Cardtronics, plc.
CARDTRONICS INC (Form: 10-Q, Received: 07/31/2013 16:28:03)

 



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  June 30 , 2013  

 

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 o  

 

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 o  

 

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  þ

Accelerated filer  o

Non-accelerated filer  o  

Smaller reporting company  o  

 

(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 o No þ  

 

Common Stock, par value: $0.0001 per share.  Shares outstanding on July 2 9 , 201 3 :   44, 907 , 806

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

CARDTRONICS, INC.

 

TABLE OF CONTENTS

 

   

Page 

   

 

PART I.  FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

1

   

Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012

1

   

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012

2

 

Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2013 and 2012

3

   

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012

4

   

Notes to Consolidated Financial Statements

5

Cautionary Statement Regarding Forward-Looking Statements  

28

Item 2.

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

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

Item 4.

Controls and Procedures

49

   

   

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

50

Item 1A.

Risk Factors

50

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

50

Item 6.

Exhibits

50

   

Signatures

51

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2013

 

December 31, 2012

 

 

(U naudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

22,341 

 

$

13,861 

Accounts and notes receivable, net of allowance of $442 and $476 as of June 30, 2013 and December 31, 2012, respectively

 

50,094 

 

 

45,135 

Inventory

 

5,435 

 

 

4,389 

Restricted cash

 

4,247 

 

 

8,298 

Current portion of deferred tax asset, net

 

14,133 

 

 

13,086 

Prepaid expenses, deferred costs, and other current assets

 

19,471 

 

 

30,980 

Total current assets

 

115,721 

 

 

115,749 

Property and equipment, net

 

222,443 

 

 

236,238 

Intangible assets, net

 

105,838 

 

 

102,573 

Goodwill

 

301,512 

 

 

285,696 

Deferred tax asset, net

 

7,777 

 

 

26,468 

Prepaid expenses, deferred costs, and other assets

 

2,693 

 

 

2,168 

Total assets

$

755,984 

 

$

768,892 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term debt and notes payable

$

1,469 

 

$

1,467 

Current portion of other long-term liabilities

 

27,544 

 

 

24,386 

Accounts payable

 

22,272 

 

 

21,593 

Accrued liabilities

 

75,862 

 

 

80,112 

Current portion of deferred tax liability, net

 

1,110 

 

 

1,179 

Total current liabilities

 

128,257 

 

 

128,737 

Long-term liabilities:

 

 

 

 

 

Long-term debt

 

334,124 

 

 

353,352 

Asset retirement obligations

 

39,466 

 

 

44,696 

Deferred tax liability, net

 

172 

 

 

182 

Other long-term liabilities

 

49,312 

 

 

93,121 

Total liabilities

 

551,331 

 

 

620,088 

   

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

   

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, $0.0001 par value; 125,000,000 shares authorized; 50,996,896 and 50,569,875 shares issued as of June 30, 2013 and December 31, 2012, respectively; 44,908,113 and 44,641,224 shares outstanding as of June 30, 2013 and December 31, 2012, respectively

 

 

 

Additional paid-in capital

 

269,973 

 

 

252,956 

Accumulated other comprehensive loss, net

 

(86,371)

 

 

(105,085)

Retained earnings

 

82,618 

 

 

57,861 

Treasury stock; 6,088,783 and 5,928,651 shares at cost as of June 30, 2013 and December 31, 2012, respectively

 

(62,090)

 

 

(58,270)

Total parent stockholders’ equity

 

204,135 

 

 

147,467 

Noncontrolling interests

 

518 

 

 

1,337 

Total stockholders’ equity

 

204,653 

 

 

148,804 

Total liabilities and stockholders’ equity

$

755,984 

 

$

768,892 

 

 

 

 

 

 

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 June 30,

 

Six Months Ended June 30,

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

ATM operating revenues

$

203,599 

 

$

181,567 

 

$

396,959 

 

$

359,380 

ATM product sales and other revenues

 

4,385 

 

 

10,453 

 

 

8,763 

 

 

23,680 

Total revenues

 

207,984 

 

 

192,020 

 

 

405,722 

 

 

383,060 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

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

 

133,482 

 

 

123,621 

 

 

263,042 

 

 

244,248 

Cost of ATM product sales and other revenues

 

4,228 

 

 

9,479 

 

 

8,357 

 

 

21,260 

Total cost of revenues

 

137,710 

 

 

133,100 

 

 

271,399 

 

 

265,508 

Gross profit

 

70,274 

 

 

58,920 

 

 

134,323 

 

 

117,552 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

18,932 

 

 

16,589 

 

 

37,921 

 

 

32,664 

Acquisition-related expenses

 

1,184 

 

 

390 

 

 

4,006 

 

 

1,477 

Depreciation and accretion expense

 

15,881 

 

 

14,735 

 

 

32,166 

 

 

28,485 

Amortization expense

 

6,081 

 

 

5,412 

 

 

11,829 

 

 

10,887 

Loss on disposal of assets

 

157 

 

 

264 

 

 

360 

 

 

812 

Total operating expenses

 

42,235 

 

 

37,390 

 

 

86,282 

 

 

74,325 

Income from operations

 

28,039 

 

 

21,530 

 

 

48,041 

 

 

43,227 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

5,059 

 

 

5,332 

 

 

10,125 

 

 

10,697 

Amortization of deferred financing costs

 

231 

 

 

224 

 

 

460 

 

 

444 

Other (income) expense

 

(2,050)

 

 

26 

 

 

(2,471)

 

 

(51)

Total other expense

 

3,240 

 

 

5,582 

 

 

8,114 

 

 

11,090 

Income before income taxes

 

24,799 

 

 

15,948 

 

 

39,927 

 

 

32,137 

Income tax expense

 

10,034 

 

 

6,369 

 

 

16,014 

 

 

12,515 

Net income

 

14,765 

 

 

9,579 

 

 

23,913 

 

 

19,622 

Net (loss) income attributable to noncontrolling interests

 

(562)

 

 

(85)

 

 

(844)

 

 

129 

Net income attributable to controlling interests and available to common stockholders

$

15,327 

 

$

9,664 

 

$

24,757 

 

$

19,493 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share – basic

$

0.34 

 

$

0.22 

 

$

0.54 

 

$

0.44 

Net income per common share – diluted

$

0.33 

 

$

0.21 

 

$

0.54 

 

$

0.43 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

44,394,230 

 

 

43,268,541 

 

 

44,321,069 

 

 

43,163,377 

Weighted average shares outstanding – diluted

 

44,615,021 

 

 

43,730,200 

 

 

44,547,851 

 

 

43,648,954 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

2

 


 

 

 

 

CARDTRONICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

14,765 

 

$

9,579 

 

$

23,913 

 

$

19,622 

Unrealized gains (losses) on interest rate swap contracts, net of deferred income tax expense (benefit) of $10,545 and $(10,436) for the three months ended June 30, 2013 and 2012, respectively, and $13,981 and $(15,050) for the six months ended June 30, 2013 and 2012, respectively

 

17,548 

 

 

(16,873)

 

 

23,251 

 

 

(23,245)

Foreign currency translation adjustments

 

(497)

 

 

(1,592)

 

 

(4,537)

 

 

302 

Other comprehensive income (loss)

 

17,051 

 

 

(18,465)

 

 

18,714 

 

 

(22,943)

Total comprehensive income (loss)

 

31,816 

 

 

(8,886)

 

 

42,627 

 

 

(3,321)

Less: comprehensive (loss) income attributable to noncontrolling interests

 

(597)

 

 

(201)

 

 

(819)

 

 

151 

Comprehensive income (loss) attributable to controlling interests

$

32,413 

 

$

(8,685)

 

$

43,446 

 

$

(3,472)

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

3

 


 

 

 

 

CARDTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

   

 

2013

 

2012

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

23,913 

 

$

19,622 

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

 

 

 

 

 

 

Depreciation, accretion, and amortization expense

 

 

43,995 

 

 

39,372 

Amortization of deferred financing costs

 

 

460 

 

 

444 

Stock-based compensation expense

 

 

5,744 

 

 

6,008 

Deferred income taxes

 

 

3,584 

 

 

11,131 

Loss on disposal of assets

 

 

360 

 

 

812 

Unrealized gain and amortization of accumulated other comprehensive gains associated with derivative instruments no longer designated as hedging instruments

 

 

 

 

(378)

Other reserves and non-cash items

 

 

2,689 

 

 

1,101 

Changes in assets and liabilities:

 

 

 

 

 

 

Increase in accounts and note receivable, net

 

 

(3,538)

 

 

(7,593)

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

 

 

9,945 

 

 

(1,870)

Increase in inventory

 

 

(1,649)

 

 

(1,758)

(Increase) decrease in other assets

 

 

(1,327)

 

 

4,404 

Increase (decrease) in accounts payable

 

 

2,398 

 

 

(10,480)

Decrease in accrued liabilities

 

 

(1,532)

 

 

(1,093)

Decrease in other liabilities

 

 

(4,688)

 

 

(3,801)

Net cash provided by operating activities

 

 

80,354 

 

 

55,921 

   

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Additions to property and equipment

 

 

(26,422)

 

 

(51,245)

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

 

 

(3,433)

 

 

(3,971)

Acquisitions, net of cash acquired

 

 

(29,610)

 

 

(250)

Net cash used in investing activities

 

 

(59,465)

 

 

(55,466)

   

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from borrowings of long-term debt

 

 

85,600 

 

 

117,300 

Repayments of long-term debt and capital leases

 

 

(104,846)

 

 

(114,499)

Repayments of borrowings under bank overdraft facility, net

 

 

 

 

(195)

Payment of contingent consideration

 

 

(750)

 

 

Proceeds from exercises of stock options

 

 

459 

 

 

2,247 

Excess tax benefit from stock-based compensation expense

 

 

10,832 

 

 

Repurchase of capital stock

 

 

(3,821)

 

 

(3,759)

Net cash (used in) provided by financing activities

 

 

(12,526)

 

 

1,094 

   

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

117 

 

 

(81)

Net increase in cash and cash equivalents

 

 

8,480 

 

 

1,468 

   

 

 

 

 

 

 

Cash and cash equivalents as of beginning of period

 

 

13,861 

 

 

5,576 

Cash and cash equivalents as of end of period

 

$

22,341 

 

$

7,044 

   

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest, including interest on capital leases

 

$

10,132 

 

$

10,508 

Cash paid for income taxes

 

$

2,550 

 

$

2,900 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

4

 


 

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 s ervices kiosks. As of June 30, 2013 , the Company provided services to  approximately   72,200 devices across its portfolio, which included approximately 63,200 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 4,300 devices throughout the United Kingdom ("U.K."), approximately 2,700 devices throughout Mexico, and approximately 2,000 devices throughout Canada. Included in the number of devices in the U.S. are approximately 2,200 multi-function financial services kiosks 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 72,200 devices are approximately 13,600 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 and regionally -known retail merchants as well as smaller retailers and operators of facilities such as shopping malls and airports. In doing so, the Company provides its retail partners with a compelling automated financial services solution that helps attract and retain customers, and in turn, increases the likelihood that the devices placed at their facilities will be utilized.

 

In addition to its retail merchant relationships, the Company also partners with leading national financial institutions to brand selected ATMs and financial services kiosks within its network, including Citibank, N.A., JPMorgan Chase Bank, N.A., Sovereign Bank, N.A., SunTrust Banks, Inc., PNC Bank, N.A . , Frost Bank, The Bank of Nova Scotia (“Scotiabank”) in Canada , Mexico, and Puerto Rico , and Grupo Financiero Banorte, S.A. de C.V. in Mexico . As of June 30, 2013 ,   approximately   18,500 of the Company’s domestic devices and approximately 500 of the Company’s ATMs in Canada were under contract with financial institutions to place their logos on those machines, and to provide convenient surcharge-free access for their banking customers.

 

The Company also owns and operates the Allpoint network, the largest surcharge-free ATM network within the U . S . (based on the number of participating ATMs). The Allpoint network , which has more than 55,000 participating ATMs globally , provides surcharge-free ATM access to customers of participating financial institutions that lack a significant ATM network in exchange for either a fixed monthly fee per cardholder or a set fee per transaction that is paid by the financial institutions who are members of the network .   The Allpoint network includes a majority of the Company’s ATMs in the U.S., U.K., Puerto Rico and Mexico, approximately a   quarter of the Company’s ATMs in Canada, and over 5,000 locations in Australia through a partnership with a local ATM owner and operator in that market. Allpoint also works with financial institutions that manage stored-value debit card programs on behalf of corporate entities and governmental agencies, including general purpose, payroll and electronic benefits transfer (“EBT”) cards. Under these programs, the issuing financial institutions pay Allpoint a fee per issued stored-value card or per transaction in return for allowing the users of those cards surcharge-free access to Allpoint’s participating ATM network.

 

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, 2012  ( the " 2012 Form 10-K"), which includes a summary of the Company's significant accounting policies and other disclosures.

 

The financial statements as of June 30, 2013 and for the three and six   months ended June 30, 2013 and 2012 are unaudited. The Consolidated Balance Sheet as of December 31, 2012 was derived from the audited balance sheet filed in the 2012 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 six   months ended June 30, 2013 and 2012 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

 

5

 


 

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.

 

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

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

(In thousands)

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

 

$  

13,858 

 

$  

13,268 

 

$  

28,136 

 

$  

25,597 

Amortization expense  

 

 

6,081 

 

 

5,412 

 

 

11,829 

 

 

10,887 

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

 

$  

19,939 

 

$  

18,680 

 

$  

39,965 

 

 $

36,484 

 

 

(2) Acquisitions  

 

On   March 7, 2013 , the Company completed the acquisition of i-design group plc (“i-design ), a Scotland-based provider and developer of marketing and advertising software and services for ATM owners .   Additionally, on May 1, 2013 and June 3, 2013 , the Company acquired the majority of the assets of Aptus Group, LLC (“Aptus”) and Merrimak ATM Group, LLC (“Merrimak”) , respectively .  Both Aptus and Merrimak were providers of ATM services to fleet s of approximately 3,300 ATMs and 4,800 ATMs, respectively, consisting primarily of merchant-owned machines.

 

The i-design , Aptus, and Merrim ak   acquisitions, both on an individual basis and on a combined basis, did not have a material effect on the Company's consolidated results of operations during the three and six months ended June 30, 2013 . As of June 30, 2013 , the Company had not yet completed its analysis to assign the purchase consideration for th ese acquisition s as a result of not yet completing its assessments of the intangible asset valuations for the acquisitions . The Company expects to complete this work during the quarter ending September 30, 2013, and as a result of the completion of the work, the Company’s preliminary allocation of the purchase consideration to the net assets acquired may change.

 

(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

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2013

 

2012

 

2013

 

2012

 

 

(In thousands)

Cost of ATM operating revenues  

 

$  

207 

 

$  

320 

 

$  

412 

 

$  

523 

Selling, general, and administrative expenses  

 

 

2,372 

 

 

3,128 

 

 

5,332 

 

 

5,485 

Total stock-based compensation expense  

 

$  

2,579 

 

$  

3,448 

 

$  

5,744 

 

$  

6,008 

 

The de crease in stock-based compensation expense during the three and six month s ended June 30, 2013 compared to the prior year was due to the   full vesting of certain restricted stock awards ("RSAs") during 2012, as well as a reversal of expenses that were previously taken related to certain performance-based awards that were no longer probable of vesting. These expense reduction s were partially offset by

6

 


 

additional expense recognition from the additional grants made during the periods. All grants during the periods above were made under the Company's Amended and Restated 2007 Stock Incentive Plan (the "2007 Stock Incentive Plan").

  

Restricted Stock Awards .  The number of the Company's outstanding RSAs as of June 30, 2013 , and changes during the six month s ended June 30, 2013 , are presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Shares

 

Weighted Average Grant Date Fair Value

RSAs outstanding as of January 1, 2013

 

 

632,107 

 

$

16.36 

Granted  

 

 

95,401 

 

$

26.81 

Vested  

 

 

(216,954)

 

$

13.87 

Forfeited

 

 

(12,500)

 

$

25.87 

RSAs outstanding as of June 30, 2013

 

 

498,054 

 

$

19.19 

 

As of June 30, 2013 , the unrecognized compensation expense associated with all outstanding restricted share grants was approximately $ 5 . 6   million ,   which will be recognized on a straight-line basis over a remaining weighted-average vesting period of approximately 2. 2  years .

 

Restricted Stock Units.   In the first quarter of each year since 2011, the Company granted restricted stock units (“ RSUs ”) under its Long Term Incentive Plan ("LTIP "), which is an   annual equity award program under the 2007 Plan. The ultimate number of RSUs to be earned and outstanding are approved by the Compensation Committee of the Company's Board of Directors (the "Committee") on an annual basis , and are based on the Company's achievement of certain performance levels during the calendar year of its grant. The majority of these grants have both a performance-based and a service-based vesting schedule (“Performance - RSUs”) , and the Company recognizes the related compensation expense based on the estimated performance levels that management believes will ultimately be met. Starting with the grants made in 2013, a portion of the awards have only a service-based vesting schedule (“Time-RSUs”) , for which the associated expense is recognized ratably over four years .   Performance-RSUs and Time- RSUs   are convertible into the Company’s common stock after the passage of the vesting periods , which are 24 ,   36 , and 48 months from January 31 of the grant year , at the rate of 50 %, 25 %, and 25 %, respectively . Performance- RSUs will be earned only if the Company achie ves certain performance levels . Although the RSUs are not considered to be earned and outstanding until at least the minimum performance metrics 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.

 

The number of the Company's non-vested RSUs as of June 30, 2013 , and changes during the six months ended June 30, 2013 , are presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Units

 

Weighted Average Grant Date Fair Value

Non-vested RSUs as of January 1, 2013

 

 

749,948 

 

$

20.01 

Granted  

 

 

119,744 

 

$

27.10 

Vested  

 

 

(261,503)

 

$

17.00 

Forfeited

 

 

(10,567)

 

$

22.67 

Non-vested RSUs as of June 30, 2013

 

 

597,622 

 

$

22.70 

 

The above table only includes earned RSUs; therefore, the Performance-RSUs granted in 2013 but not yet earned are not included, but the Time-RSUs are included as granted.

 

As of June 30, 2013 , the unrecognized compensation expense associated with earned RSUs was approximately $ 6. 6 million, which will be recognized using a graded vesting schedule for Performance-RSUs and a straight-line vesting schedule for Time-RSUs, over a remaining weighted-average vesting period of approximately 2. 2  years .  

 

Options.   The number of the Company's outstanding stock options as of June 30, 2013 , and changes during the six months ended June 30, 2013 , are presented below:  

 

 

7

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Shares

 

Weighted Average Exercise Price

Options outstanding as of January 1, 2013

 

 

552,799 

 

$  

9.68 

Exercised  

 

 

(70,117)

 

$  

6.55 

Forfeited

 

 

(1,875)

 

$

11.05 

Options outstanding as of June 30, 2013

 

 

480,807 

 

$  

10.13 

 

 

 

 

 

 

 

Options vested and exercisable as of June 30, 2013

 

 

456,307 

 

$  

10.26 

 

As of June 30, 2013 , the unrecognized compensation expense associated with outstanding options was approximately $ 26 ,000 ,   which will be recognized on a straight-line basis over a remaining weighted-average vesting period of approximately 0. 5  yea rs .  

 

(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 six month s ended June 30, 2013 and 2012 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 six month s ended June 30, 2013 and 2012 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 June 30, 2013

 

Six Months Ended June 30, 2013

 

 

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  

 

$  

15,327 

 

 

 

 

 

 

 

$  

24,757 

 

 

 

 

 

 

Less: U ndistributed earnings allocated to unvested restricted shares  

 

 

(448)

 

 

 

 

 

 

 

 

(666)

 

 

 

 

 

 

Net income available to common stockholders  

 

$  

14,879 

 

 

44,394,230 

 

$  

0.34 

 

$  

24,091 

 

 

44,321,069 

 

$  

0.54 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Undistributed earnings allocated to restricted shares  

 

$  

448 

 

 

 

 

 

 

 

$  

666 

 

 

 

 

 

 

Stock options added to the denominator under the treasury stock method  

 

 

 

 

 

220,791 

 

 

 

 

 

 

 

 

226,782 

 

 

 

Less: Undistributed earnings reallocated to restricted shares  

 

 

(445)

 

 

 

 

 

 

 

 

(662)

 

 

 

 

 

 

Net income available to common stockholders and assumed conversions  

 

$  

14,882 

 

 

44,615,021 

 

$  

0.33 

 

$  

24,095 

 

 

44,547,851 

 

$  

0.54 

8

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2012

 

Six Months Ended June 30, 2012

 

 

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  

 

$  

9,664 

 

 

 

 

 

 

 

$  

19,493 

 

 

 

 

 

 

Less: Undistributed earnings allocated to unvested restricted shares  

 

 

(359)

 

 

 

 

 

 

 

 

(696)

 

 

 

 

 

 

Net income available to common stockholders  

 

$  

9,305 

 

 

43,268,541 

 

$  

0.22 

 

$  

18,797 

 

 

43,163,377 

 

$  

0.44 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Undistributed earnings allocated to restricted shares  

 

$  

359 

 

 

 

 

 

 

 

$  

696 

 

 

 

 

 

 

Stock options added to the denominator under the treasury stock method  

 

 

 

 

 

461,659 

 

 

 

 

 

 

 

 

485,577 

 

 

 

Less: Undistributed earnings reallocated to restricted shares  

 

 

(356)

 

 

 

 

 

 

 

 

(689)

 

 

 

 

 

 

Net income available to common stockholders and assumed conversions  

 

$  

9,308 

 

 

43,730,200 

 

$  

0.21 

 

$  

18,804 

 

 

43,648,954 

 

$  

0.43 

 

The computation of diluted earnings per share excluded potentially dilutive common shares related to restricted stock (including both RSAs and RSUs )   of  4 54 , 918 and  466 , 152 sh ares for the three and six month s ended June 30, 2013 ,   respectively, and 688 , 414 and 683 , 639 shares for the three and six month s ended June 30, 2012 , respectively, because the effect of including these shares in the computation would have been anti-dilutive.

 

(5) Accumulated Other Comprehensive Loss , Net

 

Accumulated other comprehensive loss, net is displayed as a separate component of S tockholders' equity in the accompanying Consolidated Balance Sheets . The following table s present the changes in the balances of each component of accumulated other comprehensive loss, net for the three and six months ended June 30, 2013 :  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

Unrealized (losses) gains on interest rate swap contracts

 

 

Total

 

 

(In thousands)

Total accumulated other comprehensive loss, net as of April 1, 2013

 

$  

(28,674)

 

$  

(74,748)

(1)

 

$  

(103,422)

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income before reclassification

 

 

(497)

 

 

11,119 

(2)

 

 

10,622 

Amounts reclassified from accumulated other comprehensive loss, net

 

 

 

 

6,429 

(2)

 

 

6,429 

Net current period other comprehensive (loss) income

 

 

(497)

 

 

17,548 

 

 

 

17,051 

Total accumulated other comprehensive loss, net as of June 30, 2013

 

$  

(29,171)

 

$  

(57,200)

(1)

 

$  

(86,371)

___________

 

 

 

 

 

 

 

(1) Net of deferred income tax benefit of $13,431 and $23,977 as of June 30, 2013 and April 1, 2013, respectively.

(2) Net of deferred income tax expense of $6,682 and $3,863 for Other comprehensive (loss) income before reclassification and Amounts reclassified from accumulated other comprehensive loss, net, respectively. See Note 12 .

 

 

9

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

Unrealized (losses) gains on interest rate swap contracts

 

 

Total

 

 

(In thousands)

Total accumulated other comprehensive loss, net as of January 1, 201 3

 

$  

(24,634)

 

$  

(80,451)

(1)

 

$  

(105,085)

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income before reclassification

 

 

(4,537)

 

 

10,492 

(2)

 

 

5,955 

Amounts reclassified from accumulated other comprehensive loss, net

 

 

 

 

12,759 

(2)

 

 

12,759 

Net current period other comprehensive (loss) income

 

 

(4,537)

 

 

23,251 

 

 

 

18,714 

Total accumulated other comprehensive loss, net as of June 30, 2013

 

$  

(29,171)

 

$  

(57,200)

(1)

 

$  

(86,371)

___________

 

 

 

 

 

 

 

(1) Net of deferred income tax benefit of $13,431 and $27,412 as of June 30, 2013 and December 31, 2012, respectively.

(2) Net of deferred income tax expense of $6,309 and $7,672 for Other comprehensive (loss) income before reclassification and Amounts reclassified from accumulated other comprehensive loss, net, respectively. See Note 12.

 

The Company records unrealized gains and losses related to its 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 foreign 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.

 

(6) Prepaid Expenses and Other Assets

 

As of December 31, 2012, the Company had $ 13.4 million recorded for an  insurance recovery receivable related to a 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 former third-party armored service providers in the Northeast U.S.   The Company collected this entire amount from its insurer in January 2013 .

 

(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 June 30, 2013 , as well as the changes in the net carrying amounts for the six month s ended June 30, 2013 , by segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

U.S.

 

U.K.

 

Other International

 

Total

 

 

(In thousands)  

Balance as of January 1, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

Gross balance  

 

$  

268,454 

 

$  

64,142 

 

$  

3,103 

 

$  

335,699 

Accumulated impairment loss  

 

 

 

 

(50,003)

 

 

 

 

(50,003)

 

 

$  

268,454 

 

$  

14,139 

 

$  

3,103 

 

$  

285,696 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

8,563 

 

 

7,996 

 

 

 —

 

 

16,559 

Purchase price adjustments

 

 

 —

 

 

 —

 

 

160 

 

 

160 

Foreign currency translation adjustments  

 

 

 —

 

 

(768)

 

 

(135)

 

 

(903)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of June 30, 2013:

 

 

 

 

 

 

 

 

 

 

 

 

Gross balance  

 

$  

277,017 

 

$  

71,370 

 

$  

3,128 

 

$  

351,515 

Accumulated impairment loss  

 

 

 

 

(50,003)

 

 

 

 

(50,003)

 

 

$  

277,017 

 

$  

21,367 

 

$  

3,128 

 

$  

301,512 

___________

 

 

 

 

 

 

 

 

 

 

 

 

(1) The Other International segment is currently comprised of the Company’s operations in Mexico and Canada.  

 

 

10

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade Name

 

 

U.S.

 

U.K.

 

Total

 

 

(In thousands)

Balance as of January 1, 2013

 

$  

200 

 

$  

3,231 

 

$  

3,431 

Acquisitions

 

 

 

 

453 

 

 

453 

Foreign currency translation adjustments  

 

 

 

 

(186)

 

 

(186)

Balance as of June 30, 2013

 

$  

200 

 

$  

3,498 

 

$  

3,698 

 

Intangible Assets with Definite Lives  

 

The following is a summary of the Com pany's intangible assets that we re subject to amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2013

 

December 31, 2012

 

 

Gross   Carrying   Amount

 

Accumulated   Amortization

 

 Net   Carrying Amount

 

Gross   Carrying   Amount

 

Accumulated   Amortization

 

 Net   Carrying Amount

 

 

(In thousands)

 

(In thousands)

Customer and branding contracts/relationships  

 

$  

221,420 

 

$  

(135,713)

 

$  

85,707 

 

$  

212,509 

 

$  

(125,920)

 

$  

86,589 

Deferred financing costs  

 

 

9,169 

 

 

(4,834)

 

 

4,335 

 

 

9,169 

 

 

(4,373)

 

 

4,796 

Exclusive license agreements  

 

 

20,525 

 

 

(13,334)

 

 

7,191 

 

 

18,724 

 

 

(12,543)

 

 

6,181 

Non-compete agreements  

 

 

3,626 

 

 

(1,786)

 

 

1,840 

 

 

2,822 

 

 

(1,246)

 

 

1,576 

Acquired technology

 

 

3,346 

 

 

(279)

 

 

3,067 

 

 

 

 

 

 

Total  

 

$  

258,086 

 

$  

(155,946)

 

$  

102,140 

 

$

243,224 

 

$

(144,082)

 

$

99,142 

 

 

 

(8) Accrued Liabilities  

 

Accrued liabilities consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2013

 

December 31, 2012

 

 

(In thousands)

Accrued merchant fees  

 

$  

25