Total System Services Inc. Annual Report 2014

FY2014 Annual Report · Total System Services Inc.
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2 0 1 4   a n n u a l   r e p o r t

Improving Lives and Businesses 
Putting People-Centered 
Payments to Work

Improving Lives and  
Businesses to Drive Growth 

People-Centered Payments® is not only  

a brand promise, but also a guiding  

principle of the growth strategy for our  

company. By putting people at the center  

of every decision we make, we can offer  

the innovative payment products and  

solutions needed by our clients and  

their customers.

At TSYS®, we believe payments  

should revolve around people  

— not the other way around®. 

Today, TSYS operates from a unique position within  

the marketplace as a payments platform company,  

with greater scale and industrial-strength systems  

to support ﬁnancial institutions, businesses  

and consumers. Across the payments value chain,  

we offer issuing and acquiring processing,  

direct-to-merchant processing and  

prepaid program management.  

Every process, product, new technology or  
acquisition we make delivers on this higher purpose:  
to improve lives and businesses while putting  
people at the center of payments. 

d e a r
Shareholders and Friends,

As your new chief executive ofﬁcer, it is an honor and a privilege  

to join Phil Tomlinson in penning this report. I could not open this  

letter without expressing my deep appreciation and admiration  

for Phil, a 40-year veteran of the payments industry and TSYS, who  

retired as CEO in 2014. His legacy of leadership at TSYS has  

culminated in a long list of achievements and accomplishments  

that we will beneﬁt from for many years to come. 

M. Troy Woods
President and 
Chief Executive Ofﬁcer

Working together for more than 27 years has  

This is a moment TSYS has been preparing  

created a bond between Phil and me that has 

for over the course of three decades. We’ve  

made the transition a seamless one. We’ve  

grown from a behind-the-scenes business  

carefully executed a succession plan and remain 

to one that now has the opportunity to interact  

closely aligned when it comes to what it will take  

directly with merchants and consumers, who  

to continue TSYS’ journey as a leading global  

increasingly seek better ways to manage their  

payment solutions provider. 

businesses and alternative ways to make and  

accept payments.

We are thrilled to say that 2014 was an incredible 

year for not only our company, but also for the  

The major stakeholders are also changing, and  

payments industry in general. There could not  

the existing boundaries have been redrawn.  

be a better time to be a part of this industry,  

A mobile phone can turn a consumer into a  

which is experiencing some of the best growth 

merchant; a group of merchants can become  

rates since the Great Recession. 

their own network; a network can set standards  

in new technology for ﬁnancial institutions;  

After decades of being seen as a niche business, 

and ﬁnancial institutions can crowdsource their 

our industry was placed in the spotlight in a very 

next card product with input from consumers.  

signiﬁcant way in 2014. Payments made headlines, 

Collaboration and partnerships are requirements 

sparked intense debates and resulted in announce-

for survival in this industry, and we believe new 

ment after new announcement, seemingly with 

players will work alongside existing ones to  

every passing month. As we close the books on a 

create innovative solutions for the next  

great year, it has never been more apparent that it 

generation of payments. 

is the payments industry’s time to shine. 

1

2014 Results

This was a year of tremendous growth, and our  

performance was strong. We truly believe this is a  

result of our core business strength, robust organic 

growth, a steady stream of new clients and an overall 

healthy economy for card usage. 

•  Revenue and Income: Total revenues were $2.4  

billion, an increase of 18.5%. Revenues before  

reimbursable items* were $2.2 billion, an increase  

of 20.2%. 

•  Earnings Per Share: Adjusted earnings per share* 

(EPS) was $1.96, an increase of 13.2%. Adjusted 

EBITDA* was $712.3 million, an increase of 14.1%.  

Basic EPS from continuing operations was $1.48, 

which was an increase of 12.8%. Diluted EPS  

from continuing operations was $1.47, an  

increase of 12.9%. 

•  Return to Shareholders: Net income attributable  

to common shareholders was $322.9 million, an  

increase of 31.9%. Our closing stock price at year  

end was $33.96, and our total shareholder return 

was 3.2%. We purchased 5.2 million shares of  

our stock for $165.3 million and intend to  

repurchase more in 2015. 

Our success is tied to our issuers’ growth, the health 

of the businesses we serve and the consumers who 

choose our products. Furthermore, we think of TSYS as 

a payments platform company with industrial-strength 

systems for ﬁnancial institutions, businesses and  

consumers — a combination that is unique in the  

payments industry. While scale and distribution net-

works are beneﬁts of these platforms, they ultimately 

provide the foundation and seamless interface that 

allow us to work with independent software vendors 

and providers to offer services not otherwise readily 

available to our clients. These healthy ﬁnancial results 

are largely attributed to the strength of our issuer  

processing, along with our direct acquiring and  

prepaid program-management capabilities. Having 

We’ve entered a world where payments blend into  

the background without friction. In this new world,  

consumers rule the day — and the status quo is not  

sufﬁcient. Amidst all this change, we differentiate  

ourselves in the market through our brand promise  

of People-Centered Payments. Every process,  

product, new technology or acquisition we make  

delivers on this higher purpose: to improve lives  

and businesses while putting people at the center  

of payments.

However, People-Centered Payments isn’t just a brand 

promise — it is the guiding principle of the growth 

strategy for our company. By putting people at the  

center of every decision we make, we can offer  

innovative products and solutions that are most  

sought-after by our clients and their customers.  

2014 was a year full of opportunity to deliver on  

this promise to ﬁnancial institutions, businesses and  

consumers. But before we get into that, we’d like to  

share our thoughts and reﬂections on the year’s  

ﬁnancial results as a whole. 

2

It’s a new era — for both our company and the industry, 

                                       but TSYS’ core mission remains the same — 

              to support payments that revolve around people.

end-to-end payment solutions under one roof has  

the utmost dedication from our team members and  

been the pinnacle of our acquisition strategy over  

positions our company for tremendous growth. 

the past few years. As part of this bundle of offerings, 

we have more to offer ﬁnancial institutions, businesses 

2014 has been a year of many high-proﬁle breaches. 

and consumers. Skills in one business can be leveraged  

This has forced ﬁnancial institutions and businesses  

across the enterprise, and our overall expertise in pay-

to accelerate the speed at which they are adopting 

ments — along with the skill and scale in technology — 

security measures. To this end, our plug-and-play  

can be utilized across all of these sectors. 

tokenization offering ﬁts the mold. Called TSYS  

Enterprise TokenizationSM, it supports secure  

This mix also leads to a more balanced portfolio of 

transactions via a mobile device and facilitates  

customers for overall stability and growth. In this  

enablement for issuers, merchants and app  

business, there are cycles, and ups and downs are  

developers in processing transactions. In September 

not always predictable. Regardless of ﬂuctuations  

2014, we announced this tokenization solution in  

in any one particular segment, our company’s  

conjunction with the services it provides for a  

overall stability and performance are solid. 

secure way to pay through Apple Pay™ — more  

We’d now like to address each of the constituents  

on this later.

we serve — ﬁnancial institutions, businesses and  

Digitally active consumers — those accustomed to  

consumers — and share how we’ve utilized  

navigating their daily lives with smartphones, tablets, 

People-Centered Payments for growth in each  

game systems and computers — want a choice in the 

of these key areas.

Financial Institutions

way they pay for goods and services, from traditional 

plastic to mobile phones, or through any other device  

of their choosing. In the UK, we partnered with  

In 2014, we had a healthy client roster of strong  

PayPal® to offer an installment loan plan at the point  

ﬁnancial institutions. Conversions like TD Bank Group® 

of sale (POS) using PayPal accounts. We see — and 

brought us millions of new accounts to fuel a core  

seize — opportunities to further diversify beyond  

growth that supports our overall business. We are  

credit to offer broader and more varied products  

proud to say that in early 2015, we completed the 

1

that best meet consumers’ needs for alternative ways  

Bank of America® conversion — the largest conversion 

 —

to pay. Our near-term pipeline across TS2®, TSYS  

ar-te

in the history of payments. This conversion required  

This conve

Managed ServicesSM EMEA and PRIMESM  licensing is 

vicesSM 

*Revenues before reimbursable items, adjusted EBITDA and adjusted earnings per share are non-GAAP ﬁnancial measures, 

which are explained further on pages 26-27 of this report.

3

encouraging, and we will continue to engage  

actively with existing clients and new prospects to  

give consumers the solutions best designed for them. 

Entering 2015, we will continue to ﬁne-tune our sales 

activities and areas of focus to ensure we drive future 

quality revenue and margins internationally. 

Digital innovation is core to our issuing and acquiring 

clients’ strategies, and we’re making it easy to access 

third-platform technologies like mobile, social, big data  

and the cloud. We’re also making the omnichannel 

integrated services that deliver more value and  

experience seamless no matter which communication 

gives them a better understanding of their business 

method consumers choose. Our business and IT  

landscape. We saw traction in sales of some of  

strategy — Surround® — announced in November  

our value-added products like TSYS Merchant  

2014 will power the next generation of digital  

InsightsSM, which provides merchants with analytics  

innovation through a suite of new technology and  

in card-based revenue, transaction history, online  

product offerings. It will also provide our issuing clients  

reputation monitoring, social media activity and  

a better way to manage their business and service  

competitor benchmarking. 

their customers. Surround brings into play more  

open platforms accessible to third parties using  

Another landmark in 2014 was our support of Apple 

application program interfaces and other tools,  

Pay as a partner for merchants, app developers and  

resulting in greater ﬂexibility to exponentially  

issuing banks. This required agility and industry  

enhance the customer experience — a prime  

leadership, which allowed us to join the ranks of the  

example of People-Centered Payments in action. 

industry’s most inﬂuential stakeholders to make this 

Businesses

new innovative payment method a reality. Apple Pay 

stands to redeﬁne consumers’ relationships with  

Putting people at the center of our business means  

the POS, and payment card information will be more 

providing them a choice in the way they pay, 

secure and private for purchases made in apps and  

while paying keen attention to important issues  

via near-ﬁeld communication (NFC)-enabled POS  

such as safety and security. We supported this goal  

terminals. In 2014, commerce initiated with mobile 

by implementing chip cards in the United States  

phones and tablets is expected to total $114 billion  

and beyond based on EMV standards. In light  

in the United States alone, according to Juniper  

of the October 2015 liability shift deadline for  

Research* — numbers that indicate an opportunity  

merchants to accept EMV payments, we are  

to expand and heighten our role in the digital market-

ramping up our capacity to produce EMV cards  

place. While still in the early stages, we believe Apple 

as market demand increases. We have also  

Pay will help drive further innovation across the industry 

been communicating with merchants about  

and allow us to capture more payments that currently 

what the upcoming EMV timeline means and  

are made with cash and checks. 

what action they must take. 

By understanding our clients and their customers’ 

needs, we help them grow their business with  

We believe that in the future, merchant service  

providers will become much more specialized,  

with solutions that focus on merchant verticals to  

*Juniper Research, Digital Payments Strategies Online, Mobile & Contactless 2014-2019, published June 24, 2014.

4

 
Digital innovation is core to our issuing and acquiring clients’ strategies, and we’re making  

it easy to access third-platform technologies like mobile, social, big data and the cloud. 

combine apps, marketing, loyalty and payments  

Another consumer win in 2014 was the launch of  

in a bundled offering. Payments will be just one  

Brink’s® Prepaid MasterCard, which appeals to  

piece of an overall solution to help merchants grow 

consumers seeking peace of mind with a secure  

their businesses. Our services give merchants the 

and stable bank alternative from an established  

power to run and analyze a business on an easy-to-use 

and trusted brand. Cardholders enjoy access  

iPad®, encrypting all transactions at the point of swipe 

to many convenient and ﬂexible features to  

for secure transactions. While the older single-purpose 

accommodate their busy, on-the-go lives,  

payments terminals will not disappear altogether, 

including round-the-clock access to their  

businesses will be looking for a more nimble POS that 

accounts online and the ability to load funds  

serves multiple functions like inventory management, 

at one of NetSpend’s 130,000 reload locations. 

order input, order-ahead capabilities and more. We 

expect to see this transition and upgrade cycle over  

In 2014, one issue in the prepaid spotlight was the  

the next year or two as the deadline for merchant  

Consumer Financial Protection Bureau’s (CFPB)  

adoption of EMV approaches.

proposed rules outlining basic consumer protections 

Consumers 

for GPR prepaid cards. Before the Bureau ﬁnalizes  

the rules, it will take comments through March 23, 

NetSpend® has dedicated the last 15 years to giving 

2015. Then it must review those comments and  

consumers the ability to choose how, when and  

decide which to include in the ﬁnal rules. With  

where they bank. Its mission to empower consumers 

that timeline — and the 12 months proposed  

with the convenience, security and freedom to be  

for implementation on existing programs — we  

self-banked is a perfect ﬁt with TSYS’ People-Centered 

don’t expect the ﬁnal rules to become a market  

Payments commitment. Last year, NetSpend announced 

reality until mid-2016. NetSpend will participate  

an agreement with Walmart® to place its branded  

independently and in concert with industry  

prepaid cards in more than 4,300 retail stores across 

groups during the comment period. 

the United States. Joining forces with a leading  

consumer brand like Walmart speaks volumes  

NetSpend is a fantastic, growth-oriented company  

about our reputation in the general-purpose  

with great management and a team who is committed 

reloadable (GPR) industry. 

to the customers they serve. With convenient places  

to buy and reload its products from marquee retail, 

NetSpend also partnered with Western Union®  

pharmacy, dollar and grocery providers nationwide; 

to launch an innovative co-branded card that  

more than 85,000 trusted employers and partner  

brings cardholders the dual beneﬁts of money  

locations distributing our products; and a wealth  

transfers with card-linked conveniences, rewards  

of innovative features and fee plan options — it all  

and offers. Cardholders can also send or receive  

adds up to making NetSpend the card of choice for  

money transfers, top up or reload cash, and 

millions of self-banked customers and the brands  

pay bills in minutes anywhere they can access  

that serve them.

their accounts.

5

A Community-Minded Company 

Looking Ahead

In addition to being known as a leading global pay-

It’s a new era — for both our company and the  

ments platform company, TSYS also places an emphasis 

industry, but TSYS’ core mission remains the same —  

on being involved in the communities in which we are 

to support payments that revolve around people. 

located. In 2014, TSYS received The Civic 50 award for 

But with the never-ending changes in technology, 

the second consecutive year, recognizing us as one of 

regulation and consumer habits, and the disruption 

the most community-minded companies in the United 

of legacy business models, we realize we must pursue 

States. The companies that receive this prestigious 

smart new strategies for increasing our market share.  

award are considered the leaders in committing time, 

The urgency is only growing because the payments 

skills and other resources to improve the quality of life 

industry is getting more crowded, better-funded  

in communities where we do business. 

and far more innovative. 

Also in 2014, TSYS was honored to receive the Corporate 

We are conﬁdent in our vision, our prospects and  

Social Responsibility Leadership Award from the  

the strategies that will guide us. We hope you share  

Financial Services Roundtable for our commitment to  

our excitement about putting people at the center  

volunteerism and community service. For more than 30 

of payments, which will continue to fuel our company’s 

years, our team members have told us that one of the 

growth and enhance our position of strength. 

greatest things about working at TSYS is their ability to 

get involved in their communities, such as collectively 

We offer our deepest gratitude for the support of our 

donating time and resources to United Way chap-

shareholders, team members and friends as we  

ters across the United States each year. We also have 

pursue this bold and exciting agenda.

pioneered efforts like Community Connect, where our 

NetSpend team members step into their customers’ 

shoes for a day, performing random acts of kindness 

Sincerely,

while also learning more about our customers’ needs 

and how our prepaid products impact their daily lives  

in a positive way. Whether it relates to our business or 

the greater community, we remain focused on making 

TSYS a great place to work, a key to delivering on our 

M. Troy Woods

brand of People-Centered Payments.

President and Chief Executive Ofﬁcer

In another tremendous honor for our company, we 

recently learned that TSYS has been named as one 

of the 2015 World’s Most Ethical Companies by the 

Ethisphere Institute. This award means we have been 

recognized for demonstrated leadership in ethical  

Philip W. Tomlinson

business practices — an accolade we are proud  

Chairman of the Board

to say we have received for the third time in  

four years.

6

 
Financial Information

(in thousands)

(in thousands)

,

$
1
5
4
1
0
7
6

,

,

$
1
8
2
3
7
0
8

,

,

$
2
1
9
2
9
7
8

,

$
5
3
6
9
9
0

,

$
6
2
4
0
9
3

,

$
7
1
2
2
6
7

,

$
1
4
7

.

$
1
7
3

.

$
1
9
6

.

12

13

14

Revenues Before  
Reimbursable Items*

12

13

14

Adjusted EBITDA*

12

13

14

Adjusted EPS*

(dollars in thousands, except per share data)

         2014

       2013

% Change      

Total revenues

$2,446,877

$2,064,305

            18.5          

Revenues before reimbursable items*

$2,192,978

$1,823,708

            20.2

Operating income

$431,640

$382,500

            12.8

Net income attributable to TSYS common shareholders

$322,872

$244,750

           31.9

Basic earnings per share from continuing operations 
attributable to TSYS common shareholders

Diluted earnings per share from continuing operations 
attributable to TSYS common shareholders

Adjusted EBITDA*

Adjusted EPS* 

$1.48

$1.47

$1.31

           12.8 

$1.30

            12.9

$712,267

$624,093

                                          14.1

$1.96

$1.73

                                          13.2

*Revenues before reimbursable items, adjusted EBITDA and adjusted earnings per share are non-GAAP ﬁnancial measures, 

which are explained further on pages 26-27 of this report.

7

        
Sidney E. Harris
Professor
Georgia State University,
J. Mack Robinson College of Business

Connie D. McDaniel
Vice President &  
Chief of Internal Audit, retired
The Coca-Cola Company

William M. Isaac
Senior Managing Director
FTI Consulting
Chairman of the Board, retired
Fifth Third Bancorp
Former Chairman
FDIC

Mason H. Lampton
Chairman of the Board
Standard Concrete Products

H. Lynn Page
Vice Chairman of the Board, retired
Synovus
TSYS

Philip W. Tomlinson
Chairman of the Board,  
Chief Executive Ofﬁcer, retired
TSYS

John T. Turner
Private Investor

Richard W. Ussery
Chairman of the Board, retired
TSYS

M. Troy Woods
President & Chief Executive Ofﬁcer
TSYS

James D. Yancey
Chairman of the Board, retired
Synovus
Columbus Bank and Trust

Board of Directors

James H. Blanchard
Chairman of the Board &
Chief Executive Ofﬁcer, retired
Synovus®
Chairman of the Board of Advisors
Jordan-Blanchard Capital, LLC

Kriss Cloninger III
President & Chief Financial Ofﬁcer
Aﬂac® Incorporated

Walter W. Driver Jr.
Chairman-Southeast
Goldman, Sachs & Co.

Gardiner W. Garrard Jr.
Chairman of the Board
The Jordan Company

Leadership

Executive Management
pictured on the left

Front Row, Left to Right

Middle Row, Left to Right

Back Row, Left to Right

M. Troy Woods
President &
Chief Executive Ofﬁcer

Ryland L. Harrelson
Executive Vice President &  
Chief Human Resource Ofﬁcer

Charles J. Harris
Senior Executive Vice President & 
President, NetSpend 

Philip W. Tomlinson
Chairman of the Board 

William A. Pruett
Senior Executive Vice President &
President, North America Services

Kenneth L. Tye
Senior Executive Vice President &
Chief Information Ofﬁcer

Gaylon Jowers Jr.
Senior Executive Vice President &
President, International Services 

Paul M. Todd
Senior Executive Vice President &
Chief Financial Ofﬁcer 

G. Sanders Grifﬁth III
Senior Executive Vice President,
General Counsel & Secretary

Mark D. Pyke
Senior Executive Vice President & 
President, Merchant Services 

Executive Vice Presidents

Connie C. Dudley
Implementation & Consulting
North America Services

Anthony W. Hodge
Technology Services
North America Services

Stephen W. Humber
Integrated Software Services

Dennis Jones
Business Operations,
International Services

Kelley C. Knutson 
Business Development
International Services 

W. Allen Pettis
Client Operations
North America Services

Dorenda K. Weaver
Chief Accounting Ofﬁcer 

David E. Wood
Business Operations,
Merchant Services

9

TSYS Financial Data

Selected Financial Data ................................................................................................................................................................... 11

Financial Overview ........................................................................................................................................................................... 11

Financial Review ............................................................................................................................................................................... 13

Consolidated Balance Sheets ....................................................................................................................................................... 38

Consolidated Statements of Income ........................................................................................................................................... 39

Consolidated Statements of Comprehensive Income ............................................................................................................. 40

Consolidated Statements of Cash Flows ..................................................................................................................................... 41

Consolidated Statements of Changes in Equity ........................................................................................................................ 42

Notes to Consolidated Financial Statements ............................................................................................................................. 43

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements ............................ 87

Management’s Report on Internal Control Over Financial Reporting .................................................................................. 88

Quarterly Financial Data, Stock Price, Dividend Information .................................................................................................. 89

Stock Performance Graph .............................................................................................................................................................. 90

Selected Financial Data
The following financial data should be read in conjunction with the Consolidated Financial Statements and Notes
thereto and Financial Review sections of the Annual Report. The historical trends in Total System Services, Inc.‘s
(TSYS’ or the Company’s) results of operations and financial position over the last five years are presented below.

Years Ended December 31,

(in thousands, except per share data)

2014

2013

2012

2011

2010

Income Statement Data:
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,446,877 2,064,305 1,793,557 1,733,237 1,657,196

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 431,640

382,500

354,969

321,120

310,213

Income from continuing operations, net of tax . . . $ 280,751
Income (Loss) from discontinued operations, net

254,542

248,928

218,446

210,711

of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling

48,655

329,406

2,055

995

4,216

(5,090)

256,597

249,923

222,662

205,621

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6,534)

(11,847)

(5,643)

(2,103)

(11,674)

Net income attributable to TSYS common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 322,872

244,750

244,280

220,559

193,947

Basic earnings per share (EPS)* attributable to

TSYS common shareholders:
Income from continuing operations . . . . . . . . . . . $
Gain (Loss) from discontinued operations . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Diluted EPS* attributable to TSYS common

shareholders:
Income from continuing operations . . . . . . . . . . . $
Gain (Loss) from discontinued operations . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Cash dividends declared per share . . . . . . . . . . . . . $

1.48
0.26

1.73

1.47
0.25

1.72

0.40

1.31
(0.01)

1.30

1.30
(0.01)

1.29

0.40

1.31
(0.02)

1.30

1.31
(0.02)

1.29

0.40

As of December 31,

1.14
0.01

1.15

1.14
0.01

1.15

0.31

1.02
(0.04)

0.99

1.02
(0.04)

0.99

0.28

(in thousands)

2014

2013

2012

2011

2010

Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,733,581 3,686,568 2,023,838 1,858,392 1,952,261
Obligations under long-term borrowings and

capital leases, excluding current portion . . . . . .

1,405,106 1,435,751

192,014

63,593

225,276

* Basic and diluted EPS amounts for continuing operations and net income do not total due to rounding.

Financial Overview
TSYS’ revenues are derived from providing global payment processing services to financial and nonfinancial
institutions, generally under long-term processing contracts. In addition, the Company derived revenues from
providing processing services, acquiring solutions, related systems and integrated support services to merchant
acquirers and merchants. The Company also derives revenues by providing general-purpose reloadable (GPR)
prepaid debit cards and payroll cards and alternative financial services to underbanked and other consumers. The
Company’s services are provided through the Company’s four operating segments: North America Services,
International Services, Merchant Services and NetSpend.

Through the Company’s North America Services and International Services segments, TSYS processes information
through its cardholder systems to financial institutions throughout the United States and internationally. The

11

Company’s North America Services segment provides these services to clients in the United States, Canada,
Mexico and the Caribbean. The Company’s International Services segment provides services to clients in Europe,
India, Middle East, Africa, Asia Pacific and Brazil. The Company’s Merchant Services segment provides merchant
services to merchant acquirers and merchants in the United States. The Company’s NetSpend segment provides
GPR prepaid debit and payroll cards and alternative financial service solutions to the underbanked and other
consumers in the United States.

TSYS acquires other companies as part of its strategy for growth. In 2014, TSYS acquired an additional 15%
equity interest in Central Payment Co., LLC (CPAY) from CPC Holding Company, LLC, a California limited liability
company. This purchase increased TSYS’ ownership of CPAY to 75%.

The following table sets forth each segment’s revenues as a percentage of the Company’s total revenues:

North America Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchant Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NetSpend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45%
21
19
15

48%
26
10
16

53%
28
—
19

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100% 100% 100%

Years Ended December 31,

2014

2013

2012

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, growth or declines in card and merchant portfolios
of existing clients, the conversion of cardholder and merchant accounts of new clients to the Company’s
processing platforms, the receipt of fees for early contract termination and the loss of cardholder and merchant
accounts either through purges or deconversions impact the results of operations from period to period.

Another factor which may affect TSYS’ revenues and results of operations from time to time is consolidation in the
financial services or retail industries either through the sale, by a client, of its business, its card portfolio or a
segment of its accounts to a party which processes cardholder or merchant accounts internally or uses another
third-party processor. A change in the economic environment in the retail sector, or a change in the mix of
payments between cash and cards could favorably or unfavorably impact TSYS’ financial position, results of
operations and cash flows in the future.

TSYS’ reported financial results will also be impacted by significant shifts in currency conversion rates. TSYS does
not view foreign currency as an economic event for the Company but as a financial reporting issue. Because
changes in foreign currency exchange rates distort the operating growth rates, TSYS discloses the impact of
foreign currency translation on its financial performance.

A significant amount of the Company’s revenues are derived from long-term contracts with large clients.
Processing contracts with large clients, representing a significant portion of the Company’s total revenues,
generally provide for discounts on certain services based on the size and activity of clients’ portfolios. Therefore,
revenues and the related margins are influenced by the client mix relative to the size of client portfolios, as well as
the number and activity of individual cardholder or merchant accounts processed for each client. Consolidation
among financial institutions has resulted in an increasingly concentrated client base, which results in a change in
client mix toward larger clients.

Regulation

Government regulation affects key areas of TSYS’ business, in the U.S. as well as internationally. TSYS, along with
the rest of the financial services industry, continues to experience increased legislative and regulatory scrutiny,
including the enactment of additional legislative and regulatory initiatives such as the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Financial Reform Act). This legislation, which provides for sweeping

12

financial regulatory reform, may have a significant and negative impact on the Company and its clients, which
could impact TSYS’ earnings through fee reductions, higher costs (both regulatory and implementation) and new
restrictions on operations. The Financial Reform Act may also impact the competitive dynamics of the financial
services industry in the U.S. by more adversely impacting large financial institutions, some of which are TSYS
clients, and by adversely impacting the competitive position of U.S. financial institutions in comparison to foreign
competitors in certain businesses.

The Financial Reform Act, which includes the Durbin Amendment to the Electronic Funds Transfer Act, mandates
that the Board of Governors of the Federal Reserve System (Board) limit debit card interchange fees. Final rules
were issued in June 2011. The final rules cap interchange fees for debit transactions at $0.21 plus five basis
points of the transaction and require that the amount of any debit interchange transaction fee charged be
reasonable and proportional to the costs incurred in connection with the transaction. In July 2013, a federal court
invalidated these rules and ordered the Board to revise them. However, a federal appeals court reversed the
lower court decision, which effectively reinstated the Board’s interchange rules, and the U.S. Supreme Court
determined not to review the appeals court decision.

Although this legislative action by the U.S. Congress had been anticipated for some time, it remains impossible
to predict the impact, if any, that the law and the regulations to be promulgated thereunder may have on the
Company’s operations or its financial condition in the future. However, as TSYS’ business is predominately credit
card related, the Durbin Amendment is not expected to have a significant negative impact upon TSYS’ business.

The Financial Reform Act also created a new Consumer Financial Protection Bureau (“CFPB”) with responsibility
for regulating consumer financial products and services and enforcing most federal consumer protection laws in
the area of financial services, including consumer credit and the prepaid card industry. For example, the CFPB
has proposed regulations regarding the prepaid industry, which, if adopted as proposed, could impose
significant additional disclosure requirements, overdraft requirements, and other requirements on the prepaid
card industry, including our NetSpend business, effective in 2016. Similarly, other future actions of the CFPB may
make payment card or product transactions generally less attractive to card issuers, acquirers, consumers and
merchants by further regulatory disclosures, payment card practices, fees, routing and other matters with respect
to credit, debit and prepaid cards, and thus negatively impact our business.

Financial Review
This Financial Review provides a discussion of critical accounting policies and estimates, related party transactions
and off-balance sheet arrangements. This Financial Review also discusses the results of operations, financial
position, liquidity and capital resources of TSYS and outlines 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 are an integral part of this Financial Review and should be read in conjunction with it.

Critical Accounting Policies and Estimates

Risk factors that could affect the Company’s future operating results and cause actual results to vary materially
from expectations are listed in the Company’s forward-looking statements. Negative developments in these or
other risk factors could have a material adverse effect on the Company’s financial position, results of operations
and cash flows.

TSYS’ financial position, results of operations and cash flows are impacted by the accounting policies the
Company has adopted. Refer to Note 1 in the Consolidated Financial Statements for more information on the
Company’s basis of presentation and a summary of significant accounting policies.

Management believes that the following accounting policies are the most critical to fully understand and evaluate
the Company’s results. Within each critical policy, the Company makes estimates that require management’s
subjective or complex judgments about the effects of matters that are inherently uncertain.

13

A summary of the Company’s critical accounting estimates applicable to the reportable operating segments
follows:

Allowance for Doubtful Accounts and Billing Adjustments

The Company estimates the allowance for doubtful accounts. When estimating the allowance, the Company
takes into consideration such factors as its knowledge of the financial position of specific clients, the industry and
size of its clients, the overall composition of its accounts receivable aging, prior experience with specific
customers of accounts receivable write-offs and prior history of allowances in proportion to the overall receivable
balance. This analysis includes an ongoing and continuous communication with its largest clients and those
clients with past due balances. A financial decline of any one of the Company’s large clients could have a material
adverse effect on collectability of receivables and thus the adequacy of the allowance for doubtful accounts. If
the actual collectability of clients’ accounts is not consistent with the Company’s estimates, bad debt expense,
which is recorded in selling, general and administrative expenses, may be materially different than was initially
recorded. The Company’s experience and extensive data accumulated historically indicates that these estimates
have proven reliable over time.

The Company estimates allowances for billing adjustments for potential billing discrepancies. When estimating
the allowance for billing adjustments, the Company considers its overall history of billing adjustments, as well as
its history with specific clients and known disputes. If the actual adjustments to clients’ billing are not consistent
with the Company’s estimates, billing adjustments, which are recorded as a reduction of revenues in the
Company’s Consolidated Statements of Income, may be materially different than was initially recorded. The
Company’s experience and extensive data accumulated historically indicates that these estimates have proven
reliable over time. The allowance for doubtful accounts and billing adjustments on the Company’s Consolidated
Balance Sheet as of December 31, 2014 was approximately $5.2 million.

Contract Acquisition Costs

In evaluating contract acquisition costs for recoverability, expected cash flows are estimated by management.
The Company evaluates the carrying value of contract acquisition costs associated with each customer for
impairment on the basis of whether these costs are fully recoverable from either contractual minimum fees
(conversion costs) or from expected undiscounted net operating cash flows of the related contract (cash
incentives paid). The determination of expected undiscounted net operating cash flows requires management to
make estimates. If the actual cash flows are not consistent with the Company’s estimates, a material impairment
charge may result and net income may be materially different than was initially recorded.

These costs may become impaired with the loss of a contract, the financial decline of a client, termination of
conversion efforts after a contract is signed, or diminished prospects for current clients. Note 11 in the
Consolidated Financial Statements contains a discussion of contract acquisition costs. The net carrying value of
contract acquisition costs on the Company’s Consolidated Balance Sheet as of December 31, 2014 was
$236.3 million.

Software Development Costs

In evaluating software development costs for recoverability, expected cash flows are estimated by management.
The Company evaluates the unamortized capitalized costs of software development as compared to the net
realizable value of the software product, which is determined by expected undiscounted net operating cash
flows. The amount by which the unamortized software development costs exceed the net realizable value is
written off in the period that such determination is made. If the actual cash flows are not consistent with the
Company’s estimates, a material write-off may result and net income may be materially different than was initially
recorded. Assumptions and estimates about future cash flows and remaining useful lives of software are complex
and subjective. They can be affected by a variety of factors, including industry and economic trends, changes in
the Company’s business strategy and changes in the internal forecasts. Note 9 in the Consolidated Financial
Statements contains a discussion of internally developed software costs. The net carrying value of internally
developed software on the Company’s Consolidated Balance Sheet as of December 31, 2014 was $100.5 million.

14

Acquisitions — Purchase Price Allocation

TSYS’ purchase price allocation methodology requires the Company to make assumptions and to apply judgment
to estimate the fair value of acquired assets and liabilities. TSYS estimates the fair value of assets and liabilities
based upon appraised market values, the carrying value of the acquired assets and widely accepted valuation
techniques, including discounted cash flows and market multiple analyses. Management determines the fair value
of fixed assets and identifiable intangible assets such as developed technology or customer relationships, and
any other significant assets or liabilities. TSYS adjusts the purchase price allocation, as necessary, up to one year
after the acquisition closing date as TSYS obtains more information regarding asset valuations and liabilities
assumed. Unanticipated events or circumstances may occur which could affect the accuracy of the Company’s fair
value estimates, including assumptions regarding industry economic factors and business strategies, and result in
an impairment or a new allocation of purchase price.

Given its history of acquisitions, TSYS may allocate part of the purchase price of future acquisitions to contingent
consideration as required by generally accepted accounting principles (GAAP) for business combinations. The fair
value calculation of contingent consideration will involve a number of assumptions that are subjective in nature
and which may differ significantly from actual results. TSYS may experience volatility in its earnings to some
degree in future reporting periods as a result of these fair value measurements.

Goodwill

In evaluating for impairment, discounted net cash flows for future periods are estimated by management. In
accordance with the provisions of GAAP, goodwill is required to be tested for impairment at least annually. The
combination of the income approach utilizing the discounted cash flow (DCF) method and the market approach,
utilizing readily available market valuation multiples, is used to estimate the fair value. Under the DCF method,
the fair value of the asset reflects the present value of the projected earnings that will be generated by each asset
after taking into account the revenues and expenses associated with the asset, the relative risk that the cash flows
will occur, the contribution of other assets, and an appropriate discount rate to reflect the value of invested
capital. Cash flows are estimated for future periods based on historical data and projections provided by
management. If the actual cash flows are not consistent with the Company’s estimates, a material impairment
charge may result and net income may be materially different than was initially recorded. Note 7 in the
Consolidated Financial Statements contains a discussion of goodwill. The net carrying value of goodwill on the
Company’s Consolidated Balance Sheet as of December 31, 2014 was $1.5 billion.

Long-lived Assets and Intangibles

In evaluating long-lived assets and intangibles for recoverability, expected undiscounted net operating cash flows
are estimated by management. The Company reviews long-lived assets, such as property and equipment and
intangibles subject to amortization, including contract acquisition costs and certain computer software, for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount
of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the actual cash
flows are not consistent with the Company’s estimates, a material impairment charge may result and net income
may be materially different than was initially recorded.

Revenue Recognition

The Company recognizes revenues in accordance with the provisions of GAAP, which sets forth guidance as to
when revenue is realized or realizable and earned when all of the following criteria are met: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller’s
price to the buyer is fixed or determinable; and (4) collectability is reasonably assured.

The Company evaluates its contractual arrangements that provide services to clients through a bundled sales
arrangement in accordance with the provisions of GAAP to determine whether an arrangement involving more
than one deliverable (a multiple element arrangement) contains more than one unit of accounting and how the
arrangement consideration should be measured and allocated to the separate units of accounting.

15

A deliverable in multiple element arrangements includes any performance obligation on the part of the Company
including obligations to perform different services, grant licenses or convey other rights. Revenue is allocated to
the separate units of accounting in a multiple element arrangement based on the price at which the deliverable
or unit of accounting would be sold on a standalone basis (the standalone selling price), provided the delivered
element has standalone value to the customer and delivery of any undelivered items is probable and substantially
within the Company’s control. An item has standalone value to the customer on a standalone basis if it is sold
separately by any vendor or the customer could resell the deliverable on a standalone basis.

As TSYS’ business and service offerings change in the future, the determination of the number of deliverables in
an arrangement and related units of accounting and future pricing practices may result in changes in the
estimates of the standalone selling price, which may change the ratio of fees allocated to each service or unit of
accounting in a given customer arrangement. There were no material changes or impact to revenue in the year
ended December 31, 2014 due to any changes in the determination of the number of deliverables in an
arrangement, units of accounting, or estimates of the standalone selling price for existing contractual
arrangements.

Cardholders’ Reserve

The Company is exposed to losses due to cardholder fraud, payment defaults and other forms of cardholder
activity as well as losses due to non-performance of third parties who receive cardholder funds for transmittal to
the Issuing Banks (banks that issue MasterCard International or Visa USA, Inc. branded cards to customers). The
Company establishes a reserve for the losses it estimates will arise from processing customer transactions, debit
card overdrafts, chargebacks for unauthorized card use and merchant-related chargebacks due to non-delivery of
goods or services. These reserves are established based upon historical loss and recovery rates and cardholder
activity for which specific losses can be identified. The cardholders’ reserve was approximately $6.3 million as of
December 31, 2014. The provision for cardholder losses is included in cost of services in the Consolidated
Statements of Income. The Company regularly updates its estimate as new facts become known and events occur
that may impact the settlement or recovery of losses.

Provision for Merchant Losses

The Company has potential liability for losses resulting from disputes between a cardholder and a merchant that
arise as a result of, among other things, the cardholder’s dissatisfaction with merchandise quality or merchant
services. Such disputes may not be resolved in the merchant’s favor. In these cases, the transaction is “charged
back” to the merchant, which means the purchase price is refunded to the customer by the card-issuing bank and
charged to the merchant. If the merchant is unable to fund the refund, TSYS must do so. TSYS also bears the risk
of reject losses arising from the fact that TSYS collects fees from its merchants on the first day after the monthly
billing period. If the merchant has gone out of business during such period, TSYS may be unable to collect such
fees. TSYS maintains cash deposits or requires the pledge of a letter of credit from certain merchants, generally
those with higher average transaction size where the card is not present when the charge is made or the product
or service is delivered after the charge is made, in order to offset potential contingent liabilities such as
chargebacks and reject losses that would arise if the merchant went out of business. Most chargeback and reject
losses are charged to cost of services as they are incurred. However, the Company also maintains a provision
against losses, including major fraud losses, which are both less predictable and involve larger amounts. The loss
provision is established using historical loss rates, applied to recent bankcard processing volume. As of
December 31, 2014, the Company had a merchant loss provision in the amount of $1.1 million.

Transaction Processing Provisions

The Company records estimates to provide for contract contingencies (performance penalties) and processing
errors. A significant number of the Company’s contracts with large clients contain service level agreements which
can result in TSYS incurring performance penalties if contractually required service levels are not met. When
estimating these accruals, the Company takes into consideration such factors as the prior history of performance
penalties and processing errors incurred, actual contractual penalties inherent in the Company’s contracts,
progress towards milestones, and known processing errors not covered by insurance. If the actual performance
penalties incurred are not consistent with the Company’s estimates, performance penalties and processing errors,

16

which are recorded in cost of services, may be materially different than were initially recorded. The Company’s
experience and extensive data accumulated historically indicates that these estimates have proven reliable over
time. As of December 31, 2014, the Company had a transaction processing provision in the amount of
$4.6 million.

Income Taxes

In calculating its effective tax rate, the Company makes decisions regarding certain tax positions, including the
timing and amount of deductions and allocations of income among various tax jurisdictions. The Company has
various tax filing positions, including the timing and amount of deductions and credits, the establishment of
reserves for audit matters and the allocation of income among various tax jurisdictions.

The Company makes estimates as to the amount of deferred tax assets and liabilities and records valuation
allowances to reduce its deferred tax assets to reflect the amount that is more likely than not to be realized. The
Company considers projected future taxable income and ongoing tax planning strategies in assessing the need
for the valuation allowance. Actual results may differ from the Company’s estimates. If the Company realizes a
deferred tax asset or the Company was unable to realize a net deferred tax asset, an adjustment to the deferred
tax asset would increase or decrease earnings, respectively, in the period the difference is recognized.

Related Party Transactions

In December 2014, TSYS’ majority-owned subsidiary, TSYS Managed Services EMEA Ltd. (TSYS Managed
Services), obtained a £900,000, or approximately $1.4 million, pound-denominated term loan bearing interest at
a rate of LIBOR plus two percentage points. The loan matures in December 2017, and has monthly interest
payments. The lender is Merchants Limited, who has a noncontrolling interest in TSYS Managed Services.

The Company provides electronic payment processing and other services to the Company’s equity investments,
Total System Services de México, S.A. de C.V. (TSYS de México) and China UnionPay Data Co., Ltd. (CUP Data).

The related party services and arrangements are performed under contracts that are similar to its contracts with
unrelated third party customers. The Company believes the terms and conditions of transactions between the
Company and these related parties are comparable to those which could have been obtained in transactions with
unaffiliated parties. The Company’s margins with respect to related party transactions are comparable to margins
recognized in transactions with unrelated third parties. The amounts related to these transactions are immaterial.
No significant changes have been made to the method of establishing terms with the affiliated companies during
the periods presented.

Refer to Note 4 in the Consolidated Financial Statements for more information on transactions with affiliated
companies.

Off-Balance Sheet Arrangements

OPERATING LEASES: As a method of funding its operations, TSYS employs noncancelable operating leases for
computer equipment, software and facilities. These leases allow the Company to use the latest technology while
avoiding the risk of ownership. Neither the assets nor obligations related to these leases are included on the
balance sheet. Refer to Notes 1 and 16 in the Consolidated Financial Statements for further information on
operating lease commitments.

CONTRACTUAL OBLIGATIONS: The total liability for uncertain tax positions as of December 31, 2014 is $6.7
million. Refer to Note 15 in the Consolidated Financial Statements for more information on income taxes. The
Company is not able to reasonably estimate the amount by which the liability will increase or decrease over time;
however, at this time, the Company does not expect any significant changes related to these obligations within
the next year.

17

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-
08 “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 addresses the
accounting for the disposal of a component of an entity or a group of components of an entity. The amendments
in this Update address those issues by changing the criteria for reporting discontinued operations and enhancing
convergence of the FASB’s and the International Accounting Standard Board’s (IASB) reporting requirements for
discontinued operations. For public entities, the ASU is effective prospectively for fiscal years, and interim periods
within those years, beginning after December 15, 2014. Early adoption is permitted, but only for disposals (or
classifications as held for sale) that have not been reported in financial statements previously issued or available
for issuance. The Company elected not to early adopt ASU 2014-08. The Company does not expect the adoption
of this ASU to have a material impact on the financial position, results of operations or cash flows of the
Company.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09
addresses the accounting for the revenues associated with customer contracts. This Update enhances
convergence of the FASB’s and the IASB’s reporting requirements for revenue recognition. For public entities,
the ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after
December 15, 2016. Early adoption is not permitted for entities applying U.S. GAAP. The Company is currently
evaluating the adoption of this ASU and its impact on the financial position, results of operations and cash flows
of the Company.

In June 2014, the FASB issued ASU 2014-12 “Compensation – Stock Compensation (Topic 718): Accounting for
Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after
the Requisite Service Period.” ASU 2014-12 addresses the accounting for stock compensation for awards with a
performance target that could be achieved after the requisite service period. For all entities, the ASU is effective
either prospectively for share-based payment awards granted or modified on or after the effective date, or
retrospectively, using a modified retrospective approach for share based awards outstanding as of the beginning
of the earliest annual period presented in the financial statements on adoption, and to all new or modified
awards thereafter. The ASU is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2015. Early adoption is permitted. The Company does not expect the adoption of this ASU to
have a material impact on the financial position, results of operations or cash flows of the Company.

In January 2015, the FASB issued ASU 2015-01 “Income Statement – Extraordinary and Unusual Items” (Subtopic
225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU
2015-01 eliminates from GAAP the concept of extraordinary items. For all entities, the ASU is effective for fiscal
years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted
provided the guidance is applied from the beginning of the fiscal year of adoption. The Company does not
expect the adoption of this ASU to have a material impact on the financial position, results of operations or cash
flows of the Company.

Results of Operations

Revenues

The Company generates revenues by providing transaction processing and other payment-related services. The
Company’s pricing for transactions and services is complex. Each category of revenue has numerous fee
components depending on the types of transactions processed or services provided. TSYS reviews its pricing and
implements pricing changes on an ongoing basis. In addition, standard pricing varies among its regional
businesses, and such pricing can be customized further for customers through tiered pricing of various thresholds
for volume activity. TSYS’ revenues are based upon transactional information accumulated by its systems or
reported by its customers. The Company’s revenues are impacted by currency translation of foreign operations,
as well as doing business in the current economic environment.

The Company has included reimbursements received for out-of-pocket expenses as revenues and expenses. The
largest reimbursable expense item for which TSYS is reimbursed by clients is postage. The Company’s

18

reimbursable items are impacted with changes in postal rates and changes in the volumes of mailing activities by
its clients. Reimbursable items for the year ended December 31, 2014, were $253.9 million, an increase of $13.3
million or 5.5% compared to $240.6 million for the same period last year. Reimbursable items for the year ended
December 31, 2013 decreased $11.9 million, or 4.7%, compared to $252.5 million for the same period in 2012.

TSYS’ revenues are generated from charges based on the number of accounts on file (AOF), transactions and
authorizations processed, statements mailed, cards embossed and mailed, and other processing services for
cardholder AOF. Cardholder AOF include active and inactive consumer credit, retail, prepaid, stored value,
government services and commercial card accounts.

TSYS’ revenues in its North America Services and International Services segments are influenced by several
factors, including volumes related to AOF and transactions. TSYS estimates that approximately 47.2% of these
segments’ revenues is AOF and transaction volume driven. The remaining 52.8% of payment processing
revenues are not AOF and transaction volume driven, and are derived from production and optional services
TSYS considers to be value added products and services, custom programming and licensing arrangements.

Whether or not an account on file is active can impact TSYS’ revenues differently. Active accounts are accounts
that have had monetary activity either during the current month or in the past 90 days based on contractual
definition. Inactive accounts are accounts that have not had a monetary transaction (such as a purchase or
payment) in the past 90 days. The more active an account is, the more revenue is generated for TSYS (items such
as transactions and authorizations processed and statements billed).

Occasionally, a client will purge inactive accounts from its portfolio. An inactive account typically will only
generate an AOF charge. A processing client will periodically review its cardholder portfolio based upon activity
and usage. Each client, based upon criteria individually set by the client, will flag an account to be “purged” from
TSYS’ system and deactivated.

A deconversion involves a client migrating all of its accounts to an in-house solution or another processor.
Account deconversions include active and inactive accounts and can impact the Company’s revenues significantly
more than an account purge.

A sale of a portfolio typically involves a client selling a portion of its accounts to another party. A sale of a
portfolio and a deconversion impact the Company’s financial statements in a similar fashion, although a sale
usually has a smaller financial impact due to the number of accounts typically involved.

TSYS’ revenues in its Merchant Services segment are influenced by several factors, including volumes related to
transactions and dollar sales volume, which are approximately 92.6% of this segment’s revenues. The remaining
7.4% of Merchant Services’ revenues are derived from value added services, monthly statement fees, compliance
fees, and miscellaneous services.

TSYS’ revenues in its NetSpend segment primarily consist of a portion of the service fees and interchange
revenues received by NetSpend’s prepaid card Issuing Banks in connection with the programs managed by
NetSpend. For the year ended December 31, 2014, 70.3% of revenues was derived from fees charged to
cardholders and 29.7% of revenues was derived from interchange and other revenues. Service fee revenues are
driven by the number of active cards, and in particular by the number of cards with direct deposit. Cardholders
with direct deposit generally initiate more transactions and generate more revenues than those that do not take
advantage of this feature. Interchange revenues are driven by gross dollar volume. Substantially all of the
NetSpend segment’s revenues are volume driven as they are driven by the active card and gross dollar volume
indicators.

19

A summary of the consolidated financial highlights for the years ended December 31, 2014, 2013, and 2012 is
provided below:

Years Ended December 31,

Percent Change

(in millions)
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,446.9 2,064.3 1,793.6
355.0
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to TSYS common

431.6

382.5

2013

2012

2014

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

322.9

244.8

244.3

Basic EPS attributable to TSYS common

shareholders1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted EPS attributable to TSYS common

shareholders1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted earnings before interest, taxes,

depreciation, and amortization (Adjusted
EBITDA)2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EPS from continuing operations3 . . . . . . .
Cash provided by operating activities . . . . . . . . . . .
1

1.73

1.72

1.30

1.29

1.30

1.29

712.3
1.96
560.2

624.1
1.73
452.4

537.0
1.47
455.8

2014 vs. 2013
18.5%
12.8

2013 vs. 2012
15.1%
7.8

31.9

33.5

33.6

14.1
13.2
23.8

0.2

0.0

(0.2)

16.2
17.3
(0.7)

2

3

Basic and diluted EPS is computed based on the two-class method in accordance with the guidance under GAAP. Refer to
Note 26 in the Consolidated Financial Statements for more information on EPS.
Adjusted EBITDA is net income excluding equity in income of equity investments, nonoperating income/(expense), income
taxes, depreciation, amortization and stock-based compensation expenses and other non-recurring items.
Adjusted EPS is adjusted earnings divided by weighted average shares outstanding used for basic EPS calculations.
Adjusted earnings is net income excluding the after-tax impact of stock-based compensation expenses, amortization of
acquisition intangibles and other nonrecurring items.

Total revenues increased 18.5%, or $382.6 million, for the year ended December 31, 2014, compared to the year
ended December 31, 2013, which increased 15.1%, or $270.7 million, compared to the year ended
December 31, 2012. The increases in revenues for 2014 and 2013 include an increase of $14.9 million and a
decrease of $5.3 million, respectively, related to the effects of currency translation of the Company’s foreign-
based subsidiaries and branches.

Excluding reimbursable items, revenues increased 20.2%, or $369.3 million, for the year ended December 31,
2014, compared to the year ended December 31, 2013, which increased 18.3%, or $282.6 million, compared to
the year ended December 31, 2012. The 20.2% increase in revenues excluding reimbursable items for the year
ended December 31, 2014, as compared to the same period in 2013, is the result of increases of 15.0% in
revenues associated with acquisitions, and 5.2% in organic growth. The Company expanded its product and
service offerings through acquisitions during 2013 and 2012. The impact of these acquisitions for the years ended
December 31, 2014, 2013 and 2012 was $274.8 million, $273.9 million and $27.1 million, respectively.

Below is a summary of AOF for the Company’s North America Services and International Services segments
combined:

(in millions)

As of December 31,

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2013
Consumer Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270.0 228.9
27.8
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298.4 256.7
39.9
18.9
Subtotal1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362.4 315.5
Prepaid/Stored Value2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127.3 118.0
Government Services3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62.2
Commercial Card Single Use4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45.3
Total AOF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 616.7 541.0

67.4
59.6

41.6
22.4

28.4

2014

Percent
Change
18.0%
2.2
16.3
4.2
18.7
14.9
7.9
8.2
31.5
14.0

1

2

Traditional accounts include consumer, retail, commercial, debit and other accounts. These accounts are grouped together
due to the tendency to have more transactional activity than prepaid, government services and single use accounts.
These accounts tend to have less transactional activity than the traditional accounts. Prepaid and stored value cards are
issued by firms through retail establishments to be purchased by consumers to be used at a later date. These accounts
tend to be the least active of all accounts on file.

3 Government services accounts are disbursements of student loan accounts issued by the Department of Education, which

4

have minimal activity.
Commercial card single use accounts are one-time use accounts issued by firms to book lodging and other travel related
expenses.

20

Major Customer

The Company works to maintain a large and diverse customer base across various industries. Although the
Company does not have a major customer on a consolidated basis, a significant amount of the Company’s
revenues are derived from long-term contracts with large clients. TSYS derives revenues from providing various
processing and other services to these clients, including processing of consumer and commercial accounts, as
well as revenues for reimbursable items. The loss of one of the Company’s large clients could have a material
adverse effect on the Company’s financial position, results of operations and cash flows.

Refer to Note 22 in the Consolidated Financial Statements for more information on major customers.

Operating Segments

TSYS’ services are provided through four operating segments: North America Services, International Services,
Merchant Services and NetSpend.

The Company’s North America Services and International Services segments have many long-term customer
contracts with card issuers providing account processing and output services for printing and embossing items.
These contracts generally require advance notice prior to the end of the contract if a client chooses not to renew.
Additionally, some contracts may allow for early termination upon the occurrence of certain events such as a
change in control. The termination fees paid upon the occurrence of such events are designed primarily to cover
balance sheet exposure related to items such as capitalized conversion costs or client incentives associated with
the contract and, in some cases, may cover a portion of lost future revenue and profit. Although these contracts
may be terminated upon certain occurrences, the contracts provide the segment with a steady revenue stream
since a vast majority of the contracts are honored through the contracted expiration date.

These services are provided throughout the period of each account’s use, starting from a card-issuing client
processing an application for a card. Services may include processing the card application, initiating service for
the cardholder, processing each card transaction for the issuing retailer or financial institution and accumulating
the account’s transactions. Fraud management services monitor the unauthorized use of accounts which have
been reported to be lost, stolen, or which exceed credit limits. Fraud detection systems help identify fraudulent
transactions by monitoring each account holder’s purchasing patterns and flagging unusual purchases. Other
services provided include customized communications to cardholders, information verification associated with
granting credit, debt collection, and customer service.

TSYS’ revenues in its North America Services and International Services segments are derived from electronic
payment processing. There are certain basic core services directly tied to accounts on file and transactions. These
are provided to all of TSYS’ processing clients. The core services begin with an account on file.

The core services include housing an account on TSYS’ system (AOF), authorizing transactions (authorizations),
accumulating monthly transactional activity (transactions) and providing a monthly statement (statement
generation). From these core services, TSYS’ clients also have the option to use fraud and portfolio management
services. Collectively, these services are considered volume-based revenues.

Non-volume related revenues include processing fees which are not directly associated with AOF and
transactional activity, such as value added products and services, custom programming and certain other
services, which are only offered to TSYS’ processing clients.

21

Value added products and services, which includes services such as data analytics and application processing, are
primarily non-volume related, are only offered to TSYS’ processing clients (i.e., indirectly derived from accounts
on file). These ancillary products and services, along with offerings such as card production, statement
production, managed services, customized reporting and custom programming provided to clients at an hourly
rate, are considered non-volume based products and services.

Additionally, certain clients license the Company’s processing systems and process in-house. Since the accounts
are processed outside of TSYS for licensing arrangements, the AOF and other volumes are not available to TSYS.
Thus, volumes reported by TSYS do not include volumes associated with licensing.

A summary of each segment’s results follows:

North America Services

The North America Services segment provides issuer account solutions for financial institutions and other
organizations primarily based in North America. Growth in revenues and operating profit in this segment is
derived from retaining and growing the core business and improving the overall cost structure. Growing the core
business comes primarily from an increase in account usage, growth from existing clients (also referred to as
organic growth) and sales to new clients and the related account conversions.

On July 19, 2012, TSYS announced that it finalized a master services agreement, with a minimum six year term,
with Bank of America to provide processing services for its consumer credit card portfolios in the U.S. In addition,
TSYS will continue to process Bank of America’s commercial credit card portfolios in the U.S. and internationally.
In the first quarter of 2015, TSYS completed the conversion of Bank of America’s consumer card portfolio from its
in-house processing system to TSYS’ processing system. Following the processing term, the agreement provides
Bank of America the option to use the TS2 software pursuant to a license under a long-term payment structure
for purposes of processing its consumer card portfolio.

The master services agreement with Bank of America provides for a tiered-pricing arrangement for both the
consumer card portfolio and the existing commercial card portfolios.

This segment has one major customer. Below is a summary of the North America Services segment:

(in millions)

Years Ended December 31,

Percent Change

2014

2013

2012

2014 vs. 2013

2013 vs. 2012

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,117.8
954.1
Revenues before reimbursable items . . . . . . . . .
351.5
Adjusted segment operating income1 . . . . . . . .
Adjusted segment operating margin2 . . . . . . . .
Key indicators:

36.8%

1,000.1
860.6
321.6

965.4
826.8
295.2

37.4%

35.7%

11.8%
10.9
9.3

3.6%
4.1
9.0

AOF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . .

550.0
10,838.0

481.9
9,132.8

424.8
8,102.3

14.1
18.7

13.4
12.7

1

2

Adjusted segment operating income excludes acquisition intangible amortization and expenses associated with Corporate
Administration and Other.
Adjusted segment operating margin equals adjusted segment operating income divided by revenues before reimbursable
items.

Total segment revenues increased $117.7 million for 2014, as compared to 2013. The increase is attributable to
an increase in new business, internal growth and reimbursable items, partially offset by decreases related to client
deconversions and price reductions. Total segment revenues increased $34.7 million for 2013, as compared to
2012. The increase is attributable to an increase in new business, internal growth and reimbursable items,
partially offset by decreases related to client deconversion, price reductions and other adjustments. The
decreases in 2013 and 2012 caused by price reductions are related to a tiered-pricing arrangement signed in the
third quarter of 2012.

22

The increase in adjusted segment operating income for 2014, as compared to 2013, is driven by an increase in
revenues partially offset by increases in total operating expenses. The increase in adjusted segment operating
income for 2013, as compared to 2012, is also driven by an increase in revenues partially offset by increases in
expenses.

For the year ended December 31, 2014, approximately 50.4% of revenues before reimbursable items of TSYS’
North America Services segment are driven by the volume of accounts on file and transactions processed and
approximately 49.6% were derived from non-volume based revenues, such as processing fees, value-added
products and services, custom programming and licensing arrangements.

(in millions)

Years Ended December 31,

Percent Change

2014

2013

2012

2014 vs. 2013

2013 vs. 2012

Volume-based revenues . . . . . . . . . . . . . . . . . . .

$ 480.4

433.7

405.3

10.8%

7.0%

Non-volume related revenues:

Processing fees . . . . . . . . . . . . . . . . . . . . . . . . .
Value-added, custom programming,

licensing and other . . . . . . . . . . . . . . . . . . . .
Output and managed services . . . . . . . . . . . .

Total non-volume related revenues . . . . . .

Total revenues before reimbursable

items . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursable items . . . . . . . . . . . . . . . . .

216.7

195.4

183.1

115.7
141.3

473.7

954.1
163.7

110.4
121.1

426.9

860.6
139.5

124.1
114.3

421.5

826.8
138.6

965.4

10.9

4.8
16.7

11.0

10.9
17.4

6.7

(11.0)
5.9

1.3

4.1
0.7

11.8%

3.6%

Total revenues . . . . . . . . . . . . . . . . . . . .

$1,117.8

1,000.1

International Services

The International Services segment provides issuer card solutions to financial institutions and other organizations
primarily based outside the North America region. Growth in revenues and operating profit in this segment is
derived from retaining and growing the core business and improving the overall cost structure. Growing the core
business comes primarily from an increase in account usage, growth from existing clients and sales to new clients
and the related account conversions.

This segment has two major customers.

Below is a summary of the International Services segment:

1.6%
0.9
54.6

8.5
20.4

(in millions)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenues before reimbursable items . . . . . . . . .
Adjusted segment operating income1 . . . . . . . .
Adjusted segment operating margin2 . . . . . . . .
Key indicators:

Years Ended December 31,

Percent Change

2014

2013

2012

2014 vs. 2013

2013 vs. 2012

$ 363.4
341.8
55.1
16.1%

341.5
321.5
42.1
13.1%

336.0
318.7
27.2

8.5%

6.4%
6.3
31.0

AOF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . .

66.6
2,268.4

59.1
2,007.4

54.5
1,667.6

12.7
13.0

1

2

Adjusted segment operating income excludes acquisition intangible amortization and expenses associated with Corporate
Administration and Other.
Adjusted segment operating margin equals adjusted segment operating income divided by revenues before reimbursable
items.

The 6.4% increase in total segment revenues for the year ended December 31, 2014, as compared to 2013, is
driven by increases in organic growth, including $14.8 million of currency translation. Reimbursable items for
2014 were $21.6 million, which was an increase of $1.5 million, or 7.5%, compared to $20.0 million for 2013.

23

Total segment revenues increased $5.5 million for 2013, as compared to 2012. The increase is mainly attributable
to increases in organic growth and $2.7 million in reimbursable items, which is partially offset by a decrease of
$5.6 million foreign currency translation and other adjustments.

Excluding reimbursable items, revenues increased 6.3% for 2014, as compared to 2013, and 2013 increased
0.9%, as compared to 2012, as a result of increases from organic growth, partially offset by decreases in client
deconversions and pricing concessions.

The increase in adjusted segment operating income for 2014 as compared to 2013, is driven primarily from an
increase in revenues partially offset by an increase in employee related expenses. Movements in foreign currency
exchange rates as compared to the U.S. Dollar can result in foreign denominated financial statements being
translated into more or fewer U.S. Dollars, which impacts the comparison to prior periods when the U.S. Dollar
was stronger or weaker.

For the year ended December 31, 2014, approximately 38.4% of the revenues before reimbursable items of
TSYS’ International Services segment are driven by the volume of accounts on file and transactions processed
and approximately 61.6% are derived from non-volume based revenues, such as processing fees, value-added
products and services, custom programming and licensing arrangements.

(in millions)

Volume-based revenues . . . . . . . . . . . . . . . . . . .

Non-volume related revenues:

Years Ended December 31,

Percent Change

2014

$131.3

2013

126.7

2012

2014 vs. 2013

2013 vs. 2012

125.1

3.6%

1.3%

Processing fees . . . . . . . . . . . . . . . . . . . . . . . . .
Value-added, custom programming,

licensing and other . . . . . . . . . . . . . . . . . . . .
Output and managed services . . . . . . . . . . . .

69.4

95.0
46.1

61.5

92.8
40.5

53.4

94.4
45.8

Total non-volume related revenues . . . . . .

210.5

194.8

193.6

Total revenues before reimbursable

items . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursable items . . . . . . . . . . . . . . . . .

341.8
21.6

Total revenues . . . . . . . . . . . . . . . . . . . .

$363.4

321.5
20.0

341.5

318.7
17.3

336.0

12.7

2.4
13.9

8.1

6.3
7.5

6.4%

15.3

(1.8)
(11.6)

0.6

0.9
15.9

1.6%

Merchant Services
The Merchant Services segment provides merchant services and related services to clients based primarily in the
United States. The Merchant Services segment’s revenues are derived from providing processing services,
acquiring solutions, related systems and integrated support services to merchant acquirers and merchants.
Revenues from merchant services include processing all payment forms including credit, debit, prepaid,
electronic benefit transfer and electronic check for merchants of all sizes across a wide array of market verticals.
Merchant services include authorization and capture of transactions; clearing and settlement of transactions;
information reporting services related to transactions; merchant billing services; and point-of-sale equipment
sales and service.

In June 2009, Bank of America announced that it formed a new joint venture to provide merchant services. In
November 2010, TSYS and Bank of America agreed to a new agreement, during the term of which TSYS expects
merchant services revenues from Bank of America to decline as Bank of America transitions its services to its new
joint venture. The loss of Bank of America as a merchant services client is not expected to have a material
adverse effect on TSYS’ financial position, results of operations or cash flows. However, the loss will have a
significant adverse effect on the Merchant Services segment’s financial position, results of operations and cash
flows.

Effective June 2013, the Company renewed its processing agreement, which includes revenue minimums, with
Bank of America for an additional two years.

This segment has no major customers.

24

Below is a summary of the Merchant Services segment:

(in millions)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenues before reimbursable items . . . . . . . . .
Adjusted segment operating income1 . . . . . . . .
Adjusted segment operating margin2 . . . . . . . .
Key indicators:

Years Ended December 31,

Percent Change

2014

2013

2012

2014 vs. 2013

2013 vs. 2012

510.1
435.6
134.9

533.1
446.3
155.6

512.6
409.7
157.4

31.0%

34.9%

38.4%

(4.3)%
(2.4)
(13.3)

4.0%
8.9
(1.1)

4,877.6
Point-of-Sale transactions . . . . . . . . . . . . . . . .
Dollar sales volume . . . . . . . . . . . . . . . . . . . . . $46,847.0 44,144.0 38,994.0

4,359.8

4,052.7

(7.0)
6.1

(10.6)
13.2

1

2

Adjusted segment operating income excludes acquisition intangible amortization and expenses associated with Corporate
Administration and Other.
Adjusted segment operating margin equals adjusted segment operating income divided by revenues before reimbursable
items.

Total segment revenues decreased $23.0 million for 2014, as compared to 2013. This decrease includes $33.7
million associated with lost business, deconversions and price reductions and $12.3 million in reimbursable items
offset by $23.0 million in new business and internal growth. Total segment revenues increased $20.5 million for
2013, as compared to 2012. This increase is attributable to a $62.4 million increase from acquisitions and $26.6
million in new business and internal growth partially offset by $52.4 million associated with lost business,
deconversions and price reductions as well as a $16.1 million decrease in reimbursable items.

The decrease in adjusted segment operating income for 2014 and 2013 is driven by lower third party processing
revenues and incremental costs related to integration projects.

The Merchant Services segment results are driven by dollar sales volume and the authorization and capture
transactions processed at the point-of-sale and clearing and settlement transactions. This segment’s authorization
and capture transactions are primarily through dial-up or Internet connectivity.

NetSpend

The NetSpend segment is a program manager for FDIC-insured depository institutions that issue GPR cards and
payroll cards and provide alternative financial services to underbanked and other consumers in the United States.
The products within this segment provide underbanked consumers with access to FDIC-insured depository
accounts with a menu of pricing and features specifically tailored to their needs. This segment has an extensive
distribution and reload network comprised of financial service centers, employers and retail locations throughout
the United States. The NetSpend segment markets prepaid cards through multiple distribution channels,
including alternative financial service providers, traditional retailers, direct-to-consumer and online marketing
programs and contractual relationships with corporate employers.

The NetSpend segment’s revenues primarily consist of a portion of the service fees and interchange revenues
received by NetSpend’s prepaid card Issuing Banks in connection with the programs managed by this segment.
Cardholders are charged fees for transactions including fees for PIN and signature-based purchase transactions
made using their prepaid cards, for ATM withdrawals or other transactions conducted at ATMs, for balance
inquiries, and monthly maintenance fees among others. Cardholders are also charged fees associated with
additional products and services offered in connection with certain cards including the use of overdraft features,
bill payment options, custom card designs and card-to-card transfers of funds initiated through call centers. The
NetSpend segment also earns revenues from a portion of the interchange fees remitted by merchants when
cardholders make purchase transactions using their cards. Subject to applicable law, interchange fees are fixed
by card associations and network organizations.

25

Below is a summary of the NetSpend segment:

(millions)

Years Ended December 31, Percent Change

2014

2013

2014 vs. 2013

Total revenues (and revenues before reimbursable items) . . . . . . . . .
Adjusted segment operating income1 . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted segment operating margin2 . . . . . . . . . . . . . . . . . . . . . . . . . .
Key indicators:

Number of active cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of active cards with direct deposit . . . . . . . . . . . . . . . . . . .
Percentage of active cards with direct deposit
. . . . . . . . . . . . . . . .
Gross dollar volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

482.7
128.3

26.6%

3.2
1.6
50.1%

207.9
66.4
31.9%

2.8
1.3
46.6%

$20,296.0

7,748.5

nm
nm

13.4
21.9

nm

nm = not meaningful. Amounts are not comparable because the amounts for 2013 only include six months of results
compared to twelve months of results for 2014

1

2

Adjusted segment operating income excludes acquisition intangible amortization and expenses associated with Corporate
Administration and Other.
Adjusted segment operating margin equals adjusted segment operating income divided by revenues before reimbursable
items.

The results noted above for the year 2013 are for the period from July 1, 2013, the date that TSYS acquired
NetSpend, through December 31, 2013. Number of active cards represents the total number of prepaid cards
that have had a PIN or signature-based purchase transaction, a point-of-sale load transaction or an ATM
withdrawal within three months of the date of determination. Number of active cards with direct deposit
represents the number of active cards that have had a direct deposit load within three months of the date of
determination. Gross dollar volume represents the total dollar volume of debit transactions and cash withdrawals
made using the prepaid cards the NetSpend segment manages.

NetSpend segment revenues increased $274.8 million for 2014, as compared to 2013. This increase is
attributable mainly to the inclusion of a full twelve months of results in 2014. The $482.7 million of revenues for
2014 was a combination of 70.3% of revenues derived from fees charged to cardholders and 29.7% of revenues
derived from interchange and other revenues. The $207.9 million of revenue for 2013 was a combination of
74.9% of revenues derived from fees charged to cardholders and 25.1% of revenues derived from interchange
and other revenues. Service fee revenues are driven by the number of active cards which totaled approximately
3.2 million and 2.8 million as of December 31, 2014 and 2013, respectively, and in particular by the number of
cards with direct deposit. Cardholders with direct deposit generally initiate more transactions and generate more
revenues than those that do not take advantage of this feature. Interchange revenues are driven by gross dollar
volume, which totaled approximately $20.3 billion and $7.7 billion for the periods ended December 31, 2014 and
2013, respectively. Substantially all of the NetSpend segment revenues are volume driven as they are driven by
the active card and gross dollar volume indicators.

Cardholder funds and deposits related to NetSpend’s prepaid products are held at FDIC-insured Issuing Banks
for the benefit of the cardholders. NetSpend currently has active agreements with five Issuing Banks.

NetSpend’s prepaid card business derived approximately one-third of its revenues from cardholders acquired
through one of its third-party distributors.

Operating Expenses

The Company’s operating expenses consist of cost of services and selling, general and administrative expenses.
Cost of services describes the direct expenses incurred in performing a particular service for customers, including
the cost of direct labor expense in putting the service in saleable condition. Selling, general and administrative
expenses are incurred in selling or marketing and for the direction of the enterprise as a whole, including
accounting, legal fees, officers’ salaries, investor relations and mergers and acquisitions.

The changes in cost of services, and selling, general and administrative expenses for the years ended
December 31, 2014 and 2013 include an increase of $5.9 million and a decrease of $16.9 million, respectively,

26

related to the effects of currency translation of the Company’s foreign-based subsidiaries and branches along
with increases in expense due to the NetSpend acquisition and a significant nonrecurring charitable contribution
in the fourth quarter of 2014. The impact of acquisitions on operating expenses was $238.3 million in 2014,
$217.4 million in 2013, and $20.0 million in 2012.

Federal legislation was enacted which made extensive changes to the system of health care insurance and
benefits. The Company estimates the legislation increased expenses in the years ended 2014, 2013, and 2012 by
approximately $1.8 million, $1.1 million and $600,000 respectively.

The Company’s merger and acquisition expenses were $3.2 million, $14.2 million and $1.7 million for the years
ended December 31, 2014, 2013 and 2012, respectively. These expenses consist of legal, accounting and
professional fees, as well as, personnel costs for severance and retention.

Nonoperating Income (Expense)

Nonoperating income (expense) consists of interest income, interest expense, gains and losses on currency
translations and gains and losses on investments in private equity. Nonoperating income (expense) decreased in
2014 as compared to 2013, and decreased in 2013 as compared to 2012.

Interest income for 2014 and 2013 was $1.1 million and $1.5 million, respectively, a decrease of 25.8%. Interest
income in 2012 was $1.5 million. The variation in interest income is primarily attributable to changes in short-term
interest rates in 2014 and 2013 and the amount of cash available for investments.

Interest expense for the year ended December 31, 2014 was $41.0 million, an $8.6 million increase when
compared to $32.4 million in 2013. The interest expense on the bonds for the year ended December 31, 2014
was $33.7 million. The $32.4 million of interest expense for the year ended December 31, 2013 was a $29.5
million increase when compared to $2.9 million in 2012. The Company’s interest expense related to a bridge loan
facility and bonds was $5.9 million and $20.0 million, respectively, for the year ended December 31, 2013. These
expenses were related to financing the NetSpend acquisition.

For the years ended December 31, 2014, 2013 and 2012, the Company recorded a translation gain of
approximately $142,000 and translation losses of approximately $1.0 million and $2.1 million, respectively,
related to intercompany loans and foreign denominated cash and accounts receivable balances.

The Company recorded gains on its investments in private equity of $793,000, $966,000 and $898,000 for the
years ended December 31, 2014, 2013 and 2012, respectively, due to changes in fair value.

Income Taxes

Income tax expense was $129.8 million, $111.0 million, and $114.1 million in 2014, 2013 and 2012, respectively,
representing effective income tax rates of 32.0%, 31.5%, and 31.9%, respectively. The calculation of the effective
tax rate excludes noncontrolling interest in consolidated subsidiaries’ net income and includes equity in income
of equity investments in pretax income.

During 2014, the Company generated income tax credits in excess of its utilization capacity based on both the
Company’s current operations and with consideration of future tax planning strategies. Based upon these same
considerations, the Company reassessed its need for valuation allowances in all jurisdictions. Accordingly, the
Company experienced a net increase in its valuation allowance for deferred income tax assets of $4.3 million.

TSYS has adopted the permanent reinvestment exception as allowed by GAAP, with respect to future earnings of
certain foreign subsidiaries. As a result, TSYS considers foreign earnings related to these foreign operations to be
permanently reinvested. No provision for U.S. federal and state incomes taxes has been made in the
Consolidated Financial Statements for those non-U.S. subsidiaries whose earnings are considered to be
reinvested. The amount of undistributed earnings considered to be “reinvested” which may be subject to tax

27

upon distribution was approximately $90.3 million as of December 31, 2014. Although TSYS does not intend to
repatriate these earnings, a distribution of these non-U.S. earnings in the form of dividends, or otherwise, would
subject the Company to both U.S. federal and state income taxes, as adjusted for non-U.S. tax credits, and
withholding taxes payable to the various non-U.S. countries. Determination of the amount of any unrecognized
deferred income tax liability on these undistributed earnings is not practicable.

In 2014, TSYS reassessed its contingencies for foreign, federal and state exposures, which resulted in a net
increase in tax contingency amounts of approximately $4.0 million.

Refer to Note 15 in the Consolidated Financial Statements for more information on income taxes.

Equity in Income of Equity Investments

TSYS’ share of income from its equity in equity investments was $17.6 million, $13.0 million and $10.2 million for
2014, 2013 and 2012, respectively. The increase in equity income is the result of the growth in CUP Data. Refer
to Note 12 in the Consolidated Financial Statements for more information on equity investments.

Discontinued Operations

TSYS sold its Japan-based operations during 2014 and recorded income from discontinued operations, net of
tax, of $48.7 million, $2.1 million and $1.0 million for 2014, 2013 and 2012, respectively. All current and prior
period results and discussions exclude the impact of any Japan-based operations occurring during the respective
years. Refer to Note 2 in the Consolidated Financial Statements for more information on discontinued operations.

Net Income

Net income increased 28.4% to $329.4 million in 2014, compared to 2013. In 2013, net income increased 2.7%
to $256.6 million, compared to $249.9 million in 2012.

Net income attributable to noncontrolling interests in 2014 decreased to $6.5 million, as compared to $11.8
million in 2013 and $5.6 million in 2012. The decrease in 2014 was a result of the purchase of an additional 15%
equity interest in CPAY in 2014. The increase in 2013, as compared to 2012, was the result of a full year’s results
following the acquisition of 60% of CPAY in 2012.

In 2014, net income attributable to TSYS common shareholders increased 31.9% to $322.9 million (basic and
diluted EPS of $1.73 and $1.72, respectively), compared to $244.8 million (basic and diluted EPS of $1.30 and
$1.29, respectively) in 2013. Net income attributable to TSYS common shareholders increased 0.2% in 2013,
compared to $244.3 million (basic and diluted EPS of $1.30 and $1.29, respectively) in 2012.

Non-GAAP Financial Measures

Management evaluates the Company’s operating performance based upon operating margin excluding
reimbursables, adjusted EPS and adjusted EBITDA, which are all non-generally accepted accounting principles
(non-GAAP) measures. TSYS also uses these non-GAAP financial measures to evaluate and assess TSYS’ financial
performance against budget.

Although not a substitute for GAAP, TSYS believes that non-GAAP financial measures are important to enable
investors to understand and evaluate its ongoing operating results. Accordingly, TSYS includes non-GAAP
financial measures when reporting its financial results to shareholders in order to provide them with an additional
tool to evaluate TSYS’ ongoing business operations. TSYS believes that the non-GAAP financial measures are
representative of comparative financial performance that reflects the economic substance of TSYS’ current and
ongoing business operations.

Although non-GAAP financial measures are often used to measure TSYS’ operating results and assess its financial
performance, they are not necessarily comparable to similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.

28

TSYS believes that its use of non-GAAP financial measures provides investors with the same key financial
performance indicators that are utilized by management to assess TSYS’ operating results, evaluate the business
and make operational decisions on a prospective, going-forward basis. Hence, management provides disclosure
of non-GAAP financial measures to give shareholders and potential investors an opportunity to see TSYS as
viewed by management, to assess TSYS with some of the same tools that management utilizes internally and to
be able to compare such information with prior periods. TSYS believes that the presentation of GAAP financial
measures alone would not provide its shareholders and potential investors with the ability to appropriately
analyze its ongoing operational results, and therefore expected future results. TSYS therefore believes that
inclusion of non-GAAP financial measures provides investors with additional information to help them better
understand its financial statements just as management utilizes these non-GAAP financial measures to better
understand the business, manage budgets and allocate resources.

The following tables provide a reconciliation of GAAP to non-GAAP financial measures:

Revenues Before Reimbursable Items and Operating Margin Excluding Reimbursable Items

(in thousands except per share data)

Years Ended December 31,

2014

2013

2012

Operating income (a)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 431,640

382,500

354,969

Total revenues (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,446,877
253,899
Less reimbursable items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,064,305
240,597

1,793,557
252,481

Revenues before reimbursable items (c) . . . . . . . . . . . . . . . . . . . . . . . . . . $2,192,978

1,823,708

1,541,076

Operating margin (as reported) (a)/(b)

. . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating margin excluding reimbursables (a)/(c) . . . . . . . . . . . . . . . . . .

17.64%

19.68%

18.53%

19.79%

20.97%

23.03%

Adjusted EBITDA

(in thousands)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted for:

Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in income of equity investments, net of taxes . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonoperating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted for:

Years Ended December 31,

2014

2013

2012

$329,406

256,597

249,923

(48,655)
(17,583)
129,761
38,711
246,620

678,260

(2,055)
(13,047)
110,981
30,024
199,026

(995)
(10,171)
114,116
2,096
163,400

581,526

518,369

Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NetSpend merger and acquisition expenses* . . . . . . . . . . . . . . . . . . .

30,790
3,217

28,933
13,634

18,621
—

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$712,267

624,093

536,990

* Excludes share-based compensation

29

Adjusted Earnings Per Share

(in thousands except per share data)

Years Ended December 31,

2014

2013

2012

Income from continuing operations attributable to TSYS common

shareholders
As reported (GAAP)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $275,216 246,893 247,149

Adjust for amounts attributable to TSYS common shareholders (net of taxes):

Acquisition intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NetSpend merger and acquisition expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65,127
20,944
3,115

43,743
19,830
15,251

17,272
12,676
—

Adjusted earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $364,402 325,717 277,097

Basic EPS—Income from continuing operations attributable to TSYS

common shareholders

As reported (GAAP)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1.48

1.31

1.31

Adjust for amounts attributable to TSYS common shareholders (net of taxes):

Acquisition intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NetSpend merger and acquisition expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted EPS* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.35
0.11
0.02

1.96

0.23
0.11
0.08

1.73

0.09
0.07
—

1.47

Average common shares and participating securities . . . . . . . . . . . . . . . . . . . . . . .

186,222 188,391 188,030

* Adjusted EPS amounts do not total due to rounding.

Projected Outlook for 2015

As compared to 2014, TSYS expects its 2015 total revenues to increase by 7%-9%, its revenues before
reimbursable items to increase by 8%-10%, and its adjusted EPS from continuing operations attributable to TSYS
common shareholders to increase by 11%-13%, based on the following assumptions with respect to 2015:
(1) there will be no significant movements in the London Interbank Offered Rate (LIBOR) and TSYS will not make
any significant draws on the remaining balance of its revolving credit facility; (2) there will be no significant
movement in foreign currency exchange rates related to TSYS’ business; (3) TSYS will not incur significant
expenses associated with the conversion of new large clients other than that included in the 2015 estimate,
additional acquisitions, or any significant impairment of goodwill or other intangibles; (4) there will be no
deconversions of large clients during the year; and (5) the economy will not worsen. In addition, TSYS’ earnings
guidance for 2015 does not include the impact of share repurchases.

Financial Position, Liquidity and Capital Resources
The Consolidated Statements of Cash Flows detail the Company’s cash flows from operating, investing and
financing activities. TSYS’ primary methods for funding its operations and growth have been cash generated from
current operations, the use of leases and the occasional use of borrowed funds to supplement financing of capital
expenditures.

Cash Flows from Operating Activities

(in thousands)

Years Ended December 31,

2014

2013

2012

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $329,406 256,597 249,923
248,018 205,351 170,610
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(27,928)
20,593
76,744
Other noncash items and charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,705
14,627
(86,294)
Net change in current and other assets and current and other liabilities . . . . . . .

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $560,201 452,398 455,753

30

TSYS’ main source of funds is derived from operating activities, specifically net income. The increase in 2014, as
compared to 2013, in net cash provided by operating activities was primarily the result of increased earnings. The
decrease in 2013, as compared to 2012, in net cash provided by operating activities was primarily the result of
the net change in current and other assets and current and other liabilities partially offset by increased earnings.

Net change in current and other assets and current and other liabilities include accounts receivable, prepaid
expenses, other current assets and other assets, accounts payable, accrued salaries and employee benefits and
other liabilities. The change in accounts receivable between the years is the result of timing of collections
compared to billings. The change in accounts payable and other liabilities between years is the result of the
timing of payments and funding of performance-based incentives.

Cash Flows from Investing Activities

(in thousands)

Years Ended December 31,

2014

2013

2012

Additions to contract acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (88,871)
(75,913)
Purchases of property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(41,501)
Additions to internally developed computer software . . . . . . . . . . . . . . . . . . .
(38,584)
Cash used in acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . .
(29,638)
Additions to licensed computer software from vendors . . . . . . . . . . . . . . . . . .
(3,291)
Purchase of private equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,212
Proceeds from insurance recovery for loss on disposal . . . . . . . . . . . . . . . . . . .
44,979
Proceeds from dispositions, net of expenses paid and cash disposed . . . . . .

(55,965)
(40,598)
(33,600)
(1,314,660)
(63,635)
(1,378)
—
—

(34,384)
(31,395)
(19,285)
(188,698)
(33,001)
(3,031)
—
—

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(226,607)

(1,509,836)

(309,794)

The major uses of cash for investing activities in 2014, 2013 and 2012 were for additions to contract acquisition
costs, equipment, acquisitions, internally developed computer software and licensed computer software from
vendors.

Contract Acquisition Costs

TSYS makes cash payments for processing rights, third-party development costs and other direct salary-related
costs in connection with converting new customers to the Company’s processing systems. The Company’s
investments in contract acquisition costs were $88.9 million in 2014, $56.0 million in 2013 and $34.4 million in
2012. The Company made cash payments for processing rights of $21.7 million, $9.7 million and $14.4 million in
2014, 2013 and 2012, respectively. Conversion cost additions were $67.2 million, $46.3 million and $20.0 million
in 2014, 2013 and 2012, respectively. The increase in conversion costs in 2014 compared to 2013 and 2013
compared to 2012 is primarily related to the conversion of Bank of America’s consumer card portfolio.

Property and Equipment

Capital expenditures for property and equipment were $75.9 million in 2014, compared to $40.6 million in 2013
and $31.4 million in 2012. The majority of capital expenditures in 2014 related to computer processing hardware.
The majority of capital expenditures in 2013 related to investments in computer processing hardware and
building improvements. The majority of capital expenditures in 2012 related to computer processing hardware.

Internally Developed Computer Software Costs

Additions to capitalized software development costs, including enhancements to, and development of,
processing systems, were $41.5 million in 2014, $33.6 million in 2013, and $19.3 million in 2012. The increase in
capitalized software development costs in 2014 and 2013 was the result of two corporate-wide initiatives. One
initiative is a multi-year, multi-phase initiative that consists of enhancing TSYS’ issuing processing platforms. The
other is an innovation initiative focused on enhancing existing product and service offerings through several new
product concepts and ideas on how to change existing processes.

31

Cash Used in Acquisitions

In 2014, the Company paid $38.6 million to NetSpend dissenting shareholders to settle the outstanding lawsuit
associated with the NetSpend acquisition. In 2013, the Company used cash of $1.3 billion in the acquisition of
NetSpend. In 2012, the Company used cash of $188.7 million in the acquisitions of ProPay and CPAY. Refer to
Note 24 in the Consolidated Financial Statements for more information on these acquisitions.

Licensed Computer Software from Vendors

Expenditures for licensed computer software from vendors for increases in processing capacity were $29.6 million
in 2014, compared to $63.6 million in 2013 and $33.0 million in 2012. The increase in expenditures in 2013 was
driven by purchases of software in anticipation of large conversions in 2014 and beyond.

Purchase of Private Equity Investments

In 2011, the Company entered into a limited partnership agreement in connection with its agreement to invest in
an Atlanta, Georgia-based venture capital fund focused exclusively on investing in technology-enabled financial
services companies. Pursuant to the limited partnership agreement, the Company has committed to invest up to
$20 million in the fund so long as its ownership interest in the fund does not exceed 50%. The Company made
investments in the fund of $3.3 million, $1.4 million and $3.0 million in 2014, 2013 and 2012, respectively. The
Company recorded gains on this investment of $793,000, $966,000 and $898,000 for the years ended
December 31, 2014, 2013 and 2012, respectively.

Proceeds from Insurance Recovery for Loss on Disposal

The Company received $6.2 million of proceeds from insurance coverage related to the destruction of property
resulting from a fire. The Company recorded the loss on disposal which was more than offset by the insurance
proceeds received.

Proceeds from Dispositions

During 2014, TSYS sold its Japan-based operations and received $45.0 million of proceeds, net of expenses paid
and cash disposed in connection with this transaction. Refer to Note 2 in the Consolidated Financial Statements
for more information on discontinued operations.

Cash Flows from Financing Activities

(in thousands)

Years Ended December 31,

2014

2013

2012

Repurchase of common stock under plans and tax withholding . . . . . . . . . . . . $(170,516)
(74,796)
Dividends paid on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(69,939)
Principal payments on long-term borrowings and capital lease obligations . .
(37,500)
Purchase of noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,172)
Subsidiary dividends paid to noncontrolling shareholders . . . . . . . . . . . . . . . .
—
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from share-based payment arrangements . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(103,857)
(56,510)
(166,805)
—
(7,321)
(13,573)
1,396 1,395,661
7,185
3,528
34,869
40,691

(74,939)
(94,035)
(200,052)
—
(2,797)
(2,073)
150,000
1,259
9,672

Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . $(316,473) 1,091,814 (212,965)

The main source of cash from financing activities has been the use of borrowed funds. The major uses of cash for
financing activities have been the purchase of stock under the stock repurchase plan as described below,
payment of dividends, principal payment on long term debt and capital lease obligations, and purchase of
noncontrolling interests. Net cash used in financing activities for the year ended December 31, 2014 was
$316.5 million and was primarily the result of the repurchase of common stock, payment of dividends, and

32

principal payments on long-term debt borrowings and capital lease obligations offset by proceeds from the
exercise of stock options. Net cash provided by financing activities for the year ended December 31, 2013 was
$1.1 billion and was primarily the result of proceeds from long term borrowings in connection with the NetSpend
acquisition. Net cash used in financing activities for the year ended December 31, 2012 was $213.0 million and
was primarily the result of principal payments on long-term debt borrowings and capital lease obligations, the
repurchase of common stock, and payment of dividends offset by proceeds from borrowings of long-term debt.
Refer to Notes 13 and 24 in the Consolidated Financial Statements for more information on the long-term debt
financing and acquisitions.

Financing

In connection with the NetSpend acquisition, the Company obtained commitments for a $1.2 billion 364-day
bridge term loan facility. In May, 2013 the Company closed the bridge term loan and issued debt of $1.4 billion
to finance the NetSpend acquisition. In April 2013, the Company entered into a new credit agreement that
provided for a five-year term loan to the Company in the amount of $200.0 million. In May 2013, the Company
closed its issuance of $550.0 million aggregate principal amount of 2.375% Senior Notes due 2018 and $550.0
million aggregate principal amount of 3.750% Senior Notes due 2023 (collectively, the “Notes”). The interest on
the Notes is payable semiannually. Upon the issuance of the Notes, the Company eliminated its bridge term loan
facility. In July 2013, the Company borrowed $100 million on its revolving credit facility which was repaid as of
December 31, 2013. In connection with the bridge term loan facility and the aforementioned loans, the Company
paid debt issuance costs of $13.6 million in 2013.

In September 2012, TSYS obtained a $150.0 million term loan, which was used to pay off an existing term loan.
During 2008 and 2009, the Company’s International segment borrowed approximately ¥2.0 billion in a Yen-
denominated three-year loan to finance activities in Japan. In December 2013, the Company repaid this loan for
approximately $19.2 million.

Refer to Note 13 in the Consolidated Financial Statements for further information on TSYS’ long-term debt and
financing arrangements.

Purchase of Noncontrolling Interest

In connection with the acquisition of CPAY, the Company is party to call and put arrangements with respect to
the membership units that represent the remaining noncontrolling interest of CPAY. The call arrangement is
exercisable by TSYS and the put arrangement is exercisable by the Seller. The put arrangement is outside the
control of the Company by requiring the Company to purchase the Seller’s entire equity interest in CPAY at a put
price at fair market value. At the time of the original acquisition, the redemption of the put option was
considered probable based upon the passage of time of the second anniversary date. The put arrangement is
recorded on the balance sheet and is classified as redeemable noncontrolling interest outside of permanent
equity.

In February 2014, the Company purchased an additional 15% equity interest in CPAY for $37.5 million, reducing
its redeemable noncontrolling interest to 25%. The call and put options for the Seller’s 25% equity interest were
extended as a result of this transaction.

The put option is not currently redeemable, but redemption is considered probable based upon the passage of
time toward the third anniversary date of the 2014 purchase of additional equity. The Company’s accounting
policy is to accrete changes in the redemption value over the period from the date of issuance to the earliest
redemption date, which the Company believes to be in 2017. The Company did not accrete any changes to the
redemption value as the balance as of December 31, 2014 exceeded the accretion fair value amount.

Refer to Note 24 in the Consolidated Financial Statements for more information on this purchase.

33

Stock Repurchase Plan

In April 2010, TSYS announced a stock repurchase plan to purchase up to 10 million shares of TSYS stock. The
shares may be purchased from time to time over the next two years at prices considered attractive to the
Company. In May 2011, TSYS announced that its Board had approved an increase in the number of shares that
may be repurchased under its current share repurchase plan from up to 10 million shares to up to 15 million
shares of TSYS stock. The expiration date of the plan was also extended to April 30, 2013. In July 2012, TSYS
announced that its Board had approved an increase in the number of shares that may be repurchased under its
current share repurchase plan from up to 15 million shares to up to 20 million shares of TSYS stock. The
expiration date of the plan was also extended to April 30, 2014. In January, 2014, TSYS announced that its Board
had approved an increase in the number of shares that may be repurchased under its current share repurchase
plan from up to 20 million shares to up to 28 million shares of TSYS stock. With the increase, TSYS had 6.8 million
shares available to be repurchased. In addition, the expiration date of the plan was extended to April 30, 2015.
Through December 31, 2014, the Company purchased 21.2 million shares for approximately $503.3 million, at an
average price of $23.75.

On January 27, 2015, TSYS announced that its Board had approved a new stock repurchase plan to repurchase
up to 20 million shares of TSYS stock. The shares may be purchased from time to time at prices considered
appropriate. There is no expiration date for the plan. The plan discussed in the preceding paragraph was
terminated.

Dividends

Dividends on common stock of $74.8 million were paid in 2014, compared to $56.5 million and $94.0 million in
2013 and 2012, respectively. The Company paid dividends of $0.40 per share in 2014, $0.30 per share in 2013
and $0.50 per share in 2012. The decrease in dividends paid in 2013 compared to 2012 is due to the acceleration
of payment of the fourth quarter 2012 dividend. The fourth quarter 2012 dividend payment was paid in
December, rather than January, to allow shareholders to benefit from the lower dividend tax rate that was set to
expire on December 31, 2012.

Significant Noncash Transactions

During 2014, 2013 and 2012, the Company issued 673,000, 1.7 million and 311,000 shares of common stock,
respectively, to certain key employees and non-management members of its Board of Directors. The grants to
certain key employees were issued in the form of nonvested stock bonus awards for services to be provided in
the future by such officers and employees. The grants to the Board of Directors were fully vested on the date of
grant. The market value of the common stock at the date of issuance is amortized as compensation expense over
the vesting period of the awards.

The Company acquired computer equipment and software under capital leases in the amount of $17.9 million,
$14.8 million and $5.3 million in 2014, 2013 and 2012, respectively.

Refer to Notes 19 and 23 in the Consolidated Financial Statements for more information on share-based
compensation and significant noncash transactions.

Additional Cash Flow Information

Off-Balance Sheet Financing

TSYS uses various operating leases in its normal course of business. These “off-balance sheet” arrangements
obligate TSYS to make payments for computer equipment, software and facilities. These computer and software
lease commitments may be replaced with new lease commitments due to new technology. Management expects
that, as these leases expire, they will be evaluated and renewed or replaced by similar leases based on need.

34

The following table summarizes future contractual cash obligations, including lease payments and software
arrangements, as of December 31, 2014, for the next five years and thereafter:

(in millions)

Contractual Cash Obligations
Payments Due By Period

Total

1 Year
or Less

2-3
Years

4-5
Years

After
5 Years

Debt obligations (principal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,446
232
Debt obligations (interest) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
386
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77
Purchase commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
Redeemable noncontrolling interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total contractual cash obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,178

44
38
122
21
—
8

233

162
74
184
28
22
6

476

690
48
50
19
—
1

808

550
72
30
9
—
—

661

Income Taxes

The total liability for uncertain tax positions as of December 31, 2014 is $6.7 million. Refer to Note 15 in the
Consolidated Financial Statements for more information on income taxes. The Company is not able to reasonably
estimate the amount by which the liability will increase or decrease over time; however, at this time, the
Company does not expect any significant changes related to these obligations within the next twelve months.

Foreign Operations

TSYS operates internationally and is subject to the impact of adverse movements in foreign currency exchange
rates. TSYS does not enter into foreign exchange forward contracts to reduce its exposure to foreign currency
rate changes; however, the Company continues to analyze the potential use of hedging instruments to safeguard
it from significant foreign currency translation risks.

TSYS maintains operating cash accounts outside the United States. Refer to Note 5 in the Consolidated Financial
Statements for more information on cash and cash equivalents. TSYS has adopted the permanent reinvestment
exception under GAAP with respect to future earnings of certain foreign subsidiaries. While some of the foreign
cash is available to repay intercompany financing arrangements, remaining amounts are not presently available to
fund domestic operations and obligations without paying a significant amount of taxes upon its repatriation.
Demand on the Company’s cash has increased as a result of its strategic initiatives. TSYS funds these initiatives
through a balance of internally generated cash, external sources of capital and, when advantageous, access to
foreign cash in a tax efficient manner. Where local regulations limit an efficient intercompany transfer of amounts
held outside of the U.S., TSYS will continue to utilize these funds for local liquidity needs. Under current law,
balances available to be repatriated to the U.S. would be subject to U.S. federal income taxes, less applicable
foreign tax credits. TSYS has provided for the U.S. federal tax liability on these amounts for financial statement
purposes, except for foreign earnings that are considered permanently reinvested outside of the U.S. TSYS
utilizes a variety of tax planning and financing strategies with the objective of having its worldwide cash available
in the locations where it is needed.

Impact of Inflation

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 more efficient computer hardware and software, it
can minimize the impact of inflation.

Working Capital

TSYS may seek additional external sources of capital in the future. The form of any such financing will vary
depending upon prevailing market and other conditions and may include short-term or long-term borrowings
from financial institutions or the issuance of additional equity and/or debt securities such as industrial revenue

35

bonds. However, there can be no assurance that funds will be available on terms acceptable to TSYS.
Management expects that TSYS will continue to be able to fund a significant portion of its capital expenditure
needs through internally generated cash in the future, as evidenced by TSYS’ current ratio of 2.3:1. As of
December 31, 2014, TSYS had working capital of $394.0 million, compared to $356.7 million in 2013 and $344.2
million in 2012.

Legal Proceedings

Refer to Note 16 in the Consolidated Financial Statements for information regarding the Company’s
commitments and contingencies including legal proceedings.

Forward-Looking Statements

Certain statements contained in this filing which are not statements of historical fact constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act (the Act). These forward-looking
statements include, among others: (i) TSYS’ expectation that the loss of Bank of America as a merchant services
client will not have a material adverse effect on TSYS’ business; (ii) TSYS’ expectation that the Durbin Amendment
will not have a significant negative impact on TSYS’ business; (iii) TSYS’ expectation with respect to the effect of
recent accounting pronouncements; (iv) TSYS’ expectation that it will be able to fund a significant portion of its
capital expenditure needs through internally generated cash in the future; (v) TSYS’ earnings guidance for 2015
total revenues, revenues before reimbursable items, and adjusted EPS attributable to TSYS’ common
shareholders from continuing operations; (vi) TSYS’ belief with respect to lawsuits, claims and other complaints;
(vii) TSYS’ expectation with respect to certain tax matters; (viii) the Board’s intention to continue to pay cash
dividends, and the assumptions underlying such statements. In addition, certain statements in future filings by
TSYS with the Securities and Exchange Commission, in press releases, and in oral and written statements made
by or with the approval of TSYS which are not statements of historical fact constitute forward-looking statements
within the meaning of the Act. Examples of forward-looking statements include, but are not limited to:
(i) projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends,
capital structure and other financial items; (ii) statements of plans and objectives of TSYS or its management or
Board of Directors, including those relating to products or services; (iii) statements of future economic
performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,”
“anticipates,” “expects,” “intends,” “targeted,” “estimates,” “projects,” “plans,” “may,” “could,” “should,”
“would,” and similar expressions are intended to identify forward-looking statements but are not the exclusive
means of identifying these statements.

These statements are based upon 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 the Company’s forward-looking statements. Many of these factors are beyond TSYS’ ability to
control or predict. These factors include, but are not limited to:

•

•

•

•

•

•

•

the material breach of security of any of TSYS’ systems;

TSYS incurs expenses associated with the signing of a significant client;

organic growth rates for TSYS’ existing clients are lower than anticipated whether as a result of
unemployment rates, card delinquencies and charge off rates or otherwise or attrition rates of existing clients
are higher than anticipated;

TSYS does not convert and deconvert clients’ portfolios as scheduled;

risks associated with foreign operations, including adverse developments with respect to foreign currency
exchange rates;

adverse developments with respect to entering into contracts with new clients and retaining current clients;

consolidation in the financial services and other industries, including the merger of TSYS clients with entities
that are not TSYS processing clients, the sale of portfolios by TSYS clients to entities that are not TSYS
processing clients and financial institutions which are TSYS clients otherwise ceasing to exist;

36

•

•

•

•

•

•

•

•

•

•

•

•

•

the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on TSYS and its clients;

adverse developments with respect to the payment card industry in general, including a decline in the use of
cards as a payment mechanism;

the impact of potential and completed acquisitions, including the costs associated therewith, their being
more difficult to integrate than anticipated, and the inability to achieve the anticipated growth opportunities
and other benefits of the acquisitions;

the costs and effects of litigation, investigations or similar matters or adverse facts and developments
relating thereto;

the impact of the application of and/or changes in accounting principles;

TSYS’ inability to timely, successfully and cost-effectively improve and implement processing systems to
provide new products, increased functionality and increased efficiencies;

TSYS’ reliance on financial institution sponsors;

changes occur in laws, rules, regulations, credit card association rules, prepaid industry rules, or other
industry standards affecting TSYS and its clients that may result in costly new compliance burdens on TSYS
and its clients and lead to a decrease in the volume and/or number of transactions processed or limit the
types and amounts of fees that can be charged to customers;

successfully managing the potential both for patent protection and patent liability in the context of rapidly
developing legal framework for expansive patent protection;

one or more of the assumptions upon which TSYS’ earnings guidance for 2015 is based is inaccurate;

the effect of current domestic and worldwide economic and geopolitical conditions;

the impact on TSYS’ business, as well as on the risks set forth above, of various domestic or international
military or terrorist activities or conflicts;

other risk factors described in the “Risk Factors” and other sections of TSYS’ Annual Report on Form 10-K for
the fiscal year ended December 31, 2014 and other filings with the Securities and Exchange Commission;
and

•

TSYS’ ability to manage the foregoing and other risks.

These forward-looking statements speak only as of the date on which they are made and TSYS does not intend to
update any forward-looking statement as a result of new information, future developments or otherwise.

Subsequent Events
In the first quarter of 2015, TSYS completed the conversion of Bank of America’s consumer card portfolio from its
in-house processing system to TSYS’ processing system.

Management performed an evaluation of the Company’s activity as of the date these audited financial statements
were issued, and has concluded that, other than as set forth above, there are no significant additional subsequent
events requiring disclosure.

37

Consolidated Balance Sheets

(in thousands, except per share data)

Assets
Current assets:

December 31,

2014

2013

Cash and cash equivalents (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances for doubtful accounts and billing adjustments of $5.2

million and $3.4 million as of 2014 and 2013, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax assets (Note 15)
Prepaid expenses and other current assets (Note 6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets of discontinued operations (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, net of accumulated amortization of $181.9 million and $105.4 million as of

2014 and 2013, respectively (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software, net of accumulated amortization of $613.3 million and $536.4 million as of 2014
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

and 2013, respectively (Note 9)

Property and equipment, net of accumulated depreciation and amortization of $423.2 million and

$ 289,183

247,700

283,203
15,190
98,974
4,003

255,773
14,158
95,109
41,193

690,553
1,547,397

653,933
1,541,574

404,107

481,419

366,148

363,880

$391.5 million as of 2014 and 2013, respectively (Note 10)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

290,585

259,968

Contract acquisition costs, net of accumulated amortization of $276.1 million and $251.8 million as

of 2014 and 2013, respectively (Note 11)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity investments, net (Note 12)
Deferred income tax assets (Note 15)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term assets of discontinued operations (Note 2)

236,305
100,468
7,002
91,016
—

184,828
94,133
3,972
87,146
15,715

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,733,581

3,686,568

Liabilities
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term borrowings (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of obligations under capital leases (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities of discontinued operations (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings, excluding current portion (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax liabilities (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations under capital leases, excluding current portion (Note 13)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities of discontinued operations (Note 2)

$

48,793
43,784
38,001
7,127
154,805
4,003

296,513
1,398,132
211,820
6,974
98,006
—

33,651
34,257
38,339
22,662
159,170
9,136

297,215
1,428,251
228,727
7,500
81,600
1,197

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,011,445

2,044,490

Redeemable noncontrolling interest in consolidated subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22,492

39,652

Commitments and contingencies (Note 16)
Equity
Shareholders’ equity: (Notes 18, 19, 20, and 21)

Common stock — $0.10 par value. Authorized 600,000 shares; 202,775 and 202,790 issued as of

2014 and 2013, respectively; 184,939 and 187,717 outstanding as of 2014 and 2013,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost (17,836 and 15,073 shares as of 2014 and 2013, respectively) . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,278
171,270
(11,926)
(453,230)
1,966,370

20,279
165,841
3,749
(326,996)
1,718,204

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,692,762

1,581,077

Noncontrolling interests in consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,882

21,349

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,699,644

1,602,426

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,733,581

3,686,568

See accompanying Notes to Consolidated Financial Statements

38

Consolidated Statements of Income

(in thousands, except per share data)

Years Ended December 31,

2014

2013

2012

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,446,877 2,064,305 1,793,557

Cost of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Merger and acquisition expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,668,892 1,369,438 1,189,341
247,597
1,650

343,128
3,217

298,147
14,220

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,015,237 1,681,805 1,438,588

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonoperating expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger and acquisition expenses—bridge loan facility and financings . . . .

431,640
(763)
(37,948)

382,500
(804)
(29,220)

354,969
(2,096)
—

Income before income taxes and equity in income of equity

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before equity in income of equity investments . . . . . . . . . . . . . . .
Equity in income of equity investments, net of tax (Note 12) . . . . . . . . . . . .

Income from continuing operations, net of tax . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . .

392,929
129,761

263,168
17,583

280,751
48,655

352,476
110,981

241,495
13,047

254,542
2,055

352,873
114,116

238,757
10,171

248,928
995

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . .

329,406
(6,534)

256,597
(11,847)

249,923
(5,643)

Net income attributable to Total System Services, Inc. (TSYS) common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 322,872

244,750

244,280

Basic earnings per share (EPS) attributable to TSYS common shareholders

(Note 26)
Income from continuing operations to TSYS common shareholders . . . . $
Gain (loss) from discontinued operations to TSYS common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income attributable to TSYS common shareholders* . . . . . . . . . . . . . $

Diluted EPS attributable to TSYS common shareholders (Note 26)

Income from continuing operations to TSYS common shareholders . . . . $
Gain (loss) from discontinued operations to TSYS common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income attributable to TSYS common shareholders* . . . . . . . . . . . . . $

1.48

0.26

1.73

1.47

0.25

1.72

1.31

1.31

(0.01)

1.30

(0.02)

1.30

1.30

1.31

(0.01)

1.29

(0.02)

1.29

Amounts attributable to TSYS common shareholders:

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 275,216
47,656
Gain (loss) from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . .

246,893
(2,143)

247,149
(2,869)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 322,872

244,750

244,280

* EPS amounts may not total due to rounding

See accompanying Notes to Consolidated Financial Statements

39

Consolidated Statements of Comprehensive Income

(in thousands)

Years Ended December 31,

2014

2013

2012

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $329,406 256,597 249,923
Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less reclassifications of foreign currency translation adjustments to net

income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postretirement healthcare plan adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain (loss) on available-for-sale securities . . . . . . . . . . . . . . . . . . . . .

Other comprehensive income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interests . . . . . . . . . . . . . .

(19,531)

(4,081)

2,183

3,514

(16,017)
589
(668)

(16,096)

—

—

(4,081)
1,895
1,773

2,183
(1,666)
—

(413)

517

313,310 256,184 250,440
4,307

6,113

9,092

Comprehensive income attributable to TSYS common shareholders . . . . . . . . . . $307,197 247,092 246,133

See accompanying Notes to Consolidated Financial Statements

40

Consolidated Statements of Cash Flows

(in thousands)

Cash flows from operating activities:

Years Ended December 31,

2014

2013

2012

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:

$ 329,406

256,597

249,923

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for fraud and other losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charges for transaction processing provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends received from equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for bad debt expenses and billing adjustments . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of bond discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) Loss on disposal of equipment, net
Changes in value of private equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from share-based payment arrangements . . . . . . . . . . . . . . . . . . . . .
Deferred income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in income of equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on disposal of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses, other current assets and other long-term assets . . . . . . . . . . . . . .
Accrued salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities and other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . .

248,018
38,381
30,790
9,468
9,189
2,823
1,817
999
383
(293)
(793)
(7,185)
(8,963)
(17,583)
(86,961)

(33,406)
(10,525)
414
8,765
45,457

205,351
11,912
28,933
7,458
8,595
2,000
7,269
1,027
225
(79)
(966)
(3,528)
26,945
(13,047)
—

(8,667)
(571)
(403)
(52,042)
(24,611)

170,610
—
18,621
2,803
7,524
1,054
298
2,012
—
324
(898)
(1,259)
285
(10,171)
—

2,855
(2,945)
(7,083)
37,206
(15,406)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

560,201

452,398

455,753

Cash flows from investing activities:

Additions to contract acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to internally developed computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used in acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to licensed computer software from vendors . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of private equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from insurance recovery for loss on disposal
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from dispositions, net of expenses paid and cash disposed . . . . . . . . . . . . . . . .

(88,871)
(75,913)
(41,501)
(38,584)
(29,638)
(3,291)
6,212
44,979

(55,965)
(40,598)
(33,600)
(1,314,660)
(63,635)
(1,378)
—
—

(34,384)
(31,395)
(19,285)
(188,698)
(33,001)
(3,031)
—
—

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(226,607)

(1,509,836)

(309,794)

Cash flows from financing activities:

Repurchase of common stock under plans and tax withholding . . . . . . . . . . . . . . . . . . . . .
Dividends paid on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on long-term borrowings and capital lease obligations . . . . . . . . . . .
Purchase of noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subsidiary dividends paid to noncontrolling shareholders . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from share-based payment arrangements . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(170,516)
(74,796)
(69,939)
(37,500)
(7,172)
—
1,396
7,185
34,869

(103,857)
(56,510)
(166,805)
—
(7,321)
(13,573)
1,395,661
3,528
40,691

(74,939)
(94,035)
(200,052)
—
(2,797)
(2,073)
150,000
1,259
9,672

Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . .

(316,473)

1,091,814

(212,965)

Cash and cash equivalents:

Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .

(6,168)

(3,758)

(1,719)

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less cash and cash equivalents of discontinued operations at end of period . . . . . . . . . .

10,953
278,230

289,183
—

30,618
247,612

278,230
(30,530)

(68,725)
316,337

247,612
(23,353)

Cash and cash equivalents of continued operations at end of period . . . . . . . . . . . . . . . .

$ 289,183

247,700

224,259

Supplemental cash flow information:

Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 40,969

23,157

2,952

Income taxes paid, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 135,770

80,033

106,778

See accompanying Notes to Consolidated Financial Statements

41

Consolidated Statements of Changes in Equity

TSYS Shareholders

Redeemable
Noncontrolling
Interests

Common Stock Additional
Shares Dollars

Paid-In
Capital

—
$ 1,505

201,860 $ 20,186
—

—

125,948
—

Accumulated
Other
Comprehensive
Income (Loss)

(445)
—

1,853

(in thousands, except per share data)

Balance as of December 31, 2011 . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income

(Note 21) . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock issued from treasury

shares for exercise of stock options
(Note 19) . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock issued for nonvested

awards (Note 19)

. . . . . . . . . . . . . . . . . .

Common stock issued from treasury

shares for nonvested awards
(Note 19) . . . . . . . . . . . . . . . . . . . . . . . . .
. . .

Share-based compensation (Note 19)
Cash dividends declared ($0.40 per

share) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .

Purchase of treasury shares (Note 20)
Subsidiary dividends paid to

noncontrolling interests . . . . . . . . . . . . .

Fair value of noncontrolling interest in

CPAY . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefits associated with share-based
compensation . . . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2012 . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income

(Note 21) . . . . . . . . . . . . . . . . . . . . . . . . .

Replacement share-based awards issued

in connection with acquisition
(Note 19) . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock issued from treasury

shares for exercise of stock options
(Note 19) . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock issued for nonvested

awards (Note 19)

. . . . . . . . . . . . . . . . . .

Common stock issued from treasury

shares for nonvested awards
(Note 19) . . . . . . . . . . . . . . . . . . . . . . . . .
. . .

Share-based compensation (Note 19)
Common stock issued from treasury
shares for dividend equivalents
(Note 19) . . . . . . . . . . . . . . . . . . . . . . . . .

Cash dividends declared ($0.40 per

share) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .

Purchase of treasury shares (Note 20)
Subsidiary dividends paid to

noncontrolling interests . . . . . . . . . . . . .
Tax benefits associated with share-based
compensation . . . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2013 . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income

(Note 21)

. . . . . . . . . . . . . . . . . . . . . . . .

Common stock issued from treasury

shares for exercise of stock options
(Note 19)

. . . . . . . . . . . . . . . . . . . . . . . .

Common stock unissued due to

forfeiture of nonvested awards . . . . .

Common stock issued from treasury

shares for nonvested awards
(Note 19)

. . . . . . . . . . . . . . . . . . . . . . . .

Share-based compensation

(Note 19)

. . . . . . . . . . . . . . . . . . . . . . . .

Common stock issued from treasury
shares for dividend equivalents
(Note 19)

. . . . . . . . . . . . . . . . . . . . . . . .

Cash dividends declared ($0.40 per

share)

. . . . . . . . . . . . . . . . . . . . . . . . . . .

Purchase of treasury shares

(Note 20)

. . . . . . . . . . . . . . . . . . . . . . . .

Subsidiary dividends paid to

noncontrolling interests . . . . . . . . . . . .
Fair value of noncontrolling interest . . .
Disposition of noncontrolling interest

(Note 2)

. . . . . . . . . . . . . . . . . . . . . . . . .

Tax benefits associated with

share-based compensation . . . . . . . . .
Balance as of December 31, 2014 . . . . .

—

—

—
—

—
—

—

38,000

—

39,505
6,515

—

611

—

61

(2,386)

(61)

—
—

—
—

—

—

—

—
(628)
— 18,623

—
—

—

—

—

—
—

—

—

297

202,471
—

20,247
—

141,793
—

—

—

—

—

—
—

—

—
—

(6,368)

—

39,652
4,650

—

—

—

—

—

—

—

—

(6,732)
(15,078)

—

—

—

—

—

319

—
—

—

—
—

—

—

—

—

—

32

—

(1,167)

(700)

(32)

—
(5,747)
— 28,972

—

—
—

—

—

36

—
—

—

2,686

—

—

(15)

—

—

—

—

—

—
—

—

—

—

—

(1)

1,955

1

— (11,142)

— 30,312

—

—

—

185

—

—

—
—
— (22,422)

—

—

—

6,540

Treasury
Stock

Retained
Earnings

Noncontrolling
Interests

Total
Equity

(225,034) 1,380,634
— 244,280

12,377

—

628
—

—

—

—
—

— (75,851)
—

(75,272)

—

—

—

—

—

—

(287,301) 1,549,063
— 244,750

—

16,723

41,391

—

5,747
—

—

—

—

—

—
—

301

161

(103,857)

— (75,770)
—

19,720
4,138

(1,336)

—

—

—
—

—
—

(2,797)

—

—

19,725
5,331

(2,754)

—

—

—

—
—

—

—
—

—

—

—

—

(953)

—

$ 1,321,009
248,418

517

9,991

—

—
18,623

(75,851)
(75,272)

(2,797)

—

297

1,444,935
250,081

(413)

15,556

40,691

—

—
28,972

498

(75,770)
(103,857)

(953)

2,686

—

—

—

—

—

—

(421)

(16,096)

—

—

—

—

—

—

—

(440)
—

(15,490)

—

34,869

—

—

30,312

411

(74,706)

(170,516)

(440)
(22,422)

(15,490)

6,540

32,914

—

11,142

—

226

— (74,706)

(170,516)

—
—

—

—

—

—
—

—

—

—

—

—
—

—
—

—

—

—

1,408
—

2,341

—

—

—

—
—

—

—
—

—

—

—

—

—

—

—

—

—

—
—

—

—

202,790
—

20,279
—

165,841
—

3,749
—

(326,996) 1,718,204
— 322,872

21,349
1,884

1,602,426
324,756

—

(15,675)

—

$ 22,492

202,775 $20,278 171,270

(11,926)

(453,230) 1,966,370

6,882

$1,699,644

See accompanying Notes to Consolidated Financial Statements

42

Notes to Consolidated Financial Statements

Note 1: Basis of Presentation and Summary of Significant Accounting Policies

BUSINESS: Total System Services, Inc.’s (TSYS’ or the Company’s) revenues are derived from providing
payment processing, merchant services and related payment services to financial and nonfinancial institutions,
generally under long-term processing contracts. The Company also derives revenues by providing general-
purpose reloadable (GPR) prepaid debit cards and payroll cards and alternative financial services to underbanked
and other consumers. The Company’s services are provided through the Company’s four operating segments:
North America Services, International Services, Merchant Services and NetSpend.

Through the Company’s North America Services and International Services segments, TSYS processes
information through its cardholder systems to financial and nonfinancial institutions throughout the United States
and internationally. The Company’s North America Services segment provides these services to clients in the
United States, Canada, Mexico and the Caribbean. The Company’s International Services segment provides
services to clients in Europe, India, Middle East, Africa, Asia Pacific and Brazil. The Company’s Merchant Services
segment provides merchant services to merchant acquirers and merchants mainly in the United States. The
Company’s NetSpend segment provides services to consumers in the United States.

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION: The accompanying consolidated
financial statements, which are prepared in accordance with generally accepted accounting principles (GAAP)
include the accounts of TSYS and its wholly- and majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. In addition, the Company evaluates its
relationships with other entities to identify whether they are variable interest entities and to assess whether it is
the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary,
then that entity is included in the consolidated financial statements.

RISKS AND UNCERTAINTIES AND USE OF ESTIMATES: Factors that could affect the Company’s future
operating results and cause actual results to vary materially from expectations include, but are not limited to,
lower than anticipated growth from existing clients, an inability to attract new clients and grow internationally,
loss of a major customer or other significant client, loss of a major supplier, an inability to grow through
acquisitions or successfully integrate acquisitions, an inability to control expenses, technology changes, the
impact of the application of and/or changes in accounting principles, financial services consolidation, changes in
regulatory requirements, a decline in the use of cards as a payment mechanism, disruption of the Company’s
international operations, breach of the Company’s security systems, a decline in the financial stability of the
Company’s clients and uncertain economic conditions. Negative developments in these or other risk factors
could have a material adverse effect on the Company’s financial position, results of operations and cash flows.

The Company has prepared the accompanying consolidated financial statements in conformity with U.S. GAAP.
The preparation of the consolidated financial statements requires management of the Company to make a
number of estimates and assumptions relating to the reported amounts of assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the period. These
estimates and assumptions are developed based upon all information available. Actual results could differ from
estimated amounts.

ACQUISITIONS — PURCHASE PRICE ALLOCATION: TSYS’ purchase price allocation methodology requires
the Company to make assumptions and to apply judgment to estimate the fair value of acquired assets and
liabilities. TSYS estimates the fair value of assets and liabilities based upon appraised market values, the carrying
value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and
market multiple analyses. Management determines the fair value of fixed assets and identifiable intangible assets
such as developed technology or customer relationships, and any other significant assets or liabilities. TSYS
adjusts the purchase price allocation, as necessary, up to one year after the acquisition closing date as TSYS
obtains more information regarding asset valuations and liabilities assumed. Unanticipated events or
circumstances may occur which could affect the accuracy of the Company’s fair value estimates, including
assumptions regarding industry economic factors and business strategies, and result in an impairment or a new
allocation of purchase price.

43

Given its history of acquisitions, TSYS may allocate part of the purchase price of future acquisitions to contingent
consideration as required by GAAP for business combinations. The fair value calculation of contingent
consideration will involve a number of assumptions that are subjective in nature and which may differ significantly
from actual results. TSYS may experience volatility in its earnings to some degree in future reporting periods as a
result of these fair value measurements.

CASH AND CASH EQUIVALENTS: Cash on hand and investments with a maturity of three months or less
when purchased are considered to be cash equivalents.

ACCOUNTS RECEIVABLE: Accounts receivable balances are stated net of allowances for doubtful accounts
and billing adjustments.

TSYS records an allowance for doubtful accounts when it is probable that the accounts receivable balance will not
be collected. When estimating the allowance for doubtful accounts, the Company takes into consideration such
factors as its day-to-day knowledge of the financial position of specific clients, the industry and size of its clients,
the overall composition of its accounts receivable aging, prior history with specific customers of accounts
receivable write-offs and prior experience of allowances in proportion to the overall receivable balance. This
analysis includes an ongoing and continuous communication with its largest clients and those clients with past
due balances. A financial decline of any one of the Company’s large clients could have a material adverse effect
on collectability of receivables and thus the adequacy of the allowance for doubtful accounts.

Increases in the allowance for doubtful accounts are recorded as charges to bad debt expense and are reflected
in selling, general and administrative expenses in the Company’s Consolidated Statements of Income. Write-offs
of uncollectible accounts are charged against the allowance for doubtful accounts.

TSYS records an allowance for billing adjustments for actual and potential billing discrepancies. When estimating
the allowance for billing adjustments, the Company considers its overall history of billing adjustments, as well as
its history with specific clients and known disputes. Increases in the allowance for billing adjustments are
recorded as a reduction of revenues in the Company’s Consolidated Statements of Income and actual
adjustments to invoices are charged against the allowance for billing adjustments.

UP-FRONT DISTRIBUTOR PAYMENTS: The Company makes up-front contractual payments to third-party
distribution partners. The Company assesses each up-front payment to determine whether it meets the criteria of
an asset as defined by U.S. GAAP. If these criteria are met, the Company capitalizes the up-front payment and
recognizes the capitalized amount as expense ratably over the benefit period, which is generally the contract
period. If the contract requires the distributor to perform specific acts (i.e. achieve a sales goal) and no other
conditions exist for the distributor to earn or retain the up-front payment, then the Company capitalizes the
payment and recognizes it as an expense when the performance conditions have been met. Up-front distributor
payments are classified on the Consolidated Balance Sheet as other non-current assets and recorded as a cost of
services in the Consolidated Statements of Income.

PROPERTY AND EQUIPMENT: Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed using the straight-line method over the estimated
useful lives of the assets. Buildings and improvements are depreciated over estimated useful lives of 5-40 years,
computer and other equipment over estimated useful lives of 2-5 years, and furniture and other equipment over
estimated useful lives of 3-15 years. The Company evaluates impairment losses on long-lived assets used in
operations in accordance with the provisions of GAAP. All ordinary repairs and maintenance costs are expensed
as incurred. Maintenance costs that extend the asset life are capitalized and amortized over the remaining
estimated life of the asset.

LICENSED COMPUTER SOFTWARE: The Company licenses software that is used in providing services to
clients. Licensed software is obtained through perpetual licenses and site licenses and through agreements
based on processing capacity (called “MIPS agreements”). Perpetual and site licenses are amortized using the
straight-line method over their estimated useful lives which range from three to ten years. Software licensed
under MIPS agreements is amortized using a units-of-production basis over the estimated useful life of the
software, generally not to exceed ten years. At each balance sheet date, the Company evaluates impairment
losses on long-lived assets used in operations in accordance with GAAP.

44

ACQUISITION TECHNOLOGY INTANGIBLES: These identifiable intangible assets are software technology
assets resulting from acquisitions. These assets are amortized using the straight-line method over periods not
exceeding their estimated useful lives, which range from five to nine years. GAAP requires that intangible assets
with estimated useful lives be amortized over their respective estimated useful lives to their residual values, and
reviewed for impairment. Acquisition technology intangibles’ net book values are included in computer software,
net in the accompanying balance sheets. Amortization expenses are charged to cost of services in the Company’s
Consolidated Statements of Income.

SOFTWARE DEVELOPMENT COSTS: Software development costs are capitalized once technological
feasibility of the software product has been established. Costs incurred prior to establishing technological
feasibility are expensed as incurred. Technological feasibility is established when the Company has completed a
detailed program design and has determined that a product can be produced to meet its design specifications,
including functions, features and technical performance requirements. Capitalization of costs ceases when the
product is generally available to clients. At each balance sheet date, the Company evaluates the unamortized
capitalized costs of software development as compared to the net realizable value of the software product which
is determined by future undiscounted net cash flows. The amount by which the unamortized software
development costs exceed the net realizable value is written off in the period that such determination is made.
Software development costs are amortized using the straight-line method over its estimated useful life, which
ranges from three to ten years.

The Company also develops software that is used internally. These software development costs are capitalized in
accordance with GAAP. Internal-use software development costs are capitalized once: (1) the preliminary project
stage is completed, (2) management authorizes and commits to funding a computer software project, and (3) it is
probable that the project will be completed and the software will be used to perform the function intended.
Costs incurred prior to meeting the qualifications are expensed as incurred. Capitalization of costs ceases when
the project is substantially complete and ready for its intended use. Internal-use software development costs are
amortized using the straight-line method over its estimated useful life which ranges from three to ten years.
Software development costs may become impaired in situations where development efforts are abandoned due
to the viability of the planned project becoming doubtful or due to technological obsolescence of the planned
software product.

CONTRACT ACQUISITION COSTS: The Company capitalizes contract acquisition costs related to signing or
renewing long-term contracts and costs related to cash payments for rights to provide processing services. The
Company capitalizes internal conversion costs in accordance with GAAP. All costs incurred prior to a signed
agreement are expensed as incurred.

Contract acquisition costs are amortized using the straight-line method over the expected customer relationship
(contract term) beginning when the client’s cardholder accounts are converted and producing revenues. The
amortization of contract acquisition costs associated with cash payments for client incentives is included as a
reduction of revenues in the Company’s Consolidated Statements of Income. The amortization of contract
acquisition costs associated with conversion activity is recorded as cost of services in the Company’s
Consolidated Statements of Income.

The Company evaluates the carrying value of contract acquisition costs associated with each customer for
impairment on the basis of whether these costs are fully recoverable from either contractual minimum fees
(contractual costs) or from expected undiscounted net operating cash flows of the related contract (cash
incentives paid). The determination of expected undiscounted net operating cash flows requires management to
make estimates. These costs may become impaired with the loss of a contract, the financial decline of a client,
termination of conversion efforts after a contract is signed, diminished prospects for current clients or if the
Company’s actual results differ from its estimates of future cash flows. The amount of the impairment is written off
in the period that such a determination is made.

EQUITY INVESTMENTS: TSYS’ 49% investment in Total System Services de México, S.A. de C.V. (TSYS de
México), an electronic payment processing support operation located in Toluca, Mexico, is accounted for using
the equity method of accounting, as is TSYS’ 44.56% investment in China UnionPay Data Co., Ltd. (CUP Data)

45

headquartered in Shanghai, China. TSYS’ equity investments are recorded initially at cost and subsequently
adjusted for equity in earnings, cash contributions and distributions, and foreign currency translation adjustments.

GOODWILL: Goodwill results from the excess of cost over the fair value of net assets of businesses acquired.

Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually. Intangible
assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated
residual values.

Equity investment goodwill, which is not reported as goodwill in the Company’s Consolidated Balance Sheet, but
is reported as a component of the equity investment, was $51.4 million as of December 31, 2014.

Identifiable intangible assets relate primarily to customer relationships,

OTHER INTANGIBLE ASSETS:
databases, channel relationships, covenants-not-to-compete, trade names and trade associations resulting from
acquisitions. These identifiable intangible assets are amortized using the straight-line method over periods not
exceeding the estimated useful lives, which range from three to ten years. Intangible assets with estimable useful
lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed
for impairment in accordance with GAAP. Amortization expenses are charged to selling, general and
administrative expenses in the Company’s Consolidated Statements of Income.

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, accrued salaries
and employee benefits, and other current liabilities approximate their fair value due to the short-term maturities
of these assets and liabilities. The fair value of the Company’s long-term debt and obligations under capital
leases is not significantly different from its carrying value.

Investments in equity investments are accounted for using the equity method of accounting and pertain to
privately held companies for which fair value is not readily available. The Company believes the fair values of its
investments in equity investments exceed their respective carrying values.

IMPAIRMENT OF LONG-LIVED ASSETS: The Company reviews long-lived assets, such as property and
equipment and intangibles subject to amortization, including contract acquisition costs and certain computer
software, for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.
If upon a triggering event the Company determines that the carrying amount of an asset exceeds its estimated
undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the
balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and would no
longer be depreciated. The assets and liabilities of a disposed group classified as held for sale would be
presented separately in the appropriate asset and liability sections of the balance sheet.

TRANSACTION PROCESSING PROVISIONS: The Company has recorded an accrual for contract
contingencies (performance penalties) and processing errors. A significant number of the Company’s contracts
with large clients contain service level agreements which can result in TSYS incurring performance penalties if
contractually required service levels are not met. When providing for these accruals, the Company takes into
consideration such factors as the prior history of performance penalties and processing errors incurred, actual
contractual penalties inherent in the Company’s contracts, progress towards milestones and known processing
errors not covered by insurance.

These accruals are included in other current liabilities in the accompanying Consolidated Balance Sheets.
Increases and decreases in transaction processing provisions are charged to cost of services in the Company’s
Consolidated Statements of Income, and payments or credits for performance penalties and processing errors
are charged against the accrual.

CARDHOLDERS’ RESERVE: The Company is exposed to losses due to cardholder fraud, payment defaults and
other forms of cardholder activity as well as losses due to non-performance of third parties who receive
cardholder funds for transmittal to the Issuing Banks (banks that issue MasterCard International or Visa USA,Inc.

46

branded cards to customers). The Company establishes a reserve for the losses it estimates will arise from
processing customer transactions, debit card overdrafts, chargebacks for unauthorized card use and merchant-
related chargebacks due to non-delivery of goods and services. These reserves are established based upon
historical loss and recovery rates and cardholder activity for which specific losses can be identified. The
cardholders’ reserve was approximately $6.3 million as of December 31, 2014. The provision for cardholder
losses is included in cost of services in the Consolidated Statements of Income. The Company regularly updates
its reserve estimate as new facts become known and events occur that may impact the settlement or recovery of
losses.

PROVISION FOR MERCHANT LOSSES: The Company has potential liability for losses resulting from disputes
between a cardholder and a merchant that arise as a result of, among other things, the cardholder’s
dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the
merchant’s favor. In these cases, the transaction is “charged back” to the merchant, which means the purchase
price is refunded to the customer by the card-issuing bank and charged to the merchant. If the merchant is
unable to fund the refund, TSYS must do so. TSYS also bears the risk of reject losses arising from the fact that
TSYS collects fees from its merchants on the first day after the monthly billing period. If the merchant has gone
out of business during such period, TSYS may be unable to collect such fees. TSYS maintains cash deposits or
requires the pledge of a letter of credit from certain merchants, generally those with higher average transaction
size where the card is not present when the charge is made or the product or service is delivered after the charge
is made, in order to offset potential contingent liabilities such as chargebacks and reject losses that would arise if
the merchant went out of business. Most chargeback and reject losses are charged to cost of services as they are
incurred. However, the Company also maintains a provision against losses, including major fraud losses, which
are both less predictable and involve larger amounts. The loss provision was established using historical loss
rates, applied to recent bankcard processing volume. As of December 31, 2014, the Company had a merchant
loss provision in the amount of $1.1 million.

REDEEMABLE NONCONTROLLING INTEREST:
LLC (CPAY), the Company is party to call and put arrangements with respect to the membership units that
represent the remaining noncontrolling interest of CPAY. The call arrangement is exercisable by TSYS and the put
arrangement is exercisable by the seller. The put arrangement is outside the control of the Company by requiring
the Company to purchase the seller’s entire equity interest in CPAY at a put price at fair market value. The put
arrangement is recorded on the balance sheet and is classified as redeemable noncontrolling interest outside of
permanent equity.

In connection with the acquisition of Central Payment Co.,

FOREIGN CURRENCY TRANSLATION: The Company maintains several different foreign operations whose
functional currency is their local currency. Foreign currency financial statements of the Company’s Mexican and
Chinese equity investments, the Company’s wholly owned subsidiaries and the Company’s majority owned
subsidiaries, as well as the Company’s division and branches in the United Kingdom and China, are translated
into U.S. dollars at current exchange rates, except for revenues, costs and expenses, and net income which are
translated at the average exchange rates for each reporting period. Net gains or losses resulting from the
currency translation of assets and liabilities of the Company’s foreign operations, net of tax when applicable, are
accumulated in a separate section of shareholders’ equity titled accumulated other comprehensive income (loss).
Gains and losses on transactions denominated in currencies other than the functional currencies are included in
determining net income for the period in which exchange rates change.

TREASURY STOCK: The Company uses the cost method when it purchases its own common stock as treasury
shares or issues treasury stock upon option exercises and displays treasury stock as a reduction of shareholders’
equity.

REVENUE RECOGNITION: Revenue is realized or realizable and earned when all of the following criteria are
met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed;
(3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. The
Company accrues for rights of refund, processing errors or penalties, or other related allowances based on
historical experience.

The Company’s North America and International Services revenues are derived from long-term processing
contracts with financial and nonfinancial institutions and are generally recognized as the services are performed.
Payment processing services revenues are generated primarily from charges based on the number of accounts on

47

file, transactions and authorizations processed, statements mailed, cards embossed and mailed and other
processing services for cardholder accounts on file. Most of these contracts have prescribed annual revenue
minimums, penalties for early termination, and service level agreements which may impact contractual fees if
certain service levels are not achieved.

Revenue is recognized as the services are performed, primarily measured on a per unit basis. Processing
contracts generally range from three to ten years in length. When providing payment processing services, the
Company frequently enters into customer arrangements to provide multiple services that may also include
conversion or implementation services, business process outsourcing services such as call center services, web-
based services, and other payment processing-related services. Revenue for these services is generally
recognized as they are performed on a per unit basis each month or ratably over the term of the contract.

The Company’s Merchant Services revenues are partially derived from relationships with thousands of individual
merchants. Additionally, part of the revenues are derived from long-term processing contracts with large financial
institutions, other merchant acquirers and merchant organizations which generally range from three to eight years
and provide for penalties for early termination. Merchant services revenue is generated primarily from processing
all payment forms including credit, debit, electronic benefits transfer and check truncation for merchants of all
sizes across a wide array of retail market segments. The products and services offered include authorization and
capture of electronic transactions, clearing and settlement of electronic transactions, information reporting
services related to electronic transactions, merchant billing services, and point-of-sale terminal services. Revenue
is recognized for merchant services as those services are performed, primarily measured on a per unit basis.
When providing merchant processing services, the Company frequently enters into customer arrangements to
provide multiple services that may also include conversion or implementation services, business process
outsourcing services such as call center services, terminal services, and other merchant processing-related
services. Revenue for these services is generally recognized as they are performed on a per unit basis each month
or ratably over the term of the contract. Revenues on point-of-sale terminal equipment are recognized upon the
transfer of ownership and shipment of product.

When a sale involves multiple deliverables, revenue recognition is affected by the determination of the number of
deliverables in an arrangement, whether those deliverables may be separated into multiple units of accounting,
and the valuation of each unit of accounting which affects the amount of revenue allocated to each unit. Pursuant
to ASC 605, the Company uses vendor-specific objective evidence of selling price (VSOE) when it exists to
determine the amount of revenue to allocate to each unit of accounting. The Company establishes VSOE of
selling price using the price charged when the same service is sold separately (on a standalone basis). In certain
situations, the Company does not have sufficient VSOE. In these situations, TSYS considered whether sufficient
third party evidence (TPE) of selling price existed for the Company’s services. However, the Company typically is
not able to determine TPE and has not used this measure of selling price due to the unique and proprietary
nature of some of its services and the inability to reliably verify relevant standalone competitor prices. When
there is insufficient evidence of VSOE and TPE, the Company has made its best estimate of the standalone selling
price (ESP) of that service for purposes of allocating revenue to each unit of accounting. When determining ESP,
TSYS uses limited standalone sales data that do not meet the Company’s criteria to establish VSOE, management
pricing strategies, residual selling price data when VSOE exists for a group of elements, the cost of providing the
services and the related margin objectives. Consideration is also given to geographies in which the services are
sold or delivered, customer classifications, and market conditions including competitor pricing strategies and
benchmarking studies. Revenue is recognized when the revenue recognition criteria for each unit of accounting
have been met.

As business and service offerings change in the future, the determination of the number of deliverables in an
arrangement and related units of accounting and the future pricing practices may result in changes in the
estimates of VSOE and ESP, which may change the ratio of fees allocated to each service or unit of accounting in
a given customer arrangement. There were no material changes or impact to revenue in revenue recognition for
current contract arrangements in the year ended December 31, 2014 due to any changes in the determination of
the number of deliverables in an arrangement, units of accounting, or estimates of VSOE or ESP.

In many situations, the Company enters into arrangements with customers to provide conversion or
implementation services in addition to processing services where the conversion or implementation services do

48

not have standalone value. For these arrangements, conversion or implementation services that do not have
standalone value, are recognized over the expected customer relationship (contract term) as the related
processing services are performed.

The Company’s other services generally have standalone value and constitute separate units of accounting for
revenue recognition purposes. Customer arrangements entered into prior to 2011 (prior to the adoption of
Accounting Standard Update (ASU) 2009-13, “Multiple-Deliverable Revenue Arrangements,” an update to ASC
Topic 605, “Revenue Recognition,” and formerly known as EITF 08-1, “Revenue Arrangements with Multiple
Deliverables”) often included services for which sufficient objective and reliable evidence of fair value did not
exist. In these situations, the deliverables were combined and recognized as a single unit of accounting based on
the proportional performance for the combined unit. For pre-2011 arrangements that have not expired, have not
been materially modified or amended, or terminated, the Company continues to recognize revenue in
accordance with these policies in the accompanying financial statements. Beginning in 2011, services in new or
materially modified arrangements of this nature were divided into separate units of accounting and revenue is
now allocated to each unit of accounting based on the relative selling price method as disclosed above. As the
services in the pre-2011 arrangements are generally delivered over the same term with consistent patterns of
performance, there is no difference in the timing or pattern of revenue recognition for each group of
arrangements (pre-2011 arrangements and those new or materially modified thereafter).

The Company’s multiple element arrangements may include one or more elements that are subject to other
topics including software revenue recognition and leasing guidance. The consideration for these multiple
element arrangements is allocated to each group of deliverables – those subject to ASC 605-25 and those
subject to other topics based on the revised guidance in ASU 2009-13. Arrangement revenue for each group of
deliverables is then further separated, allocated, and recognized based on applicable guidance.

The Company’s NetSpend revenues principally consist of a portion of the service fees and interchange revenues
received by the Issuing Banks in connection with the programs NetSpend manages. Revenue is recognized when
there is persuasive evidence of an arrangement, the relevant services have been rendered, the price is fixed or
determinable and collectability is reasonably assured.

Cardholders are charged fees in connection with NetSpend’s products and services as follows:

•

•

•

Transactions — Cardholders are typically charged a fee for each PIN and signature-based purchase
transaction made using their GPR cards, unless the cardholder is on a monthly or annual service plan, in
which case the cardholder is instead charged a monthly or annual subscription fee, as applicable.
Cardholders are also charged fees for ATM withdrawals and other transactions conducted at ATMs.

Customer Service and Maintenance-Cardholders are typically charged fees for balance inquiries made
through NetSpend’s call centers. Cardholders are also charged a monthly maintenance fee after a specified
period of inactivity.

Additional Products and Services-Cardholders are charged fees associated with additional products and
services offered in connection with certain GPR cards, including the use of overdraft features, a variety of bill
payment options, custom card designs and card-to-card transfers of funds initiated through the call centers.

• Other-Cardholders are charged fees in connection with the acquisition and reloading of the GPR cards at

retailers and the Company receives a portion of these amounts in some cases.

Revenue resulting from the service fees charged to the cardholders described above is recognized when the fees
are charged because the earnings process is substantially complete, except for revenue resulting from the initial
activation of cards and annual subscription fees. Revenue resulting from the initial activation of cards is
recognized ratably, net of commissions paid to distributors, over the average account life, which is approximately
six months for GPR cards. Revenue resulting from annual subscription fees is recognized ratably over the annual
period to which the fees relate.

Revenues also include fees charged in connection with program management and processing services the
Company provides for private-label programs. Revenue resulting from these fees is recognized when the
Company has fulfilled its obligations under the underlying service agreements.

49

NetSpend earns revenues from a portion of the interchange fees remitted by merchants when cardholders make
purchases using their GPR cards. Subject to applicable law, interchange fees are fixed by the card associations
and network organizations (Networks). Interchange revenues are recognized net of sponsorship, licensing and
processing fees charged by the Networks for services they provide in processing purchase transactions routed
through them. Interchange revenue is recognized during the period that the purchase transactions occur. Also
included in interchange revenue are fees earned from branding agreements with the Networks.

In regards to taxes assessed by a governmental authority imposed directly on a revenue producing transaction,
the Company reports its revenues on a net basis.

REIMBURSABLE ITEMS: Reimbursable items consist of out-of-pocket expenses which are reimbursed by the
Company’s clients. These expenses consist primarily of postage, access fees and third party software.

SHARE-BASED COMPENSATION: GAAP establishes standards for the accounting for transactions in which an
entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity
incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity
instruments or that may be settled by the issuance of those equity instruments. A public entity must measure the
cost of employee services received in exchange for an award of equity instruments based on the grant-date fair
value of the award (with limited exceptions). That cost will be recognized over the period during which an
employee is required to provide service in exchange for the award.

The Company recognizes compensation costs for the nonvested portion of outstanding share-based
compensation granted in the form of stock options based on the grant-date fair value of those awards calculated
under the provisions of GAAP. Share-based compensation expenses include the impact of expensing the fair
value of stock options, as well as expenses associated with nonvested shares.

The Company estimates forfeitures when recognizing compensation cost. The estimate of forfeitures will be
adjusted by the Company as actual forfeitures differ from its estimates, resulting in compensation cost only for
those awards that actually vest. The effect of the change in estimated forfeitures is recognized as compensation
costs in the period the change in estimate occurred. In estimating its forfeiture rate, the Company stratified its
data based upon historical experience to determine separate forfeiture rates for the different award grants. The
Company currently estimates a forfeiture rate for existing stock option grants to TSYS non-executive employees,
and a forfeiture rate for other TSYS share-based awards. Currently, TSYS estimates a forfeiture rate in the range of
0% to 10%.

The Company has issued its vested awards to directors and nonvested awards to certain employees. The market
value of the common stock at the date of issuance is recognized as compensation expense immediately for
vested awards and over the vesting period of the nonvested awards. For nonvested award grants that have pro
rata vesting, the Company recognizes compensation expense using the straight-line method over the vesting
period of the award.

LEASES: The Company is obligated under noncancelable leases for computer equipment and facilities. As
these leases expire, they will be evaluated and renewed or replaced by similar leases based on need. A lease is
an agreement conveying the right to use property, plant or equipment (land and/or depreciable assets) usually
for a stated period of time. For purposes of applying the accounting and reporting standards, leases are
classified from the standpoint of the lessee as capital or operating leases.

Rental payments on operating leases are charged to expense over the lease term. If rental payments are not
made on a straight-line basis, rental expense nevertheless shall be recognized on a straight-line basis unless
another systematic and rational basis is more representative of the time pattern in which use benefit is derived
from the leased property, in which case that basis shall be used.

Certain of the Company’s operating leases are for office space. The Company will make various alterations
(leasehold improvements) to the office space and capitalize these costs as part of property and equipment.
Leasehold improvements are amortized on a straight-line basis over the useful life of the improvement or the
term of the lease, whichever is shorter.

50

ADVERTISING: Advertising costs are expensed as incurred or the first time the advertising takes place except
for direct-response advertising and television advertising production costs. Direct-response advertising consists
of commission paid to affiliate marketers for the new funded customer accounts generated by them.
Direct-response advertising costs are capitalized and amortized over the average life of the new accounts, which
is approximately one year. Television advertising production costs consist of the costs of developing and filming
television ads. Television advertising production costs are capitalized when the production services are received
and expensed in the period when the advertising first takes place. Advertising expense for 2014, 2013 and 2012
was $5.7 million, $1.3 million and $1.0 million, respectively.

Income taxes reflected in TSYS’ consolidated financial statements are computed based on

INCOME TAXES:
the taxable income of TSYS and its affiliated subsidiaries. A consolidated U.S. federal income tax return is filed for
TSYS and its majority- owned U.S. subsidiaries. Additionally, income tax returns are also filed in states where
TSYS and its subsidiaries have filing obligations and in foreign jurisdictions where TSYS has a foreign affiliate.

The Company accounts for income taxes in accordance with the asset and liability method. 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 basis and operating
loss and tax credit carry forwards. Deferred 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. Reserves against the carrying value of a deferred tax asset are established when necessary to reflect the
decreased likelihood of realization of a deferred asset in the future. 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.

Income tax provisions require the use of management judgments, which are subject to challenge by various
taxing authorities. Contingency reserves are periodically established where the amount of the contingency can be
reasonably determined and is likely to occur. Reductions in contingency reserves are recognized when tax
disputes are settled or examination periods lapse.

Significant estimates used in accounting for income taxes relate to the determination of taxable income, the
determination of temporary differences between book and tax basis, as well as estimates on the realizability of
tax credits and net operating losses.

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax
expense in the Consolidated Statements of Income.

NONCONTROLLING INTEREST: Noncontrolling interest in earnings of subsidiaries represents the minority
shareholders’ share of the net income or loss of TSYS Managed Services EMEA Ltd. (TSYS Managed Services) and
CPAY. The noncontrolling interest in the Consolidated Balance Sheet reflects the original investment by these
shareholders in TSYS Managed Services and CPAY, their proportional share of the earnings or losses and their
proportional share of net gains or losses resulting from the currency translation of assets and liabilities of TSYS
Managed Services and CPAY. TSYS has adopted the accounting policy to recognize gains or losses on equity
transactions of a subsidiary as a capital transaction.

EARNINGS PER SHARE: Unvested share-based payment awards that contain nonforfeitable rights to dividends
or dividend equivalents are “participating securities” as defined by GAAP, and therefore should be included in
EPS using the two-class method.

The two-class method is an earnings allocation method for computing EPS when an entity’s capital structure
includes two or more classes of common stock or common stock and participating securities. It determines EPS
based on dividends declared on common stock and participating securities and participation rights of
participating securities in any undistributed earnings.

Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding
during the period. Diluted EPS is calculated to reflect the potential dilution that would occur if stock options or
other contracts to issue common stock were exercised. Diluted EPS is calculated by dividing net income by
weighted average common and common equivalent shares outstanding. Common equivalent shares are
calculated using the treasury stock method.

51

RECLASSIFICATIONS: Certain reclassifications have been made to the 2013 and 2012 financial statements to
conform to the presentation adopted in 2014.

Note 2 Discontinued Operations

In accordance with GAAP, the Company determined its Japan-based businesses became discontinued
operations in the first quarter of 2014.

The Company sold all of its stock of GP Network Corporation (GP Net) (representing 54% ownership of the
company) and all of its stock of TSYS Japan Godo Kaisha (TSYS Japan) (representing 100% ownership of the
company) in April 2014. Both entities were part of the International Services segment. The sale of the Company’s
stock in both of its operations in Japan was the result of management’s decision during the first quarter of 2014,
to divest non-strategic businesses and focus resources on core products and services. The Company had a gain
of $48.6 million, net of tax, related to the sales of its operations in Japan.

GP Net and TSYS Japan were not significant components of TSYS’ consolidated results.

The following table presents the main classes of assets and liabilities held for sale as of December 31, 2014 and
2013:

(in thousands)

2014

2013

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — 30,530
4,003 26,378
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,003 10,333
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The following table presents the summarized results of discontinued operations for the years ended
December 31, 2014, 2013 and 2012:

(in thousands)

2014

2013

2012

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,376 68,048 77,415

Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1

3,443

1,982

Income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

(39)

1,388

Income from operating activities of discontinued operations, net of tax . . . . . . . . . . . $

40

2,055

Gain on dispositions, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,615

—

Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,655

2,055

987

995

—

995

Income from discontinued operations, net of tax, attributable to noncontrolling

interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

999

4,198

3,864

Income (loss) from discontinued operations, net of tax, attributable to TSYS

common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $47,656

(2,143)

(2,869)

Interest allocated to discontinued operations1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

—

281

275

1

Interest expense relates to borrowings directly for use by Japan-based operations

Note 3

Fair Value Measurement

GAAP requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy
for which these assets and liabilities must be grouped, based on significant level of inputs. The three-tier fair
value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1 — Quoted prices for identical assets and liabilities in active markets.

52

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that
are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs for the asset or liability.

Goodwill is assessed annually for impairment in the second quarter of each year using fair value measurement
techniques. Specifically, goodwill impairment is determined using a two-step test. The first step of the goodwill
impairment test is used to identify potential impairment by comparing the fair value of a reporting unit (RU) with
its book value, including goodwill. If the fair value of the RU exceeds its book value, goodwill is considered not
impaired and the second step of the impairment test is unnecessary. If the book value of the RU exceeds its fair
value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if
any. The second step of the goodwill impairment test compares the implied fair value of the RU’s goodwill with
the book value of that goodwill. If the book value of the RU’s goodwill exceeds the implied fair value of that
goodwill, an impairment loss is recognized in an amount equal to that excess. The fair value of the RU is allocated
to all of the assets and liabilities of that unit as if the RU had been acquired in a business combination and the fair
value of the RU was the purchase price paid to acquire the RU.

The estimate of fair value of the Company’s RUs is determined using various valuation techniques, including
using an equally weighted combination of the market approach and the income approach. The market approach,
which contains Level 2 inputs, utilizes readily available market valuation multiples to estimate fair value. The
income approach is a valuation technique that utilizes the discounted cash flow (DCF) method, which includes
Level 3 inputs. Under the DCF method, the fair value of the RU reflects the present value of the projected
earnings that will be generated by each RU after taking into account the revenues and expenses associated with
the asset, the relative risk that the cash flows will occur, the contribution of other assets, and an appropriate
discount rate to reflect the value of the invested capital. Cash flows are estimated for future periods based upon
historical data and projections by management.

As of December 31, 2014, the Company had recorded goodwill in the amount of $1.5 billion. The Company
performed its annual impairment test of its goodwill balances as of May 31, 2014, and this test did not indicate
any impairment. The fair value of the RUs substantially exceeds the carrying value. Refer to Note 7 for more
information regarding goodwill.

The fair value of the Company’s long-term debt and obligations under capital leases is not significantly different
from its carrying value.

Note 4 Relationships with Affiliated Companies

During December 2014, TSYS Managed Services obtained a £900,000, or approximately $1.4 million, pound-
denominated term loan bearing interest at a rate of LIBOR plus two percent. The loan matures in December
2017, and has monthly interest payments. The lender in this transaction is Merchants Limited, who has a
noncontrolling interest in TSYS Managed Services. Refer to Note 13 for more information regarding this loan.

The Company provides electronic payment processing and other services to the Company’s equity investments,
TSYS de México and CUP Data.

The foregoing related party arrangements and services are performed under contracts that are similar to its
contracts with unrelated third party customers. The Company believes the terms and conditions of transactions
between the Company and these related parties are comparable to those which could have been obtained in
transactions with unaffiliated parties.

Through its related party transactions, TSYS generates accounts receivable and liability accounts with TSYS de
México and CUP Data.

53

The Company had the following balances with related parties as of December 31, 2014 and 2013:

(in thousands)

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Account payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2014

$19
12

2013

7
12

The table below details revenues derived from affiliated companies for the years ended December 31, 2014,
2013 and 2012:

(in thousands)

Total revenues:

CUP Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TSYS de México . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Processing support fees paid to TSYS de Mexico1 . . . . . . . . . . . . . . . . . . . . . . . .

2014

2013

2012

$232
78

$310

$148

229
68

297

148

172
72

244

186

1

The Company and TSYS de México are parties to an agreement where TSYS de México provides processing support to the
Company.

Note 5 Cash and Cash Equivalents

Cash and cash equivalent balances as of December 31, 2014 and 2013 are summarized as follows:

(in thousands)

2014

2013

Cash and cash equivalents in domestic accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $225,396 191,460
56,240
Cash and cash equivalents in foreign accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63,787

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $289,183 247,700

The Company maintains operating accounts outside the United States denominated in currencies other than the
U.S. dollar. All amounts in domestic accounts are denominated in U.S. dollars.

Note 6 Prepaid Expenses and Other Current Assets

Significant components of prepaid expenses and other current assets as of December 31, 2014 and 2013 are
summarized as follows:

(in thousands)

Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2014

2013

$35,334
14,340
49,300

$98,974

41,905
12,142
41,062

95,109

Note 7 Goodwill

In 2013, the Company allocated $1.0 billion to goodwill due to the acquisition of NetSpend. In 2014, the
Company adjusted the NetSpend purchase price allocation to add an additional $8.5 million for settlement of the
dissenting shareholder lawsuit and adjustments to deferred taxes.

54

The gross amount and accumulated impairment losses of goodwill as of December 31, 2014 and 2013 are as
follows:

(in thousands)

North America
Services

International
Services

Merchant
Services

NetSpend

Consolidated

Gross amount . . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . . .

$ 70,796
(182)

31,681
(1,605)

415,973
(2,225)

1,032,959
—

$1,551,409
(4,012)

Goodwill, net . . . . . . . . . . . . . . . . . . . . .

$ 70,614

30,076

413,748

1,032,959

$1,547,397

2014

North America
Services

International
Services

Merchant
Services

NetSpend

Consolidated

2013

Gross amount . . . . . . . . . . . . . . . . . . . . . .
Accumulated impairment losses . . . . . . .

$70,796
—

Goodwill, net . . . . . . . . . . . . . . . . . . . . .

$70,796

34,201
—

34,201

415,973
(2,225)

1,024,434
—

$1,545,404
(2,225)

413,748

1,024,434

$1,543,179

The changes in the carrying amount of goodwill as of December 31, 2014 and 2013 are as follows:

(in thousands)

North America
Services

International
Services

Merchant
Services

NetSpend

Consolidated

Balance as of December 31, 2012 . . . . . .
NetSpend purchase price allocation . . . .
ProPay purchase price allocation . . . . . . .
Currency translation adjustments . . . . . . .

Balance as of December 31, 2013 . . . . . .
Disposal of GP Net . . . . . . . . . . . . . . . . .
NetSpend purchase price allocation . . .
Currency translation adjustments . . . . .

$ 70,796
—
—
—

$ 70,796
(182)
—
—

33,944
—
—
257

34,201
(1,605)
—
(2,520)

413,604
—
144
—

413,748
—
—
—

— $

1,024,434
—
—

1,024,434
—
8,525
—

518,344
1,024,434
144
257

$ 1,543,179
(1,787)
8,525
(2,520)

Balance as of December 31, 2014 . . . .

$70,614

$30,076

$413,748

$1,032,959

$1,547,397

Refer to Note 24 for more information on acquisitions.

Note 8 Other Intangible Assets, net

In 2014, the changes related to other gross intangible assets were related to foreign currency translation. In 2013,
TSYS allocated $401.6 million to other intangible assets due to the acquisition of NetSpend. Refer to Note 24 for
more information on acquisitions.

Significant components of other intangible assets as of December 31, 2014 and 2013 are summarized as follows:

(in thousands)

2014

Accumulated
Amortization

Gross

Channel relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 318,600
167,140
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,480
Trade name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,000
Database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,940
Covenants-not-to-compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,000
Trade association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
875
Favorable lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(60,079)
(87,201)
(15,680)
(8,400)
(5,551)
(4,750)
(267)

Net

$258,521
79,939
30,800
19,600
9,389
5,250
608

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 586,035

(181,928)

$404,107

55

(in thousands)

2013

Accumulated
Amortization

Gross

Channel relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $318,600
167,871
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,561
Trade name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,000
Database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,940
Covenants-not-to-compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,000
Trade association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
875
Favorable lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(20,261)
(69,114)
(6,527)
(2,800)
(2,887)
(3,750)
(89)

Net

$298,339
98,757
40,034
25,200
12,053
6,250
786

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $586,847

(105,428)

$481,419

Amortization related to other intangible assets, which is recorded in selling, general and administrative expenses,
was $77.3 million, $50.0 million and $16.6 million for 2014, 2013 and 2012, respectively.

The weighted average useful life for each component of other intangible assets, and in total, as of December 31,
2014 is as follows:

Weighted
Average
Amortization
Period (Yrs)

Channel relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Covenants-not-to-compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Favorable Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.0
8.2
4.9
5.0
5.3
10.0
4.9

7.6

Estimated future amortization expense of other intangible assets as of December 31, 2014 for the next five years
is:

(in thousands)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75,770
75,213
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74,823
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60,166
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,870
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56

Note 9 Computer Software, net

Computer software as of December 31, 2014 and 2013 is summarized as follows:

(in thousands)

2014

2013

Licensed computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $435,701 393,947
376,026 337,993
Software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
167,687 168,336
Acquisition technology intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

979,414 900,276

Less accumulated amortization:

Licensed computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition technology intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

243,866 207,496
275,512 254,046
74,854

93,888

Total accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

613,266 536,396

Computer software, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $366,148 363,880

The Company allocated approximately $78.7 million to acquisition technology intangibles during 2013 due to the
acquisition of NetSpend. Refer to Note 24 for more information on this acquisition.

Amortization expense includes amounts for computer software acquired under capital lease. The Company had
the following amortization expense related to computer software for the years ended December 31, 2014, 2013
and 2012:

(in thousands)

Amortization expense related to:

2014

2013

2012

Licensed computer software costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition technology intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$36,775
25,248
19,683

33,511
21,430
15,855

33,393
23,044
9,712

The company held the following computer software under capital lease as of as of December 31, 2014 and 2013:

(in thousands)

2014

Gross

Accumulated
Amortization

Net

Licensed computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,156

(4,816)

$12,340

(in thousands)

2013

Accumulated
Amortization

Net

Gross

Licensed computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,175

(2,031)

$11,144

The weighted average useful life for each component of computer software, and in total, as of December 31,
2014, is as follows:

Licensed computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition technology intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted
Average
Amortization
Period (Yrs)

5.2
5.8
6.8

5.7

57

Estimated future amortization expense of licensed computer software, software development costs and
acquisition technology intangibles as of December 31, 2014 for the next five years is:

(in thousands)

Licensed
Computer
Software

Software
Development
Costs

Acquisition
Technology
Intangibles

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$41,956
31,960
21,326
11,017
6,097

25,334
18,919
13,770
7,689
1,568

16,670
15,202
13,718
11,243
11,243

Note 10 Property and Equipment, net

Property and equipment balances as of December 31, 2014 and 2013 are as follows:

(in thousands)

2014

2013

Computer and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $317,862 261,937
243,211 241,675
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
135,741 129,799
Furniture and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,021
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
989
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,763
204

Total property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

713,781 651,421
423,196 391,453

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $290,585 259,968

Depreciation and amortization expense includes amounts for computer equipment, furniture, and other
equipment acquired under capital lease. Depreciation and amortization expense related to property and
equipment was $53.5 million, $45.5 million and $43.4 million for the years ended December 31, 2014, 2013 and
2012, respectively.

The company held the following property and equipment under capital lease as of December 31, 2014 and 2013:

(in thousands)

2014

Gross

Accumulated
Amortization

Net

Computer and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,193
5,374
Furniture and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(29,816)
(1,666)

$ 8,377
3,708

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,567

(31,482)

$12,085

(in thousands)

2013

Accumulated
Amortization

Gross

Computer and other equipment
Furniture and other equipment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$35,335
2,382

(22,101)
(931)

Net

$13,234
1,451

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$37,717

(23,032)

$14,685

58

Note 11 Contract Acquisition Costs, net

Significant components of contract acquisition costs as of December 31, 2014 and 2013 are summarized as
follows:

(in thousands)

2014

2013

Conversion costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $159,339 112,177
72,651
Payments for processing rights, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76,966

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $236,305 184,828

Amortization expense related to contract acquisition cost for the years ended December 31, 2014, 2013 and
2012 are as follows:

(in thousands)

Amortization expense related to:

2014

2013

2012

Conversion costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for processing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17,816
16,209

19,515
13,099

24,014
13,290

The weighted average useful life for each component of contract acquisition costs, and in total, as of
December 31, 2014 is as follows:

Payments for processing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted
Average
Amortization
Period (Yrs)

14.5
12.3

13.4

Estimated future amortization expense of conversion costs and payments for processing rights as of
December 31, 2014 for the next five years is:

(in thousands)

Conversion
Costs

Payments for
Processing Rights

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$30,060
28,598
26,210
23,687
20,715

16,897
13,797
11,691
10,229
8,322

Note 12 Equity Investments

The Company has an equity investment in TSYS de México and records its 49% ownership using the equity
method of accounting. The operation prints statements and provides card-issuing support services to the equity
investment clients and others.

The Company has an equity investment in CUP Data and records its 44.56% ownership using the equity method
of accounting. CUP Data is sanctioned by the People’s Bank of China, China’s central bank, and has become one
of the world’s largest and fastest-growing payments networks. CUP Data currently provides transaction
processing, disaster recovery and other services for banks and bankcard issuers in China.

TSYS’ equity investments are recorded initially at cost and subsequently adjusted for equity in earnings, cash
contributions and distributions, and foreign currency translation adjustments. TSYS believes the carrying value
approximates the underlying assets of the equity investments.

59

TSYS’ equity in income of equity investments (net of tax) for the years ended December 31, 2014, 2013 and 2012
was $17.6 million, $13.0 million and $10.2 million, respectively.

A summary of TSYS’ equity investments as of December 31, 2014 and 2013 is as follows:

(in thousands)

CUP Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TSYS de México . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2014

$ 92,738
7,730

$100,468

2013

86,549
7,584

94,133

Note 13 Long-term Borrowings and Capital Lease Obligations

Long-term debt as of December 31, 2014 and 2013 consists of:

(in thousands)

2014

2013

$550,000,000 2.375% Senior Notes due June 1, 2018 (5 year tranche), net of

discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 549,889

549,858

$550,000,000 3.75% Senior Notes due June 1, 2023 (10 year tranche), net of

discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

546,379

546,027

LIBOR + 1.125%, unsecured term loan, due April 8, 2018, with quarterly principal and

interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

185,000

195,000

LIBOR + 1.125%, unsecured term loan, due September 10, 2017, with quarterly

principal and interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

131,250

138,750

1.50% note payable, due September 30, 2016, with monthly interest and principal

payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,886

—

1.50% note payable, due December 31, 2015, with monthly interest and principal

payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,075

20,000

1.50% note payable, due January 31, 2016, with monthly interest and principal

payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,332

8,269

1.50% note payable, due July 31, 2015, with monthly interest and principal

payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,709

4,604

LIBOR + 2.0%, unsecured term loan, due December 7, 2017, with monthly interest

payments and principal paid at maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,396

—

Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,441,916 1,462,508
34,257

43,784

Noncurrent portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,398,132 1,428,251

During December 2014, TSYS Managed Services obtained a £900,000, or approximately $1.4 million, pound-
denominated term loan bearing interest at a rate of LIBOR plus two percent. The loan matures in December
2017, and has monthly interest payments. The lender in this transaction is Merchants Limited, who has a
noncontrolling interest in TSYS Managed Services. The balance as of December 31, 2014 was $1.4 million.

In September 2014, the Company entered into a $13.6 million financing agreement for perpetual software
licenses. The balance as of December 31, 2014 was $11.9 million.

In December 2013, the Company entered into a $20.0 million financing arrangement to purchase additional
software licenses. The balance as of December 31, 2014, was $10.1 million.

In February 2013, the Company and its wholly-owned merger subsidiary entered into an Agreement and Plan of
Merger (as amended on May 29, 2013, the “Merger Agreement”) with NetSpend, pursuant to which, upon the
terms and subject to the conditions set forth in the Merger Agreement, the merger subsidiary merged with and
into NetSpend on July 1, 2013, with NetSpend continuing as the surviving corporation and as a wholly-owned
subsidiary of TSYS (the “Merger”). Refer to Note 24 for more information about the acquisition.

60

TSYS also acquired additional mainframe software licenses to increase capacity in 2012. The Company entered
into an $8.6 million and an $11.9 million financing agreement in June and December of 2012, respectively, to
purchase these additional software licenses. The balances as of December 31, 2014 were $1.7 million and
$4.3 million, respectively.

In addition, TSYS maintains an unsecured credit agreement with Columbus Bank and Trust. 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 2014, 2013 or 2012.

Acquisition-Related Borrowings

In April 2013, the Company entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase
Bank, N.A., as Administrative Agent, The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Syndication Agent, Regions Bank
and U.S. Bank National Association, as Documentation Agents, and other lenders party thereto, with J.P. Morgan
Securities LLC, The Bank of Tokyo Mitsubishi UFJ, Ltd., Regions Capital Markets, and U.S. Bank National
Association as joint lead arrangers and joint bookrunners. The Credit Agreement provides for a five-year term
loan to the Company in the amount of $200.0 million (the “Term Loan”) and bears interest at LIBOR plus 1.125%,
which are subject to adjustment based on changes in the Company’s credit ratings, with margins ranging from
1.00% to 1.75%. As of December 31, 2014, the outstanding balance on the Credit Agreement was $185.0
million.

Concurrently with entering into the Merger Agreement, TSYS obtained commitments for a $1.2 billion 364-day
bridge term loan facility from JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and The Bank of Tokyo-
Mitsubishi UFJ, Ltd. Thereafter, JPMorgan Chase Bank, N.A. and The Bank of Tokyo-Mitsubishi UFJ, Ltd.
assigned portions of their commitments to other bridge facility lenders. The Company paid fees in 2013
associated with the bridge term loan of approximately $5.9 million. The total commitments under the bridge
term loan facility were eliminated in May 2013 after the issuance of the Notes described below.

In May 2013, the Company closed its issuance (the “Transaction”) of $550.0 million aggregate principal amount
of 2.375% Senior Notes due 2018 and $550.0 million aggregate principal amount of 3.750% Senior Notes due
2023 (collectively, the “Notes”) pursuant to an Underwriting Agreement with J.P. Morgan Securities LLC, as
representative of certain underwriters (the “Underwriters”), whereby the Company agreed to sell and the
Underwriters agreed to purchase the Notes from the Company, subject to and upon the terms and conditions set
forth in the Underwriting Agreement. The interest on the Notes are payable semiannually. The Company paid
fees in 2013 associated with the issuance of these Notes of approximately $8.9 million and recorded discounts of
approximately $4.3 million that are being amortized over the life of the Notes. The Company used the net
proceeds of the Transaction to pay a portion of the $1.4 billion purchase price of the Company’s acquisition of
NetSpend and related fees and expenses. The Notes were issued pursuant to an Indenture dated as of May 22,
2013 between the Company and Wells Fargo Bank, National Association, as trustee. The Company received a
rating from Moody’s of Baa3 and a rating from Standard & Poor’s of BBB+ in connection with the Senior Notes at
the time of issuance.

The Notes also contain various affirmative and negative covenants, including those that create limitations on the
Company’s:

•

creation of liens;

• merging or selling assets unless certain conditions are met; and

•

entering into sale/leaseback transactions.

The Notes also contain a provision that requires the Company to repurchase all or any portion of a holder’s
Notes, at the holder’s option, if a Change in Control Repurchase Event occurs.

Amendment to Existing Credit Agreement

In September 2012, the Company entered into a credit agreement with JPMorgan Chase Bank, N.A., as
Administrative Agent, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Regions Bank and U.S. Bank National Association,
as Syndication Agents, and the other lenders named therein, with J.P. Morgan Securities LLC, The Bank of Tokyo-
Mitsubishi UFJ, Ltd., Regions Capital Markets and U.S. Bank National Association, as joint lead arrangers and

61

joint bookrunners (the “Existing Credit Agreement”). The Existing Credit Agreement provides for a $350.0 million
five-year unsecured revolving credit facility (which may be increased by up to an additional $350.0 million under
certain circumstances) and includes a $50.0 million subfacility for the issuance of standby letters of credit and a
$50.0 million subfacility for swingline loans. The Existing Credit Agreement also provides for a $150 million five-
year unsecured term loan, which was fully funded on the closing of the Existing Credit Agreement. As of
December 31, 2014, the outstanding balance on the Existing Credit Agreement was $131.3 million.

In April 2013, the Company entered into the First Amendment to the Existing Credit Agreement (the “Revolver”)
in order to conform certain provisions of the Existing Credit Agreement to the Credit Agreement for the Term
Loan. On July 1, 2013, an additional $100.0 million was used as funding in the NetSpend Merger. As of
December 31, 2014, there was no outstanding balance on the Revolver.

The Credit Agreement for the aforementioned loan provided for a $168.0 million unsecured five year term loan
to the Company and a $252.0 million five year unsecured revolving credit facility. The principal balance of loans
outstanding under the credit facility bears interest at a rate of LIBOR plus an applicable margin of 0.60%. The
applicable margin could vary within a range from 0.27% to 0.725% depending on changes in the Company’s
corporate credit rating. Interest was paid on the last date of each interest period; however, if the period
exceeded three months, interest was paid every three months after the beginning of such interest period. In
addition, the Company paid each lender a fee in respect of the amount of such lender’s commitment under the
revolving credit facility (regardless of usage), ranging from 0.08% to 0.15% (currently 0.10%) depending on the
Company’s corporate credit rating.

The Company was not required to make any scheduled principal payments other than payment of the entire
outstanding balance on December 21, 2012. The Company was able to prepay the revolving credit facility and
the term loan in whole or in part at any time without premium or penalty, subject to reimbursement of the
lenders’ customary breakage and redeployment costs in the case of prepayment of LIBOR borrowings. The
Credit Agreement included covenants requiring the Company to maintain certain minimum financial ratios. The
Company did not use the revolving credit facility in 2014.

Required annual principal payments on long-term debt for the five years subsequent to December 31, 2014 are
summarized as follows:

(in thousands)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,784
35,468
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
126,396
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
690,000
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Capital lease obligations as of December 31, 2014 and 2013 consist of:

(in thousands)

2014

2013

Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,101 30,162
7,127 22,662
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Noncurrent portion of capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,974

7,500

62

The future minimum lease payments under capital leases as of December 31, 2014 are summarized as follows:

(in thousands)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,355
3,554
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,627
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
987
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,586
485

Principal minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,101

Note 14 Other Current Liabilities

Significant components of other current liabilities as of December 31, 2014 and 2013 are summarized as follows:

(in thousands)

2014

2013

Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,773
23,617
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,006
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dissenting shareholder liability1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36,408
23,265
19,508
— 25,723
54,266

70,409

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $154,805 159,170

1 Refer to Note 24 on acquisitions for additional information.

Note 15 Income Taxes

The provision for income taxes includes income taxes currently payable and those deferred because of temporary
differences between the financial statement carrying amounts and tax bases of assets and liabilities.

The components of income tax expense included in the Consolidated Statements of Income were as follows:

(in thousands)

Current income tax expense:

Years Ended December 31,

2014

2013

2012

Federal
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $126,203
5,161
7,694

74,327
2,949
6,822

102,953
2,572
8,450

Total current income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

139,058

84,098

113,975

Deferred income tax expense (benefit):

Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,623)
(2,039)
(3,635)

(9,297)

27,447
(55)
(509)

26,883

1,395
411
(1,665)

141

Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $129,761

110,981

114,116

63

(in thousands)

Components of income before income tax expense:

Years Ended December 31,

2014

2013

2012

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$369,888
23,041

328,052
24,424

319,709
33,164

Total income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$392,929

352,476

352,873

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, noncontrolling interest and equity in income of equity investments as a
result of the following:

(in thousands)

Computed “expected” income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in income tax expense resulting from:

International tax rate differential and equity income . . . . . . . . . . . . . . . . . .
State income tax expense, net of federal income tax effect . . . . . . . . . . . .
Increase (decrease) in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deduction for domestic production activities . . . . . . . . . . . . . . . . . . . . . . . .
Permanent differences and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended December 31,

2014

2013

2012

$137,525

123,367

123,505

6,541
4,823
(4,550)
(3,459)
(8,750)
(2,369)

1,870
3,408
1,715
(6,141)
(8,225)
(5,013)

1,870
2,101
1,239
(3,787)
(5,727)
(5,085)

Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$129,761

110,981

114,116

Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities
that give rise to significant portions of the net deferred tax liability as of December 31, 2014 and 2013 relate to
the following:

(in thousands)

Deferred income tax assets:

As of December 31,

2014

2013

Net operating loss and income tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,978
1,328
Allowances for doubtful accounts and billing adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
31,240
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,192
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24,079
728
20,111
50,960

Total deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less valuation allowance for deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .

113,738
(18,963)

95,878
(14,691)

Net deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

94,775

81,187

Deferred income tax liabilities:

Excess tax over financial statement depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase accounting adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(53,527)
(67,703)
(136,701)
(7,642)
(18,830)

(45,727)
(55,074)
(168,689)
(10,291)
(12,003)

Total deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(284,403)

(291,784)

Net deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(189,628)

(210,597)

Total net deferred tax assets (liabilities):

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,190
(204,818)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent

14,158
(224,755)

Net deferred income tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(189,628)

(210,597)

64

As of December 31, 2014, TSYS had recognized deferred tax assets from net operating losses and federal and
state income tax credit carryforwards of $5.9 million and $26.1 million, respectively. As of December 31, 2013,
TSYS had recognized deferred tax assets from net operating losses, capital losses and federal and state income
tax credit carry forwards of $11.4 million, $1.9 million and $10.8 million, respectively.

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than
not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of
deferred income tax assets is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

Management believes it is more likely than not that TSYS will realize the benefits of these deductible differences,
net of existing valuation allowances. The valuation allowance for deferred tax assets was $19.0 million and $14.7
million as of December 31, 2014 and 2013, respectively. The increase in the valuation allowance for deferred
income tax assets was $4.3 million for 2014. The increase in the valuation allowance for deferred income tax
assets was $1.7 million for 2013. The increase relates to tax credits which, more likely than not, will not be
realized in later years.

TSYS has adopted the permanent reinvestment exception under GAAP, with respect to future earnings of certain
foreign subsidiaries. As a result, TSYS considers foreign earnings related to these foreign operations to be
permanently reinvested. No provision for U.S. federal and state incomes taxes has been made in the
consolidated financial statements for those non-U.S. subsidiaries whose earnings are considered to be reinvested.
The amount of undistributed earnings considered to be “reinvested” which may be subject to tax upon
distribution was approximately $90.3 million as of December 31, 2014. Although TSYS does not intend to
repatriate these earnings, a distribution of these non-U.S. earnings in the form of dividends, or otherwise, would
subject the Company to both U.S. federal and state income taxes, as adjusted for non-U.S. tax credits, and
withholding taxes payable to the various non-U.S. countries. Determination of the amount of any unrecognized
deferred income tax liability on these undistributed earnings is not practicable.

TSYS is the parent of an affiliated group that files a consolidated U.S. federal income tax return and most state
and foreign income tax returns on a separate entity basis. In the normal course of business, the Company is
subject to examinations by these taxing authorities unless statutory examination periods lapse. TSYS is no longer
subject to U.S. federal income tax examinations for years before 2011 and with few exceptions, the Company is
no longer subject to income tax examinations from state and local or foreign tax authorities for years before
2005. There are currently federal income tax examinations in progress for the years 2009 through 2012 for a
subsidiary which was acquired in 2013. Additionally, a number of tax examinations are in progress by the relevant
state tax authorities. Although TSYS is unable to determine the ultimate outcome of these examinations, TSYS
believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate.

GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition,
measurement and disclosure of a tax position taken or expected to be taken in a tax return. During the year
ended December 31, 2014, TSYS increased its liability for prior year uncertain income tax positions as a discrete
item by a net amount of approximately $4.0 million (net of the federal tax effect). The Company is not able to
reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time,
the Company does not expect any significant changes related to these obligations within the next twelve months.

65

A reconciliation of the beginning and ending amount of unrecognized tax liabilities is as follows 1:

(in millions)

Year Ended
December 31, 2014

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current activity:

Additions based on tax positions related to current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net, current activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2.7

0.9
3.5
(0.4)

4.0

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6.7

1

Unrecognized state tax liabilities are not adjusted for the federal tax impact

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax
expense in the Consolidated Statements of Income. Gross accrued interest and penalties on unrecognized tax
benefits totaled $0.3 million and $0.3 million as of December 31, 2014 and December 31, 2013, respectively. The
total amounts of unrecognized income tax benefits as of December 31, 2014 and December 31, 2013 that, if
recognized, would affect the effective tax rates are $6.5 million and $2.8 million (net of the federal benefit on
state tax issues), respectively, which includes interest and penalties of $0.2 million and $0.2 million, respectively.

Note 16 Commitments and Contingencies

LEASE COMMITMENTS:
and facilities.

TSYS is obligated under noncancelable operating leases for computer equipment

The future minimum lease payments under noncancelable operating leases with remaining terms greater than
one year for the next five years and thereafter and in the aggregate as of December 31, 2014, are as follows:

(in thousands)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $118,321
121,745
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,741
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,184
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,693
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,088
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total future minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $382,772

The majority of computer equipment lease commitments come with a renewal option or an option to terminate
the lease. These lease commitments may be replaced with new leases which allow the Company to continually
update its computer equipment. Total rental expense under all operating leases in 2014, 2013 and 2012 was
$105.2 million, $93.4 million and $95.2 million, respectively.

In the normal course of its business, the Company maintains long-term

CONTRACTUAL COMMITMENTS:
processing contracts with its clients. 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 clients, the Company may incur penalties and
certain clients 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 position, results of operations or cash flows.

66

CONTINGENCIES:

Legal Proceedings — General

The Company is subject to various legal proceedings and claims and is also subject to information requests,
inquiries and investigations arising out of the ordinary conduct of its business. The Company establishes reserves
for litigation and similar matters when those matters present loss contingencies that TSYS determines to be both
probable and reasonably estimable in accordance with GAAP. In the opinion of management, based on current
knowledge and in part upon the advice of legal counsel, all matters not specifically discussed below are believed
to be adequately covered by insurance, or, if not covered, the possibility of losses from such matters are believed
to be remote or such matters are of such kind or involve such amounts that would not have a material adverse
effect on the financial position, results of operations or cash flows of the Company if disposed of unfavorably.

Telexfree Matter

ProPay, Inc. (“ProPay”), a subsidiary of the Company, has been named as one of a number of defendants
(including other merchant processors) in several purported class action lawsuits relating to the activities of
Telexfree, Inc. and its affiliates and principals. Telexfree is a former merchant customer of ProPay. With regard to
Telexfree, each purported class action lawsuit generally alleges that Telexfree engaged in an improper multi-tier
marketing scheme involving voice-over Internet protocol telephone services. The plaintiffs in each of the
purported class action complaints generally allege that the various merchant processor defendants, including
ProPay, knowingly furthered the improper activities of Telexfree with knowledge that Telexfree did not have
legitimate business operations. Telexfree filed for bankruptcy protection in Nevada. The bankruptcy was
subsequently transferred to the Massachusetts Bankruptcy Court.

Specifically, ProPay has been named as one of a number of defendants (including other merchant processors) in
each of the following purported class action complaints relating to Telexfree: (i) Waldermara Martin, et al. v.
TelexFree, Inc., et al. (Case No. BK-S-14-12524-ABL) filed on May 3, 2014 in the United States Bankruptcy Court
District of Nevada, (ii) Anthony Cellucci, et al. v. TelexFree, Inc., et. al. (Case No. 4:14-BK-40987) filed on May 15,
2014 in the United States Bankruptcy Court District of Massachusetts, (iii) Maduako C. Ferguson Sr., et al. v.
Telexelectric, LLLP, et. al (Case No. 5:14-CV-00316-D) filed on June 5, 2014 in the United States District Court of
North Carolina, (iv) Todd Cook v. TelexElectric LLLP et al. (Case No. 2:14-CV-00134), filed on June 24, 2014 in
the United States District Court for the Northern District of Georgia, (v) Felicia Guevara v. James M. Merrill et al.,
CA No. 1:14-cv-22405-DPG), filed on June 27, 2014 in the United State District Court for the Southern District of
Florida, (vi) Reverend Jeremiah Githere, et al. v. TelexElectric LLLP et al. (Case No. 1:14-CV-12825-GAO), filed on
June 30, 2014 in the United States District Court for the District of Massachusetts , and (vii) Paulo Eduardo Ferrari
et al. v. Telexfree, Inc. et al. (Case No. 14-04080), filed on August 20, 2014 in the United States Bankruptcy Court
for the District of Massachusetts (together, the “Actions”). On October 21, 2014, all of the above-referenced
lawsuits, with the exception of the Ferrari case, were transferred to the United States District Court for the District
of Massachusetts by the Judicial Panel on Multidistrict Litigation. ProPay has not yet been served with the Ferrari
complaint. The United States District Court for the District of Massachusetts has entered an order appointing lead
counsel for the plaintiffs, but has not yet formally consolidated the Actions, and ProPay has not yet been required
to respond to any of the complaints.

In December 2014, ProPay was also named as a defendant in another putative class action relating to TelexFree
filed in the United States District Court for the Southern District of New York, , Abdelgadir v. TelexFree, Inc., et
al., Case No. 14-CV-9857. The Abdelgadir complaint makes allegations that are substantially the same as those
contained in the other putative class actions described above. ProPay has not been served with the Abdelgadir
complaint.

ProPay has also received various subpoenas, a seizure warrant and other inquiries requesting information
regarding Telexfree from (i) the Commonwealth of Massachusetts, Securities Division, (ii) United States Securities
and Exchange Commission, (iii) US Immigration and Customs Enforcement, and (iv) a “Notice of Potential Claim
and Demand to Preserve Evidence” from the bankruptcy Trustee of the Chapter 11 entities of Telexfree, Inc.,
Telexfree, LLC and Telexfree Financial, Inc. ProPay has produced documents to the above-named governmental
entities and to the TelexFree bankruptcy Trustee pursuant to their requests. To date, none have taken any further
action with respect to ProPay. Pursuant to the seizure warrant served by the United States Attorney’s Office for

67

the District of Massachusetts, ProPay delivered all funds associated with Telexfree held for chargeback and other
purposes by ProPay to US Immigration and Customs Enforcement.

The above proceedings and actions are preliminary in nature. While the Company and ProPay intend to
vigorously defend matters arising out of the relationship of ProPay with Telexfree and believe ProPay has
substantial defenses related to these purported claims, the Company currently cannot reasonably estimate losses
attributable to these matters.

GUARANTEES AND INDEMNIFICATIONS: The Company has entered into processing and licensing
agreements with its clients that include intellectual property indemnification clauses. Under these clauses, the
Company generally agrees to indemnify its clients, subject to certain exceptions, against legal claims that TSYS’
services or systems infringe on certain third party patents, copyrights or other proprietary rights. In the event of
such a claim, the Company is generally obligated to hold the client harmless and pay for related losses, liabilities,
costs and expenses, including, without limitation, court costs and reasonable attorney’s fees. The Company has
not made any indemnification payments pursuant to these indemnification clauses.

A portion of the Company’s business is conducted through distributors that provide load and reload services to
cardholders at their locations. Members of the Company’s distribution and reload network collect cardholder
funds and remit them by electronic transfer to the Issuing Banks for deposit in the cardholder accounts. The
Company’s Issuing Banks typically receive cardholders’ funds no earlier than three business days after they are
collected by the distributor. If any distributor fails to remit cardholders’ funds to the Company’s Issuing Banks,
the Company typically reimburses the Issuing Banks for the shortfall created thereby. The Company manages the
risk associated with this process through a formalized set of credit standards, volume limits and deposit
requirements for certain distributors and by typically maintaining the right to offset any settlement shortfall
against the commissions payable to the relevant distributor. To date, the Company has not experienced any
significant losses associated with settlement failures and the Company had not recorded a settlement guarantee
liability as of December 31, 2014. As of December 31, 2014, the Company’s estimated gross settlement
exposure was $11.1 million.

GPR cardholders can incur charges in excess of the funds available in their accounts and are liable for the
resulting overdrawn account balance. Although the Company generally declines authorization attempts for
amounts that exceed the available balance in a cardholder’s account, the application of the Networks’ rules and
regulations, the timing of the settlement of transactions and the assessment of subscription, maintenance or
other fees can, among other things, result in overdrawn card accounts. The Company also provides, as a courtesy
and in its discretion, certain cardholders with a “cushion” that allows them to overdraw their card accounts by up
to $10. In addition, eligible cardholders may enroll in the Issuing Banks’ overdraft protection programs and fund
transactions that exceed the available balance in their accounts. The Company generally provides the funds used
as part of these overdraft programs (one of the Company’s issuing banks will advance the first $1.0 million on
behalf of its cardholders) and is responsible to the Issuing Banks for any losses associated with any overdrawn
account balances. As of December 31, 2014 and 2013, cardholders’ overdrawn account balances totaled
$14.0 million and $13.8 million, respectively. As of December 31, 2014 and 2013, the Company’s reserves for the
losses it estimates will arise from processing customer transactions, debit card overdrafts, chargebacks for
unauthorized card use and merchant-related chargebacks due to non-delivery of goods or services was
$6.3 million and $5.8 million, respectively.

The Company has not recorded a liability for guarantees or indemnities in the accompanying consolidated
balance sheet since the maximum amount of potential future payments under such guarantees and indemnities is
not determinable.

PRIVATE EQUITY INVESTMENTS: On May 31, 2011, the Company entered into a limited partnership
agreement in connection with its agreement to invest in an Atlanta, Georgia-based venture capital fund focused
exclusively on investing in technology-enabled financial services companies. Pursuant to the limited partnership
agreement, the Company has committed to invest up to $20 million in the fund so long as its ownership interest
in the fund does not exceed 50%. As of December 31, 2014 and 2013, the Company’s investment balance in the
fund was $9.3 million and $6.0 million, respectively. The Company recognized gains of $0.8 million, $1.0 million,
and $0.9 million due to increases in fair value in the years ended December 31, 2014, 2013 and 2012,
respectively.

68

Note 17 Employee Benefit Plans

The Company provides benefits to its employees by offering employees participation in certain defined
contribution plans. The employee benefit plans through which TSYS provided benefits to its employees during
2014 are described as follows:

RETIREMENT SAVINGS AND STOCK PURCHASE PLANS: TSYS maintains a single plan, the Retirement
Savings Plan, which is designed to reward all team members of TSYS U.S.-based companies with a uniform
employer contribution. The terms of the plan provide for the Company to match 100% of the employee
contribution up to 4% of eligible compensation. The Company can make discretionary contributions up to
another 4% based upon business conditions.

The Company also maintains a stock purchase plan for employees. The Company contributes 15% of employee
contributions. The funds are used to purchase presently issued and outstanding shares of TSYS common stock on
the open market at fair market value for the benefit of participants. The Company’s contributions to the plans
charged to expense for the years ended December 31, 2014, 2013 and 2012 are as follows:

(in thousands)

2014

2013

2012

TSYS Retirement Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,531 14,506 13,421
1,140
TSYS Stock Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,288

1,236

POSTRETIREMENT MEDICAL BENEFITS PLAN: TSYS provides certain medical benefits to qualified retirees
through a postretirement medical benefits plan, which is immaterial to the Company’s consolidated financial
statements. The measurement of the benefit expense and accrual of benefit costs associated with the plan do not
reflect the effects of the 2003 Medicare Act. Additionally, the benefit expense and accrued benefit cost
associated with the plan, as well as any potential impact of the effects of the 2003 Medicare Act, are not
significant to the Company’s consolidated financial statements.

Note 18 Equity

DIVIDENDS: Dividends on common stock of $74.8 million were paid in 2014, compared to $56.5 million and
$94.0 million in 2013 and 2012, respectively. The increase in dividends paid in 2014 compared to 2013 is due to
the acceleration of payment of the fourth quarter 2012 dividend. The fourth quarter 2012 dividend payment was
paid in December 2012, rather than January 2013, to allow shareholders to benefit from the lower dividend tax
rate that was set to expire on December 31, 2012.

EQUITY COMPENSATION PLANS: The following table summarizes TSYS’ equity compensation plans by
category as of December 31, 2014:

(in thousands, except per share data)
Plan Category

Equity compensation plans
approved by security
holders . . . . . . . . . . . . . . . . . . . .

(a)
Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights

(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights

(c)
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))

4,892

$23.83

9,8791

The Company does not have any equity compensation plans that were not approved by security holders.

1

Shares available for future grants under the Total System Services Inc. 2007 Omnibus Plan and 2012 Omnibus Plan, which
could be in the form of options, nonvested awards and performance shares

Note 19 Share-Based Compensation

General Description of Share-Based Compensation Plans

TSYS has various long-term incentive plans under which the Compensation Committee of the Board of Directors
has the authority to grant share-based compensation to TSYS employees.

69

Employee stock options granted during or after 2006 (other than performance-based stock options) generally
become exercisable in three equal annual installments on the anniversaries of the date of grant and expire ten
years from the date of grant. Vesting for stock options granted during the years 2006 through 2009 (other than
performance-based stock options) accelerate upon retirement for employees who have reached age 62 and who
also have no less than fifteen years of service, or are 65, at the date of their election to retire. For stock options
granted during the years 2006 through 2009, share-based compensation expense is fully recognized for plan
participants upon meeting the retirement eligibility requirements of age and service. Employees not retirement
eligible who terminate employment only received the shares for the full vesting periods completed.

Stock options granted during 2010 and 2011 generally become exercisable in three equal annual installments on
the anniversaries of the date of grant and expire ten years from the date of grant. These options vest on a pro-
rata basis upon retirement based upon the number of months employed during the year of retirement. For stock
options granted during 2010 and 2011, share-based compensation expense is fully recognized for plan
participants upon meeting the retirement eligibility requirements of age and service. Employees not retirement
eligible who terminate employment only received the shares for the full vesting periods completed.

Stock options granted subsequent to 2011 generally become exercisable in three equal annual installments on
the anniversaries of the date of grant and expire ten years from the date of grant. For employees who retire
during the first 18 months of the options term, the options vest on a pro-rata basis based upon the number of
months employed during the year of retirement. If the employee retires after the 18-month period, vesting is
accelerated upon retirement. When an employee meets the requirements for retirement eligibility after the 18-
month period but before the final vesting period, the employee is fully vested in the options at that time.
Employees not retirement eligible who terminate employment only received the shares for the full vesting
periods completed.

Stock options granted prior to 2006 generally become exercisable at the end of a two to three-year period and
expire ten years from the date of grant. Vesting for stock options granted prior to 2006 accelerates upon
retirement for plan participants who have reached age 50 and who also have no less than fifteen years of service
at the date of their election to retire. Share-based compensation expense is recognized in income over the
remaining nominal vesting period with consideration for retirement eligibility.

Long-Term Incentive Plans

TSYS maintains the Total System Services, Inc. 2012 Omnibus Plan, Total System Services, Inc. 2007 Omnibus
Plan, Total System Services, Inc. 2002 Long-Term Incentive Plan,Total System Services, Inc. 2000 Long-Term
Incentive Plan and the Amended and Restated NetSpend Holdings Inc. 2004 Equity Incentive Plan for Options
and Restricted Shares Assumed by Total System Services, Inc. to advance the interests of TSYS and its
shareholders through awards that give employees and directors a personal stake in TSYS’ growth, development
and financial success. Awards under these plans are designed to motivate employees and directors to devote
their best efforts to the business of TSYS. Awards will also help TSYS attract and retain the services of employees
and directors who are in a position to make significant contributions to TSYS’ success.

The plans are administered by the Compensation Committee of the Company’s Board of Directors and enable
the Company to grant nonqualified and incentive stock options, stock appreciation rights, restricted stock and
restricted stock units, performance units or performance shares, cash-based awards, and other stock-based
awards.

All stock options must have a maximum life of no more than ten years from the date of grant. The exercise price
will not be less than 100% of the fair market value of TSYS’ common stock at the time of grant. Any shares related
to awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares,
are settled in cash in lieu of shares, or are exchanged with the Committee’s permission, prior to the issuance of
shares, for awards not involving shares, shall be available again for grant under the various plans. The aggregate
number of shares of TSYS stock which may be granted to participants pursuant to awards granted under the
various plans may not exceed the following: Total System Services, Inc. 2012 Omnibus Plan -17 million shares;
Total System Services, Inc. 2007 Omnibus Plan -5 million shares; Total System Services, Inc. 2002 Long-Term
Incentive Plan -9.4 million shares; and Total System Services, Inc. 2000 Long-Term Incentive Plan -2.4 million

70

shares. Effective February 1, 2010 and March 5, 2012, no additional awards may be made from the Total System
Services, Inc. 2000 and 2002 Long-Term Incentive Plans, respectively.

Share-Based Compensation

Share-based compensation costs are classified as selling, general and administrative expenses on the Company’s
statements of income and corporate administration and other expenses for segment reporting purposes. TSYS
does not include amounts associated with share-based compensation as costs capitalized as software
development and contract acquisition costs as these awards are typically granted to individuals not involved in
capitalizable activities. For the year ended December 31, 2014, share-based compensation was $30.8 million
compared to $28.9 million and $18.6 million for the same periods in 2013 and 2012, respectively.

Nonvested Awards: The Company granted shares of TSYS common stock to certain key employees and non-
management members of its Board of Directors. The grants to certain key employees were issued under
nonvested stock bonus awards for services to be provided in the future by such officers and employees. The
grants to the Board of Directors were fully vested on the date of grant.

On July 1, 2013, the Company issued 870,361 shares of TSYS common stock as nonvested stock replacement
awards with a market value of $21.5 million as part of the NetSpend acquisition. The nonvested stock bonus
awards to employees of NetSpend are for services to be provided in the future and vest over varying periods.
The NetSpend awards were converted into equivalent shares of Company’s common stock on the acquisition
date. The value of the stock at the date of issuance is charged as compensation expense over the vesting periods
of the awards.

On July 18, 2013, the Company issued 212,694 retention shares of TSYS common stock with a market value of
$5.5 million to certain key employees of NetSpend. The nonvested stock bonus awards to certain key employees
are for services to be provided in the future and vest over periods ranging from two to four years. The market
value of the TSYS common stock at the date of issuance is charged as compensation expense over the vesting
periods of the awards.

The following table summarizes the number of shares granted each year:

2014

2013

2012

Number of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672,724 1,667,246 310,690
Market value (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6.7

20.6

41.3

A summary of the status of TSYS’ nonvested shares as of December 31, 2014, 2013 and 2012 and the changes
during the periods are presented below:

Nonvested shares
(in thousands, except per share data)

2014

Weighted
Average
Grant-Date
Fair Value

Shares

Outstanding at beginning of year
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . 1,783
673
(602)
(85)

Outstanding at end of year . . . . . . . . . . . . . . . . . . . 1,769

$24.19
30.67
23.74
25.47

$26.75

2013

2012

Weighted
Average
Grant-Date
Fair Value

$19.96
24.75
19.95
23.82

Shares

554
1,6671
(328)
(110)

1,783

$24.19

Shares

618
311
(366)
(9)

554

Weighted
Average
Grant-Date
Fair Value

$16.80
21.47
15.91
19.85

$19.96

1

Includes the issuance of approximately 870,361 stock replacement awards in connection with the acquisition of NetSpend
in 2013. These awards had a market value of $21.5 million. A portion of the expense associated with these options has
been included as a component of the total purchase price of the NetSpend acquisition. Refer to Note 24.

As of December 31, 2014, there was approximately $30.5 million of total unrecognized compensation cost
related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a
remaining weighted average period of 2.0 years.

71

In 2014, TSYS authorized a total grant of 211,593 performance shares to certain key executives with a
performance-based vesting schedule (2014 performance shares). These 2014 performance shares have a
2014-2016 performance period for which the Compensation Committee of the Board of Directors established
two performance goals: revenues before reimbursable items and adjusted EPS and, if such goals are attained in
2016, the performance shares will vest, up to a maximum of 200% of the total grant. Compensation expense for
the award is measured on the grant date based on the quoted market price of TSYS common stock. The
Company estimates the probability of achieving the goals through the performance period and expenses the
award on a straight-line basis. Compensation costs related to these performance shares are expected to be
recognized through the end of 2016.

On July 18, 2013, TSYS issued 225,000 shares of TSYS common stock as a performance-based retention stock
award to a certain key executive with a performance-based vesting schedule through 2015. This award was
forfeited in July 2014. The Company has reversed all previously recorded expense associated with this award.

On July 1, 2013, the Company issued 87,356 shares of TSYS common stock as a performance-based replacement
stock award as part of the NetSpend acquisition. The performance-based stock award has a 2013-2015
performance period for which the Compensation Committee of the Board of Directors established two
performance goals: compound growth in revenues of the NetSpend segment and operating income of the
NetSpend segment and, if such goals are attained in 2015, the performance award will vest, up to a maximum of
100% of the total grant. The Company estimates the probability of achieving the goals through the performance
period and expenses the award on a straight-line basis. Compensation costs related to the performance-based
stock award are expected to be recognized until the end of 2015.

In April 2013, TSYS authorized a total grant of 237,679 performance shares to certain key executives with a
performance-based vesting schedule (2013 performance shares). These 2013 performance shares have a
2013-2015 performance period for which the Compensation Committee of the Board of Directors established
two performance goals: compounded growth in revenues before reimbursable items and income from continuing
operations and, if such goals are attained in 2015, the performance shares will vest, up to a maximum of 200% of
the total grant. Compensation expense for the award is measured on the grant date based on the quoted market
price of TSYS common stock. The Company estimates the probability of achieving the goals through the
performance period and expenses the award on a straight-line basis. Compensation costs related to these
performance shares are expected to be recognized until the end of 2015.

In March 2012, TSYS authorized a total grant of 241,095 performance shares to certain key executives with a
performance based vesting schedule (2012 performance shares). These 2012 performance shares have a
2012-2014 performance period for which the Compensation Committee of the Board of Directors established
two performance goals: compound growth in revenues before reimbursable items and income from continuing
operations and, if such goals are attained in 2014, the performance shares will vest, up to a maximum of 200% of
the total grant. Compensation expense for the award is measured on the grant date based on the quoted market
price of TSYS common stock. On February 4, 2015, when the Committee certified performance, the performance
shares vested at approximately 134% of the total grant.

As of December 31, 2014, there was approximately $10.4 million of total unrecognized compensation cost
related to the 2013 and 2014 performance shares compensation arrangements. That cost is expected to be
recognized until the end of 2015.

A summary of the awards authorized in each year is below:

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

211,593
563,803
241,095

Total Number of
Shares Awarded

Potential Number
of Performance-
Based Shares to be
Vested

211,593 (2017)
(2016)
325,035
(2015)
458,082

72

A summary of the status of TSYS’ performance-based nonvested shares as of December 31, 2014, 2013 and 2012
and changes during those periods are presented below:

Performance-based
Nonvested shares
(in thousands, except per share data)

2014

Weighted
Average
Grant Date
Fair Value

Shares

Outstanding at beginning of year
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . 1,049
211
(258)
(236)

$22.75
30.89
17.57
25.62

Weighted
Average
Grant Date
Fair Value

$18.76
24.88
15.93
—

Shares

809
5641
(324)
—

Outstanding at end of year . . . . . . . . . . . . . . . . . . .

766

$25.86

1,049

$22.75

Weighted
Average
Grant Date
Fair Value

$16.68
22.91
18.08
16.57

$18.76

Shares

580
278
(37)
(12)

809

2013

2012

1

Includes the issuance of approximately 87,356 stock replacement awards in connection with the acquisition of NetSpend in
2013. These awards had a market value of $2.2 million. A portion of the expense associated with these awards has been
included as a component of the total purchase price of the NetSpend acquisition. Refer to Note 24.

Stock Option Awards

During 2014, 2013 and 2012, the Company granted stock options to key TSYS executive officers and non-
management members of its Board of Directors. The grants to key TSYS executive officers were issued for
services to be provided in the future and vest over a period of three years. The grants to the Board of Directors
were fully vested on the date of grant. The average fair value of the options granted was estimated on the date
of grant using the Black-Scholes-Merton option-pricing model.

On July 1, 2013, the Company issued 1,060,148 stock option replacement awards with a market value of
$13.7 million as part of the NetSpend acquisition. The weighted average fair value of the options was $12.93 and
was calculated on the date of grant using a conversion factor into equivalent shares of the Company’s common
stock on the acquisition date. The grants vest over a period ranging from seven months to 45 months. The
weighted average fair value of the option grants was estimated on the date of grant using the Black-Scholes-
Merton option-pricing model with the following weighted average assumptions: exercise price of $11.68; risk-free
interest rate of 1.31%; expected volatility of 29.22%; expected term of 4.7 years; and dividend yield of 1.63%.

The following table summarizes the weighted average assumptions, and the weighted average fair value of the
options:

2014

2013

2012

Number of options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average exercise price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (years)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

30.96 $
2.01%
25.06%
6.5
1.29%
7.66 $

1,046,372

1,939,796

818,090
17.42 $ 22.95

1.31%
26.81%
6.0
1.64%
9.48 $

1.69%
24.11%
7.9
1.75%
5.27

73

A summary of TSYS’ stock option activity as of December 31, 2014, 2013 and 2012, and changes during the years
ended on those dates is presented below:

(in thousands,
except per share data)

Options:

Outstanding at beginning of year
. .
Granted 1 . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled . . . . . . . . . . . . . .

Outstanding at end of year . . . . . . . .

Options exercisable at year-end . . . .

Weighted average fair value of
options granted during the
year . . . . . . . . . . . . . . . . . . . . . . . . .

2014

Weighted
Average

2013

Weighted
Average

Options

Exercise Price Options

Exercise Price Options

2012

Weighted
Average
Exercise Price

5,752
1,046
(1,850)
(56)

4,892

2,781

$20.96
30.96
18.79
28.88

$23.83

$22.86

6,065
1,940
(2,177)
(76)

5,752

3,232

$21.27
17.42
18.75
16.78

$20.96

6,082
818
(619)
(216)

6,065

$20.61
22.95
16.15
23.73

$21.27

$23.02

3,235

$24.12

$ 7.66

$ 9.48

$ 5.27

1

Includes the issuance of approximately 1.1 million stock option replacement awards in connection with the acquisition of
NetSpend in 2013. These awards had a market value of $13.7 million. A portion of the expense associated with these
awards has been included as a component of the total purchase price of the NetSpend acquisition. Refer to Note 24.

As of December 31, 2014 the average remaining contractual life and intrinsic value of TSYS’ outstanding and
exercisable stock options were as follows:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average remaining contractual life (in years)
Aggregate intrinsic value (in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.6
$49,548

5.1
30,866

Outstanding Exercisable

Shares Issued for Options Exercised

During 2014, 2013 and 2012, employees of the Company exercised options for shares of TSYS common stock
that were issued from treasury. The table below summarizes these stock option exercises by year:

(in thousands)

Options Exercised
and Issued from
Treasury

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,850)
2,177
619

Intrinsic Value

$22,883
16,580
4,243

For awards granted before January 1, 2006 that were not fully vested on January 1, 2006, the Company will
record the tax benefits from the exercise of stock options as increases to the “Additional paid-in capital” line item
of the Consolidated Balance Sheets. If the Company does recognize tax benefits, the Company will record these
tax benefits from share-based compensation costs as cash inflows in the financing section and cash outflows in
the operating section in the Statement of Cash Flows. The Company has elected to use the short-cut method to
calculate its historical pool of windfall tax benefits.

As of December 31, 2014, there was approximately $5.7 million of total unrecognized compensation cost related
to TSYS stock options that is expected to be recognized over a remaining weighted average period of 1.2 years.

74

Note 20 Treasury Stock

The following table summarizes shares held as treasury stock and their related carrying value as of December 31:

(in thousands)

Number of
Treasury
Shares

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,836
15,073
15,440

Treasury
Shares Cost

$453,230
326,996
287,301

Stock Repurchase Plan

On April 20, 2010, TSYS announced a stock repurchase plan to purchase up to 10 million shares of TSYS stock.
The shares may be purchased from time to time over the next two years at prices considered attractive to the
Company. On May 3, 2011, TSYS announced that its Board had approved an increase in the number of shares
that may be repurchased under its current share repurchase plan from up to 10 million shares to up to 15 million
shares of TSYS stock. On July 24, 2012, TSYS announced that its Board had approved an increase in the number
of shares that may be repurchased under its current share repurchase plan from up to 15 million shares to up to
20 million shares of TSYS stock. The expiration date of the plan was also extended to April 30, 2014. During
2014, the Company purchased 5.2 million shares for approximately $165.3 million, at an average price of $31.79.
During 2013, the Company purchased 3.1 million shares for approximately $97.6 million, at an average price of
$31.48. During 2012, the Company purchased 3.2 million shares for approximately $74.6 million, at an average
price of $23.31. In January 2014, the TSYS Board approved an increase in the number of shares that may be
repurchased under its current share repurchase plan from up to 20 million shares to up to 28 million shares of
TSYS stock. With the increase, TSYS had 12.0 million shares available to be repurchased. In addition, the
expiration date of the plan was extended to April 30, 2015.

On January 27, 2015, TSYS announced that its Board had approved a new stock repurchase plan to purchase up
to 20 million shares of TSYS stock. The shares may be purchased from time to time at prices considered
appropriate. There is no expiration date for the plan. The plan discussed in the preceding paragraph was
terminated.

The following table sets forth information regarding the Company’s purchases of its common stock on a monthly
basis during the three months ended December 31, 2014:

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number of
Cumulative shares Purchased
as Part of Publicly
announced Plans or
Programs

$ —
32.88
33.35

$33.08

19,693
20,543
21,193

(in thousands, except per share data)

October 2014 . . . . . . . . . . . . . . . . .
November 2014 . . . . . . . . . . . . . . .
December 2014 . . . . . . . . . . . . . . .

—
850
650

Total

. . . . . . . . . . . . . . . . . . . . . .

1,500

Treasury Shares

Maximum
Number of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs

8,307
7,457
6,807

In 2008, the Compensation Committee approved “share withholding for taxes” for all employee nonvested
awards, and also for employee stock options under specified circumstances. The dollar amount of the income tax
liability from each exercise is converted into TSYS shares and withheld at the statutory minimum. The shares are
added to the treasury account and TSYS remits funds to the Internal Revenue Service to settle the tax liability.
During 2014 and 2013, the Company acquired 162,489 shares for approximately $5.2 million and acquired
264,383 shares for approximately $6.3 million, respectively, as a result of share withholding for taxes.

75

Note 21 Other Comprehensive Income (Loss)

Comprehensive income (loss) for TSYS consists of net income, cumulative foreign currency translation
adjustments, unrealized gain on available for sale securities and the recognition of an overfunded or underfunded
status of a defined benefit postretirement plan recorded as a component of shareholders’ equity. The income tax
effects allocated to and the cumulative balance of each component of accumulated other comprehensive income
(loss) are as follows:

(in thousands)

Beginning
Balance

Pretax
amount

Tax

effect Net-of-tax

Ending
Balance

As of December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . .
Transfer from noncontrolling interest (NCI) . . . . . . . . . . . . .
Change in accumulated other comprehensive income

$(2,585)
$ (186)
28

5,397
4,875
—

3,257
1,357
—

(AOCI) related to postretirement healthcare plans . . . . .

(287)

(2,603)

(938)

As of December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . .
Transfer from NCI
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on available for sale securities . . . . . . . . . . . . . . . . . . .
Change in AOCI related to postretirement healthcare

$ (445)
$ 3,332
28
—

2,272
(295)
—
2,810

419
1,033
—
1,037

2,140
3,518
—

(1,665)

1,853
(1,328)
—
1,773

$
$

$
$

(445)
3,332
28

(1,952)

1,408
2,004
28
1,773

plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,952)

1,926

30

1,896

(56)

As of December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . .
Transfer from NCI
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on available for sale securities . . . . . . . . . . . . . . . . .
Change in AOCI related to postretirement healthcare

$ 1,408
$2,004
28
1,773

4,441
(17,143)
—
(1,058)

2,100
(1,547)
—
(390)

$

2,341

3,749
(15,596) $(13,592)
28
1,105

—
(668)

plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(56)

921

332

589

533

As of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,749

(17,280)

(1,605)

(15,675) $(11,926)

Consistent with its overall strategy of pursuing international investment opportunities, TSYS adopted the
permanent reinvestment exception under GAAP, with respect to future earnings of certain foreign subsidiaries. Its
decision to permanently reinvest foreign earnings offshore means TSYS will no longer allocate taxes to foreign
currency translation adjustments associated with these foreign subsidiaries accumulated in other comprehensive
income.

Note 22 Segment Reporting, including Geographic Area Data and Major Customers

TSYS provides global payment processing and other services to card-issuing and merchant acquiring institutions
in the United States and internationally through online accounting and electronic payment processing systems.
Corporate expenses, such as finance, legal, human resources, mergers and acquisitions and investor relations are
categorized as Corporate Administration.

In the first quarter of 2014, the Company’s Japan-based entities qualified for discontinued operations treatment.

In July 2013, TSYS completed its acquisition of all the outstanding stock of NetSpend, which previously operated
as a publicly traded company. NetSpend’s financial results are included in the NetSpend segment.

In December 2012, TSYS completed its acquisition of all the outstanding stock of ProPay, a privately-held
payment solutions company. ProPay’s financial results are included in the Merchant Services segment.

In August 2012, TSYS completed its acquisition of 60% of CPAY, a privately held direct merchant acquirer.
CPAY’s financial results are included in the Merchant Services segment. In February, 2014, the Company
purchased an additional 15% equity interest in CPAY.

Refer to Note 24 for more information on acquisitions.

76

North America Services includes electronic payment processing services and other services provided from within
the North America region. International Services includes electronic payment processing and other services
provided from outside the North America region. Merchant Services includes electronic processing and other
services provided to merchants and merchant acquirers. The NetSpend segment provides GPR prepaid debit and
payroll cards and alternative financial service solutions to the underbanked and other consumers in the
United States.

At TSYS, the chief operating decision maker (CODM) is a group consisting of Senior Executive Management and
above. In the first quarter of 2014, the CODM decided that all share-based compensation costs should be
included in the category “Corporate Administration and Other” for purposes of segment disclosures. All prior
periods were restated to reflect this change. This change is used to evaluate performance and assess resources
starting in the first quarter of 2014. The information utilized by the CODM consists of the financial statements and
the main metrics monitored are revenue growth and growth in profitability.

Upon completion of the NetSpend acquisition in 2013, the CODM implemented a new metric called adjusted
segment operating income in order to analyze each segment’s results of operations. This new metric consists of
operating income adjusted for amortization of acquisition related intangibles and corporate administrative and
other costs. All periods presented have been adjusted to reflect this new measure. Depreciation and amortization
for the segments changed as a result of this new metric removing amortization associated with intangible assets
from the total for the segments.

In early 2013, TSYS embarked on two corporate-wide initiatives that impact more than one operating segment.
One initiative is a multi-year, multi-phase initiative that consists of enhancing TSYS’ issuing processing platforms.
The other is an innovation initiative focused on enhancing existing product and service offerings through several
new product concepts and ideas on how to change existing processes. The costs associated with these two new
initiatives are not allocated to the operating segments, but are combined, along with the existing corporate
administration, in a grouping titled “Corporate Administration and Other.” This was a change the CODM
requested and was used to evaluate performance and assess resources starting in the first quarter of 2013. The
following operating results by segment comparison reflects the change in segment reporting from these
initiatives, including the 2012 results.

The Company believes the terms and conditions of transactions between the segments are comparable to those
which could have been obtained in transactions with unaffiliated parties. TSYS’ operating segments share certain
resources, such as information technology support, that TSYS allocates asymmetrically.

77

Years Ended December 31,
(in thousands)
Operating Segments

Revenues before reimbursable items

2014

2013

2012

North America Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
International Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchant Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NetSpend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intersegment revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

954,082
341,785
435,649
482,686
(21,224)

860,645
321,484
446,277
207,851
(12,549)

826,750
318,730
409,698
—
(14,102)

Revenues before reimbursable items from external customers . . . . . . $ 2,192,978

1,823,708 1,541,076

Total revenues

North America Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,117,764
363,359
International Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
510,120
Merchant Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
482,686
NetSpend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(27,052)
Intersegment revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,000,073
341,549
533,050
207,851
(18,218)

965,393
336,047
512,580
—
(20,463)

Revenues from external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,446,877

2,064,305 1,793,557

Depreciation and amortization

North America Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
International Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchant Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NetSpend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Segment depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Administration and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

86,513
38,909
14,571
7,509

147,502
96,971
2,147

74,480
41,708
12,034
3,121

131,343
65,893
1,790

74,673
47,889
12,083
—

134,645
26,264
2,491

Total depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . $

246,620

199,026

163,400

Adjusted segment operating income

North America Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
International Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchant Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NetSpend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total adjusted segment operating income . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition intangible amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NetSpend merger and acquisition operating expenses . . . . . . . . . . . . .
Corporate Administration and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

351,512
55,123
134,872
128,285

669,792
(96,971)
(3,217)
(137,964)

321,619
42,068
155,643
66,353

585,683
(65,893)
(14,220)
(123,070)

295,171
27,211
157,409
—

479,791
(26,264)
—
(98,558)

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

431,640

382,500

354,969

As of December 31,

Total assets

2014

2013

North America Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,327,160
356,590
International Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
695,744
Merchant Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,556,369
NetSpend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,202,282)
Intersegment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,215,333
417,379
676,592
1,596,150
(2,218,886)

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,733,581

3,686,568

78

GEOGRAPHIC AREA DATA: The Company maintains property and equipment, net of accumulated
depreciation and amortization, in the following geographic areas:

2013
(in millions)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $237.9 207.4
46.4
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $290.6 260.0

45.5
7.2

As of
December 31,
2014

GEOGRAPHIC AREA REVENUE BY OPERATING SEGMENT: The following tables reconcile segment external
revenue to revenues by geography for the years ended December 31:

(in millions)

2014

North
America
Services

International
Services

Merchant
Services NetSpend

Total

%

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 778.8
0.8
Europe1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
290.2
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.2
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.3
Other1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,102.3

—
304.3
—
—
47.9

352.2

508.7
—
0.3
—
0.7

509.7

482.7
—
—
—
—

$1,770.2
305.1
290.5
16.2
64.9

72.3
12.5
11.9
0.7
2.7

482.7

$2,446.9 100.0

2013

(in millions)

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

North
America
Services

$712.1
0.8
243.0
16.5
14.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$986.9

International
Services

Merchant
Services NetSpend

—
293.8
—
—
41.0

334.8

533.9
—
0.2
—
0.6

534.7

207.9
—
—
—
—

207.9

Total

$1,453.9
294.6
243.2
16.5
56.1

%

70.4
14.3
11.8
0.8
2.7

$2,064.3 100.0

(in millions)

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

North
America
Services

$706.7
0.8
217.3
11.7
10.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$947.0

2012

International
Services

Merchant
Services NetSpend

—
292.2
—
—
39.3

331.5

514.4
—
0.2
—
0.5

515.1

—
—
—
—
—

—

Total

$1,221.1
293.0
217.5
11.7
50.3

%

68.1
16.3
12.1
0.7
2.8

$1,793.6 100.0

1

Revenues are impacted by movements in foreign currency exchange rates.

MAJOR CUSTOMER: For the years ended December 31, 2014, 2013 and 2012, the Company had no major
customers.

79

Note 23 Supplemental Cash Flow Information

Nonvested Share Awards

The Company has issued shares of TSYS common stock to certain key employees and non-management members of
its Board of Directors. The grants to certain key employees were issued in the form of nonvested stock bonus awards
for services to be provided in the future by such officers and employees. The grants to the Board of Directors were
fully vested on the date of grant. Refer to Note 18 for more information on nonvested share awards.

Equipment and Software Acquired Under Capital Lease Obligations

The Company acquired computer equipment and software under capital leases in the amount of $17.9 million,
$5.3 million and $8.1 million in 2014, 2013 and 2012, respectively.

Software Acquired Under Direct Financing

The Company acquired software under direct financing in the amount of $13.6 million in 2014 . The Company did
not acquire any software under direct financing in 2013 and 2012. Refer to Note 13 for more information.

Note 24 Acquisitions

2014

In February 2014, the Company acquired an additional 15% equity interest in CPAY from its privately held owner
for $37.5 million, which increased its equity interest in CPAY from 60% to 75%. This purchase reduced the
remaining redeemable noncontrolling interest in CPAY to 25% of its total outstanding equity. The pro forma
earnings from this acquisition are not material to the consolidated financial statements.

2013

On July 1, 2013, TSYS acquired all the outstanding stock of NetSpend, which previously operated as a publicly
traded company and is a leading provider of GPR prepaid debit and payroll cards and related financial services to
underbanked and other consumers in the U.S. The acquisition complements the Company’s existing presence in
the prepaid processing space. The results of the newly acquired business are being reported by TSYS as a new
operating segment titled NetSpend.

Under the terms of the Merger Agreement, TSYS acquired 100 percent ownership of NetSpend for approximately
$1.4 billion, including $1.2 billion of cash to shareholders, $70.7 million of cash for payment to holders of vested
stock options and awards, $58.3 million of cash for repayment of NetSpend’s revolving credit facility and $15.6
million in replacement stock options and awards. NetSpend shareholders received $16.00 in cash for each share
of NetSpend common stock. There were 1.6 million NetSpend shares held by five shareholders who asserted
appraisal (or dissenters’) rights with respect to their NetSpend shares, for a preliminary value of $25.7 million at
$16.00 per share that were not funded at the closing of the acquisition. During 2014, TSYS paid $38.6 million to
dissenting shareholders to settle the lawsuit.

Under the terms of the Merger Agreement, the Company replaced unvested share-based awards for certain
current employees of NetSpend. The following table provides a list of all replacement awards and the estimated
fair value of those awards issued in conjunction with the acquisition of NetSpend:

Time-based restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-qualified stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incentive stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance-based restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

870,361
530,696
529,452
87,356

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,017,865

$21.5
8.4
5.3
2.2

$37.4

Number of Shares
and Options Issued

Fair Value
(in millions)

80

The portion of the fair value of the replacement awards related to services provided prior to the business
combination was included in the total purchase price. The portion of the fair value associated with future service
is recognized as expense over the future service period, which varies by award. The Company determined that
$15.6 million ($11.1 million net of tax) of the replacement awards was related to services rendered prior to the
business combination.

The goodwill amount of $1.0 billion arising from the acquisition consists largely of expansion of customer base,
differentiation in market opportunity and economies of scale expected from combining the operations of TSYS
and NetSpend. All of the goodwill was assigned to TSYS’ new NetSpend segment. The goodwill recognized is
not expected to be deductible for income tax purposes.

The following table summarizes the consideration paid for NetSpend and the initially recognized amounts of the
identifiable assets acquired and liabilities assumed on July 1, 2013 (the acquisition date).

(in thousands)
Consideration
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,355,270
15,557
Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,723
Dissenting shareholder liability* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value of total consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,396,550

Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property equipment and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40,610
11,335
11,657
480,086
10,165
36,660
(155,945)
(62,452)

Total identifiable net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill

372,116
1,024,434

$1,396,550

* Represents 1.6 million NetSpend shares held by dissenting shareholders

As of December 31, 2014, goodwill related to NetSpend increased $8.5 million due to changes during the
measurement period. For more information, refer to Note 7.

Identifiable intangible assets acquired in the NetSpend acquisition include channel relationships, current
technology, a prospect database, the NetSpend trade name and non-compete agreements.

The identifiable intangible assets had no significant estimated residual value. These intangible assets are being
amortized over their estimated useful lives of five to eight years based on the pattern of expected future
economic benefit, which approximates a straight-line basis over the useful lives of the assets. The fair value of the
acquired identifiable intangible assets of $480.1 million was estimated using the income approach (discounted
cash flow and relief from royalty methods) and cost approach. The fair values and useful lives of the identified
intangible assets were primarily determined using forecasted cash flows, which included estimates for certain
assumptions such as revenues, expenses, attrition rates and royalty rates.

81

The estimated fair value of identifiable intangible assets acquired in the acquisitions and the related estimated
weighted average useful lives are as follows:

(in thousands)

Weighted Average
Useful Life
(in years)

Fair Value

Channel relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $317,000
78,711
Current technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,000
Trade name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,000
Database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,500
Covenants-not-to-compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
875
Favorable lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total acquired identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $480,086

8.0
7.0
5.0
5.0
6.0
4.9

7.3

The fair value measurement of the identifiable intangible assets represents Level 2 and Level 3 measurements.
Key assumptions include (a) cash flow projections based on market participant and internal data, (b) a discount
rate of 11%, (c) a pre-tax royalty rate range of 2.5-7.0%, (d) attrition rates of 5%-40%, (e) an effective tax rate of
40%, and (f) a terminal value based on a long-term sustainable growth rate of 3%.

In connection with the acquisition, TSYS incurred $3.2 million and $14.2 million in acquisition-related costs
primarily related to professional legal, finance, and accounting costs for the years ended December 31, 2014 and
2013, respectively. These costs were expensed as incurred and are included in merger and acquisition expenses
on the income statement.

Pro Forma Results of Operations

The amounts of NetSpend revenue and earnings included in TSYS’ consolidated income statement for the years
ended December 31, 2013 and 2012, and the pro forma revenue and earnings of the combined entity had the
acquisition date been January 1, 2012 are:

Actual

Years Ended
December 31,

Supplemental pro
forma

Years Ended
December 31,

(in thousands, except per share data)

2013

2012

2013

2012

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,064,305 1,793,557 2,286,348 2,144,654

Net income attributable to TSYS common shareholders . . . . . . $ 244,750

244,280

239,775

193,255

Basic EPS attributable to TSYS common shareholders . . . . . . . $

Diluted EPS attributable to TSYS common shareholders . . . . . . $

1.30

1.29

1.30

1.29

1.28

1.27

1.03

1.02

The unaudited pro forma financial information presented above does not purport to represent what the actual
results of operations would have been if the acquisition of NetSpend’s operations had occurred prior to
January 1, 2012, nor is it indicative of the future operating results of TSYS. The unaudited pro forma financial
information does not reflect the impact of future events that may occur after the acquisition, including, but not
limited to, anticipated cost savings from operating synergies.

The unaudited pro forma financial information presented in the table above has been adjusted to give effect to
adjustments that are (1) directly related to the business combination; (2) factually supportable; and (3) expected
to have a continuing impact. These adjustments include, but are not limited to, the application of accounting
policies; and depreciation and amortization related to fair value adjustments to property, plant and equipment
and intangible assets.

82

The pro forma adjustments do not reflect the following material items that result directly from the acquisition and
which impacted the statement of operations following the acquisition:

•

•

Acquisition and related financing transactions costs relating to fees to investment bankers, attorneys,
accountants, and other professional advisors, and other transaction-related costs that were not capitalized as
deferred financing costs; and

The effect of anticipated cost savings or operating efficiencies expected to be realized and related
restructuring charges such as technology and infrastructure integration expenses, and other costs related to
the integration of NetSpend into TSYS.

2012

On December 26, 2012, TSYS completed its acquisition of ProPay for $123.7 million. ProPay previously operated
as a privately-held company, and offers simple, secure and affordable payment solutions for organizations
ranging from small, home based entrepreneurs to multi-billion dollar enterprises. The results of operations for
ProPay are immaterial and therefore not included in the Company’s results for the year ended December 31,
2012. The goodwill of $93.5 million recorded arises largely from synergies and economies of scale expected to
be realized from combining the operations of TSYS and ProPay. None of the goodwill is tax deductible. ProPay is
included as part of the Merchant Services segment.

On August 8, 2012, TSYS completed its acquisition of 60% of CPAY, a privately held direct merchant acquirer, for
$66.0 million in cash. CPAY provides merchant services to small- to medium-sized merchants through an
Independent Sales Agent (ISA) model, with a focus on merchants in the restaurant, personal services and retail
sectors. The acquisition of CPAY expands the Company’s presence in the merchant acquiring industry and
enhances the Company’s distribution model with CPAY’s strong sales agent channel. The results of operations for
CPAY have been included in the Company’s results beginning August 8, 2012, and are included in the Merchant
Services segment. The goodwill of $68.6 million recorded arises largely from synergies and economies of scale
expected to be realized from combining the operations of TSYS and CPAY. All of the goodwill is tax deductible.

The following table summarizes the consideration paid for acquisitions and the preliminary recognized amounts
of identifiable assets acquired and liabilities assumed during the year ended December 31, 2012.

(in thousands)
Cash and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,003
4,092
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,522
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,600
Identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(30,558)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(38,000)
Noncontrolling interest in acquired entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
162,090
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $189,749

The fair value of accounts receivable, accounts payable, accrued compensation, and other liabilities approximates
the carrying amount of those assets and liabilities at the acquisition date. The fair value of accounts receivable
due under agreements with customers is $4.1 million. The gross amount due under the agreements is $4.8
million, of which approximately $688,000 is expected to be uncollectible.

Of the $123.7 million in consideration paid for ProPay, $12.5 million was placed in escrow for a period of 18
months to secure certain claims that may be brought against the escrowed consideration by TSYS pursuant to the
merger agreement. The 18-month period has been extended for an additional nine months in a subsequent
tolling agreement between the parties. Consideration is contingent and may be returned to the Company
pursuant to indemnification commitments made by the shareholders which formerly owned ProPay related to a
breach of the representations and warrantees made in the merger agreement. Such indemnification
commitments are recognized as a possible receivable and measured at fair value. Based upon the probability of

83

various possible outcomes related to the indemnification commitments, TSYS has determined that the fair value
of any receivable asset would be immaterial. The maximum amount of contingent consideration returnable to the
Company related to certain indemnification commitments made by the Seller is $12.5 million. The maximum
amount of contingent consideration returnable to the Company related to fundamental representations and
warranties made by the Seller is limited to the purchase price.

Of the $66.0 million in consideration paid for CPAY, $3.3 million was placed in escrow for a period of 21 months
to secure certain claims that may be brought against the escrowed consideration by TSYS pursuant to the
Investment Agreement. The entire amount of the escrow was released to the Seller (as defined below) in May
2014 pursuant to the terms of the Escrow Agreement between the parties. Consideration is contingent and may
be returned to the Company pursuant to indemnification commitments made by the company which formerly
owned 100% of Central Payment (Seller) related to, among other things, a breach of certain representations and
warranties made in the Investment Agreement, and losses arising out of any of the Excluded Liabilities as defined
in the Investment Agreement. Such indemnification commitments are recognized as a possible asset receivable
and measured at fair value. Based upon the probability of various possible outcomes related to the
indemnification commitments, TSYS has determined that the fair value of any receivable asset would be
immaterial. The maximum amount of contingent consideration returnable to the Company related to certain
indemnification commitments made by the Seller is $9.9 million. The maximum amount of contingent
consideration returnable to the Company related to fundamental representations and warranties made by the
Seller is limited to the purchase price.

Identifiable intangible assets acquired in the acquisitions had no significant estimated residual value. These
intangible assets are being amortized over their estimated useful lives of two to ten years based on the pattern of
expected future economic benefit, which approximates a straight-line basis over the useful lives of the assets. The
fair value of the acquired identifiable intangible assets of $76.6 million was estimated using the income approach
(discounted cash flow and relief from royalty methods) and cost approach. The fair values and useful lives of the
identified intangible assets were primarily determined using forecasted cash flows, which included estimates for
certain assumptions such as revenues, expenses, attrition rates, and royalty rates. The estimated fair value of
identifiable intangible assets acquired in the acquisitions and the related estimated weighted average useful lives
are as follows:

Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Covenants-not-to-compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total acquired identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair Value
(in millions)

Weighted
Useful Lives
(in years)

$59.5
13.0
2.9
1.2

$76.6

8.6
5.0
2.8
2.0

7.7

This fair value measurement is based on significant inputs that are both observable (Level 2) and non-observable
(Level 3) in the market. Key assumptions in the ProPay acquisition include (a) cash flow projections based on
market participant and internal data, (b) a discount rate of 14.0% for the overall Company and a discount rate of
14.5% for the intangible assets, (c) a pre-tax royalty rate of 1.0% for trade names and technology (d) an attrition
rate of 3.0%- 5.0%, (e) an effective tax rate of 39.0%, and (f) a terminal value based on a long-term sustainable
growth rate of 3.0%.

Key assumptions in the CPAY acquisition include (a) cash flow projections based on market participant and
internal data, (b) a discount rate of 19.0% for the overall company and a discount rate of 19.5% for the intangible
assets, (c) a pre-tax royalty rate of 1.0% for trade names and technology (d) an attrition rate of 25.0%, (e) an
effective tax rate of 39.0%, and (f) a terminal value based on a long-term sustainable growth rate of 3.0%.

In connection with these acquisitions, TSYS incurred $1.3 million in acquisition-related costs primarily related to
professional legal, finance, and accounting costs. These costs were expensed as incurred and are included in
selling, general, and administrative expenses in the income statement for the year ended December 31, 2012.

84

Other

On February 1, 2012, TSYS acquired contract-based intangible assets in its Merchant Services segment for
$1.7 million. These intangible assets are being amortized on a straight-line basis over their estimated useful lives
of five years which approximates their usage.

Redeemable Noncontrolling Interest

The fair value of the noncontrolling interest in CPAY, owned by a private company, was based on the actual
purchase price paid for the controlling interest in CPAY. Next, adjustments were made for lack of control and lack
of marketability that market participants would consider when estimating the fair value of the noncontrolling,
non-marketable interest in CPAY.

In connection with the acquisition of CPAY, the Company is party to call and put arrangements with respect to
the membership units that represent the remaining noncontrolling interest of CPAY. The call arrangement is
exercisable by TSYS and the put arrangement is exercisable by the Seller. The put arrangement is outside the
control of the Company by requiring the Company to purchase the Seller’s entire equity interest in CPAY at a put
price at fair market value. At the time of the original acquisition, the redemption of the put option was
considered probable based upon the passage of time of the second anniversary date. The put arrangement is
recorded on the balance sheet and is classified as redeemable noncontrolling interest outside of permanent
equity.

In February 2014, the Company purchased an additional 15% equity interest in CPAY for $37.5 million, reducing
its redeemable noncontrolling interest in CPAY to 25%. As a result of this transaction, the call and put
arrangements for CPAY, representing 25% of its total outstanding equity interests, were extended and may now
be exercised at the discretion of TSYS or the Seller on the third anniversary of the closing of the additional
purchase and upon the recurrence of certain other specified events.

The put option is not currently redeemable, but redemption is considered probable based upon the passage of
time of the third anniversary date of the 2014 purchase of additional equity. As such, the Company has adopted
the accounting policy to accrete changes in the redemption value over the period from the date of issuance to
the earliest redemption date, which the Company believes to be in 2017. If the put option was redeemable as of
December 31, 2014, the redemption value was estimated to be approximately $22.5 million. The Company did
not accrete any changes to the redemption value as the balance as of December 31, 2014 exceeded the
accretion fair value amount.

Pro forma Results of Operations

The pro forma revenue and earnings of TSYS’ acquisitions other than NetSpend are not material to the
consolidated financial statements.

Note 25 Collaborative Arrangement

TSYS has a 45% ownership interest in an enterprise jointly owned with two other entities which operates aircraft
for the owners’ internal use. The arrangement allows each entity access to the aircraft and each entity pays for its
usage of the aircraft. Each quarter, the net operating results of the enterprise are shared among the owners
based on their respective ownership percentage.

TSYS records its usage of the aircraft and its share of net operating results of the enterprise in selling, general and
administrative expenses.

85

Note 26 Earnings Per Share

The following table illustrates basic and diluted EPS under the guidance of GAAP for the years ended
December 31, 2014, 2013 and 2012:

(in thousands, except per share data)

Basic EPS:

2014

2013

2012

Common
Stock

Participating
Securities

Common
Stock

Participating
Securities

Common
Stock

Participating
Securities

Net income . . . . . . . . . . . . . . . . . . . . . . . . $322,872
Less income allocated to nonvested

$244,750

$244,280

awards . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,308)

3,308

(1,595)

1,595

(800)

800

Net income allocated to common

stock for EPS calculation(a)

. . . . . . . $319,564

3,308

$243,155

1,595

$243,480

800

Average common shares

outstanding(b) . . . . . . . . . . . . . . . . . . . . 184,297

1,925

187,145

1,246

187,403

Basic EPS(a)/(b) . . . . . . . . . . . . . . . . . . . . . $

1.73

1.72

$

1.30

1.28

$

1.30

627

1.28

Diluted EPS:

Net income . . . . . . . . . . . . . . . . . . . . . . . . $322,872
Less income allocated to nonvested

$244,750

$244,280

awards . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,288)

3,288

(1,585)

1,585

(796)

796

Net income allocated to common

stock for EPS calculation(c)

. . . . . . . $319,584

3,288

$243,165

1,585

$243,484

Average common shares outstanding . . 184,297
Increase due to assumed issuance of

shares related to common equivalent
shares outstanding . . . . . . . . . . . . . . . .

1,459

Average common and common

1,925

187,145

1,246

187,403

1,648

1,262

equivalent shares outstanding(d)

. . . . 185,756

1,925

188,793

1,246

188,665

Diluted EPS(c)/(d) . . . . . . . . . . . . . . . . . . . $

1.72

1.71

$

1.29

1.27

$

1.29

796

627

627

1.27

The diluted EPS calculation excludes stock options and nonvested awards that are convertible into 1.1 million,
2.9 million and 3.6 million common shares for the years ended December 31, 2014, 2013 and 2012, respectively,
because their inclusion would have been anti-dilutive.

Note 27 Subsequent Events

In the first quarter of 2015, TSYS completed the conversion of Bank of America’s consumer card portfolio from its
in-house processing system to TSYS’ processing system.

Management performed an evaluation of the Company’s activity as of the date these audited financial statements
were issued, and has concluded that, other than as set forth above, there are no additional significant subsequent
events requiring disclosure.

86

Report of Independent Registered Public Accounting Firm

The Board of Directors
Total System Services, Inc.:

We have audited the accompanying consolidated balance sheets of Total System Services, Inc. and subsidiaries
(the Company) as of December 31, 2014 and 2013, and the related consolidated statements of income,
comprehensive income, cash flows and equity for each of the years in the three-year period ended December 31,
2014. We also have audited the Company’s internal control over financial reporting as of December 31, 2014,
based on criteria established in Internal Control — Integrated Framework 2013 issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for
these consolidated financial statements, for maintaining effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on these consolidated financial statements and an opinion on the Company’s internal control over financial
reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement and whether effective internal control
over financial reporting was maintained in all material respects. Our audits of the consolidated financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audits of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

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 as of December 31, 2014 and 2013, and the
results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2014, in conformity with U.S. generally accepted accounting principles. Also in our opinion, Total System
Services, Inc. maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control — Integrated Framework 2013 issued by
the Committee of Sponsoring Organizations of the Treadway Commission.

Atlanta, Georgia
February 25, 2015

87

Management’s Report on Internal Control Over Financial
Reporting
The management of Total System Services, Inc. (the Company) is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act
of 1934. The Company maintains accounting and internal control systems which are intended to provide
reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition, transactions
are executed in accordance with management’s authorization and accounting records are reliable for preparing
financial statements in accordance with accounting principles generally accepted in the United States.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting
objectives because of its inherent limitations. Internal control over financial reporting is a process that involves
human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human
failures. Internal control over financial reporting also can be circumvented by collusion or improper management
override. Because of such limitations, there is a risk that material misstatements may not be prevented or
detected on a timely basis by internal control over financial reporting. However, these inherent limitations are
known features of the financial reporting process. Therefore, it is possible to design into the process safeguards
to reduce, though not eliminate, risk.

The Company’s management assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control — Integrated
Framework 2013.

Based on our assessment, management believes that, as of December 31, 2014, the Company’s internal control
over financial reporting is effective based on those criteria.

KPMG LLP, the independent registered public accounting firm who audited the Company’s consolidated financial
statements, has issued an attestation report on the effectiveness of internal control over financial reporting as of
December 31, 2014 that appears on the preceding page.

M. Troy Woods
President &
Chief Executive Officer

Paul M. Todd
Senior Executive Vice President &
Chief Financial Officer

88

Quarterly Financial Data (Unaudited), 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
February 18, 2015, there were 21,713 holders of record of TSYS common stock, some of whom are holders in
nominee name for the benefit of different shareholders.

The 2014 fourth quarter dividend of $0.10 per share was declared on December 2, 2014, and was paid January 2,
2015, to shareholders of record on December 19, 2014. The 2013 fourth quarter dividend of $0.10 per share was
declared on December 3, 2013, and was paid December 26, 2013, to shareholders of record on December 17,
2013. Total dividends declared in 2014 and in 2013 amounted to $74.8 million and $75.8 million, respectively. 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, 2014
and 2013.

(in thousands, except per share data)

2014 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to TSYS common shareholders . . . . . . . . . . .
Basic earnings per share attributable to TSYS common

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

$592,848
80,697
49,303

602,036
98,763
109,904

616,891
129,407
83,805

635,104
122,773
79,860

2013

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.26

0.59

0.45

0.43

Diluted earnings per share attributable to TSYS common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock prices:

High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to TSYS common shareholders . . . . . . . . . . . . . .
Basic earnings per share attributable to TSYS common shareholders . . . .
Diluted earnings per share attributable to TSYS common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock prices:

High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.26
0.10

33.28
28.71
30.41

0.58
0.10

32.70
28.70
31.41

0.45
0.10

32.41
30.63
30.96

0.43
0.10

34.41
28.83
33.96

$ 448,791
74,520
57,029
0.31

461,860
94,642
57,716
0.31

570,551
104,479
64,350
0.34

583,103
108,858
65,655
0.35

0.30
0.10

24.78
21.97
24.78

0.31
0.10

24.94
22.62
24.48

0.34
0.10

29.93
24.65
29.42

0.34
0.10

33.30
28.49
33.28

89

STOCK PERFORMANCE GRAPH

The following graph compares the yearly percentage change in cumulative shareholder return on TSYS stock with
the cumulative total return of the Standard & Poor’s 500 Index and the Standard & Poor’s Systems Software Index
for the last five fiscal years (assuming a $100 investment on December 31, 2009 and reinvestment of all
dividends).

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among TSYS, the S&P 500 Index, and the S&P Systems Software Index

2009

2010

2011

2012

2013

2014

TSYS

S&P 500

S&P SS

TSYS

S&P 500

S&P SS

2009

2010

2011

2012

2013

2014

$100.00 $ 90.74 $117.38 $130.77 $206.26 $213.18

$100.00 $115.06 $117.49 $136.30 $180.44 $205.14

$100.00 $104.80 $ 94.37 $108.74 $144.51 $177.76

$250

$200

$150

$100

$50

$0

90

Shareholder Information

Corporate Headquarters
TSYS
One TSYS Way
P.O. Box 2567
Columbus, GA 31902-2567
www.tsys.com
+1.706.649.2310

Stock Trading Information
TSYS common stock is traded as “TSS” on the New York  
Stock Exchange (NYSE). Price and volume information  
appear under the abbreviation “TSS” in NYSE  
daily stock quotation listings.

Dividend Reinvestment and  
Direct Stock Purchase Plan
The TSYS Dividend Reinvestment and Direct Stock  
Purchase Plan (“Plan”) provides a comprehensive  
package of services designed to make investing in TSYS 
stock easy, convenient and more affordable. You may 
request information about the Plan over the phone  
at +1.877.833.6707.

New Investors
You can join the Plan by making an initial investment  
of at least $250.

TSYS Shareholders
You can participate by submitting a completed enrollment 
form. If your shares are held in a brokerage account, you 
must ﬁrst register some or all of your shares in your name.

Dividend Reinvestment
You can invest all or a part of your cash dividends to  
accumulate more shares without paying fees.

Online Access

Optional Cash Investments
You can purchase additional shares by investing between 
$50 at any one time and $250,000 in total per calendar 
year. If you wish, we can withdraw funds automatically  
from your bank account each month to purchase shares.  
Purchases are made weekly, or more often if volume 
dictates. Fees are lower than those typically charged  
by the ﬁnancial services industry.

Safekeeping
You can deposit your certiﬁcates with us for safekeeping  
at no cost to you. You can request a certiﬁcate any time  
at no cost.

Gifts and Transfers of Shares
You can make gifts or transfers to others.  
Contact American Stock Transfer & Trust Company, LLC  
at +1.877.833.6707 or your brokerage ﬁrm 
for more information.

Sale of Shares
You can sell some or all of your shares when you choose 
at fees lower than those typically charged by the ﬁnancial 
services industry. Shares are sold weekly, or more often  
if volume dictates. 

Form 10-K
A copy of the company’s 2014 Annual Report on Form  
10-K, ﬁled with the Securities and Exchange Commission, 
is available at no charge upon written request to Investor  
Relations at the address below:

TSYS Investor Relations
One TSYS Way
Columbus, GA 31901
ir@tsys.com

Annual Shareholders’ Meeting
The Annual Meeting of Shareholders will be held  
on April 28, 2015 at 10 a.m. ET at the TSYS Riverfront  
Campus Auditorium in Columbus, Georgia.

Independent Auditors
KPMG LLP, Atlanta, Georgia

Investor Relations
Analysts, investors and others seeking additional  
information not available at tsys.com should contact:

Shawn Roberts
TSYS Investor Relations
One TSYS Way
Columbus, GA 31901
+1.706.644.6081
shawnroberts@tsys.com

Current shareholders requiring
assistance should contact:  

American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
+1.877.833.6707
www.amstock.com

Online Services at tsys.com 
You can purchase your initial shares online at tsys.com. TSYS makes it easy and convenient to get current information about your shareholder account any time.

You will have access to:
• View account status
• Purchase or sell shares
• View book-entry information
• Request certiﬁcate issuance
• Establish or change your PIN

• View payment history for dividends
• Make address changes
• Obtain a duplicate 1099 tax form
• Request a dividend check replacement
• Receive annual meeting materials electronically 

Cautionary language regarding forward-looking statements:
This annual report to shareholders contains forward-looking statements, which by their nature involve risks and uncertainties. Please refer to TSYS’ Annual Report on Form 10-K ﬁled  
with the Securities and Exchange Commission for information concerning forward-looking statements, under the caption “Safe Harbor Statement,” and for a description of certain  
factors that may cause actual results to differ from goals referred to in this report or contemplated by such statements.

© 2015 Total System Services, Inc.® All rights reserved worldwide. Total System Services, Inc. and TSYS® are federally registered service marks of Total System Services, Inc. 
in the United States. Total System Services, Inc. and its afﬁliates own a number of service marks that are registered in the United States and in other countries. All other 
products and company names are trademarks of their respective companies. Apple, the Apple logo, and iPhone are trademarks of Apple Inc., registered in the U.S. and 
other countries. Apple Pay and Touch ID are trademarks of Apple Inc.

About TSYS

At TSYS® (NYSE: TSS), we believe payments should revolve around people, not the other way around.  
We call this belief People-Centered Payments®. By putting people at the center of every decision we  
make, TSYS supports ﬁnancial institutions, businesses and governments in more than 80 countries.  
Through NetSpend®, A TSYS Company, we empower consumers with the convenience, security, and  
freedom to be self-banked. TSYS offers issuer services and merchant payment acceptance for credit,  
debit, prepaid, healthcare and business solutions.

TSYS’ headquarters are located in Columbus, Ga., U.S.A., with local ofﬁces spread across the Americas,  
EMEA and Asia-Paciﬁc. TSYS is a member of The Civic 50 and was named one of the 2015 World’s  
Most Ethical Companies by Ethisphere magazine. TSYS routinely posts all important information  
on its website. For more, please visit us at www.tsys.com.

In 2014, for the second consecutive year, TSYS was named to the The Civic 50, an annual initiative 

that identi(cid:373)es and reco(cid:74)ni(cid:93)es com(cid:83)anies for their commitment to im(cid:83)rove the (cid:84)uality of life in the 

communities where they do business. The survey was conducted by the National Conference on 

Citi(cid:93)enshi(cid:83) (cid:11)NCoC(cid:12) and (cid:51)oints of (cid:47)i(cid:74)ht, the nation(cid:337)s de(cid:373)nitive e(cid:91)(cid:83)erts on civic en(cid:74)a(cid:74)ement, and 

(cid:83)ublished by (cid:37)loomber(cid:74) News. 

For the third time in four years, TSYS was named one  

of the 2015 (cid:58)orld(cid:337)s (cid:48)ost (cid:40)thical Com(cid:83)anies by  

(cid:40)this(cid:83)here, a (cid:74)lobal ethics thin(cid:78) tan(cid:78).

NYSE: TSS

TSYS®
One TSYS Way
P.O. Box 2567
Columbus, GA 31902-2567
+1.706.649.2310

www.tsys.com