NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) General and Basis of Presentation
(a) General
Cardtronics plc, together with its wholly and majority-owned subsidiaries (collectively, the “Company”), provides convenient automated financial related services to consumers through its global network of automated teller machines and multi-function financial services kiosks (collectively referred to as “ATMs”). As of
June 30, 2019
, Cardtronics was the world’s largest ATM owner/operator, providing services to over
290,000
ATMs globally,
26%
of which are Company-owned.
During the three months ended
June 30, 2019
, approximately
62%
of the Company’s revenues were derived from operations in North America (including its ATM operations in the United States ("U.S."), Canada, and Mexico), approximately
30%
of the Company’s revenues were derived from operations in Europe and Africa (including its ATM operations in the United Kingdom ("U.K."), Ireland, Germany, Spain, and South Africa), and approximately
8%
of the Company’s revenues were derived from the Company’s operations in Australia and New Zealand. As of
June 30, 2019
, the Company provided processing only services or various forms of managed services solutions to approximately
204,000
ATMs. Under a managed services arrangement, retailers, financial institutions, and ATM distributors rely on Cardtronics to handle some or all of the operational aspects associated with operating and maintaining ATMs, typically in exchange for a monthly service fee, fee per transaction, or fee per service provided.
Through its network, the Company delivers financial related services to cardholders and provides ATM management and ATM equipment-related services (typically under multi-year contracts) to large retail merchants, smaller retailers, and operators of facilities such as shopping malls, airports, and train stations. In doing so, the Company provides its retail partners with a compelling automated solution that helps attract and retain customers, and in turn, increases the likelihood that the ATMs placed at their facilities will be utilized. The Company also owns and operates electronic funds transfer (“EFT”) transaction processing platforms that provide transaction processing services to its network of ATMs, as well as to other ATMs under managed services arrangements. Additionally, the Company provides processing services for issuers of debit cards.
In addition to its retail merchant relationships, the Company also partners with leading financial institutions to brand selected ATMs within its network. These financial institutions include BBVA Compass Bancshares, Inc., Citibank, N.A., Citizens Financial Group, Inc., Cullen/Frost Bankers, Inc., Discover Bank, PNC Bank, N.A., Santander Bank, N.A., and TD Bank, N.A. in the U.S.; BMO Bank of Montreal, the Bank of Nova Scotia, Canadian Imperial Bank Commerce, and TD Bank in Canada; Deutsche Post Bank in Germany; ING Group in Spain; Capitec Bank in South Africa, and the Bank of Queensland Limited and HSBC Holdings plc in Australia. In Mexico, the Company partners with Scotiabank and Banco Multiva. As of
June 30, 2019
, approximately
20,000
of the Company’s ATMs were under contract with approximately
500
financial institutions to place their logos on the ATMs and to provide convenient surcharge-free access for their banking customers.
The Company owns and operates the Allpoint network (“Allpoint”), the largest surcharge-free ATM network (based on the number of participating ATMs). Allpoint, which has approximately
55,000
participating ATMs, provides surcharge-free ATM access to approximately
1,200
participating credit unions, banks, and stored-value debit card issuers. For participants, Allpoint provides scale, density, and convenience of surcharge-free ATMs that surpasses the largest banks in the U.S. Allpoint earns either a fixed monthly fee per cardholder or a fixed fee per transaction that is paid by the participants. Allpoint includes a majority of the Company’s ATMs in the U.S. and certain ATMs in the U.K., Canada, Mexico, and Australia. Allpoint also provides services to organizations that manage stored-value debit card programs on behalf of corporate entities and governmental agencies, including general purpose, payroll, and electronic benefits transfer cards. Under these programs, the issuing organizations pay Allpoint a fee per issued stored-value debit card or per transaction in return for allowing the users of those cards surcharge-free access to Allpoint’s participating ATM network.
The Company’s revenues are generally recurring in nature, and historically have been derived primarily from convenience transaction fees, which are paid by cardholders, as well as other transaction-based fees, including interchange fees, which are paid by the cardholder’s financial institution for the use of the ATMs serving their customers and connectivity to the applicable EFT network that transmits data between the ATM and the cardholder’s financial institution. Other revenue sources include: (i) fees from financial institutions that participate in Allpoint, (ii) fees for bank-branding ATMs and providing financial institution cardholders with surcharge-free access, (iii) revenues earned by providing managed services (including transaction processing services) solutions to retailers and financial institutions, (iv) fees earned from foreign currency exchange transactions at the ATM, known as dynamic currency conversion, and (v) revenues from the sale of ATMs and ATM-related equipment and other ancillary services.
(b) Basis of Presentation
This Quarterly Report on Form 10-Q (this “Form 10-Q”) has been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial information. As this is an interim period filing presented using a condensed format, it does not include all of the disclosures required by accounting principles generally accepted in the U.S. (“U.S. GAAP” or “GAAP”), although the Company believes that the disclosures are adequate to make the information not misleading. This Form 10-Q should be read along with the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018
(the “
2018
Form 10-K”), which includes a summary of the Company’s significant accounting policies and other disclosures.
In management’s opinion, all normal recurring adjustments necessary for a fair presentation of the Company’s interim and prior period results have been made. The results of operations for the
three and six
months ended
June 30, 2019
and
2018
are not necessarily indicative of results of operations that may be expected for any other interim period or for the full fiscal year.
The unaudited interim financial statements include the accounts of the Company. All material intercompany accounts and transactions have been eliminated in consolidation. The Company owns a majority (
95.7%
) interest in, and realizes a majority of the earnings and/or losses of, Cardtronics Mexico, S.A. de C.V., thus this entity is reflected as a consolidated subsidiary in the financial statements, with the remaining ownership interests not held by the Company being reflected as noncontrolling interests.
The preparation of the unaudited interim financial statements to conform with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of this Form 10-Q and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and these differences could be material to the financial statements.
(c) Cost of ATM Operating Revenues Presentation
The Company presents the Cost of ATM operating revenues in the accompanying Consolidated Statements of Operations exclusive of depreciation, accretion, and amortization of intangible assets related to ATMs and ATM-related assets.
The following table reflects the amounts excluded from the Cost of ATM operating revenues line in the accompanying Consolidated Statements of Operations for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
|
Depreciation and accretion expenses related to ATMs and ATM-related assets
|
$
|
25,384
|
|
|
$
|
23,037
|
|
|
$
|
49,991
|
|
|
$
|
46,412
|
|
|
Amortization of intangible assets
|
12,591
|
|
|
13,498
|
|
|
25,003
|
|
|
27,269
|
|
|
Total depreciation, accretion, and amortization of intangible assets excluded from Cost of ATM operating revenues
|
$
|
37,975
|
|
|
$
|
36,535
|
|
|
$
|
74,994
|
|
|
$
|
73,681
|
|
(d) Restructuring Expenses
During 2017 and 2018, the Company implemented a global corporate reorganization and cost reduction initiative (the "2017 and 2018 Restructuring Plan”), intended to improve its cost structure and operating efficiency. The 2017 and 2018 Restructuring Plan included workforce reductions, facilities closures, contract terminations, and other cost reduction measures. During the
three and six
months ended June 30, 2018, the Company incurred pre-tax charges of
$2.1 million
and
$4.5 million
, respectively, related to the 2017 and 2018 Restructuring Plan, primarily consisting of employee severance.
During the three and six months ended June 30, 2019, the Company incurred
$3.5 million
of pre-tax charges primarily consisting of professional fees, employee severance costs, and facility costs related to a planned reorganization (the "2019 Restructuring Plan").
The following table reflects the amounts recorded in the Restructuring expenses line in the accompanying Consolidated Statements of Operations for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
|
North America
|
$
|
213
|
|
|
$
|
1,073
|
|
|
$
|
213
|
|
|
$
|
2,130
|
|
|
Europe & Africa
|
400
|
|
|
495
|
|
|
400
|
|
|
1,176
|
|
|
Corporate
|
2,850
|
|
|
495
|
|
|
2,850
|
|
|
1,170
|
|
|
Total restructuring expenses
|
$
|
3,463
|
|
|
$
|
2,063
|
|
|
$
|
3,463
|
|
|
$
|
4,476
|
|
As of June 30, 2019, the following tables reflect unpaid professional fees, employee severance costs, and facility costs. These amounts are presented within the Accrued liabilities line item in the accompanying Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2019
|
|
|
North America
|
|
Europe & Africa
|
|
Corporate
|
|
Total
|
|
|
(In thousands)
|
|
Accrued liabilities
|
$
|
—
|
|
|
$
|
77
|
|
|
$
|
877
|
|
|
$
|
954
|
|
The changes in the Company’s restructuring liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Restructuring liabilities as of December 31, 2018
|
$
|
1,531
|
|
|
Restructuring expenses
|
3,463
|
|
|
Payments
|
(4,040
|
)
|
|
Restructuring liabilities as of June 30, 2019
|
$
|
954
|
|
(e) Cash, Cash Equivalents, and Restricted Cash
For purposes of reporting financial condition, cash and cash equivalents include cash in bank and short-term deposit accounts. Additionally, the Company maintains cash on deposit with banks that is pledged for a particular use or restricted to support a liability. These balances are recorded in Restricted cash and/or Prepaid expenses, deferred costs, and other noncurrent assets lines in the accompanying Consolidated Balance Sheets based on when the Company expects this cash to be paid. Current restricted cash primarily consists of amounts collected on behalf of, but not yet remitted to, certain of the Company’s merchant customers or third-party service providers. Restricted cash in current and noncurrent assets are offset by corresponding liability balances in the Accrued liabilities line in the accompanying Consolidated Balance Sheets. The changes in the settlement liabilities corresponding to the changes in the balance of restricted cash during the six month period ended
June 30, 2019
and 2018 are presented in the Statements of Cash Flows within the (Decrease) increase in restricted cash liabilities line.
The following table provides a reconciliation of the ending cash, cash equivalents, and restricted cash balances as of
June 30, 2019
and
2018
, corresponding with the balances in the accompanying Consolidated Statements of Cash Flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
|
Cash and cash equivalents
|
$
|
33,495
|
|
|
$
|
40,252
|
|
|
Current and long-term restricted cash
|
86,431
|
|
|
73,114
|
|
|
Total cash, cash equivalents, and restricted cash in the Consolidated Statements of Cash Flows
|
$
|
119,926
|
|
|
$
|
113,366
|
|
The June 30, 2018 balance includes approximately
$0.1 million
classified in Prepaid expenses, deferred costs, and other noncurrent assets.
(f) Inventory, net
The Company’s inventory is determined using the average cost method. The Company periodically assesses its inventory, and as necessary, adjusts the carrying values to the lower of cost or net realizable value.
The following table reflects the Company’s primary inventory components:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
(In thousands)
|
|
ATMs
|
$
|
2,651
|
|
|
$
|
1,990
|
|
|
ATM spare parts and supplies
|
6,568
|
|
|
9,572
|
|
|
Total inventory
|
9,219
|
|
|
11,562
|
|
|
Less: Inventory reserves
|
(170
|
)
|
|
(170
|
)
|
|
Inventory, net
|
$
|
9,049
|
|
|
$
|
11,392
|
|
(g) Acquisition
In May 2019, the Company acquired ATM processing contracts for approximately
62,000
ATMs.
(2) New Accounting Pronouncements
Adoption of New Accounting Pronouncements
Lease Accounting
. The Company adopted Accounting Standards Codification Topic 842, Leases (the “Lease Standard”) as of January 1, 2019, using the modified retrospective approach and using the effective date as the date of initial application. Consequently, financial information for dates and periods before January 1, 2019 have not been updated or recasted. In addition, the Company elected the practical expedients permitted under the transition guidance within the Lease Standard, which allowed the Company to carry forward prior conclusions about lease identification, lease classification, and initial direct costs. In accordance with the Company's accounting policy, the Company elected not to exclude short-term leases for any of its vehicle and equipment leases, as the lease terms associated with our operating leases are routinely longer than 12 months. In addition, the Company elected not to separate lease and non-lease components for its ATM placement agreements that contain fixed payments and are deemed to contain an operating lease under the Lease Standard.
The Company’s adoption of ASC 842 resulted in the recognition of operating lease assets and liabilities of approximately
$85 million
and
$95 million
, respectively, as well as the derecognition of certain prepaid and deferred lease balances upon adoption. Upon adoption, this guidance had no impact on the Company's consolidated income from operations, net income, or cash flows.
Hedge Accounting.
The Company adopted
ASU No. 2017-12, Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12” or the “Hedging Standard”) as of January 1, 2019, using the modified retrospective transition approach, which requires the Company to account for ASU 2017-12 as of the date of adoption with any retrospective adjustments applicable to prior periods included as a cumulative-effect adjustment to accumulated other comprehensive loss and retained earnings. ASU 2017-12 amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. Upon adoption, this guidance had no impact on the Company's consolidated income from operations, net income, or cash flows.
Upon adoption, the Lease Standard and the Hedging Standard had the following impact on the Company’s consolidated statement of financial position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 As Reported
|
|
ASC Topic 842 (Leases)
|
|
ASU 2017-12 (Hedging)
|
|
December 31, 2018 As Adjusted
|
|
|
(In thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
39,940
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
39,940
|
|
|
Accounts and notes receivable, net
|
75,643
|
|
|
—
|
|
|
—
|
|
|
75,643
|
|
|
Inventory, net
|
11,392
|
|
|
—
|
|
|
—
|
|
|
11,392
|
|
|
Restricted cash
|
155,470
|
|
|
—
|
|
|
—
|
|
|
155,470
|
|
|
Prepaid expenses, deferred costs, and other current assets
|
84,386
|
|
|
3,483
|
|
|
—
|
|
|
87,869
|
|
|
Total current assets
|
366,831
|
|
|
3,483
|
|
|
—
|
|
|
370,314
|
|
|
Property and equipment, net of accumulated depreciation
|
460,187
|
|
|
—
|
|
|
—
|
|
|
460,187
|
|
|
Intangible assets, net
|
150,847
|
|
|
—
|
|
|
—
|
|
|
150,847
|
|
|
Goodwill
|
749,144
|
|
|
—
|
|
|
—
|
|
|
749,144
|
|
|
Operating lease assets
|
—
|
|
|
85,068
|
|
|
—
|
|
|
85,068
|
|
|
Deferred tax asset, net
|
8,658
|
|
|
—
|
|
|
—
|
|
|
8,658
|
|
|
Prepaid expenses, deferred costs, and other noncurrent assets
|
51,677
|
|
|
—
|
|
|
—
|
|
|
51,677
|
|
|
Total assets
|
$
|
1,787,344
|
|
|
$
|
88,551
|
|
|
$
|
—
|
|
|
$
|
1,875,895
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of other long-term liabilities
|
$
|
20,266
|
|
|
$
|
20,602
|
|
|
$
|
—
|
|
|
$
|
40,868
|
|
|
Accounts payable
|
39,310
|
|
|
—
|
|
|
—
|
|
|
39,310
|
|
|
Accrued liabilities
|
369,160
|
|
|
(447
|
)
|
|
—
|
|
|
368,713
|
|
|
Total current liabilities
|
428,736
|
|
|
20,155
|
|
|
—
|
|
|
448,891
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
818,485
|
|
|
—
|
|
|
—
|
|
|
818,485
|
|
|
Asset retirement obligations
|
54,413
|
|
|
—
|
|
|
—
|
|
|
54,413
|
|
|
Noncurrent operating lease liabilities
|
—
|
|
|
74,746
|
|
|
—
|
|
|
74,746
|
|
|
Deferred tax liability, net
|
41,198
|
|
|
—
|
|
|
—
|
|
|
41,198
|
|
|
Other long-term liabilities
|
67,740
|
|
|
(6,350
|
)
|
|
—
|
|
|
61,390
|
|
|
Total liabilities
|
1,410,572
|
|
|
88,551
|
|
|
—
|
|
|
1,499,123
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
|
|
|
Ordinary shares
|
461
|
|
|
—
|
|
|
—
|
|
|
461
|
|
|
Additional paid-in capital
|
327,009
|
|
|
—
|
|
|
—
|
|
|
327,009
|
|
|
Accumulated other comprehensive loss, net
|
(66,877
|
)
|
|
—
|
|
|
366
|
|
|
(66,511
|
)
|
|
Retained earnings
|
116,276
|
|
|
—
|
|
|
(366
|
)
|
|
115,910
|
|
|
Total parent shareholders' equity
|
376,869
|
|
|
—
|
|
|
—
|
|
|
376,869
|
|
|
Noncontrolling interests
|
(97
|
)
|
|
—
|
|
|
—
|
|
|
(97
|
)
|
|
Total shareholders’ equity
|
376,772
|
|
|
—
|
|
|
—
|
|
|
376,772
|
|
|
Total liabilities and shareholders’ equity
|
$
|
1,787,344
|
|
|
$
|
88,551
|
|
|
$
|
—
|
|
|
$
|
1,875,895
|
|
Accounting Pronouncements Issued But Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. This pronouncement, along with the ASUs issued to clarify certain provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net
presentation of the amount expected to be collected on the financial asset. This pronouncement is effective for fiscal years, and for interim periods, beginning after December 15, 2019 and the Company plans to adopt this guidance effective January 1, 2020. We are currently evaluating the adoption of this guidance but do not expect it to have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test, eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment, and provides other guidance on measuring a goodwill impairment loss. This guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those years, and early adoption is permitted. Cardtronics expects to adopt this guidance effective January 1, 2020. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. This guidance is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company plans to adopt this guidance effective January 1, 2020. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). This guidance is effective for fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company plans to adopt this guidance in 2020. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
(3)
Revenue Recognition
Disaggregated Revenues
The following tables detail the revenues of the Company’s reportable segments disaggregated by financial statement line and component:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2019
|
|
|
(In thousands)
|
|
|
North America
|
|
Europe & Africa
|
|
Australia & New Zealand
|
|
Eliminations
|
|
Consolidated
|
|
Surcharge revenues
|
$
|
88,234
|
|
|
$
|
44,427
|
|
|
$
|
19,776
|
|
|
$
|
—
|
|
|
$
|
152,437
|
|
|
Interchange revenues
|
34,286
|
|
|
54,423
|
|
|
1,198
|
|
|
—
|
|
|
89,907
|
|
|
Bank-branding and surcharge-free network revenues
|
48,538
|
|
|
483
|
|
|
—
|
|
|
—
|
|
|
49,021
|
|
|
Managed services and processing revenues
|
28,478
|
|
|
2,168
|
|
|
3,752
|
|
|
(2,682
|
)
|
|
31,716
|
|
|
Total ATM operating revenues
|
199,536
|
|
|
101,501
|
|
|
24,726
|
|
|
(2,682
|
)
|
|
323,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM product sales and other revenues
|
15,679
|
|
|
1,969
|
|
|
92
|
|
|
—
|
|
|
17,740
|
|
|
Total revenues
|
$
|
215,215
|
|
|
$
|
103,470
|
|
|
$
|
24,818
|
|
|
$
|
(2,682
|
)
|
|
$
|
340,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2018
|
|
|
(In thousands)
|
|
|
North America
|
|
Europe & Africa
|
|
Australia & New Zealand
|
|
Eliminations
|
|
Consolidated
|
|
Surcharge revenues
|
$
|
90,687
|
|
|
$
|
30,888
|
|
|
$
|
22,679
|
|
|
$
|
—
|
|
|
$
|
144,254
|
|
|
Interchange revenues
|
35,819
|
|
|
72,412
|
|
|
1,064
|
|
|
—
|
|
|
109,295
|
|
|
Bank-branding and surcharge-free network revenues
|
43,990
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,990
|
|
|
Managed services and processing revenues
|
26,982
|
|
|
2,509
|
|
|
5,281
|
|
|
(3,090
|
)
|
|
31,682
|
|
|
Total ATM operating revenues
|
197,478
|
|
|
105,809
|
|
|
29,024
|
|
|
(3,090
|
)
|
|
329,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM product sales and other revenues
|
9,628
|
|
|
2,041
|
|
|
97
|
|
|
—
|
|
|
11,766
|
|
|
Total revenues
|
$
|
207,106
|
|
|
$
|
107,850
|
|
|
$
|
29,121
|
|
|
$
|
(3,090
|
)
|
|
$
|
340,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
(In thousands)
|
|
|
North America
|
|
Europe & Africa
|
|
Australia & New Zealand
|
|
Eliminations
|
|
Consolidated
|
|
Surcharge revenues
|
$
|
173,344
|
|
|
$
|
75,472
|
|
|
$
|
40,444
|
|
|
$
|
—
|
|
|
$
|
289,260
|
|
|
Interchange revenues
|
68,665
|
|
|
109,731
|
|
|
2,501
|
|
|
—
|
|
|
180,897
|
|
|
Bank-branding and surcharge-free network revenues
|
94,411
|
|
|
483
|
|
|
—
|
|
|
—
|
|
|
94,894
|
|
|
Managed services and processing revenues
|
54,162
|
|
|
4,493
|
|
|
7,572
|
|
|
(5,595
|
)
|
|
60,632
|
|
|
Total ATM operating revenues
|
390,582
|
|
|
190,179
|
|
|
50,517
|
|
|
(5,595
|
)
|
|
625,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM product sales and other revenues
|
28,881
|
|
|
4,216
|
|
|
311
|
|
|
—
|
|
|
33,408
|
|
|
Total revenues
|
$
|
419,463
|
|
|
$
|
194,395
|
|
|
$
|
50,828
|
|
|
$
|
(5,595
|
)
|
|
$
|
659,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
(In thousands)
|
|
|
North America
|
|
Europe & Africa
|
|
Australia & New Zealand
|
|
Eliminations
|
|
Consolidated
|
|
Surcharge revenues
|
$
|
179,801
|
|
|
$
|
57,057
|
|
|
$
|
46,749
|
|
|
$
|
—
|
|
|
$
|
283,607
|
|
|
Interchange revenues
|
71,638
|
|
|
139,870
|
|
|
2,189
|
|
|
—
|
|
|
213,697
|
|
|
Bank-branding and surcharge-free network revenues
|
88,437
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88,437
|
|
|
Managed services and processing revenues
|
53,351
|
|
|
5,063
|
|
|
10,723
|
|
|
(5,926
|
)
|
|
63,211
|
|
|
Total ATM operating revenues
|
393,227
|
|
|
201,990
|
|
|
59,661
|
|
|
(5,926
|
)
|
|
648,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM product sales and other revenues
|
23,760
|
|
|
4,304
|
|
|
155
|
|
|
—
|
|
|
28,219
|
|
|
Total revenues
|
$
|
416,987
|
|
|
$
|
206,294
|
|
|
$
|
59,816
|
|
|
$
|
(5,926
|
)
|
|
$
|
677,171
|
|
Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Revenue is recorded in ATM operating revenues and ATM product sales and other revenues line items in the accompanying Consolidated Statements of Operations.
ATM operating revenues are recognized daily as the associated transactions are processed or monthly on a per ATM or per cardholder basis. For customer contracts that provide for up-front fees that do not pertain to a distinct performance obligation, such fees are recognized over the term of the underlying agreement on a straight-line basis. ATM product sales and other revenues are recognized when the related performance obligations are fulfilled upon transfer of control of goods or services to the customer.
ATM operating revenues.
The Company presents revenues from automated consumer financial services, bank-branding and surcharge-free network offerings, managed services and other services in the ATM operating revenues line in the accompanying Consolidated Statements of Operations. The Company’s ATM operating revenues consist of the following:
|
|
|
|
•
|
Surcharge revenue
. Surcharge revenues are received in the form of a fee paid by a cardholder who has made a cash withdrawal from an ATM. Surcharge fees can vary widely based on the location of the ATM and the nature of the contracts negotiated with our merchants. In the U.S. and Canada, the Company does not receive surcharge fees from cardholders whose financial institutions participate in a surcharge-free network or have branded a location; instead, the Company receives interchange and bank-branding or surcharge-free network-branding revenues, which are discussed below. For certain ATMs, primarily those owned and operated by merchants, the Company does not receive any portion of the surcharge but rather the entire surcharge fee is earned by the merchant. In the U.K., ATM deployers operate their ATMs on either a free-to-use (surcharge-free) or a pay-to-use (surcharge) basis. On free-to-use ATMs in the U.K., the Company earns interchange revenue on withdrawal and certain other transactions. These fees are paid by the cardholder’s financial institution. On pay-to-use ATMs in the U.K., the Company only earns a surcharge fee paid by the cardholder on withdrawal transactions, and interchange is only paid by the cardholder’s financial institution on other non-withdrawal transaction types. In Germany, Australia, and
|
Mexico, the Company collects surcharge fees on withdrawal transactions but generally does not receive interchange revenue. In South Africa, the Company generally earns interchange revenues only, the amount of which varies by transaction type and customer arrangement. Surcharge revenues, as described above, are recognized daily as the associated transactions are processed.
|
|
|
|
•
|
Interchange revenue.
An interchange fee is a fee paid by the cardholder’s financial institution for its customer’s use of an ATM that is owned by another operator and for the fee the EFT network charges to transmit data between the ATM and the cardholder’s financial institution. The Company typically receives a majority of the interchange fee paid by the cardholder’s financial institution, net of the amount retained by the EFT network and the Company recognizes the net amount received from the network as revenue. In some markets in which the Company operates, interchange fees are earned not only on cash withdrawal transactions but also on other ATM transactions, including balance inquiries and balance transfers. Interchange revenues are subject to various arrangements and are recognized daily as the associated transactions are processed.
|
|
|
|
|
•
|
Bank-branding and surcharge-free network revenues.
Under a bank-branding arrangement, ATMs that are Company-owned and operated are branded with the logo of the branding financial institution. In exchange for a monthly per ATM fee, the financial institution’s customers gain access to use these bank-branded ATMs without paying a surcharge. Under the Company’s Allpoint surcharge-free network, financial institutions that participate pay either a fixed monthly fee per cardholder or a fixed fee per transaction so that cardholders gain surcharge-free access to our large network of ATMs. Bank-branding and surcharge-free network revenues are generally recognized monthly on a per ATM or per cardholder basis, except for transaction-based fee arrangements which are recognized daily as they occur. Any up-front fees associated with these arrangements are recognized ratably over the life of the arrangement.
|
|
|
|
|
•
|
Managed services and processing revenues
. Under managed service agreements, the Company provides various forms of ATM-related services, including monitoring, maintenance, cash management, cash delivery, customer service, on-screen advertising, processing and other services to merchants, financial institutions, and third-party ATM operators. Under processing arrangements, the Company provides transaction processing services to merchants, financial institutions, and third-party operators. Under managed services and processing arrangements, surcharge and interchange fees are generally earned by the customer and the Company typically receives a fixed fee per transaction and/or a periodic management fee per ATM in return for providing the agreed-upon operating services. The managed services and processing fees are recognized as the related services are provided to the customers.
|
|
|
|
|
•
|
Other disclosures.
The Company’s bank-branding, surcharge-free network, and managed services arrangements result in the Company providing a series of distinct services that have the same pattern of transfer to the customer. As a result, these arrangements create singular performance obligations that are satisfied over-time (generally
3
-
5 years
) for which the Company has a right to consideration that corresponds directly with the value of the entity’s performance completed to date. In conjunction with these arrangements, the Company recognizes revenue in the amount it has a right to receive. Variable consideration may exist in these arrangements and is recognized only to the extent a significant reversal is not probable.
|
ATM product
sales
and other revenues.
The Company presents revenues from other product sales and services in the ATM product sales and other revenues line in the accompanying Consolidated Statements of Operations. The Company earns revenues from the sale of ATMs and ATM-related equipment as well as the delivery of other non-transaction-based services. Revenues related to these activities are recognized when the equipment is delivered to the customer and the Company has completed all required installation and set-up procedures. With respect to the sale of ATMs to Value-Added-Resellers (“VARs”), the Company recognizes revenues related to such sales when the equipment is delivered to the VAR.
Due to the transactional nature of the Company’s revenue, there are no significant judgments that affect the determination of the amount and timing of its revenues.
Contract Balances
As of
June 30, 2019
, the Company has recognized no significant contract assets. Accounts receivables that relate to completed performance obligations are recognized on the Company's consolidated balance sheets. Contract liabilities totaled
$8.2
million and
$8.4 million
at
June 30, 2019
and
December 31, 2018
, respectively. These amounts represent deferred revenues for advance consideration received primarily in relation to bank-branding and surcharge-free network arrangements. The revenue recognized during the
three and six
months ended
June 30, 2019
and 2018 on previously deferred revenues was not material. The Company expects to recognize the revenue associated with its contract liabilities ratably over various periods extending over the next
36 months
. During the three and six months ended
June 30, 2019
, the Company did not recognize any significant impairment losses related to its accounts receivable or contract assets.
Contract Cost
The Company expects that the incremental commissions paid to sales personnel, together with other associated costs, are recoverable, and therefore, the Company capitalizes these amounts as deferred contract acquisition costs. Deferred contract acquisition costs totaled
$7.8 million
and
$7.9 million
at
June 30, 2019
and December 31, 2018, respectively. Sales commissions capitalized are generally amortized over a
4
-
5
year period corresponding with the related agreements. Similarly, and consistent with past practice, the costs incurred to fulfill a contract, primarily consisting of prepaid merchant commissions and other consideration paid or provided to merchant partners, are capitalized and recognized over the duration of the related contract. The Company does not capitalize the costs of obtaining a contract if the associated contract is one year or less.
(4) Share-based Compensation
The Company accounts for its share-based compensation by recognizing the grant date fair value of share-based awards, net of estimated forfeitures, as share-based compensation expense over the underlying requisite service periods of the related awards. The grant date fair value is based upon the Company's share price on the date of the grant.
The following table reflects the total share-based compensation expense amounts reported in the accompanying Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
|
(In thousands)
|
|
Cost of ATM operating revenues
|
$
|
366
|
|
|
$
|
90
|
|
|
$
|
627
|
|
|
$
|
174
|
|
|
Selling, general, and administrative expenses
|
4,884
|
|
|
3,423
|
|
|
9,107
|
|
|
5,784
|
|
|
Total share-based compensation expense
|
$
|
5,250
|
|
|
$
|
3,513
|
|
|
$
|
9,734
|
|
|
$
|
5,958
|
|
For the
three and six
months ended
June 30, 2019
, total share-based compensation expense increased by
$1.7 million
and
$3.8 million
compared to the same periods of
2018
, respectively. This increase is attributable to the
amount, timing and terms of share-based payment awards granted during the periods, net of estimated forfeitures.
Restricted Stock Units.
The Company grants restricted stock units (“RSUs”) under its Long-Term Incentive Plan (“LTIP”), which is an annual equity award program under the Fourth Amended and Restated 2007 Stock Incentive Plan. The ultimate number of RSUs, that are determined to be earned under the LTIP are approved by the Compensation Committee of the Company’s Board of Directors ("Board"), based on the Company’s achievement of previously specified performance levels at the end of the associated performance period. RSU grants are service-based (“Time-RSUs”), performance-based (“Performance-RSUs”), or market-based (“Market-Based-RSUs”). Each is recognized ratably over the associated service period. For Time-RSUs and Market-Based-RSUs, the Company recognizes the related compensation expense based on the grant date fair value. The grant date fair value of the Time-Based RSUs is the Company's closing stock price on the date of grant while the grant date fair value of the Market-Based-RSUs is derived from a Monte Carlo simulation. For Performance-RSUs, the Company recognizes the related compensation expense based on the estimated performance levels that management believes will ultimately be met. Time-RSUs are convertible into the Company’s common shares upon passage of the annual graded vesting periods, which begin
1
-
2 years
after the grant date and extend
3
-
4 years
. Performance-RSUs and Market-Based RSUs will be earned to the extent the Company achieves the associated performance-based or market-based vesting conditions and these awards are convertible into the Company’s common shares after the passage of the vesting periods which extend
3
-
4 years
from the grant date. Although these RSUs are not considered to be earned and outstanding until the vesting conditions are met, the Company recognizes the related compensation expense over the requisite service period (or to an employee’s qualified retirement date, if earlier) using a graded vesting methodology. RSUs may also be granted outside of LTIPs, with or without performance-based vesting requirements.
The number of the Company’s earned non-vested RSUs as of
June 30, 2019
, and changes during the
six
months ended
June 30, 2019
, are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Non-vested RSUs as of December 31, 2018
|
911,165
|
|
|
$
|
28.74
|
|
|
Granted
|
245,399
|
|
|
33.80
|
|
|
Vested
|
(260,306
|
)
|
|
33.88
|
|
|
Forfeited
|
(17,594
|
)
|
|
31.02
|
|
|
Non-vested RSUs as of June 30, 2019
|
878,664
|
|
|
$
|
28.58
|
|
The above table only includes earned RSUs. The Performance-RSUs and Market-Based RSUs granted in 2018 and 2019 that are not yet earned are not included. The number of Performance-RSUs granted at target in 2018, net of forfeitures, was
298,387
units with a weighted average grant date fair value of $
22.82
per unit. The number of Performance-RSUs granted at target in 2019, net of forfeitures, was
122,215
units with a weighted average grant date fair value of $
33.81
per unit. The number of Market-Based RSUs granted in 2018, net of forfeitures, was
134,989
units with a weighted average grant date fair value $
24.13
. The number of Market-Based RSUs granted in 2019, net of forfeitures, was
122,127
units with a weighted average grant date fair value of $
49.33
per unit. Time-RSUs are included in the listing of outstanding RSUs as granted.
As of
June 30, 2019
, the unrecognized compensation expense associated with earned RSUs was
$15.5 million
, which will be recognized using a graded vesting schedule for Performance-RSUs and a straight-line vesting schedule for Time-RSUs, over a remaining weighted average vesting period of approximately
1.84
weighted average remaining life years.
Options
. The number of the Company’s outstanding stock options as of
June 30, 2019
, and changes during the
six
months ended
June 30, 2019
, are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|
Options outstanding as of December 31, 2018
|
234,959
|
|
|
$
|
22.31
|
|
|
Granted
|
145,221
|
|
|
31.99
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
Options outstanding as of June 30, 2019
|
380,180
|
|
|
26.01
|
|
|
|
|
|
|
|
Options vested and exercisable as of June 30, 2019
|
78,326
|
|
|
$
|
22.31
|
|
As of
June 30, 2019
, the unrecognized compensation expense associated with outstanding options was approximately
$2.8 million
, which will be recognized over the remaining weighted average vesting period of approximately
2.21 years
.
(5) Earnings Per Share
The Company reports its earnings per share under the two-class method. Under this method, potentially dilutive securities are excluded from the calculation of diluted earnings per share (as well as their related impact on the net income available to common shareholders) when their impact on net income available to common shareholders is anti-dilutive.
Potentially dilutive securities for the
three and six
months ended
June 30, 2019
included all outstanding stock options and RSUs, which were included in the calculation of diluted earnings per share for these periods. The potentially dilutive effect of outstanding warrants and the underlying shares exercisable under the Company’s
$287.5 million
of
1.00%
Convertible Senior Notes due
2021
(the “Convertible Notes”) were excluded from diluted shares outstanding as the exercise price exceeded the average market price of the Company’s common shares. The effect of the note hedge, described in
Note 9. Long-Term Debt,
was also excluded as the effect is anti-dilutive.
The allocated details of our Earnings per Share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(
in thousands, excluding share and per share amounts
)
|
|
Net income available to common shareholders
|
$
|
10,471
|
|
|
$
|
3,767
|
|
|
$
|
14,790
|
|
|
$
|
999
|
|
|
Weighted average common basic shares outstanding (for basic calculation)
|
46,180,161
|
|
|
45,927,732
|
|
|
46,201,842
|
|
|
45,880,661
|
|
|
Dilutive effect of outstanding common stock options and RSUs
|
421,327
|
|
|
451,081
|
|
|
418,305
|
|
|
477,115
|
|
|
Weighted average common dilutive shares outstanding (for diluted calculation)
|
46,601,488
|
|
|
46,378,813
|
|
|
46,620,147
|
|
|
46,357,776
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic
|
$
|
0.23
|
|
|
$
|
0.08
|
|
|
$
|
0.32
|
|
|
$
|
0.02
|
|
|
Net income per common share - diluted
|
$
|
0.22
|
|
|
$
|
0.08
|
|
|
$
|
0.32
|
|
|
$
|
0.02
|
|
For both the three and six months ended
June 30, 2019
, there were
145,221
stock options excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive.
(6) Shareholders' Equity
Share Repurchases.
On March 26, 2019, the Company announced that its Board had authorized a share repurchase program, under which it is authorized to repurchase up to
$50 million
of its Class A ordinary shares through August 31, 2020. Share repurchases under the authorized plan may be effected on behalf of the Company through open market transactions, privately negotiated transactions, or otherwise, pursuant to SEC trading rules. The timing and extent of repurchases will depend upon several factors, including market and business conditions, valuation of shares, regulatory requirements and other corporate considerations, and repurchases may be suspended or discontinued at any time.
During the three and six months ended June 30, 2019, the Company repurchased and canceled
677,679
shares of its outstanding Class A ordinary shares at a weighted average price of
$29.51
per share, for an aggregate purchase price of
$20.1 million
.
Accumulated Other Comprehensive Loss, net.
Accumulated other comprehensive loss, net, is a separate component of Shareholders’ equity in the accompanying Consolidated Balance Sheets. The following tables present the changes in the balances of each component of Accumulated other comprehensive loss, net, for the
three and six
months ended
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustments
|
|
|
|
Unrealized Losses on Interest Rate Swap and Foreign Currency Forward Contracts
|
|
|
|
Total
|
|
|
(In thousands)
|
|
Total accumulated other comprehensive loss, net as of March 31, 2019
|
$
|
(61,210
|
)
|
|
(1)
|
|
$
|
(13,268
|
)
|
|
(2)
|
|
$
|
(74,478
|
)
|
|
Other comprehensive income (loss) before reclassification
|
4,274
|
|
|
(3)
|
|
(13,543
|
)
|
|
(4)
|
|
(9,269
|
)
|
|
Amounts reclassified from accumulated other comprehensive loss, net
|
—
|
|
|
(3)
|
|
(63
|
)
|
|
(4)
|
|
(63
|
)
|
|
Net current period other comprehensive income (loss)
|
4,274
|
|
|
(1)
|
|
(13,606
|
)
|
|
(2)
|
|
(9,332
|
)
|
|
Total accumulated other comprehensive loss, net as of June 30, 2019
|
$
|
(56,936
|
)
|
|
(1)
|
|
$
|
(26,874
|
)
|
|
(2)
|
|
$
|
(83,810
|
)
|
(1)
Net of deferred income tax (benefit) of
$(5,474)
and
$(5,312)
as of
June 30, 2019
and March 31, 2019, respectively.
(2)
Net of deferred income tax expense of
$11,835
and
$15,917
as of
June 30, 2019
and March 31, 2019, respectively.
(3)
Net of deferred income tax (benefit) of
$(162)
.
|
|
|
|
(4)
|
Net of deferred income tax benefit of
$(4,012)
and
$(70)
for Other comprehensive income before reclassification and Amounts reclassified from accumulated comprehensive loss, net, respectively, as of
June 30, 2019
. For additional information, see Note 13. Derivative Financial Instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustments
|
|
|
|
Unrealized Losses on Interest Rate Swap and Foreign Currency Forward Contracts
|
|
|
|
Total
|
|
|
(In thousands)
|
|
Total accumulated other comprehensive loss, net as of December 31, 2018
|
$
|
(66,312
|
)
|
|
(1)
|
|
$
|
(565
|
)
|
|
(2)
|
|
$
|
(66,877
|
)
|
|
Other comprehensive income (loss) before reclassification
|
9,376
|
|
|
(3)
|
|
(25,964
|
)
|
|
(4)
|
|
(16,588
|
)
|
|
Amounts reclassified from accumulated other comprehensive loss, net
|
—
|
|
|
|
|
(345
|
)
|
|
(4)
|
|
(345
|
)
|
|
Net current period other comprehensive income (loss)
|
9,376
|
|
|
|
|
(26,309
|
)
|
|
|
|
(16,933
|
)
|
|
Total accumulated other comprehensive loss, net as of June 30, 2019
|
$
|
(56,936
|
)
|
|
(1)
|
|
$
|
(26,874
|
)
|
|
(2)
|
|
$
|
(83,810
|
)
|
(1)
Net of deferred income tax (benefit) of
$(5,474)
and
$(5,232)
as of June 30, 2019 and December 31, 2018, respectively.
(2)
Net of deferred income tax expense of
$11,835
and
$19,112
as of June 30, 2019 and December 31, 2018, respectively.
(3)
Net of deferred income tax (benefit) of
$(242)
.
|
|
|
|
(4)
|
Net of deferred income tax benefit of
$(7,216)
and
$(61)
for Other comprehensive income before reclassification and Amounts reclassified from accumulated other comprehensive loss, net, respectively, as of June 30, 2019. For additional information, see Note 13. Derivative Financial Instruments.
|
The Company records unrealized gains and losses related to its interest rate swap and foreign currency forward contracts net of taxes, in the Accumulated other comprehensive loss, net line within the accompanying Consolidated Balance Sheets. The amounts reclassified from Accumulated other comprehensive loss, net are recognized in the Cost of ATM operating revenues, Interest expense, net, or Other (income) expense lines in the accompanying Consolidated Statements of Operations.
The Company has elected the portfolio approach for the deferred tax asset of the unrealized gains and losses related to the interest rate swap and foreign currency forward contracts in Accumulated other comprehensive loss, net within the accompanying Consolidated Balance Sheets. Under the portfolio approach, the disproportionate tax effect created when the valuation allowance was appropriately released as a tax benefit into continuing operations in 2010, will reverse out of the Accumulated other comprehensive loss, net line within the accompanying Consolidated Balance Sheets and into continuing operations as a tax expense when the Company ceases to hold any interest rate swap contracts. As of
June 30, 2019
, the disproportionate tax effect is
$14.6 million
.
The Company currently believes that the unremitted earnings of certain of its subsidiaries will be reinvested for an indefinite period of time. Accordingly, no deferred taxes have been provided for the differences between the Company’s book basis and underlying tax basis in these subsidiaries or on the foreign currency translation adjustment amounts.
(7) Intangible Assets
Goodwill
The following table presents the net carrying amounts of the Company’s intangible assets with indefinite lives as of
December 31, 2018
and
June 30, 2019
, as well as the changes in the net carrying amounts for the
six
months ended
June 30, 2019
by segment. For additional information related to the Company’s segments, see
Note 17. Segment Information
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
Europe & Africa
|
|
Australia & New
Zealand
|
|
Total
|
|
|
(In thousands)
|
|
Goodwill, gross as of December 31, 2018
|
$
|
556,570
|
|
|
$
|
231,121
|
|
|
$
|
151,494
|
|
|
$
|
939,185
|
|
|
Accumulated impairment loss
|
—
|
|
|
(50,003
|
)
|
|
(140,038
|
)
|
|
(190,041
|
)
|
|
Goodwill, net as of December 31, 2018
|
$
|
556,570
|
|
|
$
|
181,118
|
|
|
$
|
11,456
|
|
|
$
|
749,144
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
4,373
|
|
|
402
|
|
|
(60
|
)
|
|
4,715
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill, gross as of June 30, 2019
|
560,943
|
|
|
231,523
|
|
|
151,434
|
|
|
943,900
|
|
|
Accumulated impairment loss
|
—
|
|
|
(50,003
|
)
|
|
(140,038
|
)
|
|
(190,041
|
)
|
|
Goodwill, net as of June 30, 2019
|
$
|
560,943
|
|
|
$
|
181,520
|
|
|
$
|
11,396
|
|
|
$
|
753,859
|
|
Intangible Assets with Definite Lives
The following table presents the Company’s intangible assets that were subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
|
(In thousands)
|
|
Merchant and bank-branding contracts/relationships
|
$
|
486,082
|
|
|
$
|
(362,763
|
)
|
|
$
|
123,319
|
|
|
$
|
476,429
|
|
|
$
|
(340,899
|
)
|
|
$
|
135,530
|
|
|
Trade names
|
18,016
|
|
|
(11,184
|
)
|
|
6,832
|
|
|
18,010
|
|
|
(9,804
|
)
|
|
8,206
|
|
|
Technology
|
10,966
|
|
|
(6,922
|
)
|
|
4,044
|
|
|
10,963
|
|
|
(6,490
|
)
|
|
4,473
|
|
|
Non-compete agreements
|
4,260
|
|
|
(4,260
|
)
|
|
—
|
|
|
4,247
|
|
|
(4,244
|
)
|
|
3
|
|
|
Revolving credit facility deferred financing costs
|
4,300
|
|
|
(1,822
|
)
|
|
2,478
|
|
|
4,170
|
|
|
(1,535
|
)
|
|
2,635
|
|
|
Total intangible assets with definite lives
|
$
|
523,624
|
|
|
$
|
(386,951
|
)
|
|
$
|
136,673
|
|
|
$
|
513,819
|
|
|
$
|
(362,972
|
)
|
|
$
|
150,847
|
|
(8) Accrued Liabilities
The Company’s accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
(In thousands)
|
|
Accrued merchant settlement
|
$
|
158,557
|
|
|
$
|
198,512
|
|
|
Accrued merchant fees
|
34,675
|
|
|
33,551
|
|
|
Accrued taxes
|
32,456
|
|
|
32,899
|
|
|
Accrued compensation
|
15,176
|
|
|
26,147
|
|
|
Accrued processing costs
|
9,949
|
|
|
7,365
|
|
|
Accrued cash management fees
|
9,024
|
|
|
8,882
|
|
|
Accrued armored
|
7,736
|
|
|
7,984
|
|
|
Accrued maintenance
|
7,477
|
|
|
3,911
|
|
|
Accrued interest
|
5,022
|
|
|
3,343
|
|
|
Accrued purchases
|
4,803
|
|
|
6,654
|
|
|
Accrued telecommunications costs
|
2,126
|
|
|
2,187
|
|
|
Other accrued expenses
|
44,232
|
|
|
37,725
|
|
|
Total accrued liabilities
|
$
|
331,233
|
|
|
$
|
369,160
|
|
(9) Long-Term Debt
The Company’s carrying value of long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
(In thousands)
|
|
Revolving credit facility, including swingline credit facility (weighted average combined interest rate of 2.6% and 2.8% as of June 30, 2019 and December 31, 2018, respectively)
|
$
|
212,811
|
|
|
$
|
259,081
|
|
|
1.00% Convertible Senior Notes due December 2020, net of unamortized discount and capitalized debt issuance costs
|
269,520
|
|
|
263,507
|
|
|
5.50% Senior Notes due May 2025, net of capitalized debt issuance costs
|
296,220
|
|
|
295,897
|
|
|
Total long-term debt
|
$
|
778,551
|
|
|
$
|
818,485
|
|
The Convertible Notes with a face value of
$287.5 million
are presented net of unamortized discount and capitalized debt issuance costs of
$18.0 million
and
$24.0 million
as of
June 30, 2019
and
December 31, 2018
, respectively. The
5.50%
Senior Notes due 2025 (the “2025 Notes”) with a face value of
$300.0 million
are presented net of capitalized debt issuance costs of
$3.8 million
and
$4.1 million
as of
June 30, 2019
and
December 31, 2018
, respectively.
Revolving Credit Facility
The Company's second amended and restated credit agreement (the “Credit Agreement”) provides the Company with a
$600.0 million
revolving credit facility maturing on November 19, 2023, which includes an accordion feature that allows the Company to increase the available borrowings under the credit facility to
$700.0 million
by obtaining increased commitments from one or more existing lenders or one or more additional lenders that become party to the Credit Agreement and who consent at such time to providing additional commitments. In addition, the credit facility includes a sub-limit of up to
$150.0 million
for letters of credit and a sub-limit of up to
$50.0 million
for swingline loans.
The total commitments under the credit facility can be borrowed in U.S. dollars, alternative currencies (including Euros, U.K. pounds sterling, Canadian dollars, Australian dollars and South African rand), or a combination thereof. Borrowings (not including swingline loans) accrue interest, at the Company’s option and based on the type of currency borrowed, at the Alternate Base Rate, the Canadian Prime Rate, the Adjusted LIBO Rate, the Canadian Dealer Offered Rate, the Bank Bill Swap Reference Rate or the Johannesburg Interbank Agreed Rate (each, as defined in the Credit Agreement) plus a margin depending on the Company’s most recent Total Net Leverage Ratio (as defined in the Credit Agreement). The margin for Alternative Base Rate loans and Canadian Prime Rate loans varies between
0%
and
0.75%
, and the margin for Adjusted LIBO Rate loans, Canadian Dealer Offered Rate
loans, Bank Bill Swap Reference Rate loans and Johannesburg Interbank Agreed Rate Loans varies between
1.00%
and
1.75%
. Swingline loans denominated in U.S. dollars bear interest at the Alternate Base Rate plus a margin as described above, swingline loans denominated in Canadian dollars bear interest at the Canadian Prime Rate plus a margin as described above and swingline loans denominated in other alternative currencies bear interest at the Overnight Foreign Currency Rate (as defined in the Credit Agreement) plus the applicable margin for the Adjusted LIBO Rate, the Bank Bill Swap Reference Rate or the Johannesburg Interbank Agreed Rate, as applicable.
Each of the Credit Facility Guarantors (as defined in the Credit Agreement) has guaranteed the full and punctual payment of the obligations under the revolving credit facility and the obligations under the revolving credit facility are secured by substantially all of the assets of the Credit Facility Guarantors. In addition, the obligations of the CFC Borrowers (as defined in the Credit Agreement) are guaranteed by the CFC Guarantors and secured by substantially all of the assets of the CFC Guarantors (as defined in the Credit Agreement).
The Credit Agreement contains representations, warranties and covenants that are customary for similar credit arrangements, including, among other things, covenants relating to: (i) financial reporting and notification, (ii) payment of obligations, (iii) compliance with applicable laws, (iv) notification of certain events, and (v) certain covenants relating to, among other things, the sale or transfer of assets, fundamental changes, incurrence or guarantee of indebtedness, liens, investments, hedging transactions with affiliates and sale and leaseback transactions. Financial covenants in the Credit Agreement require the Company to maintain: (i) as of the last day of any fiscal quarter, a Total Net Leverage Ratio (as defined in the Credit Agreement) of no more than
4.25
to 1.00, and (ii) as of the last day of any fiscal quarter, an Interest Coverage Ratio (as defined in the Credit Agreement) of no less than
3.00
to 1.00. Additionally, the Company is limited on the amount of restricted payments; however, the Company may generally make restricted payments so long as no event of default exists at the time of such payment and the Total Net Leverage Ratio is less than
3.75
to 1.00 at the time such restricted payment is made.
As of
June 30, 2019
, the Company had
$212.8 million
of outstanding borrowings under its
$600.0 million
revolving credit facility and was in compliance with all applicable covenants and ratios under the Credit Agreement. The Company also had
$10.7 million
outstanding in letters of credit. The weighted average interest rates on the Company’s outstanding borrowings under the revolving credit facility were
2.6%
and
2.8%
, as of
June 30, 2019
and December 31, 2018, respectively.
$287.5 million
1.00%
Convertible Senior Notes Due 2020 and Related Equity Instruments
On November 19, 2013, Cardtronics, Inc. issued the Convertible Notes at par value. Cardtronics, Inc. received
$254.2 million
in net proceeds from the offering after deducting underwriting fees paid to the initial purchasers and a repurchase of
665,994
of its outstanding common shares concurrent with the offering. Cardtronics, Inc. used a portion of the net proceeds from the offering to fund the net cost of the convertible note hedge transaction, as described below. The convertible note hedge and warrant transactions were entered into concurrent with the pricing of the Convertible Notes. Interest on the Convertible Notes is payable semi-annually in cash in arrears on June 1st and December 1st of each year. Under U.S. GAAP, certain convertible debt instruments that may be settled in cash (or other assets) upon conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. The Company, with assistance from a valuation professional, determined that the fair value of the debt component was
$215.8 million
and the fair value of the embedded option was
$71.7 million
as of the issuance date. The Company recognizes effective interest expense on the debt component and that interest expense effectively accretes the debt component to the total principal amount due at maturity of
$287.5 million
. The effective rate of interest to accrete the debt balance is approximately
5.26%
, which corresponded to the Company’s estimated conventional debt instrument borrowing rate at the date of issuance.
On July 1, 2016, Cardtronics plc, Cardtronics, Inc., and Wells Fargo Bank, National Association, as trustee, entered into a supplemental indenture (the “Convertible Notes Supplemental Indenture”) with respect to the Convertible Notes. The Convertible Notes Supplemental Indenture provides for the unconditional and irrevocable guarantee by Cardtronics plc of the prompt payment, when due, of any amount owed to the holders of the Convertible Notes. The Convertible Notes Supplemental Indenture also provides that, from and after July 1, 2016, the Convertible Notes will be convertible into shares of Cardtronics plc in lieu of common share of Cardtronics, Inc.
The Convertible Notes have a conversion price of
$52.35
per share, which equals a conversion rate of
19.1022
shares per $1,000 principal amount of Convertible Notes, for a total of approximately
5.5 million
shares underlying the debt. The conversion rate, however, is subject to adjustment under certain circumstances. Conversion can occur: (i) any time on or after September 1, 2020, (ii) after March 31, 2014, during any calendar quarter that follows a calendar quarter in which the price of the shares exceeds
135%
of the conversion price for at least
20
days during the
30
consecutive trading-day period ending on the last trading day of the quarter, (iii) during the
ten
consecutive trading-day period following any
five
consecutive trading-day period in which the trading price of the Convertible Notes is less than
98%
of the closing price of the shares multiplied by the applicable conversion
rate on each such trading day, (iv) upon specified distributions to Cardtronics plc’s shareholders upon recapitalizations, reclassifications, or changes in shares, and (v) upon a make-whole fundamental change. A fundamental change is defined as any one of the following: (i) any person or group that acquires
50%
or more of the total voting power of all classes of common equity that is entitled to vote generally in the election of Cardtronics plc’s directors, (ii) Cardtronics plc engages in any recapitalization, reclassification, or changes of common shares as a result of which the shares would be converted into or exchanged for, shares, other securities, other assets, or property, (iii) Cardtronics plc engages in any share exchange, consolidation, or merger where the shares converted into cash, securities, or other property, (iv) the Company engages in certain sales, leases, or other transfers of all or substantially all of the consolidated assets, or (v) Cardtronics plc’s shares are not listed for trading on any U.S. national securities exchange.
None
of the Convertible Notes were deemed convertible as of
June 30, 2019
, and therefore, remain classified in the Long-term debt line in the accompanying Consolidated Balance Sheets at
June 30, 2019
. In future financial reporting periods, the classification of the Convertible Notes may change depending on whether any of the above contingent criteria have been subsequently satisfied.
Upon conversion, holders of the Convertible Notes are entitled to receive cash, shares, or a combination of cash and shares, at the Company’s election. In the event of a change in control, as defined in the indenture under which the Convertible Notes have been issued, holders can require Cardtronics, Inc. to purchase all or a portion of their Convertible Notes for
100%
of the notes’ par value plus any accrued and unpaid interest.
The Company’s interest expense related to the Convertible Notes consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
|
Cash interest per contractual coupon rate
|
$
|
719
|
|
|
$
|
719
|
|
|
$
|
1,438
|
|
|
$
|
1,438
|
|
|
Amortization of note discount
|
2,816
|
|
|
2,673
|
|
|
5,596
|
|
|
5,310
|
|
|
Amortization of debt issuance costs
|
211
|
|
|
190
|
|
|
417
|
|
|
375
|
|
|
Total interest expense related to Convertible Notes
|
$
|
3,746
|
|
|
$
|
3,582
|
|
|
$
|
7,451
|
|
|
$
|
7,123
|
|
The Company’s carrying value of the Convertible Notes consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
(In thousands)
|
|
Principal balance
|
$
|
287,500
|
|
|
$
|
287,500
|
|
|
Unamortized discount and capitalized debt issuance costs
|
(17,980
|
)
|
|
(23,993
|
)
|
|
Net carrying amount of Convertible Notes
|
$
|
269,520
|
|
|
$
|
263,507
|
|
In connection with the issuance of the Convertible Notes, Cardtronics, Inc. entered into separate convertible note hedge and warrant transactions to reduce the potential dilutive impact upon the conversion of the Convertible Notes. The net effect of these transactions effectively raised the price at which dilution would occur from the
$52.35
initial conversion price of the Convertible Notes to
$73.29
. Pursuant to the convertible note hedge, Cardtronics, Inc. purchased call options granting Cardtronics Inc. the right to acquire up to approximately
5.50 million
common shares with an initial strike price of
$52.35
. The call options automatically become exercisable upon conversion of the Convertible Notes, and will terminate on the second scheduled trading day immediately preceding December 1, 2020. Cardtronics Inc. also sold to the initial purchasers warrants to acquire up to approximately
5.50 million
common shares with a strike price of
$73.29
. The warrants will expire incrementally on a series of expiration dates subsequent to the maturity date of the Convertible Notes through August 30, 2021. If the conversion price of the Convertible Notes remains between the strike prices of the call options and warrants, Cardtronics plc’s shareholders will not experience any dilution in connection with the conversion of the Convertible Notes; however, to the extent that the price of the shares exceeds the strike price of the warrants on any or all of the series of related expiration dates of the warrants, Cardtronics plc would be required to issue additional shares to the warrant holders. The amounts allocated to both the note hedge and warrants were recorded in the Shareholders’ equity section in the accompanying Consolidated Balance Sheets.
$300.0 million
5.50%
Senior Notes Due 2025
On April 4, 2017, in a private placement offering, Cardtronics Inc. and Cardtronics USA, Inc. (the “2025 Notes Issuers”) issued
$300.0 million
in aggregate principal amount of the 2025 Notes pursuant to an indenture dated April 4, 2017 (the “2025 Notes Indenture”) among the 2025 Notes Issuers, Cardtronics plc, and certain of its subsidiaries, as guarantors (each, a “2025 Notes Guarantor”), and Wells Fargo Bank, National Association, as trustee.
Interest on the 2025 Notes accrues from April 4, 2017, the date of issuance, at the rate of
5.50%
per annum. Interest on the 2025 Notes is payable semi-annually in cash in arrears on May 1st and November 1st of each year with the initial payment having commenced on November 1, 2017.
The 2025 Notes and the related guarantees (the “2025 Guarantees”) are the general unsecured senior obligations of each of the 2025 Notes Issuers and the 2025 Notes Guarantors, respectively, and rank: (i) equally in right of payment with all of the 2025 Notes Issuers’ and the 2025 Notes Guarantors’ existing and future senior indebtedness and (ii) senior in right of payment to all of the 2025 Notes Issuers’ and the 2025 Notes Guarantors’ future subordinated indebtedness. The 2025 Notes and the 2025 Guarantees are effectively subordinated to any of the 2025 Notes Issuers’ and the 2025 Notes Guarantors’ existing and future secured debt to the extent of the collateral securing such debt, including all borrowings under the Company’s revolving credit facility. The 2025 Notes are structurally subordinated to all liabilities of any of Cardtronics plc’s subsidiaries (excluding the 2025 Notes Issuers) that do not guarantee the 2025 Notes.
The 2025 Notes contain covenants that, among other things, limit the 2025 Notes Issuers’ ability and the ability of Cardtronics plc and certain of its restricted subsidiaries to incur or guarantee additional indebtedness, make certain investments, or pay dividends or distributions on Cardtronics plc’s common shares or repurchase common shares or make certain other restricted payments, consolidate or merge with or into other companies, conduct asset sales, restrict dividends or other payments by restricted subsidiaries, engage in transactions with affiliates or related persons, and create liens.
Obligations under the 2025 Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by Cardtronics plc and certain of its subsidiaries and certain of its future subsidiaries, with the exception of Cardtronics plc’s immaterial subsidiaries and CFC Guarantors (as defined in the Credit Agreement). There are no significant restrictions on the ability of Cardtronics plc to obtain funds from Cardtronics Inc., Cardtronics USA, Inc., or the other 2025 Notes Guarantors by dividend or loan. None of the 2025 Notes Guarantors’ assets represent restricted assets pursuant to Rule 4-08(e)(3) of Regulation S-X.
The 2025 Notes are subject to certain automatic customary releases with respect to the 2025 Notes Guarantors (other than Cardtronics plc, Cardtronics Holdings Limited, and CATM Holdings LLC), including the sale, disposition, or transfer of the common shares or substantially all of the assets of such 2025 Notes Guarantor, designation of such 2025 Notes Guarantor as unrestricted in accordance with the 2025 Notes Indenture, exercise of the legal defeasance option or the covenant defeasance option, liquidation, or dissolution of such 2025 Notes Guarantor. The 2025 Notes Guarantors, including Cardtronics plc, may not sell or otherwise dispose of all or substantially all of their properties or assets to, or consolidate with or merge into, another company if such a sale would cause a default under the 2025 Notes Indenture and certain other specified requirements under the 2025 Notes Indenture are not satisfied.
(10) Asset Retirement Obligations
Asset retirement obligations (“ARO”) consist primarily of costs to deinstall the Company’s ATMs and, in some cases, restore the ATM sites to their original condition, which are estimated based on current market rates. In most cases, the Company is contractually required to perform this deinstallation of its owned ATMs, and in some cases, site restoration work. For each group of similar ATM types, the Company has recognized the estimated fair value of the ARO as a liability in the accompanying Consolidated Balance Sheets and capitalized that cost as part of the cost basis of the related asset. The related assets are depreciated on a straight-line basis over the assets estimated useful life, which is the estimated average time period that an ATM is installed in a location before being deinstalled, and the related liabilities are accreted to their full value over the same period of time.
The changes in the Company’s ARO liability consisted of the following
(in thousands)
:
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations at December 31, 2018
|
$
|
61,223
|
|
|
Additional obligations
|
2,214
|
|
|
Accretion expense
|
910
|
|
|
Payments
|
(3,080
|
)
|
|
Foreign currency translation adjustments
|
(166
|
)
|
|
Asset retirement obligations at June 30, 2019
|
61,101
|
|
|
Less: current portion of asset retirement obligations
|
6,874
|
|
|
Asset retirement obligations, excluding current portion, at June 30, 2019
|
$
|
54,227
|
|
For additional information related to the Company’s ARO with respect to its fair value measurements, see
Note 14. Fair Value Measurements
.
(11) Leases
The Company leases facilities consisting of office and warehouse space as well as vehicles and office equipment. In addition, certain ATM placement agreements are deemed to contain an operating lease of merchant space under the Lease Standard. The Company's facility leases have various remaining terms extending up to
12 years
, some of which may include one or more options to extend the associated lease term by up to
5
-
10 years
, and some may include options for the Company or the lessor to terminate the leases prior to the end of the lease term. The exercise of lease renewal options is at the Company's discretion. From time to time, the Company may sublease office or warehouse space. This sublease activity is currently not significant. The Company's vehicle and office equipment leases currently have remaining lease terms extending up to
4 years
and these leases typically have original terms of approximately
4
-
6 years
. The Company has not historically extended its vehicle and office equipment leases beyond their original term. Similarly, the Company has not historically subleased these assets. The Company's ATM placement agreements that are deemed to contain an operating lease of merchant space under the Lease Standard have remaining terms extending from less than
1 year
to more than
5 years
. These consist of semi-permanent or through-the-wall placements of company-owned ATMs at merchant or financial institution locations. These arrangements are deemed to contain a lease as our counterparty lacks the practical ability to substitute alternative space. The renewal provisions under ATM placement agreements vary.
The Company's ATM placement agreements that are deemed to contain an operating lease generally require fixed and/or variable merchant commissions. The variable payments are based on the type and volume of transactions conducted on the ATMs at each respective location. In addition, the merchant commissions may also change, in accordance with the terms of these agreements, responsive to changes in interchange fees or interest rates. Certain Company facility leases require variable payments based on an index or based on external market rates. The Company's vehicle and office equipment leases do not generally include variable payments.
The Company recognizes the accounting impact of lease extension options when reasonably certain that a right to extend a lease will be exercised. The Company does not provide residual value guarantees within or in conjunction with any of its leases. As of June 30, 2019, all material leases of facilities, vehicles, office equipment, and merchant space had commenced.
The Company is not currently party to any significant finance leases. As a result, the net assets recorded under finance leases and the associated liabilities are not material.
See
Note 2. New Accounting Pronouncements
for the accounting impact of the Company's adoption of ASC 842-Leases on January 1, 2019.
Balance sheet information related to operating leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
June 30, 2019
|
|
January 1, 2019 (Upon Adoption)
|
|
Assets
|
|
|
|
(In thousands)
|
|
Operating lease assets
|
|
Operating lease assets
|
|
$
|
81,355
|
|
|
$
|
85,068
|
|
|
Total operating lease assets
|
|
|
|
$
|
81,355
|
|
|
$
|
85,068
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Operating lease liabilities
|
|
Current portion of other long-term liabilities
|
|
$
|
19,435
|
|
|
$
|
20,602
|
|
|
Noncurrent
|
|
|
|
|
|
|
|
|
Noncurrent operating lease liabilities
|
|
Noncurrent operating lease liabilities
|
|
73,246
|
|
|
74,746
|
|
|
Total operating lease liabilities
|
|
|
|
$
|
92,681
|
|
|
$
|
95,348
|
|
Operating lease costs during the three and six months ended
June 30, 2019
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
Classification
|
|
June 30, 2019
|
|
June 30, 2019
|
|
|
|
|
|
(In thousands)
|
|
Operating lease costs
|
|
Cost of ATM operating revenues
(1)
|
|
$
|
6,900
|
|
|
$
|
14,290
|
|
|
Operating lease costs
|
|
Selling, general, and administrative expenses
(2)
|
|
1,720
|
|
|
3,504
|
|
|
Total operating lease cost
|
|
|
|
$
|
8,620
|
|
|
$
|
17,794
|
|
|
|
|
|
(1)
|
Includes the fixed and variable cost of facilities, vehicles, and equipment that are deemed direct operating lease costs. The variable lease cost associated with these leases was not significant. In addition, includes the fixed and variable cost associated with our ATM placement agreements that are deemed to contain a lease. The variable cost associated with these placements was approximately
$1.1 million
and
$2.2 million
in the three and six months ended June 30, 2019, respectively.
|
|
|
|
|
(2)
|
Includes the fixed and variable cost of facilities, vehicles, and equipment that are deemed general and administrative operating lease costs. The variable lease cost associated with these leases was not significant.
|
The following table presents the weighted-average remaining term and weighted-average discount rate associated with the Company's operating leases.
|
|
|
|
|
|
|
|
|
|
|
Lease Term and Discount Rate
|
|
June 30, 2019
|
|
January 1, 2019 (Upon Adoption)
|
|
Weighted-average remaining lease term (years)
|
|
|
|
|
|
Operating leases
|
|
6.9
|
|
|
7.1
|
|
|
Weighted-average discount rate
|
|
|
|
|
|
|
|
Operating leases
|
|
3.34
|
%
|
|
3.45
|
%
|
Additional lease information is summarized below:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
|
(In thousands)
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
Operating cash outflows resulting from payments of operating lease liabilities
|
|
$
|
10,597
|
|
|
|
|
|
|
New operating lease assets recognized during the period
|
|
$
|
7,175
|
|
During the
six
months ended
June 30, 2019
, the Company made
$10.6 million
in payments to satisfy the recognized operating lease obligations, approximately
$7 million
of which related to ATM placement agreements. The Company also recognized
$7.2 million
in new operating lease assets primarily consisting of equipment leases and ATM placement agreements that are deemed to contain an operating lease. Comparative prior period information is not presented above as we adopted the Lease Standard on January 1, 2019 using this effective date as the date of initial application.
The following table presents the
June 30, 2019
undiscounted cash flows associated with the Company's recognized operating lease liabilities in the next five years and thereafter.
|
|
|
|
|
|
|
|
|
Maturity of Recognized Operating Lease Liabilities
|
|
Operating
Lease Payments
(1)
|
|
|
|
(In thousands)
|
|
2019
|
|
$
|
10,310
|
|
|
2020
|
|
21,102
|
|
|
2021
|
|
19,058
|
|
|
2022
|
|
11,729
|
|
|
2023
|
|
8,146
|
|
|
After 2023
|
|
35,977
|
|
|
Total lease payments
|
|
106,322
|
|
|
Less: Interest
(2)
|
|
(13,641
|
)
|
|
Present value of operating lease liabilities
(3)
|
|
$
|
92,681
|
|
|
|
|
|
(1)
|
Operating lease payments reflect the Company's current fixed obligations under the operating lease agreements. The Company has identified no extensions that are reasonably certain of being exercised and there are no significant lease agreements that have been signed and not yet commenced.
|
|
|
|
|
(2)
|
Calculated using the estimated incremental borrowing rate for each lease.
|
|
|
|
|
(3)
|
Includes current operating lease liabilities of
$19.4 million
and noncurrent operating lease liabilities of
$73.2 million
.
|
The following table presents the fixed payment obligations under the Company’s operating leases and ATM placement agreements as of December 31, 2018, as presented in the Company's Annual Report on Form 10-K for the year ended December 31, 2018. The fixed payment obligations associated with our ATM placement agreements that were deemed not to contain a lease because our counterparty has the practical ability to substitute alternative space, are not included in the recognized operating lease liabilities.
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
2019
|
$
|
36,590
|
|
|
2020
|
29,760
|
|
|
2021
|
24,990
|
|
|
2022
|
13,081
|
|
|
2023
|
8,523
|
|
|
Thereafter
|
39,222
|
|
|
Total
|
$
|
152,166
|
|
(12) Other Liabilities
The Company’s other liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
(In thousands)
|
|
Current portion of other long-term liabilities
|
|
|
|
|
Operating lease liabilities
|
$
|
19,435
|
|
|
$
|
—
|
|
|
Asset retirement obligations
|
6,874
|
|
|
6,810
|
|
|
Acquisition related contingent consideration
|
6,828
|
|
|
—
|
|
|
Interest rate swap and cap contracts
|
6,680
|
|
|
396
|
|
|
Deferred revenue
|
4,103
|
|
|
4,109
|
|
|
Other
|
8,427
|
|
|
8,951
|
|
|
Total current portion of other long-term liabilities
|
$
|
52,347
|
|
|
$
|
20,266
|
|
|
|
|
|
|
|
Noncurrent portion of other long-term liabilities
|
|
|
|
|
|
Acquisition related contingent consideration
|
$
|
23,508
|
|
|
$
|
38,266
|
|
|
Interest rate swap and cap contracts
|
12,488
|
|
|
2,894
|
|
|
Deferred revenue
|
4,090
|
|
|
4,319
|
|
|
Other
|
14,553
|
|
|
22,261
|
|
|
Total noncurrent portion of other long-term liabilities
|
$
|
54,639
|
|
|
$
|
67,740
|
|
As of
June 30, 2019
and December 31, 2018, the Acquisition related contingent consideration lines consisted of the estimated fair value of the contingent consideration associated with the Spark acquisition.
(13) Derivative Financial Instruments
Risk Management Objectives of Using Derivatives
The Company is exposed to interest rate risk associated with its vault cash rental obligations and, to a lesser extent, borrowings under its revolving credit facility. The Company utilizes varying notional amount interest rate swap contracts and interest rate cap agreements (“Interest Rate Derivatives”) to manage the interest rate risk associated with its vault cash rental obligations in the U.S., Canada, the U.K., and Australia. The Company has also entered into an interest rate swap to mitigate its exposure to floating interest rates on its revolving credit facility borrowings outstanding. The Company is exposed to foreign currency exchange rate risk with respect to its operations outside the U.S. The Company uses foreign currency forward contracts to hedge its foreign exchange rate risk associated with certain anticipated transactions. Currently, the Company has outstanding foreign currency forward contracts for the purchase of approximately
$1.8 million
Canadian dollars with durations that extend through September 30, 2019.
The Company’s Interest Rate Derivatives serve to mitigate interest rate risk by converting a portion of the Company’s monthly floating-rate vault cash rental payments to either monthly fixed-rate vault cash rental payments or to vault cash rental payments with a capped rate. Typically, the Company receives monthly floating-rate payments from its Interest Rate Derivative counterparties that correspond to, in all material respects, the monthly floating-rate payments required by the Company to its vault cash rental providers for the portion of the average outstanding vault cash balances that have been hedged. The floating-rate payments may or may not be capped or limited. In return, the Company pays its counterparties a monthly fixed-rate amount based on the same notional amounts outstanding. By converting the vault cash rental obligation interest rate from a floating-rate to a fixed-rate or a capped rate, the impact of favorable and unfavorable changes in future interest rates on the monthly vault cash rental payments recognized in the Cost of ATM operating revenues line in the accompanying Consolidated Statement of Operations, has been reduced.
There is never an exchange of the underlying principal or notional amounts associated with the interest rate swap contracts described above. Additionally,
none
of the Company’s existing interest rate swap contracts contain credit-risk-related contingent features.
Accounting Policy
The Interest Rate Derivatives discussed above are used by the Company to hedge exposure to variability in expected future cash flows attributable to a particular risk; therefore, they are designated and qualify as cash flow hedging instruments. The Company does not currently hold any derivative instruments not designated as cash flow hedges, fair value hedges, or hedges of a net investment in a foreign operation.
In accordance with the new Hedging Standard, the Company reports the gain or loss related to each highly effective cash flow hedging instrument, including any ineffectiveness, as a component of Accumulated other comprehensive loss, net within the accompanying Consolidated Balance Sheets and reclassifies the gain or loss into earnings within the Cost of ATM operating revenues, Interest expense, net, or Other expense (income) lines of the accompanying Consolidated Statements of Operations in the same period or periods during which the hedged transaction affects and has been forecasted in earnings. The classification of the gain or loss is determined based on the associated hedge designation.
As discussed above, the Company generally utilizes fixed-for-floating Interest Rate Derivatives where the underlying pricing terms of the cash flow hedging instrument agree, in all material respects, with the pricing terms of the vault cash rental obligations to the Company’s vault cash providers. Therefore, the amount of ineffectiveness associated with the Interest Rate Derivatives has historically been immaterial. If the Company concludes 1) the vault cash obligations that have been hedged are no longer probable or 2) that underlying terms of the vault cash rental agreements have changed such that they do not sufficiently agree to the pricing terms of the Interest Rate Derivatives, the Interest Rate Derivative contracts would be deemed ineffective. The Company does not currently anticipate terminating or modifying terms of its existing derivative instruments prior to their expiration dates.
Accordingly, the Company recognizes all of its Interest Rate Derivative contracts as assets or liabilities in the accompanying Consolidated Balance Sheets at fair value and any changes in the fair values of the related Interest Rate Derivative contracts have been reported in Accumulated other comprehensive loss, net within the accompanying Consolidated Balance Sheets. The unrealized gains and losses related to the interest rate swap contracts have been reported net of taxes in Accumulated other comprehensive loss, net within the accompanying Consolidated Balance Sheets. For additional information related to the Company’s interest rate swap contracts with respect to its fair value measurements, see
Note 14. Fair Value Measurements
.
Summary of Outstanding Interest Rate Derivatives
The notional amounts, weighted average fixed rates, and terms associated with our interest rate swap contracts and cap agreement that are currently in place in the U.S., Canada, the U.K, and Australia (as of the date of the issuance of this 2019 Form 10-Q) are as follows:
Outstanding Interest Rate Derivatives Associated with Vault Cash Rental Obligations
North America – Interest Rate Swap Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts
U.S. $
|
|
Weighted Average Fixed Rate
|
|
Notional Amounts
CAD$
|
|
Weighted Average Fixed Rate
|
|
Term
|
|
(In millions)
|
|
|
|
(In millions)
|
|
|
|
|
|
$
|
1,000
|
|
|
2.06%
|
|
CAD
|
|
$
|
125
|
|
|
2.46%
|
|
July 1, 2019 – December 31, 2019
|
|
$
|
1,000
|
|
|
2.06%
|
|
CAD
|
|
$
|
125
|
|
|
2.46%
|
|
January 1, 2020 – December 31, 2020
|
|
$
|
600
|
|
|
1.95%
|
|
CAD
|
|
$
|
125
|
|
|
2.46%
|
|
January 1, 2021 – December 31, 2021
|
|
$
|
400
|
|
|
1.46%
|
|
|
|
|
|
|
|
January 1, 2022 – December 31, 2022
|
North America – Interest Rate Cap Contracts
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts
U.S. $
|
|
Cap Rate
(1)
|
|
Term
|
|
(In millions)
|
|
|
|
|
|
$
|
|
200
|
|
|
3.25%
|
|
January 1, 2021 – December 31, 2023
|
(1)
Maximum amount of interest to be paid each year as per terms of cap. Cost of cap is amortized through vault cash rental expense over term of cap.
Europe & Africa – Interest Rate Swap Contracts
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts
|
|
Weighted Average
|
|
|
|
U.K. £
|
|
Fixed Rate
|
|
Term
|
|
(In millions)
|
|
|
|
|
|
£
|
550
|
|
|
0.90%
|
|
July 1, 2019 – December 31, 2019
|
|
£
|
500
|
|
|
0.94%
|
|
January 1, 2020 – December 31, 2020
|
|
£
|
500
|
|
|
0.94%
|
|
January 1, 2021 – December 31, 2021
|
|
£
|
500
|
|
|
0.94%
|
|
January 1, 2022 – December 31, 2022
|
Australia & New Zealand – Interest Rate Swap Contracts
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts
AUS $
|
|
Weighted Average
Fixed Rate
|
|
Term
|
|
(In millions)
|
|
|
|
|
|
$
|
150
|
|
|
1.95%
|
|
July 1, 2019 – December 31, 2019
|
|
$
|
100
|
|
|
1.95%
|
|
January 1, 2020 – December 31, 2020
|
Outstanding Interest Rate Derivatives Associated with Revolving Credit Facility Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts
U.K. £
|
|
Weighted Average Fixed Rate
|
|
Term
|
|
(In millions)
|
|
|
|
|
|
£
|
80
|
|
|
0.95
|
%
|
|
July 1, 2019 – January 1, 2020
|
|
£
|
50
|
|
|
0.95
|
%
|
|
January 2, 2020 – January 1, 2021
|
The following tables depict the effects of the use of the Company’s derivative interest rate swap contracts in the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations.
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
Asset (Liability) Derivative Instruments
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
|
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
|
Prepaid expenses, deferred costs, and other current assets
|
|
$
|
1,273
|
|
|
Prepaid expenses, deferred costs, and other current assets
|
|
$
|
4,489
|
|
|
Interest rate swap contracts
|
|
Prepaid expenses, deferred costs, and other noncurrent assets
|
|
549
|
|
|
Prepaid expenses, deferred costs, and other noncurrent assets
|
|
15,316
|
|
|
Interest rate swap contracts
|
|
Current portion of other long-term liabilities
|
|
(6,680
|
)
|
|
Current portion of other long-term liabilities
|
|
(396
|
)
|
|
Interest rate swap and cap contracts
|
|
Other long-term liabilities
|
|
(12,488
|
)
|
|
Other long-term liabilities
|
|
(2,894
|
)
|
|
Total derivative instruments, net
|
|
|
|
$
|
(17,346
|
)
|
|
|
|
$
|
16,515
|
|
Statements of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Derivatives in Cash Flow Hedging Relationship
|
|
Amount of Gain (Loss) Recognized in
Accumulated Other Comprehensive Loss on
Derivative Instruments
|
|
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
|
|
Amount of (Gain) Loss Reclassified from
Accumulated Other Comprehensive Loss
into Income
|
|
|
|
2019
|
|
2018
|
|
|
|
2019
|
|
2018
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
|
Interest rate swap contracts
|
|
$
|
(13,474
|
)
|
|
$
|
747
|
|
|
Cost of ATM operating revenues
|
|
$
|
120
|
|
|
$
|
(1,283
|
)
|
|
Interest rate swap contracts
|
|
(69
|
)
|
|
—
|
|
|
Interest expense, net
|
|
(57
|
)
|
|
—
|
|
|
Total
|
|
$
|
(13,543
|
)
|
|
$
|
747
|
|
|
|
|
$
|
63
|
|
|
$
|
(1,283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
Derivatives in Cash Flow Hedging Relationship
|
|
Amount of Gain (Loss) Recognized in
Accumulated Other Comprehensive Loss on
Derivative Instruments
|
|
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
|
|
Amount of (Gain) Loss Reclassified from
Accumulated Other Comprehensive Loss
into Income
|
|
|
|
2019
|
|
2018
|
|
|
|
2019
|
|
2018
|
|
|
|
(In thousands)
|
|
|
|
(In thousands)
|
|
Interest rate swap contracts
|
|
$
|
(25,583
|
)
|
|
$
|
15,519
|
|
|
Cost of ATM operating revenues
|
|
$
|
458
|
|
|
$
|
(3,872
|
)
|
|
Interest rate swap contracts
|
|
(381
|
)
|
|
—
|
|
|
Interest expense, net
|
|
(113
|
)
|
|
—
|
|
|
Total
|
|
$
|
(25,964
|
)
|
|
$
|
15,519
|
|
|
|
|
$
|
345
|
|
|
$
|
(3,872
|
)
|
As of
June 30, 2019
, the Company expects to reclassify
$5.4 million
of net derivative-related losses contained in the Accumulated comprehensive loss, net within its accompanying Consolidated Balance Sheets into earnings during the next twelve months concurrent with the recording of the related vault cash rental expense amounts.
The following tables show the impact of our cash flow hedge accounting relationships on the statement of operations for the three and six months ended
June 30, 2019
and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location and Amount of Loss (Gain) Recognized in Income on Cash Flow Hedging Relationships in the Three Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(In thousands)
|
|
|
|
Cost of ATM Operating Revenues
|
|
Interest Expense, net
|
|
Cost of ATM Operating Revenues
|
|
Total amount of expense presented in the statements of operations in which the effects of cash flow hedges are recorded
|
|
$
|
208,081
|
|
|
$
|
6,871
|
|
|
$
|
215,353
|
|
|
|
|
|
|
|
|
|
|
Amount of loss (gain) reclassified from accumulated other comprehensive income into income
|
|
$
|
120
|
|
|
$
|
(57
|
)
|
|
$
|
(1,283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location and Amount of Loss (Gain) Recognized in Income on Cash Flow Hedging Relationships in the Six Months Ended June 30,
|
|
|
|
2019
|
|
2018
|
|
|
|
(In thousands)
|
|
|
|
Cost of ATM Operating Revenues
|
|
Interest Expense, net
|
|
Cost of ATM Operating Revenues
|
|
Total amount of expense presented in the statements of operations in which the effects of cash flow hedges are recorded
|
|
$
|
414,239
|
|
|
$
|
13,514
|
|
|
$
|
430,843
|
|
|
|
|
|
|
|
|
|
|
Amount of loss (gain) reclassified from accumulated other comprehensive income into income
|
|
$
|
458
|
|
|
$
|
(113
|
)
|
|
$
|
(3,872
|
)
|
(14) Fair Value Measurements
The following tables provide the financial assets and liabilities carried at fair value measured on a recurring basis as of
June 30, 2019
and
December 31, 2018
using the fair value hierarchy prescribed by U.S. GAAP. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 refers to fair values estimated using significant non-observable inputs. An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at June 30, 2019
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets associated with interest rate swap contracts
|
$
|
1,822
|
|
|
$
|
—
|
|
|
$
|
1,822
|
|
|
$
|
—
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Liabilities associated with interest rate swap contracts
|
$
|
(19,168
|
)
|
|
$
|
—
|
|
|
$
|
(19,168
|
)
|
|
$
|
—
|
|
|
Liabilities associated with acquisition related contingent consideration
|
$
|
(30,336
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(30,336
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2018
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets associated with interest rate swap contracts
|
$
|
19,805
|
|
|
$
|
—
|
|
|
$
|
19,805
|
|
|
$
|
—
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Liabilities associated with interest rate swap contracts
|
$
|
(3,290
|
)
|
|
$
|
—
|
|
|
$
|
(3,290
|
)
|
|
$
|
—
|
|
|
Liabilities associated with acquisition related contingent consideration
|
$
|
(38,266
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(38,266
|
)
|
As of
June 30, 2019
and
December 31, 2018
, liabilities associated with Level 2 interest rate swap contracts also includes an insignificant amount related to foreign currency forward contracts.
Below are descriptions of the Company’s valuation methodologies for assets and liabilities measured at fair value. The methods described below may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Cash and cash equivalents, accounts and notes receivable, net of allowance for doubtful accounts, prepaid expenses, deferred costs, and
other
current assets, accounts payable, accrued liabilities, and other current liabilities.
These financial instruments are not carried at fair value, but are carried at amounts that approximate fair value due to their short-term nature and generally negligible credit risk.
Acquisition related intangible assets.
The estimated fair values of acquisition related intangible assets are valued based on a discounted cash flows analysis using significant non-observable (Level 3) inputs. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An assessment of non-amortized intangible assets is performed on an annual basis or more frequently based on the occurrence of events that might indicate a potential impairment.
Acquisition related contingent consideration.
Liabilities from acquisition related contingent consideration are estimated using a Monte Carlo simulation and market observable, as well as internal projections, and other significant non-observable inputs (Level 3) based on the Company’s best estimate of future operational results upon which the payment of these obligations are contingent. Future changes to the estimated contingent liability either higher or lower may occur as the estimated internal projections and other significant non-observable inputs for the calculation become available and are updated as deemed necessary. These future updates could result in a material change in the estimated contingent liability. The estimates and significant non-observable inputs may differ from actual results. As the estimated contingent liability is based upon performance relative to certain agreed upon earnings targets in 2019 and 2020, the performance based payments are expected to occur in 2020 and 2021, respectively. As of
June 30, 2019
, the estimated fair value of the Company’s acquisition related contingent consideration liability was approximately
$30.3 million
. Based on current forecasts, the Company estimates that approximately
$6.8 million
of the total aggregate estimated liability will be paid in the first quarter of 2020 with the remaining amount being paid in the first quarter of 2021. During the three and six months ended
June 30, 2019
, the Company recognized an
$0.5 million
gain and
$8.7 million
gain in Other (income) expense to revise the estimated fair value of the contingent consideration liability. The foreign exchange losses
recognized during the three and six months ended
June 30, 2019
, to remeasure the South African Rand denominated liability to U.S. Dollars were both approximately
$0.8 million
. Both the revision to the estimated fair value and the foreign exchange adjustments are included in the Other income line in the Consolidated Statements of Operations.
Long-term debt
. The carrying amount of the long-term debt balance related to borrowings under the Company’s revolving credit facility approximates fair value due to the fact that any outstanding borrowings are subject to short-term floating interest rates. As of
June 30, 2019
, the fair value of our 2020 Notes and 2025 Notes totaled
$277.7 million
and
$298.7 million
respectively, based on the quoted prices in markets that are not active inputs (Level 2) for these notes as of that date. For additional information related to long-term debt, see
Note 9. Long-Term Debt.
Additions to asset retirement obligations liability.
The Company estimates the fair value of additions to its ARO liability using expected discounted future cash flow at the Company’s credit-adjusted risk-free interest rate. Liabilities added to the ARO are measured at fair value at the time of the asset installations using significant non-observable (Level 3) inputs. These liabilities are evaluated periodically based on estimated current fair value. Amounts added to the ARO liability during the six months ended
June 30, 2019
totaled
$2.2 million
.
Interest rate derivatives and foreign currency forward contracts.
As of
June 30, 2019
, the recognized fair value of the Company’s Interest Rate Derivatives resulted in an asset of
$1.8 million
and a liability of
$19.1 million
(including an insignificant amount related to foreign currency forward contracts). These financial instruments are carried at fair value and are valued using pricing models based on significant other observable inputs (Level 2), while taking into account the creditworthiness of the party that is in the liability position with respect to each trade. For additional information related to the valuation process of this asset or liability, see
Note 13. Derivative Financial Instruments
.
(15) Commitments and Contingencies
Legal Matters
The Company is subject to various legal proceedings and claims arising in the ordinary course of its business. The Company has provided reserves where necessary for contingent liabilities, based on ASC 450, contingencies, when it has determined that a liability is probable and reasonably estimable. The Company’s management does not expect the outcome in any legal proceedings or claims, individually or collectively, to have a material adverse financial or operational impact on the Company. Additionally, the Company currently expenses all legal costs as they are incurred.
Other Commitments
Asset retirement obligations.
The Company’s ARO consist primarily of costs to deinstall the Company’s ATMs and to restore the ATM sites to their original condition. In most cases, the Company is contractually required to perform this deinstallation of its owned ATMs, and in some cases, site restoration work. As of
June 30, 2019
, the Company had
$61.1 million
accrued for these liabilities. For additional information, see
Note 10. Asset Retirement Obligations
.
Acquisition related contingent consideration.
As of
June 30, 2019
, the Company had
$30.3 million
accrued for the Spark acquisition related contingent consideration.
For additional information related to the Spark acquisition related contingent consideration, s
ee Note 14. Fair Value Measurements.
(16) Income Taxes
The Company’s income tax expense based on income before income taxes for the periods presented was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30, 2019
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(In thousands, excluding percentages)
|
|
Income tax expense
|
$
|
3,565
|
|
|
$
|
2,586
|
|
|
$
|
6,694
|
|
|
$
|
2,555
|
|
|
Effective tax rate
|
25.4
|
%
|
|
40.7
|
%
|
|
31.2
|
%
|
|
72.1
|
%
|
The Company’s income tax expense for the three months ended
June 30, 2019
totaled
$3.6 million
, resulting in an effective tax rate of
25.4%
, compared to an expense of
$2.6 million
, and an effective tax rate of
40.7%
, for the same period of 2018. The Company’s income tax expense for the six months ended
June 30, 2019
totaled
$6.7 million
, resulting in an effective tax rate of
31.2%
, compared to an expense of
$2.6 million
, and an effective tax rate of
72.1%
, for the same period of 2018. The increase in the tax expense for the three months ended
June 30, 2019
, compared to the same period of 2018, was primarily attributable to increased profits in the current period, partially offset by tax benefits from the utilization of interest deductions disallowed in the prior year.
During quarter ended June 30, 2019, the Company recorded an uncertain tax benefit of
$2.4 million
, of which
$1.5 million
was for net operating losses generated in prior years with an associated valuation allowance, and
$0.5 million
was for a deferred tax asset for the related US federal tax benefit. A net amount of
$0.4 million
of this uncertain tax benefit was recorded to tax expense for the quarter ended June 30, 2019.
The Company assesses the need for any deferred tax asset valuation allowances at the end of each reporting period. The determination of whether a valuation allowance for deferred tax assets is needed is subject to considerable judgment and requires an evaluation of all available positive and negative evidence. The Company’s assessment concluded that maintaining valuation allowances on deferred tax assets in Australia, Canada, Mexico, and Spain was appropriate, as the Company currently believes that it is more likely than not that the related deferred tax assets will not be realized.
The deferred tax expenses and benefits associated with the Company’s net unrealized gains and losses on derivative instruments and foreign currency translation adjustments have been recorded in the Accumulated other comprehensive loss, net line in the accompanying Consolidated Balance Sheets.
(17) Segment Information
As of
June 30, 2019
, the Company’s operations consisted of its North America, Europe & Africa, and Australia & New Zealand segments. The Company’s ATM operations in the U.S., Canada, Mexico, and Puerto Rico are included in its North America segment. The North America segment also includes the Company’s transaction processing operations, which service its internal ATM operations, along with external customers. The Company’s ATM operations in the U.K., Ireland, Germany, Spain, and South Africa are included in its Europe & Africa segment, along with i-design (the Company’s ATM advertising business based in the U.K.). The Company’s Australia & New Zealand segment consists of its ATM operations in these two countries. Corporate primarily includes the Company’s corporate general and administrative expenses. While each of the reporting segments provides similar kiosk-based and/or ATM-related services, each segment is managed separately and requires different marketing and business strategies.
Management uses Adjusted EBITDA and Adjusted EBITA, together with U.S. GAAP measures, to manage and measure the performance of its segments. Management believes Adjusted EBITDA and Adjusted EBITA are useful measures as they allow management to more effectively evaluate the performance of the business and compare its results of operations from period to period without regard to financing methods, capital structure, or non-recurring costs as defined by the Company. Adjusted EBITDA and Adjusted EBITA exclude amortization of intangible assets, share-based compensation expense, acquisition and divestiture-related expenses, certain non-operating expenses, (if applicable in a particular period), certain costs not anticipated to occur in future periods, gains or losses on disposal and impairment of assets, the Company’s obligations for the payment of income taxes, interest expense, and other obligations such as capital expenditures, and an adjustment for noncontrolling interests. Additionally, Adjusted EBITDA excludes depreciation and accretion expense. Depreciation and accretion expense and amortization of intangible assets are excluded
as these amounts can vary substantially from company to company within the Company’s industry depending upon accounting methods and book values of assets, capital structures, and the methods by which the assets were acquired.
Adjusted EBITDA and Adjusted EBITA, as defined by the Company, are non-GAAP financial measures provided as a complement to financial results prepared in accordance with U.S. GAAP and may not be comparable to similarly-titled measures reported by other companies. In evaluating the Company’s performance as measured by Adjusted EBITDA and Adjusted EBITA, management recognizes and considers the limitations of these measurements. Accordingly, Adjusted EBITDA and Adjusted EBITA are only two of the measurements that management utilizes. Therefore, Adjusted EBITDA and Adjusted EBITA should not be considered in isolation or as a substitute for operating income, net income, cash flows from operating, investing, or financing activities, or other income or cash flow measures prepared in accordance with U.S. GAAP.
The following table is a reconciliation of Net income attributable to controlling interests and available to common shareholders to EBITDA, Adjusted EBITDA, and Adjusted EBITA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(In thousands)
|
|
Net income attributable to controlling interests and available to common shareholders
|
$
|
10,471
|
|
|
$
|
3,767
|
|
|
$
|
14,790
|
|
|
$
|
999
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Interest expense, net
|
6,871
|
|
|
9,159
|
|
|
13,514
|
|
|
18,333
|
|
|
Amortization of deferred financing costs and note discount
|
3,330
|
|
|
3,355
|
|
|
6,622
|
|
|
6,663
|
|
|
Income tax expense
|
3,565
|
|
|
2,586
|
|
|
6,694
|
|
|
2,555
|
|
|
Depreciation and accretion expense
|
33,205
|
|
|
31,764
|
|
|
66,178
|
|
|
62,806
|
|
|
Amortization of intangible assets
|
12,591
|
|
|
13,498
|
|
|
25,003
|
|
|
27,269
|
|
|
EBITDA
|
70,033
|
|
|
64,129
|
|
|
132,801
|
|
|
118,625
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
Loss on disposal and impairment of assets
|
1,496
|
|
|
9,697
|
|
|
2,464
|
|
|
15,117
|
|
|
Other expense (income)
(1)
|
1,456
|
|
|
(2,187
|
)
|
|
(5,751
|
)
|
|
(27
|
)
|
|
Noncontrolling interests
(2)
|
16
|
|
|
18
|
|
|
31
|
|
|
19
|
|
|
Share-based compensation expense
|
5,250
|
|
|
3,513
|
|
|
9,734
|
|
|
5,958
|
|
|
Restructuring expenses
(3)
|
3,463
|
|
|
2,063
|
|
|
3,463
|
|
|
4,476
|
|
|
Acquisition related expenses
(4)
|
—
|
|
|
913
|
|
|
—
|
|
|
2,633
|
|
|
Adjusted EBITDA
|
81,714
|
|
|
78,146
|
|
|
142,742
|
|
|
146,801
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Depreciation and accretion expense
(5)
|
33,205
|
|
|
31,764
|
|
|
66,178
|
|
|
62,805
|
|
|
Adjusted EBITA
|
$
|
48,509
|
|
|
$
|
46,382
|
|
|
$
|
76,564
|
|
|
$
|
83,996
|
|
|
|
|
|
(1)
|
Includes foreign currency translation gains/losses, the revaluation of the estimated acquisition related contingent consideration, and other non-operating costs.
|
|
|
|
|
(2)
|
Noncontrolling interest adjustment made such that Adjusted EBITDA includes only the Company’s ownership interest in the Adjusted EBITDA of one of its Mexican subsidiaries.
|
|
|
|
|
(3)
|
For the three and six months ended June 30, 2019, expenses include professional fees, employee severance costs, and facility costs related to the 2019 Restructuring Plan. For the three and six months ended June 30, 2018, expenses include employee severance and other costs incurred in conjunction with a corporate reorganization and cost reduction initiative.
|
|
|
|
|
(4)
|
For the three and six months ended June 30, 2018, expenses primarily include employee severance costs and lease termination costs related to the DCPayments acquisition.
|
|
|
|
|
(5)
|
Amounts exclude a portion of the expenses incurred by one of its Mexican subsidiaries to account for the amounts allocable to the noncontrolling interest shareholders.
|
The following tables reflect certain financial information for each of the Company’s reporting segments for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
North America
|
|
Europe & Africa
|
|
Australia & New Zealand
|
|
Corporate
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Revenue from external customers
|
$
|
212,670
|
|
|
$
|
103,333
|
|
|
$
|
24,818
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
340,821
|
|
|
Intersegment revenues
|
2,545
|
|
|
137
|
|
|
—
|
|
|
—
|
|
|
(2,682
|
)
|
|
—
|
|
|
Cost of revenues
|
143,164
|
|
|
63,543
|
|
|
17,915
|
|
|
366
|
|
|
(2,606
|
)
|
|
222,382
|
|
|
Selling, general, and administrative expenses
|
16,198
|
|
|
10,707
|
|
|
2,273
|
|
|
12,817
|
|
|
—
|
|
|
41,995
|
|
|
Restructuring expenses
|
213
|
|
|
400
|
|
|
—
|
|
|
2,850
|
|
|
—
|
|
|
3,463
|
|
|
Loss (gain) on disposal and impairment of assets
|
778
|
|
|
746
|
|
|
(28
|
)
|
|
—
|
|
|
—
|
|
|
1,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
55,852
|
|
|
29,223
|
|
|
4,629
|
|
|
(7,934
|
)
|
|
(56
|
)
|
|
81,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and accretion expense
|
19,371
|
|
|
12,316
|
|
|
1,269
|
|
|
266
|
|
|
(17
|
)
|
|
33,205
|
|
|
Adjusted EBITA
|
36,481
|
|
|
16,908
|
|
|
3,359
|
|
|
(8,201
|
)
|
|
(38
|
)
|
|
48,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
(1)
|
$
|
14,715
|
|
|
$
|
9,652
|
|
|
$
|
1,379
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
(2)
|
|
|
North America
|
|
Europe & Africa
|
|
Australia & New Zealand
|
|
Corporate
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Revenue from external customers
|
$
|
204,540
|
|
|
$
|
107,326
|
|
|
$
|
29,121
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
340,987
|
|
|
Intersegment revenues
|
2,566
|
|
|
524
|
|
|
—
|
|
|
—
|
|
|
(3,090
|
)
|
|
—
|
|
|
Cost of revenues
|
140,193
|
|
|
66,043
|
|
|
22,030
|
|
|
91
|
|
|
(2,918
|
)
|
|
225,439
|
|
|
Selling, general, and administrative expenses
|
15,145
|
|
|
9,963
|
|
|
2,691
|
|
|
13,200
|
|
|
(71
|
)
|
|
40,928
|
|
|
Restructuring expenses
|
1,073
|
|
|
495
|
|
|
—
|
|
|
495
|
|
|
—
|
|
|
2,063
|
|
|
Acquisition related expenses
|
(311
|
)
|
|
167
|
|
|
433
|
|
|
624
|
|
|
—
|
|
|
913
|
|
|
Loss on disposal and impairment of assets
|
8,612
|
|
|
972
|
|
|
113
|
|
|
—
|
|
|
—
|
|
|
9,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
51,770
|
|
|
31,844
|
|
|
4,398
|
|
|
(9,778
|
)
|
|
(88
|
)
|
|
78,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and accretion expense
|
17,309
|
|
|
13,262
|
|
|
1,247
|
|
|
—
|
|
|
(54
|
)
|
|
31,764
|
|
|
Adjusted EBITA
|
34,461
|
|
|
18,583
|
|
|
3,153
|
|
|
(9,781
|
)
|
|
(34
|
)
|
|
46,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
(1)
|
$
|
4,991
|
|
|
$
|
9,144
|
|
|
$
|
1,555
|
|
|
$
|
10,253
|
|
|
$
|
—
|
|
|
$
|
25,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
North America
|
|
Europe & Africa
|
|
Australia & New Zealand
|
|
Corporate
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Revenue from external customers
|
$
|
414,334
|
|
|
$
|
193,929
|
|
|
$
|
50,828
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
659,091
|
|
|
Intersegment revenues
|
5,129
|
|
|
466
|
|
|
—
|
|
|
—
|
|
|
(5,595
|
)
|
|
—
|
|
|
Cost of revenues
|
281,072
|
|
|
126,952
|
|
|
37,276
|
|
|
627
|
|
|
(5,462
|
)
|
|
440,465
|
|
|
Selling, general, and administrative expenses
|
33,464
|
|
|
21,453
|
|
|
4,514
|
|
|
26,224
|
|
|
—
|
|
|
85,655
|
|
|
Restructuring expenses
|
213
|
|
|
400
|
|
|
—
|
|
|
2,850
|
|
|
—
|
|
|
3,463
|
|
|
Loss (gain) on disposal and impairment of assets
|
1,102
|
|
|
1,417
|
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
|
2,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
104,927
|
|
|
45,991
|
|
|
9,038
|
|
|
(17,118
|
)
|
|
(96
|
)
|
|
142,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and accretion expense
|
38,857
|
|
|
24,337
|
|
|
2,489
|
|
|
533
|
|
|
(38
|
)
|
|
66,178
|
|
|
Adjusted EBITA
|
66,070
|
|
|
21,654
|
|
|
6,548
|
|
|
(17,651
|
)
|
|
(57
|
)
|
|
76,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
(1)
|
$
|
32,290
|
|
|
$
|
19,900
|
|
|
$
|
2,863
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
55,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
(2)
|
|
|
North America
|
|
Europe & Africa
|
|
Australia & New Zealand
|
|
Corporate
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Revenue from external customers
|
$
|
412,074
|
|
|
$
|
205,281
|
|
|
$
|
59,816
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
677,171
|
|
|
Intersegment revenues
|
4,913
|
|
|
1,013
|
|
|
—
|
|
|
—
|
|
|
(5,926
|
)
|
|
—
|
|
|
Cost of revenues
|
285,580
|
|
|
128,573
|
|
|
44,971
|
|
|
175
|
|
|
(5,608
|
)
|
|
453,691
|
|
|
Selling, general, and administrative expenses
|
31,078
|
|
|
19,822
|
|
|
5,417
|
|
|
26,532
|
|
|
(181
|
)
|
|
82,668
|
|
|
Restructuring expenses
|
2,130
|
|
|
1,176
|
|
|
—
|
|
|
1,170
|
|
|
—
|
|
|
4,476
|
|
|
Acquisition related expenses
|
(348
|
)
|
|
1,516
|
|
|
635
|
|
|
830
|
|
|
—
|
|
|
2,633
|
|
|
Loss on disposal and impairment of assets
|
10,634
|
|
|
4,382
|
|
|
101
|
|
|
—
|
|
|
—
|
|
|
15,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
100,327
|
|
|
57,899
|
|
|
9,429
|
|
|
(20,754
|
)
|
|
(100
|
)
|
|
146,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and accretion expense
|
33,852
|
|
|
26,498
|
|
|
2,509
|
|
|
—
|
|
|
(53
|
)
|
|
62,806
|
|
|
Adjusted EBITA
|
66,474
|
|
|
31,401
|
|
|
6,920
|
|
|
(20,753
|
)
|
|
(46
|
)
|
|
83,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
(1)
|
$
|
10,523
|
|
|
$
|
18,544
|
|
|
$
|
3,422
|
|
|
$
|
14,193
|
|
|
$
|
—
|
|
|
$
|
46,682
|
|
|
|
|
|
(1)
|
Capital expenditures include payments made for plant, property, and equipment, exclusive license agreements, and site acquisition costs. Additionally, capital expenditure amounts for one of the Company’s Mexican subsidiaries, included in the North America segment, are reflected gross of any noncontrolling interest amounts.
|
|
|
|
|
(2)
|
The segment information presented for the three and six months ended June 30, 2018 has been revised to ensure consistency with the current allocation of certain intercompany revenues and expenses.
|
Identifiable Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
(In thousands)
|
|
North America
|
$
|
1,146,100
|
|
|
$
|
1,195,693
|
|
|
Europe & Africa
|
540,858
|
|
|
494,457
|
|
|
Australia & New Zealand
|
67,102
|
|
|
63,613
|
|
|
Corporate
|
23,949
|
|
|
33,581
|
|
|
Total
|
$
|
1,778,009
|
|
|
$
|
1,787,344
|
|
(18) Supplemental Guarantor Financial Information
The 2025 Notes are fully and unconditionally and jointly and severally guaranteed on a senior unsecured basis by Cardtronics plc and certain of its subsidiaries and certain of its future subsidiaries, with the exception of Cardtronics plc’s immaterial subsidiaries and CFC Guarantors (as defined in the Credit Agreement). The guarantees of the 2025 Notes by any Guarantor are subject to automatic and customary releases upon: (i) the sale or disposition of all or substantially all of the assets of the Guarantor, (ii) the disposition of sufficient capital stock of the Guarantor so that it no longer qualifies under the Indenture as a restricted subsidiary of the Company, (iii) the designation of the Guarantor as an unrestricted subsidiary in accordance with the Indenture, (iv) the legal or covenant defeasance of the notes or the satisfaction and discharge of the Indenture, (v) the liquidation or dissolution of the Guarantor, or (vi) provided the Guarantor is not wholly-owned by the Company, its ceasing to guarantee other debt of the Company or another Guarantor. A Guarantor may not sell or otherwise dispose of all or substantially all of its properties or assets to, or consolidate with or merge with or into, another company (other than the Company or another Guarantor), unless no default under the Indenture exists and either the successor to the Guarantor assumes its guarantee of the 2025 Notes or the disposition, consolidation, or merger complies with the “Asset Sales” covenant in the Indenture.
The following information reflects the Condensed Consolidating Statements of Comprehensive (Loss) Income for the three and six months ended
June 30, 2019
and 2018, the Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2019
and 2018, and the Condensed Consolidated Balance Sheets as of
June 30, 2019
and December 31, 2018 for: (i) Cardtronics plc, the parent Guarantor of the 2025 Notes (“Parent”), (ii) Cardtronics Inc. (“Issuer”), (iii) the 2025 Notes Guarantors (the “Guarantors”), and (iv) the 2025 Notes Non-Guarantors.
Condensed Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
Parent
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
247,328
|
|
|
$
|
96,310
|
|
|
$
|
(2,817
|
)
|
|
$
|
340,821
|
|
|
Operating costs and expenses
|
8,719
|
|
|
27
|
|
|
217,047
|
|
|
92,152
|
|
|
(2,813
|
)
|
|
315,132
|
|
|
(Loss) income from operations
|
(8,719
|
)
|
|
(27
|
)
|
|
30,281
|
|
|
4,158
|
|
|
(4
|
)
|
|
25,689
|
|
|
Interest expense (income), net, including amortization of deferred financing costs and note discount
|
—
|
|
|
3,233
|
|
|
9,848
|
|
|
(2,942
|
)
|
|
62
|
|
|
10,201
|
|
|
Equity in (earnings) loss of subsidiaries
|
(17,439
|
)
|
|
(16,585
|
)
|
|
(4,826
|
)
|
|
—
|
|
|
38,850
|
|
|
—
|
|
|
Other (income) expense
|
(112
|
)
|
|
299
|
|
|
6,324
|
|
|
(910
|
)
|
|
(4,145
|
)
|
|
1,456
|
|
|
Income before income taxes
|
8,832
|
|
|
13,026
|
|
|
18,935
|
|
|
8,010
|
|
|
(34,771
|
)
|
|
14,032
|
|
|
Income tax (benefit) expense
|
(1,635
|
)
|
|
(828
|
)
|
|
4,962
|
|
|
1,066
|
|
|
—
|
|
|
3,565
|
|
|
Net income
|
10,467
|
|
|
13,854
|
|
|
13,973
|
|
|
6,944
|
|
|
(34,771
|
)
|
|
10,467
|
|
|
Net loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(4
|
)
|
|
Net income attributable to controlling interests and available to common shareholders
|
10,467
|
|
|
13,854
|
|
|
13,973
|
|
|
6,944
|
|
|
(34,767
|
)
|
|
10,471
|
|
|
Other comprehensive loss attributable to controlling interest
|
(9,331
|
)
|
|
—
|
|
|
(7,430
|
)
|
|
(1,854
|
)
|
|
9,284
|
|
|
(9,331
|
)
|
|
Comprehensive income attributable to controlling interests
|
$
|
1,136
|
|
|
$
|
13,854
|
|
|
$
|
6,543
|
|
|
$
|
5,090
|
|
|
$
|
(25,483
|
)
|
|
$
|
1,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
|
Parent
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
242,299
|
|
|
$
|
102,032
|
|
|
$
|
(3,344
|
)
|
|
$
|
340,987
|
|
|
Operating costs and expenses
|
6,374
|
|
|
12
|
|
|
221,384
|
|
|
99,916
|
|
|
(3,384
|
)
|
|
324,302
|
|
|
(Loss) income from operations
|
(6,374
|
)
|
|
(12
|
)
|
|
20,915
|
|
|
2,116
|
|
|
40
|
|
|
16,685
|
|
|
Interest expense (income), net, including amortization of deferred financing costs and note discount
|
—
|
|
|
6,619
|
|
|
10,528
|
|
|
(4,693
|
)
|
|
60
|
|
|
12,514
|
|
|
Equity in earnings of subsidiaries
|
(8,861
|
)
|
|
(13,071
|
)
|
|
(2,577
|
)
|
|
—
|
|
|
24,509
|
|
|
—
|
|
|
Other (income) expense
|
(91
|
)
|
|
51
|
|
|
126
|
|
|
(798
|
)
|
|
(1,475
|
)
|
|
(2,187
|
)
|
|
Income before income taxes
|
2,578
|
|
|
6,389
|
|
|
12,838
|
|
|
7,607
|
|
|
(23,054
|
)
|
|
6,358
|
|
|
Income tax (benefit) expense
|
(1,194
|
)
|
|
(1,655
|
)
|
|
3,627
|
|
|
1,808
|
|
|
—
|
|
|
2,586
|
|
|
Net income
|
3,772
|
|
|
8,044
|
|
|
9,211
|
|
|
5,799
|
|
|
(23,054
|
)
|
|
3,772
|
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|
Net income attributable to controlling interests and available to common stockholders
|
3,772
|
|
|
8,044
|
|
|
9,211
|
|
|
5,799
|
|
|
(23,059
|
)
|
|
3,767
|
|
|
Other comprehensive (loss) income attributable to controlling interest
|
(28,779
|
)
|
|
—
|
|
|
13,258
|
|
|
(42,033
|
)
|
|
28,775
|
|
|
(28,779
|
)
|
|
Comprehensive (loss) income attributable to controlling interests
|
$
|
(25,007
|
)
|
|
$
|
8,044
|
|
|
$
|
22,469
|
|
|
$
|
(36,234
|
)
|
|
$
|
5,716
|
|
|
$
|
(25,012
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
Parent
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
483,013
|
|
|
$
|
181,741
|
|
|
$
|
(5,663
|
)
|
|
$
|
659,091
|
|
|
Operating costs and expenses
|
16,567
|
|
|
26
|
|
|
428,324
|
|
|
183,985
|
|
|
(5,674
|
)
|
|
623,228
|
|
|
(Loss) income from operations
|
(16,567
|
)
|
|
(26
|
)
|
|
54,689
|
|
|
(2,244
|
)
|
|
11
|
|
|
35,863
|
|
|
Interest expense (income), net, including amortization of deferred financing costs and note discount
|
—
|
|
|
6,372
|
|
|
19,184
|
|
|
(5,534
|
)
|
|
114
|
|
|
20,136
|
|
|
Equity in earnings loss of subsidiaries
|
(28,186
|
)
|
|
(24,629
|
)
|
|
(5,342
|
)
|
|
—
|
|
|
58,157
|
|
|
—
|
|
|
Other (income) expense
|
(22
|
)
|
|
270
|
|
|
9,395
|
|
|
(7,977
|
)
|
|
(7,417
|
)
|
|
(5,751
|
)
|
|
Income before income taxes
|
11,641
|
|
|
17,961
|
|
|
31,452
|
|
|
11,267
|
|
|
(50,843
|
)
|
|
21,478
|
|
|
Income tax (benefit) expense
|
(3,143
|
)
|
|
(1,544
|
)
|
|
9,231
|
|
|
2,150
|
|
|
—
|
|
|
6,694
|
|
|
Net income
|
14,784
|
|
|
19,505
|
|
|
22,221
|
|
|
9,117
|
|
|
(50,843
|
)
|
|
14,784
|
|
|
Net loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
|
Net income attributable to controlling interests and available to common shareholders
|
14,784
|
|
|
19,505
|
|
|
22,221
|
|
|
9,117
|
|
|
(50,837
|
)
|
|
14,790
|
|
|
Other comprehensive (loss) income attributable to controlling interest
|
(16,933
|
)
|
|
(3
|
)
|
|
(18,253
|
)
|
|
1,475
|
|
|
16,780
|
|
|
(16,934
|
)
|
|
Comprehensive (loss) income attributable to controlling interests
|
$
|
(2,149
|
)
|
|
$
|
19,502
|
|
|
$
|
3,968
|
|
|
$
|
10,592
|
|
|
$
|
(34,057
|
)
|
|
$
|
(2,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
Parent
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
487,182
|
|
|
$
|
196,328
|
|
|
$
|
(6,339
|
)
|
|
$
|
677,171
|
|
|
Operating costs and expenses
|
11,910
|
|
|
9
|
|
|
442,180
|
|
|
200,937
|
|
|
(6,376
|
)
|
|
648,660
|
|
|
(Loss) income from operations
|
(11,910
|
)
|
|
(9
|
)
|
|
45,002
|
|
|
(4,609
|
)
|
|
37
|
|
|
28,511
|
|
|
Interest expense (income), net, including amortization of deferred financing costs and note discount
|
—
|
|
|
13,160
|
|
|
21,169
|
|
|
(9,393
|
)
|
|
60
|
|
|
24,996
|
|
|
Equity in (earnings) losses of subsidiaries
|
(10,642
|
)
|
|
(4,993
|
)
|
|
12,083
|
|
|
—
|
|
|
3,552
|
|
|
—
|
|
|
Other expense (income)
|
10
|
|
|
186
|
|
|
(3,656
|
)
|
|
(8,006
|
)
|
|
11,439
|
|
|
(27
|
)
|
|
(Loss) income before income taxes
|
(1,278
|
)
|
|
(8,362
|
)
|
|
15,406
|
|
|
12,790
|
|
|
(15,014
|
)
|
|
3,542
|
|
|
Income tax (benefit) expense
|
(2,265
|
)
|
|
(3,308
|
)
|
|
4,126
|
|
|
4,002
|
|
|
—
|
|
|
2,555
|
|
|
Net income (loss)
|
987
|
|
|
(5,054
|
)
|
|
11,280
|
|
|
8,788
|
|
|
(15,014
|
)
|
|
987
|
|
|
Net loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
(12
|
)
|
|
Net income (loss) attributable to controlling interests and available to common shareholders
|
987
|
|
|
(5,054
|
)
|
|
11,280
|
|
|
8,788
|
|
|
(15,002
|
)
|
|
999
|
|
|
Other comprehensive income (loss) attributable to controlling interest
|
(3,793
|
)
|
|
(1
|
)
|
|
20,064
|
|
|
(23,852
|
)
|
|
3,790
|
|
|
(3,792
|
)
|
|
Comprehensive (loss) income attributable to controlling interests
|
$
|
(2,806
|
)
|
|
$
|
(5,055
|
)
|
|
$
|
31,344
|
|
|
$
|
(15,064
|
)
|
|
$
|
(11,212
|
)
|
|
$
|
(2,793
|
)
|
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2019
|
|
|
Parent
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
89
|
|
|
$
|
6
|
|
|
$
|
16,413
|
|
|
$
|
16,987
|
|
|
$
|
—
|
|
|
$
|
33,495
|
|
|
Accounts and notes receivable, net
|
—
|
|
|
—
|
|
|
58,646
|
|
|
27,061
|
|
|
—
|
|
|
85,707
|
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
68,646
|
|
|
17,785
|
|
|
—
|
|
|
86,431
|
|
|
Other current assets
|
—
|
|
|
1,273
|
|
|
35,874
|
|
|
63,010
|
|
|
(18
|
)
|
|
100,139
|
|
|
Total current assets
|
89
|
|
|
1,279
|
|
|
179,579
|
|
|
124,843
|
|
|
(18
|
)
|
|
305,772
|
|
|
Property and equipment, net
|
—
|
|
|
—
|
|
|
331,426
|
|
|
124,331
|
|
|
—
|
|
|
455,757
|
|
|
Intangible assets, net
|
—
|
|
|
—
|
|
|
117,699
|
|
|
18,974
|
|
|
—
|
|
|
136,673
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
616,604
|
|
|
137,255
|
|
|
—
|
|
|
753,859
|
|
|
Operating lease assets
|
—
|
|
|
—
|
|
|
41,649
|
|
|
39,706
|
|
|
—
|
|
|
81,355
|
|
|
Investments in and advances to subsidiaries
|
381,001
|
|
|
204,873
|
|
|
171,272
|
|
|
—
|
|
|
(757,146
|
)
|
|
—
|
|
|
Intercompany receivable
|
13,640
|
|
|
233,529
|
|
|
216,732
|
|
|
380,658
|
|
|
(844,559
|
)
|
|
—
|
|
|
Deferred tax asset, net
|
754
|
|
|
—
|
|
|
(1,831
|
)
|
|
12,621
|
|
|
—
|
|
|
11,544
|
|
|
Prepaid expenses, deferred costs, and other noncurrent assets
|
—
|
|
|
706
|
|
|
22,429
|
|
|
9,914
|
|
|
—
|
|
|
33,049
|
|
|
Total assets
|
$
|
395,484
|
|
|
$
|
440,387
|
|
|
$
|
1,695,559
|
|
|
$
|
848,302
|
|
|
$
|
(1,601,723
|
)
|
|
$
|
1,778,009
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of other long-term liabilities
|
$
|
—
|
|
|
$
|
4,029
|
|
|
$
|
22,833
|
|
|
$
|
25,485
|
|
|
$
|
—
|
|
|
$
|
52,347
|
|
|
Accounts payable and accrued liabilities
|
415
|
|
|
1,677
|
|
|
254,675
|
|
|
109,101
|
|
|
(67
|
)
|
|
365,801
|
|
|
Total current liabilities
|
415
|
|
|
5,706
|
|
|
277,508
|
|
|
134,586
|
|
|
(67
|
)
|
|
418,148
|
|
|
Long-term debt
|
—
|
|
|
269,519
|
|
|
340,123
|
|
|
168,909
|
|
|
—
|
|
|
778,551
|
|
|
Intercompany payable
|
33,196
|
|
|
69,700
|
|
|
619,001
|
|
|
125,902
|
|
|
(847,799
|
)
|
|
—
|
|
|
Asset retirement obligations
|
—
|
|
|
—
|
|
|
28,969
|
|
|
25,258
|
|
|
—
|
|
|
54,227
|
|
|
Noncurrent operating lease liabilities
|
—
|
|
|
—
|
|
|
46,689
|
|
|
26,557
|
|
|
—
|
|
|
73,246
|
|
|
Deferred tax liability, net
|
—
|
|
|
—
|
|
|
37,325
|
|
|
—
|
|
|
—
|
|
|
37,325
|
|
|
Other long-term liabilities
|
—
|
|
|
7,779
|
|
|
19,854
|
|
|
27,006
|
|
|
—
|
|
|
54,639
|
|
|
Total liabilities
|
33,611
|
|
|
352,704
|
|
|
1,369,469
|
|
|
508,218
|
|
|
(847,866
|
)
|
|
1,416,136
|
|
|
Shareholders' equity
|
361,873
|
|
|
87,683
|
|
|
326,090
|
|
|
340,084
|
|
|
(753,857
|
)
|
|
361,873
|
|
|
Total liabilities and shareholders' equity
|
$
|
395,484
|
|
|
$
|
440,387
|
|
|
$
|
1,695,559
|
|
|
$
|
848,302
|
|
|
$
|
(1,601,723
|
)
|
|
$
|
1,778,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
|
|
Parent
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
89
|
|
|
$
|
6
|
|
|
$
|
26,124
|
|
|
$
|
13,721
|
|
|
$
|
—
|
|
|
$
|
39,940
|
|
|
Accounts and notes receivable, net
|
—
|
|
|
—
|
|
|
47,209
|
|
|
28,434
|
|
|
—
|
|
|
75,643
|
|
|
Restricted cash
|
—
|
|
|
—
|
|
|
140,145
|
|
|
15,325
|
|
|
—
|
|
|
155,470
|
|
|
Other current assets
|
1
|
|
|
4,374
|
|
|
38,570
|
|
|
52,843
|
|
|
(10
|
)
|
|
95,778
|
|
|
Total current assets
|
90
|
|
|
4,380
|
|
|
252,048
|
|
|
110,323
|
|
|
(10
|
)
|
|
366,831
|
|
|
Property and equipment, net
|
—
|
|
|
—
|
|
|
330,743
|
|
|
129,444
|
|
|
—
|
|
|
460,187
|
|
|
Intangible assets, net
|
—
|
|
|
—
|
|
|
124,236
|
|
|
26,611
|
|
|
—
|
|
|
150,847
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
611,632
|
|
|
137,512
|
|
|
—
|
|
|
749,144
|
|
|
Investments in and advances to subsidiaries
|
375,535
|
|
|
410,955
|
|
|
181,116
|
|
|
19,226
|
|
|
(986,832
|
)
|
|
—
|
|
|
Intercompany receivable
|
7,412
|
|
|
211,359
|
|
|
145,103
|
|
|
363,961
|
|
|
(727,835
|
)
|
|
—
|
|
|
Deferred tax asset, net
|
342
|
|
|
—
|
|
|
(1,688
|
)
|
|
10,004
|
|
|
—
|
|
|
8,658
|
|
|
Prepaid expenses, deferred costs, and other noncurrent assets
|
—
|
|
|
10,957
|
|
|
24,742
|
|
|
15,978
|
|
|
—
|
|
|
51,677
|
|
|
Total assets
|
$
|
383,379
|
|
|
$
|
637,651
|
|
|
$
|
1,667,932
|
|
|
$
|
813,059
|
|
|
$
|
(1,714,677
|
)
|
|
$
|
1,787,344
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of other long-term liabilities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,654
|
|
|
$
|
3,624
|
|
|
$
|
(12
|
)
|
|
$
|
20,266
|
|
|
Accounts payable and accrued liabilities
|
642
|
|
|
240
|
|
|
316,974
|
|
|
90,681
|
|
|
(67
|
)
|
|
408,470
|
|
|
Total current liabilities
|
642
|
|
|
240
|
|
|
333,628
|
|
|
94,305
|
|
|
(79
|
)
|
|
428,736
|
|
|
Long-term debt
|
—
|
|
|
263,507
|
|
|
351,292
|
|
|
203,686
|
|
|
—
|
|
|
818,485
|
|
|
Intercompany payable
|
5,964
|
|
|
69,711
|
|
|
562,552
|
|
|
92,851
|
|
|
(731,078
|
)
|
|
—
|
|
|
Asset retirement obligations
|
—
|
|
|
—
|
|
|
28,355
|
|
|
26,058
|
|
|
—
|
|
|
54,413
|
|
|
Deferred tax liability, net
|
—
|
|
|
—
|
|
|
40,873
|
|
|
325
|
|
|
—
|
|
|
41,198
|
|
|
Other long-term liabilities
|
—
|
|
|
2,620
|
|
|
25,998
|
|
|
39,122
|
|
|
—
|
|
|
67,740
|
|
|
Total liabilities
|
6,606
|
|
|
336,078
|
|
|
1,342,698
|
|
|
456,347
|
|
|
(731,157
|
)
|
|
1,410,572
|
|
|
Shareholders' equity
|
376,773
|
|
|
301,573
|
|
|
325,234
|
|
|
356,712
|
|
|
(983,520
|
)
|
|
376,772
|
|
|
Total liabilities and shareholders' equity
|
$
|
383,379
|
|
|
$
|
637,651
|
|
|
$
|
1,667,932
|
|
|
$
|
813,059
|
|
|
$
|
(1,714,677
|
)
|
|
$
|
1,787,344
|
|
Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
Parent
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Net cash provided by operating activities
|
$
|
21,383
|
|
|
$
|
6,265
|
|
|
$
|
(27,005
|
)
|
|
$
|
54,587
|
|
|
$
|
—
|
|
|
$
|
55,230
|
|
|
Additions to property and equipment
|
|
|
|
—
|
|
|
(43,374
|
)
|
|
(11,679
|
)
|
|
—
|
|
|
(55,053
|
)
|
|
Acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
(9,100
|
)
|
|
—
|
|
|
—
|
|
|
(9,100
|
)
|
|
Net cash used in investing activities
|
—
|
|
|
—
|
|
|
(52,474
|
)
|
|
(11,679
|
)
|
|
—
|
|
|
(64,153
|
)
|
|
Proceeds from borrowings under revolving credit facility
|
—
|
|
|
70,700
|
|
|
130,936
|
|
|
88,874
|
|
|
—
|
|
|
290,510
|
|
|
Repayments of borrowings under revolving credit facility
|
—
|
|
|
(70,700
|
)
|
|
(142,306
|
)
|
|
(123,316
|
)
|
|
—
|
|
|
(336,322
|
)
|
|
Intercompany financing
|
737
|
|
|
(6,266
|
)
|
|
9,878
|
|
|
(4,349
|
)
|
|
—
|
|
|
—
|
|
|
Tax payments related to share-based compensation
|
(2,022
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,022
|
)
|
|
Proceeds from exercises of stock options
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
Repurchase of common shares
|
(20,100
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,100
|
)
|
|
Net cash used in financing activities
|
(21,383
|
)
|
|
(6,266
|
)
|
|
(1,492
|
)
|
|
(38,791
|
)
|
|
—
|
|
|
(67,932
|
)
|
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
—
|
|
|
—
|
|
|
687
|
|
|
684
|
|
|
—
|
|
|
1,371
|
|
|
Net (decrease) increase in cash, cash equivalents, and restricted cash
|
—
|
|
|
(1
|
)
|
|
(80,284
|
)
|
|
4,801
|
|
|
—
|
|
|
(75,484
|
)
|
|
Cash, cash equivalents, and restricted cash as of beginning of period
|
89
|
|
|
7
|
|
|
165,343
|
|
|
29,971
|
|
|
—
|
|
|
195,410
|
|
|
Cash, cash equivalents, and restricted cash as of end of period
|
$
|
89
|
|
|
$
|
6
|
|
|
$
|
85,059
|
|
|
$
|
34,772
|
|
|
$
|
—
|
|
|
$
|
119,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
|
Parent
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
|
(In thousands)
|
|
Net cash provided by (used in) operating activities
|
$
|
2,506
|
|
|
$
|
(100
|
)
|
|
$
|
120,812
|
|
|
$
|
(13,443
|
)
|
|
$
|
—
|
|
|
$
|
109,775
|
|
|
Additions to property and equipment
|
—
|
|
|
—
|
|
|
(31,246
|
)
|
|
(15,436
|
)
|
|
—
|
|
|
(46,682
|
)
|
|
Net cash used in investing activities
|
—
|
|
|
—
|
|
|
(31,246
|
)
|
|
(15,436
|
)
|
|
—
|
|
|
(46,682
|
)
|
|
Proceeds from borrowing under revolving credit facility
|
—
|
|
|
192,000
|
|
|
24,602
|
|
|
128,908
|
|
|
—
|
|
|
345,510
|
|
|
Repayments of borrowings under revolving credit facility
|
—
|
|
|
(191,900
|
)
|
|
(81,028
|
)
|
|
(118,062
|
)
|
|
—
|
|
|
(390,990
|
)
|
|
Intercompany financing
|
—
|
|
|
—
|
|
|
(2,106
|
)
|
|
2,106
|
|
|
—
|
|
|
—
|
|
|
Tax payments related to share-based compensation
|
(2,506
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,506
|
)
|
|
Net cash (used in) provided by financing activities
|
(2,506
|
)
|
|
100
|
|
|
(58,532
|
)
|
|
12,952
|
|
|
—
|
|
|
(47,986
|
)
|
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
—
|
|
|
—
|
|
|
(1,624
|
)
|
|
66
|
|
|
—
|
|
|
(1,558
|
)
|
|
Net increase (decrease) in cash, cash equivalents, and restricted cash
|
—
|
|
|
—
|
|
|
29,410
|
|
|
(15,861
|
)
|
|
—
|
|
|
13,549
|
|
|
Cash, cash equivalents, and restricted cash as of beginning of period
|
89
|
|
|
6
|
|
|
51,500
|
|
|
48,222
|
|
|
—
|
|
|
99,817
|
|
|
Cash, cash equivalents, and restricted cash as of end of period
|
$
|
89
|
|
|
$
|
6
|
|
|
$
|
80,910
|
|
|
$
|
32,361
|
|
|
$
|
—
|
|
|
$
|
113,366
|
|
(19) Concentration Risk
Significant merchant customers.
During the trailing twelve months ended
June 30, 2019
, the Company derived approximately
24%
of its total revenues from ATMs placed at the locations of its top five merchant customers. The Company’s top five merchant customers, none accounting for more than
7%
of total revenue for the trailing twelve months ended
June 30, 2019
, were Co-operative Food (in the U.K.), CVS Caremark Corporation, Alimentation Couche-Tard Inc. (in the U.S. and Canada), Speedway LLC, and Walgreens Boots Alliance, Inc. Accordingly, a significant percentage of the Company’s future revenues and operating income will be dependent upon the successful continuation of its relationship with these merchants.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbor provisions thereof. Forward-looking statements can be identified by words such as “project,” “believe,” “estimate,” “expect,” “future,” “anticipate,” “intend,” “contemplate,” “foresee,” “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 management’s current expectations and beliefs concerning future developments and their potential effect on the Company. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting the Company will be those that are anticipated. All comments concerning the Company’s expectations for future revenues and operating results are based on its estimates for its existing operations and do not include the potential impact of any future acquisitions. The Company’s forward-looking statements involve significant risks and uncertainties (some of which are beyond its control) and assumptions that could cause actual results to differ materially from its historical experience and present expectations or projections. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include:
|
|
|
|
•
|
the Company’s financial outlook and the financial outlook of the automated teller machines and multi-function financial services kiosks (collectively, “ATMs”) industry and the continued usage of cash by consumers at rates near historical patterns;
|
|
|
|
|
•
|
the Company’s ability to respond to recent and future network and regulatory changes;
|
|
|
|
|
•
|
the Company’s ability to renew its existing merchant relationships on comparable or improved economic terms and add new merchants;
|
|
|
|
|
•
|
changes in interest rates and foreign currency rates;
|
|
|
|
|
•
|
the Company’s ability to successfully manage its existing international operations and to continue to expand internationally;
|
|
|
|
|
•
|
the Company’s ability to manage concentration risks with and changes in the mix of key customers, merchants, vendors, and service providers;
|
|
|
|
|
•
|
the Company’s ability to prevent thefts of cash and maintain adequate insurance;
|
|
|
|
|
•
|
the Company’s ability to manage cybersecurity risks and protect against cyber-attacks and manage and prevent cyber incidents, data breaches or losses, or other business disruptions;
|
|
|
|
|
•
|
the Company’s ability to respond to changes implemented by networks and how they determine interchange, and potential reductions in the amount of net interchange that it receives from global and regional debit networks due to pricing changes implemented by those networks as well as changes in how issuers route their ATM transactions over those networks;
|
|
|
|
|
•
|
the Company’s ability to provide new ATM solutions to retailers and financial institutions including the demand for any such new ATM solutions as well as its ability to place additional banks’ brands on ATMs currently deployed;
|
|
|
|
|
•
|
the Company’s ATM vault cash rental needs, including potential liquidity issues with its vault cash providers and its ability to continue to secure vault cash rental agreements in the future and once secured, on reasonable economic terms;
|
|
|
|
|
•
|
the Company’s ability to manage the risks associated with its third-party service providers failing to perform their contractual obligations;
|
|
|
|
|
•
|
the Company’s ability to renew its existing third-party service provider relationships on comparable or improved economic terms;
|
|
|
|
|
•
|
the Company’s ability to successfully implement and evolve its corporate strategy;
|
|
|
|
|
•
|
the Company’s ability to compete successfully with new and existing competitors;
|
|
|
|
|
•
|
the Company’s ability to meet the service levels required by its service level agreements with its customers;
|
|
|
|
|
•
|
the additional risks the Company is exposed to in its United Kingdom (“U.K.”) armored transport business;
|
|
|
|
|
•
|
the Company’s ability to pursue, complete, and successfully integrate acquisitions, strategic alliances, or joint ventures;
|
|
|
|
|
•
|
the impact of changes in laws, including tax laws, that could adversely affect the Company’s business and profitability;
|
|
|
|
|
•
|
the impact of, or uncertainty related to, the U.K.’s planned exit from the European Union, including any material adverse effect on the tax, tax treaty, currency, operational, legal, human, and regulatory regime and macro-economic environment to which it will be subject to as a U.K. company;
|
|
|
|
|
•
|
the Company's ability to manage the potential impact of a determination to make changes to LIBOR, if any;
|
|
|
|
|
•
|
the Company’s ability to adequately maintain and upgrade its ATM fleet to address changes in industry standards, regulations and consumer behavior patterns;
|
|
|
|
|
•
|
the Company’s ability to retain its key employees and maintain good relations with its employees; and
|
|
|
|
|
•
|
the Company’s ability to manage the fluctuation of its operating results, including as a result of the foregoing and other risk factors included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.
|
For additional information regarding known material factors that could cause the Company’s actual results to differ from its projected results, see:
Part I. Item 1A. Risk Factors
in the Company's Annual Report on Form 10-K for the year ended December 31, 2018. Readers are cautioned not to place undue reliance on forward-looking statements contained in this document, which speak only as of the date of this Form 10-Q. Except as required by applicable law, the Company undertakes 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.