NetSpend 2012 Annual Report Download - page 25

Income Taxes
The total liability for uncertain tax positions under
ASC 740, “Income Taxes,” at December 31, 2012 is
$9.0 million. Refer to Note 20 in the consolidated
financial statements for more information on income
taxes. The Company is not able to reasonably
estimate the amount by which the liability will
increase or decrease over time; however, at this time,
the Company expects significant changes related to
these obligations within the next year pursuant to the
outcomes of ongoing federal examinations.
Foreign Operations
TSYS operates internationally and is subject to
adverse movements in foreign currency exchange
rates. TSYS does not enter into foreign exchange
forward contracts to reduce its exposure to foreign
currency rate changes; however, the Company
continues to analyze the potential use of hedging
instruments to safeguard it from significant foreign
currency translation risks.
TSYS maintains operating cash accounts outside the
United States. Refer to Note 5 in the consolidated
financial statements for more information on cash and
cash equivalents. TSYS has adopted the permanent
reinvestment exception under ASC 740 with respect
to future earnings of certain foreign subsidiaries.
While some of the foreign cash is available to repay
intercompany financing arrangements, remaining
amounts are not presently available to fund domestic
operations and obligations without paying a
significant amount of 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. would be subject to U.S.
federal income taxes, less applicable foreign tax
credits. TSYS has provided for the U.S. federal tax
liability on these amounts for financial statement
purposes, except for foreign earnings that are
considered permanently reinvested outside of the
U.S. 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 the impact of inflation on its operations
cannot be precisely determined, the Company
believes that by controlling its operating expenses
and by taking advantage of more efficient computer
hardware and software, it can minimize the impact of
inflation.
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 2.5:1. At December 31, 2012, TSYS
had working capital of $344.2 million, compared to
$269.6 million in 2011 and $494.5 million in 2010.
Legal Proceedings
General
The Company is subject to various legal proceedings
and claims and is also subject to information
requests, inquiries and investigations arising out of
the ordinary conduct of its business. The Company
establishes reserves for litigation and similar matters
when those matters present loss contingencies that
TSYS determines to be both probable and reasonably
estimable in accordance with ASC 450,
“Contingencies.” 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.
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