## Income Taxes 

The total liability for uncertain tax positions under ASC 740, “Income Taxes,” at December 31, 2010 is $4.5 million. Refer to Note 20 in the consolidated financial statements for more infor- mation 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 any significant changes related to these obligations within the next year. 

## Redeemable Noncontrolling Interest 

With the acquisition of TMS, the Company is a party to put and call arrangements with respect to the membership units that repre- sent the remaining noncontrolling interest of FNMS Holding. The call and put arrangements may be exercised at the discretion of TSYS or FNBO on April 1, 2015, 2016 and 2017, upon the dilution of FNBO’s equity ownership in FNMS Holding below a designated threshold and in connection with certain acquisitions by TSYS or FNMS Holding in excess of designated value thresholds. 

The fair value of the noncontrolling interest in TMS, owned by a private company at December 31, 2010, was estimated by apply- ing the income and market approaches. In particular, a discounted cash flow method, a guideline companies method, and a recent equity transaction were employed. This fair value measurement is based on significant inputs that are both observable (Level 2) and non-observable (Level 3) in the market as defined in ASC 820. Key assumptions include (a) cash flow projections based on market participant data and developed by Company management, (b) a discount rate of approximately 13 percent, (c) a terminal value based on a long-term sustainable growth rate of approximately 3 percent, (d) an effective tax rate of approximately 36 percent, (e) financial multiples of companies deemed to be similar to TMS, and (f) adjustments because of the lack of control or lack of marketability that market participants would consider when esti- mating the fair value of the noncontrolling interest in TMS. 

Refer to Note 24 of the Notes in the consolidated financial statements for more information on the acquisition of TMS. 

## Foreign Exchange 

TSYS operates internationally and is subject to potentially adverse movements in foreign currency exchange rates. TSYS has not entered into foreign exchange forward contracts to reduce its exposure to foreign currency rate changes. The Company con- tinues to analyze potential hedging instruments to safeguard it from significant currency translation risks. 

## 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 prevail- ing 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 3.2:1. At December 31, 2010, TSYS had working capital of $494.5 million, compared to $590.1 million in 2009 and $396.2 million in 2008. 

## Legal Proceedings 

## General 

The Company is subject to various legal proceedings and claims and is also subject to information requests, inquiries and investiga- tions arising out of the ordinary conduct of its business. The Com- pany 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 are believed to be adequately covered by insurance, or if not covered, are believed to be without merit or 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. 

## Infonox Matter 

On September 22, 2010, Safwan Shah filed a lawsuit in the Superior Court of California, Santa Clara County, against Total System Ser- vices, Inc., TSYS Acquiring Solutions, L.L.C. and Infonox, a TSYS Company (Case No. 1-10-CV-183173). The claims arise out of TSYS’ purchase of Infonox on the Web (“Infonox”) in November 2008. The Agreement and Plan of Merger in connection with the trans- action provided that certain “remaining shareholders” of Infonox could receive “contingent merger consideration” if Infonox reached certain revenue targets during the three years following the closing of the transaction. Plaintiff, a former shareholder of Infonox, alleges that the defendants have wrongfully refused to pay 

