Tableof Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

----

 

**FORM 10-Q**

 

| **(Mark  One)**                                                                                                                                                | ** **                                                                                                         | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|------------|
| **x**                                                                                                                                                          | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934**  |
| ** **                                                                                                                                                     | ** **                                                                                                         | ** ** |
| **For the quarterly period ended  June 30, 2008**                                                                                                         |
| ** **                                                                                                                                                     | ** **                                                                                                         | ** ** |
| **OR**                                                                                                                                                         |
| ** **                                                                                                                                                     | ** **                                                                                                         | ** ** |
| **o**                                                                                                                                                          | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                     | ** **                                                                                                         | ** ** |
| **For the transition period from            to          ** |

 

**Commission File Number: 001-32033**

 

**TNS, INC.**

(Exact name of registrant as specified in itscharter)

 

| **DELAWARE**                                                        | ** ** | **36-4430020**                          |
|---------------------------------------------------------------------|------------|-----------------------------------------|
| ** **(State  or jurisdiction of incorporation or organization) | ** ** | (I.R.S. Employer Identification Number) |

 

**11480 Commerce Park Drive, Suite 600**

**Reston, VA 20191**

(Address of principal executive offices)

 

**(703) 453-8300**

(Registrant’s telephone number, includingarea code)

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirement for the past 90 days. x Yeso No

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See definitions of “large accelerated filer,” “accelerated filer,” and“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Checkone):

 

| Large accelerated filer o                     |   | Accelerated filer x         |
|-----------------------------------------------|--------|----------------------------------|
|                                          |   |                             |
| Non-accelerated filer o                       |   | Smaller reporting company o |
| (Do not check if a smaller reporting company) |   |                             |

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).o Yes  x No

 

Indicate the number of shares outstanding of each of the issuer’sclasses of Common Stock, as of the latest practicable date.

 

**SharesOutstanding as of July 1, 2008**

** **

24,943,767 Shares of CommonStock, $0.001 par value

 

 

 

----

Tableof Contents

 

**TNS, INC.**

 

**INDEX**

 
| ** **                             | ** **                                                                                                      | **Page** |
|----------------------------------------|-----------------------------------------------------------------------------------------------------------------|----------|
| **Part I: FINANCIAL INFORMATION** |                                                                                                            |
| Item 1.                                | Condensed Consolidated Financial Statements (Unaudited)                                                         | 3        |
|                                   | Condensed Consolidated Balance Sheets as of  December 31, 2007 and June 30, 2008                      | 3        |
|                                   | Condensed Consolidated Statements of  Operations for the three and six months ended June 30, 2007 and 2008 | 4        |
|                                   | Condensed Consolidated Statements of Cash  Flows for the six months ended June 30, 2007 and 2008           | 5        |
|                                   | Notes to Condensed  Consolidated Financial Statements                                                           | 6        |
| Item 2.                                | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                     | 16       |
| Item 3.                                | Quantitative and Qualitative Disclosures  About Market Risk                                                     | 25       |
| Item 4.                                | Controls and Procedures                                                                                         | 25       |
| **Part II: OTHER INFORMATION**    |                                                                                                            |
| Item 1.                                | Legal Proceedings                                                                                               | 26       |
| Item 1A.                               | Risk Factors                                                                                                    | 26       |
| Item 2.                                | Unregistered Sales of Equity Securities and  Use of Proceeds                                                    | 26       |
| Item 3.                                | Default Upon Senior Securities                                                                                  | 26       |
| Item 4.                                | Submission of Matters to a Vote of Security  Holders                                                            | 26       |
| Item 5.                                | Other Information                                                                                               | 26       |
| Item 6.                                | Exhibits                                                                                                        | 26       |

 

2

----

Tableof Contents

 

**PART I—FINANCIALINFORMATION**

 

**Item 1. Condensed Consolidated FinancialStatements**

 

**TNS, INC.**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(dollars in thousands, except share and pershare data)**

 
| ** **                                                                                                                                                                                               | ** ** | **December 31,** | ** ** | **June 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------|------------|
| ** **                                                                                                                                                                                               | ** ** | **2007**              | ** ** | **2008**          | ** ** |
| ** **                                                                                                                                                                                               | ** ** | ** **            | ** ** | **(UNAUDITED)**   | ** ** |
| **ASSETS**                                                                                                                                                                                               |       |                  |       |              |       |
| Current assets:                                                                                                                                                                                          |       |                  |       |              |       |
| Cash and cash equivalents                                                                                                                                                                                |       | $                     | 17,805     |              | $          | 22,494 |   |
| Accounts receivable, net of allowance for  doubtful accounts of $3,093 and $3,423, respectively                                                                                                          |       | 75,112                |       | 80,946            |       |
| Prepaid expenses                                                                                                                                                                                         |       | 6,765                 |       | 7,581             |       |
| Deferred tax assets                                                                                                                                                                                      |       | 2,800                 |       | 2,027             |       |
| Other current assets                                                                                                                                                                                     |       | 5,952                 |       | 6,358             |       |
| Total current assets                                                                                                                                                                                     |       | 108,434               |       | 119,406           |       |
| Property and equipment, net                                                                                                                                                                              |       | 55,376                |       | 57,741            |       |
| Identifiable intangible assets, net                                                                                                                                                                      |       | 180,330               |       | 170,854           |       |
| Goodwill                                                                                                                                                                                                 |       | 13,513                |       | 13,225            |       |
| Deferred tax assets, net                                                                                                                                                                                 |       | 21,110                |       | 24,251            |       |
| Other assets                                                                                                                                                                                             |       | 4,335                 |       | 4,659             |       |
| Total assets                                                                                                                                                                                             |       | $                     | 383,098    |              | $          | 390,136 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                                            |       |                  |       |              |       |
| Current liabilities:                                                                                                                                                                                     |       |                  |       |              |       |
| Accounts payable, accrued expenses and  other current liabilities                                                                                                                                        |       | $                     | 57,069     |              | $          | 63,096 |   |
| Deferred revenue                                                                                                                                                                                         |       | 18,521                |       | 23,196            |       |
| Total current liabilities                                                                                                                                                                                |       | 75,590                |       | 86,292            |       |
| Long-term debt, net of current portion                                                                                                                                                                   |       | 205,500               |       | 187,500           |       |
| Deferred tax liability                                                                                                                                                                                   |       | 5,537                 |       | 2,671             |       |
| Other liabilities                                                                                                                                                                                        |       | 4,199                 |       | 2,524             |       |
| Total liabilities                                                                                                                                                                                        |       | 290,826               |       | 278,987           |       |
| Commitments and contingencies                                                                                                                                                                            |       |                  |       |              |       |
| Stockholders’ equity:                                                                                                                                                                               |       |                  |       |              |       |
| Common stock, $0.001 par value; 130,000,000  shares authorized; 24,274,195 shares issued and 24,258,942 shares outstanding  and 25,042,932 shares issued and 24,943,767 shares outstanding, respectively |       | 24                    |       | 25                |       |
| Treasury stock, 15,253 shares and 99,165  shares, respectively                                                                                                                                           |       | (239                  | )          | (1,800            | )          |
| Additional paid-in capital                                                                                                                                                                               |       | 131,485               |       | 146,404           |       |
| Accumulated deficit                                                                                                                                                                                      |       | (44,278               | )          | (41,652           | )          |
| Accumulated other comprehensive income                                                                                                                                                                   |       | 5,280                 |       | 8,172             |       |
| Total stockholders’ equity                                                                                                                                                                          |       | 92,272                |       | 111,149           |       |
| Total liabilities and stockholders’ equity                                                                                                                                                          |       | $                     | 383,098    |              | $          | 390,136 |   |

 

See accompanying notes to condensedconsolidated financial statements (unaudited).

 

3

----

Tableof Contents

 

**TNS, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

**(dollars in thousands, except share and pershare data)**

 
| ** **                                                                                   | ** ** | **Three months ended  June 30,** | ** ** | **Six months ended  June 30,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                   | ** ** | **2007**                                        | ** ** | **2008**                                      | ** ** | **2007** | ** ** | **2008** | ** ** |
| Revenues                                                                                     |       | $                                               | 79,361     |                                          | $          | 90,148 |   | $ | 152,022 |   | $ | 174,273 |   |
| Operating expenses:                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Cost of network services, exclusive of the  items shown separately below                     |       | 40,174                                          |       | 42,225                                        |       | 79,046 |   | 82,932 |   |
| Engineering and development                                                                  |       | 6,641                                           |       | 7,669                                         |       | 13,003 |   | 14,868 |   |
| Selling, general, and administrative                                                         |       | 17,581                                          |       | 20,955                                        |       | 34,755 |   | 40,400 |   |
| Depreciation and amortization of property  and equipment                                     |       | 5,433                                           |       | 6,094                                         |       | 11,237 |   | 12,061 |   |
| Amortization of intangible assets                                                            |       | 5,972                                           |       | 6,359                                         |       | 12,083 |   | 12,457 |   |
| Total operating expenses                                                                     |       | 75,801                                          |       | 83,302                                        |       | 150,124 |   | 162,718 |   |
| Income from operations                                                                       |       | 3,560                                           |       | 6,846                                         |       | 1,898 |   | 11,555 |   |
| Interest expense                                                                             |       | (4,221                                          | )          | (2,631                                        | )          | (8,189 | ) | (6,340 | ) |
| Interest income                                                                              |       | 429                                             |       | 148                                           |       | 674 |   | 327 |   |
| Other income (expense), net                                                                  |       | 491                                             |       | (290                                          | )          | 1,136 |   | (221 | ) |
| Income (loss) before income tax benefit and  equity in net loss of unconsolidated affiliates |       | 259                                             |       | 4,073                                         |       | (4,481 | ) | 5,321 |   |
| Income tax (provision) benefit                                                               |       | (285                                            | )          | (2,977                                        | )          | 1,292 |   | (2,625 | ) |
| Equity in net income (loss) of  unconsolidated affiliates                                    |       | 563                                             |       | (70                                           | )          | 499 |   | (70 | ) |
| Net income (loss)                                                                            |       | $                                               | 537        |                                          | $          | 1,026 |   | $ | (2,690 | ) | $ | 2,626 |   |
|                                                                                         |       |                                            |       |                                          |       |   |   |   |   |
| Basic and diluted net income (loss) per  common share                                        |       | $                                               | 0.02       |                                          | $          | 0.04 |   | $ | (0.11 | ) | $ | 0.11 |   |
| Basic weighted average common shares  outstanding                                            |       | 24,208,755                                      |       | 24,699,262                                    |       | 24,172,212 |   | 24,504,459 |   |
| Diluted weighted average common shares  outstanding                                          |       | 24,219,660                                      |       | 25,274,241                                    |       | 24,172,212 |   | 25,002,074 |   |
| Dividends declared per common share                                                          |       | $                                               | —     |                                          | $          | — |   | $ | 4.00 |   | $ | — |   |

 

See accompanying notes to condensedconsolidated financial statements (unaudited).

 

4

----

Tableof Contents

 

**TNS, INC.**

 

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

**(dollars in thousands)**

 
| ** **                                                                       | ** ** | **Six months ended June 30** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                       | ** ** | **2007**                          | ** ** | **2008** | ** ** |
| Cash flows from operating activities:                                            |       |                              |       |   |   |
| Net (loss) income                                                                |       | $                                 | (2,690     | ) | $ | 2,626 |   |
| Adjustments to reconcile net loss to net  cash provided by operating activities: |       |                              |       |   |   |
| Non-cash items                                                                   |       | 30,462                            |       | 27,814 |   |
| Working capital items                                                            |       | (610                              | )          | (637 | ) |
| Net cash provided by operating activities:                                       |       | 27,162                            |       | 29,803 |   |
| Cash flows from investing activities                                             |       |                              |       |   |   |
| Purchases of property and equipment                                              |       | (10,302                           | )          | (13,718 | ) |
| Proceeds from sale of property and  equipment                                    |       | 2,163                             |       | — |   |
| Proceeds from sale of investment in  unconsolidated affiliate                    |       | 625                               |       | — |   |
| Cash paid for business acquisitions, net of  cash acquired                       |       | (4,166                            | )          | — |   |
| Net cash used in investing activities:                                           |       | (11,680                           | )          | (13,718 | ) |
| Cash flows from financing activities                                             |       |                              |       |   |   |
| Proceeds from issuance of long-term debt,  net of issuance costs of $3,051       |       | 221,949                           |       | — |   |
| Payment of special dividend, $4 per common  share                                |       | (98,293                           | )          | — |   |
| Repayments of long-term debt                                                     |       | (132,313                          | )          | (18,000 | ) |
| Proceeds from stock option exercises,  inclusive of tax benefit                  |       | 31                                |       | 8,946 |   |
| Payment of long-term debt financing costs                                        |       | —                            |       | (75 | ) |
| Purchase of treasury stock                                                       |       | (698                              | )          | (1,561 | ) |
| Net cash used in financing activities                                            |       | (9,324                            | )          | (10,690 | ) |
| Effect of exchange rates on cash and cash  equivalents                           |       | (559                              | )          | (706 | ) |
| Net increase in cash and cash equivalents                                        |       | 5,599                             |       | 4,689 |   |
| Cash and cash equivalents, beginning of  period                                  |       | 17,322                            |       | 17,805 |   |
| Cash and cash equivalents, end of period                                         |       | $                                 | 22,921     |   | $ | 22,494 |   |
|                                                                             |       |                              |       |   |   |
| Supplemental disclosures of cash flow  information:                              |       |                              |       |   |   |
| Cash paid for interest                                                           |       | $                                 | 3,151      |   | $ | 2,476 |   |
| Cash paid for income taxes                                                       |       | $                                 | 3,409      |   | $ | 2,748 |   |

 

See accompanying notes to condensedconsolidated financial statements (unaudited).

 

5

----

Table of Contents

 

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

 

**1.****             Descriptionof Business and Basis of Presentation**

 

TNS, Inc. (TNS or the Company) is a Delaware corporation. TNS is aleading provider of business-critical data communications services toprocessors of credit card, debit card and automated teller machine (ATM)transactions. TNS is also a leading provider of call signaling and databaseaccess services to the domestic telecommunications industry and of secure dataand voice network services to the global financial services industry. TNS’ datacommunication services enable secure and reliable transmission oftime-sensitive, transaction-related information critical to its customers’operations. The Company’s customers outsource their data communicationrequirements to TNS because of the Company’s expertise, comprehensive customersupport, and cost-effective services. TNS provides services to customers in theUnited States and increasingly to customers in 29 countries, including Canada,Mexico and countries in Europe, Latin America and the Asia-Pacific region.

 

The Company provides its services through its multiple data networks,each designed specifically for transaction applications. These networks supporta variety of widely accepted communications protocols, are designed to bescalable and are accessible by multiple methods, including dial-up, dedicated,wireless and Internet connections.

 

The Company has four business divisions: (1) thepoint-of-sale/point-of-service (POS) division, which provides datacommunications services to payment processors in the U.S., Canada and Mexico, (2) thetelecommunication services division (TSD), which provides call signalingservices and database access services targeting primarily thetelecommunications industry, (3) the financial services division (FSD),which provides data and voice communications services to the financial servicescommunity in support of the Financial Information eXchange (FIX) messagingprotocol and other transaction-oriented trading applications, and (4) theinternational services division (ISD), which markets the Company’s POS andfinancial services in countries outside of the United States, Canada andMexico.

 

The accompanying unaudited condensed consolidated financial statementshave been prepared in accordance with United States generally acceptedaccounting principles (GAAP) for interim financial information and inconjunction with the rules and regulations of the Securities and ExchangeCommission (SEC). Certain information and note disclosures normally included inthe annual financial statements, required by GAAP, have been condensed oromitted pursuant to those rules and regulations, although the Companybelieves that the disclosures made are adequate to make the informationpresented not misleading.

 

In the opinion of management, the accompanying unaudited condensedconsolidated financial statements reflect adjustments (all of which are of a normaland recurring nature) that are necessary for fair presentation of the periodspresented. The results of operations for the three and six months ended June 30,2008 are not necessarily indicative of the results to be expected for anysubsequent interim period or for the fiscal year. It is suggested that theseunaudited condensed consolidated financial statements be read in conjunctionwith the Company’s annual report on Form 10-K filed with the SEC on March 17,2008, which includes consolidated financial statements and the notes theretofor the year ended December 31, 2007.

 

*Dividends and Recapitalization*

 

On March 28, 2007, the Company’s board of directors declared aspecial dividend of $4.00 per common share, which was paid on April 12,2007. Also, on March 28, 2007, the Company entered into a secured creditfacility, which consists of two facilities: a senior secured term loan facilityin an aggregate principal amount of $225 million (the Term Facility) and asenior secured revolving credit facility in an aggregate principal amount of$15 million (the Revolving Facility). The Company used approximately $98.3million of the proceeds from the Term Facility to pay the special dividend. Theremainder of the proceeds from the Term Facility were used to refinanceexisting debt, to pay fees related to the senior secured credit facility and thespecial dividend, and for general corporate purposes.

 

*Capital Structure*

 

During the six months ended June 30, 2008, the Company issued487,250 shares of common stock following the exercise of stock options and281,487 shares of common stock following the vesting of restricted stock units.During the six months ended June 30, 2007, the Company issued 1,718 sharesof common stock following the exercise of stock options and 138,366 shares ofcommon stock following the vesting of restricted stock units. The Companypurchased 83,912 and 42,145 of treasury shares following the vesting ofrestricted stock units during the six months ended June 30, 2008 and 2007,respectively. The Company retired 73,878 treasury shares during the six monthsended June 30, 2007. The Company retired 99,165 treasury shares in July2008.

 

6

----

Tableof Contents

 

**Use of Estimates**

 

The preparation of financial statements in conformity with GAAPrequires management to make estimates and assumptions that affect the reportedamounts of certain assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements. Significant estimatesaffecting the consolidated financial statements include management’s judgmentsregarding the allowance for doubtful accounts, future cash flows fromlong-lived assets, accrued expenses for probable losses, estimates of the fairvalue of assets and liabilities assumed and estimates related to the fair valueof employee stock options, including volatility, expected term and estimates offorfeitures in future periods. Actual results could differ from thoseestimates.

 

**Revenue Recognition**

 

The Company recognizes revenue when persuasive evidence of an agreementexists, the terms are fixed and determinable, services are performed, andcollection is probable. Cash received in advance of revenue recognition isrecorded as deferred revenue.

 

POS services revenue is derived primarily from per transaction feespaid by the Company’s customers for the transmission of transaction data,through the Company’s networks, between payment processors and POS or ATMterminals and monthly recurring fees for broadband and wireless offerings. TSDrevenue is derived primarily from fixed monthly fees for call signalingservices and per query fees charged for database access and call validationservices. Financial services revenue is derived primarily from monthlyrecurring fees based on the number of customer connections to and through theCompany’s networks.

 

Incentives granted to new customers or upon contract renewals aredeferred and recognized ratably as a reduction of revenue over the contractperiod to the extent that the incentives are recoverable against the customer’sminimum purchase commitments under the contract. In addition, the Companyreceives installation fees related to the configuration of the customers’systems. Revenue from installation fees is deferred and recognized ratably overthe customer’s contractual service period, generally three years. The Companyperforms periodic evaluations of its customer base and establishes allowancesfor estimated credit losses.

 

**Cost of Network Services**

 

Cost of network services is comprised primarily of telecommunicationscharges, which include data transmission and database access charges, leaseddigital capacity charges, circuit installation charges and activation charges.The cost of data transmission is based on a contract or tariff rate per minuteof usage in addition to a prescribed rate per transaction for certain vendors.The costs of database access, circuits, installation, and activation chargesare based on fixed fee contracts with local exchange carriers and interexchangecarriers. The cost of network services also includes salaries, equipmentmaintenance and other costs related to the ongoing operation of the Company’sdata networks. These costs are expensed by the Company as incurred. The Companyrecognizes a liability for telecommunications charges based upon networkservices utilized at historical invoiced rates. Depreciation expense on networkequipment and amortization expense on developed technology are excluded fromcost of network services and included in depreciation and amortization ofproperty and equipment and amortization of intangible assets in theaccompanying condensed consolidated statements of operations.

 

**Stock-Based Compensation**

 

The Company accounts for stock-based compensation under Statement ofFinancial Accounting Standards (SFAS) No. 123R “Share Based Payment”,using the modified prospective transition method. SFAS No. 123R requiresall stock-based compensation to employees be measured at fair value andexpensed over the requisite service period and also requires an estimate offorfeitures when calculating compensation expense. Stock-based compensation forall non-vested awards outstanding as of January 1, 2006, are beingrecognized based on the grant date fair value estimated in accordance with theprovisions of SFAS No. 123 “Accounting for Stock-Based Compensation” andin accordance with SFAS No. 123R for all awards granted or modified after January 1,2006.

 

Stock-based compensation expense has been included in the followingcategories in the accompanying condensed consolidated statements of operations(in thousands)

 

7

----

Table of Contents

 
| ** **                          | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|-------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                          | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                          | ** ** | **2007**                         | ** ** | **2008**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
| Cost of network services            |       | $                                | 222        |                           | $          | 249 |   | $ | 474 |   | $ | 576 |   |
| Engineering and development         |       | 421                              |       | 300                            |       | 1,177 |   | 755 |   |
| Selling, general and administrative |       | 1,680                            |       | 2,536                          |       | 3,772 |   | 4,719 |   |
|                                |       | $                                | 2,323      |                           | $          | 3,085 |   | $ | 5,423 |   | $ | 6,050 |   |

 

On March 28, 2007 the Company’s Board of Directors decided toallow the outstanding restricted stock units to receive dividend equivalent payments.As a result of this decision, the Company recorded $1.5 million ofstock-based compensation, which is included in the $5.4 million ofstock-based compensation mentioned above for the six months ended June 30, 2007.The $1.5 million charge related to this decision is reported as follows inthe accompanying condensed consolidated statement of operations for the sixmonths ended June 30, 2007: $0.1 million is included in cost ofnetwork services, $0.4 million is included in engineering and development and$1.0 million is included in selling, general and administrative expenses.This modification increased net loss per share by $0.04 per share. As of June 30,2008, there was a total of $16.5 million of deferred compensation costrelated to stock-based awards, which is expected to be recognized over aweighted average period of approximately two years.

 

*Time-Vested Awards*

 

Time-vested awards are subject to a vesting period determined at thedate of the grant, generally in equal installments over three or four years.The Company uses the Black Scholes option pricing model to determine the grantdate fair value of any time-vested stock options. The Company uses the marketprice of the Company’s stock on the date of grant to determine the fair valueof any time-vested restricted stock units. The Company recognizes compensationcost on these time-vested awards in equal installments over the vesting period.

 

During the three months ended June 30, 2007, the Company granted323,324 stock options and 325,902 restricted stock units at weighted averageestimated fair values of $6.20 and $12.35, respectively. During the six monthsended June 30, 2007, the Company granted 332,324 stock options and 464,927restricted stock units at weighted average estimated fair values of $6.26 and$14.36, respectively. During the three months ended June 30, 2008, theCompany granted 9,500 stock options and 2,550 restricted stock units atweighted average estimated fair values of $9.68 and $23.00, respectively.During the six months ended June 30, 2008, the Company granted 25,000stock options and 20,100 restricted stock units at weighted average estimatedfair values of $7.92 and $17.00, respectively.

 

*Performance-Based Awards*

 

Performance-based awards are tied to the Company’s annual performanceagainst pre-established internal targets for revenues and adjusted earnings pershare and may vary from zero to 200% of an employee’s target payout, based uponthe Company’s actual performance over the fiscal year. The Company uses theBlack Scholes option pricing model to determine the grant date fair value ofany performance-based stock options. The Company uses the market price of theCompany’s stock on the date of grant to determine the fair value of anyperformance-based restricted stock units. Performance-based awards are alsosubject to vesting requirements, and generally vest in equal installments overthree years. Compensation cost is based on the expected payout level that willbe achieved and is adjusted in subsequent periods as changes in the estimatesoccur until the performance criteria have been satisfied. The Companyrecognizes compensation cost on these performance based awards using anaccelerated attribution method.

 

In May 2007, the Company put in place a long-term performance-basedstock compensation plan (the 2007 Equity Performance Plan). The actual payoutunder the Company’s 2007 Equity Performance Plan was 147% of the targetedpayout, the results of which were approved by the Company’s board of directorsin February 2008. The total performance-based awards issued under theCompany’s 2007 Equity Performance Plan were 576,076 stock options and 236,341restricted stock units. The weighted average grant date fair value ofperformance-based stock options and restricted stock units granted was $6.23and $12.39, respectively.  As of June 30,2008, there was a total of $1.9 million of deferred compensation expenserelated to these performance-based awards which is included in the $16.5million total deferred compensation cost mentioned previously.

 

8

----

Tableof Contents

 

In February 2008, the Company put in place a long-termperformance-based stock compensation plan (the 2008 Equity Performance Plan). Thetarget payout under the 2008 Equity Performance Plan may range from 0% to 100%of an employee’s target payout. The total number of awards that would be issuedunder the Company’s 2008 Equity Performance Plan, assuming that the targetpayout level was achieved, would be 253,266 stock options and 248,142restricted stock units. The weighted average grant date fair value ofperformance-based stock options and restricted stock units granted was $6.78and $16.15, respectively.  As of June 30,2008, there was a total of $4.3 million of deferred compensation expenserelated to these performance based awards which is included in the $16.5million total deferred compensation cost mentioned above.

 

**Income Taxes**

 

The Company accounts for income taxes in accordance with SFAS No. 109,“Accounting for Income Taxes.” Under SFAS No. 109, deferred tax assets orliabilities are computed based upon the difference between financial statementand income tax bases of assets and liabilities using the enacted marginal taxrate. The Company provides a valuation allowance on its net deferred tax assetswhen it is more likely than not that such assets will not be realized. Deferredincome tax expense or benefits are based upon the changes in the asset orliability from period to period. The Company also recognizes interest andpenalties related to uncertain tax positions in income tax expense.

 

Effective January 1, 2007, the Company adopted FinancialAccounting Standards Board (FASB) Interpretation No. 48, “Accounting forUncertainty in Income Taxes—an interpretation of FASB Statement No. 109”(FIN 48), which prescribes a recognition threshold and measurementattribute for the financial statement recognition and measurement of a taxposition taken, or expected to be taken, in a tax return, and provides guidanceon derecognition, classification, interest and penalties, accounting in interimperiods, disclosure and transition. The adoption of FIN 48 did not resultin a cumulative adjustment to the Company’s accumulated deficit.

 

The Company records interest and penalties related to income taxes ascomponents of the income tax provision, which totaled $326,000 and $40,000 forthe six months ended June 30, 2007 and June 30, 2008, respectively.Of the $4.4 million liability for unrecognized income tax benefits as of June 30,2008, the Company’s accrual for potential interest and penalties associatedwith uncertain tax positions was $185,000. To the extent interest and penaltiesare not assessed with respect to uncertain tax positions, amounts accrued willbe reversed and reflected as a reduction of the overall income tax provision.

 

The Company remains subject to examination by U.S. Federal, state,local and foreign tax authorities for tax years 2004 through 2007.  Withfew exceptions, the Company is no longer subject to U.S. Federal, state, localor foreign tax examinations for the tax years prior to 2004.

 

A reconciliation of the beginning and ending balance for liabilitiesassociated with unrecognized tax benefits, excluding interest and penalties, isas follows (in thousands)

 
| Balance as of January 1, 2008                         |   | $   | 3,863  |   |
|------------------------------------------------------------|--------|-----|--------|--------|
| Additions for tax positions related to the  current period |   | 400 |   |
| Balance as of June 30, 2008                           |   | $   | 4,263  |   |

 

The entire balance of unrecognized tax benefits as of June 30,2008 would impact the effective tax rate if recognized.

 

The Company’s effective tax rate for the six months ended June 30,2007 and June 30, 2008 of 33.3% and 49.9%, respectively, differ from theU.S. Federal statutory rate primarily due to stock-based compensation expensenot deductible for income tax purposes and profits of our internationalsubsidiaries being taxed at rates different than the U.S. statutory rate.

 

**Recent Accounting Pronouncements**

 

In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements”. SFAS No. 157 defines fair value, establishes aframework for measuring fair value in accordance with generally acceptedaccounting principles, and expands 

 

9

----

Table of Contents

 

disclosuresabout fair value measurements. In February 2007, the FASB issued SFAS No. 159,“The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159permits entities to choose to measure many financial assets and financialliabilities at fair value. For financial assets and financialliabilities, SFAS 157 was effective for the Company on January 1,2008. The adoption of SFAS 157 to the Company’s financial assets andfinancial liabilities did not have a material effect on the Company’sconsolidated financial statements. As we did not elect to fair value any of ourfinancial instruments under the provisions of SFAS 159, the adoption of this statementdid not have any impact on our financial position or results of operations.

 

In December 2007, the FASB issued SFAS No. 141 (R), “BusinessCombinations, a revision of SFAS No. 141”. SFAS No. 141 (R) establishes principles and requirements for how theacquirer of a business recognizes and measures in its financial statements theidentifiable assets acquired, the liabilities assumed, and any noncontrollinginterest in the acquiree. The statement also provides guidance for recognizingand measuring the goodwill acquired in the business combination and determineswhat information to disclose to enable users of the financial statement toevaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for financial statements issued for fiscal yearsbeginning after December 15, 2008. Accordingly, any business combinationswe engage in will be recorded and disclosed following existing GAAP until January 1,2009. The Company expects SFAS No. 141 (R) will have an impact on itsconsolidated financial statements when effective, but the nature and magnitudeof the specific effects will depend upon the nature, terms and size of theacquisitions the Company consummates after the effective date. The Company isstill assessing the full impact of this standard on its future consolidatedfinancial statements.

 

**2.****             Acquisitionand Long-term Investments**

 

**Dialect Payment Technologies, Pty LimitedAcquisition**

 

On June 8, 2007, the Company acquired all of the outstandingshares of Dialect Payment Technologies Pty Limited (Dialect), an Australianprovider of internet payment gateway services to the card-not-presenttransaction market, for a purchase price of $4.2 million, plus directacquisition costs of approximately $0.4 million. The purchase priceincludes approximately $0.9 million which is currently held in escrow andwhich may be refundable to the Company depending on the performance of aparticular customer contract. The Company accounted for the transaction as apurchase under the provisions of SFAS No. 141. The Company purchasedDialect primarily to expand its current suite of POS product offerings. Thepurchase price for Dialect was allocated as follows (in thousands):

 
| Current assets                                            |   | $      | 580    |   |
|-----------------------------------------------------------|--------|--------|--------|--------|
| Accounts receivable                                       |   | 964    |   |
| Property and equipment                                    |   | 866    |   |
| Developed technology                                      |   | 6,315  |   |
| Customer relationships                                    |   | 5,132  |   |
| Tradename                                                 |   | 168    |   |
| Non-compete agreements                                    |   | 946    |   |
| Deferred tax asset                                        |   | 206    |   |
| Accounts payable, accrued expenses and  other liabilities |   | (1,983 | )      |
| Deferred revenue                                          |   | (8,608 | )      |
| Net assets acquired                                       |   | $      | 4,586  |   |

 

The amounts allocated to the customer relationships and developedtechnology are being amortized over their estimated useful life of seven years.The amounts allocated to the non-compete agreements and tradename are being amortizedover their estimated useful life of three years and two years, respectively.Unaudited pro forma results of operations are not provided because thehistorical operating results were not significant and pro forma results wouldnot be significantly different from reported results for the periods presented.The Company’s results of operations include the operating results of thisacquisition beginning June 8, 2007.

 

10

----

Tableof Contents

 

**3.****             Long-termDebt**

 

On March 28, 2007, the Company entered into a $240.0 millionsenior secured credit facility (2007 Credit Facility) to finance the specialcash dividend and to refinance its 2005 amended and restated senior securedcredit facility (2005 Credit Facility). The 2007 Credit Facility consists of asenior secured term loan facility in an aggregate principal amount of$225.0 million (Term Facility) and a senior secured revolving credit facilityin an aggregate principal amount of $15.0 million (Revolving Facility),under which there were no borrowings as of June 30, 2008. The RevolvingFacility matures March 27, 2013. Payments on the Term Facility are due inquarterly installments over the seven year term beginning June 30, 2007,with the remainder payable on March 28, 2014. Voluntary prepayments on theTerm Facility are applied as directed by the Company. The Company madevoluntary pre-payments on the Term Facility totaling $18.0 million duringthe six months ended June 30, 2008.

 

As of June 30, 2008, the total scheduled remaining payments on theTerm Facility are as follows (in thousands):

 
| Six months ending December 31, 2008 |   | $       | —  |   |
|------------------------------------------|--------|---------|---------|--------|
| 2009                                     |   | —  |    |
| 2010                                     |   | —  |    |
| 2011                                     |   | —  |    |
| 2012                                     |   | —  |    |
| Thereafter                               |   | 187,500 |    |
|                                     |   | $       | 187,500 |   |

 

Interest on the outstanding balances under the Revolving Facility ispayable, at the Company’s option, at a rate equal to the higher of the WallStreet Journal published “base rate on corporate loans posted by at least 75%of the nation’s largest banks” or the federal funds rate plus 50 basis points(the “Base Rate”), in each case, plus a margin of 0.75% or at the LondonInterbank Offered Rate (“LIBOR”), plus a margin of 1.75%. Interest on theoutstanding balances under the Term Facility is payable, at the Company’soption, at the Base Rate plus a margin of 1.0%, or at LIBOR plus a margin of2.0%. For the six months ended June 30, 2008, borrowings on the TermFacility bore interest at the LIBOR rate (4.5% as of June 30, 2008, inclusiveof 2.0% margin).  The weighted averageinterest rate for the six months ended June 30, 2008 was 6.4%.  The weighted average interest rate for thesix months ended June 30, 2007 was 7.3%. The Revolving Credit Facility is subject to an annual commitment fee inan amount equal to 0.5% per annum multiplied by the amount of funds availablefor borrowing under the Revolving Facility. Interest payments on the 2007Credit Facility are due biweekly, monthly, bimonthly or quarterly at theCompany’s option.

 

The terms of the 2007 Credit Facility require the Company to make anannual prepayment in an amount that may range from 0% to 50% of the Company’s “excesscash flow” (as such term is defined in the Credit Agreement) depending on theCompany’s Leverage Ratio for any fiscal year. Prepayments are also required tobe made in other circumstances, including upon asset sales.

 

The terms of the 2007 Credit Facility require the Company to complywith financial and nonfinancial covenants, including maintaining a specifiedleverage ratio at the end of each fiscal quarter and complying with specifiedannual limits on capital expenditures. As of June 30, 2008, the Companywas required to maintain a leverage ratio of less than 3.1 to 1.0. The maximumleverage ratio continues to decline over the term of the 2007 Credit Facility.The Company’s leverage ratio as of June 30, 2008 was 2.2 to 1.0. The 2007Credit Facility also contains nonfinancial covenants that restrict some of theCompany’s corporate activities, including its ability to dispose of assets,incur additional debt, pay dividends, create liens, make investments, makecapital expenditures and engage in specified transactions with affiliates.Noncompliance with any of the financial or nonfinancial covenants without cureor waiver would constitute an event of default under the 2007 Credit Facility.An event of default resulting from a breach of a financial or nonfinancialcovenant may result, at the option of the lenders, in an acceleration of theprincipal and interest outstanding, and a termination of the RevolvingFacility. The 2007 Credit Facility also contains other customary events ofdefault (subject to specified grace periods), including defaults based onevents of bankruptcy and insolvency, nonpayment of principal, interest or feeswhen due, breach of specified covenants, change in control and materialinaccuracy of representations and warranties. The Company was in compliancewith the financial and non-financial covenants of the 2007 Credit Facility asof June 30, 2008.

 

In connection with the closing of the 2007 Credit Facility, the Companyincurred approximately $3.1 million in financing costs. These financingcosts were deferred and are being amortized using the effective interest methodover the life of the 2007 Credit Facility. In connection with the repayment ofthe 2005 Credit Facility in March 2007, the Company wrote-offapproximately $1.4 million in unamortized deferred financing costs related tothe 2005 Credit Facility. Such write-off has been included in interest expensein the accompanying condensed consolidated statement of operations for the sixmonths ended June 30, 2007.

 

11

----

Tableof Contents

 

**4.****             Comprehensive(Loss) Income**

 

The components of comprehensive (loss) income, net of tax effect are asfollows (in thousands):

 
| ** **                               | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                               | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                               | ** ** | **2007**                         | ** ** | **2008**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
| Net income (loss)                        |       | $                                | 537        |                           | $          | 1,026 |   | $ | (2,690 | ) | $ | 2,626 |   |
| Foreign currency translation adjustments |       | 525                              |       | 452                            |       | 918 |   | 2,892 |   |
| Total comprehensive income (loss)        |       | $                                | 1,062      |                           | $          | 1,478 |   | $ | (1,772 | ) | $ | 5,518 |   |

 

**5.****             NetIncome (Loss) Per Common Share**

 

SFAS No. 128, “Earnings Per Share”, requires the presentation ofbasic and diluted earnings per share. Basic earnings (loss) per common share iscomputed by dividing income (loss) attributable to common stockholders by theweighted average number of common shares outstanding for the period. Thediluted earnings (loss) per common share data is computed using the weightedaverage number of common shares outstanding plus the dilutive effect of commonstock equivalents, unless the common stock equivalents are anti-dilutive.During the six months ended June 30, 2007, the treasury stock effect ofoptions to purchase 2,041,330 shares of common stock and 667,464 restrictedstock units were not included in the computation of diluted income (loss) percommon share as their effect would have been anti-dilutive.

 
| ** **                                                | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|-----------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                | ** ** | **2007**                         | ** ** | **2008**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
| Net income (loss)                                         |       | $                                | 537        |                           | $          | 1,026 |   | $ | (2,690 | ) | $ | 2,626 |   |
| Weighted average common share calculation:                |       |                             |       |                           |       |   |   |   |   |
| Basic weighted average common shares  outstanding         |       | 24,208,755                       |       | 24,699,262                     |       | 24,172,212 |   | 24,504,459 |   |
| Treasury stock effect of outstanding  options to purchase |       | —                           |       | 271,081                        |       | — |   | 296,941 |   |
| Treasury stock effect of unvested  restricted stock units |       | 10,905                           |       | 303,898                        |       | — |   | 200,674 |   |
| Diluted weighted average common shares  outstanding       |       | 24,219,660                       |       | 25,274,241                     |       | 24,172,212 |   | 25,002,074 |   |
|                                                      |       |                             |       |                           |       |   |   |   |   |
| Net income (loss) per common share:                       |       |                             |       |                           |       |   |   |   |   |
| Basic and diluted net income (loss) per  common share     |       | $                                | 0.02       |                           | $          | 0.04 |   | $ | (0.11 | ) | $ | 0.11 |   |

 

**6.****             SegmentInformation**

 

The Company’s reportable segments are strategic business units thatoffer different products and services. The Company classifies its business intofour segments: POS, TSD, FSD and ISD. However, the Company’s management onlyevaluates revenues for these four segments. A significant portion of theCompany’s North American operating expenses are shared between the POS, TSD andFSD segments, and therefore, management analyzes operating results for thesethree segments on a combined basis.

 

Management evaluates the North American and ISD performance on EBITDAbefore stock compensation expense because operating expenses aredistinguishable between North American and ISD operations. The Company definesEBITDA before stock compensation expense as income from operations beforedepreciation, amortization and stock compensation expense. EBITDA before stockcompensation expense is not a generally accepted accounting principle measure,but rather a measure employed by management to view operating results adjustedfor major noncash items. The Company’s definition of EBITDA before stockcompensation expense may not be comparable to similarly titled measures used byother entities. Assets are not segregated between reportable segments, andmanagement does not use asset information by segments to evaluate segmentperformance. As such, no information is presented related to fixed assets byreportable segment and capital expenditures for each segment.

 

12

----

Tableof Contents

 

Revenue for the Company’s four business units is presented below (inthousands):

 
| ** **     | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **     | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **     | ** ** | **2007**                         | ** ** | **2008**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
| ISD            |       | $                                | 32,380     |                           | $          | 42,608 |   | $ | 60,587 |   | $ | 79,778 |   |
| POS            |       | 20,754                           |       | 19,145                         |       | 40,553 |   | 37,500 |   |
| TSD            |       | 16,109                           |       | 16,814                         |       | 31,022 |   | 34,668 |   |
| FSD            |       | 10,118                           |       | 11,581                         |       | 19,860 |   | 22,327 |   |
| Total revenues |       | $                                | 79,361     |                           | $          | 90,148 |   | $ | 152,022 |   | $ | 174,273 |   |

 

EBITDA before stock compensation expense for the North American and ISDoperations is reflected below (in thousands):

 
| ** **                                      | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|-------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                      | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                      | ** ** | **2007**                         | ** ** | **2008**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
| ISD                                             |       | $                                | 11,727     |                           | $          | 16,718 |   | $ | 16,346 |   | $ | 29,597 |   |
| North Ameirca                                   |       | 5,561                            |       | 5,666                          |       | 14,295 |   | 12,526 |   |
| Total EBITDA before stock compensation  expense |       | $                                | 17,288     |                           | $          | 22,384 |   | $ | 30,641 |   | $ | 42,123 |   |

 

EBITDA before stock compensation expense differs from income(loss)before income taxes and equity in net loss of unconsolidated affiliatereported in the condensed consolidated statements of operations as follows (inthousands):

 
| ** **                                                                             | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                             | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                                             | ** ** | **2007**                         | ** ** | **2008**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
| EBITDA before stock compensation expense                                               |       | $                                | 17,288     |                           | $          | 22,384 |   | $ | 30,641 |   | $ | 42,123 |   |
| Reconciling items:                                                                     |       |                             |       |                           |       |   |   |   |   |
| Depreciation and amortization of property  and equipment                               |       | (5,433                           | )          | (6,094                         | )          | (11,237 | ) | (12,061 | ) |
| Amortization of intangible assets                                                      |       | (5,972                           | )          | (6,359                         | )          | (12,083 | ) | (12,457 | ) |
| Stock compensation expense                                                             |       | (2,323                           | )          | (3,085                         | )          | (5,423 | ) | (6,050 | ) |
| Interest expense                                                                       |       | (4,221                           | )          | (2,631                         | )          | (8,189 | ) | (6,340 | ) |
| Interest income and other income (expense),  net                                       |       | 920                              |       | (142                           | )          | 1,810 |   | 106 |   |
| Income (loss) before income taxes and  equity in net loss of unconsolidated affiliates |       | $                                | 259        |                           | $          | 4,073 |   | $ | (4,481 | ) | $ | 5,321 |   |

 

Goodwill and intangible assets are located in the following reportingsegments (in thousands):

 
| ** **                                              | ** ** | **December 31,** | ** ** | **June 30,** | ** ** |
|---------------------------------------------------------|------------|-----------------------|------------|-------------------|------------|
| ** **                                              | ** ** | **2007**              | ** ** | **2008**          | ** ** |
| POS                                                     |       | $                     | 114,573    |              | $          | 108,947 |   |
| ISD                                                     |       | 54,430                |       | 51,851            |       |
| TSD                                                     |       | 3,760                 |       | 3,196             |       |
| FSD                                                     |       | 21,080                |       | 20,085            |       |
| Total goodwill and identifiable intangible  assets, net |       | $                     | 193,843    |              | $          | 184,079 |   |

 

13

----

Tableof Contents

 

**Geographic Information**

 

The Company sells its services throughforeign subsidiaries in Australia, Austria, Bermuda, Canada, France, Germany,India, Ireland, Italy, Japan, Mexico, the Netherlands, New Zealand, Poland,Romania, South Korea, Spain, Sweden, Thailand and the United Kingdom.Information regarding revenues and long-lived tangible assets attributable toeach geographic region is stated below.

 

The Company’s revenues were generated in thefollowing geographic regions (in thousands):

 
| ** **     | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **     | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **     | ** ** | **2007**                         | ** ** | **2008**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
| North America  |       | $                                | 46,981     |                           | $          | 47,540 |   | $ | 91,435 |   | $ | 94,495 |   |
| Europe         |       | 27,928                           |       | 33,842                         |       | 52,580 |   | 63,441 |   |
| Asia-Pacific   |       | 4,452                            |       | 8,766                          |       | 8,007 |   | 16,337 |   |
| Total revenues |       | $                                | 79,361     |                           | $          | 90,148 |   | $ | 152,022 |   | $ | 174,273 |   |

 

Revenues from the Company’s subsidiaries inthe United Kingdom were $17.2 million and $19.9 million for the threemonths ended June 30, 2007 and 2008, respectively. Revenues from theCompany’s subsidiaries in the United Kingdom were $32.4 million and$37.2 million for the six months ended June 30, 2007 and 2008,respectively.

 

The Company’s long-lived assets, includinggoodwill and intangible assets, were located as follows (in thousands):

 
| ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | **December 31,** | ** ** | **June 30,** | ** ** |
|----------------------------------------------------|------------|------------|------------|------------|------------|-----------------------|------------|-------------------|------------|
| ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | **2007**              | ** ** | **2008**          | ** ** |
| North America                                      | ** ** | ** ** | ** ** | ** ** | ** ** | $                     | 204,177    |              | $          | 201,532 |   |
| Europe                                             | ** ** | ** ** | ** ** | ** ** | ** ** | 53,310                |       | 51,630            |       |
| Asia-Pacific                                       | ** ** | ** ** | ** ** | ** ** | ** ** | 17,177                |       | 17,568            |       |
| Total long lived assets, goodwill and  intangibles | ** ** | ** ** | ** ** | ** ** | ** ** | $                     | 274,664    |              | $          | 270,730 |   |

 

**7.****                                     RestructuringCosts**

 

In August 2006, the Company implementeda plan to reduce its cost structure and improve operating efficiencies byreducing its workforce and implementing productivity improvement initiativesand expense reduction measures (2006 Restructuring Plan). In connection withthe 2006 Restructuring Plan, the Company incurred approximately$5.6 million of severance associated with its workforce reduction, ofwhich $4.2 million was selling, general and administrative expense,$0.8 million was engineering and development expense and $0.6 millionwas cost of network services.

 

During 2007 the Company incurred anadditional $3.0 million in severance and benefits, of which$2.7 million was selling, general and administrative expense and$0.3 million was engineering and development expense.

 

A summary of the liability for the Company’sseverance and benefits obligation is as follows (in thousands):

 
| ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **2008** | ** ** |
|----------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|----------|------------|
| Balance as of January 1                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | $        | 4,216      |   |
| Accretion of liability due to the passage  of time | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | 39       |       |
| Effects of foreign currency translation            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | 62       |       |
| Cash paid                                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | (2,393   | )          |
| Balance as of June 30                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | $        | 1,924      |   |

 

The remaining cash expenditures relating tothe severance and benefits will be paid through June 2009.

 

14

----

Tableof Contents

 

**8.****                                     Litigationand Claims**

 

Certain states in which the Company operatesassess sales taxes on certain services provided by the Company. The Companybelieves it has no liability because its customer contracts contain terms thatstipulate the customer, not the Company, is responsible for any sales taxliability. In jurisdictions where the customer may be liable for sales taxes,the Company either includes sales tax on its invoice or has obtained anexemption certificate from the customer. Certain states have audited theCompany from 1996 to early 2001. On April 25, 2008, the Company enteredinto a settlement agreement with the remaining state’s Commissioner of Revenueto settle the only state sales tax assessment remaining for the period from1996 to early 2001. In the settlement, the Company agreed to settle theoutstanding sales tax assessment in the amount of $942,000 for a settlementpayment in the amount of $250,000. The Company’s customer paid $212,500 of thesettlement payment with the remaining $37,500 paid by the Company. Based on thefinal executed settlement, the Company reduced its net liability for thismatter by $0.9 million. This $0.9 million reduction in the liability, or$0.02 per share, is included in selling, general and administrative expenses inthe accompanying consolidated statements of operations for the six months endedJune 30, 2008.

 

The Company, John J. McDonnell, Jr., theCompany’s former Chief Executive Officer, and Henry H. Graham, Jr., theCompany’s Chief Executive Officer, are defendants in a putative class actionlawsuit filed in connection with the Company’s public offering of common stockin September 2005 (“Secondary Offering”). The Cement Masons and PlasterersJoint Pension Trust, purportedly on behalf of itself and others similarlysituated, filed the class action lawsuit captioned *Cement Masons & Plasterers Joint Pension Trust v. TNS, Inc.,et al.,* Case No. 1:06 CV 363, CMH/BRP, on April 4, 2006 inthe United States District Court for the Eastern District of Virginia. Afterdenying the Company’s motion to dismiss on September 12, 2006, the Courtordered the parties to conduct discovery in the case. In March 2007, theparties agreed to stay further discovery in the case with the Court’s approvalpending a mediation designed to reach a settlement resolving the lawsuit. Theparties conducted a mediation in April 2007, and subsequently entered intoa settlement agreement in February 2008. The settlement agreement providesfor a cash settlement payment of $3.6 million to be paid by the Company’sinsurer and payment of expenses of plaintiff’s lead counsel not to exceed$50,000. In exchange for the cash settlement payment and expense payment, theCompany and all defendants would be released from all claims of class membersrelating to the action. The Court preliminarily approved the settlementagreement of the parties by an order entered on April 1, 2008, andsubsequently granted final approval of the settlement agreement after afairness hearing on June 20, 2008. We do not expect the final outcome ofthe lawsuit to have a material adverse affect on our financial condition oroperating results. During the year ended December 31, 2006, the Companyaccrued legal costs of approximately $0.5 million, representing the legalcosts to defend itself in this matter not otherwise covered by its insurancecarrier.

 

15

----

Tableof Contents

 

**Item2.   Management’s Discussion and Analysisof Financial Condition and Results of Operations**

 

You should read the following discussion ofthe financial condition and results of operations of TNS, Inc. inconjunction with the consolidated financial statements and the related notesincluded in our annual report on Form 10-K filed with the SEC on March 17,2008 and available directly from the SEC at www.sec.gov and the condensedconsolidated financial statements and the related notes of TNS, Inc.,included elsewhere in this quarterly report.

 

There are statements made herein which maynot address historical facts and, therefore, could be interpreted to beforward-looking statements within the meaning of The Private SecuritiesLitigation Reform Act of 1995. These forward-looking statements are based oncurrent expectations, forecasts and assumptions that are subject to risks anduncertainties that could cause actual results to differ materially from thoseset forth in, or implied by, the forward-looking statements. The Company hasattempted, whenever possible, to identify these forward-looking statementsusing words such as “may,” “will,” “should,” “projects,” “estimates,” “expects,”“plans,” “intends,” “anticipates,” “believes,” and variations of these wordsand similar expressions. Similarly, statements herein that describe the Company’sbusiness strategy, prospects, opportunities, outlook, objectives, plans,intentions or goals are also forward-looking statements. Actual results maydiffer materially from those indicated by such forward-looking statements as aresult of various important factors, including: the Company’s reliance upon asmall number of customers for a significant portion of its revenue; competitivefactors such as pricing pressures; uncertainties related to the updatedinternational tax planning strategy implemented by the Company; our customer’sability to direct their data communications from the Company’s networks toother networks; the Company’s ability to grow its business domestically andinternationally by generating greater transaction volumes, acquiring newcustomers or developing new service offerings; fluctuations in the Company’squarterly results because of the seasonal nature of the business and otherfactors outside of the Company’s control; the Company’s substantial debt couldadversely affect its financial health because the Company may be unable toobtain additional financing for working capital, capital expenditures,acquisitions and general corporate purposes, the Company may not generatesufficient cash flow to repay the debt on a timely basis or to pre-pay thedebt, and a significant portion of the Company’s cash flow from operations willbe dedicated to the repayment or servicing of indebtedness, thereby reducingthe amount of cash available for other purposes; the Company’s ability toidentify, execute or effectively integrate acquisitions; the Company’s abilityto identify, execute or effectively integrate future acquisitions; increases inthe prices charged by telecommunication providers for services used by theCompany; unfavorable foreign exchange movements; the Company’s ability to adaptto changing technology; additional costs related to compliance with theSarbanes-Oxley Act of 2002, any revised New York Stock Exchange listingstandards, SEC rule changes or other corporate governance issues; andother risk factors described in the Company’s annual report on Form 10-Kfiled with the SEC on March 17, 2008. In addition, the statements in thisquarterly report are made as of the date of this filing. The Company expectsthat subsequent events or developments will cause its views to change. TheCompany undertakes no obligation to update any of the forward-lookingstatements made herein, whether as a result of new information, future events,changes in expectations or otherwise. These forward-looking statements shouldnot be relied upon as representing the Company’s views as of any datesubsequent to the date of this filing. The forward-looking statements in thisdocument are intended to be subject to the safe harbor protection provided bySections 27A of the Securities Act and 21E of the Exchange Act.

 

**Overview**

 

We are an international data communicationscompany which provides networking, data communications and value added servicesto many of the world’s leading retailers, banks and payment processors. We arealso a leading provider of secure data and voice network services to the globalfinancial services industry. We operate one of the largest unaffiliatedSignaling System No. 7 networks in the United States capable of providingservices nationwide, and we utilize this network to provide call signaling anddatabase access services to the domestic telecommunications industry. Our datacommunications services enable secure and reliable transmission oftime-sensitive, transaction-related information critical to our customers’operations. Our customers outsource their data communications requirements tous because of our substantial expertise, comprehensive customer support andcost-effective services. We provide services to customers in the United Statesand increasingly to international customers in 29 countries, including Canadaand Mexico and countries in Europe, Latin America and the Asia-Pacific region.

 

We provide services through our multiple datanetworks, each designed specifically for transaction applications. Our networkssupport a variety of widely accepted communications protocols and are designedto be scalable and accessible by multiple methods, including dial-up,dedicated, wireless, broadband and internet connections.

 

16

----

Table of Contents

 

We generate revenues through four businessdivisions:

 

•                 ***POS services.***Weprovide fast, secure and reliable data communications services primarily topayment processors in the United States and Canada. POS services revenue isderived primarily from per transaction fees paid by our customers for thetransmission of transaction data through our networks between paymentprocessors and POS or ATM terminals.

 

•                 ***Telecommunication services.***Weprovide call signaling services that enable telecommunications carriers toestablish and terminate telephone calls placed by their subscribers. We alsoprovide database access services that enable our customers to provideintelligent network services, such as caller identification, toll-free callrouting and local number portability, and validation services, such as creditcard, calling card, third- party billing and collect calling. Ourtelecommunication services division generates revenues primarily from fixedmonthly fees charged for our call signaling services and per-query fees chargedfor our database access and validation services.

 

•                 ***Financial services.***Weprovide fast, secure and reliable private data networking services that enableseamless communications and facilitate electronic trading among commercialbanks, mutual funds, pension funds, broker-dealers, alternative tradingsystems, electronic communications networks, securities and commoditiesexchanges and other market participants. Our networks support multiplecommunications protocols including the Financial Information eXchange, or FIX,protocol. Our financial services division generates revenues from monthlyrecurring fees based on the number of customer connections to and through ournetworks.

 

•                 ***International services.***Wesell our POS and financial services through our international servicesdivision. We are one of the leading providers of data communications servicesto the POS industry in the United Kingdom. Our international services divisionalso provides POS and financial services in Australia, Austria, Belgium,Bermuda, Finland, France, Gibraltar, Germany, Hong Kong, India, Ireland, Italy,Japan, Malaysia, the Netherlands, New Zealand, Norway, Poland, Romania,Singapore, South Korea, Spain, Sweden, Taiwan and Thailand.

 

Our most significant expense is cost ofnetwork services, which is comprised primarily of telecommunications charges,including data transmission and database access, leased digital capacitycharges, circuit installation charges and activation charges. The cost of datatransmission is based on a contract or tariff rate per minute of usage inaddition to a prescribed rate per transaction for some vendors. The costs ofdatabase access, circuits, installation charges and activation charges arebased on fixed fee contracts with local exchange carriers and interexchangecarriers. The cost of network services also includes salaries, equipmentmaintenance and other costs related to the ongoing operation of our data networks.Depreciation expense on our network equipment and amortization of developedtechnology are excluded from our cost of network services and included indepreciation and amortization of property and equipment and amortization ofintangible assets in our consolidated statements of operations.

 

Our engineering and development expensesinclude salaries and other costs related to product development, engineering,hardware maintenance and materials. The majority of these costs are expensed asincurred, including costs related to the development of internal use softwarein the preliminary project, the post-implementation and operation stages.Development costs we incur during the software application development stageare capitalized and amortized over the estimated useful life of the developedsoftware.

 

Our selling, general and administrativeexpenses include costs related to sales, marketing, administrative andmanagement personnel, as well as external legal, accounting and consultingservices.

 

17

----

Table of Contents

 

**Results of Operations**

 

The following table sets forth, for theperiods indicated selected statement of operations data (dollars in thousands):

 
| ** **                                                                                   | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                                   | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                                                   | ** ** | **2007**                         | ** ** | **2008**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
| Revenues                                                                                     |       | $                                | 79,361     |                           | $          | 90,148 |   | $ | 152,022 |   | $ | 174,273 |   |
| Operating expenses:                                                                          |       |                             |       |                           |       |   |   |   |   |
| Cost of network services, exclusive of the  items shown separately below                     |       | 40,174                           |       | 42,225                         |       | 79,046 |   | 82,932 |   |
| Engineering and development                                                                  |       | 6,641                            |       | 7,669                          |       | 13,003 |   | 14,868 |   |
| Selling, general, and administrative                                                         |       | 17,581                           |       | 20,955                         |       | 34,755 |   | 40,400 |   |
| Depreciation and amortization of property  and equipment                                     |       | 5,433                            |       | 6,094                          |       | 11,237 |   | 12,061 |   |
| Amortization of intangible assets                                                            |       | 5,972                            |       | 6,359                          |       | 12,083 |   | 12,457 |   |
| Total operating expenses                                                                     |       | 75,801                           |       | 83,302                         |       | 150,124 |   | 162,718 |   |
| Income from operations                                                                       |       | 3,560                            |       | 6,846                          |       | 1,898 |   | 11,555 |   |
| Interest expense                                                                             |       | (4,221                           | )          | (2,631                         | )          | (8,189 | ) | (6,340 | ) |
| Interest income                                                                              |       | 429                              |       | 148                            |       | 674 |   | 327 |   |
| Other income (expense), net                                                                  |       | 491                              |       | (290                           | )          | 1,136 |   | (221 | ) |
| Income (loss) before income tax benefit and  equity in net loss of unconsolidated affiliates |       | 259                              |       | 4,073                          |       | (4,481 | ) | 5,321 |   |
| Income tax (provision) benefit                                                               |       | (285                             | )          | (2,977                         | )          | 1,292 |   | (2,625 | ) |
| Equity in net income (loss) of  unconsolidated affiliates                                    |       | 563                              |       | (70                            | )          | 499 |   | (70 | ) |
| Net income (loss)                                                                            |       | $                                | 537        |                           | $          | 1,026 |   | $ | (2,690 | ) | $ | 2,626 |   |

 

**Three months ended June 30, 2008compared to the three months ended June 30, 2007**

 

***Revenues.***Total revenues increased $10.7 million, or13.6%, to $90.1 million for the three months ended June 30, 2008,from $79.4 million for the three months ended June 30, 2007. Wegenerate revenues through four operating divisions.

 

***Internationalservices division.***Revenues from the internationalservices division increased $10.2 million, or 31.6%, to $42.6 millionfor the three months ended June 30, 2008, from $32.4 million for thethree months ended June 30, 2007. On a constant dollar basis, revenue forthe three months ended June 30, 2008 would have increased$8.0 million, or 24.7% to $40.4 million. This increase was the result ofan additional $4.5 million from higher transaction volumes and increasedbroadband connections from POS customers in Europe and Asia Pacific, $2.1million in incremental revenue from our Dialect acquisition and $1.4 millionfrom additional connections from financial services customers. Revenues fromour U.K. subsidiaries increased $2.7 million, or 15.9%, to$19.9 million for the three months ended June 30, 2008, from$17.2 million for the three months ended June 30, 2007. On a constantdollar basis, revenue from the U.K. subsidiaries for the three months ended June 30,2008 would have increased $2.8 million, or 16.7%, to $20.0 million. Futurerevenue growth in the international services division depends on a number offactors including the success of our POS and financial service products incountries we have recently entered, the success of our new product offeringsand the successful integration of our card-not-present service offeringsthrough our acquisition of Dialect.

 

***POSdivision.***Revenues from the POS division decreased$1.7 million, or 7.8%, to $19.1 million for the three months ended June 30,2008, from $20.8 million for the three months ended June 30, 2007.Included in POS revenue for the three months ended June 30, 2008 is$0.5 million in pass-through revenues compared with $0.7 million forthe three months ended June 30, 2007. POS dial-up transaction volumesdecreased 8.2% to 1.38 billion transactions for the three months ended June 30,2008, from 1.51 billion transactions for the three months ended June 30,2007. Excluding the decrease in pass-through revenues, revenues from the POSdivision decreased 6.7% to $18.6 from $20.0 million million for the threemonths ended June 30, 2008 and 2007 respectively due to lower transactionvolumes primarily resulting from a customer moving a portion of their trafficoff our network for the stated purpose of increasing its vendor diversification.This was partially offset by increased revenue from sales of our managedbroadband products. Growth in the POS division depends on a number of factorsincluding the success of our new broadband, wireless and vending serviceofferings as well as the total number of POS dial-up transactions we transport.

 

18

----

Table of Contents

 

***Telecommunicationservices division.***Revenues from thetelecommunication services division increased $0.7 million, or 4.4%, to$16.8 million for the three months ended June 30, 2008, from$16.1 million for the three months ended June 30, 2007. Included inTSD revenue for the three months ended June 30, 2008 is $1.6 millionin pass-through revenues compared with $1.4 million for the three months ended June 30,2007. Excluding the increase in pass-through revenues, revenues increased $0.5million, or 3.1% to $15.2 million from $14.7 million for the three months endedJune, 30 2008 and 2007 respectively. This increase was primarily due to anincrease in network and database access services provided to cable customers andto a lesser extent volume growth from our traditional wirelinetelecommunications customers which more than offset the effects of pricingcompression we experienced in connection with the renewal of certain customercontracts. Future revenue growth in the telecommunication services divisiondepends on a number of factors including the number of database access querieswe transport, the number of call signaling routes our customers purchase andthe success of our new product offerings, which potentially may be offset bycustomers seeking pricing discounts due to industry consolidation or otherreasons.

 

***Financialservices division.***Revenues from the financialservices division increased $1.5 million, or 14.5%, to $11.6 millionfor the three months ended June 30, 2008, from $10.1 million for thethree months ended June 30, 2007. The increase in revenues was primarilydue to increases in new customer endpoint installations and increases inconnectivity between existing customers and to a lesser extent from increaseddemand for greater bandwidth connectivity which results in higher averagerevenue per customer endpoint. Future revenue growth in the financial servicesdivision depends on a number of factors including the number of connections toand through our networks as well as the success of our new product offerings.We have begun to see an increased demand from our customers for largerbandwidth connections to our network and while these connections create greaterrevenue per physical endpoint, they require longer sales and installationlead-times.

 

***Costof network services.***Cost of network servicesincreased $2.1 million, or 5.1%, to $42.2 million for the threemonths ended June 30, 2008, from $40.2 million for the three monthsended June 30, 2007. On a constant dollar basis, cost of network serviceswould have increased $1.2 million, or 3.1%, to $41.4 million. Cost ofnetwork services were 46.8% of revenues for the three months ended June 30,2008, compared to 50.6% of revenues for the three months ended June 30,2007. Excluding the effect of foreign exchange, the increase in cost of networkservices resulted primarily from higher volumes in our international servicesand telecommunications services divisions and to a lesser extent our financialservices division. This was partially offset by declines in transaction volumesin our POS division, as mentioned above as well as reductions in the cost ofservices provided to us through focus on cost control of key suppler contractsin our POS and telecommunication services divisions.

 

Gross profit represented 53.2% of totalrevenues for the three months ended June 30, 2008, compared to 49.4% forthe three months ended June 30, 2007. The improvement in gross margin fromlast year is a result of increased contribution from our international servicesdivision, our highest gross margin division, and improvement in the grossmargins of our POS division as we worked to lower the cost of services providedto us.

 

Future cost of network services depends on anumber of factors including total transaction and query volumes, the relativegrowth and contribution to total transaction volume of each of our customers,the success of our new service offerings, the timing and extent of our networkexpansion and the timing and extent of any network cost increases orreductions.

 

***Engineeringand development expense.***Engineering anddevelopment expense increased $1.0 million, or 15.5%, to $7.7 millionfor the three months ended June 30, 2008, from $6.6 million for thethree months ended June 30, 2007. On a constant dollar basis, engineeringand development expense would have increased $0.8 million, or 12.1% to$7.4 million. Engineering and development expense represented 8.5% of revenuesfor the three months ended June 30, 2008 and 8.4% of revenues for thethree months ended June 30, 2007. Included in engineering and developmentexpense for the three months ended June 30, 2008 and 2007 is $1.4 millionand $0.3 million, respectively, relating to Dialect. This increase was due to additionalheadcount to develop our card-not-present gateway application resulting fromour acquisition of Dialect in June 2007. Included in engineering anddevelopment expense for the three months ended June 30, 2008 and 2007 isstock compensation expense of $0.3 million and $0.4 million,respectively. Excluding the items mentioned above and the effects of foreignexchange, engineering and development expense would have decreased $0.1 millionto $5.7 million, or 6.3% of revenues, for the three months ended June 30,2008 from $6.0 million, or 7.5% of revenues, for the three months ended June 30,2007.

 

***Selling,general and administrative expense.***Selling,general and administrative expenses increased $3.4 million, or 19.2%, to$21.0 million for the three months ended June 30, 2008, from$17.6 million for the three months ended June 30, 2007. On a constantdollar basis, selling, general and administrative expenses would have increased$2.8 million, or 16.2%, to $20.4 million. Selling, general and administrativeexpenses represented 23.2% of revenues for the three months ended June

 

19

----

Tableof Contents

 

30, 2008, compared to 22.2% of revenues for the three months ended June 30,2007. Included in selling, general and administrative expenses for the threemonths ended June 30, 2008 and 2007 was $0.8 million and $0.1 million,respectively, relating to Dialect. This increase was due to investment in thesales force to drive sales of our card-not-present gateway application resultingfrom our acquisition of Dialect in June 2007. Included in selling, general andadministrative expenses for the three months ended June 30, 2008 and 2007is $2.5 million and $1.7 million of stock compensation expense,respectively. The increase in stock compensation expense relates primarily toadditional performance based grants made during the year. Excluding these itemsand the effects of foreign exchange, selling, general and administrativeexpenses would have increased $1.3 million to $17.0 million, or 18.9% ofrevenues, for the three months ended June 30, 2008 from $15.8 million, or 19.9%of revenues, for the three months ended June 30, 2007 due primarily to ourplanned investment in our business development group that is focused on drivingrevenue growth from our customers in our domestic and international POSbusiness.

 

***Depreciationand amortization of property and equipment.***Depreciationand amortization of property and equipment increased $0.7 million, or12.2%, to $6.1 million for the three months ended June 30, 2008, from$5.4 million for the three months ended June 30, 2007. Depreciationand amortization of property and equipment represented 6.8% of revenues for boththe three month periods ended June 30, 2008 and 2007. Depreciation expenseincreased due to capital expenditures made to support our revenue growth,primarily in the international services division.

 

***Amortizationof intangible assets.***Amortization of intangibleassets increased $0.4 million, or 6.5%, to $6.4 million for the threemonths ended June 30, 2008, from $6.0 million for the three monthsended June 30, 2007 and relates solely to intangible assets resulting fromacquisitions. On a constant dollar basis, amortization of intangible assetswould have increased $0.1 million, or 2.5% to $6.1 million. For purposesof measuring and recognizing impairment of long-lived assets includingintangibles, we assess whether separate cash flows can be attributed to anindividual asset. For our customer relationship intangible assets, we recognizeand measure impairment upon the significant loss of revenue from a customer.Based upon our contract with one of our major customers, we believe thatrevenues and related transaction volumes from this customer will continue todecline in 2008 and may decline further thereafter. The intangible asset valueattributable to this customer relationship was approximately $20.1 millionas of June 30, 2008. We assessed the recoverability of this customerrelationship asset based upon undiscounted anticipated future cash flows andconcluded no impairment existed as of June 30, 2008.

 

***Interestexpense.***Interest expense decreased$1.6 million, or 37.7%, to $2.6 million for the three months ended June 30,2008, from $4.2 million for the three months ended June 30, 2007.Interest expense decreased primarily as a result of the lower effectiveinterest rate associated with our 2007 credit facility and to a lesser extentour reduced debt levels.

 

***Interestincome.***Interest income was $0.1 million for the threemonths ended June 30, 2008, compared to $0.4 million for the threemonths ended June 30, 2007. The decrease in interest income is due to therelease of the restricted cash on hand, related to our special cash dividendpayment made in April 2007.

 

***Otherincome (expense), net.***Other income (expense), netwas an expense of $0.3 million for the three months ended June 30, 2008compared to income of $0.5 million for the three months ended June 30,2007. Included in other income (expense), net for the three months ended June 30,2008 are foreign currency revaluation losses of approximately $0.2 million dueto fluctuations in the value of the U.S. dollar principally against the Euroand Pound Sterling, versus a gain on foreign currency revaluation of $0.4 millionfor the three months ended June 30, 2007.

 

***Incometax provision.***For the three months ended June 30,2008, our income tax provision was approximately $3.0 million compared to$0.3 million for the three months ended June 30, 2007. The increasein our income tax provision is primarily related to higher income in foreignjurisdictions that cannot be offset by losses in other jurisdictions. Oureffective tax rate was 74.6% and 34.7% for the three months ended June 30,2008 and 2007, respectively. Our effective tax rate differs from the U.S.Federal statutory rate primarily due to stock-based compensation expense notdeductible for income tax purposes and profits of our internationalsubsidiaries being taxed at rates different than the U.S. Federal statutory rate.

 

***Equityin net income (loss) of unconsolidated affiliates.***Equityin net income (loss) of unconsolidated affiliates for the three months ended June 30,2008 was a loss of $0.1 million, compared to income of $0.6 million for thethree months ended June 30, 2007. The decrease was due to the gain of $0.6million on the sale of all of our outstanding shares of our investment in WAYSystems, Inc. during the three months ended June 30, 2007. The lossfor the three month period ended June 30, 2008 relates to our investmentin AK Jensen, Inc. As of June 30, 2008, the carrying value of ourinvestment in AK Jensen, Inc. was $0.7 million.

 

20

----

Tableof Contents

 

**Six months ended June 30, 2008 compared to the six months ended June 30,2007**

 

***Revenues.***Totalrevenues increased $22.2 million, or 14.6%, to $174.2 million for thesix months ended June 30, 2008, from $152.0 million for the sixmonths ended June 30, 2007. We generate revenues through four operatingdivisions.

 

***Internationalservices division.***Revenues from the internationalservices division increased $19.2 million, or 31.7%, to $79.8 millionfor the six months ended June 30, 2008, from $60.6 million for thesix months ended June 30, 2007. On a constant dollar basis, revenue forthe six months ended June 30, 2008 would have increased $14.4 million,or 24.0% to $75.0 million. This increase was the result of $6.1 million fromhigher transaction volumes and increased broadband connections from POScustomers in Europe and Asia Pacific, an incremental $5.6 million from ourDialect acquisition and $2.6 million from additional connections from financialservices customers. Revenues from our U.K. subsidiaries increased$4.8 million, or 14.8%, to $37.2 million for the six months ended June 30,2008, from $32.4 million for the six months ended June 30, 2007. On aconstant dollar basis, revenue for the U.K. subsidiary for the six months endedJune 30, 2008 would have increased $4.7 million, or 14.6%, to $37.1million. Future revenue growth in the international services division dependson a number of factors including the success of our POS and financial serviceproducts in countries we have recently entered, the success of our new productofferings and the successful integration of our card-not-present serviceofferings through our acquisition of Dialect.

 

***POS division.***Revenuesfrom the POS division decreased $3.0 million, or 7.5%, to$37.5 million for the six months ended June 30, 2008, from$40.5 million for the six months ended June 30, 2007. Included in POSrevenue for the six months ended June 30, 2008 is $0.9 million in pass-throughrevenues compared with $1.4 million for the six months ended June 30,2007. POS dial-up transaction volumes decreased 8.4% to 2.7 billiontransactions for the six months ended June 30, 2008, from 2.9 billiontransactions for the six months ended June 30, 2007. Excluding thedecrease in pass-through revenues, revenues for the six months ended June 30,2008 decreased 6.5% to $36.3 from $39.1 million for the six months ended June 30,2007 due to lower transaction volumes primarily from a customer moving aportion of their traffic off our network for the stated purpose of vendordiversification. This was partially offset by increased revenue from sales ofour managed broadband products. Growth in the POS division depends on a numberof factors including the success of our new broadband, wireless and vendingservice offerings as well as the total number of POS dial-up transactions wetransport.

 

***Telecommunicationservices division.***Revenues from thetelecommunication services division increased $3.6 million, or 11.8%, to$34.7 million for the six months ended June 30, 2008, from$31.1 million for the three months ended June 30, 2007. Included inTSD revenue for the six months ended June 30, 2008 is $3.4 million inpass-through revenues compared with $2.7 million for the six months ended June 30,2007. Excluding the increase in pass-through revenues, revenues increased $2.9million, or 10.2% to $31.3 million from $28.4 million for the three monthsended June 30, 2008 and 2007 respectively. This was due to an increase innetwork and database access services provided to cable customers and to a lesserextent volume growth from our traditional wireline telecommunications customerswhich more than offset the effects of pricing compression we experienced inconnection with the renewal of certain customer contracts. Future revenuegrowth in the telecommunication services division depends on a number offactors including the number of database access queries we transport, thenumber of call signaling routes our customers purchase and the success of ournew product offerings, which potentially may be offset by customers seekingpricing discounts due to industry consolidation or other reasons.

 

***Financial servicesdivision.***Revenues from the financial servicesdivision increased $2.4 million, or 12.4%, to $22.3 million for thesix months ended June 30, 2008, from $19.9 million for the six monthsended June 30, 2007.  The increasein revenues was primarily due to increases in new customer endpointinstallations and increases in connectivity between existing customers and to alesser extent increased demand for greater bandwidth connectivity which resultsin higher average revenue per customer endpoint. Future revenue growth in thefinancial services division depends on a number of factors including the numberof connections to and through our networks as well as the success of our newproduct offerings. We have begun to see an increased demand from our customersfor larger bandwidth connections to our network and while these connectionscreate greater revenue per physical endpoint, they require longer sales andinstallation lead-times.

 

***Cost of networkservices.***Cost of network services increased$3.9 million, or 4.9%, to $82.9 million for the six months ended June 30,2008, from $79.0 million for the six months ended June 30, 2007. On aconstant dollar basis, cost of network services would have increased$2.2 million, or 2.8%, to $81.2 million. Cost of network serviceswere 47.6% of revenues for the six months ended June 30, 2008, compared to52.0% of revenues for the six months ended June 30, 2007. Excluding theeffect of foreign exchange, the increase in cost of network services resultedprimarily from higher volumes in our international services andtelecommunications services divisions and to a lesser extent our financialservices division. This which was partially offset by declines in transactionvolumes in our POS division, as mentioned above, as well as reductions 

 

21

----

Tableof Contents

 

in the cost of services provided to us through focus on cost control ofkey suppler contracts in our POS and telecommunication services divisions.

 

Gross profit represented 52.4% of total revenues for the six monthsended June 30, 2008, compared to 48.0% for the six months ended June 30,2007. The improvement in gross margin from last year is a result of increasedcontribution from our international services division, our highest gross margindivision, and improvement in the gross margins of our POS division as we workedto lower the cost of services provided to us.

 

Future cost of network services depends on a number of factorsincluding total transaction and query volumes, the relative growth andcontribution to total transaction volume of each of our customers, the successof our new service offerings, the timing and extent of our network expansionand the timing and extent of any network cost increases or reductions.

 

***Engineering anddevelopment expense.***Engineering and developmentexpense increased $1.9 million, or 14.3%, to $14.9 million for thesix months ended June 30, 2008, from $13.0 million for the six monthsended June 30, 2007. On a constant dollar basis, engineering anddevelopment expense would have increased $1.4 million, or 11.0% to $14.4million. Engineering and development expense represented 8.5% of revenues forthe six months ended June 30, 2008 and 8.6% of revenues for the six monthsended June 30, 2007. Included in engineering and development expense forthe six months ended June 30, 2008 and 2007 is $2.8 million and $0.3million, respectively, relating to Dialect. This increase was due to additionalheadcount to develop our card-not-present gateway application resulting fromour acquisition of Dialect in June 2007. Included in engineering anddevelopment expense for the six months ended June 30, 2008 and 2007 isstock compensation expense of $0.8 million and $1.2 million,respectively. The $0.4 million decrease in stock compensation expense relatedto the decision by the Board of Directors to allow for dividend equivalentpayments on the outstanding restricted stock units as of June 30, 2007.Excluding these items and the effects of foreign exchange, engineering anddevelopment expense would have decreased $0.4 million to $10.9 million, or 6.3%of revenues, for the six months ended June 30, 2008,  from $11.3 million, or 7.4% of revenues, forthe six months ended June 30, 2007.

 

***Selling, general andadministrative expense.***Selling, general andadministrative expenses increased $5.7 million, or 16.2%, to$40.4 million for the six months ended June 30, 2008, from$34.7 million for the six months ended June 30, 2007. On a constantdollar basis, selling, general and administrative expenses would have increased$4.6 million, or 13.1%, to $39.3 million. Selling, general and administrativeexpenses represented 23.2% of revenues for the six months ended June 30,2008, compared to 22.9% of revenues for the six months ended June 30,2007. Included in selling, general and administrative expense for the sixmonths ended June 30, 2008 and 2007 is $1.7 million and $0.1 millionrespectively relating to Dialect. This increase is due to investment in a salesforce to drive sales of our card-not-present gateway application resulting fromour acquisition of Dialect in June 2007. Included in selling, general and administrative expenses for the sixmonths ended June 30, 2008 and 2007 is $4.7 million and$3.8 million of stock compensation expense, respectively. The increase instock compensation expense relates primarily to additional performance-basedgrants made during the year and was partially offset by expense of $1.0 millionrelated to the decision by the Board of Directors to allow for dividendequivalent payments on the outstanding stock units as of March 31, 2007.Included in selling, general and administrative expenses for the six monthsended June 30, 2008 is $0.9 million pre-tax benefit associated withthe settlement of a state sales tax liability. Included in selling, general andadministrative expenses for the six months ended June 30, 2007 is$0.8 million in severance expenses associated with the departure ofcertain executives. Excluding these items and the effects of foreign exchange,selling, general and administrative expenses would have increased $3.8 millionto $33.8 million, or 19.4% of revenues, for the six months ended June 30,2008 from $30.0 million, or 19.7% of revenues, for the six months ended June 30,2007. This increase relates primarily to our planned investment in our businessdevelopment group that is focused on driving revenue growth from our customersin our domestic and international POS business and to a lesser extent tosupport our revenue growth in the international services division.

 

***Depreciation andamortization of property and equipment.***Depreciationand amortization of property and equipment increased $0.8 million, or7.3%, to $12.0 million for the six months ended June 30, 2008, from$11.2 million for the six months ended June 30, 2007. On a constantdollar basis, depreciation and amortization of property and equipment wouldhave increased $0.6 million, or 5.6% to $11.8 million. Depreciation andamortization of property and equipment represented 6.9% of revenues for the sixmonths ended June 30, 2008, compared to 7.4% of revenues for the sixmonths ended June 30, 2007. Depreciation expense increased primarily dueto capital expenditures made to support our revenue growth in the internationalservices division.

 

***Amortization ofintangible assets.***Amortization of intangibleassets increased $0.4 million, or 3.1%, to $12.5 million for the sixmonths ended June 30, 2008, from $12.1 million for the six monthsended June 30, 2007 and relates solely to intangible assets resulting fromacquisitions. On a constant dollar basis, amortization of intangible assets forthe six 

 

22

----

Tableof Contents

 

months ended June 30, 2008 remained unchanged. Included inamortization expense for the six months ended June 30, 2008, was an incremental$0.7 million related to the acquisition of Dialect which was offset by adecrease in expense of $0.6 million as certain intangible assets reached theend of their useful lives. For purposes of measuring and recognizing impairmentof long-lived assets including intangibles, we assess whether separate cashflows can be attributed to an individual asset. For our customer relationshipintangible assets, we recognize and measure impairment upon the significantloss of revenue from a customer. Based upon our contract with one of our majorcustomers, we believe that revenues and related transaction volumes from thiscustomer will continue to decline in 2008 and may decline further thereafter.The intangible asset value attributable to this customer relationship wasapproximately $20.1 million as of June 30, 2008. We assessed therecoverability of this customer relationship asset based upon undiscountedanticipated future cash flows and concluded no impairment existed as of June 30,2008.

 

***Interest expense.***Interestexpense decreased $1.9 million, or 22.6%, to $6.3 million for the sixmonths ended June 30, 2008, from $8.2 million for the six monthsended June 30, 2007. Included in interest expense for the six months endedJune 30, 2007 is a charge of $1.4 million related to the acceleration ofdeferred financing costs as a result of the recapitalization in March 2007 supportingour special dividend. Excluding this charge, interest expense decreased $0.5million due to the lower effective interest rate associated with our 2007credit facility partially offset by the effects of a higher average balance resultingfrom our recapitalization in March 2007 supporting the special dividend.

 

***Interest income.***Interest income was $0.3 million for the six months ended June 30, 2008compared to $0.7 million for the six months ended June 30, 2007. Thedecrease in interest income is due to the release of the restricted cash onhand, related to our special cash dividend payment made in April 2007.

 

***Other income(expense), net.***Other income (expense), net was anexpense of $0.2 million for the six months ended June 30, 2008 compared toincome of $1.1 million for the six months ended June 30, 2007.Included in other income (expense), net for the six months ended June 30,2008 are foreign currency revaluation losses of approximately $0.1 million dueto fluctuations in the value of the U.S. dollar, principally against the Euroand Pound Sterling, versus a gain on foreign currency revaluation of $0.7million for the three months ended June 30, 2007. Included in other income(expense), net for the six months ended June 30, 2007 is a gain on thesale of an asset of $0.3 million.

 

***Income tax(provision)  benefit.***Forthe six months ended June 30, 2008, our income tax provision was$2.6 million compared to a benefit of $1.3 million for the six monthsended June 30, 2007.  The increasein our income tax provision is primarily related to higher income in foreignjurisdictions that cannot be offset by losses in other jurisdictions.  Our effective tax rate was 49.9% and 33.3%for the six months ended June 30, 2008 and 2007, respectively.  Our effective tax rate differs from the U.S.Federal statutory rate primarily due to stock-based compensation expense notdeductible for income tax purposes and profits of our internationalsubsidiaries being taxed at rates different than the U.S. Federal statutoryrate.

 

***Equity in net income(loss) of unconsolidated affiliates.***Equity in netincome (loss) of unconsolidated affiliates for the six months ended June 30,2008 was a loss of $0.1 million, compared to income of $0.5 million for the sixmonths ended June 30, 2007. The decrease was due primarily to the realizedgain of $0.6 million on the sale of all our outstanding shares of ourinvestment in WAY Systems, Inc. during the six months ended June 30,2007. The loss for the three month period ended June 30, 2008 relates toour investment in AK Jensen, Inc. As of June 30, 2008, the carrying value of our investment in AKJensen, Inc. was $0.7 million.

 

23

----

Tableof Contents

 

**Liquidity and Capital Resources**

 

Our primary liquidity and capital resource needs are to finance thecosts of our operations, to make capital expenditures and to service our debt.Based upon our current level of operations, we expect that our cash flow fromoperations, together with the amounts we are able to borrow under our 2007senior secured revolving credit facility, will be adequate to meet ouranticipated needs for the foreseeable future. Although we have no specificplans to do so, to the extent we decide to pursue one or more significantstrategic acquisitions, we will likely need to incur additional debt or selladditional equity to finance those acquisitions.

 

Our operations provided us cash of $29.8 million for the six monthsended June 30, 2008, which was attributable to net income of $2.6 million,depreciation, amortization and other non-cash charges of $27.8 million and an increasein working capital of $0.6 million. Our operations provided us cash of$27.2 million for the six months ended June 30, 2007, which wasattributable to a net loss of $2.7 million, depreciation, amortization andother non-cash charges of $30.5 million and an increase in working capital of $0.6 million.

 

We used cash of $13.7 million in investing activities for the sixmonths ended June 30, 2008, which comprised solely of capital expendituresto support our revenue growth. We used cash of $11.7 million in investingactivities for the six months ended June 30, 2007, which included $4.2 millionfor our acquisition of Dialect, $10.3 million in capital expenditures tosupport our revenue growth, and proceeds of $2.2 million from the sale ofnon-strategic property and equipment and $0.6 million from the sale of all ofour outstanding shares of our investment in WAY Systems.

 

We used cash of $10.7 million from financing activities for thesix months ended June 30, 2008, which includes $18.0 million of voluntarypre-payments on our 2007 senior secured credit facility and $8.9 million inproceeds from stock options exercised during the three months ended June 30,2008. We used cash of $9.3 million from financing activities for the six monthsended June 30, 2007, which includes net proceeds of $222 million from our2007 senior secured credit facility, of which $98.3 million was used forpayment of a special dividend and $123.3 million was used to repay our 2005amended and restated senior secured credit facility. In addition, we madevoluntary pre-payments of $9.0 million on our 2007 senior secured creditfacility.

 

**Seasonality**

 

Credit card and debit card transactions account for a major percentageof the transaction volume processed by our customers. The volume of thesetransactions on our networks generally is greater in the third and fourthquarter vacation and holiday seasons than during the rest of the year.Consequently, revenues and earnings from credit card and debit cardtransactions in the first and second quarter generally are lower than revenuesand earnings from credit card and debit card transactions in the third andfourth quarters of the immediately preceding year. We expect that our operatingresults in the foreseeable future will be significantly affected by seasonaltrends in the credit card and debit card transaction market.

 

24

----

Tableof Contents

 

**Item 3. Quantitative and QualitativeDisclosures About Market Risk**

 

***Interest rates***

 

Our principal exposure to market risk relates to changes in interestrates. As of June 30, 2008, we had $187.5 million outstanding underour 2007 senior secured credit facility with interest rates tied to changes inthe lender’s base rate or the LIBOR rate. Based upon the outstanding borrowingson June 30, 2008 and assuming repayment of the Term Loan in accordancewith scheduled maturities, each 1.0% increase in these rates could add anadditional $1.9 million to our annual interest expense.

 

As of June 30, 2008, we did not hold derivative financial orcommodity instruments and all of our cash and cash equivalents were held inmoney market or commercial accounts.

 

***Foreign currencyrisk***

 

Our earnings are affected by fluctuations in the value of the U.S.dollar as compared with foreign currencies, predominately the euro, the Britishpound and the Australian dollar due to our operations in Europe and Australia.

 

We have operations in 20 countries outside of the U.S., including theUnited Kingdom, Austria, Australia, Bermuda, Canada, France, German, India,Ireland, Italy, Japan, Mexico, New Zealand, Poland, Romania, South Korea,Spain, Sweden, Thailand and the Netherlands. We provide services in thesecountries using networks deployed in each country. We manage foreign exchangerisk through the structure of our business. In the substantial majority of ourtransactions, we receive payments denominated in the U.S. dollar, Britishpound, euro or Australian dollar. Therefore, we do not rely on internationalcurrency markets to obtain and pay illiquid currencies. The foreign currencyexposure that does exist is limited by the fact that the majority oftransactions are paid according to our standard payment terms, which aregenerally short-term in nature. Our policy is not to speculate in foreigncurrencies, and we promptly buy and sell foreign currencies as necessary tocover our net payables and receivables, which are denominated in foreigncurrencies. For the three and six months ended June 30, 2008, we recordedloss on foreign currency transactions of approximately $0.2 million and$0.1 million, respectively.

 

**Item 4. Controls and Procedures**

 

The Company maintains disclosure controls and procedures that aredesigned to ensure that information required to be disclosed in the Company’sreports under the Securities Exchange Act of 1934, as amended, is recorded,processed, summarized and reported within the time periods specified in the SEC’srules and forms, and that such information is accumulated and communicatedto the Company’s management, including its Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding requireddisclosure. In designing and evaluating the disclosure controls and procedures,management recognized that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving thedesired control objectives, and management necessarily was required to applyits judgment in evaluating the cost-benefit relationship of possible controlsand procedures.

 

**Evaluation**

 

The Company carried out an evaluation, under the supervision, and withthe participation, of the Company’s management, including the Company’s ChiefExecutive Officer and the Company’s Chief Financial Officer, of theeffectiveness of the Company’s disclosure controls and procedures as of June 30,2008. Based on the foregoing, the Company’s Chief Executive Officer andprincipal financial officers concluded that the Company’s disclosure controlsand procedures were effective as of June 30, 2008 at the reasonableassurance level.

 

There have been no changes during the three and six months ended June 30,2008 covered by this report in the Company’s internal control over financialreporting or in other factors that could materially affect or are reasonablylikely to materially affect the internal control over financial reporting.

 

25

----

Tableof Contents

 

**PART II—OTHERINFORMATION**

 

**Item 1.****              Legal Proceedings**

 

Information regarding legal proceedings is contained in Note 8 tothe Condensed Consolidated Financial Statements contained in this Report and isincorporated herein by reference.

 

**Item 1A.****     Risk Factors**

 

There were no material changes from the risk factors previouslydisclosed in “Item 1A. Risk Factors” included in our Annual Report on Form 10-Kfor the year ended December 31, 2007.

 

**Item 2.****              Unregistered Salesof Equity Securities and Use of Proceeds**

 

None.

 

**Item 3.****              Default Upon SeniorSecurities**

 

None.

 

**Item 4.****              Submission ofMatters to a Vote of Security Holders**

 

The AnnualMeeting of Stockholders was held on May 22, 2008. The stockholders voted on thefollowing matters as set forth in the proxy statement:

 

1.  ELECTION OF DIRECTORS. The stockholders votedto elect five directors to a one-year term expiring at the annual meeting ofstockholders in 2009. The voting tabulation for each nominee was as follows:

 
| **Director**         | ** ** | **Votes in Favor** | ** ** | **Votes Withheld** | ** ** |
|----------------------|------------|--------------------|------------|--------------------|------------|
|                 |       |               |       |               |       |
| John B. Benton       |       | 20,661,449         |       | 2,522,068          |       |
|                 |       |               |       |               |       |
| Stephen X. Graham    |       | 19,925,199         |       | 3,258,318          |       |
|                 |       |               |       |               |       |
| Henry H. Graham, Jr. |       | 21,008,976         |       | 2,174,541          |       |
|                 |       |               |       |               |       |
| Jay E. Ricks         |       | 19,925,199         |       | 3,258,318          |       |
|                 |       |               |       |               |       |
| John V. Sponyoe      |       | 19,887,112         |       | 3,296,405          |       |

 

 

2.  RATIFICATION OF INDEPENDENTACCOUNTANTS. The stockholders ratified the selection of Ernst & Young LLPas the Company’s independent registered public accounting firm for the current2008 fiscal year. The voting tabulation was as follows: 23,146,327 votes infavor of the ratification; 35,150 against the ratification; and 2,040abstentions.

 

3.  APPROVAL OF AMENDMENT TO THETNS, INC. 2004 LONG-TERM INCENTIVE PLAN WITH RESPECT TO THE ADDITION OF UP TO800,000 SHARES. The stockholders approved an increase in the aggregate numberof shares of Common Stock authorized for issuance under the Company’s 2004Long-Term Incentive Plan from 3,847,384 to 4,647,384 shares.  The voting tabulation was as follows:14,465,962 votes in favor of the increase; 6,578,716 votes against the increase;and 124,813 abstentions.

 

**Item 5.****              Other Information**

 

None.

 

**Item 6.****              Exhibits**

 

(31.1)  Certification—ChiefExecutive Officer

 

(31.2)  Certification — ChiefFinancial Officer

 

(32.1)  Written Statement ofChief Executive Officer and Chief Financial Officer

 

26

----

Tableof Contents

 

**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
|                       |   | TNS, Inc. |
|----------------------------|--------|----------------|
|                       |   | (Registrant)   |
|                       |   |           |
| Date: August 11, 2008 |   | By:            | /s/ HENRY H. GRAHAM, JR. |
|                       |   |           |
|                       |   |           | Henry H. Graham, Jr. |
|                       |   |           | Chief Executive Officer |
|                       |   |           |
| Date: August 11, 2008 |   | By:            | /s/ DENNIS L. RANDOLPH, JR. |
|                       |   |           |
|                       |   |           | Dennis L. Randolph, Jr. |
|                       |   |           | Executive Vice President, Chief Financial Officer &  Treasurer |

 

27

----