TOTAL SYSTEM SERVICES, INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 2007
Commission file number
1-10254
TOTAL SYSTEM SERVICES, INC.
(Exact name of registrant as specified in its charter)
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Georgia
(State or other jurisdiction of incorporation or organization)
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58-1493818
(I.R.S. Employer Identification No.) |
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1600 First Avenue
Columbus, Georgia
(Address of principal executive offices)
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31901
(Zip Code)
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(Registrants telephone number, including area code) (706) 649-2262
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered |
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Common Stock, $.10 Par Value
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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 þ
NO o
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 o
NO þ
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 þ
NO o
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 registrants 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
YES o
NO þ
As of June 30, 2007, the aggregate market value of the registrants common stock held by
non-affiliates of the registrant was approximately $861,159,000 based on the closing sale price as
reported on the New York Stock Exchange.
As of February 21, 2008, there were 198,849,665 shares of the registrants common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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Incorporated Documents |
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Form 10-K Reference Locations |
Portions of the Annual Report to Shareholders
for the year ended December 31, 2007 (Annual Report)
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Parts I, II, III and IV |
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Portions of the 2008 Proxy Statement for the Annual
Meeting of Shareholders to be held April 30, 2008
(Proxy Statement)
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Part III |
PART I
Safe Harbor Statement
We have included or incorporated by reference in this Annual Report on Form
10-K, and from time to time our management may make, statements that may constitute
forward-looking statements within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but
instead represent only our belief regarding future events, many of which by their nature are
inherently uncertain and outside our control. These statements include statements other than
historical information or statements of current condition and may relate to our future plans,
objectives and results, among other things, and also include (without limitation) statements made
in Managements Discussion and Analysis of Financial Condition and Results of Operations in Part
II, Item 7 of this Annual Report. It is possible that our actual results may differ, possibly
materially, from the anticipated results indicated in these forward-looking statements. Important
factors that could cause actual results to differ from those in the forward-looking statements
include, among others, those discussed under Risk Factors in Part I, Item 1A of this Annual
Report and Managements Discussion and Analysis of Financial Condition and Results of Operations
in Part II, Item 7 of this Annual Report.
Accordingly, you are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date on which they are made. We undertake no obligation to update
publicly or revise any forward-looking statements to reflect the impact of circumstances or events
that arise after the dates they are made, whether as a result of new information, future events or
otherwise except as required by applicable law. You should, however, consult further disclosures
we may make in future filings of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, and any amendments thereto.
Item 1. Business
Business. We provide electronic payment processing and related services to financial and
nonfinancial institutions. Services include processing consumer, retail, commercial, government
services, stored value and debit cards. Based in Columbus, Georgia, and traded on the New York
Stock Exchange under the symbol TSS, we provide services to financial and nonfinancial
institutions throughout the United States and internationally. We currently offer merchant
acquiring services to financial institutions and other organizations in the United States through
our wholly owned subsidiary, TSYS Acquiring Solutions, L.L.C., and in Japan through our majority
owned subsidiary, GP Network Corporation. We also offer optional value added products and services
to support our 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 and customer retention programs, such as loyalty
programs and bonus rewards.
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The services we provide are divided into three operating segments, domestic-based support
services, which accounted for 70.5% of our revenues in 2007, international-based support services,
which accounted for 13.8% of our revenues in 2007, and merchant acquiring services, which accounted
for 15.7% of our revenues in 2007. In addition, a new cost center, spin-related costs, was added for
2007 to include information regarding the spin-off by Synovus Financial Corp. (Synovus) to its
shareholders of all of the shares of TSYS stock formerly owned by Synovus on December 31, 2007. See
Note 23 of Notes to Consolidated Financial Statements on pages 80 and 81 of the Annual Report which
is incorporated in this document by reference for additional information about the spin-off.
Seasonality. Due to the somewhat seasonal nature of the credit card industry, our 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. Our 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 our revenues is derived from long-term contracts
with large clients, including our major customers during 2007, Bank of America Corporation and
Capital One Financial Corporation. For the year ended December 31, 2007, Bank of America
Corporation and Capital One Financial Corporation accounted for approximately 11.8% and 13.1%,
respectively, of our total revenues. As a result, the loss of Bank of America Corporation or
Capital One Financial Corporation, or other large clients, could have a material adverse effect on
our financial position, results of operations and cash flows. See Major Customers under the
Financial Review Section on pages 28 and 29 and Note 20 on pages 74 through 78 of the Annual
Report which are incorporated in this document by reference.
Competition. We encounter vigorous competition in providing electronic payment processing
services from several different sources. Most of the national market in third party card
processors is presently being provided by approximately three vendors. We believe that as of
December 31, 2007 we are the second largest third party card processor in the United States. In
addition, we compete with in house processors and software vendors which provide their products to
institutions which process in house. We are presently encountering, and in the future anticipate
continuing to encounter, substantial competition from data processing and bankcard computer service
firms and other such third party vendors located throughout the United States and from certain
international processors with respect to international-based support services. Based upon
available market share data that includes cards processed in house, we believe that during 2007 we
held a 42% share of the domestic consumer credit card processing market, an
87% share of the Visa and MasterCard domestic commercial card processing market and a 10%
share of the domestic retail card processing market. With respect to merchant acquiring services,
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we believe that TSYS Acquiring Solutions is the second largest processor of merchant accounts and
holds an approximately 20% market share of all bank card accepting merchant locations in the U.S.
We expect a decrease in domestic consumer and commercial market share in 2008 as a result of a
large customer migrating from an outsourcing to a licensing model in 2007.
Our major competitor in the card processing industry is First Data Resources, LLC, a wholly
owned subsidiary of First Data Corporation, which provides card processing services. The principal
methods of competition between us and First Data Resources are price, system performance and
reliability, breadth of features and functionality, disaster recovery capabilities, data security,
scalability and flexibility of infrastructure and servicing capability. Certain other subsidiaries
of First Data Corporation also compete with us with respect to the provision of merchant acquiring
services.
Backlog of Accounts. As of December 31, 2007, we had a pipeline of approximately six million
accounts associated with new clients. We expect to convert our entire backlog of six million new
accounts in 2008.
Regulation and Examination. We are subject to being examined, and are indirectly regulated,
by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, 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 we provide electronic payment processing
services. Matters reviewed and examined by these federal and state financial institution regulatory
agencies have included our internal controls in connection with our present performance of
electronic payment processing services, and the agreements pursuant to which we provide such
services. In addition, we are registered with Visa, MasterCard, American Express and the Discover
Network as a service provider and are subject to their respective rules.
Employees. As of December 31, 2007, we had 6,921 full-time equivalent employees.
Available Information. Our 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 in the Investors 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 Securities and Exchange
Commission.
We have adopted a Code of Business Conduct and Ethics for our directors, officers
and employees and have also adopted Corporate Governance Guidelines. Our Code of
Business Conduct and Ethics, Corporate Governance Guidelines and the charters of
our board committees are available in the Corporate Governance section of our website at
www.tsys.com/ir/governance. Copies of these documents are also available in print upon written
request to the Corporate Secretary, Total System Services, Inc., 1600 First Avenue, Columbus,
Georgia 31901.
For more information about our business see the Financial Overview Section on pages
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16 through 18, the Financial Review Section on pages 18 through 43 and Note 1, Note 6, Note 17, Note
20 and Note 22 of Notes to Consolidated Financial Statements on pages 48 through 55, pages 58 and
59, pages 70 and 71, pages 74 through 78, and pages 78 through 80 of the Annual Report which are
incorporated in this document by reference.
Item 1A. Risk Factors
This section highlights specific risks that could affect our business and us. Although this
section attempts to highlight key factors, please be aware that other risks may prove to be
important in the future. New risks may emerge at any time and we cannot predict such risks or
estimate the extent to which they may affect our financial performance. In addition to the factors
discussed elsewhere or incorporated by reference in this report, among the other factors that could
cause actual results to differ materially are the following:
If we do not successfully renew or renegotiate our agreements with our clients, our business will
suffer.
A significant amount of our revenues is derived from long-term contracts with large clients,
including certain major customers. Consolidation among financial institutions has resulted in an
increasingly concentrated client base. The financial position of these clients and their
willingness to pay for our products and services are affected by general market positions,
competitive pressures and operating margins within their industries. Renewal or renegotiation time
presents our clients with the opportunity to consider other providers. The loss or renegotiation
of our contracts with existing clients or a significant decline in the number of transactions we
process for them could have a material adverse effect on our financial position and results of
operation.
Consolidation among financial institutions, including the merger of TSYS clients with entities that
are not TSYS clients or the sale of portfolios by TSYS clients to entities that are not TSYS
clients could materially impact our financial position and results of operation.
Consolidation among financial institutions, particularly in the area of credit card
operations, continues to be a major risk. Specifically, we face the risk that our clients may
merge with entities that are not our clients or our clients may sell portfolios to entities that
are not our clients, thereby impacting our existing agreements and projected revenues with these
clients. In addition, consolidation among financial institutions has
led to an increasingly concentrated client base at TSYS which increases the pressure on our profit
margins. Consolidation among financial institutions and the loss of any significant client by us
could have a material adverse effect on our financial position and results of operations.
Accounts on file may be lower than anticipated and internal growth rates for our existing clients
may be lower than anticipated.
Our electronic payment processing services revenues are generated from charges based on
several factors, one of which is the number of accounts on file. There is no guarantee that
accounts on file will be as we anticipate and this could have a material adverse effect on our
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financial position and results of operations. Furthermore, a significant amount of our revenues is
derived from certain large clients and internal growth rates for these existing clients may be
lower than anticipated, thereby negatively impacting our business.
We may incur expenses associated with the signing of a significant client to our processing system
and in connection with our efforts to grow internationally or incur other costs that may hurt our
financial results.
We incur significant up-front expenses prior to converting a significant client to our
processing systems. In the event we enter into a processing contract with a significant client,
these expenses will directly affect our earnings results. In addition, we provide services to our
clients worldwide and plan to continue to expand our service offerings internationally in the
future. We are likely to incur costs in growing our business internationally, and there is no
guarantee that such international expansion will be successful. We may also incur other expenses
and costs, such as operating and marketing expenses. If we are unable to successfully manage these
expenses as our business develops, changes and expands, our financial position and results of
operations could be negatively impacted. In addition, changes in accounting policies can
significantly affect how we calculate expenses and earnings.
There may be a decline in the use of credit cards as a payment mechanism for consumers or adverse
developments with respect to the credit card industry in general.
If consumers do not continue to use credit cards as a payment mechanism for their transactions
or if there is a change in the mix of payments between cash, credit cards and debit cards, it could
have a material adverse effect on our financial position and results of operations. We believe
future growth in the use of credit cards will be driven by the cost, ease-of-use, and quality of
products and services offered to consumers and businesses. In order to consistently increase and
maintain our profitability, consumers and businesses must continue to use credit cards. Moreover,
if there is an adverse development in the credit card industry in general, such as new legislation
or regulation that makes it more difficult for our clients to do business, our financial position
and results of operations may be adversely affected.
We may not convert and deconvert clients portfolios as scheduled.
The timing of the conversion of card portfolios of new clients to our processing systems and
the deconversion of existing clients to other systems impacts our revenues and expenses. There is
no guarantee that conversions and deconversions will occur as scheduled and this may have a
material adverse effect on our financial position and results of operations.
We have pursued various strategic acquisitions and these acquisitions may be more difficult to
integrate than anticipated.
We regularly explore opportunities for strategic acquisitions and expect to grow, in part,
through such acquisitions. Difficulty in integrating an acquired company may cause us not to
realize expected revenue increases, cost savings, increases in geographic or product presence,
and/or other projected benefits of the acquisition. The integration could result in loss of key
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employees, disruption of our business or the business of the acquired company, or otherwise
adversely affect our ability to maintain relationships with clients or achieve the anticipated
benefits of the acquisition. These factors could contribute to us not achieving the anticipated
benefits of the acquisition within the desired time frames, if at all.
Our business may be adversely affected by risks associated with foreign operations.
We provide services to our clients worldwide and plan to continue to expand our service
offerings internationally in the future. As a result, our business and revenues derived from
international operations are subject to risk of loss from currency fluctuations, social
instability, changes in government policies, unfavorable political or diplomatic developments and
changes in legislation related to non-U.S. ownership. Any adverse change in one of the foregoing
factors could impact our plans to continue to expand our business internationally and adversely
affect our financial position and results of operations.
The costs and effects of litigation, investigations or similar matters, or adverse facts and
developments related thereto, could materially affect our financial position and results of
operations.
We may be involved from time to time in a variety of litigation, investigations or similar
matters arising out of our business. Our insurance may not cover all claims that may be asserted
against it, and any claims asserted against us, regardless of merit or eventual outcome, may harm
our reputation. Should the ultimate judgments or settlements in any litigation or investigation
significantly exceed our insurance coverage, they could have a material adverse effect on our
financial position and results of operations. In addition, we may not be able to obtain
appropriate types or levels of insurance in the future, nor may we be able to obtain adequate
replacement policies with acceptable terms, if at all.
Changes in accounting policies and practices, as may be adopted by the regulatory agencies, the
Financial Accounting Standards Board, or other authoritative bodies, could materially impact our
financial statements.
Our accounting policies and methods are fundamental to how we record and report our financial
position and results of operations. From time to time, the regulatory agencies, the Financial
Accounting Standards Board, and other authoritative bodies change the financial accounting and
reporting standards that govern the preparation of our financial statements. These changes can be
hard to predict and can materially impact how we record and report our financial position and
results of operations.
If we do not anticipate and respond to technological change or changes in industry standards,
particularly with respect to e-commerce, our services could become obsolete and we could lose our
clients.
Our success depends, in part, on our ability to timely, successfully and cost-effectively
improve and implement processing systems to provide new products, increased functionality and
increased efficiencies. The widespread adoption of new technologies could require us to make
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substantial expenditures to modify or adopt our existing products and services, and we may not be
successful in improving and implementing our processing systems or in achieving market acceptance
of these new technologies. If competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, particularly with respect to
e-commerce, our existing product and service offerings, proprietary technology and systems may
become obsolete. Further, if we fail to adopt or develop these new technologies or to adapt our
products and services to emerging industry standards, we may lose current and future clients, which
could have a material adverse effect on our financial position and results of operations. Our
industry is changing rapidly. To remain competitive, we must continue to enhance and improve the
functionality and features of our processing systems, products, services and technologies.
Changes in the laws, regulations, credit card association rules or other industry standards
affecting our business may require significant product redevelopment efforts or may reduce the
market for or value of our products.
There may be changes in the laws, regulations, credit card association rules or other industry
standards that affect our operating environment in substantial and unpredictable ways. Changes to
statutes, regulations or industry standards, including interpretation and implementation of
statutes, regulations or standards, could increase or decrease the cost of doing business or affect
the competitive balance. We cannot predict whether any of this potential legislation will be
enacted or whether any credit card association rule or other industry standard will change, and if
enacted or changed, the effect that it would have on our financial position or results of
operations. These changes may require us to incur significant expenses to redevelop our products,
but there is no guarantee that we would be successful or that there would be a market for or value
of our products. Also, if we do not comply with laws, regulations, policies or standards, we
could receive regulatory sanctions and damage to our reputation.
We may not be able to successfully manage our intellectual property and may be subject to
infringement claims.
In the rapidly developing legal framework, we rely on a combination of contractual rights and
copyright, trademark, patent and trade secret laws to establish and protect our proprietary
technology. Despite our efforts to protect our intellectual property, third parties may infringe
or misappropriate our intellectual property or may develop software or technology competitive to
us. Our competitors may independently develop similar technology, duplicate our products or
services or design around our intellectual property rights. We may have to litigate to enforce and
protect our intellectual property rights, trade secrets and know-how or to determine their scope,
validity or enforceability, which is expensive and could cause a diversion of resources and may not
prove successful. The loss of intellectual property protection or the inability to secure or
enforce intellectual property protection could harm our business and ability to compete.
We may also be subject to costly litigation in the event our products and technology infringe
upon another partys proprietary rights. Third parties may have, or may eventually be issued,
patents that would be infringed by our products or technology. Any of these third parties could
make a claim of infringement against us with respect to our products or technology. We
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may also be subject to claims by third parties for breach of copyright, trademark or license usage rights. Any
such claims and any resulting litigation could subject us to significant liability for damages. An
adverse determination in any litigation of this type could require us to design around a third
partys patent or to license alternative technology from another party. In addition, litigation is
time consuming and expensive to defend and could result in the diversion of the time and attention
of our management and employees. Any claim from third parties may result in limitation on our
ability to use the intellectual property subject to these claims.
Security and privacy breaches in our systems may damage client relations and inhibit our growth.
The uninterrupted operation of our processing systems and the confidentiality of the client
information that resides on our systems is critical to our business. We have security backups and
recovery systems in place, as well as a business continuity plan to ensure our systems will not be
inoperable. We also have what we believe to be sufficient security around our systems to prevent
unauthorized access. Any failures in our security and privacy measures could have a material
adverse effect on our financial position and results of operations. We electronically store
personal information about consumers who are customers of our clients. If we are unable to
protect, or our clients perceive that we are unable to protect, the security and privacy of our
electronic transactions, our growth could be materially adversely affected. A security or privacy
breach may:
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cause our clients to lose confidence in our services; |
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harm our reputation; |
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expose us to liability; and |
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increase our expenses from potential remediation costs. |
While we believe we use proven applications designed for data security and integrity to
process electronic transactions, there can be no assurance that our use of these applications will
be sufficient to address changing market positions or the security and privacy concerns of existing
and potential clients.
If we lose key personnel or are unable to attract additional qualified personnel as we grow, our
business could be adversely affected.
We are dependent upon the ability and experience of a number of highly skilled technical,
management and sales and marketing personnel who have substantial experience with our operations,
the rapidly changing transaction processing industry and markets in which we offer our services.
It is possible that the loss of the services of one or a combination of our key personnel would
have an adverse effect on our operations. Our success also depends on our ability to continue to
attract, manage and retain additional qualified management and technical personnel as we grow.
Competition for the best people, particularly those individuals with technology experience, is
intense. We cannot guarantee that we will continue to attract or retain such personnel.
Our financial condition and outlook may be adversely affected by damage to our reputation.
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Our financial condition and outlook is highly dependent upon perceptions of our business
practices and reputation. Our ability to attract and retain clients and employees could be
adversely affected to the extent our reputation is damaged. Negative public opinion could result
from our actual or alleged conduct in any number of activities, including corporate governance,
regulatory compliance, mergers and acquisitions, disclosure and security breaches. Damage to our
reputation could give rise to legal risks, which, in turn, could increase the size and number of
litigation claims and damages asserted or subject us to enforcement actions, fines and penalties
and cause us to incur related costs and expenses.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2007, we and our subsidiaries owned 11 facilities encompassing
approximately 1,442,168 square feet and leased from third parties 34 facilities encompassing
approximately 659,977 square feet. These facilities are used for operational, sales and
administrative purposes.
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Owned Facilities |
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Leased Facilities |
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Number |
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Square Footage |
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Number |
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Square Footage |
Domestic-based support services |
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9 |
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1,345,800 |
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11 |
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299,579 |
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International-based support services |
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2 |
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96,368 |
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19 |
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146,705 |
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Merchant acquiring services |
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-0- |
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-0- |
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4 |
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213,693 |
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We believe that our facilities are suitable and adequate for our current business; however, we
periodically review our space requirements and may acquire new space to meet the needs of our
businesses or consolidate and dispose of or sublet facilities which are no longer required.
See Note 1, Note 5, Note 17 and Note 20 of Notes to Consolidated Financial Statements on pages
48 through 55, page 58, pages 70 and 71, and pages 74 through 78 and Operating Expenses and
Property and Equipment under the Financial Review Section on pages 33 through 36, and page 39,
respectively, of the Annual Report which are incorporated in this document by reference.
Item 3. Legal Proceedings
See Note 17 of Notes to Consolidated Financial Statements on pages 70 and 71 of the Annual
Report which is incorporated in this document by reference.
Item 4. Submission of Matters to a Vote of Security Holders
A Special Meeting of the Shareholders of TSYS was held on November 29, 2007. There were 16
proposals voted on at the meeting. The vote on each of the proposals was as indicated
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below.
Shareholder Vote on Proposals to Approve Amendments Contained in the Amended and Restated
Articles of Incorporation of TSYS
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Proposal 1a: |
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To enlarge TSYS business purpose |
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Votes For |
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Votes Against |
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Abstentions |
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186,962,532 |
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173,326 |
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34,194 |
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Proposal 1b: |
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To authorize 100 million shares of preferred stock |
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Votes For |
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Votes Against |
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Abstentions |
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Broker Non-Votes |
169,701,403 |
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8,758,365 |
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51,331 |
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8,658,953 |
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Proposal 1c: |
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To provide that TSYS Board of Directors will fix the number of
directors |
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Votes For |
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Votes Against |
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Abstentions |
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Broker Non-Votes |
170,106,993 |
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8,377,241 |
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26,866 |
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8,658,952 |
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Proposal 1d: |
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To provide that directors may be removed only
for cause, and to decrease to 66 2/3% the required shareholder vote
for removal of directors |
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Votes For |
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Votes Against |
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Abstentions |
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Broker Non-Votes |
170,164,498 |
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8,296,565 |
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50,037 |
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8,658,952 |
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Proposal 1e: |
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To eliminate supermajority voting requirements for
shareholder approval of mergers and similar transactions |
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Votes For |
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Votes Against |
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Abstentions |
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186,895,184 |
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181,107 |
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93,761 |
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Proposal 1f: |
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To eliminate supermajority voting requirements for
shareholder approval for most amendments to
TSYS Articles of Incorporation |
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Votes For |
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Votes Against |
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Abstentions |
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186,892,945 |
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230,979 |
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46,127 |
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Proposal 1g: |
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To eliminate supermajority voting requirements for
shareholders to call a special meeting of shareholders |
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Votes For |
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Votes Against |
|
Abstentions |
|
|
186,398,297 |
|
657,735 |
|
114,019 |
|
|
10
|
|
|
|
|
|
|
Proposal 1h: |
|
To eliminate the provision requiring unanimous
shareholder action by written consent |
|
|
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstentions |
|
|
186,123,589 |
|
940,207 |
|
106,255 |
|
|
|
|
|
|
|
|
|
Proposal 1i: |
|
To update the provision allowing TSYS Board of
Directors to consider non-economic impacts of
tender offers to conform to current Georgia law so
that the Board of Directors may consider the interests
of constituencies in addition to shareholders when
considering the best interests of the corporation |
|
|
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstentions |
|
|
178,911,319 |
|
8,213,332 |
|
45,400 |
|
|
|
|
|
|
|
|
|
Proposal 1j: |
|
To update the provision limiting
the personal liability
of directors to conform to current Georgia law |
|
|
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstentions |
|
|
186,974,528 |
|
116,537 |
|
78,987 |
|
|
Shareholder Vote on Proposals
to Approve Amendments Contained in the Amended and Restated
Bylaws of TSYS
|
|
|
|
|
|
|
Proposal 2a: |
|
To eliminate supermajority requirements for
shareholders to call a special meeting of shareholders |
|
|
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstentions |
|
|
186,518,681 |
|
555,576 |
|
95,795 |
|
|
|
|
|
|
|
|
|
Proposal 2b: |
|
To eliminate the shareholders ability to fix the
number of directors |
|
|
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstentions |
|
Broker Non-Votes |
170,014,576 |
|
8,464,996 |
|
31,529 |
|
8,658,951 |
|
|
|
|
|
|
|
Proposal 2c: |
|
To eliminate the supermajority requirement to
declassify TSYS Board of Directors |
|
|
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstentions |
|
|
186,779,477 |
|
291,447 |
|
99,128 |
|
|
|
|
|
|
|
|
|
Proposal 2d: |
|
To provide that directors may be removed only for
cause and to decrease to 66 2/3% the required
shareholder vote for removal of directors |
|
|
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstentions |
|
Broker Non-Votes |
170,303,656 |
|
8,155,292 |
|
52,153 |
|
8,658,951 |
|
|
|
|
|
|
|
Proposal 2e: |
|
To eliminate supermajority voting requirements for
shareholder approval of mergers and similar transactions |
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstentions |
|
|
186,898,571 |
|
214,957 |
|
56,523 |
|
|
Shareholder Vote on Proposal to Approve the TSYS 2008 Omnibus Plan
|
|
|
|
|
|
|
Proposal 3: |
|
To approve the adoption of the Total System Services,
Inc. 2008 Omnibus Plan |
|
|
|
|
|
|
|
Votes For |
|
Votes Against |
|
Abstentions |
|
Broker Non-Votes |
176,555,117 |
|
1,807,554 |
|
148,429 |
|
8,658,952 |
PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Repurchases of Equity Securities
The Quarterly Financial Data, Stock Price, Dividend Information Section under the Financial
Review Section on page 85, Note 15 of Notes to Consolidated Financial Statements on page 69 and
Stock Performance Graph on page 86 of the Annual Report are incorporated in this document by
reference. The Stock Performance Graph is incorporated herein by reference; however, this
information shall not be deemed to be soliciting material or to be filed with the Commission or
subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange
Act of 1934, as amended.
Item 6. Selected Financial Data
The Selected Financial Data Section which is set forth on page 15 of the Annual Report is
incorporated in this document by reference.
Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations
The Financial Overview and Financial Review Sections which are set forth on pages 16
through 43 of the Annual Report which includes the information encompassed within Managements
Discussion and Analysis of Financial Condition and Results of Operations, are incorporated in this
document by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Foreign Exchange Risk. We are exposed to foreign exchange risk because we have assets,
liabilities, revenues and expenses denominated in foreign currencies. 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 our foreign
operations, net of tax, are accumulated in a separate section of shareholders equity entitled accumulated other comprehensive income. The amount of other comprehensive income for the
year ended December 31, 2007 was $7.6 million. The amount of other comprehensive
12
income related to
foreign currency translation for the year ended December 31, 2006 was $15.9 million net of tax. The
amount of other comprehensive loss for the year ended December 31, 2005 was $9.6 million.
Currently, we do not use financial instruments to hedge our exposure to exchange rate changes.
The following table presents the carrying value of the net assets of our foreign operations in
U.S. dollars at December 31, 2007:
|
|
|
|
|
(in millions) |
|
December 31, 2007 |
|
Europe |
|
$ |
136.7 |
|
China |
|
|
62.3 |
|
Japan |
|
|
5.8 |
|
Mexico |
|
|
8.1 |
|
Canada |
|
|
0.3 |
|
Other |
|
|
11.2 |
|
We record foreign currency translation adjustments associated with other balance sheet
accounts. See Nonoperating Income (Expense) under the Financial Review Section on page 36 of
the Annual Report which is incorporated in this document by reference. We maintain several cash
accounts denominated in foreign currencies, primarily in Euros and BPS. As we translate the
foreign-denominated cash balances into U.S. dollars, the translated cash balance is adjusted upward
or downward depending upon the foreign currency exchange movements. The upward or downward
adjustment is recorded as a gain or loss on foreign currency translation in our statements of
income. As those cash accounts have increased, the upward or downward adjustments have increased.
We recorded a net translation loss of approximately $3.3 million for the year ended December 31,
2007 relating to the translation of foreign denominated balance sheet accounts, most of which were
cash. The balance of the foreign-denominated cash accounts subject to risk of translation gains or
losses at December 31, 2007 was approximately $10.5 million, the majority of which is denominated
in Euros.
We provide financing to our international operations in Europe and Japan through intercompany
loans that require each operation to repay the financing in U.S. dollars. The functional currency
of each operation is the respective local currency. As we translate the foreign currency
denominated financial statements into U.S. dollars, the translated balance of the financing
(liability) is adjusted upward or downward to match the U.S. dollar obligation (receivable) on our
financial statements. The upward or downward adjustment is recorded as a gain or loss on foreign
currency translation. As a result of these financing arrangements, we recorded a foreign currency
translation gain on our financing with foreign operations during the year ended December 31, 2007
of $2.6 million. The balance of the financing arrangements at December 31, 2006 was approximately
$4.9 million.
13
To follow is a summary of account balances subject to foreign currency exchange rates between
the local currencies and the U.S. dollar:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
(in thousands) |
|
|
December 31, 2007 |
|
Asset |
|
Cash |
|
$ |
10,496 |
|
Liability |
|
Intercompany financing arrangements |
|
|
(4,865 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net account balances |
|
$ |
5,631 |
|
|
|
|
|
|
|
|
|
The following table presents the potential effect on income before income taxes of
hypothetical shifts in the foreign currency exchange rate between the local currencies and the U.S.
dollar of plus or minus 100 basis points, 500 basis points and 1,000 basis points based on the net
asset account balance of $5.6 million at December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Basis Point Change |
|
|
Increase in basis point of |
|
Decrease in basis point of |
(in thousands) |
|
100 |
|
500 |
|
1,000 |
|
100 |
|
500 |
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on income
before income taxes |
|
$ |
56 |
|
|
|
282 |
|
|
|
563 |
|
|
|
(56 |
) |
|
|
(282 |
) |
|
|
(563 |
) |
The foreign currency risks associated with other currencies is not significant.
Interest Rate Risk. We are also exposed to interest rate risk associated with the investing of
available cash. We invest available cash in conservative short-term instruments and are primarily
subject to changes in the short-term interest rates.
The following table provides information about our debt obligations that are sensitive to
changes interest rates. The table presents principal cash flows and related weighted average
interest rates by expected maturity dates. The information is presented in U.S. dollar
equivalents, which is our reporting currency. The debt obligations actual cash flows are
denominated in U.S. dollars (US), British Pounds (GBP) and Japanese YEN (YEN), as indicated in
parentheses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007 |
|
|
|
|
|
|
|
|
|
Expected maturity date |
|
|
|
|
|
Liabilities |
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
TOTAL |
|
(US$ Equivalent in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate (US) |
|
$ |
6.5 |
|
|
|
6.7 |
|
|
|
7.0 |
|
|
|
1.8 |
|
|
|
|
|
|
$ |
22.0 |
|
Average interest rate |
|
|
3.96 |
% |
|
|
3.96 |
% |
|
|
3.96 |
% |
|
|
3.96 |
% |
|
|
|
|
|
|
3.96 |
% |
Variable Rate (US) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168.0 |
|
|
$ |
168.0 |
|
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.46 |
% |
|
|
5.46 |
% |
Variable Rate (GBP) |
|
$ |
|
|
|
|
65.3 |
|
|
|
|
|
|
|
3.9 |
|
|
|
|
|
|
$ |
69.2 |
|
Average interest rate |
|
|
|
|
|
|
6.55 |
% |
|
|
|
|
|
|
7.99 |
% |
|
|
|
|
|
|
6.80 |
% |
Variable Rate (YEN) |
|
$ |
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2.2 |
|
Average interest rate |
|
|
2.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.00 |
% |
14
Item 8. Financial Statements and Supplementary Data
The Quarterly Financial Data, Stock Price, Dividend Information Section, which is set forth
on page 85, 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, Report of Independent Registered Public Accounting Firm
(on consolidated financial statements), Managements Report on Internal Control Over Financial
Reporting and Report of Independent Registered Public Accounting Firm (on the effectiveness of
internal control over financial reporting) Sections, which are set forth on pages 44 through 84
of the Annual Report are incorporated in this document by reference.
Item 9. |
|
Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure |
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We have evaluated the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the period covered
by this Annual Report as required by Rule 13a-15 of the Securities Exchange Act of 1934, as
amended. 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 our
disclosure controls and procedures are effective in timely alerting them to material information
relating to us (including our consolidated subsidiaries) required to be included in our periodic
SEC filings.
Managements Report on Internal Control Over Financial Reporting and Report of Independent
Registered Public Accounting Firm. Managements Report on Internal Control Over Financial
Reporting, which is set forth on page 83 of the Annual Report, and Report of Independent
Registered Public Accounting Firm (on the effectiveness of internal control over financial
reporting ), which is set forth on page 84 of the Annual Report, are incorporated in this document
by reference.
Changes in Internal Control Over Financial Reporting. No change in our internal control over
financial reporting occurred during the fourth fiscal quarter covered by this Annual Report that
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Item 9B. Other Information
None.
15
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information included under the following captions in our Proxy Statement is incorporated in
this document by reference:
|
|
|
PROPOSALS TO BE VOTED ON PROPOSAL 1: ELECTION OF
DIRECTORS; |
|
|
|
|
EXECUTIVE OFFICERS; |
|
|
|
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE;
and |
|
|
|
|
CORPORATE GOVERNANCE AND BOARD MATTERS Committees of the Board. |
We have a Code of Business Conduct and Ethics that applies to all directors, officers and
employees, including our principal executive officer, our principal financial officer and our chief
accounting officer. You can find our Code of Business Conduct and Ethics in the Corporate
Governance section of our website at www.tsys.com/ir/governance. We will post any amendments to
the Code of Business Conduct and Ethics and any waivers that are required to be disclosed by the
rules of either the SEC or the NYSE in the Corporate Governance section of our website.
Because our common stock is listed on the NYSE, our chief executive officer is required to
make, and he has made, an annual certification to the NYSE stating that he was not aware of any
violation by us of the corporate governance listing standards of the NYSE. Our chief executive
officer made his annual certification to that effect to the NYSE as of May 17, 2007. In addition,
we have filed, as exhibits to this Annual Report, the certifications of our chief executive officer
and chief financial officer required under Section 302 of the Sarbanes-Oxley Act of 2002.
Item 11. Executive Compensation
Information included under the following captions in our Proxy Statement is incorporated in
this document by reference:
|
|
|
DIRECTOR COMPENSATION; |
|
|
|
|
EXECUTIVE COMPENSATION Compensation Discussion and Analysis;
Compensation Committee Report; Summary Compensation Table and the compensation
tables and related information which follow the Summary Compensation Table; and |
|
|
|
|
CORPORATE GOVERNANCE AND BOARD MATTERS Committees of the Board
Compensation Committee Interlocks and Insider Participation. |
The information included under the heading Compensation Committee Report in our
16
Proxy
Statement is incorporated herein by reference; however, this information shall not be deemed to be
soliciting material or to be filed with the Commission or subject to Regulation
14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information pertaining to equity compensation plans is contained in Note 13 of Notes to
Consolidated Financial Statements on page 63 of the Annual Report and is incorporated in this
document by reference.
Information included under the following captions in our Proxy Statement is incorporated in
this document by reference:
|
|
|
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS; and |
|
|
|
|
PRINCIPAL SHAREHOLDERS. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information included under the following captions in our Proxy Statement is incorporated in
this document by reference:
|
|
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; |
|
|
|
|
RELATIONSHIPS BETWEEN TSYS, SYNOVUS, CB&T AND CERTAIN OF SYNOVUS SUBSIDIARIES
Spin-Off; Interlocking Directorates of TSYS, Synovus and CB&T; and
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.; and |
|
|
|
|
CORPORATE GOVERNANCE AND BOARD MATTERS Independence. |
See
also Note 2 of Notes to Consolidated Financial Statements on pages 55 through 57 of the Annual Report which is incorporated in this document by reference.
Item 14. Principal Accountant Fees and Services
Information included under the following captions in our Proxy Statement is incorporated in
this document by reference:
|
|
|
AUDIT COMMITTEE REPORT KPMG LLP Fees and Services (excluding the
information under the main caption AUDIT COMMITTEE REPORT); and Policy on Audit
Committee Pre-Approval. |
17
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statements
The following consolidated financial statements of TSYS are incorporated in this document by
reference from pages 44 through 84 of the Annual Report.
Consolidated Balance Sheets December 31, 2007 and 2006.
Consolidated Statements of Income Years Ended December 31, 2007, 2006 and 2005.
Consolidated Statements of Cash Flows Years Ended December 31, 2007, 2006 and
2005.
Consolidated Statements of Shareholders Equity and Comprehensive Income Years
Ended December 31, 2007, 2006 and 2005.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm (on consolidated
financial statements).
Managements Report on Internal Control Over Financial Reporting.
Report of Independent Registered Public Accounting Firm (on the effectiveness of internal
control over financial reporting).
2. Financial Statement Schedules
The following report of independent registered public accounting firm and consolidated
financial statement schedule of TSYS are included:
Report of Independent Registered Public Accounting Firm.
Schedule II Valuation and Qualifying Accounts Years Ended
December 31, 2007, 2006 and 2005.
All other schedules are omitted because they are inapplicable or the required
information is included in the consolidated financial statements and notes thereto.
18
3. Exhibits
The following exhibits are filed herewith or are incorporated to other documents
previously filed with the SEC. Exhibits 10.9 through 10.38 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.
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
3.1
|
|
Amended and Restated Articles of Incorporation of TSYS. |
|
|
|
3.2
|
|
Bylaws of TSYS, as amended, incorporated by reference to
Exhibit 3.1 of TSYS Current Report on Form 8-K dated January 2, 2008. |
|
|
|
10.1
|
|
Credit Agreement of TSYS with Bank of America N.A., as
Administrative Agent, the Royal Bank of Scotland plc, as Syndication Agent, and
the other lenders named therein, incorporated by reference to Exhibit 10.1 of
TSYS Current Report on Form 8-K dated December 27, 2007. |
|
|
|
10.2
|
|
Agreement and Plan of Distribution, dated as of October 25,
2007, by and among Synovus Financial Corp., Columbus Bank and Trust Company and
TSYS, incorporated by reference to Exhibit 2.1 of TSYS Current Report on Form
8-K dated October 25, 2007. |
|
|
|
10.3
|
|
Amendment No. 1 to Agreement and Plan of Distribution by and
among Synovus Financial Corp., Columbus Bank and Trust Company and TSYS, dated
as of November 30, 2007, incorporated by reference to Exhibit 2.1 of TSYS
Current Report on Form 8-K dated November 30, 2007. |
|
|
|
10.4
|
|
Transition Services Agreement by and among Synovus Financial
Corp. and TSYS, dated as of November 30, 2007, incorporated by reference to
Exhibit 10.1 of TSYS Current Report on Form 8-K dated November 30, 2007. |
|
|
|
10.5
|
|
Employee Matters Agreement by and among Synovus Financial Corp.
and TSYS, dated as of November 30, 2007, incorporated by reference to Exhibit
10.2 of TSYS Current Report on Form 8-K dated November 30, 2007. |
|
10.6
|
|
Indemnification and Insurance Matters Agreement by and among
Synovus Financial Corp. and TSYS, dated as of November 30, 2007, incorporated
by reference to Exhibit 10.3 of TSYS Current |
19
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
Report on Form 8-K dated November 30, 2007. |
|
|
|
10.7
|
|
Master Confidential Disclosure Agreement by and among Synovus
Financial Corp. and TSYS, dated as of November 30, 2007, incorporated by
reference to Exhibit 10.4 of TSYS Current Report on Form 8-K dated November
30, 2007. |
|
|
|
10.8
|
|
Tax Sharing Agreement by and among Synovus Financial Corp.,
Columbus Bank and Trust Company and TSYS, dated as of November 30, 2007,
incorporated by reference to Exhibit 10.5 of TSYS Current Report on Form 8-K
dated November 30, 2007. |
|
|
|
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS |
|
|
|
10.9
|
|
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 SEC on March 16, 2000. |
|
|
|
10.10
|
|
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 SEC on March 19,
2002. |
|
|
|
10.11
|
|
Amended and Restated Total System Services, Inc. Deferred
Compensation Plan. |
|
|
|
10.12
|
|
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 SEC on
March 18, 1993. |
|
|
|
10.13
|
|
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 SEC on
March 19, 2002. |
|
|
|
10.14
|
|
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 SEC on March 18, 1993. |
20
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.15
|
|
Agreement in Connection With Personal Use of Company Aircraft,
incorporated by reference to Exhibit 10.10 of TSYS Annual Report on Form 10-K
for the fiscal year ended December 31, 2005, as filed with the SEC on March 1,
2006. |
|
10.16
|
|
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 SEC on March 22, 1994. |
|
|
|
10.17
|
|
Change of Control Agreement for executive officers of TSYS. |
|
|
|
10.18
|
|
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, as
filed with the SEC on March 19, 2002. |
|
|
|
10.19
|
|
Form of Stock Option Agreement for the Total System Services,
Inc. 1992 (renamed 2000) and 2002 Long-Term Incentive Plans, incorporated by
reference to Exhibit 10.1 of TSYS Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004, as filed with the SEC on November 8, 2004. |
|
|
|
10.20
|
|
Summary of Board of Directors Compensation, incorporated by
reference to Exhibit 10.21 of TSYS Annual Report on Form 10-K for the fiscal
year ended December 31, 2006, as filed with the SEC on February 28, 2007. |
|
|
|
10.21
|
|
Form of Restricted Stock Award Agreement for the TSYS 2002
Long-Term Incentive Plan, incorporated by reference to Exhibit 10.1 of TSYS
Current Report on Form 8-K dated January 20, 2005, as filed with the SEC on
January 25, 2005. |
|
|
|
10.22
|
|
Form of Performance-Based Restricted Stock Award Agreement for
the TSYS 2002 Long-Term Incentive Plan, incorporated by reference to Exhibit
10.2 of TSYS Current Report on Form 8-K dated January 20, 2005, as filed with
the SEC on January 25, 2005. |
|
|
|
10.23
|
|
Form of Non-Employee Director Restricted Stock Award Agreement
for the TSYS 2002 Long-Term Incentive Plan, incorporated by reference to
Exhibit 10.1 of TSYS Current Report on Form 8-K dated February 1, 2005, as
filed with the SEC on February 3, 2005. |
21
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
10.24
|
|
Form of Stock Option Agreement for the Total System Services,
Inc. 2002 Long-Term Incentive Plan for grants made subsequent to January 17,
2006, incorporated by reference to Exhibit 10.1 of TSYS Current Report on Form
8-K dated January 17, 2006. |
|
|
|
10.25
|
|
Form of Restricted Stock Award Agreement for the Total System
Services, Inc. 2002 Long-Term Incentive Plan for grants made subsequent to
January 17, 2006, incorporated by reference to Exhibit 10.2 of TSYS Current
Report on Form 8-K dated January 17, 2006. |
|
|
|
10.26
|
|
Total System Services, Inc. 2007 Omnibus Plan, incorporated by
reference to Exhibit 10.1 of TSYS Current Report on Form 8-K dated April 24,
2007, as filed with the SEC on April 25, 2007. |
|
|
|
10.27
|
|
Form of Restricted Stock Award Agreement for restricted stock
awards under the Total System Services, Inc. 2007 Omnibus Plan, incorporated by
reference to Exhibit 10.3 of TSYS Current Report on Form 8-K dated April 24,
2007, as filed with the SEC on April 25, 2007. |
|
|
|
10.28
|
|
Form of Performance-Based Restricted Stock Award Agreement for
performance-based restricted stock awards under the Total System Services, Inc.
2007 Omnibus Plan, incorporated by reference to Exhibit 10.4 of TSYS Current
Report on Form 8-K dated April 24, 2007. |
|
|
|
10.29
|
|
Form of Revised Stock Option Agreement for stock option awards
under the Total System Services, Inc. 2007 Omnibus Plan, incorporated by
reference to Exhibit 10.5 of TSYS Current Report on Form 8-K dated February 5,
2008. |
|
|
|
10.30
|
|
Total System Services, Inc. 2008 Omnibus Plan. |
|
|
|
10.31
|
|
Form of Performance-Based Restricted Stock Award Agreement for
performance-based restricted stock awards under the Total System Services, Inc.
2008 Omnibus Plan, incorporated by reference to Exhibit 10.3 of TSYS Current
Report on Form 8-K dated January 2, 2008. |
|
|
|
10.32
|
|
Form of Restricted Stock Unit Agreement for restricted stock
unit awards under the Total System Services, Inc. 2008 Omnibus Plan,
incorporated by reference to Exhibit 10.4 of TSYS Current Report on Form 8-K
dated January 2, 2008. |
|
|
|
10.33
|
|
Form of Revised Stock Option Agreement for stock option awards |
|
|
|
22
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
under the Total System Services, Inc. 2008 Omnibus Plan, incorporated
by reference to Exhibit 10.2 of TSYS Current Report on Form 8-K
dated February 5, 2008. |
|
|
|
10.34
|
|
Form of Retention Restricted Stock Award Agreement for
retention restricted stock awards under the Total System Services, Inc. 2008
Omnibus Plan, incorporated by reference to Exhibit 10.3 of TSYS Current Report
on Form 8-K dated February 5, 2008. |
|
|
|
10.35
|
|
Form of Performance-Based Retention Restricted Stock Award
Agreement for performance-based restricted stock awards under the Total System
Services, Inc. 2008 Omnibus Plan, incorporated by reference to Exhibit 10.4 of
TSYS Current Report on Form 8-K dated February 5, 2008. |
|
|
|
10.36
|
|
Form of Revised Restricted Stock Award Agreement for
restricted stock unit awards under the Total System Services, Inc. 2008 Omnibus
Plan, incorporated by reference to Exhibit 10.5 of TSYS Current Report on Form
8-K dated February 5, 2008. |
|
|
|
10.37
|
|
Summary of Annual Base Salaries of TSYS Named Executive
Officers. |
|
|
|
10.38
|
|
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 dated July 25, 2007. |
|
|
|
13.1
|
|
Certain specified pages of TSYS 2007 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
2007 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. |
23
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
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.
Employee Stock Purchase Plan for the year ended December 31, 2007 (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, 2007 (to be filed
as an amendment hereto within 120 days of the end of the period covered by this
report.) |
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.
24
Report of Independent Registered Public Accounting Firm
The Board of Directors
Total System Services, Inc.:
Under date of February 28, 2008, we reported on the consolidated balance sheets of Total System
Services, Inc. and subsidiaries as of December 31, 2007 and 2006, and the related consolidated
statements of income, shareholders equity and comprehensive income, and cash flows for each of the
years in the three-year period ended December 31, 2007, as contained in the 2007 annual report to
shareholders. These consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year ended December 31, 2007. In connection
with our audits of the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule as listed in the accompanying index. This
financial statement schedule is the responsibility of the Companys 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.
As discussed in Notes 1 and 18 to the consolidated financial statements, effective January 1, 2007,
the Company adopted the recognition and disclosure provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes- an Interpretation of FASB Statement No. 109.
As discussed in Notes 1 and 14 to the consolidated financial statements, effective January 1, 2006,
the Company adopted the fair value method of accounting for stock-based compensation as required by
Statement of Financial Accounting Standards No. 123(R), Share-Based Payment.
As discussed in Note 16 to the consolidated financial statements, the Company adopted the
recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, as of December
31, 2006.
Atlanta, Georgia
February 28, 2008
TOTAL SYSTEM SERVICES, INC.
Schedule II
Valuation and Qualifying Accounts
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in |
|
|
|
|
|
|
|
|
|
|
|
|
|
allowances, charges to |
|
|
|
|
|
|
|
|
|
Balance at |
|
|
expenses and changes |
|
|
|
|
|
|
|
|
|
beginning |
|
|
to other accounts |
|
|
Deductions |
|
|
Balance at end |
|
|
|
of period |
|
|
describe |
|
|
describe |
|
|
of period |
|
Year ended December 31, 2005: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts and billing adjustments |
|
$ |
6,767 |
|
|
|
8,860 |
(1), (4) |
|
|
(3,013 |
)(3) |
|
$ |
12,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,767 |
|
|
|
8,860 |
|
|
|
(3,013 |
) |
|
$ |
12,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing accruals |
|
$ |
9,284 |
|
|
|
7,397 |
(2) |
|
|
(7,228 |
)(3) |
|
$ |
9,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,284 |
|
|
|
7,397 |
|
|
|
(7,228 |
) |
|
$ |
9,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts and billing adjustments |
|
$ |
12,614 |
|
|
|
1,614 |
(1) |
|
|
(3,255 |
)(3) |
|
$ |
10,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
12,614 |
|
|
|
1,614 |
|
|
|
(3,255 |
) |
|
$ |
10,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing accruals |
|
$ |
9,453 |
|
|
|
10,981 |
(2) |
|
|
(7,789 |
)(3) |
|
$ |
12,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,453 |
|
|
|
10,981 |
|
|
|
(7,789 |
) |
|
$ |
12,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for doubtful accounts and billing adjustments |
|
$ |
10,973 |
|
|
|
(568 |
)(1) |
|
|
(260 |
)(3) |
|
$ |
10,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,973 |
|
|
|
(568 |
) |
|
|
(260 |
) |
|
$ |
10,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing accruals |
|
$ |
12,645 |
|
|
|
35 |
(2) |
|
|
(4,155 |
)(3) |
|
$ |
8,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
12,645 |
|
|
|
35 |
|
|
|
(4,155 |
) |
|
$ |
8,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount reflected includes charges to (recoveries of) bad debt expense which are classified in other operating expenses and the charges for billing
adjustments which are recorded against revenues. |
|
(2) |
|
Amount reflected is the change in transaction processing accruals reflected in other operating expenses. |
|
(3) |
|
Accounts deemed to be uncollectible and written off during the year as it relates to bad debts. Amounts that relate to
billing adjustments and transaction processing accruals reflect actual billing adjustments and processing errors charged against the allowances. |
|
(4) |
|
Includes $4.3 million of doubtful accounts and billing adjustments on March 1, 2005 related to consolidating the financial results of
TSYS Acquiring Solutions, L.L.C. |
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)
|
|
February 28, 2008 |
By: |
/s/ Philip W. Tomlinson
|
|
|
|
Philip W. Tomlinson, |
|
|
|
Principal Executive Officer and
Chairman of the Board |
|
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Philip W. Tomlinson and M. Troy Woods 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/ Philip W. Tomlinson
Philip W. Tomlinson,
|
|
Date: February 28, 2008 |
Principal Executive Officer
and Chairman of the Board |
|
|
|
|
|
|
|
Date: February 28, 2008 |
M. Troy Woods, |
|
|
President and Director |
|
|
|
|
|
|
|
Date: February 28, 2008 |
|
|
|
James B. Lipham,
Senior Executive Vice President, Treasurer
and Principal Financial Officer |
|
|
|
|
|
/s/ Dorenda K. Weaver
Dorenda K. Weaver,
|
|
Date: February 28, 2008 |
Chief Accounting Officer |
|
|
|
|
|
/s/ Richard E. Anthony
Richard E. Anthony,
|
|
Date: February 28, 2008 |
Director |
|
|
|
|
|
/s/ James H. Blanchard
James H. Blanchard,
|
|
Date: February 28, 2008 |
Director and Chairman of the
Executive Committee |
|
|
|
|
|
/s/ Richard Y. Bradley
Richard Y. Bradley,
|
|
Date: February 28, 2008 |
Director |
|
|
|
|
|
|
|
Date: _________ ___, 2008 |
Director |
|
|
|
|
|
/s/ G. Wayne Clough
G. Wayne Clough,
|
|
Date: February 28, 2008 |
Director |
|
|
|
|
|
/s/ Walter W. Driver, Jr.
Walter W. Driver, Jr.,
Director
|
|
Date: February 28, 2008 |
|
|
|
/s/ Gardiner W. Garrard, Jr.
Gardiner W. Garrard, Jr.,
|
|
Date: February 28, 2008 |
Director |
|
|
|
|
|
|
|
Date: February 28, 2008 |
|
|
|
Sidney E. Harris, |
|
|
Director |
|
|
|
|
|
/s/ Alfred W. Jones III
Alfred W. Jones III,
|
|
Date: February 28, 2008 |
Director |
|
|
|
|
|
|
|
Date: February 28, 2008 |
Mason H. Lampton, |
|
|
Director |
|
|
|
|
|
/s/ H. Lynn Page
H. Lynn Page,
Director
|
|
Date: February 28, 2008 |
|
|
|
/s/ W. Walter Miller, Jr.
|
|
Date: February 28, 2008 |
W. Walter Miller, Jr., |
|
|
Director |
|
|
|
|
|
|
|
Date: February 28, 2008 |
John T. Turner, |
|
|
Director |
|
|
|
|
|
|
|
Date: February 28, 2008 |
Richard W. Ussery, |
|
|
Director |
|
|
|
|
|
|
|
Date: February 28, 2008 |
James D. Yancey,
Director |
|
|
|
|
|
|
|
Date: February 28, 2008 |
Rebecca K. Yarbrough,
Director |
|
|