##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 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 333-113470
 CARDTRONICS, INC.
  Delaware
    
    76-0681190(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)3110 Hayes Road, Suite 300
Houston, TX
(Address of principal executive offices)
    
    77082
(Zip Code)
 (281) 596-9988
 þ o
  Large accelerated filer
o
    
    Accelerated filer
o
    
    Non-accelerated filer
þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 Shares outstanding on May 9, 2008: 38,667,914




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##### 



CARDTRONICS, INC.
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    1Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007
    
    
    1Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007
    
    
    2Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007
    
    
    3Notes to Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4T. Controls and Procedures
    
    
    39PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    40Item 1A. Risk Factors
    
    
    40Item 6. Exhibits
    
    
    41Signatures
    
    
    42Certification of Chief Executive OfficerCertification of Chief Financial OfficerCertifications of CEO and CFO
   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)
 March 31, 2008
    
    
    December 31, 2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,908
    
    
    $
    13,439Accounts and notes receivable, net of allowance of $474
and $560 as of March 31, 2008 and December 31, 2007,
respectively
    
    
    26,324
    
    
    
    23,248Inventory
    
    
    3,633
    
    
    
    2,355Restricted cash, short-term
    
    
    8,419
    
    
    
    5,900Deferred tax asset, net
    
    
    214
    
    
    
    216Prepaid expenses, deferred costs, and other current assets
    
    
    14,558
    
    
    
    11,627Total current assets
    
    
    62,056
    
    
    
    56,785Restricted cash
    
    
    321
    
    
    
    317Property and equipment, net
    
    
    174,225
    
    
    
    163,912Intangible assets, net
    
    
    126,227
    
    
    
    130,901Goodwill
    
    
    234,355
    
    
    
    235,185Prepaid expenses and other assets
    
    
    4,336
    
    
    
    4,185Total assets
    
    $
    601,520
    
    
    $
    591,285LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    980
    
    
    $
    882Current portion of capital lease obligations
    
    
    922
    
    
    
    1,147Current portion of other long-term liabilities
    
    
    23,173
    
    
    
    16,201Accounts payable
    
    
    37,044
    
    
    
    34,385Accrued liabilities
    
    
    49,981
    
    
    
    70,524Total current liabilities
    
    
    112,100
    
    
    
    123,139Long-term liabilities:Long-term
debt, net of current portion and related discounts
    
    
    343,190
    
    
    
    307,733Capital
lease obligations, net of current portion
    
    
    785
    
    
    
    982Deferred tax liability, net
    
    
    11,884
    
    
    
    11,480Asset retirement obligations
    
    
    18,374
    
    
    
    17,448Other long-term liabilities
    
    
    27,413
    
    
    
    23,392Total liabilities
    
    
    513,746
    
    
    
    484,174Stockholders equity:Common stock, $0.0001 par value; 125,000,000 shares
authorized; 43,659,816 and 43,571,956 shares issued as of
March 31, 2008 and December 31, 2007, respectively;
38,654,067 and 38,566,207 shares outstanding as of March
31, 2008 and December 31, 2007, respectively
    
    
    4
    
    
    
    4Subscriptions receivable (at face value)
    
    
    (218
    )
    
    
    (229
    )Additional paid-in capital
    
    
    190,625
    
    
    
    190,508Accumulated other comprehensive loss, net
    
    
    (19,391
    )
    
    
    (4,518
    )Accumulated deficit
    
    
    (35,025
    )
    
    
    (30,433
    )Treasury stock; 5,005,749 shares at cost as of March 31,
2008 and December 31, 2007
    
    
    (48,221
    )
    
    
    (48,221
    )Total stockholders equity
    
    
    87,774
    
    
    
    107,111Total liabilities and stockholders equity
    
    $
    601,520
    
    
    $
    591,285
 See accompanying notes to consolidated financial statements.
 1




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##### Table of Contents



CARDTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
 Three Months Ended
March 31,2008
    
    
    2007Revenues:ATM operating revenues
    
    $
    115,062
    
    
    $
    71,656Vcom operating revenues
    
    
    1,235
    
    
    
    ATM product sales and other revenues
    
    
    4,278
    
    
    
    2,862Total revenues
    
    
    120,575
    
    
    
    74,518Cost of revenues:Cost of ATM operating revenues (includes stock-based
compensation of $65 in 2008 and $16 in 2007. Excludes
depreciation, accretion, and amortization shown separately
below. See Note 1)
    
    
    86,832
    
    
    
    54,736Cost of Vcom operating revenues
    
    
    2,269
    
    
    
    Cost of ATM product sales and other revenues
    
    
    4,164
    
    
    
    2,797Total cost of revenues
    
    
    93,265
    
    
    
    57,533Gross profit
    
    
    27,310
    
    
    
    16,985Operating expenses:Selling, general, and administrative expenses (includes
stock-based compensation of $201 in 2008 and $206 in 2007)
    
    
    8,551
    
    
    
    6,444Depreciation and accretion expense
    
    
    9,082
    
    
    
    6,398Amortization expense
    
    
    4,503
    
    
    
    2,486Total operating expenses
    
    
    22,136
    
    
    
    15,328Income from operations
    
    
    5,174
    
    
    
    1,657Other expense (income):Interest expense, net
    
    
    7,632
    
    
    
    5,892Amortization of deferred financing costs and bond discounts
    
    
    508
    
    
    
    356Minority interest in subsidiary
    
    
    
    
    
    
    (112
    )Other
    
    
    1,061
    
    
    
    (119
    )Total other expense
    
    
    9,201
    
    
    
    6,017Loss before income taxes
    
    
    (4,027
    )
    
    
    (4,360
    )Income tax expense (benefit)
    
    
    565
    
    
    
    (973
    )Net loss
    
    
    (4,592
    )
    
    
    (3,387
    )Preferred stock accretion expense
    
    
    
    
    
    
    67Net loss available to common stockholders
    
    $
    (4,592
    )
    
    $
    (3,454
    )Net loss per common share  basic and diluted
    
    $
    (0.12
    )
    
    $
    (0.25
    )Weighted average shares outstanding  basic and diluted
    
    
    38,589,878
    
    
    
    13,965,875
 See accompanying notes to consolidated financial statements.
 2




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CARDTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months Ended March 31,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (4,592
    )
    
    $
    (3,387
    )Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:Depreciation, accretion, and amortization expense
    
    
    13,585
    
    
    
    8,884Amortization of deferred financing costs and bond discounts
    
    
    508
    
    
    
    356Stock-based compensation expense
    
    
    266
    
    
    
    222Deferred income taxes
    
    
    430
    
    
    
    (1,026
    )Gain on sale of Winn-Dixie equity securities
    
    
    
    
    
    
    (569
    )Minority interest
    
    
    
    
    
    
    (112
    )Loss on disposal of assets
    
    
    1,150
    
    
    
    492Other reserves and non-cash items
    
    
    (1,975
    )
    
    
    443Changes in assets and liabilities, net of acquisitions:(Increase) decrease in accounts and notes receivable, net
    
    
    (2,964
    )
    
    
    2,051Increase in prepaid, deferred costs, and other current assets
    
    
    (2,595
    )
    
    
    (499
    )Increase in inventory
    
    
    (932
    )
    
    
    (359
    )(Increase) decrease in other assets
    
    
    217
    
    
    
    (53
    )Decrease in accounts payable and accrued liabilities
    
    
    (12,006
    )
    
    
    (3,130
    )Decrease in other liabilities
    
    
    (1,417
    )
    
    
    (671
    )Net cash provided by (used in) operating activities
    
    
    (10,325
    )
    
    
    2,642Cash flows from investing activities:Additions to property and equipment
    
    
    (25,799
    )
    
    
    (13,332
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    3Payments for exclusive license agreements and site acquisition costs
    
    
    (298
    )
    
    
    (567
    )Additions to equipment to be leased to customers
    
    
    
    
    
    
    (203
    )Principal payments received under direct financing leases
    
    
    13
    
    
    
    4Proceeds from sale of Winn-Dixie equity securities
    
    
    
    
    
    
    3,950Acquisition, net of cash acquired
    
    
    
    
    
    
    876Net cash used in investing activities
    
    
    (26,084
    )
    
    
    (9,269
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    49,836
    
    
    
    20,897Repayments of long-term debt and capital leases
    
    
    (14,995
    )
    
    
    (12,017
    )Repayments of borrowings under bank overdraft facility, net
    
    
    (1,866
    )
    
    
    (3,222
    )Payments received on subscriptions receivable
    
    
    11
    
    
    
    Proceeds from exercises of stock options
    
    
    123
    
    
    
    46Equity offering costs
    
    
    (1,250
    )
    
    
    Debt issuance and modification costs
    
    
    (4
    )
    
    
    Net cash provided by financing activities
    
    
    31,855
    
    
    
    5,704Effect of exchange rate changes on cash
    
    
    23
    
    
    
    (13
    )Net decrease in cash and cash equivalents
    
    
    (4,531
    )
    
    
    (936
    )Cash and cash equivalents at beginning of period
    
    
    13,439
    
    
    
    2,718Cash and cash equivalents at end of period
    
    $
    8,908
    
    
    $
    1,782Supplemental disclosure of cash flow information:Cash paid for interest, including interest on capital leases
    
    $
    15,116
    
    
    $
    10,646Cash paid for income taxes
    
    $
    
    
    
    $
    27Fixed assets financed with direct debt
    
    $
    
    
    
    $
    1,101
 See accompanying notes to consolidated financial statements.
 3




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##### Table of Contents



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




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Cost of ATM Operating Revenues and Gross Profit Presentation
  2008
    
    
    2007(In thousands)Depreciation and accretion expenses related to ATMs and ATM-related assets
    
    $
    7,962
    
    
    $
    6,021Amortization expense
    
    
    4,503
    
    
    
    2,486Total depreciation, accretion, and amortization expenses excluded from
cost of ATM operating revenues and gross profit
    
    $
    12,465
    
    
    $
    8,507
 (2)  Acquisitions
 Acquisition of 7-Eleven Financial Services Business
  Note 8
 5




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##### Table of Contents



Business Combinations.
 Cash
    
    $
    1,427Trade accounts receivable, net
    
    
    3,767Surcharge and interchange receivable
    
    
    3,769Inventory
    
    
    1,953Other current assets
    
    
    2,344Property and equipment
    
    
    18,315Software
    
    
    4,273Intangible assets subject to amortization
    
    
    78,000Goodwill
    
    
    62,191Total assets acquired
    
    
    176,039Accounts payable
    
    
    (688
    )Accrued liabilities and deferred income
    
    
    (9,749
    )Current portion of capital lease obligations
    
    
    (1,326
    )Current portion of other long-term liabilities
    
    
    (7,777
    )Non-current portion of capital lease obligations
    
    
    (1,378
    )Other long-term liabilities
    
    
    (17,809
    )Total liabilities assumed
    
    
    (38,727
    )Net assets acquired
    
    $
    137,312
   Pro Forma Results of Operations. Note 8
 Revenues
    
    $
    116,039Income from operations
    
    
    6,820Net loss available to common shareholders
    
    
    (2,368
    )Net loss per share  basic and diluted
    
    $
    (0.17
    )
 6




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##### Table of Contents



(3) Stock-based Compensation
 Share-Based Payment,
 2008
    
    
    2007(In thousands)Cost of ATM operating revenues
    
    $
    65
    
    
    $
    16Selling, general, and administrative expenses
    
    
    201
    
    
    
    206Total stock-based compensation expense
    
    $
    266
    
    
    $
    222
  WeightedNumber
    
    Averageof Shares
    
    Exercise PriceOptions outstanding as of January 1, 2008
    
    
    4,960,041
    
    
    $
    7.78Exercised
    
    
    (87,860
    )
    
    $
    1.40Forfeited
    
    
    (130,156
    )
    
    $
    11.22Options outstanding as of March 31, 2008
    
    
    4,742,025
    
    
    $
    7.80Options vested and exercisable as of March 31, 2008
    
    
    2,925,802
    
    
    $
    5.60
 (4) Earnings per Share
 Earnings per
Share
 2008
    
    2007Stock options
    
    
    1,229,145
    
    
    
    1,624,519Restricted shares
    
    
    
    
    
    
    19,789Preferred stock
    
    
    
    
    
    
    7,390,413Total potentially dilutive securities
    
    
    1,229,145
    
    
    
    9,034,721
 7




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##### Table of Contents



(5) Comprehensive Loss
 Reporting Comprehensive Income
 2008
    
    
    2007(In thousands)Net loss
    
    $
    (4,592
    )
    
    $
    (3,387
    )Unrealized losses on interest rate hedges
    
    
    (13,465
    )
    
    
    (1,172
    )Foreign currency translation adjustments
    
    
    (1,408
    )
    
    
    (160
    )Reclassifications of unrealized gains on available-for-sale securities, net of taxes
    
    
    
    
    
    
    (498
    )Total comprehensive loss
    
    $
    (19,465
    )
    
    $
    (5,217
    )
 Note 12
  March 31, 2008
    
    
    December 31, 2007(In thousands)Unrealized losses on interest rate hedges
    
    $
    (27,109
    )
    
    $
    (13,644
    )Foreign currency translation adjustments
    
    
    7,718
    
    
    
    9,126Total accumulated other comprehensive loss
    
    $
    (19,391
    )
    
    $
    (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
    
    
    
    
    
    
    (833
    )
    
    
    (3
    )
    
    
    
    
    
    
    (41
    )
    
    
    (877
    )Balance as of March 31, 2008
    
    $
    150,451
    
    
    $
    83,217
    
    
    $
    687
    
    
    $
    200
    
    
    $
    3,974
    
    
    $
    238,529
 8




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##### Table of Contents



Intangible Assets with Definite Lives
  Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount(In thousands)Customer and branding contracts/relationships
    
    $
    163,095
    
    
    $
    (53,848
    )
    
    $
    109,247Deferred financing costs
    
    
    13,926
    
    
    
    (4,636
    )
    
    
    9,290Exclusive license agreements
    
    
    5,420
    
    
    
    (1,950
    )
    
    
    3,470Non-compete agreements
    
    
    101
    
    
    
    (55
    )
    
    
    46Total
    
    $
    182,542
    
    
    $
    (60,489
    )
    
    $
    122,053
    Deferred
    
    
    ExclusiveCustomer and Branding
    
    
    Financing
    
    
    License
    
    
    Non-competeContracts/Relationships
    
    
    Costs
    
    
    Agreements
    
    
    Agreements
    
    
    Total(In thousands)2008
    
    $
    12,907
    
    
    $
    1,154
    
    
    $
    558
    
    
    $
    19
    
    
    $
    14,6382009
    
    
    16,785
    
    
    
    1,639
    
    
    
    741
    
    
    
    25
    
    
    
    19,1902010
    
    
    15,257
    
    
    
    1,764
    
    
    
    644
    
    
    
    2
    
    
    
    17,6672011
    
    
    13,585
    
    
    
    1,903
    
    
    
    531
    
    
    
    
    
    
    
    16,0192012
    
    
    12,744
    
    
    
    1,767
    
    
    
    463
    
    
    
    
    
    
    
    14,9742013
    
    
    10,723
    
    
    
    1,063
    
    
    
    335
    
    
    
    
    
    
    
    12,121Thereafter
    
    
    27,246
    
    
    
    
    
    
    
    198
    
    
    
    
    
    
    
    27,444Total
    
    $
    109,247
    
    
    $
    9,290
    
    
    $
    3,470
    
    
    $
    46
    
    
    $
    122,053
 9




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##### Table of Contents



(7) Accrued Liabilities
  March 31, 2008
    
    
    December 31, 2007(In thousands)Accrued merchant fees
    
    $
    11,917
    
    
    $
    11,486Accrued merchant settlement
    
    
    7,294
    
    
    
    4,254Accrued interest
    
    
    3,827
    
    
    
    11,257Accrued armored fees
    
    
    3,779
    
    
    
    5,879Accrued cash management fees
    
    
    3,480
    
    
    
    5,574Accrued maintenance fees
    
    
    2,794
    
    
    
    6,970Accrued purchases
    
    
    2,016
    
    
    
    6,098Accrued ATM telecommunications costs
    
    
    1,727
    
    
    
    1,424Accrued compensation
    
    
    1,569
    
    
    
    3,832Accrued processing costs
    
    
    1,119
    
    
    
    1,477Accrued property and sales taxes
    
    
    1,038
    
    
    
    446Accrued interest rate swap payments
    
    
    892
    
    
    
    147Other accrued expenses
    
    
    8,529
    
    
    
    11,680Total
    
    $
    49,981
    
    
    $
    70,524
 (8) Long-term Debt
  March 31, 2008
    
    
    December 31, 2007(In thousands)Revolving credit facility
    
    $
    39,500
    
    
    $
    4,000Senior subordinated notes due
August 2013 (net of unamortized
discounts of $3.8 million as of
March 31, 2008 and $3.9 million
as of December 31, 2007)
    
    
    296,220
    
    
    
    296,088Other
    
    
    8,450
    
    
    
    8,527Total
    
    
    344,170
    
    
    
    308,615Less current portion
    
    
    980
    
    
    
    882Total excluding current portion
    
    $
    343,190
    
    
    $
    307,733
 Credit Facility
   10




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##### Table of Contents



Senior Subordinated Notes
 Series A Notes.
 Series B Notes.
  Other Facilities
 Bank Machine overdraft facility.
 Cardtronics Mexico equipment financing agreements.
 11




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##### Table of Contents



(9) Asset Retirement Obligations
 Asset
Retirement Obligations.
 (in thousands)
 Asset retirement obligation as of January 1, 2008
    
    $
    17,448Additional obligations
    
    
    1,778Accretion expense
    
    
    395Payments
    
    
    (946
    )Change in estimates
    
    
    (265
    )Foreign currency translation adjustments
    
    
    (36
    )Asset retirement obligation as of March 31, 2008
    
    $
    18,374
  (10) Other Long-term Liabilities
  March 31, 2008
    
    
    December 31, 2007(In thousands)Interest rate swaps
    
    $
    15,522
    
    
    $
    9,155Obligations associated with acquired unfavorable contracts
    
    
    5,681
    
    
    
    7,626Deferred revenue
    
    
    3,156
    
    
    
    3,380Other long-term liabilities
    
    
    3,054
    
    
    
    3,231Total
    
    $
    27,413
    
    
    $
    23,392
 (11) Commitments and Contingencies
 Legal and Other Regulatory Matters
  12




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##### Table of Contents



Capital and Operating Leases
 Capital Lease Obligations.
 Operating Lease Obligations.
 Related Letters of Credit.
 Other Commitments
 Asset retirement obligations. Note 9
 Registration payment arrangements. Accounting for
Registration Payment Arrangements Accounting for
Contingencies
 13




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##### Table of Contents



(12) Derivative Financial Instruments
   Weighted AverageNotional Amount
    
    Fixed Rate
    
    Period(In thousands)$
    550,000
    
    
    
    4.61
    %
    
    April 1, 2008  December 31, 2008$
    550,000
    
    
    
    4.30
    %
    
    January 1, 2009  December 31, 2009$
    550,000
    
    
    
    4.11
    %
    
    January 1, 2010  December 31, 2010$
    400,000
    
    
    
    3.72
    %
    
    January 1, 2011  December 31, 2011$
    200,000
    
    
    
    3.96
    %
    
    January 1, 2012  December 31, 2012
 Accounting for Derivative Instruments and Hedging Activities,
   (13) Income Taxes
  2008
    
    2007(In thousands)Income tax expense (benefit)
    
    $
    565
    
    
    $
    (973
    )Effective tax rate
    
    
    (14.0
    )%
    
    
    22.3
    %
  14




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##### Table of Contents



(14) Segment Information
   2008
    
    
    2007(In thousands)EBITDA
    
    $
    17,698
    
    
    $
    10,772Depreciation and accretion expense
    
    
    9,082
    
    
    
    6,398Amortization expense
    
    
    4,503
    
    
    
    2,486Interest expense, net, including amortization of deferred financing costs and bond discounts
    
    
    8,140
    
    
    
    6,248Income tax expense (benefit)
    
    
    565
    
    
    
    (973
    )Net loss
    
    $
    (4,592
    )
    
    $
    (3,387
    )
  15




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##### Table of Contents



For the Three Months Ended March 31, 2008United
    
    
    
    
    
    AdvancedUnited States
    
    Kingdom
    
    Mexico
    
    Functionality
    
    Eliminations
    
    Total(In thousands)Revenue from external customers
    
    $
    99,118
    
    
    $
    17,640
    
    
    $
    2,582
    
    
    $
    1,235
    
    
    $
    
    
    
    $
    120,575Intersegment revenues
    
    
    195
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (195
    )
    
    
    Cost of revenues
    
    
    74,417
    
    
    
    14,392
    
    
    
    2,187
    
    
    
    2,464
    
    
    
    (195
    )
    
    
    93,265Selling, general, and administrative expenses
    
    
    7,236
    
    
    
    928
    
    
    
    298
    
    
    
    89
    
    
    
    
    
    
    
    8,551EBITDA
    
    
    16,945
    
    
    
    1,944
    
    
    
    127
    
    
    
    (1,318
    )
    
    
    
    
    
    
    17,698Depreciation and accretion expense
    
    
    6,113
    
    
    
    2,682
    
    
    
    309
    
    
    
    
    
    
    
    (22
    )
    
    
    9,082Amortization expense
    
    
    3,953
    
    
    
    538
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    4,503Interest expense, net
    
    
    6,503
    
    
    
    1,456
    
    
    
    181
    
    
    
    
    
    
    
    
    
    
    
    8,140Capital expenditures, excluding acquisitions (1) (2)
    
    $
    15,642
    
    
    $
    10,187
    
    
    $
    67
    
    
    $
    201
    
    
    $
    
    
    
    $
    26,097
 For the Three Months Ended March 31, 2007United
    
    
    
    
    
    AdvancedUnited States
    
    Kingdom
    
    Mexico
    
    Functionality
    
    Eliminations
    
    Total(In thousands)Revenue from external customers
    
    $
    60,955
    
    
    $
    12,960
    
    
    $
    603
    
    
    $
    
    
    
    $
    
    
    
    $
    74,518Intersegment revenue
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93
    )
    
    
    Cost of revenues
    
    
    47,984
    
    
    
    9,070
    
    
    
    540
    
    
    
    
    
    
    
    (61
    )
    
    
    57,533Selling, general, and administrative expenses
    
    
    5,147
    
    
    
    987
    
    
    
    310
    
    
    
    
    
    
    
    
    
    
    
    6,444EBITDA
    
    
    8,236
    
    
    
    2,827
    
    
    
    (259
    )
    
    
    
    
    
    
    (32
    )
    
    
    10,772Depreciation and accretion expense
    
    
    5,042
    
    
    
    1,358
    
    
    
    25
    
    
    
    
    
    
    
    (27
    )
    
    
    6,398Amortization expense
    
    
    2,067
    
    
    
    407
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    2,486Interest expense, net
    
    
    5,233
    
    
    
    991
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    6,248Capital expenditures, excluding acquisitions (1) (2)
    
    $
    8,191
    
    
    $
    5,674
    
    
    $
    34
    
    
    $
    
    
    
    $
    
    
    
    $
    13,899Additions to equipment to be leased to customers
    
    
    
    
    
    
    
    
    
    
    203
    
    
    
    
    
    
    
    
    
    
    
    203
 
 (1)
    
    Capital expenditure amounts include payments made for exclusive license agreements and site acquisition costs.(2)
    
    Capital expenditure amounts for Mexico are reflected gross of any minority interest amounts. Identifiable Assets:
 March 31, 2008
    
    
    December 31, 2007(In thousands)United States
    
    $
    412,327
    
    
    $
    409,120United Kingdom
    
    
    167,250
    
    
    
    163,464Mexico
    
    
    13,915
    
    
    
    12,337Advanced Functionality
    
    
    8,028
    
    
    
    6,364Total
    
    $
    601,520
    
    
    $
    591,285
 (15) New Accounting Pronouncements
 Fair Value Measurements. Fair Value
Measurements,
 1.
    
    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;2.
    
    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;3.
    
    Eliminates large position discounts for financial instruments quoted in active markets
and requires consideration of the Companys creditworthiness when valuing liabilities; and4.
    
    Expands disclosures about instruments measured at fair value.
 16




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##### Table of Contents



Accounting for Leases
   Fair Value MeasurementsTotal CarryingValue as ofMarch 31, 2008

    Level 1
    
    Level 2
    
    Level 3Interest rate swaps
    
    $
    27,109
    
    
    $
    
    
    
    $
    27,109
    
    
    $
    
  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.
  17




---



##### Table of Contents



Fair Value Option. The Fair Value Option for
Financial Assets and Financial Liabilities
 Issued But Not Yet Adopted
  Business Combinations. Business
Combinations
 Noncontrolling Interests. Noncontrolling
Interests in Consolidated Financial Statements  an amendment of ARB No. 51
 Disclosures about Derivatives and Hedging Activities. Disclosures about Derivatives and Hedging Activities  an amendment of SFAS No. 133,
 Useful Life of Intangible Assets. Determination
of the Useful Life of Intangible Assets, Goodwill and Other Intangible Assets
 (16) Supplemental Guarantor Financial Information
  18




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##### Table of Contents



Condensed Consolidating Statements of Operations
 Three Months Ended March 31, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    100,353
    
    
    $
    20,222
    
    
    $
    
    
    
    $
    120,575Operating costs and expenses
    
    
    17
    
    
    
    94,060
    
    
    
    21,346
    
    
    
    (22
    )
    
    
    115,401Operating income (loss)
    
    
    (17
    )
    
    
    6,293
    
    
    
    (1,124
    )
    
    
    22
    
    
    
    5,174Interest expense, net, including
amortization of deferred financing costs
and bond discounts
    
    
    49
    
    
    
    6,454
    
    
    
    1,637
    
    
    
    
    
    
    
    8,140Equity in (earnings) losses of subsidiaries
    
    
    3,422
    
    
    
    
    
    
    
    
    
    
    
    (3,422
    )
    
    
    Other (income) expense, net
    
    
    (56
    )
    
    
    771
    
    
    
    346
    
    
    
    
    
    
    
    1,061(Loss) income before income taxes
    
    
    (3,432
    )
    
    
    (932
    )
    
    
    (3,107
    )
    
    
    3,444
    
    
    
    (4,027
    )Income tax expense (benefit)
    
    
    1,182
    
    
    
    136
    
    
    
    (753
    )
    
    
    
    
    
    
    565Net (loss) income available to common
stockholders
    
    $
    (4,614
    )
    
    $
    (1,068
    )
    
    $
    (2,354
    )
    
    $
    3,444
    
    
    $
    (4,592
    )
 Three Months Ended March 31, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Revenues
    
    $
    
    
    
    $
    61,048
    
    
    $
    13,563
    
    
    $
    (93
    )
    
    $
    74,518Operating costs and expenses
    
    
    307
    
    
    
    59,933
    
    
    
    12,709
    
    
    
    (88
    )
    
    
    72,861Operating income (loss)
    
    
    (307
    )
    
    
    1,115
    
    
    
    854
    
    
    
    (5
    )
    
    
    1,657Interest expense, net, including
amortization of deferred financing costs
and bond discounts
    
    
    2,201
    
    
    
    3,032
    
    
    
    1,015
    
    
    
    
    
    
    
    6,248Equity in (earnings) losses of subsidiaries
    
    
    2,034
    
    
    
    
    
    
    
    
    
    
    
    (2,034
    )
    
    
    Other (income) expense, net
    
    
    (112
    )
    
    
    (207
    )
    
    
    88
    
    
    
    
    
    
    
    (231
    )(Loss) income before income taxes
    
    
    (4,430
    )
    
    
    (1,710
    )
    
    
    (249
    )
    
    
    2,029
    
    
    
    (4,360
    )Income tax expense (benefit)
    
    
    (1,048
    )
    
    
    53
    
    
    
    22
    
    
    
    
    
    
    
    (973
    )Net (loss) income
    
    
    (3,382
    )
    
    
    (1,763
    )
    
    
    (271
    )
    
    
    2,029
    
    
    
    (3,387
    )Preferred stock accretion expense
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67Net (loss) income available to common
stockholders
    
    $
    (3,449
    )
    
    $
    (1,763
    )
    
    $
    (271
    )
    
    $
    2,029
    
    
    $
    (3,454
    )
 19




---



##### Table of Contents



Condensed Consolidating Balance Sheets
 As of March 31, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Assets:Cash and cash equivalents
    
    $
    166
    
    
    $
    6,877
    
    
    $
    1,865
    
    
    $
    
    
    
    $
    8,908Receivables, net
    
    
    (204
    )
    
    
    23,018
    
    
    
    3,691
    
    
    
    (181
    )
    
    
    26,324Other current assets
    
    
    1,442
    
    
    
    15,161
    
    
    
    11,258
    
    
    
    (1,037
    )
    
    
    26,824Total current assets
    
    
    1,404
    
    
    
    45,056
    
    
    
    16,814
    
    
    
    (1,218
    )
    
    
    62,056Property and equipment, net
    
    
    
    
    
    
    104,947
    
    
    
    69,468
    
    
    
    (190
    )
    
    
    174,225Intangible assets, net
    
    
    8,498
    
    
    
    102,858
    
    
    
    14,871
    
    
    
    
    
    
    
    126,227Goodwill
    
    
    
    
    
    
    150,451
    
    
    
    83,904
    
    
    
    
    
    
    
    234,355Investments in and advances to subsidiaries
    
    
    32,877
    
    
    
    
    
    
    
    
    
    
    
    (32,877
    )
    
    
    Intercompany receivable
    
    
    (2,098
    )
    
    
    7,540
    
    
    
    (5,442
    )
    
    
    
    
    
    
    Prepaid expenses and other assets
    
    
    395,531
    
    
    
    3,107
    
    
    
    1,550
    
    
    
    (395,531
    )
    
    
    4,657Total assets
    
    $
    436,212
    
    
    $
    413,959
    
    
    $
    181,165
    
    
    $
    (429,816
    )
    
    $
    601,520Liabilities and Stockholders Equity:Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    980
    
    
    $
    
    
    
    $
    980Current portion of capital lease obligations
    
    
    
    
    
    
    922
    
    
    
    
    
    
    
    
    
    
    
    922Current portion of other long-term liabilities
    
    
    
    
    
    
    23,004
    
    
    
    169
    
    
    
    
    
    
    
    23,173Accounts payable and accrued liabilities
    
    
    4,149
    
    
    
    59,581
    
    
    
    24,507
    
    
    
    (1,212
    )
    
    
    87,025Total current liabilities
    
    
    4,149
    
    
    
    83,507
    
    
    
    25,656
    
    
    
    (1,212
    )
    
    
    112,100Long-term debt, net of current portion
    
    
    335,720
    
    
    
    282,708
    
    
    
    120,293
    
    
    
    (395,531
    )
    
    
    343,190Capital lease obligations, net of current portion
    
    
    
    
    
    
    785
    
    
    
    
    
    
    
    
    
    
    
    785Deferred tax liability
    
    
    8,569
    
    
    
    981
    
    
    
    2,334
    
    
    
    
    
    
    
    11,884Asset retirement obligations
    
    
    
    
    
    
    12,750
    
    
    
    5,624
    
    
    
    
    
    
    
    18,374Other non-current liabilities
    
    
    
    
    
    
    26,920
    
    
    
    493
    
    
    
    
    
    
    
    27,413Total liabilities
    
    
    348,438
    
    
    
    407,651
    
    
    
    154,400
    
    
    
    (396,743
    )
    
    
    513,746Stockholders equity
    
    
    87,774
    
    
    
    6,308
    
    
    
    26,765
    
    
    
    (33,073
    )
    
    
    87,774Total liabilities and stockholders equity
    
    $
    436,212
    
    
    $
    413,959
    
    
    $
    181,165
    
    
    $
    (429,816
    )
    
    $
    601,520
 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
    
    
    (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
 20




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##### Table of Contents



Condensed Consolidating Statements of Cash Flows
 Three Months Ended March 31, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Net cash provided by (used in) operating activities
    
    $
    (7,307
    )
    
    $
    (5,417
    )
    
    $
    2,399
    
    
    $
    
    
    
    $
    (10,325
    )Additions to property and equipment
    
    
    
    
    
    
    (15,792
    )
    
    
    (10,007
    )
    
    
    
    
    
    
    (25,799
    )Payments for exclusive license agreements and site
acquisition costs
    
    
    
    
    
    
    (51
    )
    
    
    (247
    )
    
    
    
    
    
    
    (298
    )Principal payments received under direct financing
leases
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13Net cash used in investing activities
    
    
    
    
    
    
    (15,843
    )
    
    
    (10,241
    )
    
    
    
    
    
    
    (26,084
    )Proceeds from issuance of long-term debt
    
    
    50,000
    
    
    
    22,640
    
    
    
    9,836
    
    
    
    (32,640
    )
    
    
    49,836Repayments of long-term debt
    
    
    (14,500
    )
    
    
    (6,079
    )
    
    
    (73
    )
    
    
    5,657
    
    
    
    (14,995
    )Issuance of long-term notes receivable
    
    
    (32,640
    )
    
    
    
    
    
    
    
    
    
    
    32,640
    
    
    
    Payments received on long-term notes receivable
    
    
    5,657
    
    
    
    
    
    
    
    
    
    
    
    (5,657
    )
    
    
    Repayments of borrowings under bank overdraft
facility, net
    
    
    
    
    
    
    
    
    
    
    (1,866
    )
    
    
    
    
    
    
    (1,866
    )Proceeds from exercises of stock options
    
    
    123
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123Other financing activities
    
    
    (1,243
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,243
    )Net cash provided by financing activities
    
    
    7,397
    
    
    
    16,561
    
    
    
    7,897
    
    
    
    
    
    
    
    31,855Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    23Net increase (decrease) in cash and cash equivalents
    
    
    90
    
    
    
    (4,699
    )
    
    
    78
    
    
    
    
    
    
    
    (4,531
    )Cash and cash equivalents at beginning of period
    
    
    76
    
    
    
    11,576
    
    
    
    1,787
    
    
    
    
    
    
    
    13,439Cash and cash equivalents at end of period
    
    $
    166
    
    
    $
    6,877
    
    
    $
    1,865
    
    
    $
    
    
    
    $
    8,908
 Three Months Ended March 31, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    Total(In thousands)Net cash provided by (used in) operating activities
    
    $
    (7,588
    )
    
    $
    6,786
    
    
    $
    3,444
    
    
    $
    
    
    
    $
    2,642Additions to property and equipment, net of
proceeds from sale of property and equipment
    
    
    
    
    
    
    (7,988
    )
    
    
    (5,341
    )
    
    
    
    
    
    
    (13,329
    )Payments for exclusive license agreements and site
acquisition costs
    
    
    
    
    
    
    (200
    )
    
    
    (367
    )
    
    
    
    
    
    
    (567
    )Additions to equipment to be leased to customers,
net of principal payments received under direct
financing leases
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    (199
    )Proceeds from sale of Winn-Dixie equity securities
    
    
    
    
    
    
    3,950
    
    
    
    
    
    
    
    
    
    
    
    3,950Acquisitions, net of cash acquired
    
    
    
    
    
    
    876
    
    
    
    
    
    
    
    
    
    
    
    876Net cash used in investing activities
    
    
    
    
    
    
    (3,362
    )
    
    
    (5,907
    )
    
    
    
    
    
    
    (9,269
    )Proceeds from issuance of long-term debt
    
    
    20,500
    
    
    
    5,000
    
    
    
    5,397
    
    
    
    (10,000
    )
    
    
    20,897Repayments of long-term debt
    
    
    (12,000
    )
    
    
    (9,000
    )
    
    
    (17
    )
    
    
    9,000
    
    
    
    (12,017
    )Issuance of long-term notes receivable
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    Payments received on long-term notes receivable
    
    
    9,000
    
    
    
    
    
    
    
    
    
    
    
    (9,000
    )
    
    
    Repayments of borrowings under bank overdraft
facility, net
    
    
    
    
    
    
    
    
    
    
    (3,222
    )
    
    
    
    
    
    
    (3,222
    )Proceeds from exercises of stock options
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46Net cash provided by (used in) financing activities
    
    
    7,546
    
    
    
    (4,000
    )
    
    
    2,158
    
    
    
    
    
    
    
    5,704Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    (13
    )Net decrease in cash and cash equivalents
    
    
    (42
    )
    
    
    (576
    )
    
    
    (318
    )
    
    
    
    
    
    
    (936
    )Cash and cash equivalents at beginning of period
    
    
    97
    
    
    
    1,818
    
    
    
    803
    
    
    
    
    
    
    
    2,718Cash and cash equivalents at end of period
    
    $
    55
    
    
    $
    1,242
    
    
    $
    485
    
    
    $
    
    
    
    $
    1,782
 21




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 This Quarterly Report on Form 10-Q contains certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements are
identified by the use of the words project, believe, expect, anticipate, intend,
contemplate, would, could, plan, and similar expressions that are intended to identify
forward-looking statements, which are generally not historical in nature. These forward-looking
statements are based on our current expectations and beliefs concerning future developments and
their potential effect on us. While we believe that these forward-looking statements are reasonable
as and when made, there can be no assurance that future developments affecting us will be those
that we anticipate. All comments concerning our expectations for future revenues and operating
results are based on our estimates for our existing operations and do not include the potential
impact of any future acquisitions. Our forward-looking statements involve significant risks and
uncertainties (some of which are beyond our control) and assumptions that could cause actual
results to differ materially from our historical experience and our present expectations or
projections. Important factors that could cause actual results to differ materially from those in
the forward-looking statements include, but are not limited to, those described in: (1) our reports
and registration statements filed or furnished from time to time with the Securities and Exchange
Commission (the SEC), including our Annual Report on Form 10-K ; and (2) other announcements we
make from time to time.
 You are cautioned not to place undue reliance on forward-looking statements, which speak only
as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update
or revise any forward-looking statements after the date they are made, whether as a result of new
information, future events or otherwise.
 Overview
  Company-owned Arrangements.
  22




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##### Table of Contents



Merchant-owned Arrangements.
  In-house Electronic Funds Transfer (EFT) Processing Operations.
  Recent Events
 7-Eleven ATM Transaction.
 23




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##### Table of Contents



Merchant-owned Account Attrition.
  24




---



##### Table of Contents



Results of Operations
  Three Months Ended March 31,2008
    
    2007Revenues:ATM operating revenues
    
    
    95.4
    %
    
    
    96.2
    %Vcom operating revenues
    
    
    1.0
    
    
    
    ATM product sales and other revenues
    
    
    3.5
    
    
    
    3.8Total revenues
    
    
    100.0
    
    
    
    100.0Cost of revenues:Cost of ATM operating revenues (exclusive of
depreciation, accretion, and amortization,
shown separately below)(1)
    
    
    72.0
    
    
    
    73.5Cost of Vcom operating revenues
    
    
    1.9
    
    
    
    Cost of ATM product sales and other revenues
    
    
    3.5
    
    
    
    3.8Total cost of revenues
    
    
    77.4
    
    
    
    77.2Gross profit
    
    
    22.6
    
    
    
    22.8Operating expenses:Selling, general, and administrative expenses
    
    
    7.1
    
    
    
    8.6Depreciation and accretion expense
    
    
    7.5
    
    
    
    8.6Amortization expense
    
    
    3.7
    
    
    
    3.3Total operating expenses
    
    
    18.4
    
    
    
    20.6Income from operations
    
    
    4.3
    
    
    
    2.2Other expense (income):Interest expense, net
    
    
    6.8
    
    
    
    8.4Minority interest in subsidiary
    
    
    
    
    
    
    (0.2
    )Other
    
    
    0.9
    
    
    
    (0.2
    )Total other expense
    
    
    7.6
    
    
    
    8.1Loss before income taxes
    
    
    (3.3
    )
    
    
    (5.9
    )Income tax expense (benefit)
    
    
    0.5
    
    
    
    (1.3
    )Net loss
    
    
    (3.8
    )%
    
    
    (4.5
    )%
 
 (1)
    
    Excludes effects of depreciation, accretion, and
amortization expense of $12.5 million and $8.5 million for
the three month periods ended March 31, 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
10.3% and 11.4% for the three months ended March 31, 2008
and 2007, respectively. 25




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##### Table of Contents



Key Operating Metrics
  Three Months Ended March 31,2008
    
    
    2007Average number of transacting ATMs:United States: Company-owned
    
    
    12,182
    
    
    
    11,542United States: Merchant-owned
    
    
    10,947
    
    
    
    11,843United States: 7-Eleven Financial Services Business
    
    
    5,672
    
    
    
    United Kingdom
    
    
    2,252
    
    
    
    1,419Mexico
    
    
    1,422
    
    
    
    424Total average number of transacting ATMs
    
    
    32,475
    
    
    
    25,228Total transactions (in thousands)
    
    
    83,037
    
    
    
    44,449Total cash withdrawal transactions (in thousands)
    
    
    53,890
    
    
    
    31,180Average monthly cash withdrawal transactions per average transacting ATM
    
    
    553
    
    
    
    412Per ATM per month:ATM operating revenues
    
    $
    1,181
    
    
    $
    947Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization) (1)
    
    
    891
    
    
    
    723ATM operating gross profit (1) (2)
    
    $
    290
    
    
    $
    224ATM operating gross profit margin (exclusive of depreciation, accretion, and amortization)
    
    
    24.5
    %
    
    
    23.6
    %ATM operating gross profit margin (inclusive of depreciation, accretion, and amortization)
    
    
    13.7
    %
    
    
    11.7
    %
 
 (1)
    
    Excludes effects of depreciation, accretion, and
amortization expense of $12.5 million and $8.5 million for
the three month period ended March 31, 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 $128 and $112
for the three month periods ended March 31, 2008 and 2007,
respectively.(2)
    
    ATM operating gross profit is a measure of profitability
that uses only the revenue and expenses that related to
operating the ATMs. The revenue and expenses from ATM
equipment sales, Vcom Services, and other ATM-related
services are not included. Revenues
 Three Months Ended March 31,2008
    
    
    2007
    
    
    % Change(In thousands)ATM operating revenues
    
    $
    115,062
    
    
    $
    71,656
    
    
    
    60.6
    %Vcom operating revenues
    
    
    1,235
    
    
    
    
    
    
    
    ATM product sales and other revenues
    
    
    4,278
    
    
    
    2,862
    
    
    
    49.5
    %Total revenues
    
    $
    120,575
    
    
    $
    74,518
    
    
    
    61.8
    %
 ATM operating revenues.
 2008 to 2007 VarianceU.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Total(In thousands)Surcharge revenue
    
    $
    15,977
    
    
    $
    2,226
    
    
    $
    1,130
    
    
    $
    19,333Interchange revenue
    
    
    13,086
    
    
    
    2,469
    
    
    
    626
    
    
    
    16,181Branding and surcharge-free network revenue
    
    
    7,874
    
    
    
    
    
    
    
    1
    
    
    
    7,875Other
    
    
    16
    
    
    
    1
    
    
    
    
    
    
    
    17Total increase in ATM operating revenues
    
    $
    36,953
    
    
    $
    4,696
    
    
    $
    1,757
    
    
    $
    43,406
 26




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##### Table of Contents



United States.
 
 United Kingdom.
  Mexico.
 Vcom operating revenues.
 27




---



##### Table of Contents



ATM product sales and other revenues.
 Cost of Revenues
 Three Months Ended March 31,2008
    
    
    2007
    
    
    % Change(In thousands)Cost of ATM operating revenues (exclusive of depreciation, accretion, and
amortization)
    
    $
    86,832
    
    
    $
    54,736
    
    
    
    58.6
    %Cost of Vcom operating revenues
    
    
    2,269
    
    
    
    
    
    
    
    Cost of ATM product sales and other revenues
    
    
    4,164
    
    
    
    2,797
    
    
    
    48.9
    %Total cost of revenues (exclusive of depreciation, accretion, and amortization)
    
    $
    93,265
    
    
    $
    57,533
    
    
    
    62.1
    %
 Cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization).
 2008 to 2007 VarianceU.S.
    
    
    U.K.
    
    
    Mexico
    
    
    Total(In thousands)Merchant commissions
    
    $
    10,344
    
    
    $
    1,873
    
    
    $
    565
    
    
    $
    12,782Cost of cash
    
    
    7,641
    
    
    
    1,997
    
    
    
    440
    
    
    
    10,078Repairs and maintenance
    
    
    3,713
    
    
    
    111
    
    
    
    138
    
    
    
    3,962Direct operations
    
    
    1,784
    
    
    
    420
    
    
    
    89
    
    
    
    2,293Communications
    
    
    1,227
    
    
    
    445
    
    
    
    81
    
    
    
    1,753Processing fees
    
    
    592
    
    
    
    453
    
    
    
    183
    
    
    
    1,228Total increase in cost of ATM operating revenues
    
    $
    25,301
    
    
    $
    5,299
    
    
    $
    1,496
    
    
    $
    32,096
 United States. Note 2 .
  28




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##### Table of Contents



United Kingdom.
 Mexico.
 Cost of Vcom operating revenues.
 Cost of ATM product sales and other revenues.
 Gross Profit Margin
 2008
    
    2007ATM operating gross profit margin:Exclusive of depreciation, accretion, and amortization
    
    
    24.5
    %
    
    
    23.6
    %Inclusive of depreciation, accretion, and amortization
    
    
    13.7
    %
    
    
    11.7
    %Vcom operating gross profit margin
    
    
    (83.7
    )%
    
    
    ATM product sales and other revenues gross profit margin
    
    
    2.7
    %
    
    
    2.3
    %Total gross profit margin:Exclusive of depreciation, accretion, and amortization
    
    
    22.6
    %
    
    
    22.8
    %Inclusive of depreciation, accretion, and amortization
    
    
    12.3
    %
    
    
    11.4
    %
 ATM operating gross profit margin
 ATM product sales and other revenues gross profit margin.
 29




---



##### Table of Contents



Selling, General, and Administrative Expenses
 Three Months Ended March 31,2008
    
    
    2007
    
    
    % Change(In thousands)Selling, general, and administrative expenses
    
    $
    8,350
    
    
    $
    6,238
    
    
    
    33.9
    %Stock-based compensation
    
    
    201
    
    
    
    206
    
    
    
    (2.4
    )%Total selling, general, and administrative expenses
    
    $
    8,551
    
    
    $
    6,444
    
    
    
    32.7
    %Percentage of total revenues:Selling, general, and administrative expenses
    
    
    6.9
    %
    
    
    8.4
    %Stock-based compensation
    
    
    0.2
    %
    
    
    0.3
    %Total selling, general, and administrative expenses
    
    
    7.1
    %
    
    
    8.6
    %
 Selling, general, and administrative expenses (SG&A expenses), excluding stock-based
compensation.
  Depreciation and Accretion Expense
 Three Months Ended March 31,2008
    
    
    2007
    
    
    % Change(In thousands)Depreciation expense
    
    $
    8,687
    
    
    $
    6,172
    
    
    
    40.7
    %Accretion expense
    
    
    395
    
    
    
    226
    
    
    
    74.8
    %Depreciation and accretion expense
    
    $
    9,082
    
    
    $
    6,398
    
    
    
    42.0
    %Percentage of total revenues:Depreciation expense
    
    
    7.2
    %
    
    
    8.3
    %Accretion expense
    
    
    0.3
    %
    
    
    0.3
    %Total depreciation and accretion expense
    
    
    7.5
    %
    
    
    8.6
    %
 Depreciation expense.
 Accretion expense. Accounting for Asset Retirement
Obligations
 30




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##### Table of Contents



Amortization Expense
 Three Months Ended March 31,2008
    
    2007
    
    % Change(In thousands)Amortization expense
    
    $4,503
    
    $2,486
       
    
    81.1
    %Percentage of total revenues
    
    3.7
    %
    3.3
       %
  Interest Expense, Net
 Three Months Ended March 31,2008
    
    
    2007
    
    
    % Change(In thousands)Interest expense, net
    
    $
    7,632
    
    
    $
    5,892
    
    
    
    29.5
    %Amortization of deferred financing costs and bond discounts
    
    
    508
    
    
    
    356
    
    
    
    42.7
    %Total interest expense, net
    
    $
    8,140
    
    
    $
    6,248
    
    
    
    30.3
    %Percentage of revenues
    
    
    6.8
    %
    
    
    8.4
    %
 Interest expense, net.
 Amortization of deferred financing costs and bond discounts.
 31




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##### Table of Contents



Other Expense (Income)
 Three Months Ended March 31,2008
    
    
    2007
    
    
    % Change(In thousands)Minority interest
    
    $
    
    
    
    $
    (112
    )
    
    
    (100.0
    )%Other expense (income)
    
    
    1,061
    
    
    
    (119
    )
    
    
    (991.6
    )%Total other expense (income)
    
    $
    1,061
    
    
    $
    (231
    )
    
    
    (559.3
    )%Percentage of revenues
    
    
    0.9
    %
    
    
    (0.3
    )%
  Income Tax Expense (Benefit)
 Three Months Ended March 31,2008
    
    2007
    
    % Change(In thousands)Income tax expense (benefit)
    
    $
    565
    
    
    $
    (973
    )
    
    
    (158.1
    )%Effective tax rate
    
    
    (14.0
    )%
    
    
    22.3
    %
   Liquidity and Capital Resources
 Overview
   32




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##### Table of Contents



Operating Activities
  Investing Activities
  Anticipated Future Capital Expenditures.
  Note 8
 33




---



##### Table of Contents



Financing Activities
  Financing Facilities
  Revolving credit facility.
   Other borrowing facilities
 Bank Machine overdraft facility.
 Cardtronics Mexico equipment financing agreements.
 34




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##### Table of Contents



Lease agreements.
 New Accounting Standards
 Fair Value Measurement. Fair Value Measurements,
 1.
    
    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;2.
    
    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;3.
    
    Eliminates large position discounts for financial instruments quoted in active markets
and requires consideration of the Companys creditworthiness when valuing liabilities; and4.
    
    Expands disclosures about instruments measured at fair value.
  Note 15
 Fair Value Option. The Fair Value Option for
Financial Assets and Financial Liabilities
 Issued But Not Yet Adopted
  Business Combinations. Business Combinations
 35




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##### Table of Contents



Noncontrolling Interests. Noncontrolling
Interests in Consolidated Financial Statements  an amendment of ARB No. 51,
 Disclosures about Derivatives and Hedging Activities Disclosures about Derivatives and Hedging Activities  an amendment of SFAS No. 133,
 Useful Life of Intangible Assets. Determination
of the Useful Life of Intangible Assets, Goodwill and Other Intangible Assets
 36




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Disclosure About Market Risk
 Interest Rate Risk
 Vault cash rental expense.
  Weighted AverageNotional Amount
    
    Fixed Rate
    
    Period(In thousands)$550,000

    
    
    
    4.61
    %
    
    April 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 ofMarch 31, 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
    
    $
    747.3
    
    
    $
    747.3
    
    
    $
    7.5
    
    
    $
    7.5
    
    
    $
    2.0
    
    
    $
    2.0United Kingdom
    
    £
    82.8
    
    
    
    164.5
    
    
    £
    0.8
    
    
    
    1.6
    
    
    £
    0.8
    
    
    
    1.6Mexico
    
    p $
    152.7
    
    
    
    14.3
    
    
    p $
    1.5
    
    
    
    0.1
    
    
    p $
    1.5
    
    
    
    0.1Total
    
    
    
    
    
    $
    926.1
    
    
    
    
    
    
    $
    9.2
    
    
    
    
    
    
    $
    3.7
 Accounting for Derivative Instruments and Hedging Activities,
   37




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##### Table of Contents



Interest expense.
 Outlook.
 Foreign Currency Exchange Risk
    38




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##### Table of Contents



ITEM 4T. CONTROLS AND PROCEDURES
 Managements Quarterly Evaluation of Disclosure Controls and Procedures
    Changes in Internal Control over Financial Reporting
  39




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  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.
  40




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##### Table of Contents



ITEM 6. EXHIBITS
  ExhibitNumber
    
    Description3.1
    
    Third Amended and Restated Certificate of Incorporation of Cardtronics, Inc.
(incorporated herein by reference to Exhibit 3.1 of the Current Report on
Form 8-K filed by Cardtronics, Inc. on December 14, 2007, Registration No.
001-33864).3.2
    
    Second Amended and Restated Bylaws of Cardtronics, Inc. (incorporated herein
by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by
Cardtronics, Inc. on December 14, 2007, Registration No. 001-33864).10.1
    
    Amendment No. 8 to Credit Agreement, dated as of March 19, 2008
(incorporated herein by reference to Exhibit 10.1 of the Current Report on
8-K filed by Cardtronics, Inc. on March 25, 2008).*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.
 41




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##### Table of Contents



SIGNATURES
  CARDTRONICS, INC.May 13, 2008
    /s/ Jack AntoniniJack AntoniniPresident and Chief Executive Officer
(Principal Executive Officer) May 13, 2008
    /s/ J. Chris BrewsterJ. Chris BrewsterChief Financial Officer
(Principal Financial and Accounting Officer) 42




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber
    
    Description3.1
    
    Third Amended and Restated Certificate of Incorporation of Cardtronics, Inc.
(incorporated herein by reference to Exhibit 3.1 of the Current Report on
Form 8-K filed by Cardtronics, Inc. on December 14, 2007, Registration No.
001-33864).3.2
    
    Second Amended and Restated Bylaws of Cardtronics, Inc. (incorporated herein
by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by
Cardtronics, Inc. on December 14, 2007, Registration No. 001-33864).10.1
    
    Amendment No. 8 to Credit Agreement, dated as of March 19, 2008
(incorporated herein by reference to Exhibit 10.1 of the Current Report on
8-K filed by Cardtronics, Inc. on March 25, 2008).*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.
 43