##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 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 Number: 001-33864
 
 CARDTRONICS, INC.
  Delaware
    
    76-0681190(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)3250 Briarpark Drive, Suite 400Houston, TX
    
    77042(Address of principal executive offices)
    
    (Zip Code)
 (832) 308-4000
 þ o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



CARDTRONICS, INC.
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    1Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009
    
    
    1Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009
    
    
    2Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009
    
    
    3Notes to Consolidated Financial Statements
    
    
    4Cautionary Statement Regarding Forward-Looking Statements
    
    
    22Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    40PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    41Item 1A. Risk Factors
    
    
    41Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 6. Exhibits
    
    
    44Signatures
    
    
    45Exhibit 31.1Exhibit 31.2Exhibit 32.1
    i




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CARDTRONICS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, excluding share and per share amounts)
 March 31, 2010
    
    
    December 31, 2009(Unaudited)
    
    
    (Audited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,694
    
    
    $
    10,449Accounts and notes receivable, net of allowance of $503
and $560 as of March 31, 2010 and December 31, 2009,
respectively
    
    
    27,004
    
    
    
    27,700Inventory
    
    
    1,977
    
    
    
    2,617Restricted cash, short-term
    
    
    3,151
    
    
    
    3,452Prepaid expenses, deferred costs, and other current assets
    
    
    9,333
    
    
    
    8,850Total current assets
    
    
    52,159
    
    
    
    53,068Property and equipment, net
    
    
    144,657
    
    
    
    147,348Intangible assets, net
    
    
    84,084
    
    
    
    89,036Goodwill
    
    
    164,235
    
    
    
    165,166Prepaid expenses, deferred costs, and other assets
    
    
    4,187
    
    
    
    5,786Total assets
    
    $
    449,322
    
    
    $
    460,404LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt and notes payable
    
    $
    2,353
    
    
    $
    2,122Capital lease obligations
    
    
    96
    
    
    
    235Current portion of other long-term liabilities
    
    
    26,242
    
    
    
    26,047Accounts payable
    
    
    15,091
    
    
    
    12,904Accrued liabilities
    
    
    41,837
    
    
    
    57,583Current portion of deferred tax liability, net
    
    
    3,127
    
    
    
    3,121Total current liabilities
    
    
    88,746
    
    
    
    102,012Long-term liabilities:Long-term debt, net of related discounts
    
    
    304,835
    
    
    
    304,930Deferred tax liability, net
    
    
    13,189
    
    
    
    12,250Asset retirement obligations
    
    
    24,655
    
    
    
    24,003Other long-term liabilities
    
    
    20,174
    
    
    
    18,499Total liabilities
    
    
    451,599
    
    
    
    461,694Commitments and contingenciesStockholders deficit:Common stock, $0.0001 par value; 125,000,000 shares
authorized; 47,111,943 and 46,238,028 shares issued as of
March 31, 2010 and December 31, 2009, respectively;
41,749,447 and 40,900,532 shares outstanding as of March
31, 2010 and December 31, 2009, respectively
    
    
    4
    
    
    
    4Additional paid-in capital
    
    
    201,995
    
    
    
    200,323Accumulated other comprehensive loss, net
    
    
    (64,337
    )
    
    
    (57,618
    )Accumulated deficit
    
    
    (92,957
    )
    
    
    (96,922
    )Treasury stock; 5,362,496 and 5,337,496 shares at cost as
of March 31, 2010 and December 31, 2009, respectively
    
    
    (48,938
    )
    
    
    (48,679
    )Total parent stockholders deficit
    
    
    (4,233
    )
    
    
    (2,892
    )Noncontrolling interests
    
    
    1,956
    
    
    
    1,602Total stockholders deficit
    
    
    (2,277
    )
    
    
    (1,290
    )Total liabilities and stockholders deficit
    
    $
    449,322
    
    
    $
    460,404
 See accompanying notes to consolidated financial statements.
  1




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CARDTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, excluding share and per share amounts)
 (Unaudited)
 Three Months Ended March 31,2010
    
    
    2009Revenues:ATM operating revenues
    
    $
    125,687
    
    
    $
    113,580ATM product sales and other revenues
    
    
    2,089
    
    
    
    1,765Total revenues
    
    
    127,776
    
    
    
    115,345Cost of revenues:Cost of ATM operating revenues (excludes depreciation,
accretion, and amortization shown separately below. See
Note 1)
    
    
    85,879
    
    
    
    82,229Cost of ATM product sales and other revenues
    
    
    2,193
    
    
    
    1,814Total cost of revenues
    
    
    88,072
    
    
    
    84,043Gross profit
    
    
    39,704
    
    
    
    31,302Operating expenses:Selling, general, and administrative expenses
    
    
    11,143
    
    
    
    10,855Depreciation and accretion expense
    
    
    10,222
    
    
    
    9,639Amortization expense
    
    
    3,979
    
    
    
    4,527Loss on disposal of assets
    
    
    377
    
    
    
    2,108Total operating expenses
    
    
    25,721
    
    
    
    27,129Income from operations
    
    
    13,983
    
    
    
    4,173Other expense (income):Interest expense, net
    
    
    7,318
    
    
    
    7,711Amortization of deferred financing costs and bond discounts
    
    
    630
    
    
    
    568Other expense (income)
    
    
    366
    
    
    
    (86
    )Total other expense
    
    
    8,314
    
    
    
    8,193Income (loss) before income taxes
    
    
    5,669
    
    
    
    (4,020
    )Income tax expense
    
    
    1,439
    
    
    
    1,017Net income (loss)
    
    
    4,230
    
    
    
    (5,037
    )Net income attributable to noncontrolling interests
    
    
    265
    
    
    
    31Net income (loss) attributable to controlling interests and
available to common stockholders
    
    $
    3,965
    
    
    $
    (5,068
    )Net income (loss) per common share  basic
    
    $
    0.10
    
    
    $
    (0.13
    )Net income (loss) per common share  diluted
    
    $
    0.09
    
    
    $
    (0.13
    )Weighted average shares outstanding  basic
    
    
    39,850,122
    
    
    
    38,960,083Weighted average shares outstanding  diluted
    
    
    40,721,310
    
    
    
    38,960,083
 See accompanying notes to consolidated financial statements.
  2




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CARDTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Three Months Ended March 31,2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    4,230
    
    
    $
    (5,037
    )Adjustments to reconcile net income (loss) to net cash provided by operating
activities:Depreciation, accretion, and amortization expense
    
    
    14,201
    
    
    
    14,166Amortization of deferred financing costs and bond discounts
    
    
    630
    
    
    
    568Stock-based compensation expense
    
    
    1,459
    
    
    
    1,058Deferred income taxes
    
    
    945
    
    
    
    946Loss on disposal of assets
    
    
    377
    
    
    
    2,108Unrealized gain on derivative instruments
    
    
    (248
    )
    
    
    Amortization of accumulated other comprehensive losses associated with
derivative instruments no longer designated as hedging instruments
    
    
    493
    
    
    
    Other reserves and non-cash items
    
    
    475
    
    
    
    (456
    )Changes in assets and liabilities:Decrease in accounts and notes receivable, net
    
    
    623
    
    
    
    2,240(Increase) decrease in prepaid, deferred costs, and other current assets
    
    
    (845
    )
    
    
    4,631Decrease (increase) in inventory
    
    
    460
    
    
    
    (181
    )Decrease in other assets
    
    
    980
    
    
    
    561Increase (decrease) in accounts payable
    
    
    1,969
    
    
    
    (1,920
    )Decrease in accrued liabilities
    
    
    (15,199
    )
    
    
    (10,464
    )Decrease in other liabilities
    
    
    (1,364
    )
    
    
    (1,273
    )Net cash provided by operating activities
    
    
    9,186
    
    
    
    6,947Cash flows from investing activities:Additions to property and equipment
    
    
    (8,526
    )
    
    
    (4,917
    )Payments for exclusive license agreements and site acquisition costs
    
    
    (79
    )
    
    
    (59
    )Net cash used in investing activities
    
    
    (8,605
    )
    
    
    (4,976
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    
    
    
    
    23,500Repayments of long-term debt and capital leases
    
    
    (647
    )
    
    
    (18,936
    )Repayments of borrowings under bank overdraft facility, net
    
    
    
    
    
    
    (142
    )Payments received on subscriptions receivable
    
    
    
    
    
    
    34Proceeds from exercises of stock options
    
    
    110
    
    
    
    Debt issuance and modification costs
    
    
    
    
    
    
    (438
    )Repurchase of capital stock
    
    
    (260
    )
    
    
    (1
    )Net cash (used in) provided by financing activities
    
    
    (797
    )
    
    
    4,017Effect of exchange rate changes on cash
    
    
    461
    
    
    
    39Net increase in cash and cash equivalents
    
    
    245
    
    
    
    6,027Cash and cash equivalents as of beginning of period
    
    
    10,449
    
    
    
    3,424Cash and cash equivalents as of end of period
    
    $
    10,694
    
    
    $
    9,451Supplemental disclosure of cash flow information:Cash paid for interest, including interest on capital leases
    
    $
    14,271
    
    
    $
    14,634Cash paid for income taxes
    
    $
    100
    
    
    $
    
 See accompanying notes to consolidated financial statements.
  3




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CARDTRONICS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 (1) General and Basis of Presentation
 General
   Basis of Presentation
     4




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Cost of ATM Operating Revenues and Gross Profit Presentation
  2010
    
    
    2009(In thousands)Depreciation and accretion expense related to ATMs and ATM-related assets
    
    $
    8,299
    
    
    $
    8,037Amortization expense
    
    
    3,979
    
    
    
    4,527Total depreciation, accretion, and amortization expense excluded from
Cost of ATM operating revenues and Gross profit
    
    $
    12,278
    
    
    $
    12,564
 Property and Equipment, net
  (2) Stock-Based Compensation
  2010
    
    
    2009(In thousands)Cost of ATM operating revenues
    
    $
    199
    
    
    $
    191Selling, general, and administrative expenses
    
    
    1,260
    
    
    
    867Total stock-based compensation expense
    
    $
    1,459
    
    
    $
    1,058
   5




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##### Table of Contents



Options.
 WeightedNumber
    
    
    Averageof Shares
    
    
    Exercise PriceOptions outstanding as of January 1, 2010
    
    
    3,803,771
    
    
    $
    8.34Granted
    
    
    23,000
    
    
    $
    10.95Exercised
    
    
    (143,975
    )
    
    $
    1.48Options outstanding as of March 31, 2010
    
    
    3,682,796
    
    
    $
    8.63Options vested and exercisable as of March 31, 2010
    
    
    3,080,349
    
    
    $
    8.34
  Restricted Stock.
 Numberof SharesRestricted shares outstanding as of January 1, 2010
    
    
    1,114,437Granted
    
    
    729,940Restricted shares outstanding as of March 31, 2010
    
    
    1,844,377
  (3) Earnings per Share
   6




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##### Table of Contents



Earnings per Share (in thousands, excluding share and per share amounts):
 Three Months Ended March 31, 2010WeightedAverage Shares
    
    
    EarningsIncome
    
    
    Outstanding
    
    
    Per ShareBasic:Net income attributable to controlling interests and available to
common stockholders
    
    $
    3,965Less: undistributed earnings allocated to unvested restricted shares
    
    
    (157
    )Net income available to common stockholders
    
    $
    3,808
    
    
    
    39,850,122
    
    
    $
    0.10Diluted:Effect of dilutive securities:Add: Undistributed earnings allocated to restricted shares
    
    
    157Stock options added to the denominator under the treasury stock method
    
    
    
    
    
    
    871,188Less: Undistributed earnings reallocated to restricted shares
    
    
    (154
    )Net income available to common stockholders and assumed conversions
    
    $
    3,811
    
    
    
    40,721,310
    
    
    $
    0.09
  (4) Comprehensive Income (Loss)
  Three Months EndedMarch 31,2010
    
    
    2009(In thousands)Net income (loss)
    
    $
    4,230
    
    
    $
    (5,037
    )Unrealized (losses) gains on interest rate hedges
    
    
    (3,384
    )
    
    
    1,193Foreign currency translation adjustments
    
    
    (3,335
    )
    
    
    (1,415
    )Total comprehensive loss
    
    
    (2,489
    )
    
    
    (5,259
    )Less: comprehensive income attributable to noncontrolling interests
    
    
    354
    
    
    
    10Comprehensive loss attributable to controlling interests
    
    $
    (2,843
    )
    
    $
    (5,269
    )
  March 31, 2010
    
    
    December 31, 2009(In thousands)Foreign currency translation adjustments
    
    $
    (27,755
    )
    
    $
    (24,420
    )Unrealized losses on interest rate hedges
    
    
    (36,582
    )
    
    
    (33,198
    )Total accumulated other comprehensive loss
    
    $
    (64,337
    )
    
    $
    (57,618
    )
    7




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##### Table of Contents



(5) Intangible Assets
 Intangible Assets with Indefinite Lives
  Goodwill
    
    
    Trade NameU.S.
    
    
    U.K.
    
    
    Mexico
    
    
    U.S.
    
    
    U.K.
    
    
    Total(In thousands)Balance as of January 1, 2010:Gross balance
    
    $
    150,461
    
    
    $
    63,994
    
    
    $
    714
    
    
    $
    200
    
    
    $
    3,243
    
    
    $
    218,612Accumulated impairment loss
    
    
    
    
    
    
    (50,003
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,003
    )$
    150,461
    
    
    $
    13,991
    
    
    $
    714
    
    
    $
    200
    
    
    $
    3,243
    
    
    $
    168,609Foreign currency translation adjustments
    
    
    
    
    
    
    (925
    )
    
    
    (6
    )
    
    
    
    
    
    
    (213
    )
    
    
    (1,144
    )Balance as of March 31, 2010:Gross balance
    
    $
    150,461
    
    
    $
    63,069
    
    
    $
    708
    
    
    $
    200
    
    
    $
    3,030
    
    
    $
    217,468Accumulated impairment loss
    
    
    
    
    
    
    (50,003
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,003
    )$
    150,461
    
    
    $
    13,066
    
    
    $
    708
    
    
    $
    200
    
    
    $
    3,030
    
    
    $
    167,465
 Intangible Assets with Definite Lives
  GrossCarrying
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    Amount(In thousands)Customer and branding contracts/relationships
    
    $
    156,361
    
    
    $
    (84,284
    )
    
    $
    72,077Deferred financing costs
    
    
    14,535
    
    
    
    (8,078
    )
    
    
    6,457Exclusive license agreements
    
    
    5,525
    
    
    
    (3,444
    )
    
    
    2,081Non-compete agreements
    
    
    437
    
    
    
    (198
    )
    
    
    239Total
    
    $
    176,858
    
    
    $
    (96,004
    )
    
    $
    80,854
 (6) Accrued Liabilities
  March 31, 2010
    
    
    December 31, 2009(In thousands)Accrued merchant commissions
    
    $
    13,013
    
    
    $
    11,470Accrued armored fees
    
    
    3,816
    
    
    
    5,234Accrued interest expense
    
    
    3,469
    
    
    
    10,406Accrued merchant settlement amounts
    
    
    3,217
    
    
    
    3,603Accrued compensation
    
    
    3,050
    
    
    
    8,470Accrued cash rental and management fees
    
    
    2,394
    
    
    
    2,866Accrued interest rate swap payments
    
    
    2,236
    
    
    
    1,937Accrued maintenance fees
    
    
    1,659
    
    
    
    4,133Accrued processing costs
    
    
    1,148
    
    
    
    1,556Accrued ATM telecommunications costs
    
    
    1,099
    
    
    
    1,169Other accrued expenses
    
    
    6,736
    
    
    
    6,739Total
    
    $
    41,837
    
    
    $
    57,583
  8




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##### Table of Contents



(7) Long-Term Debt
  March 31, 2010
    
    
    December 31, 2009(In thousands)Senior subordinated notes due August 2013 (net
of unamortized discounts of $2.6 million and
$2.8 million as of March 31, 2010 and December
31, 2009)
    
    $
    297,402
    
    
    $
    297,242Other
    
    
    9,786
    
    
    
    9,810Total
    
    
    307,188
    
    
    
    307,052Less: current portion
    
    
    2,353
    
    
    
    2,122Total long-term debt, excluding current portion
    
    $
    304,835
    
    
    $
    304,930
 Revolving Credit Facility
  Other Facilities
 Cardtronics Mexico equipment financing agreements.
 Bank Machine overdraft facility.
 (8) Asset Retirement Obligations
   9




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##### Table of Contents



(in thousands)
 Asset retirement obligation as of January 1, 2010
    
    $
    24,003Additional obligations
    
    
    814Accretion expense
    
    
    621Change in estimate
    
    
    61Payments
    
    
    (357
    )Foreign currency translation adjustments
    
    
    (487
    )Asset retirement obligation as of March 31, 2010
    
    $
    24,655
 Note 1, General and Basis of Presentation  Property and Equipment,
net Note 11, Fair Value Measurements
 (9) Other Liabilities
  March 31, 2010
    
    
    December 31, 2009(In thousands)Current Portion of Other Long-Term Liabilities:Interest rate swaps
    
    $
    23,949
    
    
    $
    23,423Deferred revenue
    
    
    2,132
    
    
    
    2,464Other
    
    
    161
    
    
    
    160Total
    
    $
    26,242
    
    
    $
    26,047Other Long-Term Liabilities:Interest rate swaps
    
    $
    15,004
    
    
    $
    12,656Deferred revenue
    
    
    2,005
    
    
    
    2,393Other
    
    
    3,165
    
    
    
    3,450Total
    
    $
    20,174
    
    
    $
    18,499
  (10) Derivative Financial Instruments
 Accounting Policy
    10




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Notional Amounts
    
    
    Notional Amounts
    
    
    Notional Amounts
    
    
    Weighted AverageUnited States
    
    
    United Kingdom
    
    
    Consolidated(1)
    
    
    Fixed Rate
    
    
    Term(In thousands)$
    600,000
    
    
    £
    75,000
    
    
    $
    713,613
    
    
    
    3.77
    %
    
    April 1, 2010  December 31, 2010$
    625,000
    
    
    £
    75,000
    
    
    $
    738,613
    
    
    
    3.44
    %
    
    January 1, 2011  December 31, 2011$
    525,000
    
    
    £
    50,000
    
    
    $
    600,742
    
    
    
    3.56
    %
    
    January 1, 2012  December 31, 2012$
    275,000
    
    
    £
    25,000
    
    
    $
    312,871
    
    
    
    3.53
    %
    
    January 1, 2013  December 31, 2013$
    100,000
    
    
    £
    
    
    
    $
    100,000
    
    
    
    3.61
    %
    
    January 1, 2014  December 31, 2014
 (1)
    
    United Kingdom pound sterling amounts have been converted
into United States dollars at approximately $1.51 to £1.00,
which was the exchange rate in effect as of March 31, 2010.  Cash Flow Hedging Strategy
     11




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##### Table of Contents



Tabular Disclosures
  Balance Sheet Data
 March 31, 2010
    
    
    December 31, 2009Balance Sheet
    
    
    
    
    
    Balance SheetLocation
    
    Fair Value
    
    
    Location
    
    Fair Value(In thousands)Asset Derivative Instruments:Derivatives Designated as Hedging Instruments:Interest rate swap contracts
    
    Prepaid expenses, deferred costs, and other assets
    
    $
    17
    
    
    Prepaid expenses, deferred costs, and other assets
    
    $
    1,445Derivatives Not Designated as Hedging Instruments:Interest rate swap contracts
    
    Prepaid expenses, deferred costs, and other current assets
    
    $
    779
    
    
    Prepaid expenses, deferred costs, and other current assets
    
    $
    Liability Derivative Instruments:Derivatives Designated as Hedging Instruments:Interest rate swap contracts
    
    Current portion of other long-term liabilities
    
    $
    22,121
    
    
    Current portion of other long-term liabilities
    
    $
    22,286Interest rate swap contracts
    
    Other long-term liabilities
    
    
    13,818
    
    
    Other long-term liabilities
    
    
    11,139Total
    
    
    
    $
    35,939
    
    
    
    
    $
    33,425Derivatives Not Designated as Hedging Instruments:Interest rate swap contracts
    
    Current portion of other long-term liabilities
    
    $
    1,828
    
    
    Current portion of other long-term liabilities
    
    $
    1,137Interest rate swap contracts
    
    Other long-term liabilities
    
    
    1,186
    
    
    Other long-term liabilities
    
    
    1,517Total
    
    
    
    $
    3,014
    
    
    
    
    $
    2,654Total Derivatives:
    
    
    
    $
    38,157
    
    
    
    
    $
    34,634
   12




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##### Table of Contents



Statements of Operations Data
 Three Months Ended March 31,Amount of Loss Recognized
    
    
    Location of Gain
    
    Amount of Loss Reclassifiedin OCI on Derivative
    
    
    (Loss) Reclassified
    
    from Accumulated OCI intoInstruments (Effective
    
    
    from Accumulated
    
    IncomeDerivatives in Cash Flow
    
    Portion)
    
    
    OCI into Income
    
    (Effective Portion)Hedging Relationships
    
    2010
    
    
    2009
    
    
    (Effective Portion)
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    (In thousands)Interest rate swap contracts
    
    $
    (10,147
    )
    
    $
    (4,254
    )
    
    Cost of ATM operating revenues
    
    $
    (6,763
    )
    
    $
    (5,447
    )
 Three Months Ended March 31,Derivatives Not
    
    
    
    Amount of Loss RecognizedDesignated as Hedging
    
    Location of Loss Recognized
    
    into Income on DerivativeInstruments
    
    into Income on Derivative
    
    2010
    
    
    2009(In thousands)Interest rate swap contracts
    
    Other expense (income)
    
    $
    (25
    )
    
    $
    
   Note 11, Fair Value Measurements
 (11) Fair Value Measurements
   Fair Value Measurements at March 31, 2010Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Assets:Assets associated with interest rate swaps
    
    $
    796
    
    
    $
    
    
    
    $
    796
    
    
    $
    Liabilities:Liabilities associated with interest rate swaps
    
    $
    38,953
    
    
    $
    
    
    
    $
    38,953
    
    
    $
    
  13




---



##### Table of Contents



Fair Value Measurements at December 31, 2009Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Assets:Assets associated with interest rate swaps
    
    $
    1,445
    
    
    $
    
    
    
    $
    1,445
    
    
    $
    Liabilities:Liabilities associated with interest rate swaps
    
    $
    36,079
    
    
    $
    
    
    
    $
    36,079
    
    
    $
    
   ash and cash equivalents, accounts and notes receivable, net of the allowance for doubtful
accounts, other current assets, accounts payable, accrued expenses, and other current liabilities.
 Interest rate swaps.
 Additions to asset retirement obligation liability.
 Long-term debt. Note 7, Long-Term Debt
 (12) Commitments and Contingencies
 Legal Matters
   14




---



##### Table of Contents



Regulatory Matters
  Other Commitments
 Asset Retirement Obligations. Note 8, Asset Retirement Obligations
 Other Contingencies
   15




---



##### Table of Contents



(13) Income Taxes
  2010
    
    
    2009(In thousands)Income tax expense
    
    $
    1,439
    
    
    $
    1,017Effective tax rate
    
    
    25.4
    %
    
    
    (25.3
    )%
   (14) Segment Information
    16




---



##### Table of Contents



2010
    
    
    2009(In thousands)EBITDA
    
    $
    27,553
    
    
    $
    18,394Depreciation and accretion expense
    
    
    10,222
    
    
    
    9,639Amortization expense
    
    
    3,979
    
    
    
    4,527Interest expense, net, including amortization of
deferred financing costs and bond discounts
    
    
    7,948
    
    
    
    8,279Income tax expense
    
    
    1,439
    
    
    
    1,017Net income (loss) attributable to controlling interests
    
    $
    3,965
    
    
    $
    (5,068
    )
  For the Three Month Period Ended March 31, 2010U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Eliminations
    
    
    Total(In thousands)Revenue from external customers
    
    $
    101,909
    
    
    $
    18,621
    
    
    $
    7,246
    
    
    $
    
    
    
    $
    127,776Intersegment revenues
    
    
    678
    
    
    
    
    
    
    
    
    
    
    
    (678
    )
    
    
    Cost of revenues
    
    
    69,149
    
    
    
    14,351
    
    
    
    5,250
    
    
    
    (678
    )
    
    
    88,072Selling, general, and administrative expenses
    
    
    9,275
    
    
    
    1,305
    
    
    
    563
    
    
    
    
    
    
    
    11,143Loss (gain) on disposal of assets
    
    
    161
    
    
    
    223
    
    
    
    (7
    )
    
    
    
    
    
    
    377EBITDA
    
    
    23,652
    
    
    
    2,713
    
    
    
    1,453
    
    
    
    (265
    )
    
    
    27,553Depreciation and accretion expense
    
    
    6,626
    
    
    
    2,943
    
    
    
    658
    
    
    
    (5
    )
    
    
    10,222Amortization expense
    
    
    3,329
    
    
    
    643
    
    
    
    7
    
    
    
    
    
    
    
    3,979Interest expense, net
    
    
    6,575
    
    
    
    1,127
    
    
    
    246
    
    
    
    
    
    
    
    7,948Capital expenditures (1)
    
    $
    6,001
    
    
    $
    2,251
    
    
    $
    353
    
    
    $
    
    
    
    $
    8,605
 For the Three Month Period Ended March 31, 2009U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Eliminations
    
    
    Total(In thousands)Revenue from external customers
    
    $
    96,767
    
    
    $
    14,777
    
    
    $
    3,801
    
    
    $
    
    
    
    $
    115,345Intersegment revenues
    
    
    374
    
    
    
    
    
    
    
    
    
    
    
    (374
    )
    
    
    Cost of revenues
    
    
    70,782
    
    
    
    10,707
    
    
    
    2,928
    
    
    
    (374
    )
    
    
    84,043Selling, general, and
administrative expenses
(2)
    
    
    9,636
    
    
    
    1,017
    
    
    
    202
    
    
    
    
    
    
    
    10,855Loss on disposal of assets
    
    
    395
    
    
    
    1,713
    
    
    
    
    
    
    
    
    
    
    
    2,108EBITDA
    
    
    16,517
    
    
    
    1,291
    
    
    
    617
    
    
    
    (31
    )
    
    
    18,394Depreciation and accretion expense
    
    
    6,805
    
    
    
    2,436
    
    
    
    403
    
    
    
    (5
    )
    
    
    9,639Amortization expense
    
    
    4,119
    
    
    
    399
    
    
    
    9
    
    
    
    
    
    
    
    4,527Interest expense, net
    
    
    6,922
    
    
    
    1,216
    
    
    
    141
    
    
    
    
    
    
    
    8,279Capital expenditures (1)
    
    $
    3,055
    
    
    $
    1,767
    
    
    $
    154
    
    
    $
    
    
    
    $
    4,976
 
 (1)
    
    Capital expenditure amounts include payments made for
exclusive license agreements and site acquisition costs.
Additionally, capital expenditure amounts for Mexico are
reflected gross of any noncontrolling interest amounts.(2)
    
    Selling, general, and administrative expenses for the
three months ended March 31, 2010 includes $0.6 million of
costs associated with the preparation and filing of a
shelf registration statement and the completion of a
secondary equity offering. Selling, general, and
administrative expenses for the three months ended March
31, 2009 includes $1.2 million in severance costs
associated with the departure of the Companys former
Chief Executive Officer in March 2009, which negatively
impacted the Companys EBITDA during the period. Identifiable Assets:
 March 31, 2010
    
    
    December 31, 2009(In thousands)United States
    
    $
    449,600
    
    
    $
    450,410United Kingdom
    
    
    68,570
    
    
    
    76,109Mexico
    
    
    19,185
    
    
    
    17,235Eliminations
    
    
    (88,033
    )
    
    
    (83,350
    )Total
    
    $
    449,322
    
    
    $
    460,404
  17




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##### Table of Contents



(15) New Accounting Pronouncements
 Adopted
 Subsequent Events. Subsequent Events Subsequent Events.
 Disclosures about Fair Value Measurements. Fair Value Measurements and Disclosures
 Issued but Not Yet Adopted
 Multiple-Deliverable Revenue Arrangements. Revenue Recognition
 (16) Supplemental Guarantor Financial Information
  Condensed Consolidating Statements of Operations
 Three Months Ended March 31, 2010Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    102,587
    
    
    $
    25,867
    
    
    $
    (678
    )
    
    $
    127,776Operating costs and expenses
    
    
    1,543
    
    
    
    86,997
    
    
    
    25,936
    
    
    
    (683
    )
    
    
    113,793Operating (loss) income
    
    
    (1,543
    )
    
    
    15,590
    
    
    
    (69
    )
    
    
    5
    
    
    
    13,983Interest expense, net, including
amortization of deferred
financing costs and bond
discounts
    
    
    1,779
    
    
    
    4,796
    
    
    
    1,373
    
    
    
    
    
    
    
    7,948Equity in earnings of subsidiaries
    
    
    (9,027
    )
    
    
    
    
    
    
    
    
    
    
    9,027
    
    
    
    Other expense (income)
    
    
    380
    
    
    
    (30
    )
    
    
    16
    
    
    
    
    
    
    
    366Income (loss) before income taxes
    
    
    5,325
    
    
    
    10,824
    
    
    
    (1,458
    )
    
    
    (9,022
    )
    
    
    5,669Income tax expense
    
    
    1,100
    
    
    
    339
    
    
    
    
    
    
    
    
    
    
    
    1,439Net income (loss)
    
    
    4,225
    
    
    
    10,485
    
    
    
    (1,458
    )
    
    
    (9,022
    )
    
    
    4,230Net income attributable to
noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    265
    
    
    
    265Net income (loss) attributable to
controlling interests and
available to common stockholders
    
    $
    4,225
    
    
    $
    10,485
    
    
    $
    (1,458
    )
    
    $
    (9,287
    )
    
    $
    3,965
  18




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##### Table of Contents



Three Months Ended March 31, 2009Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    97,141
    
    
    $
    18,578
    
    
    $
    (374
    )
    
    $
    115,345Operating costs and expenses
    
    
    1,133
    
    
    
    90,604
    
    
    
    19,814
    
    
    
    (379
    )
    
    
    111,172Operating (loss) income
    
    
    (1,133
    )
    
    
    6,537
    
    
    
    (1,236
    )
    
    
    5
    
    
    
    4,173Interest expense, net, including amortization of
deferred financing costs and bond discounts
    
    
    496
    
    
    
    6,426
    
    
    
    1,357
    
    
    
    
    
    
    
    8,279Equity in losses of subsidiaries
    
    
    2,634
    
    
    
    
    
    
    
    
    
    
    
    (2,634
    )
    
    
    Other (income) expense
    
    
    (167
    )
    
    
    (22
    )
    
    
    103
    
    
    
    
    
    
    
    (86
    )(Loss) income before income taxes
    
    
    (4,096
    )
    
    
    133
    
    
    
    (2,696
    )
    
    
    2,639
    
    
    
    (4,020
    )Income tax expense
    
    
    946
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    1,017Net (loss) income
    
    
    (5,042
    )
    
    
    62
    
    
    
    (2,696
    )
    
    
    2,639
    
    
    
    (5,037
    )Net income attributable to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    31Net (loss) income attributable to controlling
interests and available to common stockholders
    
    $
    (5,042
    )
    
    $
    62
    
    
    $
    (2,696
    )
    
    $
    2,608
    
    
    $
    (5,068
    )
 Condensed Consolidating Balance Sheets
 As of March 31, 2010Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Assets:Cash and cash equivalents
    
    $
    261
    
    
    $
    8,451
    
    
    $
    1,982
    
    
    $
    
    
    
    $
    10,694Accounts and notes receivable, net
    
    
    30,339
    
    
    
    22,918
    
    
    
    4,020
    
    
    
    (30,273
    )
    
    
    27,004Other current assets
    
    
    461
    
    
    
    7,018
    
    
    
    6,988
    
    
    
    (6
    )
    
    
    14,461Total current assets
    
    
    31,061
    
    
    
    38,387
    
    
    
    12,990
    
    
    
    (30,279
    )
    
    
    52,159Property and equipment, net
    
    
    
    
    
    
    86,833
    
    
    
    57,972
    
    
    
    (148
    )
    
    
    144,657Intangible assets, net
    
    
    6,045
    
    
    
    70,064
    
    
    
    7,975
    
    
    
    
    
    
    
    84,084Goodwill
    
    
    
    
    
    
    150,461
    
    
    
    13,774
    
    
    
    
    
    
    
    164,235Investments in subsidiaries
    
    
    (20,037
    )
    
    
    
    
    
    
    
    
    
    
    20,037
    
    
    
    Intercompany receivable (payable)
    
    
    299,354
    
    
    
    14,887
    
    
    
    (5,813
    )
    
    
    (308,428
    )
    
    
    Prepaid expenses, deferred costs, and other assets
    
    
    
    
    
    
    3,330
    
    
    
    857
    
    
    
    
    
    
    
    4,187Total assets
    
    $
    316,423
    
    
    $
    363,962
    
    
    $
    87,755
    
    
    $
    (318,818
    )
    
    $
    449,322Liabilities and Stockholders (Deficit) Equity:Current portion of long-term debt and notes payable
    
    $
    
    
    
    $
    
    
    
    $
    2,353
    
    
    $
    
    
    
    $
    2,353Capital lease obligations
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    96Current portion of other long-term liabilities
    
    
    
    
    
    
    22,658
    
    
    
    3,584
    
    
    
    
    
    
    
    26,242Accounts payable and accrued liabilities
    
    
    9,383
    
    
    
    61,510
    
    
    
    19,435
    
    
    
    (30,273
    )
    
    
    60,055Total current liabilities
    
    
    9,383
    
    
    
    84,264
    
    
    
    25,372
    
    
    
    (30,273
    )
    
    
    88,746Long-term debt, net of related discounts
    
    
    297,402
    
    
    
    
    
    
    
    7,433
    
    
    
    
    
    
    
    304,835Intercompany payable
    
    
    
    
    
    
    205,217
    
    
    
    102,863
    
    
    
    (308,080
    )
    
    
    Deferred tax liability, net
    
    
    11,915
    
    
    
    1,326
    
    
    
    (52
    )
    
    
    
    
    
    
    13,189Asset retirement obligations
    
    
    
    
    
    
    14,893
    
    
    
    9,762
    
    
    
    
    
    
    
    24,655Other long-term liabilities
    
    
    
    
    
    
    18,432
    
    
    
    1,742
    
    
    
    
    
    
    
    20,174Total liabilities
    
    
    318,700
    
    
    
    324,132
    
    
    
    147,120
    
    
    
    (338,353
    )
    
    
    451,599Stockholders (deficit) equity
    
    
    (2,277
    )
    
    
    39,830
    
    
    
    (59,365
    )
    
    
    19,535
    
    
    
    (2,277
    )Total liabilities and stockholders (deficit) equity
    
    $
    316,423
    
    
    $
    363,962
    
    
    $
    87,755
    
    
    $
    (318,818
    )
    
    $
    449,322
  19




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##### Table of Contents



As of December 31, 2009Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Assets:Cash and cash equivalents
    
    $
    40
    
    
    $
    8,400
    
    
    $
    2,009
    
    
    $
    
    
    
    $
    10,449Accounts and notes receivable, net
    
    
    38,261
    
    
    
    23,846
    
    
    
    3,980
    
    
    
    (38,387
    )
    
    
    27,700Other current assets
    
    
    80
    
    
    
    8,218
    
    
    
    6,627
    
    
    
    (6
    )
    
    
    14,919Total current assets
    
    
    38,381
    
    
    
    40,464
    
    
    
    12,616
    
    
    
    (38,393
    )
    
    
    53,068Property and equipment, net
    
    
    
    
    
    
    86,975
    
    
    
    60,527
    
    
    
    (154
    )
    
    
    147,348Intangible assets, net
    
    
    6,467
    
    
    
    73,390
    
    
    
    9,179
    
    
    
    
    
    
    
    89,036Goodwill
    
    
    
    
    
    
    150,461
    
    
    
    14,705
    
    
    
    
    
    
    
    165,166Investments in subsidiaries
    
    
    (30,887
    )
    
    
    
    
    
    
    
    
    
    
    30,887
    
    
    
    Intercompany receivable (payable)
    
    
    306,786
    
    
    
    11,681
    
    
    
    (6,015
    )
    
    
    (312,452
    )
    
    
    Prepaid expenses, deferred costs, and other assets
    
    
    
    
    
    
    3,454
    
    
    
    2,332
    
    
    
    
    
    
    
    5,786Total assets
    
    $
    320,747
    
    
    $
    366,425
    
    
    $
    93,344
    
    
    $
    (320,112
    )
    
    $
    460,404Liabilities and Stockholders (Deficit) Equity:Current portion of long-term debt and notes payable
    
    $
    
    
    
    $
    
    
    
    $
    2,122
    
    
    $
    
    
    
    $
    2,122Capital lease obligations
    
    
    
    
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    235Current portion of other long-term liabilities
    
    
    
    
    
    
    23,217
    
    
    
    2,830
    
    
    
    
    
    
    
    26,047Accounts payable and accrued liabilities
    
    
    13,825
    
    
    
    77,829
    
    
    
    20,341
    
    
    
    (38,387
    )
    
    
    73,608Total current liabilities
    
    
    13,825
    
    
    
    101,281
    
    
    
    25,293
    
    
    
    (38,387
    )
    
    
    102,012Long-term debt, net of related discounts
    
    
    297,242
    
    
    
    
    
    
    
    7,688
    
    
    
    
    
    
    
    304,930Intercompany payable
    
    
    
    
    
    
    205,215
    
    
    
    106,889
    
    
    
    (312,104
    )
    
    
    Deferred tax liability, net
    
    
    10,970
    
    
    
    1,326
    
    
    
    (46
    )
    
    
    
    
    
    
    12,250Asset retirement obligations
    
    
    
    
    
    
    14,405
    
    
    
    9,598
    
    
    
    
    
    
    
    24,003Other long-term liabilities
    
    
    
    
    
    
    16,931
    
    
    
    1,568
    
    
    
    
    
    
    
    18,499Total liabilities
    
    
    322,037
    
    
    
    339,158
    
    
    
    150,990
    
    
    
    (350,491
    )
    
    
    461,694Stockholders (deficit) equity
    
    
    (1,290
    )
    
    
    27,267
    
    
    
    (57,646
    )
    
    
    30,379
    
    
    
    (1,290
    )Total liabilities and stockholders (deficit) equity
    
    $
    320,747
    
    
    $
    366,425
    
    
    $
    93,344
    
    
    $
    (320,112
    )
    
    $
    460,404
 Condensed Consolidating Statements of Cash Flows
 Three Months Ended March 31, 2010Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Net cash provided by operating activities
    
    $
    371
    
    
    $
    6,192
    
    
    $
    2,623
    
    
    $
    
    
    
    $
    9,186Additions to property and equipment
    
    
    
    
    
    
    (5,952
    )
    
    
    (2,574
    )
    
    
    
    
    
    
    (8,526
    )Payments for exclusive license agreements and site
acquisition costs
    
    
    
    
    
    
    (50
    )
    
    
    (29
    )
    
    
    
    
    
    
    (79
    )Net cash used in investing activities
    
    
    
    
    
    
    (6,002
    )
    
    
    (2,603
    )
    
    
    
    
    
    
    (8,605
    )Repayments of long-term debt and capital leases
    
    
    
    
    
    
    (139
    )
    
    
    (508
    )
    
    
    
    
    
    
    (647
    )Proceeds from exercises of stock options
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110Repurchase of capital stock
    
    
    (260
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (260
    )Net cash used in financing activities
    
    
    (150
    )
    
    
    (139
    )
    
    
    (508
    )
    
    
    
    
    
    
    (797
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    461
    
    
    
    
    
    
    
    461Net increase (decrease) in cash and cash equivalents
    
    
    221
    
    
    
    51
    
    
    
    (27
    )
    
    
    
    
    
    
    245Cash and cash equivalents as of beginning of period
    
    
    40
    
    
    
    8,400
    
    
    
    2,009
    
    
    
    
    
    
    
    10,449Cash and cash equivalents as of end of period
    
    $
    261
    
    
    $
    8,451
    
    
    $
    1,982
    
    
    $
    
    
    
    $
    10,694
  20




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##### Table of Contents



Three Months Ended March 31, 2009Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Net cash (used in) provided by operating activities
    
    $
    (12,593
    )
    
    $
    16,130
    
    
    $
    3,410
    
    
    $
    
    
    
    $
    6,947Additions to property and equipment
    
    
    
    
    
    
    (2,999
    )
    
    
    (1,918
    )
    
    
    
    
    
    
    (4,917
    )Payments for exclusive license agreements and
site acquisition costs
    
    
    
    
    
    
    (55
    )
    
    
    (4
    )
    
    
    
    
    
    
    (59
    )Net cash used in investing activities
    
    
    
    
    
    
    (3,054
    )
    
    
    (1,922
    )
    
    
    
    
    
    
    (4,976
    )Proceeds from issuance of long-term debt
    
    
    23,500
    
    
    
    9,500
    
    
    
    1,000
    
    
    
    (10,500
    )
    
    
    23,500Repayments of long-term debt and capital leases
    
    
    (18,500
    )
    
    
    (18,700
    )
    
    
    (236
    )
    
    
    18,500
    
    
    
    (18,936
    )Issuance of long-term notes receivable
    
    
    (10,500
    )
    
    
    
    
    
    
    
    
    
    
    10,500
    
    
    
    Payments received on long-term notes receivable
    
    
    18,500
    
    
    
    
    
    
    
    
    
    
    
    (18,500
    )
    
    
    Repayments of borrowings under bank overdraft
facility, net
    
    
    
    
    
    
    
    
    
    
    (142
    )
    
    
    
    
    
    
    (142
    )Other financing activities
    
    
    (405
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (405
    )Net cash provided by (used in) financing activities
    
    
    12,595
    
    
    
    (9,200
    )
    
    
    622
    
    
    
    
    
    
    
    4,017Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    39Net increase in cash and cash equivalents
    
    
    2
    
    
    
    3,876
    
    
    
    2,149
    
    
    
    
    
    
    
    6,027Cash and cash equivalents at beginning of period
    
    
    20
    
    
    
    3,165
    
    
    
    239
    
    
    
    
    
    
    
    3,424Cash and cash equivalents at end of period
    
    $
    22
    
    
    $
    7,041
    
    
    $
    2,388
    
    
    $
    
    
    
    $
    9,451
  21




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##### Table of Contents



Cautionary Statement Regarding Forward-Looking Statements
 Certain statements and information in this Quarterly Report on Form 10-Q (this Form 10-Q)
may constitute forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The words believe, expect, anticipate, plan, intend, foresee,
should, would, could or other similar expressions are intended to identify forward-looking
statements, which are generally not historical in nature. These forward-looking statements are
based on our current expectations and beliefs concerning future developments and their potential
effect on us. While management believes that these forward-looking statements are reasonable as
and when made, there can be no assurance that future developments affecting us will be those that
we currently anticipate. All comments concerning our expectations for future revenues and
operating results are based on our forecasts for our existing operations and do not include the
potential impact of any future acquisitions. Our forward-looking statements involve significant
risks and uncertainties (some of which are beyond our control) and assumptions that could cause
actual results to differ materially from our historical experience and our present expectations or
projections. Important factors that could cause actual results to differ materially from those in
the forward-looking statements include, but are not limited to, those summarized below:
 
    
    our financial outlook and the financial outlook of the ATM industry;
 
    
    our ability to provide new ATM solutions to financial institutions;
 
    
    our ATM vault cash rental needs, including potential liquidity issues with our vault
cash providers;
 
    
    the implementation of our corporate strategy;
 
    
    our ability to compete successfully with new and existing competitors;
 
    
    our ability to renew and strengthen our existing customer relationships and add new
customers;
 
    
    our ability to meet the service levels required by our service level agreements with our
customers;
 
    
    our ability to pursue and successfully integrate acquisitions;
 
    
    our ability to successfully manage our existing international operations and to continue
to expand internationally;
 
    
    our ability to prevent security breaches;
 
    
    our ability to manage the risks associated with our third-party service providers
failing to perform their contractual obligations;
 
    
    changes in interest rates, foreign currency rates and regulatory requirements; and
 
    
    the additional risks we are exposed to in our armored courier operations.
 Other factors that could cause our actual results to differ from our projected results are
described in (1) Part II, Item 1A. Risk Factors and elsewhere in this Form 10-Q , (2) our Annual
Report on Form 10-K for the fiscal year ended December 31, 2009 (2009 Form 10-K), (3) our reports
and registration statements filed from time to time with the Securities and Exchange Commission
(SEC) and (4) other announcements we make from time to time.
 Readers are cautioned not to place undue reliance on forward-looking statements, which speak
only as of the date hereof. We undertake no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as a result of new information,
future events or otherwise.
  22




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
   Business Update
   
    
    Total transactions conducted on our network increased over 8% from 354.4 million in 2008
to 383.3 million in 2009;
 
    
    Monthly cash withdrawal transactions per ATM increased over 6% from 579 in 2008 to 616
in 2009;
 
    
    Gross profit margins increased from 23.2% in 2008 to 30.2% in 2009; and
 
    
    Net cash provided by operating activities increased from $16.2 million in 2008 to $74.9
million in 2009, allowing us to pay down the entire amount previously outstanding under our
revolving credit facility at the end of 2008.
  
    
    Deploying additional ATMs within our existing retail merchant partner locations and
implementing selective surcharge rate (or convenience fee) increases;
 
    
    Adding new retail merchant partners to our portfolio of existing retail locations;
 
    
    Driving incremental transactions to our devices by providing financial institutions the
opportunity to place their brands on selected devices within our network;
 
    
    Continuing to expand the number of issuing financial institutions that participate in
Allpoint, our wholly-owned surcharge free ATM network;
  23




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##### Table of Contents




    
    Providing ATM management services (generally on a fixed-fee basis) for fleets of ATMs
owned by financial institutions and retailers; and
 
    
    Selectively expanding our existing ATM estates within the United Kingdom and Mexico,
while also considering additional market entries outside of the United States.
  Recent Events
 Withdrawal Transaction and Revenue Trends  United States.
 Part II, Item 1A. Risk Factors  Interchange fees,
which comprise a substantial portion of our transaction revenues, may be lowered at the discretion
of the various EFT networks through which our transactions are routed, or through potential
regulatory changes, thus reducing our future revenues
 Withdrawal Transaction and Revenue Trends  United Kingdom.
 Part II, Item 1A. Risk Factors -
Interchange fees, which comprise a substantial portion of our transaction revenues, may be lowered
at the discretion of the various EFT
networks through which our transactions are routed, or through potential regulatory changes,
thus reducing our future revenues
  24




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##### Table of Contents



Change in Mexico Fee Structure. Item 1, Notes to Consolidated
Financial Statements, Note 12, Commitments and Contingencies  Regulatory Matters
 Shelf Registration Filing and Secondary Equity Offering.
   25




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##### Table of Contents



Results of Operations
  Three Months Ended March 31,2010
    
    
    2009Revenues:ATM operating revenues
    
    
    98.4
    %
    
    
    98.5
    %ATM product sales and other revenues
    
    
    1.6
    
    
    
    1.5Total revenues
    
    
    100.0
    
    
    
    100.0Cost of revenues:Cost of ATM operating revenues (exclusive of depreciation,
accretion, and amortization, shown separately below)
(1)
    
    
    67.2
    
    
    
    71.3Cost of ATM product sales and other revenues
    
    
    1.7
    
    
    
    1.6Total cost of revenues
    
    
    68.9
    
    
    
    72.9Gross profit
    
    
    31.1
    
    
    
    27.1Operating expenses:Selling, general, and administrative expenses (2)
    
    
    8.7
    
    
    
    9.4Depreciation and accretion expense
    
    
    8.0
    
    
    
    8.4Amortization expense
    
    
    3.1
    
    
    
    3.9Loss on disposal of assets
    
    
    0.3
    
    
    
    1.8Total operating expenses
    
    
    20.1
    
    
    
    23.5Income from operations
    
    
    10.9
    
    
    
    3.6Other expense (income):Interest expense, net
    
    
    5.7
    
    
    
    6.7Amortization of deferred financing costs and bond discounts
    
    
    0.5
    
    
    
    0.5Other expense (income)
    
    
    0.3
    
    
    
    (0.1
    )Total other expense
    
    
    6.5
    
    
    
    7.1Income (loss) before income taxes
    
    
    4.4
    
    
    
    (3.5
    )Income tax expense
    
    
    1.1
    
    
    
    0.9Net income (loss)
    
    
    3.3
    
    
    
    (4.4
    )Net income attributable to noncontrolling interests
    
    
    0.2
    
    
    
    0.0Net income (loss) attributable to controlling interests and
available to common stockholders
    
    
    3.1
    %
    
    
    (4.4
    )%
 
 (1)
    
    Excludes effects of depreciation, accretion, and
amortization expense of $12.3 million and $12.6 million
for the three month periods ended March 31, 2010 and 2009,
respectively. The inclusion of this depreciation,
accretion, and amortization expense in Cost of ATM
operating revenues would have increased our Cost of ATM
operating revenues as a percentage of total revenues by
9.6% and 10.9% for the three month periods ended March 31,
2010 and 2009, respectively.(2)
    
    The three months ended March 31, 2010 includes $0.6
million of costs associated with the preparation and
filing of a shelf registration statement and the
completion of a secondary equity offering, and
approximately $0.4 million in incremental stock-based
compensation expense (when compared to the same period in
the prior year). The three months ended March 31, 2009
includes the effect of $1.2 million in severance costs
associated with the departure of our former Chief Executive Officer during
March 2009.  26




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##### Table of Contents



Key Operating Metrics
  Three Months Ended March 31,2010
    
    
    2009Average number of transacting ATMs:United States: Company-owned
    
    
    18,128
    
    
    
    18,257United States: Merchant-owned
    
    
    9,920
    
    
    
    10,145United Kingdom
    
    
    2,712
    
    
    
    2,544Mexico
    
    
    2,745
    
    
    
    2,094Total average number of transacting ATMs
    
    
    33,505
    
    
    
    33,040Total transactions (in thousands)
    
    
    96,642
    
    
    
    89,369Total cash withdrawal transactions (in thousands)
    
    
    60,884
    
    
    
    57,564Average monthly cash withdrawal transactions per average transacting ATM
    
    
    606
    
    
    
    581Per ATM per month:ATM operating revenues
    
    $
    1,250
    
    
    $
    1,146Cost of ATM operating revenues (exclusive of depreciation,
accretion, and amortization) (1)
    
    
    854
    
    
    
    830ATM operating gross profit (1) (2)
    
    $
    396
    
    
    $
    316ATM operating gross profit margin (exclusive of depreciation,
accretion, and amortization)
    
    
    31.7
    %
    
    
    27.6
    %ATM operating gross profit margin (inclusive of depreciation,
accretion, and amortization)
    
    
    21.9
    %
    
    
    16.5
    %
 
 (1)
    
    Excludes effects of depreciation,
accretion, and amortization expense
of $12.3 million and $12.6 million
for the three month periods ended
March 31, 2010 and 2009,
respectively. The inclusion of this
depreciation, accretion, and
amortization expense in Cost of ATM
operating revenues would have
increased our Cost of ATM operating
revenues per ATM per month and
decreased our ATM operating gross
profit per ATM per month by $122 and
$127 for the three month periods
ended March 31, 2010 and 2009,
respectively.(2)
    
    ATM operating gross profit is a
measure of profitability that uses
only the revenue and expenses that
relate to operating the ATMs in our
portfolio. Revenues and expenses
from ATM equipment sales and other
ATM-related services are not
included.  27




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##### Table of Contents



Revenues
 Three Months Ended March 31,2010
    
    
    2009
    
    
    % Change(In thousands)ATM operating revenues
    
    $
    125,687
    
    
    $
    113,580
    
    
    
    10.7
    %ATM product sales and other revenues
    
    
    2,089
    
    
    
    1,765
    
    
    
    18.4
    %Total revenues
    
    $
    127,776
    
    
    $
    115,345
    
    
    
    10.8
    %
 ATM operating revenues.
 Variance: Three Months Ended March 31, 2009 toThree Months Ended March 31, 2010U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Total(In thousands)Surcharge revenues
    
    $
    1,179
    
    
    $
    508
    
    
    $
    3,252
    
    
    $
    4,939Interchange revenues
    
    
    220
    
    
    
    3,293
    
    
    
    144
    
    
    
    3,657Bank branding and surcharge-free network revenues
    
    
    3,101
    
    
    
    
    
    
    
    
    
    
    
    3,101Other revenues
    
    
    176
    
    
    
    1
    
    
    
    233
    
    
    
    410Total increase in ATM operating revenues
    
    $
    4,676
    
    
    $
    3,802
    
    
    $
    3,629
    
    
    $
    12,107
 United States
 Recent Events  Withdrawal Transaction
and Revenue Trends  United States
 United Kingdom
 Recent Events  Withdrawal Transaction
and Revenue Trends  United Kingdom
  28




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##### Table of Contents



Mexico
 Recent
Events, Change in Mexico Fee Structure
 ATM product sales and other revenues.
 Cost of Revenues
 Three Months Ended March 31,2010
    
    
    2009
    
    
    % Change(In thousands)Cost of ATM operating revenues (exclusive
of depreciation, accretion, and
amortization)
    
    $
    85,879
    
    
    $
    82,229
    
    
    
    4.4
    %Cost of ATM product sales and other revenues
    
    
    2,193
    
    
    
    1,814
    
    
    
    20.9
    %Total cost of revenues (exclusive of
depreciation, accretion, and amortization)
    
    $
    88,072
    
    
    $
    84,043
    
    
    
    4.8
    %
  29




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##### Table of Contents



Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization).
 Variance: Three Months Ended March 31, 2009 toThree Months Ended March 31, 2010U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    TotalIncrease (decrease)(In thousands)Merchant commissions
    
    $
    632
    
    
    $
    963
    
    
    $
    1,100
    
    
    $
    2,695Vault cash rental expense
    
    
    379
    
    
    
    610
    
    
    
    203
    
    
    
    1,192Other costs of cash
    
    
    (1,825
    )
    
    
    1,167
    
    
    
    785
    
    
    
    127Repairs and maintenance
    
    
    (1,009
    )
    
    
    381
    
    
    
    (36
    )
    
    
    (664
    )Communications
    
    
    (204
    )
    
    
    85
    
    
    
    118
    
    
    
    (1
    )Transaction processing
    
    
    (256
    )
    
    
    284
    
    
    
    (15
    )
    
    
    13Stock-based compensation
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Other expenses
    
    
    14
    
    
    
    156
    
    
    
    110
    
    
    
    280Total (decrease) increase in cost of ATM operating revenues
    
    $
    (2,261
    )
    
    $
    3,646
    
    
    $
    2,265
    
    
    $
    3,650
 United States
 United Kingdom
  Mexico
   30




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##### Table of Contents



Cost of ATM product sales and other revenues.
 Gross Profit Margin
 Three Months Ended March 31,2010
    
    
    2009ATM operating gross profit margin:Exclusive of depreciation, accretion, and amortization
    
    
    31.7
    %
    
    
    27.6
    %Inclusive of depreciation, accretion, and amortization
    
    
    21.9
    %
    
    
    16.5
    %ATM product sales and other revenues gross profit margin
    
    
    (5.0
    )%
    
    
    (2.8
    )%Total gross profit margin:Exclusive of depreciation, accretion, and amortization
    
    
    31.1
    %
    
    
    27.1
    %Inclusive of depreciation, accretion, and amortization
    
    
    21.5
    %
    
    
    16.2
    %
 ATM operating gross profit margin Cost of Revenues
  ATM product sales and other revenues gross profit margin.
 Selling, General, and Administrative Expenses
 Three Months Ended March 31,2010
    
    
    2009
    
    
    % Change(In thousands)Selling, general, and administrative expenses
    
    $
    9,883
    
    
    $
    9,988
    
    
    
    (1.1
    )%Stock-based compensation
    
    
    1,260
    
    
    
    867
    
    
    
    45.3
    %Total selling, general, and administrative expenses
    
    $
    11,143
    
    
    $
    10,855
    
    
    
    2.7
    %Percentage of total revenues:Selling, general, and administrative expenses
    
    
    7.7
    %
    
    
    8.7
    %Stock-based compensation
    
    
    1.0
    %
    
    
    0.7
    %Total selling, general, and administrative expenses
    
    
    8.7
    %
    
    
    9.4
    %
  31




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##### Table of Contents



Selling, general, and administrative expenses (SG&A expenses), excluding stock-based
compensation.
 Stock-based compensation. Item 1, Notes to
Consolidated Financial Statements, Note 2, Stock-Based Compensation
 Depreciation and Accretion Expense
 Three Months Ended March 31,2010
    
    
    2009
    
    
    % Change(In thousands)Depreciation expense
    
    $
    9,601
    
    
    $
    9,174
    
    
    
    4.7
    %Accretion expense
    
    
    621
    
    
    
    465
    
    
    
    33.5
    %Depreciation and accretion expense
    
    $
    10,222
    
    
    $
    9,639
    
    
    
    6.0
    %Percentage of total revenues:Depreciation expense
    
    
    7.5
    %
    
    
    8.0
    %Accretion expense
    
    
    0.5
    %
    
    
    0.4
    %Total depreciation and accretion expense
    
    
    8.0
    %
    
    
    8.4
    %
 Depreciation expense. Item 1, Notes to Consolidated Financial
Statements, Note 1, General and Basis of Presentation  Property and Equipment, net
 Accretion expense. Depreciation expense
 Amortization Expense
 Three Months Ended March 31,2010
    
    
    2009
    
    
    % Change(In thousands)Amortization expense
    
    $
    3,979
    
    
    $
    4,527
    
    
    
    (12.1
    )%Percentage of total revenues
    
    
    3.1
    %
    
    
    3.9
    %
   32




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##### Table of Contents



Loss on Disposal of Assets
 Three Months Ended March 31,2010
    
    
    2009
    
    
    % Change(In thousands)Loss on disposal of assets
    
    $
    377
    
    
    $
    2,108
    
    
    
    (82.1
    )%Percentage of total revenues
    
    
    0.3
    %
    
    
    1.8
    %
  Interest Expense, Net
 Three Months Ended March 31,2010
    
    
    2009
    
    
    % Change(In thousands)Interest expense, net
    
    $
    7,318
    
    
    $
    7,711
    
    
    
    (5.1
    )%Amortization of deferred financing costs and bond discounts
    
    
    630
    
    
    
    568
    
    
    
    10.9
    %Total interest expense, net
    
    $
    7,948
    
    
    $
    8,279
    
    
    
    (4.0
    )%Percentage of total revenues
    
    
    6.2
    %
    
    
    7.2
    %
 Interest expense, net.
 Amortization of deferred financing costs and bond discounts.
 Income Tax Expense
 Three Months Ended March 31,2010
    
    
    2009
    
    
    % Change(In thousands)Income tax expense
    
    $
    1,439
    
    
    $
    1,017
    
    
    
    41.5
    %Effective tax rate
    
    
    25.4
    %
    
    
    (25.3
    )%
   33




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##### Table of Contents



Liquidity and Capital Resources
 Overview
    Financing Facilities
 Operating Activities
  Investing Activities
  Anticipated Future Capital Expenditures.
  34




---



##### Table of Contents



Financing Activities
  Financing Facilities
  Revolving credit facility.
  Cardtronics Mexico equipment financing agreements.
 Bank Machine overdraft facility.
  35




---



##### Table of Contents



Capital lease agreements.
 New Accounting Standards
 Item 1, Notes to Consolidated
Financial Statements, Note 15, New Accounting Pronouncements
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
    Interest Rate Risk
 Vault cash rental expense.
  WeightedNotional Amounts
    
    
    Notional Amounts
    
    
    Notional Amounts
    
    
    AverageUnited States
    
    
    United Kingdom
    
    
    Consolidated(1)
    
    
    Fixed Rate
    
    
    Term(In thousands)$
    600,000
    
    
    £
    75,000
    
    
    $
    713,613
    
    
    
    3.77
    %
    
    April 1, 2010  December 31, 2010$
    625,000
    
    
    £
    75,000
    
    
    $
    738,613
    
    
    
    3.44
    %
    
    January 1, 2011  December 31, 2011$
    525,000
    
    
    £
    50,000
    
    
    $
    600,742
    
    
    
    3.56
    %
    
    January 1, 2012  December 31, 2012$
    275,000
    
    
    £
    25,000
    
    
    $
    312,871
    
    
    
    3.53
    %
    
    January 1, 2013  December 31, 2013$
    100,000
    
    
    £
    
    
    
    $
    100,000
    
    
    
    3.61
    %
    
    January 1, 2014  December 31, 2014
 (1)
    
    United Kingdom pound sterling amounts have been converted
into United States dollars at approximately $1.51 to £1.00,
which was the exchange rate in effect as of March 31, 2010.  Additional Interest
    
    
    Additional Interest IncurredIncurred on 100 Basis
    
    
    on 100 Basis Point IncreasePoint Increase
    
    
    (Including Impact of AllVault Cash Balance as of
    
    
    (Excluding Impact of
    
    
    Interest Rate SwapsMarch 31, 2010
    
    
    Interest Rate Swaps)
    
    
    Currently under Contract)(Functional
    
    
    
    
    
    
    (Functional
    
    
    
    
    
    
    (Functionalcurrency)
    
    
    (U.S. dollars)
    
    
    currency)
    
    
    (U.S. dollars)
    
    
    currency)
    
    
    (U.S. dollars)(In millions)

    

    
    (In millions)
    


    
    (In millions)United States
    
    $
    877.4
    
    
    $
    877.4
    
    
    $
    8.8
    
    
    $
    8.8
    
    
    $
    2.8
    
    
    $
    2.8United Kingdom
    
    £
    105.1
    
    
    
    159.3
    
    
    £
    1.1
    
    
    
    1.6
    
    
    £
    0.3
    
    
    
    0.5Mexico

    
    p $
    550.9
    
    
    
    44.4
    
    
    p $
    5.5
    
    
    
    0.4
    
    
    p $
    5.5
    
    
    
    0.4Total
    
    
    
    
    
    $
    1,081.1
    
    
    
    
    
    
    $
    10.8
    
    
    
    
    
    
    $
    3.7
 Item 1, Notes to Consolidated Financial Statements, Note 10, Derivative Financial
Instruments Note 11, Fair Value Measurements
  37




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Interest expense.
 Outlook.
 Foreign Currency Exchange Risk
  Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations  Results of Operations
  38




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Item 4. Controls and Procedures
 Managements Quarterly Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Part I., Item I., Financial
Information, Notes to Consolidated Financial Statements, Note 12, Commitments and Contingencies.
 
 Item 1A. Risk Factors
 Part I, Item 1A. Risk Factors
 Interchange fees, which comprise a substantial portion of our transaction revenues, may be lowered
at the discretion of the various EFT networks through which our transactions are routed, or through
potential regulatory changes, thus reducing our future revenues.
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Deterioration in global credit markets, as well as changes in legislative and regulatory
requirements, could have a negative impact on financial institutions that we conduct business with.
   We rely on EFT network providers, transaction processors, armored courier providers, and
maintenance providers; if they fail or no longer agree to provide their services, we could suffer a
temporary loss of transaction revenues or the permanent loss of any merchant contract affected by
such disruption.
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The passing of legislation banning or limiting surcharge fees would severely impact our revenues.
    Potential new currency designs may require modifications to our ATMs that could severely impact our
cash flows.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
 Total Number of
    
    
    Approximate DollarTotal Number
    
    
    Average
    
    
    Shares Purchased as
    
    
    Value that May Yetof Shares
    
    
    Price Paid
    
    
    Part of a Publicly
    
    
    be Purchased UnderPeriod
    
    Purchased
    
    
    Per Share
    
    
    Announced Program
    
    
    the Program (1) (2)January 1  31, 2010
    
    
    25,000
    (3)
    
    $
    10.39
    (4)
    
    
    
    
    
    $
    9,882,410February 1  28, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,882,410March 1  31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,882,410
 
 (1)
    
    In February 2009, our Board of Directors approved a common
stock repurchase program that authorizes the repurchase of
up to an aggregate of $10.0 million in common stock. The
shares will be repurchased from time to time in open market
transactions or privately negotiated transactions at our
discretion. The share repurchase program will expire on
March 31, 2011, unless extended or terminated earlier by
the Board of Directors. To date, we have purchased
approximately 35,000 shares of our common stock at a total
cost of $0.1 million and at an average price per share of
$3.37.(2)
    
    In connection with the lapsing of the forfeiture
restrictions on restricted shares granted by us under our
2007 Stock Incentive Plan, which was adopted in December
2007 and expires in December 2017, we permitted employees
and directors to sell a portion of their shares to us in
order to satisfy their tax liabilities that arose as a
consequence of the lapsing of the forfeiture restrictions.
In future periods, we may not permit individuals to sell
their shares to us in order to satisfy such tax
liabilities. Furthermore, since the number of restricted
shares that will become unrestricted each year is dependent
upon the continued employment of the award recipients, we
cannot forecast either the total amount of such securities
or the approximate dollar value of those securities that we
might purchase in future years as the forfeiture
restrictions on such shares lapse.(3)
    
    Represents shares surrendered to us by participants in our
2007 Stock Incentive Plan to settle the participants
personal tax liabilities that resulted from the lapsing of
restrictions on shares awarded to the participants under
the plan.(4)
    
    The price paid per share was based on the average high and
low trading prices of the Companys common stock on January
7, 2010, which represents the date on which we repurchased
shares from the participants under our 2007 Stock Incentive
Plan. 
 Item 6. Exhibits
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SIGNATURES
  CARDTRONICS, INC.May 7, 2010
    /s/ J. Chris BrewsterJ. Chris Brewster(Duly Authorized Officer and

Principal Financial Officer)May 7, 2010
    /s/ Tres ThompsonTres ThompsonChief Accounting Officer

(Duly Authorized Officer and

Principal Accounting Officer)  45




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EXHIBIT INDEX
  ExhibitNumber
    
    Description3.1
    
    
    Third Amended and Restated Certificate of Incorporation of Cardtronics, Inc.
(incorporated herein by reference to Exhibit 3.1 of the Current Report on
Form 8-K filed by Cardtronics, Inc. on December 14, 2007, File No.
001-33864).3.2
    
    
    Second Amended and Restated Bylaws of Cardtronics, Inc. (incorporated herein
by reference to Exhibit 3.2 of the Current Report on Form 8-K filed by
Cardtronics, Inc. on December 14, 2007, File No. 001-33864).10.1
    
    
    Underwriting Agreement by and among Cardtronics, Inc., the Selling
Stockholders named therein and the Underwriters named therein, dated March
30, 2010 (incorporated herein by reference to Exhibit 1.1 of the Current
Report on Form 8-K filed by Cardtronics, Inc. on March 31, 2010, File No.
001-33864).*31.1
    
    
    Certification of the Chief Executive Officer of Cardtronics, Inc. pursuant
to Section 13a-14(a) of the Securities Exchange Act of 1934.* 31.2
    
    
    Certification of the Chief Financial Officer of Cardtronics, Inc. pursuant
to Section 13a-14(a) of the Securities Exchange Act of 1934.*32.1
    
    
    Certification of the Chief Executive Officer and Chief Financial Officer of
Cardtronics, Inc. pursuant to Section 13a-14(b) of the Securities Exchange
Act of 1934 and 18 U.S.C. Section 1350.
  46