##### 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, 2008
 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. Employer Identification No.)incorporation or organization)3110 Hayes Road, Suite 300
Houston, TX
(Address of principal executive offices)
    
    77082
(Zip Code)
 (281) 596-9988
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 Common Stock, par value: $0.0001 per share.
    
    Shares outstanding on August 8, 2008: 40,546,583




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##### 



CARDTRONICS, INC.
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    1Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007
    
    
    1Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2008 and 2007
    
    
    2Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007
    
    
    3Notes to Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 4T. Controls and Procedures
    
    
    43PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    44Item 4. Submission of Matters to a Vote of Security Holders
    
    
    45Item 6. Exhibits
    
    
    46Signatures
    
    
    47Exhibit 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, except share and per share amounts)
 June 30, 2008
    
    
    December 31, 2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,155
    
    
    $
    13,439Accounts and notes receivable, net of allowance of $465 and $560 as of
June 30, 2008 and December 31, 2007, respectively
    
    
    21,405
    
    
    
    23,248Inventory
    
    
    3,508
    
    
    
    2,355Restricted cash, short-term
    
    
    12,061
    
    
    
    5,900Deferred tax asset, net
    
    
    214
    
    
    
    216Prepaid expenses, deferred costs, and other current assets
    
    
    14,086
    
    
    
    11,627Total current assets
    
    
    56,429
    
    
    
    56,785Restricted cash
    
    
    323
    
    
    
    317Property and equipment, net
    
    
    176,088
    
    
    
    163,912Intangible assets, net
    
    
    121,698
    
    
    
    130,901Goodwill
    
    
    234,466
    
    
    
    235,185Prepaid expenses and other assets
    
    
    8,201
    
    
    
    4,185Total assets
    
    $
    597,205
    
    
    $
    591,285LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    1,293
    
    
    $
    882Current portion of capital lease obligations
    
    
    853
    
    
    
    1,147Current portion of other long-term liabilities
    
    
    18,878
    
    
    
    16,201Accounts payable
    
    
    20,721
    
    
    
    34,385Accrued liabilities
    
    
    65,851
    
    
    
    70,524Total current liabilities
    
    
    107,596
    
    
    
    123,139Long-term liabilities:Long-term debt, net of current portion and related discounts
    
    
    341,158
    
    
    
    307,733Capital lease obligations, net of current portion
    
    
    598
    
    
    
    982Deferred tax liability, net
    
    
    11,329
    
    
    
    11,480Asset retirement obligations
    
    
    19,100
    
    
    
    17,448Other long-term liabilities
    
    
    13,661
    
    
    
    23,392Total liabilities
    
    
    493,442
    
    
    
    484,174Commitments and contingenciesStockholders equity:Common stock, $0.0001 par value; 125,000,000 shares authorized;
45,531,082 and 43,571,956 shares issued as of June 30, 2008 and December
31, 2007, respectively; 40,525,333 and 38,566,207 shares outstanding as
of June 30, 2008 and December 31, 2007, respectively
    
    
    4
    
    
    
    4Subscriptions receivable (at face value)
    
    
    (128
    )
    
    
    (229
    )Additional paid-in capital
    
    
    191,323
    
    
    
    190,508Accumulated other comprehensive loss, net
    
    
    (808
    )
    
    
    (4,518
    )Accumulated deficit
    
    
    (38,407
    )
    
    
    (30,433
    )Treasury stock; 5,005,749 shares at cost
    
    
    (48,221
    )
    
    
    (48,221
    )Total stockholders equity
    
    
    103,763
    
    
    
    107,111Total liabilities and stockholders equity
    
    $
    597,205
    
    
    $
    591,285
 See accompanying notes to consolidated financial statements.
  1




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CARDTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except share and per share amounts)
 (Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:ATM operating revenues
    
    $
    121,505
    
    
    $
    73,964
    
    
    $
    236,567
    
    
    $
    145,620Vcom operating revenues
    
    
    1,363
    
    
    
    
    
    
    
    2,598
    
    
    
    ATM product sales and other revenues
    
    
    4,107
    
    
    
    3,275
    
    
    
    8,385
    
    
    
    6,137Total revenues
    
    
    126,975
    
    
    
    77,239
    
    
    
    247,550
    
    
    
    151,757Cost of revenues:Cost of ATM operating revenues (excludes
depreciation, accretion, and amortization
shown separately below. See Note 1)
    
    
    91,862
    
    
    
    56,344
    
    
    
    178,694
    
    
    
    111,080Cost of Vcom operating revenues
    
    
    1,739
    
    
    
    
    
    
    
    4,008
    
    
    
    Cost of ATM product sales and other revenues
    
    
    3,662
    
    
    
    3,288
    
    
    
    7,826
    
    
    
    6,085Total cost of revenues
    
    
    97,263
    
    
    
    59,632
    
    
    
    190,528
    
    
    
    117,165Gross profit
    
    
    29,712
    
    
    
    17,607
    
    
    
    57,022
    
    
    
    34,592Operating expenses:Selling, general, and administrative expenses
    
    
    9,800
    
    
    
    6,920
    
    
    
    18,351
    
    
    
    13,364Depreciation and accretion expense
    
    
    10,039
    
    
    
    5,182
    
    
    
    19,121
    
    
    
    11,580Amortization expense
    
    
    4,501
    
    
    
    2,372
    
    
    
    9,004
    
    
    
    4,858Total operating expenses
    
    
    24,340
    
    
    
    14,474
    
    
    
    46,476
    
    
    
    29,802Income from operations
    
    
    5,372
    
    
    
    3,133
    
    
    
    10,546
    
    
    
    4,790Other expense (income):Interest expense, net
    
    
    7,722
    
    
    
    6,000
    
    
    
    15,354
    
    
    
    11,892Amortization of deferred financing costs and
bond discounts
    
    
    530
    
    
    
    360
    
    
    
    1,038
    
    
    
    716Minority interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (112
    )Other
    
    
    1,042
    
    
    
    478
    
    
    
    2,103
    
    
    
    359Total other expense
    
    
    9,294
    
    
    
    6,838
    
    
    
    18,495
    
    
    
    12,855Loss before income taxes
    
    
    (3,922
    )
    
    
    (3,705
    )
    
    
    (7,949
    )
    
    
    (8,065
    )Income tax expense (benefit)
    
    
    (540
    )
    
    
    1,910
    
    
    
    25
    
    
    
    937Net loss
    
    
    (3,382
    )
    
    
    (5,615
    )
    
    
    (7,974
    )
    
    
    (9,002
    )Preferred stock accretion expense
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    133Net loss available to common stockholders
    
    $
    (3,382
    )
    
    $
    (5,681
    )
    
    $
    (7,974
    )
    
    $
    (9,135
    )Net loss per common share  basic and diluted
    
    $
    (0.09
    )
    
    $
    (0.41
    )
    
    $
    (0.21
    )
    
    $
    (0.65
    )Weighted average shares outstanding  basic
and diluted
    
    
    38,735,027
    
    
    
    14,026,960
    
    
    
    38,662,452
    
    
    
    13,996,586
 See accompanying notes to consolidated financial statements.
  2




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CARDTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Six Months Ended June 30,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (7,974
    )
    
    $
    (9,002
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation, accretion, and amortization expense
    
    
    28,125
    
    
    
    16,438Amortization of deferred financing costs and bond discounts
    
    
    1,038
    
    
    
    716Stock-based compensation expense
    
    
    811
    
    
    
    455Deferred income taxes
    
    
    (111
    )
    
    
    831Gain on sale of Winn-Dixie equity securities
    
    
    
    
    
    
    (569
    )Minority interest
    
    
    
    
    
    
    (112
    )Loss on disposal of assets
    
    
    2,056
    
    
    
    990Other reserves and non-cash items
    
    
    (3,643
    )
    
    
    676Changes in assets and liabilities, net of acquisitions:Decrease in accounts and notes receivable, net
    
    
    1,534
    
    
    
    925(Increase) decrease in prepaid, deferred costs, and other current assets
    
    
    (1,621
    )
    
    
    356(Increase) decrease in inventory
    
    
    157
    
    
    
    (1,187
    )(Increase) decrease in other assets
    
    
    394
    
    
    
    (165
    )Increase (decrease) in accounts payable and accrued liabilities
    
    
    (10,335
    )
    
    
    5,333Decrease in other liabilities
    
    
    (2,371
    )
    
    
    (1,652
    )Net cash provided by operating activities
    
    
    8,060
    
    
    
    14,033Cash flows from investing activities:Additions to property and equipment
    
    
    (43,090
    )
    
    
    (23,912
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    3Payments for exclusive license agreements and site acquisition costs
    
    
    (497
    )
    
    
    (817
    )Additions to equipment to be leased to customers
    
    
    
    
    
    
    (422
    )Principal payments received under direct financing leases
    
    
    17
    
    
    
    13Proceeds from sale of Winn-Dixie equity securities
    
    
    
    
    
    
    3,950Acquisition, net of cash acquired
    
    
    
    
    
    
    876Net cash used in investing activities
    
    
    (43,570
    )
    
    
    (20,309
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    76,236
    
    
    
    25,039Repayments of long-term debt and capital leases
    
    
    (43,829
    )
    
    
    (17,060
    )Repayments of borrowings under bank overdraft facility, net
    
    
    (3,881
    )
    
    
    (2,597
    )Payments received on subscriptions receivable
    
    
    101
    
    
    
    Proceeds from exercises of stock options
    
    
    286
    
    
    
    46Equity offering costs
    
    
    (1,489
    )
    
    
    Debt issuance and modification costs
    
    
    (54
    )
    
    
    (15
    )Net cash provided by financing activities
    
    
    27,370
    
    
    
    5,413Effect of exchange rate changes on cash
    
    
    (144
    )
    
    
    (19
    )Net decrease in cash and cash equivalents
    
    
    (8,284
    )
    
    
    (882
    )Cash and cash equivalents at beginning of period
    
    
    13,439
    
    
    
    2,718Cash and cash equivalents at end of period
    
    $
    5,155
    
    
    $
    1,836Supplemental disclosure of cash flow information:Cash paid for interest, including interest on capital leases
    
    $
    16,096
    
    
    $
    12,142Cash paid for income taxes
    
    $
    220
    
    
    $
    27Fixed assets financed with direct debt
    
    $
    
    
    
    $
    2,545
 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
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Depreciation and
accretion expenses
related to ATMs and
ATM-related assets
    
    $
    8,734
    
    
    $
    4,757
    
    
    $
    16,696
    
    
    $
    10,778Amortization expense
    
    
    4,501
    
    
    
    2,372
    
    
    
    9,004
    
    
    
    4,858Total depreciation,
accretion, and
amortization
expenses excluded
from cost of ATM
operating revenues
and gross profit
    
    $
    13,235
    
    
    $
    7,129
    
    
    $
    25,700
    
    
    $
    15,636
 (2) Acquisitions
 Acquisition of 7-Eleven Financial Services Business
  Business Combinations
 Pro Forma Results of Operations. Note 8 Note 8
 Three Months
    
    
    Six MonthsEnded June 30, 2007
    
    
    Ended June 30, 2007(In thousands, excluding per share amounts)Revenues
    
    $
    115,301
    
    
    $
    231,340Income from operations
    
    
    3,266
    
    
    
    10,086Net loss available to common stockholders
    
    
    (7,719
    )
    
    
    (10,087
    )Net loss per share  basic and diluted
    
    
    (0.55
    )
    
    
    (0.72
    )
   5




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##### Table of Contents



(3) Stock-Based Compensation
 Share-Based Payment,
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Cost of ATM operating revenues
    
    $
    132
    
    
    $
    15
    
    
    $
    197
    
    
    $
    31Selling, general, and administrative expenses
    
    
    413
    
    
    
    218
    
    
    
    614
    
    
    
    424Total stock-based compensation expense
    
    $
    545
    
    
    $
    233
    
    
    $
    811
    
    
    $
    455
  Restricted Shares.
 Options.
 WeightedNumber
    
    
    Averageof Shares
    
    
    Exercise PriceOptions outstanding as of January 1, 2008
    
    
    4,960,041
    
    
    $
    7.78Granted
    
    
    153,000
    
    
    $
    8.96Exercised
    
    
    (318,876
    )
    
    $
    0.90Forfeited
    
    
    (130,156
    )
    
    $
    11.22Cancelled
    
    
    (406,367
    )
    
    $
    11.40Options outstanding as of June 30, 2008
    
    
    4,257,642
    
    
    $
    7.89Options vested and exercisable as of June 30, 2008
    
    
    2,858,718
    
    
    $
    6.21
   6




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##### Table of Contents



(4) Earnings per Share
 Earnings per
Share
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Stock options
    
    
    1,149,774
    
    
    
    1,614,681
    
    
    
    1,157,555
    
    
    
    1,619,832Restricted shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,979Preferred stock
    
    
    
    
    
    
    7,390,413
    
    
    
    
    
    
    
    7,390,413Total potentially dilutive securities
    
    
    1,149,774
    
    
    
    9,005,094
    
    
    
    1,157,555
    
    
    
    9,021,224
 (5) Comprehensive Income (Loss)
 Reporting Comprehensive Income
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Net loss
    
    $
    (3,382
    )
    
    $
    (5,615
    )
    
    $
    (7,974
    )
    
    $
    (9,002
    )Unrealized gains on interest rate hedges, net of taxes
    
    
    18,421
    
    
    
    1,366
    
    
    
    4,956
    
    
    
    194Foreign currency translation adjustments
    
    
    162
    
    
    
    2,660
    
    
    
    (1,246
    )
    
    
    2,500Reclassifications of unrealized gains on
available-for-sale securities, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (498
    )Total comprehensive income (loss)
    
    $
    15,201
    
    
    $
    (1,589
    )
    
    $
    (4,264
    )
    
    $
    (6,806
    )
 Note 12
  June 30, 2008
    
    
    December 31, 2007(In thousands)Unrealized losses on interest rate hedges
    
    $
    (8,688
    )
    
    $
    (13,644
    )Foreign currency translation adjustments
    
    
    7,880
    
    
    
    9,126Total accumulated other comprehensive loss
    
    $
    (808
    )
    
    $
    (4,518
    )
   7




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(6) 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, 2007
    
    $
    150,445
    
    
    $
    84,050
    
    
    $
    690
    
    
    $
    200
    
    
    $
    4,015
    
    
    $
    239,400Purchase price adjustments
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Foreign currency translation adjustments
    
    
    
    
    
    
    (717
    )
    
    
    (8
    )
    
    
    
    
    
    
    (35
    )
    
    
    (760
    )Balance as of June 30, 2008
    
    $
    150,451
    
    
    $
    83,333
    
    
    $
    682
    
    
    $
    200
    
    
    $
    3,980
    
    
    $
    238,646
 Intangible Assets with Definite Lives
  Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount(In thousands)Customer and branding contracts/relationships
    
    $
    163,328
    
    
    $
    (58,169
    )
    
    $
    105,159Deferred financing costs
    
    
    14,064
    
    
    
    (5,030
    )
    
    
    9,034Exclusive license agreements
    
    
    5,420
    
    
    
    (2,137
    )
    
    
    3,283Non-compete agreements
    
    
    105
    
    
    
    (63
    )
    
    
    42Total
    
    $
    182,917
    
    
    $
    (65,399
    )
    
    $
    117,518
 (7) Accrued Liabilities
  June 30, 2008
    
    
    December 31, 2007(In thousands)Accrued
merchant settlement amounts
    
    $
    13,313
    
    
    $
    5,807Accrued merchant fees
    
    
    10,924
    
    
    
    9,933Accrued interest
    
    
    10,609
    
    
    
    11,257Accrued armored fees
    
    
    5,579
    
    
    
    5,879Accrued cash management fees
    
    
    4,558
    
    
    
    5,574Accrued maintenance fees
    
    
    3,844
    
    
    
    6,970Accrued compensation
    
    
    2,740
    
    
    
    3,832Accrued ATM telecommunications costs
    
    
    1,454
    
    
    
    1,424Accrued processing costs
    
    
    1,454
    
    
    
    1,477Accrued property and sales taxes
    
    
    1,123
    
    
    
    446Accrued interest rate swap payments
    
    
    1,079
    
    
    
    147Accrued purchases
    
    
    584
    
    
    
    6,098Other accrued expenses
    
    
    8,590
    
    
    
    11,680Total
    
    $
    65,851
    
    
    $
    70,524
  8




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##### Table of Contents



(8) Long-Term Debt
  June 30, 2008
    
    
    December 31, 2007(In thousands)Revolving credit facility
    
    $
    37,500
    
    
    $
    4,000Senior subordinated notes due
August 2013 (net of
unamortized discounts of $3.6
million as of June 30, 2008
and $3.9 million as of
December 31, 2007)
    
    
    296,356
    
    
    
    296,088Other
    
    
    8,595
    
    
    
    8,527Total
    
    
    342,451
    
    
    
    308,615Less current portion
    
    
    1,293
    
    
    
    882Total excluding current portion
    
    $
    341,158
    
    
    $
    307,733
 Credit Facility
  Senior Subordinated Notes
   (9) Asset Retirement Obligations
 Asset
Retirement Obligations.
  9




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##### Table of Contents



(in thousands)
 Asset retirement obligation as of January 1, 2008
    
    $
    17,448Additional obligations
    
    
    2,622Accretion expense
    
    
    826Payments
    
    
    (1,527
    )Change in estimates
    
    
    (265
    )Foreign currency translation adjustments
    
    
    (4
    )Asset retirement obligation as of June 30, 2008
    
    $
    19,100
  (10) Other Liabilities
  June 30, 2008
    
    
    December 31, 2007(In thousands)Current Portion of Other Long-Term Liabilities:Obligations associated with acquired unfavorable contracts
    
    $
    8,046
    
    
    $
    8,158Interest rate swaps
    
    
    7,528
    
    
    
    4,489Deferred revenue
    
    
    1,665
    
    
    
    1,789Other
    
    
    1,639
    
    
    
    1,765Total
    
    $
    18,878
    
    
    $
    16,201Other Long-Term Liabilities:Interest rate swaps
    
    $
    4,640
    
    
    $
    9,155Obligations associated with acquired unfavorable contracts
    
    
    3,667
    
    
    
    7,626Deferred revenue
    
    
    2,818
    
    
    
    3,380Other long-term liabilities
    
    
    2,536
    
    
    
    3,231Total
    
    $
    13,661
    
    
    $
    23,392
 (11) Commitments and Contingencies
 Legal and Other Regulatory Matters
   10




---



##### Table of Contents



Capital and Operating Leases
 Capital Lease Obligations.
 Operating Lease Obligations.
 Related Letters of Credit.
 Other Commitments
 Asset Retirement Obligations. Note 9
  11




---



##### Table of Contents



(12) Derivative Financial Instruments
   Weighted AverageNotional Amount
    
    
    Fixed Rate
    
    
    Period(In thousands)$
    550,000
    
    
    
    4.61
    %
    
    July 1, 2008  December 31, 2008$
    550,000
    
    
    
    4.30
    %
    
    January 1, 2009  December 31, 2009$
    550,000
    
    
    
    4.11
    %
    
    January 1, 2010  December 31, 2010$
    400,000
    
    
    
    3.72
    %
    
    January 1, 2011  December 31, 2011$
    200,000
    
    
    
    3.96
    %
    
    January 1, 2012  December 31, 2012
 Accounting for Derivative Instruments and Hedging Activities,
   (13) Income Taxes
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)
    
    
    (In thousands)Income tax expense (benefit)
    
    $
    (540
    )
    
    $
    1,910
    
    
    $
    25
    
    
    $
    937Effective tax rate
    
    
    13.8
    %
    
    
    (51.6
    )%
    
    
    (0.3
    )%
    
    
    (11.6
    )%
  12




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##### Table of Contents



(14) Segment Information
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)
    
    
    (In thousands)EBITDA
    
    $
    18,870
    
    
    $
    10,209
    
    
    $
    36,568
    
    
    $
    20,981Depreciation and accretion expense
    
    
    10,039
    
    
    
    5,182
    
    
    
    19,121
    
    
    
    11,580Amortization expense
    
    
    4,501
    
    
    
    2,372
    
    
    
    9,004
    
    
    
    4,858Interest expense, net, including
amortization of deferred
financing costs and bond
discounts
    
    
    8,252
    
    
    
    6,360
    
    
    
    16,392
    
    
    
    12,608Income tax expense
    
    
    (540
    )
    
    
    1,910
    
    
    
    25
    
    
    
    937Net loss
    
    $
    (3,382
    )
    
    $
    (5,615
    )
    
    $
    (7,974
    )
    
    $
    (9,002
    )
  13




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##### Table of Contents



For the Three Months Ended June 30, 2008United
    
    
    
    
    
    
    AdvancedUnited States
    
    
    Kingdom
    
    
    Mexico
    
    
    Functionality
    
    
    Eliminations
    
    
    Total(In thousands)Revenue from external customers
    
    $
    102,688
    
    
    $
    19,701
    
    
    $
    3,223
    
    
    $
    1,363
    
    
    $
    
    
    
    $
    126,975Intersegment revenues
    
    
    525
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (525
    )
    
    
    Cost of revenues
    
    
    75,603
    
    
    
    17,541
    (1)
    
    
    2,745
    
    
    
    1,899
    
    
    
    (525
    )
    
    
    97,263Selling, general, and administrative expenses
    
    
    7,884
    
    
    
    1,538
    
    
    
    277
    
    
    
    101
    
    
    
    
    
    
    
    9,800EBITDA
    
    
    19,320
    
    
    
    138
    (1)
    
    
    49
    
    
    
    (637
    )
    
    
    
    
    
    
    18,870Depreciation and accretion expense
    
    
    6,583
    
    
    
    3,055
    
    
    
    406
    
    
    
    
    
    
    
    (5
    )
    
    
    10,039Amortization expense
    
    
    3,952
    
    
    
    536
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    4,501Interest expense, net
    
    
    6,607
    
    
    
    1,432
    
    
    
    213
    
    
    
    
    
    
    
    
    
    
    
    8,252Capital expenditures, excluding acquisitions (2) (3)
    
    
    6,076
    
    
    
    8,679
    
    
    
    2,696
    
    
    
    39
    
    
    
    
    
    
    
    17,490
 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
    
    
    
    Cost of revenues
    
    
    47,619
    
    
    
    11,240
    (1)
    
    
    762
    
    
    
    11
    
    
    
    59,632Selling, general, and administrative expenses
    
    
    5,496
    
    
    
    1,050
    
    
    
    307
    
    
    
    67
    
    
    
    6,920EBITDA
    
    
    7,502
    
    
    
    2,956
    (1)
    
    
    (182
    )
    
    
    (67
    )
    
    
    10,209Depreciation and accretion expense
    
    
    3,488
    
    
    
    1,652
    
    
    
    44
    
    
    
    (2
    )
    
    
    5,182Amortization expense
    
    
    1,937
    
    
    
    422
    
    
    
    13
    
    
    
    
    
    
    
    2,372Interest expense, net
    
    
    5,251
    
    
    
    1,041
    
    
    
    68
    
    
    
    
    
    
    
    6,360Capital expenditures, excluding acquisitions (2) (3)
    
    
    3,919
    
    
    
    5,550
    
    
    
    1,361
    
    
    
    
    
    
    
    10,830Additions to equipment to be leased to customers
    
    
    
    
    
    
    
    
    
    
    219
    
    
    
    
    
    
    
    219
 For the Six Months Ended June 30, 2008United
    
    
    
    
    
    
    AdvancedUnited States
    
    
    Kingdom
    
    
    Mexico
    
    
    Functionality
    
    
    Eliminations
    
    
    Total(In thousands)Revenue from external customers
    
    $
    201,806
    
    
    $
    37,341
    
    
    $
    5,805
    
    
    $
    2,598
    
    
    $
    
    
    
    $
    247,550Intersegment revenues
    
    
    720
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (720
    )
    
    
    Cost of revenues
    
    
    150,020
    
    
    
    31,933
    (1)
    
    
    4,932
    
    
    
    4,363
    
    
    
    (720
    )
    
    
    190,528Selling, general, and administrative expenses
    
    
    15,120
    
    
    
    2,466
    
    
    
    575
    
    
    
    190
    
    
    
    
    
    
    
    18,351EBITDA
    
    
    36,265
    
    
    
    2,082
    (1)
    
    
    176
    
    
    
    (1,955
    )
    
    
    
    
    
    
    36,568Depreciation and accretion expense
    
    
    12,696
    
    
    
    5,737
    
    
    
    715
    
    
    
    
    
    
    
    (27
    )
    
    
    19,121Amortization expense
    
    
    7,905
    
    
    
    1,074
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    9,004Interest expense, net
    
    
    13,110
    
    
    
    2,888
    
    
    
    394
    
    
    
    
    
    
    
    
    
    
    
    16,392Capital expenditures, excluding acquisitions (2) (3)
    
    
    21,718
    
    
    
    18,866
    
    
    
    2,763
    
    
    
    240
    
    
    
    
    
    
    
    43,587
  14




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##### Table of Contents



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
    )
    
    
    Cost of revenues
    
    
    95,603
    
    
    
    20,310
    (1)
    
    
    1,302
    
    
    
    (50
    )
    
    
    117,165Selling, general, and administrative expenses
    
    
    10,643
    
    
    
    2,037
    
    
    
    617
    
    
    
    67
    
    
    
    13,364EBITDA
    
    
    15,738
    
    
    
    5,783
    (1)
    
    
    (441
    )
    
    
    (99
    )
    
    
    20,981Depreciation and accretion expense
    
    
    8,530
    
    
    
    3,010
    
    
    
    69
    
    
    
    (29
    )
    
    
    11,580Amortization expense
    
    
    4,004
    
    
    
    829
    
    
    
    25
    
    
    
    
    
    
    
    4,858Interest expense, net
    
    
    10,484
    
    
    
    2,032
    
    
    
    92
    
    
    
    
    
    
    
    12,608Capital expenditures, excluding acquisitions (2) (3)
    
    
    12,110
    
    
    
    11,224
    
    
    
    1,395
    
    
    
    
    
    
    
    24,729Additions to equipment to be leased to customers
    
    
    
    
    
    
    
    
    
    
    422
    
    
    
    
    
    
    
    422
 
 (1)
    
    During the second quarter of 2008, we experienced a significant increase in transactions conducted on our
ATMs in the United Kingdom with counterfeit credit cards. Due to a delay in the completion of our Europay
MasterCard Visa (EMV) security standard certification with the network whose brand was on those cards, we
are liable under the networks rules for the resulting claims, which we estimate could total $1.3 million.
As a result, our cost of revenues and EBITDA were negatively impacted by the $1.3 million charge during the
three and six month periods ended June 30, 2008. Additionally, we incurred a similar charge in the amount of
$0.4 million during the second quarter of 2007, which negatively impacted our United Kingdom segments costs
of revenues and EBITDA for the three and six months ended June 30, 2007.(2)
    
    Capital expenditure amounts include payments made for exclusive license agreements and site acquisition costs.(3)
    
    Capital expenditure amounts for Mexico are reflected gross of any minority interest amounts. Identifiable Assets:
 June 30, 2008
    
    
    December 31, 2007(In thousands)United States
    
    $
    405,802
    
    
    $
    409,120United Kingdom
    
    
    170,505
    
    
    
    163,464Mexico
    
    
    13,364
    
    
    
    12,337Advanced Functionality
    
    
    7,534
    
    
    
    6,364Total
    
    $
    597,205
    
    
    $
    591,285
 (15) New Accounting Pronouncements
 Adopted
 Fair Value Measurements. Fair Value Measurements,
 
    
    Defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date and establishes a framework for measuring fair value;
 
    
    Establishes a three-level hierarchy for fair value measurements based upon the
transparency of inputs to the valuation of an asset or liability as of the measurement
date;
 
    
    Eliminates large position discounts for financial instruments quoted in active markets
and requires consideration of the Companys creditworthiness when valuing liabilities; and
 
    
    Expands disclosures about instruments measured at fair value.
  15




---



##### Table of Contents




    
    Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities.
 
    
    Level 2 inputs are quoted prices for similar assets and liabilities in active markets
or inputs that are observable for the asset or liability, either directly or indirectly
through market corroboration, for substantially the full term of the financial instrument.
 
    
    Level 3 inputs are unobservable inputs based on assumptions used to measure assets and
liabilities at fair value.
  Accounting for Leases
   Fair Value MeasurementsTotal CarryingValue as ofJune 30, 2008
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Interest rate swaps
    
    $
    (8,689
    )
    
    $
    
    
    
    $
    (8,689
    )
    
    $
    
  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.
   16




---



##### Table of Contents



Fair Value Option. The Fair Value Option for
Financial Assets and Financial Liabilities
 Issued but Not Yet Adopted
  Business Combinations. Business
Combinations
 Noncontrolling Interests. Noncontrolling
Interests in Consolidated Financial Statements  an amendment of ARB No. 51
 Disclosures about Derivatives and Hedging Activities. Disclosures about Derivatives and Hedging Activities  an amendment of SFAS No. 133,
 Useful Life of Intangible Assets. Determination
of the Useful Life of Intangible Assets, Goodwill and Other Intangible Assets
  17




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##### Table of Contents



(16) Supplemental Guarantor Financial Information
  Condensed Consolidating Statements of Operations
 Three Months Ended June 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    104,416
    
    
    $
    22,924
    
    
    $
    (365
    )
    
    $
    126,975Operating costs and expenses
    
    
    673
    
    
    
    95,189
    
    
    
    26,111
    
    
    
    (370
    )
    
    
    121,603Operating (loss) income
    
    
    (673
    )
    
    
    9,227
    
    
    
    (3,187
    )
    
    
    5
    
    
    
    5,372Interest expense, net, including
amortization of deferred financing costs
and bond discounts
    
    
    34
    
    
    
    6,573
    
    
    
    1,645
    
    
    
    
    
    
    
    8,252Equity in (earnings) losses of subsidiaries
    
    
    1,962
    
    
    
    
    
    
    
    
    
    
    
    (1,962
    )
    
    
    Other (income) expense, net
    
    
    (116
    )
    
    
    522
    
    
    
    636
    
    
    
    
    
    
    
    1,042(Loss) income before income taxes
    
    
    (2,553
    )
    
    
    2,132
    
    
    
    (5,468
    )
    
    
    1,967
    
    
    
    (3,922
    )Income tax expense (benefit)
    
    
    834
    
    
    
    
    
    
    
    (1,374
    )
    
    
    
    
    
    
    (540
    )Net (loss) income available to common
stockholders
    
    $
    (3,387
    )
    
    $
    2,132
    
    
    $
    (4,094
    )
    
    $
    1,967
    
    
    $
    (3,382
    )
 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, including
amortization of deferred financing costs
and bond discounts
    
    
    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 expense (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
    )
  18




---



##### Table of Contents



Condensed Consolidating Statements of Operations  Continued
 Six Months Ended June 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    204,769
    
    
    $
    43,146
    
    
    $
    (365
    )
    
    $
    247,550Operating costs and expenses
    
    
    690
    
    
    
    189,249
    
    
    
    47,457
    
    
    
    (392
    )
    
    
    237,004Operating (loss) income
    
    
    (690
    )
    
    
    15,520
    
    
    
    (4,311
    )
    
    
    27
    
    
    
    10,546Interest expense, net
    
    
    83
    
    
    
    13,027
    
    
    
    3,282
    
    
    
    
    
    
    
    16,392Equity in (earnings) losses of subsidiaries
    
    
    5,384
    
    
    
    
    
    
    
    
    
    
    
    (5,384
    )
    
    
    Other (income) expense, net
    
    
    (172
    )
    
    
    1,293
    
    
    
    982
    
    
    
    
    
    
    
    2,103(Loss) income before income taxes
    
    
    (5,985
    )
    
    
    1,200
    
    
    
    (8,575
    )
    
    
    5,411
    
    
    
    (7,949
    )Income tax expense (benefit)
    
    
    2,016
    
    
    
    136
    
    
    
    (2,127
    )
    
    
    
    
    
    
    25Net (loss) income available to common
stockholders
    
    $
    (8,001
    )
    
    $
    1,064
    
    
    $
    (6,448
    )
    
    $
    5,411
    
    
    $
    (7,974
    )
 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
    
    
    
    
    
    
    
    247Loss before income taxes
    
    
    (8,072
    )
    
    
    (2,443
    )
    
    
    (715
    )
    
    
    3,165
    
    
    
    (8,065
    )Income tax expense (benefit)
    
    
    860
    
    
    
    105
    
    
    
    (28
    )
    
    
    
    
    
    
    937Net (loss) income
    
    
    (8,932
    )
    
    
    (2,548
    )
    
    
    (687
    )
    
    
    3,165
    
    
    
    (9,002
    )Preferred stock accretion expense
    
    
    133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133Net loss available to common stockholders
    
    $
    (9,065
    )
    
    $
    (2,548
    )
    
    $
    (687
    )
    
    $
    3,165
    
    
    $
    (9,135
    )
  19




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##### Table of Contents



Condensed Consolidating Balance Sheets
 As of June 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Assets:Cash and cash equivalents
    
    $
    25
    
    
    $
    4,991
    
    
    $
    139
    
    
    $
    
    
    
    $
    5,155Receivables, net
    
    
    1,937
    
    
    
    18,053
    
    
    
    3,759
    
    
    
    (2,344
    )
    
    
    21,405Other current assets
    
    
    1,923
    
    
    
    16,023
    
    
    
    13,402
    
    
    
    (1,479
    )
    
    
    29,869Total current assets
    
    
    3,885
    
    
    
    39,067
    
    
    
    17,300
    
    
    
    (3,823
    )
    
    
    56,429Property and equipment, net
    
    
    
    
    
    
    102,438
    
    
    
    73,835
    
    
    
    (185
    )
    
    
    176,088Intangible assets, net
    
    
    8,290
    
    
    
    98,859
    
    
    
    14,549
    
    
    
    
    
    
    
    121,698Goodwill
    
    
    
    
    
    
    150,451
    
    
    
    84,015
    
    
    
    
    
    
    
    234,466Investments in and advances to subsidiaries
    
    
    49,367
    
    
    
    
    
    
    
    
    
    
    
    (49,367
    )
    
    
    Intercompany receivable (payable)
    
    
    (480
    )
    
    
    8,113
    
    
    
    (7,633
    )
    
    
    
    
    
    
    Prepaid expenses and other assets
    
    
    396,822
    
    
    
    6,721
    
    
    
    1,803
    
    
    
    (396,822
    )
    
    
    8,524Total assets
    
    $
    457,884
    
    
    $
    405,649
    
    
    $
    183,869
    
    
    $
    (450,197
    )
    
    $
    597,205Liabilities and Stockholders Equity:Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    1,293
    
    
    $
    
    
    
    $
    1,293Current portion of capital lease obligations
    
    
    
    
    
    
    853
    
    
    
    
    
    
    
    
    
    
    
    853Current portion of other long-term liabilities
    
    
    
    
    
    
    18,878
    
    
    
    
    
    
    
    
    
    
    
    18,878Accounts payable and accrued liabilities
    
    
    10,863
    
    
    
    55,155
    
    
    
    24,372
    
    
    
    (3,818
    )
    
    
    86,572Total current liabilities
    
    
    10,863
    
    
    
    74,886
    
    
    
    25,665
    
    
    
    (3,818
    )
    
    
    107,596Long-term debt, net of current portion
    
    
    333,856
    
    
    
    275,846
    
    
    
    128,278
    
    
    
    (396,822
    )
    
    
    341,158Capital lease obligations, net of current portion
    
    
    
    
    
    
    598
    
    
    
    
    
    
    
    
    
    
    
    598Deferred tax liability
    
    
    9,402
    
    
    
    980
    
    
    
    947
    
    
    
    
    
    
    
    11,329Asset retirement obligations
    
    
    
    
    
    
    12,816
    
    
    
    6,284
    
    
    
    
    
    
    
    19,100Other non-current liabilities
    
    
    
    
    
    
    13,661
    
    
    
    
    
    
    
    
    
    
    
    13,661Total liabilities
    
    
    354,121
    
    
    
    378,787
    
    
    
    161,174
    
    
    
    (400,640
    )
    
    
    493,442Stockholders equity
    
    
    103,763
    
    
    
    26,862
    
    
    
    22,695
    
    
    
    (49,557
    )
    
    
    103,763Total liabilities and stockholders equity
    
    $
    457,884
    
    
    $
    405,649
    
    
    $
    183,869
    
    
    $
    (450,197
    )
    
    $
    597,205
  20




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##### Table of Contents



Condensed Consolidating Balance Sheets  Continued
 As of December 31, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Assets:Cash and cash equivalents
    
    $
    76
    
    
    $
    11,576
    
    
    $
    1,787
    
    
    $
    
    
    
    $
    13,439Receivables, net
    
    
    (292
    )
    
    
    20,894
    
    
    
    2,713
    
    
    
    (67
    )
    
    
    23,248Other current assets
    
    
    1,031
    
    
    
    8,781
    
    
    
    10,876
    
    
    
    (590
    )
    
    
    20,098Total current assets
    
    
    815
    
    
    
    41,251
    
    
    
    15,376
    
    
    
    (657
    )
    
    
    56,785Property and equipment, net
    
    
    
    
    
    
    99,764
    
    
    
    64,360
    
    
    
    (212
    )
    
    
    163,912Intangible assets, net
    
    
    8,768
    
    
    
    106,808
    
    
    
    15,325
    
    
    
    
    
    
    
    130,901Goodwill
    
    
    
    
    
    
    150,445
    
    
    
    84,740
    
    
    
    
    
    
    
    235,185Investments in and advances to subsidiaries
    
    
    50,249
    
    
    
    
    
    
    
    
    
    
    
    (50,249
    )
    
    
    Intercompany receivable (payable)
    
    
    (863
    )
    
    
    6,395
    
    
    
    (5,532
    )
    
    
    
    
    
    
    Prepaid expenses and other assets
    
    
    368,424
    
    
    
    2,970
    
    
    
    1,532
    
    
    
    (368,424
    )
    
    
    4,502Total assets
    
    $
    427,393
    
    
    $
    407,633
    
    
    $
    175,801
    
    
    $
    (419,542
    )
    
    $
    591,285Liabilities and Stockholders Equity:Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    882
    
    
    $
    
    
    
    $
    882Current portion of capital lease obligations
    
    
    
    
    
    
    1,147
    
    
    
    
    
    
    
    
    
    
    
    1,147Current portion of other long-term liabilities
    
    
    
    
    
    
    16,032
    
    
    
    169
    
    
    
    
    
    
    
    16,201Accounts payable and accrued liabilities
    
    
    12,808
    
    
    
    66,726
    
    
    
    26,027
    
    
    
    (652
    )
    
    
    104,909Total current liabilities
    
    
    12,808
    
    
    
    83,905
    
    
    
    27,078
    
    
    
    (652
    )
    
    
    123,139Long-term debt, net of current portion
    
    
    300,088
    
    
    
    265,725
    
    
    
    110,343
    
    
    
    (368,423
    )
    
    
    307,733Capital lease obligations, net of current portion
    
    
    
    
    
    
    982
    
    
    
    
    
    
    
    
    
    
    
    982Deferred tax liability
    
    
    7,386
    
    
    
    980
    
    
    
    3,114
    
    
    
    
    
    
    
    11,480Asset retirement obligations
    
    
    
    
    
    
    12,332
    
    
    
    5,116
    
    
    
    
    
    
    
    17,448Other non-current liabilities
    
    
    
    
    
    
    22,868
    
    
    
    524
    
    
    
    
    
    
    
    23,392Total liabilities
    
    
    320,282
    
    
    
    386,792
    
    
    
    146,175
    
    
    
    (369,075
    )
    
    
    484,174Stockholders equity
    
    
    107,111
    
    
    
    20,841
    
    
    
    29,626
    
    
    
    (50,467
    )
    
    
    107,111Total liabilities and stockholders equity
    
    $
    427,393
    
    
    $
    407,633
    
    
    $
    175,801
    
    
    $
    (419,542
    )
    
    $
    591,285
 Condensed Consolidating Statements of Cash Flows
 Six Months Ended June 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Net cash (used in) provided by operating activities
    
    $
    (5,239
    )
    
    $
    5,930
    
    
    $
    7,369
    
    
    $
    
    
    
    $
    8,060Additions to property and equipment, net of proceeds
from sale of property and equipment
    
    
    
    
    
    
    (21,907
    )
    
    
    (21,183
    )
    
    
    
    
    
    
    (43,090
    )Payments for exclusive license agreements and site
acquisition costs
    
    
    
    
    
    
    (50
    )
    
    
    (447
    )
    
    
    
    
    
    
    (497
    )Principal payments received under direct financing leases
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Net cash used in investing activities
    
    
    
    
    
    
    (21,957
    )
    
    
    (21,613
    )
    
    
    
    
    
    
    (43,570
    )Proceeds from issuance of long-term debt
    
    
    76,400
    
    
    
    44,179
    
    
    
    16,870
    
    
    
    (61,213
    )
    
    
    76,236Repayments of long-term debt
    
    
    (42,900
    )
    
    
    (34,735
    )
    
    
    (251
    )
    
    
    34,057
    
    
    
    (43,829
    )Issuance of long-term notes receivable
    
    
    (61,213
    )
    
    
    
    
    
    
    
    
    
    
    61,213
    
    
    
    Payments received on long-term notes receivable
    
    
    34,057
    
    
    
    
    
    
    
    
    
    
    
    (34,057
    )
    
    
    Repayments of borrowings under bank overdraft facility,
net
    
    
    
    
    
    
    
    
    
    
    (3,881
    )
    
    
    
    
    
    
    (3,881
    )Proceeds from exercises of stock options
    
    
    286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    286Other financing activities
    
    
    (1,442
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,442
    )Net cash provided by financing activities
    
    
    5,188
    
    
    
    9,444
    
    
    
    12,738
    
    
    
    
    
    
    
    27,370Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (144
    )
    
    
    
    
    
    
    (144
    )Net decrease in cash and cash equivalents
    
    
    (51
    )
    
    
    (6,583
    )
    
    
    (1,650
    )
    
    
    
    
    
    
    (8,284
    )Cash and cash equivalents at beginning of period
    
    
    76
    
    
    
    11,576
    
    
    
    1,787
    
    
    
    
    
    
    
    13,439Cash and cash equivalents at end of period
    
    $
    25
    
    
    $
    4,993
    
    
    $
    137
    
    
    $
    
    
    
    $
    5,155
  21




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##### Table of Contents



Condensed Consolidating Statements of Cash Flows  Continued
 Six Months Ended June 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Net cash (used in) provided by operating activities
    
    $
    (7,593
    )
    
    $
    12,239
    
    
    $
    9,387
    
    
    $
    
    
    
    $
    14,033Additions to property and equipment, net of
proceeds from sale of property and equipment
    
    
    
    
    
    
    (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 under direct
financing leases
    
    
    
    
    
    
    
    
    
    
    (409
    )
    
    
    
    
    
    
    (409
    )Proceeds from sale of Winn-Dixie equity securities
    
    
    
    
    
    
    3,950
    
    
    
    
    
    
    
    
    
    
    
    3,950Acquisition, net of cash acquired
    
    
    
    
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    876Net cash used in investing activities
    
    
    
    
    
    
    (7,280
    )
    
    
    (13,029
    )
    
    
    
    
    
    
    (20,309
    )Proceeds from issuance of long-term debt
    
    
    24,500
    
    
    
    9,000
    
    
    
    5,539
    
    
    
    (14,000
    )
    
    
    25,039Repayments 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
    )
    
    
    Repayments of borrowings under bank overdraft
facility, net
    
    
    
    
    
    
    
    
    
    
    (2,597
    )
    
    
    
    
    
    
    (2,597
    )Other financing activities
    
    
    31
    
    
    
    (189
    )
    
    
    189
    
    
    
    
    
    
    
    31Net cash provided by (used in) financing activities
    
    
    7,531
    
    
    
    (5,189
    )
    
    
    3,071
    
    
    
    
    
    
    
    5,413Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )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
  22




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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 (this  Form 10-Q ) contains certain forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
These statements are identified by the use of the words project, believe, expect,
anticipate, intend, contemplate, would, could, plan, and similar expressions that 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 we believe 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 anticipate. All comments concerning our expectations for future
revenues and operating results are based on our estimates 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. Other factors that could cause actual results to differ materially
from those in the forward-looking statements include, but are not limited to, those described in:
(1) our reports and registration statements filed or furnished from time to time with the
Securities and Exchange Commission (the SEC), including our Annual Report on Form 10-K for the
fiscal year ended December 31, 2007 (2007 Form 10-K ); and (2) other announcements we make from
time to time.
 You are cautioned not to place undue reliance on forward-looking statements, which speak only
as of the date of this Form 10-Q . 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.
 Overview
 Form
10-K.
 Recent Events
 Strategic Initiatives.
 
    
    In-House EFT Processing Operations.As of June 30, 2008, we were utilizing our in-house
EFT transaction processing platform to process transactions for over 23,000 ATMs, including
a substantial majority of our traditional ATMs located in the United States, all of our
advanced functionality (or Vcom) terminals, our entire United Kingdom portfolio, and
approximately 700 ATMs owned by a third party who has engaged us to serve as the processor
for a portion of its ATM portfolio. We expect to transition our remaining ATMs, including
those of our Mexico operations, to our processing platform by the end of the year.
However, there are approximately 3,500 ATMs acquired in the 7-Eleven ATM Transaction that
cannot be converted to our EFT platform until the end of 2009, when our agreement with a
third party processor expires.
 
    
    Advanced Functionality Services.In May 2008, we launched our remote deposit capture
program with CO-OP®, the nations largest surcharge-free network for credit unions, which
allows cardholders of financial institutions that participate in the CO-OP network to make
deposits at any of our Vcom units. We are also working with a number of other financial
institutions to implement similar programs for their cardholders, one of which we
anticipate will be implemented in the fourth quarter of 2008. Additionally, we are
currently working on several opportunities with existing and new advanced functionality
partners that we believe will result in incremental revenues, additional cost savings and,
potentially, additional service offerings to consumers in future periods.
  23




---



##### Table of Contents



Financing Transactions.
 Merchant-Owned Account Attrition.
  Factors Impacting Comparability
 7-Eleven ATM Transaction.
   24




---



##### Table of Contents



Results of Operations
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:ATM operating revenues
    
    
    95.7
    %
    
    
    95.8
    %
    
    
    95.6
    %
    
    
    96.0
    %Vcom operating revenues
    
    
    1.1
    
    
    
    
    
    
    
    1.0
    
    
    
    ATM product sales and other revenues
    
    
    3.2
    
    
    
    4.2
    
    
    
    3.4
    
    
    
    4.0Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of revenues:Cost of ATM operating revenues (exclusive of
depreciation, accretion, and amortization,
shown separately below)(1)
    
    
    72.3
    
    
    
    72.9
    
    
    
    72.2
    
    
    
    73.2Cost of Vcom operating revenues
    
    
    1.4
    
    
    
    
    
    
    
    1.6
    
    
    
    Cost of ATM product sales and other revenues
    
    
    2.9
    
    
    
    4.3
    
    
    
    3.2
    
    
    
    4.0Total cost of revenues
    
    
    76.6
    
    
    
    77.2
    
    
    
    77.0
    
    
    
    77.2Gross profit
    
    
    23.4
    
    
    
    22.8
    
    
    
    23.0
    
    
    
    22.8Operating expenses:Selling, general, and administrative expenses
    
    
    7.7
    
    
    
    9.0
    
    
    
    7.4
    
    
    
    8.8Depreciation and accretion expense
    
    
    7.9
    
    
    
    6.7
    
    
    
    7.7
    
    
    
    7.6Amortization expense
    
    
    3.5
    
    
    
    3.1
    
    
    
    3.6
    
    
    
    3.2Total operating expenses
    
    
    19.2
    
    
    
    18.7
    
    
    
    18.8
    
    
    
    19.6Income from operations
    
    
    4.2
    
    
    
    4.1
    
    
    
    4.3
    
    
    
    3.2Other expense (income):Interest expense, net
    
    
    6.5
    
    
    
    8.2
    
    
    
    6.6
    
    
    
    8.3Minority interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Other
    
    
    0.8
    
    
    
    0.6
    
    
    
    0.8
    
    
    
    0.2Total other expense
    
    
    7.3
    
    
    
    8.9
    
    
    
    7.5
    
    
    
    8.5Loss before income taxes
    
    
    (3.1
    )
    
    
    (4.8
    )
    
    
    (3.2
    )
    
    
    (5.3
    )Income tax (benefit) expense
    
    
    (0.4
    )
    
    
    2.5
    
    
    
    0.0
    
    
    
    0.6Net loss
    
    
    (2.7
    )%
    
    
    (7.3
    )%
    
    
    (3.2
    )%
    
    
    (5.9
    )%
 
 (1)
    
    Excludes effects of depreciation, accretion, and
amortization expense of $13.2 million and $7.1 million for
the three month periods ended June 30, 2008 and 2007,
respectively, and $25.7 million and $15.6 million for the
six month periods ended June 30, 2008 and 2007,
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
10.4% and 9.2% for the three month periods ended June 30,
2008 and 2007, respectively, and by 10.4% and 10.3% for
the six month periods ended June 30, 2008 and 2007,
respectively.  25




---



##### Table of Contents



Key Operating Metrics
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Average number of transacting ATMs:United States: Company-owned
    
    
    12,390
    
    
    
    11,568
    
    
    
    12,262
    
    
    
    11,544United States: Merchant-owned
    
    
    10,720
    
    
    
    11,706
    
    
    
    10,855
    
    
    
    11,778United States: 7-Eleven Financial Services Business
    
    
    5,697
    
    
    
    
    
    
    
    5,684
    
    
    
    United Kingdom
    
    
    2,413
    
    
    
    1,583
    
    
    
    2,331
    
    
    
    1,502Mexico
    
    
    1,581
    
    
    
    627
    
    
    
    1,514
    
    
    
    524Total average number of transacting ATMs
    
    
    32,801
    
    
    
    25,484
    
    
    
    32,646
    
    
    
    25,348Total transactions (in thousands)
    
    
    89,788
    
    
    
    48,726
    
    
    
    172,825
    
    
    
    93,176Total cash withdrawal transactions (in thousands)
    
    
    58,710
    
    
    
    33,044
    
    
    
    112,599
    
    
    
    64,224Average monthly cash withdrawal transactions per average transacting ATM
    
    
    597
    
    
    
    432
    
    
    
    575
    
    
    
    422Per ATM per month:ATM operating revenues
    
    $
    1,235
    
    
    $
    967
    
    
    $
    1,208
    
    
    $
    957Cost of ATM operating revenues (exclusive of depreciation,
accretion, and amortization) (1)
    
    
    934
    
    
    
    737
    
    
    
    912
    
    
    
    730ATM operating gross profit (1) (2)
    
    $
    301
    
    
    $
    230
    
    
    $
    296
    
    
    $
    227ATM operating gross profit margin (exclusive of depreciation,
accretion, and amortization)
    
    
    24.4
    %
    
    
    23.8
    %
    
    
    24.5
    %
    
    
    23.7
    %ATM operating gross profit margin (inclusive of depreciation,
accretion, and amortization)
    
    
    13.5
    %
    
    
    14.2
    %
    
    
    13.6
    %
    
    
    13.0
    %
 
 (1)
    
    Excludes effects of depreciation,
accretion, and amortization expense
of $13.2 million and $7.1 million
for the three month periods ended
June 30, 2008 and 2007,
respectively, and by $25.7 million
and $15.6 million for the six month
periods ended June 30, 2008 and
2007, 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 $134 and
$93 for the three month periods
ended June 30, 2008 and 2007,
respectively, and by $131 and $103
for the six month periods ended June
30, 2008 and 2007, respectively.(2)
    
    ATM operating gross profit is a
measure of profitability that uses
only the revenue and expenses that
related to operating the ATMs. The
revenue and expenses from ATM
equipment sales, Vcom Services, and
other ATM-related services are not
included.  26




---



##### Table of Contents



Revenues
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)ATM operating revenues
    
    $
    121,505
    
    
    $
    73,964
    
    
    
    64.3
    %
    
    $
    236,567
    
    
    $
    145,620
    
    
    
    62.5
    %Vcom operating revenues
    
    
    1,363
    
    
    
    
    
    
    
    
    
    
    
    2,598
    
    
    
    
    
    
    
    ATM product sales and other revenues
    
    
    4,107
    
    
    
    3,275
    
    
    
    25.4
    %
    
    
    8,385
    
    
    
    6,137
    
    
    
    36.6
    %Total revenues
    
    $
    126,975
    
    
    $
    77,239
    
    
    
    64.4
    %
    
    $
    247,550
    
    
    $
    151,757
    
    
    
    63.1
    %
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
 ATM operating revenues.
 Variance: Three Months Ended June 30, 2008to Three Months Ended June 30, 2007U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Total(In thousands)Surcharge revenue
    
    $
    18,651
    
    
    $
    1,489
    
    
    $
    1,298
    
    
    $
    21,438Interchange revenue
    
    
    15,101
    
    
    
    2,791
    
    
    
    708
    
    
    
    18,600Branding and surcharge-free network revenue
    
    
    7,458
    
    
    
    
    
    
    
    
    
    
    
    7,458Other
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Total increase
    
    $
    41,255
    
    
    $
    4,280
    
    
    $
    2,006
    
    
    $
    47,541
 United States.
  United Kingdom.
  27




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##### Table of Contents



Mexico.
 Vcom operating revenues.
 ATM product sales and other revenues.
 Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
 ATM Operating Revenues.
 Variance: Six Months Ended June 30, 2008to Six Months Ended June 30, 2007U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Total(In thousands)Surcharge revenue
    
    $
    34,628
    
    
    $
    3,715
    
    
    $
    2,428
    
    
    $
    40,771Interchange revenue
    
    
    28,187
    
    
    
    5,260
    
    
    
    1,334
    
    
    
    34,781Branding and surcharge-free network revenue
    
    
    15,332
    
    
    
    
    
    
    
    1
    
    
    
    15,333Other
    
    
    61
    
    
    
    1
    
    
    
    
    
    
    
    62Total increase
    
    $
    78,208
    
    
    $
    8,976
    
    
    $
    3,763
    
    
    $
    90,947
  28




---



##### Table of Contents



United States.
  United Kingdom.
 Mexico.
 Vcom operating revenues.
 ATM product sales and other revenues.
 Cost of Revenues
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Cost of ATM operating revenues (exclusive
of depreciation, accretion, and
amortization)
    
    $
    91,862
    
    
    $
    56,344
    
    
    
    63.0
    %
    
    $
    178,694
    
    
    $
    111,080
    
    
    
    60.9
    %Cost of Vcom operating revenues
    
    
    1,739
    
    
    
    
    
    
    
    
    
    
    
    4,008
    
    
    
    
    
    
    
    Cost of ATM product sales and other revenues
    
    
    3,662
    
    
    
    3,288
    
    
    
    11.4
    %
    
    
    7,826
    
    
    
    6,085
    
    
    
    28.6
    %Total cost of revenues (exclusive of
depreciation, accretion, and amortization)
    
    $
    97,263
    
    
    $
    59,632
    
    
    
    63.1
    %
    
    $
    190,528
    
    
    $
    117,165
    
    
    
    62.6
    %
  29




---



##### Table of Contents



Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
 Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization).
 Variance: Three Months Ended June 30, 2008to Three Months Ended June 30, 2007U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    TotalIncrease (decrease)(In thousands)Merchant commissions
    
    $
    12,627
    
    
    $
    2,409
    
    
    $
    549
    
    
    $
    15,585Cost of cash
    
    
    6,945
    
    
    
    2,097
    
    
    
    470
    
    
    
    9,512Repairs and maintenance
    
    
    3,441
    
    
    
    (9
    )
    
    
    194
    
    
    
    3,626Direct operations
    
    
    1,974
    
    
    
    157
    
    
    
    166
    
    
    
    2,297Communications
    
    
    1,310
    
    
    
    263
    
    
    
    71
    
    
    
    1,644Charges related to EMV certification process
    
    
    
    
    
    
    972
    
    
    
    
    
    
    
    972Processing and other expenses
    
    
    1,149
    
    
    
    410
    
    
    
    323
    
    
    
    1,882Total increase in cost of ATM operating revenues
    
    $
    27,446
    
    
    $
    6,299
    
    
    $
    1,773
    
    
    $
    35,518
 United States.
  United Kingdom.
  30




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##### Table of Contents



Mexico.
 Cost of Vcom operating revenues.
 Cost of ATM product sales and other revenues. 
 Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
 Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization).
 Variance: Six Months Ended June 30, 2008to Six Months Ended June 30, 2007U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Total(In thousands)Merchant commissions
    
    $
    22,971
    
    
    $
    4,282
    
    
    $
    1,114
    
    
    $
    28,367Cost of cash
    
    
    14,586
    
    
    
    4,094
    
    
    
    910
    
    
    
    19,590Repairs and maintenance
    
    
    7,154
    
    
    
    102
    
    
    
    332
    
    
    
    7,588Direct operations
    
    
    3,758
    
    
    
    577
    
    
    
    255
    
    
    
    4,590Communications
    
    
    2,537
    
    
    
    708
    
    
    
    152
    
    
    
    3,397Charges related to EMV certification process
    
    
    
    
    
    
    972
    
    
    
    
    
    
    
    972Processing and other expenses
    
    
    1,741
    
    
    
    863
    
    
    
    506
    
    
    
    3,110Total increase in cost of ATM operating revenues
    
    $
    52,747
    
    
    $
    11,598
    
    
    $
    3,269
    
    
    $
    67,614
  31




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##### Table of Contents



United States.
  United Kingdom.
 Mexico.
 Cost of Vcom operating revenues.
 Cost of ATM product sales and other revenues.
 Gross Profit Margin
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007ATM operating gross profit margin:Exclusive of depreciation, accretion, and amortization
    
    
    24.4
    %
    
    
    23.8
    %
    
    
    24.5
    %
    
    
    23.7
    %Inclusive of depreciation, accretion, and amortization
    
    
    13.5
    %
    
    
    14.2
    %
    
    
    13.6
    %
    
    
    13.0
    %Vcom operating gross profit margin
    
    
    (27.6
    )%
    
    
    
    
    
    
    (54.3
    )%
    
    
    ATM product sales and other revenues gross profit margin
    
    
    10.8
    %
    
    
    (0.4
    )%
    
    
    6.7
    %
    
    
    0.8
    %Total gross profit margin:Exclusive of depreciation, accretion, and amortization
    
    
    23.4
    %
    
    
    22.8
    %
    
    
    23.0
    %
    
    
    22.8
    %Inclusive of depreciation, accretion, and amortization
    
    
    13.0
    %
    
    
    13.6
    %
    
    
    12.7
    %
    
    
    12.5
    %
  32




---



##### Table of Contents



ATM operating gross profit margin
  ATM product sales and other revenues gross profit margin.
 Vcom operating gross profit margin
 Selling, General, and Administrative Expenses
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Selling, general, and administrative expenses,
excluding stock-based compensation
    
    $
    9,387
    
    
    $
    6,702
    
    
    
    40.1
    %
    
    $
    17,737
    
    
    $
    12,940
    
    
    
    37.1
    %Stock-based compensation
    
    
    413
    
    
    
    218
    
    
    
    89.4
    %
    
    
    614
    
    
    
    424
    
    
    
    44.8
    %Total selling, general, and administrative expenses
    
    $
    9,800
    
    
    $
    6,920
    
    
    
    41.6
    %
    
    $
    18,351
    
    
    $
    13,364
    
    
    
    37.3
    %Percentage of total revenues:Selling, general, and administrative expenses,
excluding stock-based compensation
    
    
    7.4
    %
    
    
    8.7
    %
    
    
    
    
    
    
    7.2
    %
    
    
    8.5
    %Stock-based compensation
    
    
    0.3
    %
    
    
    0.3
    %
    
    
    
    
    
    
    0.2
    %
    
    
    0.3
    %Total selling, general, and administrative expenses
    
    
    7.7
    %
    
    
    9.0
    %
    
    
    
    
    
    
    7.4
    %
    
    
    8.8
    %
  33




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##### Table of Contents



Selling, general, and administrative expenses (SG&A expenses), excluding stock-based
compensation.
 Stock-based compensation. Note 3
  Depreciation and Accretion Expense
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Depreciation expense
    
    $
    9,608
    
    
    $
    4,937
    
    
    
    94.6
    %
    
    $
    18,295
    
    
    $
    11,109
    
    
    
    64.7
    %Accretion expense
    
    
    431
    
    
    
    245
    
    
    
    75.9
    %
    
    
    826
    
    
    
    471
    
    
    
    75.4
    %Depreciation and accretion expense
    
    $
    10,039
    
    
    $
    5,182
    
    
    
    93.7
    %
    
    $
    19,121
    
    
    $
    11,580
    
    
    
    65.1
    %Percentage of total revenues:Depreciation expense
    
    
    7.6
    %
    
    
    6.4
    %
    
    
    
    
    
    
    7.4
    %
    
    
    7.3
    %Accretion expense
    
    
    0.3
    %
    
    
    0.3
    %
    
    
    
    
    
    
    0.3
    %
    
    
    0.3
    %Total depreciation and accretion expense
    
    
    7.9
    %
    
    
    6.7
    %
    
    
    
    
    
    
    7.7
    %
    
    
    7.6
    %
 Depreciation expense.
 Accretion expense. Accounting for Asset Retirement
Obligations
   34




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##### Table of Contents



Amortization Expense
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Amortization expense
    
    $
    4,501
    
    
    $
    2,372
    
    
    
    89.8
    %
    
    $
    9,004
    
    
    $
    4,858
    
    
    
    85.3
    %Percentage of total revenues
    
    
    3.5
    %
    
    
    3.1
    %
    
    
    
    
    
    
    3.6
    %
    
    
    3.2
    %
  Interest Expense, Net
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Interest expense, net
    
    $
    7,722
    
    
    $
    6,000
    
    
    
    28.7
    %
    
    $
    15,354
    
    
    $
    11,892
    
    
    
    29.1
    %Amortization of deferred
financing costs and bond
discounts
    
    
    530
    
    
    
    360
    
    
    
    47.2
    %
    
    
    1,038
    
    
    
    716
    
    
    
    45.0
    %Total interest expense, net
    
    $
    8,252
    
    
    $
    6,360
    
    
    
    29.7
    %
    
    $
    16,392
    
    
    $
    12,608
    
    
    
    30.0
    %Percentage of total revenues
    
    
    6.5
    %
    
    
    8.2
    %
    
    
    
    
    
    
    6.6
    %
    
    
    8.3
    %
 Interest expense, net.
 Amortization of deferred financing costs and bond discounts.
 Other Expense (Income)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Minority interest
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    (112
    )
    
    
    Other expense
    
    
    1,042
    
    
    
    478
    
    
    
    118.0
    %
    
    
    2,103
    
    
    
    359
    
    
    
    485.8
    %Total other expense
    
    $
    1,042
    
    
    $
    478
    
    
    
    118.0
    %
    
    $
    2,103
    
    
    $
    247
    
    
    
    751.4
    %Percentage of total revenues
    
    
    0.8
    %
    
    
    0.6
    %
    
    
    
    
    
    
    0.8
    %
    
    
    0.2
    %
   35




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##### Table of Contents



Income Tax Expense (Benefit)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Income tax expense (benefit)
    
    $
    (540
    )
    
    $
    1,910
    
    
    
    (128.3
    )%
    
    $
    25
    
    
    $
    937
    
    
    
    (97.3
    )%Effective tax rate
    
    
    13.8
    %
    
    
    (51.6
    )%
    
    
    
    
    
    
    (0.3
    )%
    
    
    (11.6
    )%
   Liquidity and Capital Resources
 Overview
    Operating Activities
   36




---



##### Table of Contents



Investing Activities
  Anticipated Future Capital Expenditures.
  Note 8
 Financing Activities
  Financing Facilities
  Revolving credit facility.
  37




---



##### Table of Contents



Bank Machine overdraft facility.
 Cardtronics Mexico equipment financing agreements.
 Lease agreements.
 New Accounting Standards
 Adopted
 Fair Value Measurement. Fair Value Measurements,
 
    
    Defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date, and establishes a framework for measuring fair value;
 
    
    Establishes a three-level hierarchy for fair value measurements based upon the
transparency of inputs to the valuation of an asset or liability as of the measurement
date;
 
    
    Eliminates large position discounts for financial instruments quoted in active markets
and requires consideration of our creditworthiness when valuing liabilities; and
 
    
    Expands disclosures about instruments measured at fair value.
  38




---



##### Table of Contents




    
    Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities.
 
    
    Level 2 inputs are quoted prices for similar assets and liabilities in active markets
or inputs that are observable for the asset or liability, either directly or indirectly
through market corroboration, for substantially the full term of the financial instrument.
 
    
    Level 3 inputs are unobservable inputs based on assumptions used to measure assets and
liabilities at fair value.
  Note 15
 Fair Value Option. The Fair Value Option for
Financial Assets and Financial Liabilities
 Issued but Not Yet Adopted
  Business Combinations. Business Combinations
 Noncontrolling Interests. Noncontrolling
Interests in Consolidated Financial Statements  an amendment of ARB No. 51,
  39




---



##### Table of Contents



Disclosures about Derivatives and Hedging Activities Disclosures about Derivatives and Hedging Activities  an amendment of SFAS No. 133,
 Useful Life of Intangible Assets. Determination
of the Useful Life of Intangible Assets, Goodwill and Other Intangible Assets
  40




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
 Vault cash rental expense.
  Weighted AverageNotional Amount
    
    
    Fixed Rate
    
    
    Period(In thousands)$
    550,000
    
    
    
    4.61
    %
    
    July 1, 2008  December 31, 2008$
    550,000
    
    
    
    4.30
    %
    
    January 1, 2009  December 31, 2009$
    550,000
    
    
    
    4.11
    %
    
    January 1, 2010  December 31, 2010$
    400,000
    
    
    
    3.72
    %
    
    January 1, 2011  December 31, 2011$
    200,000
    
    
    
    3.96
    %
    
    January 1, 2012  December 31, 2012
  Additional Interest Incurred
    
    
    Additional Interest Incurredon 100 Basis Point Increase
    
    
    on 100 Basis Point IncreaseVault Cash Balance as of
    
    
    (Excluding Impact of
    
    
    (Including Impact ofJune 30, 2008
    
    
    Interest Rate Swaps)
    
    
    Interest Rate Swaps)(Functional currency)
    
    
    (U.S. dollars)
    
    
    (Functional currency)
    
    
    (U.S. dollars)
    
    
    (Functional currency)
    
    
    (U.S. dollars)(In millions)
    
    
    (In millions)
    
    
    (In millions)United States
    
    $
    786.4
    
    
    $
    786.4
    
    
    $
    7.9
    
    
    $
    7.9
    
    
    $
    2.4
    
    
    $
    2.4United Kingdom
    
    £
    105.6
    
    
    
    210.1
    
    
    £
    1.1
    
    
    
    2.1
    
    
    £
    1.1
    
    
    
    2.1Mexico
    
    p  $
    198.9
    
    
    
    19.3
    
    
    p  $
    2.0
    
    
    
    0.2
    
    
    p  $
    2.0
    
    
    
    0.2Total
    
    
    
    
    
    $
    1,015.8
    
    
    
    
    
    
    $
    10.2
    
    
    
    
    
    
    $
    4.7
     41




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##### Table of Contents



Interest expense.
 Outlook.
 Foreign Currency Exchange Risk
     42




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##### Table of Contents



ITEM 4T. CONTROLS AND PROCEDURES
 Managements Quarterly Evaluation of Disclosure Controls and Procedures
  Identification and Remediation of Material Weaknesses
   Changes in Internal Control over Financial Reporting
   43




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  Security breaches could harm our business by compromising customer information and disrupting
our ATM transaction processing services, thus damaging our relationships with our merchant
customers and exposing us to liability.
    44




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##### Table of Contents



The armored transport business exposes us to additional risks beyond those currently
experienced by us in the ownership and operation of ATMs.
  If not done properly, the transitioning of armored transport services from third-party service
providers to our own internal operations could lead to service interruptions, which would harm our
business and our relationships with our merchants.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Proposal No. 1:
 Number of SharesFor
    
    
    WithheldRobert P. Barone
    
    
    36,403,127
    
    
    
    11,755Jorge M. Diaz
    
    
    33,051,307
    
    
    
    3,363,575
  Proposal No. 2:
 For
    
    Against
    
    Abstain
    
    Broker Non-Votes36,393,208
    
    
    20,324
    
    
    
    1,350
    
    
    
  45




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##### Table of Contents



ITEM 6. EXHIBITS
  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, Registration No.
001-33864).3.2
    
    
    Second Amended and Restated Bylaws 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, Registration No. 001-33864).10.1
    
    
    Form of Employment Agreement (incorporated by reference to Exhibit 10.1 of
the Current Report on Form 8-K filed by Cardtronics, Inc. on June 25,
2008).10.2
    
    
    First Amendment to Employment Agreement between Cardtronics, LP,
Cardtronics, Inc., and Rick Updyke, dated effective as of June 20, 2008
(incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K
filed by Cardtronics, Inc. on June 25, 2008).10.3
    
    
    First Amendment to Amended and Restated Service Agreement between Bank
Machine Ltd. and Ron Delnevo, dated effective as of June 5, 2008
(incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K
filed by Cardtronics, Inc. on June 25, 2008).10.4
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and Jack M. Antonini
dated effective as of June 20, 2008 (incorporated herein by reference to
Exhibit 10.4 of the Current Report on Form 8-K filed by Cardtronics, Inc. on
June 25, 2008, Registration No. 001-33864). 10.5
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and J. Chris Brewster
dated effective as of June 20, 2008 (incorporated herein by reference to
Exhibit 10.5 of the Current Report on Form 8-K filed by Cardtronics, Inc. on
June 25, 2008, Registration No. 001-33864). 10.6
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and Michael H. Clinard
dated effective as of June 20, 2008 (incorporated herein by reference to
Exhibit 10.6 of the Current Report on Form 8-K filed by Cardtronics, Inc. on
June 25, 2008, Registration No. 001-33864). 10.7
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and Rick Updyke dated
effective as of June 20, 2008 (incorporated herein by reference to Exhibit
10.7 of the Current Report on Form 8-K filed by Cardtronics, Inc. on June
25, 2008, Registration No. 001-33864). 10.8
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and Ron Delnevo dated
effective as of June 20, 2008 (incorporated herein by reference to Exhibit
10.8 of the Current Report on Form 8-K filed by Cardtronics, Inc. on June
25, 2008, Registration No. 001-33864). 10.9
    
    
    Cardtronics, Inc.s 2008 Executive Performance Bonus Plan (incorporated
herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed
by Cardtronics, Inc. on May 1, 2008, Registration 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.
 
    
    Indicates management contract or compensatory plan or arrangement.  46




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##### Table of Contents



SIGNATURES
  CARDTRONICS, INC.August 14, 2008
    /s/ Jack AntoniniJack AntoniniChief Executive Officer
(Duly Authorized Officer and
Principal Executive Officer)August 14, 2008
    /s/ J. Chris BrewsterJ. Chris BrewsterChief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)  47




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##### Table of Contents



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, Registration No.
001-33864).3.2
    
    
    Second Amended and Restated Bylaws 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, Registration No. 001-33864).10.1
    
    
    Form of Employment Agreement (incorporated by reference to Exhibit 10.1 of
the Current Report on Form 8-K filed by Cardtronics, Inc. on June 25,
2008).10.2
    
    
    First Amendment to Employment Agreement between Cardtronics, LP,
Cardtronics, Inc., and Rick Updyke, dated effective as of June 20, 2008
(incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K
filed by Cardtronics, Inc. on June 25, 2008).10.3
    
    
    First Amendment to Amended and Restated Service Agreement between Bank
Machine Ltd. and Ron Delnevo, dated effective as of June 5, 2008
(incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K
filed by Cardtronics, Inc. on June 25, 2008).10.4
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and Jack M. Antonini
dated effective as of June 20, 2008 (incorporated herein by reference to
Exhibit 10.4 of the Current Report on Form 8-K filed by Cardtronics, Inc. on
June 25, 2008, Registration No. 001-33864). 10.5
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and J. Chris Brewster
dated effective as of June 20, 2008 (incorporated herein by reference to
Exhibit 10.5 of the Current Report on Form 8-K filed by Cardtronics, Inc. on
June 25, 2008, Registration No. 001-33864). 10.6
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and Michael H. Clinard
dated effective as of June 20, 2008 (incorporated herein by reference to
Exhibit 10.6 of the Current Report on Form 8-K filed by Cardtronics, Inc. on
June 25, 2008, Registration No. 001-33864). 10.7
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and Rick Updyke dated
effective as of June 20, 2008 (incorporated herein by reference to Exhibit
10.7 of the Current Report on Form 8-K filed by Cardtronics, Inc. on June
25, 2008, Registration No. 001-33864). 10.8
    
    
    Restricted Stock Agreement between Cardtronics, Inc. and Ron Delnevo dated
effective as of June 20, 2008 (incorporated herein by reference to Exhibit
10.8 of the Current Report on Form 8-K filed by Cardtronics, Inc. on June
25, 2008, Registration No. 001-33864). 10.9
    
    
    Cardtronics, Inc.s 2008 Executive Performance Bonus Plan (incorporated
herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed
by Cardtronics, Inc. on May 1, 2008, Registration 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.
 
    
    Indicates management contract or compensatory plan or arrangement.  48