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• | We are offering to exchange up to $100,000,000 of our outstanding 9.250% Senior Subordinated Notes due 2013 — Series B for new notes with substantially identical terms that have been registered under the Securities Act of 1933, as amended, and are freely tradable. | |
• | We will exchange all outstanding notes that are validly tendered and not validly withdrawn before the exchange offer expires for an equal principal amount of new notes. | |
• | The exchange offer expires at 12:00 a.m. midnight, New York City time, on July 16, 2008, unless extended. We do not currently intend to extend the exchange offer. | |
• | Tenders of outstanding notes may be withdrawn at any time prior to the expiration of the exchange offer. | |
• | The exchange of outstanding notes for new notes will not be a taxable event for U.S. federal income tax purposes. |
• | The new notes will mature on August 15, 2013. |
• | Interest on the new notes is payable on February 15 and August 15 of each year. | |
• | Interest will accrue from February 15, 2008. |
• | We may redeem some or all of the notes at any time on or after August 15, 2009 at redemption prices listed in “Description of the New Notes — Optional Redemption,” and we may redeem some or all of the notes before that date by the payment of a make-whole premium. Subject to certain limitations, we may also redeem up to 35% of the new notes using the proceeds of certain equity offerings completed before August 15, 2008. |
• | The notes are unsecured senior subordinated obligations of the Company. The notes are subordinated in right of payment to all existing and future senior debt of the Company, including the indebtedness of the Company under the Credit Agreement. The notes arepari passuin right of payment with all existing and any future senior subordinated indebtedness of the Company. The notes are senior in right of payment to any future subordinated indebtedness of the Company. The notes are guaranteed by the Guarantors as described under “Description of the New Notes — Note Guarantees”. The notes are effectively subordinated to all existing and any future indebtedness and other liabilities of the Company’s subsidiaries that are not Guarantors. |
• | If we experience a change of control, subject to certain conditions, we must offer to purchase the new notes. |
• | All payments on the notes, including principal and interest, will be jointly and severally guaranteed on a senior subordinated basis by all of our existing domestic subsidiaries and certain of our future subsidiaries. |
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Exchange Offer | We are offering to exchange new notes for outstanding notes. | |
Expiration Date | The exchange offer will expire at 12:00 a.m. midnight, New York City time, on July 16, 2008, unless we decide to extend it. We do not currently intend to extend the exchange offer. | |
Condition to the Exchange Offer | The registration rights agreement does not require us to accept outstanding notes for exchange if the exchange offer or the making of any exchange by a holder of the outstanding notes would violate any applicable law or interpretation of the staff of the SEC. A minimum aggregate principal amount of outstanding notes being tendered is not a condition to the exchange offer. In addition, we will not be obligated to accept for exchange the outstanding notes of any holder that has not complied with the procedures for tendering outstanding notes. For additional information, see “Exchange Offer — Conditions to the Exchange Offer.” | |
Procedures for Tendering Outstanding Notes | To participate in the exchange offer, you must follow the procedures established by The Depository Trust Company, which we call “DTC,” for tendering notes held in book-entry form. These procedures, which we call “ATOP,” require that the exchange agent receive, prior to the expiration date of the exchange offer, a computer generated message known as an “agent’s message” that is transmitted through DTC’s automated tender offer program and that DTC confirm that: | |
• DTC has received your instructions to exchange your notes; and | ||
• you agree to be bound by the terms of the letter of transmittal. | ||
For additional information, see “Exchange Offer — Terms of the Exchange Offer” and “Exchange Offer — Procedures for Tendering.” | ||
Guaranteed Delivery Procedures | None. | |
Withdrawal of Tenders | You may withdraw your tender of outstanding notes at any time prior to the expiration date. To withdraw, you must submit a notice of withdrawal to exchange agent using ATOP procedures before 12:00 a.m. midnight, New York City time, on the expiration date of the exchange offer. For additional information, see “Exchange Offer — Withdrawal of Tenders.” | |
Acceptance of Outstanding Notes and Delivery of New Notes | If you fulfill all conditions required for proper acceptance of outstanding notes, we will accept any and all outstanding notes that you properly tender in the exchange offer on or before 12:00 a.m. midnight, New York City time, on the expiration date. We will return any outstanding note that we do not accept for exchange to |
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you without expense promptly following the expiration or termination of the exchange offer. We will deliver the new notes promptly after the expiration date and acceptance of the outstanding notes for exchange. For additional information, see “Exchange Offer — Terms of the Exchange Offer.” | ||
Fees and Expenses | We will bear all expenses related to the exchange offer. See “Exchange Offer — Fees and Expenses.” | |
Use of Proceeds | The issuance of the new notes will not provide us with any new proceeds. We are making this exchange offer solely to satisfy our obligations under our registration rights agreement. | |
Consequences of Failure to Exchange Outstanding Notes | If you do not exchange your outstanding notes in this exchange offer, you will no longer be able to require us to register the outstanding notes under the Securities Act except in the limited circumstances provided under our registration rights agreement. In addition, you will not be able to resell, offer to resell or otherwise transfer the outstanding notes unless we have registered the outstanding notes under the Securities Act, or unless you resell, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act. | |
U.S. Federal Income Tax Considerations | The exchange of new notes for outstanding notes in the exchange offer should not be a taxable event for U.S. federal income tax purposes. See “Federal Income Tax Considerations.” | |
Exchange Agent | We have appointed Wells Fargo, National Association as exchange agent for the exchange offer. You should direct questions and requests for assistance and requests for additional copies of this prospectus (including the letter of transmittal) to the exchange agent addressed as follows: Wells Fargo Bank, National Association, Attention: Corporate Trust Operations, Sixth and Marquette Avenue, MAC N9303-121, Minneapolis, MN 55479. Eligible institutions may make requests by facsimile at(612) 667-6282. |
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Issuer | Cardtronics, Inc. | |
Notes Offered | $100.0 million aggregate principal amount of 9.25% Senior Subordinated Notes due 2013 — Series B (the “Notes”). | |
Maturity | The Notes will mature on August 15, 2013. | |
Interest | Interest on the Notes will accrue at the rate of 9.25% per annum from February 15, 2008 and will be payable semi-annually, in cash, in arrears on February 15 and August 15 of each year, commencing on August 15, 2008. | |
Guarantees | All payments on the Notes, including principal and interest, will be jointly and severally guaranteed on a senior subordinated basis by all of our existing domestic subsidiaries and certain of our future subsidiaries. See “Description of the New Notes — Note Guarantees.” | |
Ranking | The Notes and the guarantees will be general unsecured obligations and will rank: | |
• junior in right of payment to all of our existing and future senior indebtedness, including borrowings under our bank credit facility; | ||
• pari passuin right of payment with all of our existing and any future senior subordinated debt, including the $200.0 million aggregate principal amount of 9.25% senior subordinated notes due 2013 issued under the indenture dated as of August 12, 2005 (the “Series A Notes”); and | ||
• senior in right of payment to any future subordinated debt. | ||
As of March 31, 2008, we had outstanding indebtedness of approximately $345.9 million, net of applicable discounts. Of this amount, approximately $49.7 million would have ranked senior in right of payment to the new Notes and guarantees, which consisted of $39.5 million outstanding under our revolving credit facility, $8.5 million outstanding under certain borrowing arrangement in place with respect to our Mexico subsidiary, including guarantees of such amounts, and $1.7 million of capital lease obligations. | ||
Optional Redemption | We may redeem some or all of the Notes on or after August 15, 2009 at the redemption prices set forth in this prospectus. At any time prior to August 15, 2009, we may redeem the Notes, in whole or in part, at a price equal to 100% of their outstanding principal amount plus the make-whole premium described under “Description of the New Notes — Optional Redemption.” |
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In addition, we may redeem up to 35% of the aggregate principal amount of the Notes at a redemption price of 109.25% using the proceeds of certain equity offerings completed on or before August 15, 2008. We may make this redemption only if, after the redemption, at least 65% of the aggregate principal amount of the Notes originally issued remains outstanding. | ||
Change of Control | If we sell substantially all of our assets or experience specific kinds of changes of control, we must offer to repurchase the Notes at a price in cash equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. | |
Certain Covenants | The indenture governing the Notes contains covenants that, among other things, limit our ability and the ability of our subsidiaries to: | |
• incur or guarantee additional indebtedness; | ||
• incur senior subordinated debt; | ||
• make certain restricted payments; | ||
• consolidate or merge with or into other companies; | ||
• conduct asset sales; | ||
• restrict dividends or other payments to us; | ||
• engage in transactions with affiliates or related persons; | ||
• create liens; | ||
• redeem or repurchase capital stock; and | ||
• issue and sell preferred stock in restricted subsidiaries. | ||
These limitations will be subject to a number of important qualifications and exceptions. See “Description of the New Notes — Certain Covenants.” | ||
Absence of a Public Market | The new Notes generally will be freely transferable; however, there can be no assurance as to the development or liquidity of any market for the new Notes. |
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• | the operations, technology, and personnel of any acquired companies may be difficult to integrate; | |
• | the allocation of management resources to consummate these transactions may disrupt our day-to-day business; and | |
• | acquired networks may not achieve anticipated revenues, earnings or cash flow. |
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• | 22.7% of our gross profits exclusive of depreciation, accretion, and amortization; | |
• | 18.5% of our pro forma gross profits exclusive of depreciation, accretion, and amortization; | |
• | 23.4% of our gross profits inclusive of depreciation, accretion, and amortization; and | |
• | 18.2% of our pro forma gross profits inclusive of depreciation, accretion, and amortization. |
• | exposure to currency fluctuations, including the risk that our future reported operating results could be negatively impacted by unfavorable movements in the functional currencies of our international operations relative to the United States dollar, which represents our consolidated reporting currency; | |
• | difficulties in complying with the different laws and regulations in each country and jurisdiction in which we operate, including unique labor and reporting laws; | |
• | unexpected changes in laws, regulations, and policies of foreign governments or other regulatory bodies, including changes that could potentially disallow surcharging or that could result in a reduction in the amount of interchange fees received per transaction; | |
• | difficulties in staffing and managing foreign operations, including hiring and retaining skilled workers in those countries in which we operate; and | |
• | potentially adverse tax consequences, including restrictions on the repatriation of foreign earnings. |
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• | changes in general economic conditions and specific market conditions in the ATM and financial services industries; | |
• | changes in payment trends and offerings in the markets in which we operate; | |
• | competition from other companies providing the same or similar services that we offer; | |
• | the timing and magnitude of operating expenses, capital expenditures, and expenses related to the expansion of sales, marketing, and operations, including as a result of acquisitions, if any; | |
• | the timing and magnitude of any impairment charges that may materialize over time relating to our goodwill, intangible assets or long-lived assets; | |
• | changes in the general level of interest rates in the markets in which we operate; | |
• | changes in regulatory requirements associated with the ATM and financial services industries; | |
• | changes in the mix of our current services; and | |
• | changes in the financial condition and credit risk of our customers. |
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• | make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under the indentures governing our senior subordinated notes and the agreements governing our other indebtedness; | |
• | require us to dedicate a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for working capital, capital expenditures, acquisitions, and other general corporate purposes; | |
• | limit our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; | |
• | make us more vulnerable to adverse changes in general economic, industry and competitive conditions, and adverse changes in government regulation; | |
• | limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, execution of our growth strategy, research and development costs, or other purposes; and | |
• | place us at a disadvantage compared to our competitors who have less debt. |
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• | sell or transfer property or assets; | |
• | pay dividends on or redeem or repurchase stock; | |
• | merge into or consolidate with any third party; | |
• | create, incur, assume or guarantee additional indebtedness; | |
• | create certain liens; | |
• | make investments; | |
• | engage in transactions with affiliates; | |
• | issue or sell preferred stock of restricted subsidiaries; and | |
• | enter into sale and leaseback transactions. |
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• | we enter into bankruptcy, liquidation, reorganization, or otherwinding-up proceedings; | |
• | there is a default in payment under our credit agreement; or | |
• | there is an acceleration of any indebtedness under our credit agreement. |
• | were insolvent or rendered insolvent by reason of such incurrence; | |
• | were engaged in a business or transaction for which one of our or such guarantor’s remaining assets constituted unreasonably small capital; or | |
• | intended to incur, or believed that we or such guarantor would incur, debts beyond our or such guarantor’s ability to pay such debts as they mature. |
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• | the sum of our or such guarantor’s debts, including contingent liabilities, was greater than the fair saleable value of our or such guarantor’s assets; | |
• | if the present fair saleable value of our or such guarantor’s assets were less than the amount than would be required to pay our or such guarantor’s probable liability on our or such guarantor’s existing debts, including contingent liabilities, as they become absolute and mature; or | |
• | we or such guarantor could not pay our or such guarantor’s debts as they become due. |
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• | within 240 days after the original issuance of the outstanding notes on July 20, 2007, file a registration statement with the SEC with respect to a registered offer to exchange each outstanding note for a new Note having terms substantially identical in all material respects to such note, except that the New note will not contain terms with respect to transfer restrictions; | |
• | use our reasonable best efforts to cause the registration statement to be declared effective under the Securities Act within 360 days after the original issuance of the outstanding notes; | |
• | promptly following the effectiveness of the registration statement, offer the new Notes in exchange for surrender of the outstanding notes; and | |
• | keep the exchange offer open for not less than 20 business days (or longer if required by applicable law) after the date notice of the exchange offer is mailed to the holders of the outstanding notes. |
• | a change in law or in applicable interpretations thereof of the staff of the SEC does not permit us to effect the exchange offer; or | |
• | for any other reason the exchange offer is not consummated within 360 days from July 20, 2007, the date of the original issuance of the outstanding notes; or | |
• | any of the initial purchasers notify us following consummation of the exchange offer that outstanding notes held by it are not eligible to be exchanged for new Notes in the exchange offer; or | |
• | certain holders are not eligible to participate in the exchange offer, or such holders do not receive freely tradeable securities on the date of the exchange. |
• | if either this registration statement or, if we are obligated to file one, a shelf registration statement is not declared effective by the Commission by the date required, | |
• | if we fail to consummate the exchange offer prior to the date that is 360 days after July 20, 2007, or | |
• | after this registration statement or a shelf registration statement, as the case may be, is declared effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions) (each such event referred to in the preceding clauses being a “registration default”); |
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• | any new Notes will be acquired in the ordinary course of your business; | |
• | you have no arrangement or understanding with any person or entity to participate in the distribution of the new Notes; | |
• | you are not engaged in and do not intend to engage in the distribution of the new Notes; | |
• | if you are a broker-dealer that will receive new Notes for your own account in exchange for outstanding notes, you acquired those notes as a result of market-making activities or other trading activities and you will deliver a prospectus, as required by law, in connection with any resale of such new Notes; and | |
• | you are not our “affiliate,” as defined in Rule 405 of the Securities Act. |
• | you are not our “affiliate” within the meaning of Rule 405 under the Securities Act; | |
• | such new Notes are acquired in the ordinary course of your business; and | |
• | you do not intend to participate in a distribution of the new Notes. |
• | cannot rely on such interpretations by the SEC staff; and |
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• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. |
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• | a book-entry confirmation of such outstanding notes into the exchange agent’s account at DTC; and | |
• | a properly transmitted agent’s message. |
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• | any new Notes that you receive will be acquired in the ordinary course of your business; | |
• | you have no arrangement or understanding with any person or entity to participate in the distribution of the new Notes; | |
• | you are not engaged in and do not intend to engage in the distribution of the new Notes; | |
• | if you are a broker-dealer that will receive new Notes for your own account in exchange for outstanding notes, you acquired those notes as a result of market-making activities or other trading activities and you will deliver a prospectus, as required by law, in connection with any resale of such new Notes; and | |
• | you are not our “affiliate,” as defined in Rule 405 of the Securities Act. |
• | SEC registration fees; | |
• | fees and expenses of the exchange agent and trustee; |
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• | accounting and legal fees and printing costs; and | |
• | related fees and expenses. |
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Three Months Ended | ||||||||||||||||||||||||||||
Years Ended December 31, | March 31, | |||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
(in thousands, except share and per share amounts, ratios, and number of ATMs) | ||||||||||||||||||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
ATM operating revenues | $ | 101,950 | $ | 182,711 | $ | 258,979 | $ | 280,985 | $ | 364,071 | $ | 71,656 | $ | 115,062 | ||||||||||||||
Vcom operating revenues | — | — | — | — | 1,251 | — | 1,235 | |||||||||||||||||||||
ATM product sales and other revenues | 8,493 | 10,204 | 9,986 | 12,620 | 12,976 | 2,862 | 4,278 | |||||||||||||||||||||
Total revenues | 110,443 | 192,915 | 268,965 | 293,605 | 378,298 | 74,518 | 120,575 | |||||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization, shown separately below)(1) | 80,286 | 143,504 | 199,767 | 209,850 | 275,286 | 54,736 | 86,832 | |||||||||||||||||||||
Cost of Vcom operating revenues | — | — | — | — | 6,065 | — | 2,269 | |||||||||||||||||||||
Cost of ATM product sales and other revenues | 7,903 | 8,703 | 9,681 | 11,443 | 11,942 | 2,797 | 4,164 | |||||||||||||||||||||
Total cost of revenues | 88,189 | 152,207 | 209,448 | 221,293 | 293,293 | 57,533 | 93,265 | |||||||||||||||||||||
Gross profit | 22,254 | 40,708 | 59,517 | 72,312 | 85,005 | 16,985 | 27,310 | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Selling, general, and administrative expenses(2)(3) | 7,229 | 13,571 | 17,865 | 21,667 | 29,357 | 6,444 | 8,551 | |||||||||||||||||||||
Depreciation and accretion expense | 3,632 | 6,785 | 12,951 | 18,595 | 26,859 | 6,398 | 9,082 | |||||||||||||||||||||
Amortization expense(4) | 3,842 | 5,508 | 8,980 | 11,983 | 18,870 | 2,486 | 4,503 | |||||||||||||||||||||
Total operating expenses | 14,703 | 25,864 | 39,796 | 52,245 | 75,086 | 15,328 | 22,136 | |||||||||||||||||||||
Income from operations | 7,551 | 14,844 | 19,721 | 20,067 | 9,919 | 1,657 | 5,174 | |||||||||||||||||||||
Other expense: | ||||||||||||||||||||||||||||
Interest expense(5) | 2,157 | 5,235 | 22,426 | 25,072 | 31,164 | 5,892 | 7,632 | |||||||||||||||||||||
Minority interest in subsidiary | — | 19 | 15 | (225 | ) | (376 | ) | 356 | 508 | |||||||||||||||||||
Other(6) | 106 | 209 | 968 | (4,761 | ) | 1,585 | (231 | ) | 1,061 | |||||||||||||||||||
Total other expense | 2,263 | 5,463 | 23,409 | 20,086 | 32,373 | 6,017 | 9,201 | |||||||||||||||||||||
Income (loss) before income taxes | 5,288 | 9,381 | (3,688 | ) | (19 | ) | (22,454 | ) | (4,360 | ) | (4,027 | ) | ||||||||||||||||
Income tax provision (benefit) | 1,955 | 3,576 | (1,270 | ) | 512 | 4,636 | (973 | ) | 565 | |||||||||||||||||||
Income (loss) before cumulative effect of change in accounting principle | 3,333 | 5,805 | (2,418 | ) | (531 | ) | (27,090 | ) | (3,387 | ) | (4,592 | ) | ||||||||||||||||
Cumulative effect of change in accounting principle for asset retirement obligations, net of related income tax benefit of $80(7) | 134 | — | — | — | — | — | — | |||||||||||||||||||||
Net income (loss) | 3,199 | 5,805 | (2,418 | ) | (531 | ) | (27,090 | ) | (3,387 | ) | (4,592 | ) | ||||||||||||||||
Preferred stock conversion, dividends and accretion expense(8) | 2,089 | 2,312 | 1,395 | 265 | 36,272 | 67 | — | |||||||||||||||||||||
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Three Months Ended | ||||||||||||||||||||||||||||
Years Ended December 31, | March 31, | |||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
(in thousands, except share and per share amounts, ratios, and number of ATMs) | ||||||||||||||||||||||||||||
Net income (loss) available to common stockholders | $ | 1,110 | $ | 3,493 | $ | (3,813 | ) | $ | (796 | ) | $ | (63,362 | ) | $ | (3,454 | ) | $ | (4,592 | ) | |||||||||
Net income (loss) per common share: | ||||||||||||||||||||||||||||
Basic | $ | 0.07 | $ | 0.20 | $ | (0.27 | ) | $ | (0.06 | ) | $ | (4.11 | ) | $ | (0.25 | ) | $ | (0.12 | ) | |||||||||
Diluted | $ | 0.06 | $ | 0.19 | $ | (0.27 | ) | $ | (0.06 | ) | $ | (4.11 | ) | $ | (0.25 | ) | $ | (0.12 | ) | |||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||
Basic | 16,521,361 | 17,795,073 | 14,040,353 | 13,904,505 | 15,423,744 | 13,965,875 | 38,589,878 | |||||||||||||||||||||
Diluted | 17,262,708 | 18,855,425 | 14,040,353 | 13,904,505 | 15,423,744 | 13,965,875 | 38,589,878 | |||||||||||||||||||||
Other Financial Data (unaudited): | ||||||||||||||||||||||||||||
Ratio of earnings to fixed charges(9) | 1.3x | 1.5 | x | — | — | — | — | — | ||||||||||||||||||||
Cash flows from operating activities | $ | 21,629 | $ | 20,466 | $ | 33,227 | $ | 25,446 | $ | 55,462 | $ | 2,642 | $ | (10,325 | ) | |||||||||||||
Cash flows from investing activities | (29,663 | ) | (118,926 | ) | (139,960 | ) | (35,973 | ) | (202,883 | ) | (9,269 | ) | (26,084 | ) | ||||||||||||||
Cash flows from financing activities | 10,404 | 94,318 | 107,214 | 11,192 | 158,155 | 5,704 | 31,855 | |||||||||||||||||||||
Operating Data (unaudited): | ||||||||||||||||||||||||||||
Total number of ATMs (at period end) | 12,021 | 24,581 | 26,208 | 25,259 | 32,319 | 25,438 | 32,577 | |||||||||||||||||||||
Total transactions | 64,605 | 111,577 | 158,851 | 172,808 | 246,595 | 44,449 | 83,037 | |||||||||||||||||||||
Total cash withdrawal transactions | 49,859 | 86,821 | 118,960 | 125,078 | 166,248 | 31,180 | 53,890 | |||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 5,554 | $ | 1,412 | $ | 1,699 | $ | 2,718 | $ | 13,439 | $ | 1,782 | $ | 8,908 | ||||||||||||||
Total assets | 65,295 | 197,667 | 343,751 | 367,756 | 591,285 | 363,572 | 601,520 | |||||||||||||||||||||
Total long-term debt, including current portion | 31,371 | 128,541 | 247,624 | 252,895 | 308,615 | 263,051 | 344,170 | |||||||||||||||||||||
Preferred stock(10) | 21,322 | 23,634 | 76,329 | 76,594 | — | 76,661 | — | |||||||||||||||||||||
Total stockholders’ equity (deficit) | (6,329 | ) | (340 | ) | (49,084 | ) | (37,168 | ) | 107,111 | (42,185 | ) | 87,774 |
(1) | Excludes depreciation, accretion, and amortization expense of $6.8 million, $11.4 million, $20.6 million, $29.2 million, and $43.1 million for the years ended December 31, 2003, 2004, 2005, 2006 and 2007, respectively, and $8.5 million and $12.5 million for the three months periods ended March 31, 2007 and 2008, respectively. | |
(2) | Includes non-cash stock-based compensation totaling $1.6 million, $1.0 million, $2.2 million, $0.8 million, and $1.0 million in 2003, 2004, 2005, 2006, and 2007, respectively, and $0.2 million in each of the three months periods ended March 31, 2007 and 2008, related to options granted to certain employees and a restricted stock grant made to our Chief Executive Officer in 2003. Additionally, the 2004 results include a bonus of $1.8 million paid to our Chief Executive Officer related to the tax liability associated with such grant. See Note 3 to our consolidated financial statements. | |
(3) | Includes the write-off in 2004 of approximately $1.8 million in costs associated with our decision to not pursue a financing transaction to completion. | |
(4) | Includes pre-tax impairment charges of $1.2 million, $2.8 million, and $5.7 million in 2005, 2006 and 2007, respectively, and $0.1 million during the three months ended March 31, 2007. | |
(5) | Includes the write-off of $5.0 million and $0.5 million of deferred financing costs in 2005 and 2006, respectively, as a result of (i) amendments to our existing credit facility and the repayment of our existing term loans in August 2005, and (ii) certain modifications made to our revolving credit facility in February 2006. | |
(6) | The “Other” line item for the years ended December 31, 2003, 2004, and 2005 and the three months ended March 31, 2008 primarily consists of losses on the disposal of fixed assets that were incurred in conjunction with the deinstallation of ATMs during the period. “Other” in 2006 reflects the recognition of approximately $4.8 million in other income primarily related to settlement proceeds received from Winn-Dixie Stores, Inc. (“Winn-Dixie”), one of our merchant customers, as part of its emergence from bankruptcy, a $1.1 million contract termination payment received from one of our customers, and a $0.5 million payment received from one of our customers related to the sale of a number of its stores to another party, which were partially offset by $1.6 million of losses on the sale or disposal of fixed assets. “Other” in 2007 includes $2.2 million of losses on the disposal of fixed assets during the period, which were partially offset by $0.6 million of gains related to the sale of the Winn-Dixie equity securities, which we received from Winn-Dixie in 2006 as a part of its bankruptcy settlement. Other income for the three months ended March 31, 2007 included $0.6 million in gains on the sale of equity securities awarded to Cardtronics pursuant to the bankruptcy plan of reorganization of Winn-Dixie Stores, Inc., one of the Company’s merchant customers. This amount was partially offset by $0.5 million in losses on the disposal of fixed assets that were incurred in conjunction with the deinstallation of ATMs during the period. | |
(7) | Reflects the effect of our adoption of Statement of Financial Accounting Standards (“SFAS”) No. 143,Accounting for Asset Retirement Obligations. See Note 1(m) to our consolidated financial statements included elsewhere within this prospectus. | |
(8) | Includes a one-time, non-cash charge of $36.0 million for the year ended December 31, 2007 associated with the conversion of the Company’s Series B redeemable convertible preferred stock into shares of the Company’s common stock in conjunction with the Company’s initial public offering. |
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(9) | For purposes of determining the ratio of earnings to fixed charges, earnings are defined as our income from operations before income taxes, plus fixed charges. Fixed charges consist of interest expense on all indebtedness, amortization of debt issuance costs and the interest portion of lease payments. Earnings were insufficient to cover fixed charges by approximately $5.4 million, $0.2 million, and $22.8 million for the years ended December 31, 2005, 2006, and 2007, respectively, and $4.5 million and $4.0 million for the three months periods ended March 31, 2007 and 2008, respectively. | |
(10) | The amount reflected on our balance sheet is shown net of issuance costs of $1.4 million as of December 31, 2006. During December 2007, the Company’s Series B Redeemable Convertible Preferred Stock were converted into shares of the Company’s common stock in conjunction with the Company’s initial public offering. |
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Quarters Ended | ||||||||||||||||||||
March 31 | June 30 | September 30 | December 31 | Total | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||
2008 | ||||||||||||||||||||
Total revenues | $ | 120,575 | N/A | N/A | N/A | $ | 120,575 | |||||||||||||
Gross profit (exclusive of depreciation, accretion, and amortization)(1) | 27,310 | N/A | N/A | N/A | 27,310 | |||||||||||||||
Net loss and net loss available to common stockholders | (4,592 | ) | N/A | N/A | N/A | (4,592 | ) | |||||||||||||
Net loss per common share: | ||||||||||||||||||||
Basic | $ | (0.12 | ) | N/A | N/A | N/A | $ | (0.12 | ) | |||||||||||
Diluted | $ | (0.12 | ) | N/A | N/A | N/A | $ | (0.12 | ) | |||||||||||
2007 | ||||||||||||||||||||
Total revenues | $ | 74,518 | $ | 77,239 | $ | 110,587 | $ | 115,954 | $ | 378,298 | ||||||||||
Gross profit (exclusive of depreciation, accretion, and amortization)(2) | 16,985 | 17,607 | 24,866 | 25,547 | 85,005 | |||||||||||||||
Net loss(3) | (3,387 | ) | (5,615 | ) | (10,683 | ) | (7,405 | ) | (27,090 | ) | ||||||||||
Net loss available to common stockholders(3) | (3,454 | ) | (5,681 | ) | (10,750 | ) | (43,477 | ) | (63,362 | ) | ||||||||||
Net loss per common share(3): | ||||||||||||||||||||
Basic | $ | (0.25 | ) | $ | (0.41 | ) | $ | (0.77 | ) | $ | (2.22 | ) | $ | (4.11 | ) | |||||
Diluted | $ | (0.25 | ) | $ | (0.41 | ) | $ | (0.77 | ) | $ | (2.22 | ) | $ | (4.11 | ) | |||||
2006 | ||||||||||||||||||||
Total revenues | $ | 69,141 | $ | 73,254 | $ | 76,365 | $ | 74,845 | $ | 293,605 | ||||||||||
Gross profit (exclusive of depreciation, accretion, and amortization)(4) | 16,043 | 18,370 | 18,980 | 18,919 | 72,312 | |||||||||||||||
Net income (loss)(5) | (3,124 | ) | 769 | (327 | ) | 2,151 | (531 | ) | ||||||||||||
Net income (loss) available to common stockholders(5) | (3,190 | ) | 703 | (394 | ) | 2,085 | (796 | ) | ||||||||||||
Net income (loss) per common share(5): | �� | |||||||||||||||||||
Basic | $ | (0.23 | ) | $ | 0.05 | $ | (0.03 | ) | $ | 0.15 | $ | (0.06 | ) | |||||||
Diluted | $ | (0.23 | ) | $ | 0.03 | $ | (0.03 | ) | $ | 0.09 | $ | (0.06 | ) |
(1) | Excludes $12.5 million of depreciation, accretion, and amortization for the quarter ended March 31, 2008. | |
(2) | Excludes $8.5 million, $7.1 million, $15.7 million, and $11.8 million of depreciation, accretion, and amortization for the quarters ended March 31, 2007, June 30, 2007, September 30, 2007, and December 31, 2007, respectively. | |
(3) | Includes pre-tax impairment charges of $0.1 million, $5.2 million, and $0.4 million for the quarters ended March 31, 2007, September 30, 2007, and December 31, 2007, respectively, related to certain contract-based intangible assets. Also, the “Net loss available to common stockholders” includes a one-time, non-cash charge of $36.0 million for the quarter ended December 31, 2007 associated with the conversion of the Company’s Series B Redeemable Convertible Preferred Stock into shares of the Company’s common stock in conjunction with the Company’s initial public offering. |
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(4) | Excludes $8.9 million, $6.6 million, $7.1 million, and $6.6 million of depreciation, accretion, and amortization for the quarters ended March 31, 2006, June 30, 2006, September 30, 2006, and December 31, 2006, respectively. | |
(5) | Includes pre-tax impairment charge of $2.8 million for the quarter ended March 31, 2006 related to certain contract-based intangible assets. Also includes $4.8 million in other income for the quarter ended December 31, 2006 primarily related to settlement proceeds received from Winn-Dixie, one of our merchant customers, as part of its emergence from bankruptcy. |
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(in thousands)
7-Eleven | ||||||||||||||||||||
Financial | ||||||||||||||||||||
Services | ||||||||||||||||||||
Cardtronics | Business | Pro Forma | ||||||||||||||||||
Historical | (See Note 1) | Adjustments | Notes | Pro Forma | ||||||||||||||||
Revenues: | ||||||||||||||||||||
ATM operating revenues | $ | 364,071 | $ | 79,313 | $ | — | $ | 443,384 | ||||||||||||
Vcom operating revenues | 1,251 | 8,197 | — | 9,448 | ||||||||||||||||
ATM product sales and other revenues | 12,976 | — | — | 12,976 | ||||||||||||||||
Total revenues | 378,298 | 87,510 | — | 465,808 | ||||||||||||||||
Cost of revenues: | ||||||||||||||||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization, shown separately below. See Note 7) | 275,286 | 63,234 | (4,389 | ) | 2 | 334,131 | ||||||||||||||
Cost of Vcom operating revenues | 6,065 | 9,126 | — | 15,191 | ||||||||||||||||
Cost of ATM product sales and other revenues | 11,942 | — | — | 11,942 | ||||||||||||||||
Total cost of revenues | 293,293 | 72,360 | (4,389 | ) | 361,264 | |||||||||||||||
Gross profit | 85,005 | 15,150 | 4,389 | 104,544 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general, and administrative expenses | 29,357 | 2,437 | — | 31,794 | ||||||||||||||||
Depreciation and accretion expense | 26,859 | 9,739 | (6,923 | ) | 4 | 29,675 | ||||||||||||||
Amortization expense | 18,870 | 346 | 4,495 | 4 | 23,711 | |||||||||||||||
Total operating expenses | 75,086 | 12,522 | (2,428 | ) | 85,180 | |||||||||||||||
Income from operations | 9,919 | 2,628 | 6,817 | 19,364 | ||||||||||||||||
Interest expense, net | 31,164 | 100 | 7,480 | 3 | 38,744 | |||||||||||||||
Other expense, net | 1,209 | — | — | 1,209 | ||||||||||||||||
Income (loss) before income taxes | (22,454 | ) | 2,528 | (663 | ) | (20,589 | ) | |||||||||||||
Income tax provision (benefit) | 4,636 | 976 | (976 | ) | 5 | 4,636 | ||||||||||||||
Net income (loss) | (27,090 | ) | 1,552 | 313 | (25,225 | ) | ||||||||||||||
Preferred stock conversion and accretion expense | 36,272 | — | — | 36,272 | ||||||||||||||||
Net income (loss) available to common stockholders | $ | (63,362 | ) | $ | 1,552 | $ | 313 | $ | (61,497 | ) | ||||||||||
Net income (loss) per common share (see Note 6): | ||||||||||||||||||||
Basic | $ | (4.11 | ) | $ | (3.99 | ) | ||||||||||||||
Diluted | $ | (4.11 | ) | $ | (3.99 | ) | ||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 15,423,744 | 15,423,744 | ||||||||||||||||||
Diluted | 15,423,744 | 15,423,744 | ||||||||||||||||||
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Total cash consideration | $ | 135,000 | ||
Working capital adjustment and other related closing costs | 2,312 | |||
Total estimated purchase price of acquisition | $ | 137,312 | ||
The total purchase price has been allocated on a preliminary basis as follows (in thousands): | ||||
Current assets | $ | 13,260 | ||
Property and equipment | 22,588 | |||
Intangible assets: | ||||
Customer contracts and relationships | 78,000 | |||
Goodwill | 62,191 | |||
Current liabilities | (19,540 | ) | ||
Other non-current liabilities | (19,187 | ) | ||
Total purchase price of acquisition | $ | 137,312 | ||
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$200.0 million 9.25% senior subordinated notes due 2013 issued in August 2005, net of the related discount | $ | 198,851 | ||
$100.0 million 9.25% senior subordinated notes due 2013 — Series B issued in July 2007, net of the related discount | 97,000 | |||
Revolving credit facility (including additional borrowings to fund the 7-Eleven ATM Transaction) | 102,954 | |||
Other long-term and current debt obligations, including capital lease obligations | 6,881 | |||
Total pro forma debt | $ | 405,686 | ||
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Interest expense associated with the senior subordinated notes issued in August 2005 ($198.9 million at an effective interest rate of 9.4%) | $ | 18,620 | ||
Interest expense associated with the Series B Notes issued in July 2007 ($97.0 million at an effective interest rate of 9.5%) | 9,250 | |||
Interest expense associated with the pro forma revolving credit facility balance ($103.0 million at an effective interest rate of 7.8%) | 8,030 | |||
Interest expense associated with other indebtedness, including acquired capital lease obligations | 721 | |||
Amortization of deferred financing costs associated with the Series B Notes issued in July 2007 and amended revolving credit facility ($1.7 million and $0.4 million amortized on a straight-line basis over 6 years and 5 years, respectively) | 353 | |||
Amortization of discount associated with the Series B Notes issued in July 2007 | 500 | |||
Amortization of deferred financing costs associated with the senior subordinated notes issued in August 2005 and revolving credit facility | 1,270 | |||
Pro forma interest expense | 38,744 | |||
Elimination of the historical interest expense of Cardtronics, Inc. and the 7-Eleven Financial Services Business | (31,264 | ) | ||
Pro forma interest expense adjustment | $ | 7,480 | ||
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• | Overview of Business | |
• | Recent Events | |
• | Results of Operations | |
• | Liquidity and Capital Resources | |
• | Critical Accounting Policies and Estimates | |
• | New Accounting Pronouncements | |
• | Commitments and Contingencies | |
• | Disclosure about Market Risk |
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• | Surcharge revenue. A surcharge fee represents a convenience fee paid by the cardholder for making a cash withdrawal from an ATM. Surcharge fees often vary by the type of arrangement under which we place our ATMs and can vary widely based on the location of the ATM and the nature of the contracts negotiated with our merchants. In the future, we expect that surcharge fees per surcharge-bearing transaction will vary depending upon negotiated surcharge fees at newly-deployed ATMs, the roll-out of additional branding arrangements, and future negotiations with existing merchant partners, as well as our ongoing efforts to improve profitability through improved pricing. For those ATMs that we own or operate on surcharge-free networks, we do not receive surcharge fees related to cash withdrawal transactions from cardholders who are participants of such networks, but rather we receive interchange and branding revenues (as discussed below.) Surcharge fees in the United Kingdom are typically higher than the surcharge fees charged in the United States. In Mexico, surcharge fees are generally less than those charged in the United States. | |
• | Interchange revenue. An interchange fee is a fee paid by the cardholder’s financial institution for the use of an ATM owned by another operator and the applicable EFT network that transmits data between the ATM and the cardholder’s financial institution. We typically receive a majority of the interchange fee paid by the cardholder’s financial institution, with the remaining portion being retained by the EFT network. In the United States and Mexico, interchange fees are earned not only on cash withdrawal transactions but on any ATM transaction, including balance inquiries, transfers, and surcharge-free transactions. In the United Kingdom, interchange fees are earned on all ATM transactions other than surcharge-bearing cash withdrawals. Interchange fees are set by the EFT networks and vary according to EFT network arrangements with financial institutions, as well as the type of transaction. Such fees are typically lower for balance inquiries and fund transfers and higher for cash withdrawal transactions. | |
• | Branding and surcharge-free network revenue. Under a bank branding agreement, ATMs that are owned and operated by us are branded with the logo of and operated as if they were owned by the branding financial institution. Customers of the branding institution can use those machines without paying a surcharge, and, in exchange, the financial institution pays us a monthly per-machine fee for such branding. Historically, this type of branding arrangement has resulted in an increase in transaction levels at the branded ATMs, as existing customers continue to use the ATMs and new customers of the branding financial institution are attracted by the surcharge-free service. Additionally, although we forego the surcharge fee on ATM transactions by the branding institution’s customers, we continue to |
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earn interchange fees on those transactions along with the monthly branding fee, and typically enjoy an increase in surcharge-bearing transactions from users who are not customers of the branding institution as a result of having a bank brand on our ATMs. Overall, based on the above, we believe a branding arrangement can substantially increase the profitability of an ATM versus operating the same machine in an unbranded mode. Fees paid for branding an ATM vary widely within our industry, as well as within our own operations. We expect that this variance in branding fees will continue in the future. However, because our strategy is to set branding fees at levels well above that required to offset lost surcharge revenue, we do not expect any such variance to cause a decrease in our total revenues. |
Three Months Ended | ||||||||||||||||||||
Pro Forma | March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
Per withdrawal transaction(1): | ||||||||||||||||||||
Surcharge revenue(2) | $ | 1.52 | $ | 1.52 | $ | 1.36 | $ | 1.31 | $ | 1.22 | ||||||||||
Interchange revenue(3) | 0.56 | 0.55 | 0.59 | 0.59 | 0.63 | |||||||||||||||
Branding and surcharge-free network revenue(4) | 0.06 | 0.13 | 0.21 | 0.21 | 0.26 | |||||||||||||||
Other revenue(5) | 0.04 | 0.05 | 0.03 | 0.03 | 0.03 | |||||||||||||||
Total ATM operating revenues | $ | 2.18 | $ | 2.25 | $ | 2.19 | $ | 2.14 | $ | 2.14 | ||||||||||
(1) | Amounts are calculated based on total cash withdrawal transactions, including surcharge cash withdrawal transactions and surcharge-free cash withdrawal transactions. | |
(2) | Excluding surcharge-free cash withdrawal transactions, per transaction amounts would have been $1.70, $1.80, and $1.88 for the years ended December 31, 2005, 2006, and 2007, respectively, $1.86 for the pro forma year ended December 31, 2007, and $1.88 for the three months ended March 31, 2008. | |
(3) | Amounts calculated based on total interchange revenues earned on all ATM transaction types, including withdrawals, balance inquiries, transfers, and surcharge-free transactions. |
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(4) | Amounts include all bank branding and surcharge-free network revenues, the majority of which are not earned on a per-transaction basis. | |
(5) | Amounts include other miscellaneous ATM operating revenues. |
Three Months Ended | ||||||||||||||||||||
Pro Forma | March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
Surcharge revenue | 69.9 | % | 67.5 | % | 62.0 | % | 61.0 | % | 57.1 | % | ||||||||||
Interchange revenue | 25.7 | 24.5 | 26.8 | 27.8 | 29.3 | |||||||||||||||
Branding and surcharge-free network revenue | 2.6 | 6.0 | 9.7 | 10.0 | 12.4 | |||||||||||||||
Other revenue | 1.8 | 2.0 | 1.5 | 1.2 | 1.2 | |||||||||||||||
Total ATM operating revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
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Three Months Ended | ||||||||||||||||||||
Years Ended December 31, | March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
Revenues: | ||||||||||||||||||||
ATM operating revenues | 96.3 | % | 95.7 | % | 96.2 | % | 96.2 | % | 95.4 | % | ||||||||||
Vcom operating revenues | — | — | 0.3 | — | 1.0 | |||||||||||||||
ATM product sales and other revenues | 3.7 | 4.3 | 3.4 | 3.8 | 3.5 | |||||||||||||||
Total revenues | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||||
Cost of revenues: | ||||||||||||||||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization, shown separately below)(1) | 74.3 | 71.5 | 72.8 | 73.5 | 72.0 | |||||||||||||||
Cost of Vcom operating revenues | — | — | 1.6 | — | 1.9 | |||||||||||||||
Cost of ATM product sales and other revenues | 3.6 | 3.9 | 3.2 | 3.8 | 3.5 | |||||||||||||||
Total cost of revenues | 77.9 | 75.4 | 77.5 | 77.2 | 77.4 | |||||||||||||||
Gross profit | 22.1 | 24.6 | 22.5 | 22.8 | 22.6 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general, and administrative expenses | 6.6 | 7.4 | 7.8 | 8.6 | 7.1 | |||||||||||||||
Depreciation and accretion expense | 4.8 | 6.3 | 7.1 | 8.6 | 7.5 | |||||||||||||||
Amortization expense(2) | 3.3 | 4.1 | 5.0 | 3.3 | 3.7 | |||||||||||||||
Total operating expenses | 14.8 | 17.8 | 19.8 | 20.6 | 18.4 | |||||||||||||||
Income from operations | 7.3 | 6.8 | 2.6 | 2.2 | 4.3 | |||||||||||||||
Other (income) expense: | ||||||||||||||||||||
Interest expense, net | 8.3 | 8.5 | 8.2 | 8.4 | 6.8 | |||||||||||||||
Minority interest in subsidiary | — | (0.1 | ) | (0.1 | ) | (0.2 | ) | — | ||||||||||||
Other | 0.4 | (1.6 | ) | 0.4 | (0.2 | ) | 0.9 | |||||||||||||
Total other expense | 8.7 | 6.8 | 8.6 | 8.1 | 7.6 | |||||||||||||||
Loss before income taxes | (1.4 | ) | — | (5.9 | ) | (5.9 | ) | (3.3 | ) | |||||||||||
Income tax expense (benefit) | (0.5 | ) | 0.2 | 1.2 | (1.3 | ) | 0.5 | |||||||||||||
Net loss | (0.9 | )% | (0.2 | )% | (7.2 | )% | (4.5 | )% | (3.8 | )% | ||||||||||
(1) | Excludes effects of depreciation, accretion, and amortization expense of $20.6 million, $29.2 million, and $43.1 million for the years ended December 31, 2005, 2006, and 2007, respectively, and $8.5 million and $12.5 million for the three months periods ended March 31, 2007 and 2008, respectively. The inclusion of this depreciation, accretion, and amortization expense in “Cost of ATM operating revenues” would |
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have increased our Cost of ATM operating revenues as a percentage of total revenues by 7.7%, 9.9%, and 11.4% for the years ended December 31, 2005, 2006, and 2007, respectively, and 10.3% and 11.4% for the three months ended March 31, 2008 and 2007, respectively. | ||
(2) | Includes pretax impairment charges of $1.2 million, $2.8 million, and $5.7 million for the years ended December 31, 2005, 2006, and 2007, respectively, and $0.1 million during the three months ended March 31, 2007. |
Three Months Ended | ||||||||||||||||||||
Years Ended December 31, | March 31 | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
Average number of transacting ATMs: | ||||||||||||||||||||
United States: Company-owned | 10,521 | 11,265 | 11,563 | 11,542 | 12,182 | |||||||||||||||
United States: Merchant-owned | 14,604 | 13,016 | 11,632 | 11,843 | 10,947 | |||||||||||||||
United States: 7-Eleven Financial Services Business(1) | — | — | 2,585 | — | 5,672 | |||||||||||||||
United Kingdom | 1,039 | 1,194 | 1,718 | 1,419 | 2,252 | |||||||||||||||
Mexico | — | 303 | 784 | 424 | 1,422 | |||||||||||||||
Total average number of transacting ATMs | 26,164 | 25,778 | 28,282 | 25,228 | 32,475 | |||||||||||||||
Total transactions(in thousands) | 156,851 | 172,808 | 246,595 | 44,449 | 83,037 | |||||||||||||||
Total cash withdrawal transactions(in thousands) | 118,960 | 125,078 | 166,248 | 31,180 | 53,890 | |||||||||||||||
Average monthly cash withdrawal transactions per average transacting ATM | 379 | 404 | 490 | 412 | 553 | |||||||||||||||
Per ATM per month: | ||||||||||||||||||||
ATM operating revenues | $ | 825 | $ | 908 | $ | 1,073 | $ | 947 | $ | 1,181 | ||||||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization)(2) | 636 | 678 | 811 | 723 | 891 | |||||||||||||||
ATM operating gross profit(2)(3) | $ | 189 | $ | 230 | $ | 262 | $ | 224 | $ | 290 | ||||||||||
ATM operating gross profit margin (exclusive of depreciation, accretion, and amortization)(4) | 22.9 | % | 25.3 | % | 24.4 | % | 23.6 | % | 24.5 | % | ||||||||||
ATM operating gross profit margin (inclusive of depreciation, accretion, and amortization)(5) | 14.9 | % | 14.9 | % | 12.5 | % | 11.7 | % | 13.7 | % |
(1) | The 2007 year-to-date average for the 7-Eleven Financial Services Business represents the12-month average of ATMs and Vcom terminals under Cardtronics’ ownership. The low figure is due to the fact that Cardtronics did not acquire the portfolio until July 20, 2007. The actual average number of transacting ATMs from the acquisition date to December 31, 2007 was 5,602. | |
(2) | Excludes effects of depreciation, accretion, and amortization expense of $20.6 million, $29.2 million, and $43.1 million for the years ended December 31, 2005, 2006, and 2007, respectively, and $8.5 million and $12.5 million for the three months ended March 31, 2007 and 2008, respectively. The inclusion of this depreciation, accretion, and amortization expense in “Cost of ATM operating revenues” would have increased our cost of ATM operating revenues per ATM per month and decreased our ATM operating gross profit per ATM per month by $66, $94, and $127 for the years ended December 31, 2005, 2006, and 2007, respectively, and $112 and $128 for the three months ended March 31, 2007 and 2008, respectively. | |
(3) | ATM operating gross profit is a measure of profitability that uses only the revenue and expenses that related to operating the ATMs. The revenue and expenses from ATM equipment sales, Vcom Services, and other ATM-related services are not included. | |
(4) | The increase in ATM operating gross profit margin (exclusive of depreciation, accretion, and amortization) in 2006 when compared to 2005 is due to the increases in revenues associated with the Company’s bank and network branding initiatives, increased surcharge rates in selected merchant retail locations, and higher gross profit margins associated with our United Kingdom portfolio of ATMs (which was acquired in May 2005). The decrease in ATM operating gross profit margin (exclusive of depreciation, accretion, and amortization) in 2007 when compared to 2006 is primarily the result of higher vault cash costs and costs incurred in connection with |
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our Triple-DES upgrade and in-house EFT processing conversion costs. The increase in ATM operating gross profit margin (exclusive of depreciation, accretion, and amortization) for the three months ended March 31, 2008 when compared to three months ended March 31, 2007 is primarily the result of the 7-Eleven ATM Transaction, as the acquired ATM operations earned higher gross margin percentages than our pre-existing operations during the quarter. | ||
(5) | The decrease in ATM operating gross profit margin (inclusive of depreciation, accretion, and amortization) in 2007 when compared to 2006 and 2005 is primarily due to higher vault cash costs, the incremental costs incurred in connection with our Triple-DES upgrade and in-house EFT processing conversion efforts, higher depreciation and accretion expense associated with recent ATM deployments in the United Kingdom and Mexico, which have yet to achieve the higher consistent recurring transaction levels seen in our more mature ATMs, and $5.7 million of incremental amortization expense related to intangible asset impairments recorded in 2007. The increase in ATM operating gross profit margin (inclusive of depreciation, accretion, and amortization) for the three months ended March 31, 2008 when compared to three months ended March 31, 2007 is primarily the result of the 7-Eleven ATM Transaction, as the acquired ATM operations earned higher gross margin percentages than our pre-existing operations during the quarter. |
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(in thousands) | ||||||||||||
ATM operating revenues | $ | 71,656 | $ | 115,062 | 60.6 | % | ||||||
Vcom operating revenues | — | 1,235 | — | |||||||||
ATM product sales and other revenues | 2,862 | 4,278 | 49.5 | % | ||||||||
Total revenues | $ | 74,518 | $ | 120,575 | 61.8 | % | ||||||
2007 to 2008 Variance | ||||||||||||||||
U.S. | U.K. | Mexico | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Surcharge revenue | $ | 15,977 | $ | 2,226 | $ | 1,130 | $ | 19,333 | ||||||||
Interchange revenue | 13,086 | 2,469 | 626 | 16,181 | ||||||||||||
Branding and surcharge-free network revenue | 7,874 | — | 1 | 7,875 | ||||||||||||
Other | 16 | 1 | — | 17 | ||||||||||||
Total increase in ATM operating revenues | $ | 36,953 | $ | 4,696 | $ | 1,757 | $ | 43,406 | ||||||||
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Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(in thousands) | ||||||||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization) | $ | 54,736 | $ | 86,832 | 58.6 | % | ||||||
Cost of Vcom operating revenues | — | 2,269 | — | |||||||||
Cost of ATM product sales and other revenues | 2,797 | 4,164 | 48.9 | % | ||||||||
Total cost of revenues (exclusive of depreciation, accretion, and amortization) | $ | 57,533 | $ | 93,265 | 62.1 | % | ||||||
2007 to 2008 Variance | ||||||||||||||||
U.S. | U.K. | Mexico | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Merchant commissions | $ | 10,344 | $ | 1,873 | $ | 565 | $ | 12,782 | ||||||||
Cost of cash | 7,641 | 1,997 | 440 | 10,078 | ||||||||||||
Repairs and maintenance | 3,713 | 111 | 138 | 3,962 | ||||||||||||
Direct operations | 1,784 | 420 | 89 | 2,293 | ||||||||||||
Communications | 1,227 | 445 | 81 | 1,753 | ||||||||||||
Processing fees | 592 | 453 | 183 | 1,228 | ||||||||||||
Total increase in cost of ATM operating revenues | $ | 25,301 | $ | 5,299 | $ | 1,496 | $ | 32,096 | ||||||||
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2007 | 2008 | |||||||
ATM operating gross profit margin: | ||||||||
Exclusive of depreciation, accretion, and amortization | 23.6 | % | 24.5 | % | ||||
Inclusive of depreciation, accretion, and amortization | 11.7 | % | 13.7 | % | ||||
Vcom operating gross profit margin | — | (83.7 | )% | |||||
ATM product sales and other revenues gross profit margin | 2.3 | % | 2.7 | % | ||||
Total gross profit margin: | ||||||||
Exclusive of depreciation, accretion, and amortization | 22.8 | % | 22.6 | % | ||||
Inclusive of depreciation, accretion, and amortization | 11.4 | % | 12.3 | % |
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Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(in thousands) | ||||||||||||
Selling, general, and administrative expenses | $ | 6,238 | $ | 8,350 | 33.9 | % | ||||||
Stock-based compensation | 206 | 201 | (2.4 | )% | ||||||||
Total selling, general, and administrative expenses | $ | 6,444 | $ | 8,551 | 32.7 | % | ||||||
Percentage of total revenues: | ||||||||||||
Selling, general, and administrative expenses | 8.4 | % | 6.9 | % | ||||||||
Stock-based compensation | 0.3 | % | 0.2 | % | ||||||||
Total selling, general, and administrative expenses | 8.6 | % | 7.1 | % |
Three Months Ended March 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(in thousands) | ||||||||||||
Depreciation expense | $ | 6,172 | $ | 8,687 | 40.7 | % | ||||||
Accretion expense | 226 | 395 | 74.8 | % | ||||||||
Depreciation and accretion expense | $ | 6,398 | $ | 9,082 | 42.0 | % | ||||||
Percentage of total revenues: | ||||||||||||
Depreciation expense | 8.3 | % | 7.2 | % | ||||||||
Accretion expense | 0.3 | % | 0.3 | % | ||||||||
Total depreciation and accretion expense | 8.6 | % | 7.5 | % |
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Three Months Ended March 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(in thousands) | ||||||||||||
Amortization expense | $ | 2,486 | $ | 4,503 | 81.1 | % | ||||||
Percentage of total revenues | 3.3 | % | 3.7 | % |
Three Months Ended March 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(in thousands) | ||||||||||||
Interest expense, net | $ | 5,892 | $ | 7,632 | 29.5 | % | ||||||
Amortization of deferred financing costs and bond discounts | 356 | 508 | 42.7 | % | ||||||||
Total interest expense, net | $ | 6,248 | $ | 8,140 | 30.3 | % | ||||||
Percentage of revenues | 8.4 | % | 6.8 | % |
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Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(in thousands) | ||||||||||||
Minority interest | $ | (112 | ) | $ | — | (100.0 | )% | |||||
Other expense (income) | (119 | ) | 1,061 | (991.6 | )% | |||||||
Total other expense (income) | $ | (231 | ) | $ | 1,061 | (559.3 | )% | |||||
Percentage of revenues | (0.3 | )% | 0.9 | % |
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2007 | 2008 | % Change | ||||||||||
(in thousands) | ||||||||||||
Income tax expense (benefit) | $ | (973 | ) | $ | 565 | (158.1 | )% | |||||
Effective tax rate | 22.3 | % | (14.0 | )% |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2005 | 2006 | 2005 to 2006 | 2007 | 2006 to 2007 | ||||||||||||||||
(in thousands, excluding percentages) | ||||||||||||||||||||
ATM operating revenues | $ | 258,979 | $ | 280,985 | 8.5 | % | $ | 364,071 | 29.6 | % | ||||||||||
Vcom operating revenues | — | — | — | 1,251 | — | |||||||||||||||
ATM product sales and other revenues | 9,986 | 12,620 | 26.4 | % | 12,976 | 2.8 | % | |||||||||||||
Total revenues | $ | 268,965 | $ | 293,605 | 9.2 | % | $ | 378,298 | 28.8 | % | ||||||||||
2005 to 2006 Variance | 2006 to 2007 Variance | |||||||||||||||||||||||||||||||
U.S. | U.K. | Mexico | Total | U.S. | U.K. | Mexico | Total | |||||||||||||||||||||||||
increase (decrease) | increase (decrease) | |||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Surcharge revenue | $ | (7,281 | ) | $ | 15,510 | $ | 398 | $ | 8,627 | $ | 19,813 | $ | 14,115 | $ | 1,921 | $ | 35,849 | |||||||||||||||
Interchange revenue | (2,863 | ) | 4,815 | 388 | 2,340 | 20,206 | 7,180 | 1,442 | 28,828 | |||||||||||||||||||||||
Branding and surcharge-free network revenue | 9,987 | — | 6 | 9,993 | 18,579 | — | 2 | 18,581 | ||||||||||||||||||||||||
Other | 986 | 60 | — | 1,046 | (176 | ) | 4 | — | (172 | ) | ||||||||||||||||||||||
Total increase | $ | 829 | $ | 20,385 | $ | 792 | $ | 22,006 | $ | 58,422 | $ | 21,299 | $ | 3,365 | $ | 83,086 | ||||||||||||||||
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2005 | 2006 | 2005 to 2006 | 2007 | 2006 to 2007 | ||||||||||||||||
(in thousands, excluding percentages) | ||||||||||||||||||||
Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization) | $ | 199,767 | $ | 209,850 | 5.0 | % | $ | 275,286 | 31.2 | % | ||||||||||
Cost of Vcom operating revenues | — | — | — | 6,065 | — | |||||||||||||||
Cost of ATM product sales and other revenues | 9,681 | 11,443 | 18.2 | % | 11,942 | 4.4 | % | |||||||||||||
Total cost of revenues (exclusive of depreciation, accretion, and amortization) | $ | 209,448 | $ | 221,293 | 5.7 | % | $ | 293,293 | 32.5 | % | ||||||||||
2005 to 2006 Variance | 2006 to 2007 Variance | |||||||||||||||||||||||||||||||
U.S. | U.K. | Mexico | Total | U.S. | U.K. | Mexico | Total | |||||||||||||||||||||||||
increase (decrease) | increase (decrease) | |||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Cost of cash | $ | 1,582 | $ | 2,172 | $ | 88 | $ | 3,842 | $ | 17,582 | $ | 6,734 | $ | 826 | $ | 25,142 | ||||||||||||||||
Merchant commissions | (6,185 | ) | 7,194 | 52 | 1,061 | 12,167 | 6,112 | 1,036 | 19,315 | |||||||||||||||||||||||
Repairs and maintenance | (638 | ) | 199 | 46 | (393 | ) | 6,702 | 413 | 450 | 7,565 | ||||||||||||||||||||||
Direct operations | 1,343 | 2,430 | 177 | 3,950 | 2,946 | 2,088 | 106 | 5,140 | ||||||||||||||||||||||||
Communications | 1,094 | (276 | ) | 1 | 819 | 3,051 | 935 | 108 | 4,094 | |||||||||||||||||||||||
In-house processing conversion | — | — | — | — | 2,419 | — | — | 2,419 | ||||||||||||||||||||||||
Processing fees | (791 | ) | 1,021 | 192 | 422 | 195 | 1,183 | 332 | 1,710 | |||||||||||||||||||||||
Other | 170 | 210 | 2 | 382 | (302 | ) | 303 | 50 | 51 | |||||||||||||||||||||||
Total increase (decrease) | $ | (3,425 | ) | $ | 12,950 | $ | 558 | $ | 10,083 | $ | 44,760 | $ | 17,768 | $ | 2,908 | $ | 65,436 | |||||||||||||||
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7-Eleven ATM Transaction. For additional details related to these liabilities, see Note 2 to our unaudited interim consolidated financial statements included elsewhere within this prospectus.
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For the Years Ended December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
ATM operating gross profit margin: | ||||||||||||
Exclusive of depreciation, accretion, and amortization | 22.9 | % | 25.3 | % | 24.4 | % | ||||||
Inclusive of depreciation, accretion, and amortization | 14.9 | % | 14.9 | % | 12.5 | % | ||||||
Vcom operating gross profit margin | — | — | (384.8 | )% | ||||||||
ATM product sales and other revenues gross profit margin | 3.1 | % | 9.3 | % | 8.0 | % | ||||||
Total gross profit margin: | ||||||||||||
Exclusive of depreciation, accretion, and amortization | 22.1 | % | 24.6 | % | 22.5 | % | ||||||
Inclusive of depreciation, accretion, and amortization | 14.5 | % | 14.7 | % | 11.1 | % |
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For The Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2005 | 2006 | 2005 to 2006 | 2007 | 2006 to 2007 | ||||||||||||||||
(in thousands, excluding percentages) | ||||||||||||||||||||
Selling, general, and administrative expenses, excluding stock-based compensation | $ | 15,664 | $ | 20,839 | 33.0 | % | $ | 28,394 | 36.3 | % | ||||||||||
Stock-based compensation expense | 2,201 | 828 | (62.4 | )% | 963 | 16.3 | % | |||||||||||||
Total selling, general, and administrative expenses | $ | 17,865 | $ | 21,667 | 21.3 | % | $ | 29,357 | 35.5 | % | ||||||||||
Percentage of revenues: | ||||||||||||||||||||
Selling, general, and administrative expenses, excluding stock-based compensation | 5.8 | % | 7.1 | % | 7.5 | % | ||||||||||||||
Stock-based compensation expense | 0.8 | % | 0.3 | % | 0.3 | % | ||||||||||||||
Total selling, general, and administrative expenses | 6.6 | % | 7.4 | % | 7.8 | % |
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For The Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2005 | 2006 | 2005 to 2006 | 2007 | 2006 to 2007 | ||||||||||||||||
(in thousands, excluding percentages) | ||||||||||||||||||||
Depreciation expense | $ | 11,949 | $ | 18,323 | 53.3 | % | $ | 25,737 | 40.5 | % | ||||||||||
Accretion expense | 1,002 | 272 | (72.9 | )% | 1,122 | 312.5 | % | |||||||||||||
Depreciation and accretion expense | $ | 12,951 | $ | 18,595 | 43.6 | % | $ | 26,859 | 44.4 | % | ||||||||||
Percentage of Revenues: | ||||||||||||||||||||
Depreciation expense | 4.4 | % | 6.2 | % | 6.8 | % | ||||||||||||||
Accretion expense | 0.4 | % | 0.1 | % | 0.3 | % | ||||||||||||||
Total depreciation and accretion expense | 4.8 | % | 6.3 | % | 7.1 | % |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2005 | 2006 | 2005 to 2006 | 2007 | 2006 to 2007 | ||||||||||||||||
(in thousands, excluding percentages) | ||||||||||||||||||||
Amortization expense | $ | 8,980 | $ | 11,983 | 33.4 | % | $ | 18,870 | 57.5 | % | ||||||||||
Percentage of revenues | 3.3 | % | 4.1 | % | 5.0 | % |
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For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2005 | 2006 | 2005 to 2006 | 2007 | 2006 to 2007 | ||||||||||||||||
(in thousands, excluding percentages) | ||||||||||||||||||||
Interest expense, net | $ | 15,485 | $ | 23,143 | 49.5 | % | $ | 29,523 | 27.6 | % | ||||||||||
Amortization and write-off of financing costs and bond discounts | 6,941 | 1,929 | (72.2 | )% | 1,641 | (14.9 | )% | |||||||||||||
Total interest expense, net | $ | 22,426 | $ | 25,072 | 11.8 | % | $ | 31,164 | 24.3 | % | ||||||||||
Percentage of revenues | 8.3 | % | 8.5 | % | 8.2 | % |
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For the Years Ended December 31, | ||||||||||||||||||||||||
% Change | % Change | |||||||||||||||||||||||
2005 | 2006 | 2005 to 2006 | 2007 | 2006 to 2007 | ||||||||||||||||||||
(in thousands, excluding percentages) | ||||||||||||||||||||||||
Minority interest | $ | 15 | $ | (225 | ) | (1,600.0 | )% | $ | (376 | ) | 67.1 | % | ||||||||||||
Other (income) expense | 968 | (4,761 | ) | (591.8 | )% | 1,585 | (133.3 | )% | ||||||||||||||||
Total other (income) expense | $ | 983 | $ | (4,986 | ) | (607.2 | )% | $ | 1,209 | (124.2 | )% | |||||||||||||
Percentage of revenues | 0.4 | % | (1.7 | )% | 0.3 | % |
For the Years Ended December 31, | ||||||||||||||||||||
% Change | % Change | |||||||||||||||||||
2005 | 2006 | 2005 to 2006 | 2007 | 2006 to 2007 | ||||||||||||||||
(in thousands, excluding percentages) | ||||||||||||||||||||
Income tax expense (benefit) | $ | (1,270 | ) | $ | 512 | 140.3 | % | $ | 4,636 | 805.5 | % | |||||||||
Effective tax rate | 34.4 | % | (2,694.7 | )% | (20.6 | )% |
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Payment Due by Period | ||||||||||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | Total | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Long-term financings: | ||||||||||||||||||||||||||||
Principal(1) | $ | 882 | $ | 1,735 | $ | 2,147 | $ | 2,372 | $ | 5,391 | $ | 300,000 | $ | 312,527 | ||||||||||||||
Interest(2) | 28,969 | 28,840 | 28,622 | 28,375 | 37,943 | 27,750 | 170,499 | |||||||||||||||||||||
Operating leases | 5,559 | 5,430 | 1,332 | 828 | 766 | 3,161 | 17,076 | |||||||||||||||||||||
Merchant space leases | 4,644 | 2,261 | 1,425 | 1,369 | 1,272 | 1,101 | 12,072 | |||||||||||||||||||||
Capital leases(3) | 1,268 | 799 | 240 | — | — | — | 2,307 | |||||||||||||||||||||
Total contractual obligations | $ | 41,322 | $ | 39,065 | $ | 33,766 | $ | 32,944 | $ | 35,372 | $ | 332,012 | $ | 514,481 | ||||||||||||||
(1) | Represents the $300.0 million face value of our Series A and Series B Notes, $4.0 million outstanding under our revolving credit facility, and $8.4 million outstanding under our Mexico equipment financing facilities. | |
(2) | Represents the estimated interest payments associated with our long-term debt outstanding as of December 31, 2007. | |
(3) | Includes interest related to the capital lease obligations. |
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1. | Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value; | |
2. | Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date; | |
3. | Eliminates large position discounts for financial instruments quoted in active markets and requires consideration of the Company’s creditworthiness when valuing liabilities; and | |
4. | Expands disclosures about instruments measured at fair value. |
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Weighted Average | ||||||||
Notional Amount | Fixed Rate | Period | ||||||
(in thousands) | ||||||||
$550,000 | 4.61 | % | April 1, 2008 — December 31, 2008 | |||||
$550,000 | 4.30 | % | January 1, 2009 — December 31, 2009 | |||||
$550,000 | 4.11 | % | January 1, 2010 — December 31, 2010 | |||||
$400,000 | 3.72 | % | January 1, 2011 — December 31, 2011 | |||||
$200,000 | 3.96 | % | January 1, 2012 — December 31, 2012 |
Additional Interest Incurred | Additional Interest Incurred | ||||||||||||||||||||
on 100 Basis Point Increase | on 100 Basis Point Increase | ||||||||||||||||||||
Vault Cash Balance as of | (Excluding Impact of | (Including Impact of | |||||||||||||||||||
March 31, 2008 | Interest Rate Swaps) | Interest Rate Swaps) | |||||||||||||||||||
(functional currency) | (U.S. dollars) | (functional currency) | (U.S. dollars) | (functional currency) | (U.S. dollars) | ||||||||||||||||
(in millions) | (in millions) | (in millions) | |||||||||||||||||||
United States | $747.3 | $ | 747.3 | $7.5 | $ | 7.5 | $2.0 | $ | 2.0 | ||||||||||||
United Kingdom | £ 82.8 | 164.5 | £0.8 | 1.6 | £0.8 | 1.6 | |||||||||||||||
Mexico | p$ | 152.7 | 14.3 | p$ | 1.5 | 0.1 | p$ | 1.5 | 0.1 | ||||||||||||
Total | $ | 926.1 | $ | 9.2 | $ | 3.7 | |||||||||||||||
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![Average Surcharge Rates](https://capedge.com/proxy/424B3/0000950129-08-003517/h53387b3h5338703.gif)
Source: | © Dove Consulting, 2006 ATM Deployer Study. Reprinted with Permission. |
![Average Surcharge Rates](https://capedge.com/proxy/424B3/0000950129-08-003517/h53387b3h5338704.gif)
Source: | ©2005 American Bankers Association and Dove Consulting,a division of Hitachi Consulting. Reprinted with Permission. All Rights Reserved. |
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• | United Kingdom. The U.K. is the largest ATM market in Europe. Until the late 1990s, most U.K. ATMs were installed at bank and building society branches. Non-bank operators began to deploy ATMs in the United Kingdom in December 1998 when LINK (which connects the ATM networks of all U.K. ATM operators) allowed them entry into its network via arrangements between non-bank operators and U.K. financial institutions. We believe that non-bank ATM operators have benefited in recent years from customer demand for more conveniently located cash machines, the emergence of internet banking with no established point of presence, and the closure of bank branches due to consolidation. According to LINK, a total of approximately 63,000 ATMs were deployed in the United Kingdom as of January 2008, of which approximately 26,000 were operated by non-banks. This has grown from approximately 36,700 total ATMs in the U.K. in 2001, with less than 7,000 operated by non-banks. The following table shows the compound annual growth rate (“CAGR”) for ATMs deployed in the United Kingdom from 2000 to 2006. |
![(BAR CHART)](https://capedge.com/proxy/424B3/0000950129-08-003517/h53387b3h5338705.gif)
Source: | APACS’ U.K. Payment Statistics 2007 |
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![(BAR CHART)](https://capedge.com/proxy/424B3/0000950129-08-003517/h53387b3h5338706.gif)
Source: | APACS’ U.K. Payment Statistics 2007 |
![(BAR CHART)](https://capedge.com/proxy/424B3/0000950129-08-003517/h53387b3h5338707.gif)
Source: | APACS’ U.K. Payment Statistics 2007. |
• | Mexico. Historically, surcharge fees were not allowed pursuant to Mexican law. However, in July 2005, the Mexican government approved a measure that now allows ATM operators to charge a fee to individuals withdrawing cash from their ATMs. As a result of the Mexican government allowing surcharging and the relatively low level of penetration of ATMs in Mexico, we believe that there will be significant growth in the number of ATMs owned in Mexico by non-banks. According to the Central Bank of Mexico, as of March 2008, Mexico had approximately 30,000 ATMs operating throughout the country, substantially all of which are owned by national and regional banks. |
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• | In February 2006, we acquired a 51.0% ownership stake in CCS Mexico, an independent ATM operator located in Mexico, for approximately $1.0 million in cash consideration and the assumption of approximately $0.4 million in additional liabilities. At the time of the acquisition, CCS Mexico operated approximately 300 ATMs. |
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• | In December 2005, we acquired all of the outstanding shares of ATM National, Inc., the owner and operator of the Allpoint nationwide surcharge-free ATM network. The consideration for such acquisition totaled $4.8 million. | |
• | In May 2005, we purchased 100% of the outstanding shares of Bank Machine (Acquisitions) Limited for approximately $95.0 million. At the time of the acquisition, Bank Machine (Acquisitions) Limited operated approximately 1,000 ATMs in the United Kingdom. | |
• | In April 2005, we acquired a portfolio of 330 ATMs, primarily at BP Amoco locations throughout the midwest region, for approximately $9.0 million in cash. | |
• | In March 2005, we acquired a portfolio of 475 ATMs located in the greater New York Metro area from BAS Communications for approximately $8.2 million in cash. | |
• | In June 2004, we acquired the ATM business owned by E*TRADE Access, Inc. for $106.9 million in cash. At the time of the acquisition, E*TRADE Access, Inc. operated 13,155 ATMs in the United States. |
Company-Owned | Merchant-Owned | Total | ||||||||||
Number of ATMs | 21,500 | 11,100 | 32,600 | |||||||||
Percent of total ATMs | 66.0 | % | 34.0 | % | 100.0 | % |
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• | an initial term of five to seven years; | |
• | exclusive deployment of ATMs at locations where we install an ATM; | |
• | our right to increase surcharge fees; | |
• | our right to remove ATMs at underperforming locations without having to pay a termination fee; | |
• | in the United States, our right to terminate or remove ATMs or renegotiate the fees payable to the merchant if surcharge fees are generally reduced or eliminated by law; and | |
• | provisions making the merchant’s fee dependent on the number of ATM transactions. |
• | in the United States, provisions prohibiting in-store check cashing by the merchant and, in the United States and United Kingdom, the operation of any other cash-back devices; | |
• | provisions imposing an obligation on the merchant to operate the ATMs at any time its stores are open for business; and | |
• | provisions, when possible, that require the assumption of our contract in the event a merchant sells its stores. |
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Name | Age | Position | ||||
Fred R. Lummis | 54 | Chairman of the Board, Class III Director | ||||
Jack Antonini | 55 | Class III Director | ||||
Tim Arnoult | 59 | Class II Director | ||||
Robert P. Barone | 70 | Class I Director | ||||
Jorge M. Diaz | 43 | Class I Director | ||||
Dennis F. Lynch | 59 | Class II Director | ||||
Michael A.R. Wilson | 40 | Class III Director |
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Nominating & | ||||||||||||
Audit | Compensation | Governance | ||||||||||
Name | Committee | Committee | Committee | |||||||||
Fred R. Lummis | X | X | ||||||||||
Jack Antonini | ||||||||||||
Tim Arnoult | X | X | ||||||||||
Robert P. Barone | X | |||||||||||
Jorge M. Diaz | X | |||||||||||
Dennis F. Lynch | X | X | ||||||||||
Michael A.R. Wilson | X |
• | assist the Board in fulfilling its oversight responsibilities with respect to the conduct by our management of our financial reporting process, including the development and maintenance of a system of internal accounting and financial reporting controls; | |
• | assist the Board in overseeing the integrity of our financial statements, qualifications and independence of our independent registered public accounting firms, their performance and the performance of the our internal audit function; | |
• | prepare for inclusion in this proxy statement the audit committee report required by the SEC; | |
• | recommend to our Board whether such audited financial statements should be included in our Annual Report onForm 10-K to be filed with the SEC; and | |
• | perform such other functions as the Board may assign to the Audit Committee from time to time. |
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• | oversee the responsibilities of the Board relating to compensation of our directors and executive officers; | |
• | design, recommend and evaluate our director and executive officer compensation plans, policies and programs; | |
• | produce the Compensation Committee Report for inclusion in the proxy statement, in accordance with applicable rules and regulations; | |
• | otherwise discharge our Board’s responsibilities relating to compensation of our directors and executive officers; and | |
• | perform such other functions as our Board may assign to the committee from time to time. |
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• | prepares and recommends to our Board for adoption appropriate corporate governance guidelines and modifications from time to time to those guidelines; | |
• | establishes criteria for selecting new directors and seeks individuals qualified to become Board members for recommendation to our Board; | |
• | seeks to implement the “independence” standards required by law, applicable listing standards, our certificate of incorporation or bylaws or our Corporate Governance Guidelines; | |
• | determines whether or not each director and each prospective director is independent, disinterested or a non-employee director under the standards applicable to the committees on which such director is serving or may serve; | |
• | recommends to our Board a director who serves as Chairman; | |
• | reviews annually the advisability or need for any changes in the number and composition of our Board; | |
• | reviews annually the advisability or need for any changes in the number, charters or titles of committees of our Board; | |
• | recommends to our Board annually the composition of each Board committee and the individual director to serve as chairman of each committee; | |
• | ensures that the chairman of each committee reports to our Board annually about the committee’s annual evaluation of its performance and evaluation of its charter; | |
• | receives comments from all directors and reports to our Board annually with an assessment of our Board’s performance to be discussed with the full Board following the end of each fiscal year; | |
• | reviews and reassesses annually the adequacy of our Corporate Governance Guidelines and recommends any proposed changes to our Board for approval; and | |
• | makes a report to our Board annually on succession planning and works with our Board to evaluate potential successors to the principal executive officer. |
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Name | Age | Position | ||||
Jack Antonini | 54 | Chief Executive Officer, President, and Director | ||||
J. Chris Brewster | 59 | Chief Financial Officer | ||||
Michael H. Clinard | 41 | Chief Operating Officer | ||||
Rick Updyke | 48 | Chief Strategy and Development Officer | ||||
Ronald Delnevo | 53 | Managing Director of Bank Machine Ltd. |
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Estimated Payout | ||||
Actual Adjusted EBITDA as a% of Target EBITDA | as a% of Target | |||
90% | 50 | % | ||
95% | 75 | % | ||
100% | 100 | % | ||
105% | 150 | % | ||
110% | 200 | % | ||
115% | 250 | % | ||
120% | 300 | % | ||
125% | 350 | % | ||
130% | 400 | % |
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Estimated Payout | ||||
Actual Adjusted EBITDA as a% of Target EBITDA | as a% of Target | |||
<90% | 0 | % | ||
90% | 50 | % | ||
95% | 75 | % | ||
100% | 100 | % | ||
105% | 125 | % | ||
110% | 150 | % | ||
115% | 175 | % | ||
120% | 200 | % | ||
>120% | 200 | % |
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• | 401(k) Savings Plan.We have a defined contribution 401(k) plan, which is designed to assist our employees in providing for their retirement and allow us to remain competitive in the market place in terms of benefits offered to employees. Each of our named executive officers is entitled to participate in this plan to the same extent that our other employees are entitled to participate. In 2007, we began matching 25% of employee contributions up to 6.0% of the employee’s salary (for a maximum matching contribution of 1.5% of the executive’s salary by us). Employees are immediately vested in their contributions while our matching contributions will vest at a rate of 20% per year. | |
• | Health and Welfare Benefits. Our named executive officers are eligible to participate in medical, dental, vision, disability and life insurance, and flexible healthcare and dependent care spending accounts to meet their health and welfare needs under the same plans and terms as the rest of our employees. These benefits are provided so as to assure that we are able to maintain a competitive position in terms of attracting and retaining executive officers and other employees. This program is a fixed component of compensation and the benefits are provided on a non-discriminatory basis to all of our employees. | |
• | Perquisites and Other Personal Benefits. We believe that the total mix of compensation and benefits provided to our executive officers is competitive and perquisites should generally not play a large role in our executive officers’ total compensation. As a result, the perquisites and other personal benefits we provide to our executive officers are very limited in nature. We provide our Chief Operating Officer with a car allowance, which was negotiated between the executive and the company when his employment agreement was renewed in 2001. Additionally, we provide the Managing Director of Bank Machine with a car allowance and make contributions into a personal retirement account, as such benefits were being provided to the executive prior to our acquisition of Bank Machine and we, therefore, elected to continue to provide him with such benefits as incentive to remain under our employment. |
Non-Equity | ||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | All Other | |||||||||||||||||||||||||||||
Executive Name & Principal Position | Year | Salary | Bonus(1) | Awards(2) | Awards(3) | Compensation | Compensation | Total | ||||||||||||||||||||||||
Jack Antonini - | 2007 | $ | 364,651 | $ | 30,000 | $ | 11,025 | $ | — | $ | 176,856 | $ | — | $ | 582,532 | |||||||||||||||||
Chief Executive Officer and President | 2006 | $ | 347,287 | — | $ | 215,894 | $ | — | $ | 223,653 | $ | — | $ | 786,834 | ||||||||||||||||||
J. Chris Brewster - | 2007 | $ | 275,000 | $ | 30,000 | — | $ | 132,449 | $ | 133,375 | $ | — | $ | 570,824 | ||||||||||||||||||
Chief Financial Officer | 2006 | $ | 248,063 | — | — | $ | 103,929 | $ | 209,753 | $ | — | $ | 561,745 | |||||||||||||||||||
Michael H. Clinard - | 2007 | $ | 243,101 | $ | 20,000 | — | $ | 88,300 | $ | 129,694 | $ | 10,739 | (4) | $ | 491,834 | |||||||||||||||||
Chief Operating Officer | 2006 | $ | 231,525 | — | — | $ | 69,286 | $ | 149,102 | $ | 9,000 | (4) | $ | 458,913 | ||||||||||||||||||
Thomas E. Upton - | 2007 | $ | 231,525 | — | — | $ | 88,300 | $ | 101,060 | $ | — | $ | 420,885 | |||||||||||||||||||
Chief Administrative Officer | 2006 | $ | 220,500 | — | — | $ | 69,286 | $ | 234,902 | $ | — | $ | 524,688 | |||||||||||||||||||
Ronald Delnevo(5) - | 2007 | $ | 353,714 | — | — | $ | 47,250 | (6) | $ | 138,209 | $ | 51,188 | (7) | $ | 590,361 | |||||||||||||||||
Managing Director of Bank Machine | 2006 | $ | 281,937 | — | — | $ | — | $ | 153,868 | $ | 49,180 | (7) | $ | 484,985 |
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(1) | Amounts represent bonuses paid to Messrs. Antonini, Brewster, and Clinard for their contributions to our initial public offering process. For additional details on awards, see “— Compensation Discussion and Analysis — Components of Executive Compensation — Discretionary Bonuses.” | |
(2) | Amounts represent the compensation expense recognized by our company for the years ended December 31, 2007 and 2006 related to restricted stock granted to Mr. Antonini in 2003. | |
(3) | Represents the amount expensed in connection with stock awards under SFAS No. 123R. For purposes of this disclosure, estimates of forfeitures related to service-based vesting conditions have been omitted. Assumptions used in the calculation of these amounts are included in Note 3 to our audited consolidated financial statements included elsewhere within this prospectus. | |
(4) | Amount presented for 2007 includes $9,750 paid to Mr. Clinard related to the car allowance provided for in his employment agreement and $989 of matching contributions under our 401(k) plan. Amount presented for 2006 represents amounts paid to Mr. Clinard related to the car allowance provided for in his employment agreement. | |
(5) | Amounts presented for Mr. Delnevo in 2007 and 2006 were converted from pounds sterling to U.S. dollars at $2.0074 and $1.9613, respectively, which represent the exchange rates in effect as of December 31, 2007 and 2006, respectively. | |
(6) | During 2007, the Compensation Committee granted option awards to Mr. Delnevo. For details on this grant, see “— Compensation Discussion and Analysis — Components of Executive Compensation — Long-term Incentive Programs — Long-Term Equity Incentive Plans” above. | |
(7) | Amount presented for 2007 includes $24,088 (£12,000) related to a car allowance and $27,100 (£13,500) of monthly contributions made on behalf of Mr. Delnevo to a personal retirement account selected by Mr. Delnevo. Amount presented for 2006 includes $23,535 (£12,000) related to a car allowance and $25,645 (£13,075) of monthly contributions made on behalf of Mr. Delnevo to a personal retirement account selected by Mr. Delnevo. Both the car allowance and the personal retirement account contributions are provided for in Mr. Delnevo’s employment agreement. |
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All Other | Grant Date | |||||||||||||||||||||||||||||||||||
Estimated Possible/Future | Option Awards: | Fair Value | ||||||||||||||||||||||||||||||||||
Payouts Under Non-Equity | Number of Securities | Exercise or Base | of Stock | |||||||||||||||||||||||||||||||||
Approval | Incentive Plan Awards(1) | Underlying | Price of Option | and Option | ||||||||||||||||||||||||||||||||
Executive | Grant Date | Date(2) | Threshold | Target | Maximum | Options | Awards(3) | Awards | ||||||||||||||||||||||||||||
J. Antonini | — | — | $ | — | $ | 182,326 | — | (4) | — | — | — | |||||||||||||||||||||||||
J. C. Brewster | — | — | $ | — | $ | 137,500 | — | (4) | — | — | — | |||||||||||||||||||||||||
M. H. Clinard | — | — | $ | — | $ | 121,551 | — | (4) | — | — | — | |||||||||||||||||||||||||
T. E. Upton | — | — | $ | — | $ | 115,763 | — | (4) | — | — | — | |||||||||||||||||||||||||
R. Delnevo(5) | 07-02-07 | 06-29-07 | — | — | — | 317,940 | $ | 11.46 | $ | 1,639,346 | ||||||||||||||||||||||||||
— | — | $ | — | $ | 142,483 | (6) | — | (4) | — | — | — |
(1) | Represents the dollar value of the applicable range (threshold, target and maximum amounts) of bonuses estimated to be awarded to each named executive officer for 2007. The actual non-equity incentive plan awards paid to the named executive officers for 2007 are reflected in the “Non-Equity Incentive Plan Compensation” column of our “Summary Compensation Table.’’ | |
(2) | Represents the date our Compensation Committee formally approved the option grant. | |
(3) | Represents the date the compensation committee formally approved the option grants. | |
(4) | Under the 2007 Performance Bonus Plan, there is no formal cap on the payout amounts an executive may receive. Rather, the annual payouts for our executives are determined at the sole discretion of our Compensation Committee. As a result, the actual amounts may exceed for fall short of the targeted level. As we are unable to predict the committee’s ultimate actions regarding the awards, we are unable to estimate the maximum possible grants that could potentially be made and paid out under the plan. | |
(5) | Amounts shown for Mr. Delnevo were converted from pounds sterling to U.S. dollars at $2.0074, which represents the exchange rate in effect as of December 31, 2007. | |
(6) | The non-equity incentive plan awards information presented for Mr. Delnevo excludes amounts that may become payable under our U.K. long-term incentive bonus program (see “— Compensation Discussion and Analysis — Components of Executive Compensation — Long-Term Incentive Programs — Long-Term Incentive Bonus Program — U.K. Operations” above). Future payouts under such program, which was established to provide a long-term incentive for Mr. Delnevo and his direct reports to achieve certain cumulative |
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earnings objectives over a four-year period, are contingent upon the actual results exceeding the cumulative earnings benchmark, less an investment charge on the capital employed to achieve such results. Under the terms of the incentive plan, such payouts would not occur until 2009 and are dependent on cumulative earnings for future periods. As a result, we are unable to estimate at this time what the ultimate payout will be, if any. |
Percentage of | ||||
Executive | Total Compensation | |||
J. Antonini | 98.1 | % | ||
J.C. Brewster | 76.8 | % | ||
M. H. Clinard | 79.9 | % | ||
T. E. Upton | 79.0 | % | ||
R. Delnevo | 83.3 | % |
Option Awards | ||||||||||||||||||||
Equity Incentive | ||||||||||||||||||||
# of Securities | Plan Awards: | |||||||||||||||||||
# of Securities | Underlying | # of Securities | ||||||||||||||||||
Underlying | Unexercised | Underlying | Option | Option | ||||||||||||||||
Unexercised Options | Options | Unexercised | Exercise | Expiration | ||||||||||||||||
Name | Exercisable | Unexercisable | Unearned Options | Price | Date | |||||||||||||||
J. Antonini | — | — | — | — | — | |||||||||||||||
J. C. Brewster | 357,682 | — | — | $ | 6.54 | 03-31-2014 | ||||||||||||||
29,807 | 89,420 | (1) | — | $ | 10.55 | 03-05-2016 | ||||||||||||||
M. H. Clinard | 98,696 | — | — | $ | 0.74 | 06-03-2011 | ||||||||||||||
49,805 | — | — | $ | 1.48 | 03-02-2012 | |||||||||||||||
19,871 | 59,614 | (1) | — | $ | 10.55 | 03-05-2016 | ||||||||||||||
T. E. Upton | 157,809 | — | — | $ | 0.74 | 06-03-2011 | ||||||||||||||
29,807 | — | — | $ | 1.48 | 03-02-2012 | |||||||||||||||
19,871 | 59,614 | (1) | — | $ | 10.55 | 03-05-2016 | ||||||||||||||
R. Delnevo | 158,970 | 158,969 | (2) | — | $ | 10.55 | 05-16-2015 | |||||||||||||
— | — | 317,940 | (3) | $ | 11.46 | 06-30-2017 |
(1) | These stock options become exercisable as to 25% of the underlying option shares on each of the first four anniversaries of the grant date. 25% of the underlying option shares for the stock options granted on March 6, 2006 will become exercisable on each of March 31, 2008, March 6, 2009 and March 6, 2010. | |
(2) | These stock options become exercisable as to 25% of the underlying option shares on each of the first four anniversaries of the grant date. 25% of the underlying option shares for the stock options granted on May 17, 2005 will become exercisable on each of May 17, 2008 and May 17, 2009. | |
(3) | These options are performance-based options granted in July 2007 that become eligible for vesting upon the achievement of certain EBITDA targets by our U.K. operations for 2007, 2008, and 2009. As of December 31, 2007, it was uncertain as to whether the EBITDA targets would be met, including targets for 2007, and whether such options would become eligible for vesting. As a result, all options were considered unearned as of December 31, 2007. As the U.K. operations did not achieve the EBITDA targets for 2007, the 2007 options did not become eligible for vesting and were forfeited in the first quarter of 2008. In the event the 2008 and/or 2009 EBITDA targets are met, the awards will continue to remain subject to service-based vesting conditions. |
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Stock Awards | ||||||||
Number of Shares | Value Realized | |||||||
Executive | Acquired on Vesting | on Vesting | ||||||
J. Antonini | 158,970 | $ | 1,821,796 |
• | Cause. Messrs. Antonini, Brewster, Clinard and Upton may be terminated for cause if the executive: (1) engages in gross negligence or willful misconduct when performing his employment duties; (2) is indicted for a felony; (3) refuses to perform his employment duties; (4) materially breaches any of our policies or our code of conduct; (5) engages in conduct in which the executive knows would be materially injurious to us; or (6) materially breaches, and fails to cure, any provision of his employment agreement. Mr. Delnevo’s agreement states that he may be terminated without payment (without specifically deeming this for “cause”), if he: (1) commits an act of serious misconduct; (2) materially or persistently breaches the terms of his service agreement; (3) has a bankruptcy order made against him; (4) is charged with or is convicted of any criminal offence; (5) is disqualified from holding an office position with us or any other company under the Insolvency Act of 1986; (6) acts in a way in which our Board believes will discredit our company; or (7) resigns as one of our directors. | |
• | Change in Control. Messrs. Antonini and Brewster’s agreements state that a change in control may occur upon any of the following events after the date of an IPO: |
• | a merger or consolidation where all or substantially all of our assets are held by a third party if (1) the holders of our equity securities no longer own equity securities of the resulting entity that are entitled to 60% or more of the votes eligible to be cast in the election of directors of the resulting entity, or (2) the members of the Board immediately prior to such transaction no longer constitute at |
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least a majority of the board of directors of the resulting entity immediately after such transaction or event; |
• | our dissolution or liquidation; | |
• | the date any person or entity acquires or gains ownership or control of more than 50% of the combined voting power of the outstanding securities of, (1) if we have not engaged in a merger or consolidation, us or (2) if we have engaged in a merger or consolidation, the resulting entity; or | |
• | as a result of or in connection with a contested election of directors, the members of the Board immediately before such election cease to constitute a majority of the Board. |
• | Good Reason. Messrs. Brewster and Clinard will have the right to terminate employment upon the occurrence of either of the following good reason events: (1) we assign the executive duties which are inconsistent with his position, or we cause there to be a significant reduction or change in either the executive’s position or his job functions; or (2) a material breach of certain compensation provisions of the employment agreement. In addition to the above events, Mr. Brewster will also have the right to terminate employment upon: (1) a Change in Control; or (2) without the executive’s prior consent, a required relocation of 100 miles from our corporate headquarters in Houston, Texas. |
• | Totally Disabled. Each of the executives will be considered totally disabled if, by reason of his illness, incapacity or other disability, the executive fails to perform his duties or fulfill his obligations under his employment agreement, as certified by a competent physician, for 180 days in any 12 month period. | |
• | Without Cause Termination. A termination without cause shall mean a termination of the executive’s employment other than for death, voluntary resignation, total disability, or cause. |
Termination in | ||||||||||||||||||
Good Reason | Connection with | |||||||||||||||||
Without Cause | Termination | a Change in | Death or | |||||||||||||||
Executive | Benefits | Termination | By Executive | Control | Disability | |||||||||||||
J. Antonini | Base salary(1) | $ | 30,388 | (2) | $ | — | $ | 30,388(3 | ) | $ | — | |||||||
Total | $ | 30,822 | $ | — | $ | 30,388 | $ | — | ||||||||||
J. C. Brewster | Base salary(1)(4) | $ | 275,000 | $ | 275,000 | $ | 275,000 | $ | — | |||||||||
Post-employment health care(5) | $ | 8,672 | $ | 8,672 | $ | 8,672 | $ | — | ||||||||||
Total | $ | 283,672 | $ | 283,672 | $ | 283,672 | $ | — | ||||||||||
M. H. Clinard | Base salary(1) | $ | 20,258 | (2) | $ | 20,258 | (6) | $ | — | $ | 15,925 | (7) | ||||||
Total | $ | 20,258 | $ | 20,258 | $ | — | $ | 15,925 | ||||||||||
T. E. Upton | Base salary(1) | $ | 19,294 | (2) | $ | — | $ | — | $ | 19,294 | (8) | |||||||
Total | $ | 19,294 | $ | — | $ | — | $ | 19,294 | ||||||||||
R. Delnevo(9) | Base salary(1) | $ | 353,714 | (2) | $ | — | $ | — | $ | 109,602 | (10) | |||||||
Total | $ | 353,714 | $ | — | $ | — | $ | 106,602 |
(1) | Upon the occurrence of any of the termination events listed, or in the event of a for-cause termination or a voluntary termination (neither of which are shown in the above table), the terminated executive would receive any base salary amount that had been earned but that had not been paid at the time of termination. We have assumed for purposes of this table that all such accrued amounts have been paid to each of the executives, thus the amounts shown above do not include accrued salary. |
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(2) | In the event of a without cause termination, Messrs. Antonini, Clinard, and Upton would receive severance pay equal to the executive’s current base salary for the lesser of a period of 12 months or the number of months remaining under the executive’s employment agreement. The employment agreements of Messrs. Antonini, Brewster, Clinard, and Upton expired on January 31, 2008. As a result, only one month of salary is reflected in the above table for Messrs. Antonini, Clinard, and Upton. (See footnotes (4) and (5) below for information on the amount shown for Mr. Brewster in the event of an without cause termination.) Mr. Delnevo’s employment agreement provides for an amount not to exceed 12 months of salary, which for purposes of this table we assumed that we would pay the full 12 months to him. For each executive, such amount would be payable in bi-weekly installments with the exception of Mr. Delnevo, whose employment agreement calls for such amount to be paid within 14 days of receiving a notice of termination. | |
(3) | In the event of a termination upon a change in control, Mr. Antonini would receive severance pay equal to his current base salary for the lesser of a period of 12 months or the number of months remaining under his employment agreement (i.e., one month as of December 31, 2007). There is no specified time period following a change in control in which Mr. Antonini must notify us of his intention to terminate his employment with us. | |
(4) | Under the terms of his employment agreement, in the event of a without cause termination or a good reason termination, Mr. Brewster would receive payment in the amount of his base salary for a period of 12 months. To be eligible to receive such payments in the event of a good reason termination, Mr. Brewster must notify us within one year of the occurrence that he intends to terminate his employment with us. However, in the event he accepts another full-time employment position (defined as 20 hours per week) within one year after termination, remaining payments to be made by us would be reduced by the gross amount being earned under his new employment arrangement. | |
(5) | If Mr. Brewster, in the event of a without cause termination or a good reason termination, elected to continue benefits coverage through our group health plan under the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), we would partially subsidize Mr. Brewster’s incremental healthcare premiums. We would reimburse Mr. Brewer on a monthly basis for the difference between the amount he must pay to continue such coverage and the employee contribution amount that active senior executive employees would pay for the same or similar coverage under our group health plan. Amounts shown above represent the difference in Mr. Brewster’s current insurance premiums and current COBRA rates for a similar plan. | |
(6) | For a good reason termination, Mr. Clinard is entitled to a severance payment equal to his base salary for the lesser of 12 months or the remaining number of months in the term; assuming a termination on December 31, 2007, Mr. Clinard had one month remaining in his employment term, and thus only one month of base salary is disclosed in the table above. | |
(7) | In the event Mr. Clinard’s employment is terminated as a result of death or disability, Mr. Clinard would be entitled to receive payments equal to the difference between his base salary and any disability benefits received by him under our disability benefits plans (under which benefits are calculated as the lesser of 60% of base salary or $52,000) for the lesser of 12 months or the number of months remaining in his contract. As his contract expired on January 31, 2008, only one month of benefits is reflected in the above table. | |
(8) | Upon a termination for death or disability, Mr. Upton is entitled to receive an amount equal to his base salary for the lesser of 12 months or the number of months remaining on his employment agreement. Assuming a termination on December 31, 2007, Mr. Upton had one month remaining in his employment term, and thus only one month of base salary is disclosed in the table above. | |
(9) | Amounts shown for Mr. Delnevo were converted from pounds sterling to U.S. dollars at $2.0074, which represents the exchange rate in effect as of December 31, 2007. | |
(10) | In the event Mr. Delnevo becomes disabled, Mr. Delveno would be entitled to receive payments equal to his base salary for a maximum of 16 weeks (i.e., 80 work days). He is not entitled to a bonus for the year in which a termination for death or disability occurs. |
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Fees Earned or | ||||||||
Name | Paid in Cash | Total | ||||||
Fred R. Lummis | — | — | ||||||
Jack Antonini | — | — | ||||||
Robert P. Barone | $ | 5,000 | $ | 5,000 | ||||
Frederick W. Brazelton | — | — | ||||||
Ralph H. Clinard | — | — | ||||||
Ronald Coben | — | — | ||||||
Ronald Delnevo | — | — | ||||||
Jorge M. Diaz | $ | 3,000 | $ | 3,000 | ||||
Roger B. Kafker | — | — | ||||||
Michael A.R. Wilson | — | — |
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• | each person known by us to beneficially own more than 5% of our common stock; | |
• | each of our Directors; | |
• | each of our Named Executive Officers (as such term is defined by the SEC); and | |
• | all Directors and Named Executive Officers as a group. |
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Percent of | ||||||||
Amount and Nature of | Common Stock | |||||||
Name and Address of Beneficial Owner(1)(2) | Beneficial Ownership | Beneficially Owned | ||||||
5% Stockholders: | ||||||||
TA Associates, Inc.(3) | 12,259,286 | 29.4 | % | |||||
TA IX, L.P.(4) | 7,583,447 | 18.2 | % | |||||
TA/Atlantic and Pacific V L.P.(5) | 3,033,370 | 7.3 | % | |||||
TA/Atlantic and Pacific IV L.P.(6) | 1,307,663 | 3.1 | % | |||||
TA Strategic Partners Fund A L.P.(7) | 155,268 | * | ||||||
TA Investors II, L.P.(8) | 151,663 | * | ||||||
TA Strategic Partners Fund B L.P.(9) | 27,875 | * | ||||||
The CapStreet Group, LLC(10) | 9,041,074 | 21.6 | % | |||||
CapStreet II, L.P.(11) | 8,091,222 | 19.4 | % | |||||
CapStreet Parallel II, L.P.(12) | 949,852 | 2.3 | % | |||||
Ralph H. Clinard(13) | 2,798,990 | 6.7 | % | |||||
Laura Clinard(14) | 2,798,986 | 6.7 | % | |||||
Columbia Wanger Asset Management, L.P.(15) | 2,544,000 | 6.1 | % | |||||
Directors and Named Executive Officers: | ||||||||
Michael A.R. Wilson(16) | 12,259,286 | 29.4 | % | |||||
Fred R. Lummis(17) | 9,041,074 | 21.6 | % | |||||
Michael H. Clinard(18) | 1,290,341 | 3.0 | % | |||||
J. Chris Brewster(19) | 417,296 | 1.0 | % | |||||
Ronald Delnevo(20) | 343,446 | * | ||||||
Thomas E. Upton(21) | 320,627 | * | ||||||
Jack Antonini | 316,969 | * | ||||||
Robert P. Barone(22) | 34,306 | * | ||||||
Jorge M. Diaz(23) | 29,807 | * | ||||||
Dennis F. Lynch(24) | 5,000 | * | ||||||
Tim Arnoult | — | — | ||||||
Rick Updyke | — | — | ||||||
All Directors and Named Executive Officers as a group (12 persons) | 24,058,152 | 57.6 | % |
* | Less than 1.0% of the outstanding common stock | |
(1) | “Beneficial ownership” is a term broadly defined by the SEC inRule 13d-3 under the Exchange Act and includes more than the typical forms of stock ownership, that is, stock held in the person’s name. The term also includes what is referred to as “indirect ownership”, meaning ownership of shares as to which a person has or shares investment or voting power. For the purpose of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of April 30, 2008, if that person or group has the right to acquire shares within 60 days after such date. | |
(2) | The address for each Named Executive Officer and director set forth in the table, unless otherwise indicated, isc/o Cardtronics, Inc., 3110 Hayes Road, Suite 300, Houston, Texas 77082. The address of The CapStreet Group, LLC, CapStreet II, L.P., CapStreet Parallel II, L.P., and Mr. Lummis isc/o The CapStreet Group, LLC, 600 Travis Street, Suite 6110, Houston, Texas 77002. The address of TA Associates, Inc., TA IX, L.P., TA/Atlantic and Pacific V L.P., TA/Atlantic and Pacific IV L.P., TA Strategic Partners Fund A L.P., TA Investors II, L.P., TA Strategic Partners Fund B L.P., and Mr. Wilson isc/o TA Associates, John Hancock Tower, 56th Floor, 200 Clarendon Street, Boston, Massachusetts 02116. |
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(3) | The shares owned by TA Associates, Inc. through its affiliated funds, including TA IX L.P., TA/Atlantic and Pacific IV L.P., TA/Atlantic and Pacific V L.P., TA Strategic Partners Fund A L.P., TA Strategic Partners Fund B L.P., and TA Investors II, L.P., which we collectively refer to as the TA Funds, represent common shares issued upon the conversion of Series B Convertible Preferred Stock into shares of our common stock. See “Certain Relationships and related person transactions.” | |
(4) | As reported on Schedule 13G dated as of December 31, 2007, and filed with the SEC on February 14, 2008, TA Associates, Inc. is the general partner of TA IX, L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of 7,583,447 shares. | |
(5) | As reported on Schedule 13G dated as of December 31, 2007, and filed with the SEC on February 14, 2008, TA Associates, Inc. is the general partner of TA Atlantic and Pacific V L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of 3,033,370 shares. | |
(6) | As reported on Schedule 13G dated as of December 31, 2007, and filed with the SEC on February 14, 2008, TA Associates, Inc. is the general partner of TA/Atlantic and Pacific IV L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of 1,307,663 shares. | |
(7) | As reported on Schedule 13G dated as of December 31, 2007, and filed with the SEC on February 14, 2008, TA Associates, Inc. is the general partner of TA Strategic Partners Fund A L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of 155,268 shares. | |
(8) | As reported on Schedule 13G dated as of December 31, 2007, and filed with the SEC on February 14, 2008, TA Associates, Inc. is the general partner of TA Investors II, L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of 151,663 shares. | |
(9) | As reported on Schedule 13G dated as of December 31, 2007, and filed with the SEC on February 14, 2008, TA Associates, Inc. is the general partner of TA Strategic Partners Fund B L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of 27,875 shares. | |
(10) | The shares owned by The CapStreet Group, LLC are owned through its affiliated funds, CapStreet II, L.P. and CapStreet Parallel II, L.P. | |
(11) | As reported on Schedule 13G dated as of December 31, 2007, and filed with the SEC on February 13, 2008, The CapStreet Group, LLC is the general partner of CapStreet GP II, L.P., which is the general partner of CapStreet II, L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of 8,091,222 shares. | |
(12) | As reported on Schedule 13G dated as of December 31, 2007, and filed with the SEC on February 13, 2008, The CapStreet Group, LLC is the general partner of CapStreet Parellel II, L.P., and each may be considered a beneficial owner, with sole voting and dispositive power of 949,852 shares. | |
(13) | The shares indicated as being beneficially owned by Ralph H. Clinard include 1,209,290 shares owned directly by him, 541,168 shares owned by four family trusts for the benefit of his children of which Mr. Clinard is a co-trustee and has shared voting power, and 1,048,532 shares owned by Mr. Clinard’s wife (Laura Clinard) of which Mr. Clinard may be deemed to be the beneficial owner. | |
(14) | The shares indicated as being beneficially owned by Laura Clinard include 1,048,532 shares owned directly by her, 541,164 shares owned by the Ralph Clinard Family Trust of which Mrs. Clinard is a co-trustee and has shared voting power, and 1,209,290 shares owned by Mrs. Clinard’s husband (Ralph H. Clinard) of which Mrs. Clinard may be deemed to be the beneficial owner. | |
(15) | As reported on Schedule 13G dated as of December 31, 2007, and filed with the SEC on January 22, 2008, Columbia Wanger Asset Management, L.P. is considered a beneficial owner, with sole voting and dispositive power of 2,544,000 shares. The shares reported therein include the shares held by Columbia Acorn Trust, a Massachusetts business trust that is advised by Columbia Wanger Asset Management, L.P. Columbia Acorn Trust holds 5.99% of our shares. | |
(16) | The shares indicated as being beneficially owned by Michael A.R. Wilson are owned directly by the TA Funds. Mr. Wilson serves as a Managing Director of TA Associates, Inc., the ultimate general partner of the TA Funds. As such, Mr. Wilson may be deemed to have a beneficial ownership of the shares owned by the TA Funds. Mr. Wilson disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein and 22,310 shares of our common stock. | |
(17) | The shares indicated as being beneficially owned by Fred R. Lummis are owned directly by CapStreet II, L.P. and CapStreet Parallel II, L.P. Mr. Lummis serves as a senior advisor of The CapStreet Group, LLC, the ultimate general partner of both CapStreet II, L.P. and CapStreet Parallel II, L.P. As such, Mr. Lummis may be deemed to have a beneficial ownership of the shares owned by CapStreet II, L.P. and CapStreet Parallel II, L.P. Mr. Lummis disclaims beneficial ownership of such shares. | |
(18) | Includes 425,641 shares owned directly by Michael H. Clinard and 188,244 options that are exercisable within 60 days of April 30, 2008. Also included in the shares indicated as being beneficially owned by Mr. Clinard are 541,164 shares owned by the Ralph Clinard Family Trust and 135,292 shares owned by a trust for the benefit of Mr. Clinard, of which Mr. Clinard is a co-trustee of and has shared voting power of and of which he may be deemed to be the beneficial owner. | |
(19) | Includes 417,296 options that are exercisable within 60 days of April 30, 2008. | |
(20) | Includes 238,454 options that are exercisable within 60 days of April 30, 2008. | |
(21) | Includes 227,359 options that are exercisable within 60 days of April 30, 2008. | |
(22) | Includes 34,306 options that are exercisable within 60 days of April 30, 2008. | |
(23) | Includes 29,807 options that are exercisable within 60 days of April 30, 2008. |
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• | general unsecured obligations of the Company; | |
• | subordinated in right of payment to all existing and future Senior Debt of the Company, including the Indebtedness of the Company under the Credit Agreement; | |
• | pari passuin right of payment with all existing and any future senior subordinated Indebtedness of the Company, including the $200.0 million aggregate principal amount of 9.250% senior subordinated notes due 2013 issued under the indenture dated as of August 12, 2005 (the “Series A Notes”); | |
• | senior in right of payment to any future subordinated Indebtedness of the Company | |
• | guaranteed by the Guarantors as described under “— Note Guarantees”; and | |
• | effectively subordinated to all existing and any future Indebtedness and other liabilities of the Company’s Subsidiaries that are not Guarantors. |
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• | is a general unsecured obligation of that Guarantor; |
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• | is subordinated in right of payment to all existing and future Senior Debt of that Guarantor, including the Guarantee by that Guarantor of Indebtedness under the Credit Agreement; | |
• | is pari passu in right of payment with all existing and any future senior subordinated Indebtedness of that Guarantor, including the Guarantee by that Guarantor of the Series A notes; and | |
• | is senior in right of payment to any future subordinated Indebtedness of that Guarantor. |
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Year | Percentage | |||
2009 | 104.625 | % | ||
2010 | 102.313 | % | ||
2011 and thereafter | 100.000 | % |
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• | you acquire the new notes in the ordinary course of your business; and | |
• | you are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of such new notes. |
• | our “affiliate” within the meaning of Rule 405 under the Securities Act; or | |
• | a broker-dealer that acquired outstanding notes directly from us. |
• | in negotiated transactions; | |
• | through the writing of options on the new notes or a combination of such methods of resale; | |
• | at market prices prevailing at the time of resale; and | |
• | at prices related to such prevailing market prices or negotiated prices. |
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CARDTRONICS, INC. AND SUBSIDIARIES | ||||
Unaudited Interim Consolidated Financial Statements: | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
Annual Financial Statements: | ||||
F-30 | ||||
F-31 | ||||
F-32 | ||||
F-33 | ||||
F-34 | ||||
F-35 | ||||
F-36 | ||||
7-ELEVEN FINANCIAL SERVICES BUSINESS | ||||
Unaudited Interim Financial Statements: | ||||
F-87 | ||||
F-88 | ||||
F-89 | ||||
F-90 | ||||
Annual Financial Statements: | ||||
F-93 | ||||
F-94 | ||||
F-95 | ||||
F-96 | ||||
F-97 | ||||
F-98 |
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March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 8,908 | $ | 13,439 | ||||
Accounts and notes receivable, net of allowance of $474 and $560 as of March 31, 2008 and December 31, 2007, respectively | 26,324 | 23,248 | ||||||
Inventory | 3,633 | 2,355 | ||||||
Restricted cash, short-term | 8,419 | 5,900 | ||||||
Deferred tax asset, net | 214 | 216 | ||||||
Prepaid expenses, deferred costs, and other current assets | 14,558 | 11,627 | ||||||
Total current assets | 62,056 | 56,785 | ||||||
Restricted cash | 321 | 317 | ||||||
Property and equipment, net | 174,225 | 163,912 | ||||||
Intangible assets, net | 126,227 | 130,901 | ||||||
Goodwill | 234,355 | 235,185 | ||||||
Prepaid expenses and other assets | 4,336 | 4,185 | ||||||
Total assets | $ | 601,520 | $ | 591,285 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 980 | $ | 882 | ||||
Current portion of capital lease obligations | 922 | 1,147 | ||||||
Current portion of other long-term liabilities | 23,173 | 16,201 | ||||||
Accounts payable | 37,044 | 34,385 | ||||||
Accrued liabilities | 49,981 | 70,524 | ||||||
Total current liabilities | 112,100 | 123,139 | ||||||
Long-term liabilities: | ||||||||
Long-term debt, net of current portion and related discounts | 343,190 | 307,733 | ||||||
Capital lease obligations, net of current portion | 785 | 982 | ||||||
Deferred tax liability, net | 11,884 | 11,480 | ||||||
Asset retirement obligations | 18,374 | 17,448 | ||||||
Other long-term liabilities | 27,413 | 23,392 | ||||||
Total liabilities | 513,746 | 484,174 | ||||||
Stockholders’ equity: | ||||||||
Common stock, $0.0001 par value; 125,000,000 shares authorized; 43,659,816 and 43,571,956 shares issued as of March 31, 2008 and December 31, 2007, respectively; 38,654,067 and 38,566,207 shares outstanding as of March 31, 2008 and December 31, 2007, respectively | 4 | 4 | ||||||
Subscriptions receivable (at face value) | (218 | ) | (229 | ) | ||||
Additional paid-in capital | 190,625 | 190,508 | ||||||
Accumulated other comprehensive loss, net | (19,391 | ) | (4,518 | ) | ||||
Accumulated deficit | (35,025 | ) | (30,433 | ) | ||||
Treasury stock; 5,005,749 shares at cost as of March 31, 2008 and December 31, 2007 | (48,221 | ) | (48,221 | ) | ||||
Total stockholders’ equity | 87,774 | 107,111 | ||||||
Total liabilities and stockholders’ equity | $ | 601,520 | $ | 591,285 | ||||
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CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
(unaudited) | ||||||||
Revenues: | ||||||||
ATM operating revenues | $ | 115,062 | $ | 71,656 | ||||
Vcom operating revenues | 1,235 | — | ||||||
ATM product sales and other revenues | 4,278 | 2,862 | ||||||
Total revenues | 120,575 | 74,518 | ||||||
Cost of revenues: | ||||||||
Cost of ATM operating revenues (includes stock-based compensation of $65 in 2008 and $16 in 2007. Excludes depreciation, accretion, and amortization shown separately below. SeeNote 1) | 86,832 | 54,736 | ||||||
Cost of Vcom operating revenues | 2,269 | — | ||||||
Cost of ATM product sales and other revenues | 4,164 | 2,797 | ||||||
Total cost of revenues | 93,265 | 57,533 | ||||||
Gross profit | 27,310 | 16,985 | ||||||
Operating expenses: | ||||||||
Selling, general, and administrative expenses (includes stock-based compensation of $201 in 2008 and $206 in 2007) | 8,551 | 6,444 | ||||||
Depreciation and accretion expense | 9,082 | 6,398 | ||||||
Amortization expense | 4,503 | 2,486 | ||||||
Total operating expenses | 22,136 | 15,328 | ||||||
Income from operations | 5,174 | 1,657 | ||||||
Other expense (income): | ||||||||
Interest expense, net | 7,632 | 5,892 | ||||||
Amortization of deferred financing costs and bond discounts | 508 | 356 | ||||||
Minority interest in subsidiary | — | (112 | ) | |||||
Other | 1,061 | (119 | ) | |||||
Total other expense | 9,201 | 6,017 | ||||||
Loss before income taxes | (4,027 | ) | (4,360 | ) | ||||
Income tax expense (benefit) | 565 | (973 | ) | |||||
Net loss | (4,592 | ) | (3,387 | ) | ||||
Preferred stock accretion expense | — | 67 | ||||||
Net loss available to common stockholders | $ | (4,592 | ) | $ | (3,454 | ) | ||
Net loss per common share — basic and diluted | $ | (0.12 | ) | $ | (0.25 | ) | ||
Weighted average shares outstanding — basic and diluted | 38,589,878 | 13,965,875 | ||||||
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Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
(unaudited) | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (4,592 | ) | $ | (3,387 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation, accretion, and amortization expense | 13,585 | 8,884 | ||||||
Amortization of deferred financing costs and bond discounts | 508 | 356 | ||||||
Stock-based compensation expense | 266 | 222 | ||||||
Deferred income taxes | 430 | (1,026 | ) | |||||
Gain on sale of Winn-Dixie equity securities | — | (569 | ) | |||||
Minority interest | — | (112 | ) | |||||
Loss on disposal of assets | 1,150 | 492 | ||||||
Other reserves and non-cash items | (1,975 | ) | 443 | |||||
Changes in assets and liabilities, net of acquisitions: | ||||||||
(Increase) decrease in accounts and notes receivable, net | (2,964 | ) | 2,051 | |||||
Increase in prepaid, deferred costs, and other current assets | (2,595 | ) | (499 | ) | ||||
Increase in inventory | (932 | ) | (359 | ) | ||||
(Increase) decrease in other assets | 217 | (53 | ) | |||||
Decrease in accounts payable and accrued liabilities | (12,006 | ) | (3,130 | ) | ||||
Decrease in other liabilities | (1,417 | ) | (671 | ) | ||||
Net cash provided by (used in) operating activities | (10,325 | ) | 2,642 | |||||
Cash flows from investing activities: | ||||||||
Additions to property and equipment | (25,799 | ) | (13,332 | ) | ||||
Proceeds from sale of property and equipment | — | 3 | ||||||
Payments for exclusive license agreements and site acquisition costs | (298 | ) | (567 | ) | ||||
Additions to equipment to be leased to customers | — | (203 | ) | |||||
Principal payments received under direct financing leases | 13 | 4 | ||||||
Proceeds from sale of Winn-Dixie equity securities | — | 3,950 | ||||||
Acquisition, net of cash acquired | — | 876 | ||||||
Net cash used in investing activities | (26,084 | ) | (9,269 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of long-term debt | 49,836 | 20,897 | ||||||
Repayments of long-term debt and capital leases | (14,995 | ) | (12,017 | ) | ||||
Repayments of borrowings under bank overdraft facility, net | (1,866 | ) | (3,222 | ) | ||||
Payments received on subscriptions receivable | 11 | — | ||||||
Proceeds from exercises of stock options | 123 | 46 | ||||||
Equity offering costs | (1,250 | ) | — | |||||
Debt issuance and modification costs | (4 | ) | — | |||||
Net cash provided by financing activities | 31,855 | 5,704 | ||||||
Effect of exchange rate changes on cash | 23 | (13 | ) | |||||
Net decrease in cash and cash equivalents | (4,531 | ) | (936 | ) | ||||
Cash and cash equivalents at beginning of period | 13,439 | 2,718 | ||||||
Cash and cash equivalents at end of period | $ | 8,908 | $ | 1,782 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest, including interest on capital leases | $ | 15,116 | $ | 10,646 | ||||
Cash paid for income taxes | $ | — | $ | 27 | ||||
Fixed assets financed with direct debt | $ | — | $ | 1,101 |
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2008 | 2007 | |||||||
(in thousands) | ||||||||
Depreciation and accretion expenses related to ATMs and ATM-related assets | $ | 7,962 | $ | 6,021 | ||||
Amortization expense | 4,503 | 2,486 | ||||||
Total depreciation, accretion, and amortization expenses excluded from cost of ATM operating revenues and gross profit | $ | 12,465 | $ | 8,507 | ||||
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Cash | $ | 1,427 | ||
Trade accounts receivable, net | 3,767 | |||
Surcharge and interchange receivable | 3,769 | |||
Inventory | 1,953 | |||
Other current assets | 2,344 | |||
Property and equipment | 18,315 | |||
Software | 4,273 | |||
Intangible assets subject to amortization | 78,000 | |||
Goodwill | 62,191 | |||
Total assets acquired | 176,039 | |||
Accounts payable | (688 | ) | ||
Accrued liabilities and deferred income | (9,749 | ) | ||
Current portion of capital lease obligations | (1,326 | ) | ||
Current portion of other long-term liabilities | (7,777 | ) | ||
Non-current portion of capital lease obligations | (1,378 | ) | ||
Other long-term liabilities | (17,809 | ) | ||
Total liabilities assumed | (38,727 | ) | ||
Net assets acquired | $ | 137,312 | ||
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Revenues | $ | 116,039 | ||
Income from operations | 6,820 | |||
Net loss available to common shareholders | (2,368 | ) | ||
Net loss per share — basic and diluted | $ | (0.17 | ) |
2008 | 2007 | |||||||
(in thousands) | ||||||||
Cost of ATM operating revenues | $ | 65 | $ | 16 | ||||
Selling, general, and administrative expenses | 201 | 206 | ||||||
Total stock-based compensation expense | $ | 266 | $ | 222 | ||||
Weighted | ||||||||
Number | Average | |||||||
of Shares | Exercise Price | |||||||
Options outstanding as of January 1, 2008 | 4,960,041 | $ | 7.78 | |||||
Exercised | (87,860 | ) | $ | 1.40 | ||||
Forfeited | (130,156 | ) | $ | 11.22 | ||||
Options outstanding as of March 31, 2008 | 4,742,025 | $ | 7.80 | |||||
Options vested and exercisable as of March 31, 2008 | 2,925,802 | $ | 5.60 |
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2008 | 2007 | |||||||
Stock options | 1,229,145 | 1,624,519 | ||||||
Restricted shares | — | 19,789 | ||||||
Preferred stock | — | 7,390,413 | ||||||
Total potentially dilutive securities | 1,229,145 | 9,034,721 | ||||||
2008 | 2007 | |||||||
(in thousands) | ||||||||
Net loss | $ | (4,592 | ) | $ | (3,387 | ) | ||
Unrealized losses on interest rate hedges | (13,465 | ) | (1,172 | ) | ||||
Foreign currency translation adjustments | (1,408 | ) | (160 | ) | ||||
Reclassifications of unrealized gains onavailable-for-sale securities, net of taxes | — | (498 | ) | |||||
Total comprehensive loss | $ | (19,465 | ) | $ | (5,217 | ) | ||
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(in thousands) | ||||||||
Unrealized losses on interest rate hedges | $ | (27,109 | ) | $ | (13,644 | ) | ||
Foreign currency translation adjustments | 7,718 | 9,126 | ||||||
Total accumulated other comprehensive loss | $ | (19,391 | ) | $ | (4,518 | ) | ||
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Goodwill | Trade Name | |||||||||||||||||||||||
U.S. | U.K. | Mexico | U.S. | U.K. | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Balance as of December 31, 2007 | $ | 150,445 | $ | 84,050 | $ | 690 | $ | 200 | $ | 4,015 | $ | 239,400 | ||||||||||||
Purchase price adjustments | 6 | — | — | — | — | 6 | ||||||||||||||||||
Foreign currency translation adjustments | — | (833 | ) | (3 | ) | — | (41 | ) | (877 | ) | ||||||||||||||
Balance as of March 31, 2008 | $ | 150,451 | $ | 83,217 | $ | 687 | $ | 200 | $ | 3,974 | $ | 238,529 | ||||||||||||
Gross Carrying | Accumulated | Net Carrying | ||||||||||
Amount | Amortization | Amount | ||||||||||
(in thousands) | ||||||||||||
Customer and branding contracts/relationships | $ | 163,095 | $ | (53,848 | ) | $ | 109,247 | |||||
Deferred financing costs | 13,926 | (4,636 | ) | 9,290 | ||||||||
Exclusive license agreements | 5,420 | (1,950 | ) | 3,470 | ||||||||
Non-compete agreements | 101 | (55 | ) | 46 | ||||||||
Total | $ | 182,542 | $ | (60,489 | ) | $ | 122,053 | |||||
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Customer and Branding | Deferred | Exclusive License | Non-compete | |||||||||||||||||
Contracts/Relationships | Financing Costs | Agreements | Agreements | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
2008 | $ | 12,907 | $ | 1,154 | $ | 558 | $ | 19 | $ | 14,638 | ||||||||||
2009 | 16,785 | 1,639 | 741 | 25 | 19,190 | |||||||||||||||
2010 | 15,257 | 1,764 | 644 | 2 | 17,667 | |||||||||||||||
2011 | 13,585 | 1,903 | 531 | — | 16,019 | |||||||||||||||
2012 | 12,744 | 1,767 | 463 | — | 14,974 | |||||||||||||||
2013 | 10,723 | 1,063 | 335 | — | 12,121 | |||||||||||||||
Thereafter | 27,246 | — | 198 | — | 27,444 | |||||||||||||||
Total | $ | 109,247 | $ | 9,290 | $ | 3,470 | $ | 46 | $ | 122,053 | ||||||||||
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(in thousands) | ||||||||
Accrued merchant fees | $ | 11,917 | $ | 11,486 | ||||
Accrued merchant settlement | 7,294 | 4,254 | ||||||
Accrued interest | 3,827 | 11,257 | ||||||
Accrued armored fees | 3,779 | 5,879 | ||||||
Accrued cash management fees | 3,480 | 5,574 | ||||||
Accrued maintenance fees | 2,794 | 6,970 | ||||||
Accrued purchases | 2,016 | 6,098 | ||||||
Accrued ATM telecommunications costs | 1,727 | 1,424 | ||||||
Accrued compensation | 1,569 | 3,832 | ||||||
Accrued processing costs | 1,119 | 1,477 | ||||||
Accrued property and sales taxes | 1,038 | 446 | ||||||
Accrued interest rate swap payments | 892 | 147 | ||||||
Other accrued expenses | 8,529 | 11,680 | ||||||
Total | $ | 49,981 | $ | 70,524 | ||||
F-12
Table of Contents
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(in thousands) | ||||||||
Revolving credit facility | $ | 39,500 | $ | 4,000 | ||||
Senior subordinated notes due August 2013 (net of unamortized discounts of $3.8 million as of March 31, 2008 and $3.9 million as of December 31, 2007) | 296,220 | 296,088 | ||||||
Other | 8,450 | 8,527 | ||||||
Total | 344,170 | 308,615 | ||||||
Less current portion | 980 | 882 | ||||||
Total excluding current portion | $ | 343,190 | $ | 307,733 | ||||
F-13
Table of Contents
F-14
Table of Contents
Asset retirement obligation as of January 1, 2008 | $ | 17,448 | ||
Additional obligations | 1,778 | |||
Accretion expense | 395 | |||
Payments | (946 | ) | ||
Change in estimates | (265 | ) | ||
Foreign currency translation adjustments | (36 | ) | ||
Asset retirement obligation as of March 31, 2008 | $ | 18,374 | ||
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
(in thousands) | ||||||||
Interest rate swaps | $ | 15,522 | $ | 9,155 | ||||
Obligations associated with acquired unfavorable contracts | 5,681 | 7,626 | ||||||
Deferred revenue | 3,156 | 3,380 | ||||||
Other long-term liabilities | 3,054 | 3,231 | ||||||
Total | $ | 27,413 | $ | 23,392 | ||||
F-15
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F-16
Table of Contents
Notional Amount | Weighted Average Fixed Rate | Period | ||
(in thousands) | ||||
$550,000 | 4.61% | April 1, 2008 — December 31, 2008 | ||
$550,000 | 4.30% | January 1, 2009 — December 31, 2009 | ||
$550,000 | 4.11% | January 1, 2010 — December 31, 2010 | ||
$400,000 | 3.72% | January 1, 2011 — December 31, 2011 | ||
$200,000 | 3.96% | January 1, 2012 — December 31, 2012 |
F-17
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2008 | 2007 | |||||||
(in thousands) | ||||||||
Income tax expense (benefit) | $ | 565 | $ | (973 | ) | |||
Effective tax rate | (14.0 | )% | 22.3 | % |
(14) | Segment Information |
F-18
Table of Contents
2008 | 2007 | |||||||
(in thousands) | ||||||||
EBITDA | $ | 17,698 | $ | 10,772 | ||||
Depreciation and accretion expense | 9,082 | 6,398 | ||||||
Amortization expense | 4,503 | 2,486 | ||||||
Interest expense, net, including amortization of deferred financing costs and bond discounts | 8,140 | 6,248 | ||||||
Income tax expense (benefit) | 565 | (973 | ) | |||||
Net loss | $ | (4,592 | ) | $ | (3,387 | ) | ||
For the Three Months Ended March 31, 2008 | ||||||||||||||||||||||||
United | Advanced | |||||||||||||||||||||||
United States | Kingdom | Mexico | Functionality | Eliminations | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue from external customers | $ | 99,118 | $ | 17,640 | $ | 2,582 | $ | 1,235 | $ | — | $ | 120,575 | ||||||||||||
Intersegment revenues | 195 | — | — | — | (195 | ) | — | |||||||||||||||||
Cost of revenues | 74,417 | 14,392 | 2,187 | 2,464 | (195 | ) | 93,265 | |||||||||||||||||
Selling, general, and administrative expenses | 7,236 | 928 | 298 | 89 | — | 8,551 | ||||||||||||||||||
EBITDA | $ | 16,945 | $ | 1,944 | $ | 127 | $ | (1,318 | ) | $ | — | $ | 17,698 | |||||||||||
Depreciation and accretion expense | $ | 6,113 | $ | 2,682 | $ | 309 | $ | — | $ | (22 | ) | $ | 9,082 | |||||||||||
Amortization expense | 3,953 | 538 | 12 | — | — | 4,503 | ||||||||||||||||||
Interest expense, net | 6,503 | 1,456 | 181 | — | — | 8,140 | ||||||||||||||||||
Capital expenditures, excluding acquisitions(1)(2) | $ | 15,642 | $ | 10,187 | $ | 67 | $ | 201 | $ | — | $ | 26,097 |
F-19
Table of Contents
For the Three Months Ended March 31, 2007 | ||||||||||||||||||||||||
United | Advanced | |||||||||||||||||||||||
United States | Kingdom | Mexico | Functionality | Eliminations | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue from external customers | $ | 60,955 | $ | 12,960 | $ | 603 | $ | — | $ | — | $ | 74,518 | ||||||||||||
Intersegment revenue | 93 | — | — | — | (93 | ) | — | |||||||||||||||||
Cost of revenues | 47,984 | 9,070 | 540 | — | (61 | ) | 57,533 | |||||||||||||||||
Selling, general, and administrative expenses | 5,147 | 987 | 310 | — | — | 6,444 | ||||||||||||||||||
EBITDA | $ | 8,236 | $ | 2,827 | $ | (259 | ) | $ | — | $ | (32 | ) | $ | 10,772 | ||||||||||
Depreciation and accretion expense | $ | 5,042 | $ | 1,358 | $ | 25 | $ | — | $ | (27 | ) | $ | 6,398 | |||||||||||
Amortization expense | 2,067 | 407 | 12 | — | — | 2,486 | ||||||||||||||||||
Interest expense, net | 5,233 | 991 | 24 | — | — | 6,248 | ||||||||||||||||||
Capital expenditures, excluding acquisitions(1)(2) | $ | 8,191 | $ | 5,674 | $ | 34 | $ | — | $ | — | $ | 13,899 | ||||||||||||
Additions to equipment to be leased to customers | — | — | 203 | — | — | 203 |
(1) | Capital expenditure amounts include payments made for exclusive license agreements and site acquisition costs. | |
(2) | Capital expenditure amounts for Mexico are reflected gross of any minority interest amounts. |
March 31, 2008 | December 31, 2007 | |||||||
(in thousands) | ||||||||
United States | $ | 412,327 | $ | 409,120 | ||||
United Kingdom | 167,250 | 163,464 | ||||||
Mexico | 13,915 | 12,337 | ||||||
Advanced Functionality | 8,028 | 6,364 | ||||||
Total | $ | 601,520 | $ | 591,285 | ||||
(15) | New Accounting Pronouncements |
1. | Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value; | |
2. | Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date; |
F-20
Table of Contents
3. | Eliminates large position discounts for financial instruments quoted in active markets and requires consideration of the Company’s creditworthiness when valuing liabilities; and | |
4. | Expands disclosures about instruments measured at fair value. |
Fair Value Measurements | ||||||||||||||||
Total Carrying | ||||||||||||||||
Value as of | ||||||||||||||||
March 31, 2008 | Level 1 | Level 2 | Level 3 | |||||||||||||
Interest rate swaps | $ | 27,109 | $ | — | $ | 27,109 | $ | — |
F-21
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F-22
Table of Contents
(16) | Supplemental Guarantor Financial Information |
Three Months Ended March 31, 2008 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | — | $ | 100,353 | $ | 20,222 | $ | — | $ | 120,575 | ||||||||||
Operating costs and expenses | 17 | 94,060 | 21,346 | (22 | ) | 115,401 | ||||||||||||||
Operating income (loss) | (17 | ) | 6,293 | (1,124 | ) | 22 | 5,174 | |||||||||||||
Interest expense, net, including amortization of deferred financing costs and bond discounts | 49 | 6,454 | 1,637 | — | 8,140 | |||||||||||||||
Equity in (earnings) losses of subsidiaries | 3,422 | — | — | (3,422 | ) | — | ||||||||||||||
Other (income) expense, net | (56 | ) | 771 | 346 | — | 1,061 | ||||||||||||||
(Loss) income before income taxes | (3,432 | ) | (932 | ) | (3,107 | ) | 3,444 | (4,027 | ) | |||||||||||
Income tax expense (benefit) | 1,182 | 136 | (753 | ) | — | 565 | ||||||||||||||
Net (loss) income available to common stockholders | $ | (4,614 | ) | $ | (1,068 | ) | $ | (2,354 | ) | $ | 3,444 | $ | (4,592 | ) | ||||||
F-23
Table of Contents
Three Months Ended March 31, 2007 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | — | $ | 61,048 | $ | 13,563 | $ | (93 | ) | $ | 74,518 | |||||||||
Operating costs and expenses | 307 | 59,933 | 12,709 | (88 | ) | 72,861 | ||||||||||||||
Operating income (loss) | (307 | ) | 1,115 | 854 | (5 | ) | 1,657 | |||||||||||||
Interest expense, net, including amortization of deferred financing costs and bond discounts | 2,201 | 3,032 | 1,015 | — | 6,248 | |||||||||||||||
Equity in (earnings) losses of subsidiaries | 2,034 | — | — | (2,034 | ) | — | ||||||||||||||
Other (income) expense, net | (112 | ) | (207 | ) | 88 | — | (231 | ) | ||||||||||||
(Loss) income before income taxes | (4,430 | ) | (1,710 | ) | (249 | ) | 2,029 | (4,360 | ) | |||||||||||
Income tax expense (benefit) | (1,048 | ) | 53 | 22 | — | (973 | ) | |||||||||||||
Net (loss) income | (3,382 | ) | (1,763 | ) | (271 | ) | 2,029 | (3,387 | ) | |||||||||||
Preferred stock accretion expense | 67 | — | — | — | 67 | |||||||||||||||
Net (loss) income available to common stockholders | $ | (3,449 | ) | $ | (1,763 | ) | $ | (271 | ) | $ | 2,029 | $ | (3,454 | ) | ||||||
F-24
Table of Contents
As of March 31, 2008 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 166 | $ | 6,877 | $ | 1,865 | $ | — | $ | 8,908 | ||||||||||
Receivables, net | (204 | ) | 23,018 | 3,691 | (181 | ) | 26,324 | |||||||||||||
Other current assets | 1,442 | 15,161 | 11,258 | (1,037 | ) | 26,824 | ||||||||||||||
Total current assets | 1,404 | 45,056 | 16,814 | (1,218 | ) | 62,056 | ||||||||||||||
Property and equipment, net | — | 104,947 | 69,468 | (190 | ) | 174,225 | ||||||||||||||
Intangible assets, net | 8,498 | 102,858 | 14,871 | — | 126,227 | |||||||||||||||
Goodwill | — | 150,451 | 83,904 | — | 234,355 | |||||||||||||||
Investments in and advances to subsidiaries | 32,877 | — | — | (32,877 | ) | — | ||||||||||||||
Intercompany receivable | (2,098 | ) | 7,540 | (5,442 | ) | — | — | |||||||||||||
Prepaid expenses and other assets | 395,531 | 3,107 | 1,550 | (395,531 | ) | 4,657 | ||||||||||||||
Total assets | $ | 436,212 | $ | 413,959 | $ | 181,165 | $ | (429,816 | ) | $ | 601,520 | |||||||||
Liabilities and Stockholders’ Equity: | ||||||||||||||||||||
Current portion of long-term debt | $ | — | $ | — | $ | 980 | $ | — | $ | 980 | ||||||||||
Current portion of capital lease obligations | — | 922 | — | — | 922 | |||||||||||||||
Current portion of other long-term liabilities | — | 23,004 | 169 | — | 23,173 | |||||||||||||||
Accounts payable and accrued liabilities | 4,149 | 59,581 | 24,507 | (1,212 | ) | 87,025 | ||||||||||||||
Total current liabilities | 4,149 | 83,507 | 25,656 | (1,212 | ) | 112,100 | ||||||||||||||
Long-term debt, net of current portion | 335,720 | 282,708 | 120,293 | (395,531 | ) | 343,190 | ||||||||||||||
Capital lease obligations, net of current portion | — | 785 | — | — | 785 | |||||||||||||||
Deferred tax liability | 8,569 | 981 | 2,334 | — | 11,884 | |||||||||||||||
Asset retirement obligations | — | 12,750 | 5,624 | — | 18,374 | |||||||||||||||
Other non-current liabilities | — | 26,920 | 493 | — | 27,413 | |||||||||||||||
Total liabilities | 348,438 | 407,651 | 154,400 | (396,743 | ) | 513,746 | ||||||||||||||
Stockholders’ equity | 87,774 | 6,308 | 26,765 | (33,073 | ) | 87,774 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 436,212 | $ | 413,959 | $ | 181,165 | $ | (429,816 | ) | $ | 601,520 | |||||||||
F-25
Table of Contents
As of December 31, 2007 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 76 | $ | 11,576 | $ | 1,787 | $ | — | $ | 13,439 | ||||||||||
Receivables, net | (292 | ) | 20,894 | 2,713 | (67 | ) | 23,248 | |||||||||||||
Other current assets | 1,031 | 8,781 | 10,876 | (590 | ) | 20,098 | ||||||||||||||
Total current assets | 815 | 41,251 | 15,376 | (657 | ) | 56,785 | ||||||||||||||
Property and equipment, net | — | 99,764 | 64,360 | (212 | ) | 163,912 | ||||||||||||||
Intangible assets, net | 8,768 | 106,808 | 15,325 | — | 130,901 | |||||||||||||||
Goodwill | — | 150,445 | 84,740 | — | 235,185 | |||||||||||||||
Investments in and advances to subsidiaries | 50,249 | — | — | (50,249 | ) | — | ||||||||||||||
Intercompany receivable | (863 | ) | 6,395 | (5,532 | ) | — | — | |||||||||||||
Prepaid expenses and other assets | 368,424 | 2,970 | 1,532 | (368,424 | ) | 4,502 | ||||||||||||||
Total assets | $ | 427,393 | $ | 407,633 | $ | 175,801 | $ | (419,542 | ) | $ | 591,285 | |||||||||
Liabilities and Stockholders’ Equity: | ||||||||||||||||||||
Current portion of long-term debt | $ | — | $ | — | $ | 882 | $ | — | $ | 882 | ||||||||||
Current portion of capital lease obligations | — | 1,147 | — | — | 1,147 | |||||||||||||||
Current portion of other long-term liabilities | — | 16,032 | 169 | — | 16,201 | |||||||||||||||
Accounts payable and accrued liabilities | 12,808 | 66,726 | 26,027 | (652 | ) | 104,909 | ||||||||||||||
Total current liabilities | 12,808 | 83,905 | 27,078 | (652 | ) | 123,139 | ||||||||||||||
Long-term debt, net of current portion | 300,088 | 265,725 | 110,343 | (368,423 | ) | 307,733 | ||||||||||||||
Capital lease obligations, net of current portion | — | 982 | — | — | 982 | |||||||||||||||
Deferred tax liability | 7,386 | 980 | 3,114 | — | 11,480 | |||||||||||||||
Asset retirement obligations | — | 12,332 | 5,116 | — | 17,448 | |||||||||||||||
Other non-current liabilities | — | 22,868 | 524 | — | 23,392 | |||||||||||||||
Total liabilities | 320,282 | 386,792 | 146,175 | (369,075 | ) | 484,174 | ||||||||||||||
Stockholders’ equity | 107,111 | 20,841 | 29,626 | (50,467 | ) | 107,111 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 427,393 | $ | 407,633 | $ | 175,801 | $ | (419,542 | ) | $ | 591,285 | |||||||||
F-26
Table of Contents
Three Months Ended March 31, 2008 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (7,307 | ) | $ | (5,417 | ) | $ | 2,399 | $ | — | $ | (10,325 | ) | |||||||
Additions to property and equipment | — | (15,792 | ) | (10,007 | ) | — | (25,799 | ) | ||||||||||||
Payments for exclusive license agreements and site acquisition costs | — | (51 | ) | (247 | ) | — | (298 | ) | ||||||||||||
Principal payments received under direct financing leases | — | — | 13 | — | 13 | |||||||||||||||
Net cash used in investing activities | — | (15,843 | ) | (10,241 | ) | — | (26,084 | ) | ||||||||||||
Proceeds from issuance of long-term debt | 50,000 | 22,640 | 9,836 | (32,640 | ) | 49,836 | ||||||||||||||
Repayments of long-term debt | (14,500 | ) | (6,079 | ) | (73 | ) | 5,657 | (14,995 | ) | |||||||||||
Issuance of long-term notes receivable | (32,640 | ) | — | — | 32,640 | — | ||||||||||||||
Payments received on long-term notes receivable | 5,657 | — | — | (5,657 | ) | — | ||||||||||||||
Repayments of borrowings under bank overdraft facility, net | — | — | (1,866 | ) | — | (1,866 | ) | |||||||||||||
Proceeds from exercises of stock options | 123 | — | — | — | 123 | |||||||||||||||
Other financing activities | (1,243 | ) | — | — | — | (1,243 | ) | |||||||||||||
Net cash provided by financing activities | 7,397 | 16,561 | 7,897 | — | 31,855 | |||||||||||||||
Effect of exchange rate changes on cash | — | — | 23 | — | 23 | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | 90 | (4,699 | ) | 78 | — | (4,531 | ) | |||||||||||||
Cash and cash equivalents at beginning of period | 76 | 11,576 | 1,787 | — | 13,439 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 166 | $ | 6,877 | $ | 1,865 | $ | — | $ | 8,908 | ||||||||||
F-27
Table of Contents
Three Months Ended March 31, 2007 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (7,588 | ) | $ | 6,786 | $ | 3,444 | $ | — | $ | 2,642 | |||||||||
Additions to property and equipment, net of proceeds from sale of property and equipment | — | (7,988 | ) | (5,341 | ) | — | (13,329 | ) | ||||||||||||
Payments for exclusive license agreements and site acquisition costs | (200 | ) | (367 | ) | — | (567 | ) | |||||||||||||
Additions to equipment to be leased to customers, net of principal payments received under direct financing leases | — | — | (199 | ) | — | (199 | ) | |||||||||||||
Proceeds from sale of Winn-Dixie equity securities | — | 3,950 | — | — | 3,950 | |||||||||||||||
Acquisitions, net of cash acquired | — | 876 | — | — | 876 | |||||||||||||||
Net cash used in investing activities | — | (3,362 | ) | (5,907 | ) | — | (9,269 | ) | ||||||||||||
Proceeds from issuance of long-term debt | 20,500 | 5,000 | 5,397 | (10,000 | ) | 20,897 | ||||||||||||||
Repayments of long-term debt | (12,000 | ) | (9,000 | ) | (17 | ) | 9,000 | (12,017 | ) | |||||||||||
Issuance of long-term notes receivable | (10,000 | ) | — | — | 10,000 | — | ||||||||||||||
Payments received on long-term notes receivable | 9,000 | — | — | (9,000 | ) | — | ||||||||||||||
Repayments of borrowings under bank overdraft facility, net | — | — | (3,222 | ) | — | (3,222 | ) | |||||||||||||
Proceeds from exercises of stock options | 46 | — | — | — | 46 | |||||||||||||||
Net cash provided by (used in) financing activities | 7,546 | (4,000 | ) | 2,158 | — | 5,704 | ||||||||||||||
Effect of exchange rate changes on cash | — | — | (13 | ) | — | (13 | ) | |||||||||||||
Net decrease in cash and cash equivalents | (42 | ) | (576 | ) | (318 | ) | — | (936 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 97 | 1,818 | 803 | — | 2,718 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 55 | $ | 1,242 | $ | 485 | $ | — | $ | 1,782 | ||||||||||
F-28
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F-29
Table of Contents
Cardtronics, Inc.:
F-30
Table of Contents
(in thousands, except share and per share amounts)
December 31, | ||||||||
2007 | 2006 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 13,439 | $ | 2,718 | ||||
Accounts and notes receivable, net of allowance of $560 and $427 as of December 31, 2007 and 2006, respectively | 23,248 | 14,891 | ||||||
Inventory | 2,355 | 4,444 | ||||||
Restricted cash, short-term | 5,900 | 883 | ||||||
Deferred tax asset, net | 216 | 273 | ||||||
Prepaid expenses, deferred costs, and other current assets | 11,627 | 15,178 | ||||||
Total current assets | 56,785 | 38,387 | ||||||
Restricted cash | 317 | 34 | ||||||
Property and equipment, net | 163,912 | 86,668 | ||||||
Intangible assets, net | 130,901 | 67,763 | ||||||
Goodwill | 235,185 | 169,563 | ||||||
Prepaid expenses and other assets | 4,185 | 5,341 | ||||||
Total assets | $ | 591,285 | $ | 367,756 | ||||
Liabilities and Stockholders’ Equity (Deficit) | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt and notes payable | $ | 882 | $ | 194 | ||||
Current portion of capital lease obligations | 1,147 | — | ||||||
Current portion of other long-term liabilities | 16,201 | 2,501 | ||||||
Accounts payable | 34,385 | 16,915 | ||||||
Accrued liabilities | 70,524 | 34,341 | ||||||
Total current liabilities | 123,139 | 53,951 | ||||||
Long-term liabilities: | ||||||||
Long-term debt, net of related discount | 307,733 | 252,701 | ||||||
Capital lease obligations | 982 | — | ||||||
Deferred tax liability, net | 11,480 | 7,625 | ||||||
Asset retirement obligations | 17,448 | 9,989 | ||||||
Other long-term liabilities and minority interest in subsidiary | 23,392 | 4,064 | ||||||
Total liabilities | 484,174 | 328,330 | ||||||
Series B redeemable preferred stock, $0.0001 par value; 10,000,000 shares authorized; 929,789 shares issued and outstanding as of December 31, 2006; liquidation value of $78,000 as of December 31, 2006 | — | 76,594 | ||||||
Stockholders’ equity (deficit): | ||||||||
Common stock, $0.0001 par value; 125,000,000 shares authorized; 43,571,956 and 19,032,715 shares issued as of December 31, 2007 and 2006; 38,566,207 and 13,995,673 shares outstanding at December 31, 2007 and 2006, respectively | 4 | — | ||||||
Subscriptions receivable (at face value) | (229 | ) | (324 | ) | ||||
Additional paid-in capital | 190,508 | 2,857 | ||||||
Accumulated other comprehensive income (loss), net | (4,518 | ) | 11,658 | |||||
Accumulated deficit | (30,433 | ) | (3,092 | ) | ||||
Treasury stock; 5,005,749 and 5,037,042 shares at cost at December 31, 2007 and 2006, respectively | (48,221 | ) | (48,267 | ) | ||||
Total stockholders’ equity (deficit) | 107,111 | (37,168 | ) | |||||
Total liabilities and stockholders’ equity (deficit) | $ | 591,285 | $ | 367,756 | ||||
F-31
Table of Contents
(in thousands)
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Revenues: | ||||||||||||
ATM operating revenues | $ | 364,071 | $ | 280,985 | $ | 258,979 | ||||||
Vcom operating revenues | 1,251 | — | — | |||||||||
ATM product sales and other revenues | 12,976 | 12,620 | 9,986 | |||||||||
Total revenues | 378,298 | 293,605 | 268,965 | |||||||||
Cost of revenues: | ||||||||||||
Cost of ATM operating revenues (includes stock-based compensation of $87, $51, and $172 in 2007, 2006, and 2005, respectively. Excludes depreciation, accretion, and amortization shown separately below. SeeNote 1) | 275,286 | 209,850 | 199,767 | |||||||||
Cost of Vcom operating revenues | 6,065 | — | — | |||||||||
Cost of ATM product sales and other revenues | 11,942 | 11,443 | 9,681 | |||||||||
Total cost of revenues | 293,293 | 221,293 | 209,448 | |||||||||
Gross profit | 85,005 | 72,312 | 59,517 | |||||||||
Operating expenses: | ||||||||||||
Selling, general, and administrative expenses (includes stock-based compensation of $963, $828, and $2,201 in 2007, 2006, and 2005, respectively) | 29,357 | 21,667 | 17,865 | |||||||||
Depreciation and accretion expense | 26,859 | 18,595 | 12,951 | |||||||||
Amortization expense | 18,870 | 11,983 | 8,980 | |||||||||
Total operating expenses | 75,086 | 52,245 | 39,796 | |||||||||
Income from operations | 9,919 | 20,067 | 19,721 | |||||||||
Other (income) expense: | ||||||||||||
Interest expense, net | 29,523 | 23,143 | 15,485 | |||||||||
Amortization and write-off of financing costs and bond discounts | 1,641 | 1,929 | 6,941 | |||||||||
Minority interest in subsidiary | (376 | ) | (225 | ) | 15 | |||||||
Other | 1,585 | (4,761 | ) | 968 | ||||||||
Total other expense | 32,373 | 20,086 | 23,409 | |||||||||
Loss before income taxes | (22,454 | ) | (19 | ) | (3,688 | ) | ||||||
Income tax expense (benefit) | 4,636 | 512 | (1,270 | ) | ||||||||
Net loss | (27,090 | ) | (531 | ) | (2,418 | ) | ||||||
Preferred stock conversion and accretion expense | 36,272 | 265 | 1,395 | |||||||||
Net loss available to common stockholders | $ | (63,362 | ) | $ | (796 | ) | $ | (3,813 | ) | |||
Net loss per common share: | ||||||||||||
Basic and diluted | $ | (4.11 | ) | $ | (0.06 | ) | $ | (0.27 | ) | |||
Weighted average shares outstanding: | ||||||||||||
Basic and diluted | 15,423,744 | 13,904,505 | 14,040,353 | |||||||||
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(in thousands)
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Common Stock, par value $0.0001 per share: | ||||||||||||
Balance at beginning of year | $ | — | $ | — | $ | — | ||||||
Capital stock issued in initial public offering | 1 | — | — | |||||||||
Capital stock issued in Series B preferred stock conversion | 2 | — | — | |||||||||
Stock split in conjunction with initial public offering | 1 | — | — | |||||||||
Balance at end of year | $ | 4 | $ | — | $ | — | ||||||
Subscriptions Receivable: | ||||||||||||
Balance at beginning of year | $ | (324 | ) | $ | (1,476 | ) | $ | (1,862 | ) | |||
Settlement of subscriptions receivable through repurchases of capital stock | — | 1,152 | — | |||||||||
Repayment of subscriptions | 95 | — | 386 | |||||||||
Balance at end of year | $ | (229 | ) | $ | (324 | ) | $ | (1,476 | ) | |||
Additional Paid in Capital: | ||||||||||||
Balance at beginning of year | $ | 2,857 | $ | 2,033 | $ | — | ||||||
Capital stock issued in initial public offering, net of offering costs | 109,757 | — | — | |||||||||
Capital stock issued in Series B preferred stock conversion | 76,844 | — | — | |||||||||
Other issuance of capital stock | — | (55 | ) | 1,590 | ||||||||
Series B preferred stock conversion (seeNote 14) | 36,021 | — | — | |||||||||
Series B preferred stock conversion charge (seeNote 14) | (36,021 | ) | — | — | ||||||||
Dividends on Series A preferred stock | — | — | (98 | ) | ||||||||
Stock-based compensation charges | 1,050 | 879 | 541 | |||||||||
Balance at end of year | $ | 190,508 | $ | 2,857 | $ | 2,033 | ||||||
Accumulated Other Comprehensive Income (Loss): | ||||||||||||
Balance at beginning of year | $ | 11,658 | $ | (346 | ) | $ | 886 | |||||
Other comprehensive income (loss) | (16,176 | ) | 12,004 | (1,232 | ) | |||||||
Balance at end of year | $ | (4,518 | ) | $ | 11,658 | $ | (346 | ) | ||||
Retained Earnings (Accumulated Deficit): | ||||||||||||
Balance at beginning of year | $ | (3,092 | ) | $ | (2,252 | ) | $ | 1,495 | ||||
Dividends on preferred stock | — | — | (1,063 | ) | ||||||||
Preferred stock issuance cost accretion | (251 | ) | (265 | ) | (234 | ) | ||||||
Distributions | — | (44 | ) | (32 | ) | |||||||
Net loss | (27,090 | ) | (531 | ) | (2,418 | ) | ||||||
Balance at end of year | $ | (30,433 | ) | $ | (3,092 | ) | $ | (2,252 | ) | |||
Treasury Stock: | ||||||||||||
Balance at beginning of year | $ | (48,267 | ) | $ | (47,043 | ) | $ | (859 | ) | |||
Issuance of capital stock | 46 | 55 | 269 | |||||||||
Purchase of treasury stock | — | (1,279 | ) | (46,453 | ) | |||||||
Balance at end of year | $ | (48,221 | ) | $ | (48,267 | ) | $ | (47,043 | ) | |||
Total stockholders’ equity (deficit) | $ | 107,111 | $ | (37,168 | ) | $ | (49,084 | ) | ||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Net loss | $ | (27,090 | ) | $ | (531 | ) | $ | (2,418 | ) | |||
Foreign currency translation adjustments | 2,415 | 12,202 | (5,491 | ) | ||||||||
Unrealized (losses) gains on interest rate cash flow hedges, net of taxes of $0 in 2007, $258 in 2006, and $(2,469) in 2005 | (18,093 | ) | (696 | ) | 4,259 | |||||||
Unrealized (realized) gains on available-for-sale securities, net of taxes of $293 in 2007 and $(293) in 2006 | (498 | ) | 498 | — | ||||||||
Other comprehensive income (loss) | (16,176 | ) | 12,004 | (1,232 | ) | |||||||
Total comprehensive income (loss) | $ | (43,266 | ) | $ | 11,473 | $ | (3,650 | ) | ||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (27,090 | ) | $ | (531 | ) | $ | (2,418 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Depreciation, accretion, and amortization expense | 45,729 | 30,578 | 21,931 | |||||||||
Amortization and write-off of financing costs and bond discount | 1,641 | 1,929 | 6,941 | |||||||||
Stock-based compensation expense | 1,050 | 879 | 541 | |||||||||
Deferred income taxes | 4,525 | 454 | (1,270 | ) | ||||||||
Non-cash receipt of Winn-Dixie equity securities | — | (3,394 | ) | — | ||||||||
Gain on sale of Winn-Dixie equity securities | (569 | ) | — | — | ||||||||
Minority interest | (376 | ) | (225 | ) | 15 | |||||||
Loss on disposal of assets | 2,235 | 1,603 | 1,036 | |||||||||
Other reserves and non-cash items | 1,217 | 1,219 | 363 | |||||||||
Changes in assets and liabilities, net of acquisitions: | ||||||||||||
(Increase) decrease in accounts receivable, net | (905 | ) | (4,105 | ) | 2,176 | |||||||
(Increase) decrease in prepaid, deferred costs, and other current assets | 630 | (3,783 | ) | 378 | ||||||||
(Increase) decrease in inventory | 3,412 | (694 | ) | 1,060 | ||||||||
Decrease in notes receivable, net | 20 | 155 | 439 | |||||||||
Increase in other assets | (19,787 | ) | (1,718 | ) | (600 | ) | ||||||
Increase (decrease) in accounts payable | 15,995 | 5,436 | (1,085 | ) | ||||||||
Increase in accrued liabilities | 22,726 | 813 | 7,190 | |||||||||
(Decrease) increase in other liabilities | 5,009 | (3,170 | ) | (3,470 | ) | |||||||
Net cash provided by operating activities | 55,462 | 25,446 | 33,227 | |||||||||
Cash flows from investing activities: | ||||||||||||
Additions to property and equipment | (68,320 | ) | (32,537 | ) | (27,261 | ) | ||||||
Proceeds from sale of property and equipment | 3 | 130 | 78 | |||||||||
Payments for exclusive license agreements and site acquisition costs | (2,993 | ) | (3,357 | ) | (4,665 | ) | ||||||
Additions to equipment to be leased to customers | (548 | ) | (197 | ) | — | |||||||
Principal payments received under direct financing leases | 34 | — | — | |||||||||
Acquisitions, net of cash acquired | (135,009 | ) | (12 | ) | (108,112 | ) | ||||||
Proceeds from sale of Winn-Dixie equity securities | 3,950 | — | — | |||||||||
Net cash used in investing activities | (202,883 | ) | (35,973 | ) | (139,960 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of long-term debt | 187,744 | 45,661 | 478,009 | |||||||||
Repayments of long-term debt and capital leases | (140,765 | ) | (37,503 | ) | (362,141 | ) | ||||||
Proceeds from borrowing under bank overdraft facility, net | 642 | 3,818 | — | |||||||||
Redemption of Series A preferred stock | — | — | (24,795 | ) | ||||||||
Issuance of capital stock | 111,363 | — | 89 | |||||||||
Purchase of treasury stock | — | (50 | ) | (46,453 | ) | |||||||
Issuance of Series B preferred stock | — | — | 73,297 | |||||||||
Minority interest shareholder capital contributions | 547 | — | — | |||||||||
Repayment of subscriptions receivable | 95 | — | 386 | |||||||||
Distributions | — | (18 | ) | (51 | ) | |||||||
Equity offering costs | (618 | ) | — | — | ||||||||
Debt issuance costs | (853 | ) | (716 | ) | (11,127 | ) | ||||||
Net cash provided by financing activities | 158,155 | 11,192 | 107,214 | |||||||||
Effect of exchange rate changes on cash | (13 | ) | 354 | (194 | ) | |||||||
Net increase in cash and cash equivalents | 10,721 | 1,019 | 287 | |||||||||
Cash and cash equivalents at beginning of period | 2,718 | 1,699 | 1,412 | |||||||||
Cash and cash equivalents at end of period | $ | 13,439 | $ | 2,718 | $ | 1,699 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid for interest, including interest on capital leases | $ | 26,521 | $ | 22,939 | $ | 8,359 | ||||||
Cash paid for income taxes | $ | 27 | $ | 67 | $ | 92 | ||||||
Fixed assets financed by direct debt | $ | 5,683 | $ | — | $ | — |
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(1) | Business and Summary of Significant Accounting Policies |
(a) | Description of Business |
(b) | Basis of Presentation and Consolidation |
2007 | 2006 | 2005 | ||||||||||
(in thousands) | ||||||||||||
Depreciation and accretion expenses related to ATMs and ATM-related assets | $ | 24,277 | $ | 17,190 | $ | 11,639 | ||||||
Amortization expense | 18,870 | 11,983 | 8,980 | |||||||||
Total depreciation, accretion, and amortization expenses excluded from cost of ATM operating revenues and gross profit | $ | 43,147 | $ | 29,173 | $ | 20,619 | ||||||
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(c) | Use of Estimates in the Preparation of Financial Statements |
(d) | Cash and Cash Equivalents |
(e) | ATM Cash Management Program |
(f) | Accounts Receivable, including Allowance for Doubtful Accounts |
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(g) | Inventory |
2007 | 2006 | |||||||
(in thousands) | ||||||||
ATMs | $ | 745 | $ | 2,625 | ||||
ATM parts and supplies | 2,040 | 2,832 | ||||||
Total | 2,785 | 5,457 | ||||||
Less: Inventory reserves | (430 | ) | (1,013 | ) | ||||
Net inventory | $ | 2,355 | $ | 4,444 | ||||
(h) | Property and Equipment, net |
(i) | Goodwill and Other Intangible Assets |
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(j) | Impairment of Long-Lived Assets and Goodwill |
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(k) | Income Taxes |
(l) | Asset Retirement Obligations |
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(m) | Revenue Recognition |
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(n) | Stock-Based Compensation |
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Net loss, as reported | $ | (2,418 | ) | |
Add: Stock-based employee compensation expense included in reported net income, net of tax | 1,492 | |||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax | (1,694 | ) | ||
Net loss, as adjusted | (2,620 | ) | ||
Preferred stock dividends and accretion expense | 1,395 | |||
Net loss available to common stockholders, as adjusted | $ | (4,015 | ) | |
Loss per share: | ||||
Basic and diluted, as reported | $ | (0.27 | ) | |
Basic and diluted, pro forma | $ | (0.29 | ) | |
(o) | Derivative Instruments |
(p) | Fair Value of Financial Instruments |
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(q) | Foreign Currency Translation |
2007 | 2006 | |||||||
(in thousands) | ||||||||
Foreign currency translation adjustments | $ | 9,126 | $ | 6,711 | ||||
Unrealized gains (losses) on interest rate swaps, net of taxes of $0 and $2.7 million as of December 31, 2007 and 2006, respectively | (13,644 | ) | 4,449 | |||||
Unrealized gains on available-for-sale securities, net of taxes of $0.3 million as of December 31, 2006 | — | 498 | ||||||
Total accumulated other comprehensive income (loss) | $ | (4,518 | ) | $ | 11,658 | |||
(s) | Treasury Stock |
(t) | Advertising Costs |
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(u) | Working Capital Deficit |
(v) | New Accounting Pronouncements |
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(2) | Acquisitions |
Cash | $ | 1,427 | ||
Trade accounts receivable, net | 3,767 | |||
Surcharge and interchange receivable | 3,769 | |||
Inventory | 1,953 | |||
Other current assets | 2,344 | |||
Property and equipment | 18,315 | |||
Software | 4,273 | |||
Intangible assets subject to amortization | 78,000 | |||
Goodwill | 62,185 | |||
Total assets acquired | 176,033 | |||
Accounts payable | (688 | ) | ||
Accrued liabilities and deferred income | (9,743 | ) | ||
Current portion of capital lease obligations | (1,326 | ) | ||
Current portion of other long-term liabilities | (7,777 | ) | ||
Non-current portion of capital lease obligations | (1,378 | ) | ||
Other long-term liabilities | (17,809 | ) | ||
Total liabilities assumed | (38,721 | ) | ||
Net assets acquired | $ | 137,312 | ||
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2007 | 2006(1) | |||||||
(In thousands, excluding per share amounts) | ||||||||
Revenues | $ | 465,808 | $ | 457,267 | ||||
Income from continuing operations | 19,364 | 45,503 | ||||||
Net (loss) income available to common shareholders | (61,497 | ) | 6,233 | |||||
Basic (loss) earnings per share | $ | (3.99 | ) | $ | 0.45 | |||
Diluted (loss) earnings per share | $ | (3.99 | ) | $ | 0.27 | |||
(1) | Pro forma results for the year ended December 31, 2006 include approximately $18.0 million of placement fee revenues associated with the Vcom operations of the 7-Eleven Financial Services Business, which are not expected to recur in future periods. |
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F-49
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Cash | $ | 3,400 | ||
Trade accounts receivable, net | 407 | |||
Inventory | 82 | |||
Other current assets | 4,936 | |||
Property and equipment | 12,590 | |||
Intangible assets subject to amortization (7 year weighted-average life) | 6,812 | |||
Intangible assets not subject to amortization | 3,682 | |||
Goodwill | 77,269 | |||
Total assets acquired | 109,178 | |||
Accounts payable | (2,467 | ) | ||
Accrued liabilities | (5,307 | ) | ||
Current portion of notes payable | (3,232 | ) | ||
Deferred income taxes, non-current | (1,926 | ) | ||
Other long-term liabilities | (1,225 | ) | ||
Total liabilities assumed | (14,157 | ) | ||
Net assets acquired | $ | 95,021 | ||
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Revenues | $ | 279,149 | ||
Income from continuing operations | 21,083 | |||
Net loss available to common shareholders | (2,557 | ) | ||
Basic and diluted loss per share | $ | (0.18 | ) | |
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Cash | $ | 142 | ||
Trade accounts receivable, net | 546 | |||
Other current assets | 6 | |||
Property and equipment | 14 | |||
Intangible assets subject to amortization (8 year weighted-average life) | 3,000 | |||
Intangible assets not subject to amortization | 200 | |||
Other assets | 11 | |||
Goodwill | 3,684 | |||
�� | ||||
Total assets acquired | 7,603 | |||
Accounts payable and accrued liabilities | (1,710 | ) | ||
Deferred income taxes | (1,113 | ) | ||
Total liabilities assumed | (2,823 | ) | ||
Net assets acquired | $ | 4,780 | ||
(3) | Stock-based Compensation |
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2007 | 2006 | 2005 | ||||||||||
(in thousands) | ||||||||||||
Cost of ATM operating revenues | $ | 87 | $ | 51 | $ | 172 | ||||||
Selling, general and administrative expenses | 963 | 828 | 2,201 | |||||||||
Total stock-based compensation expense | $ | 1,050 | $ | 879 | $ | 2,373 | ||||||
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Weighted Average | Aggregate | |||||||||||||||
Number of | Weighted Average | Contractual Term | Intrinsic | |||||||||||||
Shares | Exercise Price | (in years) | Value | |||||||||||||
(in thousands) | ||||||||||||||||
Options outstanding as of January 1, 2007 | 4,049,437 | $ | 6.64 | |||||||||||||
Granted | 1,140,609 | $ | 12.15 | |||||||||||||
Exercised | (31,293 | ) | $ | 1.48 | ||||||||||||
Forfeited | (198,712 | ) | $ | 10.55 | ||||||||||||
Options outstanding as of December 31, 2007 | 4,960,041 | $ | 7.78 | 6.8 | $ | 14,636 | ||||||||||
Options exercisable as of December 31, 2007 | 2,654,986 | $ | 4.86 | 5.3 | $ | 14,242 | ||||||||||
2007 | 2006 | |||
Weighted average estimated fair value per stock option granted | $4.02 | $4.24 | ||
Valuation assumptions: | ||||
Expected option term (years) | 6.25 | 6.25 | ||
Expected volatility | 31.76% - 35.30% | 34.50% - 35.90% | ||
Expected dividend yield | 0.00% | 0.00% | ||
Risk-free interest rate | 3.68% - 4.94% | 4.74% - 4.85% |
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Number of | Weighted | |||||||
Shares Under | Average | |||||||
Outstanding | Grant Date | |||||||
Options | Fair Value | |||||||
Non-vested options as of January 1, 2007 | 1,830,132 | $ | 2.27 | |||||
Granted | 1,140,609 | $ | 4.02 | |||||
Vested | (665,686 | ) | $ | 1.76 | ||||
Non-vested options as of December 31, 2007 | 2,305,055 | $ | 3.28 |
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(4) | Earnings per Share |
2007 | 2006 | 2005 | ||||||||||
Stock options | 1,602,228 | 1,535,289 | 1,024,695 | |||||||||
Restricted shares | 8,339 | 94,070 | 157,396 | |||||||||
Preferred stock | 6,965,211 | 7,390,413 | 6,502,249 | |||||||||
Total potentially dilutive securities | 8,575,778 | 9,019,772 | 7,684,340 | |||||||||
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(5) | Related Party Transactions |
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2007 | 2006 | |||||||
(in thousands) | ||||||||
Prepaid expenses | $ | 9,915 | $ | 6,519 | ||||
Available-for-sale securities, at market value | — | 4,184 | ||||||
Current portion of interest rate swaps | — | 4,079 | ||||||
Deferred costs and other current assets | 1,712 | 396 | ||||||
Total | $ | 11,627 | $ | 15,178 | ||||
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2007 | 2006 | |||||||
(in thousands) | ||||||||
ATM and Vcom equipment and related costs | $ | 199,146 | $ | 114,803 | ||||
Office furniture, fixtures, and other | 18,490 | 9,299 | ||||||
Total | 217,636 | 124,102 | ||||||
Less accumulated depreciation | (53,724 | ) | (37,434 | ) | ||||
Net property and equipment | $ | 163,912 | $ | 86,668 | ||||
(8) | Intangible Assets |
Goodwill | Trade Name | |||||||||||||||||||||||
U.S. | U.K. | Mexico | U.S. | U.K. | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Balance as of December 31, 2006 | $ | 86,702 | $ | 82,172 | $ | 689 | $ | 200 | $ | 3,923 | $ | 173,686 | ||||||||||||
Acquisitions | 62,185 | — | — | — | — | 62,185 | ||||||||||||||||||
Purchase price adjustments | 1,558 | — | — | — | — | 1,558 | ||||||||||||||||||
Foreign currency translation adjustments | — | 1,878 | 1 | — | 92 | 1,971 | ||||||||||||||||||
Balance at December 31, 2007 | $ | 150,445 | $ | 84,050 | $ | 690 | $ | 200 | $ | 4,015 | $ | 239,400 | ||||||||||||
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Weighted | ||||||||||||||||
Average | ||||||||||||||||
Remaining | Gross | Net | ||||||||||||||
Amortization | Carrying | Accumulated | Carrying | |||||||||||||
Period | Amount | Amortization | Amount | |||||||||||||
(in thousands) | ||||||||||||||||
Customer and branding contracts/relationships | 8.1 | $ | 162,995 | $ | (49,574 | ) | $ | 113,421 | ||||||||
Deferred financing costs | 5.4 | 13,867 | (4,260 | ) | 9,607 | |||||||||||
Exclusive license arrangements | 5.6 | 5,369 | (1,763 | ) | 3,606 | |||||||||||
Non-compete agreements | 2.1 | 100 | (48 | ) | 52 | |||||||||||
Total | 7.8 | $ | 182,331 | $ | (55,645 | ) | $ | 126,686 | ||||||||
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Customer | ||||||||||||||||||||
Contracts | Exclusive | |||||||||||||||||||
and | Deferred | License | Non-compete | |||||||||||||||||
Relationships | Financing Costs | Agreements | Agreements | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
2008 | $ | 16,585 | $ | 1,517 | $ | 736 | $ | 25 | $ | 18,863 | ||||||||||
2009 | 16,150 | 1,630 | 731 | 25 | 18,536 | |||||||||||||||
2010 | 14,616 | 1,754 | 634 | 2 | 17,006 | |||||||||||||||
2011 | 12,944 | 1,893 | 521 | — | 15,358 | |||||||||||||||
2012 | 11,987 | 1,754 | 453 | — | 14,194 | |||||||||||||||
Thereafter | 41,139 | 1,059 | 531 | — | 42,729 | |||||||||||||||
Total | $ | 113,421 | $ | 9,607 | $ | 3,606 | $ | 52 | $ | 126,686 | ||||||||||
(9) | Prepaid Expenses and Other Non-current Assets |
2007 | 2006 | |||||||
(in thousands) | ||||||||
Interest rate swaps, non-current | $ | — | $ | 2,994 | ||||
Prepaid expenses | 784 | 627 | ||||||
Deferred costs | 2,218 | 1,364 | ||||||
Other | 1,183 | 356 | ||||||
Total | $ | 4,185 | $ | 5,341 | ||||
(10) | Accrued Liabilities |
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2007 | 2006 | |||||||
(in thousands) | ||||||||
Accrued merchant fees | $ | 11,486 | $ | 7,915 | ||||
Accrued interest | 11,257 | 7,954 | ||||||
Accrued maintenance | 6,970 | 2,090 | ||||||
Accrued purchases | 6,098 | 343 | ||||||
Accrued armored | 5,879 | 3,242 | ||||||
Accrued cash management fees | 5,574 | 2,740 | ||||||
Accrued merchant settlement | 4,254 | 27 | ||||||
Accrued compensation | 3,832 | 3,499 | ||||||
Accrued processing costs | 1,477 | 803 | ||||||
Accrued ATM telecommunication fess | 1,424 | 650 | ||||||
Other accrued expenses | 12,273 | 5,078 | ||||||
Total | $ | 70,524 | $ | 34,341 | ||||
(11) | Asset Retirement Obligations |
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2007 | 2006 | |||||||
(in thousands) | ||||||||
Asset retirement obligation as of beginning of period | $ | 9,989 | $ | 8,339 | ||||
Additional obligations | 9,805 | 2,291 | ||||||
Accretion expense | 1,122 | 272 | ||||||
Payments | (1,551 | ) | (1,079 | ) | ||||
Change in estimates | (1,974 | ) | — | |||||
Foreign currency translation adjustments | 57 | 166 | ||||||
Asset retirement obligation as of end of period | $ | 17,448 | $ | 9,989 | ||||
(12) | Other Long-term Liabilities and Minority Interest in Subsidiary |
2007 | 2006 | |||||||
(in thousands) | ||||||||
Interest rate swaps | $ | 9,155 | $ | — | ||||
Deferred revenue | 3,380 | 481 | ||||||
Obligations associated with acquired unfavorable contracts | 7,626 | — | ||||||
Minority interest in subsidiary | — | 112 | ||||||
Other long-term liabilities | 3,231 | 3,471 | ||||||
Total | $ | 23,392 | $ | 4,064 | ||||
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(13) | Long-term Debt |
2007 | 2006 | |||||||
(in thousands) | ||||||||
Revolving credit loan facility, including swing-line credit facility as of December 31, 2006 (weighted-average combined rate of 8.3% and 8.7% at December 31, 2007 and 2006, respectively) | $ | 4,000 | $ | 53,100 | ||||
Senior subordinated notes due August 2013, net of unamortized discount of $3.9 million and $1.2 million as of December 31, 2007 and 2006, respectively | 296,088 | 198,783 | ||||||
Other | 8,527 | 1,012 | ||||||
Total | 308,615 | 252,895 | ||||||
Less current portion | 882 | 194 | ||||||
Total excluding current portion | $ | 307,733 | $ | 252,701 | ||||
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2008 | $ | 882 | ||
2009 | 1,735 | |||
2010 | 2,147 | |||
2011 | 2,372 | |||
2012 | 5,391 | |||
2013 | 300,000 | |||
Total | $ | 312,527 | ||
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2007 | 2006 | 2005 | ||||||||||
(in thousands) | ||||||||||||
Balance as of January 1 | $ | 76,594 | $ | 76,329 | $ | — | ||||||
Issuances, net of issuance costs of $1,858 | — | — | 76,095 | |||||||||
Accretion of issuance costs | 251 | 265 | 234 | |||||||||
Conversion into common stock | (76,845 | ) | — | — | ||||||||
Balance as of December 31 | $ | — | $ | 76,594 | $ | 76,329 | ||||||
(16) | Commitments and Contingencies |
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2008 | $ | 1,147 | ||
2009 | 747 | |||
2010 | 235 | |||
Total minimum lease payments | $ | 2,129 | ||
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2008 | $ | 10,203 | ||
2009 | 7,691 | |||
2010 | 2,757 | |||
2011 | 2,197 | |||
2012 | 2,038 | |||
Thereafter | 4,262 | |||
Total minimum lease payments | $ | 29,148 | ||
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Notional Amount | Weighted Average Fixed Rate | Period | ||
(in thousands) | ||||
$550,000 | 4.61% | January 1, 2008 — December 31, 2008 | ||
$450,000 | 4.68% | January 1, 2009 — December 31, 2009 | ||
$350,000 | 4.76% | January 1, 2010 — December 31, 2010 |
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Notional Amount | Weighted Average Fixed Rate | Period | ||
(in thousands) | ||||
$100,000 | 2.58% | January 1, 2009 — December 31, 2009 | ||
$200,000 | 2.97% | January 1, 2010 — December 31, 2010 | ||
$400,000 | 3.72% | January 1, 2011 — December 31, 2011 | ||
$200,000 | 3.96% | January 1, 2012 — December 31, 2012 |
2007 | 2006 | 2005 | ||||||||||
(in thousands) | ||||||||||||
Current: | ||||||||||||
U.S. federal | $ | — | $ | — | $ | — | ||||||
State and local | 111 | 28 | — | |||||||||
Foreign | — | 30 | — | |||||||||
Total current | $ | 111 | $ | 58 | $ | — | ||||||
Deferred: | ||||||||||||
U.S. federal | $ | 4,963 | $ | (584 | ) | $ | (1,831 | ) | ||||
State and local | (153 | ) | 251 | 332 | ||||||||
Foreign | (285 | ) | 787 | 229 | ||||||||
Total deferred | 4,525 | 454 | (1,270 | ) | ||||||||
Total | $ | 4,636 | $ | 512 | $ | (1,270 | ) | |||||
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2007 | 2006 | 2005 | ||||||||||
(in thousands) | ||||||||||||
Income tax (benefit) expense at the statutory rate of 34.0% | $ | (7,637 | ) | $ | (6 | ) | $ | (1,254 | ) | |||
State tax, net of federal benefit | (376 | ) | 195 | 131 | ||||||||
Change in United Kingdom statutory tax rate | (208 | ) | — | — | ||||||||
Non-deductible expenses | 21 | 52 | 22 | |||||||||
Potential non-deductible interest of foreign subsidiary | — | 205 | — | |||||||||
Impact of foreign rate differential | 81 | (55 | ) | (31 | ) | |||||||
Change in effective state tax rate | — | — | (72 | ) | ||||||||
Other | 21 | 16 | (66 | ) | ||||||||
Subtotal | (8,098 | ) | 407 | (1,270 | ) | |||||||
Change in valuation allowance | 12,734 | 105 | — | |||||||||
Total tax expense (benefit) | $ | 4,636 | $ | 512 | $ | (1,270 | ) | |||||
United States | United Kingdom | Mexico | Consolidated | |||||||||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Current deferred tax asset | $ | 2,268 | $ | 440 | $ | 216 | $ | 149 | $ | 88 | $ | 47 | $ | 2,572 | $ | 636 | ||||||||||||||||
Valuation allowance | (1,927 | ) | — | — | — | (88 | ) | (47 | ) | (2,015 | ) | (47 | ) | |||||||||||||||||||
Current deferred tax liability | (341 | ) | (316 | ) | — | — | — | — | (341 | ) | (316 | ) | ||||||||||||||||||||
Net current deferred tax asset | — | 124 | 216 | 149 | — | — | 216 | 273 | ||||||||||||||||||||||||
Non-current deferred tax asset | 22,610 | 11,740 | 137 | 248 | 463 | 187 | 23,210 | 12,175 | ||||||||||||||||||||||||
Valuation allowance | (15,442 | ) | — | — | — | (401 | ) | (101 | ) | (15,843 | ) | (101 | ) | |||||||||||||||||||
Non-current deferred tax liability | (15,534 | ) | (16,120 | ) | (3,251 | ) | (3,493 | ) | (62 | ) | (86 | ) | (18,847 | ) | (19,699 | ) | ||||||||||||||||
Net non-current deferred tax liability | (8,366 | ) | (4,380 | ) | (3,114 | ) | (3,245 | ) | — | — | (11,480 | ) | (7,625 | ) | ||||||||||||||||||
Net deferred tax liability | $ | (8,366 | ) | $ | (4,256 | ) | $ | (2,898 | ) | $ | (3,096 | ) | $ | — | $ | — | $ | (11,264 | ) | $ | (7,352 | ) | ||||||||||
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2007 | 2006 | |||||||
(in thousands) | ||||||||
Current deferred tax assets: | ||||||||
Reserve for receivables | $ | 233 | $ | 98 | ||||
Accrued liabilities and reserves | 1,857 | 438 | ||||||
Other | 482 | 100 | ||||||
Subtotal | 2,572 | 636 | ||||||
Valuation allowance | (2,015 | ) | (47 | ) | ||||
Current deferred tax assets | 557 | 589 | ||||||
Non-current deferred tax assets: | ||||||||
Net operating loss carryforward | 16,656 | 8,827 | ||||||
Unrealized loss on derivative instruments | 4,974 | — | ||||||
Share-based compensation | 507 | 353 | ||||||
Asset retirement obligations | 850 | 367 | ||||||
Deferred revenue and reserves | 167 | 1,679 | ||||||
Other | 56 | 949 | ||||||
Subtotal | 23,210 | 12,175 | ||||||
Valuation allowance | (15,843 | ) | (101 | ) | ||||
Non-current deferred tax assets | 7,367 | 12,074 | ||||||
Current deferred tax liabilities: | ||||||||
Unrealized gain on marketable securities | — | (293 | ) | |||||
Other | (341 | ) | (23 | ) | ||||
Current deferred tax liabilities | (341 | ) | (316 | ) | ||||
Non-current deferred tax liabilities: | ||||||||
Tangible and intangible assets | (13,374 | ) | (13,506 | ) | ||||
Deployment costs | (5,449 | ) | (3,569 | ) | ||||
Unrealized gain on derivative instruments | — | (2,624 | ) | |||||
Other | (24 | ) | — | |||||
Non-current deferred tax liabilities | (18,847 | ) | (19,699 | ) | ||||
Net deferred tax liability | $ | (11,264 | ) | $ | (7,352 | ) | ||
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F-74
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2007 | 2006 | 2005 | ||||||||||
(in thousands) | ||||||||||||
EBITDA | $ | 54,439 | $ | 55,631 | $ | 40,669 | ||||||
Depreciation and accretion expense | 26,859 | 18,595 | 12,951 | |||||||||
Amortization expense | 18,870 | 11,983 | 8,980 | |||||||||
Interest expense, net, including amortization and write-off of financing costs and bond discounts | 31,164 | 25,072 | 22,426 | |||||||||
Income tax expense (benefit) | 4,636 | 512 | (1,270 | ) | ||||||||
Net loss | $ | (27,090 | ) | $ | (531 | ) | $ | (2,418 | ) | |||
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As of or For The Year Ended December 31, 2007 | ||||||||||||||||||||||||
United | Advanced | |||||||||||||||||||||||
United States | Kingdom | Mexico | Functionality | Eliminations | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue from external customers | $ | 308,827 | $ | 63,389 | $ | 4,831 | $ | 1,251 | $ | — | $ | 378,298 | ||||||||||||
Intersegment revenue | 82 | — | — | — | (82 | ) | — | |||||||||||||||||
Cost of revenues | 238,368 | 44,925 | 3,985 | 6,065 | (50 | ) | 293,293 | |||||||||||||||||
Selling, general, and administrative expenses | 23,391 | 4,525 | 1,268 | 157 | 16 | 29,357 | ||||||||||||||||||
EBITDA | 46,177 | 13,471 | (454 | ) | (4,971 | ) | 216 | 54,439 | ||||||||||||||||
Depreciation and accretion expense | 19,005 | 7,456 | 421 | — | (23 | ) | 26,859 | |||||||||||||||||
Amortization expense | 17,000 | 1,821 | 49 | — | — | 18,870 | ||||||||||||||||||
Interest expense, net | 26,421 | 4,443 | 300 | — | — | 31,164 | ||||||||||||||||||
Capital expenditures, excluding acquisitions | $ | 31,659 | $ | 33,982 | $ | 5,446 | $ | 226 | $ | — | $ | 71,313 | ||||||||||||
Additions to equipment to be leased to customers | — | — | 548 | — | — | 548 |
As of or For The Year Ended December 31, 2006(1) | ||||||||||||||||||||
United | ||||||||||||||||||||
United States | Kingdom | Mexico | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenue from external customers | $ | 250,425 | $ | 42,157 | $ | 1,023 | $ | — | $ | 293,605 | ||||||||||
Intersegment revenue | 340 | — | — | (340 | ) | — | ||||||||||||||
Cost of revenues | 193,673 | 27,157 | 717 | (254 | ) | 221,293 | ||||||||||||||
Selling, general, and administrative expenses | 17,823 | 3,206 | 641 | (3 | ) | 21,667 | ||||||||||||||
EBITDA | 45,083 | 10,932 | (298 | ) | (86 | ) | 55,631 | |||||||||||||
Depreciation and accretion expense | 14,155 | 4,401 | 39 | — | 18,595 | |||||||||||||||
Amortization expense | 10,664 | 1,274 | 45 | — | 11,983 | |||||||||||||||
Interest expense, net | 21,767 | 3,300 | 5 | — | 25,072 | |||||||||||||||
Capital expenditures, excluding acquisitions | $ | 19,384 | $ | 14,912 | $ | 1,795 | $ | — | $ | 36,901 | ||||||||||
Additions to equipment to be leased to customers | — | — | 197 | — | 197 |
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As of or For The Year Ended December 31, 2005(1) | ||||||||||||||||
United | ||||||||||||||||
United States | Kingdom | Eliminations | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Revenue from external customers | $ | 247,143 | $ | 21,822 | $ | — | $ | 268,965 | ||||||||
Intersegment revenue | 358 | — | (358 | ) | — | |||||||||||
Cost of revenues | 195,476 | 14,208 | (236 | ) | 209,448 | |||||||||||
Selling, general, and administrative expenses | 15,543 | 2,326 | (4 | ) | 17,865 | |||||||||||
EBITDA | 35,652 | 5,136 | (119 | ) | 40,669 | |||||||||||
Depreciation and accretion expense | 10,865 | 2,086 | — | 12,951 | ||||||||||||
Amortization expense | 8,346 | 634 | — | 8,980 | ||||||||||||
Interest expense, net | 20,777 | 1,649 | — | 22,426 | ||||||||||||
Capital expenditures, excluding acquisitions | $ | 23,344 | $ | 8,582 | $ | — | $ | 31,926 |
(1) | No information is shown in 2005 and 2006 for the Company’s Advanced Functionality operations, as they were not acquired until 2007. Additionally, no information is shown in 2005 for the Company’s Mexico operations, as they were not acquired until 2006. |
December 31, | December 31, | |||||||
2007 | 2006 | |||||||
(in thousands) | ||||||||
Identifiable Assets: | ||||||||
United States | $ | 409,120 | $ | 238,127 | ||||
United Kingdom | 163,464 | 126,070 | ||||||
Mexico | 12,337 | 3,559 | ||||||
Advanced Functionality | 6,364 | — | ||||||
Total | $ | 591,285 | $ | 367,756 | ||||
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Year Ended December 31, 2007 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | — | $ | 310,160 | $ | 68,220 | $ | (82 | ) | $ | 378,298 | |||||||||
Operating costs and expenses | 1,253 | 302,733 | 64,450 | (57 | ) | 368,379 | ||||||||||||||
Operating income (loss) | (1,253 | ) | 7,427 | 3,770 | (25 | ) | 9,919 | |||||||||||||
Interest expense, net | 8,269 | 18,152 | 4,743 | — | 31,164 | |||||||||||||||
Equity in (earnings) losses of subsidiaries | 13,206 | — | — | (13,206 | ) | — | ||||||||||||||
Other expense, net | (112 | ) | 1,085 | 500 | (264 | ) | 1,209 | |||||||||||||
(Loss) income before income taxes | (22,616 | ) | (11,810 | ) | (1,473 | ) | 13,445 | (22,454 | ) | |||||||||||
Income tax expense (benefit) | 4,713 | 207 | (284 | ) | — | 4,636 | ||||||||||||||
Net (loss) income | (27,329 | ) | (12,017 | ) | (1,189 | ) | 13,445 | (27,090 | ) | |||||||||||
Preferred stock conversion and accretion expense | 36,272 | — | — | — | 36,272 | |||||||||||||||
Net (loss) income available to common stockholders | $ | (63,601 | ) | $ | (12,017 | ) | $ | (1,189 | ) | $ | 13,445 | $ | (63,362 | ) | ||||||
Year Ended December 31, 2006 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | — | $ | 250,765 | $ | 43,180 | $ | (340 | ) | $ | 293,605 | |||||||||
Operating costs and expenses | 865 | 235,450 | 37,480 | (257 | ) | 273,538 | ||||||||||||||
Operating income (loss) | (865 | ) | 15,315 | 5,700 | (83 | ) | 20,067 | |||||||||||||
Interest expense, net | 8,491 | 13,276 | 3,305 | — | 25,072 | |||||||||||||||
Equity in (earnings) losses of subsidiaries | (8,151 | ) | — | — | 8,151 | — | ||||||||||||||
Other (income) expense, net | (175 | ) | (5,639 | ) | 826 | 2 | (4,986 | ) | ||||||||||||
(Loss) income before income taxes | (1,030 | ) | 7,678 | 1,569 | (8,236 | ) | (19 | ) | ||||||||||||
Income tax expense (benefit) | (584 | ) | 278 | 818 | — | 512 | ||||||||||||||
Net (loss) income | (446 | ) | 7,400 | 751 | (8,236 | ) | (531 | ) | ||||||||||||
Preferred stock accretion expense | 265 | — | — | — | 265 | |||||||||||||||
Net (loss) income available to common stockholders | $ | (711 | ) | $ | 7,400 | $ | 751 | $ | (8,236 | ) | $ | (796 | ) | |||||||
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Year Ended December 31, 2005 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues | $ | — | $ | 247,501 | $ | 21,822 | $ | (358 | ) | $ | 268,965 | |||||||||
Operating costs and expenses | 2,547 | 227,682 | 19,254 | (239 | ) | 249,244 | ||||||||||||||
Operating income (loss) | (2,547 | ) | 19,819 | 2,568 | (119 | ) | 19,721 | |||||||||||||
Interest expense, net | 8,062 | 12,715 | 1,649 | — | 22,426 | |||||||||||||||
Equity in (earnings) losses of subsidiaries | (6,399 | ) | — | — | 6,399 | — | ||||||||||||||
Other expense, net | — | 830 | 153 | — | 983 | |||||||||||||||
(Loss) income before income taxes | (4,210 | ) | 6,274 | 766 | (6,518 | ) | (3,688 | ) | ||||||||||||
Income tax expense (benefit) | (1,911 | ) | 412 | 229 | — | (1,270 | ) | |||||||||||||
Net (loss) income | (2,299 | ) | 5,862 | 537 | (6,518 | ) | (2,418 | ) | ||||||||||||
Preferred stock dividends and accretion expense | 1,395 | — | — | — | 1,395 | |||||||||||||||
Net (loss) income available to common stockholders | $ | (3,694 | ) | $ | 5,862 | $ | 537 | $ | (6,518 | ) | $ | (3,813 | ) | |||||||
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As of December 31, 2007 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 76 | $ | 11,576 | $ | 1,787 | $ | — | $ | 13,439 | ||||||||||
Receivables, net | (292 | ) | 20,894 | 2,713 | (67 | ) | 23,248 | |||||||||||||
Other current assets | 1,031 | 8,781 | 10,876 | (590 | ) | 20,098 | ||||||||||||||
Total current assets | 815 | 41,251 | 15,376 | (657 | ) | 56,785 | ||||||||||||||
Property and equipment, net | — | 99,764 | 64,360 | (212 | ) | 163,912 | ||||||||||||||
Intangible assets, net | 8,768 | 106,808 | 15,325 | — | 130,901 | |||||||||||||||
Goodwill | — | 150,445 | 84,740 | — | 235,185 | |||||||||||||||
Investments and advances to subsidiaries | 50,249 | — | — | (50,249 | ) | — | ||||||||||||||
Intercompany receivable | (863 | ) | 6,395 | (5,532 | ) | — | — | |||||||||||||
Prepaid expenses and other assets | 368,424 | 2,970 | 1,532 | (368,424 | ) | 4,502 | ||||||||||||||
Total assets | $ | 427,393 | $ | 407,633 | $ | 175,801 | $ | (419,542 | ) | $ | 591,285 | |||||||||
Liabilities and Stockholders’ Equity (Deficit): | ||||||||||||||||||||
Current portion of long-term debt and notes payable | $ | — | $ | — | $ | 882 | $ | — | $ | 882 | ||||||||||
Current portion of capital lease obligations | — | 1,147 | — | — | 1,147 | |||||||||||||||
Current portion of other long-term liabilities | — | 16,032 | 169 | — | 16,201 | |||||||||||||||
Accounts payable and accrued liabilities | 12,808 | 66,726 | 26,027 | (652 | ) | 104,909 | ||||||||||||||
Total current liabilities | 12,808 | 83,905 | 27,078 | (652 | ) | 123,139 | ||||||||||||||
Long-term debt, less current portion | 300,088 | 265,725 | 110,343 | (368,423 | ) | 307,733 | ||||||||||||||
Capital lease obligations, less current portion | — | 982 | — | — | 982 | |||||||||||||||
Deferred tax liability | 7,386 | 980 | 3,114 | — | 11,480 | |||||||||||||||
Asset retirement obligations | — | 12,332 | 5,116 | — | 17,448 | |||||||||||||||
Other non-current liabilities and minority interest | — | 22,868 | 524 | — | 23,392 | |||||||||||||||
Total liabilities | 320,282 | 386,792 | 146,175 | (369,075 | ) | 484,174 | ||||||||||||||
Stockholders’ equity (deficit) | 107,111 | 20,841 | 29,626 | (50,467 | ) | 107,111 | ||||||||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 427,393 | $ | 407,633 | $ | 175,801 | $ | (419,542 | ) | $ | 591,285 | |||||||||
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As of December 31, 2006 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 97 | $ | 1,818 | $ | 803 | $ | — | $ | 2,718 | ||||||||||
Receivables, net | 3,463 | 13,068 | 1,966 | (3,606 | ) | 14,891 | ||||||||||||||
Other current assets | 544 | 14,069 | 6,204 | (39 | ) | 20,778 | ||||||||||||||
Total current assets | 4,104 | 28,955 | 8,973 | (3,645 | ) | 38,387 | ||||||||||||||
Property and equipment, net | — | 59,512 | 27,326 | (170 | ) | 86,668 | ||||||||||||||
Intangible assets, net | 6,982 | 45,757 | 15,024 | — | 67,763 | |||||||||||||||
Goodwill | — | 86,702 | 82,861 | — | 169,563 | |||||||||||||||
Investments and advances to subsidiaries | 81,076 | — | — | (81,076 | ) | — | ||||||||||||||
Intercompany receivable | (122 | ) | 5,046 | (4,924 | ) | — | — | |||||||||||||
Prepaid expenses and other assets | 211,175 | 5,006 | 369 | (211,175 | ) | 5,375 | ||||||||||||||
Total assets | $ | 303,215 | $ | 230,978 | $ | 129,629 | $ | (296,066 | ) | $ | 367,756 | |||||||||
Liabilities and Stockholders’ Equity (Deficit): | ||||||||||||||||||||
Current portion of long-term debt and notes payable | $ | — | $ | — | $ | 194 | $ | — | $ | 194 | ||||||||||
Current portion of other long-term liabilities | — | 2,458 | 43 | — | 2,501 | |||||||||||||||
Accounts payable and accrued liabilities | 8,458 | 32,202 | 14,218 | (3,622 | ) | 51,256 | ||||||||||||||
Total current liabilities | 8,458 | 34,660 | 14,455 | (3,622 | ) | 53,951 | ||||||||||||||
Long-term debt, less current portion | 251,883 | 132,351 | 79,641 | (211,174 | ) | 252,701 | ||||||||||||||
Deferred tax liability | 3,340 | 1,040 | 3,245 | — | 7,625 | |||||||||||||||
Asset retirement obligations | — | 7,673 | 2,316 | — | 9,989 | |||||||||||||||
Other non-current liabilities and minority interest | 108 | 3,806 | 150 | — | 4,064 | |||||||||||||||
Total liabilities | 263,789 | 179,530 | 99,807 | (214,796 | ) | 328,330 | ||||||||||||||
Preferred stock | 76,594 | — | — | — | 76,594 | |||||||||||||||
Stockholders’ equity (deficit) | (37,168 | ) | 51,448 | 29,822 | (81,270 | ) | (37,168 | ) | ||||||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 303,215 | $ | 230,978 | $ | 129,629 | $ | (296,066 | ) | $ | 367,756 | |||||||||
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Year Ended December 31, 2007 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (4,509 | ) | $ | 39,986 | $ | 19,985 | $ | — | $ | 55,462 | |||||||||
Additional to property and equipment, net of proceeds from sale of property and equipment | — | (30,748 | ) | (37,569 | ) | — | (68,317 | ) | ||||||||||||
Payments for exclusive license agreements and site acquisition costs | — | (1,133 | ) | (1,860 | ) | — | (2,993 | ) | ||||||||||||
Additions to equipment to be leased to customers, net of principal payments received under direct financing leases | — | — | (514 | ) | — | (514 | ) | |||||||||||||
Acquisitions, net of cash acquired | — | (135,009 | ) | — | — | (135,009 | ) | |||||||||||||
Proceeds from sale of Winn-Dixie equity securities | — | 3,950 | — | — | 3,950 | |||||||||||||||
Net cash (used in) provided by investing activities | — | (162,940 | ) | (39,943 | ) | — | (202,883 | ) | ||||||||||||
Proceeds from issuance of long-term debt | 185,934 | 166,635 | 19,957 | (184,782 | ) | 187,744 | ||||||||||||||
Repayments of long-term debt and capital leases | (140,100 | ) | (33,733 | ) | (192 | ) | 33,260 | (140,765 | ) | |||||||||||
Issuance of long-term notes receivable | (184,782 | ) | — | — | 184,782 | — | ||||||||||||||
Payments received on long-term notes receivable | 33,260 | — | — | (33,260 | ) | — | ||||||||||||||
Proceeds from borrowing under bank overdraft facility, net | — | — | 642 | — | 642 | |||||||||||||||
Issuance of capital stock | 111,552 | (736 | ) | 547 | — | 111,363 | ||||||||||||||
Minority interest shareholder capital contribution | — | 547 | — | — | 547 | |||||||||||||||
Other financing activities | (1,376 | ) | — | — | — | (1,376 | ) | |||||||||||||
Net cash (used in) provided by financing activities | 4,488 | 132,713 | 20,954 | — | 158,155 | |||||||||||||||
Effect of exchange rate changes | — | — | (13 | ) | — | (13 | ) | |||||||||||||
Net (decrease) increase in cash and cash equivalents | (21 | ) | 9,759 | 983 | — | 10,721 | ||||||||||||||
Cash and cash equivalents at beginning of period | 97 | 1,818 | 803 | — | 2,718 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 76 | $ | 11,577 | $ | 1,786 | $ | — | $ | 13,439 | ||||||||||
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Table of Contents
Year Ended December 31, 2006 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (12,716 | ) | $ | 27,485 | $ | 10,677 | $ | — | $ | 25,446 | |||||||||
Additions to property and equipment, net of proceeds from sale of property and equipment | — | (17,534 | ) | (14,873 | ) | — | (32,407 | ) | ||||||||||||
Payments for exclusive license agreements and site acquisition costs | — | (2,486 | ) | (871 | ) | — | (3,357 | ) | ||||||||||||
Additions to equipment to be leased to customers, net of principal payments received under direct financing leases | — | — | (197 | ) | — | (197 | ) | |||||||||||||
Acquisitions, net of cash acquired | (1,039 | ) | 27 | — | 1,000 | (12 | ) | |||||||||||||
Net cash (used in) provided by investing activities | (1,039 | ) | (19,993 | ) | (15,941 | ) | 1,000 | (35,973 | ) | |||||||||||
Proceeds from issuance of long-term debt | 44,800 | 18,200 | 861 | (18,200 | ) | 45,661 | ||||||||||||||
Repayments of long-term debt | (37,500 | ) | (25,400 | ) | (3 | ) | 25,400 | (37,503 | ) | |||||||||||
Issuance of long-term notes receivable | (18,200 | ) | — | — | 18,200 | — | ||||||||||||||
Payments received on long-term notes receivable | 25,400 | — | — | (25,400 | ) | — | ||||||||||||||
Proceeds from borrowing under bank overdraft facility, net | — | — | 3,818 | — | 3,818 | |||||||||||||||
Issuance of capital stock | — | — | 1,000 | (1,000 | ) | — | ||||||||||||||
Purchase of treasury stock | (50 | ) | — | — | — | (50 | ) | |||||||||||||
Other financing activities | (716 | ) | (18 | ) | — | — | (734 | ) | ||||||||||||
Net cash (used in) provided by financing activities | 13,734 | (7,218 | ) | 5,676 | (1,000 | ) | 11,192 | |||||||||||||
Effect of exchange rate changes | — | — | 354 | — | 354 | |||||||||||||||
Net (decrease) increase in cash and cash equivalents | (21 | ) | 274 | 766 | — | 1,019 | ||||||||||||||
Cash and cash equivalents at beginning of period | 118 | 1,544 | 37 | — | 1,699 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 97 | $ | 1,818 | $ | 803 | $ | — | $ | 2,718 | ||||||||||
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Table of Contents
Year Ended December 31, 2005 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantors | Guarantors | Eliminations | Total | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Cash flows provided by (used in) operating activities | $ | (4,607 | ) | $ | 32,563 | $ | 5,271 | $ | — | $ | 33,227 | |||||||||
Capital expenditures, net | — | (22,300 | ) | (4,883 | ) | — | (27,183 | ) | ||||||||||||
Payments for exclusive license agreements and site acquisition costs | — | (988 | ) | (3,677 | ) | — | (4,665 | ) | ||||||||||||
Acquisitions, net of cash acquired | (25,369 | ) | (17,108 | ) | (88,669 | ) | 23,034 | (108,112 | ) | |||||||||||
Cash flows (used in) provided by investing activities | (25,369 | ) | (40,396 | ) | (97,229 | ) | 23,034 | (139,960 | ) | |||||||||||
Proceeds from issuance of long-term debt | 451,056 | 173,037 | 66,235 | (212,319 | ) | 478,009 | ||||||||||||||
Repayments of long-term debt | (206,600 | ) | (162,141 | ) | — | 6,600 | (362,141 | ) | ||||||||||||
Issuance of long-term notes receivable | (215,083 | ) | — | — | 215,083 | — | ||||||||||||||
Payments received on long-term notes receivable | 6,600 | — | — | (6,600 | ) | — | ||||||||||||||
Issuance of preferred stock | 73,142 | — | — | 155 | 73,297 | |||||||||||||||
Redemption of preferred stock | (24,795 | ) | — | — | — | (24,795 | ) | |||||||||||||
Purchase of treasury stock | (46,453 | ) | — | — | — | (46,453 | ) | |||||||||||||
Issuance of capital stock | 88 | — | 25,954 | (25,953 | ) | 89 | ||||||||||||||
Other financing activities | (7,861 | ) | (2,931 | ) | — | — | (10,792 | ) | ||||||||||||
Cash flows (used in) provided by financing activities | 30,094 | 7,965 | 92,189 | (23,034 | ) | 107,214 | ||||||||||||||
Effect of exchange rate changes | — | — | (194 | ) | — | (194 | ) | |||||||||||||
Increase in cash and cash equivalents | 118 | 132 | 37 | — | 287 | |||||||||||||||
Cash and cash equivalents at beginning of period | — | 1,412 | — | — | 1,412 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 118 | $ | 1,544 | $ | 37 | $ | — | $ | 1,699 | ||||||||||
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Quarters Ended | ||||||||||||||||||||
March 31 | June 30 | September 30 | December 31 | Total | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||
2007 | ||||||||||||||||||||
Total revenues | $ | 74,518 | $ | 77,239 | $ | 110,587 | $ | 115,954 | $ | 378,298 | ||||||||||
Gross profit(1) | 16,985 | 17,607 | 24,866 | 25,547 | 85,005 | |||||||||||||||
Net loss(2) | (3,387 | ) | (5,615 | ) | (10,683 | ) | (7,405 | ) | (27,090 | ) | ||||||||||
Net loss available to common stockholders(2) | (3,454 | ) | (5,681 | ) | (10,750 | ) | (43,477 | ) | (63,362 | ) | ||||||||||
Basic and diluted net loss per common share(2) | $ | (0.25 | ) | $ | (0.41 | ) | $ | (0.77 | ) | $ | (2.22 | ) | $ | (4.11 | ) | |||||
2006 | ||||||||||||||||||||
Total revenues | $ | 69,141 | $ | 73,254 | $ | 76,365 | $ | 74,845 | $ | 293,605 | ||||||||||
Gross profit(3) | 16,043 | 18,370 | 18,980 | 18,919 | 72,312 | |||||||||||||||
Net income (loss)(4) | (3,124 | ) | 769 | (327 | ) | 2,151 | (531 | ) | ||||||||||||
Net income (loss) available to common stockholders(4) | (3,190 | ) | 703 | (394 | ) | 2,085 | (796 | ) | ||||||||||||
Net income (loss) per common share(4): | ||||||||||||||||||||
Basic | $ | (0.23 | ) | $ | 0.05 | $ | (0.03 | ) | $ | 0.15 | $ | (0.06 | ) | |||||||
Diluted | $ | (0.23 | ) | $ | 0.03 | $ | (0.03 | ) | $ | 0.09 | $ | (0.06 | ) | |||||||
(1) | Excludes $8.5 million, $7.1 million, $15.7 million and $11.8 million of depreciation, accretion, and amortization for the quarters ended March 31, June 30, September 30, and December 31, respectively. | |
(2) | Includes pre-tax impairment changes of $0.1 million, $5.2 million, and $0.4 million for the quarters ended March 31, September 30, and December 31, respectively. | |
(3) | Excludes $8.9 million, $6.6 million, $7.1 million and $6.6 million of depreciation, accretion, and amortization for the quarters ended March 31, June 30, September 30, and December 31, respectively. | |
(4) | Includes pre-tax impairment charge of $2.8 million related to certain contract-based intangible assets for the quarter ended March 31. Includes $4.8 million in other income in the quarter ended December 31 primarily related to settlement proceeds received from Winn-Dixie, one of the Company’s merchant customers, as a part of that company’s emergence from bankruptcy. |
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F-86
Table of Contents
December 31, | June 30, | |||||||
2006 | 2007 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash | $ | 13,015 | $ | 10,304 | ||||
Accounts receivable | 74,565 | 65,868 | ||||||
Other current assets | 7,215 | 2,986 | ||||||
Total current assets | 94,795 | 79,158 | ||||||
Property and equipment, net | 90,484 | 85,901 | ||||||
Goodwill | 35,593 | 35,593 | ||||||
Total assets | $ | 220,872 | $ | 200,652 | ||||
Liabilities and Shareholder’s Equity | ||||||||
Current liabilities | ||||||||
Accrued expenses and other liabilities | $ | 72,242 | $ | 69,020 | ||||
Capital lease obligations due within one year | 1,465 | 1,244 | ||||||
Total current liabilities | 73,707 | 70,264 | ||||||
Deferred credits and other liabilities | 13,004 | 11,594 | ||||||
Long-term capital lease obligations | 1,900 | 1,381 | ||||||
Commitments and contingencies | ||||||||
Shareholder’s equity | ||||||||
Common stock, $.10 par value | — | — | ||||||
Additional paid-in capital | 128,273 | 111,570 | ||||||
Accumulated earnings | 3,988 | 5,843 | ||||||
Total shareholder’s equity | 132,261 | 117,413 | ||||||
Total liabilities and shareholder’s equity | $ | 220,872 | $ | 200,652 | ||||
F-87
Table of Contents
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2006 | 2007 | 2006 | 2007 | |||||||||||||
restated | ||||||||||||||||
Revenues: | ||||||||||||||||
Commissions | $ | 39,449 | $ | 37,111 | $ | 71,030 | $ | 73,464 | ||||||||
Other income | 5,407 | 951 | 10,049 | 6,119 | ||||||||||||
Total revenues | 44,856 | 38,062 | 81,079 | 79,583 | ||||||||||||
Expenses: | ||||||||||||||||
Commission expense to 7-Eleven | 12,343 | 13,709 | 23,273 | 26,124 | ||||||||||||
Other expenses | 22,735 | 25,312 | 47,338 | 50,347 | ||||||||||||
Operating, selling, general and administrative expenses | 35,078 | 39,021 | 70,611 | 76,471 | ||||||||||||
Interest expense, net | 170 | 42 | 408 | 91 | ||||||||||||
Total expenses | 35,248 | 39,063 | 71,019 | 76,562 | ||||||||||||
Earnings (loss) before income taxes | 9,608 | (1,001 | ) | 10,060 | 3,021 | |||||||||||
Income tax expense (benefit) | 3,709 | (386 | ) | 3,883 | 1,166 | |||||||||||
Net earnings (loss) | $ | 5,899 | $ | (615 | ) | $ | 6,177 | $ | 1,855 | |||||||
F-88
Table of Contents
Six Months Ended June 30 | ||||||||
2006 | 2007 | |||||||
restated | ||||||||
Cash Flows From Operating Activities | ||||||||
Net earnings | $ | 6,177 | $ | 1,855 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation and amortization of equipment | 7,516 | 9,121 | ||||||
Deferred income taxes | 690 | (763 | ) | |||||
Net (gain) loss on disposal of equipment | (9 | ) | 36 | |||||
(Increase) decrease in accounts receivable | (2,414 | ) | 8,697 | |||||
Decrease in other assets | 3,557 | 4,195 | ||||||
Decrease in trade accounts payable and other liabilities | (14,798 | ) | (3,835 | ) | ||||
Net cash provided by operating activities | 719 | 19,306 | ||||||
Cash Flows From Investing Activities | ||||||||
Payments for purchase of equipment | (12,188 | ) | (4,574 | ) | ||||
Net cash used in investing activities | (12,188 | ) | (4,574 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Principal payments under capital lease obligations | (4,203 | ) | (740 | ) | ||||
Capital contributions from (returned to) 7-Eleven, net | 35,650 | (16,703 | ) | |||||
Payments related to capital lease purchase | (22,639 | ) | — | |||||
Net cash provided by (used in) financing activities | 8,808 | (17,443 | ) | |||||
Net decrease in cash | (2,661 | ) | (2,711 | ) | ||||
Cash at beginning of year | 15,392 | 13,015 | ||||||
Cash at end of period | $ | 12,731 | $ | 10,304 | ||||
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Table of Contents
NOTE 1: | Basis of Presentation and Summary of Significant Accounting Policies |
2006 | ||||||||
Impact of | As | |||||||
restatement | restated | |||||||
(dollars in thousands) | ||||||||
Six Months Ended June 30: | ||||||||
OSG&A | $ | 210 | $ | 70,611 | ||||
Earnings before income taxes | (210 | ) | 10,060 | |||||
Income tax expense | (81 | ) | 3,883 | |||||
Net earnings | (129 | ) | 6,177 | |||||
Net cash provided by operating activities | (2 | ) | 719 | |||||
Net cash provided by financing activities | 2 | 8,808 |
F-90
Table of Contents
NOTE 2: | Recently Issued Accounting Standards |
NOTE 3: | Subsequent Event |
F-91
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F-92
Table of Contents
F-93
Table of Contents
December 31, | December 31, | |||||||
2005 | 2006 | |||||||
restated | restated | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash | $ | 15,392 | $ | 13,015 | ||||
Accounts receivable | 43,093 | 74,565 | ||||||
Other current assets | 9,094 | 7,215 | ||||||
Total current assets | 67,579 | 94,795 | ||||||
Property and equipment, net | 86,970 | 90,484 | ||||||
Goodwill | 35,593 | 35,593 | ||||||
Other assets | 34 | — | ||||||
Total assets | $ | 190,176 | $ | 220,872 | ||||
Liabilities and Shareholder’s Equity | ||||||||
Current liabilities | ||||||||
Accrued expenses and other liabilities | $ | 50,002 | $ | 72,242 | ||||
Capital lease obligations due within one year | 9,008 | 1,465 | ||||||
Total current liabilities | 59,010 | 73,707 | ||||||
Deferred credits and other liabilities | 18,912 | 13,004 | ||||||
Long-term capital lease obligations | 21,921 | 1,900 | ||||||
Commitments and contingencies | ||||||||
Shareholder’s equity | ||||||||
Common stock, $.10 par value; 1,000 shares issued and outstanding | — | — | ||||||
Additional paid-in capital | 97,122 | 128,273 | ||||||
Accumulated (deficit) earnings | (6,789 | ) | 3,988 | |||||
Total shareholder’s equity | 90,333 | 132,261 | ||||||
Total liabilities and shareholder’s equity | $ | 190,176 | $ | 220,872 | ||||
F-94
Table of Contents
Years Ended December 31 | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
restated | restated | |||||||||||
Revenues: | ||||||||||||
Commissions | $ | 65,363 | $ | 138,243 | $ | 142,735 | ||||||
Other income | 31,754 | 19,748 | 20,927 | |||||||||
Total revenues | 97,117 | 157,991 | 163,662 | |||||||||
Expenses: | ||||||||||||
Commission expense to 7-Eleven | 25,816 | 47,413 | 49,233 | |||||||||
Other expenses | 68,577 | 101,657 | 96,356 | |||||||||
Operating, selling, general and administrative expenses | 94,393 | 149,070 | 145,589 | |||||||||
Interest expense, net | 909 | 1,056 | 520 | |||||||||
Total expenses | 95,302 | 150,126 | 146,109 | |||||||||
Earnings before income taxes | 1,815 | 7,865 | 17,553 | |||||||||
Income tax expense | 702 | 3,036 | 6,776 | |||||||||
Net earnings | $ | 1,113 | $ | 4,829 | $ | 10,777 | ||||||
F-95
Table of Contents
Years Ended December 31 | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
restated | restated | |||||||||||
Cash Flows from Operating Activities | ||||||||||||
Net earnings | $ | 1,113 | $ | 4,829 | $ | 10,777 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization of equipment | 12,465 | 14,456 | 15,820 | |||||||||
Deferred income taxes | 1,815 | 2,454 | 228 | |||||||||
Net loss (gain) on disposal of equipment | 116 | (13 | ) | (115 | ) | |||||||
Increase in accounts receivable | (16,274 | ) | (13,326 | ) | (31,472 | ) | ||||||
Increase in other assets | (919 | ) | (1,437 | ) | (708 | ) | ||||||
Increase in trade accounts payable and other liabilities | 18,078 | 18,508 | 18,725 | |||||||||
Net cash provided by operating activities | 16,394 | 25,471 | 13,255 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Payments for purchase of equipment | (11,151 | ) | (26,296 | ) | (19,325 | ) | ||||||
Proceeds from sale of equipment | 1,243 | 13 | 106 | |||||||||
Acquisition of a business | (44,743 | ) | — | — | ||||||||
Net cash used in investing activities | (54,651 | ) | (26,283 | ) | (19,219 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||||
Principal payments under capital lease obligations | (6,348 | ) | (9,549 | ) | (4,932 | ) | ||||||
Capital contributions from 7-Eleven, net | 54,324 | 15,713 | 31,151 | |||||||||
Payments related to capital lease purchase | — | — | (22,632 | ) | ||||||||
Payments to 7-Eleven for return of Vcomtm kiosks’ cash inventory | (96,298 | ) | — | — | ||||||||
Net cash (used in) provided by financing activities | (48,322 | ) | 6,164 | 3,587 | ||||||||
Net (decrease) increase in cash | (86,579 | ) | 5,352 | (2,377 | ) | |||||||
Cash at beginning of year | 96,619 | 10,040 | 15,392 | |||||||||
Cash at end of year | $ | 10,040 | $ | 15,392 | $ | 13,015 | ||||||
Related disclosures for cash flow reporting | ||||||||||||
Assets obtained by entering into capital leases | $ | 3,291 | $ | — | $ | — | ||||||
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Table of Contents
Common | ||||||||||||||||||||
Stock | Additional | Accumulated | ||||||||||||||||||
Par | Paid-in | (Deficit) | Shareholder’s | |||||||||||||||||
Shares | Value | Capital | Earnings | Equity | ||||||||||||||||
Balance at December 31, 2003 | 1 | $ | — | $ | 123,383 | $ | (12,731 | ) | $ | 110,652 | ||||||||||
Net earnings | 1,113 | 1,113 | ||||||||||||||||||
Payments to 7-Eleven for return of Vcomtm kiosks’ cash inventory | (96,298 | ) | (96,298 | ) | ||||||||||||||||
Capital contributions from 7-Eleven, net | 54,324 | 54,324 | ||||||||||||||||||
Balance at December 31, 2004 | 1 | — | 81,409 | (11,618 | ) | 69,791 | ||||||||||||||
Net earnings, as restated (see Note 1) | 4,829 | 4,829 | ||||||||||||||||||
Capital contributions from 7-Eleven, net, as restated (see Note 1) | 15,713 | 15,713 | ||||||||||||||||||
Balance at December 31, 2005, as restated | 1 | — | 97,122 | (6,789 | ) | 90,333 | ||||||||||||||
Net earnings, as restated (see Note 1) | 10,777 | 10,777 | ||||||||||||||||||
Capital contributions from 7-Eleven, net, as restated (see Note 1) | 31,151 | 31,151 | ||||||||||||||||||
Balance at December 31, 2006, as restated | 1 | $ | — | $ | 128,273 | $ | 3,988 | $ | 132,261 | |||||||||||
F-97
Table of Contents
YEARS ENDED DECEMBER 31, 2004, 2005 and 2006
NOTE 1: | Basis of Presentation and Summary of Significant Accounting Policies |
F-98
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
2005 | 2006 | |||||||||||||||
Impact of | Impact of | |||||||||||||||
Restatement | As Restated | Restatement | As Restated | |||||||||||||
(dollars in thousands) | ||||||||||||||||
As of December 31: | ||||||||||||||||
Total current assets | — | — | $ | (379 | ) | $ | 94,795 | |||||||||
Property and equipment, net | — | — | (1,333 | ) | 90,484 | |||||||||||
Total current liabilities | — | — | (99 | ) | 73,707 | |||||||||||
Deferred credits and other liabilities | — | — | (168 | ) | 13,004 | |||||||||||
Additional paid-in capital | $ | 1,066 | $ | 97,122 | 57 | 128,273 | ||||||||||
Accumulated (deficit) earnings | (1,066 | ) | (6,789 | ) | (1,502 | ) | 3,988 | |||||||||
Year Ended December 31: | ||||||||||||||||
OSG&A | $ | 1,736 | $ | 149,070 | $ | 709 | $ | 145,589 | ||||||||
Earnings before income taxes | (1,736 | ) | 7,865 | (709 | ) | 17,553 | ||||||||||
Income tax expense | (670 | ) | 3,036 | (273 | ) | 6,776 | ||||||||||
Net earnings | (1,066 | ) | 4,829 | (436 | ) | 10,777 | ||||||||||
Net cash provided by operating activities | (1,066 | ) | 25,471 | 106 | 13,255 | |||||||||||
Net cash used in investing activities | — | — | 903 | (19,219 | ) | |||||||||||
Net cash provided by financing activities | 1,066 | 6,164 | (1,009 | ) | 3,587 |
F-99
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
Years | ||||
Leasehold improvements | 3 to 20 | |||
Equipment | 3 to 10 | |||
Software | 3 to 7 |
F-100
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
Years Ended December 31 | ||||||||
2004 | 2005 | |||||||
(dollars in thousands) | ||||||||
restated | ||||||||
Net earnings as reported | $ | 1,113 | $ | 4,829 | ||||
Add: Stock-based compensation expense included in reported net earnings, net of tax | — | 1,147 | ||||||
Less: Total stock-based compensation expense determined under the fair-value-based method for all stock-option awards, net of tax | (90 | ) | (1,019 | ) | ||||
Pro forma net earnings | $ | 1,023 | $ | 4,957 | ||||
F-101
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
NOTE 2: | Accounts Receivable |
December 31 | ||||||||
2005 | 2006 | |||||||
(dollars in thousands) | ||||||||
restated | ||||||||
ATM receivables | $ | 35,606 | $ | 61,787 | ||||
Placement fee receivables | 3,551 | 5,511 | ||||||
Other receivables | 3,936 | 7,267 | ||||||
$ | 43,093 | $ | 74,565 | |||||
NOTE 3: | Other Current Assets |
December 31 | ||||||||
2005 | 2006 | |||||||
(dollars in thousands) | ||||||||
Prepaid expenses | $ | 5,550 | $ | 6,291 | ||||
Deferred income taxes | 3,544 | 924 | ||||||
$ | 9,094 | $ | 7,215 | |||||
NOTE 4: | Property and Equipment |
December 31 | ||||||||
2005 | 2006 | |||||||
(dollars in thousands) | ||||||||
restated | ||||||||
Cost | ||||||||
Leasehold improvements | $ | 10 | $ | 10 | ||||
Developed software | 26,772 | 28,645 | ||||||
Equipment | 48,846 | 88,335 | ||||||
75,628 | 116,990 | |||||||
Original value | ||||||||
Capital lease equipment | 46,399 | 3,699 | ||||||
122,027 | 120,689 | |||||||
Accumulated depreciation and amortization (includes $8,442 and $13,081 related to developed software) | (35,057 | ) | (30,205 | ) | ||||
$ | 86,970 | $ | 90,484 | |||||
NOTE 5: | Goodwill |
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Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
NOTE 6: | Accrued Expenses and Other Liabilities |
December 31 | ||||||||
2005 | 2006 | |||||||
(dollars in thousands) | ||||||||
restated | ||||||||
Interest | $ | 81 | $ | 79 | ||||
Accrued advertising | 390 | 432 | ||||||
Accrued rent | 885 | 432 | ||||||
Deferred income | 2,038 | 824 | ||||||
Settlement payables | 41,180 | 65,808 | ||||||
Other | 5,428 | 4,667 | ||||||
$ | 50,002 | $ | 72,242 | |||||
NOTE 7: | Deferred Credits and Other Liabilities |
December 31 | ||||||||
2005 | 2006 | |||||||
(dollars in thousands) | ||||||||
restated | ||||||||
Deferred income taxes | $ | 13,489 | $ | 11,096 | ||||
Deferred income | 5,423 | 1,908 | ||||||
$ | 18,912 | $ | 13,004 | |||||
NOTE 8: | Leases |
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NOTES TO FINANCIAL STATEMENTS — (Continued)
Capital | Operating | |||||||
Leases | Leases | |||||||
(dollars in thousands) | ||||||||
2007 | $ | 1,638 | $ | 4,016 | ||||
2008 | 1,048 | 3,965 | ||||||
2009 | 755 | 3,837 | ||||||
2010 | 233 | 225 | ||||||
Future minimum lease payments | 3,674 | $ | 12,043 | |||||
Amount representing imputed interest | (309 | ) | ||||||
Present value of future minimum lease payments | $ | 3,365 | ||||||
2007 | $ | 1,465 | ||
2008 | 955 | |||
2009 | 716 | |||
2010 | 229 | |||
$ | 3,365 | |||
NOTE 9: | Benefit Plans |
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NOTES TO FINANCIAL STATEMENTS — (Continued)
NOTE 10: | Commitments and Contingencies |
NOTE 11: | Income Taxes |
Years Ended December 31 | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(dollars in thousands) | ||||||||||||
restated | restated | |||||||||||
Current | ||||||||||||
Federal | $ | (1,613 | ) | $ | (118 | ) | $ | 5,798 | ||||
State | 500 | 700 | 750 | |||||||||
Subtotal | (1,113 | ) | 582 | 6,548 | ||||||||
Deferred | 1,815 | 2,454 | 228 | |||||||||
Income tax expense on earnings | $ | 702 | $ | 3,036 | $ | 6,776 | ||||||
Years Ended December 31 | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(dollars in thousands) | ||||||||||||
restated | restated | |||||||||||
Tax expense at federal statutory rate | $ | 635 | $ | 2,753 | $ | 6,144 | ||||||
State income tax expense, net of federal income tax benefit | 67 | 283 | 632 | |||||||||
$ | 702 | $ | 3,036 | $ | 6,776 | |||||||
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NOTES TO FINANCIAL STATEMENTS — (Continued)
December 31 | ||||||||
2005 | 2006 | |||||||
(dollars in thousands) | ||||||||
restated | ||||||||
Deferred tax assets | ||||||||
Property and equipment | $ | 3,544 | $ | 924 | ||||
Deferred tax liabilities | ||||||||
Property and equipment | (12,178 | ) | (9,925 | ) | ||||
Intangible assets and other | (1,311 | ) | (1,171 | ) | ||||
Subtotal | (13,489 | ) | (11,096 | ) | ||||
Net deferred tax liability | $ | (9,945 | ) | $ | (10,172 | ) | ||
Deferred taxes consist of the following: | ||||||||
Current deferred tax assets | $ | 3,544 | $ | 924 | ||||
Noncurrent deferred tax liabilities | (13,489 | ) | (11,096 | ) | ||||
Net deferred tax liability | $ | (9,945 | ) | $ | (10,172 | ) | ||
NOTE 12: | Recently Issued Accounting Standards |
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By Registered & Certified Mail: | By Regular Mail or Overnight Courier: | |
WELLS FARGO BANK, N.A. Corporate Trust Operations MAC N9303-121 PO Box 1517 Minneapolis, MN 55480 | WELLS FARGO BANK, N.A. Corporate Trust Operations MAC N9303-121 Sixth & Marquette Avenue Minneapolis, MN 55479 |
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• | DTC has received your instructions to tender your Outstanding Notes; and | |
• | You agree to be bound by the terms of this Letter of Transmittal. |
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