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

For the quarterly period ended March 31, 2009

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

EURONET WORLDWIDE, INC.

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

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

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

The number of shares of the issuer’s common stock, $0.02 par value, outstanding as of April 30, 2009 was 50,514,940 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			16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			32
ITEM 4. CONTROLS AND PROCEDURES			33
PART II—OTHER INFORMATION			33
ITEM 1. LEGAL PROCEEDINGS			33
ITEM 1A. RISK FACTORS			33
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			34
ITEM 6. EXHIBITS			35
EX-10.1
EX-10.2
EX-10.3
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

		As of
						December 31,
		March 31, 2009				2008
ASSETS
Current assets:
Cash and cash equivalents		$	158,675			$	181,341
Restricted cash			105,498				131,025
Inventory — PINs and other			52,699				61,279
Trade accounts receivable, net of allowances for doubtful accounts of $10,135 at March 31, 2009 and $9,445 at December 31, 2008			225,287				261,084
Deferred income taxes, net			8,429				8,539
Prepaid expenses and other current assets			39,450				35,352
Current assets of discontinued operations			3,461				3,729
Total current assets			593,499				682,349
Property and equipment, net of accumulated depreciation of $121,091 at March 31, 2009 and $125,258 at December 31, 2008			83,753				89,532
Goodwill			464,805				488,305
Acquired intangible assets, net of accumulated amortization of $66,114 at March 31, 2009 and $62,920 at December 31, 2008			116,228				125,313
Deferred income taxes, net			38,794				40,465
Other assets, net of accumulated amortization of $16,594 at March 31, 2009 and $15,785 at December 31, 2008			35,258				20,628
Non-current assets of discontinued operations			4,173				4,053
Total assets		$	1,336,510			$	1,450,645
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	200,980			$	245,671
Accrued expenses and other current liabilities			208,811				223,814
Current portion of capital lease obligations			3,685				4,614
Short-term debt obligations and current maturities of long-term debt obligations			58,944				68,646
Income taxes payable			17,399				16,590
Deferred income taxes			5,390				5,592
Deferred revenue			14,794				14,914
Current liabilities of discontinued operations			3,429				3,359
Total current liabilities			513,432				583,200
Debt obligations, net of current portion			286,710				294,355
Capital lease obligations, net of current portion			4,767				6,356
Deferred income taxes			59,813				62,905
Other long-term liabilities			8,174				7,919
Total liabilities			872,896				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; 50,715,901 issued at March 31, 2009 and 50,605,909 issued at December 31, 2008			1,014				1,012
Additional paid-in-capital			732,301				729,907
Treasury stock, at cost, 227,961 shares at March 31, 2009 and 225,072 shares at December 31, 2008			(815	)			(784	)
Accumulated deficit			(245,754	)			(233,456	)
Restricted reserve			963				996
Accumulated other comprehensive income			(30,015	)			(9,350	)
Total Euronet Worldwide, Inc. stockholders’ equity			457,694				488,325
Noncontrolling interests			5,920				7,585
Total equity			463,614				495,910
Total liabilities and equity		$	1,336,510			$	1,450,645

See accompanying notes to the consolidated financial statements.

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

		Three Months Ended March 31,
		2009				2008
Revenues:
EFT Processing Segment		$	46,206			$	48,236
Prepaid Processing Segment			134,523				144,225
Money Transfer Segment			52,968				52,332
Total revenues			233,697				244,793
Operating expenses:
Direct operating costs			153,548				165,938
Salaries and benefits			28,596				30,694
Selling, general and administrative			19,068				20,949
Goodwill and acquired intagible assets impairment			9,884				—
Depreciation and amortization			12,903				13,981
Total operating expenses			223,999				231,562
Operating income			9,698				13,231
Other income (expense):
Interest income			969				3,808
Interest expense			(7,067	)			(9,888	)
Income from unconsolidated affiliates			518				243
Impairment loss on investment securities			—				(17,502	)
Loss on early retirement of debt			(103	)			(155	)
Foreign currency exchange gain (loss), net			(10,591	)			13,077
Other expense, net			(16,274	)			(10,417	)
Income (loss) from continuing operations before income taxes			(6,576	)			2,814
Income tax expense			(5,317	)			(10,087	)
Loss from continuing operations			(11,893	)			(7,273	)
Discontinued operations, net			(61	)			(813	)
Net loss			(11,954	)			(8,086	)
Less: Net income attributable to noncontrolling interests			(344	)			(563	)
Net loss attributable to Euronet Worldwide, Inc.		$	(12,298	)		$	(8,649	)
Loss per share attributable to Euronet Worldwide, Inc. stockholders — basic:
Continuing operations		$	(0.24	)		$	(0.16	)
Discontinued operations			—				(0.02	)
Total		$	(0.24	)		$	(0.18	)
Basic weighted average shares outstanding			50,292,907				48,956,945
Loss per share attributable to Euronet Worldwide, Inc. stockholders — diluted:
Continuing operations		$	(0.24	)		$	(0.16	)
Discontinued operations			—				(0.02	)
Total		$	(0.24	)		$	(0.18	)
Diluted weighted average shares outstanding			50,292,907				48,956,945

See accompanying notes to the consolidated financial statements.

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

		Three Months Ended March
		2009				2008
Net loss		$	(11,954	)		$	(8,086	)
Other comprehensive income (loss), net of tax:
Translation adjustment			(21,613	)			32,487
Unrealized gain (loss) on interest rate swaps			477				(751	)
Gain (loss) on investment securities			227				(572	)
Comprehensive income (loss)			(32,863	)			23,078
Comprehensive (income) loss attributable to noncontrolling interests			244				(765	)
Comprehensive income (loss) attributable to Euronet Worldwide, Inc.		$	(32,619	)		$	22,313

See accompanying notes to the consolidated financial statements.

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

		Three Months Ended March 31,
		2009				2008
Net loss attributable to Euronet Worldwide, Inc.		$	(12,298	)		$	(8,649	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			12,903				14,450
Share-based compensation			1,632				2,907
Unrealized foreign exchange (gain) loss, net			10,577				(13,073	)
Non-cash impairment of goodwill and acquired intangible assets			9,884				—
Non-cash impairment of investment securities			—				17,502
Deferred income tax expense (benefit)			(1,139	)			3,438
Income assigned to noncontrolling interests			344				563
Income from unconsolidated affiliates			(518	)			(243	)
Accretion of convetible debentures discount and amortization of debt issuance costs			3,005				3,757
Changes in working capital, net of amounts acquired:
Income taxes payable, net			1,463				(1,579	)
Restricted cash			23,899				27,484
Inventory — PINs and other			6,189				1,821
Trade accounts receivable			23,042				25,987
Prepaid expenses and other current assets			(6,211	)			(3,531	)
Trade accounts payable			(37,569	)			(75,877	)
Deferred revenue			391				(624	)
Accrued expenses and other current liabilities			(10,696	)			19,368
Changes in noncurrent assets and liabilities			(9,788	)			892
Net cash provided by operating activities			15,110				14,593
Cash flows from investing activities:
Acquisitions, net of cash acquired			(3,300	)			(1,786	)
Acquisition escrow			—				26,000
Purchases of property and equipment			(6,648	)			(10,001	)
Purchases of other long-term assets			(734	)			(938	)
Other, net			131				182
Net cash provided (used) by investing activities			(10,551	)			13,457
Cash flows from financing activities:
Proceeds from issuance of shares			373				462
Net repayments of short-term debt obligations and revolving credit agreements classified as current liabilities			(52	)			(215	)
Borrowings from revolving credit agreements classified as non-current liabilities			90,400				23,500
Repayments of revolving credit agreements classified as non-current liabilities			(98,432	)			(74,143	)
Repayments of long-term debt obligations			(11,449	)			(10,000	)
Repayments of capital lease obligations			(1,788	)			(2,263	)
Cash dividends paid to noncontrolling interests stockholders			(2,413	)			—
Other, net			614				67
Net cash used by financing activities			(22,747	)			(62,592	)
Effect of exchange differences on cash			(3,638	)			4,048
Decrease in cash and cash equivalents			(21,826	)			(30,494	)
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 $1,392 in 2009 and $0 in 2008)		$	160,067			$	237,097
Interest paid during the period		$	1,505			$	4,149
Income taxes paid during the period			5,210				6,881

See accompanying notes to the 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 March 31, 2009, and the results of its operations and cash flows for the three-month periods ended March 31, 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-month period ended March 31, 2009 are not necessarily indicative of the results to be expected for the full year ending December 31, 2009. Certain amounts in the prior year 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 (Loss) 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 (Loss) 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 (Loss) 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, 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 FAS 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. 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 March 31, 2009, the Company’s money transfer settlement obligations were $31.3 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 first quarter 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 $17.5 million in impairment losses associated with the investment 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 March 31, 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.

Recent accounting pronouncements

In April 2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.” FSP FAS 141(R)-1 amends the requirements to measure contingencies acquired in a business combination at fair value, requiring that a contingency acquired in a business combination be initially measured at fair value on the acquisition date if fair value can be determined during the measurement period. Acquired contingencies whose fair value cannot be determined during the measurement period would be recognized if it is probable that an asset existed or liability had been incurred at the acquisition date and the amount for that asset or liability can be reasonably estimated. FSP FAS 141(R)-1 is effective for Euronet beginning January 1, 2009, concurrent with the adoption of SFAS No. 141(R), and it did not have a material impact on the Consolidated Financial Statements.

In April 2009, the FASB issued 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 FAS 107 to also be made in interim financial statements. FSP FAS 107-1 and APB 28-1 is effective for Euronet for the quarterly reporting period ending June 30, 2009. The Company’s adoption of FSP FAS 107-1 and APB 28-1 is not expected to have a material impact on the Consolidated Financial Statements.

(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 the 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.

For the three-month periods ended March 31, 2009 and 2008, the Company incurred net losses; therefore, diluted loss per share is the same as basic loss per share for each period. For the three-month periods ended March 31, 2009 and 2008, the calculation of diluted loss per share excludes approximately 4,928,000 and 3,192,000, respectively, stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding. Additionally, for the three months ended March 31, 2008, the calculation of diluted loss per share excludes approximately 953,000 shares issuable in connection with acquisition obligations that are anti-dilutive to the Company’s weighted average common shares outstanding.

The Company has $59.2 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 1.8 million shares of Common Stock for the $59.2 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 conversion of the 1.625% and 3.50% convertible debentures was anti-dilutive for both three-month periods ended March 31, 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 in the process of selling 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’s results to discontinued operations. The following amounts related to Essentis have been segregated from continuing operations and reported as discontinued operations:

		Three Months Ended March 31,
(in thousands)		2009				2008
Revenues		$	1,424			$	2,270
Loss before income taxes		$	(93	)		$	(1,121	)
Net loss		$	(61	)		$	(813	)

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)		March 31, 2009				2008
ASSETS
Current assets
Cash and cash equivalents		$	1,392			$	552
Trade accounts receivable, net of allowance for doubtful accounts			1,243				2,187
Prepaid expenses and other current assets			826				990
Total current assets			3,461				3,729
Property and equipment, net of accumulated depreciation			419				427
Acquired intangible assets, net of accumulated amortization			971				991
Other assets, net of accumulated amortization			2,783				2,635
Total assets		$	7,634			$	7,782
LIABILITIES
Current liabilities
Trade accounts payable		$	358			$	250
Accrued expenses and other current liabilities			739				760
Deferred revenue			2,332				2,349
Total current liabilities			3,429				3,359
Deferred income taxes			611				624
Other long-term liabilities			3				3
Total liabilities		$	4,043			$	3,986
Net assets		$	3,591			$	3,796

(5) GOODWILL AND ACQUIRED INTANGIBLE ASSETS, NET

A summary of acquired intangible assets and goodwill activity for the three-month period ended March 31, 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	)
Amortization			(5,552	)			—				(5,552	)
Other (primarily changes in foreign currency exchange rates)			(2,422	)			(14,727	)			(17,149	)
Balance as of March 31, 2009		$	116,228			$	464,805			$	581,033

Estimated annual amortization expense on intangible assets with finite lives, before income taxes, as of March 31, 2009, is expected to total $21.9 million for 2009, $21.4 million for 2010, $17.8 million for 2011, $15.6 million for 2012, $11.3 million for 2013 and $8.8 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 three-month period ended March 31, 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 borrowings (repayments)			(8,032	)			(52	)			(1,746	)			(10,411	)			—				(1,000	)			(21,241	)
Accretion			—				—				—				906				1,567				—				2,473
Capital lease interest			—				—				446												—				446
Foreign exchange gain			(175	)			(150	)			(1,218	)			—				—				—				(1,543	)
Balance at March 31, 2009			8,512				86				8,452				57,043				149,013				131,000				354,106
Less — current maturities			—				(1	)			(3,685	)			(57,043	)			—				(1,900	)			(62,629	)
Long-term obligations at March 31, 2009		$	8,512			$	85			$	4,767			$	—			$	149,013			$	129,100			$	291,477

In March 2009, the Company repurchased in privately negotiated transactions $10.8 million in principal amount of the 1.625% convertible debentures due 2024. During the three-months ended March 31, 2009, the Company repaid $1.0 million of the term loan, of which $0.5 million was a scheduled repayment. The remaining $0.5 million represents prepayment of amounts not yet due and along with the convertible debentures repurchase resulted in the Company recognizing a $0.1 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 $59.2 million and $70.0 million and unamortized discounts outstanding of $2.1 million and $3.5 million as of March 31, 2009 and December 31, 2008, respectively. The discount will be amortized through December 15, 2009. Contractual interest expense was $0.3 million and $0.6 million and discount accretion was $0.9 million and $1.7 million for the three months ended March 31, 2009 and 2008, respectively. The effective interest rate was 7.1% for the three months ended March 31, 2009 and 2008. The carrying amount of the equity portion was $32.3 million as of March 31, 2009 and December 31, 2008.

The 3.50% convertible debentures had principal amounts outstanding of $175.0 million and unamortized discounts outstanding of $26.0 million and $27.6 million as of March 31, 2009 and December 31, 2008, respectively. The discount will be amortized through October 15, 2012. Contractual interest expense was $1.5 million and discount accretion was $1.6 million and $1.4 million for the three months ended March 31, 2009 and 2008, respectively. The effective interest rate was 8.4% for the three months ended March 31, 2009 and 2008. The carrying amount of the equity portion was $45.1 million as of March 31, 2009 and December 31, 2008.

(7) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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, which currently bears interest at the London Inter-Bank Offered Rate (“LIBOR”) plus 200 basis points. The interest rate swap agreements are determined to be cash flow hedges and effectively convert $50 million of the term loan to a fixed interest rate of 7.3% through the May 2009 maturity date of the swap agreements.

As of March 31, 2009, the Company had foreign currency forward contracts outstanding with a notional value of $41.1 million, primarily in euros, which had a weighted average remaining maturity of 2.8 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 the relatively short duration of the contracts, typically 1 to 14 days, and the frequency 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.

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

						Fair Values of Derivative
						Instruments
		Consolidated Balance Sheet								December 31,
(in thousands)		Location				March 31, 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				$	(353	)		$	(830	)
						Asset Derivatives
Derivatives not designated as hedging instruments under SFAS No. 133
Foreign currency derivative contracts — gross gains		Cash and cash equivalents				$	365			$	433
Foreign currency derivative contracts — gross losses		Cash and cash equivalents					(124	)			(155	)
Total						$	241			$	278
						Liability Derivatives
Embedded derivative in foreign lease		Other long-term liabilities				$	(569	)		$	—
Total derivatives						$	(681	)		$	(552	)

		Amount of Gain (Loss)
		Recognized in OCI on Derivative
		(Effective Portion)
		Three Months Ended March 31,
(in thousands)		2009				2008
Derivatives in SFAS No. 133 Cash Flow Hedging Relationships
Interest rate swaps related to floating rate debt		$	477			$	(751	)

						Amount of Gain (Loss)
						Recognized in Income on
		Location of Gain (Loss)				Derivative
		Recognized in Income on				Three Months Ended March 31,
(in thousands)		Derivative				2009				2008
Derivatives not designated as hedging instruments under SFAS No. 133
Foreign currency derivative contracts		Foreign currency exchange gain (loss), net				$	(37	)		$	79
Embedded derivative in foreign lease		Foreign currency exchange gain (loss), net					(569	)			—
Total						$	(606	)		$	79

See Note 9, Fair Value Measurements, for the determination of the fair values of derivatives.

(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 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-month periods ended March 31, 2009 and 2008:

		For the Three Months Ended March 31, 2009
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	46,206			$	134,523			$	52,968			$	—			$	233,697
Operating expenses:
Direct operating costs			18,955				109,035				25,558				—				153,548
Salaries and benefits			7,012				6,424				11,820				3,340				28,596
Selling, general and administrative			4,147				4,542				8,815				1,564				19,068
Goodwill and acquired intangible asset impairment			—				—				9,884				—				9,884
Depreciation and amortization			4,182				3,646				4,762				313				12,903
Total operating expenses			34,296				123,647				60,839				5,217				223,999
Operating income (loss)		$	11,910			$	10,876			$	(7,871	)		$	(5,217	)		$	9,698

		For the Three Months Ended March 31, 2008
														Corporate
														Services,
		EFT				Prepaid				Money				Eliminations
(in thousands)		Processing				Processing				Transfer				and Other				Consolidated
Total revenues		$	48,236			$	144,225			$	52,332			$	—			$	244,793
Operating expenses:
Direct operating costs			21,737				117,856				26,345				—				165,938
Salaries and benefits			7,908				6,568				11,757				4,461				30,694
Selling, general and administrative			3,778				5,275				7,452				4,444				20,949
Depreciation and amortization			4,668				4,192				4,827				294				13,981
Total operating expenses			38,091				133,891				50,381				9,199				231,562
Operating income (loss)		$	10,145			$	10,334			$	1,951			$	(9,199	)		$	13,231

(9) FAIR VALUE MEASUREMENTS

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
						March 31, 2009 Using
						Quoted Prices				Signifcant
		Carrying				in Active				Other
		Value as of				Markets for				Observable
(in thousands)		March 31, 2009				Identical Assets				Inputs
Available-for-sale investment securities		$	1,579			$	1,579			$	—
Interest rate swaps related to floating rate debt			(353	)			—				(353	)
Foreign currency derivative contracts			241				—				241
Embedded derivative in foreign lease			(569	)			—				(569	)

The Company values available for sale investment securities using quoted prices from the securities’ primary exchange. Interest rate swaps are valued using present value measurements based on the LIBOR swap rate, credit spreads and other relevant market conditions. 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. For the three months ended March 31, 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 as discussed in Note 5, Goodwill and Acquired Intangible Assets, Net. The fair values were determined using significant unobservable inputs. The 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, management determined that an acquired intangible asset associated with a previous acquisition in the Money Transfer Segment had no value and, accordingly, the Company recorded a write-off of the remaining net book value of the intangible asset. The fair values of these assets are summarized in the following table:

						Fair Value Measurements				Total Losses for
		Carrying				as of March 31, 2009				the Three
		Value as of				Using Significant				Months Ended
(in thousands)		March 31, 2009				Unobservable Inputs				March 31, 2009
Goodwill		$	258,831			$	258,831			$	(8,773	)
Acquired intangible assets			—				—				(1,111	)
										$	(9,884	)

(10) GUARANTEES

As of March 31, 2009, the Company had $43.4 million of stand-by letters of credit/bank guarantees issued on its behalf, of which $8.3 million are collateralized by cash deposits held by the respective issuing banks.

Euronet regularly grants guarantees in support of obligations of subsidiaries. As of March 31, 2009, the Company granted off balance sheet guarantees for cash in various ATM networks amounting to $17.8 million over the terms of the cash supply agreements and performance guarantees amounting to approximately $25.7 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 Sheets. As of March 31, 2009, the balance of ATM network cash for which the Company was responsible was approximately $240 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 March 31, 2009 or December 31, 2008.

(11) INCOME TAXES

The Company’s effective tax rates were (81%) and 359% for the three-month periods ended March 31, 2009 and 2008, respectively. The effective tax rates were significantly influenced by the goodwill and acquired intangible assets impairment charge and foreign currency exchange net loss for the first quarter 2009 and the impairment loss on investment securities and foreign currency exchange net gain for the first quarter 2008. 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 41.6% and 28.1% for the three months ended March 31, 2009 and 2008, respectively.

The increase in the effective tax rate, as adjusted, for the first quarter 2009 compared to the same period in 2008 was primarily related to the loss of certain tax deductions in Spain as a result of the goodwill and acquired intangible assets impairment charges. Also, approximately $3.5 million of contract termination fees were recorded in India which has a tax rate that is higher than the Company’s weighted average effective tax rate.

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”), 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 March 31, 2009, we operate in the following three principal business segments.

	•		An EFT Processing Segment, which processes transactions for a network of 9,205 ATMs and approximately 56,000 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 421,000 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, through this segment, we are the third-largest global money transfer company. The Money Transfer Segment originates and terminates transactions through a network of approximately 77,100 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, six in North America, five in Asia Pacific and one in the Middle East. Our executive offices are located in Leawood, Kansas, USA. With approximately 73% 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 20% of total consolidated revenues for the first quarter 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 does 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 57% of total consolidated revenues for the first quarter 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 margin 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 represents approximately 23% of total consolidated revenues for the first quarter 2009, are primarily derived through the charging of 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 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 and Asia, 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 other operations.

Corporate Services, Eliminations and Other — In addition to operating in our principal business segments described above, our “Corporate Services, Elimination and Other” division 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 most 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-month periods ended March 31, 2009 and 2008 are summarized in the tables below:

		Revenues for the Three																Operating Income (Loss) for the
		Months Ended March 31,								Year-over-Year Change								Three Months Ended March 31,								Year-over-Year Change
										Increase				Increase												Increase				Increase
										(Decrease)				(Decrease)												(Decrease)				(Decrease)
(dollar amounts in thousands)		2009				2008				Amount				Percent				2009				2008				Amount				Percent
EFT Processing		$	46,206			$	48,236			$	(2,030	)		(4%)				$	11,910			$	10,145			$	1,765				17%
Prepaid Processing			134,523				144,225				(9,702	)		(7%)					10,876				10,334				542				5%
Money Transfer			52,968				52,332				636			1%					(7,871	)			1,951				(9,822	)			n/m
Total			233,697				244,793				(11,096	)		(5%)					14,915				22,430				(7,515	)			(34%)
Corporate services			—				—				—								(5,217	)			(9,199	)			3,982				(43%)
Total		$	233,697			$	244,793			$	(11,096	)		(5%)				$	9,698			$	13,231			$	(3,533	)			(27%)

n/m — Not meaningful.

Beginning in 2006 and through mid-2008, the U.S. dollar weakened compared to most of the currencies of the countries in which we operate. In the second half of 2008 and into the first quarter of 2009, the U.S. dollar strengthened significantly. Because our revenues and local expenses are recorded in the functional currencies of our operating entities, amounts we earned for the first quarter 2009 are negatively impacted by the strengthening of the U.S. dollar. We estimate that, depending on the mix of countries and currencies, our operating income for the first quarter 2009 was diminished by approximately 35% to 40% when compared to the first quarter 2008 as a result of changes in foreign currency exchange rates. If applicable, we will refer to the impact of fluctuation in foreign currency exchange rates in our comparison of operating segment results for the three-month periods ended March 31, 2009 and 2008. To provide further perspective on the impact of foreign currency exchange rates, the following table shows the changes in values relative to the U.S. dollar from first quarter 2008 to first quarter 2009 of the currencies of the countries in which we have our most significant operations:

		Average Translation Rate
		Three Months				Three Months
		Ended March 31,				Ended March 31,				Decrease
Currency		2009				2008				Percent
Australian dollar		$	0.665			$	0.905				(27	%)
British pound			1.438				1.977				(27	%)
euro			1.306				1.499				(13	%)
Indian rupee			0.020				0.025				(20	%)
Polish zloty			0.291				0.419				(31	%)

COMPARISON OF OPERATING RESULTS FOR THE THREE- MONTH PERIODS ENDED MARCH 31, 2009 AND 2008

EFT PROCESSING SEGMENT

The following table presents the results of operations for the three-month periods ended March 31, 2009 and 2008 for our EFT Processing Segment:

		Three Months Ended
		March 31,								Year-over-Year Change
										Increase				Increase
										(Decrease)				(Decrease)
(dollar amounts in thousands)		2009				2008				Amount				Percent
Total revenues		$	46,206			$	48,236			$	(2,030	)			(4	%)
Operating expenses:
Direct operating costs			18,955				21,737				(2,782	)			(13	%)
Salaries and benefits			7,012				7,908				(896	)			(11	%)
Selling, general and administrative			4,147				3,778				369				10	%
Depreciation and amortization			4,182				4,668				(486	)			(10	%)
Total operating expenses			34,296				38,091				(3,795	)			(10	%)
Operating income		$	11,910			$	10,145			$	1,765				17	%
Transactions processed (millions)			159.5				168.4				(8.9	)			(5	%)
ATMs as of March 31			9,205				11,917				(2,712	)			(23	%)
Average ATMs			9,397				11,771				(2,374	)			(20	%)

Discontinued operations

During the second quarter 2008, we decided to sell Euronet Essentis Limited (“Essentis”), a U.K. software entity previously included in the EFT Processing Segment, in order to focus our investments and resources on our transaction processing businesses. We are in the process of selling the business. Accordingly, the results of operations for Essentis are shown as discontinued operations in the Unaudited Consolidated Statements of Operations for all periods presented and have been excluded from the table above.

Revenues

Our revenues for the first quarter 2009 decreased compared to the first quarter 2008 primarily due to the strengthening of the U.S. dollar in the first quarter 2009 compared to the first quarter 2008 relative to most of the currencies of the countries in which we operate. Because our revenues are recorded in the functional currencies of our operating entities, amounts we earn in foreign currencies are negatively impacted by the strengthening of the U.S. dollar. Additionally, the decrease in the number of ATMs operated, which is primarily due to the expiration or termination of ATM services contracts discussed in more detail in the following paragraphs, contributed to our revenue decrease. Partly offsetting these decreases were contract termination fees totaling $4.4 million and increases in revenues primarily associated with our operations in India and our software business. The increase in revenues in the first quarter 2009 associated with our software business was primarily due to the sale of a significant license to an entity in which Euronet has a 10% stake.

Average monthly revenue per ATM was $1,639 for the first quarter 2009, compared to $1,366 for the first quarter 2008 and revenue per transaction was $0.29 for both the first quarter 2009 and 2008. The increase in revenue per ATM is generally the result of the non-recurring contract termination fees discussed above and the expiration of an ATM services contract in the U.K. at the end of the first quarter 2008. The U.K. contract involved processing services only, with very little associated costs and, therefore, had lower-than-average revenue per ATM. As of March 31, 2008, we were providing processing services for approximately 2,400 ATMs under this contract prior to its expiration. Partly offsetting the improvement in average revenue per ATM is the addition of ATMs in India and China, where revenues per ATM have been historically lower than Central and Eastern Europe (due to lower labor costs).

Our contracts in the EFT Processing Segment tend to cover large numbers of ATMs, so significant increases and decreases in our pool of managed ATMs may result from entry into or termination of these management contracts. Banks have historically been very deliberate in negotiating these agreements and have evaluated a wide range of matters when deciding to choose an outsource vendor. Generally, the process of negotiating a new agreement is subject to extensive management analysis and approvals and the process typically takes six to twelve months or longer. Increasing consolidation in the banking industry could make this process less predictable.

Our existing contracts generally have terms of five to seven years and a number of them will expire or be up for renewal each year for the next few years. As a result, we expect to be regularly engaged in discussions with one or more of our customer banks to either obtain renewal of, or restructure, our ATM outsourcing agreements. During the fourth quarter 2008 and first quarter 2009, certain customer contracts were terminated or expired, resulting in a decrease of approximately 1,700 ATMs. Most of the ATM reductions resulted from bank customers shifting their processing to related processing subsidiaries in contemplation of selling the subsidiaries to raise capital, rather than the loss of contracts to competitors. The reduction in the number of ATMs from contract terminations or expirations was partially offset by increases in ATMs driven under new contracts, expansion of ATMs under existing contracts and the deployment of ATMs in markets where we operate Euronet-branded ATMs.

For contracts that we are able to renew, as was the case for contract renewals in Romania and Greece in prior years, we expect customers to seek rate concessions or up-front payments because of the greater availability of alternative processing solutions in many of our markets now, as compared to when we originally entered into the contracts. Excluding the expiring or terminated contracts discussed above, we have been able to renew or extend most of the remaining contracts that came up for renewal in 2008 or were due to expire in 2009. While we have been successful in many cases in obtaining new terms that preserve the same level of earnings arising from the agreements, we have not been successful in all cases and, therefore, we expect to experience reductions in revenues in future quarters arising from the expiration or restructuring of agreements.

For the contracts that expired during the fourth quarter 2008 and first quarter 2009, excluding the substantial termination fees described above, we estimate that the impact to 2009 will be a reduction in revenues of approximately $15 million to $16 million, resulting in reduced operating income of approximately $3 million to $4 million. We cannot be sure we will have sufficient revenues from new contracts to offset potential revenue reductions from expired or restructured agreements.

Direct operating costs

Direct operating costs consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications and the cost of data center operations-related personnel, as well as the processing centers’ facility related costs and other processing center related expenses. The decrease in direct operating costs for the first quarter 2009, compared to the first quarter 2008, is attributed to the impact of the strengthening U.S. dollar and the decrease in the number of ATMs under operation.

Gross profit

Gross profit, which is calculated as revenues less direct operating costs, increased to $27.3 million for the first quarter 2009 from $26.5 million for the first quarter 2008. This increase is mainly attributable to the contract termination fee revenues discussed above, partly offset by the impact of the strengthening U.S. dollar. Gross profit as a percentage of revenues (“gross margin”) was 59% for the first quarter 2009 compared to 55% for the first quarter 2008 mainly as a result of the non-recurring contract termination fees discussed above, partly offset by increased contributions of our subsidiaries in India and China, which have historically earned a lower gross margin than our other operations.

Salaries and benefits

The decrease in salaries and benefits for the first quarter 2009 compared to the first quarter 2008 was primarily due to the impact of the strengthening U.S. dollar discussed above, partly offset by increased staffing costs to support growth in ATMs managed in India and China as well as costs resulting from general merit increases awarded to employees. As a percentage of revenues these costs decreased to 15% of revenues for the first quarter 2009 compared to 16% for the first quarter 2008.

Selling, general and administrative

The increase in selling, general and administrative expenses for the first quarter 2009 compared to the first quarter 2008 is due primarily to increased expenses incurred in connection with growth in India and China and in our cross-border merchant processing and acquiring business. Partly offsetting these increases is the impact of the strengthening U.S. dollar discussed above. As a percentage of revenues, selling, general and administrative expenses were 9% for the first quarter 2009 compared to 8% for the first quarter 2008.

Depreciation and amortization

The decrease in depreciation and amortization expense for the first quarter 2009 compared to the first quarter 2008 is due primarily to the impact of the strengthening U.S. dollar described above. As a percentage of revenues, depreciation and amortization expense was 9% of revenues for the first quarter 2009 compared to 10% for the same period in 2008.

Operating income

The increase in operating income was primarily due to the substantial contract termination revenues described above, partly offset by the impact of the strengthening U.S. dollar. Operating income as a percentage of revenues for the first quarter 2009 was 26%, compared to 21% for the first quarter 2008, and operating income per transaction was $0.07 for the first quarter 2009, compared to $0.06 per transaction for the first quarter 2008.

PREPAID PROCESSING SEGMENT

The following table presents the results of operations for the three-month periods ended March 31, 2009 and 2008 for our Prepaid Processing Segment:

		Three Months Ended
		March 31,								Year-over-Year Change
										Increase				Increase
										(Decrease)				(Decrease)
(dollar amounts in thousands)		2009				2008				Amount				Percent
Total revenues		$	134,523			$	144,225			$	(9,702	)			(7	%)
Operating expenses:
Direct operating costs			109,035				117,856				(8,821	)			(7	%)
Salaries and benefits			6,424				6,568				(144	)			(2	%)
Selling, general and administrative			4,542				5,275				(733	)			(14	%)
Depreciation and amortization			3,646				4,192				(546	)			(13	%)
Total operating expenses			123,647				133,891				(10,244	)			(8	%)
Operating income		$	10,876			$	10,334			$	542				5	%
Transactions processed (millions)			184.3				167.3				17.0				10	%

Revenues

The decrease in revenues for first quarter 2009 compared to first quarter 2008 was primarily due to the strengthening of the U.S. dollar in the first quarter 2009 compared to the same period in 2008 relative to most of the currencies of the countries in which we operate, particularly the Australian dollar and British pound. Because our revenues are recorded in the functional currencies of our operating entities, amounts we earn in foreign currencies are negatively impacted by the strengthening of the U.S. dollar. This decrease was partly offset by an increase in total transactions processed, led by improvements in Australia, Germany and the U.S. Our Australian subsidiary enhanced its market position in the first quarter 2009 by signing an exclusive, long-term distribution agreement with Vodafone Australia. The agreement strengthens our existing relationship with Vodafone and preserves our gross margins during the term of the agreement.

In certain more mature markets, such as the U.K., New Zealand and Spain, our revenue growth has slowed substantially or revenues have decreased because conversion from scratch cards to electronic top-up is substantially complete and certain mobile operators and retailers are driving competitive reductions in pricing and margins. We expect most of our future revenue growth to be derived from: (i) additional products sold over the base of prepaid processing terminals, (ii) developing markets or markets in which there is organic growth in the prepaid sector overall, (iii) continued conversion from scratch cards to electronic top-up in less mature markets, and (iv) acquisitions, if available.

Revenues per transaction decreased to $0.73 for the first quarter 2009 from $0.86 for the first quarter 2008 primarily due to the impact of the strengthening U.S. dollar.

Direct operating costs

Direct operating costs in the Prepaid Processing Segment include the commissions we pay to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, as well as expenses required to operate POS terminals. Because of their nature, these expenditures generally fluctuate directly with revenues and processed transactions. The decrease in direct operating costs is generally attributable to the impact of the strengthening U.S. dollar, partly offset by the increase in total transactions processed.

Gross profit

Gross profit, which represents revenues less direct costs, was $25.5 million for the first quarter 2009 compared to $26.4 million for the first quarter 2008. Gross margin increased slightly to 19% for the first quarter 2009 compared to 18% for the first quarter 2008 and gross profit per transaction decreased to $0.14 for the first quarter 2009 compared to $0.16 for the first quarter 2008. The primary cause of the reduction in gross profit per transaction is the impact of the strengthening U.S. dollar.

Salaries and benefits

The decrease in salaries and benefits for first quarter 2009 compared to the first quarter 2008 is primarily due to the impact of the strengthening U.S. dollar, partly offset by additional overhead to support development in new and growing markets. As a percentage of revenues, salaries and benefits increased to 4.8% for first quarter 2009 from 4.6% for first quarter 2008.

Selling, general and administrative

The decrease in selling, general and administrative expenses for the first quarter 2009 compared to the first quarter 2008 is due to the impact of the strengthening U.S. dollar, partly offset by additional overhead to support development in other new and growing markets. As a percentage of revenues, these expenses decreased to 3.4% for first quarter 2009 from 3.7% for the first quarter 2008.

Depreciation and amortization

Depreciation and amortization expense primarily represents amortization of acquired intangibles and the depreciation of POS terminals we install in retail stores. Depreciation and amortization expense decreased for the first quarter 2009 compared to the first quarter 2008 mainly due to the impact of the strengthening U.S. dollar. As a percentage of revenues, these expenses decreased to 2.7% for the first quarter 2009 from 2.9% for the first quarter 2008.

Operating income

The improvement in operating income for 2009 compared to 2008 was due to the growth in transactions processed, partly offset by the impact of foreign currency translations to the U.S. dollar.

Operating income as a percentage of revenues was 8.1% for the first quarter 2009 compared to 7.2% for the first quarter 2008. The increase is primarily due to the increase in transactions processed and the associated leveraging of fixed costs. Operating income per transaction remained flat at $0.06 for both first quarter 2009 and 2008 reflecting the leveraging of fixed costs offsetting the negative impact of the strengthening U.S. dollar.

MONEY TRANSFER SEGMENT

The following tables present the results of operations for the three-month periods ended March 31, 2009 and 2008 for the Money Transfer Segment:

		Three Months Ended March 31,								Year-over-Year Change
										Increase				Increase
										(Decrease)				(Decrease)
(dollar amounts in thousands)		2009				2008				Amount				Percent
Total revenues		$	52,968			$	52,332			$	636				1	%
Operating expenses:
Direct operating costs			25,558				26,345				(787	)			(3	%)
Salaries and benefits			11,820				11,757				63				1	%
Selling, general and administrative			8,815				7,452				1,363				18	%
Goodwill and acquired intangible assets impairment			9,884				—				9,884				n/m
Depreciation and amortization			4,762				4,827				(65	)			(1	%)
Total operating expenses			60,839				50,381				10,458				21	%
Operating income (loss)		$	(7,871	)		$	1,951			$	(9,822	)			n/m
Transactions processed (millions)			4.0				3.8				0.2				5	%

n/m — Not meaningful.

Revenues

Revenues from the Money Transfer Segment include a transaction fee for each transaction as well as the difference between purchasing currency at wholesale exchange rates and selling the currency to customers at retail exchange rates. Revenue per transaction decreased to $13.24 for the first quarter 2009 from $13.77 for the first quarter 2008. The growth rate of revenues lagged the transaction growth rate largely as a result of the impact of the strengthening U.S. dollar. Because our revenues are recorded in the functional currencies of our operating entities, amounts we earn in foreign currencies are negatively impacted by the strengthening of the U.S. dollar. This decrease was partly offset by a strong increase in transfers from non-U.S. locations which generally have higher-than-average revenue per transaction. For the first quarter 2009, 65% of our money transfers were initiated in the U.S., 32% in Europe and 3% in other countries, such as Canada and Australia. This compares to 70% initiated in the U.S., 28% initiated in Europe and 2% initiated in other countries for the first quarter 2008. We expect that the U.S. will continue to represent our highest volume market; however, future growth is expected to be derived largely from non-U.S. initiated sources.

The increase in revenues for the first quarter 2009 compared to the first quarter 2008 is primarily due to an increase in the number of transactions processed, partly offset by the negative impact of the strengthening U.S. dollar. For the first quarter 2009, money transfers to Mexico, which represented 27% of total money transfers, decreased by 12% while transfers to all other countries increased 15% when compared to the first quarter 2008. The increase in transfers to all other countries was due to the expansion of our operations and continued growth in immigrant worker populations. The decline in transfers to Mexico was largely the result of downturns in certain labor markets and other economic factors impacting the U.S. market as well as immigration developments in the U.S. These issues have also resulted in certain competitors lowering transaction fees and foreign currency exchange spreads in certain markets where we do business in an attempt to limit the impact on money transfer volumes. We have generally maintained our pricing structure in response to these developments.

Direct operating costs

Direct operating costs in the Money Transfer Segment primarily represent commissions paid to agents that originate money transfers on our behalf and distribution agents that disburse funds to the customers’ destination beneficiary, together with less significant costs, such as telecommunication and bank and other fees to collect money from originating agents. While direct operating costs generally increase or decrease by a similar percentage as transactions, growth in transactions has exceeded the change in direct costs due to a greater growth rate for Company-owned stores than for agents along with the impact of the strengthening U.S. dollar.

Gross profit

Gross profit, which represents revenues less direct costs, was $27.4 million for the first quarter 2009 compared to $26.0 million for the first quarter 2008. This improvement is primarily due to the growth in money transfer transactions, particularly in Company-owned stores discussed above. As discussed above, certain competitors have been lowering transaction fees and foreign currency exchange spreads in the U.S. market as a result of the economic factors and immigration developments impacting the U.S. market. We have generally maintained our pricing structure in response to these developments. We cannot predict how long these issues will continue to affect the U.S. market or whether other markets will experience similar issues and we cannot predict whether we will change our pricing strategy over the short or long term in order to protect or increase market share. Gross margin as a percentage of revenues was 52% for the first quarter 2009 compared to 50% for the first quarter 2008. The improvement primarily reflects the strong growth in transaction volume in our more profitable non-U.S. locations.

Salaries and benefits