TSYS Reports 14.4% Increase in Net Income for Second Quarter 2007

TSYS today announced the results for the second quarter with revenues of $460.2 million, and a 14.4% increase in net income over the same period in 2006. For the first six months of 2007, TSYS’ revenues were $889.8 million, operating income increased 16% to $181.6 million, and net income increased to $123.0 million, or 14.1%, over the same period in 2006. "At 12.0%, internal revenue growth in our core processing business continues to be a strong driver of our results. Our growth in international operations continued as a result of both our acquisitions and strong demand resulting in revenue growth of 44.3%. These results are clearly reflected in the expansion of our operating margin to 25.7% in the first six months of 2007 over 23.3% in the same period of 2006, excluding reimbursable items. For the full year, we project this margin to be in the 25% to 26% range,” said Philip W. Tomlinson, chairman and chief executive officer of TSYS. "Continuing the same pattern as the first quarter of this year, we experienced strong internal revenue growth and continued to manage expenses. As a result of these factors, we continue to expect to achieve our previously announced net income growth guidance of 20% to 22% on a non-GAAP basis and 0% to 2% on a GAAP basis. Our team’s performance has taken us well beyond the client losses from last year,” said Tomlinson. Financial Highlights (dollars in millions, except earnings per share data) Three Months Ended Six Months Ended June 30, June 30, 2007   2006   Percent Change   2007   2006   Percent Change Revenues Before Reimbursables $364.1   342.8   6.2%   $707.7   672.3   5.3% Total Revenues 460.2   429.2   7.2%   889.8   841.5   5.7% Operating Income 95.9   84.7   13.2%   181.6   156.6   16.0% Net Income 65.7   57.4   14.4%   123.0   107.8   14.1% Basic EPS 0.33   0.29   14.7%   0.63   0.55   14.4% Diluted EPS 0.33   0.29   14.5%   0.62   0.55   14.2% Recent Highlights TSYS successfully completed the pilot program for the Wal-Mart MoneyCard, issued by GE and reloaded through Green Dot’s national reloading network. The Visa-branded prepaid product was first piloted in November of 2006 with TSYS, and will be available in 2,600 Wal-Mart stores by the end of July 2007. TSYS renewed merchant acquiring service agreements with Merchant Management Systems, as well as signed new agreements with mPay Gateway and The Bancorp Bank. TSYS introduced Chip and PIN Secure Payments in Cyprus with the introduction of EMV cards through partnerships with three Cyprus-based banks, Marfin Popular Bank (formerly Laiki Bank, Cyprus), Hellenic Bank and Universal Bank. The Commercial Bank of Qatar also issued its first EMV card program utilizing TSYS’ card-management solution, PRIME. TSYS launched the Rewards card pilot program in the United Kingdom with Norwich Union (NU), which is now the second program that NU has live on the TSYS Prepaid platform. TSYS continued its focus on the healthcare industry with the appointment of Duane White, a 24-year veteran of the financial services and healthcare industries, to lead TSYS' healthcare initiatives. TSYS announced that CUP Data, TSYS' joint venture with China UnionPay, has recently begun providing processing services for Huaxia Bank Co., Ltd, one of China's largest nationwide banks. CUP Data now provides processing services for three of the four largest issuing banks in China that use outsourced services to support their payment programs. Projected Outlook for 2007 Excluding the one time Bank of America contract termination fee in 2006 of approximately $68.9 million and the acceleration of amortization of Bank of America contract acquisition costs of approximately $6 million, net income is expected to increase between 20%–22% in 2007 compared to 2006. Based on GAAP, TSYS’ estimated 2007 net income is expected to increase between 0%–2% as compared to 2006. TSYS’ 2007 earnings guidance is based on the following assumptions: 1. Including the Bank of America contract termination fee of approximately $68.9 million in 2006 and an acceleration of amortization of contract acquisition costs of approximately $6 million, estimated total revenues will decline 3%–2% in 2007. Excluding the termination fee and reimbursable items, revenues will increase by 3%-5% over 2006. 2. J.P. Morgan Chase & Co. will discontinue its processing agreement according to the original schedule and will license TSYS’ processing software in the third quarter of 2007. 3. Expense reductions in employment, equipment, leases and other areas that are included in 2007 estimates will be accomplished. 4. TSYS will not incur significant expenses associated with the conversion of new large clients and/or acquisitions, or any significant impairment of goodwill or other intangibles. Presentation of revenues and net income excluding the Bank of America termination fee, acceleration of amortization of contract acquisition costs and reimbursable items are non-GAAP financial measures. The following table reconciles the range of changes from 2006 to 2007, comparing non-GAAP financial measures to GAAP financial measures. Range of Guidance($ in millions) 2007 Forecast   2006 Actual   Percent Change Net income $250 to $255   $ 249     0% to 2% Less: termination fee, net of acceleration of amortization of contract acquisition costs, net of tax       ($41 )     Net income, excluding impact of termination fee, net of acceleration of amortization of contract acquisition costs $250 to $255   $ 208     20% to 22% Total revenues $1,742 to $1,760   $ 1,787     (3%) to (2%) Less: reimbursable items ($329 )     ($353 )     Less: termination fee, net of related contract acquisition cost amortization(a)       ($65 )     Revenues, excluding reimbursable items and net termination fee $1,413 to $1,431   $ 1,369     3% to 5% (a) Note: TSYS accelerated the amortization of approximately $6 million in contract acquisition costs (comprised of $4 million of amortization related to payments for processing rights, which was recorded as a reduction of revenues, and $2 million of amortization expense related to conversion costs). TSYS believes the table above presents meaningful information to assist investors in understanding the company’s financial estimates for changes in total revenues and net income from 2006 to 2007 as a result of the Bank of America consumer portfolio deconversion as the non-GAAP financial measures exclude amounts that the company does not consider part of ongoing operating results. The non-GAAP financial percentage changes should not be considered by themselves or as a substitute for the GAAP percentage changes year over year. The non-GAAP measures should be considered as an additional view of the way TSYS’ financial measures are affected by the one-time Bank of America contract termination fee, acceleration of amortization of contract acquisition costs and reimbursable items; and should be used in conjunction with all publicly filed financial statements and reports. Conference Call TSYS will host its quarterly conference call at 8:30 a.m. EDT, Tuesday, July 24. The conference call can be accessed via simultaneous Internet broadcast at tsys.com by clicking on the "Conference Call” icon on the homepage. The replay will be archived for 12 months and will be available approximately 30 minutes after the completion of the call. About TSYS TSYS is one of the world’s largest payment-services companies, offering a broad range of packaged or outsourced issuing and acquiring technologies that support consumer finance, credit, debit and prepaid services for financial institutions and retail companies worldwide. Based in Columbus, Ga., TSYS (NYSE: TSS) is 81-percent held by Synovus (NYSE: SNV), one of FORTUNE magazine’s "Most Admired Companies” and a member of its "100 Best Companies to Work For” Hall of Fame. For more information, contact news@tsys.com. This press release contains statements that constitute "forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements regarding TSYS’ projection that its net operating margin, excluding reimbursable items, will be in the 25% to 26% range and TSYS’ expected net income growth for 2007, and the assumptions underlying such statements, including, with respect to TSYS’ expected increase in net income for 2007: (1) including the Bank of America contract termination fee of approximately $68.9 million in 2006 and an acceleration of amortization of contract-acquisition costs of approximately $6 million, estimated total revenues will decline 3-2% in 2007 and excluding the termination fee and reimbursable items, estimated revenues will increase by 3%-5% over 2006; (2) JP Morgan Chase & Co. will discontinue its processing agreement according to the original schedule and will license TSYS' processing software in the third quarter of 2007; (3) expense reductions in employment, equipment, leases and other areas which are included in 2007 estimates will be accomplished; and (4) TSYS will not incur significant expenses associated with the conversion of new large clients and/or acquisitions, or any other significant impairment of goodwill or other intangibles. These statements are based on the current beliefs and expectations of TSYS’ management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by our forward-looking statements in this press release. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to, one or more of the assumptions upon which TSYS’ 2007 net income forecast is based are inaccurate. Additional factors that could cause actual results to differ materially from those contemplated in this release can be found in TSYS’ filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise. TSYS Financial Highlights (Unaudited) (In thousands, except per share data)                   Three Months Ended Six Months Ended June 30, June 30, Percentage Change Percentage 2007 2006 2007   2006   Change   Revenues Electronic payment processing services $ 244,840 232,301 5.4 % $ 475,004 453,362 4.8 % Merchant acquiring services 64,277 65,820 (2.3 ) 124,957 129,769 (3.7 ) Other services 54,977   44,670   23.1 107,744   89,212   20.8 Revenues before reimbursables 364,094 342,791 6.2 707,705 672,343 5.3 Reimbursable items 96,061   86,374   11.2 182,053   169,112   7.7 Total revenues 460,155   429,165   7.2 889,758   841,455   5.7   Expenses Salaries & other personnel expense 145,532 120,433 20.8 285,974 241,763 18.3 Net occupancy & equipment expense 67,953 75,703 (10.2 ) 134,089 151,053 (11.2 ) Other operating expenses 54,693   61,924   (11.7 ) 106,047   122,939   (13.7 ) Expenses before reimbursable items 268,178 258,060 3.9 526,110 515,755 2.0 Reimbursable items 96,061   86,374   11.2 182,053   169,112   7.7 Total operating expenses 364,239   344,434   5.8 708,163   684,867   3.4   Operating income 95,916   84,731   13.2 181,595   156,588   16.0   Other income: Interest income 6,159 3,425 79.8 11,647 5,933 96.3 Interest expense (366 ) (85 ) nm (576 ) (129 ) nm Loss on foreign currency translation, net (845 ) (363 ) (132.8 ) (162 ) (87 ) (86.2 ) Dividend income 44   -   nm 58   -   nm Other income 4,992   2,977   67.7 10,967   5,717   91.8   Income before income taxes, minority interest and equity in income of equity investments 100,908 87,708 15.0 192,562 162,305 18.6 Income taxes 35,603   31,148   14.3 70,495   56,113   25.6 Income before minority interest and equity in income of equity investments 65,305 56,560 15.5 122,067 106,192 14.9 Minority interest (602 ) (173 ) nm (952 ) (264 ) nm Equity in income of equity investments 985   1,019   (3.3 ) 1,845   1,871   (1.4 )   Net income $ 65,688   57,406   14.4 % $ 122,960   107,799   14.1 %   Basic earnings per share $ 0.33   0.29   14.7 % $ 0.63   0.55   14.4 %   Diluted earnings per share $ 0.33   0.29   14.5 % $ 0.62   0.55   14.2 %   Dividend declared per share $ 0.07   0.07   $ 0.14   0.13     Average common shares outstanding 196,693   197,093   196,591   197,089     Average common and common equivalent shares outstanding 197,147   197,330   197,081   197,334     nm = not meaningful TSYS Segment Breakdown (Unaudited) (In thousands) Three Months Ended June 30, 2007 Three Months Ended June 30, 2006 Merchant acquiring services Merchant acquiring services Domestic-based support services International-based support services Consolidated Domestic-based support services International-based support services Consolidated Revenues before reimbursables $ 254,340 58,043 58,234 370,617 253,313 34,145 60,144 347,602 Intersegment revenues (5,754 ) (372 ) (397 ) (6,523 ) (4,778 ) -   (33 ) (4,811 ) Revenues before reimbursables from external customers $ 248,586   57,671   57,837   364,094   248,535   34,145   60,111   342,791   Total revenues $ 333,872 60,733 74,114 468,719 325,106 40,326 70,736 436,168 Intersegment revenues (7,795 ) (372 ) (397 ) (8,564 ) (6,970 ) -   (33 ) (7,003 ) Revenues from external customers $ 326,077   60,361   73,717   460,155   318,136   40,326   70,703   429,165   Depreciation and amortization $ 25,748   5,507   6,755   38,010   31,692   4,795   6,499   42,986   Intersegment expenses $ 2,982   (3,727 ) (7,821 ) (8,566 ) 6,591   (5,531 ) (8,046 ) (6,986 ) Segment operating income $ 68,860   10,872   16,184   95,916   66,780   3,204   14,747   84,731   Income before income taxes, minority interest and equity income of equity investments 75,275   9,053   16,580   100,908   70,001   2,389   15,318   87,708   Income tax expense $ 27,404   2,235   5,964   35,603   23,443   1,926   5,779   31,148   Equity in income of equity investments $ -   985   -   985   -   1,019   -   1,019   Net Income $ 48,172   6,900   10,616   65,688   46,712   1,155   9,539   57,406     1,582,154 337,571 182,751 2,102,476   (396,490 ) (1,302 ) (185 ) (397,977 )   1,185,664   336,269   182,566   1,704,499     Six Months Ended June 30, 2007 Six Months Ended June 30, 2006 Merchant acquiring services Consolidated Merchant acquiring services Consolidated Domestic-based support services International-based support services Domestic-based support services International-based support services Revenues before reimbursables $ 495,309 111,006 113,052 719,367 497,756 64,858 119,006 681,620 Intersegment revenues (10,535 ) (595 ) (532 ) (11,662 ) (9,212 ) -   (65 ) (9,277 ) Revenues before reimbursables from external customers $ 484,774   110,411   112,520   707,705   488,544   64,858   118,941   672,343   Total revenues $ 648,329 116,134 140,998 905,461 637,936 76,572 141,068 855,576 Intersegment revenues (14,576 ) (595 ) (532 ) (15,703 ) (14,056 ) -   (65 ) (14,121 ) Revenues from external customers $ 633,753   115,539   140,466   889,758   623,880   76,572   141,003   841,455   Depreciation and amortization $ 51,715   11,307   13,585   76,607   63,603   8,773   13,772   86,148   Intersegment expenses $ 6,389   (6,965 ) (15,123 ) (15,699 ) 15,282   (13,105 ) (16,265 ) (14,088 ) Segment operating income $ 130,447   23,001   28,147   181,595   127,745   4,083   24,760   156,588   Income before income taxes, minority interest and equity income of equity investments 142,967   20,530   29,065   192,562   133,481   3,116   25,708   162,305   Income tax expense $ 53,653   6,407   10,435   70,495   43,914   2,493   9,706   56,113   Equity in income of equity investments $ -   1,845   -   1,845   -   1,871   -   1,871   Net Income $ 89,734   14,596   18,630   122,960   89,531   2,266   16,002   107,799       Note: Revenues from domestic-based services include electronic payment processing services and other services provided from the United States to clients domiciled in the United States or other countries. Revenues from international-based services include electronic payment processing services and other services provided from outside the United States to clients based mainly outside the United States. Revenues from merchant processing services include TSYS Acquiring's merchant acquiring and related services.             TSYS Balance Sheet (In thousands)   June 30, 2007 Dec 31, 2006 (unaudited) (audited) Assets Current assets: Cash and cash equivalents $ 452,194 389,123 Restricted cash 41,744 31,568 Accounts receivable, net 253,640 246,637 Deferred income tax assets 26,853 21,556 Prepaid expenses and other current assets 58,520   55,832   Total current assets 832,951 744,716 Property and equipment, net 272,560 271,321 Computer software, net 198,193 216,450 Contract acquisition costs, net 159,829 167,449 Goodwill, net 141,973 133,337 Equity investments, net 62,795 62,064 Other intangible assets, net 14,456 21,314 Other assets 21,742   17,590   Total assets $ 1,704,499   1,634,241     Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 31,024 31,589 Accrued salaries and employee benefits 48,819 80,697 Current portion of notes payable and obligations under capital leases 6,008 3,156 Other current liabilities 160,818   180,345   Total current liabilities 246,669 295,787 Deferred income tax liabilities 75,468 75,019 Obligations under notes payable and capital leases excluding current portion 9,634 3,625 Other long-term liabilities 36,706   36,221   Total liabilities 368,477   410,652   Minority interest in consolidated subsidiary 7,022   6,229   Shareholders' Equity: Common stock 19,920 19,868 Additional paid-in capital 81,317 66,677 Treasury stock (34,312 ) (35,233 ) Accumulated other comprehensive income 23,317 20,641 Retained earnings 1,238,758   1,145,407   Total shareholders' equity 1,329,000   1,217,360   Total liabilities and shareholders' equity $ 1,704,499   1,634,241               TSYS Cash Flow (Unaudited) (In thousands)   Six Months Ended June 30, 2007   2006   Cash flows from operating activities: Net income $ 122,960 107,799 Adjustments to reconcile net income to net cash provided by operating activities:   Minority interests in consolidated subsidiaries' net income 952 264 Equity in income of equity investments (1,845 ) (1,871 ) Dividends received from equity investments 2,994 2,371 Loss on currency translation adjustments, net 162 87 Depreciation and amortization 76,607 86,148 Share-based compensation 6,596 4,445 Impairment of developed software/contract acquisition costs 620 - Provisions for (recoveries of) bad debt expense and billing adjustments 148 224 Charges for transaction processing provisions 437 7,501 Deferred income tax benefit (2,760 ) (17,041 ) Loss on disposal of equipment, net 23 105 (Increase) decrease in: Accounts receivable (6,150 ) (4,442 ) Prepaid expenses, other current assets and other long-term assets (8,921 ) 3,830 Increase (decrease) in: Accounts payable (814 ) 451 Accrued salaries and employee benefits (31,870 ) (41,590 ) Excess tax benefit from share-based payment arrangements (3,869 ) - Other current liabilities and other long-term liabilities (35,764 ) (17,338 ) Net cash provided by operating activities 119,506   130,943     Cash flows from investing activities: Purchases of property and equipment, net (21,438 ) (14,306 ) Additions to licensed computer software from vendors (4,810 ) (4,437 ) Additions to internally developed computer software (7,458 ) (8,999 ) Cash used in acquisitions (472 ) - Additions to contract acquisition costs (9,542 ) (22,339 ) Net cash used in investing activities (43,720 ) (50,081 )   Cash flows from financing activities: Proceeds from borrowings of long-term debt 6,805 - Principal payments on long-term debt borrowings and capital lease obligations (1,744 ) (1,060 ) Proceeds from exercise of stock options 5,112 - Excess tax benefit from share-based payment arrangements 3,869 - Dividends paid on common stock (27,598 ) (23,683 ) Net cash used in financing activities (13,556 ) (24,743 ) Effect of exchange rate changes on cash and cash equivalents 841   1,795   Net increase in cash and cash equivalents 63,071 57,914 Cash and cash equivalents at beginning of year 389,123   237,569   Cash and cash equivalents at end of period $ 452,194   295,483           Geographic Area Data: The following geographic area data represents revenues for the three months ended June 30 based on where the client is domiciled:   Three Months Ended June 30, (dollars in millions): 2007 %     2006 %   % Chg United States $ 362.5 78.8 % $ 360.3 83.9 % 0.6 % Europe 49.0 10.7 36.2 8.4 35.6 Canada 30.8 6.7 24.0 5.6 28.3 Japan 6.1 1.3 4.5 1.1 35.0 Mexico 3.3 0.7 2.9 0.7 13.7 Other 8.5 1.8     1.3 0.3 nm $ 460.2 100.0 % $ 429.2 100.0 % 7.2 %   The following geographic area data represents revenues for the six months ended June 30 based on where the client is domiciled:   Six Months Ended June 30, (dollars in millions): 2007 %     2006 %   % Chg United States $ 700.3 78.7 % $ 710.2 84.4 % (1.4 ) % Europe 95.0 10.7 68.9 8.2 37.9 Canada 60.8 6.8 46.1 5.5 31.9 Japan 11.4 1.3 8.4 1.0 35.9 Mexico 6.5 0.7 5.4 0.6 21.6 Other 15.8 1.8     2.5 0.3 nm $ 889.8 100.0 % $ 841.5 100.0 % 5.7 %   Geographic Area Revenue by Operating Segment: The following table reconciles segment revenues to revenues by reporting segment for the three months ended June 30:   Three Months Ended June 30, Domestic-based support services International-based support services Merchant acquiring services     (dollars in millions): 2007 2006     2007 2006   2007   2006 United States $ 289.1 289.9 - - 73.4 70.4 Europe 0.4 0.3 48.6 35.9 - - Canada 30.7 23.9 - - 0.1 0.1 Japan - - 6.1 4.5 - - Mexico 3.3 2.9 - - - - Other 2.6 1.1     5.7 -   0.2   0.2 $ 326.1 318.1     60.4 40.4   73.7   70.7   The following table reconciles segment revenues to revenues by reporting segment for the six months ended June 30:   Six Months Ended June 30, Domestic-based support services International-based support services Merchant processing services     (dollars in millions): 2007 2006     2007 2006   2007   2006 United States $ 560.5 569.8 - - 139.8 140.4 Europe 0.9 0.7 94.1 68.2 - - Canada 60.5 45.8 - - 0.3 0.3 Japan - - 11.4 8.4 - - Mexico 6.5 5.4 - - - - Other 5.4 2.2     10.0 -   0.4   0.3 $ 633.8 623.9     115.5 76.6   140.5   141.0   nm = not meaningful   Supplemental Information: Accounts on File at June 30, (in millions) 2007   %   2006   %   % Change   Consumer 277.0 63.1 % 241.2 65.8 % 14.9 % Retail 57.3 13.0 36.8 10.1 55.6 Commercial 35.0 8.0 31.4 8.6 11.3 Government services/EBT 21.9 5.0 19.6 5.3 12.1 Stored Value 42.9 9.8 29.3 8.0 46.5 Debit 5.1   1.1   8.2   2.2 (38.3 ) 439.2   100.0 % 366.5   100.0 % 19.8 %     (in millions) June 30, 2007 June 30, 2006 % Change   QTD Average Accounts on File 433.6 415.8 4.3 % YTD Average Accounts on File 426.0 427.5 (0.4 )   Accounts on File at June 30, (in millions) 2007   %   2006   %   % Change   Domestic 368.0 83.8 % 308.5 84.2 % 19.3 % International 71.2   16.2   58.0   15.8 22.7 439.2   100.0 % 366.5   100.0 % 19.8 %   Note: The accounts on file between domestic and international is based on the geographic domicile of processing clients.   Growth in Accounts on File (in millions): June 2006 to June 2007 June 2005 to June 2006 Beginning balance 366.5 388.6 Change in accounts on file due to: Internal growth of existing clients 33.1 36.5 New clients 105.5 40.0 Purges/Sales (14.0) (12.3) Deconversions (51.9) (86.3) Ending balance 439.2 366.5     Number of Employees (FTEs): 2007 2006 At June 30, 6,773 6,542 Quarterly average for period ended June 30, 6,783 6,540 YTD average for period ended June 30, 6,755 6,592