SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ____________ to______________.
Commission file number 1-10254
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 Identification No.)
incorporation or organization)
1200 Sixth Avenue,
Columbus, Georgia 31901
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (706) 649-2204
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- --------------------------- -----------------------------------------
Common Stock, $.10 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark 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 X NO___________
-----------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 12, 1997, 129,289,680 shares of the $.10 par value common
stock of Total System Services, Inc. were outstanding, and the aggregate market
value of the shares of $.10 par value common stock of Total System Services,
Inc. held by non-affiliates was approximately $554,512,500 (based upon the
closing per share price of such stock on said date.)
Portions of the 1996 Annual Report to Shareholders of Registrant are
incorporated in Parts I, II, III and IV of this report. Portions of the Proxy
Statement of Registrant dated March 13, 1997 are incorporated in Part III of
this report.
<PAGE>
Registrant's Documents Incorporated by Reference
Part Number and Item
Document Incorporated Number of Form 10-K
by Reference Into Which Incorporated
- ------------------------------- -----------------------
Pages 18 through 25, 30 through Part I, Item 1, Business
33, and 37 of Registrant's
1996 Annual Report to Shareholders
Pages 30 through 34, and 37 of Part I, Item 2, Properties
Registrant's 1996 Annual
Report to Shareholders
Page 37 of Registrant's 1996 Part I, Item 3, Legal
Annual Report to Shareholders Proceedings
Page 39 of Registrant's 1996 Part II, Item 5, Market
Annual Report to Shareholders for Registrant's Common
Equity and Related Stock-
holder Matters
Page 17 of Registrant's 1996 Part II, Item 6, Selected
Annual Report to Shareholders Financial Data
Pages 18 through 25 of Registrant's Part II, Item 7, Management's
1996 Annual Report to Shareholders Discussion and Analysis of
Financial Condition and
Results of Operations
Pages 26 through 39 Part II, Item 8, Financial
of Registrant's 1996 Annual Statements and Supplementary
Report to Shareholders Data
Pages 2 through 4, 6 and 7, and 18 Part III, Item 10,
of Registrant's Proxy Directors and Executive
Statement in connection with Officers of the Registrant
the Annual Meeting of Shareholders
to be held on April 14, 1997
Pages 7 through 10, and 13 and 14 Part III, Item 11,
of Registrant's Proxy Statement Executive Compensation
in connection with the Annual Meeting
of Shareholders to be held on April 14, 1997
<PAGE>
Page 5, and 15 through 17 of Part III, Item 12, Security
Registrant's Proxy Ownership of Certain
Statement in connection with the Beneficial Owners and
Annual Meeting of Management
Shareholders to be held on April 14, 1997
Pages 13 through 15, and 17 and 18 Part III, Item 13,
of Registrant's Proxy Statement in Certain Relationships
connection with the Annual Meeting and Related Transactions
of Shareholders to be held on April 14, 1997
and pages 32 and 33 of Registrant's 1996
Annual Report to Shareholders
Pages 26 through 38 of Registrant's Part IV, Item 14, Exhibits,
1996 Annual Report to Shareholders Financial Statement
Schedules and Reports
on Form 8-K
<PAGE>
Cross Reference Sheet
Item No. Caption Page No.
Part I
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of
Security Holders
Part II
5. Market for Registrant's Common Equity
and Related Stockholder Matters
6. Selected Financial Data
7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
8. Financial Statements and Supplementary
Data
9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure
Part III
10. Directors and Executive Officers of
the Registrant
11. Executive Compensation
12. Security Ownership of Certain
Beneficial Owners and Management
13. Certain Relationships and Related
Transactions
Part IV
14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
<PAGE>
Item 1. Business.
Business. Established in 1983 as an outgrowth of an on-line accounting and
bankcard data processing system developed for Columbus Bank and Trust
Company(R), Total System Services, Inc.(sm) ("TSYS(R)") is now one of the
world's largest credit, debit, commercial, and private-label card processing
companies. Based in Columbus, Georgia, and traded on the New York Stock Exchange
under the symbol "TSS," TSYS provides a comprehensive on-line system of data
processing services marketed as THE TOTAL SYSTEM(sm), servicing issuing
institutions throughout the United States, Puerto Rico, Canada and Mexico,
representing more than 79 million cardholder accounts. TSYS provides card
production, domestic and international clearing, statement preparation, customer
service support, merchant accounting, and management support. Synovus Financial
Corp.(R), an $8.6 billion asset, multi-financial services company, owns 80.7
percent of TSYS.
TSYS has four wholly owned subsidiaries: (1) Columbus Depot Equipment
Company(sm) ("CDEC (sm)"), which sells and leases computer related equipment
associated with TSYS' bankcard data processing services and bank data processing
services provided by an affiliate; (2) Mailtek, Inc.(sm) ("Mailtek"), which
provides full-service direct mail production services and offers data
processing, list management, laser printing, computer output microfiche, card
embossing, encoding and mailing services; (3) Lincoln Marketing, Inc.(sm)
("LMI"), which provides correspondence, fulfillment, telemarketing, data
processing and mailing services; and (4) Columbus Productions, Inc.(sm) ("CPI"),
which provides full-service commercial printing and related services. TSYS also
holds a 49% equity interest in a joint venture company named Total System
Services de Mexico, S.A. de C.V.("TSM"), which provides credit card related
processing services to Mexican banks, and a 50% interest in Vital Processing
Services L.L.C., a joint venture with Visa U.S.A. that combines the front-end
authorizations and back-end accounting and settlement processing of financial
and nonfinancial institutions and their merchant customers.
Service Marks. TSYS owns a family of service marks containing the name
Total System, and the federally registered service marks TSYS and TS2, to which
TSYS believes strong customer identification attaches. TSYS also owns service
marks associated with its subsidiaries. Management does not believe the loss of
such marks would have a material impact on the business of TSYS.
Major Customers. A significant amount of TSYS' revenues are derived from
certain major customers who are processed under long-term contracts. For the
year ended December 31, 1996, AT&T Universal Card Services Corp. and NationsBank
accounted for 17.6% and 11.9%, respectively, of TSYS' total revenues. As a
result, the loss of one of TSYS' major customers could have a material
adverse effect on TSYS' financial condition and results of operations.
- ------------------------------------
Synovus Financial Corp., Synovus, Columbus Bank and Trust Company and CB&T are
federally registered service marks of Synovus Financial Corp. Total System
Services, Inc., "THE TOTAL SYSTEM," Columbus Depot Equipment Company, CDEC,
Lincoln Marketing, Inc., Mailtek, Inc. and Columbus Productions, Inc. are
service marks of Total System Services, Inc. TSYS and TS2 are federally
registered service marks of Total System Services, Inc.
1
<PAGE>
Competition. TSYS encounters vigorous competition in providing bankcard
data processing services from several different sources. The national market in
third party bankcard data processors is presently being provided by
approximately five vendors. TSYS believes that it is the second largest third
party bankcard processor in the United States. In addition, TSYS competes
against software vendors which provide their products to institutions which
process in-house. TSYS is presently encountering, and in the future anticipates
continuing to encounter, substantial competition from bankcard associations,
data processing and bankcard computer service firms and other such third party
vendors located throughout the United States.
TSYS' major competitor in the bankcard data processing industry is First
Data Resources, Inc., a wholly owned subsidiary of First Data Corporation, which
is headquartered in Omaha, Nebraska, and provides bankcard data processing
services, including authorization and data entry services. The principal methods
of competition between TSYS and First Data Resources are price and the type and
quality of services provided. Certain other subsidiaries of First Data
Corporation also compete with TSYS. In addition, there are a number of other
companies which have the necessary financial resources and the technological
ability to develop or acquire products and, in the future, to provide services
similar to those being offered by TSYS.
Regulation and Examination. TSYS is subject to being examined, and is
indirectly regulated, by the Office of the Comptroller of the Currency, the
Federal Reserve Board ("Board"), the Federal Deposit Insurance Corporation, the
Office of Thrift Supervision, the National Credit Union Administration, and the
various state financial regulatory agencies which supervise and regulate the
banks, savings institutions and credit unions for which TSYS provides bankcard
data processing services. Matters reviewed and examined by these federal and
state financial institution regulatory agencies have included TSYS' internal
controls in connection with its present performance of bankcard data processing
services, and the agreements pursuant to which TSYS provides such services.
On January 4, 1990, the Federal Reserve Bank of Atlanta approved Synovus'
indirect retention of its ownership of TSYS through Columbus Bank and Trust
Company ("CB&T") and TSYS is now subject to direct regulation by the Board. TSYS
was formed with the prior written approval of, and is subject to regulation and
examination by, the Department of Banking and Finance of the State of Georgia as
a subsidiary of CB&T and is authorized to engage in only those activities which
CB&T itself is authorized to engage in directly, which includes the bankcard and
other data processing services presently being provided by TSYS. As TSYS and its
subsidiaries operate as subsidiaries of CB&T, they are subject to regulation by
the Federal Deposit Insurance Corporation.
Employees. As of February 28, 1997, TSYS had 2,664 full-time employees and
94 part-time employees.
See the "Financial Review" Section on pages 18 through 25 and Note 1, Note
4 and Note 10 of Notes to Consolidated Financial Statements on pages 30 through
32, page 33, and page 37 of TSYS' 1996 Annual Report to Shareholders which are
specifically incorporated herein by reference.
2
<PAGE>
Item 2. Properties.
TSYS owns its 73,000 square foot South Center located at 1000 Fifth Avenue,
Columbus, Georgia 31901, and owns its 60,000 square foot Annex Building located
at 420 10th Street, Columbus, Georgia 31901. TSYS also owns a warehouse
facility, various other tracts of real estate located near or adjacent to its
South Center and Annex Building which are used for parking and/or future
expansion needs, and leases additional office space in Columbus, Georgia,
Atlanta, Georgia, and Jacksonville, Florida.
The approximately 32,000 square foot Columbus Depot, located at 1200 Sixth
Avenue, Columbus, Georgia 31901, which is owned by TSYS and is on the National
Register of Historic Places, houses TSYS' executive offices and several
corporate divisions.
TSYS also owns a 252,000 square foot production center which is located on
a 40.4 acre tract of land in north Columbus, Georgia. Primarily a production
center, this facility houses TSYS' primary data processing computer operations,
statement preparation, mail handling, microfiche production and purchasing, as
well as other related operations. Additional space will be added to this
facility in 1997 to house TSYS' card production services.
During 1995, TSYS purchased a 110,000 square foot building on a 23-acre
site in Columbus, Georgia, to accommodate current and future office space needs.
On March 7, 1996, TSYS announced its plans to purchase approximately 50
acres in downtown Columbus, Georgia, on which it will begin building a
campus-like complex for its corporate headquarters in 1997.
All properties owned and leased by TSYS are in good repair and suitable
condition for the purposes for which they are used.
In addition to its real property, TSYS owns and/or leases a substantial
amount of computer equipment.
See Note 1, Note 2, Note 3, Note 4, Note 6 and Note 10 of Notes to
Consolidated Financial Statements on pages 30 through 33, page 34, and page 37
of TSYS' 1996 Annual Report to Shareholders which are specifically incorporated
herein by reference.
Item 3. Legal Proceedings.
See Note 10 of Notes to Consolidated Financial Statements on page 37 of
TSYS' 1996 Annual Report to Shareholders which is specifically incorporated
herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
3
<PAGE>
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The "Quarterly Financial Data, Stock Price, Dividend Information" Section
which is set forth on page 39 of TSYS' 1996 Annual Report to Shareholders is
specifically incorporated herein by reference.
On January 3, 1994, TSYS issued 404,492 shares of its $.10 par value common
stock ("TSYS Common Stock") to CB&T in exchange for all 98,360 of the issued and
outstanding shares of $5.00 par value common stock of CPI, which existed as a
wholly owned subsidiary of CB&T.
On November 6, 1995, TSYS issued 4,156 shares of TSYS Common Stock to an
individual for no monetary consideration in connection with his employment by
TSYS.
On January 28, 1994 and January 29, 1996, TSYS issued 46,816 and 21,978
shares, respectively, to the two former shareholders of Mailtek. These shares
were issued pursuant to the Acquisition Agreement between TSYS, Mailtek and the
shareholders of Mailtek pursuant to which TSYS purchased all 10,000 of the
issued and outstanding shares of $.05 par value common stock of Mailtek on July
15, 1992.
All of the shares of TSYS Common Stock referenced above were issued
pursuant to the exemption from registration set forth in Section 4(2) of the
Securities Act of 1933 as they were issued to a limited number of persons.
Item 6. Selected Financial Data.
The "Selected Financial Data" Section which is set forth on page 17 of
TSYS' 1996 Annual Report to Shareholders is specifically incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The "Financial Review" Section which is set forth on pages 18 through 25 of
TSYS' 1996 Annual Report to Shareholders, which includes the information
encompassed within "Management's Discussion and Analysis of Financial Condition
and Results of Operations," is specifically incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The "Quarterly Financial Data, Stock Price, Dividend Information" Section,
which is set forth on page 39, and the "Consolidated Balance Sheets,
Consolidated Statements of Income, Consolidated Statements of Shareholders'
Equity, Consolidated Statements of Cash Flows, Notes to Consolidated Financial
Statements and Report of Independent Auditors" Sections, which are set forth on
pages 26 through 38 of TSYS' 1996 Annual Report to Shareholders are specifically
incorporated herein by reference.
4
<PAGE>
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
Item 10. Directors and Executive Officers of the Registrant.
The "ELECTION OF DIRECTORS - Information Concerning Number and
Classification of Directors and Nominees" Section which is set forth on pages 2
and 3, the "ELECTION OF DIRECTORS - Information Concerning Directors and
Nominees for Class II Directors - General Information" Section which is set
forth on pages 3 and 4, the "ELECTION OF DIRECTORS - Executive Officers" Section
which is set forth on pages 6 and 7, and the "SECTION 16(a) Beneficial Ownership
Reporting Compliance" Section which is set forth on page 18 of TSYS' Proxy
Statement in connection with the Annual Meeting of Shareholders of TSYS to be
held on April 14, 1997 are specifically incorporated herein by reference.
Item 11. Executive Compensation.
The "EXECUTIVE COMPENSATION - Summary Compensation Table; Stock Option
Exercises and Grants; Compensation of Directors; Change in Control Arrangements;
and Compensation Committee Interlocks and Insider Participation" Sections which
are set forth on pages 7 through 10, and pages 13 and 14 of TSYS' Proxy
Statement in connection with the Annual Meeting of Shareholders of TSYS to be
held on April 14, 1997 are specifically incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The "ELECTION OF DIRECTORS - Information Concerning Directors and Nominees
for Class II Directors - TSYS Common Stock Ownership of Directors and
Management" Section which is set forth on page 5, the "RELATIONSHIPS BETWEEN
TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Beneficial Ownership
of TSYS Common Stock by CB&T" Section which is set forth on page 15, and the
"RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES
- - Synovus Common Stock Ownership of Directors and Management" Section which is
set forth on pages 15 through 17 of TSYS' Proxy Statement in connection with the
Annual Meeting of Shareholders of TSYS to be held on April 14, 1997 are
specifically incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider
Participation" Section which is set forth on pages 13 and 14, "EXECUTIVE
COMPENSATION - Transactions with Management" Section which is set forth on page
14, the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS'
SUBSIDIARIES - Beneficial Ownership of TSYS Common Stock by CB&T" Section
which is set forth on page 15, the "RELATIONSHIPS BETWEEN TSYS,
5
<PAGE>
SYNOVUS, CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Interlocking Directorates
of TSYS, Synovus and CB&T" Section which is set forth on page 15, and the
"RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T, AND CERTAIN OF SYNOVUS' SUBSIDIARIES
- - Bankcard Data Processing Services Provided to CB&T and Certain of Synovus'
Subsidiaries; Other Agreements Between TSYS, Synovus, CB&T and Certain of
Synovus' Subsidiaries" Section which is set forth on pages 17 and 18 of TSYS'
Proxy Statement in connection with the Annual Meeting of Shareholders of TSYS to
be held on April 14, 1997 are specifically incorporated herein by reference.
See also Note 2 of Notes to Consolidated Financial Statements on pages 32
and 33 of TSYS' 1996 Annual Report to Shareholders which is specifically
incorporated herein by reference.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements
The following Consolidated Financial Statements of TSYS are
specifically incorporated by reference from pages 26 through 38 of TSYS' 1996
Annual Report to Shareholders to Item 8, Part II, Financial Statements and
Supplementary Data.
Consolidated Balance Sheets - December 31, 1996 and 1995.
Consolidated Statements of Income - Years Ended December 31,
1996, 1995 and 1994.
Consolidated Statements of Shareholders' Equity - Years Ended
December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows - Years Ended December
31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Index to Financial Statement Schedules
The following report of independent auditors and consolidated
financial statement schedule of Total System Services, Inc. are included:
Report of Independent Auditors.
Schedule II - Valuation and Qualifying Accounts - Years Ended
December 31, 1996, 1995 and 1994.
All other schedules are omitted because they are inapplicable
6
<PAGE>
or the required information is included in the Notes to Consolidated Financial
Statements.
3. Exhibits
Exhibit
Number Description
3.1 Articles of Incorporation of Total System Services,
Inc. ("TSYS"), as amended, incorporated by reference
to Exhibit 3.1 of TSYS' Annual Report on Form 10-K
for the fiscal year ended December 31, 1990, as filed
with the Commission on March 19, 1991.
3.2 Bylaws of TSYS.
10. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.1 Director Stock Purchase Plan of TSYS, incorporated by
reference to Exhibit 10.1 of TSYS' Annual Report on
Form 10-K for the fiscal year ended December 31,
1992, as filed with the Commission on March 18, 1993.
10.2 Group "Y" Key Executive Restricted Stock Bonus Plan
of TSYS, incorporated by reference to Exhibit 10.2 of
TSYS' Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, as filed with the Commission
on March 18, 1993.
10.3 1985 Key Employee Restricted Stock Bonus Plan of
TSYS, incorporated by reference to Exhibit 10.3 of
TSYS' Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, as filed with the Commission
on March 18, 1993.
10.4 1990 Key Employee Restricted Stock Bonus 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, 1992, as filed with the Commission
on March 18, 1993.
10.5 Total System Services, Inc. 1992 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 Commission
on March 18, 1993.
10.6 Excess Benefit Agreement of TSYS, incorporated by
reference to Exhibit 10.6 of TSYS' Annual Report on
Form 10-K for the fiscal year ended December 31,
1992, as filed with the Commission on March 18, 1993.
10.7 Wage Continuation Agreement of TSYS, incorporated by
7
<PAGE>
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 Commission on March 18, 1993.
10.8 Incentive Bonus Plan of Synovus Financial Corp. in
which executive officers of TSYS participate,
incorporated by reference to Exhibit 10.8 of TSYS'
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, as filed with the Commission on
March 18, 1993.
10.9 Agreement in connection with use of aircraft,
incorporated by reference to Exhibit 10.9 of TSYS'
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, as filed with the Commission on
March 18, 1993.
10.10 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 Commission on
March 22, 1994.
10.11 Synovus Financial Corp. 1994 Long-Term Incentive Plan
in which executive officers of TSYS participate,
incorporated by reference to Exhibit 10.11 of TSYS'
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as filed with the Commission on
March 9, 1995.
10.12 Synovus Financial Corp. Executive Bonus Plan in which
executive officers of TSYS participate, incorporated
by reference to Exhibit 10.12 of TSYS' Annual Report
on Form 10-K for the fiscal year ended December 31,
1995, as filed with the Commission on March 19, 1996.
10.13 Change of Control Agreements for executive officers
of TSYS, incorporated by reference to Exhibit 10.13
of TSYS' Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, as filed with the
Commission on March 19, 1996.
10.14 Stock Option Agreement of Samuel A. Nunn.
11.1 Statement re Computation of Per Share Earnings.
13.1 Certain specified pages of TSYS' 1996 Annual Report
to Shareholders which are specifically incorporated
herein by reference.
8
<PAGE>
20.1 Proxy Statement for the Annual Meeting of
Shareholders of TSYS to be held on April 14, 1997,
certain pages of which are specifically incorporated
herein by reference.
21.1 Subsidiaries of Total System Services, Inc.
23.1 Independent Auditor' Consent.
24.1 Powers of Attorney contained on the signature pages
of the 1996 Annual Report on Form 10-K.
27.1 Financial Data Schedule (for SEC use only).
99.1 Annual Report on Form 11-K for the Total System
Services, Inc. Employee Stock Purchase Plan for the
year ended December 31, 1996 (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, 1996 (to be filed as an
amendment hereto within 120 days of the end of the
period covered by this report.)
(b) Reports on Form 8-K
On September 20, 1996, TSYS filed a Form 8-K with the
Commission in connection with the announcement of its expectation that earnings
for 1996 would exceed current analysts' estimates by approximately 10%.
TSYS\TSYS96.10K
9
<PAGE>
Report of Independent Auditors
The Board of Directors
Total System Services, Inc.
Under date of January 22, 1997, we reported on the consolidated balance sheets
of Total System Services, Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the years in the three-year period ended December
31, 1996, as contained in the Total System Services, Inc. 1996 Annual Report to
Shareholders. These consolidated financial statements and our report thereon are
incorporated by reference in the Total System Services, Inc. Annual Report on
Form 10-K for the year 1996. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule in Item 14(a)2. The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Atlanta, Georgia
January 22, 1997
<TABLE>
Total System Services, Inc.
Schedule II
Valuation and Qualifying Accounts
<CAPTION>
__________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________
Additions
________________________
Charged to
Balance at Charged to other Balance at
beginning costs and accounts-- Deductions-- end of
Description of period expenses describe describe period
__________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994: (16,347)<F1>
Allowance for doubtful accounts $ 815,073 - - (542,958)<F2> $ 255,768
======= ======= ======= ======== ========
Year ended December 31, 1995:
Allowance for doubtful accounts $ 255,768 509,500 - (50,894)<F1> $ 714,374
======= ======= ======= ======== ========
Year ended December 31, 1996:
Allowance for doubtful accounts $ 714,374 94,500 - (104,392)<F1> $ 704,482
======= ======= ======= ======== ========
<FN>
- --------------------
<F1> Accounts deemed to be uncollectible and written off during the year.
<F2> Reversal of provision for bad debt expense to adjust allowance for doubtful accounts to appropriate amounts.
</FN>
</TABLE>
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)
March 20, 1997 By:/s/Richard W. Ussery
-----------------------------------
Richard W. Ussery,
Chairman and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James H. Blanchard, Richard W. Ussery and
Philip W. Tomlinson, 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/James H. Blanchard Date: March 20, 1997
- ------------------------------------------------
James H. Blanchard,
Director and Chairman of the
Executive Committee
/s/Richard W. Ussery Date: March 20, 1997
- ------------------------------------------------
Richard W. Ussery,
Chairman of the Board
and Principal Executive Officer
<PAGE>
/s/Philip W. Tomlinson Date: March 20, 1997
- --------------------------------------------------
Philip W. Tomlinson,
President
and Director
/s/James B. Lipham Date: March 20, 1997
- -------------------------------------------------
James B. Lipham,
Executive Vice President, Treasurer, Principal
Accounting and Financial Officer
/s/William A. Pruett Date: March 20, 1997
- -------------------------------------------------
William A. Pruett,
Executive Vice President
/s/M. Troy Woods Date: March 20, 1997
- -------------------------------------------------
M. Troy Woods,
Executive Vice President
/s/Griffin B. Bell Date: March 20, 1997
- -------------------------------------------------
Griffin B. Bell,
Director
/s/Richard Y. Bradley Date: March 20, 1997
- -------------------------------------------------
Richard Y. Bradley,
Director
/s/Gardiner W. Garrard, Jr., Date: March 20, 1997
- -------------------------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/John P. Illges, III Date: March 20, 1997
- -------------------------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: March 20, 1997
- -------------------------------------------------
Mason H. Lampton,
Director
<PAGE>
/s/Samuel A. Nunn Date: March 20, 1997
- -------------------------------------------------
Samuel A. Nunn,
Director
/s/H. Lynn Page Date: March 20, 1997
- -------------------------------------------------
H. Lynn Page,
Director
/s/W. Walter Miller, Jr. Date: March 20, 1997
- -------------------------------------------------
W. Walter Miller, Jr.,
Director
/s/William B. Turner Date: March 20, 1997
- -------------------------------------------------
William B. Turner,
Director
/s/George C. Woodruff, Jr. Date: March 20, 1997
- -------------------------------------------------
George C. Woodruff, Jr.,
Director
/s/James D. Yancey Date: March 20, 1997
- -------------------------------------------------
James D. Yancey,
Director
filings/tss\confo.sig
EXHIBIT 3.2
As Amended and Restated
Effective January 24, 1997
BYLAWS
OF
TOTAL SYSTEM SERVICES, INC.
ARTICLE I. OFFICES
Section 1. Principal Office. The principal office for the transaction of
the business of the corporation shall be located in Muscogee County, Georgia, at
such place within said County as may be fixed from time to time by the Board of
Directors.
Section 2. Other Offices. Branch offices and places of business may be
established at any time by the Board of Directors at any place or places where
the corporation is qualified to do business, whether within or without the State
of Georgia.
ARTICLE II. SHAREHOLDERS' MEETINGS
Section 1. Meetings, Where Held. Any meeting of the shareholders of the
corporation, whether an annual meeting or a special meeting, may be held either
at the principal office of the corporation or at any place in the United States
within or without the State of Georgia.
Section 2. Annual Meeting. The annual meeting of the shareholders of the
corporation for the election of Directors and for the transaction of such other
business as may properly come before the meeting shall be held on such date and
at such time and place as is determined by the Board of Directors of the
corporation each year. Provided, however, that if the Board of Directors shall
fail to set a date for the annual meeting of shareholders in any year, that the
annual meeting of the shareholders of the corporation shall be held on the
second Monday in April of each year; provided, that if said day shall fall upon
a legal holiday, then such annual meeting shall be held on the next day
thereafter ensuing which is not a legal holiday. In addition to any other
applicable requirements, for business to properly come before the meeting,
notice of any nominations of persons for election to the Board of Directors or
of any other business to be brought before an annual meeting of shareholders by
a shareholder must be provided in writing to the Secretary of the corporation
not later than the close of business on the sixtieth (60th) day nor earlier than
the close of business on the one hundred twentieth (120th) day prior to the date
of the
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meeting and such business must constitute a proper subject to be brought before
such meeting. Such shareholder's notice shall set forth (a) as to each person
whom the shareholder proposes to nominate for election as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the Proxy
Statement in connection with such annual meeting as a nominee and to serving as
a director if elected), and evidence reasonably satisfactory to the corporation
that such nominee has no interests that would limit such nominee's ability to
fulfill his or her duties of office; (b) as to any other business that the
shareholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the shareholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such shareholder, as they appear on the corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the corporation
that are owned beneficially and held of record by such shareholder and such
beneficial owner. Notwithstanding anything in these bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 2. The Chairman of the Board of Directors
shall, if the facts warrant, determine and declare to the meeting that business
has not been properly brought before the meeting in accordance with the
provisions of this Section 2, and if the Chairman should so determine, the
Chairman shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 3. Special Meetings. A special meeting of the shareholders of the
corporation, for any purpose or purposes whatsoever, may be called at any time
by the Chairman of the Board, any Vice Chairman of the Board, if elected, the
President, any Vice President, a majority of the Board of Directors, or one or
more shareholders of the corporation holding at least 80% of the issued and
outstanding shares of common stock of the corporation. Such a call for a special
meeting must state the purpose of the meeting. This section, as it relates to
the call of a special meeting of the shareholders of the corporation by one or
more shareholders holding at least 80% of the issued and outstanding shares of
common stock of the corporation shall not be altered, deleted or rescinded
except upon the affirmative vote of the shareholders of the corporation holding
at least 80% of the issued and outstanding shares of common stock of the
corporation.
Section 4. Notice of Meetings. Unless waived, written notice of each annual
meeting and of each special meeting of the shareholders of the corporation shall
be given to each shareholder of record entitled to vote, either personally or by
first class mail (postage prepaid) addressed to such shareholder at his last
known address, not less than ten (10) days nor more than seventy (70) days prior
to said meeting. Such written notice shall specify the place, day and hour of
the meeting; and in the case of
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a special meeting, it shall also specify the purpose or purposes for which the
meeting is called.
Section 5. Waiver of Notice. Notice of any annual or special meeting of the
shareholders of the corporation may be waived by any shareholder, either before
or after the meeting; and the attendance of a shareholder at a meeting, either
in person or by proxy, shall of itself constitute waiver of notice and waiver of
any and all objections to the place or time of the meeting, or to the manner in
which it has been called or convened, except when a shareholder attends solely
for the purpose of stating, at the beginning of the meeting, an objection or
objections to the transaction of business at such meeting.
Section 6. Quorum, Voting and Proxy. Shareholders representing a majority
of the issued and outstanding shares of common stock of the corporation shall
constitute a quorum at a shareholders' meeting. Each shareholder shall be
entitled to one vote for each share of common stock owned. Any shareholder may
be represented and vote at any shareholders' meeting by written proxy filed with
the Secretary of the corporation on or before the date of such meeting;
provided, however, that no proxy shall be valid for more than 11 months after
the date thereof unless otherwise specified in such proxy.
Section 7. No Meeting Necessary When. Any action required by law or
permitted to be taken at any shareholders' meeting may be taken without a
meeting if, and only if, written consent, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such consent shall have the same force and effect as a
unanimous vote of the shareholders and shall be filed with the Secretary and
recorded in the Minute Book of the corporation.
ARTICLE III. DIRECTORS
Section 1. Number. The Board of Directors of the corporation shall consist
of not less than 8 nor more than 60 Directors. The number of Directors may vary
between said minimum and maximum, and within said limits, the shareholders
holding at least 80% of the issued and outstanding shares of common stock of the
corporation may, from time to time, by resolution fix the number of Directors to
comprise said Board. This section, as it relates to from time to time, fixing
the number of Directors of the corporation by the shareholders of the
corporation holding at least 80% of the issued and outstanding shares of common
stock of the corporation, shall not be altered, deleted or rescinded except upon
the affirmative vote of the shareholders of the corporation holding at least 80%
of the issued and outstanding shares of common stock of the corporation.
Section 2. Election and Tenure. The Board of Directors of the corporation
shall be divided into three classes serving staggered 3-year terms, with each
class to be as nearly equal in number as possible. At the first annual meeting
of the
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shareholders of the corporation, all members of the Board of Directors shall be
elected with the terms of office of Directors comprising the first class to
expire at the first annual meeting of the shareholders of the corporation after
their election, the terms of office of Directors comprising the second class to
expire at the second annual meeting of the shareholders of the corporation after
their election and the terms of office of Directors comprising the third class
to expire at the third annual meeting of the shareholders of the corporation
after their election, and as their terms of office expires, the Directors of
each class will be elected to hold office until the third succeeding annual
meeting of the shareholders of the corporation after their election. In such
elections, the nominees receiving a plurality of votes shall be elected. This
section, as it relates to the division of the Board of Directors into three
classes serving staggered 3-year terms, shall not be altered, deleted or
rescinded except upon the affirmative vote of the shareholders of the
corporation holding at least 80% of the issued and outstanding shares of common
stock of the corporation.
Section 3. Powers. The Board of Directors shall have authority to manage
the affairs and exercise the powers, privileges and franchises of the
corporation as they may deem expedient for the interests of the corporation,
subject to the terms of the Articles of Incorporation, bylaws, and such policies
and directions as may be prescribed from time to time by the shareholders of the
corporation.
Section 4. Meetings. The annual meeting of the Board of Directors shall be
held without notice immediately following the annual meeting of the shareholders
of the corporation, on the same date and at the same place as said annual
meeting of the shareholders. The Board by resolution may provide for regular
meetings, which may be held without notice as and when scheduled in such
resolution. Special meetings of the Board may be called at any time by the
Chairman of the Board, any Vice Chairman of the Board, if elected, the President
or by any two or more Directors.
Section 5. Notice and Waiver; Quorum. Notice of any special meeting of the
Board of Directors shall be given to each Director personally or by mail,
telegram or cablegram addressed to him at his last known address, at least one
day prior to the meeting. Such notice may be waived, either before or after the
meeting; and the attendance of a Director at any special meeting shall of itself
constitute a waiver of notice of such meeting and of any and all objections to
the place or time of the meeting, or to the manner in which it has been called
or convened, except where a Director states, at the beginning of the meeting,
any such objection or objections to the transaction of business. A majority of
the Board of Directors shall constitute a quorum at any Directors' meeting.
Section 6. No Meeting Necessary, When. Any action required by law or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if written consent, setting forth the action so taken, shall
be signed by all the Directors. Such consent shall have the same force and
affect as a unanimous vote of
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the Board of Directors and shall be filed with the Secretary and recorded in the
Minute Book of the corporation.
Section 7. Voting. At all meetings of the Board of Directors each Director
shall have one vote and, except as otherwise provided herein or provided by law,
all questions shall be determined by a majority vote of the Directors present.
Section 8. Removal. Any one or more Directors or the entire Board of
Directors may be removed from office, with or without cause, by the affirmative
vote of the shareholders of the corporation holding at least 80% of the issued
and outstanding shares of common stock of the corporation at any shareholders'
meeting with respect to which notice of such purpose has been given. This
section, as it relates to the removal of Directors of the corporation by the
shareholders of the corporation holding at least 80% of the issued and
outstanding shares of common stock of the corporation, shall not be altered,
deleted or rescinded except upon the affirmative vote of the shareholders of the
corporation holding at least 80% of the issued and outstanding shares of common
stock of the corporation.
Section 9. Vacancies. Any vacancy occurring in the Board of Directors
caused by an increase in the number of Directors may be filled by the
shareholders of the corporation for a full classified 3-year term, or such
vacancy may be filled by the Board of Directors until the next annual meeting of
the shareholders. Any vacancy occurring in the Board of Directors caused by the
removal of a Director shall be filled by the shareholders, or if authorized by
the shareholders, by the Board of Directors, for the unexpired term of the
Director so removed. Any vacancy occurring in the Board of Directors caused by a
reason other than an increase in the number of Directors or removal of a
Director may be filled by the Board of Directors, or the shareholders, for the
unexpired term of the Director whose position is vacated. Vacancies in the Board
of Directors filled by the Board of Directors may be filled by the affirmative
vote of a majority of the remaining Directors, though less than a quorum, or the
sole remaining Director, as the case may be.
Section 10. Dividends. The Board of Directors may declare dividends payable
in cash or other property out of the unreserved and unrestricted net earnings of
the current fiscal year, computed to the date of declaration of the dividend, or
the preceding fiscal year, or out of the unreserved and unrestricted earned
surplus of the corporation, as they may deem expedient.
Section 11. Committees. In the discretion of the Board of Directors, said
Board from time to time may elect or appoint, from its own members, one or more
committees as said Board may see fit to establish. Each such committee shall
consist of three or more Directors, and each shall possess such powers and be
charged with such responsibilities, subject to the limitations imposed by
applicable law, as the Board by resolution may from time to time prescribe.
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Section 12. Officers, Salaries and Bonds. The Board of Directors shall
elect all officers of the corporation and fix their compensation. The fact that
any officer is a Director shall not preclude him from receiving a salary or from
voting upon the resolution providing the same. The Board of Directors may or may
not, in their discretion, require bonds from either or all of the officers and
employees of the corporation for the faithful performance of their duties and
good conduct while in office.
Section 13. Compensation of Directors. Directors, as such shall be entitled
to receive compensation for their service as Directors and such fees and
expenses, if any, for attendance at each regular or special meeting of the Board
and any adjournments thereof, as may be fixed from time to time by resolution of
the Board, and such fees and expenses shall be payable even though an
adjournment be had because of the absence of a quorum; provided, however, that
nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefore. Members of either standing or special committees may be allowed such
compensation as may be provided from time to time by resolution of the Board for
serving upon and attending meetings of such committees.
Section 14. Emeritus Directors. When a member of the Board of Directors of
the corporation, as the case may be: (a) attains seventy (70) years of age or,
(b) prior to his attainment of seventy (70) years of age, retires from his
principal occupation, under the retirement policy and criteria established from
time to time by the Board of Directors of the corporation (except for a member
of the Board of Directors of the corporation: (1) who is, upon the attainment of
age seventy (70), then serving as an executive officer, including Chairman of
the Board or Chairman of the Executive Committee of the corporation or its
parent or grandparent corporation; or (2) who was sixty (60) years of age on
June 14, 1973), such director shall automatically, at his option, either (i)
retire from the Board of Directors of the corporation, as the case may be; or
(ii) be appointed as a member of the Emeritus Board of Directors of the
corporation. A member of the Board of Directors of the corporation: (1) who is,
upon the attainment of age seventy (70), then serving as an executive officer,
including Chairman of the Board or Chairman of the Executive Committee, of the
corporation or its parent or grandparent corporation; or (2) who was sixty (60)
years of age on June 14, 1973, may, at his option, either: (a) continue his
service as a member of the Board of Directors of the corporation, as the case
may be; or (b) be appointed as a member of the Emeritus Board of Directors of
the corporation. Members of the Emeritus Board of Directors of the corporation
shall be appointed annually by the Chairman of the Board of Directors of the
corporation at the Annual Meeting of the Board of Directors of the corporation,
or from time to time thereafter. Each member of the Emeritus Board of Directors
of the corporation, except in the case of his earlier death, resignation,
retirement, disqualification or removal, shall serve until the next succeeding
Annual Meeting of the Board of Directors of the corporation. Any individual
appointed as a member of the Emeritus Board of Directors of the corporation may,
but shall not be required to, attend meetings of the Board of Directors of the
corporation and may participate in any discussions thereat, but such
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individual may not vote at any meeting of the Board of Directors of the
corporation or be counted in determining a quorum at any meeting of the Board of
Directors of the corporation, as provided in Section 5 of Article III of the
bylaws of the corporation. It shall be the duty of the members of the Emeritus
Board of Directors of the corporation to serve as goodwill ambassadors of the
corporation, but such individuals shall not have any responsibility or be
subject to any liability imposed upon a member of the Board of Directors of the
corporation or in any manner otherwise be deemed to be a member of the Board of
Directors of the corporation. Each member of the Emeritus Board of Directors of
the corporation shall be paid such compensation as may be set from time to time
by the Chairman of the Board of Directors of the corporation and shall remain
eligible to participate in any Director Stock Purchase Plan maintained by, or
participated in, from time to time by the corporation according to the terms and
conditions thereof. Notwithstanding the foregoing, if a member of the Board of
Directors of the corporation is initially elected to the Board of Directors
within six years of his attainment of seventy (70) years of age, such member
may, subject to his continuing election to the Board of Directors of the
corporation, serve as a director of the corporation for a period ending the
later of (i) six years from the date of his initial election to the Board of
Directors of the corporation; or (ii) the expiration of the term of office of
such director to which he was last elected during such six year period, at which
time such director shall automatically, at his option, either (i) retire from
the Board of Directors of the corporation; or (ii) be appointed as a member of
the Emeritus Board of Directors of the corporation."
Section 15. Advisory Directors. The Board of Directors of the corporation
may at its annual meeting, or from time to time thereafter, appoint any
individual to serve as a member of an Advisory Board of Directors of the
corporation. Any individual appointed to serve as a member of an Advisory Board
of Directors of the corporation shall be entitled to attend all meetings of the
Board of Directors and may participate in any discussion thereat, but such
individual may not vote at any meeting of the Board of Directors or be counted
in determining a quorum for such meeting. It shall be the duty of members of the
Advisory Board of Directors of the corporation to advise and provide general
policy advice to the Board of Directors of the corporation at such times and
places and in such groups and committees as may be determined from time to time
by the Board of Directors, but such individuals shall not have any
responsibility or be subject to any liability imposed upon a director or in any
manner otherwise deemed a director. The same compensation paid to directors for
their services as directors shall be paid to members of an Advisory Board of
Directors of the corporation for their services as advisory directors. Each
member of the Advisory Board of Directors except in the case of his earlier
death, resignation, retirement, disqualification or removal, shall serve until
the next succeeding annual meeting of the Board of Directors and thereafter
until his successor shall have been appointed.
ARTICLE IV. OFFICERS
Section 1. Selection. The Board of Directors at each annual meeting shall
elect or appoint a Chairman of the Board, a President, a Secretary and a
Treasurer, each to serve for the ensuing year and until his successor is elected
and
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qualified, or until his earlier resignation, removal from office, or death. The
Board of Directors, at such meeting, may or may not, in the discretion of the
Board, elect one or more Vice Chairmen of the Board, one or more Chairmen of the
Board-Emeritus, one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers,
and such other officers as the Board of Directors, in its discretion, shall
determine are desirable for the management of the business and affairs of the
corporation. When more than one Vice President is elected, they may, in the
discretion of the Board, be designated Executive Vice President, First Vice
President, Second Vice President, etc., according to seniority or rank, and any
person may hold two or more offices, except that the President shall not also
serve as the Secretary.
Section 2. Removal, Vacancies. Any officers of the corporation may be
removed from office at any time by the Board of Directors, with or without
cause. Any vacancy occurring in any office of the corporation may be filled by
the Board of Directors.
Section 3. Chairman of the Board. The Chairman of the Board of Directors,
shall, whenever present, preside at all meetings of the Board of Directors and
at all meetings of the shareholders. The Chairman of the Board of Directors
shall confer with the President on matters of general policy affecting the
business of the corporation and shall have, in his discretion, power and
authority to generally supervise all the affairs of the corporation and the acts
and conduct of all the officers of the corporation, and shall have such other
duties as may be conferred upon him. Any Vice Chairman of the Board, if elected,
shall perform the duties of the Chairman of the Board during the absence or
disability of the Chairman of the Board and shall have such other duties as may
be conferred upon him by the Board of Directors or the Chairman of the Board.
Section 4. President. In the absence of the Chairman of the Board and if
there be no Vice Chairman of the Board elected, or in his absence, the President
shall preside at all meetings of the Board of Directors and at all meetings of
the shareholders. The immediate supervision of the affairs of the corporation
shall be vested in the President. It shall be his duty to attend constantly to
the business of the corporation and maintain strict supervision over all of its
affairs and interests. He shall keep the Board of Directors fully advised of the
affairs and condition of the corporation, and shall manage and operate the
business of the corporation pursuant to such policies as may be prescribed from
time to time by the Board of Directors. The President shall, subject to approval
of the Board, hire and fix the compensation of all employees and agents of the
corporation, other than officers, and any person thus hired shall be removable
at his pleasure.
Section 5. Vice President. Any Vice President of the corporation may be
designated by the Board of Directors to act for and in the place of the
President in the event of sickness, disability or absence of the President or
the failure of the President to act for any reason, and when so designated, such
Vice President shall exercise all the
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powers of the President in accordance with such designation. The Vice Presidents
shall have such duties as may be required of, or assigned to, them by the Board
of Directors, the Chairman of the Board, the Vice Chairman of the Board, if
elected, or the President.
Section 6. Secretary. It shall be the duty of the Secretary to keep a
record of the proceedings of all meetings of the shareholders and Board of
Directors; to keep the stock records of the corporation; to notify the
shareholders and Directors of meetings as provided by these bylaws; and to
perform such other duties as may be prescribed by the Board of Directors, the
Chairman of the Board, any Vice Chairman of the Board, if elected, or the
President. Any Assistant Secretary, if elected, shall perform the duties of the
Secretary during the absence or disability of the Secretary and shall perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board, any Vice Chairman of the Board, if elected, the President or the
Secretary.
Section 7. Treasurer. The Treasurer shall keep, or cause to be kept, the
financial books and records of the corporation, and shall faithfully account for
its funds. He shall make such reports as may be necessary to keep the Board of
Directors, the Chairman of the Board, any Vice Chairman of the Board, if
elected, and the President fully informed at all times as to the financial
condition of the corporation, and shall perform such other duties as may be
prescribed by the Board of Directors, the Chairman of the Board, any Vice
Chairman of the Board, if elected, or the President. Any Assistant Treasurer, if
elected, shall perform the duties of the Treasurer during the absence or
disability of the Treasurer, and shall perform such other duties as may be
prescribed by the Board of Directors, the Chairman of the Board, any Vice
Chairman of the Board, if elected, the President or the Treasurer.
ARTICLE V. CONTRACTS, ETC.
Section 1. Contracts, Deeds and Loans. All contracts, deeds, mortgages,
pledges, promissory notes, transfers and other written instruments binding upon
the corporation shall be executed on behalf of the corporation by the Chairman
of the Board, any Vice Chairman of the Board, if elected, the President, any
Executive Vice President, any Vice Presidents who report directly to such
Executive Vice Presidents, or by such other officers or agents as the Board of
Directors may designate from time to time. Any such instrument required to be
given under the seal of the corporation may be attested by the Secretary or
Assistant Secretary of the corporation.
Section 2. Proxies. The Chairman of the Board, any Vice Chairman of the
Board, if elected, the President, any Vice President, the Secretary or the
Treasurer of the corporation shall have full power and authority, on behalf of
the corporation, to attend and to act and to vote at any meetings of the
shareholders, bond holders or other security holders of any corporation, trust
or association in which the corporation may hold securities, and at and in
connection with any such meeting shall possess and may exercise any and all of
the rights and powers incident to the ownership of such securities
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and which as owner thereof the corporation might have possessed and exercised if
present, including the power to execute proxies and written waivers and consents
in relation thereto. In the case of conflicting representation at any such
meeting, the corporation shall be represented by its highest ranking officer, in
the order first above stated. Notwithstanding the foregoing, the Board of
Directors may, by resolution, from time to time, confer like powers upon any
other person or persons.
ARTICLE VI. CHECKS AND DRAFTS
Checks and drafts of the corporation shall be signed by such officer or officers
or such other employees or persons as the Board of Directors may from time to
time designate.
ARTICLE VII. STOCK
Section 1. Certificates of Stock. The certificates for shares of capital
stock of the corporation shall be in such form as shall be determined by the
Board of Directors. They shall be numbered consecutively and entered into the
stock book of the corporation as they are issued. Each certificate shall state
on its face the fact that the corporation is a Georgia corporation, the name of
the person to whom the shares are issued, the number and class of shares (and
series, if any) represented by the certificate and their par value, or a
statement that they are without par value. In addition, when and if more than
one class of shares shall be outstanding, all share certificates of whatever
class shall state that the corporation will furnish to any shareholder upon
request and without charge a full statement of the designations, relative
rights, preferences and limitations of the shares of each class authorized to be
issued by the corporation.
Section 2. Signature; Transfer Agent; Registrar. Share certificates shall
be signed by the President or any Vice President and by the Secretary or an
Assistant Secretary of the corporation, and shall bear the seal of the
corporation or a facsimile thereof. The Board of Directors may from time to time
appoint transfer agents and registrars for the shares of capital stock of the
corporation or any class thereof, and when any share certificate is
countersigned by a transfer agent or registered by a registrar, the signature of
any officer of the corporation appearing thereon may be a facsimile signature.
In case any officer who signed, or whose facsimile signature was placed upon,
any such certificate shall have died or ceased to be such officer before such
certificate is issued, it may nevertheless be issued with the same effect as if
he continued to be such officer on the date of issue.
Section 3. Stock Book. The corporation shall keep at its principal office,
or at the office of its transfer agent, wherever located, with a copy at the
principal office of the corporation, a book, to be known as the stock book of
the corporation, containing in alphabetical order name of each shareholder of
record, together with his address, the number of shares of each kind, class or
series of stock held by him and his
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social security number. The stock book shall be maintained in current condition.
The stock book, including the share register, or the duplicate copy thereof
maintained at the principal office of the corporation, shall be available for
inspection and copying by any shareholder at any meeting of the shareholders
upon request, or, for a bona fide purpose which is in the best interest of the
business of the corporation, at other times upon the written request of any
shareholder or holder of a voting trust certificate. The stock book may be
inspected and copied either by a shareholder or a holder of a voting trust
certificate in person, or by their duly authorized attorney or agent. The
information contained in the stock book and share register may be stored on
punch cards, magnetic tape, or any other approved information storage devices
related to electronic data processing equipment, provided that any such method,
device, or system employed shall first be approved by the Board of Directors,
and provided further that the same is capable of reproducing all informations
contained therein, in legible and understandable form, for inspection by
shareholders or for any other proper corporate purpose.
Section 4. Transfer of Stock; Registration of Transfer. The stock of the
corporation shall be transferred only by surrender of the certificate and
transfer upon the stock book of the corporation. Upon surrender to the
corporation, or to any transfer agent or registrar for the class of shares
represented by the certificate surrendered, of a certificate properly endorsed
for transfer, accompanied by such assurances as the corporation, or such
transfer agent or registrar, may require as to the genuineness and effectiveness
of each necessary endorsement and satisfactory evidence of compliance with all
applicable laws relating to securities transfers and the collection of taxes, it
shall be the duty of the corporation, or such transfer agent or registrar, to
issue a new certificate, cancel the old certificate and record the transactions
upon the stock book of the corporation.
Section 5. Registered Shareholders. Except as otherwise required by law,
the corporation shall be entitled to treat the person registered on its stock
book as the owner of the shares of the capital stock of the corporation as the
person exclusively entitled to receive notification, dividends or other
distributions, to vote and to otherwise exercise all the rights and powers of
ownership and shall not be bound to recognize any adverse claim.
Section 6. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action affecting the interests of shareholders, the Board
of Directors may fix, in advance, a record date. Such date shall not be more
than seventy (70) nor less than ten (10) days before the date of any such
meeting nor more than seventy (70) days prior to any other action. In each case,
except as otherwise provided by law, only such persons as shall be shareholders
of record on the date so fixed shall be entitled to notice of and to vote at
such meeting and
11
<PAGE>
any adjournment thereof, to express such consent or dissent, or to receive
payment of such dividend or such allotment of rights, or otherwise be recognized
as shareholders for any other related propose, notwithstanding any registration
of a transfer of shares on the stock book of the corporation after any such
record date so fixed.
Section 7. Lost Certificates. When a person to whom a certificate of stock
has been issued alleges it to have been lost, destroyed or wrongfully taken, and
if the corporation, transfer agent or registrar is not on notice that such
certificate has been acquired by a bona fide purchaser, a new certificate may be
issued upon such owner's compliance with all of the following conditions,
to-wit: (a) He shall file with the Secretary of the corporation, and the
transfer agent or the registrar, his request for the issuance of a new
certificate, with an affidavit setting for the time, place and circumstances of
the loss; (b) He shall also file with the Secretary, and the transfer agent or
the registrar, a bond with good and sufficient security acceptable to the
corporation and the transfer agent or the registrar, or other agreement of
indemnity acceptable to the corporation and the transfer agent or the registrar,
conditioned to indemnify and save harmless the corporation and the transfer
agent or the registrar from any and all damage, liability and expense of every
nature whatsoever resulting from the corporation's or the transfer agent's or
the registrar's issuing a new certificate in place of the one alleged to have
been lost; and (c) He shall comply with such other reasonable requirements as
the Board of Directors, the Chairman of the Board, any Vice Chairman of the
Board, if elected, or the President of the corporation, and the transfer agent
or the registrar shall deem appropriate under the circumstances.
Section 8. Replacement of Mutilated Certificates. A new certificate may be
issued in lieu of any certificate previously issued that may be defaced or
mutilated upon surrender for cancellation of a part of the old certificate
sufficient in the opinion of the Secretary and the transfer agent or the
registrar to duly identify the defaced or mutilated certificate and to protect
the corporation and the transfer agent or the registrar against loss or
liability. Where sufficient identification is lacking, a new certificate may be
issued upon compliance with the conditions set forth in Section 7 of this
Article VII.
ARTICLE VIII. INDEMNIFICATION AND REIMBURSEMENT
Subject to any express limitations imposed by applicable law, every
person now or hereafter serving as a director, officer, employee or agent of the
corporation and all former directors and officers, employees or agents shall be
indemnified and held harmless by the corporation from and against the obligation
to pay a judgement, settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan), and reasonable expenses (including
attorneys' fees and disbursements) that may be imposed upon or incurred by him
or her in connection with or resulting from any threatened, pending, or
completed, action, suit, or proceeding, whether civil, criminal, administrative,
investigative, formal or informal, in which he or she is, or is
12
<PAGE>
threatened to be made, a named defendant or respondent: (a) because he or she is
or was a director, officer, employee, or agent of the corporation; (b) because
he or she is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise; or
(c) because he or she is or was serving as an employee of the corporation who
was employed to render professional services as a lawyer or an accountant to the
corporation; regardless of whether such person is acting in such a capacity at
the time such obligation shall have been imposed or incurred, if (i) such person
acted in a manner he or she believed in good faith to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
proceeding, if such person had no reasonable cause to believe his or her conduct
was unlawful or (ii), with respect to an employee benefit plan, such person
believed in good faith that his or her conduct was in the interests of the
participants in and beneficiaries of the plan.
Reasonable expenses incurred in any proceeding shall be paid by the
corporation in advance of the final disposition of such proceeding if authorized
by the Board of Directors in the specific case, or if authorized in accordance
with procedures adopted by the Board of Directors, upon receipt of a written
undertaking executed personally by or on behalf of the director, officer,
employee, or agent to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the corporation, and a
written affirmation of his or her good faith belief that he or she has met the
standard of conduct required for indemnification.
The foregoing rights of indemnification and advancement of expenses
shall not be deemed exclusive of any other right to which those indemnified may
be entitled, and the corporation may provide additional indemnity and rights to
its directors, officers, employees or agents to the extent they are consistent
with law.
The provisions of this Article VIII shall cover proceedings whether now
pending or hereafter commenced and shall be retroactive to cover acts or
omissions or alleged acts or omissions which heretofore have taken place. In the
event of death of any person having a right of indemnification or advancement of
expenses under the provisions of this Article VIII, such right shall inure to
the benefit of his or her heirs, executors, administrators and personal
representatives. If any part of this Article VIII should be found to be invalid
or ineffective in any proceeding, the validity and effect of the remaining
provisions shall not be affected.
ARTICLE IX.
MERGERS, CONSOLIDATIONS AND OTHER DISPOSITIONS OF ASSETS
The affirmative vote of the shareholders of the corporation holding at least 80%
of the issued and outstanding shares of common stock of the corporation shall be
required to approve any merger or consolidation of the corporation with or into
any corporation, and the sale, lease, exchange or other disposition of all, or
substantially all, of the assets of the corporation to or with any other
corporation, person or entity, with respect to which the approval of the
corporation's shareholders is required by the provisions of the
13
<PAGE>
corporate laws of the State of Georgia. This Article shall not be altered,
deleted or rescinded except upon the affirmative vote of the shareholders
holding at least 80% of the issued and outstanding shares of common stock of the
corporation.
ARTICLE X.
CRITERIA FOR CONSIDERATION OF TENDER OR OTHER OFFERS
Section 1. Factors to Consider. The Board of Directors of the corporation
may, if it deems it advisable, oppose a tender or other offer for the
corporation's securities, whether the offer is in cash or in the securities of a
corporation or otherwise. When considering whether to oppose an offer, the Board
of Directors may, but is not legally obligated to, consider any pertinent
issues; by way of illustration, but not of limitation, the Board of Directors
may, but shall not be legally obligated to, consider all or any of the
following:
(i) whether the offer price is acceptable based on the historical
and present operating results or financial condition of the corporation;
(ii) whether a more favorable price could be obtained for the
corporation's securities in the future;
(iii) the impact which an acquisition of the corporation would
have on the employees and customers of the corporation and its
subsidiaries and the communities which they serve;
(iv) the reputation and business practices of the offeror and
its management and affiliates as they would affect the employees and
customers of the corporation and its subsidiaries and the future value
of the corporation's stock;
(v) the value of the securities, if any, that the offeror is
offering in exchange for the corporation's securities, based on an
analysis of the worth of the corporation as compared to the offeror or
any other entity whose securities are being offered; and
(vi) any antitrust or other legal or regulatory issues that are
raised by the offer.
Section 2. Appropriate Actions. If the Board of Directors determines that
an offer should be rejected, it may take any lawful action to accomplish its
purpose including, but not limited to, any or all of the following: (i) advising
shareholders not to accept the offer; (ii) litigation against the offeror; (iii)
filing complaints with governmental and regulatory authorities; (iv) acquiring
the corporation's securities; (v)
14
<PAGE>
selling or otherwise issuing authorized but unissued securities of the
corporation or treasury stock or granting options or rights with respect
thereto; (vi) acquiring a company to create an antitrust or other regulatory
problem for the offeror; and (vii) soliciting a more favorable offer from
another individual or entity.
ARTICLE XI. AMENDMENT
Except as otherwise specifically provided herein, the bylaws of the corporation
may be altered, amended or added to by a majority of the issued and outstanding
shares of common stock of the corporation present and voting therefor at a
shareholders' meeting or, subject to such limitations as the shareholders may
from time to time prescribe, by a majority vote of all the Directors then
holding office at any meeting of the Board of Directors.
files\bylaws.tss
15
<PAGE>
EXHIBIT 10.14
TOTAL SYSTEM SERVICES, INC.
STOCK OPTION AGREEMENT
January 10, 1997
THIS AGREEMENT ("Agreement"), dated as of the 10th day of January, 1997, by
and between Total System Services, Inc. (the "Company"), a Georgia corporation
having its principal office at 1200 6th Avenue, Columbus, Georgia, and Samuel A.
Nunn (the "Option Holder"), an individual resident of the State of Georgia.
W I T N E S S E T H:
WHEREAS, the Board of Directors of Company recognizes the value of having
Option Holder serve as a member of Company's Board of Directors and has elected
to provide Option Holder with added incentive and inducement to serve on
Company's Board of Directors and contribute to the success of the Company; and
WHEREAS, effective January 10, 1997, the Board of Directors of the Company
(a) granted to the Option Holder an option in respect of the number of shares
herein below set forth, and (b) fixed and determined the option price and
exercise and termination dates as set forth below.
NOW THEREFORE, in consideration of the mutual promises and representations
herein contained and other good and valuable consideration, it is agreed by and
between the parties hereto as follows:
1. The Company hereby grants to the Option Holder a non-qualified stock
option (the "Option") to purchase, on the terms and subject to the conditions
hereinafter set forth, all or any part of an aggregate of 25,000 shares of the
Common Stock ($1.00 par value) of the Company at the purchase price of $27.75
per share, exercisable in the amounts and at the times set forth in this
Paragraph 1. The Option may be exercised as follows: (a) 8,333 shares may be
exercised on or after January 10, 1998; (b) an additional 8,333 shares may be
exercised on or after January 10, 1999; and (c) the remaining 8,334 shares may
be exercised on or after January 10, 2000; provided that Option Holder has
remained a member of Company's Board of Directors through such dates or provided
that Option Holder is not a member of Company's Board of Directors as the result
of his death or disability. In the event Option Holder has not remained a member
of Company's Board of Directors through such dates for any reason other than
Option Holder's death or disability, the Option shall expire and shall not be
exercisable. Unless sooner terminated as provided in this Agreement, the Option
shall terminate, and all rights of the Option Holder hereunder shall expire as
follows: (a) 8,333 shares shall expire on January 10, 2008; (b) 8,333 shares
shall expire on January 10, 2009; and (c) 8,334 shares shall expire on January
10, 2010. In no event may the Option be exercised after January 10, 2010.
2. The Option, or any part thereof, may, to the extent that it is
exercisable, be exercised by giving written notice of exercise to the Company
specifying the number of shares to be purchased, accompanied by payment in full
of the purchase price, in cash, by check or such other instrument as may be
acceptable to the Company. No shares of Company stock resulting from the
exercise of the Option shall be issued until full payment therefor (including
any applicable taxes) has been made. Shares issued to Option Holder upon
exercise may be newly-issued shares or treasury shares.
3. The Option or any part thereof may be exercised during the lifetime of
the Option Holder only by the Option Holder and only while the Option Holder is
a member of Company's Board of Directors, except as otherwise provided in this
Agreement.
<PAGE>
4. Except as otherwise provided in this Agreement, the Option shall not be
transferred, assigned, pledged or hypothecated in any way. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of the Option or any
right or privilege confirmed hereby contrary to the provisions hereof, the
Option and the rights and privileges confirmed hereby shall immediately become
null and void.
5. In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Company's stock, any necessary adjustments shall be made to the
number of shares and price per share of the Option in order to preserve Option
Holder's rights so that Option Holder's rights after such event are
substantially proportionate to Option Holder's rights existing prior to such
event.
6. Any notice to be given to the Company shall be addressed to the Chairman
of the Company at 1200 6th Avenue, Columbus, Georgia, 31901.
7. Nothing herein contained shall affect the rights or obligations of
Company or Option Holder (as member of the Board of Directors of Company),
subject to the terms of any written contractual arrangement to the contrary,.
8. This Agreement shall be binding upon and inure to the benefit of the
Option Holder, his personal representatives, heirs and legatees, but neither
this Agreement nor any rights hereunder shall be assignable or otherwise
transferable by the Option Holder except as expressly set forth in this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
effective as of the date and year first written above.
TOTAL SYSTEM SERVICES, INC.
By: /s/Kathleen Moates
Title: Assistant Secretary
OPTION HOLDER
/s/Samuel A. Nunn
SIGNATURE
/s/Samual A. Nunn
PRINT NAME
<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 twelve months ended December 31, 1996, 1995
and 1994.
<CAPTION>
Twelve Months Ended Twelve Months Ended Twelve Months Ended
December 31, 1996 December 31, 1995 December 31, 1994
------------------------ -------------------------- -----------------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
Earnings Earnings Earnings Earnings Earnings Earnings
Per Share Per Share Per Share Per Share Per Share Per Share
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 39,437,181 $ 39,437,181 $ 27,730,102 $ 27,730,102 $ 22,490,144 $ 22,490,144
=========== =========== =========== =========== =========== ===========
Weighted average number of common shares
outstanding 129,287,493 129,287,493 129,263,226 129,263,226 129,259,124 129,259,124
Increase due to assumed issuance of shares
related to stock options outstanding 163,605 167,903 130,086 153,588 110,548 127,718
Increase due to contingently issuable
shares associated with an acquisition - - 21,978 21,978 - 75,302
----------- ----------- ----------- ----------- ----------- -----------
Adjusted weighted average number of common
and common equivalent shares outstanding 129,451,098 129,455,396 129,415,290 129,438,792 129,369,672 129,462,144
=========== =========== =========== =========== =========== ===========
Net income per common and common equivalent share $ .30 $ .30 $ .21 $ .21 $ .17 $ .17
=========== =========== =========== =========== =========== ===========
</TABLE>
EXHIBIT 13.1
Selected Financial Data
The following comparisons highlight significant historical trends in TSYS'
results of operations and financial condition. Total revenues and net income
have grown over the last five years at compounded annual growth rates of 22.6%
and 21.0%, respectively. The balance sheet data also reflects the continued
strong financial position of TSYS, as evidenced by the current ratio of 1.9:1 at
December 31, 1996, and increased shareholders' equity. The following data should
be read in conjunction with the Consolidated Financial Statements and related
Notes thereto and Financial Review, included elsewhere in this Annual Report.
<TABLE>
<CAPTION>
Years Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands except share and per share data) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Bankcard data processing services ........... $ 277,870 218,953 166,194 136,650 123,356
Other services .............................. 33,778 30,755 21,377 15,424 6,307
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues ...................... 311,648 249,708 187,571 152,074 129,663
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Salaries and other personnel expense ........ 124,259 94,946 73,051 54,517 43,136
Net occupancy and equipment expense ......... 82,118 64,549 51,283 43,421 39,793
Other operating expenses .................... 53,368 47,291 28,139 21,521 17,712
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses ............ 259,745 206,786 152,473 119,459 100,641
- ------------------------------------------------------------------------------------------------------------------------------------
Equity in income (loss) of joint ventures ... 7,094 69 (13) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income .................... 58,997 42,991 35,085 32,615 29,022
Nonoperating income (expense):
Gain (loss) on disposal of equipment, net ... 31 (123) 65 335 157
Interest income (expense), net .............. 1,416 839 264 (80) (1,121)
- ------------------------------------------------------------------------------------------------------------------------------------
Total nonoperating income (expense) . 1,447 716 329 255 (964)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes .......... 60,444 43,707 35,414 32,870 28,058
Income taxes ........................................ 21,007 15,977 12,924 12,647 10,489
- ------------------------------------------------------------------------------------------------------------------------------------
Net income .......................... $ 39,437 27,730 22,490 20,223 17,569
====================================================================================================================================
Net income per share ................ $ .31 .21 .17 .16 .14
====================================================================================================================================
Cash dividends declared per share ................... $ .045 .045 .040 .035 .035
====================================================================================================================================
Weighted average outstanding shares ................. 129,287,493 129,263,226 129,259,124 128,811,280 128,106,672
====================================================================================================================================
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------
(in thousands) 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets ............................. $246,759 199,000 165,042 133,339 122,048
Working capital .......................... 46,218 37,687 33,421 30,594 31,850
Total long-term debt ..................... 676 931 1,162 1,707 12,282
Shareholders' equity ..................... 178,878 144,472 123,004 102,278 85,945
</TABLE>
17
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
Financial Review
This Financial Review provides a discussion of the results of operations,
financial condition, liquidity and capital resources of TSYS and creates
awareness of the factors that have affected its recent earnings, as well as
those factors that may affect its future earnings. The accompanying Consolidated
Financial Statements and related Notes, and Selected Financial Data are an
integral part of this Financial Review and should be read in conjunction with
it.
Results of Operations
Revenues
TSYS' revenues are derived principally from providing bankcard data processing
and related services to banks and other institutions under long-term processing
contracts. TSYS' services are provided as THE TOTAL SYSTEM to financial
institutions and other organizations across the United States and in Mexico,
Puerto Rico and Canada.
Bankcard data processing revenues are generated primarily from charges
based on the number of accounts billed, transactions and authorizations
processed, credit bureau requests, credit cards embossed and mailed, and other
processing services for cardholder accounts on file. Due to the expanding use of
bankcards and the increase in the number of cardholder accounts processed by
TSYS, revenues relating to bankcard data processing services have continued to
grow. Processing contracts with certain large customers generally provide for
discounts on certain services based on increases in the number of cardholder
accounts processed. As a result, bankcard data processing revenues are
influenced by the customer mix relative to the size of customer bankcard
portfolios, as well as the number of individual cardholder accounts processed
for each customer.
Due to the somewhat seasonal nature of the credit card industry, TSYS'
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. Furthermore, the conversion of
cardholder accounts for new customers to THE TOTAL SYSTEM, as well as the
deconversion of cardholder accounts of existing customers, also impacts the
results of operations from period to period. Another factor, among others, which
may affect TSYS' revenues and results of operations from time to time is the
sale by a customer of its card portfolio or a segment of its accounts to a party
which processes cardholder accounts internally or uses another processor. The
financial services industry continues to consolidate which could favorably or
unfavorably impact TSYS' financial condition or results of operations.
The average number of cardholder accounts on file increased 35.7% to 72.0
million in 1996, compared to 53.1 million in 1995, which represented a 35.2%
increase over 39.5 million in 1994. At December 31, 1996, TSYS' cardholder
accounts on file were approximately 79.4 million, up from 63.3 million and 44.1
million at December 31, 1995 and 1994, respectively.
During 1996, the majority of the growth in cardholder accounts is primarily
a result of portfolio growth of existing customers. In addition, approximately
6.5 million cardholder accounts of new customers were added to THE TOTAL SYSTEM.
On August 16, 1995, TSYS and Visa U.S.A. Inc. ("Visa") announced an
agreement in principle to merge their merchant and point-of-sale processing
operations. On May 1, 1996, the joint venture, known as Vital Processing
Services L.L.C. ("Vital"), became operational and began offering fully
integrated merchant transaction and related electronic information services to
financial and nonfinancial institutions and their merchant customers. Vital is
structured with its own management team and separate Board of Directors and has
its corporate headquarters in Tempe, Arizona, with other locations in Columbus,
Georgia, and Atlanta, Georgia. TSYS and Visa are equal owners in the joint
venture.
Revenues and expenses associated with TSYS' merchant operations through
April 1996 are included in TSYS' revenues and expenses. However, since Vital
became operational May 1, 1996, TSYS' share of its results of operations 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 affects the comparability of prior periods
presented in the Company's statements of income.
Since 1994, TSYS has been servicing commercial cards which include
purchasing cards, corporate cards and company business cards for employees. At
December 31, 1996, TSYS was processing approximately 3.1 million commercial card
accounts, a 42.5% increase over the approximately 2.0 million being processed at
year-end 1995, representing a 53.8% increase over the 1.3 million at year-end
1994. Commercial card revenue is included in revenues from bankcard processing.
A significant amount of the Company's revenues are derived from certain
major customers who are processed under long-term contracts. For the years ended
December 31, 1996, 1995 and 1994, two customers accounted for approximately 29%,
34% and 36% 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
financial condition and results of operations.
During 1996, TSYS successfully converted approximately 4.5 million
cardholder accounts for Bank of America. TSYS' conversion schedule for 1997
anticipates converting all of Bank of America's remaining accounts. In addition,
Bankcard Revenues (Millions of Dollars)
96......................$277.9
95......................$219.0
94......................$166.2
93......................$136.7
92......................$123.4
Operating Income (Millions of Dollars)
96.....................$59.0
95.....................$43.0
94.....................$35.1
93.....................$32.6
92.....................$29.0
19
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
The following table sets forth certain revenue and expense items as a percentage
of total revenues and the percentage increase or decrease in those items from
the table of Selected Financial Data:
<TABLE>
<CAPTION>
Percentage Change
in Dollar Amounts
-----------------------
Percentage of Total Revenues 1996 1995
Years Ended December 31, vs vs
1996 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Bankcard data processing services ...................... 89.2% 87.7 88.6 26.9 31.7
Other services ......................................... 10.8 12.3 11.4 9.8 43.9
- -----------------------------------------------------------------------------------------------------
Total revenues ................................. 100.0 100.0 100.0 24.8 33.1
- -----------------------------------------------------------------------------------------------------
Expenses:
Salaries and other personnel expense ................... 39.9 38.0 38.9 30.9 30.0
Net occupancy and equipment expense .................... 26.3 25.8 27.3 27.2 25.9
Other operating expenses ............................... 17.1 19.0 15.0 12.9 68.1
- -----------------------------------------------------------------------------------------------------
Total operating expenses ....................... 83.3 82.8 81.2 25.6 35.6
- -----------------------------------------------------------------------------------------------------
Equity in income (loss) of joint ventures .............. 2.2 0.0 (0.0) nm nm
- -----------------------------------------------------------------------------------------------------
Operating income ............................... 18.9 17.2 18.8 37.2 22.5
- -----------------------------------------------------------------------------------------------------
Nonoperating income (expense):
Gain (loss) on disposal of equipment, net .............. 0.0 (0.0) 0.0 nm nm
Interest income (expense), net ......................... 0.5 0.3 0.1 68.6 nm
- -----------------------------------------------------------------------------------------------------
Total nonoperating income ...................... 0.5 0.3 0.1 101.9 118.2
- -----------------------------------------------------------------------------------------------------
Income before income taxes ..................... 19.4 17.5 18.9 38.3 23.4
Income taxes ................................................... 6.7 6.4 6.9 31.5 23.6
- -----------------------------------------------------------------------------------------------------
Net income ..................................... 12.7% 11.1 12.0 42.2 23.3
=====================================================================================================
</TABLE>
nm = not meaningful
during the second quarter of 1996, 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. Management
believes all of Bank of America's cardholder accounts will be successfully
converted to TS2.
Revenues from other services consist primarily of revenues generated by
TSYS' wholly owned subsidiaries, Columbus Depot Equipment Company ("CDEC"),
Mailtek, Inc. ("Mailtek"), Lincoln Marketing, Inc. ("LMI"),
and Columbus Productions, Inc. ("CPI"). CDEC provides TSYS
customers with an option to lease certain equipment nec-
20
essary for on-line communications and use of TSYS applications; Mailtek and LMI
provide TSYS customers and others with mail and correspondence processing
services and account solicitation services, and CPI provides full-service
commercial printing services to TSYS customers and others.
Operating Expenses
As a percentage of revenues, operating expenses increased in 1996 to 83.3%,
compared to 82.8% and 81.2% for 1995 and 1994, respectively. The principal
increases in operating expenses resulted from 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 transaction processing provisions; and
certain costs associated with the conversion of customers to TS2 and the
start-up of TSYS de Mexico.
A significant portion of TSYS' operating expenses relates to salaries and
other personnel costs. During 1996, the average number of employees increased to
2,498, compared to 2,087 in 1995 and 1,874 in 1994. In addition to the growth in
number of employees, the increase in salaries and other personnel costs is
attributable to normal salary increases and related employee benefits.
Employment costs related to internally developed software and contract
acquisition costs capitalized in 1996 were $4.9 million, compared to $8.4
million and $14.5 million in 1995 and 1994, respectively, the majority of which
related to the development of TS2. These decreases in capitalization are a major
component of the increases in employment expense, particularly in comparing 1995
to 1994. Since the completion of core TS2, employment expenses capitalized
relate primarily to enhancements to TS2 and costs associated with the conversion
to TS2 of customers under long-term contracts.
Due to the importance of technology to our business, a large portion of
TSYS' employees are programmers - approximately 33.1% in 1996, compared to 35.7%
and 31.6% in 1995 and 1994, respectively. To expand our programmer base, the
state of Georgia has offered an incentive program called Intellectual Capital
Partnership Program ("ICAPP"). ICAPP is a commitment of up to $23 million for
classrooms, teachers, computer equipment and high-tech training designed to meet
TSYS' growth needs for technical analysts, computer systems personnel and
mainframe programmers into the next century.
Net occupancy and equipment expense increased 27.2% in 1996 over 1995,
compared to 25.9% in 1995 over 1994. Equipment and software rentals, which
represents the largest component of net occupancy and equipment expense,
increased $11.1 million, or 34.1% in 1996, compared to 1995, and $8.5 million,
or 35.1% in 1995 compared to 1994. Substantial new, technologically advanced
equipment was leased in order to meet growth needs in 1996 and anticipated
future growth, including mainframe computers and significant additional direct
access storage devices. Purchasing and leasing mainframe computers, laser
printers and direct access storage drives are part of TSYS' strategy of
supporting infrastructure growth. Due to the rapidly
21
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
changing technology in computer equipment, leasing provides a way for TSYS to
acquire new equipment while minimizing some of the risks associated with
investing in state-of-the-art computer equipment.
TSYS continues to monitor and assess its building and equipment needs as it
positions itself for future growth and expansion. During 1996, TSYS made a
strategic decision to remain in Columbus, Georgia, and build a new campus-type
facility on approximately 50 acres of land north of downtown Columbus. The new
facility will consolidate most of TSYS' multiple Columbus locations and will
facilitate future growth. In addition, TSYS began developing plans to expand its
operations center in north Columbus during 1997. This expansion, while not
finalized, will include additional space for the card production services now
located in downtown Columbus. The expansion is also expected to include
additional space for statement printing and data processing functions. A
separate building will be constructed on the North Center property in 1997 to
serve as LMI's headquarters. In 1995, a new, 110,000 square-foot building was
purchased to accommodate current office space needs and provide space for future
growth in technical staff.
Other operating expenses increased 12.9% in 1996 compared to 1995 and 68.1%
in 1995 compared to 1994. Management fees were paid to an affiliate for human
resources, maintenance, security, communications, corporate education, travel
and administration. These fees were paid for only the second half of 1995 but
were paid for a full year in 1996 and therefore increased 171.7% in 1996 over
1995. However, if the fee paid in 1996 is compared to an annualized fee for
1995, the increase would be 35.9% and is a significant factor in the increase in
other operating expenses. Of the remaining components in other operating
expenses, the fluctuations varied. For example, certain direct business expenses
such as supplies and telecommunications grew collectively 5.2% or $1.0 million.
Partially offsetting this growth is a reduction in certain professional fees and
local taxes.
Factors contributing to the increase in other operating expenses in 1995
included the volume of supplies related to the processing of accounts due to the
growth in number of accounts serviced, coupled with an increase in the cost of
supplies, especially paper. In the second half of 1995, management fees totaling
$3.2 million were paid to an affiliate for various services; these management
fees are included in other operating expenses in the second half of 1995 and
would have been reflected as salaries and other personnel expenses in the first
half of 1995 and in 1994. Other operating expenses also increased in 1995 as a
result of certain provisions made for contractual or negotiated processing
commitments. These provisions were deemed necessary in view of the increased
risks associated with the significant growth in the number of accounts being
processed.
Operating Income
Operating income increased 37.2% to $59.0 million in 1996, compared to $43.0
million in 1995, an increase of 22.5% over 1994. Equity in income of TSYS' two
joint
22
ventures contributed significantly to the increase in 1996 over 1995 as Vital
became operational during 1996 and the Mexican joint venture had its first full
year of operations in 1996. Excluding the equity income, operating income
increased 20.9% to $51.9 million in 1996, primarily due to increased revenues
combined with a focus on expense control. The operating income margin increased
to 18.9% in 1996, compared to 17.2% and 18.8% in 1995 and 1994, respectively.
Nonoperating Income (Expense)
Interest income (expense), net, includes interest expense of $62,872, $156,692
and $151,584 and interest income of $1,478,572, $996,373 and $415,565 for 1996,
1995 and 1994, respectively.
Interest expense decreased in 1996 due to the decreasing level of
outstanding debt. Interest expense increased only 3.4% in 1995, as compared to
1994, due to new debt obtained in early 1995 and repaid in November 1995.
Although the Company has not yet finalized the design or the financing of its
new real estate development projects, financing costs will likely increase in
1997.
Interest income increased 48.4% in 1996, as compared to 1995, and increased
139.8% in 1995, compared to 1994. The changes are the result of both
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.
Income Taxes
Income tax expense was $21.0 million, $16.0 million and $12.9 million in 1996,
1995 and 1994, respectively, representing effective tax rates of 34.8%, 36.6%
and 36.5%. The decline in TSYS' effective tax rate for 1996, as compared to 1995
and 1994, is attributable to certain effective income tax planning strategies,
including the identification and recognition of research and experimentation
credits for ongoing development activities and a reduction in state income
taxes.
Net Income
Net income increased 42.2% to $39.4 million ($.31 per share) in 1996, compared
to a 23.3% increase to $27.7 million ($.21 per share) for 1995, up from $22.5
million ($.17 per share) in 1994.
Financial Condition, Liquidity and
Capital Resources
The Consolidated Statements of Cash Flows detail the Company's cash flows from
operating, investing and financing activities. TSYS' primary method for funding
liquidity requirements for TSYS has been cash generated from current operations
and the occasional use of borrowed funds to supplement financing of capital
expenditures. The major uses of cash generated from operations have been the
addition of property and equipment; computer software developed internally and
purchased; investment in joint ventures, contract acquisitions and short-term
investments; and the payment of cash dividends.
23
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
During 1996, TSYS purchased and leased computer hardware and related
equipment including software. Capital expenditures for property and equipment
were $19.4 million in 1996, compared to $17.0 million in 1995, and $8.7 million
in 1994. Expenditures for purchased computer software were $9.0 million in 1996,
compared to $5.5 million in 1995 and $3.1 million in 1994. Additions to
internally developed computer software, principally TS2 and enhancements to TS2,
were less than $200,000 in 1996, $2.6 million in 1995, and $10.6 million in
1994.
Costs to develop the core TS2 bankcard processing and support software were
capitalized, and amortization began in October 1994 over a useful life of ten
years. Amortization of TS2 resulted in amortization expense of $3.3 million in
1996 and 1995 and $826,000 in 1994. Costs associated with the development of
additional features of TS2 continue to be capitalized upon establishing
technological feasibility and are amortized when they become available for
general customer use.
Costs associated with the conversion of customers under long-term contracts
to TS2 are capitalized as contract acquisition costs and are amortized over the
life of the processing contracts. Capitalized conversion costs, included in
contract acquisition costs, at December 31, 1996, 1995 and 1994, amounted to
$8.4 million, $5.4 million and $2.5 million, respectively. Amortization of
specific capitalized conversion costs commenced in April 1996 and totaled
$204,000 in 1996.
In late 1994, TSYS invested in a Mexican joint venture, TSYS de Mexico,
which began generating revenues in June 1995 from its new facility in Toluca
near Mexico City. TSYS de Mexico is now providing credit card related processing
for 20 banks in Mexico. TSYS de Mexico performs card and statement production
services, while subcontracting bankcard processing to TSYS. TSYS' total capital
investment in TSYS de Mexico is $6.2 million, representing an equity interest of
49%. At December 31, 1996, currency translation adjustments decreased the
Company's equity investment in TSYS de Mexico by $1.9 million and resulted in a
cumulative currency translation adjustment, net of income taxes, of $1.2
million. Effective in 1997, Mexico's highly inflationary economy will require
any foreign currency fluctuations above the valuation at December 31, 1996, to
be reflected in TSYS' results of operations.
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.
The joint venture between TSYS and Visa U.S.A., known as Vital Processing
Services L.L.C., became operational May 1, 1996, merging the companies' merchant
and point-of-sale processing operations. TSYS contributed cash of $2.5 million,
as well as $1.4 million in equipment and other assets, to the joint venture.
TSYS and Visa are equal owners in the joint venture.
24
In each quarter of 1996, the Board of Directors declared a dividend on
TSYS' common stock of $.011 per share. Total dividends declared in 1996 and 1995
were $5.8 million, compared to $5.2 million in 1994. In 1996, a stock dividend
was distributed, effecting a two-for-one stock split. (See Note 7 to
Consolidated Financial Statements.)
During 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.
During 1996, TSYS announced its decision to remain in Columbus, Georgia,
and build a new campus-type facility on approximately 50 acres of land north of
downtown Columbus. The decision was based on a commitment by the state of
Georgia to provide 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-building, multi-year phased
project with initial construction scheduled to begin by mid 1997. Preliminary
cost estimates for the first phase are expected to be $75-100 million over a two
to three year period. In addition, the proposed expansion of the Company's
operations center is expected to cost $20-25 million. Financing for these
projects 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.
Although the impact of inflation on its operations cannot be precisely
determined, the Company believes that by controlling its operating expenses and
by taking advantage of the economies of scale through utilization of more
efficient computer hardware and software, it can minimize the impact of
inflation.
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, as evidenced by TSYS' current ratio of 1.9:1. At December 31, 1996,
TSYS had working capital of $46.2 million, compared to $37.7 million in 1995 and
$33.4 million in 1994.
Management believes that outside sources for capital will be available to
finance expansion projects and possible acquisitions should the Company decide
to pursue such financing. 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. However, there can be no assurance that funds will be
available on terms acceptable to TSYS. The Company did not require any
short-term borrowings during 1996, 1995 or 1994.
25
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (includes $25.1 million and $16.7 million
on deposit with a related party in 1996 and 1995, respectively) 27,496,057 18,849,623
Short-term investments with a related party 5,000,000 --
Accounts receivable, net of allowance for doubtful accounts of
$704,000 and $714,000 in 1996 and 1995, respectively 59,202,399 49,614,779
Prepaid expenses and other current assets 6,624,482 9,362,500
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 98,322,938 77,826,902
Property and equipment, net (Note 3) 62,955,926 54,572,903
Computer software, net (Note 4) 39,720,484 39,215,561
Other assets (Notes 5 and 11) 45,759,735 27,384,435
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 246,759,083 198,999,801
====================================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 4,695,970 5,811,334
Accrued salaries and related liabilities 6,422,199 4,523,723
Accrued employee benefits 14,590,362 10,412,551
Current portion of long-term debt and obligations under capital leases (Note 6) 201,274 243,786
Other current liabilities 26,195,540 19,148,536
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 52,105,345 40,139,930
Long-term debt and obligations under capital leases,
excluding current portion (Note 6) 474,513 686,955
Deferred income taxes (Note 8) 15,301,478 13,700,895
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 67,881,336 54,527,780
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity (Notes 2 and 7):
Common stock $.10 par value. Authorized 300,000,000 shares;
129,483,522 and 129,461,544 issued in 1996 and 1995, respectively;
129,289,680 and 129,266,744 outstanding in 1996 and 1995, respectively 12,948,352 12,946,154
Additional paid-in capital 5,353,972 4,445,755
Treasury stock, at cost (473,544) (475,789)
Cumulative currency translation adjustments (1,178,182) (1,052,081)
Retained earnings 162,227,149 128,607,982
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 178,877,747 144,472,021
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 10)
Total liabilities and shareholders' equity $ 246,759,083 198,999,801
====================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
26
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Bankcard data processing services (includes $24.9 million, $10.2 million
and $1.6 million from related parties for the years ended
December 31, 1996, 1995, and 1994, respectively) $277,869,778 218,953,101 166,194,263
Other services 33,778,571 30,754,596 21,376,564
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues (Notes 2 and 12) 311,648,349 249,707,697 187,570,827
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Salaries and other personnel expense 124,258,754 94,946,370 73,050,930
Net occupancy and equipment expense 82,117,603 64,548,541 51,282,584
Other operating expenses 53,368,464 47,291,267 28,138,822
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses (Note 2) 259,744,821 206,786,178 152,472,336
- ------------------------------------------------------------------------------------------------------------------------------------
Equity in income (loss) of joint ventures (Note 5) 7,093,600 68,666 (12,612)
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 58,997,128 42,990,185 35,085,879
- ------------------------------------------------------------------------------------------------------------------------------------
Nonoperating income (expense):
Gain (loss) on disposal of equipment, net 31,576 (122,790) 64,539
Interest income (expense), net (includes $1.4 million,
$759,000 and $324,000 from a related party for the
years ended December 31, 1996, 1995 and 1994) 1,415,700 839,681 263,981
- ------------------------------------------------------------------------------------------------------------------------------------
Total nonoperating income (Note 2) 1,447,276 716,891 328,520
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 60,444,404 43,707,076 35,414,399
Income taxes (Note 8) 21,007,223 15,976,974 12,924,255
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 39,437,181 27,730,102 22,490,144
====================================================================================================================================
Net income per share $ .31 .21 .17
====================================================================================================================================
Weighted average shares outstanding 129,287,493 129,263,226 129,259,124
====================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
27
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Years Ended December 31, 1996, 1995 and 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative
Additional Currency
Common Stock Paid-in Treasury Translation Retained
Shares Amount Capital Stock Adjustment Earnings Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
At December 31, 1993 129,006,080 $12,900,608 478,248 (475,789) -- 89,375,104 $102,278,171
Common stock issued in
acquisitions 451,308 45,130 2,742,879 -- -- -- 2,788,009
Amortization of restricted
stock awards (Note 7) -- -- 618,019 -- -- -- 618,019
Cash dividends declared
($.040 per share) -- -- -- -- -- (5,170,505) (5,170,505)
Net income -- -- -- -- -- 22,490,144 22,490,144
- -----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1994 129,457,388 12,945,738 3,839,146 (475,789) -- 106,694,743 123,003,838
Common stock issued
under restricted stock
awards (Note 7) 4,156 416 (416) -- -- -- --
Amortization of restricted
stock awards (Note 7) -- -- 607,025 -- -- -- 607,025
Increase in cumulative currency
translation adjustments -- -- -- -- (1,052,081) -- (1,052,081)
Cash dividends declared
($.045 per share) -- -- -- -- -- (5,816,863) (5,816,863)
Net income -- -- -- -- -- 27,730,102 27,730,102
- -----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1995 129,461,544 12,946,154 4,445,755 (475,789) (1,052,081) 128,607,982 144,472,021
Common stock issued in
acquisitions 21,978 2,198 310,302 -- -- -- 312,500
Common stock issued
through exercise of
stock option -- -- 315 2,245 -- -- 2,560
Amortization of restricted
stock awards (Note 7) -- -- 582,267 -- -- -- 582,267
Increase in cumulative currency
translation adjustments -- -- -- -- (126,101) -- (126,101)
Cash dividends declared
($.045 per share) -- -- -- -- -- (5,818,014) (5,818,014)
Tax benefits associated
with stock awards -- -- 15,333 -- -- -- 15,333
Net income -- -- -- -- -- 39,437,181 39,437,181
- -----------------------------------------------------------------------------------------------------------------------------------
At December 31, 1996 129,483,522 $12,948,352 5,353,972 (473,544) (1,178,182) 162,227,149 $178,877,747
===================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 39,437,181 27,730,102 22,490,144
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in (income) loss of joint ventures (7,093,600) (68,666) 12,612
Depreciation and amortization 23,106,775 20,285,123 16,389,812
Provision for doubtful accounts 94,500 458,606 (559,305)
Deferred income tax expense 1,600,583 963,384 2,823,772
(Gain) loss on disposal of equipment, net (31,576) 122,790 (64,539)
(Increase) in:
Accounts receivable (9,682,120) (13,970,497) (2,630,810)
Prepaid expenses and other assets (1,600,679) (94,883) (2,589,668)
Increase (decrease) in:
Accounts payable (1,115,364) 314,885 2,214,514
Accrued expenses and other liabilities 13,338,079 12,137,363 5,772,622
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 58,053,779 47,878,207 43,859,154
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (19,426,253) (16,977,970) (8,736,909)
Additions to computer software (9,195,856) (8,129,742) (13,763,844)
Proceeds from disposal of equipment 657,699 864,699 111,295
Purchases of businesses, net of cash and cash equivalents acquired -- -- 463,347
Investment in joint ventures (2,482,939) (3,455,865) (2,735,088)
Additions to contract acquisition costs (7,889,846) (9,954,881) (7,119,144)
Purchase of short-term investment (5,000,000) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (43,337,195) (37,653,759) (31,780,343)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long-term debt -- 1,965,775 --
Principal payments on long-term debt and capital lease obligations (254,954) (2,208,457) (1,342,144)
Dividends paid on common stock (5,817,756) (5,816,817) (4,843,399)
Proceeds from exercise of stock option 2,560 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (6,070,150) (6,059,499) (6,185,543)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 8,646,434 4,164,949 5,893,268
Cash and cash equivalents at beginning of period 18,849,623 14,684,674 8,791,406
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 27,496,057 18,849,623 14,684,674
====================================================================================================================================
Cash paid for interest $ 62,129 157,130 159,356
====================================================================================================================================
Cash paid for income taxes $ 22,890,244 16,244,194 9,094,595
====================================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
29
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
Notes To Consolidated Financial Statements
NOTE 1 Basis of Presentation
and Summary of Significant
Accounting Policies
Business: Total System Services, Inc. ("TSYS" or "the Company") is an 80.7%
owned subsidiary of Columbus Bank and Trust Company (CB&T) which is a wholly
owned subsidiary of Synovus Financial Corp. (Synovus). Synovus' stock is traded
on the NYSE under the symbol "SNV." TSYS provides bankcard data processing and
related services to banks and other institutions.
Principles of Consolidation and Basis of Presentation: The accompanying
consolidated financial statements of Total System Services, Inc. include the
accounts of TSYS and its wholly owned subsidiaries, Columbus Depot Equipment
Company ("CDEC"), Mailtek, Inc. ("Mailtek"), Lincoln Marketing, Inc. ("LMI"),
and Columbus Productions, Inc. ("CPI"). Significant intercompany accounts and
transactions have been eliminated in consolidation. Management of the Company
has made a number of estimates and assumptions relating to the reporting of
assets and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
Investment in Joint Ventures: TSYS' 49% investment in Total System Services de
Mexico, S.A. de C.V. ("TSYS de Mexico"), a bankcard data processing operation
located in Mexico, is accounted for using the equity method of accounting, as is
TSYS' 50% investment in Vital Processing Services L.L.C. ("Vital"), a merchant
processing operation headquartered in Tempe, Arizona.
Property and Equipment: Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation expense is computed
using the straight-line method over the estimated useful lives of the assets.
Computer Software: The Company capitalizes software development costs incurred
from the time technological feasibility of the software product or enhancement
is established until the software is ready for use in providing processing
services to customers. Research and development costs and computer software
maintenance costs which relate to software development are expensed as incurred.
Software development costs related to the core of TS2 are amortized using the
greater of (1) the straight-line method over the estimated useful life of 10
years or (2) the ratio of current revenues to current and anticipated revenues.
All other software development costs and costs of purchased computer software
are amortized using the greater of (1) the straight-line method over the
estimated useful lives of three to five years or (2) the ratio of current
revenues to current and anticipated revenues.
The carrying value of computer software costs is reviewed for impairment by
the Company, and impairments are recognized when the expected undiscounted
future operating cash flows derived from such intangible assets are less than
their carrying value. If such review indicates a potential impairment, the
Company uses fair value in determining the amount that should be written off.
Revenue Recognition: The Company's bankcard data processing revenues are derived
from long-term processing contracts with banks and other institutions and are
recognized as revenues at the time the services are performed. The Company's
service contracts generally contain terms ranging from three to ten years.
30
Contract Acquisition Costs: The Company capitalizes certain contract acquisition
costs related to signing or renewing long-term contracts. These costs, which
primarily consist of cash payments for rights to provide processing services,
incremental internal conversion and software development costs, and third-party
software development costs, are amortized using the straight-line method over
the contract term beginning when the customer's cardholder accounts are
converted to the Company's processing system. The Company evaluates the carrying
value of contract acquisition costs for impairment on the basis of whether these
costs are fully recoverable from expected undiscounted operating cash flows of
the related contract. If such review indicates a potential impairment, the
Company uses fair value in determining the amount that should be written off.
All costs incurred prior to contract execution are expensed as incurred.
Goodwill: Goodwill results from the excess of cost over the fair value of net
assets of businesses acquired and is being amortized using the straight-line
method over periods of five to 15 years. The Company reviews goodwill for
impairment on the basis of whether the goodwill is fully recoverable from
expected undiscounted operating cash flows of the related business units. If
such review indicates a potential impairment, the Company uses fair value in
determining the amount that should be written off.
Income Taxes: Income tax expense reflected in TSYS' consolidated financial
statements is computed based on the taxable income of TSYS as a separate entity.
A consolidated federal income tax return is filed for Synovus and its majority
owned subsidiaries, including TSYS.
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109 ("Statement 109"). Under the
asset and liability method of Statement 109, deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred income tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Cash Flow Reporting: Cash equivalents are considered to be investments with a
maturity of three months or less when purchased.
Net Income per Share: Net income per share is based on the weighted average
number of shares of common stock outstanding during each period, including
shares issued under restricted stock awards. The dilutive impact of contingently
issuable shares and outstanding options to acquire common stock is not
significant to the computation of net income per share.
Fair Values of Financial Instruments: The Company uses financial instruments in
the normal course of its business. The carrying values of cash equivalents,
accounts receivable, accounts payable, and employee benefits and other current
liabilities approximate fair value due to the short-term maturities of these
assets and liabilities. The investment in joint ventures is accounted for by the
equity method and pertains to privately held companies for which a fair value is
not readily available. The Company believes the fair values of its investment in
joint ventures exceed the carrying value.
31
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
Foreign Currency Translation: Foreign currency financial statements of the
Company's Mexican joint venture are translated into U.S. dollars at current
exchange rates, except for revenues, costs and expenses, and net income which
are translated at average exchange rates during each reporting period. Net
exchange gains or losses resulting from the translation of assets and
liabilities are accumulated in a separate section of shareholders' equity titled
Cumulative Currency Translation Adjustments.
Reclassifications: Certain reclassifications have been made to the 1995 and 1994
financial statements to conform to the presentation adopted in 1996.
NOTE 2 Relationship with Affiliated Companies
At December 31, 1996, CB&T owned 104,401,292 shares (approximately 80.7%) of
TSYS common stock.
TSYS has entered into agreements with CB&T and certain of its affiliates,
pursuant to which TSYS performs bankcard data processing services. Such bankcard
data processing service revenues were $1,809,847, $1,805,280 and $1,495,391
during the years ended December 31, 1996, 1995 and 1994, respectively.
Miscellaneous data processing services performed by TSYS for certain Synovus
nonbanking affiliates generated revenues of $128,411, $113,568 and $107,166
during the years ended December 31, 1996, 1995 and 1994, respectively; these
revenues are included in bankcard data processing services. Bankcard data
processing revenues related to TSYS de Mexico, the Company's Mexican joint
venture, were $18,201,357 and $8,281,777 for the years ended December 31, 1996
and 1995, respectively. Bankcard data processing revenues related to Vital, the
Company's joint venture with Visa, were $4,755,406 for the year ended December
31, 1996. Revenues from other services provided by TSYS to Synovus and its
affiliates were $920,703, $718,281 and $614,333 during the years ended December
31, 1996, 1995 and 1994, respectively.
TSYS maintains an unsecured credit agreement with CB&T. The credit
agreement has a maximum available principal balance of $5.0 million, with
interest at prime. TSYS did not use the credit facility during 1996 or 1995.
In 1996, 1995 and 1994, TSYS received interest income from CB&T amounting
to $1,392,543, $837,356 and $384,070, respectively. Also, in 1995 and 1994, TSYS
paid CB&T interest expense of $78,318 and $60,193, respectively.
During 1996, 1995 and 1994, Synovus Data Corp. paid TSYS $303,554, $701,159
and $732,136, respectively, for data links, network services and other
miscellaneous items.
TSYS leases a portion of its facilities from Synovus Data Corp. and CB&T,
and leases portions of the buildings it owns to CB&T. TSYS made lease payments
for office facilities to Synovus Data Corp. of $240,000 in 1996 and $214,650 in
1995 and 1994. Lease payments made to CB&T amounted to $53,790 in 1996, $54,313
in 1995 and $71,720 in 1994. Lease payments received from CB&T amounted to
$11,628 in 1996, $20,203 in 1995, and $30,716 in 1994.
TSYS has entered into a management agreement with Synovus pursuant to which
TSYS pays for management, legal and tax services provided by Synovus. Such
management fees amounted to $1,079,706, $1,039,693 and $915,215 for the years
ended December 31, 1996, 1995 and 1994, respectively. Synovus paid TSYS
management fees of $361,093 and $409,438 in 1995 and 1994, respectively, for
payroll processing support services.
In July 1995, Synovus formed a separate company, Synovus Service Corp.
("SSC"), to provide human resource, payroll, security, maintenance and other
administrative services to TSYS and other affiliated companies. TSYS paid
SSC $8,583,648 and $3,158,695 for these services in 1996 and 1995,
respectively. TSYS received $107,449 and $198,578
32
in rent from SSC in 1996 and 1995, respectively. TSYS made lease payments to SSC
for $34,472 in 1996.
TSYS maintains deposit accounts with CB&T, the majority of which are
interest-earning and on which TSYS receives market rates of interest. Included
in cash and cash equivalents are deposit balances with CB&T of $25,136,569 and
$16,742,926 at December 31, 1996 and 1995, respectively.
TSYS also has a $5.0 million certificate of deposit with CB&T, which is
included in short-term investments.
Certain officers of TSYS participate in the Synovus 1994 Long-Term
Incentive Plan. These officers were granted restricted stock awards and
nonqualified options for Synovus common stock in 1996, 1995 and 1994 as follows:
- --------------------------------------------------------------------------------
Number of Shares
1996 1995 1994
- --------------------------------------------------------------------------------
Restricted stock awards ................. 35,349 25,683 18,326
Stock options ........................... 227,896 191,055 54,977
The restricted stock awards were valued at the price paid for the Synovus
shares which was $764,422, $389,526 and $210,743 in 1996, 1995 and 1994,
respectively, and are being amortized as compensation expense over the five-year
vesting period. The stock options were granted with an exercise price equal to
the fair market value of Synovus common stock at the date of grant. The options
vest and are exercisable over three years and expire eight years from date of
grant.
The Company believes the terms and conditions of transactions between TSYS,
CB&T, Synovus, SSC and other affiliated companies are comparable to those which
could have been obtained in transactions with unaffiliated parties.
NOTE 3 Property and Equipment
Property and equipment balances at December 31 are as follows:
- -------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------
Land .......................................... $ 2,482,820 2,482,820
Buildings ..................................... 43,387,052 38,071,521
Computer equipment ............................ 42,024,097 38,122,588
Furniture and other equipment ................. 33,424,802 30,840,053
Construction in progress ...................... 78,361 --
- -------------------------------------------------------------------------------
121,397,132 109,516,982
Less accumulated depreciation
and amortization ...................... 58,441,206 54,944,079
- -------------------------------------------------------------------------------
Property and equipment, net ................... $ 62,955,926 54,572,903
===============================================================================
Depreciation and amortization of property and equipment was $10,478,116,
$9,768,665 and $9,802,873 for the years ended December 31, 1996, 1995 and 1994,
respectively.
NOTE 4 Computer Software
Computer software at December 31 is summarized as follows:
- -------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------
TS2 ........................................... $33,048,872 33,048,872
Other internally developed
software including TS2
enhancements ............................ 5,523,804 5,346,071
Purchased computer software.................... 25,864,700 17,137,936
- -------------------------------------------------------------------------------
64,437,376 55,532,879
Less accumulated amortization ................ 24,716,892 16,317,318
- -------------------------------------------------------------------------------
Computer software, net........................ $39,720,484 39,215,561
===============================================================================
Capitalized software development costs for the years ended December 31,
1996, 1995 and 1994, were $177,732, $2,617,445 and $10,623,828, respectively.
Amortization expense related to purchased computer software costs was
$4,146,670, $3,350,507 and $2,300,386 for the years ended December 31, 1996,
1995 and 1994, respectively. Amortization of developed software was $4,483,193,
$4,007,037 and $1,369,062 for the years ended December 31, 1996, 1995 and 1994,
respectively.
NOTE 5 Investment in Joint Ventures
In 1994, the Company acquired a 49% equity interest in Total System de Mexico, a
joint venture which processes
33
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
cardholder and merchant accounts for 20 banks in Mexico. Effective May 1, 1996,
Vital began operations. Vital, a 50/50 joint venture with Visa U.S.A., combined
the front-end authorization and back-end accounting and settlement processing of
merchants. The unaudited condensed financial statement information for the
combined joint ventures as of December 31, 1996, and for the year then ended is
as follows:
- --------------------------------------------------------------------------------
Balance Sheet Data:
Current assets ................................... $ 29,292,567
Total assets ..................................... 41,312,690
Liabilities (all current) ....................... 10,187,539
Statement of Income Data:
Revenues .......................................... 95,625,643
Operating income ................................. 15,201,419
Income before income taxes........................ 16,162,670
Net income* ....................................... 14,292,665
Equity in income of joint ventures ................ 7,093,600
*Vital is a limited liability company and is taxed in a manner similar to a
partnership; therefore, net income related to Vital does not include income tax
expense.
The Company had contributed cash and other assets totaling approximately
$10.1 million to the two joint ventures as of December 31, 1996.
NOTE 6 Long-Term Debt and
Obligations Under Capital Leases
Long-term debt and obligations under capital leases at December 31 consist of
the following:
- -------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------
Capital lease obligations, with
interest rates ranging from
7.85% to 13.48%, payable
monthly through 1999,
secured by equipment with
a carrying value of $299,398 ................ $ 359,269 582,949
Note payable with an interest rate
of 9.23%, maturing in 2003 ................... 316,518 347,792
- -------------------------------------------------------------------------------
Total long-term debt and obligations
under capital leases ......................... 675,787 930,741
Less current portion ........................... 201,274 243,786
- -------------------------------------------------------------------------------
Noncurrent portion of long-
term debt and obligations
under capital leases ......................... $ 474,513 686,955
===============================================================================
NOTE 7 Shareholders' Equity
Stock Split: In April 1996, a two-for-one common stock split was effected in the
form of a 100% stock dividend. All share and shareholders' equity amounts
included herein have been restated to reflect the split for all periods
presented. Prior to the split, TSYS' charter was amended to increase authorized
shares from 100 million to 300 million.
Restricted Stock Awards: The Company has issued its common stock to certain
executive officers under restricted stock awards. The market value of the common
stock at the date of issuance is included as a reduction of additional paid-in
capital in the Company's consolidated balance sheets and is amortized as
compensation expense over the vesting period of the awards. Compensation expense
relating to these awards was $456,619, $529,982 and $618,019 for the years ended
December 31, 1996, 1995 and 1994, respectively, and unamortized compensation at
December 31, 1996, was $531,566. Common stock issued under restricted stock
awards is considered outstanding for purposes of the computation of net income
per share. The amounts and terms of common stock issued under restricted awards
are summarized as follows:
- --------------------------------------------------------------------------------
Number Market Value at Vesting
Date of Issuance of Shares Date of Issuance Period
- --------------------------------------------------------------------------------
July 21, 1992 435,200 $1,332,800 60 months
February 24, 1992 524,000 1,801,250 72 months
November 6, 1995 4,156 46,495 36 months
34
Long-Term Incentive Plan: In 1992, the Total System Services, Inc. Long-Term
Incentive Plan ("LTI Plan") was adopted to enable Total System Services, Inc.
and subsidiaries to attract, retain, motivate and reward employees who make a
significant contribution to the Company's long-term success, and to enable such
employees to acquire and maintain an equity interest in the Company. The LTI
Plan is administered by the Compensation Committee of the Company's Board of
Directors and enables the Company to grant stock options, stock appreciation
rights, restricted stock and performance awards. As of December 31, 1996,
446,544 shares of the Company's common stock remained available for distribution
under the terms of the LTI Plan. During 1994, the Company awarded compensatory
options to acquire 199,300 shares of common stock to certain key employees. All
options granted were nonqualified compensatory stock options with an exercise
price of $3 per share and are exercisable beginning in June 1997 and expiring in
June 2002. The Company is recording compensation expense of $375,781 for the
difference between the exercise price and the fair market value of the Company's
common stock at the date of grant over the period from the date of grant through
June 1997, the vesting date. As of December 31, 1996, options to acquire 189,000
shares remained outstanding after cancellations with none of these options
exercisable.
NOTE 8 Income Taxes
The provision for income taxes includes income taxes currently payable and those
deferred because of temporary differences between the financial statement and
tax bases of assets and liabilities.
The components of income tax expense included in the Consolidated
Statements of Income are as follows:
- --------------------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
Current income tax
expense:
Federal ............. $17,710,103 13,522,207 9,550,558
State ............... 1,696,537 1,491,383 549,925
- --------------------------------------------------------------------------------
Total current income
tax expense ......... 19,406,640 15,013,590 10,100,483
- --------------------------------------------------------------------------------
Deferred income tax
expense:
Federal ............. 1,470,806 885,272 2,247,759
State ............... 129,777 78,112 576,013
- --------------------------------------------------------------------------------
Total deferred income
tax expense ......... 1,600,583 963,384 2,823,772
- --------------------------------------------------------------------------------
Total income tax
expense ............. $21,007,223 15,976,974 12,924,255
================================================================================
Income tax expense differed from the amounts computed by applying the statutory
U.S. federal income tax rate of 35% to income before income taxes as a result of
the following:
- --------------------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
Computed "expected"
income tax
expense ................. $ 21,155,541 15,273,444 12,395,040
Increase (decrease) in
income tax expense
resulting from:
State income tax
expense, net
of federal income
tax benefit ..... 1,187,104 1,020,172 731,860
Other, net ...... (1,335,422) (316,642) (202,645)
- -------------------------------------------------------------------------------
Total income tax
expense ................. $ 21,007,223 15,976,974 12,924,255
===============================================================================
35
TOTAL SYSTEM SERVICES, INC.(sm) 1996 ANNUAL REPORT
The tax effects of the significant components of deferred income tax assets and
liabilities are presented in the following table:
- --------------------------------------------------------------------------------
Years Ended December 31, 1996 1995
- --------------------------------------------------------------------------------
Deferred income tax assets:
Primarily accruals not
deductible until paid ............ $ 4,556,046 5,314,057
- --------------------------------------------------------------------------------
Deferred income tax liabilities:
Computer software
development costs ................ (16,617,264) (17,927,787)
Other, net ....................... (3,240,260) (1,087,165)
- --------------------------------------------------------------------------------
Total deferred income
tax liability .................... (19,857,524) (19,014,952)
- --------------------------------------------------------------------------------
Net deferred income
tax liability .................... $(15,301,478) (13,700,895)
================================================================================
NOTE 9 Employee Benefit Plans
The Company provides certain benefits to its employees by allowing employees to
participate in certain defined contribution plans. These employee benefit plans
are described as follows:
Profit Sharing Plan: The Company's employees are eligible to participate in the
Synovus Financial Corp./Total System Services, Inc. ("Synovus/TSYS") Profit
Sharing Plan. The Company's contributions to the plan are contingent upon
achievement of certain financial goals. The terms of the plan limit the
Company's contribution to 9% (15% in 1994) of participant compensation, as
defined, not to exceed the maximum allowable deduction under Internal Revenue
Service guidelines. TSYS' annual contributions to the plan charged to expense
are as follows:
- --------------------------------------------------------------------------------
1996 ..................... $5,270,884
1995 ..................... 4,429,998
1994 ..................... 4,947,261
Money Purchase Plan: In 1995, the Company's employees became eligible to
participate in the Synovus/TSYS Money Purchase Pension Plan, a defined
contribution pension plan. The terms of the plan provide for the Company to make
annual contributions to the Plan equal to 7% of participant compensation, as
defined. The Company's contributions to the plan charged to expense are as
follows:
- --------------------------------------------------------------------------------
1996 ............................ $ 3,925,699
1995 ............................ 3,417,057
401(k) Plan: Also in 1995, the Company's employees became eligible to
participate in the Synovus/TSYS 401(k) Plan. The terms of the plan allow
employees to contribute up to 10% of pretax compensation with a discretionary
company contribution up to a maximum of 5% of participant compensation, as
defined, based upon the Company's attainment of certain financial goals. The
Company's contributions to the plan charged to expense are as follows:
- --------------------------------------------------------------------------------
1996 ........................... $ 3,976,544
1995 ........................... 1,601,939
Stock Purchase Plan: The Company maintains stock purchase plans for directors
and employees, whereby TSYS makes contributions equal to one-half of employee
and director voluntary contributions. The funds are used to purchase presently
issued and outstanding shares of TSYS common stock for the benefit of
participants. TSYS' contributions to these plans charged to expense are as
follows:
- --------------------------------------------------------------------------------
1996 ........................... $ 1,226,340
1995 ........................... 962,829
1994 ........................... 692,208
Pension Plan: The Company terminated its defined benefit pension plan
during 1995. No significant gain or loss resulted from the Company's termination
of the plan. Total pension expense for 1994 was $623,788.
36
Postretirement Medical Benefits Plan: TSYS provides certain medical benefits to
qualified retirees through a postretirement medical benefits plan. The benefit
expense and accrued benefit cost associated with the plan are not material to
the Company's consolidated financial statements.
NOTE 10 Commitments and
Contingencies
Lease Commitments: TSYS is obligated under noncancelable operating leases for
computer equipment and facilities. Management expects that, as these leases
expire, they will be renewed or replaced by similar leases. The future minimum
lease payments under noncancelable operating leases with remaining terms greater
than one year for the next five years and in the aggregate as of December 31,
1996, are as follows:
- --------------------------------------------------------------------------------
1997 ................. $26,377,431
1998 ................. 20,496,750
1999 ................. 15,219,022
2000 ................. 9,246,338
2001 ................. 1,027,191
- -------------------------------------------------------------------------------
$72,366,732
===============================================================================
Total rental expense under all operating leases in 1996, 1995 and 1994 was
$45,990,637, $34,862,784 and $26,408,605, respectively.
Contractual Commitments: In the normal course of its business, the Company
maintains processing contracts with its customers. These processing contracts
contain commitments, including, but not limited to, minimum standards and time
frames against which the Company's performance is measured. In the event the
Company does not meet its contractual commitments with its customers, the
Company may incur penalties and/or certain customers may have the right to
terminate their contracts with the Company. The Company does not believe that it
will fail to meet its contractual commitments to an extent that will result in a
material adverse effect on its financial condition or results of operations.
Contingencies: The Company is subject to lawsuits, claims and other complaints
arising out of the ordinary conduct of its business. In the opinion of
management, based in part upon the advice of legal counsel, all matters are
adequately covered by insurance or, if not covered, are without merit or are of
such kind or involve such amounts as would not have a material effect on the
financial condition or results of operations of the Company if disposed of
unfavorably.
NOTE 11 Supplementary Balance Sheet Information Significant components of other
assets are summarized as follows:
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Contract acquisition costs, net .............. $19,645,910 17,628,448
Investment in joint ventures, net .............. 15,347,876 4,506,686
NOTE 12 Major Customers
For the years ended December 31, 1996, 1995 and 1994, two customers accounted
for approximately 29%, 34%, and 36% of total revenues, respectively.
37
TOTAL SYSTEM SERVICES, INC.(SM) 1996 ANNUAL REPORT
Report of Independent Auditors
KPMG Peat Marwick LLP 303 Peachtree Street, N.E.
Suite 2000
Atlanta, GA 30308
The Board of Directors and Shareholders
Total System Services, Inc.:
We have audited the accompanying consolidated balance sheets of Total System
Services, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Total System
Services, Inc. and subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/KPMG Peat Marwick LLP
January 22, 1997
38
Quarterly Financial Data, Stock Price, Dividend Information
TSYS' common stock trades on the New York Stock Exchange ("NYSE") under the
symbol "TSS." Price and volume information appears under the abbreviation
"TotlSysSvc" in NYSE daily stock quotation listings. As of December 20, 1996,
there were 6,484 holders of record of TSYS common stock, some of whom are
holders in nominee name for the benefit of different shareholders.
The fourth quarter dividend was declared on December 9, 1996, and was paid
January 2, 1997, to shareholders of record on December 20, 1996. Total dividends
declared in 1996 and 1995 amounted to $5.8 million. It is the present intention
of the Board of Directors of TSYS to continue to pay cash dividends on its
common stock.
Presented here is a summary of the unaudited quarterly
financial data for the years ended December 31, 1996 and 1995.
Revenues Net Income
(Millions of Dollars) (Millions of Dollars)
1996 1995 1996 1995
Quarter 4 $85.9 $71.1 Quarter 4 $14.2 $ 9.5
Quarter 3 $80.2 $66.1 Quarter 3 $11.3 $ 7.4
Quarter 2 $74.5 $59.1 Quarter 2 $ 7.9 $ 6.0
Quarter 1 $71.1 $53.4 Quarter 1 $ 6.0 $ 4.8
<TABLE>
<CAPTION>
First Second Third Fourth
(in thousands except per share data) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 Revenues ...................... $71,102 74,489 80,179 85,878
Operating income ................. 8,579 11,654 17,269 21,495
Net income ....................... 5,969 7,900 11,347 14,221
Net income per share ............. .05 .06 .09 .11
Cash dividends declared per share. .011 .011 .012 .011
Stock prices:
High............................ 21 27 3/8 26 1/4 29 3/4
Low ............................ 11 1/2 20 20 1/2 25 3/8
- --------------------------------------------------------------------------------------
1995 Revenues ...................... $53,380 59,134 66,108 71,086
Operating income ................. 7,562 9,558 11,075 14,796
Net income ....................... 4,784 6,013 7,390 9,543
Net income per share ............. .04 .05 .06 .07
Cash dividends declared per share. .011 .011 .012 .011
Stock prices:
High............................ 9 1/8 8 5/8 12 1/8 15 7/8
Low............................. 8 1/8 6 3/4 7 3/8 10 5/8
- --------------------------------------------------------------------------------------
</TABLE>
39
EXHIBIT 20.1
TSYS(R)
Richard W. Ussery March 13, 1997
Chairman of the Board
Dear Shareholder:
The Annual Meeting of the Shareholders of Total System Services, Inc. will
be held on April 14, 1997, in the Dining Gallery of the Columbus, Georgia
Convention & Trade Center, beginning at 10:00 o'clock A.M., E.T., for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders
and Proxy Statement.
We hope that you will be able to be with us and let us give you a review of
1996. Whether you own a few or many shares of stock and whether or not you plan
to attend in person, it is important that your shares be voted on matters that
come before the meeting. To make sure your shares are represented, we urge you
to complete and mail the enclosed Proxy Card promptly.
Thank you for helping us make 1996 a good year. We look forward to your
continued support in 1997 and another good year.
Sincerely yours,
/s/Richard W. Ussery
RICHARD W. USSERY
Total System Services, Inc. Post Office Box 2506 Columbus, Georgia 31902-2506
TSYS(R)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 14, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Total
System Services, Inc.(SM) ("TSYS(R)") will be held in the Dining Gallery of the
Columbus, Georgia Convention & Trade Center, on April 14, 1997, at 10:00 o'clock
A.M., E.T., for:
(1) The election of five nominees as Class II directors of TSYS to serve
until the 2000 Annual Meeting of Shareholders; and
(2) The transaction of such other business as may properly come before the
Annual Meeting.
Information relating to the above matters is set forth in the accompanying
Proxy Statement.
Only shareholders of record at the close of business on February 12, 1997
will be entitled to notice of and to vote at the Annual Meeting.
/s/G. Sanders Griffith, III
G. SANDERS GRIFFITH, III
Secretary
Columbus, Georgia
March 13, 1997
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING IN PERSON, PLEASE
VOTE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE
UNITED STATES.
TSYS(R)
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 14, 1997
I. INTRODUCTION
A. Purposes of Solicitation - Terms of Proxies.
The Annual Meeting of the Shareholders ("Annual Meeting") of Total System
Services, Inc. ("TSYS") will be held on April 14, 1997 for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders and in this
Proxy Statement. The enclosed Proxy Card ("Proxy") is solicited BY AND ON BEHALF
OF TSYS' BOARD OF DIRECTORS in connection with such Annual Meeting or any
adjournment thereof. The costs of the solicitation of Proxies by TSYS' Board of
Directors will be paid by TSYS. Forms of Proxies and Proxy Statements will also
be distributed through brokers, banks, nominees, custodians and other like
parties to the beneficial owners of shares of the $.10 par value common stock of
TSYS ("TSYS Common Stock"), and TSYS will reimburse such parties for their
reasonable out-of-pocket expenses therefor. TSYS' mailing address is Post Office
Box 2506, Columbus, Georgia 31902-2506.
The shares represented by the Proxy in the accompanying form, which when
properly executed, returned to TSYS' Board of Directors and not revoked, will be
voted in accordance with the instructions specified in such Proxy. If a choice
is not specified in the Proxy, the shares represented by such Proxy will be
voted "FOR" the election of the five nominees for Class II directors named
herein.
Each Proxy granted may be revoked in writing at any time before the
authority granted thereby is exercised. Attendance at the Annual Meeting will
constitute a revocation of the Proxy for such Meeting if the maker thereof
elects to vote in person.
This Proxy Statement and the enclosed Proxy are being first mailed to
shareholders on or about March 10, 1997.
B. TSYS Securities Entitled to Vote and Record Date.
TSYS' outstanding voting securities are TSYS Common Stock, each share of
which entitles the holder thereof to one vote on any matter coming before a
meeting of TSYS' shareholders. Only shareholders of record at the close of
business on February 12, 1997 are entitled to vote at the Annual Meeting or any
adjournment thereof. As of that date, there were 129,289,680 shares of TSYS
Common Stock outstanding and entitled to vote. TSYS owned 193,842 shares of TSYS
Common Stock on February 12, 1997 as treasury shares, which are not considered
to be outstanding and are not entitled to be voted at the Annual Meeting.
C. Shareholder Proposals.
From time to time, TSYS' shareholders may present proposals which may be
proper subjects for inclusion in TSYS' Proxy Statement for consideration at
TSYS' Annual Meeting. To be considered for inclusion, shareholder proposals must
be submitted on a timely basis. Proposals for TSYS' 1998 Annual Meeting, which
has been tentatively scheduled for April 13, 1998, must be received by TSYS no
later than November 13, 1997, and any such proposals, as well as any questions
related thereto, should be directed to Secretary, Total System Services, Inc.,
901 Front Avenue, Suite 301, Columbus, Georgia 31901.
1
D. Director Nominees or Other Business for Presentation at the Annual Meeting.
Shareholders who wish to present director nominations or other business at
the Annual Meeting are required to notify the Secretary of their intent at least
60 days but not more than 120 days before the meeting and the notice must
provide information as required in the bylaws. A copy of these bylaw
requirements will be provided upon request in writing to Secretary, Total System
Services, Inc., 901 Front Avenue, Suite 301, Columbus, Georgia 31901. This
requirement does not affect the deadline for submitting shareholder proposals
for inclusion in the Proxy Statement nor does it preclude discussion by any
shareholder of any business properly brought before the Annual Meeting.
E. Columbus Bank and Trust Company.
Columbus Bank and Trust Company(R) (CB&T") owned individually 104,401,292
shares, or 80.7%, of the outstanding shares of TSYS Common Stock on February 12,
1997. CB&T(R) is a wholly owned banking subsidiary of Synovus Financial Corp.(R)
("Synovus"), a multi-financial services company having 116,369,039 shares of
$1.00 par value voting common stock ("Synovus Common Stock") outstanding on
February 12, 1997.
II. ELECTION OF DIRECTORS
A. Information Concerning Number and Classification of Directors and
Nominees.
(1) Number and Classification of Directors.
In accordance with the vote of shareholders taken at TSYS' 1988 Annual
Meeting, the number of members of TSYS' Board of Directors was fixed at 18.
TSYS' Board of Directors is currently comprised of 14 members. TSYS has four
directorships which remain vacant, one of which positions was vacated by a Class
III director. These vacant directorships could be filled in the future at the
discretion of TSYS' Board of Directors. This discretionary power gives TSYS'
Board of Directors the flexibility of appointing new directors in the periods
between TSYS' Annual Meetings should suitable candidates come to its attention.
Any person appointed by TSYS' Board of Directors to fill the vacant Class III
directorship would serve the remainder of the Class III term, which expires at
the 1998 Annual Meeting. Any person so appointed by TSYS' Board of Directors to
the remaining vacant directorships would not be appointed to serve a classified,
three-year term but would only serve as a director until the next succeeding
Annual Meeting. At such Annual Meeting, such appointee would stand before TSYS'
shareholders for election to a classified term of office as a director. Proxies
cannot be voted at the 1997 Annual Meeting for a greater number of persons than
the number of nominees named.
Pursuant to TSYS' Articles of Incorporation and bylaws, the members who
comprise TSYS' Board of Directors are divided into three classes of directors:
Class I, Class II and Class III directors, with each of such Classes of
directors to be as nearly equal in number as possible. Each Class of directors
serves a staggered 3-year term. At TSYS' 1995 Annual Meeting, Class III
directors were elected to serve 3-year terms to expire at TSYS' 1998 Annual
Meeting, and at TSYS' 1996 Annual Meeting, Class I directors were elected to
serve 3-year terms to expire at TSYS' 1999 Annual Meeting. The terms of office
of the Class II directors expire at TSYS' 1997 Annual Meeting.
(2) Nominees for Class II Directors and Vote Required.
TSYS' Board of Directors has selected five nominees which it proposes for
election to TSYS' Board as Class II directors. The five nominees for Class II
directors of TSYS will be elected to serve 3-year terms that will expire at
TSYS' 2000 Annual Meeting. The five nominees for Class II directors of TSYS are:
James H. Blanchard, Richard Y. Bradley, Gardiner W. Garrard, Jr., John P.
Illges, III and W. Walter Miller, Jr.
Under TSYS' bylaws and Georgia law, a majority of the issued and
outstanding shares of TSYS Common Stock entitled to vote must be
represented at the 1997 Annual Meeting in order to
2
constitute a quorum and all shares represented at the Meeting, including shares
abstaining and withholding authority, are counted for purposes of determining
whether a quorum exists. The nominees for election as directors at the Annual
Meeting who receive the greatest number of votes (a plurality), a quorum being
present, shall become directors at the conclusion of the tabulation of votes.
Thus, once a quorum has been established, abstentions and broker non-votes have
no effect upon the election of directors. The shares represented by Proxies
executed for TSYS' 1997 Annual Meeting in such manner as not to withhold
authority to vote for the election of any nominee for election as a Class II
director on TSYS' Board of Directors shall be voted "FOR" the election of the
five nominees for Class II directors on TSYS' Board named herein.
If any nominee for Class II director of TSYS becomes unavailable for any
reason before TSYS' 1997 Annual Meeting, the shares represented by executed
Proxies may be voted for such substitute nominee as may be determined by the
holders of such Proxies. It is not anticipated that any nominee will be
unavailable for election.
TSYS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE FIVE
NOMINEES FOR ELECTION AS CLASS II DIRECTORS ON TSYS' BOARD SET FORTH HEREIN.
B. Information Concerning Directors and Nominees for Class II Directors.
(1) General Information.
The following sets forth the name, age, principal occupation and employment
(which, except as noted, has been for the past five years) of each of the
nominees for election as Class II directors of TSYS and the remaining directors
presently serving on TSYS' Board of Directors, his director classification, his
length of service as a director of TSYS, any family relationships with other
directors or executive officers of TSYS, and any Board of Directors of which he
is a member with respect to any company with a class of securities registered
with the Securities and Exchange Commission ("SEC") pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), including
Synovus, or any company which is subject to the requirements of Section 15(d) of
that Act, or any company registered with the SEC as an investment company under
the Investment Company Act of 1940 ("Public Company").
<TABLE>
<CAPTION>
TSYS Year
Director First Principal Occupation
Classifi- Elected and Other Directorships
Name Age cation Director of Public Companies
- ------------------------ ------- ---------- ----------- -------------------------------------------------------
<S> <C> <C> <C> <C>
Griffin B. Bell 78 I 1987 Senior Partner, King & Spalding (Law Firm)
James H. Blanchard<F1> 55 II 1982 Chairman of the Board and Chief
Executive Officer, Synovus Financial
Corp.; Chairman of the Executive
Committee, Total System Services, Inc.;
Director, BellSouth Corporation
Richard Y. Bradley<F2> 58 II 1991 Partner, Bradley & Hatcher (Law Firm);
Director, Synovus Financial Corp.
Gardiner W. Garrard, Jr. 56 II 1982 President, The Jordan Company (Real
Estate Development); Director, Synovus
Financial Corp.
John P. Illges, III 62 II 1982 Senior Vice President and Financial
Consultant, The Robinson-Humphrey
Company, Inc. (Stockbroker); Director,
Synovus Financial Corp.
Mason H. Lampton 49 III 1986 President, The Hardaway Company
(Construction Company); Director,
Synovus Financial Corp.
W. Walter Miller, Jr.<F3> 48 II 1993 Senior Vice President, Total System
Services, Inc.
3
TSYS Year
Director First Principal Occupation
Classifi- Elected and Other Directorships
Name Age cation Director of Public Companies
- ------------------------ ------- ---------- ----------- -------------------------------------------------------
Samuel A. Nunn<F4> 58 I 1997 Senior Partner, King & Spalding (Law
Firm); Director, The Coca-Cola Company,
General Electric Company, National Service
Industries and Scientific-Atlanta, Inc.
H. Lynn Page 56 I 1982 Vice Chairman of the Board (Retired) and
Director, Synovus Financial Corp.,
Columbus Bank and Trust Company and
Total System Services, Inc.
Philip W. Tomlinson<F5> 50 I 1982 President, Total System Services, Inc.
William B. Turner<F3> 74 III 1982 Chairman of the Executive Committee,
Columbus Bank and Trust Company and
Synovus Financial Corp.; Advisory
Director, W.C. Bradley Co. (Metal
Manufacturer and Real Estate)
Richard W. Ussery<F6> 49 I 1982 Chairman of the Board and Chief
Executive Officer, Total System Services,
Inc.
George C. Woodruff, Jr. 68 III 1982 Real Estate and Personal Investments;
Director, Synovus Financial Corp. and
United Cities Gas Company
James D. Yancey 55 III 1982 Vice Chairman of the Board, Synovus
Financial Corp. and Columbus Bank and
Trust Company
<FN>
- -------------------
<F1> James H. Blanchard was elected Chairman of the Executive Committee of TSYS
in February, 1992. From 1982 until 1992, Mr. Blanchard served as Chairman
of the Board of TSYS.
<F2> Richard Y. Bradley formed Bradley & Hatcher in September, 1995. From 1991
until 1995, Mr. Bradley served as President of Bickerstaff Clay Products
Company, Inc.
<F3> Mr. Miller's spouse is the niece of William B. Turner.
<F4> Samuel A. Nunn was elected as a director of TSYS in January, 1997 by TSYS'
Board of Directors to fill the unexpired term of a vacant Class I board
seat. Mr. Nunn joined the law firm of King & Spalding in January, 1997.
From 1972 until 1997, Mr. Nunn represented the State of Georgia in the
United States Senate.
<F5> Philip W. Tomlinson was elected President of TSYS in February, 1992. From
1982 until 1992, Mr. Tomlinson served as Executive Vice President of TSYS.
<F6> Richard W. Ussery was elected Chairman of the Board of TSYS in February,
1992. From 1982 until 1992, Mr. Ussery served as President of TSYS.
</FN>
</TABLE>
4
(2) TSYS Common Stock Ownership of Directors and Management.
The following table sets forth, as of December 31, 1996, the number of
shares of TSYS Common Stock beneficially owned by each of TSYS' directors and
TSYS' five most highly compensated executive officers. Information relating to
beneficial ownership of TSYS Common Stock is based upon information furnished by
each person or entity using "beneficial ownership" concepts set forth in the
rules of the SEC under Section 13(d) of the Exchange Act.
<TABLE>
<CAPTION>
Shares of TSYS Shares of TSYS Shares of TSYS Percentage of
Common Stock Common Stock Common Stock Total Outstanding
Beneficially Beneficially Beneficially Shares Shares of
Owned with Owned with Owned with of TSYS TSYS Common
Sole Voting Shared Voting Sole Voting but Common Stock Stock
and Investment and Investment no Investment Beneficially Beneficially
Power as of Power as of Power as of Owned as of Owned as of
Name 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
-------------------------- ------------------- -------------------- ------------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Griffin B. Bell 55,112 8,000 --- 63,112 .05%
James H. Blanchard 520,800 240,902 --- 761,702 .59
Richard Y. Bradley 13,770 --- --- 13,770 .01
Gardiner W. Garrard, Jr. 6,022 --- --- 6,022 .005
John P. Illges, III 122,294 --- --- 122,294 .09
Mason H. Lampton 17,521 68,440<F1> --- 85,961 .07
James B. Lipham 40,202 800 20,480 61,482 .05
W. Walter Miller, Jr. 35,742 8,251 20,480 64,473 .05
Samuel A. Nunn --- --- --- --- ---
H. Lynn Page 421,589 63,764 --- 485,353 .38
William A. Pruett 117,932 --- 25,600 143,532 .11
Philip W. Tomlinson 415,448 39,864 84,000 539,312 .42
William B. Turner 101,886 384,000 --- 485,886 .38
Richard W. Ussery 411,486 49,100 94,000 554,586 .43
George C. Woodruff, Jr. 76,092 --- --- 76,092 .06
M. Troy Woods 24,209 --- 21,440 45,649 .04
James D. Yancey 533,510 16,000 --- 549,510 .43
<FN>
- --------
<F1> Includes 19,200 shares of TSYS Common Stock held in a trust for which Mr.
Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership of
such shares.
</FN>
</TABLE>
The following table sets forth information, as of December 31, 1996, with
respect to the beneficial ownership of TSYS Common Stock by all directors and
executive officers of TSYS as a group.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
TSYS Common Stock TSYS Common Stock
Name of Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/96 as of 12/31/96
- ----------------------- ----------------------- -----------------------------
<S> <C> <C>
All directors
and executive
officers of TSYS 4,071,684 3.15%
as a group
(includes
18 persons)
</TABLE>
For a detailed discussion of the beneficial ownership of Synovus Common
Stock by TSYS' named executive officers and directors and by all directors and
executive officers of TSYS as a group, see Section IV(C) hereof captioned
"Synovus Common Stock Ownership of Directors and Management."
5
C. Board Committees and Attendance.
The business and affairs of TSYS are under the direction of TSYS' Board of
Directors. During 1996, TSYS' Board of Directors held five regular meetings and
two special meetings. During 1996, each of TSYS' incumbent directors attended at
least 75% of the meetings of TSYS' Board of Directors and the committees thereof
on which he sat, except Messrs. Bell and Tomlinson, who attended 71% and 57%,
respectively.
TSYS' Board of Directors has three principal standing committees -- an
Executive Committee, an Audit Committee and a Compensation Committee. There is
no Nominating Committee of TSYS' Board of Directors.
Executive Committee. The members of TSYS' Executive Committee are: James H.
Blanchard, Chairman, Richard W. Ussery, Philip W. Tomlinson, William B. Turner,
James D. Yancey, Gardiner W. Garrard, Jr. and Richard Y. Bradley. During the
intervals between meetings of TSYS' Board of Directors, TSYS' Executive
Committee possesses and may exercise any and all of the powers of TSYS' Board of
Directors in the management and direction of the business and affairs of TSYS
with respect to which specific direction has not been previously given by TSYS'
Board of Directors. During 1996, TSYS' Executive Committee did not meet.
Audit Committee. The members of TSYS' Audit Committee are: Gardiner W.
Garrard, Jr., Chairman, Mason H. Lampton and John P. Illges, III. The primary
functions to be engaged in by TSYS' Audit Committee include: (i) annually
recommending to TSYS' Board the independent certified public accountants
("Independent Auditors") to be engaged by TSYS for the next fiscal year; (ii)
reviewing the plan and results of the annual audit by TSYS' Independent
Auditors; (iii) reviewing and approving the range of management advisory
services provided by TSYS' Independent Auditors; (iv) reviewing TSYS' internal
audit function and the adequacy of the internal accounting control systems of
TSYS; (v) reviewing the results of regulatory examinations of TSYS; (vi)
periodically reviewing the financial statements of TSYS; and (vii) considering
such other matters with regard to the internal and independent audit of TSYS as,
in its discretion, it deems to be necessary or desirable, periodically reporting
to TSYS' Board as to the exercise of its duties and responsibilities and, where
appropriate, recommending matters in connection with the audit function with
respect to which TSYS' Board should consider taking action. During 1996, TSYS'
Audit Committee held five meetings.
Compensation Committee. The members of the Compensation Committee of TSYS'
Board of Directors are: Gardiner W. Garrard, Jr., Chairman, and Mason H.
Lampton. The primary functions to be engaged in by TSYS' Compensation Committee
include: (i) evaluating the remuneration of senior management and board members
of TSYS and its subsidiaries and the compensation and fringe benefit plans in
which officers, employees and directors of TSYS are eligible to participate; and
(ii) recommending to TSYS' Board whether or not it should modify, alter, amend,
terminate or approve such remuneration, compensation or fringe benefit plans.
During 1996, TSYS' Compensation Committee held five meetings.
D. Executive Officers.
The following table sets forth the name, age and position with TSYS of each
executive officer of TSYS.
<TABLE>
<CAPTION>
Name Age Position with TSYS
- ---------------------------- --- ------------------------------------
<S> <C> <C>
James H. Blanchard 55 Chairman of the Executive Committee
Richard W. Ussery 49 Chairman of the Board
and Chief Executive Officer
Philip W. Tomlinson 50 President
William A. Pruett 43 Executive Vice President
James B. Lipham 48 Executive Vice President
and Chief Financial Officer
M. Troy Woods 45 Executive Vice President
G. Sanders Griffith, III 43 General Counsel and Secretary
</TABLE>
6
All of the executive officers of TSYS are members of TSYS' Board of
Directors, except William A. Pruett, James B. Lipham, M. Troy Woods and G.
Sanders Griffith, III. William A. Pruett was elected as Executive Vice President
of TSYS in February, 1993. From 1976 until 1993, Mr. Pruett served in various
capacities with CB&T and/or TSYS, including Senior Vice President. James B.
Lipham was elected as Executive Vice President and Chief Financial Officer of
TSYS in July, 1995. From 1984 until 1995, Mr. Lipham served in various financial
capacities with Synovus and/or TSYS, including Senior Vice President and
Treasurer. M. Troy Woods was elected as Executive Vice President of TSYS in
July, 1995. From 1987 until 1995, Mr. Woods served in various capacities with
TSYS, including Senior Vice President. G. Sanders Griffith, III has served as
General Counsel of TSYS since 1988 and was elected as Secretary of TSYS in June,
1995. Mr. Griffith currently serves as Senior Executive Vice President, General
Counsel and Secretary of Synovus and has held various positions with Synovus
since 1988.
All of the executive officers of TSYS serve at the pleasure of TSYS' Board
of Directors. There are no family relationships between any of TSYS' executive
officers, and there are no arrangements or understandings between any such
executive officer or any other person pursuant to which any such officer was
elected.
III. EXECUTIVE COMPENSATION
(1) Summary Compensation Table.
The following table summarizes the cash and noncash compensation for each
of the last three fiscal years for the chief executive officer of TSYS and for
the other four most highly compensated executive officers of TSYS.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
-------------------------------------------------------- ------------------------------
Other Restricted Securities All
Annual Stock Underlying Other
Name and Compen- Award(s) Options/ Compen-
Principal Position<F1> Year Salary<F2> Bonus<F3> sation<F4> <F5> SARs sation<F6>
- ----------------------- ------ -------------- ----------- ------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard W. Ussery 1996 $391,725 $491,363 -0- $316,187 43,853 $137,152
Chairman of the Board 1995 331,400 204,750 -0- 222,015 38,987 102,439
and Chief Executive 1994 255,000 162,105 -0- 79,505 20,741 47,400
Officer
Philip W. Tomlinson 1996 335,350 386,000 -0- 223,784 31,038 115,728
President 1995 283,900 160,500 -0- 157,133 27,594 87,508
1994 221,350 129,830 -0- 56,252 14,675 42,602
William A. Pruett 1996 200,900 246,080 -0- 84,880 11,774 67,486
Executive Vice 1995 173,000 103,800 -0- 59,604 10,467 50,628
President 1994 138,500 88,100 -0- 22,494 5,868 29,428
M. Troy Woods 1996 179,375 184,375 -0- 75,792 10,513 53,175
Executive Vice 1995 150,000 59,375 -0- -0- 5,400 35,356
President 1994<F7> -- -- -- -- -- --
James B. Lipham 1996 147,500 152,500 -0- 63,938 8,868 43,755
Executive Vice President 1995 122,500 48,125 -0- -0- 5,400 30,302
and Chief Financial 1994 95,000 23,750 -0- -0- 4,800 22,774
Officer
<FN>
- --------------------
<F1> Mr. Blanchard received no cash compensation from TSYS during 1996, other
than director fees.
<F2> Amount consists of base salary and director fees for Messrs. Ussery and
Tomlinson.
<F3> Bonus amount for 1996 includes a special recognition award of $5,000 for
Messrs. Ussery, Tomlinson, Pruett, Woods and Lipham.
7
<F4> Perquisites and other personal benefits are excluded because the aggregate
amount does not exceed the lesser of $50,000 or 10% of annual salary and
bonus for the named executives.
<F5> Amount consists of value of award, net of consideration paid by the
executive. As of December 31, 1996, Messrs. Ussery, Tomlinson, Pruett,
Woods and Lipham held 123,164, 104,640, 33,491, 24,944 and 23,436
restricted shares, respectively, with a value of $3,463,144, $2,920,560,
$941,499, $688,766 and $645,362, respectively. On July 1, 1996, restricted
stock was awarded in the amount of 14,618, 10,346, 3,925, 3,504 and 2,956
shares of Synovus Common Stock to Messrs. Ussery, Tomlinson, Pruett, Woods
and Lipham, respectively, with the following vesting schedule: 20% on July
1, 1997; 20% on July 1, 1998; 20% on July 1, 1999; 20% on July 1, 2000; and
20% on July 1, 2001. On September 5, 1995, restricted stock was awarded in
the amount of 12,996, 9,198 and 3,489 shares of Synovus Common Stock to
Messrs. Ussery, Tomlinson and Pruett, respectively, with the following
vesting schedule: 20% on September 5, 1996; 20% on September 5, 1997; 20%
on September 5, 1998; 20% on September 5, 1999; and 20% on September 5,
2000. On June 28, 1994, restricted stock was awarded in the amount of
6,914, 4,892 and 1,956 shares of Synovus Common Stock to Messrs. Ussery,
Tomlinson and Pruett, respectively, with the following vesting schedule:
20% on June 28, 1995; 20% on June 28, 1996; 20% on June 28, 1997; 20% on
June 28, 1998; and 20% on June 28, 1999. Dividends are paid on all
restricted shares.
<F6> The 1996 amount consists of contributions or other allocations to defined
contribution plans of $30,000 for each executive; allocations pursuant to
defined contribution excess benefit agreements of $96,168, $74,424,
$36,922, $22,671 and $13,352 for each of Messrs. Ussery, Tomlinson, Pruett,
Woods and Lipham, respectively; premiums paid for group term life insurance
coverage of $720, $720, $564, $504 and $403 for each of Messrs. Ussery,
Tomlinson, Pruett, Woods and Lipham, respectively; the economic benefit of
life insurance coverage related to split-dollar life insurance policies of
$92 and $99 for Messrs. Ussery and Tomlinson, respectively; and the dollar
value of the benefit of premiums paid for split-dollar life insurance
policies (unrelated to term life insurance coverage) projected on an
actuarial basis of $10,172 and $10,485 for Messrs. Ussery and Tomlinson,
respectively.
<F7> Disclosure is not required for 1994.
</FN>
</TABLE>
(2) Stock Option Exercises and Grants.
The following tables provide certain information regarding options to
purchase Synovus Common Stock granted and exercised in the last fiscal year and
the number and value of unexercised options at the end of the fiscal year.
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
- ------------------------------------------------------------------------------
% of Total Potential
Options/ Realized Value at
SARs Exercise Assumed Annual Rates of
Options/ Granted to or Stock Price Appreciation
SARs Employees Base For Option Term<F2>
Granted in Fiscal Price Expiration --------------------------
Name (#)<F1> Year ($/Share) Date 5%($) 10%($)
- ------------------- ----------- ------------- -------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Ussery 43,853 3.44% $21.63 06/30/04 $453,001 $1,084,923
Philip W. Tomlinson 31,038 2.43% 21.63 06/30/04 320,623 767,880
William A. Pruett 11,774 0.92% 21.63 06/30/04 121,625 291,289
M. Troy Woods 10,513 0.82% 21.63 06/30/04 108,599 260,092
James B. Lipham 8,868 0.69% 21.63 06/30/04 91,606 219,394
<FN>
- ---------------
<F1> Options granted on July 1, 1996 at fair market value to executives in
tandem with restricted stock awards as part of the Synovus 1994 Long-Term
Incentive Plan. Options become exercisable on July 1, 1998.
<F2> The dollar gains under these columns result from calculations using the
identified growth rates and are not intended to forecast future price
appreciation of Synovus Common Stock.
</FN>
</TABLE>
8
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Shares Value Options/SARs at FY-End (#) Options/SARs at FY-End ($)<F1>
Acquired on Realized -------------------------- -----------------------------
Name Exercise (#) ($)<F1> Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------- ------------ ----------- -------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Ussery -0- -0- 20,741 / 82,840 $427,783 / $1,121,262
Philip W. Tomlinson -0- -0- 14,675 / 58,632 302,672 / 793,600
William A. Pruett -0- -0- 5,868 / 22,241 121,028 / 301,036
M. Troy Woods -0- -0- 0 / 15,913 0 / 201,891
-0- -0- 0 / 6,000<F2> 0 / 143,250
James B. Lipham -0- -0- 0 / 14,268 0 / 184,627
-0- -0- 0 / 4,800<F2> 0 / 114,600
<FN>
- ----------
<F1> Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
<F2> Options pertain to shares of TSYS Common Stock.
</FN>
</TABLE>
(3) Compensation of Directors.
Compensation. During 1996, TSYS' directors received a $12,000 retainer, a
fee of $800 for regular and special meetings of TSYS' Board of Directors they
personally attended and a fee of $500 for meetings of the committees of TSYS'
Board of Directors they personally attended. In addition, directors of TSYS are
entitled to receive an $800 fee for one regular meeting and a fee of $800 for
one special meeting of TSYS' Board of Directors, despite the fact they are
unable to personally attend such meetings.
Director Stock Purchase Plan. TSYS' Director Stock Purchase Plan ("DSPP")
is a non-tax-qualified, contributory stock purchase plan pursuant to which
qualifying TSYS directors can purchase, with the assistance of contributions
from TSYS, presently issued and outstanding shares of TSYS Common Stock. Under
the terms of the DSPP, qualifying directors can elect to contribute up to $1,000
per calendar quarter to make purchases of TSYS Common Stock, and TSYS
contributes an additional amount equal to 50% of the directors' cash
contributions. Participants in the DSPP are fully vested in, and may request the
issuance to them of, all shares of TSYS Common Stock purchased for their benefit
thereunder.
(4) Change in Control Arrangements.
Messrs. Ussery, Tomlinson, Pruett, Lipham and Woods each hold shares of
restricted stock of, and options to purchase stock of, Synovus and/or TSYS which
were issued pursuant to the 1992 Total System Services, Inc. Long-Term Incentive
Plan and the Synovus Financial Corp. 1994 Long-Term Incentive Plan. Under the
terms of the 1992 Total System Services, Inc. Long-Term Incentive Plan and the
Synovus Financial Corp. 1994 Long-Term Incentive Plan, in the event of a change
in control of TSYS or Synovus, the vesting of any stock options, stock
appreciation and other similar rights, restricted stock and performance awards
will be accelerated so that all awards not previously exercisable and vested
will become fully exercisable and vested.
Effective January 1, 1996, TSYS entered into Change of Control Agreements
("Agreements") with Messrs. Ussery, Tomlinson, Pruett, Woods and Lipham and
certain other executive officers. The Change of Control Agreements provide
severance pay and continuation of certain benefits in the event of a Change of
Control of Synovus or TSYS. In order to receive benefits under the Agreements,
the executive's employment must be terminated involuntarily, without cause,
whether actual or "constructive" within one year following
a Change of Control or the executive may voluntarily or involuntarily
terminate employment during the thirteenth month following a
9
Change of Control. With respect to Synovus, a "Change of Control" generally is
deemed to occur in any of the following circumstances: (1) the acquisition by
any person of 20% or more of the "beneficial ownership" of Synovus' outstanding
voting stock, with certain exceptions for Turner family members; (2) the persons
serving as directors of Synovus as of January 1, 1996 and those replacements or
additions subsequently approved by a two-thirds (2/3) vote of the Board ceasing
to comprise at least two-thirds (2/3) of the Board; (3) a merger, consolidation,
reorganization or sale of Synovus' assets unless (a) the previous beneficial
owners of Synovus own more than two-thirds (2/3) of the new company, (b) no
person owns more than 20% of the new company, and (c) two-thirds (2/3) of the
new company's Board were members of the incumbent Board which approved the
business combination; or (4) a "triggering event" as defined in the Synovus
Rights Agreement. With respect to TSYS, a Change of Control is generally defined
in the same manner as a Change of Control of Synovus, except that (1) a spin-off
of TSYS stock to Synovus shareholders and (2) any transaction in which Synovus
continues to own more than 50% of the outstanding voting stock of TSYS are
specifically excluded from the definition of Change of Control.
Under the Agreements with Messrs. Ussery and Tomlinson, severance pay would
equal three times current base salary and bonus, with bonus being defined as the
average of the previous three years measured as a percentage of base salary
multiplied by current base salary. Under the Agreements with Messrs. Pruett,
Lipham and Woods, severance pay would equal two times current base salary and
bonus, as previously defined. Medical, life, disability and other welfare
benefits will be provided at the expense of TSYS for three years for Messrs.
Ussery and Tomlinson (two years for Messrs. Pruett, Lipham and Woods) with the
level of coverage being determined by the amount elected by the executive during
the open enrollment period immediately preceding the Change of Control.
Executives would also receive a short-year bonus for the year of separation
based on the greater of a half year's maximum bonus or pro rata maximum bonus to
the date of termination and a cash amount in lieu of a long-term incentive award
for the year of separation. If the executive has already received a long-term
incentive award in the separation year, the amount would equal 1.5 times the
market grant and if the executive has not, the amount would equal 2.5 times
market grant.
Executives who are impacted by the Internal Revenue Service excise tax that
applies to certain change of control agreements would receive additional gross
up payments so that they are in the same position as if there were no excise
tax. The Agreements do not provide for retirement benefits or perquisites.
Notwithstanding anything to the contrary set forth in any of TSYS' previous
filings under the Securities Act of 1933, as amended, or the Exchange Act that
might incorporate future filings, including this Proxy Statement, in whole or in
part, the following Performance Graph and Compensation Committee Report on
Executive Compensation shall not be incorporated by reference into any such
filings.
10
(5) Stock Performance Graph.
The following graph compares the yearly percentage change in cumulative
shareholder return on TSYS Common Stock with the cumulative total return of the
Standard & Poor's 500 Index and the Standard & Poor's Computer Software &
Services Index for the last five fiscal years (assuming a $100 investment on
December 31, 1991 and reinvestment of all dividends).
[Omitted Stock Performance Graph is represented by the following table.]
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
TSYS, S&P 500 AND S&P COMPUTER SOFTWARE & SERVICES INDEX
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
TSYS $100 $114 $210 $276 $494 $872
S&P 500 $100 $108 $118 $120 $165 $203
S&P CS&S $100 $119 $131 $174 $242 $360
</TABLE>
(6) Compensation Committee Report on Executive Compensation.
The Compensation Committee (the "Committee") of the Board of Directors of
TSYS is responsible for evaluating the remuneration of senior management and
board members of TSYS and its subsidiaries and the compensation and fringe
benefit plans in which officers, employees and directors of TSYS and its
subsidiaries are eligible to participate. Because TSYS' mission is to exceed the
expectations of its customers through the delivery of superior service and
continuous quality improvement that rewards its employees and enhances the value
of its shareholders' investment, the Committee's executive compensation policies
and practices are designed to attract, retain and reward its executives for
their performance in accomplishing TSYS' mission.
Elements of Executive Compensation. The four elements of executive
compensation at TSYS are:
o Base Salary
o Annual Bonus
o Long-Term Incentives
o Other Benefits
The Committee believes that a substantial portion, though not a majority,
of an executive's compensation should be "at-risk" based upon TSYS' short-term
performance (through the annual bonus and the Synovus/TSYS Profit Sharing Plan
and the Synovus/TSYS 401(k) Savings Plan) and long-term performance (through
long-term incentives including stock options and restricted stock
11
awards). The remainder of each executive's compensation is primarily based upon
the competitive practices of companies similar in size to TSYS ("similar
companies") with certain adjustments as described below. The companies used for
comparison are not the same companies included in the peer group index appearing
in the Stock Performance Graph above. A description of each element of executive
compensation and the factors and criteria used by the Committee in determining
these elements is discussed below:
Base Salary. Base salary is an executive's annual rate of pay without
regard to any other elements of compensation. The Committee believes that the
base salary of TSYS executives should reflect the fact that TSYS has had
outstanding stock performance over the previous 10 years, resulting in
significant market value added for its shareholders. The Committee has had
considerable difficulty, however, in obtaining data that reflected the
appropriate market for the compensation of TSYS executives. Positions for which
market matches could be found were targeted at the median level. The Committee
added a premium, however, to the size-based market data designed to reflect pay
at companies with similar strong stock performance and market value added.
Positions for which such market data could not be obtained were slotted using
internal equity considerations. Based solely upon these comparisons, the
Committee increased Mr. Ussery's base salary in 1996. The Committee also
increased the base salaries of TSYS' other executive officers in 1996 based upon
these comparisons and internal equity considerations, as described above.
Annual Bonus. Annual bonuses are awarded to the executive officers of TSYS
pursuant to the terms of the Synovus Executive Bonus Plan and the Synovus
Incentive Bonus Plan (collectively, the "plans"). The Committee has the
discretion from year-to-year to select participants in the Synovus Executive
Bonus Plan, which was approved by the shareholders of TSYS in 1996. For 1996,
the Committee selected Mr. Ussery to participate in the Synovus Executive Bonus
Plan, while the Committee selected Messrs. Tomlinson, Pruett, Woods and Lipham
to participate in the Synovus Incentive Bonus Plan. Under the terms of the
plans, bonus amounts are paid as a percentage of base pay based on the
achievement of previously established performance goals. The performance
measures for such goals may be chosen by the Committee from among the following
for Synovus, any of its business segments and/or any of its business units: (i)
number of cardholder, merchant and/or other customer accounts processed and/or
converted by TSYS; (ii) successful negotiation or renewal of contracts with new
and/or existing customers by TSYS; (iii) productivity and expense control; (iv)
stock price; (v) return on capital compared to cost of capital; (vi) net income;
(vii) operating income; (viii) earnings per share and/or earnings per share
growth; (ix) return on equity; (x) return on assets; (xi) nonperforming assets
and/or loans as a percentage of total assets and/or loans; (xii) noninterest
expense as a percentage of total expense; (xiii) loan charge-offs as a
percentage of total loans; and (xiv) asset growth. For Mr. Ussery and TSYS'
other executive officers, the Committee established a payout matrix based upon
the attainment of net income targets during 1996. TSYS' financial performance
and individual performance, separate from the financial performance goals
established at the beginning of the year, can reduce bonus awards determined by
the attainment of the established goals, although this was not the case for any
of TSYS' executive officers. The maximum percentage payouts under the plans for
1996 were 65% for Mr. Ussery, 60% for Messrs. Tomlinson and Pruett and 50% for
Messrs. Woods and Lipham. The Committee also established a special provision
that would double the bonus otherwise payable to TSYS' executive officers. This
provision was based upon the attainment of a "stretch" net income goal and the
attainment of a selected number of cardholder accounts. Because the two goals
under this special provision were exceeded and the overall financial results of
TSYS were favorable, Mr. Ussery and TSYS' other executive officers were awarded
the maximum bonus amount for which each executive was eligible.
Long-Term Incentives. The two types of long-term incentives awarded to
executives to date are stock options and restricted stock awards. Because of the
relatively low number of previously traded shares of TSYS, the Committee has
decided to award stock options and restricted stock awards of Synovus stock to
TSYS executives, thereby linking their interests to the interests of TSYS and
Synovus shareholders. Restricted stock awards are designed to focus executives
on the long-term performance of TSYS and Synovus. Stock options provide
executives with the opportunity to buy and maintain an equity
interest in TSYS and Synovus and to share in the appreciation
12
of the value of TSYS and Synovus Common Stock. In 1994, the Committee
established a payout matrix for future long-term incentive grants that uses
total shareholder return as measured by Synovus' performance (stock price
increases plus dividends) and how Synovus' total shareholder return compares to
the return of a peer group of companies. For the long-term incentive awards made
in 1996, total shareholder return and peer comparisons were measured during the
1993-1995 performance period. Applying the results of the 1993-1995 performance
period to the payout matrix, the Committee granted Mr. Ussery and TSYS' other
executive officers restricted stock awards and stock options in 1996.
Benefits. Benefits offered to executives serve a different purpose than the
other elements of total compensation. In general, these benefits provide either
retirement income or protection against catastrophic events such as illness,
disability and death. Executives generally receive the same benefits offered to
the general employee population, with the only exceptions designed to promote
tax efficiency or to replace other benefits lost due to regulatory limits. The
Synovus/TSYS Profit Sharing Plan and the Synovus/TSYS 401(k) Savings Plan,
including excess benefit arrangements designed to replace benefits lost due to
regulatory limits (collectively the "Plan"), is the largest component of TSYS'
benefits package for executives. The Plan is directly related to corporate
performance because the amount of employer contributions to the Plan (to a
maximum of 14% of an executive's compensation) is a function of TSYS'
profitability. For 1996, Mr. Ussery and TSYS' other executive officers received
a Plan contribution of 14% of their compensation based upon the profitability
formula under the Plan. The remaining benefits provided to executives are
primarily based upon the competitive practices of similar companies.
In 1993, the Internal Revenue Code of 1986, as amended (the "Code"), was
amended to limit the deductibility for federal income tax purposes of annual
compensation paid by a publicly held corporation to its chief executive officer
and four other highest paid executives for amounts greater than $1 million
unless certain conditions are met. Because the Committee seeks to maximize
shareholder value, the Committee has taken steps to ensure the deductibility of
compensation in excess of $1 million. For 1996, Mr. Ussery would have been
affected by this provision but for the steps taken by the Committee. However,
the Committee reserves the ability to make awards which do not qualify for full
deductibility under Section 162(m) of the Code if the Committee determines that
the benefits of so doing outweigh full deductibility.
The Committee believes that the executive compensation policies serve the
best interests of the shareholders and of TSYS. A substantial portion of the
compensation of TSYS' executives is directly related to and commensurate with
TSYS' performance. The Committee believes that the performance of TSYS to date
validates the Committee's compensation philosophy.
Gardiner W. Garrard, Jr.
Mason H. Lampton
(7) Compensation Committee Interlocks and Insider Participation.
William B. Turner, Gardiner W. Garrard, Jr., George C. Woodruff, Jr. and
Mason H. Lampton served as members of TSYS' Compensation Committee during 1996.
No member of the Committee is a current or former officer or employee of TSYS or
its subsidiaries.
During 1996, Mr. Turner was Chairman of the Executive Committee of W.C.
Bradley Co. James H. Blanchard, Chairman of the Executive Committee of TSYS,
serves on the Board of Directors of W.C. Bradley Co. TSYS leases various
properties in Columbus, Georgia, from W.C. Bradley Co. for office space and
storage. The rent paid for the space in 1996, which is approximately 71,915
square feet, is approximately $688,403. The lease agreements were made on
substantially the same terms as those prevailing at the time for comparable
leases for similar facilities with an unrelated third party in Columbus,
Georgia.
TSYS has entered into an agreement with CB&T with respect to the use of
aircraft owned or leased by B&C Company, a Georgia general partnership in which
CB&T and W.C. Bradley Co. are equal partners. CB&T and W.C. Bradley Co.
have each agreed to remit to B&C Company fixed fees
13
for each hour they fly the aircraft owned and/or leased by B&C Company. TSYS
paid CB&T $600,953 for its use of the B&C Company aircraft during 1996, which
$600,953 was remitted to B&C Company by CB&T. The charges payable by TSYS to
CB&T in connection with its use of this aircraft approximate charges made
available to unrelated third parties in the State of Georgia for use of
comparable aircraft for commercial purposes. William B. Turner, a director of
TSYS and Chairman of the Executive Committee of CB&T and Synovus, was an
officer, director and shareholder of W.C. Bradley Co. during 1996. James H.
Blanchard, Chairman of the Executive Committee of TSYS, Chairman of the Board of
Synovus and a director of CB&T, is a director of W.C. Bradley Co. W. Walter
Miller, Jr., a director of W.C. Bradley Co., is Senior Vice President and a
director of TSYS. Elizabeth C. Ogie, the niece of William B. Turner and the
sister-in-law of W. Walter Miller, Jr., is a director of W.C Bradley Co. and a
director of CB&T and Synovus. Stephen T. Butler, the nephew of William B. Turner
and an officer and director of W.C. Bradley Co., is a director of CB&T. Samuel
M. Wellborn, III, Chairman of the Board of CB&T, is a director of W.C. Bradley
Co. W.B. Turner, Jr. and John T. Turner, the sons of William B. Turner, are
officers and directors of W.C. Bradley Co. and are also directors of CB&T.
Gardiner W. Garrard, Jr. is President of The Jordan Company. TSYS leases
from The Jordan Company approximately 10,000 square feet of office space in
Columbus, Georgia for $5,900 per month, which lease expires on September 30,
1999. The lease was made on substantially the same terms as those prevailing at
the time for leases of comparable property between unrelated third parties.
During 1996, The Jordan Company received payments from a third party lessor of
$116,440 in connection with its representation of TSYS as leasing agent in
securing office space in Atlanta, Georgia. The payments were made in the
ordinary course of business on substantially the same terms as those prevailing
at the time for comparable transactions with unrelated third parties. Gardiner
W. Garrard, Jr., a director of TSYS, CB&T and Synovus, is an officer, director
and shareholder of The Jordan Company. Richard M. Olnick, the brother-in-law of
Gardiner W. Garrard, Jr. and a director of CB&T, is an officer, director and
shareholder of The Jordan Company.
(8) Transactions with Management.
During 1996, TSYS paid to Communicorp, Inc. an aggregate of $504,389. These
payments were made in the ordinary course of business on substantially the same
terms as those prevailing at the time for comparable transactions with unrelated
third parties and were primarily for various printing and business communication
services provided by Communicorp, Inc. to TSYS. Communicorp, Inc. is a wholly
owned subsidiary of AFLAC Incorporated. Daniel P. Amos, a director of CB&T and
Synovus, is Chief Executive Officer and a director of AFLAC Incorporated.
King & Spalding, a law firm located in Atlanta, Georgia, performed legal
services on behalf of TSYS during 1996. Griffin B. Bell and Samuel A. Nunn,
directors of TSYS, are Senior Partners of King & Spalding.
Bradley & Hatcher, a law firm located in Columbus, Georgia, was retained by
TSYS in 1996 to perform legal services on its behalf. Richard Y. Bradley, a
director of Synovus, CB&T and TSYS, is a partner of Bradley and Hatcher.
For information about transactions with companies that are affiliates of
William B. Turner and Gardiner W. Garrard, Jr., directors of TSYS, see Section
III (7) hereof captioned "Compensation Committee Interlocks and Insider
Participation."
For a description of certain transactions between TSYS and its affiliated
companies, upon whose Boards of Directors certain of TSYS' directors also serve,
see Section IV(D) hereof captioned "Bankcard Data Processing Services Provided
to CB&T and Certain of Synovus' Subsidiaries; Other Agreements Between TSYS,
Synovus, CB&T and Certain of Synovus' Subsidiaries."
14
IV. RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS'
SUBSIDIARIES
A. Beneficial Ownership of TSYS Common Stock by CB&T.
The following table sets forth, as of December 31, 1996, the number of
shares of TSYS Common Stock beneficially owned by CB&T, the only known
beneficial owner of more than 5% of the issued and outstanding shares of TSYS
Common Stock.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
TSYS Common Stock TSYS Common Stock
Name and Address Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/96 as of 12/31/96
- ------------------------ ------------------------ -----------------------------
<S> <C> <C>
Columbus Bank
and Trust Company 104,401,292<F1><F2> 80.7%
1148 Broadway,
Columbus, Georgia 31901
<FN>
- ------------
<F1> CB&T individually owns these shares.
<F2> As of December 31, 1996, Synovus Trust Company, a wholly owned trust
company subsidiary of CB&T ("Synovus Trust"), held in various fiduciary
capacities a total of 743,852 shares (.57%) of TSYS Common Stock. Of this
total, Synovus Trust held 569,414 shares as to which it possessed sole
voting power, 580,570 shares as to which it possessed sole investment power
and 163,282 shares as to which it possessed shared voting and investment
power. In addition, as of December 31, 1996, Synovus Trust held in various
agency capacities an additional 1,291,408 shares of TSYS Common Stock as to
which it possessed no voting or investment power. Synovus and its
subsidiaries disclaim beneficial ownership of all shares of TSYS Common
Stock which are held by Synovus Trust in various fiduciary and agency
capacities.
</FN>
</TABLE>
CB&T, by virtue of its individual ownership of 104,401,292 shares, or
80.7%, of the outstanding shares of TSYS Common Stock on December 31, 1996 is
able to, and intends to, elect a majority of TSYS' Board of Directors. CB&T
presently controls TSYS.
B. Interlocking Directorates of TSYS, Synovus and CB&T.
Eight of the fourteen members of and nominees to serve on TSYS' Board of
Directors also serve as members of the Boards of Directors of Synovus and CB&T.
They are James H. Blanchard, Richard Y. Bradley, Gardiner W. Garrard, Jr., John
P. Illges, III, H. Lynn Page, William B. Turner, George C. Woodruff, Jr., and
James D. Yancey. Mason H. Lampton serves as an Advisory Director of CB&T and as
a director of Synovus.
C. Synovus Common Stock Ownership of Directors and Management.
The following table sets forth, as of December 31, 1996, the number of
shares of Synovus Common Stock beneficially owned by TSYS' directors and TSYS'
five most highly compensated executive officers.
15
<TABLE>
<CAPTION>
Shares of Shares of Shares of
Synovus Synovus Synovus Percentage
Common Stock Common Stock Common Stock of
Beneficially Beneficially Beneficially Total Outstanding
Owned with Owned with Owned with Shares of Shares of
Sole Voting Shared Sole Voting Synovus Synovus
and Voting and but no Common Stock Common Stock
Investment Investment Investment Beneficially Beneficially
Power as of Power as of Power as of Owned as of Owned as of
Name 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
- ----------------------- ------------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Griffin B. Bell 18,857 10,000 --- 28,857 .02%
James H. Blanchard 720,749<F1> 4,460 164,598 889,807 .76
Richard Y. Bradley 8,133 56,221 --- 64,354 .06
Gardiner W. Garrard, Jr. 88,481 635,938 --- 724,419 .62
John P. Illges, III 247,356 116,445<F2> --- 363,801 .31
Mason H. Lampton 77,462 128,693<F3> --- 206,155 .18
James B. Lipham 1,080 --- 2,956 4,036 .003
W. Walter Miller, Jr. 17,668<F4> 28,334 --- 46,002 .04
Samuel A. Nunn --- --- --- --- ---
H. Lynn Page 373,688 5,118 --- 378,806 .33
William A. Pruett 7,347<F5> --- 7,891 15,238 .01
Philip W. Tomlinson 18,611<F6> --- 20,640 39,251 .03
William B. Turner 41,649 13,503,372<F7> --- 13,545,021 11.64
Richard W. Ussery 36,229<F8> 1,744 29,164 67,137 .06
George C. Woodruff, Jr. 56,605 30,000<F9> --- 86,605 .07
M. Troy Woods --- --- 3,504 3,504 .003
James D. Yancey 453,585<F10> 27,412 34,615 515,612 .44
<FN>
- -------------------
<F1> Includes 38,151 shares of Synovus Common Stock with respect to which Mr.
Blanchard has options to acquire.
<F2> Includes 27,852 shares of Synovus Common Stock held by a charitable
foundation of which Mr. Illges is a trustee.
<F3> Includes 117,639 shares of Synovus Common Stock held in a trust for which
Mr. Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership
of such shares.
<F4> Includes 4,500 shares of Synovus Common Stock with respect to which Mr.
Miller has options to acquire.
<F5> Includes 5,868 shares of Synovus Common Stock with respect to which Mr.
Pruett has options to acquire.
<F6> Includes 14,675 shares of Synovus Common Stock with respect to which Mr.
Tomlinson has options to acquire.
<F7> Includes 1,141,425 shares held by a charitable foundation of which Mr.
Turner is a trustee.
<F8> Includes 20,741 shares of Synovus Common Stock with respect to which Mr.
Ussery has options to acquire.
<F9> Includes 30,000 shares held by a charitable foundation of which Mr.
Woodruff is a trustee.
<F10>Includes 24,588 shares of Synovus Common Stock with respect to which Mr.
Yancey has options to acquire.
</FN>
</TABLE>
16
The following table sets forth information, as of December 31, 1996, with
respect to the beneficial ownership of Synovus Common Stock by all directors and
executive officers of TSYS as a group.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
Synovus Common Stock Synovus Common Stock
Name of Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/96 as of 12/31/96
- ------------------------ ----------------------- -----------------------------
<S> <C> <C>
All directors
and executive
officers of TSYS as a 17,095,947 14.69%
group (includes 18
persons)
</TABLE>
D. Bankcard Data Processing Services Provided to CB&T and Certain of Synovus'
Subsidiaries; Other Agreements Between TSYS, Synovus, CB&T and Certain of
Synovus' Subsidiaries.
During 1996, TSYS provided bankcard data processing services to CB&T and 29
of Synovus' other banking subsidiaries. The bankcard data processing agreement
between TSYS and CB&T can be terminated by CB&T upon 60 days prior written
notice to TSYS or terminated by TSYS upon 180 days prior written notice to CB&T.
During 1996, TSYS derived $1,809,847 in revenues from CB&T and 29 of Synovus'
other banking subsidiaries from the performance of bankcard data processing
services and $128,411 in revenues from Synovus and its subsidiaries from the
performance of other data processing services. TSYS' charges to CB&T and
Synovus' other subsidiaries for bankcard and other data processing services are
comparable to, and are determined on the same basis as, charges by TSYS to
similarly situated unrelated third parties.
Synovus Service Corp. ("SSC"), a wholly owned subsidiary of Synovus,
provides various services to Synovus' subsidiary companies, including TSYS. TSYS
and SSC are parties to Lease Agreements pursuant to which SSC leased from TSYS
office space for lease payments aggregating $107,449 during 1996, and TSYS
leased from SSC office space for lease payments aggregating $34,472 during 1996.
The terms of these transactions are comparable to those which could have been
obtained in transactions with unaffiliated third parties.
TSYS and Synovus and TSYS and SSC are parties to Management Agreements
(having one year, automatically renewable, unless terminated, terms), pursuant
to which Synovus and SSC provide certain management services to TSYS. During
1996, these services included human resource services, maintenance services,
security services, communications services, corporate education services, travel
services, investor relations services, corporate governance services, legal
services, regulatory and statutory compliance services, executive management
services performed on behalf of TSYS by certain of Synovus' officers and
financial services. As compensation for management services provided during
1996, TSYS paid Synovus and SSC management fees of $1,079,706 and $8,583,648,
respectively. Management fees are subject to future adjustments based upon
charges at the time by unrelated third parties for comparable services.
During 1996, Synovus Trust Company served as Trustee of various employee
benefit plans of TSYS. During 1996, TSYS paid Synovus Trust Company trustee's
fees under these plans of $151,525.
During 1996, Columbus Depot Equipment Company ("CDEC"), a wholly owned
subsidiary of TSYS, and CB&T and 25 of Synovus' other subsidiaries were parties
to Lease Agreements pursuant to which CB&T and 25 of Synovus' other subsidiaries
leased from CDEC computer related equipment for bankcard and bank data
processing services for lease payments aggregating $152,262. During 1996, CDEC
sold CB&T and certain of Synovus' other subsidiaries computer related equipment
for bankcard and bank data processing services for payments aggregating $23,073.
In addition, CDEC was paid $15,375 by CB&T and certain of Synovus' other
subsidiaries for monitoring such equipment. The terms, conditions, rental rates
and/or sales prices provided for in these Agreements are comparable to
corresponding terms, conditions and rates provided for in leases and sales of
similar equipment offered by unrelated third parties.
During 1996, Synovus Data Corp., a wholly owned subsidiary of Synovus, paid
TSYS $303,554 for data links, network services and other miscellaneous items
related to the data processing services which Synovus Data Corp.
provides to its customers, which amount was reimbursed to
17
Synovus Data Corp. by its customers. During 1996, Synovus Data Corp. paid TSYS
$31,825, primarily for computer processing services. During 1996, TSYS and
Synovus Data Corp. were parties to a Lease Agreement pursuant to which TSYS
leased from Synovus Data Corp. portions of its office building for lease
payments aggregating $240,000. The charges for processing and other services,
and the terms of the Lease Agreement, are comparable to those between unrelated
third parties.
During 1996, TSYS and CB&T were parties to Lease Agreements pursuant to
which CB&T leased from TSYS portions of its maintenance and warehouse facilities
for lease payments aggregating $11,628. During 1996, TSYS and CB&T were also
parties to a Lease Agreement pursuant to which TSYS leased office space from
CB&T for lease payments of $4,483 per month. The terms, conditions and rental
rates provided for in these Lease Agreements are comparable to corresponding
terms, conditions and rates provided for in leases of similar facilities offered
by unrelated third parties in the Columbus, Georgia area.
During 1996, Synovus, CB&T and other Synovus subsidiaries paid to Columbus
Productions, Inc. and Lincoln Marketing, Inc., wholly owned subsidiaries of
TSYS, an aggregate of $753,065 for printing and correspondence services. The
charges for these services are comparable to those between unrelated third
parties.
During 1996, TSYS purchased 35,349 shares of Synovus Common Stock from
Synovus for $764,422 and simultaneously granted the shares to certain executive
officers of TSYS as restricted stock awards. The per share purchase price of
such shares was equal to the fair market value of a share of Synovus Common
Stock on the date of purchase.
During 1996, TSYS and its subsidiaries were paid $1,392,543 of interest by
CB&T in connection with deposit accounts with, and commercial paper purchased
from, CB&T. These interest rates are comparable to those provided for between
unrelated third parties.
The Board of Directors of TSYS has resolved that transactions with
officers, directors, key employees and their affiliates shall be approved by a
majority of its independent and disinterested directors, if otherwise permitted
by applicable law, and will be on terms no less favorable than could be obtained
from unrelated third parties.
V. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires TSYS' officers and directors,
and persons who own more than ten percent of TSYS Common Stock, to file reports
of ownership and changes in ownership on Forms 3,4 and 5 with the SEC and the
New York Stock Exchange. Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish TSYS with copies of all
Section 16(a) forms they file.
To TSYS' knowledge, based solely on its review of the copies of such forms
received by it, and written representations from certain reporting persons that
no Forms 5 were required for those persons, TSYS believes that during the fiscal
year ended December 31, 1996, all Section 16(a) filing requirements applicable
to its officers, directors, and greater than ten percent beneficial owners were
complied with, except that Mr. Woodruff reported six transactions late on a Form
5, Mr. Turner reported seven transactions late on a Form 5, and Mr. Page
reported one transaction late on a Form 5.
VI. INDEPENDENT AUDITORS
On February 28, 1997, TSYS' Board of Directors appointed KPMG Peat Marwick
LLP as the independent auditors to audit the financial statements of TSYS and
its subsidiaries for the fiscal year ending December 31, 1997. The Board of
Directors knows of no direct or material indirect financial interest by KPMG
Peat Marwick LLP in TSYS or of any connection between KPMG Peat Marwick LLP and
TSYS in the capacity of promoter, underwriter, voting trustee, director,
officer, shareholder or employee.
Representatives of KPMG Peat Marwick LLP will be present at TSYS' 1997
Annual Meeting with the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
18
VII. FINANCIAL INFORMATION WITH REFERENCE TO TSYS CONTAINED IN TSYS' 1996
ANNUAL REPORT
Detailed financial information for TSYS and its subsidiaries for its 1996
fiscal year is included in TSYS' 1996 Annual Report that is being mailed to
TSYS' shareholders together with this Proxy Statement.
VIII. OTHER MATTERS
At the time of preparation of this Proxy Statement, TSYS' Board of
Directors has not been informed of any matters to be presented by or on behalf
of TSYS' Board of Directors or its management for action at TSYS' 1997 Annual
Meeting which are not referred to herein. If any other matters come before the
Annual Meeting or any adjournment thereof, it is the intention of the persons
named in the accompanying Proxy to vote thereon in accordance with their best
judgment.
TSYS' shareholders are urged to vote, date and sign the enclosed Proxy Card
solicited on behalf of TSYS' Board of Directors and return it at once in the
envelope which is enclosed for that purpose. This should be done whether or not
the TSYS shareholder plans to attend TSYS' 1997 Annual Meeting.
By Order of the Board of Directors
/s/Richard W. Ussery
Richard W. Ussery
Chairman of the Board, Total System Services, Inc.
Columbus, Georgia
March 13, 1997
19
EXHIBIT 21.1
SUBSIDIARIES OF TOTAL SYSTEM SERVICES, INC.
<TABLE>
<CAPTION>
<S> <C>
Columbus Depot Equipment Company 100%
A Georgia corporation
Mailtek, Inc. 100%
A Georgia corporation
Lincoln Marketing, Inc. 100%
A Georgia corporation
Columbus Productions, Inc. 100%
A Georgia corporation
</TABLE>
TSYS\subsid.doc
EXHIBIT 23.1
Independent Auditors' Consent
The Board of Directors
Total System Services, Inc.
We consent to the incorporation by reference in the Registration Statements (No.
2-92497 and No. 33-1736) on Form S-8 and (No. 33-52258) on Form S-3 of Total
System Services, Inc. of our reports dated January 22, 1997, relating to the
consolidated balance sheets of Total System Services, Inc. and subsidiaries as
of December 31, 1996 and 1995, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1996, and the related financial statement
schedule, which reports appear in the 1996 Annual Report on Form 10-K of Total
System Services, Inc. and 1996 Annual Report to Shareholders and is incorporated
by reference in the 1996 Annual Report on Form 10-K of Total System Services,
Inc.
/s/KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Atlanta, Georgia
March 17, 1997
EXHIBIT 24.1
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)
March 20, 1997 By:/s/Richard W. Ussery
-----------------------------------
Richard W. Ussery,
Chairman and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James H. Blanchard, Richard W. Ussery and
Philip W. Tomlinson, 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/James H. Blanchard Date: March 20, 1997
- ------------------------------------------------
James H. Blanchard,
Director and Chairman of the
Executive Committee
/s/Richard W. Ussery Date: March 20, 1997
- ------------------------------------------------
Richard W. Ussery,
Chairman of the Board
and Principal Executive Officer
<PAGE>
/s/Philip W. Tomlinson Date: March 20, 1997
- --------------------------------------------------
Philip W. Tomlinson,
President
and Director
/s/James B. Lipham Date: March 20, 1997
- -------------------------------------------------
James B. Lipham,
Executive Vice President, Treasurer, Principal
Accounting and Financial Officer
/s/William A. Pruett Date: March 20, 1997
- -------------------------------------------------
William A. Pruett,
Executive Vice President
/s/M. Troy Woods Date: March 20, 1997
- -------------------------------------------------
M. Troy Woods,
Executive Vice President
/s/Griffin B. Bell Date: March 20, 1997
- -------------------------------------------------
Griffin B. Bell,
Director
/s/Richard Y. Bradley Date: March 20, 1997
- -------------------------------------------------
Richard Y. Bradley,
Director
/s/Gardiner W. Garrard, Jr., Date: March 20, 1997
- -------------------------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/John P. Illges, III Date: March 20, 1997
- -------------------------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: March 20, 1997
- -------------------------------------------------
Mason H. Lampton,
Director
<PAGE>
/s/Samuel A. Nunn Date: March 20, 1997
- -------------------------------------------------
Samuel A. Nunn,
Director
/s/H. Lynn Page Date: March 20, 1997
- -------------------------------------------------
H. Lynn Page,
Director
/s/W. Walter Miller, Jr. Date: March 20, 1997
- -------------------------------------------------
W. Walter Miller, Jr.,
Director
/s/William B. Turner Date: March 20, 1997
- -------------------------------------------------
William B. Turner,
Director
/s/George C. Woodruff, Jr. Date: March 20, 1997
- -------------------------------------------------
George C. Woodruff, Jr.,
Director
/s/James D. Yancey Date: March 20, 1997
- -------------------------------------------------
James D. Yancey,
Director
filings/tss\confo.sig
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000721683
<NAME> TOTAL SYSTEM SERVICES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 27,496,057
<SECURITIES> 0
<RECEIVABLES> 59,906,399
<ALLOWANCES> 704,000
<INVENTORY> 0
<CURRENT-ASSETS> 98,322,938
<PP&E> 121,397,132
<DEPRECIATION> 58,441,206
<TOTAL-ASSETS> 246,759,083
<CURRENT-LIABILITIES> 52,105,345
<BONDS> 0
0
0
<COMMON> 12,948,352
<OTHER-SE> 165,929,395
<TOTAL-LIABILITY-AND-EQUITY> 246,759,083
<SALES> 311,648,349
<TOTAL-REVENUES> 311,648,349
<CGS> 0
<TOTAL-COSTS> 259,744,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 60,444,404
<INCOME-TAX> 21,007,223
<INCOME-CONTINUING> 39,437,181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,437,181
<EPS-PRIMARY> .31<F1>
<EPS-DILUTED> 0
<FN>
<F1> On March 29, 1996, TSYS announced a two-for-one stock split to be 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>
