Item 1. Business
Business. Established in 1983 as an outgrowth of an on-line accounting and bankcard data processing system developed for Columbus Bank and Trust Company, TSYS is now one of the world's largest electronic payment processors of consumer credit, debit, commercial, stored value and retail cards. Based in Columbus, Georgia, and traded on the New York Stock Exchange under the symbol "TSS," TSYS provides the electronic link between buyers and sellers with a comprehensive on-line system of data processing services servicing financial and nonfinancial institutions throughout the United States, Canada, Mexico, Honduras, the Caribbean and Europe, representing more than 245 million cardholder accounts on file as of December 31, 2002. TSYS currently offers merchant services to financial institutions and other organizations in Japan through its majority owned subsidiary, GP Network Corporation, and in the United States through its joint venture, Vital Processing Services L.L.C. TSYS also offers value added products and services to support its core processing services. Value added products and services include: risk management tools and techniques, such as credit evaluation, fraud detection and prevention and behavior analysis tools; and revenue enhancement tools, such as loyalty programs and bonus rewards. Synovus Financial Corp., a $19 billion asset, diverse financial services company, owns 81 percent of TSYS.
As of January 1, 2003, TSYS had five wholly owned subsidiaries: (1) Columbus Depot Equipment Company, which sells and leases computer related equipment associated with TSYS' transaction processing services; (2) Columbus Productions, Inc., which provides full-service commercial printing and related services; (3) TSYS Canada, Inc., which provides programming support and assistance with the conversion of card portfolios to TS2; (4) TSYS Total Debt Management, Inc., which provides debt collection and bankruptcy management services; and (5) ProCard, Inc., which provides software and Internet tools designed to assist organizations with the management of purchasing, travel and fleet card programs.
TSYS also holds: (1) a 49% equity interest in a joint venture company named Total System Services de Mexico, S.A. de C.V., which provides credit card related services to financial and nonfinancial Mexican institutions; (2) a 50% interest in Vital Processing Services L.L.C., a joint venture with Visa U.S.A. Inc., that offers fully integrated merchant transaction and related electronic transaction processing services to financial and nonfinancial institutions and their merchant customers; and (3) a 51.46% equity interest in GP Network Corporation, a company which provides merchant processing services to financial institutions and retailers in Japan.
The services provided by TSYS are divided into two operating segments, domestic-based processing services, which accounted for 93% of TSYS' revenues in 2002, and international-based processing services, which accounted for 7% of TSYS' revenues in 2002. TSYS does not believe that it is subject to any material risks with respect to its international operations other than foreign exchange risk as described in Part II, Item 7A under the caption "Quantitative and Qualitative Disclosures About Market Risk."
Seasonality. 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.
Intellectual Property. TSYS' intellectual property portfolio is a component of our ability to be a leading electronic payment services provider. We diligently protect and work to build our intellectual property rights through patent, servicemark and trade secret laws. We also use various licensed intellectual property to conduct our business. In addition to using our intellectual property in our own operations, we grant licenses to certain of our clients to use our intellectual property.
Major Customers. A significant amount of TSYS' revenues are derived from long-term contracts with significant customers, including certain major customers. For the year ended December 31, 2002, Bank of America Corporation and Providian Financial Corporation accounted for approximately 19% and 13%, respectively, of TSYS' total revenues. As a result, the loss of Bank of America Corporation or Providian Financial Corporation, or other major or significant customers, could have a material adverse effect on TSYS' financial position, results of operations and cash flows.
Competition. TSYS encounters vigorous competition in providing card processing services from several different sources. Most of the national market in third party card processors is presently being provided by approximately four vendors. TSYS believes that as of December 31, 2002 it is the second largest third party card processor in the United States. In addition, TSYS competes with in-house processors and software vendors which provide their products to institutions which process in-house. TSYS is presently encountering, and in the future anticipates continuing to encounter, substantial competition from card associations, data processing and bankcard computer service firms and other such third party vendors located throughout the United States. Based upon available market share data, TSYS believes that at the end of 2002 it held a 21% share of the domestic Visa and MasterCard consumer card processing market, an 86% share of the Visa and MasterCard domestic commercial card processing market, an 18% share of the domestic retail card processing market and a 4% share of the domestic off-line debit processing market. In addition to processing cards for United States clients, TSYS also believes it holds an approximately 25% share of the Mexican credit card processing market, an approximately 33% share of the Canadian credit card processing market and an approximately 21% share of the United Kingdom credit card processing market. TSYS believes that as of December 31, 2002 it is the world's largest third party processor of international accounts.
TSYS' major competitor in the card processing industry is First Data Resources, Inc., a wholly owned subsidiary of First Data Corporation, which provides card processing services, including authorization and data entry services. The principal methods of competition between TSYS and First Data Resources are price, quality, features and functionality and reliability of service. Certain other subsidiaries of First Data Corporation also compete with TSYS. In addition, there are a number of other companies which have the necessary financial resources and the technological ability to develop or acquire products and, in the future, to provide services similar to those being offered by TSYS.
Regulation and Examination. TSYS is subject to being examined, and is indirectly regulated, by the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, and the various state financial regulatory agencies which supervise and regulate the financial institutions for which TSYS provides electronic payment processing services. Matters reviewed and examined by these federal and state financial institution regulatory agencies have included TSYS' internal controls in connection with its present performance of electronic payment processing services, and the agreements pursuant to which TSYS provides such services.
As the Federal Reserve Bank of Atlanta has approved Synovus' indirect ownership of TSYS through Columbus Bank and Trust Company, TSYS is subject to direct regulation by the Federal Reserve Board. TSYS was formed with the prior written approval of, and is subject to regulation and examination by, the Department of Banking and Finance of the State of Georgia as a subsidiary of Columbus Bank and Trust Company. In addition, as TSYS and its subsidiaries operate as subsidiaries of Columbus Bank and Trust Company, they are subject to regulation by the Federal Deposit Insurance Corporation.
Employees. As of December 31, 2002, TSYS had 5,121 full-time employees.
Website Access. TSYS' website address is www.tsys.com. You may obtain free electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports at the investor relations section of our website under the heading "Financials" and then under "SEC Filings." These reports are available on our website as soon as reasonably practicable after we electronically file them with the SEC.
See the "Financial Review" Section on pages through and Note 1, Note 4, Note 9, Note 11 and Note 12 of Notes to Consolidated Financial Statements on pages through, pages and, and pages through of the Financial Appendix to TSYS' Proxy Statement in connection with its Annual Shareholders' Meeting to be held on April 17, 2003 which are specifically incorporated herein by reference.
Item 2.
Item 2. Properties
TSYS owns a 377,000 square foot production center and a 72,000 square foot production center which are located on a 40.4 acre tract of land in north Columbus, Georgia. Primarily production centers, these facilities house TSYS' primary data processing computer operations, statement preparation, mail handling, microfiche production, purchasing and card production, as well as other related operations.
TSYS owns a 110,000 square foot building on a 23-acre site in Columbus, Georgia, which accommodates current and future office space needs, 82,500 square feet of which houses TSYS' Business Process Management Division. TSYS also owns a 104,000 square foot building on an 18-acre site in Columbus which functions as a second data center.
TSYS entered into an operating lease for the purpose of financing its 540,000 square foot campus-type facility on approximately 46 acres of land in downtown Columbus, Georgia, which lease was renewed for a period of up to twelve months in November 2002. The campus facility serves as TSYS' corporate headquarters and houses administrative, client contact and programming team members. The campus facility consolidated most of TSYS' multiple Columbus locations.
Columbus Productions, Inc. owns a 61,000 square foot production facility, located in Columbus, Georgia.
TSYS owns a 40,000 square foot building in York, England, 23,000 square feet of which are occupied by TSYS, which houses client service and administrative personnel for TSYS Europe. TSYS Europe is included in the segment international-based processing services.
All of the properties listed above are utilized by TSYS for domestic-based processing services with the one exception noted above with respect to the space occupied by TSYS Europe.
All properties owned and leased by TSYS are in good repair and suitable condition for the purposes for which they are used. In addition to its real property, TSYS owns and/or leases a substantial amount of computer equipment.
See Note 1, Note 3, Note 4 and Note 9 of Notes to Consolidated Financial Statements on pages through, pages and, and pages and and "Operating Expenses" under the "Financial Review" Section on pages and of the Financial Appendix to TSYS' Proxy Statement which are specifically incorporated herein by reference.
Item 3.
Item 3. Legal Proceedings
See Note 9 of Notes to Consolidated Financial Statements on pages and of the Financial Appendix to TSYS' Proxy Statement which is specifically incorporated herein by reference.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The "Quarterly Financial Data, Stock Price, Dividend Information Section" which is set forth on page of the Financial Appendix to TSYS' Proxy Statement is specifically incorporated herein by reference.
Equity Compensation Plans. The following table summarizes TSYS' equity compensation plans by category.
Item 6.
Item 6. Selected Financial Data
The "Selected Financial Data" Section which is set forth on page of the Financial Appendix to TSYS' Proxy Statement is specifically incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The "Financial Review" Section which is set forth on pages through of the Financial Appendix to TSYS' Proxy Statement which includes the information encompassed within "Management's Discussion and Analysis of Financial Condition and Results of Operations," is specifically incorporated herein by reference.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Exchange Risk. TSYS is exposed to foreign exchange risk because it has revenues and expenses denominated in foreign currencies including Euro, British Pound, Mexican Peso, Canadian Dollar and Japanese Yen. These currencies 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 rate for each reporting period. Net exchange gains or losses resulting from the translation of assets and liabilities of TSYS' foreign operations, net of tax, are accumulated in a separate section of shareholders' equity titled accumulated other comprehensive loss. The amount of other comprehensive income for the year ended December 31, 2002 was $4,508,235. The amount of other comprehensive loss for the years ended December 31, 2001 and 2000 was $1,841,657 and $159,973, respectively. Currently, TSYS does not use financial instruments to hedge its exposure to exchange rate changes.
The carrying value of the assets of its foreign operations in Europe, Mexico, Canada and Japan was approximately (in U.S. dollars) $71.7 million, $3.4 million, $15,000 and $7.6 million, respectively, at December 31, 2002.
Interest Rate Risk. TSYS is also exposed to interest rate risk associated with the investing of available cash and the lease on its campus facilities. TSYS invests available cash in conservative short-term instruments and is primarily subject to changes in the prime rate.
The payments under the operating lease arrangement of the campus facilities are tied to the London Interbank Offered Rate ("LIBOR"). TSYS locks into interest rates for six-month intervals. The extent that rates change in a six-month period represents TSYS' exposure. The following represents the potential effect on operating income of hypothetical shifts in the LIBOR of plus or minus 50 basis points, 100 basis points and 150 points over a 12-month period.
TSYS renewed the lease in November 2002 for a period of up to 12 months. However, TSYS has the option to either renew the lease subject to prevailing market rates or purchase the property at the original cost of the property. As such, TSYS could have a future interest rate risk associated with a future obligation with respect to the corporate campus. TSYS can withdraw from the lease agreement by providing 60-days written notice.
Concentration of credit risk. TSYS works to maintain a large and diverse customer base across various industries to minimize the credit risk of any one customer to TSYS' accounts receivable amounts. In addition, TSYS performs ongoing credit evaluations of its customers' and suppliers' financial condition.
Concentration of client base. A significant amount of TSYS' revenues is derived from long-term contracts with large clients, including certain major customers. Processing contracts with large clients, representing a significant portion of TSYS' total revenues, generally provide for discounts on certain services based on the size and activity of clients' portfolios. Therefore, electronic payment processing revenues and the related margins are influenced by the client mix relative to the size of client card portfolios, as well as the number and activity of individual cardholder accounts processed for each client. Consolidation among financial institutions has resulted in an increasingly concentrated client base, which results in a changing client mix toward larger clients.
TSYS does have two major customers that account for a large portion of its revenues, which subjects it to credit risk. See Note 11 of Notes to Consolidated Financial Statements on pages through of the Financial Appendix to TSYS' Proxy Statement which is specifically incorporated herein by reference for a description of major customers. In addition to its two major customers, TSYS has other large clients representing a significant portion of its total revenues. The loss of any one of TSYS' large clients could have a material adverse effect on its financial position, results of operations and cash flows.
Item 8.
Item 8. Financial Statements and Supplementary Data
The "Quarterly Financial Data, Stock Price, Dividend Information" Section, which is set forth on page, and the "Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Cash Flows, Consolidated Statements of Shareholders' Equity and Comprehensive Income, Notes to Consolidated Financial Statements and Report of Independent Auditors" Sections, which are set forth on pages through of the Financial Appendix to
TSYS' Proxy Statement are specifically incorporated herein by reference.
Item 9.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The "ELECTION OF DIRECTORS" Section which is set forth on pages 3 and 4, the "EXECUTIVE OFFICERS" Section which is set forth on page 7, and the "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" Section which is set forth on page 20 of TSYS' Proxy Statement are specifically incorporated herein by reference.
Item 11.
Item 11. Executive Compensation
The "DIRECTORS' COMPENSATION" Section which is set forth on page 7, the "EXECUTIVE COMPENSATION - Summary Compensation Table; Stock Option Exercises and Grants; and Change in Control Arrangements" Sections which are set forth on pages 10 through 12, and the "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" Section which is set forth on page 16 of TSYS' Proxy Statement are specifically incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information set forth in Part II, Item 5 of this Form 10-K under the caption "Equity Compensation Plans" is hereby incorporated by reference in response to this item.
The "STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS" Section which is set forth on pages 8 and 9, the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Beneficial Ownership of TSYS Stock by CB&T" Section which is set forth on page 17, and the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Synovus Stock Ownership of Directors and Management" Section which is set forth on pages 17 and 18 of TSYS' Proxy Statement are specifically incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
The "TRANSACTIONS WITH MANAGEMENT" Section which is set forth on page 16, the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Beneficial Ownership of TSYS Stock by CB&T" Section which is set forth on page 17, the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND
CERTAIN OF SYNOVUS' SUBSIDIARIES - Interlocking Directorates of TSYS, Synovus and CB&T" Section which is set forth on page 17, and the "RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T, AND CERTAIN OF SYNOVUS' SUBSIDIARIES - Electronic Payment Processing Services Provided to CB&T and Certain of Synovus' Subsidiaries; Other Agreements Between TSYS, Synovus, CB&T and Certain of Synovus' Subsidiaries" Section which is set forth on pages 18 and 19 of TSYS' Proxy Statement are specifically incorporated herein by reference.
See also Note 2 of Notes to Consolidated Financial Statements on pages through of the Financial Appendix to TSYS' Proxy Statement which is specifically incorporated herein by reference.
Item 14.
Item 14. Controls and Procedures
We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures within 90 days of the filing date of this annual report. This evaluation was carried out under the supervision and with the participation of our management, including our chief executive officer and chief financial officer. Based on this evaluation, the chief executive officer and chief financial officer have concluded that the design and operation of our disclosure controls and procedures are effective in all material respects, including those to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. There were no significant changes to our internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements of TSYS are specifically incorporated by reference from pages through of the Financial Appendix to TSYS' Proxy Statement to Item 8, Part II, Financial Statements and Supplementary Data.
Consolidated Balance Sheets - December 31, 2002 and 2001.
Consolidated Statements of Income - Years Ended December 31, 2002, 2001 and 2000.
Consolidated Statements of Cash Flows - Years Ended December 31, 2002, 2001 and 2000.
Consolidated Statements of Shareholders' Equity and Comprehensive Income - Years Ended December 31, 2002, 2001 and 2000.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Index to Financial Statement Schedules
The following report of independent auditors and consolidated financial statement schedule of Total System Services, Inc. are included:
Report of Independent Auditors.
Schedule II - Valuation and Qualifying Accounts - Years Ended December 31, 2002, 2001 and 2000.
All other schedules are omitted because they are inapplicable or the required information is included in the Notes to Consolidated Financial Statements.
3. Exhibits
Exhibit Number Description ------- -----------
3.1 Articles of Incorporation of Total System Services, Inc. ("TSYS"), as amended, incorporated by reference to Exhibit 4.1 of TSYS' Registration Statement on Form S-8 filed with the Commission on April 18, 1997 (File No. 333-25401).
3.2 Bylaws of TSYS, as amended.
10. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.1 Director Stock Purchase Plan of TSYS, incorporated by reference to Exhibit 10.1 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as filed with the Commission on March 16, 2000.
10.2 Total System Services, Inc. 2002 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.2 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the Commission on March 19, 2002.
10.3 Synovus Financial Corp. 2002 Long-Term Incentive Plan in which
executive officers of TSYS participate, incorporated by reference to Exhibit 10.3 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the Commission on March 19, 2002.
10.4 Synovus Financial Corp./Total System Services, Inc. Deferred Compensation Plan, incorporated by reference to Exhibit 10.4 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the Commission on March 19, 2002.
10.5 Total System Services, Inc. 1992 Long-Term Incentive Plan, which was renamed the Total System Services, Inc. 2000 Long-Term Incentive Plan, incorporated by reference to Exhibit 10.5 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the Commission on March 18, 1993.
10.6 Total System Services, Inc. Directors' Deferred Compensation Plan, incorporated by reference to Exhibit 10.6 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the Commission on March 19, 2002.
10.7 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, as filed with the Commission on March 18, 1993.
10.8 Incentive Bonus Plan of Synovus Financial Corp. in which executive officers of TSYS participate, incorporated by reference to Exhibit 10.8 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the Commission on March 18, 1993.
10.9 Agreement in connection with use of aircraft, incorporated by reference to Exhibit 10.9 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the Commission on March 18, 1993.
10.10 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, as filed with the Commission on March 22, 1994.
10.11 Synovus Financial Corp. 1994 Long-Term Incentive Plan in which executive officers of TSYS participate, incorporated by reference
to Exhibit 10.11 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as filed with the Commission on March 9, 1995.
10.12 Synovus Financial Corp. Executive Bonus Plan in which executive officers of TSYS participate, incorporated by reference to Exhibit 10.12 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1995, as filed with the Commission on March 19, 1996.
10.13 Change of Control Agreements for executive officers of TSYS, incorporated by reference to Exhibit 10.13 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1995, as filed with the Commission on March 19, 1996.
10.14 Stock Option Agreement of Samuel A. Nunn, incorporated by reference to Exhibit 10.14 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as filed with the Commission on March 20, 1997.
10.15 Synovus Financial Corp. Deferred Stock Option Plan in which executive officers of TSYS participate, incorporated by reference to Exhibit 10.15 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the Commission on March 19, 2002.
10.16 Vital Processing Services, L.L.C. Restricted Unit Agreement for executive officers of TSYS, incorporated by reference to Exhibit 10.16 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 2000, as filed with the Commission on March 21, 2001.
10.17 Lease Agreement between First Security Bank, National Association, and TSYS incorporated by reference to Exhibit 10.15 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as filed with the Commission on March 23, 1998.
10.18 Synovus Financial Corp. 2000 Long-Term Incentive Plan in which executive officers of TSYS participate, incorporated by reference to Exhibit 10.16 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as filed with the Commission on March 16, 2000.
10.19 Split Dollar Insurance Agreement and related Executive Benefit
Substitution Agreement of Synovus Financial Corp. in which executive officers of TSYS participate, incorporated by reference to Exhibit 10.19 of TSYS' Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the Commission on March 19, 2002.
20.1 Proxy Statement, including Financial Appendix, for the Annual Meeting of Shareholders of TSYS to be held on April 17, 2003, certain pages of which are specifically incorporated herein by reference.
21.1 Subsidiaries of Total System Services, Inc.
23.1 Independent Auditors' Consent.
24.1 Powers of Attorney contained on the signature pages of the 2002 Annual Report on Form 10-K.
99.1 Annual Report on Form 11-K for the Total System Services, Inc. Employee Stock Purchase Plan for the year ended December 31, 2002 (to be filed as an amendment hereto within 120 days of the end of the period covered by this report.)
99.2 Annual Report on Form 11-K for the Total System Services, Inc. Director Stock Purchase Plan for the year ended December 31, 2002 (to be filed as an amendment hereto within 120 days of the end of the period covered by this report.)
99.3 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.4 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
On October 15, 2002, TSYS filed a Form 8-K with the Commission in connection with the announcement of its earnings for the third quarter of 2002.
Independent Auditors' Report
The Board of Directors Total System Services, Inc.:
Under date of January 13, 2003, we reported on the consolidated balance sheets of Total System Services, Inc. and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of income, cash flows, and shareholders' equity and comprehensive income for each of the years in the three-year period ended December 31, 2002, as contained in the Total System Services, Inc. 2002 Annual Report to Shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the Total System Services, Inc. Annual Report on Form 10-K for the year 2002. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/KPMG LLP
Atlanta, Georgia January 13, 2003
TOTAL SYSTEM SERVICES, INC. Schedule II Valuation and Qualifying Accounts
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. (Registrant)
March 19, 2003 By: /s/Richard W. Ussery ----------------------------------------- Richard W. Ussery, Chairman and Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James H. Blanchard, Richard W. Ussery and Philip W. Tomlinson, and each of them, his true and lawful attorney(s)-in-fact and agent(s), with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this report and to file the same, with all exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney(s)-in-fact and agent(s) full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated.
/s/James H. Blanchard Date: March 19, 2003 - --------------------------------------------- James H. Blanchard, Director and Chairman of the Executive Committee
/s/Richard W. Ussery Date: March 19, 2003 - --------------------------------------------- Richard W. Ussery, Chairman of the Board and Principal Executive Officer
/s/Philip W. Tomlinson Date: March 19, 2003 - --------------------------------------------- Philip W. Tomlinson, President and Director
/s/James B. Lipham Date: March 19, 2003 - --------------------------------------------- James B. Lipham, Executive Vice President, Treasurer, Principal Accounting and Financial Officer
/s/Richard Y. Bradley Date: March 19, 2003 - --------------------------------------------- Richard Y. Bradley, Director
Date: March __, 2003 - --------------------------------------------- G. Wayne Clough, Director
Date: March __, 2003 - --------------------------------------------- Walter W. Driver, Jr., Director
/s/Gardiner W. Garrard, Jr. Date: March 19, 2003 - --------------------------------------------- Gardiner W. Garrard, Jr., Director
Date: March __, 2003 - --------------------------------------------- Sidney E. Harris, Director
/s/John P. Illges, III Date: March 19, 2003 - --------------------------------------------- John P. Illges, III, Director
Date: March __, 2003 - --------------------------------------------- Alfred W. Jones III, Director
/s/Mason H. Lampton Date: March 19, 2003 - --------------------------------------------- Mason H. Lampton, Director
/s/H. Lynn Page Date: March 19, 2003 - --------------------------------------------- H. Lynn Page, Director
Date: March __, 2003 - --------------------------------------------- W. Walter Miller, Jr., Director
/s/William B. Turner Date: March 19, 2003 - --------------------------------------------- William B. Turner, Director
/s/James D. Yancey Date: March 19, 2003 - --------------------------------------------- James D. Yancey, Director
Date: March __, 2003 - -------------------------------------------- Rebecca K. Yarbrough, Director
Certification of Chief Executive Officer
I, Richard W. Ussery, certify that:
1. I have reviewed this annual report on Form 10-K of Total System Services, Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 19, 2003 /s/Richard W. Ussery ----------------------------------- Richard W. Ussery Chief Executive Officer
Certification of Chief Financial Officer
I, James B. Lipham, certify that:
1. I have reviewed this annual report on Form 10-K of Total System Services, Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 19, 2003 /s/James B. Lipham -------------------------- James B. Lipham Chief Financial Officer