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 June 30, 2006

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

EURONET WORLDWIDE, INC.

Delaware (State or other jurisdiction of incorporation or organization)		74-2806888 (I.R.S. employer identification no.)

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

(913) 327-4200
(Registrant’s telephone number, including area 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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerþ               Accelerated filero               Non-accelerated filero

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 July 31, 2006 was 37,233,066 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			17
		ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			35
		ITEM 4.		CONTROLS AND PROCEDURES			36
PART II—OTHER INFORMATION							36
		ITEM 1.		LEGAL PROCEEDINGS			36
		ITEM 1A.		RISK FACTORS			36
		ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			38
		ITEM 6.		EXHIBITS			39

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

		June 30,
		2006				December 31,
		(unaudited)				2005 (1)
ASSETS
Current assets:
Cash and cash equivalents		$	232,723			$	219,932
Restricted cash			87,375				73,942
Inventory — PINs and other			32,580				25,595
Trade accounts receivable, net of allowances for doubtful accounts of $2,217 at June 30, 2006 and $1,995 at December 31, 2005			148,756				166,451
Deferred income taxes, net			3,410				1,812
Prepaid expenses and other current assets			26,393				21,211
Total current assets			531,237				508,943
Property and equipment, net of accumulated depreciation of $77,536 at June 30, 2006 and $66,644 at December 31, 2005			50,075				44,852
Goodwill			274,208				267,195
Acquired intangible assets, net of accumulated amortization of $16,205 at June 30, 2006 and $11,918 at December 31, 2005			50,502				50,724
Deferred income taxes			6,553				6,994
Other assets, net of accumulated amortization of $8,788 at June 30, 2006 and $7,721 at December 31, 2005			15,189				15,644
Total assets		$	927,764			$	894,352
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	184,773			$	202,655
Accrued expenses and other current liabilities			80,938				77,101
Current portion of capital lease obligations			6,180				5,431
Short-term debt obligations and current maturities of long-term debt obligations			12,803				22,893
Income taxes payable			10,164				8,207
Deferred income taxes			3,261				3,023
Deferred revenue			9,800				8,013
Total current liabilities			307,919				327,323
Debt obligations, net of current portion			324,328				315,000
Capital lease obligations, net of current portion			13,713				12,229
Deferred income taxes			24,508				25,157
Other long-term liabilities			1,842				1,161
Minority interest			7,446				7,129
Total liabilities			679,756				687,999
Stockholders’ equity:
Preferred Stock, $0.02 par value. Authorized 10,000,000 shares; none issued			—				—
Common Stock, $0.02 par value. Authorized 90,000,000 shares at June 30, 2006 and 60,000,000 shares at December 31, 2005; issued and outstanding 37,204,682 shares at June 30, 2006 and 35,776,431 at December 31, 2005			745				717
Additional paid-in-capital			331,828				312,025
Treasury stock			(196	)			(196	)
Subscriptions receivable			(313	)			(124	)
Accumulated deficit			(84,309	)			(104,787	)
Restricted reserve			796				776
Accumulated other comprehensive loss			(543	)			(2,058	)
Total stockholders’ equity			248,008				206,353
Total liabilities and stockholders’ equity		$	927,764			$	894,352

See accompanying notes to the unaudited consolidated financial statements.

(1)		Adjusted to include the retroactively applied effects of SFAS No. 123R share-based compensation expense; see Note 1 — General, Note 2, Significant Accounting Policies and Practices and Note 7 — Stock Plans to the unaudited consolidated financial statements.

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

		Three Months Ended June 30,								Six Months Ended June 30,
		2006				2005 (1)				2006				2005 (1)
Revenues:
EFT Processing		$	32,418			$	26,041			$	62,286			$	49,930
Prepaid Processing			114,185				102,480				225,146				191,861
Software Solutions			7,200				3,724				13,341				7,660
Total revenues			153,803				132,245				300,773				249,451
Operating expenses:
Direct operating costs			105,761				92,157				207,114				174,529
Salaries and benefits			19,454				14,979				37,488				28,183
Selling, general and administrative			9,277				8,197				17,713				14,335
Depreciation and amortization			7,063				5,645				13,882				10,670
Total operating expenses			141,555				120,978				276,197				227,717
Operating income			12,248				11,267				24,576				21,734
Other income (expense):
Interest income			3,387				1,105				6,109				2,312
Interest expense			(3,656	)			(1,617	)			(7,253	)			(3,205	)
Income from unconsolidated affiliates			187				407				358				652
Foreign exchange gain (loss), net			2,772				(4,715	)			4,330				(7,557	)
Other income (expense), net			2,690				(4,820	)			3,544				(7,798	)
Income before income taxes and minority interest			14,938				6,447				28,120				13,936
Income tax expense			(3,599	)			(3,471	)			(7,169	)			(7,301	)
Minority interest			(212	)			(313	)			(473	)			(401	)
Net income			11,127				2,663				20,478				6,234
Translation adjustment			2,118				(3,621	)			1,515				(5,582	)
Comprehensive income (loss)		$	13,245			$	(958	)		$	21,993			$	652
Earnings per share — basic:
Earnings per share		$	0.30			$	0.08			$	0.56			$	0.18
Basic weighted average shares outstanding			37,030,289				35,129,878				36,792,719				34,506,665
Earnings per share — diluted (see Note 3):
Earnings per share		$	0.28			$	0.07			$	0.52			$	0.17
Diluted weighted average shares outstanding			42,748,030				37,318,188				42,413,623				36,608,589

See accompanying notes to the unaudited consolidated financial statements.

(1)		Adjusted to include the retroactively applied effects of SFAS No. 123R share-based compensation expense; see Note 1 — General, Note 2, Significant Accounting Policies and Practices and Note 7 — Stock Plans to the unaudited consolidated financial statements.

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

		Six Months Ended June 30,
		2006				2005 (1)
Net income		$	20,478			$	6,234
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			13,882				10,670
Share-based compensation			3,838				2,687
Unrealized foreign exchange (gain) loss, net			(3,685	)			6,913
Gain on disposal of property and equipment			(189	)			(97	)
Deferred income tax expense (benefit)			(2,318	)			667
Income assigned to minority interest			473				401
Income from unconsolidated affiliates			(358	)			(652	)
Amortization of debt issuance expense			1,131				639
Changes in working capital, net of amounts acquired:
Income taxes payable			2,019				(164	)
Restricted cash			(10,279	)			(15,460	)
Inventory — PINs and other			(6,826	)			(11,261	)
Trade accounts receivable			22,381				(10,366	)
Prepaid expenses and other current assets			(3,759	)			(11,813	)
Trade accounts payable			(27,042	)			48,013
Deferred revenue			2,025				(3,711	)
Accrued expenses and other current liabilities			4,091				(1,339	)
Other, net			(251	)			(1,156	)
Net cash provided by operating activities			15,611				20,205
Cash flows from investing activities:
Acquisitions, net of cash acquired			(2,312	)			(99,410	)
Proceeds from sale of property and equipment			669				318
Purchases of property and equipment			(10,818	)			(7,851	)
Purchases of other long-term assets			(1,526	)			(1,199	)
Net cash used in investing activities			(13,987	)			(108,142	)
Cash flows from financing activities:
Proceeds from issuance of shares			11,685				5,419
Net borrowings on short-term debt obligations and revolving credit agreements			505				15,208
Repayment of capital lease obligations			(3,084	)			(2,761	)
Other, net			(180	)			(746	)
Net cash provided by financing activities			8,926				17,120
Effect of exchange differences on cash			2,241				(3,048	)
Increase (decrease) in cash and cash equivalents			12,791				(73,865	)
Cash and cash equivalents at beginning of period			219,932				124,198
Cash and cash equivalents at end of period		$	232,723			$	50,333
Interest paid during the period		$	6,245			$	2,484
Income taxes paid during the period			5,237				7,619

See accompanying notes to the unaudited consolidated financial statements.

(1)		Adjusted to include the retroactively applied effects of SFAS No. 123R share-based compensation expense; see Note 1 — General, Note 2, Significant Accounting Policies and Practices and Note 7 — Stock Plans to the unaudited consolidated financial statements.

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

(1) GENERAL

Basis of presentation

The accompanying unaudited consolidated financial statements of Euronet Worldwide, Inc. and its subsidiaries (“Euronet” or the “Company”) have been prepared from the records of the Company, in conformity with U.S. generally accepted accounting principles and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, such unaudited consolidated financial statements contain all adjustments (consisting of normal interim closing procedures) necessary to present fairly the financial position of the Company as of June 30, 2006, the results of its operations for the three- and six-month periods ended June 30, 2006 and 2005 and cash flows for the six-month periods ended June 30, 2006 and 2005.

The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Euronet for the year ended December 31, 2005, including the notes thereto, set forth in the Company’s Form 10-K. Certain prior year amounts have been reclassified to conform to the current period consolidated financial statement presentation.

The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” (“SFAS No. 123R”) on January 1, 2006. The Company elected to adopt SFAS No. 123R utilizing the modified retrospective application method and, accordingly, financial statement amounts for the prior periods presented in this Form 10-Q have been adjusted to reflect the fair value method of expensing prescribed by SFAS No. 123R. See Note 2 — Significant Accounting Policies and Practices and Note 7 — Stock Plans for further discussion.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for the three- and six-month periods ended June 30, 2006 are not necessarily indicative of the results to be expected for the full year ending December 31, 2006.

(2) SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

Share-based compensation

Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123R, which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123R requires the determination of the fair value of the share-based compensation at the grant date and the recognition of the related expense over the period in which the share-based compensation vests (“requisite service period”). The Company elected to adopt the modified retrospective application method as provided by SFAS No. 123R and, accordingly, financial statement amounts for the prior periods presented in this Form 10-Q have been adjusted to reflect the fair value method of expensing prescribed by SFAS No. 123R. The Company believes that this method achieves the highest level of clarity and comparability among the presented periods.

As a result of adopting SFAS No. 123R, the Company’s deferred tax assets related to U.S. Federal and state net operating loss carryforwards, reported for U.S. GAAP purposes, and deferred compensation, increased by an estimated $8.1 million as of December 31, 2005. The Company’s initial estimate remains preliminary while management completes its analysis. However, since the Company records a valuation allowance for its entire U.S. net deferred tax asset position, upon adoption of SFAS No. 123R, the amount of net deferred tax assets did not, and is not expected to, change. The Company has chosen to use the Black-Scholes pricing model for the determination of fair value for future stock option grants. The amount of future compensation expense related to restricted share awards will continue to be based on the share price at the grant date. Share-based compensation expense is generally recognized as an expense of the Corporate division on a “straight-line” basis over the requisite service period. For awards with performance conditions, expense is recognized on a “graded attribution method.” The graded attribution method results in expense recognition on a straight-line basis over the requisite service period for each separately vesting portion of an award, as if the award was, in-substance, multiple awards. See Note 7 — Stock Plans for further disclosure.

For a description of other significant accounting policies of the Company, see Note 3 to the Audited Consolidated Financial Statements as of and for the year ended December 31, 2005, set forth in the Company’s Annual Report on Form 10-K.

Recent accounting pronouncements

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” FIN 48 is an interpretation of SFAS No. 109, “Accounting for Income Taxes,” and seeks to reduce the diversity in practice associated with certain aspects of the measurement and recognition related to accounting for income taxes. This

interpretation also requires expanded disclosure with respect to uncertain tax positions. The provisions of FIN 48 will be effective for the Company beginning January 1, 2007. The Company is in the process of determining the effect, if any, that the adoption of FIN 48 will have on its financial statements.

(3) EARNINGS PER SHARE

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

		Three Months Ended June 30,								Six Months Ended June 30,
(dollar amounts in thousands)		2006				2005 (1)				2006				2005 (1)
Basic weighted average shares outstanding			37,030,289				35,129,878				36,792,719				34,506,665
Additional shares from assumed conversion of 1.625% convertible debentures			4,162,950				—				4,162,950				—
Weighted average shares issuable in connection with acquisition obligations (See Note 4 - Acquisitions)			91,285				—				73,028				—
Incremental shares from assumed conversion of stock options and restricted stock (1)			1,463,506				2,188,310				1,384,926				2,101,924
Potentially diluted weighted average shares outstanding			42,748,030				37,318,188				42,413,623				36,608,589
Net income		$	11,127			$	2,663			$	20,478			$	6,234
Add: interest expense of 1.625% convertible debentures			797				—				1,594				—
Earnings available to common stockholders		$	11,924			$	2,663			$	22,072			$	6,234

For the three- and six-month periods ended June 30, 2006 and 2005, the average market price of Euronet common stock exceeded the exercise price of all stock options outstanding.

The Company has $140 million of 1.625% convertible debentures due 2024 and $175 million 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 4.2 million shares of Common Stock for the $140 million 1.625% issue, and 4.3 million shares of Common Stock for the $175 million 3.50% issue, initially in December 2009 and October 2012, respectively, or earlier 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 net income 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% convertible debentures was dilutive for the three- and six-month periods ended June 30, 2006 and anti-dilutive for the three- and six-month periods ended June 30, 2005. Accordingly, the impact has been included in the above computation of potentially diluted weighted average shares outstanding for the three- and six-month periods ended June 30, 2006 and excluded from the above computation for the three- and six-month periods ended June 30, 2005. Under the if-converted method, the assumed conversion of the 3.50% convertible debentures, issued October 2005, was anti-dilutive for the three- and six-month periods ended June 30, 2006 and, accordingly, the impact has been excluded from the above computation of potentially dilutive weighted average shares outstanding. The 3.50% convertible debentures were not outstanding for the three- and six-month periods ended June 30, 2005.

(4) ACQUISITIONS

In accordance with SFAS No. 141, “Business Combinations,” the Company allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by management. For certain large or unique acquisitions management engaged an appraiser to assist in the valuation.

2006 Acquisitions:

In January 2006, the Company completed the acquisition of the assets of Essentis Limited (“Essentis”) for approximately $3.0 million, which was comprised of $0.9 million in cash and approximately $2.1 million in assumed liabilities. Essentis is a U.K. company that owns a card issuing and merchant acquiring software package that will enhance Euronet’s outsourcing and software offerings to banks. Essentis is reported in the Company’s Software Solutions Segment. The Company’s allocation of the purchase price to the fair values of acquired tangible and intangible assets is preliminary and remains so while management completes its valuation of the fair value of the net assets acquired. The following table summarizes the estimated allocation of the purchase price to the fair values of the acquired tangible and intangible assets at the acquisition date:

		Estimated
(dollar amounts in thousands)		Life				Essentis
Property and equipment		various				$	573
Software		5 years					2,467
Assets acquired						$	3,040

There are no potential additional purchase price or escrow arrangements associated with the acquisition of Essentis.

2005 Acquisitions:

During 2005, the Company completed seven acquisitions for an aggregate purchase price of approximately $119.1 million. The Company’s allocation of the purchase price to the fair values of acquired tangible and intangible assets for certain acquisitions are preliminary and remain so while management completes its valuation of the fair value of the net assets acquired. The following table summarizes the allocation of the purchase price, including $2.9 million paid in prior years for acquisitions accounted for as step acquisitions, to the fair values of the acquired tangible and intangible assets at the acquisition dates.

		Estimated								Other
(dollar amounts in thousands)		Life				Telerecarga				Acquisitions				Total
Current assets						$	—			$	3,841			$	3,841
Property and equipment		various					1,415				1,412				2,827
Customer relationships		8 or 9 years					10,295				14,703				24,998
Software		5 years					655				900				1,555
Patent		7 years					—				1,699				1,699
Trade name		2 years					254				—				254
Non-compete agreements		5 years					147				—				147
Deferred income tax asset							—				1,055				1,055
Goodwill		Indefinite					42,144				53,513				95,657
Assets acquired							54,910				77,123				132,033
Current liabilities							—				(687	)			(687	)
Deferred income tax liability							(3,892	)			(5,442	)			(9,334	)
Net assets acquired						$	51,018			$	70,994			$	122,012

Acquisition of Telerecarga S.L.

In March 2005, to supplement the Company’s prepaid processing business in Spain, Euronet purchased 100% of the assets of Telerecarga S.L. (“Telerecarga”), a Spanish company that distributes prepaid mobile airtime and other prepaid products via Point of Sale (“POS”) terminals throughout Spain. The purchase price of €38.1 million (approximately $51.0 million) was settled through the assumption of €25.4 million (approximately $34.0 million) in liabilities and cash payments of €12.7 million (approximately $17.0 million).

Other acquisitions

During 2005, Euronet completed six other acquisitions described below for a total purchase price of $68.1 million, comprised of $39.6 million in cash, 864,131 shares of Euronet Common Stock, valued at $23.6 million and $4.9 million in liabilities assumed. Additionally, the purchase price for acquisitions accounted for as step acquisitions, in accordance with SFAS No. 141, include $2.9 million paid in prior years.

	•		In December 2005, EFT Services Holding B.V. (a wholly-owned subsidiary of Euronet) purchased 6.25% of Euronet Services Private Limited, the Company’s subsidiary in India (“Euronet India”), increasing its share ownership of Euronet India to 100%. Euronet India is included in the Company’s EFT Processing Segment and, since the Company’s ownership share previously exceeded 50%, has been a consolidated subsidiary since inception.
	•		In two separate transactions, one in April 2005 and one in December 2005, EFT Services Holding B.V. (a wholly-owned subsidiary of Euronet) purchased an additional 64% of Europlanet a.d. (“Europlanet”), a Serbian company, increasing its share ownership in Europlanet to 100%. Europlanet is an ATM and card processor that owns, operates and manages a network of ATMs and POS terminals. Upon obtaining a controlling interest in April 2005, Euronet began consolidating Europlanet’s financial position and results of operations. Euronet’s $0.2 million share of dividends declared prior to acquiring a controlling ownership share of Europlanet was recognized as income from unconsolidated affiliates during 2005.
	•		In October 2005, Euronet EFT Services Hellas EPE (a wholly-owned subsidiary of Euronet) acquired all of the share capital of Instreamline S.A. (“Instreamline”), a Greek company that provides card processing services in addition to debit card and transaction gateway switching services in Greece and the Balkan region. Instreamline will complement the Company’s EFT Processing Segment. Subsequent to the acquisition, Instreamline was renamed Euronet Card Services Greece.
	•		In May 2005, Euronet acquired all of the outstanding membership interests in Continental Transfer, LLC and a wholly-owned subsidiary, TelecommUSA, Limited (“TelecommUSA”), a company based in North Carolina. TelecommUSA provides money transfer services, primarily to consumers in the U.S. to destinations in Latin America, and bill payment services within the U.S. This acquisition launched the Company’s money transfer and bill payment business.
	•		In March 2005, to enhance the Company’s U.S. prepaid processing business, PaySpot (a wholly-owned subsidiary of Euronet) purchased substantially all of the assets of Dynamic Telecom, Inc. (“Dynamic Telecom”), a company based in Iowa. Dynamic Telecom’s distribution network in convenience store chains throughout the U.S. provides several types of prepaid products including wireless, long distance and gift cards via POS terminals.
	•		In March 2005, the Company exercised its option to acquire an additional 41% of the shares of ATX Software, Ltd. (“ATX”) and increased its share ownership in ATX to 51%. Euronet originally acquired a 10% share in ATX in May 2004. Euronet’s $0.1 million share of dividends declared prior to acquiring the additional 41% ownership share of ATX was recognized as income from unconsolidated affiliates during 2005. Upon the increase in ownership from 10% to 51%, Euronet consolidated ATX’s financial position and results of operations.

In connection with these six acquisitions, $3.5 million in cash remains in escrow. This cash has been reflected in the purchase price allocation because the Company has determined beyond a reasonable doubt that the performance criteria will be met. During the six-month period ending June 30, 2006, the Company issued 109,542 shares of Euronet Common Stock, valued at $4.1 million, in settlement of contingent payment arrangements associated with the Company’s 2005 acquisitions. This settlement was recorded as an increase in goodwill.

Pro Forma results:

The following unaudited pro forma financial information presents the condensed combined results of operations of Euronet for the three- and six-month periods ended June 30, 2006 and 2005, as if the acquisitions described above had occurred January 1, 2005. An adjustment was made to the combined results of operations, reflecting amortization of purchased intangible assets, net of tax, which would have been recorded if the acquisitions had occurred on January 1, 2005. The unaudited pro forma financial information is not intended to represent, or be indicative of, the consolidated results of operations or financial condition of Euronet that would have been reported had the acquisitions been completed as of the beginning of the periods presented. Moreover, the unaudited pro forma financial information should not be considered as representative of the future consolidated results of operations or financial condition of Euronet.

		Pro Forma for the Three Months								Pro Forma for the Six Months
		Ended June 30,								Ended June 30,
(amounts in thousands, except per share data)		2006				2005				2006				2005
Revenues		$	153,803			$	137,221			$	300,773			$	268,704
Operating income		$	12,248			$	9,370			$	24,576			$	18,680
Net income		$	11,127			$	1,302			$	20,478			$	3,803
Per share data:
Earnings per share-basic		$	0.30			$	0.04			$	0.56			$	0.11
Earnings per share-diluted		$	0.28			$	0.03			$	0.52			$	0.10

(5) GOODWILL AND INTANGIBLE ASSETS

Intangible assets are carried at amortized cost, and goodwill, which is not amortized, is carried at cost. Intangible assets and goodwill are evaluated for impairment annually or more frequently if there is an indication of impairment. Goodwill represents the excess of the purchase price of the acquired businesses over the fair value of the underlying net tangible and intangible assets acquired. A summary of intangible assets and goodwill activity for the six-month period ended June 30, 2006, is presented below:

		Amortizable								Total
		Intangible								Intangible
(in thousands):		Assets				Goodwill				Assets
Balance as of January 1, 2006		$	50,724			$	267,195			$	317,919
Increases (decreases):
Acquisition of Essentis			2,467				—				2,467
Earn-out payment related to Dynamic Telecom acquisition			—				4,126				4,126
Adjustments to other 2005 acquisitions			232				(611	)			(379	)
Amortization			(4,134	)			—				(4,134	)
Other (primarily changes in foreign currency exchange rates)			1,213				3,498				4,711
Balance as of June 30, 2006		$	50,502			$	274,208			$	324,710

Estimated annual amortization expense on intangible assets with finite lives, before income taxes, as of June 30, 2006 is expected to be $8.3 million for 2006, $8.3 million for 2007, $8.1 million for 2008, $8.1 million for 2009, $8.0 million for 2010 and $6.1 million for 2011.

(6) DEBT OBLIGATIONS

A summary of the activity for the six-month period ended June 30, 2006 for all debt obligations 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				Total
Balance at January 1, 2006		$	7,343			$	15,550			$	17,660			$	140,000			$	175,000			$	355,553
Increases (decreases):
Indebtedness incurred			7,146				1,548				5,204				—				—				13,898
Repayments			(7,919	)			(2,040	)			(4,000	)			—				—				(13,959	)
Capital lease interest accrued			—				—				916				—				—				916
Foreign exchange loss			123				380				113				—				—				616
Balance at June 30, 2006			6,693				15,438				19,893				140,000				175,000				357,024
Less — current maturities			—				(12,803	)			(6,180	)			—				—				(18,983	)
Long-term obligations at June 30, 2006		$	6,693			$	2,635			$	13,713			$	140,000			$	175,000			$	338,041

During the second quarter 2006 the Company amended its October 2004, $50 million revolving credit agreement to extend the maturity date to May 26, 2009 and established a new credit facility in India maturing on May 26, 2009. The amended facility also increased the number of participating financial institutions from one to three. The credit agreement, as amended, comprises the following:

	•		A $10 million facility is to be used by the Company and certain U.S. subsidiaries (the “U.S. facility”) and drawn in U.S. dollars. This facility bears interest at either (i) the prime rate plus an applicable margin specified in the respective agreement, or (ii) a fixed rate equal to the U.S. dollar London Interbank Offered Rate (“LIBOR”), plus an applicable margin set forth in the agreement, and varies based on a consolidated funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio, adjusted for certain other items as defined in the agreements. Fixed rate borrowings are made with maturities of one month, two months or three months. The U.S. facility is secured by approximately 65% of the share capital of Euronet Services Holding B.V. and the share capital of a majority of the Company’s U.S. subsidiaries.
	•		A $30 million facility for use by the Company and certain European subsidiaries (the “European facility”). The European facility is a multi-currency facility that may be drawn in any combination of U.S. dollar, euro or British pound denominations. U.S. dollar draws are subject to interest charges similar to the $10 million U.S. facility described above. Borrowings in euro or

			British pounds bear interest at a rate fixed to the Euro Interbank Offered Rate (“EURIBOR”) or LIBOR rate, respectively, plus a margin that varies based on a consolidated debt to EBITDA ratio, plus ancillary costs. Fixed rate borrowings are made with maturities of one month, two months or three months. Borrowings under this facility are secured by the share capital of e-pay Ltd., Euronet Services GmbH, Transact GmbH and Delta Euronet GmbH, and are secured and guaranteed by a majority of the Company’s U.S. subsidiaries.
	•		A $10 million facility, to be drawn in Indian rupees, for use by the Company’s Indian subsidiary (the “Rupee facility”). Borrowings under the Rupee facility either (i) bear interest at a floating rate equal to the Indian prime lending rate or the Mumbai Interbank Offered Rate (“MIBOR”), plus an applicable margin, or (ii) at a fixed MIBOR rate plus an applicable margin. Fixed rate borrowings are made with maturities of one month, two months or three months. Borrowings under this facility are unsecured and guaranteed by Euronet Worldwide, Inc.

The agreement allows the Company to elect to increase the aggregate commitments under the credit facility from $50 million to $65 million. The borrowings under the agreement may be used to refinance debt, for working capital needs, for permitted acquisitions and for other general corporate purposes. The agreement places certain restrictions on use of the facility to finance investments in, or operations of, “money services businesses” such as those engaged in money transfer activities. The agreement contains customary events of cross-default and covenants related to limitations on indebtedness and the maintenance of certain financial ratios. Total debt issuance costs of $0.3 million are being amortized over three years.

As of June 30, 2006, there were borrowings of $6.7 million and stand-by letters of credit of $5.6 million outstanding against these facilities. As a result of the amendment to the revolving credit facility described above, borrowings under the facilities are classified as long-term debt obligations in the unaudited consolidated balance sheet as of June 30, 2006.

(7) STOCK PLANS

The Company has established, and shareholders have approved, a share compensation plan (the “SCP”) that allows the Company to grant restricted shares, or options to purchase shares, of its Common Stock to certain current and prospective key employees, directors and consultants of the Company. These awards generally vest over periods ranging from three to seven years from the date of grant and are generally exercisable during the shorter of a ten-year term or the term of employment or consulting arrangements with the Company. As of June 30, 2006, the Company reserved 13,663,991 shares of Common Stock, including 4,000,000 approved during the three-month period ended June 30, 2006, of which 9,497,340 have been awarded to employees.

(a) Adoption of SFAS No. 123R

As discussed in Note 1 and Note 2, the Company elected to adopt SFAS No. 123R under the modified retrospective application method applied to all periods for which SFAS No 123 was effective. Accordingly, financial statement amounts for the prior periods presented in this Form 10-Q have been adjusted to reflect the fair value method of expensing prescribed by SFAS No. 123R. The following table outlines the impact of adopting SFAS No. 123R on previously reported results:

		As Previously				Impact of
(in thousands, except per share data)		Reported				Adoption				As Adjusted
For Three Months Ended June 30, 2005:
Income before income taxes and minority interest		$	7,702			$	(1,255	)		$	6,447
Net income		$	3,918			$	(1,255	)		$	2,663
Earnings per share:
Basic		$	0.11			$	(0.03	)		$	0.08
Diluted		$	0.10			$	(0.03	)		$	0.07
For Six Months Ended June 30, 2005:
Income before income taxes and minority interest		$	16,446			$	(2,510	)		$	13,936
Net income		$	8,744			$	(2,510	)		$	6,234
Earnings per share:
Basic		$	0.25			$	(0.07	)		$	0.18
Diluted		$	0.24			$	(0.07	)		$	0.17
As of December 31, 2005:
Additional paid-in capital		$	279,307			$	32,718			$	312,025
Accumulated deficit		$	(72,069	)		$	(32,718	)		$	(104,787	)

Changes to the Company’s consolidated statement of cash flows for the six-month period ended June 30, 2005 for the adoption of SFAS No. 123R were limited to the impact on net income shown above and the offsetting adjustment for share-based compensation as a non-cash expense.

The Company’s consolidated statements of income and comprehensive income includes share-based compensation expense of $1.9 million and $1.3 million for the three-month periods ended June 30, 2006 and 2005, respectively, and $3.8 million and $2.7 million for the six-month periods ended June 30, 2006 and 2005, respectively. This is recorded as salaries and benefits expense. Of these amounts, approximately $0.1 million and $0.2 million was recorded as expense of the Company’s business segments during the six-month periods ended June 30, 2006 and 2005, respectively. The Company recorded a tax benefit of $0.1 million and $0.2 million during the three- and six-month periods ended June 30, 2006, respectively, for the portion of this expense that relates to foreign tax jurisdictions in which an income tax benefit is expected to be derived. The Company did not record a tax benefit for the three- and six-month periods ended June 30, 2005.

(b) Stock options

Summary stock options activity is presented in the table below:

										Weighted
						Weighted				Average				Aggregate
						Average				Remaining				Intrinsic
		Number of				Exercise				Contractual				Value
		Shares				Price				Term				(thousands)
Outstanding at January 1, 2006			3,803,261			$	11.91			6.2 years				$	60,439
Exercised			(1,273,026	)			8.56							$	30,262
Forfeited			(75,914	)			19.08							$	2,608
Outstanding at June 30, 2006			2,454,321			$	13.51			6.3 years				$	61,016
Exercisable at January 1, 2006			2,142,090			$	8.75			5.2 years				$	40,807
Exercisable at June 30, 2006			1,283,158			$	10.92			5.7 years				$	35,227

There were no options granted during the six-month period ended June 30, 2006. The Company received cash of $10.9 million in connection with stock options exercised during the six-month period ended June 30, 2006. As of June 30, 2006, unrecognized compensation expense related to nonvested stock options totaled $5.2 million and will be recognized over the next 30 months, with an overall weighted average period of one year.

(c) Restricted stock

Restricted stock awards vest based on the achievement of time-based service conditions and/or performance-based conditions. For certain awards, vesting is based on the achievement of one or more than one condition of an award with multiple time-based and/or performance-based conditions. The assumed annual forfeiture rate for restricted stock awards is 5%.

During the six-month period ended June 30, 2006, 240,000 restricted shares were granted, 20,100 restricted shares were forfeited and 9,763 restricted shares vested. A summary of restricted stock outstanding as of June 30, 2006 is presented in the table below:

						Weighted								Unrecognized
						Average								Compensation
						Remaining				Aggregate				Cost on
		Number of				Vesting Period				Intrinsic				Unvested
(dollar amounts in thousands)		Shares				(years)				Value				Shares
Restricted stock vesting based on continued employment			317,270				5.6			$	12,174			$	8,276
Restricted stock vesting based on achievement of performance criteria			435,930				5.0			$	16,727			$	11,705

(d) Employee stock purchase plans

In 2003, the Company established a qualified Employee Stock Purchase Plan (the “ESPP”), which allows qualified employees (as defined by the plan documents) to participate in the purchase of rights to purchase designated shares of the Company’s Common Stock at a price equal to the lower of 85% of the closing price at the beginning or end of each quarterly offering period. The Company reserved 500,000 shares of Common Stock for purchase under the ESPP. Pursuant to the ESPP, during the six-month period ended June 30, 2006 the Company issued 23,112 rights to purchase shares of Common Stock at an average price per share of $26.59. The following table provides the weighted average fair value of the ESPP stock purchase rights during the six-month period ended June 30, 2006 and the assumptions used to calculate the fair value using the Black-Scholes pricing model:

		Six Months
		Ended June 30,
		2006
Volatility			32.1	%
Risk-free interest rates			4.0	%
Dividend yield			0.0	%
Expected lives		3 months
Weighted-average fair value (per share)		$	5.36

(8) BUSINESS SEGMENT INFORMATION

The Company operates in three principal business segments.

	1)		Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, Asia and Africa. The Company provides comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions and electronic recharge services (for prepaid mobile airtime purchases via ATM or directly from the handset).
	2)		Through the Prepaid Processing Segment, the Company provides prepaid processing, or top-up services, for prepaid mobile airtime and other prepaid products. The Company operates a network of POS terminals providing electronic processing of prepaid mobile airtime services in the U.S., Europe, Africa and Asia Pacific. This segment includes the results of Euronet Payments & Remittance, Inc., a licensed money transfer and bill payment company.
	3)		Through the Software Solutions Segment, the Company offers a suite of integrated electronic financial transaction (“EFT”) software solutions for electronic payment and transaction delivery systems.

In addition, in its administrative division, “Corporate Services, Eliminations and Other,” the Company accounts for non-operating results, certain intercompany eliminations and the costs of providing corporate and other administrative services to the three business segments. These services are not directly identifiable with the Company’s business segments. During the second quarter and first half of 2006 the Company’s Software Solutions Segment recorded intersegment revenues of $0.6 million in relation to software and services provided to EFT Processing Segment entities. Salaries and benefits expense related to share-based compensation is generally recorded as a corporate expense.

The following tables present the segment results of the Company’s operations for the three- and six-month periods ended June 30, 2006 and 2005:

		For the Three Months Ended June 30, 2006
														Corporate
														Services,
		EFT				Prepaid				Software				Eliminations
(in thousands)		Processing				Processing				Solutions				and Other				Consolidated
Total revenues		$	32,418			$	114,185			$	7,762			$	(562	)		$	153,803
Operating expenses:
Direct operating costs			13,591				91,770				400				—				105,761
Salaries and benefits			4,983				6,205				4,458				3,808				19,454
Selling, general and administrative			2,835				4,537				1,090				815				9,277
Depreciation and amortization			3,018				3,552				448				45				7,063
Total operating expenses			24,427				106,064				6,396				4,668				141,555
Operating income (loss)			7,991				8,121				1,366				(5,230	)			12,248
Other income (expense):
Interest income			103				1,051				23				2,210				3,387
Interest expense			(700	)			(338	)			(14	)			(2,604	)			(3,656	)
Income (loss) from unconsolidated affiliates			(631	)			356				—				462				187
Foreign exchange gain, net			—				—				—				2,772				2,772
Total other income (expense)			(1,228	)			1,069				9				2,840				2,690
Income (loss) before income taxes and minority interest		$	6,763			$	9,190			$	1,375			$	(2,390	)		$	14,938

		For the Three Months Ended June 30, 2005
														Corporate
														Services,
		EFT				Prepaid				Software				Eliminations
(in thousands)		Processing				Processing				Solutions				and Other (1)				Consolidated
Total revenues		$	26,041			$	102,480			$	3,724			$	—			$	132,245
Operating expenses:
Direct operating costs			10,756				81,053				348				—				92,157
Salaries and benefits			4,169				6,030				2,152				2,628				14,979
Selling, general and administrative			2,447				4,105				186				1,459				8,197
Depreciation and amortization			2,415				2,956				259				15				5,645
Total operating expenses			19,787				94,144				2,945				4,102				120,978
Operating income (loss)			6,254				8,336				779				(4,102	)			11,267
Other income (expense):
Interest income			60				889				—				156				1,105
Interest expense			(521	)			(132	)			—				(964	)			(1,617	)
Income from unconsolidated affiliates			202				205				—				—				407
Foreign exchange loss, net			—				—				—				(4,715	)			(4,715	)
Total other income (expense)			(259	)			962				—				(5,523	)			(4,820	)
Income (loss) before income taxes and minority interest		$	5,995			$	9,298			$	779			$	(9,625	)		$	6,447

		For the Six Months Ended June 30, 2006
														Corporate
														Services,
		EFT				Prepaid				Software				Eliminations
(in thousands)		Processing				Processing				Solutions				and Other				Consolidated
Total revenues		$	62,286			$	225,146			$	13,916			$	(575	)		$	300,773
Operating expenses:
Direct operating costs			26,017				180,257				840				—				207,114
Salaries and benefits			9,297				12,489				8,382				7,320				37,488
Selling, general and administrative			5,589				8,383				2,068				1,673				17,713
Depreciation and amortization			5,963				6,936				895				88				13,882
Total operating expenses			46,866				208,065				12,185				9,081				276,197
Operating income (loss)			15,420				17,081				1,731				(9,656	)			24,576
Other income (expense):
Interest income			165				2,029				24				3,891				6,109
Interest expense			(1,343	)			(704	)			(14	)			(5,192	)			(7,253	)
Income (loss) from unconsolidated affiliates			(810	)			706				—				462				358
Foreign exchange gain, net			—				—				—				4,330				4,330
Total other income (expense)			(1,988	)			2,031				10				3,491				3,544
Income (loss) before income taxes and minority interest		$	13,432			$	19,112			$	1,741			$	(6,165	)		$	28,120
Total assets as of June 30, 2006		$	139,758			$	588,463			$	15,863			$	183,680			$	927,764

		For the Six Months Ended June 30, 2005
														Corporate
														Services,
		EFT				Prepaid				Software				Eliminations
(in thousands)		Processing				Processing				Solutions				and Other (1)				Consolidated
Total revenues		$	49,930			$	191,861			$	7,660			$	—			$	249,451
Operating expenses:
Direct operating costs			21,590				152,332				607				—				174,529
Salaries and benefits			7,872				10,933				4,279				5,099				28,183
Selling, general and administrative			3,755				7,225				576				2,779				14,335
Depreciation and amortization			4,880				5,199				541				50				10,670
Total operating expenses			38,097				175,689				6,003				7,928				227,717
Operating income (loss)			11,833				16,172				1,657				(7,928	)			21,734
Other income (expense):
Interest income			106				1,798				—				408				2,312
Interest expense			(1,090	)			(286	)			—				(1,829	)			(3,205	)
Income from unconsolidated affiliates			202				318				—				132				652
Foreign exchange loss, net			—				—				—				(7,557	)			(7,557	)
Total other income (expense)			(782	)			1,830				—				(8,846	)			(7,798	)
Income (loss) before income taxes and minority interest		$	11,051			$	18,002			$	1,657			$	(16,774	)		$	13,936
Total assets as of December 31, 2005		$	124,772			$	477,893			$	6,308			$	285,379			$	894,352

(9) CONTINGENCIES

From time to time, the Company is a party to litigation arising in the ordinary course of its business.

During 2005, a former cash supply contractor in Central Europe (the “Contractor”) claimed that the Company owed it approximately $2.0 million for the provision of cash during the fourth quarter 1999 and first quarter 2000 that has not been returned. This claim, based on events that purportedly occurred over five years ago, was made more than a year after the Company had terminated its business with the Contractor and established a cash supply agreement with another supplier. In the first quarter 2006, the Contractor initiated legal action in Budapest, Hungary regarding the claim. Management expects the Company to prevail in defending itself in this matter and, accordingly has not recorded any liability or expense related to this claim. The Company will continue to monitor and assess this claim until ultimate resolution.

Currently, there are no other legal proceedings that management believes, either individually or in the aggregate, would have a material adverse effect upon the consolidated results of operations or financial condition of the Company.

(10) GUARANTEES

As of June 30, 2006, the Company had $26.7 million of bank guarantees issued on its behalf, of which $12.0 million are collateralized by cash deposits held by the respective issuing banks.

Euronet Worldwide, Inc. regularly grants guarantees of the obligations of its wholly-owned subsidiaries. As of June 30, 2006, the Company had granted guarantees in the following amounts:

	•		Cash in various ATM networks — $18.8 million over the terms of the cash supply agreements.
	•		Commercial obligations of the Company’s Australian Prepaid Processing subsidiary, including PIN inventory held on consignment with our customers, to a maximum of approximately $45 million.
	•		Other vendor supply agreements — $17.8 million over the term of the vendor agreements.

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 obligations is not stated in the agreements. Our liability under such indemnification provision may be subject to time and materiality limitations, monetary caps and other conditions and defenses. Such indemnity obligations include the following:

	•		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 our vendors and into 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
	•		In connection with the Company’s entry into the money transfer business, the Company has issued surety bonds in compliance with licensing requirements of those states.

To date, the Company is not aware of any significant claims made by the indemnified parties or third parties to guarantee agreements with the Company and, accordingly, no liabilities were recorded as of June 30, 2006 and December 31, 2005.

(11) INCOME TAXES

The Company's effective tax rate, after consideration of minority interest, was 24% and 57% for the three-month periods ended June 30, 2006 and 2005, respectively, and was 26% and 54% for the six-month periods ended June 30, 2006 and 2005, respectively. The improvement in the effective tax rate largely relates to the impact of foreign currency exchange gains or losses. Since the Company is in a net operating loss position for its U.S. operations and, accordingly has valuation allowances to reserve for net deferred tax assets, tax benefit or expense associated with foreign currency gains or losses incurred by its U.S. entities is not currently recognized.

(12) EXPIRATION OF PREFERENTIAL COMMISSION RATES IN SPAIN

Under arrangements with a major mobile operator, the Spanish subsidiaries of Euronet received a preferred, exclusive distributor commission on sales of prepaid mobile airtime; the preferential commission under this arrangement expired in May 2006 leaving in place a lower, non-exclusive commission. The Company chose to only pass through a portion of this reduction to its retailers to reduce the risk of losing any retail accounts. Accordingly, as a result of the expiration of the preferred commission, revenues and margins in the second quarter 2006 were reduced by approximately $1.1 million.

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. (“Euronet” or the “Company”) is a leading electronic transaction processor, offering ATM and POS outsourcing services, integrated electronic financial transaction (“EFT”) software, network gateways and electronic prepaid top-up services to financial institutions, mobile operators and retailers, as well as electronic consumer money transfer and bill payment services. We operate the largest independent pan-European ATM network, the largest national shared ATM network in India, and we are one of the largest providers of prepaid mobile airtime processing.

We operate in three principal business segments:

	•		An EFT Processing Segment, in which we process transactions for a network of 7,866 ATMs and more than 38,000 POS terminals across Europe, Asia and Africa. We provide comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit card outsourcing and electronic recharge services (for prepaid mobile airtime via an ATM or directly from the handset).
	•		A Prepaid Processing Segment, through which we provide distribution of prepaid mobile airtime and other prepaid products and collections services for various prepaid products, cards and services. We operate a network of more than 259,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in the U.S., Europe, Africa and Asia Pacific. This segment also includes Euronet Payments & Remittance, Inc. (“Euronet Payments & Remittance”), which resulted from the 2005 acquisition of TelecommUSA, and provides money transfer services to customers from the U.S. to destinations in Latin America, and bill payment services to customers within the U.S.
	•		A Software Solutions Segment, through which we offer a suite of integrated EFT software solutions for electronic payment and transaction delivery systems.

We have seven processing centers in Europe, two in Asia and one in the U.S., and we have 17 principal offices in Europe, four in the Asia-Pacific region, four in the U.S. and one in the Middle East. Our executive offices are located in Leawood, Kansas, USA. With approximately 84% 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 (for more discussion, see Item 7A — Quantitative and Qualitative Disclosure About Market Risk, and Part I, Item 1A — Risk Factors in the Company’s Annual Report of Form 10-K for the year ended December 31, 2005).

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.