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The information in this preliminary prospectus supplement and the accompanying prospectus, which relate to an effective registration statement under the Securities Act of 1933, as amended, is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus do not constitute an offer to sell, nor do they seek an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted. |
RegistrationNo. 333-164395
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Per Share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discount | $ | $ | ||||||
Proceeds, before expenses, to the selling stockholders | $ | $ |
Piper Jaffray | UBS Investment Bank |
William Blair & Company | SunTrust Robinson Humphrey |
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About This Prospectus | 1 | |||
Where You Can Find More Information | 1 | |||
Documents Incorporated by Reference | 1 | |||
Cautionary Statement Regarding Forward-Looking Statements | 3 | |||
Cardtronics, Inc. | 4 | |||
The Subsidiary Guarantors | 4 | |||
Risk Factors | 5 | |||
Use of Proceeds | 6 | |||
Ratio of Earnings to Fixed Charges | 6 | |||
Description of Debt Securities | 6 | |||
Description of Common Stock | 18 | |||
Selling Stockholders | 22 | |||
Plan of Distribution | 23 | |||
Legal Matters | 25 | |||
Experts | 25 |
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• | Annual Report onForm 10-K for the fiscal year ended December 31, 2009 (the “2009 Form10-K”), including information specifically to be incorporated by reference into our Form10-K from our definitive proxy statement to be prepared in connection with the 2010 Annual Meeting of Stockholders to be held on June 15, 2010; | |
• | Current Report onForm 8-K filed on January 22, 2010; | |
• | Current Report onForm 8-K filed on January 27, 2010; | |
• | Current Report onForm 8-K filed on February 8, 2010; | |
• | Current Report onForm 8-K filed on March 8, 2010; and | |
• | Current Report onForm 8-K filed on March 22, 2010. |
Attention: Chief Financial Officer
3250 Briarpark Drive, Suite 400
Houston, Texas 77042
(832) 308-4000
• | our financial outlook and the financial outlook of the ATM and financial services industry; | |
• | our ability to expand our bank branding and surcharge-free service offerings; | |
• | our ability to provide new ATM solutions to financial institutions; | |
• | our vault cash rental needs, including potential liquidity issues with our vault cash providers; |
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• | the implementation of our corporate strategy; | |
• | our ability to compete successfully with our competitors; | |
• | our financial performance; | |
• | our ability to strengthen existing customer relationships and reach new customers; | |
• | our ability to meet the service levels required by our service level agreements with our customers; | |
• | our ability to pursue and successfully integrate acquisitions; | |
• | our ability to expand internationally; | |
• | our ability to prevent security breaches; | |
• | changes in interest rates, foreign currency rates and regulatory requirements; and | |
• | the additional risks we are exposed to in our armored courier operations. |
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• | the dollar volume of cash used in the United States economy is large and growing; | |
• | United States banks are seeking to increase customer touch points in a cost-effective manner, and provide convenient, surcharge-free access to ATMs; | |
• | there has been a recent proliferation in the number of prepaid debit cards, especially in the United States, that can be used at our ATMs; | |
• | recent increases in the fees charged by large United States financial institutions for non-customers to use their ATMs have provided us with an opportunity to increase the fees we charge on our ATMs and increased the value proposition of our Allpoint surcharge-free network; | |
• | demand for automated consumer financial services beyond basic banking services continues to increase; | |
• | outsourcing by financial institutions of non-core operations such as the management of their ATM fleets could provide us with additional revenue opportunities; and | |
• | the continuing under-penetration of ATMs in many international markets. |
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Common stock offered by the selling stockholders | 6,000,000 shares | |
Common stock to be outstanding after the offering | 41,658,756 shares | |
Overallotment option | The selling stockholders have granted the underwriters the right to purchase up to an additional 900,000 shares to cover overallotments, if any, within 30 days from the date of this prospectus. | |
Use of proceeds | We will not receive any of the proceeds from this offering. | |
Dividend policy | We do not currently and do not expect to pay dividends on our common stock for the foreseeable future. | |
NASDAQ Global Market symbol for our common stock | CATM | |
Risk Factors | Investing in our common stock involves risks. See “Risk Factors” beginning onpage S-9 of this prospectus supplement for a discussion of factors that you should carefully consider before deciding to invest in shares of our common stock. |
• | 3,763,487 shares of common stock issuable upon the exercise of stock options outstanding as of March 15, 2010, at a weighted average exercise price of $8.44; and | |
• | 584,777 shares of common stock reserved for issuance under our 2007 equity incentive compensation plan. |
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For the Years Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(In thousands, except share and per share information, number of devices, and transactions per device) | ||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||
ATM operating revenues | $ | 365,322 | $ | 475,800 | $ | 483,138 | ||||||
Total revenues | 378,298 | 493,014 | 493,353 | |||||||||
Gross profit (exclusive of depreciation, accretion, and amortization expense)(1) | 84,651 | 114,473 | 148,879 | |||||||||
Income (loss) from operations(2) | 7,158 | (38,118 | ) | 43,000 | ||||||||
Net income (loss)(2) | (27,857 | ) | (72,397 | ) | 5,771 | |||||||
Net income (loss) attributable to controlling interests and available to common stockholders(2)(3) | (63,753 | ) | (71,375 | ) | 5,277 | |||||||
Share and Per Share Data: | ||||||||||||
Basic and diluted net income (loss) per common share | $ | (4.13 | ) | $ | (1.84 | ) | $ | 0.13 | ||||
Basic weighted average shares outstanding | 15,423,744 | 38,800,782 | 39,244,057 | |||||||||
Diluted weighted average shares outstanding | 15,423,744 | 38,800,782 | �� | 39,896,366 | ||||||||
Consolidated Balance Sheet Data: | ||||||||||||
Total cash and cash equivalents | $ | 13,439 | $ | 3,424 | $ | 10,449 | ||||||
Total assets | 590,737 | 480,828 | 460,404 | |||||||||
Total long-term debt and capital lease obligations, including current portion | 310,744 | 347,181 | 307,287 | |||||||||
Total stockholders’ equity (deficit) | 106,720 | (19,750 | ) | (1,290 | ) | |||||||
Other Financial Data (Unaudited): | ||||||||||||
Adjusted EBITDA(4) | $ | 60,582 | $ | 81,939 | $ | 110,376 | ||||||
Capital expenditures, excluding acquisitions(5) | 70,959 | 60,133 | 26,031 | |||||||||
Interest expense, net | 29,523 | 31,090 | 30,133 | |||||||||
Operating Data (Unaudited): | ||||||||||||
Average number of transacting Company-owned devices(6) | 20,732 | 22,215 | 22,871 | |||||||||
Average number of total transacting devices(6) | 28,277 | 32,856 | 33,059 | |||||||||
Total transactions | 247,270 | 354,391 | 383,323 | |||||||||
Total cash withdrawal transactions | 166,248 | 228,306 | 244,378 | |||||||||
Amounts per device per month: | ||||||||||||
ATM operating revenues | $ | 1,076 | $ | 1,207 | $ | 1,218 | ||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization)(7)(8) | 829 | 921 | 842 | |||||||||
ATM operating gross profit(9) | $ | 247 | $ | 286 | $ | 376 | ||||||
ATM operating gross profit margin (exclusive of depreciation, accretion, and amortization)(7) | 22.9 | % | 23.7 | % | 30.9 | % | ||||||
Total transactions | 729 | 899 | 966 | |||||||||
Total cash withdrawal transactions | 490 | 579 | 616 |
(1) | “Gross Profit” amounts exclude depreciation, accretion, and amortization expense of $43.1 million, $52.4 million, and $51.5 million for the years ended December 31, 2007, 2008 and 2009, respectively. |
(2) | For the year ended December 31, 2008, amounts include a $50.0 million goodwill impairment charge associated with our United Kingdom operations. |
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(3) | For the year ended December 31, 2007, net loss attributable to controlling interests and available to common stockholders reflects a $36.0 million one-time, non-cash charge associated with the conversion of our Series B redeemable convertible preferred stock into shares of common stock in conjunction with our initial public offering in December 2007, and the accretion of issuance costs associated with the Series B redeemable convertible preferred stock. | |
(4) | Adjusted EBITDA represents net income (loss) before interest expense, income tax expense, and depreciation, accretion and amortization expense, as well as adjustments for certain non-cash and non-recurring items, as defined in our revolving credit facility. For the year ended December 31, 2008, Adjusted EBITDA also excluded a $50.0 million impairment charge of the goodwill associated with our United Kingdom operation. This charge has been excluded as goodwill and associated write-downs would be company-specific and management believes the inclusion of such a charge in Adjusted EBITDA would not contribute to its understanding of the operating results and effectiveness of its business. Adjusted EBITDA, as we define it, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income, cash flows from operating, investing, and financing activities or other income or cash flow statement data prepared in accordance with U.S. GAAP. | |
We believe Adjusted EBITDA is useful to an equity investor in evaluating our operating performance because: |
• | it is used by investors to measure a company’s operating performance without regard to items such as interest expense, depreciation, accretion, and amortization, which can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired; and | |
• | it helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating results. |
Our management uses Adjusted EBITDA: |
• | as a measure of operating performance because it assists them in comparing our performance on a consistent basis as it removes the impact of our capital structure and asset base from our operating results; | |
• | as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; | |
• | to assess compliance with financial ratios and covenants included in our credit agreement; | |
• | in communications with lenders concerning our financial performance; and | |
• | as a performance measure by which our management is evaluated and compensated. |
Management compensates for the limitations of Adjusted EBITDA as an analytical tool by reviewing the comparable U.S. GAAP measures, understanding the differences between the measures, and incorporating this knowledge into management’s decision-making process. | ||
The following table provides a reconciliation of Adjusted EBITDA to net income (loss), its most directly comparable U.S. GAAP financial measure, for each of the periods presented: |
Years Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(In thousands) | ||||||||||||
Net income (loss) attributable to controlling interests | $ | (27,481 | ) | $ | (71,375 | ) | $ | 5,277 | ||||
Income tax expense | 4,477 | 989 | 4,245 | |||||||||
Interest expense, including amortization of deferred financing costs and bond discounts | 31,164 | 33,197 | 32,528 | |||||||||
Goodwill impairment charge | — | 50,003 | — | |||||||||
Amortization expense | 18,870 | 18,549 | 18,916 | |||||||||
Depreciation and accretion expense | 26,781 | 39,164 | 39,420 | |||||||||
EBITDA | $ | 53,811 | $ | 70,527 | $ | 100,386 | ||||||
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Years Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
(In thousands) | ||||||||||||
Add back: | ||||||||||||
Loss on disposal of assets | $ | 2,485 | $ | 5,807 | $ | 6,016 | ||||||
Other expense | (626 | ) | 93 | (982 | ) | |||||||
Noncontrolling interest | (169 | ) | (1,633 | ) | (1,281 | ) | ||||||
Stock-based compensation expense | 1,050 | 3,516 | 4,620 | |||||||||
Adjustments to cost of ATM operating revenues(a) | 3,236 | 2,911 | 154 | |||||||||
Adjustments to selling, general, and administrative expenses(a) | 795 | 718 | 1,463 | |||||||||
Adjusted EBITDA | $ | 60,582 | $ | 81,939 | $ | 110,376 | ||||||
(a) | Adjustments to cost of ATM operating revenues for 2007 and 2008 primarily consisted of costs associated with the conversion of our ATMs over to our in-house EFT processing platform and, in 2008,start-up costs associated with our in-house armored operation in the United Kingdom. Adjustments to selling, general, and administrative expenses primarily consisted of litigation settlement costs in 2007, the write-off of certain acquisition-related costs in 2008, and the recognition of $1.2 million in severance costs associated with the departure of our former Chief Executive Officer in 2009. |
(5) | Capital expenditure amounts for Cardtronics Mexico are reflected gross of any noncontrolling interest amounts. | |
(6) | The historical 2007 average number of transacting Company-owned devices and total transacting devices include the devices acquired in our acquisition of the 7-Eleven, Inc. financial services business beginning from the acquisition date (July 20, 2007) and continuing through the end of the year. | |
(7) | Excludes effects of depreciation, accretion, and amortization expense of $43.1 million, $52.4 million, and $51.5 million for the years ended December 31, 2007, 2008, and 2009, respectively. The inclusion of this depreciation, accretion, and amortization expense in “Cost of ATM operating revenues” would have increased our cost of ATM operating revenues per ATM per month and decreased our ATM operating gross profit per ATM per month by $127, $133, and $130 for the years ended December 31, 2007, 2008, and 2009, respectively. Additionally, our ATM operating gross profit margin would have been 11.1%, 12.7%, and 20.2% for the years ended December 31, 2007, 2008, and 2009, respectively. | |
(8) | The decline in the Cost of ATM operating revenues per ATM per month from 2008 to 2009 was due to foreign currency exchange rate movements between the two periods, lower vault cash interest costs, and other operating cost reductions as a result of better pricing terms under the renegotiated contracts with our maintenance and armored service providers. | |
(9) | ATM operating gross profit is a measure of profitability that uses only the revenue and expenses that related to operating the ATMs. The revenue and expenses from ATM equipment sales and other ATM-related services are not included. |
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• | exposure to currency fluctuations, including the risk that our future reported operating results could be negatively impacted by unfavorable movements in the functional currencies of our international operations relative to the United States dollar, which represents our consolidated reporting currency; | |
• | difficulties in complying with the different laws and regulations in each country and jurisdiction in which we operate, including unique labor and reporting laws; | |
• | unexpected changes in laws, regulations, and policies of foreign governments or other regulatory bodies, including changes that could potentially disallow surcharging or that could result in a reduction in the amount of interchange fees received per transaction; | |
• | unanticipated political and social instability that may be experienced in developing countries; | |
• | rising crime rates in certain of the areas we operate in, including increased incidents of crimes against store personnel where our ATMs are located; | |
• | difficulties in staffing and managing foreign operations, including hiring and retaining skilled workers in those countries in which we operate; and | |
• | potential adverse tax consequences, including restrictions on the repatriation of foreign earnings. |
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• | make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under the indentures governing our senior subordinated notes and the agreements governing our other indebtedness; | |
• | require us to dedicate a substantial portion of our cash flow in the future to pay principal and interest on our debt, which will reduce the funds available for working capital, capital expenditures, acquisitions, and other general corporate purposes; | |
• | limit our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; | |
• | make us more vulnerable to adverse changes in general economic, industry and competitive conditions, and adverse changes in government regulation; and | |
• | limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our growth strategy, research and development costs, or other purposes. |
• | sell or transfer property or assets; | |
• | pay dividends on or redeem or repurchase stock; | |
• | merge into or consolidate with any third party; | |
• | create, incur, assume or guarantee additional indebtedness; | |
• | create certain liens; | |
• | make investments; | |
• | engage in transactions with affiliates; |
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• | issue or sell preferred stock of restricted subsidiaries; and | |
• | enter into sale and leaseback transactions. |
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• | changes in general economic conditions and specific market conditions in the ATM and financial services industries; | |
• | changes in payment trends and offerings in the markets in which we operate; | |
• | competition from other companies providing the same or similar services that we offer; | |
• | the timing and magnitude of operating expenses, capital expenditures, and expenses related to the expansion of sales, marketing, and operations, including as a result of acquisitions, if any; | |
• | the timing and magnitude of any impairment charges that may materialize over time relating to our goodwill, intangible assets or long-lived assets; | |
• | changes in the general level of interest rates in the markets in which we operate; | |
• | changes in regulatory requirements associated with the ATM and financial services industries; | |
• | changes in the mix of our current services; and | |
• | changes in the financial condition and credit risk of our customers. |
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• | authorize the issuance of blank check preferred stock that could be issued by our board of directors to thwart a takeover attempt; | |
• | classify the board of directors into staggered, three-year terms, which may lengthen the time required by a third party to gain control of our board of directors; | |
• | discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of two years after the person becomes an interested stockholder, unless such a transaction has met certain fair market value requirements; | |
• | prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of stock to elect some directors; |
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• | require super-majority voting to effect amendments to certain provisions of our certificate of incorporation or bylaws, including those provisions concerning the composition of the board of directors and the taking of action by stockholders by written consent; | |
• | limit who may call special meetings of both the board of directors and stockholders; | |
• | prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; | |
• | establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholders’ meetings; and | |
• | require that vacancies on the board of directors, including newly-created directorships, be filled only by a majority vote of directors then in office. |
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As of | ||||
December 31, | ||||
2009 | ||||
(In thousands) | ||||
Cash and cash equivalents | $ | 10,449 | ||
Debt (including current maturities): | ||||
Revolving credit facility | $ | — | ||
Long-term notes payable and capital lease obligations | 10,045 | |||
$300.0 million 9.25% senior subordinated notes due 2013, net of discounts of $2.8 million | 297,242 | |||
Total debt | 307,287 | |||
Stockholders’ deficit: | ||||
Common stock, par value $0.0001 per share, 125,000,000 shares authorized; 46,238,028 shares issued; 40,900,532 shares outstanding | 4 | |||
Additional paid-in capital | 200,323 | |||
Accumulated other comprehensive loss, net | (57,618 | ) | ||
Accumulated deficit | (96,922 | ) | ||
Treasury stock, 5,337,496 shares as cost | (48,679 | ) | ||
Total parent stockholders’ deficit | (2,892 | ) | ||
Noncontrolling interests | 1,602 | |||
Total stockholders’ deficit | (1,290 | ) | ||
Total capitalization | $ | 305,997 | ||
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High | Low | |||||||
Fiscal Year Ended December 31, 2010 | ||||||||
First Quarter (through March 18, 2010) | $ | 12.78 | $ | 9.51 | ||||
Fiscal Year Ended December 31, 2009 | ||||||||
Fourth Quarter | $ | 12.16 | $ | 7.74 | ||||
Third Quarter | 8.06 | 3.47 | ||||||
Second Quarter | 4.05 | 1.81 | ||||||
First Quarter | 2.02 | 0.85 | ||||||
Fiscal Year Ended December 31, 2008 | ||||||||
Fourth Quarter | $ | 8.16 | $ | 0.47 | ||||
Third Quarter | 9.48 | 3.37 | ||||||
Second Quarter | 10.44 | 5.88 | ||||||
First Quarter | 10.30 | 6.60 |
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For the Years Ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
ATM operating revenues | $ | 258,979 | $ | 280,985 | $ | 365,322 | $ | 475,800 | $ | 483,138 | ||||||||||
ATM product sales and other revenues | 9,986 | 12,620 | 12,976 | 17,214 | 10,215 | |||||||||||||||
Total revenues | 268,965 | 293,605 | 378,298 | 493,014 | 493,353 | |||||||||||||||
Cost of revenues: | ||||||||||||||||||||
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization shown separately below)(1) | 199,767 | 209,850 | 281,705 | 362,916 | 333,907 | |||||||||||||||
Cost of ATM product sales and other revenues | 9,681 | 11,443 | 11,942 | 15,625 | 10,567 | |||||||||||||||
Total cost of revenues | 209,448 | 221,293 | 293,647 | 378,541 | 344,474 | |||||||||||||||
Gross profit | 59,517 | 72,312 | 84,651 | 114,473 | 148,879 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general, and administrative expenses | 17,865 | 21,667 | 29,357 | 39,068 | 41,527 | |||||||||||||||
Depreciation and accretion expense | 12,951 | 18,595 | 26,781 | 39,164 | 39,420 | |||||||||||||||
Amortization expense(2) | 8,980 | 11,983 | 18,870 | 18,549 | 18,916 | |||||||||||||||
Loss on disposal of assets | 1,036 | 1,653 | 2,485 | 5,807 | 6,016 | |||||||||||||||
Goodwill impairment charge | — | — | — | 50,003 | — | |||||||||||||||
Total operating expenses | 40,832 | 53,898 | 77,493 | 152,591 | 105,879 | |||||||||||||||
Income (loss) from operations | 18,685 | 18,414 | 7,158 | (38,118 | ) | 43,000 | ||||||||||||||
Other (income) expense: | ||||||||||||||||||||
Interest expense, net | 15,485 | 23,143 | 29,523 | 31,090 | 30,133 | |||||||||||||||
Amortization and write-off of financing costs and bond discounts(3) | 6,941 | 1,929 | 1,641 | 2,107 | 2,395 | |||||||||||||||
Other expense (income)(4) | (68 | ) | (6,414 | ) | (626 | ) | 93 | 456 | ||||||||||||
Total other expense | 22,358 | 18,658 | 30,538 | 33,290 | 32,984 | |||||||||||||||
Income (loss) before income taxes | (3,673 | ) | (244 | ) | (23,380 | ) | (71,408 | ) | 10,016 | |||||||||||
Income tax expense (benefit) | (1,270 | ) | 512 | 4,477 | 989 | 4,245 | ||||||||||||||
Net (loss) income | (2,403 | ) | (756 | ) | (27,857 | ) | (72,397 | ) | 5,771 |
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For the Years Ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | 15 | (225 | ) | (376 | ) | (1,022 | ) | 494 | ||||||||||||
Net income (loss) attributable to controlling interests | (2,418 | ) | (531 | ) | (27,481 | ) | (71,375 | ) | 5,277 | |||||||||||
Preferred stock conversion and accretion expense | 1,395 | 265 | 36,272 | — | — | |||||||||||||||
Net income (loss) attributable to controlling interests and available to common stockholders | $ | (3,813 | ) | $ | (796 | ) | $ | (63,753 | ) | $ | (71,375 | ) | $ | 5,277 | ||||||
Net income (loss) per common share — basic and diluted | $ | (0.27 | ) | $ | (0.06 | ) | $ | (4.13 | ) | $ | (1.84 | ) | $ | 0.13 | ||||||
Weighted average shares outstanding — basic | 14,040,353 | 13,904,505 | 15,423,744 | 38,800,782 | 39,244,057 | |||||||||||||||
Weighted average shares outstanding — diluted | 14,040,353 | 13,904,505 | 15,423,744 | 38,800,782 | 39,896,366 | |||||||||||||||
Consolidated Statements of Cash Flows Data: | ||||||||||||||||||||
Cash flows from operating activities | $ | 33,227 | $ | 25,446 | $ | 55,108 | $ | 16,218 | $ | 74,874 | ||||||||||
Cash flows from investing activities | (139,960 | ) | (35,973 | ) | (202,529 | ) | (60,476 | ) | (26,031 | ) | ||||||||||
Cash flows from financing activities | 107,214 | 11,192 | 158,155 | 34,507 | (42,232 | ) | ||||||||||||||
Operating Data (unaudited): | ||||||||||||||||||||
Total number of devices (at period end) | 26,208 | 25,259 | 32,319 | 32,950 | 33,408 | |||||||||||||||
Total transactions | 156,851 | 172,808 | 247,270 | 354,391 | 383,323 | |||||||||||||||
Total cash withdrawal transactions | 118,960 | 125,078 | 166,248 | 228,306 | 244,378 |
As of December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 1,699 | $ | 2,718 | $ | 13,439 | $ | 3,424 | $ | 10,449 | ||||||||||
Total assets | 343,751 | 367,756 | 590,737 | 480,828 | 460,404 | |||||||||||||||
Total long-term debt and capital lease obligations, including current portion | 247,624 | 252,895 | 310,744 | 347,181 | 307,287 | |||||||||||||||
Preferred stock | 76,329 | 76,594 | — | — | — | |||||||||||||||
Total stockholders’ equity (deficit) | (49,084 | ) | (37,168 | ) | 106,720 | (19,750 | ) | (1,290 | ) |
(1) | “Costs of ATM Operating Revenues” excludes depreciation, accretion, and amortization expense of $20.6 million, $29.2 million, $43.1 million, $52.4 million, and $51.5 million for the years ended December 31, 2005, 2006, 2007, 2008 and 2009, respectively. | |
(2) | “Amortization expense” includes pre-tax impairment charges of $1.2 million, $2.8 million, $5.7 million, $0.4 million, and $1.2 million for the years ended December 31, 2005, 2006, 2007, 2008, and 2009, respectively. | |
(3) | “Amortization and write-off of deferred financing costs and bond discounts” includes the write-off of $0.5 million and $5.0 million of deferred financing costs in 2005 and 2006, respectively, as a result of (i) amendments to our existing revolving credit facility and the repayment of our existing term loans in August 2005, and (ii) certain modifications made to our revolving credit facility in February 2006. | |
(4) | “Other” for the year ended December 31, 2006 reflects the recognition of approximately $4.8 million in other income primarily related to settlement proceeds received from Winn-Dixie Stores, Inc., one of our merchant customers, as a part of its emergence from bankruptcy, a $1.1 million contract termination payment received from one of our customers, and a $0.5 million payment received from one of our customers related to the sale of a number of its stores to another party. |
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• | Economic and Strategic Outlook | |
• | Overview of Business | |
• | Developing Trends in the ATM and Financial Services Industry | |
• | Recent Events | |
• | Results of Operations | |
• | Liquidity and Capital Resources | |
• | Critical Accounting Policies and Estimates | |
• | New Accounting Pronouncements Issued but Not Yet Adopted | |
• | Commitments and Contingencies |
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• | Surcharge revenue. A surcharge fee represents a convenience fee paid by the cardholder for making a cash withdrawal from an ATM. Surcharge fees often vary by the type of arrangement under which we place our ATMs and can vary widely based on the location of the ATM and the nature of the contracts negotiated with our merchants. In the future, we expect that surcharge fees per surcharge-bearing transaction will vary depending upon negotiated surcharge fees at newly-deployed ATMs, the roll-out of additional branding arrangements, and future negotiations with existing merchant partners, as well as our ongoing efforts to improve profitability through improved pricing. For those ATMs that we own or operate on surcharge-free networks, we do not receive surcharge fees related to withdrawal transactions from cardholders who are participants of such networks, but rather we receive interchange and branding revenues (as discussed below). Surcharge fees in the United Kingdom are typically higher than the surcharge fees charged in the United States. In Mexico, domestic surcharge fees are generally less than those charged in the United States, except for machines that dispense U.S. dollars, where we charge an additional foreign currency convenience fee. | |
• | Interchange revenue. An interchange fee is a fee paid by the cardholder’s financial institution for the use of an ATM owned by another operator and the applicable EFT network that transmits data between the ATM and the cardholder’s financial institution. We typically receive a majority of the interchange fee paid by the cardholder’s financial institution, with the remaining portion being retained by the EFT network. In the United States and Mexico, interchange fees are earned not only on cash withdrawal transactions but on any ATM transaction, including balance inquiries, transfers, and surcharge-free transactions. However, based on recent legislation passed in Mexico, ATM operators will be required in the future to elect between receiving interchange fees from card issuers or surcharge fees from consumers. In the United Kingdom, interchange fees are earned on all ATM transactions other thanpay-to-use cash withdrawals. Interchange fees are set by the EFT networks and vary according to EFT network arrangements with financial institutions, as well as the type of transaction. Such fees are typically lower for balance inquiries and fund transfers and higher for withdrawal transactions. | |
• | Branding and surcharge-free network revenue. Under a bank branding agreement, ATMs that are owned and operated by us are branded with the logo of and operated as if they were owned by the branding financial institution. Customers of the branding institution can use those machines without paying a surcharge, and, in exchange, the financial institution pays us a monthly per-machine fee for such branding. Historically, this type of branding arrangement has resulted in an increase in transaction levels at the branded ATMs, as existing customers continue to use the ATMs and new customers of the branding financial institution are attracted by the surcharge-free service. Additionally, although we forego the surcharge fee on transactions by the branding institution’s customers, we continue to earn interchange fees on those transactions along with the monthly branding fee, and typically enjoy an increase in surcharge-bearing transactions from users who are not customers of the branding institution as a result of having a bank brand on the devices. Overall, based on these factors, we believe a branding arrangement can substantially increase the profitability of an ATM versus operating the same machine in an unbranded mode. Fees paid for branding vary widely within our industry, as well as within our own operations. We expect that this variance in branding fees will continue in the future. However, because our strategy is to set branding fees at levels well above those required to offset lost surcharge revenue, we do not expect any such variance to cause a decrease in our total revenues. |
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Pro Forma | ||||||||||||||||
2009 | 2008 | 2007 | 2007 | |||||||||||||
Per cash withdrawal transaction(1): | ||||||||||||||||
Surcharge revenue(2) | $ | 1.04 | $ | 1.17 | $ | 1.36 | $ | 1.31 | ||||||||
Interchange revenue(3) | 0.61 | 0.62 | 0.59 | 0.59 | ||||||||||||
Branding and surcharge-free network revenue(4) | 0.28 | 0.25 | 0.21 | 0.21 | ||||||||||||
Other revenue | 0.05 | 0.04 | 0.04 | 0.07 | ||||||||||||
Total ATM operating revenues | $ | 1.98 | $ | 2.08 | $ | 2.20 | $ | 2.18 | ||||||||
(1) | Amounts calculated based on total cash withdrawal transactions, including surcharge cash withdrawal transactions and surcharge-free cash withdrawal transactions. | |
(2) | Excluding surcharge-free cash withdrawal transactions, per transaction amounts would have been $1.96, $1.88, and $1.88 for the years ended December 31, 2009, 2008, and 2007, respectively, and $1.86 for the pro forma year ended December 31, 2007. | |
(3) | Amounts calculated based on total interchange revenues earned on all ATM transaction types, including surcharge and surcharge-free cash withdrawals, balance inquiries, and transfers. | |
(4) | Amounts include all bank branding and surcharge-free network revenues, the majority of which are not earned on a per-transaction basis. |
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Pro Forma | ||||||||||||||||
2009 | 2008 | 2007 | 2007 | |||||||||||||
Surcharge revenue | 52.7 | % | 56.0 | % | 61.7 | % | 59.8 | % | ||||||||
Interchange revenue | 31.0 | 29.6 | 26.7 | 27.2 | ||||||||||||
Branding and surcharge-free network revenue | 14.1 | 12.2 | 9.7 | 9.7 | ||||||||||||
Other revenue | 2.2 | 2.2 | 1.9 | 3.3 | ||||||||||||
Total ATM operating revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
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• | United Kingdom. The United Kingdom is the largest ATM market in Europe. Until the late 1990s, most United Kingdom ATMs were installed at bank and building society branches. Non-bank operators began to deploy ATMs in the United Kingdom in December 1998 when LINK (which connects the ATM networks of all United Kingdom ATM operators) allowed them entry into its network via arrangements between non-bank operators and United Kingdom financial institutions. We believe that non-bank ATM operators have benefited in recent years from customer demand for more conveniently located cash machines, the emergence of internet banking with no established point of presence, and the closure of bank branches due to consolidation. According to LINK, a total of approximately 64,000 ATMs were deployed in the United Kingdom as of June 2009, of which approximately 29,000 were operated by non-banks. This has grown from approximately 36,700 total ATMs in the United Kingdom in 2001, with less than 7,000 operated by non-banks. Similar to the United States, electronic payment alternatives have gained popularity in the United Kingdom in recent years. However, cash is still the primary payment method preferred by consumers, representing nearly two-thirds of total transaction spending according to the APACS’ United Kingdom Payment Statistics 2009 publication. | |
• | Mexico. Historically, surcharge fees were not allowed pursuant to Mexican law. However, in July 2005, the Mexican government approved a measure that now allows ATM operators to charge a fee to individuals withdrawing cash from their ATMs. However, in October 2009, the Central Bank of Mexico adopted new rules that would require ATM operators to elect between receiving interchange fees from card issuers or surcharge fees from consumers, which will go into effect on April 30, 2010. At this time, it is our expectation that Cardtronics Mexico will elect to assess the surcharge fee to the consumer rather than the interchange fee to that consumer’s financial institution. According to the Central Bank of Mexico, as of September 2009, Mexico had approximately 32,700 ATMs operating throughout the country, substantially all of which are owned by national and regional banks. |
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Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Revenues: | ||||||||||||
ATM operating revenues | 97.9 | % | 96.5 | % | 96.6 | % | ||||||
ATM product sales and other revenues | 2.1 | 3.5 | 3.4 | |||||||||
Total revenues | 100.0 | 100.0 | 100.0 | |||||||||
Cost of revenues: | ||||||||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization, shown separately below)(1) | 67.7 | 73.6 | 74.5 | |||||||||
Cost of ATM product sales and other revenues | 2.1 | 3.2 | 3.2 | |||||||||
Total cost of revenues | 69.8 | 76.8 | 77.6 | |||||||||
Gross profit | 30.2 | 23.2 | 22.4 | |||||||||
Operating expenses: | ||||||||||||
Selling, general, and administrative expenses | 8.4 | 7.9 | 7.8 | |||||||||
Depreciation and accretion expense | 8.0 | 7.9 | 7.1 | |||||||||
Amortization expense(2) | 3.8 | 3.8 | 5.0 | |||||||||
Loss on disposal of assets | 1.2 | 1.2 | 0.7 | |||||||||
Goodwill impairment charge(3) | — | 10.1 | — | |||||||||
Total operating expenses | 21.5 | 31.0 | 20.5 | |||||||||
Income (loss) from operations | 8.7 | (7.7 | ) | 1.9 | ||||||||
Other expense (income): | ||||||||||||
Interest expense, net | 6.1 | 6.3 | 7.8 | |||||||||
Amortization of deferred financing costs and bond discounts | 0.5 | 0.4 | 0.4 | |||||||||
Other | 0.1 | — | (0.2 | ) | ||||||||
Total other expense | 6.7 | 6.8 | 8.1 | |||||||||
Income (loss) before income taxes | 2.0 | (14.5 | ) | (6.2 | ) | |||||||
Income tax expense | 0.9 | 0.2 | 1.2 | |||||||||
Net income (loss) | 1.2 | (14.7 | ) | (7.4 | ) | |||||||
Net income (loss) attributable to noncontrolling interests | 0.1 | (0.2 | ) | (0.1 | ) | |||||||
Net income (loss) attributable to controlling interests | 1.1 | (14.5 | ) | (7.3 | ) | |||||||
Preferred stock conversion and accretion expense | — | — | 9.6 | |||||||||
Net income (loss) attributable to controlling interest and available to common stockholders | 1.1 | % | (14.5 | )% | (16.9 | )% | ||||||
(1) | Excludes effects of depreciation, accretion, and amortization expense of $51.5 million, $52.4 million, and $43.1 million, for the years ended December 31, 2009, 2008, and 2007, respectively. The inclusion of this depreciation, accretion, and amortization expense in “Cost of ATM operating revenues” would have increased our Cost of ATM operating revenues as a percentage of total revenues by 10.4%, 10.6%, and 11.4% for the years ended December 31, 2009, 2008, and 2007, respectively. | |
(2) | Includes pre-tax impairment charges of $1.2 million, $0.4 million, and $5.7 million for the years ended December 31, 2009, 2008, and 2007, respectively. |
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(3) | Represents a $50.0 million charge in 2008 to write-down the value of the goodwill associated with our United Kingdom operations. |
2009 | 2008 | 2007 | ||||||||||
Average number of transacting ATMs: | ||||||||||||
United States: Company-owned | 18,190 | 17,993 | 14,143 | |||||||||
United States: Merchant-owned | 10,066 | 10,695 | 11,632 | |||||||||
United Kingdom | 2,606 | 2,421 | 1,718 | |||||||||
Mexico | 2,197 | 1,747 | 784 | |||||||||
Total average number of transacting ATMs | 33,059 | 32,856 | 28,277 | |||||||||
Total transactions (in thousands) | 383,323 | 354,391 | 247,270 | |||||||||
Total cash withdrawal transactions (in thousands) | 244,378 | 228,306 | 166,248 | |||||||||
Monthly cash withdrawal transactions per ATM | 616 | 579 | 490 | |||||||||
Per ATM per month: | ||||||||||||
ATM operating revenues | $ | 1,218 | $ | 1,207 | $ | 1,076 | ||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization)(1)(2) | 842 | 921 | 829 | |||||||||
ATM operating gross profit(1)(3) | $ | 376 | $ | 286 | $ | 247 | ||||||
ATM operating gross profit margin (exclusive of depreciation, accretion, and amortization) | 30.9 | % | 23.7 | % | 22.9 | % | ||||||
ATM operating gross profit margin (inclusive of depreciation, accretion, and amortization) | 20.2 | % | 12.7 | % | 11.1 | % |
(1) | Excludes effects of depreciation, accretion, and amortization expense of $51.5 million, $52.4 million, and $43.1 million for the years ended December 31, 2009, 2008, and 2007, respectively. The inclusion of this depreciation, accretion, and amortization expense in “Cost of ATM operating revenues” would have increased our cost of ATM operating revenues per ATM per month and decreased our ATM operating gross profit per ATM per month by $130, $133, and $127 for the years ended December 31, 2009, 2008, and 2007, respectively. | |
(2) | The decline in the Cost of ATM operating revenues per ATM per month from 2008 to 2009 was due to foreign currency exchange rate movements between the two periods, lower vault cash interest costs, and other operating cost reductions as a result of better pricing terms under the renegotiated contract with our maintenance and armored service providers. | |
(3) | ATM operating gross profit is a measure of profitability that uses only the revenue and expenses that related to operating the ATMs. The revenue and expenses from ATM equipment sales and other ATM-related services are not included. |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2009 | 2008 | 2008 to 2009 | 2007 | 2007 to 2008 | ||||||||||||||||
(In thousands, excluding percentages) | ||||||||||||||||||||
ATM operating revenues | $ | 483,138 | $ | 475,800 | 1.5 | % | $ | 365,322 | 30.2 | % | ||||||||||
ATM product sales and other revenues | 10,215 | 17,214 | (40.7 | )% | 12,976 | 32.7 | % | |||||||||||||
Total revenues | $ | 493,353 | $ | 493,014 | 0.1 | % | $ | 378,298 | 30.3 | % | ||||||||||
2008 to 2009 Variance | ||||||||||||||||
U.S. | U.K. | Mexico | Total | |||||||||||||
Increase (Decrease) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Surcharge revenues | $ | (11,557 | ) | $ | (4,978 | ) | $ | 4,712 | $ | (11,823 | ) | |||||
Interchange revenues | 3,692 | 4,098 | 253 | 8,043 | ||||||||||||
Branding and surcharge-free network revenues | 9,565 | — | (5 | ) | 9,560 | |||||||||||
Other revenues | 798 | — | 760 | 1,558 | ||||||||||||
Total increase (decrease) in ATM operating revenues | $ | 2,498 | $ | (880 | ) | $ | 5,720 | $ | 7,338 | |||||||
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2007 to 2008 Variance | ||||||||||||||||
U.S. | U.K. | Mexico | Total | |||||||||||||
Increase (Decrease) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Surcharge revenue | $ | 33,355 | $ | 2,273 | $ | 5,111 | $ | 40,739 | ||||||||
Interchange revenue | 32,303 | 8,349 | 2,655 | 43,307 | ||||||||||||
Branding and surcharge-free network revenue | 22,481 | — | (2 | ) | 22,479 | |||||||||||
Other | 3,952 | 1 | — | 3,953 | ||||||||||||
Total increase in ATM operating revenues | $ | 92,091 | $ | 10,623 | $ | 7,764 | $ | 110,478 | ||||||||
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2009 | 2008 | 2008 to 2009 | 2007 | 2007 to 2008 | ||||||||||||||||
(In thousands, excluding percentages) | ||||||||||||||||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization) | $ | 333,907 | $ | 362,916 | (8.0 | )% | $ | 281,705 | 28.8 | % | ||||||||||
Cost of ATM product sales and other revenues | 10,567 | 15,625 | (32.4 | )% | 11,942 | 30.8 | % | |||||||||||||
Total cost of revenues (exclusive of depreciation, accretion, and amortization) | $ | 344,474 | $ | 378,541 | (9.0 | )% | $ | 293,647 | 28.9 | % | ||||||||||
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2008 to 2009 Variance | ||||||||||||||||
U.S. | U.K. | Mexico | Total | |||||||||||||
Increase (Decrease) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Merchant commissions | $ | (7,933 | ) | $ | (1,091 | ) | $ | 1,422 | $ | (7,602 | ) | |||||
Vault cash rental expense | (5,409 | ) | (7,575 | ) | 154 | (12,830 | ) | |||||||||
Other cost of cash | (3,370 | ) | (656 | ) | 282 | (3,744 | ) | |||||||||
Repairs and maintenance | (204 | ) | 77 | 576 | 449 | |||||||||||
Communications | (1,050 | ) | (1,278 | ) | 180 | (2,148 | ) | |||||||||
Transaction processing | (1,936 | ) | 76 | 22 | (1,838 | ) | ||||||||||
Stock-based compensation | 177 | — | — | 177 | ||||||||||||
Other expenses | 1,173 | (2,684 | ) | 38 | (1,473 | ) | ||||||||||
Total increase (decrease) in cost of ATM revenues | $ | (18,552 | ) | $ | (13,131 | ) | $ | 2,674 | $ | (29,009 | ) | |||||
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2007 to 2008 Variance | ||||||||||||||||
U.S. | U.K. | Mexico | Total | |||||||||||||
Increase (Decrease) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Merchant commissions | $ | 21,928 | $ | 7,636 | $ | 3,103 | $ | 32,667 | ||||||||
Vault cash rental expense | 7,522 | 2,384 | 1,164 | 11,070 | ||||||||||||
Other cost of cash | 8,628 | 3,035 | 944 | 12,607 | ||||||||||||
Repairs and maintenance | 9,037 | 1,816 | 722 | 11,575 | ||||||||||||
Direct operations | 5,423 | 732 | 505 | 6,660 | ||||||||||||
Communications | 3,862 | 672 | 384 | 4,918 | ||||||||||||
Transaction processing | (2,497 | ) | (924 | ) | (33 | ) | (3,454 | ) | ||||||||
Stock-based compensation | 534 | — | — | 534 | ||||||||||||
Charges related to EMV certification | — | 793 | — | 793 | ||||||||||||
Other expenses | 686 | 3,118 | 37 | 3,841 | ||||||||||||
Total increase in cost of ATM revenues | $ | 55,123 | $ | 19,262 | $ | 6,826 | $ | 81,211 | ||||||||
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For the Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
ATM operating gross profit margin: | ||||||||||||
Exclusive of depreciation, accretion, and amortization | 30.9 | % | 23.7 | % | 22.9 | % | ||||||
Inclusive of depreciation, accretion, and amortization | 20.2 | % | 12.7 | % | 11.1 | % | ||||||
ATM product sales and other revenues gross profit margin | (3.4 | )% | 9.2 | % | 8.0 | % | ||||||
Total gross profit margin: | ||||||||||||
Exclusive of depreciation, accretion, and amortization | 30.2 | % | 23.2 | % | 22.4 | % | ||||||
Inclusive of depreciation, accretion, and amortization | 19.7 | % | 12.6 | % | 11.0 | % |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2009 | 2008 | 2008 to 2009 | 2007 | 2007 to 2008 | ||||||||||||||||
(In thousands, excluding percentages) | ||||||||||||||||||||
Selling, general, and administrative expenses, excluding stock-based compensation | $ | 37,705 | $ | 36,173 | 4.2 | % | $ | 28,394 | 27.4 | % | ||||||||||
Stock-based compensation expense | 3,822 | 2,895 | 32.0 | % | 963 | 200.6 | % | |||||||||||||
Total selling, general, and administrative expenses | $ | 41,527 | $ | 39,068 | 6.3 | % | $ | 29,357 | 33.1 | % | ||||||||||
Percentage of revenues: | ||||||||||||||||||||
Selling, general, and administrative expenses, excluding stock-based compensation | 7.6 | % | 7.3 | % | 7.5 | % | ||||||||||||||
Stock-based compensation expense | 0.8 | % | 0.6 | % | 0.3 | % | ||||||||||||||
Total selling, general, and administrative expenses | 8.4 | % | 7.9 | % | 7.8 | % |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2009 | 2008 | 2008 to 2009 | 2007 | 2007 to 2008 | ||||||||||||||||
(In thousands, excluding percentages) | ||||||||||||||||||||
Depreciation expense | $ | 37,403 | $ | 37,528 | (0.3 | )% | $ | 25,659 | 46.3 | % | ||||||||||
Accretion expense | 2,017 | 1,636 | 23.3 | % | 1,122 | 45.8 | % | |||||||||||||
Depreciation and accretion expense | $ | 39,420 | $ | 39,164 | 0.7 | % | $ | 26,781 | 46.2 | % | ||||||||||
Percentage of Revenues: | ||||||||||||||||||||
Depreciation expense | 7.6 | % | 7.6 | % | 6.8 | % | ||||||||||||||
Accretion expense | 0.4 | % | 0.3 | % | 0.3 | % | ||||||||||||||
Total depreciation and accretion expense | 8.0 | % | 7.9 | % | 7.1 | % |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2009 | 2008 | 2008 to 2009 | 2007 | 2007 to 2008 | ||||||||||||||||
(In thousands, excluding percentages) | ||||||||||||||||||||
Amortization expense | $ | 18,916 | $ | 18,549 | 2.0 | % | $ | 18,870 | (1.7 | )% | ||||||||||
Percentage of revenues | 3.8 | % | 3.8 | % | 5.0 | % |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2009 | 2008 | 2008 to 2009 | 2007 | 2007 to 2008 | ||||||||||||||||
(In thousands, excluding percentages) | ||||||||||||||||||||
Loss on disposal of assets | $ | 6,016 | $ | 5,807 | 3.6 | % | $ | 2,485 | 133.7 | % | ||||||||||
Percentage of revenues | 1.2 | % | 1.2 | % | 0.7 | % |
For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2009 | 2008 | 2008 to 2009 | 2007 | 2007 to 2008 | ||||||||||||||||
(In thousands, excluding percentages) | ||||||||||||||||||||
Interest expense, net | $ | 30,133 | $ | 31,090 | (3.1 | )% | $ | 29,523 | 5.3 | % | ||||||||||
Amortization of financing costs and bond discounts | 2,395 | 2,107 | 13.7 | % | 1,641 | 28.4 | % | |||||||||||||
Total interest expense, net | $ | 32,528 | $ | 33,197 | (2.0 | )% | $ | 31,164 | 6.5 | % | ||||||||||
Percentage of revenues | 6.6 | % | 6.7 | % | 8.2 | % |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2009 | 2008 | 2008 to 2009 | 2007 | 2007 to 2008 | ||||||||||||||||
(In thousands, excluding percentages) | ||||||||||||||||||||
Other expense (income) | $ | 456 | $ | 93 | 390.3 | % | $ | (626 | ) | (114.9 | )% | |||||||||
Percentage of revenues | 0.1 | % | — | (0.2 | )% |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2009 | 2008 | 2008 to 2009 | 2007 | 2007 to 2008 | ||||||||||||||||
(In thousands, excluding percentages) | ||||||||||||||||||||
Income tax expense | $ | 4,245 | $ | 989 | 329.2 | % | $ | 4,477 | (77.9 | )% | ||||||||||
Effective tax rate | 42.4 | % | (1.4 | )% | (19.1 | )% |
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• | Bank Machine overdraft facility. In addition to Cardtronics, Inc.’s $175.0 million revolving credit facility, Bank Machine has a £1.0 million overdraft facility. Such facility, which bears interest at 1.75% over the bank’s base rate (0.5% as of December 31, 2009) and is secured by a letter of credit posted under the our revolving credit facility, is utilized for general corporate purposes for the Company’s United Kingdom operations. As of December 31, 2009, there was no balance outstanding under this overdraft facility. The amount outstanding under the overdraft facility as of December 31, 2008 was approximately £99,000 ($145,000) and is reflected in accounts payable in our Consolidated Balance Sheets, as any borrowings are automatically repaid once cash deposits are made to the underlying bank accounts. | |
• | Cardtronics Mexico equipment financing agreements. Between 2006 and 2009, Cardtronics Mexico entered into nine separate five-year equipment financing agreements with a single lender. These agreements, which are denominated in pesos and bear interest at an average fixed rate of 10.57%, were utilized for the purchase of additional ATMs to support our Mexico operations. As of December 31, 2009, approximately $128.0 million pesos ($9.8 million U.S.) were outstanding under the agreements, with any future borrowings to be individually negotiated between the lender and Cardtronics Mexico. Pursuant to the terms of the equipment financing agreements, we have issued guarantees for 51.0% of the obligations under these agreements (consistent with our ownership percentage in Cardtronics Mexico). As of December 31, 2009, the total amount of the guarantees was $65.3 million pesos ($5.0 million U.S.). | |
• | Capital lease agreements. In connection with the 7-Eleven ATM Transaction, we assumed certain capital and operating lease obligations for approximately 2,000 ATMs. We currently have $0.4 million in letters of credit under our revolving credit facility in favor of the lessors under these assumed equipment leases. These letters of credit reduce the available borrowing capacity under our revolving credit facility. As of December 31, 2009, the principal balance of our capital lease obligations totaled $0.2 million. |
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Payments Due by Period | ||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Long-term financings: | ||||||||||||||||||||||||||||
Principal(1) | $ | 2,122 | $ | 2,860 | $ | 2,360 | $ | 301,326 | $ | 1,142 | $ | — | $ | 309,810 | ||||||||||||||
Interest(2) | 28,685 | 28,423 | 28,121 | 27,938 | 56 | — | 113,223 | |||||||||||||||||||||
Operating leases | 2,598 | 2,089 | 1,978 | 1,946 | 3,919 | 5,163 | 17,693 | |||||||||||||||||||||
Merchant space leases | 2,401 | 2,345 | 2,288 | 2,189 | 365 | 117 | 9,705 | |||||||||||||||||||||
Capital leases(3) | 240 | — | — | — | — | — | 240 | |||||||||||||||||||||
Other(4) | 1,100 | — | — | — | — | — | 1,100 | |||||||||||||||||||||
Total contractual obligations | $ | 37,146 | $ | 35,717 | $ | 34,747 | $ | 333,399 | $ | 5,482 | $ | 5,280 | $ | 451,771 | ||||||||||||||
(1) | Represents the $300.0 million face value of our senior subordinated notes and $9.8 million outstanding under our Mexico equipment financing facilities. | |
(2) | Represents the estimated interest payments associated with our long-term debt outstanding as of December 31, 2009. | |
(3) | Includes interest related to the capital lease obligations. | |
(4) | Represents commitment to purchase $1.1 million of ATM equipment from one of our primary ATM suppliers during 2010. |
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Rank | Top U.S. ATM Owners | Number of ATMs(1) | ||||||
1 | Bank of America | 18,262 | ||||||
2 | Cardtronics | 18,111 | ||||||
3 | JPMorgan Chase | 15,406 | ||||||
4 | Wells Fargo | 12,363 | ||||||
5 | PNC Financial Services Group | 6,473 |
(1) | Source: Compiled by the Company from publicly available information, as of December 31, 2009. |
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Company-Owned | Merchant-Owned | Total | ||||||||||
Number of devices at period end | 22,871 | 10,537 | 33,408 | |||||||||
Percent of total | 68.5 | % | 31.5 | % | 100.0 | % | ||||||
Average monthly withdrawal transactions per average transacting device | 776 | 277 | 616 |
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• | a targeted term of seven years; | |
• | exclusive deployment of devices at locations where we install a device; | |
• | the right to increase surcharge fees, subject to merchant approval; | |
• | our right to remove devices at underperforming locations without having to pay a termination fee; | |
• | in the United States, our right to terminate or remove devices or renegotiate the fees payable to the merchant if surcharge fees are generally reduced or eliminated by law; and | |
• | provisions that make the merchant’s fee dependent on the number of device transactions. |
• | in the United States, provisions prohibiting in-store check cashing by the merchant and, in the United States and United Kingdom, the operation of any other cash-back devices; | |
• | provisions imposing an obligation on the merchant to operate the ATMs at any time its stores are open for business; and | |
• | provisions, when possible, that require the assumption of our contract in the event a merchant sells its stores. |
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Name | Age | |||
Fred R. Lummis | 56 | |||
Steven A. Rathgaber | 56 | |||
J. Tim Arnoult | 60 | |||
Robert P. Barone | 72 | |||
Jorge M. Diaz | 45 | |||
Dennis F. Lynch | 61 | |||
G. Patrick Phillips | 60 | |||
Michael A.R. Wilson | 42 |
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Name | Age | Position | ||||
Steven A. Rathgaber | 56 | Chief Executive Officer | ||||
J. Chris Brewster | 60 | Chief Financial Officer | ||||
Michael H. Clinard | 42 | President of Global Services | ||||
Rick Updyke | 50 | President of Global Development | ||||
Carleton K. “Tres” Thompson, III | 41 | Chief Accounting Officer |
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• | Mr. Lummis. Mr. Lummis co-founded and currently serves as a senior advisor to The CapStreet Group, LLC, CapStreet II, L.P. and CapStreet Parallel II, L.P. (the “CapStreet Funds”). The CapStreet Funds collectively own 21.7% of our common stock as of March 15, 2010. Our Nominating & Governance Committee has reviewed Mr. Lummis’ connection to the CapStreet Funds and the CapStreet Funds’ influence over us and determined that the CapStreet Funds’ influence over us is not material and that Mr. Lummis’ relationship with the CapStreet Funds does not impair his independence. However, on March 17, 2009, Mr. Lummis was appointed as our Interim Chief Executive Officer. Accordingly, Mr. Lummis was not considered to be an independent director while he served in that position. Effective February 1, 2010, Mr. Lummis resigned as our Interim Chief Executive Officer, concurrent with the appointment of Steven A. Rathgaber as the Company’s Chief Executive Officer. Because Mr. Lummis served as our Interim Chief Executive Officer for less than a full year, he is still considered to be an independent director. | |
• | Mr. Wilson. Mr. Wilson is the managing director at TA Associates, Inc., a private equity firm. TA Associates, Inc. is the ultimate parent of TA IV, L.P, TA/Atlantic Pacific V, L.P., TA/Atlantic Pacific IV, L.P., TA Strategic Partners Fund A L.P., TA Investors II, L.P. and TA Strategic Partners Fund B L.P. (collectively, the “TA Funds”). The TA Funds collectively own 27.7% of our common stock as of March 15, 2010. Our Nominating & Corporate Governance Committee has reviewed Mr. Wilson’s connection to the TA Funds and the TA Funds’ influence over us and determined that the TA Funds’ influence over us is not material and that Mr. Wilson’s relationship with the TA Funds does not impair his independence. | |
• | Mr. Diaz. Mr. Diaz has not been considered independent following our initial public offering in 2007 because of his employment with Fiserv Output Solutions, a division of Fiserv, Inc. In 2009, we paid |
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approximately $23.6 million in fees to Fiserv for services rendered to us in the ordinary course of business. |
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Nominating & | ||||||||||||
Audit | Compensation | Governance | ||||||||||
Name | Committee | Committee | Committee | |||||||||
J. Tim Arnoult | X | X | * | |||||||||
Robert P. Barone(1) | X | * | X | |||||||||
Fred R. Lummis | X | |||||||||||
Dennis F. Lynch | X | X | * | |||||||||
G. Patrick Phillips | X | X | ||||||||||
Michael A.R. Wilson | X | X |
* | Committee Chairman. | |
(1) | Mr. Barone served as a member of our Compensation Committee from March 17, 2009 through February 1, 2010, in connection with Mr. Lummis’ temporary resignation from that committee. |
• | assist the Board in fulfilling its oversight responsibilities with respect to the conduct by our management of our financial reporting process, including the development and maintenance of a system of internal accounting and financial reporting controls; |
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• | assist the Board in overseeing the integrity of our financial statements, qualifications and independence of our independent registered public accounting firm, and the performance of such firm and our internal audit function; | |
• | prepare the annual Audit Committee report, in accordance with applicable rules and regulations; and | |
• | perform such other functions as the Board may assign to the Audit Committee from time to time. |
• | oversee the responsibilities of the Board relating to compensation of our directors and executive officers; | |
• | design, recommend and evaluate our director and executive officer compensation plans, policies and programs; | |
• | prepare the annual Compensation Committee Report, in accordance with applicable rules and regulations; | |
• | otherwise discharge our Board’s responsibilities relating to compensation of our directors and executive officers; and | |
• | perform such other functions as our Board may assign to the committee from time to time. |
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• | prepares and recommends to our Board for adoption appropriate Corporate Governance Principles and modifications from time to time to those principles; | |
• | establishes criteria for selecting new directors and seeks individuals qualified to become board members for recommendation to our Board; | |
• | seeks to implement the “independence” standards required by law, applicable listing standards, our certificate of incorporation or bylaws or our Corporate Governance Principles; | |
• | determines whether or not each director and each prospective director is independent, disinterested or a non-employee director under the standards applicable to the committees on which such director is serving or may serve; | |
• | reviews annually the advisability or need for any changes in the number and composition of our Board; | |
• | reviews annually the advisability or need for any changes in the number, charters or titles of committees of our Board; | |
• | recommends to our Board annually the composition of each Board committee and the individual director to serve as chairman of each committee; | |
• | reports to our Board annually with an assessment of our Board’s performance to be discussed with the full Board following the end of each fiscal year; and | |
• | works with our Compensation Committee relating to the evaluation, performance, development and success of the CEO and executive officers to evaluate potential successors to the principal executive officer. |
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Name | Position | |
Fred R. Lummis | Interim Chief Executive Officer | |
J. Chris Brewster | Chief Financial Officer | |
Michael H. Clinard | President of Global Services | |
Rick Updyke | President of Global Development | |
Carleton K. “Tres” Thompson, III | Chief Accounting Officer | |
Jack M. Antonini | Former Chief Executive Officer |
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• | updates regarding regulatory changes affecting our compensation program; | |
• | information on market trends, practices and other data; | |
• | assistance in designing program elements; and | |
• | overall guidance and advice about the efficacy of each element of our compensation program and its fit within the Committee’s developing compensation philosophy. |
Fiscal Year | ||||
Company Name | 2009 Revenue | |||
(In millions) | ||||
Coinstar, Inc. | $ | 1,144.8 | ||
Euronet Worldwide, Inc. | 1,032.7 | |||
Global Cash Access Holdings, Inc. | 667.7 | |||
Heartland Payment Systems, Inc. | 1,652.1 | |||
TNS, Inc. | 474.8 | |||
Wright Express Corporation | 318.2 |
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Quarter of 2009 | Items Associated with Plan Administration | |
1st Quarter | Reviewed financial and operational results for 2008 and based upon that review, approved bonuses relating to 2008 performance. Acting upon management’s recommendation, agreed that due to the uncertain economic environment, no salary increases would be granted to employees at the mid-management level or higher. | |
2nd Quarter | With input from PM&P, submitted to the Board the 2009 director compensation plan. Commenced work with PM&P to develop a comprehensive non-equity management incentive compensation plan. | |
3rd Quarter | Through multiple meetings, developed and approved a comprehensive non-equity incentive compensation plan for 2009. Considered and approved (i) special bonuses for certain non-executive employees for services performed during the first and second quarters of 2009, and (ii) equity awards to certain non-executive employees who had not previously been granted equity awards. | |
4th Quarter | Reviewed publicly available compensation data from the Company’s peer group, as well as other similar companies to determine what, if any, additional compensation policies or guidelines should be recommended in the future. Began working on the Company’s 2010 non-equity and equity incentive compensation programs. Reviewed the proposed compensation package for the Company’s new Chief Executive Officer and, following consultation with PM&P, submitted a recommendation to the Board for approval. On December 7, 2009, Mr. Diaz relinquished his role as both a member and Chairman of the Compensation Committee. Mr. Lynch replaced Mr. Diaz as both a member and Chairman of the Compensation Committee. |
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Element | Form of Compensation | Purpose/Objective | Performance Metric(s) | |||
Base Pay | Cash — fixed | To recognize role, responsibilities and experience consistent with market for comparable positions | Not performance-based | |||
Annual Non-Equity Incentive Plan Awards | Cash — variable | To reward operating results consistent with the non-equity incentive compensation plan and to provide a strong motivational tool to achieve earnings and other related pre-established objectives | Adjusted EBITDA and ROIC | |||
Long-Term Incentive Awards | Stock options and restricted stock awards — variable | To create a strong financial incentive for achieving or exceeding long-term performance goals and encourage a significant equity stake in our Company | Historically, such awards have not been performance-based. However, the Compensation Committee is considering in 2010 the use of performance- based awards as a component of future grants | |||
Discretionary Bonuses | Cash — variable | To reward an executive for significant contributions to a Company initiative or when the executive has performed at a level above what was expected | Varies, but typically relates to performance with respect to special projects that require significant time and effort on the part of the executive, such as our initial public offering in 2007 | |||
Health, Life, Retirement Savings and Other Benefits | Eligibility to participate in benefit plans generally available to our employees, including retirement, health, life insurance and disability plans — generally fixed | Plans are part of our broad-based employee benefits program | Not performance-based |
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Element | Form of Compensation | Purpose/Objective | Performance Metric(s) | |||
Executive Severance and Change in Control Agreements | Payment of compensation and for benefit coverage costs in the form of separation payments — subject to compliance with restrictive covenants and related conditions. Levels are fixed for duration of employment agreements | To provide the executive with assurances against certain types of terminations without cause or resulting from change-in-control where the terminations were not based upon cause. This type of protection is intended to provide the executive with a basis for keeping focus and functioning in the stockholders’ interests at all times | Not performance-based | |||
Limited Perquisites | Cash — fixed | To provide executive with additional benefits considered necessary or customary for his position | Not performance-based |
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2009 Incentive Payout as a % of Base Salary | ||||||||||||
Threshold | Target | Maximum | ||||||||||
Named Executive Officer | Performance | Performance | Performance | |||||||||
Fred R. Lummis | — | — | — | |||||||||
J. Chris Brewster | 25% | 50% | 100% | |||||||||
Michael H. Clinard | 25% | 50% | 100% | |||||||||
Rick Updyke | 25% | 50% | 100% | |||||||||
Carleton K. “Tres” Thompson, III | 20% | 40% | 80% | |||||||||
Jack M. Antonini | 25% | 50% | 100% |
2009 Incentive | ||||||
MBO Rating | Performance | Payout Multiplier | ||||
5 | All MBOs exceeded | 120% | ||||
4 | All MBOs attained | 100% | ||||
3 | Substantially all MBOs attained | 80% | ||||
2 | Most but not all MBOs attained | 50% | ||||
1 | Most MBOs missed | 0% |
• | Adjusted EBITDA. The annual Company-level financial targets set under the Plan for 2009 were consistent with the Adjusted EBITDA and capital expenditure ranges reflected in our annual budget and communicated to investors at the beginning of the year. As we expect to achieve our budgeted Adjusted EBITDA and capital expenditure (and thus, ROIC) targets when they are set, and the financial targets set under the Plan are consistent with the Adjusted EBITDA and capital expenditure (and thus ROIC) ranges reflected in our annual budget, we have similar expectations that the targets under our Plan will be achieved. |
• | ROIC. For ROIC, the threshold level was set at 19.2% (which is the level achieved if the Capital Invested in 2009 was at budgeted levels and Adjusted EBITDA was 90% of budget); the targeted ROIC level was set at 23.5% (which is the level achieved if the Capital Invested in 2009 was at budgeted levels and Adjusted EBITDA was 100% of budget); and the maximum ROIC level was set at 32.0% (which was the level achieved if Capital Invested was at budgeted levels and Adjusted EBITDA was |
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120% of budget). As with the Adjusted EBITDA target, any actions approved by the Board that may affect the attainment of the originally budgeted ROIC amount would result in a revised targeted ROIC figure for bonus calculation purposes. No such revisions were required in 2009. |
Metric | Weighting | Threshold | Target | Maximum | ||||||||||||
Adjusted EBITDA | 50% | $ | 72,000,000 | $ | 80,000,000 | $ | 96,000,000 | |||||||||
ROIC(1) | 50% | 19.2% | 23.5% | 32.0% |
(1) | ROIC for 2009 is defined in the 2009 Plan as follows: |
• | Net Operating Profit After Tax (“NOPAT”) divided by Capital Invested, where: |
• | NOPAT is defined as Adjusted EBITDA less depreciation for the relevant Plan year, less adjustments for non-wholly-owned subsidiaries, less income taxes calculated using a 35% effective tax rate; and | |
• | Capital Invested is defined as the average of our total assets minus goodwill and intangible assets, minus accounts payable, accrued liabilities, assets related to interest rate hedging activities and asset retirement obligations, all as reported in our quarterly reports onForm 10-Q and annual reports onForm 10-K for the trailing five quarterly periods then ended. |
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• | 401(k) Savings Plan. We have a defined contribution 401(k) plan, which is designed to assist our employees in providing for their retirement and allow us to remain competitive in the market place in terms of benefits offered to employees. Each of our executive officers is entitled to participate in this plan to the same extent that our other employees are entitled to participate. In 2007, we began matching 25% of employee contributions up to 6.0% of the employee’s salary (for a maximum matching contribution of 1.5% of the employee’s salary by us). Employees are immediately vested in their contributions while our matching contributions will vest at a rate of 20% per year. | |
• | Health and Welfare Benefits. Our executive officers are eligible to participate in medical, dental, vision, disability and life insurance, and flexible healthcare and dependent care spending accounts to meet their health and welfare needs under the same plans and terms as the rest of our employees. These benefits are provided so as to assure that we are able to maintain a competitive position in terms of attracting and retaining executive officers and other employees. This program is a fixed component of compensation and the benefits are provided on a non-discriminatory basis to all of our employees. | |
• | Perquisites and Other Personal Benefits. We believe that the total mix of compensation and benefits provided to our executive officers is competitive and perquisites should generally not play a large role in our executive officers’ total compensation. As a result, the perquisites and other personal benefits we provide to our executive officers are very limited in nature and are not guaranteed to be provided to any Named Executive Officer in any given year; thus, no significant perquisites were provided to our Named Executive Officers during the 2009 year. |
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* | Effective March 17, 2009, Mr. Lummis resigned as a member of our Compensation Committee in connection with him assuming the role of our Interim Chief Executive Officer. Effective February 1, 2010, Mr. Lummis resigned as our Interim Chief Executive Officer, at which point, the Board re-appointed Mr. Lummis to the Compensation Committee. | |
** | Concurrent with Mr. Lummis’ resignation from the Compensation Committee, Mr. Barone was appointed to the Compensation Committee. Mr. Barone served in this capacity until resigning from the Compensation Committee effective February 1, 2010, concurrent with Mr. Lummis’ re-appointment. | |
*** | Mr. Diaz served as the Chairman of the Compensation Committee through December 7, 2009. Effective as of that date, Mr. Diaz resigned from the Compensation Committee due to independence restrictions resulting from Mr. Diaz’ employment with Fiserv, Inc. Mr. Lynch replaced Mr. Diaz as the Chairman of the Compensation Committee effective on the same date. |
Non-Equity | ||||||||||||||||||||||||||||
Stock | Incentive Plan | All Other | ||||||||||||||||||||||||||
Name & Principal Position | Year | Salary | Bonus | Awards(1) | Compensation | Compensation(2) | Total | |||||||||||||||||||||
Steven A. Rathgaber(3) | 2009 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||||||
Fred R. Lummis | 2009 | $ | — | $ | 250,000 | (4) | $ | — | $ | — | $ | — | $ | 250,000 | ||||||||||||||
Interim Chief Executive Officer | ||||||||||||||||||||||||||||
J. Chris Brewster | 2009 | $ | 302,500 | $ | — | $ | — | $ | 302,500 | $ | 4,481 | $ | 609,481 | |||||||||||||||
Chief Financial Officer | 2008 | 302,500 | — | 1,521,000 | 104,091 | 3,321 | 1,930,912 | |||||||||||||||||||||
2007 | 275,000 | 30,000 | — | 133,375 | 3,901 | 442,276 | ||||||||||||||||||||||
Michael H. Clinard | 2009 | $ | 370,800 | $ | — | $ | — | $ | 370,800 | $ | 927 | $ | 742,527 | |||||||||||||||
President of Global Services | 2008 | 370,800 | — | 1,132,300 | 134,309 | 2,079 | 1,639,488 | |||||||||||||||||||||
2007 | 243,101 | 20,000 | — | 129,694 | 10,739 | (5) | 403,534 | |||||||||||||||||||||
Rick Updyke(6) | 2009 | $ | 291,000 | $ | — | $ | — | $ | 291,000 | $ | 4,125 | $ | 586,125 | |||||||||||||||
President of Global Development | 2008 | 291,000 | — | 676,000 | 100,134 | 13,045 | (7) | 1,080,179 | ||||||||||||||||||||
Carleton K. “Tres” Thompson, III(8) | 2009 | $ | 200,170 | $ | — | $ | — | $ | 160,136 | $ | — | $ | 360,306 | |||||||||||||||
Chief Accounting Officer | ||||||||||||||||||||||||||||
Jack M. Antonini(9) | 2009 | $ | 86,910 | (9) | $ | — | $ | — | $ | — | $ | 423,830 | (10) | $ | 510,740 | |||||||||||||
Former Chief Executive Officer | 2008 | 397,470 | — | 1,014,000 | (11) | 136,771 | 3,967 | 1,552,208 | ||||||||||||||||||||
2007 | 364,651 | 30,000 | — | 176,856 | 2,051 | 573,558 |
(1) | The amounts included in the “Stock Awards” columns represent the aggregate grant date fair value of awards made to our Named Executive Officers, computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718. The value ultimately realized by the executive upon the actual vesting of the award(s) may or may not be equal to the value(s) reflected above. Assumptions used in |
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the calculation of these amounts are included in Part II, Item 8. Financial Statements and Supplementary Data, Note 4, Stock-Based Compensation, to our audited consolidated financial statements for the fiscal year ended December 31, 2009, included in our 2009 Annual Report onForm 10-K. We did not grant stock option awards to the listed Named Executive Officers in any of 2007, 2008 or 2009, and no restricted stock awards were granted with regard to the 2009 year. |
(2) | Amounts in this column reflect the amount of Company matching contributions made to our 401(k) Plan on behalf of the eligible Named Executive Officer, unless otherwise noted in the applicable footnotes below. | |
(3) | Mr. Rathgaber assumed the position of Chief Executive Officer on February 1, 2010. Prior to such date, Mr. Rathgaber was not employed by us. | |
(4) | Mr. Lummis served as the Company’s Interim Chief Executive Officer from March 17, 2009 through February 1, 2010. In recognition of his significant contributions to the Company, the Compensation Committee of our Board of Directors awarded Mr. Lummis a one-time special payment in the amount of $250,000. | |
(5) | The $10,739 amount presented within the “All Other Compensation” column in 2007 for Mr. Clinard is comprised of $9,750 in car allowance payments provided for under Mr. Clinard’s previous employment agreement, and $989 of matching contributions made under our 401(k) plan. The employment agreement signed by Mr. Clinard in June 2008 did not include any car allowance payments. | |
(6) | No information is presented for Mr. Updyke for 2007, as he did not qualify as a Named Executive Officer prior to 2008. | |
(7) | The $13,045 amount presented within the “All Other Compensation” column in 2008 for Mr. Updyke is comprised of $9,000 in car allowance payments provided for under Mr. Updyke’s previous employment agreement, and $4,045 of matching contributions made under our 401(k) plan. The employment agreement signed by Mr. Updyke in June 2008 did not include any car allowance payments. | |
(8) | No information is presented for Mr. Thompson for 2008 and 2007, as he did not qualify as a Named Executive Officer prior to 2009. | |
(9) | Mr. Antonini’s employment and directorship with us ended effective March 17, 2009. Accordingly, the amount reflected in the “Salary” column above represents the amount earned by Mr. Antonini for the period from January 1, 2009 through March 17, 2009. | |
(10) | The $423,830 amount included in the “All Other Compensation” column in 2009 for Mr. Antonini is comprised of $422,427 in severance payments made to Mr. Antonini following the termination of his employment with the Company effective March 17, 2009, and $1,403 of matching contributions made under our 401(k) plan. For further information, see the discussion in “— Potential Payments upon Termination or Change in Control” section included below. | |
(11) | Upon the termination of Mr. Antonini’s employment with the Company as of March 17, 2009, the stock award granted to Mr. Antonini in 2008 was forfeited as of that date. |
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Estimated Possible/Future Payouts Under | ||||||||||||
Non-Equity Incentive Plan Awards(2) | ||||||||||||
Name | Threshold(3) | Target | Maximum(3) | |||||||||
Fred R. Lummis(4) | $ | — | $ | — | $ | — | ||||||
J. Chris Brewster | $ | 75,625 | $ | 151,250 | $ | 302,500 | ||||||
Michael H. Clinard | $ | 92,700 | $ | 185,400 | $ | 370,800 | ||||||
Rick Updyke | $ | 72,750 | $ | 145,500 | $ | 291,000 | ||||||
Carleton K. “Tres” Thompson, III | $ | 40,034 | $ | 80,068 | $ | 160,136 | ||||||
Jack M. Antonini | $ | 99,368 | $ | 198,735 | $ | 397,470 |
(1) | On January 15, 2010, each of Messrs. Brewster, Clinard and Updyke were granted 100,000 shares of restricted shares for services rendered to us in 2009. | |
(2) | Represents the dollar value of the applicable range (threshold, target and maximum amounts) of the awards granted to each Named Executive Officer for 2009. The actual non-equity incentive plan compensation awards paid to the Named Executive Officers for 2009 are reflected in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table for 2009.” | |
(3) | Under the 2009 Plan, the threshold payout amount an executive could receive for the 2009 year was equal to 50% of his individual target goal, while the maximum payout amount an executive could receive for the 2009 year was equal to 200% of his individual target goal. | |
(4) | Mr. Lummis was not eligible for an award under our 2009 Plan due to his status as Interim CEO. |
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Percentage of | ||||
Name | Total Compensation | |||
Fred R. Lummis | 100.0 | % | ||
J. Chris Brewster | 49.6 | % | ||
Michael H. Clinard | 49.9 | % | ||
Rick Updyke | 49.6 | % | ||
Carleton K. “Tres” Thompson, III | 55.6 | % | ||
Jack M. Antonini | 17.0 | % |
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Option Awards | Stock Awards | |||||||||||||||||||||||
Number of Securities | Number of Securities | Market Value of | ||||||||||||||||||||||
Underlying | Underlying | Option | Option | Number of Shares or | Shares or Units of | |||||||||||||||||||
Unexercised Options | Unexercised Options | Exercise | Expiration | Units of Stock That | Stock That Have | |||||||||||||||||||
Name | (#) Exercisable | (#) Unexercisable | Price | Date | Have Not Vested(1) | Not Vested(2) | ||||||||||||||||||
Fred R. Lummis | — | — | — | — | — | — | ||||||||||||||||||
J. Chris Brewster | — | — | — | — | 135,000 | $ | 1,493,100 | |||||||||||||||||
357,682 | — | $ | 6.54 | 03-31-2014 | — | — | ||||||||||||||||||
89,420 | 29,807 | (3) | $ | 10.55 | 03-05-2016 | — | — | |||||||||||||||||
Michael H. Clinard | — | — | — | — | 100,500 | $ | 1,111,530 | |||||||||||||||||
98,696 | — | $ | 0.74 | 06-03-2011 | — | — | ||||||||||||||||||
49,805 | — | $ | 1.48 | 03-02-2012 | — | — | ||||||||||||||||||
59,614 | 19,871 | (3) | $ | 10.55 | 03-05-2016 | — | — | |||||||||||||||||
Rick Updyke | — | — | — | — | 60,000 | $ | 663,600 | |||||||||||||||||
139,098 | 139,099 | (4) | $ | 13.08 | 07-15-2017 | — | — | |||||||||||||||||
Carleton K. “Tres” Thompson, III | — | — | — | — | 60,000 | $ | 663,600 | |||||||||||||||||
15,013 | — | $ | 6.54 | 06-06-2014 | — | — | ||||||||||||||||||
39,742 | — | $ | 10.55 | 02-09-2015 | — | — | ||||||||||||||||||
29,807 | 9,935 | (3) | $ | 10.55 | 03-05-2016 | — | — | |||||||||||||||||
Jack M. Antonini | — | — | — | — | — | — |
(1) | The forfeiture provisions on these shares lapse at the rate of 25% of the underlying shares on each of the first four anniversaries of the June 20, 2008 grant date. These restricted shares were granted pursuant to our 2007 Plan. | |
(2) | The market value of shares that have not vested is based on the closing price of our stock as of December 31, 2009, of $11.06 per share. | |
(3) | These stock options become exercisable as to 25% of the underlying option shares on each of the first four anniversaries of the grant date. 25% of the underlying option shares for the stock options granted on March 6, 2006 became exercisable on each of March 6, 2007, March 6, 2008 and March 6, 2009. These remaining options vested on March 6, 2010. These stock options were each granted pursuant to our 2001 Plan. | |
(4) | These stock options become exercisable as to 25% of the underlying option shares on each of the first four anniversaries of the employee’s employment date. 25% of the underlying option shares for the stock options granted on November 19, 2007 became exercisable on each of July 16, 2008, and July 16, 2009. These remaining options will vest in two equal annual installments, the first of which will occur on July 16, 2010 and the last of which will occur on July 16, 2011. These stock options were granted pursuant to our 2007 Plan. |
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Option Awards | Stock Awards | |||||||||||||||
Number of Shares | Value Realized | Number of Shares | Value Realized | |||||||||||||
Acquired on | Upon | Acquired on | on | |||||||||||||
Name | Exercise | Exercise(1) | Vesting | Vesting(2) | ||||||||||||
Fred R. Lummis | — | — | — | — | ||||||||||||
J. Chris Brewster | — | — | 45,000 | $ | 154,350 | |||||||||||
Michael H. Clinard | — | — | 33,500 | $ | 114,905 | |||||||||||
Rick Updyke | — | — | 20,000 | $ | 68,600 | |||||||||||
Carleton K. “Tres” Thompson, III | 24,729 | $ | 102,859 | 20,000 | $ | 68,600 | ||||||||||
Jack M. Antonini | — | — | — | — |
(1) | Based on the difference between the average of the high and low of our stock on the exercise date and the exercise price of the option, which is the method by which we determine fair market value. | |
(2) | Based on the average of the high and low trading price of our common stock as of the date of vesting. |
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• | Cause. |
• | Messrs. Brewster, Clinard, and Thompson may be terminated for cause if the executive: (1) engages in gross negligence, gross incompetence or willful misconduct in the performance of his employment duties; (2) refuses, without proper legal reason, to perform his employment duties and responsibilities; (3) materially breaches any material provision of his employment agreement, any written agreement or a corporate policy or code of conduct established by us; (4) willfully engages in conduct that is materially injurious to us; (5) discloses without specific authorization confidential information that is materially injurious to us; (6) commits an act of theft, fraud, embezzlement, misappropriation or willful breach of a fiduciary duty to us; (7) is convicted of (or pleads no contest to) a crime involving fraud, dishonesty or moral turpitude or any felony (or a crime of similar import in a foreign jurisdiction). | |
• | Mr. Updyke may be terminated for cause if he (1) engages in gross negligence or willful misconduct when performing his employment duties; (2) is indicted for a felony; (3) refuses to perform his employment duties; (4) materially breaches any of our policies or our code of conduct; (5) engages in conduct in which the executive knows would be materially injurious to us; or (6) materially breaches, and fails to cure, any provision of his employment agreement. |
• | Change in Control. Messrs. Brewster and Clinard’s agreements state that a change in control may occur upon any of the following events: |
• | a merger, consolidation, or asset sale where all or substantially all of our assets are held by a third party if (1) the holders of our equity securities no longer own equity securities of the resulting entity that are entitled to 60% or more of the votes eligible to be cast in the election of directors of the resulting entity, or (2) the members of the Board immediately prior to such transaction no longer constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event; | |
• | our dissolution or liquidation; | |
• | the date any person or entity, including a “group” as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the resulting entity’s outstanding securities; or | |
• | as a result of or in connection with a contested election of directors, the members of the Board immediately before such election cease to constitute a majority of the Board. |
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• | Good Reason. |
• | Messrs. Brewster and Clinard have the right to terminate employment upon the occurrence of any of the following good reason events: (1) a material diminution in the executive’s base salary; (2) a material diminution of the executive’s authority, duties or responsibilities of his job function; and (3) without the executive’s prior consent, a required involuntary relocation of more than 75 miles from our corporate headquarters in Houston, Texas. | |
• | Mr. Updyke has the right to terminate employment upon the occurrence of any of the following good reason events: (1) prior to the first anniversary date of employee’s employment, the Company is sold and as a consequence of such sale Mr. Updyke is (a) not retained in the same job function; (b) required to relocate to a location that is greater than 100 miles from Dallas, Texas; or (c) without his prior consent, the assignment of duties inconsistent with his current role or any significant reduction or significant change in either position or job function, except in connection with the termination of employment for cause or in connection with the termination of employment by reason of him becoming totally disabled (defined below); or (2) a material breach by us of Article 4 of his employment agreement (i.e., the article governing the payment of compensation and the provision of benefits to Mr. Updyke). | |
• | Mr. Thompson’s agreement does not contain a “good reason” concept. |
• | Totally Disabled. |
• | Under Messrs. Brewster, Clinard, and Thompson’s employment agreements, we have the right to terminate the executive’s employment at any time if the employee is unable to perform his duties or fulfill his obligations by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, as certified by a competent physician (without this specifically being deemed as “totally disabled”). | |
• | Under Mr. Updyke’s employment agreement, we have the right to terminate his employment at any time if he becomes Totally Disabled. The executive will be considered totally disabled if, by reason of his illness, incapacity or other disability, the executive fails to perform his duties or fulfill his obligations under his employment agreement, as certified by a competent physician, for 180 days in any 12 month period. |
• | Without Cause Termination. A termination without cause shall mean a termination of the executive’s employment other than for death, voluntary resignation, total disability, or cause. |
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Termination in | ||||||||||||||||||||||
Without | Good Reason | Change in | Connection | |||||||||||||||||||
Cause | Termination | Control (No | with a Change | Death or | ||||||||||||||||||
Executive | Benefits | Termination | By Executive | Termination) | in Control | Disability | ||||||||||||||||
J. C. Brewster | Base salary | $ | 605,000 | (1) | $ | 605,000 | (1) | $ | — | $ | 605,000 | (1) | $ | — | ||||||||
Non-equity incentive compensation | 237,466 | (1) | 237,466 | (1) | — | 237,466 | (1) | — | ||||||||||||||
Post-employment health care | 27,474 | (1) | 27,474 | (1) | — | 27,474 | (1) | — | ||||||||||||||
Restricted shares | — | — | 746,550 | (2) | 1,493,100 | (3) | 497,700 | (4) | ||||||||||||||
Taxgross-up | — | — | — | — | (5) | — | ||||||||||||||||
Total | $ | 869,940 | $ | 869,940 | $ | 746,550 | $ | 2,363,040 | $ | 497,700 | ||||||||||||
M. H. Clinard | Base salary | $ | 741,600 | (1) | $ | 741,600 | (1) | $ | — | $ | 741,600 | (1) | $ | — | ||||||||
Non-equity incentive compensation | 264,003 | (1) | 264,003 | (1) | — | 264,003 | (1) | — | ||||||||||||||
Post-employment health care | 27,329 | (1) | 27,329 | (1) | — | 27,329 | (1) | — | ||||||||||||||
Restricted shares | — | — | 555,765 | (2) | 1,111,530 | (3) | 370,510 | (4) | ||||||||||||||
Taxgross-up | — | — | — | 409,841 | (5) | — | ||||||||||||||||
Total | $ | 1,032,932 | $ | 1,032,932 | $ | 555,765 | $ | 2,554,303 | $ | 370,510 | ||||||||||||
R. Updyke(6) | Base salary | $ | 291,000 | (7) | $ | 291,000 | (7) | $ | — | $ | — | $ | — | |||||||||
Post-employment health care | 8,604 | (7) | 8,604 | (7) | — | — | — | |||||||||||||||
Restricted shares | — | — | — | — | 221,200 | (4) | ||||||||||||||||
Total | $ | 299,604 | $ | 299,604 | $ | — | $ | — | $ | 221,200 | ||||||||||||
C. K. “Tres” Thompson, III(6) | Base salary | $ | 200,170 | (8) | $ | — | $ | — | $ | — | $ | — | ||||||||||
Post-employment health care | 18,316 | (8) | — | — | — | — | ||||||||||||||||
Restricted shares | — | — | — | — | 221,200 | (4) | ||||||||||||||||
Total | $ | 218,486 | $ | — | $ | — | $ | — | $ | 221,200 |
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(1) | In the event of a without cause termination, a good reason termination by Messrs. Brewster or Clinard, or a termination in connection with a change in control, the executive indicated would be entitled to receive severance pay equal to two times his then-current base salary plus two times the average amount paid to him in the two preceding calendar years under our non-equity incentive plan. The average of each executive’s 2008 and 2007 payout amounts were used to calculate the values in the table above. Additionally, in the event the executive elected to continue benefits coverage through our group health plan under COBRA, we would reimburse the executive for the COBRA premiums for up to 18 months. For each executive, all amounts would be payable in bi-monthly installments; provided, however, that if the executive is a “specified employee” under Section 409A of the Internal Revenue Code at the time of his termination, the amounts will be delayed for a period of six months to the extent required to avoid additional federal income taxes for the executive. | |
(2) | Pursuant to the terms of Messrs. Brewster and Clinard’s restricted stock agreements, in the event of a change in control, 50% of all remaining forfeiture restrictions lapse effective as of the date the change in control occurs. The amounts presented above represent the product of (a) the number of restricted shares that would have vested as of December 31, 2009 upon the change in control, and (b) $11.06, the closing price of our common stock as of December 31, 2009. | |
(3) | Pursuant to the terms of Messrs. Brewster and Clinard’s restricted stock agreements, in the event the executive is terminated following a change in control, and such termination is an Involuntary Termination or a Good Reason Termination, all remaining forfeiture restrictions lapse effective as of the termination date. The amounts presented represent the product of (a) the number of then unvested restricted shares that each executive held as of December 31, 2009, and (b) $11.06, the closing price of our common stock as of December 31, 2009. | |
(4) | Pursuant to the terms of Messrs. Brewster, Clinard, Updyke and Thompson’s restricted stock agreements, in the event the executive dies or becomes disabled during the term of his employment, the percentage of the total number of restricted shares as to which the forfeiture restrictions shall lapse shall automatically increase by 25% of the shares awarded. The amounts presented represent the product of (a) the number of restricted shares that would have vested as of December 31, 2009 upon the aforementioned events, and (b) $11.06, the closing price of our common stock as of December 31, 2009. | |
(5) | Federal excise taxgross-up payments were calculated pursuant to Section 280G of the Code. Only the severance amount payable to Mr. Clinard exceeded his Section 280G safe harbor amount; therefore, he is the only Named Executive Officer that would have received agross-up payment for federal excise taxes in the event his employment was terminated on December 31, 2009 following a change in control of our Company. Mr. Clinard’s potentialgross-up payment was calculated based upon an excise tax rate under Section 4999 of the Internal Revenue Code of 20%, a 35% federal income tax rate and a 1.45% Medicare tax rate. | |
(6) | In the event of a termination of employment for any reason other than cause, Messrs. Updyke and Thompson would be entitled to receive payment of any prior year bonus earned under our non-equity incentive plan (if not already paid) and a pro rata portion of the amount earned under our non-equity incentive plan for the year in which the termination occurred. However, such amounts would not be considered a “termination payment” but rather would represent compensation earned by the executive for services rendered, and we, therefore, have not reflected these amounts in the table. | |
(7) | In the event of a termination without cause or a good reason termination by the executive, Mr. Updyke would be entitled to receive severance pay equal to 12 months of his current base salary. This amount would be payable in bi-monthly installments. However, in the event he accepts another full-time employment position (defined as 20 hours per week) within one year after termination, remaining payments to be made by us would be reduced by the gross amount being earned under his new employment arrangement. Additionally, if Mr. Updyke elected to continue benefits coverage through our group health plan under COBRA, we would partially subsidize Mr. Updyke’s incremental healthcare premiums. Specifically, we would reimburse Mr. Updyke on a monthly basis for the difference between the amount he must pay to continue such coverage and the employee contribution amount that active senior executive employees would pay for the same or similar coverage under our group health plan. Amounts shown |
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above represent the difference in Mr. Updyke’s current insurance premiums and current COBRA rates for a similar plan. | ||
(8) | In the event of a termination without cause, Mr. Thompson would be entitled to receive severance pay equal to 12 months of his current base salary. This amount would be payable in bi-monthly installments. However, in the event he accepts another full-time employment position (defined as 20 hours per week) within one year after termination, remaining payments to be made by us would be reduced by the gross amount being earned under his new employment arrangement. Additionally, in the event the Mr. Thompson elected to continue benefits coverage through our group health plan under COBRA, we would reimburse Mr. Thompson for the COBRA premiums for up to 12 months. |
• | The program design provides a balanced mix of cash and equity, annual and longer-term incentives, and performance metrics. |
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• | Our 2009 non-equity incentive compensation plan has a cap. | |
• | Compliance and ethical behaviors are integral factors considered in all performance assessments. | |
• | We set the proper ethical and moral expectations through our policies and procedures and provide various mechanisms for reporting issues. | |
• | We maintain an aggressive internal and external audit program, which enables us to verify that our compensation policies and practices are aligned with expectations. | |
• | We also perform extensive financial analysis work before entering into new contracts or ventures thus making it more difficult for individuals to act against the Company’s long-term interest by attempting to manipulate earnings results in the short term. |
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Fees Earned or | Stock | |||||||||||
Name | Paid in Cash | Awards(1) | Total | |||||||||
J. Tim Arnoult | 65,000 | 72,500 | 137,500 | |||||||||
Robert P. Barone | 62,698 | 72,500 | 135,198 | |||||||||
Jorge M. Diaz | 54,036 | 72,500 | 126,536 | |||||||||
Dennis F. Lynch | 62,074 | 72,500 | 134,574 | |||||||||
Michael A.R. Wilson | — | — | — |
(1) | In May 2009, the Company granted Messrs. Arnoult, Barone, Diaz and Lynch 25,000 shares of restricted stock each. The grant date fair value of each grant, as computed in accordance with FASB ASC Topic 718, was $72,500. The full fair value of these awards was recognized as compensation expense under FASB ASC Topic 718 during 2009. Messrs. Arnoult, Barone, Diaz and Lynch had no unvested stock awards outstanding as of December 31, 2009. |
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Number of Securities | ||||||||||||
Number of | Weighted- | Remaining Available | ||||||||||
Securities to be | Average Exercise | for Future Issuance | ||||||||||
Issued Upon | Price of | Under Equity | ||||||||||
Exercise of | Outstanding | Compensation Plans | ||||||||||
Outstanding | Options, | (Excluding Securities | ||||||||||
Options, Warrants | Warrants and | Reflected in Column | ||||||||||
Plan Category | and Rights | Rights | (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders(1) | 349,500 | $ | 7.06 | 1,302,717 | ||||||||
Equity compensation plans not approved by security holders(2) | 3,454,271 | 8.47 | — | |||||||||
Total | 3,803,771 | $ | 8.34 | 1,302,717 | ||||||||
(1) | Represents our 2007 Stock Incentive Plan. For additional information on the terms of this plan, see “Executive Compensation — Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table — Equity Incentive Plans — 2007 Plan.” | |
(2) | Represents our 2001 Stock Incentive Plan. For additional information on the terms of this plan, see “Executive Compensation — Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table — Equity Incentive Plans — 2001 Plan.” |
• | each person known by us to beneficially own more than 5% of our common stock; | |
• | each of our directors and director nominees; | |
• | each of our Named Executive Officers (as such term is defined by the SEC); and | |
• | all directors and executive officers as a group. |
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Amount and Nature | Percent of Common | |||||||
Name and Address of Beneficial Owner(1)(2) | of Beneficial Ownership | Stock Beneficially Owned | ||||||
5% Stockholders: | ||||||||
TA Associates, Inc.(3) | 11,556,886 | 25.8 | % | |||||
TA IX, L.P.(4) | 7,148,958 | 15.9 | % | |||||
TA/Atlantic and Pacific V L.P.(5) | 2,859,597 | 6.4 | % | |||||
TA/Atlantic and Pacific IV L.P.(6) | 1,232,709 | 2.7 | % | |||||
TA Strategic Partners Fund A L.P.(7) | 146,417 | * | ||||||
TA Investors II, L.P.(8) | 142,954 | * | ||||||
TA Strategic Partners Fund B L.P.(9) | 26,251 | * | ||||||
The CapStreet Group, LLC(10) | 9,041,074 | 20.2 | % | |||||
CapStreet II, L.P.(11) | 8,091,222 | 18.0 | % | |||||
CapStreet Parallel II, L.P.(12) | 949,852 | 2.1 | % | |||||
Columbia Wanger Asset Management, L.P.(13) | 2,976,000 | 6.6 | % | |||||
Directors and Named Executive Officers: | ||||||||
Michael A.R. Wilson(14) | 11,556,886 | 25.8 | % | |||||
Fred R. Lummis(15) | 9,041,074 | 20.2 | % | |||||
Michael H. Clinard(16) | 1,205,222 | 2.7 | % | |||||
J. Chris Brewster(17) | 756,909 | 1.7 | % | |||||
Steve Rathgaber(18) | 350,000 | * | ||||||
Rick Updyke(19) | 313,808 | * | ||||||
Carleton K. “Tres” Thompson, III(20) | 179,207 | * | ||||||
Jorge M. Diaz(21) | 57,605 | * | ||||||
Robert P. Barone(22) | 44,169 | * | ||||||
Dennis F. Lynch(23) | 34,863 | * | ||||||
J. Tim Arnoult(24) | 29,738 | * | ||||||
G. Patrick Phillips(25) | 5,988 | * | ||||||
All directors and executive officers as a group (12 persons) | 23,575,469 | 52.6 | % |
* | Less than 1.0% of our outstanding common stock | |
(1) | “Beneficial ownership” is a term broadly defined by the SEC inRule 13d-3 under the Exchange Act and includes more than the typical forms of stock ownership, that is, stock held in the person’s name. The term also includes what is referred to as “indirect ownership”, meaning ownership of shares as to which a person has or shares investment or voting power, or a person who, through a trust or proxy, prevents the person from having beneficial ownership. For the purpose of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of March 15, 2010, if that person or group has the right to acquire shares within 60 days after such date. | |
(2) | The address for each Named Executive Officer and director set forth in the table, unless otherwise indicated, isc/o Cardtronics, Inc., 3250 Briarpark Drive, Suite 400, Houston, Texas 77042. The address of The CapStreet Group, LLC, CapStreet II, L.P., CapStreet Parallel II, L.P., and Mr. Lummis isc/o The CapStreet Group, LLC, 600 Travis Street, Suite 6110, Houston, Texas 77002. The address of TA Associates, Inc., TA IX, L.P., TA/Atlantic and Pacific V L.P., TA/Atlantic and Pacific IV L.P., TA Strategic |
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Partners Fund A L.P., TA Investors II, L.P., TA Strategic Partners Fund B L.P., and Mr. Wilson isc/o TA Associates, John Hancock Tower, 56th Floor, 200 Clarendon Street, Boston, Massachusetts 02116. The address of Columbia Wanger Asset Management, L.P. is 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606. The address of Mr. Clinard is 3306 Chartreuse Way, Houston, Texas 77082. | ||
(3) | The shares owned by TA Associates, Inc. are owned through its affiliated funds, including TA IX L.P., TA/Atlantic and Pacific IV L.P., TA/Atlantic and Pacific V L.P., TA Strategic Partners Fund A L.P., TA Strategic Partners Fund B L.P., and TA Investors II, L.P., which we collectively refer to as the TA Funds. | |
(4) | As reported on Schedule 13G dated as of December 31, 2009 and filed with the SEC on February 12, 2010, TA Associates IX LLC. is the general partner of TA IX, L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of the shares listed. | |
(5) | As reported on Schedule 13G dated as of December 31, 2009 and filed with the SEC on February 12, 2010, TA Associates, Inc. is the general partner of TA Atlantic and Pacific V L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of the shares listed. | |
(6) | As reported on Schedule 13G dated as of December 31, 2009 and filed with the SEC on February 12, 2010, TA Associates, Inc. is the general partner of TA/Atlantic and Pacific IV L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of the shares listed. | |
(7) | As reported on Schedule 13G dated as of December 31, 2009 and filed with the SEC on February 12, 2010, TA Associates, Inc. is the general partner of TA Strategic Partners Fund A L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of the shares listed. | |
(8) | As reported on Schedule 13G dated as of December 31, 2009 and filed with the SEC on February 12, 2010, TA Associates, Inc. is the general partner of TA Investors II, L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of the shares listed. | |
(9) | As reported on Schedule 13G dated as of December 31, 2009 and filed with the SEC on February 12, 2010, TA Associates, Inc. is the general partner of TA Strategic Partners Fund B L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of the shares listed. | |
(10) | The shares owned by The CapStreet Group, LLC are owned through its affiliated funds, CapStreet II, L.P. and CapStreet Parallel II, L.P. | |
(11) | As reported on Schedule 13G/A dated as of December 31, 2008 and filed with the SEC on February 13, 2009, The CapStreet Group, LLC is the general partner of CapStreet GP II, L.P., which is the general partner of CapStreet II, L.P., and each may be considered a beneficial owner, with shared voting and dispositive power of 8,091,222 shares. CapStreet GP II, L.P. has not sold or purchased any additional Cardtronics stock since the February 2009 filing. | |
(12) | As reported on Schedule 13G/A dated as of December 31, 2008 and filed with the SEC on February 13, 2009, The CapStreet Group, LLC is the general partner of CapStreet Parallel II, L.P., and each may be considered a beneficial owner, with shared voting and dispositive power of 949,852 shares. CapStreet Parallel II, L.P. has not sold or purchased any additional Cardtronics stock since the February 2009 filing. | |
(13) | As reported on Schedule 13G/A dated as of December 31, 2009 and filed with the SEC on February 9, 2010, Columbia Wanger Asset Management, L.P. is considered a beneficial owner, with sole voting and dispositive power of 2,976,000 shares. The shares reported therein include the shares held by Columbia Acorn Trust, a Massachusetts business trust that is advised by Columbia Wanger Asset Management, L.P. Columbia Acorn Trust holds 6.43% of our shares. | |
(14) | The shares indicated as being beneficially owned by Michael A.R. Wilson are owned directly by the TA Funds. Mr. Wilson serves as a Managing Director of TA Associates, Inc., the ultimate general partner of the TA Funds. As such, Mr. Wilson may be deemed to have a beneficial ownership of the shares owned by the TA Funds. Mr. Wilson disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein and 22,316 shares of our common stock. | |
(15) | The shares indicated as being beneficially owned by Fred R. Lummis are owned directly by CapStreet II, L.P. and CapStreet Parallel II, L.P. Mr. Lummis serves as a senior advisor of The CapStreet Group, |
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LLC, the ultimate general partner of CapStreet II, L.P. and CapStreet Parallel II, L.P. As such, Mr. Lummis may be deemed to have a beneficial ownership of the shares owned by CapStreet II, L.P. and CapStreet Parallel II, L.P. Mr. Lummis disclaims beneficial ownership of such shares. | ||
(16) | Includes 100,280 shares owned directly; 100,500 restricted shares, the forfeiture restrictions on which lapse as to 33,500 shares on each of the three remaining anniversaries of the grant date beginning in June 2010; 100,000 restricted shares, the forfeiture restrictions on which lapse as to 25,000 shares on each of the first four anniversaries of the grant date beginning in January 2011; and 227,986 options that are exercisable within 60 days of March 15, 2010. Also included in the shares indicated as being beneficially owned by Mr. Clinard are 541,164 shares owned by the Ralph Clinard Family Trust and 135,292 shares owned by a trust for the benefit of Mr. Clinard, of which Mr. Clinard is a co-trustee of and has shared voting power of and of which he may be deemed to be the beneficial owner. | |
(17) | Includes 45,000 shares owned directly; 135,000 restricted shares, the forfeiture restrictions on which lapse as to 45,000 shares on each of the three remaining anniversaries of the grant date beginning in June 2010; 100,000 shares of restricted shares, the forfeiture restrictions on which lapse as to 25,000 shares on each of the first four anniversaries of the grant date beginning in January 2011; and 476,909 options which are exercisable within 60 days of March 15, 2010. | |
(18) | The shares indicated are restricted shares, the forfeiture restrictions on which lapse as to 87,500 shares on each of the first four anniversaries of the grant date beginning in February 2011. | |
(19) | Includes 14,710 shares owned directly; 60,000 restricted shares, the forfeiture restrictions on which lapse as to 20,000 shares on each of the three remaining anniversaries of the grant date beginning in June 2010; 100,000 shares of restricted shares, the forfeiture restrictions on which lapse as to 25,000 shares on each of the first four anniversaries of the grant date beginning in January 2011; and 139,098 options which are exercisable within 60 days of March 15, 2010. | |
(20) | Includes 24,710 shares owned directly; 60,000 restricted shares, the forfeiture restrictions on which lapse as to 20,000 shares on each of the three remaining anniversaries of the grant date beginning in June 2010; and 94,497 options which are exercisable within 60 days of March 15, 2010. | |
(21) | Includes 23,875 shares owned directly; 5,988 restricted shares, the restrictions on which lapse on February 15, 2011; and 27,742 options that are exercisable within 60 days of March 15, 2010. | |
(22) | Includes 18,875 shares owned directly; 5,988 restricted shares, the restrictions on which lapse on February 15, 2011; and 19,306 options that are exercisable within 60 days of March 15, 2010. | |
(23) | Includes 28,875 shares owned directly and 5,988 restricted shares, the restrictions on which lapse on February 15, 2011. | |
(24) | Includes 23,750 shares owned directly and 5,988 restricted shares, the restrictions on which lapse on February 15, 2011. | |
(25) | The shares indicated are restricted shares, the forfeiture restrictions on which lapse on February 15, 2011. |
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Tim Arnoult
Dennis F. Lynch
2009 | 2008 | |||||||
(In thousands) | ||||||||
Audit Fees | $ | 1,196 | $ | 1,288 | ||||
Audit-Related Fees | 27 | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
Total | $ | 1,223 | $ | 1,288 | ||||
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Shares | ||||||||||||||||||||
Shares Beneficially Owned | Offered | Shares Beneficially Owned | ||||||||||||||||||
Prior to the Offering | Hereby | After the Offering(1) | ||||||||||||||||||
Number | Percentage(2) | Number | Number | Percentage(2) | ||||||||||||||||
CapStreet II, L.P. | 8,091,222 | 19.4 | % | 2,684,821 | 5,406,401 | 13.0 | % | |||||||||||||
CapStreet Parallel II, L.P. | 949,852 | 2.3 | 315,179 | 634,673 | 1.5 | |||||||||||||||
TA IX, L.P. | 7,148,958 | 17.2 | 1,855,766 | 5,293,192 | 12.7 | |||||||||||||||
TA/Atlantic and Pacific V L.P. | 2,859,597 | 6.9 | 742,310 | 2,117,287 | 5.1 | |||||||||||||||
TA/Atlantic and Pacific IV L.P. | 1,232,709 | 3.0 | 319,993 | 912,716 | 2.2 | |||||||||||||||
TA Strategic Partners Fund A L.P. | 146,417 | * | 38,008 | 108,409 | * | |||||||||||||||
TA Investors II, L.P. | 142,954 | * | 37,109 | 105,845 | * | |||||||||||||||
TA Strategic Partners Fund B L.P. | 26,251 | * | 6,814 | 19,437 | * |
* | Less than 1.0% of the outstanding common shares. | |
(1) | Assumes that the selling stockholder disposes of all the shares of common stock covered by this prospectus (assuming no exercise of the underwriters’ over-allotment) and does not acquire beneficial ownership of any additional shares. The registration of these shares does not necessarily mean that the selling stockholder will sell all or any portion of the shares covered by this prospectus. | |
(2) | Based on 41,658,756 shares of our common stock outstanding as of March 15, 2010. |
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FORNON-U.S. HOLDERS
• | an individual who is a citizen or resident of the United States; | |
• | a partnership, or any other entity treated as a partnership for United States federal income tax purposes; | |
• | a corporation, or any other entity subject to tax as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; | |
• | an estate whose income is subject to United States federal income taxation regardless of its source; or | |
• | a trust (1) if it is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) that has a valid election in effect under applicable Treasury regulations to be treated as a United States person. |
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• | the gain is effectively connected with the conduct of a trade or business in the United States (and, where a tax treaty applies, is attributable to a United States permanent establishment or fixed base of thenon-U.S. holder); in these cases, thenon-U.S. holder will be subject to tax on the net gain derived from the disposition in the same manner as if thenon-U.S. holder were a United States person as defined in the Code, and if thenon-U.S. holder is a foreign corporation, it may be subject to the additional “branch profits tax” at a 30% rate or a lower rate specified by an applicable treaty; | |
• | thenon-U.S. holder is an individual present in the United States for 183 days or more in the taxable year in which the disposition occurs and certain other conditions are met; in these cases, the individualnon-U.S. holder will be subject to a flat 30% tax on the gain derived from the disposition, which tax may be offset by United States source capital losses, even though the individual is not considered a resident of the United States; or | |
• | we are or have been a “United States real property holding corporation” for United States federal income tax purposes at any time during the shorter of thenon-U.S. holder’s holding period for our common stock and the five year period ending on the date of disposition. |
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Number of | ||
Underwriters | shares | |
Piper Jaffray & Co. | ||
UBS Securities LLC | ||
William Blair & Company, L.L.C. | ||
SunTrust Robinson Humphrey, Inc. | ||
Total | 6,000,000 | |
• | receipt and acceptance of our common stock by the underwriters, and | |
• | the underwriters’ right to reject orders in whole or in part. |
No Exercise | Full Exercise | |||||||
Per share | $ | $ | ||||||
Total | $ | $ |
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• | stabilizing transactions; | |
• | short sales; | |
• | purchases to cover positions created by short sales; | |
• | imposition of penalty bids; and | |
• | syndicate covering transactions. |
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Common Stock
Guarantees of Debt Securities
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• | Annual Report onForm 10-K for the fiscal year ended December 31, 2008, including information specifically incorporated by reference into ourForm 10-K from our definitive proxy statement prepared in connection with the 2009 Annual Meeting of Stockholders held on June 18, 2009; | |
• | Quarterly Report onForm 10-Q for the quarterly period ended September 30, 2009; | |
• | Quarterly Report onForm 10-Q for the quarterly period ended June 30, 2009; | |
• | Quarterly Report onForm 10-Q for the quarterly period ended March 31, 2009; | |
• | Current Report onForm 8-K filed on February 8, 2010; | |
• | Current Report onForm 8-K filed on January 27, 2010; | |
• | Current Report onForm 8-K filed on January 22, 2010; | |
• | Current Report onForm 8-K filed on December 21, 2009; | |
• | Current Report onForm 8-K filed on August 14, 2009; | |
• | Current Report onForm 8-K filed on August 4, 2009; | |
• | Current Report onForm 8-K filed on March 26, 2009; | |
• | Current Report onForm 8-K filed on March 18, 2009; | |
• | Current Report onForm 8-K/A filed on March 10, 2009; | |
• | Current Report onForm 8-K filed on March 6, 2009; | |
• | Current Report onForm 8-K filed on February 24, 2009; | |
• | Current Report onForm 8-K/A filed on July 17, 2007; and | |
• | description of our common stock contained in our registration statement onForm 8-A, filed pursuant to Section 12 of the Exchange Act on December 3, 2007 (RegistrationNo. 001-33864). |
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• | our financial outlook and the financial outlook of the ATM industry; | |
• | our ability to expand our bank branding and surcharge-free service offerings; | |
• | our ability to provide new ATM solutions to financial institutions; | |
• | our ATM vault cash rental needs, including potential liquidity issues with our vault cash providers; | |
• | the implementation of our corporate strategy; | |
• | our ability to compete successfully with our competitors; | |
• | our financial performance; | |
• | our ability to strengthen existing customer relationships and reach new customers; | |
• | our ability to meet the service levels required by our service level agreements with our customers; | |
• | our ability to pursue and successfully integrate acquisitions; | |
• | our ability to expand internationally; | |
• | our ability to prevent security breaches; | |
• | changes in interest rates, foreign currency rates and regulatory requirements; and | |
• | the additional risks we are exposed to in our armored courier operations. |
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Nine Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
September 30, | Fiscal Year Ended December 31, | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
Ratio of earnings to fixed charges | 1.3 | x | — | (a) | — | (a) | — | (a) | — | (a) | 2.2x |
(a) | Earnings before fixed charges were inadequate to cover fixed charges by $71.4 million, $23.4 million, $0.2 million and $3.7 million for the years ended December 31, 2008, 2007, 2006 and 2005, respectively. |
• | “earnings” is the aggregate of the following items: pre-tax income from continuing operations before adjustment for income or loss from equity investees; plus fixed charges; plus amortization of capitalized interest; plus distributed income of equity investees; plus our share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed charges; less interest capitalized; less preference security dividend requirements of consolidated subsidiaries; and less the noncontrolling interest in pre-tax income of subsidiaries that have not incurred fixed charges; and | |
• | “fixed charges” means the sum of the following: (1) interest expensed and capitalized, (2) amortized premiums, discounts and capitalized expenses related to indebtedness, (3) an estimate of the interest within rental expense and (4) preference security dividend requirements of consolidated subsidiaries. |
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• | the applicability and effect of such provisions upon any payment or distribution respecting that series following any liquidation, dissolution or otherwinding-up, or any assignment for the benefit of creditors or other marshalling of assets or any bankruptcy, insolvency or similar proceedings; | |
• | the applicability and effect of such provisions in the event of specified defaults with respect to any Senior Debt, including the circumstances under which and the periods during which we will be prohibited from making payments on the Subordinated Debt Securities; and | |
• | the definition of Senior Debt applicable to the Subordinated Debt Securities of that series and, if the series is issued on a senior subordinated basis, the definition of Subordinated Debt applicable to that series. |
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• | before the person became an interested stockholder, our board of directors approved either the business combination or the transaction in which the interested stockholder became an interested stockholder; | |
• | upon completion of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owns at least 85% of our outstanding voting stock at the time |
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the transaction commenced, excluding stock held by directors who are also officers of the corporation and stock held by certain employee stock plans; or |
• | at or subsequent to such time the interested stockholder became an interested stockholder, the business combination is approved by our board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock that is not owned by the interested stockholder. |
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• | for any breach of the officer’s or director’s duty of loyalty to us or our stockholders; | |
• | for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; | |
• | for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or | |
• | for any transaction from which the officer or director derived an improper personal benefit. |
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Shares Beneficially Owned | Shares Offered | Shares Beneficially Owned | ||||||||||||||||||
Prior to the Offering | Hereby | After the Offering(1) | ||||||||||||||||||
Number | Percentage(2) | Number | Number | Percentage(2) | ||||||||||||||||
CapStreet II, L.P. | 8,091,222 | 19.4 | % | |||||||||||||||||
CapStreet Parallel II, L.P. | 949,852 | 2.3 | ||||||||||||||||||
TA IX, L.P. | 7,212,298 | 17.3 | ||||||||||||||||||
TA/Atlantic and Pacific V L.P. | 2,884,931 | 6.9 | ||||||||||||||||||
TA/Atlantic and Pacific IV L.P. | 1,243,637 | 3.0 | ||||||||||||||||||
TA Strategic Partners Fund A L.P. | 147,707 | * | ||||||||||||||||||
TA Investors II, L.P. | 144,224 | * | ||||||||||||||||||
TA Strategic Partners Fund B L.P. | 26,489 | * |
* | Less than 1.0% of the outstanding common stock. | |
(1) | Assumes that the selling stockholder disposes of all the shares of common stock covered by this prospectus and does not acquire beneficial ownership of any additional shares. The registration of these shares does not necessarily mean that the selling stockholder will sell all or any portion of the shares covered by this prospectus. | |
(2) | Based on 41,613,339 shares of our common stock outstanding as of February 17, 2010. |
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• | the terms of the offering; | |
• | the names of any underwriters, brokers, dealers or agents; | |
• | the name or names of any managing underwriter or underwriters; | |
• | the purchase price or public offering price of the securities; | |
• | the net proceeds to us from the sale of the securities; | |
• | any delayed delivery arrangements; | |
• | any underwriting discounts, commissions and other items constituting underwriters’ compensation; | |
• | any discounts or concessions allowed or reallowed or paid to dealers; | |
• | any commissions paid to agents; | |
• | any securities exchange or market on which the securities may be listed. |
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