EXHIBIT 99.2

Interim unaudited consolidated financial statements of Total System Services, Inc.

as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018.

TOTAL SYSTEM SERVICES, INC.

Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except per share data)		June 30, 2019				December 31, 2018
Assets
Current assets:
Cash and cash equivalents (Note 2)		$	458,220				471,156
Accounts receivable, net of allowances for doubtful accounts and billing adjustments of $6.1 million and $6.0 million as of 2019 and 2018, respectively			513,712				450,322
Contract assets (Note 3)			43,847				30,950
Prepaid expenses and other current assets (Note 2)			224,048				188,355
Total current assets			1,239,827				1,140,783
Contract assets (Note 3)			56,925				47,839
Goodwill			4,114,851				4,114,838
Other intangible assets, net of accumulated amortization of $891.1 million and $802.0 million as of 2019 and 2018, respectively			703,617				796,702
Intangible assets - computer software, net of accumulated amortization of $955.2 million and $893.4 million as of 2019 and 2018, respectively			520,494				534,536
Property and equipment, net of accumulated depreciation and amortization of $530.4 million and $522.7 million as of 2019 and 2018, respectively (Note 4)			373,868				383,074
Operating lease right-of-use assets, net (Note 4)			198,539				—
Contract cost assets, net of accumulated amortization			148,938				145,598
Equity investments, net			206,504				180,661
Deferred income tax assets			7,516				7,773
Other assets			135,727				116,905
Total assets		$	7,706,806				7,468,709
Liabilities
Current liabilities:
Accounts payable		$	57,911				97,956
Contract liabilities (Note 3)			51,553				47,227
Current portion of operating lease liabilities (Note 4)			43,346				—
Accrued salaries and employee benefits			34,922				73,143
Current portion of long-term borrowings (Note 5)			17,811				20,807
Current portion of obligations under finance leases and license agreements (Note 4)			17,712				8,318
Other current liabilities (Note 2)			278,072				268,150
Total current liabilities			501,327				515,601
Long-term borrowings, excluding current portion (Note 5)			4,003,248				3,843,394
Deferred income tax liabilities			401,486				380,278
Operating lease liabilities, excluding current portion (Note 4)			167,102				—
Obligations under finance leases and license agreements, excluding current portion (Note 4)			39,490				46,147
Contract liabilities (Note 3)			25,281				21,489
Other long-term liabilities			74,278				75,894
Total liabilities			5,212,212				4,882,803
Commitments and contingencies (Note 6)
Shareholders’ Equity
Shareholders’ equity:
Common stock - $0.10 par value. Authorized 600,000 shares; 202,765 issued as of 2019 and 2018; 176,977 and 180,586 outstanding as of 2019 and 2018, respectively			20,277				20,277
Additional paid-in capital			203,098				189,889
Accumulated other comprehensive loss, net (Notes 1 and 2)			(64,200	)			(60,223	)
Treasury stock, at cost (25,788 and 22,179 shares as of 2019 and 2018, respectively)			(1,426,177	)			(1,042,687	)
Retained earnings			3,761,596				3,478,650
Total shareholders’ equity			2,494,594				2,585,906
Total liabilities and shareholders’ equity		$	7,706,806				7,468,709

See accompanying Notes to Unaudited Consolidated Financial Statements

TOTAL SYSTEM SERVICES, INC.

Consolidated Statements of Income

(Unaudited)

 

		Three months ended								Six months ended
		June 30,								June 30,
(in thousands, except per share data)		2019				2018				2019				2018
Total revenues (Notes 3 and 11)		$	1,035,485				1,007,580				2,070,016				1,994,750
Cost of services			630,820				617,818				1,263,032				1,231,183
Selling, general and administrative expenses			185,578				181,064				364,627				366,598
Total operating expenses			816,398				798,882				1,627,659				1,597,781
Operating income			219,087				208,698				442,357				396,969
Nonoperating expenses, net			(37,416	)			(41,170	)			(80,407	)			(78,812	)
Income before income taxes and equity in income of equity investments			181,671				167,528				361,950				318,157
Income taxes (Note 8)			31,128				37,415				61,027				55,549
Income before equity in income of equity investments			150,543				130,113				300,923				262,608
Equity in income of equity investments, net of tax			12,217				12,322				23,444				22,929
Net income			162,760				142,435				324,367				285,537
Net income attributable to noncontrolling interests			—				—				—				(1,261	)
Net income attributable to Total System Services, Inc. (TSYS) common shareholders		$	162,760				142,435				324,367				284,276
Basic earnings per share (EPS) attributable to TSYS common shareholders (Note 9)		$	0.92				0.78				1.83				1.56
Diluted EPS attributable to TSYS common shareholders (Note 9)		$	0.91				0.78				1.81				1.55

See accompanying Notes to Unaudited Consolidated Financial Statements

 

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TOTAL SYSTEM SERVICES, INC.

Consolidated Statements of Comprehensive Income

(Unaudited)

 

		Three months ended								Six months ended
		June 30,								June 30,
(in thousands)		2019				2018				2019				2018
Net income		$	162,760				142,435				324,367				285,537
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			(10,009	)			(21,752	)			416				(9,257	)
Postretirement healthcare plan adjustments			837				(211	)			659				(358	)
Unrealized (loss) gain on available-for-sale securities (Note 1)			—				(1,840	)			—				741
Other comprehensive (loss) income			(9,172	)			(23,803	)			1,075				(8,874	)
Comprehensive income			153,588				118,632				325,442				276,663
Comprehensive income attributable to noncontrolling interests			—				—				—				(1,261	)
Comprehensive income attributable to TSYS common shareholders		$	153,588				118,632				325,442				275,402

See accompanying Notes to Unaudited Consolidated Financial Statements

 

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TOTAL SYSTEM SERVICES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

		Six months ended
		June 30,
(in thousands)		2019				2018
Cash flows from operating activities:
Net income		$	324,367				285,537
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			208,483				208,679
Amortization of operating lease right-of-use assets			25,555				—
Provisions for cardholder losses			25,540				34,433
Share-based compensation			22,214				20,524
Provisions for bad debt expenses and billing adjustments			5,587				5,170
Charges for transaction processing provisions			1,319				3,177
Amortization of debt issuance costs			2,652				2,362
Dividends received from equity investments			—				892
Loss (gain) on foreign currency			287				(107	)
Amortization of bond discount			557				482
(Gain) loss on disposal of equipment, net			(801	)			32
Deferred income tax expense			21,258				18,657
Changes in value of equity investments			(5,196	)			—
Equity in income of equity investments, net of tax			(23,444	)			(22,929	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable			(69,011	)			(17,489	)
Contract assets and contract liabilities			(13,965	)			(8,797	)
Contract cost assets			(3,214	)			2,989
Prepaid expenses, other current assets and other long-term assets			(52,859	)			5,111
Accounts payable			(9,156	)			(3,368	)
Accrued salaries and employee benefits			(38,282	)			(38,784	)
Other current liabilities and other long-term liabilities			(26,461	)			(25,978	)
Net cash provided by operating activities			395,430				470,593
Cash flows from investing activities:
Additions to licensed computer software from vendors			(61,209	)			(19,216	)
Purchases of property and equipment			(30,844	)			(48,608	)
Additions to internally developed computer software			(24,817	)			(19,934	)
Cash used in acquisitions, net of cash acquired			—				(1,051,629	)
Other investing activities			(2,700	)			(4,119	)
Net cash used in investing activities			(119,570	)			(1,143,506	)
Cash flows from financing activities:
Principal payments on long-term borrowings, finance lease obligations and license agreements			(299,499	)			(2,626,534	)
Purchase of noncontrolling interest			—				(126,000	)
Dividends paid on common stock			(46,534	)			(47,190	)
Subsidiary dividends paid to noncontrolling shareholders			—				(3,778	)
Repurchase of common stock under plans and tax withholding			(400,023	)			(82	)
Debt issuance costs			—				(15,979	)
Proceeds from borrowings of long-term debt			450,000				3,477,000
Proceeds from exercise of stock options			6,911				29,289
Net cash (used in) provided by financing activities			(289,145	)			686,726
Cash, cash equivalents and restricted cash:
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(332	)			(4,143	)
Net (decrease) increase in cash, cash equivalents and restricted cash			(13,617	)			9,670
Cash, cash equivalents and restricted cash at beginning of period			474,279				451,370
Cash, cash equivalents and restricted cash at end of period		$	460,662				461,040
Supplemental cash flow information:
Interest paid		$	85,404				71,778
Income taxes paid, net		$	59,411				21,475

See accompanying Notes to Unaudited Consolidated Financial Statements

 

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TOTAL SYSTEM SERVICES, INC.

Consolidated Statements of Changes in Equity

(Unaudited)

 

						TSYS Shareholders
																		Accumulated
																		Other
		Redeemable												Additional				Comprehensive
		Noncontrolling				Common Stock								Paid-In				Income (Loss),				Treasury				Retained
(in thousands, except per share data)		Interests				Shares				Dollars				Capital				Net of Tax				Stock				Earnings				Total Equity
Balance as of December 31, 2018		$	—				202,765			$	20,277				189,889				(60,223	)			(1,042,687	)			3,478,650			$	2,585,906
Cumulative effect adjustment from adoption of ASU No. 2016-01 (Note 1)			—				—				—				—				(5,052	)			—				5,052				—
Cumulative effect adjustment from adoption of ASU No. 2016-02 (Note 1)			—				—				—				—				—				—				(203	)			(203	)
Net income			—				—				—				—				—				—				161,607				161,607
Other comprehensive income			—				—				—				—				10,247				—				—				10,247
Common stock issued from treasury shares for exercise of stock options			—				—				—				3,485				—				2,981				—				6,466
Common stock unissued due to forfeiture of nonvested awards			—				—				—				77				—				(77	)			—				—
Common stock issued from treasury shares for nonvested awards			—				—				—				(12,812	)			—				12,812				—				—
Share-based compensation (Note 7)			—				—				—				11,296				—				—				—				11,296
Cash dividends declared ($0.13 per share)			—				—				—				—				—				—				(22,546	)			(22,546	)
Purchase of treasury shares			—				—				—				—				—				(400,013	)			—				(400,013	)
Balance as of March 31, 2019			—				202,765				20,277				191,935				(55,028	)			(1,426,984	)			3,622,560				2,352,760
Net income			—				—				—				—				—				—				162,760				162,760
Other comprehensive loss			—				—				—				—				(9,172	)			—				—				(9,172	)
Common stock issued from treasury shares for exercise of stock options			—				—				—				30				—				416				—				446
Common stock issued from treasury shares for nonvested awards			—				—				—				(401	)			—				401				—				—
Common stock issued from treasury shares for dividend equivalents			—				—				—				602				—				—				—				602
Share-based compensation (Note 7)			—				—				—				10,932				—				—				—				10,932
Cash dividends declared ($0.13 per share)			—				—				—				—				—				—				(23,724	)			(23,724	)
Purchase of treasury shares			—				—				—				—				—				(10	)			—				(10	)
Balance as of June 30, 2019		$	—				202,765			$	20,277				203,098				(64,200	)			(1,426,177	)			3,761,596			$	2,494,594

See accompanying Notes to Unaudited Consolidated Financial Statements

 

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TOTAL SYSTEM SERVICES, INC.

Consolidated Statements of Changes in Equity

(Unaudited)

 

						TSYS Shareholders
																		Accumulated
																		Other
		Redeemable												Additional				Comprehensive
		Noncontrolling				Common Stock								Paid-In				Income (Loss),				Treasury				Retained
(in thousands, except per share data)		Interests				Shares				Dollars				Capital				Net of Tax				Stock				Earnings				Total Equity
Balance as of December 31, 2017		$	115,689				202,765			$	20,277				162,806				(36,148	)			(909,960	)			3,004,018			$	2,240,993
Cumulative effect adjustment from adoption of ASU No. 2014-09 (Note 3)			—				—				—				—				—				—				(4,445	)			(4,445	)
Net income			1,261				—				—				—				—				—				141,841				141,841
Other comprehensive income			—				—				—				—				14,929				—				—				14,929
Common stock issued from treasury shares for exercise of stock options			—				—				—				5,199				—				21,258				—				26,457
Common stock unissued due to forfeiture of nonvested awards			—				—				—				551				—				(551	)			—				—
Common stock issued from treasury shares for nonvested awards			—				—				—				(12,368	)			—				12,368				—				—
Common stock issued from treasury shares for dividend equivalents			—				—				—				925				—				9				—				934
Share-based compensation (Note 7)			—				—				—				6,835				—				—				—				6,835
Cash dividends declared ($0.13 per share)			—				—				—				—				—				—				(23,895	)			(23,895	)
Purchase of treasury shares			—				—				—				—				—				(24	)			—				(24	)
Adjustments to redemption value of redeemable noncontrolling interest			9,051				—				—				(9,051	)			—				—				—				(9,051	)
Subsidiary dividends paid to noncontrolling interests			(1	)			—				—				—				—				—				—				—
Balance as of March 31, 2018			126,000				202,765				20,277				154,897				(21,219	)			(876,900	)			3,117,519				2,394,574
Net income			—				—				—				—				—				—				142,435				142,435
Other comprehensive loss			—				—				—				—				(23,803	)			—				—				(23,803	)
Common stock issued from treasury shares for exercise of stock options			—				—				—				1,110				—				1,717				—				2,827
Common stock unissued due to forfeiture of nonvested awards			—				—				—				78				—				(78	)			—				—
Common stock issued from treasury shares for nonvested awards			—				—				—				(577	)			—				577				—				—
Share-based compensation (Note 7)			—				—				—				13,406				—				—				—				13,406
Cash dividends declared ($0.13 per share)			—				—				—				—				—				—				(23,908	)			(23,908	)
Purchase of treasury shares			—				—				—				—				—				(58	)			—				(58	)
Adjustments to redemption value of redeemable noncontrolling interest			3,777				—				—				(3,777	)			—				—				—				(3,777	)
Subsidiary repurchase of noncontrolling interests			(126,000	)			—				—				—				—				—				—				—
Subsidiary dividends paid to noncontrolling interests			(3,777	)			—				—				—				—				—				—				—
Balance as of June 30, 2018		$	—				202,765			$	20,277				165,137				(45,022	)			(874,742	)			3,236,046			$	2,501,696

See accompanying Notes to Unaudited Consolidated Financial Statements

 

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TOTAL SYSTEM SERVICES, INC.

Notes to Unaudited Consolidated Financial Statements

Note 1 — 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 and payroll cards, demand deposit accounts and other financial service solutions to the underbanked and other consumers and businesses. The Company’s services are provided through three operating segments: Issuer Solutions, Merchant Solutions and Consumer Solutions.

Through the Company’s Issuer Solutions segment, TSYS processes information through its cardholder systems for financial and nonfinancial institutions throughout the United States and internationally. The Company’s Merchant Solutions segment provides merchant services to merchant acquirers and merchants mainly in the United States. The Company’s Consumer Solutions segment provides financial service solutions to consumers and businesses in the United States.

Pending Merger with Global Payments Inc.

On May 27, 2019, TSYS entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Global Payments Inc., a Georgia corporation (“Global Payments”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, TSYS will merge with and into Global Payments (the “Merger”), with Global Payments as the surviving entity in the Merger.

Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each share of TSYS common stock outstanding immediately prior to the effective time of the Merger, other than certain shares held by TSYS or Global Payments, will be converted into the right to receive 0.8101 shares of common stock of Global Payments. Holders of common stock of TSYS will receive cash in lieu of fractional shares. Following the completion of the Merger, former holders of TSYS common stock will own approximately forty-eight percent (48%) and former holders of Global Payments common stock will own approximately fifty-two percent (52%) of the fully diluted shares of the combined company.

The transaction, which is expected to close in the fourth quarter of 2019, is subject to the satisfaction or waiver of customary closing conditions for both parties, including receipt of required regulatory approvals, the approval of shareholders of both companies and other customary closing conditions.

Refer to the definitive joint proxy statement/prospectus of TSYS and Global Payments dated July 23, 2019, as filed by TSYS with the U.S. Securities and Exchange Commission (the “SEC”) on July 25, 2019 for additional information on the Merger.

Basis of Presentation

The accompanying unaudited consolidated financial statements of TSYS include the accounts of TSYS and its wholly- and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

These financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes required by U.S. GAAP for complete financial statements. The preparation of the consolidated financial statements requires management of the Company to make estimates and assumptions relating to the reported amounts of assets and liabilities as of 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. All adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a fair presentation of financial position and results of operations for the periods covered by this report, have been included.

 

-7-

The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s summary of significant accounting policies, consolidated financial statements and related notes included in Exhibit 99.1 to this Current Report on Form 8-K. Results of interim periods are not necessarily indicative of results to be expected for the year.

Out-of-period adjustment

As of January 1, 2019, the Company recorded an adjustment to reclassify the cumulative unrealized gain of $5.1 million related to an investment in common stock with a readily determinable fair value from other comprehensive income to opening retained earnings. This adjustment was recorded to comply with the guidance in Accounting Standards Update (“ASU”) No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.

Fair Value Measurement

Refer to Note 3 in the Notes to the Consolidated Financial Statements included in Exhibit 99.1 to this Current Report on Form 8-K, for a discussion regarding fair value measurement.

The Company had no transfers between Level 1, Level 2 or Level 3 assets during the six months ended June 30, 2019 and 2018.

As of June 30, 2019, the Company had recorded goodwill in the amount of $4.1 billion. The Company performs its annual impairment testing of its goodwill balance as of May 31^st of each year. The Company performed its annual impairment testing of its goodwill balance as of May 31, 2019, and this test did not indicate any impairment. The fair value of the reporting units substantially exceeds their carrying value.

Recently Adopted Accounting Pronouncements

The Company adopted the following ASUs on January 1, 2019:

In September 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenues from Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842), which made amendments to SEC paragraphs pursuant to the Staff Announcement at the July 20, 2017 Emerging Issues Task Force (“EITF”) Meeting and Rescission of Prior SEC Staff Announcements and Observer comments. This guidance, which is effective immediately, generally relates to the adoption of ASC 606 and 842. The adoption of the amendments in this ASU did not have a material impact on the Company’s financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which introduced a lessee model that brings most operating leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the FASB’s new revenue recognition standard. The FASB has issued several additional ASUs since this time that provide additional clarification to certain issues existing after the original ASU was released. All of the new standards were effective for the Company on January 1, 2019. TSYS adopted the new leases standard as of January 1, 2019 using the cumulative effect method. See Note 4 for further discussion of the Company’s adoption of this new standard.

New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The ASU is effective for the Company on January 1, 2020. Early adoption is permitted for periods beginning on or after January 1, 2019.

 

-8-

The FASB has issued additional ASUs that provide clarification to certain issues identified after ASU 2016-13 was released. In May 2019, the FASB issued ASU 2019-05 Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief. ASU 2019-05 was issued to provide entities with more flexibility in applying the fair value option upon the adoption of the new standard. On adoption, an entity is allowed to irrevocably elect the fair value option on an instrument-by-instrument basis. This alternative is available for all instruments in the scope of Subtopic 326-20 except for existing held-to-maturity debt securities. If an entity elects the fair value option, the difference between the instrument’s fair value and carrying amount is recognized as a cumulative-effect adjustment. In April 2019, the FASB issued ASU 2019-04 Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. ASU 2019-04 makes several changes to how entities will estimate expected credit losses, including two changes that will likely have the most significant effect. The ASU clarifies that the estimate of expected credit losses should include expected recoveries of financial assets, including recoveries of amounts expected to be written off and those previously written off. The ASU also clarifies that contractual extension or renewal options that are not unconditionally cancellable by the lender are considered when determining the contractual term over which expected credit losses are measured. The effective date and transition requirements for the amendments in ASU 2019-05 and ASU 2019-04 are the same as the effective date and transition requirements in ASU 2016-13.

The Company is continuing to evaluate the potential effects of ASU 2016-13 on its consolidated financial statements. Based upon the Company’s evaluation to date, the new guidance will apply to the Company’s accounts receivable and contract assets. The Company does not have any available-for-sale debt securities. The adoption of this guidance will require the implementation of new or updated accounting processes, procedures and internal controls over financial reporting. The new standard will also require expanded qualitative and quantitative disclosures about the Company’s financial assets and allowance for credit losses.

Refer to Note 1 in the Notes to the Consolidated Financial Statements included in Exhibit 99.1 to this Current Report on Form 8-K for a discussion regarding other new accounting pronouncements.

Note 2 — Supplementary Balance Sheet Information

Cash, Cash Equivalents and Restricted Cash

The Company maintains 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. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows.

Cash, cash equivalents and restricted cash balances are summarized as follows:

 

(in thousands)		June 30, 2019				December 31, 2018
Cash and cash equivalents in domestic accounts		$	405,000				405,535
Cash and cash equivalents in foreign accounts			53,220				65,621
Total cash and cash equivalents			458,220				471,156
Restricted cash included in other long-term assets			2,442				3,123
Total cash, cash equivalents and restricted cash shown in the statements of cash flows		$	460,662				474,279

Restricted cash included in other assets in the Consolidated Balance Sheets represents immaterial amounts required across the Company’s segments for operational purposes.

 

-9-

Prepaid Expenses and Other Current Assets

Significant components of prepaid expenses and other current assets are summarized as follows:

 

(in thousands)		June 30, 2019				December 31, 2018
Prepaid expenses		$	60,647				48,058
Income taxes receivable			48,509				19,362
R&D state tax credit			21,657				26,541
Supplies inventory			19,710				18,089
Other			73,525				76,305
Total		$	224,048				188,355

Other Current Liabilities

Significant components of other current liabilities are summarized as follows:

 

(in thousands)		June 30, 2019				December 31, 2018
Accrued card brand fees		$	63,887				55,991
Accrued third-party commissions			53,705				46,977
Accrued expenses			28,431				25,178
Dividends payable			23,780				24,645
Accrued interest			21,818				22,191
Other			86,451				93,168
Total		$	278,072				268,150

Accumulated Other Comprehensive Loss

The income tax effects allocated to and the cumulative balance of accumulated other comprehensive income (loss) are as follows:

 

(in thousands)		Foreign Currency Translation Adjustments				Gain on Available-For- Sale Securities				Change in Postretirement Healthcare Plans				Total Accumulated Other Comprehensive Loss, Net of Tax
Balance as of December 31, 2018		$	(63,186	)			5,052				(2,089	)		$	(60,223	)
Reclassification from adoption of ASU No. 2016-01 (Note 1)			—				(5,052	)			—				(5,052	)
Balance after reclassification (a)			(63,186	)			—				(2,089	)			(65,275	)
Pretax amount			420				—				966				1,386
Tax effect			4				—				307				311
Net-of-tax amount (b)			416				—				659				1,075
Balance as of June 30, 2019 (a)+(b)		$	(62,770	)			—				(1,430	)		$	(64,200	)

Note 3 — Revenue from Contracts with Customers

Description of service offerings

Issuer Solutions

The Company’s Issuer Solutions revenues are derived from long-term processing contracts with financial and nonfinancial institutions. Payment processing services revenues are generated primarily from charges based on:

 

•

The number of accounts on file;

 

•

Transactions and authorizations processed;

 

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•

Statements generated and/or mailed;

 

•

Managed services; and

 

•

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.

Issuer Solutions revenues also include loyalty redemption services and professional services.

Merchant Solutions

The Company’s Merchant Solutions revenues are partially derived from relationships with thousands of individual merchants whose contracts range from thirty days to five years. 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. Merchant services revenue is generated primarily from processing all payment forms including credit, debit and electronic benefits transfer for merchants of all sizes across a wide array of retail market segments.

The products and services offered include:

 

•

Authorizations 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 equipment and services.

Most of these contracts have prescribed revenue minimums, penalties for early termination, and service level agreements which may impact contractual fees if certain service levels are not achieved.

Consumer Solutions

The Company’s Consumer Solutions revenues principally consist of a portion of the service fees collected from cardholders and interchange revenues received by the issuing banks in connection with the programs that the Consumer Solutions segment manages.

Customers are charged fees in connection with the Consumer Solutions segment’s products and services as follows:

 

•

Transactions - Customers are typically charged a fee for each Personal Identification Number (“PIN”) and signature-based purchase transaction made using their cards, unless the customer is on a monthly or annual service plan, in which case the customer is instead charged a monthly or annual subscription fee, as applicable. Customers are also charged fees for Automated Teller Machine (“ATM”) withdrawals and other transactions conducted at ATMs.

 

•

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

 

•

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

 

•

Other - Customers are charged fees in connection with the acquisition and reloading of the cards at retailers and the Company receives a portion of these amounts in some cases.

 

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Disaggregation of revenue

The following table summarizes volume-based and non-volume related revenue from contracts with external customers for the three and six months ended June 30, 2019 and 2018:

 

		Three months ended June 30, 2019
(in thousands)		Issuer Solutions				Merchant Solutions				Consumer Solutions				Total
Volume-based revenues		$	231,265				342,651				195,659			$	769,575
Non-volume related revenues			241,441				23,985				484				265,910
Total revenues		$	472,706				366,636				196,143			$	1,035,485

 

		Six months ended June 30, 2019
(in thousands)		Issuer Solutions				Merchant Solutions				Consumer Solutions				Total
Volume-based revenues		$	461,476				665,464				414,354			$	1,541,294
Non-volume related revenues			481,389				46,353				980				528,722
Total revenues		$	942,865				711,817				415,334			$	2,070,016

 

		Three months ended June 30, 2018
(in thousands)		Issuer Solutions				Merchant Solutions				Consumer Solutions				Total
Volume-based revenues		$	223,677				329,295				199,490			$	752,462
Non-volume related revenues			234,924				19,419				775				255,118
Total revenues		$	458,601				348,714				200,265			$	1,007,580

 

		Six months ended June 30, 2018
(in thousands)		Issuer Solutions				Merchant Solutions				Consumer Solutions				Total
Volume-based revenues		$	442,949				628,242				409,211			$	1,480,402
Non-volume related revenues			473,011				39,895				1,442				514,348
Total revenues		$	915,960				668,137				410,653			$	1,994,750

Issuer Solutions

Volume-based revenues are generated from charges based on the number of Accounts on File (“AOF”), transactions and authorizations processed, statements generated, and other processing services for cardholder AOF. Cardholder AOF includes active and inactive consumer credit, retail, prepaid, stored value and commercial card accounts. TSYS’ clients also have the option to use fraud and portfolio management services which are based on authorizations processed and AOF, respectively. 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. Additionally, non-volume based revenues include licensing, managed services and output services such as card and document production.

Merchant Solutions

The Merchant Solutions segment’s revenues primarily consist of volume-based revenues generated from charges based on sales volume processed, and authorized transactions and settled transactions processed. Non-volume related revenues include chargeback and retrieval services, data transmissions, value added products and managed services which are not directly associated with transactional activity.

 

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Consumer Solutions

The Consumer Solutions segment’s revenues primarily consist of volume-based revenues generated from a portion of the service fees collected from cardholders and interchange revenues. Non-volume related revenues include value-added products and services which are not directly associated with transactional activity.

The following table summarizes revenue from contracts with customers, by currency, for the three and six months ended June 30, 2019 and 2018:

 

		Three months ended June 30, 2019
(in thousands)		Issuer Solutions				Merchant Solutions				Consumer Solutions				Total
U.S. dollar		$	372,674				366,313				196,143			$	935,130
British Pound Sterling			67,142				—				—				67,142
Euro			25,750				—				—				25,750
Other			7,140				323				—				7,463
Total revenues		$	472,706				366,636				196,143			$	1,035,485

 

		Six months ended June 30, 2019
(in thousands)		Issuer Solutions				Merchant Solutions				Consumer Solutions				Total
U.S. dollar		$	744,674				711,184				415,334			$	1,871,192
British Pound Sterling			132,294				—				—				132,294
Euro			51,361				—				—				51,361
Other			14,536				633				—				15,169
Total revenues		$	942,865				711,817				415,334			$	2,070,016

 

		Three months ended June 30, 2018
(in thousands)		Issuer Solutions				Merchant Solutions				Consumer Solutions				Total
U.S. dollar		$	367,489				348,524				200,265			$	916,278
British Pound Sterling			59,098				—				—				59,098
Euro			25,419				—				—				25,419
Other			6,595				190				—				6,785
Total revenues		$	458,601				348,714				200,265			$	1,007,580

 

		Six months ended June 30, 2018
(in thousands)		Issuer Solutions				Merchant Solutions				Consumer Solutions				Total
U.S. dollar		$	727,359				667,743				410,653			$	1,805,755
British Pound Sterling			122,219				—				—				122,219
Euro			52,016				—				—				52,016
Other			14,366				394				—				14,760
Total revenues		$	915,960				668,137				410,653			$	1,994,750

See Note 11 for disclosure of revenues by geography.

Performance obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The purpose of this disclosure is to provide additional information about the amounts and expected timing of revenue to be recognized from the remaining performance obligations in the Company’s existing contracts.

 

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