##### 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 June 30, 2007
 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 333-113470
 CARDTRONICS, INC.
  Delaware
    
    76-0681190(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)3110 Hayes Road, Suite 300
    
    77082Houston, TX
    
    (Zip Code)(Address of principal executive offices)
 (281) 596-9988
 þ o
  o o þ
 o þ
 Common Stock, par value: $0.0001 per share.
    
    Shares outstanding on August 14, 2007: 1,764,735.




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##### 



CARDTRONICS, INC.
 TABLE OF CONTENTS
 PAGEPART I. Financial InformationItem 1. Financial Statements (unaudited)
    
    
    1Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006
    
    
    1Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and 2006
    
    
    2Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    34PART II. Other InformationItem 1. Legal Proceedings
    
    
    35Item 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3. Defaults Upon Senior Securities
    
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    
    37Item 5. Other Information
    
    
    37Item 6. Exhibits
    
    
    38Signatures
    
    
    39Second Amended and Restated Certificate of IncorporationIndenture dated as of July 20, 2007Registration Rights AgreementSupplemental IndentureSupplement IndentureAmendment No. 7 to Credit AgreementCertification of the Chief Executive OfficerCertification of the Chief Financial OfficerCertification of the Chief Executive OfficerCertification of the Chief Financial Officer




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CARDTRONICS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
 June 30,
    
    
    December 31,2007
    
    
    2006(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,836
    
    
    $
    2,718Accounts and notes receivable, net of allowance of $522 and $409 as of
June 30, 2007 and December 31, 2006, respectively
    
    
    13,660
    
    
    
    14,891Inventory
    
    
    6,849
    
    
    
    4,444Prepaid expenses, deferred costs, and other current assets
    
    
    13,049
    
    
    
    16,334Total current assets
    
    
    35,394
    
    
    
    38,387Property and equipment, net
    
    
    98,280
    
    
    
    86,668Intangible assets, net
    
    
    62,849
    
    
    
    67,763Goodwill
    
    
    171,292
    
    
    
    169,563Prepaid expenses and other assets
    
    
    5,591
    
    
    
    5,375Total assets
    
    $
    373,406
    
    
    $
    367,756LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt and notes payable
    
    $
    398
    
    
    $
    194Current portion of other long-term liabilities
    
    
    2,084
    
    
    
    2,501Accounts payable and accrued liabilities
    
    
    52,333
    
    
    
    51,256Total current liabilities
    
    
    54,815
    
    
    
    53,951Long-term liabilities:Long-term debt, net of related discount
    
    
    263,309
    
    
    
    252,701Deferred tax liability, net
    
    
    8,641
    
    
    
    7,625Other long-term liabilities and minority interest in subsidiaries
    
    
    13,530
    
    
    
    14,053Total liabilities
    
    
    340,295
    
    
    
    328,330Redeemable preferred stock
    
    
    76,727
    
    
    
    76,594Stockholders deficit:Common stock, $0.0001 par value; 5,000,000 shares authorized;
2,394,509 shares issued at June 30, 2007 and December 31, 2006;
1,764,735 and 1,760,798 outstanding at June 30, 2007 and December
31, 2006, respectively
    
    
    
    
    
    
    Subscriptions receivable (at face value)
    
    
    (324
    )
    
    
    (324
    )Additional paid-in capital
    
    
    3,312
    
    
    
    2,857Accumulated other comprehensive income, net
    
    
    13,854
    
    
    
    11,658Accumulated deficit
    
    
    (12,237
    )
    
    
    (3,092
    )Treasury stock; 629,774 and 633,711 shares at cost at June 30, 2007
and December 31, 2006, respectively
    
    
    (48,221
    )
    
    
    (48,267
    )Total stockholders deficit
    
    
    (43,616
    )
    
    
    (37,168
    )Total liabilities and stockholders deficit
    
    $
    373,406
    
    
    $
    367,756
 See accompanying notes to condensed consolidated financial statements.
 1




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CARDTRONICS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands)
 (Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:ATM operating revenues
    
    $
    73,964
    
    
    $
    70,246
    
    
    $
    145,620
    
    
    $
    136,655ATM product sales and other revenues
    
    
    3,275
    
    
    
    3,008
    
    
    
    6,137
    
    
    
    5,740Total revenues
    
    
    77,239
    
    
    
    73,254
    
    
    
    151,757
    
    
    
    142,395Cost of revenues:Cost of ATM operating revenues (includes
stock-based compensation of $15 and $16 for
the three months ended June 30, 2007 and
2006, respectively, and $31 and $20 for the
six months ended June 30, 2007 and 2006,
respectively)
    
    
    56,344
    
    
    
    52,406
    
    
    
    111,080
    
    
    
    102,945Cost of ATM product sales and other revenues
    
    
    3,288
    
    
    
    2,478
    
    
    
    6,085
    
    
    
    5,037Total cost of revenues
    
    
    59,632
    
    
    
    54,884
    
    
    
    117,165
    
    
    
    107,982Gross profit
    
    
    17,607
    
    
    
    18,370
    
    
    
    34,592
    
    
    
    34,413Operating expenses:Selling, general, and administrative expenses
(includes stock-based compensation of $218
and $238 for the three months ended June 30,
2007 and 2006, respectively, and $424 and
$360 for the six months ended June 30, 2007
and 2006, respectively)
    
    
    6,920
    
    
    
    5,060
    
    
    
    13,364
    
    
    
    9,898Depreciation and accretion expense
    
    
    5,182
    
    
    
    4,641
    
    
    
    11,580
    
    
    
    8,858Amortization expense
    
    
    2,372
    
    
    
    2,331
    
    
    
    4,858
    
    
    
    7,347Total operating expenses
    
    
    14,474
    
    
    
    12,032
    
    
    
    29,802
    
    
    
    26,103Income from operations
    
    
    3,133
    
    
    
    6,338
    
    
    
    4,790
    
    
    
    8,310Other expense (income):Interest expense, net
    
    
    6,000
    
    
    
    5,657
    
    
    
    11,892
    
    
    
    11,322Amortization and write-off of financing costs
and bond discount
    
    
    360
    
    
    
    337
    
    
    
    716
    
    
    
    1,214Minority interest in subsidiary
    
    
    
    
    
    
    (49
    )
    
    
    (112
    )
    
    
    (57
    )Other
    
    
    478
    
    
    
    (854
    )
    
    
    359
    
    
    
    (657
    )Total other expense
    
    
    6,838
    
    
    
    5,091
    
    
    
    12,855
    
    
    
    11,822(Loss) income before income taxes
    
    
    (3,705
    )
    
    
    1,247
    
    
    
    (8,065
    )
    
    
    (3,512
    )Income tax provision (benefit)
    
    
    1,910
    
    
    
    478
    
    
    
    937
    
    
    
    (1,157
    )Net (loss) income
    
    
    (5,615
    )
    
    
    769
    
    
    
    (9,002
    )
    
    
    (2,355
    )Preferred stock accretion expense
    
    
    66
    
    
    
    66
    
    
    
    133
    
    
    
    132Net (loss) income available to common stockholders
    
    $
    (5,681
    )
    
    $
    703
    
    
    $
    (9,135
    )
    
    $
    (2,487
    )
 See accompanying notes to condensed consolidated financial statements.
 2




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CARDTRONICS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Six Months Ended June 30,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (9,002
    )
    
    $
    (2,355
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation, amortization and accretion expense
    
    
    16,438
    
    
    
    16,205Amortization and write-off of financing costs and bond discount
    
    
    716
    
    
    
    1,214Stock-based compensation expense
    
    
    455
    
    
    
    380Deferred income taxes
    
    
    831
    
    
    
    (1,168
    )Minority interest
    
    
    (112
    )
    
    
    (57
    )Loss on sale or disposal of assets
    
    
    990
    
    
    
    447Gain on sale of Winn-Dixie equity securities
    
    
    (569
    )
    
    
    Other reserves and non-cash items
    
    
    676
    
    
    
    53Changes in assets and liabilities, net of acquisitions:Decrease in accounts and notes receivable, net
    
    
    925
    
    
    
    1,814Decrease (increase) in prepaid, deferred costs and other current assets
    
    
    356
    
    
    
    (1,549
    )Increase in inventory
    
    
    (1,187
    )
    
    
    (1,057
    )Increase in other assets
    
    
    (165
    )
    
    
    (313
    )Increase in accounts payable and accrued liabilities
    
    
    5,319
    
    
    
    2,667Decrease in other liabilities
    
    
    (1,652
    )
    
    
    (2,060
    )Net cash provided by operating activities
    
    
    14,019
    
    
    
    14,221Cash flows from investing activities:Additions to property and equipment
    
    
    (23,912
    )
    
    
    (9,454
    )Proceeds from disposals of property and equipment
    
    
    3
    
    
    
    8Payments for exclusive license agreements and site acquisition costs
    
    
    (817
    )
    
    
    (2,140
    )Additions to equipment to be leased to customers
    
    
    (422
    )
    
    
    Principal payments received under direct financing leases
    
    
    13
    
    
    
    Proceeds from sale of Winn-Dixie equity securities
    
    
    3,950
    
    
    
    Proceeds received out of escrow related to BASC acquisition
    
    
    876
    
    
    
    Net cash used in investing activities
    
    
    (20,309
    )
    
    
    (11,586
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    25,026
    
    
    
    14,300Repayments of long-term debt
    
    
    (17,060
    )
    
    
    (14,500
    )Repayment of bank overdraft facility, net
    
    
    (2,597
    )
    
    
    Issuance of capital stock
    
    
    46
    
    
    
    Debt issuance and modification costs
    
    
    
    
    
    
    (198
    )Net cash provided by (used in) financing activities
    
    
    5,415
    
    
    
    (398
    )Effect of exchange rate changes on cash
    
    
    (7
    )
    
    
    Net (decrease) increase in cash and cash equivalents
    
    
    (882
    )
    
    
    2,237Cash and cash equivalents at beginning of period
    
    
    2,718
    
    
    
    1,699Cash and cash equivalents at end of period
    
    $
    1,836
    
    
    $
    3,936Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    12,142
    
    
    $
    11,001Cash paid for income taxes
    
    $
    27
    
    
    $
    Fixed assets
financed by direct debt
    
    $
    2,545
    
    
    $
    
 See accompanying notes to condensed consolidated financial statements.
 3




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##### Table of Contents



CARDTRONICS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 1. General and Basis of Presentation
 General
  ®
 Basis of Presentation
     2. Acquisitions
 Acquisition of 7-Eleven, Inc. Financial Services Business
 ®
 4




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Business Combinations.
 Acquisition of CCS Mexico
    3. Stock-based Compensation
 Share-Based
Payment
 Three Months EndedJune 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)Cost of ATM operating revenues
    
    $
    15
    
    
    $
    16
    
    
    $
    31
    
    
    $
    20Selling, general, and administrative expenses
    
    
    218
    
    
    
    238
    
    
    
    424
    
    
    
    360Total stock-based compensation expense
    
    $
    233
    
    
    $
    254
    
    
    $
    455
    
    
    $
    380
  WeightedNumber
    
    
    Averageof Shares
    
    
    Exercise PriceBalance as of January 1, 2007
    
    
    509,461
    
    
    $
    52.76Granted
    
    
    16,000
    
    
    $
    86.05Exercised
    
    
    (3,937
    )
    
    $
    11.73Forfeited
    
    
    
    
    
    $
    Balance as of June 30, 2007
    
    
    521,524
    
    
    $
    54.09Options vested and exercisable as of June 30, 2007
    
    
    356,524
    
    
    $
    41.63
 4. Comprehensive Income (Loss)
 Reporting Comprehensive Income
 5




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##### Table of Contents



Three Months EndedJune 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)Net (loss) income
    
    $
    (5,615
    )
    
    $
    769
    
    
    $
    (9,002
    )
    
    $
    (2,355
    )Foreign currency translation adjustments
    
    
    2,660
    
    
    
    5,190
    
    
    
    2,500
    
    
    
    5,309Unrealized gains on interest rate hedges, net of taxes
    
    
    1,366
    
    
    
    1,348
    
    
    
    194
    
    
    
    3,480Reclassifications of unrealized gains on
available-for-sale securities, net of taxes
    
    
    
    
    
    
    
    
    
    
    (498
    )
    
    
    Total comprehensive (loss) income
    
    $
    (1,589
    )
    
    $
    7,307
    
    
    $
    (6,806
    )
    
    $
    6,434
  June 30, 2007
    
    
    December 31, 2006(in thousands)Foreign currency translation adjustments
    
    $
    9,211
    
    
    $
    6,711Unrealized gains on interest rate hedges, net of taxes
    
    
    4,643
    
    
    
    4,449Unrealized gains on available-for-sale securities, net of taxes
    
    
    
    
    
    
    498Total accumulated other comprehensive income
    
    $
    13,854
    
    
    $
    11,658
  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 December 31, 2006
    
    $
    86,702
    
    
    $
    82,172
    
    
    $
    689
    
    
    $
    200
    
    
    $
    3,923
    
    
    $
    173,686Foreign currency translation adjustments
    
    
    
    
    
    
    1,730
    
    
    
    (1
    )
    
    
    
    
    
    
    84
    
    
    
    1,813Balance as of June 30, 2007
    
    $
    86,702
    
    
    $
    83,902
    
    
    $
    688
    
    
    $
    200
    
    
    $
    4,007
    
    
    $
    175,499
 Intangible Assets with Definite Lives
  Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount(in thousands)Customer contracts and relationships
    
    $
    83,663
    
    
    $
    (35,936
    )
    
    $
    47,727Deferred financing costs
    
    
    11,263
    (1)
    
    
    (3,572
    )
    
    
    7,691Exclusive license agreements
    
    
    4,568
    
    
    
    (1,409
    )
    
    
    3,159Non-compete agreements
    
    
    100
    
    
    
    (35
    )
    
    
    65Total
    
    $
    99,594
    
    
    $
    (40,952
    )
    
    $
    58,642
 
 (1)
    
    Amount includes approximately $262,000 of costs accrued as of
June 30, 2007 related to the Companys issuance of $100.0 million of 9.25%
senior subordinated notes due 2013  Series B in July 2007. See Note 7 for
additional information on the issuance of the notes. 6




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##### Table of Contents



Customer
    
    
    Deferred
    
    
    ExclusiveContracts
    
    
    Financing
    
    
    License
    
    
    Non-competeand Relationships(1)
    
    
    Costs(2)
    
    
    Agreements
    
    
    Agreements
    
    
    Total(in thousands)2007
    
    $
    4,624
    
    
    $
    665
    
    
    $
    349
    
    
    $
    13
    
    
    $
    5,6512008
    
    
    9,262
    
    
    
    1,382
    
    
    
    638
    
    
    
    25
    
    
    
    11,3072009
    
    
    8,948
    
    
    
    1,459
    
    
    
    633
    
    
    
    25
    
    
    
    11,0652010
    
    
    7,495
    
    
    
    1,134
    
    
    
    536
    
    
    
    2
    
    
    
    9,1672011
    
    
    5,667
    
    
    
    977
    
    
    
    422
    
    
    
    
    
    
    
    7,0662012
    
    
    4,588
    
    
    
    1,080
    
    
    
    351
    
    
    
    
    
    
    
    6,019Thereafter
    
    
    7,143
    
    
    
    732
    
    
    
    230
    
    
    
    
    
    
    
    8,105Total
    
    $
    47,727
    
    
    $
    7,429
    
    
    $
    3,159
    
    
    $
    65
    
    
    $
    58,380
 
 (1)
    
    Amounts presented exclude the effects of any intangible assets that
will be established as part of the 7-Eleven ATM Transaction.(2)
    
    Amounts presented exclude the $262,000 of accrued financing costs
associated with the Companys July 2007 issuance of $100.0 million of 9.25% senior
subordinated notes due 2013  Series B, discussed above. 7




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##### Table of Contents



6. Accounts Payable and Accrued Liabilities
  June 30, 2007
    
    
    December 31, 2006(in thousands)Accounts payable
    
    $
    16,791
    
    
    $
    16,915Accrued interest
    
    
    7,823
    
    
    
    7,954Accrued merchant fees
    
    
    7,326
    
    
    
    7,915Accrued armored fees
    
    
    3,739
    
    
    
    3,242Accrued cash management fees
    
    
    2,765
    
    
    
    2,740Accrued maintenance fees
    
    
    2,408
    
    
    
    2,090Accrued compensation
    
    
    1,588
    
    
    
    3,499Accrued purchases
    
    
    789
    
    
    
    343Other accrued expenses
    
    
    9,104
    
    
    
    6,558Total
    
    $
    52,333
    
    
    $
    51,256
 7. Long-term Debt
  June 30, 2007
    
    
    December 31, 2006(in thousands)Revolving credit facility
    
    $
    60,600
    
    
    $
    53,100Senior subordinated notes due
August 2013 (net of
unamortized discount of $1.1
million as June 30, 2007 and
$1.2 million as of December
31, 2006)
    
    
    198,851
    
    
    
    198,783Other
    
    
    4,256
    
    
    
    1,012Total
    
    
    263,707
    
    
    
    252,895Less current portion
    
    
    398
    
    
    
    194Total excluding current portion
    
    $
    263,309
    
    
    $
    252,701
 Revolving Credit Facility
     8




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##### Table of Contents



Senior Subordinated Notes
 th th
  Other Facilities
   9




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##### Table of Contents



8. Other Long-term Liabilities
  June 30, 2007
    
    
    December 31, 2006(in thousands)Asset retirement obligations (see Note 9)
    
    $
    10,455
    
    
    $
    9,989Deferred revenue and other obligations
    
    
    540
    
    
    
    642Minority interest in subsidiary
    
    
    
    
    
    
    112Other long-term liabilities
    
    
    2,535
    
    
    
    3,310Total
    
    $
    13,530
    
    
    $
    14,053
  9. Asset Retirement Obligations
 Asset
Retirement Obligations.
  Asset retirement obligation as of January 1, 2007
    
    $
    9,989Additional obligations
    
    
    2,564Accretion expense
    
    
    473Payments
    
    
    (648
    )Change in estimates
    
    
    (1,973
    )Foreign currency translation adjustments
    
    
    50Asset retirement obligation as of June 30, 2007
    
    $
    10,455
  10. Preferred Stock
   10




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11. Income Taxes
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)
    
    
    (in thousands)Income tax provision (benefit)
    
    $
    1,910
    
    
    $
    478
    
    
    $
    937
    
    
    $
    (1,157
    )Effective tax rate
    
    
    (51.6
    )%
    
    
    38.3
    %
    
    
    (11.6
    )%
    
    
    32.9
    %
   12. Commitments and Contingencies
 National Federation of the Blind (NFB).
  11




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##### Table of Contents



Other matters.
   13. Derivative Financial Instruments
   Weighted AverageNotional Amount
    
    
    Fixed Rate
    
    Period$
    300,000
    
    
    
    3.91
    %
    
    July 1, 2007  December 31, 2007$
    300,000
    
    
    
    4.35
    %
    
    January 1, 2008  December 31, 2008$
    200,000
    
    
    
    4.36
    %
    
    January 1, 2009  December 31, 2009$
    100,000
    
    
    
    4.34
    %
    
    January 1, 2010  December 31, 2010
  Accounting for Derivative Instruments and Hedging Activities,
  12




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##### Table of Contents



13




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##### Table of Contents



14. Segment Information
  For the Three Months Ended June 30, 2007UnitedUnited States
    
    
    Kingdom
    
    
    Mexico
    
    
    Eliminations
    
    
    Total(in thousands)Revenue from external customers
    
    $
    60,972
    
    
    $
    15,380
    
    
    $
    887
    
    
    $
    
    
    
    $
    77,239Intersegment revenue
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    Depreciation, depletion, and amortization expense
    
    
    5,425
    
    
    
    2,075
    
    
    
    56
    
    
    
    (2
    )
    
    
    7,554Income (loss) from operations
    
    
    2,421
    
    
    
    1,016
    
    
    
    (239
    )
    
    
    (65
    )
    
    
    3,133Interest income
    
    
    1,088
    
    
    
    19
    
    
    
    31
    
    
    
    (1,058
    )
    
    
    80Interest expense
    
    
    6,339
    
    
    
    1,060
    
    
    
    99
    
    
    
    (1,058
    )
    
    
    6,440Loss before income taxes
    
    
    (3,174
    )
    
    
    (160
    )
    
    
    (306
    )
    
    
    (65
    )
    
    
    (3,705
    )Capital expenditures(1) (2)
    
    $
    3,919
    
    
    $
    5,550
    
    
    $
    1,361
    
    
    $
    
    
    
    $
    10,830Additions to equipment to be leased to customers
    
    
    
    
    
    
    
    
    
    
    219
    
    
    
    
    
    
    
    219
 For the Three Months Ended June 30, 2006UnitedUnited States
    
    
    Kingdom
    
    
    Mexico
    
    
    Eliminations
    
    
    Total(in thousands)Revenue from external customers
    
    $
    63,612
    
    
    $
    9,492
    
    
    $
    150
    
    
    $
    
    
    
    $
    73,254Intersegment revenue
    
    
    108
    
    
    
    
    
    
    
    
    
    
    
    (108
    )
    
    
    Depreciation, depletion, and amortization expense
    
    
    5,626
    
    
    
    1,336
    
    
    
    10
    
    
    
    
    
    
    
    6,972Income (loss) from operations
    
    
    5,212
    
    
    
    1,241
    
    
    
    (93
    )
    
    
    (22
    )
    
    
    6,338Interest income
    
    
    935
    
    
    
    54
    
    
    
    
    
    
    
    (872
    )
    
    
    117Interest expense
    
    
    6,097
    
    
    
    871
    
    
    
    15
    
    
    
    (872
    )
    
    
    6,111Income (loss) before income taxes
    
    
    1,004
    
    
    
    314
    
    
    
    (47
    )
    
    
    (24
    )
    
    
    1,247Capital expenditures(1) (2)
    
    $
    4,774
    
    
    $
    2,647
    
    
    $
    47
    
    
    $
    
    
    
    $
    7,468
 For the Six Months Ended June 30, 2007UnitedUnited States
    
    
    Kingdom
    
    
    Mexico
    
    
    Eliminations
    
    
    Total(in thousands)Revenue from external customers
    
    $
    121,927
    
    
    $
    28,340
    
    
    $
    1,490
    
    
    $
    
    
    
    $
    151,757Intersegment revenue
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    (82
    )
    
    
    Depreciation, depletion, and amortization expense
    
    
    12,534
    
    
    
    3,840
    
    
    
    93
    
    
    
    (29
    )
    
    
    16,438Income (loss) from operations
    
    
    3,229
    
    
    
    2,153
    
    
    
    (522
    )
    
    
    (70
    )
    
    
    4,790Interest income
    
    
    2,091
    
    
    
    36
    
    
    
    46
    
    
    
    (2,045
    )
    
    
    128Interest expense
    
    
    12,575
    
    
    
    2,068
    
    
    
    138
    
    
    
    (2,045
    )
    
    
    12,736Loss before income taxes
    
    
    (7,280
    )
    
    
    (89
    )
    
    
    (626
    )
    
    
    (70
    )
    
    
    (8,065
    )Capital expenditures(1) (2)
    
    $
    12,110
    
    
    $
    11,224
    
    
    $
    1,395
    
    
    $
    
    
    
    $
    24,729Additions to equipment to be leased to customers
    
    
    
    
    
    
    
    
    
    
    422
    
    
    
    
    
    
    
    422
 For the Six Months Ended June 30, 2006UnitedUnited States
    
    
    Kingdom
    
    
    Mexico
    
    
    Eliminations
    
    Total(in thousands)Revenue from external customers
    
    $
    124,557
    
    
    $
    17,636
    
    
    $
    202
    
    
    $
    
    
    
    $
    142,395Intersegment revenue
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    (170
    )
    
    
    Depreciation, depletion, and amortization expense
    
    
    13,694
    
    
    
    2,497
    
    
    
    14
    
    
    
    
    
    
    
    16,205Income (loss) from operations
    
    
    6,652
    
    
    
    1,831
    
    
    
    (129
    )
    
    
    (44
    )
    
    
    8,310Interest income
    
    
    1,793
    
    
    
    98
    
    
    
    
    
    
    
    (1,683
    )
    
    
    208Interest expense
    
    
    12,730
    
    
    
    1,682
    
    
    
    15
    
    
    
    (1,683
    )
    
    
    12,744(Loss) income before income taxes
    
    
    (3,513
    )
    
    
    103
    
    
    
    (55
    )
    
    
    (47
    )
    
    
    (3,512
    )Capital expenditures(1) (2)
    
    $
    8,157
    
    
    $
    3,308
    
    
    $
    129
    
    
    $
    
    
    
    $
    11,594
 
 (1)
    
    Capital expenditure amounts presented above include payments
made for exclusive license agreements and site acquisition costs.(2)
    
    Capital expenditure amounts for Cardtronics Mexico are reflected
gross of any minority interest amounts. Additionally, the 2006 capital expenditure
amount excludes the Companys initial $1.0 million investment in Cardtronics
Mexico. 14




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##### Table of Contents



Identifiable Assets:
 June 30, 2007
    
    
    December 31, 2006(in thousands)United States
    
    $
    230,592
    
    
    $
    238,127United Kingdom
    
    
    136,001
    
    
    
    126,070Mexico
    
    
    6,813
    
    
    
    3,559Total
    
    $
    373,406
    
    
    $
    367,756
 15. New Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes. Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 Accounting for Income Taxes
 Fair Value Measurements. Fair Value
Measurements
 Fair Value Option. The Fair Value Option for
Financial Assets and Financial Liabilities
 Registration Payment Arrangements. Accounting for Registration Payment
Arrangements Accounting for Contingencies Accounting for Derivative Instruments and Hedging Activities Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others
 16. Related Party Transactions
 Series B Convertible Preferred Stock Amendment.
 15




---



##### Table of Contents



Cardtronics Mexico Capital Contribution.
 17. Supplemental Guarantor Financial Information
  Condensed Consolidating Statements of Operations
 Three Months Ended June 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(in thousands)Revenues
    
    $
    
    
    
    $
    60,961
    
    
    $
    16,267
    
    
    $
    11
    
    
    $
    77,239Operating costs and expenses
    
    
    282
    
    
    
    58,258
    
    
    
    15,490
    
    
    
    76
    
    
    
    74,106Operating (loss) income
    
    
    (282
    )
    
    
    2,703
    
    
    
    777
    
    
    
    (65
    )
    
    
    3,133Interest expense, net
    
    
    2,159
    
    
    
    3,092
    
    
    
    1,109
    
    
    
    
    
    
    
    6,360Equity in (earnings) losses of subsidiaries
    
    
    1,201
    
    
    
    
    
    
    
    
    
    
    
    (1,201
    )
    
    
    Other (income) expense, net
    
    
    
    
    
    
    344
    
    
    
    134
    
    
    
    
    
    
    
    478(Loss) income before income taxes
    
    
    (3,642
    )
    
    
    (733
    )
    
    
    (466
    )
    
    
    1,136
    
    
    
    (3,705
    )Income tax provision (benefit)
    
    
    1,908
    
    
    
    52
    
    
    
    (50
    )
    
    
    
    
    
    
    1,910Net (loss) income
    
    
    (5,550
    )
    
    
    (785
    )
    
    
    (416
    )
    
    
    1,136
    
    
    
    (5,615
    )Preferred stock accretion expense
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66Net (loss) income available to common
stockholders
    
    $
    (5,616
    )
    
    $
    (785
    )
    
    $
    (416
    )
    
    $
    1,136
    
    
    $
    (5,681
    )
 Three Months Ended June 30, 2006Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(in thousands)Revenues
    
    $
    
    
    
    $
    63,720
    
    
    $
    9,642
    
    
    $
    (108
    )
    
    $
    73,254Operating costs and expenses
    
    
    323
    
    
    
    58,185
    
    
    
    8,494
    
    
    
    (86
    )
    
    
    66,916Operating (loss) income
    
    
    (323
    )
    
    
    5,535
    
    
    
    1,148
    
    
    
    (22
    )
    
    
    6,338Interest expense, net
    
    
    1,889
    
    
    
    3,273
    
    
    
    832
    
    
    
    
    
    
    
    5,994Equity in (earnings) losses of subsidiaries
    
    
    (3,323
    )
    
    
    
    
    
    
    
    
    
    
    3,323
    
    
    
    Other income, net
    
    
    
    
    
    
    (955
    )
    
    
    49
    
    
    
    3
    
    
    
    (903
    )Income (loss) before income taxes
    
    
    1,111
    
    
    
    3,217
    
    
    
    267
    
    
    
    (3,348
    )
    
    
    1,247Income tax benefit
    
    
    317
    
    
    
    66
    
    
    
    95
    
    
    
    
    
    
    
    478Net income (loss)
    
    
    794
    
    
    
    3,151
    
    
    
    172
    
    
    
    (3,348
    )
    
    
    769Preferred stock accretion expense
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66Net income (loss) available to common
stockholders
    
    $
    728
    
    
    $
    3,151
    
    
    $
    172
    
    
    $
    (3,348
    )
    
    $
    703
 16




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##### Table of Contents



Six Months Ended June 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(in thousands)Revenues
    
    $
    
    
    
    $
    122,009
    
    
    $
    29,830
    
    
    $
    (82
    )
    
    $
    151,757Operating costs and expenses
    
    
    589
    
    
    
    118,191
    
    
    
    28,199
    
    
    
    (12
    )
    
    
    146,967Operating (loss) income
    
    
    (589
    )
    
    
    3,818
    
    
    
    1,631
    
    
    
    (70
    )
    
    
    4,790Interest expense, net
    
    
    4,360
    
    
    
    6,124
    
    
    
    2,124
    
    
    
    
    
    
    
    12,608Equity in (earnings) losses of subsidiaries
    
    
    3,235
    
    
    
    
    
    
    
    
    
    
    
    (3,235
    )
    
    
    Other (income) expense, net
    
    
    (112
    )
    
    
    137
    
    
    
    222
    
    
    
    
    
    
    
    247(Loss) income before income taxes
    
    
    (8,072
    )
    
    
    (2,443
    )
    
    
    (715
    )
    
    
    3,165
    
    
    
    (8,065
    )Income tax provision (benefit)
    
    
    860
    
    
    
    105
    
    
    
    (28
    )
    
    
    
    
    
    
    937Net (loss) income
    
    
    (8,932
    )
    
    
    (2,548
    )
    
    
    (687
    )
    
    
    3,165
    
    
    
    (9,002
    )Preferred stock accretion expense
    
    
    133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133Net (loss) income available to common
stockholders
    
    $
    (9,065
    )
    
    $
    (2,548
    )
    
    $
    (687
    )
    
    $
    3,165
    
    
    $
    (9,135
    )
 Six Months Ended June 30, 2006Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(in thousands)Revenues
    
    $
    
    
    
    $
    124,727
    
    
    $
    17,838
    
    
    $
    (170
    )
    
    $
    142,395Operating costs and expenses
    
    
    485
    
    
    
    117,590
    
    
    
    16,136
    
    
    
    (126
    )
    
    
    134,085Operating (loss) income
    
    
    (485
    )
    
    
    7,137
    
    
    
    1,702
    
    
    
    (44
    )
    
    
    8,310Interest expense, net
    
    
    4,106
    
    
    
    6,831
    
    
    
    1,599
    
    
    
    
    
    
    
    12,536Equity in (earnings) losses of subsidiaries
    
    
    (1,120
    )
    
    
    
    
    
    
    
    
    
    
    1,120
    
    
    
    Other income, net
    
    
    
    
    
    
    (772
    )
    
    
    55
    
    
    
    3
    
    
    
    (714
    )(Loss) income before income taxes
    
    
    (3,471
    )
    
    
    1,078
    
    
    
    48
    
    
    
    (1,167
    )
    
    
    (3,512
    )Income tax (benefit) provision
    
    
    (1,163
    )
    
    
    (26
    )
    
    
    32
    
    
    
    
    
    
    
    (1,157
    )Net (loss) income
    
    
    (2,308
    )
    
    
    1,104
    
    
    
    16
    
    
    
    (1,167
    )
    
    
    (2,355
    )Preferred stock accretion expense
    
    
    132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132Net (loss) income available to common
stockholders
    
    $
    (2,440
    )
    
    $
    1,104
    
    
    $
    16
    
    
    $
    (1,167
    )
    
    $
    (2,487
    )
 17




---



##### Table of Contents



Condensed Consolidating Balance Sheets
 As of June 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    TotalAssets:Cash and cash equivalents
    
    $
    35
    
    
    $
    1,588
    
    
    $
    213
    
    
    $
    
    
    
    $
    1,836Receivables, net
    
    
    4,571
    
    
    
    11,227
    
    
    
    2,713
    
    
    
    (4,851
    )
    
    
    13,660Other current assets
    
    
    1,001
    
    
    
    12,373
    
    
    
    6,711
    
    
    
    (187
    )
    
    
    19,898Total current assets
    
    
    5,607
    
    
    
    25,188
    
    
    
    9,637
    
    
    
    (5,038
    )
    
    
    35,394Property and equipment, net
    
    
    
    
    
    
    61,174
    
    
    
    37,312
    
    
    
    (206
    )
    
    
    98,280Intangible assets, net
    
    
    6,757
    
    
    
    41,096
    
    
    
    14,996
    
    
    
    
    
    
    
    62,849Goodwill
    
    
    
    
    
    
    86,703
    
    
    
    84,589
    
    
    
    
    
    
    
    171,292Investments and advances to subsidiaries
    
    
    78,325
    
    
    
    
    
    
    
    
    
    
    
    (78,325
    )
    
    
    Intercompany receivable
    
    
    (129
    )
    
    
    5,288
    
    
    
    (5,159
    )
    
    
    
    
    
    
    Prepaid and other assets
    
    
    214,837
    
    
    
    4,089
    
    
    
    1,439
    
    
    
    (214,774
    )
    
    
    5,591Total assets
    
    $
    305,397
    
    
    $
    223,538
    
    
    $
    142,814
    
    
    $
    (298,343
    )
    
    $
    373,406Liabilities and Stockholders Deficit:Current portion of long-term debt and notes
payable
    
    $
    
    
    
    $
    
    
    
    $
    398
    
    
    $
    
    
    
    $
    398Current portion of other long-term liabilities
    
    
    
    
    
    
    1,939
    
    
    
    145
    
    
    
    
    
    
    
    2,084Accounts payable and accrued liabilities
    
    
    8,522
    
    
    
    34,811
    
    
    
    13,981
    
    
    
    (4,981
    )
    
    
    52,333Total current liabilities
    
    
    8,522
    
    
    
    36,750
    
    
    
    14,524
    
    
    
    (4,981
    )
    
    
    54,815Long-term debt, less current portion
    
    
    259,450
    
    
    
    127,351
    
    
    
    91,282
    
    
    
    (214,774
    )
    
    
    263,309Other non-current liabilities and minority
interest
    
    
    4,314
    
    
    
    10,840
    
    
    
    7,017
    
    
    
    
    
    
    
    22,171Total liabilities
    
    
    272,286
    
    
    
    174,941
    
    
    
    112,823
    
    
    
    (219,755
    )
    
    
    340,295Preferred stock
    
    
    76,727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,727Stockholders equity (deficit)
    
    
    (43,616
    )
    
    
    48,597
    
    
    
    29,991
    
    
    
    (78,588
    )
    
    
    (43,616
    )Total liabilities and stockholders deficit
    
    $
    305,397
    
    
    $
    223,538
    
    
    $
    142,814
    
    
    $
    (298,343
    )
    
    $
    373,406
 As of December 31, 2006Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(in thousands)Assets:Cash and cash equivalents
    
    $
    97
    
    
    $
    1,818
    
    
    $
    803
    
    
    $
    
    
    
    $
    2,718Receivables, net
    
    
    3,463
    
    
    
    13,068
    
    
    
    1,966
    
    
    
    (3,606
    )
    
    
    14,891Other current assets
    
    
    544
    
    
    
    14,069
    
    
    
    6,204
    
    
    
    (39
    )
    
    
    20,778Total current assets
    
    
    4,104
    
    
    
    28,955
    
    
    
    8,973
    
    
    
    (3,645
    )
    
    
    38,387Property and equipment, net
    
    
    
    
    
    
    59,512
    
    
    
    27,326
    
    
    
    (170
    )
    
    
    86,668Intangible assets, net
    
    
    6,982
    
    
    
    45,757
    
    
    
    15,024
    
    
    
    
    
    
    
    67,763Goodwill
    
    
    
    
    
    
    86,702
    
    
    
    82,861
    
    
    
    
    
    
    
    169,563Investments and advances to subsidiaries
    
    
    81,076
    
    
    
    
    
    
    
    
    
    
    
    (81,076
    )
    
    
    Intercompany receivable
    
    
    (122
    )
    
    
    5,046
    
    
    
    (4,924
    )
    
    
    
    
    
    
    Prepaid and other assets
    
    
    211,175
    
    
    
    5,006
    
    
    
    369
    
    
    
    (211,175
    )
    
    
    5,375Total assets
    
    $
    303,215
    
    
    $
    230,978
    
    
    $
    129,629
    
    
    $
    (296,066
    )
    
    $
    367,756Liabilities and Stockholders Deficit:Current portion of long-term debt and notes
payable
    
    $
    
    
    
    $
    
    
    
    $
    194
    
    
    $
    
    
    
    $
    194Current portion of other long-term liabilities
    
    
    
    
    
    
    2,458
    
    
    
    43
    
    
    
    
    
    
    
    2,501Accounts payable and accrued liabilities
    
    
    8,458
    
    
    
    32,202
    
    
    
    14,218
    
    
    
    (3,622
    )
    
    
    51,256Total current liabilities
    
    
    8,458
    
    
    
    34,660
    
    
    
    14,455
    
    
    
    (3,622
    )
    
    
    53,951Long-term debt, less current portion
    
    
    251,883
    
    
    
    132,351
    
    
    
    79,641
    
    
    
    (211,174
    )
    
    
    252,701Other non-current liabilities and minority
interest
    
    
    3,448
    
    
    
    12,519
    
    
    
    5,711
    
    
    
    
    
    
    
    21,678Total liabilities
    
    
    263,789
    
    
    
    179,530
    
    
    
    99,807
    
    
    
    (214,796
    )
    
    
    328,330Preferred stock
    
    
    76,594
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,594Stockholders equity (deficit)
    
    
    (37,168
    )
    
    
    51,448
    
    
    
    29,822
    
    
    
    (81,270
    )
    
    
    (37,168
    )Total liabilities and stockholders deficit
    
    $
    303,215
    
    
    $
    230,978
    
    
    $
    129,629
    
    
    $
    (296,066
    )
    
    $
    367,756
 18




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##### Table of Contents



Condensed Consolidating Statements of Cash Flows
 Six Months Ended June 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(in thousands)Net cash (used in) provided by operating activities
    
    $
    (7,608
    )
    
    $
    12,239
    
    
    $
    9,388
    
    
    $
    
    
    
    $
    14,019Capital expenditures, net
    
    
    
    
    
    
    (11,800
    )
    
    
    (12,109
    )
    
    
    
    
    
    
    (23,909
    )Payments for exclusive license agreements and site
acquisition costs
    
    
    
    
    
    
    (306
    )
    
    
    (511
    )
    
    
    
    
    
    
    (817
    )Additions to equipment to be leased to customers, net
of principal payments received
    
    
    
    
    
    
    
    
    
    
    (409
    )
    
    
    
    
    
    
    (409
    )Proceeds from sale of Winn-Dixie equity securities
    
    
    
    
    
    
    3,950
    
    
    
    
    
    
    
    
    
    
    
    3,950Proceeds received out of escrow related to BASC
acquisition
    
    
    
    
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    876Net cash used in investing activities
    
    
    
    
    
    
    (7,280
    )
    
    
    (13,029
    )
    
    
    
    
    
    
    (20,309
    )Proceeds from issuance of long-term debt
    
    
    24,500
    
    
    
    9,000
    
    
    
    5,526
    
    
    
    (14,000
    )
    
    
    25,026Repayments of long-term debt
    
    
    (17,000
    )
    
    
    (14,000
    )
    
    
    (60
    )
    
    
    14,000
    
    
    
    (17,060
    )Issuance of long-term notes receivable
    
    
    (14,000
    )
    
    
    
    
    
    
    
    
    
    
    14,000
    
    
    
    Payments received on long-term notes receivable
    
    
    14,000
    
    
    
    
    
    
    
    
    
    
    
    (14,000
    )
    
    
    Repayment of bank overdraft facility, net
    
    
    
    
    
    
    
    
    
    
    (2,597
    )
    
    
    
    
    
    
    (2,597
    )46
    
    
    
    (189
    )
    
    
    189
    
    
    
    
    
    
    
    46Net cash provided by (used in) financing activities
    
    
    7,546
    
    
    
    (5,189
    )
    
    
    3,058
    
    
    
    
    
    
    
    5,415Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Net decrease in cash and cash equivalents
    
    
    (62
    )
    
    
    (230
    )
    
    
    (590
    )
    
    
    
    
    
    
    (882
    )Cash and cash equivalents at beginning of period
    
    
    97
    
    
    
    1,818
    
    
    
    803
    
    
    
    
    
    
    
    2,718Cash and cash equivalents at end of period
    
    $
    35
    
    
    $
    1,588
    
    
    $
    213
    
    
    $
    
    
    
    $
    1,836
 Six Months Ended June 30, 2006Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(in thousands)Net cash (used in) provided by operating activities
    
    $
    (5,100
    )
    
    $
    13,666
    
    
    $
    5,655
    
    
    $
    
    
    
    $
    14,221Capital expenditures, net
    
    
    
    
    
    
    (6,009
    )
    
    
    (3,437
    )
    
    
    
    
    
    
    (9,446
    )Payments for exclusive license agreements and site
acquisition costs
    
    
    
    
    
    
    (1,842
    )
    
    
    (298
    )
    
    
    
    
    
    
    (2,140
    )Acquisitions, net of cash acquired
    
    
    (1,026
    )
    
    
    26
    
    
    
    
    
    
    
    1,000
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (1,026
    )
    
    
    (7,825
    )
    
    
    (3,735
    )
    
    
    1,000
    
    
    
    (11,586
    )Proceeds from issuance of long-term debt
    
    
    14,300
    
    
    
    3,900
    
    
    
    
    
    
    
    (3,900
    )
    
    
    14.300Repayments of long-term debt
    
    
    (14,500
    )
    
    
    (10,400
    )
    
    
    
    
    
    
    10,400
    
    
    
    (14,500
    )Issuance of long-term notes receivable
    
    
    (3,900
    )
    
    
    
    
    
    
    
    
    
    
    3,900
    
    
    
    Payments received on long-term notes receivable
    
    
    10,400
    
    
    
    
    
    
    
    
    
    
    
    (10,400
    )
    
    
    Issuance of capital stock
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    (1,000
    )
    
    
    Other financing activities
    
    
    (167
    )
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    (198
    )Net cash provided by (used in) financing activities
    
    
    6,133
    
    
    
    (6,531
    )
    
    
    1,000
    
    
    
    (1,000
    )
    
    
    (398
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    7
    
    
    
    (690
    )
    
    
    2,920
    
    
    
    
    
    
    
    2,237Cash and cash equivalents at beginning of period
    
    
    118
    
    
    
    1,544
    
    
    
    37
    
    
    
    
    
    
    
    1,699Cash and cash equivalents at end of period
    
    $
    125
    
    
    $
    854
    
    
    $
    2,957
    
    
    $
    
    
    
    $
    3,936
 19




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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 certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are
identified by the use of the words believe, expect, anticipate, will, contemplate,
would, and similar expressions that contemplate future events. Numerous important factors,
risks, and uncertainties may affect our operating results, including, without limitation, risks and
uncertainties relating to trends in ATM usage and alternative payment options; declines in, or
system failures that interrupt or delay, ATM transactions; the Companys reliance on third parties
for cash management and other key outsourced services; decreases in the number of ATMs that can be
placed with the Companys top merchants; the Companys ability to continue to execute its growth
strategies; risks associated with the acquisition of other ATM networks; increased industry
competition; increased regulation and regulatory uncertainty; changes in interest rates; changes in
the ATM transaction fees the Company receives; changes in ATM technology; changes in foreign
currency rates; and general and economic conditions. As a result, our future results may differ
materially from the results implied by these or any other forward-looking statements made by us or
on our behalf, and there can be no assurance that future results will meet expectations. All of
our forward-looking statements, whether written or oral, are expressly qualified by these
cautionary statements and any other cautionary statements that may accompany such forward-looking
statements. In addition, we disclaim any obligation to update any forward-looking statements to
reflect events or circumstances after the date of this report.
 With this in mind, you should consider the risks discussed elsewhere in this report and other
documents we file with the SEC from time to time and the following important factors that could
cause actual results to differ materially from those expressed in any forward-looking statement
made by us or on our behalf.
 Overview
  Company-owned.
  Merchant-owned.
 20




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##### Table of Contents



In-house transaction processing.
 Recent Events
 7-Eleven ATM Transaction. ®
   Merchant-owned account attrition.
 21




---



##### Table of Contents



Asset impairments.
 Valuation allowance.
 22




---



##### Table of Contents



Results of Operations
  Three Months EndedJune 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:ATM operating revenues
    
    
    95.8
    %
    
    
    95.9
    %
    
    
    96.0
    %
    
    
    96.0
    %ATM product sales and other revenues
    
    
    4.2
    
    
    
    4.1
    
    
    
    4.0
    
    
    
    4.0Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of revenues:Cost of ATM operating revenues
    
    
    72.9
    
    
    
    71.5
    
    
    
    73.2
    
    
    
    72.3Cost of ATM product sales and other revenues
    
    
    4.3
    
    
    
    3.4
    
    
    
    4.0
    
    
    
    3.5Total cost of revenues
    
    
    77.2
    
    
    
    74.9
    
    
    
    77.2
    
    
    
    75.8Gross profit
    
    
    22.8
    
    
    
    25.1
    
    
    
    22.8
    
    
    
    24.2Operating expenses:Selling, general, and administrative expenses
    
    
    9.0
    
    
    
    6.9
    
    
    
    8.8
    
    
    
    7.0Depreciation and accretion expense
    
    
    6.7
    
    
    
    6.3
    
    
    
    7.6
    
    
    
    6.2Amortization expense
    
    
    3.0
    
    
    
    3.2
    
    
    
    3.2
    
    
    
    5.2Total operating expenses
    
    
    18.7
    
    
    
    16.4
    
    
    
    19.6
    
    
    
    18.4Income from operations
    
    
    4.1
    
    
    
    8.7
    
    
    
    3.2
    
    
    
    5.8Other expense (income):Interest expense, net
    
    
    8.3
    
    
    
    8.2
    
    
    
    8.3
    
    
    
    8.8Minority interest in subsidiary
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    Other
    
    
    0.6
    
    
    
    (1.1
    )
    
    
    0.3
    
    
    
    (0.5
    )Total other expense
    
    
    8.9
    
    
    
    7.0
    
    
    
    8.5
    
    
    
    8.3(Loss) income before income taxes
    
    
    (4.8
    )
    
    
    1.7
    
    
    
    (5.3
    )
    
    
    (2.5
    )Income tax provision (benefit)
    
    
    2.5
    
    
    
    0.7
    
    
    
    0.6
    
    
    
    (0.8
    )Net (loss) income
    
    
    (7.3
    )%
    
    
    1.0
    %
    
    
    (5.9
    )%
    
    
    (1.7
    )%
 Key Operating Metrics
  Three Months EndedJune 30,
    
    

Six
Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Average number of transacting ATMs
    
    
    25,484
    
    
    
    25,756
    
    
    
    25,348
    
    
    
    25,983Total transactions (in thousands)
    
    
    48,726
    
    
    
    42,955
    
    
    
    93,176
    
    
    
    83,782Monthly total transactions per ATM
    
    
    637
    
    
    
    556
    
    
    
    613
    
    
    
    537Total withdrawal transactions (in thousands)
    
    
    33,044
    
    
    
    31,519
    
    
    
    64,224
    
    
    
    61,493Monthly withdrawal transactions per ATM
    
    
    432
    
    
    
    408
    
    
    
    422
    
    
    
    394Per withdrawal transaction:Total transaction revenues
    
    $
    2.24
    
    
    $
    2.23
    
    
    $
    2.27
    
    
    $
    2.22Cost of transaction revenues
    
    
    1.71
    
    
    
    1.66
    
    
    
    1.73
    
    
    
    1.67Transaction gross profit(1)
    
    $
    0.53
    
    
    $
    0.57
    
    
    $
    0.54
    
    
    $
    0.55Transaction gross profit margin
    
    
    23.7
    %
    
    
    25.6
    %
    
    
    23.8
    %
    
    
    24.8
    %
 
 (1)
    
    Transaction gross profit is a measure of profitability that uses only the
revenue and expenses that related to operating the ATMs. The revenue and expenses from
ATM equipment sales and other ATM-related services are not included. 23




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##### Table of Contents



Revenues
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % Change(in thousands)
    
    
    
    
    
    
    (in thousands)ATM operating revenues
    
    $
    73,964
    
    
    $
    70,246
    
    
    
    5.3
    %
    
    $
    145,620
    
    
    $
    136,655
    
    
    
    6.6
    %ATM product sales and other revenues
    
    
    3,275
    
    
    
    3,008
    
    
    
    8.9
    %
    
    
    6,137
    
    
    
    5,740
    
    
    
    6.9
    %Total revenues
    
    $
    77,239
    
    
    $
    73,254
    
    
    
    5.4
    %
    
    $
    151,757
    
    
    $
    142,395
    
    
    
    6.6
    %
 ATM operating revenues.
    ATM product sales and other revenues.
 24




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##### Table of Contents



Cost of Revenues and Gross Margins
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % Change(in thousands)
    
    
    
    
    
    
    (in thousands)Cost of ATM operating revenues
    
    $
    56,344
    
    
    $
    52,406
    
    
    
    7.5
    %
    
    $
    111,080
    
    
    $
    102,945
    
    
    
    7.9
    %Cost of ATM product sales and other revenues
    
    
    3,288
    
    
    
    2,478
    
    
    
    32.7
    %
    
    
    6,085
    
    
    
    5,037
    
    
    
    20.8
    %Total cost of revenues
    
    $
    59,632
    
    
    $
    54,884
    
    
    
    8.7
    %
    
    $
    117,165
    
    
    $
    107,982
    
    
    
    8.5
    %ATM operating revenues gross margin
    
    
    23.8
    %
    
    
    25.4
    %
    
    
    
    
    
    
    23.7
    %
    
    
    24.7
    %ATM product sales and other revenues gross
margin
    
    
    (0.4
    )%
    
    
    17.6
    %
    
    
    
    
    
    
    0.8
    %
    
    
    12.2
    %Total gross margin
    
    
    22.8
    %
    
    
    25.1
    %
    
    
    
    
    
    
    22.8
    %
    
    
    24.2
    %
 Cost of ATM operating revenues.
     25




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##### Table of Contents



ATM operating revenues gross margin.
 Cost of ATM product sales and other revenues.
 ATM product sales and other revenues gross margin.
 Selling, General, and Administrative Expenses
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % Change(in thousands)
    
    
    
    
    
    
    (in thousands)Selling, general, and administrative expenses
    
    $
    6,702
    
    
    $
    4,822
    
    
    
    39.0
    %
    
    $
    12,940
    
    
    $
    9,538
    
    
    
    35.7
    %Stock-based compensation
    
    
    218
    
    
    
    238
    
    
    
    (8.4
    )%
    
    
    424
    
    
    
    360
    
    
    
    17.8
    %Total selling, general, and administrative expenses
    
    $
    6,920
    
    
    $
    5,060
    
    
    
    36.8
    %
    
    $
    13,364
    
    
    $
    9,898
    
    
    
    35.0
    %Percentage of revenues:Selling, general, and administrative expenses
    
    
    8.7
    %
    
    
    6.6
    %
    
    
    
    
    
    
    8.5
    %
    
    
    6.7
    %Stock-based compensation
    
    
    0.3
    
    
    
    0.3
    
    
    
    
    
    
    
    0.3
    
    
    
    0.3Total selling, general, and administrative expenses
    
    
    9.0
    %
    
    
    6.9
    %
    
    
    
    
    
    
    8.8
    %
    
    
    7.0
    %
 Selling, general, and administrative expenses.
  26




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##### Table of Contents



Depreciation and Accretion Expense
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % Change(in thousands)
    
    
    
    
    
    
    (in thousands)Depreciation expense
    
    $
    4,937
    
    
    $
    4,366
    
    
    
    13.1
    %
    
    $
    11,110
    
    
    $
    8,305
    
    
    
    33.8
    %Accretion expense
    
    
    245
    
    
    
    275
    
    
    
    (10.9
    )%
    
    
    470
    
    
    
    553
    
    
    
    (15.0
    )%Depreciation and accretion expense
    
    $
    5,182
    
    
    $
    4,641
    
    
    
    11.7
    %
    
    $
    11,580
    
    
    $
    8,858
    
    
    
    30.7
    %Percentage of revenuesDepreciation expense
    
    
    6.4
    %
    
    
    6.0
    %
    
    
    
    
    
    
    7.3
    %
    
    
    5.8
    %Accretion expense
    
    
    0.3
    
    
    
    0.3
    
    
    
    
    
    
    
    0.3
    
    
    
    0.4Total depreciation and accretion
    
    
    6.7
    %
    
    
    6.3
    %
    
    
    
    
    
    
    7.6
    %
    
    
    6.2
    %
 Depreciation expense.
 Accretion expense. Accounting for Asset Retirement Obligations
  Amortization Expense
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % Change(in thousands)
    
    
    
    
    
    
    (in thousands)Amortization expense
    
    $
    2,372
    
    
    $
    2,331
    
    
    
    1.8
    %
    
    $
    4,858
    
    
    $
    7,347
    
    
    
    (33.9
    )%Percentage of revenues
    
    
    3.0
    %
    
    
    3.2
    %
    
    
    
    
    
    
    3.2
    %
    
    
    5.2
    %
  27




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##### Table of Contents



Interest Expense, Net
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % Change(in thousands)
    
    
    
    
    
    
    (in thousands)Interest expense, net
    
    $
    6,000
    
    
    $
    5,657
    
    
    
    6.1
    %
    
    $
    11,892
    
    
    $
    11,322
    
    
    
    5.0
    %Amortization and write-off
of financing costs and
bond discount
    
    
    360
    
    
    
    337
    
    
    
    6.8
    %
    
    
    716
    
    
    
    1,214
    
    
    
    (41.0
    )%Total interest expense, net
    
    $
    6,360
    
    
    $
    5,994
    
    
    
    6.1
    %
    
    $
    12,608
    
    
    $
    12,536
    
    
    
    0.6
    %Percentage of revenues
    
    
    8.3
    %
    
    
    8.2
    %
    
    
    
    
    
    
    8.3
    %
    
    
    8.8
    %
 Interest expense, net.
 Liquidity and Capital Resources
 Amortization and write-off of financing costs and bond discount.
 Other Expense (Income)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % Change(in thousands)
    
    
    
    
    
    
    (in thousands)Minority interest
    
    $
    
    
    
    $
    (49
    )
    
    
    (100.0
    )%
    
    $
    (112
    )
    
    $
    (57
    )
    
    
    96.5
    %Other expense (income)
    
    
    478
    
    
    
    (854
    )
    
    
    (156.0
    )%
    
    
    359
    
    
    
    (657
    )
    
    
    (154.6
    )%Total other expense (income)
    
    $
    478
    
    
    $
    (903
    )
    
    
    (152.9
    )%
    
    $
    247
    
    
    $
    (714
    )
    
    
    (134.6
    )%Percentage of revenues
    
    
    0.6
    %
    
    
    (1.2
    )%
    
    
    
    
    
    
    0.2
    %
    
    
    (0.5
    )%
  28




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Income Tax Provision (Benefit)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % Change(in thousands)
    
    
    
    
    
    
    (in thousands)Income tax provision (benefit)
    
    $
    1,910
    
    
    $
    478
    
    
    
    299.6
    %
    
    $
    937
    
    
    $
    (1,157
    )
    
    
    181.0
    %Effective tax rate
    
    
    (51.6
    )%
    
    
    38.3
    %
    
    
    
    
    
    
    (11.6
    )%
    
    
    32.9
    %
  Liquidity and Capital Resources
 Overview
   Operating Activities
  Investing Activities
  29




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##### Table of Contents



Financing Activities
  Financing Facilities
     30




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##### Table of Contents



New Accounting Standards
 Accounting for Uncertainty in Income Taxes. Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 Accounting for Income Taxes
 Fair Value Measurements. Fair Value
Measurements
 Fair Value Option. The Fair Value Option for
Financial Assets and Financial Liabilities
 Registration Payment Arrangements. Accounting for Registration Payment
Arrangements Accounting for Contingencies Accounting for Derivative Instruments and Hedging Activities Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others
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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Disclosure About Market Risk
 Interest Rate Risk
   Notional Amount
    
    
    Weighted Average Fixed Rate

    
    Period$
    300,000
    
    
    
    3.91
    %
    
    July 1, 2007  December 31, 2007$
    300,000
    
    
    
    4.35
    %
    
    January 1, 2008  December 31, 2008$
    200,000
    
    
    
    4.36
    %
    
    January 1, 2009  December 31, 2009$
    100,000
    
    
    
    4.34
    %
    
    January 1, 2010  December 31, 2010
  Accounting for Derivative Instruments and Hedging Activities,
   32




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##### Table of Contents



Foreign Currency Exchange Risk
    33




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  34




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 National Federation of the Blind (NFB).
  Other matters.
   35




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##### Table of Contents



ITEM 1A. RISK FACTORS
  The 7-Eleven ATM Transaction represents our second largest acquisition to date, based on the number
of ATMs being acquired. We may be unable to integrate the acquired business in an efficient manner,
thus increasing our cost of operations and reducing the expected profits to be generated from such
acquisition.
   A substantial portion of our future revenues and operating profits are now generated by the new
7-Eleven merchant relationship. Accordingly, if 7-Elevens financial condition deteriorates in the
future and it is required to close some or all of its store locations, or if our ATM placement
agreement with 7-Eleven expires or is terminated, our future financial results would be
significantly impaired.
  We will incur future losses by continuing to provide some or all of the Vcom Services currently
being offered by 7-Eleven for a period of time subsequent to the acquisition date.
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##### Table of Contents



We will rely on Wells Fargo Bank, N.A. to provide us with the cash required to operate the ATMs and
Vcom units acquired as part of the 7-Eleven ATM Transaction. If Wells Fargo is unable or unwilling
to provide us with the necessary cash to operate the ATMs and Vcom units, we would need to locate
alternative sources of cash to operate such machines. If we were unsuccessful in those efforts, we
would not be able to operate the acquired business.
    
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  37




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##### Table of Contents



ITEM 6. EXHIBITS
  ExhibitNumber
    
    Description*3.1
    
    Second Amended and Restated Certificate of Incorporation of Cardtronics, Inc., dated as of July 13, 2007.*4.1
    
    Indenture dated as of July 20, 2007 among Cardtronics, Inc., the Subsidiary Guarantors party thereto,
and Wells Fargo National Bank, N.A. as Trustee.*4.2
    
    Registration Rights Agreement dated July 20, 2007 by and among Cardtronics, Inc., the Guarantors named
therein, Banc of America Securities, LLC, and BNP Paribas Securities Corp.*4.3
    
    Supplemental Indenture dated as of June 22, 2007 among Cardtronics Holdings, LLC and Wells Fargo Bank,
N.A. as Trustee.*4.4
    
    Supplemental Indenture dated as of December 22, 2005 among ATM National, LLC and Wells Fargo Bank, N.A.
as Trustee.10.1
    
    Purchase and Sale Agreement, dated as of July 20, 2007, by and between Cardtronics, LP and 7-Eleven,
Inc. (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on July
26, 2007).*10.2
    
    Amendment No. 7 to Credit Agreement, dated as of July 18, 2007.*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 of Cardtronics, Inc. pursuant to Section 13a-14(b) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.*32.2
    
    Certification of the 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.
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##### Table of Contents



SIGNATURES
  CARDTRONICS, INC.August 14, 2007
    
    /s/ Jack AntoniniJack AntoniniPresident and Chief Executive Officer(Principal Executive Officer)
 August 14, 2007
    
    /s/ J. Chris BrewsterJ. Chris BrewsterChief Financial Officer(Principal Financial and Accounting Officer)
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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber
    
    Description*3.1
    
    Second Amended and Restated Certificate of Incorporation of Cardtronics, Inc., dated as of July 13, 2007.*4.1
    
    Indenture dated as of July 20, 2007 among Cardtronics, Inc., the Subsidiary Guarantors party thereto,
and Wells Fargo National Bank, N.A. as Trustee.*4.2
    
    Registration Rights Agreement dated July 20, 2007 by and among Cardtronics, Inc., the Guarantors named
therein, Banc of America Securities, LLC, and BNP Paribas Securities Corp.*4.3
    
    Supplemental Indenture dated as of June 22, 2007 among Cardtronics Holdings, LLC and Wells Fargo Bank, N.A. as Trustee.*4.4
    
    Supplemental Indenture dated as of
December 22, 2005 among ATM National and Wells Fargo Bank, N.A. as Trustee.10.1
    
    Purchase and Sale Agreement, dated as of July 20, 2007, by and between Cardtronics, LP and 7-Eleven,
Inc. (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on July
26, 2007).*10.2
    
    Amendment No. 7 to Credit Agreement, dated as of July 18, 2007.*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 of Cardtronics, Inc. pursuant to Section 13a-14(b) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.*32.2
    
    Certification of the 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.
 40