UPDATE: TSYS reports profit of $60.3 million, buys back stock and sets up $500 million credit line

Earnings per share of 32 cents matches the expectations of Wall Street analysts

tadams@ledger-enquirer.comOctober 23, 2012 

Continuing to put the Great Recession in its rearview mirror and position itself for growth down the road, credit-card processor TSYS today reported a third-quarter profit of $60.3 million, or 32 cents per share.

That matched the expectations of Wall Street analysts surveyed by research firm Thomson Financial, who were anticipating an average consensus 32 cents per share for the July-September timeframe.

“We have approximately 100 million accounts in the conversion pipeline, which we expect to be converted by the end of 2014,” TSYS Chairman and Chief Executive Officer Phil Tomlinson said during a conference call with financial research analysts after the report’s release.

He specifically mentioned Bank of America, which signed a six-year deal last summer to have TSYS process consumer cards for it. The number of cards involved was not disclosed, but they are believed to be tens of thousands. Tomlinson said the “heavy lifting” is now under way to get those converted to the TSYS system.

In the official release from the company, the CEO noted his company’s joint venture with Central Payment Co. during the quarter, a move aimed at boosting sales among merchants. He also said TSYS bought back 2.6 million of its stock shares for $61.2 million, bringing the total number of shares repurchased over the last two years to 12.3 million at a price tag of $227 million.

“We continue to see value in our buyback program, absent a strategic acquisition, and have 7.7 million shares remaining under the plan that expires in April 2014,” Tomlinson said. “We also closed a new credit facility of $500 million this quarter with a five-year term loan of $150 million and a five-year revolver of $350 million that included nine banks. This new revolver, along with our free cash flow, will provide us with more financial flexibility as we continue to make investments that we expect to grow our company and enhance shareholder return.”

The $60.3 million in quarterly net income was 3.7 percent higher than the $58.1 recorded in the same period a year ago.

Through the first nine months of this year, the global card and payment processor raked in a profit of $183.4 million, up 14 percent from $160.7 million a year ago. Earnings per share came in at 97 cents over the current January through September period.

Those profits were made on third-quarter revenue of $468 million, an increase of nearly 2 percent from the same period a year ago. Through the first nine months, the company has amassed revenue of nearly $1.4 billion, 4 percent more than in the same period of 2011.

Card transactions in both North American and overseas rose during the quarter, the company said, with sales in its direct-merchant segment up sharply as well.

Tomlinson, between ticking off clients that have renewed contracts or signed new agreements, noted this was the 10th quarter in a row that TSYS has experienced transaction growth. He also said the pace of prospecting for more clients is picking up rapidly.

“We have active dialogue with many new entrants and non-traditional players,” the CEO said. “We have a number of initiatives under way including making investments through private equity funds to helping young companies enter the (electronic) payment space. We’re also forming partnerships with companies we feel will add incremental value to our clients and the customers that we serve.”

Before issuing its earnings report today after the market’s close, TSYS said it has reached extending its long-term contract with BB&T Financial, a subsidiary of BB&T Corp., a bank based in Winston-Salem, N.C. Terms of the agreement were not disclosed, although BB&T will use TSYS technology for processing card transactions and handling services such as dispute resolution. BB&T has been a customer since 1997.

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