TSYS » Topics » Income taxes:

This excerpt taken from the TSYS 10-Q filed May 1, 2009.
Income taxes:
 
Income tax expense was $3.1 million for the first quarter of 2009 against pre-tax income representing an effective tax rate of approximately 39%. In the first quarter of 2008, which was prior to the 2008 year-end reversal of the deferred tax asset (benefit) valuation allowance, we recorded a tax provision for $0.1 million for alternative minimum taxes.
 
This excerpt taken from the TSYS 10-K filed Mar 3, 2009.
Income Taxes:
 
The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS 109”). Under SFAS 109, deferred tax assets and liabilities are computed based on the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate. Upon the adoption of FIN 48 on January 1, 2007, the estimated value of the Company’s uncertain tax positions was a liability of $2.7 million resulting from unrecognized net tax benefits which did not include interest and penalties. The Company recorded the estimated value of its uncertain tax position by reducing the value of certain tax attributes. The Company would classify any interest and penalties accrued on any unrecognized tax benefits as a component of the provision for income taxes. There were no interest or penalties recognized in the consolidated statement of income for year ended December 31, 2008 and the consolidated balance sheet at December 31, 2008. The Company does not currently anticipate that the total amounts of unrecognized tax benefits will significantly increase within the next 12 months. The Company files income tax returns in U.S. and state jurisdictions. As of December 31, 2008, open tax years in the federal and some state jurisdictions date back to 1999, due to the taxing authorities’ ability to adjust operating loss carry forwards.
 
SFAS 109 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion of all of the net deferred tax asset will not be realized.
 
This process requires the Company’s management to make assessments regarding the timing and probability of the ultimate tax impact. The Company records valuation allowances on deferred tax assets if determined it is more likely than not that the asset will not be realized. Additionally, the Company establishes reserves for uncertain tax positions based upon our judgment regarding potential future challenges to those positions. Actual income taxes could vary from these estimates due to future changes in income tax law, significant changes in the jurisdictions in which the Company operates, our inability to generate sufficient future taxable income or unpredicted results from the final determination of each year’s liability by taxing authorities. These changes could have a significant impact on the Company’s financial position.
 
Deferred tax assets consist primarily of net operating loss and tax credit carryforwards as well as deductible temporary differences. Prior to 2008, the Company provided a full tax valuation allowance for federal and state deferred tax assets based on management’s evaluation that the Company’s ability to realize such assets did not meet the criteria of “more likely than not”. The Company has continuously evaluated additional facts representing positive and negative evidence in the determination of its ability to realize the deferred tax assets. In the year ended December 31, 2008, management has determined, as the result of cumulative income and anticipated future taxable income, that it is now more likely than not that these deferred tax assets will be realized in the future. Accordingly, the Company determined that it is appropriate to reverse the deferred tax asset valuation. This has resulted in a benefit to deferred tax expense of $33.3 million for the year 2008.
 
Discontinued Operations:
 
In 2007, the Company sold its Enterprise division operations, which had previously been included in our Commercial Segment. Accordingly, the assets, liabilities, and results of operations for the Enterprise assets have been classified as discontinued operations for all periods presented in the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement No. 144).


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Effective January 1, 2007, the Company sold two of its three Enterprise units to strategic buyers for common stock in the acquiring publicly traded companies valued at approximately $1 million and earn-out arrangements. As at December 31, 2008, we wrote down the investments by $0.8 million. The Company does not expect to receive material payments from the earn-out arrangement. During May 2007, the last Enterprise unit was sold for $4 million in cash of which $0.2 million was in escrow and was released in June 2008, a $1 million 18-month note which was paid in full in November 2008, and $0.2 million in equity interest.
 
The following table presents income statement data for the Enterprise division, currently reported as discontinued operations. The 2005 results were previously reported as part of the results of our Commercial Segment.
 
                                                         
                2008 vs. 2007           2007 vs. 2006  
($ in millions)
  2008     2007     $     %     2006     $     %  
 
Total revenue
  $     $ 5.6     $ (5.6 )     100 %   $ 26.0     $ (20.4 )     (78 %)
                                                         
Total gross profit
          0.8     $ (0.8 )     100 %     4.5     $ (3.7 )     (82 %)
                                                         
Loss from discontinued operations, including 2006 impairment charges of $15.5 million
  $     $ (0.3 )   $ 0.3       100 %   $ (23.7 )   $ 23.4       99 %
                                                         
 
This excerpt taken from the TSYS 10-Q filed Nov 4, 2008.
Income taxes:
 
We have recorded a full valuation allowance for deferred tax assets as a result of the uncertainty regarding our ability to fully realize our net operating loss carry-forwards and other deferred tax assets. Income tax expense of $0.1 million and $0.3 million, respectively, was recorded for the three- and nine-months ended September 30, 2008 based on projected annual effective tax rates. The projected annual effective tax rate is calculated using alternative minimum taxes (AMT) due on income, for which a valuation allowance has been provided for the AMT credit carryforward.
 
Discontinued Operations — Enterprise assets:
 
In 2007, the Company sold its Enterprise division operations, which had previously been included in our Commercial Segment. Their operations and cash flows of the business have been eliminated from those of continuing operations and the Company has no significant involvement in the operations since the disposal transactions. Accordingly, the assets, liabilities, results of operations, and cash flows for the Enterprise assets have been classified as discontinued operations for all periods presented in the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement No. 144).
 
Effective January 1, 2007, the Company sold two of its three Enterprise units to strategic buyers for common stock in the acquiring publicly traded companies valued at approximately $1 million and earn-out arrangements. During the nine months ended September 30, 2008, we wrote down the investments by about $0.7 million. The Company does not currently expect to receive material payments from the earn-out arrangement. During May 2007, the last Enterprise unit was sold for $4 million in cash of which $0.2 was in escrow that was released in June 2008, a $1 million 18-month note, and $0.2 million in equity interest.
 
This excerpt taken from the TSYS 10-Q filed Aug 5, 2008.
Income taxes:
 
We have recorded a full valuation allowance for deferred tax assets as a result of the uncertainty regarding our ability to fully realize our net operating loss carry-forwards and other deferred tax assets. Income tax expense of $0.2 recorded for the three- and six-months ended June 30, 2008 for alternative


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minimum tax due on income generated for the period. No income tax provision for federal or state income taxes was made for the three- and six-months ended June 30, 2007.
 
Discontinued Operations — Enterprise assets:
 
In 2007, the Company sold its Enterprise division operations, which had previously been included in our Commercial Segment. Their operations and cash flows of the business have been eliminated from those of continuing operations and the Company has no significant involvement in the operations since the disposal transactions. Accordingly, the assets, liabilities, results of operations, and cash flows for the Enterprise assets have been classified as discontinued operations for all periods presented in the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement No. 144).
 
Effective January 1, 2007, the Company sold two of its three Enterprise units to strategic buyers for common stock in the acquiring publicly traded companies valued at approximately $1 million and earn-out arrangements. During the first quarter of 2008, we wrote down one of the investments by about $0.5 million. The Company does not currently expect to receive material payments from the earn-out arrangement. During May 2007, the last Enterprise unit was sold for $4 million in cash of which $0.2 is in escrow, a $1 million 18-month note, and $0.2 million in equity interest.
 
The following table presents income statement data for the discontinued Enterprise operations:
 
                                                                 
    Three Months
          Six Months
       
    Ended June 30,     2008 vs. 2007     Ended June 30,     2008 vs. 2007  
($ in millions)
  2008     2007     $     %     2008     2007     $     %  
 
Enterprise revenue
  $     $ 1.7     $ (1.7 )     NM     $     $ 5.6     $ (5.6 )     NM  
                                                                 
Enterprise gross profit
  $     $ 0.4     $ (0.4 )     NM     $     $ 0.9     $ (0.9 )     NM  
                                                                 
Loss from discontinued operations
  $     $ (0.1 )   $ 0.1       NM     $     $ (0.3 )   $ 0.3       NM  
                                                                 
 
Second quarter 2007 revenue, gross profit, and operating expenses include only Mobile Asset Management division operations, and the revenue and costs of the two subscriber-based divisions that were sold effective January 1, 2007. Other income in 2007 represents the estimated earn-out payments earned during the quarter under our subscriber unit divestiture agreements.
 
This excerpt taken from the TSYS 10-Q filed May 5, 2008.
Income taxes:
 
We have recorded a full valuation allowance for deferred tax assets as a result of the uncertainty regarding our ability to fully realize our net operating loss carry-forwards and other deferred tax assets. Income tax expense was recorded for the three-months ended March 31, 2008 for alternative minimum tax due on income generated for the quarter. No income tax provision for federal or state income taxes was made for the three-months ended March 31, 2007.


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Discontinued Operations — Enterprise assets
 
In 2007, the Company sold its Enterprise division operations, which had previously been included in our Commercial Segment. Their operations and cash flows of the business have been eliminated from those of continuing operations and the Company has no significant involvement in the operations since the disposal transactions. Accordingly, the assets, liabilities, results of operations, and cash flows for the Enterprise assets have been classified as discontinued operations for all periods presented in the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement No. 144).
 
Effective January 1, 2007, the Company sold two of its three Enterprise units to strategic buyers for common stock in the acquiring publicly traded companies valued at approximately $1 million and earn-out arrangements. During the first quarter of 2008, we wrote down one of the investments by about $0.5 million. The Company does not currently expect to receive material payments from the earn-out arrangement. During May 2007, the last Enterprise unit was sold for $4 million in cash of which $0.2 is in escrow, a $1 million 18-month note, and $0.2 million in equity interest.
 
The following table presents income statement data for the discontinued Enterprise operations:
 
                                 
    Three Months
       
    Ended
       
    March 31     2008 vs. 2007  
($ in millions)
  2008     2007     $     %  
 
Enterprise revenue
  $     $ 3.9     $ (3.9 )     NM  
                                 
Enterprise gross profit
          0.5       (0.5 )     NM  
                                 
Loss from discontinued operations
  $     $ (0.1 )   $ (0.1 )     NM  
                                 
 
First quarter 2007 revenue, gross profit, and operating expenses include only Mobile Asset Management division operations, and the revenue and costs of the two subscriber-based divisions that were sold effective January 1, 2007. Other income in 2007 represents the estimated earn-out payments earned during the quarter under our subscriber unit divestiture agreements.
 
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