Merchant Services segment’s results are driven by the authorization and capture transactions processed at the point-of-sale and clearing and settlement transactions at the end of the day. This segment’s authorization and capture transactions are primarily through dial-up or Internet connectivity. With the acquisition of TMS, dollar sales volume also drives the Merchant Services segment’s results. The changes in cost of services, and selling, general and administrative expenses for the years ended December 31, 2010 and 2009 include an increase of $1.6 million and a decrease of $39.6 million, respectively, related to the effects of currency translation of the Company’s foreign based subsidiaries and branches. The impact of acquisitions on consolidated total expenses was $83.1 million in 2010, including $4.1 million of professional and legal fees associated with the acquisition of TMS. In February 2010, the Company reduced its overall workforce by approximately 5%, primarily from the U.S., through a targeted workforce reduction and attrition. Some positions were eliminated and some employees were terminated with severance. Federal legislation was recently enacted which makes extensive changes to the current system of health care insurance and benefits. The Company has reviewed the legislation and, based upon information available, expects the impact of the legislation on 2011 to be approximately $2.2 million. Spin related expenses consist of expenses associated with the sep- aration from Synovus Financial Corp. (Synovus). As the spin-off was finalized and completed, TSYS incurred expenses for the incremental fair value associated with converting Synovus stock options held by TSYS employees to TSYS options. During the year ended Decem- ber 31, 2008, the Company incurred approximately $11.1 million of spin related expenses. Refer to Note 25 in the consolidated financial statements for more information on the spin-off. Income tax expense was $106.1 million, $121.9 million and $131.2 million in 2010, 2009 and 2008, respectively, representing effective income tax rates of 34.9%, 35.4% and 34.4%, respec- tively. The calculation of the effective tax rate excludes noncon- trolling interest in consolidated subsidiaries’ net income and includes equity in income of equity investments in pretax income. During 2010, the Company generated foreign net operating loss benefits in excess of its utilization capacity based on both the Company’s current operations and with consideration of future tax planning strategies. Additionally, the Company reassessed its need for federal and state valuation allowances based upon these same considerations. Accordingly, the Company experienced a net increase in its valuation allowance for deferred income tax assets of $2.6 million. Nonoperating income (expense) consists of interest income, inter- est expense and gains and losses on currency translations. Non- operating income increased in 2010 as compared to 2009, and decreased in 2009 as compared to 2008. Interest income for 2010 was $638,000, a 65.7% decrease com- pared to $1.9 million in 2009, which was a 78.5% decrease com- pared to $8.6 million in 2008. The variation in interest income is primarily attributable to changes in short-term interest rates in 2010 and 2009 and the amount of cash available for investments. TSYS has adopted the permanent reinvestment exception under ASC 740, “Income Taxes,” with respect to future earnings of certain foreign subsidiaries. As a result, TSYS now considers foreign earnings related to these foreign operations to be permanently reinvested. In 2010, TSYS reassessed its contingencies for foreign, federal and state exposures, which resulted in a net decrease in tax contin- gency amounts of approximately $0.5 million. Interest expense for 2010 was $2.9 million, a decrease of $1.2 million compared to $4.1 million in 2009, which was a decrease of $7.2 million compared to $11.3 million in 2008. The decrease in interest expense in 2010 compared to 2009 is attributable to the changes in interest rates. The decrease in interest expense in 2009 compared to 2008 relates to changes in interest rates. For the years ended December 31, 2010, 2009 and 2008, the Company recorded a translation loss of approximately $162,000 and $2.6 million and a translation gain of $10.5 million, respec- tively, related to intercompany loans and foreign denominated cash and accounts receivable balances. TSYS’ share of income from its equity in equity investments was $7.1 million, $7.0 million and $7.4 million for 2010, 2009 and 2008, respectively. Refer to Note 11 in the consolidated financial statements for more information on equity investments. 19 Operating Expenses Spin Related Expenses Nonoperating Income (Expense) Income Taxes Equity in Income of Equity Investments