UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~March 31,~~June 30, 2010


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

Commission File Number: 001-31648

EURONET WORLDWIDE, INC.

(Exact name of the registrant as specified in its charter)


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


~~4601~~3500 COLLEGE BOULEVARD ~~SUITE 300~~
LEAWOOD, KANSAS		66211
(Address of principal executive offices)		~~66211~~ (Zip Code)

(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. YesþNoo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesoþNoo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~


Large accelerated filerþ	Accelerated filero	~~Accelerated~~Non-accelerated filero	~~Non-accelerated filer~~o	Smaller reporting companyo
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesoNoþ

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares of the issuer’s common stock, $0.02 par value, outstanding as of ~~April 30,~~July 31, 2010 was ~~50,913,136~~50,990,720 shares.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share and per share data)


	As of						As of
	March 31, 2010			December 31, 2009			June 30, 2010			December 31, 2009
	(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	185,279		$	183,528		$	202,587		$	183,528
Restricted cash		82,470			73,148			72,796			73,148
Inventory — PINs and other		67,657			87,661			68,005			87,661
Trade accounts receivable, net of allowances for doubtful accounts of $14,027 at March 31, 2010 and $13,909 at December 31, 2009		244,756			282,905
Trade accounts receivable, net of allowances for doubtful accounts of $13,444 at June 30, 2010 and $13,909 at December 31, 2009								226,105			282,905
Prepaid expenses and other current assets		32,080			31,344			31,056			31,344

Total current assets		612,242			658,586			600,549			658,586

Property and equipment, net of accumulated depreciation of $156,588 at March 31, 2010 and $153,255 at December 31, 2009		91,731			96,592
Property and equipment, net of accumulated depreciation of $148,353 at June 30, 2010 and $153,255 at December 31, 2009								81,916			96,592
Goodwill		485,763			504,650			458,459			504,650
Acquired intangible assets, net of accumulated amortization of $91,507 at March 31, 2010 and $88,924 at December 31, 2009		103,093			112,948
Other assets, net of accumulated amortization of $17,759 at March 31, 2010 and $16,866 at December 31, 2009		39,736			39,903

Acquired intangible assets, net of accumulated amortization of $92,047 at June 30, 2010 and $88,924 at December 31, 2009								93,580			112,948
Other assets, net of accumulated amortization of $18,495 at June 30, 2010 and $16,866 at December 31, 2009								37,115			39,903

Total assets	$	1,332,565		$	1,412,679		$	1,271,619		$	1,412,679


LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable	$	217,490		$	228,768		$	207,956		$	228,768
Accrued expenses and other current liabilities		215,799			225,474			212,683			225,474
Current portion of capital lease obligations		2,264			2,510			1,835			2,510
Short-term debt obligations and current maturities of long-term debt obligations		2,193			3,127			2,490			3,127
Income taxes payable		17,007			18,379			15,756			18,379
Deferred revenue		12,051			13,320			10,510			13,320


Total current liabilities		466,804			491,578			451,230			491,578

Debt obligations, net of current portion		283,084			320,283			283,567			320,283
Capital lease obligations, net of current portion		1,518			1,997			1,273			1,997
Deferred income taxes		21,761			23,854			19,710			23,854
Other long-term liabilities		8,615			8,464			6,731			8,464

Total liabilities		781,782			846,176			762,511			846,176


Equity:
Euronet Worldwide, Inc. stockholders’ equity
Preferred Stock, $0.02 par value. Authorized 10,000,000 shares; none issued		—			—
Common Stock, $0.02 par value. 90,000,000 shares authorized; 51,140,582 issued at March 31, 2010 and 51,101,833 issued at December 31, 2009		1,023			1,022
Euronet Worldwide, Inc. stockholders’ equity:
Preferred Stock, $0.02 par value. 10,000,000 shares authorized; none issued								—			—
Common Stock, $0.02 par value. 90,000,000 shares authorized; 51,216,358 issued at June 30, 2010 and 51,101,833 issued at December 31, 2009								1,024			1,022
Additional paid-in-capital		743,787			740,990			746,704			740,990
Treasury stock, at cost, 239,703 shares at March 31, 2010 and 241,644 shares at December 31, 2009		(1,497	)		(1,483	)
Treasury stock, at cost, 250,228 shares at June 30, 2010 and 241,644 shares at December 31, 2009								(1,643	)		(1,483	)
Accumulated deficit		(200,313	)		(203,139	)		(201,796	)		(203,139	)
Restricted reserve		973			1,013			1,009			1,013
Accumulated other comprehensive income (loss)		(1,010	)		20,566			(41,933	)		20,566

Total Euronet Worldwide, Inc. stockholders’ equity		542,963			558,969			503,365			558,969
Noncontrolling interests		7,820			7,534			5,743			7,534

Total equity		550,783			566,503			509,108			566,503

Total liabilities and equity	$	1,332,565		$	1,412,679		$	1,271,619		$	1,412,679

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share data)


		Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
		2010			2009			2010			2009			2010			2009
Revenues:
EFT Processing Segment		$	48,566		$	46,206		$	46,488		$	45,592		$	95,054		$	91,798
epay Segment			145,380			134,523			137,689			145,253			283,069			279,776
Money Transfer Segment			56,057			52,968			60,051			57,769			116,108			110,737


Total revenues			250,003			233,697			244,228			248,614			494,231			482,311


Operating expenses:
Direct operating costs			165,861			153,548			160,836			165,053			326,697			318,601
Salaries and benefits			32,172			28,596			31,448			31,085			63,620			59,681
Selling, general and administrative			19,193			19,068			21,850			20,911			41,043			39,979
Goodwill and acquired intagible assets impairment			—			9,884			—			—			—			9,884
Depreciation and amortization			14,548			12,903			13,552			13,541			28,100			26,444


Total operating expenses			231,774			223,999			227,686			230,590			459,460			454,589


Operating income			18,229			9,698			16,542			18,024			34,771			27,722


Other income (expense):
Interest income			555			969			572			885			1,127			1,854
Interest expense			(4,954	)		(7,067	)		(5,031	)		(6,653	)		(9,985	)		(13,720	)
Income from unconsolidated affiliates			554			518			447			516			1,001			1,034
Loss on early retirement of debt			—			(103	)		—			(150	)		—			(253	)
Foreign currency exchange loss, net			(5,082	)		(10,591	)
Foreign currency exchange gain (loss), net									(9,341	)		9,650			(14,423	)		(941	)


Other expense, net			(8,927	)		(16,274	)
Other income (expense), net									(13,353	)		4,248			(22,280	)		(12,026	)


Income (loss) from continuing operations before income taxes			9,302			(6,576	)
Income from continuing operations before income taxes									3,189			22,272			12,491			15,696
Income tax expense			(5,787	)		(5,317	)		(4,344	)		(6,397	)		(10,131	)		(11,714	)


Income (loss) from continuing operations			3,515			(11,893	)		(1,155	)		15,875			2,360			3,982

Discontinued operations, net			—			(61	)		—			146			—			85


Net income (loss)			3,515			(11,954	)		(1,155	)		16,021			2,360			4,067
Net income attributable to noncontrolling interests			(689	)		(344	)
Less: Net income attributable to noncontrolling interests									(328	)		(477	)		(1,017	)		(821	)

Net income (loss) attributable to Euronet Worldwide, Inc.		$	2,826		$	(12,298	)	$	(1,483	)	$	15,544		$	1,343		$	3,246


Earnings (loss) per share attributable to Euronet Worldwide, Inc. stockholders — basic:	��
Continuing operations		$	0.06		$	(0.24	)	$	(0.03	)	$	0.31		$	0.03		$	0.06
Discontinued operations			—			—			—			—			—			—


Total		$	0.06		$	(0.24	)	$	(0.03	)	$	0.31		$	0.03		$	0.06


Basic weighted average shares outstanding			50,801,170			50,292,907			50,914,453			50,425,261			50,857,812			50,358,983


Earnings (loss) per share attributable to Euronet Worldwide, Inc. stockholders — diluted:
Continuing operations		$	0.05		$	(0.24	)	$	(0.03	)	$	0.30		$	0.03		$	0.06
Discontinued operations			—			—			—			—			—			—


Total		$	0.05		$	(0.24	)	$	(0.03	)	$	0.30		$	0.03		$	0.06


Diluted weighted average shares outstanding			51,923,122			50,292,907			50,914,453			51,240,221			51,777,392			50,821,373

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	Three Months Ended March 31,						Six Months Ended June 30,
	2010			2009			2010			2009
Net income (loss)	$	3,515		$	(11,954	)
Net income							$	2,360		$	4,067

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,362			12,903			28,100			26,444
Share-based compensation		1,934			1,632			4,391			3,825
Unrealized foreign exchange loss, net		5,284			10,577			14,625			1,000
Non-cash impairment of goodwill and acquired intangible assets		—			9,884			—			9,884
Deferred income taxes		(1,988	)		(1,139	)		(2,089	)		(2,679	)
Income from unconsolidated affiliates		(554	)		(518	)		(1,001	)		(1,034	)
Accretion of convertible debentures discount and amortization of debt issuance costs		2,145			3,005			4,332			5,855

Changes in working capital, net of amounts acquired:
Income taxes payable, net		(708	)		1,463			(2,839	)		3,472
Restricted cash		(11,279	)		23,899			(5,230	)		32,460
Inventory — PINs and other		19,913			6,189			14,531			8,857
Trade accounts receivable		32,779			23,042			34,211			28,577
Prepaid expenses and other current assets		(1,237	)		(6,211	)		(2,340	)		(2,684	)
Trade accounts payable		(2,522	)		(37,569	)		(3,737	)		(37,890	)
Deferred revenue		(1,573	)		391			(2,684	)		(1,896	)
Accrued expenses and other current liabilities		(7,663	)		(10,696	)		3,764			(18,956	)
Changes in noncurrent assets and liabilities		365			(9,788	)		1,644			(9,284	)


Net cash provided by operating activities		52,773			15,110			88,038			50,018


Cash flows from investing activities:
Acquisitions, net of cash acquired		—			(3,300	)		—			(10,016	)
Purchases of property and equipment		(5,444	)		(6,648	)		(12,427	)		(16,783	)
Purchases of other long-term assets		(809	)		(734	)		(2,618	)		(1,360	)
Other, net		107			131			473			(270	)


Net cash used in investing activities		(6,146	)		(10,551	)		(14,572	)		(28,429	)


Cash flows from financing activities:
Proceeds from issuance of shares		850			373			1,311			888
Borrowings from revolving credit agreements classified as non-current liabilities		108,000			90,400			108,000			285,400
Repayments of revolving credit agreements classified as non-current liabilities		(146,439	)		(98,432	)		(147,172	)		(297,219	)
Repayments of long-term debt obligations		(1,727	)		(11,449	)		(2,227	)		(27,083	)
Repayments of capital lease obligations		(654	)		(1,788	)		(1,255	)		(3,149	)
Cash dividends paid to noncontrolling interests stockholders		—			(2,413	)		(1,676	)		(2,413	)
Other, net		206			562			728			(812	)


Net cash used in financing activities		(39,764	)		(22,747	)		(42,291	)		(44,388	)


Effect of exchange rate changes on cash and cash equivalents		(5,112	)		(3,638	)		(12,116	)		2,508


Increase (decrease) in cash and cash equivalents		1,751			(21,826	)		19,059			(20,291	)
Cash and cash equivalents at beginning of period (includes cash of discontinued operations of $552 in 2009)		183,528			181,893			183,528			181,893


Cash and cash equivalents at end of period (includes cash of discontinued operations of $1,392 in 2009)	$	185,279		$	160,067
Cash and cash equivalents at end of period (includes cash of discontinued operations of $1,086 in 2009)							$	202,587		$	161,602


Interest paid during the period	$	1,259		$	1,505		$	5,643		$	7,162
Income taxes paid during the period		7,547			5,210			15,191			11,805

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

(1) GENERAL

Organization

Euronet Worldwide, Inc. and its subsidiaries (the “Company” or “Euronet”) is an industry leader in processing secure electronic financial transactions in three principal business segments. Euronet’s epay Segment is one of the world’s largest providers of “top-up” services for prepaid products, primarily prepaid mobile airtime, distributing these products in Europe, the Middle East, Asia Pacific and the Americas. The EFT Processing Segment provides end-to-end solutions relating to operations of automated teller machine (“ATM”) and point-of-sale (“POS”) networks, and debit and credit card processing in Europe, the Middle East and Asia Pacific. The epay Segment is one of the world’s largest providers of “top-up” services for prepaid products, primarily prepaid mobile airtime, distributing these products in Europe, the Middle East, Asia Pacific and North America. The Money Transfer Segment is comprised primarily of the Company’s RIA Envia, Inc. (“RIA”) subsidiary and its operating subsidiaries, which is the third-largest global money transfer company based upon revenues and volumes. The Money Transfer Segment provides services through a sending network of agents and Company-owned stores primarily in North America and Europe, disbursing money transfers through a worldwide ~~payer~~correspondent network. See Note 8, Segment Information, for additional information about the Company’s business segments.

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared from the records of the Company, in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, such unaudited consolidated financial statements contain all adjustments (consisting of normal interim closing procedures) necessary to present fairly the financial position of the Company as of ~~March 31,~~June 30, 2010, and the results of its operations for the three- and six-month periods ended June 30, 2010 and 2009 and its cash flows for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2010 and 2009.

The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Euronet for the year ended December 31, 2009, including the notes thereto, set forth in the Company’s 2009 Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2010 are not necessarily indicative of the results to be expected for the full year ending December 31, 2010. Certain amounts in the prior year have been reclassified to conform to current period presentation.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

Multiple-deliverable revenue arrangements

Effective January 1, 2010, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2009-13,Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force.ASU 2009-13 adds estimated selling price as acceptable evidence of fair value of undelivered products and services in revenue arrangements with multiple deliverables. Estimated selling price can be used if there is no vendor specific objective evidence or third-party evidence of fair value. Additionally, ASU 2009-13 eliminates the use of the residual method of allocating revenue and establishes the relative selling price method as the appropriate means to allocate revenue to each deliverable of an arrangement. The adoption of ASU 2009-13 did not materially affect the Company’s unaudited consolidated financial statements.

Money transfer settlement obligations

Money transfer settlement obligations are recorded in accrued expenses and other current liabilities on the Company’s Unaudited Consolidated Balance Sheets and consist of amounts owed by Euronet to money transfer recipients. As of ~~March 31,~~June 30, 2010, the Company’s money transfer settlement obligations were ~~$12.7~~$28.1 million.

(3) EARNINGS PER SHARE

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


	~~Three Months~~
	~~Ended March 31,~~
	~~2010~~
~~Computation of diluted weighted average shares outstanding:~~
~~Basic weighted average shares outstanding~~		~~50,801,170~~
~~Incremental shares from assumed conversion of stock options and restricted stock~~		~~1,121,952~~


~~Diluted weighted average shares outstanding~~		~~51,923,122~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Computation of diluted weighted average shares outstanding:
Basic weighted average shares outstanding		50,914,453		50,425,261		50,857,812		50,358,983
Incremental shares from assumed conversion of stock options and restricted stock		—		814,960		919,580		462,390


Diluted weighted average shares outstanding		50,914,453		51,240,221		51,777,392		50,821,373

The table includes all stock options and restricted stock that are dilutive to Euronet’s weighted average common shares outstanding during the period. For the ~~three-month period~~three months ended ~~March 31, 2009,~~June 30, 2010, the Company incurred a net loss; therefore, diluted loss per share is the same as basic loss per ~~share. For~~share for the ~~three-month periods ended March 31, 2010 and 2009, the~~period. The calculation of diluted earnings (loss) per share excludes ~~approximately 2,204,000 and 4,928,000, respectively,~~ stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares ~~outstanding.~~outstanding of approximately 4,963,000 and 2,252,000 for the three- and six-month periods ended June 30, 2010, respectively, and of approximately 1,989,000 and 3,868,000 for the three- and six-month periods ended June 30, 2009, respectively.

The Company has convertible debentures that, if converted, would have a potentially dilutive effect on the Company’s stock. The 3.50% debentures are convertible into 4.3 million shares of common stock only upon the occurrence of certain conditions. The 1.625% debentures outstanding as of December 31, 2009 were repurchased in January 2010, but the associated shares, if dilutive, would be included in diluted weighted average shares outstanding for the periods the debentures were outstanding. The weighted average shares associated with the 1.625% convertible debentures were 11 thousand and 2.1 million for the three-months periods ended March 31, 2010 and 2009, respectively. As required by Accounting Standards Codification (“ASC”) Topic 260,Earnings per Share,, if dilutive, the impact of the contingently issuable shares must be included in the calculation of diluted earnings per share under the “if-converted” method, regardless of whether the conditions upon which the debentures would be convertible into shares of the Company’s common stock have been met. The Company’s 3.50% debentures are convertible into 4.3 million shares of common stock only upon the occurrence of certain conditions. Under the if-converted method, the assumed conversion of the ~~1.625% and~~ 3.50% ~~convertible~~ debentures was anti-dilutive for ~~each three-month~~the three- and six-month periods ended June 30, 2010 and 2009. The Company’s remaining 1.625% convertible debentures outstanding were repurchased in January 2010 and the assumed conversion of the then-outstanding debentures was anti-dilutive for the six-month period ended ~~March 31,~~June 30, 2010 and for the three- and six-month periods ended June 30, 2009.

(4) DISCONTINUED OPERATIONS

During the fourth quarter of 2009, the Company sold Euronet Essentis Limited (“Essentis”), a U.K. software entity, in order to focus its investments and resources on its transaction processing ~~business.~~businesses. Accordingly, Essentis’s results of operations are shown as discontinued operations in the Unaudited Consolidated Statements of Operations. Previously, Essentis’s results were reported in the EFT Processing Segment. The segment results in Note 8, Segment Information, also reflect the classification of Essentis’s results in discontinued operations. The following amounts related to Essentis have been segregated from continuing operations and reported as discontinued operations:


	Three Months Ended			Three Months Ended		Six Months Ended
(in thousands)	March 31, 2009			June 30, 2009		June 30, 2009
Revenues	$	1,424		$	1,835	$	3,259
Loss before income taxes	$	(93	)
Net loss	$	(61	)
Income before income taxes				$	212	$	119
Net income				$	146	$	85

and 2009. Discount accretion was $1.7 million and ~~$1.6~~$3.5 million for the three and six months ended ~~March 31,~~June 30, 2010, respectively, and $1.6 million and $3.2 million for the three and six months ended June 30, 2009, respectively. The effective interest rate was 8.4% for the three and six months ended ~~March 31,~~June 30, 2010 and ~~2009. The carrying amount of the equity portion was $45.1 million as of March 31, 2010 and December 31,~~ 2009.

(7) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As of ~~March 31,~~June 30, 2010, the Company had foreign currency forward contracts outstanding with a notional value of ~~$76.0~~$41.3 million, primarily in euros and U.S. dollars, which were not designated as hedges and had a weighted average remaining maturity of ~~4.0~~4.1 days. Although the Company enters into foreign currency forward contracts to offset foreign currency exposure related to the notional value of money transfer transactions collected in currencies other than the U.S. dollar, they are not designated as hedges under ASC Topic 815. This is mainly due to the relatively short duration of the contracts, typically 1 to 14 days, and the frequency with which the Company enters into them.

The Company has an office lease in a foreign country that requires payment in a currency that is not the functional currency of either party to the lease or the Company’s reporting currency. Therefore, the lease contains an embedded derivative per ASC Topic 815 and its fair value is recorded in the Unaudited Consolidated Balance Sheets.

During 2007, the Company entered into interest rate swap agreements for a total notional amount of $50 million to manage interest rate exposure related to a portion of ~~its~~the term loan. The interest rate swap agreements were determined to be cash flow hedges and effectively converted $50 million of the term loan to a fixed interest rate of 7.3% through the May 2009 maturity date of the swap agreements. The swap agreements required no payment by either party at their maturities.

Below are the tabular disclosures required for derivative instruments:

Consolidated Fair Values of Derivative Instruments
Balance Sheet March 31, 2010 December 31, 2009
(in thousands) Location Asset Derivatives
Derivatives not designated as hedging instruments under ASC Topic 815

Foreign currency derivative contracts — gross gains Cash and cash equivalents $ 39 $ 138
Foreign currency derivative contracts — gross losses Cash and cash equivalents (224 ) (102 )

Total $ (185 ) $ 36

Liability Derivatives
Embedded derivative in foreign lease Other long-term liabilities $ (157 ) $ (220 )

Total derivatives
$ (342 ) $ (184 )

Amount of Gain Recognized in OCI on
Derivative (Effective Portion)
Three Months Ended March 31,
(in thousands) 2010 2009
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships

Interest rate swaps related to floating rate debt $ — $ 477


		Fair Values of Derivative
		Instruments
	Consolidated Balance				December 31,
(in thousands)	Sheet Location	June 30, 2010			2009
		Asset Derivatives
Derivatives not designated as hedging instruments under ASC Topic 815
Foreign currency derivative contracts - gross gains	Cash and cash equivalents	$	113		$	138
Foreign currency derivative contracts - gross losses	Cash and cash equivalents		(74	)		(102	)

Total		$	39		$	36


		Liability Derivatives
Embedded derivative in foreign lease	Other long-term liabilities	$	(198	)	$	(220	)


Total derivatives		$	(159	)	$	(184	)

Amount of Gain (Loss) Recognized in Income
on Derivative
Three Months Ended March 31,
Location of Gain
(Loss) Recognized
in Income on
(in thousands) Derivative 2010 2009
Derivatives not designated as hedging instruments under ASC Topic 815

Foreign currency derivative contracts Foreign currency exchange gain (loss), net $ 143 $ (37 )

Embedded derivative in foreign lease Foreign currency exchange gain (loss), net 63 (569 )

Total $ 206 $ (606 )


	Amount of Gain Recognized in				Amount of Gain Recognized in
	OCI on Derivative (Effective				OCI on Derivative (Effective
	Portion)				Portion)
	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2010		2009		2010		2009
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships
Interest rate swaps related to floating rate debt	$	—	$	353	$	—	$	830


		Amount of Gain (Loss)					Amount of Gain (Loss)
		Recognized in Income on					Recognized in Income on
	Location of Gain (Loss)	Derivative					Derivative
	Recognized in Income on	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	Derivative	2010			2009		2010		2009
Derivatives not designated as hedging instruments under ASC Topic 815
Foreign currency derivative contracts	Foreign currency exchange gain (loss), net	$	(44	)	$	42	$	99	$	5
Embedded derivative in foreign lease	Foreign currency exchange gain (loss), net		(41	)		276		22		(293	)


Total		$	(85	)	$	318	$	121	$	(288	)

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

(8) SEGMENT INFORMATION

Euronet’s reportable operating segments have been determined in accordance with ASC Topic 280,Segment ~~Reporting~~Reporting.. The Company currently operates in the following three reportable operating segments:

	1)		Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, the Middle East and Asia Pacific. The Company provides comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing and electronic recharge services for prepaid mobile airtime. Through this segment, the Company also offers a suite of integrated electronic financial transaction (“EFT”) software solutions for electronic payment and transaction delivery systems.

	2)		Through the epay Segment, the Company provides distribution of prepaid mobile airtime and other electronic payment products and collection services in Europe, the Middle East, Asia Pacific and ~~the Americas.~~North America.

	3)		Through the Money Transfer Segment, the Company provides global consumer-to-consumer money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America and Europe, disbursing money transfers through a worldwide ~~payer~~correspondent network. Bill payment services are offered primarily in the U.S.

In addition, in its administrative division, “Corporate Services, Eliminations and Other,” the Company accounts for non-operating activity, share-based compensation expense, certain intersegment eliminations and the costs of providing corporate and other administrative services to the three segments. These services are not directly identifiable with the Company’s reportable operating segments.


	For the Six Months Ended June 30, 2009
								Corporate
								Services,
	EFT				Money			Eliminations
(in thousands)	Processing		epay		Transfer			and Other			Consolidated
Total revenues	$	91,798	$	279,776	$	110,737		$	—		$	482,311


Operating expenses:
Direct operating costs		38,611		226,377		53,613			—			318,601
Salaries and benefits		14,455		13,217		24,923			7,086			59,681
Selling, general and administrative		8,304		9,951		17,662			4,062			39,979
Goodwill and acquired intangible assets impairment		—		—		9,884			—			9,884
Depreciation and amortization		8,719		7,244		9,845			636			26,444


Total operating expenses		70,089		256,789		115,927			11,784			454,589


Operating income (loss)	$	21,709	$	22,987	$	(5,190	)	$	(11,784	)	$	27,722

(9) FAIR VALUE MEASUREMENTS

The carrying ~~amount~~amounts of cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt obligations ~~approximates~~approximate fair values due to their short maturities. The carrying ~~value~~values of the Company’s term loan due 2014 and revolving credit agreements approximate fair values because interest is based on ~~the~~ London Inter-Bank Offered Rate (“LIBOR”) that resets at various intervals of less than one year. The following table provides the estimated fair values of the Company’s other financial instruments, based on quoted market prices or significant other observable inputs.


													As of
	As of												June 30, 2010						December 31, 2009
	March 31, 2010						December 31, 2009						Carrying						Carrying
(in thousands)	Carrying Value			Fair Value			Carrying Value			Fair Value			Value			Fair Value			Value			Fair Value
3.50% convertible debentures, unsecured, due 2025	$	(155,638	)	$	(162,094	)	$	(153,927	)	$	(162,313	)		(157,388	)		(160,125	)		(153,927	)		(162,313	)
Foreign currency derivative contracts		(185	)		(185	)		36			36			39			39			36			36
Embedded derivative in foreign lease		(157	)		(157	)		(220	)		(220	)		(198	)		(198	)		(220	)		(220	)
1.625% convertible senior debentures, unsecured, due 2024		—			—			(1,227	)		(1,224	)		—			—			(1,227	)		(1,224	)

(10) GUARANTEES

As of ~~March 31,~~June 30, 2010, the Company had ~~$58.7~~$53.9 million of stand-by letters of credit/bank guarantees issued on its behalf, of which ~~$10.9~~$10.1 million are collateralized by cash deposits held by the respective issuing banks.

Under certain circumstances, Euronet grants guarantees in support of obligations of subsidiaries. As of ~~March 31,~~June 30, 2010, the Company granted off balance sheet guarantees for cash in various ATM networks amounting to ~~$19.4~~$18.3 million over the terms of the cash supply agreements and performance guarantees amounting to approximately ~~$30.7~~$27.0 million over the terms of the agreements with the customers.

From time to time, Euronet enters into agreements with unaffiliated parties that contain indemnification provisions, the terms ~~and conditions~~ of which may vary depending on the negotiated terms ~~and conditions~~ of each respective agreement. The amount of such potential obligations is generally not stated in the agreements. Our liability under such indemnification provisions may be mitigated by relevant insurance coverage and may be subject to time and materiality limitations, monetary caps and other conditions and defenses. Such indemnification obligations include the following:

In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for damages to ATMs and theft of ATM network cash that, generally, is not recorded on the Company’s Consolidated Balance Sheets. As of March 31, 2010, the balance of ATM network cash for which the Company was responsible was approximately $260 million. The Company maintains insurance policies to mitigate this exposure;

	•		In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for damage to ATMs and theft of ATM network cash that, generally, is not recorded on the Company’s Consolidated Balance Sheets. As of June 30, 2010, the balance of ATM network cash for which the Company was responsible was approximately $230 million. The Company maintains insurance policies to mitigate this exposure;

	•		In connection with the license of proprietary systems to customers, Euronet provides certain warranties and infringement indemnities to the ~~licensees,~~licensee, which generally warrant that such systems do not infringe on intellectual property owned by third parties and that the systems will perform in accordance with their specifications;

	•		Euronet has entered into purchase and service agreements with vendors and consulting agreements with providers of consulting services, pursuant to which the Company has agreed to indemnify certain of such vendors and consultants, respectively, against third-party claims arising from the Company’s use of the vendor’s product or the services of the vendor or consultant;

	•		In connection with acquisitions and dispositions of subsidiaries, operating units and business assets, the Company has entered into agreements containing indemnification provisions, which can be generally described as follows: (i) in connection with acquisitions made by Euronet, the Company has agreed to indemnify the seller against third party claims made against the seller relating to the subject subsidiary, operating unit or asset and arising after the closing of the transaction, and (ii) in connection with dispositions made by Euronet, Euronet has agreed to indemnify the buyer against damages incurred by the buyer due to the buyer’s reliance on representations and warranties relating to the subject subsidiary, operating unit or business assets in the disposition agreement if such representations or warranties were untrue when made;

	•		Euronet has entered into agreements with certain third parties, including banks that provide fiduciary and other services to Euronet or to the Company’s benefit plans. Under such agreements, the Company has agreed to indemnify such service providers for third party claims relating to the carrying out of their respective duties under such agreements; and

	•		The Company has ~~issued~~obtained surety bonds in compliance with money transfer licensing requirements of the applicable governmental authorities.

The Company is also required to meet minimum capitalization and cash requirements of various regulatory authorities in the jurisdictions in which the Company has money transfer operations. To date, the Company is not aware of any significant claims made by the indemnified parties or third parties to guarantee agreements with the Company and, accordingly, no liabilities were recorded as of ~~March 31,~~June 30, 2010 or December 31, 2009.

(11) INCOME TAXES

The Company’s effective tax rates for continuing operations were ~~62%~~136.2% and ~~(81%)~~28.7% for the three-month periods ended ~~March 31,~~June 30, 2010 and 2009, respectively, and were 81.1% and 74.6% for the six-month periods ended June 30, 2010 and 2009, respectively. The effective tax rates were significantly influenced by the foreign currency exchange ~~net~~gains and losses ~~for~~in the ~~first quarter of 2010~~respective periods and ~~2009 and~~by the goodwill and acquired intangible assets impairment charge ~~for~~in the first quarter of 2009. Excluding foreign currency exchange results and the impairment charge from pre-tax income, as well as the related tax effects for these items, the Company’s effective tax rates were ~~41.5%~~36.2% and ~~41.6%~~46.8% for the three months ended ~~March 31,~~June 30, 2010 and 2009, respectively, and 39.0% and 44.1% for the six months ended June 30, 2010 and 2009, respectively.

The increase in the effective tax rate, as adjusted, for the ~~first~~second quarter of 2010 compared to the applicable statutory rate of 35% is primarily related to the Company’s U.S. tax position. For the ~~three months~~three- and six-month periods ended ~~March 31,~~June 30, 2010, ~~Euronet~~the Company has recorded a valuation allowance against its U.S. federal tax net operating losses as it is more likely than not that a tax benefit will not be realized. Accordingly, the federal income tax benefit associated with pre-tax book losses generated by the Company’s U.S. entities has

not been recognized in these periods. For the second quarter of 2010, this ~~period.~~increase was partly offset by a $1.0 million adjustment to the reserve related to deferred tax assets generated from prior U.S. net operating losses. Additionally, the ~~first quarter 2010~~ effective tax rate for the first half of 2010 is lower due to a $0.8 million adjustment related to a foreign tax law change.

(12) CONTINGENCIES

In the second quarter of 2009, the Antitrust Division of the United States Department of Justice (the “DOJ”) served Continental Exchange Solutions, Inc. d/b/a RIA Financial Services (“CES”), an indirect, wholly-owned subsidiary of the Company, with a grand jury subpoena requesting documents from CES and its affiliates in connection with an investigation into possible price collusion related to money transmission services to the Dominican Republic (“D.R.”) during the period from January 1, 2004 to the date of the subpoena. The Company acquired all of the stock of RIA Envia, Inc., the parent of CES, in April 2007. CES foreign exchange transactions between the U.S and the D.R. generated approximately 0.3% of the Company’s 2009 consolidated revenues. The Company and CES are fully cooperating with the DOJ in its investigation.

The Company believes that, during the period covered by the DOJ investigation, CES generally derived part of its charge for exchanging U.S. dollars into D.R. pesos from a reference rate recommended by ADEREDI, a trade association in the D.R. composed of a CES subsidiary and other D.R. money transfer firms. The Company further believes, however, that CES set its own service fee on the D.R. transactions and its overall transaction price to customers. Customers were also free during this time period to use CES and other firms to transmit dollars into the D.R., without conversion into D.R. pesos, and the Company believes such transmissions occurred with increasing frequency over the course of this time period.

At this time, the Company is unable to predict ~~whether this investigation will result in the DOJ bringing charges against CES. Accordingly, the Company is unable to predict~~ the outcome of ~~this~~the DOJ investigation, or, if charges were to be brought against CES, the ~~possible loss or~~ possible range of loss, if any, associated with the resolution of any ~~charges that may be brought against CES, or~~such charges. Nor can the Company predict any potential effect on the Company’s business, results of operations or financial ~~condition.~~condition arising from such charges or potential collateral consequences, which could include fines, penalties, limitations on or revocation of CES’s license to engage in the money transfer business in one or more states, and civil liability. In addition, the Company has incurred and may continue to incur significant fees and expenses in connection with the DOJ investigation and related matters.

1415

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,”~~Euronet” the “Company,” “we” or “us”) is a leading ~~global~~ electronic payments provider. We offer payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Our primary product offerings include comprehensive automated teller machine (“ATM”), point-of-sale (“POS”) and card outsourcing services; electronic distribution of prepaid mobile airtime and other prepaid products; and global consumer money transfer services. As of ~~March 31,~~June 30, 2010, we operate in the following three principal business segments:

	•		The EFT Processing Segment, which processes transactions for a network of ~~10,283~~10,408 ATMs and approximately ~~55,000~~57,000 POS terminals across Europe, the Middle East and Asia Pacific. We provide comprehensive electronic payment solutions consisting of ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing and electronic recharge services for prepaid mobile airtime. Through this segment, we also offer a suite of integrated electronic financial transaction (“EFT”) software solutions for electronic payment and transaction delivery systems.

	•		The epay Segment, which provides distribution of prepaid mobile airtime and other electronic payment products and collection services for various prepaid products, cards and services. Including terminals operated by unconsolidated subsidiaries, we operate a network of approximately ~~510,000~~515,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in Europe, the Middle East, Asia Pacific and ~~the Americas.~~North America.

	•		The Money Transfer Segment, which provides global consumer-to-consumer money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America and Europe, disbursing money transfers through a worldwide ~~payer~~correspondent network. The Money Transfer Segment originates and terminates transactions through a network of approximately ~~86,100~~104,400 locations, which include sending agents and Company-owned stores, and an extensive ~~payer~~correspondent network in ~~more than 100~~120 countries. Bill payment services are offered primarily in the U.S.

We have six processing centers in Europe, two in Asia Pacific and two in North America. We have 25 principal offices in Europe, seven in North America, six in Asia Pacific and one in the Middle East. Our executive offices are located in Leawood, Kansas, USA. With approximately ~~77%~~76% 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.~~results of operations.

SOURCES OF REVENUES AND CASH FLOW

Euronet earns revenues and income based on ATM management fees, transaction fees and commissions, professional services, software licensing fees and software maintenance agreements. Each business segment’s sources of revenue are described below.

EFT Processing Segment– Revenues in the EFT Processing Segment, which represented approximately ~~20%~~19% of total consolidated revenues for the first ~~quarter~~half of 2010, are derived from fees charged for transactions made by cardholders on our proprietary network of ATMs, as well as fixed management fees and transaction fees we charge to banks for operating ATMs and processing debit and credit cards under outsourcing agreements. Through our proprietary network, we generally charge fees for four types of ATM transactions: i) cash withdrawals, ii) balance inquiries, iii) transactions not completed because the relevant card issuer ~~does~~did not give authorization, and iv) prepaid telecommunication recharges. Revenues in this segment are also derived from license fees, professional services and maintenance fees for software and sales of related hardware. Software license fees are the fees we charge to license our proprietary application software to customers. Professional service fees consist of charges for customization, installation and consulting services to customers. Software maintenance revenues represent the ongoing fees charged for maintenance and support for customers’ software products. Hardware sales are derived from the sale of computer equipment necessary for the respective software solution.

MasterCard and Visa Europe recently announced reductions in fees paid for ATM interchange in Poland beginning in the second quarter of 2010. Our results are affected by these reductions both directly (because we receive the interchange fees for card transactions on our ATM networks in certain circumstances) and indirectly (because pricing established in our ATM outsourcing agreements has historically been based on the level of the interchange fee). It is difficult to predict with certainty the overall impact of these direct and indirect effects over time, but we expect these fee reductions to significantly adversely affect the EFT Processing Segment’s operating income. For 2010, the reduction to operating income of the MasterCard interchange fee reduction is expected to be approximately $1.2 million and the effect of the Visa Europe interchange fee reduction is expected to be approximately $5.6 million. The amounts are net of anticipated cost savings from renegotiated vendor service contracts and, to a lesser extent, additional ATM transactions processed as a result of lower interchange fees charged to cardholders.

epay Segment– Revenues in the epay Segment, which represented approximately ~~58%~~57% of total consolidated revenues for the first ~~quarter~~half of 2010, are primarily derived from commissions or processing fees received from telecommunications service providers for the sale and distribution of prepaid mobile airtime. We also generate revenues from commissions earned from the distribution of other electronic payment products. Due to certain provisions in our mobile phone operator agreements, the operators have the ability to reduce the overall

products offered by this segment include prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, prepaid gift cards, prepaid vouchers, transport payments, lottery payments, bill payment, money transfer and prepaid ~~mobile~~ content such as music and games.

Money Transfer Segment– Revenues in the Money Transfer Segment, which represented approximately ~~22%~~24% of total consolidated revenues for the first ~~quarter~~half of 2010, are primarily derived ~~through the~~from charging of a transaction fee and retaining the difference between the price of foreign currency purchased at wholesale exchange rates and sold to consumers at retail exchange rates. We have an origination network in place comprised of agents and Company-owned stores primarily in North America and Europe and a worldwide network of correspondent agents, consisting primarily of financial institutions in the transfer destination countries. Origination and correspondent agents each earn fees for cash collection and distribution services. These fees are recognized as direct operating costs at the time of sale.

OPPORTUNITIES AND CHALLENGES

EFT Processing Segment- The continued expansion and development of our EFT Processing Segment business will depend on various factors including, but not necessarily limited to, the following:

	•		the impact of competition by banks and other ATM operators and service providers in our current target markets;

	•		the demand for our ATM outsourcing services in our current target markets;

	•		the ability to develop products or services to drive increases in transactions;

	•		the expansion of our various business lines in markets where we operate and in new markets;

	•		the entrance into additional card acceptance and ATM management agreements with banks;

	•		the ability to obtain required licenses in markets we intend to enter or expand services;

	•		the availability of financing for expansion;

	•		the ability to efficiently install ATMs contracted under newly awarded outsourcing agreements;

	•		the ability to renew existing contracts at profitable rates;

	•		the ability to maintain pricing and interchange fees at current levels;

	•		the ability to expand and sign additional customers for the cross-border merchant processing and acquiring business; and

	•		the continued development and implementation of our software products and their ability to interact with other leading products.

epay Segment– The continued expansion and development of the epay Segment business will depend on various factors, including, but not necessarily limited to, the following:

	•		the ability to negotiate new agreements in additional markets with mobile phone operators, agent financial institutions and retailers;

	•		the ability to use existing expertise and relationships with mobile operators and retailers to our advantage;

	•		the continued use of third-party providers such as ourselves to supply electronic processing solutions for prepaid content;

	•		the development of mobile phone networks in the markets in which we do business and the increase in the number of mobile phone users;

	•		the overall pace of growth in the prepaid mobile phone market;

	•		our market share of the retail distribution capacity;

	•		the ~~ability to successfully brand our retail locations;~~

	•		~~the~~ level of commission that is paid to the various intermediaries in the prepaid distribution chain;

	•		our ability to fully recover monies collected by retailers;

	•		our ability to add new and differentiated prepaid products in addition to those offered by mobile operators;

	•		the ability to take advantage of cross-selling opportunities with our Money Transfer Segment, including providing money transfer services through our prepaid locations; and

	•		the availability of financing for further expansion.

Money Transfer Segment –The expansion and development of our money transfer business will depend on various factors, including, but not necessarily limited to, the following:

	•		the continued growth in worker migration and employment opportunities;

	•		the mitigation of economic and political factors that have had an adverse impact on money transfer volumes, such as changes in the economic sectors in which immigrants work and the developments in immigration policies in the U.S.;

	•		our ability to recover from agents funds collected from customers and our ability to recover advances made to correspondents;

	•		our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate;

	•		the ability to take advantage of cross-selling opportunities with our epay Segment, including providing prepaid services through RIA’s stores and agents worldwide;

	•		the ability to leverage our banking and merchant/retailer relationships to expand money transfer corridors to Europe, Asia and ~~Asia,~~Africa, including high growth corridors to Central and Eastern European countries;

	•		the availability of financing for further expansion;

	•		our ability to continue to successfully integrate RIA with our other operations; and

	•		our ability to successfully expand our agent network in Europe using our Payment Services Directive license.

Corporate Services, Eliminations and Other –- In addition to operating in our principal business segments described above, our “Corporate Services, Elimination and Other” ~~division~~category includes non-operating activity, certain inter-segment eliminations and the cost of providing corporate and other administrative services to the business segments, including share-based compensation ~~expense related to most stock option and restricted stock grants.~~expense. These services are not directly identifiable with our business segments.

SEGMENT SUMMARY RESULTS OF OPERATIONS

Revenues and operating income by segment for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2010 and 2009 are summarized in the tables below:



	Revenues for the Three									Operating Income (Loss) for the Three																Year-over-Year Change
	Months Ended March 31,				Year-over-Year Change					Months Ended March 31,						Year-over-Year Change						Revenues for the Three				Increase			Increase			Revenues for the Six				Year-over-Year Change
																Increase (Decrease)			Increase (Decrease)			Months Ended June 30,				(Decrease)			(Decrease)			Months Ended June 30,				Increase		Increase
(dollar amounts in thousands)	2010		2009		Increase Amount		Increase Percent			2010			2009			Amount			Percent			2010		2009		Amount			Percent			2010		2009		Amount		Percent
EFT Processing	$	48,566	$	46,206	$	2,360		5	%	$	9,719		$	11,910		$	(2,191	)		(18	%)	$	46,488	$	45,592	$	896			2	%	$	95,054	$	91,798	$	3,256		4	%
epay		145,380		134,523		10,857		8	%		12,070			10,876			1,194			11	%		137,689		145,253		(7,564	)		(5	)%		283,069		279,776		3,293		1	%
Money Transfer		56,057		52,968		3,089		6	%		1,492			(7,871	)		9,363			n/m			60,051		57,769		2,282			4	%		116,108		110,737		5,371		5	%

Total		250,003		233,697		16,306		7	%		23,281			14,915			8,366			56	%

Corporate services		—		—		—					(5,052	)		(5,217	)		165			(3	%)


Total	$	250,003	$	233,697	$	16,306		7	%	$	18,229		$	9,698		$	8,531			88	%	$	244,228	$	248,614	$	(4,386	)		(2	)%	$	494,231	$	482,311	$	11,920		2	%

Impact of changes in foreign currency exchange rates

Compared to most of the currencies of the foreign countries in which we operate, the U.S. dollar was weaker during the first ~~quarter~~half of 2010 than it was in the first ~~quarter~~half of 2009. Because our revenues and local expenses are recorded in the functional currencies of our operating entities, amounts we earned for the first ~~quarter~~half of 2010 are positively impacted by the weaker U.S. dollar. For the second quarter of 2010, the U.S. dollar was weaker than some currencies of the foreign countries in which we operate and was stronger than others compared to the second quarter of 2009. Considering the results by country and the associated functional currency, we estimate that our operating income for the first ~~quarter~~half of 2010 benefitted by approximately ~~15%~~8% when compared to the first ~~quarter~~half of 2009 as a result of changes in foreign currency exchange rates. The impact of changes in foreign currency exchange rates on our consolidated operating income was negligible for the second quarter of 2010 compared to the second quarter of 2009. If ~~applicable,~~significant, in our discussion we will refer to the impact of fluctuation in foreign currency exchange rates in our comparison of operating segment results for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2010 and 2009. To provide further perspective on the impact of foreign currency exchange rates, the following table shows the changes in values relative to the U.S. dollar from the second quarter and first ~~quarter~~half of 2009 to the second quarter and first ~~quarter~~half of 2010 of the currencies of the countries in which we have our most significant operations:


	Average Translation Rate							Average Translation Rate				Increase			Average Translation Rate
	Three Months Ended		Three Months Ended					Three Months Ended		Three Months Ended		(Decrease)			Six Months Ended		Six Months Ended		Increase
Currency	March 31, 2010		March 31, 2009		Increase Percent			June 30, 2010		June 30, 2009		Percent			June 30, 2010		June 30, 2009		Percent
Australian dollar	$	0.9030	$	0.6650		36	%	$	0.8834	$	0.7615		16	%	$	0.8932	$	0.7133		25	%
British pound		1.5598		1.4384		8	%	$	1.4916	$	1.5521		(4	)%	$	1.5257	$	1.4953		2	%
euro		1.3833		1.3059		6	%	$	1.2739	$	1.3633		(7	)%	$	1.3286	$	1.3346		—
Hungarian forint		0.0052		0.0045		16	%	$	0.0047	$	0.0048		(2	)%	$	0.0049	$	0.0046		7	%
Indian rupee		0.0218		0.0202		8	%	$	0.0220	$	0.0206		7	%	$	0.0219	$	0.0204		7	%
Polish zloty		0.3473		0.2911		19	%	$	0.3182	$	0.3073		4	%	$	0.3327	$	0.2992		11	%

These increases were partly offset by contract termination fees totaling $4.4 million during the first quarter of 2009, reductions in interchange fee revenues in Poland beginning in the second quarter of 2010 and by a decrease in revenues from our software business, ~~primarily~~mainly due to the sale of a significant license during the first quarter of 2009 to an entity in which Euronet has a 10% stake.

Average monthly revenue per ATM was ~~$1,586~~$1,494 for the second quarter and $1,540 for the first ~~quarter~~half of 2010, compared to ~~$1,639~~$1,638 for the second quarter and first ~~quarter~~half of ~~2009 and revenues per transaction was $0.26 for~~2009. The decrease in the ~~first~~second quarter of 2010 ~~compared~~from the same period in 2009 is primarily due to ~~$0.30 for~~the reduction in Visa Europe and MasterCard interchange fee revenues in Poland that took effect in the second quarter of 2010. The decrease in the first ~~quarter~~half of ~~2009. The decreases~~2010 from the same period in ~~revenue per ATM and per transaction are generally the result of~~2009 was also impacted by the non-recurring contract termination fees indiscussed above. Revenue per transaction was $0.24 for the second quarter and $0.25 for the first half of 2010, compared to $0.26 for the second quarter and $0.28 for the first half of ~~2009~~2009. These decreases are primarily the result of the reduction in interchange fee revenues and the non-recurring contract termination fees discussed above, ~~and~~as well as the ~~addition~~growth of ~~ATMs in India where revenue~~Cashnet transactions which generate lower revenues per ~~ATM and~~ transaction ~~have been historically lower~~ than ~~Central and Eastern Europe, generally due to lower labor costs.~~those on owned or outsourced ATMs. Partly offsetting these decreases are ~~the impact of the weaker U.S. dollar and~~ the increase in transaction fees in Germany ~~which have contributed approximately $2.0 million in incremental revenues.~~and the impact of the weaker U.S. dollar. We were able to increase transaction fees in Germany beginning in mid-2009, but we are uncertain if we will be able to maintain the current rates.

Direct operating costs

Direct operating costs consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications and the cost of data center operations-related personnel, as well as the processing centers’ facility related costs and other processing center related expenses. The increase in direct operating costs for the first ~~quarter~~half of 2010, compared to the first ~~quarter~~half of 2009, is ~~mainly~~ attributed to the increase in the number of ATMs under operation ~~the sale of POS terminals in Slovakia~~ and the impact of the weaker U.S. dollar.

Gross profit

Gross profit, which is calculated as revenues less direct operating costs, decreased to ~~$24.6~~$23.7 million for the second quarter and $48.3 million for the first ~~quarter~~half of 2010 from ~~$27.3~~$25.9 million for the second quarter and $53.2 million for the first ~~quarter~~half of 2009. ~~This decrease is~~These decreases are mainly attributable to the reduced interchange fees in Poland and the first quarter 2009 contract termination fee revenues ~~during the first quarter of 2009, partly offset by~~discussed above. Partly offsetting these decreases are the increased ~~ATM~~transaction fees in Germany, ~~contributions from the card and ATM processing business we acquired~~growth in ~~Serbia during the fourth quarter of 2009~~Cashnet transaction volumes and the impact of the weaker U.S. dollar. ~~Other than the impact of the weaker U.S. dollar, these items resulted in a decrease in gross~~Gross profit as a percentage of revenues (“gross margin”) towas 51% for the second quarter and first ~~quarter~~half of 2010 compared to ~~59%~~57% for the second quarter and 58% for the first ~~quarter~~half of 2009. The decrease in the second quarter gross margin is primarily due to the previously mentioned interchange fee revenue reductions while the decrease in the first half gross margin is also impacted by the $4.4 million contract termination fees discussed above.

Salaries and benefits

The decrease in salaries and benefits for the first ~~quarter~~half of 2010 compared to the first ~~quarter~~half of 2009 is primarily due to lower bonus expense related to reduced operating income, partly offset by the impact of the weaker U.S. dollar discussed above. As a percentage of revenues, these costs decreased to ~~13%~~14% of revenues for the first ~~quarter~~half of 2010 compared to ~~15%~~16% for the first ~~quarter~~half of 2009.

Selling, general and administrative

The decrease in selling, general and administrative expenses for the first ~~quarter~~half of 2010 compared to the first ~~quarter~~half of 2009 is due to general cost control measures, partly offset by the impact of the weaker U.S. dollar discussed above. As a percentage of revenues, selling, general and administrative expenses ~~were~~decreased slightly to 8% for the first ~~quarter~~half of 2010 compared to 9% for the first ~~quarter~~half of 2009.

Depreciation and amortization

The increase in depreciation and amortization expense for the first ~~quarter~~half of 2010 compared to the first ~~quarter~~half of 2009 is due primarily to the growth in the number of ATMs and the impact of the weaker U.S. dollar described above. As a percentage of revenues, depreciation and amortization expense was 10% ~~of revenues~~ for the first ~~quarter~~half of 2010 compared to 9% for the ~~same period in~~first half of 2009.

Operating income

The decrease in operating income for the first half of 2010 compared to the first half of 2009 is primarily due to the ~~contract termination fees~~reduced interchange fee revenues and ~~greater software license revenues during~~ the first quarter of 2009 contract termination fees, partly offset by the increased ~~ATMs~~transaction fees in Germany, growth in Cashnet volumes and the impact of the weaker U.S. dollar. Operating income as a percentage of revenues (“operating margin”) for the first ~~quarter~~half of 2010 was ~~20%,~~

EPAY SEGMENT

The following table presents the results of operations for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2010 and 2009 for our epay Segment:



														Year-over-Year Change										Year-over-Year Change
										Three Months Ended				Increase			Increase			Six Months Ended				Increase			Increase
	Three Months Ended March 31,				Year-over-Year Change					June 30,				(Decrease)			(Decrease)			June 30,				(Decrease)			(Decrease)
(dollar amounts in thousands)	2010		2009		Increase Amount		Increase Percent			2010		2009		Amount			Percent			2010		2009		Amount			Percent
Total revenues	$	145,380	$	134,523	$	10,857		8	%	$	137,689	$	145,253	$	(7,564	)		(5	)%	$	283,069	$	279,776	$	3,293			1	%


Operating expenses:
Direct operating costs		115,599		109,035		6,564		6	%		109,754		117,342		(7,588	)		(6	)%		225,353		226,377		(1,024	)		—
Salaries and benefits		8,325		6,424		1,901		30	%		7,154		6,793		361			5	%		15,479		13,217		2,262			17	%
Selling, general and administrative		5,231		4,542		689		15	%		7,429		5,409		2,020			37	%		12,660		9,951		2,709			27	%
Depreciation and amortization		4,155		3,646		509		14	%		3,822		3,598		224			6	%		7,977		7,244		733			10	%


Total operating expenses		133,310		123,647		9,663		8	%		128,159		133,142		(4,983	)		(4	)%		261,469		256,789		4,680			2	%


Operating income	$	12,070	$	10,876	$	1,194		11	%	$	9,530	$	12,111	$	(2,581	)		(21	)%	$	21,600	$	22,987	$	(1,387	)		(6	)%


Transactions processed (millions)		199.8		184.3		15.5		8	%		204.4		194.2		10.2			5	%		404.2		378.5		25.7			7	%

The increase in revenues for the first ~~quarter~~half of 2010 compared to the first ~~quarter~~half of 2009 was primarily due to the impact of the weaker U.S. dollar in the first ~~quarter~~half of 2010 compared to the same period in 2009 relative to most of the currencies of the countries in which we operate, particularly the Australian ~~dollar, and the increase in total transactions processed. Additionally, revenues~~dollar. Revenues also ~~increased~~improved due to the increase, primarily in Germany, in total transactions processed. These increases were partly offset by mobile operator commission rate decreases in certain ~~markets.~~markets, declines in transactions processed in the U.K., Australia and Spain due to economic pressures, and changes in the mix of transactions to lower revenue transactions. The epay Segment offers different levels of service with associated differences in revenues and costs per transaction. In the second quarter of 2010, transactions processed increased, but a shift in the mix of transactions contributed to lower revenues. However, due to higher profit margins for these transactions, our gross profits remained constant. Additionally, the impact of the weaker U.S. dollar was less pronounced in the second quarter of 2010 than the first; therefore, the second quarter 2010 revenues benefitted less from the changes in foreign currency exchange rates and decreased compared to the second quarter 2009 revenues.

Salaries and benefits

The increase in salaries and benefits for the first ~~quarter~~half of 2010 compared to the first ~~quarter~~half of 2009 is primarily due to additional overhead to support development in new and growing markets, certain severance costs and the impact of the weaker U.S. dollar. As a percentage of revenues, salaries and benefits increased to ~~5.7%~~5.5% for the first ~~quarter~~half of 2010 from ~~4.8%~~4.7% for the first ~~quarter~~half of 2009.

Selling, general and administrative

The increase in selling, general and administrative expenses for the first ~~quarter~~half of 2010 compared to the first ~~quarter~~half of 2009 is mainly due to the additional overhead to support development in new and growing markets, the impact of the weaker U.S. dollar, ~~along with additional overhead~~professional fees related to ~~support development~~due diligence, recruiting and legal matters, and certain rebranding and marketing expenses incurred in ~~other new and growing markets.~~the first half of 2010. As a percentage of revenues, these expenses increased to ~~3.6% for first quarter of 2010 from 3.4%~~4.5% for the first ~~quarter~~half of 2010 compared to 3.6% for the first half of 2009.

Depreciation and amortization

Depreciation and amortization expense primarily represents amortization of acquired ~~intangibles~~intangible assets and the depreciation of POS terminals we install in retail stores. Depreciation and amortization expense increased for the first ~~quarter~~half of 2010 compared to the first ~~quarter~~half of 2009 mainly due to the growth in installed POS terminals in new and growing markets, primarily Italy, and the impact of the weaker U.S. ~~dollar and an increase in installed POS terminals.~~dollar. As a percentage of revenues, these expenses increased slightly to ~~2.9%~~2.8% for the first ~~quarter~~half of 2010 from ~~2.7%~~2.6% for the first ~~quarter~~half of 2009.

Operating income

Operating margin was 6.9% for the second quarter and 7.6% for the first half of 2010 compared to 8.3% for the second quarter and 8.2% for the first half of 2009. Operating income per transaction was $0.05 for the second quarter and first half of 2010 compared to $0.06 for the second quarter and first half of 2009. The ~~improvement~~decreases in operating income, operating margin and operating income per transaction for the first ~~quarter~~half of 2010 compared to the ~~same period in~~first half of 2009 ~~is primarily~~are mainly due to the ~~impact of foreign currency translations to~~increase in operating expenses discussed above, partly offset by the ~~U.S. dollar.~~

Operating income as a percentage of revenues was 8.3% for the first quarter of 2010 compared to 8.1% for the first quarter of 2009. The slight increase is primarily due to the improvements in gross margin. Operating income per transaction remained flat at $0.06 for both the first quarter of 2010 and 2009 reflecting the favorable impact of the weaker U.S. ~~dollar being offset by the growth in transactions outpacing the growth in profitability.~~dollar.

2122

MONEY TRANSFER SEGMENT

The following ~~table presents~~tables present the results of operations for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2010 and 2009 for the Money Transfer Segment:



																Year-over-Year Change											Year-over-Year Change
	Three Months Ended March 31,					Year-over-Year Change						Three Months Ended				Increase			Increase			Six Months Ended					Increase			Increase
						Increase (Decrease)			Increase (Decrease)			June 30,				(Decrease)			(Decrease)			June 30,					(Decrease)			(Decrease)
(dollar amounts in thousands)	2010		2009			Amount			Percent			2010		2009		Amount			Percent			2010		2009			Amount			Percent
Total revenues	$	56,057	$	52,968		$	3,089			6	%	$	60,051	$	57,769	$	2,282			4	%	$	116,108	$	110,737		$	5,371			5	%


Operating expenses:
Direct operating costs		26,334		25,558			776			3	%		28,292		28,055		237			1	%		54,626		53,613			1,013			2	%
Salaries and benefits		14,197		11,820			2,377			20	%		13,886		13,103		783			6	%		28,083		24,923			3,160			13	%
Selling, general and administrative		8,944		8,815			129			1	%		8,666		8,847		(181	)		(2	)%		17,610		17,662			(52	)		—
Goodwill and acquired intangible assets impairment		—		9,884			(9,884	)			n/m		—		—		—			n/m			—		9,884			(9,884	)		n/m
Depreciation and amortization		5,090		4,762			328			7	%		4,967		5,083		(116	)		(2	)%		10,057		9,845			212			2	%


Total operating expenses		54,565		60,839			(6,274	)		(10	%)		55,811		55,088		723			1	%		110,376		115,927			(5,551	)		(5	)%


Operating income (loss)	$	1,492	$	(7,871	)	$	9,363				n/m	$	4,240	$	2,681	$	1,559			58	%	$	5,732	$	(5,190	)	$	10,922			n/m


Transactions processed (millions)		4.3		4.0			0.3			8	%		4.7		4.5		0.2			4	%		9.0		8.5			0.5			6	%

The increase in revenues for the first ~~quarter~~half of 2010 compared to revenues for the first ~~quarter~~half of 2009 is primarily due to anthe increase in the number of transactions ~~processed and the favorable impact of the weaker U.S. dollar.~~processed. For the first ~~quarter~~half of 2010, money transfers ~~from the U.S.~~ to Mexico, which represented ~~21%~~22% of total money transfers, decreased by ~~14%~~12% while transfers to all other ~~transfers~~countries increased ~~15%~~12% when compared to the first ~~quarter~~half of 2009. The increase in transfers to countries other than Mexico ~~was primarily~~is due to the expansion of our ~~operations.~~agent and correspondent payout networks in non-U.S. markets. The decline in transfers to Mexico was largely the result of downturns in certain labor markets and other economic factors impacting the U.S. market, as well as immigration developments in the U.S. ~~While the transfers to Mexico continue to decline on a year-over-year basis, the decline has slowed recently.~~ These issues have also resulted in certain competitors lowering transaction fees and foreign currency exchange spreads in certain markets where we do business in an attempt to limit the impact on money transfer volumes. We have generally maintained our pricing structure in response to these developments. We cannot predict how long these issues will continue to impact the U.S. market or whether other markets will experience similar issues and we cannot predict whether we will change our pricing strategy over the short or long term in order to protect or increase market share.

Gross profit

Gross profit, which represents revenues less direct costs, was $31.8 million for the second quarter and $61.5 million for the first half of 2010 compared to gross profit of $29.7 million for the ~~first~~second quarter ~~of 2010 compared to $27.4~~and $57.1 million for the first ~~quarter~~half of 2009. ~~This improvement is~~The improvements are primarily due to the growth in money transfer transactions, the shift in transaction mix to transfers from non-U.S. sources and the ~~impact~~addition of the weaker U.S. dollar related to money transfers originated outside the U.S. As discussed above, certain competitors have been lowering transaction fees and foreign currency exchange spreads in the U.S. market as a result of the economic factors and immigration developments impacting the U.S. market. We have generally maintained our pricing structure in response to these developments. We cannot predict how long these issues will continue to affect the U.S. market or whether other markets will experience similar issues and we cannot predict whether we will change our pricing strategy over the short or long term in order to protect or increase market share.new products. Gross margin was 53% for the second quarter and first ~~quarter~~half of 2010 compared to 51% for the second quarter and 52% for the first ~~quarter~~half of 2009. ~~The~~This improvement primarily reflects the ~~strong growth~~shift in transaction ~~volume in our more profitable~~mix to transfers from non-U.S. ~~locations,~~sources, partly offset by lower revenues per transaction.

Salaries and benefits

~~Salaries and benefits include salaries and commissions paid to employees, the cost of providing employee benefits, amounts paid to contract workers and accruals for incentive compensation.~~ The increase in salaries and benefits for the first ~~quarter~~half of 2010 compared to the ~~first quarter of~~same period in 2009 ~~was primarily~~is due to the increased expenditures we incurred to support expansion of our operations, primarily ~~internationally, and the impact of the weaker U.S. dollar.~~internationally. As a percentage of revenues, salaries and benefits increased to ~~25%~~24% for the first ~~quarter~~half of 2010 from ~~22%~~23% for the same period in 2009.

Selling, general and administrative

Selling, general and administrative expenses include operations support costs, such as rent, utilities, professional fees, indirect telecommunications, advertising and other miscellaneous overhead costs. The increase in selling, general and administrative expenses for the first ~~quarter~~half of 2010 were nearly unchanged compared to the first ~~quarter~~half of 2009, is primarily ~~due~~as the result of our ability to leverage fixed operating costs while expanding the ~~impact of the weaker U.S. dollar.~~business. As a percentage of revenues, selling, general and administrative expenses decreased ~~slightly~~ to ~~16%~~15% for the first ~~quarter~~half of 2010 from ~~17%~~16% for the same period in 2009.

Goodwill and acquired intangible assets impairment

In the fourth quarter of 2008, we recorded a non-cash impairment charge of $169.4 million related to certain goodwill and intangible assets of the RIA money transfer business. This charge was an estimate based on the assessment performed up to the filing date of our 2008 Annual Report on Form 10-K. We completed the assessment in the first quarter of 2009 and recorded an additional $9.9 million non-cash impairment charge in the first quarter of 2009.

Depreciation and amortization

Depreciation and amortization primarily represents amortization of acquired ~~intangibles~~intangible assets and also includes depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. ~~The increase in~~For the second quarter and first half of 2010, depreciation and amortization ~~for the first quarter of 2010~~has remained relatively flat compared to the ~~first quarter of~~same periods in 2009, ~~was primarily due to additional computer equipment~~reflecting a shift in ~~our customer service centers and increased leasehold improvements, office equipment and computer equipment for~~achieving expansion ~~of our~~more through agents which requires less capital expenditures than expansion from adding company ~~stores along with greater acquisition-related amortization and the impact of the weaker U.S. dollar.~~stores. As a percentage of revenues, depreciation and amortization remained flat at 9% for ~~both~~ the first ~~quarter~~half of 2010 and 2009.

Operating income (loss)

Excluding the goodwill and acquired intangible assets impairment charge, operating income for the first ~~quarter~~half of 2010 ~~decreased $0.5~~increased $1.0 million compared to the first ~~quarter~~half of 2009. This increase reflects the growth in ~~costs~~transactions processed, the shift in transactions to ~~expand internationally,~~non-U.S. markets, the addition of new products and the leveraging of fixed costs, partly offset by increased salaries and benefits expenses to expand internationally. Operating margin, excluding the ~~increase~~goodwill and acquired intangible assets impairment charge, increased to 5% for the first half of 2010 from 4% for the same period in ~~transactions processed, mainly those originated in non-U.S. locations, and the impact of the weaker U.S. dollar, as discussed in more detail in the sections above.~~2009.

2324

Foreign currency exchange ~~loss,~~gain (loss), net

Assets and liabilities denominated in currencies other than the local currency of each of our subsidiaries give rise to foreign currency exchange gains and losses. Exchange gains and losses that result from re-measurement of these assets and liabilities are recorded in determining net income. The majority of our foreign currency gains or losses are due to the re-measurement of intercompany loans that are in a currency other than the functional currency of one of the parties to the loan. For example, we make intercompany loans based in euros from our corporate division, which is comprised of U.S. dollar functional currency entities, to certain European entities that use the euro as the functional currency. As the U.S. dollar strengthens against the euro, foreign currency losses are generated on our corporate entities because the number of euros to be received in settlement of the loans decreases in U.S. dollar terms. Conversely, in this example, in periods where the U.S. dollar weakens, our corporate entities will record foreign currency gains.

We recorded net foreign currency exchange losses of $9.3 million and $14.4 million in the second quarter and first half of 2010, respectively, compared to a net foreign currency ~~exchange loss~~gain of ~~$5.1 million and $10.6~~$9.7 million in the ~~first~~second quarter of ~~2010~~2009 and ~~2009, respectively. During~~a $0.9 million loss in the first ~~quarter~~half of ~~2010~~2009. These realized and ~~2009,~~unrealized foreign currency exchange gains and losses reflect the respective weakening and strengthening of the U.S. dollar ~~strengthened~~ against most of the currencies of the countries in which we operate ~~creating realized and unrealized foreign currency exchange losses.~~during the respective periods.

INCOME TAX EXPENSE

Our effective tax rates as reported and as adjusted are calculated below:


	Three Months Ended
	March 31,						Three Months Ended June 30,						Six Months Ended June 30,
(dollar amounts in thousands)	2010			2009			2010			2009			2010			2009
Income (loss) from continuing operations before income taxes		9,302			(6,576	)
Income from continuing operations before income taxes							$	3,189		$	22,272		$	12,491		$	15,696
Income tax expense		5,787			5,317			4,344			6,397			10,131			11,714


Income (loss) from continuing operations	$	3,515		$	(11,893	)	$	(1,155	)	$	15,875		$	2,360		$	3,982


Effective income tax rate		62.2	%		(80.9	%)		136.2	%		28.7	%		81.1	%		74.6	%


Income (loss) from continuing operations before income taxes	$	9,302		$	(6,576	)
Adjust: Foreign currency exchange loss, net		(5,082	)		(10,591	)
Income from continuing operations before income taxes							$	3,189		$	22,272		$	12,491		$	15,696
Adjust: Foreign currency exchange gain (loss), net								(9,341	)		9,650			(14,423	)		(941	)
Adjust: Goodwill and acquired intangible assets impairment		—			(9,884	)		—			—			—			(9,884	)


Income from continuing operations before income taxes, as adjusted	$	14,384		$	13,899		$	12,530		$	12,622		$	26,914		$	26,521


Income tax expense	$	5,787		$	5,317		$	4,344		$	6,397		$	10,131		$	11,714
Adjust: Income tax benefit attributable to foreign currency exchange loss, net		(183	)		(470	)
Adjust: Income tax expense (benefit) attributable to foreign currency exchange gain (loss), net								(193	)		485			(376	)		14


Income tax expense, as adjusted	$	5,970		$	5,787		$	4,537		$	5,912		$	10,507		$	11,700


Effective income tax rate, as adjusted		41.5	%		41.6	%		36.2	%		46.8	%		39.0	%		44.1	%

months ended ~~March 31,~~June 30, 2010 and 2009, respectively, and 39.0% and 44.1% for the six months ended June 30, 2010 and 2009, respectively.

The increase in the effective tax rate, as adjusted, for the ~~first~~second quarter of 2010 compared to the applicable statutory rate of 35% is primarily related to our U.S. tax position. For the ~~three months~~three- and six-month periods ended ~~March 31,~~June 30, 2010, we have recorded a valuation allowance against our U.S. federal tax net operating losses as ~~we have determined that~~ it is more likely than not that a tax benefit will not be realized. Accordingly, the federal income tax benefit associated with pre-tax book losses generated by our U.S. entities has not been recognized in these periods. For the second quarter of 2010, this ~~period.~~increase was partly offset by a $1.0 million adjustment to the reserve related to deferred tax assets generated from prior U.S. net operating losses. Additionally, the ~~first quarter 2010~~ effective tax rate for the first half of 2010 is lower due to a $0.8 million adjustment related to a foreign tax law change.

Income from continuing operations before income taxes, as adjusted, income tax expense, as adjusted and effective income tax rate, as adjusted are non-GAAP financial measures that management believes are useful for understanding why our effective tax rates are significantly different than would be expected.

OTHER

Discontinued operations, net

During the fourth quarter of 2009, we sold Essentis in order to focus our investments and resources on our transaction processing businesses. Accordingly, Essentis’s results of operations are shown as discontinued operations in the Unaudited Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2009.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests was ~~$0.7 million and~~ $0.3 million for the second quarter and $1.0 million for the first ~~quarter~~half of 2010 compared to $0.5 million for the second quarter and ~~2009, respectively.~~$0.8 million for the first half of 2009. Noncontrolling interests represents the elimination of net income or loss attributable to the minority shareholders’ portion of our consolidated subsidiaries that are not wholly-owned. Our subsidiaries which are not wholly-owned are summarized in the table below:


	Percent
Subsidiary	Owned			Segment - Country
Movilcarga		80	%	epay -— Spain
e-pay SRL		51	%	epay -— Italy
ATX		51	%	epay -— various
Euronet China		75	%	EFT -— China

NET INCOME (LOSS) ATTRIBUTABLE TO EURONET WORLDWIDE, INC.

Net loss attributable to Euronet Worldwide, Inc. was $1.5 million for the second quarter of 2010 and net income attributable to Euronet Worldwide, Inc. was ~~$2.8~~$1.3 million for the first ~~quarter~~half of 2010 compared to ~~a loss~~net income of ~~$12.3~~$15.5 million for the second quarter and $3.2 million for the first ~~quarter~~half of 2009. As more fully discussed above, the ~~increased income~~decrease of ~~$15.1~~$1.9 million for the first half of 2010 as compared to the same period in 2009 was primarily the result of the ~~$8.5~~$13.5 million increase ~~in operating income, the $5.5 million decrease~~ in foreign currency exchange losses, ~~and the $1.7 million decrease in net interest expense,~~ partly offset by the ~~$0.5~~$7.0 increase in operating income which is largely the result of the $9.9 million ~~increase~~goodwill and acquired intangible assets impairment charge in the first half of 2009. Additionally, net interest expense decreased $3.0 million and income tax expense ~~and other items totaling $0.1 million.~~decreased $1.6 million in the first half of 2010.

LIQUIDITY AND CAPITAL RESOURCES

Working capital

As of ~~March 31,~~June 30, 2010, we had working capital, which is calculated as the difference between total current assets and total current liabilities, of ~~$145.4~~$149.3 million, compared to working capital of $167.0 million as of December 31, 2009. Our ratio of current assets to current liabilities was ~~1.31 at March 31,~~1.33 as of June 30, 2010, compared to 1.34 as of December 31, 2009. The decrease in working capital was primarily due to the use of cash to reduce revolving credit facility borrowings.

We require substantial working capital to finance operations. The Money Transfer Segment funds the correspondent distribution network before receiving the benefit of amounts collected from customers by agents. Working capital needs increase due to weekends and international banking holidays. As a result, we may report more or less working capital for the Money Transfer Segment based solely upon the day on which the fiscal period ~~ending on a particular day.~~ends. As of ~~March 31,~~June 30, 2010, working capital in the Money Transfer Segment was ~~$92.9~~$60.5 million. We expect that working capital needs will increase as we expand this business. The epay Segment produces positive working capital, but

much of it is restricted in connection with the administration of its customer collection and vendor remittance activities. The EFT Processing Segment does not require substantial working capital.

Operating cash flow

Cash flows provided by operating activities were ~~$56.7~~$88.0 million for the first ~~quarter~~half of 2010 compared to ~~$15.1~~$50.0 million for the first ~~quarter~~half of 2009. The increase ~~was~~is primarily due to fluctuations in working capital primarily associated with the timing of the settlement ~~process~~processes with mobile operators in the epay Segment and ~~by amounts paid~~with correspondents in the Money Transfer Segment, in addition to payments made in the first ~~quarter~~half of 2009 to secure an exclusive, long-term distribution agreement with a vendor in Australia.

Investing activity cash flow

Cash flows used in investing activities were ~~$6.1~~$14.6 million for the first ~~quarter~~half of 2010, compared to ~~$10.6~~$28.4 million for the first ~~quarter~~half of 2009. Our investing activities included ~~$5.4~~$12.4 million and ~~$6.6~~$16.8 million for purchases of property and equipment in the first ~~quarter~~half of 2010 and 2009, respectively. Additionally, the first ~~quarter~~half of 2009 included ~~$3.3~~$10.0 million in cash used for acquisitions. Finally, cash used for software development and other investing activities totaled ~~$0.7 million and $0.6~~$2.1 million in the first ~~quarter~~half of 2010 and ~~2009, respectively.~~$1.6 million in the first half of 2009.

Financing activity cash flow

Cash flows used in financing activities were ~~$39.8~~$42.3 million during the first ~~quarter~~half of 2010 compared to ~~$22.7~~$44.4 million during the first ~~quarter~~half of 2009. Our financing activities for the first ~~quarter~~half of 2010 consisted primarily of net repayments of debt obligations of ~~$40.8~~$42.7 million compared to ~~$21.3~~$42.1 million infor the first ~~quarter~~half of 2009. To support the short-term cash needs of our Money Transfer Segment, we generally borrow amounts under the revolving credit facility several times each month to fund the correspondent network in advance of collecting remittance amounts from the agency network. These borrowings are repaid over a very short period of time, generally within a few days. Primarily as a result of this, during the first ~~quarter~~half of 2010 we had a total of $108.0 million in borrowings and ~~$146.4~~$147.2 million in repayments under our revolving credit facility. During the first ~~quarter~~half of 2010, we paid ~~$1.7 million for the redemption of the 1.625% convertible debentures and repayments on the term loan, and $0.7~~$2.2 million for repayments and early retirements of debt obligations and $1.3 million for capital lease obligations. Additionally, we paid $1.7 million and $2.4 million of dividends to noncontrolling interests stockholders in the first ~~quarter~~half of ~~2009.~~2010 and 2009, respectively.

Expected future financing and investing cash requirements primarily depend on our acquisition activity and the related financing needs.

Other sources of capital

Credit Facility —– In connection with completing the April 2007 acquisition of RIA, we entered into a $290 million secured credit facility consisting of a $190 million seven-year term loan, which was fully drawn at closing, and a $100 million five-year revolving credit facility (together, the “Credit Facility”). The ~~$190 million seven-year~~ term loan bears interest at LIBOR plus 200 basis points or prime plus 100 basis points and requires that we repay $1.9 million of the balance each year, with the remaining balance payable at the end of the seven-year term. We have prepaid amounts on this loan and we estimate that we will be able to repay the remaining ~~$128.5 million~~$128.0 term loan prior to its maturity date through cash flows available from operations, provided our operating cash flows are not required for future business developments. Up front financing costs of $4.8 million were deferred and are being amortized over the terms of the respective loans.

The ~~$100 million five-year~~ revolving credit facility bears interest at LIBOR or prime plus a margin that adjusts each quarter based upon our Consolidated EBITDA ratio as defined in the Credit Facility agreement. We intend to use the revolving credit facility primarily to fund working capital requirements, which are expected to increase as we expand the Money Transfer business. Based on our current projected working capital requirements, we anticipate that our revolving credit facility will be sufficient to fund our working capital needs.

We may be required to repay our obligations under the Credit Facility six months before any potential repurchase dates, the first being October 15, 2012, under our $175 million 3.50% Convertible Debentures Due 2025, unless we are able to demonstrate that either: (i) we could borrow unsubordinated funded debt equal to the principal amount of the convertible debentures while remaining in compliance with the financial covenants in the Credit Facility or (ii) we will have sufficient liquidity to meet repayment requirements (as determined by the administrative agent and the lenders). These and other material terms and conditions applicable to the Credit Facility are described in the agreement governing the Credit Facility.

The term loan may be expanded by up to an additional $150 million and the revolving credit facility can be expanded by up to an additional $25 million, subject to satisfaction of certain conditions including pro forma debt covenant compliance.

As of ~~March 31,~~June 30, 2010, we had borrowings of ~~$128.5~~$128.0 million outstanding under the term loan. We had no borrowings ~~of $0.8~~and $35.9 million ~~and~~of stand-by letters of credit ~~of $41.1 million~~ outstanding under the revolving credit facility. The remaining ~~$58.1~~$64.1 million under the revolving credit facility ~~($83.1 million if the facility were increased to $125.0 million)~~ was available for borrowing. Borrowings under the revolving credit facility are being used to fund short-term working capital requirements in the U.S. and India. As of ~~March 31,~~June 30, 2010, our weighted average interest rate was ~~6.1% under the revolving credit facility and 2.2%~~2.3% under the term loan, excluding amortization of deferred financing costs.

Short-term debt obligations —– Short-term debt obligations at ~~March 31,~~June 30, 2010 were primarily comprised of the $1.9 million annual repayment requirement under the term loan. Certain of our subsidiaries also have available credit lines and overdraft facilities to supplement short-term working capital requirements, when necessary, and there were ~~$0.3~~$0.6 million outstanding ~~against~~under these facilities as of ~~March 31,~~June 30, 2010.

We believe that the short-term debt obligations can be funded through cash generated from operations, together with cash on hand or borrowings under our revolving credit facility.

Convertible debt —– We have $175 million in principal amount of 3.50% Convertible Debentures Due 2025 that are convertible into 4.3 million shares of Euronet ~~Common Stock~~common stock at a conversion price of $40.48 per share upon the occurrence of certain events (relating to the closing prices of Euronet ~~Common Stock~~common stock exceeding certain thresholds for specified periods). The debentures may not be redeemed by us until October 20, 2012, but are redeemable at par at any time thereafter. Holders of the debentures have the option to require us to purchase their debentures at par on October 15, 2012, 2015 and 2020, or upon a change in control of the Company. On the maturity date, these debentures can be settled in cash or Euronet ~~Common Stock,~~common stock, at our option, at predetermined conversion rates.

Should holders of the 3.50% convertible debentures require us to repurchase their debentures on the dates outlined above, we cannot guarantee that we will have sufficient cash on hand or have acceptable financing options available to us to fund these required repurchases. An inability to be able to finance these potential repayments could have an adverse impact on our operations. These terms and other material terms and conditions applicable to the convertible debentures are set forth in the indenture agreement governing the debentures.

Other uses of capital

Payment obligations related to acquisitions —– We have potential contingent obligations to the former owner of the net assets of Movilcarga. Based upon presently available information, we do not believe any additional payments will be required. The seller disputed this conclusion and initiated arbitration as provided for in the purchase agreement. A global public accounting firm was engaged as an independent expert to review the results of the computation, but procedures for such review have never been commenced, principally

because the seller is in a bankruptcy proceeding. Any additional payments, if ultimately determined to be owed the seller, will be recorded as additional goodwill and could be made in either cash or a combination of cash and Euronet ~~Common Stock~~common stock at our option.

In connection with the acquisition of Brodos Romania, we agreed to contingent consideration arrangements based on the achievement of certain performance criteria. If the criteria are achieved, we would have to pay a total of $2.5 million in cash or 75,489 shares of Euronet ~~Common Stock,~~common stock, at the option of the seller. However, Brodos Romania failed to achieve the performance criteria by January 2010 for the first $1.25 million and based on its current performance, it is unlikely to achieve the performance criteria during 2010 for the remaining amounts.

Capital expenditures and needs —– Total capital expenditures for the first ~~quarter~~half of 2010 were ~~$5.4~~$12.8 million. These capital expenditures were primarily for the purchase of ATMs to meet contractual requirements in Poland, India and China, the purchase and installation of ATMs in key under-penetrated markets, the purchase of POS terminals for the epay and Money Transfer Segments, and office, data center and company store computer equipment and software, including capital expenditures for the purchase and development of the necessary processing systems and capabilities to expand the cross-border merchant processing and acquiring business. Total capital expenditures for 2010 are currently estimated to be approximately ~~$35~~$30 million to ~~$45~~$40 million.

In the epay Segment, approximately 107,000 of the approximately ~~510,000~~515,000 POS devices that we operate are Company-owned, with the remaining terminals being operated as integrated cash register devices of our major retail customers or owned by the retailers. As our epay Segment expands, we will continue to add terminals in certain independent retail locations at a price of approximately $300 per terminal. We expect the proportion of owned terminals to total terminals operated to remain relatively constant.

At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our revolving credit facility and other existing and potential future financing will be sufficient to meet our debt, leasing, contingent acquisition and capital expenditure obligations. If our capital resources are not sufficient to meet these obligations, we will seek to refinance our debt and/or issue additional equity under terms acceptable to us. However, we can offer no assurances that we will be able to obtain favorable terms for the refinancing of any of our debt or other obligations or for the issuance of additional equity.

Other trends and uncertainties

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

Our existing contracts generally have terms of five to seven years and a number of them will expire or be up for renewal each year for the next few years. As a result, we expect to be regularly engaged in discussions with one or more of our customer banks to either obtain renewal of, or restructure, our ATM outsourcing agreements. For contracts that we are able to renew, as was the case for contract renewals in Romania and Greece in prior years, we expect customers to seek rate concessions or up-front payments because of the greater availability of alternative processing solutions in many of our markets now, as compared to when we originally entered into the contracts. While we have been successful in many cases in obtaining new terms that preserve the same level of earnings arising from the agreements, we have not been successful in all cases and, therefore, we expect to experience reductions in revenues in future quarters arising from the expiration or restructuring of agreements.

~~Cross border merchant processing and acquiring~~ — In our EFT Processing Segment, we have entered the cross-border merchant processing and acquiring business, through the execution of an agreement with a large petrol retailer in Central Europe. Since the beginning of 2007, we have devoted significant resources, including capital expenditures of approximately $9.2 million, to the ongoing investment in development of the necessary processing systems and capabilities to enter this business, which involves the purchase and design of hardware and software. Merchant acquiring involves processing credit and debit card transactions that are made on POS terminals, including authorization, settlement, and processing of settlement files. It involves the assumption of credit risk, as the principal amount of transactions is settled to merchants before settlements are received from card associations. We incurred $0.7 million in operating losses related to this business in the first quarter of 2010 and currently expect to incur approximately $2.0 million to $2.5 million in operating losses for the full year 2010.

Inflation and functional currencies

Generally, the countries in which we operate have experienced low and stable inflation in recent years. Therefore, the local currency in each of these markets is the functional currency. Currently, we do not believe that inflation will have a significant effect on our results of operations or financial position. We continually review inflation and the functional currency in each of the countries where we operate.

OFF BALANCE SHEET ARRANGEMENTS

On occasion, we grant guarantees ~~in support~~ of the obligations of subsidiaries and we sometimes enter into agreements with unaffiliated third parties that contain indemnification provisions, the terms ~~and conditions~~ of which may vary depending on the negotiated terms ~~and conditions~~ of each respective agreement. Our liability under such indemnification provisions may be subject to time and materiality limitations, monetary caps and other conditions and defenses. As of ~~March 31,~~June 30, 2010, there were no material changes from the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2009. To date, we are not aware of any significant claims made by the indemnified parties or parties to whom we have provided guarantees on behalf of our subsidiaries and, accordingly, no liabilities have been recorded as of ~~March 31,~~June 30, 2010. See also Note 10, Guarantees, to the Unaudited Consolidated Financial Statements.

CONTRACTUAL OBLIGATIONS

As of ~~March 31,~~June 30, 2010, the only material change from the disclosure relating to contractual obligations contained in our Annual Report on Form 10-K for the year ended December 31, 2009, is the ~~$38.4~~$39.2 million net reduction of debt under our revolving credit facilities.

FORWARD-LOOKING STATEMENTS

This document contains statements that constitute forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of ~~1934.~~1934 (“Exchange Act”). All statements other than statements of historical facts included in this document are forward-looking statements, including statements regarding the following:

•		trends affecting our business plans, financing plans and requirements;

•		trends affecting our business;

•		the adequacy of capital to meet our capital requirements and expansion plans;

•		the assumptions underlying our business plans;

•		our ability to repay indebtedness;

•		business strategy;

•		government regulatory action;

•		technological advances; and

•		projected costs and revenues.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct. Forward-looking statements are typically identified by the words believe, expect, anticipate, intend, estimate and similar expressions.

Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may materially differ from those in the forward-looking statements as a result of various factors, including, but not limited to, conditions in world financial markets and general economic conditions; technological developments affecting the market for our products and services; foreign currency exchange fluctuations; our ability to renew existing contracts at profitable rates; changes in laws and regulations affecting our business, including immigration laws, and those referred to above and as set forth and more fully described in Part I, Item 1A —– Risk Factors of our Annual Report on Form 10-K for the year ended December 31, ~~2009.~~2009 and Part II, Item 1A of our Quarterly Report on Form 10-Q for the three months ended March 31, 2010. We do not intend, and do not undertake, any obligation to update any forward looking statements to reflect future events or circumstances after the date of such statements.


~~ITEM 3.~~		~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk

As of ~~March 31,~~June 30, 2010, our total debt outstanding was ~~$289.1~~$289.2 million. Of this amount, ~~$155.6~~$157.4 million, or 54% of our total debt obligations, relates to contingent convertible debentures having a fixed coupon rate. Our $175 million principal amount of contingent convertible debentures, issued in October 2005, accrue cash interest at a rate of 3.50% of the ~~$175.0 million~~ principal amount per annum. Based on quoted market prices, as of ~~March 31,~~June 30, 2010, the fair value of our fixed rate convertible debentures was ~~$162.1~~$160.1 million, compared to a carrying value of ~~$155.6~~$157.4 million. Interest expense for these debentures, including accretion and amortization of deferred debt issuance costs, totals approximately $13.8 million per year, or a weighted average interest rate of 8.9% annually. Additionally, approximately ~~$3.8~~$3.1 million, or 1% of our total debt obligations, relate to capitalized leases with fixed payment and interest terms that expire between 2010 and 2014.

The remaining ~~$129.6~~$128.7 million, or 45% of our total debt obligations, relates to debt that accrues interest at variable rates. If we were to maintain these borrowings for one year, and maximize the potential borrowings available under the revolving credit facility for one year, including the $25.0 million in potential additional expanded borrowings, a 1% increase in the applicable interest rate would result in additional interest expense to the Company of approximately ~~$2.1~~$2.2 million. This computation excludes the potential additional $150.0

million under the term loan because of the limited circumstances under which the additional amounts would be available to us for borrowing.

Our excess cash is invested in instruments with original maturities of three months or less; therefore, as investments mature and are reinvested, the amount we earn will increase or decrease with changes in the underlying ~~short-term~~short term interest rates.

Foreign currency exchange rate risk

For the first ~~quarter~~half of 2010, ~~77%~~76% of our revenues were generated in non-U.S. dollar countries compared to ~~73%~~74% for the first ~~quarter~~half of 2009. We expect to continue generating a significant portion of our revenues in countries with currencies other than the U.S. dollar.

We are particularly vulnerable to fluctuations in exchange rates of the U.S. dollar to the currencies of countries in which we have significant operations, primarily to the euro, British pound, Australian dollar and Polish ~~zloty and Indian rupee.~~zloty. As of ~~March 31,~~June 30, 2010, we estimate that a 10% fluctuation in these foreign currency exchange rates would have the combined annualized effect on reported net income and working capital of approximately $20 million to $30 million. This effect is estimated by applying a 10% adjustment factor to our non-U.S. dollar results from operations, intercompany loans that generate foreign currency gains or losses and working capital balances that require translation from the respective functional currency to the U.S. dollar reporting currency. Additionally, we have other non-current, non-U.S. dollar assets and liabilities on our balance sheet that are translated to the U.S. dollar during consolidation. These items primarily represent goodwill and intangible assets recorded in connection with acquisitions in countries other than the U.S. We estimate that a 10% fluctuation in foreign currency exchange rates would have a non-cash impact on total comprehensive income of approximately ~~$45~~$40 million to ~~$55~~$50 million as a result of the change in value of these items during translation to the U.S. dollar. For the fluctuations described above, a strengthening U.S. dollar produces a financial loss, while a weakening U.S. dollar produces a financial gain. We believe this quantitative measure has inherent limitations and does not take into account any governmental actions or changes in either customer purchasing patterns or our financing or operating strategies. Because a majority of our revenues and expenses are incurred in the functional currencies of our international operating entities, the profits we earn in foreign currencies are positively impacted by the weakening of the U.S. dollar and negatively impacted by the strengthening of the U.S. dollar. Additionally, our debt obligations are primarily in U.S. ~~dollars;~~dollars, therefore, as foreign currency exchange rates fluctuate, the amount available for repayment of debt will also increase or decrease.

We are also exposed to foreign currency exchange rate risk in our Money Transfer Segment. A majority of the money transfer business involves receiving and disbursing different currencies, in which we earn a foreign currency spread based on the difference between buying currency at wholesale exchange rates and selling the currency to consumers at retail exchange rates. This spread provides some protection against currency fluctuations that occur while we are holding the foreign currency. Our exposure to changes in foreign currency exchange rates is limited by the fact that disbursement occurs for the majority of transactions shortly after they are initiated. Additionally, we enter into foreign currency forward contracts to help offset foreign currency exposure related to the notional value of money transfer transactions collected in currencies other than the U.S. dollar. As of ~~March 31,~~June 30, 2010, we had foreign currency forward contracts outstanding with a notional value of ~~$76.0~~$41.3 million, primarily in euros and U.S. dollars, that were not designated as hedges and mature in a weighted average of ~~4.0~~4.1 days. The fair value of these forward contracts as of ~~March 31,~~June 30, 2010 was an unrealized ~~loss~~gain of ~~approximately $0.2~~less than $0.1 million, which was ~~largely~~partially offset by the unrealized ~~gain~~loss on the related foreign currency receivables.


~~ITEM 4.~~		~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Our executive management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Exchange Act as of ~~March 31,~~June 30, 2010. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of these disclosure controls and procedures were effective as of such date to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

CHANGE IN INTERNAL CONTROLS

There has been no change in our internal control over financial reporting during the ~~first~~second quarter of 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION


~~ITEM 1.~~		~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

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

Currently, there are no 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.


~~ITEM 1A.~~		~~RISK FACTORS~~

ITEM 1A. RISK FACTORS

You should carefully consider the risks described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as updated in our subsequent filings with the SEC before making an investment decision. The risks and uncertainties described in our Annual Report on Form 10-K, as updated by any subsequent Quarterly Reports on Form 10-Q, are not the only ones facing our ~~company.~~Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the risks identified in our Annual Report on Form 10-K, as updated by any subsequent Quarterly Reports on Form 10-Q, actually occurs, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our ~~Common Stock~~common stock could decline substantially. This Quarterly Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described ~~below~~in our Risk Factors and elsewhere in this Quarterly Report.

~~Other than as set forth below, there~~There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the three months ended March 31, 2010, as filed with the SEC.

~~Risks Related to Our Business~~

Our operating results depend in part on the volume of transactions on ATMs in our network and the fees we can collect from processing these transactions. We generally have little control over the ATM transaction fees established in the markets where we operate, and therefore, cannot control any potential reductions in these fees.

Transaction fees from banks and international card organizations for transactions processed on our ATMs have historically accounted for a substantial majority of our revenues. These fees are set by agreement among all banks in a particular market. The future operating results of our ATM business depend on the following factors:

	•		~~the increased issuance of credit and debit cards;~~

	•		~~the increased acceptance of our ATM processing and management services in our target markets;~~

	•		~~the maintenance of the level of transaction fees we receive;~~

	•		~~the installation of larger numbers of ATMs; and~~

	•		~~the continued use of our ATMs by credit and debit cardholders.~~

The amount of fees we receive per transaction is set in various ways in the markets in which we do business. We have card acceptance agreements or ATM management agreements with some banks under which fees are set. However, we derive the bulk of our revenues in most markets from “interchange fees” that are set by the central ATM processing switch. The banks that participate in these switches set the interchange fee, and we are not in a position in any market to greatly influence these fees, which may increase or decrease over time. We have experienced a significant decrease in the interchange fee in one of our markets and a significant decrease in any other market could adversely affect our results in that market.

Although we believe that the volume of transactions in developing countries may increase due to growth in the number of cards being issued by banks in these markets, we anticipate that transaction levels on any given ATM in developing markets will not increase significantly. We can attempt to improve the levels of transactions on our ATM network overall by acquiring good sites for our ATMs, eliminating poor locations, entering new less-developed markets and adding new transactions to the sets of transactions that are available on our ATMs. However, we may not be successful in materially increasing transaction levels through these measures. Per-transaction fees paid by international card organizations have declined in certain markets in recent years and competitive factors have required us to reduce the transaction fees we charge customers. If we cannot continue to increase our transaction levels and per-transaction fees generally decline, our results would be adversely affected.

We conduct a significant portion of our business in various European countries, and we have subsidiaries in the Middle East and Asia Pacific, where the risk of continued political, economic and regulatory change that could impact our operating results is greater than in the U.S.

We have subsidiaries in Europe, the Middle East and Asia Pacific. We expect to continue to expand our operations to other countries in these regions. We sell software in many other markets in the developing world. Some of these countries have undergone significant political, economic and social change in recent years and the risk of new, unforeseen changes in these countries remains greater than in the U.S. In particular, changes in laws or regulations or in the interpretation of existing laws or regulations, whether caused by a change in government or otherwise, could materially adversely affect our business, growth, financial condition or results of operations.

For example, currently there are no limitations on the repatriation of profits from any of the countries in which we have subsidiaries (although U.S. tax laws discourage repatriation), but foreign currency exchange control restrictions, taxes or limitations may be imposed or increased in the future with regard to repatriation of earnings and investments from these countries. If exchange control restrictions, taxes or limitations are imposed, our ability to receive dividends or other payments from affected subsidiaries could be reduced, which may have a material adverse effect on us.

In addition, corporate, contract, property, insolvency, competition, securities and other laws and regulations in Central Europe have been, and continue to be, substantially revised. Therefore, the interpretation and procedural safeguards of the new legal and regulatory systems are in the process of being developed and defined, and existing laws and regulations may be applied inconsistently. Also, in some circumstances, it may not be possible to obtain the legal remedies provided for under these laws and regulations in a reasonably timely manner, if at all.

Europe has recently experienced a deep recession and countries such as Greece, Italy and Spain have been particularly vulnerable to the impacts of the recession with results such as increasing national debts and depressed economic activity. We have significant operations in these countries which could be adversely affected by economic developments such as higher taxes, growing inflation, decreasing government spending, rising unemployment and currency instability.

Transmittal of data by electronic means and telecommunications is subject to specific regulation in most Central European countries. Although these regulations have not had a material impact on our business to date, changes in these regulations, including taxation or limitations on transfers of data across national borders, could have a material adverse effect on our business, growth, financial condition or results of operations.


~~ITEM 2.~~		~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Stock repurchases

For the three months ended ~~March 31,~~June 30, 2010, the Company purchased, in accordance with the 2006 Stock Incentive Plan (Amended and Restated), ~~431~~876 shares of its ~~Common Stock~~common stock for participant income tax withholding in conjunction with the lapse of restrictions on stock awards, as requested by the participants. The following table sets forth information with respect to those ~~shares:~~shares (all purchases occurred during May 2010):

Total Number

of Shares

Purchased as

Maximum Number

Purchased as

Maximum Number

Total

Average

Part of Publicly

of Shares that May

Total

Average

Part of Publicly

of Shares that May

Number of

Price

Announced

Yet Be Purchased

Number of

Price Paid

Announced

Yet Be Purchased

Paid Per

Plans or

Under the Plans or

Per Share

Plans or

Under the Plans or

Period

Purchased

Share (1)

Programs

Purchased

(1)

Programs

January 1 - January 31

431

21.95

—

May 1 - May 31

876

14.67

—

Total

876

14.67

—


~~ITEM 6.~~		~~EXHIBITS~~

ITEM 6. EXHIBITS

a) Exhibits

The exhibits that are required to be filed or incorporated herein by reference are listed on the Exhibit Index below.

EXHIBITS

Exhibit Index


Exhibit			Description

	10.1			~~Form of Employee Restricted Stock Unit~~Employment Agreement ~~as amended, pursuant to~~dated March 8, 2010 between Euronet Worldwide, Inc. ~~2006 Stock Incentive Plan~~and Charles T. Piper (1)

	~~10.2~~			~~Form of Nonqualified Stock Option Agreement, as amended, pursuant to Euronet Worldwide, Inc. 2006 Stock Incentive Plan (1)~~

	12.1			Computation of Ratio of Earnings to Fixed Charges (1)

	31.1			Section 302 —– Certification of Chief Executive Officer (1)

	31.2			Section 302 —– Certification of Chief Financial Officer (1)

	32.1			Section 906 Certification of Chief Executive Officer (2)

	32.2			Section 906 Certification of Chief Financial Officer (2)

101		The following materials from Euronet Worldwide, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at June 30, 2010 and 2009, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2010 and 2009, (iii) Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2010 and 2009, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009, and (v) Notes to the Unaudited Consolidated Financial Statements, tagged as blocks of text. (3)


	(1)		Filed herewith.

	(2)		Pursuant to Item 601(b)(32) of Regulation S-K, this Exhibit is furnished rather than filed with this Form 10-Q.

(3)		Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for puposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

PLEASE NOTE: Pursuant to the rules and regulations of the Securities and Exchange Commission, we have filed or incorporated by reference the agreements referenced above as exhibits to this Quarterly Report on Form 10-Q. The agreements have been filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about the Company or its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about the Company or its business or operations on the date hereof.


PART I—FINANCIAL INFORMATION			3

ITEM 1. FINANCIAL STATEMENTS			3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			1516
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			3031
ITEM 4. CONTROLS AND PROCEDURES			3132

PART II—OTHER INFORMATION			3132

ITEM 1. LEGAL PROCEEDINGS			3132
ITEM 1A. RISK FACTORS			32
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			33
ITEM 5. OTHER INFORMATION			33
ITEM 6. EXHIBITS			34
EX-10.1
~~EX-10.2~~
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009			2010			2009
Net income (loss)	$	3,515		$	(11,954	)	$	(1,155	)	$	16,021		$	2,360		$	4,067

Other comprehensive income (loss), net of tax:

Translation adjustment		(21,979	)		(21,613	)		(41,652	)		39,736			(63,631	)		18,123
Unrealized gain on interest rate swaps		—			477			—			353			—			830
Unrealized gain on investment securities		—			227
Gain on investment securities								—			803			—			1,030


Comprehensive loss		(18,464	)		(32,863	)
Comprehensive income attributable to noncontrolling interests		(286	)		(100	)
Comprehensive income (loss)								(42,807	)		56,913			(61,271	)		24,050
Comprehensive (income) loss attributable to noncontrolling interests								401			(825	)		115			(925	)

Comprehensive loss attributable to Euronet Worldwide, Inc.	$	(18,750	)	$	(32,963	)
Comprehensive income (loss) attributable to Euronet Worldwide, Inc.							$	(42,406	)	$	56,088		$	(61,156	)	$	23,125


										Acquired						Total
	Acquired Intangible						Total Intangible			Intangible						Intangible
(in thousands)	Assets			Goodwill			Assets			Assets			Goodwill			Assets
Balance as of December 31, 2009	$	112,948		$	504,650		$	617,598		$	112,948		$	504,650		$	617,598
Decreases:
Amortization		(5,757	)		—			(5,757	)		(11,295	)		—			(11,295	)
Other (primarily changes in foreign currency exchange rates)		(4,098	)		(18,887	)		(22,985	)		(8,073	)		(46,191	)		(54,264	)


Balance as of March 31, 2010	$	103,093		$	485,763		$	588,856
Balance as of June 30, 2010										$	93,580		$	458,459		$	552,039


By:		/s/ MICHAEL J. BROWN


~~By:~~ Michael J. Brown	~~/s/ MICHAEL J. BROWN~~
	~~Michael J. Brown~~	Chief Executive Officer
	~~Chief Executive Officer~~
By:		/s/ RICK L. WELLER

~~By:~~	~~/s/ RICK L. WELLER~~
		Rick L. Weller
		Chief Financial Officer


																														1.625%			3.50%
																					Revolving									Convertible			Convertible
	Revolving Credit			Other Debt						1.625% Convertible			3.50% Convertible								Credit			Other Debt			Capital			Debentures			Debentures		Term
(in thousands)	Facilities			Obligations			Capital Leases			Debentures Due 2024			Debentures Due 2025		Term Loan			Total			Facilities			Obligations			Leases			Due 2024			Due 2025		Loan			Total
Balance at December 31, 2009	$	39,164		$	92		$	4,507		$	1,227		$	153,927	$	129,000		$	327,917		$	39,164		$	92		$	4,507		$	1,227		$	153,927	$	129,000		$	327,917
Increases (decreases):
Net borrowings (repayments)		(38,439	)		206			(750	)		(1,227	)		—		(500	)		(40,710	)		(39,172	)		692			(1,119	)		(1,227	)		—		(1,000	)		(41,826	)
Accretion		—			—			—			—			1,711		—			1,711			—			—			—			—			3,461		—			3,461
Capital lease interest		—			—			96			—			—		—			96			—			—			196			—			—		—			196
Foreign exchange (gain) loss		34			82			(71	)		—			—		—			45
Foreign currency exchange (gain) loss																						8			(115	)		(476	)		—			—		—			(583	)


Balance at March 31, 2010		759			380			3,782			—			155,638		128,500			289,059
Balance at June 30, 2010																						—			669			3,108			—			157,388		128,000			289,165

Less — current maturities		—			(293	)		(2,264	)		—			—		(1,900	)		(4,457	)		—			(590	)		(1,835	)		—			—		(1,900	)		(4,325	)


Long-term obligations at March 31, 2010	$	759		$	87		$	1,518		$	—		$	155,638	$	126,600		$	284,602
Long-term obligations at June 30, 2010																					$	—		$	79		$	1,273		$	—		$	157,388	$	126,100		$	284,840


	Consolidated	Fair Values of Derivative Instruments
	Balance Sheet	March 31, 2010			December 31, 2009
(in thousands)	Location	Asset Derivatives
Derivatives not designated as hedging instruments under ASC Topic 815
Foreign currency derivative contracts — gross gains	Cash and cash equivalents	$	39		$	138
Foreign currency derivative contracts — gross losses	Cash and cash equivalents		(224	)		(102	)


Total		$	(185	)	$	36


		Liability Derivatives
Embedded derivative in foreign lease	Other long-term liabilities	$	(157	)	$	(220	)


Total derivatives		$	(342	)	$	(184	)


	Amount of Gain Recognized in OCI on
	Derivative (Effective Portion)
	Three Months Ended March 31,
(in thousands)	2010		2009
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships
Interest rate swaps related to floating rate debt	$	—	$	477


		Amount of Gain (Loss) Recognized in Income
		on Derivative
		Three Months Ended March 31,
	Location of Gain
	(Loss) Recognized
	in Income on
(in thousands)	Derivative	2010		2009
Derivatives not designated as hedging instruments under ASC Topic 815
Foreign currency derivative contracts	Foreign currency exchange gain (loss), net	$	143	$	(37	)

Embedded derivative in foreign lease	Foreign currency exchange gain (loss), net		63		(569	)


Total		$	206	$	(606	)


												For the Three Months Ended June 30, 2010
	For the Three Months Ended March 31, 2010																	Corporate
							Corporate Services,											Services,
							Eliminations and					EFT				Money		Eliminations
(in thousands)	EFT Processing		epay		Money Transfer		Other			Consolidated		Processing		epay		Transfer		and Other			Consolidated
Total revenues	$	48,566	$	145,380	$	56,057	$	—		$	250,003	$	46,488	$	137,689	$	60,051	$	—		$	244,228


Operating expenses:
Direct operating costs		23,928		115,599		26,334		—			165,861		22,790		109,754		28,292		—			160,836
Salaries and benefits		6,241		8,325		14,197		3,409			32,172		6,863		7,154		13,886		3,545			31,448
Selling, general and administrative		3,754		5,231		8,944		1,264			19,193		4,116		7,429		8,666		1,639			21,850
Depreciation and amortization		4,924		4,155		5,090		379			14,548		4,486		3,822		4,967		277			13,552


Total operating expenses		38,847		133,310		54,565		5,052			231,774		38,255		128,159		55,811		5,461			227,686


Operating income (loss)	$	9,719	$	12,070	$	1,492	$	(5,052	)	$	18,229	$	8,233	$	9,530	$	4,240	$	(5,461	)	$	16,542
																				��


													For the Three Months Ended June 30, 2009
	For the Three Months Ended March 31, 2009																		Corporate
								Corporate Services,											Services,
								Eliminations and					EFT				Money		Eliminations
(in thousands)	EFT Processing		epay		Money Transfer			Other			Consolidated		Processing		epay		Transfer		and Other			Consolidated
Total revenues	$	46,206	$	134,523	$	52,968		$	—		$	233,697	$	45,592	$	145,253	$	57,769	$	—		$	248,614


Operating expenses:
Direct operating costs		18,955		109,035		25,558			—			153,548		19,656		117,342		28,055		—			165,053
Salaries and benefits		7,012		6,424		11,820			3,340			28,596		7,443		6,793		13,103		3,746			31,085
Selling, general and administrative		4,147		4,542		8,815			1,564			19,068		4,157		5,409		8,847		2,498			20,911
Goodwill and acquired intangible assets impairment		—		—		9,884			—			9,884
Depreciation and amortization		4,182		3,646		4,762			313			12,903		4,537		3,598		5,083		323			13,541


Total operating expenses		34,296		123,647		60,839			5,217			223,999		35,793		133,142		55,088		6,567			230,590


Operating income (loss)	$	11,910	$	10,876	$	(7,871	)	$	(5,217	)	$	9,698	$	9,799	$	12,111	$	2,681	$	(6,567	)	$	18,024


	For the Six Months Ended June 30, 2010
							Corporate
							Services,
	EFT				Money		Eliminations
(in thousands)	Processing		epay		Transfer		and Other			Consolidated
Total revenues	$	95,054	$	283,069	$	116,108	$	—		$	494,231


Operating expenses:
Direct operating costs		46,718		225,353		54,626		—			326,697
Salaries and benefits		13,104		15,479		28,083		6,954			63,620
Selling, general and administrative		7,870		12,660		17,610		2,903			41,043
Depreciation and amortization		9,410		7,977		10,057		656			28,100


Total operating expenses		77,102		261,469		110,376		10,513			459,460


Operating income (loss)	$	17,952	$	21,600	$	5,732	$	(10,513	)	$	34,771


	As of March 31, 2010
				Fair Value Measurements
				Using Significant Other
(in thousands)	Carrying Value			Observable Inputs
Foreign currency derivative contracts	$	(185	)	$	(185	)
Embedded derivative in foreign lease		(157	)		(157	)


	•		the continuation of the trend of increased use of electronic money transfer and bill payment services among immigrant workers and the unbanked population in our markets;

	•		the ability to maintain our agent and correspondent networks;

	•		the ability to offer our products and services or develop new products and services at competitive prices to drive increases in transactions;

	•		the expansion of our services in markets where we operate and in new markets;

	•		the ability to strengthen our brands;

	•		our ability to fund working capital requirements;


(1)		The price paid per share is the closing price of the shares on the vesting date.


n/m		- Not meaningful.