NetSpend 2012 Annual Report Download - page 22

Cash Flows from Investing Activities
Years Ended December 31,
(in thousands) 2012 2011 2010
Cash used in
acquisitions and
equity
investments, net of
cash acquired .... $(188,698) (47,909) (148,531)
Additions to contract
acquisition
costs ........... (34,384) (31,623) (75,669)
Additions to licensed
computer software
from vendors .... (33,001) (19,502) (69,826)
Purchases of
property and
equipment, net . . . (31,395) (26,938) (46,547)
Additions to
internally
developed
computer
software ........ (19,285) (17,882) (25,466)
Other ............. (3,031) 2,434 4,333
Net cash used in
investing
activities ........ $(309,794) (141,420) (361,706)
The major uses of cash for investing activities in 2012,
2011 and 2010 were for acquisitions, additions to
contract acquisition costs, equipment, licensed
computer software from vendors and internally
developed computer software.
Cash Used in Acquisitions
In 2012, the Company used cash of $188.7 million in
the acquisitions of ProPay Inc. (ProPay) and CPAY. In
2011, the Company used cash of $42.0 million in the
acquisition of TermNet. In 2010, the Company
acquired TMS for an aggregate consideration of
approximately $150.5 million. Refer to Note 24 in the
consolidated financial statements for more
information on these acquisitions.
In May 2011, TSYS made a payment of $6.0 million of
contingent merger consideration in connection with
the purchase of Infonox on the Web, which was
recorded as goodwill.
Contract Acquisition Costs
TSYS makes cash payments for processing rights,
third-party development costs and other direct
salary-related costs in connection with converting
new customers to the Company’s processing
systems. The Company’s investments in contract
acquisition costs were $34.4 million in 2012,
$31.6 million in 2011 and $75.7 million in 2010. The
Company made cash payments for processing rights
of $14.4 million, $5.2 million and $45.4 million in
2012, 2011 and 2010, respectively. Conversion cost
additions were $20.0 million, $26.4 million and
$30.3 million in 2012, 2011 and 2010, respectively.
Property and Equipment
Capital expenditures for property and equipment
were $31.4 million in 2012, compared to $26.9
million in 2011 and $46.5 million in 2010. The
majority of capital expenditures in 2012, 2011 and
2010 related to investments in new computer
processing hardware.
Licensed Computer Software from Vendors
Expenditures for licensed computer software from
vendors for increases in processing capacity were
$33.0 million in 2012, compared to $19.5 million in
2011 and $69.8 million in 2010.
Internally Developed Computer Software Costs
Additions to capitalized software development costs,
including enhancements to and development of
processing systems, were $19.3 million in 2012,
$17.9 million in 2011, and $25.5 million in 2010.
Purchase of Private Equity Investments
On May 31, 2011, the Company entered into a
limited partnership agreement in connection with its
agreement to invest in an Atlanta-based venture
capital fund focused exclusively on investing in
technology-enabled financial services companies.
Pursuant to the limited partnership agreement, the
Company has committed to invest up to $20 million
in the fund so long as its ownership interest in the
fund does not exceed 50%. The Company made
investments in the fund of $3.0 million and
$1.6 million in 2012 and 2011, respectively. The
Company recorded a gain on this investment of
$898,000 for the year ended December 31, 2012.
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