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Euronet Worldwide Reports Fourth Quarter And Full Year 2012 Financial Results

Stocks in this article: EEFT

Euronet's global payment network is extensive - including 17,600 ATMs, approximately 67,000 EFT POS terminals and a growing portfolio of outsourced debit and credit card services which are under management in 38 countries; card software solutions; a prepaid processing network of approximately 680,000 POS terminals at approximately 339,000 retailer locations in 30 countries; and a consumer-to-consumer money transfer network of approximately 177,000 locations serving 133 countries. With corporate headquarters in Leawood, Kansas, USA, and 49 worldwide offices, Euronet serves clients in approximately 150 countries. For more information, please visit the Company's website at www.euronetworldwide.com.

Statements contained in this news release that concern Euronet's or its 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: conditions in world financial markets and general economic conditions, including economic conditions in specific countries or regions; technological developments affecting the market for the Company's products and services; the ability of the Company to successfully introduce new products; foreign currency exchange rate fluctuations; the effects of any potential future computer security breaches; the Company's ability to renew existing contracts at profitable rates; changes in fees payable for transactions performed for cards bearing international logos or over switching networks such as card transactions on ATMs; changes in the Company's relationship with, or in fees charged by, the Company's business partners; competition; the outcome of claims and other loss contingencies affecting the Company; and changes in laws and regulations affecting the Company's business, including immigration laws. These risks and other risks are described in the Company's filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Copies of these filings may be obtained via the SEC's Edgar website or by contacting the Company or the SEC. Any forward-looking statements made in this release speak only as of the date of this release. Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such update under any circumstances. The Company regularly posts important information to the investor relations section of its website.

EURONET WORLDWIDE, INC.
Consolidated Statements of Operations
(unaudited - in millions, except share and per share data)
                 
Year Ended Three Months Ended
December 31, December 31,
2012 2011 2012 2011
 
Revenues $ 1,267.6   $ 1,161.3   $ 351.2   $ 319.4  
 
Operating expenses:
Direct operating costs 812.1 740.7 225.1 203.9
Salaries and benefits 184.2 168.6 49.4 44.4
Selling, general and administrative 120.4 112.5 33.9 32.2
Impairment of goodwill and acquired intangible assets 28.7 28.7
Depreciation and amortization 64.2   60.4   16.0   15.9  
Total operating expenses 1,209.6   1,082.2   353.1   296.4  
Operating income (loss) 58.0   79.1   (1.9 ) 23.0  
 
Other income (expense):
Interest income 4.0 5.7 0.5 1.4
Interest expense (19.5 ) (21.5 ) (3.0 ) (5.8 )
Income from unconsolidated affiliates 0.9 1.9 0.1 0.4
Other gains, net 4.1 1.0
Loss on early retirement of debt (1.9 )
Foreign exchange (loss) gain, net (0.2 ) (1.6 ) 1.1   (2.7 )
Total expense, net (10.7 ) (16.4 ) (1.3 ) (6.7 )
Income (loss) before income taxes 47.3 62.7 (3.2 ) 16.3
 
Income tax expense (27.0 ) (24.7 ) (9.6 ) (5.3 )
 
Net income (loss) 20.3 38.0 (12.8 ) 11.0
Net loss (income) attributable to noncontrolling interests 0.2   (1.1 ) (0.2 ) (0.1 )
Net income (loss) attributable to Euronet Worldwide, Inc. $ 20.5   $ 36.9   $ (13.0 ) $ 10.9  
 
 
Earnings (loss) per share attributable to Euronet
Worldwide, Inc. stockholders - diluted
Earnings (loss) per share $ 0.40   $ 0.71   $ (0.26 ) $ 0.21  
 
Diluted weighted average shares outstanding 51,412,510   51,729,513   50,002,236   51,185,879  
 
EURONET WORLDWIDE, INC.
Condensed Consolidated Balance Sheets
(in millions)
             
 
As of
December 31, As of
2012 December 31,
(unaudited) 2011
 
ASSETS
Current assets:
Cash and cash equivalents $ 191.2 $ 170.7
Restricted cash 81.9 73.3
Inventory - PINs and other 101.2 98.8
Trade accounts receivable, net 370.8 349.5
Other current assets, net 68.1   61.7
 
Total current assets 813.2 754.0
 
Property and equipment, net 115.5 102.9
Goodwill and acquired intangible assets, net 565.2 588.5
Other assets, net 57.6   60.9
 
Total assets $ 1,551.5   $ 1,506.3
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 686.7 $ 601.6
Short-term debt obligations 10.0   172.9
 
Total current liabilities 696.7 774.5
 
Debt obligations, net of current portion 286.7 161.7
Capital lease obligations, net of current portion 4.6 4.2
Deferred income taxes 22.0 26.0
Other long-term liabilities 14.9   13.2
 
Total liabilities 1,024.9 979.6
 
Equity 526.6   526.7
 
Total liabilities and equity $ 1,551.5   $ 1,506.3
 
EURONET WORLDWIDE, INC.
Reconciliation of Net Income (Loss) to Adjusted EBITDA and Operating Income (Expense) to Adjusted Operating Income (Expense)
(unaudited - in millions)
                     
Year ended December 31, 2012
 
EFT Processing     epay     Money Transfer     Corporate Services     Consolidated
 
Net income $ 20.3
 
Add: Income tax expense 27.0
Add: Total other expense, net 10.7  
 
Operating income (expense) $ 44.4 $ 19.6 $ 24.6 $ (30.6 ) 58.0
 
Add: Impairment charges       28.7                   28.7  
 
Adjusted operating income (expense)(1) 44.4 48.3 24.6 (30.6 ) 86.7
 
Add: Depreciation and amortization 25.3 19.7 18.8 0.4 64.2
Add: Share-based compensation       0.1             11.8       11.9  
 
Earnings (expense) before interest, taxes, depreciation, amortization, share-based compensation and other non-operating and non-recurring items (Adjusted EBITDA) (1) $ 69.7       $ 68.1       $ 43.4       $ (18.4 )     $ 162.8  
 
 
Year ended December 31, 2011
 
EFT Processing     epay     Money Transfer     Corporate Services     Consolidated
 
Net income $ 38.0
 
Add: Income tax expense 24.7
Add: Total other expense, net 16.4  
 
Operating income (expense) $ 33.2 $ 56.8 $ 17.1 $ (28.0 ) 79.1
 
Adjust: Change in fair value of acquisition contingent consideration (0.3 )     0.2                   (0.1 )
 
Adjusted operating income (expense) 32.9 57.0 17.1 (28.0 ) 79.0
 
Add: Depreciation and amortization 21.1 18.5 20.4 0.4 60.4
Add: Share-based compensation                   10.8       10.8  
 
Earnings (expense) before interest, taxes, depreciation, amortization, share-based compensation and other non-operating and non-recurring items (Adjusted EBITDA) (1) $ 54.0       $ 75.5       $ 37.5       $ (16.8 )     $ 150.2  
 

(1) Adjusted EBITDA and adjusted operating income (expense) are non-GAAP measures that should be considered in addition to, and not a substitute for, net income (loss) and operating income (expense) computed in accordance with U.S. GAAP.

EURONET WORLDWIDE, INC.

Reconciliation of Net Income (Loss) to Adjusted EBITDA and Operating Income (Loss) to Adjusted Operating Income (Expense)

(unaudited - in millions)
                     
Three months ended December 31, 2012
 
EFT Processing     epay     Money Transfer     Corporate Services     Consolidated
 
Net loss $ (12.8 )
 
Add: Income tax expense 9.6
Add: Total other expense, net 1.3  
 

Operating income (loss)

$ 13.6 $ (13.8 ) $ 7.4 $ (9.1 ) (1.9 )
 
Add: Impairment charges       28.7                   28.7  
 

Adjusted operating income (expense)

13.6 14.9 7.4 (9.1 ) 26.8

 

Add: Depreciation and amortization 6.6 4.5 4.8 0.1 16.0
Add: Share-based compensation                   3.0       3.0  
 
Earnings (expense) before interest, taxes, depreciation, amortization, share-based compensation and other non-operating and non-recurring items (Adjusted EBITDA) (1) $ 20.2       $ 19.4       $ 12.2       $ (6.0 )     $ 45.8  
 
 
Three months ended December 31, 2011
 
EFT Processing     epay     Money Transfer     Corporate Services     Consolidated
 
Net income $ 11.0
 
Add: Income tax expense 5.3
Add: Total other expense, net 6.7  
 
Operating income (expense) $ 8.9 $ 16.9 $ 4.5 $ (7.3 ) 23.0
 
Add: Depreciation and amortization 5.7 5.2 4.9 0.1 15.9
Add: Share-based compensation                   2.8       2.8  
 
Earnings (expense) before interest, taxes, depreciation, amortization, share-based compensation and other non-operating and non-recurring items (Adjusted EBITDA) (1) $ 14.6       $ 22.1       $ 9.4       $ (4.4 )     $ 41.7  
 

(1) Adjusted EBITDA and adjusted operating income (expense) are non-GAAP measures that should be considered in addition to, and not a substitute for, net income (loss) and operating income (expense) computed in accordance with U.S. GAAP.

EURONET WORLDWIDE, INC.
Reconciliation of Adjusted Cash Earnings per Share
(unaudited - in millions, except share and per share data)
                       
Year Ended Three Months Ended
December 31, December 31,
2012 2011 2012 2011
 
Net income (loss) attributable to Euronet Worldwide, Inc. $ 20.5 $ 36.9 $ (13.0 ) $ 10.9
3.5% convertible debt interest and amortization of issuance costs, net of tax (1) 5.1     0.3   3.5
Earnings (loss) applicable for common shareholders -- cash earnings per share 25.6 36.9 (12.7 ) 14.4
 
Foreign exchange loss (gain), net of tax 0.1 1.4 (1.1 ) 2.7
Intangible asset amortization, net of tax 18.0 17.8 4.2 4.7
Share-based compensation, net of tax 11.0 10.2 2.7 2.6
Impairment of goodwill and acquired intangible assets, net of tax 27.0 27.0
Non-cash 3.5% convertible debt accretion interest, net of tax 6.3 7.6 0.3
Change in fair value of acquisition contingent consideration (0.1 )
Other gains, net (4.4 ) (1.0 )
Loss on early debt retirement, net of tax 1.9
Non-cash GAAP tax expense 3.7   2.6   2.5   1.1
 
Adjusted cash earnings (2) $ 87.3   $ 77.3   $ 22.9   $ 25.5
 
Adjusted cash earnings per share - diluted (2) $ 1.57   $ 1.48   $ 0.44   $ 0.46
 
Diluted weighted average shares outstanding 51,412,510 51,729,513 50,002,236 51,185,879
 
Incremental shares from assumed conversion of stock options and restricted stock 951,782
Effect of assumed conversion of convertible debentures (1) 3,362,774 764,655 4,235,136
Effect of unrecognized share-based compensation on diluted shares outstanding 760,055   596,625   757,544   564,378
Adjusted diluted weighted average shares outstanding 55,535,339   52,326,138   52,476,217   55,985,393
 

(1) As required by U.S. GAAP, the interest cost and amortization of the convertible debt issuance cost 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. Although the assumed conversion of the convertible debentures was not dilutive to the Company's GAAP earnings for the periods presented, it was dilutive to the Company's adjusted cash earnings per share for the three and twelve month periods ended December 31, 2012 and the three months ended December 31, 2011. Accordingly, the interest cost and amortization of the convertible debt issuance cost are excluded from income and the convertible shares are treated as if all were outstanding for the period.

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