NetSpend 2012 Annual Report Download - page 20

Equity in Income of Equity Investments
TSYS’ share of income from its equity in equity
investments was $10.2 million, $8.7 million, and
$7.1 million for 2012, 2011 and 2010, respectively.
The increase in equity income is the result of the
growth in CUP Data. Refer to Note 11 in the
consolidated financial statements for more
information on equity investments.
Loss from Discontinued Operations, net
of tax
Loss from discontinued operations, net of tax in 2010
contains the operating results of TSYS POS Systems
and Services, LLC and the loss on the sale of the
subsidiary. Refer to Note 2 in the consolidated
financial statements for more information on
discontinued operations.
Net Income
Net income increased 12.2% to $249.9 million in
2012, compared to 2011. In 2011, net income
increased 8.3% to $222.7 million, compared to
$205.6 million in 2010.
Net income attributable to noncontrolling interests in
2012 increased to $5.6 million, as compared to $2.1
million in 2011 and $11.7 million in 2010. The increase
in 2012, as compared to 2011, is the result of the
acquisition of 60% of CPAY in 2012. The decrease in
2011, as compared to 2010, is the result of the
acquisition of the remaining 49% of TMS in 2011.
Net income attributable to TSYS common
shareholders increased 10.8% to $244.3 million (basic
and diluted EPS of $1.30 and $1.29, respectively) in
2012, compared to 2011. In 2011, net income
attributable to TSYS common shareholders increased
13.7% to $220.6 million (basic and diluted EPS of
$1.15), compared to $193.9 million (basic and diluted
EPS of $0.99) in 2010.
Non-GAAP Financial Measures
Management evaluates the Company’s operating
performance based upon operating and net profit
margins excluding reimbursable items, a non-
generally accepted accounting principles (non-GAAP)
measure. TSYS also uses these non-GAAP financial
measures to evaluate and assess TSYS’ financial
performance against budget. TSYS believes that
these non-GAAP financial measures are important to
enable investors to understand and evaluate its
ongoing operating results.
TSYS believes that these non-GAAP financial
measures are representative measures of
comparative financial performance that reflect the
economic substance of TSYS’ current and ongoing
business operations. 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 captions
of other companies due to potential inconsistencies
in the method of calculation.
TSYS believes that its use of these non-GAAP
financial measures provides investors with the same
key financial performance indicators that are utilized
by management to assess TSYS’ operating results,
evaluate the business and make operational decisions
on a prospective, going-forward basis. Hence,
management provides disclosure of non-GAAP
financial measures in order to allow shareholders and
potential investors an opportunity to see TSYS as
viewed by management, assess TSYS with some of
the same tools that management utilizes internally
and compare such information with prior periods.
Profit Margins and Reimbursable Items
Management believes that operating and net profit
margins excluding reimbursable items are more
useful because reimbursable items do not impact
profitability as the Company receives reimbursement
for expenses incurred on behalf of its clients. TSYS
believes that the presentation of GAAP financial
measures alone would not provide its shareholders
and potential investors with the ability to
appropriately analyze its ongoing operational results,
and therefore expected future results. TSYS therefore
believes that inclusion of these non-GAAP financial
measures provides investors with more information to
help them better understand its financial statements
just as management utilizes these non-GAAP financial
measures to better understand the business, measure
performance and allocate its resources.
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