(Source: Business Wire)Heartland Payment Systems, Inc. (NYSE:HPY), a leading provider of credit/debit/prepaid card processing, payroll, check management and payment services, today announced a GAAP net loss of $13.6 million or ($0.36) per share for the three months ended September 30, 2009. Results for the quarter are after $35.6 million (pre-tax), or $0.59 per share, of various expenses, accruals and reserves, all of which are attributable to the processing system intrusion, including charges related to settlement offers made by the Company in attempts to resolve certain processing system intrusion related claims and settlements of certain claims deemed to be likely to be agreed upon in the near future based upon discussions between the Company and the claimants. Excluding these expenses, accruals and reserves, Adjusted Net Income and Earnings per Share were $8.7 million and $0.23, respectively. Third quarter Adjusted Net Income and Earnings per Share are non-GAAP measures that exclude certain items detailed later in this press release under the heading "Use of Non-GAAP Financial Measures."

Highlights for the third quarter, include:

Small and Mid-Sized Merchant (SME) transaction processing volume of $15.8 billion, up 1.1% from a year ago

Quarterly Net Revenue of $110 million, down marginally from the record quarterly revenues of the year ago period due to declines in equipment-related revenues

Operating margin on net revenue of 13.4% compared to 20.9% for the same quarter in 2008

New margin installed and same store sales down 16.3% and 8.6%, respectively, from the same quarter last year, but both representing a sequential improvement compared to the second quarter of 2009

SFAS 123R stock compensation expense of $1.7 million, or $0.03 per share

Robert Carr, Chairman and CEO, said, "We were able to generate solid returns during the quarter while continuing to invest in both our processing platforms and our new business initiatives. Certain of our key transaction processing performance metrics are stabilizing despite the lack of any demonstrable improvement during the quarter in the economic conditions that impact the vast majority of our customers. We saw encouraging growth from a range of our new product initiatives, including payroll and our new Discover and American Express agreements. We also made some progress improving operating efficiency, as third quarter processing and servicing costs, our largest non-pass-through cost of services, were down relative to a year ago. Though the economic outlook remains uncertain, we will continue to provide merchants large and small with a "Fair Deal" and technology-driven product improvements that are responsive to their most pressing needs and which leverages our franchise to create value for our shareholders."

Net revenue from SME card processing and Network Services were both up in the third quarter. However, due to a decrease in revenues from equipment-related businesses, net revenues of $110.0 million for the quarter were little changed from record quarterly net revenues of $110.4 million in the third quarter of 2008. SME card processing volume for the three months ended September 30, 2009 was $15.8 billion, a 1.1% improvement compared to the year ago period. Network Services transactions processed, the basis for their revenues, totaled 757 million in the quarter compared to 771 million in the same quarter of 2008. Same store sales in the SME segment were down 8.6% in the quarter; however, performance in September was the best in nearly a year. Operating income as a percentage of net revenues was 13.4% in the third quarter of 2009, down compared to the 2008 period due to an increase in general and administrative expenses, primarily stock compensation, legal costs, and salary, bonus and fringe benefits. The various expenses, accruals, and reserves, all of which are attributable to the processing system intrusion in the third quarter, were $35.6 million pre-tax, or $0.59 per share. The majority of these charges relate to settlement offers made by the Company in attempts to resolve certain of the claims asserted against it relating to the processing system intrusion, and settlements of certain claims asserted against the Company that are deemed likely to be agreed upon in the near term based upon discussions between the Company and the claimants. This charge also includes significant legal fees. These various expenses and accruals are shown separately in the Company's Statement of Operations.

Mr. Carr continued, "We believe 2010 will be a year in which we achieve breakthroughs in enhancing payments security. The initial commercial implementations of our new ˜E3' technology is expected to commence late this year, and to be rolled out more fully in the first quarter of next year. Consequently, we plan on getting an early start in a pivotal year with a technology solution offering merchants and consumers what we believe to be the highest level of payments processing data security in the industry. At a time when economic conditions have stalled overall market growth, we believe ˜E3' will provide a competitive advantage as security becomes a processing priority. Our strategy is to continue to invest in our technology platform, expand our product portfolio and strengthen our merchant franchise to achieve growth in the near term while planning for accelerated growth as the economy recovers. With a more robust platform, leading security and technology, and steady efficiency gains, we feel strongly that our investments are creating value for shareholders."

NINE MONTH RESULTS:

For the first nine months of 2009, GAAP net loss was $18.7 million or ($0.50) per share. Net revenues for the first nine months of 2009 were $315.1 million, up 11.1% compared to the first nine months of 2008. Excluding various expenses, accruals and reserves, all of which are attributable to the processing systems intrusion, Adjusted Net Income and Earnings per Share for the first nine months of fiscal 2009 were $23.4 million or $0.62 per share, compared to GAAP earnings of $33.9 million, or $0.87 per share, in the prior nine months. Year-to-date 2009, stock compensation expense has reduced earnings by $2.8 million or $0.05 per diluted share compared to $1.1 million or $0.02 per diluted share for the same nine-month period in 2008.

Use of Non-GAAP Financial Measures

To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company provides additional measures of it operating results, net income and earnings per share, which exclude certain costs and expenses related to the processing system intrusion. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its historical performance as well as prospects for its future performance.

This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission.