UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 000-22167
EURONET WORLDWIDE, INC.
(Exact name of the registrant as specified in its charter)
| Delaware | 74-2806888 | |
| (State or other jurisdiction of incorporation or organization) |
(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 x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of April 30, 2005, the Company had 35,066,342 common shares outstanding.
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| 3 | ||||
| ITEM 1. |
3 | |||
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
15 | ||
| ITEM 3. |
39 | |||
| ITEM 4. |
40 | |||
| 40 | ||||
| ITEM 1. |
40 | |||
| ITEM 2. |
40 | |||
| ITEM 6. |
41 | |||
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| ITEM 1. | FINANCIAL STATEMENTS |
EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
| As of |
||||||||
| March 31, 2005 (unaudited) |
December 31, 2004 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 72,984 | $ | 124,198 | ||||
| Restricted cash |
107,896 | 69,300 | ||||||
| Inventory - PINs and other |
18,224 | 18,949 | ||||||
| Trade accounts receivable, net of allowances for doubtful accounts of $1,254 at March 31, 2005 and $1,373 at December 31, 2004 |
114,276 | 110,306 | ||||||
| Earnings in excess of billings |
5,703 | 7,206 | ||||||
| Deferred income tax assets |
2,905 | 1,637 | ||||||
| Prepaid expenses and other current assets |
19,741 | 13,170 | ||||||
| Total current assets |
341,729 | 344,766 | ||||||
| Property, plant and equipment, net of accumulated depreciation of $61,088 at March 31, 2005 and $61,384 at December 31, 2004 |
42,007 | 39,907 | ||||||
| Goodwill |
245,624 | 183,668 | ||||||
| Acquired intangible assets, net of accumulated amortization of $6,887 at March 31, 2005 and $5,363 at December 31, 2004 |
40,579 | 28,930 | ||||||
| Deferred income tax assets |
9,112 | 8,494 | ||||||
| Other assets, net of accumulated amortization of $6,068 at March 31, 2005 and $5,430 at December 31, 2004 |
9,476 | 12,710 | ||||||
| Total assets |
$ | 688,527 | $ | 618,475 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 205,020 | $ | 155,079 | ||||
| Accrued expenses and other current liabilities |
84,567 | 107,580 | ||||||
| Current installments on obligations under capital leases |
4,855 | 4,403 | ||||||
| Short-term obligations |
4,233 | 4,862 | ||||||
| Income taxes payable |
10,479 | 9,446 | ||||||
| Deferred income tax liabilities |
4,024 | 1,864 | ||||||
| Deferred revenue |
9,350 | 9,949 | ||||||
| Total current liabilities |
322,528 | 293,183 | ||||||
| Debt obligations |
140,000 | 140,000 | ||||||
| Obligations under capital leases, excluding current installments |
15,450 | 16,894 | ||||||
| Deferred income tax liabilities |
22,762 | 17,520 | ||||||
| Other long-term liabilities |
2,314 | 3,093 | ||||||
| Minority interest |
6,341 | 5,871 | ||||||
| Total liabilities |
509,395 | 476,561 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.02 par value; 60,000,000 shares authorized; 34,870,941 and 33,126,038 shares issued and outstanding at March 31, 2005 and December 31, 2004, respectively |
698 | 663 | ||||||
| Additional paid-in-capital |
270,025 | 235,559 | ||||||
| Treasury stock |
(149 | ) | (149 | ) | ||||
| Employee loans for stock |
(47 | ) | (47 | ) | ||||
| Subscriptions receivable |
(328 | ) | (180 | ) | ||||
| Accumulated deficit |
(94,618 | ) | (99,444 | ) | ||||
| Restricted reserve |
774 | 774 | ||||||
| Accumulated other comprehensive income |
2,777 | 4,738 | ||||||
| Total stockholders’ equity |
179,132 | 141,914 | ||||||
| Total liabilities and stockholders’ equity |
$ | 688,527 | $ | 618,475 | ||||
See accompanying notes to the consolidated financial statements.
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EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statement of Operations and Comprehensive Income
(Unaudited, in thousands, except share and per share data)
| Three Months Ended March 31, |
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| 2005 |
2004 |
|||||||
| Revenues: |
||||||||
| EFT Processing Segment |
$ | 23,889 | $ | 14,940 | ||||
| Prepaid Processing Segment |
89,381 | 62,919 | ||||||
| Software Solutions Segment |
3,936 | 3,196 | ||||||
| Total revenues |
117,206 | 81,055 | ||||||
| Operating expenses: |
||||||||
| Direct operating costs |
82,372 | 56,645 | ||||||
| Salaries and benefits |
11,949 | 9,454 | ||||||
| Selling, general and administrative |
6,138 | 4,889 | ||||||
| Depreciation and amortization |
5,025 | 3,554 | ||||||
| Total operating expenses |
105,484 | 74,542 | ||||||
| Operating income |
11,722 | 6,513 | ||||||
| Other income (expenses): |
||||||||
| Interest income |
1,207 | 571 | ||||||
| Interest expense |
(1,588 | ) | (1,836 | ) | ||||
| Income (loss) from unconsolidated affiliates |
245 | (21 | ) | |||||
| Loss on early retirement of debt |
— | (71 | ) | |||||
| Foreign exchange gain (loss), net |
(2,842 | ) | 235 | |||||
| Total other expense |
(2,978 | ) | (1,122 | ) | ||||
| Income from continuing operations before income taxes and minority interest |
8,744 | 5,391 | ||||||
| Income tax expense |
(3,830 | ) | (2,105 | ) | ||||
| Minority interest |
(88 | ) | — | |||||
| Net income |
4,826 | 3,286 | ||||||
| Translation adjustment, net |
(1,961 | ) | (205 | ) | ||||
| Comprehensive income |
$ | 2,865 | $ | 3,081 | ||||
| Net income per share - basic: |
||||||||
| Net income per share |
$ | 0.14 | $ | 0.11 | ||||
| Basic weighted average shares outstanding |
33,883,451 | 30,120,295 | ||||||
| Net income per share - diluted: |
||||||||
| Net income per share |
$ | 0.13 | $ | 0.10 | ||||
| Diluted weighted average shares outstanding |
36,528,742 | 33,351,456 | ||||||
See accompanying notes to the unaudited consolidated financial statements.
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EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Net income |
$ | 4,826 | $ | 3,286 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
5,025 | 3,554 | ||||||
| Unrealized foreign exchange (gain) loss |
2,724 | (672 | ) | |||||
| Gain on disposal of fixed assets |
(92 | ) | — | |||||
| Deferred income tax expense |
333 | 1,563 | ||||||
| Income assigned to minority interest |
88 | — | ||||||
| Accretion of discount on notes payable |
— | 31 | ||||||
| Amortization of debt obligations issuance expense |
223 | — | ||||||
| Changes in working capital, net of amounts acquired: |
||||||||
| Increase in income taxes payable, net |
779 | 1,561 | ||||||
| Decrease (increase) in restricted cash |
(38,596 | ) | 20,667 | |||||
| Decrease (increase) in inventory |
725 | (2,864 | ) | |||||
| Decrease (increase) in trade accounts receivable |
(2,773 | ) | 414 | |||||
| Decrease (increase) in accrued income |
1,503 | (1,712 | ) | |||||
| Decrease (increase) in prepaid expenses and other current assets |
(6,801 | ) | 3,293 | |||||
| Increase (decrease) in trade accounts payable |
33,968 | (2,962 | ) | |||||
| Decrease in deferred revenue |
(1,378 | ) | (1,325 | ) | ||||
| Increase (decrease) in accrued expenses and other liabilities |
7,741 | (14,025 | ) | |||||
| Other, net |
1,604 | (1,402 | ) | |||||
| Total adjustments and changes in working capital |
5,073 | 6,121 | ||||||
| Net cash provided by operating activities |
9,899 | 9,407 | ||||||
| Cash flows from investing activities: |
||||||||
| Acquisitions, net of cash acquired |
(55,969 | ) | (2,600 | ) | ||||
| Proceeds from sale of fixed assets |
164 | — | ||||||
| Fixed asset purchases |
(3,041 | ) | (2,000 | ) | ||||
| Purchase of intangible and other long term assets |
(465 | ) | (65 | ) | ||||
| Net cash used in investing activities |
(59,311 | ) | (4,665 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of shares and other capital contributions |
3,369 | 1,769 | ||||||
| Repayment of obligations under capital leases |
(2,048 | ) | (6,550 | ) | ||||
| Net repayments on short-term borrowings |
(236 | ) | — | |||||
| Other, net |
— | (2 | ) | |||||
| Net cash provided by (used in) financing activities |
1,085 | (4,783 | ) | |||||
| Effect of exchange differences on cash |
(2,887 | ) | 64 | |||||
| Net increase (decrease) in cash and cash equivalents |
(51,214 | ) | 23 | |||||
| Cash and cash equivalents at beginning of period |
124,198 | 19,245 | ||||||
| Cash and cash equivalents at end of period |
$ | 72,984 | $ | 19,268 | ||||