NetSpend 2012 Annual Report Download - page 68

In connection with the TermNet acquisition, TSYS
incurred $192,000 in acquisition-related costs
primarily related to professional legal, finance, and
accounting costs. These costs were expensed as
incurred and are included in selling, general, and
administrative expenses in the income statement for
2011.
Other
On October 1, 2011, TSYS acquired contract-based
intangible assets in its Merchant Services segment for
$2.6 million. These intangible assets are being
amortized on a straight-line basis over their estimated
useful lives of five years.
In May 2011, TSYS made a payment of $6.0 million of
contingent merger consideration in connection with
the purchase of Infonox, which was accounted for
under SFAS No. 141. The payment of the contingent
merger consideration by TSYS was recorded as
goodwill and had no impact on our results of
operations.
2010
On March 1, 2010, TSYS announced the signing of an
Investment Agreement with First National Bank of
Omaha (FNBO) to form a new joint venture company,
First National Merchant Solutions (FNMS). On
January 4, 2011, TSYS announced it had acquired the
remaining 49% interest in FNMS, effective January 1,
2011, from FNBO. The entity was rebranded as TSYS
Merchant Solutions (TMS).
TMS offers transaction processing, merchant support
and underwriting, and business and value-added
services, as well as Visa- and MasterCard-branded
prepaid cards for businesses of any size.
Under the terms of the Investment Agreement, TSYS
acquired 51% ownership of FNMS Holding, LLC
(FNMS Holding), which owned 100% of FNMS, for
approximately $150.5 million, while FNBO owned the
remaining 49%. The transaction closed on April 1,
2010.
The goodwill amount of $155.5 million arising from
the acquisition consists largely of economies of scale
expected to be realized from combining the
operations of TSYS and TMS. TMS is included within
the Merchant Services segment, and as such, all of
the goodwill was assigned to that segment. The
goodwill recognized is expected to be deductible for
income tax purposes.
The following table summarizes the consideration
paid for TMS and the amounts of the assets acquired
and liabilities assumed recognized on April 1, 2010
(the acquisition date), as well as the fair value at the
acquisition date of the noncontrolling interest in TMS.
TSYS assumed no liabilities in connection with the
acquisition.
(in thousands)
Consideration:
Cash .............................. $150,450
Equity instruments ................... —
Contingent consideration
arrangement ...................... —
Fair value of total consideration
transferred ....................... 150,450
Fair value of TSYS’ equity interest in TMS
held before the business
combination ...................... —
$ 150,450
Acquisition-related costs (included in
selling, general, and administrative
expenses in TSYS’ income statement
for the twelve months ended
December 31, 2010) ............... $ 4,130
Recognized amounts of identifiable
assets acquired and liabilities
assumed:
Cash .............................. $ 1,919
Property and equipment .............. 1,788
Software ........................... 243
Identifiable intangible assets .......... 100,800
Other assets ........................ 1,204
Financial liabilities ................... —
Liability arising from a contingency ..... —
Total identifiable net assets ......... 105,954
Noncontrolling interest in TMS ......... (111,000)
Goodwill ........................... 155,496
$ 150,450
The Investment Agreement includes a contingent
right of TSYS to receive a return of consideration paid
(“contingently returnable consideration”) if certain
specified major customer contracts are terminated or
modified prior to the first anniversary of the closing,
which has since expired. Contingently returnable
consideration is recognized as an asset and measured
at fair value. Based upon the probability of outcomes,
TSYS determined the fair value of the contingently
returnable consideration would approximate zero.
The maximum amount of contingently returnable
consideration is not significant.
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