10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________________ 

FORM 10-Q

__________________________________ 

(Mark One)

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

For the quarterly period ended June 30, 2012

OR

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

For the transition period from to

Commission File No. 001-32594

______________________________________________ 

HEARTLAND PAYMENT SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	22-3755714
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer 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)

____________________________________________________________ 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  YES    o  NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  YES    o  NO

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

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o  (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o  YES    x  NO

As of August 1, 2012, there were 38,892,203 shares of the registrant’s Common Stock, $0.001 par value, outstanding.

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.
	Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011	1
	Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2012 and 2011	2
	Condensed Consolidated Statements of Equity for the six months ended June 30, 2012 and 2011	3
	Condensed Consolidated Statements of Cash Flow for the six months ended June 30, 2012 and 2011	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	45
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

Heartland Payment Systems, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(unaudited)

	June 30, 2012			December 31, 2011
Assets
Current assets:
Cash and cash equivalents	$	42,951		$	40,301
Funds held for payroll customers	48,859			42,511
Receivables, net	180,096			176,535
Investments held to maturity	3,711			2,505
Inventory	11,168			11,492
Prepaid expenses	8,787			9,660
Current tax assets	4,091			—
Current deferred tax assets, net	6,875			6,746
Total current assets	306,538			289,750
Capitalized customer acquisition costs, net	56,223			55,014
Property and equipment, net	120,437			115,579
Goodwill	118,610			103,399
Intangible assets, net	37,359			32,498
Deposits and other assets, net	738			681
Total assets	$	639,905		$	596,921
Liabilities and Equity
Current liabilities:
Due to sponsor banks	$	54,451		$	63,881
Accounts payable	56,401			47,373
Deposits held for payroll customers	48,859			42,511
Current portion of borrowings	43,502			15,003
Current portion of accrued buyout liability	9,232			8,104
Processing liabilities and loss reserves	37,229			30,689
Accrued expenses and other liabilities	41,493			50,884
Current tax liabilities	—			1,408
Total current liabilities	291,167			259,853
Deferred tax liabilities, net	26,296			21,643
Reserve for unrecognized tax benefits	2,190			1,819
Long-term portion of borrowings	60,000			70,000
Long-term portion of accrued buyout liability	24,218			23,554
Total liabilities	403,871			376,869
Commitments and contingencies (Note 11)	—			—
Equity
Common stock, $0.001 par value, 100,000,000 shares authorized, 40,742,488 and 39,626,846 shares issued at June 30, 2012 and December 31, 2011; 38,806,159 and 38,847,957 outstanding at June 30, 2012 and December 31, 2011	41			39
Additional paid-in capital	229,691			207,643
Accumulated other comprehensive loss	(699		)	(680		)
Retained earnings	56,111			29,236
Treasury stock, at cost (1,936,329 and 778,889 shares at June 30, 2012 and December 31, 2011)	(50,000		)	(16,828		)
Total stockholders’ equity	235,144			219,410
Noncontrolling interests	890			642
Total equity	236,034			220,052
Total liabilities and equity	$	639,905		$	596,921

See accompanying notes to condensed consolidated financial statements.

1

Heartland Payment Systems, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30
	2012			2011			2012			2011
Total revenues	$	518,521		$	525,977		$	989,006		$	993,623
Costs of services:
Interchange	330,742			365,207			628,690			686,006
Dues, assessments and fees	52,505			38,551			96,373			72,701
Processing and servicing	57,188			55,359			113,910			107,915
Customer acquisition costs	11,263			12,130			22,699			23,788
Depreciation and amortization	4,506			3,701			8,892			7,576
Total costs of services	456,204			474,948			870,564			897,986
General and administrative	32,584			29,377			65,466			59,423
Total expenses	488,788			504,325			936,030			957,409
Income from operations	29,733			21,652			52,976			36,214
Other income (expense):
Interest income	45			41			160			82
Interest expense	(756		)	(1,116		)	(1,606		)	(2,308		)
Provision for processing system intrusion costs	(81		)	(372		)	(238		)	(675		)
Other, net	(4		)	(308		)	(4		)	(745		)
Total other income (expense)	(796		)	(1,755		)	(1,688		)	(3,646		)
Income before income taxes	28,937			19,897			51,288			32,568
Provision for income taxes	10,975			7,505			19,474			12,314
Net income	17,962			12,392			31,814			20,254
Less: Net income attributable to noncontrolling interests	161			134			259			181
Net income attributable to Heartland	$	17,801		$	12,258		$	31,555		$	20,073
Net income	$	17,962		$	12,392		$	31,814		$	20,254
Other comprehensive income (loss):
Unrealized gains on investments, net of income tax of $2, $0, $10 and $2	4			—			15			5
Unrealized losses on derivative financial instruments	(3		)	(536		)	(9		)	(582		)
Foreign currency translation adjustment	(267		)	97			(36		)	453
Comprehensive income	17,696			11,953			31,784			20,130
Less: Comprehensive income attributable to noncontrolling interests	81			163			248			317
Comprehensive income attributable to Heartland	$	17,615		$	11,790		$	31,536		$	19,813
Earnings per common share:
Basic	$	0.46		$	0.32		$	0.81		$	0.52
Diluted	$	0.44		$	0.31		$	0.78		$	0.50
Weighted average number of common      shares outstanding:
Basic	38,844			38,792			38,840			38,625
Diluted	40,448			40,128			40,504			39,934

See accompanying notes to condensed consolidated financial statements.

2

Heartland Payment Systems, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

(In thousands)

(unaudited)

	Heartland Stockholders’ Equity
	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			(Accumulated Deficit) Retained Earnings			Treasury Stock			Noncontrolling Minority Interests			Total Equity
	Shares		Amount
Six Months Ended June 30, 2011:
Balance, January 1, 2011	38,415		$	38	$	185,689		$	37		$	(8,471	)	$	—		$	301		$	177,594
Issuance of common      stock– options      exercised	698		1		5,733			—			—			—			—			5,734
Issuance of common       stock – RSU's vested	59		—		(518		)	—			—			—			—			(518		)
Excess tax benefit on      stock options exercised	—		—		2,537			—			—			—			—			2,537
Share-based compensation	—		—		3,700			—			—			—			—			3,700
Other comprehensive (loss) income	—		—		—			(260		)	—			—			136			(124		)
Dividends on common      stock	—		—		—			—			(3,095		)	—			—			(3,095		)
Net income for the period	—		—		—			—			20,073			—			181			20,254
Balance June 30, 2011	39,172		$	39	$	197,141		$	(223	)	$	8,507		$	—		$	618		$	206,082
Six Months Ended June 30, 2012:
Balance, January 1, 2012	38,848		$	39	$	207,643		$	(680	)	$	29,236		$	(16,828	)	$	642		$	220,052
Issuance of common      stock – options      exercised	1,038		2		11,838			—			—			—			—			11,840
Issuance of common       stock – RSU's vested	77		—		(1,247		)	—			—			—			—			(1,247		)
Excess tax benefit on      stock options exercised			—		4,556			—			—			—			—			4,556
Repurchase of common      stock	(1,157	)	—		—			—			—			(33,172		)	—			(33,172		)
Share-based compensation	—		—		6,901			—			—			—			—			6,901
Other comprehensive loss	—		—		—			(19		)	—			—			(11		)	(30		)
Dividends on common      stock	—		—		—			—			(4,680		)	—			—			(4,680		)
Net income for the period	—		—		—			—			31,555			—			259			31,814
Balance June 30, 2012	38,806		$	41	$	229,691		$	(699	)	$	56,111		$	(50,000	)	$	890		$	236,034

See accompanying notes to condensed consolidated financial statements.

3

Heartland Payment Systems, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flow

(In thousands)

(unaudited)

	Six Months Ended June 30,
	2012			2011
Cash flows from operating activities
Net income	$	31,814		$	20,254
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of capitalized customer acquisition costs	22,509			24,400
Other depreciation and amortization	14,714			14,023
Addition to loss reserves	1,195			3,381
Provision for doubtful receivables	390			1,270
Share-based compensation	6,901			3,700
Deferred taxes	4,522			2,253
Exit costs for service center	—			771
Other	29			83
Changes in operating assets and liabilities:
Increase in receivables	(2,324		)	(17,561		)
Decrease in inventory	383			1,093
Payment of signing bonuses, net	(15,461		)	(14,161		)
Increase in capitalized customer acquisition costs	(8,257		)	(6,942		)
Decrease (increase) in prepaid expenses	886			(2,750		)
(Increase) decrease in current tax assets	(945		)	15,758
Increase in deposits and other assets	(53		)	(295		)
Excess tax benefits on employee share-based compensation	(4,556		)	(2,537		)
Increase in reserve for unrecognized tax benefits	371			273
(Decrease) increase in due to sponsor bank	(9,430		)	7,512
Increase in accounts payable	9,035			666
(Decrease) increase in accrued expenses and other liabilities	(11,457		)	1,723
Increase in processing liabilities and loss reserves	5,263			2,025
Payouts of accrued buyout liability	(6,655		)	(7,276		)
Increase in accrued buyout liability	8,447			6,330
Net cash provided by operating activities	47,321			53,993
Cash flows from investing activities
Purchase of investments held to maturity	(1,865		)	(2,178		)
Maturities of investments held to maturity	676			1,282
(Increase) decrease in funds held for payroll customers	(6,323		)	1,818
Increase (decrease) in deposits held for payroll customers	6,348			(1,812		)
Acquisition of business, net of cash acquired	(23,682		)	(7,598		)
Purchases of property and equipment	(16,420		)	(20,365		)
Net cash used in investing activities	(41,266		)	(28,853		)
Cash flows from financing activities
Proceeds from borrowings	26,000			—
Principal payments on borrowings	(7,502		)	(30,778		)
Proceeds from exercise of stock options	11,840			5,733
Excess tax benefits on employee share-based compensation	4,556			2,537
Repurchases of common stock	(33,586		)	—
Dividends paid on common stock	(4,680		)	(3,095		)
Net cash used in financing activities	(3,372		)	(25,603		)
Net increase (decrease) in cash	2,683			(463		)
Effect of exchange rates on cash	(33		)	37
Cash at beginning of year	40,301			41,729
Cash at end of period	$	42,951		$	41,303
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest	$	1,488		$	2,132
Income taxes	15,457			(5,972		)

See accompanying notes to condensed consolidated financial statements.

4

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements

(unaudited)

1. Organization and Operations

Basis of Financial Statement Presentation— The accompanying condensed consolidated financial statements include those of Heartland Payment Systems, Inc. (the “Company,” “we,” “us,” or “our”) and its wholly-owned subsidiaries, Heartland Payroll Company (“HPC”), Debitek, Inc. (“Debitek”) and Heartland Acquisition LLC (“Network Services”), and its 70% owned subsidiary Collective POS Solutions Ltd. (“CPOS”). The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All intercompany balances and transactions with the Company's subsidiaries have been eliminated upon consolidation. Certain amounts relating to 2011 financial information have been reclassified to conform with the current year presentation.

The accompanying condensed consolidated financial statements are unaudited. In the opinion of the Company's management, the unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the Company's financial position at June 30, 2012, its results of operations, changes in stockholders’ equity and cash flows for the six months ended June 30, 2012 and 2011. Results of operations reported for interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2012. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2011. The December 31, 2011 condensed consolidated balance sheet was derived from the audited 2011 consolidated financial statements.

In the Consolidated Statements of Cash Flow, the prior period reflects a correction to the presentation of the reconciliation of net income to net cash provided by operating activities. Previously, the reconciliation of net income to net cash provided by operating activities started with net income attributable to Heartland, and net income attributable to noncontrolling interests was included as a reconciling item. As restated, the reconciliation of net income to net cash provided by operating activities starts with net income which includes noncontrolling interests. This change had no effect on reported net cash provided by operating activities.

Business Description—The Company’s principal business is to provide payment processing services related to bankcard transactions for merchants throughout the United States and Canada. In addition, the Company provides certain other merchant services, including the sale and rental of terminal equipment, loyalty and gift card processing, and the sale of terminal supplies. The Company provides K to 12 school solutions in the United States including school nutrition and point-of-sale solutions. HPC provides payroll and related tax filing services throughout the United States. Debitek provides prepaid card and stored-value card solutions throughout the United States and Canada. The Company and Debitek also provide campus payment solutions throughout the United States and Canada. CPOS is a Canadian provider of payment processing services and secure point-of-sale solutions.

Over 73% of the Company's revenue is derived from processing and settling Visa and MasterCard bankcard transactions for its merchant customers. Because the Company is not a ''member bank'' as defined by Visa and MasterCard, in order to process and settle these bankcard transactions for its merchants, the Company has entered into sponsorship agreements with member banks. Visa and MasterCard rules restrict the Company from performing funds settlement or accessing merchant settlement funds and require that these funds be in the possession of the member bank until the merchant is funded. A sponsorship agreement permits the Company to route Visa and MasterCard bankcard transactions under the member bank's control and identification numbers to clear credit bankcard transactions through Visa and MasterCard. A sponsorship agreement also enables the Company to settle funds between cardholders and merchants by delivering funding files to the member bank, which in turn transfers settlement funds to the merchants' bank accounts. These restrictions place the settlement assets and obligations under the control of the member bank.

The sponsorship agreements with the member banks require, among other things, that the Company abide by the by-laws and regulations of the Visa and MasterCard networks, and certain of the Sponsor banks require a certificate of deposit or a cash balance in a deposit account. If the Company breaches a sponsorship agreement, the Sponsor banks may terminate the agreement and, under the terms of the agreement, the Company would have 180 days to identify an alternative Sponsor bank. The Company is dependent on its Sponsor banks, Visa and MasterCard for notification of any compliance breaches. As of June 30, 2012, the Company has not been notified of any such issues by its Sponsor banks, Visa or MasterCard.

At June 30, 2012, the Company is party to five bank sponsorship agreements.

5

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

• The Company entered into a sponsorship agreement with KeyBank, National Association on April 1, 1999 and on December 22, 2011, the Company entered into an amendment agreement that extended the expiration date of that agreement to October 1, 2012.

• In 2007, the Company entered into a sponsorship agreement with Heartland Bank, an unrelated third party. The agreement with Heartland Bank has been renewed through September 2013.

• In November 2009, the Company entered into a sponsorship agreement with The Bancorp Bank to sponsor the Company's large national and mid-tier merchants processed by Network Services. The agreement with The Bancorp Bank expires in November 2014.

• On March 24, 2011, the Company entered into a sponsorship agreement with Barclays Bank Delaware to sponsor certain of the Company's large national merchants processed by Network Services. The agreement with Barclays Bank Delaware expires in March 2016 with an automatic one year renewal.

• On February 8, 2012, the Company entered into a sponsorship agreement with Wells Fargo Bank, N.A. ("WFB"). The WFB sponsorship agreement will be in effect until February 8, 2016 and will automatically renew for successive three year periods unless either party provides six months' written notice of nonrenewal to the other party. Processing activity associated with the WFB sponsorship has not yet commenced.

Following is a breakout of the Company’s total Visa and MasterCard settled bankcard processing volume for the month ending June 30, 2012 by percentage processed under its individual bank sponsorship agreements:

Sponsor Bank	% of June 2012 Bankcard Processing Volume
KeyBank, National Association	64%
The Bancorp Bank	15%
Barclays Bank Delaware	13%
Heartland Bank	8%

Processing System Intrusion—On January 20, 2009, the Company publicly announced the discovery of a criminal

breach of its payment systems environment (the “Processing System Intrusion”). The Processing System Intrusion involved

malicious software that appears to have been used to collect in-transit, unencrypted payment card data while it was being

processed by the Company during the transaction authorization process. The Company believes the breach did not extend

beyond 2008.

Since its announcement of the Processing System Intrusion on January 20, 2009 and through June 30, 2012, the

Company has expensed a total of $147.3 million, before reducing those charges by $31.2 million of total insurance recoveries. The majority of the total charges of approximately $114.7 million relates to settlements of claims. Approximately $32.6 million of the total charges were for legal fees and costs the Company incurred for investigations, defending various claims and

actions, remedial actions and crisis management services.

During the three months ended June 30, 2012, the Company incurred approximately $0.1 million, or less than one cent per share, for legal fees and costs it incurred related to the Processing System Intrusion. During the three months ended

June 30, 2011, the Company expensed approximately $0.4 million, or less than one cent per share, related to the Processing System Intrusion. During the six months ended June 30, 2012, the Company incurred approximately $0.2 million, or less than one cent per share, for legal fees and costs it incurred related to the Processing System Intrusion. During the six months ended June 30, 2011, the Company expensed approximately $0.7 million, or $0.01 per share, related to the Processing System Intrusion.

2. Summary of Significant Accounting Policies

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates include, among other things, the accrued buyout liability, capitalized customer acquisition costs, goodwill, loss reserves, certain accounts payable and

6

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

accrued expenses and certain tax assets and liabilities as well as the related valuation allowances, if any. Actual results could differ from those estimates.

Cash and Cash Equivalents—At June 30, 2012, cash included approximately $29.0 million of processing-related cash in transit and collateral, compared to approximately $28.0 million of processing-related cash in transit and collateral at December 31, 2011.

Receivables—Receivables are stated net of allowance for doubtful accounts. The Company estimates its allowance based on experience with its merchants, customers, and sales force and its judgment as to the likelihood of their ultimate payment. The Company also considers collection experience and makes estimates regarding collectability based on trends in aging. Historically, the Company has not experienced significant charge offs for its merchant receivables.

The Company's primary receivables are from its bankcard processing merchants. These receivables result from the Company's practice of advancing interchange fees to most of its small and mid-sized merchants (referred to as Small and Midsized Enterprises, or “SME”) during the month and collecting those fees at the beginning of the following month, as well as from transaction fees the Company charges its merchants for processing transactions. The Company does not advance interchange fees to its Network Services Merchants.

Generally, the Company uses cash available for investment to fund these advances to SME merchants; when available cash has been expended, the Company directs its sponsor banks to make these advances, thus generating a payable to the sponsor banks. We pay our sponsor banks the prime rate on these payables. At June 30, 2012, the Company used $48.5 million of its available cash to fund merchant advances and at December 31, 2011, the Company used $40.0 million of its cash to fund merchant advances. The amount due to sponsor banks for funding advances was $43.1 million at June 30, 2012 and $45.2 million at December 31, 2011. The payable to sponsor banks is repaid at the beginning of the following month out of the fees the Company collects from its merchants. Receivables from merchants also include receivables from the sale of point of sale terminal equipment. Unlike the SME merchants, Network Services Merchants are invoiced monthly, on payment terms of 30 days net from date of invoicing.

Receivables also include amounts resulting from the pre-funding of Discover and American Express transactions to some of the Company's merchants and are due from the related bankcard networks. These amounts are recovered the next business day from the date of processing the transaction.

Receivables also include amounts resulting from the sale, installation, training and repair of payment system hardware and software for prepaid card and stored-value card payment systems, campus payment solutions, and Heartland School Solutions. These receivables are mostly invoiced on terms of 30 days net from date of invoicing.

Investments and Funds Held for Payroll Customers—Investments, including those carried on the Condensed Consolidated Balance Sheet as Funds held for payroll customers, consist primarily of fixed income bond funds and certificates of deposit. Funds held for payroll customers also include overnight bank deposits. The majority of investments carried in Funds held for payroll customers are available-for-sale and recorded at fair value based on quoted market prices. Certificates of deposit are classified as held to maturity and recorded at cost. In the event of a sale, cost is determined on a specific identification basis. At June 30, 2012, Funds held for payroll customers included cash and cash equivalents of $47.7 million and investments available for sale of $1.2 million.

Capitalized Customer Acquisition Costs, net—Capitalized customer acquisition costs consist of (1) up-front signing bonus payments made to Relationship Managers and sales managers (the Company's sales force) for the establishment of new merchant relationships, and (2) a deferred acquisition cost representing the estimated cost of buying out the commissions of vested sales employees. Capitalized customer acquisition costs represent incremental, direct customer acquisition costs that are recoverable through gross margins associated with merchant contracts. The capitalized customer acquisition costs are amortized using a method which approximates a proportional revenue approach over the initial three-year term of the merchant contract.

The up-front signing bonus paid for new SME bankcard, payroll and loyalty marketing accounts is based on the estimated gross margin for the first year of the merchant contract. The signing bonus, amount capitalized, and related amortization are adjusted after one year to reflect the actual gross margin generated by the merchant contract during that year. The deferred customer acquisition cost asset is accrued over the first year of SME bankcard merchant processing, consistent with the build-up in the accrued buyout liability, as described below. Beginning in June 2012, Relationship Managers and sales

7

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

managers earn portfolio equity on their newly installed payroll and loyalty marketing merchant accounts based on the residual commissions they earn on those accounts. The accrued buyout liability and deferred acquisition cost asset will be developed the same as the SME bankcard merchant portfolio equity.

Management evaluates the capitalized customer acquisition costs for impairment by comparing, on a pooled basis by vintage month of origination, the expected future net cash flows from underlying merchant relationships to the carrying amount of the capitalized customer acquisition costs. If the estimated future net cash flows are lower than the recorded carrying amount, indicating an impairment of the value of the capitalized customer acquisition costs, the impairment loss will be charged to operations. The Company believes that no impairment has occurred as of June 30, 2012.

Processing Liabilities and Loss Reserves—The majority of the Company's processing liabilities include funds in transit associated with bankcard and check processing. In addition, the Company maintains merchant deposits to offset potential liabilities from merchant chargeback processing. Disputes between a cardholder and a merchant periodically arise due to the cardholder's dissatisfaction with merchandise quality or the merchant's service, and the disputes may not always be resolved in the merchant's favor. In some of these cases, the transaction is ''charged back'' to the merchant and the purchase price is refunded to the cardholder by the credit card-issuing institution. If the merchant is unable to fund the refund, the Company is liable for the full amount of the transaction. The Company's obligation to stand ready to perform is minimal. The Company maintains a deposit or the pledge of a letter of credit from certain merchants as an offset to potential contingent liabilities that are the responsibility of such merchants. The Company evaluates its ultimate risk and records an estimate of potential loss for chargebacks related to merchant fraud based upon an assessment of actual historical fraud loss rates compared to recent bankcard processing volume levels. The Company believes that the liability recorded as loss reserves approximates fair value.

Accrued Buyout Liability—The Company's Relationship Managers and sales managers are paid residual commissions based on the gross margin generated by monthly SME merchant processing activity. The Company has the right, but not the obligation, to buy out some or all of these commissions, and intends to do so periodically. Such purchases of the commissions are at a fixed multiple of the last twelve months' commissions. Because of the Company's intent and ability to execute purchases of the residual commissions, and the mutual understanding between the Company and the Relationship Managers and sales managers, the Company has accounted for this deferred compensation arrangement pursuant to the substantive nature of the plan. The Company therefore records the amount that it would have to pay (the ''settlement cost'') to buy out non-servicing related commissions in their entirety from vested Relationship Managers and sales managers, and an accrual, based on their progress towards vesting, for those unvested Relationship Managers and sales managers who are expected to vest in the future. As noted above, as the liability increases over the first year of a SME merchant contract, the Company also records a related deferred acquisition cost asset for currently vested Relationship Managers and sales managers. The accrued buyout liability associated with unvested Relationship Managers and sales managers is not included in the deferred acquisition cost asset since future services are required in order to vest. Subsequent changes in the estimated accrued buyout liability due to merchant attrition, same-store sales growth and changes in gross margin are included in the same income statement caption as customer acquisition costs expense.

Beginning in June 2012, Relationship Managers and sales managers earn portfolio equity on their newly installed payroll and loyalty marketing merchant accounts based on the residual commissions they earn on those accounts. The accrued buyout liability and deferred acquisition cost asset will be accrued identically as the SME bankcard merchant portfolio equity.

The accrued buyout liability is based on merchants under contract at the balance sheet date, the gross margin generated by those merchants over the prior twelve months, and the contractual buyout multiple. The liability related to a new merchant is therefore zero when the merchant is installed, and increases over the twelve months following the installation date. The same procedure is applied to unvested commissions over the expected vesting period, but is further adjusted to reflect the Company's estimate that 31% of unvested Relationship Managers and sales managers become vested.

The classification of the accrued buyout liability between current and non-current liabilities on the Condensed Consolidated Balance Sheet is based upon the Company's estimate of the amount of the accrued buyout liability that it reasonably expects to pay over the next twelve months. This estimate is developed by calculating the cumulative annual average percentage that total historical buyout payments represent of the accrued buyout liability. That percentage is applied to the period-end accrued buyout liability to determine the current portion.

Revenue—Revenues are mainly comprised of gross processing revenue, payroll processing revenue and equipment-

8

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

related income. Gross processing revenue primarily consists of discount fees, per-transaction fees and periodic fees (primarily monthly) from the processing of Visa, MasterCard, American Express and Discover bankcard transactions for merchants. The Company passes through to its customers any changes in interchange or network fees. Gross processing revenue also includes fees for servicing American Express accounts, customer service fees, fees for processing chargebacks, termination fees on terminated contracts, gift and loyalty card fees, fees generated by our Heartland School Solutions business, and other miscellaneous revenue. Payroll processing revenue includes periodic and annual fees charged by HPC for payroll processing services, and interest earned from investing tax impound funds held for our customers. Revenue is recorded as bankcard and other processing transactions are processed or payroll services are performed.

Equipment-related income includes revenues from the sale, rental and deployment of bankcard and check processing terminals, from the sale of hardware, software and associated services for prepaid card and stored-value card payment systems, and campus payment solutions. Revenues are recorded at the time of shipment, or the provision of service.

Loss Contingencies and Legal Expenses—The Company records a liability for loss contingencies when the liability is probable and the amount is reasonably estimable. Legal fees associated with loss contingencies are recorded when the legal fees are incurred.

The Company records recoveries from its insurance providers when cash is received from the provider.

Other Income (Expense)— Other income (expense) consists of interest income on cash and investments, the interest cost on our borrowings, the gains or losses on the disposal of property and equipment and other non-operating income or expense items. For the six months ended June 30, 2012, other income (expense) was insignificant. For the six months ended June 30, 2011, other income (expense) included pre-tax charges of $0.8 million reflecting the costs (primarily accrued staff termination costs and fixed asset write downs) associated with closing of the Company's Johnson City, Tennessee service center.

Other income (expense) also includes the pre-tax charges related to the Provision for processing system intrusion costs.

Income Taxes—The Company accounts for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and the tax basis of assets and liabilities using enacted tax rates.

The provision for income taxes for the three and six months ended June 30, 2012 and 2011 and the resulting effective tax rates were as follows:

	Three Months Ended June 30,						Six Months Ended  June 30,
	2012			2011			2012			2011
	(In thousands)
Provision for income taxes	$	10,975		$	7,505		$	19,474		$	12,314
Effective tax rate	37.9		%	37.7		%	38.0		%	37.8		%

The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future earnings, carry back and carry forward periods and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.

The Company regularly evaluates its tax positions for additional unrecognized tax benefits and associated interest and penalties, if applicable. There are many factors that are considered when evaluating these tax positions including: interpretation of tax laws, recent tax litigation on a position, past audit or examination history, and subjective estimates and assumptions, which have been deemed reasonable by management. However, if management's estimates are not representative of actual outcomes, the Company's results could be materially impacted. The Company does not expect any material changes to unrecognized tax benefits in the next twelve months. At June 30, 2012, the reserve for unrecognized tax benefits related to uncertain tax positions was $2.2 million, of which $1.4 million would, if recognized, impact the effective tax rate. At December 31, 2011, the reserve for unrecognized tax benefits related to uncertain tax positions was $1.8 million, of which $1.1

9

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

million would, if recognized, impact the effective tax rate.

Share–Based Compensation—- In the fourth quarter of 2010, the Company's Board of Directors approved grants of508,800 performance-based Restricted Share Units. These Restricted Share Units are share awards which would vest 50% in 2013, 25% in 2014, and 25% in 2015 only if, over the term of these Restricted Share Units, the following diluted earnings per share targets for the years ended December 31, 2012, 2013 and 2014 are achieved:

	2012	2013	2014
Diluted Earnings Per Share (a)	$1.48	$1.74	$2.04

(a) Calculated on a Pro Forma basis to exclude non-operating gains and losses, if any, and excluding the after-tax impact of Share-based Compensation Expense.

As of December 31, 2011, management determined that achieving these performance targets was probable to occur and began recording share-based compensation expense for these Restricted Share Units. The closing price of the Company's common stock on the grant date equals the grant date fair value of these nonvested Restricted Share Units awards and will be recognized as compensation expense over their vesting periods.

In the fourth quarter of 2011, the Company's Board of Directors approved grants of 164,808 performance-based Restricted Share Units. These Restricted Share Units are nonvested share awards which would vest 50% in 2014 and 50% in 2015 only if the Company achieves a diluted earnings per share compound annual growth rate ("CAGR") of seventeen percent (17%) for the two-year period ending December 31, 2013. Diluted earnings per share will be calculated on a Pro Forma basis to exclude non-operating gains and losses, if any, and exclude the after-tax impact of Share-based Compensation Expense. For each 1% that the CAGR actually achieved by the Company for the two year period ending on December 31, 2013 is above the 17% target, the number of shares underlying the Restricted Share Units awarded would be increased by 3.09%; provided, however, that the maximum increase in the number of shares that may be awarded is 100%. Likewise, for each 1% that the CAGR actually achieved by the Company for the two-year period ending on December 31, 2013 is below the 17% target, the number of shares underlying the Restricted Share Units awarded would be decreased by 1.13%. If the target CAGR is missed by 80% or more, then the number of shares awarded is zero.

As of June 30, 2012, management determined that achieving a CAGR for the two-year period ending December 31, 2013 which would result in earning the maximum 100% increase in the number of shares that may be awarded was probable to occur, and began recording share-based compensation expense for these Restricted Share Units based on 329,616 shares. The closing price of the Company's common stock on the grant date equals the grant date fair value of these nonvested Restricted Share Units awards and will be recognized as compensation expense over their vesting periods.

Diluted earnings per share for the six months ended June 30, 2012 and 2011 were computed based on the weighted average outstanding common shares plus equivalent shares assuming exercise of stock options and vesting of Restricted Share Units, where dilutive.

Common Stock Repurchases. On October 21, 2011, the Company's Board of Directors authorized the repurchase ofup to $50 million worth of the Company's outstanding common stock. Repurchases under this program were made through the open market in accordance with applicable laws and regulations. The Company funded repurchases with cash flow from operations, existing cash on the balance sheet, and other sources including the proceeds of options exercises. At June 30, 2012, the Company had no amounts remaining under the October 21, 2011 authorization to repurchase its common stock. On July 27, 2012, the Company's Board of Directors authorized a new program to repurchase up to $50 million of the Company's outstanding common stock under essentially the same terms as the October 21, 2011 program.

Under the October 21, 2011 authorization from its Board of Directors, during the six months ended June 30, 2012 and the year ended December 31, 2011, respectively, the Company repurchased an aggregate of 1,157,440 shares of its common stock at a total cost of $33.2 million, at an average cost of $28.66 per share, and 778,889 shares of its common stock at a total cost of $16.8 million, at an average cost of $21.61 per share. No common stock was repurchased in the six months ended June 30, 2011.

Derivative Financial Instruments—The Company utilizes derivative instruments to manage interest rate risk on its borrowings under its Second Amended and Restated Credit Agreement dated November 24, 2010 with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders who are a party to the Credit Agreement. The Company recognizes the fair value of derivative financial instruments in the Condensed Consolidated Balance Sheets in investments, or accrued expenses

10

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

and other liabilities. Changes in fair value of derivative instruments are recognized immediately in earnings unless the derivative is designated and qualifies as a hedge of future cash flows. For derivatives that qualify as hedges of future cash flows, the effective portion of changes in fair value is recorded in other comprehensive income and reclassified into interest expense in the same periods during which the hedged item affects earnings. Any ineffectiveness of cash flow hedges would be recognized in Other income (expense) in the Condensed Consolidated Statements of Income and Comprehensive Income during the period of change.

In January 2011, the Company entered into fixed-pay amortizing interest rate swaps having an initial notional amount of $50 million as a hedge of future cash flows on the variable rate debt outstanding under its Term Credit Facility. These interest rate swaps convert the related notional amount of variable rate debt to fixed rate. At June 30, 2012, the remaining notional amount of these interest rate swaps was $38.8 million and the fair value of these interest rate swaps, $0.9 million, was recorded as a liability in accrued expenses and other liabilities. The related deferred tax benefit was $0.3 million. At December 31, 2011, the remaining notional amount of these interest rate swaps was $42.5 million and the fair value of these interest rate swaps, $0.9 million, was recorded as a liability in accrued expenses and other liabilities. The related deferred tax benefit was $0.3 million.

Foreign Currency—The Canadian dollar is the functional currency of CPOS, which operates in Canada. CPOS' revenues and expenses are translated at the average exchange rates prevailing during the period. The foreign currency assets and liabilities of CPOS are translated at the period-end rate of exchange. The resulting translation adjustment is allocated between the Company and CPOS' noncontrolling interests and is recorded as a component of other comprehensive income or noncontrolling interests in total equity. At June 30, 2012, the cumulative foreign currency translation reflected a loss of $0.3 million and at June 30, 2011 reflected a gain of $0.2 million. The Company intends to indefinitely reinvest undistributed earnings of CPOS and has not tax affected the cumulative foreign currency translation gain or loss. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested profits is not material.

Noncontrolling Interests— Noncontrolling interests represent noncontrolling minority stockholders' share of the equity and after-tax net income or loss of consolidated subsidiaries. Noncontrolling minority stockholders' share of after-tax net income or loss of consolidated subsidiaries is included in Net income attributable to noncontrolling interests in the Condensed Consolidated Statement of Income and Comprehensive Income. The minority stockholders’ interests included in noncontrolling interests in the June 30, 2012 and December 31, 2011 Condensed Consolidated Balance Sheet were $0.9 million and $0.6 million, respectively, and reflect the original investments by these minority shareholders in the consolidated subsidiaries, along with their proportionate share of the earnings or losses of the subsidiaries.

Subsequent Events—The Company evaluated subsequent events with respect to the Consolidated Financial Statements as of and for the six months ended June 30, 2012.

New Accounting Pronouncements— In May 2011, the FASB issued an accounting standard update which addresses

changes to concepts regarding performing fair value measurements including: (i) the application of the highest and best use and

valuation premise; (ii) the valuation of an instrument classified in the reporting entity's shareholder equity; (iii) the valuation of

financial instruments that are managed within a portfolio; and (iv) the application of premiums and discounts. This update also

enhances disclosure requirements about fair value measurements, including providing information regarding Level 3

measurements such as quantitative information about unobservable inputs, further discussion of the valuation processes used

and assumption sensitivity analysis. The update is effective for interim and annual periods beginning after December 15, 2011.

The implementation of this update did not have a material effect on the Company's Consolidated Financial Statements.

In June 2011, the FASB issued an accounting standard update which amends the comprehensive income topic of the

current codification. The update eliminates the option to present the components of other comprehensive income as part of the

statement of changes in equity, and instead requires consecutive presentation of the statement of net income and other

comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive

statements. The update is effective for interim and annual periods beginning after December 15, 2011. The implementation of

this update did not have a material effect on the Company's Consolidated Financial Statements.

In September 2011, the FASB issued an accounting standard update on testing goodwill for impairment. This

guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not

that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required

to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure

the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines that the fair

11

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

value of a reporting unit is more than its carrying amount, the two-step goodwill impairment test is not required. The

amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after

December 15, 2011 (early adoption is permitted). The Company early adopted this update at December 31, 2011 and the implementation of this update did not have a material effect on the Company's Consolidated Financial Statements.

In December 2011, the FASB issued an accounting standard update on disclosures about offsetting assets and

liabilities. This guidance requires entities to disclose information about offsetting and related arrangements to enable users of

financial statements to understand the effect of those arrangements on the entity's financial position. The amendments require

enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either

(i) offset in accordance with current literature or (ii) subject to an enforceable master netting arrangement or similar agreement,

irrespective of whether they are offset in accordance with current literature. The update is effective for fiscal years, and interim

periods within those years, beginning on or after January 1, 2013. The implementation of this update is not expected to have a

material effect on the Company's Consolidated Financial Statements.

In July 2012, the FASB issued an accounting standard update on testing indefinite-lived intangible assets for impairment. This guidance will allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. Under these amendments, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not the indefinite-lived intangible asset is impaired. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. The update is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 (early adoption is permitted). The Company is currently evaluating the impact of this update on the Company's consolidated financial statements.

3. Acquisitions

The Company initiated its Heartland School Solutions product through its acquisitions of the school solutions businesses operated by Lunchbox, Comalex, mySchoolBucks, School-Link Technologies and Lunch Byte Systems. Lunchbox, Comalex, mySchoolBucks, School-Link Technologies and Lunch Byte Systems, Inc. serve approximately 4,400, 3,700, 900, 10,000, and 10,000 schools, respectively. The combined Heartland School Solutions develops, manufactures, sells, services and maintains computer software designed to facilitate accounting and management functions of school food service operations. These acquisitions provide the Company with the ability to offer Internet payment capability to parents, which facilitates on-line deposits of funds into student accounts and enables schools to operate more efficiently. The Company plans to consolidate the individual platforms and products of Lunchbox, Comalex, mySchoolBucks, School-Link Technologies and Lunch Byte Systems, Inc. to optimize synergies, cost efficiencies and product offerings to customers. Pro forma results of operations have not been presented because the effect of these acquisitions was not material. The entire amount of goodwill is expected to be deductible for income tax reporting. Details of the individual acquisition transactions follow:

Lunchbox

On December 30, 2010, the Company purchased for a $7.7 million cash payment the net assets of the K to 12 school solutions business previously operated by Lunchbox. The acquisition was financed through a combination of cash on hand and our credit facilities. Pro forma results of operations have not been presented because the effect of the acquisition was not material. The transaction was accounted for under the purchase method of accounting. Beginning December 30, 2010, Lunchbox's results of operations are included in the Company's results of operations. The allocation of the total purchase price was as follows: $6.0 million to goodwill, $1.9 million to intangible assets and $0.2 million to net tangible liabilities.

Comalex, Inc.

On January 12, 2011, the Company purchased for a $6.1 million cash payment the net assets of Comalex, Inc. The acquisition was funded with cash on hand. Pro forma results of operations have not been presented because the effect of the acquisition was not material. The transaction was accounted for under the purchase method of accounting. Beginning January 12, 2011, Comalex's results of operations are included in the Company's results of operations. The allocation of the total purchase price was as follows: $4.9 million to goodwill, $1.8 million to intangible assets and $0.6 million to net tangible liabilities.

mySchoolBucks, LLC

On February 4, 2011, the Company purchased for a $1.5 million cash payment the net assets of mySchoolBucks, LLC. The acquisition was funded with cash on hand. Pro forma results of operations have not been presented because the effect of

12

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

the acquisition was not material. The transaction was accounted for under the purchase method of accounting. Beginning February 4, 2011, mySchoolBucks' results of operations are included in the Company's results of operations. The allocation of the total purchase price was as follows: $1.0 million to goodwill and $0.5 million to intangible assets.

School-Link Technologies, Inc.

On September 30, 2011, the Company purchased for a $15.6 million cash payment the net assets of School-Link Technologies, Inc. The acquisition was funded with cash on hand. The transaction was accounted for under the purchase method of accounting. Beginning October 1, 2011, School-Link's results of operations are included in the Company's results of operations. The allocation of the total purchase price was as follows: $28.7 million to goodwill, $4.3 million to intangible assets and $17.4 million to net tangible liabilities. The fair values of the School-Link Technologies' assets acquired and liabilities assumed were estimated as of their acquisition date. The fair values are preliminary, based on estimates, and may be adjusted as more information becomes available and valuations are finalized.

Lunch Byte Systems, Inc.

On June 29, 2012, the Company purchased for a $26.0 million cash payment the net assets of Lunch Byte Systems, Inc. (a.k.a. "Nutrikids"). The $26.0 million cash payment made on June 29, 2012 was funded through our Revolving Credit Facility and subsequently repaid with cash on hand in July 2012. Beginning July 1, 2012, Lunch Byte's results of operations will be included in the Company's results of operations. The transaction was accounted for under the purchase method of accounting. The allocation of the total purchase price was as follows: $15.2 million to goodwill, $7.0 million to intangible assets and $3.8 million to net tangible assets. The fair values of the Lunch Byte Systems' assets acquired and liabilities assumed were estimated as of their acquisition date. The fair values are preliminary, based on estimates, and may be adjusted as more information becomes available and valuations are finalized. The weighted average amortization life for the 2012 acquired finite lived intangible assets related to acquisition of Lunch Byte is as follows:

Weighted-average amortization life
	(In years)
Customer relationships	6.0
Software	3.3
Non-compete agreements	5.0
Total	5.9

4. Receivables

A summary of receivables by major class was as follows at June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
	(In thousands)
Accounts receivable from merchants	$	165,784		$	151,228
Accounts receivable from bankcard networks	14,298			24,301
Accounts receivable from others	1,433			2,457
	181,515			177,986
Less allowance for doubtful accounts	(1,419		)	(1,451		)
Total receivables, net	$	180,096		$	176,535

Included in accounts receivable from others are amounts due from employees which are $0.6 million at June 30, 2012 and December 31, 2011, respectively. Accounts receivable related to bankcard networks are primarily amounts which were pre-funded to merchants for processing Discover and American Express bankcard transactions as well as amounts due from Visa for PIN debit transactions.

A summary of the activity in the allowance for doubtful accounts for the three and six months ended June 30, 2012 and 2011 was as follows:

13

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	1,453		$	898		$	1,451		$	683
Additions to allowance	307			570			390			1,270
Charges against allowance	(341		)	(261		)	(422		)	(746		)
Ending balance	$	1,419		$	1,207		$	1,419		$	1,207

5. Funds Held for Payroll Customers and Investments

A summary of Funds held for payroll customers and investments, including the cost, gross unrealized gains (losses) and estimated fair value for investments held to maturity and investments available-for-sale by major security type and class of security were as follows at June 30, 2012 and December 31, 2011:

	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
June 30, 2012
Funds Held for Payroll Customers:
Fixed income bond fund - available for sale	$	968	$	214	$	—	$	1,182
Cash held for payroll customers	47,677		—		—		47,677
Total Funds held for payroll customers	$	48,645	$	214	$	—	$	48,859
Investments:
Investments held to maturity – Certificates of deposit (a)	$	3,711	$	—	$	—	$	3,711
Total investments	$	3,711	$	—	$	—	$	3,711

(a) Certificates of deposit have remaining terms ranging from 1 month to 14 months.

	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
December 31, 2011
Funds Held for Payroll Customers:
Fixed income bond fund - available for sale	$	968	$	190	$	—	$	1,158
Cash held for payroll customers	41,353		—		—		41,353
Total Funds held for payroll customers	$	42,321	$	190	$	—	$	42,511
Investments:
Investments held to maturity – Certificates of deposit	$	2,505	$	—	$	—	$	2,505
Total investments	$	2,505	$	—	$	—	$	2,505

During the six months ended June 30, 2012 and during the twelve months ended December 31, 2011, the Company did not experience any other-than-temporary losses on its investments.

The maturity schedule of all available-for-sale debt securities and held to maturity investments along with amortized cost and estimated fair value as of June 30, 2012 is as follows:

	Amortized Cost		Estimated Fair Value
	(In thousands)
Due in one year or less	$	4,581	$	4,795
Due after one year through five years	98		98
	$	4,679	$	4,893

14

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

6. Capitalized Customer Acquisition Costs, Net

A summary of net capitalized customer acquisition costs as of June 30, 2012 and December 31, 2011 was as follows:

	June 30, 2012			December 31, 2011
	(In thousands)
Capitalized signing bonuses	$	85,669		$	86,837
Less accumulated amortization	(43,149		)	(45,125		)
	42,520			41,712
Capitalized customer deferred acquisition costs	36,767			36,564
Less accumulated amortization	(23,064		)	(23,262		)
	13,703			13,302
Capitalized customer acquisition costs, net	$	56,223		$	55,014

A summary of the activity in capitalized customer acquisition costs, net for the three and six month periods ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Balance at beginning of period	$	55,339		$	57,316		$	55,014		$	59,251
Plus additions to:
Capitalized signing bonuses, net	7,907			7,045			15,461			14,161
Capitalized customer deferred acquisition costs	4,289			3,612			8,257			6,942
	12,196			10,657			23,718			21,103
Less amortization expense on:
Capitalized signing bonuses, net	(7,332		)	(8,091		)	(14,653		)	(16,605		)
Capitalized customer deferred acquisition costs	(3,980		)	(3,928		)	(7,856		)	(7,795		)
	(11,312		)	(12,019		)	(22,509		)	(24,400		)
Balance at end of period	$	56,223		$	55,954		$	56,223		$	55,954

Net signing bonus adjustments from estimated amounts to actual were $(0.8) million and $(0.2) million, respectively, for the three months ended June 30, 2012 and 2011, and $(1.5) million and $(0.4) million, respectively, for the six months ended June 30, 2012 and 2011. Net signing bonus adjustments are netted against additions in the table above. Negative signing bonus adjustments occur when the actual gross margin generated by the merchant contract during the first year is less than the estimated gross margin for that year, resulting in the overpayment of the up-front signing bonus and would be recovered from the relevant salesperson. Positive signing bonus adjustments result from the prior underpayment of signing bonuses and would be paid to the relevant salesperson.

Fully amortized signing bonuses of $8.4 million and $11.2 million were written off during the three month periods ended June 30, 2012 and 2011, respectively, and $16.4 million and $23.5 million respectively, were written off during the six month periods ended June 30, 2012 and 2011. In addition, fully amortized customer deferred acquisition costs of $4.2 million and $3.9 million, respectively, were written off during the three months ended June 30, 2012 and 2011, and $8.1 million and $7.7 million, respectively, were written off during the six months ended June 30, 2012 and 2011.

The Company believes that no impairment of capitalized customer acquisition costs has occurred as of June 30, 2012 and December 31, 2011.

7. Intangible Assets and Goodwill

Intangible Assets — Intangible assets consisted of the following as of June 30, 2012 and December 31, 2011:

15

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

	June 30, 2012						Amortization Life and Method
	Gross Assets		Accumulated Amortization		Net Assets
	(In thousands)
Finite Lived Assets:
Customer relationships	$	39,537	$	6,711	$	32,826	3 to 18 years—proportional cash flow
Merchant portfolio	3,345		2,084		1,261		7 years—proportional cash flow
Software	10,152		8,928		1,224		1 to 5 years—straight line
Non-compete agreements	3,323		1,346		1,977		3 to 5 years—straight line
Other	454		383		71		2 to 9 years—straight line
	$	56,811	$	19,452	$	37,359

	December 31, 2011						Amortization Life and Method
	Gross Assets		Accumulated Amortization		Net Assets
	(In thousands)
Finite Lived Assets:
Customer relationships	$	33,166	$	5,406	$	27,760	3 to 18 years—proportional cash flow
Merchant portfolio	3,345		1,819		1,526		7 years—proportional cash flow
Software	10,078		8,612		1,466		2 to 5 years—straight line
Non-compete agreements	2,794		1,126		1,668		3 to 5 years—straight line
Other	457		379		78		2 to 9 years—straight line
	$	49,840	$	17,342	$	32,498

Amortization expense related to the intangible assets was $1.1 million and $1.2 million, respectively, for the three months ended June 30, 2012 and 2011 and $2.2 million and $2.7 million for the six months ended June 30, 2012 and 2011, respectively. The estimated remaining amortization expense related to intangible assets in twelve month increments is as follows:

For the Twelve Months Ended June 30,
	(In thousands)
2013	$	6,041
2014	5,269
2015	4,582
2016	4,021
2017	2,926
Thereafter	14,520
	$	37,359

Goodwill — The changes in the carrying amount of goodwill for the six months ended June 30, 2012 and 2011 were as follows:

	Six Months Ended June 30,
	2012			2011
	(In thousands)
Beginning balance	$	103,399		$	68,319
Goodwill acquired during the period	15,231			5,987
Effects of foreign currency translation	(20		)	353
Other (a)	—			456
Ending balance	$	118,610		$	75,115

(a) Reflects adjustments to allocations of purchase price.

8. Processing Liabilities and Loss Reserves

The majority of our processing liabilities include funds in transit associated with bankcard and check processing. In addition, we maintain merchant deposits to offset potential liabilities from merchant chargeback processing. A summary of

16

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

processing liabilities and loss reserves was as follows at June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
	(In thousands)
Merchant bankcard processing	$	14,371	$	10,295
Check processing	12,239		8,594
Merchant deposits	8,642		9,839
Loss reserves	1,977		1,961
	$	37,229	$	30,689

The Company's bankcard processing merchants have the liability for any charges properly reversed by the cardholder through a mechanism known as a chargeback. If the merchant is unable to pay this amount, the Company will be liable to the card brand networks for the reversed charges. The Company has determined that the fair value of its obligation to stand ready to perform is minimal. The Company requires personal guarantees and merchant deposits from certain merchants to minimize its obligation.

The card brand networks generally allow chargebacks up to four months after the later of the date the transaction is processed or the delivery of the product or service to the cardholder. As the majority of the Company's SME merchant transactions involve the delivery of the product or service at the time of the transaction, a reasonable basis for determining an estimate of the Company's exposure to chargebacks is the last four months' processing volume on the SME portfolio, which was $24.7 billion and $22.3 billion for the four months ended June 30, 2012 and December 31, 2011, respectively. However, for the four months ended June 30, 2012 and December 31, 2011, the Company was presented with $11.1 million and $12.2 million, respectively, in chargebacks by issuing banks. In the six months ended June 30, 2012 and 2011, the Company incurred merchant credit losses of $0.9 million and $2.9 million, respectively, on total SME bankcard dollar volumes processed of $35.3 billion and $32.9 billion, respectively. These credit losses are included in processing and servicing costs in the Company's Condensed Consolidated Statement of Income and Other Comprehensive Income.

The loss recorded by the Company for chargebacks associated with any individual merchant is typically small, due both to the relatively small size and the processing profile of the Company's SME merchants. However, from time to time the Company will encounter instances of merchant fraud, and the resulting chargeback losses may be considerably more significant to the Company. The Company has established a contingent reserve for estimated credit and fraud losses on its Condensed Consolidated Balance Sheet, amounting to $2.0 million at June 30, 2012 and at December 31, 2011. This reserve is determined by performing an analysis of the Company's historical loss experience applied to current processing volume and exposures.

A summary of the activity in the loss reserve for the three and six months ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	1,960		$	1,739		$	1,961		$	1,667
Additions to reserve	928			1,892			1,195			3,381
Charges against reserve (a)	(911		)	(1,775		)	(1,179		)	(3,192		)
Ending balance	$	1,977		$	1,856		$	1,977		$	1,856

(a)Included in these amounts are payroll segment losses of $36,000 and $20,000, respectively, for the three months ended June 30, 2012 and 2011, and $48,000 and $79,000, respectively, for the six months ended June 30, 2012 and 2011.

9. Accrued Buyout Liability

A summary of the accrued buyout liability was as follows as of June 30, 2012 and December 31, 2011:

17

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

	June 30, 2012			December 31, 2011
	(In thousands)
Vested Relationship Managers and sales managers	$	32,576		$	30,269
Unvested Relationship Managers and sales managers	874			1,389
	33,450			31,658
Less current portion	(9,232		)	(8,104		)
Long-term portion of accrued buyout liability	$	24,218		$	23,554

In calculating the accrued buyout liability for unvested Relationship Managers and sales managers, the Company has assumed that 31% of the unvested Relationship Managers and sales managers will vest in the future, which represents the Company’s historical vesting rate. A 5% increase to 36% in the expected vesting rate would have increased the accrued buyout liability for unvested Relationship Managers and sales managers by $0.1 million at June 30, 2012 and December 31, 2011.

A summary of the activity in the accrued buyout liability for the three and six months ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	33,568		$	28,242		$	31,658		$	28,810
Increase in settlement obligation, net	4,240			3,723			8,447			6,330
Buyouts	(4,358		)	(4,101		)	(6,655		)	(7,276		)
Ending balance	$	33,450		$	27,864		$	33,450		$	27,864

10. Credit Facilities

On November 24, 2010, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders who are a party to the Credit Agreement. Credit extended under the Credit Agreement is guaranteed by the Company's subsidiaries and is secured by substantially all of its assets and the assets of its subsidiaries. The Credit Agreement amended and restated in its entirety the previous amended and restated credit agreement entered into on May 30, 2008, as amended (the “Previous Credit Agreement”), between the Company and certain of the parties to the Credit Agreement.

The Credit Agreement provides for a revolving credit facility in the aggregate amount of up to $50 million (the “Revolving Credit Facility”), of which up to $10 million may be used for the issuance of letters of credit and up to $5 million is available for swing line loans. Upon the prior approval of the administrative agent, the Company may increase the total revolving commitments by $50 million for a total commitment under the Revolving Credit Facility of $100 million. On July 20, 2012, the Company entered into Amendment No. 1 (the “Amendment”) to the Credit Agreement. The Amendment amends the Credit Agreement by, among other things, allowing the Company to increase the total Revolving Credit Facility commitments from $100 million to $150 million upon the prior approval of the administrative agent. The Revolving Credit Facility is available to the Company on a revolving basis until November 24, 2015. All principal and interest not previously paid on the Revolving Credit Facility will mature and be due and payable on November 24, 2015.

The Credit Agreement also provides for a term credit facility in the aggregate amount of up to $100 million (the “Term Credit Facility”). The Term Credit Facility requires amortization payments in the amount of $3.75 million for each fiscal quarter during the fiscal years ended December 31, 2011 and 2012, $5.0 million for each fiscal quarter during the fiscal years ended December 31, 2013 and 2014, and $7.5 million for each fiscal quarter during the period commencing on January 1, 2015 through the maturity date on November 24, 2015. All principal and interest not previously paid on the Term Credit Facility will mature and be due and payable on November 24, 2015. Amounts borrowed and repaid under the Term Credit Facility may not be re-borrowed. Principal payments due under the Term Credit Facility as of June 30, 2012 were as follows:

18

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

For the Twelve Months Ended June 30,	(In thousands)
2013	$	17,500
2014	20,000
2015	25,000
2016	15,000
Total	$	77,500

The Credit Agreement contains covenants which include: the Company's maintenance of certain leverage and fixed charge coverage ratios; limitations on its indebtedness, liens on its properties and assets, its investments in, and loans to other business units, its ability to enter into business combinations and asset sales; and certain other financial and non-financial covenants. These covenants also apply to certain of the Company's subsidiaries. The Company was in compliance with these covenants as of June 30, 2012 and expects it will remain in compliance with these covenants for at least the next twelve months.

Under the terms of the Credit Agreement, the Company may borrow, at its option, at interest rates equal to one, two, three or six month adjusted LIBOR rates, or equal to the greater of the prime rate, the federal funds rate plus 0.50% and the adjusted LIBOR rate plus 1%, in each case plus a margin determined by its current leverage ratio.

The weighted average interest rate at June 30, 2012 was 2.9%. Total fees and direct costs paid for the Credit Agreement through June 30, 2012 were $1.3 million. These costs are being amortized to interest expense over the life of the Credit Agreement.

At June 30, 2012, there was $77.5 million outstanding under the Term Credit Facility and $26.0 million outstanding under the Revolving Credit Facility. The $26.0 million on the Revolving Credit Facility was used to fund the acquisition of Lunch Byte and was repaid in July 2012.

11. Commitments and Contingencies

Litigation—The Company is involved in ordinary course legal proceedings, which include all claims, lawsuits,investigations and proceedings, including unasserted claims, which are probable of being asserted, arising in the ordinary course ofbusiness and otherwise not described below. The Company has considered all such ordinary course legal proceedings in formulating its disclosures and assessments. In the opinion of the Company, based on consultations with outside counsel, material losses in addition to amounts previously accrued are not considered reasonably possible in connection with these ordinary course legal proceedings.

The Company has also been subject to lawsuits, claims, and investigations which resulted from the Processing System Intrusion. See Contingencies below for a description of the Processing System Intrusion.

Contingencies—The Company collects and stores sensitive data about its merchant customers and bankcard holders. If the Company’s network security is breached or sensitive merchant or cardholder data is misappropriated, the Company could be exposed to assessments, fines or litigation costs.

On January 20, 2009, the Company publicly announced the Processing System Intrusion. The Processing System Intrusion involved malicious software that appears to have been used to collect in-transit, unencrypted payment card data while it was being processed by the Company during the transaction authorization process. See Note 1. Organization and Operations - Processing System Intrusion for total expenses incurred, including amounts paid for settlement of claims, related to theProcessing System Intrusion.

The Company does not consider it a reasonable possibility that losses exceeding the amounts already recognized on the matters subject to the settlement agreements will be incurred. With regard to the unsettled claims related to the Processing System Intrusion, which the Company described in its Annual Report on Form 10-K for the year ended December 31, 2011, the Company determined material losses in addition to those previously expensed are not considered reasonably possible on any such claim disclosed. The Company is prepared to vigorously defend itself against any unsettled claims relating to the Processing System Intrusion that have been asserted against it and its sponsor banks to date. The Company feels it has strong defenses to all the claims that have been asserted against it and its sponsor banks relating to the Processing System Intrusion.

Leases—The Company leases various office spaces and certain equipment under operating leases with remaining terms ranging up to nine years. The majority of the office space lease agreements contain renewal options and generally

19

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

require the Company to pay certain operating expenses.

Future minimum lease payments for all non-cancelable operating leases as of June 30, 2012 were as follows:

For the Twelve Months Ended June 30,	(In thousands)
2013	$	7,658
2014	5,476
2015	3,535
2016	2,099
2017	2,108
Thereafter	3,870
Total future minimum lease payments (a)	$	24,746

(a) There were no material capital leases at June 30, 2012

Rent expense for leased facilities and equipment was $2.0 million and $2.2 million, respectively, for the three months ended June 30, 2012 and 2011, and $4.1 million and $4.4 million, respectively, for the six months ended June 30, 2012 and 2011.

Commitments—Certain officers of the Company have entered into employee confidential information and non-competition agreements under which they are entitled to severance pay equal to their base salary and medical benefits for twelve months and a pro-rated bonus in the event they are terminated by the Company other than for cause. There were no material payouts under these agreements in the six months ended June 30, 2012 and 2011.

The following table reflects the Company’s other significant contractual obligations, including leases as discussed above, as of June 30, 2012:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 to 3 Years		3 to 5 years		More than 5 years
	(In thousands)
Processing providers (a)	$	25,277	$	9,658	$	11,849	$	3,770	$	—
Telecommunications providers	2,182		2,182		—		—		—
Office and equipment leases	24,746		7,658		9,011		4,207		3,870
Term Credit Facility (b)	77,500		17,500		45,000		15,000		—
	$	129,705	$	36,998	$	65,860	$	22,977	$	3,870

(a) The Company has agreements with several third-party processors to provide to us on a non-exclusive basis payment processing and transmittal, transaction authorization and data capture services, and access to various reporting tools. Our agreements with third-party processors require the Company to submit a minimum monthly number of transactions or volume for processing. If the Company submits a number of transactions or volume that is lower than the minimum, it is required to pay the third-party processors the fees that they would have received if the Company had submitted the required minimum number or volume of transactions.

(b) Interest rates on the Term Credit Facility are variable in nature; however, in January 2011 we entered into fixed-pay amortizing interest rate swaps having an initial notional amount of $50.0 million and a current notional amount of $38.8 million. If interest rates were to remain at the June 30, 2012 level, we would make interest payments of $2.4 million in the next 1 year, $2.7 million in the next 1 to 3 years and $0.1 million in the next 3 to 5 years or a total of $5.2 million including net settlements on the fixed-pay amortizing interest rate swaps. In addition, we had $26.0 million outstanding under our Revolving Credit Facility at June 30, 2012. The Revolving Credit Facility is available on a revolving basis until November 24, 2015.

12. Segments

The determination of the Company's business segments is based on how the Company monitors and manages the performance of its operations. The Company's operating segments are strategic business units that offer different products and services. They are managed separately because each business requires different marketing strategies, personnel skill sets and technology.

The Company has two reportable segments, as follows: (1) Card, which provides payment processing and related services for bankcard transactions and (2) Other. The Card segment also includes CPOS and Network Services. The Other segment includes Payroll, which provides payroll and related tax filing services, PrepaidCard, which provides prepaid card,

20

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

stored-value card and loyalty and gift card solutions, and Heartland School Solutions, which provides point-of-sale platforms designed to facilitate food service operations. None of these businesses aggregated in the Other segments meet the defined operating thresholds for disclosing individually as reportable segments.

The Company allocates revenues, expenses, assets and liabilities to segments only where directly attributable. The unallocated corporate administration amounts are costs attributed to finance, corporate administration, human resources and corporate services. At June 30, 2012 and 2011, 30% and 37% respectively, of the Other segment's total assets were funds that the Company holds as a fiduciary in its Payroll services activities for payment to taxing authorities. At June 30, 2012 and 2011, 41% and 25% respectively, of the Other segment's total assets was goodwill. Reconciling items include eliminations of intercompany investments and receivables.

A summary of the Company’s segments for the three and six month periods ended June 30, 2012 and 2011 was as follows:

	Card Segment		Other Segment		Unallocated Corporate Administration Amounts			Reconciling Items			Total Amount
	(In thousands)
Three Months Ended June 30, 2012
Total revenues	$	502,514	$	16,086	$	—		$	(79	)	$	518,521
Depreciation and amortization	5,990		1,286		55			—			7,331
Interest income	45		—		—			—			45
Interest expense	833		2		—			(79		)	756
Net income attributable to Heartland	19,570		1,948		(3,717		)	—			17,801
Total assets	647,956		161,516		—			(169,567		)	639,905

Three Months Ended June 30, 2011
Total revenues	$	513,632	$	12,395		$	—		$	(50	)	$	525,977
Depreciation and amortization	6,013		817			121			—			6,951
Interest income	41		—			—			—			41
Interest expense	1,165		1			—			(50		)	1,116
Net income attributable to Heartland	16,645		(148		)	(4,239		)	—			12,258
Total assets	647,216		85,540			—			(153,602		)	579,154

Six Months Ended June 30, 2012
Total revenues	$	949,733	$	39,416	$	—		$	(143	)	$	989,006
Depreciation and amortization	12,027		2,576		111			—			14,714
Interest income	160		—		—			—			160
Interest expense	1,745		4		—			(143		)	1,606
Net income attributable to Heartland	35,634		4,038		(8,117		)	—			31,555
Total assets	647,956		161,516		—			(169,567		)	639,905

Six Months Ended June 30, 2011
Total revenues	$	968,630	$	25,093	$	—		$	(100	)	$	993,623
Depreciation and amortization	12,159		1,618		246			—			14,023
Interest income	82		—		—			—			82
Interest expense	2,405		3		—			(100		)	2,308
Net income attributable to Heartland	28,140		451		(8,518		)	—			20,073
Total assets	647,216		85,540		—			(153,602		)	579,154

13. Earnings Per Share

The Company presents earnings per share data following the established standards for the computation and presentation of basic and diluted earnings per share data. Under these standards, the dilutive effect of stock options is excluded from the calculation of basic earnings per share but included in diluted earnings per share. The following is a reconciliation of the amounts used to calculate basic and diluted earnings per share:

21

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In thousands, except per share data)
Basic:
Net income attributable to Heartland	$	17,801	$	12,258	$	31,555	$	20,073
Weighted average common stock outstanding	38,844		38,792		38,840		38,625
Earnings per share	$	0.46	$	0.32	$	0.81	$	0.52
Diluted:
Net income attributable to Heartland	$	17,801	$	12,258	$	31,555	$	20,073
Basic weighted average common stock outstanding	38,844		38,792		38,840		38,625
Effect of dilutive instruments:
Stock options and restricted share units	1,604		1,336		1,664		1,309
Diluted weighted average shares outstanding	40,448		40,128		40,504		39,934
Earnings per share	$	0.44	$	0.31	$	0.78	$	0.50

14. Fair Value of Financial Instruments

The Company applies a fair value framework in order to measure and disclose its financial assets and liabilities which include fixed income equity securities, interest swap derivatives and certain other financial instruments. The Company determines fair value based on quoted prices when available or through the use of alternative approaches when market quotes are not readily accessible or available. The Company carries its liabilities at fair value, including its derivative liabilities.

The Company’s framework for measuring fair value provides a three-level hierarchy, which prioritizes the factors (inputs) used to calculate the fair value of assets and liabilities as follows:

• Level 1 inputs are unadjusted quoted prices, such as a New York Stock Exchange closing price, in active markets for identical assets. Level 1 is the highest priority in the hierarchy.

• Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as other significant inputs that are observable at commonly quoted intervals, such as interest rates, foreign exchange rates, and yield curves.

• Level 3 inputs are unobservable and are based on company assumptions due to little, if any, observable market information. Level 3 is the lowest priority in the hierarchy.

For the six months ended June 30, 2012, there have been no transfers between Level 1 and Level 2 categories. As of June 30, 2012, the Company owns no Level 3 assets or liabilities. The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2012 and at December 31, 2011:

June 30, 2012	Total		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:	(In thousands)
Investments available for sale:
Fixed income bond fund (a)	$	1,182	$	1,182	$	—
Investments held to maturity:
Certificates of deposit	3,711		—		3,711
Total assets	$	4,893	$	1,182	$	3,711
Liabilities:
Interest rate swaps	$	914	$	—	$	914
Total liabilities	$	914	$	—	$	914

22

Heartland Payment Systems, Inc. and Subsidiaries

Notes To Condensed Consolidated Financial Statements—(Continued)

(unaudited)

December 31, 2011	Total		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:	(In thousands)
Investments available for sale:
Fixed income bond fund (a)	$	1,158	$	1,158	$	—
Investments held to maturity:
Certificates of deposit	2,505		—		2,505
Total assets	$	3,663	$	1,158	$	2,505
Liabilities:
Interest rate swaps	$	897	$	—	$	897
Total liabilities	$	897	$	—	$	897

(a) Amounts included in Funds held for payroll customers on the Condensed Consolidated Balance Sheet

At June 30, 2012 and December 31, 2011, all investments in available-for-sale securities held by the Company were measured using Level 1 inputs and all held to maturity investments held by the Company were measured using Level 2 inputs.

The Company’s liabilities include interest rate swaps that are measured at fair value using observable market inputs including the Company’s credit risk and its counterparties’ credit risks. Based on these inputs, the interest rate swaps are classified within Level 2 of the valuation hierarchy. Based on the Company’s continued ability to enter into these swaps, the Company considers the markets for its fair value instruments to be active.

The carrying amounts of the Company's cash and cash equivalents and cash held for payroll customers approximate fair value as of June 30, 2012 and December 31, 2011, because they bear interest at market rates and had maturities of less than 90 days at the time of purchase. This fair value measurement is classified as Level 1. The carrying amount of the Company's accounts receivable, accounts payable, and accrued expenses approximates fair value as of June 30, 2012 and December 31, 2011, because of the relatively short timeframe to realization. This fair value measurement is classified as Level 2.

23

PART I. FINANCIAL INFORMATION (continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the accompanying notes to condensed consolidated financial statements included elsewhere in this report, and the consolidated financial statements, notes to consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 Form 10-K”).

Forward Looking Statements

Unless the context requires otherwise, references in this report to “the Company,” “we,” “us,” and “our” refer to Heartland Payment Systems, Inc. and our subsidiaries.

Some of the information in this Quarterly Report on Form 10-Q may contain forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. You should understand that many important factors, in addition to those discussed elsewhere in this report, could cause our results to differ materially from those expressed in the forward-looking statements. Some of these factors are described in Item 1A. Risk Factors of the 2011 Form 10-K and include, without limitation, our competitive environment, the business cycles and credit risks of our merchants, chargeback liability, merchant attrition, problems with our Sponsor banks, our relationships with third-party bankcard payment processors, our inability to pass increased interchange fees along to our merchants, economic conditions, systems failures and government regulation.

Overview

General

Our primary business is to provide bankcard payment processing services to merchants in the United States and Canada. This involves facilitating the exchange of information and funds between merchants and cardholders' financial institutions, providing end-to-end electronic payment processing services to merchants, including merchant set-up and training, transaction authorization and electronic draft capture, clearing and settlement, merchant accounting, merchant assistance and support, and risk management. Our merchant customers primarily fall into two categories: our core small and mid-sized merchants (referred to as "Small and Midsized Enterprises," or “SME merchants”) and Network Services' large national and mid-tier merchants, primarily in the petroleum industry (referred to as “Network Services Merchants”). We also provide additional services to our merchants, such as payroll processing, gift and loyalty programs, paper check processing, and we sell and rent point-of-sale devices and supplies. In addition, we provide closed and open-loop payment solutions, and other transactional services to the college market, and school nutrition and point-of-sale solutions to K to 12 schools.

At June 30, 2012, we provided our bankcard payment processing services to approximately 173,315 active SME merchants located across the United States. This compares to 171,801 active SME bankcard merchants at December 31, 2011, and 174,730 active SME bankcard merchants at June 30, 2011. At June 30, 2012, we provided bankcard payment processing services through Network Services Merchants to 293 merchants with 48,414 locations. Additionally, at June 30, 2012, we provided bankcard payment processing services to over 11,500 merchants in Canada through our 70% owned subsidiary Collective POS Solutions Ltd. (“CPOS”). According to The Nilson Report, in 2011 we were the 6^th largest card acquirer in the United States ranked by transaction count and the 9^th largest acquirer by processed dollar volume, which consists of both credit and debit Visa and MasterCard transactions, as well as credit card transactions on American Express, Discover, Diners Club, and JCB. These rankings represented 2.8 billion transactions and 4% of the total bankcard processing market, respectively.

Our total bankcard processing volume for the three months ended June 30, 2012 was $26.1 billion, a 21.4% increase from the $21.5 billion processed during the three months ended June 30, 2011. Our total bankcard processing volume for the six months ended June 30, 2012 was $49.4 billion, a 23.2% increase from the $40.1 billion processed during the six months ended June 30, 2011. Our SME bankcard processing volume for the three and six months ended June 30, 2012 was $18.6 billion and $35.3 billion, respectively, increases of 6.2% and 7.2%, respectively, over the three and six months ended June 30,

24

2011 reflecting increases for same store sales growth, new SME merchants installed, and lower merchant attrition. Our bankcard processing volume for the three and six months ended June 30, 2012 also includes $7.3 billion and $13.8 billion, respectively, of settled volume for Network Services Merchants, compared to $3.8 billion and $6.9 billion, respectively, for the three and six months ended June 30, 2011. Network Services' increase for the 2012 periods primarily reflects the expansion of a contract with a large petroleum merchant to include back end settlement. Bankcard processing volume for the three and six months ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In millions)
SME merchants	$	18,572	$	17,483	$	35,271	$	32,908
Network Services Merchants	7,288		3,801		13,805		6,913
Canada	194		173		358		309
Total bankcard processing volume (a)	$	26,054	$	21,457	$	49,434	$	40,130

(a) Bankcard processing volume includes volume for credit and signature debit transactions.

Merchant attrition is expected in the card payment processing industry in the ordinary course of business. We experience attrition in merchant bankcard processing volume resulting from several factors, including business closures, transfers of merchants' accounts to our competitors and account closures that we initiate due to heightened credit risks relating to, or contract breaches by, merchants, and (when applicable) same store sales contraction. We measure SME processing volume attrition against all SME merchants that were processing with us in the same month a year earlier. During the three months ended June 30, 2012, we experienced a 12.7% average annualized attrition in our SME bankcard processing volume and for the 2012six month period we experienced attrition of 12.5%. During 2011, 2010 and 2009, we experienced average annual attrition in our SME bankcard processing volume of 13.5%, 15.3% and 22.6%, respectively. Historically, much of our attrition has been related to business closures, which accelerated in 2009 due to weak economic conditions.

In our SME business, we measure same store sales growth, or contraction, as the change in bankcard processing volume for all bankcard merchants that were processing with us in the same month a year earlier. During the three months ended June 30, 2012, same store sales grew 2.2% on average, compared to 2.5% in the quarter ended June 30, 2011 and 2.6% on average in 2011. Same store sales growth or contraction results from the combination of the increasing or decreasing use by consumers of bankcards for the purchase of goods and services at the point of sale, and sales growth or contraction experienced by our retained SME bankcard merchants. The following table compares our same store sales growth or contraction during 2012, 2011, and 2010:

Same Store Sales Growth (Contraction)	2012		2011		2010
First Quarter	3.4	%	3.2	%	(1.5	)%
Second Quarter	2.2	%	2.5	%	1.1	%
Third Quarter			2.3	%	2.0	%
Fourth Quarter			2.5	%	3.8	%
Full Year			2.6	%	1.3	%

Historically, our same store sales experience has tracked overall economic conditions. Due to continuing uncertain economic conditions, management believes that near-term sames store sales growth will be modest.

We measure the overall production of our sales force by new gross margin installed, which reflects the expected annual gross profit from a merchant contract after deducting processing and servicing costs associated with that revenue. We measure installed margin primarily for our SME card processing, payroll processing and loyalty and gift marketing businesses. Our newly installed gross margin for the three months ended June 30, 2012 increased 20.5% and for the 2012six month period our gross margin increased 17.9% from the gross margin we installed during the three and six months ended June 30, 2011, respectively. We attribute this increase in newly installed gross margin to higher volumes and margins at newly installed merchants and improved individual productivity achieved by our salespersons. We expect to drive increases in year-over-year installed margin in future periods primarily by increasing our Relationship Manager and Territory Manager count. Our combined Relationship Managers and Territory Managers count amounted to 731 and 810 at June 30, 2011 and June 30, 2012, respectively.

The bankcard revenue we earn in our SME business is recurring in nature, as we typically enter into three-year service contracts with our card processing SME merchants that, in order to qualify for the agreed-upon pricing, require the merchant to achieve bankcard processing volume minimums. Most of our SME revenue is from payment processing fees, which are a combination of a fee equal to a percentage of the dollar amount of each transaction we process plus a flat fee per transaction. We make mandatory payments of interchange fees to the card issuer through the card networks and dues, assessments and

25

other network fees to Visa, MasterCard and Discover. Our SME gross bankcard processing revenue is largely driven by the Visa and MasterCard volume processed by our merchants. We also realize card processing revenues from processing transactions for our SME merchants accepting American Express and from processing Discover transactions.

In contrast to SME card processing revenues, revenues from our Network Services Merchants are largely driven by the number of transactions we process (whether settled, or only authorized), not our processing volume, as the merchants which comprise Network Services' customer base pay on a per transaction basis for processing services. Additionally, we provide authorization, settlement and account servicing services on our front and back end systems for American Express transactions for larger merchants, and merchants signed to American Express by other processors; for those services we receive compensation from American Express on a per transaction basis. The number of transactions we processed for Network Services Merchants and American Express for the three and six months ended June 30, 2012 and 2011 were as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
	2012	2011	2012	2011
	(In thousands)
Network Services Merchants:
Settled	246,035	141,787	469,633	264,718
Authorized	645,875	705,546	1,227,186	1,329,299
American Express (a)	8,275	7,922	16,007	15,389
Total	900,185	855,255	1,712,826	1,609,406

(a) Includes only those transactions not eligible for residual compensation

Our internally-developed front-end authorization systems, HPS Exchange, VAPS and NWS, provide us greater control of the electronic transaction process, allow us to offer our merchants a differentiated product offering, and offer economies of scale that we expect will increase our long-term profitability. During the three months ended June 30, 2012 and 2011, approximately 95% and 93%, respectively, of our SME transactions were processed through HPS Exchange. All of our Network Services transactions were processed through VAPS or NWS. During the three months ended June 30, 2012 and2011, 97% of all SME merchant accounts established were placed on HPS Exchange.

We provide clearing, settlement and merchant accounting services through our own internally developed back-end processing system, Passport. Passport enables us to customize these services to the needs of our Relationship Managers and merchants. At both June 30, 2012 and 2011, approximately 99% of total SME bankcard merchants were processing on Passport and all Network Services' settled transactions were processed on Passport.

We provide payroll processing services throughout the United States. At June 30, 2012, we processed payroll for 12,211 customers, an increase of 0.5% from 12,147 payroll customers at June 30, 2011 and an increase of 3.1% from 11,841 payroll customers at December 31, 2011. In the six months ended June 30, 2012 and the full year 2011, we installed 813 and 3,723 new payroll processing customers, respectively. We developed a new comprehensive payroll management system, which we refer to as PlusOne Payroll, that streamlines all aspects of the payroll process to enable time and cost savings. PlusOne Payroll was made available to new and existing customers beginning in 2010. The PlusOne Payroll platform enables us to process payroll on a large scale and provide customizable solutions for businesses of all sizes.

We also provide school nutrition and point-of-sale solutions to K to 12 schools throughout the United States. At June 30, 2012, we provided Heartland School Solutions to over 29,000 public and private schools, compared to over 19,000 public and private schools at December 31, 2011. On June 29, 2012, we acquired the K to 12 school solutions business of Lunch Byte Systems, Inc. accounting for the increase in the number of schools served. See “— Liquidity and Capital Resources — Acquisitions" for detail on our Heartland School Solutions acquisitions.

Second Quarter of 2012 Financial Results

Our financial results for the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, benefited from a higher operating margin, reflecting 10.7% year-over-year growth in net revenue and a lesser increase of 3.3% in processing and servicing costs. For the three months ended June 30, 2012, we recorded net income of $17.8 million, or $0.44per share, compared to $12.3 million, or $0.31 per share, in the three months ended June 30, 2011. The following is a summary of our financial results for the three months ended June 30, 2012:

• Net revenue, which we define as total revenues less interchange fees and dues, assessments and fees, increased $13.1 million, or 10.7%, from $122.2 million in the three months ended June 30, 2011 to $135.3 million in the three months ended June 30, 2012. The increase in net revenue was driven by the increased card processing net revenue from our SME merchants and increases in revenues for Heartland School Solutions, Payroll processing,

26

and Loyalty and Gift revenues.

• During the three months ended June 30, 2012, our SME processing volume increased 6.2% to $18.6 billion from $17.5 billion during the three months ended June 30, 2011. We earn percentage-based revenues on our SME processing volume. The year-over-year increase reflects same store sales growth, improved merchant volume attrition, and increased processing activity from new SME merchants installed.

• Our processing and servicing expenses increased $1.8 million, or 3.3%, from $55.4 million in the three months ended June 30, 2011, to $57.2 million in the three months ended June 30, 2012 primarily due to increased costs associated with processing and servicing higher SME bankcard processing volume, increased residual commission expense and increased costs of sales and servicing related to the higher Heartland School Solutions, payroll processing, and loyalty and gift revenues. The increase in processing and servicing expense also reflects refined allocations of certain information technology related expenses, previously reported in general and administrative expense, to processing and servicing starting in 2012. Partially offsetting the increases in processing and servicing expense was a decrease in costs at our service center and a decrease in card related equipment costs.

• Our general and administrative expenses increased $3.2 million, or 10.9%, from $29.4 million in the three months ended June 30, 2011 to $32.6 million in the three months ended June 30, 2012. The increase in general and administrative expense for the three months ended June 30, 2012 was primarily due to a $3.0 million increase in personnel costs, including a $2.2 million increase in share-based compensation. General and administrative expenses for the three months ended June 30, 2012 benefited from refined allocations of certain information technology related expenses, previously reported in general and administrative expense, now recorded in processing and servicing expense. General and administrative expenses as a percentage of total revenue for the three months ended June 30, 2012 was 6.3%, up from 5.6% for the three months ended June 30, 2011.

• As a result of the 10.7% growth achieved in net revenue, a lower increase in processing and servicing expenses and controlled general and administrative expense increases, our income from operations, which we also refer to as operating income, increased $8.1 million to $29.7 million for the three months ended June 30, 2012, from $21.7 million for the three months ended June 30, 2011. Our Operating Margin, which we measure as operating income divided by Net Revenue, was 22.0% for the three months ended June 30, 2012, compared to 17.7% for the three months ended June 30, 2011.

See “— Results of Operations — Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011” for a more detailed discussion of our second quarter financial results.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. These condensed consolidated financial statements are unaudited. In our opinion, the unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of our financial position at June 30, 2012, our results of operations, our changes in stockholders' equity and our cash flows for the six months ended June 30, 2012 and 2011. Results of operations reported for interim periods are not necessarily indicative of the results to be expected for the year ended December 31, 2012. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates. Our significant accounting policies are more fully described in Note 2 to our Condensed Consolidated Financial Statements included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2011. The critical accounting estimates described here are those that are most important to the depiction of our financial condition and results of operations, including those whose application requires management's most subjective judgment in making estimates about the effect of matters that are inherently uncertain. The line items on our income statement and balance sheet, which are impacted by management's estimates, are described below.

Revenue

Our bankcard processing revenue is derived from processing and settling Visa, MasterCard, American Express and Discover bankcard transactions for our merchant customers. Our most significant expense related to the generation of those revenues is interchange fees, which are set by the card networks, and paid to the card issuing banks. For our SME merchant bankcard processing, we do not offset bankcard processing revenues and interchange fees because our business practice is to advance the interchange fees to most of our merchants when settling their daily transactions (thus paying the full amount of the transaction to the merchant), and then to collect our full discount fees from our merchants on the first business day of the next

27

month. We believe this policy aids in new business generation, as our merchants benefit from bookkeeping simplicity. However, this results in our carrying a large receivable from our merchants at each period-end, and a corresponding but smaller payable to our sponsor banks, which are settled on the first business day after the period-end. As we are at risk for the receivables, we record the associated revenues on a gross processing revenue basis in our consolidated income statements. Certain of our competitors report their processing revenue net of interchange fees. This is because the card issuing banks make their payments to these competitors net of those interchange fees, and these acquirers pay this reduced amount to their merchants. Since the acquisition of Network Services, we also record a portion of our processing revenues net of interchange fees because the daily cash settlement with Network Services' merchants is net of interchange fees.

Capitalized Customer Acquisition Costs

Capitalized customer acquisition costs consist of (1) up-front signing bonuses paid to Relationship Managers and sales managers, referred to as the "salesperson" or "salespersons," for the establishment of new merchant relationships, and (2) deferred acquisition cost representing the estimated cost of buying out the commissions of vested salespersons at some point in the future. Capitalized customer acquisition costs represent incremental, direct customer acquisition costs that are recoverable through gross margins associated with SME merchant contracts. The capitalized customer acquisition costs are amortized using a method which approximates a proportional revenue approach over the initial three-year term of the merchant contract.

The amount of the up-front signing bonus paid for new SME bankcard, payroll and loyalty marketing accounts is based on the estimated gross margin for the first year of the merchant contract. The gross signing bonuses paid during the six months ended June 30, 2012 and 2011 were $16.9 million and $14.5 million, respectively, and for the full year ended December 31, 2011 were $30.5 million. The signing bonus paid, amount capitalized, and related amortization are adjusted at the end of the first year to reflect the actual gross margin generated by the merchant contract during that year. The net signing bonus adjustments made during the six months ended June 30, 2012 and 2011 were $(1.5) million and $(0.4) million, respectively. Negative signing bonus adjustments occur when the actual gross margin generated by the merchant contract during the first year is less than the estimated gross margin for that year, resulting in the overpayment of the up-front signing bonus and would be recovered from the relevant sales person. Positive signing bonus adjustments result from prior underpayments of up-front signing bonuses, and would be paid to the relevant salesperson. The amount of signing bonuses paid which remained subject to adjustment at June 30, 2012 was $32.6 million.

The deferred acquisition cost component of capitalized customer acquisition costs is accrued for vested salespersons over the first year of SME bankcard merchant processing, consistent with the build-up in the accrued buyout liability, which is described below.

Management evaluates the capitalized customer acquisition costs for impairment by comparing, on a pooled basis by vintage month of origination, the expected future net cash flows from underlying merchant relationships to the carrying amount of the capitalized customer acquisition costs. If the estimated future net cash flows are lower than the recorded carrying amount, indicating an impairment of the value of the capitalized customer acquisition costs, the impairment loss will be charged to operations. We have not recognized an impairment loss for the six months ended June 30, 2012.

Accrued Buyout Liability

We pay our salespersons residual commissions based on the gross margin generated from the monthly processing activity of SME merchants signed by them. We refer to these residual commissions as the ''owned'' portion of such commissions, or ''portfolio equity.'' The salesperson has no obligation to perform additional services for the merchant for so long as the merchant continues processing with us. We accrue the buyout liability, which represents the estimated current settlement cost of buying out all vested and expected-to-vest salespersons for the owned portion of such commissions. We also record a deferred acquisition cost asset related to those buyouts, and amortize that asset as an expense over the initial 3-year contract term. Beginning in June 2012, our salespersons earn portfolio equity on their newly installed payroll and loyalty marketing merchant accounts based on the residual commissions they earn on those accounts. The accrued buyout liability and deferred acquisition cost asset will be developed the same as the SME card merchant portfolio equity.

We consider a salesperson to be vested once they have established merchant relationships that generate the equivalent of $10,000 of monthly gross margin. Vested status entitles the salesperson to his or her residual commissions for as long as the merchant processes with us, even if the salesperson is no longer employed by us.

The accrued buyout liability is based on the merchants we have under contract at the balance sheet date, the gross margin we generated from those accounts in the prior twelve months, the “owned” commission rate, and the fixed buyout multiple of 2.5 times the commissions. The liability related to a new merchant is therefore zero when the merchant is installed, and increases over the twelve months following the installation date.

28

For unvested salespersons, the accrued buyout liability is accrued over the expected vesting period; however, no deferred acquisition cost is capitalized as future services are required in order to vest. In calculating the accrued buyout liability for unvested salespersons, we have assumed that 31% of unvested salespersons will vest in the future, which represents our historical vesting rate. A 5% increase to 36% in the expected vesting rate would have increased the accrued buyout liability for unvested salespersons by $0.1 million at June 30, 2012 and December 31, 2011.

Buyout payments made to salespersons reduce the outstanding accrued buyout liability. Given our view of the duration of the cash flows associated with a pool of merchant contracts, we believe that the benefits of such buyouts significantly exceed the cost, which typically represents 2 years of commissions. If the cash flows associated with a pool of bought out contracts does not exceed this cost, we will incur an economic loss on our decision to buyout the contracts. During the six months ended June 30, 2012 and 2011 we made buyout payments of approximately $6.7 million and $7.3 million respectively, and during the 2011 full year, we made buyout payments of approximately $10.4 million.

Processing Liabilities and Loss Reserves

The majority of our processing liabilities include funds in transit associated with bankcard and check processing. At June 30, 2012, these funds in transit totaled $26.6 million, compared to approximately $18.9 million at December 31, 2011. In addition, we maintain merchant deposits to offset potential liabilities for merchant chargebacks.

Disputes between a cardholder and a merchant periodically arise as a result of, among other things, the cardholder's dissatisfaction with merchandise quality or merchant services. Such disputes may not be resolved in the merchant's favor. In these cases, the transaction is ''charged back'' to the merchant, which means the purchase price is refunded to the customer by the card-issuing bank and charged to the merchant. If the merchant is unable to fund the refund, we must do so. We also bear the risk of reject losses arising from the fact that we collect our fees from our merchants on the first day after the monthly billing period. If the merchant has gone out of business during such period, we may be unable to collect such fees. We maintain cash deposits or require the pledge of a letter of credit from certain merchants, generally those with higher average transaction size where the card is not present when the charge is made or the product or service is delivered after the charge is made, in order to offset potential contingent liabilities such as chargebacks and reject losses that would arise if the merchant went out of business. At June 30, 2012 and December 31, 2011, we held SME merchant deposits totaling $8.6 million and $9.8 million, respectively. Most chargeback and reject losses are charged to processing and servicing as they are incurred. However, we also maintain a loss reserve against losses including major fraud losses, which are both less predictable and involve larger amounts. The loss reserve was established using historical loss rates, applied to recent bankcard processing volume. At both June 30, 2012 and December 31, 2011, our loss reserve totaled $2.0 million, respectively. Aggregate SME bankcard merchant losses, including losses charged to operations and the loss reserve, were $0.9 million and $2.9 million for the six months ended June 30, 2012 and 2011.

Chargeback losses originating from Network Services bankcard processing on Passport during the full year 2011 and six months ended June 30, 2012 were insignificant.

Share-based Compensation

We expense employee share-based payments under the fair value method. Share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite service period. We estimate the grant date fair value of the stock options we issue using a Black-Scholes valuation model for “plain-vanilla” stock options and performance-based stock options, and we use a lattice valuation model to measure grant date fair value for stock options containing market vesting conditions. Our assumption for expected volatility is based on our historical volatility data related to market trading of our own common stock. We base our assumptions for the expected life of new stock option grants on our analysis of the historical exercise patterns of our stock options. Our dividend yield assumption is based on dividends expected to be paid over the expected life of the stock option. Our risk-free interest rate assumption for stock options granted is determined by using U.S. treasury rates of the same period as the expected option term of each stock option.

The weighted-average fair value of options we granted during the six months ended June 30, 2012 and the years ended December 31, 2011 and 2010 were $9.36, $7.95 and $6.12, respectively. The fair value of options granted during the six months ended June 30, 2012 and the years ended December 31, 2011 and 2010 was estimated at the grant date using the following weighted average assumptions:

29

	Six Months Ended		Year Ended December 31,
	June 30, 2012		2011		2010
Expected volatility	55	%	55	%	54	%
Expected life	3.75 years		3.65 years		3.75 years
Expected dividends	1.00	%	0.80	%	0.40	%
Risk-free interest rate	0.51	%	0.55	%	1.21	%

In the fourth quarter of 2010, our Board of Directors approved grants of 508,800 performance-based Restricted Share Units. These Restricted Share Units are nonvested share awards which would vest 50% in 2013, 25% in 2014, and 25% in 2015 only if over the term of these Restricted Share Units, the following diluted earnings per share targets for the years ended December 31, 2012, 2013 and 2014 are achieved:

	2012		2013		2014
Diluted Earnings Per Share (a)	$	1.48	$	1.74	$	2.04

(a) Calculated on a Pro Forma basis to exclude non-operating gains and losses, if any, and excluding the after-tax impact of stock compensation expense.

As of December 31, 2011, management determined that achieving these performance targets was probable to occur and began recording share-based compensation expense for these Restricted Share Units. The closing price of our common stock on the grant date equals the grant date fair value of these nonvested Restricted Share Units awards and will be recognized as compensation expense over their vesting periods.

In the fourth quarter of 2011, our Board of Directors approved target grants of 164,808 performance-based Restricted Share Units. These Restricted Share Units are nonvested share awards which would vest 50% in 2014 and 50% in 2015 only if we achieve a diluted earnings per share compound annual growth rate ("CAGR") of seventeen percent (17%) for the two-year period ending December 31, 2013. Diluted earnings per share will be calculated on a Pro Forma basis to exclude non-operating gains and losses, if any, and exclude the after-tax impact of stock compensation expense. For each 1% that the CAGR actually achieved for the two-year period ending on December 31, 2013 is above the 17% target, the number of shares underlying the Restricted Share Units awarded would be increased by 3.09%; provided, however, that the maximum increase in the number of shares that may be awarded is 100%. Likewise, for each 1% that the CAGR actually achieved for the two-year period ending on December 31, 2013 is below the 17% target, the number of shares underlying the Restricted Share Units awarded would be decreased by 1.13%. If the target CAGR is missed by 80% or more, then the number of shares awarded is zero.

As of June 30, 2012, management determined that achieving a CAGR for the two-year period ending December 31, 2013 which would result in earning the maximum 100% increase in the number of shares that may be awarded was probable to occur, and began recording share-based compensation expense for these Restricted Share Units based on 329,616 shares. The closing price of our common stock on the grant date equals the grant date fair value of these nonvested Restricted Share Units awards and will be recognized as compensation expense over their vesting periods.

Goodwill

Goodwill represents the excess of acquisition costs over the fair values of net assets acquired in business combinations. We test goodwill for impairment at least annually and between annual tests if an event occurs or changes in circumstances suggest a potential decline in the fair value of the reporting unit. A significant amount of judgment is involved in determining if an indicator or change in circumstances relating to impairment has occurred.  Such changes may include, among others: a significant decline in expected future cash flows; a sustained decline in market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. We perform annual goodwill impairment testing in the fourth quarter. Our evaluation indicated that no impairment existed as of December 31, 2011. At June 30, 2012 and December 31, 2011, goodwill of $118.6 million and $103.4 million, respectively, is recorded on our Condensed Consolidated Balance Sheet. We may be required to record goodwill impairment losses in future periods, whether in connection with our next annual impairment testing in the fourth quarter of 2012 or prior to that, if any such indicators constitute a triggering event in other than the quarter in which the annual goodwill impairment test is performed.  It is not possible at this time to determine if any such future impairment loss would result or, if it does, whether such charge would be material.

Income Taxes

We account for income taxes by recognizing deferred tax assets and liabilities, which are recorded to reflect the future tax consequences attributable to the effects of differences between the carrying amounts of existing assets and liabilities for

30

financial reporting and for income tax purposes. Judgments are required in determining the amount and probability of future taxable income, which in turn is critical to a determination of whether a valuation reserve against the deferred tax asset is appropriate.

We also account for the recognition and measurement of tax benefits associated with uncertain tax positions. This requires evaluations of individual tax positions to determine whether any part of that position can be recognized or continues to be recognized in the financial statements. An uncertain tax position exists if it is unclear how a transaction will be treated under tax law. We had approximately $2.2 million of total gross unrecognized tax benefits as of June 30, 2012, approximately $1.4 million of which would impact the effective tax rate.

We have recorded income tax expense at U.S. tax rates on all taxable income, except undistributed earnings of CPOS, our Canadian subsidiary. We intend to indefinitely reinvest undistributed earnings of CPOS and accordingly, have provided Canadian income tax on those earnings but not U.S. income tax. The amount of undistributed earnings of CPOS for which we have not recorded U.S. income tax was approximately $3.1 million. In the event of distribution of those earnings in the form of dividends or otherwise, we would be subject to U.S. income taxes subject to an adjustment, if any, for foreign tax credits. Determination of the amount of U.S. income tax liability that would be incurred is not practicable because of the complexities associated with this hypothetical calculation.

Results of Operations

Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011

The following table shows certain income statement data as a percentage of revenue for the periods indicated (in thousands of dollars):

	Three Months Ended June 30,			% of Total Revenue		Three Months Ended June 30,			% of Total Revenue		Change
	2012					2011					Amount			%
Total revenues	$	518,521		100.0	%	$	525,977		100.0	%	$	(7,456	)	(1.4	)%
Costs of services:
Interchange	330,742			63.8	%	365,207			69.4	%	(34,465		)	(9.4	)%
Dues, assessments and fees	52,505			10.1	%	38,551			7.3	%	13,954			36.2	%
Processing and servicing	57,188			11.0	%	55,359			10.5	%	1,829			3.3	%
Customer acquisition costs	11,263			2.2	%	12,130			2.3	%	(867		)	(7.1	)%
Depreciation and amortization	4,506			0.9	%	3,701			0.7	%	805			21.8	%
Total costs of services	456,204			88.0	%	474,948			90.3	%	(18,744		)	(3.9	)%
General and administrative	32,584			6.3	%	29,377			5.6	%	3,207			10.9	%
Total expenses	488,788			94.3	%	504,325			95.9	%	(15,537		)	(3.1	)%
Income from operations	29,733			5.7	%	21,652			4.1	%	8,081			37.3	%
Other income (expense):
Interest income	45					41					4			9.8	%
Interest expense	(756		)	(0.1	)%	(1,116		)	(0.2	)%	360			32.3	%
Provision for processing system intrusion costs	(81		)			(372		)	(0.1	)%	291			78.2	%
Other, net	(4		)			(308		)	(0.1	)%	304			98.7	%
Total other income (expense)	(796		)	(0.2	)%	(1,755		)	(0.3	)%	959			54.6	%
Income before income taxes	28,937			5.6	%	19,897			3.8	%	9,040			45.4	%
Provision for income taxes	10,975			2.1	%	7,505			1.4	%	3,470			46.2	%
Net income	17,962			3.5	%	12,392			2.4	%	5,570			44.9	%
Less: Net income attributable to noncontrolling interests	161					134					27			20.1	%
Net income attributable to Heartland	$	17,801		3.4	%	$	12,258		2.3	%	$	5,543		45.2	%

Total Revenues. Total revenues decreased by 1.4% from $526.0 million in the three months ended June 30, 2011 to $518.5 million in the three months ended June 30, 2012, notwithstanding increased processing activity, primarily as a result of the "Durbin Amendment," which was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that went into effect on October 1, 2011. SME card processing revenues and the Durbin Amendment are discussed below in "—Processing revenues, gross". The breakout of our total revenues for the three months ended June 30, 2012 and 2011 was as follows (in thousands of dollars):

31

	Three Months Ended June 30,				Change from Prior Year
	2012		2011		Amount			%
Processing revenues, gross (a)	$	503,817	$	511,517	$	(7,700	)	(1.5	)%
Payroll processing revenues	4,947		4,418		529			12.0	%
Equipment-related income	9,757		10,042		(285		)	(2.8	)%
Total Revenues	$	518,521	$	525,977	$	(7,456	)	(1.4	)%

(a) Includes Visa, MasterCard, American Express and Discover bankcard processing revenues, American Express fees, check processing fees, customer service fees, gift card, loyalty, Heartland School Solutions and other miscellaneous revenue.

Processing revenues, gross. Further breakout of our gross processing revenues for the three months ended June 30, 2012 and 2011 was as follows (in thousands of dollars):

	Three Months Ended June 30,				Change from Prior Year
	2012		2011		Amount			%
Merchant Card Processing Revenue:
SME card processing	$	452,908	$	470,518	$	(17,610	)	(3.7	)%
Network Services card processing	38,402		33,271		5,131			15.4	%
CPOS card processing	2,385		2,094		291			13.9	%
	493,695		505,883		(12,188		)	(2.4	)%
Heartland School Solutions income	5,372		1,147		4,225			368.4	%
Prepaid Card income	4,242		3,947		295			7.5	%
Other miscellaneous revenue	508		540		(32		)	(5.9	)%
Total Processing Revenues, Gross	$	503,817	$	511,517	$	(7,700	)	(1.5	)%

The $7.7 million decrease in gross processing revenues from $511.5 million in the three months ended June 30, 2011 to $503.8 million in the three months ended June 30, 2012 was primarily due to a decrease in SME merchant card processing revenue, partially offset by higher revenues from our Heartland School Solutions business and Network Services card processing.

Our gross SME merchant card processing revenues for the three months ended June 30, 2012 reflect a decline as compared to the three months ended June 30, 2011 due to the impact of the Durbin Amendment. The Durbin Amendment places limits on debit card interchange rates that card issuing banks may charge. While not impacting our net revenue (which we present net of interchange, dues and assessments and fees as discussed below in "—Net revenue"), beginning in the fourth quarter of 2011 there was a decrease in the amount of SME interchange expense we record in our Income Statement as a result of the Durbin Amendment. Since our gross SME card processing revenues include the interchange that we pass through to our merchants, our total revenues decreased by an equivalent amount. We estimate that the amount of this decrease on our gross SME merchant card processing revenues for the three months ended June 30, 2012 was a reduction of approximately $50.4 million.

Partially offsetting the impact that the Durbin Amendment had on our gross revenues from SME card processing was the increase in revenue attributable to higher SME bankcard processing volume. For the three months ended June 30, 2012, our SME bankcard processing volume increased 6.2% to $18.6 billion, compared to $17.5 billion for the three months ended June 30, 2011, reflecting increases for same store sales growth, new SME merchants installed, and decreased SME merchant volume attrition.

Network Services increased its card processing revenues based on the 246 million transactions it settled, representing $7.3 billion in processing volume, and the 646 million transactions it authorized through its front-end card processing systems during the three months ended June 30, 2012, as compared to the 142 million transactions it settled, representing $3.8 billion in processing volume, and the 706 million transactions it authorized through its front-end card processing systems during the three months ended June 30, 2011. Network Services' increase for the 2012 period primarily reflects the expansion of a contract with a large petroleum merchant to include back end settlement. We report Network Services’ settled bankcard processing revenues net of credit interchange because the daily cash settlement with Network Services’ merchants is on a net basis. However, the Durbin Amendment did impact Network Services' settled PIN debit interchange by approximately $1.8 million for the three months ended June 30, 2012.

Also contributing to our growth in processing revenues for the three months ended June 30, 2012 were the processing revenues generated by our Heartland School Solutions businesses, reflecting acquisitions we made in 2011 ( see "— Liquidity and Capital Resources” for detail on these acquisitions). During the three months ended

32

June 30, 2012, we processed for approximately 19,000 K to 12 schools, compared to approximately 9,000 K to 12 schools during the three months ended June 30, 2011.

Payroll processing revenues. Payroll processing revenues, which include fees earned on payroll processing services and interest income earned on funds held for customers, increased by 12.0%, from $4.4 million in the three months ended June 30, 2011 to $4.9 million in the three months ended June 30, 2012, primarily due to price increases for almost half of our payroll processing customers and an increase in the total number of payroll processing customers from 12,147 at June 30, 2011 to 12,211 at June 30, 2012.

Equipment-related income. Equipment-related income decreased by 2.8%, from $10.0 million in the three months ended June 30, 2011 to $9.8 million in the three months ended June 30, 2012, primarily due to a decrease in revenues from the sale of card processing terminals, including our proprietary encryption terminals, referred to as E3 Terminals, partially offset by an increase in sales of equipment in our Heartland School Solutions business.

Net revenue. Net revenue, which we define as total revenues less interchange fees and dues, assessments and fees, increased 10.7% from $122.2 million in the three months ended June 30, 2011, to $135.3 million in the three months ended June 30, 2012. The increase in net revenue was driven primarily by increases in SME bankcard processing volume, and increases in revenues from Heartland School Solutions. The following table summarizes our Net Revenue components for the three months ended June 30, 2012 and 2011 (in thousands of dollars):

	Three Months Ended June 30,						Change from Prior Year
	2012			2011			Amount			%
Merchant Card Processing Revenue:
SME card processing	$	452,908		$	470,518
Less: interchange, dues, assessments and fees	(357,431		)	(383,411		)
SME card processing net revenue	95,477			87,107			$	8,370		9.6	%
Network Services card processing	38,402			33,271
Less: interchange, dues, assessments and fees	(25,816		)	(20,347		)
Network Services card processing net revenue	12,586			12,924			(338		)	(2.6	)%
CPOS card processing net revenue	2,385			2,094			291			13.9	%
Card processing net revenue	110,448			102,125			8,323			8.1	%
Heartland School Solutions income	5,372			1,147			4,225			368.4	%
Prepaid card income	4,242			3,947			295			7.5	%
Other miscellaneous revenue	508			540			(32		)	(5.9	)%
Processing net revenue	120,570			107,759			12,811			11.9	%
Payroll processing revenues	4,947			4,418			529			12.0	%
Equipment-related revenues	9,757			10,042			(285		)	(2.8	)%
Total net revenue	$	135,274		$	122,219		$	13,055		10.7	%

Costs of services. Costs of services decreased 3.9% from $474.9 million in the three months ended June 30, 2011 to $456.2 million in the three months ended June 30, 2012, primarily due to the decrease in interchange expense resulting from the Durbin Amendment. Interchange expense decreased 9.4% from $365.2 million in the three months ended June 30, 2011 to $330.7 million in the three months ended June 30, 2012, and represented 63.8% of total revenues in the three months ended June 30, 2012 compared to 69.4% in the three months ended June 30, 2011.

Dues, assessments and fees increased 36.2% from $38.6 million in the three months ended June 30, 2011 to $52.5 million in the three months ended June 30, 2012, primarily as a result of increases in Visa and MasterCard assessments and fees which we pass through to our merchants, and also due to higher SME bankcard processing volume and Network Services transactions. Dues, assessments and fees were 10.1% of total revenues in the three months ended June 30, 2012, compared to 7.3% in the three months ended June 30, 2011.

Processing and servicing expense for the three months ended June 30, 2012 increased by $1.8 million, or 3.3%, compared with the three months ended June 30, 2011. The increase in processing and servicing expenses was due to increased costs associated with processing and servicing higher SME bankcard processing volume, increased residual commission expense and increased cost of sales and servicing related to higher Heartland School Solutions revenues. The increase in processing and servicing expense also reflects refined allocations of certain information technology related expenses, previously reported in general and administrative expense, to processing and servicing starting in 2012. Partially offsetting the increases in processing and servicing expense were decreases in service center and card related equipment costs. As a percentage of total revenue, processing and servicing expense increased to 11.0% for the three months ended June 30, 2012

33

from 10.5% for the three months ended June 30, 2011.

Customer acquisition costs for the three months ended June 30, 2012 decreased by $0.9 million, or 7.1% compared with the three months ended June 30, 2011. This decline reflects the impacts of the lower signing bonus amortization as capitalized signing bonuses recorded in periods having higher new gross margin installed become fully amortized. Customer acquisition costs for the three months ended June 30, 2012 and 2011 included the following components (in thousands of dollars):

	Three Months Ended June 30,
	2012			2011
Amortization of signing bonuses, net	$	7,332		$	8,091
Amortization of capitalized customer deferred acquisition costs	3,980			3,928
Increase in accrued buyout liability	4,240			3,723
Capitalized customer deferred acquisition costs	(4,289		)	(3,612		)
Total customer acquisition costs	$	11,263		$	12,130

Depreciation and amortization expenses increased 21.8% from $3.7 million in the three months ended June 30, 2011 to $4.5 million in the three months ended June 30, 2012. Most of our investments in information technology have been for security-related enhancements and in support of the continuing development of our processing platforms. Depreciation and amortization expense recorded on these investments is included in processing and servicing expense. Additionally, we capitalized salaries, fringe benefits and other expenses incurred by our employees that worked on internally developed software projects and we capitalized some outsourced programming expenses as well. Amortization does not begin on the internally developed software until the project is complete and placed in service, at which time we begin to amortize the asset over expected lives of three to five years. The amount capitalized increased from $6.1 million in the three months ended June 30, 2011 to $7.1 million in the three months ended June 30, 2012. The total amount of capitalized costs for projects placed in service in the three months ended June 30, 2012 and 2011 was $5.1 million and $2.0 million, respectively.

General and administrative. General and administrative expenses increased $3.2 million, or 10.9%, from $29.4 million in the three months ended June 30, 2011 to $32.6 million in the three months ended June 30, 2012. This increase was primarily due to a $3.1 million increase in personnel costs, including a $2.2 million increase in share-based compensation. See "— Critical Accounting Estimates — Share-based Compensation" for more detail on share-based compensation expense. General and administrative expenses for the three months ended June 30, 2012 benefited from refined allocations of certain information technology related expenses, previously reported in general and administrative expense, now recorded in processing and servicing expense. General and administrative expenses as a percentage of total revenue for the three months ended June 30, 2012 was 6.3%, an increase from 5.6% for the three months ended June 30, 2011.

Income from operations. As a result of the 10.7% increase in net revenue and much lower increases in processing and servicing expenses, our income from operations, which we also refer to as operating income, improved to $29.7 million for the three months ended June 30, 2012, from $21.7 million for the three months ended June 30, 2011. Our operating margin, which we measure as operating income divided by net revenue, was 22.0% for the three months ended June 30, 2012, compared to 17.7% for the three months ended June 30, 2011.

Interest expense. Interest expense for the three months ended June 30, 2012 was $0.8 million, compared with $1.1 million for the three months ended June 30, 2011. Interest expense in both periods includes interest incurred under our Credit Facilities and interest we recorded on payables to our sponsor banks. The decline in interest expense reflects lower borrowings due to payments we made on our Term Loan Facility. See “-Liquidity and Capital Resources-Credit Facility” for more detail on our borrowings.

Provision for processing system intrusion costs. On January 20, 2009, we publicly announced the discovery of acriminal breach of our payment systems environment (the “Processing System Intrusion”). The Processing System Intrusion involved malicious software that appears to have been used to collect in-transit, unencrypted payment card data while it was being processed during the transaction authorization process. We believe the breach did not extend beyond 2008.

Since the announcement of the Processing System Intrusion on January 20, 2009 and through June 30, 2012, we have expensed a total of $147.3 million, before reducing those charges by $31.2 million of total insurance recoveries. The majority of the total charges, or approximately $114.7 million, related to settlements of claims. Approximately $32.6 million of the total charges were for legal fees and costs we incurred for investigations, defending various claims and actions, remedial actions and crisis management services.

During the three months ended June 30, 2012, we incurred approximately $0.1 million, or less than one cent per share,

34

for legal fees and costs incurred related to the Processing System Intrusion. During the three months ended June 30, 2011, we expensed approximately $0.4 million, or less than one cent per share, related to the Processing System Intrusion.

Other income (expense), net. Other, net for the three months ended June 30, 2011 included pre-tax charges of $0.3 million reflecting the costs (primarily staff termination costs and fixed asset write downs) associated with the closing of our Johnson City, Tennessee service center.

Income taxes. Income taxes for the three months ended June 30, 2012 were an expense of $11.0 million, reflecting an effective tax rate of 37.9%. This compares to income tax expense of $7.5 million for the three months ended June 30, 2011, reflecting an effective tax rate of 37.7%.

Net income attributable to Heartland. As a result of the above factors, we recorded net income of $17.8 million for the three months ended June 30, 2012. This compares to a net income of $12.3 million for the three months ended June 30, 2011.

Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011

The following table shows certain income statement data as a percentage of revenue for the periods indicated (in thousands of dollars):

	Six Months Ended June 30,			% of Total Revenue		Six Months Ended June 30,			% of Total Revenue		Change
	2012					2011					Amount			%
Total revenues	$	989,006		100.0	%	$	993,623		100.0	%	$	(4,617	)	(0.5	)%
Costs of services:
Interchange	628,690			63.6	%	686,006			69.0	%	(57,316		)	(8.4	)%
Dues, assessments and fees	96,373			9.7	%	72,701			7.3	%	23,672			32.6	%
Processing and servicing	113,910			11.5	%	107,915			10.9	%	5,995			5.6	%
Customer acquisition costs	22,699			2.3	%	23,788			2.4	%	(1,089		)	(4.6	)%
Depreciation and amortization	8,892			0.9	%	7,576			0.8	%	1,316			17.4	%
Total costs of services	870,564			88.0	%	897,986			90.4	%	(27,422		)	(3.1	)%
General and administrative	65,466			6.6	%	59,423			6.0	%	6,043			10.2	%
Total expenses	936,030			94.6	%	957,409			96.4	%	(21,379		)	(2.2	)%
Income from operations	52,976			5.4	%	36,214			3.6	%	16,762			46.3	%
Other income (expense):
Interest income	160					82					78			95.1	%
Interest expense	(1,606		)	(0.2	)%	(2,308		)	(0.2	)%	702			30.4	%
Provision for processing system intrusion costs	(238		)			(675		)	(0.1	)%	437			64.7	%
Other, net	(4		)			(745		)	(0.1	)%	741			99.5	%
Total other income (expense)	(1,688		)	(0.2	)%	(3,646		)	(0.4	)%	1,958			53.7	%
Income before income taxes	51,288			5.2	%	32,568			3.3	%	18,720			57.5	%
Provision for income taxes	19,474			2.0	%	12,314			1.2	%	7,160			58.1	%
Net income	31,814			3.2	%	20,254			2.0	%	11,560			57.1	%
Less: Net income attributable to noncontrolling interests	259					181					78			43.1	%
Net income attributable to Heartland	$	31,555		3.2	%	$	20,073		2.0	%	$	11,482		57.2	%

Total Revenues. Total revenues decreased by 0.5% from $993.6 million in the six months ended June 30, 2011 to $989.0 million in the six months ended June 30, 2012, notwithstanding increased processing activity, primarily as a result of the "Durbin Amendment," which was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that went into effect on October 1, 2011. SME card processing revenues and the Durbin Amendment are discussed below in "—Processing revenues, gross". The breakout of our total revenues for the six months ended June 30, 2012 and 2011 was as follows (in thousands of dollars):

35

	Six Months Ended June 30,				Change from Prior Year
	2012		2011		Amount			%
Processing revenues, gross (a)	$	958,841	$	965,773	$	(6,932	)	(0.7	)%
Payroll processing revenues	11,226		10,127		1,099			10.9	%
Equipment-related income	18,939		17,723		1,216			6.9	%
Total Revenues	$	989,006	$	993,623	$	(4,617	)	(0.5	)%

(a) Includes Visa, MasterCard, American Express and Discover bankcard processing revenues, American Express fees, check processing fees, customer service fees, gift card, loyalty, Heartland School Solutions and other miscellaneous revenue.

Processing revenues, gross. Further breakout of our gross processing revenues for the six months ended June 30, 2012 and 2011 was as follows (in thousands of dollars):

	Six Months Ended June 30,				Change from Prior Year
	2012		2011		Amount			%
Merchant Card Processing Revenue:
SME card processing	$	862,134	$	887,275	$	(25,141	)	(2.8	)%
Network Services card processing	71,595		63,922		7,673			12.0	%
CPOS card processing	4,467		3,868		599			15.5	%
	938,196		955,065		(16,869		)	(1.8	)%
Heartland School Solutions income	10,985		2,199		8,786			399.5	%
Prepaid Card income	8,657		7,459		1,198			16.1	%
Other miscellaneous revenue	1,003		1,050		(47		)	(4.5	)%
Total Processing Revenues, Gross	$	958,841	$	965,773	$	(6,932	)	(0.7	)%

The $6.9 million decrease in gross processing revenues from $965.8 million in the six months ended June 30, 2011 to $958.8 million in the six months ended June 30, 2012 was primarily due to a decrease in SME merchant card processing revenue partially offset by higher revenues from our Heartland School Solutions business, Network Services card processing, and from prepaid card income including loyalty and gift marketing.

Our gross SME merchant card processing revenues for the six months ended June 30, 2012 reflect a decline as compared to the six months ended June 30, 2011 due to the impact of the Durbin Amendment. The Durbin Amendment places limits on debit card interchange rates that card issuing banks may charge. While not impacting our net revenue (which we present net of interchange, dues and assessments and fees as discussed below in "—Net revenue"), beginning in the fourth quarter of 2011 there was a decrease in the amount of SME interchange expense we record in our Income Statement as a result of the Durbin Amendment. Since our gross SME card processing revenues include the interchange that we pass through to our merchants, our total revenues decreased by an equivalent amount. We estimate that the amount of this decrease on our gross SME merchant card processing revenues for the six months ended June 30, 2012 was a reduction of approximately $91.8 million.

Partially offsetting the impact that the Durbin Amendment had on our gross revenues from SME card processing was the increase in revenue attributable to higher SME bankcard processing volume. For the six months ended June 30, 2012, our SME bankcard processing volume increased 7.2% to $35.3 billion, compared to $32.9 billion for the six months ended June 30, 2011, reflecting increases for same store sales growth, new SME merchants installed, and decreased SME merchant volume attrition.

Network Services increased its card processing revenues based on the 470 million transactions it settled, representing $13.8 billion in processing volume, and the 1,227 million transactions it authorized through its front-end card processing systems during the six months ended June 30, 2012, as compared to the 265 million transactions it settled, representing $6.9 billion in processing volume, and the 1,329 million transactions it authorized through its front-end card processing systems during the six months ended June 30, 2011. Network Services' increase for the 2012 period primarily reflects the expansion of a contract with a large petroleum merchant to include back end settlement We report Network Services’ settled bankcard processing revenues net of credit interchange because the daily cash settlement with Network Services’ merchants is on a net basis. However, the Durbin Amendment did impact Network Services' settled PIN debit interchange by approximately $3.4 million for the six months ended June 30, 2012.

Also contributing to our growth in processing revenues for the six months ended June 30, 2012 were the processing revenues generated by our Heartland School Solutions businesses, and from prepaid card income including loyalty and gift marketing. The increase in Heartland School Solution processing revenues for the six

36

months ended June 30, 2012 reflects acquisitions we made in 2011 (see "— Liquidity and Capital Resources” for detail on these acquisitions). At June 30, 2012, we processed for approximately 19,000 K to 12 schools, compared to approximately 9,000 K to 12 schools at June 30, 2011.

Payroll processing revenues. Payroll processing revenues, which include fees earned on payroll processing services and interest income earned on funds held for customers, increased by 10.9%, from $10.1 million in the six months ended June 30, 2011 to $11.2 million in the six months ended June 30, 2012, primarily due to price increases for almost half of our payroll processing customers and an increase in the total number of payroll processing customers from 12,147 at June 30, 2011 to 12,211 at June 30, 2012.

Equipment-related income. Equipment-related income increased by $1.2 million, or 6.9%, from $17.7 million in the six months ended June 30, 2011 to $18.9 million in the six months ended June 30, 2012, primarily due to increases in revenues from the sale of card processing terminals, including our proprietary encryption terminals, referred to as E3 Terminals, which benefited from a one-time sale in the first quarter of 2012, and from sales of equipment in our Heartland School Solutions business.

Net revenue. Net revenue, which we define as total revenues less interchange fees and dues, assessments and fees, increased 12.4% from $234.9 million in the six months ended June 30, 2011, to $263.9 million in the six months ended June 30, 2012. The increase in net revenue was driven primarily by increases in SME bankcard processing volume, and increases in revenues from Heartland School Solutions, Payroll processing, Loyalty and Gift and equipment-related income. The following table summarizes our Net Revenue components for the six months ended June 30, 2012 and 2011 (in thousands of dollars):

	Six Months Ended June 30,						Change from Prior Year
	2012			2011			Amount			%
Merchant Card Processing Revenue:
SME card processing	$	862,134		$	887,275
Less: interchange, dues, assessments and fees	(677,891		)	(720,119		)
SME card processing net revenue	184,243			167,156			$	17,087		10.2	%
Network Services card processing	71,595			63,922
Less: interchange, dues, assessments and fees	(47,172		)	(38,588		)
Network Services card processing net revenue	24,423			25,334			(911		)	(3.6	)%
CPOS card processing net revenue	4,467			3,868			599			15.5	%
Card processing net revenue	213,133			196,358			16,775			8.5	%
Heartland School Solutions income	10,985			2,199			8,786			399.5	%
Prepaid card income	8,657			7,459			1,198			16.1	%
Other miscellaneous revenue	1,003			1,050			(47		)	(4.5	)%
Processing net revenue	233,778			207,066			26,712			12.9	%
Payroll processing revenues	11,226			10,127			1,099			10.9	%
Equipment-related revenues	18,939			17,723			1,216			6.9	%
Total net revenue	$	263,943		$	234,916		$	29,027		12.4	%

Costs of services. Costs of services decreased 3.1% from $898.0 million in the six months ended June 30, 2011 to $870.6 million in the six months ended June 30, 2012, due primarily to the decrease in interchange expense resulting from the Durbin Amendment. Interchange expense decreased 8.4% from $686.0 million in the six months ended June 30, 2011 to $628.7 million in the six months ended June 30, 2012, and represented 63.6% of total revenues in the six months ended June 30, 2012, compared to 69.0% in the six months ended June 30, 2011.

Dues, assessments and fees increased 32.6% from $72.7 million in the six months ended June 30, 2011 to $96.4 million in the six months ended June 30, 2012, primarily as a result of increases in Visa and MasterCard assessments and fees which we pass through to our merchants, and also due to higher SME bankcard processing volume and Network Services transactions. Dues, assessments and fees were 9.7% of total revenues in the six months ended June 30, 2012, compared to 7.3% in the six months ended June 30, 2011.

Processing and servicing expense for the six months ended June 30, 2012 increased by $6.0 million or 5.6%, compared with the six months ended June 30, 2011. The increase in processing and servicing expense was due to increased

37

costs associated with processing and servicing higher SME bankcard processing volume, increased residual commission expense and increased cost of sales and servicing related to higher Heartland School Solutions, Payroll processing, and Loyalty and Gift revenues. The increase in processing and servicing expense also reflects refined allocations of certain information technology related expenses, previously reported in general and administrative expense, to processing and servicing in the six months ended June 30, 2012. Partially offsetting the increases in Processing and servicing expense were decreases in merchant losses, service center expense and card related equipment costs. As a percentage of total revenue, processing and servicing expense increased to 11.5% for the six months ended June 30, 2012 compared with 10.9% for the six months ended June 30, 2011.

Customer acquisition costs for the six months ended June 30, 2012 decreased by $1.1 million, or 4.6% compared with the six months ended June 30, 2011. This decline primarily reflects the impacts of lower signing bonus amortization, as capitalized signing bonuses recorded in periods having higher new gross margin installs become fully amortized. Customer acquisition costs for the six months ended June 30, 2012 and 2011 included the following components (in thousands of dollars):

	Six Months Ended June 30,
	2012			2011
Amortization of signing bonuses, net	$	14,653		$	16,605
Amortization of capitalized customer deferred acquisition costs	7,856			7,795
Increase in accrued buyout liability	8,447			6,330
Capitalized customer deferred acquisition costs	(8,257		)	(6,942		)
Total customer acquisition costs	$	22,699		$	23,788

Depreciation and amortization expenses increased 17.4% from $7.6 million in the six months ended June 30, 2011 to $8.9 million in the six months ended June 30, 2012. Most of our investments in information technology have been for security-related enhancements and in support of the continuing development of our processing platforms. Depreciation and amortization expense recorded on these investments is included in processing and servicing expense. Additionally, we capitalized salaries, fringe benefits and other expenses incurred by our employees that worked on internally developed software projects and we capitalized some outsourced programming expenses as well. Amortization does not begin on the internally developed software until the project is complete and placed in service, at which time we begin to amortize the asset over expected lives of three to five years. The amount capitalized in the six months ended June 30, 2012 and 2011 was $13.4 million and $11.3 million, respectively. The total amount of capitalized costs for projects placed in service in the six months ended June 30, 2012 and 2011 was $9.8 million and $4.1 million, respectively.

General and administrative. General and administrative expenses increased $6.0 million, or 10.2%, from $59.4 million in the six months ended June 30, 2011 to $65.5 million in the six months ended June 30, 2012. General and administrative expenses in the six months ended June 30, 2012 included $1.1 million for our periodic sales and servicing organization summit held in March 2012. Excluding these summit expenses, our general and administrative expenses in 2012 increased $4.9 million, or 8.3%, primarily due to a $4.9 million increase in personnel costs, including a $3.2 million increase for share-based compensation. General and administrative expenses for the six months ended June 30, 2012 benefited from refined allocations of certain information technology related expenses, previously reported in general and administrative expense, now recorded in processing and servicing expense. Offsetting this benefit was the increase in personnel costs which included additional personnel costs relating to the acquisition of the Heartland School Solutions businesses and an increase in share-based compensation expense. See "— Critical Accounting Estimates — Share-based Compensation" for more detail on share-based compensation expense. General and administrative expenses as a percentage of total revenue for the six months ended June 30, 2012 was 6.6%, an increase from 6.0% for the six months ended June 30, 2011.

Income from operations. As a result of the increase in net revenue and much lower increases in processing and servicingexpenses and general and administrative expenses, our income from operations, which we also refer to as operating income, improved to $53.0 million for the six months ended June 30, 2012, from $36.2 million for the six months ended June 30, 2011. Our operating margin, which we measure as operating income divided by net revenue, was 20.1% for the six months ended June 30, 2012, compared to 15.4% for the six months ended June 30, 2011.

Interest expense. Interest expense for the six months ended June 30, 2012 was $1.6 million, compared to $2.3 million for the six months ended June 30, 2011. Interest expense in both periods includes interest incurred under our Credit Facilities and interest we recorded on payables to our sponsor banks. The decline in interest expense reflects lower borrowings due to payments we made on our Term Loan Facility. See “-Liquidity and Capital Resources-Credit Facility” for more detail on our borrowings.

Provision for processing system intrusion costs. During the six months ended June 30, 2012, we incurred

38

approximately $0.2 million, or less than one cent per share, for legal fees and costs incurred related to the Processing System Intrusion. During the six months ended June 30, 2011, we expensed approximately $0.7 million, or $0.01 per share, related to the Processing System Intrusion.

Other income (expense), net. Other, net for the six months ended June 30, 2011 included pre-tax charges of $0.8 million reflecting the estimated liability for costs (primarily accrued staff termination costs and fixed asset write downs) associated with the closing of our Johnson City, Tennessee service center.

Income taxes. Income tax expense for the six months ended June 30, 2012 was $19.5 million, reflecting an effective tax rate of 38.0%. This compares to income tax expense of $12.3 million for the six months ended June 30, 2011, reflecting an effective tax rate of 37.8%.

Net income attributable to Heartland. As a result of the above factors, we recorded net income of $31.6 million for the six months ended June 30, 2012. This compares to a net income of $20.1 million for the six months ended June 30, 2011.

Balance Sheet Information

	June 30, 2012		December 31, 2011
	(In thousands)
Selected Balance Sheet Data
Cash and cash equivalents	$	42,951	$	40,301
Funds held for payroll customers	48,859		42,511
Receivables, net	180,096		176,535
Current tax assets	4,091		—
Current deferred tax assets, net	6,875		6,746
Capitalized customer acquisition costs, net	56,223		55,014
Property and equipment, net	120,437		115,579
Goodwill	118,610		103,399
Intangible assets, net	37,359		32,498
Total assets	639,905		596,921
Due to sponsor banks	54,451		63,881
Accounts payable	56,401		47,373
Deposits held for payroll customers	48,859		42,511
Borrowings:
Current portion	43,502		15,003
Long term portion	60,000		70,000
Accrued buyout liability:
Current portion	9,232		8,104
Long term portion	24,218		23,554
Total liabilities	403,871		376,869
Total stockholders’ equity	235,144		219,410

June 30, 2012 Compared to December 31, 2011

Total assets increased $43.0 million, or 7.2%, to $639.9 million at June 30, 2012 from $596.9 million at December 31, 2011, primarily due to increases in goodwill and intangible assets, funds held for payroll customers, receivables and fixed assets. Cash increased $2.7 million, or 6.6%, primarily due to higher balances in processing related cash at June 30, 2012 and an increase in operating cash for the six months ended June 30, 2012 (see “— Liquidity and Capital Resources” for more detail). The $6.3 million increase in funds held for payroll customers was offset by an equal increase in deposits held for payroll customers.

The increases in goodwill and intangibles resulted from the June 2012 acquisition of the Heartland School Services business, Lunch Byte Systems (see “— Liquidity and Capital Resources” for more detail).

    Our receivables, which increased $3.6 million, or 2.0% from December 31, 2011, are primarily due from our bankcard processing merchants and result in large part from our practice of advancing interchange fees to most of our SME merchants during the month and collecting those fees from our merchants at the beginning of the following month, as well as from transaction fees we charge merchants for processing transactions. Generally, these advances to our SME merchants are funded

39

first with our available cash, then by incurring a payable to our sponsor banks when that cash has been expended. Our receivables from SME bankcard processing merchants increased $8.6 million from December 31, 2011. At June 30, 2012, we used $48.5 million of available cash to fund merchant advances and at December 31, 2011, we used $40.0 million of cash to fund merchant advances. The amount due to sponsor banks for funding advances was $43.1 million at June 30, 2012 and $45.2 million at December 31, 2011. The payable to sponsor banks is repaid at the beginning of the following month out of the fees we collect from our merchants. Receivables from merchants also include transaction fees due from Network Services Merchants, up approximately $4.0 million from December 31, 2011 and receivables from the sale of point of sale terminal equipment. Total receivables also include amounts due from bankcard networks for pre-funding of Discover and American Express transactions to our merchants as well as amounts due from Visa for PIN debit transactions. These amounts are recovered from the networks the following business day from the date of processing the transaction and were down approximately $10.0 million from December 31, 2011.

Total borrowings increased $18.5 million, or 21.8%, to $103.5 million at June 30, 2012 from $85.0 million at December 31, 2011, primarily due to borrowing $26.0 million under our Revolving Credit Facility to fund the Lunch Byte acquisition less the $7.5 million of amortization payments due and paid on our Term Credit Facility. See “— Liquidity and Capital Resources” for discussion of Credit Facilities.

Total stockholders' equity increased $15.7 million from December 31, 2011 primarily due to recording net income of $31.5 million for the six months ended June 30, 2012. Other increases in total stockholders' equity for the six months ended June 30, 2012 included proceeds received from the exercise of stock options, tax benefits related to those stock option exercises and share-based compensation expense. During the six months ended June 30, 2012, we repurchased $33.2 million of our outstanding common stock and paid cash dividends of $4.7 million. See “— Liquidity and Capital Resources” for discussions of common stock repurchases and dividends.

Liquidity and Capital Resources

General. Liquidity and capital resource management is a process focused on providing the funding we need to meet our short and long-term cash and working capital needs. We have used our funding sources to build our merchant portfolio, our servicing technology platforms, and our Jeffersonville, Indiana service center, and to make acquisitions with the expectation that these investments will generate cash flows sufficient to cover our working capital needs and other anticipated needs for capital.

Our cash requirements include funding payments to salespersons for signing bonuses, residual commissions and residual buyouts, paying interest expense and other operating expenses, including taxes, adding to our primary service center, investing in our technology infrastructure, and making acquisitions of businesses or assets. We expect that our future cash requirements will continue to include amounts used to repurchase our common stock as authorized by our Board of Directors.

Other than borrowings we had used to fund certain acquisitions and settlements of claims related to the Processing System Intrusion, we fund our cash needs primarily with cash flow from our operating activities and through our agreements with our sponsor banks to fund SME merchant advances. We believe that our current cash and investment balances, cash generated from operations and our agreements with our sponsor banks to fund SME merchant advances will provide sufficient liquidity to meet our anticipated needs for operating capital for at least the next twelve months.

Working Capital. Our working capital, defined as current assets less current liabilities, was positive by $15.4 million at June 30, 2012.

At June 30, 2012, we had cash on our Balance Sheet totaling $43.0 million compared to $40.3 million at December 31, 2011. Our cash balance included processing-related cash in transit and collateral of approximately $29.0 million and $28.0 million at June 30, 2012 and December 31, 2011, respectively. As of June 30, 2012, we had used $48.5 million of our available cash to fund SME merchant advances and at December 31, 2011, we had used $40.0 million of our cash to fund advances.

On June 30, 2012, we had $24.0 million available under our Revolving Credit Facility. See “— Credit Facilities” for more details.

Acquisitions. On January 12, 2011, February 4, 2011, September 30, 2011 and June 29, 2012 we acquired the Heartland SchoolSolutions businesses of Comalex, Inc., mySchoolBucks, LLC, School-Link Technologies, Inc, and Lunch Byte Systems, Inc, respectively. We made cash payments of $6.1 million, $1.5 million, $15.6 million and $26.0 million, respectively, for the net assets of these four businesses. These acquisitions, which were funded through a combination of cash

40

on hand and our Revolving Credit Facility, enable us to offer school nutrition and point-of-sale solutions including Internet payment capability enabling on-line deposits of funds into student accounts, to a wide base of schools, students and their parents. Comalex, mySchoolBucks, School-Link and Lunch Byte contributed approximately 3,700, 900, 10,000 and 10,000 schools, respectively, to our Heartland School Solutions product. These acquisitions, added to the December 30, 2010 acquisition of Lunchbox and its approximately 4,400 schools, have given us an almost 30% market share in this industry. We plan to consolidate the individual platforms and products of these acquired businesses to optimize synergies, cost efficiencies and product offerings to our customers.

The $7.7 million cash payment for the Lunchbox acquisition in December 2010 was financed through a combination of cash on hand and our Revolving Credit Facility. We repaid the amount we borrowed under our Revolving Credit Facility in the first quarter of 2011. See “— Credit Facilities” for more details.

Cash Flow Provided By Operating Activities. We reported net cash provided by operating activities of $47.3 million in the six months ended June 30, 2012, compared to $54.0 million in the six months ended June 30, 2011. Cash provided by operating activities in the six months ended June 30, 2011 included a $16.7 million tax refund received from the carry back of our 2010 federal tax operating loss to prior years, while the 2012 six month period reflected tax payments of $15.5 million. Cash provided by operating activities in the six months ended June 30, 2012 reflects the benefit of our increase in net income for the current year, partially offset by our use of a greater amount of operating cash to fund receivables, including SME merchant advances during the six months ended June 30, 2012, and lower payable to sponsor banks. As of June 30, 2012, we had used $48.5 million of our available cash to fund SME merchant advances, compared to $47.3 million as of June 30, 2011. Additionally, during the six months ended June 30, 2012 we used cash to pay and reduce accrued expenses.

Other major determinants of operating cash flow are net signing bonus payments, which consume operating cash as we install new merchants, and payouts on the accrued buyout liability, which represent the costs of buying out residual commissions owned by our salespersons. See “— Critical Accounting Estimates — Capitalized Customer Acquisition Costs” and “— Critical Accounting Estimates — Accrued Buyout Liability” for more information. We paid net signing bonuses of $15.5 million and $14.2 million, respectively, in the six months ended June 30, 2012 and 2011. The increase in net signing bonuses paid during the six months ended June 30, 2012 reflects a year-over-year improvement in newly installed gross margin. In the six months ended June 30, 2012 and 2011, we reduced our accrued buyout liability by making buyout payments of $6.7 million and $7.3 million, respectively.

Cash Flow Used In Investing Activities. Net cash used in investing activities was $41.3 million for the six months ended June 30, 2012, compared to $28.9 million for the six months ended June 30, 2011. The amount of cash used in investing activities during the six months ended June 30, 2012 included $26.0 million for the acquisition of Lunch Byte and during the six months ended June 30, 2011 included $7.6 million for the acquisitions of Comalex and mySchoolBucks.

We made capital expenditures of $16.4 million during the six months ended June 30, 2012, compared to $20.4 million in the six months ended June 30, 2011. Capital expenditures in the six months ended June 30, 2011 include costs of $5.5 million related to additions to our primary service center facility in Jeffersonville, Indiana. We also continue building our technology infrastructure and developing and expanding our operating platforms. To further develop our technology, we anticipate that these expenditures will continue near current levels.

Cash Flow Used In Financing Activities. Net cash used in financing activities was $3.4 million for the six months ended June 30, 2012 and $25.6 million for the six months ended June 30, 2011.

In both the six months ended June 30, 2012 and 2011, we made term loan amortization payments of $7.5 million due under our Term Credit Facility and during the six months ended June 30, 2011 we paid down $23.2 million on our Revolving Credit Facility. See “— Credit Facilities” for more details.

Cash used in financing activities in the six months ended June 30, 2012 included cash for common stock repurchases. See “— Common Stock Repurchases” for more information on our common stock repurchase authorizations. We used $33.6 million of cash to repurchase 1,157,440 shares of our common stock during the six months ended June 30, 2012.

Cash dividends paid in the six months ended June 30, 2012 were $4.7 million, compared to cash dividends paid of $3.1 million in the six months ended June 30, 2011. See “— Dividends on Common Stock” for more information on our common stock dividends. During the six months ended June 30, 2012 and 2011, employees exercised stock options generating cash proceeds in the aggregate of $11.8 million and $5.7 million, respectively.

Credit Facilities. On November 24, 2010, we entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders who are a party to the

41

Credit Agreement. Credit extended under the Credit Agreement is guaranteed by our subsidiaries and is secured by substantially all of our assets and the assets of our subsidiaries. The Credit Agreement amended and restated in its entirety our previous amended and restated credit agreement entered into on May 30, 2008, as amended (the “Previous Credit Agreement”), between us and certain of the parties to the Credit Agreement.

The Credit Agreement provides for a revolving credit facility in the aggregate amount of up to $50 million (the “Revolving Credit Facility”), of which up to $10 million may be used for the issuance of letters of credit and up to $5 million is available for swing line loans. Upon the prior approval of the administrative agent, we may increase the total revolving commitments by $50 million for a total commitment under the Revolving Credit Facility of $100 million. On July 20, 2012, we entered into Amendment No. 1 (the “Amendment”) to the Credit Agreement. The Amendment amends the Credit Agreement by, among other things, allowing us to increase the total Revolving Credit Facility commitments from $100 million to $150 million upon the prior approval of the administrative agent. The Revolving Credit Facility is available to us on a revolving basis until November 24, 2015. All principal and interest not previously paid on the Revolving Credit Facility will mature and be due and payable on November 24, 2015.

The Credit Agreement also provides for a term credit facility in the aggregate amount of up to $100 million (the “Term Credit Facility”). The Term Credit Facility requires amortization payments in the amount of $3.75 million for each fiscal quarter during the fiscal years ended December 31, 2011 and 2012, $5.0 million for each fiscal quarter during the fiscal years ended December 31, 2013 and 2014, and $7.5 million for each fiscal quarter during the period commencing on January 1, 2015 through the maturity date on November 24, 2015. All principal and interest not previously paid on the Term Credit Facility will mature and be due and payable on November 24, 2015.

The Credit Agreement contains covenants which include: maintenance of certain leverage and fixed charge coverage ratios; limitations on our indebtedness, liens on our properties and assets, investments in, and loans to other business units, our ability to enter into business combinations and asset sales; and certain other financial and non-financial covenants. These covenants also apply to certain of our subsidiaries. We were in compliance with these covenants as of June 30, 2012 and December 31, 2011 and expect we will remain in compliance with these covenants for at least the next twelve months.

At June 30, 2012, there was $77.5 million outstanding under the Term Credit Facility and $26.0 million outstanding under the Revolving Credit Facility. The $26.0 million on the Revolving Credit Facility was used to fund the acquisition of Lunch Byte and was repaid in July 2012. At December 31, 2011, we had $85.0 million outstanding under the Term Credit Facility and no borrowings outstanding under the Revolving Credit Facility.

Common Stock Repurchases. On October 21, 2011, our Board of Directors authorized the repurchase of up to $50million worth of our common stock. Repurchases under this program were made through the open market in accordance with applicable laws and regulations. We funded repurchases with cash flow from operations, existing cash on the balance sheet, and other sources including the proceeds of options exercises. At June 30, 2012, there were no amounts remaining under the October 21, 2011 authorization to repurchase common stock. On July 27, 2012, our Board of Directors authorized a new program to repurchase up to $50 million of our outstanding common stock under essentially the same terms as the October 21, 2011 program.

Under authorization from our Board of Directors, during the six months ended June 30, 2012 and the year ended December 31, 2011, respectively, we repurchased an aggregate of 1,157,440 shares of our common stock at a total cost of $33.2 million, at an average cost of $28.66 per share, and 778,889 shares of our common stock at a total cost of $16.8 million, at an average cost of $21.61 per share.

Dividends on Common Stock. The following table summarizes quarterly cash dividends declared and paid on our common stock during 2012 and 2011:

42

Date Declared	Record Date	Date Paid	Amount Paid Per Common Share
Six Months Ended June 30, 2012:
February 8, 2012	March 2, 2012	March 15, 2012	$0.06
May 1, 2012	May 24, 2012	June 15, 2012	$0.06
Twelve Months Ended December 31, 2011:
February 16, 2011	March 4, 2011	March 15, 2011	$0.04
May 13, 2011	May 24, 2011	June 15, 2011	$0.04
August 2, 2011	August 24, 2011	September 15, 2011	$0.04
October 21, 2011	November 24, 2011	December 15, 2011	$0.04

On July 27, 2012, our Board of Directors declared a quarterly cash dividend of $0.06 per share of common stock, payable on September 14, 2012 to stockholders of record as of August 24, 2012.

Contractual Obligations. The card brand networks generally allow chargebacks up to four months after the later of the date the transaction is processed or the delivery of the product or service to the cardholder. If the merchant incurring the chargeback is unable to fund the refund to the card issuing bank, we must do so. As the majority of our SME transactions involve the delivery of the product or service at the time of the transaction, a good basis to estimate our exposure to chargebacks is the last four months' bankcard processing volume on our SME portfolio, which was $24.7 billion for the four months ended June 30, 2012 and $22.3 billion for the four months ended December 31, 2011. However, during the four months ended June 30, 2012 and December 31, 2011, we were presented with $11.1 million and $12.2 million, respectively, of chargebacks by issuing banks. In the six months ended June 30, 2012 and the year ended December 31, 2011, we incurred merchant credit losses of $0.9 million and $5.1 million, respectively, on total SME bankcard dollar volumes processed of $35.3 billion and $67.5 billion, respectively. These credit losses are included in processing and servicing expense in our Consolidated Statement of Income.

The following table reflects our significant contractual obligations as of June 30, 2012:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
	(in thousands)
Processing providers (a)	$	25,277	$	9,658	$	11,849	$	3,770	$	—
Telecommunications providers	2,182		2,182		—		—		—
Office and equipment leases	24,746		7,658		9,011		4,207		3,870
Term Credit Facility (b)	77,500		17,500		45,000		15,000		—
	$	129,705	$	36,998	$	65,860	$	22,977	$	3,870

(a) We have agreements with several third-party processors to provide to us on a non-exclusive basis payment processing and transmittal, transaction authorization and data capture services, and access to various reporting tools. Our agreements with third-party processors require us to submit a minimum monthly number of transactions or volume for processing. If we submit a number of transactions or volume that is lower than the minimum, we are required to pay the third-party processors the fees that they would have received if we had submitted the required minimum number or volume of transactions.

(b) Interest rates on the Term Credit Facility are variable in nature; however, in January 2011 we entered into fixed-pay amortizing interest rate swaps having an initial notional amount of $50.0 million and a current notional amount of $38.8 million. If interest rates were to remain at the June 30, 2012 level, we would make interest payments of $2.4 million in the next 1 year, $2.7 million in the next 1 to 3 years and $0.1 million in the next 3 to 5 years or a total of $5.2 million including net settlements on the fixed-pay amortizing interest rate swaps. In addition, we had $26.0 million outstanding under our Revolving Credit Facility at June 30, 2012. We repaid that $26.0 million in July 2012. The Revolving Credit Facility is available on a revolving basis until November 24, 2015.

Unrecognized Tax Benefits. At June 30, 2012, we had gross tax-effected unrecognized tax benefits of approximately $2.2 million. See “— Critical Accounting Estimates — Income Taxes.” As of June 30, 2012 we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority, hence the unrecognized tax benefits have been excluded from the above commitment and contractual obligations table.

Legal and Regulatory Considerations

The following is a description of material developments that occurred during the quarter ended June 30, 2012 in legal proceedings reported in our Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Report on

43

Form 10-Q for the quarter ended March 31, 2012.

On June 10, 2009, the Judicial Panel on Multidistrict Litigation (the “JPML”) entered an order centralizing the class action cases for pre-trial proceedings before the United States District Court for the Southern District of Texas, under the caption In re Heartland Payment Systems, Inc. Customer Data Security Breach Litigation, MDL No. 2046, 4:09-md-2046. On August 24, 2009, the court appointed interim co-lead and liaison counsel for the financial institution and consumer plaintiffs. On September 23, 2009, the financial institution plaintiffs filed a Master Complaint in the MDL proceedings, which we moved to dismiss on October 23, 2009. On December 1, 2011, the Court entered an order granting in part our motion to dismiss the financial institution plaintiffs' master complaint against us, but allowing the plaintiffs leave to amend to re-plead certain claims. Plaintiffs' amended complaint was due on August 3, 2012. A status conference is scheduled for August 7, 2012. On December 18, 2009, we and interim counsel for the consumer plaintiffs filed with the Court a proposed settlement agreement, subject to court approval, of the consumer class action claims. On May 3, 2010, the Court entered an order preliminarily certifying the settlement class, authorizing notice to the class to proceed, and scheduling a fairness hearing for December 10, 2010, which was later adjourned to December 13, 2010. On March 20, 2012, the Court issued a memorandum and opinion granting final approval to the settlement and on April 12, 2012, the Court entered a judgment, which has since become final.

In the ordinary course of our business, we are party to various legal proceedings, which we believe are incidental to the operation of our business. We believe that the outcome of the proceedings to which we are currently a party will not have a material adverse effect on our financial position, results of operations or cash flows.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk. Our primary market risk exposure is to changes in interest rates.

We have interest rate risk related to our payable to our sponsor banks. Within our amount payable to our sponsor banks are balances which KeyBank and Heartland Bank have advanced to our SME merchants for interchange fees. We fund these advances first by applying a portion of our available cash and then by incurring a significant payable to our sponsor banks, bearing interest at the prime rate. At June 30, 2012, our payable to sponsor banks included $43.1 million for funding interchange advances to our SME merchants. This payable is repaid on the first business day of the following month out of fees collected from our merchants. During the quarter ended June 30, 2012 the average daily interest-bearing balance of that payable was approximately $8.4 million. The outstanding balance of our payable to our sponsor banks is directly related to our bankcard processing volume and also will fluctuate depending on the amount of our available cash. A hypothetical 100 basis point change in short-term interest rates applied to our average payable to sponsor banks would result in a change of approximately $84,000 in annual pre-tax income.

We also incur interest rate risk on borrowings under our Second Amended and Restated Credit Agreement. The Second Amended and Restated Credit Agreement provides for a Revolving Credit Facility of $50.0 million and a Term Credit Facility of $100.0 million. At June 30, 2012, there was $77.5 million outstanding under the Term Credit Facility and $26.0 million outstanding under the Revolving Credit Facility. The Term Credit Facility requires amortization payments in the amount of $3.75 million for each fiscal quarter during the fiscal years ended December 31, 2011 and 2012, $5.0 million for each fiscal quarter during the fiscal years ended December 31, 2013 and 2014, and $7.5 million for each fiscal quarter during the period commencing on January 1, 2015 through the maturity date on November 24, 2015. Under the terms of the Credit Agreement, we may borrow, at our option, at interest rates equal to one, two, three or six month adjusted LIBOR rates, or equal to the greater of the prime rate, the federal funds rate plus 0.50% and the adjusted LIBOR rate plus 1%, in each case plus a margin determined by our current leverage ratio. In January 2011, we entered into fixed-pay amortizing interest rate swaps having an initial notional amount of $50.0 million on the variable rate debt outstanding under the Term Credit Facility. These interest rate swaps convert that initial notional amount to fixed rate. At June 30, 2012, the remaining notional amount of these interest rate swaps was $38.8 million. At June 30, 2012, there was $26.0 million outstanding on the Revolving Credit Facility which was used to fund the acquisition of Lunch Byte and was repaid in July 2012. The impact which a hypothetical 100 basis point increase in short-term interest rates would have on our outstanding June 30, 2012 balances under the Second Amended and Restated Credit Agreement would be a decline of approximately $648,000 in annual pre-tax income, including the effect from interest rate swaps.

While the bulk of our cash and cash-equivalents are held in checking accounts or money market funds, we do hold certain fixed-income investments with maturities within three years. At June 30, 2012, a hypothetical 100 basis point increase in short-term interest rates would result in an increase of approximately $53,000 in annual pre-tax income from money market fund holdings, but a decrease in the value of fixed-rate investments of approximately $30,000. A hypothetical 100 basis point decrease in short-term interest rates would result in a decrease of approximately $53,000 in annual pre-tax income from money market funds, but an increase in the value of fixed-rate instruments of approximately $30,000.

44

Foreign Currency Risk. While substantially all of our business is conducted in U.S. dollars, our 70% owned Canadian processing subsidiary, CPOS, conducts its operations in Canadian dollars. Consequently, a portion of CPOS' revenues and expenses may be affected by fluctuations in foreign currency exchange rates. We are also affected by fluctuations in exchange rates on assets and liabilities related to our CPOS subsidiary. We have not hedged our translation risk on foreign currency exposure. For the year ended December 31, 2011, foreign currency exposures had an immaterial impact on our revenues and our net income. For the six months ended June 30, 2012, fluctuations in exchange rates on CPOS' assets and liabilities decreased our total other comprehensive income and noncontrolling interests by $36,000.

We do not hold or engage in the trading of foreign exchange instruments.

Office Facilities

At June 30, 2012, we owned one facility and leased sixteen facilities which we use for operational, sales and administrative purposes.

Our principal executive offices are located in approximately 9,300 square feet of leased office space on Nassau Street in Princeton, New Jersey. The Nassau Street lease expires in May 2013.

We own 35 acres of land in Jeffersonville, Indiana, on which we constructed our credit card operations and service center. The state-of-the-art facility is comprised of 238,000 square feet of space supporting customer service, operations, deployment, day care, fitness, cafeteria, and large company meetings.

We also leased the following facilities as of June 30, 2012:

Location	Square Feet	Expiration
Auburn, Alabama	2,382	April 30, 2014
Chattanooga, Tennessee	9,461	June 30, 2014
Cleveland, Ohio	41,595	June 30, 2019
Colorado Springs, Colorado	9,920	February 28, 2015
Harlan, Kentucky	5,000	May 25, 2014
Johnson City, Tennessee	5,252	April 17, 2014
Phoenix, Arizona	1,284	April 30, 2013
Phoenix, Arizona	1,930	October 31, 2012
Plano, Texas	53,976	May 31, 2015 for 26,988 square feet. January 14, 2019 for 26,988 square feet.
Plano, Texas	26,020	January 31, 2015
Portland, Oregon	11,564	September 30, 2013
Rochester, New York	18,000	June 30, 2018
Tempe, Arizona	14,315	September 30, 2014
Toronto, Ontario, Canada	14,094	July 31, 2020
West Windsor Township, New Jersey	5,288	May 31, 2013

We believe that our facilities are suitable and adequate for our current business operations and, if necessary, could be replaced with little disruption to our company. We periodically review our space requirements and may acquire new space to meet our business needs or consolidate and dispose of or sublet facilities which are no longer required.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations –Quantitative and Qualitative Disclosures About Market Risk.”

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("the Exchange Act") as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our CEO and CFO concluded that, as

45

of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective and provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based, in part, upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

Changes in Internal Controls

During the quarter ended June 30, 2012, there was no change in our internal controls over financial reporting (as defined in Rule 13 a-15(f) and 15d-15(e) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Except as disclosed in “Legal and Regulatory Considerations” of Part I of this Quarterly Report on Form 10-Q, there were no material developments that occurred since the filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 in the proceedings reported under Part I, Item 3. Legal Proceedings in our Annual Report on Form 10-K for the year ended December 31, 2011, nor are we aware of any other material legal proceedings initiated against us during such time.

Item 1A. Risk Factors

There have been no material changes in our Risk Factors as previously reported in our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) None

(b) None

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On October 21, 2011, our Board of Directors authorized the repurchase of up to $50.0 million worth of our common stock. Repurchases under this program will be made through the open market, or in privately negotiated transactions, from time to time in accordance with applicable laws and regulations. We intend to fund any repurchases with cash flow from operations, existing cash on the balance sheet, and other sources including the proceeds of options exercises. The manner, timing and amount of repurchases, if any, will be determined by our management and will depend on a variety of factors, including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements. The repurchase program may be modified or discontinued at any time.

During the six months ended June 30, 2012 and the year ended December 31, 2011, respectively, we repurchased an aggregate of 1,157,440 shares of our common stock at a total cost of $33.2 million, at an average cost of $28.66 per share, and 778,889 shares of our common stock at a total cost of $16.8 million, at an average cost of $21.61 per share. As of June 30, 2012, we have completed our previous authorization to repurchase up to $50 million of our common stock. In July 2012, our Board of Directors has authorized a new $50 million repurchase program under essentially the same terms and conditions as the previous program.

The following table presents information with respect to those purchases of our common stock made during the three months ended June 30, 2012:

46

	Total Number of Shares Purchased	Average Price Paid Per Share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
				(In thousands)
April 1— 30, 2012	254,900	$29.57	254,900	$	14,245
May 1— 31, 2012	422,300	29.66	422,300	1,719
June 1 — 30, 2012	60,991	28.19	60,991	—
Total	738,191	$29.51	738,191

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

Grant of RSUs to David Gilbert

On June 14, 2012, the Compensation Committee of our Board of Directors granted David Gilbert, President - Hospitality Group, 52,296 restricted stock units with each restricted stock unit representing a contingent right to receive one share of our common stock. The restricted stock units vest in four equal installments over four years beginning on the first anniversary of the date of grant (June 14, 2013). Such restricted stock units will also be subject to the terms and provisions of the Company's amended and restated 2008 Equity Incentive Plan and related restricted stock unit agreement.

Employee Confidential Information and Noncompetition Agreement

On July 13, 2012, we entered into an Employee Confidential Information and Noncompetition Agreement (the “Agreement”) with Michael A. Lawler, President - Strategic Markets. Subject to Mr. Lawler's compliance with the confidentiality, non-competition, non-solicitation and other covenants set forth therein, the Agreement provides that in the event he is terminated by us for other than cause (as defined in the Agreement) or disability (as defined in the Agreement), he will be entitled to receive severance pay in an amount equal to the base salary that would have been paid to him during a twelve-month period plus medical benefits for twelve months.  In addition, if Mr. Lawler's employment is terminated by us other than for cause or his employment with us is terminated due to his death, he shall also be entitled to receive a pro rata portion of any annual bonus that he would have been entitled to receive based on the number of days he was employed by us during such year.

The description of the Agreement set forth above does not purport to be complete and is qualified in its entirety by reference to the Agreement, which is filed as Exhibit 10.9 hereto and incorporated herein by reference.

Cash Dividend

On July 31, 2012, our Board of Directors declared a quarterly cash dividend of $0.06 per share of our common stock, which will be payable on September 14, 2012 to our stockholders of record as of August 24, 2012.

47

Item 6. Exhibits

Exhibit Number	Description
10.1	Uncommitted Revolving Line of Credit Agreement, dated July 20, 2012 by and among Wells Fargo Bank, National Association, as lender and as sponsor bank, Heartland Payment Systems, Inc., a Delaware corporation and each guarantor thereto (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on July 26, 2012).
10.2	Uncommitted Revolving Line of Credit Note, dated July 20, 2012 between Heartland Payment Systems, Inc., a Delaware corporation and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on July 26, 2012).
10.3	Intercreditor Agreement, dated as of July 20, 2012, among Heartland Payment Systems, Inc., a Delaware corporation, Wells Fargo Bank, National Association, as Sponsor and JPMorgan Chase Bank, N.A., as the Bank Group Administrative Agent for the Bank Group Lenders (Incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed on July 26, 2012).
10.4	Amendment No. 1, dated July 20, 2012 to Second Amended and Restated Credit Agreement, dated November 24, 2010, and Consent among Heartland Payment Systems, Inc., a Delaware corporation, the Lenders party thereto, and JPMorgan Chase Bank, N.A. as Administrative Agent, Swingline Lender and Issuing Bank (Incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed on July 26, 2012).
*10.5**	Offer Letter between David Gilbert and Heartland Payment Systems, Inc. dated May 21, 2012.
*10.6**	Employee Confidential Information and Noncompetition Agreement between David Gilbert and Heartland Payment Systems, Inc. dated June 14, 2012.
*10.7**	Offer Letter between Ian M. Drysdale and Heartland Payment Systems, Inc. dated July 9, 2012.
*10.8**	Employee Confidential Information and Noncompetition Agreement between Ian M. Drysdale and Heartland Payment Systems, Inc. dated July 9, 2012.
*10.9**	Employee Confidential Information and Noncompetition Agreement between Michael A. Lawler and Heartland Payment Systems, Inc. dated July 13, 2012.
*31.1	Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101	The following financial information from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL ("Extensible Business Reporting Language") and furnished electronically herewith: (i) the Consolidated Statements of Income and Comprehensive Income; (ii) The Consolidated Balance Sheets; (iii) the Consolidated Statements of Cash Flow; (iv) the Consolidated Statements of Equity; and (v) the Notes to the Consolidated Financial Statements.

______________________

*    Filed herewith.

48

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 6, 2012

HEARTLAND PAYMENT SYSTEMS, INC.
(Registrant)
By:	/S/    ROBERT O. CARR
	Robert O. Carr
	Chief Executive Officer
	(Principal Executive Officer)
By:	/S/    Maria Rueda
	Maria Rueda
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

49

EXHIBIT INDEX

Exhibit Number	Description
10.1	Uncommitted Revolving Line of Credit Agreement, dated July 20, 2012 by and among Wells Fargo Bank, National Association, as lender and as sponsor bank, Heartland Payment Systems, Inc., a Delaware corporation and each guarantor thereto (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on July 26, 2012).
10.2	Uncommitted Revolving Line of Credit Note, dated July 20, 2012 between Heartland Payment Systems, Inc., a Delaware corporation and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on July 26, 2012).
10.3	Intercreditor Agreement, dated as of July 20, 2012, among Heartland Payment Systems, Inc., a Delaware corporation, Wells Fargo Bank, National Association, as Sponsor and JPMorgan Chase Bank, N.A., as the Bank Group Administrative Agent for the Bank Group Lenders (Incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed on July 26, 2012).
10.4	Amendment No. 1, dated July 20, 2012 to Second Amended and Restated Credit Agreement, dated November 24, 2010, and Consent among Heartland Payment Systems, Inc., a Delaware corporation, the Lenders party thereto, and JPMorgan Chase Bank, N.A. as Administrative Agent, Swingline Lender and Issuing Bank (Incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed on July 26, 2012).
*10.5**	Offer Letter between David Gilbert and Heartland Payment Systems, Inc. dated May 21, 2012.
*10.6**	Employee Confidential Information and Noncompetition Agreement between David Gilbert and Heartland Payment Systems, Inc. dated June 14, 2012.
*10.7**	Offer Letter between Ian M. Drysdale and Heartland Payment Systems, Inc. dated July 9, 2012.
*10.8**	Employee Confidential Information and Noncompetition Agreement between Ian M. Drysdale and Heartland Payment Systems, Inc. dated July 9, 2012.
*10.9**	Employee Confidential Information and Noncompetition Agreement between Michael A. Lawler and Heartland Payment Systems, Inc. dated July 13, 2012.
*31.1	Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2	Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1	Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2	Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*101	The following financial information from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL ("Extensible Business Reporting Language") and furnished electronically herewith: (i) the Consolidated Statements of Income and Comprehensive Income; (ii) The Consolidated Balance Sheets; (iii) the Consolidated Statements of Cash Flow; (iv) the Consolidated Statements of Equity; and (v) the Notes to the Consolidated Financial Statements.

_____________________

* Filed herewith.

50

EX-10.5

May 21, 2012

David Gilbert

1024 Tyne Boulevard

Nashville, Tennessee 37220

Dear David:

This letter confirms our offer and your acceptance of the full time position of President - Hospitality Group reporting to Bob Carr, Chief Executive Officer. You will be based in Nashville, TN but as discussed, your responsibilities will require extensive travel. Your semi-monthly rate will be $15,416.67 per pay ($370,000 annually) and you will be paid on the 15th and the end of each month. In addition to your base salary listed above, your compensation package will also include the following:

• Annual bonus eligibility equivalent to 50% of base salary. Your bonus is guaranteed in the first two years of your employment with Heartland. Your 2012 bonus will be prorated based on your start date with Heartland. In 2014, your bonus will be guaranteed for the remaining portion of your second year of employment (approximately 7 months value). Thereafter the bonus will be determined based upon your personal performance and Heartland achieving key objectives. Bonuses are generally paid in January for the previous year except that for the period in which your bonus is guaranteed, which will be paid monthly.

• Restricted Stock Units will be issued to you as of June 1, 2012. These RSUs will vest over 4 years. The number of these RSUs will be determined on the date of this agreement and will have value equal to four times your annual salary.

We look forward to you beginning your full-time employment on or about July 30th, 2012 but you will begin as a part-time employee on June 1, 2012 for the purposes of gaining background about the company and your position prior to your full-time start date. Your compensation for your part time work will be $1. You will be provided a minimum of four weeks of vacation per year, including your first year.

After 90 days of employment with Heartland, you will automatically be enrolled in HPS's 401K Profit Sharing Plan at a standard deduction of 1%. You may elect to have a higher percentage taken out or none at all. Informationabout these programs and other company benefits, as well as guidelinesconcerning your employment, are described in Heartland's Employee Handbook,which you will be provided access via our web-site when your employment begins.If you have other specific benefit questions, feel free to contact Jose Muniz atjose.muniz@e-hps.com or Jackie Lamont at Jackie.lamont@e-hps.com.

As discussed, this offer is contingent upon the successful completion of a background check and your written acceptance of the terms and conditions set forth in the attached document pertaining to Heartland's Alcohol and Drug-Free Workplace Policy.

Your employment with Heartland is “at-will.” This means that just as you have the right to end your employment with Heartland at any time, for any reason or no reason, and with or without notice, Heartland also has the right to terminate your employment at any time, for any reason or no reason, and with or without notice.

To confirm your acceptance of this offer and acknowledge your at-will employment relationship with Heartland, please sign this letter and the Alcohol and Drug Free Workplace policy and return to Heartland's Human Resource Department. Feel free to retain a copy for your records.

On behalf of Heartland Payment Systems, I look forward to having you join our team. In the meantime, if you have any questions about the terms of our offer or the company in general, please feel free to contact me.

Sincerely,

/s/ Robert O. Carr

Bob Carr

Chief Executive Officer

I hereby accept the offer of employment described above and acknowledge that my employment relationship with Heartland Payment Systems is contingent upon the successful completion of a background check, and my written acceptance of the terms and conditions set forth in Heartland's Alcohol and Drug-Free Workplace Policy. I further acknowledge that any employment relationship I may have with Heartland is at-will.

_/s/ David Gilbert_____________________________ May 21, 2012

David GilbertDate

EX-10.6

EMPLOYEE CONFIDENTIAL INFORMATION

AND

NONCOMPETITION AGREEMENT

This Employee Confidential Information and Noncompetition Agreement is made and entered into on this 14th day of June, 2012, by and between David Gilbert, hereinafter “Employee,” and Heartland Payment Systems, Inc., a Delaware corporation (collectively with any and all current and future subsidiary and/or affiliate companies, the “Company”).

WHEREAS, Employee has established an employment relationship with the Company and has received, and may continue to receive, certain benefits including stock grants and options; and

WHEREAS, by reason of employment by the Company, Employee has received, and will continue to receive, the value and advantage of confidential information and special training and skills, and the expert knowledge and experience of the contacts with other Company employees; and

WHEREAS, the future granting of stock grants and options represents an advantage to Employee and was conditioned upon Employee entering into this Agreement; and

NOW THEREFORE, in exchange for good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, it is agreed as follows:

Section 1. Scope of Agreement.

(a)This contract is not a contract of employment for any particular term. Employee's employment by the Company is at will, unless otherwise agreed by the Company and Employee in writing.

(b)Severance policies and procedures are as set forth in the Employee Policy Manual of the Company; provided, that in the event of a conflict between this Agreement and the Employee Policy Manual, this Agreement shall govern.

Section 2. Severance and Bonuses.

(a)In consideration of the covenants by Employee contained below, in the event of a termination of Employee's employment by action of the Company other than for Cause or Disability, the Employee will receive severance pay, in an amount equal to the base salary that would have been paid for a period of twelve (12) months payable in accordance with the Company's regular payroll practices, plus medical benefits for such

1

period; provided, that the Employee shall not be eligible to receive such severance pay unless such termination of employment occurs after the ninetieth (90th) day of the Employee's employment by the Company. Medical benefit continuation during such severance period shall be counted against the benefit continuation period required under COBRA.

(b)In the event of a termination of Employee's employment by action of the Company other than for Cause or in the event of termination of Employee's employment by death of Employee, the Employee shall also be entitled to receive a pro rata portion (based on the number of days of Employee's employment during the fiscal quarter in which the Employee's employment is terminated) of any bonus payment that would have been payable to him for that fiscal quarter if the Employee had been in the employ of the Company for the full fiscal quarter. If the Employee's compensation arrangement did not contemplate a bonus payable on a quarterly basis, but instead contemplated a bonus paid on some longer fiscal period (such as a half-year or full year), then the pro rata bonus shall be computed based on the number of days of Employee's employment during such longer fiscal period in which the Employee's employment is terminated and the amount of the bonus payment that would have been payable to him for such longer fiscal period. No bonus will be payable to the Employee with respect to any bonus period commencing after the bonus period in which the Employee's employment terminated.

(c)     Cause. “Cause” means:

(i)The Employee has breached the provisions of Section 4, Section 5, Section 6, or Section 7 of this Agreement in any material respect;

(ii)The Employee has been convicted of, or plead guilty or no contest to, (A) fraud, misappropriation or embezzlement in connection with the Company's business, or (B) a felony, and has failed to submit a resignation in accordance with Section 2(f) below; or

(iii)The Employee has breached his or her duties hereunder or failed to perform his or her duties as an officer or employee of the Company, if such breach or failure has not been cured within thirty (30) days after receipt of written notice from the Company of such breach or failure.

Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated for Cause pursuant to clause (i) above unless and until there shall have been delivered to the Employee (A) a notice of termination and (B) a copy of a resolution duly adopted by the Board of Directors of the Company finding that, after reasonable notice to the Employee and an opportunity to be heard, in the good faith opinion of the Board of Directors of the Company, the Employee has engaged in conduct constituting Cause for termination hereunder.

2

(c)     Disability. “Disability” means any mental or physical condition that renders the Employee unable to perform the essential functions of his position, with or without reasonable accommodation, for a period in excess of six (6) months.

(c)

(d)If the Employee is ever convicted of, or pleads guilty or no contest to, any felony offense, then the Employee shall immediately tender a resignation from each and every position the Employee then holds with the Company (whether as officer, director, employee, consultant or otherwise).

Section 3.Employees' Acknowledgments.

(a)The Employee understands and acknowledges that because of the confidential and sensitive nature of the information to which the Employee will have access during the course of his employment with the Company, any unauthorized use, disclosure or misappropriation of such information will cause irreparable damage to the Company.

(b)The Employee acknowledges that the Company has expended considerable resources to develop the confidential information and the relationships that the Company enjoys with its customers, suppliers, employees, officers and other agents, and these assets of the Company are critical to the business of the Company. The Employee agrees that the restrictions set forth below are necessary to prevent even the inadvertent disclosure of this confidential information or the interference with these relationships and to protect the legitimate business interests of the Company and are reasonable in scope and content.

Section 4. Protection of Information.

(a)The Employee hereby covenants with Company that, throughout the term of his employment by the Company, Employee will serve Company's best interests loyally and diligently. Throughout the course of employment by Company and thereafter, Employee will not disclose to any person, firm, corporation or entity (except when expressly authorized in writing by Company) any information relating to Company's business, including, without limitation, merchant application processing and credit underwriting software, merchant information systems, sales compensation and sales force automation software and systems, electronic payment transaction processing software, fraud and risk analysis systems, human resources and time and attendance information systems and software, payroll services information systems and payroll application processing software, sales policy documents, marketing communications materials, information relating to trade secrets, business methods, products, processes, procedures, development or experimental projects, suppliers, customer lists or the needs of customers or prospective customers, clients, etc., and will not use such information for his own purpose or for the purpose of any person, firm, corporation or entity except the Company.

3

(b)Upon termination of his employment with the Company, the Employee shall deliver promptly to the Company all records, manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof that relate in any way to the business, products, practices or techniques of the Company, and all other property trade secrets and confidential information of the Company, including, but not limited to, all documents that in whole or in part contain any trade secrets or confidential information of the Company, which in any of these cases are in his possession or under his control.

Section 5. Covenant Not to Compete

(a)During the Restricted Period (as defined below), Employee will not (i) directly or indirectly engage in any business or activity which markets, sells or is developing products or services which compete with the products or services marketed, sold or being developed by the Company at the time of such termination (such business or activity being hereinafter sometimes called a “Competing Business”), in any country, state, territory, region or other geographic area, whether in the United States or otherwise, in which, at the time the Employee becomes no longer employed by the Company, the Company transacts business or sells or markets its products or services, whether such engagement by the Employee shall be as an officer, principal, agent, director, owner, employee, partner, affiliate, consultant or other participant in any Competing Business, or (ii) assist others in engaging in any Competing Business in any manner described in the foregoing clause (i).

(b)The Employee understands that the foregoing restrictions may limit his ability to earn a livelihood in a business competitive to the business of the Company, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits in connection with the Company's issuance of certain stock and stock options to the Employee as well as other benefits to clearly justify such restrictions which, in any event (given his education, skills and ability), the Employee does not believe would prevent him from earning a living.

(c)“Restricted Period” shall mean the period commencing on the date hereof and ending on the last day of the twelfth (12th) full calendar month following the Employee's termination for any reason whatsoever including but not limited to involuntary termination (with or without Cause) and/or voluntary termination; provided that the Restricted Period shall be extended by any amount of time that the Employee has failed to comply with his promises contained in this Section 5 of this Agreement.

Section 6. Non Solicitation.

(a)During the period commencing on the date hereof and ending on the last day of the twelfth (12th) full calendar month following the Employee's termination for any reason whatsoever including but not limited to involuntary termination (with or

4

without Cause) and/or voluntary termination, Employee hereby covenants that he will not, directly or indirectly, solicit, entice or induce any Customer or Supplier (as defined below) of the Company to (i) become a Customer or Supplier of any other person or entity engaged in any business activity that competes with any business conducted by the Company at any time during the period of Employee's employment with the Company, or any business planned by the Company at any time during the period of Employee's employment with the Company or (ii) cease doing business with the Company, and Employee agrees that he will not assist any person or entity in taking any action described in the foregoing clauses (i) and (ii). For purposes of this Section 6, (A) a “Customer” of the Company means any person, corporation, partnership, trust, division, business unit, department or agency which, at the time of termination or within one year prior thereto, shall be or shall have been a customer, distributor or agent of the Company or shall be or shall have been contacted by the Company for the purpose of soliciting it to become a customer, distributor or agent of the Company; and (B) a “Supplier” of the Company means any person, corporation, partnership, trust, division, business unit, department or agency which, at the time of termination or within one year prior thereto, shall be or shall have been a supplier, vendor, manufacturer or developer for any product or service or significant component used in any product or service of the Company.

(b)During the period commencing on the date hereof and ending on the last day of the twenty-fourth (24th) full calendar month following the Employee's termination for any reason whatsoever, including but not limited to involuntary termination (with or without Cause) and/or voluntary termination, the Employee will not, directly or indirectly, induce other employees of the Company to terminate their employment with the Company or engage in any Competing Business.

Section 7. Company Right to Inventions.

The Employee shall promptly disclose, grant and assign ownership to the Company for its sole use and benefit any and all inventions, improvements, technical information and suggestions relating in any way to the business of the Company (whether patentable or not), which he may develop, acquire, conceive or reduce to practice while employed by the Company (whether or not during usual working hours), together with all patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or upon any such invention, improvement or technical information. In connection therewith:

(a)The Employee shall without charge, but at the expense of the Company, promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to any such inventions, improvements, technical information, patent applications, patents, copyrights or reissues thereof in the corporation and to enable it to obtain and maintain the entire right and title thereto throughout the world; and

5

(b)The Employee shall render to the Company at its expense (including a reasonable payment for the time involved in case he is not then in its employ) all such assistance as it may require in the prosecution of applications for said patents, copyrights or reissues thereof, in the prosecution or defense of interferences which may be declared involving any said applications, patents or copyrights and in any litigation in which the Company may be involved relating to any such patents, inventions, improvements or technical information.

Section 8. Remedies; Survival.

(a)The Employee acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be accurately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by the Employee of the provisions in Section 4, Section 5, Section 6, or Section 7 hereof, the Company shall be entitled to but not limited to injunctive relief restraining him from such breach without posting any bond. Nothing herein contained shall be construed as prohibiting the Company from pursuing any other additional or alternative remedies available for any breach or threatened breach of this Agreement, including but not limited to monetary damages.

(b)Notwithstanding anything contained in the Agreement to the contrary, the provisions of Section 4, Section 5, Section 6, Section 7 and this Section 8, shall survive the expiration or other termination of this Agreement or employment of the Employee by the Company until by their terms, such provisions are no longer operative.

Section 9. Other Agreements: Prohibition Against Use of Trade Secrets of Others.

(a)Employee represents and warrants to the Company that except for agreements set forth in Exhibit A attached hereto, if any, he is not a party to any agreement or other arrangement with any other corporation, partnership or entity relating to noncompetition with such entity or to non-disclosure of confidential and proprietary information of such entity or to other matters similar to the matters set forth in this Agreement.

(b)Employee represents, warrants and agrees that he can and will perform his duties for the Company without the unauthorized use of any confidential and/or proprietary information of others.

Section 10. General Provisions.

(a)This Agreement and any or all terms hereof may not be changed, waived, discharged, or terminated orally, but only by way of an instrument in writing executed by the Company and the Employee.

6

(b)This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey without regard to legal principles pertaining to conflict of laws.

(c)It is the desire and intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of any jurisdiction where this Agreement may be subject to review and interpretation, the terms of such restriction, for the purpose only of the operation of such restriction in such jurisdiction, shall be the maximum restriction allowed by the laws of such jurisdiction and such restriction shall be deemed to have been revised accordingly herein.

(d)Any suit, action or proceeding arising out of or relating to this Agreement shall be brought only in the Superior Court in the County of Mercer, New Jersey or the United States District Court for the District of New Jersey, and Employee hereby agrees and consents to the personal and exclusive jurisdiction of said courts over him or her as to all suits, actions and proceedings arising out of or relating to this Agreement, and Employee further waives any claim that such suit, action or proceeding is brought in an improper or inconvenient forum.

(e)If any portion of this Agreement shall be found to be invalid or contrary to public policy, the same may be modified or stricken by a Court of competent jurisdiction, to the extent necessary to allow the Court to enforce such provision in a manner which is as consistent with the original intent of the provision as possible. The striking or modification by the Court of any provision shall not have the effect of invalidating the Agreement as a whole.

(f)This Agreement constitutes the entire and exclusive agreement between Employee and Company pertaining to the subject matter thereof, and supersedes and replaces any and all earlier confidential information, invention and noncompetition agreements between Company and Employee and representations and understandings of the parties with respect thereto, without extinguishing whatsoever rights heretofore acquired by Company under any previous agreements.

(g)The Company may assign any of its rights under this Agreement to any successor entity to the Company, including, but not limited to, any entity formed by the Company to carry on the business of the Company.

[SIGNATURES APPEAR ON NEXT PAGE]

7

IN WITNESS WHEREOF, the Agreement has been executed as aforesaid.

COMPANY

HEARTLAND PAYMENT SYSTEMS, INC.

By: /s/ Charles Kallenbach    

Name: Charles Kallenbach    

Title: General Counsel and Chief Legal Officer    

EMPLOYEE:

By: /s/ David Gilbert         

Name: David Gilbert

8

EXHIBIT A

OTHER AGREEMENTS

[NONE]

9

EX-10.7

July 9, 2012

Ian Drysdale

14352 Club Circle

Milton, Georgia 30004

Dear Ian:

This letter confirms our offer and your acceptance of the full time position of Group President reporting to me as Chief Executive Officer in Princeton, New Jersey. You will be authorized to work from your home office in Atlanta, although you will be expected to meet with me in Princeton several times each month at Heartland's corporate headquarters to report on your activities and take regular direction.

We look forward to you beginning your employment on or about July 9, 2012. Your semi-monthly rate will be $11,041.67 per pay ($265,000 annually) and you will be paid on the 15th and the end of each month. In addition to your base salary listed above, your compensation package will also include the following:

• Annual bonus eligibility equivalent to 50% of base salary. Bonuses are generally paid in January for the previous year. However, we will guarantee your bonus for your first twelve months of active employment and pay you monthly for the bonus on a pro-rata basis.

• Restricted Stock Units will be issued to you by the Compensation Committee as soon as practicable after your start date of July 9, 2012. These RSUs will vest over 4 years and will be paid out upon vesting. The number of these RSUs will be determined as of the date that the Compensation Committee of the Board of Directors approves the grant and will have value equal to $1,060,000.

After 90 days of employment with Heartland, you will automatically be enrolled in HPS's 401K Profit Sharing Plan at a standard deduction of 1%. You may elect to have a higher percentage taken out or none at all. Informationabout these programs and other company benefits, as well as guidelinesconcerning your employment, are described in Heartland's Employee Handbook,which you will be provided access via our web-site when your employment begins.If you have other specific benefit questions, feel free to contact Jose Muniz atjose.muniz@e-hps.comor Jackie Lamont at Jackie.lamont@e-hps.com.

As discussed, this offer is contingent upon the successful completion of a background check and your written acceptance of the terms and conditions set forth in the attached document pertaining to Heartland's Alcohol and Drug-Free Workplace Policy.

Your employment with Heartland is “at-will.” This means that just as you have the right to end your employment with Heartland at any time, for any reason or no reason, and with or without notice, Heartland also has the right to terminate your employment at any time, for any reason or no reason,

1

and with or without notice. If your employment is terminated, the monthly guaranteed bonus payments will be governed on the same terms as provided in Attachment 2.

In consideration of and as a condition to this offer of employment, you will be required to sign and strictly abide by the terms of the attached "Employee Confidential Information and NonCompetition Agreement." You acknowledge and agree that this is necessary for the protection of Heartland's legitimate business interests, given than you will have a high level position at Heartland with extensive access to sensitive, confidential and proprietary information and extensive contact with Heartland customers.

At the same time, you have disclosed and acknowledge that you have entered into a restrictive covenant agreement ("restrictive covenant") with your former employer, WorldPay US, Inc. ("WorldPay"). You have also represented that you do not expect that this will hinder you from fully performing the Group President position you are being hired to perform at Heartland, and that you fully expect to be able to perform your job without any material impediment from WorldPay and/or as a result of the restrictive covenant. While, as we discussed, no one can ensure the behavior of a third party uninvolved in these negotiations, you have represented that you know of no facts that would reasonably justify a claim against you or Heartland by WorldPay as a result of your performance in your new role as Group President at Heartland. You agree that, should WorldPay pursue litigation against you as a result of any alleged breach of the WorldPay restrictive covenant, you will be responsible for your own defense to any claim WorldPay may make against you, including all the attorney fees you may incur in defending such a claim. Further, if WorldPay also and/or separately pursues any claim against Heartland for or related to your alleged breach of the restrictive covenant, you will also indemnify and hold harmless Heartland for the legal defense -- not to include any allocation of in-house legal department salaries -- of any such claim by World Pay and any liability arising out of it.

To confirm your acceptance of this offer and acknowledge your at-will employment relationship with Heartland, please sign this letter, the Alcohol and Drug Free Workplace policy and the Employee Confidential Information and Noncompetition Agreement and return all three to Heartland's Human Resource Department. Feel free to retain a copy for your records.

On behalf of Heartland Payment Systems, I look forward to having you join our team. In the meantime, if you have any questions about the terms of our offer or the company in general, please feel free to contact me.

Sincerely,

/s/ Robert O. Carr

Robert O. Carr

Chief Executive Officer

I hereby accept the offer of employment described above and acknowledge that my employment relationship with Heartland Payment Systems is contingent upon the successful completion of a background check, and my written acceptance of the terms and conditions set forth in Heartland's

2

Alcohol and Drug-Free Workplace Policy and Employee Confidential Information and NonCompetition Agreement. I further acknowledge that any employment relationship I may have with Heartland is at-will.

_/s/ Ian Drysdale_____________________________ July 9, 2012

Ian Drysdale                            Date

3

EX-10.8

EMPLOYEE CONFIDENTIAL INFORMATION

AND

NONCOMPETITION AGREEMENT

This Employee Confidential Information and Noncompetition Agreement is made and entered into on this 9th day of July, 2012, by and between Ian Drysdale, hereinafter “Employee,” and Heartland Payment Systems, Inc., a Delaware corporation (collectively with any and all current and future subsidiary and/or affiliate companies, the “Company”).

WHEREAS, Employee has established an employment relationship with the Company and has received, and may continue to receive, certain benefits including stock grants and options; and

WHEREAS, by reason of employment by the Company, Employee has received, and will continue to receive, the value and advantage of confidential information and special training and skills, and the expert knowledge and experience of the contacts with other Company employees; and

WHEREAS, the future granting of stock grants and options represents an advantage to Employee and was conditioned upon Employee entering into this Agreement; and

NOW THEREFORE, in exchange for good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, it is agreed as follows:

Section 1. Scope of Agreement.

(a)This contract is not a contract of employment for any particular term. Employee's employment by the Company is at will, unless otherwise agreed by the Company and Employee in writing.

(b)Severance policies and procedures are as set forth in the Employee Policy Manual of the Company; provided, that in the event of a conflict between this Agreement and the Employee Policy Manual, this Agreement shall govern.

Section 2. Severance and Bonuses.

(a)In consideration of the covenants by Employee contained below, in the event of a termination of Employee's employment by action of the Company other than for Cause or Disability, the Employee will receive severance pay, in an amount equal to

1

the base salary that would have been paid for a period of six (6) months payable in accordance with the Company's regular payroll practices, plus medical benefits for such period, paid as if Employee were still employed with Company; provided, that the Employee shall not be eligible to receive such severance pay unless such termination of employment occurs after the ninetieth (90th) day of the Employee's employment by the Company. Medical benefit continuation during such severance period shall be counted against the benefit continuation period required under COBRA.

(b)In the event of a termination of Employee's employment by action of the Company other than for Cause or in the event of termination of Employee's employment by death of Employee, the Employee (or is designee or next of kin, in the event of death of the employee) shall also be entitled to receive fifty percent (50%) of the pro rata portion (based on the number of days of Employee's employment during the fiscal quarter in which the Employee's employment is terminated) of any bonus payment that would have been payable to him for that fiscal quarter if the Employee had been in the employ of the Company for the full fiscal quarter. If the Employee's compensation arrangement did not contemplate a bonus payable on a quarterly basis, but instead contemplated a bonus paid on some longer fiscal period (such as a half-year or full year), then fifty percent (50%) of the pro rata bonus shall be computed based on the number of days of Employee's employment during such longer fiscal period in which the Employee's employment is terminated and the amount of the bonus payment that would have been payable to him for such longer fiscal period. No bonus will be payable to the Employee with respect to any bonus period commencing after the bonus period in which the Employee's employment terminated.

(c)     Cause. “Cause” means:

(i)The Employee has breached the provisions of Section 4, Section 5, Section 6, or Section 7 of this Agreement in any material respect;

(ii)The Employee is enjoined by any judge, jury, arbitrator or other adjudicator from performing one or more of the essential or material functions of Employee's job for the Company; or

(iii)The Employee has been convicted of, or plead guilty or no contest to, (A) fraud, misappropriation or embezzlement in connection with the Company's business, or (B) a felony, and has failed to submit a resignation in accordance with Section 2(d) below; or

(iv)The Employee has breached his or her duties hereunder or failed to perform his or her duties as an officer or employee of the Company, if such breach or failure has not been cured with thirty (30) days after receipt of written notice from the Company of such breach or failure.

2

Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated for Cause pursuant to clause (i) above unless and until there shall have been delivered to the Employee (A) a notice of termination and (B) a copy of a resolution duly adopted by the Board of Directors of the Company finding that, after reasonable notice to the Employee and an opportunity to be heard, in the good faith opinion of the Board of Directors of the Company, the Employee has engaged in conduct constituting Cause for termination hereunder.

(c)Disability. “Disability” means any mental or physical condition that renders the Employee unable to perform the essential functions of his position, with or without reasonable accommodation, for a period in excess of six (6) months.

(d)If the Employee is ever convicted of, or pleads guilty or no contest to, any felony offense, then the Employee shall immediately tender a resignation from each and every position the Employee then holds with the Company (whether as officer, director, employee, consultant or otherwise).

Section 3. Employees' Acknowledgments.

(a)The Employee understands and acknowledges that because of the confidential and sensitive nature of the information to which the Employee will have access during the course of his employment with the Company, any unauthorized use, disclosure or misappropriation of such information will cause irreparable damage to the Company.

(b)The Employee acknowledges that the Company has expended considerable resources to develop the confidential information and the relationships that the Company enjoys with its customers, suppliers, employees, officers and other agents, and these assets of the Company are critical to the business of the Company. The Employee agrees that the restrictions set forth below are necessary to prevent even the inadvertent disclosure of this confidential information or the interference with these relationships and to protect the legitimate business interests of the Company and are reasonable in scope and content.

Section 4. Protection of Information.

(a)The Employee hereby covenants with Company that, throughout the term of his employment by the Company, Employee will serve Company's best interests loyally and diligently. Throughout the course of employment by Company and thereafter, Employee will not disclose to any person, firm, corporation or entity (except when expressly authorized in writing by Company) any information relating to Company's business, including, without limitation, merchant application processing and credit underwriting software, merchant information systems, sales compensation and sales force automation software and systems, electronic payment transaction processing software,

3

fraud and risk analysis systems, human resources and time and attendance information systems and software, payroll services information systems and payroll application processing software, sales policy documents, marketing communications materials, information relating to trade secrets, business methods, products, processes, procedures, development or experimental projects, suppliers, customer lists or the needs of customers or prospective customers, clients, etc., and will not use such information for his own purpose or for the purpose of any person, firm, corporation or entity except the Company.

(b)Upon termination of his employment with the Company, the Employee shall deliver promptly to the Company all records, manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof that relate in any way to the business, products, practices or techniques of the Company, and all other property trade secrets and confidential information of the Company, including, but not limited to, all documents that in whole or in part contain any trade secrets or confidential information of the Company, which in any of these cases are in his possession or under his control.

Section 5. Covenant Not to Compete.

(a)During the Restricted Period (as defined below), Employee will not (i) directly or indirectly perform activities of the type conducted, authorized, offered, or provided to the Company within two years prior to termination for any business which markets, sells or is developing products or services which compete with the products or services marketed, sold or being developed by the Company within two years of such termination (such business being hereinafter sometimes called a “Competing Business”), in any territory in which Employee conducted business on behalf of the Company within one year of termination, or (ii) assist others in engaging in any Competing Business in any manner described in the foregoing clause (i).

(b)The Employee understands that the foregoing restrictions may limit his ability to earn a livelihood in a business competitive to the business of the Company, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits in connection with the Company's issuance of certain stock and stock options to the Employee as well as other benefits to clearly justify such restrictions which, in any event (given his education, skills and ability), the Employee does not believe would prevent him from earning a living.

(c)“Restricted Period” shall mean the period commencing on the date hereof and ending on the last day of the sixth (6th) full calendar month following the Employee's termination for any reason whatsoever including but not limited to involuntary termination (with or without Cause) and/or voluntary termination. In the event the enforceability of any of the terms of the Agreement shall be challenged in Court and Employee is not enjoined from breaching any of the protective covenants, then if a

4

court of competent jurisdiction finds that the challenged protective covenant is enforceable, the time periods shall be deemed tolled upon the filing of the lawsuit challenging the enforceability of this Agreement until the dispute is finally resolved and all periods of appeal have expired.

Section 6. Non Solicitation.

(a)During the period commencing on the date hereof and ending on the last day of the twelfth (12th) full calendar month following the Employee's termination for any reason whatsoever including but not limited to involuntary termination (with or without Cause) and/or voluntary termination, Employee hereby covenants that he will not, directly or indirectly, solicit, entice or induce any Customer or Supplier (as defined below) of the Company to (i) become a Customer or Supplier of any other person or entity engaged in any business activity that competes with any business conducted by the Company at any time during the period of Employee's employment with the Company, or any business planned by the Company at any time during the period of Employee's employment with the Company or (ii) cease doing business with the Company, and Employee agrees that he will not assist any person or entity in taking any action described in the foregoing clauses (i) and (ii). For purposes of this Section 6, (A) a “Customer” of the Company means any person, corporation, partnership, trust, division, business unit, department or agency with whom Employee had Material Contact (as defined below) at the time of termination or within one year prior thereto; and (B) a “Supplier” of the Company means any person, corporation, partnership, trust, division, business unit, department or agency with whom Employee had Material Contact (as defined below) at the time of termination or within one year prior thereto. Material Contact means the contact between Employee and each customer, potential customer, supplier, and/or potential supplier; (a) with whom or which Employee dealt on behalf of the Company; (b) whose dealings with the Company were coordinated or supervised by Employee; (c) about whom Employee obtained confidential information in the ordinary course of business as a result of Employee's association with the Company; or (d) who receives products or services authorized by the Company, the sale or provision of which results or resulted in compensation, commissions or earnings for Employee within two years prior to the date of Employee's termination.

(b)During the period commencing on the date hereof and ending on the last day of the twenty-fourth (24th) month following the Employee's termination for any reason whatsoever, including but not limited to involuntary termination (with or without Cause) and/or voluntary termination, the Employee will not, directly or indirectly, induce other employees of the Company to terminate their employment with the Company or engage in any Competing Business.

Section 7. Company Right to Inventions.

The Employee shall promptly disclose, grant and assign ownership to the

5

Company for its sole use and benefit any and all inventions, improvements, technical information and suggestions relating in any way to the business of the Company (whether patentable or not), which he may develop, acquire, conceive or reduce to practice while employed by the Company (whether or not during usual working hours), together with all patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or upon any such invention, improvement or technical information. In connection therewith:

(a)The Employee shall without charge, but at the expense of the Company, promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to any such inventions, improvements, technical information, patent applications, patents, copyrights or reissues thereof in the corporation and to enable it to obtain and maintain the entire right and title thereto throughout the world; and

(b)The Employee shall render to the Company at its expense (including a reasonable payment for the time involved in case he is not then in its employ) all such assistance as it may require in the prosecution of applications for said patents, copyrights or reissues thereof, in the prosecution or defense of interferences which may be declared involving any said applications, patents or copyrights and in any litigation in which the Company may be involved relating to any such patents, inventions, improvements or technical information.

Section 8. Remedies; Survival.

(a)The Employee acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be accurately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by the Employee of the provisions in Section 4, Section 5, Section 6, or Section 7 hereof, the Company shall be entitled to but not limited to injunctive relief restraining him from such breach without posting any bond. Nothing herein contained shall be construed as prohibiting the Company from pursuing any other additional or alternative remedies available for any breach or threatened breach of this Agreement, including but not limited to monetary damages.

(b)Notwithstanding anything contained in the Agreement to the contrary, the provisions of Section 4, Section 5, Section 6, Section 7 and this Section 8, shall survive the expiration or other termination of this Agreement or employment of the Employee by the Company until by their terms, such provisions are no longer operative.

Section 9. Other Agreements: Prohibition Against Use of Trade Secrets of Others.

(a)Employee represents and warrants to the Company that, except for the

6

restrictive covenants in the Separate Agreement with WorldPay set forth in Exhibit A attached hereto, he is not party to any agreement or other arrangement with any other corporation, partnership or entity relating to noncompetition with such entity or to non-disclosure of confidential and proprietary information of such entity or to other matters similar to the matters set forth in this Agreement.

(b)Employee represents, warrants and agrees that he can and will perform his duties for the Company without the unauthorized use of any confidential and/or proprietary information of others.

Section 10. General Provisions.

(a)This Agreement and any or all terms hereof may not be changed, waived, discharged, or terminated orally, but only by way of an instrument in writing executed by the Company and the Employee.

(b)This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey without regard to legal principles pertaining to conflict of laws.

(c)It is the desire and intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of any jurisdiction where this Agreement may be subject to review and interpretation, the terms of such restriction, for the purpose only of the operation of such restriction in such jurisdiction, shall be the maximum restriction allowed by the laws of such jurisdiction and such restriction shall be deemed to have been revised accordingly herein.

(d)Any suit, action or proceeding arising out of or relating to this Agreement shall be brought only in the Superior Court in the County of Mercer, New Jersey or the United States District Court for the District of New Jersey, and Employee hereby agrees and consents to the personal and exclusive jurisdiction of said courts over him or her as to all suits, actions and proceedings arising out of or relating to this Agreement, and Employee further waives any claim that such suit, action or proceeding is brought in an improper or inconvenient forum.

(e)If any portion of this Agreement shall be found to be invalid or contrary to public policy, the same may be modified or stricken by a Court of competent jurisdiction, to the extent necessary to allow the Court to enforce such provision in a manner which is as consistent with the original intent of the provision as possible. The striking or modification by the Court of any provision shall not have the effect of invalidating the Agreement as a whole.

7

(f)This Agreement constitutes the entire and exclusive agreement between Employee and Company pertaining to the subject matter thereof, and supersedes and replaces any and all earlier confidential information, invention and noncompetition agreements between Company and Employee and representations and understandings of the parties with respect thereto, without extinguishing whatsoever rights heretofore acquired by Company under any previous agreements.

(g)The Company may assign any of its rights under this Agreement to any successor entity to the Company, including, but not limited to, any entity formed by the Company to carry on the business of the Company.

[SIGNATURES APPEAR ON NEXT PAGE]

8

IN WITNESS WHEREOF, the Agreement has been executed as aforesaid.

COMPANY

HEARTLAND PAYMENT SYSTEMS, INC.

By: /s/ Robert O. Carr

Name: Robert O. Carr

Title: Chief Executive Officer

EMPLOYEE:

By: /s/ Ian Drysdale    

Name: Ian Drysdale

9

EXHIBIT A

OTHER AGREEMENTS

[NONE]

10

EX-10.9

EMPLOYEE CONFIDENTIAL INFORMATION

AND

NONCOMPETITION AGREEMENT

This Employee Confidential Information and Noncompetition Agreement is made and entered into on this 13th day of July, 2012, by and between Michael A. Lawler, hereinafter “Employee,” and Heartland Payment Systems, Inc., a Delaware corporation (collectively with any and all current and future subsidiary and/or affiliate companies, the “Company”).

WHEREAS, Employee has established an employment relationship with the Company and has received, and may continue to receive, certain benefits including stock grants and options; and

WHEREAS, by reason of employment by the Company, Employee has received, and will continue to receive, the value and advantage of confidential information and special training and skills, and the expert knowledge and experience of the contacts with other Company employees; and

WHEREAS, the future granting of stock grants and options represents an advantage to Employee and was conditioned upon Employee entering into this Agreement; and

NOW THEREFORE, in exchange for good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, it is agreed as follows:

Section 1. Scope of Agreement.

(a)This contract is not a contract of employment for any particular term. Employee's employment by the Company is at will, unless otherwise agreed by the Company and Employee in writing.

(b)Severance policies and procedures are as set forth in the Employee Policy Manual of the Company; provided, that in the event of a conflict between this Agreement and the Employee Policy Manual, this Agreement shall govern.

Section 2. Severance and Bonuses.

(a)In consideration of the covenants by Employee contained below, in the event of a termination of Employee's employment by action of the Company other than for Cause or Disability, the Employee will receive severance pay, in an amount equal to the base salary that would have been paid for a period of twelve (12) months payable in accordance with the Company's regular payroll practices, plus medical benefits for such

1

period; provided, that the Employee shall not be eligible to receive such severance pay unless such termination of employment occurs after the ninetieth (90th) day of the Employee's employment by the Company. Medical benefit continuation during such severance period shall be counted against the benefit continuation period required under COBRA.

(b)In the event of a termination of Employee's employment by action of the Company other than for Cause or in the event of termination of Employee's employment by death of Employee, the Employee shall also be entitled to receive a pro rata portion (based on the number of days of Employee's employment during the fiscal quarter in which the Employee's employment is terminated) of any bonus payment that would have been payable to him for that fiscal quarter if the Employee had been in the employ of the Company for the full fiscal quarter. If the Employee's compensation arrangement did not contemplate a bonus payable on a quarterly basis, but instead contemplated a bonus paid on some longer fiscal period (such as a half-year or full year), then the pro rata bonus shall be computed based on the number of days of Employee's employment during such longer fiscal period in which the Employee's employment is terminated and the amount of the bonus payment that would have been payable to him for such longer fiscal period. No bonus will be payable to the Employee with respect to any bonus period commencing after the bonus period in which the Employee's employment terminated.

(c)Cause. “Cause” means:

(i)The Employee has breached the provisions of Section 4, Section 5, Section 6, or Section 7 of this Agreement in any material respect;

(ii)The Employee has been convicted of, or plead guilty or no contest to, (A) fraud, misappropriation or embezzlement in connection with the Company's business, or (B) a felony, and has failed to submit a resignation in accordance with Section 2(e) below; or

(iii)The Employee has breached his or her duties hereunder or failed to perform his or her duties as an officer or employee of the Company, if such breach or failure has not been cured within thirty (30) days after receipt of written notice from the Company of such breach or failure.

Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated for Cause pursuant to clause (i) above unless and until there shall have been delivered to the Employee (A) a notice of termination and (B) a copy of a resolution duly adopted by the Board of Directors of the Company finding that, after reasonable notice to the Employee and an opportunity to be heard, in the good faith opinion of the Board of Directors of the Company, the Employee has engaged in conduct constituting Cause for termination hereunder.

2

(d)Disability. “Disability” means any mental or physical condition that renders the Employee unable to perform the essential functions of his position, with or without reasonable accommodation, for a period in excess of six (6) months.

(e)If the Employee is ever convicted of, or pleads guilty or no contest to, any felony offense, then the Employee shall immediately tender a resignation from each and every position the Employee then holds with the Company (whether as officer, director, employee, consultant or otherwise).

Section 3. Employees' Acknowledgments.

(a)The Employee understands and acknowledges that because of the confidential and sensitive nature of the information to which the Employee will have access during the course of his employment with the Company, any unauthorized use, disclosure or misappropriation of such information will cause irreparable damage to the Company.

(b)The Employee acknowledges that the Company has expended considerable resources to develop the confidential information and the relationships that the Company enjoys with its customers, suppliers, employees, officers and other agents, and these assets of the Company are critical to the business of the Company. The Employee agrees that the restrictions set forth below are necessary to prevent even the inadvertent disclosure of this confidential information or the interference with these relationships and to protect the legitimate business interests of the Company and are reasonable in scope and content.

Section 4. Protection of Information.

(a)The Employee hereby covenants with Company that, throughout the term of his employment by the Company, Employee will serve Company's best interests loyally and diligently. Throughout the course of employment by Company and thereafter, Employee will not disclose to any person, firm, corporation or entity (except when expressly authorized in writing by Company) any information relating to Company's business, including, without limitation, merchant application processing and credit underwriting software, merchant information systems, sales compensation and sales force automation software and systems, electronic payment transaction processing software, fraud and risk analysis systems, human resources and time and attendance information systems and software, payroll services information systems and payroll application processing software, sales policy documents, marketing communications materials, information relating to trade secrets, business methods, products, processes, procedures, development or experimental projects, suppliers, customer lists or the needs of customers or prospective customers, clients, etc., and will not use such information for his own purpose or for the purpose of any person, firm, corporation or entity except the Company.

3

(b)Upon termination of his employment with the Company, the Employee shall deliver promptly to the Company all records, manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, data, tables, calculations or copies thereof that relate in any way to the business, products, practices or techniques of the Company, and all other property trade secrets and confidential information of the Company, including, but not limited to, all documents that in whole or in part contain any trade secrets or confidential information of the Company, which in any of these cases are in his possession or under his control.

Section 5. Covenant Not to Compete.

(a)During the Restricted Period (as defined below), Employee will not (i) directly or indirectly engage in any business or activity which markets, sells or is developing products or services which compete with the products or services marketed, sold or being developed by the Company at the time of such termination (such business or activity being hereinafter sometimes called a “Competing Business”), in any country, state, territory, region or other geographic area, whether in the United States or otherwise, in which, at the time the Employee becomes no longer employed by the Company, the Company transacts business or sells or markets its products or services, whether such engagement by the Employee shall be as an officer, principal, agent, director, owner, employee, partner, affiliate, consultant or other participant in any Competing Business, or (ii) assist others in engaging in any Competing Business in any manner described in the foregoing clause (i).

(b)The Employee understands that the foregoing restrictions may limit his ability to earn a livelihood in a business competitive to the business of the Company, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits in connection with the Company's issuance of certain stock and stock options to the Employee as well as other benefits to clearly justify such restrictions which, in any event (given his education, skills and ability), the Employee does not believe would prevent him from earning a living.

(c)“Restricted Period” shall mean the period commencing on the date hereof and ending on the last day of the twelfth (12th) full calendar month following the Employee's termination for any reason whatsoever including but not limited to involuntary termination (with or without Cause) and/or voluntary termination; provided that the Restricted Period shall be extended by any amount of time that the Employee has failed to comply with his promises contained in this Section 5 of this Agreement.

Section 6. Non Solicitation.

(a)During the period commencing on the date hereof and ending on the last day of the twelfth (12th) full calendar month following the Employee's termination for any reason whatsoever including but not limited to involuntary termination (with or

4

without Cause) and/or voluntary termination, Employee hereby covenants that he will not, directly or indirectly, solicit, entice or induce any Customer or Supplier (as defined below) of the Company to (i) become a Customer or Supplier of any other person or entity engaged in any business activity that competes with any business conducted by the Company at any time during the period of Employee's employment with the Company, or any business planned by the Company at any time during the period of Employee's employment with the Company or (ii) cease doing business with the Company, and Employee agrees that he will not assist any person or entity in taking any action described in the foregoing clauses (i) and (ii). For purposes of this Section 6, (A) a “Customer” of the Company means any person, corporation, partnership, trust, division, business unit, department or agency which, at the time of termination or within one year prior thereto, shall be or shall have been a customer, distributor or agent of the Company or shall be or shall have been contacted by the Company for the purpose of soliciting it to become a customer, distributor or agent of the Company; and (B) a “Supplier” of the Company means any person, corporation, partnership, trust, division, business unit, department or agency which, at the time of termination or within one year prior thereto, shall be or shall have been a supplier, vendor, manufacturer or developer for any product or service or significant component used in any product or service of the Company.

(b)During the period commencing on the date hereof and ending on the last day of the twenty-fourth (24th) full calendar month following the Employee's termination for any reason whatsoever, including but not limited to involuntary termination (with or without Cause) and/or voluntary termination, the Employee will not, directly or indirectly, induce other employees of the Company to terminate their employment with the Company or engage in any Competing Business.

Section 7. Company Right to Inventions.

The Employee shall promptly disclose, grant and assign ownership to the Company for its sole use and benefit any and all inventions, improvements, technical information and suggestions relating in any way to the business of the Company (whether patentable or not), which he may develop, acquire, conceive or reduce to practice while employed by the Company (whether or not during usual working hours), together with all patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or upon any such invention, improvement or technical information. In connection therewith:

(a)The Employee shall without charge, but at the expense of the Company, promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to any such inventions, improvements, technical information, patent applications, patents, copyrights or reissues thereof in the corporation and to enable it to obtain and maintain the entire right and title thereto throughout the world; and

5

(b)The Employee shall render to the Company at its expense (including a reasonable payment for the time involved in case he is not then in its employ) all such assistance as it may require in the prosecution of applications for said patents, copyrights or reissues thereof, in the prosecution or defense of interferences which may be declared involving any said applications, patents or copyrights and in any litigation in which the Company may be involved relating to any such patents, inventions, improvements or technical information.

Section 8. Remedies; Survival.

(a)The Employee acknowledges and understands that the provisions of this Agreement are of a special and unique nature, the loss of which cannot be accurately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by the Employee of the provisions in Section 4, Section 5, Section 6, or Section 7 hereof, the Company shall be entitled to but not limited to injunctive relief restraining him from such breach without posting any bond. Nothing herein contained shall be construed as prohibiting the Company from pursuing any other additional or alternative remedies available for any breach or threatened breach of this Agreement, including but not limited to monetary damages.

(b)Notwithstanding anything contained in the Agreement to the contrary, the provisions of Section 4, Section 5, Section 6, Section 7 and this Section 8, shall survive the expiration or other termination of this Agreement or employment of the Employee by the Company until by their terms, such provisions are no longer operative.

Section 9. Other Agreements: Prohibition Against Use of Trade Secrets of Others.

(a)Employee represents and warrants to the Company that except for agreements set forth in Exhibit A attached hereto, if any, he is not a party to any agreement or other arrangement with any other corporation, partnership or entity relating to noncompetition with such entity or to non-disclosure of confidential and proprietary information of such entity or to other matters similar to the matters set forth in this Agreement.

(b)Employee represents, warrants and agrees that he can and will perform his duties for the Company without the unauthorized use of any confidential and/or proprietary information of others.

6

Section 10. General Provisions.

(a)This Agreement and any or all terms hereof may not be changed, waived, discharged, or terminated orally, but only by way of an instrument in writing executed by the Company and the Employee.

(b)This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey without regard to legal principles pertaining to conflict of laws.

(c)It is the desire and intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, to the extent that a restriction contained in this Agreement is more restrictive than permitted by the laws of any jurisdiction where this Agreement may be subject to review and interpretation, the terms of such restriction, for the purpose only of the operation of such restriction in such jurisdiction, shall be the maximum restriction allowed by the laws of such jurisdiction and such restriction shall be deemed to have been revised accordingly herein.

(d)Any suit, action or proceeding arising out of or relating to this Agreement shall be brought only in the Superior Court in the County of Mercer, New Jersey or the United States District Court for the District of New Jersey, and Employee hereby agrees and consents to the personal and exclusive jurisdiction of said courts over him or her as to all suits, actions and proceedings arising out of or relating to this Agreement, and Employee further waives any claim that such suit, action or proceeding is brought in an improper or inconvenient forum.

(e)If any portion of this Agreement shall be found to be invalid or contrary to public policy, the same may be modified or stricken by a Court of competent jurisdiction, to the extent necessary to allow the Court to enforce such provision in a manner which is as consistent with the original intent of the provision as possible. The striking or modification by the Court of any provision shall not have the effect of invalidating the Agreement as a whole.

(f)This Agreement constitutes the entire and exclusive agreement between Employee and Company pertaining to the subject matter thereof, and supersedes and replaces any and all earlier confidential information, invention and noncompetition agreements between Company and Employee and representations and understandings of the parties with respect thereto, without extinguishing whatsoever rights heretofore acquired by Company under any previous agreements.

7

(g)The Company may assign any of its rights under this Agreement to any successor entity to the Company, including, but not limited to, any entity formed by the Company to carry on the business of the Company.

[SIGNATURES APPEAR ON NEXT PAGE]

8

IN WITNESS WHEREOF, the Agreement has been executed as aforesaid.

COMPANY

HEARTLAND PAYMENT SYSTEMS, INC.

By: /s/ Robert O. Carr    

Name: Robert O. Carr

Title: Chief Executive Officer                

EMPLOYEE:

By: /s/ Michael A. Lawler    

Name: Michael A. Lawler

9

EXHIBIT A

OTHER AGREEMENTS

[NONE]

10

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) and 15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert O. Carr, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Heartland Payment Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 6, 2012

/s/	Robert O. Carr
	Robert O. Carr
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) and 15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Maria Rueda, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Heartland Payment Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 6, 2012

/s/	Maria Rueda
	Maria Rueda
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Heartland Payment Systems, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert O. Carr, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is being provided pursuant to 18 U.S.C. Section 1350 and is not deemed to be “filed” for any purpose whatsoever.

Date: August 6, 2012

/s/	Robert O. Carr
	Robert O. Carr
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Heartland Payment Systems, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Maria Rueda, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is being provided pursuant to 18 U.S.C. Section 1350 and is not deemed to be “filed” for any purpose whatsoever.

Date: August 6, 2012

/s/	Maria Rueda
	Maria Rueda
	Chief Financial Officer

XML

Summary of Significant Accounting Policies (Effective Income Tax Rate) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Accounting Policies [Abstract]
Provision for income taxes	$ 10,975	$ 7,505	$ 19,474	$ 12,314
Effective tax rate	37.90%	37.70%	38.00%	37.80%

XML

Accrued Buyout Liability (Summary of Accrued Buyout Liability) (Details) (USD $)	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010
Accrued Buyout Liability [Line Items]
Accrued Buyout Liability Total	$ 33,450,000	$ 33,568,000	$ 31,658,000	$ 27,864,000	$ 28,242,000	$ 28,810,000
Less current portion	(9,232,000)		(8,104,000)
Long-term portion of accrued buyout liability	24,218,000		23,554,000
Estimated vesting percentage, Relationship Managers and sales managers	31.00%
Hypothetical increase to vesting percentage, Relationship Managers and sales managers	5.00%
Hypothetical vesting percentage, Relationship Managers and sales managers	36.00%
Hypothetical increase to accrued buyout liability	100,000		100,000
Vested Relationship Managers and sales managers [Member]
Accrued Buyout Liability [Line Items]
Accrued Buyout Liability Total	32,576,000		30,269,000
Unvested Relationship Managers and sales managers [Member]
Accrued Buyout Liability [Line Items]
Accrued Buyout Liability Total	$ 874,000		$ 1,389,000

XML

Capitalized Customer Acquisition Costs, Net (Capitalized Customer Acquisition Activity) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Capitalized Customer Acquisition Costs, Net [Roll Forward]
Balance at beginning of period	$ 55,339,000	$ 57,316,000	$ 55,014,000	$ 59,251,000
Capitalized signing bonuses, net	7,907,000	7,045,000	15,461,000	14,161,000
Capitalized customer deferred acquisition costs	4,289,000	3,612,000	8,257,000	6,942,000
Capitalized customer acquisition costs, additions	12,196,000	10,657,000	23,718,000	21,103,000
Capitalized signing bonuses, net	(7,332,000)	(8,091,000)	(14,653,000)	(16,605,000)
Capitalized customer deferred acquisition costs	(3,980,000)	(3,928,000)	(7,856,000)	(7,795,000)
Capitalized customer acquisition costs, amortization expense	(11,312,000)	(12,019,000)	(22,509,000)	(24,400,000)
Balance at end of period	56,223,000	55,954,000	56,223,000	55,954,000
Signing bonus adjustments from estimated amounts to actual	(800,000)	(200,000)	(1,500,000)	(400,000)
Write-off of fully amortized signing bonuses	8,400,000	11,200,000	16,400,000	23,500,000
Write-off of fully amortized customer deferred acquisition costs	$ 4,200,000	$ 3,900,000	$ 8,100,000	$ 7,700,000

XML

Accrued Buyout Liability (Summary of Activity in Accrued Buyout Liability) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Accrued Buyout Liability [Abstract]
Beginning balance	$ 33,568	$ 28,242	$ 31,658	$ 28,810
Increase in settlement obligations, net	4,240	3,723	8,447	6,330
Buyouts	(4,358)	(4,101)	(6,655)	(7,276)
Ending balance	$ 33,450	$ 27,864	$ 33,450	$ 27,864

XML

Funds Held for Payroll Customers and Investments (Investment Maturities) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Amortized Cost [Abstract]
Marketable securities maturities within one year, amortized cost	$ 4,581
Marketable securities maturities, after one through five years, amortized cost	98
Marketable securities, amortized cost	4,679
Estimated Fair Value
Marketable securities maturities within one year, fair value	4,795
Marketable securities maturities, after one through five years, fair value	98
Marketable securities, fair value	$ 4,893

XML

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum lease payments for all non-cancelable operating leases as of June 30, 2012 were as follows:

For the Twelve Months Ended June 30,	(In thousands)
2013	$	7,658
2014	5,476
2015	3,535
2016	2,099
2017	2,108
Thereafter	3,870
Total future minimum lease payments (a)	$	24,746

(a) There were no material capital leases at June 30, 2012

Rent expe

Schedule Of Contractual Obligations

The following table reflects the Company’s other significant contractual obligations, including leases as discussed above, as of June 30, 2012:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 to 3 Years		3 to 5 years		More than 5 years
	(In thousands)
Processing providers (a)	$	25,277	$	9,658	$	11,849	$	3,770	$	—
Telecommunications providers	2,182		2,182		—		—		—
Office and equipment leases	24,746		7,658		9,011		4,207		3,870
Term Credit Facility (b)	77,500		17,500		45,000		15,000		—
	$	129,705	$	36,998	$	65,860	$	22,977	$	3,870

(a) The Company has agreements with several third-party processors to provide to us on a non-exclusive basis payment processing and transmittal, transaction authorization and data capture services, and access to various reporting tools. Our agreements with third-party processors require the Company to submit a minimum monthly number of transactions or volume for processing. If the Company submits a number of transactions or volume that is lower than the minimum, it is required to pay the third-party processors the fees that they would have received if the Company had submitted the required minimum number or volume of transactions.

(b) Interest rates on the Term Credit Facility are variable in nature; however, in January 2011 we entered into fixed-pay amortizing interest rate swaps having an initial notional amount of $50.0 million and a current notional amount of $38.8 million. If interest rates were to remain at the June 30, 2012 level, we would make interest payments of $2.4 million in the next 1 year, $2.7 million in the next 1 to 3 years and $0.1 million in the next 3 to 5 years or a total of $5.2 million including net settlements on the fixed-pay amortizing interest rate swaps. In addition, we had $26.0 million outstanding under our Revolving Credit Facility at June 30, 2012. The Revolving Credit Facility is available on a revolving basis until November 24, 2015.

XML

Commitments and Contingencies (Schedule of Future Minimum Rental Payments for Operating Leases) (Details) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011	Jun. 30, 2012		Jun. 30, 2011
Operating Leases, Future Minimum Payments Due [Abstract]
2013	$ 7,658,000	[1]		$ 7,658,000	[1]
2014	5,476,000	[1]		5,476,000	[1]
2015	3,535,000	[1]		3,535,000	[1]
2016	2,099,000	[1]		2,099,000	[1]
2017	2,108,000	[1]		2,108,000	[1]
Thereafter	3,870,000	[1]		3,870,000	[1]
Total future minimum lease payments	24,746,000	[1]		24,746,000	[1]
Leases, Operating [Abstract]
Operating leases, remaining terms				9 years
Rent expense, leased facilities and expense	$ 2,000,000		$ 2,200,000	$ 4,100,000		$ 4,400,000

[1] There were no material capital leases at June 30, 2012Rent expe

XML

Acquisitions Acquisitions (Tables)

6 Months Ended

Jun. 30, 2012

Acquisitions [Abstract]

Schedule of Finite-Lived Intangible Assets, Weighted Average Amortization Life

The weighted average amortization life for the 2012 acquired finite lived intangible assets related to acquisition of Lunch Byte is as follows:

Weighted-average amortization life
	(In years)
Customer relationships	6.0
Software	3.3
Non-compete agreements	5.0
Total	5.9

XML

Intangible Assets and Goodwill (Schedule of Finite-Lived Intangible Assets, Future Amortization Expense) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Finite-Lived Intangible Assets, Future Amortization Expense [Abstract]
2013	$ 6,041
2014	5,269
2015	4,582
2016	4,021
2017	2,926
Thereafter	14,520
Total	$ 37,359

XML

Acquisitions Acquisitions (Weighted Average Amortization Lives) (Details)	6 Months Ended
	Jun. 30, 2012 Y
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, weighted-average useful life	5.9
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, weighted-average useful life	6.0
Software
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, weighted-average useful life	3.3
Non-compete agreements
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, weighted-average useful life	5.0

XML

Organization and Operations (Bankcard Processing Volume) (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended		42 Months Ended	1 Months Ended			6 Months Ended	1 Months Ended	6 Months Ended
	Jun. 30, 2012 Bank_Sponsorship_Agreements	Jun. 30, 2011	Jun. 30, 2012 Bank_Sponsorship_Agreements	Jun. 30, 2011	Jun. 30, 2012 Bank_Sponsorship_Agreements	Jun. 30, 2012 KeyBank, National Association [Member]	Jun. 30, 2012 The Bancorp Bank [Member]	Jun. 30, 2012 Barclays Bank Delaware [Member]	Jun. 30, 2012 Barclays Bank Delaware [Member]	Jun. 30, 2012 Heartland Bank [Member]	Jun. 30, 2012 Wells Fargo Bank [Member]	Jun. 30, 2012 Merchant Bankcard Processing [Member] Visa And MasterCard [Member]	Jun. 30, 2012 Collective POS Solutions Ltd. [Member]
Organization and Operations
Parent's ownership percentage													70.00%
Sales revenue, minimum percentage												73.00%
Days to Identify Alternative Bank Sponsor Following Terminated Agreement			180 days
Number of bank sponsorship agreements	5		5		5
Automatic Renewal Period, Sponsor Bank Agreement									1 year		3 years
Written notice period, nonrenewal of sponsor bank agreement											6 months
Sponsor banks, bankcard processing volume percentage						64.00%	15.00%	13.00%		8.00%
Processing System Intrusion Expenses, Gross	$ 0.1	$ 0.4	$ 0.2	$ 0.7	$ 147.3
Insurance recoveries, non-operating income					31.2
Processing System Intrusion Expenses Settlement Of Claims					114.7
Legal Fees					$ 32.6
Processing System Intrusion Costs Per Share				$ 0.01

XML

Processing Liabilities and Loss Reserves (Details) (USD $)	4 Months Ended		6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012	Jun. 30, 2011
Processing Liabilities and Loss Reserves [Line Items]
Processing liabilities and loss reserves	$ 37,229,000	$ 30,689,000	$ 37,229,000
Chargebacks, card brand networks, period			4 months
Bank chargebacks	11,100,000	12,200,000
Merchant credit losses			900,000	2,900,000
Merchant bankcard processing
Processing Liabilities and Loss Reserves [Line Items]
Processing liabilities and loss reserves	14,371,000	10,295,000	14,371,000
Check processing
Processing Liabilities and Loss Reserves [Line Items]
Processing liabilities and loss reserves	12,239,000	8,594,000	12,239,000
Merchant deposits
Processing Liabilities and Loss Reserves [Line Items]
Processing liabilities and loss reserves	8,642,000	9,839,000	8,642,000
Loss reserves
Processing Liabilities and Loss Reserves [Line Items]
Processing liabilities and loss reserves	1,977,000	1,961,000	1,977,000
SME [Member]
Processing Liabilities and Loss Reserves [Line Items]
Processing volume	$ 24,700,000,000	$ 22,300,000,000	$ 35,300,000,000	$ 32,900,000,000

XML

Fair Value of Financial Instruments (Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012		Dec. 31, 2011
Assets:
Fixed income bond fund	$ 48,859		$ 42,511
Fair Value, Measurements, Recurring [Member]
Assets:
Total Assets	4,893		3,663
Liabilities:
Interest rate swaps	914		897
Total Liabilities	914		897
Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets:
Total Assets	1,182		1,158
Liabilities:
Interest rate swaps			0
Total Liabilities	0		0
Fair Value, Measurements, Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets:
Total Assets	3,711		2,505
Liabilities:
Interest rate swaps	914		897
Total Liabilities	914		897
Certificates of Deposit [Member]
Assets:
Certificates of deposit	3,711	[1]	2,505
Certificates of Deposit [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Certificates of deposit	3,711		2,505
Available-for-sale securities [Member] | Fixed Income Funds [Member]
Assets:
Fixed income bond fund	1,182		1,158	[2]
Available-for-sale securities [Member] | Fixed Income Funds [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Investments available for sale	1,182	[2]	1,158
Available-for-sale securities [Member] | Fixed Income Funds [Member] | Fair Value, Measurements, Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets:
Fixed income bond fund	$ 1,182	[2]	$ 1,158

[1] Certificates of deposit have remaining terms ranging from 1 month to 14 months.

[2] mounts included in Funds held for payroll customers on the Condensed Consolidated Balance Sheet

XML

Capitalized Customer Acquisition Costs, Net (Capitalized Customer Acquisition Costs Net) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010
Capitalized Customer Acquisition Costs, Net [Abstract]
Capitalized signing bonuses	$ 85,669		$ 86,837
Less accumulated amortization	(43,149)		(45,125)
Capitalized signing bonuses, net	42,520		41,712
Capitalized customer deferred acquisition costs	36,767		36,564
Less accumulated amortization	(23,064)		(23,262)
Capitalized customer deferred acquisition costs, net	13,703		13,302
Capitalized customer acquisition costs, net	$ 56,223	$ 55,339	$ 55,014	$ 55,954	$ 57,316	$ 59,251

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates include, among other things, the accrued buyout liability, capitalized customer acquisition costs, goodwill, loss reserves, certain accounts payable and accrued expenses and certain tax assets and liabilities as well as the related valuation allowances, if any. Actual results could differ from those estimates.

Cash and Cash Equivalents—At June 30, 2012, cash included approximately $29.0 million of processing-related cash in transit and collateral, compared to approximately $28.0 million of processing-related cash in transit and collateral at December 31, 2011.

Receivables—Receivables are stated net of allowance for doubtful accounts. The Company estimates its allowance based on experience with its merchants, customers, and sales force and its judgment as to the likelihood of their ultimate payment. The Company also considers collection experience and makes estimates regarding collectability based on trends in aging. Historically, the Company has not experienced significant charge offs for its merchant receivables.

The Company's primary receivables are from its bankcard processing merchants. These receivables result from the Company's practice of advancing interchange fees to most of its small and mid-sized merchants (referred to as Small and Midsized Enterprises, or “SME”) during the month and collecting those fees at the beginning of the following month, as well as from transaction fees the Company charges its merchants for processing transactions. The Company does not advance interchange fees to its Network Services Merchants.

Generally, the Company uses cash available for investment to fund these advances to SME merchants; when available cash has been expended, the Company directs its sponsor banks to make these advances, thus generating a payable to the sponsor banks. We pay our sponsor banks the prime rate on these payables. At June 30, 2012, the Company used $48.5 million of its available cash to fund merchant advances and at December 31, 2011, the Company used $40.0 million of its cash to fund merchant advances. The amount due to sponsor banks for funding advances was $43.1 million at June 30, 2012 and $45.2 million at December 31, 2011. The payable to sponsor banks is repaid at the beginning of the following month out of the fees the Company collects from its merchants. Receivables from merchants also include receivables from the sale of point of sale terminal equipment. Unlike the SME merchants, Network Services Merchants are invoiced monthly, on payment terms of 30 days net from date of invoicing.

Receivables also include amounts resulting from the pre-funding of Discover and American Express transactions to some of the Company's merchants and are due from the related bankcard networks. These amounts are recovered the next business day from the date of processing the transaction.

Receivables also include amounts resulting from the sale, installation, training and repair of payment system hardware and software for prepaid card and stored-value card payment systems, campus payment solutions, and Heartland School Solutions. These receivables are mostly invoiced on terms of 30 days net from date of invoicing.

Investments and Funds Held for Payroll Customers—Investments, including those carried on the Condensed Consolidated Balance Sheet as Funds held for payroll customers, consist primarily of fixed income bond funds and certificates of deposit. Funds held for payroll customers also include overnight bank deposits. The majority of investments carried in Funds held for payroll customers are available-for-sale and recorded at fair value based on quoted market prices. Certificates of deposit are classified as held to maturity and recorded at cost. In the event of a sale, cost is determined on a specific identification basis. At June 30, 2012, Funds held for payroll customers included cash and cash equivalents of $47.7 million and investments available for sale of $1.2 million.

Capitalized Customer Acquisition Costs, net—Capitalized customer acquisition costs consist of (1) up-front signing bonus payments made to Relationship Managers and sales managers (the Company's sales force) for the establishment of new merchant relationships, and (2) a deferred acquisition cost representing the estimated cost of buying out the commissions of vested sales employees. Capitalized customer acquisition costs represent incremental, direct customer acquisition costs that are recoverable through gross margins associated with merchant contracts. The capitalized customer acquisition costs are amortized using a method which approximates a proportional revenue approach over the initial three-year term of the merchant contract.

The up-front signing bonus paid for new SME bankcard, payroll and loyalty marketing accounts is based on the estimated gross margin for the first year of the merchant contract. The signing bonus, amount capitalized, and related amortization are adjusted after one year to reflect the actual gross margin generated by the merchant contract during that year. The deferred customer acquisition cost asset is accrued over the first year of SME bankcard merchant processing, consistent with the build-up in the accrued buyout liability, as described below. Beginning in June 2012, Relationship Managers and sales managers earn portfolio equity on their newly installed payroll and loyalty marketing merchant accounts based on the residual commissions they earn on those accounts. The accrued buyout liability and deferred acquisition cost asset will be developed the same as the SME bankcard merchant portfolio equity.

Management evaluates the capitalized customer acquisition costs for impairment by comparing, on a pooled basis by vintage month of origination, the expected future net cash flows from underlying merchant relationships to the carrying amount of the capitalized customer acquisition costs. If the estimated future net cash flows are lower than the recorded carrying amount, indicating an impairment of the value of the capitalized customer acquisition costs, the impairment loss will be charged to operations. The Company believes that no impairment has occurred as of June 30, 2012.

Processing Liabilities and Loss Reserves—The majority of the Company's processing liabilities include funds in transit associated with bankcard and check processing. In addition, the Company maintains merchant deposits to offset potential liabilities from merchant chargeback processing. Disputes between a cardholder and a merchant periodically arise due to the cardholder's dissatisfaction with merchandise quality or the merchant's service, and the disputes may not always be resolved in the merchant's favor. In some of these cases, the transaction is ''charged back'' to the merchant and the purchase price is refunded to the cardholder by the credit card-issuing institution. If the merchant is unable to fund the refund, the Company is liable for the full amount of the transaction. The Company's obligation to stand ready to perform is minimal. The Company maintains a deposit or the pledge of a letter of credit from certain merchants as an offset to potential contingent liabilities that are the responsibility of such merchants. The Company evaluates its ultimate risk and records an estimate of potential loss for chargebacks related to merchant fraud based upon an assessment of actual historical fraud loss rates compared to recent bankcard processing volume levels. The Company believes that the liability recorded as loss reserves approximates fair value.

Accrued Buyout Liability—The Company's Relationship Managers and sales managers are paid residual commissions based on the gross margin generated by monthly SME merchant processing activity. The Company has the right, but not the obligation, to buy out some or all of these commissions, and intends to do so periodically. Such purchases of the commissions are at a fixed multiple of the last twelve months' commissions. Because of the Company's intent and ability to execute purchases of the residual commissions, and the mutual understanding between the Company and the Relationship Managers and sales managers, the Company has accounted for this deferred compensation arrangement pursuant to the substantive nature of the plan. The Company therefore records the amount that it would have to pay (the ''settlement cost'') to buy out non-servicing related commissions in their entirety from vested Relationship Managers and sales managers, and an accrual, based on their progress towards vesting, for those unvested Relationship Managers and sales managers who are expected to vest in the future. As noted above, as the liability increases over the first year of a SME merchant contract, the Company also records a related deferred acquisition cost asset for currently vested Relationship Managers and sales managers. The accrued buyout liability associated with unvested Relationship Managers and sales managers is not included in the deferred acquisition cost asset since future services are required in order to vest. Subsequent changes in the estimated accrued buyout liability due to merchant attrition, same-store sales growth and changes in gross margin are included in the same income statement caption as customer acquisition costs expense.

Beginning in June 2012, Relationship Managers and sales managers earn portfolio equity on their newly installed payroll and loyalty marketing merchant accounts based on the residual commissions they earn on those accounts. The accrued buyout liability and deferred acquisition cost asset will be accrued identically as the SME bankcard merchant portfolio equity.

The accrued buyout liability is based on merchants under contract at the balance sheet date, the gross margin generated by those merchants over the prior twelve months, and the contractual buyout multiple. The liability related to a new merchant is therefore zero when the merchant is installed, and increases over the twelve months following the installation date. The same procedure is applied to unvested commissions over the expected vesting period, but is further adjusted to reflect the Company's estimate that 31% of unvested Relationship Managers and sales managers become vested.

The classification of the accrued buyout liability between current and non-current liabilities on the Condensed Consolidated Balance Sheet is based upon the Company's estimate of the amount of the accrued buyout liability that it reasonably expects to pay over the next twelve months. This estimate is developed by calculating the cumulative annual average percentage that total historical buyout payments represent of the accrued buyout liability. That percentage is applied to the period-end accrued buyout liability to determine the current portion.

Revenue—Revenues are mainly comprised of gross processing revenue, payroll processing revenue and equipment-related income. Gross processing revenue primarily consists of discount fees, per-transaction fees and periodic fees (primarily monthly) from the processing of Visa, MasterCard, American Express and Discover bankcard transactions for merchants. The Company passes through to its customers any changes in interchange or network fees. Gross processing revenue also includes fees for servicing American Express accounts, customer service fees, fees for processing chargebacks, termination fees on terminated contracts, gift and loyalty card fees, fees generated by our Heartland School Solutions business, and other miscellaneous revenue. Payroll processing revenue includes periodic and annual fees charged by HPC for payroll processing services, and interest earned from investing tax impound funds held for our customers. Revenue is recorded as bankcard and other processing transactions are processed or payroll services are performed.

Equipment-related income includes revenues from the sale, rental and deployment of bankcard and check processing terminals, from the sale of hardware, software and associated services for prepaid card and stored-value card payment systems, and campus payment solutions. Revenues are recorded at the time of shipment, or the provision of service.

Loss Contingencies and Legal Expenses—The Company records a liability for loss contingencies when the liability is probable and the amount is reasonably estimable. Legal fees associated with loss contingencies are recorded when the legal fees are incurred.

The Company records recoveries from its insurance providers when cash is received from the provider.

Other Income (Expense)— Other income (expense) consists of interest income on cash and investments, the interest cost on our borrowings, the gains or losses on the disposal of property and equipment and other non-operating income or expense items. For the six months ended June 30, 2012, other income (expense) was insignificant. For the six months ended June 30, 2011, other income (expense) included pre-tax charges of $0.8 million reflecting the costs (primarily accrued staff termination costs and fixed asset write downs) associated with closing of the Company's Johnson City, Tennessee service center.

Other income (expense) also includes the pre-tax charges related to the Provision for processing system intrusion costs.

Income Taxes—The Company accounts for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and the tax basis of assets and liabilities using enacted tax rates.

The provision for income taxes for the three and six months ended June 30, 2012 and 2011 and the resulting effective tax rates were as follows:

	Three Months Ended June 30,						Six Months Ended  June 30,
	2012			2011			2012			2011
	(In thousands)
Provision for income taxes	$	10,975		$	7,505		$	19,474		$	12,314
Effective tax rate	37.9		%	37.7		%	38.0		%	37.8		%

The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future earnings, carry back and carry forward periods and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.

The Company regularly evaluates its tax positions for additional unrecognized tax benefits and associated interest and penalties, if applicable. There are many factors that are considered when evaluating these tax positions including: interpretation of tax laws, recent tax litigation on a position, past audit or examination history, and subjective estimates and assumptions, which have been deemed reasonable by management. However, if management's estimates are not representative of actual outcomes, the Company's results could be materially impacted. The Company does not expect any material changes to unrecognized tax benefits in the next twelve months. At June 30, 2012, the reserve for unrecognized tax benefits related to uncertain tax positions was $2.2 million, of which $1.4 million would, if recognized, impact the effective tax rate. At December 31, 2011, the reserve for unrecognized tax benefits related to uncertain tax positions was $1.8 million, of which $1.1 million would, if recognized, impact the effective tax rate.

Share–Based Compensation—- In the fourth quarter of 2010, the Company's Board of Directors approved grants of508,800 performance-based Restricted Share Units. These Restricted Share Units are share awards which would vest 50% in 2013, 25% in 2014, and 25% in 2015 only if, over the term of these Restricted Share Units, the following diluted earnings per share targets for the years ended December 31, 2012, 2013 and 2014 are achieved:

	2012	2013	2014
Diluted Earnings Per Share (a)	$1.48	$1.74	$2.04

(a) Calculated on a Pro Forma basis to exclude non-operating gains and losses, if any, and excluding the after-tax impact of Share-based Compensation Expense.

As of December 31, 2011, management determined that achieving these performance targets was probable to occur and began recording share-based compensation expense for these Restricted Share Units. The closing price of the Company's common stock on the grant date equals the grant date fair value of these nonvested Restricted Share Units awards and will be recognized as compensation expense over their vesting periods.

In the fourth quarter of 2011, the Company's Board of Directors approved grants of 164,808 performance-based Restricted Share Units. These Restricted Share Units are nonvested share awards which would vest 50% in 2014 and 50% in 2015 only if the Company achieves a diluted earnings per share compound annual growth rate ("CAGR") of seventeen percent (17%) for the two-year period ending December 31, 2013. Diluted earnings per share will be calculated on a Pro Forma basis to exclude non-operating gains and losses, if any, and exclude the after-tax impact of Share-based Compensation Expense. For each 1% that the CAGR actually achieved by the Company for the two year period ending on December 31, 2013 is above the 17% target, the number of shares underlying the Restricted Share Units awarded would be increased by 3.09%; provided, however, that the maximum increase in the number of shares that may be awarded is 100%. Likewise, for each 1% that the CAGR actually achieved by the Company for the two-year period ending on December 31, 2013 is below the 17% target, the number of shares underlying the Restricted Share Units awarded would be decreased by 1.13%. If the target CAGR is missed by 80% or more, then the number of shares awarded is zero.

As of June 30, 2012, management determined that achieving a CAGR for the two-year period ending December 31, 2013 which would result in earning the maximum 100% increase in the number of shares that may be awarded was probable to occur, and began recording share-based compensation expense for these Restricted Share Units based on 329,616 shares. The closing price of the Company's common stock on the grant date equals the grant date fair value of these nonvested Restricted Share Units awards and will be recognized as compensation expense over their vesting periods.

Diluted earnings per share for the six months ended June 30, 2012 and 2011 were computed based on the weighted average outstanding common shares plus equivalent shares assuming exercise of stock options and vesting of Restricted Share Units, where dilutive.

Common Stock Repurchases. On October 21, 2011, the Company's Board of Directors authorized the repurchase ofup to $50 million worth of the Company's outstanding common stock. Repurchases under this program were made through the open market in accordance with applicable laws and regulations. The Company funded repurchases with cash flow from operations, existing cash on the balance sheet, and other sources including the proceeds of options exercises. At June 30, 2012, the Company had no amounts remaining under the October 21, 2011 authorization to repurchase its common stock. On July 27, 2012, the Company's Board of Directors authorized a new program to repurchase up to $50 million of the Company's outstanding common stock under essentially the same terms as the October 21, 2011 program.

Under the October 21, 2011 authorization from its Board of Directors, during the six months ended June 30, 2012 and the year ended December 31, 2011, respectively, the Company repurchased an aggregate of 1,157,440 shares of its common stock at a total cost of $33.2 million, at an average cost of $28.66 per share, and 778,889 shares of its common stock at a total cost of $16.8 million, at an average cost of $21.61 per share. No common stock was repurchased in the six months ended June 30, 2011.

Derivative Financial Instruments—The Company utilizes derivative instruments to manage interest rate risk on its borrowings under its Second Amended and Restated Credit Agreement dated November 24, 2010 with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders who are a party to the Credit Agreement. The Company recognizes the fair value of derivative financial instruments in the Condensed Consolidated Balance Sheets in investments, or accrued expenses and other liabilities. Changes in fair value of derivative instruments are recognized immediately in earnings unless the derivative is designated and qualifies as a hedge of future cash flows. For derivatives that qualify as hedges of future cash flows, the effective portion of changes in fair value is recorded in other comprehensive income and reclassified into interest expense in the same periods during which the hedged item affects earnings. Any ineffectiveness of cash flow hedges would be recognized in Other income (expense) in the Condensed Consolidated Statements of Income and Comprehensive Income during the period of change.

In January 2011, the Company entered into fixed-pay amortizing interest rate swaps having an initial notional amount of $50 million as a hedge of future cash flows on the variable rate debt outstanding under its Term Credit Facility. These interest rate swaps convert the related notional amount of variable rate debt to fixed rate. At June 30, 2012, the remaining notional amount of these interest rate swaps was $38.8 million and the fair value of these interest rate swaps, $0.9 million, was recorded as a liability in accrued expenses and other liabilities. The related deferred tax benefit was $0.3 million. At December 31, 2011, the remaining notional amount of these interest rate swaps was $42.5 million and the fair value of these interest rate swaps, $0.9 million, was recorded as a liability in accrued expenses and other liabilities. The related deferred tax benefit was $0.3 million.

Foreign Currency—The Canadian dollar is the functional currency of CPOS, which operates in Canada. CPOS' revenues and expenses are translated at the average exchange rates prevailing during the period. The foreign currency assets and liabilities of CPOS are translated at the period-end rate of exchange. The resulting translation adjustment is allocated between the Company and CPOS' noncontrolling interests and is recorded as a component of other comprehensive income or noncontrolling interests in total equity. At June 30, 2012, the cumulative foreign currency translation reflected a loss of $0.3 million and at June 30, 2011 reflected a gain of $0.2 million. The Company intends to indefinitely reinvest undistributed earnings of CPOS and has not tax affected the cumulative foreign currency translation gain or loss. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested profits is not material.

Noncontrolling Interests— Noncontrolling interests represent noncontrolling minority stockholders' share of the equity and after-tax net income or loss of consolidated subsidiaries. Noncontrolling minority stockholders' share of after-tax net income or loss of consolidated subsidiaries is included in Net income attributable to noncontrolling interests in the Condensed Consolidated Statement of Income and Comprehensive Income. The minority stockholders’ interests included in noncontrolling interests in the June 30, 2012 and December 31, 2011 Condensed Consolidated Balance Sheet were $0.9 million and $0.6 million, respectively, and reflect the original investments by these minority shareholders in the consolidated subsidiaries, along with their proportionate share of the earnings or losses of the subsidiaries.

Subsequent Events—The Company evaluated subsequent events with respect to the Consolidated Financial Statements as of and for the six months ended June 30, 2012.

New Accounting Pronouncements— In May 2011, the FASB issued an accounting standard update which addresses

changes to concepts regarding performing fair value measurements including: (i) the application of the highest and best use and

valuation premise; (ii) the valuation of an instrument classified in the reporting entity's shareholder equity; (iii) the valuation of

financial instruments that are managed within a portfolio; and (iv) the application of premiums and discounts. This update also

enhances disclosure requirements about fair value measurements, including providing information regarding Level 3

measurements such as quantitative information about unobservable inputs, further discussion of the valuation processes used

and assumption sensitivity analysis. The update is effective for interim and annual periods beginning after December 15, 2011.

The implementation of this update did not have a material effect on the Company's Consolidated Financial Statements.

In June 2011, the FASB issued an accounting standard update which amends the comprehensive income topic of the

current codification. The update eliminates the option to present the components of other comprehensive income as part of the

statement of changes in equity, and instead requires consecutive presentation of the statement of net income and other

comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive

statements. The update is effective for interim and annual periods beginning after December 15, 2011. The implementation of

this update did not have a material effect on the Company's Consolidated Financial Statements.

In September 2011, the FASB issued an accounting standard update on testing goodwill for impairment. This

guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not

that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required

to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure

the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines that the fair

value of a reporting unit is more than its carrying amount, the two-step goodwill impairment test is not required. The

amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after

December 15, 2011 (early adoption is permitted). The Company early adopted this update at December 31, 2011 and the implementation of this update did not have a material effect on the Company's Consolidated Financial Statements.

In December 2011, the FASB issued an accounting standard update on disclosures about offsetting assets and

liabilities. This guidance requires entities to disclose information about offsetting and related arrangements to enable users of

financial statements to understand the effect of those arrangements on the entity's financial position. The amendments require

enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either

(i) offset in accordance with current literature or (ii) subject to an enforceable master netting arrangement or similar agreement,

irrespective of whether they are offset in accordance with current literature. The update is effective for fiscal years, and interim

periods within those years, beginning on or after January 1, 2013. The implementation of this update is not expected to have a

material effect on the Company's Consolidated Financial Statements.

In July 2012, the FASB issued an accounting standard update on testing indefinite-lived intangible assets for impairment. This guidance will allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. Under these amendments, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not the indefinite-lived intangible asset is impaired. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. The update is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 (early adoption is permitted). The Company is currently evaluating the impact of this update on the Company's consolidated financial statements.

XML

Receivables (Schedule of Accounts, Notes, Loans and Financing Receivable) (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total receivables, gross	$ 181,515,000	$ 177,986,000
Less allowance for doubtful accounts	(1,419,000)	(1,451,000)
Receivables, Net, Current	180,096,000	176,535,000
Due from employees		600,000
Accounts receivable from merchants [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total receivables, gross	165,784,000	151,228,000
Receivables from bankcard networks [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total receivables, gross	14,298,000	24,301,000
Accounts receivable from others [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total receivables, gross	$ 1,433,000	$ 2,457,000

XML

Intangible Assets and Goodwill (Tables)

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets by Major Class

Intangible Assets — Intangible assets consisted of the following as of June 30, 2012 and December 31, 2011:

	June 30, 2012						Amortization Life and Method
	Gross Assets		Accumulated Amortization		Net Assets
	(In thousands)
Finite Lived Assets:
Customer relationships	$	39,537	$	6,711	$	32,826	3 to 18 years—proportional cash flow
Merchant portfolio	3,345		2,084		1,261		7 years—proportional cash flow
Software	10,152		8,928		1,224		1 to 5 years—straight line
Non-compete agreements	3,323		1,346		1,977		3 to 5 years—straight line
Other	454		383		71		2 to 9 years—straight line
	$	56,811	$	19,452	$	37,359

	December 31, 2011						Amortization Life and Method
	Gross Assets		Accumulated Amortization		Net Assets
	(In thousands)
Finite Lived Assets:
Customer relationships	$	33,166	$	5,406	$	27,760	3 to 18 years—proportional cash flow
Merchant portfolio	3,345		1,819		1,526		7 years—proportional cash flow
Software	10,078		8,612		1,466		2 to 5 years—straight line
Non-compete agreements	2,794		1,126		1,668		3 to 5 years—straight line
Other	457		379		78		2 to 9 years—straight line
	$	49,840	$	17,342	$	32,498

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The estimated remaining amortization expense related to intangible assets in twelve month increments is as follows:

For the Twelve Months Ended June 30,
	(In thousands)
2013	$	6,041
2014	5,269
2015	4,582
2016	4,021
2017	2,926
Thereafter	14,520
	$	37,359

Schedule of Goodwill

Goodwill — The changes in the carrying amount of goodwill for the six months ended June 30, 2012 and 2011 were as follows:

	Six Months Ended June 30,
	2012			2011
	(In thousands)
Beginning balance	$	103,399		$	68,319
Goodwill acquired during the period	15,231			5,987
Effects of foreign currency translation	(20		)	353
Other (a)	—			456
Ending balance	$	118,610		$	75,115

(a) Reflects adjustments to allocations of purchase price.

XML

Capitalized Customer Acquisition Costs, Net (Tables)

6 Months Ended

Jun. 30, 2012

Capitalized Customer Acquisition Costs, Net [Abstract]

Capitalized Customer Acquisition Costs Net

A summary of net capitalized customer acquisition costs as of June 30, 2012 and December 31, 2011 was as follows:

	June 30, 2012			December 31, 2011
	(In thousands)
Capitalized signing bonuses	$	85,669		$	86,837
Less accumulated amortization	(43,149		)	(45,125		)
	42,520			41,712
Capitalized customer deferred acquisition costs	36,767			36,564
Less accumulated amortization	(23,064		)	(23,262		)
	13,703			13,302
Capitalized customer acquisition costs, net	$	56,223		$	55,014

Capitalized Customer Acquisition Activity

A summary of the activity in capitalized customer acquisition costs, net for the three and six month periods ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Balance at beginning of period	$	55,339		$	57,316		$	55,014		$	59,251
Plus additions to:
Capitalized signing bonuses, net	7,907			7,045			15,461			14,161
Capitalized customer deferred acquisition costs	4,289			3,612			8,257			6,942
	12,196			10,657			23,718			21,103
Less amortization expense on:
Capitalized signing bonuses, net	(7,332		)	(8,091		)	(14,653		)	(16,605		)
Capitalized customer deferred acquisition costs	(3,980		)	(3,928		)	(7,856		)	(7,795		)
	(11,312		)	(12,019		)	(22,509		)	(24,400		)
Balance at end of period	$	56,223		$	55,954		$	56,223		$	55,954

XML

Credit Facilities (Schedule of Maturities of Long-term Debt) (Details) (USD $)	6 Months Ended		6 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012 Federal Funds Rate [Member]	Jun. 30, 2012 LIBOR [Member]	Jun. 30, 2012 Revolving Credit Facility [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Subsequent To Administrative Agent Approval [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Letter of Credit [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Bridge Loan [Member]	Jun. 30, 2012 Term Credit Facility [Member]	Jun. 30, 2012 Term Credit Facility [Member] Line of Credit [Member]	Jun. 30, 2012 Lunch Byte Systems [Member] Revolving Credit Facility [Member]	Jul. 20, 2012 Credit Agreement [Member] Revolving Credit Facility [Member] Subsequent To Administrative Agent Approval [Member]
Line of Credit Facility
Maximum borrowing capacity				$ 50,000,000	$ 100,000,000	$ 10,000,000	$ 5,000,000	$ 100,000,000			$ 150,000,000
Commitment Increase Agreement, additional borrowings					50,000,000
Quarterly repayments of principal, for fiscal years ended 2011 and 2012								3,750,000
Quarterly repayments of principal, for fiscal years ending 2013 and 2014								5,000,000
Quarterly repayments of principal, for 2015 (November 24, 2015 maturity)								7,500,000
Principal payments due under Term Credit Facility: [Abstract]
2013									17,500,000
2014									20,000,000
2015									25,000,000
2016									15,000,000
Total principal payments due under Term Credit Facility									77,500,000
Credit agreement, description of variable rate periods	interest rates equal to one, two, three or six month adjusted LIBOR rates		LIBOR
Credit agreement, basis spread on variable rate		0.50%	1.00%
Credit agreement, weighted average interest rate	2.90%
Credit agreement, fees and direct costs	1,300,000
Credit agreement, amount outstanding				$ 26,000,000				$ 77,500,000		$ 26,000,000

XML

Receivables (Summary of Allowance for Doubtful Accounts Receivables) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Movement in Valuation Allowances and Reserves [Roll Forward]
Additions to allowance			$ 390,000	$ 1,270,000
Allowance for Doubtful Accounts [Member]
Movement in Valuation Allowances and Reserves [Roll Forward]
Beginning balance	1,453,000	898,000	1,451,000	683,000
Additions to allowance	307,000	570,000	390,000	1,270,000
Charges against allowance	(341,000)	(261,000)	(422,000)	(746,000)
Ending balance	$ 1,419,000	$ 1,207,000	$ 1,419,000	$ 1,207,000

XML

Processing Liabilities and Loss Reserves (Tables)

6 Months Ended

Jun. 30, 2012

Processing Liabilities and Loss Reserves [Abstract]

Summary Of Processing Liabilities And Loss Reserves

A summary of processing liabilities and loss reserves was as follows at June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
	(In thousands)
Merchant bankcard processing	$	14,371	$	10,295
Check processing	12,239		8,594
Merchant deposits	8,642		9,839
Loss reserves	1,977		1,961
	$	37,229	$	30,689

Schedule Of Credit And Fraud Loss Reserve

A summary of the activity in the loss reserve for the three and six months ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	1,960		$	1,739		$	1,961		$	1,667
Additions to reserve	928			1,892			1,195			3,381
Charges against reserve (a)	(911		)	(1,775		)	(1,179		)	(3,192		)
Ending balance	$	1,977		$	1,856		$	1,977		$	1,856

(a)Included in these amounts are payroll segment losses of $36,000 and $20,000, respectively, for the three months ended June 30, 2012 and 2011, and $48,000 and $79,000, respectively, for the six months ended June 30, 2012 and 2011.

XML

Accrued Buyout Liability (Tables)

6 Months Ended

Jun. 30, 2012

Accrued Buyout Liability [Abstract]

Summary of Accrued Buyout Liability

A summary of the accrued buyout liability was as follows as of June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
	(In thousands)
Vested Relationship Managers and sales managers	$	32,576		$	30,269
Unvested Relationship Managers and sales managers	874			1,389
	33,450			31,658
Less current portion	(9,232		)	(8,104		)
Long-term portion of accrued buyout liability	$	24,218		$	23,554

Summary of Activity in Accrued Buyout Liability

A summary of the activity in the accrued buyout liability for the three and six months ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	33,568		$	28,242		$	31,658		$	28,810
Increase in settlement obligation, net	4,240			3,723			8,447			6,330
Buyouts	(4,358		)	(4,101		)	(6,655		)	(7,276		)
Ending balance	$	33,450		$	27,864		$	33,450		$	27,864

XML

Organization and Operations

6 Months Ended

Jun. 30, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Operations

Organization and Operations

Basis of Financial Statement Presentation— The accompanying condensed consolidated financial statements include those of Heartland Payment Systems, Inc. (the “Company,” “we,” “us,” or “our”) and its wholly-owned subsidiaries, Heartland Payroll Company (“HPC”), Debitek, Inc. (“Debitek”) and Heartland Acquisition LLC (“Network Services”), and its 70% owned subsidiary Collective POS Solutions Ltd. (“CPOS”). The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All intercompany balances and transactions with the Company's subsidiaries have been eliminated upon consolidation. Certain amounts relating to 2011 financial information have been reclassified to conform with the current year presentation.

The accompanying condensed consolidated financial statements are unaudited. In the opinion of the Company's management, the unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the Company's financial position at June 30, 2012, its results of operations, changes in stockholders’ equity and cash flows for the six months ended June 30, 2012 and 2011. Results of operations reported for interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2012. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2011. The December 31, 2011 condensed consolidated balance sheet was derived from the audited 2011 consolidated financial statements.

In the Consolidated Statements of Cash Flow, the prior period reflects a correction to the presentation of the reconciliation of net income to net cash provided by operating activities. Previously, the reconciliation of net income to net cash provided by operating activities started with net income attributable to Heartland, and net income attributable to noncontrolling interests was included as a reconciling item. As restated, the reconciliation of net income to net cash provided by operating activities starts with net income which includes noncontrolling interests. This change had no effect on reported net cash provided by operating activities.

Business Description—The Company’s principal business is to provide payment processing services related to bankcard transactions for merchants throughout the United States and Canada. In addition, the Company provides certain other merchant services, including the sale and rental of terminal equipment, loyalty and gift card processing, and the sale of terminal supplies. The Company provides K to 12 school solutions in the United States including school nutrition and point-of-sale solutions. HPC provides payroll and related tax filing services throughout the United States. Debitek provides prepaid card and stored-value card solutions throughout the United States and Canada. The Company and Debitek also provide campus payment solutions throughout the United States and Canada. CPOS is a Canadian provider of payment processing services and secure point-of-sale solutions.

Over 73% of the Company's revenue is derived from processing and settling Visa and MasterCard bankcard transactions for its merchant customers. Because the Company is not a ''member bank'' as defined by Visa and MasterCard, in order to process and settle these bankcard transactions for its merchants, the Company has entered into sponsorship agreements with member banks. Visa and MasterCard rules restrict the Company from performing funds settlement or accessing merchant settlement funds and require that these funds be in the possession of the member bank until the merchant is funded. A sponsorship agreement permits the Company to route Visa and MasterCard bankcard transactions under the member bank's control and identification numbers to clear credit bankcard transactions through Visa and MasterCard. A sponsorship agreement also enables the Company to settle funds between cardholders and merchants by delivering funding files to the member bank, which in turn transfers settlement funds to the merchants' bank accounts. These restrictions place the settlement assets and obligations under the control of the member bank.

The sponsorship agreements with the member banks require, among other things, that the Company abide by the by-laws and regulations of the Visa and MasterCard networks, and certain of the Sponsor banks require a certificate of deposit or a cash balance in a deposit account. If the Company breaches a sponsorship agreement, the Sponsor banks may terminate the agreement and, under the terms of the agreement, the Company would have 180 days to identify an alternative Sponsor bank. The Company is dependent on its Sponsor banks, Visa and MasterCard for notification of any compliance breaches. As of June 30, 2012, the Company has not been notified of any such issues by its Sponsor banks, Visa or MasterCard.

At June 30, 2012, the Company is party to five bank sponsorship agreements.

• The Company entered into a sponsorship agreement with KeyBank, National Association on April 1, 1999 and on December 22, 2011, the Company entered into an amendment agreement that extended the expiration date of that agreement to October 1, 2012.

• In 2007, the Company entered into a sponsorship agreement with Heartland Bank, an unrelated third party. The agreement with Heartland Bank has been renewed through September 2013.

• In November 2009, the Company entered into a sponsorship agreement with The Bancorp Bank to sponsor the Company's large national and mid-tier merchants processed by Network Services. The agreement with The Bancorp Bank expires in November 2014.

• On March 24, 2011, the Company entered into a sponsorship agreement with Barclays Bank Delaware to sponsor certain of the Company's large national merchants processed by Network Services. The agreement with Barclays Bank Delaware expires in March 2016 with an automatic one year renewal.

• On February 8, 2012, the Company entered into a sponsorship agreement with Wells Fargo Bank, N.A. ("WFB"). The WFB sponsorship agreement will be in effect until February 8, 2016 and will automatically renew for successive three year periods unless either party provides six months' written notice of nonrenewal to the other party. Processing activity associated with the WFB sponsorship has not yet commenced.

Following is a breakout of the Company’s total Visa and MasterCard settled bankcard processing volume for the month ending June 30, 2012 by percentage processed under its individual bank sponsorship agreements:

Sponsor Bank	% of June 2012 Bankcard Processing Volume
KeyBank, National Association	64%
The Bancorp Bank	15%
Barclays Bank Delaware	13%
Heartland Bank	8%

Processing System Intrusion—On January 20, 2009, the Company publicly announced the discovery of a criminal

breach of its payment systems environment (the “Processing System Intrusion”). The Processing System Intrusion involved

malicious software that appears to have been used to collect in-transit, unencrypted payment card data while it was being

processed by the Company during the transaction authorization process. The Company believes the breach did not extend

beyond 2008.

Since its announcement of the Processing System Intrusion on January 20, 2009 and through June 30, 2012, the

Company has expensed a total of $147.3 million, before reducing those charges by $31.2 million of total insurance recoveries. The majority of the total charges of approximately $114.7 million relates to settlements of claims. Approximately $32.6 million of the total charges were for legal fees and costs the Company incurred for investigations, defending various claims and

actions, remedial actions and crisis management services.

During the three months ended June 30, 2012, the Company incurred approximately $0.1 million, or less than one cent per share, for legal fees and costs it incurred related to the Processing System Intrusion. During the three months ended

June 30, 2011, the Company expensed approximately $0.4 million, or less than one cent per share, related to the Processing System Intrusion. During the six months ended June 30, 2012, the Company incurred approximately $0.2 million, or less than one cent per share, for legal fees and costs it incurred related to the Processing System Intrusion. During the six months ended June 30, 2011, the Company expensed approximately $0.7 million, or $0.01 per share, related to the Processing System Intrusion.

XML

Credit Facilities (Tables)

6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Schedule of Maturities of Long-term Debt

Principal payments due under the Term Credit Facility as of June 30, 2012 were as follows:

For the Twelve Months Ended June 30,	(In thousands)
2013	$	17,500
2014	20,000
2015	25,000
2016	15,000
Total	$	77,500

XML

Summary of Significant Accounting Policies (Diluted Earnings Per Share) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Accounting Policies [Abstract]
Diluted earnings per share, restricted units, benchmark one year					$ 1.48	[1]
Diluted earnings per share, restricted units, benchmark year two			$ 1.74	[1]
Diluted earnings per share, restricted units, benchmark year three	$ 2.04	[1]

[1] Calculated on a Pro Forma basis to exclude non-operating gains and losses, if any, and excluding the after-tax impact of Share-based Compensation Expense.

XML

Processing Liabilities and Loss Reserves (Schedule Of Credit And Fraud Loss Reserve) (Details) (Loss reserves, USD $)	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Movement in Valuation Allowances and Reserves [Roll Forward]
Beginning balance	$ 1,960,000		$ 1,739,000		$ 1,961,000		$ 1,667,000
Additions to reserve	928,000		1,892,000		1,195,000		3,381,000
Charges against reserve	(911,000)	[1]	(1,775,000)	[1]	(1,179,000)	[1]	(3,192,000)	[1]
Ending balance	1,977,000		1,856,000		1,977,000		1,856,000
Payroll [Member]
Movement in Valuation Allowances and Reserves [Roll Forward]
Charges against reserve	$ (36,000)		$ (20,000)		$ (48,000)		$ (79,000)

[1] Included in these amounts are payroll segment losses of $36,000 and $20,000, respectively, for the three months ended June 30, 2012 and 2011, and $48,000 and $79,000, respectively, for the six months ended June 30, 2012 and 2011.

XML

Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 42,951	$ 40,301
Funds held for payroll customers	48,859	42,511
Receivables, net	180,096	176,535
Investments held to maturity	3,711	2,505
Inventory	11,168	11,492
Prepaid expenses	8,787	9,660
Current tax asset	4,091	0
Current deferred tax assets, net	6,875	6,746
Total current assets	306,538	289,750
Capitalized customer acquisition costs, net	56,223	55,014
Property and equipment, net	120,437	115,579
Goodwill	118,610	103,399
Intangible assets, net	37,359	32,498
Deposits and other assets, net	738	681
Total assets	639,905	596,921
Current liabilities:
Due to sponsor banks	54,451	63,881
Accounts payable	56,401	47,373
Deposits held for payroll customers	48,859	42,511
Current portion of borrowings	43,502	15,003
Current portion of accrued buyout liability	9,232	8,104
Processing liabilities and loss reserves	37,229	30,689
Accrued expenses and other liabilities	41,493	50,884
Current Tax Liability	0	1,408
Total current liabilities	291,167	259,853
Deferred tax liabilities, net	26,296	21,643
Reserve for unrecognized tax benefits	2,190	1,819
Long-term portion of borrowings	60,000	70,000
Long-term portion of accrued buyout liability	24,218	23,554
Total liabilities	403,871	376,869
Commitments and contingencies (Note 11)	0	0
Equity
Common Stock, $0.001 par value, 100,000,000 shares authorized, 40,742,488 and 39,626,846 shares issued at June 30, 2012 and December 31, 2011; 38,806,159 and 38,847,957 outstanding at June 30, 2012 and December 31, 2011	41	39
Additional paid-in capital	229,691	207,643
Accumulated other comprehensive income	(699)	(680)
Retained earnings	56,111	29,236
Treasury stock, at cost (1,936,329 and 778,889 shares at June 30, 2012 and December 31, 2011)	(50,000)	(16,828)
Total stockholders’ equity	235,144	219,410
Noncontrolling interests	890	642
Total equity	236,034	220,052
Total liabilities and equity	$ 639,905	$ 596,921

XML

Funds Held for Payroll Customers and Investments (Funds Held for Payroll Customers and Investments) (Details) (USD $) In Thousands, unless otherwise specified			6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Minimum [Member]	Jun. 30, 2012 Maximum [Member]	Jun. 30, 2012 Fixed income bond fund Available-for-sale securities [Member]	Dec. 31, 2011 Fixed income bond fund Available-for-sale securities [Member]		Jun. 30, 2012 Cash held for payroll customers [Member]	Dec. 31, 2011 Cash held for payroll customers [Member]	Jun. 30, 2012 Investments held to maturity - Certificates of deposit		Dec. 31, 2011 Investments held to maturity - Certificates of deposit
Funds Held for Payroll Customers:
Cost	$ 48,645	$ 42,321			$ 968	$ 968		$ 47,677	$ 41,353
Gross Unrealized Gains	214	190			214	190		0	0
Gross Unrealized Losses	0	0			0	0		0	0
Estimated Fair Value	48,859	42,511			1,182	1,158	[1]	47,677	41,353
Investments:
Cost	3,711	2,505								3,711	[2]	2,505
Estimated Fair Value										$ 3,711	[2]	$ 2,505
Certificates of Deposit, Term, Minimum			1 month
Certificates of Deposit, Term, Maximum				14 months

[1] mounts included in Funds held for payroll customers on the Condensed Consolidated Balance Sheet

[2] Certificates of deposit have remaining terms ranging from 1 month to 14 months.

XML

Condensed Consolidated Statements of Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Gain (Loss)	(Accumulated Deficit) Retained Earnings	Treasury Stock [Member]	Noncontrolling Minority Interests
Stockholders' Equity at Dec. 31, 2010	$ 177,594	$ 38	$ 185,689	$ 37	$ (8,471)	$ 0	$ 301
Common Stock Shares Outstanding at Dec. 31, 2010		38,415,000
Increase (Decrease) in Stockholders' Equity
Issuance of Common Stock - options exercised, shares		698,000
Issuance of Common Stock - options exercised, amount	5,734	1	5,733
Issuance of Common Stock - RSU's Vested, shares		59,000
Adjustment to Additional Paid-in-capital, Value, Restricted Stock Units Vested	(518)		(518)
Excess tax benefit on stock options exercised	2,537		2,537
Stock-based compensation	3,700		3,700
Unrealized gains on available for sale investments	(124)			(260)			136
Dividends on Common Stock	(3,095)				(3,095)
Net income for the period	20,254				20,073		181
Stockholders' Equity at Jun. 30, 2011	206,082	39	197,141	(223)	8,507	0	618
Common Stock Shares Outstanding at Jun. 30, 2011		39,172,000
Stockholders' Equity at Dec. 31, 2011	220,052	39	207,643	(680)	29,236	(16,828)	642
Common Stock Shares Outstanding at Dec. 31, 2011	38,847,957	38,848,000
Increase (Decrease) in Stockholders' Equity
Issuance of Common Stock - options exercised, shares		1,038,000
Issuance of Common Stock - options exercised, amount	11,840	2	11,838
Issuance of Common Stock - RSU's Vested, shares		77,000
Adjustment to Additional Paid-in-capital, Value, Restricted Stock Units Vested	(1,247)		(1,247)
Excess tax benefit on stock options exercised	4,556		4,556
Repurchase of common stock, shares		(1,157,000)
Repurchase of common stock, amount	(33,172)					(33,172)
Stock-based compensation	6,901		6,901
Unrealized gains on available for sale investments	(30)			(19)			(11)
Dividends on Common Stock	(4,680)				(4,680)
Net income for the period	31,814				31,555		259
Stockholders' Equity at Jun. 30, 2012	$ 236,034	$ 41	$ 229,691	$ (699)	$ 56,111	$ (50,000)	$ 890
Common Stock Shares Outstanding at Jun. 30, 2012	38,806,159	38,806,000

XML

Segments (Schedule of Segment Reporting Information, by Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012 Reportable_Segments	Jun. 30, 2011	Jun. 30, 2012 Reportable_Segments	Jun. 30, 2011	Dec. 31, 2011
Segment Reporting Information [Line Items]
Number of Reportable Segments	2		2
Total revenues	$ 518,521	$ 525,977	$ 989,006	$ 993,623
Depreciation and amortization	7,331	6,951	14,714	14,023
Interest income	45	41	160	82
Interest expense	756	1,116	1,606	2,308
Net income (loss) attributable to Heartland	17,801	12,258	31,555	20,073
Total assets	639,905	579,154	639,905	579,154	596,921
Card Segment [Member]
Segment Reporting Information [Line Items]
Total revenues	502,514	513,632	949,733	968,630
Depreciation and amortization	5,990	6,013	12,027	12,159
Interest income	45	41	160	82
Interest expense	833	1,165	1,745	2,405
Net income (loss) attributable to Heartland	19,570	16,645	35,634	28,140
Total assets	647,956	647,216	647,956	647,216
Other Segment [Member]
Segment Reporting Information [Line Items]
Funds held as a fiduciary in payroll services activities for payment to taxing authorities, portion of total assets, percentage	30.00%	37.00%	30.00%	37.00%
Total revenues	16,086	12,395	39,416	25,093
Depreciation and amortization	1,286	817	2,576	1,618
Interest income	0	0	0	0
Interest expense	2	1	4	3
Net income (loss) attributable to Heartland	1,948	(148)	4,038	451
Total assets	161,516	85,540	161,516	85,540
Portion of Total Assets That Are Goodwill	41.00%	25.00%	41.00%	25.00%
Unallocated Corporate Administration Amounts [Member]
Segment Reporting Information [Line Items]
Total revenues	0	0	0	0
Depreciation and amortization	55	121	111	246
Interest income	0	0	0	0
Interest expense	0	0	0	0
Net income (loss) attributable to Heartland	(3,717)	(4,239)	(8,117)	(8,518)
Total assets	0	0	0	0
Reconciling Items [Member]
Segment Reporting Information [Line Items]
Total revenues	(79)	(50)	(143)	(100)
Depreciation and amortization	0	0	0	0
Interest income	0	0	0	0
Interest expense	(79)	(50)	(143)	(100)
Net income (loss) attributable to Heartland	0	0	0	0
Total assets	$ (169,567)	$ (153,602)	$ (169,567)	$ (153,602)

XML

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Schedule of Calculation of Numerator and Denominator in Earnings Per Share

The following is a reconciliation of the amounts used to calculate basic and diluted earnings per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In thousands, except per share data)
Basic:
Net income attributable to Heartland	$	17,801	$	12,258	$	31,555	$	20,073
Weighted average common stock outstanding	38,844		38,792		38,840		38,625
Earnings per share	$	0.46	$	0.32	$	0.81	$	0.52
Diluted:
Net income attributable to Heartland	$	17,801	$	12,258	$	31,555	$	20,073
Basic weighted average common stock outstanding	38,844		38,792		38,840		38,625
Effect of dilutive instruments:
Stock options and restricted share units	1,604		1,336		1,664		1,309
Diluted weighted average shares outstanding	40,448		40,128		40,504		39,934
Earnings per share	$	0.44	$	0.31	$	0.78	$	0.50

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates include, among other things, the accrued buyout liability, capitalized customer acquisition costs, goodwill, loss reserves, certain accounts payable and accrued expenses and certain tax assets and liabilities as well as the related valuation allowances, if any. Actual results could differ from those estimates.

Receivables

Receivables—Receivables are stated net of allowance for doubtful accounts. The Company estimates its allowance based on experience with its merchants, customers, and sales force and its judgment as to the likelihood of their ultimate payment. The Company also considers collection experience and makes estimates regarding collectability based on trends in aging. Historically, the Company has not experienced significant charge offs for its merchant receivables.

The Company's primary receivables are from its bankcard processing merchants. These receivables result from the Company's practice of advancing interchange fees to most of its small and mid-sized merchants (referred to as Small and Midsized Enterprises, or “SME”) during the month and collecting those fees at the beginning of the following month, as well as from transaction fees the Company charges its merchants for processing transactions. The Company does not advance interchange fees to its Network Services Merchants.

Generally, the Company uses cash available for investment to fund these advances to SME merchants; when available cash has been expended, the Company directs its sponsor banks to make these advances, thus generating a payable to the sponsor banks. We pay our sponsor banks the prime rate on these payables. At June 30, 2012, the Company used $48.5 million of its available cash to fund merchant advances and at December 31, 2011, the Company used $40.0 million of its cash to fund merchant advances. The amount due to sponsor banks for funding advances was $43.1 million at June 30, 2012 and $45.2 million at December 31, 2011. The payable to sponsor banks is repaid at the beginning of the following month out of the fees the Company collects from its merchants. Receivables from merchants also include receivables from the sale of point of sale terminal equipment. Unlike the SME merchants, Network Services Merchants are invoiced monthly, on payment terms of 30 days net from date of invoicing.

Receivables also include amounts resulting from the pre-funding of Discover and American Express transactions to some of the Company's merchants and are due from the related bankcard networks. These amounts are recovered the next business day from the date of processing the transaction.

Receivables also include amounts resulting from the sale, installation, training and repair of payment system hardware and software for prepaid card and stored-value card payment systems, campus payment solutions, and Heartland School Solutions. These receivables are mostly invoiced on terms of 30 days net from date of invoicing.

Investments and Funds Held for Payroll Customers

Investments and Funds Held for Payroll Customers—Investments, including those carried on the Condensed Consolidated Balance Sheet as Funds held for payroll customers, consist primarily of fixed income bond funds and certificates of deposit. Funds held for payroll customers also include overnight bank deposits. The majority of investments carried in Funds held for payroll customers are available-for-sale and recorded at fair value based on quoted market prices. Certificates of deposit are classified as held to maturity and recorded at cost. In the event of a sale, cost is determined on a specific identification basis.

Capitalized Customer Acquisition Costs, net

Capitalized Customer Acquisition Costs, net—Capitalized customer acquisition costs consist of (1) up-front signing bonus payments made to Relationship Managers and sales managers (the Company's sales force) for the establishment of new merchant relationships, and (2) a deferred acquisition cost representing the estimated cost of buying out the commissions of vested sales employees. Capitalized customer acquisition costs represent incremental, direct customer acquisition costs that are recoverable through gross margins associated with merchant contracts. The capitalized customer acquisition costs are amortized using a method which approximates a proportional revenue approach over the initial three-year term of the merchant contract.

The up-front signing bonus paid for new SME bankcard, payroll and loyalty marketing accounts is based on the estimated gross margin for the first year of the merchant contract. The signing bonus, amount capitalized, and related amortization are adjusted after one year to reflect the actual gross margin generated by the merchant contract during that year. The deferred customer acquisition cost asset is accrued over the first year of SME bankcard merchant processing, consistent with the build-up in the accrued buyout liability, as described below. Beginning in June 2012, Relationship Managers and sales managers earn portfolio equity on their newly installed payroll and loyalty marketing merchant accounts based on the residual commissions they earn on those accounts. The accrued buyout liability and deferred acquisition cost asset will be developed the same as the SME bankcard merchant portfolio equity.

Management evaluates the capitalized customer acquisition costs for impairment by comparing, on a pooled basis by vintage month of origination, the expected future net cash flows from underlying merchant relationships to the carrying amount of the capitalized customer acquisition costs. If the estimated future net cash flows are lower than the recorded carrying amount, indicating an impairment of the value of the capitalized customer acquisition costs, the impairment loss will be charged to operations.

Processing Liabilities And Loss Reserves

Processing Liabilities and Loss Reserves—The majority of the Company's processing liabilities include funds in transit associated with bankcard and check processing. In addition, the Company maintains merchant deposits to offset potential liabilities from merchant chargeback processing. Disputes between a cardholder and a merchant periodically arise due to the cardholder's dissatisfaction with merchandise quality or the merchant's service, and the disputes may not always be resolved in the merchant's favor. In some of these cases, the transaction is ''charged back'' to the merchant and the purchase price is refunded to the cardholder by the credit card-issuing institution. If the merchant is unable to fund the refund, the Company is liable for the full amount of the transaction. The Company's obligation to stand ready to perform is minimal. The Company maintains a deposit or the pledge of a letter of credit from certain merchants as an offset to potential contingent liabilities that are the responsibility of such merchants. The Company evaluates its ultimate risk and records an estimate of potential loss for chargebacks related to merchant fraud based upon an assessment of actual historical fraud loss rates compared to recent bankcard processing volume levels. The Company believes that the liability recorded as loss reserves approximates fair value.

Accrued Buyout Liability

Accrued Buyout Liability—The Company's Relationship Managers and sales managers are paid residual commissions based on the gross margin generated by monthly SME merchant processing activity. The Company has the right, but not the obligation, to buy out some or all of these commissions, and intends to do so periodically. Such purchases of the commissions are at a fixed multiple of the last twelve months' commissions. Because of the Company's intent and ability to execute purchases of the residual commissions, and the mutual understanding between the Company and the Relationship Managers and sales managers, the Company has accounted for this deferred compensation arrangement pursuant to the substantive nature of the plan. The Company therefore records the amount that it would have to pay (the ''settlement cost'') to buy out non-servicing related commissions in their entirety from vested Relationship Managers and sales managers, and an accrual, based on their progress towards vesting, for those unvested Relationship Managers and sales managers who are expected to vest in the future. As noted above, as the liability increases over the first year of a SME merchant contract, the Company also records a related deferred acquisition cost asset for currently vested Relationship Managers and sales managers. The accrued buyout liability associated with unvested Relationship Managers and sales managers is not included in the deferred acquisition cost asset since future services are required in order to vest. Subsequent changes in the estimated accrued buyout liability due to merchant attrition, same-store sales growth and changes in gross margin are included in the same income statement caption as customer acquisition costs expense.

Beginning in June 2012, Relationship Managers and sales managers earn portfolio equity on their newly installed payroll and loyalty marketing merchant accounts based on the residual commissions they earn on those accounts. The accrued buyout liability and deferred acquisition cost asset will be accrued identically as the SME bankcard merchant portfolio equity.

The accrued buyout liability is based on merchants under contract at the balance sheet date, the gross margin generated by those merchants over the prior twelve months, and the contractual buyout multiple. The liability related to a new merchant is therefore zero when the merchant is installed, and increases over the twelve months following the installation date. The same procedure is applied to unvested commissions over the expected vesting period, but is further adjusted to reflect the Company's estimate that 31% of unvested Relationship Managers and sales managers become vested.

The classification of the accrued buyout liability between current and non-current liabilities on the Condensed Consolidated Balance Sheet is based upon the Company's estimate of the amount of the accrued buyout liability that it reasonably expects to pay over the next twelve months. This estimate is developed by calculating the cumulative annual average percentage that total historical buyout payments represent of the accrued buyout liability. That percentage is applied to the period-end accrued buyout liability to determine the current portion.

Revenue

Revenue—Revenues are mainly comprised of gross processing revenue, payroll processing revenue and equipment-related income. Gross processing revenue primarily consists of discount fees, per-transaction fees and periodic fees (primarily monthly) from the processing of Visa, MasterCard, American Express and Discover bankcard transactions for merchants. The Company passes through to its customers any changes in interchange or network fees. Gross processing revenue also includes fees for servicing American Express accounts, customer service fees, fees for processing chargebacks, termination fees on terminated contracts, gift and loyalty card fees, fees generated by our Heartland School Solutions business, and other miscellaneous revenue. Payroll processing revenue includes periodic and annual fees charged by HPC for payroll processing services, and interest earned from investing tax impound funds held for our customers. Revenue is recorded as bankcard and other processing transactions are processed or payroll services are performed.

Equipment-related income includes revenues from the sale, rental and deployment of bankcard and check processing terminals, from the sale of hardware, software and associated services for prepaid card and stored-value card payment systems, and campus payment solutions. Revenues are recorded at the time of shipment, or the provision of service.

Loss Contingencies and Legal Expenses

Loss Contingencies and Legal Expenses—The Company records a liability for loss contingencies when the liability is probable and the amount is reasonably estimable. Legal fees associated with loss contingencies are recorded when the legal fees are incurred.

The Company records recoveries from its insurance providers when cash is received from the provider.

Other Income (Expense)

Other Income (Expense)— Other income (expense) consists of interest income on cash and investments, the interest cost on our borrowings, the gains or losses on the disposal of property and equipment and other non-operating income or expense items.

Income Taxes

Income Taxes—The Company accounts for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and the tax basis of assets and liabilities using enacted tax rates.

The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future earnings, carry back and carry forward periods and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.

The Company regularly evaluates its tax positions for additional unrecognized tax benefits and associated interest and penalties, if applicable. There are many factors that are considered when evaluating these tax positions including: interpretation of tax laws, recent tax litigation on a position, past audit or examination history, and subjective estimates and assumptions, which have been deemed reasonable by management. However, if management's estimates are not representative of actual outcomes, the Company's results could be materially impacted.

Derivative Financial Instruments

Derivative Financial Instruments—The Company utilizes derivative instruments to manage interest rate risk on its borrowings under its Second Amended and Restated Credit Agreement dated November 24, 2010 with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders who are a party to the Credit Agreement. The Company recognizes the fair value of derivative financial instruments in the Condensed Consolidated Balance Sheets in investments, or accrued expenses and other liabilities. Changes in fair value of derivative instruments are recognized immediately in earnings unless the derivative is designated and qualifies as a hedge of future cash flows. For derivatives that qualify as hedges of future cash flows, the effective portion of changes in fair value is recorded in other comprehensive income and reclassified into interest expense in the same periods during which the hedged item affects earnings. Any ineffectiveness of cash flow hedges would be recognized in Other income (expense) in the Condensed Consolidated Statements of Income and Comprehensive Income during the period of change.

Foreign Currency

Foreign Currency—The Canadian dollar is the functional currency of CPOS, which operates in Canada. CPOS' revenues and expenses are translated at the average exchange rates prevailing during the period. The foreign currency assets and liabilities of CPOS are translated at the period-end rate of exchange. The resulting translation adjustment is allocated between the Company and CPOS' noncontrolling interests and is recorded as a component of other comprehensive income or noncontrolling interests in total equity. At June 30, 2012, the cumulative foreign currency translation reflected a loss of $0.3 million and at June 30, 2011 reflected a gain of $0.2 million. The Company intends to indefinitely reinvest undistributed earnings of CPOS and has not tax affected the cumulative foreign currency translation gain or loss. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested profits is not material.

Noncontrolling Interests

Noncontrolling Interests— Noncontrolling interests represent noncontrolling minority stockholders' share of the equity and after-tax net income or loss of consolidated subsidiaries. Noncontrolling minority stockholders' share of after-tax net income or loss of consolidated subsidiaries is included in Net income attributable to noncontrolling interests in the Condensed Consolidated Statement of Income and Comprehensive Income. The minority stockholders’ interests included in noncontrolling interests in the June 30, 2012 and December 31, 2011 Condensed Consolidated Balance Sheet were $0.9 million and $0.6 million, respectively, and reflect the original investments by these minority shareholders in the consolidated subsidiaries, along with their proportionate share of the earnings or losses of the subsidiaries.

Subsequent Events

Subsequent Events—The Company evaluated subsequent events with respect to the Consolidated Financial Statements as of and for the six months ended June 30, 2012.

New Accounting Pronouncements

New Accounting Pronouncements— In May 2011, the FASB issued an accounting standard update which addresses

changes to concepts regarding performing fair value measurements including: (i) the application of the highest and best use and

valuation premise; (ii) the valuation of an instrument classified in the reporting entity's shareholder equity; (iii) the valuation of

financial instruments that are managed within a portfolio; and (iv) the application of premiums and discounts. This update also

enhances disclosure requirements about fair value measurements, including providing information regarding Level 3

measurements such as quantitative information about unobservable inputs, further discussion of the valuation processes used

and assumption sensitivity analysis. The update is effective for interim and annual periods beginning after December 15, 2011.

The implementation of this update did not have a material effect on the Company's Consolidated Financial Statements.

In June 2011, the FASB issued an accounting standard update which amends the comprehensive income topic of the

current codification. The update eliminates the option to present the components of other comprehensive income as part of the

statement of changes in equity, and instead requires consecutive presentation of the statement of net income and other

comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive

statements. The update is effective for interim and annual periods beginning after December 15, 2011. The implementation of

this update did not have a material effect on the Company's Consolidated Financial Statements.

In September 2011, the FASB issued an accounting standard update on testing goodwill for impairment. This

guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not

that the fair value of a reporting unit is less than its carrying amount. If an entity determines that this is the case, it is required

to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure

the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines that the fair

value of a reporting unit is more than its carrying amount, the two-step goodwill impairment test is not required. The

amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after

December 15, 2011 (early adoption is permitted). The Company early adopted this update at December 31, 2011 and the implementation of this update did not have a material effect on the Company's Consolidated Financial Statements.

In December 2011, the FASB issued an accounting standard update on disclosures about offsetting assets and

liabilities. This guidance requires entities to disclose information about offsetting and related arrangements to enable users of

financial statements to understand the effect of those arrangements on the entity's financial position. The amendments require

enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either

(i) offset in accordance with current literature or (ii) subject to an enforceable master netting arrangement or similar agreement,

irrespective of whether they are offset in accordance with current literature. The update is effective for fiscal years, and interim

periods within those years, beginning on or after January 1, 2013. The implementation of this update is not expected to have a

material effect on the Company's Consolidated Financial Statements.

XML

Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2012 and at December 31, 2011:

June 30, 2012	Total		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:	(In thousands)
Investments available for sale:
Fixed income bond fund (a)	$	1,182	$	1,182	$	—
Investments held to maturity:
Certificates of deposit	3,711		—		3,711
Total assets	$	4,893	$	1,182	$	3,711
Liabilities:
Interest rate swaps	$	914	$	—	$	914
Total liabilities	$	914	$	—	$	914

December 31, 2011	Total		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:	(In thousands)
Investments available for sale:
Fixed income bond fund (a)	$	1,158	$	1,158	$	—
Investments held to maturity:
Certificates of deposit	2,505		—		2,505
Total assets	$	3,663	$	1,158	$	2,505
Liabilities:
Interest rate swaps	$	897	$	—	$	897
Total liabilities	$	897	$	—	$	897

(a) Amounts included in Funds held for payroll customers on the Condensed Consolidated Balance Sheet

XML

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Schedule of Effective Income Tax Rate

The provision for income taxes for the three and six months ended June 30, 2012 and 2011 and the resulting effective tax rates were as follows:

	Three Months Ended June 30,						Six Months Ended  June 30,
	2012			2011			2012			2011
	(In thousands)
Provision for income taxes	$	10,975		$	7,505		$	19,474		$	12,314
Effective tax rate	37.9		%	37.7		%	38.0		%	37.8		%

Schedule of Share-based Compensation, Restricted Stock Units Award Activity

Share–Based Compensation—- In the fourth quarter of 2010, the Company's Board of Directors approved grants of508,800 performance-based Restricted Share Units. These Restricted Share Units are share awards which would vest 50% in 2013, 25% in 2014, and 25% in 2015 only if, over the term of these Restricted Share Units, the following diluted earnings per share targets for the years ended December 31, 2012, 2013 and 2014 are achieved:

	2012	2013	2014
Diluted Earnings Per Share (a)	$1.48	$1.74	$2.04

(a) Calculated on a Pro Forma basis to exclude non-operating gains and losses, if any, and excluding the after-tax impact of Share-based Compensation Expense.

XML

Condensed Consolidated Statements of Cash Flow (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities
Net income	$ 31,814	$ 20,254
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of capitalized customer acquisition costs	22,509	24,400
Other depreciation and amortization	14,714	14,023
Addition to loss reserves	1,195	3,381
Provision for doubtful receivables	390	1,270
Stock-based compensation	6,901	3,700
Deferred taxes	4,522	2,253
Net income attributable to noncontrolling interests	259	181
Exit costs for service center	0	771
Other	29	83
Changes in operating assets and liabilities:
Increase in receivables	(2,324)	(17,561)
Decrease in inventory	383	1,093
Payment of signing bonuses, net	(15,461)	(14,161)
Increase in capitalized customer acquisition costs	(8,257)	(6,942)
Decrease (increase) in prepaid expenses	886	(2,750)
(Increase) decrease in current tax asset	(945)	15,758
Increase in deposits and other assets	(53)	(295)
Excess tax benefits on employee share-based compensation	(4,556)	(2,537)
Increase in reserve for unrecognized tax benefits	371	273
(Decrease) increase in due to sponsor bank	(9,430)	7,512
Increase in accounts payable	9,035	666
(Decrease) increase in accrued expenses and other liabilities	(11,457)	1,723
Increase in processing liabilities and loss reserves	5,263	2,025
Payouts of accrued buyout liability	(6,655)	(7,276)
Increase in accrued buyout liability	8,447	6,330
Net cash provided by operating activities	47,321	53,993
Cash flows from investing activities
Purchase of investments held to maturity	(1,865)	(2,178)
Maturities of investments held to maturity	676	1,282
(Increase) decrease in funds held for payroll customers	(6,323)	1,818
Increase (decrease) in deposits held for payroll customers	6,348	(1,812)
Acquisition of business, net of cash acquired	(23,682)	(7,598)
Purchases of property and equipment	(16,420)	(20,365)
Net cash used in investing activities	(41,266)	(28,853)
Cash flows from financing activities
Proceeds from borrowings	26,000	0
Principal payments on borrowings	(7,502)	(30,778)
Proceeds from exercise of stock options	11,840	5,733
Excess tax benefits on employee share-based compensation	4,556	2,537
Repurchases of common stock	(33,586)	0
Dividends paid on common stock	(4,680)	(3,095)
Net cash used in financing activities	(3,372)	(25,603)
Net (decrease) increase in cash	2,683	(463)
Effect of exchange rates on cash	(33)	37
Cash at beginning of year	40,301	41,729
Cash at end of period	42,951	41,303
Supplemental cash flow information:
Interest	1,488	2,132
Income taxes	$ 15,457	$ (5,972)

XML

Condensed Consolidated Balance Sheets Parentheticals (Unaudited) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Equity
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	40,742,488	39,626,846
Common stock, shares outstanding	38,806,159	38,847,957
Treasury Stock, shares	1,936,329	778,889

XML

Credit Facilities

6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Credit Facilities

Credit Facilities

On November 24, 2010, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders who are a party to the Credit Agreement. Credit extended under the Credit Agreement is guaranteed by the Company's subsidiaries and is secured by substantially all of its assets and the assets of its subsidiaries. The Credit Agreement amended and restated in its entirety the previous amended and restated credit agreement entered into on May 30, 2008, as amended (the “Previous Credit Agreement”), between the Company and certain of the parties to the Credit Agreement.

The Credit Agreement provides for a revolving credit facility in the aggregate amount of up to $50 million (the “Revolving Credit Facility”), of which up to $10 million may be used for the issuance of letters of credit and up to $5 million is available for swing line loans. Upon the prior approval of the administrative agent, the Company may increase the total revolving commitments by $50 million for a total commitment under the Revolving Credit Facility of $100 million. On July 20, 2012, the Company entered into Amendment No. 1 (the “Amendment”) to the Credit Agreement. The Amendment amends the Credit Agreement by, among other things, allowing the Company to increase the total Revolving Credit Facility commitments from $100 million to $150 million upon the prior approval of the administrative agent. The Revolving Credit Facility is available to the Company on a revolving basis until November 24, 2015. All principal and interest not previously paid on the Revolving Credit Facility will mature and be due and payable on November 24, 2015.

The Credit Agreement also provides for a term credit facility in the aggregate amount of up to $100 million (the “Term Credit Facility”). The Term Credit Facility requires amortization payments in the amount of $3.75 million for each fiscal quarter during the fiscal years ended December 31, 2011 and 2012, $5.0 million for each fiscal quarter during the fiscal years ended December 31, 2013 and 2014, and $7.5 million for each fiscal quarter during the period commencing on January 1, 2015 through the maturity date on November 24, 2015. All principal and interest not previously paid on the Term Credit Facility will mature and be due and payable on November 24, 2015. Amounts borrowed and repaid under the Term Credit Facility may not be re-borrowed. Principal payments due under the Term Credit Facility as of June 30, 2012 were as follows:

For the Twelve Months Ended June 30,	(In thousands)
2013	$	17,500
2014	20,000
2015	25,000
2016	15,000
Total	$	77,500

The Credit Agreement contains covenants which include: the Company's maintenance of certain leverage and fixed charge coverage ratios; limitations on its indebtedness, liens on its properties and assets, its investments in, and loans to other business units, its ability to enter into business combinations and asset sales; and certain other financial and non-financial covenants. These covenants also apply to certain of the Company's subsidiaries. The Company was in compliance with these covenants as of June 30, 2012 and expects it will remain in compliance with these covenants for at least the next twelve months.

Under the terms of the Credit Agreement, the Company may borrow, at its option, at interest rates equal to one, two, three or six month adjusted LIBOR rates, or equal to the greater of the prime rate, the federal funds rate plus 0.50% and the adjusted LIBOR rate plus 1%, in each case plus a margin determined by its current leverage ratio.

The weighted average interest rate at June 30, 2012 was 2.9%. Total fees and direct costs paid for the Credit Agreement through June 30, 2012 were $1.3 million. These costs are being amortized to interest expense over the life of the Credit Agreement.

At June 30, 2012, there was $77.5 million outstanding under the Term Credit Facility and $26.0 million outstanding under the Revolving Credit Facility. The $26.0 million on the Revolving Credit Facility was used to fund the acquisition of Lunch Byte and was repaid in July 2012.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 01, 2012
Entity Information [Line Items]
Entity Registrant Name	HEARTLAND PAYMENT SYSTEMS INC
Entity Central Index Key	0001144354
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		38,892,203

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Litigation—The Company is involved in ordinary course legal proceedings, which include all claims, lawsuits,investigations and proceedings, including unasserted claims, which are probable of being asserted, arising in the ordinary course ofbusiness and otherwise not described below. The Company has considered all such ordinary course legal proceedings in formulating its disclosures and assessments. In the opinion of the Company, based on consultations with outside counsel, material losses in addition to amounts previously accrued are not considered reasonably possible in connection with these ordinary course legal proceedings.

The Company has also been subject to lawsuits, claims, and investigations which resulted from the Processing System Intrusion. See Contingencies below for a description of the Processing System Intrusion.

Contingencies—The Company collects and stores sensitive data about its merchant customers and bankcard holders. If the Company’s network security is breached or sensitive merchant or cardholder data is misappropriated, the Company could be exposed to assessments, fines or litigation costs.

On January 20, 2009, the Company publicly announced the Processing System Intrusion. The Processing System Intrusion involved malicious software that appears to have been used to collect in-transit, unencrypted payment card data while it was being processed by the Company during the transaction authorization process. See Note 1. Organization and Operations - Processing System Intrusion for total expenses incurred, including amounts paid for settlement of claims, related to theProcessing System Intrusion.

The Company does not consider it a reasonable possibility that losses exceeding the amounts already recognized on the matters subject to the settlement agreements will be incurred. With regard to the unsettled claims related to the Processing System Intrusion, which the Company described in its Annual Report on Form 10-K for the year ended December 31, 2011, the Company determined material losses in addition to those previously expensed are not considered reasonably possible on any such claim disclosed. The Company is prepared to vigorously defend itself against any unsettled claims relating to the Processing System Intrusion that have been asserted against it and its sponsor banks to date. The Company feels it has strong defenses to all the claims that have been asserted against it and its sponsor banks relating to the Processing System Intrusion.

Leases—The Company leases various office spaces and certain equipment under operating leases with remaining terms ranging up to nine years. The majority of the office space lease agreements contain renewal options and generally require the Company to pay certain operating expenses.

Future minimum lease payments for all non-cancelable operating leases as of June 30, 2012 were as follows:

For the Twelve Months Ended June 30,	(In thousands)
2013	$	7,658
2014	5,476
2015	3,535
2016	2,099
2017	2,108
Thereafter	3,870
Total future minimum lease payments (a)	$	24,746

(a) There were no material capital leases at June 30, 2012

Rent expense for leased facilities and equipment was $2.0 million and $2.2 million, respectively, for the three months ended June 30, 2012 and 2011, and $4.1 million and $4.4 million, respectively, for the six months ended June 30, 2012 and 2011.

Commitments—Certain officers of the Company have entered into employee confidential information and non-competition agreements under which they are entitled to severance pay equal to their base salary and medical benefits for twelve months and a pro-rated bonus in the event they are terminated by the Company other than for cause. There were no material payouts under these agreements in the six months ended June 30, 2012 and 2011.

The following table reflects the Company’s other significant contractual obligations, including leases as discussed above, as of June 30, 2012:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 to 3 Years		3 to 5 years		More than 5 years
	(In thousands)
Processing providers (a)	$	25,277	$	9,658	$	11,849	$	3,770	$	—
Telecommunications providers	2,182		2,182		—		—		—
Office and equipment leases	24,746		7,658		9,011		4,207		3,870
Term Credit Facility (b)	77,500		17,500		45,000		15,000		—
	$	129,705	$	36,998	$	65,860	$	22,977	$	3,870

(a) The Company has agreements with several third-party processors to provide to us on a non-exclusive basis payment processing and transmittal, transaction authorization and data capture services, and access to various reporting tools. Our agreements with third-party processors require the Company to submit a minimum monthly number of transactions or volume for processing. If the Company submits a number of transactions or volume that is lower than the minimum, it is required to pay the third-party processors the fees that they would have received if the Company had submitted the required minimum number or volume of transactions.

(b) Interest rates on the Term Credit Facility are variable in nature; however, in January 2011 we entered into fixed-pay amortizing interest rate swaps having an initial notional amount of $50.0 million and a current notional amount of $38.8 million. If interest rates were to remain at the June 30, 2012 level, we would make interest payments of $2.4 million in the next 1 year, $2.7 million in the next 1 to 3 years and $0.1 million in the next 3 to 5 years or a total of $5.2 million including net settlements on the fixed-pay amortizing interest rate swaps. In addition, we had $26.0 million outstanding under our Revolving Credit Facility at June 30, 2012. The Revolving Credit Facility is available on a revolving basis until November 24, 2015.

XML

Condensed Consolidated Statements of Income and Comprehensive Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Total revenues	$ 518,521	$ 525,977	$ 989,006	$ 993,623
Costs of services:
Interchange	330,742	365,207	628,690	686,006
Dues, assessments and fees	52,505	38,551	96,373	72,701
Processing and servicing	57,188	55,359	113,910	107,915
Customer acquisition costs	11,263	12,130	22,699	23,788
Depreciation and amortization	4,506	3,701	8,892	7,576
Total costs of services	456,204	474,948	870,564	897,986
General and administrative	32,584	29,377	65,466	59,423
Total expenses	488,788	504,325	936,030	957,409
Income from operations	29,733	21,652	52,976	36,214
Other income (expense):
Interest income	45	41	160	82
Interest expense	(756)	(1,116)	(1,606)	(2,308)
Provision for processing system intrusion costs	(81)	(372)	(238)	(675)
Other, net	(4)	(308)	(4)	(745)
Total other income (expense)	(796)	(1,755)	(1,688)	(3,646)
Income before income taxes	28,937	19,897	51,288	32,568
Provision for income taxes	10,975	7,505	19,474	12,314
Net income	17,962	12,392	31,814	20,254
Less: Net income attributable to noncontrolling interests	161	134	259	181
Net income attributable to Heartland	17,801	12,258	31,555	20,073
Net income	17,962	12,392	31,814	20,254
Other comprehensive income (loss):
Unrealized gains on investments, net of income tax of $2, $0, $10 and $2	4	0	15	5
Unrealized losses on derivative financial instruments	(3)	(536)	(9)	(582)
Foreign currency translation adjustment	(267)	97	(36)	453
Comprehensive income	17,696	11,953	31,784	20,130
Less: Comprehensive income attributable to noncontrolling interests	81	163	248	317
Comprehensive income attributable to Heartland	$ 17,615	$ 11,790	$ 31,536	$ 19,813
Earnings per common share:
Basic	$ 0.46	$ 0.32	$ 0.81	$ 0.52
Diluted	$ 0.44	$ 0.31	$ 0.78	$ 0.50
Weighted average number of common shares outstanding:
Basic	38,844	38,792	38,840	38,625
Diluted	40,448	40,128	40,504	39,934

XML

Funds Held for Payroll Customers and Investments

6 Months Ended

Jun. 30, 2012

Funds Held for Payroll Customers and Investments [Abstract]

Funds Held for Payroll Customers and Investments

Funds Held for Payroll Customers and Investments

A summary of Funds held for payroll customers and investments, including the cost, gross unrealized gains (losses) and estimated fair value for investments held to maturity and investments available-for-sale by major security type and class of security were as follows at June 30, 2012 and December 31, 2011:

	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
June 30, 2012
Funds Held for Payroll Customers:
Fixed income bond fund - available for sale	$	968	$	214	$	—	$	1,182
Cash held for payroll customers	47,677		—		—		47,677
Total Funds held for payroll customers	$	48,645	$	214	$	—	$	48,859
Investments:
Investments held to maturity – Certificates of deposit (a)	$	3,711	$	—	$	—	$	3,711
Total investments	$	3,711	$	—	$	—	$	3,711

(a) Certificates of deposit have remaining terms ranging from 1 month to 14 months.

	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
December 31, 2011
Funds Held for Payroll Customers:
Fixed income bond fund - available for sale	$	968	$	190	$	—	$	1,158
Cash held for payroll customers	41,353		—		—		41,353
Total Funds held for payroll customers	$	42,321	$	190	$	—	$	42,511
Investments:
Investments held to maturity – Certificates of deposit	$	2,505	$	—	$	—	$	2,505
Total investments	$	2,505	$	—	$	—	$	2,505

During the six months ended June 30, 2012 and during the twelve months ended December 31, 2011, the Company did not experience any other-than-temporary losses on its investments.

The maturity schedule of all available-for-sale debt securities and held to maturity investments along with amortized cost and estimated fair value as of June 30, 2012 is as follows:

	Amortized Cost		Estimated Fair Value
	(In thousands)
Due in one year or less	$	4,581	$	4,795
Due after one year through five years	98		98
	$	4,679	$	4,893

XML

Receivables

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Receivables

Receivables

A summary of receivables by major class was as follows at June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
	(In thousands)
Accounts receivable from merchants	$	165,784		$	151,228
Accounts receivable from bankcard networks	14,298			24,301
Accounts receivable from others	1,433			2,457
	181,515			177,986
Less allowance for doubtful accounts	(1,419		)	(1,451		)
Total receivables, net	$	180,096		$	176,535

Included in accounts receivable from others are amounts due from employees which are $0.6 million at June 30, 2012 and December 31, 2011, respectively. Accounts receivable related to bankcard networks are primarily amounts which were pre-funded to merchants for processing Discover and American Express bankcard transactions as well as amounts due from Visa for PIN debit transactions.

A summary of the activity in the allowance for doubtful accounts for the three and six months ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	1,453		$	898		$	1,451		$	683
Additions to allowance	307			570			390			1,270
Charges against allowance	(341		)	(261		)	(422		)	(746		)
Ending balance	$	1,419		$	1,207		$	1,419		$	1,207

XML

Organization and Operations (Tables) (Visa And MasterCard [Member])

6 Months Ended

Jun. 30, 2012

Visa And MasterCard [Member]

Bankcard Processing Volume [Line Items]

Bankcard Processing Volume

Following is a breakout of the Company’s total Visa and MasterCard settled bankcard processing volume for the month ending June 30, 2012 by percentage processed under its individual bank sponsorship agreements:

Sponsor Bank	% of June 2012 Bankcard Processing Volume
KeyBank, National Association	64%
The Bancorp Bank	15%
Barclays Bank Delaware	13%
Heartland Bank	8%

XML

Segments

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Segments

Segments

The determination of the Company's business segments is based on how the Company monitors and manages the performance of its operations. The Company's operating segments are strategic business units that offer different products and services. They are managed separately because each business requires different marketing strategies, personnel skill sets and technology.

The Company has two reportable segments, as follows: (1) Card, which provides payment processing and related services for bankcard transactions and (2) Other. The Card segment also includes CPOS and Network Services. The Other segment includes Payroll, which provides payroll and related tax filing services, PrepaidCard, which provides prepaid card, stored-value card and loyalty and gift card solutions, and Heartland School Solutions, which provides point-of-sale platforms designed to facilitate food service operations. None of these businesses aggregated in the Other segments meet the defined operating thresholds for disclosing individually as reportable segments.

The Company allocates revenues, expenses, assets and liabilities to segments only where directly attributable. The unallocated corporate administration amounts are costs attributed to finance, corporate administration, human resources and corporate services. At June 30, 2012 and 2011, 30% and 37% respectively, of the Other segment's total assets were funds that the Company holds as a fiduciary in its Payroll services activities for payment to taxing authorities. At June 30, 2012 and 2011, 41% and 25% respectively, of the Other segment's total assets was goodwill. Reconciling items include eliminations of intercompany investments and receivables.

A summary of the Company’s segments for the three and six month periods ended June 30, 2012 and 2011 was as follows:

	Card Segment		Other Segment		Unallocated Corporate Administration Amounts			Reconciling Items			Total Amount
	(In thousands)
Three Months Ended June 30, 2012
Total revenues	$	502,514	$	16,086	$	—		$	(79	)	$	518,521
Depreciation and amortization	5,990		1,286		55			—			7,331
Interest income	45		—		—			—			45
Interest expense	833		2		—			(79		)	756
Net income attributable to Heartland	19,570		1,948		(3,717		)	—			17,801
Total assets	647,956		161,516		—			(169,567		)	639,905

Three Months Ended June 30, 2011
Total revenues	$	513,632	$	12,395		$	—		$	(50	)	$	525,977
Depreciation and amortization	6,013		817			121			—			6,951
Interest income	41		—			—			—			41
Interest expense	1,165		1			—			(50		)	1,116
Net income attributable to Heartland	16,645		(148		)	(4,239		)	—			12,258
Total assets	647,216		85,540			—			(153,602		)	579,154

Six Months Ended June 30, 2012
Total revenues	$	949,733	$	39,416	$	—		$	(143	)	$	989,006
Depreciation and amortization	12,027		2,576		111			—			14,714
Interest income	160		—		—			—			160
Interest expense	1,745		4		—			(143		)	1,606
Net income attributable to Heartland	35,634		4,038		(8,117		)	—			31,555
Total assets	647,956		161,516		—			(169,567		)	639,905

Six Months Ended June 30, 2011
Total revenues	$	968,630	$	25,093	$	—		$	(100	)	$	993,623
Depreciation and amortization	12,159		1,618		246			—			14,023
Interest income	82		—		—			—			82
Interest expense	2,405		3		—			(100		)	2,308
Net income attributable to Heartland	28,140		451		(8,518		)	—			20,073
Total assets	647,216		85,540		—			(153,602		)	579,154

XML

Processing Liabilities and Loss Reserves

6 Months Ended

Jun. 30, 2012

Processing Liabilities and Loss Reserves [Abstract]

Processing Liabilities and Loss Reserves

Processing Liabilities and Loss Reserves

The majority of our processing liabilities include funds in transit associated with bankcard and check processing. In addition, we maintain merchant deposits to offset potential liabilities from merchant chargeback processing. A summary of processing liabilities and loss reserves was as follows at June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
	(In thousands)
Merchant bankcard processing	$	14,371	$	10,295
Check processing	12,239		8,594
Merchant deposits	8,642		9,839
Loss reserves	1,977		1,961
	$	37,229	$	30,689

The Company's bankcard processing merchants have the liability for any charges properly reversed by the cardholder through a mechanism known as a chargeback. If the merchant is unable to pay this amount, the Company will be liable to the card brand networks for the reversed charges. The Company has determined that the fair value of its obligation to stand ready to perform is minimal. The Company requires personal guarantees and merchant deposits from certain merchants to minimize its obligation.

The card brand networks generally allow chargebacks up to four months after the later of the date the transaction is processed or the delivery of the product or service to the cardholder. As the majority of the Company's SME merchant transactions involve the delivery of the product or service at the time of the transaction, a reasonable basis for determining an estimate of the Company's exposure to chargebacks is the last four months' processing volume on the SME portfolio, which was $24.7 billion and $22.3 billion for the four months ended June 30, 2012 and December 31, 2011, respectively. However, for the four months ended June 30, 2012 and December 31, 2011, the Company was presented with $11.1 million and $12.2 million, respectively, in chargebacks by issuing banks. In the six months ended June 30, 2012 and 2011, the Company incurred merchant credit losses of $0.9 million and $2.9 million, respectively, on total SME bankcard dollar volumes processed of $35.3 billion and $32.9 billion, respectively. These credit losses are included in processing and servicing costs in the Company's Condensed Consolidated Statement of Income and Other Comprehensive Income.

The loss recorded by the Company for chargebacks associated with any individual merchant is typically small, due both to the relatively small size and the processing profile of the Company's SME merchants. However, from time to time the Company will encounter instances of merchant fraud, and the resulting chargeback losses may be considerably more significant to the Company. The Company has established a contingent reserve for estimated credit and fraud losses on its Condensed Consolidated Balance Sheet, amounting to $2.0 million at June 30, 2012 and at December 31, 2011. This reserve is determined by performing an analysis of the Company's historical loss experience applied to current processing volume and exposures.

A summary of the activity in the loss reserve for the three and six months ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	1,960		$	1,739		$	1,961		$	1,667
Additions to reserve	928			1,892			1,195			3,381
Charges against reserve (a)	(911		)	(1,775		)	(1,179		)	(3,192		)
Ending balance	$	1,977		$	1,856		$	1,977		$	1,856

(a)Included in these amounts are payroll segment losses of $36,000 and $20,000, respectively, for the three months ended June 30, 2012 and 2011, and $48,000 and $79,000, respectively, for the six months ended June 30, 2012 and 2011.

XML

Earnings Per Share (Schedule of Calculation of Numerator and Denominator in Earnings Per Share) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Earnings Per Share, Basic:
Net income attributable to Heartland	$ 17,801	$ 12,258	$ 31,555	$ 20,073
Basic weighted average common stock outstanding	38,844	38,792	38,840	38,625
Earnings per share, basic (in dollars per share)	$ 0.46	$ 0.32	$ 0.81	$ 0.52
Earnings Per Share, Diluted:
Net income attributable to Heartland	$ 17,801	$ 12,258	$ 31,555	$ 20,073
Basic weighted average common stock outstanding	38,844	38,792	38,840	38,625
Stock options and restricted share units	1,604	1,336	1,664	1,309
Diluted weighted average shares outstanding	40,448	40,128	40,504	39,934
Earnings per share, diluted (in dollars per share)	$ 0.44	$ 0.31	$ 0.78	$ 0.50

XML

Capitalized Customer Acquisition Costs, Net

6 Months Ended

Jun. 30, 2012

Capitalized Customer Acquisition Costs, Net [Abstract]

Capitalized Customer Acquisition Costs, Net

Capitalized Customer Acquisition Costs, Net

A summary of net capitalized customer acquisition costs as of June 30, 2012 and December 31, 2011 was as follows:

	June 30, 2012			December 31, 2011
	(In thousands)
Capitalized signing bonuses	$	85,669		$	86,837
Less accumulated amortization	(43,149		)	(45,125		)
	42,520			41,712
Capitalized customer deferred acquisition costs	36,767			36,564
Less accumulated amortization	(23,064		)	(23,262		)
	13,703			13,302
Capitalized customer acquisition costs, net	$	56,223		$	55,014

A summary of the activity in capitalized customer acquisition costs, net for the three and six month periods ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Balance at beginning of period	$	55,339		$	57,316		$	55,014		$	59,251
Plus additions to:
Capitalized signing bonuses, net	7,907			7,045			15,461			14,161
Capitalized customer deferred acquisition costs	4,289			3,612			8,257			6,942
	12,196			10,657			23,718			21,103
Less amortization expense on:
Capitalized signing bonuses, net	(7,332		)	(8,091		)	(14,653		)	(16,605		)
Capitalized customer deferred acquisition costs	(3,980		)	(3,928		)	(7,856		)	(7,795		)
	(11,312		)	(12,019		)	(22,509		)	(24,400		)
Balance at end of period	$	56,223		$	55,954		$	56,223		$	55,954

Net signing bonus adjustments from estimated amounts to actual were $(0.8) million and $(0.2) million, respectively, for the three months ended June 30, 2012 and 2011, and $(1.5) million and $(0.4) million, respectively, for the six months ended June 30, 2012 and 2011. Net signing bonus adjustments are netted against additions in the table above. Negative signing bonus adjustments occur when the actual gross margin generated by the merchant contract during the first year is less than the estimated gross margin for that year, resulting in the overpayment of the up-front signing bonus and would be recovered from the relevant salesperson. Positive signing bonus adjustments result from the prior underpayment of signing bonuses and would be paid to the relevant salesperson.

Fully amortized signing bonuses of $8.4 million and $11.2 million were written off during the three month periods ended June 30, 2012 and 2011, respectively, and $16.4 million and $23.5 million respectively, were written off during the six month periods ended June 30, 2012 and 2011. In addition, fully amortized customer deferred acquisition costs of $4.2 million and $3.9 million, respectively, were written off during the three months ended June 30, 2012 and 2011, and $8.1 million and $7.7 million, respectively, were written off during the six months ended June 30, 2012 and 2011.

The Company believes that no impairment of capitalized customer acquisition costs has occurred as of June 30, 2012 and December 31, 2011.

XML

Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

Intangible Assets and Goodwill

Intangible Assets — Intangible assets consisted of the following as of June 30, 2012 and December 31, 2011:

	June 30, 2012						Amortization Life and Method
	Gross Assets		Accumulated Amortization		Net Assets
	(In thousands)
Finite Lived Assets:
Customer relationships	$	39,537	$	6,711	$	32,826	3 to 18 years—proportional cash flow
Merchant portfolio	3,345		2,084		1,261		7 years—proportional cash flow
Software	10,152		8,928		1,224		1 to 5 years—straight line
Non-compete agreements	3,323		1,346		1,977		3 to 5 years—straight line
Other	454		383		71		2 to 9 years—straight line
	$	56,811	$	19,452	$	37,359

	December 31, 2011						Amortization Life and Method
	Gross Assets		Accumulated Amortization		Net Assets
	(In thousands)
Finite Lived Assets:
Customer relationships	$	33,166	$	5,406	$	27,760	3 to 18 years—proportional cash flow
Merchant portfolio	3,345		1,819		1,526		7 years—proportional cash flow
Software	10,078		8,612		1,466		2 to 5 years—straight line
Non-compete agreements	2,794		1,126		1,668		3 to 5 years—straight line
Other	457		379		78		2 to 9 years—straight line
	$	49,840	$	17,342	$	32,498

Amortization expense related to the intangible assets was $1.1 million and $1.2 million, respectively, for the three months ended June 30, 2012 and 2011 and $2.2 million and $2.7 million for the six months ended June 30, 2012 and 2011, respectively. The estimated remaining amortization expense related to intangible assets in twelve month increments is as follows:

For the Twelve Months Ended June 30,
	(In thousands)
2013	$	6,041
2014	5,269
2015	4,582
2016	4,021
2017	2,926
Thereafter	14,520
	$	37,359

Goodwill — The changes in the carrying amount of goodwill for the six months ended June 30, 2012 and 2011 were as follows:

	Six Months Ended June 30,
	2012			2011
	(In thousands)
Beginning balance	$	103,399		$	68,319
Goodwill acquired during the period	15,231			5,987
Effects of foreign currency translation	(20		)	353
Other (a)	—			456
Ending balance	$	118,610		$	75,115

(a) Reflects adjustments to allocations of purchase price.

XML

Accrued Buyout Liability

6 Months Ended

Jun. 30, 2012

Accrued Buyout Liability [Abstract]

Accrued Buyout Liability

Accrued Buyout Liability

A summary of the accrued buyout liability was as follows as of June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
	(In thousands)
Vested Relationship Managers and sales managers	$	32,576		$	30,269
Unvested Relationship Managers and sales managers	874			1,389
	33,450			31,658
Less current portion	(9,232		)	(8,104		)
Long-term portion of accrued buyout liability	$	24,218		$	23,554

In calculating the accrued buyout liability for unvested Relationship Managers and sales managers, the Company has assumed that 31% of the unvested Relationship Managers and sales managers will vest in the future, which represents the Company’s historical vesting rate. A 5% increase to 36% in the expected vesting rate would have increased the accrued buyout liability for unvested Relationship Managers and sales managers by $0.1 million at June 30, 2012 and December 31, 2011.

A summary of the activity in the accrued buyout liability for the three and six months ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	33,568		$	28,242		$	31,658		$	28,810
Increase in settlement obligation, net	4,240			3,723			8,447			6,330
Buyouts	(4,358		)	(4,101		)	(6,655		)	(7,276		)
Ending balance	$	33,450		$	27,864		$	33,450		$	27,864

XML

Segments (Tables)

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

A summary of the Company’s segments for the three and six month periods ended June 30, 2012 and 2011 was as follows:

	Card Segment		Other Segment		Unallocated Corporate Administration Amounts			Reconciling Items			Total Amount
	(In thousands)
Three Months Ended June 30, 2012
Total revenues	$	502,514	$	16,086	$	—		$	(79	)	$	518,521
Depreciation and amortization	5,990		1,286		55			—			7,331
Interest income	45		—		—			—			45
Interest expense	833		2		—			(79		)	756
Net income attributable to Heartland	19,570		1,948		(3,717		)	—			17,801
Total assets	647,956		161,516		—			(169,567		)	639,905

Three Months Ended June 30, 2011
Total revenues	$	513,632	$	12,395		$	—		$	(50	)	$	525,977
Depreciation and amortization	6,013		817			121			—			6,951
Interest income	41		—			—			—			41
Interest expense	1,165		1			—			(50		)	1,116
Net income attributable to Heartland	16,645		(148		)	(4,239		)	—			12,258
Total assets	647,216		85,540			—			(153,602		)	579,154

Six Months Ended June 30, 2012
Total revenues	$	949,733	$	39,416	$	—		$	(143	)	$	989,006
Depreciation and amortization	12,027		2,576		111			—			14,714
Interest income	160		—		—			—			160
Interest expense	1,745		4		—			(143		)	1,606
Net income attributable to Heartland	35,634		4,038		(8,117		)	—			31,555
Total assets	647,956		161,516		—			(169,567		)	639,905

Six Months Ended June 30, 2011
Total revenues	$	968,630	$	25,093	$	—		$	(100	)	$	993,623
Depreciation and amortization	12,159		1,618		246			—			14,023
Interest income	82		—		—			—			82
Interest expense	2,405		3		—			(100		)	2,308
Net income attributable to Heartland	28,140		451		(8,518		)	—			20,073
Total assets	647,216		85,540		—			(153,602		)	579,154

XML

Intangible Assets and Goodwill (Schedule of Goodwill) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011
Goodwill [Roll Forward]
Beginning balance	$ 103,399		$ 68,319
Goodwill acquired during the period	15,231		5,987
Effects of foreign currency translation	(20)		353
Other	0	[1]	456	[1]
Ending balance	$ 118,610		$ 75,115

[1] Reflects adjustments to allocations of purchase price.

XML

Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2012

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company applies a fair value framework in order to measure and disclose its financial assets and liabilities which include fixed income equity securities, interest swap derivatives and certain other financial instruments. The Company determines fair value based on quoted prices when available or through the use of alternative approaches when market quotes are not readily accessible or available. The Company carries its liabilities at fair value, including its derivative liabilities.

The Company’s framework for measuring fair value provides a three-level hierarchy, which prioritizes the factors (inputs) used to calculate the fair value of assets and liabilities as follows:

• Level 1 inputs are unadjusted quoted prices, such as a New York Stock Exchange closing price, in active markets for identical assets. Level 1 is the highest priority in the hierarchy.

• Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as other significant inputs that are observable at commonly quoted intervals, such as interest rates, foreign exchange rates, and yield curves.

• Level 3 inputs are unobservable and are based on company assumptions due to little, if any, observable market information. Level 3 is the lowest priority in the hierarchy.

For the six months ended June 30, 2012, there have been no transfers between Level 1 and Level 2 categories. As of June 30, 2012, the Company owns no Level 3 assets or liabilities. The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2012 and at December 31, 2011:

June 30, 2012	Total		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:	(In thousands)
Investments available for sale:
Fixed income bond fund (a)	$	1,182	$	1,182	$	—
Investments held to maturity:
Certificates of deposit	3,711		—		3,711
Total assets	$	4,893	$	1,182	$	3,711
Liabilities:
Interest rate swaps	$	914	$	—	$	914
Total liabilities	$	914	$	—	$	914

December 31, 2011	Total		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:	(In thousands)
Investments available for sale:
Fixed income bond fund (a)	$	1,158	$	1,158	$	—
Investments held to maturity:
Certificates of deposit	2,505		—		2,505
Total assets	$	3,663	$	1,158	$	2,505
Liabilities:
Interest rate swaps	$	897	$	—	$	897
Total liabilities	$	897	$	—	$	897

(a) Amounts included in Funds held for payroll customers on the Condensed Consolidated Balance Sheet

At June 30, 2012 and December 31, 2011, all investments in available-for-sale securities held by the Company were measured using Level 1 inputs and all held to maturity investments held by the Company were measured using Level 2 inputs.

The Company’s liabilities include interest rate swaps that are measured at fair value using observable market inputs including the Company’s credit risk and its counterparties’ credit risks. Based on these inputs, the interest rate swaps are classified within Level 2 of the valuation hierarchy. Based on the Company’s continued ability to enter into these swaps, the Company considers the markets for its fair value instruments to be active.

The carrying amounts of the Company's cash and cash equivalents and cash held for payroll customers approximate fair value as of June 30, 2012 and December 31, 2011, because they bear interest at market rates and had maturities of less than 90 days at the time of purchase. This fair value measurement is classified as Level 1. The carrying amount of the Company's accounts receivable, accounts payable, and accrued expenses approximates fair value as of June 30, 2012 and December 31, 2011, because of the relatively short timeframe to realization. This fair value measurement is classified as Level 2.

XML

Receivables (Tables)

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

A summary of receivables by major class was as follows at June 30, 2012 and December 31, 2011:

	June 30, 2012			December 31, 2011
	(In thousands)
Accounts receivable from merchants	$	165,784		$	151,228
Accounts receivable from bankcard networks	14,298			24,301
Accounts receivable from others	1,433			2,457
	181,515			177,986
Less allowance for doubtful accounts	(1,419		)	(1,451		)
Total receivables, net	$	180,096		$	176,535

Summary of Allowance for Doubtful Accounts Receivables

A summary of the activity in the allowance for doubtful accounts for the three and six months ended June 30, 2012 and 2011 was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	1,453		$	898		$	1,451		$	683
Additions to allowance	307			570			390			1,270
Charges against allowance	(341		)	(261		)	(422		)	(746		)
Ending balance	$	1,419		$	1,207		$	1,419		$	1,207

XML

Intangible Assets and Goodwill (Schedule of Finite-Lived Intangible Assets by Major Class) (Details) (USD $)	3 Months Ended		6 Months Ended			6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Jun. 30, 2012 Customer relationships Y	Dec. 31, 2011 Customer relationships Y	Jun. 30, 2012 Merchant Portfolio Y	Dec. 31, 2011 Merchant Portfolio Y	Jun. 30, 2012 Software Y	Dec. 31, 2011 Software Y	Jun. 30, 2012 Non-compete agreements Y	Dec. 31, 2011 Non-compete agreements Y	Jun. 30, 2012 Other Y	Dec. 31, 2011 Other Y
Finite Lived Assets:
Gross Assets	$ 56,811,000		$ 56,811,000		$ 49,840,000	$ 39,537,000	$ 33,166,000	$ 3,345,000	$ 3,345,000	$ 10,152,000	$ 10,078,000	$ 3,323,000	$ 2,794,000	$ 454,000	$ 457,000
Accumulated Amortization	19,452,000		19,452,000		17,342,000	6,711,000	5,406,000	2,084,000	1,819,000	8,928,000	8,612,000	1,346,000	1,126,000	383,000	379,000
Net Asset	37,359,000		37,359,000		32,498,000	32,826,000	27,760,000	1,261,000	1,526,000	1,224,000	1,466,000	1,977,000	1,668,000	71,000	78,000
Amortization life and method, useful life, minimum (in years)						3	3			1	2	3	3	2	2
Amortization life and method, useful life, maximum (in years)						18	18	7	7	5	5	5	5	9	9
Finite-Lived intangible assets, amortization expense	$ 1,100,000	$ 1,200,000	$ 2,200,000	$ 2,700,000

XML

Acquisitions (Narrative) (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012 Lunchbox school	Dec. 30, 2010 Lunchbox	Jun. 30, 2012 Comalex school	Jan. 12, 2011 Comalex	Jun. 30, 2012 mySchoolBucks school	Feb. 04, 2011 mySchoolBucks	Jun. 30, 2012 School-Link Technologies school	Sep. 30, 2011 School-Link Technologies	Jun. 30, 2012 Lunch Byte Systems school	Jun. 29, 2012 Lunch Byte Systems
Business Acquisition [Line Items]
Approximate number of schools served	4,400		3,700		900		10,000		10,000
Cost of acquired entity, cash payment		$ 7.7		$ 6.1		$ 1.5		$ 15.6		$ 26.0
Business Acquisition, Purchase Price Allocation
Goodwill		6.0		4.9		1.0		28.7		15.2
Intangible assets		1.9		1.8		0.5		4.3		7.0
Net tangible liabilities		(0.2)		(0.6)				(17.4)
Business Acquisition, Purchase Price Allocation, Tangible Assets										$ 3.8

XML

Consolidated Statements of Operations and Comprehensive Income (Loss) Parentheticals (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Statement of Income and Comprehensive Income [Abstract]
Unrealized (losses) gains on investments, tax	$ 2	$ 0	$ 10	$ 2

XML

Acquisitions

6 Months Ended

Jun. 30, 2012

Business Combinations [Abstract]

Acquisitions

Acquisitions

The Company initiated its Heartland School Solutions product through its acquisitions of the school solutions businesses operated by Lunchbox, Comalex, mySchoolBucks, School-Link Technologies and Lunch Byte Systems. Lunchbox, Comalex, mySchoolBucks, School-Link Technologies and Lunch Byte Systems, Inc. serve approximately 4,400, 3,700, 900, 10,000, and 10,000 schools, respectively. The combined Heartland School Solutions develops, manufactures, sells, services and maintains computer software designed to facilitate accounting and management functions of school food service operations. These acquisitions provide the Company with the ability to offer Internet payment capability to parents, which facilitates on-line deposits of funds into student accounts and enables schools to operate more efficiently. The Company plans to consolidate the individual platforms and products of Lunchbox, Comalex, mySchoolBucks, School-Link Technologies and Lunch Byte Systems, Inc. to optimize synergies, cost efficiencies and product offerings to customers. Pro forma results of operations have not been presented because the effect of these acquisitions was not material. The entire amount of goodwill is expected to be deductible for income tax reporting. Details of the individual acquisition transactions follow:

Lunchbox

On December 30, 2010, the Company purchased for a $7.7 million cash payment the net assets of the K to 12 school solutions business previously operated by Lunchbox. The acquisition was financed through a combination of cash on hand and our credit facilities. Pro forma results of operations have not been presented because the effect of the acquisition was not material. The transaction was accounted for under the purchase method of accounting. Beginning December 30, 2010, Lunchbox's results of operations are included in the Company's results of operations. The allocation of the total purchase price was as follows: $6.0 million to goodwill, $1.9 million to intangible assets and $0.2 million to net tangible liabilities.

Comalex, Inc.

On January 12, 2011, the Company purchased for a $6.1 million cash payment the net assets of Comalex, Inc. The acquisition was funded with cash on hand. Pro forma results of operations have not been presented because the effect of the acquisition was not material. The transaction was accounted for under the purchase method of accounting. Beginning January 12, 2011, Comalex's results of operations are included in the Company's results of operations. The allocation of the total purchase price was as follows: $4.9 million to goodwill, $1.8 million to intangible assets and $0.6 million to net tangible liabilities.

mySchoolBucks, LLC

On February 4, 2011, the Company purchased for a $1.5 million cash payment the net assets of mySchoolBucks, LLC. The acquisition was funded with cash on hand. Pro forma results of operations have not been presented because the effect of the acquisition was not material. The transaction was accounted for under the purchase method of accounting. Beginning February 4, 2011, mySchoolBucks' results of operations are included in the Company's results of operations. The allocation of the total purchase price was as follows: $1.0 million to goodwill and $0.5 million to intangible assets.

School-Link Technologies, Inc.

On September 30, 2011, the Company purchased for a $15.6 million cash payment the net assets of School-Link Technologies, Inc. The acquisition was funded with cash on hand. The transaction was accounted for under the purchase method of accounting. Beginning October 1, 2011, School-Link's results of operations are included in the Company's results of operations. The allocation of the total purchase price was as follows: $28.7 million to goodwill, $4.3 million to intangible assets and $17.4 million to net tangible liabilities. The fair values of the School-Link Technologies' assets acquired and liabilities assumed were estimated as of their acquisition date. The fair values are preliminary, based on estimates, and may be adjusted as more information becomes available and valuations are finalized.

Lunch Byte Systems, Inc.

On June 29, 2012, the Company purchased for a $26.0 million cash payment the net assets of Lunch Byte Systems, Inc. (a.k.a. "Nutrikids"). The $26.0 million cash payment made on June 29, 2012 was funded through our Revolving Credit Facility and subsequently repaid with cash on hand in July 2012. Beginning July 1, 2012, Lunch Byte's results of operations will be included in the Company's results of operations. The transaction was accounted for under the purchase method of accounting. The allocation of the total purchase price was as follows: $15.2 million to goodwill, $7.0 million to intangible assets and $3.8 million to net tangible assets. The fair values of the Lunch Byte Systems' assets acquired and liabilities assumed were estimated as of their acquisition date. The fair values are preliminary, based on estimates, and may be adjusted as more information becomes available and valuations are finalized. The weighted average amortization life for the 2012 acquired finite lived intangible assets related to acquisition of Lunch Byte is as follows:

Weighted-average amortization life
	(In years)
Customer relationships	6.0
Software	3.3
Non-compete agreements	5.0
Total	5.9

XML

Commitments and Contingencies (Schedule of Contractual Obligations) (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011	Jan. 31, 2011
Other significant contractual obligations:
Total	$ 129,705,000
Less than 1 year	36,998,000
1 to 3 years	65,860,000
3 to 5 years	22,977,000
More than 5 years	3,870,000
Notional amount of fixed-pay amortizing interest rate swaps	38,800,000		42,500,000	50,000,000
Contractual obligation, total	129,705,000
Processing providers [Member]
Other significant contractual obligations:
Total	25,277,000	[1]
Less than 1 year	9,658,000	[1]
1 to 3 years	11,849,000	[1]
3 to 5 years	3,770,000	[1]
More than 5 years	0	[1]
Contractual obligation, total	25,277,000	[1]
Telecommunications providers [Member]
Other significant contractual obligations:
Total	2,182,000
Less than 1 year	2,182,000
1 to 3 years	0
3 to 5 years	0
More than 5 years	0
Contractual obligation, total	2,182,000
Office and equipment leases [Member]
Other significant contractual obligations:
Total	24,746,000
Less than 1 year	7,658,000
1 to 3 years	9,011,000
3 to 5 years	4,207,000
More than 5 years	3,870,000
Contractual obligation, total	24,746,000
Term Credit Facility [Member]
Other significant contractual obligations:
Total	77,500,000	[2]
Less than 1 year	17,500,000	[2]
1 to 3 years	45,000,000	[2]
3 to 5 years	15,000,000	[2]
More than 5 years	0	[2]
Contractual obligation, total	77,500,000	[2]
Interest Payments Including Net Settlements On Interest Rate Swaps [Member] | Term Credit Facility [Member]
Other significant contractual obligations:
Total	5,200,000
Less than 1 year	2,400,000
1 to 3 years	2,700,000
3 to 5 years	100,000
Contractual obligation, total	5,200,000
Revolving Credit Facility [Member]
Other significant contractual obligations:
Credit agreement, amount outstanding	$ 26,000,000

[1] The Company has agreements with several third-party processors to provide to us on a non-exclusive basis payment processing and transmittal, transaction authorization and data capture services, and access to various reporting tools. Our agreements with third-party processors require the Company to submit a minimum monthly number of transactions or volume for processing. If the Company submits a number of transactions or volume that is lower than the minimum, it is required to pay the third-party processors the fees that they would have received if the Company had submitted the required minimum number or volume of transactions.

[2] Interest rates on the Term Credit Facility are variable in nature; however, in January 2011 we entered into fixed-pay amortizing interest rate swaps having an initial notional amount of $50.0 million and a current notional amount of $38.8 million. If interest rates were to remain at the June 30, 2012 level, we would make interest payments of $2.4 million in the next 1 year, $2.7 million in the next 1 to 3 years and $0.1 million in the next 3 to 5 years or a total of $5.2 million including net settlements on the fixed-pay amortizing interest rate swaps. In addition, we had $26.0 million outstanding under our Revolving Credit Facility at June 30, 2012. The Revolving Credit Facility is available on a revolving basis until November 24, 2015.

XML

Funds Held for Payroll Customers and Investments (Tables)

6 Months Ended

Jun. 30, 2012

Funds Held for Payroll Customers and Investments [Abstract]

Funds Held for Payroll Customers and Investments

	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
December 31, 2011
Funds Held for Payroll Customers:
Fixed income bond fund - available for sale	$	968	$	190	$	—	$	1,158
Cash held for payroll customers	41,353		—		—		41,353
Total Funds held for payroll customers	$	42,321	$	190	$	—	$	42,511
Investments:
Investments held to maturity – Certificates of deposit	$	2,505	$	—	$	—	$	2,505
Total investments	$	2,505	$	—	$	—	$	2,505

A summary of Funds held for payroll customers and investments, including the cost, gross unrealized gains (losses) and estimated fair value for investments held to maturity and investments available-for-sale by major security type and class of security were as follows at June 30, 2012 and December 31, 2011:

	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
June 30, 2012
Funds Held for Payroll Customers:
Fixed income bond fund - available for sale	$	968	$	214	$	—	$	1,182
Cash held for payroll customers	47,677		—		—		47,677
Total Funds held for payroll customers	$	48,645	$	214	$	—	$	48,859
Investments:
Investments held to maturity – Certificates of deposit (a)	$	3,711	$	—	$	—	$	3,711
Total investments	$	3,711	$	—	$	—	$	3,711

(a) Certificates of deposit have remaining terms ranging from 1 month to 14 months.

Investments Classified by Contractual Maturity Date

The maturity schedule of all available-for-sale debt securities and held to maturity investments along with amortized cost and estimated fair value as of June 30, 2012 is as follows:

	Amortized Cost		Estimated Fair Value
	(In thousands)
Due in one year or less	$	4,581	$	4,795
Due after one year through five years	98		98
	$	4,679	$	4,893

XML

Summary of Significant Accounting Policies (Details) (USD $)	0 Months Ended	3 Months Ended	6 Months Ended		12 Months Ended						3 Months Ended
	Oct. 21, 2011	Mar. 31, 2012	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Jan. 31, 2011	Jun. 30, 2012 Funding advances [Member]	Dec. 31, 2011 Funding advances [Member]	Dec. 31, 2011 Restricted Stock Units Performance Based [Member]	Dec. 31, 2010 Restricted Stock Units Performance Based [Member]	Dec. 31, 2011 Restricted Share Units, 2011 [Member]	Dec. 31, 2011 Two Year Period Ending December 31 2013 [Member]	Jun. 30, 2012 Cash held for payroll customers [Member]	Dec. 31, 2011 Cash held for payroll customers [Member]	Dec. 31, 2011 Maximum [Member] Restricted Stock Units Performance Based [Member]	Jun. 30, 2012 Fair Value, Measurements, Recurring [Member]	Dec. 31, 2011 Fair Value, Measurements, Recurring [Member]	Jun. 30, 2012 Fair Value, Measurements, Recurring [Member] Fair Value, Inputs, Level 2 [Member]	Dec. 31, 2011 Fair Value, Measurements, Recurring [Member] Fair Value, Inputs, Level 2 [Member]
Significant Accounting Policies [Line Items]
Cash Used To Fund Merchant Advances			$ 48,500,000		$ 40,000,000
Processing-related cash in transit and collateral			29,000,000		28,000,000
Due to sponsor banks			54,451,000		63,881,000		43,100,000	45,200,000
Funds held for payroll customers			48,859,000		42,511,000								47,677,000	41,353,000
Estimated vesting percentage, Relationship Managers and sales managers			31.00%
Other income (expense), pre-tax charges			0	771,000
Reserve for unrecognized tax benefits			2,190,000		1,819,000
Unrecognized tax benefits that would impact effective tax rate			1,400,000		1,100,000
Number of performance-based Restricted Share Units authorized									164,808	508,800					329,616
Restricted share units, vesting percent rate in 2013		50.00%
Restricted share units, vesting percent rate in 2014		25.00%									50.00%
Restricted share units, vesting percent rate in 2015		25.00%									50.00%
Compound annual growth rate, diluted earnings per share, target												17.00%
Compound annual growth rate, increase over target												1.00%
Restricted share units, increase for exceeding CAGR target												3.09%
Restricted share units, maximum number of shares authorized to award												100.00%
Compound annual growth rate, decrease below target												1.00%
Restricted share units, decrease for falling below CAGR target												1.13%
Compound annual growth rate, percentage of target required to award shares												80.00%
Restricted share units, awards if CAGR target missed by 80% or more		0
Stock repurchase program, authorized purchase amount	50,000,000
Common stock repurchased during period, shares			1,157,440		778,889
Payments for repurchase of common stock			33,200,000		16,800,000
Treasury stock acquired, average cost per share			$ 28.66		$ 21.61
Notional amount of interest rate derivatives			38,800,000		42,500,000	50,000,000
Derivative Financial Instruments, Liabilities, Fair Value Disclosure																914,000	897,000	914,000	897,000
Deferred income tax expense (benefit), interest rate swaps			(300,000)		300,000
Cumulative foreign currency translation gain (loss)			(300,000)	200,000
Stockholders' equity attributable to noncontrolling interest			890,000		642,000
Invoicing terms			30 days
Amortization of capitalized customer acquisition costs, period			3 years
Signing bonus amount and amortization, adjustment period			1 year
Buy out of Relationship Managers and sales managers commissions, fixed multiple period			12 months
Determination of accrued buyout liability, gross margin for prior period			12 months
New SME merchant accrued buyout liability			$ 0
Period accrued buyout liability increases for new SME merchants			12 months
Classification of current accrued buyout liability, period			12 months
Diluted earnings per share compound annual growth rate, period			2 years

XML

Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The Company presents earnings per share data following the established standards for the computation and presentation of basic and diluted earnings per share data. Under these standards, the dilutive effect of stock options is excluded from the calculation of basic earnings per share but included in diluted earnings per share. The following is a reconciliation of the amounts used to calculate basic and diluted earnings per share:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In thousands, except per share data)
Basic:
Net income attributable to Heartland	$	17,801	$	12,258	$	31,555	$	20,073
Weighted average common stock outstanding	38,844		38,792		38,840		38,625
Earnings per share	$	0.46	$	0.32	$	0.81	$	0.52
Diluted:
Net income attributable to Heartland	$	17,801	$	12,258	$	31,555	$	20,073
Basic weighted average common stock outstanding	38,844		38,792		38,840		38,625
Effect of dilutive instruments:
Stock options and restricted share units	1,604		1,336		1,664		1,309
Diluted weighted average shares outstanding	40,448		40,128		40,504		39,934
Earnings per share	$	0.44	$	0.31	$	0.78	$	0.50