catm_Current folio_10Q

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UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

 

FORM 10-Q 

 

(Mark One)

 

 

 

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

 

 

 

For the quarterly period ended March 31, 2018

 

 

or

 

 

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

 

 

 

For the transition period from    to

 

Commission File Number: 001-37820 

 


 

Cardtronics plc 

(Exact name of registrant as specified in its charter)

 

 

 

England and Wales 

98-1304627

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

3250 Briarpark Drive, Suite 400

77042

Houston, Texas 

(Zip Code)

(Address of principal executive offices)

 

 

Registrant’s telephone number, including area code: (832) 308-4000

 

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. Yes ☑ 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). Yes ☑ No ☐ 

 

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

 

 

 

 

Large accelerated filer            

 

Accelerated filer                    

Non-accelerated filer              

(Do not check if a smaller reporting company)

Smaller reporting company   

Emerging growth company    

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑ 

 

Shares outstanding as of April 30, 2018: 45,924,163 Ordinary shares, nominal value $0.01 per share.

 

 

 

 


 

Table of Contents

 

CARDTRONICS PLC

 

TABLE OF CONTENTS

 

31

 

 

 

 

 

 

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION 

 

 

Item 1. 

Financial Statements

 

3

 

Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017

 

3

 

Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2018 and 2017

 

4

 

Unaudited Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2018 and 2017

 

5

 

Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017 

 

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

 

Cautionary Statement Regarding Forward-Looking Statements

 

41

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

43

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

 

65

Item 4. 

Controls and Procedures

 

68

 

 

 

 

PART II. OTHER INFORMATION 

 

 

Item 1. 

Legal Proceedings

 

70

Item 1A. 

Risk Factors

 

70

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

 

70

Item 3. 

Defaults Upon Senior Securities

 

70

Item 4. 

Mine Safety Disclosures

 

70

Item 5. 

Other Information

 

70

Item 6. 

Exhibits

 

71

 

Signatures

 

72

 

 

 

 

 

 

When we refer to “us,” “we,” “our,” “ours,” “the Company,” or “Cardtronics” we are describing Cardtronics plc and/or our subsidiaries, unless the context indicates otherwise.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CARDTRONICS PLC
CONSOLIDATED BALANCE SHEETS
(In thousands, excluding share and per share amounts)

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

46,673

 

$

51,370

Accounts and notes receivable, net of allowance for doubtful accounts of $1,982 and $2,001 as of March 31, 2018 and December 31, 2017, respectively

 

 

94,345

 

 

105,245

Inventory, net

 

 

15,529

 

 

14,283

Restricted cash

 

 

73,003

 

 

48,328

Prepaid expenses, deferred costs, and other current assets

 

 

121,298

 

 

96,106

Total current assets

 

 

350,848

 

 

315,332

Property and equipment, net of accumulated depreciation of $403,473 and $404,141 as of March 31, 2018 and December 31, 2017, respectively

 

 

487,695

 

 

497,902

Intangible assets, net

 

 

195,378

 

 

209,862

Goodwill

 

 

779,394

 

 

774,939

Deferred tax asset, net

 

 

5,948

 

 

6,925

Prepaid expenses, deferred costs, and other noncurrent assets

 

 

75,245

 

 

57,756

Total assets

 

$

1,894,508

 

$

1,862,716

   

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of other long-term liabilities

 

$

22,877

 

$

31,370

Accounts payable

 

 

32,332

 

 

44,235

Accrued liabilities

 

 

330,424

 

 

306,945

Total current liabilities

 

 

385,633

 

 

382,550

Long-term liabilities:

 

 

 

 

 

 

Long-term debt

 

 

915,586

 

 

917,721

Asset retirement obligations

 

 

61,392

 

 

59,920

Deferred tax liability, net

 

 

42,394

 

 

37,130

Other long-term liabilities

 

 

70,921

 

 

75,002

Total liabilities

 

 

1,475,926

 

 

1,472,323

   

 

 

 

 

 

 

Commitments and contingencies (See Note 14)

 

 

 

 

 

 

   

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

Ordinary shares, $0.01 nominal value; 45,921,203 and 45,696,338 issued and outstanding as of March 31, 2018 and December 31, 2017, respectively

 

 

459

 

 

457

Additional paid-in capital

 

 

316,996

 

 

316,940

Accumulated other comprehensive loss, net

 

 

(8,610)

 

 

(33,595)

Retained earnings

 

 

109,835

 

 

106,670

Total parent shareholders' equity

 

 

418,680

 

 

390,472

Noncontrolling interests

 

 

(98)

 

 

(79)

Total shareholders’ equity

 

 

418,582

 

 

390,393

Total liabilities and shareholders’ equity

 

$

1,894,508

 

$

1,862,716

 

 

The accompanying notes are an integral part of these consolidated financial statements.

Th

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CARDTRONICS PLC

CONSOLIDATED STATEMENTS OF OPERATIONS 

(In thousands, excluding share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

 

2018

    

2017

Revenues:

 

 

 

 

 

 

ATM operating revenues

 

$

319,731

 

$

341,788

ATM product sales and other revenues

 

 

16,453

 

 

15,784

Total revenues

 

 

336,184

 

 

357,572

Cost of revenues:

 

 

 

 

 

 

Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets reported separately below. See Note 1(c))

 

 

215,490

 

 

231,927

Cost of ATM product sales and other revenues

 

 

12,762

 

 

14,635

Total cost of revenues

 

 

228,252

 

 

246,562

Operating expenses:

 

 

 

 

 

 

Selling, general, and administrative expenses

 

 

41,740

 

 

41,949

Redomicile-related expenses

 

 

 —

 

 

760

Restructuring expenses

 

 

2,413

 

 

8,243

Acquisition and divestiture-related expenses

 

 

1,720

 

 

8,456

Depreciation and accretion expense

 

 

31,042

 

 

29,121

Amortization of intangible assets

 

 

13,771

 

 

15,180

Loss on disposal and impairment of assets

 

 

5,420

 

 

3,194

Total operating expenses

 

 

96,106

 

 

106,903

Income from operations

 

 

11,826

 

 

4,107

Other expense:

 

 

 

 

 

 

Interest expense, net

 

 

9,174

 

 

6,557

Amortization of deferred financing costs and note discount

 

 

3,308

 

 

2,976

Other expense (income)

 

 

2,160

 

 

(1,580)

Total other expense

 

 

14,642

 

 

7,953

Loss before income taxes

 

 

(2,816)

 

 

(3,846)

Income tax benefit

 

 

(31)

 

 

(2,952)

Net loss

 

 

(2,785)

 

 

(894)

Net (loss) income attributable to noncontrolling interests

 

 

(17)

 

 

 7

Net loss attributable to controlling interests and available to common shareholders

 

$

(2,768)

 

$

(901)

 

 

 

 

 

 

 

Net loss per common share – basic

 

$

(0.06)

 

$

(0.02)

Net loss per common share – diluted

 

$

(0.06)

 

$

(0.02)

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

45,833,070

 

 

45,490,461

Weighted average shares outstanding – diluted

 

 

45,833,070

 

 

45,490,461

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

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CARDTRONICS PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2018

    

2017

    

Net loss

 

$

(2,785)

 

$

(894)

 

Unrealized gain on interest rate swap and foreign currency forward contracts, net of deferred income tax expense of $5,143 and $1,360 for the three months ended March 31, 2018 and 2017, respectively.

 

 

17,361

 

 

1,405

 

Foreign currency translation adjustments, net of deferred income tax expense (benefit) of $24, and $(1,383) for the three months ended March 31, 2018 and 2017, respectively.

 

 

7,624

 

 

7,246

 

Other comprehensive income

 

 

24,985

 

 

8,651

 

Total comprehensive income

 

 

22,200

 

 

7,757

 

Less: Comprehensive (loss) income attributable to noncontrolling interests

 

 

(19)

 

 

 6

 

Comprehensive income attributable to controlling interests

 

$

22,219

 

$

7,751

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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CARDTRONICS PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

   

    

2018

    

2017

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(2,785)

 

$

(894)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation, accretion, and amortization of intangible assets

 

 

44,813

 

 

44,301

Amortization of deferred financing costs and note discount

 

 

3,308

 

 

2,976

Share-based compensation expense

 

 

2,445

 

 

2,197

Deferred income tax (benefit)

 

 

(281)

 

 

(4,060)

Loss on disposal and impairment of assets

 

 

5,420

 

 

3,194

Other reserves and non-cash items

 

 

2,368

 

 

(1,198)

Changes in assets and liabilities:

 

 

 

 

 

 

Decrease in accounts and notes receivable, net

 

 

12,633

 

 

215

Increase in prepaid expenses, deferred costs, and other current assets

 

 

(17,995)

 

 

(2,726)

Increase in inventory, net

 

 

(1,424)

 

 

(1,037)

Increase in other assets

 

 

(118)

 

 

(2,635)

Decrease in accounts payable

 

 

(11,581)

 

 

(24,206)

Increase in accrued liabilities

 

 

18,661

 

 

9,906

Decrease in other liabilities

 

 

(6,031)

 

 

(3,325)

Net cash provided by operating activities

 

 

49,433

 

 

22,708

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Additions to property and equipment

 

 

(20,739)

 

 

(38,561)

Acquisitions, net of cash acquired

 

 

 —

 

 

(484,602)

Net cash used in investing activities

 

 

(20,739)

 

 

(523,163)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from borrowings under revolving credit facility

 

 

143,502

 

 

624,199

Repayments of borrowings under revolving credit facility

 

 

(150,518)

 

 

(133,399)

Tax payments related to share-based compensation

 

 

(2,379)

 

 

(7,602)

Proceeds from exercises of stock options

 

 

 —

 

 

 3

Net cash (used in) provided by financing activities

 

 

(9,395)

 

 

483,201

   

 

 

 

 

 

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

684

 

 

(1,163)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

19,983

 

 

(18,417)

   

 

 

 

 

 

 

Cash, cash equivalents, and restricted cash as of beginning of period

 

 

99,817

 

 

105,747

Cash, cash equivalents, and restricted cash as of end of period

 

$

119,800

 

$

87,330

   

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

7,553

 

$

8,277

Cash (refund) paid for income taxes

 

$

(7,138)

 

$

299

 

The accompanying notes are an integral part of these consolidated financial statements.

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CARDTRONICS PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

(1) General and Basis of Presentation 

 

(a) General 

 

Cardtronics plc, together with its wholly and majority-owned subsidiaries (collectively, the “Company”), provides convenient automated financial related services to consumers through its network of automated teller machines and multi-function financial services kiosks (collectively referred to as “ATMs”). As of March 31, 2018, the Company was the world’s largest ATM owner/operator, providing services to approximately 230,000 ATMs.

 

During 2018, 62% of the Company’s revenues were derived from operations in North America (including its ATM operations in the U.S., Canada, and Mexico), 29% of the Company’s revenues were derived from operations in Europe and Africa (including its ATM operations in the U.K., Ireland, Germany, Spain, and South Africa), and 9% of the Company’s revenues were derived from the Company’s operations in Australia and New Zealand. As of March 31, 2018, the Company provided processing only services or various forms of managed services solutions to approximately 135,000 ATMs. Under a managed services arrangement, retailers, financial institutions, and ATM distributors rely on Cardtronics to handle some or all of the operational aspects associated with operating and maintaining ATMs, typically in exchange for a monthly service fee, fee per transaction, or fee per service provided.

 

Through its network, the Company delivers financial related services to cardholders and provides ATM management and ATM equipment-related services (typically under multi-year contracts) to large retail merchants, smaller retailers, and operators of facilities such as shopping malls, airports, and train stations. In doing so, the Company provides its retail partners with a compelling automated solution that helps attract and retain customers, and in turn, increases the likelihood that the ATMs placed at their facilities will be utilized. The Company also owns and operates electronic funds transfer (“EFT”) transaction processing platforms that provide transaction processing services to its network of ATMs, as well as to other ATMs under managed services arrangements. Additionally, the Company provides processing services for issuers of debit cards.

 

In addition to its retail merchant relationships, the Company also partners with leading financial institutions to brand selected ATMs within its network, including BBVA Compass Bancshares, Inc. (“BBVA”), Citibank, N.A. (“Citibank”), Citizens Financial Group, Inc. (“Citizens”), Cullen/Frost Bankers, Inc. (“Cullen/Frost”), Discover Bank (“Discover”), PNC Bank, N.A. (“PNC Bank”), Santander Bank, N.A. (“Santander”), and TD Bank, N.A. (“TD Bank”) in the U.S.; the Bank of Nova Scotia (“Scotiabank”), TD Bank, Canadian Imperial Bank Commerce (“CIBC”), and DirectCash Bank in Canada; and the Bank of Queensland Limited (“BOQ”) and HSBC Holdings plc (“HSBC”) in Australia. In Mexico, the Company partners with Scotiabank to place their brands on its ATMs in exchange for certain services provided by them. As of March 31, 2018, approximately 20,000 of the Company’s ATMs were under contract with approximately 500 financial institutions to place their logos on the ATMs, and to provide convenient surcharge-free access for their banking customers. 

 

The Company owns and operates the Allpoint network (“Allpoint”), the largest surcharge-free ATM network (based on the number of participating ATMs). Allpoint, which has approximately 55,000 participating ATMs, provides surcharge-free ATM access to over 1,000 participating banks, credit unions, and stored-value debit card issuers. For participants, Allpoint provides scale, density, and convenience of surcharge-free ATMs that surpasses the largest banks in the U.S. Allpoint earns either a fixed monthly fee per cardholder or a fixed fee per transaction that is paid by the participants. The Allpoint network includes a majority of the Company’s ATMs in the U.S. and certain ATMs in the U.K., Canada, Mexico, Puerto Rico, and Australia. Allpoint also works with financial institutions that manage stored-value debit card programs on behalf of corporate entities and governmental agencies, including general purpose, payroll, and electronic benefits transfer (“EBT”) cards. Under these programs, the issuing financial institutions pay Allpoint a fee per issued stored-value debit card or per transaction in return for allowing the users of those cards surcharge-free access to Allpoint’s participating ATM network.

 

The Company’s revenues are generally recurring in nature, and historically have been derived largely from convenience transaction fees, which are paid by cardholders, as well as other transaction-based fees, including interchange fees, which

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are paid by the cardholder’s financial institution for the use of the ATMs serving their customers and connectivity to the applicable EFT network that transmits data between the ATM and the cardholder’s financial institution. Other revenue sources include: (i) fees for branding ATMs with the logos of financial institutions and providing financial institution cardholders with surcharge free access, (ii) revenues earned by providing managed services (including transaction processing services) solutions to retailers and financial institutions, (iii) fees from financial institutions that participate in the Allpoint surcharge-free network, (iv) fees earned from foreign currency exchange transactions at the ATM, known as dynamic currency conversion, and (v) revenues from the sale of ATMs and ATM-related equipment and other ancillary services.

 

(b) Basis of Presentation

 

This Quarterly Report on Form 10-Q (this “Form 10-Q”) has been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial information. Because this is an interim period filing presented using a condensed format, it does not include all of the disclosures required by accounting principles generally accepted in the U.S. (“U.S. GAAP”), although the Company believes that the disclosures are adequate to make the information not misleading. You should read this Form 10-Q along with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Form 10-K”), which includes a summary of the Company’s significant accounting policies and other disclosures.

 

In management’s opinion, all normal recurring adjustments necessary for a fair presentation of the Company’s interim and prior period results have been made. The results of operations for the three months ended March 31, 2018 and 2017 are not necessarily indicative of results of operations that may be expected for any other interim period or for the full fiscal year.

 

The unaudited interim financial statements include the accounts of the Company. All material intercompany accounts and transactions have been eliminated in consolidation. The Company owns a majority (95.7%) interest in, and realizes a majority of the earnings and/or losses of, Cardtronics Mexico, S.A. de C.V., thus this entity is reflected as a consolidated subsidiary in the financial statements, with the remaining ownership interests not held by the Company being reflected as noncontrolling interests.

 

The preparation of the unaudited interim financial statements to conform with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of this Form 10-Q and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and these differences could be material to the financial statements.

 

(c) Cost of ATM Operating Revenues Presentation 

 

The Company presents the Cost of ATM operating revenues in the accompanying Consolidated Statements of Operations exclusive of depreciation, accretion, and amortization of intangible assets related to ATMs and ATM-related assets.

 

The following table reflects the amounts excluded from the Cost of ATM operating revenues line item in the accompanying Consolidated Statement of Operations for the periods presented:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2018

    

2017

 

 

 

( In thousands)

Depreciation and accretion expenses related to ATMs and ATM-related assets

 

$

23,375

 

$

21,984

Amortization of intangible assets

 

 

13,771

 

 

15,180

Total depreciation, accretion, and amortization of intangible assets excluded from Cost of ATM operating revenues

 

$

37,146

 

$

37,164

 

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(d) Redomicile to the U.K. 

 

On July 1, 2016, the Cardtronics group of companies changed the location of incorporation of the parent company from Delaware to the U.K. Cardtronics plc, a public limited company organized under English law (“Cardtronics plc”), became the new publicly traded corporate parent of the Cardtronics group of companies following the completion of the merger between Cardtronics, Inc., a Delaware corporation (“Cardtronics Delaware”), and one of its subsidiaries.

 

Any references to “the Company” (as defined above) or any similar references relating to periods before the Redomicile Transaction shall be construed as references to Cardtronics Delaware being the previous parent company of the Cardtronics group of companies, and/or its subsidiaries depending on the context. The Redomicile Transaction was accounted for as an internal reorganization of entities under common control and, therefore, the Cardtronics Delaware assets and liabilities have been accounted for at their historical cost basis and not revalued in the transaction.

 

(e) Restructuring Expenses

 

During 2017, the Company initiated a global corporate reorganization and cost reduction initiative (the “Restructuring Plan”), intended to improve its cost structure and operating efficiency. The Restructuring Plan included workforce reductions, facilities closures, contract terminations, and other cost reduction measures. The Company incurred $8.2 million and $10.4 million of pre-tax expenses related to its Restructuring Plan during the three and twelve months ended March 31, 2017 and December 31, 2017, respectively. During the three months ended March 31, 2018, the Company implemented additional workforce reductions in an effort to continue its cost reduction initiative and thereby improve its cost structure and operating efficiency. The Company incurred $2.4 million of pre-tax expenses, largely consisting of employee severance, during the first quarter of 2018. The Company’s 2018 Restructuring Plan activities will likely include additional workforce reductions, certain facilities closures, and other cost reduction measures.

 

The following tables reflect the amounts recorded in the Restructuring expenses line item in the accompanying Consolidated Statements of Operations for the periods presented:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 2018

 

    

North America

    

Europe & Africa

    

Corporate

    

Total

 

 

(In thousands)

Restructuring expenses

 

$

1,057

 

$

681

 

$

675

 

$

2,413

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 2017

 

    

North America

    

Europe & Africa

    

Corporate

    

Total

 

 

(In thousands)

Restructuring expenses

 

$

3,727

 

$

787

 

$

3,729

 

$

8,243

 

As of March 31, 2018, $3.6 million of unpaid employee severance and lease termination costs were presented within the Current portion of other long-term liabilities, Accrued liabilities, and Other long-term liabilities line items in the accompanying Consolidated Balance Sheets. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2018

 

   

North America

   

Europe & Africa

   

Corporate

   

Total

 

 

(In thousands)

Current portion of other long-term liabilities

 

$

 —

 

$

27

 

$

 —

 

$

27

Accrued liabilities

 

 

 —

 

 

549

 

 

2,620

 

 

3,169

Other long-term liabilities

 

 

 —

 

 

376

 

 

 —

 

 

376

Total restructuring liabilities

 

$

 —

 

$

952

 

$

2,620

 

$

3,572

 

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The changes in the Company’s restructuring liabilities consisted of the following:

 

 

 

 

 

 

 

(In thousands)

Restructuring liabilities as of December 31, 2017

   

$

5,383

Restructuring expenses

 

 

2,413

Payments

 

 

(4,224)

Restructuring liabilities as of March 31, 2018

 

$

3,572

 

(f) Cash, Cash Equivalents, and Restricted Cash

 

For purposes of reporting financial condition, cash and cash equivalents include cash in bank and short-term deposit sweep accounts. Additionally, the Company maintains cash on deposit with banks that is pledged for a particular use or restricted to support a potential liability. These balances are classified as Restricted cash in the Current assets or Noncurrent assets line items in the accompanying Consolidated Balance Sheets based on when the Company expects this cash to be paid. Current restricted cash largely consists of amounts collected on behalf of, but not yet remitted to, certain of the Company’s merchant customers or third-party service providers. These assets are offset by corresponding liability balances in the Accrued liabilities line item in the accompanying Consolidated Balance Sheets.  For purpose of reporting cash flows, the following table provides a reconciliation of the ending cash, cash equivalents, and restricted cash balances as of March 31, 2018 and 2017.

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018

 

 

March 31, 2017

 

 

 

(In thousands)

Cash and cash equivalents

 

$

46,673

 

$

40,245

Current and long-term restricted cash

 

 

73,127

 

 

47,085

Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows

 

$

119,800

 

$

87,330

 

(g) Inventory, net

 

The Company’s inventory is determined using the average cost method. The Company periodically assesses its inventory, and as necessary, adjusts the carrying values to the lower of cost and net realizable value.

 

The following table reflects the Company’s primary inventory components:

 

 

 

 

 

 

 

 

 

   

March 31, 2018

 

December 31, 2017

 

 

(In thousands)

ATMs

 

$

3,886

 

$

3,181

ATM spare parts and supplies

 

 

11,849

 

 

12,935

Total inventory

 

 

15,735

 

 

16,116

Less: Inventory reserves

 

 

(206)

 

 

(1,833)

Inventory, net

 

$

15,529

 

$

14,283

 

.

 

 

 

(2) New Accounting Pronouncements

 

Adoption of New Accounting Standards

Revenue from Contracts with Customers. On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (the “new revenue standard”), using the modified retrospective adoption method, for contracts that were not completed as of January 1, 2018. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information in prior periods has not been restated and continues to be reported under the

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accounting standards in effect for those periods. The Company expects the impact of the adoption of the new revenue standard to be immaterial to net income on an ongoing basis.

 

On January 1, 2018, the Company recorded a net credit to opening retained earnings of approximately $5.9 million, representing the cumulative impact of adopting the new revenue standard. This adjustment was entirely related to the deferral of contract acquisition costs, consisting of sales commissions and other directly related costs totaling approximately $7.5 million, net of the related tax impact of approximately $1.6 million. During the quarter ended March 31, 2018 the Company recognized sales commission expense and other directly related costs as a result amortizing the amounts deferred. The incremental expense recognized during the period was not material.

 

The cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet for the adoption of ASC 606, Revenue from Contracts with Customers were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

December 31, 2017 as Reported

 

Adjustments Due to ASC 606

 

January 1, 2018 Upon Adoption

 

 

(In thousands)

Assets

 

 

 

 

 

 

Prepaid expenses, deferred costs, and other current assets

$

96,106

$

2,919

$

99,025

Prepaid expenses, deferred costs, and other noncurrent assets

 

57,756

 

4,593

 

62,349

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Deferred tax liability, net

$

37,130

$

1,579

$

38,709

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Retained earnings

$

106,670

$

5,933

$

112,603

 

Statement of Cash Flows. On January 1, 2018, the Company also adopted the provisions of ASC 230, Statement of Cash Flows pertaining to the presentation of Restricted Cash (“ASU 2016-18” or the “new cash flow guidance”) and the classification of certain cash receipts and cash payments (the “classification guidance”).  In accordance with ASU 2016-18, the Company now presents restricted cash together with cash and cash equivalents when presenting the Consolidated Statements of Cash Flows and has applied the changes retrospectively. Also related to the classification guidance, when they occur, the Company will recognize contingent consideration payments up to the amount of the acquisition date liability in financing activities and any excess payments in operating activities.

 

Other Guidance Adopted in 2018. Effective January 1, 2018 the Company adopted the guidance in ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). This guidance clarifies what constitutes a modification of a share-based payments award. Upon adoption, this guidance had no impact on the Company’s consolidated financial statements.

 

Effective January 1, 2018, the Company adopted the guidance in ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business applicable to the recognition and reporting of an acquisition, divestiture or disposal.  ASU 2017-01 also clarifies the definition of a business applicable when assessing goodwill for impairment and when assessing if certain entities should be consolidated. Upon adoption, this guidance had no impact on the Company’s consolidated financial statements.

 

In February 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which was intended to eliminate the stranded tax effects within Accumulated Other Comprehensive Income (“AOCI”) resulting from the Tax Cuts and Jobs Act (“TCJA”) that was enacted on December 22, 2017. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with early adoption permitted. Cardtronics elected to early adopt this guidance and apply the provisions of ASU 2018-02 to the period ended March 31, 2018. The impact of adoption was not material.   

 

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In March 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-05, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”, to add various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118 (“SAB 118”), to ASC 740 “Income Taxes”. SAB 118 was issued by the SEC in December 2018 to provide immediate guidance for accounting implications of U.S. tax reform under the “Tax Cuts and Jobs Act” (the “Tax Act”) enacted on December 22, 2017. The Company evaluated the potential impacts of SAB 118 and has applied this guidance to its consolidated financial statements and related disclosures for the period ended March 31, 2018.

 

Accounting Standards Issued But Not Yet Adopted

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (the “Lease Standard”) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous U.S. GAAP. The Lease Standard requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. The Lease Standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, using a modified retrospective approach and early adoption is permitted. The Company is required to adopt the Lease Standard during the first quarter of fiscal 2019. The Company is working to implement the standard and determine the ultimate impact the Lease Standard will have on its consolidated financial statements. The Company currently anticipates that its adoption of the Lease Standard will result in the recognition of significant right-to-use assets and lease liabilities related to its operating leases as well as certain of its ATM placement agreements that contain fixed payments and are deemed to contain a lease under the Lease Standard. The Company does not believe the adoption will have any material impact on its currently outstanding indebtedness or its ability to continue borrowing under its revolving credit facility.

 

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory (“ASU 2016-16”). ASU 2016-16 requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments eliminate the exception for an intra-entity transfer of an asset other than inventory. ASU 2016-16 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, and early adoption is permitted. The Company is currently evaluating the impact the standard will have on its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test and the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, and interim periods within those years, and early adoption is permitted. The Company is currently evaluating the standard and has not yet concluded on whether it will early adopt in 2018.

 

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 provides targeted improvements to the accounting for hedging activities to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 and early adoption is permitted. The Company is currently evaluating the standard and has not yet concluded on whether it will early adopt in 2018.  

 

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(3)  Revenue Recognition

 

Disaggregated Revenues

 

The following table presents the revenue of the Company’s reportable segments disaggregated by financial statement line item and component:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2018

 

 

 

 

 

North America

 

Europe & Africa

 

Australia & New Zealand

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

Surcharge revenues

 

$

89,115

 

$

26,169

 

$

24,070

 

$

 -

 

$

139,354

 

Interchange revenues

 

 

35,819

 

 

67,458

 

 

1,126

 

 

 -

 

 

104,403

 

Bank-branding and surcharge-free network revenues

 

 

44,447

 

 

 -

 

 

 -

 

 

 -

 

 

44,447

 

Managed services revenues

 

 

12,553

 

 

 -

 

 

4,179

 

 

 -

 

 

16,732

 

Other ATM operating revenues

 

 

13,694

 

 

2,555

 

 

1,263

 

 

(2,717)

 

 

14,795

 

Total ATM operating revenues

 

$

195,628

 

$

96,182

 

$

30,638

 

$

(2,717)

 

$

319,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ATM product sales

 

$

12,786

 

$

 6

 

$

16

 

$

 -

 

$

12,808

 

Other revenues

 

 

1,346

 

 

2,257

 

 

42

 

 

 -

 

 

3,645

 

ATM product sales and other revenues

 

 

14,132

 

 

2,263

 

 

58

 

 

 -

 

 

16,453

 

Total revenue

 

$

209,760

 

$

98,445

 

$

30,696

 

$

(2,717)

 

$

336,184

 

 

Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. The Company currently classifies revenues under two financial statement captions: (i) ATM operating revenues and (ii) ATM product sales and other revenues.

 

ATM Operating Revenues are recognized daily as the associated transactions are processed or monthly on a per ATM or per cardholder basis. For customer contracts that provide for up-front fees that do not pertain to a distinct performance obligation, such fees are recognized over the term of the underlying agreement on a straight-line basis. ATM Product Sales and Other Revenues are recognized when the related performance obligations are fulfilled largely via a transfer of goods or services to the customer. 

   

ATM Operating Revenues. The Company presents revenues from automated consumer financial services, bank-branding arrangements and surcharge-free network offerings, managed services and other services in the ATM operating revenues line item in the accompanying Consolidated Statements of Operations. The Company’s ATM operating revenues consist of the following:

   

·

Surcharge revenue. Surcharge revenues are received in the form of a fee paid by a cardholder who has made a cash withdrawal from an ATM. Surcharge fees can vary widely based on the location of the ATM and the nature of the contracts negotiated with our merchants. In the U.S. and Canada, the Company does not receive surcharge fees from cardholders whose financial institutions participate in a surcharge-free network or have branded a location; instead, the Company receives interchange and bank-branding or surcharge-free network-branding revenues, which are discussed below. For certain ATMs, primarily those owned and operated by merchants, the Company does not receive any portion of the surcharge but rather the entire surcharge fee is earned by the merchant. In the U.K., ATM deployers operate their ATMs on either a free-to-use (surcharge-free) or a pay-to-use (surcharging) basis. On free-to-use ATMs in the U.K., the Company earns interchange revenue on withdrawal and certain other transactions. These fees are paid by the cardholder’s financial institution. On pay-to-use ATMs in the U.K., the Company only earns a surcharge fee paid by the cardholder on withdrawal transactions, and interchange is only paid by the cardholder’s financial institution on other non-withdrawal transaction types. In Germany, Australia, and Mexico the Company collects surcharge fees on withdrawal transactions but generally does not receive interchange revenue. In South Africa, the Company generally earns interchange revenues only,

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the amount of which varies by transaction type and customer arrangement. Surcharge revenues, as described above, are recognized daily as the associated transactions are processed.

   

·

Interchange revenue. An interchange fee is a fee paid by the cardholder’s financial institution for its customer’s use of an ATM that is owned by another operator and for the fee the EFT network charges to transmit data between the ATM and the cardholder’s financial institution. The Company typically receives a majority of the interchange fee paid by the cardholder’s financial institution, net of the amount retained by the EFT network and the Company recognizes the net amount received from the network as revenue. In some markets in which the Company operates, interchange fees are earned not only on cash withdrawal transactions but also on other ATM transactions, including balance inquiries and balance transfers. Interchange revenues are subject to variable terms and are recognized daily as the associated transactions are processed.

   

·

Bank-branding and surcharge-free network revenues. Under a bank-branding arrangement, ATMs that are Company-owned and operated are branded with the logo of the branding financial institution. In exchange for a monthly per ATM fee, the financial institution’s customers gain access to use these bank-branded ATMs without paying a surcharge. Under the Company’s surcharge-free network arrangements, financial institutions that participate pay either a fixed monthly fee per cardholder or a fixed fee per transaction so that cardholders gain surcharge-free access to our large network of ATMs. Bank-branding and surcharge-free network revenues are generally recognized monthly on a per ATM or per cardholder basis, except for transaction-based fee arrangements which are recognized daily as they occur. Any up-front fees associated with these arrangements are recognized ratably over the life of the arrangement.

 

·

Managed services revenue. Under a managed service arrangement, the Company offers ATM-related services depending on the needs of our customers, including monitoring, maintenance, cash management, cash delivery, customer service, transaction processing, and other services. Under a managed services arrangement, all of the surcharge and interchange fees are generally earned by the customer, whereas the Company typically receives a fixed management fee per ATM and/or a fixed fee per transaction in return for providing the agreed-upon operating services. The managed services fees are recognized as the related services are provided.  

   

·

Other revenue. Other revenues include ATM operating revenues from transaction processing for third party ATM operators. The Company also earns ATM operating revenues, in exchange for advertising and other services. The Company typically recognizes these revenues as the related services are provided.

 

ATM Product Sales and Services. The Company presents revenues from other product sales and services in the ATM Product Sales and Services line item in the accompanying Consolidated Statements of Operations. 

 

The Company earns revenues from the sale of ATMs and ATM-related equipment as well as the delivery of other non-transaction-based services. Revenues related to these activities are recognized when the equipment is delivered to the customer and the Company has completed all required installation and set-up procedures. With respect to the sale of ATMs to Value-Added-Resellers (“VARs”), the Company recognizes revenues related to such sales when the equipment is delivered to the VAR. The Company typically extends payment terms and receives payment directly from the associate VAR irrespective of the ultimate sale to a third-party.

 

Contract Balances

 

As of March 31, 2018 the Company has recognized no significant contract assets apart from Accounts Receivables that relate to completed performance obligations. Contract liabilities totaled approximately $5.6 million and $5.7 million at March 31, 2018 and December 31, 2017, respectively. These amounts represent deferred revenues for advance consideration received largely in relation to bank-branding and surcharge-free network arrangements. The revenue recognized during the three months ended March 31, 2018 on previously recognized deferred revenues was not material.  The Company expects to recognize the revenue associated with its contract liabilities ratably over various periods extending over the next 12 to 36 months.

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Contract Cost

 

The Company expects that the incremental commissions paid to sales personnel, together with other associated costs, are recoverable, and therefore, the Company capitalizes these amounts as deferred contract acquisition costs. Upon adoption of ASC 606 on January 1, 2018, the Company recognized deferred sales commissions of approximately $7.5 million and as of March 31, 2018 the deferred sales commissions totaled approximately $7.6 million. Sales commissions capitalized are generally amortized over a 4 - 5 year period corresponding with the related placement agreements. Similarly, and consistent with past practice, the costs incurred to fulfill a contract, largely consisting of prepaid merchant commissions and other consideration paid or provided to merchant partners, are capitalized and recognized over the duration of the related contract.

 

Practical Expedients and Other Disclosures 

 

In order to adopt and subsequently apply the new revenue standard, the Company utilized various practical expedients. The Company elected not to reexamine contracts modified prior to its adoption using the modified retrospective adoption method and elected to utilize a portfolio approach to assess and apply the impact of the standard.  Furthermore, the Company has elected not to disclose information about remaining performance obligations that have original expected durations of one year or less. Similarly, the Company does not defer the costs of obtaining a contract if the associated contract is one year or less.

 

The Company’s Bank-branding, Surcharge-free network and Managed services arrangements result in the Company providing a series of distinct services that have the same pattern of transfer to the customer. As a result, these arrangements create singular performance obligations that are satisfied over-time (generally 3-5 years) for which the Company has a right to consideration that corresponds directly with the value of the entity’s performance completed to date. In conjuction with these arrangments the Company recognizes revenue in the amount it has a right to receive. Variable consideration may exist in these arrangements and is recognized only to the extent a significant reversal is not probable.

 

 

(4) Acquisitions

 

DirectCash Payments Inc. Acquisition

 

On January 6, 2017, the Company completed the acquisition of DirectCash Payments Inc. (“DCPayments”), whereby DCPayments became a wholly-owned indirect subsidiary of the Company. In connection with the closing of the acquisition, each DCPayments common share was acquired for Canadian Dollars $19.00 in cash per common share, and the Company also repaid the outstanding third-party indebtedness of DCPayments, the combined aggregate of which represented a total transaction value of approximately $658 million Canadian Dollars (approximately $495 million U.S. dollars). The total amount paid for the acquisition at closing was financed with cash on hand and borrowings under the Company’s revolving credit facility.

 

As a result of the DCPayments acquisition, the Company significantly increased the size of its Canada, Mexico, and U.K. operations and entered into the Australia and New Zealand markets. With this acquisition, the Company added approximately 25,000 ATMs to its global ATM count.

 

The DCPayments acquisition was accounted for as a business combination using the purchase method of accounting under the provisions of ASC Topic 805, Business Combinations (“ASC 805”). In accordance with ASC 805, all assets acquired and liabilities assumed have been recorded at their estimated fair value as of the acquisition date and any excess of the purchase consideration over the fair value of the identifiable assets acquired and liabilities assumed has been recognized as goodwill. In conjunction with the transaction, the Company recognized current and other noncurrent assets of $50.4 million, property and equipment of $68.8 million, goodwill of $300.3 million, intangible assets of $182.1 million, current and other long-term liabilities of $74.0 million, Asset Retirement Obligations (“ARO”) of $8.9 million, and a deferred tax liability of $23.2 million.

 

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Spark ATM Systems Pty Ltd Acquisition

 

On January 31, 2017, the Company completed the acquisition of Spark ATM Systems Pty Ltd. (“Spark”), an independent ATM deployer in South Africa, with a growing network of approximately 2,300 ATMs. The initial purchase consideration of approximately $19.5 million was paid in cash. In addition to the initial consideration, the total purchase price also includes potential additional contingent consideration of up to approximately $67.8 million at the March 31, 2018 foreign currency exchange rate. The contingent consideration will vary based upon performance relative to certain agreed upon earnings targets in 2019 and 2020 and would be payable to the previous investors in the business. The estimated acquisition date fair value of the contingent consideration was approximately $34.8 million, at the January 31, 2017 foreign currency exchange rate, as determined with the assistance of an independent appraisal firm using forecasted future financial projections and other Level 3 inputs (for additional information related to the Company’s fair value estimates see Note 13. Fair Value Measurements).  In conjunction with the transaction, the Company recognized property and equipment of $5.3 million, goodwill of $48.2 million, intangible assets of $2.8 million, ARO of approximately $0.4 million, and other net liabilities of $1.5 million.

 

(5) Share-based Compensation 

 

The Company accounts for its share-based compensation by recognizing the grant date fair value of share-based awards, net of estimated forfeitures, as share-based compensation expense over the underlying requisite service periods of the related awards.

 

The following table reflects the total share-based compensation expense amounts reported in the accompanying Consolidated Statements of Operations:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2018

    

2017

 

 

(In thousands)

Cost of ATM operating revenues

 

$

83

 

$

(43)

Selling, general, and administrative expenses

 

 

2,362

 

 

2,240

Total share-based compensation expense

 

$

2,445

 

$

2,197

 

The increase in total share-based compensation expense for the three months ended March 31, 2018, compared to the same period of 2017 is attributable to the amount and timing of share-based payment awards, net of forfeitures.

 

Restricted Stock Units. The Company grants restricted stock units (“RSUs”) under its LTIP, which is an annual equity award program under the Third Amended and Restated 2007 Stock Incentive Plan. The ultimate number of RSUs that are determined to be earned under the LTIP are approved by the Compensation Committee of the Company’s Board of Directors on an annual basis, based on the Company’s achievement of certain performance levels during the calendar year of its grant or the associated performance period, if longer than one year. The majority of these grants have both a performance-based and a service-based vesting schedule (“Performance-RSUs”), and for these the Company recognizes the related compensation expense based on the estimated performance levels that management believes will ultimately be met. In addition, a portion of the awards have only a service-based vesting schedule (“Time-RSUs”), for which the associated expense is recognized ratably over four years. Finally, a limited number of RSUs have a market-based and service based vesting schedule (“Market-Based-RSUs”). For these grants, the Company recognizes the estimated grant date fair value over a 24 month period. Performance-RSUs and Time-RSUs are convertible into the Company’s common shares after the passage of the vesting periods, which are generally 24, 36, and 48 months from January 31 of the grant year, at the rate of 50%, 25%, and 25%, respectively. Performance-RSUs and Market-Based RSUs will be earned to the extent the Company achieves the associated performance-based or market-based vesting conditions. Although these RSUs are not considered to be earned and outstanding until the vesting conditions are met, the Company recognizes the related compensation expense over the requisite service period (or to an employee’s qualified retirement date, if earlier) using a graded vesting methodology. RSUs are also granted outside of LTIPs, with or without performance-based vesting requirements.

 

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The number of the Company’s non-vested RSUs as of March 31, 2018, and changes during the three months ended March 31, 2018, are presented below:

 

 

 

 

 

 

 

 

   

Number of Shares

   

Weighted Average Grant Date Fair Value

Non-vested RSUs as of December 31, 2017

 

1,006,009

 

$

37.88

Granted

 

484,538

 

$

27.85

Vested

 

(322,894)

 

$

38.05

Forfeited

 

(107,621)

 

$

38.23

Non-vested RSUs as of March 31, 2018

 

1,060,032

 

$

33.21

 

The above table only includes earned RSUs; therefore, the Performance-RSUs and Market-Based RSUs granted in 2018 but not yet earned are not included. The number of Performance-RSUs granted at target in 2018, net of estimated forfeitures, was 187,645 units with a grant date fair value of $21.82 per unit. The number Market-Based RSUs granted in 2018, net of estimated forfeitures, was 134,989 units with a grant date fair value of $24.13 per unit. Time-RSUs are included as granted.

 

As of March 31, 2018, the unrecognized compensation expense associated with earned RSUs was $17.8 million, which will be recognized using a graded vesting schedule for Performance-RSUs and a straight-line vesting schedule for Time-RSUs, over a remaining weighted average vesting period of approximately 2.3 weighted average remaining life years. 

 

Options. The number of the Company’s outstanding stock options as of March 31, 2018, and changes during the three months ended March 31, 2018, are presented below:

 

 

 

 

 

 

 

 

    

Number of Shares

    

Weighted Average Exercise Price

Options outstanding as of December 31, 2017

 

1,250

 

$

9.69

Granted

 

234,959

 

$

22.31

Options outstanding as of March 31, 2018

 

236,209

 

$

22.24

 

 

 

 

 

 

Options vested and exercisable as of March 31, 2018

 

1,250

 

$

9.69

 

As of March 31, 2018, the unrecognized compensation expense associated with outstanding options was approximately $1.9 million.

 

Restricted Stock Awards. As of March 31, 2018, all Restricted Stock Awards (“RSAs”) have fully vested and the Company has no unrecognized compensation expense.  The Company ceased granting RSAs in 2013.

 

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(6) Accumulated Other Comprehensive Loss, net

 

Accumulated other comprehensive loss, net, is a separate component of the Shareholders’ equity in the accompanying Consolidated Balance Sheets. The following table presents the changes in the balances of each component of Accumulated other comprehensive loss, net, for the three months ended March 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

    

Foreign Currency Translation Adjustments

    

Unrealized (Losses) Gains on Interest Rate Swap and Foreign Currency Forward Contracts

    

Total

 

 

(In thousands)

Total accumulated other comprehensive loss, net as of December 31, 2017

 

$

(24,374)

(1)

$

(9,221)

(2)

$

(33,595)

 

 

 

 

 

 

 

 

 

 

Other comprehensive income before reclassification

 

 

7,624

(3)

 

14,772

(4)

 

22,396

Amounts reclassified from accumulated other comprehensive loss, net

 

 

 —

 

 

2,589

(4)

 

2,589

Net current period other comprehensive income

 

 

7,624

 

 

17,361

 

 

24,985

Total accumulated other comprehensive (loss) income, net as of March 31, 2018

 

$

(16,750)

(1)

$

8,140

(2)  

$

(8,610)

 

(1)

Net of deferred income tax (benefit) of $(5,315) and $(5,339) as of March 31, 2018 and December 31, 2017, respectively.

(2)

Net of deferred income tax expense of $21,460 and $16,317 as of March 31, 2018 and December 31, 2017, respectively.

(3)

Net of deferred income tax expense of $24 as of March 31, 2018.

(4)

Net of deferred income tax expense of $4,376 and $767 for Other comprehensive income before reclassification and Amounts reclassified from accumulated other comprehensive loss, net, respectively, as of March 31, 2018. See Note 12. Derivative Financial Instruments.

 

The Company records unrealized gains and losses related to its interest rate swap contracts net of estimated taxes in the Accumulated other comprehensive loss, net line item in the accompanying Consolidated Balance Sheets since it is more likely than not that the Company will be able to realize the benefits associated with its net deferred tax asset positions in the future. The amounts reclassified from Accumulated other comprehensive loss, net are recognized in the Cost of ATM operating revenues line item in the accompanying Consolidated Statements of Operations.

 

The Company has elected the portfolio approach for the deferred tax asset of the unrealized gains and losses related to the interest rate swap contracts in the Accumulated other comprehensive loss, net line item in the accompanying Consolidated Balance Sheets. Under the portfolio approach, the disproportionate tax effect created when the valuation allowance was appropriately released as a tax benefit into continuing operations in 2010, will reverse out of the Accumulated other comprehensive loss, net line item in the accompanying Consolidated Balance Sheets and into continuing operations as a tax expense when the Company ceases to hold any interest rate swap contracts. As of March 31, 2018, the disproportionate tax effect is $14.6 million.

 

The Company currently believes that the unremitted earnings of its foreign subsidiaries under its former U.S. parent company will be reinvested for an indefinite period of time. Accordingly, no deferred taxes have been provided for the differences between the Company’s book basis and underlying tax basis in these subsidiaries or on the foreign currency translation adjustment amounts.

 

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(7) Intangible Assets 

 

Intangible Assets with Indefinite Lives 

 

The following tables present the net carrying amounts of the Company’s intangible assets with indefinite lives as of December 31, 2017 and March 31, 2018, as well as the changes in the net carrying amounts for the three months ended March 31, 2018 by segment (for additional information related to the Company’s segments, see Note 16. Segment Information).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

North America

    

Europe & Africa

    

Australia & New Zealand

    

Total

 

 

(In thousands) 

Goodwill, gross as of December 31, 2017

 

$

565,717

 

$

246,549

 

$

152,714

 

$

964,980

Accumulated impairment loss

 

 

 —

 

 

(50,003)

 

 

(140,038)

 

 

(190,041)

Goodwill, net as of December 31, 2017

 

$

565,717

 

$

196,546

 

$

12,676

 

$

774,939

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(3,102)

 

 

7,761

 

 

(204)

 

 

4,455

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill, gross as of March 31, 2018

 

$

562,615

 

$

254,310

 

$

152,510

 

$

969,435

Accumulated impairment loss

 

 

 —

 

 

(50,003)

 

 

(140,038)

 

 

(190,041)

Goodwill, net as of March 31, 2018

 

$

562,615

 

$

204,307

 

$

12,472

 

$

779,394

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade Name: Indefinite-lived

 

    

North America

    

Europe & Africa

    

Total

 

 

(In thousands)

Trade names: indefinite-lived as of December 31 , 2017

 

$

200

 

$

459

 

$

659

Foreign currency translation adjustments

 

 

 —

 

 

18

 

 

18

Trade names: indefinite-lived as of March 31, 2018

 

$

200

 

$

477

 

$

677

 

Intangible Assets with Definite Lives 

 

The following table presents the Company’s intangible assets that were subject to amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018

 

December 31, 2017

 

   

Gross Carrying Amount

   

Accumulated Amortization

   

Net Carrying Amount

   

Gross Carrying Amount

   

Accumulated Amortization

   

Net Carrying Amount

 

 

(In thousands)

Merchant and bank-branding contracts/relationships

 

$

490,745

 

$

(313,453)

 

$

177,292

 

$

490,332

 

$

(299,801)

 

$

190,531

Trade names: definite-lived

 

 

18,803

 

 

(8,251)

 

 

10,552

 

 

18,480

 

 

(7,091)

 

 

11,389

Technology

 

 

10,952

 

 

(5,521)

 

 

5,431

 

 

10,901

 

 

(5,230)

 

 

5,671

Non-compete agreements

 

 

4,457

 

 

(4,368)

 

 

89

 

 

4,438

 

 

(4,308)

 

 

130

Revolving credit facility deferred financing costs

 

 

2,736

 

 

(1,399)

 

 

1,337

 

 

2,730

 

 

(1,248)

 

 

1,482

Total intangible assets with definite lives

 

$

527,693

 

$

(332,992)

 

$

194,701

 

$

526,881

 

$

(317,678)

 

$

209,203

 

 

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(8) Accrued Liabilities 

 

The Company’s accrued liabilities consisted of the following: