UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K/A

Amendment No. 1

 

 

Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

for the fiscal year ended December 31, 2018

Commission file number 1-10254

 

 

 

LOGO

TOTAL SYSTEM SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Georgia   58-1493818

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

One TSYS Way

Columbus, Georgia

  31901
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (706) 644-4388

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of each exchange on which registered

Common Stock, $.10 Par Value   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    

YES  ☒    NO  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    YES  ☐    NO  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES  ☒    NO  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ☒    Accelerated Filer   ☐
Non-accelerated filer   ☐    Smaller reporting company   ☐
Emerging growth company   ☐     

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ☐    NO  ☒

As of June 30, 2018, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $9,575,381,000 based on the closing sale price as reported on the New York Stock Exchange.

As of January 31, 2019, there were 176,915,530 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

 

Incorporated Documents

 

Form 10-K Reference Locations

Portions of the Annual Report to Shareholders

for the year ended December 31, 2018 (“Annual Report”)

  Parts I, II, III and IV

Portions of the 2019 Proxy Statement for the Annual Meeting

of Shareholders to be held May 2, 2019 (“Proxy Statement”)

  Part III

 

 

 

EXPLANATORY NOTE

Total System Services, Inc. is filing this Amendment No. 1 on Form 10-K/A for the sole purpose of amending Item 15 of its Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on February 21, 2019, to include Exhibit 99.1, the Annual Report on Form 11-K for the Total System Services, Inc. 2012 Employee Stock Purchase Plan for the year ended December 31, 2018 as set forth below and in the attached exhibits. This Amendment No. 1 does not otherwise update information in the originally filed Form 10-K to reflect facts or events occurring subsequent to the original filing date.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)    1.     Financial Statements

The following consolidated financial statements of TSYS are incorporated in this document by reference from pages 35 through 86 of the Annual Report.

Consolidated Balance Sheets—December 31, 2018 and 2017

Consolidated Statements of Income—Years Ended December 31, 2018, 2017 and 2016

Consolidated Statements of Comprehensive Income—Years Ended December 31, 2018, 2017 and 2016

Consolidated Statements of Cash Flows—Years Ended December 31, 2018, 2017 and 2016

Consolidated Statements of Changes in Equity—Years Ended December 31, 2018, 2017 and 2016

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Management’s Report on Internal Control Over Financial Reporting

2.     Financial Statement Schedules

The following consolidated financial statement schedule of TSYS is included:

Schedule II—Valuation and Qualifying Accounts—Years Ended December 31, 2018, 2017 and 2016

All other schedules are omitted because they are inapplicable or the required information is included in the consolidated financial statements and notes thereto.

3.     Exhibits

The following exhibits are filed herewith or are incorporated to other documents previously filed with the SEC. Exhibits 10.5 through 10.28 pertain to executive compensation plans and arrangements. With the exception of those portions of the Annual Report and Proxy Statement that are expressly incorporated by reference in this Form 10-K, such documents are not to be deemed filed as part of this Form 10-K.

 

1

Exhibit

Number

  

Exhibit Description

  2.1    Agreement and Plan of Merger, dated December  16, 2017, by and among Total System Services, Inc., PCP CYN Merger Sub, Inc., MW CYN Merger Sub, LLC, Cayan Holdings LLC, PCP MW Holding Corp., and Parthenon Investors IV L.P. solely in its capacity as representative of the equityholders, incorporated by reference to Exhibit 2.1 of TSYS’ Current Report on Form 8-K filed with the SEC on December 19, 2017
  3.1    Articles of Incorporation of TSYS, as amended, incorporated by reference to Exhibit 3.1 of TSYS’ Current Report on Form 8-K filed with the SEC on April 30, 2009
  3.2    Bylaws of TSYS, as amended, incorporated by reference to Exhibit 3.1 of TSYS’ Current Report on Form 8-K filed with the SEC on June 20, 2018
  4.1    Indenture, dated as of May  22, 2013, between TSYS and Wells Fargo Bank, National Association, as trustee, incorporated by reference to Exhibit 4.1 of TSYS’ Current Report on Form 8-K filed with the SEC on May 22, 2013
  4.2    Form of 2.375% Senior Note due 2018, incorporated by reference to Exhibit 4.2 of TSYS’ Current Report on Form 8-K filed with the SEC on May 22, 2013
  4.3    Form of 3.750% Senior Note due 2023, incorporated by reference to Exhibit 4.3 of TSYS’ Current Report on Form 8-K filed with the SEC on May 22, 2013
  4.4    Senior Indenture, dated March  17, 2016, between TSYS and Regions Bank as trustee, incorporated by reference to Exhibit 4.1 of TSYS’ Current Report on Form 8-K filed with the SEC on March 17, 2016
  4.5    Form of 3.800% Senior Note due 2021, incorporated by reference to Exhibit 4.2 of TSYS’ Current Report on Form 8-K filed with the SEC on March 17, 2016
  4.6    Form of 4.800% Senior Note due 2026, incorporated by reference to Exhibit 4.3 of TSYS’ Current Report on Form 8-K filed with the SEC on March 17, 2016
  4.7    Form of 4.000% Senior Note due 2023, incorporated by reference to Exhibit 4.1 of TSYS’ Current Report on Form 8–K filed with the SEC on May 11, 2018
  4.8    Form of 4.450% Senior Note due 2028, incorporated by reference to Exhibit 4.2 of TSYS’ Current Report on Form 8–K filed with the SEC on May 11, 2018
10.1    Credit Agreement of Total System Services, Inc., dated as of February  23, 2016, with JPMorgan Chase Bank, N.A., as Administrative Agent and L/C Issuer, Bank of America, N.A., as Syndication Agent and L/C Issuer, The Bank of Tokyo-Mitsubishi UFJ, LTD., U.S. Bank National Association and Wells Fargo Bank, National Association, as Co-Documentation Agents, and the other lenders party thereto, with J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Bank of Tokyo-Mitsubishi UFJ, LTD., U.S. Bank National Association and Wells Fargo Securities, LLC as joint lead arrangers and joint bookrunners, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on February 23, 2016

 

2

10.2    Bilateral Loan Facility Commitment Letter, dated December  16, 2017, by and among Total System Services, Inc. and Bank of America N.A., incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on December 19, 2017
10.3    Credit Agreement, dated January  10, 2018, by and among Total System Services, Inc., Bank of America, N.A. as Administrative Agent, the other lenders party thereto from time to time and Bank of America Merrill Lynch, as sole lead arranger and sole bookrunner, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on January 11, 2018
10.4    Credit Agreement of Total System Services, Inc., dated as of April  23, 2018, with Bank of America, N.A., as Administrative Agent and L/C Issuer, JPMorgan Chase Bank, N.A., as Syndication Agent, MUFG Bank, Ltd., Capital One, N.A., Regions Bank, SunTrust Bank, TD Bank, N.A., U.S. Bank National Association and Wells Fargo Bank, National Association, as Co-Documentation Agents, and the other lenders party thereto, with Bank of America Merrill Lynch and JPMorgan Chase Bank, N.A., MUFG Bank, Ltd., Capital One, N.A., Regions Bank, Suntrust Robinson Humphrey, Inc., TD Securities (USA) LLC, U.S. Bank National Association and Wells Fargo Securities, LLC as joint lead arrangers and joint bookrunners, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on April 24, 2018

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

 

10.5    Amended and Restated Total System Services, Inc. Deferred Compensation Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed with the SEC on August 9, 2010
10.6    Amended and Restated Total System Services, Inc. Directors’ Deferred Compensation Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, filed with the SEC on August 7, 2008
10.7P    Wage Continuation Agreement of TSYS, incorporated by reference to Exhibit 10.7 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 1992, filed with the SEC on March 18, 1993
10.8P    Split Dollar Insurance Agreement of TSYS, incorporated by reference to Exhibit 10.10 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 1993, filed with the SEC on March 22, 1994
10.9    Change of Control Agreement for executive officers of TSYS, incorporated by reference to Exhibit 10.17 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC on February 29, 2008
10.10    Split Dollar Insurance Agreement and related Executive Benefit Substitution Agreement, incorporated by reference to Exhibit 10.19 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed with the SEC on March 19, 2002

 

3

10.11    Summary of Board of Directors Compensation, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 4, 2017
10.12    Total System Services, Inc. 2012 Omnibus Plan (formerly named the 2008 Omnibus Plan), incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on May 4, 2012
10.13    Form of Non-Employee Director Fully Vested Stock Option Agreement, incorporated by reference to Exhibit 10.37 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC on February 28, 2011
10.14    Form of Non-Employee Director Fully Vested Share Award Agreement, incorporated by reference to Exhibit 10.38 of TSYS’ Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC on February 28, 2011
10.15    Form of Indemnification Agreement for directors and executive officers of TSYS, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on July 26, 2007
10.16    Form of Senior Executive Stock Option Agreement for 2015 stock option awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the Quarter ended March 31, 2015, filed with the SEC on May 7, 2015
10.17    Form of Senior Executive Performance Share Agreement for 2015 performance share awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Quarterly Report on Form 10-Q for the Quarter ended March 31, 2015, filed with the SEC on May 7, 2015
10.18    Form of Amendment to Senior Executive Stock Option Agreement and Senior Executive Performance Share Agreement, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the Quarter ended September 30, 2015, filed with the SEC on November 5, 2015
10.19    Transition and Retirement Agreement, dated June  23, 2014, between Philip W. Tomlinson and Total System Services, Inc., incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on June 23, 2014
10.20    Restrictive Covenant Agreement, dated June  23, 2014, between Philip W. Tomlinson and Total System Services, Inc., incorporated by reference to Exhibit 10.2 of TSYS’ Current Report on Form 8-K filed with the SEC on June 23, 2014
10.21    Consulting Agreement, dated June  23, 2014, between Philip W. Tomlinson and Total System Services, Inc., incorporated by reference to Exhibit 10.3 of TSYS’ Current Report on Form 8-K filed with the SEC on June 23, 2014
10.22    Form of Stock Option Agreement for stock option awards under the Total System Services, Inc. 2012 and 2017 Omnibus Plans, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on May 5, 2016

 

4

10.23    Form of Performance Share Agreement for 2016 performance share awards under the Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.2 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed with the SEC on May 5, 2016
10.24    Form of Performance Share Agreement for 2017 and 2018 performance share awards under the Total System Services, Inc. 2012 and 2017 Omnibus Plans, incorporated by reference to Exhibit 10.2 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 4, 2017
10.25    Total System Services, Inc. 2017 Omnibus Plan, incorporated by reference to Exhibit 10.1 of TSYS’ Current Report on Form 8-K filed with the SEC on April 28, 2017
10.26    Letter Agreement regarding separation, dated September  21, 2017, between Total System Services, Inc. and Pamela A. Joseph, incorporated by reference to Exhibit 10.1 of TSYS’ Quarterly Report on Form 10-Q for the quarter ended October  31, 2017, filed with the SEC on November 7, 2017
10.27    Form of Performance Share Agreement for performance share awards with nonfinancial metrics under the Total System Services, Inc. 2017 Omnibus Plan, incorporated by reference to TSYS’ Quarterly Report on Form 10–Q for the quarter ended March 31, 2018, filed with the SEC on May 8, 2018
10.28    Form of Amendment to Nonemployee Director Fully Vested Stock Option Agreement
13.1    Certain specified pages of TSYS’ 2018 Annual Report to Shareholders which are incorporated herein by reference
21.1    Subsidiaries of Total System Services, Inc.
23.1*    Consent of Independent Registered Public Accounting Firm
24.1    Powers of Attorney contained on the signature pages of this 2018 Annual Report on Form 10-K and incorporated herein by reference
31.1*    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1*    Annual Report on Form 11-K for the Total System Services, Inc. 2012 Employee Stock Purchase Plan for the year ended December 31, 2018
101    Interactive Data File

 

*

Filed Herewith

 

5

We agree to furnish the SEC, upon request, a copy of each instrument with respect to issues of long-term debt. The principal amount of any individual instrument, which has not been previously filed, does not exceed ten percent of the total assets of TSYS and our subsidiaries on a consolidated basis.

Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Total System Services, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    TOTAL SYSTEM SERVICES, INC.
April 11, 2019     By:   /s/ M. Troy Woods
      M. Troy Woods,
      Chairman, President and Chief Executive Officer
      (Principal Executive Officer)

 

6

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

The Plan Administrator

Total System Services, Inc.

    2012 Employee Stock Purchase Plan:

We consent to the incorporation by reference in the registration statement (No. 333-181790) on Form S-8 of Total System Services, Inc. of our report dated April 11, 2019, with respect to the statements of financial condition of the Total System Services, Inc. 2012 Employee Stock Purchase Plan (the Plan) as of December 31, 2018 and 2017, the related statements of operations and changes in plan equity for each of the years in the three-year period ended December 31, 2018, and the related notes, which report appears in the December 31, 2018 annual report on Form 11-K of the Total System Services, Inc. 2012 Employee Stock Purchase Plan, included as Exhibit 99.1 to the December 31, 2018 annual report Form 10-K/A Amendment No.1 of Total System Services, Inc.

/s/ KPMG LLP

Atlanta, Georgia

April 11, 2019

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, M. Troy Woods, certify that:

 

1.

I have reviewed this Amendment No. 1 to the annual report on Form 10-K of Total System Services, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

  (c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: April 11, 2019       /s/ M. Troy Woods
      M. Troy Woods
      Chairman, President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Paul M. Todd, certify that:

 

1.

I have reviewed this Amendment No. 1 to the annual report on Form 10-K of Total System Services, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

  (c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: April 11, 2019       /s/ Paul M. Todd
      Paul M. Todd
      Senior Executive Vice President and Chief Financial Officer

Exhibit 99.1

  

 

 

 

 

FORM 11-K

 

 

(Mark One)

☒

ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

 

☐

TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      To                     

Commission file number 1-10254

 

 

TOTAL SYSTEM SERVICES, INC. 2012 EMPLOYEE STOCK PURCHASE PLAN

TOTAL SYSTEM SERVICES, INC.

ONE TSYS WAY

COLUMBUS, GEORGIA 31901

(706) 644-4388

 

 

 

TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Financial Statements

December 31, 2018, 2017, and 2016

(With Report of Independent Registered Public Accounting Firm Thereon)

Report of Independent Registered Public Accounting Firm

The Plan Administrator and Plan Participants

Total System Services, Inc.

    2012 Employee Stock Purchase Plan:

Opinion on the Financial Statements

We have audited the accompanying statements of financial condition of the Total System Services, Inc. 2012 Employee Stock Purchase Plan (the Plan) as of December 31, 2018 and 2017, the related statements of operations and changes in plan equity for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Plan as of December 31, 2018 and 2017, and the results of its operations and changes in its plan equity for each of the years in the three-year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/KPMG LLP

We have served as the Plan’s auditor since 2013.

Atlanta, Georgia

April 11, 2019

TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Statements of Financial Condition

December 31, 2018 and 2017

 

Assets    2018      2017  

Cash

   $ 646,223        526,712  
  

 

 

    

 

 

 

Total assets

   $ 646,223        526,712  
  

 

 

    

 

 

 

Plan Equity

     

Plan Equity–

     

(3,646 active participants and 3,303 actively contributing participants at December 31, 2018;
3,304 active participants and 2,901 actively contributing participants at December 31, 2017)

   $ 646,223        526,712  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

2

TOTAL SYSTEM SERVICES, INC.

2012 EMPLOYEE STOCK PURCHASE PLAN

Statements of Operations and Changes in Plan Equity

Years ended December 31, 2018, 2017 and 2016

 

     2018      2017      2016  

Contributions:

        

Participants

   $ 11,947,106        10,650,124        10,554,208  

Participating employers:

        

Total System Services, Inc.

     1,178,427        1,094,650        1,080,477  

Columbus Depot Equipment Company

     1,733        1,089        97  

Columbus Productions, Inc.

     5,277        5,524        5,707  

TSYS Canada, Inc.

     4,335        4,209        13,119  

TSYS Acquiring Solutions

     136,417        120,239        122,328  

TSYS Merchant Solutions, LLC

     30,654        31,076        47,296  

TSYS International

     89,226        87,764        119,807  

ProPay

     30,680        25,176        21,141  

NetSpend

     112,519        90,816        90,637  

TSYS Advisors

     9,224        8,863        10,563  

Cayan

     25,779        —          —    

Central Payment

     5,164        4,041        2,461  

TSYS Business Solutions (formerly TransFirst)

     160,942        124,259        78,674
  

 

 

    

 

 

    

 

 

 

Total employer contributions

     1,790,378        1,597,706        1,592,306  
  

 

 

    

 

 

    

 

 

 

Total additions

     13,737,484        12,247,830        12,146,514  

Withdrawals by participants – common stock of Total System Services, Inc. at fair market value (153,126 shares in 2018, 192,918 shares in 2017, and 250,061 shares in 2016.)

     13,608,347        11,721,118        12,146,514  

Withdrawals by terminated participants

     9,626        —          —    
  

 

 

    

 

 

    

 

 

 

Increase in Plan equity for the year

     119,511        526,712        —    

Plan equity at beginning of year

     526,712        —          —    
  

 

 

    

 

 

    

 

 

 

Plan equity at end of year

   $ 646,223        526,712        —    
  

 

 

    

 

 

    

 

 

 

See accompanying notes to financial statements

 

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(1)

Description of the Plan

On January 31, 2012, the board of directors of Total System Services, Inc. (TSYS) adopted the Total System Services, Inc. 2012 Employee Stock Purchase Plan (the Plan). The Plan was approved by the TSYS shareholders on May 1, 2012, and became effective as of July 1, 2012. On July 1, 2012, the plan assets of the predecessor plan, the Total System Services, Inc. Employee Stock Purchase Plan, were rolled over into the Plan. The Plan is designed to enable participating TSYS and participating subsidiaries’ employees to purchase shares of common stock of TSYS at prevailing market prices from contributions made by them and by TSYS and its subsidiaries (the Participating Employers).

TSYS serves as the Plan Administrator. As of September 1, 2015, the Plan agent is Fidelity Stock Plan Services, LLC, hereafter referred to as “Agent.” Prior to September 1, 2015, the Plan agent was ComputerShare Shareowner Services, LLC.

All employees based in the United States who work 20 hours per week or more are eligible to participate in the Plan on the first payroll date after completing three months of continuous employment. Employees of TSYS or TSYS affiliates who are employed in a country other than the United States are not eligible to participate in the Plan unless the Plan is registered or qualified in the employee’s country of residence.

Participants contribute to the Plan through payroll deductions as a percentage of compensation. The maximum allowable contribution ranges from 3% to 7% of compensation based on years of service. The maximum amount of compensation that may be taken into account under the Plan on an annual basis is $250,000. The minimum allowable contribution is 1% of compensation. Matching contributions to the Plan are to be made by the Participating Employers in an amount equal to 0-50% of each participant’s contribution, with the percentage of the matching contribution to be set by the TSYS Board of Directors. As of December 31, 2018 and 2017, the Participating Employer’s match was 15%. Participants are immediately vested in their contributions and Participating Employer’s matching contributions.

The Plan provides, among other things, that all expenses of the Plan and its administration shall be paid by TSYS with the exception of brokers’ fees, commissions, and transaction costs, which are included in the cost of each participant’s investment in common stock of TSYS.

The Plan Agent purchases TSYS common stock on behalf of each participant with the participant contributions and company contributions. From Plan inception through August 31, 2015, TSYS common stock purchased through the Plan was held in the Plan for each participant. Effective September 1, 2015, concurrent with the change in Agent, shares of TSYS common stock purchased on behalf of Plan participants, or amounts less than the full price of a share, are immediately distributed to each participant’s personal brokerage account. Dividends are no longer paid to participants through the Plan but are paid within their brokerage account. Participants may choose dividends paid, or reinvested to purchase additional shares. Accordingly, subsequent to September 1, 2015, there is a zero balance for Plan equity except for when there is a timing difference between year-end contributions and withdrawals.

Within their personal brokerage account, the Plan provides that all shares must be held for a minimum period of six months, during which the shares cannot be sold, transferred, assigned, pledged, or otherwise disposed of. Subsequent to the six months holding period, the Plan provides that each participant may withdraw at any time all or some of his or her account balance. The participant may elect to receive the proceeds in the form of shares of common stock of TSYS or in lump-sum cash distributions.

The Plan provides that upon termination of participation in the Plan, each former participant will receive, at his or her discretion, (i) the full number of shares of TSYS common stock held on his or her behalf by the Agent, together with a check for any fractional share interest, or (ii) a lump-sum cash distribution for the proceeds of the sale of all shares held on his or her behalf by the Agent.

Participation in the Plan shall automatically terminate upon termination of a participant’s employment whether by death, retirement, or otherwise.

 

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TSYS expects to maintain the Plan indefinitely, but reserves the right to terminate or amend the Plan at any time, provided, however, that no termination or amendment shall affect or diminish any participant’s right to the benefit of contributions made by him or her, or his or her Participating Employer prior to the date of such amendment or termination.

TSYS reserves the right to suspend Participating Employer contributions to the Plan if its board of directors feels that TSYS’ financial condition warrants such action.

 

(2)

Summary of Significant Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Contributions to the Plan by TSYS and participating employees are accounted for on the accrual basis. Withdrawals are accounted for upon distribution.

Purchases and sales of TSYS common stock are reflected on a trade-date basis.

 

(3)

Tax Status of the Plan

The Plan is not qualified under Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended. The Plan does not provide for income taxes because any income is taxable to the participants. Participants in the Plan must treat as compensation income their pro rata share of contributions made to the Plan by their Participating Employer. Cash dividends paid on common stock of TSYS purchased under the Plan will be taxable to the participants on a pro rata basis for Federal and state income tax purposes during the year any such dividend is received by the participant or the Plan. Upon disposition of the common stock of TSYS purchased under the Plan, participants must treat any gain or loss as long-term or short-term capital gain or loss depending upon when such disposition occurs.

 

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