EURONET WORLDWIDE, INC. - Quarter Report: 2009 June (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-31648

EURONET WORLDWIDE, INC.

Delaware (State or other jurisdiction of incorporation or organization)		74-2806888 (I.R.S. Employer Identification No.)

4601 COLLEGE BOULEVARD, SUITE 300
LEAWOOD, KANSAS		66211
(Address of principal executive offices)		(Zip Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

Large accelerated filer þ		Accelerated filer o		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 (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares of the issuer’s common stock, $0.02 par value, outstanding as of July 31, 2009 was 50,650,787 shares.

 

 

Table of Contents

PART I—FINANCIAL INFORMATION			3
ITEM 1. FINANCIAL STATEMENTS			3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			35
ITEM 4. CONTROLS AND PROCEDURES			36
PART II—OTHER INFORMATION			37
ITEM 1. LEGAL PROCEEDINGS			37
ITEM 1A. RISK FACTORS			37
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			37
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			38
ITEM 5. OTHER INFORMATION			38
ITEM 6. EXHIBITS			39
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I—FINANCIAL INFORMATION

ITEM 1.		FINANCIAL STATEMENTS

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited, in thousands, except share and per share data)

		As of
						December 31,
		June 30, 2009				2008
ASSETS
Current assets:
Cash and cash equivalents		$	160,516			$	181,341
Restricted cash			112,577				131,025
Inventory — PINs and other			53,933				61,279
Trade accounts receivable, net of allowances for doubtful accounts of $10,046 at June 30, 2009 and $9,445 at December 31, 2008			243,075				261,084
Deferred income taxes, net			8,196				8,539
Prepaid expenses and other current assets			39,205				35,352
Current assets of discontinued operations			3,046				3,729
Total current assets			620,548				682,349
Property and equipment, net of accumulated depreciation of $139,220 at June 30, 2009 and $125,258 at December 31, 2008			94,730				89,532
Goodwill			492,448				488,305
Acquired intangible assets, net of accumulated amortization of $75,906 at June 30, 2009 and $62,920 at December 31, 2008			120,871				125,313
Deferred income taxes, net			38,273				40,465
Other assets, net of accumulated amortization of $17,835 at June 30, 2009 and $15,785 at December 31, 2008			36,806				20,628
Non-current assets of discontinued operations			5,019				4,053
Total assets		$	1,408,695			$	1,450,645
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	218,323			$	245,671
Accrued expenses and other current liabilities			221,371				223,814
Current portion of capital lease obligations			3,866				4,614
Short-term debt obligations and current maturities of long-term debt obligations			45,063				68,646
Income taxes payable			20,791				16,590
Deferred income taxes			6,019				5,592
Deferred revenue			12,789				14,914
Current liabilities of discontinued operations			2,988				3,359
Total current liabilities			531,210				583,200
Debt obligations, net of current portion			283,823				294,355
Capital lease obligations, net of current portion			4,371				6,356
Deferred income taxes			57,608				62,905
Other long-term liabilities			8,392				7,919
Total liabilities			885,404				954,735
Equity:
Euronet Worldwide, Inc. stockholders’ equity
Preferred Stock, $0.02 par value. Authorized 10,000,000 shares; none issued			—				—
Common Stock, $0.02 par value. 90,000,000 shares authorized; 50,868,508 issued at June 30, 2009 and 50,605,909 issued at December 31, 2008			1,017				1,012
Additional paid-in-capital			735,245				729,907
Treasury stock, at cost, 242,649 shares at June 30, 2009 and 225,072 shares at December 31, 2008			(1,063	)			(784	)
Accumulated deficit			(230,210	)			(233,456	)
Restricted reserve			1,028				996
Accumulated other comprehensive income (loss)			10,529				(9,350	)
Total Euronet Worldwide, Inc. stockholders’ equity			516,546				488,325
Noncontrolling interests			6,745				7,585
Total equity			523,291				495,910
Total liabilities and equity		$	1,408,695			$	1,450,645

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share data)

		Three Months Ended June 30,								Six Months Ended June 30,
		2009				2008				2009				2008
Revenues:
EFT Processing Segment		$	45,592			$	52,361			$	91,798			$	100,597
Prepaid Processing Segment			145,253				152,633				279,776				296,858
Money Transfer Segment			57,769				59,456				110,737				111,788
Total revenues			248,614				264,450				482,311				509,243
Operating expenses:
Direct operating costs			165,053				179,425				318,601				345,363
Salaries and benefits			31,085				33,064				59,681				63,758
Selling, general and administrative			20,911				20,050				39,979				40,999
Goodwill and acquired intagible assets impairment			—				—				9,884				—
Depreciation and amortization			13,541				14,613				26,444				28,594
Total operating expenses			230,590				247,152				454,589				478,714
Operating income			18,024				17,298				27,722				30,529
Other income (expense):
Interest income			885				2,092				1,854				5,900
Interest expense			(6,653	)			(9,138	)			(13,720	)			(19,026	)
Income from unconsolidated affiliates			516				238				1,034				481
Impairment loss on investment securities			—				(1,258	)			—				(18,760	)
Loss on early retirement of debt			(150	)			(91	)			(253	)			(246	)
Foreign currency exchange gain (loss), net			9,650				(378	)			(941	)			12,699
Other income (expense), net			4,248				(8,535	)			(12,026	)			(18,952	)
Income from continuing operations before income taxes			22,272				8,763				15,696				11,577
Income tax expense			(6,397	)			(1,662	)			(11,714	)			(11,749	)
Income (loss) from continuing operations			15,875				7,101				3,982				(172	)
Discontinued operations, net			146				(496	)			85				(1,309	)
Net income (loss)			16,021				6,605				4,067				(1,481	)
Less: Net income attributable to noncontrolling interests			(477	)			(673	)			(821	)			(1,236	)
Net income (loss) attributable to Euronet Worldwide, Inc.		$	15,544			$	5,932			$	3,246			$	(2,717	)
Earnings (loss) per share attributable to Euronet Worldwide, Inc. stockholders — basic:
Continuing operations		$	0.31			$	0.13			$	0.06			$	(0.03	)
Discontinued operations			—				(0.01	)			—				(0.03	)
Total		$	0.31			$	0.12			$	0.06			$	(0.06	)
Basic weighted average shares outstanding			50,425,261				48,916,432				50,358,983				48,862,196
Earnings (loss) per share attributable to Euronet Worldwide, Inc. stockholders — diluted:
Continuing operations		$	0.30			$	0.13			$	0.06			$	(0.03	)
Discontinued operations			—				(0.01	)			—				(0.03	)
Total		$	0.30			$	0.12			$	0.06			$	(0.06	)
Diluted weighted average shares outstanding			51,240,221				50,575,414				50,821,373				48,862,196

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited, in thousands)

		Three Months Ended June 30,								Six Months Ended June 30,
		2009				2008				2009				2008
Net income (loss)		$	16,021			$	6,605			$	4,067			$	(1,481	)
Other comprehensive income (loss), net of tax:
Translation adjustment			39,736				3,419				18,123				35,906
Unrealized gain (loss) on interest rate swaps			353				724				830				(27	)
Gain (loss) on investment securities			803				—				1,030				(572	)
Comprehensive income			56,913				10,748				24,050				33,826
Comprehensive income attributable to noncontrolling interests			(825	)			(644	)			(925	)			(1,972	)
Comprehensive income attributable to Euronet Worldwide, Inc.		$	56,088			$	10,104			$	23,125			$	31,854

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited, in thousands)

		Six Months Ended June 30,
		2009				2008
Net income (loss)		$	4,067			$	(1,481	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			26,444				29,063
Share-based compensation			3,825				5,618
Unrealized foreign exchange (gain) loss, net			1,000				(12,693	)
Non-cash impairment of goodwill and acquired intangible assets			9,884				—
Non-cash impairment of investment securities			—				18,760
Deferred income tax expense (benefit)			(2,679	)			752
Income from unconsolidated affiliates			(1,034	)			(481	)
Accretion of convertible debentures discount and amortization of debt issuance costs			5,855				7,630
Changes in working capital, net of amounts acquired:
Income taxes payable, net			3,472				(557	)
Restricted cash			32,460				36,971
Inventory — PINs and other			8,857				(1,824	)
Trade accounts receivable			28,577				2,978
Prepaid expenses and other current assets			(2,684	)			10,054
Trade accounts payable			(37,890	)			(85,682	)
Deferred revenue			(1,896	)			(490	)
Accrued expenses and other current liabilities			(18,956	)			48,993
Changes in noncurrent assets and liabilities			(9,284	)			55
Net cash provided by operating activities			50,018				57,666
Cash flows from investing activities:
Acquisitions, net of cash acquired			(10,016	)			(3,457	)
Purchases of property and equipment			(16,783	)			(21,223	)
Purchases of other long-term assets			(1,360	)			(1,799	)
Acquisition escrow			—				26,000
Other, net			(270	)			762
Net cash provided by (used in) investing activities			(28,429	)			283
Cash flows from financing activities:
Proceeds from issuance of shares			888				1,007
Net repayments of short-term debt obligations and revolving
credit agreements classified as current liabilities			(199	)			(78	)
Borrowings from revolving credit agreements classified as non-current liabilities			285,400				29,300
Repayments of revolving credit agreements classified as non-current liabilities			(297,219	)			(84,943	)
Repayments of long-term debt obligations			(27,083	)			(15,000	)
Repayments of capital lease obligations			(3,149	)			(4,165	)
Cash dividends paid to noncontrolling interests stockholders			(2,413	)			—
Other, net			(613	)			(399	)
Net cash used in financing activities			(44,388	)			(74,278	)
Effect of exchange differences on cash			2,508				4,645
Decrease in cash and cash equivalents			(20,291	)			(11,684	)
Cash and cash equivalents at beginning of period (includes cash of discontinued operations of $552 in 2009 and $722 in 2008)			181,893				267,591
Cash and cash equivalents at end of period (includes cash of discontinued operations of $1,086 in 2009 and $300 in 2008)		$	161,602			$	255,907
Interest paid during the period		$	7,162			$	11,665
Income taxes paid during the period			11,805				10,464

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) GENERAL

Organization

Euronet Worldwide, Inc. and its subsidiaries (the “Company” or “Euronet”) is an industry leader in processing secure electronic financial transactions in three principal business segments. Euronet’s Prepaid Processing Segment is one of the world’s largest providers of “top-up” services for prepaid products, primarily prepaid mobile airtime, distributing these products in Europe, the Middle East, Asia Pacific and North America. The EFT Processing Segment provides end-to-end solutions relating to operations of automated teller machine (“ATM”) and point-of-sale (“POS”) networks, and debit and credit card processing in Europe, the Middle East and Asia Pacific. The Money Transfer Segment, comprised primarily of the Company’s RIA Envia, Inc. (“RIA”) subsidiary and its operating subsidiaries, is the third-largest global money transfer company based upon revenues and volumes, and provides services through a sending network of agents and Company-owned stores primarily in North America and Europe, disbursing money transfers through a worldwide payer network.

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared from the records of the Company, in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, such unaudited consolidated financial statements contain all adjustments (consisting of normal interim closing procedures) necessary to present fairly the financial position of the Company as of June 30, 2009, and the results of its operations for the three- and six-month periods ended June 30, 2009 and 2008 and its cash flows for the six-month periods ended June 30, 2009 and 2008.

The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Euronet for the year ended December 31, 2008, including the notes thereto, set forth in the Company’s 2008 Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for the three- and six-month periods ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year ending December 31, 2009. Certain amounts in prior years have been reclassified to conform to current period presentation.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

Convertible debentures

Effective January 1, 2009, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” FSP APB 14-1 requires the proceeds from the issuance of such convertible debt instruments to be allocated between debt and equity components so that debt is discounted to reflect the Company’s nonconvertible debt borrowing rate. The debt discount is amortized over the period the convertible debt is expected to be outstanding as additional non-cash interest expense. This treatment impacts the accounting associated with the Company’s convertible debentures. The Company’s Unaudited Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Income and Statements of Cash Flows have been adjusted to reflect the retrospective application of the provisions to prior periods.

Noncontrolling interests

Effective January 1, 2009, the Company adopted the provision of FASB Statement of Financial Accounting Standards (“SFAS”) No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” SFAS No. 160 requires noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. The presentation of the Company’s Unaudited Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Income and Statements of Cash Flows has been adjusted to reflect the retrospective application of the provisions to prior periods.

Business combinations

Effective January 1, 2009, the Company adopted the provision of SFAS No. 141(R), “Business Combinations,” which is a revision of SFAS No. 141, “Business Combinations.” SFAS No. 141(R) applies to all business combinations and requires most identifiable assets,

liabilities, noncontrolling interests and goodwill acquired in a business combination to be recorded at “full fair value” at the acquisition date. SFAS No. 141(R) also requires transaction-related costs to be expensed in the period incurred, rather than capitalizing these costs as a component of the respective purchase price.

Accounting for derivative instruments and hedging activities

The Company accounts for derivative instruments and hedging activities in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, which requires that all derivative instruments be recognized as either assets or liabilities on the balance sheet at fair value. During the second quarter 2007, the Company entered into derivative instruments to manage exposure to interest rate risk that are considered cash flow hedges under the provisions of SFAS No. 133. To qualify for hedge accounting under SFAS No. 133, the details for the hedging relationship must be formally documented at the inception of the arrangement, including the Company’s hedging strategy, risk management objective, the specific risk being hedged, the derivative instrument being used, the item being hedged, an assessment of hedge effectiveness and how effectiveness will continue to be assessed and measured. For the effective portion of a cash flow hedge, changes in the value of the hedge instrument are recorded temporarily in stockholders’ equity and the Unaudited Consolidated Statements of Comprehensive Income as a component of other comprehensive income and then recognized as an adjustment to interest expense over the term of the hedging instrument.

In the Money Transfer Segment, the Company enters into foreign currency forward contracts to offset foreign currency exposure related to the notional value of money transfer transactions collected in currencies other than the U.S. dollar. These forward contracts are considered derivative instruments under the provisions of SFAS No. 133, however, the Company does not designate such instruments as hedges. Accordingly, changes in the value of these contracts are recognized immediately as a component of foreign currency exchange gain (loss), net in the Unaudited Consolidated Statements of Operations. The impact of changes in value of these forward contracts, together with the impact of the change in value of the related foreign currency denominated receivable, on the Company’s Unaudited Consolidated Statements of Operations is not significant.

Cash flows resulting from derivative instruments are classified as cash flows from operating activities in the Company’s Unaudited Consolidated Statements of Cash Flows. The Company enters into derivative instruments with financial institutions it believes to be highly credit-worthy and does not use derivative instruments for trading or speculative purposes.

Additionally, effective January 1, 2009, the Company adopted the provisions of SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” which requires an entity to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. See Note 7, Derivative Instruments and Hedging Activities, for these disclosures and a further discussion of derivative instruments.

Fair value measurements

Effective January 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value Measurements,” for financial assets and liabilities. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Statement applies whenever other accounting pronouncements require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. Additionally, FSP No. 157-2, “Effective Date of FASB Statement No. 157,” delayed the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 for certain nonfinancial assets and liabilities. Beginning January 1, 2009, the Company adopted the provisions for those nonfinancial assets and liabilities, which include those measured at fair value in goodwill impairment testing, indefinite-lived intangible assets measured at fair value for impairment assessment, nonfinancial long-lived assets measured at fair value for impairment assessment and investments in unconsolidated subsidiaries.

Effective for the quarterly reporting period ended June 30, 2009, the Company adopted the provisions of FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” which requires the annual fair value disclosures about financial instruments within the scope of SFAS No. 107 to also be made in interim financial statements.

See Note 9, Fair Value Measurements, for the required fair value disclosures.

Money transfer settlement obligations

Money transfer settlement obligations are recorded in accrued expenses and other current liabilities on the Company’s Unaudited Consolidated Balance Sheets and consist of amounts owed by Euronet to money transfer recipients. As of June 30, 2009, the Company’s money transfer settlement obligations were $31.9 million.

Investment in MoneyGram International, Inc.

The Company’s investment in MoneyGram International, Inc. (“MoneyGram”) was classified as available-for-sale as of December 31, 2007 and was recorded in other assets on the Company’s Consolidated Balance Sheet. During the first quarter 2008, the Company decided not to pursue the acquisition of MoneyGram. Also, during the six months ended June 30, 2008, the value of the Company’s investment in MoneyGram declined and the Company determined the decline to be other than temporary. Accordingly, the Company recognized impairment losses associated with the investment of $1.3 million in the second quarter 2008 and $18.8 million during the six months ended June 30, 2008 and reversed the $0.6 million gain recorded as of December 31, 2007 in accumulated other comprehensive income. The investment was included in other current assets on the Company’s Unaudited Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008. During the first quarter 2008, the Company also recorded acquisition-related expenses totaling $3.0 million, which are included in selling, general and administrative expenses.

Subsequent events

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events.” This standard incorporates into authoritative accounting literature certain guidance that already existed within generally accepted auditing standards, but the rules concerning recognition and disclosure of subsequent events will remain essentially unchanged. SFAS No. 165 provides general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company adopted the provisions of SFAS No. 165 for the quarter ended June 30, 2009. The adoption of these provisions did not have a material effect on the Consolidated Financial Statements. The Company has evaluated subsequent events through August 10, 2009, the date the financial statements were issued. Events occurring after this date have not been evaluated.

Recent accounting pronouncements

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 168 authorizes the FASB Accounting Standards Codification™ (“Codification”) to become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws remain sources of authoritative GAAP for SEC registrants. On the effective date of SFAS No. 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. All guidance contained in the Codification carries an equal level of authority. Certain accounting treatments that entities have followed, and continue to follow, which are not part of the Codification are grandfathered because they were adopted before a certain date or certain accounting standards have allowed for the continued application of superseded accounting standards. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company’s adoption of SFAS No. 168 is not expected to have a material impact on the Consolidated Financial Statements. However, all references to U.S. GAAP recognized by the FASB will use Codification citations except for those to grandfathered accounting literature.

(3) EARNINGS PER SHARE

Basic earnings per share has been computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the respective period. Diluted earnings per share has been computed by dividing earnings available to common stockholders by the weighted average shares outstanding during the respective period, after adjusting for any potential dilution of the assumed conversion of the Company’s convertible debentures, shares issuable in connection with acquisition obligations, restricted stock and options to purchase the Company’s common stock. The following table provides the computation of diluted weighted average number of common shares outstanding:

		Three Months Ended June 30,								Six Months Ended June 30,
		2009				2008				2009				2008
Computation of diluted weighted average shares outstanding:
Basic weighted average shares outstanding			50,425,261				48,916,432				50,358,983				48,862,196
Incremental shares from assumed conversion of stock options and restricted stock			814,960				572,266				462,390				—
Weighted average shares issuable in connection with acquisition obligations			—				1,086,716				—				—
Diluted weighted average shares outstanding			51,240,221				50,575,414				50,821,373				48,862,196

The table includes all stock options and restricted stock that are dilutive to Euronet’s weighted average common shares outstanding during the period. For the six months ended June 30, 2008, the Company incurred a net loss; therefore, diluted loss per share is the same as basic loss per share for the period. The calculation of diluted earnings per share excludes stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding for the three- and six-month periods ended June 30, 2009 of approximately 1,989,000 and 3,868,000, respectively. The calculation of diluted earnings per share excludes stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding for the three- and six-month periods ended June 30, 2008 of approximately 1,632,000 and 2,959,000, respectively. Additionally, for the six months ended June 30, 2008, the calculation of diluted loss per share excludes approximately 1,087,000 shares issuable in connection with acquisition obligations that are anti-dilutive to the Company’s weighted average common shares outstanding.

The Company has $44.2 million principal amount of 1.625% convertible debentures due 2024 and $175 million principal amount of 3.50% convertible debentures due 2025 outstanding that, if converted, would have a potentially dilutive effect on the Company’s stock. These debentures are convertible into 1.3 million shares of Common Stock for the $44.2 million 1.625% issue, and 4.3 million shares of Common Stock for the $175 million 3.50% issue, only upon the occurrence of certain conditions. As required by EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” if dilutive, the impact of the contingently issuable shares must be included in the calculation of diluted earnings per share under the “if-converted” method, regardless of whether the conditions upon which the debentures would be convertible into shares of the Company’s Common Stock have been met. Under the if-converted method, the assumed conversions of the 1.625% and 3.50% convertible debentures were anti-dilutive for the three- and six-month periods ended June 30, 2009 and 2008.

(4) DISCONTINUED OPERATIONS

During the second quarter 2008, the Company committed to a plan to sell Euronet Essentis Limited (“Essentis”), a U.K. software entity, in order to focus its investments and resources on its transaction processing businesses. The Company is currently negotiating an agreement to sell the assets of the business. Accordingly, Essentis’s results of operations are shown as discontinued operations in the Unaudited Consolidated Statements of Operations for all periods presented. Previously, Essentis’s results were reported in the EFT Processing Segment. The segment results in Note 8, Segment Information, also reflect the reclassification of Essentis to discontinued operations. The following amounts related to Essentis have been segregated from continuing operations and reported as discontinued operations:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2009				2008				2009				2008
Revenues		$	1,835			$	2,864			$	3,259			$	5,134
Income (loss) before income taxes		$	212			$	(665	)		$	119			$	(1,786	)
Net income (loss)		$	146			$	(496	)		$	85			$	(1,309	)

The Unaudited Consolidated Balance Sheets include Essentis’s net assets expected to be sold and the major classes of its assets and liabilities are presented below:

						December 31,
(in thousands)		June 30, 2009				2008
ASSETS
Current assets
Cash and cash equivalents		$	1,086			$	552
Trade accounts receivable, net of allowance for doubtful accounts			942				2,187
Prepaid expenses and other current assets			1,018				990
Total current assets			3,046				3,729
Property and equipment, net of accumulated depreciation			488				427
Acquired intangible assets, net of accumulated amortization			1,116				991
Other assets, net of accumulated amortization			3,415				2,635
Total assets		$	8,065			$	7,782
LIABILITIES
Current liabilities
Trade accounts payable		$	188			$	250
Accrued expenses and other current liabilities			862				760
Deferred revenue			1,938				2,349
Total current liabilities			2,988				3,359
Deferred income taxes			702				624
Other long-term liabilities			4				3
Total liabilities		$	3,694			$	3,986
Net assets		$	4,371			$	3,796

A summary of acquired intangible assets and goodwill activity for the six-month period ended June 30, 2009 is presented below:

		Acquired								Total
		Intangible								Intangible
(in thousands)		Assets				Goodwill				Assets
Balance as of December 31, 2008		$	125,313			$	488,305			$	613,618
Increases (decreases):
Impairment			(1,111	)			(8,773	)			(9,884	)
Acquisitions			6,802				—				6,802
Amortization			(11,249	)			—				(11,249	)
Other (primarily changes in foreign currency exchange rates)			1,116				12,916				14,032
Balance as of June 30, 2009		$	120,871			$	492,448			$	613,319

Estimated annual amortization expense on intangible assets with finite lives, before income taxes, as of June 30, 2009, is expected to total $23.0 million for 2009, $23.2 million for 2010, $19.2 million for 2011, $16.9 million for 2012, $12.4 million for 2013 and $9.6 million for 2014.

The Company’s annual goodwill impairment test is performed during the fourth quarter. The Company’s annual impairment test for the year ended December 31, 2008 resulted in the Company recording an estimated non-cash goodwill impairment charge of $219.8 million in the fourth quarter of 2008 related to its RIA money transfer business and its Spanish prepaid business. Additionally, the Company recorded a non-cash impairment charge of $0.3 million in the fourth quarter of 2008 related to certain trade names and customer relationships of the RIA money transfer business. The Company completed the impairment testing in the first quarter of 2009 and recorded an additional non-cash goodwill impairment charge of $8.8 million and a $1.1 million non-cash impairment charge related to a money transfer intangible asset in the first quarter of 2009.

Determining the fair value of reporting units requires significant management judgment in estimating future cash flows and assessing potential market and economic conditions. It is reasonably possible that the Company’s operations will not perform as expected, or that estimates or assumptions could change, which may result in the Company recording additional material non-cash impairment charges during the year in which these changes take place.

(6) DEBT OBLIGATIONS

A summary of debt obligation activity for the six-month period ended June 30, 2009 is presented below:

														1.625%				3.50%
		Revolving												Convertible				Convertible
		Credit				Other Debt				Capital				Debentures				Debentures
(in thousands)		Facilities				Obligations				Leases				Due 2024				Due 2025				Term Loan				Total
Balance at December 31, 2008		$	16,719			$	288			$	10,970			$	66,548			$	147,446			$	132,000			$	373,971
Increases (decreases):
Net repayments			(11,819	)			(199	)			(3,000	)			(24,966	)			—				(2,000	)			(41,984	)
Accretion			—				—				—				1,581				3,169				—				4,750
Capital lease interest			—				—				808				—				—				—				808
Foreign currency exchange (gain) loss			118				1				(541	)			—				—				—				(422	)
Balance at June 30, 2009			5,018				90				8,237				43,163				150,615				130,000				337,123
Less — current maturities			—				—				(3,866	)			(43,163	)			—				(1,900	)			(48,929	)
Long-term obligations at June 30, 2009		$	5,018			$	90			$	4,371			$	—			$	150,615			$	128,100			$	288,194

During the first half of 2009, the Company repurchased in privately negotiated transactions $25.8 million in principal amount of the 1.625% convertible debentures due 2024. During the six months ended June 30, 2009, the Company repaid $2.0 million of the term loan, of which $1.0 million were scheduled repayments. The remaining $1.0 million represents prepayment of amounts not yet due and, along with the convertible debentures repurchases, resulted in the Company recognizing a $0.3 million pre-tax loss on early retirement of debt.

As discussed in Note 2, Summary of Significant Accounting Policies and Practices, the Company adopted the provisions of FSP APB 14-1, which resulted in the adjustment of amounts previously reported for the Company’s convertible debentures. The 1.625% convertible debentures had principal amounts outstanding of $44.2 million and $70.0 million and unamortized discounts outstanding of $1.0 million and $3.5 million as of June 30, 2009 and December 31, 2008, respectively. The discount will be amortized through December 15, 2009. Contractual interest expense was $0.2 million and $0.5 million and discount accretion was $0.7 million and $1.6 million for the three and six months ended June 30, 2009, respectively. Contractual interest expense was $0.6 million and $1.1 million and discount accretion was $1.7 million and $3.4 million for the three and six months ended June 30, 2008, respectively. The effective interest rate was 7.1% for the three and six months ended June 30, 2009 and 2008. The carrying amount of the equity portion was $32.3 million as of June 30, 2009 and December 31, 2008.

The 3.50% convertible debentures had principal amounts outstanding of $175.0 million and unamortized discounts outstanding of $24.4 million and $27.6 million as of June 30, 2009 and December 31, 2008, respectively. The discount will be amortized through October 15, 2012. Contractual interest expense was $1.5 million and $3.1 million for the respective three- and six-month periods ended June 30, 2009 and 2008. Discount accretion was $1.6 million and $3.2 million for the three and six months ended June 30, 2009, respectively and $1.5 million and $2.9 million for the three and six months ended June 30, 2008, respectively. The effective interest rate was 8.4% for the three and six months ended June 30, 2009 and 2008. The carrying amount of the equity portion was $45.1 million as of June 30, 2009 and December 31, 2008.

(7) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As of June 30, 2009, the Company had foreign currency forward contracts outstanding with a notional value of $41.2 million, primarily in euros, which were not designated as hedges and had a weighted average maturity of 4.9 days. Although the Company enters into foreign currency forward contracts to offset foreign currency exposure related to the notional value of money transfer transactions collected in currencies other than the U.S. dollar, they are not designated as hedges under SFAS No. 133. This is mainly due to the relatively short duration of the contracts, typically 1 to 14 days, and the frequency with which the Company enters into them.

The Company has an office lease in a foreign country that requires payment in a currency that is not the functional currency of either party to the lease or the Company’s reporting currency. Therefore, the lease contains an embedded derivative per SFAS No. 133 and its fair value is recorded in the Unaudited Consolidated Balance Sheet.

During 2007, the Company entered into interest rate swap agreements for a total notional amount of $50 million to manage interest rate exposure related to a portion of the term loan. The interest rate swap agreements were determined to be cash flow hedges and effectively converted $50 million of the term loan to a fixed interest rate of 7.3% through the May 2009 maturity date of the swap agreements. The swap agreements required no payment by either party at their maturities.

Below are the tabular disclosures required by SFAS No. 161:

						Fair Values of Derivative
						Instruments
		Consolidated Balance Sheet								December 31,
(in thousands)		Location				June 30, 2009				2008
						Liability Derivatives
Derivatives designated as hedging instruments under SFAS No. 133
Interest rate swaps related to floating rate debt		Accrued expenses and other current liabilities				$	—			$	(830	)
						Asset Derivatives
Derivatives not designated as hedging instruments under SFAS No. 133
Foreign currency derivative contracts — gross gains		Cash and cash equivalents				$	79			$	433
Foreign currency derivative contracts — gross losses		Cash and cash equivalents					(88	)			(155	)
Total						$	(9	)		$	278
						Liability Derivatives
Embedded derivative in foreign lease		Other long-term liabilities				$	(293	)		$	—
Total derivatives						$	(302	)		$	(552	)

		Amount of Gain (Loss)								Amount of Gain (Loss)
		Recognized in OCI on Derivative								Recognized in OCI on Derivative
		(Effective Portion)								(Effective Portion)
		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2009				2008				2009				2008
Derivatives in SFAS No. 133 Cash Flow Hedging Relationships
Interest rate swaps related to floating rate debt		$	353			$	724			$	830			$	(27	)

						Amount of Gain (Loss)								Amount of Gain (Loss)
		Location of Gain (Loss)				Recognized in Income on Derivative								Recognized in Income on Derivative
		Recognized in Income on				Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		Derivative				2009				2008				2009				2008
Derivatives not designated as hedging instruments under SFAS No. 133
Foreign currency derivative contracts		Foreign currency exchange gain (loss), net				$	42			$	(77	)		$	5			$	2
Embedded derivative in foreign lease		Foreign currency exchange gain (loss), net					276				—				(293	)			—
Total						$	318			$	(77	)		$	(288	)		$	2

(8) SEGMENT INFORMATION

Euronet’s reportable operating segments have been determined in accordance with SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information.” The Company currently operates in the following three reportable operating segments:

	1)		Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, the Middle East and Asia Pacific. The Company provides comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing and electronic recharge services for prepaid mobile airtime. Through this segment, the Company also offers a suite of integrated electronic financial transaction (“EFT”) software solutions for electronic payment, merchant acquiring, card issuing and transaction delivery systems.
	2)		Through the Prepaid Processing Segment, the Company provides distribution of prepaid mobile airtime and other prepaid products and collection services in Europe, the Middle East, Asia Pacific and North America.
	3)		Through the Money Transfer Segment, the Company provides global money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America and Europe, disbursing money transfers through a worldwide payer network. Bill payment services are offered primarily in the U.S.

In addition, in its administrative division, “Corporate Services, Eliminations and Other,” the Company accounts for non-operating activity, certain intersegment eliminations and the costs of providing corporate and other administrative services to the three segments. These services are not directly identifiable with the Company’s reportable operating segments. The following tables present the segment results of the Company’s operations for the three- and six-month periods ended June 30, 2009 and 2008:

		For the Three Months Ended June 30, 2009
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	45,592			$	145,253			$	57,769			$	—			$	248,614
Operating expenses:
Direct operating costs			19,656				117,342				28,055				—				165,053
Salaries and benefits			7,443				6,793				13,103				3,746				31,085
Selling, general and administrative			4,157				5,409				8,847				2,498				20,911
Depreciation and amortization			4,537				3,598				5,083				323				13,541
Total operating expenses			35,793				133,142				55,088				6,567				230,590
Operating income (loss)		$	9,799			$	12,111			$	2,681			$	(6,567	)		$	18,024

		For the Three Months Ended June 30, 2008
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	52,361			$	152,633			$	59,456			$	—			$	264,450
Operating expenses:
Direct operating costs			24,625				124,604				30,196				—				179,425
Salaries and benefits			9,113				6,916				13,035				4,000				33,064
Selling, general and administrative			4,610				5,459				8,577				1,404				20,050
Depreciation and amortization			4,974				4,234				5,090				315				14,613
Total operating expenses			43,322				141,213				56,898				5,719				247,152
Operating income (loss)		$	9,039			$	11,420			$	2,558			$	(5,719	)		$	17,298

		For the Six Months Ended June 30, 2009
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	91,798			$	279,776			$	110,737			$	—			$	482,311
Operating expenses:
Direct operating costs			38,611				226,377				53,613				—				318,601
Salaries and benefits			14,455				13,217				24,923				7,086				59,681
Selling, general and administrative			8,304				9,951				17,662				4,062				39,979
Goodwill and acquired intangible assets impairment			—				—				9,884				—				9,884
Depreciation and amortization			8,719				7,244				9,845				636				26,444
Total operating expenses			70,089				256,789				115,927				11,784				454,589
Operating income (loss)		$	21,709			$	22,987			$	(5,190	)		$	(11,784	)		$	27,722

		For the Six Months Ended June 30, 2008
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	100,597			$	296,858			$	111,788			$	—			$	509,243
Operating expenses:
Direct operating costs			46,362				242,460				56,541				—				345,363
Salaries and benefits			17,021				13,484				24,792				8,461				63,758
Selling, general and administrative			8,388				10,734				16,029				5,848				40,999
Depreciation and amortization			9,642				8,426				9,917				609				28,594
Total operating expenses			81,413				275,104				107,279				14,918				478,714
Operating income (loss)		$	19,184			$	21,754			$	4,509			$	(14,918	)		$	30,529

(9) FAIR VALUE MEASUREMENTS

The carrying amount of cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt obligations approximates fair value, due to their short maturities. The carrying value of the Company’s term loan due 2014 and revolving credit agreements approximate fair value because interest is based on LIBOR that resets at various intervals of less than one year. The following table provides the estimated fair values of the Company’s other financial instruments, based on quoted market prices or significant other observable inputs.

		As of
		June 30, 2009								December 31, 2008
		Carrying								Carrying
(in thousands)		Value				Fair Value				Value				Fair Value
Available-for-sale investment securities		$	2,381			$	2,381			$	1,351			$	1,351
1.625% convertible senior debentures, unsecured, due 2024			43,163				43,068				66,548				63,522
3.50% convertible debentures, unsecured, due 2025			150,615				153,125				147,446				112,131
Foreign currency derivative contracts			(9	)			(9	)			278				278
Embedded derivative in foreign lease			(293	)			(293	)			—				—
Interest rate swaps related to floating rate debt			—				—				(830	)			(830	)

The Company’s assets and liabilities recorded at fair value on a recurring basis are set forth in the following table:

						Fair Value Measurements as of
						June 30, 2009 Using
						Quoted Prices				Signifcant
		Carrying				in Active				Other
		Value as of				Markets for				Observable
(in thousands)		June 30, 2009				Identical Assets				Inputs
Available-for-sale investment securities		$	2,381			$	2,381			$	—
Foreign currency derivative contracts			(9	)			—				(9	)
Embedded derivative in foreign lease			(293	)			—				(293	)

The Company values available-for-sale investment securities using quoted prices from the securities’ primary exchange. Foreign currency derivative contracts are valued using foreign currency exchange quotations for similar assets and liabilities. The embedded derivative in foreign lease is valued using present value techniques and foreign currency exchange quotations.

Certain assets are measured at fair value on a non-recurring basis. During the first quarter of 2009, the Company finalized the assessment of the fair value of the goodwill related to its RIA money transfer business and its Spanish prepaid business and recorded an impairment charge of $8.8 million as discussed in Note 5, Goodwill and Acquired Intangible Assets, Net. The fair values were determined using significant unobservable inputs. The $258.8 million fair value of goodwill was determined by calculating its implied fair value as the excess of the fair value of the respective entity over the fair value of its net assets. Additionally, during the first quarter of 2009, management determined that an acquired intangible asset associated with a previous acquisition in the Money Transfer Segment had no value and, accordingly, the Company wrote off the remaining net book value of the intangible asset of $1.1 million. No assets were measured at fair value on a non-recurring basis in the second quarter of 2009.

(10) GUARANTEES

As of June 30, 2009, the Company had $55.3 million of stand-by letters of credit/bank guarantees issued on its behalf, of which $9.7 million are collateralized by cash deposits held by the respective issuing banks.

Euronet regularly grants guarantees in support of obligations of subsidiaries. As of June 30, 2009, the Company granted off balance sheet guarantees for cash in various ATM networks amounting to $18.9 million over the terms of the cash supply agreements and performance guarantees amounting to approximately $27.2 million over the terms of the agreements with the customers.

From time to time, Euronet enters into agreements with unaffiliated parties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. The amount of such potential obligations is generally not stated in the agreements. Our liability under such indemnification provisions may be mitigated by relevant insurance coverage and may be

subject to time and materiality limitations, monetary caps and other conditions and defenses. Such indemnification obligations include the following:

	•		In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for damages to ATMs and theft of ATM network cash that, generally, is not recorded on the Company’s Consolidated Balance Sheet. As of June 30, 2009, the balance of ATM network cash for which the Company was responsible was approximately $290 million. The Company maintains insurance policies to mitigate this exposure;
	•		In connection with the license of proprietary systems to customers, Euronet provides certain warranties and infringement indemnities to the licensee, which generally warrant that such systems do not infringe on intellectual property owned by third parties and that the systems will perform in accordance with their specifications;
	•		Euronet has entered into purchase and service agreements with vendors and consulting agreements with providers of consulting services, pursuant to which the Company has agreed to indemnify certain of such vendors and consultants, respectively, against third-party claims arising from the Company’s use of the vendor’s product or the services of the vendor or consultant;
	•		In connection with acquisitions and dispositions of subsidiaries, operating units and business assets, the Company has entered into agreements containing indemnification provisions, which can be generally described as follows: (i) in connection with acquisitions made by Euronet, the Company has agreed to indemnify the seller against third party claims made against the seller relating to the subject subsidiary, operating unit or asset and arising after the closing of the transaction, and (ii) in connection with dispositions made by Euronet, Euronet has agreed to indemnify the buyer against damages incurred by the buyer due to the buyer’s reliance on representations and warranties relating to the subject subsidiary, operating unit or business assets in the disposition agreement if such representations or warranties were untrue when made;
	•		Euronet has entered into agreements with certain third parties, including banks that provide fiduciary and other services to Euronet or to the Company’s benefit plans. Under such agreements, the Company has agreed to indemnify such service providers for third party claims relating to the carrying out of their respective duties under such agreements; and
	•		The Company has obtained surety bonds in compliance with money transfer licensing requirements of the applicable governmental authorities and has agreed to reimburse the surety for any amounts that they are required to pay in connection with such bonds.

The Company is also required to meet minimum capitalization and cash requirements of various regulatory authorities in the jurisdictions in which the Company has money transfer operations. To date, the Company is not aware of any significant claims made by the indemnified parties or third parties to guarantee agreements with the Company and, accordingly, no liabilities were recorded as of June 30, 2009 or December 31, 2008.

(11) INCOME TAXES

The Company’s effective tax rates for continuing operations were 28.7% and 19.0% for the three-month periods ended June 30, 2009 and 2008, respectively, and were 74.6% and 101.5% for the six-month periods ended June 30, 2009 and 2008, respectively. The effective tax rates were significantly influenced by the goodwill and acquired intangible assets impairment charge in the first quarter 2009 and the impairment losses on investment securities during the first half of 2008. Additionally, foreign currency exchange rates fluctuated significantly during the reported periods creating foreign currency exchange gains and losses that impacted the effective tax rates. Excluding foreign currency exchange results and the impairments to goodwill and acquired intangible assets and to investment securities from pre-tax income, as well as the related tax effects for these items, the Company’s effective tax rates were 46.8% and 20.2% for the three months ended June 30, 2009 and 2008, respectively, and 44.1% and 23.4% for the six months ended June 30, 2009 and 2008, respectively.

The increases in the effective tax rates, as adjusted, for the second quarter and first half of 2009 compared to the same periods in 2008 are primarily related to the Company’s U.S. tax position. For the three- and six-month periods ended June 30, 2009, the Company has recorded a valuation allowance against its U.S. federal tax net operating losses as it has determined that it is more likely than not that a tax benefit will not be realized. Accordingly, the federal income tax benefit associated with pre-tax book losses generated by the Company’s U.S. entities has not been recognized in these periods. For the three- and six-month periods ended June 30, 2008, no valuation allowance was recorded against its U.S. federal tax net operating losses, resulting in a tax benefit associated with the pre-tax loss generated by the Company’s U.S. operations. Additional reasons for the increases in the Company’s effective tax rates include the accrual of incremental state income tax expense in the first six months of 2009 compared to the same period in 2008, mainly due to exhausting certain state net operating losses, and the recognition of a one-time tax benefit in the first half of 2008 resulting from the successful conclusion of a tax audit in one of the Company’s foreign jurisdictions. Finally, the loss of certain income tax deductions in Spain as a result of the goodwill and acquired intangible assets impairment charges increased income tax expense in the first half of 2009.

(12) CONTINGENCIES

In the second quarter 2009, the Antitrust Division of the United States Department of Justice (the “DOJ”) served Continental Exchange Solutions, Inc. d/b/a RIA Financial Services (“CES”), an indirect, wholly-owned subsidiary of the Company, with a grand jury subpoena requesting documents from CES and its affiliates in connection with an investigation into money transmission services to the Dominican Republic during the period from January 1, 2004 to the date of the subpoena. The Company and CES are fully cooperating with the DOJ in its investigation.

At this time, the Company is unable to predict whether this investigation will result in the DOJ bringing charges against CES. Accordingly, the Company is unable to predict the outcome of this investigation, the possible loss or possible range of loss, if any, associated with the resolution of any charges that may be brought against CES, or any potential effect on the Company’s business, results of operations or financial condition.

The Company acquired all of the stock of RIA Envia, Inc., the parent of CES, in April 2007.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW

COMPANY OVERVIEW, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES

Euronet Worldwide, Inc. (together with our subsidiaries, “we,” “us,” “Euronet” or the “Company”) is a leading electronic payments provider, offering automated teller machine (“ATM”) and point-of-sale (“POS”) and card outsourcing services, card issuing and merchant acquiring services, integrated electronic financial transaction (“EFT”) software, network gateways, electronic distribution of top-up services for prepaid mobile airtime and other prepaid products, electronic consumer money transfer and bill payment services to financial institutions, mobile operators, retailers and individual customers. As of June 30, 2009, we operate in the following three principal business segments:

	•		An EFT Processing Segment, which processes transactions for a network of 9,336 ATMs and approximately 51,000 POS terminals across Europe, the Middle East and Asia Pacific. We provide comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing and electronic recharge services for prepaid mobile airtime. Through this segment, we also offer a suite of integrated EFT software solutions for electronic payment and transaction delivery systems.
	•		A Prepaid Processing Segment, which provides distribution of prepaid mobile airtime and other prepaid products and collection services for various prepaid products, cards and services. We are one of the largest international providers of prepaid mobile airtime processing. Including terminals operated by unconsolidated subsidiaries, we operate a network of approximately 470,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in Europe, the Middle East, Asia Pacific and North America.
	•		A Money Transfer Segment, which provides global consumer to consumer money transfer services. We offer this service through a sending network of agents and Company-owned stores primarily in Europe and North America, disbursing money transfers through a worldwide payer network. Bill payment services are offered primarily in the U.S. Based on revenues and volumes, we are the third-largest global money transfer company. The Money Transfer Segment originates and terminates transactions through a network of approximately 79,200 locations, which include sending agents and Company-owned stores, and an extensive payer network in more than 100 countries.

We have five processing centers in Europe, two in Asia Pacific and two in North America. We have 23 principal offices in Europe, seven in North America, five in Asia Pacific and one in the Middle East. Our executive offices are located in Leawood, Kansas, USA. With approximately 74% of our revenues denominated in currencies other than the U.S. dollar, any significant changes in currency exchange rates will likely have a significant impact on our growth in revenues, operating income and diluted earnings per share.

SOURCES OF REVENUES AND CASH FLOW

Euronet earns revenues and income based on ATM management fees, transaction fees and commissions, professional services, software licensing fees and software maintenance agreements. Each business segment’s sources of revenue are described below.

EFT Processing Segment — Revenues in the EFT Processing Segment, which represented approximately 19% of total consolidated revenues for the first half of 2009, are derived from fees charged for transactions effected by cardholders on our proprietary network of ATMs, as well as fixed management fees and transaction fees we charge to banks for operating ATMs and processing credit cards under outsourcing agreements. Through our proprietary network, we generally charge fees for four types of ATM transactions: i) cash withdrawals, ii) balance inquiries, iii) transactions not completed because the relevant card issuer did not give authorization, and iv) prepaid telecommunication recharges. Revenues in this segment are also derived from license fees, professional services and maintenance fees for software and sales of related hardware. Software license fees are the fees we charge to license our proprietary application software to customers. Professional service fees consist of charges for customization, installation and consulting services to customers. Software maintenance revenues represent the ongoing fees charged for maintenance and support for customers’ software products. Hardware sales are derived from the sale of computer equipment necessary for the respective software solution.

Prepaid Processing Segment — Revenues in the Prepaid Processing Segment, which represented approximately 58% of total consolidated revenues for the first half of 2009, are primarily derived from commissions or processing fees received from telecommunications service providers for the sale and distribution of prepaid mobile airtime. We also generate revenues from commissions earned from the distribution of other prepaid products. Due to certain provisions in our mobile phone operator agreements, the operators have the ability to reduce the overall commission paid on each top-up transaction. However, by virtue of our agreements with retailers (distributors where POS terminals are located) in certain markets, not all of these reductions are absorbed by us because we are able to pass a significant portion of the reductions to retailers. Accordingly, under certain retailer agreements, the effect is to reduce revenues and reduce our direct operating costs resulting in only a small impact on gross profit and operating income. In some markets, reductions in commissions can significantly impact our results as it may not be possible, either contractually or commercially in the concerned market, to pass a

reduction in commissions to the retailers. In Australia, certain retailers negotiate directly with the mobile phone operators for their own commission rates, which also limits our ability to pass through reductions in commissions. Agreements with mobile operators are important to the success of our business. These agreements permit us to distribute prepaid mobile airtime to the mobile operators’ customers. Other products offered by this segment include prepaid long distance calling card plans, prepaid internet plans, prepaid debit cards, prepaid gift cards, bill payment, money transfer and prepaid mobile content such as music, ringtones and games.

Money Transfer Segment — Revenues in the Money Transfer Segment, which represented approximately 23% of total consolidated revenues for the first half of 2009, are primarily derived from charging a transaction fee, as well as the difference between purchasing foreign currency at wholesale exchange rates and selling the foreign currency to consumers at retail exchange rates. We have an origination network in place comprised of agents and Company-owned stores primarily in Europe and North America and a worldwide network of correspondent agents, consisting primarily of financial institutions in the transfer destination countries. Origination and correspondent agents each earn fees for cash collection and distribution services. These fees are recognized as direct operating costs at the time of sale.

OPPORTUNITIES AND CHALLENGES

EFT Processing Segment — The continued expansion and development of our EFT Processing Segment business will depend on various factors including, but not necessarily limited to, the following:

	•		the impact of competition by banks and other ATM operators and service providers in our current target markets;
	•		the demand for our ATM outsourcing services in our current target markets;
	•		the ability to develop products or services to drive increases in transactions;
	•		the expansion of our various business lines in markets where we operate and in new markets;
	•		the entrance into additional card acceptance and ATM management agreements with banks;
	•		the ability to obtain required licenses in markets we intend to enter or expand services;
	•		the availability of financing for expansion;
	•		the ability to efficiently install ATMs contracted under newly awarded outsourcing agreements;
	•		the ability to renew existing contracts at profitable rates;
	•		the ability to expand and sign additional customers for the cross-border merchant processing and acquiring business; and
	•		the continued development and implementation of our software products and their ability to interact with other leading products.

Prepaid Processing Segment — The continued expansion and development of the Prepaid Processing Segment business will depend on various factors, including, but not necessarily limited to, the following:

	•		the ability to negotiate new agreements in additional markets with mobile phone operators, agent financial institutions and retailers;
	•		the ability to use existing expertise and relationships with mobile operators and retailers to our advantage;
	•		the continuation of the trend towards conversion from scratch card solutions to electronic processing solutions for prepaid mobile airtime among mobile phone users and the continued use of third-party providers such as ourselves to supply this service;
	•		the development of mobile phone networks in these markets and the increase in the number of mobile phone users;
	•		the overall pace of growth in the prepaid mobile phone market;
	•		our market share of the retail distribution capacity;
	•		the level of commission that is paid to the various intermediaries in the prepaid mobile airtime distribution chain;
	•		our ability to add new and differentiated prepaid products in addition to those offered by mobile operators;
	•		the ability to take advantage of cross-selling opportunities with our Money Transfer Segment, including providing money transfer services through our prepaid locations; and
	•		the availability of financing for further expansion.

Money Transfer Segment — The expansion and development of our money transfer business will depend on various factors, including, but not necessarily limited to, the following:

	•		the continued growth in worker migration and employment opportunities;
	•		the mitigation of economic and political factors that have had an adverse impact on money transfer volumes, such as changes in the economic sectors in which immigrants work and the developments in immigration policies in the U.S.;
	•		the continuation of the trend of increased use of electronic money transfer and bill payment services among immigrant workers and the unbanked population in our markets;
	•		the ability to maintain our agent and correspondent networks;
	•		the ability to offer our products and services or develop new products and services at competitive prices to drive increases in transactions;
	•		the expansion of our services in markets where we operate and in new markets;

	•		the ability to strengthen our brands;
	•		our ability to fund working capital requirements;
	•		our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate;
	•		the ability to take advantage of cross-selling opportunities with our Prepaid Processing Segment, including providing prepaid services through RIA’s stores and agents worldwide;
	•		the ability to leverage our banking and merchant/retailer relationships to expand money transfer corridors to Europe, Asia and Africa, including high growth corridors to Central and Eastern European countries;
	•		the availability of financing for further expansion; and
	•		our ability to continue to successfully integrate RIA with our existing operations.

Corporate Services, Eliminations and Other — In addition to operating in our principal business segments described above, our “Corporate Services, Elimination and Other” category includes non-operating activity, certain inter-segment eliminations and the cost of providing corporate and other administrative services to the business segments, including share-based compensation expense related to stock option and restricted stock grants. These services are not directly identifiable with our business segments.

SEGMENT SUMMARY RESULTS OF OPERATIONS

Revenues and operating income by segment for the three- and six-month periods ended June 30, 2009 and 2008 are summarized in the tables below:

		Revenues for the Three																Revenues for the Six
		Months Ended June 30,								Year-over-Year Change								Months Ended June 30,								Year-over-Year Change
										Decrease				Decrease												Decrease				Decrease
(dollar amounts in thousands)		2009				2008				Amount				Percent				2009				2008				Amount				Percent
EFT Processing		$	45,592			$	52,361			$	(6,769	)		(13%)				$	91,798			$	100,597			$	(8,799	)		(9%)
Prepaid Processing			145,253				152,633				(7,380	)		(5%)					279,776				296,858				(17,082	)		(6%)
Money Transfer			57,769				59,456				(1,687	)		(3%)					110,737				111,788				(1,051	)		(1%)
Total		$	248,614			$	264,450			$	(15,836	)		(6%)				$	482,311			$	509,243			$	(26,932	)		(5%)
		Operating Income (Loss)																Operating Income (Loss)
		for the Three Months																for the Six Months Ended
		Ended June 30,								Year-over-Year Change								June 30,								Year-over-Year Change
										Increase																Increase				Increase
										(Decrease)				Increase												(Decrease)				(Decrease)
(dollar amounts in thousands)		2009				2008				Amount				Percent				2009				2008				Amount				Percent
EFT Processing		$	9,799			$	9,039			$	760			8%				$	21,709			$	19,184			$	2,525			13%
Prepaid Processing			12,111				11,420				691			6%					22,987				21,754				1,233			6%
Money Transfer			2,681				2,558				123			5%					(5,190	)			4,509				(9,699	)		n/m
Total			24,591				23,017				1,574			7%					39,506				45,447				(5,941	)		(13%)
Corporate services			(6,567	)			(5,719	)			(848	)		15%					(11,784	)			(14,918	)			3,134			(21%)
Total		$	18,024			$	17,298			$	726			4%				$	27,722			$	30,529			$	(2,807	)		(9%)