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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the quarterly period ended March 31, 2005
 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
   For the transition period from to
 Commission file no GLOBAL CASH ACCESS, INC.  DELAWARE
    
    94-3309549(State or Other Jurisdiction of
    
    (I.R.S. Employer I.D. No.)Incorporation or Organization)3525 E. POST ROADSUITE 120LAS VEGAS, NEVADA
    
    89120(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code:(800) 833-7110 Indicate by check mark whether the Registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes þ Noo Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). YesoNoþ As of May 12, 2005, there were 1,000 shares of the Registrants common stock, $0.001 par value
per share, issued and outstanding.




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TABLE OF CONTENTS PagePart I: Financial InformationItem 1: Unaudited Condensed Consolidated Financial Statements
    
    
    3Unaudited Condensed Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004
    
    
    3Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2005 and 2004
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4: Controls and Procedures
    
    
    33Part II: Other InformationItem 1: Legal Proceedings
    
    
    34Item 6: Exhibits
    
    
    35Signatures
    
    
    36EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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PART I: FINANCIAL INFORMATION 
 ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
 GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL CASH ACCESS, L.L.C.) 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (amounts in thousands, except par value and shares)
 (unaudited)
 
 March 31,
    
    
    December 31,2005
    
    
    2004ASSETSCash and cash equivalents
    
    $
    23,720
    
    
    $
    48,877Settlement receivables
    
    
    23,127
    
    
    
    30,357Receivables, other
    
    
    3,480
    
    
    
    4,641Prepaid and other assets
    
    
    15,328
    
    
    
    13,725Property, equipment and leasehold improvements, net
    
    
    10,456
    
    
    
    10,341Goodwill, net
    
    
    156,725
    
    
    
    156,733Other intangibles, net
    
    
    15,536
    
    
    
    16,546Deferred income taxes, net
    
    
    211,074
    
    
    
    214,705Total assets
    
    $
    459,446
    
    
    $
    495,925LIABILITIES AND STOCKHOLDERS DEFICITLIABILITIES:Settlement liabilities
    
    $
    35,834
    
    
    $
    42,192Accounts payable
    
    
    19,073
    
    
    
    20,617Accrued expenses
    
    
    7,045
    
    
    
    12,258Borrowings
    
    
    446,750
    
    
    
    478,250Total liabilities
    
    
    508,702
    
    
    
    553,317COMMITMENTS AND CONTINGENCIESMINORITY INTEREST
    
    
    317
    
    
    
    87STOCKHOLDERS DEFICITCommon stock, $0.001 par value, 1,000 shares authorized and
outstanding at March 31, 2005 and December 31, 2004
    
    
    
    
    
    
    Accumulated deficit
    
    
    (50,790
    )
    
    
    (59,429
    )Accumulated other comprehensive income
    
    
    1,217
    
    
    
    1,950Total stockholders deficit
    
    
    (49,573
    )
    
    
    (57,479
    )Total liabilities and stockholders deficit
    
    $
    459,446
    
    
    $
    495,925
 See notes to unaudited condensed consolidated financial statements. 3




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GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL CASH ACCESS, L.L.C.) 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 (amounts in thousands)
 (unaudited)
 
 Three Months EndedMarch 31,2005
    
    
    2004REVENUES:Cash advance
    
    $
    56,778
    
    
    $
    50,455ATM
    
    
    43,773
    
    
    
    38,330Check services
    
    
    6,309
    
    
    
    5,838Central Credit and other revenues
    
    
    2,806
    
    
    
    2,747Total revenues
    
    
    109,666
    
    
    
    97,370COST OF REVENUES
    
    
    72,597
    
    
    
    64,940GROSS PROFIT
    
    
    37,069
    
    
    
    32,430Operating expenses
    
    
    (11,881
    )
    
    
    (10,954
    )Amortization
    
    
    (1,364
    )
    
    
    (1,438
    )Depreciation
    
    
    (1,952
    )
    
    
    (1,969
    )OPERATING INCOME
    
    
    21,872
    
    
    
    18,069INTEREST INCOME (EXPENSE), NETInterest income
    
    
    451
    
    
    
    294Interest expense
    
    
    (10,932
    )
    
    
    (3,097
    )Total interest income (expense), net
    
    
    (10,481
    )
    
    
    (2,803
    )INCOME BEFORE INCOME TAX PROVISION AND MINORITY OWNERSHIP LOSS
    
    
    11,391
    
    
    
    15,266INCOME TAX PROVISION
    
    
    (4,101
    )
    
    
    (1,163
    )INCOME BEFORE MINORITY OWNERSHIP LOSS
    
    
    7,290
    
    
    
    14,103MINORITY OWNERSHIP LOSS
    
    
    50
    
    
    
    NET INCOME
    
    
    7,340
    
    
    
    14,103Foreign currency translation
    
    
    (733
    )
    
    
    (61
    )Income tax benefit related to other comprehnsive income items
    
    
    264
    
    
    
    22COMPREHENSIVE INCOME
    
    $
    6,871
    
    
    $
    14,064
 See notes to unaudited condensed consolidated financial statements. 4




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GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL CASH ACCESS, L.L.C.) 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (amounts in thousands)
 (unaudited)
 
 Three Months EndedMarch 31,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    7,340
    
    
    $
    14,103Adjustments to reconcile net income to cash provided by
operating activities:Amortization of financing costs
    
    
    494
    
    
    
    115Amortization of intangibles
    
    
    1,364
    
    
    
    1,438Depreciation
    
    
    1,952
    
    
    
    1,969Deferred income taxes
    
    
    3,625
    
    
    
    Minority ownership loss
    
    
    (50
    )
    
    
    Changes in operating assets and liabilities:Changes in restricted cash
    
    
    
    
    
    
    (1,000
    )Settlement receivables
    
    
    7,184
    
    
    
    8,882Receivables, other
    
    
    962
    
    
    
    184Prepaid and other assets
    
    
    (2,098
    )
    
    
    (39
    )Settlement liabilities
    
    
    (6,300
    )
    
    
    (12,215
    )Accounts payable
    
    
    (1,513
    )
    
    
    1,965Accrued expenses
    
    
    (5,187
    )
    
    
    5,418Net cash provided by operating activities
    
    
    7,773
    
    
    
    20,820CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property, equipment and leasehold improvements
    
    
    (2,068
    )
    
    
    (737
    )Purchase of other intangibles
    
    
    (353
    )
    
    
    (115
    )Net cash used in investing activities
    
    
    (2,421
    )
    
    
    (852
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under credit facility
    
    
    
    
    
    
    484,087Repayments under credit facility
    
    
    (31,500
    )
    
    
    Debt issuance costs
    
    
    
    
    
    
    (2,488
    )Minority capital contributions
    
    
    280
    
    
    
    Capital contributions
    
    
    700
    
    
    
    Redemption of membership interests and distributions to partners
    
    
    
    
    
    
    (505,338
    )Net cash used in financing activities
    
    
    (30,520
    )
    
    
    (23,739
    )
 (Continued) 5




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GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL CASH ACCESS, L.L.C.) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
 
 Three Months EndedMarch 31,2005
    
    
    2004NET EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS
    
    $
    11
    
    
    $
    (6
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (25,157
    )
    
    
    (3,777
    )CASH AND CASH EQUIVALENTSBeginning of period
    
    
    48,877
    
    
    
    23,423CASH AND CASH EQUIVALENTSEnd of period
    
    $
    23,720
    
    
    $
    19,646SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    15,489
    
    
    $
    1,310Cash paid for income taxes, net of refunds
    
    $
    1,450
    
    
    $
    181SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Contribution related to forgiveness of related party payable
    
    
    
    
    
    $
    964Distribution related to forgiveness of related party receivable
    
    
    
    
    
    $
    3,166Debt issuance costs treated as a reduction of credit facility proceeds
    
    
    
    
    
    $
    10,913
 See notes to unaudited condensed consolidated financial statements. 6




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GLOBAL CASH ACCESS, INC.
AND SUBSIDIARIES

(FORMERLY GLOBAL CASH ACCESS, L.L.C.) 
 NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)  1.
    BUSINESS AND BASIS OF PRESENTATIONBusinessGlobal Cash Access, Inc. (the Company or GCA) is a financial services company
that provides cash access products and services to the gaming industry. The Company is a
wholly owned subsidiary of Global Cash Access Holdings, Inc. (Holdings), whose principal
asset is the capital stock of the Company. The Companys cash access products and services
allow gaming patrons to access funds through a variety of methods, including credit card cash
advances, point-of-sale debit card cash advances, automated teller machine (ATM)
withdrawals, check cashing transactions and money transfers. These services are provided to
patrons at gaming establishments directly by the Company or through one of its consolidated
subsidiaries: CashCall Systems, Inc. (CashCall), Global Cash Access (BVI), Inc. (BVI) or
QuikPlay, LLC (QuikPlay).The Company also owns and operates one of the leading credit reporting agencies in the gaming
industry, Central Credit, LLC (Central), and provides credit-information services and
credit-reporting history on gaming patrons to various gaming establishments. Central operates
in both international and domestic gaming markets.The accompanying unaudited condensed consolidated financial statements include the accounts of
GCA and its consolidated subsidiaries: CashCall, Central, BVI and QuikPlay.Basis of PresentationThe condensed consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Some of the information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted accounting
principles in the United States have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of management, all adjustments (which
include normal recurring adjustments) necessary for a fair presentation of results for the
interim periods have been made. The results for the three months ended March 31, 2005 are not
necessarily indicative of results to be expected for the full fiscal year.These unaudited condensed consolidated financial statements should be read in conjunction with
the annual consolidated financial statements and notes thereto included within the Companys
Annual Report on Form 10-K filed on March 10, 2005.2.
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of Consolidation On June 7, 2004, the Company was incorporated under the laws of
Delaware and became known as Global Cash Access, Inc. Prior to June 7, 2004, the Company
operated as a limited liability company and was known as Global Cash Access, L.L.C. The
unaudited condensed consolidated financial statements presented for the three months ended
March 31, 2005 and 2004 and as of December 31, 2004 include the accounts of Global Cash
Access, Inc. (and its predecessor Global Cash Access, L.L.C.), and its subsidiaries. CashCall
was contributed into the Company on March 10, 2004. The financial statements include CashCall
as a combined entity for the period prior to its contribution on March 10, 2004.All significant intercompany transactions and balances have been eliminated in consolidation. 7




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Stock-Based CompensationAs permitted by Statement of Financial Accounting Standards (SFAS)
No. 148, Accounting for Stock-Based Compensation- Transition and Disclosure, an amendment of
FASB Statement No. 123, the Company continues to apply the provisions of Accounting Principles
Board (APB) No. 25 and related interpretations in accounting for its employee stock-based
compensation. Accordingly, the intrinsic value method is used to determine the compensation
expense that is to be recognized.At March 31, 2005, the Company had no stock incentive plans, however the Company applies the
provisions of Emerging Issues Task Force (EITF) 00-23, Options Granted to Employees of
Entities under Common Control. EITF 00-23 requires the Company to record expense associated
with equity instruments granted by Holdings to the Companys employees and a corresponding
offset to capital contributions. No amounts have been expensed for the three months ended
March 31, 2005 or 2004.In the three months ended March 31, 2005, options to purchase 3.1 million shares of Holdings
Class A Common Stock were issued to employees and directors of the Company. As all options
granted had an exercise price equal to the fair value of the underlying common stock on the
date of grant, no compensation expense has been recorded related to these grants.The following table illustrates the effect on net income if the Company had applied the
fair-value recognition provisions of SFAS No. 123 to the options granted for the three months
ended March 31, 2005 and 2004, respectively (amounts in thousands): Three Months EndedMarch
31,
2005
    
    

March
31,
2004Net income, as reported
    
    $
    7,340
    
    
    $
    14,103Less: total stock-based compensation determined
under fair-value based method for all awards, net of tax
    
    
    (881
    )
    
    
    Pro forma net income
    
    $
    6,459
    
    
    $
    14,103
  The fair value of the option grants in the three months ended March 31, 2005 are
estimated on the date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used: dividend yield of zero percent; expected volatility of 50
percent; risk-free interest rate of 3.73 percent, an expected life of six years for the
options granted and an expected 10% forfeiture rate. The weighted average fair value per share
of the options granted was $7.27. There were no option grants in the three months ended March
31, 2004.Recently Issued Accounting StandardsIn December 2004, the FASB issued SFAS No. 123(R),
Share-Based Payment,which establishes accounting standards for all transactions in which an
entity exchanges its equity instruments for goods and services. SFAS No. 123(R) focuses
primarily on accounting for transactions with employees, and carries forward without change
prior guidance for share-based payments for transactions with non-employees. The provisions of
SFAS No. 123(R) are effective for fiscal years beginning after June 15, 2005. The Company
believes that the adoption of SFAS No. 123(R) will not have a material impact on its financial
position, results of operations, or cash flows.ReclassificationsCertain reclassifications have been made in the prior period unaudited
condensed consolidated financial statements to conform to the presentation used at and for the
period ended March 31, 2005. These reclassifications had no effect on the Companys
consolidated net income.3.
    ATM FUNDING AGREEMENTSBank of America Amended Treasury Services AgreementOn March 8, 2004, the Company entered
into an Amendment of the Treasury Services Agreement with Bank of America, N.A. that allowed
for the Company 8




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to utilize up to $300 million in funds owned by Bank of America to provide the
currency needed for normal operating requirements for all the Companys ATMs. For use of
these funds, GCA pays Bank of America a cash usage fee equal to the average daily balance of
funds utilized multiplied by the one-month LIBOR rate plus 25 basis points. The cash usage
interest rate in effect at March 31, 2005 was 3.06%.Site Funded ATMsThe Company operates some ATMs at customer locations where the customer
provides the cash required for ATM operational needs. The Company is required to reimburse
the customer for the amount of cash dispensed from these site-funded ATMs. As of March 31,
2005 and December 31, 2004, the Company operated 129 and 122 ATMs, respectively, that were
site funded.4.
    COMMITMENTS AND CONTINGENCIESOn March 22, 2005, the Company entered into a Patent Purchase and License Agreement (the
Patent Purchase Agreement) with USA Payments, a related party. Under terms of the Patent
Purchase Agreement, the Company has agreed to acquire the patent held by USA Payments for the
3-in-1 rollover functionality utilized in our cash advance business. The purchase price is
$10.0 million and is contingent upon Holdingss completion of an initial public offering.On October 22, 2004, we and USA Payments, as co-plaintiffs, filed a complaint in United States
District Court, District of Nevada against U.S. Bancorp d/b/a U.S. Bank, Certegy Inc., Certegy
Check Services, Inc., Game Financial Corporation and GameCash, Inc. alleging the infringement
of the patented 3-in-1 rollover functionality. In this litigation, we are seeking an
injunction against future infringement of the patent and recovery of damages as a result of
past infringement of the patent. In its response, the defendants have denied infringement and
have asserted patent invalidity. In addition, the defendants have asserted various antitrust
and unfair competition counterclaims.We are threatened with or named as a defendant in various lawsuits in the ordinary course of
business, such as personal injury claims and employment-related claims. It is not possible to
determine the ultimate disposition of these matters; however, we are of the opinion that the
final resolution of any such threatened or pending litigation, individually or in the
aggregate, is not likely to have a material adverse effect on our business, cash flow, results
of operations or financial position.5.
    BORROWINGSSenior Secured Credit FacilityIn April 2005, the Company entered into an Amended and
Restated Credit Facility (the Amended Credit Facility). The term loan portion of the
Amended Credit Facility amortizes at a rate of $2.8 million per quarter beginning with the
quarter ending June 30, 2005 continuing through the quarter ending March 31, 2009 with the
remaining balance to be repaid in equal quarterly installments of $41.8 million from June 30,
2009 through March 31, 2010. In addition, the Company is required to make additional
principal payments (within 100 days of the end of every fiscal year) based upon an applicable
percentage of the excess cash flow, as defined. The applicable percentage is 75% at leverage
levels (as determined at the end of the applicable fiscal year) greater than or equal to 4.25
times earnings before interest, taxes, depreciation and amortization (EBITDA), 50% at
leverage levels less than 4.25 times EBITDA, and 0% at leverage levels below 3.0 times EBITDA.Borrowings under the Credit Facility bear interest, at the Companys option, at either i) a
base rate plus an applicable margin or ii) LIBOR plus an applicable margin. For the term loan
portion of the Amended Credit Facility the applicable margin for LIBOR loans is 2.25% while
the applicable margin for base rate loans is 1.25%. Further reductions in the applicable
margin for term loans are possible based upon the Companys leverage ratio and credit ratings.
The revolving portion of the Amended Credit Facility has an applicable margin for LIBOR loans
of 2.50% while base rate loans have an applicable margin of 1.50%. The applicable
margin for both the term loan and revolving portion of the Amended Credit Facility may be
adjusted from time-to-time based upon the Companys leverage ratio, provided that the
applicable margins for base rate loans will always be 1% less than the applicable margins for
LIBOR loans. 9




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In March 2005, the Company made repayments of $31.5 million on the term loan. Under the terms
of our Amended Credit Facility we are required to maintain financial covenants related to our
leverage ratio, senior leverage ratio and fixed charge cover ratio. Additionally, we have a
covenant related to our allowable capital expenditures. The Company believes it was in
compliance with all of its debt covenants as of March 31, 2005.As of March 31, 2005, the Company had $3.4 million in letters of credits issued and
outstanding, which reduced amounts available under the revolving portion of the Credit
Facility.6.
    RELATED PARTY TRANSACTIONSM&C International (M&C) is the owner of approximately 38.7% of the
outstanding equity interests of Holdings. Bank of America Corporation
owns approximately 5.0% of the equity interests of Holdings.The Company made payments for software development costs to Infonox on the Web, a company
owned by M&C during each of the periods presented. A portion of the software development costs are capitalized and reflected in intangible assets
in the unaudited condensed consolidated balance sheets and the remainder are classified in
operating expenses in the unaudited condensed consolidated statements of income.GCA made payments for transaction processing services to USA Payments, a company owned by M&C.
The processing payments have been reflected in cost of revenues and operating expenses in the
unaudited condensed consolidated statements of income. Additionally, USA Payments provides
pass through invoices related mainly to gateway fees and other processing charges incurred on
behalf of the Company from unrelatedthird parties; these expenses are also
classified as part of cost of revenues.The Company uses Bank of America, N.A. for general
corporate banking purposes and is charged monthly servicing fees for these services, which are
included in operating expenses. In connection with the ATM Funding agreement, GCA obtains
cash for our ATMs from Bank of America, N.A. The fees paid to Bank of America for the
preparation of the cash used in our ATMs is included within operating expenses, while the cash
usage fee is included as part of interest expense.In April 2005, Banc of America Securities LLC, an affiliate of Bank of America Corporation,
acted as financial advisor to the Company in connection with the Amended Credit Facility. As
a fee for those services, we are obligated to pay Banc of America Securities 50% of the
difference between the interest expense we pay under the Amended Credit Facility and what we
would have paid under the prior credit facility. Our obligation to pay this fee ends in April
2006.The following table represents the transactions with related parties for the three months
ended March 31, 2005 and 2004 (amounts in thousands): 10




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Three months endedMarch 31,Name ofRelated Party
    
    Description of Transaction
    
    2005
    
    
    2004M&C Subsidiaries:Infonox on the Web
    
    Software development costs and maintenance
    
    $
    440
    
    
    $
    381expense included in operating expenses andother intangibles, netUSA Payments
    
    Transaction processing charges included in
    
    
    714
    
    
    
    615cost of revenuesUSA Payments
    
    Pass through billing related to gateway fees,
    
    
    294
    
    
    
    512telecom and other items included in cost ofrevenues and operating expensesBank of America and Subsidiaries:Bank of America, N.A.
    
    Bank fees and cash preparation fees for cash
    
    
    435
    
    
    
    78accounts maintained included within operatingexpensesBank of America, N.A.
    
    Cash usage fee included within interest expense
    
    $
    1,982
    
    
    $
    
  The following table details the amounts due from(to) these related parties that are
recorded as part of receivables, other, accounts payable and accrued expenses in the
unaudited condensed consolidated balance sheets (amounts in thousands): March 31,
    
    
    December 31,2005
    
    
    2004M&C and related companies
    
    $
    45
    
    
    $
    45Bank of America
    
    
    9
    
    
    
    6Total included within receivables, other
    
    $
    54
    
    
    $
    51USA Payments
    
    $
    (340
    )
    
    $
    (325
    )Infonox on the Web
    
    
    (100
    )
    
    
    (52
    )Bank of America
    
    
    (136
    )
    
    
    (137
    )Total included within accounts payable and
accrued expenses
    
    $
    (576
    )
    
    $
    (514
    )
 11




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7.
    PRO FORMA INCOME TAXESOn May 14, 2004, Holdings converted to a C corporation
as defined in the Internal Revenue Code. Prior to this date, the
Company was a pass through entity for U.S. federal and state income tax purposes. The
following presents the pro forma unaudited income taxes that would have been reported had the
Company been subject to U.S. federal and state income taxes as a corporation for the three
months ended March 31, 2004 (amounts in thousands): March 31,2004Income
before income tax provision and minority ownership loss - historical
    
    $
    15,266Income tax provision  historical, exclusive of tax benefit, net
    
    
    (1,163
    )Pro forma income tax provision
    
    
    (4,333
    )Minority ownership loss  historical
    
    
    Pro forma net income
    
    $
    9,770
  Pro forma income tax provision is based upon the statutory income tax rates and
adjustments to income for estimated permanent differences occurring during the period. Actual
rates and expenses could have differed had the Company been subject to U.S. federal and state
income taxes for all periods presented. Therefore, the unaudited pro forma amounts are for
informational purposes only and are intended to be indicative of the results of operations had
the Company been subject to U.S. federal and state income taxes for all periods presented.The following table presents the computation of the pro forma income tax expense for the three
month period ended March 31, 2004 (amounts in thousands ): March 31,2004Income before income taxes, as reported
    
    $
    15,266Effective pro forma income tax rate
    
    
    36.00
    %Pro forma income tax expense
    
    $
    5,496
  8.
    EQUITY AWARDSIn January 2005, Holdings adopted the 2005 Stock Incentive Plan (Stock Incentive Plan).
Under the Stock Incentive Plan, Holdings has reserved 3,841,615 shares of Class A Common
Stock for the grant of stock options and other equity incentive awards.During the three months ended March 31, 2005, the Company granted options to purchase
3,066,930 shares of Class A Common Stock at an exercise price of $13.99 per share with a four
year vesting period. There were 85,000 option cancellations during the three months ended
March 31, 2005. The following table summarizes information about stock options outstanding at
March 31, 2005: 12




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##### Table of Contents



Weighted AverageReminaing Contractual
    
    
    Weighted AverageExercise Price
    
    Number Outstanding
    
    
    Life
    
    
    Exercise Price$8.05
    
    
    722,215
    
    
    9.33 years
    
    $
    8.05$13.99
    
    
    2,981,930
    
    
    
    9.76
    
    
    $
    13.993,704,145
    
    
    
    9.68
    
    
    $
    12.83
  As of March 31, 2005, there were no options that were exercisable.9.
    SEGMENT INFORMATIONOperating segments as defined by SFAS No. 131, Disclosures About Segments of an Enterprise and
Related Information, are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating decision maker, or
decision-making group, in deciding how to allocate resources and in assessing performance. The
Companys chief operating decision-making group consists of the Chief Executive Officer and
Chief Financial Officer. The operating segments are reviewed separately because each
represents products that can be, and often are, sold separately to our customers.GCA operates in four distinct business segments: cash advance, ATM, check services and credit
reporting services. These segments are monitored separately by management for performance
against its internal forecast and are consistent with GCAs internal management reporting.Other lines of business, none of which exceed the established materiality for segment
reporting, include Western Union, direct marketing and QuikPlay, among others.The Companys business is predominantly domestic, with no specific regional concentrations.Major customers During the three months ended March 31, 2005, GCA had one customer that
generated total revenues of approximately $11.1 million from all segments. During the three
months ended March 31, 2004, one customer generated total revenues of approximately $10.2
million from all segments. The Companys contract with that customer expired on October 1,
2004 and was renewed through March 2008 in April 2005.The accounting policies of the operating segments are generally the same as those described in
the summary of significant accounting policies. The tables below present the results of
operations and total assets by operating segment as of, and for the three months ended March
31, 2005 and 2004 (amounts in thousands): 13




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##### Table of Contents



Cash
    
    
    
    
    
    
    Check
    
    
    CreditAdvance
    
    
    ATM
    
    
    Services
    
    
    Reporting
    
    
    Other
    
    
    TotalThree Months Ended March 31,
2005Revenues
    
    $
    56,778
    
    
    $
    43,773
    
    
    $
    6,309
    
    
    $
    2,354
    
    
    $
    452
    
    
    $
    109,666Depreciation and amortization
    
    
    (1,182
    )
    
    
    (2,001
    )
    
    
    (9
    )
    
    
    (3
    )
    
    
    (121
    )
    
    
    (3,316
    )Operating income
    
    
    11,310
    
    
    
    6,804
    
    
    
    2,351
    
    
    
    1,292
    
    
    
    115
    
    
    
    21,872Interest income
    
    
    451
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    451Interest expense
    
    
    (4,634
    )
    
    
    (5,554
    )
    
    
    (515
    )
    
    
    (192
    )
    
    
    (37
    )
    
    
    (10,932
    )Income taxes
    
    
    (2,566
    )
    
    
    (450
    )
    
    
    (661
    )
    
    
    (396
    )
    
    
    (28
    )
    
    
    (4,101
    )Minority ownership loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    50Net income
    
    $
    4,561
    
    
    $
    800
    
    
    $
    1,175
    
    
    $
    704
    
    
    $
    100
    
    
    $
    7,340Three Months Ended March 31,
2004Revenues
    
    $
    50,455
    
    
    $
    38,330
    
    
    $
    5,838
    
    
    $
    2,406
    
    
    $
    341
    
    
    $
    97,370Depreciation and amortization
    
    
    (1,258
    )
    
    
    (1,932
    )
    
    
    
    
    
    
    (91
    )
    
    
    (126
    )
    
    
    (3,407
    )Operating income
    
    
    9,387
    
    
    
    5,314
    
    
    
    2,224
    
    
    
    1,129
    
    
    
    15
    
    
    
    18,069Interest income
    
    
    294
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294Interest expense
    
    
    (1,076
    )
    
    
    (1,848
    )
    
    
    (120
    )
    
    
    (45
    )
    
    
    (8
    )
    
    
    (3,097
    )Income taxes
    
    
    (455
    )
    
    
    446
    
    
    
    (760
    )
    
    
    (392
    )
    
    
    (2
    )
    
    
    (1,163
    )Minority ownership loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    8,150
    
    
    $
    3,912
    
    
    $
    1,344
    
    
    $
    692
    
    
    $
    5
    
    
    $
    14,103
 March 31,
    
    
    December 31,Total Assets
    
    2005
    
    
    2004Cash advance
    
    $
    280,758
    
    
    $
    316,904ATM
    
    
    134,594
    
    
    
    133,005Check services
    
    
    2,950
    
    
    
    4,223Credit reporting
    
    
    41,068
    
    
    
    41,263Other
    
    
    76
    
    
    
    530Total assets
    
    $
    459,446
    
    
    $
    495,925
  10.
    GUARANTOR INFORMATIONThe Company issued $235 million in senior subordinated notes due 2012 (the Notes). The Notes
are guaranteed by all of the Companys domestic wholly-owned existing subsidiaries. These
guaranties are full, unconditional, joint and several. CashCall, which is a wholly owned
subsidiary, and QuikPlay, which is a consolidated joint venture do not guaranty these notes.
As such, the following consolidating schedules present separate unaudited condensed financial
statement information on a combined basis for the parent only, as well as the Companys
guarantor subsidiaries and non-guarantor subsidiaries and affiliate, as of March 31, 2005 and
December 31, 2004, and for the three months ended March 31, 2005 and 2004. 14




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##### Table of Contents



GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL CASH ACCESS, L.L.C.) CONDENSED CONSOLIDATING SCHEDULE  BALANCE SHEET INFORMATION
MARCH 31, 2005
(amounts in thousands)
(unaudited)
 
 Combined
    
    
    Combined
    
    
    EliminationParent
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Entries *
    
    
    ConsolidatedASSETSCash and cash equivalents
    
    $
    19,721
    
    
    $
    246
    
    
    $
    3,753
    
    
    $
    
    
    
    $
    23,720Settlement receivables
    
    
    22,800
    
    
    
    
    
    
    
    327
    
    
    
    
    
    
    
    23,127Receivables, other
    
    
    7,193
    
    
    
    18,953
    
    
    
    15
    
    
    
    (22,681
    )
    
    
    3,480Prepaid and other assets
    
    
    15,319
    
    
    
    4
    
    
    
    5
    
    
    
    
    
    
    
    15,328Investment in subsidiaries
    
    
    61,089
    
    
    
    
    
    
    
    
    
    
    
    (61,089
    )
    
    
    Property, equipment and
leasehold improvements, net
    
    
    10,407
    
    
    
    4
    
    
    
    45
    
    
    
    
    
    
    
    10,456Goodwill, net
    
    
    116,575
    
    
    
    39,470
    
    
    
    680
    
    
    
    
    
    
    
    156,725Other intangibles, net
    
    
    15,278
    
    
    
    178
    
    
    
    80
    
    
    
    
    
    
    
    15,536Deferred income taxes, net
    
    
    210,496
    
    
    
    
    
    
    
    578
    
    
    
    
    
    
    
    211,074TOTAL
    
    $
    478,878
    
    
    $
    58,855
    
    
    $
    5,483
    
    
    $
    (83,770
    )
    
    $
    459,446LIABILITIES AND
STOCKHOLDERS
(DEFICIT) EQUITYLIABILITIES:Settlement liabilities
    
    $
    35,595
    
    
    $
    
    
    
    $
    239
    
    
    $
    
    
    
    $
    35,834Accounts payable
    
    
    18,086
    
    
    
    764
    
    
    
    223
    
    
    
    
    
    
    
    19,073Accrued expenses
    
    
    28,372
    
    
    
    31
    
    
    
    1,323
    
    
    
    (22,681
    )
    
    
    7,045Borrowings
    
    
    446,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    446,750Total liabilities
    
    
    528,803
    
    
    
    795
    
    
    
    1,785
    
    
    
    (22,681
    )
    
    
    508,702COMMITMENTS AND CONTINGENCIESMINORITY INTEREST
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    317STOCKHOLDERS (DEFICIT) EQUITY
    
    
    (50,242
    )
    
    
    58,060
    
    
    
    3,698
    
    
    
    (61,089
    )
    
    
    (49,573
    )TOTAL
    
    $
    478,878
    
    
    $
    58,855
    
    
    $
    5,483
    
    
    $
    (83,770
    )
    
    $
    459,446
   *
    
    Eliminations include intercompany investments and management fees 15




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##### Table of Contents



GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
 (FORMERLY GLOBAL CASH ACCESS, L.L.C.)
 CONDENSED CONSOLIDATING SCHEDULE  BALANCE SHEET INFORMATION
 DECEMBER 31, 2004
 (amounts in thousands)
 (unaudited)
 
 Combined
    
    
    Combined
    
    
    EliminationParent
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Entries *
    
    
    ConsolidatedASSETSCash and
cash equivalents
    
    $
    45,037
    
    
    $
    662
    
    
    $
    3,178
    
    
    $
    
    
    
    $
    48,877Settlement receivables
    
    
    29,787
    
    
    
    
    
    
    
    570
    
    
    
    
    
    
    
    30,357Receivables, other
    
    
    6,915
    
    
    
    16,952
    
    
    
    19
    
    
    
    (19,245
    )
    
    
    4,641Prepaid and other assets
    
    
    13,713
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    13,725Investment in subsidiaries
    
    
    59,719
    
    
    
    
    
    
    
    
    
    
    
    (59,719
    )
    
    
    Property, equipment and
leasehold improvements, net
    
    
    10,341
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,341Goodwill, net
    
    
    116,575
    
    
    
    39,470
    
    
    
    688
    
    
    
    
    
    
    
    156,733Other intangibles, net
    
    
    16,512
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    16,546Deferred income taxes, net
    
    
    214,121
    
    
    
    
    
    
    
    584
    
    
    
    
    
    
    
    214,705TOTAL
    
    $
    512,720
    
    
    $
    57,118
    
    
    $
    5,051
    
    
    $
    (78,964
    )
    
    $
    495,925LIABILITIES AND
STOCKHOLDERS
(DEFICIT) EQUITYLIABILITIES:Settlement liabilities
    
    $
    41,583
    
    
    $
    
    
    
    $
    609
    
    
    $
    
    
    
    $
    42,192Accounts payable
    
    
    19,929
    
    
    
    375
    
    
    
    313
    
    
    
    
    
    
    
    20,617Accrued expenses
    
    
    30,350
    
    
    
    
    
    
    
    1,153
    
    
    
    (19,245
    )
    
    
    12,258Borrowings
    
    
    478,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478,250Total liabilities
    
    
    570,112
    
    
    
    375
    
    
    
    2,075
    
    
    
    (19,245
    )
    
    
    553,317COMMITMENTS AND CONTINGENCIESMINORITY INTEREST
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87STOCKHOLDERS (DEFICIT)
EQUITY
    
    
    (57,479
    )
    
    
    56,743
    
    
    
    2,976
    
    
    
    (59,719
    )
    
    
    (57,479
    )TOTAL
    
    $
    512,720
    
    
    $
    57,118
    
    
    $
    5,051
    
    
    $
    (78,964
    )
    
    $
    495,925
   *
    
    Eliminations include intercompany investments and management fees 16




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##### Table of Contents



GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
 (FORMERLY GLOBAL CASH ACCESS, L.L.C.)
 CONDENSED CONSOLIDATING SCHEDULE  STATEMENT OF INCOME INFORMATION
 THREE MONTHS ENDED MARCH 31, 2005
 (amounts in thousands)
 (unaudited)
 
 Combined
    
    
    Combined
    
    
    EliminationParent
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Entries *
    
    
    ConsolidatedREVENUES:Cash advance
    
    $
    55,584
    
    
    $
    
    
    
    $
    1,194
    
    
    $
    
    
    
    $
    56,778ATM
    
    
    43,773
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,773Check services
    
    
    6,217
    
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    6,309Central Credit and other revenues
    
    
    1,924
    
    
    
    2,354
    
    
    
    21
    
    
    
    (1,493
    )
    
    
    2,806Total revenues
    
    
    107,498
    
    
    
    2,446
    
    
    
    1,215
    
    
    
    (1,493
    )
    
    
    109,666COST OF REVENUES
    
    
    71,780
    
    
    
    50
    
    
    
    767
    
    
    
    
    
    
    
    72,597GROSS PROFIT
    
    
    35,718
    
    
    
    2,396
    
    
    
    448
    
    
    
    (1,493
    )
    
    
    37,069Operating expenses
    
    
    (10,653
    )
    
    
    (1,040
    )
    
    
    (312
    )
    
    
    124
    
    
    
    (11,881
    )Amortization
    
    
    (1,324
    )
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    (1,364
    )Depreciation
    
    
    (1,949
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (1,952
    )OPERATING INCOME (LOSS)
    
    
    21,792
    
    
    
    1,316
    
    
    
    133
    
    
    
    (1,369
    )
    
    
    21,872INTEREST INCOME (EXPENSE), NETInterest income
    
    
    427
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    451Interest expense
    
    
    (10,932
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,932
    )Total interest income (expense), net
    
    
    (10,505
    )
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    (10,481
    )INCOME (LOSS) BEFORE INCOME TAX PROVISION
AND MINORITY OWNERSHIP LOSS
    
    
    11,287
    
    
    
    1,316
    
    
    
    157
    
    
    
    (1,369
    )
    
    
    11,391INCOME TAX PROVISION
    
    
    (3,997
    )
    
    
    
    
    
    
    (104
    )
    
    
    
    
    
    
    (4,101
    )INCOME (LOSS) BEFORE MINORITY
OWNERSHIP LOSS
    
    
    7,290
    
    
    
    1,316
    
    
    
    53
    
    
    
    (1,369
    )
    
    
    7,290MINORITY OWNERSHIP LOSS
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50NET INCOME (LOSS)
    
    $
    7,340
    
    
    $
    1,316
    
    
    $
    53
    
    
    $
    (1,369
    )
    
    $
    7,340
   *
    
    Eliminations include earnings on subsidiaries and management fees 17




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##### Table of Contents



GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
 (FORMERLY GLOBAL CASH ACCESS, L.L.C.)
 CONDENSED CONSOLIDATING SCHEDULE  STATEMENT OF INCOME INFORMATION
 THREE MONTHS ENDED MARCH 31, 2004
 (amounts in thousands)
 (unaudited)
 
 Combined
    
    
    CombinedParent
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations *
    
    
    ConsolidatedREVENUES:Cash advance
    
    $
    49,341
    
    
    $
    
    
    
    $
    1,114
    
    
    $
    
    
    
    $
    50,455ATM
    
    
    38,330
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,330Check services
    
    
    5,838
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,838Central Credit and other revenues
    
    
    276
    
    
    
    2,667
    
    
    
    16
    
    
    
    (212
    )
    
    
    2,747Total revenues
    
    
    93,785
    
    
    
    2,667
    
    
    
    1,130
    
    
    
    (212
    )
    
    
    97,370COST OF REVENUES
    
    
    64,178
    
    
    
    58
    
    
    
    704
    
    
    
    
    
    
    
    64,940GROSS PROFIT
    
    
    29,607
    
    
    
    2,609
    
    
    
    426
    
    
    
    (212
    )
    
    
    32,430Operating expenses
    
    
    (8,348
    )
    
    
    (907
    )
    
    
    (1,798
    )
    
    
    99
    
    
    
    (10,954
    )Amortization
    
    
    (1,354
    )
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    (1,438
    )Depreciation
    
    
    (1,962
    )
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    (1,969
    )OPERATING INCOME (LOSS)
    
    
    17,943
    
    
    
    1,611
    
    
    
    (1,372
    )
    
    
    (113
    )
    
    
    18,069INTEREST INCOME (EXPENSE), NETInterest income
    
    
    239
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    294Interest expense
    
    
    (3,097
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,097
    )Total interest income (expense), net
    
    
    (2,858
    )
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    (2,803
    )INCOME (LOSS) BEFORE INCOME TAX PROVISION AND MINORITY
OWNERSHIP LOSS
    
    
    15,085
    
    
    
    1,611
    
    
    
    (1,317
    )
    
    
    (113
    )
    
    
    15,266INCOME TAX PROVISION
    
    
    (982
    )
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    (1,163
    )INCOME (LOSS) BEFORE MINORITY
OWNERSHIP LOSS
    
    
    14,103
    
    
    
    1,611
    
    
    
    (1,498
    )
    
    
    (113
    )
    
    
    14,103MINORITY OWNERSHIP LOSS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME (LOSS)
    
    $
    14,103
    
    
    $
    1,611
    
    
    $
    (1,498
    )
    
    $
    (113
    )
    
    $
    14,103
   *
    
    Eliminations include earnings on subsidiaries and management fees 18




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##### Table of Contents



GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL CASH ACCESS, L.L.C.) CONDENSED CONSOLIDATING SCHEDULE  STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2005
(amounts in thousands)
(unaudited)
 
 CombinedCombined
    
    
    Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations *
    
    
    ConsolidatedCASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    7,340
    
    
    $
    1,316
    
    
    $
    53
    
    
    $
    (1,369
    )
    
    $
    7,340Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:Amortization of financing costs
    
    
    494
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    494Amortization of intangibles
    
    
    1,324
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    1,364Depreciation
    
    
    1,949
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    1,952Deferred income taxes
    
    
    3,625
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,625Equity (income) loss
    
    
    (1,369
    )
    
    
    
    
    
    
    
    
    
    
    1,369
    
    
    
    Minority ownership loss
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50
    )Changes in operating assets and liabilities:Settlement receivables
    
    
    6,947
    
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    7,184Receivables, other
    
    
    (476
    )
    
    
    (2,001
    )
    
    
    3
    
    
    
    3,436
    
    
    
    962Prepaid and other assets
    
    
    (2,101
    )
    
    
    (4
    )
    
    
    7
    
    
    
    
    
    
    
    (2,098
    )Settlement liabilities
    
    
    (5,938
    )
    
    
    
    
    
    
    (362
    )
    
    
    
    
    
    
    (6,300
    )Accounts payable
    
    
    (1,816
    )
    
    
    389
    
    
    
    (86
    )
    
    
    
    
    
    
    (1,513
    )Accrued expenses
    
    
    (1,964
    )
    
    
    32
    
    
    
    181
    
    
    
    (3,436
    )
    
    
    (5,187
    )Net cash provided by (used in) operating activities
    
    
    7,965
    
    
    
    (228
    )
    
    
    36
    
    
    
    
    
    
    
    7,773CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property, equipment and leasehold improvements
    
    
    (2,016
    )
    
    
    (4
    )
    
    
    (48
    )
    
    
    
    
    
    
    (2,068
    )Purchase of other intangibles
    
    
    (90
    )
    
    
    (183
    )
    
    
    (80
    )
    
    
    
    
    
    
    (353
    )Investments in subsidiaries
    
    
    (700
    )
    
    
    
    
    
    
    
    
    
    
    700
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (2,806
    )
    
    
    (187
    )
    
    
    (128
    )
    
    
    700
    
    
    
    (2,421
    )
   *
    
    Eliminations include intercompany investments and management fees (Continued) 19




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##### Table of Contents



GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL CASH ACCESS, L.L.C.) CONDENSED CONSOLIDATED SCHEDULE  STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2005
(amounts in thousands)
(unaudited)
 
 Combined
    
    
    Combined Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations *
    
    
    ConsolidatedCASH FLOWS FROM FINANCING ACTIVITIES:Repayments under credit facility
    
    
    (31,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,500
    )Minority capital contributions
    
    
    280
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280Capital contributions
    
    
    700
    
    
    
    
    
    
    
    700
    
    
    
    (700
    )
    
    
    700Net cash (used in) provided by financing activities
    
    
    (30,520
    )
    
    
    
    
    
    
    700
    
    
    
    (700
    )
    
    
    (30,520
    )NET EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS
    
    
    45
    
    
    
    
    
    
    
    (34
    )
    
    
    0
    
    
    
    11NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS
    
    
    (25,316
    )
    
    
    (416
    )
    
    
    575
    
    
    
    
    
    
    
    (25,157
    )CASH AND CASH EQUIVALENTSBeginning
of period
    
    
    45,037
    
    
    
    662
    
    
    
    3,178
    
    
    
    
    
    
    
    48,877CASH AND CASH EQUIVALENTSEnd
of period
    
    $
    19,721
    
    
    $
    246
    
    
    $
    3,753
    
    
    $
    
    
    
    $
    23,720
   *
    
    Eliminations include intercompany investments and management fees 20




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##### Table of Contents



GLOBAL CASH ACCESS, INC. AND SUBSIDIARIES
(FORMERLY GLOBAL CASH ACCESS, L.L.C.) CONDENSED CONSOLIDATING SCHEDULE  STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2004
(amounts in thousands)
(unaudited)
 
 Combined
    
    
    Combined Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations *
    
    
    ConsolidatedCASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    14,103
    
    
    $
    1,611
    
    
    $
    (1,498
    )
    
    $
    (113
    )
    
    $
    14,103Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:Amortization of financing costs
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115Amortization of intangibles
    
    
    1,355
    
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    1,438Depreciation
    
    
    1,962
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    1,969Equity (income) loss
    
    
    (113
    )
    
    
    
    
    
    
    
    
    
    
    113
    
    
    
    Changes in operating assets and liabilities:Changes in restricted cash
    
    
    (1,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Settlement receivables
    
    
    8,791
    
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    8,882Receivables, other
    
    
    (17,562
    )
    
    
    (1,610
    )
    
    
    (3,242
    )
    
    
    22,598
    
    
    
    184Prepaid and other assets
    
    
    (38
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (39
    )Settlement liabilities
    
    
    (12,112
    )
    
    
    
    
    
    
    (103
    )
    
    
    
    
    
    
    (12,215
    )Accounts payable
    
    
    1,976
    
    
    
    (21
    )
    
    
    10
    
    
    
    
    
    
    
    1,965Accrued expenses
    
    
    24,505
    
    
    
    
    
    
    
    3,511
    
    
    
    (22,598
    )
    
    
    5,418Net cash provided by (used in) operating activities
    
    
    21,982
    
    
    
    70
    
    
    
    (1,232
    )
    
    
    
    
    
    
    20,820CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property, equipment and leasehold improvements
    
    
    (737
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (737
    )Purchase of other intangibles
    
    
    (115
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (115
    )Net cash used in investing activities
    
    
    (852
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (852
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under credit facility
    
    
    484,087
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484,087Debt issuance costs
    
    
    (2,488
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,488
    )Redemption of membership interests and distributions to partners
    
    
    (501,388
    )
    
    
    
    
    
    
    (3,950
    )
    
    
    
    
    
    
    (505,338
    )Net cash used in financing activities
    
    
    (19,789
    )
    
    
    
    
    
    
    (3,950
    )
    
    
    
    
    
    
    (23,739
    )NET EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS
    
    
    153
    
    
    
    
    
    
    
    (159
    )
    
    
    
    
    
    
    (6
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    1,494
    
    
    
    70
    
    
    
    (5,341
    )
    
    
    
    
    
    
    (3,777
    )CASH AND CASH EQUIVALENTSBeginning of period
    
    
    14,665
    
    
    
    195
    
    
    
    8,563
    
    
    
    
    
    
    
    23,423CASH AND CASH EQUIVALENTSEnd of period
    
    $
    16,159
    
    
    $
    265
    
    
    $
    3,222
    
    
    $
    
    
    
    $
    19,646
   *
    
    Eliminations include intercompany investments and management fees 21




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 This Quarterly Report on Form 10-Q contains forward-looking statements within the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements
included in this Quarterly Report, other than statements that are purely historical, are
forward-looking statements. Words such as anticipate, expect, intend, plan, believe,
seek, estimate, and similar expressions also identify forward-looking statements.
Forward-looking statements in this Quarterly Report include, without limitation: our estimates
of the useful lives for depreciable and amortizable assets, our estimates of cash flows in
assessing the recoverability of long-lived assets, and our estimates of liabilities for
chargebacks, litigation, claims and assessments; our expectation that the adoption of SFAS No.
123(R) will not have a material impact on our financial position, results of operations, or
cash flows; our expectation that commissions and interchange expenses will continue to
increase, and that, in the balance of 2005, cost of revenues will increase at a rate faster
than revenues; our expectation that gross profit for the final three quarters of 2005 will be
higher than in the comparable 2004 period; our estimate that, due to the amortization of our
deferred tax asset, actual taxes paid on pretax income generated in the first quarter of 2005
will be substantially lower than the provision for income taxes; our expectation that capital
expenditures for 2005 will not exceed $8 million; our intention to purchase the patent
covering our 3-in-1 rollover functionality from USA Payments for a purchase price of $10.0
million; our intention to use our revolving credit facility to provide ongoing working capital
and for other general corporate purposes; our expectation that Holdings will complete an
initial public offering of common stock; our intention to use $89.4 million of the net
proceeds of Holdings initial public offering of common stock to redeem $82.3 million face
amount of our senior subordinated notes at a redemption price of 108.75% of face amount; our
expectation that excess net proceeds of Holdings initial public offering of common stock will
be added to our cash and cash equivalents; our expectation that Holdings will issue a
subordinated guarantee of our senior subordinated notes; our belief that borrowings under our
secured credit facilities and operating cash flows will be adequate to meet our working
capital, capital expenditure and debt service needs for the next twelve months and for the
foreseeable future; our plan to seek additional financing through bank borrowings or debt or
equity financings, if necessary; our belief that replacement costs of equipment, furniture and
leasehold improvements will not materially affect our operations; and our expectation that we
will continue to pay interest on borrowings under our senior secured credit facilities based
on LIBOR of various maturities. Our expectations, beliefs, objectives, anticipations, intentions and strategies regarding the
future, including, without limitation, those concerning expected operating results, revenues
and earnings are not guarantees of future performance and are subject to risks and
uncertainties that could cause actual results to differ materially from results contemplated
by the forward-looking statements including, but not limited to: inaccuracies in the
assumptions underlying our estimates of the useful lives for depreciable and amortizable
assets, our estimates of cash flows in assessing the recoverability of long-lived assets, and
our estimates of liabilities for chargebacks, litigation, claims and assessments;
unanticipated transactions involving the exchange of our equity for goods or services, such
that the adoption of SFAS No. 123(R) materially impacts our financial position, results of
operations, or cash flows; the failure of card associations and networks to increase
interchange fees or our success in negotiating commission rates that do not continue to
increase such that our cost of revenues does not increase faster than our revenues; a downturn
in the gaming industry; unanticipated changes to applicable tax rates or laws or changes in
our tax position, including changes in the amortization of our deferred tax asset; an
unexpected need to purchase equipment or make other capital expenditures; our inability to
consummate the purchase of the 3-in-1 rollover patent due to the failure of Holdings to
consummate an initial public offering; unanticipated expenses, costs or fees, or a change in
our financial position; unfavorable market conditions such that it is not feasible or no
longer in the best interest of Holdings to complete an initial public offering of common
stock; an unanticipated need to use the proceeds from Holdings initial public offering for
purposes other than redeeming our senior subordinated notes or an opportunity to use such
proceeds in a manner deemed to be more advantageous than redeeming the senior subordinated
notes; a lack of excess net proceeds from Holdings initial public offering of common stock;
the inability or refusal of Holdings to issue a subordinated guarantee of our senior
subordinated notes; our inability to satisfy conditions precedent to our ability to borrow
additional funds under our senior secured credit facilities; our failure to accurately
estimate our operating cash flows and our failure to accurately predict our working capital
and capital expenditure needs; our inability to obtain additional financing through bank
borrowings or debt or equity financings at all or on terms that are favorable to us;
unexpectedly high costs or a limited supply of equipment; an unanticipated change in interest
rates; competitive forces or unexpectedly high increases in interchange and processing costs
that preclude us from passing such costs on to our 22




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##### Table of Contents



customers through increased surcharges or reduced commissions; our inability to compete
effectively in the cash access products and services market; our inability to anticipate the
political and regulatory developments affecting growth in the gaming industry; our inability
to protect our intellectual property rights; our inability to keep pace with the changing
technology, evolving industry standards and the introduction of new products and services;
unexpected changes in our leverage ratio, upon which the percentage of our excess cash flow
that is required to be used to make additional payments of principal on our bank debt is
based; a renegotiation or refinancing of our debt obligations that alters our debt service
burden for a particular period; actions taken by our technology partners or the failure of our
technology partners to service our needs, which results in our decision t
o sever our
relationships them; our failure to renew our contracts with our top customers; changes in the
rules and regulations of the card associations that require the discontinuation of or material
changes to our products or services; and our inability to identify or form joint ventures with
partners that result in products that are commercially successful. We assume no obligation to update any forward-looking statements. Readers are cautioned not to
place undue reliance on forward-looking statements, which speak only as of the date of this
Quarterly Report on Form 10-Q. Readers should also consult the cautionary statements and risk
factors listed in our Annual Report on Form 10-K (No. 333-117218) filed on March 10, 2005 and
our other filings with the Securities and Exchange Commission (SEC), including our Current
Reports on Form 8-K. Overview We are a provider of cash access products and related services to the gaming industry in the
United States, the United Kingdom, Canada and the Caribbean. Our products and services provide
gaming establishment patrons access to cash through a variety of methods, including ATM cash
withdrawals, credit card cash advances, point-of-sale, or POS, debit card transactions, check
cashing and money transfers. In addition, we also provide products and services that improve
credit decision-making, automate cashier operations and enhance patron marketing activities
for gaming establishments. We began our operations as a joint venture limited liability company among M&C International
and entities affiliated with Bank of America Corporation and First Data Corporation in July
1998. In September 2000, Bank of America Corporation sold its entire ownership interest in us
to M&C International and First Data Corporation. In March 2004, Global Cash Access, Inc.
issued $235 million in aggregate principal amount of 83/4% senior subordinated notes due 2012
and borrowed $260 million under senior secured credit facilities. Global Cash Access Holdings,
Inc. was formed to hold all of the outstanding capital stock of Global Cash Access, Inc. and
to guarantee the obligations under the senior secured credit facilities. A substantial portion
of the proceeds of these senior subordinated notes and senior secured credit facilities were
used to redeem all of First Data Corporations interest in us and a portion of M&C
Internationals interest in us through a recapitalization (the Recapitalization), in which
Bank of America Corporation reacquired an ownership interest in us. In May 2004, we completed
a private equity restructuring (the Private Equity Restructuring) in which M&C
International sold a portion of its ownership interest in us to a number of private equity
investors, including entities affiliated with Summit Partners, and we converted from a limited
liability company to a Delaware corporation. In connection with our conversion from a limited liability company to a corporation for United
States federal income tax purposes, we recognized deferred tax assets and liabilities from the
expected tax consequences of temporary differences between the book basis and tax basis of our
assets and liabilities at the date of conversion into a taxable entity. Prior to our
conversion to a corporation, we operated our business through a limited liability company that
was treated as a pass through entity for United States federal income tax purposes, so that
our owners were responsible for the taxes on our earnings. The pro forma information included
within our consolidated statements of income reflect the expected tax effects had we operated
our business through a taxable corporation during all periods presented. Principal Sources of Revenues and Expenses We derive our revenues as follows: Cash Advance.Cash advance revenues are comprised of transaction fees assessed to gaming
patrons in connection with credit card cash advances and point-of-sale (POS) debit card
transactions at the time the transactions are authorized. Such fees are based on a combination
of a fixed amount plus a percentage of the face amount of the credit card cash advance or POS
debit card transaction amount. 23




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##### Table of Contents



ATM.ATM revenues are comprised of transaction fees in the form of cardholder surcharges
assessed to gaming patrons in connection with ATM cash withdrawals at the time the
transactions are authorized and reverse interchange fees paid to us by the patrons issuing
banks. Cardholder surcharges are recognized as revenue when a transaction is initiated and
reverse interchange is recognized as revenue on a monthly basis based on the total
transactions occurring during the month. The cardholder surcharges assessed to gaming patrons
in connection with ATM cash withdrawals are currently a fixed dollar amount and not a
percentage of the transaction amount. Check Services.Check services revenues are principally comprised of check warranty revenues
and are generally based upon a percentage of the face amount of checks warranted. These fees
are paid to us by gaming establishments. In some cases, gaming establishments pass on the fees
to patrons. Central Credit and Other Revenues.Central Credit revenues are based upon either a flat
monthly unlimited usage fee or a variable fee structure driven by the volume of patron credit
histories generated, while other revenues are primarily based on a fee for specific service
performed. Our principal costs and expenses include: Cost of Revenues.Cost of revenues are costs and expenses directly related to the generation
of revenue. For cash advance, ATM and, to a lesser extent, check services, we pay a commission
to the gaming establishment at which the transaction occurs. Commissions are the largest
component of cost of revenues. We pay credit card associations and POS debit networks
interchange fees for services they provide in routing transactions through their networks. In
addition, we pay fees to participate in various ATM networks. The amounts of these interchange
fees are determined by the card associations and networks in their sole discretion, and are
subject to increase in their discretion from time to time. Many of our cash advance contracts
enable us to pass through to our gaming establishment customers, who may in turn pass through
to patrons, the amount of any increase in interchange or processing fees. We pay connectivity
and processing fees to our network services providers. We incur warranty expense when checks
that we have warranted through our Central Credit check warranty service or that TeleCheck has
warranted through its check warranty service are dishonored upon presentment for payment. Our
contract with TeleCheck limits our warranty expense for checks warranted by TeleCheck to a
maximum percentage of the total face amount of dishonored checks. Other cost of revenues
consists primarily of costs related to maintaining our Central Credit database and our patron
transaction database. Operating Expenses.Operating expenses consist primarily of salaries and benefits, armored
carrier expenses, telecommunications expenses, the cost of repair and maintenance on our cash
access devices and gain (loss) on sale or disposal of assets. Interest Income.We generate interest income on the amount of cash in our bank accounts and on
cash that is deposited into accounts to settle our credit card cash advance and POS debit card
transactions. Interest Expense.Interest expense includes interest incurred on our senior secured credit
facilities and our senior subordinated notes, and the amortization of deferred financing
costs. Interest expense also includes the cash usage fees associated with the cash used in our
ATM machines. Income Tax.Our earnings are subject to taxation under the tax laws of the jurisdictions in
which we operate. Prior to our conversion to a Delaware corporation, our domestic earnings
were not subject to corporate taxation because we were organized as a Delaware limited
liability company. Subsequent to our conversion to a Delaware corporation, our domestic
earnings have been subject to corporate taxation. Minority Interest.We operate a cashless gaming joint venture with IGT through QuikPlay, LLC,
a Delaware limited liability company, or QuikPlay, of which we own 60% of the equity interests
and of which IGT owns 40% of the equity interests. The joint venture was formed to develop and
market a cash access product that allows patrons to utilize a debit card to access cash
directly at gaming machines. The minority interest shown on the consolidated financial
statements reflects the addition to our net income of the 40% of QuikPlays losses that are
attributable to IGT. Three months ended March 31, 2005 compared to three months ended March 31, 2004 The following table sets forth the unaudited condensed consolidated results of operations for
the three months ended (amounts in thousands): 24




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##### Table of Contents



Three Months EndedMarch 31, 2005
    
    
    March 31, 2004$
    
    
    %
    
    
    $
    
    
    %REVENUES:Cash advance
    
    $
    56,778
    
    
    
    51.8
    %
    
    $
    50,455
    
    
    
    51.8
    %ATM
    
    
    43,773
    
    
    
    39.9
    %
    
    
    38,330
    
    
    
    39.4
    %Check services
    
    
    6,309
    
    
    
    5.8
    %
    
    
    5,838
    
    
    
    6.0
    %Central Credit and other revenues
    
    
    2,806
    
    
    
    2.6
    %
    
    
    2,747
    
    
    
    2.8
    %Total revenues
    
    
    109,666
    
    
    
    100.0
    %
    
    
    97,370
    
    
    
    100.0
    %COST OF REVENUES
    
    
    72,597
    
    
    
    66.2
    %
    
    
    64,940
    
    
    
    66.7
    %GROSS PROFIT
    
    
    37,069
    
    
    
    33.8
    %
    
    
    32,430
    
    
    
    33.3
    %Operating expenses
    
    
    (11,881
    )
    
    
    -10.8
    %
    
    
    (10,954
    )
    
    
    -11.2
    %Amortization
    
    
    (1,364
    )
    
    
    -1.2
    %
    
    
    (1,438
    )
    
    
    -1.5
    %Depreciation
    
    
    (1,952
    )
    
    
    -1.8
    %
    
    
    (1,969
    )
    
    
    -2.0
    %OPERATING INCOME
    
    
    21,872
    
    
    
    19.9
    %
    
    
    18,069
    
    
    
    18.6
    %INTEREST INCOME (EXPENSE), NETInterest income
    
    
    451
    
    
    
    0.4
    %
    
    
    294
    
    
    
    0.3
    %Interest expense
    
    
    (10,932
    )
    
    
    -10.0
    %
    
    
    (3,097
    )
    
    
    -3.2
    %Total interest income (expense), net
    
    
    (10,481
    )
    
    
    -9.6
    %
    
    
    (2,803
    )
    
    
    -2.9
    %INCOME BEFORE INCOME TAX PROVISION
AND MINORITY OWNERSHIP LOSS
    
    
    11,391
    
    
    
    10.4
    %
    
    
    15,266
    
    
    
    15.7
    %INCOME TAX PROVISION
    
    
    (4,101
    )
    
    
    -3.7
    %
    
    
    (1,163
    )
    
    
    -1.2
    %INCOME BEFORE MINORITY
OWNERSHIP LOSS
    
    
    7,290
    
    
    
    6.6
    %
    
    
    14,103
    
    
    
    14.5
    %MINORITY OWNERSHIP LOSS
    
    
    50
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %NET INCOME
    
    $
    7,340
    
    
    
    6.7
    %
    
    $
    14,103
    
    
    
    14.5
    %
 Total Revenues Total revenues for the quarter ended March 31, 2005 were $109.7 million, an increase of $12.3
million, or 12.6%, as compared to the quarter ended March 31, 2004. This increase was
primarily due to the reasons described below. Cash Advance.Cash advance revenue for the quarter ended March 31, 2005 was $56.8 million, an
increase of $6.3 million, or 12.5%, as compared to the quarter ended March 31, 2004. This
increase was primarily due to a 38.2% increase in POS debit card transaction revenue and a
10.0% increase in credit card cash advance revenue. The total amount of cash disbursed
increased 8.8% from $1.04 billion to $1.13 billion and the
number of transactions completed increased 4.7% from 2.2 million to 2.3 million. Revenue per
cash advance transaction increased 7.5%, from $22.92 to $24.63. ATM.ATM revenue for the quarter ended March 31, 2005 was $43.8 million, an increase of
$5.4 million, or 14.2%, as compared to the quarter ended March 31, 2004. The increase was
primarily attributable to a 10.7% increase in the number of transactions from 13.0 million to
14.3 million. Revenue per ATM transaction 25




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increased 3.0% from $2.96 to $3.05. There was a
16.6% increase in the total amount of cash disbursed from $2.0 billion to $2.4 billion. Check Services.Check services revenue for the quarter ended March 31, 2005 was $6.3 million,
an increase of $0.5 million, or 8.1%, as compared to the quarter ended March 31, 2004. The
face amount of checks warranted increased 9.0% from $232.8 million to $253.8 million. The
number of checks warranted increased 1.4% from 1.08 million to 1.10 million, while the average
face amount per check warranted increased from $215.13 to $231.28. Check warranty revenue as a
percent of face amount warranted was 2.36% in the 2005 quarter as compared to 2.43% for the
quarter ended March 31, 2004, and revenue per check warranty transaction increased 4.4% from
$5.23 to $5.46. Central Credit and Other.Central Credit and other revenues for the quarter ended March 31,
2005, were $2.8 million, an increase of $0.1 million, or 2.1%, as compared to the quarter
ended March 31, 2004. The increase was primarily a result of increases in our marketing
revenue, our QuikPlay revenue and our Other revenue. Costs and Expenses Cost of Revenues.Cost of revenues increased 11.8% from $64.9 million to $72.6 million. The
largest component of cost of revenues is commissions, and commissions increased 8.2% in the
2005 quarter as contracts were signed or renewed at higher commission rates than experienced
in the 2004 quarter. The second-largest component of cost of revenues is interchange;
interchange expenses increased 22.8%. Warranty expenses increased 9.6%. We expect that
commissions and interchange will continue to increase, and we expect that in the balance of
2005 cost of revenues will increase at a rate faster than revenues. Primarily as a result of the factors described above, gross profit increased 14.3%, from $32.4
million to $37.1 million. We expect that, even though cost of revenues will grow more rapidly
than revenues, gross profit for the final three quarters of 2005 will be higher than in the
comparable 2004 period. Operating Expenses.Operating expenses for the quarter ended March 31, 2005 were $11.9
million, an increase of $0.9 million, or 8.5%, as compared to the quarter ended March 31,
2004. Operating expenses in the 2004 quarter included
$1.9 million in expenses we consider unusual in nature. Excluding these unusual expenses, operating expenses in the 2004 quarter
would have been $9.0 million. As compared to this amount, operating expenses in the first
quarter of 2005 increased $2.8 million, or 25.9%. The increase in operating expenses in the
2005 quarter is primarily attributable to increased legal expenses incurred in connection with
the Companys patent infringement suit against US Bancorp and Certegy, expenses associated
with maintenance of the Companys ATMs, and expenses incurred in connection with the Companys
efforts to prepare for compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Depreciation and Amortization.Depreciation expense for the quarter ended March 31, 2005 was
$1.95 million, essentially unchanged from $1.97 million in the 2004 quarter. Amortization
expense, which relates principally to computer software and customer contracts, decreased from
$1.44 million to $1.36 million, as a result of some capitalized software projects becoming
fully amortized. Primarily as a result of the factors described above, operating income for the quarter ended
March 31, 2005 was $21.9 million, an increase of $3.8 million, or 21.0%, as compared to the
quarter ended March 31, 2004. Interest Income (Expense), Net.Interest income was $451 thousand in the first quarter of
2005, an increase of 53.4% from the first quarter of 2004, due primarily to higher prevailing
interest rates and higher cash balances. Interest expense for the quarter ended March 31,
2005, was $10.9 million, an increase of $7.8 million, or 253.0%, as compared to March 31,
2004. The increase is primarily due to the borrowings incurred in March 2004 in connection
with the Recapitalization. Interest expense on borrowings (including amortization of deferred
financing costs) was $8.9 million in the 2005 quarter as compared to $2.1 million in the 2004
quarter. The cash usage fee for cash used in our ATMs is included in interest expense. ATM
cash usage fees were
$2.0 million in the first quarter of 2005 as compared to $1.0 million in the same quarter of
2004. The increase resulted principally from higher levels of the interest rates upon which
the cash usage fee is based. Primarily as a result of the foregoing, income before income tax provision and minority
ownership loss was $11.4 million for the quarter ended March 31, 2005, a decrease of $3.9
million, or 25.4%, as compared to the prior quarter. 26




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Income Tax.In 2004, we were a limited liability company up until May 14, 2004, at which point
we converted to a Delaware corporation and elected to be taxed at the corporate level. United
States income tax obligations for the period prior to May 14, 2004, were passed through to our
members and we recorded no provision for such taxes. Income tax expense of $1.2 million in the
first quarter of 2004 was entirely attributable to income taxes in non-United States
jurisdictions. The provision for income taxes in the first quarter of 2005 represents our
estimate of the effective tax rate for the year of 36%. Due to the amortization of our
deferred tax asset, actual cash taxes paid on pretax income generated in the first quarter of
2005 will be substantially lower than the provision. Primarily as a result of the foregoing, income before minority ownership loss was $7.3 million
for the quarter ended March 31, 2005, a decrease of $6.8 million, or 48.3%, as compared to the
2004 quarter. Minority Ownership Loss.Minority ownership loss attributable to QuikPlay, LLC for the quarter
ended March 31, 2004 was $50 thousand in the first quarter of 2005 as compared to $0 in the
comparable period of 2004. In the first quarter of 2004 the minority partner had losses in
excess of contributed capital. Accordingly, no allocation of minority loss could be made
until June 2004 when QuikPlay received additional funds from the minority partner through a
capital call. Primarily as a result of the foregoing, net income was $7.3 million for the quarter ended
March 31, 2004, a decrease of $6.8 million as compared to the comparable quarter of 2004. 27




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LIQUIDITY AND CAPITAL RESOURCES 
 Cash Flows The following table summarizes our cash flows for the three months ended March 31, 2005 and
2004, respectively (amounts in thousands): Three Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004Net cash provided by operating activities
    
    $
    7,773
    
    
    $
    20,820Net cash used in investing activities
    
    
    (2,421
    )
    
    
    (852
    )Net cash used in financing activities
    
    
    (30,520
    )
    
    
    (23,739
    )Net effect of exchange rate changes on cash
and cash equivalents
    
    
    11
    
    
    
    (6
    )Net decrease in cash and cash equivalents
    
    
    (25,157
    )
    
    
    (3,777
    )Cash and cash equivalents, beginning of period
    
    
    48,877
    
    
    
    23,423Cash and cash equivalents, end of period
    
    $
    23,720
    
    
    $
    19,646
 Our principal source of liquidity is cash flows from operating activities, which were $7.8
million and $20.8 million, for the quarters ended March 31, 2005 and 2004, respectively. Our
cash from operating activities was lower in the first quarter of 2005 than in the comparable
2004 period because of higher levels of ATM interest expense. In addition, accrued expenses
were reduced by $5.2 million in the three months ended March 31, 2005 due to the payment of
semiannual interest on our senior subordinated notes in March 2005. In the comparable quarter
of 2004, accrued expenses increased $5.4 million primarily due to interest on the Companys
senior secured credit facilities and senior subordinated debt and foreign income taxes. The
difference in cash flows in accrued expenses accounts for $10.6 million of the difference in
cash from operating activities in the two quarters. Our cash flows from operating activities are influenced by changes in settlement receivables
and the timing of payments related to settlement liabilities. As a result, our cash flows from
operating activities have changed and may in the future change substantially based upon the
timing of our settlement liability payments. We calculate our net cash position as cash and
cash equivalents plus settlement receivables less settlement liabilities. The following table
presents our net cash position as of March 31, 2005 and 2004 (amounts in thousands): 28




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##### Table of Contents



Three Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004Cash and cash equivalents
    
    $
    23,720
    
    
    $
    19,646Settlement receivables
    
    
    23,127
    
    
    
    15,847Settlement liabilities
    
    
    (35,834
    )
    
    
    (15,189
    )Net cash position
    
    $
    11,013
    
    
    $
    20,304
 Net cash used in investing activities totaled $2.4 million and $0.9 million for the quarters
ended March 31, 2005 and 2004, respectively. Included in net cash used in investing activities
were funds spent on software development in the amounts of $0.3 million and $0.1 million and
funds spent on the procurement of cash access equipment, computer and other hardware in the
amounts of $2.1 million and $0.8 million for the quarters ended March 31, 2005 and 2004,
respectively. We have met our capital requirements to date through cash flows from operating
activities. We currently expect that capital expenditures in 2005 will be between $6 million
and $8 million. In addition, the Company has committed to purchase the 3-in-1 rollover
patent from USA Payments for a price of $10 million, conditioned upon and out of the net
proceeds of a contemplated initial public offering of common stock by Holdings. Net cash used in financing activities was $30.5 million and $23.7 million for the quarters
ended March 31, 2005 and 2004, respectively. In the 2005 quarter, we repaid $31.5 million of
principal on our Credit Facilities. In the 2004 quarter, the net cash used is principally the
result of $481.6 million in net borrowings (which includes payments for debt issuance costs)
and $505.3 million of distributions on or redemptions of membership interests in connection
with the Recapitalization. Indebtedness On March 10, 2004 we entered into senior secured credit facilities arranged by Banc of America
Securities LLC with Bank of America, N.A. as administrative agent in an aggregate principal
amount of $280.0 million, consisting of a five-year revolving credit facility of $20.0 million
and a six-year term loan facility of $260.0 million. Proceeds of the term loan under the
senior secured credit facilities were used to finance in part the Recapitalization and to pay
related fees and expenses. The revolving credit facility may be used to provide ongoing
working capital and for other general corporate purposes. Amounts available under this
revolving credit were reduced by $3.4 million of letters of credit outstanding at March 31,
2005. The terms of our senior secured credit facilities require that a significant portion of
our excess cash flow be devoted to reducing amounts outstanding under these facilities. In
March 2005 we made repayments of $31.5 million on the term loan. Under the terms of our senior
secured credit facilities we are required to maintain financial covenants related to our
leverage ratio, senior leverage ratio and fixed charge cover ratio. Additionally, we have a
covenant related to our allowable capital expenditures. We believe we were in compliance with
all of our debt covenants that were applicable as of March 31, 2005. On April 14, 2005, we entered into an Amended and Restated Credit Agreement pursuant to which
some of the terms in our original credit agreement were modified. Among other things, the
Amended and Restated Credit Agreement and related documents provide the following. The Applicable Margin over LIBOR on which our interest expense is based was reduced from 275
basis points to 225 basis points, with further reductions possible dependent on our leverage
ratio and credit ratings. Until April 14, 2006, we will be required to pay as a fee to Banc
of America Securities, our agent with respect to the
Amended Agreement, 50% of the savings in interest expense between what we would have paid
under the terms of the original credit facility and what we actually pay. This fee will be

included in interest expense in our financial statements. 29




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##### Table of Contents




    The Excess Cash Flow Sweep percentage reduces from 75% to 50% at leverage levels
below 4.25x and is eliminated at leverage levels below 3.0x.
    The requirement to devote 50% of the net proceeds on a Qualifying IPO to prepay
borrowings under the Term Loan is eliminated.
    The Company must use net proceeds from a Qualifying IPO to redeem up to 35% of the
senior subordinated notes at the redemption price specified in the Indenture governing
the notes.
    Capital expenditures may not exceed $8 million per annum. The following is a summary of our contractual cash obligations as of March 31, 2005, including
our senior subordinated notes and our senior secured credit facilities. These amounts exclude
payments for excess cash flow, described above. Further, they assume a LIBOR rate of 2.85% for
all periods presented. 2-3
    
    
    4-5
    
    
    AfterContractual Cash Obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years(amounts in thousands)Long-term debt
    
    $
    446,750
    
    
    $
    8,359
    
    
    $
    22,289
    
    
    $
    139,309
    
    
    $
    276,793Estimated interest payments
    
    
    196,899
    
    
    
    28,574
    
    
    
    60,566
    
    
    
    56,183
    
    
    
    51,576Operating leases
    
    
    2,926
    
    
    
    488
    
    
    
    1,001
    
    
    
    962
    
    
    
    475Total cash obligations
    
    $
    646,575
    
    
    $
    37,421
    
    
    $
    83,856
    
    
    $
    196,454
    
    
    $
    328,844
 Other Liquidity Needs and Resources On March 22, 2005, Holdings filed a Registration Statement on Form S-1 with the Securities and
Exchange Commission and announced its intention to complete an initial public offering of
common stock. Holdings intends to sell $110 million of newly issued common stock. Under the
terms of our Credit Facilities, the net proceeds of this offering must be immediately
contributed from Holdings into us. Holdings intends to cause us to apply $10 million of the
net proceeds to purchase the 3-in-1 rollover patent from USA Payments, and to use $89.4
million of the net proceeds to redeem $82.25 million face amount of our senior subordinated
notes at a redemption price of 108.75% of face amount. The excess net proceeds, if any, from
the offering will be added to our cash and cash equivalents. In addition, Holdings has also
proposed to issue a subordinated guarantee of our senior subordinated notes. Bank of America, N.A. supplies us with currency needed for normal operating requirements of
our ATMs pursuant to a treasury services agreement. Under the terms of this agreement, we pay
a monthly cash usage fee based upon the product of the average daily dollars outstanding in
all ATMs multiplied by the average London Interbank Offered Rate, or LIBOR, for one-month
United States dollar deposits for each day that rate is published in that month plus a margin
of 25 basis points. We are therefore exposed to interest rate risk to the extent that the
applicable LIBOR rate increases. As of March 31, 2005, the rate in effect, inclusive of the 25
basis points margin, was 3.06%, and the currency supplied by Bank of America, N.A. pursuant to
this agreement was $270.9 million. We need supplies of cash to support each of our foreign operations that involve the dispensing
of currency. For some foreign jurisdictions, such as the United Kingdom, applicable law and
cross-border treaties allow us to transfer funds between our domestic and foreign operations
efficiently. For other foreign jurisdictions, we must rely on the supply of cash generated by
our operations in those foreign jurisdictions, and the costs of repatriation are prohibitive.
For example, CashCall Systems, Inc., the subsidiary through which we operate in
Canada, generates a supply of cash that is sufficient to support its operations, and all cash
generated through such operations is retained by CashCall Systems, Inc. As we expand our
operations into new foreign jurisdictions, we must rely on treaty-favored cross-border
transfers of funds, the supply of cash generated by our operations in those foreign
jurisdictions or alternate sources of working capital. Pursuant to the terms of our agreement with IGT, we are obligated to invest up to our pro rata
share of $10.0 million in capital to QuikPlay. Our obligation to invest additional capital in
QuikPlay is conditioned upon capital calls, which are in our sole discretion. As of March 31
2005, we had invested a total of $3.7 million in QuikPlay. We believe that borrowings available under our senior secured credit facilities, together with
our anticipated operating cash flows will be adequate to meet our anticipated future
requirements for working capital, capital 30




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##### Table of Contents



expenditures and scheduled interest payments on the
notes and under our senior secured credit facilities for the next 12 months and for the
foreseeable future. Although no additional financing other than the initial public offering by
Holding is currently contemplated, we may seek, if necessary or otherwise advisable and to the
extent permitted under the indenture governing the notes and the terms of the senior secured
credit facilities, additional financing through bank borrowings or public or private debt or
equity financings. We cannot assure you that additional financing, if needed, will be
available to us, or that, if available, the financing will be on terms favorable to us. The
terms of any additional debt or equity financing that we may obtain in the future could impose
additional limitations on our operations and/or management structure. We also cannot assure
you that the estimates of our liquidity needs are accurate or that new business developments
or other unforeseen events will not occur, resulting in the need to raise additional funds. Off-Balance Sheet Arrangements We obtain currency to meet the normal operating requirements of our domestic ATMs and ACMs
pursuant to a treasury services agreement with Bank of America, N.A. Under this agreement, all
currency supplied by Bank of America, N.A. remains the sole property of Bank of America, N.A.
at all times until it is dispensed, at which time Bank of America, N.A. obtains an interest in
the corresponding settlement receivable. Because it is never an asset of ours, supplied cash
is not reflected on our balance sheet. Because Bank of America, N.A. obtains an interest in
our settlement receivables, there is no liability corresponding to the supplied cash reflected
on our balance sheet. The fees that we pay to Bank of America, N.A. pursuant to the treasury
services agreement are reflected as interest expense in our financial statements. Currency for
the normal operating requirements of our foreign ATMs is supplied by the gaming establishments
in which those ATMs are located. Effects of Inflation Our monetary assets, consisting primarily of cash and receivables, are not significantly
affected by inflation. Our non-monetary assets, consisting primarily of our deferred tax
asset, goodwill and other intangible assets, are not affected by inflation. We believe that
replacement costs of equipment, furniture and leasehold improvements will not materially
affect our operations. However, the rate of inflation affects our operating expenses, such as
those for salaries and benefits, armored carrier expenses, telecommunications expenses and
equipment repair and maintenance services, which may not be readily recoverable in the
financial terms under which we provide our cash access products and services to gaming
establishments and their patrons. Critical Accounting Policies The preparation of our financial statements in conformity with U.S. GAAP requires us to make
estimates and assumptions that affect our reported amounts of assets and liabilities, revenues
and expenses, and related disclosures of contingent assets and liabilities in our consolidated
financial statements. The SEC has defined a companys critical accounting policies as the
ones that are most important to the portrayal of the financial condition and results of
operations, and which require management to make its most difficult and subjective judgments,
often as a result of the need to make estimates about matters that are inherently uncertain.
There were no newly identified significant accounting estimates in three months ended March
31, 2005, nor were there any material changes to the critical accounting policies and
estimates discussed in the Companys audited consolidated financial statements for the year
ended December 31, 2004, included in the Companys Annual Report on Form 10-K filed on March
10, 2005. 31




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 
 In the normal course of business, we are exposed to foreign currency exchange risk. We
operate and conduct business in foreign countries and, as a result, are exposed to movements
in foreign currency exchange rates. Our exposure to foreign currency exchange risk related to
our foreign operations is not material to our results of operations, cash flows or financial
position. At present, we do not hedge this risk, but continue to evaluate such foreign
currency translation risk exposure. At present, we do not hold any derivative securities of
any kind. Bank of America, N.A. supplies us with currency needed for normal operating requirements of
our domestic ATMs and ACMs pursuant to a treasury services agreement. Under the terms of this
agreement, we pay a monthly cash usage fee based upon the product of the average daily dollars
outstanding in all ATMs and ACMs multiplied by the average LIBOR for one-month United States
dollar deposits for each day that rate is published in that month plus a margin of 25 basis
points. We are therefore exposed to interest rate risk to the extent that the applicable LIBOR
rate increases. As of March 31, 2005, the rate in effect, inclusive of the 25 basis points
margin, was 3.1% and the currency supplied by Bank of America, N.A. pursuant to this agreement
was $270.9 million. Based upon the average outstanding amount of currency to be supplied by
Bank of America, N.A. pursuant to this agreement during the first three months of 2005, which
was $231.1 million, each 1% change in the applicable LIBOR rate would have a $2.3 million
impact on income before taxes and minority ownership loss over a 12-month period. Currency for
the normal operating requirements of our foreign ATMs is supplied by the gaming establishments
in which those ATMs are located. Our senior secured credit facilities bear interest at rates that can vary over time. We have
the option of having interest on the outstanding amounts under these credit facilities paid
based on a base rate (equivalent to the prime rate) or based on the Eurodollar rate
(equivalent to LIBOR). We have historically elected to pay interest based on one month United
States dollar LIBOR, and we expect to continue to pay interest based on LIBOR of various
maturities. Our interest expense on these credit facilities is the applicable LIBOR rate plus
a margin of 225 basis points for the term loan portion and LIBOR plus 250 basis points for the
revolving credit portion. The margin for the term loan portion may decrease if our leverage
ratio, as defined, decreases. At March 31, 2005, we had $0 drawn under the revolving credit
portion and we had $211.8 million outstanding under the term loan portion at an interest rate,
including the margin, of 5.6%. Based upon the outstanding balance on the term loan of $211.8
million on March 31, 2005, each 1% increase in the applicable LIBOR rate would add an
additional $2.1 million of interest expense over a 12-month period. 32




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES 
 As of the end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our Chief Executive Officer and Chief Financial
Officer of the effectiveness of the design and operation of our disclosure controls and
procedures. While our disclosure controls and procedures are designed to provide reasonable
assurance of achieving their objectives, the design of any system of controls is based in part
upon assumptions about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions
regardless of how remote. However, based on the evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were effective in
timely alerting them to material information required to be included in our periodic SEC
filings at the reasonable assurance level. There has been no change in our internal control over financial reporting that occurred during
our most recent fiscal quarter that has materially affected or is reasonably likely to
materially affect our internal control over financial reporting. 33




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##### Table of Contents



PART II. OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS 
 On October 22, 2004, we and USA Payments, as co-plaintiffs, filed a complaint in United
States District Court, District of Nevada against U.S. Bancorp d/b/a U.S. Bank, Certegy Inc.,
Certegy Check Services, Inc., Game Financial Corporation and GameCash, Inc. alleging the
infringement of the patented 3-in-1 rollover functionality. In this litigation, we are
seeking an injunction against future infringement of the patent and recovery of damages as a
result of past infringement of the patent. In its response, the defendants have denied
infringement and have asserted patent invalidity. In addition, the defendants have asserted
various antitrust and unfair competition counterclaims. We are threatened with or named as a defendant in various lawsuits in the ordinary course of
business, such as personal injury claims and employment-related claims. It is not possible to
determine the ultimate disposition of these matters; however, we are of the opinion that the
final resolution of any such threatened or pending litigation, individually or in the
aggregate, is not likely to have a material adverse effect on our business, cash flow, results
of operations or financial position. 34




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##### Table of Contents



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 
  (a)
    Exhibits 31.1
    
    Certification of Kirk E. Sanford, Chief Executive Officer of Global
Cash Access, Inc. dated May 13, 2005 in accordance with 18 U.S.C.
1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of Harry C. Hagerty, Chief Financial Officer of Global
Cash Access, Inc. dated May 13, 2005 in accordance with 18 U.S.C.
1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Certification of Kirk E. Sanford, Chief Executive Officer of Global
Cash Access, Inc. dated May 13, 2005 in accordance with 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Certification of Harry C. Hagerty, Chief Financial Officer of Global
Cash Access, Inc. dated May 13, 2005 in accordance with 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 35




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. May 13, 2005
    
    GLOBAL CASH ACCESS, INC.(Date)
    
    (Registrant)/s/ Harry C. HagertyHarry C. HagertyChief Financial Officer(For the Registrant and as
Principal Financial Officer
and as Chief Accounting Officer)
 36




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##### Table of Contents



EXHIBIT INDEX 31.1
    
    Certification of Kirk E. Sanford, Chief Executive Officer of
Global Cash Access, Inc. dated May 13, 2005 in accordance with
18 U.S.C. 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Harry C. Hagerty, Chief Financial Officer of
Global Cash Access, Inc. dated May 13, 2005 in accordance with
18 U.S.C. 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Kirk E. Sanford, Chief Executive Officer of
Global Cash Access, Inc. dated May 13, 2005 in accordance with
18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Harry C. Hagerty, Chief Financial Officer of
Global Cash Access, Inc. dated May 13, 2005 in accordance with
18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.