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 September 30, 2007March 31, 2008
OR
   
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 74-2806888
(State or other jurisdiction
of incorporation or organization)
 (I.R.S. employer
identification no.)
4601 COLLEGE BOULEVARD, SUITE 300
LEAWOOD, KANSAS 66211
(Address of principal executive offices)
(913) 327-4200
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a non-accelerated filer.smaller reporting company. See definitionthe definitions of ‘‘“large accelerated filer,” “accelerated filer” and large accelerated filer’’“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerþ      Accelerated filero
Large accelerated filerþAccelerated fileroNon-accelerated fileroSmaller 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). Yeso Noþ
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of the issuer’s common stock, $0.02 par value, outstanding as of October 31, 2007April 30, 2008 was 48,711,29549,035,026 shares.
 
 

 


 

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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 September As of  December 31, 
 30, 2007 December 31,  March 31, 2008 2007 
 (unaudited) 2006  (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents $251,435 $321,058  $237,097 $267,591 
Restricted cash 107,538 80,703  87,594 140,222 
Inventory — PINs and other 41,071 49,511  50,654 50,265 
Trade accounts receivable, net of allowances for doubtful accounts of $6,023 at September 30, 2007 and $2,137 at December 31, 2006 312,075 212,631 
Trade accounts receivable, net of allowances for doubtful accounts of $7,289 at March 31, 2008 and $6,248 at December 31, 2007 273,272 290,378 
Deferred income taxes, net 27,686 9,356  14,298 13,570 
Prepaid expenses and other current assets 25,656 15,212  48,391 40,458 
          
Total current assets 765,461 688,471  711,306 802,484 
Property and equipment, net of accumulated depreciation of $116,359 at September 30, 2007 and $91,883 at December 31, 2006 76,864 55,174 
Property and equipment, net of accumulated depreciation of $133,796 at March 31, 2008 and $119,742 at December 31, 2007 97,623 88,984 
Goodwill 756,173 297,134  798,731 762,723 
Acquired intangible assets, net of accumulated amortization of $39,316 at September 30, 2007 and $23,073 at December 31, 2006 162,043 50,649 
Acquired intangible assets, net of accumulated amortization of $53,750 at March 31, 2008 and $45,561 at December 31, 2007 155,889 156,751 
Deferred income taxes, net 19,718 19,004  36,879 30,822 
Other assets, net of accumulated amortization of $13,431 at September 30, 2007 and $10,542 at December 31, 2006 24,644 19,208 
Other assets, net of accumulated amortization of $14,682 at March 31, 2008 and $13,270 at December 31, 2007 22,393 44,392 
          
Total assets $1,804,903 $1,129,640  $1,822,821 $1,886,156 
          
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Trade accounts payable $274,163 $269,212  $235,538 $307,108 
Accrued expenses and other current liabilities 186,818 99,039  194,552 169,246 
Current installments on capital lease obligations 5,514 6,592 
Current portion of capital lease obligations 5,414 5,079 
Short-term debt obligations and current maturities of long-term debt obligations 5,498 4,378  1,900 1,910 
Income taxes payable 20,415 9,463  12,589 15,619 
Deferred income taxes 6,954 4,108  7,991 7,609 
Deferred revenue 12,327 11,318  16,262 16,603 
          
Total current liabilities 511,689 404,110  474,246 523,174 
Debt obligations, net of current portion 501,633 349,073  479,987 539,303 
Capital lease obligations, excluding current installments 12,260 13,409 
Capital lease obligations, net of current portion 11,169 11,520 
Deferred income taxes 75,825 44,094  87,323 74,641 
Other long-term liabilities 2,639 1,811  8,894 4,641 
Minority interest 9,171 8,350  10,323 8,975 
          
Total liabilities 1,113,217 820,847  1,071,942 1,162,254 
          
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; 48,823,598 and 37,647,782 issued at September 30, 2007 and December 31, 2006, respectively 972 749 
Common Stock, $0.02 par value. 90,000,000 shares authorized; 49,210,963 issued at March 31, 2008 and 49,159,968 issued at December 31, 2007 984 983 
Additional paid-in-capital 653,087 338,216  661,530 658,047 
Treasury stock, at cost, 205,919 and 207,755 shares at September 30, 2007 and December 31, 2006, respectively  (387)  (196)
Subscriptions receivable  (39)  (170)
Treasury stock, at cost, 210,298 shares at March 31, 2008 and 207,065 shares at December 31, 2007  (493)  (379)
Accumulated deficit  (25,531)  (59,409)  (12,741)  (5,905)
Restricted reserve 953 780  1,001 957 
Accumulated other comprehensive income 62,631 28,823  100,598 70,199 
          
Total stockholders’ equity 691,686 308,793  750,879 723,902 
          
Total liabilities and stockholders’ equity $1,804,903 $1,129,640  $1,822,821 $1,886,156 
          
See accompanying notes to the unaudited consolidated financial statements.

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EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of IncomeOperations and Comprehensive Income
(Unaudited, in thousands, except share and per share data)
                        
 Three Months Ended September 30, Nine Months Ended September 30,  Three Months Ended March 31, 
 2007 2006 2007 2006  2008 2007 
Revenues:  
EFT Processing Segment $48,113 $40,539 $135,844 $116,166  $50,506 $42,047 
Prepaid Processing Segment 144,631 120,240 414,442 343,957  144,225 127,581 
Money Transfer Segment 53,573 874 103,581 2,303  52,332 789 
         
     
Total revenues 246,317 161,653 653,867 462,426  247,063 170,417 
              
 
Operating expenses:  
Direct operating costs 165,079 112,488 446,154 319,602  165,953 120,664 
Salaries and benefits 32,437 18,676 82,155 56,164  32,933 18,929 
Selling, general and administrative 16,889 9,971 45,104 27,684  21,621 10,802 
Depreciation and amortization 13,478 7,512 34,333 21,575  14,450 8,105 
              
Total operating expenses 227,883 148,647 607,746 425,025  234,957 158,500 
              
Operating income 12,106 11,917 
     
Operating income 18,434 13,006 46,121 37,401 
         
Other income (expense):  
Interest income 4,053 3,682 12,494 9,791  3,826 4,345 
Interest expense  (7,474)  (3,802)  (18,837)  (11,055)  (6,867)  (3,581)
Income from unconsolidated affiliates  (9) 197 867 555  243 240 
Impairment loss on investment securities  (17,502)  
Loss on early retirement of debt  (411)  (411)    (155)  
Foreign currency exchange gain, net 8,561 1,090 10,302 5,420  13,073 433 
              
Other income, net 4,720 1,167 4,415 4,711 
Total other income (expense)  (7,382) 1,437 
              
 
Income from continuing operations before income taxes and minority interest 23,154 14,173 50,536 42,112  4,724 13,354 
Income tax expense  (6,634) (3,599) (15,451) (10,712)  (10,997)  (3,884)
Minority interest  (599)  (243)  (1,551)  (716)  (563)  (353)
              
Income (loss) from continuing operations  (6,836) 9,117 
Gain from discontinued operations  344 
     
Income from continuing operations 15,921 10,331 33,534 30,684 
Gain from discontinued operations, net   344  
         
Net income 15,921 10,331 33,878 30,684 
Net income (loss)  (6,836) 9,461 
Translation adjustment 22,395 5,321 34,390 14,047  31,722 2,615 
Unrealized loss on interest rate swaps  (553)   (582)    (751)  
Impairment loss on investment securities  (572)  
              
Comprehensive income $37,763 $15,652 $67,686 $44,731  $23,563 $12,076 
              
 
Earnings per share — basic: 
Earnings (loss) per share — basic: 
Continuing operations $0.33 $0.28 $0.76 $0.83  $(0.14) $0.24 
Discontinued operations   0.01    0.01 
              
Total $(0.14) $0.25 
     
Basic weighted average shares outstanding 48,956,945 38,434,178 
     
 
Earnings (loss) per share — diluted: 
Continuing operations $(0.14) $0.22 
Discontinued operations  $0.01 
     
Total $0.33 $0.28 $0.77 $0.83  $(0.14) $0.23 
              
Basic weighted average shares outstanding 48,523,643 37,230,518 44,222,453 36,938,652 
         
Earnings per share — diluted: 
Continuing operations $0.31 $0.26 $0.72 $0.78 
Discontinued operations   0.01  
         
Total $0.31 $0.26 $0.73 $0.78 
         
Diluted weighted average shares outstanding 54,439,296 42,525,511 49,905,599 42,463,401  48,956,945 43,688,014 
              
See accompanying notes to the unaudited consolidated financial statements.

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EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
                
 Nine Months Ended September 30,  Three Months Ended March 31, 
 2007 2006  2008 2007 
 
Net income $33,878 $30,684 
 
Adjustments to reconcile net income to net cash provided by operating activities: 
Net income (loss) $(6,836) $9,461 
Adjustments to reconcile net income (loss) to net cash provided by operating activities: 
Depreciation and amortization 34,333 21,575  14,450 8,105 
Share-based compensation 6,138 5,832  2,907 1,874 
Unrealized foreign exchange gain, net  (8,825)  (4,841)
Loss (gain) on disposal of property and equipment 37 (165)
Gain on discontinued operations  (344)  
Deferred income tax benefit 524  (3,271)
Foreign exchange (gain) loss, net  (13,073) 1,044 
Non-cash impairment of investment securities 17,502  
Gain from discontinued operations   (344)
Deferred income tax expense (benefit) 4,657  (348)
Income assigned to minority interest 1,551 716  563 353 
Income from unconsolidated affiliates  (867)  (555)  (243)  (240)
Amortization of debt obligations issuance expense 1,769 1,581  725 283 
  
Changes in working capital, net of amounts acquired:  
Income taxes payable, net  (777) 2,916   (1,579) 2,677 
Restricted cash 17,198  (8,997) 27,484  (1,564)
Inventory — PINs and other 12,177  (8,793) 1,821 1,567 
Trade accounts receivable  (33,931) 10,945  25,987 12,267 
Prepaid expenses and other current assets  (5,837) 3,318   (3,531)  (3,995)
Trade accounts payable  (26,454)  (10,741)  (75,877)  (28,253)
Deferred revenue 493 1,750   (624) 1,201 
Accrued expenses and other current liabilities 28,529 9,336  19,368 3,318 
Other, net  (285)  (670) 892 84 
          
 
Net cash provided by operating activities 59,307 50,620  14,593 7,490 
          
 
Cash flows from investing activities:  
Acquisitions, net of cash acquired  (352,573)  (2,312)  (1,786)  (14,959)
Acquisition escrow  (26,000)   26,000  (26,000)
Proceeds from sale of property and equipment 127 732 
Purchases of property and equipment  (21,781)  (15,586)  (10,001)  (3,384)
Purchases of other long-term assets  (3,420)  (3,106)  (938)  (2,008)
Other, net 596   182 51 
          
 
Net cash used in investing activities  (403,051)  (20,272)
Net cash provided (used) by investing activities 13,457  (46,300)
          
  
Cash flows from financing activities:  
Proceeds from issuance of shares 165,389 12,456  462 160,432 
Borrowings from short-term debt obligations and revolving credit agreements 639,119 12,523 
Payments on short-term debt obligations and revolving credit agreements  (687,515)  (18,464)
Proceeds from long-term debt obligations 190,000  
Repayment of long-term debt  (25,000)  
Repayment of capital lease obligations  (7,603)  (4,639)
Debt issuance costs  (3,827)  
Proceeds received from minority interest stockholders 188  
Net repayments of short-term debt obligations and revolving credit agreements classified as current liabilities  (215)  
Borrowings from revolving credit agreements classified as non-current liabilities 23,500 9,000 
Repayments of revolving credit agreements classified as non-current liabilities  (74,143)  (28,157)
Repayments of long-term debt obligations  (10,000)  
Repayments of capital lease obligations  (2,263)  (2,839)
Cash dividends paid to minority interest stockholders  (1,572)     (1,572)
Other, net 115  (196) 67 11 
          
 
Net cash provided by financing activities 269,294 1,680 
     
Net cash provided (used) by financing activities  (62,592) 136,875 
      
Effect of exchange differences on cash 4,827 3,406  4,048 366 
          
 
Increase in cash and cash equivalents  (69,623) 35,434 
Increase (decrease) in cash and cash equivalents  (30,494) 98,431 
Cash and cash equivalents at beginning of period 321,058 219,932  267,591 321,058 
     
         
Cash and cash equivalents at end of period $251,435 $255,366  $237,097 $419,489 
          
 
Interest paid during the period $15,102 $7,366  $4,149 $1,153 
Income taxes paid during the period 13,428 8,862  6,881 2,075 
See accompanying notes to the consolidated financial statements.

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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. Euronet’s Prepaid Processing Segment is one of the world’s largest providers of “top-up” services for prepaid products, primarily prepaid mobile airtime. 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. The Money Transfer Segment, comprised primarily of the Company’s subsidiary, RIA Envia, Inc. (“RIA”), subsidiary and its operating subsidiaries, is the third-largest global money transfer company based upon revenues and volumes and provides services through a sending network of agents and Company-owned stores in the U.S., the Caribbean, Europe and Asia, disbursing money transfers through a worldwide payer network.
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 September 30, 2007,March 31, 2008, and the results of its operations for the three- and nine-month periods ended September 30, 2007 and 2006 and cash flows for the nine-monththree-month periods ended September 30, 2007March 31, 2008 and 2006.2007.
The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of Euronet for the year ended December 31, 2006,2007, including the notes thereto, set forth in the Company’s 2007 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 consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for the three- and nine-month periodsthree-month period ended September 30, 2007March 31, 2008 are not necessarily indicative of the results to be expected for the full year ending December 31, 2007.2008. Certain amounts in prior years have been reclassified to conform to current period presentation.
Goodwill and acquired intangible translation adjustment
During the third quarter 2007, the Company corrected an immaterial error related to foreign currency translation adjustments for goodwill and acquired intangible assets recorded in connection with acquisitions completed induring periods prior to December 31, 2006. The impact of this adjustment increased goodwillcorrection on the Company’s Unaudited Statements of Operations and Comprehensive Income was to increase depreciation and amortization expense by $18.4$0.2 million, acquired intangible assets by $3.1 million, deferred income tax liabilities by $1.0 million and accumulated other comprehensivedecrease operating income by $21.4$0.2 million, as of December 31, 2006. Additionally, the adjustment increased intangible amortization expensereduce net income by $0.1 million and $0.3decrease diluted earnings per share by $0.01 for the three months ended March 31, 2007. Due primarily to the impact of the correction on the Company’s foreign currency translation adjustment, total comprehensive income increased by $1.3 million for the three- and nine-month periodsthree months ended September 30, 2006, respectively, and increased comprehensive income by $3.0 million and $10.1 million for the three- and nine-month periods ended September 30, 2006, respectively.March 31, 2007. This correction did not impact the Company’s cash flows from operating, financing or investing activities.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
Fair Value Measurements
Effective January 1, 2008, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” for financial assets and liabilities. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Statement applies whenever other accounting pronouncements require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. Additionally, FASB Staff Position No. 157-2, “Effective Date of FASB Statement No. 157,” delayed the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 for certain nonfinancial assets and liabilities. Beginning January 1, 2009, the Company will adopt the provisions for those nonfinancial assets and liabilities, which include those measured at fair value in goodwill impairment testing, indefinite-lived intangible assets measured at fair value for impairment assessment, nonfinancial long-lived assets measured at fair value for impairment assessment and investments in unconsolidated subsidiaries. The Company does not expect the provisions of SFAS No. 157 related to these items to have a material impact on its consolidated financial statements. See Note 9, Fair Value Measurements, for the required fair value disclosures.
Investment in MoneyGram International, Inc.
The Company’s investment in MoneyGram International, Inc. (“MoneyGram”) was classified as available-for-sale as of December 31, 2007 and was recorded in other assets on the Company’s Consolidated Balance Sheet. During the first quarter 2008, the Company decided not to pursue the acquisition of MoneyGram. Also, during the first quarter 2008, the value of the Company’s investment in MoneyGram declined and the Company determined the decline to be other than temporary. Accordingly, the Company recognized $17.5 million in

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impairment losses associated with the investment and reversed the $0.6 million gain recorded during 2007 in other comprehensive income. Because of the Company’s decision not to submit a proposal to acquire MoneyGram, the investment was reclassified to other current assets on the Company’s Unaudited Consolidated Balance Sheet as of March 31, 2008. During the first quarter 2008, the Company also recorded acquisition related expenses totaling $3.0 million, which are included in selling, general and administrative expenses.
Money transfer settlement obligations
Money transfer settlement obligations are recorded in accrued expenses and other current liabilities on the Company’s unaudited consolidated balance sheetUnaudited Consolidated Balance Sheets and consist of amounts owed by Euronet to money transfer recipients. As of September 30, 2007,March 31, 2008, the Company’s money transfer settlement obligations were $43.0$39.8 million.
Accounting for derivative instruments and hedging activities
The Company accounts for derivative instruments and hedging activities in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”)SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS No. 133”), which requires that all derivative instruments be recognized as either assets or liabilities on the balance sheet at fair value. During the second quarter 2007, the Company entered into derivative instruments to manage exposure to interest rate risk that are considered cash flow hedges under the provisions of SFAS No. 133. To qualify for hedge accounting under SFAS No. 133, the details for the hedging relationship must be formally documented at the inception of the arrangement, including the Company’s hedging strategy, risk management objective, the specific risk being hedged, the derivative instrument being used, the item being hedged, an assessment of hedge effectiveness and how effectiveness will continue to be assessed and measured. For the effective portion of a cash flow hedge, changes in the value of the hedge instrument are recorded temporarily in stockholders’ equity as a component of other comprehensive income and then recognized as an adjustment to interest expense over the term of the hedging instrument.
In the Money Transfer Segment, the Company enters into foreign currency forward contracts to offset foreign currency exposure related to the notional value of money transfer transactions collected or paid in currencies other than the U.S. dollar. These forward contracts are considered derivative instruments under the provisions of SFAS No. 133, however, the Company does not designate such instruments as hedges. Accordingly, changes in the value of these contracts are recognized immediately as a component of foreign currency exchange gain, net in the unaudited consolidated statementUnaudited Consolidated Statements of incomeOperations and comprehensive income.Comprehensive Income. The impact of changes in value of these forward contracts, together with the impact of the change in value of the related foreign currency denominated receivable or payable, on the Company’s unaudited consolidated statementUnaudited Consolidated Statements of incomeOperations and comprehensive incomeComprehensive Income is not significant.

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Cash flows resulting from derivative instruments are classified as cash flows from operating activities in the Company’s unaudited consolidated statementUnaudited Consolidated Statements of cash flows.Cash Flows. The Company enters into derivative instruments with highly credit-worthy financial institutions and does not use derivative instruments for trading or speculative purposes. See Note 9,6, Derivative Instruments and Hedging Activities, for further discussion of derivative instruments.
Presentation of taxes collected and remitted to governmental authorities
During 2006, the Emerging Issues Task Force (“EITF”) issued EITF 06-3, “How Taxes Collected and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).” The Company presents taxes collected and remitted to governmental authorities on a net basis in the accompanying consolidated statements of income.
Accounting for uncertainty in income taxes
Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of SFAS No. 109, “Accounting for Income Taxes.” FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the measurement and recognition related to accounting for income taxes.
The Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax expense in the consolidated statements of income. See Note 14, Income Taxes, for further discussion regarding the adoption of FIN 48.
Recent accounting pronouncements
In February 2007,March 2008, the FASB issued SFAS No. 159, “The Fair Value Option161, “Disclosures about Derivative Instruments and Hedging Activities,” which requires enhanced disclosures about an entity’s derivative and hedging activities, including: (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (“under SFAS No. 159”). SFAS No. 159 expands the use of fair value accounting133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not affect existing standards which require, assets or liabilities to be carriedcomparative disclosures for earlier periods at fair value. Under SFAS No. 159, a company may elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. Other eligible items include firm commitments for financial instruments that otherwise would not be recognized at inception and non-cash warranty obligations where a warrantorinitial adoption. Management of the Company is permitted to pay a third party to providestill evaluating the warranty goods or services. If the useimpact of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings and cannot be deferred, such as deferred financing costs. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the adoption of SFAS No. 159, changes in fair value are recognized in earnings. SFAS No. 159 is effective for Euronet beginning in the first quarter 2008. Euronet is currently determining whether fair value accounting is appropriate for any of its eligible items and cannot estimate161; however, the impact if any, which SFAS No. 159 will have on its consolidated results of operations and financial condition.is not expected to be material.
(3) EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share has been computed by dividing earnings (loss) available to common stockholders by the weighted average number of common shares outstanding during the respective period. Diluted earnings (loss) per share has been computed by dividing earnings (loss) available to common stockholders by the weighted-average shares outstanding during the respective period, after adjusting for the 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 and restricted stock. The following table provides a reconciliation of net income to earnings available to common stockholders and the computation of diluted weighted average number of common shares outstanding:

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 Three Months Ended September 30, Nine Months Ended September 30,  Three Months Ended 
(dollar amounts in thousands) 2007 2006 2007 2006  March 31, 2007 
Reconciliation of net income to earnings available to earnings available to common stockholders: 
Reconciliation of net income to earnings available to common stockholders: 
Net income $15,921 $10,331 $33,878 $30,684  $9,461 
Add: interest expense of 1.625% convertible debentures 836 797 2,370 2,391 
Add: interest expense related to 1.625% convertible debentures 737 
            
 
Earnings available to common stockholders $16,757 $11,128 $36,248 $33,075  $10,198 
            
  
Computation of diluted weighted average shares outstanding:  
Basic weighted average shares outstanding 48,523,643 37,230,518 44,222,453 36,938,652  38,434,178 
Additional shares from assumed conversion of 1.625% convertible debentures 4,163,488 4,163,488 4,163,488 4,163,488  4,163,488 
Weighted average shares issuable in connection with acquisition obligations (See Note 4 - Acquisitions) 714,644  467,672 48,685 
Incremental shares from assumed conversion of stock options and restricted stock 1,037,521 1,131,505 1,051,986 1,312,576  1,090,348 
            
 
Diluted weighted average shares outstanding 54,439,296 42,525,511 49,905,599 42,463,401 
Potentially diluted weighted average shares outstanding 43,688,014 
            
The table includes all stock options and restricted stock that are dilutive to Euronet’s weighted average common shares outstanding during the period. For both the three- and nine-monththree months ended March 31, 2008, the Company incurred a net loss; therefore, diluted loss per share is the same as basic loss per share. For the three-month periods ended September 30,March 31, 2008 and 2007, the table does not include 567,093calculation of diluted earnings (loss) per share excludes approximately 3,192,000 and 295,000, respectively, stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding. ForAdditionally, for the three-month periodthree months ended September 30, 2006,March 31, 2008, the table does not include 592,400 stock options orcalculation of diluted loss per share excludes approximately 953,000 shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding. For the nine-month period ended September 30, 2006, the table does not include 55,000 stock options or shares of restricted stockissuable in connection with acquisition obligations that are anti-dilutive to the Company’s weighted average common shares outstanding.
The Company has $140 million of 1.625% convertible debentures due 2024 and $175 million of 3.50% convertible debentures due 2025 outstanding that, if converted, would have a potentially dilutive effect on the Company’s stock. These debentures are convertible into 4.2 million shares of Common Stock for the $140 million 1.625% issue, and 4.3 million shares of Common Stock for the $175 million 3.50% issue only upon the occurrence of certain conditions. As required by EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” if dilutive, the impact of the contingently issuable shares must be included in the calculation of diluted 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. Under the if-converted method, the assumed conversion of the 1.625% convertible debentures was anti-dilutive for the three months ended March 31, 2008 and dilutive for the three- and nine-month periodsthree months ended September 30, 2007 and 2006.March 31, 2007. Under the if-converted method, the assumed conversion of the 3.50% convertible debentures was anti-dilutive for the three- and nine-monthboth three-month periods ended September 30, 2007March 31, 2008 and 2006.2007.
(4) ACQUISITIONS
In accordance with SFAS No. 141, “Business Combinations,” the Company allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired based on estimated fair values. Any excess purchase price over those fair values is recorded as goodwill. The fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by management. For certain acquisitions, management engages an appraiser to assist in the valuation process.
2007 Acquisitions:
Acquisition of RIA
In April 2007, the Company completed the acquisition of the common stock of RIA, which expanded the Company’s money transfer operations in the U.S. and internationally. The purchase price of $504.3 million was comprised of $358.3 million in cash, 4,053,606 shares of Euronet Common Stock valued at $108.9 million, 3,685,098 contingent value rights (“CVRs”) and stock appreciation rights (“SARs”) valued at a total of $32.1 million and transaction costs of approximately $5.0 million. The Company financed the cash portion of the purchase price through a combination of cash on hand and $190 million in additional debt obligations. The following table summarizes the allocation of the purchase price to the fair values of the acquired tangible and intangible assets at the acquisition date, which remains preliminary while management completes its valuation of the fair value of the net assets acquired.

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  Estimated    
(dollar amounts in thousands) Life    
Current assets   $78,220 
Property and equipment various  10,854 
Customer relationships 3 - 8 years  73,280 
Trademarks and trade names 20 years  36,760 
Software 5 years  1,610 
Non-compete agreements 3 years  270 
Other non-current assets    1,396 
Goodwill Indefinite  403,523 
      
Assets acquired    605,913 
       
Current liabilities    (85,190)
Non-current liabilities    (1,574)
Deferred income tax liability    (14,852)
      
Net assets acquired   $504,297 
      
Pursuant to the terms of the Stock Purchase Agreement in the RIA acquisition (as amended, the “Stock Purchase Agreement”), $35.0 million in cash and 276,382 shares of Euronet Common Stock valued at $7.4 million are being held in escrow to secure certain obligations of the sellers under the Stock Purchase Agreement. These amounts have been reflected in the purchase price because the Company has determined beyond a reasonable doubt that the obligations will be met. The 3,685,098 CVRs mature on October 1, 2008 and will result in the issuance of up to $20 million of additional shares of Euronet Common Stock or payment of additional cash, at the Company’s option, if the price of Euronet Common Stock is less than $32.56 on the maturity date. The 3,685,098 SARs entitle the sellers to acquire additional shares of Euronet Common Stock at an exercise price of $27.14 at any time through October 1, 2008. Combined, the CVRs and SARs entitle the sellers to additional consideration of at least $20 million in Euronet Common Stock or cash. Management has initially estimated the total fair value of the CVRs and SARs at approximately $32.1 million using a Black Scholes pricing model. These and other terms and conditions applicable to the CVRs and SARs are set forth in the agreements governing these instruments.
Additionally, in April 2007, the Company combined its previous money transfer business with RIA and incurred total exit costs of approximately $0.9 million during the second quarter 2007. These costs were recorded as operating expenses and represent the accelerated depreciation and amortization of property and equipment, software and leasehold improvements that were disposed of during the second quarter 2007; the write off of marketing materials and trademarks that have been discontinued or will not be used; the write off of accounts receivable from agents that did not meet RIA’s credit requirements; and severance and retention payments made to certain employees. Additional costs incurred in association with exiting the Company’s previous money transfer business, if any, are not expected to be significant.
Other acquisitions:
During the nine-months ended September 30, 2007, the Company completed three other acquisitions described below for an aggregate purchase price of $26.5 million, comprised of $18.1 million in cash, 275,429 shares of Euronet Common Stock valued at $7.6 million and notes payable of $0.8 million. In connection with one of these acquisitions, the Company agreed to certain contingent consideration arrangements based on the value of Euronet Common Stock and the achievement of certain performance criteria. Upon the achievement of certain performance criteria, during 2009 and 2010, the Company may have to pay a total of $2.5 million in cash or 75,489 shares of Euronet Common Stock, at the option of the seller.
During January 2007, EFT Services Holding BV and Euronet Adminisztracios Kft, both wholly-owned subsidiaries of Euronet, completed the acquisition of a total of 100% of the share capital of Brodos SRL in Romania (“Brodos Romania”). Brodos Romania is a leading electronic prepaid mobile airtime processor that expanded the Company’s Prepaid Processing Segment business to Romania.
During February 2007, e-pay Holdings Limited, a wholly-owned subsidiary of Euronet, completed the acquisition of all of the share capital of Omega Logic, Ltd. (“Omega Logic”). Omega Logic is a prepaid top-up company based, and primarily operating, in the U.K. This acquisition enhanced our Prepaid Processing Segment business in the U.K.
During April 2007, PaySpot, Inc. (a wholly-owned subsidiary of Euronet) acquired customer relationships from Synergy Telecom, Inc. (“Synergy”) and Synergy agreed not to compete with PaySpot in the prepaid mobile phone top-up business in the U.S. for a period of five years. This acquisition enhances the Company’s Prepaid Processing Segment business in the U.S.

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As of September 30, 2007, 75,743 shares of Euronet Common Stock issued in connection with these acquisitions remains in escrow subject to the achievement of certain performance criteria. These shares have been reflected in the purchase price because the Company has determined beyond a reasonable doubt that the performance criteria will be met.
Agreement to acquire La Nacional
During January 2007, the Company signed a stock purchase agreement to acquire Envios de Valores La Nacional Corp. and its U.S. based affiliates (“La Nacional”), a money transfer company originating transactions through a network of sending agents and company-owned stores. See Note 12, Commitments, Litigation and Contingencies, for further disclosure regarding the agreement to acquire La Nacional.
2006 Acquisition:
In January 2006, the Company completed the acquisition of the assets of Essentis Limited (“Essentis”) for approximately $2.9 million, which was comprised of $0.9 million in cash and approximately $2.0 million in assumed liabilities. Essentis is a U.K. company that owns and develops software packages that enhance Euronet’s outsourcing and software offerings to banks. Essentis is reported with our software business in the Company’s EFT Processing Segment. There are no potential additional purchase price or escrow arrangements associated with the acquisition of Essentis.
Pro Forma and Condensed Statements of Net Income:
The following unaudited pro forma financial information presents the condensed combined results of operations of Euronet for the three-months ended September 30, 2006 and nine-months ended September 30, 2007 and 2006, as if the acquisition of RIA described above had occurred January 1, 2006. Adjustments were made to reflect the impact of events that are a direct result of the acquisition and are expected to have a continuing impact on the Company’s combined results of operations, including amortization of purchased intangible assets that would have been recorded if the acquisition had occurred at the beginning of the periods presented. The pro forma financial information is not intended to represent, or be indicative of, the consolidated results of operations or financial condition of Euronet that would have been reported had the acquisitions been completed as of the beginning of the periods presented. Moreover, the pro forma financial information should not be considered as representative of the future consolidated results of operations or financial condition of Euronet.
             
  Pro Forma
  Three Months Ended Nine Months Ended September 30,
(in thousands, except per share data) September 30, 2006 2007 2006
Revenues $207,961  $700,056  $595,033 
Operating income $15,771  $47,156  $42,766 
Net income $6,578  $26,703  $17,004 
             
Per share data:            
Net income per share-basic $0.16  $0.59  $0.41 
Net income per share-diluted $0.15  $0.56  $0.39 
(5) PROPERTY AND EQUIPMENT, NET
The components of property and equipment, net of accumulated depreciation and amortization, as of September 30, 2007 and December 31, 2006 are as follows:
         
  September 30,  December 31, 
(in thousands) 2007  2006 
ATMs $87,797  $75,568 
POS terminals  29,688   25,473 
Vehicles and office equipment  23,664   8,990 
Computers and software  52,074   37,026 
       
   193,223   147,057 
Less accumulated depreciation and amortization  (116,359)  (91,883)
       
Total $76,864  $55,174 
       

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(6) GOODWILL AND ACQUIRED INTANGIBLE ASSETS, NET
A summary of acquired intangible assets and goodwill activity for the nine-monththree-month period ended September 30, 2007March 31, 2008 is presented below:
             
  Amortizable      Total 
  Intangible      Intangible 
(in thousands): Assets  Goodwill  Assets 
Balance as of December 31, 2006 (Adjusted — See Note 1) $50,649  $297,134  $347,783 
Increases (decreases):            
Acquisition of RIA  111,920   403,523   515,443 
Other 2007 acquisitions  8,366   21,553   29,919 
Adjustment to 2006 acquisition  (116)     (116)
Amortization  (14,394)     (14,394)
Other (primarily changes in foreign currency exchange rates)  5,618   33,963   39,581 
          
Balance as of September 30, 2007 $162,043  $756,173  $918,216 
          
             
  Acquired        
  Intangible      Total Intangible 
(in thousands) Assets  Goodwill  Assets 
Balance as of December 31, 2007 $156,751  $762,723  $919,474 
Increases (decreases):            
Adjustment to acquisition of RIA     132   132 
Amortization  (6,354)     (6,354)
Other (primarily changes in foreign currency exchange rates)  5,492   35,876   41,368 
          
 
Balance as of March 31, 2008 $155,889  $798,731  $954,620 
          
Estimated annual amortization expense on intangible assets with finite lives, before income taxes, as of September 30, 2007,March 31, 2008, is expected to total $20.7 million for 2007, $24.9$25.6 million for 2008, $24.8$25.5 million for 2009, $24.5$25.0 million for 2010, $19.2$19.9 million for 2011, and $16.5$17.3 million for 2012.2012 and $12.2 million for 2013.

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The Company’s annual goodwill impairment test is performed during the fourth quarter. ForThe Company’s annual impairment test for the year ended December 31, 2006, the results of the Company’s goodwill impairment test2007 indicated that there were no impairments. Determining the fair value of reporting units for the purpose of the goodwill impairment test requires significant management judgment in estimating future cash flows and assessing potential market and economic conditions. It is reasonably possible that the Company’s operations will not perform as expected, or that estimates or assumptions could change, which may result in the Company recording material non-cash impairment charges during the year in which these changes take place.
(7) OTHER ASSETS
During the third quarter 2007, the Company recognized $0.3 million of equity losses related to e-pay Malaysia’s unsuccessful expansion efforts into Indonesia. The Company has a 40% minority investment in e-pay Malaysia.
During October 2007, e-pay Malaysia reported that it was ceasing operations in Indonesia. It is uncertain whether this business development will adversely impact the Company’s share of equity earnings in this minority investment. As of September 30, 2007, the Company’s investment in e-pay Malaysia was $2.6 million. Based on the performance of e-pay Malaysia’s core business, management of the Company does not believe that the amount recorded as investment in e-pay Malaysia is impaired.
(8)(5) DEBT OBLIGATIONS
A summary of debt obligation activity for the nine-monththree-month period ended September 30, 2007March 31, 2008 is presented below:

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              1.625%  3.50%       
  Revolving          Convertible  Convertible       
  Credit  Other Debt  Capital  Debentures  Debentures       
(in thousands) Facilities  Obligations  Leases  Due 2024  Due 2025  Term Loan  Total 
Balance at January 1, 2007 $34,073  $4,378  $20,001  $140,000  $175,000  $  $373,452 
Increases (decreases):                            
Net borrowings (repayments)  (10,762)  (1,045)  (5,051)        165,000   148,142 
Capital lease interest        1,301            1,301 
Foreign exchange gain (loss)  222   265   1,523            2,010 
                      
Balance at September 30, 2007  23,533   3,598   17,774   140,000   175,000   165,000   524,905 
                             
Less — current maturities     (3,598)  (5,514)        (1,900)  (11,012)
                      
Long-term obligations at September 30, 2007 $23,533  $  $12,260  $140,000  $175,000  $163,100  $513,893 
                      
In connection with the completion of the acquisition of RIA during April 2007, the Company entered into a $290 million secured syndicated 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 (the “Credit Facility”) that replaced an existing $50 million revolving credit facility. The $190 million seven-year term loan bears interest at LIBOR plus 200 basis points or prime plus 100 basis points and contains a 1% per annum principal amortization requirement, payable quarterly, with the remaining balance outstanding due at the end of year seven. The $100 million five-year revolving line of credit bears interest at LIBOR or prime plus a margin that adjusts each quarter based upon the Company’s consolidated total leverage ratio. The weighted average interest rate of the Company’s borrowings under the revolving credit facility was 8.2% as of September 30, 2007.
The term loan may be expanded by up to an additional $150 million and the revolving credit facility may be expanded by up to an additional $25 million, subject to satisfaction of certain conditions including pro-forma debt covenant compliance. The agreements for the credit facility contain certain mandatory prepayments, customary events of default and financial covenants, including leverage ratios. The leverage ratios step down on various dates through September 2008. Financing costs of $4.8 million have been deferred and are being amortized over the terms of the respective loans.
                             
              1.625%  3.50%       
  Revolving          Convertible  Convertible       
  Credit  Other Debt  Capital  Debentures  Debentures       
(in thousands) Facilities  Obligations  Leases  Due 2024  Due 2025  Term Loan  Total 
Balance at December 31, 2007 $62,203  $10  $16,599  $140,000  $175,000  $164,000  $557,812 
Increases (decreases):                            
Net repayments  (50,643)  (215)  (1,612)        (10,000)  (62,470)
Capital lease interest        387            387 
Foreign exchange gain  1,327   205   1,209            2,741 
                      
Balance at March 31, 2008  12,887      16,583   140,000   175,000   154,000   498,470 
                             
Less — current maturities        (5,414)        (1,900)  (7,314)
                      
 
Long-term obligations at March 31, 2008 $12,887  $  $11,169  $140,000  $175,000  $152,100  $491,156 
                      
During the nine-monthsthree months ended September 30, 2007,March 31, 2008, the Company repaid $25.0$10.0 million of the term loan, of which $1.0$0.5 million was a scheduled repayments.repayment. The remaining $24.0$9.5 million represents prepayment of amounts not yet due and resulted in the Company recognizing a $0.4$0.2 million pre-tax loss on early retirement of debt.
(9)(6) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
During the second quarter 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 the term loan, which currently bears interest at LIBOR plus 200 basis points. The interest rate swap agreements are determined to be cash flow hedges and effectively convert $50 million of the term loan to a fixed interest rate of 7.3% through the May 2009 maturity date of the swap agreements. As of September 30, 2007,March 31, 2008, the Company has recorded a liability of $0.6$1.7 million in the other long-term liabilities caption on the Company’s consolidated balance sheetsUnaudited Consolidated Balance Sheet to recognize the fair value of the swap agreements. The offset is recorded inimpact to accumulated other comprehensive income.income for the first quarter 2008 was a loss of $0.8 million. The fair value of swap agreements is based on the London Inter-Bank Offered Rate ("LIBOR") swap rate, credit spreads and other relevant market quotes received from the agreement counterparties and represents the net amount the Company would have been required to pay to terminate the positions.conditions.
As of September 30, 2007,March 31, 2008, the Company had foreign currency forward contracts outstanding with a notional value of $41.0$52.9 million, primarily in euros, which were not designated as hedges and had a weighted average maturity of six days.
(10) EQUITY PRIVATE PLACEMENT(7) STOCK PLANS
During March 2007,the first quarter 2008, the Company entered into a securities purchase agreement with certain accredited investors to issue and sell 6,374,528granted 147,402 shares of Common Stock inperformance-based restricted stock to executives, having a private placement.total value of $2.9 million on the grant date. The offering price forshares shall vest during the years 2009 through 2013 upon the attainment of certain financial performance goals, combined with continued employment on the vesting date. Additionally, 22,651 shares of restricted stock were granted or accelerated during the first quarter 2008, having a value of $0.5 million on the date the shares was $25.00 per share and the gross proceedswere granted or accelerated, in connection with severance benefits due to an executive officer of the offering were approximately $159.4 million. The net proceeds fromCompany who resigned during the sale, after deducting commissions and expenses, were approximately $154.3 million.first quarter 2008.
(11)(8) SEGMENT INFORMATION
Euronet’s reportable operating segments have been determined in accordance with SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information.” Effective January 1, 2007, the Company began reporting and managing the operations of the EFT Processing Segment and the former Software Solutions Segment on a combined basis. Additionally, as a result of the acquisition of RIA in April 2007, the Company began reporting the Money Transfer Segment. The Company’s former money transfer business was

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previously reported within the Prepaid Processing Segment. Previously reported amounts have been adjusted to reflect these changes, which did not impact the Company’s consolidated financial statements. As a result of these changes, 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, Asia and Africa. 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, merchant acquiring, card issuing and transaction delivery systems.

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 2) Through the Prepaid Processing Segment, the Company provides distribution of prepaid mobile airtime and other prepaid products and collection services in the U.S., Europe, Africa, Asia Pacific and Asia Pacific.the Middle-East.
 
 3) Through the Money Transfer Segment, the Company provides global money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America, the Caribbean, Europe and Asia Pacific, disbursing money transfers through a worldwide payer network.
In addition, in its administrative division, “Corporate Services, Eliminations and Other,” the Company accounts for non-operating activity, 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.
The following tables present the segment results of the Company’s operations for the three- and nine-monththree-month periods ended September 30, 2007March 31, 2008 and 2006:2007:
                                        
 For the Three Months Ended September 30, 2007  For the Three Months Ended March 31, 2008 
 Corporate    Corporate   
 Services,    Services,   
 EFT Prepaid Money Eliminations    EFT Prepaid Money Eliminations   
(in thousands) Processing Processing Transfer and Other Consolidated  Processing Processing Transfer and Other Consolidated 
Total revenues $48,113 $144,631 $53,573 $ $246,317  $50,506 $144,225 $52,332 $ $247,063 
                      
Operating expenses:  
Direct operating costs 18,644 118,038 28,397  165,079  21,752 117,856 26,345  165,953 
Salaries and benefits 10,616 7,081 10,784 3,956 32,437  10,147 6,568 11,757 4,461 32,933 
Selling, general and administrative 3,981 4,879 6,777 1,252 16,889  4,450 5,275 7,452 4,444 21,621 
Depreciation and amortization 4,641 4,230 4,205 402 13,478  5,137 4,192 4,827 294 14,450 
                      
  
Total operating expenses 37,882 134,228 50,163 5,610 227,883  41,486 133,891 50,381 9,199 234,957 
                      
  
Operating income (loss) $10,231 $10,403 $3,410 $(5,610) $18,434  $9,020 $10,334 $1,951 $(9,199) $12,106 
                      
                                        
 For the Three Months Ended September 30, 2006  For the Three Months Ended March 31, 2007 
 Corporate    Corporate   
 Services,    Services,   
 EFT Prepaid Money Eliminations    EFT Prepaid Money Eliminations   
(in thousands) Processing Processing Transfer and Other Consolidated  Processing Processing Transfer and Other Consolidated 
Total revenues $40,539 $120,240 $874 $ $161,653  $42,047 $127,581 $789 $ $170,417 
                      
Operating expenses:  
Direct operating costs 14,674 97,294 520  112,488  16,923 103,230 511  120,664 
Salaries and benefits 8,964 5,488 631 3,593 18,676  9,254 6,385 590 2,700 18,929 
Selling, general and administrative 3,970 4,338 455 1,208 9,971  4,864 4,577 451 910 10,802 
Depreciation and amortization 3,791 3,559 106 56 7,512  4,068 3,873 104 60 8,105 
                      
  
Total operating expenses 31,399 110,679 1,712 4,857 148,647  35,109 118,065 1,656 3,670 158,500 
                      
  
Operating income (loss) $9,140 $9,561 $(838) $(4,857) $13,006  $6,938 $9,516 $(867) $(3,670) $11,917 
                      

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  For the Nine Months Ended September 30, 2007 
              Corporate    
              Services,    
  EFT  Prepaid  Money  Eliminations    
(in thousands) Processing  Processing  Transfer  and Other  Consolidated 
Total revenues $135,844  $414,442  $103,581  $  $653,867 
                
Operating expenses:                    
Direct operating costs  53,335   337,516   55,303      446,154 
Salaries and benefits  30,427   20,486   21,207   10,035   82,155 
Selling, general and administrative  12,933   14,845   14,047   3,279   45,104 
Depreciation and amortization  12,733   11,976   9,101   523   34,333 
                
                     
Total operating expenses  109,428   384,823   99,658   13,837   607,746 
                
                     
Operating income (loss) $26,416  $29,619  $3,923  $(13,837) $46,121 
                
                     
Total assets as of September 30, 2007 $182,735  $712,695  $682,197  $227,276  $1,804,903 
                
(9) FAIR VALUE MEASUREMENTS
                     
  For the Nine Months Ended September 30, 2006 
              Corporate    
              Services,    
  EFT  Prepaid  Money  Eliminations    
(in thousands) Processing  Processing  Transfer  and Other  Consolidated 
Total revenues $116,166  $343,957  $2,303  $  $462,426 
                
Operating expenses:                    
Direct operating costs  41,531   276,708   1,363      319,602 
Salaries and benefits  26,643   17,038   1,570   10,913   56,164 
Selling, general and administrative  11,513   12,048   1,128   2,995   27,684 
Depreciation and amortization  10,649   10,523   259   144   21,575 
                
                     
Total operating expenses  90,336   316,317   4,320   14,052   425,025 
                
                     
Operating income (loss) $25,830  $27,640  $(2,017) $(14,052) $37,401 
                
                     
Total assets as of December 31, 2006 $172,191  $694,437  $18,387  $244,625  $1,129,640 
                
The Company’s assets and liabilities recorded at fair value on a recurring basis are set forth in the following table:
         
  Fair Value Measurements as of 
  March 31, 2008 Using 
  Quoted Prices in Active    
  Markets for Identical  Signifcant Other 
(in thousands) Assets  Observable Inputs 
Available for sale investment securities $2,488  $ 
Interest rate swaps related to floating rate debt     (1,745)
Foreign currency derivative contracts     (258)
The Company values available for sale investment securities using quoted prices from the securities’ primary exchange. Interest rate swaps are valued using present value measurements based on the LIBOR swap rate, credit spreads and other relevant market conditions. Foreign currency derivative contracts are valued using foreign currency quotes for similar assets and liabilities.
(12) COMMITMENTS, LITIGATION(10) NONCASH FINANCING AND CONTINGENCIESINVESTING ACTIVITIES
Future minimumCapital lease payments
Future minimum lease payments under noncancelable operating leases (with remaining lease terms in excessobligations of one year) as of September 30, 2007 are:
     
(in thousands)    
Year ending December 31,    
2007 (three months) $4,666 
2008  15,689 
2009  15,210 
2010  12,754 
2011  7,420 
thereafter  3,325 
    
Total minimum lease payments $59,064 
    

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Litigation
During 2005, a former cash supply contractor in Central Europe (the “Contractor”) claimed that the Company owed it approximately $2.0$0.7 million for the provision of cash during the fourth quarter 1999 and first quarter 2000 that had not been returned. This claim was made after the Company terminated its business with the Contractor and established a cash supply agreement with another supplier. In the first quarter 2006, the Contractor initiated legal action in Budapest, Hungary regarding the claim. In April 2007, an arbitration tribunal awarded the Contractor $1.0$1.5 million plus $0.2 million in interest, under the claim, which was recorded as selling, general and administrative expenses of the Company’s EFT Processing Segmentwere incurred during the first quarter 2008 and 2007, and paid inrespectively. The Company issued Euronet common stock valued at $7.6 million for an acquisition completed during the secondfirst quarter 2007.
Contingencies(11) CONTINGENCIES
In connection withOn January 12, 2007, the Company signed a stock purchase agreement to acquire La Nacional inand certain of its affiliates (“La Nacional”), subject to regulatory approvals and other customary closing conditions. In connection with this agreement, on January 16, 2007, the Company deposited $26 million in an escrow account created for the proposed acquisition, which can onlyacquisition. The escrowed funds were not permitted to be released byexcept upon mutual agreement of the Company and La NacionalNacional’s stockholder or through legal remedies available underin the agreement. On February 6, 2007, two employees of La Nacional working in different La Nacional stores were arrested for allegedly violating federal money laundering laws and certain state statutes.
On April 5, 2007, the Company gave notice to the stockholder of La Nacional of the termination of the stock purchase agreement, alleging certain breaches of the terms thereof by La Nacional and requested the release of the escrowed funds$26 million held in escrow under the terms of the stock purchase agreement. La Nacional is contesting the Company’sNacional’s stockholder denied such breaches occurred, contested such termination and did not consent to our request for release of the escrowed funds. While pursuing all legal remedies available the Company is alsoto us, we engaged in negotiations with La Nacional and its stockholder to determine whether the dispute cancould be resolved through revised terms for the acquisition.acquisition or some other mutually agreeable method.
In addition, from time to time,On January 10, 2008, the Company isentered into a partysettlement agreement with La Nacional and its stockholder evidencing the parties’ mutual agreement not to litigation arisingconsummate the acquisition of La Nacional, in the ordinary courseexchange for payment by Euronet 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 conditionportion of the Company. The Company expenses legal costsfees incurred by La Nacional. Among other terms and conditions, the settlement agreement contains mutual releases in connection with loss contingencies when incurred.litigation and provided for the release to the Company in the first quarter 2008 of the $26 million held in escrow, plus interest earned on the escrowed funds.
(12) FEDERAL EXCISE TAX REFUND
During 2006, the Internal Revenue Service (“IRS”) announced that Internal Revenue Code Section 4251 (relating to communications excise tax) will no longer apply to, among other services, prepaid mobile airtime services such as those offered by the Company’s Prepaid Processing Segment’s U.S. operations. Additionally, companies that paid this excise tax during the period beginning on March 1, 2003 and ending on July 31, 2006, are entitled to a credit or refund of amounts paid in conjunction with the filing of 2006 federal income tax returns. The Company has claimed a refund for amounts paid during this period and has been informed byDuring the fourth quarter 2007, the IRS thatcompleted an initial field examination confirming the amount of the claim and, therefore, the Company recorded $12.2 million for the amount of the refund is currently being examined. Therefore, no benefit for any potential recovery has beenclaimed as a reduction to operating expenses of the Prepaid Processing Segment and as an other current asset. In addition, the Company will receive approximately $1.2 million in interest on the amount claimed, which was recorded as interest income in the Consolidated Financial Statements, and no such amounts will be recorded until such time as the refund is considered “realizable” as stipulated under SFAS No. 5, “Accounting for Contingencies.”first quarter 2008.
(13) GUARANTEES
As of September 30, 2007,March 31, 2008, the Company had $36.7$33.5 million of stand-by letters of credit/bank guarantees issued on its behalf, of which $1.7$1.8 million are collateralized by cash deposits held by the respective issuing banks and $35.5 million are supported by stand-by letters of credit issued against the Company’s revolving credit facility.banks.

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Euronet regularly grants guarantees in support of the obligations of its wholly-owned subsidiaries. As of September 30, 2007,March 31, 2008, the Company had granted off balance sheet guarantees for cash in various ATM networks amounting to $25.9 million over the following amounts:  
Cash in various ATM networks — $24.6 million over the terms of the cash supply agreements.
Performance guarantees — $26.7terms of the cash supply agreements and performance guarantees amounting to approximately $28.1 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 of which may vary depending on the negotiated terms 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 that supply cash to ATMs in the EFT Processing Segment, the Company is responsible for the loss of network cash that, generally, is not recorded on the Company’s consolidated balance sheet, because the cash remains the property of the financial institutions while in the ATMs. As of September 30, 2007,
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 Sheet. As of March 31, 2008, the balance of ATM network cash for which the Company was responsible was approximately $300 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 licensee, which generally warrant that such systems do not infringe on intellectual property owned by third parties and that the systems will perform in accordance with their specifications;
Euronet has entered into purchase and service agreements with our vendors and 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;

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In connection with the license of proprietary systems to customers, Euronet provides certain warranties and infringement indemnities to the licensee, which generally warrant that such systems do not infringe on intellectual property owned by third parties and that the systems will perform in accordance with their specifications;
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 surety bonds in compliance with money transfer licensing requirements of certain states.
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 obtained surety bonds in compliance with money transfer licensing requirements of the applicable governmental authorities and has agreed to reimburse the surety for any amounts that they are required to pay in connection with such bonds.
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 September 30, 2007March 31, 2008 or December 31, 2006.2007.
(14) INCOME TAXES
The Company’s effective tax rate, after consideration of minority interest, was 29.4%264.3% and 25.8%29.9% for the three-month periods ended September 30,March 31, 2008 and 2007, and 2006, respectively, and was 31.5% and 25.9%respectively. The net loss for the nine-month periods ended September 30, 2007 and 2006, respectively.first quarter 2008 reflects an unrealized capital loss of $17.5 million recorded in connection with the Company’s investment in MoneyGram, for which an associated tax benefit was not recorded because of the uncertainty surrounding the Company’s future ability to have offsetting capital gains.
Excluding the impact of this unrealized capital loss, the Company’s income tax rate was 50.8% for the first quarter 2008, compared to 29.9% for the first quarter 2007. This increase in the 2007 effective tax rate primarily relates to several factors. During the nine-months ended September 30, 2007, the Company recognized $3.7 millionrecognition of non-cash deferred income tax expense related to the deduction of goodwill amortization expense for U.S. income tax purposes, a substantial portion of which relates to the Company’s acquisition of RIA. Additionally, during the second quarter 2007, the Company reversed $2.7 million in valuation allowances recorded against deferred tax assets related to U.S. Federal and state net operating losses; the Company concluded that it is more likely than not that the net deferred tax asset of $2.7 million will be realized because the Company would employ tax-planning strategies to utilize its net operating losses prior to expiration in the event they wereU.S. attributable to expire.
Since the Company is in a net operating loss position for its U.S. operations, valuation allowances have been recorded in instances where the Company determines that it is more likely than not that a tax benefit will not be realized. Accordingly, tax benefit or expense associated with foreign currency gains or losses incurredpre-tax income generated by the Company’s U.S. entities have historically been offset through an adjustment to the valuation allowance. During the quarter ended September 30, 2007, the Company’s U.S. operations recognized significant realized and unrealized foreign currency gains. The impact of these gains, as well as the above-mentioned reversal of $2.7 million of valuation allowances for tax-planning strategies, reduced the Company’s remaining valuation allowances related to its U.S. operations to $0.1 million. Consequently, should the Company’s U.S. operations generate pre-tax book income, including income from the recognition of additional foreign currency gains the Company would be requiredand interest income earned on loans to recognize tax expense on such income.foreign subsidiaries. For U.S. federal income tax purposes, however, the Company has approximately $114 million insignificant net operating losses as of September 30, 2007 that will offset future taxable income generated in future periods from pre-tax income produced by our U.S. operations and result in little or no cash taxes paid in the U.S. untilrecognition of the net operating losses have been fully utilized.
Other factors contributing to the increase in thefuture tax effects of temporary differences recorded as deferred tax liabilities. The first quarter 2008 effective tax rate include profits generatedwas also unfavorably impacted by the acquisition of RIA, which operates in jurisdictions havingthat have tax rates that are higher than the Company’s historical effective tax rate, and the recognition of significant deferred tax benefits from net operating losses in India and Poland during 2006.
As of January 1, 2007, the Company adopted the provisions of FIN 48 and has analyzed its filing positions in all federal, state and foreign jurisdictions. As a result of this analysis, the Company recognized less than $0.1 million in additional unrecognized tax benefits. The amount of unrecognized tax benefits as of January 1, 2007 included approximately $5.9 million of uncertain tax benefits and other items. Approximately $2.8 million of the unrecognized tax benefits would impact the Company’s provision for income taxes and effective tax rate, if recognized. Total estimated accrued interest and penalties related to the underpayment of income taxes was $0.5 million as of January 1, 2007 and September 30, 2007. The following tax years remain open in the Company’s major jurisdictions as of January 1, 2007:
Poland1999 through 2006
U.S. (Federal)2000 through 2006
Spain2002 through 2006
Australia2003 through 2006
U.K.2004 through 2006
Germany2004 through 2006
As of September 30, 2007, the Company’s open tax years in Spain are 2003 through 2006. The application of FIN 48 requires significant judgment in assessing the outcome of future tax examinations and their potential impact on the Company’s estimated effective tax rate andrate.

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(15) SUBSEQUENT EVENTS
During April 2008, the valueCompany entered into an amendment to its secured syndicated credit facility to change, among other items, the definition of deferred tax assets, such as those related to the Company’s net operating loss carryforwards. It is reasonably possible that amounts reserved for potential exposure could significantly change as a resultone of the conclusionfinancial covenants contained in the original agreement. Euronet incurred costs of tax examinations and, accordingly, materially affect our operating results. During$0.6 million in connection with the nine-months ended September 30, 2007,amendment, which will be recognized as additional interest expense over the Company’s unrecognized tax benefits increased by $0.7 million and the amount that would impact the Company’s provision for income taxes, if recognized, increased by $0.5 million.
(15) GAIN FROM DISCONTINUED OPERATIONS
In July 2002, the Company sold substantially allremaining 48 month term of the non-current assets and related capital lease obligations of its ATM processing business in France to Atos S.A. During the first quarter 2007, the Company received a binding French Supreme Court decision relating to a lawsuit in France that resulted in a cash recovery and gain to the Company of $0.3 million, net of legal costs. There were no assets or liabilities held for sale at September 30, 2007 or December 31, 2006.
(16) RELATED PARTY TRANSACTIONS
The Company leases an airplane from a company owned by Mr. Michael J. Brown, Euronet’s Chief Executive Officer and Chairman of the Board of Directors, and Mr. Daniel R. Henry, a member of Euronet’s Board of Directors. The airplane is leased for business use on a per flight hour basis with no minimum usage requirement. During the nine-months ended September 30, 2007, Euronet incurred less than $0.1 million in expenses for the use of this airplane. Euronet did not incur any expense for the use of this plane during the nine-months ended September 30, 2006.credit facility.

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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. (together with our subsidiaries, “we,” “us,” “Euronet” or the “Company”) is a leading electronic transaction processor,payments provider, offering automated teller machine (“ATM”) and Point of Salepoint-of-sale (“POS”) and card outsourcing services, card issuing and merchant acquiring services, integrated electronic financial transaction (“EFT”) software, network gateways, and electronic prepaiddistribution of top-up services to financial institutions,for prepaid mobile operatorsairtime and retailers andother prepaid products, electronic consumer money transfer and bill payment services. The EFT Processing Segment provides endservices to end solutions relating to operationsfinancial institutions, mobile operators, retailers and individual customers. As of ATMs and POS networks, and debit and credit card processing in Europe, the Middle East, and Asia. We are one of the largest providers of prepaid mobile airtime processing. Based on revenues and volumes, the current year acquisition of RIA Envia, Inc. (“RIA”) also makes us the third-largest global money transfer company.
Effective January 1, 2007, we began reporting and managing the operations of the EFT Processing Segment and the former Software Solutions Segment on a combined basis. Additionally, as a result of the acquisition of RIA in April 2007, we commenced reporting of the Money Transfer Segment. Previously reported amounts have been adjusted to reflect these changes, which did not impact our consolidated financial statements. As a result of these changes,March 31, 2008, we operate in the following three principal business segments.
  An EFT Processing Segment, which processes transactions for a network of 10,51611,917 ATMs and more than 48,000approximately 51,000 POS terminals across Europe, Asia and Africa.the Middle-East. 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 EFT software solutions for electronic payment, merchant acquiring, card issuing and transaction delivery systems.
 
��
  A Prepaid Processing Segment, which provides distribution of prepaid mobile airtime and other prepaid products and collection services for various prepaid products, cards and services. Including terminals operated by unconsolidated subsidiaries, we operate a network of approximately 370,000394,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services in the U.S., Europe, Africa, Asia Pacific and Asia Pacific.the Middle-East.
 
  A Money Transfer Segment, which provides global money transfer and bill payment services through a sending network of agents and Company-owned stores primarily in North America, the Caribbean, Europe and Asia-Pacific, disbursing money transfers through a worldwide payer network. Bill payment services are offered primarily in the U.S. The Money Transfer Segment originates and terminates transactions through a network of more than 68,000 locations, which include sending agents and Company-owned stores, and an extensive payer network across 100 countries.
We have six processing centers in Europe, two in Asia and two in the U.S., and we We have 2422 principal offices in Europe, five in the Asia-Pacific region, fourthree in the U.S. and one each in the Middle East and Latin America. Our executive offices are located in Leawood, Kansas, USA.
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 Revenue in the EFT Processing Segment, which represented approximately 21% of total consolidated revenue for the nine-months ended September 30, 2007,first quarter 2008, is derived from fees charged for transactions effected 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 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 not give authorization, and iv) prepaid telecommunication recharges. Revenue in this segment is also derived from licensing,license fees, professional services and maintenance fees for software and sales of related hardware, primarilyhardware. Software license fees are the fees we charge to financial institutions aroundlicense our proprietary application software to customers. Professional service fees consist of charges for customization, installation and consulting services to customers. Software maintenance revenue represents the world.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.
Prepaid Processing Segment Revenue in the Prepaid Processing Segment, which represented approximately 63%58% of total consolidated revenue for the nine-months ended September 30, 2007,first quarter 2008, is primarily derived from commissions andor processing fees received from mobile and other telecommunication operators, or from distributors of prepaid wireless productstelecommunications service providers for the sale and distribution and/or processing of prepaid mobile airtime. We also generate revenue from commissions earned from the distribution of other prepaid products. Due to certain provisions in our mobile phone operator agreements, the operators have the ability to reduce the overall commission paid on each top-up transaction. However, by virtue of our agreements with retailers (distributors where POS terminals are located) in certain markets, not all of these reductions are absorbed by us because we are able to pass a significant portion of the reductions to retailers. Accordingly, under certain retailer agreements, the effect is to reduce revenues and reduce our direct operating costs resulting in only a small impact on gross margin and operating income. In some markets, reductions in commissions can significantly impact our results as it may not be possible, either contractually or commercially in the concerned market, to pass a reduction in commissions to the retailers. In Australia, certain retailers negotiate directly with the mobile phone operators for their own commission rates, which also limits our ability to pass through reductions in commissions. Agreements with mobile operators are important to the success of our business. These agreements permit us to distribute prepaid mobile airtime to the mobile operators’

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customers. Other products offered by this segment include prepaid long distance calling card plans, prepaid Internetinternet plans, prepaid debit cards, prepaid gift cards and prepaid mobile content such as ring tones and games.
Money Transfer Segment Revenue in the Money Transfer Segment, which represents approximately 16%21% of total consolidated revenue for the nine-months ended September 30, 2007,first quarter 2008, is primarily derived through the charging of a transaction fee, as well as the difference between purchasing foreign currency at wholesale exchange rates and selling the foreign currency to consumers at retail exchange rates. We have an origination network in place comprised of agents and Company-ownedcompany-owned stores primarily in North America, the Caribbean,

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Europe and Asia-Pacific and a worldwide network of distribution agents, consisting primarily of financial institutions in the transfer destination countries. Origination and distribution 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 successful entry into the cross-border merchant processing and acquiring business;
 
  the successful entry into the card issuing and outsourcing business; and
 
  the continued development and implementation of our software products and their ability to interact with other leading products.
Software products are an integral part of our product lines, and our investment in research, development, delivery and customer support reflects our ongoing commitment to an expanded customer base. We have been able to enter into agreements under which we use our software in lieu of cash as our initial capital contributions to new transaction processing joint ventures. Such contributions sometimes permit us to enter new markets without significant capital investment.
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 to the 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 may involve the assumption of credit risk, as the principal amount of transactions may be settled to merchants before settlements are received from card associations.
Prepaid Processing Segment The continued expansion and development of the Prepaid Processing 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 continuation of the trend towards conversion from scratch card solutions to electronic processing solutions for prepaid mobile airtime among mobile phone users and the continued use of third party providers such as ourselves to supply this service;
 
  the development of mobile phone networks in these markets 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 level of commission that is paid to the various intermediaries in the prepaid mobile airtime distribution chain;
 
  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;
 
  the availability of financing for further expansion; and
 
  our ability to successfully integrate newly acquired operations with our existing operations.
During the first quarter 2007, we completed the acquisitions of the stock of Omega Logic, Ltd. (“Omega Logic”) and Brodos SRL in Romania (“Brodos Romania”). Omega Logic is a prepaid top-up company based, and primarily operating, in the U.K. that enhanced our Prepaid Processing Segment business in the U.K. Brodos Romania is a leading electronic prepaid mobile airtime processor in Romania.
Money Transfer Segment We completed the acquisition of RIA in April 2007, which expanded our money transfer and bill payment services business and makes Euronet the third-largest global money transfer company based upon revenues and volumes. RIA processes approximately $4.5 billion in money transfers annually, originates transactions through a network of approximately 11,000 sending agents, including Company-owned stores, located throughout 13 countries in North America, the Caribbean, Europe and Asia-Pacific.

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RIA disburses money transfers through a payer network of over 56,000 locations in over 100 countries. The Money Transfer Segment provides us with additional expansion opportunities.
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 the immigration developments occurring in the U.S. duringthat started in 2006 and 2007;changes in the economic sectors in which immigrants work;
 
  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 orand 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;

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  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 Prepaid Processing 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 and Asia, including high growth corridors to Central and Eastern European countries; and
 
  our ability to continue to successfully integrate RIA with our existing operations.
Like other participants in the money transfer industry, as a result of immigration developments, downturns in certain labor markets and/or other economic factors, growth rates in money transfers from the U.S. to Mexico have slowed. This slowing of growth began during the middle of 2006 and continues to impact money transfer revenues for transactions from the U.S. to Mexico. Despite recent improvement in this trend, we believe that it is too early to conclude on the impact, if any, to our results of operations.
Corporate Services, Eliminations and Other- In addition to operating in our principal business segments described above, our “Corporate Services, Elimination and Other” division 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. These services are not directly identifiable with our business segments. The impact of share-based compensation is recorded as an expense of the Corporate Services division.

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SEGMENT SUMMARY RESULTS OF OPERATIONS
Revenue and operating income by segment for the three- and nine-monththree-month periods ended September 30,March 31, 2008 and 2007 and 2006 are summarized in the tables below:
                                 
  Revenues for the Three               
  Months Ended          Revenues for the Nine Months    
  September 30,  Year-over-Year Change  Ended September 30,  Year-over-Year Change 
          Increase  Increase          Increase  Increase 
(in thousands) 2007  2006  Amount  Percent  2007  2006  Amount  Percent 
EFT Processing $48,113  $40,539  $7,574   19% $135,844  $116,166  $19,678   17%
Prepaid Processing  144,631   120,240   24,391   20%  414,442   343,957   70,485   20%
Money Transfer  53,573   874   52,699   6030%  103,581   2,303   101,278   4398%
                           
                                 
Total $246,317  $161,653  $84,664   52% $653,867  $462,426  $191,441   41%
                           
                                                                
 Operating Income for the Operating Income for the    Revenues for the Three Operating Income (Loss) for the   
 Three Months Ended Nine Months Ended    Months Ended March 31, Year-over-Year Change Three Months Ended March 31, Year-over-Year Change 
 September 30, Year-over-Year Change September 30, Year-over-Year Change  Increase Increase Increase Increase 
 Increase Increase Increase Increase 
 (Decrease) (Decrease) (Decrease) (Decrease) 
(in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent 
(dollar amounts in thousands) 2008 2007 Amount Percent 2008 2007 Amount Percent 
EFT Processing $10,231 $9,140 $1,091  12% $26,416 $25,830 $586  2% $50,506 $42,047 $8,459  20% $9,020 $6,938 $2,082  30%
Prepaid Processing 10,403 9,561  842   9% 29,619 27,640 1,979  7% 144,225 127,581 16,644  13% 10,334 9,516 818  9%
Money Transfer 3,410  (838) 4,248 n/m 3,923  (2,017) 5,940 n/m  52,332 789 51,543  6533% 1,951  (867) 2,818 n/m 
                          
Total 24,044 17,863 6,181  35% 59,958 51,453 8,505  17% 247,063 170,417 76,646  45% 21,305 15,587 5,718  37%
  
Corporate services  (5,610)  (4,857)  (753)  16%  (13,837)  (14,052) 215  (2%)     (9,199)  (3,670)  (5,529)  151%
                          
  
Total $18,434 $13,006 $5,428  42% $46,121 $37,401 $8,720  23% $247,063 $170,417 $76,646  45% $12,106 $11,917 $189  2%
                          
 
n/m — not meaningful- Not meaningful.
Amounts shown aboveImpact of changes in foreign currency exchange rates
Throughout 2007 and into 2008, the U.S. dollar has weakened compared to most of the currencies of the countries in which we operate. Because our revenues and local expenses are recorded in the functional currencies of our operating entities, amounts we earned for the three-first quarter 2008 are positively impacted by the weakening of the U.S. dollar. We estimate that, depending on the mix of countries and nine-month periods ended September 30, 2006 have been adjustedcurrencies, our operating income for the impact of the correction for an immaterial error relatedfirst quarter 2008 benefited by approximately 10% to foreign currency translation adjustments for goodwill and acquired intangible assets. See Note 1 — General15% when compared to the unaudited consolidated financial statements for further discussion.first quarter 2007.

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COMPARISON OF OPERATING RESULTS FOR THE THREE- AND NINE-MONTHMONTH PERIODS ENDED SEPTEMBER 30,MARCH 31, 2008 AND 2007 AND 2006
EFT PROCESSING SEGMENT
The following table presents the results of operations for the three- and nine-monththree-month periods ended September 30,March 31, 2008 and 2007 and 2006 for our EFT Processing Segment:
                                 
  Results for the Three          Results for the Nine    
  Months Ended September 30,  Year-over-Year Change  Months Ended September 30,  Year-over-Year Change 
                          Increase  Increase 
          Increase  Increase          (Decrease)  (Decrease) 
(dollar amounts in thousands) 2007  2006  Amount  Percent  2007  2006  Amount  Percent 
Total revenues $48,113  $40,539  $7,574   19% $135,844  $116,166  $19,678   17%
                           
Operating expenses:                                
Direct operating costs  18,644   14,674   3,970   27%  53,335   41,531   11,804   28%
Salaries and benefits  10,616   8,964   1,652   18%  30,427   26,643   3,784   14%
Selling, general and administrative  3,981   3,970   11   0%  12,933   11,513   1,420   12%
Depreciation and amortization  4,641   3,791   850   22%  12,733   10,649   2,084   20%
                           
                                 
Total operating expenses  37,882   31,399   6,483   21%  109,428   90,336   19,092   21%
                           
                                 
Operating income $10,231  $9,140  $1,091   12% $26,416  $25,830  $586   2%
                           
                                 
Transactions processed (in millions)  156.4   119.1   37.3   31%  434.0   335.9   98.1   29%
ATMs as of September 30  10,516   8,491   2,025   24%  10,516   8,491   2,025   24%
Average ATMs  10,296   8,351   1,945   23%  9,664   7,837   1,827   23%
As discussed previously, effective January 1, 2007, we began reporting and managing the operations of the EFT Processing Segment and the former Software Solutions Segment on a combined basis. Previously reported amounts have been adjusted to reflect these changes.
                 
  Three Months Ended    
  March 31,  Year-over-Year Change 
          Increase  Increase 
          (Decrease)  (Decrease) 
(dollar amounts in thousands) 2008  2007  Amount  Percent 
Total revenues $50,506  $42,047  $8,459   20%
              
                 
Operating expenses:                
Direct operating costs  21,752   16,923   4,829   29%
Salaries and benefits  10,147   9,254   893   10%
Selling, general and administrative  4,450   4,864   (414)  (9%)
Depreciation and amortization  5,137   4,068   1,069   26%
              
                 
Total operating expenses  41,486   35,109   6,377   18%
              
                 
Operating income $9,020  $6,938  $2,082   30%
              
                 
Transactions processed (millions)  168.4   130.7   37.7   29%
ATMs as of March 31  11,917   9,182   2,735   30%
Average ATMs  11,771   9,040   2,731   30%
Revenues
Our revenuesrevenue for the nine-months ended September 30, 2007first quarter 2008 increased when compared to the nine-months ended September 30, 2006first quarter 2007 primarily due to increases in the number of ATMs operated and, for owned ATMs, the number of transactions processed as well as the impact of foreign currency translations to the U.S. dollar.processed. These increases were attributable to mostmany of our operations, but primarily our operations in Poland India and GreeceIndia. Additionally, for the first quarter 2008, the U.S. dollar has weakened compared to the first quarter 2007 relative to the currencies of most of the countries in which we operate. Because our revenues are recorded in the functional currencies of our operating entities, amounts we earn in foreign currencies are positively impacted by the weakening of the U.S. dollar. Partially offsetting these improvements were decreases in revenue associated with our operations in Romania and our software operations.
Partially offsetting these increases was abusiness. The reduction in revenues associatedRomania is due to a decrease in the per transaction fee structure of a contract with the extension of certaina customer contracts for several years beyond their original terms. Inwhich we granted in exchange for these extensions, we paid or received up-front payments, and agreed on gradually declining fee structures. As prescribed by U.S. GAAP, revenue under these contracts is recognized based on proportional performancean extension of services over the term of the contract, which generally results in “straight-line” (i.e., consistent value per period) revenue recognition of the contracts’ total cash flows, including any up-front payment. This straight-line revenue recognition resultscontract. The decrease in revenue associated with our software business was primarily due to heavy implementation activity on two major contracts that is less than contractual invoices and cash receipts ingenerated significant revenue during the early periods of the agreement and revenue that is greater than the contractual invoices and cash receipts in the later years of the agreement. As a result of the revenue recognition under these contracts, amounts invoiced under the contracts exceeded the amount of revenue that we recognized by about $1.8 million for the nine-months ended September 30,first quarter 2007. We may decide to enter into similar arrangements with other EFT Processing Segment customers.
Average monthly revenuesrevenue per ATM was $1,558$1,430 for the thirdfirst quarter 2008, compared to $1,550 for the first quarter 2007 and $1,562 for the nine-months ended September 30, 2007 compared to $1,618 for the third quarter 2006 and $1,647 for the nine-months ended September 30, 2006. Revenuesrevenue per transaction was $0.31$0.30 for both the thirdfirst quarter 2007 and nine-months ended September 30, 20072008, compared to $0.34$0.32 for the thirdfirst quarter 2006 and $0.35 for the nine-months ended September 30, 2006.2007. The decrease in revenues per ATM and revenues per transaction was due to the addition of ATMs where related revenue has not yet developed to mature levels, the impact of the contract extensions discussed abovein India and the addition of ATMs in IndiaChina, where revenues per ATM have been historically lower than Central and Eastern Europe generally due to lower labor costs.costs, and the reduction of revenue in Romania and our software business discussed above.

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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 cost of facilities for our processing centerscenters’ facility related costs and other processing center related expenses. The increase in direct operating cost for the nine-months ended September 30, 2007first quarter 2008, compared to the nine-months ended September 30, 2006first quarter 2007, is attributed to the increase in the number of ATMs under operation, the number of transactions processed and foreign currency translations to the U.S. dollar.operation.
Gross margin
Gross margin, which is calculated as revenues less direct operating costs, increased to $29.5$28.8 million for the thirdfirst quarter 2007 and $82.52008 from $25.1 million for the nine-months ended September 30, 2007 from $25.9 million forfirst quarter 2007. This increase is attributable to the third quarter 2006 and $74.6 million for the nine-months ended September 30, 2006.increase in revenues discussed above. Gross margin as a percentage of revenues was 61%57% for the nine-months ended September 30, 2007first quarter 2008 compared to 64%60% for the nine-months ended September 30, 2006.first quarter 2007. The slight decrease in gross margin as a percentage of revenues is due to the impact of accounting for certainthe contract renewalsextension in Romania and other fluctuations in revenuessoftware business discussed above, as well as the

18


increased contributions of our subsidiarysubsidiaries in India and China, which hashave historically earned a lower gross margin than our other operations.
Salaries and benefits
The increase in salaries and benefits for the nine-months ended September 30, 2007first quarter 2008 compared to the nine-months ended September 30, 2006first quarter 2007 was due to staffing costs to expandsupport growth in emerging markets, such as India, ChinaATMs managed and new European markets,transactions processed and additionalfor new products, such as POS, card processing and cross-border merchant processing and acquiring. Salaries and benefits also increased as a result of general merit increases awarded to employees and certain additional staffing requirements due to the larger number of ATMs under operation and transactions processed.employees. As a percentage of revenue, however, these costs remained relatively flat at 22%decreased to 20% of revenues for the nine-months ended September 30, 2007first quarter 2008 compared to 23%22% for the nine-months ended September 30, 2006.first quarter 2007.
Selling, general and administrative
The increasedecrease in selling, general and administrative expenses for the nine-months ended September 30, 2007,first quarter 2008 compared to the nine-months ended September 30, 2006, is primarily due to the $1.2 million loss recorded in the first quarter 2007 under an arbitral award grantedis due primarily to the first quarter 2007 $1.2 million arbitration loss awarded by a tribunal in Budapest, Hungary arising from a claim by a former cash supply contractor in Central Europe. The cash supply contractor claimed it provided us with cash during the fourth quarter 1999 and first quarter 2000 that was not returned. Excluding this loss, the $0.7 million increase in selling, general and administrative expenses was to support segment growth. Excluding the impact of the arbitration loss, as a percentage of revenues, these costs decreased slightly torevenue, selling, general and administrative expenses were flat at 9% of revenues for both the nine-months ended September 30, 2007 from 10% of revenues for the nine-months ended September 30, 2006.first quarter 2008 and first quarter 2007.
Depreciation and amortization
The increase in depreciation and amortization expense for the nine-months ended September 30, 2007first quarter 2008 compared to the nine-months ended September 30, 2006first quarter 2007 is due primarily to additional ATMs in Poland, India and China, additional equipment and software for the expansion of our Hungarian processing center incurred during 2006, additional ATMs in Poland and India and additional software amortization recorded byrelated to our Essentis software product. As a percentage of revenue, these expenses remainedwere flat at 9% of revenues10% for both the nine-months ended September 30, 2007first quarters 2008 and 2006.2007.
Operating income
Operating income increased slightly for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006. This increase includes the arbitration loss described under selling, general and administrative expenses above. Excluding the arbitration loss: theThe increase in operating income forwas primarily due to the segment is generally the result of increasedincreases in revenues and gross margin described above combined with leveraging certain management cost structures; and the impact of the first quarter 2007 arbitration loss. Excluding the impact of the arbitration loss from the first quarter 2007, operating income as a percentage of revenues was 20% for the nine-months ended September 30, 2007first quarter 2008 was 18%, compared to 22%19% for the nine-months ended September 30, 2006first quarter 2007, and operating income per transaction was $0.05 for the first quarter 2008, compared to $0.06 per transaction for the nine-months ended September 30, 2007 compared to $0.08 per transaction for the nine-months ended September 30, 2006. Also excluding the arbitration loss, average monthly operating income per ATM was $318 for the nine-months ended September 30, 2007 compared to $366 for the nine-months ended September 30, 2006.first quarter 2007. The decreases in operating income as a percentagepercent of revenue,revenues and operating income per transaction are due to the contract extension in Romania and average monthlythe reduced revenues recorded by our software business discussed above. Additionally, the first quarter 2008 includes approximately $0.4 million in operating income perlosses incurred to develop processing systems and capabilities in preparation for our entry into the cross-border merchant acquiring business.
Expiration of contract
In January 2003, we sold 100% of our shares in our U.K. subsidiary, Euronet Services (U.K.) Ltd. (“Euronet U.K.”), to Bridgepoint Capital Limited (“Bridgepoint”), which subsequently became Bank Machine Limited (“Bank Machine”). Simultaneous with this transaction, Euronet and Bank Machine signed an ATM were generallyand Gateway Services Agreement (the “Services Agreement”) under which a wholly-owned subsidiary of Euronet provided ATM operating, monitoring, and transaction processing services to Bank Machine through December 31, 2007. Management allocated $4.5 million of the total sale proceeds to the Services Agreement, which was recorded as revenues on a straight-line basis over the five-year contract term. During the first quarter 2008, the Service Agreement expired and was not renewed. As a result of this development, beginning in the decreases in gross margin, revenues per ATM and revenues per transaction described above.
Forsecond quarter 2008, the nine-months ended September 30, 2007 and 2006, operating income includes $0.9 million and $1.0 million, respectively, in losses associated with expanding operations for the Company’s 75% owned joint venture in China. As of September 30, 2007, we have deployed and are providing all of the day-to-day outsourcing services for over 100 ATMs. Under current agreements, we expect that the total number of ATMs in China deployedoperated, quarterly revenue and quarterly operating income for which wethe EFT Processing Segment will be providing day-to-day outsourcing services will increase to over 800 during the next 12 to 18 months.decrease by approximately 2,400 ATMs, $0.8 million and $0.8 million, respectively.

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Software sales backlog
As of September 30, 2007, we had a software contract backlog of approximately $7.0 million compared to approximately $10.3 million as of September 30, 2006. Such backlog represents software sales based on signed contracts under which we continue to have performance milestones before the sale will be completed. We recognize revenue on a percentage of completion method, based on certain milestone conditions, for our software solutions. As a result, we have not recognized all the revenues associated with these sales contracts. We cannot give assurances that the milestones under the contracts will be completed or that we will be able to recognize the related revenue within the next year.
PREPAID PROCESSING SEGMENT
The following table presents the results of operations for the three- and nine-monththree-month periods ended September 30,March 31, 2008 and 2007 and 2006 for our Prepaid Processing Segment:
                                 
  Results for the Three          Results for the Nine    
  Months Ended September          Months Ended September    
  30,  Year-over-Year Change  30,  Year-over-Year Change 
          Increase  Increase          Increase  Increase 
(dollar amounts in thousands) 2007  2006  Amount  Percent  2007  2006  Amount  Percent 
Total revenues $144,631  $120,240  $24,391   20% $414,442  $343,957  $70,485   20%
                           
                                 
Operating expenses:                                
Direct operating costs  118,038   97,294   20,744   21%  337,516   276,708   60,808   22%
Salaries and benefits  7,081   5,488   1,593   29%  20,486   17,038   3,448   20%
Selling, general and administrative  4,879   4,338   541   12%  14,845   12,048   2,797   23%
Depreciation and amortization  4,230   3,559   671   19%  11,976   10,523   1,453   14%
                           
                                 
Total operating expenses  134,228   110,679   23,549   21%  384,823   316,317   68,506   22%
                           
                                 
Operating income $10,403  $9,561  $842  9% $29,619  $27,640  $1,979   7%
                           
                                 
Transactions processed (in millions)  162.4   121.7   40.7   33%  462.1   325.8   136.3   42%
Effective in the second quarter 2007, as a result of the acquisition of RIA, the Company established the Money Transfer Segment. The Company’s previous money transfer business was relatively insignificant and was reported and managed as part of the Company’s Prepaid Processing Segment. We have adjusted previously reported amounts to reflect the reclassification of the money transfer business from the Prepaid Processing Segment to Money Transfer Segment for all periods presented.
                 
  Three Months Ended    
  March 31,  Year-over-Year Change 
          Increase  Increase 
(dollar amounts in thousands) 2008  2007  Amount  Percent 
Total revenues $144,225  $127,581  $16,644   13%
              
                 
Operating expenses:                
Direct operating costs  117,856   103,230   14,626   14%
Salaries and benefits  6,568   6,385   183   3%
Selling, general and administrative  5,275   4,577   698   15%
Depreciation and amortization  4,192   3,873   319   8%
              
                 
Total operating expenses  133,891   118,065   15,826   13%
              
                 
Operating income $10,334  $9,516  $818   9%
              
                 
Transactions processed (millions)  167.3   139.4   27.9   20%
Revenues
The increase in revenues for the nine-months ended September 30, 20072008 compared to the nine-months ended September 30, 20062007 was generally attributable to: (i)to the increase in total transactions processed across all of our Prepaid Processing Segment operations, (ii)particularly Australia and Poland, and additional revenue from Omega Logic Ltd. (“Omega Logic”) which was acquired in February 2007. Additionally, for the first quarter 2008 the U.S. dollar has weakened compared to the first quarter 2007 acquisitions of Omega Logic and Brodos Romania, and (iii) foreign currency translationsrelative to the currencies of most of the countries in which we operate. Because our revenues are recorded in the functional currencies of our operating entities, amounts we earn in foreign currencies are positively impacted by the weakening of the U.S. dollar. The acquisitions of Omega Logic and Brodos Romania contributed revenues of $13.6 million for the third quarter 2007 and $32.3 million for the nine-months ended September 30, 2007. Revenue growth was partially offset by reduced revenues in Spain resulting from the second quarter 2006 expiration of a preferential commission arrangement with a Spanish mobile operator. Additionally, in
In certain more mature markets, such as the U.K., Australia, New Zealand and Spain, our revenue growth has slowed substantially and, in some cases, revenues have decreased because conversion from scratch cards to electronic top-up is substantially complete and certain mobile operators and retailers are driving competitive reductions in pricing and margins. We expect most of our future revenue growth to be derived from: (i) developing markets or markets in which there is organic growth in the prepaid sector overall, (ii) from continued conversion from scratch cards to electronic top-up in less mature markets, (iii) from additional products sold over the base of prepaid processing terminals, and (iv) possibly from acquisitions.
Revenues per transaction decreased to $0.89$0.86 for the thirdfirst quarter 2007 and $0.902008 from $0.92 for the nine-months ended September 30,first quarter 2007 from $0.99 for the third quarter 2006 and $1.06 for the nine-months ended September 30, 2006 due primarily to the growth in revenues and transactions recorded by our ATX subsidiary, which is 51% Euronet-owned. In accordance with U.S. GAAP, ATX is consolidated and the amounts in our financial statements and in the table above reflect 100% of ATX. Results attributable to the 49% minority owner are reflected in the minority interest line of our consolidated statements of income and comprehensive income.subsidiary. ATX provides only transaction processing services without significant direct costs and other operating costs generally associated with installing and managing terminals; therefore, the revenue we recognize from these transactions is a fraction of that recognized on average transactions but with very low cost. Transaction volumes atfor ATX havein the first quarter 2008 increased by approximately 140% for the nine-months ended September 30, 2007over 50% compared to the same period in 2006. The expiration of preferential commission arrangements in Spain discussed above also contributed to the decrease in revenues per transaction.first quarter 2007. Partially offsetting the decreases described abovethis decrease was the growth in both volumes

24


and revenues in Australia and the U.S., which generally have higher revenues per transaction, but also pay higher commission rates to retailers, than our other Prepaid Processing subsidiaries.
Direct operating costs
Direct operating costs in the Prepaid Processing Segment include the commissions we pay to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, as well as expenses required to operate POS terminals. Because of their nature, these expenditures generally fluctuate directly with revenues and processed transactions. The increase in direct operating costs is generally attributable to the increase in total transactions processed and foreign currency translations to the U.S. dollar compared to the prior year.
Gross margin
Gross margin, which represents revenues less direct costs, was $26.6$26.4 million for the thirdfirst quarter 2007 and $76.92008 compared to $24.4 million for the nine-months ended September 30, 2007 compared to $22.9 million for the thirdfirst quarter 2006 and $67.2 million for the nine-months ended September 30, 2006.2007. Gross margin as a percentage of revenues was relatively flat atdecreased slightly to 18% for the first quarter 2008 compared to 19% for the nine-months ended September 30,

20


first quarter 2007 compared to 20% for the nine-months ended September 30, 2006. Grossand gross margin per transaction wasalso decreased slightly to $0.16 for the thirdfirst quarter 2007 and2008 compared to $0.17 for the nine-months ended September 30, 2007 compared to $0.19 for the thirdfirst quarter 2006 and $0.21 for the nine-months ended September 30, 2006. Most2007. The primary cause of the reduction in gross margin per transaction is due to the growth of revenues and transactions at our ATX subsidiary the expiration of preferential commission arrangements in Spain discussed above and the general maturity of the prepaid mobile airtime business in many of our markets.
Salaries and benefits
The increase in salaries and benefits for the nine-months ended September 30, 2007first quarter 2008 compared to the nine-months ended September 30, 2006first quarter 2007 is primarily the result of the acquisitions of Brodos Romania and Omega Logic, as well as additional overhead to support development in other new and growing markets.markets, particularly in Italy. As a percentage of revenue, salaries and benefits have decreased slightly to 4.9%4.6% for the nine-months ended September 30, 2007,first quarter 2008 from 5.0% for the same period in 2006.first quarter 2007.
Selling, general and administrative
The increase in selling, general and administrative expenses for the nine-months ended September 30, 2007first quarter 2008 compared to the nine-months ended September 30, 2006first quarter 2007 is the result of the acquisitions of Brodos Romania and Omega Logic, as well as additional overhead to support development in other new and growing markets. As a percentage of revenues, these selling, general and administrative expenses increased slightlyremained relatively flat at 3.7% for first quarter 2008 compared to 3.6% for the nine-months ended September 30, 2007 from 3.5% for the nine-months ended September 30, 2006.first quarter 2007.
Depreciation and amortization
Depreciation and amortization expense primarily represents amortization of acquired intangibles and the depreciation of POS terminals we install in retail stores. The increase in depreciationDepreciation and amortization expense remained relatively flat for the nine-months ended September 30, 2007first quarter 2008, compared to the nine-months ended September 30, 2006 was primarily due to the acquisitions of Brodos Romaniafirst quarter 2007 and, Omega Logic. Asas a percentage of revenues, depreciation and amortization decreased slightly to 2.9% for the nine-months ended September 30, 2007first quarter 2008 from 3.1%3.0% for the nine-monthsfirst quarter 2007.
Goodwill and acquired intangible translation adjustment
During the third quarter 2007, we corrected an immaterial error related to foreign currency translation adjustments for goodwill and acquired intangible assets recorded in connection with acquisitions completed during periods prior to 2007. The impact of this correction on the Prepaid Processing Segment was to increase depreciation and amortization expense and decrease operating income by $0.2 million for the three months ended September 30, 2006.March 31, 2007.
Operating income
The improvement in operating income for the nine-months ended September 30, 2007first quarter 2008 compared to the nine-months ended September 30, 2006first quarter 2007 was due to the significant growth in revenues and transactions processed and the benefit of foreign currency translations to the U.S. dollar, partially offset by the impact of the events in Spain discussed above and the costs of development in Italy and other new and growing markets.
Operating income as a percentage of revenues was 7.2% for the thirdfirst quarter 2007 and 7.1%2008 compared to 7.5% for the nine-months ended September 30, 2007 compared to 8.0% for both the thirdfirst quarter 2006 and the nine-months ended September 30, 2006.2007. The decreases aredecrease is primarily due to the eventsdecreases in Spaingross margin described above and operating expenses incurred to support development in new and growing markets. Operating income per transaction was $0.06 for both the thirdfirst quarter 2007 and nine- months ended September 30, 20072008 compared to $0.08$0.07 for both the thirdfirst quarter 2006 and nine-months ended September 30, 2006.2007. The decrease in operating income per transaction is due to the eventsdecreases in Spaingross margins described above and the growth in revenues and transactions at our ATX subsidiary, partially offset by the benefit of foreign currency translations to the U.S. dollar.subsidiary.

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MONEY TRANSFER SEGMENT
The Money Transfer Segment was established during April 2007 with the acquisition of RIA, which is more fully described in Note 4 — Acquisitions, to the unaudited consolidated financial statements included in this report.RIA. To assist in betterwith understanding the results of the Money Transfer Segment, unaudited pro forma results have been provided as if RIA’s results were included in our consolidated results of operations beginning January 1, 2006.2007. Because our results of operations for the three- and nine-month periodsthree months ended September 30, 2006March 31, 2007 were insignificant, and fluctuations when compared to the three- and nine-month periodsthree months ended September 30, 2007March 31, 2008 are nearly entirely due to the acquisition of RIA, the following discussion and analysis will focus on pro forma results of operations. The pro forma financial information is not intended to represent, or be indicative of, the consolidated results of operations or financial condition that would have been reported had the RIA acquisition been completed as of the beginning of the periods presented. Moreover, the pro forma financial information should not be considered as representative of our future consolidated results of operations or financial condition. The following tables present the actual and pro forma results of operations for the three- and nine-monththree-month periods ended September 30,March 31, 2008 and 2007 and 2006 for the Money Transfer Segment:
                        
 As Reported             
 Results for the Three Year-over- Results for the Nine Year-over-  As Reported 
 Months Ended September 30, Year Change Months Ended September 30, Year Change  Three Months Ended March 31, Year-over- 
 Increase Increase  Year 
(dollar amounts in thousands) 2007 2006 Amount 2007 2006 Amount  2008 2007 Increase 
Total revenues $53,573 $874 $52,699 $103,581 $2,303 $101,278  $52,332 $789 $51,543 
                    
  
Operating expenses:  
Direct operating costs 28,397 520 27,877 55,303 1,363 53,940  26,345 511 25,834 
Salaries and benefits 10,784 631 10,153 21,207 1,570 19,637  11,757 590 11,167 
Selling, general and administrative 6,777 455 6,322 14,047 1,128 12,919  7,452 451 7,001 
Depreciation and amortization 4,205 106 4,099 9,101 259 8,842  4,827 104 4,723 
                    
  
Total operating expenses 50,163 1,712 48,451 99,658 4,320 95,338  50,381 1,656 48,725 
                    
  
Operating income (loss) $3,410 $(838) $4,248 $3,923 $(2,017) $5,940  $1,951 $(867) $2,818 
                    
  
Transactions processed (in millions) 4.0 0.1 3.9 7.9 0.2 7.7 
Transactions processed (millions) 3.8 0.1 3.7 
                                
 Pro Forma
 Results for the Three Results for the Nine   
 Months Ended Months Ended                   
 September 30, Year-over-Year Change September 30, Year-over-Year Change  Pro Forma 
 Increase Increase Increase Increase  Three Months Ended March 31, Year-over-Year Change 
 (Decrease) (Decrease)      Increase Increase 
(dollar amounts in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent  2008 2007 Amount Percent 
Total revenues $53,573 $47,182 $6,391  14% $149,770 $134,910 $14,860  11% $52,332 $44,505 $7,827  18%
                    
  
Operating expenses:  
Direct operating costs 28,397 24,889 3,508  14% 80,097 72,060 8,037  11% 26,345 24,067 2,278  9%
Salaries and benefits 10,784 9,202 1,582  17% 31,535 27,004 4,531  17% 11,757 9,928 1,829  18%
Selling, general and administrative 6,777 6,528 249  4% 20,049 19,496 553  3% 7,452 6,591 861  13%
Depreciation and amortization 4,205 4,311  (106)  (2%) 13,131 12,677 454  4% 4,827 4,306 521  12%
                    
  
Total operating expenses 50,163 44,930 5,233  12% 144,812 131,237 13,575  10% 50,381 44,892 5,489  12%
       ��              
  
Operating income $3,410 $2,252 $1,158  51% $4,958 $3,673 $1,285  35%
Operating income (loss) $1,951 $(387) $2,338 n/m 
                    
 
Transactions processed (millions) 3.8 3.4 0.4  12%

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Comparison of pro forma operating results
During the second quarter 2007, we combined our previous money transfer business with RIA and incurred total exit costs of $0.9 million. These costs represented the accelerated depreciation and amortization of property and equipment, software and leasehold improvements that were disposed of during the second quarter 2007; the write off of marketing materials and trademarks that have been discontinued or will not be used; the write off of accounts receivable from agents that did not meet RIA’s credit requirements; and severance and retention payments made to certain employees. These exit costs are not included in pro-forma operating expenses in the above table.
n/m- Not meaningful.
Revenues
Revenues from the Money Transfer Segment include a transaction fee for each transaction as well as the difference between purchasing currency at wholesale exchange rates and selling the currency to customers at retail exchange rates. OnPro forma revenue per transaction increased to $13.77 for the first quarter 2008 from $13.09 for the first quarter 2007. The growth rate of revenues exceeded the transaction growth rate largely as a historical basis, about 75%result of our Money Transfer Segment revenues are derivedthe strong increase in transfers from transaction fees, about 25% is derived from the foreign currency spread and other small amounts of non-U.S. locations which generally have higher-than-average

22


revenue are derived from sources such as fees for cashing checks, issuing money orders and processing bill payments.per transaction. For the nine-months ended September 30, 2007, 74%first quarter 2008, 70% of our money transfers were initiated in the U.S., 22%28% in Europe and 4%2% in other countries, such as Canada Australia and the Dominican Republic. For the nine-months ended September 30, 2006,Australia. This compares to 80% of our money transfers were initiated in the U.S., 15%19% initiated in Europe and 5%1% initiated in other countries.countries for the first quarter 2007. We expect that the U.S. will continue to represent our highest volume market; however, significant future growth is expected to be derived from non-U.S. initiated sources.
The increase in pro forma revenues for 2007the first quarter 2008 compared to 2006the first quarter 2007 is primarily due to an increase in the number of transactions processed of 15% forprocessed. For the thirdfirst quarter 2007 compared to the third quarter 2006 and an increase of 11% for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006. On a year-to-date basis,2008, money transfers to Mexico, which represented approximately 40%33% of total money transfers, decreased by 1.6%9%, while transfers to all other countries increased 22% when compared to the prior year.first quarter 2007 due to the expansion of our operations and continued growth in immigrant worker populations. The decline in transfers to Mexico was largely the result of immigration developments, downturns in certain labor markets and other economic factors impacting the U.S. market. 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. During the third quarter 2007, however, total money transfers to Mexico slightly exceeded total money transfers to Mexico during the third quarter 2006.
Direct operating costs
Direct operating costs in the Money Transfer Segment primarily represent commissions paid to agents that originate money transfers on our behalf and distribution agents that disburse funds to the customers’ destination beneficiary, together with less significant costs, such as telecommunication and bank fees to collect money from originating agents. Direct operating costs generally increase or decrease by a similar percentage as revenues.transactions.
Gross margin
Pro forma gross margin, which represents revenues less direct costs, was $25.2$26.0 million for the thirdfirst quarter 2007 and $69.72008 compared to $20.4 million for the nine-months ended September 30, 2007 compared to $22.3 million for the thirdfirst quarter 2006 and $62.9 million for the nine-months ended September 30, 2006.2007. This improvement is primarily due to the growth in money transfer transactions and revenues discussed above. Despite the decrease in money transfers to Mexico, the related gross margin slightly increased as we largely avoided lowering prices. Pro forma gross margin as a percentage of revenues was 47%50% for both the nine-months ended September 30, 2007 and 2006.first quarter 2008 compared to 46% for the first quarter 2007.
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. Pro forma salaries and benefits expense for the nine-months ended September 30, 2007 increased as compared to the nine-months ended September 30, 2006 primarily due to overall Company growth. ProThe increase in pro forma salaries and benefits for 2006 also include costs associated with our previous money transfer business that generally have been eliminated from our cost structure beginning in the secondfirst quarter 2007.2008 compared to the first quarter 2007 is primarily to support expansion of the Company’s operations, primarily internationally.
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. Pro forma selling, general and administrative expenses for the nine-months ended September 30, 2007 were relatively flat compared to the nine-months ended September 30, 2006. However, the prior year pro forma results include costs associated with our previous money transfer business, which generally have been eliminated from our cost structure beginning in the second quarter 2007. Excluding the impact of these costs, theThe increase in pro forma selling, general and administrative expenses for 2007the first quarter 2008 compared to 2006the first quarter 2007 is due primarily to overall Company growth.support expansion of the Company’s operations, primarily internationally.

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Depreciation and amortization
Depreciation and amortization primarily represents amortization of acquired intangibles and also includes depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. The increase in pro forma depreciation and amortization for the nine-months ended September 30, 2007first quarter 2008 compared to the nine-months ended September 30, 2006first quarter 2007 is primarily due to additional computer equipment in our customer service centers and increased leasehold improvements, office equipment and computer equipment for expansion.expansion of our company stores.
Operating income
The increase in pro forma operating income for the nine-months ended September 30, 2007first quarter 2008 compared to the nine-months ended September 30, 2006first quarter 2007 is the result of increased pro forma revenues, without commensurate increases in pro forma operating expenses, as discussed in more detail in the sections above.

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CORPORATE SERVICES
The following table presents the operating expenses for the three- and nine-monththree-month periods ended September 30,March 31, 2008 and 2007 and 2006 for Corporate Services:
                                
 Results for the Three Results for the Nine   
 Months Ended Months Ended                   
 September 30, Year-over-Year Change September 30, Year-over-Year Change  Three Months Ended   
     Increase Increase  March 31, Year-over-Year Change 
 Increase Increase (Decrease) (Decrease)  Increase Increase 
(dollar amounts in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent  2008 2007 Amount Percent 
Salaries and benefits $3,956 $3,593 $363  10% $10,035 $10,913 $(878)  (8%) $4,461 $2,700 $1,761  65%
Selling, general and administrative 1,252 1,208 44  4% 3,279 2,995 284  9% 4,444 910 3,534  388%
Depreciation and amortization 402 56 346  618% 523 144 379  263% 294 60 234  390%
                    
 
Total operating expenses $5,610 $4,857 $753  16% $13,837 $14,052 $(215)  (2%) $9,199 $3,670 $5,529  151%
                    
Corporate operating expenses
Operating expenses for Corporate Services increased substantially for the first quarter 2008 compared to the first quarter 2007. The decreaseincrease in salaries and benefits compensation foris primarily the nine-months ended September 30, 2007 comparedresult of severance costs related to the nine-months ended September 30, 2006 was due primarily to lower incentive compensation accrualscertain senior level positions and the December 2006 resignation of our former President and Chief Operating Officer.overall Company growth. The increase in selling, general and administrative expenses was mainlydue primarily to the resultwrite-off of higher$3.0 million in professional fees and other expensessettlement costs associated with acquisitions that were not completed.our potential acquisition of MoneyGram. The increase in corporate depreciation and amortization is the result of amortization associated with the third quarter 2007 purchase of a Company-wide three-year Microsoftan enterprise-wide desk-top license.
OTHER INCOME (EXPENSE), NET
                                
 Results for the Three Results for the Nine                   
 Months Ended Months Ended    Three Months Ended   
 September 30, Year-over-Year Change September 30, Year-over-Year Change  March 31, Year-over-Year Change 
 Increase Increase Increase Increase  Increase Increase 
 (Decrease) (Decrease) (Decrease) (Decrease)  (Decrease) (Decrease) 
(dollar amounts in thousands) 2007 2006 Amount Percent 2007 2006 Amount Percent  2008 2007 Amount Percent 
Interest income $4,053 $3,682 $371  10% $12,494 $9,791 $2,703  28%  $3,826 $4,345 $(519)  (12%)
Interest expense  (7,474)  (3,802) 3,672  97%  (18,837)  (11,055) 7,782  70%   (6,867)  (3,581)  (3,286)  92%
Income from unconsolidated affiliates  (9) 197  (206)  (105%) 867 555 312  56%  243 240 3  1%
Impairment loss on investment securities  (17,502)   (17,502) n/m 
Loss on early retirement of debt  (411)   (411) n/m  (411)   (411) n/m   (155)   (155) n/m 
Foreign currency exchange gain, net 8,561 1,090 7,471 685% 10,302 5,420 4,882 90%  13,073 433 12,640  2919%
                
  
Total other income (expense) $4,720 $1,167 $3,553 304% $4,415 $4,711 $(296) (6%) $(7,382) $1,437 $(8,819) n/m 
                
 
n/m — Not meaningful.

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n/m- Not meaningful.
Interest income
Interest income was $12.5 million for the nine-months ended September 30, 2007 compared to $9.8 million for the nine-months ended September 30, 2006. The increasedecrease in interest income for the first quarter 2008 from the first quarter 2007 was primarily due to the $154.3 million of net proceeds from the private equity placement that was completed during March 2007 and cash generated from operations. We have also benefited from higher average interest rates during 2007 compared to 2006 due to the general risea decline in short-term interest rates as well asand a shiftdecrease in average cash balances on hand during the respective periods. Partly offsetting this decrease was the recognition of a portion of our investments from money market accounts$1.2 million in the first quarter 2008 for interest related to commercial paper.the federal excise tax refund recorded in the fourth quarter 2007.
Interest expense
Interest expense was $18.8 million for the nine-months ended September 30, 2007 compared to $11.1 million for the nine-months ended September 30, 2006. The increase in interest expense isfor the first quarter 2008 over the first quarter 2007 was primarily related to the additional borrowings to finance the April 2007 acquisition of RIA andRIA. We also incurred additional borrowings under the revolving credit facility to finance the working capital requirements of RIA, which comprises our newthe Money Transfer Segment. The RIA acquisition was completedWe 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. Additionally, the effective interest rate on April 4, 2007.our debt obligations increased in the first quarter 2008 compared to the first quarter 2007 as the interest rates on the term loan and revolving credit facility are substantially higher than the interest rates on the $315 million in outstanding convertible debentures.

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Income from unconsolidated affiliates
Income from unconsolidated affiliates increased for the nine-months ended September 30, 2007 compared to the nine-months ended September 30, 2006 because we recognized a gain of $0.4 million from the sale of our 8% ownership interest in CashNet Telecommunications Egypt SAE during the second quarter 2007. The remainder of income from unconsolidated affiliates represents the equity in income of our 40% equity investment in e-pay Malaysia.Malaysia which remained flat for the first quarter 2008 compared to the first quarter 2007.
Impairment loss on investment securities
During the first quarter 2008, the value of our investment in MoneyGram declined and the decline was determined to be other than temporary. Accordingly, we recognized a $17.5 million impairment loss.
Loss on early retirement of debt
Loss on early retirement of debt of $0.4$0.2 million for the nine-months ended September 30, 2007first quarter 2008 represents the pro-rata write-off of deferred financing costs associated with the portion of the $190 million term loan that was prepaid during 2007.the first quarter 2008. We expect to continue to prepay amounts outstanding under the term loan through available cash flows and, accordingly, recognizingrecognize losses on early retirement of debt for the pro-rata portion of unamortized deferred financing costs.
ForeignNet foreign currency exchange gain net
The re-measurement of assetsAssets and liabilities denominated in currencies other than the functionallocal currency of each of our subsidiaries givesgive 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. We recorded a net foreign currency exchange gain of $13.1 million in the first quarter 2008 and $0.4 million in the first quarter 2007. The foreign currency exchange gains recorded are a result of $10.3 millionthe impact of fluctuations in foreign currency exchange rates on the recorded value of these assets and $5.4 million duringliabilities. For the nine-months ended September 30, 2007 and 2006, respectively. The increase for the nine-months ended September 30, 2007first quarter 2008, compared to the nine-months ended September 30, 2006 is generally due to the weakening offirst quarter 2007, the U.S. dollar weakened against many ofmost European-based currencies, primarily the currencies of the countries in which we operate.euro and British pound, creating realized and unrealized foreign currency exchange gains.

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INCOME TAX EXPENSE
                 
  Results for the Three Months  Results for the Nine Months 
  Ended September 30,  Ended September 30, 
(dollar amounts in thousands) 2007  2006  2007  2006 
Income from continuing operations before income taxes and minority interest $23,154  $14,173  $50,536  $42,112 
Minority interest  (599)  (243)  (1,551)  (716)
             
Income from continuing operations before income taxes  22,555   13,930   48,985   41,396 
Income tax expense  6,634   3,599   15,451   10,712 
             
Income from continuing operations $15,921  $10,331  $33,534  $30,684 
             
Effective income tax rate  29.4%  25.8%  31.5%  25.9%
             
                 
Income from continuing operations before income taxes $22,555  $13,930  $48,985  $41,396 
Adjust: Foreign exchange gain, net  8,561   1,090   10,302   5,420 
             
Income from continuing operations before income taxes and foreign exchange gain, net $13,994  $12,840  $38,683  $35,976 
             
Effective income tax rate, excluding foreign exchange gain, net  47.4%  28.0%  39.9%  29.8%
             
We calculate ourThe effective tax rate, by dividing income tax expense by pre-tax book income including the effectafter consideration of minority interest. Ourinterest, was 264.3% and 29.9% for the three-month periods ended March 31, 2008 and 2007, respectively. The net loss for the first quarter 2008 reflects an unrealized capital loss of $17.5 million recorded in connection with our investment in MoneyGram, for which an associated tax benefit was not recorded because of the uncertainty surrounding our future ability to have offsetting capital gains.
Excluding the impact of this unrealized capital loss, the effective income tax rate was 31.5%50.8% for the nine-months ended September 30, 2007first quarter 2008, compared to 25.9%29.9% for the nine-months ended September 30, 2006. We are in a net operating loss position for our U.S. operations and, accordingly, have valuation allowances to reserve for deferred tax assets that are not considered more likely than not of realization. Therefore, we do not currently recognize the tax benefit or expense associated with foreign currency gains or losses incurred by our U.S. operations. Excluding foreign currency exchange translation results from pre-tax income, our effective tax rate was 39.9% for the nine-months ended September 30, 2007 and 29.8% for the nine-months ended September 30, 2006.
During the thirdfirst quarter 2007, our U.S. operations recognized significant realized and unrealized foreign currency gains. The impact of these gains, as well as the reversal of $2.7 million of valuation allowances for tax-planning strategies, reduced our remaining valuation allowances related to our U.S. operations to $0.1 million as of September 30, 2007. Consequently, should our U.S. operations generate pre-tax income for financial reporting purposes, including income from the recognition of additional foreign currency gains, we would be required to recognize tax expense on such income. For income tax purposes, however, the Company has approximately $114 million in net operating losses as of September 30, 2007 that will offset future taxable income and result in little or no cash taxes paid in the U.S. until the net operating losses have been fully utilized.
TheThis increase in the effective tax rate for the three- and nine-months ended September 30, 2007 comparedprimarily relates to the same periodsrecognition of deferred income tax expense in 2006, excludingthe U.S. attributable to pre-tax income generated by our U.S. operations from foreign currency gains and interest income earned on loans to foreign subsidiaries. For U.S. federal income tax purposes, however, we have significant net operating losses primarily relates tothat will offset taxable income generated in future periods from pre-tax income produced by our U.S. operations and the recognition of the future tax effects of temporary differences recorded as deferred tax liabilities. The first quarter 2008 effective tax rate was also unfavorably impacted by the acquisition of RIA, which operates in jurisdictions that have tax rates that are higher than our historical effective tax rate, and the recognition of significant deferred tax benefits for net operating losses in certain countries during 2006.
During the nine-months ended September 30, 2007, we recognized $3.7 million of non-cash deferred income tax expense related to the deduction of goodwill amortization expense for U.S. income tax purposes, a substantial portion of which relates to the acquisition of RIA. Goodwill arising from certain business combinations involving our U.S. operations is amortized for tax purposes over 15 years but not for financial reporting purposes. Accordingly, we are required to record deferred income tax expense and a deferred tax liability for the tax effect of the amortization expense deducted for U.S. tax purposes. Consistent with the associated goodwill, the deferred tax liability is deemed to have an indefinite life and will remain on the consolidated balance sheet unless there is an impairment of goodwill for financial reporting purposes or the related business entity is disposed. Because we have significant tax net operating losses in the U.S., SFAS No. 109, “Accounting for Income Taxes,” does not allow the deferred income tax expense and related deferred tax liability to be offset by the tax benefit generated from tax assets with definite lives when we have significant unrecognized tax net operating losses. Moreover, during the nine-months ended September 30, 2007, we reversed $2.7 million in valuation allowances on deferred tax assets related to U.S. Federal and state net operating losses. We concluded that it is more likely than not that the net deferred tax asset will be realized because we would employ tax-planning strategies to utilize our net operating losses prior to expiration in the event they were to expire.rate.
We determine income tax expense and remit income taxes based upon enacted tax laws and regulations applicable in each of the taxing jurisdictions where we conduct business. Based on our interpretation of such laws and regulations, and considering the evidence of available facts and circumstances and baseline operating forecasts, we have accrued the estimated tax effects of certain transactions, business ventures, contractual and organizational structures, projected business unit performance, and the estimated future reversal of timing differences. Should a taxing jurisdiction change its laws and regulations or dispute our conclusions, or should management become

30


aware of new facts or other evidence that could alter our conclusions, the resulting impact to our estimates could have a material adverse effect onto our consolidated financial statements.Consolidated Financial Statements.
DISCONTINUED OPERATIONS
In July 2002, we sold substantially all of the non-current assets and related capital lease obligations of our ATM processing business in France to Atos S.A. During the first quarter 2007, we received a binding French Supreme Court decision relating to a lawsuit in France that resulted in a cash recovery and gain of $0.3 million, net of legal costs. There were no related assets or liabilities held for sale at September 30, 2007March 31, 2008 or December 31, 2006.2007.
NET INCOME (LOSS)
We recorded a net loss of $6.8 million for the first quarter 2008 compared to net income of $33.9$9.5 million for the nine-months ended September 30, 2007 compared to $30.7 million for the nine-months ended September 30, 2006.first quarter 2007. As more fully discussed above, the increasedecrease of $3.2$16.3 million was primarily the result of the $17.5 million first quarter 2008 impairment loss on investment securities along with a $7.1 million increase in income tax expense, an increase in operating incomenet interest expense of $8.7 million, an increase in the net foreign currency exchange gain of $4.9 million, an increase in income from unconsolidated affiliates of $0.3$3.8 million and a gain from discontinued operations of $0.3

25


other items totaling $0.7 million. These increasesdecreases to net income were partially offset by an increase in net interest expenseforeign currency gains of $5.1 million, an increase in income tax expense of $4.7 million, a loss on early retirement of debt of $0.8$12.6 million and an increase in operating income attributable to minority interest of $0.8$0.2 million.
LIQUIDITY AND CAPITAL RESOURCES
Working capital
As of September 30, 2007,March 31, 2008, we had working capital, which is calculated as the difference between total current assets and total current liabilities, of $253.8$237.1 million, compared to working capital of $284.4$279.3 million as of December 31, 2006.2007. Our ratio of current assets to current liabilities was 1.50 at September 30, 2007,March 31, 2008, compared to 1.701.53 as of December 31, 2006.2007. The decrease in working capital and the reduction in the ratio of current assets to current liabilities werewas due primarily to the reduction inuse of cash of approximately $168.3 million for the acquisition of RIA, mostly offset by the proceeds from the private equity offering that we completed during March 2007. As of September 30, 2007, the net proceeds from the offering remained unused and included in unrestricted cash.to reduce debt outstanding.
We require substantial working capital to finance operations. RIA traditionallyThe Money Transfer Segment funds the correspondent distribution network before receiving the benefit of amounts are collected from customers by agents. Working capital needs increase due to weekends and international banking holidays. As a result, we may requirereport more or less working capital for RIAthe Money Transfer Segment based solely upon the fiscal period ending on a particular day. As of September 30, 2007, RIA’sMarch 31, 2008, working capital in the Money Transfer Segment was $30.9$55.0 million. We expect that RIA’s working capital needs will increase as we expand this business.
Operating cash flow
Cash flows provided by operating activities were $59.3$14.6 million for the nine-months ended September 30, 2007first quarter 2008 compared to $50.6$7.5 million for the nine-months ended September 30, 2006.first quarter 2007. The increase was primarily due to increased profitability and the increase in depreciation and amortization expense, which is a non-cash expense and added back to net income to reconcile to net cash provided by operating activities. This increase was partially offset due to fluctuations in working capital associated with the timing of the settlement process with mobile operators in the Prepaid Processing Segment and other net working capital changes.Segment.
Investing activity cash flow
Cash flows used inprovided by investing activities were $403.1 million for nine-months ended September 30, 2007, compared to $20.3$13.5 million for the nine-months ended September 30, 2006.first quarter 2008, compared to cash flows used of $46.3 million for the first quarter 2007. Our investing activities for the nine-months ended September 30, 2007 consistedfirst quarter 2008 include the return of $352.6 million in cash paid related to acquisitions, primarily RIA. We placed $26 million that was placed in escrow in the first quarter 2007 in connection with the agreement to acquire Envios de Valores La Nacional Corp. (“La Nacional”). See further discussion under “Other trendsOn January 10, 2008, we entered into a settlement agreement with La Nacional and uncertainties — Agreementits stockholder evidencing the parties’ mutual agreement not to acquireconsummate the acquisition, in exchange for payment by Euronet of a portion of the legal fees incurred by La Nacional” below. WeNacional. Investing activities also incurred $24.5include $10.9 million and $5.4 million for purchases of property and equipment software development and other long-term assets in the first quarter 2008 and 2007, respectively. Additionally, first quarter 2008 investing activities. Ourcash flows included a working capital settlement of $1.8 million paid to the sellers of RIA, compared to $15.0 million in investing activitiescash flows used for the nine-months ended September 30, 2006 include $2.3 million in cash paid for acquisitions of Omega Logic and $18.0 million for purchases of property and equipment, software development and other investing activities.Brodos SRL Romania during the first quarter 2007.

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Financing activity cash flowsflow
Cash flows fromused by financing activities were $269.3$62.6 million during the nine-months ended September 30, 2007first quarter 2008 compared to $1.7cash provided of $136.9 million during the nine-months ended September 30, 2006.first quarter 2007. Our financing activities for the nine-months ended September 30, 2007first quarter of 2008 consisted primarily of $190.0 million in proceeds from borrowings under our term loan agreement that were used to finance a portion of the acquisition of RIA and proceeds from the equity private placement and stock option exercises totaling $165.4 million. Partially offsetting these increases were net repayments and early retirements of debt obligations, including capital lease obligations, of $73.4 million, dividends paid to minority interest stockholders of $1.6 million and debt issuance costs associated with our new syndicated credit facility of $3.8$63.1 million. 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 nine-months ended September 30, 2007,first quarter 2008 we had a total of $639.1$23.5 million in borrowings and $687.5$74.1 million in repayments under our revolving credit facility. Additionally, we paid $0.5 million of scheduled repayments and $9.5 million of early repayments on our term loan in the first quarter 2008. We financed these net repayments through the release of escrow cash in connection with the agreement to acquire La Nacional discussed above, cash available from operations and cash on hand. Our financing activities for the nine-months ended September 30, 2006first quarter 2007 consisted primarily of proceeds from the exerciseequity private placement of stock options and employee share purchase of $12.5$159.4 million, partiallypartly offset by $22.0 million of net repayments of short-term borrowings, payments onobligations under revolving credit and capital lease obligationsarrangements and other$1.6 million of dividends paid to minority interest stockholders.
Expected future financing activities totaling $10.8 million.and investing cash requirements primarily depend on our acquisition activity and the related financing needs.
Other sources of capital
Credit FacilityIn connection with completingTo finance the acquisition of RIA discussed under “Opportunities and Challenges” above,in the second quarter 2007, 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% of the outstanding balance each year, with the remaining balance payable after seven years. We estimate that we will be able to repay the $190 million 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. Financing costs of $4.8 million have been deferred and are being amortized over the terms of the respective loans.

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The $100 million five-year revolving credit facility replaced the previouslyprevious existing revolving credit facility and bears interest at LIBOR or prime plus a margin that adjusts each quarter based upon our consolidated total debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio. We intend to use the revolving credit facility primarily to fund working capital requirements, which are expected to increase as a result of our recent acquisitions.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 date under our $140 million 1.625% Convertible Senior Debentures Due 2024 or our $175 million 3.5% 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 applicable convertible debentures while remaining in compliance with the financial covenants in the Credit Facility or (ii) we will have sufficient liquidity (as determined by the administrative agent and the lenders). The Credit Facility contains three financial covenants that become more restrictive through September 30, 2008: (1) total debt to EBITDA ratio, (2) senior secured debt to EBITDA ratio and (3) EBITDA to fixed charge coverage ratio. Because of the change to these covenants over time, in order to remain in compliance with our debt covenants we will be required to increase our EBITDA, repay debt, or both. 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 September 30, 2007,March 31, 2008, after making required repayments on the term loan of $1.0$1.9 million and voluntary prepayments of $24.0$34.1 million, we had borrowings of $165.0$154.0 million outstanding against the term loan. We had borrowings of $23.5$12.9 million and stand-by letters of credit of $35.5$27.3 million outstanding against the revolving credit facility. The remaining $41.0$59.8 million under the revolving credit facility ($66.084.8 million if the facility were increased to $125 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. Our weighted average interest rate under the revolving credit facility as of September 30, 2007March 31, 2008 was 8.2%9.1%.
Short-term debt obligations — Short-term debt obligations at March 31, 2008 consist primarilyonly of the current portion of$1.9 million annual repayment requirement under the term loan,loan. Certain of our subsidiaries also have available credit lines and overdraft facilities and short-term loans to support ATM cash needs and supplement short-term working capital requirements.requirements, when necessary. As of September 30, 2007, we had $5.5 million in short-term debt obligations, comprisedMarch 31, 2008, there were no borrowings outstanding against any of $3.6 million being used to fund short-term working capital requirements in the Czech Republic and Spain and $1.9 million for the 1% annual repayment under the term loan.
Our Prepaid Processing Segment subsidiaries in Spain enter into agreements with financial institutions to receive cash in advance of collections on customers’ accounts. These arrangements can be with or without recourse and the financial institutions charge the Spanish subsidiaries transaction fees and/or interest in connection with these advances. Cash received can be up to 40 days prior to the customer invoice due dates. Accordingly, the Spanish subsidiaries remain obligated to the banks on the cash advances until the underlying account receivable is ultimately collected. Where the risk of collection remains with Euronet, the receipt of cash continues to be carried on the consolidated balance sheet in each of trade accounts receivable and accrued expenses and other current liabilities. Amounts outstanding under these arrangements are generally $2 million or less.facilities.

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We believe that the short-term debt obligations can be refinanced aton terms acceptable to us. However, if acceptable refinancing options are not available, we believe that amounts due under these 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 at a conversion price of $40.48 per share upon the occurrence of certain events (relating to the closing prices of Euronet Common Stock exceeding certain thresholds for specified periods). We will pay contingent interest for the six-month period from October 15, 2012 through April 14, 2013 and for each six-month period thereafter from April 15 to October 14 or October 15 to April 14 if the average trading price of the debentures for the applicable five trading-day period preceding such applicable six-month interest period equals or exceeds 120% of the principal amount of the debentures. Contingent interest will equal 0.35% per annum of the average trading price of a debenture for such five trading-day 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. When due, these debentures can be settled in cash or Euronet Common Stock, at our option, at predetermined conversion rates.
We also have $140 million in principal amount of 1.625% Convertible Senior Debentures Due 2024 that are convertible into 4.2 million shares of Euronet Common Stock at a conversion price of $33.63 per share upon the occurrence of certain events (relating to the closing prices of Euronet Common Stock exceeding certain thresholds for specified periods). We will pay contingent interest for the six-month period from December 20, 2009 through June 14, 2010 and for each six-month period thereafter from June 15 to December 14 or December 15 to June 14 if the average trading price of the debentures for the applicable five trading-day period preceding such applicable six-month interest period equals or exceeds 120% of the principal amount of the debentures. Contingent interest will equal 0.30% per annum of the average trading price of a debenture for such five trading-day periods. The debentures may not be redeemed by us until December 20, 2009 but are redeemable at any time thereafter at par. Holders of the debentures have the option to require us to purchase their debentures at par on December 15, 2009, 2014 and 2019, and upon a change in control of the Company. When due, these debentures can be settled in cash or Euronet Common Stock, at our option, at predetermined conversion rates.
These terms and other material terms and conditions applicable to the convertible debentures are set forth in the indenture agreements governing these debentures.
Proceeds from issuance of shares and other capital contributions- We have established, and shareholders have approved, share compensation plans that allow the Company to make grants of restricted stock, or options to purchase shares of Common Stock, to certain current and prospective key employees, directors and consultants. During the nine-months ended September 30, 2007, 283,884 stock options were exercised at an average exercise price of $15.68, resulting in proceeds to us of approximately $4.5 million.
Other uses of capital
Payment obligations related to acquisitions- As partial consideration for the acquisition of RIA, we granted the sellers of RIA 3,685,098 contingent value rights (“CVRs”) and 3,685,098 stock appreciation rights (“SARs”). The 3,685,098 CVRs mature on October 1, 2008 and will result in the issuance of up to $20 million of additional shares of Euronet Common Stock or payment of additional cash, at our option, if the price of Euronet Common Stock is less than $32.56 on the maturity date. The 3,685,098 SARs entitle the sellers to acquire additional shares of Euronet Common Stock at an exercise price of $27.14 at any time through October 1, 2008. Combined, the CVRs and SARs, entitle the sellers are entitled to additional consideration of at least $20 million in Euronet Common Stock or cash. The SARS also provide potential additional value to the sellers for situations in which Euronet Common Stock appreciates beyond $32.56 per share prior

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to October 1, 2008, which is to be settled through the issuance of additional shares of Euronet Common Stock. These and other terms and conditions applicable to the CVRs and SARs are set forth in the agreements governing these instruments.
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 has disputed this conclusion and has initiated arbitration as provided for in the purchase agreement. A global public accounting firm has been engaged as an independent expert to review the results of the computation. Any additional payments, if ultimately determined to be owed the seller, will be recorded as additional goodwill and could be made in either cash of a combination of cash and Euronet 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, during 2009 and 2010, we would have to pay a total of $2.5 million in cash or 75,489 shares of Euronet Common Stock, at the option of the seller.
Leases- We lease ATMs and other property and equipment under capital lease arrangements and as of September 30, 2007 we owed $17.8 million under these arrangements. The majority of these lease agreements are entered into in connection with long-term outsourcing agreements where, generally, we purchase a bank’s ATMs and simultaneously sell the ATMs to an entity related to the bank and lease back the ATMs for purposes of fulfilling the ATM outsourcing agreement with the bank. We fully recover the related lease costs from the bank under the outsourcing agreements. Generally, the leases may be canceled without penalty upon reasonable notice in the unlikely

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event the bank or we were to terminate the related outsourcing agreement. We expect that, if terms were acceptable, we would acquire more ATMs from banks under such outsourcing and lease agreements.
Capital expenditures and needs- Total capital expenditures for the nine-months ended September 30, 2007first quarter 2008 were $27.0 million, of which $1.7 million were funded through capital leases.$11.7 million. These capital expenditures were primarily for the purchase of ATMs to meet contractual requirements in Poland, India and India,China, the purchase and installation of ATMs in key under-penetrated markets, the purchase of POS terminals for the Prepaid Processing and Money Transfer Segments, and office, and data center and company store computer equipment and software. We also incurred $3.0 million for a company-wide, three-year Microsoft license during the third quarter 2007. Included in capital expenditures for office and data center equipment and software, for the nine-months ended September 30, 2007 is approximately $3.3 million inincluding capital expenditures for the purchase and development of the necessary processing systems and capabilities to enter the cross-border merchant processing and acquiring business. Total capital expenditures for 20072008 are estimated to be approximately $30$35 million to $35$45 million.
In the Prepaid Processing Segment, approximately 93,00095,000 of the approximately 370,000394,000 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 Prepaid Processing 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 recently amended 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 insufficient to meet these obligations, we will seek to refinance our debt 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.
Litigation — During 2005, a former cash supply contractor in Central Europe (the “Contractor”) claimed that we owed approximately $2.0 million for the provision of cash during the fourth quarter 1999 and first quarter 2000 that had not been returned. This claim was made after the Company terminated its business with the Contractor and established a cash supply agreement with another supplier. In the first quarter 2006, the Contractor initiated legal action in Budapest, Hungary regarding the claim. In April 2007, an arbitration tribunal awarded the Contractor $1.0 million, plus $0.2 million in interest, under the claim, which was recorded as selling, general and administrative expenses of the Company’s EFT Processing Segment during the first quarter 2007 and paid in the second quarter 2007.
Contingencies
In addition to the La Nacional matter described below, from time to time we are a party to litigation arising in the ordinary course of its business. Currently, there are no legal proceedings arising in the ordinary course of our business that management believes, either individually or in the aggregate, would have a material adverse effect upon our consolidated results of operations or financial condition.
During 2006, the Internal Revenue Service announced that Internal Revenue Code Section 4251 (relating to telecommunications excise tax) will no longer apply to, among other services, prepaid mobile airtime such as the services offered by our Prepaid Processing Segment’s U.S. operations. Additionally, companies that paid this excise tax during the period beginning on March 1, 2003 and ending on July 31, 2006, are entitled to a credit or refund of amounts paid in conjunction with the filing of 2006 federal income tax returns. We have claimed a refund for amounts paid during this period and have been informed by the IRS that the refund is currently being examined.. Therefore, no amounts have been recorded for any potential recovery in the Consolidated Financial Statements, and no such amounts will be recorded until such time as the refund is considered “realizable” as stipulated under SFAS No. 5, “Accounting for Contingencies.”
Other trends and uncertainties
Agreement to acquire La Nacional — During January 2007, we signed a stock purchase agreement to acquire La Nacional, subject to regulatory approvals and other customary closing conditions. In connection with this agreement, in January 2007 we deposited $26 million in an escrow account created for the proposed acquisition. The escrowed funds can only be released by mutual agreement of the Company and La Nacional or through legal remedies available in the agreement.
On February 6, 2007, two employees of La Nacional working in different La Nacional stores were arrested for allegedly violating federal money laundering laws and certain state statutes. On April 5, 2007, we gave notice to the stockholders of La Nacional of the termination of the stock purchase agreement and requested the release of the $26 million held in escrow under the terms of the stock purchase agreement. La Nacional is contesting our request for release of the escrowed funds. While pursuing all legal remedies available to us, we are also engaged in negotiations to determine whether the dispute can be resolved through revised terms for the acquisition. We cannot predict when this dispute will be resolved or what the resolution may be.

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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 $3.3$5.6 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. MerchantThe cross-border merchant processing and acquiring business involves processing credit and debit card transactions that are made on POS terminals, including authorization, settlement, and processing of settlement files. It will involve the assumption of credit risk, as the principal amount of transactions will be settled to merchants before settlements are received from card associations. We expect to incur an additional $2.0$0.5 million to $2.5$1.0 million in capital expenditures associated with the development of the necessary systems and capabilities to enter this businessbusiness. We expect that are expectedthe necessary systems and capabilities will be completed and we will be processing transactions during the second quarter 2008. Additionally, we expect to be funded through cash generated from operations or, if necessary, amounts available on our revolving credit facility.incur approximately $5.0 million to $5.5 million in operating losses related to this product for the full year 2008.
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
We regularly grant guarantees of the obligations of our wholly-owned subsidiaries and we sometimes enter into agreements with unaffiliated third parties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms 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 September 30, 2007, other than the item listed below,March 31, 2008, there were no material changes from the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2006.2007. 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 September 30, 2007.
In connection with contracts with financial institutions that supply cash to ATMs in the EFT Processing Segment, the Company is responsible for the loss of network cash that, generally, is not recorded on the Company’s consolidated balance sheet, because the cash remains the property of the financial institutions while in the ATMs. As of September 30, 2007, the balance of ATM network cash for which the Company was responsible was $300 million. The Company maintains insurance policies to mitigate this exposure;
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations as of September 30, 2007:
                     
      Payments due by period 
      Less than 1          More than 5 
(in thousands) Total  year  1-3 years  4-5 years  years 
Long-term debt obligations, less current maturities, including interest $624,841  $22,089  $186,176  $43,427  $373,149 
Short-term debt obligations and current maturities of long-term debt obligations, including interest  5,924   5,924          
Estimated contingent acquisition obligations  22,500      21,250   1,250    
Obligations under capital leases  19,884   6,790   9,743   3,082   269 
Obligations under operating leases  59,064   14,900   26,518   13,222   4,424 
Vendor purchase obligations  7,105   5,732   872   488   13 
                
                     
Total $739,318  $55,435  $244,559  $61,469  $377,855 
                
For the purposes of the above table, our $140 million convertible debentures issued in December 2004 are considered due during 2009, and our $175 million convertible debentures issued in October 2005 are considered due during 2012, representing the first years in which holders have the right to exercise their put option. Additionally, the above table only includes interest on these convertible debentures up to these dates.
Estimated contingent acquisition obligations as of September 30, 2007 include: 1) $20 million in cash and/or Euronet Common Stock to be provided to the sellers of RIA upon the assumed settlement of the CVRs and SARs during October 2008; and 2) additionalMarch 31, 2008.

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considerationCONTRACTUAL OBLIGATIONS
As of March 31, 2008, there were no material changes from the disclosure relating to be settledcontractual obligations contained in cash or Euronet Common Stock thatour Annual Report on Form 10-K for the year ended December 31, 2007.
SUBSEQUENT EVENTS
During April 2008, we may haveentered into an amendment to pay during 2009 and 2010the Credit Facility to change, among other items, the definition of one of the financial covenants contained in the original agreement. We incurred costs of $0.6 million in connection with the acquisitionamendment, which will be recognized as additional interest expense over the remaining 48 month term of Brodos, totaling up to $2.5 million. See Note 4 — Acquisitions to the unaudited consolidated financial statements included elsewhere in this report for a more complete description of these acquisitions.
Purchase obligations include contractual amounts for ATM maintenance, cleaning, telecommunication and cash replenishment operating expenses. While contractual payments may be greater or less based on the number of ATMs and transaction levels, the purchase obligations listed above are estimated based on the current levels of such business activity.
Our total liability for uncertain tax positions under FIN 48 was $3.5 million as of September 30, 2007. We are not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, the Company does not expect a significant payment related to these obligations within the next year. See Note 14 — Income Taxes to the unaudited consolidated financial statements included elsewhere in this report for additional information.Credit Facility.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During 2005,In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“FASB”SFAS”) issuedNo. 161, “Disclosures about Derivative Instruments and Hedging Activities,” which requires enhanced disclosures about an exposure draft that would amendentity’s derivative and hedging activities, including: (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 141, “Business Combinations.” During redeliberations, the FASB has reaffirmed certain decisions including, among other things: 1) measuring133 and recognizing contingent consideration at fair value as of the acquisition dateits related interpretations, and recording adjustments to liabilities as adjustments in earnings; 2) identifiable intangible assets acquired in a business combination should be measured at a current exchange value rather than at(c) how derivative instruments and related hedged items affect an entity-specific value; 3) the acquiring company should measureentity’s financial position, financial performance, and recognize the acquiree’s identifiable assets and liabilities and goodwill in a step or partial acquisition at 100 percent of their acquisition date fair values; and 4) accounting for transaction related costs as expenses in the period incurred, rather than capitalizing these costs as a component of the respective purchase price. The FASB has not yet reaffirmed decisions on other items. The FASB expects to issue the final statement during the fourth quarter 2007, which will becash flows. This Statement is effective for usfinancial statements issued for fiscal years and interim periods beginning in 2009. If adopted, the changes described above, as well as other possible changes, would likely have a significant impact on the accounting treatment for acquisitions occurring on or after January 1, 2009.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASBNovember 15, 2008, with early application encouraged. This Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accountingencourages, but does not affect existing standards which require, assets or liabilities to be carriedcomparative disclosures for earlier periods at fair value. Under SFAS 159, a company may elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. Other eligible items include firm commitments for financial instruments that otherwise would not be recognized at inception and non-cash warranty obligations where a warrantor is permitted to pay a third party to provideinitial adoption. We are still evaluating the warranty goods or services. If the useimpact of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings and cannot be deferred, such as deferred financing costs. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the adoption of SFAS 159, changes in fair value are recognized in earnings. SFAS 159 will be effective beginning in our first quarter 2008. We are currently determining whether fair value accounting is appropriate for any of our eligible items and cannot estimateNo. 161; however, the impact if any, which SFAS 159 will have on our consolidated results of operations and financial condition.is not expected to be material.
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. 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;
business strategy;
government regulatory action;
technological advances; and
projected costs and revenues.
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;
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.

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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, 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, 2006 and Part II, Item 1A — Risk Factors of this report.2007.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk
As of March 31, 2008, our total debt outstanding was $498.5 million. Of this amount, $315 million, or 63% of our total debt obligations, relates to contingent convertible debentures having fixed coupon rates. Our $175 million contingent convertible debentures, issued in October 2005, accrue interest at a rate of 3.50% per annum. The $140 million contingent convertible debentures, issued in December 2004 accrue interest at a rate of 1.625% per annum. Based on quoted market prices, as of March 31, 2008, the fair value of our fixed rate convertible debentures was $276.8 million, compared to a carrying value of $315 million.
Through the use of interest rate swap agreements covering the period from June 1, 2007 to May 29, 2009, $50.0 million of our variable rate term debt has been effectively converted to a fixed rate of 7.3%. As of March 31, 2008, the unrealized loss on the interest rate swap agreements was $1.7 million. Interest expense, including amortization of deferred debt issuance costs, for our total $365 million in fixed

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rate debt totals approximately $13.8 million per year, or a weighted average interest rate of 3.8% annually. Additionally, approximately $16.6 million, or 3% of our total debt obligations, relate to capitalized leases with fixed payment and interest terms that expire between 2008 and 2013.
The remaining $116.9 million, or 23% 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 $2.0 million. This computation excludes the $50.0 million relating to the interest rate swap discussed above and the potential $150.0 million in potential expanded 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 interest rates.
Foreign currency exchange rate risk
For the nine-months ended September 30, 2007, 76%first quarter 2008, 75% of our revenues were generated in non-U.S. dollar countries compared to 84%83% for the nine-months ended September 30, 2006.first quarter 2007. The decrease in the percentage of revenues from non-U.S. dollar countries, compared to the prior year is due primarily to the second quarter 2007 acquisition of RIA, as well as increased revenues of our U.S.-based Prepaid Processing Segment operations. 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. WeAs of March 31, 2008, we estimate that depending on the net foreign currency working capital position at a selected point in time, a 10% fluctuation in these foreign currency exchange rates would have the combined annualized effect on reported net income and working capital of up to approximately $15$25 million to $20$30 million. This effect is estimated by segregating revenues, expenses and working capital by currency and applying a 10% currency depreciation and appreciationadjustment factor to theour non-U.S. dollar amounts.pre-tax results from operations, as well as all balance sheet, including intercompany accounts receivable or payable, items that require remeasurement into the respective functional currency. 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 have been positively impacted by the weakening of the U.S. dollar. Additionally, our debt obligations are primarily in U.S. 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 September 30, 2007,March 31, 2008, we had foreign currency forward contracts outstanding with a notional value of $41.0$52.9 million, primarily in euros that were not designated as hedges and mature in a weighted average of 6six days. The fair value of these forward contracts as of September 30, 2007March 31, 2008 was an unrealized loss of approximately $0.6$0.3 million, which was partially offset by the unrealized gain on the related foreign currency receivables.
Interest rate risk
In connection with completing the acquisition of RIA during the second quarter, we entered into a $290 million secured syndicated 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, which accrue interest at variable rates. This revolving credit facility replaces our $50 million revolving credit facility. The credit facility may be expanded by up to an additional $150 million in term loan and up to an additional $25 million for the revolving line of credit, subject to satisfaction of certain conditions including pro forma debt covenant compliance. This facility substantially increases our interest rate risk.
As of September 30, 2007, our total outstanding debt was $524.9 million. Of this amount, $315 million, or 60% of our total debt obligations, relates to contingent convertible debentures having fixed coupon rates. Our $175 million contingent convertible debentures, issued in October 2005, accrue interest at a rate of 3.50% per annum. The $140 million contingent convertible debentures, issued in December 2004 accrue interest at a rate of 1.625% per annum. Based on quoted market prices, as of September 30, 2007 the fair value of our fixed rate convertible debentures was $328.1 million, compared to a carrying value of $315 million.
Through the use of interest rate swap agreements covering the period from June 1, 2007 to May 29, 2009, $50.0 million of our variable rate term debt has been effectively converted to a fixed rate of 7.3%. As of September 30, 2007, the unrealized loss on the interest rate swap agreements was less than $0.6 million. Interest expense, including amortization of deferred debt issuance costs, for our total $365.0 million in fixed rate debt totals approximately $13.7 million per year, or a weighted average interest rate of 3.8% annually. Additionally, approximately $17.8 million, or 3% of our total debt obligations, relate to capitalized leases with fixed payment and interest terms that expire between 2007 and 2011.
The remaining $142.1 million, or 27% 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

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additional interest expense to the Company of approximately $2.1 million. This computation excludes the $50.0 million relating to the interest rate swap discussed above and the potential $150.0 million in potential expanded 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 interest rates.
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 September 30, 2007.March 31, 2008. 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 thirdfirst quarter 20072008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time a party to litigation arising in the ordinary course of its business.
The discussion in Part I, Item 1. Financial Statements, Note 12 — Commitments, Litigation and Contingencies to the unaudited consolidated financial statements included elsewhere in this report, regarding litigation is incorporated herein by reference.
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
You should carefully consider the risks described in Part I, Item 1A. Risk Factors in our Annual Report onForm 10-K for the fiscal year ended December 31, 20062007 as updated in our subsequent filings with the SEC including this Quarterly Report on Form 10-Q, before making an investment decision. The risks and uncertainties described in our Annual Report onForm 10-K, as updated by any subsequent Quarterly Reports onForm 10-Q, are not the only ones facing our 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 onForm 10-K, as updated by any subsequent Quarterly Reports onForm 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 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 and elsewhere in this Quarterly Report.our Form 10-K.
Other than as set forth below, thereThere have been no material changes from the risk factors previously disclosed in the Company’s Annual Report onForm 10-K for the year ended December 31, 2006,2007, as filed with the SEC.
Risks Related to Our Business
We may be required to prepay our obligations under the $290 million secured syndicated credit facility.
Prepayment in full of the obligations under the $290 million secured syndicated credit facility (the “Credit Facility”) may be required six months prior to any required repurchase date under our $140 million 1.625% Convertible Senior Debentures Due 2024 or our $175 million 3.5% 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 applicable convertible debentures while remaining in compliance with the financial covenants in the Credit Facility or (ii) we will have sufficient liquidity (as determined by the administrative agent and the lenders). Holders of the $140

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million 1.625% debentures have the option to require us to purchase their debentures at par on December 15, 2009, 2014 and 2019, and upon a change in control of the Company. Holders of the $175 million 3.50% 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.
The Credit Facility contains three financial covenants that become more restrictive between now and September 30, 2008, including: (1) total debt to EBITDA ratio, (2) senior secured debt to EBITDA ratio and (3) EBITDA to fixed charge coverage ratio. Because these covenant thresholds will become more restrictive through September 30, 2008, to remain in compliance with our debt covenants we will be required to increase EBITDA, repay debt, or both. We cannot assure you that we will have sufficient assets, liquidity or EBITDA to meet or avoid these obligations, which could have an adverse impact on our financial condition.
Increases in interest rates will adversely impact our results from operations.
We have entered into interest rate swap agreements covering the period from June 1, 2007 through May 29, 2009 for a notional amount of $50 million that effectively converts a portion of our $190 million variable rate term loan to a fixed interest rate of 7.3% per annum. For the remaining outstanding balance of the term loan, as well as borrowings incurred under our revolving credit facility and other variable rate borrowing arrangements, increases in variable interest rates will increase the amount of interest expense that we pay for our borrowings and have a negative impact on our results from operations.
If we are unable to maintain our money transfer agent network, our business may be adversely affected.
Our money transfer based revenue is primarily generated through our agent network. Transaction volumes at existing agent locations may increase over time and new agents provide us with additional revenue. If agents decide to leave our network or if we are unable to sign new agents, our revenue and profit growth rates may be adversely affected. Our agents are also subject to a wide variety of laws and regulations that vary significantly, depending on the legal jurisdiction. Changes in these laws and regulations could adversely affect our ability to maintain our agent network or the cost of providing money transfer services. In addition, agents may generate fewer transactions or less revenue due to various factors, including increased competition. Because our agents are third parties that may sell products and provide services in addition to our money transfer services, our agents may encounter business difficulties unrelated to the provision of our services, which may cause the agents to reduce their number of locations or hours of operation, or cease doing business altogether.
If consumer confidence in our money transfer business or brands declines, our business may be adversely affected.
Our money transfer business relies on consumer confidence in our brands and our ability to provide efficient and reliable money transfer services. A decline in consumer confidence in our business or brands, or in traditional money transfer providers as a means to transfer money, may adversely impact transaction volumes which would in turn be expected to adversely impact our business.
Our money transfer service offerings are dependent on financial institutions to provide such offerings.
Our money transfer business involves transferring funds internationally and is dependent upon foreign and domestic financial institutions, including our competitors, to execute funds transfers and foreign currency transactions. Changes to existing regulations of financial institution operations, such as those designed to combat terrorism or money laundering, could require us to alter our operating procedures in a manner that increases our cost of doing business or to terminate certain product offerings. In addition, as a result of existing regulations and/or changes to those regulations, financial institutions could decide to cease providing the services on which we depend, requiring us to terminate certain product offerings.
We are subject to the risks of liability for fraudulent bankcard and other card transactions involving a breach in our security systems, breaches of our information security policies or safeguards, as well as for ATM theft and vandalism.
We capture, transmit, handle and store sensitive information in conducting and managing electronic, financial and mobile transactions, such as card information and PIN numbers. These businesses involve certain inherent security risks, in particular the risk of electronic interception and theft of the information for use in fraudulent or other card transactions, by persons outside the Company or by our own employees. We incorporate industry-standard encryption technology and processing methodology into our systems and software, and maintain controls and procedures regarding access to our computer systems by employees and others, to maintain high levels of security. Although this technology and methodology decrease security risks, they cannot be eliminated entirely, as criminal elements apply increasingly sophisticated technology to attempt to obtain unauthorized access to the information handled by ATM and electronic financial transaction networks.
Any breach in our security systems could result in the perpetration of fraudulent financial transactions for which we may be found liable. We are insured against various risks, including theft and negligence, but such insurance coverage is subject to deductibles, exclusions and limitations that may leave us bearing some or all of any losses arising from security breaches.
We also collect, transfer and retain consumer data as part of our money transfer business. These activities are subject to certain consumer privacy laws and regulations in the U.S. and in other jurisdictions where our money transfer services are offered. We maintain technical

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and operational safeguards designed to comply with applicable legal requirements. Despite these safeguards, there remains a risk that these safeguards could be breached resulting in improper access to, and disclosure of, sensitive consumer information. Breaches of our security policies or applicable legal requirements resulting in a compromise of consumer data could expose us to regulatory enforcement action, subject us to litigation, limit our ability to provide money transfer services and/or cause harm to our reputation.
In addition to electronic fraud issues and breaches of our information security policies and safeguards, the possible theft and vandalism of ATMs present risks for our ATM business. We install ATMs at high-traffic sites and consequently our ATMs are exposed to theft and vandalism. Although we are insured against such risks, deductibles, exclusions or limitations in such insurance may leave us bearing some or all of any losses arising from theft or vandalism of ATMs. In addition, we have experienced increases in claims under our insurance, which has increased our insurance premiums.
Our money transfer and prepaid mobile airtime top-up businesses may be susceptible to fraud and/or credit risks occurring at the retailer and/or consumer level.
In our Prepaid Processing Segment, we contract with retailers that accept payment on our behalf, which we then transfer to a trust or other operating account for payment to mobile phone operators. In the event a retailer does not transfer to us payments that it receives for mobile airtime, we are responsible to the mobile phone operator for the cost of the airtime credited to the customer’s mobile phone. We can provide no assurance that retailer fraud will not increase in the future or that any proceeds we receive under our credit enhancement insurance policies will be adequate to cover losses resulting from retailer fraud, which could have a material adverse effect on our business, financial condition and results of operations.
With respect to our money transfer business, our business is primarily conducted through our agent network, which provides money transfer services directly to consumers at retail locations. Our agents collect funds directly from the consumers and in turn we collect from the agents the proceeds due us resulting from the money transfer transactions. Therefore, we have credit exposure to our agents. The failure of agents owing us significant amounts to remit funds to us or to repay such amounts could adversely affect our business, financial condition and results of operations.
We are subject to business cycles, seasonality and other outside factors that may negatively affect our business.
A recessionary economic environment or other outside factors could have a negative impact on mobile phone operators, retailers and our customers and could reduce the level of transactions, which could, in turn, negatively impact our financial results. If mobile phone operators and financial institutions experience decreased demand for their products and services or if the locations where we provide services decrease in number, we will process fewer transactions, resulting in lower revenue. In addition, a recessionary economic environment could reduce the level of transactions taking place on our networks, which will have a negative impact on our business.
Our experience is that the level of transactions on our networks is also subject to substantial seasonal variation. Transaction levels have consistently been much higher in the fourth quarter of the fiscal year due to increased use of ATMs, prepaid mobile airtime top-ups and money transfer services during the holiday season. Generally, the level of transactions drops in the first quarter, during which transaction levels are generally the lowest we experience during the year, which reduces the level of revenues that we record. Additionally, in the Money Transfer Segment, we experience increased transaction levels during the April through September timeframe coinciding with the increase in worker migration patterns. As a result of these seasonal variations, our quarterly operating results may fluctuate materially and could lead to volatility in the price of our shares.
Additionally, economic or political instability, civil unrest, terrorism and natural disasters may make money transfers to, from or within a particular country more difficult. The inability to timely complete money transfers could adversely affect our business.
Our operating results in the money transfer business depend in part on continued worker immigration patterns, our ability to expand our share of the existing electronic market and to expand into new markets and our ability to continue complying with regulations issued by the Office of Foreign Assets Control (“OFAC”), Bank Secrecy Act (“BSA”), Financial Crimes Enforcement Network (“FINCEN”), PATRIOT Act regulations or any other existing or future regulations that impact any aspect of our money transfer business.
Our money transfer business primarily focuses on workers who migrate to foreign countries in search of employment and then send a portion of their earnings to family members in their home countries. Our ability to continue complying with the requirements of OFAC, BSA, FINCEN, the PATRIOT Act and other regulations (both U.S. and foreign) is important to our success in achieving growth and an inability to do this could have an adverse impact on our revenues and earnings. Changes in U.S. and foreign government policies or enforcement toward immigration may have a negative affect on immigration in the U.S. and other countries, which could also have an adverse impact on our money transfer revenues.
Future growth and profitability depend upon expansion within the markets in which we currently operate and the development of new markets for our money transfer services. Our expansion into new markets is dependent upon our ability to successfully integrate RIA into our existing operations, to apply our existing technology or to develop new applications to satisfy market demand. We may not have

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adequate financial and technological resources to expand our distribution channels and product applications to satisfy these demands, which may have an adverse impact on our ability to achieve expected growth in revenues and earnings.
Developments in electronic financial transactions could materially reduce our transaction levels and revenues.
Certain developments in the field of electronic financial transactions may reduce the need for ATMs, prepaid mobile phone POS terminals and money transfer agents. These developments may reduce the transaction levels that we experience on our networks in the markets where they occur. Financial institutions, retailers and agents could elect to increase fees to their customers for using our services, which may cause a decline in the use of our services and have an adverse effect on our revenues. If transaction levels over our existing network of ATMs, POS terminals, agents and other distribution methods do not increase, growth in our revenues will depend primarily on increased capital investment for new sites and developing new markets, which reduces the margin we realize from our revenues.
The mobile phone industry is a rapidly evolving area, in which technological developments, in particular the development of new methods or services, may affect the demand for other services in a dramatic way. The development of any new technology that reduces the need or demand for prepaid mobile phone time could materially and adversely affect our business.
Because our business is highly dependent on the proper operation of our computer network and telecommunications connections, significant technical disruptions to these systems would adversely affect our revenues and financial results.
Our business involves the operation and maintenance of a sophisticated computer network and telecommunications connections with financial institutions, mobile operators, retailers and agents. This, in turn, requires the maintenance of computer equipment and infrastructure, including telecommunications and electrical systems, and the integration and enhancement of complex software applications. Our ATM segment also uses a satellite-based system that is susceptible to the risk of satellite failure. There are operational risks inherent in this type of business that can result in the temporary shutdown of part or all of our processing systems, such as failure of electrical supply, failure of computer hardware and software errors. Excluding Germany, transactions in the EFT Processing Segment are processed through our Budapest, Belgrade, Athens, Beijing and Mumbai operations centers. Transactions in the Prepaid Processing Segment are processed through our Basildon, Martinsried, Madrid and Leawood, Kansas operations centers. Transactions in our Money Transfer Segment are processed through our Cerritos, California operations center. Any operational problem in these centers may have a significant adverse impact on the operation of our networks. Even with disaster recovery procedures in place, these risks cannot be eliminated entirely and any technical failure that prevents operation of our systems for a significant period of time will prevent us from processing transactions during that period of time and will directly and adversely affect our revenues and financial results.
Our competition in the EFT Processing Segment, Prepaid Processing Segment and Money Transfer Segment include large, well financed companies and financial institutions larger than us with earlier entry into the market. As a result, we may lack the financial resources and access to capital needed to capture increased market share.
EFT Processing Segment— Our principal EFT Processing competitors include ATM networks owned by banks and national switches consisting of consortiums of local banks that provide outsourcing and transaction services only to banks and independent ATM deployers in that country. Large, well-financed companies offer ATM network and outsourcing services that compete with us in various markets. In some cases, these companies also sell a broader range of card and processing services than we, and are in some cases, willing to discount ATM services to obtain large contracts covering a broad range of services. Competitive factors in our EFT Processing Segment include network availability and response time, breadth of service offering, price to both the bank and to its customers, ATM location and access to other networks.
For our ITM product line, we are a leading supplier of electronic financial transaction processing software for the IBM iSeries platform in a largely fragmented market, which is made up of competitors that offer a variety of solutions that compete with our products, ranging from single applications to fully integrated electronic financial processing software. Additionally, for ITM, other industry suppliers service the software requirements of large mainframe systems and UNIX-based platforms, and accordingly are not considered competitors. We have specifically targeted customers consisting of financial institutions that operate their back office systems with the IBM iSeries. For Essentis, we are a strong supplier of electronic payment processing software for card issuers and merchant acquirers on a mainframe platform. Our competition includes products owned and marketed by other software companies as well as large, well financed companies that offer outsourcing and credit card services to financial institutions. We believe our Essentis offering is one of the few software solutions in this product area that has been developed as a completely new system, as opposed to a re-engineered legacy system, taking full advantage of the latest technology and business strategies available.
Our software solutions business has multiple types of competitors that compete across all EFT software components in the following areas: (i) ATM, network and POS software systems, (ii) Internet banking software systems, (iii) credit card software systems, (iv) mobile banking systems, (v) mobile operator solutions, (vi) telephone banking and (vii) full EFT software. Competitive factors in the software solutions business include price, technology development and the ability of software systems to interact with other leading products.
Prepaid Processing Segment— We face competition in the prepaid business in all of our markets. A few multinational companies operate in several of our markets, and we therefore compete with them in a number of countries. In other markets, our competition is from

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smaller, local companies. Major retailers with high volumes are in a position to demand a larger share of commissions, which may compress our margins.
Money Transfer Segment— Our primary competitors in the money transfer and bill payment business include other independent processors and electronic money transmitters, as well as certain major national and regional banks, financial institutions and independent sales organizations. Our competitors include Western Union, MoneyGram, Global Payments and others, some of which are larger than we are and have greater resources and access to capital for expansion than we have. This may allow them to offer better pricing terms to customers, which may result in a loss of our current or potential customers or could force us to lower our prices. Either of these actions could have an adverse impact on our revenues. In addition, our competitors may have the ability to devote more financial and operational resources than we can to the development of new technologies that provide improved functionality and features to their product and service offerings. If successful, their development efforts could render our product and services offerings less desirable, resulting in the loss of customers or a reduction in the price we could demand for our services. In addition to traditional money payment services, new technologies are emerging that may effectively compete with traditional money payment services, such as stored-value cards, debit networks and web-based services. Our continued growth depends upon our ability to compete effectively with these alternative technologies.
Because we derive our revenues from a multitude of countries with different currencies, our business is affected by local inflation and foreign currency exchange rates and policies.
We attempt to match any assets denominated in a currency with liabilities denominated in the same currency. Nonetheless, substantially all of our indebtedness is denominated in U.S. dollars, Euros and British pounds. While a significant amount of our cash outflows, including the acquisition of ATMs, executive salaries, certain long-term contracts and a significant portion of our debt obligations, are made in U.S. dollars, most of our revenues are denominated in other currencies. As exchange rates among the U.S. dollar, the euro, and other currencies fluctuate, the translation effect of these fluctuations may have a material adverse effect on our results of operations or financial condition as reported in U.S. dollars. Moreover, exchange rate policies have not always allowed for the free conversion of currencies at the market rate. Future fluctuations in the value of the dollar could have an adverse effect on our results.
Our Money Transfer Segment is subject to foreign currency exchange risks because our customers deposit funds in one currency at our retail and agent locations worldwide and we typically deliver funds denominated in a different, destination country currency. Although we use foreign currency forward contracts to mitigate a portion of this risk, we cannot eliminate all of the exposure to the impact of changes in foreign currency exchange rates for the period between collection and disbursement of the money transfers.
An additional 12.5 million shares of Common Stock, representing 26% of the shares outstanding as of September 30, 2007, could be added to our total Common Stock outstanding through the exercise of options or the issuance of additional shares of our Common Stock pursuant to existing convertible debt and other agreements. Once issued, these shares of Common Stock could be traded into the market and result in a decrease in the market price of our Common Stock.
As of September 30, 2007, we had an aggregate of 3.0 million options and restricted stock awards outstanding held by our directors, officers and employees, which entitles these holders to acquire an equal number of shares of our Common Stock upon exercise. Of this amount, 1.4 million options are vested and exercisable as of September 30, 2007. Approximately 0.3 million additional shares of our Common Stock may be issued in connection with our employee stock purchase plan. Another 8.5 million shares of Common Stock could be issued upon conversion of the Company’s Convertible Debentures issued in December 2004 and October 2005. Additionally, based on current trading prices for our Common Stock, we expect to issue approximately 0.7 million shares of our Common Stock to the sellers of RIA in settlement of the contingent value and stock appreciation rights.
Accordingly, based on current trading prices of our Common Stock, approximately 12.5 million shares could potentially be added to our total current Common Stock outstanding through the exercise of options or the issuance of additional shares, which could adversely impact the trading price for our stock. The actual number of shares issuable could be higher depending upon our stock price at the time of payment (i.e. more shares could be issuable if our share price declines).
Of the 3.0 million total options and restricted stock awards outstanding, an aggregate of 1.4 million options and restricted shares are held by persons who may be deemed to be our affiliates and who would be subject to Rule 144. Thus, upon exercise of their options or sale of shares for which restrictions have lapsed, these affiliates’ shares would be subject to the trading restrictions imposed by Rule 144. The remainder of the common shares issuable under option and restricted stock arrangements would be freely tradable in the public market. Over the course of time, all of the issued shares have the potential to be publicly traded, perhaps in large blocks.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITES AND USE OF PROCEEDS

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Stock repurchases
The following table sets forth information with respect to shares of Company Common Stock purchased by us during the three months ended September 30, 2007 (all purchases occurred during September 2007).
                 
          Total Number of  Maximum Number of 
      Average  Shares Purchased  Shares that May Yet 
  Total Number  Price Paid  as Part of Publicly  Be Purchased Under 
  of Shares  Per Share  Announced Plans  the Plans or 
Period Purchased (1)  (2)  or Programs  Programs 
September 1 - September 30  136  $26.19       
             
                 
Total  136  $26.19       
             
(1)For the three months ended September 30, 2007, the Company purchased, in accordance with the 2006 Stock Incentive Plan (Amended and Restated) 136 shares of its common stock for participant income tax withholding in conjunction with the lapse of restrictions on stock awards, as requested by the participants.
(2)The price paid per share is the closing price of the shares on the vesting date.
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
ExhibitDescription
3.1Amended and Restated Bylaws (filed as Exhibit 3.1A to Euronet’s Form 8-K filed on February 26, 2008 and incorporate by reference herein)
10.1Amendment No. 1 to the Credit Agreement dated April 23, 2008 (1)
10.2Amended and Restated Employment Agreement executed in March 2008 and effective April 25, 2008 between Euronet Worldwide, Inc. and Miro Bergman, Executive Vice President and Chief Operations Officer, Prepaid Processing Segment (1)(2)
10.3Amended and Restated Employment Agreement dated April 10, 2008 between Euronet Worldwide, Inc. and Michael J. Brown, Chairman and Chief Executive Officer (1)(2)
10.4Amended and Restated Employment Agreement dated April 10, 2008 between Euronet Worldwide, Inc. and Rick L. Weller, Executive Vice President and Chief Financial Officer (1)(2)
10.5Amended and Restated Employment Agreement dated April 10, 2008 between Euronet Worldwide, Inc. and Jeffrey B. Newman, Executive Vice President and General Counsel (1)(2)
10.6Amended and Restated Employment Agreement dated April 10, 2008 between Euronet Worldwide, Inc. and Juan C. Bianchi, Executive Vice President and Managing Director, Money Transfer Segment (1)(2)
12.1Computation of Ratio of Earnings to Fixed Charges (1)
31.1Section 302 — Certification of Chief Executive Officer (1)
31.2Section 302 — Certification of Chief Financial Officer (1)
32.1Section 906 Certification of Chief Executive Officer and Chief Financial Officer (1)
(1)Filed herewith.
(2)Management contracts and compensatory plans and arrangements required to be filed as Exhibits pursuant to Item 15(a) of this report.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
November 8, 2007
Euronet Worldwide, Inc.May 9, 2008
     
By: /s/ MICHAEL J. BROWN
 
  
  Michael J. Brown  
  Chief Executive Officer  
     
By: /s/ RICK L. WELLER
  
  Rick L. Weller  
  Chief Financial Officer  

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EXHIBITS
Exhibit Index
ExhibitDescription
4.1Form of Contingent Value Rights Agreement, entered into April 4, 2007 with each of the Irving Barr Living Trust and the Fred Kunik Family Trust, granting each contingent value rights associated with 1,842,549 shares of common stock (with an “Initial FMV” of $27.136333, a “Target FMV” of $32.563599 and “Nasdaq Cap” of 7,420,990 shares) (filed as Exhibit B to the Stock Purchase Agreement attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 28, 2006 and incorporated by reference herein).
4.2Form of Stock Appreciation Rights Agreement, entered into April 4, 2007 with each of the Irving Barr Living Trust and the Fred Kunik Family Trust, granting each stock appreciation rights with respect to 1,842,549 shares of common stock (with an “Initial Fair Market Value” of $27.136333 and “Nasdaq Cap” of 7,420,990 shares) (filed as Exhibit C to the Stock Purchase Agreement attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 28, 2006 and incorporated by reference herein).
12.1(1)Computation of Ratio of Earnings to Fixed Charges
31.1(1)Section 302 — Certification of Chief Executive Officer
31.2(1)Section 302 — Certification of Chief Financial Officer
32.1(1)Section 906 — Certifications of Chief Executive Officer and Chief Financial Officer
(1)Filed herewith.

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