The loss of large clients, price compression, currency valuations and the tough economy all contributed to a difficult fourth quarter and 2009 for Total System Services Inc., and its executives said the same issues are likely to affect it well into this year.

The processor reported fourth-quarter net income of $60.2 million, down 9.2% from a year earlier. Revenue rose 0.5%, to $434.8 million.

"Until we see unemployment start to fall and people regaining jobs and feeling more secure and beginning to spend again, we expect some level of continued constriction," TSYS' chairman and chief executive, Phil Tomlinson, said during a conference call Wednesday with analysts to discuss the results.

TSYS faces a "significant revenue hole" in 2010 "unlike anything we have ever faced," Tomlinson said.

"As a result of this reregulation of this industry and the continued economic problems clients have, they continue to delay projects or they've stopped them altogether, and organic growth has been anemic at best."

TSYS, of Columbus, Ga., had 352.2 million accounts on file in December 2008, but that number decreased 2.2%, to 344.8 million by December 2009.

Washington Mutual Inc., Nordstrom Inc., Charming Shoppes Inc. and Bank of America Corp. are among the major clients that TSYS lost in the past year.

Overall, the company added 25.2 million accounts from internal growth and 28.1 million from new clients during the year. The processor lost 34.1 million accounts from purges and sales and 26.9 million from deconversions.

TSYS is still feeling the effects of the "card market in general deleveraging," said Darrin Peller, information technology and computer services analyst at Barclays Capital, the investment banking division of Barclays Bank PLC.

"Issuers are trying to cut back on risk," Pellar said, but that is affecting the processors. "By nature of growth slowing down as issuers cut back, these guys will feel it, because most of their revenue comes from processing credit card accounts on file."

Revenue for the North America segment in the fourth quarter declined 9.9%, to $247.3 million. The international services segment's revenue increased 24.7%, to $99.9 million. The merchant services segment posted revenue of $87.6 million, a 12% increase.

Total cardholder transactions fell 4% in the fourth quarter from a year earlier, and point of sale transactions reached 1.3 billion.

Tomlinson said he believes economic recovery will be slow this year, and that it will continue to affect both the card industry and his company.

Peller agreed. "2010 is going to be a tough year for these guys."

To reduce expenses, TSYS has put hiring on hold indefinitely and plans to shrink its work force by roughly 5% this year; it already has reduced its work force by 5%. "When you add 2009 and 2010 together, we will reduce our head count by about 10%," Tomlinson said. "Head count makes up 54% of our expense base."

TSYS expects to announce several new clients in 2010, Tomlinson said.

One of those came Thursday, when TSYS announced a multiyear payment services agreement with Caterpillar Financial Services Corp., the financial arm of Caterpillar Inc.

Under the agreement, TSYS will process commercial credit accounts and provide its CounterPass Web-based virtual point of sale product to Caterpillar's more than 900 dealer locations in the U.S.

TSYS did not disclose financial terms of the agreement.

TSYS' per-share earnings in the fourth quarter were 31 cents, down from 34 cents a year earlier, but exceeding Wall Street's expectations by a penny.

The company said it expects to earn between 95 cents to 97 cents per share from continuing operations in the current year.

The news did little to help the company's share price. At mid-afternoon Thursday, TSYS shares were trading at $15.00, down 11.82% from its closing price on Wednesday.

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