News Column

EURONET WORLDWIDE INC - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

February 27, 2014

Company Overview, Geographic Locations and Principal Products and Services Euronet is 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") and card outsourcing services, card issuing and merchant acquiring services; electronic distribution of prepaid mobile airtime and other electronic payment products; and global consumer money transfer services. We operate in the following three segments: The EFT Processing Segment, which processes transactions for a network of 18,311 ATMs and approximately 68,000 POS terminals across Europe,



the Middle East and Asia Pacific. We provide 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, 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 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 name Ria. We offer this service through a network of sending agents, Company-owned stores (primarily in North America and Europe) and via the Company's website (at riamoneytransfer.com), disbursing money transfers through a worldwide correspondent network that includes approximately 216,000



locations. 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.

We have four processing centers in Europe, three in Asia Pacific and two in North America. We have 30 principal offices in Europe, 10 in Asia Pacific, six 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 76% 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 (for a further discussion, see Item 1A - Risk Factors and Item 7A - Quantitative and Qualitative Disclosures About Market Risk). Sources of Revenues and Cash FlowEuronet primarily earns revenues and income from ATM management fees, transaction fees, commissions and foreign currency spreads. Each operating segment's sources of revenues are described below. EFT Processing Segment - Revenues in the EFT Processing Segment, which represented approximately 21% of total consolidated revenues for the year ended December 31, 2013, are 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 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. 40



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epay Segment - Revenues in the epay Segment, which represented approximately 53% of total consolidated revenues for the year ended December 31, 2013, 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. Due to certain provisions in our mobile phone operator agreements, the operators have the ability to reduce the overall commission paid on top-up transactions. 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 profit 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 certain markets, retailers may negotiate directly with the mobile phone operators and prepaid content providers for their own commission rates, which also limits our ability to pass through reductions in commissions. Agreements with mobile operators and prepaid content providers are important to the success of our business. These agreements permit us to distribute prepaid mobile airtime and other electronic payment products to the end consumer. 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. Money Transfer Segment - Revenues in the Money Transfer Segment, which represented approximately 26% of total consolidated revenues for the year ended December 31, 2013, 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 consumers at retail exchange rates. We have a sending agent network in place comprised of agents, Company-owned stores, primarily in North America and Europe, and our riamoneytransfer.com website, 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. These fees are recognized as direct operating costs at the time of sale. 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 share-based compensation expense. These services are not directly identifiable with our reportable operating segments.



Opportunities and Challenges

Our expansion plans and opportunities are focused on six primary areas: signing new outsourced ATM and POS terminal management contracts and

adding ATMs to our network;

increasing transactions processed on our network of owned and operated

ATMs and POS devices;

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 and bill payment network; 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; 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;



the availability of financing for expansion;

our ability to efficiently install ATMs contracted under newly awarded outsourcing agreements; 41



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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 outsource customers. However, we cannot predict the 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 the legal and regulatory considerations of 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 acquisition or termination 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. We have been able to enter into agreements under which we contribute the right to 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. epay Segment - The continued expansion and development of the epay Segment business will depend on various factors, including, but not necessarily limited to, the following: our ability to maintain and renew existing agreements, and to negotiate



new agreements in additional markets with mobile operators, content

providers, agent financial institutions and retailers;

our ability to use existing expertise and relationships with mobile

operators, 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 content;

the development of mobile phone networks in the markets in which we do

business and the increase in the number of mobile phone users;

the overall pace of growth in the prepaid mobile phone market,

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;



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 take advantage of cross-selling opportunities with our EFT 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 grow organically. Competition among prepaid mobile airtime 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 distributors, offer a superior product offering and demonstrate the value of a global network. In certain markets in which we operate, 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. 42



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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 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;

the ability to grow our online money transfer services;

the 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; and

our ability to successfully expand our agent network in Europe using our Payment Services Directive license. The accounting policies of each segment are the same as those referenced in the summary of significant accounting policies (see Note 3, Summary of Significant Accounting Policies and Practices, to the Consolidated Financial Statements). 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. An inability to continue to effectively manage expansion could have a material adverse effect on our business, growth, financial condition or 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. 43



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Segment Revenues and Operating Income For The Years Ended December 31, 2013, 2012 and 2011 Revenues Operating Income (in thousands) 2013 2012 2011 2013 2012 2011 EFT Processing $ 296,240$ 237,948$ 199,249$ 81,350$ 44,408$ 33,208 epay 748,680 714,125 677,051 39,461 19,501 56,774 Money Transfer 370,365 316,135 285,299 31,095 24,623 17,126 Total 1,415,285 1,268,208 1,161,599 151,906 88,532 107,108 Corporate services and eliminations (2,116 ) (607 ) (295 ) (33,495 ) (30,527 ) (27,971 ) Total $ 1,413,169$ 1,267,601$ 1,161,304 $



118,411 $ 58,005$ 79,137

Summary

Our annual consolidated revenues increased by 11% for 2013 compared to 2012 and by 9% for 2012 compared to 2011. The increase in revenues for 2013 was primarily due to an increase in the number of ATMs under management, along with an increase in demand for dynamic currency conversion ("DCC") and other value added services, in our EFT Processing Segment, an increase in the number of transactions processed by our epay subsidiaries in the U.S. and Germany, an increase in the number of money transfers processed and the impact of the results of the acquired businesses of ezi-pay Limited ("ezi-pay") since November 2012 and Pure Commerce Pty Limited ("Pure Commerce") since January 2013. These increases were partly offset by a decrease in the number of prepaid transactions processed in Australia and the U.K. and a decrease in the average commission earned per prepaid transaction in Brazil. The increase in revenues for 2012 was primarily due to an increase in ATMs under management, along with an increase in demand for DCC and other value added services, in our EFT Processing Segment, an increase in the number of transactions processed by our epay subsidiaries in the U.S. and Germany, an increase in the number of money transfers processed and the impact of full year results from the acquisition of cadooz (located in Germany) in September 2011. These increases were partly offset by a decrease in the number of prepaid transactions processed in Australia, Brazil and Spain, a decrease in the average commission earned per prepaid mobile transaction in the U.K. and the impact of the weaker foreign currencies. Our operating income for 2013 and 2012 includes non-cash goodwill and intangible asset impairment charges of $18.4 million and $28.7 million, respectively, as discussed in Note 8, Goodwill and Acquired Intangible Assets, Net, to the Consolidated Financial Statements. Additionally, operating income for 2013 includes a $19.3 million acquisition-related contingent consideration gain, as discussed in Note 17, Financial Instruments and Fair Value Measurements, to the Consolidated Financial Statements. Excluding the impairment charges and the contingent consideration gain, our operating income increased by 35% for 2013 compared to 2012 and 10% for 2012 compared to 2011. Excluding the impairment charges and contingent consideration gain, the remaining increase for 2013 was primarily due to the increase in ATMs under management, along with the increase in demand for DCC and other value added services, the increase in the number of prepaid transactions processed in the U.S. and Germany, the increase in the number of money transfer transactions processed and the acquisition of ezi-pay. These increases were partly offset by the decrease in revenues at our epay subsidiary in Australia. Excluding the impairment charges, the remaining increase for 2012 was primarily due to the increase in ATMs under management, along with the increase in demand for DCC and other value added services, the increase in the number of transactions processed by our epay subsidiaries in the U.S. and Germany, the increase in the number of money transfers processed and the impact of full year results from the acquisition of cadooz. These increases were partly offset by the decrease in revenues at our epay subsidiaries in Australia, Brazil and Spain and the impact of the weaker foreign currencies. Net income attributable to Euronet for 2013, 2012 and 2011 was $88.0 million, or $1.69 per diluted share, $20.5 million, or $0.40 per diluted share, and $37.0 million, or $0.71 per diluted share, respectively. 44



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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; 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. Considering the results by country and the associated functional currency, our consolidated operating income for 2013 was not significantly influenced by the changes in foreign currency exchange rates when compared to 2012. However, we estimate that our consolidated operating income for 2012 was approximately 6% higher when compared to 2011 as a result of changes in foreign currency exchange rates. If significant, in our discussion we will refer to the impact of fluctuations in foreign currency exchange rates in our comparison of operating segment results. 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 during 2013 and 2012, of the currencies of the countries in which we have our most significant operations: 2013 Average Translation Rate Increase Year Ended December 31, (Decrease) 2012 Decrease Currency 2013 2012 2011 Percent Percent Australian dollar $ 0.9677$ 1.0357$ 1.0329 (7 )% n/m Brazilian real $ 0.4654$ 0.5143$ 0.5993 (10 )% (14 )% British pound $ 1.5645$ 1.5852$ 1.6042 (1 )% (1 )% euro $ 1.3284$ 1.2862$ 1.3923 3 % (8 )% Hungarian forint $ 0.0045$ 0.0045$ 0.0050 n/m (11 )% Indian rupee $ 0.0172$ 0.0188$ 0.0215 (9 )% (13 )% Polish zloty $ 0.3170$ 0.3080$ 0.3395 3 % (9 )% ___________________ n/m - Not meaningful.



Comparison of Operating Results For The Years Ended December 31, 2013, 2012 and 2011 - By Operating Segment

EFT Processing Segment



The following table summarizes the results of operations for our EFT Processing Segment for the years ended December 31, 2013 and 2012:

Year Ended December 31, Year-over-Year Change Increase (Decrease) Increase (dollar amounts in thousands) 2013 2012 Amount Percent Total revenues $ 296,240$ 237,948$ 58,292 24 % Operating expenses: Direct operating costs 141,381 114,826 26,555 23 % Salaries and benefits 40,150 32,784 7,366 22 % Selling, general and administrative 23,141 20,628 2,513 12 % Acquisition-related contingent consideration gain (19,319 ) - (19,319 ) n/m Depreciation and amortization 29,537 25,302 4,235 17 % Total operating expenses 214,890 193,540 21,350 11 % Operating income $ 81,350$ 44,408$ 36,942 83 % Transactions processed (millions) 1,188 1,164 24 2 % ATMs as of December 31 18,311 17,600 711 4 % Average ATMs 17,764 16,692 1,072 6 % ___________________ n/m - Not meaningful. 45



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Revenues

Our revenues for 2013 increased when compared to 2012, primarily due to an increase in the number of ATMs under management, an increase in transactions processed on brown label ATMs in India, an increase in demand for dynamic currency conversion ("DCC") and other valued added services on our ATMs under management and the impact of DCC revenues earned on POS devices from our acquisition of Pure Commerce in January 2013. Average monthly revenues per ATM were $1,390 for 2013 compared to $1,188 for 2012. Revenues per transaction were $0.25 for 2013 compared to $0.20 for 2012. These increases were primarily the result of revenue growth from DCC and other value added services, both of which earn higher revenues per transaction than other ATM services and the cancellation of an ATM driving and managed services contract in India. The revenues per ATM and per transaction earned under the canceled contract were significantly lower than other ATM services. Our contracts in the EFT Processing Segment tend to cover large numbers of ATMs, so significant increases and decreases in our pool of managed ATMs could result from entry into or termination of these management contracts. Banks have historically been very deliberate in negotiating these agreements and have evaluated a wide range of matters when deciding to choose an outsource vendor. Generally, the process of negotiating a new agreement is subject to extensive management analysis and approvals and the process typically takes several months. Increasing consolidation in the banking industry could make this process less predictable. Our existing contracts generally have terms of five to seven years and a number of them will expire or be up for renewal each year for the next few years. As a result, we expect to be regularly engaged in discussions with one or more of our customer banks to either renew or restructure our ATM outsourcing agreements. For contracts that we are able to renew, as was the case for certain contract renewals in prior years, we expect customers to seek rate concessions or up-front payments because of the greater availability of alternative processing solutions in many of our markets now, as compared to when we entered into the contracts. We offer DCC over our Independent ATM Deployed networks, ATM networks that we operate on an outsourced basis for banks, and over ATM networks or POS devices as a stand-alone service. On ATMs or POS devices that are operated for banks, or where we offer DCC as a stand-alone service to banks or merchants, we share the foreign exchange margin. The foreign exchange margin on a DCC transaction can substantially increase the amount Euronet earns from the underlying ATM or POS transaction and increase the profitability of those ATMs on which DCC is offered. Direct operating costs Direct operating costs consist primarily of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications and the cost of data center operations-related personnel, as well as the processing centers' facility-related costs and other processing center-related expenses. Direct operating costs increased for 2013 compared to 2012 primarily due to the increase in the number of ATMs under management, the acquisition of Pure Commerce and the increase in the number of transactions processed on brown label ATMs. Gross profit Gross profit, which is calculated as revenues less direct operating costs, was $154.9 million for 2013 compared to $123.1 million for 2012. This increase was primarily due to growth in revenues from DCC and other value added services, including revenues from DCC earned on POS devices related to our acquisition of Pure Commerce and the increase in ATMs under management. Gross profit as a percentage of revenues ("gross margin") increased to 52.3% for 2013 from 51.7% for 2012, primarily due to the increase in revenues from DCC and other value added services discussed above, both of which earn a higher gross profit than other services. Salaries and benefits The increase in salaries and benefits for 2013 compared to 2012 was primarily due to adding employees to support the growth in ATMs under management, along with the impact of our acquisition of Pure Commerce. As a percentage of revenues, these costs decreased slightly to 13.6% for 2013 from 13.8% for 2012. Selling, general and administrative The increase in selling, general and administrative expenses for 2013 compared to 2012 was primarily due to the impact of our acquisition of Pure Commerce and costs incurred to support the growth in ATMs under management. As a percentage of revenues, selling, general and administrative expenses decreased to 7.8% for 2013 from 8.7% for 2012, primarily due to the increase in revenues from DCC and value added services discussed above, which require minimal incremental support costs. 46



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Acquisition-related contingent consideration gain Euronet adjusted to fair value the acquisition-related contingent consideration liability related to Pure Commerce, based on its assessment that the performance targets for gross profit and EBITDA would not be met. The change in fair value resulted in the recognition of a $19.3 million gain (see further discussion in Note 17, Financial Instruments and Fair Value Measurements, to the Consolidated Financial Statements). Depreciation and amortization Depreciation and amortization expense increased for 2013 compared to 2012 primarily due to the amortization of acquired intangible assets related to Pure Commerce and the increase in ATMs under management discussed above, partly offset by certain software assets becoming fully amortized during 2013. As a percentage of revenues, depreciation and amortization expense decreased to 10.0% for 2013 from 10.6% for 2012, primarily due to the increase in revenues from DCC and other value added services discussed above, which require minimal incremental support costs. Operating income Operating income increased for 2013 compared to 2012, primarily due to the acquisition-related contingent consideration gain, an increase in the number of ATMs under management, an increase in the number of transactions processed on brown label ATMs in India and growth in revenues earned from DCC and other value added services, partly offset by the increase in amortization expense. Excluding the acquisition-related contingent consideration gain, operating income as a percentage of revenues ("operating margin") for 2013 was 20.9% compared to 18.7% for 2012 and operating income per transaction increased to $0.05 for 2013 from $0.04 for 2012. These increases were primarily due to the growth in revenues earned from DCC and other value added services on our ATMs under management, partly offset by the increase in amortization expense.



2012 Compared to 2011

The following table summarizes the results of operations for our EFT Processing Segment for the years ended December 31, 2012 and 2011:

Year Ended December 31, Year-over-Year Change Increase Increase (dollar amounts in thousands) 2012

2011 Amount Percent Total revenues $ 237,948$ 199,249$ 38,699 19 % Operating expenses: Direct operating costs 114,826 95,739 19,087 20 % Salaries and benefits 32,784 29,487 3,297 11 % Selling, general and administrative 20,628 19,798 830 4 % Depreciation and amortization 25,302 21,017 4,285 20 % Total operating expenses 193,540 166,041 27,499 17 % Operating income $ 44,408$ 33,208$ 11,200 34 % Transactions processed (millions) 1,164 943 221 23 % ATMs as of December 31 17,600 14,224 3,376 24 % Average ATMs 16,692 12,114 4,578 38 % Revenues Our revenues for 2012 increased when compared to 2011, primarily due to an increase in the number of ATMs under management, including those added from 2011 acquisitions, an increase in demand for DCC and other value added services and the acquisition of the remaining 51% of Euronet Middle East W.L.L in January 2012. These increases were partly offset by the impact of the weaker foreign currencies. 47



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Average monthly revenues per ATM were $1,188 for 2012 compared to $1,371 for 2011. Revenues per transaction were $0.20 for 2012 compared to $0.21 for 2011. These decreases were primarily the result of ATM and transaction growth in India and Pakistan, where revenues per ATM and revenues per transaction are generally lower than those in Europe, and the impact of the weaker foreign currencies. These decreases were partly offset by revenues growth from DCC and other value added services, which earn higher revenues per transaction than other ATM transactions. Direct operating costs Direct operating costs increased for 2012 compared to 2011 primarily due to an increase in the number of ATMs under management discussed above, partly offset by the impact of weaker foreign currencies. Gross profit Gross profit was $123.1 million for 2012 compared to $103.5 million for 2011. This increase was primarily due to the increase in the number of ATMs under management, growth in revenues from DCC and other value added services for which we earn a higher gross profit than other services and the acquisition of the remaining 51% of Euronet Middle East W.L.L. These increases were partly offset by the impact of the weaker foreign currencies. Gross margin decreased slightly to 51.7% for 2012 from 52.0% for 2011. Salaries and benefits The increase in salaries and benefits for 2012 compared to 2011 was primarily due to adding employees to support the growth in ATMs under management discussed above, the acquisition of the remaining 51% of Euronet Middle East W.L.L and increased bonus expense in certain countries for 2012, partly offset by the impact of the weaker foreign currencies. As a percentage of revenues, these costs decreased to 13.8% for 2012 from 14.8% for 2011. This decrease was primarily due to the growth in revenues earned from DCC and value added services, which require minimal incremental support costs. Selling, general and administrative The increase in selling, general and administrative expenses for 2012 compared to 2011 was primarily due to increased operating costs to support growth in the business, partly offset by the impact of the weaker foreign currencies. As a percentage of revenues, selling, general and administrative expenses decreased to 8.7% for 2012 from 9.9% for 2011. This decrease resulted from growth in revenues from value added services, which require minimal incremental support costs. Depreciation and amortization Depreciation and amortization expense increased for 2012 compared to 2011 primarily due to the increase in ATMs under management discussed above and the amortization of intangible assets related to the acquisition of the remaining 51% of Euronet Middle East W.L.L., partly offset by the impact of the weaker foreign currencies. As a percentage of revenues, depreciation and amortization expense increased slightly to 10.6% for 2012 from 10.5% for 2011. Operating income Operating margin for 2012 was 18.7% compared to 16.7% for 2011. The increase in operating income and operating margin in 2012 compared to 2011 was primarily due to the increase in ATMs under management, growth in revenues from DCC and other value added services, which require minimal incremental support costs, and the acquisition of the remaining 51% of Euronet Middle East W.L.L. These increases were partly offset by the impact of the weaker foreign currency. Operating income per transaction was unchanged at $0.04 for both 2012 and 2011, reflecting the increase in revenues from DCC and other value added services, partly offset by transaction growth in India and Pakistan. 48



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epay Segment

The following table summarizes the results of operations for our epay Segment for the years ended December 31, 2013 and 2012:

Year Ended December 31, Year-over-Year Change Increase Increase (Decrease) (dollar amounts in thousands) 2013 2012 (Decrease) Amount Percent Total revenues $ 748,680$ 714,125 $ 34,555 5 % Operating expenses: Direct operating costs 575,787 548,390 27,397 5 % Salaries and benefits 57,251 53,399 3,852 7 % Selling, general and administrative 41,000 44,496 (3,496 ) (8 )% Goodwill and acquired intangible assets impairment 18,425 28,740 (10,315 ) n/m Depreciation and amortization 16,756 19,599 (2,843 ) (15 )% Total operating expenses 709,219 694,624 14,595 2 % Operating income $ 39,461$ 19,501 $ 19,960 102 % Transactions processed (millions) 1,115 1,113 2 n/m _____________________ n/m - Not meaningful. Revenues The increase in revenues for 2013 compared to 2012 was primarily due to an increase in the number of prepaid mobile transactions processed in the U.S., increased demand for non-mobile products in Germany, an increase in voucher redemptions and physical gift fulfillments at our cadooz subsidiary and the impact of our acquisition of ezi-pay in November 2012. These increases were partly offset by revenue declines in Australia, Brazil and the U.K. The decrease in revenues for Australia and the U.K. were the result of increased competitive pressures and certain mobile operators modifying their distribution strategies to drive consumer demand for top-up services to on-line or mobile device channels. The decrease in revenues for Brazil was primarily due to a decrease in the average commission earned per transaction. We expect most of our future revenue growth to be derived from: (i) additional electronic payment products sold over the base of POS terminals, (ii) valued added services, (iii) developing markets or markets in which there is organic growth in the electronic top-up sector overall, and (iv) acquisitions, if available and commercially appropriate. Revenues per transaction were $0.67 for 2013 and $0.64 for 2012. This increase was primarily due to an increase in revenues at our cadooz subsidiary, where revenues are recorded at gross value, in contrast to our other electronic payment products which are recorded at net value, and the impact of a decrease in the number transactions processed at our ATX subsidiary. This increase was partly offset by growth in the number of transactions processed in India, where revenues per transaction are considerably lower than average and a decrease in the average commission earned in Brazil. At our ATX subsidiary, we provide only transaction processing services without significant direct costs and other operating costs related to installing and managing terminals. Therefore, the revenues we recognize from these transactions are a fraction of those recognized on average transactions, but with strong contribution to gross profit. Direct operating costs Direct operating costs in the epay Segment include the commissions we pay to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, expenses required to operate POS terminals and the cost of vouchers sold and physical gifts fulfilled. The increase in direct operating costs was primarily due to the growth in transactions processed in the U.S. and Germany, increased voucher redemptions and physical gifts fulfilled at our cadooz subsidiary, increased commissions costs in Brazil and the impact of our acquisition of ezi-pay. These increases were partly offset by the decrease in the number of transactions processed in Australia and the U.K. 49



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Gross profit Gross profit, which represents revenues less direct costs, was $172.9 million for 2013 compared to $165.7 million for 2012. The increase in gross profit was primarily due to the increase in transactions processed in Germany (mainly from increased demand for non-mobile products), the U.S. and at our cadooz subsidiary, along with the impact of our acquisition of ezi-pay. These increases were partly offset by the decrease in transactions processed in Australia and the U.K., and the increase in commission costs in Brazil, as a result of a larger percentage of transactions being conducted through large retailers. Gross margin decreased slightly to 23.1% for 2013 from 23.2% for 2012. Gross profit per transaction increased to $0.16 for 2013 from $0.15 for 2012, primarily due to the increase of non-mobile transactions discussed above. Salaries and benefits The increase in salaries and benefits for 2013 compared to 2012 was primarily due to an increase in staff in Germany and the U.S. to support the increases in transactions processed, the impact of our acquisition of ezi-pay and the full year impact of costs in Russia and Turkey. These increases were partly offset by a decrease in salaries and benefits in Australia and Brazil in response to a decrease in revenues. As a percentage of revenues, salaries and benefits increased slightly to 7.6% for 2013 from 7.5% for 2012. Selling, general and administrative The decrease in selling, general and administrative expenses for 2013 compared to 2012 was primarily due to a decrease in professional fees and bad debt expense, partly offset by the impact of our acquisition of ezi-pay. As a percentage of revenues, these expenses decreased to 5.5% for 2013 from 6.2% for 2012, primarily due to the decreases in revenues in Australia, Brazil, and the U.K., along with the decrease in professional fees and bad debt expense. Goodwill and acquired intangible asset impairment During the fourth quarter of 2013, epay Australia and epay Spain recorded non-cash charges for impairment of goodwill of $12.3 million and $6.1 million, respectively (see further discussion in Note 8, Goodwill and Acquired Intangible Assets, Net to the Consolidated Financial Statements). The goodwill impairment charge in Australia was the result of continuing declines in the demand for mobile top-up services, caused by certain large retailers (which have a significant share of the retail market) negotiating direct agreements with two mobile operators and certain mobile operators modifying their distribution strategies to drive consumer demand for top-up services to on-line or mobile device channels. In Spain, the goodwill impairment charge was the result of the longer term effect of poor economic conditions, including continued high levels of unemployment and increased competitive pressures. In response to the business challenges in Australia and Spain, the Company has continued to sell additional products and services to mobile operators and develop strategies to increase the distribution of other prepaid products. However, in the fourth quarter of 2013, the Company concluded that while future cash flows from existing agreements with mobile operators and from the launch of new products would likely grow steadily over time, the growth would not add the level of cash flows previously forecasted. Based upon these revised future cash flow forecasts, the Company concluded that the resulting valuations were not sufficient to support the goodwill carrying values of epay Australia and epay Spain. Therefore, the impairment charges were recorded in the period. Depreciation and amortization Depreciation and amortization expense primarily represents amortization of acquired intangible assets and the depreciation of POS terminals we install in retail stores. Depreciation and amortization expense decreased for 2013 compared to 2012. As a percentage of revenues, these expenses decreased to 2.2% for 2013 from 2.7% for 2012. These decreases were the result of certain acquired intangible assets becoming fully amortized during 2012 and the first quarter of 2013, partly offset by the impact of our acquisition of ezi-pay. Operating income Operating income for 2013 and 2012 includes non-cash goodwill and intangible asset impairment charges of $18.4 million and $28.7 million, respectively. Excluding the impairment charges, operating income was $57.9 million for 2013 and $48.2 million for 2012. This increase was primarily due to the growth in transactions processed in Germany, the U.S., and at our cadooz subsidiary, along with the operating income from the acquisition of ezi-pay and the decrease in amortization expense, professional fees and bad debt expense. These increases were partly offset by declines in revenues and transactions processed in Australia and increased commission costs in Brazil. Excluding the impairment charges, operating margin was 7.7% for 2013 compared to 6.8% for 2012 and operating income per transaction was $0.05 for 2013 compared to $0.04 for 2012. These increases were primarily due to the increases in revenues discussed above, along with the decrease in amortization expense, professional fees, and bad debt expense, partly offset by increased commission costs in Brazil. 50



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The following table summarizes the results of operations for our epay Segment for the years ended December 31, 2012 and 2011:

Year Ended December 31, Year-over-Year Change Increase Increase (Decrease) (Decrease) (dollar amounts in thousands) 2012 2011 Amount Percent Total revenues $ 714,125$ 677,051$ 37,074 5 % Operating expenses: Direct operating costs 548,390 514,429 33,961 7 % Salaries and benefits 53,399 48,386 5,013 10 % Selling, general and administrative 44,496 38,711 5,785 15 % Goodwill impairment 28,740 - 28,740 n/m Depreciation and amortization 19,599 18,751 848 5 % Total operating expenses 694,624 620,277 74,347 12 % Operating income $ 19,501$ 56,774$ (37,273 ) (66 )% Transactions processed (millions) 1,113 1,064 49 5 % _____________________ n/m - Not meaningful. Revenues The increase in revenues for 2012 compared to 2011 was primarily due to the increase in the number of prepaid mobile transactions processed in the U.S., increased demand for non-mobile products in Germany and the impact of our acquisition of cadooz in September 2011. These increases were partly offset by revenue declines in Australia, Brazil, Spain and the U.K, and the impact of the weaker foreign currencies. The decrease in revenues in Australia was caused by certain large retailers entering into direct agreements with two mobile operators during the second half of 2011. The decrease in revenues in Brazil was caused by certain mobile operators modifying their distribution strategies beginning in the fourth quarter of 2011. The revenue declines in Spain and the U.K. were mostly driven by economic and competitive pressures and lower cost calling plans. Revenues per transaction were unchanged at $0.64 for both 2012 and 2011, resulting from an increase in revenues per transaction, primarily due to the impact of the cadooz transactions, which are recorded at gross value, in contrast to our other electronic payment products which are recorded at net value, offset by a decrease in revenues per transaction in Australia, Brazil, Spain and the U.K. for the reasons discussed above, growth in transactions at our ATX subsidiary and the impact of weaker foreign currencies. Direct operating costs The increase in direct operating costs was primarily due to the growth in transactions processed in the U.S. and Germany as well as the impact of our acquisition of cadooz, partly offset by the decrease in the number of transactions processed in Australia, Brazil and Spain, and the impact of the weaker foreign currencies. Gross profit Gross profit was $165.7 million for 2012 compared to $162.6 million for 2011. The increase in gross profit was primarily due to increased transaction volumes in the U.S. and Germany and the impact of our acquisition of cadooz. These increases were partly offset by a decline in transaction volumes in Australia, Brazil and Spain and the impact of the weaker foreign currencies. Gross margin decreased to 23.2% for 2012 from 24.0% for 2011, primarily due to the impact of the cadooz revenues, which are recorded at gross value but have lower gross margins and the decreases in revenues in certain markets discussed above. Gross profit per transaction remained unchanged at $0.15 for both 2012 and 2011. 51



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Salaries and benefits The increase in salaries and benefits for 2012 compared to 2011 was primarily due to the impact of our acquisition of cadooz and an increase in staff in Germany, primarily to support the increased demand for non-mobile products. These increases were partly offset by decreases in salaries and benefits in Brazil and the U.K. in response to declines in revenues and the impact of the weaker foreign currencies. As a percentage of revenues, salaries and benefits increased to 7.5% for 2012 from 7.1% for 2011. This increase was primarily due to the impact of our acquisition of cadooz. Selling, general and administrative The increase in selling, general and administrative expenses for 2012 compared to 2011 was primarily due to the impact of our acquisition of cadooz, increased bad debt expense in Spain and Australia, and increased expenses in Germany as a result of the growth in non-mobile transaction volume and revenues. These increases were partly offset by decreases in selling, general and administrative in Australia and Brazil in response to declines in revenues and the impact of the weaker foreign currencies. As a percentage of revenues, these expenses increased to 6.2% for 2012 from 5.7% for 2011, primarily due to the decreases in revenues in Australia, Brazil, and Spain, along with an increase in bad debt expense during 2012. Goodwill and acquired intangible asset impairment During the fourth quarter of 2012, epay Brazil recorded a non-cash charge for impairment of goodwill and acquired intangible assets (specifically customer relationship assets) of $23.5 million and $5.2 million, respectively (see further discussion in Note 8, Goodwill and Acquired Intangible Assets, Net to the Consolidated Financial Statements). The initial factor contributing to the impairment charges was changes in certain mobile operators' distribution strategies throughout 2012. These changes limited our ability to distribute certain mobile operators' products in certain markets and had a negative impact on epay Brazil's 2012 results. While the changes affected the 2012 results, we continued to negotiate alternative arrangements with the mobile operators in order to regain profitability in Brazil. In the fourth quarter of 2012, we determined that these negotiations were not likely to result in arrangements that would restore our profitability from those products in the future. While these distribution changes were occurring, we were also establishing plans to introduce other electronic payment products in the Brazilian market which was expected to increase profitability. As the plans became more concrete in the fourth quarter of 2012, our assessment was that the added profitability from these new products would likely grow steadily over time, but would not add significant earnings as quickly as originally projected. Simultaneously with the changes in the mobile operators' distribution strategies, epay Brazil undertook efforts to align costs with revenues. While significant progress was made in reducing costs during 2012, the extent of that progress was constrained by the investments needed to launch the new electronic payment products. In the fourth quarter of 2012, the revised cost structure, which aligns costs with the decreased mobile revenues and supports the new products, was solidified and resulted in cost savings which were less than initially expected. Further, the changes in the mobile operators' distribution strategies accelerated efforts to pursue other distribution channels. In the fourth quarter of 2012, epay Brazil acquired new partners in these other channels which provided insight to the profit potential of these channels. The Company's assessment of the opportunity in these channels was that while these channels are expected to be profitable, they are not likely to have profit margins as great as the ones lost with the changes in mobile operators' distribution strategies previously discussed. As described above, the Company had several initiatives to improve profitability which were evolving during the year. The collective impact of those initiatives was the key consideration to determining if the epay Brazil business could return to or exceed its previous profitability. While each initiative had the potential to significantly contribute to that goal, during the fourth quarter of 2012, the Company determined that each initiative was likely to contribute less than what was previously expected. The culmination of these various factors in the fourth quarter of 2012 led the Company to conclude that the resulting valuation was not sufficient to support the recorded value of its investment in epay Brazil and, therefore, it recorded the goodwill and other acquired intangible assets impairment charges in the period. Depreciation and amortization Depreciation and amortization expense increased for 2012 compared to 2011 mainly due to the impact of our acquisition of cadooz, including amortization of acquired intangible assets, and improvements to our network platform. These increases were partly offset by decreased expenses in markets where acquired intangible assets became fully amortized, as well as the impact of the weaker foreign currencies. As a percentage of revenues, these expenses decreased slightly to 2.7% for 2012 from 2.8% for 2011. 52



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Operating income The decrease in operating income for 2012 compared to 2011 was primarily due to the $28.7 million charge for impairment of goodwill and acquired intangible assets, transaction volume and revenue declines in Australia, Brazil and Spain, increased bad debt expense in Australia and Spain, and the impact of the weaker foreign currencies. The declines in volume and revenues in Australia were due to the full year impact of certain large retailers entering into direct agreements with two mobile operators during the second half of 2011. The declines in volume and revenues in Brazil were due to certain mobile operators modifying their distribution strategies beginning in the fourth quarter of 2011. The declines in volume and revenues in Spain were mostly driven by economic and competitive pressures. These decreases were partly offset by increases in transaction volumes and revenues in the U.S. and Germany and the full year impact of the cadooz acquisition completed in the second half of 2011. Excluding the impairment charges, operating margin was 6.8% for 2012 compared to 8.4% for 2011 and operating income per transaction was $0.04 for 2012 compared to $0.05 for 2011. The decreases in operating margin and operating income per transaction were mainly due to the transaction volume and revenue declines discussed above and increased bad debt expense in Australia and Spain. Money Transfer Segment



The following table summarizes the results of operations for our Money Transfer Segment for the years ended December 31, 2013 and 2012:

Year Ended December 31, Year-over-Year Change Increase Increase (Decrease) (Decrease) (dollar amounts in thousands) 2013 2012 Amount Percent Total revenues $ 370,365$ 316,135$ 54,230 17 % Operating expenses: Direct operating costs 177,783 149,397 28,386 19 % Salaries and benefits 88,222 75,540 12,682 17 % Selling, general and administrative 54,870 47,673 7,197 15 % Depreciation and amortization 18,395 18,902 (507 ) (3 )% Total operating expenses 339,270 291,512 47,758 16 % Operating income $ 31,095$ 24,623$ 6,472 26 % Transactions processed (millions) 35.2 30.7 4.5 15 %



Revenues

The increase in revenues for 2013 compared to 2012 was primarily due to an increase in the number of transactions processed and growth in revenues from other products such as mobile top-up, check cashing, bill payment and money order transactions. The increase in transactions processed was driven by a 17% increase in money transfers, including a 19% increase in transfers from the U.S. and 14% increase in transfers from non-U.S. markets for 2013 compared to 2012. The increase in the number of money transfers processed from both the U.S. and non-U.S. markets was due to the expansion of our agent and correspondent payout networks. Revenues per transaction increased to $10.52 for 2013 from $10.30 for 2012. The increase was primarily due to the growth rate of money transfer transactions, which earn higher revenues per transaction than non-money transfer services and the impact of the euro strengthening against the U.S. dollar, partly offset by a shift in the percentage of transactions processed to U.S. locations, which earn lower revenues per transaction than non-U.S. locations. Direct operating costs Direct operating costs in the Money Transfer Segment primarily represent commissions paid to agents who originate money transfers on our behalf and correspondent agents who disburse funds to the customers' destination beneficiaries, together with less significant costs, such as bank depository fees and cash handling costs. The increase in direct operating costs in 2013 compared to 2012 was primarily due to the growth in the number of transactions processed. 53



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Gross profit Gross profit, which represents revenues less direct costs, was $192.6 million for 2013 compared to $166.7 million for 2012. The increase in gross profit was primarily due to the growth in money transfer transactions and other services such as mobile top-up, check cashing, bill payment and money order transactions. Gross margin was 52.0% for 2013 compared to 52.7% for 2012. This decrease was primarily due to an increase in the percentage of money transfer transactions processed at U.S. locations during 2013, which earn lower revenues and gross profit per transaction than non-U.S. locations. Salaries and benefits The increase in salaries and benefits for 2013 compared to 2012 was primarily due to an increase in headcount to support the expansion of our operations both in the U.S and internationally and support costs incurred to launch our on-line money transfer service. As a percentage of revenues, salaries and benefits decreased slightly to 23.8% for 2013 from 23.9% for 2012. Selling, general and administrative Selling, general and administrative expenses increased for 2013 compared to 2012, primarily due to an increase in professional fees and legal expenses and increased expenditures we incurred to support expansion of our operations and products, both in the U.S. and internationally. As a percentage of revenues, selling, general and administrative expenses decreased slightly to 14.8% for 2013 from 15.1% for 2012. This decrease was primarily due to the growth of money transfer revenues exceeding the incremental required support costs. Depreciation and amortization Depreciation and amortization primarily represents amortization of acquired intangible assets and depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. For 2013, depreciation and amortization expense decreased compared to 2012 as the impact of the increased capital expenditures was more than offset by certain acquired intangible assets becoming fully amortized during the first quarter of 2013. As a percentage of revenues, depreciation and amortization expense decreased to 5.0% for 2013 from 6.0% for 2012, primarily due to the decrease in amortization expense combined with the increase in revenues. Operating income Operating income increased by $6.5 million for 2013 compared to 2012, primarily due to the growth in transactions processed and the decrease in amortization expense. These increases were partly offset by the increase in professional fees and legal expenses. As a result, operating margin increased to 8.4% for 2013 from 7.8% for 2012 and operating income per transaction increased to $0.88 for 2013 from $0.80 for 2012. The increase in operating income per transaction was also due to the impact of the euro strengthening against the U.S. dollar.



2012 Compared to 2011

The following table presents the results of operations for the years ended December 31, 2012 and 2011 for the Money Transfer Segment.

Year Ended December 31, Year-over-Year Change Increase Increase (dollar amounts in thousands) 2012 2011 (Decrease)Amount (Decrease)Percent Total revenues $ 316,135$ 285,299 $ 30,836 11 % Operating expenses: Direct operating costs 149,397 130,783 18,614 14 % Salaries and benefits 75,540 70,603 4,937 7 % Selling, general and administrative 47,673 46,441 1,232 3 % Depreciation and amortization 18,902 20,346 (1,444 ) (7 )% Total operating expenses 291,512 268,173 23,339 9 % Operating income $ 24,623$ 17,126 $ 7,497 44 % Transactions processed (millions) 30.7 24.5 6.2 25 % 54



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Revenues

The increase in revenues for 2012 compared to 2011 was primarily due to the increase in the number of money transfer transactions processed and growth in other products such as mobile top-up, check cashing, bill payments, and money order transactions, partly offset by the impact of the weaker foreign currencies. The growth in transactions processed was driven by a 15% increase in money transfers, including an 18% increase from the U.S. and a 10% increase from non-U.S. markets in 2012 compared to 2011. The increase in transfers from the U.S. was primarily the result of growth in the U.S. to Mexico money transfer activity and an increase in the number of company-owned stores and agents. The increase in transfers from non-U.S. markets was due to the expansion of our agent and correspondent payout networks. Revenues per transaction decreased to $10.30 for 2012 from $11.64 for 2011. The growth rate of transactions exceeded the revenue growth rate for 2012 compared to 2011 largely because of the increase in the number of non-money transfer transactions, which generate considerably lower revenues per transaction than money transfers, and the impact of the weaker foreign currencies. Direct operating costs The increase in direct operating costs in 2012 compared to 2011 was primarily due to the growth in transactions processed, partly offset by the impact of the weaker foreign currencies. Gross profit Gross profit was $166.7 million for 2012 compared to $154.5 million for 2011. The increase was primarily due to the growth in revenues discussed above, partly offset by the impact of weaker foreign currencies. Gross margin was 52.7% for 2012 compared to 54.2% for 2011. The decline was primarily due to the increase in the number of non-money transfer transactions, which generate lower revenues and margin per transaction than money transfers. Salaries and benefits The increase in salaries and benefits for 2012 compared to 2011 was due to the increased expenses we incurred to support expansion of our operations and the increase in money transfers processed, partly offset by the impact of the weaker foreign currencies. As a percentage of revenues, salaries and benefits decreased to 23.9% for 2012 from 24.7% for 2011. This decrease was primarily due to the growth in non-money transfer services discussed above, which did not require similar increases in support cost. Selling, general and administrative Selling, general and administrative expenses increased for 2012 compared to 2011, primarily as a result of the increased expenses we incurred to support expansion of our company-owned locations and the increase in money transfers processed, partly offset by the impact of the weaker foreign currencies. As a percentage of revenues, selling, general and administrative expenses decreased to 15.1% for 2012 from 16.3% for 2011. This decrease was primarily due to the growth in non-money transfer services discussed above, which did not require similar increases in support cost. Depreciation and amortization For 2012, depreciation and amortization expense decreased compared to 2011 as the impact of the increased capital expenditures was more than offset by certain acquired intangible assets becoming fully amortized during 2011 and 2012. As a percentage of revenues, depreciation and amortization expense decreased to 6.0% for 2012 from 7.1% for 2011, primarily due to the decrease in depreciation and amortization discussed above combined with the increase in revenues. Operating income Operating income increased by $7.5 million for 2012 compared to 2011, reflecting the growth in money transfer and non-money transfer transactions processed and lower intangible amortization expense discussed above, partly offset by the impact of the weaker foreign currencies. As a result, operating margin increased to 7.8% for 2012 compared to 6.0% for 2011. Operating income per transaction increased to $0.80 for 2012 from $0.70 for 2011. These increases were primarily due to the increases in transaction-based revenues discussed above and the decrease in amortization expense during 2012, partly offset by the impact of the weaker foreign currencies. 55



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Corporate Services

The components of Corporate Services' operating expenses for 2013, 2012 and 2011 were as follows: Year Ended December 31, Year-over-Year Change 2012 2013 Increase Increase (dollar amounts in thousands) 2013 2012 2011 Percent Percent Salaries and benefits $ 22,621$ 22,332$ 19,998 1 % 12 %



Selling, general and administrative 10,509 7,831 7,630

34 % 3 % Depreciation and amortization 365 364 343 n/m 6 % Total operating expenses $ 33,495$ 30,527$ 27,971 10 % 9 % ___________________ n/m - Not meaningful. Corporate operating expenses Overall, operating expenses for Corporate Services increased 10% for 2013 compared to 2012, primarily due to an increase in selling, general and administrative expenses. This increase was primarily due to an increase in professional fees and legal contingency accruals. Overall, operating expenses for Corporate Services increased 9% for 2012 compared to 2011, primarily due to an increase in salaries and benefits. This increase was primarily the result of higher share-based compensation and bonus expense due to improved results relative to the respective incentive compensation performance targets. Other Expense, Net Year Ended December 31, Year-over-Year Change 2013 2012 Decrease Decrease (dollar amounts in thousands) 2013 2012 2011 Percent Percent Interest income $ 1,998$ 3,993$ 5,749 (50 )% (31 )% Interest expense (10,139 ) (19,653 ) (21,385 ) (48 )% (8 )% Income from unconsolidated affiliates 206 942 1,852 (78 )% (49 )% Other gains, net 2,398 4,146 1,000 n/m n/m Loss on early retirement of debt - - (1,899 ) n/m n/m Foreign currency exchange gain (loss), net 2,211 (99 ) (1,662 ) n/m n/m Other expense, net $ (3,326 )$ (10,671 )$ (16,345 ) n/m n/m ____________________ n/m - Not meaningful. Interest income The decrease in interest income for 2013 and 2012 was primarily due to less interest earned in Australia and Brazil, as a result of holding less cash in interest earning bank accounts due to revenue declines and increased working capital requirements. The decrease for Brazil was also due to the U.S. dollar strengthening against the Brazilian real during 2013 and 2012. Interest expense The decrease in interest expense for 2013 and 2012 was primarily related to Euronet's repurchase of $167.9 million of our convertible debentures in October 2012, which was largely funded by borrowing under the credit facility, which had a significantly lower average effective interest rate than the convertible debentures. 56



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Income from unconsolidated affiliates Income from unconsolidated affiliates primarily represents the equity in income of our 40% equity investment in epay Malaysia, our 49% investment in EuronetMiddle East, our 49% investment in Euronet ETT (China) and our 47% investment in Euronet Indonesia. The decrease in income for 2013 from 2012 was primarily due to the sale of the Company's 40% equity method investment in epay Malaysia in July 2013. The decrease in income for 2012 from 2011 was primarily due to the acquisition of the remaining 51% interest of Euronet Middle East W.L.L. in January 2012. Other gains, net In 2013, we completed the sale of our 40% equity method investment in epay Malaysia, which resulted in the recognition of a $2.8 million gain. Additionally, we recorded a $0.4 million impairment charge to a cost basis investment in an unconsolidated affiliate. In 2012, our acquisition of the remaining 51% interest of Euronet Middle East W.L.L. resulted in Euronet obtaining control of the entity, which was considered a business combination. Accordingly, we valued the assets and liabilities at fair value, which resulted in a $4.4 million gain on the 49% interest previously owned. Additionally, we recorded an investment in marketable securities at fair value which resulted in a loss of $0.2 million. In 2011, Euronet recorded $1.0 million gain from the settlement of a class action lawsuit related to losses on MoneyGram, Inc. stock we formerly held. Loss on early retirement of debt During 2011, we entered into an amended and expanded credit facility and recorded a $1.7 million loss primarily related to the write-off of deferred financing costs associated with the extinguished credit facility. Also during 2011, we repurchased $3.6 million principal amount of our 3.5% convertible debentures and recognized a $0.2 million loss representing the difference in the amounts paid for the convertible debentures over their carrying amounts. Foreign currency exchange gain (loss), net Assets and liabilities denominated in currencies other than the local currency of each of our subsidiaries give rise to foreign currency exchange gains and losses. Foreign currency exchange gains and losses that result from re-measurement of these assets and liabilities are recorded in determining net income. The majority of our foreign currency exchange gains or losses are due to the re-measurement of intercompany loans that are in a currency other than the functional currency of one of the parties to the loan. For example, we make intercompany loans based in euros from our corporate division, which is comprised of U.S. dollar functional currency entities, to certain European entities that use the euro as the functional currency. As the U.S. dollar strengthens against the euro, foreign currency exchange losses are generated on our corporate entities because the number of euros to be received in settlement of the loans decreases in U.S. dollar terms. Conversely, in this example, in periods where the U.S. dollar weakens, our corporate entities will record foreign currency exchange gains. We recorded a net foreign currency exchange gain of $2.2 million in 2013 and net foreign currency exchange losses of $0.1 million and $1.7 million in 2012 and 2011, respectively. These realized and unrealized foreign currency exchange gains and losses primarily reflect the respective weakening and strengthening of the U.S. dollar against the currencies of the countries in which we operate during the respective periods related to those assets and liabilities described above. 57



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Income Tax Expense

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

Year Ended December 31, (dollar amounts in thousands) 2013 2012 2011 Income before income taxes $ 115,085$ 47,334$ 62,792 Income tax expense (27,732 ) (26,937 ) (24,704 ) Net income $ 87,353$ 20,397$ 38,088 Effective income tax rate 24.1 % 56.9 % 39.3 % Income before income taxes $ 115,085$ 47,334$ 62,792 Adjust: Goodwill and acquired intangible assets impairment (18,425 ) (28,740 ) - Adjust: Acquisition-related contingent consideration gain 19,319 - - Adjust: Other gains, net 2,398 4,146



1,000

Adjust: Foreign currency exchange gain (loss), net 2,211 (99 ) (1,662 ) Adjust: Loss on early retirement of debt - - (1,899 ) Income before income taxes, as adjusted $ 109,582$ 72,027$ 65,353 Income tax expense $ (27,732 )$ (26,937 )$ (24,704 ) Adjust: Income tax benefit attributable to acquired intangible assets impairment - 1,709 - Adjust: Income tax (expense) benefit attributable to foreign currency exchange gain (loss), net (303 ) 29



265

Income tax expense, as adjusted $ (27,429 )$ (28,675 )$ (24,969 ) Effective income tax rate, as adjusted 25.0 % 39.8



% 38.2 %

We calculate our effective income tax rate by dividing income tax expense by pre-tax book income. Our effective income tax rates were 24.1%, 56.9% and 39.3% for the years ended December 31, 2013, 2012 and 2011, respectively. The effective income tax rates were significantly influenced by the acquisition-related contingent consideration gain in 2013, the non-cash goodwill and acquired intangible asset impairment charges recorded in 2013 and 2012, other non-operating gains and the impact of foreign currency exchange gains (losses). Excluding these items from pre-tax income, as well as the related tax effects for these items, our effective income tax rates were 25.0%, 39.8% and 38.2% for the years ended December 31, 2013, 2012 and 2011, respectively. The effective income tax rate, as adjusted, for 2013 was lower than that for 2012 and the applicable statutory income tax rate of 35% primarily because of our U.S. tax position and the realization of deferred tax benefits in various jurisdictions. For the fiscal years ended December 31, 2013, 2012 and 2011, we have recorded a valuation allowance against our U.S. federal tax net operating losses, as it is more likely than not that a tax benefit will not be realized. Accordingly, the federal income tax benefit associated with pre-tax book losses generated by our U.S. entities has not been recognized. During periods, such as 2013, when the Company generates U.S. pre-tax book income, no income tax expense is recognized to the extent there are net operating loss carryforwards to offset pre-tax book income. There was no material change in the effective tax rate, as adjusted, for 2012 compared to 2011. 58



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We determine income tax expense based upon enacted tax laws applicable in each of the taxing jurisdictions where we conduct business. Based on our interpretation of such laws, and considering the evidence of available facts and circumstances and baseline operating forecasts, we have accrued the estimated income tax effects of certain transactions, business ventures, contractual and organizational structures, and the estimated future reversal of timing differences. Should a taxing jurisdiction change its laws or dispute our conclusions, or should management become aware of new facts or other evidence that could alter our conclusions, the resulting impact to our estimates could have a material adverse effect on our results of operations and financial condition. Income before income taxes, as adjusted, income tax expense, as adjusted and effective income tax rate, as adjusted are non-GAAP financial measures that management believes are useful for understanding why our effective income tax rates are significantly different than would be expected. Net Loss (Income) Attributable To Noncontrolling Interest Net loss attributable to noncontrolling interests was $0.6 million and $0.1 million for 2013 and 2012, respectively, compared to net income of $1.1 million for 2011. The increase in loss attributable to noncontrolling interests in 2013 compared to 2012 was primarily due to the goodwill impairment charge recorded by our Movilcarga subsidiary and the acquisition of the remaining noncontrolling interests in ATX in January 2013. The decrease in net income attributable to noncontrolling interests in 2012 compared to 2011 was primarily due to decreased profitability at our Movilcarga and ATX subsidiaries. Noncontrolling interests represents the elimination of net income or loss attributable to the minority shareholders' portion of the following consolidated subsidiaries that are not wholly owned: Percent Subsidiary Owned (1) Segment - Country Movilcarga 80 % epay - Spain Euronet China 75 % EFT - China Euronet Pakistan 70 % EFT - Pakistan Universal Solutions Partners 51 % EFT - UAE Euronet Services 95 % epay - Russia ______________



(1) Percent owned as of December 31, 2013.

Net Income Attributable to Euronet

Net income attributable to Euronet was $88.0 million, $20.5 million and $37.0 million for 2013, 2012 and 2011, respectively. As more fully discussed above, the increase of $67.5 million for 2013 as compared to 2012 includes a $19.3 million acquisition-related contingent consideration gain in 2013, an $18.4 million non-cash impairment charge of goodwill in 2013 and a $28.7 million non-cash impairment charge of goodwill and acquired intangible assets in 2012. The remaining increase is primarily due to a $30.8 million increase in operating income (excluding the contingent consideration gain and non-cash impairment charges), a decrease in interest expense of $9.5 million and the increase in foreign currency exchange gain of $2.3 million. These increases were partly offset by an increase in income tax expense of $0.8 million, a decrease in other non-operating gains of $1.7 million and a decrease in interest income of $2.0 million. Other non-operating items decreased net income by $0.3 million. The decrease of $16.5 million for 2012 as compared to 2011 was mainly the result of a $21.1 million decrease in operating income in 2012, caused by a $28.7 million non-cash impairment charge for goodwill and acquired intangible assets. Additionally, interest income decreased by $1.8 million, income from unconsolidated affiliates decreased by $0.9 million and income tax expense increased $2.2 million. These decreases to net income were partly offset by a $1.7 million decrease in interest expense, a $3.1 million increase in non-operating gains, recognition of a $1.9 million loss on early retirement of debt in 2011 and a decrease in foreign currency exchange loss of $1.6 million. Other items increased net income by $1.2 million during 2012 compared to 2011. 59



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Translation Adjustment

Translation gains and losses are the result of translating our foreign entities' balance sheets from local functional currency to the U.S. dollar reporting currency prior to consolidation and are recorded in comprehensive income. As required by U.S. GAAP, during this translation process, asset and liability accounts are translated at current foreign currency exchange rates and equity accounts are translated at historical rates. Historical rates represent the rates in effect when the balances in our equity accounts were originally created. By using this mix of rates to convert the balance sheet from functional currency to U.S. dollars, differences between current and historical exchange rates generate this translation adjustment. We recorded a net gain on translation adjustments of $0.8 million and $10.9 million for 2013 and 2012, respectively, and a loss of $26.7 million for 2011. During 2013, the U.S. dollar weakened compared to certain currencies and strengthened compared to others and the net results was translation gain, which were recorded in comprehensive income. During 2012, the U.S. dollar weakened against most European-based currencies, primarily the British pound, euro and Polish zloty, resulting in translation gains which were recorded in comprehensive income. Liquidity and Capital Resources Working capital As of December 31, 2013, we had working capital of $108.4 million, which is calculated as the difference between total current assets and total current liabilities, compared to working capital of $116.5 million as of December 31, 2012. Our ratio of current assets to current liabilities was 1.15 as of December 31, 2013, compared to 1.17 as of December 31, 2012. We require substantial working capital to finance operations. The Money Transfer Segment funds the correspondent distribution network before receiving the benefit of amounts collected from customers by agents. Working capital needs increase due to weekends and international banking holidays. As a result, we may report more or less working capital for the Money Transfer Segment based solely upon the day on which the fiscal period ends. As of December 31, 2013, working capital in the Money Transfer Segment was $85.6 million. We expect that working capital needs will continue to increase as this business grows. The epay Segment produces positive working capital, but much of it is restricted in connection with the administration of its customer collection and vendor remittance activities. The EFT Processing Segment does not require substantial working capital. We had cash and cash equivalents of $209.8 million as of December 31, 2013, of which $164.5 million was held outside of the United States and is expected to be indefinitely reinvested for continued use in foreign operations. Repatriation of these assets to the U.S. could have negative tax consequences. Operating cash flow Cash flows provided by operating activities were $169.3 million for 2013 compared to $184.7 million for 2012. The decrease was mainly due to fluctuations in working capital primarily associated with the timing of the settlement processes with mobile operators in the epay Segment and with correspondents in the Money Transfer Segment, partly offset by improved operating results. Cash flows provided by operating activities were $184.7 million for 2012 compared to $97.9 million for 2011. The increase was mainly due to fluctuations in working capital primarily associated with the timing of the settlement processes with mobile operators in the epay Segment and with correspondents in the Money Transfer Segment. Investing activity cash flow Cash flows used in investing activities were $69.5 million for 2013 compared to $69.2 million for 2012. Purchases of property and equipment were $40.9 million and $46.2 million for 2013 and 2012, respectively. Cash used for acquisitions in 2013 was $30.8 million compared to $22.3 million for 2012. Cash used for software development and long-term assets totaled $6.3 million for 2013 and $4.4 million for 2012. Additionally, we received $7.6 million of net proceeds from the sale of an equity investment during 2013. Other investing activities consist mainly of proceeds from the sale of property and equipment of $0.9 million and $3.8 million for 2013 and 2012, respectively. Cash flows used in investing activities were $69.2 million for 2012 compared to $124.1 million for 2011. Purchases of property and equipment were $46.2 million and $46.0 million for 2012 and 2011, respectively. Cash used for acquisitions in 2012 was $22.3 million compared to $78.7 million for 2011. Cash used for software development and long-term assets totaled $4.4 million for 2012 and $3.2 million for 2011. Other investing activities consist mainly of proceeds from the sale of property and equipment of $3.8 million for both 2012 and 2011. 60



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Financing activity cash flow Cash flows used in financing activities were $91.2 million for 2013 compared to $92.6 million for 2012. Our financing activities for 2013 consisted of net repayments of debt obligations of $96.2 million compared to $44.2 million for 2012. To support the short-term cash needs of our Money Transfer Segment, we generally borrow amounts under our 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 2013 we had a total of $1,991.7 million in borrowings and $2,077.8 million in repayments under our revolving credit facility. During 2013, we used $8.7 million for repayments of debt obligations compared to $172.4 million in 2012. The 2012 repayments mainly consisted of repurchases of $167.9 million of convertible debentures which were largely funded by borrowings under our revolving credit facility. We used $7.9 million and $3.3 million during 2013 and 2012, respectively, for the acquisition of subsidiary shares from holders of noncontrolling interests. Additionally, for 2013 and 2012, we paid $2.6 million and $2.9 million, respectively, for capital lease obligations. Further, we received proceeds of $12.8 million and $2.9 million during 2013 and 2012, respectively, for the issuance of stock options in connection with our Stock Incentive Plan. Further, we used $42.9 million for the repurchase of shares during 2012. Other financing activities were $1.3 million and $2.2 million during 2013 and 2012, respectively. Cash flows used in financing activities were $92.6 million during 2012 compared to cash flows provided by financing activities of $13.9 million in 2011. Our financing activities for 2012 centered around the repurchase of $167.9 million of our convertible debentures and the repurchase of $42.9 million of our common stock. As a result of the repurchases of the convertible debentures and Common Stock, during 2012 we had $128.1 million in net borrowings under our revolving credit facility. During 2011, we borrowed $80.0 million of long-term debt from our new term loan and used $128.0 million for repayments of debt obligations. During 2012, we used $1.9 million for debt issuance costs and $2.9 million for repayments of capital lease obligations. In 2011, we used $3.5 million for debt issuance costs and $2.6 million for repayments of capital lease obligations. Further, we used $16.0 million for the repurchase of shares during 2011. Additionally, we received cash of $2.9 million and $2.4 million from the issuance of shares in 2012 and 2011, respectively. During 2011, we paid $5.5 million in settlement of contingent consideration amounts recorded at the time of two different acquisitions. We paid $0.5 million and $1.1 million of dividends to noncontrolling interests' stockholders during 2012 and 2011, respectively. Other sources of capital Credit Facility - We have a $480 million senior secured credit facility (the "Credit Facility") consisting of a $390 million five-year revolving credit facility, a $10 million five-year India revolving credit facility and an $80 million five-year term loan. The revolving credit facility allows for borrowings in U.S. dollars, euro, British pound sterling, Australian dollars and/or Indian rupees. The $390 million revolving credit facility contains a $200 million sublimit for the issuance of letters of credit and a $25 million sublimit for swingline loans. We intend to use the revolving credit facility primarily to fund working capital requirements, which are expected to increase as we expand the money transfer business. Based on our current projected working capital requirements, we anticipate that our revolving credit facility will be sufficient to fund our working capital needs. On October 11, 2012, Euronet exercised its right to increase the aggregate commitments under its senior secured revolving credit facility by $125 million. In the process, additional financial institutions were added as lenders under the credit agreement. Borrowing capacity under the senior secured revolving credit facility increased from $275 million to $400 million (including the $10 million five-year India revolving credit facility), and Euronet remains entitled, provided lenders agree, to increase the aggregate commitments under the senior secured revolving credit facility by an additional $80 million. All other terms of the credit agreement remain unchanged. Fees and interest on borrowings vary based upon Euronet's consolidated total leverage ratio (as defined in the Credit Agreement) and will be based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over London Inter-Bank Offered Rate ("LIBOR") or a margin over the base rate, as selected by us, with the applicable margin ranging from 1.5% to 2.5% (or 0.5% to 1.5% for base rate loans). The base rate is the highest of (i) the Bank of America prime rate, (ii) the Federal Funds rate plus 0.50% or (iii) the Fixed LIBOR rate plus 1.00%. The term loan is subject to scheduled quarterly amortization payments, as set forth in the Credit Agreement. The maturity date for the Credit Facility is August 18, 2016, at which time the outstanding principal balance and all accrued interest will be due and payable in full. As of December 31, 2013, we had borrowings of $68.0 million outstanding under the term loan. We had $129.0 million of borrowings and $58.7 million of stand-by letters of credit outstanding under the revolving credit facility as of December 31, 2013. The remaining $212.3 million under the revolving credit facility was available for borrowing. As of December 31, 2013, the weighted average interest rate was 1.7% under the Credit Facility, excluding amortization of deferred financing costs. 61



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Short-term debt obligations - Short-term debt obligations at December 31, 2013 were primarily comprised of $8.5 million of payments due in 2014 under the term loan. Certain of our subsidiaries also have available credit lines and overdraft facilities to supplement short-term working capital requirements, when necessary. As of December 31, 2013 there was $2.4 million outstanding under these arrangements. Other uses of capital Debt and equity repurchases - In August 2011, the Board of Directors authorized a stock repurchase program ("2011 Program") allowing Euronet to repurchase up to $100 million in value or 5.0 million shares of its Common Stock. During 2011 and 2012, Euronet repurchased 1.0 million shares for a total value of $16.0 million and 2.0 million shares for a total value of $42.9 million, respectively, under the 2011 Program. The average purchase price per share was $15.65 and $21.60 for the years ended December 31, 2011 and 2012, respectively. The 2011 program expired in August 2013. In September 2013, the Board of Directors authorized a stock repurchase program extending through September 19, 2015 ("2013 program") allowing Euronet to repurchase up to $100 million in value or 5 million shares of its Common Stock. Because of constraints established in Euronet's Credit Agreement, repurchases may only begin after December 31, 2013. Repurchases under the 2013 Program may take place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan. In October 2012, we repurchased $167.9 million of convertible debentures. Pursuant to the terms of the debentures, holders had the right to require us to repurchase some or all of the debentures on such date. We utilized cash on hand and borrowings on our revolving credit facility to fund these repurchases. In September 2013, we repurchased the remaining $3.6 million in principal amount of convertible debentures. Payment obligations related to acquisitions - A portion of the net assets acquired in the acquisition of Pure Commerce included a liability for additional purchase price consideration up to 30 million Australian dollars, payable in cash and Euronet Common Stock, based upon achieving certain performance conditions for the twelve month period ending in December 2013. The performance conditions were not met and as of December 31, 2013, no additional purchase price consideration is owed to the sellers under this agreement. Capital expenditures and needs - Total capital expenditures for 2013 were $41.8 million. These capital expenditures were primarily for the purchase of ATMs to meet contractual requirements in Poland and India, the purchase and installation of ATMs in key under-penetrated markets, the purchase of POS terminals for the epay and Money Transfer Segments, and office, data center and company store computer equipment and software. Total capital expenditures for 2014 are currently estimated to be approximately $40 million to $50 million. In the epay Segment, approximately 88,000 of the approximately 665,000 POS devices that we operate are Euronet-owned, with the remaining terminals being operated as integrated cash register devices of our major retail customers or owned by the retailers. As our epay Segment expands, we will continue to add terminals in certain independent retail locations at a price of approximately $300 per terminal. We expect the proportion of owned terminals to total terminals operated to remain relatively constant. At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our revolving credit facility and other existing and potential future financing will be sufficient to meet our debt, leasing, contingent acquisition and capital expenditure obligations. If our capital resources are not sufficient to meet these obligations, we will seek to refinance our debt and/or issue additional equity under terms acceptable to us. However, we can offer no assurances that we will be able to obtain favorable terms for the refinancing of any of our debt or other obligations or for the issuance of additional equity. Other trends and uncertainties Although Euronet has no direct investments in European sovereign debt, we are indirectly exposed to its risks. Many of the customers of our EFT Segment are banks who may hold investments in European sovereign debt. To the extent those customers are negatively impacted by those investments, they may be less able to pay amounts owed to us or renew service agreements with us. Further, to the extent that sovereign debt concerns depress economic activity, such concerns may negatively impact the number of transactions processed on our epay and money transfer networks, resulting in lower revenue. Our Australia and U.K. epay businesses have recently experienced year-over-year declines in the number of transactions each processes, which has reduced their profitability. Continued economic and competitive pressures in Australia and the U.K. may negatively impact the epay Segment's profitability in the near term. 62



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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 have certain significant off balance sheet items described below, in the following section, "Contractual Obligations" and in Note 20, Commitments, to the Consolidated Financial Statements.

On occasion, we grant guarantees of the obligations of our 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. 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 December 31, 2013. Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2013: Payments due by period Less than More than (in thousands) Total 1 year 1-3 years 3-5 years 5 years

Long-term debt obligations, including interest $ 205,749$ 11,786$ 193,963 $ - $ - Obligations under operating leases 150,469 39,694 62,705 35,637 12,433 Obligations under capital leases 5,673 2,573 2,844 256 - Purchase obligations 6,502 4,516 1,704 130 152 Total $ 368,393$ 58,569$ 261,216$ 36,023$ 12,585 The computation of interest for debt obligations with variable interest rates reflects interest rates in effect at December 31, 2013. For additional information on debt obligations, see Note 10, Debt Obligations, to the Consolidated Financial Statements. For additional information on capital and operating lease obligations, see Note 12, Leases, to the Consolidated Financial Statements. Purchase obligations primarily consist of ATM machines, services and maintenance as well as telecommunications services. Our total liability for uncertain tax positions under Accounting Standards Codification ("ASC") 740-10-25 and -30 was $14.2 million as of December 31, 2013. The application of ASC 740-10-25 and -30 requires significant judgment in assessing the outcome of future income tax examinations and their potential impact on the Company's estimated effective income tax rate and the value of deferred tax assets, such as those related to the Company's net operating loss carryforwards. It is reasonably possible that the balance of gross unrecognized tax benefits could significantly change within the next twelve months, as a result of the resolution of audit examinations and expirations of certain statutes of limitations and, accordingly, materially affect our consolidated financial statements. At this time, it is not possible to estimate the range of change due to the uncertainty of potential outcomes. 63



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Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates, often as a result of the need to make estimates of matters that are inherently uncertain and for which the actual results will emerge over time. These judgments, assumptions and estimates affect the amounts of assets, liabilities, revenues and expenses reported in the Consolidated Financial Statements and accompanying notes. Note 3, Summary of Significant Accounting Policies and Practices, to the Consolidated financial statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Our most critical estimates and assumptions are used for computing income taxes, contingent purchase price consideration, 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. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The following descriptions of critical accounting policies and estimates are forward-looking statements and are impacted significantly by estimates and should be read in conjunction with Item 1A - Risk Factors. Actual results could differ materially from the results anticipated by these forward-looking statements. Accounting for income taxes The deferred income tax effects of transactions reported in different periods for financial reporting and income tax return purposes are recorded under the liability method. This method gives consideration to the future tax consequences of deferred income or expense items and immediately recognizes changes in income tax laws upon enactment. The statement of operations effect is generally derived from changes in deferred income taxes, net of valuation allowances, on the balance sheet as measured by differences in the book and tax bases of our assets and liabilities. We have significant tax loss carryforwards, and other temporary differences, which are recorded as deferred tax assets and liabilities. Deferred tax assets realizable in future periods are recorded net of a valuation allowance based on an assessment of each entity's, or group of entities', ability to generate sufficient taxable income within an appropriate period, in a specific tax jurisdiction. In assessing the recognition of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized. As more fully described in Note 13, Taxes, to the Consolidated Financial Statements, gross deferred tax assets were $110.5 million as of December 31, 2013, partially offset by a valuation allowance of $81.0 million. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We make judgments and estimates on the scheduled reversal of deferred tax liabilities, historical and projected future taxable income in each country in which we operate, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and current projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not that we will realize the benefits of these deductible differences, net of the existing valuation allowance at December 31, 2013. If we have a history of generating taxable income in a certain country in which we operate, and baseline forecasts project continued taxable income in this country, we will reduce the valuation allowance for those deferred tax assets that we expect to realize. Additionally, we follow the provisions of ASC 740-10-25 and -30 to account for uncertainty in income tax positions. Applying the standard requires substantial management judgment and use of estimates in determining whether the impact of a tax position is "more likely than not" of being sustained on audit by the relevant taxing authority. We consider many factors when evaluating and estimating our tax positions, which may require periodic adjustments and which may not accurately anticipate actual outcomes. It is reasonably possible that amounts reserved for potential exposure could change significantly as a result of the conclusion of tax examinations and, accordingly, materially affect our operating results. 64



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Goodwill and other intangible assets In accordance with ASC Topic 805, Business Combinations, we allocate the acquisition purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The 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 larger or more complex acquisitions, management engages an appraiser to assist in the valuation. Intangible assets with finite lives are amortized over their estimated useful lives. As of December 31, 2013, the Consolidated Balance Sheet includes goodwill of $498.4 million and acquired intangible assets, net of accumulated amortization, of $93.0 million. In accordance with ASC Topic 350, Intangibles - Goodwill and Other, on an annual basis, and whenever events or circumstances dictate, we test for impairment. Impairment tests are performed annually during the fourth quarter and are performed at the reporting unit level. Generally, fair value represents discounted projected future cash flows and market multiple of earnings and potential impairment is indicated when the carrying value of a reporting unit, including goodwill, exceeds its estimated fair value. If the potential for impairment exists, the fair value of the reporting unit is subsequently measured against the fair value of its underlying assets and liabilities, excluding goodwill, to estimate an implied fair value of the reporting unit's goodwill. An impairment loss is recognized for any excess of the carrying value of the reporting unit's goodwill over the implied fair value. As a result of our annual impairment test for the years ended December 31, 2013 and 2012, we recorded non-cash goodwill impairment charges of $18.4 million and $23.5 million, respectively. See Note 8, Goodwill and Acquired Intangible Assets, Net, to the Consolidated Financial Statements for additional information regarding these charges. Our annual impairment test for the year ended December 31, 2011 indicated that there were no impairments. 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 our operations will not perform as expected, or that estimates or assumptions could change, which may result in the recording of additional material non-cash impairment charges during the year in which these determinations take place. Impairment or disposal of long-lived assets In accordance with ASC Topic 350, long-lived assets, such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors that are considered important which could trigger an impairment review include the following: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the respective asset. The same estimates are also used in planning for our long- and short-range business planning and forecasting. We assess the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available comparable market data. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the respective asset. Assets to be disposed are required to be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale are required to be presented separately in the appropriate asset and liability sections of the balance sheet. Reviewing long-lived assets for impairment requires considerable judgment. Estimating the future cash flows requires significant judgment. If future cash flows do not materialize as expected or there is a future adverse change in market conditions, we may be unable to recover the carrying amount of an asset, resulting in future impairment losses. For the year ended December 31, 2012, we recorded a $5.2 million non-cash impairment charge for acquired intangible assets, specifically related to customer relationship assets in Brazil. See Note 8, Goodwill and Acquired Intangible Assets, Net, to the Consolidated Financial Statements for additional information regarding these charges. Revenue recognition In accordance with U.S. GAAP, we recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collection is reasonably assured. The majority of our revenues are comprised of monthly recurring management fees and transaction-based fees that are recognized when the transactions are processed or the services are performed. When determining the proper revenue recognition for monthly management fees and transaction-based fees, we consider the guidance in Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements," as amended by SAB 104, "Revenue Recognition," ASC 605-45, ASC 605-25 and various other interpretations. 65



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Certain of our noncancelable customer contracts provide for the receipt of up-front fees paid to or received from the customer and/or decreasing or increasing fee schedules over the agreement term for substantially the same level of services provided by Euronet. As prescribed by SAB 101 and SAB 104, we recognize revenue under these contracts based on proportional performance of services over the term of the contract, which generally results in "straight-line" revenue recognition of the contracts' total cash flows, including any up-front payment. Substantial management judgment and estimation is required in determining the proper revenue recognition methodology for our various revenue-producing activities, as well as the proper and consistent application of our determined methodology. New Accounting Pronouncements In February 2013, the Financial Accounting Standards Board ("FASB") issued amended guidance that requires an entity to present information about significant items reclassified out of accumulated other comprehensive income, referred to as AOCI, on the face of the statement where net income is presented or as a separate disclosure in the notes to the financial statements. Additionally, the guidance expands the disclosure requirements for presentation of changes in AOCI by component. The guidance is effective for us for interim and annual reporting periods beginning January 1, 2013, and its adoption did not have an impact on our results of operations, cash flows or financial position. In July 2013, the FASB issued Accounting Standards Update ("ASU") ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"). The amendments in ASU 2013-11 provide guidance on the financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. We do not anticipate a material impact to our financial position, results of operations or cash flows as a result of this change. No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material impact on the consolidated financial statements. 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 ("Exchange Act"). 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;

business strategy;

government regulatory action;

technological advances; and

projected costs and revenues.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct. Forward-looking statements are typically identified by the words believe, expect, anticipate, intend, estimate and similar expressions. Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may materially differ from those in the forward-looking statements as a result of various factors, including, but not limited to, conditions in world financial markets and general economic conditions, 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; foreign currency exchange rate fluctuations; the effects of any potential future security breaches; 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 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 referred to above and as set forth and more fully described in Part I, Item 1A - Risk Factors. Any forward-looking statements made in this Form 10-K 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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