##### 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 September 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
    
    77082Houston, TX
    
    (Zip Code)(Address of principal executive offices)
 (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




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##### 



CARDTRONICS, INC.
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    1Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007
    
    
    1Consolidated Statements of Operations for the Three and Nine Months Ended September 30,
2008 and 2007
    
    
    2Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2007
    
    
    3Notes to Consolidated Financial Statements
    
    
    4Cautionary Statement Regarding Forward-Looking Statements
    
    
    24Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 4T. Controls and Procedures
    
    
    46PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    47Item 1A. Risk Factors
    
    
    47Item 6. Exhibits
    
    
    51Signatures
    
    
    52Exhibit 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)
 September 30, 2008
    
    
    December 31, 2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,205
    
    
    $
    13,439Accounts and notes receivable, net of allowance of $431 and $560 as of
September 30, 2008 and December 31, 2007, respectively
    
    
    26,098
    
    
    
    23,248Inventory
    
    
    2,425
    
    
    
    2,355Restricted cash, short-term
    
    
    2,958
    
    
    
    5,900Deferred tax asset, net
    
    
    195
    
    
    
    216Prepaid expenses, deferred costs, and other current assets
    
    
    16,218
    
    
    
    11,627Total current assets
    
    
    49,099
    
    
    
    56,785Restricted cash
    
    
    324
    
    
    
    317Property and equipment, net
    
    
    170,477
    
    
    
    163,912Intangible assets, net
    
    
    116,125
    
    
    
    130,901Goodwill
    
    
    227,139
    
    
    
    235,185Prepaid expenses and other assets
    
    
    4,583
    
    
    
    4,185Total assets
    
    $
    567,747
    
    
    $
    591,285LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    1,512
    
    
    $
    882Current portion of capital lease obligations
    
    
    818
    
    
    
    1,147Current portion of other long-term liabilities
    
    
    18,170
    
    
    
    16,201Accounts payable
    
    
    24,981
    
    
    
    34,385Accrued liabilities
    
    
    51,026
    
    
    
    70,524Total current liabilities
    
    
    96,507
    
    
    
    123,139Long-term liabilities:Long-term debt, net of current portion and related discounts
    
    
    341,985
    
    
    
    307,733Capital lease obligations, net of current portion
    
    
    411
    
    
    
    982Deferred tax liability, net
    
    
    11,740
    
    
    
    11,480Asset retirement obligations
    
    
    19,103
    
    
    
    17,448Other long-term liabilities
    
    
    14,950
    
    
    
    23,392Total liabilities
    
    
    484,696
    
    
    
    484,174Commitments and contingenciesStockholders equity:Common stock, $0.0001 par value; 125,000,000 shares authorized;
45,633,582 and 43,571,956 shares issued as of September 30, 2008 and
December 31, 2007, respectively; 40,627,833 and 38,566,207 shares
outstanding as of September 30, 2008 and December 31, 2007, respectively
    
    
    4
    
    
    
    4Subscriptions receivable (at face value)
    
    
    (128
    )
    
    
    (229
    )Additional paid-in capital
    
    
    192,755
    
    
    
    190,508Accumulated other comprehensive loss, net
    
    
    (18,779
    )
    
    
    (4,518
    )Accumulated deficit
    
    
    (42,580
    )
    
    
    (30,433
    )Treasury stock; 5,005,749 shares at cost
    
    
    (48,221
    )
    
    
    (48,221
    )Total stockholders equity
    
    
    83,051
    
    
    
    107,111Total liabilities and stockholders equity
    
    $
    567,747
    
    
    $
    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 September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:ATM operating revenues
    
    $
    121,192
    
    
    $
    106,234
    
    
    $
    357,759
    
    
    $
    251,854Vcom operating revenues
    
    
    1,416
    
    
    
    685
    
    
    
    4,014
    
    
    
    685ATM product sales and other revenues
    
    
    4,651
    
    
    
    3,668
    
    
    
    13,036
    
    
    
    9,805Total revenues
    
    
    127,259
    
    
    
    110,587
    
    
    
    374,809
    
    
    
    262,344Cost of revenues:Cost of ATM operating revenues (excludes
depreciation, accretion, and amortization
shown separately below. See Note 1)
    
    
    91,434
    
    
    
    79,966
    
    
    
    270,128
    
    
    
    191,046Cost of Vcom operating revenues
    
    
    1,469
    
    
    
    2,644
    
    
    
    5,477
    
    
    
    2,644Cost of ATM product sales and other revenues
    
    
    4,064
    
    
    
    3,111
    
    
    
    11,890
    
    
    
    9,196Total cost of revenues
    
    
    96,967
    
    
    
    85,721
    
    
    
    287,495
    
    
    
    202,886Gross profit
    
    
    30,292
    
    
    
    24,866
    
    
    
    87,314
    
    
    
    59,458Operating expenses:Selling, general, and administrative expenses
    
    
    10,387
    
    
    
    7,621
    
    
    
    28,738
    
    
    
    20,985Depreciation and accretion expense
    
    
    10,048
    
    
    
    6,961
    
    
    
    29,169
    
    
    
    18,541Amortization expense
    
    
    4,657
    
    
    
    9,204
    
    
    
    13,661
    
    
    
    14,062Total operating expenses
    
    
    25,092
    
    
    
    23,786
    
    
    
    71,568
    
    
    
    53,588Income from operations
    
    
    5,200
    
    
    
    1,080
    
    
    
    15,746
    
    
    
    5,870Other expense (income):Interest expense, net
    
    
    7,913
    
    
    
    8,545
    
    
    
    23,267
    
    
    
    20,437Amortization of deferred financing costs and
bond discounts
    
    
    531
    
    
    
    439
    
    
    
    1,569
    
    
    
    1,155Minority interest in subsidiary
    
    
    (814
    )
    
    
    (174
    )
    
    
    (814
    )
    
    
    (286
    )Other
    
    
    1,274
    
    
    
    678
    
    
    
    3,377
    
    
    
    1,037Total other expense
    
    
    8,904
    
    
    
    9,488
    
    
    
    27,399
    
    
    
    22,343Loss before income taxes
    
    
    (3,704
    )
    
    
    (8,408
    )
    
    
    (11,653
    )
    
    
    (16,473
    )Income tax expense
    
    
    469
    
    
    
    2,275
    
    
    
    494
    
    
    
    3,212Net loss
    
    
    (4,173
    )
    
    
    (10,683
    )
    
    
    (12,147
    )
    
    
    (19,685
    )Preferred stock accretion expense
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    200Net loss available to common stockholders
    
    $
    (4,173
    )
    
    $
    (10,750
    )
    
    $
    (12,147
    )
    
    $
    (19,885
    )Net loss per common share  basic and diluted
    
    $
    (0.11
    )
    
    $
    (0.77
    )
    
    $
    (0.31
    )
    
    $
    (1.42
    )Weighted average shares outstanding  basic
and diluted
    
    
    38,920,887
    
    
    
    14,026,960
    
    
    
    38,749,233
    
    
    
    14,006,822
 See accompanying notes to consolidated financial statements.
  2




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CARDTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Nine Months Ended September 30,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (12,147
    )
    
    $
    (19,685
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation, accretion, and amortization expense
    
    
    42,830
    
    
    
    32,603Amortization of deferred financing costs and bond discounts
    
    
    1,569
    
    
    
    1,155Stock-based compensation expense
    
    
    2,167
    
    
    
    768Deferred income taxes
    
    
    388
    
    
    
    3,053Gain on sale of Winn-Dixie equity securities
    
    
    
    
    
    
    (569
    )Minority interest
    
    
    (814
    )
    
    
    (286
    )Loss on disposal of assets
    
    
    3,350
    
    
    
    1,672Other reserves and non-cash items
    
    
    (5,481
    )
    
    
    (840
    )Changes in assets and liabilities, net of acquisitions:Increase in accounts and notes receivable, net
    
    
    (3,378
    )
    
    
    (1,607
    )(Increase) decrease in prepaid, deferred costs, and other current assets
    
    
    (4,096
    )
    
    
    2,855Decrease in inventory
    
    
    362
    
    
    
    3,231(Increase) decrease in other assets
    
    
    674
    
    
    
    (5,193
    )Increase (decrease) in accounts payable and accrued liabilities
    
    
    (10,927
    )
    
    
    19,393Decrease in other liabilities
    
    
    (2,724
    )
    
    
    (1,010
    )Net cash provided by operating activities
    
    
    11,773
    
    
    
    35,540Cash flows from investing activities:Additions to property and equipment
    
    
    (53,585
    )
    
    
    (43,957
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    3Payments for exclusive license agreements and site acquisition costs
    
    
    (895
    )
    
    
    (1,381
    )Additions to equipment to be leased to customers
    
    
    
    
    
    
    (412
    )Principal payments received under direct financing leases
    
    
    17
    
    
    
    22Acquisition, net of cash acquired
    
    
    (350
    )
    
    
    (137,694
    )Proceeds from sale of Winn-Dixie equity securities
    
    
    
    
    
    
    3,950Net cash used in investing activities
    
    
    (54,813
    )
    
    
    (179,469
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    103,336
    
    
    
    170,264Repayments of long-term debt and capital leases
    
    
    (69,753
    )
    
    
    (22,363
    )Repayments of borrowings under bank overdraft facility, net
    
    
    (2,961
    )
    
    
    54Payments received on subscriptions receivable
    
    
    101
    
    
    
    Proceeds from exercises of stock options
    
    
    362
    
    
    
    46Minority interest stockholder capital contribution
    
    
    1,662
    
    
    
    174Equity offering costs
    
    
    (1,489
    )
    
    
    (150
    )Debt issuance and modification costs
    
    
    (195
    )
    
    
    (677
    )Net cash provided by financing activities
    
    
    31,063
    
    
    
    147,348Effect of exchange rate changes on cash
    
    
    (257
    )
    
    
    (19
    )Net increase (decrease) in cash and cash equivalents
    
    
    (12,234
    )
    
    
    3,400Cash and cash equivalents at beginning of period
    
    
    13,439
    
    
    
    2,718Cash and cash equivalents at end of period
    
    $
    1,205
    
    
    $
    6,118Supplemental disclosure of cash flow information:Cash paid for interest, including interest on capital leases
    
    $
    31,025
    
    
    $
    22,872Cash paid for income taxes
    
    
    220
    
    
    
    27Fixed assets financed with direct debt
    
    
    
    
    
    
    3,125
 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
   Note 10
   4




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Cost of ATM Operating Revenues and Gross Profit Presentation
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Depreciation and
accretion expenses
related to ATMs and
ATM-related assets
    
    $
    8,719
    
    
    $
    6,479
    
    
    $
    25,415
    
    
    $
    17,257Amortization expense
    
    
    4,657
    
    
    
    9,204
    
    
    
    13,661
    
    
    
    14,062Total depreciation,
accretion, and
amortization
expenses excluded
from cost of ATM
operating revenues
and gross profit
    
    $
    13,376
    
    
    $
    15,683
    
    
    $
    39,076
    
    
    $
    31,319
 (2) Acquisitions
 Acquisition of 7-Eleven Financial Services Business.
 Business Combinations
 Pro Forma Results of Operations. Note 8
 Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30, 2007
    
    
    September 30, 2007(In thousands, excluding per share amounts)Revenues
    
    $
    118,514
    
    
    $
    349,854Income from operations
    
    
    867
    
    
    
    10,953Net loss
    
    
    (12,295
    )
    
    
    (22,249
    )Net loss available to common stockholders
    
    
    (12,362
    )
    
    
    (22,449
    )Net loss per share  basic and diluted
    
    $
    (0.88
    )
    
    $
    (1.60
    )
   5




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##### Table of Contents



Acquisition of Deposit Solutions, Inc.
 (3) Stock-Based Compensation
 Share-Based Payment,
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Cost of ATM operating revenues
    
    $
    227
    
    
    $
    16
    
    
    $
    424
    
    
    $
    47Selling, general, and administrative expenses
    
    
    1,129
    
    
    
    297
    
    
    
    1,743
    
    
    
    721Total stock-based compensation expense
    
    $
    1,356
    
    
    $
    313
    
    
    $
    2,167
    
    
    $
    768
  Restricted Shares.
 Numberof SharesRestricted shares outstanding as of January 1, 2008
    
    
    Granted
    
    
    1,670,250Vested
    
    
    (3,500
    )Restricted shares outstanding as of September 30, 2008
    
    
    1,666,750
   6




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##### Table of Contents



Options.
 WeightedNumber
    
    
    Averageof Shares
    
    
    Exercise PriceOptions outstanding as of January 1, 2008
    
    
    4,960,041
    
    
    $
    7.78Granted
    
    
    228,000
    
    
    $
    8.57Exercised
    
    
    (391,376
    )
    
    $
    0.92Forfeited
    
    
    (130,156
    )
    
    $
    11.22Cancelled
    
    
    (406,367
    )
    
    $
    11.40Options outstanding as of September 30, 2008
    
    
    4,260,142
    
    
    $
    8.00Options vested and exercisable as of September 30, 2008
    
    
    2,935,251
    
    
    $
    6.66
  (4) Earnings per Share
 Earnings per
Share
 (5) Comprehensive Income (Loss)
 Reporting Comprehensive Income
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Net loss
    
    $
    (4,173
    )
    
    $
    (10,683
    )
    
    $
    (12,147
    )
    
    $
    (19,685
    )Unrealized gains (losses) on interest rate hedges
    
    
    (4,314
    )
    
    
    (7,155
    )
    
    
    642
    
    
    
    (6,961
    )Foreign currency translation adjustments
    
    
    (13,657
    )
    
    
    1,878
    
    
    
    (14,903
    )
    
    
    4,378Reclassifications of unrealized gains on
available-for-sale securities, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (498
    )Total comprehensive loss
    
    $
    (22,144
    )
    
    $
    (15,960
    )
    
    $
    (26,408
    )
    
    $
    (22,766
    )
   7




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##### Table of Contents



September 30, 2008
    
    
    December 31, 2007(In thousands)Unrealized losses on interest rate hedges
    
    $
    (13,002
    )
    
    $
    (13,644
    )Foreign currency translation adjustments
    
    
    (5,777
    )
    
    
    9,126Total accumulated other comprehensive loss
    
    $
    (18,779
    )
    
    $
    (4,518
    )
  (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
    
    
    
    
    
    
    (8,052
    )
    
    
    
    
    
    
    
    
    
    
    (395
    )
    
    
    (8,447
    )Balance as of September 30, 2008
    
    $
    150,451
    
    
    $
    75,998
    
    
    $
    690
    
    
    $
    200
    
    
    $
    3,620
    
    
    $
    230,959
 Intangible Assets with Definite Lives
  Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount(In thousands)Customer and branding contracts/relationships
    
    $
    162,327
    
    
    $
    (62,154
    )
    
    $
    100,173Deferred financing costs
    
    
    14,080
    
    
    
    (5,422
    )
    
    
    8,658Exclusive license agreements
    
    
    5,420
    
    
    
    (2,322
    )
    
    
    3,098Non-compete agreements
    
    
    448
    
    
    
    (72
    )
    
    
    376Total
    
    $
    182,275
    
    
    $
    (69,970
    )
    
    $
    112,305
  8




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##### Table of Contents



(7) Accrued Liabilities
  September 30, 2008
    
    
    December 31, 2007(In thousands)Accrued merchant fees
    
    $
    10,511
    
    
    $
    9,933Accrued armored fees
    
    
    6,771
    
    
    
    5,879Accrued cash management fees
    
    
    4,766
    
    
    
    5,574Accrued maintenance fees
    
    
    4,617
    
    
    
    6,970Accrued merchant settlement amounts
    
    
    4,018
    
    
    
    5,807Accrued interest
    
    
    3,742
    
    
    
    11,257Accrued compensation
    
    
    3,109
    
    
    
    3,832Accrued processing costs
    
    
    1,584
    
    
    
    1,477Accrued purchases
    
    
    1,497
    
    
    
    6,098Accrued ATM telecommunications costs
    
    
    1,495
    
    
    
    1,424Accrued property and sales taxes
    
    
    1,283
    
    
    
    446Accrued interest rate swap payments
    
    
    1,014
    
    
    
    147Other accrued expenses
    
    
    6,619
    
    
    
    11,680Total
    
    $
    51,026
    
    
    $
    70,524
 Note 8
 (8) Long-Term Debt
  September 30, 2008
    
    
    December 31, 2007(In thousands)Revolving credit facility
    
    $
    39,100
    
    
    $
    4,000Senior subordinated notes due
August 2013 (net of unamortized
discounts of $3.5 million as of
September 30, 2008 and $3.9
million as of December 31, 2007)
    
    
    296,494
    
    
    
    296,088Other
    
    
    7,903
    
    
    
    8,527Total
    
    
    343,497
    
    
    
    308,615Less current portion
    
    
    1,512
    
    
    
    882Total excluding current portion
    
    $
    341,985
    
    
    $
    307,733
 Revolving Credit Facility
   9




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##### Table of Contents



Senior Subordinated Notes
   Other
  (9) Asset Retirement Obligations
 Asset
Retirement Obligations.
 (in thousands)
 Asset retirement obligation as of January 1, 2008
    
    $
    17,448Additional obligations
    
    
    3,694Accretion expense
    
    
    1,233Payments
    
    
    (2,538
    )Change in estimates
    
    
    (265
    )Foreign currency translation adjustments
    
    
    (469
    )Asset retirement obligation as of September 30, 2008
    
    $
    19,103
   10




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##### Table of Contents



(10) Other Liabilities
  September 30, 2008
    
    
    December 31, 2007(In thousands)Current Portion of Other Long-Term Liabilities:Obligations associated with acquired unfavorable contracts
    
    $
    7,990
    
    
    $
    8,158Interest rate swaps
    
    
    6,888
    
    
    
    4,489Deferred revenue
    
    
    1,674
    
    
    
    1,789Other
    
    
    1,618
    
    
    
    1,765Total
    
    $
    18,170
    
    
    $
    16,201Other Long-Term Liabilities:Interest rate swaps
    
    $
    6,384
    
    
    $
    9,155Obligations associated with acquired unfavorable contracts
    
    
    1,636
    
    
    
    7,626Deferred revenue
    
    
    3,539
    
    
    
    3,380Minority interest
    
    
    848
    
    
    
    Other long-term liabilities
    
    
    2,543
    
    
    
    3,231Total
    
    $
    14,950
    
    
    $
    23,392
  Minority Interest Liability.
 (11) Commitments and Contingencies
 Legal and Other Regulatory Matters
   11




---



##### Table of Contents



Capital and Operating Leases
 Capital Lease Obligations.
 Operating Lease Obligations.
  12




---



##### Table of Contents



Related Letters of Credit.
 Other Commitments
 Asset Retirement Obligations. Note 9
 (12) Derivative Financial Instruments
   Weighted AverageNotional Amount
    
    
    Fixed Rate
    
    
    Period(In thousands)$
    550,000
    
    
    
    4.61
    %
    
    October 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




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##### Table of Contents



(13) Income Taxes
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)
    
    
    (In thousands)Income tax expense
    
    $
    469
    
    
    $
    2,275
    
    
    $
    494
    
    
    $
    3,212Effective tax rate
    
    
    (12.7
    )%
    
    
    (27.1
    )%
    
    
    (4.2
    )%
    
    
    (19.5
    )%
   (14) Segment Information
   14




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)
    
    
    (In thousands)EBITDA
    
    $
    19,445
    
    
    $
    16,741
    
    
    $
    56,013
    
    
    $
    37,722Depreciation and accretion expense
    
    
    10,048
    
    
    
    6,961
    
    
    
    29,169
    
    
    
    18,541Amortization expense
    
    
    4,657
    
    
    
    9,204
    
    
    
    13,661
    
    
    
    14,062Interest expense, net, including
amortization of deferred
financing costs and bond
discounts
    
    
    8,444
    
    
    
    8,984
    
    
    
    24,836
    
    
    
    21,592Income tax expense
    
    
    469
    
    
    
    2,275
    
    
    
    494
    
    
    
    3,212Net loss
    
    $
    (4,173
    )
    
    $
    (10,683
    )
    
    $
    (12,147
    )
    
    $
    (19,685
    )
  For the Three Months Ended September 30, 2008United
    
    

    United
    
    
    
    
    

    AdvancedStates
    
    
    Kingdom

    
    Mexico
    
    
    Functionality
    
    
    Eliminations

    
    Total(In thousands)Revenue from external customers
    
    $
    101,068
    
    
    $
    20,132
    
    
    $
    4,643
    
    
    $
    1,416
    
    
    $
    
    
    
    $
    127,259Intersegment revenues
    
    
    536
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (536
    )
    
    
    Cost of revenues
    
    
    75,665
    
    
    
    16,396
    
    
    
    3,824
    
    
    
    1,618
    
    
    
    (536
    )
    
    
    96,967Selling, general, and administrative expenses
    
    
    8,788
    
    
    
    1,204
    
    
    
    270
    
    
    
    125
    
    
    
    
    
    
    
    10,387EBITDA
    
    
    16,984
    
    
    
    1,577
    
    
    
    397
    
    
    
    (327
    )
    
    
    814
    
    
    
    19,445Depreciation and accretion expense
    
    
    6,521
    
    
    
    3,062
    
    
    
    471
    
    
    
    
    
    
    
    (6
    )
    
    
    10,048Amortization expense
    
    
    4,112
    
    
    
    532
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    4,657Interest expense, net
    
    
    6,786
    
    
    
    1,448
    
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    8,444Capital expenditures, excluding
acquisitions (2)(3)
    
    
    3,106
    
    
    
    6,071
    
    
    
    1,585
    
    
    
    131
    
    
    
    
    
    
    
    10,893For the Three Months Ended September 30, 2007United
    
    

    United
    
    
    
    
    

    AdvancedStates (1)
    
    
    Kingdom
    
    
    Mexico
    
    
    Functionality (1)
    
    
    Eliminations
    
    
    Total(In thousands)Revenue from external customers
    
    $
    91,259
    
    
    $
    17,192
    
    
    $
    1,451
    
    
    $
    685
    
    
    $
    
    
    
    $
    110,587Cost of revenues
    
    
    69,586
    
    
    
    12,339
    
    
    
    1,152
    
    
    
    2,644
    
    
    
    
    
    
    
    85,721Selling, general, and administrative expenses
    
    
    6,091
    
    
    
    1,116
    
    
    
    344
    
    
    
    121
    
    
    
    (51
    )
    
    
    7,621EBITDA
    
    
    15,036
    
    
    
    3,611
    
    
    
    (50
    )
    
    
    (2,080
    )
    
    
    224
    
    
    
    16,741Depreciation and accretion expense
    
    
    4,862
    
    
    
    1,997
    
    
    
    93
    
    
    
    
    
    
    
    9
    
    
    
    6,961Amortization expense
    
    
    8,743
    
    
    
    449
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    9,204Interest expense, net
    
    
    7,778
    
    
    
    1,124
    
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    8,984Capital expenditures, excluding
acquisitions (2)(3)
    
    
    9,685
    
    
    
    9,833
    
    
    
    865
    
    
    
    226
    
    
    
    
    
    
    
    20,609Additions to equipment to be leased to customers
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )
  15




---



##### Table of Contents



For the Nine Months Ended September 30, 2008United

    
    
    United
    
    
    
    
    
    
    AdvancedStates
    
    
    Kingdom
    
    
    Mexico
    
    
    Functionality
    
    
    Eliminations
    
    
    Total(In thousands)Revenue from external customers
    
    $
    302,874
    
    
    $
    57,473
    
    
    $
    10,448
    
    
    $
    4,014
    
    
    $
    
    
    
    $
    374,809Intersegment revenues
    
    
    1,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,256
    )
    
    
    Cost of revenues
    
    
    225,685
    
    
    
    48,329
    (4)
    
    
    8,756
    
    
    
    5,981
    
    
    
    (1,256
    )
    
    
    287,495Selling, general, and administrative expenses
    
    
    23,908
    
    
    
    3,670
    
    
    
    845
    
    
    
    315
    
    
    
    
    
    
    
    28,738EBITDA
    
    
    53,249
    
    
    
    3,659
    (4)
    
    
    573
    
    
    
    (2,282
    )
    
    
    814
    
    
    
    56,013Depreciation and accretion expense
    
    
    19,217
    
    
    
    8,799
    
    
    
    1,186
    
    
    
    
    
    
    
    (33
    )
    
    
    29,169Amortization expense
    
    
    12,017
    
    
    
    1,606
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    13,661Interest expense, net
    
    
    19,896
    
    
    
    4,336
    
    
    
    604
    
    
    
    
    
    
    
    
    
    
    
    24,836Capital expenditures, excluding acquisitions (2) (3)
    
    
    24,824
    
    
    
    24,937
    
    
    
    4,348
    
    
    
    371
    
    
    
    
    
    
    
    54,480For the Nine Months Ended September 30, 2007United
    
    
    United
    
    
    
    
    
    
    AdvancedStates (1)
    
    
    Kingdom
    
    
    Mexico
    
    
    Functionality (1)
    
    
    Eliminations
    
    
    Total(In thousands)Revenue from external customers
    
    $
    213,186
    
    
    $
    45,533
    
    
    $
    2,940
    
    
    $
    685
    
    
    $
    
    
    
    $
    262,344Intersegment revenues
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (82
    )
    
    
    Cost of revenues
    
    
    165,188
    
    
    
    32,650
    (4)
    
    
    2,454
    
    
    
    2,644
    
    
    
    (50
    )
    
    
    202,886Selling, general, and administrative expenses
    
    
    16,735
    
    
    
    3,152
    
    
    
    961
    
    
    
    121
    
    
    
    16
    
    
    
    20,985EBITDA
    
    
    30,773
    
    
    
    9,394
    (4)
    
    
    (491
    )
    
    
    (2,080
    )
    
    
    126
    
    
    
    37,722Depreciation and accretion expense
    
    
    13,392
    
    
    
    5,007
    
    
    
    162
    
    
    
    
    
    
    
    (20
    )
    
    
    18,541Amortization expense
    
    
    12,747
    
    
    
    1,278
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    14,062Interest expense, net
    
    
    18,262
    
    
    
    3,156
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    21,592Capital expenditures,
excluding acquisitions (2) (3)
    
    
    21,795
    
    
    
    21,058
    
    
    
    2,259
    
    
    
    226
    
    
    
    
    
    
    
    45,338Additions to equipment to be leased to customers
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    
    
    
    
    
    
    
    
    412
 
 (1)
    
    The Company consummated the 7-Eleven ATM Transaction on July 20, 2007. As a result, the Companys results of
operations for the three and nine months ended September 30, 2007 only include the acquired operations for 70
days. The acquired ATM operations are included in the United States segment results, and the acquired Vcom
operations are included in the Advanced Functionality segment results.(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.(4)
    
    During the second quarter of 2008, the Company experienced a significant increase in transactions conducted
on its ATMs in the United Kingdom with counterfeit credit cards. Due to a delay in the completion of its
Europay MasterCard Visa (EMV) security standard certification with the network whose brand was on those
cards, the Company was liable under the networks rules for the resulting claims, which the Company now
estimates could total $1.2 million. As a result, cost of revenues and EBITDA were negatively impacted by the
$1.2 million charge during the nine month period ended September 30, 2008. Additionally, a similar charge in
the amount of $0.4 million was incurred during the second quarter of 2007, which negatively impacted the
United Kingdom segments costs of revenues and EBITDA for the nine month period ended September 30, 2007.
However, during the third quarter of 2008, the Company successfully achieved EMV certification with this
particular network, and thus, it does not expect to incur additional charges related to this issue in the
future. Identifiable Assets:
 September 30, 2008
    
    
    December 31, 2007(In thousands)United States
    
    $
    386,000
    
    
    $
    409,120United Kingdom
    
    
    156,570
    
    
    
    163,464Mexico
    
    
    14,585
    
    
    
    12,337Advanced Functionality
    
    
    10,592
    
    
    
    6,364Total
    
    $
    567,747
    
    
    $
    591,285
  16




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##### Table of Contents



(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.
  
    
    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.
  Application of FASB
Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair
Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 Effective Date of FASB Statement No. 157 Accounting for Leases
   17




---



##### Table of Contents



Fair Value MeasurementsTotal CarryingValue
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Interest rate swaps
    
    $
    13,002
    
    
    $
    
    
    
    $
    13,002
    
    
    $
    
  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.
  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
  18




---



##### 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
 (16)
Supplemental Guarantor Financial Information
  Condensed Consolidating Statements of Operations
 Three Months Ended September 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    102,870
    
    
    $
    24,775
    
    
    $
    (386
    )
    
    $
    127,259Operating costs and expenses
    
    
    1,451
    
    
    
    95,228
    
    
    
    25,772
    
    
    
    (392
    )
    
    
    122,059Operating (loss) income
    
    
    (1,451
    )
    
    
    7,642
    
    
    
    (997
    )
    
    
    6
    
    
    
    5,200Interest expense, net, including
amortization of deferred
financing costs and bond
discounts
    
    
    236
    
    
    
    6,550
    
    
    
    1,658
    
    
    
    
    
    
    
    8,444Equity in losses of subsidiaries
    
    
    2,414
    
    
    
    
    
    
    
    
    
    
    
    (2,414
    )
    
    
    Other (income) expense, net
    
    
    (116
    )
    
    
    283
    
    
    
    1,107
    
    
    
    (814
    )
    
    
    460(Loss) income before income taxes
    
    
    (3,985
    )
    
    
    809
    
    
    
    (3,762
    )
    
    
    3,234
    
    
    
    (3,704
    )Income tax expense (benefit)
    
    
    1,008
    
    
    
    (30
    )
    
    
    (509
    )
    
    
    
    
    
    
    469Net (loss) income available to
common stockholders
    
    $
    (4,993
    )
    
    $
    839
    
    
    $
    (3,253
    )
    
    $
    3,234
    
    
    $
    (4,173
    )
  19




---



##### Table of Contents



Condensed Consolidating Statements of Operations  Continued
 Three Months Ended September 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    91,944
    
    
    $
    18,643
    
    
    $
    
    
    
    $
    110,587Operating costs and expenses
    
    
    320
    
    
    
    91,727
    
    
    
    17,502
    
    
    
    (42
    )
    
    
    109,507Operating (loss) income
    
    
    (320
    )
    
    
    217
    
    
    
    1,141
    
    
    
    42
    
    
    
    1,080Interest expense, net, including
amortization of deferred
financing costs and bond
discounts
    
    
    2,142
    
    
    
    5,636
    
    
    
    1,206
    
    
    
    
    
    
    
    8,984Equity in losses of subsidiaries
    
    
    6,005
    
    
    
    
    
    
    
    
    
    
    
    (6,005
    )
    
    
    Other (income) expense, net
    
    
    
    
    
    
    547
    
    
    
    131
    
    
    
    (174
    )
    
    
    504Loss before income taxes
    
    
    (8,467
    )
    
    
    (5,966
    )
    
    
    (196
    )
    
    
    6,221
    
    
    
    (8,408
    )Income tax expense (benefit)
    
    
    2,432
    
    
    
    53
    
    
    
    (210
    )
    
    
    
    
    
    
    2,275Net (loss) income
    
    
    (10,899
    )
    
    
    (6,019
    )
    
    
    14
    
    
    
    6,221
    
    
    
    (10,683
    )Preferred stock accretion expense
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67Net (loss) income available to
common stockholders
    
    $
    (10,966
    )
    
    $
    (6,019
    )
    
    $
    14
    
    
    $
    6,221
    
    
    $
    (10,750
    )
 Nine Months Ended September 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    307,639
    
    
    $
    67,921
    
    
    $
    (751
    )
    
    $
    374,809Operating costs and expenses
    
    
    2,141
    
    
    
    284,477
    
    
    
    73,229
    
    
    
    (784
    )
    
    
    359,063Operating (loss) income
    
    
    (2,141
    )
    
    
    23,162
    
    
    
    (5,308
    )
    
    
    33
    
    
    
    15,746Interest expense, net
    
    
    319
    
    
    
    19,577
    
    
    
    4,940
    
    
    
    
    
    
    
    24,836Equity in losses of subsidiaries
    
    
    7,798
    
    
    
    
    
    
    
    
    
    
    
    (7,798
    )
    
    
    Other (income) expense, net
    
    
    (288
    )
    
    
    1,576
    
    
    
    2,089
    
    
    
    (814
    )
    
    
    2,563(Loss) income before income taxes
    
    
    (9,970
    )
    
    
    2,009
    
    
    
    (12,337
    )
    
    
    8,645
    
    
    
    (11,653
    )Income tax expense (benefit)
    
    
    3,024
    
    
    
    106
    
    
    
    (2,636
    )
    
    
    
    
    
    
    494Net (loss) income available to
common stockholders
    
    $
    (12,994
    )
    
    $
    1,903
    
    
    $
    (9,701
    )
    
    $
    8,645
    
    
    $
    (12,147
    )
 Nine Months Ended September 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    213,953
    
    
    $
    48,473
    
    
    $
    (82
    )
    
    $
    262,344Operating costs and expenses
    
    
    909
    
    
    
    209,918
    
    
    
    45,701
    
    
    
    (54
    )
    
    
    256,474Operating (loss) income
    
    
    (909
    )
    
    
    4,035
    
    
    
    2,772
    
    
    
    (28
    )
    
    
    5,870Interest expense, net
    
    
    6,502
    
    
    
    11,760
    
    
    
    3,330
    
    
    
    
    
    
    
    21,592Equity in losses of subsidiaries
    
    
    9,240
    
    
    
    
    
    
    
    
    
    
    
    (9,240
    )
    
    
    Other (income) expense, net
    
    
    (112
    )
    
    
    684
    
    
    
    353
    
    
    
    (174
    )
    
    
    751Loss before income taxes
    
    
    (16,539
    )
    
    
    (8,409
    )
    
    
    (911
    )
    
    
    9,386
    
    
    
    (16,473
    )Income tax expense (benefit)
    
    
    3,292
    
    
    
    158
    
    
    
    (238
    )
    
    
    
    
    
    
    3,212Net loss
    
    
    (19,831
    )
    
    
    (8,567
    )
    
    
    (673
    )
    
    
    9,386
    
    
    
    (19,685
    )Preferred stock accretion expense
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200Net loss available to common stockholders
    
    $
    (20,031
    )
    
    $
    (8,567
    )
    
    $
    (673
    )
    
    $
    9,386
    
    
    $
    (19,885
    )
  20




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##### Table of Contents



Condensed Consolidating Balance Sheets
 As of September 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Assets:Cash and cash equivalents
    
    $
    25
    
    
    $
    425
    
    
    $
    755
    
    
    $
    
    
    
    $
    1,205Receivables, net
    
    
    935
    
    
    
    22,473
    
    
    
    4,049
    
    
    
    (1,359
    )
    
    
    26,098Other current assets
    
    
    2,469
    
    
    
    10,935
    
    
    
    10,365
    
    
    
    (1,973
    )
    
    
    21,796Total current assets
    
    
    3,429
    
    
    
    33,833
    
    
    
    15,169
    
    
    
    (3,332
    )
    
    
    49,099Property and equipment, net
    
    
    
    
    
    
    100,299
    
    
    
    70,358
    
    
    
    (180
    )
    
    
    170,477Intangible assets, net
    
    
    7,961
    
    
    
    95,049
    
    
    
    13,115
    
    
    
    
    
    
    
    116,125Goodwill
    
    
    
    
    
    
    150,451
    
    
    
    76,688
    
    
    
    
    
    
    
    227,139Investments in and advances to subsidiaries
    
    
    39,762
    
    
    
    
    
    
    
    
    
    
    
    (39,762
    )
    
    
    Intercompany receivable (payable)
    
    
    (2,751
    )
    
    
    8,647
    
    
    
    (5,896
    )
    
    
    
    
    
    
    Prepaid expenses and other assets
    
    
    384,575
    
    
    
    3,186
    
    
    
    1,721
    
    
    
    (384,575
    )
    
    
    4,907Total assets
    
    $
    432,976
    
    
    $
    391,465
    
    
    $
    171,155
    
    
    $
    (427,849
    )
    
    $
    567,747Liabilities and Stockholders Equity:Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    1,512
    
    
    $
    
    
    
    $
    1,512Current portion of capital lease obligations
    
    
    
    
    
    
    818
    
    
    
    
    
    
    
    
    
    
    
    818Current portion of other long-term liabilities
    
    
    
    
    
    
    18,170
    
    
    
    
    
    
    
    
    
    
    
    18,170Accounts payable and accrued liabilities
    
    
    3,921
    
    
    
    53,077
    
    
    
    22,335
    
    
    
    (3,326
    )
    
    
    76,007Total current liabilities
    
    
    3,921
    
    
    
    72,065
    
    
    
    23,847
    
    
    
    (3,326
    )
    
    
    96,507Long-term debt, net of current portion
    
    
    335,594
    
    
    
    267,447
    
    
    
    123,519
    
    
    
    (384,575
    )
    
    
    341,985Capital lease obligations, net of current portion
    
    
    
    
    
    
    411
    
    
    
    
    
    
    
    
    
    
    
    411Deferred tax liability
    
    
    10,410
    
    
    
    981
    
    
    
    349
    
    
    
    
    
    
    
    11,740Asset retirement obligations
    
    
    
    
    
    
    13,089
    
    
    
    6,014
    
    
    
    
    
    
    
    19,103Other non-current liabilities
    
    
    
    
    
    
    14,084
    
    
    
    18
    
    
    
    848
    
    
    
    14,950Total liabilities
    
    
    349,925
    
    
    
    368,077
    
    
    
    153,747
    
    
    
    (387,053
    )
    
    
    484,696Stockholders equity
    
    
    83,051
    
    
    
    23,388
    
    
    
    17,408
    
    
    
    (40,796
    )
    
    
    83,051Total liabilities and stockholders equity
    
    $
    432,976
    
    
    $
    391,465
    
    
    $
    171,155
    
    
    $
    (427,849
    )
    
    $
    567,747
  21




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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
 Nine Months Ended September 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Net cash (used in) provided by operating activities
    
    $
    (10,354
    )
    
    $
    13,571
    
    
    $
    8,556
    
    
    $
    
    
    
    $
    11,773Additions to property and equipment
    
    
    
    
    
    
    (25,144
    )
    
    
    (28,441
    )
    
    
    
    
    
    
    (53,585
    )Payments for exclusive license agreements and site
acquisition costs
    
    
    
    
    
    
    (50
    )
    
    
    (845
    )
    
    
    
    
    
    
    (895
    )Principal payments received under direct financing leases
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Acquisitions
    
    
    
    
    
    
    (350
    )
    
    
    
    
    
    
    
    
    
    
    (350
    )Net cash used in investing activities
    
    
    
    
    
    
    (25,544
    )
    
    
    (29,269
    )
    
    
    
    
    
    
    (54,813
    )Proceeds from issuance of long-term debt
    
    
    103,500
    
    
    
    53,899
    
    
    
    19,853
    
    
    
    (73,916
    )
    
    
    103,336Repayments of long-term debt
    
    
    (68,400
    )
    
    
    (53,077
    )
    
    
    (453
    )
    
    
    52,177
    
    
    
    (69,753
    )Issuance of long-term notes receivable
    
    
    (73,916
    )
    
    
    
    
    
    
    
    
    
    
    73,916
    
    
    
    Payments received on long-term notes receivable
    
    
    52,177
    
    
    
    
    
    
    
    
    
    
    
    (52,177
    )
    
    
    Repayments of borrowings under bank overdraft facility,
net
    
    
    
    
    
    
    
    
    
    
    (2,961
    )
    
    
    
    
    
    
    (2,961
    )Proceeds from exercises of stock options
    
    
    362
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    362Other financing activities
    
    
    (3,420
    )
    
    
    
    
    
    
    3,499
    
    
    
    
    
    
    
    79Net cash provided by financing activities
    
    
    10,303
    
    
    
    822
    
    
    
    19,938
    
    
    
    
    
    
    
    31,063Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (257
    )
    
    
    
    
    
    
    (257
    )Net decrease in cash and cash equivalents
    
    
    (51
    )
    
    
    (11,151
    )
    
    
    (1,032
    )
    
    
    
    
    
    
    (12,234
    )Cash and cash equivalents at beginning of period
    
    
    76
    
    
    
    11,576
    
    
    
    1,787
    
    
    
    
    
    
    
    13,439Cash and cash equivalents at end of period
    
    $
    25
    
    
    $
    425
    
    
    $
    755
    
    
    $
    
    
    
    $
    1,205
  22




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##### Table of Contents



Condensed Consolidating Statements of Cash Flows  Continued
 Nine Months Ended September 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Net cash (used in) provided by operating activities
    
    $
    (4,114
    )
    
    $
    25,335
    
    
    $
    14,319
    
    
    $
    
    
    
    $
    35,540Additions to property and equipment, net of
proceeds from sale of property and equipment
    
    
    
    
    
    
    (21,711
    )
    
    
    (22,243
    )
    
    
    
    
    
    
    (43,954
    )Payments for exclusive license agreements and site
acquisition costs
    
    
    
    
    
    
    (307
    )
    
    
    (1,074
    )
    
    
    
    
    
    
    (1,381
    )Additions to equipment to be leased to customers,
net of principal payments received under direct
financing leases
    
    
    
    
    
    
    
    
    
    
    (390
    )
    
    
    
    
    
    
    (390
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (137,694
    )
    
    
    
    
    
    
    
    
    
    
    (137,694
    )Proceeds from sale of Winn-Dixie equity securities
    
    
    
    
    
    
    3,950
    
    
    
    
    
    
    
    
    
    
    
    3,950Net cash used in investing activities
    
    
    
    
    
    
    (155,762
    )
    
    
    (23,707
    )
    
    
    
    
    
    
    (179,469
    )Proceeds from issuance of long-term debt
    
    
    169,434
    
    
    
    155,935
    
    
    
    8,877
    
    
    
    (163,982
    )
    
    
    170,264Repayments of long-term debt
    
    
    (22,000
    )
    
    
    (21,610
    )
    
    
    (113
    )
    
    
    21,360
    
    
    
    (22,363
    )Issuance of long-term notes receivable
    
    
    (163,982
    )
    
    
    
    
    
    
    
    
    
    
    163,982
    
    
    
    Payments received on long-term notes receivable
    
    
    21,360
    
    
    
    
    
    
    
    
    
    
    
    (21,360
    )
    
    
    Repayments of borrowings under bank overdraft
facility, net
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    54Other financing activities
    
    
    (781
    )
    
    
    (189
    )
    
    
    363
    
    
    
    
    
    
    
    (607
    )Net cash provided by financing activities
    
    
    4,031
    
    
    
    134,136
    
    
    
    9,181
    
    
    
    
    
    
    
    147,348Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )Net increase (decrease) in cash and cash equivalents
    
    
    (83
    )
    
    
    3,709
    
    
    
    (226
    )
    
    
    
    
    
    
    3,400Cash and cash equivalents at beginning of period
    
    
    97
    
    
    
    1,818
    
    
    
    803
    
    
    
    
    
    
    
    2,718Cash and cash equivalents at end of period
    
    $
    14
    
    
    $
    5,527
    
    
    $
    577
    
    
    $
    
    
    
    $
    6,118
  23




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##### Table of Contents



Cautionary Statement Regarding Forward-Looking Statements
 Certain statements and information in this Quarterly Report on Form 10-Q (this Form 10-Q)
may constitute forward-looking statements within the meaning of the Private Securities Litigation
Act of 1995. The words believe, expect, anticipate, plan, intend, foresee, should,
would, could or other similar expressions are intended to identify forward-looking statements,
which are generally not historical in nature. These forward-looking statements are based on our
current expectations and beliefs concerning future developments and their potential effect on us.
While management believes that these forward-looking statements are reasonable as and when made,
there can be no assurance that future developments affecting us will be those that we anticipate.
All comments concerning our expectations for future revenues and operating results are based on our
forecasts for our existing operations and do not include the potential impact of any future
acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of
which are beyond our control) and assumptions that could cause actual results to differ materially
from our historical experience and our present expectations or projections. Important factors that
could cause actual results to differ materially from those in the forward-looking statements
include, but are not limited to, those summarized below:
 
    
    our financial outlook and the financial outlook of the ATM industry;
 
    
    our ability to compete successfully with our competitors;
 
    
    our cash needs, including liquidity issues with our vault cash providers;
 
    
    the implementation of our corporate strategy;
 
    
    our financial performance;
 
    
    our ability to expand our bank branding and surcharge-free service offerings;
 
    
    our ability to provide new ATM solutions to financial institutions;
 
    
    our ability to pursue and successfully integrate acquisitions;
 
    
    our ability to implement new services on our advanced-functionality Vcom units;
 
    
    our ability to strengthen existing customer relationships and reach new customers;
 
    
    our ability to expand internationally;
 
    
    our ability to meet the service levels required by our service level agreements with our
customers;
 
    
    our ability prevent security breaches;
 
    
    the additional risks we are exposed to in our armored transport business;
 
    
    the consolidation of several of our existing branding customers; and
 
    
    our ability to cope with and develop business strategies dealing with the deterioration
experienced in global credit markets.
 Other factors that could cause our actual results to differ from our projected results are
described in (1) Part II, Item 1A. Risk Factors and elsewhere in this Form 10-Q , (2) our Annual
Report on Form 10-K for the fiscal year ended December 31, 2007 (2007 Form 10-K), (3) our reports
and registration statements filed from time to time with the Securities and Exchange Commission
(SEC) and (4) other announcements we make from time to time.
 Readers are cautioned not to place undue reliance on forward-looking statements, which speak
only as of the date hereof. We undertake no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as a result of new information,
future events or otherwise.
  24




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 Form 10-K.
 Economic and Strategic Outlook
  Stable earnings and consistent cash flows
 Strong liquidity position
 Product diversification
  25




---



##### Table of Contents



Factors Impacting Comparability
 7-Eleven ATM Transaction.
  26




---



##### Table of Contents



27




---



##### Table of Contents



Results of Operations
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:ATM operating revenues
    
    
    95.2
    %
    
    
    96.1
    %
    
    
    95.5
    %
    
    
    96.0
    %Vcom operating revenues
    
    
    1.1
    
    
    
    0.6
    
    
    
    1.1
    
    
    
    0.3ATM product sales and other revenues
    
    
    3.7
    
    
    
    3.3
    
    
    
    3.5
    
    
    
    3.7Total 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)
    
    
    71.8
    
    
    
    72.3
    
    
    
    72.1
    
    
    
    72.8Cost of Vcom operating revenues
    
    
    1.2
    
    
    
    2.4
    
    
    
    1.5
    
    
    
    1.0Cost of ATM product sales and other revenues
    
    
    3.2
    
    
    
    2.8
    
    
    
    3.2
    
    
    
    3.5Total cost of revenues
    
    
    76.2
    
    
    
    77.5
    
    
    
    76.7
    
    
    
    77.3Gross profit
    
    
    23.8
    
    
    
    22.5
    
    
    
    23.3
    
    
    
    22.7Operating expenses:Selling, general, and administrative expenses
    
    
    8.2
    
    
    
    6.9
    
    
    
    7.7
    
    
    
    8.0Depreciation and accretion expense
    
    
    7.9
    
    
    
    6.3
    
    
    
    7.8
    
    
    
    7.1Amortization expense
    
    
    3.7
    
    
    
    8.3
    
    
    
    3.6
    
    
    
    5.4Total operating expenses
    
    
    19.7
    
    
    
    21.5
    
    
    
    19.1
    
    
    
    20.4Income from operations
    
    
    4.1
    
    
    
    1.0
    
    
    
    4.2
    
    
    
    2.2Other expense (income):Interest expense, net
    
    
    6.6
    
    
    
    8.1
    
    
    
    6.6
    
    
    
    8.2Minority interest in subsidiary
    
    
    (0.6
    )
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (0.1
    )Other
    
    
    1.0
    
    
    
    0.6
    
    
    
    0.9
    
    
    
    0.4Total other expense
    
    
    7.0
    
    
    
    8.6
    
    
    
    7.3
    
    
    
    8.5Loss before income taxes
    
    
    (2.9
    )
    
    
    (7.6
    )
    
    
    (3.1
    )
    
    
    (6.3
    )Income tax expense
    
    
    0.4
    
    
    
    2.1
    
    
    
    0.1
    
    
    
    1.2Net loss
    
    
    (3.3
    )%
    
    
    (9.7
    )%
    
    
    (3.2
    )%
    
    
    (7.5
    )%
 
 (1)
    
    Excludes effects of depreciation, accretion, and
amortization expense of $13.4 million and $15.7 million
for the three month periods ended September 30, 2008 and
2007, respectively, and $39.1 million and $31.3 million
for the nine month periods ended September 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
10.5% and 14.2% for the three month periods ended
September 30, 2008 and 2007, respectively, and by 10.4%
and 12.0% for the nine month periods ended September 30,
2008 and 2007, respectively.  28




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##### Table of Contents



Key Operating Metrics
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Average number of transacting ATMs:United States: Company-owned
    
    
    12,326
    
    
    
    11,347
    
    
    
    12,288
    
    
    
    11,424United States: Merchant-owned
    
    
    10,641
    
    
    
    11,691
    
    
    
    10,781
    
    
    
    11,811United
States: 7-Eleven Financial Services
Business(1)
    
    
    5,716
    
    
    
    4,170
    
    
    
    5,695
    
    
    
    1,668United Kingdom
    
    
    2,518
    
    
    
    1,794
    
    
    
    2,389
    
    
    
    1,602Mexico
    
    
    1,905
    
    
    
    878
    
    
    
    1,645
    
    
    
    644Total average number of transacting ATMs
    
    
    33,106
    
    
    
    29,880
    
    
    
    32,798
    
    
    
    27,149Total transactions (in thousands)
    
    
    91,853
    
    
    
    73,007
    
    
    
    264,678
    
    
    
    166,183Total cash withdrawal transactions (in thousands)
    
    
    59,095
    
    
    
    49,710
    
    
    
    171,694
    
    
    
    113,934Average monthly cash withdrawal transactions per average transacting ATM
    
    
    595
    
    
    
    555
    
    
    
    582
    
    
    
    466Per ATM per month:ATM operating revenues
    
    $
    1,220
    
    
    $
    1,185
    
    
    $
    1,212
    
    
    $
    1,031Cost of ATM operating revenues (exclusive of depreciation,
accretion, and amortization) (2)
    
    
    920
    
    
    
    892
    
    
    
    915
    
    
    
    782ATM operating gross profit (2) (3)
    
    $
    300
    
    
    $
    293
    
    
    $
    297
    
    
    $
    249ATM operating gross profit margin (exclusive of depreciation,
accretion, and amortization)
    
    
    24.6
    %
    
    
    24.7
    %
    
    
    24.5
    %
    
    
    24.2
    %ATM operating gross profit margin (inclusive of depreciation,
accretion, and amortization)
    
    
    13.5
    %
    
    
    10.0
    %
    
    
    13.6
    %
    
    
    11.7
    %
 
 (1)
    
    The average number of transacting ATMs for the three and
nine months ended September 30, 2007 includes the ATM and
Vcom units acquired in the 7-Eleven ATM Transaction
beginning from the acquisition date (July 20, 2007) and
continuing through September 30, 2007. The actual number
of transacting ATMs and Vcom units from the acquisition
date to September 30, 2007 was 5,560.(2)
    
    Excludes effects of depreciation, accretion, and
amortization expense of $13.4 million and $15.7 million
for the three month periods ended September 30, 2008 and
2007, respectively, and by $39.1 million and $31.3 million
for the nine month periods ended September 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 $135 and $175
for the three month periods ended September 30, 2008 and
2007, respectively, and by $132 and $128 for the nine
month periods ended September 30, 2008 and 2007,
respectively.(3)
    
    ATM operating gross profit is a measure of profitability
that uses only the revenue and expenses that related to
operating the ATMs. The revenue and expenses from ATM
equipment sales, Vcom Services, and other ATM-related
services are not included.  29




---



##### Table of Contents



Revenues
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)ATM operating revenues
    
    $
    121,192
    
    
    $
    106,234
    
    
    
    14.1
    %
    
    $
    357,759
    
    
    $
    251,854
    
    
    
    42.1
    %Vcom operating revenues
    
    
    1,416
    
    
    
    685
    
    
    
    106.7
    %
    
    
    4,014
    
    
    
    685
    
    
    
    486.0
    %ATM product sales and other revenues
    
    
    4,651
    
    
    
    3,668
    
    
    
    26.8
    %
    
    
    13,036
    
    
    
    9,805
    
    
    
    33.0
    %Total revenues
    
    $
    127,259
    
    
    $
    110,587
    
    
    
    15.1
    %
    
    $
    374,809
    
    
    $
    262,344
    
    
    
    42.9
    %
 Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 ATM operating revenues.
 Variance: Three Months Ended September 30, 2008to Three Months Ended September 30, 2007U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Total(In thousands)Surcharge revenue
    
    $
    1,822
    
    
    $
    252
    
    
    $
    1,605
    
    
    $
    3,679Interchange revenue
    
    
    4,178
    
    
    
    2,637
    
    
    
    829
    
    
    
    7,644Branding and surcharge-free network revenue
    
    
    4,091
    
    
    
    
    
    
    
    
    
    
    
    4,091Other
    
    
    (456
    )
    
    
    
    
    
    
    
    
    
    
    (456
    )Total increase
    
    $
    9,635
    
    
    $
    2,889
    
    
    $
    2,434
    
    
    $
    14,958
 United States
  United Kingdom
  30




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##### Table of Contents



Mexico
 Vcom operating revenues.
 ATM product sales and other revenues.
  31




---



##### Table of Contents



Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 ATM Operating Revenues.
 Variance: Nine Months Ended September 30, 2008to Nine Months Ended September 30, 2007U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Total(In thousands)Surcharge revenue
    
    $
    36,450
    
    
    $
    3,967
    
    
    $
    4,033
    
    
    $
    44,450Interchange revenue
    
    
    32,365
    
    
    
    7,897
    
    
    
    2,163
    
    
    
    42,425Branding and surcharge-free network revenue
    
    
    19,423
    
    
    
    
    
    
    
    1
    
    
    
    19,424Other
    
    
    (395
    )
    
    
    1
    
    
    
    
    
    
    
    (394
    )Total increase
    
    $
    87,843
    
    
    $
    11,865
    
    
    $
    6,197
    
    
    $
    105,905
 United States.
  United Kingdom.
  32




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##### Table of Contents



Mexico
 Vcom operating revenues.
 ATM product sales and other revenues.
 Cost of Revenues
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    (In thousands)Cost of ATM operating revenues (exclusive
of depreciation, accretion, and
amortization)
    
    $
    91,434
    
    
    $
    79,966
    
    
    
    14.3
    %
    
    $
    270,128
    
    
    $
    191,046
    
    
    
    41.4
    %Cost of Vcom operating revenues
    
    
    1,469
    
    
    
    2,644
    
    
    
    (44.4
    )%
    
    
    5,477
    
    
    
    2,644
    
    
    
    107.1
    %Cost of ATM product sales and other revenues
    
    
    4,064
    
    
    
    3,111
    
    
    
    30.6
    %
    
    
    11,890
    
    
    
    9,196
    
    
    
    29.3
    %Total cost of revenues (exclusive of
depreciation, accretion, and amortization)
    
    $
    96,967
    
    
    $
    85,721
    
    
    
    13.1
    %
    
    $
    287,495
    
    
    $
    202,886
    
    
    
    41.7
    %
 Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization).
 Variance: Three Months Ended September 30, 2008to Three Months Ended September 30, 2007U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    TotalIncrease (decrease)(In thousands)Merchant commissions
    
    $
    1,224
    
    
    $
    2,045
    
    
    $
    618
    
    
    $
    3,887Cost of cash
    
    
    1,490
    
    
    
    1,107
    
    
    
    684
    
    
    
    3,281Repairs and maintenance
    
    
    1,549
    
    
    
    406
    
    
    
    202
    
    
    
    2,157Direct operations
    
    
    543
    
    
    
    160
    
    
    
    153
    
    
    
    856Communications
    
    
    450
    
    
    
    120
    
    
    
    146
    
    
    
    716Charges related to EMV certification
    
    
    
    
    
    
    (179
    )
    
    
    
    
    
    
    (179
    )Processing and other expenses
    
    
    24
    
    
    
    396
    
    
    
    330
    
    
    
    750Total increase in cost of ATM operating revenues
    
    $
    5,280
    
    
    $
    4,055
    
    
    $
    2,133
    
    
    $
    11,468
  33




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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.
  34




---



##### Table of Contents



Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization).
 Variance: Nine Months Ended September 30, 2008to Nine Months Ended September 30, 2007U.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Total(In thousands)Merchant commissions
    
    $
    24,195
    
    
    $
    6,327
    
    
    $
    1,732
    
    
    $
    32,254Cost of cash
    
    
    16,076
    
    
    
    5,201
    
    
    
    1,594
    
    
    
    22,871Repairs and maintenance
    
    
    8,703
    
    
    
    508
    
    
    
    534
    
    
    
    9,745Direct operations
    
    
    4,301
    
    
    
    737
    
    
    
    408
    
    
    
    5,446Communications
    
    
    2,987
    
    
    
    828
    
    
    
    298
    
    
    
    4,113Charges related to EMV certification
    
    
    
    
    
    
    793
    
    
    
    
    
    
    
    793Processing and other expenses
    
    
    1,765
    
    
    
    1,259
    
    
    
    836
    
    
    
    3,860Total increase in cost of ATM operating revenues
    
    $
    58,027
    
    
    $
    15,653
    
    
    $
    5,402
    
    
    $
    79,082
 United States
  United Kingdom
  35




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##### Table of Contents



Mexico
 Cost of Vcom operating revenues.
 Cost of ATM product sales and other revenues.
 Gross Profit Margin
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007ATM operating gross profit margin:Exclusive of depreciation, accretion, and amortization
    
    
    24.6
    %
    
    
    24.7
    %
    
    
    24.5
    %
    
    
    24.1
    %Inclusive of depreciation, accretion, and amortization
    
    
    13.5
    %
    
    
    10.0
    %
    
    
    13.6
    %
    
    
    11.7
    %Vcom operating gross profit margin
    
    
    (3.7
    )%
    
    
    (286.0
    )%
    
    
    (36.4
    )%
    
    
    (286.0
    )%ATM product sales and other revenues gross profit margin
    
    
    12.6
    %
    
    
    15.2
    %
    
    
    8.8
    %
    
    
    6.2
    %Total gross profit margin:Exclusive of depreciation, accretion, and amortization
    
    
    23.8
    %
    
    
    22.5
    %
    
    
    23.3
    %
    
    
    22.7
    %Inclusive of depreciation, accretion, and amortization
    
    
    13.3
    %
    
    
    8.3
    %
    
    
    12.9
    %
    
    
    10.7
    %
 ATM operating gross profit margin
  36




---



##### Table of Contents



ATM product sales and other revenues gross profit margin.
 Vcom operating gross profit margin
 Selling, General, and Administrative Expenses
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Selling, general, and administrative expenses,
excluding stock-based compensation
    
    $
    9,258
    
    
    $
    7,324
    
    
    
    26.4
    %
    
    $
    26,995
    
    
    $
    20,264
    
    
    
    33.2
    %Stock-based compensation
    
    
    1,129
    
    
    
    297
    
    
    
    280.1
    %
    
    
    1,743
    
    
    
    721
    
    
    
    141.7
    %Total selling, general, and administrative expenses
    
    $
    10,387
    
    
    $
    7,621
    
    
    
    36.3
    %
    
    $
    28,738
    
    
    $
    20,985
    
    
    
    36.9
    %Percentage of total revenues:Selling, general, and administrative expenses,
excluding stock-based compensation
    
    
    7.3
    %
    
    
    6.6
    %
    
    
    
    
    
    
    7.2
    %
    
    
    7.7
    %Stock-based compensation
    
    
    0.9
    %
    
    
    0.3
    %
    
    
    
    
    
    
    0.5
    %
    
    
    0.3
    %Total selling, general, and administrative expenses
    
    
    8.2
    %
    
    
    6.9
    %
    
    
    
    
    
    
    7.7
    %
    
    
    8.0
    %
 Selling, general, and administrative expenses (SG&A expenses), excluding stock-based
compensation.
  37




---



##### Table of Contents



Stock-based compensation. Note 3
  Depreciation and Accretion Expense
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Depreciation expense
    
    $
    9,641
    
    
    $
    6,600
    
    
    
    46.1
    %
    
    $
    27,936
    
    
    $
    17,710
    
    
    
    57.7
    %Accretion expense
    
    
    407
    
    
    
    361
    
    
    
    12.7
    %
    
    
    1,233
    
    
    
    831
    
    
    
    48.4
    %Depreciation and accretion expense
    
    $
    10,048
    
    
    $
    6,961
    
    
    
    44.3
    %
    
    $
    29,169
    
    
    $
    18,541
    
    
    
    57.3
    %Percentage of total revenues:Depreciation expense
    
    
    7.6
    %
    
    
    6.0
    %
    
    
    
    
    
    
    7.5
    %
    
    
    6.8
    %Accretion expense
    
    
    0.3
    %
    
    
    0.3
    %
    
    
    
    
    
    
    0.3
    %
    
    
    0.3
    %Total depreciation and accretion expense
    
    
    7.9
    %
    
    
    6.3
    %
    
    
    
    
    
    
    7.8
    %
    
    
    7.1
    %
 Depreciation expense.
 Accretion expense. Accounting for Asset Retirement
Obligations
  Amortization Expense
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Amortization expense
    
    $
    4,657
    
    
    $
    9,204
    
    
    
    (49.4
    )%
    
    $
    13,661
    
    
    $
    14,062
    
    
    
    (2.9
    )%Percentage of total revenues
    
    
    3.7
    %
    
    
    8.3
    %
    
    
    
    
    
    
    3.6
    %
    
    
    5.4
    %
   38




---



##### Table of Contents



Interest Expense, Net
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    (In thousands)Interest expense, net
    
    $
    7,913
    
    
    $
    8,545
    
    
    
    (7.4
    )%
    
    $
    23,267
    
    
    $
    20,437
    
    
    
    13.8
    %Amortization of deferred
financing costs and bond
discounts
    
    
    531
    
    
    
    439
    
    
    
    21.0
    %
    
    
    1,569
    
    
    
    1,155
    
    
    
    35.8
    %Total interest expense, net
    
    $
    8,444
    
    
    $
    8,984
    
    
    
    (6.0
    )%
    
    $
    24,836
    
    
    $
    21,592
    
    
    
    15.0
    %Percentage of total revenues
    
    
    6.6
    %
    
    
    8.1
    %
    
    
    
    
    
    
    6.6
    %
    
    
    8.2
    %
 Interest expense, net.
  Amortization of deferred financing costs and bond discounts.
  39




---



##### Table of Contents



Other Expense (Income)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Minority interest
    
    $
    (814
    )
    
    $
    (174
    )
    
    
    367.8
    %
    
    $
    (814
    )
    
    $
    (286
    )
    
    
    184.6
    %Other expense
    
    
    1,274
    
    
    
    678
    
    
    
    87.9
    %
    
    
    3,377
    
    
    
    1,037
    
    
    
    225.7
    %Total other expense
    
    $
    460
    
    
    $
    504
    
    
    
    (8.7
    )%
    
    $
    2,563
    
    
    $
    751
    
    
    
    241.3
    %Percentage of total revenues
    
    
    0.4
    %
    
    
    0.5
    %
    
    
    
    
    
    
    0.7
    %
    
    
    0.3
    %
 Minority interest. Minority interest income
 Other expense.
 Income Tax Expense (Benefit)
 Three Months Ended September 30,
    
    

Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % Change(In thousands)
    
    
    
    
    
    
    (In thousands)Income tax expense
    
    $
    469
    
    
    $
    2,275
    
    
    
    (79.4
    )%
    
    $
    494
    
    
    $
    3,212
    
    
    
    (84.6
    )%Effective tax rate
    
    
    (12.7
    )%
    
    
    (27.1
    )%
    
    
    
    
    
    
    (4.2
    )%
    
    
    (19.5
    )%
    40




---



##### Table of Contents



Liquidity and Capital Resources
 Overview
    Operating Activities
  Investing Activities
  Anticipated Future Capital Expenditures.
   41




---



##### Table of Contents



Note 8
 Financing Activities
  Financing Facilities
  Revolving Credit Facility.
    42




---



##### Table of Contents



Bank Machine Overdraft Facility.
 Cardtronics Mexico Equipment Financing Agreements.
 Lease Agreements.
 New Accounting Standards
 Part I.
Financial Information, Notes to Consolidated Financial Statements, Note 15
  43




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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
    %
    
    October 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 ofSeptember 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
    
    $
    748.5
    
    
    $
    748.5
    
    
    $
    7.5
    
    
    $
    7.5
    
    
    $
    2.0
    
    
    $
    2.0United Kingdom
    
    £
    80.3
    
    
    
    145.3
    
    
    £
    0.8
    
    
    
    1.5
    
    
    £
    0.8
    
    
    
    1.5Mexico
    
    p $
    206.3
    
    
    
    18.9
    
    
    p $
    2.1
    
    
    
    0.2
    
    

    p $
    2.1
    
    
    
    0.2Total
    
    
    
    
    
    $
    912.7
    
    
    
    
    
    
    $
    9.2
    
    
    
    
    
    
    $
    3.7
    Interest expense.
  44




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##### Table of Contents



Outlook.
 Foreign Currency Exchange Risk
     45




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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
   46




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Part II., Item I., Financial
Information, Notes to Consolidated Financial Statements, Note 11
 
 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.
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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.
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The recent deterioration experienced in global credit markets could have a negative impact on
financial institutions that we conduct business with.
   We rely on third parties to provide us with the cash we require to operate many of our ATMs.
If these third parties were unable or unwilling to provide us with the necessary cash to operate
our ATMs, we would need to locate alternative sources of cash to operate our ATMs or we would not
be able to operate our business.
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We depend on ATM transaction fees for substantially all of our revenues, and our revenues
would be reduced by a decline in the usage of our ATMs or a decline in the number of ATMs that we
operate.
      50




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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 3.2 of the Current Report on Form 8-K filed by
Cardtronics, Inc. on December 14, 2007, 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.
  51




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SIGNATURES
  CARDTRONICS, INC.November 12, 2008
    /s/ Jack AntoniniJack AntoniniChief Executive Officer
(Duly Authorized Officer and
Principal Executive Officer)November 12, 2008
    /s/ J. Chris BrewsterJ. Chris BrewsterChief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)  52




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EXHIBIT INDEX
  ExhibitNumber
    
    Description3.1
    
    
    Third Amended and Restated Certificate of Incorporation of Cardtronics, Inc.
(incorporated herein by reference to Exhibit 3.1 of the Current Report on
Form 8-K filed by Cardtronics, Inc. on December 14, 2007, Registration No.
001-33864).3.2
    
    
    Second Amended and Restated Bylaws of Cardtronics, Inc. (incorporated herein
by reference to Exhibit 3.2 of the Current Report on Form 8-K filed by
Cardtronics, Inc. on December 14, 2007, 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.
  53