Cardtronics, plc.
Cardtronics plc (Form: 10-Q, Received: 05/03/2017 16:43:15)

Table of Contents

 

UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION  

Washington, D.C. 20549  

 

FORM 10-Q  

 

(Mark One)

 

 

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

 

 

 

For the quarterly period ended March 31, 2017  

 

or  

 

 

☐ 

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

 

 

 

For the transition period from     to

 

Commission File Number: 001-37820  

 


 

Cardtronics plc  

(Exact name of registrant as specified in its charter)

 

 

 

England and Wales  

98-1304627

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

3250 Briarpark Drive, Suite 400

77042

Houston, Texas  

(Zip Code)

(Address of principal executive offices)

 

 

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

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ 

 

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

 

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

 

 

 

 

Large accelerated filer                 

 

Accelerated filer                       

Non-accelerated filer                   

(Do not check if a smaller reporting company)

Smaller reporting company      

Emerging growth company         

 

 

 

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

 

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

 

Shares outstanding as of May 1, 2017: 45,637,418 Ordinary shares, nominal value $0.01 per share.

 

 

 

 


 

Table of Contents

 

CARDTRONICS PLC

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION  

 

 

Item 1.  

Financial Statements

 

3

 

Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016

 

3

 

Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2017 and 2016

 

4

 

Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2017 and 2016

 

5

 

Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016  

 

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

 

Cautionary Statement Regarding Forward-Looking Statements

 

40

Item 2.  

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

 

42

Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

 

64

Item 4.  

Controls and Procedures

 

67

 

 

 

 

PART II. OTHER INFORMATION  

 

 

Item 1.  

Legal Proceedings

 

69

Item 1A.  

Risk Factors

 

69

Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

 

69

Item 3.  

Default Upon Senior Securities

 

69

Item 4.  

Mine Safety Disclosures

 

69

Item 5.  

Other Information

 

69

Item 6.  

Exhibits

 

69

 

Signatures

 

70

 

 

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

2


 

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

 

 

 

 

 

 

 

 

 

    

March 31, 2017

    

December 31, 2016

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

40,245

 

$

73,534

Accounts and notes receivable, net of allowance for doubtful accounts of $1,980 and $1,931 as of March 31, 2017 and December 31, 2016, respectively

 

 

99,113

 

 

84,156

Inventory, net

 

 

13,323

 

 

12,527

Restricted cash

 

 

46,977

 

 

32,213

Prepaid expenses, deferred costs, and other current assets

 

 

73,364

 

 

67,107

Total current assets

 

 

273,022

 

 

269,537

Property and equipment, net of accumulated depreciation of $421,268 and $397,972 as of March 31, 2017 and December 31, 2016, respectively

 

 

480,959

 

 

392,735

Intangible assets, net

 

 

297,926

 

 

121,230

Goodwill

 

 

883,221

 

 

533,075

Deferred tax asset, net

 

 

8,916

 

 

13,004

Prepaid expenses, deferred costs, and other noncurrent assets

 

 

38,824

 

 

35,115

Total assets

 

$

1,982,868

 

$

1,364,696

   

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of other long-term liabilities

 

$

27,283

 

$

28,237

Accounts payable

 

 

43,090

 

 

44,965

Accrued liabilities

 

 

285,818

 

 

240,618

Total current liabilities

 

 

356,191

 

 

313,820

Long-term liabilities:

 

 

 

 

 

 

Long-term debt

 

 

996,172

 

 

502,539

Asset retirement obligations

 

 

53,263

 

 

45,086

Deferred tax liability, net

 

 

52,100

 

 

27,625

Other long-term liabilities

 

 

65,874

 

 

18,691

Total liabilities

 

 

1,523,600

 

 

907,761

   

 

 

 

 

 

 

Commitments and contingencies (See Note 13 )

 

 

 

 

 

 

   

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Ordinary shares, $0.01 nominal value; 45,625,774 and 45,326,430 issued and outstanding as of March 31, 2017 and December 31, 2016, respectively

 

 

456

 

 

453

Additional paid-in capital

 

 

305,614

 

 

311,041

Accumulated other comprehensive loss, net

 

 

(98,484)

 

 

(107,135)

Retained earnings

 

 

251,755

 

 

252,656

Total parent shareholders’ equity

 

 

459,341

 

 

457,015

Noncontrolling interests

 

 

(73)

 

 

(80)

Total shareholders’ equity

 

 

459,268

 

 

456,935

Total liabilities and shareholders’ equity

 

$

1,982,868

 

$

1,364,696

 

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

3


 

Table of Contents

CARDTRONICS PLC

CONSOLIDATED STATEMENTS OF OPERATIONS  

(In thousands, excluding share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

 

2017

    

2016

Revenues:

 

 

 

 

 

 

ATM operating revenues

 

$

341,788

 

$

292,088

ATM product sales and other revenues

 

 

15,784

 

 

11,159

Total revenues

 

 

357,572

 

 

303,247

Cost of revenues:

 

 

 

 

 

 

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

 

 

231,927

 

 

185,940

Cost of ATM product sales and other revenues

 

 

14,635

 

 

9,933

Total cost of revenues

 

 

246,562

 

 

195,873

Gross profit

 

 

111,010

 

 

107,374

Operating expenses:

 

 

 

 

 

 

Selling, general, and administrative expenses

 

 

41,949

 

 

37,399

Redomicile-related expenses

 

 

760

 

 

6,036

Restructuring expenses

 

 

8,243

 

 

 —

Acquisition and divestiture-related expenses

 

 

8,456

 

 

1,584

Depreciation and accretion expense

 

 

29,121

 

 

22,677

Amortization of intangible assets

 

 

15,180

 

 

9,263

Loss on disposal and impairment of assets

 

 

3,194

 

 

382

Total operating expenses

 

 

106,903

 

 

77,341

Income from operations

 

 

4,107

 

 

30,033

Other expense:

 

 

 

 

 

 

Interest expense, net

 

 

6,557

 

 

4,492

Amortization of deferred financing costs and note discount

 

 

2,976

 

 

2,782

Other income

 

 

(1,580)

 

 

(555)

Total other expense

 

 

7,953

 

 

6,719

(Loss) income before income taxes

 

 

(3,846)

 

 

23,314

Income tax (benefit) expense

 

 

(2,952)

 

 

7,955

Net (loss) income

 

 

(894)

 

 

15,359

Net income (loss) attributable to noncontrolling interests

 

 

 7

 

 

(25)

Net (loss) income attributable to controlling interests and available to common shareholders

 

$

(901)

 

$

15,384

 

 

 

 

 

 

 

Net (loss) income per common share – basic

 

$

(0.02)

 

$

0.34

Net (loss) income per common share – diluted

 

$

(0.02)

 

$

0.34

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

45,490,461

 

 

45,073,654

Weighted average shares outstanding – diluted

 

 

45,490,461

 

 

45,703,488

 

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

 

4


 

Table of Contents

CARDTRONICS PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2017

    

2016

Net (loss) income

 

$

(894)

 

$

15,359

Unrealized gain (loss) on interest rate swap contracts, net of deferred income tax expense (benefit) of $1,360 and $(5,890) for the three months ended March 31, 2017 and 2016, respectively

 

 

1,405

 

 

(10,686)

Foreign currency translation adjustments, net of deferred income tax (benefit) of $(1,383) and $(825) for the three months ended March 31, 2017 and 2016, respectively

 

 

7,246

 

 

(5,271)

Other comprehensive income (loss)

 

 

8,651

 

 

(15,957)

Total comprehensive income (loss)

 

 

7,757

 

 

(598)

Less: comprehensive income attributable to noncontrolling interests

 

 

 6

 

 

95

Comprehensive income (loss) attributable to controlling interests

 

$

7,751

 

$

(693)

 

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

 

5


 

Table of Contents

CARDTRONICS PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS  

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

   

    

2017

    

2016

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(894)

 

$

15,359

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation, accretion, and amortization of intangible assets

 

 

44,301

 

 

31,940

Amortization of deferred financing costs and note discount

 

 

2,976

 

 

2,782

Share-based compensation expense

 

 

2,197

 

 

3,168

Deferred income taxes

 

 

(4,060)

 

 

3,076

Loss on disposal and impairment of assets

 

 

3,194

 

 

382

Other reserves and non-cash items

 

 

(1,198)

 

 

(768)

Changes in assets and liabilities:

 

 

 

 

 

 

Decrease (increase) in accounts and notes receivable, net

 

 

215

 

 

(2,014)

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

 

 

(2,726)

 

 

(2,103)

(Increase) decrease in inventory, net

 

 

(1,037)

 

 

1,222

(Increase) decrease in other assets

 

 

(14,894)

 

 

1,820

Decrease in accounts payable

 

 

(24,206)

 

 

(4,573)

Increase (decrease) in accrued liabilities

 

 

9,906

 

 

(3,830)

Decrease in other liabilities

 

 

(3,325)

 

 

(1,807)

Net cash provided by operating activities

 

 

10,449

 

 

44,654

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Additions to property and equipment

 

 

(38,561)

 

 

(16,451)

Acquisitions, net of cash acquired

 

 

(487,077)

 

 

(2,743)

Proceeds from sale of assets and businesses

 

 

 —

 

 

7,438

Net cash used in investing activities

 

 

(525,638)

 

 

(11,756)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from borrowings under revolving credit facility

 

 

624,199

 

 

56,494

Repayments of borrowings under revolving credit facility

 

 

(133,399)

 

 

(86,418)

Tax payments related to share-based compensation

 

 

(7,602)

 

 

 —

Proceeds from exercises of stock options

 

 

 3

 

 

133

Additional tax (expense) related to share-based compensation

 

 

 —

 

 

(400)

Repurchase of common shares

 

 

 —

 

 

(3,850)

Net cash provided by (used in) financing activities

 

 

483,201

 

 

(34,041)

   

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(1,301)

 

 

(105)

Net decrease in cash and cash equivalents

 

 

(33,289)

 

 

(1,248)

   

 

 

 

 

 

 

Cash and cash equivalents as of beginning of period

 

 

73,534

 

 

26,297

Cash and cash equivalents as of end of period

 

$

40,245

 

$

25,049

   

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

8,277

 

$

6,904

Cash paid for income taxes

 

$

299

 

$

1,133

 

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

6


 

Table of Contents

CARDTRONICS PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

(1) General and Basis of Presentation  

 

(a) General  

 

Cardtronics plc, together with its wholly and majority-owned subsidiaries (collectively, the “Company”), provides convenient automated consumer financial services through its network of automated teller machines and multi-function financial services kiosks (collectively referred to as “ATMs”). As of March 31, 2017, the Company provided services to over 233,000 ATMs across its portfolio, which included approximately 183,000 ATMs located in all 50 states of the United States (the “U.S.”) (including the U.S. territory of Puerto Rico), approximately 22,000 ATMs throughout the United Kingdom (“U.K.”) and Ireland, approximately 12,400 ATMs throughout Canada, approximately 10,800 ATMs throughout Australia and New Zealand, approximately 2,300 ATMs in South Africa, approximately 1,500 ATMs throughout Germany, Poland, and Spain, and approximately 1,000 ATMs throughout Mexico. In the U.S., in addition to providing traditional ATM functions such as cash dispensing and bank account balance inquiries, certain of the Company’s ATMs perform other automated consumer financial services, including remote deposit capture (which is deposit-taking at ATMs using electronic imaging). The total count of over 233,000 ATMs also includes ATMs for which the Company provides processing only services and various forms of managed services solutions, which may include transaction processing, monitoring, maintenance, cash management, communications, and customer service.

 

Through its network, the Company provides ATM management and ATM equipment-related services (typically under multi-year contracts) to large retail merchants of varying sizes, as well as smaller retailers and operators of facilities such as shopping malls, airports, and train stations. In doing so, the Company provides its retail partners with a compelling automated financial services solution that helps attract and retain customers, and in turn, increases the likelihood that the ATMs placed at their facilities will be utilized.

 

In addition to its retail merchant relationships, the Company also partners with leading financial institutions to brand selected ATMs within its network, including BBVA Compass Bancshares, Inc. (“BBVA”), Citibank, N.A. (“Citibank”), Citizens Financial Group, Inc. (“Citizens”), Cullen/Frost Bankers, Inc. (“Cullen/Frost”), Discover Bank (“Discover”), JPMorgan Chase & Co (“Chase”), PNC Bank, N.A. (“PNC Bank”), Santander Bank, N.A. (“Santander”), and TD Bank, N.A. (“TD Bank”) in the U.S., The Bank of Nova Scotia (“Scotiabank”) and Santander in Puerto Rico, and Scotiabank, TD Bank, and Canadian Imperial Bank Commerce (“CIBC”) in Canada. In Mexico, the Company operates Cardtronics Mexico, S.A. de C.V. (“Cardtronics Mexico”) and partners with Scotiabank to place their brands on its ATMs in exchange for certain services provided by them. As of March 31, 2017, over 20,000 of the Company’s ATMs were under contract with approximately 500 fin ancial institutions to place their logos on the ATMs, and to provide convenient surcharge-free access for their banking customers.  

 

The Company owns and operates the Allpoint network (“Allpoint”), the largest surcharge-free ATM network (based on the number of participating ATMs). Allpoint, which has approximately 55,000 participating ATMs, provides surcharge-free ATM access to over 1,300 participating banks, credit unions, and stored-value debit card issuers. For participants, Allpoint provides scale, density, and convenience of free ATMs that surpasses the largest banks in the U.S. In exchange, Allpoint earns either a fixed monthly fee per cardholder or a fixed fee per transaction that is paid by the participants . The Allpoint network includes a majority of the Company’s ATMs in the U.S. and a portion of the Company-owned ATMs in the U.K., Canada, Puerto Rico, and Mexico. Allpoint also works with financial institutions that manage stored-value debit card programs on behalf of corporate entities and governmental agencies, including general purpose, payroll and electronic benefits transfer (“EBT”) cards. Under these programs, the issuing financial institutions pay Allpoint a fee per issued stored-value debit card or per transaction in return for allowing the users of those cards surcharge-free access to Allpoint’s participating ATM network.

 

In Canada, through the Company’s acquisition of DirectCash Payments Inc. (“DCPayments”), the Company also provides processing services for issuers of debit cards. Also, the Company owns and operates electronic funds transfer (“EFT”) transaction processing platforms that provide transaction processing services to its network of ATMs, as well as other ATMs under managed services arrangements. Additionally, through the acquisition of Columbus Data Services,

7


 

Table of Contents

L.L.C. in 2015, the Company provides leading-edge ATM processing solutions to ATM sales and service organizations and financial institutions.

 

(b) Basis of Presentation

 

This Quarterly Report on Form 10-Q (this “Form 10-Q”) has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial information. Because this is an interim period filing presented using a condensed format, it does not include all of the disclosures required by accounting principles generally accepted in the U.S. (“U.S. GAAP”), although the Company believes that the disclosures are adequate to make the information not misleading. You should read this Form 10-Q along with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”), which includes a summary of the Company’s significant accounting policies and other disclosures.

 

The consolidated financial statements as of March 31, 2017 and for the three months ended March 31, 2017 and 2016 are unaudited. The Consolidated Balance Sheet as of December 31, 2016 was derived from the audited balance sheet filed in the 2016 Form 10-K. The Company has adopted the provisions of the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-09, Improvements to Employee Stock-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company has utilized the prospective transition method in adopting this new standard and beginning January 1, 2017, the Company recognized all excess tax charges or benefits as income tax expense or benefit in the accompanying Consolidated Statements of Operations and in the accompanying Consolidated Statements of Cash Flows as operating activities. The Company also adopted ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”), for additional information, see (f) Inventory, net below.

 

In management’s opinion, all normal recurring adjustments necessary for a fair presentation of the Company’s interim and prior period results have been made. The results of operations for the three months ended March 31, 2017 and 2016 are not necessarily indicative of results of operations that may be expected for any other interim period or for the full fiscal year.

 

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

 

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

 

(c) Cost of ATM Operating Revenues and Gross Profit Presentation  

 

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

 

8


 

Table of Contents

The following table reflects the amounts excluded from the Cost of ATM operating revenues and Gross profit line items for the periods presented:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2017

    

2016

 

 

(In thousands)

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

 

$

21,984

 

$

18,123

Amortization of intangible assets

 

 

15,180

 

 

9,263

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

 

$

37,164

 

$

27,386

 

(d) Redomicile to the U.K.  

 

On July 1, 2016, the Cardtronics group of companies changed the location of incorporation of the parent company from Delaware to the U.K. Cardtronics plc, a public limited company organized under English law (“Cardtronics plc”), became the new publicly traded corporate parent of the Cardtronics group of companies following the completion of the merger between Cardtronics, Inc., a Delaware corporation (“Cardtronics Delaware”), and one of its subsidiaries (the “Merger”). The Merger was completed pursuant to the Agreement and Plan of Merger, dated April 27, 2016, the adoption of which was approved by Cardtronics Delaware’s Shareholders on June 28, 2016 (collectively, the “Redomicile Transaction”). Pursuant to the Redomicile Transaction, each issued and outstanding common share of Cardtronics Delaware held immediately prior to the Merger was effectively converted into one Class A Ordinary Share, nominal value $0.01 per share, of Cardtronics plc (collectively “common shares”). Upon completion, the common shares were listed and began trading on The NASDAQ Stock Market LLC under the symbol “CATM,” the same symbol under which common shares of Cardtronics Delaware were formerly listed and traded.

 

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

 

(e) Restructuring Expenses

 

During the three months ended March 31, 2017, the Company initiated a global corporate reorganization and cost reduction initiative (the “Restructuring Plan”), intended to improve its cost structure and operating efficiency. The Restructuring Plan includes workforce reductions, facilities closures, and other cost reduction measures.

 

During the three months ended March 31, 2017, the Company incurred $8.2 million of pre-tax expenses related to the Restructuring Plan, including employee termination benefits of $8.0 million and lease termination costs of $0.2 million. These expenses have been reflected in the Restructuring expenses line item in the accompanying Consolidated Statements of Operations. During the quarter, the Company also identified certain assets that will likely be abandoned or are no longer capable of recovering their carrying values, and as a result, the Company recognized $3.2 million in asset impairment charges included in the Loss on disposal and impairment of assets line item in the accompanying Consolidated Statements of Operations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2017

 

    

North America

    

Europe & Africa

    

DCPayments

    

Corporate & Other

    

Total

 

 

(In thousands)

Restructuring expenses

 

$

3,048

 

$

788

 

$

660

 

$

3,747

 

$

8,243

 

9


 

Table of Contents

Approximately $7.2 million of the employee termination benefits and lease termination costs recognized in the three months ended March 31, 2017, were unpaid at the end of the period and are presented within the Accrued liabilities, Other long-term liabilities, and Current portion of other long-term liabilities line items in the accompanying Consolidated Balance Sheets. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2017

 

    

North America

    

Europe & Africa

    

DCPayments

    

Corporate & Other

    

Total

 

 

(In thousands)

Current portion of other long-term liabilities

 

$

55

 

$

 —

 

$

 —

 

$

66

 

$

121

Accrued liabilities

 

 

 —

 

 

798

 

 

 —

 

 

4,824

 

 

5,622

Other long-term liabilities

 

 

67

 

 

 —

 

 

 —

 

 

1,417

 

 

1,484

Total restructuring liabilities

 

$

122

 

$

798

 

$

 —

 

$

6,307

 

$

7,227

 

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

 

 

 

 

 

 

 

(In thousands)

Restructuring liabilities as of January 1, 2017

    

$

 —

Restructuring expenses

 

 

8,243

Payments

 

 

1,016

Restructuring liabilities as of March 31, 2017

 

$

7,227

 

(f) Inventory, net

 

The Company has adopted the provisions of ASU 2015-11, which requires entities to measure their inventory at the lower of cost and net realizable value. The adoption of ASU 2015-11 did not have an impact on the Company’s consolidated financial statements. The Company’s inventory is determined using the average cost method.

 

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

 

 

 

 

 

 

 

 

 

    

March 31, 2017

 

December 31, 2016

 

 

(In thousands)

ATMs

 

$

3,027

 

$

1,915

ATM spare parts and supplies

 

 

12,633

 

 

12,556

Total inventory

 

 

15,660

 

 

14,471

Less: Inventory reserves

 

 

(2,337)

 

 

(1,944)

Inventory, net

 

$

13,323

 

$

12,527

 

(g) Restricted Cash

Restricted cash consists of amounts collected on behalf of, but not yet remitted to, certain of the Company’s merchant customers or third-party service providers. The amounts include deposits held by the Company for transactions processed by its customers, as well as surcharge and interchange fees earned by the Company’s customers on transactions processed. These balances are classified as Restricted cash in the Current assets or Noncurrent assets line item in the accompanying Consolidated Balance Sheets based on when the Company expects this cash to be paid.   The Company held $47.0 million and $32.2 million of Restricted cash in the Current assets line item in the accompanying Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016, respectively . These assets are offset by accrued liability balances in the Current liability line item in the accompanying Consolidated Balance Sheets.

 

 

 

 

10


 

Table of Contents

(2) Acquisitions

 

DirectCash Payments Inc. Acquisition

 

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

 

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

 

The results of DCPayments operations have been included in the accompanying Consolidated Statements of Operations subsequent to the January 6, 2017 acquisition date. DCPayments contributed a $(0.2) million loss from operations in the three months ended March 31, 2017, including approximately $1.2 million in acquisition-related expenses.

 

The DCPayments acquisition was accounted for as a business combination using the purchase method of accounting under the provisions of ASC Topic 805, Business Combinations (“ASC 805”), with Cardtronics as the acquirer of DCPayments. In accordance with ASC 805, all assets acquired and liabilities assumed have been recorded at their estimated fair value as of the acquisition date and any excess of the purchase consideration over the fair value of the identifiable assets acquired and liabilities assumed has been recognized as goodwill. This preliminary fair value purchase allocation process resulted in a preliminary goodwill allocation of approximately $294.7 million, all of which has been assigned to the Company’s DCPayments reporting segment, which includes operations from the DCPayments operations in Australia, New Zealand, Canada, the U.K., and Mexico. The recognized goodwill is primarily attributable to expected revenue and cost synergies from the acquisition. None of the goodwill or intangible asset amounts are expected to be deductible for income tax purposes; however, the Company acquired certain tax assets in the form of accumulated net operating loss carryforwards and capital allowances, which the Company currently expects to utilize. The Company is in the process of reviewing several components of the preliminary purchase price allocation and expects to finalize its purchase accounting for this acquisition later in 2017.

 

11


 

Table of Contents

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:

 

 

 

 

 

 

 

(In thousands)

Cash and cash equivalents

 

$

28,227

Accounts and notes receivable

 

 

14,841

Inventory

 

 

977

Restricted cash

 

 

2,475

Prepaid expenses, deferred costs, and other current assets

 

 

2,879

Property and equipment

 

 

66,494

Intangible assets

 

 

186,344

Goodwill

 

 

294,676

Prepaid expenses, deferred costs, and other noncurrent assets

 

 

674

Total assets acquired

 

$

597,587

 

 

 

 

Current portion of other long-term liabilities

 

$

712

Accounts payable and other current liabilities

 

 

52,404

Asset retirement obligations

 

 

5,668

Deferred tax liability

 

 

30,769

Other long-term liabilities

 

 

12,555

Total liabilities assumed

 

$

102,108

 

 

 

 

Net assets acquired

 

$

495,479

 

The fair values of intangible assets acquired have been estimated utilizing an income approach, with the assistance of an independent appraisal firm. The intangible assets acquired as part of the DCPayments acquisition are being amortized on a straight-line basis, over the estimated lives. At the date of the acquisition the estimated fair values consisted of the following:

 

 

 

 

 

 

 

 

 

    

Fair Values

    

Estimated Useful Lives

 

 

(In thousands)

 

 

 

Merchant contracts/relationships

 

$

173,016

 

 

8 years

Trade names: definite-lived

 

 

13,328

 

 

3 – 5 years

Total intangible assets acquired

 

$

186,344

 

 

 

12


 

Table of Contents

Pro Forma Results of Operations

 

The following table presents certain unaudited pro forma combined results of operations of the Company and the acquired DCPayments business for the three months ended March 31, 2016, after giving effect to certain pro forma and conforming accounting adjustments including: (i) amortization of acquired intangible assets, (ii) the impact of certain fair value adjustments such as depreciation on the acquired property and equipment, (iii) an interest expense adjustment for the net impact of the removal of the interest expense on the historical long-term debt of DCPayments that was repaid and the new interest expense on additional borrowings incurred by the Company to fund the acquisition, and (iv) a conforming adjustment to recognize certain DCPayments surcharge revenues on a gross basis (not reduced by merchant commission payments), consistent with the Company policy and practice, and other less significant conforming accounting adjustments.

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 2016

 

 

As Reported

 

Pro Forma

 

 

(In thousands, excluding per share amounts)

Total revenues

 

$

303,247

 

$

365,861

Net income attributable to controlling interests and available to common shareholders

 

 

15,384

 

 

16,606

 

 

 

 

 

 

 

Net income per common share – basic

 

$

0.34

 

$

0.37

Net income per common share – diluted

 

$

0.34

 

$

0.36

 

The unaudited pro forma combined results of operations for the three months ended March 31, 2016, reflected in the table above, do not include the impact of other acquisitions completed since March 31, 2016, as these transactions did not have a material impact on the overall consolidated financial statements. These unaudited pro forma combined results of operations do not reflect the impact of any potential operating efficiencies, savings from expected synergies, or costs to integrate the operations. The unaudited pro forma combined results of operations are not necessarily indicative of the future results to be expected for the Company’s consolidated results of operations.

 

Other Acquisitions

 

On January 31, 2017, the Company completed the acquisition of Spark ATM Systems Pyt Ltd. (“Spark”), an independent ATM deployer in South Africa, with a growing network of approximately 2,300 ATMs. The initial purchase consideration of 260.7 million South African Rand (“Rand”) (approximately $19. 5 million U.S. dollars ), was paid in cash and included approximately 64.0 million Rand to pay off third-party debt of Spark. The total purchase consideration also includes potential additional contingent consideration of up to approximately $59.6 million. This amount is contingent upon Spark achieving certain agreed upon earnings targets in 2019 and 2020 and would be payable to the previous investors in the Spark business. As of January 31, 2017, the preliminary estimated fair value of the contingent consideration arrangement was approximately 505 million Rand (approximately $37.4 million U.S. dollars ), as determined with the assistance of an independent appraisal firm using forecasted future financial projections and other Level 3 inputs ( for additional information related to the Company’s fair value estimates see Note 12. Fair Value Measurements ) . In conjunction with the transaction, the Company preliminarily recognized property and equipment of approximately $5.3 million, intangible assets of $ 2.8  million, Asset Retirement Obligations (“AROs”) of approximately $0.4 million, other net liabilities of approximately $1.1 million, and goodwill of approximately $50.3 million. The purchase accounting remains preliminary, pending finalization of the related asset appraisals.

 

On April 13, 2016, the Company completed the acquisition of a 2,600 location ATM portfolio in the U.S. from a major financial institution. This acquisition was affected through multiple closings taking place primarily in April 2016. The total purchase consideration of approximately $13.8 million was paid in installments corresponding to each close. In conjunction with the transaction, the Company recognized property and equipment of $8.3 million, contract intangibles and prepaid merchant commissions of $7.1 million, and AROs of $1.6 million. The Company completed the purchase accounting during the fourth quarter of 2016.

 

 

13


 

Table of Contents

(3) Share-based Compensation  

 

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

 

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

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2017

    

2016

 

 

(In thousands)

Cost of ATM operating revenues

 

$

(43)

 

$

117

Selling, general, and administrative expenses

 

 

2,240

 

 

3,051

Total share-based compensation expense

 

$

2,197

 

$

3,168

 

The decrease in total share-based compensation expense for the three months ended March 31, 2017, is primarily attributable to a higher level of forfeitures during the period as a result of the Company’s Restructuring Plan and the associated employee terminations. The employee terminations resulted in the net reversal of approximately $1.5 million in share-based compensation expense.

 

Restricted Stock Units. The Company grants restricted stock units (“RSUs”) under its Long-term Incentive Plan (“LTIP”), which is an annual equity award program under the Third Amended and Restated 2007 Stock Incentive Plan (the “2007 Plan”). The ultimate number of RSUs that are determined to be earned under the LTIP are approved by the Compensation Committee of the Company’s Board of Directors on an annual basis, based on the Company’s achievement of certain performance levels during the calendar year of its grant. 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. 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 shares after the passage of the vesting periods, which are generally 24, 36, and 48 months from January 31 of the grant year, at the rate of 50%, 25%, and 25%, respectively. Performance-RSUs will be earned only if the Company achieves certain performance levels. Although the Performance-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. RSUs are also granted outside of LTIPs, with or without performance-based vesting requirements.

 

The number of the Company’s non-vested RSUs as of March 31, 2017, and changes during the three months ended March 31, 2017, are presented below:

 

 

 

 

 

 

 

 

    

Number of Shares

    

Weighted Average Grant Date Fair Value

Non-vested RSUs as of January 1, 2017

 

971,751

 

$

37.08

Granted

 

551,428

 

$

38.99

Vested

 

(449,546)

 

$

36.36

Forfeited

 

(119,667)

 

$

37.01

Non-vested RSUs as of March 31, 2017

 

953,966

 

$

38.54

 

The above table only includes earned RSUs; therefore, the Performance-RSUs granted in 2017 but not yet earned are not included. The number of Performance-RSUs granted at target in 2017, net of estimated forfeitures, was 117,704 units with a grant date fair value of $46.75 per unit. Time-RSUs are included as granted.

 

14


 

Table of Contents

As of March 31, 2017, the unrecognized compensation expense associated with earned RSUs was $17.6 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 2.4 years.  

 

Restricted Stock Awards . As of March 31, 2017, there were 5,875 outstanding Restricted Stock Awards (“RSAs”) with a weighted average grant date fair value of $29.06. The Company has not granted any RSAs since 2013. As of March 31, 2017, the Company had less than $0.1 million of unrecognized compensation expense associated with all outstanding RSAs.

 

Options . As of March 31, 2017, there were 13,050 outstanding and exercisable options with a weighted average grant date fair value of $8.73. The Company has not granted any options since 2010. As of March 31, 2017, the Company had no unrecognized compensation expense associated with outstanding options as all the remaining outstanding options became fully vested during 2014.

 

(4) Earnings (Losses) per Share 

 

The Company reports its earnings (losses) per share under the two-class method. Under this method, potentially dilutive securities are excluded from the calculation of diluted earnings per share (as well as their related impact on the net income available to common shareholders) when their impact on net income available to common shareholders is anti-dilutive. During the three months ended March 31, 2017, the Company incurred a net loss and, accordingly, excluded all potentially dilutive securities from the calculation of diluted earnings (losses) per share as their impact on the net loss available to common shareholders was anti-dilutive. 

 

Potentially dilutive securities included all outstanding stock options, RSAs, and RSUs, which were included in the calculation of diluted earnings per share for the three months ended March 31, 2016. The potentially dilutive effect of outstanding warrants and the underlying shares exercisable under the Company’s $287.5 million of 1.00% Convertible Senior Notes due 2020 (the “Convertible Notes”) were excluded from diluted shares outstanding for the three months ended March 31, 2016 because the exercise price exceeded the average market price of the Company’s common shares. The effect of the note hedge the Company purchased to offset the underlying conversion option embedded in the Convertible Notes was also excluded, as the effect is anti-dilutive. The exercise price of the Convertible Notes also exceeded the average market price of the Company’s common shares in the three months ended March 31, 2017. The restricted shares issued by the Company under RSAs have a non-forfeitable right to cash dividends, if and when declared by the Company. Accordingly, restricted shares issued under RSAs are considered to be participating securities and, as such, the Company has allocated the undistributed earnings for the three months ended March 31, 2017 and 2016 among the Company’s outstanding common shares and issued but unvested restricted shares. The undistributed losses for the three months ended March 31, 2017 have not been allocated to the unvested restricted shares as they do not carry an obligation to share in losses.

 

15


 

Table of Contents

Accordingly, the Company has allocated the undistributed earnings and losses for the three months ended March 31, 2017 and 2016, as follows:

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

March 31, 2017

 

March 31, 2016

 

    

Loss

    

Weighted Average Shares Outstanding

    

Loss per Share

    

Income

    

Weighted Average Shares Outstanding

    

Earnings per Share  

Basic:

 

 

 

    

 

    

 

 

    

 

 

    

 

    

 

 

Net (loss) income attributable to controlling interests and available to common shareholders

 

$

(901)

 

 

 

 

 

 

$

15,384

 

 

 

 

 

Less: Undistributed earnings allocated to unvested RSAs

 

 

 —

 

 

 

 

 

 

 

(12)

 

 

 

 

 

Net (loss) income available to common shareholders

 

$

(901)

 

45,490,461

 

$

(0.02)

 

$

15,372

 

45,073,654

 

$

0.34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Undistributed earnings allocated to restricted shares

 

$

 —

 

 

 

 

 

 

$

12

 

 

 

 

 

Stock options added to the denominator under the treasury stock method

 

 

 

 

 —

 

 

 

 

 

 

 

33,691

 

 

 

RSUs added to the denominator under the treasury stock method

 

 

 

 

 —

 

 

 

 

 

 

 

596,143

 

 

 

Less: Undistributed earnings reallocated to RSAs

 

 

 —

 

 

 

 

 

 

 

(12)

 

 

 

 

 

Net (loss) income available to common shareholders and assumed conversions

 

$

(901)

 

45,490,461

 

$

(0.02)

 

$

15,372

 

45,703,488

 

$

0.34

 

The computation of diluted earnings per share excluded potentially dilutive common shares related to restricted shares issued by the Company under RSAs of 17,476 shares for the three months ended March 31, 2016 because the effect of including these shares in the computation would have been anti-dilutive.

 

16


 

Table of Contents

(5) Accumulated Other Comprehensive Loss, Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5) Accumulated Other Comprehensive Loss, Net

 

Accumulated other comprehensive loss, net is a separate component of the Shareholders’ equity section in the accompanying Consolidated Balance Sheets. The following table presents the changes in the balances of each component of Accumulated other comprehensive loss, net for the three months ended March 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

    

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, 2017

 

$

(81,602)

(1)

$

(25,533)

(2)

$

(107,135)

Other comprehensive income (loss) before reclassification

 

 

7,246

(3)

 

(3,855)

(4)

 

3,391

Amounts reclassified from accumulated other comprehensive loss, net

 

 

 —

 

 

5,260

(4)

 

5,260

Net current period other comprehensive income

 

 

7,246

 

 

1,405

 

 

8,651

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

 

$

(74,356)

(1)

$

(24,128)

(2)

$

(98,484)

 

(1)

Net of deferred income tax (benefit) of $(5,496) and $(4,113) as of March 31, 2017 and January 1, 2017, respectively.

(2)

Net of deferred income tax expense of $10,629 and $9,269 as of March 31, 2017 and January 1, 2017, respectively.

(3)

Net of deferred income tax (benefit) of $(1,383) for the three months ended March 31, 2017.

(4)

Net of deferred income tax (benefit) expense of $(3,732) and $5,092 for Other comprehensive income (loss) before reclassification and Amounts reclassified from accumulated other comprehensive loss, net, respectively, for the three months ended March 31, 2017. See Note 11. Derivative Financial Instruments.

 

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

 

The Company has elected the portfolio approach for the deferred tax asset of the unrealized gains and losses related to the interest rate swap contracts in the Accumulated other comprehensive loss, net line item in the accompanying Consolidated Balance Sheets. Under the portfolio approach, the disproportionate tax effect created when the valuation allowance was appropriately released as a tax benefit into continuing operations in 2010, will reverse out of the Accumulated other comprehensive loss, net line item in the accompanying Consolidated Balance Sheets and into continuing operations as a tax expense when the Company ceases to hold any interest rate swap contracts . As of March 31, 2017, the disproportionate tax effect is approximately $14.7 million.

 

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

 

17


 

Table of Contents

(6) Intangible Assets  

 

Intangible Assets with Indefinite Lives  

 

The following tables present the net carrying amounts of the Company’s intangible assets with indefinite lives as of January 1, 2017 and March 31, 2017, as well as the changes in the net carrying amounts for the three months ended March 31, 2017 by segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

    

North America (1)

    

Europe & Africa (2)

    

DCPayments (3)

    

Corporate & Other (4)

    

Total

 

 

(In thousands)  

Balance as of  January 1, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross balance

 

$

445,582

 

$

130,846

 

$

 —

 

$

6,650

 

$

583,078

Accumulated impairment loss

 

 

 —

 

 

(50,003)

 

 

 —

 

 

 —

 

 

(50,003)

 

 

$

445,582

 

$

80,843

 

$

 —

 

$

6,650

 

$

533,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

 

 —

 

 

50,272

 

 

294,676

 

 

 —

 

 

344,948

Foreign currency translation adjustments

 

 

72

 

 

1,467

 

 

3,659

 

 

 —

 

 

5,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross balance

 

$

445,654

 

$

182,585

 

$

298,335

 

$

6,650

 

$

933,224

Accumulated impairment loss

 

 

 —

 

 

(50,003)

 

 

 —

 

 

 —

 

 

(50,003)

 

 

$

445,654

 

$

132,582

 

$

298,335

 

$

6,650

 

$

883,221

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade Names: indefinite-lived

 

    

North America (1)

    

Europe & Africa (2)

    

Total

 

 

(In thousands)

Balance as of  January 1, 2017

 

$

200

 

$

419

 

$

619

Foreign currency translation adjustments

 

 

 —

 

 

 6

 

 

 6

Balance as of March 31, 2017

 

$

200

 

$

425

 

$

625

 

(1)

The North America segment is comprised of the Company’s operations in the U.S., Canada, Mexico, and Puerto Rico, but excludes the recently acquired operations that DCPayments has in these regions.

(2)

The Europe & Africa segment is comprised of the Company’s operations in the U.K., Ireland, Germany, Poland, Spain, South Africa, and its ATM advertising business, i-design group limited (“i-design”), but excludes the recently acquired operations that DCPayments has in these regions.

(3)

The DCPayments segment is comprised of the Company’s operations in Australia, New Zealand, Canada, the U.K., and Mexico acquired on January 6, 2017 from DCPayments. For additional information, see Note 2. Acquisitions and Note 15. Segment Information .

(4)

The Corporate & Other segment is comprised of the Company’s transaction processing activities and the Company’s corporate general and administrative functions.

 

18


 

Table of Contents

Intangible Assets with Definite Lives  

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2017

 

December 31, 2016

 

    

Gross Carrying Amount

    

Accumulated Amortization

    

Net Carrying Amount

    

Gross Carrying Amount

    

Accumulated Amortization

    

Net Carrying Amount

 

 

(In thousands)

Merchant and bank-branding contracts/relationships

 

$

532,572

 

$

(264,789)

 

$

267,783

 

$

353,334

 

$

(248,428)

 

$

104,906

Trade names: definite-lived

 

 

26,529

 

 

(4,439)

 

 

22,090

 

 

11,618

 

 

(3,674)

 

 

7,944

Technology

 

 

10,853

 

 

(5,064)

 

 

5,789

 

 

10,718

 

 

(4,781)

 

 

5,937

Non-compete agreements

 

 

4,367

 

 

(4,116)

 

 

251

 

 

4,351

 

 

(4,057)

 

 

294

Revolving credit facility deferred financing costs

 

 

2,258

 

 

(870)

 

 

1,388

 

 

3,770

 

 

(2,240)

 

 

1,530

Total intangible assets with definite lives

 

$

576,579

 

$

(279,278)