-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HlI1wm0hu904DwUu2Bwx6z3CFWutyQiiw8fSFNu/L9tf2brdySRCqjlQNkz99qts zLeazdAibdQ9k6p8H1nphw== 0000950123-06-013454.txt : 20061103 0000950123-06-013454.hdr.sgml : 20061103 20061103081525 ACCESSION NUMBER: 0000950123-06-013454 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061103 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061103 DATE AS OF CHANGE: 20061103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEARTLAND PAYMENT SYSTEMS INC CENTRAL INDEX KEY: 0001144354 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32594 FILM NUMBER: 061184726 BUSINESS ADDRESS: STREET 1: 90 NASSAU STREET, 2ND FLOOR CITY: PRINCETON STATE: NJ ZIP: 08542 BUSINESS PHONE: 6096833850 MAIL ADDRESS: STREET 1: 90 NASSAU STREET, 2ND FLOOR CITY: PRINCETON STATE: NJ ZIP: 08542 8-K 1 y26631e8vk.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) November 3, 2006 HEARTLAND PAYMENT SYSTEMS, INC. ------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 000-51265 22-3755714 -------- --------- ---------- (State or other jurisdiction of (Commission File No) (I.R.S. Employer incorporation or organization) Identification Number) 90 NASSAU STREET, PRINCETON, NEW JERSEY 08542 --------------------------------------------- (Address of principal executive offices) (Zip Code) (609) 683-3831 -------------- (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following information is furnished pursuant to Item 2.02, "Results of Operations and Financial Condition." On November 3, 2006, Heartland Payment Systems, Inc., a Delaware corporation (the "Company"), issued a press release announcing its financial results for the third quarter ended September 30, 2006. The information contained in this report, including Exhibit 99.1 attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. On November 3, 2006, the Company conducted a properly noticed conference call to discuss its results of operations for the third quarter ended September 30, 2006 and to answer any questions raised by the call's audience. ITEM 8.01 OTHER EVENTS Cash Dividend On November 2, 2006, the board of directors of the Company declared a quarterly cash dividend of $0.025 per share of Company's common stock, which will be payable on December 15, 2006 to stockholders of record as of November 24, 2006. The press release announcing the cash dividend is furnished as Exhibit 99.1 to this report. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits
Exhibit Number Description - ---------- --------------------------------------------------- 99.1 Press Release of the Company dated November 3, 2006
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: November 3, 2006 Heartland Payment Systems, Inc. ----------------------------------- (Registrant) By: /s/ Robert H.B. Baldwin, Jr. ----------------------------------- Robert H.B. Baldwin, Jr. Chief Financial Officer EX-99.1 2 y26631exv99w1.txt EX-99.1: PRESS RELEASE EXHIBIT 99.1 News Release HEARTLAND PAYMENT SYSTEMS THIRD QUARTER NET INCOME UP 55%, DILUTED EARNINGS PER SHARE UP 47% Operating Margin Expands to 21.2% PRINCETON, N.J., NOVEMBER 3, 2006 -- Heartland Payment Systems, Inc. (NYSE: HPY), the nation's sixth largest provider of merchant acquiring services, today announced revenues for the quarter ended September 30, 2006 increased 29% to a record $293.8 million, compared to $228.1 million in the third quarter of 2005. The company's operating margin for the quarter expanded to a record high 21.2% of net revenues (defined as total revenues less interchange and dues and assessments), boosting operating income by 47% to $14.2 million from $9.7 million in the year earlier period. Net income for the three months was $10.1 million, or $0.25 per fully diluted share, increases of 55% and 47%, respectively, compared to net income of $6.5 million, or $0.17 per fully diluted share, in the third quarter of 2005. Net income in the third quarter of 2006 is based on an effective 29.6% tax rate as the result of a $1.5 million ($0.03 per diluted share) one-time adjustment to reflect a permanent reduction in the company's consolidated tax rate arising from an analysis of individual state tax rates. Net income in 2005 includes a net pre-tax benefit of $2.5 million, or $0.02 per diluted share, from other, non-operating income recognized in the quarter. Earnings per share in the third quarter of 2006 are based on a 3% higher average diluted share count than in the same period in 2005. Robert Carr, Chairman and CEO, said, "Net income for the quarter rose by 55% as we continued to execute our winning formula of steady top line growth and improved operating efficiency. Merchant processing volumes for the quarter were another record as our base of installed merchants continues to grow at a better than 20% annual rate. The operating margin in the quarter was 21.2%, up both sequentially and on a year-over-year basis, reflecting the increasing proportion of merchants processing on our proprietary technology platforms. The conversion of virtually our entire card merchant portfolio processing and servicing to our back-end processing platform, "Passport," which is now complete, will provide lasting benefits of significant magnitude to operating margins. The successful implementation of this complex, state-of-the-art processing platform represents a tremendous accomplishment; however, we incurred significant costs in the third quarter to resolve certain outstanding issues related to this conversion. We believe those costs are behind us. On the front end, 80% of new card merchants installed and 66% of total transactions processed this quarter were on HPS Exchange." Processing volume for the three months ended September 30, 2006 increased 26.4% to $11.7 billion from $9.3 billion during the same period in 2005, even though same store sales at our installed base rose only 3.5%, well below the company's historical experience. The Company's active merchant count rose to 133,000 at September 30, 2006, a 22% increase over the past twelve months and includes 129,100 of card processing merchants and 3,900 of payroll merchants. NINE MONTH RESULTS For the first nine months of fiscal 2006, revenues were $808.6 million, up 33% compared to $607.6 million for the first nine months of fiscal 2005. Net income for the first nine months of 2006 was $22.0 million, or $0.55 per fully diluted share, increases of 61% and 49%, respectively, compared to net income of $13.6 million, or $0.37 per fully diluted share in the first nine months of 2005. Earnings per share in the 2006 period are based on an 8% increase in the average diluted share count compared to the same period in 2005. PAGE 1 Mr. Carr continued, "This quarter we introduced the Merchant Bill of Rights, ten fundamental rights to ensure reasonable credit and debit card processing costs, cutting-edge security and fair treatment for all small and mid-sized business owners. We also significantly strengthened and expanded our sales organization to 1,230 sales professionals at September 30, 2006. With the Merchant Bill of Rights articulating our Fair Deal philosophy and the continued growth of the industry's strongest sales force, we believe we are well-positioned to maintain our leadership and grow our market share among small and mid-sized merchants." FULL YEAR 2006 GUIDANCE: For the year, the company is raising its guidance, and now expects net revenue (total revenue less interchange, dues and assessments) to grow by 30% - 32%; operating income as a percentage of net revenue to be 18% - 20% on a pro forma basis, which excludes the $2 million interchange estimate change in the first quarter; a fourth quarter tax rate of 37.2% and a full year tax rate of 36.2%; and earnings per share of $0.76 - $0.80, which excludes only $0.04 per share of after-tax SFAS No. 123R stock-based compensation expense currently anticipated for fiscal 2006. BOARD DECLARES QUARTERLY DIVIDEND The Company also declared a quarterly dividend of $0.025 per common share. The dividend is payable to shareholders of record on November 24, 2006 and will be paid on December 15, 2006. CONFERENCE CALL: Heartland Payment Systems, Inc. will host a conference call on November 3, 2006 at 8:30 a.m. Eastern Time to discuss financial results and business highlights. The conference call may be accessed by calling 973-582-2845 at 8:25 AM Eastern time on November 3, 2006. Please provide the operator with PIN number 8012942. The conference call will also be Web cast where it can be accessed on the investor relations portion of Heartland's website at www.heartlandpaymentsystems.com. A digital replay of the conference call will be available within two hours of the conclusion of the call and will remain available through December 8, 2006. The number to call for the taped replay is 973-341-3080 and the conference PIN 8012942. The webcast will also be archived within two hours of the live call on the investor relations portion of the Company's website. ABOUT HEARTLAND Heartland Payment Systems, Inc. (HPS), a NYSE company trading under the symbol HPY, delivers credit/debit card processing and payroll solutions to 133,000 small to medium-sized merchants throughout the United States. HPS also provides additional services to its merchants such as gift and loyalty card programs, paper check authorization, and sells and rents point-of-sale devices and supplies. With over 1,200 national sales professionals, HPS builds long-term business relationships in local sales territories providing merchants with enhanced technology tools that assist them in more effectively operating their businesses. Heartland processed its first transaction in 1997, and, since 2000, has grown at a compound annual rate of more than 30% to become the sixth largest merchant processor in the United States and fifteenth largest merchant processor in the world. http://www.heartlandpaymentsystems.com PAGE 2 FORWARD-LOOKING STATEMENTS: This press release may contain statements of a forward-looking nature which represent our management's beliefs and assumptions concerning future events. Forward-looking statements involve risks, uncertainties and assumptions and are based on information currently available to us. Actual results may differ materially from those expressed in the forward-looking statements due to many factors. Information concerning these factors is contained in the Company's Securities and Exchange Commission filings. We undertake no obligation to update any forward-looking statements to reflect events or circumstances that may arise after the date of this release. CONTACT: Paul Johnson or Joe Hassett Gregory FCA 27 West Athens Ave. Ardmore, PA 19003 Tel: 610-642-8253 Email: Heartland_ir@gregoryfca.com TABLES FOLLOW PAGE 3 HEARTLAND PAYMENT SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------------ -------------------------------- 2006 2005 2006 2005 ------------------ ---------------- ---------------- -------------- TOTAL REVENUES $ 293,790 $ 228,092 $ 808,645 $ 607,648 ------------------ ---------------- ---------------- -------------- COSTS OF SERVICES: Interchange 215,656 168,550 592,426 444,100 Dues and assessments 10,920 8,624 29,732 22,938 Processing and servicing 30,894 22,567 88,656 64,919 Customer acquisition costs 8,774 7,037 25,269 20,278 Depreciation and amortization 1,602 1,447 4,403 4,056 ------------------ ---------------- ---------------- -------------- Total costs of services 267,846 208,225 740,486 556,291 General and administrative 11,699 10,169 35,489 28,448 ------------------ ---------------- ---------------- -------------- Total expenses 279,545 218,394 775,975 584,739 ------------------ ---------------- ---------------- -------------- INCOME FROM OPERATIONS 14,245 9,698 32,670 22,909 ------------------ ---------------- ---------------- -------------- OTHER INCOME (EXPENSE): Interest income 431 239 1,261 422 Interest expense (264) (418) (608) (1,391) Fair value adjustment for warrants with mandatory redemption provisions -- (2,620) -- (2,912) Gain on settlement of financing arrangement -- 5,140 -- 5,140 Other, net -- 4 831 11 ------------------ ---------------- ---------------- -------------- Total other income (expense) 167 2,345 1,484 1,270 ------------------ ---------------- ---------------- -------------- Income before income taxes 14,412 12,043 34,154 24,179 Provision for income taxes 4,273 5,507 12,182 10,568 ------------------ ---------------- ---------------- -------------- NET INCOME 10,139 6,536 21,972 13,611 INCOME ALLOCATED TO SERIES A SENIOR CONVERTIBLE PREFERRED STOCK -- 1,326 -- 4,728 ------------------ ---------------- ---------------- -------------- Net income attributable to Common Stock $ 10,139 $ 5,210 $ 21,972 $ 8,883 ================== ================ ================ ============== EARNINGS PER COMMON SHARE: Basic $ 0.27 $ 0.21 $ 0.61 $ 0.46 Diluted $ 0.25 $ 0.17 $ 0.55 $ 0.37 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Basic 36,939 24,995 36,096 19,331 Diluted 39,955 38,647 39,921 36,864
PAGE 4 HEARTLAND PAYMENT SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (unaudited)
SEPTEMBER 30, DECEMBER 31, 2006 2005 --------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 23,251 $ 17,747 Receivables, net 98,265 93,756 Investments 2,522 2,141 Inventory 2,360 714 Prepaid expenses 1,427 1,979 Current tax asset 23,786 1,602 Current deferred tax assets, net 806 1,492 --------------- -------------- Total current assets 152,417 119,431 Capitalized customer acquisition costs, net 53,341 42,930 Deferred tax assets, net 4,059 3,477 Property and equipment, net 22,289 17,661 Goodwill and intangible assets 1,767 -- Deposits and other assets 118 186 --------------- -------------- Total assets $ 233,991 $ 183,685 =============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Due to sponsor bank $ 28,450 $ 34,530 Accounts payable 28,127 25,339 Current portion of accrued buyout liability 11,186 10,478 Merchant deposits and loss reserves 4,514 7,450 Accrued expenses and other liabilities 9,614 7,407 Current portion of borrowings and financing arrangements 243 261 --------------- -------------- Total current liabilities 82,134 85,465 Long-term portion of borrowings and financing arrangements -- 173 Long-term portion of accrued buyout liability 21,051 17,996 --------------- -------------- Total liabilities 103,185 103,634 --------------- -------------- Commitments and contingencies (Note 11) -- -- STOCKHOLDERS' EQUITY Common Stock, $0.001 par value, 100,000,000 shares authorized; 38,193,179 and 34,222,114 shares issued at September 30, 2006 and December 31, 2005; 37,131,679 and 34,200,114 shares outstanding at September 30, 2006 and December 31, 2005 38 34 Additional paid-in capital 150,561 96,417 Accumulated other comprehensive loss (19) (26) Retained earnings (Accumulated deficit) 5,165 (15,879) Treasury stock, at cost (1,061,500 and 22,000 shares at September 30, 2006 and December 31, 2005) (24,939) (495) --------------- -------------- Total stockholders' equity 130,806 80,051 --------------- -------------- Total liabilities and stockholders' equity $ 233,991 $ 183,685 =============== ==============
PAGE 5 HEARTLAND PAYMENT SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (unaudited)
NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- 2006 2005 --------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 21,972 $ 13,611 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of capitalized customer acquisition costs 25,758 17,842 Other depreciation and amortization 5,537 4,062 Stock-based compensation 764 -- Deferred taxes 104 1,030 Gain on settlement of financing arrangement -- (5,140) Fair value adjustment for warrants with mandatory redemption -- provisions 2,912 Loss on disposal of property and equipment -- 33 Changes in operating assets and liabilities: Increase in receivables (3,500) (10,027) Increase in inventory (546) (662) Payment of signing bonuses, net (23,934) (14,723) Increase in capitalized customer acquisition costs (12,235) (9,402) Decrease (increase) in prepaid expenses 544 (123) Decrease in deposits and other assets 5,474 1 Excess tax benefits on options exercised under SFAS No. 123R (27,661) -- (Decrease) increase in due to sponsor bank (6,081) 4,092 Increase (decrease) in accounts payable 1,913 (2,507) Increase in accrued expenses and other liabilities 2,178 197 (Decrease) increase in merchant deposits and loss reserves (2,936) 1,191 Payouts of accrued buyout liability (7,983) (11,420) Increase in accrued buyout liability 11,746 11,838 --------------- -------------- Net cash (used in) provided by operating activities (8,886) 2,805 --------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (1,061) (410) Maturities of investments 687 166 Acquisition of business, net of cash acquired (3,453) -- Proceeds from disposal of property and equipment -- 27 Purchases of property and equipment (9,603) (9,274) --------------- -------------- Net cash used in investing activities (13,430) (9,491) --------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on borrowings and financing arrangements (192) (7,459) Proceeds from exercise of stock options 25,723 6,430 Proceeds from sale of common stock -- 41,712 Excess tax benefits on options exercised under SFAS No. 123R 27,661 -- Repurchase of common stock (24,444) -- Dividends paid on common stock (928) -- --------------- -------------- Net cash provided by financing activities 27,820 40,683 --------------- -------------- Net increase in cash and cash equivalents 5,504 33,997 Cash and cash equivalents at beginning of year 17,747 13,237 --------------- -------------- Cash and cash equivalents at end of period $ 23,251 $ 47,234 =============== ============== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 611 $ 1,339 Income taxes 6,604 11,312
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