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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2019
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from To


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2019

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from To

Commission file number: 1-10254

Total System Services, Inc.

www.tsys.com

(Exact name of registrant as specified in its charter)

Georgia	58-1493818
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


Georgia	58-1493818
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One TSYS Way, Post Office Box 1755, Columbus, Georgia 31902

(Address of principal executive offices) (Zip Code)

(706) 644-4388

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 par value	TSS	New York Stock Exchange

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐ ◻

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

~~Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐~~

IfLarge anAccelerated ~~emerging~~Filer ~~growth~~☑ ~~company,~~Accelerated ~~indicate~~Filer by◻ ~~check~~Non-accelerated ~~mark~~Filer if◻ ~~the~~Smaller ~~registrant~~reporting ~~has~~company ~~elected~~☐ ~~not~~Emerging togrowth ~~use~~company ~~the~~☐ ~~extended~~ ~~transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐~~

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

CLASS	OUTSTANDING AS OF: March 31, 2019
Common Stock, $0.10 par value	176,943,121 shares

As of June 30, 2019, there were 176,977,106 shares of the registrant’s common stock, $0.10 par value, outstanding.

Table of Contents

TOTAL SYSTEM SERVICES, INC.

Table of Contents

	PageNumber
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited) — March 31, 2019 and December 31, 2018	3
Consolidated Statements of Income (unaudited) — Three months ended March 31, 2019 and 2018	4
Consolidated Statements of Comprehensive Income (unaudited) — Three months ended March 31, 2019 and 2018	5
Consolidated Statements of Cash Flows (unaudited) — Three months ended March 31, 2019 and 2018	6
Consolidated Statement of Changes in Equity (unaudited) — Three months ended March 31, 2019 and 2018	7
Notes to Unaudited Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	43
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	43
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6. Exhibits	44
SIGNATURES	45

	Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited) — June 30, 2019 and December 31, 2018	3
Consolidated Statements of Income (unaudited) — Three and six months ended June 30, 2019 and 2018	4
Consolidated Statements of Comprehensive Income (unaudited) — Three and six months ended June 30, 2019 and 2018	5
Consolidated Statements of Cash Flows (unaudited) — Six months ended June 30, 2019 and 2018	6
Consolidated Statement of Changes in Equity (unaudited) — Three and six months ended June 30, 2019 and 2018	7
Notes to Unaudited Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	49
Item 4. Controls and Procedures	50
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	50
Item 1A. Risk Factors	50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 6. Exhibits	54
SIGNATURES	55

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

TOTAL SYSTEM SERVICES, INC.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share data)	March 31, 2019		December 31, 2018

Assets
(in thousands, except per share data)	June 30, 2019		December 31, 2018
Current assets:
Assets
Cash and cash equivalents (Note 2)	$	494,646	471,156
Current assets:
Accounts receivable, net of allowances for doubtful accounts and billing adjustments of $6.0 million as of 2019 and 2018		490,045	450,322
Cash and cash equivalents (Note 2)	$	458,220	471,156
Contract assets (Note 3)		44,473	30,950
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
Prepaid expenses and other current assets (Note 2)		200,229	188,355
Contract assets (Note 3)		43,847	30,950
Total current assets		1,229,393	1,140,783
Prepaid expenses and other current assets (Note 2)		224,048	188,355
Contract assets (Note 3)		53,865	47,839
Total current assets		1,239,827	1,140,783
Goodwill		4,115,380	4,114,838
Contract assets (Note 3)		56,925	47,839
Other intangible assets, net of accumulated amortization of $846.2 million and $802.0 million as of 2019 and 2018, respectively		748,490	796,702
Goodwill		4,114,851	4,114,838
Intangible assets - computer software, net of accumulated amortization of $930.3 million and $893.4 million as of 2019 and 2018, respectively		539,964	534,536
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
Property and equipment, net of accumulated depreciation and amortization of $523.0 million and $522.7 million as of 2019 and 2018, respectively (Note 4)		385,400	383,074
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
Operating lease right-of-use assets, net (Note 4)		206,239	-
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
Contract cost assets, net of accumulated amortization		147,342	145,598
Operating lease right-of-use assets, net (Note 4)		198,539	-
Equity investments, net		197,831	180,661
Contract cost assets, net of accumulated amortization		148,938	145,598
Deferred income tax assets		7,750	7,773
Equity investments, net		206,504	180,661
Other assets		142,478	116,905
Deferred income tax assets		7,516	7,773
Total assets	$	7,774,132	7,468,709
Other assets		135,727	116,905
Liabilities
Total assets	$	7,706,806	7,468,709
Current liabilities:
Liabilities
Accounts payable	$	73,061	97,956
Current liabilities:
Contract liabilities (Note 3)		54,581	47,227
Accounts payable	$	57,911	97,956
Current portion of operating lease liabilities (Note 4)		49,469	-
Contract liabilities (Note 3)		51,553	47,227
Accrued salaries and employee benefits		33,778	73,143
Current portion of operating lease liabilities (Note 4)		43,346	-
Current portion of long-term borrowings (Note 5)		21,000	20,807
Accrued salaries and employee benefits		34,922	73,143
Current portion of obligations under finance leases and license agreements (Note 4)		17,710	8,318
Current portion of long-term borrowings (Note 5)		17,811	20,807
Other current liabilities (Note 2)		315,778	268,150
Current portion of obligations under finance leases and license agreements (Note 4)		17,712	8,318
Total current liabilities		565,377	515,601
Other current liabilities (Note 2)		278,072	268,150
Long-term borrowings, excluding current portion (Note 5)		4,139,148	3,843,394
Total current liabilities		501,327	515,601
Deferred income tax liabilities		409,706	380,278
Long-term borrowings, excluding current portion (Note 5)		4,003,248	3,843,394
Operating lease liabilities, excluding current portion (Note 4)		168,505	-
Deferred income tax liabilities		401,486	380,278
Obligations under finance leases and license agreements, excluding current portion (Note 4)		41,585	46,147
Operating lease liabilities, excluding current portion (Note 4)		167,102	-
Contract liabilities (Note 3)		23,805	21,489
Obligations under finance leases and license agreements, excluding current portion (Note 4)		39,490	46,147
Other long-term liabilities		73,246	75,894
Contract liabilities (Note 3)		25,281	21,489
Total liabilities		5,421,372	4,882,803
Other long-term liabilities		74,278	75,894
Commitments and contingencies (Note 6)
Total liabilities		5,212,212	4,882,803
Shareholders' Equity
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; 176,943 and 180,586 outstanding as of 2019 and 2018, respectively		20,277	20,277
Shareholders’ equity:
Additional paid-in capital		191,935	189,889
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
Accumulated other comprehensive loss, net (Notes 1 and 2)		(55,028)	(60,223)
Additional paid-in capital		203,098	189,889
Treasury stock, at cost (25,822 and 22,179 shares as of 2019 and 2018, respectively)		(1,426,984)	(1,042,687)
Accumulated other comprehensive loss, net (Notes 1 and 2)		(64,200)	(60,223)
Retained earnings		3,622,560	3,478,650
Treasury stock, at cost (25,788 and 22,179 shares as of 2019 and 2018, respectively)		(1,426,177)	(1,042,687)
Total shareholders’ equity		2,352,760	2,585,906
Retained earnings		3,761,596	3,478,650
Total liabilities and shareholders' equity	$	7,774,132	7,468,709
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~~

3 See accompanying Notes to Unaudited Consolidated Financial Statements

~~Table of Contents~~ 3

~~TOTAL~~Table ~~SYSTEM~~of ~~SERVICES, INC.~~ Contents

~~Consolidated~~TOTAL ~~Statements~~SYSTEM ofSERVICES, ~~Income~~ INC.

~~(Unaudited)~~ Consolidated Statements of Income

	Three months ended
	March 31,
(in thousands, except per share data)	2019		2018
Total revenues (Notes 3 and 11)	$	1,034,531	987,170
Cost of services (Note 3)		632,212	613,365
Selling, general and administrative expenses		179,049	185,534
Total operating expenses		811,261	798,899
Operating income		223,270	188,271
Nonoperating expenses, net		(42,991)	(37,642)
Income before income taxes and equity in income of equity investments		180,279	150,629
Income taxes (Note 8)		29,899	18,135
Income before equity in income of equity investments		150,380	132,494
Equity in income of equity investments, net of tax		11,227	10,608
Net income		161,607	143,102
Net income attributable to noncontrolling interests		-	(1,261)
Net income attributable to Total System Services, Inc. (TSYS) common shareholders	$	161,607	141,841
Basic earnings per share (EPS) attributable to TSYS common shareholders (Note 9)	$	0.91	0.78
Diluted EPS attributable to TSYS common shareholders (Note 9)	$	0.90	0.77

(Unaudited)

See accompanying Notes to Unaudited Consolidated Financial Statements


	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

~~Table~~See ofaccompanying ~~Contents~~ Notes to Unaudited Consolidated Financial Statements

~~TOTAL SYSTEM SERVICES, INC.~~

~~Consolidated Statements of Comprehensive Income~~ 4

~~(Unaudited)~~ Table of Contents

	Three months ended
	March 31,
(in thousands)	2019		2018
Net income	$	161,607	143,102
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		10,426	12,495
Postretirement healthcare plan adjustments		(179)	(147)
Unrealized gain on available-for-sale securities (Note 1)		-	2,581
Other comprehensive income		10,247	14,929
Comprehensive income		171,854	158,031
Comprehensive income attributable to noncontrolling interests		-	(1,261)
Comprehensive income attributable to TSYS common shareholders	$	171,854	156,770

TOTAL SYSTEM SERVICES, INC.

~~See~~Consolidated ~~accompanying~~Statements ~~Notes~~of toComprehensive ~~Unaudited Consolidated Financial Statements~~ Income

5 (Unaudited)

Table of Contents


	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

~~TOTAL SYSTEM SERVICES, INC.~~

~~Consolidated~~See ~~Statements~~accompanying ofNotes ~~Cash~~to ~~Flows~~ Unaudited Consolidated Financial Statements

~~(Unaudited)~~

	Three months ended
	March 31,
(in thousands)	2019		2018
Cash flows from operating activities:
Net income	$	161,607	143,102
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		103,710	104,389
Amortization of operating lease right-of-use assets		12,654	-
Provisions for cardholder losses		13,269	15,545
Share-based compensation		10,714	6,295
Provisions for bad debt expenses and billing adjustments		2,948	2,839
Charges for transaction processing provisions		7	729
Amortization of debt issuance costs		1,322	1,035
Loss on foreign currency		1,138	427
Amortization of bond discount		277	233
(Gain) loss on disposal of equipment, net		(307)	2
Deferred income tax expense		27,745	15,180
Changes in value of equity investments		(174)	-
Equity in income of equity investments, net of tax		(11,227)	(10,608)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(40,813)	9,006
Contract assets and contract liabilities		(11,357)	498
Contract cost assets		116	2,168
Prepaid expenses, other current assets and other long-term assets		(38,936)	(7,701)
Accounts payable		918	2,289
Accrued salaries and employee benefits		(39,718)	(50,835)
Other current liabilities and other long-term liabilities		33,696	(22,700)
Net cash provided by operating activities		227,589	211,893
Cash flows from investing activities:
Additions to licensed computer software from vendors		(48,628)	(13,827)
Purchases of property and equipment		(19,396)	(22,069)
Additions to internally developed computer software		(12,405)	(10,340)
Cash used in acquisitions, net of cash acquired		-	(1,036,853)
Other investing activities		(2,350)	(1,550)
Net cash used in investing activities		(82,779)	(1,084,639)
Cash flows from financing activities:
Principal payments on long-term borrowings, finance lease obligations and license agreements		(157,324)	(129,010)
Dividends paid on common stock		(23,456)	(23,496)
Subsidiary dividends paid to noncontrolling shareholders		-	(1)
Repurchase of common stock under plans and tax withholding		(400,013)	(24)
Proceeds from borrowings of long-term debt		450,000	1,040,000
Proceeds from exercise of stock options		6,466	26,461
Net cash (used in) provided by financing activities		(124,327)	913,930
Cash, cash equivalents and restricted cash:
Effect of exchange rate changes on cash, cash equivalents and restricted cash		2,049	1,684
Net increase in cash, cash equivalents and restricted cash		22,532	42,868
Cash, cash equivalents and restricted cash at beginning of period		474,279	451,370
Cash, cash equivalents and restricted cash at end of period	$	496,811	494,238
Supplemental cash flow information:
Interest paid	$	10,629	42,040
Income taxes (refunded) paid, net	$	(1,949)	2,936

~~See~~Table ~~accompanying~~of ~~Notes to Unaudited Consolidated Financial Statements~~ Contents

6 TOTAL SYSTEM SERVICES, INC.

~~Table~~Consolidated Statements of ~~Contents~~ Cash Flows

~~TOTAL SYSTEM SERVICES, INC.~~ (Unaudited)

Consolidated Statements of Changes in Equity


	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

~~(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 loss		-	-		-	-	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

			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 loss		-	-		-	-	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

~~See accompanying Notes to Unaudited Consolidated Financial Statements~~

~~Table of Contents~~

~~TOTAL SYSTEM SERVICES, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~ 6

~~Note~~Table ~~1 —Summary~~ of ~~Significant Accounting Policies~~ Contents

~~Business~~ TOTAL SYSTEM SERVICES, INC.

~~Total~~Consolidated ~~System~~Statements ~~Services,~~of ~~Inc.’s~~Changes ~~(“TSYS’”~~in 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. Equity

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. (Unaudited)

Basis of Presentation


			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

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~~See ~~financial~~accompanying ~~statements~~Notes ~~have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions~~ to ~~Form~~Unaudited ~~10-Q~~Consolidated ~~and~~Financial 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. Statements

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 appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”). Results of interim periods are not necessarily indicative of results to be expected for the year. 7

~~Out-~~Table of~~-period~~ ~~adjustment~~ Contents

AsTOTAL ofSYSTEM ~~January 1~~SERVICES, ~~2019, the Company recorded an adjustment to reclassify the cumulative unrealized gain of $5~~INC.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~~Consolidated ~~Value~~Statements ~~Measurement~~ of Changes in Equity

Refer to Note 3 of the Company’s audited financial statements for the year ended December 31, 2018, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC, for a discussion regarding fair value measurement. (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

~~Table of Contents~~

~~The~~See ~~Company~~accompanying ~~had~~Notes noto ~~transfers~~Unaudited ~~between~~Consolidated ~~Level~~Financial ~~1, Level 2 or Level 3 assets during the three months ended March 31, 2019 and 2018.~~ Statements

As of March 31, 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 31st of each year. 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 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~~

Refer to Note 1 of the Company’s audited financial statements for the year ended December 31, 2018, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC, for a discussion regarding new accounting pronouncements.

~~Note 2 — Supplementary Balance Sheet Information~~ 8

~~Cash,~~Table ~~Cash~~of ~~Equivalents and Restricted Cash~~ Contents

~~The~~TOTAL ~~Company~~SYSTEM 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 cashSERVICES, ~~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~~INC.

~~Cash,~~Notes ~~cash~~to ~~equivalents~~Unaudited ~~and~~Consolidated ~~restricted~~Financial ~~cash balances are summarized as follows:~~ Statements

(in thousands)	March 31, 2019		December 31, 2018
Cash and cash equivalents in domestic accounts	$	434,130	405,535
Cash and cash equivalents in foreign accounts		60,516	65,621
Total cash and cash equivalents		494,646	471,156
Restricted cash included in other long-term assets		2,165	3,123
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	496,811	474,279

~~Restricted~~Note ~~cash~~1 ~~included~~—Summary inof ~~other~~Significant ~~assets~~Accounting ~~in the Consolidated Balance Sheets represents immaterial amounts required across the Company’s segments for operational purposes.~~ Policies

~~Table of Contents~~ Business

~~Prepaid Expenses and Other Current Assets~~

~~Significant~~Total ~~components~~System ofServices, 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 ~~expenses~~debit and payroll cards, demand deposit accounts and other ~~current~~financial ~~assets~~service solutions to the underbanked and other consumers and businesses. The Company’s services are ~~summarized~~provided asthrough ~~follows~~three operating segments: Issuer Solutions, Merchant Solutions and Consumer Solutions.

(in thousands)	March 31, 2019		December 31, 2018
Prepaid expenses	$	63,088	48,058
Income taxes receivable		26,782	19,362
R&D state tax credit		21,593	26,541
Supplies inventory		20,074	18,089
Other		68,692	76,305
Total	$	200,229	188,355

~~Other~~Through ~~Current~~the ~~Liabilities~~ 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.

~~Significant components of other current liabilities are summarized as follows:~~

(in thousands)	March 31, 2019		December 31, 2018
Accrued card brand fees	$	62,637	55,991
Accrued interest		53,960	22,191
Accrued third-party commissions		52,187	46,977
Accrued expenses		29,705	25,178
Dividends payable		23,736	24,645
Other		93,553	93,168
Total	$	315,778	268,150

Pending Merger with Global Payments Inc.

~~Accumulated Other Comprehensive Loss (AOCL)~~

~~The~~On ~~income~~May ~~tax~~27, ~~effects~~2019, ~~allocated~~TSYS toentered into an Agreement and Plan of Merger (the ~~cumulative~~“Merger ~~balance~~Agreement”) ofwith ~~accumulated~~Global ~~other~~Payments ~~comprehensive~~Inc., ~~income~~a Georgia corporation (“~~AOCI~~Global Payments”). ~~(loss)~~The ~~attributable~~Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, TSYS ~~shareholders~~will ~~are~~merge with and into Global Payments (the “Merger”), with Global Payments as ~~follows:~~ the surviving entity in the Merger.

(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		11,418		-		(231)		11,187
Tax effect		992		-		(52)		940
Net-of-tax amount (b)		10,426		-		(179)		10,247
Balance as of March 31, 2019 (a)+(b)	$	(52,760)		-		(2,268)	$	(55,028)

~~Note~~Upon 3the —terms ~~Revenue~~and ~~from~~subject ~~Contracts~~to ~~with~~the ~~Customers~~ 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.

~~Description of service offerings~~

~~Issuer~~The ~~Solutions~~ 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.

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:

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

~~· Transactions and authorizations processed;~~

10 Basis of Presentation

~~Table of Contents~~

·The ~~Statements~~accompanying ~~generated~~unaudited consolidated financial statements of TSYS include the accounts of TSYS and~~/or~~ ~~mailed;~~its wholly- and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

~~· Managed services; and~~

·These ~~Cards~~financial ~~embossed~~statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and ~~mailed~~the instructions to Form 10-Q and ~~other~~Rule ~~processing~~10-01 ~~services~~of Regulation S-X and, therefore, do not include all information and footnotes required by U.S. GAAP for ~~cardholder~~complete ~~accounts~~financial onstatements. ~~file~~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

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. 9

~~Issuer~~Table ~~Solutions~~of ~~revenues also include loyalty redemption services and professional services.~~ Contents

~~Merchant~~accruals, ~~Solutions~~ 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.

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~~accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s summary of significant accounting policies, consolidated financial statements and ~~services~~related ~~offered~~notes ~~include:~~appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC. Results of interim periods are not necessarily indicative of results to be expected for the year.

~~· Authorizations and capture of electronic transactions;~~

~~· Clearing and settlement~~ Out-of-period ~~electronic~~adjustment ~~transactions;~~

~~· Information reporting services related to electronic transactions;~~

·As ~~Merchant~~of ~~billing~~January ~~services;~~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.

~~· Point-of-sale equipment and services.~~

~~Most~~Fair ofValue ~~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.~~ Measurement

~~Consumer Solutions~~

~~The~~Refer to Note 3 of the Company’s ~~Consumer~~audited ~~Solutions~~financial ~~revenues~~statements ~~principally~~for ~~consist~~the ofyear aended ~~portion~~December of31, ~~the~~2018, ~~service~~which ~~fees collected~~is ~~from~~included ~~cardholders~~as ~~and~~Exhibit ~~interchange~~13.1 ~~revenues~~to ~~received~~the byCompany’s Annual Report on Form 10-K for the ~~issuing~~year ~~banks~~ended inDecember ~~connection~~31, 2018, as filed with the ~~programs~~SEC, ~~that~~for ~~the~~a ~~Consumer~~discussion ~~Solutions~~regarding ~~segment~~fair ~~manages~~value measurement.

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

·The ~~Transactions~~Company -had ~~Customers~~no ~~are~~transfers ~~typically~~between ~~charged~~Level ~~a fee for each Personal Identification Number (“PIN”) and signature-based purchase transaction made using their cards~~1, ~~unless~~Level ~~the~~2 ~~customer is on a monthly~~ or ~~annual~~Level ~~service~~3 ~~plan,~~assets induring ~~which case~~ the ~~customer~~six ismonths ~~instead~~ended ~~charged~~June ~~a monthly or annual subscription fee~~30, as2019 ~~applicable. Customers are also charged fees for Automated Teller Machine (“ATM”) withdrawals~~ and ~~other transactions conducted at ATMs~~2018.

· 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.

·As ~~Additional~~of ~~Products~~June ~~and~~30, ~~Services~~2019, -the ~~Customers~~Company ~~are~~had ~~charged~~recorded ~~fees~~goodwill ~~associated~~in ~~with~~the ~~additional~~amount ~~products~~of ~~and~~$4.1 ~~services~~billion. ~~offered~~The inCompany ~~connection~~performs ~~with~~its ~~certain~~annual ~~cards,~~impairment ~~including~~testing ~~the~~of ~~use~~its goodwill balance as of ~~overdraft~~May ~~features,~~31st aof ~~variety~~each year. The Company performed its annual impairment testing of ~~bill~~its ~~payment~~goodwill ~~options,~~balance ~~card~~as ~~replacement,~~of ~~foreign~~May ~~exchange~~31, 2019, and ~~card-to-card~~this ~~transfers~~test ofdid ~~funds~~not ~~initiated~~indicate ~~through~~any impairment. The fair value of the ~~call~~reporting ~~centers~~units substantially exceeds their carrying value.

~~· 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.~~

11 Recently Adopted Accounting Pronouncements

~~Table of Contents~~

~~Disaggregation~~The ofCompany ~~revenue~~ adopted the following ASUs on January 1, 2019:

~~The following table summarizes volume-based and non-volume related revenue from contracts with external customers for the three months ended March 31, 2019 and 2018:~~

	Three months ended March 31, 2019
(in thousands)	Issuer Solutions		Merchant Solutions		Consumer Solutions		Total
Volume-based revenues	$	230,211		322,812		218,696	$	771,719
Non-volume related revenues		239,948		22,369		495		262,812
Total revenues	$	470,159		345,181		219,191	$	1,034,531

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.

	Three months ended March 31, 2018
(in thousands)	Issuer Solutions		Merchant Solutions		Consumer Solutions		Total
Volume-based revenues	$	219,271		298,948		209,721	$	727,940
Non-volume related revenues		238,088		20,475		667		259,230
Total revenues	$	457,359		319,423		210,388	$	987,170

~~Issuer~~In ~~Solutions~~ 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.

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~~New ~~Solutions~~ Accounting Pronouncements

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.

~~Consumer~~In ~~Solutions~~ 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

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. 10

12 Table of Contents

~~Table~~update ofalso ~~Contents~~ 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.

~~The following table summarizes revenue from contracts with customers, by currency, for the three months ended March 31, 2019 and 2018:~~

	Three months ended March 31, 2019
(in thousands)	Issuer Solutions		Merchant Solutions		Consumer Solutions		Total
U.S. dollar	$	372,000		344,871		219,191	$	936,062
British Pound Sterling		65,152		-		-		65,152
Euro		25,611		-		-		25,611
Other		7,396		310		-		7,706
Total revenues	$	470,159		345,181		219,191	$	1,034,531

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.

	Three months ended March 31, 2018
(in thousands)	Issuer Solutions		Merchant Solutions		Consumer Solutions		Total
U.S. dollar	$	359,870		319,219		210,388	$	889,477
British Pound Sterling		63,121		-		-		63,121
Euro		26,597		-		-		26,597
Other		7,771		204		-		7,975
Total revenues	$	457,359		319,423		210,388	$	987,170

~~See~~The ~~Note~~Company 11is 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 ~~disclosure~~debt securities. The adoption of ~~revenues~~this byguidance ~~geography~~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.

~~Performance obligations~~

~~The~~Refer ~~following table includes estimated revenue expected~~ to beNote ~~recognized~~1 inof the ~~future~~Company’s ~~related~~audited tofinancial ~~performance~~statements ~~obligations~~for ~~that are unsatisfied or partially unsatisfied at~~ the ~~end~~year ofended ~~the~~December ~~reporting~~31, ~~period.~~2018, ~~The~~which ~~purpose of this disclosure~~ is toincluded ~~provide~~as ~~additional~~Exhibit ~~information~~13.1 ~~about the amounts and expected timing of revenue~~ to ~~be recognized from~~ the ~~remaining performance obligations in the~~ Company’s ~~existing~~Annual ~~contracts. For~~Report ~~revenue~~on ~~which~~Form is10-K ~~recognized~~for ~~using (i)~~ the ~~“as-invoiced”~~year ~~practical~~ended ~~expedient~~December ~~and~~31, ~~(ii) the “direct allocation” method~~2018, ~~the~~ ~~Company~~as isfiled ~~required~~with ~~to disclose~~ the ~~value~~SEC, ~~of unsatisfied performance obligations~~ for ~~contractual~~a ~~minimums~~discussion ~~only. Accordingly,~~regarding ~~the~~other ~~total~~new ~~unsatisfied~~accounting ~~or partially unsatisfied performance obligations related to processing services are materially higher than the amounts disclosed in the below table~~pronouncements.

(in thousands)		Remainder of 2019			2020		2021		2022		2023 - 2029			Total
Unsatisfied or partially unsatisfied performance obligations		$	586,952		632,569		532,219		387,996		468,465		$	2,608,201

~~Contract~~Note ~~balances~~ 2 — Supplementary Balance Sheet Information

Contract assets are defined as an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time (for example, the entity’s future performance).

~~Contract~~Cash, ~~liabilities~~Cash ~~are~~Equivalents ~~defined~~and asRestricted ~~an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.~~ Cash

Net contract assets and liabilities may include amounts related to signing incentives for signing or renewing long-term contracts. Capitalized signing incentives are amortized over the contract term and the amortization is included as a reduction of revenues in the Company’s Consolidated Statements of Income.

~~ASC~~The ~~606~~Company ~~requires~~maintains anaccounts ~~entity~~outside tothe ~~present~~United inStates ~~its~~denominated ~~Consolidated~~in ~~Balance~~currencies ~~Sheets~~other than the ~~net~~U.S. ~~position~~dollar. All amounts in adomestic ~~customer~~accounts ~~contract~~are ondenominated ain ~~contract-by-contract~~U.S. ~~basis~~dollars. The ~~net~~following ~~position~~table inprovides a ~~customer~~reconciliation ~~contract~~of iscash, ~~presented~~cash asequivalents ~~either~~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.

~~Table~~Cash, ofcash ~~Contents~~ equivalents and restricted cash balances are summarized as follows:

~~contract assets or contract liabilities. Significant changes in the contract assets and liabilities balances during the three months ended March 31, 2019 are as follows:~~

	Three months ended March 31, 2019

(in thousands)	Contract Assets Increase/(Decrease)		Contract Liabilities (Increase)/Decrease

Signing incentive additions	$	22,540	$	-
(in thousands)	June 30, 2019		December 31, 2018
Signing incentive amortization		(6,721)		(1,093)
Cash and cash equivalents in domestic accounts	$	405,000	405,535
Revenue recognized in advance of billings		6,005		-
Cash and cash equivalents in foreign accounts		53,220	65,621
Billed amounts transferred to receivables		(2,004)		-
Total cash and cash equivalents		458,220	471,156
Cash received from customers		(1,396)		(47,981)
Restricted cash included in other long-term assets		2,442	3,123
Deferred revenue that was recognized as revenue		2,349		37,294
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	460,662	474,279

Other changes in contract assets and contract liabilities primarily relate to movements in net contract position (between contract assets and contract liabilities) each period and foreign currency translation.

~~Note~~Restricted 4cash –included ~~Leases~~ in other assets in the Consolidated Balance Sheets represents immaterial amounts required across the Company’s segments for operational purposes.

The Company adopted ASU No. 2016-02 and related ASUs (“ASC 842”) as of January 1, 2019 using the cumulative effect method. Upon adoption, the Company recorded right-of-use (“ROU”) assets of $195.2 million and additional operating liabilities of approximately $190.7 million for existing operating leases. Also as part of the initial adoption, the Company wrote off the carrying value of favorable lease intangible assets of $2.1 million and increased the ROU assets by the same amount. The cumulative effect adjustment recorded to opening retained earnings was not material. The adoption of this ASU did not have a material impact on the Company’s results of operations or cash flows.

~~Description of leases and lease policies - lessee~~ 11

~~TSYS~~Table ~~enters into leases for datacenters, facilities, computer equipment and certain other equipment. Leases with an initial term~~ of 12 months or less are not recorded on the balance sheet. TSYS recognizes lease expense or depreciation expense for leases on a straight-line basis over the lease term. Variable lease expense primarily relates to maintenance and other monthly expenses that do not depend on an index or rate. Contents

~~TSYS~~Prepaid ~~determines~~Expenses ~~if an arrangement is a lease at contract inception. Operating leases are included in operating lease ROU assets, other current liabilities,~~ and ~~operating~~Other ~~lease~~Current ~~liabilities in our Consolidated Balance Sheet. Finance leases are included in property and equipment, net and current and long-term obligations under finance leases in our Consolidated Balance Sheet.~~ Assets

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of the future lease payments. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. TSYS uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives received. TSYS lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

~~TSYS~~Significant ~~has~~components ~~lease~~of ~~agreements~~prepaid ~~with~~expenses ~~lease~~ and ~~non-lease~~other ~~components,~~current ~~which~~assets are ~~combined~~summarized ~~and accounted for~~ as a single lease component for all asset classes excluding computer equipment. For computer equipment leases, the Company accounts for the lease and non-lease components as separate components. The majority of computer equipment lease commitments come with a renewal option or an option to terminate the lease. These lease commitments may be replaced with new leases, which allow the Company to continually update its computer equipment. follows:

Table of Contents



(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

~~Practical expedients and policy elections~~

~~The~~Other ~~Company~~Current ~~has elected to utilize the following practical expedients and accounting policy elections:~~ Liabilities

 Electing as a package, the Company did not reassess: (a) whether expired or existing contracts contain leases under the new definition of a lease, (b) lease classification for expired or existing leases, and (c) whether previously capitalized initial direct costs would qualify for capitalization under ASU No. 2016-02.

Significant ~~The~~components ~~Company did not evaluate land easements that existed or expired before the Company’s adoption~~ of ~~ASU~~other ~~No.~~current ~~2016-02~~liabilities ~~and~~are ~~that~~summarized ~~were not previously accounted for~~ as ~~leases.~~ follows:

 From a lessee perspective, the Company has elected to combine lease and non-lease components for all classes of assets except for computer equipment. Accordingly, for all asset classes excluding computer equipment, the Company accounts for the combined lease and non-lease components as a single lease component. For computer equipment, the Company accounts for lease and non-lease components, such as maintenance, separately.

 From a lessee perspective, the Company has elected, as an accounting policy election by class of underlying asset, not to recognize ROU assets and lease liabilities for short-term leases.



(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

 From a lessor perspective, the Company has elected to utilize the practical expedient in ASU No. 2018-11 to not separate non-lease components from the associated lease component for arrangements including point-of-sale (“POS”) terminals. Since the predominant component in these arrangements is service revenue and not the POS terminal, the combined components in these arrangements will be accounted for under ASC 606 and not ASC 842.

Accumulated ~~The~~Other ~~Company~~Comprehensive ~~utilized~~Loss ~~incremental borrowing rates in transition (as of January 1, 2019) based on the remaining lease payments and remaining lease term.~~

~~The Company decided not to elect the use of hindsight in determining the lease term and in assessing impairment of the Company’s ROU assets.~~

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

~~Supplemental balance sheet information related to leases is as follows:~~

(in thousands)	March 31, 2019		December 31, 2018

Lease assets:
(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
Operating lease right-of-use assets, net:
Balance as of December 31, 2018	$	(63,186)		5,052		(2,089)	$	(60,223)
Computer equipment	$	74,587	na
Reclassification from adoption of ASU No. 2016-01 (Note 1)		-		(5,052)		-		(5,052)
Facilities		131,420	na
Balance after reclassification (a)		(63,186)		-		(2,089)		(65,275)
Other		232	na
Pretax amount		420		-		966		1,386
Total operating lease right-of-use assets, net		206,239	na
Tax effect		4		-		307		311
Finance lease right-of-use assets:
Net-of-tax amount (b)		416		-		659		1,075
Computer and other equipment		78,794	91,526
Balance as of June 30, 2019 (a)+(b)	$	(62,770)		-		(1,430)	$	(64,200)
Furniture and other equipment		3,859	6,104

Total finance lease assets		82,653	97,630
Less accumulated depreciation:
Computer and other equipment		(37,622)	(47,903)
Furniture and other equipment		(2,823)	(4,859)
Total accumulated depreciation		(40,445)	(52,762)
Total finance lease right-of-use assets, net		42,208	44,868
Total lease assets	$	248,447	44,868
Lease liabilities:
Current portion of operating lease liabilities	$	49,469	na
Operating lease liabilities, excluding current portion		168,505	na
Current portion of obligations under finance leases		5,976	5,934
Obligations under finance leases, excluding current portion		29,849	31,243
Total lease liabilities	$	253,799	37,177
na = not applicable since TSYS adopted ASC 842 as of January 1, 2019

~~Table of Contents~~

AsNote ~~of March 31, 2019, finance lease assets and finance lease accumulated depreciation decreased by approximately $15.0 million and $12.~~3 ~~million,~~— ~~respectively,~~Revenue ~~when~~from ~~compared~~Contracts towith December 31, 2018. This decrease is related to the execution of purchase options for certain finance leases as well as the retirement of certain assets no longer in use. The balances of any finance leases subject to purchase options exercised during the three months ended March 31, 2019 were subsequently moved to Property and Equipment. Customers

~~Lease expense~~

~~The~~Description ~~components~~ of ~~lease~~service ~~expense~~offerings ~~are as follows:~~

	Three months ended
(in thousands)	March 31, 2019
Operating lease expense:
Fixed lease expense	$	14,975
Variable lease expense		1,969
Short-term lease expense		1,369
Total operating lease expense		18,313
Finance lease expense:
Amortization of ROU assets		2,891
Interest on finance lease liabilities		388
Total finance lease expense		3,279
Total lease expense	$	21,592

~~Total~~Issuer ~~rental expense under all operating leases for the year ended December 31, 2018 was $128.6 million.~~ Solutions

~~Other lease information~~

~~Supplemental~~The ~~cash~~Company's ~~flow~~Issuer ~~information~~Solutions ~~related~~revenues toare ~~leases~~derived isfrom aslong-term ~~follows~~processing contracts with financial and nonfinancial institutions. Payment processing services revenues are generated primarily from charges based on:

	Three months ended
(in thousands)	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	18,882
Operating cash flows from finance leases		388
Financing cash flows from finance leases		1,461

●

The number of accounts on file;

	Three months ended March 31,
(in thousands)	2019		2018
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	36,369	na
Finance leases		-	6,818
na = not applicable since TSYS adopted ASC 842 as of January 1, 2019

●

Transactions and authorizations processed;

~~The weighted-average remaining lease term and weighted-average discount rate are as follows:~~ 12

	Three months ended
	March 31, 2019
Weighted-average remaining lease term (years):
Operating leases	5.32
Finance leases	5.81
Weighted-average discount rate:
Operating leases	4.25	%
Finance leases	8.46	%

Table of Contents

16 ● Statements generated and/or mailed;

~~Table~~● ofManaged ~~Contents~~ services; and

~~Maturity~~● ofCards ~~lease~~embossed ~~liabilities~~ and mailed and other processing services for cardholder accounts on file.

The future minimum lease payments under noncancelable operating and finance leases with remaining terms greater than one year for the next five years and thereafter and in the aggregate as of March 31, 2019 and December 31, 2018, are as follows:

	March 31, 2019			December 31, 2018
(in thousands)	Operating Leases		Finance Leases	Operating Leases	Finance Leases
20191	$	43,544	5,581	54,818	7,393
2020		54,611	7,406	54,738	7,319
2021		51,209	7,161	50,794	7,085
2022		42,355	7,127	42,048	7,051
2023		19,226	6,732	19,089	6,658
Thereafter		33,057	6,936	32,894	6,868
Total lease payments		244,002	40,943	254,381	42,374
Less imputed interest		(24,081)	(4,840)	na	(5,197)
Total	$	219,921	36,103	254,381	37,177
na = not applicable since TSYS adopted ASC 842 as of January 1, 2019

~~1 For the three months ended March 31, 2019, this row represents the remaining payments from April to December 2019.~~

InIssuer ~~March~~Solutions ~~2019,~~revenues ~~the~~also ~~Company~~include ~~entered~~loyalty ~~into~~redemption ~~operating~~services and ~~finance~~professional ~~leases for certain computer equipment whose commencement dates range from July 2019 to August 2019~~services. Amounts related to these operating and finance leases totaling $2.2 million are not reflected on the Company’s consolidated balance sheet as of March 31, 2019. However, amounts related to these operating and finance leases are reflected in the above disclosure of future operating lease commitments as of March 31, 2019.

In April 2019, the Company entered into operating leases for certain facilities whose commencement dates range from April 1, 2019 to November 1, 2019. Amounts related to these operating leases are not reflected on the Company’s consolidated balance sheet as of March 31, 2019 or in the above disclosure of operating lease commitments as of March 31, 2019.

~~Note~~Merchant ~~5 — Long-Term Borrowings and License Agreements~~ Solutions

Refer to Note 12 of the Company’s audited financial statements for the year ended December 31, 2018, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC, for further discussion regarding long-term borrowings and license agreements.

~~Note~~The 6Company’s —Merchant ~~Commitments~~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 ~~Contingencies~~ 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.

Refer to Note 15 of the Company’s audited financial statements for the year ended December 31, 2018, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC, for a discussion regarding commitments and contingencies.

~~Legal~~The ~~Proceedings~~products –and ~~General~~services offered include:

~~The~~● ~~Company~~Authorizations ~~is subject to various legal proceedings~~ and ~~claims~~capture ~~and is also subject to information requests, inquiries and investigations arising out~~ of ~~the~~electronic ordinary conduct of its business. The Company establishes accruals for litigation and similar matters when those matters present loss contingencies that TSYS determines to be both probable and reasonably estimable in accordance with GAAP. Legal costs are expensed as incurred. In the opinion of management, based on current knowledge and in part upon the advice of legal counsel, all matters not specifically discussed below are believed to be adequately covered by insurance, or, if not covered, the possibility of losses from such matters are believed to be remote or such matters are of such kind or involve such amounts that would not have a material adverse effect on the financial position, results of operations or cash flows of the Company if disposed of unfavorably. transactions;

17 ● Clearing and settlement of electronic transactions;

~~Table~~● ofInformation ~~Contents~~ reporting services related to electronic transactions;

~~TelexFree~~● ~~Matter~~ Merchant billing services; and

~~ProPay,~~● ~~Inc. (“ProPay”), a subsidiary~~ Point-of-sale ~~the~~equipment ~~Company, has been named as one of a number of defendants (including other merchant processors) in several purported class action lawsuits relating to the activities of TelexFree, Inc.~~ and its affiliates and principals. TelexFree is a former merchant customer of ProPay. With regard to TelexFree, each purported class action lawsuit generally alleges that TelexFree engaged in an improper multi-tier marketing scheme involving voice-over Internet protocol telephone services. The plaintiffs in each of the purported class action complaints generally allege that the various merchant processor defendants, including ProPay, aided and abetted the improper activities of TelexFree. TelexFree filed for bankruptcy protection in Nevada. The bankruptcy proceeding was subsequently transferred to the Massachusetts Bankruptcy Court.

Specifically, ProPay has been named as one of a number of defendants (including other merchant processors) in each of the following purported class action complaints relating to TelexFree: (i) Waldermara Martin, et al. v. TelexFree, Inc., et al. (Case No. BK-S-14-12524-ABL) (Bankr. D. Nev.); (ii) Anthony Cellucci, et al. v. TelexFree, Inc., et. al. (Case No. 4:14-BK-40987) (Bankr. D. Mass.); (iii) Maduako C. Ferguson Sr., et al. v. Telexelectric, LLP, et. al (Case No. 5:14-CV-00316-D) (E.D.N.C.); (iv) Todd Cook v. TelexElectric LLP et al. (Case No. 2:14-CV-00134) (N.D. Ga.); (v) Felicia Guevara v. James M. Merrill et al., CA No. 1:14-cv-22405-DPG) (S.D. Fla.); (vi) Reverend Jeremiah Githere, et al. v. TelexElectric LLP et al. (Case No. 1:14-CV-12825-GAO) (D. Mass.); (vii) Paulo Eduardo Ferrari et al. v. Telexfree, Inc. et al. (Case No. 14-04080) (Bankr. D. Mass); (viii) Magalhaes v. TelexFree, Inc., et al., No. 14-cv-12437 (D. Mass.); (ix) Griffith v. Merrill et al., No. 14-CV-12058 (D. Mass.); (x) Abelgadir v. Telexelectric, LLP, No. 14-09857 (S.D.N.Y.); and (xi) Rita Dos Santos, v. TelexElectric, LLP et al., 2:15-cv-01906-NVW (D. Ariz.) (together, the “Actions”).

OnMost ~~October~~of ~~21,~~these ~~2014,~~contracts ~~the~~have ~~Judicial~~prescribed ~~Panel~~revenue onminimums, ~~Multidistrict~~penalties ~~Litigation~~for ~~(“JPML”)~~early ~~transferred~~termination, and ~~consolidated~~service ~~the~~level ~~Actions~~agreements ~~filed~~which ~~before~~may ~~that~~impact ~~date~~contractual tofees ~~the~~if ~~United~~certain ~~States~~service ~~District~~levels ~~Court~~are ~~for~~not ~~the District of Massachusetts (the “Consolidated Action”)~~achieved. ~~The JPML subsequently transferred the remaining Actions to the Consolidated Action. The Consolidated Action is styled In Re: Telexfree Securities Litigation (4:14-md-02566-TSH) (D. Mass.).~~

The plaintiffs in the Consolidated Action filed a First Consolidated Amended Complaint on March 31, 2015 and filed a Second Consolidated Amended Complaint (the “Second Amended Complaint”) on April 30, 2015. The Second Amended Complaint, which supersedes the complaints filed prior to consolidation of the Actions, purports to bring claims on behalf of all persons who purchased certain TelexFree “memberships” and suffered a “net loss” between January 1, 2012 and April 16, 2014. With respect to ProPay, the Second Amended Complaint alleges that ProPay aided and abetted tortious acts committed by TelexFree, and that ProPay was unjustly enriched in the course of providing payment processing services to TelexFree. Several defendants, including ProPay, moved to dismiss the Second Amended Complaint on June 2, 2015. The court held a hearing on the motions to dismiss on November 2, 2015.

OnConsumer January 29, 2019, the court granted in part and denied in part ProPay’s motion to dismiss the Second Amended Complaint. The court dismissed plaintiffs’ claim that ProPay was unjustly enriched by the alleged TelexFree fraud, but denied ProPay’s motion to dismiss the plaintiffs’ claim that ProPay allegedly aided and abetted TelexFree’s purported scheme. The court’s ruling does not reflect any determination of the merits of the plaintiffs’ aiding and abetting claim against ProPay, but instead is merely a ruling that the plaintiffs have alleged facts that could potentially entitle them to relief from ProPay if those facts were true. ProPay denies that it had any knowledge of TelexFree’s alleged fraud or that it aided and abetted that fraud in any way. Solutions

After deciding the motions to dismiss filed by ProPay and some of the other defendants in the litigation, the court lifted the stay on discovery that had been in place since the outset of the Consolidated Action. Approximately 50 defendants remain in the litigation. The Court held a scheduling conference on March 20, 2019, but has not yet entered an order setting the case schedule.

~~ProPay~~The ~~has~~Company’s ~~also~~Consumer ~~received~~Solutions ~~various~~revenues ~~subpoenas,~~principally aconsist ~~seizure~~of ~~warrant~~a ~~and~~portion ~~other~~of ~~inquiries~~the ~~requesting~~service ~~information~~fees collected ~~regarding TelexFree~~ from ~~(i)~~cardholders ~~the Commonwealth of Massachusetts, Securities Division, (ii) United States Securities~~ and ~~Exchange~~interchange ~~Commission,~~revenues ~~(iii)~~received USby ~~Immigration~~the ~~and~~issuing ~~Customs~~banks ~~Enforcement,~~in ~~and~~connection ~~(iv)~~with the ~~bankruptcy~~programs ~~Trustee~~that of the ~~Chapter~~Consumer 11Solutions ~~entities~~segment ~~of TelexFree, Inc~~manages., ~~TelexFree, LLC and TelexFree Financial, Inc. Pursuant to the seizure warrant served by the United States Attorney’s Office for the District of~~

~~Table~~Customers ofare ~~Contents~~ charged fees in connection with the Consumer Solutions segment’s products and services as follows:

~~Massachusetts,~~● ~~ProPay~~Transactions ~~delivered~~- ~~all~~Customers ~~funds~~are ~~associated~~typically ~~with~~charged ~~TelexFree~~a ~~held~~fee for ~~chargeback~~each ~~and~~Personal ~~other~~Identification ~~purposes~~Number by(“PIN”) ~~ProPay~~and tosignature-based USpurchase ~~Immigration~~transaction ~~and~~made ~~Customs~~using ~~Enforcement.~~their ~~In addition~~cards, ~~ProPay~~unless ~~received~~the customer is on a ~~notice~~monthly ofor ~~potential~~annual ~~claim~~service ~~from~~plan, in which case the ~~bankruptcy~~customer ~~Trustee~~is asinstead charged a ~~result~~monthly ofor ~~the~~annual ~~relationship~~subscription offee, ~~ProPay~~as ~~with~~applicable. ~~TelexFree~~Customers are also charged fees for Automated Teller Machine (“ATM”) withdrawals and ~~its~~other ~~affiliates~~transactions conducted at ATMs.

~~While~~● ~~the~~Customer ~~Company~~Service and ~~ProPay~~Maintenance ~~intend~~- toCustomers ~~vigorously~~are ~~defend~~typically ~~the~~charged ~~Consolidated~~fees ~~Action~~for ~~and~~balance ~~other~~inquiries ~~matters~~made ~~arising~~through ~~out~~call ofcenters. ~~the~~Customers ~~relationship~~are ofalso ~~ProPay~~charged ~~with~~a ~~TelexFree~~monthly ~~and~~maintenance ~~believe~~fee ~~ProPay~~after ~~has~~a ~~substantial~~specified ~~defenses~~period ~~related~~of ~~to these purported claims, the Company currently cannot reasonably estimate losses attributable to these matters~~inactivity.

~~Note~~● 7Additional —Products ~~Share~~and Services -~~Based~~ ~~Compensation~~ 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.

~~Refer~~● toOther ~~Notes~~- 1Customers ~~and 18 of the Company’s audited financial statements for the year ended December 31, 2018, which~~ are ~~included~~charged asfees ~~Exhibit~~in ~~13.1~~connection towith the ~~Company’s~~acquisition ~~Annual~~and ~~Report~~reloading onof ~~Form 10-K for~~ the ~~year~~cards ~~ended~~at ~~December 31,~~retailers ~~2018,~~and ~~as filed with~~ the ~~SEC,~~Company ~~for~~receives a ~~discussion~~portion ~~regarding~~of ~~the~~these ~~Company’s~~amounts ~~share-based~~in ~~compensation~~some ~~plans and policy~~cases.

~~Share-Based Compensation~~

Share-based compensation costs are classified as selling, general and administrative expenses on the Company’s statements of income and corporate administration and other expenses for segment reporting purposes. TSYS’ share-based compensation costs are expensed, rather than capitalized, as these awards are typically granted to individuals not involved in capitalizable activities. 13

~~Below~~Table ~~is a summary~~ of ~~share-based compensation expense for the three months ended March 31, 2019 and 2018:~~ Contents

	Three months ended
	March 31,
(in thousands)	2019		2018
Share-based compensation	$	10,714	6,295

Disaggregation of revenue

~~Nonvested Share Awards - Time-Based~~

The ~~Company~~following ~~granted~~table ~~awards~~summarizes ofvolume-based ~~TSYS~~and ~~common~~non-volume ~~stock~~related torevenue ~~certain~~from ~~key~~contracts ~~employees.~~with ~~The~~external ~~nonvested~~customers ~~stock bonus awards are typically~~ for ~~services to be provided in~~ the ~~future~~three and ~~vest~~six ~~over~~months aended ~~period~~June ~~of up to four years. The market value of the TSYS common stock as of the date of issuance is charged as compensation expense over the vesting periods of the awards. As of March 31~~30, 2019, ~~there~~and ~~was approximately $41.2 million of unrecognized compensation cost related to time-based nonvested share awards.~~ 2018:

	Three months ended
	March 31,
	2019		2018
Number of shares granted		304,911	292,359
Market value (in millions)	$	28.0	26.1

Performance- and Market-Based Awards

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

The Company granted performance- and market-based awards to certain key employees. The performance- and market-based goals are established by the Compensation Committee of the Board of Directors and will vest up to a maximum of 200%. During the first three months of 2019 and 2018, the Compensation Committee established performance goals based primarily on various financial and market-based measures. The Company’s market-based awards are based upon the Company’s Total Shareholder Return (“TSR”) as compared to the TSR of the companies in the S&P 500 determined at the end of the performance period for 2018 and determined using a twenty day average of the fair market value at the beginning and end of the performance period for 2019 awards.

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

~~Table of Contents~~

Compensation expense for performance shares is measured on the grant date based on the quoted market price of TSYS common stock. The Company estimates the probability of achieving the goals through the performance period and expenses the awards on a straight-line basis. The fair value of market-based awards is estimated on the grant date using a Monte Carlo simulation model. The Company expenses market-based awards on a straight-line basis. Compensation costs related to performance- and market-based shares are recognized through the longer of the performance period or the vesting period. As of March 31, 2019, there was approximately $28.4 million of unrecognized compensation cost related to TSYS performance-based awards that is expected to be recognized through December 2021. As of March 31, 2019, there was approximately $4.7 million of unrecognized compensation cost related to TSYS market-based awards that is expected to be recognized through December 2021.


	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

~~During the three months ended March 31, 2019 and 2018, the Company granted performance-based awards based on non-financial metrics and the following performance measures:~~

Performance Measure Definition of Measure Adjusted diluted EPS Adjusted earnings divided by weighted average diluted shares outstanding used for diluted EPS calculations. Adjusted earnings is net income excluding the after-tax impact of share-based compensation expense, amortization of acquisition intangibles, merger and acquisition expenses for completed acquisitions and litigation claims, judgments or settlement expenses and related legal expenses. Net revenue Net revenue is total revenues less reimbursable items that are recorded by TSYS as expense. Adjusted EBITDA Adjusted EBITDA is net income excluding equity in income of equity investments, nonoperating income/(expense), income taxes, depreciation, amortization, share-based compensation expenses and other items.


	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

The number of performance-based shares with a one to two year performance period granted during the three months ended March 31, 2019 and 2018 totaled 86,779 and 95,748. The number of performance-based shares with a three year performance period granted during the three months ended March 31, 2019 and 2018, totaled 79,132 and 79,218, respectively. The grants awarded with a three year performance period during the first three months of 2019 and 2018 will be expensed through December 31, 2021 and 2020, respectively.

~~The~~Issuer number of market-based awards granted during the three months ended March 31, 2019 and 2018 were 30,856 and 33,940, respectively. The performance measure for the market-based awards is the Company’s TSR as compared to the TSR of the companies in the S&P 500 determined at the end of the performance period for 2018 and determined using a twenty day average of the fair market value at the beginning and end of the performance period for 2019 awards. Solutions

~~Table~~Volume-based revenues are generated from charges based on the number of ~~Contents~~ 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.

~~Stock Option Awards~~

~~The~~Merchant ~~Company granted stock options to certain key executives. The grants will vest over a period of up to three years.~~ Solutions

~~The weighted average fair value of the option grants was estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions:~~

		Three months ended
		March 31,
	2019			2018
Number of options granted		223,520		341,659
Weighted average exercise price	$	91.93		87.08
Risk-free interest rate		2.48	%	2.55	%
Expected volatility		22.79	%	21.80	%
Expected term (years)		4.8		4.8
Dividend yield		0.57	%	0.60	%
Weighted average fair value	$	21.85		19.34

As of March 31, 2019, there was approximately $7.0 million of unrecognized compensation cost related to TSYS stock options that is expected to be recognized over a remaining weighted average period of 1.9 years.

~~Note 8 — Income Taxes~~ 14

~~Refer~~Table ~~to Notes 1 and 14~~ of the Company’s audited financial statements for the year ended December 31, 2018, which are included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC, for a discussion regarding income taxes. Contents

~~TSYS~~Consumer is the parent of an affiliated group that files a consolidated U.S. federal income tax return, consolidated income tax returns for most states and separate entity basis income tax returns for most foreign jurisdictions. In the normal course of business, the Company is subject to examinations by these taxing authorities unless statutory examination periods lapse. TSYS is no longer subject to U.S. federal income tax examinations for years before 2011 and with few exceptions, the Company is no longer subject to income tax examinations from state and local or foreign tax authorities for years before 2011. There are currently federal income tax examinations in progress for the years 2011 through 2013. In March 2019, TSYS reached a closing agreement with the IRS for the federal income tax examinations of these years. Additionally, a number of tax examinations are in progress by the relevant state tax authorities. Although TSYS is unable to determine the ultimate outcome of these examinations, TSYS believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate. Solutions

TSYS’ effective tax rate was 16.6% and 12.0% for the three months ended March 31, 2019 and 2018, respectively. The primary reasons for the higher effective income tax rate for the three months ended March 31, 2019 as compared to the same period last year is a decrease to the favorable discrete item for excess tax benefits of share-based compensation offset by a reduction in FIN 48 reserves.

~~GAAP~~The ~~prescribes~~Consumer aSolutions ~~recognition~~segment’s ~~threshold~~revenues ~~and~~primarily ~~measurement~~consist ~~attribute for the financial statement recognition, measurement and disclosure~~ of avolume-based ~~tax~~revenues ~~position~~generated ~~taken~~from ~~or expected to be taken in~~ a ~~tax~~portion ~~return.~~of ~~The~~the ~~unrecognized~~service ~~tax~~fees ~~benefit~~collected ~~amounts~~from ~~were~~cardholders ~~$18.4 million~~ and ~~$22~~interchange revenues.3 ~~million~~Non-volume asrelated ofrevenues ~~March~~include ~~31,~~value-added ~~2019~~products and ~~December~~services ~~31, 2018, respectively,~~ which ~~resulted~~are innot adirectly ~~decrease~~associated ofwith ~~$3.9~~transactional ~~million during the period~~activity.

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Income. Gross accrued interest and penalties on unrecognized tax benefits totaled $1.5 million and $2.5 million as of March 31, 2019 and December 31, 2018, respectively. The total amounts of unrecognized income tax benefits as of March 31, 2019 and December 31, 2018, that, if recognized, would affect the effective tax rates are $18.8 million and $23.5 million (net of the federal benefit on state tax issues), respectively, which include interest and penalties of $0.9 million and $1.7 million,

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

~~Table of Contents~~

respectively. TSYS does not expect any significant changes to its calculation of uncertain tax positions during the next twelve months.

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

Euro

25,750

Other

7,140

323

7,463

Total revenues

472,706

366,636

196,143

1,035,485

~~Note 9 – Earnings Per Share~~

The following tables illustrate basic and diluted EPS for the three months ended March 31, 2019 and 2018:

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

Euro

51,361

Other

14,536

633

15,169

Total revenues

942,865

711,817

415,334

2,070,016

	Three months ended
	March 31,
	2019		2018
(in thousands, except per share data)	CommonStock		CommonStock
Basic EPS:
Net income attributable to TSYS common shareholders	$	161,607		141,841
Less income allocated to nonvested awards		(38)		(168)
Net income allocated to common stock for EPS calculation (a)	$	161,569		141,673
Weighted average shares outstanding		178,435		181,612
Less participating securities		(41)		(217)
Average common shares outstanding (b)		178,394		181,395
Basic EPS (a)/(b)	$	0.91		0.78
Diluted EPS:
Net income attributable to TSYS common shareholders	$	161,607		141,841
Less income allocated to nonvested awards		(38)		(168)
Add income reallocated to nonvested awards1		38		168
Net income allocated to common stock for EPS calculation (c)	$	161,607		141,841
Weighted average shares outstanding		178,435		181,612
Less participating securities		(41)		(217)
Average common shares outstanding		178,394		181,395
Increase due to assumed issuance of shares related to common equivalent shares outstanding		867		1,236
Average nonvested awards1		625		667
Average common and common equivalent shares outstanding (d)		179,886		183,298
Diluted EPS (c)/(d)	$	0.90		0.77

1 In accordance with the diluted EPS guidance under the two-class method, the Company uses the approach- either the treasury stock method or the two-class method assuming a participating security is not exercised- that is more dilutive.


	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

The diluted EPS calculation excludes stock options and nonvested awards that are exercisable into 0.3 million common shares for the three months ended March 31, 2019, and excludes 0.3 million common shares for the three months ended March 31, 2018, because their inclusion would have been anti-dilutive.

Note 10 — Supplementary Cash Flow Information


	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

~~Software Acquired Under License Agreements~~

~~There~~See ~~was~~Note ~~approximately~~11 ~~$6.9~~for ~~million~~disclosure ~~and $3.4 million~~ of ~~software~~revenues ~~acquired~~by ~~under license agreements in the first three months of 2019 and 2018, respectively~~geography. Additionally, the Company did not acquire software through vendor financing and other arrangements during the first three months of 2019 compared to $36.5 million of software acquired through vendor financing and other arrangements during the first three months of 2018.

~~Note 11 — Segment Reporting and Major Customers~~

~~Refer~~Performance to Note 21 of the Company’s audited financial statements for the year ended December 31, 2018, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC, for a discussion regarding segment reporting and major customers. obligations

~~Table~~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 ~~Contents~~ 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.

At TSYS, the chief operating decision maker (“CODM”) is a group consisting of Senior Executive Management. In the first quarter of 2019, the CODM changed the profitability measure for its operating segments to adjusted segment EBITDA. All periods presented have been adjusted to reflect this new measure. 15

~~The~~Table ~~following~~of ~~table presents the Company’s total assets by segment:~~ Contents

	As of
(in thousands)	March 31, 2019		December 31, 2018
Issuer Solutions	$	7,075,930	6,843,451
Merchant Solutions		4,247,317	4,248,183
Consumer Solutions		1,419,687	1,374,667
Intersegment assets		(4,968,802)	(4,997,592)
Total assets	$	7,774,132	7,468,709

For revenue which is recognized using (i) the “as-invoiced” practical expedient and (ii) the “direct allocation” method, the Company is required to disclose the value of unsatisfied performance obligations for contractual minimums only. Accordingly, the total unsatisfied or partially unsatisfied performance obligations related to processing services are materially higher than the amounts disclosed in the below table.

~~The Company maintains property and equipment, net of accumulated depreciation and amortization, in the following geographic areas:~~

	As of

(in thousands)	~~March~~Remainder ~~31,~~of 2019		~~December 31, 2018~~2020	2021	2022	2023 - 2029		Total
United States	$	321,654	321,119
Unsatisfied or partially unsatisfied performance obligations	$	382,746	630,966	528,869	392,712	470,584	$	2,405,877
Europe		47,994	45,872

Other		15,752	16,083
Total	$	385,400	383,074

~~The following table presents the Company’s depreciation and amortization by segment:~~

	Three months ended
		March 31,
(in thousands)	2019		2018
Depreciation and amortization by segment:
Issuer Solutions	$	35,167	28,331
Merchant Solutions		7,682	7,825
Consumer Solutions		4,416	4,259
Segment depreciation and amortization		47,265	40,415
Acquisition intangible amortization		54,957	63,023
Corporate administration and other		1,488	951
Total depreciation and amortization	$	103,710	104,389

Contract balances

~~The following tables reconcile geographic revenues to external revenues by operating segment based on the domicile of the Company’s customers:~~

	Three months ended March 31, 2019
(in thousands)	Issuer Solutions		Merchant Solutions	Consumer Solutions	Total
United States	$	271,130	344,298	219,191	$	834,619
Europe1		94,387	160	-		94,547
Canada1		79,633	388	-		80,021
Other1		25,009	335	-		25,344
Total	$	470,159	345,181	219,191	$	1,034,531

~~1 Certain of these revenues are impacted by movements in foreign currency exchange rates.~~

23 Contract liabilities are defined as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer.

~~Table of Contents~~

	Three months ended March 31, 2018
(in thousands)	Issuer Solutions		Merchant Solutions	Consumer Solutions	Total
United States	$	264,032	318,749	210,388	$	793,169
Europe1		95,143	125	-		95,268
Canada1		77,582	279	-		77,861
Other1		20,602	270	-		20,872
Total	$	457,359	319,423	210,388	$	987,170

~~1 Certain of these revenues are impacted by movements in foreign currency exchange rates.~~

~~The~~ASC ~~following~~606 ~~table~~requires ~~presents~~an entity to present in its Consolidated Balance Sheets the ~~Company’s~~net ~~operating~~position ~~results~~in a customer contract on a contract-by-contract ~~segment~~basis. The net position in a customer contract is presented as either contract assets or contract liabilities. Significant changes in the contract assets and liabilities balances during the six months ended June 30, 2019 are as follows:

Operating Segments	Three months ended March 31,
(in thousands)		2019	2018
Adjusted segment EBITDA1:
Issuer Solutions (a)	$	204,934	195,764
Merchant Solutions (b)		128,836	118,940
Consumer Solutions (c)		63,693	53,667
Corporate administration and other		(40,176)	(37,449)
Total		357,287	330,922
Less:
Share-based compensation		10,714	6,295
Cayan and TransFirst merger & acquisition (M&A) and integration expenses2		3,710	14,367
Depreciation and amortization		103,710	104,389
Contract asset amortization		8,038	6,874
Contract cost asset amortization		7,845	10,726
Operating income		223,270	188,271
Nonoperating expenses, net		(42,991)	(37,642)
Income before income taxes and equity in income of equity investments	$	180,279	150,629
Net revenue by segment:
Issuer Solutions (e)	$	433,473	423,574
Merchant Solutions (f)		342,956	317,403
Consumer Solutions (g)		219,178	210,489
Segment net revenue		995,607	951,466
Less: intersegment revenues		15,337	15,969
Net revenue3		980,270	935,497
Add: reimbursable items		54,261	51,673
Total revenues	$	1,034,531	987,170
Adjusted segment EBITDA margin on net revenue:
Issuer Solutions (a)/(e)		47.3%	46.2%
Merchant Solutions (b)/(f)		37.6%	37.5%
Consumer Solutions (c)/(g)		29.1%	25.5%

1 Adjusted segment EBITDA is net income excluding equity in income investments, interest expense (net of interest income), income taxes, depreciation, amortization, contract asset amortization, contract cost asset amortization, gains or losses on foreign currency translation, other nonoperating income or expenses, share-based compensation, litigation, claims, judgements or settlements and Cayan and TransFirst M&A and integration expenses.


	Six months ended June 30, 2019
(in thousands)	Contract Assets Increase/(Decrease)		Contract Liabilities (Increase)/Decrease
Signing incentive additions	$	32,585	$	-
Signing incentive amortization		(13,336)		(2,631)
Revenue recognized in advance of billings		8,308		867
Billed amounts transferred to receivables		(4,387)		(316)
Cash received from customers		(1,460)		(80,485)
Deferred revenue that was recognized as revenue		3,499		68,548

~~2 Excludes share-based compensation~~

3Other ~~Net~~changes ~~revenue~~in iscontract ~~defined~~assets asand ~~total~~contract ~~revenues~~liabilities ~~less~~primarily ~~reimbursable~~relate ~~items~~to movements in net contract position (~~such~~between ascontract ~~postage)~~assets ~~that~~and ~~are~~contract ~~recorded~~liabilities) byeach ~~TSYS~~period asand ~~expense~~foreign currency translation.

~~Major Customers~~

~~For the three months ended March 31, 2019 and 2018, the Company did not have any major customers.~~

Note 124 —– ~~Subsequent~~Leases ~~Events~~

~~Management~~The ~~performed~~Company anadopted ~~evaluation~~ASU No. 2016-02 and related ASUs (“ASC 842”) as of January 1, 2019 using the cumulative effect method. Upon adoption, the Company’s ~~activity~~recorded right-of-use (“ROU”) assets of $195.2 million and additional operating liabilities of approximately $190.7 million for existing operating leases. Also as part of the ~~date~~initial ~~these~~adoption, ~~consolidated~~the ~~financial~~Company ~~statements~~wrote ~~were~~off ~~issued~~the carrying value of favorable lease intangible assets of $2.1 million and ~~has~~increased ~~concluded~~the ~~that~~ROU ~~there~~assets ~~are~~by nothe ~~significant~~same ~~subsequent~~amount. ~~events~~The ~~requiring~~cumulative ~~disclosure~~effect adjustment recorded to opening retained earnings was not material. The adoption of this ASU did not have a material impact on the Company’s results of operations or cash flows.

~~Table~~Description of ~~Contents~~ leases and lease policies - lessee

~~Item~~TSYS 2.enters ~~Management’s~~into ~~Discussion~~leases ~~and~~for ~~Analysis~~datacenters, offacilities, ~~Financial~~computer ~~Condition~~equipment and ~~Results~~certain other equipment. Leases with an initial term of ~~Operations~~12 months or less are not recorded on the balance sheet. TSYS recognizes lease expense

~~Financial Overview~~ 16

~~Total~~Table ~~System~~of Services, Inc.’s (“TSYS'” or the “Company’s”) revenues are derived from providing payment processing services, 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. Contents

~~Through~~or ~~the~~depreciation ~~Company’s~~expense ~~Issuer~~for ~~Solutions~~leases ~~segment,~~on ~~TSYS~~a ~~processes~~straight-line ~~information~~basis ~~through~~over ~~its cardholder systems to financial and nonfinancial institutions throughout~~ the ~~United~~lease ~~States and internationally~~term. ~~The~~Variable ~~Company's~~lease ~~Merchant~~expense ~~Solutions~~primarily ~~segment~~relates ~~provides merchant services~~ to ~~merchant~~maintenance ~~acquirers~~ and ~~merchants~~other ~~mainly~~monthly inexpenses ~~the~~that ~~United~~do ~~States.~~not ~~The~~depend ~~Company’s~~on ~~Consumer~~an ~~Solutions~~index ~~segment~~or ~~provides financial service solutions to consumers and businesses in the United States~~rate.

~~For~~TSYS adetermines ~~detailed~~if ~~discussion~~an ~~regarding~~arrangement ~~the~~is ~~Company’s~~a ~~operations,~~lease ~~see~~at ~~“Item~~contract 7:inception. ~~Management’s~~Operating ~~Discussion~~leases ~~and~~are ~~Analysis~~included ofin ~~Financial~~operating ~~Condition~~lease ~~and~~ROU ~~Results~~assets, ofother ~~Operations~~current liabilities,” ~~which~~and isoperating ~~included~~lease asliabilities ~~Exhibit~~in ~~13.1~~our toConsolidated ~~the~~Balance ~~Company’s~~Sheet. ~~Annual~~Finance ~~Report~~leases onare ~~Form~~included ~~10-K~~in ~~for~~property ~~the~~and ~~year~~equipment, ~~ended~~net ~~December~~and ~~31,~~current ~~2018,~~and aslong-term ~~filed~~obligations ~~with~~under ~~the~~finance ~~Securities~~leases ~~and~~in ~~Exchange~~our ~~Commission~~Consolidated ~~(“SEC”)~~Balance Sheet.

~~Management~~ROU assets represent the Company’s ~~discussion~~right to use an underlying asset for the lease term and ~~analysis~~lease ~~contains~~liabilities ~~items~~represent ~~prepared~~its inobligation ~~conformity~~to ~~with~~make ~~GAAP,~~lease aspayments ~~well~~arising asfrom ~~non-GAAP~~the ~~measures~~lease. ~~For~~Operating ~~detailed~~lease ~~information~~ROU assets and ~~reconciliations~~liabilities toare ~~GAAP~~recognized at the commencement date based on the present value of the future lease payments. As most of its leases do not provide an implicit rate, ~~refer~~the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. TSYS uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives received. TSYS’ lease terms may include options to extend or terminate the ~~discussion~~lease ~~under~~when it is reasonably certain that the ~~caption~~Company ~~Non-GAAP~~will ~~Measures~~exercise that option.

ATSYS ~~summary~~has oflease ~~the~~agreements ~~financial~~with ~~highlights~~lease and non-lease components, which are combined and accounted for ~~2019~~as a single lease component for all asset classes excluding computer equipment. For computer equipment leases, the Company accounts for the lease and non-lease components as ~~compared~~separate components. The majority of computer equipment lease commitments come with a renewal option or an option to ~~2018~~terminate the lease. These lease commitments may be replaced with new leases, iswhich ~~provided~~allow ~~below:~~ the Company to continually update its computer equipment.

	Three months ended
	March 31,
				Percent
(in thousands, except per share data)	2019		2018	Change
Total revenues	$	1,034,531	987,170	4.8	%
Net revenue1	$	980,270	935,497	4.8
Operating income	$	223,270	188,271	18.6
Net income attributable to TSYS common shareholders	$	161,607	141,841	13.9
Basic earnings per share (EPS) attributable to TSYS common shareholders2	$	0.91	0.78	16.0
Diluted EPS attributable to TSYS common shareholders2	$	0.90	0.77	16.1
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA)3	$	357,287	330,922	8.0
Adjusted earnings4	$	215,446	207,586	3.8
Adjusted diluted EPS5	$	1.20	1.13	5.8
Cash flows from operating activities	$	227,589	211,893	7.4
Free cash flow6	$	147,160	165,657	(11.2)

~~Refer~~Practical toexpedients ~~the~~and ~~reconciliation~~policy ~~of GAAP to non-GAAP measures later in Item 2.~~ elections

~~1 Net revenue is defined as total revenues less reimbursable items (such as postage) that are recorded by TSYS as expense.~~

2The ~~Under~~Company ~~GAAP,~~has ~~entities~~elected that have participating securities must compute basic EPS using the two-class method and compute diluted EPS using the more dilutive approach of either the two-class method or the treasury stock method. Refer to ~~Note~~utilize ~~9 in~~ the ~~Notes~~following topractical ~~Unaudited~~expedients ~~Consolidated~~and ~~Financial~~accounting ~~Statements~~policy ~~for more information on EPS.~~elections:

3● ~~Adjusted~~Electing ~~EBITDA~~as isa ~~defined~~package, asthe ~~net~~Company ~~income~~did ~~excluding~~not ~~equity~~reassess: in(a) ~~income~~whether expired or existing contracts contain leases under the new definition of ~~equity~~a ~~investments~~lease, ~~nonoperating income/~~(~~expense~~b), ~~income~~lease ~~taxes,~~classification ~~depreciation,~~for ~~amortization,~~expired ~~share-based~~or ~~compensation~~existing ~~expenses~~leases, and ~~other~~(c) ~~items~~whether previously capitalized initial direct costs would qualify for capitalization under ASU No. 2016-02.

4● ~~Adjusted~~The ~~earnings~~Company isdid ~~net~~not ~~income~~evaluate ~~excluding~~land ~~noncontrolling~~easements ~~interests,~~that existed or expired before the ~~after-tax~~Company’s ~~impact~~adoption of ~~share~~ASU No. 2016-~~based~~02 ~~compensation~~and ~~expenses,~~that ~~amortization~~were ofnot ~~acquisition~~previously ~~intangibles~~accounted ~~and~~for ~~other~~as ~~items~~leases.

5● ~~Adjusted~~From ~~diluted~~a ~~EPS~~lessee isperspective, ~~defined~~the Company has elected to combine lease and non-lease components for all classes of assets except for computer equipment. Accordingly, for all asset classes excluding computer equipment, the Company accounts for the combined lease and non-lease components as ~~adjusted~~a ~~earnings~~single ~~divided~~lease bycomponent. ~~weighted~~For ~~average~~computer ~~shares~~equipment, ~~outstanding~~the ~~used~~Company accounts for ~~diluted~~lease ~~EPS~~and ~~calculations~~non-lease components, such as maintenance, separately.

6● ~~Free~~From ~~cash~~a ~~flow~~lessee isperspective, ~~defined~~the Company has elected, as ~~net~~an ~~cash~~accounting ~~provided~~policy election by ~~operating~~class ~~activities~~of ~~less~~underlying ~~capital~~asset, ~~expenditures~~not to recognize ROU assets and lease liabilities for short-term leases.

25 ● From a lessor perspective, the Company has elected to utilize the practical expedient in ASU No. 2018-11 to not separate non-lease components from the associated lease component for arrangements including point-of-sale (“POS”) terminals. Since the predominant component in these arrangements is service revenue and not the POS terminal, the combined components in these arrangements will be accounted for under ASC 606 and not ASC 842.

~~Table~~● The Company utilized incremental borrowing rates in transition (as of ~~Contents~~ January 1, 2019) based on the remaining lease payments and remaining lease term.

~~Financial~~ ~~Review~~

~~This~~The ~~Financial~~Company ~~Review~~decided ~~provides~~not ato ~~discussion~~elect ~~of critical accounting policies and estimates, related party transactions and off-balance sheet arrangements. This Financial Review also discusses~~ the ~~results~~use of ~~operations,~~hindsight ~~financial~~in ~~position,~~determining ~~liquidity and capital resources of TSYS and outlines~~ the ~~factors~~lease ~~that~~term have affected its recent earnings, as well as those factors that may affect its future earnings. For a detailed discussion regarding these topics, refer to our Notes to Consolidated Financial Statements and ~~“Item~~in 7:assessing ~~Management’s~~impairment ~~Discussion and Analysis~~ of ~~Financial Condition and Results of Operations” which are included as Exhibit 13.1 to~~ the Company’s ~~Annual~~ROU ~~Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC~~assets.

~~Critical Accounting Policies and Estimates~~

Refer to Note 1 in the Notes to Unaudited Consolidated Financial Statements for more information on changes to the Company’s critical accounting policies, estimates and assumptions on the judgments affecting the application of those estimates and assumptions in 2019. TSYS has updated its lease policies in conjunction with the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASC 842”) as further described in Notes 1 and 4 in the Notes to Unaudited Consolidated Financial Statements. The most significant impact of adopting ASC 842 in 2019 is primarily the addition of operating lease right-of-use assets and corresponding liabilities to the Consolidated Balance Sheet. 17

~~Off-Balance~~Table ~~Sheet~~of ~~Arrangements~~ Contents

~~Operating~~Supplemental ~~Leases~~ Information

As a method of funding its operations, TSYS employs noncancelable operating leases for computer equipment and facilities. These leases allow the Company to provide the latest technology while avoiding the risk of ownership. Neither the assets nor obligations related to these leases are included on the Consolidated Balance Sheets as of December 31, 2018. With the adoption of ASC 842, operating lease right-of-use assets and operating lease liabilities were recognized on the Consolidated Balance Sheet as of January 1, 2019.

~~Contractual~~Supplemental ~~Obligations~~ balance sheet information related to leases is as follows:

~~The Company has long-term obligations which consist of required minimum future payments under contracts with certain of our distributors and other service providers.~~

Recent Accounting Pronouncements


(in thousands)	June 30, 2019		December 31, 2018
Lease assets:
Operating lease right-of-use assets, net:
Computer equipment	$	68,179	na
Facilities		130,162	na
Other		198	na
Total operating lease right-of-use assets, net		198,539	na
Finance lease right-of-use assets:
Computer and other equipment		62,896	91,526
Furniture and other equipment		3,894	6,104
Total finance lease assets		66,790	97,630
Less accumulated depreciation:
Computer and other equipment		(24,605)	(47,903)
Furniture and other equipment		(3,000)	(4,859)
Total accumulated depreciation		(27,605)	(52,762)
Total finance lease right-of-use assets, net		39,185	44,868
Total lease assets	$	237,724	44,868
Lease liabilities:
Current portion of operating lease liabilities	$	43,346	na
Operating lease liabilities, excluding current portion		167,102	na
Current portion of obligations under finance leases		5,986	5,934
Obligations under finance leases, excluding current portion		28,247	31,243
Total lease liabilities	$	244,681	37,177
na = not applicable since TSYS adopted ASC 842 as of January 1, 2019

~~For a discussion of recent accounting pronouncements, refer to Note 1 in the Notes to Unaudited Consolidated Financial Statements.~~

~~Results~~As of ~~Operations~~ June 30, 2019, finance lease assets and finance lease accumulated depreciation decreased by approximately $30.8 million and $25.2 million, respectively, when compared to December 31, 2018. This decrease is related to the execution of purchase options for certain finance leases, the retirement of certain assets no longer in use as well as the expiration of certain leases at the end of their lease term. The balances of any finance leases subject to purchase options exercised during the six months ended June 30, 2019 were subsequently moved to Property and Equipment.

~~Revenues~~

~~The~~Lease Company generates revenues by providing transaction processing and other payment-related services. The Company’s pricing for transactions and services is complex. Each category of revenue has numerous fee components depending on the types of transactions processed or services provided. TSYS reviews its pricing and implements pricing changes on an ongoing basis. In addition, standard pricing varies among its regional businesses, and such pricing can be customized further for its clients through tiered pricing of various thresholds for volume activity. TSYS’ revenues are based upon transactional information accumulated by its systems. The Company’s revenues are impacted by currency translation of foreign operations, as well as doing business in the current economic environment. expense

Total revenues increased 4.8%, for the three months ended March 31, 2019, compared to the same period in 2018. Revenues for the three months ended March 31, 2019 also included a decrease of $8.3 million related to the effects of currency translation of the Company’s foreign-based subsidiaries and branches.

26 The components of lease expense are as follows:

~~Table of Contents~~

The Company reviews revenue performance on a net revenue basis which is a non-GAAP measure. Net revenue is defined as total revenues less reimbursable items that are recorded by TSYS as expense. The Company has included reimbursements received for out-of-pocket expenses as revenues and expenses. The largest reimbursable expense items for which TSYS is reimbursed by clients are postage fees. The Company’s reimbursable items are primarily impacted by changes in postal rates and changes in the volumes of mailing activities by its clients. Reimbursable items for the three months ended March 31, 2019 were $54.3 million, an increase of 5.0%, compared to the same period last year, primarily due to an increase in postal rates.


	Three months ended		Six months ended
(in thousands)	June 30, 2019		June 30, 2019
Operating lease expense:
Fixed lease expense	$	15,050	30,025
Variable lease expense		1,726	3,695
Short-term lease expense		1,715	3,084
Total operating lease expense		18,491	36,804
Finance lease expense:
Amortization of ROU assets		2,836	5,727
Interest on finance lease liabilities		375	763
Total finance lease expense		3,211	6,490
Total lease expense	$	21,702	43,294

Net revenue increased $44.8 million, or 4.8% during the three months ended March 31, 2019, compared to the same period in 2018. The increase in net revenue for the three months ended March 31, 2019, as compared to the same period in 2018, is primarily the result of organic growth, partially offset by a decrease of $7.7 million associated with currency translation.

~~Major~~Total ~~Customers~~ rental expense under all operating leases for the year ended December 31, 2018 was $128.6 million.

For a discussion regarding the Company’s major customers, refer to Note 11 in the Notes to Unaudited Consolidated Financial Statements and see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC. 18

~~The~~Table Company works to maintain a large and diverse customer base across various industries. For the three months ended March 31, 2019, the Company did not have a major customer on a consolidated basis. However, a significant amount of the Company's revenues are derived from long-term contracts with large clients. TSYS derives revenues from providing various processing and other services to these clients, including processing of consumer and commercial accounts, as well as revenues for reimbursable items. The loss of one of the Company’s large clients could have a material adverse effect on the Company’s financial position, results of operations and cash flows. Contents

~~Operating Segments~~

~~TSYS’~~Other ~~services~~lease ~~are provided through three operating segments: Issuer Solutions, Merchant Solutions and Consumer Solutions. Refer to Note 11 in the Notes to Unaudited Consolidated Financial Statements for more~~ information ~~on the Company’s operating segments.~~

~~Issuer Solutions~~

~~The~~Supplemental ~~Company’s~~cash ~~Issuer~~flow ~~Solutions~~information segment has many long-term customer contracts with card issuers providing account processing and output services for printing and embossing items. These contracts generally require advance notice prior to the end of the contract if a client chooses not to renew. Additionally, some contracts may permit early termination upon the occurrence of certain events such as a change in control. The termination fees paid upon the occurrence of such events are designed primarily to cover balance sheet exposure related to ~~items~~leases ~~such~~is as ~~contract~~follows: assets and contract cost assets associated with the contract and, in some cases, may cover a portion of lost future revenue and profit. Although these contracts may be terminated upon certain occurrences, the contracts provide the segment with a steady revenue stream since a vast majority of the contracts are honored through the contracted expiration date.

These services are provided throughout the period of each account's use, starting from a card-issuing client processing an application for a card. Services may include processing the card application, initiating service for the cardholder, processing each card transaction for the issuing retailer or financial institution and accumulating the account's transactions. Fraud management services monitor the unauthorized use of accounts which have been reported to be lost, stolen, or which exceed credit limits. Fraud detection systems help identify fraudulent transactions by monitoring each accountholder's purchasing patterns and flagging unusual purchases. Other services provided include customized communications to cardholders, information verification associated with granting credit, debt collection and customer service.


	Six months ended
(in thousands)	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	41,703
Operating cash flows from finance leases		765
Financing cash flows from finance leases		2,927

~~Table of Contents~~

TSYS’ revenues in its Issuer Solutions segment are primarily derived from electronic payment processing. There are certain basic core services directly tied to accounts on file (“AOF”) and transactions. These are provided to all of TSYS’ processing clients. The core services begin with AOF.


	Six months ended June 30,
(in thousands)	2019		2018
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	44,125	na
Finance leases		-	7,382
na = not applicable since TSYS adopted ASC 842 as of January 1, 2019

The core services include housing AOF, authorizing transactions (authorizations), accumulating monthly transactional activity (transactions) and providing a monthly statement (statement generation). From these core services, 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.

~~Below~~The isweighted-average aremaining ~~summary~~lease ofterm ~~AOF~~and ~~for~~weighted-average ~~the~~discount ~~Company’s~~rate ~~Issuer~~are ~~Solutions~~as ~~segment~~follows:

(in millions)	As of March 31,
AOF	2019	2018	PercentChange
Consumer	523.0	486.5	7.5	%
Commercial	60.2	55.2	8.9
Other	45.0	36.9	22.2
Traditional AOF1	628.2	578.6	8.6
Prepaid/Stored Value2	11.5	38.7	(70.3)
Commercial Card Single-Use3	116.3	97.5	19.3
Government Services4	-	96.5	(100.0)
Total AOF	756.0	811.3	(6.8)

1 Traditional accounts include consumer, retail, commercial, debit and other accounts. These accounts are grouped together due to the tendency to have more transactional activity than prepaid, government services and single-use accounts.


	Six months ended
	June 30, 2019
Weighted-average remaining lease term (years):
Operating leases	5.29
Finance leases	5.56
Weighted-average discount rate:
Operating leases	4.21	%
Finance leases	8.49	%

2 Prepaid does not include Consumer Solutions accounts. These accounts tend to have less transactional activity than the traditional accounts. Prepaid and stored value cards are issued by firms through retail establishments to be purchased by consumers to be used at a later date. These accounts tend to be the least active of all accounts on file.

3Maturity ~~Commercial~~of ~~card~~lease ~~single-use accounts are one-time use accounts issued by firms to book lodging and other travel related expenses.~~liabilities

4 Government services accounts are disbursements of student loan accounts issued by the Department of Education, which have minimal activity. This portfolio of AOF had deconverted by December 31, 2018.

~~Non-volume~~The ~~related~~future ~~revenues~~minimum ~~include~~lease ~~processing~~payments ~~fees~~under ~~which~~noncancelable ~~are~~operating ~~not~~and ~~directly~~finance ~~associated~~leases with ~~AOF~~remaining ~~and~~terms ~~transactional~~greater ~~activity,~~than ~~such~~one asyear ~~certain~~for ~~value~~the ~~added~~next ~~products~~five years and ~~services,~~thereafter ~~custom~~and ~~programming~~in ~~and~~the ~~certain~~aggregate ~~other~~as ~~services~~of June 30, ~~which~~2019 ~~are~~and ~~only~~December ~~offered~~31, to2018, ~~TSYS’~~are ~~processing~~as ~~clients.~~ follows:

Additionally, certain clients license the Company’s processing systems and process in-house. Since the accounts are processed outside of TSYS for licensing arrangements, the AOF and other volumes are not available to TSYS. Thus, volumes reported by TSYS do not include volumes associated with licensing.

Output and managed services include offerings such as card production, statement production, correspondence and call center support services.


	June 30, 2019			December 31, 2018
(in thousands)	Operating Leases		Finance Leases	Operating Leases	Finance Leases
2019¹	$	23,552	3,714	54,818	7,393
2020		55,056	7,381	54,738	7,319
2021		52,898	7,145	50,794	7,085
2022		44,350	7,111	42,048	7,051
2023		20,990	6,719	19,089	6,658
Thereafter		41,107	6,930	32,894	6,868
Total lease payments		237,953	39,000	254,381	42,374
Less imputed interest		(24,582)	(4,488)	na	(5,197)
Total	$	213,371	34,512	254,381	37,177
na = not applicable since TSYS adopted ASC 842 as of January 1, 2019

~~The~~1 ~~Issuer~~For ~~Solutions segment provides payment processing and related services to clients based in~~ the ~~United~~six ~~States~~months ~~and~~ended ~~internationally.~~June ~~Growth~~30, in2019, ~~revenues and operating profit in~~ this ~~segment~~row isrepresents ~~derived from retaining and growing~~ the ~~core~~remaining ~~business~~payments ~~and improving the overall cost structure. Growing the core business comes primarily~~ from anJuly ~~increase in account usage, growth from existing clients and sales~~ to ~~new~~December ~~clients and the related account conversions. This segment has two major customers for the three months ended March 31,~~ 2019.

~~Table~~In 2019, the Company entered into operating and finance leases for certain computer equipment as well as an operating lease for a facility, whose commencement dates range from July 2019 to August 2019. Amounts related to these operating and finance leases totaling $3.5 million are not reflected on the Company’s consolidated balance sheet as of ~~Contents~~ June 30, 2019. However, amounts related to these operating and finance leases are reflected in the above disclosure of future lease commitments as of June 30, 2019.

~~Below is a summary of the Issuer Solutions segment:~~

	Three months ended
	March 31,
(in thousands, except key indicators)	2019			2018		PercentChange
Volume-based revenues	$	215,423		205,624		4.8	%
Non-volume related revenues:
Processing fees		74,865		79,841		(6.2)
Value-added, custom programming, licensing and other		71,548		76,055		(5.9)
Output and managed services		71,637		62,054		15.4
Total non-volume related revenues		218,050		217,950		0.0
Net revenue1	$	433,473		423,574		2.3
Adjusted segment EBITDA2	$	204,934		195,764		4.7
Adjusted segment EBITDA margin3		47.3	%	46.2	%
Key indicators (in millions):
AOF		756.0		811.3		(6.8)
Traditional AOF		628.2		578.6		8.6
Transactions		5,948.9		5,547.9		7.2

1Table ~~Net~~of ~~revenue is defined as total revenues less reimbursable items (such as postage) that are recorded by TSYS as expense.~~Contents

2Note ~~Adjusted~~5 ~~segment~~— ~~EBITDA~~Long-Term ~~excludes~~Borrowings ~~acquisition intangible amortization~~ and ~~expenses~~License ~~associated with Corporate Administration and Other.~~Agreements

~~3 Adjusted segment EBITDA margin is adjusted segment EBITDA divided by net revenue.~~

~~For~~Refer to Note 12 of the ~~three~~Company’s ~~months~~audited financial statements for the year ended ~~March~~December 31, ~~2019~~2018, ~~approximately~~which 49is included as Exhibit 13.7%1 ofto ~~net~~the ~~revenue~~Company’s ~~was~~Annual ~~driven~~Report byon Form 10-K for the ~~volume~~year ofended ~~AOF~~December ~~and~~31, ~~transactions~~2018, ~~processed~~as ~~and~~filed ~~approximately~~with ~~50.3%~~the ~~was~~SEC, ~~derived~~for ~~from~~further ~~non~~discussion regarding long-~~volume~~term ~~based~~borrowings ~~revenues~~and license agreements.

~~The increase in net revenue for the three months ended March 31, 2019, as compared to the same period in 2018, was driven by organic growth.~~

~~Movements~~Note in6 ~~foreign~~— ~~currency~~Commitments ~~exchange~~and rates as compared to the U.S. dollar can result in foreign denominated financial statements being translated into more or fewer U.S. dollars, which impacts the comparison to prior periods when the U.S. dollar was stronger or weaker. Contingencies

~~Net revenue for the three months ended March 31, 2019, as compared to the same period in 2018, included a decrease of $7.8 million associated with currency translation.~~

~~Merchant~~Refer ~~Solutions~~ to Note 15 of the Company’s audited financial statements for the year ended December 31, 2018, which is included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC, for a discussion regarding commitments and contingencies.

The Merchant Solutions segment provides merchant processing and related services to clients based primarily in the United States. Merchant Solutions revenues are derived from providing processing services, acquiring solutions, related systems and support services to merchant acquirers and merchants. Revenues from merchant services include processing all payment forms including credit, debit, prepaid, electronic benefit transfer and electronic check for merchants of all sizes across a wide array of market verticals. Merchant Solutions include authorization and capture of transactions; clearing and settlement of transactions; information reporting services related to transactions; and merchant billing services. This segment has no major customers for the three months ended March 31, 2019.

~~The~~Legal ~~Merchant~~Proceedings ~~Solutions~~– ~~segment's~~General results are driven by dollar sales volume and the authorization and capture transactions processed at the point-of-sale ("POS”). This segment's authorization and capture transactions are primarily through Internet connectivity.

~~Table~~The Company is subject to various legal proceedings and claims and is also subject to information requests, inquiries and investigations arising out of ~~Contents~~ the ordinary conduct of its business. The Company establishes accruals for litigation and similar matters when those matters present loss contingencies that TSYS determines to be both probable and reasonably estimable in accordance with GAAP. Legal costs are expensed as incurred. In the opinion of management, based on current knowledge and in part upon the advice of legal counsel, all matters not specifically discussed below are believed to be adequately covered by insurance, or, if not covered, the possibility of losses from such matters are believed to be remote or such matters are of such kind or involve such amounts that would not have a material adverse effect on the financial position, results of operations or cash flows of the Company if disposed of unfavorably.

~~Below is a summary of the Merchant Solutions segment:~~

	Three months ended
	March 31,
(in thousands, except key indicators)	2019			2018		PercentChange
Net revenue1	$	342,956		317,403		8.1	%
Adjusted segment EBITDA2	$	128,836		118,940		8.3
Adjusted segment EBITDA margin3		37.6	%	37.5	%
Key indicators:
Dollar sales volume (in millions)	$	40,241.6		37,266.7		8.0
POS transactions (in millions)		1,524.3		1,339.6		13.8
Net revenue per POS transaction	$	0.225		0.237		(5.1)

TelexFree Matter

~~1 Net revenue is defined as total revenues less reimbursable items (such as postage) that are recorded by TSYS as an expense.~~

2ProPay, ~~Adjusted~~Inc. ~~segment~~(“ProPay”), ~~EBITDA~~a ~~excludes~~subsidiary ~~acquisition~~of ~~intangible~~the ~~amortization~~Company, has been named as one of a number of defendants (including other merchant processors) in several purported class action lawsuits relating to the activities of TelexFree, Inc. and ~~expenses~~its ~~associated~~affiliates ~~with~~and ~~Corporate~~principals. ~~Administration~~TelexFree is a former merchant customer of ProPay. With regard to TelexFree, each purported class action lawsuit generally alleges that TelexFree engaged in an improper multi-tier marketing scheme involving voice-over Internet protocol telephone services. The plaintiffs in each of the purported class action complaints generally allege that the various merchant processor defendants, including ProPay, aided and ~~Other~~abetted the improper activities of TelexFree. TelexFree filed for bankruptcy protection in Nevada. The bankruptcy proceeding was subsequently transferred to the Massachusetts Bankruptcy Court.

~~3 Adjusted segment EBITDA margin is adjusted segment EBITDA divided by net revenue.~~

~~For~~Specifically, ProPay has been named as one of a number of defendants (including other merchant processors) in each of the ~~three~~following ~~months~~purported ~~ended~~class ~~March~~action 31complaints relating to TelexFree: (i) Waldermara Martin, ~~2019~~et al. v. TelexFree, ~~approximately~~ 93Inc.5%, ofet ~~net~~al. ~~revenue~~(Case ~~was~~No. ~~influenced~~BK-S-14-12524-ABL) by(Bankr. ~~several~~D. ~~factors~~Nev.); (ii) Anthony Cellucci, ~~including~~et ~~volumes~~al. ~~related~~v. toTelexFree, ~~transactions~~Inc., ~~and~~et. ~~dollar~~al. ~~sales~~(Case ~~volume~~No. ~~The~~4:14-BK-40987) ~~remaining~~(Bankr. 6D. Mass.); (iii) Maduako C. Ferguson Sr., et al. v. Telexelectric, LLP, et. al (Case No. 5%:14-CV-00316-D) of(E.D.N.C.); ~~this~~(iv) ~~segment’s~~Todd ~~net~~Cook ~~revenue~~v. ~~was~~TelexElectric ~~derived~~LLP ~~from~~et ~~value~~al. ~~added~~(Case ~~services~~No. 2:14-CV-00134) (N.D. Ga.); (v) Felicia Guevara v. James M. Merrill et al., ~~chargebacks~~CA No. 1:14-cv-22405-DPG) (S.D. Fla.); (vi) Reverend Jeremiah Githere, ~~managed~~et ~~services~~al. v. TelexElectric LLP et al. (Case No. 1:14-CV-12825-GAO) (D. Mass.); (vii) Paulo Eduardo Ferrari et al. v. Telexfree, ~~investigation~~Inc. ~~and~~et ~~risk~~al. (Case No. 14-04080) (Bankr. D. Mass); (viii) Magalhaes v. TelexFree, Inc., et al., No. 14-cv-12437 (D. Mass.); (ix) Griffith v. Merrill et al., No. 14-CV-12058 (D. Mass.); (x) Abelgadir v. Telexelectric, LLP, No. 14-09857 (S.D.N.Y.); and ~~collection~~(xi) ~~services~~Rita ~~performed~~Dos Santos, v. TelexElectric, LLP et al., 2:15-cv-01906-NVW (D. Ariz.) (together, the “Actions”).

The increase in net revenue and adjusted segment EBITDA for the three months ended March 31, 2019, as compared to the same period in 2018, was driven by higher processing volumes, product fees and processing fees.

~~Consumer~~On ~~Solutions~~October 21, 2014, the Judicial Panel on Multidistrict Litigation (“JPML”) transferred and consolidated the Actions filed before that date to the United States District Court for the District of Massachusetts (the “Consolidated Action”). The JPML subsequently transferred the remaining Actions to the Consolidated Action. The Consolidated Action is styled In Re: TelexFree Securities Litigation (4:14-md-02566-TSH) (D. Mass.).

The Consumer Solutions segment provides GPR prepaid cards, payroll cards, demand deposit accounts and other financial service solutions to the underbanked and other consumers and businesses in the United States. The segment’s products provide customers with access to depository accounts insured by the Federal Deposit Insurance Corporation (“FDIC”) with a menu of pricing and features specifically tailored to their needs. The Consumer Solutions segment has an extensive distribution and reload network including financial service centers and other retail locations throughout the United States, and is a program manager for FDIC-insured depository institutions that issue the products that the segment develops, promotes and distributes. The Consumer Solutions segment currently has active agreements with five issuing banks.

The ~~Consumer~~plaintiffs ~~Solutions~~in ~~segment~~the ~~markets~~Consolidated ~~its~~Action ~~products~~filed ~~through~~a ~~multiple~~First ~~distribution~~Consolidated ~~channels,~~Amended ~~including~~Complaint ~~alternative~~on ~~financial~~March ~~service providers~~31, ~~traditional~~2015 ~~retailers,~~and ~~direct-to-consumer~~filed ~~and~~a ~~online~~Second ~~marketing~~Consolidated ~~programs,~~Amended ~~and~~Complaint ~~contractual~~(the ~~relationships~~“Second ~~with~~Amended ~~corporate~~Complaint”) ~~employers.~~on ~~This~~April ~~segment~~30, ~~has~~2015. noThe ~~major~~Second ~~customers~~Amended ~~and~~Complaint, ~~one~~which ~~major~~supersedes ~~third-party~~the ~~distributor~~complaints ~~for~~filed ~~the~~prior ~~three~~to ~~months~~consolidation ~~ended~~of ~~March~~the 31Actions, ~~2019.~~

The Consumer Solutions segment’s revenues primarily consist of a portion of the service fees and interchange revenues received by the segment’s issuing banks and others in connection with the programs managed by this segment. Customers are charged fees for transactions including fees for PIN and signature-based purchase transactions made using their cards, for ATM withdrawals or other transactions conducted at ATMs, for balance inquiries, and monthly maintenance fees among others. Customers are also charged fees associated with additional features and services offered in connection with certain products including the use of courtesy overdraft protection, bill payment options, custom card designs and card-to-card transfers of funds initiated through call centers. The Consumer Solutions segment also earns revenues from a portion of the interchange fees remitted by merchants when customers make purchase transactions using their products. Subject to applicable law, interchange fees are fixed by card associations and network organizations. 20

30 Table of Contents

~~Table~~purports to bring claims on behalf of ~~Contents~~ all persons who purchased certain TelexFree “memberships” and suffered a “net loss” between January 1, 2012 and April 16, 2014. With respect to ProPay, the Second Amended Complaint alleges that ProPay aided and abetted tortious acts committed by TelexFree, and that ProPay was unjustly enriched in the course of providing payment processing services to TelexFree. Several defendants, including ProPay, moved to dismiss the Second Amended Complaint on June 2, 2015. The court held a hearing on the motions to dismiss on November 2, 2015.

~~Below is a summary of the Consumer Solutions segment:~~

	Three months ended
	March 31,
(in thousands, except key indicators)	2019			2018		PercentChange
Net revenue1	$	219,178		210,489		4.1	%
Adjusted segment EBITDA2	$	63,693		53,667		18.7
Adjusted segment EBITDA margin3		29.1	%	25.5	%
Key indicators (in millions):
Gross dollar volume4	$	10,053.5		9,690.0		3.8
Number of active cards5		5.2		5.2		0.0
Number of active cards with direct deposit6		2.7		2.7		0.4
Percentage of active cards with direct deposit		51.3	%	51.1	%

On January 29, 2019, the court granted in part and denied in part ProPay’s motion to dismiss the Second Amended Complaint. The court dismissed plaintiffs’ claim that ProPay was unjustly enriched by the alleged TelexFree fraud, but denied ProPay’s motion to dismiss the plaintiffs’ claim that ProPay allegedly aided and abetted TelexFree’s purported scheme. The court’s ruling does not reflect any determination of the merits of the plaintiffs’ aiding and abetting claim against ProPay, but instead is merely a ruling that the plaintiffs have alleged facts that could potentially entitle them to relief from ProPay if those facts were true. ProPay denies that it had any knowledge of TelexFree’s alleged fraud or that it aided and abetted that fraud in any way.

~~1 Net revenue is defined as total revenues less reimbursable items (such as postage) that are recorded by TSYS as an expense.~~

2After ~~Adjusted~~deciding ~~segment~~the ~~EBITDA~~motions ~~excludes~~to ~~acquisition~~dismiss ~~intangible~~filed ~~amortization~~by ProPay and ~~expenses~~some ~~associated~~of ~~with~~the ~~Corporate~~other ~~Administration~~defendants ~~and~~in ~~Other~~the litigation, the court lifted the stay on discovery that had been in place since the outset of the Consolidated Action. Approximately 50 defendants remain in the litigation. The Court held a scheduling conference on March 20, 2019, but has not yet entered an order setting the case schedule.

~~3 Adjusted segment EBITDA margin is adjusted segment EBITDA divided by net revenue.~~

4ProPay ~~Gross~~has ~~dollar~~also ~~volume~~received ~~represents~~various subpoenas, a seizure warrant and other inquiries requesting information regarding TelexFree from (i) the ~~total~~Commonwealth ~~dollar~~of ~~volume~~Massachusetts, Securities Division, (ii) United States Securities and Exchange Commission, (iii) US Immigration and Customs Enforcement, and (iv) the bankruptcy Trustee of ~~debit~~the ~~transactions~~Chapter 11 entities of TelexFree, Inc., TelexFree, LLC and ~~cash~~TelexFree ~~withdrawals~~Financial, ~~made~~Inc. ~~using~~Pursuant ~~Consumer~~to ~~Solutions~~the ~~products~~seizure warrant served by the United States Attorney’s Office for the District of Massachusetts, ProPay delivered all funds associated with TelexFree held for chargeback and other purposes by ProPay to US Immigration and Customs Enforcement. In addition, ProPay received a notice of potential claim from the bankruptcy Trustee as a result of the relationship of ProPay with TelexFree and its affiliates.

5 Number of active cards represents the total number of cards that have had a PIN or signature-based purchase transaction, a point-of-sale load transaction or an ATM withdrawal within three months of the date of determination, adjusted to remove prepaid cards that consumers upgraded to a demand deposit account during the period.

6While ~~Number~~the ofCompany ~~active~~and ~~cards~~ProPay ~~with~~intend ~~direct~~to ~~deposit~~vigorously ~~represents~~defend the ~~number~~Consolidated ofAction ~~active~~and ~~cards~~other ~~that~~matters ~~have~~arising ~~had~~out aof ~~direct~~the ~~deposit~~relationship ~~load~~of ~~within~~ProPay ~~three~~with ~~months~~TelexFree ofand ~~the~~believe ~~date~~ProPay ofhas ~~determination,~~substantial ~~adjusted~~defenses related to ~~remove~~these ~~prepaid~~purported ~~cards~~claims, ~~that~~the ~~consumers~~Company ~~upgraded~~currently tocannot areasonably ~~demand~~estimate ~~deposit~~losses ~~account~~attributable ~~during~~to ~~the~~these ~~period~~matters.

For the three months ended March 31, 2019, 69.6% of revenues were derived from service fees charged to customers and 30.4% of revenues were derived from interchange and other revenues. Service fee revenues are driven by the number of active cards and in particular by the number of cards with direct deposit. Customers with direct deposit generally initiate more transactions and generate more revenues than those that do not take advantage of this feature. Interchange revenues are driven by gross dollar volume. Substantially all of the Consumer Solutions segment revenues were volume driven as they were driven by the active card and gross dollar volume indicators.

~~Net~~TSYS ~~revenue for the three months ended March 31, 2019, as compared to the same period in 2018, increased $8.7 million. Service fee revenue increased $5.4 million, or 3.7%. Revenues from interchange~~ and ~~other~~Global ~~services~~Payments ~~increased~~Merger ~~$3.3 million, or 5.2%.~~ Litigation

On January 25, 2018, the Consumer Financial Protection Bureau (“CFPB”) announced that it had finalized updates to its 2016 prepaid rule. The CFPB’s 2016 prepaid rule put in place requirements for treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosures, access to account information, and overdraft features if offered in conjunction with prepaid accounts. The changes announced by the CFPB adjust requirements for resolving errors on unregistered accounts, provide greater flexibility for credit cards linked to digital wallets, and extend the effective date of the rule by one year to April 1, 2019.

~~Operating~~As ~~Expenses~~ of the date of this report, three putative class action lawsuits challenging the Merger have been filed. Two of these lawsuits, captioned Peters v. Total System Services, Inc. et al. (Case No. 4:19-cv-00114) and Wolf v. Total System Services, Inc., et al. (Case No. 4:19-cv-00115), were filed in the United States District Court for the Middle District of Georgia on July 18, 2019. The third lawsuit, captioned Drulias v. Global Payments Inc., et. al (Case No. 60774/2019) was filed in the Supreme Court of the State of New York, County of Westchester on July 19, 2019.

The Company’s operating expenses were $811.3 million for the three months ended March 31, 2019, compared to $798.9 million for the same period in 2018. The Company’s operating expenses consist of cost of services and selling, general and administrative expenses. Cost of services describes the direct expenses incurred in performing a particular service for the Company’s customers, including the cost of reimbursable items and direct labor expense in putting the service in saleable condition. Selling, general and administrative expenses are incurred in selling or marketing and for the direction of the enterprise as a whole, including accounting, legal fees, sales, investor relations and mergers and acquisitions.

31 In addition, a lawsuit challenging the Merger on behalf of an individual plaintiff captioned Hickey v. Total System Services, Inc., et al. (Civil Action No. 1:19-cv-03337-LMM) was filed in the United States District Court for the Northern District of Georgia, Atlanta Division, on July 23, 2019.

~~Table of Contents~~

~~Operating~~The ~~expenses~~Peters ~~for~~lawsuit names as defendants TSYS, the ~~three~~current ~~months~~members ~~ended~~of ~~March~~the ~~31,~~TSYS ~~2019~~board ~~increased~~of ~~$12~~directors and certain former members of the TSYS board of directors.4 ~~million~~The Wolf lawsuit names as defendants TSYS, members of the TSYS board of directors and Global Payments. The ~~increase~~Drulias ~~primarily~~lawsuit ~~related~~names toas andefendants ~~increase~~Global inPayments ~~cost~~and members of ~~services~~its ~~offset~~board. The ~~partially~~Hickey bylawsuit names as defendants TSYS and the members of the TSYS board of directors. The complaints filed in the lawsuits assert, among other things, claims for filing a ~~decrease~~materially incomplete registration statement with the SEC. The plaintiffs in ~~selling~~the lawsuits seek, ~~general~~among other things, an injunction barring the Merger, rescission of the Merger or rescissory damages, and ~~administrative~~an ~~expenses~~award of damages and attorney’s fees. TSYS believes that the claims asserted in the lawsuits are without merit.

The Company’s cost of services were $632.2 million for the three months ended March 31, 2019, which was an increase of 3.1%, compared to the same period last year. The increase in cost of services for the three months ended March 31, 2019 is due to an increase in merchant referral fees and commissions, reimbursable expenses and salaries. The Company’s selling, general and administrative expenses were $179.0 million for the three months ended March 31, 2019, a decrease of 3.5%, compared to the same period last year. The decrease in selling, general, and administrative costs for the three months ended March 31, 2019 is the result of a decrease in merger and acquisition expenses and amortization of acquisition intangibles. 21

~~The~~Table ~~Company’s transaction and integration expenses related to acquisitions were $4.0 million for the three months ended March 31, 2019. These expenses consist~~ of ~~costs related to the completion of the acquisitions such as legal, accounting and professional fees, share-based compensation, as well as, personnel costs for severance and retention.~~ Contents

~~Operating Income~~

~~Operating~~Note ~~income~~7 ~~increased~~— ~~18.6%~~Share-Based for the three months ended March 31, 2019, compared to the same period in 2018. The Company’s operating profit margin for the three months ended March 31, 2019, was 21.6%, compared to 19.1% for the same period last year. TSYS’ operating margin increased for the three months ended March 31, 2019, as compared to the same period in 2018, due primarily to a decrease in merger and acquisition expenses and amortization of acquisition intangibles. Compensation

~~Nonoperating Income (Expense)~~

~~Nonoperating~~Refer ~~income~~to ~~(expense)~~Notes ~~consists~~1 and 18 of ~~interest~~the ~~expense,~~Company’s ~~interest~~audited ~~income~~financial ~~and~~statements ~~gains~~for ~~and~~the ~~losses~~year onended ~~currency~~December ~~translation~~31, ~~and~~2018, ~~transactions~~which are included as Exhibit 13.1 ~~Net~~to ~~nonoperating~~the ~~expense~~Company’s ~~increased~~Annual Report on Form 10-K for the ~~three~~year ~~months~~ ended ~~March~~ December 31, ~~2019~~2018, as ~~compared~~filed towith the ~~same~~SEC, ~~period~~for ina ~~2018.~~discussion regarding the Company’s share-based compensation plans and policy.

~~The following table provides a summary of nonoperating expenses, net:~~

	Three months ended
	March 31,
(in thousands)	2019		2018	PercentChange
Interest expense1	$	(43,997)	(37,400)	(17.6)	%
Interest income		1,228	747	64.4
Currency translation and transaction gains (losses), net		(1,138)	(427)	nm
Other		916	(562)	nm
Total	$	(42,991)	(37,642)	(14.2)
nm = not meaningful

Share-Based Compensation

~~1 Interest expense includes interest on Senior Notes of $32.9 million for the three months ended March 31, 2019, and $25.5 million for the same period in 2018.~~

~~Interest~~Share-based ~~expense~~compensation ~~for~~costs ~~the~~are ~~three~~classified ~~months~~as ~~ended March 31~~selling, ~~2019,~~general ~~increased~~and ~~$6.6~~administrative ~~million,~~expenses ~~compared~~on to the ~~same~~Company’s ~~period~~Consolidated inStatements ~~2018. The increase in interest expense for the three months ended March 31, 2019 was primarily the result~~ of ~~the~~Income ~~addition~~and ofcorporate ~~$450~~administration ~~million~~and ofother ~~bonds~~expenses infor ~~May~~segment ~~2018~~reporting aspurposes. ~~well~~TSYS’ asshare-based ~~the~~compensation ~~expiration~~costs ofare ~~lower~~expensed, ~~interest~~rather ~~rate~~than ~~borrowings in June 2018. Additionally~~capitalized, ~~the~~as ~~increase~~these inawards ~~interest~~are ~~expense~~typically isgranted ~~attributable~~ to ~~higher~~individuals ~~interest~~not ~~rates~~involved ~~associated with the 4.000% and 4.450% Senior Notes issued~~ in ~~May~~capitalizable ~~2018 compared to the 2~~activities.~~375%~~ ~~Senior Notes that were paid off at maturity on June 1, 2018.~~

Occasionally, the Company will provide financing to its subsidiaries in the form of an intercompany loan, which is required to be repaid in U.S. dollars. For its subsidiaries whose functional currency is other than the U.S. dollar, the translated balance of the financing (liability) is adjusted upward or downward to match the U.S. dollar obligation (receivable) on the Company’s consolidated financial statements. The upward or downward adjustment is recorded as a gain or loss on foreign currency translation in the Company’s Consolidated Statements of Income.

32 Below is a summary of share-based compensation expense for the three and six months ended June 30, 2019 and 2018:

~~Table of Contents~~

The Company records foreign currency translation adjustments on foreign-denominated balance sheet accounts. The Company maintains several cash accounts denominated in foreign currencies. As the Company translates 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 currency translation and transaction gain or loss on foreign currency translation in the Company’s Consolidated Statements of Income.


	Three months ended			Six months ended
	June 30,			June 30,
(in thousands)	2019		2018	2019	2018
Share-based compensation	$	11,500	14,230	22,214	20,524

The balance of the Company’s foreign-denominated cash accounts subject to risk of translation gains or losses as of March 31, 2019, was approximately $34.2 million, the majority of which is denominated in U.S. dollars and Euros. The net asset account balance subject to foreign currency exchange rates between the local currencies and the U.S. dollar as of March 31, 2019 was $66.6 million.

~~Income~~Nonvested ~~Taxes~~ Share Awards - Time-Based

For a detailed discussion regarding income taxes, refer to Notes 1 and 14 in the Notes to Consolidated Financial Statements and “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” which are included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC. See also Note 8 in the Notes to Unaudited Consolidated Financial Statements for additional information on income taxes for the three months ended March 31, 2019.

~~Below~~The isCompany granted awards of TSYS common stock to certain key employees. The nonvested stock bonus awards are typically for services to be provided in the future and vest over a ~~summary~~period of ~~income~~up ~~tax~~to four years. The market value of the TSYS common stock as of the date of issuance is charged as compensation expense: over the vesting periods of the awards. As of June 30, 2019, there was approximately $35.2 million of unrecognized compensation cost related to time-based nonvested share awards.

	Three months ended
	March 31,
(in thousands)	2019			2018		PercentChange
Income tax expense	$	29,899		18,135		64.9	%
Effective income tax rate		16.6	%	12.0	%

The primary reason for the higher effective income tax rate for the three months ended March 31, 2019, as compared to the same period last year, is the unfavorable variance in discrete items related to excess tax benefits from share-based compensation. However, some of this unfavorable variance was offset by favorable variances in discrete items related to FIN 48 releases.



	Six months ended
	June 30,
	2019		2018
Number of shares granted		316,755	320,853
Market value (in millions)	$	29.2	28.6

In the normal course of business, TSYS is subject to examinations from various tax authorities. These examinations may alter the timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions.

~~TSYS~~Performance- ~~continually monitors~~ and ~~evaluates~~Market-Based the potential impact of current events and circumstances on the estimates and assumptions used in the analysis of its income tax positions, and accordingly, TSYS’ effective tax rate may fluctuate in the future. Awards

No provision for U.S. federal and state income taxes has been made in the Company’s current year consolidated financial statements for those non-U.S. subsidiaries whose earnings are considered to be permanently reinvested. The amount of undistributed earnings considered to be “reinvested” which may be subject to withholding tax upon distribution was approximately $122.4 million as of March 31, 2019. Although TSYS does not intend to repatriate these earnings, a distribution of these non-U.S. earnings in the form of dividends, or otherwise, may subject the Company to withholding taxes payable to some of the various non-U.S. jurisdictions.

33 The Company granted performance- and market-based awards to certain key employees. The performance- and market-based goals are established by the Compensation Committee of the Board of Directors and will vest up to a maximum of 200%. During the first six months of 2019 and 2018, the Compensation Committee established performance goals based primarily on various financial and market-based measures. The Company’s market-based awards are based upon the Company’s Total Shareholder Return (“TSR”) as compared to the TSR of the companies in the S&P 500 determined at the end of the performance period for 2018 awards and determined using a twenty day average of the fair market value at the beginning and end of the performance period for 2019 awards.

~~Table of Contents~~

~~Equity~~Compensation inexpense ~~Income~~for performance shares is measured on the grant date based on the quoted market price of ~~Equity~~TSYS ~~Investments~~ common stock. The Company estimates the probability of achieving the goals through the performance period and expenses the awards on a straight-line basis. The fair value of market-based awards is estimated on the grant date using a Monte Carlo simulation model. The Company expenses market-based awards on a straight-line basis. Compensation costs related to performance- and market-based shares are recognized through the longer of the performance period or the vesting period. As of June 30, 2019, there was approximately $22.3 million of unrecognized compensation cost related to TSYS performance-based awards that is expected to be recognized through December 2021. As of June 30, 2019, there was

~~Below is a summary of TSYS' share of income from its interest in equity investments:~~ 22

	Three months ended
	March 31,
(in thousands)	2019		2018	Percent Change
Equity in income of equity investments, net of tax	$	11,227	10,608	5.8	%

Table of Contents

~~The~~approximately ~~increase~~$3.4 inmillion ~~equity~~of ~~income~~unrecognized ~~for~~compensation ~~the~~cost ~~three~~related ~~months ended March 31, 2019, compared~~ to ~~the~~TSYS ~~same~~market-based ~~period~~awards inthat ~~2018,~~ is ~~primarily~~expected ~~the~~to ~~result~~be ofrecognized ~~increased~~through ~~operating~~December ~~results associated with China UnionPay Data Services Co~~2021.~~, LTD.~~

~~Net Income~~

~~The~~During ~~following~~the ~~table~~six ~~provides~~months aended ~~summary~~June of30, ~~net~~2019 ~~income~~and 2018, the Company granted performance-based awards based on non-financial metrics and ~~EPS~~the following performance measures:

	Three months ended
	March 31,
(in thousands, except per share data)	2019		2018	Percent change
Net income	$	161,607	143,102	12.9	%
Net income attributable to noncontrolling interests		-	(1,261)	100.0
Net income attributable to TSYS common shareholders	$	161,607	141,841	13.9
Basic EPS attributable to TSYS common shareholders1	$	0.91	0.78	16.0
Diluted EPS attributable to TSYS common shareholders1	$	0.90	0.77	16.1

1 ~~Basic~~ ~~and~~Performance Measure Definition of Measure Adjusted diluted EPS Adjusted earnings divided by weighted average diluted shares outstanding used for diluted EPS calculations. Adjusted earnings is ~~computed~~net ~~based~~income onexcluding the ~~two~~after-~~class~~tax ~~method~~impact inof ~~accordance~~share-based ~~with~~compensation ~~the~~expense, ~~guidance~~amortization ~~under~~of ~~GAAP~~acquisition intangibles, merger and acquisition expenses for completed acquisitions and litigation claims, judgments or settlement expenses and related legal expenses. ~~Refer~~Net torevenue ~~Note~~Net 9revenue is total revenues less reimbursable items that are recorded by TSYS as expense. Adjusted EBITDA Adjusted EBITDA is net income excluding equity in ~~the~~income ~~Notes~~of toequity ~~Unaudited~~investments, ~~Consolidated~~nonoperating ~~Financial~~income/(expense), ~~Statements~~income ~~for~~taxes, ~~more~~depreciation, ~~information~~amortization, onshare-based ~~EPS~~compensation expenses and other items.

~~Non-GAAP Measures~~

~~Management~~The ~~evaluates~~number ~~the~~of ~~Company's~~performance-based ~~operating~~shares with a one- to two-year performance ~~based~~period ~~upon~~granted ~~net~~during ~~revenue,~~the asix ~~constant~~months ~~currency~~ended ~~basis~~June 30, ~~adjusted~~2019 ~~EBITDA,~~and ~~adjusted~~2018 ~~earnings~~totaled 86,779 ~~adjusted~~and ~~diluted~~95,904, ~~EPS~~respectively. ~~and~~The ~~free~~number ~~cash~~of ~~flow~~performance-based ~~which~~shares ~~are~~with ~~all~~a ~~non~~three-~~generally~~year ~~accepted~~performance ~~accounting~~period ~~principles~~granted ~~(“non-GAAP”)~~during ~~measures~~the six months ended June 30, 2019 and 2018, totaled 79,132 and 79,218, respectively. ~~TSYS~~The ~~also~~grants ~~uses~~awarded ~~these~~with ~~non~~a three-~~GAAP~~year ~~financial~~performance ~~measures~~period toduring ~~evaluate~~the first six months of 2019 and ~~assess~~2018 ~~TSYS'~~will ~~financial~~be ~~performance~~expensed ~~against~~through ~~budget~~December 31, 2021 and 2020, respectively.

Although non-GAAP financial measures are often used to measure TSYS’ operating results and assess its financial performance, they are not necessarily comparable to similarly titled measures of other companies due to potential inconsistencies in the method of calculation.

~~TSYS~~The ~~believes~~number ~~that its provision~~ of ~~non~~market-~~GAAP~~based ~~financial~~awards ~~measures~~granted ~~provides~~during ~~investors~~the ~~with~~six ~~important~~months ~~key~~ended ~~financial~~June ~~performance~~30, ~~indicators~~2019 ~~that~~and ~~are~~2018 ~~utilized~~were ~~by management to assess TSYS’ operating results~~30,856 ~~evaluate the business~~ and ~~make operational decisions on a prospective~~33,940, ~~going-forward basis~~respectively. ~~Hence,~~The ~~management~~performance ~~provides~~measure ~~disclosure~~for ofthe ~~non~~market-~~GAAP~~based ~~financial~~awards ~~measures~~is tothe ~~give~~Company’s ~~shareholders~~TSR ~~and potential investors an opportunity to see TSYS~~ as ~~viewed~~compared ~~by management,~~ to ~~assess~~the ~~TSYS~~TSR ~~with some~~ of the ~~same~~companies ~~tools~~in ~~that~~the ~~management~~S&P ~~utilizes~~500 ~~internally~~determined ~~and~~at tothe beend ~~able to compare such information with prior periods. TSYS believes that inclusion~~ of ~~non-GAAP~~the ~~financial~~performance ~~measures~~period ~~provides~~for ~~investors~~2018 ~~with~~awards ~~additional~~and ~~information~~determined tousing ~~help~~a ~~them~~twenty ~~better~~day ~~understand~~average ~~its~~of ~~financial~~the ~~statements~~fair ~~just~~market asvalue ~~management~~at ~~utilizes~~the ~~these~~beginning ~~non-GAAP~~and ~~financial~~end ~~measures~~of ~~to understand~~ the ~~business,~~performance ~~manage~~period ~~budgets~~for ~~and~~2019 ~~allocate resources~~awards.

~~Table~~Stock ofOption ~~Contents~~ Awards

~~The following tables provide a reconciliation of GAAP to the Company’s non-GAAP financial measures:~~

Net Revenue
	Three months ended
	March 31,
(in thousands)	2019		2018
Total revenues (GAAP)	$	1,034,531	987,170
Less: reimbursable items		54,261	51,673
Net revenue (non-GAAP)	$	980,270	935,497

The Company granted stock options to certain key executives. The grants will vest over a period of up to three years.

Constant Currency Comparison
	Three months ended
(in thousands)	March 31,
Consolidated	2019		2018
Total revenues (GAAP)	$	1,034,531	987,170
Foreign currency impact1		8,270	—
Constant currency2 (non-GAAP)	$	1,042,801	987,170
Net revenue (non-GAAP)	$	980,270	935,497
Foreign currency impact1		7,706	—
Constant currency2 (non-GAAP)	$	987,976	935,497
Operating income (GAAP)	$	223,270	188,271
Foreign currency impact1		1,897	—
Constant currency2 (non-GAAP)	$	225,167	188,271
Issuer Solutions
Segment net revenue (GAAP)	$	433,473	423,574
Foreign currency impact1		7,847	—
Constant currency2 (non-GAAP)	$	441,320	423,574

1The ~~Reflects~~weighted average fair value of the ~~impact~~option grants was estimated on the date of ~~calculated~~grant ~~changes~~using inthe ~~foreign~~Black-Scholes-Merton ~~currency~~option-pricing ~~rates~~model ~~from~~with the ~~comparable~~following ~~period.~~weighted average assumptions:

~~2 Reflects current period results on a non-GAAP basis as if foreign currency rates did not change from the comparable prior year period.~~



		Six months ended
		June 30,
	2019			2018
Number of options granted		233,667		360,118
Weighted average exercise price	$	92.37		86.90
Risk-free interest rate		2.47	%	2.55	%
Expected volatility		22.79	%	21.80	%
Expected term (years)		4.8		4.8
Dividend yield		0.56	%	0.60	%
Weighted average fair value	$	21.98		19.23

~~Table of Contents~~

Adjusted EBITDA
	Three months ended
	March 31,
(in thousands)	2019			2018
Net income (GAAP) (a)	$	161,607		143,102
Adjust for:
Less: Equity in income of equity investments		(11,227)		(10,608)
Add: Income tax expense		29,899		18,135
Add: Interest expense, net		42,769		36,652
Add: Depreciation and amortization		103,710		104,389
Add: Contract asset amortization		8,038		6,874
Add: Contract cost asset amortization		7,845		10,726
Add: Loss on foreign currency translation and transaction (gains) losses		1,138		427
Add/Less: Other nonoperating (income) expenses		(916)		562
Add: Share-based compensation		10,714		6,295
Add: Cayan and TransFirst M&A and integration expenses1		3,710		14,368
Adjusted EBITDA (non-GAAP) (b)	$	357,287		330,922
Total revenues (GAAP) (c)	$	1,034,531		987,170
Net income margin on total revenues (GAAP) (a)/(c)		15.6	%	14.5	%
Net revenue (non-GAAP) (d)	$	980,270		935,497
Adjusted EBITDA margin on net revenue (non-GAAP) (b)/(d)		36.4	%	35.4	%

As of June 30, 2019, there was approximately $5.1 million of unrecognized compensation cost related to TSYS stock options that is expected to be recognized over a remaining weighted average period of 1.7

~~1 Costs associated with the Cayan and TransFirst acquisitions which are included in selling, general and administrative expenses and nonoperating expenses~~years.

Adjusted Earnings and Adjusted Diluted Earnings Per Share
	Three months ended
	March 31,
(in thousands, except per share data)	2019		2018
Net income attributable to TSYS common shareholders (GAAP)	$	161,607	141,841
Adjust for amounts attributable to TSYS common shareholders:
Add: Acquisition intangible amortization		54,957	62,988
Add: Share-based compensation		10,714	6,294
Add: Cayan and TransFirst M&A and integration expenses1		3,710	14,368
Less: Tax impact of adjustments2		(15,542)	(17,905)
Adjusted earnings (non-GAAP)	$	215,446	207,586
Diluted EPS - Net income attributable to TSYS common shareholders:
As reported (GAAP)	$	0.90	0.77
Adjusted diluted EPS (non-GAAP)	$	1.20	1.13
Weighted average diluted shares		179,886	183,298

~~1 Costs associated with the Cayan and TransFirst acquisitions which are included in selling, general and administrative expenses and nonoperating expenses.~~23

2Table ~~Certain~~ of ~~these merger and acquisition costs are nondeductible for income tax purposes.~~Contents

Free Cash Flow
	Three months ended
	March 31,
(in thousands)	2019		2018
Net cash provided by operating activities (GAAP)	$	227,589	211,893
Capital expenditures		(80,429)	(46,236)
Free cash flow (non-GAAP)	$	147,160	165,657

Note 8 — Income Taxes

~~Financial Position, Liquidity and Capital Resources~~

~~Cash~~Refer ~~Flows~~ to Notes 1 and 14 of the Company’s audited financial statements for the year ended December 31, 2018, which are included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC, for a discussion regarding income taxes.

The Consolidated Statements of Cash Flows detail the Company’s cash flows from operating, investing and financing activities. TSYS’ primary method of funding its operations and growth has been cash generated from current operations. TSYS has occasionally used borrowed funds to supplement financing of capital expenditures and acquisitions.

36 TSYS is the parent of an affiliated group that files a consolidated U.S. federal income tax return, consolidated income tax returns for most states and separate entity basis income tax returns for most foreign jurisdictions. In the normal course of business, the Company is subject to examinations by these taxing authorities unless statutory examination periods lapse. TSYS is no longer subject to U.S. federal income tax examinations for years before 2011 and with few exceptions, the Company is no longer subject to income tax examinations from state and local or foreign tax authorities for years before 2014. In March 2019, TSYS reached a closing agreement with the IRS for the federal income tax examinations in progress for the years 2011 through 2013. Additionally, a number of tax examinations are in progress by the relevant state tax authorities. Although TSYS is unable to determine the ultimate outcome of these examinations, TSYS believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate.

~~Table of Contents~~

~~Cash~~TSYS’ ~~Flows~~effective ~~From~~tax ~~Operating~~rate ~~Activities~~ was 17.1% and 22.3% for the three months ended June 30, 2019 and 2018, respectively, and 16.9% and 17.5% for the six months ended June 30, 2019 and 2018, respectively. The primary reasons for the lower effective income tax rate for the three and six months ended June 30, 2019 as compared to the same periods last year are favorable differences in discrete items related to FIN 48 reserves and equity investment true-ups. During the six-month period ended June 30, 2019, these were mostly offset by unfavorable differences in excess tax benefits of share-based compensation.

	Three months ended
	March 31,
(in thousands)	2019		2018
Net income	$	161,607	143,102
Depreciation and amortization		103,710	104,389
Amortization of operating lease right-of-use assets		12,654	-
Provisions for cardholder losses		13,269	15,545
Share-based compensation		10,714	6,295
Provisions for bad debt expenses and billing adjustments		2,948	2,839
Charges for transaction processing provisions		7	729
Amortization of debt issuance costs		1,322	1,035
Deferred income tax expense		27,745	15,180
Equity in income of equity investments		(11,227)	(10,608)
Other noncash items and charges, net		934	662
Net change in current and other assets and current and other liabilities		(96,094)	(67,275)
Net cash provided by operating activities	$	227,589	211,893

~~TSYS'~~GAAP ~~main~~prescribes ~~source~~a ofrecognition ~~funds~~threshold isand ~~derived~~measurement ~~from~~attribute ~~operating~~for ~~activities, specifically net income. The amortization of operating lease right-of-use assets relates to~~ the ~~Company’s~~financial ~~adoption~~statement ~~of ASC 842~~recognition, ~~Leases,~~measurement asand disclosure of ~~January~~a 1,tax ~~2019.~~position ~~See~~taken ~~further~~or ~~discussion~~expected into ~~Notes~~be 1taken ~~and 4~~ in ~~the~~a ~~Notes~~tax ~~to Unaudited Consolidated Financial Statements~~return. ~~Net~~The ~~change~~unrecognized intax ~~current~~benefit ~~and~~amounts ~~other~~were ~~assets includes accounts receivable, contract assets and contract liabilities, contract cost assets, prepaid expenses, other current assets and other long-term assets~~$18.8 ~~Net~~million ~~change in current~~ and ~~other liabilities includes accounts payable, accrued salaries and employee benefits, and other current liabilities and other long-term liabilities~~$22.3 ~~The~~million ~~change in accounts receivable~~ as of ~~March~~June 3130, 2019, asand ~~compared~~December ~~to March~~ 31, 2018, isrespectively, ~~the~~which ~~result~~resulted ~~of timing of payments by clients. The change~~ in ~~accounts~~a ~~payable~~decrease ~~and other liabilities for the same period is the result~~ of ~~the timing of payments of vendor invoices~~$3.5 ~~The~~million ~~change~~during ~~in accrued salaries and employee benefits is due primarily to changes in incentive bonuses and benefits paid in~~ the ~~first three months ended March 31, 2019 compared to the same~~ period ~~in 2018~~.

~~Cash Flows From Investing Activities~~

	Three months ended
	March 31,
(in thousands)	2019		2018
Cash used in acquisitions, net of cash acquired	$	-	(1,036,853)
Additions to licensed computer software from vendors		(48,628)	(13,827)
Purchases of property and equipment		(19,396)	(22,069)
Additions to internally developed computer software		(12,405)	(10,340)
Other investing activities		(2,350)	(1,550)
Net cash used in investing activities	$	(82,779)	(1,084,639)

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Income. Gross accrued interest and penalties on unrecognized tax benefits totaled $1.7 million and $2.5 million as of June 30, 2019 and December 31, 2018, respectively. The total amounts of unrecognized income tax benefits as of June 30, 2019 and December 31, 2018, that, if recognized, would affect the effective tax rates are $19.3 million and $23.5 million (net of the federal benefit on state tax issues), respectively, which include interest and penalties of $1.0 million and $1.7 million, respectively. TSYS does not expect any significant changes to its calculation of uncertain tax positions during the next twelve months.

The primary uses of cash for investing activities in 2019 were for the purchase of licensed computer software, purchases of property and equipment and internal development of computer software. The primary uses of cash for investing activities in 2018 were for the acquisition of Cayan Holdings, LLC, purchases of property and equipment, internal development of computer software and the purchase of licensed computer software.

37 24

Table of Contents

~~Cash~~Note ~~Flows~~9 ~~From~~– ~~Financing~~Earnings ~~Activities~~ Per Share

	Three months ended
	March 31,
(in thousands)	2019		2018
Repurchase of common stock under plans and tax withholding	$	(400,013)	(24)
Principal payments on long-term borrowings, finance lease obligations and license agreements		(157,324)	(129,010)
Dividends paid on common stock		(23,456)	(23,496)
Proceeds from borrowings of long-term debt		450,000	1,040,000
Proceeds from exercise of stock options		6,466	26,461
Subsidiary dividends paid to noncontrolling shareholders		-	(1)
Net cash provided by (used in) financing activities	$	(124,327)	913,930

The ~~main~~following ~~uses~~tables ofillustrate ~~cash~~basic ~~for financing activities in 2019 were repurchase of common stock, principal payments on long-term borrowings, finance lease obligations~~ and ~~license~~diluted ~~agreements~~EPS ~~and~~for the ~~payment~~three ~~of dividends. The main sources of cash provided by financing activities in 2019 were the proceeds from borrowing of long-term debt~~ and ~~exercises~~six ofmonths ~~stock~~ended ~~options.~~June ~~The main uses of cash for financing activities in 2018 were principal payments on long-term borrowings~~30, ~~finance~~2019 ~~lease obligations~~ and ~~license agreements, and the payment of dividends. The main sources of cash provided by financing activities in~~ 2018 ~~were the proceeds from borrowing of long-term debt and exercises of stock options.~~ :

~~Refer to Note 5 in the Notes to Unaudited Consolidated Financial Statements for more information on borrowings.~~

Dividends



	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
(in thousands, except per share data)	Common Stock		Common Stock		Common Stock		Common Stock
Basic EPS:
Net income attributable to TSYS common shareholders	$	162,760		142,435		324,367		284,276
Less income allocated to nonvested awards		(3)		(59)		(41)		(233)
Net income allocated to common stock for EPS calculation (a)	$	162,757		142,376		324,326		284,043
Weighted average shares outstanding		176,962		182,355		177,697		181,992
Less participating securities		(3)		(76)		(22)		(150)
Average common shares outstanding (b)		176,959		182,279		177,675		181,842
Basic EPS (a)/(b)	$	0.92		0.78		1.83		1.56

Diluted EPS:
Net income attributable to TSYS common shareholders	$	162,760		142,435		324,367		284,276
Less income allocated to nonvested awards		(3)		(59)		(41)		(233)
Add income reallocated to nonvested awards¹		3		59		41		233
Net income allocated to common stock for EPS calculation (c)	$	162,760		142,435		324,367		284,276
Weighted average shares outstanding		176,962		182,355		177,697		181,992
Less participating securities		(3)		(76)		(22)		(150)
Average common shares outstanding		176,959		182,279		177,675		181,842
Increase due to assumed issuance of shares related to common equivalent shares outstanding		986		881		926		1,064
Average nonvested awards¹		569		415		597		551
Average common and common equivalent shares outstanding (d)		178,514		183,575		179,198		183,457
Diluted EPS (c)/(d)	$	0.91		0.78		1.81		1.55

~~Dividends~~1 onIn ~~common~~accordance ~~stock~~with ofthe ~~$23.5~~diluted ~~million~~EPS ~~were~~guidance ~~paid~~under ~~during~~ the ~~three~~two-class ~~months~~method, ~~ended~~the ~~March~~Company ~~31,~~uses ~~2019~~the ~~and~~approach- ~~2018.~~either ~~For~~ the ~~three~~treasury ~~months~~stock ~~ended~~method ~~March~~or ~~31,~~the ~~2019~~two-class ~~and~~method ~~2018,~~assuming ~~the~~a ~~Company~~participating ~~paid~~security ~~dividends~~is ofnot ~~$0.13~~exercised- ~~per~~that ~~share~~is more dilutive.

~~Stock Repurchase~~

~~For~~The adiluted ~~detailed~~EPS ~~discussion~~calculation ~~regarding~~excludes ~~the~~stock ~~Company’s~~options ~~stock~~and ~~repurchase~~nonvested ~~plan,~~awards ~~see~~that ~~“Item~~are 7:exercisable ~~Management’s~~into ~~Discussion~~0.1 million and ~~Analysis~~0.2 ofmillion ~~Financial~~common ~~Condition~~shares ~~and~~for ~~Results~~the ofthree ~~Operations,”~~and ~~which~~six ismonths ~~included~~ended asJune ~~Exhibit~~30, ~~13.1~~2019, torespectively, ~~the~~and ~~Company’s~~excludes ~~Annual~~0.4 ~~Report~~million oncommon ~~Form~~shares ~~10-K~~ for the ~~year~~three and six months ended ~~December~~June 3130, 2018, asbecause ~~filed~~their ~~with~~inclusion ~~the~~would ~~SEC~~have been anti-dilutive.

In January 2019, the Company entered into an accelerated share repurchase (“ASR”) agreement with a third-party financial institution to repurchase $400 million of the Company’s common stock. Under the ASR agreement, the Company paid a specified amount to the financial institution and received an initial delivery of shares. This initial delivery of shares represents approximately 83% of the estimated shares delivered under the agreement by repurchasing $400 million of the Company’s common stock divided by the Trade Date closing price. Upon settlement of the ASR agreement, the financial institution delivered additional shares, with the final number of shares delivered determined with reference to the volume-weighted average price of the Company’s common stock over the term of the agreement, less an agreed-upon discount. The transactions are accounted for as equity transactions and are included in Treasury Stock when the shares are received, at which time there is an immediate reduction in the weighted-average common shares calculation for basic and diluted earnings per share.

InNote ~~February~~10 ~~2019,~~— ~~the~~Supplementary ~~Company~~Cash ~~received~~Flow anInformation ~~initial delivery of 3.7 million shares. The transaction was completed in March 2019, at which time the Company received an additional 638,414 shares.~~

~~Foreign Operations~~

~~TSYS~~Software ~~operates~~Acquired ~~internationally~~Under ~~and~~License is subject to adverse movements in foreign currency exchange rates. On June 23, 2016, the United Kingdom (“U.K.”) held a referendum in which voters approved an exit from the European Union (“E.U.”), commonly referred to as “Brexit.” The U.K. is currently negotiating the terms of its Agreements

~~Table~~There was approximately $6.9 million and $3.4 million of ~~Contents~~ software acquired under license agreements in the first six months of 2019 and 2018, respectively. Additionally, the Company did not acquire software through vendor financing and other arrangements during the first six months of 2019 compared to $39.6 million of software acquired through vendor financing and other arrangements during the first six months of 2018.

expected exit from the E.U. which is now scheduled to occur no later than October 31, 2019. This date represents an extension of the original date of March 29, 2019 and was jointly agreed to between the U.K. and the E.U. in April 2019. The extension is expected to only be as long as necessary and in any event no later than October 31, 2019 to allow for the ratification of the withdrawal agreement which was negotiated between the U.K. and the E.U. One of the conditions of the extension is that the U.K. must participate in the elections to the E.U. Parliament in May 2019 and, if it does not, the U.K. will exit the E.U. on June 1, 2019. TSYS continues to monitor Brexit and its potential impact across key areas including service continuity, contracts, regulatory (including data privacy), the economy and freedom of movement of people. Uncertainty over the terms of the withdrawal of the U.K. from the E.U. may create global economic uncertainty, and have unknown social and geopolitical impact, which may adversely affect the Company’s business, results of operations and financial condition, as well as potentially affect TSYS’ relationships with its existing and future customers, vendors and employees. Additionally, the U.K. may be required to negotiate new terms of trade with various jurisdictions which could be disruptive and adversely affect TSYS’ tax benefits or liabilities in those jurisdictions. TSYS has not entered into foreign exchange forward contracts to reduce its exposure to foreign currency rate changes. TSYS continues to analyze potential hedging instruments to safeguard it from significant foreign currency translation risks.

~~TSYS maintains operating cash accounts outside the United States. Refer to~~ Note 211 in— ~~the~~Segment ~~Notes~~Reporting ~~to Unaudited Consolidated Financial Statements for more information on cash~~ and ~~cash~~Major ~~equivalents.~~Customers TSYS has adopted the permanent reinvestment exception under GAAP with respect to future earnings of certain foreign subsidiaries. While some of the foreign cash is available to repay intercompany financing arrangements, some remaining amounts may not be presently available to fund domestic operations and obligations without paying withholding taxes upon its repatriation. Demand on the Company’s cash has increased as a result of its strategic initiatives. TSYS funds these initiatives through a balance of internally generated cash, external sources of capital and, when advantageous, access to foreign cash in a tax efficient manner. Where local regulations limit an efficient intercompany transfer of amounts held outside of the U.S., TSYS will continue to utilize these funds for local liquidity needs. Under current law, balances available to be repatriated to the U.S. may be subject to foreign withholding taxes. Pursuant to the Tax Cuts and Jobs Act of 2017 (“Tax Act”), TSYS has not provided for the U.S. federal tax liability on these amounts for financial statement purposes. TSYS utilizes a variety of tax planning and financing strategies with the objective of having its worldwide cash available in the locations where it is needed.

~~Impact of Inflation~~

~~Although~~Refer ~~the~~to ~~impact~~Note 21 of ~~inflation~~the onCompany’s ~~its~~audited ~~operations~~financial ~~cannot~~statements befor ~~precisely~~the ~~determined~~year ended December 31, ~~the~~2018, ~~Company~~which ~~believes~~is ~~that~~included byas ~~controlling~~Exhibit ~~its~~13.1 ~~operating~~to ~~expenses,~~the ~~and~~Company’s byAnnual ~~taking~~Report ~~advantage~~on ofForm ~~more~~10-K ~~efficient~~for ~~computer~~the ~~hardware~~year ~~and~~ended ~~software~~December 31, it2018, ~~can~~as ~~minimize~~filed with the ~~impact~~SEC, offor ~~inflation~~a discussion regarding segment reporting and major customers.

~~Working Capital~~

TSYS may seek additional external sources of capital in the future. The form of any such financing will vary depending upon prevailing market and other conditions and may include short-term or long-term borrowings from financial institutions or the issuance of additional equity and/or debt securities such as industrial revenue bonds. However, there can be no assurance that funds will be available on terms acceptable to TSYS. Management expects that TSYS will continue to be able to fund a significant portion of its capital expenditure needs through internally generated cash in the future, as evidenced by TSYS’ current ratio of 2.2:1. As of March 31, 2019, TSYS had working capital of $664.0 million compared to working capital of $625.2 million as of December 31, 2018. 25

~~Legal~~Table ~~Proceedings~~ of Contents

~~Refer~~At toTSYS, ~~Note 15 of~~ the ~~Company’s~~chief ~~audited~~operating ~~financial~~decision ~~statements~~maker ~~for~~(“CODM”) ~~the~~is ~~year~~a ~~ended~~group ~~December~~consisting ~~31,~~of ~~2018,~~Senior ~~which~~Executive ~~are included as Exhibit 13~~Management.1 toIn the ~~Company’s~~first ~~Annual~~quarter ~~Report~~of on2019, ~~Form 10-K for~~ the ~~year~~CODM ~~ended~~changed ~~December 31, 2018, as filed with~~ the ~~SEC,~~profitability measure for aits ~~discussion~~operating ~~regarding~~segments ~~commitments~~to ~~and~~adjusted ~~contingencies~~segment ~~including legal proceedings~~EBITDA. ~~Also,~~All ~~for~~periods ~~more~~presented ~~information~~have ~~regarding~~been ~~the~~adjusted ~~Company’s legal proceedings, refer~~ to ~~Note~~reflect 6this innew ~~the Notes to Unaudited Consolidated Financial Statements~~measure.

~~Table~~The offollowing ~~Contents~~ table presents the Company’s total assets by segment:

~~Forward-Looking Statements~~

Certain statements contained in this filing which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (“the Act”). These forward-looking statements include, among others: (i) TSYS’ expectation with respect to the impact of the CFPB’s new rule pertaining to prepaid financial products on its Consumer Solutions segment and the Company’s 2019 revenue and earnings; (ii) TSYS’ expectation that it will be able to fund a significant portion of its capital expenditure needs through internally generated cash in the future; (iii) TSYS’ belief with respect to lawsuits, claims and other complaints; (iv) TSYS’ expectation with respect to certain tax matters; and the assumptions underlying such statements. In addition, certain statements in future filings by TSYS with the Securities and Exchange Commission, in press releases, and in oral and written statements made by or with the approval of TSYS which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of TSYS or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “estimates,” “projects,” “plans,” “may,” “could,” “should,” “would,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying these statements.


	As of
(in thousands)	June 30, 2019		December 31, 2018
Issuer Solutions	$	7,049,467	6,843,451
Merchant Solutions		4,204,758	4,248,183
Consumer Solutions		1,383,015	1,374,667
Intersegment assets		(4,930,434)	(4,997,592)
Total assets	$	7,706,806	7,468,709

These statements are based upon the current beliefs and expectations of TSYS’ management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by the Company’s forward-looking statements. Many of these factors are beyond TSYS’ ability to control or predict. These factors include, but are not limited to:

·The ~~the~~Company ~~material~~maintains ~~breach~~property ofand ~~security~~equipment, ofnet ~~any~~ of ~~TSYS’~~accumulated ~~systems~~depreciation and ~~software;~~amortization, in the following geographic areas:

~~· TSYS incurs expenses associated with the signing of a significant client;~~

· organic growth rates for TSYS’ existing clients are lower than anticipated whether as a result of unemployment rates, card delinquencies and charge off rates or otherwise or attrition rates of existing clients are higher than anticipated;

Filing Compare · TOTAL SYSTEM SERVICES INC