Document
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
 

þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended March 31, 2019
 
 
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.)
2050 West Sam Houston Parkway South, Suite 1300
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 þ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes þ 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             þ 
 
Accelerated filer                     ☐
Non-accelerated filer               ☐
 
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 þ
Shares outstanding as of April 30, 2019: 46,316,418 Ordinary shares, nominal value $0.01 per share.
 


Table of Contents

CARDTRONICS PLC
TABLE OF CONTENTS
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2019
 
December 31, 2018
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
35,444

 
$
39,940

Accounts and notes receivable, net of allowance for doubtful accounts of $3,208 and $3,005 as of March 31, 2019 and December 31, 2018, respectively
80,277

 
75,643

Inventory, net
12,773

 
11,392

Restricted cash
84,790

 
155,470

Prepaid expenses, deferred costs, and other current assets
102,884

 
84,386

Total current assets
316,168

 
366,831

Property and equipment, net of accumulated depreciation of $445,272 and $417,151 as of March 31, 2019 and December 31, 2018, respectively
458,067

 
460,187

Intangible assets, net
140,091

 
150,847

Goodwill
754,084

 
749,144

Operating lease assets
81,973

 

Deferred tax asset, net
10,311

 
8,658

Prepaid expenses, deferred costs, and other noncurrent assets
41,516

 
51,677

Total assets
$
1,802,210

 
$
1,787,344

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of other long-term liabilities
$
50,492

 
$
20,266

Accounts payable
35,440

 
39,310

Accrued liabilities
322,297

 
369,160

Total current liabilities
408,229

 
428,736

 
 
 
 
Long-term debt
802,719

 
818,485

Asset retirement obligations
54,946

 
54,413

Noncurrent operating lease liabilities
72,482

 

Deferred tax liability, net
39,630

 
41,198

Other long-term liabilities
48,375

 
67,740

Total liabilities
1,426,381

 
1,410,572

 
 
 
 
Commitments and contingencies (See Note 15)

 

 
 
 
 
Shareholders' equity:
 
 
 
Ordinary shares, $0.01 nominal value; 46,308,277 and 46,134,381 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
463

 
461

Additional paid-in capital
329,712

 
327,009

Accumulated other comprehensive loss, net
(74,478
)
 
(66,877
)
Retained earnings
120,229

 
116,276

Total parent shareholders' equity
375,926

 
376,869

Noncontrolling interests
(97
)
 
(97
)
Total shareholders’ equity
375,829

 
376,772

Total liabilities and shareholders’ equity
$
1,802,210

 
$
1,787,344

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

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Table of Contents

CARDTRONICS PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, excluding share and per share amounts)
(Unaudited)
 
 
Three Months Ended
March 31,
 
 
2019
 
2018
Revenues:
 
 
 
 
ATM operating revenues
 
$
302,602

 
$
319,731

ATM product sales and other revenues
 
15,668

 
16,453

Total revenues
 
318,270

 
336,184

Cost of revenues:
 
 
 
 
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets reported separately below. See Note 1(c))
 
206,158

 
215,490

Cost of ATM product sales and other revenues
 
11,925

 
12,762

Total cost of revenues
 
218,083

 
228,252

Operating expenses:
 
 
 
 
Selling, general, and administrative expenses
 
43,660

 
41,740

Restructuring expenses
 

 
2,413

Acquisition related expenses
 

 
1,720

Depreciation and accretion expense
 
32,973

 
31,042

Amortization of intangible assets
 
12,412

 
13,771

Loss on disposal and impairment of assets
 
968

 
5,420

Total operating expenses
 
90,013

 
96,106

Income from operations
 
10,174

 
11,826

Other expenses:
 
 
 
 
Interest expense, net
 
6,643

 
9,174

Amortization of deferred financing costs and note discount
 
3,292

 
3,308

Other (income) expense
 
(7,207
)
 
2,160

Total other expenses
 
2,728

 
14,642

 Income (loss) before income taxes
 
7,446

 
(2,816
)
Income tax expense (benefit)
 
3,129

 
(31
)
Net income (loss)
 
4,317

 
(2,785
)
Net loss attributable to noncontrolling interests
 
(2
)
 
(17
)
Net income (loss) attributable to controlling interests and available to common shareholders
 
$
4,319

 
$
(2,768
)
 
 
 
 
 
Net income (loss) per common share – basic
 
$
0.09

 
$
(0.06
)
Net income (loss) per common share – diluted
 
$
0.09

 
$
(0.06
)
 
 
 
 
 
Weighted average shares outstanding – basic
 
46,223,764

 
45,833,070

Weighted average shares outstanding – diluted
 
46,635,033

 
45,833,070

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

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CARDTRONICS PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
Three Months Ended
March 31,
 
2019
 
2018
Net income (loss)
$
4,317

 
$
(2,785
)
Unrealized (loss) gain on interest rate swap contracts, net of deferred income tax (benefit) expense of $(3,196) and $5,143 for the three months ended March 31, 2019 and 2018, respectively.
(12,703
)
 
17,361

Foreign currency translation adjustments, net of deferred income tax (benefit) expense of $(80) and $24 for the three months ended March 31, 2019 and 2018, respectively.
5,102

 
7,624

Other comprehensive (loss) income
(7,601
)
 
24,985

Total comprehensive (loss) income
(3,284
)
 
22,200

Less: Comprehensive loss attributable to noncontrolling interests

 
(19
)
Comprehensive (loss) income attributable to controlling interests
$
(3,284
)
 
$
22,219

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

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CARDTRONICS PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY 
(In thousands)
(Unaudited)

 
Common Shares
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss, Net
Retained
Earnings
Noncontrolling
Interests
 
 
Shares
Amount
Total
Balance as of December 31, 2017
45,696

$
457

$
316,940

$
(33,595
)
$
106,670

$
(79
)
$
390,393

Issuance of common shares for share-based compensation, net of forfeitures
225

2





2

Share-based compensation expense


2,445




2,445

Tax payments related to share-based compensation


(2,379
)



(2,379
)
Unrealized gain on interest rate swap and foreign currency forward contracts, net of deferred income tax expense of $5,143



17,361



17,361

Net loss attributable to controlling interests




(2,768
)

(2,768
)
Net loss attributable to noncontrolling interests





(17
)
(17
)
Deferred sales commission




5,933


5,933

Foreign currency translation adjustments, net of deferred income tax expense of $24


(10
)
7,624


(1
)
7,613

Balance as of March 31, 2018
45,921

$
459

$
316,996

$
(8,610
)
$
109,835

$
(97
)
$
418,583


 
Common Shares
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss, Net
Retained
Earnings
Noncontrolling
Interests
 
 
Shares
Amount
Total
Balance as of December 31, 2018
46,134

$
461

$
327,009

$
(66,877
)
$
116,276

$
(97
)
$
376,772

Cumulative effect of change in accounting principle



366

(366
)


Issuance of common shares for share-based compensation, net of forfeitures
174

2





2

Share-based compensation expense


4,484




4,484

Tax payments related to share-based compensation


(1,781
)



(1,781
)
Unrealized loss on interest rate swap and foreign currency forward contracts, net of deferred income tax (benefit) of $(3,196)



(13,069
)


(13,069
)
Net income attributable to controlling interests




4,319


4,319

Net loss attributable to noncontrolling interests





(2
)
(2
)
Foreign currency translation adjustments, net of deferred income tax (benefit) of $(80)



5,102


2

5,104

Balance as of March 31, 2019
46,308

$
463

$
329,712

$
(74,478
)
$
120,229

$
(97
)
$
375,829

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,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
4,317

 
$
(2,785
)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:


 
 
Depreciation, accretion, and amortization of intangible assets
45,385

 
44,813

Amortization of deferred financing costs and note discount
3,292

 
3,308

Share-based compensation expense
4,484

 
2,445

Deferred income tax (benefit)
354

 
(281
)
Loss on disposal and impairment of assets
968

 
5,420

Other reserves and non-cash items
(7,497
)
 
2,368

Changes in assets and liabilities:
 
 
 
(Increase) decrease in accounts and notes receivable, net
(3,851
)
 
12,633

Increase in prepaid expenses, deferred costs, and other current assets
(19,222
)
 
(17,995
)
Increase in inventory, net
(2,741
)
 
(1,424
)
Decrease (increase) in other assets
1,740

 
(118
)
Decrease in accounts payable
(4,506
)
 
(11,581
)
(Decrease) increase in restricted cash liabilities
(71,521
)
 
24,238

Increase (decrease) in accrued liabilities
27,399

 
(5,577
)
Decrease in other liabilities
(406
)
 
(6,031
)
Net cash (used in) provided by operating activities
(21,805
)
 
49,433

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions to property and equipment
(29,307
)
 
(20,739
)
Net cash used in investing activities
(29,307
)
 
(20,739
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from borrowings under revolving credit facility
120,918

 
143,502

Repayments of borrowings under revolving credit facility
(144,466
)
 
(150,518
)
Tax payments related to share-based compensation
(1,781
)
 
(2,379
)
Proceeds from exercises of stock options
2

 

Net cash used in financing activities
(25,327
)
 
(9,395
)
 
 
 
 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
1,263

 
684

Net (decrease) increase in cash, cash equivalents, and restricted cash
(75,176
)
 
19,983

 
 
 
 
Cash, cash equivalents, and restricted cash as of beginning of period
195,410

 
99,817

Cash, cash equivalents, and restricted cash as of end of period
$
120,234

 
$
119,800

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
1,860

 
$
7,553

Cash paid (refund) for income taxes
$
4,720

 
$
(7,138
)
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 global network of automated teller machines and multi-function financial services kiosks (collectively referred to as “ATMs”). As of March 31, 2019, Cardtronics was the world’s largest ATM owner/operator, providing services to approximately 229,000 ATMs globally,  33% of which are Company - owned.  
During the three months ended March 31, 2019, approximately 64% of the Company’s revenues were derived from operations in North America (including its ATM operations in the United States ("U.S."), Canada, and Mexico), approximately 28% of the Company’s revenues were derived from operations in Europe and Africa (including its ATM operations in the United Kingdom ("U.K."), Ireland, Germany, Spain, and South Africa), and approximately 8% of the Company’s revenues were derived from the Company’s operations in Australia and New Zealand. As of March 31, 2019, the Company provided processing only services or various forms of managed services solutions to approximately 139,000 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. These financial institutions include BBVA Compass Bancshares, Inc., Citibank, N.A. , Citizens Financial Group, Inc., Cullen/Frost Bankers, Inc., Discover Bank, PNC Bank, N.A., Santander Bank, N.A., and TD Bank, N.A. in the U.S.; BMO Bank of Montreal, the Bank of Nova Scotia, Canadian Imperial Bank Commerce, DirectCash Bank, and TD Bank in Canada; and the Bank of Queensland Limited and HSBC Holdings plc in Australia. In Mexico, the Company partners with Scotiabank and Banco Multiva. As of March 31, 2019, 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 approximately 1,200 participating credit unions, banks, 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. Allpoint includes a majority of the Company’s ATMs in the U.S. and certain ATMs in the U.K., Canada, Mexico, and Australia. Allpoint also provides services to organizations that manage stored-value debit card programs on behalf of corporate entities and governmental agencies, including general purpose, payroll, and electronic benefits transfer cards. Under these programs, the issuing organizations 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 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 from financial institutions that participate in Allpoint, (ii) fees for bank-branding ATMs and providing financial institution cardholders with surcharge-free access, (iii) revenues earned by providing managed services (including transaction processing services) solutions to retailers and financial institutions, (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.

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(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. As 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” or “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, 2018 (the “2018 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. A change to the prior year cash flow was made to conform to the Company's current year cash flow disclosure within the (Decrease) increase restricted cash liabilities line. This change was made to consistently present the changes in settlement liabilities corresponding to the changes in the balance of restricted cash. The results of operations for the three months ended March 31, 2019 and 2018 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 in the accompanying Consolidated Statements of Operations for the periods presented:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Depreciation and accretion expenses related to ATMs and ATM-related assets
$
24,607

 
$
23,375

Amortization of intangible assets
12,412

 
13,771

Total depreciation, accretion, and amortization of intangible assets excluded from Cost of ATM operating revenues
$
37,019

 
$
37,146

(d) 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. During the three months ended March 31, 2018, the Company implemented additional workforce reductions in an effort to continue its cost reduction initiative and incurred charges of $2.4 million, largely consisting of employee severance.

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The following table reflects the amounts recorded in the Restructuring expenses line in the accompanying Consolidated Statements of Operations for the periods presented:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
North America
$

 
$
1,057

Europe & Africa

 
681

Corporate

 
675

Total restructuring expenses
$

 
$
2,413

    
As of March 31, 2019, a minimal amount of employee severance and lease termination costs remain unpaid and are presented within the Accrued liabilities and Other long-term liabilities lines in the accompanying Consolidated Balance Sheets.
(e) Cash, Cash Equivalents, and Restricted Cash
For purposes of reporting financial condition, cash and cash equivalents include cash in bank and short-term deposit accounts. Additionally, the Company maintains cash on deposit with banks that is pledged for a particular use or restricted to support a liability. These balances are classified as Restricted cash in the Current assets or Noncurrent assets line 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. Restricted cash in current and noncurrent assets are offset by corresponding liability balances in the Accrued liabilities line in the accompanying Consolidated Balance Sheets. The changes in the settlement liabilities corresponding to the changes in the balance of restricted cash during the three month periods ended March 31, 2019 and 2018 are presented in our Statements of Cash Flows within the (Decrease) increase in restricted cash liabilities line.
The following table provides a reconciliation of the ending cash, cash equivalents, and restricted cash balances as of March 31, 2019 and 2018, corresponding with the balances reflected on its Consolidated Statements of Cash Flows.
 
March 31,
 
2019
 
2018
 
(in thousands)
Cash and cash equivalents
$
35,444

 
$
46,673

Current and long-term restricted cash
84,790

 
73,127

Total cash, cash equivalents, and restricted cash in the Consolidated Statements of Cash Flows
$
120,234

 
$
119,800


The March 31, 2018 balance includes approximately $0.1 million classified in Other noncurrent assets.
(f) 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 or net realizable value.
The following table reflects the Company’s primary inventory components:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
ATMs
$
2,746

 
$
1,990

ATM spare parts and supplies
10,212

 
9,572

Total inventory
12,958

 
11,562

Less: Inventory reserves
(185
)
 
(170
)
Inventory, net
$
12,773

 
$
11,392


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(2) New Accounting Pronouncements

Adoption of New Accounting Pronouncements

Lease Accounting. The Company adopted Accounting Standards Codification Topic 842, Leases (the “Lease Standard”) as of January 1, 2019, using the modified retrospective approach and using the effective date as the date of initial application. Consequently, financial information for dates and periods before January 1, 2019 have not been updated or recasted. In addition, the Company elected the practical expedients permitted under the transition guidance within the Lease Standard, which allowed the Company to carry forward prior conclusions about lease identification, lease classification, and initial direct costs. In accordance with the Company's accounting policy, the Company elected not to exclude short-term leases for any of its vehicle and equipment leases, as the lease terms associated with our operating leases are routinely longer than 12 months. In addition, the Company elected not to separate lease and non-lease components for its ATM placement agreements that contain fixed payments and are deemed to contain an operating lease under the Lease Standard.

The Company’s adoption of ASC 842 resulted in the recognition of operating lease assets and liabilities of approximately $85 million and $95 million, respectively, as well as the the derecognition of certain prepaid and deferred lease balances upon adoption. Upon adoption, this guidance had no impact on the Company's consolidated income from operations, net income, or cash flows.

Hedge Accounting. The Company adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12” or the “Hedging Standard”) as of January 1, 2019, using the modified retrospective transition approach, which requires the Company to account for ASU 2017-12 as of the date of adoption with any retrospective adjustments applicable to prior periods included as a cumulative-effect adjustment to accumulated other comprehensive loss and retained earnings. ASU 2017-12 amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. Upon adoption, this guidance had no impact on the Company's consolidated income from operations, net income, or cash flows.

Upon adoption, the Lease Standard and the Hedging Standard had the following impact on the Company’s consolidated statement of financial position:


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Effect of Accounting Standards Adoption on Consolidated Statement of Financial Position
 
December 31, 2018 As Reported
 
ASC Topic 842 (Leases)
 
ASU 2017-12 (Hedging)
 
December 31, 2018 As Adjusted
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
39,940

 
$

 
$

 
$
39,940

Accounts and notes receivable, net
75,643

 

 

 
75,643

Inventory, net
11,392

 

 

 
11,392

Restricted cash
155,470

 

 

 
155,470

Prepaid expenses, deferred costs, and other current assets
84,386

 
3,483

 

 
87,869

Total current assets
366,831

 
3,483

 

 
370,314

Property and equipment, net of accumulated depreciation
460,187

 

 

 
460,187

Intangible assets, net
150,847

 

 

 
150,847

Goodwill
749,144

 

 

 
749,144

Operating lease assets

 
85,068

 

 
85,068

Deferred tax asset, net
8,658

 

 

 
8,658

Prepaid expenses, deferred costs, and other noncurrent assets
51,677

 

 

 
51,677

Total assets
$
1,787,344

 
$
88,551

 
$

 
$
1,875,895

 
 
 
 
 
 
 

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Current portion of other long-term liabilities
$
20,266

 
$
20,602

 
$

 
$
40,868

Accounts payable
39,310

 

 

 
39,310

Accrued liabilities
369,160

 
(447
)
 

 
368,713

Total current liabilities
428,736

 
20,155

 

 
448,891

 
 
 
 
 
 
 
 
Long-term debt
818,485

 

 

 
818,485

Asset retirement obligations
54,413

 

 

 
54,413

Noncurrent operating lease liabilities

 
74,746

 

 
74,746

Deferred tax liability, net
41,198

 

 

 
41,198

Other long-term liabilities
67,740

 
(6,350
)
 

 
61,390

Total liabilities
1,410,572

 
88,551

 

 
1,499,123

 
 
 
 
 
 
 
 
Shareholders' equity:
 
 
 
 
 
 
 
Ordinary shares
461

 

 

 
461

Additional paid-in capital
327,009

 

 

 
327,009

Accumulated other comprehensive loss, net
(66,877
)
 

 
366

 
(66,511
)
Retained earnings
116,276

 

 
(366
)
 
115,910

Total parent shareholders' equity
376,869

 

 

 
376,869

Noncontrolling interests
(97
)
 

 

 
(97
)
Total shareholders’ equity
376,772

 

 

 
376,772

Total liabilities and shareholders’ equity
$
1,787,344

 
$
88,551

 
$

 
$
1,875,895





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Table of Contents

Accounting Pronouncements Issued But Not Yet Adopted

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance 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. This guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those years, and early adoption is permitted. Cardtronics expects to adopt this guidance effective January 1, 2020. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. This guidance is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company plans to adopt this guidance effective January 1, 2020. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company plans to adopt this guidance when effective in 2020. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
(3) Revenue Recognition
Disaggregated Revenues
The following tables detail the revenues of the Company’s reportable segments disaggregated by financial statement line and component:
 
Three Months Ended March 31, 2019
 
(In thousands)
 
North America
 
Europe & Africa
 
Australia & New Zealand
 
Eliminations
 
Consolidated
Surcharge revenues
$
85,110

 
$
31,045

 
$
20,668

 
$


 
$
136,823

Interchange revenues
34,379

 
55,308

 
1,303

 

 
90,990

Bank-branding and surcharge-free network revenues
45,873

 

 

 

 
45,873

Managed services revenues
12,396

 

 
2,711

 

 
15,107

Other revenues
13,288

 
2,325

 
1,109

 
(2,913
)
 
13,809

Total ATM operating revenues
$
191,046

 
$
88,678

 
$
25,791

 
$
(2,913
)
 
$
302,602

 
 
 
 
 
 
 
 
 
 
ATM product sales
$
11,819

 
$
431

 
$
15

 
$

 
$
12,265

Other revenues
1,383

 
1,816

 
204

 

 
3,403

ATM product sales and other revenues
13,202

 
2,247

 
219

 

 
15,668

Total revenues
$
204,248

 
$
90,925

 
$
26,010

 
$
(2,913
)
 
$
318,270



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Table of Contents

 
Three Months Ended March 31, 2018
 
(In thousands)
 
North America
 
Europe & Africa
 
Australia & New Zealand
 
Eliminations
 
Consolidated
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 revenues
13,813

 
2,555

 
1,263

 
(2,836
)
 
14,795

Total ATM operating revenues
$
195,747

 
$
96,182

 
$
30,638

 
$
(2,836
)
 
$
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 revenues
$
209,879

 
$
98,445

 
$
30,696

 
$
(2,836
)
 
$
336,184


Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Revenue is recorded in ATM operating revenues and ATM product sales and other revenues line items in the accompanying Consolidated Statements of Operations.
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 upon transfer of control of goods or services to the customer.
ATM operating revenues. The Company presents revenues from automated consumer financial services, bank-branding and surcharge-free network offerings, managed services and other services in the ATM operating revenues line 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, 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 various arrangements and are recognized daily as the associated transactions are processed.

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Table of Contents

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 Allpoint 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 to the customers, who include both retailers and financial institutions.
Other revenue. Other revenues include ATM operating revenues from transaction processing for third-party ATM operators. The Company also earns ATM operating revenues related to advertising and other services. The Company typically recognizes these revenues as the related services are provided.
Other disclosures. 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 conjunction with these arrangements, 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.
ATM product sales and services. The Company presents revenues from other product sales and services in the ATM product sales and services line 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.
Due to the transactional nature of the Company’s revenue, there are no significant judgments that affect the determination of the amount and timing of its revenues.
Contract Balances
As of March 31, 2019, the Company has recognized no significant contract assets. Accounts receivables that relate to completed performance obligations are recognized on the Company's consolidated balance sheets. Contract liabilities totaled $8.0 million and $8.4 million at March 31, 2019 and December 31, 2018, 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, 2019 and 2018 on previously 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 36 months. During March 31, 2019, the Company did not recognize any significant impairment losses related to its accounts receivable or contract assets.
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. Deferred contract acquisition costs totaled $8.1 million and $7.9 million at March 31, 2019 and December 31, 2018, respectively. Sales commissions capitalized are generally amortized over a 4  -  5 years period corresponding with the related 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. The Company does not capitalize the costs of obtaining a contract if the associated contract is one year or less.


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Table of Contents

(4) 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 grant date fair value is based upon the Company's share price on the date of the grant.
The following table reflects the total share-based compensation expense amounts reported in the accompanying Consolidated Statements of Operations:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Cost of ATM operating revenues
$
261

 
$
83

Selling, general, and administrative expenses
4,223

 
2,362

Total share-based compensation expense
$
4,484

 
$
2,445

For the three months ended March 31, 2019, total share-based compensation expense increased by $2.0 million compared to the same period of 2018. This increase 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 Long-Term Incentive Plan (“LTIP”), which is an annual equity award program under the Fourth 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, based on the Company’s achievement of previously specified performance levels at the end of the associated performance period. RSU grants are service-based (“Time-RSUs”), performance-based (“Performance-RSUs”), or market-based (“Market-Based-RSUs”). Each is recognized ratably over the associated service period. For Time-RSUs and Market-Based-RSUs, the Company recognizes the related compensation expense based on the grant date fair value. The grant date fair value of the Time-Based RSUs is the Company's closing stock price on the date of grant while the grant date fair value of the Market-Based-RSUs is derived from a Monte Carlo simulation. For Performance-RSUs, the Company recognizes the related compensation expense based on the estimated performance levels that management believes will ultimately be met. Time-RSUs are convertible into the Company’s common shares upon passage of the annual graded vesting periods, which begin 1-2 years after the grant date and extend 3-4 years. Performance-RSUs and Market-Based RSUs will be earned to the extent the Company achieves the associated performance-based or market-based vesting conditions and these awards are convertible into the Company’s common shares after the passage of the vesting periods which extend 3-4 years from the grant date. 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 may also be granted outside of LTIPs, with or without performance-based vesting requirements.
The number of the Company’s earned non-vested RSUs as of March 31, 2019, and changes during the three months ended March 31, 2019, are presented below:
 
Number of Shares
 
Weighted Average Grant Date Fair Value
Non-vested RSUs as of December 31, 2018
911,165

 
$
28.74

Granted
112,364

 
31.81

Vested
(241,779
)
 
34.06

Forfeited
(2,957
)
 
30.91

Non-vested RSUs as of March 31, 2019
778,793

 
$
27.52

The above table only includes earned RSUs; therefore, the Performance-RSUs and Market-Based RSUs granted in 2018 and 2019 that are not yet earned are not included. The number of Performance-RSUs granted at target in 2018, net of estimated forfeitures, was 302,906 units with a grant date fair value of $22.84 per unit. The number of Performance-RSUs granted at target in 2019, net of estimated forfeitures, was 62,611 units with a grant date fair value of $31.99 per unit. The number of Market-Based RSUs granted in 2018 , net of estimated forfeitures, was 134,989 units with a grant date fair value $24.13. The number of Market-Based RSUs granted in 2019, net of estimated forfeitures, was 62,605 units with a grant date fair value of $45.82 per unit. Time-RSUs are included as granted.

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Table of Contents

As of March 31, 2019, the unrecognized compensation expense associated with earned RSUs was $14.0 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 1.9 weighted average remaining life years. 
Options. The number of the Company’s outstanding stock options as of March 31, 2019, and changes during the three months ended March 31, 2019, are presented below:
 
Number of Shares
 
Weighted Average Exercise Price
Options outstanding as of December 31, 2018
234,959

 
$
22.31

Granted
145,221

 
31.99

Exercised

 

Options outstanding as of March 31, 2019
380,180

 
$
26.01

 
 
 
 
Options vested and exercisable as of March 31, 2019
78,326

 
$
22.31

As of March 31, 2019, the unrecognized compensation expense associated with outstanding options was approximately $3.1 million, which will be recognized over the remaining weighted average vesting period of approximately 2.5 years.
(5) Earnings (Loss) Per Share
The Company reports its earnings per share under the two-class method. Under this method, potentially dilutive securities are excluded from the calculation of diluted earnings per share (as well as their related impact on the net income available to common shareholders) when their impact on net income available to common shareholders is anti-dilutive.
Potentially dilutive securities for the three months ended March 31, 2019 included all outstanding stock options and RSUs, which were included in the calculation of diluted earnings per share for these periods. The potentially dilutive effect of outstanding warrants and the underlying shares exercisable under the Company’s $287.5 million of 1.00% Convertible Senior Notes due 2021 (the “Convertible Notes”) were excluded from diluted shares outstanding as the exercise price exceeded the average market price of the Company’s common shares. The effect of the note hedge, described in Note 9. Long-Term Debt, was also excluded as the effect is anti-dilutive. As of March 31, 2019 and 2018, all RSAs with a non-forfeitable right to cash dividends were fully vested as the Company ceased granting RSAs in 2013. Therefore, there are no outstanding participating securities.
The allocated details of our Earnings (loss) per Share are as follows:
Earnings (loss) per Share (in thousands, excluding share and per share amounts)
 
Three Months Ended
March 31, 2019
 
Income
 
Weighted Average Shares Outstanding
 
Income per Share
Basic:
 
 
 
 
 
Net income available to common shareholders
$
4,319

 
46,223,764

 
$
0.09

 
 
 
 
 
 
Diluted:
 
 
 
 
 
Effect of dilutive securities:
 
 
 
 
 
Stock options added to the denominator under the treasury stock method
 
 
16,390

 
 
RSUs added to the denominator under the treasury stock method
 
 
394,879

 
 
Net income available to common shareholders and assumed conversions
$
4,319

 
46,635,033

 
$
0.09


For the three months ended March 31, 2019, there were 145,222 stock options excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive.



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Table of Contents

 
Three Months Ended
March 31, 2018
 
Loss
 
Weighted Average Shares Outstanding
 
Loss per Share
Basic and Diluted:
 
 
 
 
 
Net loss available to common shareholders
$
(2,768
)
 
45,833,070

 
$
(0.06
)

(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, 2019:
 
Foreign Currency Translation Adjustments
 
    
 
Unrealized Losses on Interest Rate Swap and Foreign Currency Forward Contracts
 
    
 
Total
 
(In thousands)
Total accumulated other comprehensive loss,
net as of December 31, 2018
$
(66,312
)
 
(1) 
 
$
(565
)
 
(2) 
 
$
(66,877
)
Other comprehensive income (loss) before reclassification
5,102

 
(3) 
 
(12,421
)
 
(4) 
 
(7,319
)
Amounts reclassified from accumulated other comprehensive loss, net

 
 
 
(282
)
 
(4) 
 
(282
)
Net current period other comprehensive income (loss)
5,102

 
 
 
(12,703
)
 
 
 
(7,601
)
Total accumulated other comprehensive loss,
net as of March 31, 2019
$
(61,210
)
 
(1) 
 
$
(13,268
)
 
(2) 
 
$
(74,478
)
(1)Net of deferred income tax (benefit) of $(5,312) and $(5,232) as of March 31, 2019 and December 31, 2018, respectively.
(2)Net of deferred income tax expense of $15,917 and $19,112 as of March 31, 2019 and December 31, 2018, respectively.
(3)Net of deferred income tax (benefit) of $(80)
(4)Net of deferred income tax (benefit) of $(3,111) and $(85) for Other comprehensive income before reclassification and Amounts reclassified from accumulated other comprehensive loss, net, respectively, as of March 31, 2019. For additional information, see Note 13. Derivative Financial Instruments.
The Company records unrealized gains and losses related to its interest rate swap and foreign currency forward contracts net of taxes, in the Accumulated other comprehensive loss, net line within the accompanying Consolidated Balance Sheets. The amounts reclassified from Accumulated other comprehensive loss, net are recognized in the Cost of ATM operating revenues, Interest expense, net, or Other (income) expense lines 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 and foreign currency forward contracts in Accumulated other comprehensive loss, net within 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 within 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, 2019, the disproportionate tax effect is $14.6 million.
The Company currently believes that the unremitted earnings of certain of its subsidiaries 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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Table of Contents

(7) Intangible Assets 
Goodwill
The following table presents the net carrying amounts of the Company’s intangible assets with indefinite lives as of December 31, 2018 and March 31, 2019, as well as the changes in the net carrying amounts for the three months ended March 31, 2019 by segment. For additional information related to the Company’s segments, see Note 17. Segment Information.
 
North America
 
Europe & Africa
 
Australia & New
Zealand
 
Total
 
(In thousands) 
Goodwill, gross as of December 31, 2018
$
556,570

 
$
231,121

 
$
151,494

 
$
939,185

Accumulated impairment loss

 
(50,003
)
 
(140,038
)
 
(190,041
)
Goodwill, net as of December 31, 2018
$
556,570

 
$
181,118

 
$
11,456

 
$
749,144

 
 
 
 
 
 
 
 
Foreign currency translation adjustments
2,227

 
2,640

 
73

 
4,940

 
 
 
 
 
 
 
 
Goodwill, gross as of March 31, 2019
$
558,797

 
$
233,761

 
$
151,567

 
$
944,125

Accumulated impairment loss

 
(50,003
)
 
(140,038
)
 
(190,041
)
Goodwill, net as of March 31, 2019
$
558,797

 
$
183,758

 
$
11,529

 
$
754,084

Intangible Assets with Definite Lives 
The following table presents the Company’s intangible assets that were subject to amortization:
 
March 31, 2019
 
December 31, 2018
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
(In thousands)
Merchant and bank-branding contracts/relationships
$
479,630

 
$
(353,438
)
 
$
126,192

 
$
476,429

 
$
(340,899
)
 
$
135,530

Trade names
18,257

 
(11,202
)
 
7,055

 
18,010

 
(9,804
)
 
8,206

Technology
10,975

 
(6,751
)
 
4,224

 
10,963

 
(6,490
)
 
4,473

Non-compete agreements
4,261

 
(4,261
)
 

 
4,247

 
(4,244
)
 
3

Revolving credit facility deferred financing costs
4,300

 
(1,680
)
 
2,620

 
4,170

 
(1,535
)
 
2,635

Total intangible assets with definite lives
$
517,423

 
$
(377,332
)
 
$
140,091

 
$
513,819

 
$
(362,972
)
 
$
150,847


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Table of Contents

(8) Accrued Liabilities 
The Company’s accrued liabilities consisted of the following:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
Accrued merchant settlement
$
150,222

 
$
198,512

Accrued merchant fees
36,943

 
33,551

Accrued taxes
33,432

 
32,899

Accrued compensation
11,149

 
26,147

Accrued interest
8,479

 
3,343

Accrued cash management fees
8,227

 
8,882

Accrued purchases
8,203

 
6,654

Accrued armored
6,962

 
7,984

Accrued maintenance
5,835

 
3,911

Accrued processing costs
5,559

 
7,365

Accrued telecommunications costs
1,786

 
2,187

Accrued interest on interest rate swaps
143

 
114

Other accrued expenses
45,357

 
37,611

Total accrued liabilities
$
322,297

 
$
369,160

(9) Long-Term Debt 
The Company’s carrying value of long-term debt consisted of the following:
 
March 31, 2019
 
December 31, 2018
 
 
 
 
 
(In thousands)
Revolving credit facility, including swingline credit facility (weighted average combined interest rate of 2.5% and 2.8% as of March 31, 2019 and December 31, 2018, respectively)
$
240,167

 
$
259,081

1.00% Convertible Senior Notes due 2020, net of unamortized discount and capitalized debt issuance costs
266,492

 
263,507

5.50% Senior Notes due 2025, net of capitalized debt issuance costs
296,060

 
295,897

Total long-term debt
$
802,719

 
$
818,485

The Convertible Notes with a face value of $287.5 million are presented net of unamortized discount and capitalized debt issuance costs of $21.0 million and $24.0 million as of March 31, 2019 and December 31, 2018, respectively. The 5.50% Senior Notes due 2025 (the “2025 Notes”) with a face value of $300.0 million are presented net of capitalized debt issuance costs of $3.9 million and $4.1 million as of March 31, 2019 and December 31, 2018, respectively.
Revolving Credit Facility 
On November 19, 2018, the Company entered into a second amended and restated credit agreement (the “Credit Agreement”). The Credit Agreement provides the Company with a $600.0 million revolving credit facility maturing on November 19, 2023, which includes an accordion feature that allows the Company to increase the available borrowings under the credit facility to $700.0 million by obtaining increased commitments from one or more existing lenders or one or more additional lenders that become party to the Credit Agreement and who consent at such time to providing additional commitments. In addition, the credit facility includes a sub-limit of up to $150.0 million for letters of credit and a sub-limit of up to $50.0 million for swingline loans.
The total commitments under the credit facility can be borrowed in U.S. dollars, alternative currencies (including Euros, U.K. pounds sterling, Canadian dollars, Australian dollars and South African rand), or a combination thereof. Borrowings (not including swingline loans) accrue interest, at the Company’s option and based on the type of currency borrowed, at the Alternate Base Rate, the Canadian Prime Rate, the Adjusted LIBO Rate, the Canadian Dealer Offered Rate, the Bank Bill Swap Reference Rate or the Johannesburg Interbank Agreed Rate (each, as defined in the Credit Agreement) plus a margin depending on the Company’s most

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recent Total Net Leverage Ratio (as defined in the Credit Agreement). The margin for Alternative Base Rate loans and Canadian Prime Rate loans varies between 0% and 0.75%, and the margin for Adjusted LIBO Rate loans, Canadian Dealer Offered Rate loans, Bank Bill Swap Reference Rate loans and Johannesburg Interbank Agreed Rate Loans varies between 1.00% and 1.75%. Swingline loans denominated in U.S. dollars bear interest at the Alternate Base Rate plus a margin as described above, swingline loans denominated in Canadian dollars bear interest at the Canadian Prime Rate plus a margin as described above and swingline loans denominated in other alternative currencies bear interest at the Overnight Foreign Currency Rate (as defined in the Credit Agreement) plus the applicable margin for the Adjusted LIBO Rate, the Bank Bill Swap Reference Rate or the Johannesburg Interbank Agreed Rate, as applicable.
Each of the Credit Facility Guarantors (as defined in the Credit Agreement) has guaranteed the full and punctual payment of the obligations under the revolving credit facility and the obligations under the revolving credit facility are secured by substantially all of the assets of the Credit Facility Guarantors. In addition, the obligations of the CFC Borrowers (as defined in the Credit Agreement) are guaranteed by the CFC Guarantors and secured by substantially all of the assets of the CFC Guarantors (as defined in the Credit Agreement).
The Credit Agreement contains representations, warranties and covenants that are customary for similar credit arrangements, including, among other things, covenants relating to: (i) financial reporting and notification, (ii) payment of obligations, (iii) compliance with applicable laws, (iv) notification of certain events, and (v) certain covenants relating to, among other things, the sale or transfer of assets, fundamental changes, incurrence or guarantee of indebtedness, liens, investments, hedging transactions with affiliates and sale and leaseback transactions. Financial covenants in the Credit Agreement require the Company to maintain: (i) as of the last day of any fiscal quarter, a Total Net Leverage Ratio (as defined in the Credit Agreement) of no more than 4.25 to 1.00, and (ii) as of the last day of any fiscal quarter, an Interest Coverage Ratio (as defined in the Credit Agreement) of no less than 3.00 to 1.00. Additionally, the Company is limited on the amount of restricted payments; however, the Company may generally make restricted payments so long as no event of default exists at the time of such payment and the Total Net Leverage Ratio is less than 3.75 to 1.00 at the time such restricted payment is made.
As of March 31, 2019, the Company had $240.2 million of outstanding borrowings under its $600.0 million revolving credit facility and was in compliance with all applicable covenants and ratios under the Credit Agreement. The Company also had $10.8 million outstanding in letters of credit. The weighted average interest rates on the Company’s outstanding borrowings under the revolving credit facility were 2.5% and 2.8%, as of March 31, 2019 and December 31, 2018, respectively.
$287.5 million 1.00% Convertible Senior Notes Due 2020 and Related Equity Instruments
On November 19, 2013, Cardtronics, Inc. issued the Convertible Notes at par value. Cardtronics, Inc. received $254.2 million in net proceeds from the offering after deducting underwriting fees paid to the initial purchasers and a repurchase of 665,994 of its outstanding common shares concurrent with the offering. Cardtronics, Inc. used a portion of the net proceeds from the offering to fund the net cost of the convertible note hedge transaction, as described below. The convertible note hedge and warrant transactions were entered into concurrent with the pricing of the Convertible Notes. Interest on the Convertible Notes is payable semi-annually in cash in arrears on June 1st and December 1st of each year. Under U.S. GAAP, certain convertible debt instruments that may be settled in cash (or other assets) upon conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. The Company, with assistance from a valuation professional, determined that the fair value of the debt component was $215.8 million and the fair value of the embedded option was $71.7 million as of the issuance date. The Company recognizes effective interest expense on the debt component and that interest expense effectively accretes the debt component to the total principal amount due at maturity of $287.5 million. The effective rate of interest to accrete the debt balance is approximately 5.26%, which corresponded to the Company’s estimated conventional debt instrument borrowing rate at the date of issuance.
On July 1, 2016, Cardtronics plc, Cardtronics, Inc., and Wells Fargo Bank, National Association, as trustee, entered into a supplemental indenture (the “Convertible Notes Supplemental Indenture”) with respect to the Convertible Notes. The Convertible Notes Supplemental Indenture provides for the unconditional and irrevocable guarantee by Cardtronics plc of the prompt payment, when due, of any amount owed to the holders of the Convertible Notes. The Convertible Notes Supplemental Indenture also provides that, from and after July 1, 2016, the Convertible Notes will be convertible into shares of Cardtronics plc in lieu of common share of Cardtronics, Inc.
The Convertible Notes have a conversion price of $52.35 per share, which equals a conversion rate of 19.1022 shares per $1,000 principal amount of Convertible Notes, for a total of approximately 5.5 million shares underlying the debt. The conversion rate, however, is subject to adjustment under certain circumstances. Conversion can occur: (i) any time on or after September 1, 2020, (ii) after March 31, 2014, during any calendar quarter that follows a calendar quarter in which the price of the shares exceeds 135% of the conversion price for at least 20 days during the 30 consecutive trading-day period ending on the last trading day of

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the quarter, (iii) during the ten consecutive trading-day period following any five consecutive trading-day period in which the trading price of the Convertible Notes is less than 98% of the closing price of the shares multiplied by the applicable conversion rate on each such trading day, (iv) upon specified distributions to Cardtronics plc’s shareholders upon recapitalizations, reclassifications, or changes in shares, and (v) upon a make-whole fundamental change. A fundamental change is defined as any one of the following: (i) any person or group that acquires 50% or more of the total voting power of all classes of common equity that is entitled to vote generally in the election of Cardtronics plc’s directors, (ii) Cardtronics plc engages in any recapitalization, reclassification, or changes of common shares as a result of which the shares would be converted into or exchanged for, shares, other securities, other assets, or property, (iii) Cardtronics plc engages in any share exchange, consolidation, or merger where the shares converted into cash, securities, or other property, (iv) the Company engages in certain sales, leases, or other transfers of all or substantially all of the consolidated assets, or (v) Cardtronics plc’s shares are not listed for trading on any U.S. national securities exchange.
None of the Convertible Notes were deemed convertible as of March 31, 2019, and therefore, remain classified in the Long-term debt line in the accompanying Consolidated Balance Sheets at March 31, 2019. In future financial reporting periods, the classification of the Convertible Notes may change depending on whether any of the above contingent criteria have been subsequently satisfied.
Upon conversion, holders of the Convertible Notes are entitled to receive cash, shares, or a combination of cash and shares, at the Company’s election. In the event of a change in control, as defined in the indenture under which the Convertible Notes have been issued, holders can require Cardtronics, Inc. to purchase all or a portion of their Convertible Notes for 100% of the notes’ par value plus any accrued and unpaid interest.
The Company’s interest expense related to the Convertible Notes consisted of the following:
 
Three Months Ended
March 31,
 
2019
 
2018
 
(In thousands)
Cash interest per contractual coupon rate
$
719

 
$
719

Amortization of note discount
2,780

 
2,638

Amortization of debt issuance costs
206

 
186

Total interest expense related to Convertible Notes
$
3,705

 
$
3,543

The Company’s carrying value of the Convertible Notes consisted of the following:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
Principal balance
$
287,500

 
$
287,500

Unamortized discount and capitalized debt issuance costs
(21,008
)
 
(23,993
)
Net carrying amount of Convertible Notes
$
266,492

 
$
263,507

In connection with the issuance of the Convertible Notes, Cardtronics, Inc. entered into separate convertible note hedge and warrant transactions to reduce the potential dilutive impact upon the conversion of the Convertible Notes. The net effect of these transactions effectively raised the price at which dilution would occur from the $52.35 initial conversion price of the Convertible Notes to $73.29. Pursuant to the convertible note hedge, Cardtronics, Inc. purchased call options granting Cardtronics Inc. the right to acquire up to approximately 5.50 million common shares with an initial strike price of $52.35. The call options automatically become exercisable upon conversion of the Convertible Notes, and will terminate on the second scheduled trading day immediately preceding December 1, 2020. Cardtronics Inc. also sold to the initial purchasers warrants to acquire up to approximately 5.50 million common shares with a strike price of $73.29. The warrants will expire incrementally on a series of expiration dates subsequent to the maturity date of the Convertible Notes through August 30, 2021. If the conversion price of the Convertible Notes remains between the strike prices of the call options and warrants, Cardtronics plc’s shareholders will not experience any dilution in connection with the conversion of the Convertible Notes; however, to the extent that the price of the shares exceeds the strike price of the warrants on any or all of the series of related expiration dates of the warrants, Cardtronics plc would be required to issue additional shares to the warrant holders. The amounts allocated to both the note hedge and warrants were recorded in the Shareholders’ equity section in the accompanying Consolidated Balance Sheets.

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$300.0 million 5.50% Senior Notes Due 2025
On April 4, 2017, in a private placement offering, Cardtronics Inc. and Cardtronics USA, Inc. (the “2025 Notes Issuers”) issued $300.0 million in aggregate principal amount of the 2025 Notes pursuant to an indenture dated April 4, 2017 (the “2025 Notes Indenture”) among the 2025 Notes Issuers, Cardtronics plc, and certain of its subsidiaries, as guarantors (each, a “2025 Notes Guarantor”), and Wells Fargo Bank, National Association, as trustee.
Interest on the 2025 Notes accrues from April 4, 2017, the date of issuance, at the rate of 5.50% per annum. Interest on the 2025 Notes is payable semi-annually in cash in arrears on May 1st and November 1st of each year with the initial payment having commenced on November 1, 2017. 
The 2025 Notes and the related guarantees (the “2025 Guarantees”) are the general unsecured senior obligations of each of the 2025 Notes Issuers and the 2025 Notes Guarantors, respectively, and rank: (i) equally in right of payment with all of the 2025 Notes Issuers’ and the 2025 Notes Guarantors’ existing and future senior indebtedness and (ii) senior in right of payment to all of the 2025 Notes Issuers’ and the 2025 Notes Guarantors’ future subordinated indebtedness. The 2025 Notes and the 2025 Guarantees are effectively subordinated to any of the 2025 Notes Issuers’ and the 2025 Notes Guarantors’ existing and future secured debt to the extent of the collateral securing such debt, including all borrowings under the Company’s revolving credit facility. The 2025 Notes are structurally subordinated to all liabilities of any of Cardtronics plc’s subsidiaries (excluding the 2025 Notes Issuers) that do not guarantee the 2025 Notes.
The 2025 Notes contain covenants that, among other things, limit the 2025 Notes Issuers’ ability and the ability of Cardtronics plc and certain of its restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments, or pay dividends or distributions on Cardtronics plc’s common shares or repurchase common shares or make certain other restricted payments, consolidate or merge with or into other companies, conduct asset sales, restrict dividends or other payments by restricted subsidiaries, engage in transactions with affiliates or related persons, and create liens.
Obligations under the 2025 Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by Cardtronics plc and certain of its subsidiaries and certain of its future subsidiaries, with the exception of Cardtronics plc’s immaterial subsidiaries and CFC Guarantors (as defined in the Credit Agreement). There are no significant restrictions on the ability of Cardtronics plc to obtain funds from Cardtronics Inc., Cardtronics USA, Inc., or the other 2025 Notes Guarantors by dividend or loan. None of the 2025 Notes Guarantors’ assets represent restricted assets pursuant to Rule 4-08(e)(3) of Regulation S-X.
The 2025 Notes are subject to certain automatic customary releases with respect to the 2025 Notes Guarantors (other than Cardtronics plc, Cardtronics Holdings Limited, and CATM Holdings LLC), including the sale, disposition, or transfer of the common shares or substantially all of the assets of such 2025 Notes Guarantor, designation of such 2025 Notes Guarantor as unrestricted in accordance with the 2025 Notes Indenture, exercise of the legal defeasance option or the covenant defeasance option, liquidation, or dissolution of such 2025 Notes Guarantor. The 2025 Notes Guarantors, including Cardtronics plc, may not sell or otherwise dispose of all or substantially all of their properties or assets to, or consolidate with or merge into, another company if such a sale would cause a default under the 2025 Notes Indenture and certain other specified requirements under the 2025 Notes Indenture are not satisfied.
(10) Asset Retirement Obligations 
Asset retirement obligations (“ARO”) consist primarily of costs to deinstall the Company’s ATMs and, in some cases, restore the ATM sites to their original condition, which are estimated based on current market rates. In most cases, the Company is contractually required to perform this deinstallation of its owned ATMs, and in some cases, site restoration work. For each group of similar ATM types, the Company has recognized the estimated fair value of the ARO as a liability in the accompanying Consolidated Balance Sheets and capitalized that cost as part of the cost basis of the related asset. The related assets are depreciated on a straight-line basis over the assets estimated useful life, which is the estimated average time period that an ATM is installed in a location before being deinstalled, and the related liabilities are accreted to their full value over the same period of time.





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The changes in the Company’s ARO liability consisted of the following (in thousands):
 
 
Asset retirement obligations at December 31, 2018
$
61,223

Additional obligations
1,126

Accretion expense
458

Payments
(1,451
)
Foreign currency translation adjustments
456

Asset retirement obligations at March 31, 2019
61,812

Less: current portion of asset retirement obligations
6,866

Asset retirement obligations, excluding current portion, at March 31, 2019
$
54,946

For additional information related to the Company’s ARO with respect to its fair value measurements, see Note 14. Fair Value Measurements.
(11) Leases 

The Company leases facilities consisting of office and warehouse space as well as vehicles and office equipment. In addition, certain ATM placement agreements are deemed to contain an operating lease of merchant space under the Lease Standard. The Company's facility leases have remaining lease terms extending up to more than 12 years, some of which may include one or more options to extend the associated lease term by up to 5-10 years, and some may include options for the Company or the lessor to terminate the leases prior to the end of the lease term. The exercise of lease renewal options is at the Company's discretion. From time to time, the Company may sublease office or warehouse space. This sublease activity is currently not significant. The Company's vehicle and office equipment leases currently have remaining lease terms extending up to 4 years and these leases typically have original terms of approximately 4-6 years. The Company has not historically extended its vehicle and office equipment leases beyond their original term. Similarly, the Company has not historically subleased these assets. The Company's ATM placement agreements that are deemed to contain an operating lease of merchant space under the Lease Standard have remaining terms extending from less than 1 year to more than 5 years. These consist of semi-permanent or through-the-wall placements of company-owned ATMs at merchant or financial institution locations. These arrangements are deemed to contain a lease as our counterparty lacks the practical ability to substitute alternative space. The renewal provisions under our ATM placement agreements vary.

The Company's ATM placement agreements that are deemed to contain an operating lease generally require fixed and/or variable merchant commissions. The variable payments are based on the type and volume of transactions conducted on the ATMs at each respective location. In addition, the merchant commissions may also change, in accordance with the terms of these agreements, responsive to changes in interchange fees or interest rates. Certain Company facility leases require variable payments based on a index or based on external market rates whereas our vehicle and office equipment leases do not generally include variable payments.

The Company recognizes the accounting impact of lease extension options when reasonably certain that a right to extend a lease will be exercised. The Company does not provide residual value guarantees within or in conjunction with any of its leases. As of March 31, 2019, all material leases of facilities, vehicles, office equipment, and merchant space had commenced.

The Company is not currently party to any significant finance leases. As a result, the net assets recorded under finance leases and the associated liabilities are not material.

See Note 2. New Accounting Pronouncements for the accounting impact of the Company's adoption of ASC 842- Leases on January 1, 2019.

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Balance sheet information related to operating leases is as follows:
 
 
Classification
 
March 31, 2019
 
January 1, 2019 (Upon Adoption)
Assets
 
 
 
(In thousands)
Operating lease assets
 
Operating lease assets
 
$
81,973

 
$
85,068

Total operating lease assets
 
 
 
$
81,973

 
$
85,068

 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Current
 
 
 
 
 
 
Operating lease liabilities
 
Current portion of other long-term liabilities
 
$
20,362

 
$
20,602

Noncurrent
 
 
 
 

 
 
Noncurrent operating lease liabilities
 
Noncurrent operating lease liabilities
 
$
72,482

 
$
74,746

Total operating lease liabilities
 
 
 
$
92,844

 
$
95,348


Operating lease costs during the three months ended March 31, 2019 were as follows:
 
 
 
 
Three Months Ended
 
 
Classification
 
March 31, 2019
 
 
 
 
(In thousands)
Operating lease costs
 
Cost of ATM operating revenues (1)
 
$
1,254

Operating lease costs
 
Selling, general, and administrative expenses (2)
 
1,783

Total operating lease cost
 
 
 
$
3,037

      
(1) Includes the fixed and variable cost of facilities, vehicles, and equipment that are deemed direct operating lease costs. The variable lease cost associated
with these leases was not significant.
(2) Includes the fixed and variable cost of facilities, vehicles, and equipment that are deemed general and administrative operating lease costs. The variable
lease cost associated with these leases was not significant.

In addition to the operating lease costs above, the Company recognized the cost of its ATM placement agreements that are deemed to contain an operating lease. These costs are recognized as a component of merchant commission expense that resides within the Company's Cost of ATM operating revenues.

The following table presents the undiscounted cash flows associated with the Company's recognized operating lease liabilities in the next five years and thereafter.
Maturity of Recognized Operating Lease Liabilities

 
Operating 
Lease Payments(1)
 
 
(In thousands)
2019
 
$
17,544

2020
 
19,924

2021
 
17,149

2022
 
10,488

2023
 
7,607

After 2023
 
34,843

Total lease payments
 
$
107,555

Less: Interest (2)
 
(14,711
)
Present value of operating lease liabilities (3)
 
$
92,844


(1) Operating lease payments reflect the Company's current fixed obligations under the operating lease agreements. The Company has identified no extensions that are reasonably certain of being exercised and there are no significant lease agreements that have been signed and not yet commenced.
(2) Calculated using the estimated incremental borrowing rate for each lease.
(3) Includes current operating lease liabilities of $20.4 million and noncurrent operating lease liabilities of $72.5 million.

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The following table presents the weighted-average remaining term and weighted-average discount rate associated with the Company's operating leases.
Lease Term and Discount Rate
 
March 31, 2019
 
January 1, 2019 (Upon Adoption)
Weighted-average remaining lease term (years)
 
 
 
 
   Operating leases
 
7.0

 
7.1

Weighted-average discount rate
 
 

 
 

   Operating leases
 
3.48
%
 
3.45
%

Additional lease information is summarized below:
 
 
Three Months Ended March 31, 2019
 
 
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
 
 
   Operating cash outflows resulting from payments of operating lease liabilities
 
$
5,297

 
 
 
New operating lease assets recognized during the period
 
$
1,857

During the three months ended March 31, 2019, the Company made $5.3 million in payments to satisfy the recognized operating lease obligations and recognized $1.9 million in new operating lease assets pertaining to new ATM placement agreements that are deemed to contain an operating lease. Comparative prior period information is not presented above as we adopted the Lease Standard on January 1, 2019 using this effective date as the date of initial application.
(12) Other Liabilities 
The Company’s other liabilities consisted of the following:
 
March 31, 2019
 
December 31, 2018
 
(In thousands)
Current portion of other long-term liabilities
 
 
 
Operating lease liabilities
$
20,362

 
$

Acquisition related contingent consideration
8,214

 

Asset retirement obligations
6,866

 
6,810

Deferred revenue
4,029

 
4,109

Interest rate swap and cap contracts
2,461

 
396

Other
8,560

 
8,951

Total current portion of other long-term liabilities
$
50,492

 
$
20,266

 
 
 
 
Noncurrent portion of other long-term liabilities


 
 
Acquisition related contingent consideration
$
21,804

 
$
38,266

Interest rate swap and cap contracts
7,456

 
2,894

Deferred revenue
3,987

 
4,319

Other
15,128

 
22,261

Total noncurrent portion of other long-term liabilities
$
48,375

 
$
67,740

 
 
 
 
As of March 31, 2019 and 2018, the Acquisition related contingent consideration line consisted of the estimated fair value of the contingent consideration associated with the Spark acquisition.
(13) Derivative Financial Instruments 
Risk Management Objectives of Using Derivatives
The Company is exposed to interest rate risk associated with its vault cash rental obligations and, to a lesser extent, borrowings under its revolving credit facility. The Company utilizes varying notional amount interest rate swap contracts and interest rate cap agreements (“Interest Rate Derivatives”) to manage the interest rate risk associated with its vault cash rental obligations in the U.S., Canada, the U.K., and Australia. The Company has also entered into an interest rate swap to mitigate its exposure to floating interest rates on its revolving credit facility borrowings outstanding. The Company is exposed to foreign currency exchange rate risk with respect to its operations outside the U.S. The Company uses foreign currency forward contracts to hedge its foreign exchange rate risk associated with certain anticipated transactions. Currently, the Company has outstanding foreign currency forward contracts for the purchase of approximately $1.4 million Canadian dollars with durations that extend through June 28, 2019.

The Company’s Interest Rate Derivatives serve to mitigate interest rate risk exposure by converting a portion of the Company’s monthly floating-rate vault cash rental payments to either monthly fixed-rate vault cash rental payments or to  vault cash rental payments with a capped rate. Typically, the Company receives monthly floating-rate payments from its Interest Rate Derivative counterparties that correspond to, in all material respects, the monthly floating-rate payments required by the Company to its vault cash rental providers for the portion of the average outstanding vault cash balances that have been hedged. The floating-rate payments may or may not be capped or limited. In return, the Company pays its counterparties a monthly fixed-rate amount based on the same notional amounts outstanding. By converting the vault cash rental obligation interest rate from a floating-rate to a fixed-rate or a capped rate, the impact of favorable and unfavorable changes in future interest rates on the monthly vault cash rental payments recognized in the Cost of ATM operating revenues line in the accompanying Consolidated Statement of Operations, has been reduced.
There is never an exchange of the underlying principal or notional amounts associated with the interest rate swap contracts described above. Additionally, none of the Company’s existing interest rate swap contracts contain credit-risk-related contingent features. 

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Accounting Policy 
The Interest Rate Derivatives discussed above are used by the Company to hedge exposure to variability in expected future cash flows attributable to a particular risk; therefore, they are designated and qualify as cash flow hedging instruments. The Company does not currently hold any derivative instruments not designated as cash flow hedges, fair value hedges, or hedges of a net investment in a foreign operation.
In accordance with the new Hedging Standard the Company reports the gain or loss related to each highly effective cash flow hedging instrument, including any ineffectiveness, as a component of Accumulated other comprehensive loss, net within the accompanying Consolidated Balance Sheets and reclassifies the gain or loss into earnings within the Cost of ATM operating revenues, Interest expense, net, or Other (income) expense lines of the accompanying Consolidated Statements of Operations in the same period or periods during which the hedged transaction affects and has been forecasted in earnings. The classification of the gain or loss is determined based on the associated hedge designation.
As discussed above, the Company generally utilizes fixed-for-floating Interest Rate Derivatives where the underlying pricing terms of the cash flow hedging instrument agree, in all material respects, with the pricing terms of the vault cash rental obligations to the Company’s vault cash providers. Therefore, the amount of ineffectiveness associated with the Interest Rate Derivatives has historically been immaterial. If the Company concludes 1) the vault cash obligations that have been hedged are no longer probable or 2) that underlying terms of the vault cash rental agreements have changed such that they do not sufficiently agree to the pricing terms of the Interest Rate Derivatives, the Interest Rate Derivative contracts would be deemed ineffective. The Company does not currently anticipate terminating or modifying terms of its existing derivative instruments prior to their expiration dates.
Accordingly, the Company recognizes all of its Interest Rate Derivative contracts as assets or liabilities in the accompanying Consolidated Balance Sheets at fair value and any changes in the fair values of the related Interest Rate Derivative contracts have been reported in Accumulated other comprehensive loss, net within the accompanying Consolidated Balance Sheets. The unrealized gains and losses related to the interest rate swap contracts have been reported net of taxes in Accumulated other comprehensive loss, net within the accompanying Consolidated Balance Sheets. For additional information related to the Company’s interest rate swap contracts with respect to its fair value measurements, see Note 14. Fair Value Measurements.

Summary of Outstanding Interest Rate Derivatives
The notional amounts, weighted average fixed rates, and terms associated with our interest rate swap contracts and cap agreement that are currently in place in the U.S., Canada, the U.K, and Australia (as of the date of the issuance of this 2019 Form 10-Q) are as follows:
Outstanding Interest Rate Derivatives Associated with Vault Cash Rental Obligations
North America – Interest Rate Swap Contracts
Notional Amounts
U.S. $
 
Weighted Average Fixed Rate 
 
Notional Amounts
CAD$
 
Weighted Average Fixed Rate 
 
Term 
(In millions)
 
 
 
(In millions)
 
 
 
 
$
1,000

 
2.06%
 
CAD
 
$
125

 
2.46%
 
April 1, 2019 – December 31, 2019
$
1,000

 
2.06%
 
CAD
 
$
125

 
2.46%
 
January 1, 2020 – December 31, 2020
$
600

 
1.95%
 
CAD
 
$
125

 
2.46%
 
January 1, 2021 – December 31, 2021
$
400

 
1.46%
 
 
 
 
 
 
 
January 1, 2022 – December 31, 2022

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North America – Interest Rate Cap Contracts
Notional Amounts
U.S. $
 
Cap Rate (1)
 
Term
(In millions)
 
 
 
 
$
 
200

 
3.25%
 
January 1, 2021 – December 31, 2023
(1) Maximum amount of interest to be paid each year as per terms of cap. Cost of cap is amortized through vault cash rental expense over term of cap.
Europe & Africa – Interest Rate Swap Contracts
Notional Amounts
 
Weighted Average
 
 
U.K. £
 
Fixed Rate
 
Term 
(In millions)
 
 
 
 
£
550

 
0.90%
 
April 1, 2019 – December 31, 2019
£
500

 
0.94%
 
January 1, 2020 – December 31, 2020
£
500

 
0.94%
 
January 1, 2021 – December 31, 2021
£
500

 
0.94%
 
January 1, 2022 – December 31, 2022
Australia & New Zealand – Interest Rate Swap Contracts
Notional Amounts
AUS $
 
Weighted Average
Fixed Rate
 
Term 
(In millions)
 
 
 
 
$
150

 
1.95%
 
April 1, 2019 - December 31, 2019
$
100

 
1.95%
 
January 1, 2020 – December 31, 2020


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Outstanding Interest Rate Derivatives Associated with Revolving Credit Facility Borrowings
Notional Amounts
U.K. £
 
Weighted Average Fixed Rate 
 
Term 
(In millions)
 
 
 
 
£
80

 
0.95
%
 
April 1, 2019 – January 1, 2020
£
50

 
0.95
%
 
January 2, 2020 – January 1, 2021
The following tables depict the effects of the use of the Company’s derivative interest rate swap contracts in the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations.
Balance Sheet Data 
 
 
March 31, 2019
 
December 31, 2018
Asset (Liability) Derivative Instruments
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
 
 
 
(In thousands) 
 
 
 
(In thousands) 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
Interest rate swap contracts
 
Prepaid expenses, deferred costs, and other current assets
 
$
3,319

 
Prepaid expenses, deferred costs, and other current assets
 
$
4,489

Interest rate swap contracts
 
Prepaid expenses, deferred costs, and other noncurrent assets
 
6,911

 
Prepaid expenses, deferred costs, and other noncurrent assets
 
15,316

Interest rate swap contracts
 
Current portion of other long-term liabilities
 
(2,461
)
 
Current portion of other long-term liabilities
 
(396
)
Interest rate swap and cap contracts
 
Other long-term liabilities
 
(7,456
)
 
Other long-term liabilities
 
(2,894
)
Total derivative instruments, net
 
 
 
$
313

 
 
 
$
16,515

Statements of Operations Data
 
 
Three Months Ended March 31,
Derivatives in Cash Flow Hedging Relationship
 
Amount of Gain (Loss) Recognized in
Accumulated Other Comprehensive Loss on
Derivative Instruments
 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)
 
Amount of Gain (Loss) Reclassified from
Accumulated Other Comprehensive Loss
into Income
 
 
2019
 
2018
 
 
 
2019
 
2018
 
 
(In thousands)
 
 
 
(In thousands)
Interest rate swap contracts
 
$
(12,109
)
 
$
14,772