TSYS beats expectations

"We are excited that we exceeded our expectations for the year, even after raising our forecast twice during 2005," says Philip W. Tomlinson, chief executive officer of TSYS. "The financial strength for the year was driven by the conversion of J.P. Morgan Chase & Co., stronger than expected earnings growth at Vital Processing Services, good growth in our value-added products and effective cross-selling of products and services. Our revenue and earnings growth for 2005 were accomplished by the hard work and dedication of our entire team. We are looking forward to another record year in 2006," said Philip W. Tomlinson, chief executive officer of TSYS.

Full year 2005 Financial Highlights

• Total revenues increased 35%
• Earnings of $194.5 million up 29%
• Earnings per share of $0.99 up 29%
• Achieved double-digit net income growth for 21 out of the last 22 years

Highlights for the Fourth Quarter 2005

• Expanded global reach into China with a 34% equity interest in China UnionPay Data Co., Ltd.
• Extended TSYS' processing relationships with Allied Irish Banks of Dublin, Ireland and Metavante of Milwaukee, Wisconsin
• Executed a long-term agreement with Toronto-Dominion Bank, of Toronto, Canada to provide a range of processing and support services for its consumer and commercial credit-card accounts
• Established TSYS Managed Services by integrating contact centers and customer-servicing operations of several subsidiary companies into a single special business unit.

"TSYS posted one of the strongest financial performances in its history in 2005, a year that included several milestone achievements. Unfortunately, the exceptional results have been somewhat overshadowed by news that Citigroup Sears and Bank of America intend to deconvert their consumer accounts in 2006. We believe our management team is deep with experience and has an exceptional support team that is unparalleled in our industry. This team will enable us to continue our momentum in 2006, and overcome any challenge facing us," Tomlinson says.

"Our fundamentals continue to be strong, with more than 75 million accounts in the pipeline for conversion in 2006," Tomlinson says. "TSYS delivers real competitive advantages in a dynamic marketplace driven by transaction growth and evolving point-of-sale technologies. We expect that our business will continue to grow domestically and abroad as we extend services to and generate revenue from new markets," said Tomlinson.

TSYS expects its 2006 earnings will increase in the range of 21% - 23%, and is based on the following assumptions:

1. Total revenues will increase 5% - 7%
   
2. Accounts on file at the end of 2006 will be approximately 395 million to 405 million
   
3. Deconvert the Citigroup Sears portfolio as scheduled in May 2006
   
4. The deconversion of Bank of America's consumer portfolio will occur as scheduled in October 2006, with a one-time contract-termination payment of approximately $69 million and an acceleration of amortization of approximately $7 million in contract-acquisition costs.
   
5. TSYS will defer revenues and costs associated with converting and servicing the Capital One portfolio. TSYS is in the process of completing the analysis of the accounting for the Capital One contract.

The expected results for 2006 also include the estimated impact of expensing the fair value of stock options beginning in 2006, as well as expenses associated with restricted stock awards, which are expected to replace stock options as TSYS' primary method of equity-based compensation. The incremental (as compared to 2005) after-tax expense for both options and restricted stock awards in 2006 is estimated at $5.8 million, which represents approximately $0.03 per diluted share, or 3% of reported 2005 diluted earnings per share.

In other business, the TSYS Board of Directors has elected Philip W. Tomlinson as chairman, to succeed Richard W. Ussery, who will continue to serve as a director.

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