NetSpend 2013 Annual Report Download - page 53

The weighted average useful life for each component
of contract acquisition costs, and in total, as of
December 31, 2013 is as follows:
Weighted
Average
Amortization
Period (Yrs)
Payments for processing rights ....... 12.8
Conversion costs .................. 8.3
Total ............................ 11.4
Estimated future amortization expense of conversion
costs and payments for processing rights as of
December 31, 2013 for the next five years is:
(in thousands) Conversion Costs Payments for Processing Rights
2014 ............. $20,537 13,925
2015 ............. 28,201 13,358
2016 ............. 26,036 10,969
2017 ............. 20,678 8,917
2018 ............. 18,705 7,952
NOTE 11 Equity Investments
The Company has an equity investment in TSYS de
México and records its 49% ownership using the
equity method of accounting. The operation prints
statements and provides card-issuing support
services to the equity investment clients and others.
The Company has an equity investment in CUP Data
and records its 44.56% ownership using the equity
method of accounting. CUP Data is sanctioned by the
People’s Bank of China, China’s central bank, and has
become one of the world’s largest and fastest-
growing payments networks. CUP Data currently
provides transaction processing, disaster recovery
and other services for banks and bankcard issuers in
China.
TSYS’ equity investments are recorded initially at cost
and subsequently adjusted for equity in earnings,
cash contributions and distributions, and foreign
currency translation adjustments. TSYS believes the
carrying value approximates the underlying assets of
the equity investments.
TSYS’ equity in income of equity investments (net of
tax) for the years ended December 31, 2013, 2012
and 2011 was $13.0 million, $10.2 million and $8.7
million, respectively.
A summary of TSYS’ equity investments as of
December 31 is as follows:
(in thousands) 2013 2012
CUP Data ................... $86,549 79,859
TSYS de México .............. 7,584 7,905
Total ....................... $94,133 87,764
NOTE 12 Long-term Debt and Capital
Lease Obligations
On February 19, 2013, the Company and its wholly-
owned merger subsidiary entered into an Agreement
and Plan of Merger (as amended on May 29, 2013,
the “Merger Agreement”) with NetSpend, pursuant
to which, upon the terms and subject to the
conditions set forth in the Merger Agreement, the
merger subsidiary merged with and into NetSpend
on July 1, 2013, with NetSpend continuing as the
surviving corporation and as a wholly-owned
subsidiary of TSYS (the “Merger”). Refer to Note 23
for more information about the acquisition.
On April 8, 2013, the Company entered into a Credit
Agreement (the “Credit Agreement”) with JPMorgan
Chase Bank, N.A., as Administrative Agent, The Bank
of Tokyo-Mitsubishi UFJ, Ltd., as Syndication Agent,
Regions Bank and U.S. Bank National Association, as
Documentation Agents, and other lenders party
thereto, with J.P. Morgan Securities LLC, The Bank of
Tokyo Mitsubishi UFJ, Ltd., Regions Capital Markets,
and U.S. Bank National Association as joint lead
arrangers and joint bookrunners. The Credit
Agreement provides for a five-year term loan to the
Company in the amount of $200.0 million (the “Term
Loan”) and bears interest at LIBOR plus 1.125%,
which are subject to adjustment based on changes in
the Company’s credit ratings, with margins ranging
from 1.00 to 1.75%. As of December 31, 2013, the
outstanding balance on the Credit Agreement was
$195.0 million.
Concurrently with entering into the Merger
Agreement, TSYS obtained commitments for a
$1.2 billion 364-day bridge term loan facility from
JPMorgan Chase Bank, N.A., J.P. Morgan Securities
LLC and The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Thereafter, JPMorgan Chase Bank, N.A. and The
Bank of Tokyo-Mitsubishi UFJ, Ltd. assigned portions
of their commitments to other bridge facility lenders.
The Company paid fees associated with the bridge
term loan of approximately $5.9 million. The total
commitments under the bridge term loan facility
were eliminated in May 2013 after the issuance of the
Notes described below.
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