Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 01, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Everi Holdings Inc. | |
Entity Central Index Key | 1,318,568 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 66,097,275 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | $ 237,537 | $ 205,769 |
Costs and expenses | ||
Operating expenses | 28,993 | 30,005 |
Research and development | 4,543 | 5,368 |
Depreciation | 10,830 | 12,335 |
Amortization | 17,325 | 23,183 |
Total costs and expenses | 214,934 | 201,984 |
Operating income | 22,603 | 3,785 |
Other expenses | ||
Interest expense, net of interest income | 25,057 | 24,992 |
Total other expenses | 25,057 | 24,992 |
Loss before income tax | (2,454) | (21,207) |
Income tax provision (benefit) | 1,054 | (8,056) |
Net loss | (3,508) | (13,151) |
Foreign currency translation | 272 | (485) |
Comprehensive loss | $ (3,236) | $ (13,636) |
Loss per share | ||
Basic (in dollars per share) | $ (0.05) | $ (0.20) |
Diluted (in dollars per share) | $ (0.05) | $ (0.20) |
Weighted average common shares outstanding | ||
Basic (in shares) | 66,090 | 66,034 |
Diluted (in shares) | 66,090 | 66,034 |
Games | ||
Revenues | $ 55,276 | $ 48,178 |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | 12,444 | 8,436 |
Operating income | 4,792 | (3,245) |
Payments | ||
Revenues | 182,261 | 157,591 |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | 140,799 | 122,657 |
Operating income | $ 17,811 | $ 7,030 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 127,861 | $ 119,051 |
Settlement receivables | 42,443 | 128,821 |
Trade and other receivables, net of allowances for doubtful accounts of $4,999 million and $4,701 at March 31, 2017 and December 31, 2016, respectively | 47,874 | 56,651 |
Inventory | 22,386 | 19,068 |
Prepaid expenses and other assets | 21,555 | 18,048 |
Total current assets | 262,119 | 341,639 |
Non-current assets | ||
Property, equipment and leased assets, net | 97,303 | 98,439 |
Goodwill | 640,551 | 640,546 |
Other intangible assets, net | 309,450 | 317,997 |
Other receivables | 3,453 | 2,020 |
Other assets | 7,598 | 7,522 |
Total non-current assets | 1,058,355 | 1,066,524 |
Total assets | 1,320,474 | 1,408,163 |
Current Liabilities | ||
Settlement liabilities | 127,635 | 239,123 |
Accounts payable and accrued expenses | 120,348 | 94,391 |
Current portion of long-term debt | 10,000 | 10,000 |
Total current liabilities | 257,983 | 343,514 |
Non-current liabilities | ||
Deferred tax liability | 58,238 | 57,611 |
Long-term debt, less current portion | 1,110,995 | 1,111,880 |
Other accrued expenses and liabilities | 2,874 | 2,951 |
Total non-current liabilities | 1,172,107 | 1,172,442 |
Total liabilities | 1,430,090 | 1,515,956 |
Commitments and Contingencies (Note 12) | ||
Stockholders' deficit) | ||
Common stock, $0.001 par value, 500,000 shares authorized and 90,965 and 90,952 shares issued at March 31, 2017 and December 31, 2016, respectively | 91 | 91 |
Additional paid-in capital | 266,175 | 264,755 |
Retained deficit | (197,806) | (194,299) |
Accumulated other comprehensive loss | (1,838) | (2,109) |
Treasury stock, at cost, 24,870 and 24,867 shares at March 31, 2017 and December 31, 2016, respectively | (176,238) | (176,231) |
Total stockholders' deficit | (109,616) | (107,793) |
Total liabilities and stockholders' deficit | $ 1,320,474 | $ 1,408,163 |
CONDENSED CONSOLIDATED BALANCE4
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Allowances for doubtful accounts | $ 4,999 | $ 4,701 |
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 90,965,482 | 90,952,185 |
Convertible preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Convertible preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Convertible preferred stock, shares outstanding | 0 | 0 |
Treasury stock, shares | 24,870,000 | 24,867,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities | ||
Net loss | $ (3,508) | $ (13,151) |
Adjustments to reconcile net loss to cash provided by operating activities: | ||
Depreciation and amortization | 28,155 | 35,518 |
Amortization of financing costs | 1,672 | 1,672 |
Loss on sale or disposal of assets | 436 | 611 |
Accretion of contract rights | 2,002 | 2,097 |
Provision for bad debts | 2,817 | 2,444 |
Reserve for obsolescence | 408 | 119 |
Stock-based compensation | 1,412 | 1,061 |
Changes in operating assets and liabilities: | ||
Settlement receivables | 86,400 | 16,634 |
Trade and other receivables | 4,423 | 5,711 |
Inventory | (3,739) | (497) |
Prepaid and other assets | (3,409) | 2,047 |
Deferred income taxes | 626 | (8,343) |
Settlement liabilities | (111,498) | (29,603) |
Accounts payable and accrued expenses | 25,161 | 8,384 |
Net cash provided by operating activities | 31,358 | 24,704 |
Cash flows from investing activities | ||
Capital expenditures | (17,184) | (23,613) |
Proceeds from sale of fixed assets | 10 | |
Placement fee agreements | (3,044) | (1,000) |
Changes in restricted cash and cash equivalents | (125) | 44 |
Net cash used in investing activities | (20,353) | (24,559) |
Cash flows from financing activities | ||
Repayments of credit facility | (2,500) | (2,500) |
Issuance costs of new debt | (480) | |
Proceeds from exercise of stock options | 5 | |
Purchase of treasury stock | (7) | (9) |
Net cash used in financing activities | (2,502) | (2,989) |
Effect of exchange rates on cash | 307 | 148 |
Cash and cash equivalents | ||
Net (decrease) increase for the period | 8,810 | (2,696) |
Balance, beginning of the period | 119,051 | 102,030 |
Balance, end of the period | 127,861 | 99,334 |
Supplemental cash disclosures | ||
Cash paid for interest | 8,243 | 8,846 |
Cash paid for income tax | 575 | 273 |
Cash refunded for income tax | 200 | |
Supplemental non-cash disclosures | ||
Accrued and unpaid capital expenditures | 2,789 | 12,424 |
Transfer of leased gaming equipment to inventory | $ 2,301 | $ 1,039 |
BUSINESS
BUSINESS | 3 Months Ended |
Mar. 31, 2017 | |
BUSINESS | |
BUSINESS | 1. BUSINESS Everi Holdings Inc. (formerly known as Global Cash Access Holdings, Inc.) (“Everi Holdings,” “Holdings” or “Everi”) is a holding company, the assets of which are the issued and outstanding shares of capital stock of each of Everi Games Holding Inc. (formerly known as Multimedia Games Holding Company, Inc.) (“Everi Games Holding”), which owns all of the issued and outstanding shares of capital stock of Everi Games Inc. (formerly known as Multimedia Games, Inc.) (“Everi Games” or “Games”) and Everi Payments Inc. (formerly known as Global Cash Access, Inc.) (“Everi Payments” or “Payments”). Unless otherwise indicated, the terms the “Company,” “we,” “us” and “our” refer to Holdings together with its consolidated subsidiaries. Everi is dedicated to providing video and mechanical reel gaming content and technology solutions, integrated gaming payments solutions and compliance and efficiency software. Everi Games provides: (a) comprehensive content, electronic gaming units and systems for Native American and commercial casinos, including the award winning TournEvent® slot tournament solution; and (b) the central determinant system for the video lottery terminals installed in the State of New York. Everi Payments provides: (a) access to cash at gaming facilities via Automated Teller Machine (“ATM”) cash withdrawals, credit card cash access transactions, point of sale (“POS”) debit card transactions, and check verification and warranty services; (b) fully integrated gaming industry kiosks that provide cash access and related services; (c) products and services that improve credit decision making, automate cashier operations and enhance patron marketing activities for gaming establishments; (d) compliance, audit and data solutions; and (e) online payment processing solutions for gaming operators in states that offer intrastate, Internet-based gaming and lottery activities. |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Our unaudited Condensed Consolidated Financial Statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Some of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the three months ended March 31, 2017 are not necessarily indicative of results to be expected for the full fiscal year. The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. There have been no changes to our basis of presentation and significant accounting policies since the most recent filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Fair Values of Financial Instruments The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. The carrying amount of cash and cash equivalents, settlement receivables, trade receivables, other receivables, settlement liabilities, accounts payable and accrued expenses approximates fair value due to the short-term maturities of these instruments. The fair value of our borrowings are estimated based on various inputs to determine a market price, such as: market demand and supply, size of tranche, maturity and similar instruments trading in more active markets. Level of Outstanding Hierarchy Fair Value Balance March 31, 2017 Term loan 1 $ 467,731 $ 463,100 Senior secured notes 3 $ 338,350 $ 335,000 Senior unsecured notes 1 $ 363,125 $ 350,000 December 31, 2016 Term loan 1 $ 451,632 $ 465,600 Senior secured notes 3 $ 324,950 $ 335,000 Senior unsecured notes 1 $ 350,000 $ 350,000 The senior secured notes were fair valued using a Level 3 input as there was no market activity or observable inputs as of March 31, 2017 and December 31, 2016. During the current period, the fair value of the senior secured notes was derived using the same rate as the term loan given that both were treated similarly. Reclassification of Prior Year Balances Reclassifications were made to the prior-period financial statements to conform to the current period presentation. Recent Accounting Guidance Recently Adopted Accounting Guidance In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, which provides updated guidance on the goodwill impairment test and the method by which an entity recognizes an impairment charge. These amendments eliminate Step 2 from the current goodwill impairment process and require that an entity recognize an impairment charge equal to the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Additionally, a company should also take into consideration income tax effects from tax deductible goodwill on the carrying amount of a reporting unit when recording an impairment loss. The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This guidance will be applied using a prospective approach. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted this guidance in the current period. As no indicators of impairment were identified for our goodwill during the three months ended March 31, 2017, this ASU did not impact our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In March 2016, the FASB issued ASU No. 2016-09, which simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This guidance will be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. We adopted this guidance in the current quarter on a prospective basis. As of March 31, 2017, the adoption of ASU No. 2016-09 has not impacted our Condensed Consolidated Financial Statements. With respect to forfeitures, the Company will continue to estimate the number of awards expected to be forfeited in accordance with our existing accounting policy. In addition, our Condensed Consolidated Statements of Cash Flows present excess tax benefits as operating activities in the current period, as the prior period was not adjusted. In July 2015, the FASB issued ASU No. 2015-11, which provides guidance on the measurement of inventory value. The amendments require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. The amendments do not apply to inventory that is measured using LIFO or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (“FIFO”) or average cost. The pronouncement is effective for annual periods beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. We adopted this guidance in the current period. This ASU did not have a material impact on our Condensed Consolidated Financial Statements and disclosures included within the Notes to Unaudited Condensed Consolidated Financial Statements. Recent Accounting Guidance Not Yet Adopted In January 2017, the FASB issued ASU No. 2017-01, which clarifies the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a prospective approach as of the beginning of the first period of adoption. Early adoption is permitted for acquisitions, or disposals that occur before the issuance date or effectiveness date of the amendments when the transaction has not been reported in financial statements that have been issued or made available for issuance. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In October 2016, the FASB issued ASU No. 2016-18, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a retrospective approach to each period presented. Early adoption is permitted and adoption in an interim period should reflect adjustments as of the beginning of the fiscal year that includes that interim period. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In October 2016, the FASB issued ASU No. 2016-16, which provides updated guidance on the recognition of the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs, and this eliminates the exception for an intra-entity transfer of such assets. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a modified retrospective approach through a cumulative-effective adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted during the first interim period of the year this guidance is adopted. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In August 2016, the FASB issued ASU No. 2016-15, which provides updated guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a retrospective approach. If it is impracticable to apply the amendments retrospectively for some of the issues within this ASU, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted including adoption in an interim period. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In June 2016, the FASB issued ASU No. 2016-13, which provides updated guidance on credit losses for financial assets measured at amortized cost basis and available-for sale debt securities. The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This guidance will be applied using a modified retrospective approach for the cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective and using a prospective approach for debt securities for which any other-than-temporary impairment had been recognized before the effective date. Early adoption is permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In February 2016, the FASB issued ASU No. 2016-02, which provides guidance on the accounting treatment of leases. The ASU establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. While we are currently assessing the impact of this ASU on our Condensed Consolidated Financial Statements, we expect the primary impact to our consolidated financial position upon adoption will be the recognition, on a discounted basis, of our minimum commitments under noncancelable operating leases on our Condensed Consolidated Balance Sheets, which will result in the recording of right of use assets and lease obligations and are currently discussed in “Note 12 — Commitments and Contingencies.” In May 2014, the FASB issued ASU No. 2014-09, which creates FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” and supersedes ASC Topic 605, “Revenue Recognition”. The guidance replaces industry-specific guidance and establishes a single five-step model to identify and recognize revenue. The core principle of the guidance is that an entity should recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires the entity to disclose further quantitative and qualitative information regarding the nature and amount of revenues arising from contracts with customers, as well as other information about the significant judgments and estimates used in recognizing revenues from contracts with customers. The guidance in ASU 2014-09 was further updated by ASU 2016-08 in March 2016, which provides clarification on the implementation of the principal versus agent considerations in ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, which provides clarification on the implementation of performance obligations and licensing in ASU 2014-09. In May 2016, the FASB issued ASU 2016-11, which amends guidance provided in two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force meeting over various topics relating to ASU 606. In May 2016, the FASB issued ASU 2016-12, which clarified various topics in ASU 606. In December 2016, the FASB issued ASU 2016-20, which clarified additional topics in ASU 606. This guidance was originally effective for interim and annual reporting periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14, which extended the effective date to interim and annual periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2015, including interim reporting periods within that reporting period. This guidance may be adopted retrospectively or under a modified retrospective method where the cumulative effect is recognized at the date of initial application. We will likely adopt this guidance using the retrospective method beginning in the first quarter of 2018. We performed an initial review of the requirements of the standard and are monitoring the activity of the FASB and the transition resource group as it relates to specific interpretive guidance that may impact us. We are currently completing detailed contract reviews to determine necessary adjustments to existing accounting policies and procedures and to support an evaluation of the standard’s impact on our Condensed Consolidated Financial Statements and disclosures included within Notes to Condensed Consolidated Financial Statements. Based on reviews performed, we do not expect our Payments revenues to be materially impacted by the implementation of this guidance. We are still evaluating our Games revenues and equipment and systems revenues to determine the extent, if any, of changes to the timing and amount of revenue recorded in each reporting period. Additionally, the new guidance will require enhanced disclosures and updates to our revenue recognition policies to identify performance obligations to customers and will also require significant judgment in both measurement and recognition. We may identify other impacts from the implementation of this guidance as we continue our assessment. |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 3 Months Ended |
Mar. 31, 2017 | |
BUSINESS COMBINATIONS | |
BUSINESS COMBINATIONS | 3. BUSINESS COMBINATIONS We account for business combinations in accordance with ASC 805, which requires that the identifiable assets acquired and liabilities assumed be recorded at their estimated fair values on the acquisition date separately from goodwill, which is the excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities. We include the results of operations of an acquired business as of the acquisition date. We had no material acquisitions for the three months ended March 31, 2017 and 2016. |
FUNDING AGREEMENTS
FUNDING AGREEMENTS | 3 Months Ended |
Mar. 31, 2017 | |
FUNDING AGREEMENTS | |
FUNDING AGREEMENTS | 4. FUNDING AGREEMENTS Contract Cash Solutions Agreement Our Contract Cash Solutions Agreement with Wells Fargo Bank, N.A. (“Wells Fargo”) allows us to use funds owned by Wells Fargo to provide the currency needed for normal operating requirements for our ATMs. For the use of these funds, we pay Wells Fargo a cash usage fee on the average daily balance of funds utilized multiplied by a contractually defined cash usage rate. These cash usage fees, reflected as interest expense within the Condensed Consolidated Statements of Loss and Comprehensive Loss, were $1.1 million and $0.8 million for the three months ended March 31, 2017 and 2016. We are exposed to interest rate risk to the extent that the applicable London Interbank Offered Rate (“LIBOR”) increases. Under this agreement, all currency supplied by Wells Fargo remains the sole property of Wells Fargo at all times until it is dispensed, at which time Wells Fargo obtains an interest in the corresponding settlement receivable which is recorded on a net basis. As these funds are not our assets, supplied cash is not reflected on the Condensed Consolidated Balance Sheets. The outstanding balances of ATM cash utilized by us from Wells Fargo were $270.8 million and $285.4 million as of March 31, 2017 and December 31, 2016, respectively. The Contract Cash Solutions Agreement, as amended, provides us with cash in the maximum amount of $425.0 million during the term of the agreement, which expires on June 30, 2019. We are responsible for any losses of cash in the ATMs under this agreement, and we self‑insure for this risk. We incurred no material losses related to this self‑insurance for the three months ended March 31, 2017 and 2016. Site-Funded ATMs We operate ATMs at certain customer gaming establishments where the gaming establishment provides the cash required for the ATM operational needs. We are required to reimburse the customer for the amount of cash dispensed from these Site-Funded ATMs. The Site-Funded ATM liability included within settlement liabilities in the accompanying Condensed Consolidated Balance Sheets was $87.3 million and $151.0 million as of March 31, 2017 and December 31, 2016, respectively. Prefunded Cash Access Agreements Due to certain regulatory requirements, some international gaming establishments require prefunding of cash to cover all outstanding settlement amounts in order for us to provide cash access services to their properties. We enter into agreements with these operators for which we supply our cash access services for their properties. Under these agreements, we maintain sole discretion to either continue or cease operations as well as discretion over the amounts prefunded to the properties and may request amounts to be refunded to us, with appropriate notice to the operator, at any time. The initial prefunded amounts and subsequent amounts from the settlement of transactions are deposited into a bank account that is to be used exclusively for cash access services and we maintain the right to monitor all transaction activity in that account. The total amount of prefunded cash outstanding was approximately $9.8 million and $8.5 million at March 31, 2017 and December 31, 2016, respectively, and is included in prepaid expenses and other assets on our Condensed Consolidated Balance Sheets. |
TRADE AND OTHER RECEIVABLES
TRADE AND OTHER RECEIVABLES | 3 Months Ended |
Mar. 31, 2017 | |
TRADE AND OTHER RECEIVABLES | |
TRADE AND OTHER RECEIVABLES | 5. TRADE AND OTHER RECEIVABLES Trade and loans receivables represent short-term credit granted to customers as well as long-term loans receivable on our games, fully integrated kiosks and compliance products. Trade and loans receivables generally do not require collateral. The balance of trade and loans receivables consists of outstanding balances owed to us by gaming establishments and casino patrons. Other receivables include income taxes receivables and other miscellaneous receivables. The balance of trade and other receivables consisted of the following (in thousands): At March 31, At December 31, 2017 2016 Trade and other receivables, net Games trade and loans receivables $ 38,118 $ 44,410 Payments trade and loans receivables 12,180 12,337 Other receivables 1,029 1,924 Total trade and other receivables, net $ 51,327 $ 58,671 Less: non-current portion of receivables 3,453 2,020 Total trade and other receivables, current portion $ 47,874 $ 56,651 At least quarterly, we evaluate the collectability of the outstanding balances and establish a reserve for the face amount of the expected losses on our receivables. The allowance for doubtful accounts for trade receivables includes reserves for both Games and Payments receivables. The provision for doubtful accounts is generally included within operating expenses in the Condensed Consolidated Statements of Loss and Comprehensive Loss. We also have a provision for doubtful accounts specifically associated with our outstanding check warranty receivables, which is included within Payments cost of revenues (exclusive of depreciation and amortization) in the Condensed Consolidated Statements of Loss and Comprehensive Loss. The outstanding balances of the check warranty and general reserves were $2.7 million and $2.3 million, respectively, as of March 31, 2017 and $2.7 million and $2.0 million, respectively, as of December 31, 2016. |
PREPAID AND OTHER ASSETS
PREPAID AND OTHER ASSETS | 3 Months Ended |
Mar. 31, 2017 | |
PREPAID AND OTHER ASSETS | |
PREPAID AND OTHER ASSETS | 6. PREPAID AND OTHER ASSETS Prepaid and other assets include the balance of prepaid expenses, deposits, debt issuance costs on our Revolving Credit Facility (defined herein), restricted cash and other assets. The current portion of these assets is included in prepaid and other assets and the non-current portion is included in other assets, both of which are contained within the Condensed Consolidated Balance Sheets. The balance of the current portion of prepaid and other assets consisted of the following (in thousands): At March 31, At December 31, 2017 2016 Prepaid expenses and other assets Deposits $ 10,259 $ 8,622 Prepaid expenses 7,613 5,937 Other 3,683 3,489 Total prepaid expenses and other assets $ 21,555 $ 18,048 The balance of the non-current portion of other assets consisted of the following (in thousands): At March 31, At December 31, 2017 2016 Other assets Prepaid expenses and deposits $ 3,485 $ 3,399 Debt issuance costs of revolving credit 632 689 Other 3,481 3,434 Total other assets $ 7,598 $ 7,522 |
INVENTORY
INVENTORY | 3 Months Ended |
Mar. 31, 2017 | |
INVENTORY | |
INVENTORY | 7. INVENTORY Our inventory primarily consists of component parts as well as work-in-progress and finished goods. The cost of inventory includes cost of materials, labor, overhead and freight. The inventory is stated at the lower of cost or market and accounted for using the FIFO method. Inventory consisted of the following (in thousands): At March 31, At December 31, 2017 2016 Inventory Raw materials and component parts, net of reserves of $1,651 and $2,155 at March 31, 2017 and December 31, 2016, respectively $ 14,243 $ 12,570 Work-in-progress 2,769 1,502 Finished goods 5,374 4,996 Total inventory $ 22,386 $ 19,068 |
PROPERTY, EQUIPMENT AND LEASED
PROPERTY, EQUIPMENT AND LEASED ASSETS | 3 Months Ended |
Mar. 31, 2017 | |
PROPERTY, EQUIPMENT AND LEASED ASSETS | |
PROPERTY, EQUIPMENT AND LEASED ASSETS | 8. PROPERTY, EQUIPMENT AND LEASED ASSETS Property, equipment and leased assets consist of the following (in thousands): At March 31, 2017 At December 31, 2016 Useful Life Accumulated Net Book Accumulated Net Book (Years) Cost Depreciation Value Cost Depreciation Value Property, equipment and leased assets Rental pool - deployed - 4 $ 130,097 $ 63,582 $ 66,515 $ 123,812 $ 59,188 $ 64,624 Rental pool - undeployed - 4 13,750 7,058 6,692 13,456 5,721 7,735 ATM equipment 5 16,372 11,671 4,701 16,537 11,189 5,348 Leasehold and building improvements Lease Term 9,919 4,022 5,897 10,023 3,698 6,325 Cash advance equipment 3 8,127 4,448 3,679 8,590 4,499 4,091 Machinery, office and other equipment - 5 30,989 21,170 9,819 30,424 20,108 10,316 Total $ 209,254 $ 111,951 $ 97,303 $ 202,842 $ 104,403 $ 98,439 Depreciation expense related to other property, equipment and leased assets totaled approximately $10.8 million for the three months ended March 31, 2017 and $12.3 million for the three months ended March 31, 2016. There was no material impairment of our property, equipment and leased assets for the three months ended March 31, 2017 and 2016, respectively. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 9. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations. The balance of goodwill was $640.6 million and $640.5 million at March 31, 2017 and December 31, 2016, respectively. In accordance with ASC 350, we test goodwill at the reporting unit level, which are identified as operating segments or one level below, for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We test for impairment annually on a reporting unit basis, at the beginning of our fourth fiscal quarter, or more often under certain circumstances. The annual impairment test is completed using either: a qualitative Step 0 assessment based on reviewing relevant events and circumstances; or a quantitative Step 1 assessment, which determines the fair value of the reporting unit, using an income approach that discounts future cash flows based on the estimated future results of our reporting units and a market approach that compares market multiples of comparable companies to determine whether or not any impairment exists. If the fair value of a reporting unit is less than its carrying amount, we will use the Step 1 assessment to determine the impairment in accordance with the adoption of ASU No 2017-04. No impairment was identified for our goodwill for the three months ended March 31, 2017 and 2016. Other Intangible Assets Other intangible assets consist of the following (in thousands): At March 31, 2017 At December 31, 2016 Useful Life Accumulated Net Book Accumulated Net Book (years) Cost Amortization Value Cost Amortization Value Other intangible assets Contract rights under placement fee agreements - 7 $ 20,334 $ 7,831 $ 12,503 $ 17,742 $ 6,281 $ 11,461 Customer contracts - 14 50,975 41,427 9,548 50,975 40,419 10,556 Customer relationships - 12 231,100 47,929 183,171 231,100 42,688 188,412 Developed technology and software - 6 228,392 134,597 93,795 224,265 126,721 97,544 Patents, trademarks and other - 17 29,242 18,809 10,433 27,771 17,747 10,024 Total $ 560,043 $ 250,593 $ 309,450 $ 551,853 $ 233,856 $ 317,997 Amortization expense related to other intangible assets was approximately $17.3 million and $23.2 million for the three months ended March 31, 2017 and 2016, respectively. We evaluate our other intangible assets for potential impairment in connection with our quarterly review process. There was no material impairment identified for any of our other intangible assets for the three months ended March 31, 2017 and 2016. We enter into placement fee agreements to provide financing for new gaming facilities or for the expansion or improvement of existing facilities. The funding under placement fee agreements is not reimbursed. In return for the fees under these agreements, each facility dedicates a percentage of its floor space, or an agreed upon unit count, for the placement of our electronic gaming machines (“EGMs”) over the term of the agreement, generally 12 to 83 months, and we receive a fixed percentage or flat fee of those machines’ hold per day. Certain of the agreements contain EGM performance standards that could allow the respective facility to reduce a portion of our guaranteed floor space. Placement fees and amounts advanced in excess of those to be reimbursed by the customer for real property and land improvements are allocated to intangible assets and are generally amortized over the term of the contract, which is recorded as a reduction of revenue generated from the facility. In the past we have, and in the future, we may, by mutual agreement, amend these agreements to reduce our floor space at the facilities. Any proceeds received for the reduction of floor space is first applied against the intangible asset for that particular placement fee agreement, if any, and the remaining net book value of the intangible asset is prospectively amortized on a straight-line method over the remaining estimated useful life. We paid approximately $3.0 million and $1.0 million to extend the term of placement fee agreements with a customer for certain of its locations for the three months ended March 31, 2017 and 2016, respectively. |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 3 Months Ended |
Mar. 31, 2017 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES The following table presents our accounts payable and accrued expenses (in thousands): At March 31, At December 31, 2017 2016 Accounts payable and accrued expenses Trade accounts payable $ 66,895 $ 55,352 Accrued interest 15,175 82 Payroll and related expenses 11,093 12,305 Deferred and unearned revenues 10,766 9,222 Cash access processing and related expenses 4,889 7,001 Accrued taxes 2,442 2,587 Other 9,088 7,842 Total accounts payable and accrued expenses $ 120,348 $ 94,391 |
LONG-TERM DEBT
LONG-TERM DEBT | 3 Months Ended |
Mar. 31, 2017 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | 11. LONG-TERM DEBT The following table summarizes our outstanding indebtedness (in thousands): At March 31, At December 31, 2017 2016 Long-term debt Senior secured term loan $ 463,100 $ 465,600 Senior secured notes 335,000 335,000 Senior unsecured notes 350,000 350,000 Total debt 1,148,100 1,150,600 Less: debt issuance costs and discount (27,105) (28,720) Total debt after debt issuance costs and discount 1,120,995 1,121,880 Less: current portion of long-term debt (10,000) (10,000) Long-term debt, less current portion $ 1,110,995 $ 1,111,880 Credit Facilities In December 2014, Everi Payments, as borrower, and Holdings entered into a credit agreement with Bank of America, N.A., as administrative agent, collateral agent, swing line lender and letter of credit issuer; Deutsche Bank Securities Inc., as syndication agent; and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., as joint lead arrangers and joint book managers (the “Credit Agreement”). The Credit Agreement consists of the $500.0 million, six-year senior secured term loan facility that matures in 2020 (the “Term Loan”) and the $50.0 million, five-year senior secured revolving credit facility that matures in 2019 (the “Revolving Credit Facility,” and together with the Term Loan, the “Credit Facilities”). The fees associated with the Credit Facilities included discounts of approximately $7.5 million and debt issuance costs of approximately $13.9 million. All borrowings under the Credit Facilities are subject to the satisfaction of customary conditions, including the absence of a default and compliance with representations and warranties. We are required to repay the Term Loan in an amount equal to 0.50% per quarter of the initial aggregate principal with the final principal repayment installment on the maturity date. Interest is due in arrears each March, June, September and December and at the maturity date. However, interest may be remitted within one to three months of such dates. The Term Loan had an applicable weighted average interest rate of 6.28% and 6.25% for the period ended March 31, 2017 and December 31, 2016. The interest rate per annum applicable to the Revolving Credit Facility is, at our option, the base rate or LIBOR plus, in each case, an applicable margin. The interest rate per annum applicable to the Term Loan is also, at our option, the base rate or LIBOR plus, in each case, an applicable margin. We have historically elected to pay interest based on LIBOR, and we expect to continue to pay interest based on LIBOR. LIBOR will be reset at the beginning of each selected interest period based on the LIBOR rate then in effect; provided that, with respect to the Revolving Credit Facility, if LIBOR is below zero, then such rate will be equal to zero plus the applicable margin, and, with respect to the Term Loan, if LIBOR is below 1.0%, then such rate will be equal to 1.0% plus the applicable margin. The base rate is a fluctuating interest rate equal to the highest of (a) the prime lending rate announced by the administrative agent, (b) the federal funds effective rate from time to time plus 0.50%, and (c) LIBOR (after taking account of any applicable floor) applicable for an interest period of one month plus 1.00%. The applicable margins of 4.75% and 5.25% for the Revolving Credit Facility and Term Loan, respectively, are subject to adjustment based on our consolidated secured leverage ratio. Voluntary prepayments of the Term Loan and the Revolving Credit Facility and voluntary reductions in the unused commitments are permitted in whole or in part, in minimum amounts as set forth in the Credit Agreement, with prior notice but without premium or penalty. Subject to certain exceptions, the obligations under the Credit Facilities are secured by substantially all of the present and after acquired assets of each of Everi Payments, Holdings and the subsidiary guarantors, including: (a) a perfected first priority pledge of all the capital stock of Everi Payments and each domestic direct, wholly owned material restricted subsidiary held by Holdings, Everi Payments or any such subsidiary guarantor; and (b) a perfected first priority security interest in substantially all other tangible and intangible assets of Holdings, Everi Payments, and such subsidiary guarantors (including, but not limited to, accounts receivable, inventory, equipment, general intangibles, investment property, certain real property, intellectual property and the proceeds of the foregoing). Subject to certain exceptions, the Credit Facilities are unconditionally guaranteed by Holdings and such subsidiary guarantors, including Everi Games Holding and its material domestic subsidiaries. The Credit Agreement contains certain covenants that, among other things, limit Holdings’ ability, and the ability of certain of its subsidiaries, to incur additional indebtedness; sell assets or consolidate or merge with or into other companies; pay dividends or repurchase or redeem capital stock; make certain investments; issue capital stock of subsidiaries; incur liens; prepay, redeem or repurchase subordinated debt; and enter into certain types of transactions with our affiliates. The Credit Agreement also requires Holdings, together with its subsidiaries, to comply with a maximum consolidated secured leverage ratio as well as an annual excess cash flow requirement. At March 31, 2017, our consolidated secured leverage ratio was 3.66, with a maximum allowable ratio of 4.25. Our consolidated secured maximum leverage ratio will be 4.00, 3.75 and 3.50 as of December 31, 2017, 2018 and 2019 and thereafter, respectively. Events of default under the Credit Agreement include customary events such as a cross-default provision with respect to other material debt (which includes the Refinanced Secured Notes and the Unsecured Notes (each defined below)). In addition, an event of default will occur if Holdings undergoes a change of control. This is defined to include the case where Holdings ceases to own 100% of the equity interests of Everi Payments, or where any person or group acquires a percentage of the economic or voting interests of Holdings’ capital stock of 35% or more (determined on a fully diluted basis), or where a majority of the board of directors of Everi Holdings ceases to consist of persons who are directors of Holdings on the closing date of the Credit Facilities or other directors whose nomination for election to the board of directors of Holdings was recommended by a majority of the then continuing directors. At March 31, 2017, we had approximately $463.1 million of borrowings outstanding under the Term Loan and no borrowings outstanding under the Revolving Credit Facility. We had $50.0 million of additional borrowing availability under the Revolving Credit Facility as of March 31, 2017. The weighted average interest rate on the Credit Facilities was approximately 6.28% for the three months ended March 31, 2017. We were in compliance with the terms of the Credit Facilities as of March 31, 2017 and December 31, 2016. We expect that our cash provided by operating activities will be sufficient for our operating and debt servicing needs during the next 12 months. If not, we have sufficient borrowings available under our Credit Facilities to meet additional funding requirements. We monitor the financial strength of our lenders on an ongoing basis using publicly-available information. Based upon that information, we believe there is not a likelihood that any of our lenders might not be able to honor their commitments under the Credit Agreement. Senior Secured Notes and Refinance of Senior Secured Notes In December 2014, we issued $350.0 million in aggregate principal amount of 7.75% Secured Notes due 2021 (the “Secured Notes”). The fees associated with the Secured Notes included debt issuance costs of approximately $13.6 million. The Secured Notes were acquired by the initial purchasers pursuant to the terms of a purchase agreement. Under the terms of the purchase agreement, during a one-year period following the closing and upon prior notice from the initial purchasers, the Company was required to use commercially reasonable efforts to aid the purchasers in the resale of the Secured Notes, including by preparing an updated offering memorandum and participating in reasonable marketing efforts including road shows, to the extent required therein. Alternatively, we had the ability to redeem the Secured Notes from the initial purchasers without penalty. On April 15, 2015, the Company entered into a note purchase agreement with Everi Payments, CPPIB Credit Investments III Inc. (the “Purchaser”), and Deutsche Bank Trust Company Americas, as collateral agent (the “Note Purchase Agreement”), and issued $335.0 million in aggregate principal amount of 7.25% Senior Secured Notes due 2021 (the “Refinanced Secured Notes”) to the Purchaser in a private offering. With the proceeds from the issuance of the Refinanced Secured Notes, we redeemed, in full, the Company’s then outstanding Secured Notes from the initial purchasers in accordance with the terms of the indenture governing the Secured Notes. In connection with the issuance of the Refinanced Secured Notes during the second quarter of 2015, we expensed $13.0 million of related debt issuance costs and fees to loss on extinguishment of debt associated with the redeemed Secured Notes that were outstanding prior to the refinance transaction. In connection with the issuance of the Refinanced Secured Notes and pursuant to the terms of the Note Purchase Agreement, the Company issued a warrant to purchase shares of the Company’s common stock (the “Warrant”) to the Purchaser. The Warrant expires on the sixth anniversary of the date of issuance. The number of shares issuable pursuant to the Warrant and the warrant exercise price are subject to adjustment for stock splits, reverse stock splits, stock dividends, mergers and certain other events. The Warrant was valued at $2.2 million using a modified Black-Scholes model and was accounted for as a debt discount. Interest is due quarterly in arrears each January, April, July and October. We were in compliance with the terms of the Refinanced Secured Notes as of March 31, 2017 and December 31, 2016. Senior Unsecured Notes In December 2014, we issued $350.0 million in aggregate principal amount of 10.00% Unsecured Notes due 2022 (the “Unsecured Notes”). The fees associated with the Unsecured Notes included original issue discounts of approximately $3.8 million and debt issuance costs of approximately $14.0 million. Interest is due semi-annually in arrears each January and July. The Unsecured Notes were acquired by the initial purchasers pursuant to the terms of a purchase agreement. Under the terms of the purchase agreement, during a one-year period following the closing and upon prior notice from the initial purchasers, the Company was required to use commercially reasonable efforts to aid the purchasers in the resale of the Unsecured Notes, including by preparing an updated offering memorandum and participating in reasonable marketing efforts including road shows, to the extent required therein. The Unsecured Notes were resold by the initial purchasers to third parties in the second quarter of 2015. In December 2015, we completed an exchange offer in which all of the unregistered Unsecured Notes were exchanged for a like amount of Unsecured Notes that had been registered under the Securities Act. We were in compliance with the terms of the Unsecured Notes as of March 31, 2017 and December 31, 2016. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 12. COMMITMENTS AND CONTINGENCIES We are involved in various investigations, claims and lawsuits in the ordinary course of our business. In addition, various legal actions, claims and governmental inquiries and proceedings are pending or may be instituted or asserted in the future against us and our subsidiaries. Although the outcome of our legal proceedings cannot be predicted with certainty and no assurances can be provided, based upon current information, we do not believe the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, will have a material adverse impact on our financial position, liquidity or results of operations. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2017 | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | 13. SHAREHOLDERS’ EQUITY Preferred Stock. Our amended and restated certificate of incorporation, as amended, allows our Board of Directors, without further action by stockholders, to issue up to 50,000,000 shares of preferred stock in one or more series and to fix the designations, powers, preferences, privileges and relative participating, optional, or special rights as well as the qualifications, limitations or restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences. As of March 31, 2017 and December 31, 2016, we had no shares of preferred stock outstanding. Common Stock. Subject to the preferences that may apply to shares of preferred stock that may be outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available at the times and in the amounts as our Board of Directors may from time to time determine. All dividends are non-cumulative. In the event of the liquidation, dissolution or winding up of Everi, the holders of common stock are entitled to share ratably in all assets remaining after the payment of liabilities, subject to the prior distribution rights of preferred stock, if any, then outstanding. Each stockholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. There are no sinking fund provisions applicable to the common stock. Each outstanding share of common stock is fully paid and non-assessable. As of March 31, 2017 and December 31, 2016, we had 90,965,482 and 90,952,185 shares of common stock issued, respectively. Treasury Stock. Employees may direct us to withhold vested shares of restricted stock to satisfy the minimum statutory withholding requirements applicable to their restricted stock vesting. We repurchased or withheld from restricted stock awards 2,574 shares of common stock for the three months ended March 31, 2017 at an aggregate purchase price of $7,475 and 2,588 shares of common stock for the three months ended March 31, 2016 at an aggregate purchase price of $8,933, to satisfy the minimum applicable tax withholding obligations related to the vesting of such restricted stock awards. |
WEIGHTED AVERAGE COMMON SHARES
WEIGHTED AVERAGE COMMON SHARES | 3 Months Ended |
Mar. 31, 2017 | |
WEIGHTED AVERAGE COMMON SHARES | |
WEIGHTED AVERAGE COMMON SHARES | 14. WEIGHTED AVERAGE COMMON SHARES The weighted average number of shares of common stock outstanding used in the computation of basic and diluted loss per share is as follows (in thousands): Three Months Ended March 31, 2017 2016 Weighted average shares Weighted average number of common shares outstanding - basic 66,090 66,034 Potential dilution from equity grants (1) — — Weighted average number of common shares outstanding - diluted 66,090 66,034 (1) The Company was in a net loss position for the three months ended March 31, 2017 and 2016. Therefore, no potential dilution from the application of the treasury stock method was applicable. Equity awards to purchase approximately 15.7 million shares of common stock for the three months ended March 31, 2017 and 8.4 million shares of common stock for the three months ended March 31, 2016 were excluded from the computation of diluted net loss per share as this effect would have been antidilutive. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2017 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 15. SHARE-BASED COMPENSATION Equity Incentive Awards Our 2014 Equity Incentive Plan (the “2014 Plan”) and our 2012 Equity Incentive Plan (as amended, the “2012 Plan”) are used to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of our business. The 2014 Plan superseded the then current 2005 Stock Incentive Plan (the “2005 Plan”). The 2012 Plan was assumed in connection with our acquisition of Everi Games Holding and conformed to include similar provisions to those as set forth in the 2014 Plan. Our equity incentive plans are administered by the Compensation Committee of our Board of Directors, which has the authority to select individuals who are to receive equity incentive awards and to specify the terms and conditions of grants of such awards, including, but not limited to: the vesting provisions and exercise prices. Generally, we grant the following award types: (a) time-based options, (b) market-based options and (c) restricted stock. These awards have varying vesting provisions and expiration periods. For the three months ended March 31, 2017, we granted time- and market-based options. Our time-based stock options granted under our equity plans generally vest at a rate of 25% per year on each of the first four anniversaries of the option grant dates. These options expire after a ten-year period. Our market-based options granted in 2017 vest at a rate of 25% per year on each of the first four anniversaries of the grant date, provided that as of the vesting date for each vesting tranche, the closing price of the Company’s shares on the New York Stock Exchange is at least a specified price hurdle, defined as a 25% premium to the closing stock price on the grant date. If the price hurdle is not met as of the vesting date for a vesting tranche, then the vested tranche shall vest and become vested shares on the last day of a period of 30 consecutive trading days during which the closing price is at least the price hurdle. These options expire after a ten-year period. Our market-based options granted in 2016 vest at a rate of 25% per year on each of the first four anniversaries of the grant date, provided that as of the vesting date for each vesting tranche, the closing price of the Company’s shares on the New York Stock Exchange is at least a specified price hurdle, defined as a 50% premium to the closing stock price on the grant date. If the price hurdle is not met as of the vesting date for a vesting tranche, then the vested tranche shall vest and become vested shares on the last day of a period of 30 consecutive trading days during which the closing price is at least the price hurdle. These options expire after a ten-year period. A summary of award activity is as follows (in thousands): Stock Options Restricted Stock Granted Granted Outstanding, December 31, 2016 18,233 80 Additional authorized shares — — Granted 4,003 — Exercised options or vested shares (4) (9) Cancelled or forfeited (71) — Outstanding, March 31, 2017 22,161 71 The maximum number of shares available for future equity awards, both under the 2014 Plan and 2012 Plan, is approximately 1.0 million shares of our common stock. There are no shares available for future equity awards under the 2005 Plan. Stock Options The fair value of our standard time-based options in connection with our annual grant that occurred during the first quarter of 2017 was determined as of the date of grant using the Black-Scholes option pricing model with the following assumptions: Three months ended March 31, 2017 Risk-free interest rate 2 % Expected life of options (in years) 6 Expected volatility 54 % Expected dividend yield — % For the three months ended March 31, 2016, certain executive and director grants were valued under the Black-Scholes option pricing model that utilized different assumptions from those used for our standard time-based options. For the time-based options granted on February 25, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of five years; (c) expected volatility of 49%; and (d) no expected dividend yield. For the time-based options granted on February 13, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of six years; (c) expected volatility of 49%; and (d) no expected dividend yield. The fair value of our market-based options in connection with the annual grant that occurred during the first quarter of 2017 was determined as of the date of grant using a lattice-based option valuation model with the following assumptions: Three months ended March 31, 2017 Risk-free interest rate 3 % Measurement period (in years) 10 Expected volatility 70 % Expected dividend yield — % For the three months ended March 31, 2016, there were no market-based options granted. The following tables present the options activity: Weighted Number of Weighted Average Average Life Aggregate Common Shares Exercise Price Remaining Intrinsic Value (in thousands) (per share) (years) (in thousands) Outstanding, December 31, 2016 18,233 $ 6.02 6.4 $ 2,387 Granted 4,003 3.29 Exercised (4) 2.20 Canceled or forfeited (71) 5.56 Outstanding, March 31, 2017 22,161 $ 5.53 6.9 $ 20,511 Vested and expected to vest, March 31, 2017 19,149 $ 5.68 6.7 $ 16,465 Exercisable, March 31, 2017 9,573 $ 7.12 4.6 $ 2,186 There were 4.0 million and 0.6 million options granted for the three months ended March 31, 2017 and 2016, respectively. The weighted average grant date fair value per share of options granted was $1.81 and $1.28 for the three months ended March 31, 2017 and 2016, respectively. The total intrinsic value of options exercised was $6,132 for the three months ended March 31, 2017. No options were exercised during the three months ended March 31, 2016. There was $15.3 million in unrecognized compensation expense related to options expected to vest as of March 31, 2017. This cost is expected to be recognized on a straight-line basis over a weighted average period of 2.5 years. We recorded $1.3 million in non-cash compensation expense related to options granted that were expected to vest for the three months ended March 31, 2017. We received $8,554 in cash from the exercise of options for the three months ended March 31, 2017. There was $15.0 million in unrecognized compensation expense related to options expected to vest as of March 31, 2016. This cost was expected to be recognized on a straight-line basis over a weighted average period of 2.5 years. We recorded $1.0 million in non-cash compensation expense related to options granted that were expected to vest as of March 31, 2016. There were no proceeds received from the exercise of options as no exercises occurred during the period. Restricted Stock The following is a summary of non-vested share awards for our time-based restricted stock: Weighted Shares Average Grant Outstanding Date Fair Value (in thousands) (per share) Outstanding, December 31, 2016 80 $ 7.12 Granted — — Vested (9) 7.09 Forfeited — — Outstanding, March 31, 2017 71 $ 7.12 There were no shares of restricted stock granted for the three months ended March 31, 2017 and 2016. The total fair value of restricted stock vested was $45,050 and $24,267 for the three months ended March 31, 2017 and 2016, respectively. There was $0.8 million in unrecognized compensation expense related to shares of time based restricted stock expected to vest as of March 31, 2017. This cost is expected to be recognized on a straight-line basis over a weighted average period of 1.6 years. There were 9,405 shares of restricted stock that vested and we recorded $0.1 million in non-cash compensation expense related to the restricted stock granted that was expected to vest during the three months ended March 31, 2017. There was $1.7 million in unrecognized compensation expense related to shares of time-based restricted shares expected to vest as of March 31, 2016. This cost was expected to be recognized on a straight-line basis over a weighted average period of 2.2 years. There were 10,600 shares of time-based restricted shares vested and we recorded $0.1 million in non-cash compensation expense related to the restricted stock granted that was expected to vest for the three months ended March 31, 2016. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2017 | |
INCOME TAXES | |
INCOME TAXES | 16. INCOME TAXES The income tax provision reflected an effective income tax rate of negative 43.0% for the three months ended March 31, 2017, which was less than the statutory federal rate of 35.0% primarily due to an increase in our valuation allowance for deferred tax assets, partially offset by the lower foreign tax rate applicable to our foreign source income, state taxes and the benefit from a research credit. The income tax provision reflected an effective income tax rate of 38.0% for the same period in the prior year, which was higher than the statutory federal rate of 35.0% primarily due to state taxes, the lower foreign tax rate applicable to our foreign source income and the benefit from a research credit, which was partially offset by non-statutory stock options that expired during 2016. We have analyzed filing positions in all of the federal, state and foreign jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. As of March 31, 2017, the Company recorded $0.8 million of unrecognized tax benefits, all of which would impact our effective tax rate, if recognized. We do not anticipate that our unrecognized tax benefits will materially change within the next 12 months. The Company has not accrued any penalties and interest for its unrecognized tax benefits. Other than the unrecognized tax benefit recorded, we believe that our income tax filing positions and deductions will be sustained upon audit, and we do not anticipate any other adjustments that will result in a material change to our financial position. We may, from time to time, be assessed interest or penalties by tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. Our policy for recording interest and penalties associated with audits and unrecognized tax benefits is to record such items as a component of income tax in our Condensed Consolidated Statements of Loss and Comprehensive Loss. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2017 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 17. SEGMENT INFORMATION Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-making group in deciding how to allocate resources and in assessing performance. Our chief operating decision-making group consists of the Chief Executive Officer and the Chief Financial Officer. This group manages the business, allocates resources and measures profitability based on our operating segments. Our operating segments are managed and reviewed separately, as each represents products that can be sold separately to our customers. Our chief operating decision-making group has determined the following to be the operating segments for which we conduct business: (a) Games and (b) Payments. We have reported our financial performance based on our segments in both the current and prior periods. Each of these segments is monitored by our management for performance against its internal forecast and is consistent with our internal management reporting. · The Games segment provides solutions directly to gaming establishments to offer their patrons gaming entertainment related experiences including: leased gaming equipment; sales and maintenance related services of gaming equipment; gaming systems; and ancillary products and services. · The Payments segment provides solutions directly to gaming establishments to offer their patrons cash access related services and products, including: access to cash at gaming facilities via ATM cash withdrawals, credit card cash access transactions and POS debit card cash access transactions; check-related services; fully integrated kiosks and maintenance services; compliance, audit and data software; casino credit data and reporting services and other ancillary offerings. Corporate overhead expenses have been allocated to the segments either through specific identification or based on a reasonable methodology. In addition, we allocate depreciation and amortization expenses to the business segments. Our business is predominantly domestic with no specific regional concentrations and no significant assets in foreign locations. The accounting policies of the operating segments are generally the same as those described in the summary of significant accounting policies. The following tables present segment information (in thousands): For the Three Months Ended March 31, 2017 2016 Revenues Games $ 55,276 $ 48,178 Payments 182,261 157,591 Total revenues $ 237,537 $ 205,769 Operating income (loss) Games $ 4,792 $ (3,245) Payments 17,811 7,030 Total operating income $ 22,603 $ 3,785 At March 31, 2017 At December 31, 2016 Total assets Games $ 886,014 $ 894,213 Payments 434,460 513,950 Total assets $ 1,320,474 $ 1,408,163 Major Customers. For the three months ended March 31, 2017 and 2016, no single customer accounted for more than 10% of our revenues. Our five largest customers accounted for approximately 27% and 32% for the three months ended March 31, 2017 and 2016, respectively. |
CONDENSED CONSOLIDATING FINANCI
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | 3 Months Ended |
Mar. 31, 2017 | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | 18. CONDENSED CONSOLIDATING FINANCIAL INFORMATION We conduct substantially all of our business through our U.S. and foreign subsidiaries. Everi Payments’ (“Subsidiary Issuer”) obligations under the Unsecured Notes are fully and unconditionally guaranteed, subject to certain customary release provisions, on a joint and several basis by Holdings (“Parent”) and substantially all of our 100%-owned U.S. subsidiaries other than Subsidiary Issuer (the “Guarantor Subsidiaries” and, together with Parent, the “Guarantors” and each a “Guarantor” ). The guarantees of our Unsecured Notes will be released under the following customary circumstances: (i) the sale or disposition of all or substantially all of the assets of the Guarantor (by way of merger, consolidation, or otherwise) to a person that is not (either before or after giving effect to such transaction) Parent, Subsidiary Issuer or a restricted subsidiary; (ii) the sale or disposition of sufficient capital stock of the Guarantor to a person that is not (either before or after giving effect to such transaction) Parent, Subsidiary Issuer or a restricted subsidiary and the Guarantor ceases to be a restricted subsidiary of Subsidiary Issuer as a result of the sale or other disposition; (iii) the designation of the Guarantor as an unrestricted subsidiary in accordance with the indenture governing the Unsecured Notes; or (iv) the legal or covenant defeasance of the Unsecured Notes or the satisfaction and discharge of the indenture governing the Unsecured Notes. Presented below is condensed consolidating financial information for (a) Parent, (b) Subsidiary Issuer, (c) the Guarantor Subsidiaries and (d) our U.S. subsidiaries that are not Guarantor Subsidiaries and our foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016. The condensed consolidating financial information has been presented to show the nature of assets held and the results of operations and cash flows of Parent, Subsidiary Issuer, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries assuming that the guarantee structure of the Unsecured Notes had been in effect at the beginning of the periods presented. Three Months Ended March 31, 2017 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total Revenues Games $ — $ — $ 55,518 $ 440 $ (682) $ 55,276 Payments — 166,673 7,688 8,050 (150) 182,261 Total revenues — 166,673 63,206 8,490 (832) 237,537 Costs and expenses Games cost of revenue (exclusive of depreciation and amortization) — — 12,919 207 (682) 12,444 Payments cost of revenue (exclusive of depreciation and amortization) — 133,100 2,181 5,518 — 140,799 Operating expenses — 17,543 11,058 542 (150) 28,993 Research and development — — 4,538 5 — 4,543 Depreciation — 1,763 8,951 116 — 10,830 Amortization — 2,880 13,962 483 — 17,325 Total costs and expenses — 155,286 53,609 6,871 (832) 214,934 Operating income — 11,387 9,597 1,619 — 22,603 Other expenses (income) Interest expense, net of interest income — 1,996 22,896 165 — 25,057 Equity in loss (income) of subsidiaries 3,508 (4,181) (103) — 776 — Total other expenses (income) 3,508 (2,185) 22,793 165 776 25,057 (Loss) income before income tax (3,508) 13,572 (13,196) 1,454 (776) (2,454) Income tax provision (benefit) — (1,060) 1,730 384 — 1,054 Net (loss) income (3,508) 14,632 (14,926) 1,070 (776) (3,508) Foreign currency translation 272 — — 272 (272) 272 Comprehensive (loss) income $ (3,236) $ 14,632 $ (14,926) $ 1,342 $ (1,048) $ (3,236) Three Months Ended March 31, 2016 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total Revenues Games $ — $ — $ 48,178 $ — $ — $ 48,178 Payments — 146,386 7,418 4,158 (371) 157,591 Total revenues — 146,386 55,596 4,158 (371) 205,769 Costs and expenses Games cost of revenue (exclusive of depreciation and amortization) — — 8,436 — — 8,436 Payments cost of revenue (exclusive of depreciation and amortization) — 118,064 2,342 2,251 — 122,657 Operating expenses — 20,925 8,974 477 (371) 30,005 Research and development — — 5,368 — — 5,368 Depreciation — 2,519 9,786 30 — 12,335 Amortization — 3,100 19,503 580 — 23,183 Total costs and expenses — 144,608 54,409 3,338 (371) 201,984 Operating income — 1,778 1,187 820 — 3,785 Other expense (income) Interest expense, net of interest income — 1,933 22,998 61 — 24,992 Equity in loss (income) of subsidiaries 13,151 (3,294) — — (9,857) — Total other expense (income) 13,151 (1,361) 22,998 61 (9,857) 24,992 (Loss) income before income tax (13,151) 3,139 (21,811) 759 9,857 (21,207) Income tax provision (benefit) — 113 (8,422) 253 — (8,056) Net (loss) income (13,151) 3,026 (13,389) 506 9,857 (13,151) Foreign currency translation (485) — — (485) 485 (485) Comprehensive (loss) income $ (13,636) $ 3,026 $ (13,389) $ 21 $ 10,342 $ (13,636) At March 31, 2017 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total ASSETS Current assets Cash and cash equivalents $ — $ 101,319 $ 8,597 $ 17,945 $ — $ 127,861 Settlement receivables — 38,271 — 4,172 — 42,443 Trade and other receivables, net — 7,971 37,198 2,705 — 47,874 Inventory — 6,257 16,129 — — 22,386 Prepaid expenses and other assets — 5,800 5,023 10,732 — 21,555 Intercompany balances — 112,547 196,137 1,452 (310,136) — Total current assets — 272,165 263,084 37,006 (310,136) 262,119 Non-current assets Property, equipment and leased assets, net — 13,674 82,410 1,219 — 97,303 Goodwill — 151,417 488,512 622 — 640,551 Other intangible assets, net — 21,829 283,359 4,262 — 309,450 Other receivables — 1,626 1,827 — — 3,453 Investment in subsidiaries (109,582) 176,399 990 86 (67,893) — Deferred tax asset — 36,933 — — (36,933) — Other assets — 5,097 2,237 264 — 7,598 Intercompany balances — 1,144,846 — — (1,144,846) — Total non-current assets (109,582) 1,551,821 859,335 6,453 (1,249,672) 1,058,355 Total assets $ (109,582) $ 1,823,986 $ 1,122,419 $ 43,459 $ (1,559,808) $ 1,320,474 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EARNINGS Current liabilities Settlement liabilities $ — $ 120,415 $ 105 $ 7,115 $ — $ 127,635 Accounts payable and accrued expenses — 85,324 31,749 3,275 — 120,348 Current portion of long-term debt — 10,000 — — — 10,000 Intercompany balances — 194,086 107,257 8,793 (310,136) — Total current liabilities — 409,825 139,111 19,183 (310,136) 257,983 Non-current liabilities Deferred tax liability — — 95,171 — (36,933) 58,238 Long-term debt, less current portion — 1,110,995 — — — 1,110,995 Other accrued expenses and liabilities — 2,524 350 — — 2,874 Intercompany balances — — 1,144,846 — (1,144,846) — Total non-current liabilities — 1,113,519 1,240,367 — (1,181,779) 1,172,107 Total liabilities — 1,523,344 1,379,478 19,183 (1,491,915) 1,430,090 Stockholders’ (deficit) equity Common stock 91 — — — — 91 Additional paid-in capital 266,175 86,498 5,728 21,103 (113,329) 266,175 (Accumulated deficit) retained earnings (197,806) 215,948 (262,186) 5,832 40,406 (197,806) Accumulated other comprehensive loss (1,804) (1,804) (601) (2,659) 5,030 (1,838) Treasury stock, at cost (176,238) — — — — (176,238) Total stockholders’ (deficit) equity (109,582) 300,642 (257,059) 24,276 (67,893) (109,616) Total liabilities and stockholders’ (deficit) equity $ (109,582) $ 1,823,986 $ 1,122,419 $ 43,459 $ (1,559,808) $ 1,320,474 At December 31, 2016 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total ASSETS Current assets Cash and cash equivalents $ — $ 88,648 $ 9,103 $ 21,300 $ — $ 119,051 Settlement receivables — 122,222 — 6,599 — 128,821 Trade and other receivables, net — 9,001 41,743 5,907 — 56,651 Inventory — 6,009 13,059 — — 19,068 Prepaid expenses and other assets — 5,359 3,807 8,882 — 18,048 Intercompany balances — 106,729 188,028 1,461 (296,218) — Total current assets — 337,968 255,740 44,149 (296,218) 341,639 Non-current assets Property, equipment and leased assets, net — 15,144 81,993 1,302 — 98,439 Goodwill — 151,417 488,512 617 — 640,546 Other intangible assets, net — 23,901 289,338 4,758 — 317,997 Other receivables — 2,019 — 1 — 2,020 Investment in subsidiaries (107,751) 171,979 1,293 86 (65,607) — Deferred tax asset — 37,578 — — (37,578) — Other assets — 4,940 2,286 296 — 7,522 Intercompany balances — 1,143,115 7,851 — (1,150,966) — Total non-current assets (107,751) 1,550,093 871,273 7,060 (1,254,151) 1,066,524 Total assets $ (107,751) $ 1,888,061 $ 1,127,013 $ 51,209 $ (1,550,369) $ 1,408,163 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY Current liabilities Settlement liabilities $ — $ 225,170 $ 268 $ 13,685 $ — $ 239,123 Accounts payable and accrued expenses — 64,192 28,970 1,229 — 94,391 Current portion of long-term debt — 10,000 — — — 10,000 Intercompany balances — 189,488 101,387 5,343 (296,218) — Total current liabilities — 488,850 130,625 20,257 (296,218) 343,514 Non-current liabilities Deferred tax liability — — 95,189 — (37,578) 57,611 Long-term debt, less current portion — 1,111,880 — — — 1,111,880 Other accrued expenses and liabilities — 2,583 368 — — 2,951 Intercompany balances — — 1,143,116 7,850 (1,150,966) — Total non-current liabilities — 1,114,463 1,238,673 7,850 (1,188,544) 1,172,442 Total liabilities — 1,603,313 1,369,298 28,107 (1,484,762) 1,515,956 Stockholders’ deficit Common stock 91 — — — — 91 Additional paid-in capital 264,755 85,499 5,314 21,093 (111,906) 264,755 (Accumulated deficit) retained earnings (194,299) 201,316 (247,273) 5,168 40,789 (194,299) Accumulated other comprehensive loss (2,067) (2,067) (326) (3,159) 5,510 (2,109) Treasury stock, at cost (176,231) — — — — (176,231) Total stockholders’ (deficit) equity (107,751) 284,748 (242,285) 23,102 (65,607) (107,793) Total liabilities and stockholders’ (deficit) equity $ (107,751) $ 1,888,061 $ 1,127,013 $ 51,209 $ (1,550,369) $ 1,408,163 Three Months Ended March 31, 2017 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total Cash flows from operating activities Net loss $ (3,508) $ 14,632 $ (14,926) $ 1,070 $ (776) $ (3,508) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization — 4,643 22,913 599 — 28,155 Amortization of financing costs — 1,672 — — — 1,672 Loss on sale or disposal of assets — 27 409 — — 436 Accretion of contract rights — — 2,002 — — 2,002 Provision for bad debts — 27 2,790 — — 2,817 Reserve for obsolescence — 140 268 — — 408 Equity in loss (income) of subsidiaries 3,508 (4,181) (103) — 776 — Stock-based compensation — 998 414 — — 1,412 Changes in operating assets and liabilities: Net settlement receivables and liabilities — (20,802) (164) (4,132) — (25,098) Other changes in operating assets and liabilities 4 19,002 4,878 (822) — 23,062 Net cash provided by (used in) operating activities 4 16,158 18,481 (3,285) — 31,358 Cash flows from investing activities Capital expenditures — (1,227) (15,938) (19) — (17,184) Placement fee agreements — — (3,044) — — (3,044) Changes in restricted cash and cash equivalents — 25 (150) — — (125) Intercompany investing activities (2) 179 145 (26) (296) — Net cash used in investing activities (2) (1,023) (18,987) (45) (296) (20,353) Cash flows from financing activities Repayments of credit facility — (2,500) — — — (2,500) Proceeds from exercise of stock options 5 — — — — 5 Purchase of treasury stock (7) — — — — (7) Intercompany financing activities — 36 — (332) 296 — Net cash provided by (used in) financing activities (2) (2,464) — (332) 296 (2,502) Effect of exchange rates on cash — — — 307 — 307 Cash and cash equivalents Net increase (decrease) for the period — 12,671 (506) (3,355) — 8,810 Balance, beginning of the period — 88,648 9,103 21,300 — 119,051 Balance, end of the period $ — $ 101,319 $ 8,597 $ 17,945 $ — $ 127,861 Three Months Ended March 31, 2016 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total Cash flows from operating activities Net (loss) income $ (13,151) $ 3,026 $ (13,389) $ 506 $ 9,857 $ (13,151) Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: Depreciation and amortization — 5,619 29,289 610 — 35,518 Amortization of financing costs — 1,672 — — — 1,672 Loss on sale or disposal of assets — 21 590 — — 611 Accretion of contract rights — — 2,097 — — 2,097 Provision for bad debts — — 2,444 — — 2,444 Reserve for obsolescence — 60 59 — — 119 Equity in loss (income) of subsidiaries 13,151 (3,294) — — (9,857) — Stock-based compensation — 699 362 — — 1,061 Changes in operating assets and liabilities: Net settlement receivables and liabilities — (17,373) 39 4,365 — (12,969) Other changes in operating assets and liabilities 1 3,788 3,408 105 — 7,302 Net cash provided by (used in) operating activities 1 (5,782) 24,899 5,586 — 24,704 Cash flows from investing activities Capital expenditures — (3,150) (20,362) (101) — (23,613) Proceeds from sale of fixed assets — 10 — — — 10 Placement fee agreements — — (1,000) — — (1,000) Changes in restricted cash and cash equivalents — 44 — — — 44 Intercompany investing activities 2 148 (8) (52) (90) — Net cash provided by (used in) investing activities 2 (2,948) (21,370) (153) (90) (24,559) Cash flows from financing activities Repayments of credit facility — (2,500) — — — (2,500) Debt issuance costs — (480) — — — (480) Purchase of treasury stock (9) — — — — (9) Intercompany financing activities — 54 — (144) 90 — Net cash used in financing activities (9) (2,926) — (144) 90 (2,989) Effect of exchange rates on cash — — — 148 — 148 Cash and cash equivalents Net(decrease) increase for the period (6) (11,656) 3,529 5,437 — (2,696) Balance, beginning of the period 6 87,078 3,900 11,046 — 102,030 Balance, end of the period $ — $ 75,422 $ 7,429 $ 16,483 $ — $ 99,334 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2017 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 19. SUBSEQUENT EVENTS On May 9, 2017, we entered into a new credit agreement with Jefferies Finance LLC, as administrative agent, which provides for an $820.0 million senior secured term B loan facility that is scheduled to mature in May 2024 and a $35.0 million senior secured revolving loan facility that is scheduled to mature in May 2022. The interest rate per annum applicable to loans under this new credit facility will be, at our option, the base rate or the Eurodollar Rate (defined to be LIBOR or a comparable or successor rate) (the “Eurodollar Rate”) plus, in each case, an applicable margin. The applicable margins are: (i) 4.50% in respect of Eurodollar Rate loans, and (ii) 3.50% in respect of base rate loans, and represent a 0.25% and 0.75% rate reduction compared to the existing Revolving Credit Facility and Term Loan, respectively. The Refinanced Secured Notes were issued at a fixed rate of 7.25%. The net proceeds of the new term loan facility were used to prepay the balances on our existing Credit Facilities of approximately $462.3 million and to redeem all of our outstanding Refinanced Secured Notes of $335.0 million, as well as to pay related fees and expenses. The revolving loan facility remained undrawn at closing. We expect to record a non-cash charge related to certain of the unamortized deferred financing fees and discounts related to the extinguished term loan and redeemed Refinanced Secured Notes. |
BASIS OF PRESENTATION AND SUM25
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation Our unaudited Condensed Consolidated Financial Statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Some of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the three months ended March 31, 2017 are not necessarily indicative of results to be expected for the full fiscal year. The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. There have been no changes to our basis of presentation and significant accounting policies since the most recent filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. |
Fair Values of Financial Instruments | Fair Values of Financial Instruments The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. The carrying amount of cash and cash equivalents, settlement receivables, trade receivables, other receivables, settlement liabilities, accounts payable and accrued expenses approximates fair value due to the short-term maturities of these instruments. The fair value of our borrowings are estimated based on various inputs to determine a market price, such as: market demand and supply, size of tranche, maturity and similar instruments trading in more active markets. Level of Outstanding Hierarchy Fair Value Balance March 31, 2017 Term loan 1 $ 467,731 $ 463,100 Senior secured notes 3 $ 338,350 $ 335,000 Senior unsecured notes 1 $ 363,125 $ 350,000 December 31, 2016 Term loan 1 $ 451,632 $ 465,600 Senior secured notes 3 $ 324,950 $ 335,000 Senior unsecured notes 1 $ 350,000 $ 350,000 The senior secured notes were fair valued using a Level 3 input as there was no market activity or observable inputs as of March 31, 2017 and December 31, 2016. During the current period, the fair value of the senior secured notes was derived using the same rate as the term loan given that both were treated similarly. |
Reclassification of Prior Year Balances | Reclassification of Prior Year Balances Reclassifications were made to the prior-period financial statements to conform to the current period presentation. |
Recent Accounting Guidance | Recent Accounting Guidance Recently Adopted Accounting Guidance In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, which provides updated guidance on the goodwill impairment test and the method by which an entity recognizes an impairment charge. These amendments eliminate Step 2 from the current goodwill impairment process and require that an entity recognize an impairment charge equal to the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. Additionally, a company should also take into consideration income tax effects from tax deductible goodwill on the carrying amount of a reporting unit when recording an impairment loss. The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This guidance will be applied using a prospective approach. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted this guidance in the current period. As no indicators of impairment were identified for our goodwill during the three months ended March 31, 2017, this ASU did not impact our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In March 2016, the FASB issued ASU No. 2016-09, which simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This guidance will be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. We adopted this guidance in the current quarter on a prospective basis. As of March 31, 2017, the adoption of ASU No. 2016-09 has not impacted our Condensed Consolidated Financial Statements. With respect to forfeitures, the Company will continue to estimate the number of awards expected to be forfeited in accordance with our existing accounting policy. In addition, our Condensed Consolidated Statements of Cash Flows present excess tax benefits as operating activities in the current period, as the prior period was not adjusted. In July 2015, the FASB issued ASU No. 2015-11, which provides guidance on the measurement of inventory value. The amendments require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. The amendments do not apply to inventory that is measured using LIFO or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (“FIFO”) or average cost. The pronouncement is effective for annual periods beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. We adopted this guidance in the current period. This ASU did not have a material impact on our Condensed Consolidated Financial Statements and disclosures included within the Notes to Unaudited Condensed Consolidated Financial Statements. Recent Accounting Guidance Not Yet Adopted In January 2017, the FASB issued ASU No. 2017-01, which clarifies the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a prospective approach as of the beginning of the first period of adoption. Early adoption is permitted for acquisitions, or disposals that occur before the issuance date or effectiveness date of the amendments when the transaction has not been reported in financial statements that have been issued or made available for issuance. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In October 2016, the FASB issued ASU No. 2016-18, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a retrospective approach to each period presented. Early adoption is permitted and adoption in an interim period should reflect adjustments as of the beginning of the fiscal year that includes that interim period. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In October 2016, the FASB issued ASU No. 2016-16, which provides updated guidance on the recognition of the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs, and this eliminates the exception for an intra-entity transfer of such assets. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a modified retrospective approach through a cumulative-effective adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted during the first interim period of the year this guidance is adopted. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In August 2016, the FASB issued ASU No. 2016-15, which provides updated guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance will be applied using a retrospective approach. If it is impracticable to apply the amendments retrospectively for some of the issues within this ASU, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted including adoption in an interim period. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In June 2016, the FASB issued ASU No. 2016-13, which provides updated guidance on credit losses for financial assets measured at amortized cost basis and available-for sale debt securities. The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This guidance will be applied using a modified retrospective approach for the cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective and using a prospective approach for debt securities for which any other-than-temporary impairment had been recognized before the effective date. Early adoption is permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the impact of adopting this guidance on our Condensed Consolidated Financial Statements and disclosures included within Notes to Unaudited Condensed Consolidated Financial Statements. In February 2016, the FASB issued ASU No. 2016-02, which provides guidance on the accounting treatment of leases. The ASU establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. While we are currently assessing the impact of this ASU on our Condensed Consolidated Financial Statements, we expect the primary impact to our consolidated financial position upon adoption will be the recognition, on a discounted basis, of our minimum commitments under noncancelable operating leases on our Condensed Consolidated Balance Sheets, which will result in the recording of right of use assets and lease obligations and are currently discussed in “Note 12 — Commitments and Contingencies.” In May 2014, the FASB issued ASU No. 2014-09, which creates FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” and supersedes ASC Topic 605, “Revenue Recognition”. The guidance replaces industry-specific guidance and establishes a single five-step model to identify and recognize revenue. The core principle of the guidance is that an entity should recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires the entity to disclose further quantitative and qualitative information regarding the nature and amount of revenues arising from contracts with customers, as well as other information about the significant judgments and estimates used in recognizing revenues from contracts with customers. The guidance in ASU 2014-09 was further updated by ASU 2016-08 in March 2016, which provides clarification on the implementation of the principal versus agent considerations in ASU 2014-09. In April 2016, the FASB issued ASU 2016-10, which provides clarification on the implementation of performance obligations and licensing in ASU 2014-09. In May 2016, the FASB issued ASU 2016-11, which amends guidance provided in two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force meeting over various topics relating to ASU 606. In May 2016, the FASB issued ASU 2016-12, which clarified various topics in ASU 606. In December 2016, the FASB issued ASU 2016-20, which clarified additional topics in ASU 606. This guidance was originally effective for interim and annual reporting periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14, which extended the effective date to interim and annual periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2015, including interim reporting periods within that reporting period. This guidance may be adopted retrospectively or under a modified retrospective method where the cumulative effect is recognized at the date of initial application. We will likely adopt this guidance using the retrospective method beginning in the first quarter of 2018. We performed an initial review of the requirements of the standard and are monitoring the activity of the FASB and the transition resource group as it relates to specific interpretive guidance that may impact us. We are currently completing detailed contract reviews to determine necessary adjustments to existing accounting policies and procedures and to support an evaluation of the standard’s impact on our Condensed Consolidated Financial Statements and disclosures included within Notes to Condensed Consolidated Financial Statements. Based on reviews performed, we do not expect our Payments revenues to be materially impacted by the implementation of this guidance. We are still evaluating our Games revenues and equipment and systems revenues to determine the extent, if any, of changes to the timing and amount of revenue recorded in each reporting period. Additionally, the new guidance will require enhanced disclosures and updates to our revenue recognition policies to identify performance obligations to customers and will also require significant judgment in both measurement and recognition. We may identify other impacts from the implementation of this guidance as we continue our assessment. |
BASIS OF PRESENTATION AND SUM26
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of fair value and carrying value of borrowings | Level of Outstanding Hierarchy Fair Value Balance March 31, 2017 Term loan 1 $ 467,731 $ 463,100 Senior secured notes 3 $ 338,350 $ 335,000 Senior unsecured notes 1 $ 363,125 $ 350,000 December 31, 2016 Term loan 1 $ 451,632 $ 465,600 Senior secured notes 3 $ 324,950 $ 335,000 Senior unsecured notes 1 $ 350,000 $ 350,000 |
TRADE AND OTHER RECEIVABLES (Ta
TRADE AND OTHER RECEIVABLES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
TRADE AND OTHER RECEIVABLES | |
Schedule of components of trade and other receivables | The balance of trade and other receivables consisted of the following (in thousands): At March 31, At December 31, 2017 2016 Trade and other receivables, net Games trade and loans receivables $ 38,118 $ 44,410 Payments trade and loans receivables 12,180 12,337 Other receivables 1,029 1,924 Total trade and other receivables, net $ 51,327 $ 58,671 Less: non-current portion of receivables 3,453 2,020 Total trade and other receivables, current portion $ 47,874 $ 56,651 |
PREPAID AND OTHER ASSETS (Table
PREPAID AND OTHER ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
PREPAID AND OTHER ASSETS | |
Schedule of components of current portion of prepaid and other assets | The balance of the current portion of prepaid and other assets consisted of the following (in thousands): At March 31, At December 31, 2017 2016 Prepaid expenses and other assets Deposits $ 10,259 $ 8,622 Prepaid expenses 7,613 5,937 Other 3,683 3,489 Total prepaid expenses and other assets $ 21,555 $ 18,048 |
Schedule of components of non-current portion of prepaid and other assets | The balance of the non-current portion of other assets consisted of the following (in thousands): At March 31, At December 31, 2017 2016 Other assets Prepaid expenses and deposits $ 3,485 $ 3,399 Debt issuance costs of revolving credit 632 689 Other 3,481 3,434 Total other assets $ 7,598 $ 7,522 |
INVENTORY (Tables)
INVENTORY (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
INVENTORY | |
Schedule of components of inventory | Inventory consisted of the following (in thousands): At March 31, At December 31, 2017 2016 Inventory Raw materials and component parts, net of reserves of $1,651 and $2,155 at March 31, 2017 and December 31, 2016, respectively $ 14,243 $ 12,570 Work-in-progress 2,769 1,502 Finished goods 5,374 4,996 Total inventory $ 22,386 $ 19,068 |
PROPERTY, EQUIPMENT AND LEASE30
PROPERTY, EQUIPMENT AND LEASED ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
PROPERTY, EQUIPMENT AND LEASED ASSETS | |
Schedule of components of property, equipment and leased assets | Property, equipment and leased assets consist of the following (in thousands): At March 31, 2017 At December 31, 2016 Useful Life Accumulated Net Book Accumulated Net Book (Years) Cost Depreciation Value Cost Depreciation Value Property, equipment and leased assets Rental pool - deployed - 4 $ 130,097 $ 63,582 $ 66,515 $ 123,812 $ 59,188 $ 64,624 Rental pool - undeployed - 4 13,750 7,058 6,692 13,456 5,721 7,735 ATM equipment 5 16,372 11,671 4,701 16,537 11,189 5,348 Leasehold and building improvements Lease Term 9,919 4,022 5,897 10,023 3,698 6,325 Cash advance equipment 3 8,127 4,448 3,679 8,590 4,499 4,091 Machinery, office and other equipment - 5 30,989 21,170 9,819 30,424 20,108 10,316 Total $ 209,254 $ 111,951 $ 97,303 $ 202,842 $ 104,403 $ 98,439 |
GOODWILL AND OTHER INTANGIBLE31
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Schedule of components of other intangible assets | Other intangible assets consist of the following (in thousands): At March 31, 2017 At December 31, 2016 Useful Life Accumulated Net Book Accumulated Net Book (years) Cost Amortization Value Cost Amortization Value Other intangible assets Contract rights under placement fee agreements - 7 $ 20,334 $ 7,831 $ 12,503 $ 17,742 $ 6,281 $ 11,461 Customer contracts - 14 50,975 41,427 9,548 50,975 40,419 10,556 Customer relationships - 12 231,100 47,929 183,171 231,100 42,688 188,412 Developed technology and software - 6 228,392 134,597 93,795 224,265 126,721 97,544 Patents, trademarks and other - 17 29,242 18,809 10,433 27,771 17,747 10,024 Total $ 560,043 $ 250,593 $ 309,450 $ 551,853 $ 233,856 $ 317,997 |
ACCOUNTS PAYABLE AND ACCRUED 32
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | |
Schedule of accounts payable and accrued expenses | The following table presents our accounts payable and accrued expenses (in thousands): At March 31, At December 31, 2017 2016 Accounts payable and accrued expenses Trade accounts payable $ 66,895 $ 55,352 Accrued interest 15,175 82 Payroll and related expenses 11,093 12,305 Deferred and unearned revenues 10,766 9,222 Cash access processing and related expenses 4,889 7,001 Accrued taxes 2,442 2,587 Other 9,088 7,842 Total accounts payable and accrued expenses $ 120,348 $ 94,391 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
LONG-TERM DEBT | |
Schedule of outstanding indebtedness | The following table summarizes our outstanding indebtedness (in thousands): At March 31, At December 31, 2017 2016 Long-term debt Senior secured term loan $ 463,100 $ 465,600 Senior secured notes 335,000 335,000 Senior unsecured notes 350,000 350,000 Total debt 1,148,100 1,150,600 Less: debt issuance costs and discount (27,105) (28,720) Total debt after debt issuance costs and discount 1,120,995 1,121,880 Less: current portion of long-term debt (10,000) (10,000) Long-term debt, less current portion $ 1,110,995 $ 1,111,880 |
WEIGHTED AVERAGE COMMON SHARES
WEIGHTED AVERAGE COMMON SHARES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
WEIGHTED AVERAGE COMMON SHARES | |
Schedule of weighted average number of common shares outstanding used in computation of basic and diluted earnings per share | The weighted average number of shares of common stock outstanding used in the computation of basic and diluted loss per share is as follows (in thousands): Three Months Ended March 31, 2017 2016 Weighted average shares Weighted average number of common shares outstanding - basic 66,090 66,034 Potential dilution from equity grants (1) — — Weighted average number of common shares outstanding - diluted 66,090 66,034 (1) The Company was in a net loss position for the three months ended March 31, 2017 and 2016. Therefore, no potential dilution from the application of the treasury stock method was applicable. Equity awards to purchase approximately 15.7 million shares of common stock for the three months ended March 31, 2017 and 8.4 million shares of common stock for the three months ended March 31, 2016 were excluded from the computation of diluted net loss per share as this effect would have been antidilutive. |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Equity Incentive Awards | |
Summary of award activity | A summary of award activity is as follows (in thousands): Stock Options Restricted Stock Granted Granted Outstanding, December 31, 2016 18,233 80 Additional authorized shares — — Granted 4,003 — Exercised options or vested shares (4) (9) Cancelled or forfeited (71) — Outstanding, March 31, 2017 22,161 71 |
Summary of options activity | Weighted Number of Weighted Average Average Life Aggregate Common Shares Exercise Price Remaining Intrinsic Value (in thousands) (per share) (years) (in thousands) Outstanding, December 31, 2016 18,233 $ 6.02 6.4 $ 2,387 Granted 4,003 3.29 Exercised (4) 2.20 Canceled or forfeited (71) 5.56 Outstanding, March 31, 2017 22,161 $ 5.53 6.9 $ 20,511 Vested and expected to vest, March 31, 2017 19,149 $ 5.68 6.7 $ 16,465 Exercisable, March 31, 2017 9,573 $ 7.12 4.6 $ 2,186 |
Summary of non-vested share awards for time-based restricted shares | Weighted Shares Average Grant Outstanding Date Fair Value (in thousands) (per share) Outstanding, December 31, 2016 80 $ 7.12 Granted — — Vested (9) 7.09 Forfeited — — Outstanding, March 31, 2017 71 $ 7.12 |
Time Based Options | |
Equity Incentive Awards | |
Schedule assumptions used to determine fair value | Three months ended March 31, 2017 Risk-free interest rate 2 % Expected life of options (in years) 6 Expected volatility 54 % Expected dividend yield — % |
Market Performance Based Options | |
Equity Incentive Awards | |
Schedule assumptions used to determine fair value | Three months ended March 31, 2017 Risk-free interest rate 3 % Measurement period (in years) 10 Expected volatility 70 % Expected dividend yield — % |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
SEGMENT INFORMATION | |
Schedule of segment information | The following tables present segment information (in thousands): For the Three Months Ended March 31, 2017 2016 Revenues Games $ 55,276 $ 48,178 Payments 182,261 157,591 Total revenues $ 237,537 $ 205,769 Operating income (loss) Games $ 4,792 $ (3,245) Payments 17,811 7,030 Total operating income $ 22,603 $ 3,785 At March 31, 2017 At December 31, 2016 Total assets Games $ 886,014 $ 894,213 Payments 434,460 513,950 Total assets $ 1,320,474 $ 1,408,163 |
CONDENSED CONSOLIDATING FINAN37
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | |
Schedule of condensed consolidating statements of income and comprehensive income | Three Months Ended March 31, 2017 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total Revenues Games $ — $ — $ 55,518 $ 440 $ (682) $ 55,276 Payments — 166,673 7,688 8,050 (150) 182,261 Total revenues — 166,673 63,206 8,490 (832) 237,537 Costs and expenses Games cost of revenue (exclusive of depreciation and amortization) — — 12,919 207 (682) 12,444 Payments cost of revenue (exclusive of depreciation and amortization) — 133,100 2,181 5,518 — 140,799 Operating expenses — 17,543 11,058 542 (150) 28,993 Research and development — — 4,538 5 — 4,543 Depreciation — 1,763 8,951 116 — 10,830 Amortization — 2,880 13,962 483 — 17,325 Total costs and expenses — 155,286 53,609 6,871 (832) 214,934 Operating income — 11,387 9,597 1,619 — 22,603 Other expenses (income) Interest expense, net of interest income — 1,996 22,896 165 — 25,057 Equity in loss (income) of subsidiaries 3,508 (4,181) (103) — 776 — Total other expenses (income) 3,508 (2,185) 22,793 165 776 25,057 (Loss) income before income tax (3,508) 13,572 (13,196) 1,454 (776) (2,454) Income tax provision (benefit) — (1,060) 1,730 384 — 1,054 Net (loss) income (3,508) 14,632 (14,926) 1,070 (776) (3,508) Foreign currency translation 272 — — 272 (272) 272 Comprehensive (loss) income $ (3,236) $ 14,632 $ (14,926) $ 1,342 $ (1,048) $ (3,236) Three Months Ended March 31, 2016 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total Revenues Games $ — $ — $ 48,178 $ — $ — $ 48,178 Payments — 146,386 7,418 4,158 (371) 157,591 Total revenues — 146,386 55,596 4,158 (371) 205,769 Costs and expenses Games cost of revenue (exclusive of depreciation and amortization) — — 8,436 — — 8,436 Payments cost of revenue (exclusive of depreciation and amortization) — 118,064 2,342 2,251 — 122,657 Operating expenses — 20,925 8,974 477 (371) 30,005 Research and development — — 5,368 — — 5,368 Depreciation — 2,519 9,786 30 — 12,335 Amortization — 3,100 19,503 580 — 23,183 Total costs and expenses — 144,608 54,409 3,338 (371) 201,984 Operating income — 1,778 1,187 820 — 3,785 Other expense (income) Interest expense, net of interest income — 1,933 22,998 61 — 24,992 Equity in loss (income) of subsidiaries 13,151 (3,294) — — (9,857) — Total other expense (income) 13,151 (1,361) 22,998 61 (9,857) 24,992 (Loss) income before income tax (13,151) 3,139 (21,811) 759 9,857 (21,207) Income tax provision (benefit) — 113 (8,422) 253 — (8,056) Net (loss) income (13,151) 3,026 (13,389) 506 9,857 (13,151) Foreign currency translation (485) — — (485) 485 (485) Comprehensive (loss) income $ (13,636) $ 3,026 $ (13,389) $ 21 $ 10,342 $ (13,636) |
Schedule of condensed consolidating balance sheets | At March 31, 2017 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total ASSETS Current assets Cash and cash equivalents $ — $ 101,319 $ 8,597 $ 17,945 $ — $ 127,861 Settlement receivables — 38,271 — 4,172 — 42,443 Trade and other receivables, net — 7,971 37,198 2,705 — 47,874 Inventory — 6,257 16,129 — — 22,386 Prepaid expenses and other assets — 5,800 5,023 10,732 — 21,555 Intercompany balances — 112,547 196,137 1,452 (310,136) — Total current assets — 272,165 263,084 37,006 (310,136) 262,119 Non-current assets Property, equipment and leased assets, net — 13,674 82,410 1,219 — 97,303 Goodwill — 151,417 488,512 622 — 640,551 Other intangible assets, net — 21,829 283,359 4,262 — 309,450 Other receivables — 1,626 1,827 — — 3,453 Investment in subsidiaries (109,582) 176,399 990 86 (67,893) — Deferred tax asset — 36,933 — — (36,933) — Other assets — 5,097 2,237 264 — 7,598 Intercompany balances — 1,144,846 — — (1,144,846) — Total non-current assets (109,582) 1,551,821 859,335 6,453 (1,249,672) 1,058,355 Total assets $ (109,582) $ 1,823,986 $ 1,122,419 $ 43,459 $ (1,559,808) $ 1,320,474 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EARNINGS Current liabilities Settlement liabilities $ — $ 120,415 $ 105 $ 7,115 $ — $ 127,635 Accounts payable and accrued expenses — 85,324 31,749 3,275 — 120,348 Current portion of long-term debt — 10,000 — — — 10,000 Intercompany balances — 194,086 107,257 8,793 (310,136) — Total current liabilities — 409,825 139,111 19,183 (310,136) 257,983 Non-current liabilities Deferred tax liability — — 95,171 — (36,933) 58,238 Long-term debt, less current portion — 1,110,995 — — — 1,110,995 Other accrued expenses and liabilities — 2,524 350 — — 2,874 Intercompany balances — — 1,144,846 — (1,144,846) — Total non-current liabilities — 1,113,519 1,240,367 — (1,181,779) 1,172,107 Total liabilities — 1,523,344 1,379,478 19,183 (1,491,915) 1,430,090 Stockholders’ (deficit) equity Common stock 91 — — — — 91 Additional paid-in capital 266,175 86,498 5,728 21,103 (113,329) 266,175 (Accumulated deficit) retained earnings (197,806) 215,948 (262,186) 5,832 40,406 (197,806) Accumulated other comprehensive loss (1,804) (1,804) (601) (2,659) 5,030 (1,838) Treasury stock, at cost (176,238) — — — — (176,238) Total stockholders’ (deficit) equity (109,582) 300,642 (257,059) 24,276 (67,893) (109,616) Total liabilities and stockholders’ (deficit) equity $ (109,582) $ 1,823,986 $ 1,122,419 $ 43,459 $ (1,559,808) $ 1,320,474 At December 31, 2016 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total ASSETS Current assets Cash and cash equivalents $ — $ 88,648 $ 9,103 $ 21,300 $ — $ 119,051 Settlement receivables — 122,222 — 6,599 — 128,821 Trade and other receivables, net — 9,001 41,743 5,907 — 56,651 Inventory — 6,009 13,059 — — 19,068 Prepaid expenses and other assets — 5,359 3,807 8,882 — 18,048 Intercompany balances — 106,729 188,028 1,461 (296,218) — Total current assets — 337,968 255,740 44,149 (296,218) 341,639 Non-current assets Property, equipment and leased assets, net — 15,144 81,993 1,302 — 98,439 Goodwill — 151,417 488,512 617 — 640,546 Other intangible assets, net — 23,901 289,338 4,758 — 317,997 Other receivables — 2,019 — 1 — 2,020 Investment in subsidiaries (107,751) 171,979 1,293 86 (65,607) — Deferred tax asset — 37,578 — — (37,578) — Other assets — 4,940 2,286 296 — 7,522 Intercompany balances — 1,143,115 7,851 — (1,150,966) — Total non-current assets (107,751) 1,550,093 871,273 7,060 (1,254,151) 1,066,524 Total assets $ (107,751) $ 1,888,061 $ 1,127,013 $ 51,209 $ (1,550,369) $ 1,408,163 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY Current liabilities Settlement liabilities $ — $ 225,170 $ 268 $ 13,685 $ — $ 239,123 Accounts payable and accrued expenses — 64,192 28,970 1,229 — 94,391 Current portion of long-term debt — 10,000 — — — 10,000 Intercompany balances — 189,488 101,387 5,343 (296,218) — Total current liabilities — 488,850 130,625 20,257 (296,218) 343,514 Non-current liabilities Deferred tax liability — — 95,189 — (37,578) 57,611 Long-term debt, less current portion — 1,111,880 — — — 1,111,880 Other accrued expenses and liabilities — 2,583 368 — — 2,951 Intercompany balances — — 1,143,116 7,850 (1,150,966) — Total non-current liabilities — 1,114,463 1,238,673 7,850 (1,188,544) 1,172,442 Total liabilities — 1,603,313 1,369,298 28,107 (1,484,762) 1,515,956 Stockholders’ deficit Common stock 91 — — — — 91 Additional paid-in capital 264,755 85,499 5,314 21,093 (111,906) 264,755 (Accumulated deficit) retained earnings (194,299) 201,316 (247,273) 5,168 40,789 (194,299) Accumulated other comprehensive loss (2,067) (2,067) (326) (3,159) 5,510 (2,109) Treasury stock, at cost (176,231) — — — — (176,231) Total stockholders’ (deficit) equity (107,751) 284,748 (242,285) 23,102 (65,607) (107,793) Total liabilities and stockholders’ (deficit) equity $ (107,751) $ 1,888,061 $ 1,127,013 $ 51,209 $ (1,550,369) $ 1,408,163 |
Schedule of condensed consolidating cash flows | Three Months Ended March 31, 2017 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total Cash flows from operating activities Net loss $ (3,508) $ 14,632 $ (14,926) $ 1,070 $ (776) $ (3,508) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization — 4,643 22,913 599 — 28,155 Amortization of financing costs — 1,672 — — — 1,672 Loss on sale or disposal of assets — 27 409 — — 436 Accretion of contract rights — — 2,002 — — 2,002 Provision for bad debts — 27 2,790 — — 2,817 Reserve for obsolescence — 140 268 — — 408 Equity in loss (income) of subsidiaries 3,508 (4,181) (103) — 776 — Stock-based compensation — 998 414 — — 1,412 Changes in operating assets and liabilities: Net settlement receivables and liabilities — (20,802) (164) (4,132) — (25,098) Other changes in operating assets and liabilities 4 19,002 4,878 (822) — 23,062 Net cash provided by (used in) operating activities 4 16,158 18,481 (3,285) — 31,358 Cash flows from investing activities Capital expenditures — (1,227) (15,938) (19) — (17,184) Placement fee agreements — — (3,044) — — (3,044) Changes in restricted cash and cash equivalents — 25 (150) — — (125) Intercompany investing activities (2) 179 145 (26) (296) — Net cash used in investing activities (2) (1,023) (18,987) (45) (296) (20,353) Cash flows from financing activities Repayments of credit facility — (2,500) — — — (2,500) Proceeds from exercise of stock options 5 — — — — 5 Purchase of treasury stock (7) — — — — (7) Intercompany financing activities — 36 — (332) 296 — Net cash provided by (used in) financing activities (2) (2,464) — (332) 296 (2,502) Effect of exchange rates on cash — — — 307 — 307 Cash and cash equivalents Net increase (decrease) for the period — 12,671 (506) (3,355) — 8,810 Balance, beginning of the period — 88,648 9,103 21,300 — 119,051 Balance, end of the period $ — $ 101,319 $ 8,597 $ 17,945 $ — $ 127,861 Three Months Ended March 31, 2016 Parent Subsidiary Guarantor Non-Guarantor Eliminations Total Cash flows from operating activities Net (loss) income $ (13,151) $ 3,026 $ (13,389) $ 506 $ 9,857 $ (13,151) Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: Depreciation and amortization — 5,619 29,289 610 — 35,518 Amortization of financing costs — 1,672 — — — 1,672 Loss on sale or disposal of assets — 21 590 — — 611 Accretion of contract rights — — 2,097 — — 2,097 Provision for bad debts — — 2,444 — — 2,444 Reserve for obsolescence — 60 59 — — 119 Equity in loss (income) of subsidiaries 13,151 (3,294) — — (9,857) — Stock-based compensation — 699 362 — — 1,061 Changes in operating assets and liabilities: Net settlement receivables and liabilities — (17,373) 39 4,365 — (12,969) Other changes in operating assets and liabilities 1 3,788 3,408 105 — 7,302 Net cash provided by (used in) operating activities 1 (5,782) 24,899 5,586 — 24,704 Cash flows from investing activities Capital expenditures — (3,150) (20,362) (101) — (23,613) Proceeds from sale of fixed assets — 10 — — — 10 Placement fee agreements — — (1,000) — — (1,000) Changes in restricted cash and cash equivalents — 44 — — — 44 Intercompany investing activities 2 148 (8) (52) (90) — Net cash provided by (used in) investing activities 2 (2,948) (21,370) (153) (90) (24,559) Cash flows from financing activities Repayments of credit facility — (2,500) — — — (2,500) Debt issuance costs — (480) — — — (480) Purchase of treasury stock (9) — — — — (9) Intercompany financing activities — 54 — (144) 90 — Net cash used in financing activities (9) (2,926) — (144) 90 (2,989) Effect of exchange rates on cash — — — 148 — 148 Cash and cash equivalents Net(decrease) increase for the period (6) (11,656) 3,529 5,437 — (2,696) Balance, beginning of the period 6 87,078 3,900 11,046 — 102,030 Balance, end of the period $ — $ 75,422 $ 7,429 $ 16,483 $ — $ 99,334 |
BASIS OF PRESENTATION AND SUM38
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Value | Level 1 | Senior secured term Loan | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 467,731 | $ 451,632 |
Fair Value | Level 1 | Senior unsecured notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 363,125 | 350,000 |
Fair Value | Level 3 | Senior secured notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 338,350 | 324,950 |
Outstanding Balance | Senior secured term Loan | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 463,100 | 465,600 |
Outstanding Balance | Senior secured notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 335,000 | 335,000 |
Outstanding Balance | Senior unsecured notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 350,000 | $ 350,000 |
FUNDING AGREEMENTS (Details)
FUNDING AGREEMENTS (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Funding Agreements | ||
Site-Funded ATM liability | $ 87,300,000 | $ 151,000,000 |
Contract Cash Solutions Agreement | Indemnification Guarantee | Cash | ||
Funding Agreements | ||
Outstanding balance | 270,800,000 | 285,400,000 |
Contract Cash Solutions Agreement | Indemnification Guarantee | Cash | Interest expense | ||
Funding Agreements | ||
Cash usage fees incurred | 1,100,000 | 800,000 |
Contract Cash Solutions Agreement, as amended | Indemnification Guarantee | Cash | ||
Funding Agreements | ||
Maximum amount | 425,000,000 | |
Prefunded Cash Access Agreements | Prepaid expenses and other assets | ||
Funding Agreements | ||
Prefunded cash | $ 9,800,000 | $ 8,500,000 |
TRADE AND OTHER RECEIVABLES (De
TRADE AND OTHER RECEIVABLES (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Trade and other receivables, net | |||
Other receivables | $ 1,029 | $ 1,924 | |
Total trade and other receivables, net | 51,327 | 58,671 | |
Less: non-current portion of receivables | 3,453 | 2,020 | |
Total trade and other receivables, current portion | 47,874 | 56,651 | |
Summary activity of the reserve for warranty losses: | |||
Outstanding balance | 4,999 | 4,701 | |
Bad debt expense | 2,817 | $ 2,444 | |
Games | |||
Trade and other receivables, net | |||
Trade receivables, net | 38,118 | 44,410 | |
Payments | |||
Trade and other receivables, net | |||
Trade receivables, net | 12,180 | 12,337 | |
Check Warranty Reserves | |||
Summary activity of the reserve for warranty losses: | |||
Outstanding balance | 2,700 | 2,700 | |
Non-warranty Reserves | |||
Summary activity of the reserve for warranty losses: | |||
Outstanding balance | $ 2,300 | $ 2,000 |
PREPAID AND OTHER ASSETS (Detai
PREPAID AND OTHER ASSETS (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Prepaid expenses and other assets | ||
Deposits | $ 10,259 | $ 8,622 |
Prepaid expenses | 7,613 | 5,937 |
Other | 3,683 | 3,489 |
Total prepaid expenses and other assets | 21,555 | 18,048 |
Other assets | ||
Prepaid expenses and deposits | 3,485 | 3,399 |
Debt issuance costs | 632 | 689 |
Other | 3,481 | 3,434 |
Total other assets, non-current | $ 7,598 | $ 7,522 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
INVENTORY | ||
Raw materials and component parts, net of reserves of $1,501 and $2,155 at March 31, 2017 and December 31, 2016, respectively | $ 14,243 | $ 12,570 |
Work in progress | 2,769 | 1,502 |
Finished goods | 5,374 | 4,996 |
Inventory, Net, Total | 22,386 | 19,068 |
Raw materials and component parts, reserves | $ 1,651 | $ 2,155 |
PROPERTY, EQUIPMENT AND LEASE43
PROPERTY, EQUIPMENT AND LEASED ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Cost | $ 209,254 | $ 202,842 | |
Accumulated Depreciation | 111,951 | 104,403 | |
Net Book Value | 97,303 | 98,439 | |
Depreciation expense | 10,830 | $ 12,335 | |
Rental pool - deployed | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Cost | 130,097 | 123,812 | |
Accumulated Depreciation | 63,582 | 59,188 | |
Net Book Value | $ 66,515 | 64,624 | |
Rental pool - deployed | Minimum | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Useful Life (years) | 2 years | ||
Rental pool - deployed | Maximum | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Useful Life (years) | 4 years | ||
Rental pool - undeployed | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Cost | $ 13,750 | 13,456 | |
Accumulated Depreciation | 7,058 | 5,721 | |
Net Book Value | $ 6,692 | 7,735 | |
Rental pool - undeployed | Minimum | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Useful Life (years) | 2 years | ||
Rental pool - undeployed | Maximum | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Useful Life (years) | 4 years | ||
ATM equipment | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Useful Life (years) | 5 years | ||
Cost | $ 16,372 | 16,537 | |
Accumulated Depreciation | 11,671 | 11,189 | |
Net Book Value | 4,701 | 5,348 | |
Leasehold and building improvements | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Cost | 9,919 | 10,023 | |
Accumulated Depreciation | 4,022 | 3,698 | |
Net Book Value | $ 5,897 | 6,325 | |
Cash advance equipment | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Useful Life (years) | 3 years | ||
Cost | $ 8,127 | 8,590 | |
Accumulated Depreciation | 4,448 | 4,499 | |
Net Book Value | 3,679 | 4,091 | |
Machinery, office and other equipment | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Cost | 30,989 | 30,424 | |
Accumulated Depreciation | 21,170 | 20,108 | |
Net Book Value | $ 9,819 | $ 10,316 | |
Machinery, office and other equipment | Minimum | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Useful Life (years) | 2 years | ||
Machinery, office and other equipment | Maximum | |||
PROPERTY, EQUIPMENT AND LEASED ASSETS | |||
Useful Life (years) | 5 years |
GOODWILL AND OTHER INTANGIBLE44
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Goodwill | $ 640,551 | $ 640,546 | |
Impairment of goodwill | $ 0 | $ 0 |
GOODWILL AND OTHER INTANGIBLE45
GOODWILL AND OTHER INTANGIBLE ASSETS - Other Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Other Intangible Assets | |||
Cost | $ 560,043 | $ 551,853 | |
Accumulated Amortization | 250,593 | 233,856 | |
Net Book Value | 309,450 | 317,997 | |
Amortization of expense | 17,300 | $ 23,200 | |
Contract rights under placement fee agreements | |||
Other Intangible Assets | |||
Cost | 20,334 | 17,742 | |
Accumulated Amortization | 7,831 | 6,281 | |
Net Book Value | $ 12,503 | 11,461 | |
Contract rights under placement fee agreements | Minimum | |||
Other Intangible Assets | |||
Useful Life (years) | 1 year | ||
Contract rights under placement fee agreements | Maximum | |||
Other Intangible Assets | |||
Useful Life (years) | 7 years | ||
Customer contracts | |||
Other Intangible Assets | |||
Cost | $ 50,975 | 50,975 | |
Accumulated Amortization | 41,427 | 40,419 | |
Net Book Value | $ 9,548 | 10,556 | |
Customer contracts | Minimum | |||
Other Intangible Assets | |||
Useful Life (years) | 7 years | ||
Customer contracts | Maximum | |||
Other Intangible Assets | |||
Useful Life (years) | 14 years | ||
Customer relationships | |||
Other Intangible Assets | |||
Cost | $ 231,100 | 231,100 | |
Accumulated Amortization | 47,929 | 42,688 | |
Net Book Value | $ 183,171 | 188,412 | |
Customer relationships | Minimum | |||
Other Intangible Assets | |||
Useful Life (years) | 8 years | ||
Customer relationships | Maximum | |||
Other Intangible Assets | |||
Useful Life (years) | 12 years | ||
Developed technology and software | |||
Other Intangible Assets | |||
Cost | $ 228,392 | 224,265 | |
Accumulated Amortization | 134,597 | 126,721 | |
Net Book Value | $ 93,795 | 97,544 | |
Developed technology and software | Minimum | |||
Other Intangible Assets | |||
Useful Life (years) | 1 year | ||
Developed technology and software | Maximum | |||
Other Intangible Assets | |||
Useful Life (years) | 6 years | ||
Patents, trademarks and other | |||
Other Intangible Assets | |||
Cost | $ 29,242 | 27,771 | |
Accumulated Amortization | 18,809 | 17,747 | |
Net Book Value | $ 10,433 | $ 10,024 | |
Patents, trademarks and other | Minimum | |||
Other Intangible Assets | |||
Useful Life (years) | 1 year | ||
Patents, trademarks and other | Maximum | |||
Other Intangible Assets | |||
Useful Life (years) | 17 years |
GOODWILL AND OTHER INTANGIBLE46
GOODWILL AND OTHER INTANGIBLE ASSETS - Placement Fee Agreements (Details) - Contract rights under placement fee agreements - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Placement fee agreements | ||
Payment advances made under placement fee agreements | $ 3 | $ 1 |
Minimum | ||
Placement fee agreements | ||
General term of the agreement | 12 months | |
Maximum | ||
Placement fee agreements | ||
General term of the agreement | 83 months |
ACCOUNTS PAYABLE AND ACCRUED 47
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Accounts payable and accrued expenses | ||
Trade accounts payable | $ 66,895 | $ 55,352 |
Payroll and related expenses | 11,093 | 12,305 |
Deferred and unearned revenues | 10,766 | 9,222 |
Cash access processing and related expenses | 4,889 | 7,001 |
Accrued taxes | 2,442 | 2,587 |
Accrued interest | 15,175 | 82 |
Other | 9,088 | 7,842 |
Total accounts payable and accrued expenses | $ 120,348 | $ 94,391 |
LONG-TERM DEBT - Summary of Ind
LONG-TERM DEBT - Summary of Indebtedness (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Long-term debt | ||
Total debt | $ 1,148,100 | $ 1,150,600 |
Less: debt issuance costs and discount | (27,105) | (28,720) |
Total debt after debt issuance costs and discount | 1,120,995 | 1,121,880 |
Less: current portion of long-term debt | (10,000) | (10,000) |
Long-term debt, less current portion | 1,110,995 | 1,111,880 |
Senior secured term Loan | ||
Long-term debt | ||
Total debt | 463,100 | 465,600 |
Senior secured notes | ||
Long-term debt | ||
Total debt | 335,000 | 335,000 |
Senior unsecured notes | ||
Long-term debt | ||
Total debt | $ 350,000 | $ 350,000 |
LONG-TERM DEBT - Credit Facilit
LONG-TERM DEBT - Credit Facilities (Details) - Credit Agreement, December 2014 - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended |
Dec. 31, 2014 | Mar. 31, 2017 | Dec. 31, 2016 | |
Credit Facilities | |||
Debt issuance discount | $ 7,500,000 | ||
Debt issuance costs | 13,900,000 | ||
Weighted average interest rate during period (as a percent) | 6.28% | ||
Consolidated secured leverage ratio (as a percent) | 366.00% | ||
Maximum | |||
Credit Facilities | |||
Maximum allowable consolidated secured leverage ratio (as a percent) | 425.00% | ||
Maximum allowable consolidated secured leverage ratio, December 31, 2017 (as a percent) | 400.00% | ||
Maximum allowable consolidated secured leverage ratio, December 31, 2018 (as a percent) | 375.00% | ||
Maximum allowable consolidated secured leverage ratio, December 31, 2019 and thereafter (as a percent) | 350.00% | ||
Person or group acquiring shares | Minimum | Event of default | |||
Credit Facilities | |||
Ownership of Holdings after stock purchase transaction (as a percent) | 35.00% | ||
Everi Payments Inc. | Maximum | Event of default | |||
Credit Facilities | |||
Subsidiary ownership (as a percent) | 100.00% | ||
Senior secured term loan facility | |||
Credit Facilities | |||
Amount of facility | $ 500,000,000 | ||
Term of facility | 6 years | ||
Percentage of initial aggregate principal used to calculate quarterly term loan repayment amount | 0.50% | ||
Weighted average interest rate during period (as a percent) | 6.28% | 6.25% | |
Outstanding borrowings | $ 463,100,000 | ||
Senior secured term loan facility | Minimum | |||
Credit Facilities | |||
Interest remittance period (in months) | 1 month | ||
Senior secured term loan facility | Maximum | |||
Credit Facilities | |||
Interest remittance period (in months) | 3 months | ||
Senior secured term loan facility | LIBOR | |||
Credit Facilities | |||
Interest rate margin (as a percent) | 5.25% | ||
Senior secured term loan facility | LIBOR | Variable rate below threshold | |||
Credit Facilities | |||
Variable reference rate threshold (as a percent) | 1.00% | ||
Variable reference rate (as a percent) | 1.00% | ||
Revolving credit facility | |||
Credit Facilities | |||
Maximum borrowing capacity | $ 50,000,000 | ||
Term of facility | 5 years | ||
Borrowings outstanding | $ 0 | ||
Additional borrowing availability | $ 50,000,000 | ||
Revolving credit facility | LIBOR | |||
Credit Facilities | |||
Interest rate margin (as a percent) | 4.75% | ||
Revolving credit facility | LIBOR | Variable rate below threshold | |||
Credit Facilities | |||
Variable reference rate threshold (as a percent) | 0.00% | ||
Variable reference rate (as a percent) | 0.00% | ||
Base rate borrowings | Federal funds effective rate | |||
Credit Facilities | |||
Interest rate margin (as a percent) | 0.50% | ||
Base rate borrowings | LIBOR | |||
Credit Facilities | |||
Variable reference rate period | 1 month | ||
Interest rate margin (as a percent) | 1.00% |
LONG-TERM DEBT - Senior Secured
LONG-TERM DEBT - Senior Secured Notes (Details) - Senior secured notes - USD ($) | Jun. 15, 2015 | Dec. 31, 2014 | Jun. 30, 2015 | Mar. 31, 2017 | Apr. 15, 2015 |
7.75% Notes due 2021 | |||||
Long-term debt | |||||
Aggregate principal amount of debt | $ 350,000,000 | ||||
Interest rate (as a percent) | 7.75% | ||||
Debt issuance costs | $ 13,600,000 | ||||
Agreed upon time commercially reasonable efforts are to be made to aid purchasers in the resale of Notes | 1 year | ||||
Debt issuance costs and fees expensed on extinguishment of debt | $ 13,000,000 | ||||
7.25% Notes due 2021 (Refinanced Secured Notes) | |||||
Long-term debt | |||||
Aggregate principal amount of debt | $ 335,000,000 | ||||
Interest rate (as a percent) | 7.25% | 7.25% | |||
Class Of Warrant Or Right, Expiration Period | 6 years | ||||
Debt issuance discount | $ 2,200,000 |
LONG-TERM DEBT - Senior Unsecur
LONG-TERM DEBT - Senior Unsecured Notes (Details) - Senior unsecured notes | 1 Months Ended |
Dec. 31, 2014USD ($) | |
Long-term debt | |
Aggregate principal amount of debt | $ 350,000,000 |
Interest rate (as a percent) | 10.00% |
Debt issuance discount | $ 3,800,000 |
Debt issuance costs | $ 14,000,000 |
Agreed upon time commercially reasonable efforts are to be made to aid purchasers in the resale of Notes | 1 year |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) | 3 Months Ended | ||
Mar. 31, 2017USD ($)seriesfundVoteshares | Mar. 31, 2016USD ($)shares | Dec. 31, 2016shares | |
Shareholders' equity | |||
Preferred stock, shares authorized | 50,000,000 | 50,000,000 | |
Preferred stock, shares outstanding | 0 | 0 | |
Number of votes for a share of common stock | Vote | 1 | ||
Number of sinking fund provisions applicable to common stock | fund | 0 | ||
Common stock, shares issued | 90,965,482 | 90,952,185 | |
Total Number of Shares Purchased or Withheld | |||
Shares repurchased or withheld from restricted stock awards | 2,574 | 2,588 | |
Maximum | |||
Shareholders' equity | |||
Preferred stock, shares authorized | 50,000,000 | ||
Minimum | |||
Shareholders' equity | |||
Number of series of preferred stock that may be issued | series | 1 | ||
Treasury Stock | |||
Total Number of Shares Purchased or Withheld | |||
Aggregate purchase price of shares repurchased or withheld from restricted stock awards | $ | $ 7,475 | $ 8,933 |
WEIGHTED AVERAGE COMMON SHARE53
WEIGHTED AVERAGE COMMON SHARES (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Weighted-average number of common shares outstanding used in the computation of basic and diluted earnings per share | ||
Weighted average number of common shares outstanding - basic | 66,090 | 66,034 |
Weighted average number of common shares outstanding - diluted | 66,090 | 66,034 |
Anti-dilutive equity awards excluded from computation of earnings per share (in shares) | 15,700 | 8,400 |
SHARE-BASED COMPENSATION - Awar
SHARE-BASED COMPENSATION - Award Activity (Details) - shares | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
2014 Equity Incentive Plan | |||
Equity Awards Available for Grant | |||
Number of shares available for grant | 1,000,000 | ||
2012 Equity Incentive Plan | |||
Equity Awards Available for Grant | |||
Number of shares available for grant | 1,000,000 | ||
2005 Stock Incentive Plan | |||
Equity Awards Available for Grant | |||
Number of shares available for grant | 0 | ||
Stock Options | |||
Stock Options Granted | |||
Outstanding (in shares) | 18,233,000 | ||
Granted (in shares) | 4,003,000 | 600,000 | |
Exercised options (in shares) | (4,000) | 0 | |
Canceled or forfeited (in shares) | (71,000) | ||
Outstanding (in shares) | 22,161,000 | 18,233,000 | |
Time Based Options | |||
Equity Incentive Awards | |||
Vesting rate per year (as a percent) | 25.00% | ||
Vesting period | 4 years | ||
Expiration period | 10 years | ||
Market Performance Based Options | |||
Equity Incentive Awards | |||
Vesting rate per year (as a percent) | 25.00% | 25.00% | |
Vesting period | 4 years | 4 years | |
Vesting price hurdle, percent of premium to closing stock price on grant date | 25.00% | 50.00% | |
Number of consecutive trading days the Company's average stock price meets certain target prices, which satisfy vesting requirements | 30 days | 30 days | |
Expiration period | 10 years | 10 years | |
Stock Options Granted | |||
Granted (in shares) | 0 | ||
Restricted Stock | |||
Restricted Stock Granted | |||
Outstanding (in shares) | 80,000 | ||
Granted (in shares) | 0 | ||
Vested (in shares) | (9,000) | (10,600) | |
Outstanding (in shares) | 71,000 | 80,000 |
SHARE-BASED COMPENSATION - Stoc
SHARE-BASED COMPENSATION - Stock Options, Fair Value Assumptions (Details) - shares shares in Thousands | Feb. 25, 2016 | Feb. 13, 2016 | Mar. 31, 2017 | Mar. 31, 2016 |
Stock Options | ||||
Stock options | ||||
Granted (in shares) | 4,003 | 600 | ||
Time Based Options | ||||
Weighted-average assumptions used in estimating fair value | ||||
Risk-free interest rate (as a percent) | 2.00% | |||
Expected life of options | 6 years | |||
Expected volatility (as a percent) | 54.00% | |||
Market Performance Based Options | ||||
Weighted-average assumptions used in estimating fair value | ||||
Risk-free interest rate (as a percent) | 3.00% | |||
Expected life of options | 10 years | |||
Expected volatility (as a percent) | 70.00% | |||
Stock options | ||||
Granted (in shares) | 0 | |||
Executives and directors | Time Based Options | ||||
Weighted-average assumptions used in estimating fair value | ||||
Risk-free interest rate (as a percent) | 1.00% | 1.00% | ||
Expected life of options | 5 years | 6 years | ||
Expected volatility (as a percent) | 49.00% | 49.00% | ||
Expected dividend yield (as a percent) | 0.00% | 0.00% |
SHARE-BASED COMPENSATION - St56
SHARE-BASED COMPENSATION - Stock Options, Activity (Details) - USD ($) $ / shares in Units, shares in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Stock options | |||
Proceeds from exercise of stock options | $ 5,000 | ||
Stock Options | |||
Stock Options Granted | |||
Outstanding (in shares) | 18,233 | ||
Granted (in shares) | 4,003 | 600 | |
Exercised options (in shares) | (4) | 0 | |
Canceled or forfeited (in shares) | (71) | ||
Outstanding (in shares) | 22,161 | 18,233 | |
Vested and expected to vest (in shares) | 19,149 | ||
Exercisable (in shares) | 9,573 | ||
Weighted Average Exercise Price | |||
Outstanding (in dollars per share) | $ 6.02 | ||
Granted (in dollars per share) | 3.29 | ||
Exercised options (in dollars per share) | 2.20 | ||
Canceled or forfeited (in dollars per share) | 5.56 | ||
Outstanding (in dollars per share) | 5.53 | $ 6.02 | |
Vested and expected to vest (in dollars per share) | 5.68 | ||
Exercisable (in dollars per share) | $ 7.12 | ||
Weighted Average Life Remaining | |||
Outstanding | 6 years 10 months 24 days | 6 years 4 months 24 days | |
Vested and expected to vest | 6 years 8 months 12 days | ||
Exercisable | 4 years 7 months 6 days | ||
Aggregate Intrinsic Value | |||
Outstanding (in dollars) | $ 20,511,000 | $ 2,387,000 | |
Vested and expected to vest (in dollars) | 16,465,000 | ||
Exercisable (in dollars) | $ 2,186,000 | ||
Stock options | |||
Weighted average grant date fair value (in dollars per share) | $ 1.81 | $ 1.28 | |
Total intrinsic value of options exercised | $ 6,132 | ||
Unrecognized compensation expense | $ 15,300,000 | $ 15,000,000 | |
Weighted-average period for recognition of unrecognized compensation expense | 2 years 6 months | 2 years 6 months | |
Non-cash compensation expense | $ 1,300,000 | $ 1,000,000 | |
Proceeds from exercise of stock options | $ 8,554 | $ 0 |
SHARE-BASED COMPENSATION - Rest
SHARE-BASED COMPENSATION - Restricted Stock (Details) - Restricted Stock - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Shares Outstanding | ||
Outstanding (in shares) | 80,000 | |
Granted (in shares) | 0 | |
Vested (in shares) | (9,000) | (10,600) |
Outstanding (in shares) | 71,000 | |
Weighted Average Grant Date Fair Value | ||
Outstanding (in dollars per share) | $ 7.12 | |
Vested (in dollars per share) | 7.09 | |
Outstanding (in dollars per share) | $ 7.12 | |
Restricted stock | ||
Total fair value of shares vested | $ 45,050 | $ 24,267 |
Unrecognized compensation expense | $ 800,000 | $ 1,700,000 |
Weighted-average period for recognition of unrecognized compensation expense | 1 year 7 months 6 days | 2 years 2 months 12 days |
Non-cash compensation expense | $ 100,000 | $ 100,000 |
INCOME TAXES - Effective Income
INCOME TAXES - Effective Income Tax Rate (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2015 | |
INCOME TAXES | ||||
Effective income tax rate (as a percent) | (43.00%) | 38.00% | ||
Statutory federal rate (as a percent) | 35.00% | 35.00% | 35.00% | 35.00% |
Unrecognized tax benefits | $ 0.8 | |||
Unrecognized tax benefits that would impact the effective tax rate, if recognized | 0.8 | |||
Penalties and interest accrued for unrecognized tax benefits | $ 0 |
SEGMENT INFORMATION - Revenues,
SEGMENT INFORMATION - Revenues, Operating Income, and Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Results of operations by operating segment | |||
Total revenues | $ 237,537 | $ 205,769 | |
Total operating income | 22,603 | 3,785 | |
Total assets | 1,320,474 | $ 1,408,163 | |
Games | |||
Results of operations by operating segment | |||
Total revenues | 55,276 | 48,178 | |
Total operating income | 4,792 | (3,245) | |
Total assets | 886,014 | 894,213 | |
Payments | |||
Results of operations by operating segment | |||
Total revenues | 182,261 | 157,591 | |
Total operating income | 17,811 | $ 7,030 | |
Total assets | $ 434,460 | $ 513,950 |
SEGMENT INFORMATION - Major Cus
SEGMENT INFORMATION - Major Customers (Details) - Five largest customers - Customer risk - Revenues - customer | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Major Customers | ||
Number of major customers | 5 | 5 |
Concentration risk (as a percent) | 27.00% | 32.00% |
CONDENSED CONSOLIDATING FINAN61
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - Guarantors (Details) | Mar. 31, 2017 |
U.S. subsidiaries other than Subsidiary Issuer | |
Condensed Consolidating Financial Information | |
Subsidiary ownership (as a percent) | 100.00% |
CONDENSED CONSOLIDATING FINAN62
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - STATEMENTS OF LOSS AND COMPREHENSIVE LOSS - (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Condensed Income Statements, Captions [Line Items] | ||
Revenues | $ 237,537 | $ 205,769 |
Costs and expenses | ||
Operating expenses | 28,993 | 30,005 |
Research and development | 4,543 | 5,368 |
Goodwill impairment | 0 | 0 |
Depreciation | 10,830 | 12,335 |
Amortization | 17,325 | 23,183 |
Total costs and expenses | 214,934 | 201,984 |
Operating income | 22,603 | 3,785 |
Other (income) expense | ||
Interest expense, net of interest income | 25,057 | 24,992 |
Total other expenses | 25,057 | 24,992 |
Loss before income tax | (2,454) | (21,207) |
Income tax (benefit) provision | 1,054 | (8,056) |
Net loss | (3,508) | (13,151) |
Foreign currency translation | 272 | (485) |
Comprehensive loss | (3,236) | (13,636) |
Eliminations | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | (832) | (371) |
Costs and expenses | ||
Operating expenses | (150) | (371) |
Total costs and expenses | (832) | (371) |
Other (income) expense | ||
Equity in loss (income) of subsidiaries | 776 | (9,857) |
Total other expenses | 776 | (9,857) |
Loss before income tax | (776) | 9,857 |
Net loss | (776) | 9,857 |
Foreign currency translation | (272) | 485 |
Comprehensive loss | (1,048) | 10,342 |
Parent | Reportable Legal Entities | ||
Other (income) expense | ||
Equity in loss (income) of subsidiaries | 3,508 | 13,151 |
Total other expenses | 3,508 | 13,151 |
Loss before income tax | (3,508) | (13,151) |
Net loss | (3,508) | (13,151) |
Foreign currency translation | 272 | (485) |
Comprehensive loss | (3,236) | (13,636) |
Subsidiary Issuer | Reportable Legal Entities | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 166,673 | 146,386 |
Costs and expenses | ||
Operating expenses | 17,543 | 20,925 |
Depreciation | 1,763 | 2,519 |
Amortization | 2,880 | 3,100 |
Total costs and expenses | 155,286 | 144,608 |
Operating income | 11,387 | 1,778 |
Other (income) expense | ||
Interest expense, net of interest income | 1,996 | 1,933 |
Equity in loss (income) of subsidiaries | (4,181) | (3,294) |
Total other expenses | (2,185) | (1,361) |
Loss before income tax | 13,572 | 3,139 |
Income tax (benefit) provision | (1,060) | 113 |
Net loss | 14,632 | 3,026 |
Comprehensive loss | 14,632 | 3,026 |
Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 63,206 | 55,596 |
Costs and expenses | ||
Operating expenses | 11,058 | 8,974 |
Research and development | 4,538 | 5,368 |
Depreciation | 8,951 | 9,786 |
Amortization | 13,962 | 19,503 |
Total costs and expenses | 53,609 | 54,409 |
Operating income | 9,597 | 1,187 |
Other (income) expense | ||
Interest expense, net of interest income | 22,896 | 22,998 |
Equity in loss (income) of subsidiaries | (103) | |
Total other expenses | 22,793 | 22,998 |
Loss before income tax | (13,196) | (21,811) |
Income tax (benefit) provision | 1,730 | (8,422) |
Net loss | (14,926) | (13,389) |
Comprehensive loss | (14,926) | (13,389) |
Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 8,490 | 4,158 |
Costs and expenses | ||
Operating expenses | 542 | 477 |
Research and development | 5 | |
Depreciation | 116 | 30 |
Amortization | 483 | 580 |
Total costs and expenses | 6,871 | 3,338 |
Operating income | 1,619 | 820 |
Other (income) expense | ||
Interest expense, net of interest income | 165 | 61 |
Total other expenses | 165 | 61 |
Loss before income tax | 1,454 | 759 |
Income tax (benefit) provision | 384 | 253 |
Net loss | 1,070 | 506 |
Foreign currency translation | 272 | (485) |
Comprehensive loss | 1,342 | 21 |
Games | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 55,276 | 48,178 |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | 12,444 | 8,436 |
Operating income | 4,792 | (3,245) |
Games | Eliminations | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | (682) | |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | (682) | |
Games | Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 55,518 | 48,178 |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | 12,919 | 8,436 |
Games | Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 440 | |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | 207 | |
Payments | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 182,261 | 157,591 |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | 140,799 | 122,657 |
Operating income | 17,811 | 7,030 |
Payments | Eliminations | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | (150) | (371) |
Payments | Subsidiary Issuer | Reportable Legal Entities | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 166,673 | 146,386 |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | 133,100 | 118,064 |
Payments | Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 7,688 | 7,418 |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | 2,181 | 2,342 |
Payments | Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Income Statements, Captions [Line Items] | ||
Revenues | 8,050 | 4,158 |
Costs and expenses | ||
Cost of revenue (exclusive of depreciation and amortization) | $ 5,518 | $ 2,251 |
CONDENSED CONSOLIDATING FINAN63
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - BALANCE SHEETS (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets | ||||
Cash and cash equivalents | $ 127,861 | $ 119,051 | $ 99,334 | $ 102,030 |
Settlement receivables | 42,443 | 128,821 | ||
Total trade and other receivables, current portion | 47,874 | 56,651 | ||
Inventory | 22,386 | 19,068 | ||
Prepaid expenses and other assets | 21,555 | 18,048 | ||
Total current assets | 262,119 | 341,639 | ||
Non-current assets | ||||
Property, equipment and leased assets, net | 97,303 | 98,439 | ||
Goodwill | 640,551 | 640,546 | ||
Other intangible assets, net | 309,450 | 317,997 | ||
Other receivables | 3,453 | 2,020 | ||
Other assets | 7,598 | 7,522 | ||
Total non-current assets | 1,058,355 | 1,066,524 | ||
Total assets | 1,320,474 | 1,408,163 | ||
Current Liabilities | ||||
Settlement liabilities | 127,635 | 239,123 | ||
Accounts payable and accrued expenses | 120,348 | 94,391 | ||
Current portion of long-term debt | 10,000 | 10,000 | ||
Total current liabilities | 257,983 | 343,514 | ||
Non-current liabilities | ||||
Deferred tax liability | 58,238 | 57,611 | ||
Long-term debt, less current portion | 1,110,995 | 1,111,880 | ||
Other accrued expenses and liabilities | 2,874 | 2,951 | ||
Total non-current liabilities | 1,172,107 | 1,172,442 | ||
Total liabilities | 1,430,090 | 1,515,956 | ||
Stockholders' deficit) | ||||
Common stock | 91 | 91 | ||
Additional paid-in capital | 266,175 | 264,755 | ||
Retained (deficit) earnings | (197,806) | (194,299) | ||
Accumulated other comprehensive (loss) income | (1,838) | (2,109) | ||
Treasury stock, at cost | (176,238) | (176,231) | ||
Total stockholders' deficit | (109,616) | (107,793) | ||
Total liabilities and stockholders' deficit | 1,320,474 | 1,408,163 | ||
Reportable Legal Entities | Parent | ||||
Current assets | ||||
Cash and cash equivalents | 6 | |||
Non-current assets | ||||
Investment in subsidiaries | (109,582) | (107,751) | ||
Total non-current assets | (109,582) | (107,751) | ||
Total assets | (109,582) | (107,751) | ||
Stockholders' deficit) | ||||
Common stock | 91 | 91 | ||
Additional paid-in capital | 266,175 | 264,755 | ||
Retained (deficit) earnings | (197,806) | (194,299) | ||
Accumulated other comprehensive (loss) income | (1,804) | (2,067) | ||
Treasury stock, at cost | (176,238) | (176,231) | ||
Total stockholders' deficit | (109,582) | (107,751) | ||
Total liabilities and stockholders' deficit | (109,582) | (107,751) | ||
Reportable Legal Entities | Subsidiary Issuer | ||||
Current assets | ||||
Cash and cash equivalents | 101,319 | 88,648 | 75,422 | 87,078 |
Settlement receivables | 38,271 | 122,222 | ||
Total trade and other receivables, current portion | 7,971 | 9,001 | ||
Inventory | 6,257 | 6,009 | ||
Prepaid expenses and other assets | 5,800 | 5,359 | ||
Intercompany balances | 112,547 | 106,729 | ||
Total current assets | 272,165 | 337,968 | ||
Non-current assets | ||||
Property, equipment and leased assets, net | 13,674 | 15,144 | ||
Goodwill | 151,417 | 151,417 | ||
Other intangible assets, net | 21,829 | 23,901 | ||
Other receivables | 1,626 | 2,019 | ||
Investment in subsidiaries | 176,399 | 171,979 | ||
Deferred tax asset, non-current | 36,933 | 37,578 | ||
Other assets | 5,097 | 4,940 | ||
Intercompany balances | 1,144,846 | 1,143,115 | ||
Total non-current assets | 1,551,821 | 1,550,093 | ||
Total assets | 1,823,986 | 1,888,061 | ||
Current Liabilities | ||||
Settlement liabilities | 120,415 | 225,170 | ||
Accounts payable and accrued expenses | 85,324 | 64,192 | ||
Current portion of long-term debt | 10,000 | 10,000 | ||
Intercompany balances | 194,086 | 189,488 | ||
Total current liabilities | 409,825 | 488,850 | ||
Non-current liabilities | ||||
Long-term debt, less current portion | 1,110,995 | 1,111,880 | ||
Other accrued expenses and liabilities | 2,524 | 2,583 | ||
Total non-current liabilities | 1,113,519 | 1,114,463 | ||
Total liabilities | 1,523,344 | 1,603,313 | ||
Stockholders' deficit) | ||||
Additional paid-in capital | 86,498 | 85,499 | ||
Retained (deficit) earnings | 215,948 | 201,316 | ||
Accumulated other comprehensive (loss) income | (1,804) | (2,067) | ||
Total stockholders' deficit | 300,642 | 284,748 | ||
Total liabilities and stockholders' deficit | 1,823,986 | 1,888,061 | ||
Reportable Legal Entities | Guarantor Subsidiaries | ||||
Current assets | ||||
Cash and cash equivalents | 8,597 | 9,103 | 7,429 | 3,900 |
Total trade and other receivables, current portion | 37,198 | 41,743 | ||
Inventory | 16,129 | 13,059 | ||
Prepaid expenses and other assets | 5,023 | 3,807 | ||
Intercompany balances | 196,137 | 188,028 | ||
Total current assets | 263,084 | 255,740 | ||
Non-current assets | ||||
Property, equipment and leased assets, net | 82,410 | 81,993 | ||
Goodwill | 488,512 | 488,512 | ||
Other intangible assets, net | 283,359 | 289,338 | ||
Other receivables | 1,827 | |||
Investment in subsidiaries | 990 | 1,293 | ||
Other assets | 2,237 | 2,286 | ||
Intercompany balances | 7,851 | |||
Total non-current assets | 859,335 | 871,273 | ||
Total assets | 1,122,419 | 1,127,013 | ||
Current Liabilities | ||||
Settlement liabilities | 105 | 268 | ||
Accounts payable and accrued expenses | 31,749 | 28,970 | ||
Intercompany balances | 107,257 | 101,387 | ||
Total current liabilities | 139,111 | 130,625 | ||
Non-current liabilities | ||||
Deferred tax liability | 95,171 | 95,189 | ||
Other accrued expenses and liabilities | 350 | 368 | ||
Intercompany balances | 1,144,846 | 1,143,116 | ||
Total non-current liabilities | 1,240,367 | 1,238,673 | ||
Total liabilities | 1,379,478 | 1,369,298 | ||
Stockholders' deficit) | ||||
Additional paid-in capital | 5,728 | 5,314 | ||
Retained (deficit) earnings | (262,186) | (247,273) | ||
Accumulated other comprehensive (loss) income | (601) | (326) | ||
Total stockholders' deficit | (257,059) | (242,285) | ||
Total liabilities and stockholders' deficit | 1,122,419 | 1,127,013 | ||
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||||
Current assets | ||||
Cash and cash equivalents | 17,945 | 21,300 | $ 16,483 | $ 11,046 |
Settlement receivables | 4,172 | 6,599 | ||
Total trade and other receivables, current portion | 2,705 | 5,907 | ||
Prepaid expenses and other assets | 10,732 | 8,882 | ||
Intercompany balances | 1,452 | 1,461 | ||
Total current assets | 37,006 | 44,149 | ||
Non-current assets | ||||
Property, equipment and leased assets, net | 1,219 | 1,302 | ||
Goodwill | 622 | 617 | ||
Other intangible assets, net | 4,262 | 4,758 | ||
Other receivables | 1 | |||
Investment in subsidiaries | 86 | 86 | ||
Other assets | 264 | 296 | ||
Total non-current assets | 6,453 | 7,060 | ||
Total assets | 43,459 | 51,209 | ||
Current Liabilities | ||||
Settlement liabilities | 7,115 | 13,685 | ||
Accounts payable and accrued expenses | 3,275 | 1,229 | ||
Intercompany balances | 8,793 | 5,343 | ||
Total current liabilities | 19,183 | 20,257 | ||
Non-current liabilities | ||||
Intercompany balances | 7,850 | |||
Total non-current liabilities | 7,850 | |||
Total liabilities | 19,183 | 28,107 | ||
Stockholders' deficit) | ||||
Additional paid-in capital | 21,103 | 21,093 | ||
Retained (deficit) earnings | 5,832 | 5,168 | ||
Accumulated other comprehensive (loss) income | (2,659) | (3,159) | ||
Total stockholders' deficit | 24,276 | 23,102 | ||
Total liabilities and stockholders' deficit | 43,459 | 51,209 | ||
Eliminations | ||||
Current assets | ||||
Intercompany balances | (310,136) | (296,218) | ||
Total current assets | (310,136) | (296,218) | ||
Non-current assets | ||||
Investment in subsidiaries | (67,893) | (65,607) | ||
Deferred tax asset, non-current | (36,933) | (37,578) | ||
Intercompany balances | (1,144,846) | (1,150,966) | ||
Total non-current assets | (1,249,672) | (1,254,151) | ||
Total assets | (1,559,808) | (1,550,369) | ||
Current Liabilities | ||||
Intercompany balances | (310,136) | (296,218) | ||
Total current liabilities | (310,136) | (296,218) | ||
Non-current liabilities | ||||
Deferred tax liability | (36,933) | (37,578) | ||
Intercompany balances | (1,144,846) | (1,150,966) | ||
Total non-current liabilities | (1,181,779) | (1,188,544) | ||
Total liabilities | (1,491,915) | (1,484,762) | ||
Stockholders' deficit) | ||||
Additional paid-in capital | (113,329) | (111,906) | ||
Retained (deficit) earnings | 40,406 | 40,789 | ||
Accumulated other comprehensive (loss) income | 5,030 | 5,510 | ||
Total stockholders' deficit | (67,893) | (65,607) | ||
Total liabilities and stockholders' deficit | $ (1,559,808) | $ (1,550,369) |
CONDENSED CONSOLIDATING FINAN64
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - STATEMENTS OF CASH FLOWS (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities | ||
Net loss | $ (3,508) | $ (13,151) |
Adjustments to reconcile net loss to cash provided by operating activities: | ||
Depreciation and amortization | 28,155 | 35,518 |
Amortization of financing costs | 1,672 | 1,672 |
Loss (gain) on sale or disposal of assets | 436 | 611 |
Accretion of contract rights | 2,002 | 2,097 |
Provision for bad debts | 2,817 | 2,444 |
Reserve for obsolescence | 408 | 119 |
Stock-based compensation | 1,412 | 1,061 |
Changes in operating assets and liabilities: | ||
Net settlement receivables and liabilities | (25,098) | (12,969) |
Other changes in operating assets and liabilities | 23,062 | 7,302 |
Net cash provided by operating activities | 31,358 | 24,704 |
Cash flows from investing activities | ||
Capital expenditures | (17,184) | (23,613) |
Proceeds from sale of fixed assets | 10 | |
Placement fee agreements | (3,044) | (1,000) |
Changes in restricted cash and cash equivalents | (125) | 44 |
Net cash used in investing activities | (20,353) | (24,559) |
Cash flows from financing activities | ||
Repayments of credit facility | (2,500) | (2,500) |
Debt issuance costs | (480) | |
Proceeds from exercise of stock options | 5 | |
Purchase of treasury stock | (7) | (9) |
Net cash used in financing activities | (2,502) | (2,989) |
Effect of exchange rates on cash | 307 | 148 |
Cash and cash equivalents | ||
Net (decrease) increase for the period | 8,810 | (2,696) |
Balance, beginning of the period | 119,051 | 102,030 |
Balance, end of the period | 127,861 | 99,334 |
Reportable Legal Entities | Parent | ||
Cash flows from operating activities | ||
Net loss | (3,508) | (13,151) |
Adjustments to reconcile net loss to cash provided by operating activities: | ||
Equity in loss (income) of subsidiaries | 3,508 | 13,151 |
Changes in operating assets and liabilities: | ||
Other changes in operating assets and liabilities | 4 | 1 |
Net cash provided by operating activities | 4 | 1 |
Cash flows from investing activities | ||
Intercompany investing activities | (2) | 2 |
Net cash used in investing activities | (2) | 2 |
Cash flows from financing activities | ||
Proceeds from exercise of stock options | 5 | |
Purchase of treasury stock | (7) | (9) |
Net cash used in financing activities | (2) | (9) |
Cash and cash equivalents | ||
Net (decrease) increase for the period | (6) | |
Balance, beginning of the period | 6 | |
Reportable Legal Entities | Subsidiary Issuer | ||
Cash flows from operating activities | ||
Net loss | 14,632 | 3,026 |
Adjustments to reconcile net loss to cash provided by operating activities: | ||
Depreciation and amortization | 4,643 | 5,619 |
Amortization of financing costs | 1,672 | 1,672 |
Loss (gain) on sale or disposal of assets | 27 | 21 |
Provision for bad debts | 27 | |
Reserve for obsolescence | 140 | 60 |
Equity in loss (income) of subsidiaries | (4,181) | (3,294) |
Stock-based compensation | 998 | 699 |
Changes in operating assets and liabilities: | ||
Net settlement receivables and liabilities | (20,802) | (17,373) |
Other changes in operating assets and liabilities | 19,002 | 3,788 |
Net cash provided by operating activities | 16,158 | (5,782) |
Cash flows from investing activities | ||
Capital expenditures | (1,227) | (3,150) |
Proceeds from sale of fixed assets | 10 | |
Changes in restricted cash and cash equivalents | 25 | 44 |
Intercompany investing activities | 179 | 148 |
Net cash used in investing activities | (1,023) | (2,948) |
Cash flows from financing activities | ||
Repayments of credit facility | (2,500) | (2,500) |
Debt issuance costs | (480) | |
Intercompany financing activities | 36 | 54 |
Net cash used in financing activities | (2,464) | (2,926) |
Cash and cash equivalents | ||
Net (decrease) increase for the period | 12,671 | (11,656) |
Balance, beginning of the period | 88,648 | 87,078 |
Balance, end of the period | 101,319 | 75,422 |
Reportable Legal Entities | Guarantor Subsidiaries | ||
Cash flows from operating activities | ||
Net loss | (14,926) | (13,389) |
Adjustments to reconcile net loss to cash provided by operating activities: | ||
Depreciation and amortization | 22,913 | 29,289 |
Loss (gain) on sale or disposal of assets | 409 | 590 |
Accretion of contract rights | 2,002 | 2,097 |
Provision for bad debts | 2,790 | 2,444 |
Reserve for obsolescence | 268 | 59 |
Equity in loss (income) of subsidiaries | (103) | |
Stock-based compensation | 414 | 362 |
Changes in operating assets and liabilities: | ||
Net settlement receivables and liabilities | (164) | 39 |
Other changes in operating assets and liabilities | 4,878 | 3,408 |
Net cash provided by operating activities | 18,481 | 24,899 |
Cash flows from investing activities | ||
Capital expenditures | (15,938) | (20,362) |
Placement fee agreements | (3,044) | (1,000) |
Changes in restricted cash and cash equivalents | (150) | |
Intercompany investing activities | 145 | (8) |
Net cash used in investing activities | (18,987) | (21,370) |
Cash and cash equivalents | ||
Net (decrease) increase for the period | (506) | 3,529 |
Balance, beginning of the period | 9,103 | 3,900 |
Balance, end of the period | 8,597 | 7,429 |
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||
Cash flows from operating activities | ||
Net loss | 1,070 | 506 |
Adjustments to reconcile net loss to cash provided by operating activities: | ||
Depreciation and amortization | 599 | 610 |
Changes in operating assets and liabilities: | ||
Net settlement receivables and liabilities | (4,132) | 4,365 |
Other changes in operating assets and liabilities | (822) | 105 |
Net cash provided by operating activities | (3,285) | 5,586 |
Cash flows from investing activities | ||
Capital expenditures | (19) | (101) |
Intercompany investing activities | (26) | (52) |
Net cash used in investing activities | (45) | (153) |
Cash flows from financing activities | ||
Intercompany financing activities | (332) | (144) |
Net cash used in financing activities | (332) | (144) |
Effect of exchange rates on cash | 307 | 148 |
Cash and cash equivalents | ||
Net (decrease) increase for the period | (3,355) | 5,437 |
Balance, beginning of the period | 21,300 | 11,046 |
Balance, end of the period | 17,945 | 16,483 |
Eliminations | ||
Cash flows from operating activities | ||
Net loss | (776) | 9,857 |
Adjustments to reconcile net loss to cash provided by operating activities: | ||
Equity in loss (income) of subsidiaries | 776 | (9,857) |
Cash flows from investing activities | ||
Intercompany investing activities | (296) | (90) |
Net cash used in investing activities | (296) | (90) |
Cash flows from financing activities | ||
Intercompany financing activities | 296 | 90 |
Net cash used in financing activities | $ 296 | $ 90 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | May 09, 2017 | Mar. 31, 2017 | Apr. 15, 2015 | Dec. 31, 2014 |
7.25% Notes due 2021 (Refinanced Secured Notes) | Senior secured notes | ||||
SUBSEQUENT EVENTS | ||||
Amount of facility | $ 335,000,000 | |||
Interest rate (as a percent) | 7.25% | 7.25% | ||
Credit Agreement, December 2014 | Senior secured term loan facility | ||||
SUBSEQUENT EVENTS | ||||
Amount of facility | $ 500,000,000 | |||
Credit Agreement, December 2014 | Senior secured term loan facility | LIBOR | ||||
SUBSEQUENT EVENTS | ||||
Interest rate margin (as a percent) | 5.25% | |||
Credit Agreement, December 2014 | Revolving credit facility | ||||
SUBSEQUENT EVENTS | ||||
Maximum borrowing capacity | $ 50,000,000 | |||
Credit Agreement, December 2014 | Revolving credit facility | LIBOR | ||||
SUBSEQUENT EVENTS | ||||
Interest rate margin (as a percent) | 4.75% | |||
Credit Agreement, December 2014 | Base rate borrowings | LIBOR | ||||
SUBSEQUENT EVENTS | ||||
Interest rate margin (as a percent) | 1.00% | |||
Subsequent Event | Senior secured term loan facility | ||||
SUBSEQUENT EVENTS | ||||
Interest rate reduction (as a percent) | 0.75% | |||
Subsequent Event | Revolving credit facility | ||||
SUBSEQUENT EVENTS | ||||
Interest rate reduction (as a percent) | 0.25% | |||
Subsequent Event | Credit agreement dated May 9, 2017 | Senior secured term loan facility | ||||
SUBSEQUENT EVENTS | ||||
Amount of facility | $ 820,000,000 | |||
Subsequent Event | Credit agreement dated May 9, 2017 | Revolving credit facility | ||||
SUBSEQUENT EVENTS | ||||
Maximum borrowing capacity | $ 35,000,000 | |||
Subsequent Event | Credit agreement dated May 9, 2017 | Eurodollar Rate Loans | LIBOR | ||||
SUBSEQUENT EVENTS | ||||
Interest rate margin (as a percent) | 4.50% | |||
Subsequent Event | Credit agreement dated May 9, 2017 | Base rate borrowings | Base rate | ||||
SUBSEQUENT EVENTS | ||||
Interest rate margin (as a percent) | 3.50% | |||
Subsequent Event | 7.25% Notes due 2021 (Refinanced Secured Notes) | Senior secured notes | ||||
SUBSEQUENT EVENTS | ||||
Outstanding amount redeemed | $ 335,000,000 | |||
Subsequent Event | Credit Agreement, December 2014 | Senior secured term loan facility | ||||
SUBSEQUENT EVENTS | ||||
Prepayment of outstanding balances | $ 462,300,000 |