UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT PURSUANT TO SECTION 13 or 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
October
25, 2005
Date
of Report (date of earliest event reported):
Euronet
Worldwide, Inc.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
|
0-22167
|
|
74-2806888
|
|
(State
or other jurisdiction
of
incorporation)
|
|
(Commission
File Number)
|
|
(IRS
Employer
ID
Number)
|
|
4601
College Boulevard
Leawood,
Kansas
|
|
66211
|
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Registrant’s
Telephone Number, including area code: (913) 327-4200
N/A
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
|
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
ITEM
2.02. Results of Operations and Financial Condition
On
October 25, 2005, Euronet Worldwide, Inc. issued a press release to announce
its
financial results for the third quarter ended September 30, 2005. The press
release is attached hereto as Exhibit 99.1.
The
information in this Current Report, including without limitation Exhibit 99.1,
is being furnished and shall not be deemed “filed” for the purposes of Section
18 of the Securities Exchange Act of 1934, or otherwise subject to the
liabilities of that Section. The information in this Current Report shall not
be
incorporated by reference into any registration statement or other document
filed pursuant to the Securities Act of 1933, except as shall be expressly
set
forth by specific reference in such a filing.
ITEM
9.01. Financial Statements and Exhibits
|
|
(c)
|
Exhibits
|
|
Exhibit
99.1 - Press Release dated October 25, 2005
|
2
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| Euronet Worldwide, Inc. | ||
| |
|
|
| Date: October 25, 2005 | By: | /s/ Rick L. Weller |
|
Rick L. Weller |
||
| Chief Financial Officer | ||
3
 |
News
Release
|
||||||||
|
Corporate
Headquarters
4601
College Boulevard,
Suite
300
Leawood,
Kansas 66211
USA
+1-913-327-4200
|
For
Immediate Release
|
Date:
October 25, 2005
|
|||||||
|
Media
Contact:
Investor
Relations (US):
|
Shruthi
Dyapaiah
IR
Dept
|
1-913-327-4225
1-913-327-4200
|
sdyapaiah@euronetworldwide.com
investor@euronetworldwide.com
|
||||||
Euronet
Worldwide Reports Third Quarter 2005 Financial Results
LEAWOOD,
KANSAS, USA—October 25, 2005—Euronet
Worldwide, Inc. (NASDAQ: EEFT), a leading electronic payments provider,
announced consolidated revenues of $137.4 million for the third quarter ended
September 30, 2005. These results compare to $99.9 million for the third
quarter
ended September 30, 2004. Consolidated operating income for the quarter was
$13.8 million, compared to $10.0 million for the third quarter 2004. Adjusted
EBITDA (operating income plus depreciation and amortization) was $19.6 million
for third quarter 2005, compared to $14.2 million for the third quarter 2004.
Net
income for the third quarter 2005 was $10.2 million, or $0.26 diluted earnings
per share, compared to a net income of $6.0 million, or $0.17 diluted earnings
per share, for the third quarter 2004. The third quarter 2005 net income
included a foreign exchange translation gain of $0.9 million. Excluding this
gain, and considering the dilutive effect of the convertible debentures issued
December 2004 as described below, diluted earnings per share were $0.24 and
net
income was $10.1 million. Net income for the third quarter 2004 included
a
foreign exchange translation gain of $0.4 million and a loss of less than
$0.1
million on early retirement of debt; excluding these items, diluted earnings
per
share were $0.16, and net income was $5.6 million.
The
EFT Processing Segment
posted third quarter 2005 revenues of $26.3 million, compared to $20.9 million
reported for the third quarter 2004. Operating income for the third quarter
was
$6.6 million, compared to the prior year’s third quarter of $4.2 million. Third
quarter 2005 Adjusted EBITDA was $8.8 million, compared to $6.5 million for
the
third quarter 2004. The
EFT Processing Segment
processed 94.4 million transactions in the third quarter 2005 compared to
70.1
million transactions for the same period last year. The segment completed
the
quarter with 6,841 ATMs owned or operated, compared to 5,404 ATMs at the
end of
the third quarter 2004. The improved results of the third quarter 2005 over
the
same quarter last year are largely attributable to the continued growth in
ATMs
under management in our European and Indian markets, together with transaction
growth from those ATMs and other managed ATMs. Euronet owns and/or operates
ATMs
in Hungary, Poland, Germany, Croatia, the Czech Republic, U.K., Greece, Romania,
Serbia, Slovakia, Albania and India.
The
Prepaid Processing Segment
reported third quarter 2005 revenues of $107.7 million, compared to $75.4
million reported for the third quarter 2004. Operating income for the third
quarter 2005 was $9.2 million, compared to the prior year’s third quarter
results of $7.7 million. Adjusted EBITDA for the third quarter 2005 was $12.5
million, compared to $9.3 million for the third quarter 2004. Total transactions
processed by the Prepaid Processing Segment in the third quarter 2005 were
94.6
million, compared to 59.8 million prepaid transactions processed in the third
quarter 2004.
The Prepaid Processing Segment processes electronic point-of-sale prepaid
transactions at more than 218,000 point-of-sale terminals across more than
109,000 retailers in Europe, Asia Pacific, Africa and the U.S. As previously
announced, the company intends to expand its Prepaid Processing Segment both
domestically and internationally through internal sales and promotional efforts
as well as, if appropriate, acquisitions.
The
Prepaid Processing Segment’s third quarter’s year-over-year revenue improvements
were the result of a continuation of transaction growth together with benefits
of acquisitions completed after the third quarter of 2004. Operating income
in
the third quarter 2005 included approximately $0.4 million in operating losses
related to a recently acquired money transfer company, TelecommUSA. Moreover
in
the third quarter 2004, the Prepaid Processing Segment benefited from stronger
than average sales of Transact’s POS terminals, which contributed approximately
$0.7 million in gross margin. The quarterly Adjusted EBITDA and operating
income
improvements were generally correlated to the increases in revenues after
considering the $0.7 million stronger than average sales of Transact’s POS
terminals in the third quarter 2004 and the inclusion in the third quarter
2005
of the operating losses of the recently acquired money transfer and bill
payment
business. Depreciation and amortization included approximately $1.8 million
for
amortization of intangible assets assigned for purchase accounting related
to
the acquisitions in the Prepaid Processing Segment.
Corporate
Services and Other had
$2.9 million of operating expenses in the third quarter 2005, compared to
$2.5
million for the third quarter 2004, primarily due to increases in professional
fees, largely driven by professional fees related to acquisition analysis,
and
salary expense resulting from overall company growth.
All
segments included, transactions processed in the third quarter 2005 were
189.0
million, compared to 129.9 million processed in the third quarter 2004. This
increase was primarily due to increases in the EFT Processing Segment’s ATMs
operated and managed, combined with continued growth and acquisitions in
the
Prepaid Processing Segment.
The
company’s unrestricted cash on hand was $52.8 million and $50.3 million as of
September 30, 2005 and June 30, 2005 respectively. Euronet’s total indebtedness
was $164.0 million at September 30, 2005 compared to $178.7 million at June
30,
2005. The decrease of $14.7 million was primarily related to third quarter
2005
repayments of draws on the company’s $50 million revolving credit agreement. The
second quarter draws accommodated certain month-end trade payables at June
30,
2005.
In
December 2004, the company issued $140 million in convertible debentures
that,
if converted in the future, would have a potentially dilutive effect on the
company’s stock. The debentures are potentially convertible into approximately
4.2 million shares of common stock, subject to adjustment. As required by
EITF
04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per
Share,” regardless of whether the conditions upon which the debentures would be
convertible into shares of the company’s common stock have been met, if
dilutive, the impact of the contingently issuable shares is included in the
calculation of diluted earnings per share under the “if converted” method.
Unlike previous quarters, the assumed conversion of the debentures was dilutive
for the third quarter 2005. Accordingly, for the third quarter 2005, 4.2
million
contingently issuable shares have been assumed to be outstanding for the
period
and $0.8 million in interest charges and amortization of debt issuance costs
have been excluded from income available to common shareholders to determine
diluted earnings per share.
In
October 2005, the company completed the sale of $175 million aggregate principal
amount of its 3.50% Convertible Debentures due 2025 to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
Euronet intends to use the net proceeds of the offering for general corporate
purposes, which may include share repurchases, acquisitions of non-US entities
or other strategic investments. There was no impact to the third quarter
2005 as
the issuance was completed in October. The impact on future earnings per
share
is expected to be dilutive if earnings per share continue to increase, and,
accordingly, 4.3 million shares would be included in the calculation of diluted
earnings per share.
Euronet
announced that the Compensation Committee of its Board of Directors, consistent
with emerging corporate trends, has reconsidered the use of stock options
as an
element of long-term management incentive compensation, and has decided
to award
restricted common stock rather than options to purchase common stock. In
this
regard, the committee recently approved the award of certain restricted
shares
to non-executive management and is currently considering an award to executive
management. The aggregate non-executive and executive awards are estimated
at
approximately 500,000 shares and will generally vest over seven years.
The
company estimates the recurring quarterly expense of these awards commencing
in
the fourth quarter 2005 to be approximately $0.5 million, or approximately
$0.01
per diluted share.
Euronet
also announced
that it expects diluted earnings per share for the fourth quarter 2005
to be
approximately $0.25, inclusive of the approximate $0.01 per share cost
of the
restricted stock awards discussed above. This increase does not take into
consideration the effects of foreign exchange gains or losses, gains or
losses
on the early retirement of debt, discontinued operations, and other
non-operating or unusual items that Euronet cannot reasonably project.
We
believe that Adjusted EBITDA provides useful information to investors because
it
is an indicator of the strength and performance of our ongoing business
operations, including our ability to fund capital expenditures, acquisitions
and
operations and to incur and service debt. While depreciation and amortization
are considered operating costs under accounting principles generally accepted
in
the United States, these expenses primarily represent non-cash current period
allocation of costs associated with long-lived assets acquired in prior periods.
Adjusted EBITDA is a calculation commonly used as a basis for investors,
analysts and credit rating agencies to evaluate and compare the periodic
and
future operating performance and value of companies within the transaction
processing industry. Moreover, management analyzes historical results adjusted
for certain items that are non-operational or not necessarily ongoing in
nature
and that are incremental to the baseline of the business. Generally, these
items
include gains or losses associated with the sale of business assets or
operations, market development costs, foreign exchange translations,
discontinued operations, early debt retirement and other similar items as
discussed in this press release. Management believes the exclusion of these
items provides a more informed basis for evaluating the underlying business
unit
performance. The attached schedules provide a full reconciliation of any
such
non-GAAP financial measures.
Euronet
Worldwide will host an analyst conference call on Wednesday, October 26,
2005,
at 10:00 a.m. U.S. Eastern Time to discuss these results. The conference
call
will be broadcast on the Internet and can be accessed via the Euronet Worldwide
Internet site at www.euronetworldwide.com or via Vcall at
http://www.investorcalendar.com/IC/CEPage.asp?ID=95972. Participants should
go
to the web site at least 15 minutes before this event to download and install
any necessary audio software. For those without Internet access, the conference
call-in number is +1-877-407-9210 (USA) or +1-201-689-8049 (non-USA). The
password is “Euronet.”
For
those unable to attend the live broadcast, a replay will be available beginning
approximately one hour after the event at
http://www.investorcalendar.com/IC/CEPage.asp?ID=95972 as well as via phone.
To
dial in for the replay, the call-in number is +1-877-660-6853 (USA)
or +1-201-612-7415 (non-USA).
The account number is 286 and the conference ID number is 172301. The call
and
webcast replay will be available for one month. You can also access the Earnings
presentation at www.euronetworldwide.com/investors/library/presentations.asp.
No
fees are charged to access any event.
About
Euronet Worldwide
Euronet
Worldwide is an industry leader in processing secure electronic financial
transactions. The company offers outsourcing and consulting services, integrated
EFT software, network gateways, electronic prepaid top-up services to financial
institutions, mobile operators and retailers, as well as electronic consumer
money transfer and bill payment services. Euronet operates and services the
largest pan-European group of ATMs and operates the largest Indian shared
ATM
network. Euronet is also one of the largest providers of prepaid processing,
or
top-up services, for prepaid mobile airtime. The company is a licensed
electronic money transmitter and bill payment company via Euronet Payments
and
Remittance, Inc. The company has processing centers located in the U.S.,
Europe
and Asia, and processes electronic top-up transactions at more than 218,000
point-of-sale terminals across more than 109,000 retailers in Europe, Asia
Pacific, Africa and the U.S. With corporate headquarters in Leawood, Kansas,
USA, and 23 worldwide offices, Euronet serves clients in approximately 70
countries. Visit the company’s web site at www.euronetworldwide.com.
Any
statements contained in this news release that concern the company's or
management's intentions, expectations, or predictions of future performance,
are
forward-looking statements. Euronet's actual results may vary materially
from
those anticipated in such forward-looking statements as a result of a number
of
factors, including: technological developments affecting the market for the
company’s products and services; foreign exchange fluctuations; and changes in
laws and regulations affecting the company's business. These risks and other
risks are described in the company’s periodic filings with the Securities and
Exchange Commission, including but not limited to Euronet’s Form 10-K for the
year ended December 31, 2004 and its Form 10-Q for the periods ended March
31,
2005 and June 30, 2005. Copies of these filings may be obtained by contacting
the company or the SEC. Euronet
does not intend to update these forward-looking statements and undertakes
no
duty to any person to effect any such update under any
circumstances.
|
EURONET
WORLDWIDE, INC.
|
|||||||
|
Consolidated
Statements of Income and Comprehensive Income
|
|||||||
|
(unaudited
- in thousands, except share and per share data)
|
|||||||
|
Three
Months Ended
|
|||||||
|
September
30,
|
|||||||
|
2005
|
2004
|
||||||
|
Revenues:
|
|||||||
|
EFT
Processing
|
$
|
26,315
|
$
|
20,930
|
|||
|
Prepaid
Processing
|
107,669
|
75,359
|
|||||
|
Software
Solutions
|
3,406
|
3,635
|
|||||
|
Total
revenues
|
137,390
|
99,924
|
|||||
|
Operating
expenses:
|
|||||||
|
Direct
operating costs
|
95,779
|
69,192
|
|||||
|
Salaries
and benefits
|
13,831
|
10,810
|
|||||
|
Selling,
general and administrative
|
8,163
|
5,733
|
|||||
|
Depreciation
and amortization
|
5,773
|
4,215
|
|||||
|
Total
operating expenses
|
123,546
|
89,950
|
|||||
|
Operating
income
|
13,844
|
9,974
|
|||||
|
Other
income (expenses):
|
|||||||
|
Interest
income
|
1,013
|
864
|
|||||
|
Interest
expense
|
(1,695
|
)
|
(1,769
|
)
|
|||
|
Income
from unconsolidated affiliates
|
254
|
164
|
|||||
|
Loss
on early retirement of debt
|
-
|
(32
|
)
|
||||
|
Foreign
exchange
gain, net
|
854
|
419
|
|||||
|
Total
other expense
|
426
|
(354
|
)
|
||||
|
Income
from continuing operations before
|
|||||||
|
income
taxes and minority interest
|
14,270
|
9,620
|
|||||
|
Income
tax expense
|
(3,929
|
)
|
(3,657
|
)
|
|||
|
Minority
interest
|
(182
|
)
|
-
|
||||
|
Net
income
|
10,159
|
5,963
|
|||||
|
Translation
adjustment
|
(617
|
)
|
521
|
||||
|
Comprehensive
income
|
$
|
9,542
|
$
|
6,484
|
|||
|
Net
Income per share - basic:
|
|||||||
|
Net
income
|
$
|
0.29
|
$
|
0.19
|
|||
|
Basic
weighted average shares outstanding
|
35,404,949
|
31,623,233
|
|||||
|
Net
Income per share - diluted:
|
|||||||
|
Net
income
|
$
|
0.26
|
$
|
0.17
|
|||
|
Diluted
weighted average shares outstanding
|
42,006,633
|
34,698,436
|
|||||
|
EURONET
WORLDWIDE, INC.
|
|||||||
|
Consolidated
Summary Balance Sheets
|
|||||||
|
(unaudited
- in thousands)
|
|||||||
|
As
of
|
As
of
|
||||||
|
September
30,
|
December
31,
|
||||||
|
2005
|
2004
|
||||||
|
ASSETS
|
|||||||
|
Current
assets:
|
|||||||
|
Cash
and cash
equivalents
|
$
|
52,798
|
$
|
124,198
|
|||
|
Restricted
cash
|
70,335
|
69,300
|
|||||
|
Inventory
- PINs and other
|
25,127
|
18,949
|
|||||
|
Trade
accounts receivable, net of allowance for doubtful accounts
|
130,047
|
110,306
|
|||||
|
Other
current assets, net
|
30,155
|
22,013
|
|||||
|
Total
current assets
|
308,462
|
344,766
|
|||||
|
Property,
plant and equipment, net
|
41,734
|
39,907
|
|||||
|
Goodwill
and intangible assets, net
|
295,525
|
212,598
|
|||||
|
Other
assets, net
|
18,620
|
21,204
|
|||||
|
Total
assets
|
$
|
664,341
|
$
|
618,475
|
|||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable and other current liabilities
|
$
|
270,262
|
$
|
283,918
|
|||
|
Current
portion of capital lease obligations and short-term borrowings
|
10,723
|
9,265
|
|||||
|
Total
current liabilities
|
280,985
|
293,183
|
|||||
|
Obligations
under capital leases, excluding current installments
|
13,276
|
16,894
|
|||||
|
Deferred
income tax
|
24,994
|
17,520
|
|||||
|
Debt
obligations
|
140,000
|
140,000
|
|||||
|
Other
long-term liabilities
|
1,385
|
3,093
|
|||||
|
Minority
interest
|
7,405
|
5,871
|
|||||
|
Total
liabilities
|
468,045
|
476,561
|
|||||
|
Stockholders'
equity
|
196,296
|
141,914
|
|||||
|
Total
liabilities and stockholders' equity
|
$
|
664,341
|
$
|
618,475
|
|||
|
EURONET
WORLDWIDE, INC.
|
|||||||||||||
|
Reconciliation
of Net Income to Adjusted EBITDA by Segment
|
|||||||||||||
|
(unaudited
- in millions)
|
|||||||||||||
|
|
Three
Months Ended September
30, 2005
|
||||||||||||
|
|
EFT
|
Prepaid
|
Software
|
||||||||||
|
|
Processing
|
Processing
|
Solutions
|
Consolidated
|
|||||||||
|
Net
income
|
$
|
4.9
|
$
|
7.2
|
$
|
1.0
|
$
|
10.2
|
|||||
|
Add:
Income tax
|
1.2
|
2.7
|
-
|
3.9
|
|||||||||
|
Add:
Interest expense
|
0.5
|
0.4
|
-
|
1.7
|
|||||||||
|
Add:
Minority interest
|
-
|
0.2
|
-
|
0.2
|
|||||||||
|
Less:
Income from unconsolidated affiliates
|
-
|
(0.3
|
)
|
-
|
(0.3
|
)
|
|||||||
|
Less:
Interest income
|
-
|
(0.9
|
)
|
-
|
(1.0
|
)
|
|||||||
|
Less:
Foreign exchange gain
|
-
|
-
|
-
|
(0.9
|
)
|
||||||||
|
Rounding
and other
|
-
|
(0.1
|
)
|
-
|
-
|
||||||||
|
Subtotal
- Operating income
|
6.6
|
9.2
|
1.0
|
13.8
|
|||||||||
|
Add:
Depreciation and amortization
|
2.2
|
3.3
|
0.3
|
5.8
|
|||||||||
|
Rounding
|
-
|
-
|
(0.1
|
)
|
-
|
||||||||
|
Earnings
before interest, taxes, depreciation and
|
|||||||||||||
|
amortization (Adjusted EBITDA)
|
$
|
8.8
|
$
|
12.5
|
$
|
1.2
|
$
|
19.6
|
|||||
|
EURONET
WORLDWIDE, INC.
|
|||||||||||||
|
Reconciliation
of Net Income to Adjusted EBITDA by Segment
|
|||||||||||||
|
(unaudited
- in millions)
|
|||||||||||||
|
Three
Months Ended
September 30, 2004
|
|||||||||||||
|
|
EFT
|
Prepaid
|
Software
|
||||||||||
|
|
Processing
|
Processing
|
Solutions
|
Consolidated
|
|||||||||
|
Net
income
|
$
|
2.3
|
$
|
6.4
|
$
|
0.6
|
$
|
6.0
|
|||||
|
Add:
Income tax
|
1.5
|
2.2
|
-
|
3.7
|
|||||||||
|
Add:
Interest expense
|
0.4
|
-
|
-
|
1.8
|
|||||||||
|
Less:
Foreign exchange gain
|
-
|
-
|
-
|
(0.4
|
)
|
||||||||
|
Less:
Income from unconsolidated subs
|
-
|
(0.2
|
)
|
-
|
(0.2
|
)
|
|||||||
|
Less:
Interest income
|
(0.1
|
)
|
(0.8
|
)
|
-
|
(0.9
|
)
|
||||||
|
Rounding
and other
|
0.1
|
0.1
|
-
|
-
|
|||||||||
|
Subtotal:
Operating income
|
4.2
|
7.7
|
0.6
|
10.0
|
|||||||||
|
Add:
Depreciation and amortization
|
2.3
|
1.6
|
0.3
|
4.2
|
|||||||||
|
Earnings
before interest, taxes, depreciation and
|
|||||||||||||
|
amortization
(Adjusted EBITDA)
|
$
|
6.5
|
$
|
9.3
|
$
|
0.9
|
$
|
14.2
|
|||||
|
EURONET
WORLDWIDE, INC.
|
|||||||
|
Reconciliation
of Net Income Excluding FX and Retirement of
Debt
|
|||||||
|
(unaudited
- in millions, except share and per share
data)
|
|||||||
|
|
Three
months ended
|
||||||
|
|
September
30,
|
||||||
|
2005
|
2004
|
||||||
|
Net
income
|
$
|
10.2
|
$
|
6.0
|
|||
|
Foreign
exchange gain
|
(0.9
|
)
|
(0.4
|
)
|
|||
|
Loss
on early debt retirement (1)
|
-
|
0.0
|
|||||
|
Add:
Convertible debt issuance costs (2)
|
0.2
|
-
|
|||||
|
Add:
Interest on convertible debt (2)
|
0.6
|
-
|
|||||
|
Net
income before foreign exchange gain
|
$
|
10.1
|
$
|
5.6
|
|||
|
Adjusted
income per share - diluted (3)
|
$
|
0.24
|
$
|
0.16
|
|||
|
Diluted
weighted average shares outstanding
|
42,006,633
|
34,698,436
|
|||||
|
(1)
Third quarter 2004 includes a loss on early retirement of debt
of less
than $0.1 million.
|
|||||||
|
(2)
As required by GAAP, convertible debt issuance and interest costs
are
excluded from income for the purpose of calculating diluted earnings
per
share for any period when the convertible debentures, if converted,
would
be dilutive to earnings per share. Further, the convertible shares
are
treated as if all were outstanding for the period.
|
|||||||
|
(3)
Adjusted income per share is a non-GAAP measure that should be
considered
in addition to, and not as a substitute for, earnings per share
computed
in accordance with GAAP.
|
|||||||
|
|
|||||||