NetSpend 2013 Annual Report Download - page 15

Off-Balance Sheet Arrangements
OPERATING LEASES: As a method of funding its
operations, TSYS employs noncancelable operating
leases for computer equipment, software and facilities.
These leases allow the Company to use the latest
technology while avoiding the risk of ownership. Neither
the assets nor obligations related to these leases are
included on the balance sheet. Refer to Notes 1 and 15
in the consolidated financial statements for further
information on operating lease commitments.
CONTRACTUAL OBLIGATIONS: The total liability
for uncertain tax positions under ASC 740, “Income
Taxes,” as of December 31, 2013 is $2.7 million.
Refer to Note 14 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 does
not expect significant changes related to these
obligations within the next year.
Recent Accounting Pronouncements
In July 2013, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update
(ASU) 2013-11 “Presentation of an Unrecognized Tax
Benefit When a Net Operating Loss Carryforward, a
Similar Tax Loss, or a Tax Credit Carryforward Exists.”
ASU 2013-11 eliminates diversity in practice regarding
financial statement presentation of an unrecognized
tax benefit when a net operating loss carryforward, a
similar tax loss, or a tax credit carryforward exists. For
public entities, this ASU is effective for fiscal years,
and interim periods within those years, beginning
after December 15, 2013. Early adoption is permitted.
The Company does not expect the adoption of this
ASU to have a material impact on its financial position,
results of operations or cash flows.
In March 2013, the FASB issued ASU 2013-05
“Parent’s Accounting for the Cumulative Translation
Adjustment upon Derecognition of Certain
Subsidiaries or Groups of Assets within a Foreign
Entity or of an Investment in a Foreign Entity.”
ASU 2013-05 addresses the accounting for the
cumulative translation adjustment when a parent
either sells part or all of its investment in a foreign
entity or no longer holds a controlling financial
interest in a subsidiary or group of assets that is a
nonprofit activity or a business within a foreign entity.
For public entities, the ASU is effective prospectively
for fiscal years, and interim periods within those
years, beginning after December 15, 2013. Early
adoption is permitted. The Company does not
expect the adoption of this ASU to have a material
impact on its financial position, results of operations
or cash flows.
In February 2013, the FASB issued ASU 2013-02,
“Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income.”
ASU 2013-02 requires that, for items reclassified out
of accumulated other comprehensive income (AOCI)
and into net income in their entirety, entities must
disclose the effect of reclassification on each affected
net income line item. For AOCI reclassification items
not reclassified in their entirety into net income,
entities must provide a cross reference to other
required disclosures. ASU 2013-02 is effective for
public companies for annual reporting periods
beginning after December 15, 2012 and interim
periods in those years. TSYS adopted this ASU on
January 1, 2013. There were no reclassifications of
AOCI to net income or to other accounts for the year
ended December 31, 2013. The adoption of this ASU
did not have a material impact on the Company’s
financial position, results of operations or cash flows.
Results of Operations
Revenues
The Company generates revenues by providing
transaction processing and other payment-related
services. The Company’s pricing for transactions and
services is complex. Each category of revenue has
numerous fee components depending on the types of
transactions processed or services provided. TSYS
reviews its pricing and implements pricing changes on
an ongoing basis. In addition, standard pricing varies
among its regional businesses, and such pricing can
be customized further for customers through tiered
pricing of various thresholds for volume activity. TSYS’
revenues are based upon transactional information
accumulated by its systems or reported by its
customers. The Company’s revenues are impacted by
currency translation of foreign operations, as well as
doing business in the current economic environment.
Total revenues increased 14.0% for the year ended
December 31, 2013. Excluding reimbursable items,
the Company estimates revenues, decreased 5.3%
due to lost business and 1.9% due to price reductions,
and 1.9% due to currency translation, termination
fees, and other adjustments and increased 16.7% due
to the impact of acquisitions and 9.2% as a result of
new business and internal growth.
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