Tsys Q3 income slides

Source: Tsys

Tsys (NYSE: TSS) today reported third quarter total revenues of $432.3 million, a 4.9% increase over the second quarter of 2009.

Compared to last year, total revenues were down 1.6%, which included an unfavorable impact of $10.3 million from foreign currency exchange rates during the quarter. On a non-GAAP basis, total revenues on a constant currency basis would have been $442.6 million.

Basic earnings per share (EPS) were $0.28 for the third quarter of 2009 and EPS from continuing operations were $0.29. TSYS completed the sale of TSYS Total Debt Management, a subsidiary of TSYS, and recognized a one-time loss in discontinued operations of $3.3 million in the quarter, or approximately $0.01 per share.

Despite the headwinds of foreign currency exchange rates and upfront costs related to international expansion, TSYS' third quarter operating margins excluding reimbursable items increased sequentially by 87 basis points, and income from continuing operations increased 10.1%. This was a result of expense management, new business added and a slight increase in transactions.

Quarterly Highlights

  Q3 2009 vs. Q2 2009 vs. Q3 2008
Total Revenues $432.3 million Up $20.3 million Down $7.2 million
Revenues before Reimbursable items $359.0 million Up $8.2 million Down $13.7 million
Operating Income $87.9 million Up $5.1 million Down $7.4 million
Income from Continuing Operations $58.3 million Up $5.4 million Down $5.9 million
Net Income $55.0 million Up $1.6 million Down $9.0 million
Basic Earnings Per Share 28 cents Up 1 cent Down 4cents

"For the second quarter in a row, we are pleased to report sequential quarterly growth across the board in revenues, operating income and net income despite the challenging economic environment," said Philip W. Tomlinson, chairman of the board and chief executive officer of TSYS.

"Our balance sheet remains very strong with cash increasing $76 million in the quarter and $209 million year-to-date to $420 million. Our accumulation of cash during these tough economic times is part of our plan to build a large capital base to deploy in support of our strategic plans. We have been aggressively pursuing acquisition opportunities around the globe and are confident we will accomplish this very important part of our corporate strategy," said Tomlinson.

TSYS reaffirms its previously released guidance for 2009 of declines in revenues of 5% to 3% and net income of 13% to 11%.

Non-GAAP Measures
TSYS has included a schedule with this release that provides revenues and operating results on a constant currency basis. This non-GAAP measure presents third quarter and year-to-date 2009 financial results using the previous year's foreign currency exchange rates. On a year-to-date constant currency basis, TSYS' International Services segment's total revenues grew 20.7% as compared to a reported GAAP decline of 0.6%, and operating income declined 8.7% versus a GAAP-reported decline of 30.7%.

This release contains non-GAAP financial measures to describe TSYS' performance. The reconciliation of those measures to the most directly comparable GAAP measures is included in the financial tables of this release.

The non-GAAP financial measures of constant currency presented by TSYS are utilized by management to better understand and assess TSYS' operating results and financial performance. TSYS also uses the non-GAAP financial measures to evaluate and assess TSYS' financial performance against budget, as well as to evaluate financial performance for executive and management compensation purposes.

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 and investors 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.

TSYS provides reconciliations for each of its non-GAAP financial measures with its most directly comparable GAAP financial measure, whenever it is used. This enables shareholders and potential investors to easily assess the impact of any differences between the measure TSYS is presenting and similarly titled captions of other companies.

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.

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