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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended January 31, 2012
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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Delaware
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04-3692546
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
þ
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Accelerated filer
¨
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Non-accelerated filer
¨
(Do not check if a smaller reporting company)
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Smaller reporting company
¨
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PART I — FINANCIAL INFORMATION
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Item 1
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Item 2
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Item 3
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Item 4
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PART II — OTHER INFORMATION
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Item 1
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Item 1A
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Item 2
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Item 3
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Item 4
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Mine Safety Disclosures
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Item 5
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Item 6
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ITEM 1.
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FINANCIAL STATEMENTS (Unaudited)
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Three Months Ended
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||||||
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January 31,
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||||||
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2012
|
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2011
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||||
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(Unaudited)
(In thousands, except per share data)
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||||||
Net revenues:
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|
|
|
||||
System Solutions
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$
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312,641
|
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$
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225,707
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Services
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106,883
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|
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58,058
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Total net revenues
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419,524
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|
283,765
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Cost of net revenues:
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|
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||||
System Solutions
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198,752
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140,140
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Services
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64,134
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32,134
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Total cost of net revenues
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262,886
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|
|
172,274
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Gross profit
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156,638
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|
|
111,491
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|
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Operating expenses:
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|
|
|
||||
Research and development
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35,079
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|
|
21,642
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|
||
Sales and marketing
|
39,986
|
|
|
28,306
|
|
||
General and administrative
|
46,038
|
|
|
24,016
|
|
||
Amortization of purchased intangible assets
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13,615
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|
|
2,316
|
|
||
Total operating expenses
|
134,718
|
|
|
76,280
|
|
||
Operating income
|
21,920
|
|
|
35,211
|
|
||
Interest expense
|
(14,634
|
)
|
|
(7,570
|
)
|
||
Interest income
|
1,007
|
|
|
283
|
|
||
Other income (expense), net
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(21,198
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)
|
|
1,651
|
|
||
Income (loss) before income taxes
|
(12,905
|
)
|
|
29,575
|
|
||
Benefit from income taxes
|
(9,782
|
)
|
|
(2,456
|
)
|
||
Net income (loss)
|
(3,123
|
)
|
|
32,031
|
|
||
(Income) loss attributable to noncontrolling interest in subsidiaries
|
350
|
|
|
(76
|
)
|
||
Net income (loss) attributable to VeriFone Systems, Inc. stockholders
|
$
|
(2,773
|
)
|
|
$
|
31,955
|
|
Net income (loss) per share attributable to VeriFone Systems, Inc. stockholders:
|
|
|
|
||||
Basic
|
$
|
(0.03
|
)
|
|
$
|
0.37
|
|
Diluted
|
$
|
(0.03
|
)
|
|
$
|
0.35
|
|
Weighted average shares used in computing net income (loss) per share attributable to VeriFone Systems, Inc. stockholders:
|
|
|
|
||||
Basic
|
105,833
|
|
|
87,090
|
|
||
Diluted
|
105,833
|
|
|
91,321
|
|
|
January 31,
2012 |
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October 31, 2011*
|
||||
|
(Unaudited)
|
|
|
||||
|
(In thousands,
except par value)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
379,979
|
|
|
$
|
594,562
|
|
Accounts receivable, net of reserves of $5,613 and $5,658
|
302,559
|
|
|
294,440
|
|
||
Inventories
|
171,414
|
|
|
144,316
|
|
||
Restricted cash and cash equivalents
|
279,965
|
|
|
4
|
|
||
Deferred income tax assets
|
40,607
|
|
|
39,040
|
|
||
Prepaid expenses and other current assets
|
106,510
|
|
|
88,086
|
|
||
Total current assets
|
1,281,034
|
|
|
1,160,448
|
|
||
Property, plant and equipment, net
|
77,884
|
|
|
65,504
|
|
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Purchased intangible assets, net
|
828,952
|
|
|
263,767
|
|
||
Goodwill
|
1,203,287
|
|
|
561,414
|
|
||
Deferred tax assets
|
221,404
|
|
|
205,496
|
|
||
Debt issuance costs, net
|
40,998
|
|
|
2,749
|
|
||
Other assets
|
94,639
|
|
|
54,183
|
|
||
Total assets
|
$
|
3,748,198
|
|
|
$
|
2,313,561
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
152,279
|
|
|
$
|
144,278
|
|
Income taxes payable
|
9,066
|
|
|
9,116
|
|
||
Accrued compensation
|
49,697
|
|
|
51,515
|
|
||
Accrued warranty
|
17,055
|
|
|
20,358
|
|
||
Deferred revenue, net
|
97,715
|
|
|
68,824
|
|
||
Deferred tax liabilities
|
9,297
|
|
|
4,960
|
|
||
Accrued expenses
|
80,690
|
|
|
74,775
|
|
||
Other current liabilities
|
88,188
|
|
|
57,399
|
|
||
Senior convertible notes
|
271,080
|
|
|
266,981
|
|
||
Short-term debt
|
53,191
|
|
|
5,074
|
|
||
Total current liabilities
|
828,258
|
|
|
703,280
|
|
||
Deferred revenue, net
|
33,178
|
|
|
31,467
|
|
||
Long-term debt
|
1,313,175
|
|
|
211,756
|
|
||
Deferred tax liabilities
|
243,801
|
|
|
92,594
|
|
||
Other long-term liabilities
|
75,435
|
|
|
78,971
|
|
||
Total liabilities
|
2,493,847
|
|
|
1,118,068
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
||||
Redeemable noncontrolling interest
|
900
|
|
|
855
|
|
||
Stockholders’ equity:
|
|
|
|
||||
VeriFone Systems, Inc. stockholders’ equity:
|
|
|
|
||||
Preferred Stock: 10,000 shares authorized as of January 31, 2012 and October 31, 2011; no shares issued and outstanding as of January 31, 2012 and October 31, 2011
|
—
|
|
|
—
|
|
||
Common stock: $0.01 par value, 200,000 shares authorized as of January 31, 2012 and October 31, 2011; 106,488 and 105,826 shares issued and 106,359 and 105,697 outstanding as of January 31, 2012 and October 31, 2011
|
1,065
|
|
|
1,058
|
|
||
Additional paid-in capital
|
1,486,477
|
|
|
1,468,862
|
|
||
Accumulated deficit
|
(272,179
|
)
|
|
(269,056
|
)
|
||
Accumulated other comprehensive loss
|
329
|
|
|
(6,671
|
)
|
||
Total VeriFone Systems, Inc. stockholders’ equity
|
1,215,692
|
|
|
1,194,193
|
|
||
Noncontrolling interests in subsidiaries
|
37,759
|
|
|
445
|
|
||
Total stockholders' equity
|
1,253,451
|
|
|
1,194,638
|
|
||
Total liabilities and equity
|
$
|
3,748,198
|
|
|
$
|
2,313,561
|
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(Unaudited)
(In thousands)
|
||||||
OPERATING ACTIVITIES:
|
|
|
|
||||
Net income (loss)
|
$
|
(3,123
|
)
|
|
$
|
32,031
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization, net
|
31,859
|
|
|
9,485
|
|
||
Stock-based compensation expense
|
10,704
|
|
|
7,439
|
|
||
Non-cash interest expense
|
6,227
|
|
|
3,818
|
|
||
Gain on bargain purchase of a business
|
—
|
|
|
(1,476
|
)
|
||
Deferred income taxes
|
(8,490
|
)
|
|
(319
|
)
|
||
Other non-cash items
|
(1,455
|
)
|
|
(178
|
)
|
||
Net cash provided by operating activities before changes in working capital
|
35,722
|
|
|
50,800
|
|
||
Changes in operating assets and liabilities, excluding effects of acquisitions:
|
|
|
|
||||
Accounts receivable, net
|
17,154
|
|
|
(13,299
|
)
|
||
Inventories
|
(1,994
|
)
|
|
5,474
|
|
||
Prepaid expenses and other current assets
|
(10,694
|
)
|
|
(15,323
|
)
|
||
Accounts payable
|
(10,913
|
)
|
|
5,263
|
|
||
Income taxes payable
|
(2,418
|
)
|
|
2,744
|
|
||
Accrued compensation
|
(15,258
|
)
|
|
(4,469
|
)
|
||
Accrued warranty
|
(3,996
|
)
|
|
1,999
|
|
||
Deferred revenue, net
|
28,589
|
|
|
(664
|
)
|
||
Accrued expenses and other current liabilities
|
(4,024
|
)
|
|
(2,116
|
)
|
||
Net cash provided by operating activities
|
32,168
|
|
|
30,409
|
|
||
INVESTING ACTIVTIES:
|
|
|
|
||||
Purchases of property, plant and equipment
|
(7,289
|
)
|
|
(2,315
|
)
|
||
Cash payments for acquisitions, net of cash acquired
|
(1,067,517
|
)
|
|
(9,730
|
)
|
||
Other
|
(714
|
)
|
|
(261
|
)
|
||
Net cash used in investing activities
|
(1,075,520
|
)
|
|
(12,306
|
)
|
||
FINANCING ACTIVITES:
|
|
|
|
||||
Proceeds from debt, net of issuance costs
|
1,409,177
|
|
|
—
|
|
||
Repayments of debt
|
(307,760
|
)
|
|
(1,358
|
)
|
||
Proceeds from issuance of common stock through equity incentive plans
|
8,812
|
|
|
16,678
|
|
||
Restricted cash and cash equivalents held in escrow for debt repayment
|
(279,159
|
)
|
|
—
|
|
||
Other
|
(135
|
)
|
|
—
|
|
||
Net cash provided by financing activities
|
830,935
|
|
|
15,320
|
|
||
Effect of exchange rate fluctuations on cash and cash equivalents
|
(2,166
|
)
|
|
607
|
|
||
Change in cash and cash equivalents
|
(214,583
|
)
|
|
34,030
|
|
||
Beginning cash and cash equivalents
|
594,562
|
|
|
445,137
|
|
||
Ending cash and cash equivalents
|
$
|
379,979
|
|
|
$
|
479,167
|
|
Cash paid to Point stockholders
|
$
|
774,268
|
|
Cash for repayment of long-term debt
|
250,264
|
|
|
Total
|
$
|
1,024,532
|
|
|
|||
Cash and cash equivalents
|
$
|
25,314
|
|
Accounts receivable (gross contractual value of $25.1 million, of which $0.6 million not expected to be collected)
|
24,505
|
|
|
Inventories
|
25,104
|
|
|
Deferred tax assets
|
13,235
|
|
|
Prepaid expense and other assets
|
44,288
|
|
|
Property, plant and equipment
|
11,152
|
|
|
Intangible assets
|
550,512
|
|
|
Accounts payable and other liabilities
|
(72,464
|
)
|
|
Deferred revenues
|
(1,387
|
)
|
|
Deferred tax liabilities
|
(153,222
|
)
|
|
Noncontrolling interests
|
(37,132
|
)
|
|
Total identifiable net assets
|
429,905
|
|
|
Goodwill
|
594,627
|
|
|
Total consideration transferred
|
$
|
1,024,532
|
|
|
Fair Value
|
|
Estimated Useful Life (Years)
|
||
Customer relationships
|
$
|
484,399
|
|
|
9.5
|
Developed software technology
|
52,528
|
|
|
4.4
|
|
Trade names
|
13,585
|
|
|
4.0
|
|
Total
|
$
|
550,512
|
|
|
|
•
|
Revenue - we use historical, forecast and industry or other sources of market data, including the number of units to be sold, selling prices, market penetration, market share and year-over-year growth rates over the product life cycles.
|
•
|
Cost of sales, research and development expenses, sales and marketing expenses and general administrative expenses - we use historical, forecast, industry and other sources of market data, including any expected synergies that can be realized by a likely buyer.
|
•
|
Estimated life of the asset - we assess the asset's life cycle by considering the impact of technology changes and applicable payment security compliance/regulatory requirements.
|
•
|
Discount rates - we use a discount rate that is based on the weighted average cost of capital with adjustments to reflect the risks associated with the specific intangible assets, such as country risks and commercial risks.
|
•
|
Customer attrition rates - we use historical and forecast data to determine the customer attrition rates and the expected customer life.
|
|
ChargeSmart
|
|
Show Media
|
|
Global Bay
|
|
Total
|
||||||||
Acquisition date
|
January 3, 2012
|
|
|
November 1, 2011
|
|
|
November 1, 2011
|
|
|
|
|||||
Assets acquired (liabilities assumed), net
|
$
|
(4,225
|
)
|
|
$
|
1,593
|
|
|
$
|
(5,028
|
)
|
|
$
|
(7,660
|
)
|
Intangible assets (1)
|
9,770
|
|
|
6,660
|
|
|
14,490
|
|
|
30,920
|
|
||||
Goodwill (2)
|
13,829
|
|
|
19,871
|
|
|
18,050
|
|
|
51,750
|
|
||||
Total purchase price
|
$
|
19,374
|
|
|
$
|
28,124
|
|
|
$
|
27,512
|
|
|
$
|
75,010
|
|
•
|
Net additional amortization expense related to the fair value of acquired identifiable intangible assets totaling
$7.2 million
and
$26.9 million
, respectively.
|
•
|
Additional interest expense of
$4.1 million
and
$1.9 million
, respectively, that would be incurred on additional borrowings made to fund the acquisitions, offset by elimination of acquired business interest expense on borrowings that were settled as part of the acquisitions,
|
•
|
Elimination of other charges that would not have a continuing impact on combined results, such as deal costs, one time professional fees, foreign currency losses related to deal consideration and amortization of FMV adjustments, totaling
$40.6 million
and
$2.3 million
, respectively.
|
|
For the Three Months Ended January 31,
|
||||||
(Unaudited)
|
2012
|
|
2011
|
||||
Total revenues
|
$
|
463,215
|
|
|
$
|
461,061
|
|
Net income
|
$
|
17,123
|
|
|
$
|
6,590
|
|
Net income per share attributable to VeriFone Systems, Inc. stockholders - diluted
|
$
|
0.16
|
|
|
$
|
0.06
|
|
|
Transaction Costs
|
|
Integration Costs
|
|
Total
|
|||||||
Cost of net revenues
|
$
|
—
|
|
34
|
|
$
|
2,368
|
|
|
$
|
2,368
|
|
Research and development
|
—
|
|
17
|
|
1,859
|
|
|
1,859
|
|
|||
Sales and marketing
|
118
|
|
|
777
|
|
|
895
|
|
||||
General and administrative
|
6,934
|
|
17,711
|
|
5,568
|
|
|
12,502
|
|
|||
|
$
|
7,052
|
|
|
$
|
10,572
|
|
|
$
|
17,624
|
|
|
Transaction Costs
|
|
Integration Costs
|
|
Total
|
|||||||
Cost of net revenues
|
$
|
—
|
|
34
|
|
$
|
21
|
|
|
$
|
21
|
|
Research and development
|
1
|
|
17
|
|
3
|
|
|
4
|
|
|||
Sales and marketing
|
82
|
|
|
15
|
|
|
97
|
|
||||
General and administrative
|
2,661
|
|
17,711
|
|
98
|
|
|
2,759
|
|
|||
|
$
|
2,744
|
|
|
$
|
137
|
|
|
$
|
2,881
|
|
|
Three Months
Ended |
|
Year Ended
|
||||
|
January 31,
2012 |
|
October 31,
2011 |
||||
Balance at October 31, 2011
|
$
|
561,414
|
|
|
$
|
169,322
|
|
Additions related to acquisitions
|
646,377
|
|
|
392,723
|
|
||
Adjustments related to prior acquisitions
|
(3,129
|
)
|
|
622
|
|
||
Currency translation adjustments
|
(1,375
|
)
|
|
(1,253
|
)
|
||
Balance at January 31, 2012
|
$
|
1,203,287
|
|
|
$
|
561,414
|
|
|
January 31, 2012
|
||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Weighted-Average Useful Life
|
||||||
Customer relationships
|
$
|
687,578
|
|
|
$
|
(32,666
|
)
|
|
$
|
654,912
|
|
|
8.4
|
Developed and core technology
|
$
|
254,321
|
|
|
$
|
(119,127
|
)
|
|
$
|
135,194
|
|
|
4.2
|
In-process research and development
|
19,304
|
|
|
—
|
|
|
19,304
|
|
|
Indefinite
|
|||
Trade name
|
17,489
|
|
|
(1,288
|
)
|
|
16,201
|
|
|
4.0
|
|||
Internal use software
|
3,031
|
|
|
(2,615
|
)
|
|
416
|
|
|
3.6
|
|||
Non-Compete
|
3,000
|
|
|
(75
|
)
|
|
2,925
|
|
|
10.0
|
|||
|
$
|
984,723
|
|
|
$
|
(155,771
|
)
|
|
$
|
828,952
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
October 31, 2011
|
||||||||||||
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
Weighted-Average Useful Life
|
|||
Developed and core technology
|
$
|
187,193
|
|
|
$
|
(114,112
|
)
|
|
$
|
73,081
|
|
|
4.0
|
In-process research and development
|
19,021
|
|
|
—
|
|
|
19,021
|
|
|
Indefinite
|
|||
Trade name
|
2,692
|
|
|
(897
|
)
|
|
1,795
|
|
|
3.3
|
|||
Internal use software
|
3,031
|
|
|
(2,418
|
)
|
|
613
|
|
|
3.6
|
|||
Customer relationships
|
185,872
|
|
|
(16,615
|
)
|
|
169,257
|
|
|
5.5
|
|||
|
$
|
397,809
|
|
|
$
|
(134,042
|
)
|
|
$
|
263,767
|
|
|
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
Included in cost of net revenues
|
$
|
8,489
|
|
|
$
|
4,859
|
|
Included in general and administrative expenses
|
13,615
|
|
|
2,316
|
|
||
|
$
|
22,104
|
|
|
$
|
7,175
|
|
Fiscal Years Ending October 31:
|
Cost of
Net Revenues
|
|
Operating
Expenses
|
|
Total
|
||||||
Remainder of fiscal 2012
|
$
|
31,082
|
|
|
$
|
70,356
|
|
|
$
|
101,438
|
|
2013
|
38,869
|
|
|
91,240
|
|
|
130,109
|
|
|||
2014
|
38,013
|
|
|
90,652
|
|
|
128,665
|
|
|||
2015
|
17,409
|
|
|
89,395
|
|
|
106,804
|
|
|||
2016
|
10,031
|
|
|
84,515
|
|
|
94,546
|
|
|||
Thereafter
|
1,632
|
|
|
246,468
|
|
|
248,100
|
|
|||
|
$
|
137,036
|
|
|
$
|
672,626
|
|
|
$
|
809,662
|
|
|
January 31,
2012 |
|
October 31,
2011 |
||||
Raw materials
|
$
|
43,244
|
|
|
$
|
37,216
|
|
Work-in-process
|
456
|
|
|
859
|
|
||
Finished goods
|
127,714
|
|
|
106,241
|
|
||
Total inventories
|
$
|
171,414
|
|
|
$
|
144,316
|
|
|
January 31,
2012 |
|
October 31,
2011 |
||||
Prepaid taxes
|
$
|
37,608
|
|
|
$
|
18,490
|
|
Other prepaid expenses
|
37,958
|
|
|
34,111
|
|
||
Assets held for sale
|
4,148
|
|
|
—
|
|
||
Investments in equity securities and warrants
|
5,988
|
|
|
6,132
|
|
||
Receivables from sales of Hypercom divested businesses
|
7,082
|
|
|
13,984
|
|
||
Sales-type lease receivables
|
4,547
|
|
|
3,340
|
|
||
Other receivables
|
6,707
|
|
|
9,696
|
|
||
Other current assets
|
2,472
|
|
|
2,333
|
|
||
Total prepaid expenses and other current assets
|
$
|
106,510
|
|
|
$
|
88,086
|
|
|
Three Months
Ended |
|
Year
Ended
|
||||
|
January 31,
2012 |
|
October 31,
2011 |
||||
Balance at beginning of period
|
$
|
22,032
|
|
|
$
|
12,747
|
|
Warranty charged to cost of net revenues
|
3,083
|
|
|
17,888
|
|
||
Utilization of warranty accrual
|
(5,889
|
)
|
|
(16,573
|
)
|
||
Acquired warranty obligations
|
348
|
|
|
7,139
|
|
||
Change in estimates
|
(1,142
|
)
|
|
831
|
|
||
Balance at end of period
|
18,432
|
|
|
22,032
|
|
||
Less current portion
|
(17,055
|
)
|
|
(20,358
|
)
|
||
Long-term portion
|
$
|
1,377
|
|
|
$
|
1,674
|
|
|
January 31,
2012 |
|
October 31,
2011 |
||||
Deferred revenue
|
$
|
145,949
|
|
|
$
|
113,154
|
|
Deferred cost of revenue
|
(15,056
|
)
|
|
(12,863
|
)
|
||
|
130,893
|
|
|
100,291
|
|
||
Less current portion
|
(97,715
|
)
|
|
(68,824
|
)
|
||
Long-term portion
|
$
|
33,178
|
|
|
$
|
31,467
|
|
|
January 31,
2012 |
|
October 31,
2011 |
||||
Accrued liabilities for contingencies
|
$
|
44,429
|
|
|
$
|
30,561
|
|
Deferred acquisition consideration payable - current portion
|
27,974
|
|
|
5,681
|
|
||
Restructuring liabilities - current portion
|
2,192
|
|
|
5,137
|
|
||
Unfavorable lease contracts accrual
|
3,028
|
|
|
3,793
|
|
||
Customer deposits
|
4,468
|
|
|
4,501
|
|
||
Other current liabilities
|
$
|
6,097
|
|
|
$
|
7,726
|
|
Total other current liabilities
|
$
|
88,188
|
|
|
$
|
57,399
|
|
|
January 31,
2012 |
|
October 31,
2011 |
||||
Other tax liabilities
|
$
|
44,165
|
|
|
$
|
51,918
|
|
Retirement and pension obligations
|
9,927
|
|
|
10,292
|
|
||
Deferred acquisition consideration payable - non-current portion
|
7,976
|
|
|
5,125
|
|
||
Accrued warranties
|
1,377
|
|
|
1,674
|
|
||
Other liabilities
|
11,990
|
|
|
9,962
|
|
||
Total other long-term liabilities
|
$
|
75,435
|
|
|
$
|
78,971
|
|
|
January 31, 2012
|
|
October 31, 2011
|
||||
Noncontrolling interests in subsidiaries at beginning of period
|
$
|
445
|
|
|
$
|
572
|
|
Additions due to acquisitions
|
37,132
|
|
|
—
|
|
||
Distributions to owners
|
(135
|
)
|
|
(418
|
)
|
||
Net income attributable to noncontrolling interests in subsidiaries, net
|
317
|
|
|
291
|
|||
Noncontrolling interests in subsidiaries at end of period
|
$
|
37,759
|
|
|
$
|
445
|
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
Foreign currency exchange (losses), net
|
$
|
(21,005
|
)
|
|
$
|
(259
|
)
|
Gain on bargain purchase of a business, net
|
—
|
|
|
1,476
|
|
||
Other income (expense), net
|
(193
|
)
|
|
434
|
|
||
Total other income (expense), net
|
$
|
(21,198
|
)
|
|
$
|
1,651
|
|
|
January 31,
2012 |
|
October 31,
2011 |
||||
2011 Credit Agreement
|
|
|
|
||||
Term A loan
|
$
|
918,500
|
|
|
$
|
—
|
|
Term B loan
|
231,500
|
|
|
—
|
|
||
Revolving loan
|
210,000
|
|
|
—
|
|
||
2006 Credit Agreement - Term B loan
|
—
|
|
|
216,250
|
|
||
Senior convertible notes
|
271,080
|
|
|
266,981
|
|
||
Point overdraft facility
|
4,620
|
|
|
—
|
|
||
Other
|
1,746
|
|
|
580
|
|
||
Total borrowings
|
1,637,446
|
|
|
483,811
|
|
||
Short-term debt
|
(324,271
|
)
|
|
(272,055
|
)
|
||
Long-term debt
|
$
|
1,313,175
|
|
|
$
|
211,756
|
|
•
|
The 2011 Credit Agreement is made up of a Term A loan, a Term B loan and a Revolving loan. The Term A loan is in the amount of
$918.5 million
, the Term B loan is in the amount of
$231.5 million
, and the Revolving loan is in the amount of
$350.0 million
.
|
•
|
At VeriFone, Inc.'s option, the Term A loan, Term B loan and the Revolving loan bear interest at a “Base Rate” or “Eurodollar Rate” plus an applicable margin. Base Rate loans bear interest at a per annum rate equal to a margin over the greater of the Federal Funds rate plus
0.50%
or the JP Morgan prime rate or the one-, two-, three- or six-month (or, in certain circumstances, nine-, twelve- or less than one month) LIBOR rate plus
1.00%
. For the Base Rate Term A loan and Revolving loan, the margin varies between
1.00%
to
2.00%
depending upon our consolidated leverage ratio and is initially
1.75%
. For the Base Rate Term B loan, the margin varies between
2.00%
to
2.25%
depending upon our consolidated leverage ratio and is initially
2.25%
with a minimum LIBOR floor rate of
1.00%
. Eurodollar Rate loans bear interest at a margin over the one-, two-, three- or six-month LIBOR rate. For the Eurodollar Term A Loan and Revolving loan, the margin varies between
2.00%
to
3.00%
depending upon our consolidated leverage ratio and is initially
2.75%
. The margin for the Eurodollar Rate Term B loan varies between
3.00%
to
3.25%
depending upon our consolidated leverage ratio and is initially
3.25%
with a minimum LIBOR floor rate of
1.00%
.
|
•
|
The terms of the 2011 Credit Agreement require VeriFone, Inc. to comply with financial covenants from January 31, 2012. VeriFone, Inc. may not permit its total Leverage Ratio to exceed (i)
4.25
to
1.00
, in the case of any fiscal quarter ending prior to November 1, 2012, (ii)
3.75
to
1.00
in the case of any fiscal quarter ending prior to November 1, 2013 and (iii)
3.50
to
1.00
, in the case of any fiscal quarter ending thereafter. In addition, VeriFone, Inc. must maintain an interest coverage ratio of at least (i)
3.50
to
1.00
, in the case of any fiscal quarter ending prior to November 1, 2012 and (ii)
4.00
to
1.00
, in the case of any fiscal quarter ending thereafter. Noncompliance with any of the financial covenants without cure or waiver would constitute an event of default under the 2011 Credit Agreement. The 2011 Credit Agreement also contains customary events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross defaults to material indebtedness and events constituting a change of control. The occurrence of an event of default could result in the termination of commitments under the 2011 Credit Agreement, the declaration that all outstanding loans are immediately due and payable in whole or in part and the requirement of cash collateral deposits in respect of outstanding letters of credit.
|
•
|
The 2011 Credit Agreement contains certain representations and warranties, certain affirmative covenants, certain negative covenants, certain financial covenants and certain conditions that are customarily required for similar financings. These covenants include, among others:
|
▪
|
A restriction on incurring additional indebtedness, subject to specified permitted debt;
|
▪
|
A restriction on creating certain liens;
|
▪
|
A restriction on mergers and consolidations, subject to specified exceptions;
|
▪
|
A restriction on certain investments, subject to certain exceptions and a suspension if VeriFone, Inc. achieves certain credit ratings; and
|
▪
|
A restriction on entering into certain transactions with affiliates.
|
•
|
Pursuant to a Guaranty, dated as of December 28, 2011 (the "Guaranty"), among certain wholly-owned domestic subsidiaries of VeriFone, Inc. identified therein (the "Guarantors"), obligations under the 2011 Credit Agreement are guaranteed by the Guarantors. Pursuant to a Security Agreement and a Pledge Agreement, each dated as of December 28, 2011 (the "Collateral Agreements") among VeriFone, Inc. and the Guarantors on the one hand and JPMorgan, as collateral agent, on the other hand, obligations under the 2011 Credit Agreement, and the guarantees of such obligations are also secured by a first priority lien and security interest, subject to customary exceptions, in certain assets of VeriFone, Inc. and the Guarantors and equity interests owned by VeriFone, Inc. and the Guarantors in certain of their respective domestic and foreign subsidiaries (limited, in the case of foreign subsidiaries, to 65% of the voting stock of such subsidiaries). Certain equity interests owned by existing and subsequently acquired subsidiaries may also be pledged in the future. Other existing and subsequently acquired or newly-formed domestic subsidiaries of VeriFone, Inc. and the Guarantors, may become Guarantors in the future.
|
•
|
VeriFone, Inc. will pay an undrawn commitment fee ranging from
0.25%
to
0.50%
(depending on VeriFone, Inc.'s leverage ratio) on the unused portion of the Revolving loan. For letters of credit issued under the Revolving loan, VeriFone, Inc. will pay upon the aggregate face amount of each letter of credit a fronting fee to be agreed to the issuer of the letter of credit together with a fee on all outstanding letters of credit at a per annum rate equal to the margin then in effect with respect to LIBOR-based loans under the Revolving loan.
|
•
|
The outstanding principal balance of the Term A loan is required to be repaid in quarterly installments of the following percentages of the original balance outstanding under the Term A loan:
1.25%
for each of the first eight calendar quarters after the Effective Date through the quarter ending December 31, 2013;
2.50%
for each of the next eight calendar quarters through the quarter ending December 31, 2015 and
5.00%
for each of the calendar quarters ending March 31, 2016, June 30, 2016 and September 30, 2016 with the balance being due at maturity on December 28, 2016. The outstanding principal balance of the Term B loan is required to be repaid in equal quarterly installments of
0.25%
with the balance being due at maturity on December 28, 2018. The Revolving loan will terminate on December 28, 2016. Outstanding amounts may also be subject to mandatory prepayment with the proceeds of certain asset sales and debt issuances and, in the case of the Term B loan only, from a portion of annual excess cash flows (as determined under the 2011 Credit Agreement) depending on VeriFone Inc.'s leverage ratio.
|
•
|
The Term A and Revolving loan bore interest at
3.05%
which was one month LIBOR plus
2.75%
margin;
|
•
|
The Term B loan bore interest at
4.25%
which was the higher of LIBOR or
1.00%
plus
3.25%
margin.
|
|
January 31,
2012 |
|
October 31,
2011 |
||||
Accounting amount of the equity component
|
$
|
77,903
|
|
|
$
|
77,903
|
|
Principal amount of the Notes
|
$
|
277,250
|
|
|
$
|
277,250
|
|
Unamortized debt discount (1)
|
(6,170
|
)
|
|
(10,269
|
)
|
||
Net carrying amount
|
$
|
271,080
|
|
|
$
|
266,981
|
|
(1)
|
As of
January 31, 2012
, the remaining period over which the unamortized debt discount will be amortized is
5
months.
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
Interest rate on the liability component
|
7.6
|
%
|
|
7.6
|
%
|
||
Interest expense related to contractual interest coupon
|
$
|
961
|
|
|
$
|
953
|
|
Interest expense related to amortization of debt discount
|
4,099
|
|
|
3,805
|
|
||
Total interest expense recognized
|
$
|
5,060
|
|
|
$
|
4,758
|
|
Fiscal Years Ending October 31:
|
|
||
2012 (Remainder of the fiscal year)
|
$
|
313,485
|
|
2013
|
53,333
|
|
|
2014
|
82,710
|
|
|
2015
|
94,182
|
|
|
2016
|
163,071
|
|
|
Thereafter
|
936,835
|
|
|
|
$
|
1,643,616
|
|
Level 1 -
|
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
Level 2 -
|
Observable inputs that reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
Level 3 -
|
Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
|
January 31, 2012
|
||||||||||||||
|
Carrying
Value
|
|
Quoted Price in
Active Market for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Money market funds (1)
|
$
|
58,571
|
|
|
$
|
58,571
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable equity investment (2)
|
5,350
|
|
|
5,350
|
|
|
—
|
|
|
—
|
|
||||
Israeli severance funds (3)
|
2,004
|
|
|
—
|
|
|
2,004
|
|
|
—
|
|
||||
Equity warrants (4)
|
633
|
|
|
—
|
|
|
633
|
|
|
—
|
|
||||
Foreign exchange forward contracts (5)
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Assets held for sale (6)
|
4,148
|
|
|
—
|
|
|
4,148
|
|
|
—
|
|
||||
Total assets measured and recorded at fair value
|
$
|
70,707
|
|
|
$
|
63,921
|
|
|
$
|
6,786
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Acquisition related earn-out payables (7)
|
$
|
25,826
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,826
|
|
Foreign exchange forward contracts (5)
|
415
|
|
|
—
|
|
|
415
|
|
|
—
|
|
||||
Total liabilities measured and recorded at fair value
|
$
|
26,241
|
|
|
$
|
—
|
|
|
$
|
415
|
|
|
$
|
25,826
|
|
|
|
|
|
|
|
|
|
||||||||
|
October 31, 2011
|
||||||||||||||
|
Carrying
Value
|
|
Quoted Price in
Active Market for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Money market funds (1)
|
$
|
186,530
|
|
|
$
|
186,530
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Marketable equity investment (2)
|
5,450
|
|
|
5,450
|
|
|
—
|
|
|
—
|
|
||||
Israeli severance funds (3)
|
2,097
|
|
|
—
|
|
|
2,097
|
|
|
—
|
|
||||
Equity warrants (4)
|
682
|
|
|
—
|
|
|
682
|
|
|
—
|
|
||||
Foreign exchange forward contracts (5)
|
58
|
|
|
—
|
|
|
58
|
|
|
—
|
|
||||
Total assets measured and recorded at fair value
|
$
|
194,817
|
|
|
$
|
191,980
|
|
|
$
|
2,837
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Acquisition related earn-out payables (7)
|
$
|
6,728
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,728
|
|
Foreign exchange forward contracts (5)
|
314
|
|
|
—
|
|
|
314
|
|
|
—
|
|
||||
Total liabilities measured and recorded at fair value
|
$
|
7,042
|
|
|
$
|
—
|
|
|
$
|
314
|
|
|
$
|
6,728
|
|
|
Three Months
Ended
|
||
|
January 31, 2012
|
||
Balance at October 31, 2011
|
$
|
6,728
|
|
Increase due to business acquisitions
|
21,657
|
|
|
Other, including the impact of fluctuations in foreign currency exchange rates
|
370
|
|
|
Earn-out paid
|
(2,929
|
)
|
|
Balance at January 31, 2012
|
$
|
25,826
|
|
|
|
As of January 31,
|
|
As of October 31,
|
||||
|
Balance Sheet Location
|
2012
|
|
2011
|
||||
Derivative Assets
|
|
|
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|||||
Foreign exchange forward contracts
|
Prepaid expenses and other current assets
|
$
|
1
|
|
|
$
|
58
|
|
Equity warrants
|
Prepaid expenses and other current assets
|
633
|
|
|
682
|
|
||
Total
|
|
$
|
634
|
|
|
$
|
740
|
|
|
|
|
|
|
||||
Derivative Liabilities
|
|
|
|
|
||||
Derivatives not designated as hedging instruments:
|
|
|
|
|||||
Foreign exchange forward contracts
|
Other current liabilities
|
$
|
415
|
|
|
$
|
314
|
|
Total
|
|
$
|
415
|
|
|
$
|
314
|
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
Net income (loss) attributable to VeriFone Systems, Inc. stockholders
|
$
|
(2,773
|
)
|
|
$
|
31,955
|
|
Other comprehensive income (loss):
|
|
|
|
||||
Foreign currency translation adjustments, net of tax
|
7,100
|
|
|
2,038
|
|
||
Unrealized gain (loss) on marketable equity investment, net of tax
|
(100
|
)
|
|
—
|
|
||
Other comprehensive income (loss) attributable to VeriFone Systems, Inc. stockholders
|
$
|
4,227
|
|
|
$
|
33,993
|
|
|
Three Months Ended
|
||||
|
January 31,
|
||||
|
2012
|
|
2011
|
||
Expected term of the options (in years)
|
3.6
|
|
|
4.0
|
|
Risk-free interest rate
|
0.7
|
%
|
|
1.5
|
%
|
Expected stock price volatility
|
67.4
|
%
|
|
73.3
|
%
|
Expected dividend rate
|
0.0
|
%
|
|
0.0
|
%
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
Cost of net revenues
|
$
|
479
|
|
|
$
|
397
|
|
Research and development
|
1,253
|
|
|
875
|
|
||
Sales and marketing
|
4,262
|
|
|
3,030
|
|
||
General and administrative
|
4,710
|
|
|
3,137
|
|
||
Total stock-based compensation
|
$
|
10,704
|
|
|
$
|
7,439
|
|
|
Number of
Shares
(in thousands)
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual
Term
(in years)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||||
Balance at October 31, 2011
|
8,201
|
|
|
$
|
18.38
|
|
|
|
|
|
||
Granted
|
1,126
|
|
|
$
|
36.49
|
|
|
|
|
|
||
Exercised
|
(533
|
)
|
|
$
|
16.53
|
|
|
|
|
|
||
Canceled
|
(94
|
)
|
|
$
|
18.88
|
|
|
|
|
|
||
Expired
|
(7
|
)
|
|
$
|
34.07
|
|
|
|
|
|
||
Balance at January 31, 2012
|
8,693
|
|
|
$
|
20.83
|
|
|
4.8
|
|
$
|
192,169
|
|
Vested or expected to vest at January 31, 2012
|
8,250
|
|
|
$
|
20.15
|
|
|
4.7
|
|
$
|
187,811
|
|
Exercisable at January 31, 2012
|
3,437
|
|
|
$
|
14.98
|
|
|
3.8
|
|
$
|
95,402
|
|
|
Shares
(in thousands)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||
Outstanding at October 31, 2011
|
1,398
|
|
|
|
||
Granted
|
156
|
|
|
|
||
Vested
|
(202
|
)
|
|
|
||
Outstanding at January 31, 2012
|
1,352
|
|
|
$
|
57,730
|
|
Vested and expected to vest at January 31, 2012
|
1,122
|
|
|
$
|
47,909
|
|
Ending exercisable (vested and deferred)
|
532
|
|
|
$
|
22,716
|
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
Basic and diluted net income (loss) per share attributable to VeriFone Systems, Inc. stockholders:
|
|
|
|
||||
Numerator:
|
|
|
|
||||
Net income (loss) attributable to VeriFone Systems, Inc. stockholders
|
$
|
(2,773
|
)
|
|
$
|
31,955
|
|
Denominator:
|
|
|
|
||||
Weighted average shares attributable to VeriFone Systems, Inc. stockholders - basic
|
105,833
|
|
|
87,090
|
|
||
Weighted average effect of dilutive securities:
|
|
|
|
||||
Stock options, RSUs and RSAs
|
—
|
|
|
4,231
|
|
||
Weighted average shares attributable to VeriFone Systems, Inc. stockholders - diluted
|
105,833
|
|
|
91,321
|
|
||
Net income (loss) attributable to VeriFone Systems, Inc. stockholders:
|
|
|
|
||||
Basic
|
$
|
(0.03
|
)
|
|
$
|
0.37
|
|
Diluted
|
$
|
(0.03
|
)
|
|
$
|
0.35
|
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
Net revenues:
|
|
|
|
||||
International
|
$
|
305,235
|
|
|
$
|
155,461
|
|
North America
|
119,967
|
|
|
128,478
|
|
||
Corporate
|
(5,678
|
)
|
|
(174
|
)
|
||
Total net revenues
|
$
|
419,524
|
|
|
$
|
283,765
|
|
Operating income (loss):
|
|
|
|
||||
International
|
$
|
85,462
|
|
|
$
|
44,010
|
|
North America
|
40,979
|
|
|
46,656
|
|
||
Corporate
|
(104,521
|
)
|
|
(55,455
|
)
|
||
Total operating income
|
$
|
21,920
|
|
|
$
|
35,211
|
|
|
January 31,
2012 |
|
October 31,
2011 |
||||
International
|
$
|
991,615
|
|
|
$
|
398,855
|
|
North America
|
211,672
|
|
|
162,559
|
|
||
Total
|
$
|
1,203,287
|
|
|
$
|
561,414
|
|
|
January 31,
2012 |
|
October 31,
2011 |
||||
International
|
$
|
2,595,501
|
|
|
$
|
1,362,402
|
|
North America
|
1,152,697
|
|
|
951,159
|
|
||
Total
|
$
|
3,748,198
|
|
|
$
|
2,313,561
|
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
United States and Canada
|
$
|
119,630
|
|
|
$
|
128,304
|
|
Europe, Middle East and Africa
|
154,907
|
|
|
78,707
|
|
||
Latin America
|
100,289
|
|
|
50,131
|
|
||
Asia
|
44,698
|
|
|
26,623
|
|
||
Total net revenues
|
$
|
419,524
|
|
|
$
|
283,765
|
|
|
Three Months Ended
|
||||||
|
January 31,
|
||||||
|
2012
|
|
2011
|
||||
Cost of net revenues
|
$
|
363
|
|
|
$
|
—
|
|
Sales and marketing
|
(75
|
)
|
|
70
|
|
||
General and administrative
|
350
|
|
|
2
|
|
||
Total restructuring expense
|
$
|
638
|
|
|
$
|
72
|
|
|
Employee
Severance and Benefit Arrangements |
|
Facilities
Related Costs |
|
Total
|
||||||
Balance at October 31, 2011
|
$
|
4,864
|
|
|
$
|
1,291
|
|
|
$
|
6,155
|
|
Current year charges and adjustments
|
638
|
|
|
—
|
|
|
638
|
|
|||
Other adjustments
|
(151
|
)
|
|
(6
|
)
|
|
(157
|
)
|
|||
Cash payments
|
(3,542
|
)
|
|
(129
|
)
|
|
(3,671
|
)
|
|||
Balance at January 31, 2012
|
$
|
1,809
|
|
|
$
|
1,156
|
|
|
$
|
2,965
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended January 31,
|
|||||||||||||
|
2012
|
|
2011
|
|
Net
Change |
|
%
Change |
|||||||
System Solutions
|
$
|
312,641
|
|
|
$
|
225,707
|
|
|
$
|
86,934
|
|
|
38.5
|
%
|
Services
|
106,883
|
|
|
58,058
|
|
|
48,825
|
|
|
84.1
|
%
|
|||
Total Net Revenues
|
$
|
419,524
|
|
|
$
|
283,765
|
|
|
$
|
135,759
|
|
|
47.8
|
%
|
|
Three Months Ended January 31,
|
|||||||||||||
(in thousands, except percentages)
|
2012
|
|
2011
|
|
Net
Change
|
|
%
Change
|
|||||||
International
|
$
|
241,640
|
|
|
$
|
134,822
|
|
|
$
|
106,818
|
|
|
79.2
|
%
|
North America
|
73,029
|
|
|
90,885
|
|
|
(17,856
|
)
|
|
-19.6
|
%
|
|||
Corporate
|
(2,028
|
)
|
|
—
|
|
|
(2,028
|
)
|
|
nm
|
|
|||
Total
|
$
|
312,641
|
|
|
$
|
225,707
|
|
|
$
|
86,934
|
|
|
38.5
|
%
|
|
Three Months Ended January 31,
|
||||||||||||
|
Amount
|
|
Gross Profit Percentage
|
||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||
System Solutions
|
$
|
113,889
|
|
|
$
|
85,567
|
|
|
36.4
|
%
|
|
37.9
|
%
|
Services
|
42,749
|
|
|
25,924
|
|
|
40.0
|
%
|
|
44.7
|
%
|
||
Total
|
$
|
156,638
|
|
|
$
|
111,491
|
|
|
37.3
|
%
|
|
39.3
|
%
|
|
Three Months Ended January 31,
|
|||||||||||||
|
2012
|
|
2011
|
|
Net
Change |
|
Percentage
Change |
|||||||
Research and development
|
$
|
35,079
|
|
|
$
|
21,642
|
|
|
$
|
13,437
|
|
|
62.1
|
%
|
Percentage of net revenues
|
8.4
|
%
|
|
7.6
|
%
|
|
|
|
|
|
Three Months Ended January 31,
|
|||||||||||||
|
2012
|
|
2011
|
|
Net
Change |
|
Percentage
Change |
|||||||
Sales and Marketing Expenses
|
$
|
39,986
|
|
|
$
|
28,306
|
|
|
$
|
11,680
|
|
|
41.3
|
%
|
Percentage of net revenues
|
9.5
|
%
|
|
10.0
|
%
|
|
|
|
|
|
Three Months Ended January 31,
|
|||||||||||||
|
2012
|
|
2011
|
|
Net
Change |
|
Percentage
Change |
|||||||
General and administrative
|
$
|
46,488
|
|
|
$
|
24,016
|
|
|
$
|
22,472
|
|
|
93.6
|
%
|
Percentage of net revenues
|
11.1
|
%
|
|
8.5
|
%
|
|
|
|
|
|
Three Months Ended January 31,
|
|||||||||||||
|
2012
|
|
2011
|
|
Net
Change |
|
Percentage
Change |
|||||||
Amortization of purchased intangible assets
|
$
|
13,615
|
|
|
$
|
2,316
|
|
|
$
|
11,299
|
|
|
487.9
|
%
|
Percentage of net revenues
|
3.2
|
%
|
|
0.8
|
%
|
|
|
|
|
|
Three Months Ended January 31,
|
|||||||||||||
|
2012
|
|
2011
|
|
Net
Change
|
|
Percentage
Change
|
|||||||
Operating income (loss):
|
|
|
|
|
|
|
|
|||||||
International
|
$
|
85,462
|
|
|
$
|
44,010
|
|
|
$
|
41,452
|
|
|
94.2
|
%
|
North America
|
40,979
|
|
|
46,656
|
|
|
(5,677
|
)
|
|
-12.2
|
%
|
|||
Corporate
|
(104,521
|
)
|
|
(55,455
|
)
|
|
(49,066
|
)
|
|
nm
|
|
|||
Total operating income
|
$
|
21,920
|
|
|
$
|
35,211
|
|
|
$
|
(13,291
|
)
|
|
-37.7
|
%
|
|
Three Months Ended January 31,
|
|||||||||||||
|
2012
|
|
2011
|
|
Net
Change |
|
Percentage
Change |
|||||||
Interest expense
|
$
|
(14,634
|
)
|
|
$
|
(7,570
|
)
|
|
$
|
(7,064
|
)
|
|
93.3
|
%
|
|
Three Months Ended January 31,
|
|||||||||||||
|
2012
|
|
2011
|
|
Net
Change |
|
Percentage
Change |
|||||||
Interest income
|
$
|
1,007
|
|
|
$
|
283
|
|
|
$
|
724
|
|
|
255.8
|
%
|
|
Three Months Ended January 31,
|
||||||||||||
|
2012
|
|
2011
|
|
Net
Change |
|
Percentage
Change |
||||||
Other income (expense), net
|
$
|
(21,198
|
)
|
|
$
|
1,651
|
|
|
$
|
(22,849
|
)
|
|
nm
|
|
Three Months Ended January 31,
|
||||||
(in thousands)
|
2012
|
|
2011
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
32,168
|
|
|
$
|
30,409
|
|
Investing activities
|
(1,075,520
|
)
|
|
(12,306
|
)
|
||
Financing activities
|
830,935
|
|
|
15,320
|
|
||
Effect of foreign currency exchange rate changes on cash
|
(2,166
|
)
|
|
607
|
|
||
Net increase (decrease) in cash and cash equivalents
|
$
|
(214,583
|
)
|
|
$
|
34,030
|
|
Contractual Commitments
The following table summarizes our contractual obligations as of October 31, 2011 (in thousands):
Interest in the above table has been calculated using the rate in effect at October 31, 2011.
We expect that we will be able to fund our remaining obligations and commitments with cash flows from our operations. To the extent we are unable to fund these obligations and commitments with cash flows from operations, we intend to fund these obligations and commitments with proceeds from the $25 million available under our revolving loan under our secured credit facility or future debt or equity financings.
|
For the Fiscal Years Ending October 31,
|
|
Total
|
||||||||||||||||||||||||
|
2012 (Remaining 9 months)
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
Thereafter
|
|
|||||||||||||||
Term A Loan (including interest) (1)
|
$
|
51,392
|
|
|
$
|
67,498
|
|
|
$
|
100,504
|
|
|
$
|
109,737
|
|
|
$
|
177,802
|
|
|
$
|
505,175
|
|
|
$
|
1,012,108
|
|
Term B Loan (including interest) (1)
|
8,262
|
|
|
8,671
|
|
|
10,238
|
|
|
10,157
|
|
|
10,098
|
|
|
237,047
|
|
|
284,473
|
|
|||||||
Revolving credit facility (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
210,000
|
|
|
210,000
|
|
|||||||
Senior convertible notes (including interest)
|
284,840
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
284,840
|
|
|||||||
Capital lease obligations and other loans
|
79
|
|
|
65
|
|
|
52
|
|
|
41
|
|
|
40
|
|
|
522
|
|
|
799
|
|
|||||||
Operating leases
|
26,621
|
|
|
19,675
|
|
|
14,993
|
|
|
9,937
|
|
|
6,659
|
|
|
8,305
|
|
|
86,190
|
|
|||||||
Minimum purchase obligations
|
128,675
|
|
|
12,832
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
141,507
|
|
|||||||
|
$
|
499,869
|
|
|
$
|
108,741
|
|
|
$
|
125,787
|
|
|
$
|
129,872
|
|
|
$
|
194,599
|
|
|
$
|
961,049
|
|
|
$
|
2,019,917
|
|
(1)
|
Interest in the above table has been calculated using the rate in effect at January 31, 2012.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
Currency
|
|
Local
Currency
Contract
Amount
|
|
Currency
|
|
Contracted
Amount
|
|
Fair Market
Value at
January 31,
2012
|
||||
Contracts to buy U.S. dollar
|
|
|
|
|
|
|
|
|
|
||||
Argentina peso
|
ARS
|
|
(18,000
|
)
|
|
USD
|
|
4,108
|
|
|
$
|
(3
|
)
|
Australian dollar
|
AUD
|
|
(5,500
|
)
|
|
USD
|
|
5,833
|
|
|
(7
|
)
|
|
Brazilian real
|
BRL
|
|
(12,000
|
)
|
|
USD
|
|
6,841
|
|
|
(11
|
)
|
|
Canadian dollar
|
CAD
|
|
(4,700
|
)
|
|
USD
|
|
4,690
|
|
|
(5
|
)
|
|
Chilian peso
|
CLP
|
|
(1,400,000
|
)
|
|
USD
|
|
2,863
|
|
|
(19
|
)
|
|
Chinese yuan
|
CNY
|
|
(123,000
|
)
|
|
USD
|
|
19,537
|
|
|
—
|
|
|
Euro
|
EUR
|
|
(27,320
|
)
|
|
USD
|
|
35,972
|
|
|
(141
|
)
|
|
British pound
|
GBP
|
|
(23,750
|
)
|
|
USD
|
|
37,252
|
|
|
(96
|
)
|
|
Indian rupee
|
INR
|
|
(530,000
|
)
|
|
USD
|
|
10,626
|
|
|
(42
|
)
|
|
Korean won
|
KRW
|
|
(1,500,000
|
)
|
|
USD
|
|
1,334
|
|
|
1
|
|
|
Mexican peso
|
MXN
|
|
(81,814
|
)
|
|
USD
|
|
6,304
|
|
|
(8
|
)
|
|
Polish zloty
|
PLN
|
|
(23,000
|
)
|
|
USD
|
|
7,142
|
|
|
(33
|
)
|
|
Swedish krona
|
SEK
|
|
(55,000
|
)
|
|
USD
|
|
8,117
|
|
|
(24
|
)
|
|
Singapore dollar
|
SGD
|
|
(4,000
|
)
|
|
USD
|
|
3,189
|
|
|
(6
|
)
|
|
Thai baht
|
THB
|
|
(114,000
|
)
|
|
USD
|
|
3,663
|
|
|
(4
|
)
|
|
South Africa rand
|
ZAR
|
|
(71,000
|
)
|
|
USD
|
|
9,120
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
(414
|
)
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
the difficulty of integrating the technologies, operations, business systems, and personnel of the acquired business, technology or product;
|
•
|
the potential disruption of our ongoing business, including the diversion of management attention to issues related to integration and administration, particularly given the number, size and varying scope of our recent completed acquisitions;
|
•
|
entering markets in which we have limited prior experience;
|
•
|
in the case of international acquisitions, which include both the Point and Hypercom acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries, including countries where we previously had limited operations;
|
•
|
the possible inability to obtain the desired financial and strategic benefits from the acquisition or investment, as discussed further in “We may not realize the expected benefits of our recently completed acquisitions, including Hypercom and Point” below;
|
•
|
the loss of all or part of our investment;
|
•
|
the loss of customers and partners of acquired businesses;
|
•
|
the need to integrate each company's accounting, legal, management, information, human resource and other administrative systems to permit effective management, and the lack of control if such integration is delayed or not implemented;
|
•
|
the need to implement controls, procedures and policies appropriate for a larger public company at companies that prior to acquisition had lacked such controls, procedures and policies;
|
•
|
the risk that increasing complexity inherent in operating a larger business and managing a broader range of solution and service offerings may impact the effectiveness of our internal controls and adversely affect our financial reporting processes;
|
•
|
the assumption of unanticipated liabilities and the incurrence of unforeseen expenditures;
|
•
|
the failure to identify or assess the magnitude of certain liabilities, shortcomings or other circumstances prior to acquiring a company, which could result in unexpected litigation, additional costs, unfavorable accounting treatment or other adverse effects; and
|
•
|
the loss of key employees of an acquired business.
|
•
|
Both Hypercom and Point have significant international operations; we may have difficulty integrating the international operations of Hypercom and Point, including coordinating the efforts of Hypercom's and Point's sales operations with those of VeriFone;
|
•
|
We may have difficulties successfully managing Hypercom's or Point's technologies or lines of businesses, particularly those lines of business with which we have limited operational experience;
|
•
|
We may not be able to adequately demonstrate to customers that the acquisitions will not result in adverse changes in client service standards or product support, in particular where the acquired business, such as Hypercom, has products that compete with existing VeriFone products;
|
•
|
Some of Hypercom's suppliers, distributors, customers, and licensors are VeriFone's competitors or work with VeriFone's competitors and may terminate their business relationships with Hypercom as a result of the acquisition;
|
•
|
We may not be able to successfully persuade the employees in various jurisdictions that the companies' business cultures are compatible, maintain employee morale, and retain key employees;
|
•
|
We may have difficulties integrating or migrating the information technology infrastructures of Hypercom and Point into our information technology systems and resources in an effective and timely manner;
|
•
|
We may be unable to cost-effectively and timely migrate Hypercom and Point to our common enterprise resource planning information system and to integrate all operations, sales, accounting, and administrative activities for the combined company;
|
•
|
We may have difficulties integrating Hypercom's supply chain operations with ours while ensuring that products continue to be manufactured and delivered on a timely basis, with superior quality to customers and at a cost acceptable to us;
|
•
|
We may have higher than anticipated costs in coordinating research and development and support activities across our existing and newly acquired products and services; and
|
•
|
We may not be able to successfully incorporate acquired technologies, products and service offerings into our next generation of products and solutions or to enhance introduction of new products, services, and technologies, while ensuring timely release of products to market.
|
•
|
securing commercial relationships to help establish or increase our presence in new and existing international markets;
|
•
|
hiring and training personnel capable of marketing, installing and integrating our solutions, supporting customers, and effectively managing operations in foreign countries;
|
•
|
adapting our solutions to meet local requirements and to target the specific needs and preferences of foreign customers, which may differ from our traditional customer base in the markets we currently serve;
|
•
|
building our brand name and awareness of our services among foreign customers in new and existing international markets;
|
•
|
enhancing our business infrastructure to enable us to efficiently manage the higher costs of operating across a larger span of geographic regions and international jurisdictions; and
|
•
|
implementing new systems, procedures, and controls to monitor our operations in new international markets.
|
•
|
multiple, changing, and often inconsistent enforcement of laws and regulations;
|
•
|
satisfying local regulatory or industry imposed requirements, including security or other certification requirements;
|
•
|
competition from existing market participants, including strong local competitors, that may have a longer history in and greater familiarity with the international markets we enter;
|
•
|
tariffs and trade barriers, and higher costs of compliance with international and U.S. laws and regulations such as import and trade regulations, export requirements and local tax laws;
|
•
|
laws and business practices that may favor local competitors;
|
•
|
restrictions on the repatriation of funds, including remittance of dividends by foreign subsidiaries, foreign currency exchange restrictions, and currency exchange rate fluctuations;
|
•
|
extended payment terms and the ability to collect accounts receivable;
|
•
|
different and/or more stringent labor laws and practices such as the use of workers' councils and labor unions;
|
•
|
different and/or more stringent data protection, privacy and other laws;
|
•
|
economic and political instability in certain foreign countries;
|
•
|
changes in a specific country's or region's political or economic conditions; and
|
•
|
greater difficulty in safeguarding intellectual property in areas such as China, India, Russia, and Latin America.
|
•
|
the manufacturing processes at our third-party contract manufacturers could become concentrated in a shorter time period. This concentration of manufacturing could increase manufacturing costs, such as costs associated with the expediting of orders, and negatively impact gross margins. The risk of higher levels of obsolete or excess inventory write-offs would also increase if we were to hold higher inventory levels to counteract this effect;
|
•
|
the higher concentration of orders may make it difficult to accurately forecast component requirements and, as a result, we could experience a shortage of the components needed for production, possibly delaying shipments and causing lost orders;
|
•
|
if we are unable to fill orders at the end of a quarter, shipments may be delayed. This could cause us to fail to meet our revenue and operating profit expectations for a particular quarter and could increase the fluctuation of quarterly results if shipments are delayed from one fiscal quarter to the next or orders are cancelled by customers; and
|
•
|
in order to fulfill orders at the end of a quarter, we may be forced to deliver our products using air freight which would result in increased distribution costs.
|
•
|
we may be unable to hedge currency risk for some transactions because of a high level of uncertainty or the inability to reasonably estimate our foreign exchange exposures; and
|
•
|
we may be unable to acquire foreign exchange hedging instruments in some of the geographic areas where we do business, or, where these derivatives are available, we may choose not to hedge because of the high cost of the derivatives.
|
•
|
the type, timing, and size of orders and shipments;
|
•
|
demand for and acceptance of our new product and services offerings;
|
•
|
customers' willingness to maintain inventories and/or increased overall channel inventories held by customers in a
|
•
|
delays in the implementation and delivery of our products and services, which may impact the timing of our recognition of revenues;
|
•
|
variations in product mix and cost during any period;
|
•
|
development of new relationships, penetration of new markets and maintenance and enhancement of existing relationships with customers and strategic partners;
|
•
|
component supply, manufacturing, or distribution difficulties;
|
•
|
deferral of customer contracts in anticipation of product or service enhancements;
|
•
|
timing of commencement, implementation, or completion of major implementation projects;
|
•
|
timing of governmental, statutory and industry association requirements, such as PCI compliance deadlines;
|
•
|
the relative geographic mix of net revenues;
|
•
|
fluctuations in currency exchange rates;
|
•
|
the fixed nature of many of our expenses; and
|
•
|
industry and economic conditions, including competitive pressures and inventory obsolescence.
|
•
|
the need to maintain significant inventory of components that are in limited supply;
|
•
|
buying components in bulk for the best pricing;
|
•
|
responding to the unpredictable demand for products;
|
•
|
cancellation of customer orders;
|
•
|
responding to customer requests for quick delivery schedules; and
|
•
|
timing of end-of-life decisions regarding products, including of acquired product lines.
|
•
|
rapid technological advancements;
|
•
|
frequent product introductions and enhancements;
|
•
|
evolving industry and government performance and security standards; and
|
•
|
changes in customer and end-user preferences or requirements.
|
•
|
requiring the dedication of a significant portion of our expected cash flow to service the indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including dividends, capital expenditures, investments and acquisitions;
|
•
|
increasing our vulnerability to general adverse economic conditions;
|
•
|
limiting our ability to obtain additional financing on acceptable terms; and
|
•
|
placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access to capital resources.
|
•
|
authorization of the issuance of “blank check” preferred stock without the need for action by stockholders;
|
•
|
the amendment of our organizational documents only by the affirmative vote of the holders of two-thirds of the shares of our capital stock entitled to vote;
|
•
|
provision that any vacancy on the board of directors, however occurring, including a vacancy resulting from an enlargement of the board, may only be filled by vote of the directors then in office;
|
•
|
inability of stockholders to call special meetings of stockholders, although stockholders are permitted to act by written consent; and
|
•
|
advance notice requirements for board nominations and proposing matters to be acted on by stockholders at stockholder meetings.
|
•
|
actual or anticipated variations in quarterly operating results;
|
•
|
changes in financial estimates by us or by any securities analysts who might cover our stock, or our failure to meet the estimates made by securities analysts;
|
•
|
uncertainty about current global economic conditions;
|
•
|
changes in the market valuations of other companies operating in our industry;
|
•
|
announcements by us or our competitors related to significant acquisitions, strategic partnerships or divestitures;
|
•
|
additions or departures of key personnel;
|
•
|
sales or purchases of our common stock, including sales or purchases of our common stock by our directors and officers or by our principal stockholders; and
|
•
|
any issuance of our common stock in connection with any conversion of our Notes. See Part I Item 3.
Quantitative and Qualitative Disclosures About Market Risk
-
Equity Price Risk
in this Form 10-Q.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
|
Description
|
10.1*
|
|
Sale and Purchase Agreement dated November 12, 2011 by and between Point Luxembourg Holding S.À.R.L. and Electronic Transactions Group Limited, as Sellers, and VeriFone Nordic AB, as Purchaser.
|
10.2(1)
|
|
Credit Agreement, dated as of December 28, 2011, by and among, inter alia,VeriFone, Inc., VeriFone Intermediate Holdings Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.
|
10.3(1)
|
|
Security Agreement, dated as of December 28, 2011, by and among JPMorgan Chase Bank, N.A., in its capacity as the Collateral Agent, and the VeriFone parties.
|
10.4(1)
|
|
Pledge Agreement, dated as of December 28, 2011, by and among the VeriFone parties and JPMorgan Chase Bank, N.A., in its capacity as the Collateral Agent.
|
10.5(1)
|
|
Guaranty, dated as of December 28, 2011, executed by each of the Guarantors party thereto in favor of JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent.
|
31.1*
|
|
Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2*
|
|
Certification of the Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1*
|
|
Certification of the Chief Executive Officer and the Chief Financial Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS **
|
|
XBRL Instance Document
|
|
|
|
101.SCH **
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL **
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF **
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB **
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE **
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith.
|
**
|
XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
|
(1)
|
Filed as an exhibit to the Company's Current Report on Form 8-K, filed January 4, 2012.
|
VERIFONE SYSTEMS, INC.
|
||
|
|
|
By:
|
|
/
S
/ D
OUGLAS
G. B
ERGERON
|
|
|
Douglas G. Bergeron
|
|
|
Chief Executive Officer
|
|
|
|
By:
|
|
/
S
/ R
OBERT
D
YKES
|
|
|
Robert Dykes
|
|
|
Executive Vice President and Chief Financial Officer
|
Exhibit
Number
|
|
Description
|
10.1*
|
|
Sale and Purchase Agreement dated November 12, 2011 by and between Point Luxembourg Holding S.À.R.L. and Electronic Transactions Group Limited, as Sellers, and VeriFone Nordic AB, as Purchaser.
|
10.2(1)
|
|
Credit Agreement, dated as of December 28, 2011, by and among, inter alia,VeriFone, Inc., VeriFone Intermediate Holdings Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.
|
10.3(1)
|
|
Security Agreement, dated as of December 28, 2011, by and among JPMorgan Chase Bank, N.A., in its capacity as the Collateral Agent, and the VeriFone parties.
|
10.4(1)
|
|
Pledge Agreement, dated as of December 28, 2011, by and among the VeriFone parties and JPMorgan Chase Bank, N.A., in its capacity as the Collateral Agent.
|
10.5(1)
|
|
Guaranty, dated as of December 28, 2011, executed by each of the Guarantors party thereto in favor of JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent.
|
31.1*
|
|
Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2*
|
|
Certification of the Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1*
|
|
Certification of the Chief Executive Officer and the Chief Financial Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS **
|
|
XBRL Instance Document
|
|
|
|
101.SCH **
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL **
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF **
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB **
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE **
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith.
|
**
|
XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
|
(1)
|
Filed as an exhibit to the Company's Current Report on Form 8-K, filed January 4, 2012.
|
(i)
|
EUR six hundred and one million (601,000,000),
less
|
(ii)
|
the interest accrued on the Shareholder Loans during the period from the Management Accounts Date up until and including the Closing Date;
plus
|
(iii)
|
an amount equal to the Warrant Redemption Price.
|
(i)
|
a date falling no later than the Longstop Date, if, prior to December 30, 2011, there is any (a) injunction, restraining order or other order issued by any court of competent jurisdiction or governmental or regulatory authority prohibiting the transaction or imposing any material restrictions on the Purchaser’s ability to own and operate the Company’s businesses or own or exercise control over its assets and properties following the Closing, (b) pending governmental or regulatory litigation seeking to block the transaction, (c) competition authority having either initiated an investigation of the transaction or made or joined a request for referral of the transaction pursuant to Article 22 of Council Regulation (EC) No. 139/2004; or until
|
(ii)
|
February 1, 2012 by giving written notice to the Sellers no later than at 23.59 CET on December 19, 2011, if in the Purchaser’s reasonable judgment, based on the advice of its Financing Sources, such extension of time is required in order to successfully market and syndicate the Debt Financing,
|
(i)
|
(A) knowingly made any unlawful contribution, gift or other payment to any person to obtain favorable treatment in securing business or (B) violated any provision of the US Foreign Corrupt Practices Act of 1977 (FCPA) or the UK Bribery Act 2010, or
|
(ii)
|
to the Seller’s knowledge established or maintained any material fund or material asset that has not been recorded in the books and records of the Group Companies.
|
(i)
|
require the consent or result in a violation or breach of, or
|
(ii)
|
permit the cancellation or termination of any Material Contract.
|
5.18
|
Knowledge of the Sellers
|
6.1
|
Authority
|
(i)
|
No material consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any governmental authority, and
|
(ii)
|
no consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any competition authority is required to be obtained or made by or with respect to the Purchaser or any of its Affiliates in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.
|
6.4
|
Knowledge of the Purchaser
|
(i)
|
the Required Financial Information, and
|
(ii)
|
management’s projections for the Company together with the assumptions utilized in preparing such projections for the fourth fiscal quarter of 2011 and on an annual basis commencing with the 2012 fiscal year through the end of the 2016 fiscal year,
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(i)
|
causing Johan Tjärnberg and Mikael Rahm (or any appropriate person replacing them) to be available, on reasonable advance notice, to participate in one due diligence session by teleconference of no more than two (2) hours in length related to the Debt Financing,
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(ii)
|
assisting the Purchaser in identifying the qualitative differences between the Accounting Principles and U.S. GAAP for the Required Financial Information assuming such Required Financial Information were prepared in accordance with U.S. GAAP by helping to review the qualitative differences identified by the Purchaser and using reasonable efforts to answer any Purchaser questions related to such qualitative differences identified,
|
(iii)
|
assisting in the preparation of customary “public side” and “private side” bank books, rating agency presentations, lender presentations, information memoranda and other customary marketing materials for the Debt Financing (the “Debt Financing
|
(iv)
|
together with the Purchaser and its advisers, requesting that the lenders under any existing debt instrument or credit facility, including the Credit Facility, in each case that need repaid in full at the Closing, provide debt payoff letters, releases of collateral and customary Swedish related documents in connection with the Purchaser’s draw down of the Debt Financing on or immediately prior to the Closing Date.
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(i)
|
permitting, if possible, reasonable access to the Company’s auditors and audit work papers (during normal working hours in Sweden and with customary conditions required under applicable professional standards),
|
(ii)
|
providing customary management representation letters to the Company’s auditors in connection with the use of Interim Financial Information, and
|
(iii)
|
assisting in obtaining, if reasonably possible, any required signed reports and consents from the Company’s auditors in connection with the Debt Financing.
|
(i)
|
each of the Sellers and any Group Company is at any time allowed to suspend cooperation pursuant to Section 7.7.1.2 to the extent it would require the Sellers to waive or amend any terms of this Agreement,
|
(ii)
|
under no circumstance shall any board of directors or officers of any Group Company be required to adopt resolutions approving the agreements, documents and instruments pursuant to which any portion of the Debt Financing is obtained,
|
(iii)
|
none of the Group Companies shall be required to execute, prior to the Closing, any definitive financing documents, including any credit or other agreements, pledge or security documents, or other certificates, legal opinions or documents in connection with any portion of the Debt Financing, unless such documents, agreements, certificates or opinions will only be effective as of or after the Closing (to the extent legally permitted), and
|
(iv)
|
any and all cooperation pursuant to Section 7.7.1.2 by the Sellers or any Group Company can be suspended to the extent it would unreasonably interfere with the ongoing Business of the Sellers or any Group Company.
|
9.2
|
Amendments and Waivers
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By: _________________________
Name:
Title:
|
|
|
/s/ Douglas G. Bergeron
|
Douglas G. Bergeron
|
Chief Executive Officer
|
/s/ Robert Dykes
|
Robert Dykes
|
Executive Vice President and Chief Financial Officer
|
By:
|
|
/s/ Douglas G. Bergeron
|
|
|
Douglas G. Bergeron
|
|
|
Chief Executive Officer
|
|
|
|
By:
|
|
/s/ Robert Dykes
|
|
|
Robert Dykes
|
|
|
Executive Vice President and Chief Financial Officer
|