10-Q

 
 
 
 
 
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, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
to
Commission File Number: 001-31648
EURONET WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware
74-2806888
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
Identification No.)
 
 
3500 College Boulevard
 
Leawood, Kansas
66211
(Address of principal executive offices)
(Zip Code)
(913) 327-4200
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
(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). Yes o No þ

On October 29, 2015, Euronet Worldwide, Inc. had 52,811,936 shares of Common Stock outstanding.
 
 
 
 
 


EURONET WORLDWIDE, INC. AND SUBSIDIARIES
Table of Contents
 
 
Page
 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 6.
 
 
 
 

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 
As of
 
September 30,
2015
 
December 31,
2014
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
528,834

 
$
468,010

Restricted cash
40,717

 
68,028

Inventory — PINs and other
56,391

 
85,675

Trade accounts receivable, net of allowances for doubtful accounts of $20,139 at September 30, 2015 and $20,546 at December 31, 2014
330,144

 
375,579

Prepaid expenses and other current assets
130,857

 
108,624

Total current assets
1,086,943

 
1,105,916

Property and equipment, net of accumulated depreciation of $240,057 at September 30, 2015 and $239,607 at December 31, 2014
149,506

 
125,307

Goodwill
686,359

 
599,863

Acquired intangible assets, net of accumulated amortization of $126,039 at September 30, 2015 and $113,153 at December 31, 2014
173,974

 
158,267

Other assets, net of accumulated amortization of $36,159 at September 30, 2015 and $30,276 at December 31, 2014
68,963

 
62,206

Total assets
$
2,165,745

 
$
2,051,559

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Trade accounts payable
$
388,323

 
$
445,984

Accrued expenses and other current liabilities
402,960

 
336,361

Current portion of capital lease obligations
1,905

 
2,216

Short-term debt obligations and current maturities of long-term debt obligations
12,303

 
11,156

Income taxes payable
14,549

 
19,248

Deferred revenue
30,609

 
33,916

Total current liabilities
850,649

 
848,881

Debt obligations, net of current portion
449,318

 
410,368

Capital lease obligations, net of current portion
4,005

 
2,148

Deferred income taxes
44,065

 
38,959

Other long-term liabilities
20,074

 
18,391

Total liabilities
1,368,111

 
1,318,747

Equity:
 
 
 
Euronet Worldwide, Inc. stockholders’ equity:
 
 
 
Preferred Stock, $0.02 par value. 10,000,000 shares authorized; none issued
—

 
—

Common Stock, $0.02 par value. 90,000,000 shares authorized; 57,707,721 issued at September 30, 2015 and 56,464,187 issued at December 31, 2014
1,154

 
1,129

Additional paid-in-capital
1,015,258

 
955,715

Treasury stock, at cost, 4,928,927 shares at September 30, 2015 and 4,867,420 shares at December 31, 2014
(138,182
)
 
(133,788
)
Retained earnings
70,940

 
5,619

Accumulated other comprehensive loss
(153,076
)
 
(97,922
)
Total Euronet Worldwide, Inc. stockholders’ equity
796,094

 
730,753

Noncontrolling interests
1,540

 
2,059

Total equity
797,634

 
732,812

Total liabilities and equity
$
2,165,745

 
$
2,051,559

See accompanying notes to the unaudited consolidated financial statements.

3
Table of Contents

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except share and per share data)
 
Three Months Ended
September 30,
 
 
Nine Months Ended
September 30,
 
2015
 
2014
 
 
2015
 
2014
Revenues
$
481,373

 
$
453,422

 
 
$
1,301,683

 
$
1,202,199

Operating expenses:
 
 
 
 
 
 
 
 
Direct operating costs
282,313

 
274,814

 
 
791,749

 
743,789

Salaries and benefits
67,070

 
64,587

 
 
192,158

 
178,529

Selling, general and administrative
43,723

 
43,968

 
 
116,373

 
117,820

Depreciation and amortization
17,993

 
19,321

 
 
51,786

 
52,819

Total operating expenses
411,099

 
402,690

 
 
1,152,066

 
1,092,957

Operating income
70,274

 
50,732

 
 
149,617

 
109,242

Other income (expense):
 
 
 
 
 
 
 
 
Interest income
539

 
797

 
 
1,642

 
1,956

Interest expense
(6,690
)
 
(3,046
)
 
 
(18,482
)
 
(7,476
)
Loss from unconsolidated affiliates
—

 
(33
)
 
 
—

 
(64
)
Foreign currency exchange loss, net
(16,010
)
 
(711
)
 
 
(34,066
)
 
(5,067
)
Other (losses) gains
(73
)
 
—

 
 
315

 
—

Other expense, net
(22,234
)
 
(2,993
)
 
 
(50,591
)
 
(10,651
)
Income before income taxes
48,040

 
47,739

 
 
99,026

 
98,591

Income tax expense
(16,716
)
 
(12,830
)
 
 
(34,056
)
 
(27,261
)
Net income
31,324

 
34,909

 
 
64,970

 
71,330

Net loss attributable to noncontrolling interests
10

 
128

 
 
351

 
231

Net income attributable to Euronet Worldwide, Inc.
$
31,334

 
$
35,037

 
 
$
65,321

 
$
71,561

 
 
 
 
 
 
 
 
 
Earnings per share attributable to Euronet Worldwide, Inc. stockholders:
 
 
 
 
 
 
 
 
Basic
$
0.60

 
$
0.67

 
 
$
1.25

 
$
1.39

Diluted
$
0.57

 
$
0.64

 
 
$
1.21

 
$
1.33

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
52,617,245

 
52,512,474

 
 
52,075,388

 
51,658,823

Diluted
54,544,763

 
54,619,793

 
 
53,944,248

 
53,740,151

See accompanying notes to the unaudited consolidated financial statements.

4
Table of Contents

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
31,324

 
$
34,909

 
$
64,970

 
$
71,330

Translation adjustment
(20,325
)
 
(61,557
)
 
(55,265
)
 
(54,221
)
Comprehensive income (loss)
10,999

 
(26,648
)
 
9,705

 
17,109

Comprehensive loss attributable to noncontrolling interests
6

 
257

 
462

 
371

Comprehensive income (loss) attributable to Euronet Worldwide, Inc.
$
11,005

 
$
(26,391
)
 
$
10,167

 
$
17,480

See accompanying notes to the unaudited consolidated financial statements.

5
Table of Contents

EURONET WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
Nine Months Ended
September 30,
 
2015
 
2014
Net income
$
64,970

 
$
71,330

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
51,786

 
52,819

Share-based compensation
9,265

 
9,631

Unrealized foreign exchange loss, net
34,066

 
5,067

Deferred income taxes
31

 
(3,470
)
Loss from unconsolidated affiliates
—

 
64

Accretion of convertible debt discount and amortization of debt issuance costs
9,154

 
854

Changes in working capital, net of amounts acquired:
 
 
 
Income taxes payable, net
(14,165
)
 
760

Restricted cash
21,843

 
16,115

Inventory — PINs and other
23,180

 
20,287

Trade accounts receivable
31,982

 
44,266

Prepaid expenses and other current assets
(28,264
)
 
(5,077
)
Trade accounts payable
(30,707
)
 
(55,762
)
Deferred revenue
(1,990
)
 
(3,259
)
Accrued expenses and other current liabilities
63,350

 
67,239

Changes in noncurrent assets and liabilities
(2,983
)
 
3,775

Net cash provided by operating activities
231,518

 
224,639

Cash flows from investing activities:
 
 
 
Acquisitions, net of cash acquired
(113,969
)
 
(84,703
)
Purchases of property and equipment
(55,305
)
 
(45,673
)
Purchases of other long-term assets
(4,976
)
 
(4,276
)
Other, net
1,138

 
219

Net cash used in investing activities
(173,112
)
 
(134,433
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of shares
6,747

 
8,512

Repurchase of shares
(5,174
)
 
(1,152
)
Borrowings from revolving credit agreements
751,813

 
2,001,386

Repayments of revolving credit agreements
(715,437
)
 
(1,833,796
)
Proceeds from long-term debt obligations
—

 
9,000

Repayments of long-term debt obligations
(3,750
)
 
(3,876
)
Repayments of capital lease obligations
(2,531
)
 
(1,897
)
(Repayments of) borrowings from short-term debt obligations, net
(1,265
)
 
2,778

Other, net
847

 
(1,812
)
Net cash provided by financing activities
31,250

 
179,143

Effect of exchange rate changes on cash and cash equivalents
(28,832
)
 
(27,988
)
Increase in cash and cash equivalents
60,824

 
241,361

Cash and cash equivalents at beginning of period
468,010

 
209,826

 
 
 
 
Cash and cash equivalents at end of period
$
528,834

 
$
451,187

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Interest paid during the period
$
7,091

 
$
5,861

Income taxes paid during the period
$
43,210

 
$
29,645

Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Equity issued in connection with acquisitions
$
43,061

 
$
56,554

See accompanying notes to the unaudited consolidated financial statements.

6
Table of Contents

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

(1) GENERAL
Organization
Euronet Worldwide, Inc. (together with its subsidiaries, the “Company” or “Euronet”) is a leading electronic payments provider. Euronet offers payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Euronet's primary product offerings include comprehensive automated teller machine (“ATM”), point-of-sale (“POS”), card outsourcing, card issuing and merchant acquiring services; electronic distribution of prepaid mobile airtime and other electronic payment products; and global money transfer services.
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 on a consolidated basis the financial position of the Company as of September 30, 2015, the results of its operations for the three and nine months ended September 30, 2015 and 2014 and cash flows for the nine months ended September 30, 2015 and 2014. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2014, including the notes thereto, set forth in the Company’s 2014 Annual Report on Form 10-K. Certain amounts in prior years have been reclassified to conform to the current year's presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Significant items subject to such estimates and assumptions include computing income taxes, estimating the useful lives and potential impairment of long-lived assets and goodwill, as well as allocating the purchase price to assets acquired and liabilities assumed in acquisitions and revenue recognition. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2015.
Seasonality
Euronet’s EFT Processing Segment experiences its heaviest demand for dynamic currency conversion services during the third quarter of the fiscal year, coinciding with tourism season. Additionally, the EFT Processing and epay Segments are impacted by seasonality during the fourth quarter and first quarter of each year due to higher transaction levels during the holiday season and lower levels following the holiday season. Seasonality in the Money Transfer Segment varies by regions of the world. In most markets, Euronet usually experiences increased demand for money transfer services from the month of May through the fourth quarter of each year, coinciding with the increase in worker migration patterns and various holidays, and experiences its lowest transaction levels during the first quarter of each year.

(2) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Issued
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-11, Inventory ("ASU 2015-11"), which simplifies the valuation of inventory by using the lower of cost or net realizable value. ASU 2015-11 will become effective for the Company on January 1, 2017 and early adoption is permitted. The guidance is to be applied on a prospective basis. The adoption of ASU 2015-11 is not expected to have a significant impact on the Company's financial position, results of operations or cash flows.
In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest ("ASU 2015-03"), which requires that transaction costs related to the issuance of debt be deducted from the carrying value of the financial liability and not recorded as separate assets. ASU 2015-03 will become effective for the Company on January 1, 2016 and early adoption is permitted. The guidance is to be applied on a retrospective basis. Euronet has debt issuance costs which will be reclassified upon adoption of the guidance, but it is not expected to have a significant impact on the Company's financial position and it will have no impact upon the Company's results of operations or cash flows.

7
Table of Contents

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In July 2015, the FASB approved a one-year deferral of the effective date of the new revenue recognition standard. The new standard will become effective for the Company on January 1, 2018 and the Company has the option to adopt it effective January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected an adoption date, a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

(3) STOCKHOLDERS' EQUITY

Earnings Per Share
Basic earnings per share has been computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the respective period. Diluted earnings per share has been computed by dividing earnings available to common stockholders by the weighted average shares outstanding during the respective period, after adjusting for any potential dilution of options to purchase the Company's common stock, assumed vesting of restricted stock and the assumed conversion of the Company’s convertible debentures. The following table provides the computation of diluted weighted average number of common shares outstanding:

Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Computation of diluted weighted average shares outstanding:
 
 
 
 
 
 
 
Basic weighted average shares outstanding
52,617,245

 
52,512,474

 
52,075,388

 
51,658,823

Incremental shares from assumed exercise of stock options and vesting of restricted stock
1,784,106

 
2,107,319

 
1,725,448

 
2,081,328

Incremental shares from assumed conversion of convertible notes
143,412

 
—

 
143,412

 
—

Diluted weighted average shares outstanding
54,544,763

 
54,619,793

 
53,944,248

 
53,740,151

The table includes the impact of all stock options and restricted stock that are dilutive to the Company’s weighted average common shares outstanding during the three and nine months ended September 30, 2015 and 2014. The calculation of diluted earnings per share excludes stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding of approximately 578,000 and 614,000 for the three and nine months ended September 30, 2015, respectively, and approximately 693,000 and 695,000 for the three and nine months ended September 30, 2014, respectively.

During the nine months ended September 30, 2015, the Company had convertible notes outstanding that, if converted, would have had a potentially dilutive effect on its common stock. At issuance, the Company stated its intent to settle any conversion of these notes by paying cash for the principal value and issuing common stock for any conversion value in excess of the principal value. As of September 30, 2015, and currently, the Company maintains the intent and ability to settle any conversion as stated. Accordingly, the convertible notes would only have a dilutive effect if the market price per share of common stock exceeds the conversion price per share of common stock, which it did as of September 30, 2015. Therefore, according to Accounting Standards Codification ("ASC") Topic 260, Earnings per Share, these notes were dilutive to earnings per share for the three and nine months ended September 30, 2015. See Note 7, Debt Obligations, for more information about the convertible notes.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists entirely of foreign currency translation adjustments. The Company recorded foreign currency translation losses of $20.3 million and $55.3 million for the three and nine months ended September 30, 2015, respectively, and $61.6 million and $54.2 million for the three and nine months ended September 30, 2014, respectively. During the three months ended September 30, 2015, the Company liquidated a small subsidiary which resulted in a $0.1 million reclassification of foreign currency translation losses into the consolidated statements of income for the three and nine months ended September 30, 2015. There were no reclassifications of foreign currency translation into the consolidated statements of income for the three and nine months ended September 30, 2014.


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Table of Contents

(4) ACQUISITIONS
XE Corporation
On July 2, 2015, the Company completed the acquisition of all of the capital stock of XE Corporation and its subsidiaries ("XE") pursuant to a Share Purchase Agreement (the "XE Purchase Agreement") among the Company and the selling shareholders of XE (the "XE Sellers"). XE Corporation is a Canadian company which operates the XE.com and x-rates.com websites, providing currency-related data and international payments services. This acquisition provides Euronet an internationally recognized brand and a large Internet presence in which to offer its foreign currency products.
Under the terms of the Purchase Agreement, the Sellers received purchase consideration (the "XE Purchase Consideration") of $79.9 million in cash, including working capital adjustments finalized in the third quarter of 2015, and 642,912 shares of Euronet common stock, with a fair value at date of acquisition of $40.1 million. Half of the common stock portion of the XE Purchase Consideration was placed in escrow at closing as security for the XE Sellers' indemnification and other obligations under the XE Purchase Agreement. Any XE Purchase Consideration remaining in escrow will be released to the XE Sellers two years following the closing date, net of any pending indemnification or other claims under the XE Purchase Agreement.
The XE Purchase Consideration was allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the date of acquisition. The valuation of the acquired net assets remains preliminary while management completes its valuation, particularly the valuation of acquired intangible assets. The intangible asset amounts are expected to be deductible for income tax purposes, but the goodwill amount is not. Pro-forma results of operations, assuming this acquisition was made at the beginning of the earliest period presented, have not been presented because the effect of this acquisition was not material to the Company's results of operations. The net assets of XE and its results of operations are included in the Money Transfer Segment's results.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date.
(in thousands)
 
As of July 2, 2015
Cash and cash equivalents
 
$
1,872

Other current assets
 
1,294

Intangible assets
 
15,367

Other long-term assets
 
341

Deferred tax assets
 
9,636

Total assets acquired
 
28,510

 
 
 
Trade accounts payable
 
(26
)
Accrued expenses and other current liabilities
 
(11,824
)
Other long-term liabilities
 
(571
)
Total liabilities assumed
 
(12,421
)
 
 
 
Goodwill
 
103,887

 
 
 
Net assets acquired
 
$
119,976



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The intangible assets of XE are being amortized on a straight-line basis, and the estimated fair values consist of the following:

(in thousands)
 
Fair Value
 
Estimated
Useful Life
Proprietary software
 
$
2,011

 
5 years
Customer relationships
 
9,414

 
8 years
Trade names
 
3,654

 
20 years
Non-compete agreements
 
288

 
3 years
Total intangible assets
 
$
15,367

 
 

IME
On June 17, 2015, the Company completed the acquisition of all of the capital stock of IME (M) Sdn Bhd and certain affiliated companies ("IME") pursuant to a Share Purchase Agreement (the "IME Purchase Agreement") among the Company and the selling shareholders of IME (the "IME Sellers"). IME is a leading Malaysian-based money transfer provider and provides the Money Transfer Segment with immediate entry into the Asian and Middle East send markets.
Under the terms of the IME Purchase Agreement, the IME Sellers received purchase consideration (the "IME Purchase Consideration") of $76.7 million in cash, including working capital adjustments finalized in the third quarter of 2015, and 49,941 shares of Euronet common stock, with a fair value at date of acquisition of $3.0 million. A portion of the IME Purchase Consideration was placed in escrow at closing as security for the IME Sellers' indemnification and other obligations under the IME Purchase Agreement. Any IME Purchase Consideration remaining in escrow will be released to the IME Sellers at various defined dates over five years following the closing date, net of any pending indemnification or other claims under the IME Purchase Agreement.
The IME Purchase Consideration was allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the date of acquisition. The valuation of the acquired net assets remains preliminary while management completes its valuation, particularly the valuation of acquired intangible assets. None of the goodwill or intangible asset amounts are expected to be deductible for income tax purposes. Pro-forma results of operations, assuming this acquisition was made at the beginning of the earliest period presented, have not been presented because the effect of this acquisition was not material to the Company's results of operations. The net assets of IME and its results of operations are included in the Money Transfer Segment's results.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date.
(in thousands)
 
As of June 17, 2015
Cash and cash equivalents
 
$
33,279

Other current assets
 
17,082

Intangible assets
 
35,130

Other long-term assets
 
5,234

Total assets acquired
 
90,725

 
 
 
Trade accounts payable
 
(1,958
)
Accrued expenses and other current liabilities
 
(1,548
)
Settlement obligations and customer deposits
 
(27,700
)
Deferred tax liabilities
 
(9,142
)
Other long-term liabilities
 
(859
)
Total liabilities assumed
 
(41,207
)
 
 
 
Goodwill
 
30,193

 
 
 
Net assets acquired
 
$
79,711


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The intangible assets of IME are being amortized on a straight-line basis, and the estimated fair values consist of the following:

(in thousands)
 
Fair Value
 
Estimated
Useful Life
Customer relationships
 
$
33,940

 
8 years
Trade names
 
650

 
2 years
Non-compete agreements
 
540

 
5 years
Total intangible assets
 
$
35,130

 
 

(5) GOODWILL AND ACQUIRED INTANGIBLE ASSETS, NET
A summary of acquired intangible assets and goodwill activity for the nine months ended September 30, 2015 is presented below:
(in thousands)
 
Acquired
Intangible
Assets
 
Goodwill
 
Total
Intangible
Assets
Balance as of December 31, 2014
 
$
158,267

 
$
599,863

 
$
758,130

Increases (Decreases):
 
 
 
 
 
 
Acquisitions
 
50,497

 
134,080

 
184,577

Amortization
 
(17,707
)
 
—

 
(17,707
)
Other (primarily changes in foreign currency exchange rates)
 
(17,083
)
 
(47,584
)
 
(64,667
)
Balance as of September 30, 2015
 
$
173,974

 
$
686,359

 
$
860,333

Estimated amortization expense on intangible assets with finite lives, before income taxes, as of September 30, 2015, is expected to total $6.1 million for the remainder of 2015, $24.3 million for 2016, $22.2 million for 2017, $20.0 million for 2018, $19.3 million for 2019 and $18.6 million for 2020.
The Company’s annual goodwill impairment test is performed during the fourth quarter of its fiscal year. The annual impairment test for the year ended December 31, 2014 resulted in no impairment charge.
Determining the fair value of reporting units 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 the estimates or assumptions included in the 2014 annual impairment test could change, which may result in the Company recording material non-cash impairment charges during the year in which these changes take place.

(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
 
 
As of
(in thousands)
 
September 30, 2015
 
December 31, 2014
Accrued expenses
 
$
120,863

 
$
97,115

Money transfer settlement obligations
 
167,056

 
137,285

Accrued amounts due to mobile operators and other content providers
 
72,475

 
64,839

Derivative liabilities
 
41,351

 
36,439

Deferred income taxes
 
1,215

 
683

Total
 
$
402,960

 
$
336,361



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(7) DEBT OBLIGATIONS
A summary of debt obligation activity for the nine months ended September 30, 2015 is presented below:
(in thousands)
 
Revolving
Credit
Facilities
 
Other Debt
Obligations
 
Capital
Leases
 
1.5%
Convertible
Notes
Due 2044
 
Term Loan A
 
Total
Balance as of December 31, 2014
 
$
5,316

 
$
6,035

 
$
4,364

 
$
337,986

 
$
72,187

 
$
425,888

Increases (decreases):
 
 
 
 
 

 
 
 
 
 
 
Net borrowings (repayments)
 
32,572

 
1,080

 
1,611

 
—

 
(3,750
)
 
31,513

Accretion
 
—

 
—

 
—

 
7,371

 
—

 
7,371

Capital lease interest
 
—

 
—

 
265

 
—

 
—

 
265

Foreign currency exchange loss (gain)
 
3,498

 
(674
)
 
(330
)
 
—

 
—

 
2,494

Balance as of September 30, 2015
 
41,386

 
6,441

 
5,910

 
345,357

 
68,437

 
467,531

Less — current maturities
 
—

 
(5,740
)
 
(1,905
)
 
—

 
(6,563
)
 
(14,208
)
Long-term obligations as of September 30, 2015
 
$
41,386

 
$
701

 
$
4,005

 
$
345,357

 
$
61,874

 
$
453,323


Credit Facility
As of September 30, 2015, the Company had a $675 million senior secured credit facility (the "Credit Facility") consisting of a $600 million revolving credit facility and a $75 million term loan ("Term Loan A"), which had been reduced to $68.4 million through principal amortization payments. The Credit Facility expires April 9, 2019.
Interest on borrowings under the revolving credit facility and Term Loan A varies based upon the Company's consolidated total leverage ratio, as defined in the Company's credit agreement, and during the third quarter of 2015 was based on a margin over the London Inter-Bank Offered Rate (“LIBOR”) rate or a margin over a base rate, as selected by the Company, with the applicable margin ranging from 1.375% to 2.375% for LIBOR loans or 0.375% to 1.375% for base rate loans. Accordingly, the weighted average interest rate for borrowings outstanding under the Company's revolving credit facility and Term Loan A was 3.23% and 1.57%, respectively, as of September 30, 2015, excluding amortization of deferred financing costs.
Convertible Debt
On October 30, 2014, the Company completed the sale of $402.5 million of Convertible Senior Notes due 2044 (“Convertible Notes”). The Convertible Notes have an interest rate of 1.5% per annum payable semi-annually in April and October, and are convertible into shares of Euronet Common Stock at a conversion price of approximately $72.18 per share if certain conditions are met (relating to the closing prices of Euronet Common Stock exceeding certain thresholds for specified periods). Holders of the Convertible Notes have the option to require the Company to purchase their notes at par on October 1, 2020, and have additional options to require the Company to purchase their notes at par on October 1, 2024, 2029, 2034, and 2039, or upon a change in control of the Company. In connection with the issuance of the Convertible Notes, the Company recorded $10.7 million in debt issuance costs, which are being amortized through October 1, 2020.
In accordance with ASC 470-20-30-27, proceeds from the issuance of convertible debt are allocated between debt and equity components so that debt is discounted to reflect the Company's nonconvertible debt borrowing rate. ASC 470-20-35-13 requires the debt discount to be amortized over the period the convertible debt is expected to be outstanding as additional non-cash interest expense. The allocation resulted in an increase to additional paid in capital of $66.1 million.
Contractual interest expense was $1.5 million and $4.5 million for the three and nine months ended September 30, 2015. Accretion expense was $2.5 million and $7.4 million for the three and nine months ended September 30, 2015. The effective interest rate was 4.7% for the three and nine months ended September 30, 2015. As of September 30, 2015, the unamortized discount was $57.1 million, and will be amortized through October 1, 2020.
 

(8) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to foreign currency exchange risk resulting from (i) the collection of funds or the settlement of money transfer transactions in currencies other than the U.S. Dollar, (ii) derivative contracts written to its customers in connection with providing cross-currency money transfer services and (iii) short-term borrowings that are payable in currencies other than the

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U.S dollar. The Company enters into foreign currency derivative contracts, primarily foreign currency forwards and cross-currency swaps, to minimize its exposure related to fluctuations in foreign currency exchange rates. As a matter of Company policy, the derivative instruments used in these activities are economic hedges and are not designated as hedges under ASC Topic 815, Derivatives and Hedging, primarily due to either the relatively short duration of the contract term or the effects of fluctuations in currency exchange rates are reflected concurrently in earnings for both the derivative instrument and the transaction and have an offsetting effect.
Foreign currency exchange contracts - Ria Operations
In the United States, the Company uses short-duration foreign currency forward contracts, generally with maturities up to 14 days, to offset the fluctuation in foreign currency exchange rates on the collection of money transfer funds between initiation of a transaction and its settlement. Due to the short duration of these contracts and the Company’s credit profile, the Company is generally not required to post collateral with respect to these foreign currency forward contracts. Most derivative contracts executed with counterparties in the U.S. are governed by an International Swaps and Derivatives Association agreement that includes standard netting arrangements; therefore, asset and liability positions from forward contracts and all other foreign exchange transactions with the same counterparty are net settled upon maturity.
As of September 30, 2015, the Company had foreign currency forward contracts outstanding in the U.S. with a notional value of $188 million, primarily in Australian dollars, Canadian dollars, British pounds, euros and Mexican pesos.

Foreign currency exchange contracts - HiFX Operations
HiFX writes derivative instruments, primarily foreign currency forward contracts and cross-currency swaps, mostly with counterparties comprised of individuals and small-to-medium size businesses and derives a currency margin from this activity as part of its operations. HiFX aggregates its foreign currency exposures arising from customer contracts and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. Foreign exchange revenues from HiFX's total portfolio of positions were $15.5 million and $47.1 million for the three and nine months ended September 30, 2015, respectively, and $15.9 million and $23.0 million for the three and nine months ended September 30, 2014, respectively. All of the derivative contracts used in the Company's HiFX operations are economic hedges and are not designated as hedges under ASC Topic 815. The duration of these derivative contracts is generally less than one year.
The fair value of HiFX's total portfolio of positions can change significantly from period to period based on, among other factors, market movements and changes in customer contract positions. HiFX manages counterparty credit risk (the risk that counterparties will default and not make payments according to the terms of the agreements) on an individual counterparty basis. It mitigates this risk by entering into contracts with collateral posting requirements and/or by performing financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties. HiFX does not expect any significant losses from counterparty defaults.
The aggregate equivalent U.S. dollar notional amounts of foreign currency derivative customer contracts held by the Company in its HiFX operations as of September 30, 2015 was approximately $849 million. The majority of customer contracts are written in major currencies such as the euro, Canadian dollar, British pound, and Australian dollar.
Balance Sheet Presentation

The following table summarizes the fair value of the derivative instruments as recorded in the Consolidated Balance Sheets as of the dates below:
 
 
Asset Derivatives
 
Liability Derivatives
 
 
 
 
Fair Value
 
 
 
Fair Value
(in thousands)
 
Balance Sheet Location
 
September 30, 2015
 
December 31, 2014
 
Balance Sheet Location
 
September 30, 2015
 
December 31, 2014
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current assets
 
$
48,094

 
$
41,151

 
Other current liabilities
 
$
(41,351
)
 
$
(36,439
)

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The following tables summarize the gross and net fair value of derivative assets and liabilities as of September 30, 2015 and December 31, 2014 (in thousands):
Offsetting of Derivative Assets
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Consolidated Balance Sheet
 
 
As of September 30, 2015
 
Gross Amounts of Recognized Assets
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts Presented in the Consolidated Balance Sheet
 
Financial Instruments
 
Cash Collateral Received
 
Net Amounts
Derivatives subject to a master netting arrangement or similar agreement
 
$
48,094

 
$
—

 
$
48,094

 
$
(31,838
)
 
$
(4,866
)
 
$
11,390

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives subject to a master netting arrangement or similar agreement
 
$
41,151

 
$
—

 
$
41,151

 
$
(28,113
)
 
$
(5,279
)
 
$
7,759


Offsetting of Derivative Liabilities
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Consolidated Balance Sheet
 
 
As of September 30, 2015
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts Presented in the Consolidated Balance Sheet
 
Financial Instruments
 
Cash Collateral Paid
 
Net Amounts
Derivatives subject to a master netting arrangement or similar agreement
 
$
(41,351
)
 
$
—

 
$
(41,351
)
 
$
31,838

 
$
671

 
$
(8,842
)
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives subject to a master netting arrangement or similar agreement
 
$
(36,439
)
 
$
—

 
$
(36,439
)
 
$
28,113

 
$
176

 
$
(8,150
)

Income Statement Presentation
The following tables summarize the location and amount of gains and losses of derivatives in the Consolidated Statements of Income for the three and nine months ended September 30, 2015 and 2014:
 
 
 
 
Amount of Loss Recognized in Income on Derivative Contracts (a)
 
 
Location of Gain (Loss) Recognized in Income on Derivative Contracts
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in thousands)
 
 
2015
 
2014
 
2015
 
2014
Foreign currency exchange contracts - Ria Operations
 
Foreign currency exchange loss, net
 
$
1,025

 
$
1,501

 
$
991

 
$
348

(a) The Company enters into derivative contracts such as foreign currency exchange forwards and cross-currency swaps as part of its HiFX operations. These derivative contracts are excluded from this table as they are part of the broader disclosure of foreign currency exchange revenues for this business discussed above.
See Note 9, Fair Value Measurements, for the determination of the fair values of derivatives.


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(9) FAIR VALUE MEASUREMENTS
Fair value measurements used in the unaudited consolidated financial statements are based upon the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
•
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. 
•
Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
•
Level 3 – Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the inputs that market participants would use in pricing.
The following table details financial assets and liabilities measured and recorded at fair value on a recurring basis:
 
 
 
 
As of September 30, 2015
(in thousands)
 
Balance Sheet Classification
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current assets
 
$
—

 
$
48,094

 
$
—

 
$
48,094

Liabilities
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current liabilities
 
$
—

 
$
(41,351
)
 
$
—

 
$
(41,351
)
 
 
 
 
As of December 31, 2014
(in thousands)
 
Balance Sheet Classification
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current assets
 
$
—

 
$
41,151

 
$
—

 
$
41,151

Liabilities
 
 
 
 
 
 
 
 
 
 
Foreign currency exchange contracts
 
Other current liabilities
 
$
—

 
$
(36,439
)
 
$
—

 
$
(36,439
)

Other Fair Value Disclosures
The carrying amounts of cash and cash equivalents, accounts receivable, trade accounts payable, accrued expenses and other current obligations approximate their fair values because of the relatively short-term maturities of these financial instruments. The carrying values of the Company’s long-term debt (other than the Convertible Notes), including the current portion, approximate fair value because interest is primarily based on LIBOR, which resets at various intervals of less than one year. The Company estimates the fair value of the Convertible Notes using quoted prices in inactive markets for identical liabilities (Level 2). As of September 30, 2015 and December 31, 2014, the fair values of the Convertible Notes were $495.2 million and $408.0 million, respectively, with carrying values of $345.4 million and $338.0 million, respectively.


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(10) SEGMENT INFORMATION
The Company’s reportable operating segments have been determined in accordance with ASC Topic 280, Segment Reporting. The Company currently operates in the following three reportable operating segments:
1)
Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, the Middle East and Asia Pacific. The Company provides comprehensive electronic payment solutions consisting of ATM cash withdrawal services, ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing, dynamic currency conversion and other value added services. Through this segment, the Company also offers a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.
2)
Through the epay Segment, the Company provides distribution, processing and collection services for prepaid mobile airtime and other electronic payment products in Europe, the Middle East, Asia Pacific, the United States and South America.
3)
Through the Money Transfer Segment, the Company provides global money transfer services under the brand names Ria, HiFX, IME and XE. Ria and IME provide global consumer-to-consumer money transfer services through a network of sending agents, Company-owned stores and Company-owned websites, disbursing money transfers through a worldwide correspondent network. HiFX offers account-to-account international payment services to high-income individuals and small-to-medium sized businesses. XE is a provider of foreign currency exchange information and offers money transfers on its currency data websites, which are executed by a third party. The Company also offers customers bill payment services, payment alternatives such as money orders and prepaid debit cards, comprehensive check cashing services, foreign currency exchange services and mobile top-up. The Company provides cash management solutions and foreign currency risk management services to small-to-medium sized businesses under the brand name HiFM.
In addition, the Company accounts for non-operating activity, most share-based compensation expense, certain intersegment eliminations and the costs of providing corporate and other administrative services in its administrative division, “Corporate Services, Eliminations and Other.” These services are not directly identifiable with the Company’s reportable operating segments.
The following tables present the Company’s reportable segment results for the three and nine months ended September 30, 2015 and 2014:

 
 
For the Three Months Ended September 30, 2015
(in thousands)
 
EFT
Processing
 
epay
 
Money
Transfer
 
Corporate
Services,
Eliminations
and Other
 
Consolidated
Total revenues
 
$
118,895

 
$
174,547

 
$
188,232

 
$
(301
)
 
$
481,373

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Direct operating costs
 
51,550

 
133,124

 
97,928

 
(289
)
 
282,313

Salaries and benefits
 
11,862

 
12,745

 
36,187

 
6,276

 
67,070

Selling, general and administrative
 
7,052

 
11,411

 
23,356

 
1,904

 
43,723

Depreciation and amortization
 
8,115

 
2,660

 
7,011

 
207

 
17,993

Total operating expenses
 
78,579

 
159,940

 
164,482

 
8,098

 
411,099

Operating income (expense)
 
$
40,316

 
$
14,607

 
$
23,750

 
$
(8,399
)
 
$
70,274


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For the Three Months Ended September 30, 2014
(in thousands)
 
EFT
Processing
 
epay
 
Money
Transfer
 
Corporate
Services,
Eliminations
and Other
 
Consolidated
Total revenues
 
$
107,503

 
$
195,086

 
$
151,250

 
$
(417
)
 
$
453,422

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Direct operating costs
 
46,612

 
153,121

 
75,455

 
(374
)
 
274,814

Salaries and benefits
 
12,155

 
14,356

 
32,219

 
5,857

 
64,587

Selling, general and administrative
 
6,516

 
11,160

 
23,747

 
2,545

 
43,968

Depreciation and amortization
 
8,010

 
3,998

 
7,246

 
67

 
19,321

Total operating expenses
 
73,293

 
182,635

 
138,667

 
8,095

 
402,690

Operating income (expense)
 
$
34,210

 
$
12,451

 
$
12,583

 
$
(8,512
)
 
$
50,732


 
 
For the Nine Months Ended September 30, 2015
(in thousands)
 
EFT
Processing
 
epay
 
Money
Transfer
 
Corporate
Services,
Eliminations
and Other
 
Consolidated
Total revenues
 
$
286,650

 
$
517,296

 
$
498,689

 
$
(952
)
 
$
1,301,683

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Direct operating costs
 
135,754

 
396,860

 
260,008

 
(873
)
 
791,749

Salaries and benefits
 
34,466

 
37,172

 
100,581

 
19,939

 
192,158

Selling, general and administrative
 
19,432

 
28,439

 
63,089

 
5,413

 
116,373

Depreciation and amortization
 
23,274

 
8,465

 
19,703

 
344

 
51,786

Total operating expenses
 
212,926

 
470,936

 
443,381

 
24,823

 
1,152,066

Operating income (expense)
 
$
73,724

 
$
46,360

 
$
55,308

 
$
(25,775
)
 
$
149,617

 
 
For the Nine Months Ended September 30, 2014
(in thousands)
 
EFT
Processing
 
epay
 
Money
Transfer
 
Corporate
Services,
Eliminations
and Other
 
Consolidated
Total revenues
 
$
271,580

 
$
562,129

 
$
369,568

 
$
(1,078
)
 
$
1,202,199

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Direct operating costs
 
125,773

 
434,984

 
183,985

 
(953
)
 
743,789

Salaries and benefits
 
35,127

 
41,856

 
83,472

 
18,074

 
178,529

Selling, general and administrative
 
19,167

 
31,433

 
57,438

 
9,782

 
117,820

Depreciation and amortization
 
22,951

 
12,323

 
17,337

 
208

 
52,819

Total operating expenses
 
203,018

 
520,596

 
342,232

 
27,111

 
1,092,957

Operating income (expense)
 
$
68,562

 
$
41,533

 
$
27,336

 
$
(28,189
)
 
$
109,242


The following table presents the Company’s property and equipment and total assets by reportable segment:
 
 
Property and Equipment, net as of
 
Total Assets as of
(in thousands)
 
September 30, 2015
 
December 31, 2014
 
September 30, 2015
 
December 31, 2014
EFT Processing
 
$
94,614

 
$
72,749

 
$
540,879

 
$
390,398

epay
 
23,310

 
24,859

 
565,516

 
754,448

Money Transfer
 
31,432

 
27,528

 
1,033,915

 
837,360

Corporate Services, Eliminations and Other
 
150

 
171

 
25,435

 
69,353

   Total
 
$
149,506

 
$
125,307

 
$
2,165,745

 
$
2,051,559


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(11) INCOME TAXES
The Company's effective income tax rates were 34.8% and 26.9% for the three months ended September 30, 2015 and 2014, respectively, and 34.4% and 27.7% for the nine months ended September 30, 2015 and 2014, respectively.
The Company's effective income tax rates for the three and nine months ended September 30, 2015 and 2014 were lower than the applicable statutory income tax rate of 35% primarily because of the Company's U.S. income tax positions. The Company does not have a history of significant taxable income in the U.S.; therefore, the Company has recorded a valuation allowance against its U.S. federal tax net operating loss carryforwards. Accordingly, in instances when the Company's U.S. legal entities generate pre-tax U.S. GAAP income, no income tax expense is recognized to the extent there are net operating loss carryforwards to offset pre-tax U.S. GAAP income. Additionally, the effective income tax rates for the three and nine months ended September 30, 2015 were significantly influenced by foreign currency exchange losses, most of which are not currently deductible for income tax purposes, resulting in a higher effective income tax rate when compared to the same periods of 2014.
(12) COMMITMENTS
As of September 30, 2015, the Company had $68.2 million of stand-by letters of credit/bank guarantees issued on its behalf, of which $42.7 million are outstanding under the revolving credit facility. The remaining stand-by letters of credit/bank guarantees are collateralized by $3.1 million of cash deposits held by the respective issuing banks.
Under certain circumstances, Euronet grants guarantees in support of obligations of subsidiaries. As of September 30, 2015, the Company had granted off balance sheet guarantees for cash in various ATM networks amounting to $15.0 million over the terms of the cash supply agreements and performance guarantees amounting to approximately $24.3 million over the terms of agreements with the customers.
Once each of Euronet's subsidiaries reaches a certain size, it is required under the Credit Facility to provide a guarantee of all or a portion of the outstanding obligations under the Credit Facility depending upon whether the subsidiary is a domestic or foreign entity.
From time to time, the Company enters into agreements with commercial counterparties 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. Euronet's liability under such indemnification provisions may be mitigated by relevant insurance coverage and may be subject to time and materiality limitations, monetary caps and other conditions and defenses. Such indemnification obligations include the following:
•
In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for damage to ATMs and theft of ATM network cash that is not recorded on the Company’s Consolidated Balance Sheets. As of September 30, 2015, the balance of ATM network cash for which the Company was responsible was approximately $450 million. The Company maintains insurance policies to mitigate this exposure;
•
In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for losses suffered by its customers and other parties as a result of the breach of its computer systems, including in particular, losses arising from fraudulent transactions made using information stolen through its processing systems. The Company maintains insurance policies to mitigate this exposure;
•
In connection with the license of proprietary systems to customers, the Company 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 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 of operating units or assets made by Euronet, the Company has agreed to indemnify the seller against third-party claims made against the seller relating to the 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; and

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•
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 carrying out their respective duties under such agreements.
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. The Company has obtained surety bonds in compliance with money transfer licensing requirements of the applicable governmental authorities.
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, 2015 or December 31, 2014.

(13) LITIGATION AND CONTINGENCIES

Contingencies
Unclaimed property compliance - In September 2013, the Company entered into a voluntary disclosure agreement with the Secretary of State of the State of Delaware to determine compliance with Delaware unclaimed property laws. Types of property under examination include, but are not limited to, certain unmatched receipts from money transfer agents, payroll checks, accounts payable checks and accounts receivable credits for the period 1996 through 2007. In June 2015, the Company reached an agreement with the State of Delaware regarding unclaimed property for this period and through periods ending in 2009 and remitted an amount which was not material to the Company's consolidated financial condition or results of operations.
Legal Proceedings
From time to time, the Company is a party to legal or regulatory proceedings arising in the ordinary course of its business. Currently, there are no legal proceeding or regulatory findings that management believes, either individually or in the aggregate, would have a material adverse effect on the Company's consolidated financial condition or results of operations. In accordance with U.S. GAAP, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The terms "Euronet," the "Company," "we" and "us" as used herein refer to Euronet Worldwide, Inc. and its subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report 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 (“Exchange Act”). Generally, the words "believe," "expect," "anticipate," "intend," "estimate," "will" and similar expressions identify forward-looking statements. However, the absence of these words or similar expressions does not mean the statement is not forward-looking. All statements other than statements of historical facts included in this document are forward-looking statements, including, but not limited to, statements regarding the following:
•
our business plans and financing plans and requirements;
•
trends affecting our business plans and financing plans and requirements;
•
trends affecting our business;
•
the adequacy of capital to meet our capital requirements and expansion plans;
•
the assumptions underlying our business plans;
•
our ability to repay indebtedness;
•
our estimated capital expenditures;
•
the potential outcome of loss contingencies;
•
our expectations regarding the closing of any pending acquisitions;
•
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.
Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may materially differ from those in the forward-looking statements as a result of various factors, including, but not limited to, conditions in world financial markets and general economic conditions, including economic conditions in specific countries and regions; technological developments affecting the market for our products and services; our ability to successfully introduce new products and services; foreign currency exchange rate fluctuations; the effects of any breach of our computer systems, including our financial processing networks; our ability to renew existing contracts at profitable rates; changes in fees payable for transactions performed for cards bearing international logos or over switching networks such as card transactions on ATMs; our ability to comply with increasingly stringent regulatory requirements, including anti-money laundering, anti-terrorism and anti-bribery requirements; changes in laws and regulations affecting our business, including immigration laws; changes in our relationships with, or in fees charged by, our business partners; competition; the outcome of claims and other loss contingencies affecting Euronet; and those other factors 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, 2014. Our Annual Report on Form 10-K is available on the SEC's EDGAR website at www.sec.gov, and a copy may also be obtained by contacting the Company. All forward-looking statements made in this Form 10-Q speak only as of the date of this report. We do not intend, and do not undertake any obligation, to update any forward-looking statements to reflect future events or circumstances after the date of such statements.


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OVERVIEW
COMPANY OVERVIEW, GEOGRAPHIC LOCATIONS AND PRINCIPAL PRODUCTS AND SERVICES
We are a leading electronic payments provider. We offer payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Our primary product offerings include comprehensive automated teller machine (“ATM”), point-of-sale (“POS”), card outsourcing, card issuing and merchant acquiring services, software solutions, electronic distribution of prepaid mobile airtime and other electronic payment products, and global money transfer services. We operate in the following three segments:
•
The EFT Processing Segment, which processes transactions for a network of 21,128 ATMs and approximately 96,000 POS terminals across Europe, the Middle East and Asia Pacific. We provide comprehensive electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing, dynamic currency conversion, and other value added services. Through this segment, we also offer a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.
•
The epay Segment, which provides distribution, processing and collection services for prepaid mobile airtime and other electronic payment products. We operate a network of approximately 665,000 POS terminals providing electronic processing of prepaid mobile airtime top-up services and other electronic payment products in Europe, the Middle East, Asia Pacific, the United States and South America. We also provide vouchers and physical gift fulfillment services in Europe.
•
The Money Transfer Segment, which provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, IME and XE, and global account-to-account money transfer services under the brand name HiFX. We offer services under the brand names Ria and IME through a network of sending agents, Company-owned stores (primarily in North America and Europe) and our websites (riamoneytransfer.com and imeremit.com), disbursing money transfers through a worldwide correspondent network that includes approximately 287,000 locations. XE is a provider of foreign currency exchange information and offers money transfer services on its currency data websites (xe.com and x-rates.com), which are executed by a third party. We offer services under the brand name HiFX through our HiFX websites (hifx.co.uk and hifx.com.au) and HiFX customer service representatives. In addition to money transfers, we also offer customers bill payment services (primarily in the U.S.), payment alternatives such as money orders and prepaid debit cards, comprehensive check cashing services for a wide variety of issued checks, along with competitive foreign currency exchange services and mobile top-up. Through our HiFM brand, we offer cash management solutions and foreign currency risk management services to small-to-medium sized businesses.
We have five processing centers in Europe, five in Asia Pacific and two in North America. We have 30 principal offices in Europe, 12 in Asia Pacific, eight in North America, three in the Middle East, two in South America and one in Africa. Our executive offices are located in Leawood, Kansas, USA. With approximately 70% of our revenues denominated in currencies other than the U.S. dollar, any significant changes in foreign currency exchange rates will likely have a significant impact on our results of operations.

SOURCES OF REVENUES AND CASH FLOW
Euronet primarily earns revenues and income based on ATM management fees, transaction fees, commissions and foreign currency exchange margin. Each operating segment’s sources of revenues are described below.
EFT Processing Segment — Revenues in the EFT Processing Segment, which represented approximately 25% and 22% of our total consolidated revenues for the third quarter and first nine months of 2015, respectively, are primarily derived from fees charged for transactions made by cardholders on our proprietary network of ATMs, fixed management fees and transaction fees we charge to customers for operating ATMs and processing debit and credit cards under outsourcing and cross-border acquiring agreements, foreign currency exchange margin on dynamic currency conversion transactions, and fees received for other value added services such as advertising, prepaid telecommunication recharges, bill payment, and money transfers provided over ATMs. Revenues in this segment are also derived from license fees, professional services and maintenance fees for proprietary application software and sales of related hardware.

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epay Segment — Revenues in the epay Segment, which represented approximately 36% and 40% of our total consolidated revenues for the third quarter and first nine months of 2015, respectively, are primarily derived from commissions or processing fees received from mobile phone operators for the processing and distribution of prepaid mobile airtime and commissions earned from the distribution of other electronic payment products, vouchers, and physical gifts. The proportion of our revenues earned from distribution of prepaid mobile phone time as compared with other electronic products has decreased over time, and non-mobile content now produces approximately 45% of our revenues. Other electronic payment products offered by this segment include prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, gift cards, vouchers, transport payments, lottery payments, bill payment, money transfer and digital content such as music, games and software. Agreements with mobile operators and prepaid content providers are important to the success of our business and these agreements permit us to distribute prepaid mobile airtime and other electronic payment products to retailers.
Money Transfer Segment — Revenues in the Money Transfer Segment, which represented approximately 39% and 38% of our total consolidated revenues for the third quarter and first nine months of 2015, respectively, are primarily derived from transaction fees, as well as the margin earned from purchasing foreign currency at wholesale exchange rates and selling the foreign currency to customers at retail exchange rates. We have a sending network in place comprised of agents, customer service representatives, Company-owned stores, primarily in North America and Europe, and our websites riamoneytransfer.com, hifx.co.uk, hifx.com.au, imeremit.com, xe.com and x-rates.com, along with a worldwide network of correspondent agents, consisting primarily of financial institutions in the transfer destination countries. Sending and correspondent agents each earn fees for cash collection and distribution services, which are recognized as direct operating costs at the time of sale.
In April 2014, the Company and Wal-Mart Stores, Inc. launched a new money transfer service called Walmart-2-Walmart Money Transfer Service which allows customers to transfer money to and from Walmart stores in the U.S. Our Ria business executes the transfers with Walmart serving as both the sending agent and payout correspondent. Ria earns a lower margin from these transactions than its traditional money transfers; however, the arrangement has added a significant number of transactions to Ria’s business. The agreement with Walmart establishes Ria as the only party through which Walmart will sell U.S. domestic money transfers branded with Walmart marks. The agreement has an initial term of three years from the launch date which will automatically renew for an initial two year term and subsequent one year terms unless either party provides notice to the contrary. The agreement imposes certain obligations on each party, the most significant being service level requirements by Ria and money transfer compliance requirements by Walmart. Any violation of these requirements by Ria could result in an obligation to indemnify Walmart or termination of the contract by Walmart. However, the agreement allows the parties to resolve disputes by mutual agreement without termination of the agreement.
Corporate Services, Eliminations and Other - In addition to operating in our principal operating segments described above, our “Corporate Services, Eliminations and Other” category includes non-operating activity, certain inter-segment eliminations and the cost of providing corporate and other administrative services to the operating segments, including most share-based compensation expense. These services are not directly identifiable with our reportable operating segments.

OPPORTUNITIES AND CHALLENGES
Our expansion plans and opportunities are currently focused on eight primary areas:
•
increasing the number of ATMs in our independent ATM networks;
•
increasing transactions processed on our network of owned and operated ATMs and POS devices;
•
signing new outsourced ATM and POS terminal management contracts;
•
expanding value added services in our EFT Processing Segment, including the sale of dynamic currency conversion services to banks and retailers;
•
expanding our epay processing network and portfolio of electronic payment products;
•
expanding our money transfer services, cross-currency payment products and bill payment network;
•
expanding our cash management solutions and foreign currency risk management services; and
•
developing our credit and debit card outsourcing business.
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;

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•
our ability to develop products or services, including value added services, to drive increases in transactions and revenues;
•
the expansion of our various business lines in markets where we operate and in new markets;
•
our entry into additional card acceptance and ATM management agreements with banks;
•
our ability to obtain required licenses in markets we intend to enter or expand services;
•
our ability to enter into and renew ATM network cash supply agreements with financial institutions;
•
the availability of financing for expansion;
•
our ability to efficiently install ATMs contracted under newly awarded outsourcing agreements;
•
our ability to renew existing contracts at profitable rates;
•
our ability to maintain pricing at current levels or mitigate price reductions in certain markets;
•
the impact of reductions in ATM interchange fees;
•
our ability to expand and sign additional customers for the cross-border merchant processing and acquiring business; and
•
the continued development and implementation of our software products and their ability to interact with other leading products.

We consistently evaluate and add prospects to our list of potential ATM outsourcing customers. However, we cannot predict any increase or decrease in the number of ATMs we manage under outsourcing agreements because this depends largely on the willingness of banks to enter into outsourcing contracts with us. Due to the thorough internal reviews and extensive negotiations conducted by existing and prospective banking customers in choosing outsource vendors, the process of entering into or renewing outsourcing agreements can take several months. The process is further complicated by legal and regulatory considerations in local countries. These agreements tend to cover large numbers of ATMs, so significant increases and decreases in our pool of managed ATMs could result from the acquisition or termination of one or more of these management contracts. Therefore, the timing of both current and new contract revenues is uncertain and unpredictable.

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.
epay Segment — The continued expansion and development of our epay Segment business will depend on various factors, including, but not necessarily limited to, the following:
•
our ability to maintain and renew existing agreements, and to negotiate new agreements in additional markets with mobile phone operators, digital content providers, agent financial institutions and retailers;
•
our ability to use existing expertise and relationships with mobile operators, digital content providers and retailers to our advantage;
•
the continued use of third-party providers such as ourselves to supply electronic processing solutions for existing and additional digital content;
•
the development of mobile phone networks in the markets in which we do business and the increase in the number of mobile phone users;
•
the overall pace of growth in the prepaid mobile phone and digital content market, including consumer shifts between prepaid and postpaid services;
•
our market share of the retail distribution capacity;
•
the development of new technologies that may compete with POS distribution of prepaid mobile airtime and other products;
•
the level of commission that is paid to the various intermediaries in the electronic payment distribution chain;
•
our ability to fully recover monies collected by retailers;
•
our ability to add new and differentiated products in addition to those offered by mobile operators;
•
our ability to develop and effectively market additional value added services;

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•
our ability to take advantage of cross-selling opportunities with our EFT Processing and Money Transfer Segments, including providing money transfer services through our distribution network; and
•
the availability of financing for further expansion.

In all of the markets in which we operate, we are experiencing significant competition which will impact the rate at which we may be able to grow organically. Competition among prepaid mobile airtime and digital content distributors results in the increase of commissions paid to retailers and increases in retailer attrition rates. To grow, we must capture market share from other prepaid mobile airtime and digital content distributors, offer a superior product offering and demonstrate the value of a global network. In certain markets in which we operate, we believe that many of the factors that may contribute to rapid growth (growth in electronic payment products, expansion of our network of retailers and access to all mobile operators' products) remain present.
Money Transfer Segment — The continued expansion and development of our Money Transfer Segment business will depend on various factors, including, but not necessarily limited to, the following:
•
the continued growth in worker migration and employment opportunities;
•
the mitigation of economic and political factors that have had an adverse impact on money transfer volumes, such as changes in the economic sectors in which immigrants work and the developments in immigration policies in the U.S.;
•
the continuation of the trend of increased use of electronic money transfer and bill payment services among high-income individuals, immigrant workers and the unbanked population in our markets;
•
our ability to maintain our agent and correspondent networks;
•
our ability to offer our products and services or develop new products and services at competitive prices to drive increases in transactions;
•
the development of new technologies that may compete with our money transfer network;
•
the expansion of our services in markets where we operate and in new markets;
•
our ability to strengthen our brands;
•
our ability to fund working capital requirements;
•
our ability to recover from agents funds collected from customers and our ability to recover advances made to correspondents;
•
our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate;
•
our ability to take advantage of cross-selling opportunities with our epay Segment, including providing prepaid services through Ria’s stores and agents worldwide;
•
our ability to leverage our banking and merchant/retailer relationships to expand money transfer corridors to Europe, Asia and Africa, including high growth corridors to Central and Eastern European countries;
•
the availability of financing for further expansion;
•
the ability to maintain banking relationships necessary for us to service our customers;
•
our ability to successfully expand our agent network in Europe using our payment institution licenses under the Payment Services Directive and in the United States; and
•
our ability to provide additional value-added products under the XE brand.

For all segments, our continued expansion may involve additional acquisitions that could divert our resources and management time and require integration of new assets with our existing networks and services. Our ability to effectively manage our growth has required us to expand our operating systems and employee base, particularly at the management level, which has added incremental operating costs. Any inability to continue to effectively manage expansion could have a material adverse effect on our business, growth, financial condition and results of operations. Inadequate technology and resources would impair our ability to maintain current processing technology and efficiencies, as well as deliver new and innovative services to compete in the marketplace.


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SEGMENT SUMMARY RESULTS OF OPERATIONS
Revenues and operating income by segment for the three and nine months ended September 30, 2015 and 2014 are summarized in the tables below:
 
 
Revenues for the Three Months Ended September 30,
 
Year-over-Year Change
 
Revenues for the Nine Months Ended September 30,
 
Year-over-Year Change
(dollar amounts in thousands)
 
2015
 
2014
 
Increase
(Decrease)
Amount
 
Increase
(Decrease)
Percent
 
2015
 
2014
 
Increase
(Decrease) Amount
 
Increase
(Decrease) Percent
EFT Processing
 
$
118,895

 
$
107,503

 
$
11,392

 
11
 %
 
$
286,650

 
$
271,580

 
$
15,070

 
6
 %
epay
 
174,547

 
195,086

 
(20,539
)
 
(11
)%
 
517,296

 
562,129

 
(44,833
)
 
(8
)%
Money Transfer
 
188,232

 
151,250

 
36,982

 
24
 %
 
498,689

 
369,568

 
129,121

 
35
 %
Total
 
481,674

 
453,839

 
27,835

 
6
 %
 
1,302,635

 
1,203,277

 
99,358

 
8
 %
Corporate services, eliminations and other
 
(301
)
 
(417
)
 
116

 
(28
)%
 
(952
)
 
(1,078
)
 
126

 
(12
)%
Total
 
$
481,373

 
$
453,422

 
$
27,951

 
6
 %
 
$
1,301,683

 
$
1,202,199

 
$
99,484

 
8
 %
 
 
Operating Income (Expense) for the Three Months Ended September 30,
 
Year-over-Year Change
 
Operating Income (Expense) for the Nine Months Ended September 30,
 
Year-over-Year Change
(dollar amounts in thousands)
 
2015
 
2014
 
Increase
(Decrease)Amount
 
Increase
(Decrease)
Percent
 
2015
 
2014
 
Increase
(Decrease)Amount
 
Increase
(Decrease) Percent
EFT Processing
 
$
40,316

 
$
34,210

 
$
6,106

 
18
 %
 
$
73,724

 
$
68,562

 
$
5,162

 
8
 %
epay
 
14,607

 
12,451

 
2,156

 
17
 %
 
46,360

 
41,533

 
4,827

 
12
 %
Money Transfer
 
23,750

 
12,583

 
11,167

 
89
 %
 
55,308

 
27,336

 
27,972

 
102
 %
Total
 
78,673

 
59,244

 
19,429

 
33
 %
 
175,392

 
137,431

 
37,961

 
28
 %
Corporate services, eliminations and other
 
(8,399
)
 
(8,512
)
 
113

 
(1
)%
 
(25,775
)
 
(28,189
)
 
2,414

 
(9
)%
Total
 
$
70,274

 
$
50,732

 
$
19,542

 
39
 %
 
$
149,617

 
$
109,242

 
$
40,375

 
37
 %


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Impact of changes in foreign currency exchange rates
Our revenues and local expenses are recorded in the functional currencies of our operating entities and translated into U.S. dollars for financial reporting purposes; therefore, amounts we earn outside the U.S. are negatively impacted by the stronger U.S. dollar and positively impacted by the weaker U.S. dollar. On average, the U.S. dollar was considerably stronger in the third quarter and first nine months of 2015 than the same periods of 2014 compared to currencies of most markets in which we operate. Considering the results by country and the associated functional currency, we estimate that our reported consolidated operating income for the third quarter and first nine months of 2015 was 16% and 15% less, respectively, due to the changes in foreign currency exchange rates when compared to the same periods of 2014.
To provide further perspective on the impact of foreign currency exchange rates, the following table shows the changes in values relative to the U.S. dollar of the currencies of the countries in which we have our most significant operations:

 
 
Average Translation Rate
Three Months Ended September 30,
 
Decrease Percent
 
Average Translation Rate
Nine Months Ended September 30,
 
Decrease Percent
Currency (dollars per foreign currency)
 
2015
 
2014
 
 
2015
 
2014
 
Australian dollar
 
$
0.7251

 
$
0.9244

 
(22
)%
 
$
0.7628

 
$
0.9179

 
(17
)%
Brazilian real
 
$
0.2840

 
$
0.4398

 
(35
)%
 
$
0.3201

 
$
0.4374

 
(27
)%
British pound
 
$
1.5487

 
$
1.6690

 
(7
)%
 
$
1.5321

 
$
1.6691

 
(8
)%
euro
 
$
1.1127

 
$
1.3246

 
(16
)%
 
$
1.1153

 
$
1.3554

 
(18
)%
Hungarian forint
 
$
0.0036

 
$
0.0043

 
(16
)%
 
$
0.0036

 
$
0.0044

 
(18
)%
Indian rupee
 
$
0.0154

 
$
0.0165

 
(7
)%
 
$
0.0158

 
$
0.0165

 
(4
)%
New Zealand dollar
 
$
0.6508

 
$
0.8420

 
(23
)%
 
$
0.7113

 
$
0.8463

 
(16
)%
Polish zloty
 
$
0.2657

 
$
0.3174

 
(16
)%
 
$
0.2685

 
$
0.3249

 
(17
)%

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COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
EFT PROCESSING SEGMENT
The following table presents the results of operations for the three and nine months ended September 30, 2015 and 2014 for our EFT Processing Segment:
 
 
Three Months Ended
September 30,
 
Year-over-Year Change
 
Nine Months Ended
September 30,
 
Year-over-Year Change
(dollar amounts in thousands)
 
2015
 
2014
 
Increase (Decrease) Amount
 
Increase
(Decrease) Percent
 
2015
 
2014
 
Increase (Decrease) Amount
 
Increase (Decrease) Percent
Total revenues
 
$
118,895

 
$
107,503

 
$
11,392

 
11
 %
 
$
286,650

 
$
271,580

 
$
15,070

 
6
 %
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct operating costs
 
51,550

 
46,612

 
4,938

 
11
 %
 
135,754

 
125,773

 
9,981

 
8
 %
Salaries and benefits
 
11,862

 
12,155

 
(293
)
 
(2
)%
 
34,466

 
35,127

 
(661
)
 
(2
)%
Selling, general and administrative
 
7,052

 
6,516

 
536

 
8
 %
 
19,432

 
19,167

 
265

 
1
 %
Depreciation and amortization
 
8,115

 
8,010

 
105

 
1
 %
 
23,274

 
22,951

 
323

 
1
 %
Total operating expenses
 
78,579

 
73,293

 
5,286

 
7
 %
 
212,926

 
203,018

 
9,908

 
5
 %
Operating income
 
$
40,316

 
$
34,210

 
$
6,106

 
18
 %
 
$
73,724

 
$
68,562

 
$
5,162

 
8
 %
Transactions processed (millions)
 
348

 
321

 
27

 
8
 %
 
980

 
942

 
38

 
4
 %
ATMs as of September 30,
 
21,128

 
19,808

 
1,320

 
7
 %
 
21,128

 
19,808

 
1,320

 
7
 %
Average ATMs
 
21,781

 
19,579

 
2,202

 
11
 %
 
21,348

 
18,995