Cardtronics, plc.
CARDTRONICS INC (Form: 10-Q, Received: 11/07/2011 16:14:59)  


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 September 30, 2011  

 

or  

 

 

o  

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: 001-33864  

________________________________

 

CARDTRONICS, INC.  

(Exact name of registrant as specified in its charter)

 

Delaware  

76-0681190  

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

3250 Briarpark Drive, Suite 400  

77042  

Houston, TX  

(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes þ  No  

 

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

 

Large accelerated filer  £   

Accelerated filer   

Non-accelerated filer  £   

Smaller reporting company  £   

 

(Do not check if a smaller reporting company)

 

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

 

Common Stock, par value: $0.0001 per share.  Shares outstanding on November 3, 2011: 43,856,525

 

 

 


 

CARDTRONICS, INC.

 

TABLE OF CONTENTS

 

Page 

 

PART I.FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

1

Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010

1

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010

2

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010

3

Notes to Consolidated Financial Statements

4

Cautionary Statement Regarding Forward-Looking Statements

30

Item 2.

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

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

49

Item 4.

Controls and Procedures

51

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

52

Item 1A.

Risk Factors

52

Item 6.

Exhibits

53

 

Signatures

54

 

 

 

When we refer to “us,” “we,” “our,” or “ours,” we are describing Cardtronics, Inc. and/or our subsidiaries.

 

 

 

 

 

 

 

 

 

 

                   

 

 

 


 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

 

 

 

 

 

 

CARDTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, excluding share and per share amounts)

 

 

 

 

 

 

 

September 30, 2011

 

December 31, 2010

 

 

(unaudited)

 

 

 

ASSETS

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

5,206

 

$

3,189

Accounts and notes receivable, net of allowance of $229 and $507 as of September 30, 2011 and December 31, 2010, respectively

 

32,716

 

 

20,270

Inventory

 

2,108

 

 

1,795

Restricted cash

 

3,568

 

 

4,466

Current portion of deferred tax asset, net

 

18,780

 

 

15,017

Prepaid expenses, deferred costs, and other current assets

 

12,685

 

 

10,222

Total current assets

 

75,063

 

 

54,959

Property and equipment, net

 

174,154

 

 

156,465

Intangible assets, net

 

112,415

 

 

74,799

Goodwill

 

269,521

 

 

164,558

Deferred tax asset, net

 

10,493

 

 

715

Prepaid expenses, deferred costs, and other assets

 

19,878

 

 

3,819

Total assets

$

661,524

 

$

455,315

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

 

 

 

 

 

Current portion of long-term debt and notes payable

$

2,717

 

$

3,076

Current portion of other long-term liabilities

 

24,868

 

 

24,493

Accounts payable

 

22,239

 

 

20,167

Accrued liabilities

 

61,691

 

 

50,543

Current portion of deferred tax liability, net

 

718

 

 

715

Total current liabilities

 

112,233

 

 

98,994

Long-term liabilities:

 

 

 

 

 

Long-term debt, net of related discounts

 

359,484

 

 

251,757

Deferred tax liability, net

 

62

 

 

10,268

Asset retirement obligations

 

32,456

 

 

26,657

Other long-term liabilities

 

54,178

 

 

23,385

Total liabilities

 

558,413

 

 

411,061

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.0001 par value; 125,000,000 shares authorized; 49,531,576 and 48,396,134 shares issued as of September 30, 2011 and December 31, 2010, respectively; 43,809,783 and 42,833,342 shares outstanding as of September 30, 2011 and December 31, 2010, respectively

 

4

 

 

4

Additional paid-in capital

 

231,111

 

 

213,754

Accumulated other comprehensive loss, net

 

(82,637)

 

 

(65,053)

Retained earnings (accumulated deficit)

 

6,117

 

 

(55,963)

Treasury stock; 5,721,793 and 5,562,792 shares at cost as of September 30, 2011 and December 31, 2010, respectively

 

(53,209)

 

 

(50,351)

Total parent stockholders’ equity

 

101,386

 

 

42,391

Noncontrolling interests

 

1,725

 

 

1,863

Total stockholders’ equity

 

103,111

 

 

44,254

Total liabilities and stockholders’ equity

$

661,524

 

$

455,315

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

1

 


 

CARDTRONICS, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(In thousands, excluding share and per share amounts)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

ATM operating revenues

$

157,636

 

$

134,090

 

$

432,164

 

$

390,337

 

ATM product sales and other revenues

 

7,423

 

 

2,515

 

 

18,230

 

 

6,992

 

Total revenues

 

165,059

 

 

136,605

 

 

450,394

 

 

397,329

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of ATM operating revenues (excludes depreciation, accretion, and amortization shown separately below.See Note 1

 

103,727

 

 

89,026

 

 

285,630

 

 

262,319

 

Cost of ATM product sales and other revenues

 

6,501

 

 

2,425

 

 

16,062

 

 

6,932

 

Total cost of revenues

 

110,228

 

 

91,451

 

 

301,692

 

 

269,251

 

Gross profit

 

54,831

 

 

45,154

 

 

148,702

 

 

128,078

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

13,772

 

 

11,519

 

 

39,701

 

 

32,934

 

Acquisition-related expenses

 

956

 

 

 

 

1,299

 

 

 

Depreciation and accretion expense

 

12,197

 

 

10,865

 

 

35,004

 

 

31,351

 

Amortization expense

 

4,946

 

 

3,823

 

 

12,240

 

 

11,567

 

Loss on disposal of assets

 

117

 

 

368

 

 

280

 

 

1,840

 

Total operating expenses

 

31,988

 

 

26,575

 

 

88,524

 

 

77,692

 

Income from operations

 

22,843

 

 

18,579

 

 

60,178

 

 

50,386

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

5,243

 

 

7,064

 

 

14,810

 

 

21,696

 

Amortization of deferred financing costs and bond discounts

 

351

 

 

546

 

 

775

 

 

1,818

 

Write-off of deferred financing costs and bond discounts

 

 

 

7,296

 

 

 

 

7,296

 

Redemption costs for early extinguishment of debt

 

 

 

7,193

 

 

 

 

7,193

 

Other expense (income)

 

318

 

 

(207)

 

 

258

 

 

(173)

 

Total other expense

 

5,912

 

 

21,892

 

 

15,843

 

 

37,830

 

Income (loss) before income taxes

 

16,931

 

 

(3,313)

 

 

44,335

 

 

12,556

 

Income tax benefit

 

(29,869)

 

 

(23,968)

 

 

(17,765)

 

 

(20,577)

 

Net income

 

46,800

 

 

20,655

 

 

62,100

 

 

33,133

 

Net (loss) income attributable to noncontrolling interests

 

(85)

 

 

(108)

 

 

20

 

 

202

 

Net income attributable to controlling interests and available to common stockholders

$

46,885

 

$

20,763

 

$

62,080

 

$

32,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share – basic

$

1.06

 

$

0.49

 

$

1.42

 

$

0.79

 

Net income per common share – diluted

$

1.05

 

$

0.49

 

$

1.40

 

$

0.78

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

42,570,137

 

 

40,529,280

 

 

42,001,624

 

 

40,119,310

 

Weighted average shares outstanding – diluted

 

43,195,554

 

 

41,207,238

 

 

42,727,446

 

 

40,790,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 


 
 

CARDTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

2011

 

2010

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

62,100

 

$

33,133

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

 

 

 

 

 

 

Depreciation, accretion, and amortization expense

 

 

47,244

 

 

42,918

Amortization of deferred financing costs and bond discounts

 

 

775

 

 

1,818

Write-off of deferred financing costs and bond discounts

 

 

 

 

7,296

Redemption costs for early extinguishment of debt

 

 

 

 

7,193

Stock-based compensation expense

 

 

6,996

 

 

4,603

Deferred income taxes

 

 

(18,599)

 

 

(21,371)

Loss on disposal of assets

 

 

280

 

 

1,840

Unrealized gain on derivative instruments

 

 

(813)

 

 

(744)

Amortization of accumulated other comprehensive losses associated with derivative instruments no longer designated as hedging instruments

 

 

234

 

 

1,316

Other reserves and non-cash items

 

 

827

 

 

1,251

Changes in assets and liabilities:

 

 

 

 

 

 

(Increase) decrease in accounts and notes receivable, net

 

 

(11,800)

 

 

4,430

Decrease (increase) in prepaid, deferred costs, and other current assets

 

 

1,338

 

 

(1,107)

(Increase) decrease in inventory

 

 

(814)

 

 

307

(Increase) decrease in other assets

 

 

(18,602)

 

 

1,582

(Decrease) increase in accounts payable

 

 

(2,323)

 

 

5,427

Increase (decrease) in accrued liabilities

 

 

5,379

 

 

(12,641)

Decrease in other liabilities

 

 

(2,870)

 

 

(4,258)

Net cash provided by operating activities

 

 

69,352

 

 

72,993

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Additions to property and equipment

 

 

(34,654)

 

 

(37,410)

Payments for exclusive license agreements, site acquisition costs and other intangible assets

 

 

(2,406)

 

 

(2,549)

Acquisitions, net of cash acquired

 

 

(143,627)

 

 

Net cash used in investing activities

 

 

(180,687)

 

 

(39,959)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from borrowings of long-term debt

 

 

317,638

 

 

345,000

Repayments of long-term debt and capital leases

 

 

(209,813)

 

 

(381,013)

Repayments of borrowings under bank overdraft facility, net

 

 

(1,042)

 

 

(47)

Debt issuance and modification costs

 

 

(655)

 

 

(5,227)

Proceeds from exercises of stock options

 

 

10,102

 

 

1,802

Repurchase of capital stock

 

 

(2,859)

 

 

(1,663)

Net cash provided by (used in) financing activities

 

 

113,371

 

 

(41,148)

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(19)

 

 

288

Net increase (decrease) in cash and cash equivalents

 

 

2,017

 

 

(7,826)

 

 

 

 

 

 

 

Cash and cash equivalents as of beginning of period

 

 

3,189

 

 

10,449

Cash and cash equivalents as of end of period

 

$

5,206

 

$

2,623

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest, including interest on capital leases

 

$

19,235

 

$

28,828

Cash paid for income taxes

 

$

1,717

 

$

831

Capital expenditures financed by direct debt

 

$

 

$

542

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

3

 


 

 

CARDTRONICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) General and Basis of Presentation

 

General

 

Cardtronics, Inc., along with its wholly- and majority-owned subsidiaries (collectively, the "Company") provides convenient consumer financial services through its network of automated teller machines ("ATMs") and multi-function financial services kiosks. As of September 30, 2011, the Company provided services to over 42,200 devices across its portfolio, which included over 35,900 devices located in all 50 states of the United States ("U.S.") as well as in the U.S. territories of Puerto Rico and the U.S. Virgin Islands, approximately 3,400 devices throughout the United Kingdom ("U.K."), and approximately 2,900 devices throughout Mexico. Included in the U.S. number are approximately 2,200 multi-function financial services kiosks deployed in the U.S. that, in addition to traditional ATM functions such as cash dispensing and bank account balance inquiries, perform other consumer financial services, including bill payments, check cashing, remote deposit capture (which is deposit taking at ATMs using electronic imaging), and money transfers. Also included in the total count of 42,200 devices are approximately 4,700 devices for which the Company provides various forms of managed services solutions, which may include services such as transaction processing, monitoring, maintenance, cash management, and customer service.

 

Through its network, the Company provides ATM management and equipment-related services (typically under multi-year contracts) to large, nationally-known retail merchants as well as smaller retailers and operators of facilities such as shopping malls and airports. The Company also partners with leading national and regional financial institutions to brand selected ATMs and financial services kiosks within its network. As of September 30, 2011, over 15,300 of the Company's domestic devices were under contract with financial institutions to place their logos on those machines, thus providing convenient surcharge-free access for their banking customers. Additionally, the Company owns and operates the Allpoint network, the largest surcharge-free ATM network within the United States (based on the number of participating ATMs). The Allpoint network, which has more than 43,000 participating ATMs, provides surcharge-free ATM access to customers of participating financial institutions that lack a significant ATM network. The Allpoint network includes a majority of the Company's ATMs in the U.S., Puerto Rico and Mexico, all of the Company's ATMs in the U.K., and over 5,000 locations in Australia through a partnership with a local ATM owner and operator in that market. Finally, the Company owns and operates an electronic funds transfer ("EFT") transaction processing platform that provides transaction processing services to its network of ATMs and financial services kiosks as well as other ATMs under managed services arrangements.

 

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 Securities and Exchange Commission ("SEC") applicable to interim financial information. Because this is an interim period filing presented using a condensed format, it does not include all of the disclosures required by accounting principles generally accepted in the United States ("U.S. GAAP"), although the Company believes that the disclosures are adequate to make the information not misleading. You should read this Form 10-Q along with the Company's Annual Report on Form 10-K for the year ended December 31, 2010 ("2010 Form 10-K"), which includes a summary of the Company's significant accounting policies and other disclosures.

 

The financial statements as of September 30, 2011 and for the three and nine month periods ended September 30, 2011 and 2010 are unaudited. The Consolidated Balance Sheet as of December 31, 2010 was derived from the audited balance sheet filed in the Company's 2010 Form 10-K. In management's opinion, all normal recurring adjustments necessary for a fair presentation of the Company's interim and prior period results have been made. The results of operations for the three and nine month periods ended September 30, 2011 and 2010 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year. Additionally, the financial statements for prior periods include certain minor reclassifications. Those reclassifications did not impact the Company's total reported net income or stockholders' equity.

 

The unaudited interim consolidated financial statements include the accounts of Cardtronics, Inc. and its wholly- and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Because the Company owns a majority (51.0%) interest in, and realizes a majority of the earnings and/or losses of, Cardtronics Mexico, S.A. de C.V. ("Cardtronics Mexico"), this entity is reflected as a consolidated subsidiary in the accompanying consolidated financial statements, with the remaining ownership interests not held by the Company being reflected as noncontrolling interests.

 

4

 


 
 

The preparation of financial statements in conformity 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 the financial statements 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.  

 

Cost of ATM Operating Revenues and Gross Profit Presentation  

 

The Company presents Cost of ATM operating revenues and Gross profit within its Consolidated Statements of Operations exclusive of depreciation, accretion, and amortization expense related to ATMs and ATM-related assets. The following table sets forth the amounts excluded from Cost of ATM operating revenues and Gross profit for the periods indicated:   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  

 

 

Nine Months Ended  

 

 

September 30,  

 

 

September 30,  

 

 

2011  

 

 

2010  

 

 

2011  

 

 

2010  

 

 

(In thousands)  

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

 

$  

10,544  

 

 

$  

9,208  

 

 

$  

30,185  

 

 

$  

25,844  

Amortization expense  

 

 

4,946  

 

 

 

3,823  

 

 

 

12,240  

 

 

 

11,567  

Total depreciation, accretion, and amortization expenses excluded from Cost of ATM operating revenues and Gross profit  

 

$  

15,490  

 

 

$  

13,031  

 

 

$  

42,425  

 

 

 $

37,411  

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Acquisitions  

 

Acquisition of the EDC ATM Portfolio

     

On June 19, 2011, the Company signed a definitive agreement to acquire all of the outstanding securities of EDC ATM Subsidiary and Efmark Deployment I (collectively referred to as "EDC") from EDC Holding Company, LLC for approximately $145.0 million in cash. On July 25, 2011, the Company completed this acquisition through borrowings under its amended credit facility.  

 

As a result of the acquisition, the Company added over 3,600 ATMs across 47 states, with the majority of the machines located in high-traffic convenience store locations. In addition, many of the EDC ATMs were under contract with financial institutions to carry their brand and logo on the ATM, which has further enhanced the Company's surcharge-free product offerings.

 

The results of operations of the acquired EDC portfolio have been included in the Company's consolidated statement of operations subsequent to the July 25, 2011 acquisition date. Revenue and earnings of $11.7 million and approximately $0.1 million, respectively, were included in both the three and nine month periods ended September 30, 2011. The estimated earnings contribution includes approximately $0.8 million in non-recurring acquisition-related expenses incurred during the quarter. The acquisition-related expenses incurred year-to-date for this acquisition were $1.1 million.

 

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (amounts in thousands). The total purchase consideration was allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the date of acquisition. Such allocation resulted in goodwill of approximately $104.1 million, which has been assigned to the Company's domestic reporting segment, and is primarily attributable to expected synergies. Of this amount, $57.8 million is expected to be deductible for income tax purposes.

 

5

 


 
 

 

 

 

 

Cash and cash equivalents

 

$

3,531

Accounts and notes receivable

 

 

768

Inventory

 

 

100

Prepaid expenses, deferred costs, and other current assets

 

 

1,297

Property and equipment, net

 

 

9,961

Intangible assets

 

 

46,000

Goodwill

 

 

104,096

Other assets

 

 

9

Total assets acquired

 

 

165,762

 

 

 

Accounts payable

 

 

4,405

Accrued liabilities

 

 

4,200

Asset retirement obligations

 

 

1,902

Deferred tax liability, net

 

 

5,755

Other long-term liabilities

 

 

4,500

Total liabilities assumed

 

 

20,762

Net assets acquired

 

$

145,000

 

 

 

The fair values of intangible assets acquired were determined by utilizing a discounted cash flow approach, with the assistance of an independent appraisal firm. The intangible assets acquired as part of the EDC acquisition are being amortized on a straight-line basis, and consist of the following: 

 

 

 

 

 

 

 

 

Fair Values  

 

Useful Lives  

 

Weighted Average Period Before Next Renewal

Customer contracts

$

 33,700

 

7 to 9.4 years

 

8.4 years

Bank branding contracts 

 

 11,200

 

4.1 years

 

4.1 years

Non-compete agreements 

 

 1,100

 

2 years

 

2 years

Total 

$

 46,000

 

 

 

 

   

Pro Forma Results of Operations

 

The following table presents the unaudited pro forma combined results of operations of the Company and the acquired EDC portfolios for the three and nine months ended September 30, 2011 and 2010, after giving effect to certain pro forma adjustments including: (i) elimination of intercompany transactions prior to the consummation of EDC into the Company, (ii) amortization of acquired intangible assets and unfavorable contract liabilities assumed, (iii) the impact of certain fair value adjustments such as depreciation on the acquired property and equipment, and (iv) interest expense adjustment for historical long-term debt of EDC that was repaid and interest expense on additional borrowings by the Company to fund the acquisition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  

 

 

Nine Months Ended  

 

 

 

September 30,  

 

 

September 30,  

 

 

 

2011  

 

 

2010  

 

 

2011  

 

 

2010  

 

 

 

(In thousands)  

 

Net revenue

 

$

169,183

 

 

$

151,081

 

 

$

484,353

 

 

$

434,244

 

Net income attributable to controlling interests and available to common stockholders

 

 

44,759

 

 

 

21,129

 

 

 

59,657

 

 

 

32,833

 

 

The unaudited pro forma financial results do not reflect the impact of the other acquisition consummated by the Company in August 2011 (see further details below), as the impact would not be material to its condensed consolidated results of operations. The unaudited pro forma financial results assume that the acquisition occurred on January 1, 2010, and are not necessarily indicative of the actual results that would have occurred had those transactions been completed on that date. Furthermore, it does not reflect the impacts of any potential operating efficiencies, savings from expected synergies, or costs to integrate the operations. The unaudited pro forma financial results are not necessarily indicative of the future results to be expected for the consolidated operations.

 

6

 


 

Other Acquisitions

 

 On August 1, 2011, the Company acquired LocatorSearch, LLC, a provider of location search technology deployed by financial institutions to help customers and members find the nearest, most appropriate and convenient ATM location based on the service they seek. Total consideration was estimated to be approximately $3.0 million, of which $2.6 million was paid at closing. The consideration was allocated $1.6 million to intangible assets, $0.8 million to goodwill, and the remainder to the acquired assets and assumed liabilities.

 

(3) Stock-Based Compensation

 

The Company calculates the fair value of stock-based awards granted to employees and directors on the date of grant and recognizes the calculated fair value, net of estimated forfeitures, as compensation expense over the requisite service periods of the related awards. The following table reflects the total stock-based compensation expense amounts included in the Company's Consolidated Statements of Operations for the periods indicated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2011

 

 

2010

 

 

2011

 

 

2010

 

 

(In thousands)

Cost of ATM operating revenues

 

$

251

 

 

$

226

 

 

$

769

 

 

$

594

Selling, general, and administrative expenses

 

 

2,122

 

 

 

1,481

 

 

 

6,227

 

 

 

4,009

Total stock-based compensation expense

 

$

2,373

 

 

$

1,707

 

 

$

6,996

 

 

$

4,603

 

 

 

 

 

 

 

 

 

 

 

 

  The increase in stock-based compensation expense during the three and nine month periods ended September 30, 2011 was due to the issuance of additional shares of restricted stock awards ("RSAs") and restricted stock units ("RSUs") to certain of the Company's employees and directors during the last quarter of 2010 and in 2011. All grants during the periods above were granted under the Company's Amended and Restated 2007 Stock Incentive Plan (the "2007 Stock Incentive Plan").

 

During the first quarter of 2011, the Company granted RSUs under the Company's 2011 Long Term Incentive Plan (the "2011 LTIP"), which is an equity program under the 2007 Stock Incentive Plan. A base pool of 273,411 RSUs has been set aside for the 2011 LTIP. From this amount, the Compensation Committee of the Company's Board of Directors (the "Committee") granted RSUs totaling 264,750, which could result in the issuance of up to 546,822 shares of common stock in the future, depending on the Company's achievement of certain performance levels during calendar year 2011. The fair value of a single RSU granted under the 2011 LTIP was $16.82 on the date of the grant. These grants have both a performance-based and a service-based vesting schedule; accordingly, the number of RSUs potentially earned by an individual will be based on the level of performance achieved during calendar year 2011. Once the performance-based vesting requirements are determined to be met by the Committee, the RSUs will be earned by the individual and will vest 50% on the second anniversary of the grant date and 25% each on the third and fourth anniversaries of the grant date. Although the RSUs will not be considered earned and outstanding until at least the minimum performance metrics are met, the Company recognizes the related compensation expense over the requisite service period using a graded vesting methodology, based on the estimated performance levels that management believes will ultimately be met.

 

Options. The number of the Company's outstanding stock options as of September 30, 2011, and changes during the nine month period ended September 30, 2011, are presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

Number

 

 

Average

 

 

 

of Shares

 

 

Exercise Price

 

Options outstanding as of January 1, 2011

 

 

2,511,105

 

 

$

9.63

 

Exercised

 

 

(1,082,614

)

 

$

9.56

 

Forfeited

 

 

(7,500

)

 

$

6.99

 

Options outstanding as of September 30, 2011

 

 

1,420,991

 

 

$

9.69

 

 

 

 

 

 

 

 

 

Options vested and exercisable as of September 30, 2011

 

 

1,304,366

 

 

$

9.93

 

 

As of September 30, 2011, the unrecognized compensation expense associated with outstanding options was approximately $0.3 million.

 

Restricted Stock Awards. The number of the Company's outstanding RSAs as of September 30, 2011, and changes during the nine month period ended September 30, 2011, are presented below:

 

 

 

 

 

 

 

Number

 

 

 

of Shares

 

RSAs outstanding as of January 1, 2011

 

 

1,558,315

 

Granted

 

 

52,828

 

Vested

 

 

(518,503

)

Forfeited

 

 

(13,750

)

RSAs outstanding as of September 30, 2011

 

 

1,078,890

 

 

 

 

 

7

 


 
 

The restricted shares granted during the nine month period ended September 30, 2011 had a total grant-date fair value of approximately $1.1 million, or $21.74 per share.  As of September 30, 2011, the unrecognized compensation expense associated with restricted share grants was approximately $9.8 million.  

 

(4) Earnings 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 statements of operations) when their impact on net income available to common stockholders is anti-dilutive. Potentially dilutive securities for the three and nine month periods ended September 30, 2011 and 2010 included all outstanding stock options and shares of restricted stock, which were included in the calculation of diluted earnings per share for these periods.

 

Additionally, the shares of restricted stock issued by the Company have a non-forfeitable right to cash dividends, if and when declared by the Company.  Accordingly, restricted shares are considered to be participating securities and, as such, the Company has allocated the undistributed earnings for the three and nine month periods ended September 30, 2011 and 2010 among the Company's outstanding shares of common stock and issued but unvested restricted shares, as follows:  

 

Earnings per Share (in thousands, excluding share and per share amounts):  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2011  

 

 

Nine Months Ended September 30, 2011  

 

 

 

Income

 

 

Weighted Average Shares Outstanding

 

 

Earnings Per Share

 

 

Income

 

 

Weighted Average Shares Outstanding

 

 

Earnings Per Share

 

Basic:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to controlling interests and available to common stockholders

 

$

46,885

 

 

 

 

 

 

 

 

 

 

$

62,080

 

 

 

 

 

 

 

 

 

Less: undistributed earnings allocated to unvested restricted shares

 

 

(1,667

)

 

 

 

 

 

 

 

 

 

 

(2,331

)

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

45,218

 

 

 

42,570,137

 

 

$

1.06  

 

 

$

59,749

 

 

 

42,001,624

 

 

$

1.42  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Undistributed earnings allocated to restricted shares

 

$

1,667

 

 

 

 

 

 

 

 

 

 

$

2,331

 

 

 

 

 

 

 

 

 

Stock options added to the denominator under the treasury stock method

 

 

 

 

 

 

625,417

 

 

 

 

 

 

 

 

 

 

 

725,822

 

 

 

 

 

Less: Undistributed earnings reallocated to restricted shares

 

 

(1,643

)

 

 

 

 

 

 

 

 

 

 

(2,293

)

 

 

 

 

 

 

 

 

Net income available to common stockholders and assumed conversions

 

$

45,242

 

 

 

43,195,554

 

 

$  

1.05  

 

 

$

59,787

 

 

 

42,727,446

 

 

$

1.40   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 


 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2010  

 

 

Nine Months Ended September 30, 2010  

 

 

 

Income

 

 

Weighted Average Shares Outstanding

 

 

Earnings Per Share

 

 

Income

 

 

Weighted Average Shares Outstanding

 

 

Earnings Per Share

 

Basic:   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to controlling interests and available to common stockholders

 

$

20,763

 

 

 

 

 

 

 

 

 

 

$

32,931

 

 

 

 

 

 

 

 

 

Less: undistributed earnings allocated to unvested restricted shares

 

 

(723

)

 

 

 

 

 

 

 

 

 

 

(1,281

)

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

20,040

 

 

 

40,529,280

 

 

$

0.49  

 

 

$

31,650

 

 

 

40,119,310

 

 

$

0.79  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Undistributed earnings allocated to restricted shares

 

$

723

 

 

 

 

 

 

 

 

 

 

$

1,281

 

 

 

 

 

 

 

 

 

Stock options added to the denominator under the treasury stock method

 

 

 

 

 

 

  677,958

 

 

 

 

 

 

 

 

 

 

 

671,194

 

 

 

 

 

Less: Undistributed earnings reallocated to restricted shares

 

 

(712

)

 

 

 

 

 

 

 

 

 

 

(1,261

)

 

 

 

 

 

 

 

 

Net income available to common stockholders and assumed conversions

 

$

20,051

 

 

 

41,207,238

 

 

$

0.49  

 

 

$

31,670

 

 

 

40,790,504

 

 

$

0.78  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The computation of diluted earnings per share excluded potentially dilutive common shares related to RSAs of 432,236 and 497,981 shares for the three and nine month periods ended September 30, 2011, respectively, and 395,985 and 427,695 shares for the three and nine month periods ended September 30, 2010, respectively, because the effect of including these shares in the computation would have been anti-dilutive.  

  

(5) Comprehensive Income

 

Total comprehensive income consisted of the following:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended  

 

 

Nine Months Ended  

 

 

 

September 30,  

 

 

September 30,  

 

 

 

2011  

 

 

2010  

 

 

2011  

 

 

2010  

 

 

 

(In thousands)  

 

Net income

 

$

46,800

 

 

$

20,655

 

 

$

62,100

 

 

$

33,133

 

Unrealized (losses) gains on interest rate swap contracts, net of income tax benefit of $6.6 million and $10.9 million for the three and nine months ended September 30, 2011, respectively

 

 

(10,697

)

 

 

805

 

 

 

(17,421

)

 

 

(10,296

)

Foreign currency translation adjustments

 

 

(1,593

)

 

 

2,668  

 

 

 

(163

)

 

 

(1,154

)

Total comprehensive income

 

 

34,510

 

 

 

24,128

 

 

 

44,516

 

 

 

21,683

 

Less: comprehensive (loss) income attributable to noncontrolling interests

 

 

(342

)

 

 

(56

)

 

 

(138

)

 

 

273

 

Comprehensive income attributable to controlling interests

 

$

34,852

 

 

$

24,184

 

 

$

44,654

 

 

$

21,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Accumulated other comprehensive loss, net is displayed as a separate component of stockholders' equity in the accompanying Consolidated Balance Sheets and consisted of the following:  

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011  

 

 

December 31, 2010

 

 

 

(In thousands)  

 

Foreign currency translation adjustments

 

$

(26,732

)

 

$

(26,569

)

Unrealized losses on interest rate swap contracts, net of income tax benefit of $12.3 million and $1.4 million as of September 30, 2011 and December 31, 2010, respectively

 

 

(55,905

)

 

 

(38,484

)

Total accumulated other comprehensive loss, net

 

$

(82,637

)

 

$

(65,053

)

 

 

 

 

 

 

 

9

 


 

  The Company records unrealized losses related to its domestic interest rate swaps net of estimated taxes in the Accumulated other comprehensive loss, net line item within Stockholders' equity in the accompanying Consolidated Balance Sheets since it is more likely than not that the Company will be able to realize the benefits associated with its net deferred tax asset positions in the future.

 

The Company currently believes that the unremitted earnings of its Mexico subsidiary 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 that subsidiary or on the foreign currency translation adjustment amounts.

 

(6) Noncurrent Prepaid Expenses and Other Assets

 

As of September 30, 2011, the Company had $19.9 million of noncurrent prepaid expenses, deferred costs, and other assets, compared to $3.8 million as of December 31, 2010.Included in the balance as of September 30, 2011 was $16.2 million recorded for an insurance receivable, related to the loss sustained as a result of the misappropriation of cash in February 2010 by the president and principal owner of Mount Vernon Money Center ("MVMC"), one of the Company's third-party armored service providers in the Northeast United States.

In March 2011, Cardtronics filed a claim under its own cash insurance policy for $16.2 million, the total amount of the cash misappropriated by MVMC. In May 2011, the Company's supplier of the vault cash demanded repayment from the Company for the $16.2 million that MVMC had misappropriated. The Company subsequently repaid this amount to the vault cash provider through a borrowing under its revolving credit facility. The Company's insurance provider has acknowledged that the loss event is a covered event under the policy, but has taken the position that the final amount of the loss is not yet determinable because the Company may recover portions or all of the loss through a combination of MVMC insurance, seized and forfeited assets and other potential sources of recovery. As a result of making the repayment to the vault cash provider, the Company recorded a receivable, currently classified as non-current, as the Company expects to receive full reimbursement of the amount of misappropriated cash. Based on current facts and circumstances, the Company believes that it is probable that it will be able to fully recover the $16.2 million recorded as a receivable. Events continue to develop in this matter, and as a result, the expected timing and ultimate amount expected to be recovered are subject to change.

 

(7) Intangible Assets

 

Intangible Assets with Indefinite Lives

 

The following table presents the net carrying amount of the Company's intangible assets with indefinite lives as of September 30, 2011, as well as the changes in the net carrying amounts for the nine month period ended September 30, 2011, by segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

 

U.S.

 

 

U.K.

 

 

Mexico

 

 

Total

 

 

 

(In thousands)

 

Balance as of January 1, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross balance

 

$

150,461

 

 

$

63,393

 

 

$

707

 

 

$

214,561

 

Accumulated impairment loss

 

 

 

 

 

(50,003

)

 

 

 

 

 

(50,003

)

 

 

$

150,461

 

 

$

13,390

 

 

$

707

 

 

$

164,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

104,904

 

 

 

 

 

 

 

 

 

104,904

 

Foreign currency translation adjustments   

 

 

 

 

 

49

 

 

 

10

 

 

 

59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2011:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross balance  

 

$

255,365

 

 

$

63,442

 

 

$

717

 

 

$

319,524

 

Accumulated impairment loss  

 

 

 

 

 

(50,003

)

 

 

 

 

 

(50,003

)

 

 

$

255,365

 

 

$

13,439

 

 

$

717

 

 

$

269,521

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade Name  

 

 

 

U.S.  

 

 

U.K.  

 

 

Total  

 

 

 

(In thousands)  

Balance as of January 1, 2011

 

$

200

 

 

$

3,105

 

 

$

3,305

 

Foreign currency translation adjustments

 

 

 

 

 

11

 

 

 

11

 

Balance as of September 30, 2011

 

$

200

 

 

$

3,116

 

 

$

3,316

 

 

 

 

 

 

 

 

 

 

 

10

 


 
 

  Intangible Assets with Definite Lives  

 

The following is a summary of the Company's intangible assets that are subject to amortization as of September 30, 2011:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Carrying Amount

 

 

Accumulated

Amortization

 

 

Net Carrying Amount

 

 

 

(In thousands)  

 

Customer and branding contracts/relationships  

 

$

206,289

 

 

$

(106,609

)

 

$

99,680

 

Deferred financing costs  

 

 

9,169

 

 

 

(3,260

)

 

 

5,909

 

Exclusive license agreements  

 

 

6,569

 

 

 

(4,636

)

 

 

1,933

 

Non-compete agreements  

 

 

1,774

 

 

 

(197

)

 

 

1,577

 

Total  

 

$

223,801

 

 

$

(114,702

)

 

$

109,099

 

 

 

 

 

 

 

 

 

 

 

 

 (8) Accrued Liabilities  

 

Accrued liabilities consisted of the following:  

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011

 

 

December 31, 2010

 

 

 

(In thousands)  

 

Accrued merchant fees  

 

$

17,491  

 

 

$

12,310  

 

Accrued armored fees  

 

 

8,030  

 

 

 

4,322  

 

Accrued compensation  

 

 

6,156  

 

 

 

7,038  

 

Accrued purchases  

 

 

4,311  

 

 

 

2,046  

 

Accrued cash rental and management fees  

 

 

4,082  

 

 

 

2,411  

 

Accrued merchant settlement amounts  

 

 

3,857  

 

 

 

4,583  

 

Accrued maintenance fees  

 

 

2,459  

 

 

 

949  

 

Accrued interest rate swap payments  

 

 

2,020  

 

 

 

2,199  

 

Accrued interest expense  

 

 

1,394  

 

 

 

5,740  

 

Accrued ATM telecommunications costs  

 

 

1,032  

 

 

 

1,402  

 

Accrued processing costs  

 

 

997  

 

 

 

764  

 

Other accrued expenses  

 

 

9,862  

 

 

 

6,779  

 

Total  

 

$

61,691  

 

 

$

50,543  

 

 

 

 

 

 

 

 

 

 (9) Long-Term Debt  

 

The Company's long-term debt consisted of the following:  

 

 

 

 

 

 

 

 

 

 

September 30, 2011

 

 

December 31, 2010

 

 

(In thousands)  

8.25% Senior subordinated notes due September 2018

 

$

200,000  

 

 

$

200,000  

Revolving credit facility, including swing-line credit facility (weighted-average combined rate of 2.6% and 3.1% as of September 30, 2011 and December 31, 2010)

 

 

156,300  

 

 

 

46,200  

Equipment financing notes

 

 

5,901  

 

 

 

8,633  

Total  

 

 

362,201  

 

 

 

254,833  

Less: current portion  

 

 

2,717  

 

 

 

3,076  

Total long-term debt, excluding current portion

 

$

359,484  

 

 

$

251,757  

 

 

 

 

 

 

 

 

11

 


 

Revolving Credit Facility   

As of September 30, 2011, the Company's revolving credit facility provided for $250.0 million in borrowings and letters of credit (subject to the covenants contained within the facility), had a termination date of July 2016, and contained a feature that allows the Company to expand the facility up to $325.0 million, subject to the availability of additional bank commitments by existing or new syndicate participants. The current borrowing capacity and termination date were modified on July 25, 2011, concurrent with the closing of the acquisition of the EDC ATM business. The amendment also modified the pricing for borrowings and undrawn commitments under the facility, both of which continue to be variable dependent upon the Company's total leverage ratio. Finally, the amendment changed certain other covenants in a manner that are generally more favorable to the Company.

 

This revolving credit facility includes a $15.0 million swing-line facility, a $60.0 million foreign currency sub-limit, and a $20.0 million letter of credit sub-limit. Borrowings under the facility bear interest at a variable rate, based upon the Company's total leverage ratio and the London Interbank Offered Rate ("LIBOR") or Alternative Base Rate (as defined in the agreement) at the Company's option. Additionally, the Company is required to pay a commitment fee on the unused portion of the revolving credit facility. Substantially all of the Company's assets, including the stock of its wholly-owned domestic subsidiaries and 66% of the stock of its foreign subsidiaries, are pledged to secure borrowings made under the revolving credit facility. Furthermore, each of the Company's domestic subsidiaries has guaranteed the Company's obligations under such facility. There are currently no restrictions on the ability of the Company's wholly-owned subsidiaries to declare and pay dividends directly to us.

 

The primary restrictive covenants within the facility include (i) limitations on the amount of senior debt and total debt that the Company can have outstanding at any given point in time and (ii) the maintenance of a set ratio of earnings to fixed charges, as computed quarterly on a trailing 12-month basis. Additionally, the Company is limited on the amount of restricted payments, including dividends, which it can make pursuant to the terms of the facility. These limitations are generally governed by a senior leverage ratio test and the existing fixed charge ratio covenant.

 

The failure to comply with the covenants will constitute an event of default (subject, in the case of certain covenants, to applicable notice and/or cure periods) under the agreement.Other events of default under the agreement include, among other things, (i) the failure to timely pay principal, interest, fees or other amounts due and owing; (ii) the inaccuracy of representations or warranties in any material respect; (iii) the occurrence of certain bankruptcy or insolvency events; (iv) loss of lien perfection or priority; and (v) the occurrence of a change in control.The occurrence and continuance of an event of default could result in, among other things, termination of the lenders' commitments and acceleration of all amounts outstanding.The Company's obligations under the credit agreement are guaranteed by certain of the Company's existing and future domestic subsidiaries, subject to certain limitations.In addition, the Company's obligations under the agreement, subject to certain exceptions, are secured on a first-priority basis by liens on substantially all of the tangible and intangible assets of the Company and the guarantors. As of September 30, 2011, the Company was in compliance with all applicable covenants and ratios under the facility.

 

As of September 30, 2011, the Company had $156.3 million of borrowings under the revolving credit facility and had a $4.3 million letter of credit posted under the facility to secure borrowings under the Company's United Kingdom subsidiary's overdraft facility (discussed below). This letter of credit, which may be drawn upon in the event the Company defaults under the overdraft facility, reduces the Company's borrowing capacity under its revolving credit facility. As of September 30, 2011, the Company's available borrowing capacity under the facility, as determined under the earnings before interest expense, income taxes, depreciation and accretion expense, and amortization expense ("EBITDA") and interest expense covenants contained in the credit agreement, totaled $89.4 million, and the Company was in compliance with all applicable covenants and ratios under the facility.

 

$200.0 Million 8.25% Senior Subordinated Notes Due 2018

 

The $200.0 million 8.25% senior subordinated notes due September 2018 (the "2018 Notes"), which are guaranteed by the Company's domestic subsidiaries, contain no maintenance covenants and only limited incurrence covenants, under which the Company has considerable flexibility. Interest under the 2018 Notes is paid semi-annually in arrears on March 1st and September 1st of each year. As of September 30, 2011, the Company was in compliance with all applicable covenants required under the 2018 Notes.

 

Other Facilities

 

Cardtronics Mexico equipment financing agreements. As of September 30, 2011, other long-term debt consisted of 10 separate equipment financing agreements entered into by Cardtronics Mexico. Each of these agreements, which are denominated in Mexican pesos, have an original term of five years and as of September 30, 2011, had an average fixed interest rate of 10.32%. Proceeds from these agreements were utilized for the purchase of additional ATMs to support the Company's Mexico operations. Pursuant to the terms of the equipment financing agreements, the Company has issued guarantees for 51.0% of the obligations under such agreements (consistent with its ownership percentage in Cardtronics Mexico.) As of September 30, 2011, the total amount of the guarantees was $40.5 million pesos (or approximately $3.0 million U.S.).

 

Bank Machine overdraft facility. Bank Machine, Ltd., the Company's wholly-owned subsidiary operating in the United Kingdom, currently has a £1.0 million overdraft facility in place. This facility, which bears interest at 1.0% over the Bank of England's base rate (0.5% as of September 30, 2011) and is secured by a letter of credit posted under the Company's corporate revolving credit facility, is utilized for general purposes for the Company's United Kingdom operations. As of September 30, 2011, no amount was outstanding under this facility.  

 

12

 


 
 

 

 (10) Asset Retirement Obligations  

 

Asset retirement obligations consist primarily of costs to deinstall the Company's ATMs and costs to restore the ATM sites to their original condition. In most cases, the Company is contractually required to perform this deinstallation and restoration work. For each group of ATMs, the Company has recognized the fair value of the asset retirement obligation as a liability on its balance sheet 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 five years, 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.  

 

The following table is a summary of the changes in the Company's asset retirement obligation liability for the nine month period ended September 30, 2011 (in thousands)  

 

 

 

 

 

Asset retirement obligation as of January 1, 2011

 

$

26,657

 

Additional obligations  

 

 

4,420

 

Additional obligations related to the EDC acquisition

 

 

1,902

 

Accretion expense  

 

 

1,660

 

Change in estimate  

 

 

(635

)

Payments   

 

 

(1,416

)

Foreign currency translation adjustments

 

 

(132

)

Asset retirement obligation as of September 30, 2011

 

$

32,456

 

 

 

 

 

  The change in estimate during the nine month period ended September 30, 2011 was the result of updating certain cost assumptions based on the actual deinstallation costs experienced by the Company in recent periods. In the United States, recent actual costs incurred were lower than the previously-estimated costs, and as a result, the Company determined that the liability should be reduced by approximately $2.0 million to account for the lower costs incurred to date and to reduce estimated future costs. In the United Kingdom, actual recent costs were higher than the previously-estimated costs, and as a result, the Company determined that the liability should be increased by approximately $1.3 million to account for higher expected costs in the future. See Note 13, Fair Value Measurements for additional disclosures on the Company's asset retirement obligations with respect to its fair value measurements.  

 

(11) Other Liabilities  

 

Other liabilities consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011

 

 

December 31, 2010

 

 

 

(In thousands)  

 

Current Portion of Other Long-Term Liabilities: