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Heartland Payment Systems Inc. Reports Operating Results (10-K)

March 10, 2011 | About:

Heartland Payment Systems Inc. (NYSE:HPY) filed Annual Report for the period ended 2010-12-31.

Heartland Payment Systems Inc. has a market cap of $744.1 million; its shares were traded at around $19.37 with a P/E ratio of 29.8 and P/S ratio of 0.4. The dividend yield of Heartland Payment Systems Inc. stocks is 0.8%. Heartland Payment Systems Inc. had an annual average earning growth of 20.1% over the past 5 years.

Highlight of Business Operations:

At December 31, 2010, we provided our bankcard payment processing services to approximately 173,860 active SME bankcard merchants located across the United States. This represents a slight increase over the 173,400 active SME bankcard merchants at December 31, 2009. At December 31, 2010, we provided bankcard payment processing services to approximately 109 Network Services Merchants with approximately 54,244 locations. Our total bankcard processing volume for the year ended December 31, 2010 was $74.9 billion, an 8.2% increase from the $69.3 billion processed during the year ended December 31, 2009. Our 2010 SME bankcard processing volume was $63.1 billion, a 7.0% increase over 2009, and included increases for American Express and Discover card processing, which were initiated in 2009. Our Discover processing volume also benefited from our purchase of an existing merchant portfolio from Discover during the third quarter of 2009. We include American Express volume in our SME bankcard processing volume only where we receive percentage-based residual compensation for that volume. Bankcard processing volume for 2010 includes $11.3 billion of settled volume for Network Services Merchants, compared to $9.9 billion for 2009. In addition to settling Visa and MasterCard transactions, Network Services processes a wide range of payment transactions for its predominantly petroleum customer base, including providing approximately 2.6 billion transaction authorizations through its front-end card processing systems (primarily for Visa and MasterCard) in 2010 and 2.4 billion transactions for the year ended December 31, 2009. We also provided bankcard processing services to over 8,300 merchants in Canada through our majority-owned Canadian subsidiary, Collective Point of Sale Solutions Ltd. (CPOS).

According to The Nilson Report, in 2009 we were the 5th largest card acquirer in the United States ranked by transaction count and the 8th largest acquirer by processed dollar volume, which consists of both credit and debit Visa and MasterCard transactions. These rankings represented 2.4 billion transactions and 4.3% of the total bankcard processing market, respectively. In 2010, 2009 and 2008, our bankcard processing dollar volume was $74.9 billion, $69.3 billion and $66.9 billion, respectively.

Since our announcement of the Processing System Intrusion on January 20, 2009 and through December 31, 2010, we have expensed a total of $146.1 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 $31.4 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 year ended December 31, 2010, we recovered from our insurance providers approximately $27.2 million of the costs incurred for the Processing System Intrusion and expensed approximately $13.1 million for accruals, legal fees and costs incurred for defending various claims and actions, resulting in a net recovery of $14.1 million, or $0.22 per share.

For the year ended December 31, 2009, we expensed a total of $132.9 million for settlement accruals, legal fees and costs we incurred for defending various claims and actions associated with the Processing System Intrusion, and recovered from our insurance providers approximately $4.0 million of the costs incurred resulting in net expenses of $128.9 million, or about $2.16 per share.

At December 31, 2010 and 2009, we carried a Reserve for Processing System Intrusion on our Consolidated Balance Sheet of $1.6 million and $99.9 million, respectively. During the years ended December 31, 2010 and 2009, we settled the following claims and disputes with the bankcard networks related to the Processing System Intrusion:

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