Results for the quarter are after $632,000 (pre-tax), or $0.01 per share, of expenses and accruals attributable to the Processing System Intrusion. Excluding these expenses and accruals, Adjusted Net Income and Earnings per Share were $7.0 million and $0.18, respectively, for the quarter ended December 31, 2010 compared to Adjusted Net Income and Earnings per Share of $5.9 million and $0.16, respectively, for the quarter ended December 31, 2009. 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 fourth quarter of 2010 include:

* Small and Mid-Sized merchant (SME) transaction processing volume of $15.7 billion, up 6.8% from a year ago
* Quarterly Net Revenue of $110.5 million, up 5.1% from a year ago
* A 35.7% increase in operating income compared to the fourth quarter of 2009
* Operating margin on net revenue of 12.9%, up from both the third quarter of 2010 as well as the 10.0% margin in the fourth quarter of 2009
* Same store sales were up 3.8% for the fourth quarter, nearly doubling the rate of same store sales growth in the preceding quarter
* New margin installed was up 6.4% from the fourth quarter of 2009, the first quarterly increase in new margin installed in 2 years
* SFAS 123R stock compensation expense of $1.8 million, or $0.03 per share, compared to $1.7 million or $0.03 per share in the fourth quarter of 2009

Robert Carr, Chairman and CEO, said, "Results for the fourth quarter represent solid progress, as they not only reflect continued success in achieving key performance metrics in the near term, but clearly indicate that our efforts to accelerate future growth and improve margins over the long term are gaining momentum. In the fourth quarter, our new business initiatives achieved growth in both new margin installed and new card merchants installed for the first time in two years, while same store sales grew at the fastest rate in over three years. At the same time, we made significant progress improving efficiency, as various cost reduction initiatives enabled us to hold processing and servicing costs in check. This very solid conclusion to a transitional 2010 is an encouraging indication that the effective execution of our strategy can drive improved results in the coming years."

Net revenues in the fourth quarter were $110.5 million, an increase of 5.1% compared to $105.1 million in the fourth quarter of 2009, with gross processing, payroll and equipment-related revenues all up double digits from the year ago quarter. SME card processing volume for the three months ended December 31, 2010 increased 6.8% to $15.7 billion compared to the fourth quarter of 2009 while our Network Services transactions processed were up 11.2% to 790 million for the quarter. Same store sales were up 3.8% in the quarter, improving by 180 basis points sequentially from the third quarter of 2010, and have now made increasingly positive contributions to our growth for three consecutive quarters. New margin installed was up 6.4% year-over-year in the fourth quarter as our focused selling efforts gained traction. Operating income was up a very strong 35.7% in the fourth quarter over the fourth quarter of 2009, and the operating margin on net revenue expanded from both the third quarter and relative to the year ago quarter. General and administrative expenses for the quarter were up just 1.9%. Expenses incurred in the fourth quarter attributable to the Processing System Intrusion were: 1) $632,000 pre-tax, or $0.01 per share, and 2) approximately $475,000, or $0.01 per share, of related interest expense.

New, Increased Credit Agreement Signed

In November, the Company closed on a new credit facility including a five-year $100 million term loan, and a $50 million revolving credit facility (which can be increased to $100 million), which is committed through November 2015.

Other Non-Operating Items

The company incurred a number of items in non-operating income and expense during the quarter. Non-operating expenses were comprised of the costs associated with the exit of the Johnson City facility ($493,000, pre-tax), an intangible asset impairment charge ($831,000, pre-tax) and a $3.8 million pre-tax charge to settle litigation over the treatment of reimbursable employee business expenses. During the quarter, the company sold 636 merchant accounts that had not been converted onto HPS Exchange and were still processing on third party platforms under legacy contracts. The sale, which generated a $3.1 million gain in the fourth quarter, was made to eliminate servicing inefficiencies associated with these merchant accounts. The net effect of all of the aforementioned items was to reduce earnings by $2.0 million (pre-tax), or $0.03 per share, in the fourth quarter as well as the full year 2010.

Mr. Carr continued, "Though our recent progress is certainly rewarding, especially for our many dedicated Heartland employees and merchants, there remain significant opportunities to strengthen our franchise with the small and mid-sized business community. Beyond our core transaction processing services, our complementary "Fair Deal" payroll, loyalty, campus solutions and other capabilities targeted to the unique needs of our Main Street merchants have all been exhibiting healthy growth rates. In addition, we continue to introduce industry-leading technology, with sales of our E3 terminals making significant inroads. We've re-tooled our sales organization to improve productivity, and this restored new business momentum heading into the new year. From this solid foundation, we plan to build a highly-efficient marketing organization that is already armed with the industry's most compelling products to grow our business. With some easing of the economic headwinds and the freeing of internal resources that has transpired over just the past few quarters, we believe we are now in a much stronger position to leverage our value proposition for sustained growth and to create value for our shareholders."

FULL YEAR 2010 RESULTS:

For the full year of 2010, GAAP net income was $34.5 million or $0.88 per diluted share. Net revenues for 2010 were $444.9 million, up 6% compared to 2009. Excluding various expenses, accruals and reserves, all of which are attributable to the Processing System Intrusion, Adjusted Net Income and Earnings per Share for fiscal 2010 were $25.8 million or $0.66 per share, compared to $29.3 million, or $0.78 per share, in 2009. Stock compensation expenses reduced earnings by $6.3 million, or $0.10 per share, in 2010 compared to $4.5 million, or approximately $0.07 per share, for 2009.