Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM TO
Commission file no 001 32622
GLOBAL CASH ACCESS HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE |
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20-0723270 |
(State or Other Jurisdiction of
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(I.R.S. Employer I.D. No.) |
Incorporation or Organization) |
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3525 EAST POST ROAD, SUITE 120 |
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LAS VEGAS, NEVADA |
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89120 |
(Address of Principal Executive Offices)
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(Zip Code) |
Registrants telephone number, including area code:
(800) 833-7110
Indicate by check mark whether the Registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such
files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
As of May 4, 2009, there were 77,977,472 shares of the Registrants $0.001 par value per share
common stock outstanding.
PART I: FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except par value)
(unaudited)
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March 31, |
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December 31, |
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2009 |
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2008 |
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ASSETS |
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Cash and cash equivalents |
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$ |
70,652 |
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$ |
77,148 |
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Restricted cash and cash equivalents |
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808 |
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388 |
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Settlement receivables |
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37,018 |
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51,604 |
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Other receivables, net |
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9,977 |
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16,759 |
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Prepaid and other assets |
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11,752 |
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11,867 |
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Assets held for sale |
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949 |
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1,540 |
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Property, equipment and leasehold improvements, net |
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23,672 |
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24,419 |
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Goodwill, net |
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184,138 |
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183,929 |
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Other intangibles, net |
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33,181 |
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34,982 |
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Deferred income taxes, net |
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151,122 |
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156,514 |
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Total assets |
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$ |
523,269 |
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$ |
559,150 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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LIABILITIES: |
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Settlement liabilities |
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$ |
46,615 |
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$ |
79,150 |
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Accounts payable |
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40,614 |
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35,561 |
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Accrued expenses |
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13,895 |
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17,811 |
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Borrowings |
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250,500 |
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265,750 |
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Total liabilities |
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351,624 |
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398,272 |
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COMMITMENTS AND CONTINGENCIES (NOTE 5) |
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Retained earnings |
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Common stock, $0.001 par value, 500,000 shares authorized
and 84,004 and 82,961 shares issued at March 31, 2009 and
December 31, 2008, respectively |
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83 |
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83 |
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Preferred
stock, $0.001 par value, 50,000 shares authorized and
0 shares outstanding at March 31, 2009 and
December 31, 2008, respectively |
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Additional paid in capital |
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173,959 |
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172,119 |
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Retained earnings |
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46,772 |
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37,659 |
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Accumulated other comprehensive income |
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1,097 |
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1,243 |
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Treasury stock, at cost, 6,024 and 6,017 shares at March 31, 2009 and
December 31, 2008, respectively |
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(50,244 |
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(50,226 |
) |
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Total Global Cash Access Holdings, Inc. shareholders equity |
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171,667 |
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160,878 |
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Minority interest |
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(22 |
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0 |
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Total stockholders equity |
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171,645 |
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160,878 |
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Total liabilities and stockholders equity |
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$ |
523,269 |
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$ |
559,150 |
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See notes to unaudited condensed consolidated financial statements.
3
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(amounts in thousands, except per share)
(unaudited)
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Three Months Ended |
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March 31, |
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2009 |
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2008 |
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REVENUES: |
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Cash advance |
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$ |
81,366 |
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$ |
73,388 |
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ATM |
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86,423 |
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59,772 |
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Check services |
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10,827 |
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7,681 |
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Central Credit and other revenues |
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3,059 |
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2,644 |
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Total revenues |
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181,675 |
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143,485 |
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Cost of revenues (exclusive of depreciation and amortization) |
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(137,170 |
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(103,374 |
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Operating expenses |
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(20,462 |
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(18,640 |
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Amortization |
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(2,220 |
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(1,362 |
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Depreciation |
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(2,551 |
) |
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(1,855 |
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OPERATING INCOME |
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19,272 |
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18,254 |
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INTEREST INCOME (EXPENSE), NET |
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Interest income |
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114 |
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942 |
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Interest expense |
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(4,768 |
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(7,664 |
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Total interest income (expense), net |
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(4,654 |
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(6,722 |
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX
PROVISION |
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14,618 |
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11,532 |
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INCOME TAX PROVISION |
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(5,555 |
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(5,430 |
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INCOME FROM CONTINUING OPERATIONS, NET OF TAX |
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9,063 |
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6,102 |
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INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX |
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32 |
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(4,403 |
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NET INCOME |
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9,095 |
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1,699 |
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PLUS: NET LOSS ATTRIBUTABLE TO MINORITY INTEREST |
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14 |
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46 |
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NET INCOME ATTRIBUTABLE TO GLOBAL CASH ACCESS
HOLDINGS, INC. AND SUBSIDIARIES |
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9,109 |
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1,745 |
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Foreign currency translation, net of tax |
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(146 |
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(85 |
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COMPREHENSIVE INCOME |
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$ |
8,963 |
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$ |
1,660 |
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Basic net income per share of common stock: |
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Continuing operations |
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$ |
0.12 |
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$ |
0.08 |
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Discontinued operations |
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$ |
0.00 |
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$ |
(0.06 |
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Basic net income per share of common stock |
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$ |
0.12 |
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$ |
0.02 |
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Diluted net income per share of common stock: |
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Continuing operations |
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$ |
0.12 |
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$ |
0.08 |
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Discontinued operations |
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$ |
0.00 |
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$ |
(0.06 |
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Basic net income per share of common stock |
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$ |
0.12 |
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$ |
0.02 |
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Weighted average number of common shares outstanding: |
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Basic |
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77,368 |
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77,182 |
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Diluted |
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77,368 |
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77,184 |
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See notes to unaudited condensed consolidated financial statements.
4
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in
thousands)
(unaudited)
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Three Months Ended |
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March 31, |
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2009 |
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2008 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
9,095 |
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$ |
1,699 |
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Adjustments to reconcile net income to cash provided
by operating activities: |
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Amortization of financing costs |
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243 |
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243 |
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Amortization of intangibles |
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2,267 |
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1,409 |
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Depreciation |
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2,551 |
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1,855 |
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Provision for bad debts |
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2,657 |
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9,092 |
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Deferred income taxes |
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5,397 |
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2,919 |
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Stock-based compensation |
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1,840 |
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1,945 |
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Changes in operating assets and liabilities: |
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Settlement receivables |
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14,586 |
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20,046 |
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Other receivables, net |
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4,681 |
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3,674 |
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Prepaid and other assets |
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(128 |
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(342 |
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Settlement liabilities |
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(32,535 |
) |
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(22,616 |
) |
Accounts payable |
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5,054 |
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|
4,568 |
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Accrued expenses |
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(3,944 |
) |
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(5,267 |
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Net cash provided by operating activities |
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11,764 |
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19,225 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchase of property, equipment and leasehold improvements |
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(1,805 |
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(1,955 |
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Purchase of other intangibles |
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(418 |
) |
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(16 |
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Other |
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(621 |
) |
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(3 |
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Net cash used in investing activities |
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(2,844 |
) |
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(1,974 |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Borrowings under credit facility |
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84,000 |
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Repayments under credit facility |
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(15,250 |
) |
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(250 |
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Purchase of treasury stock |
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(20 |
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(9,347 |
) |
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Net cash (used in) provided by financing activities |
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(15,270 |
) |
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74,403 |
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(Continued)
5
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
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Three Months Ended |
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March 31, |
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2009 |
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2008 |
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NET EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS |
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$ |
(146 |
) |
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$ |
517 |
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
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(6,496 |
) |
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92,171 |
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CASH AND CASH EQUIVALENTSBeginning of period |
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77,148 |
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71,063 |
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CASH AND CASH EQUIVALENTSEnd of period |
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$ |
70,652 |
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$ |
163,234 |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid for interest |
|
$ |
8,240 |
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$ |
11,080 |
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Cash paid for income taxes, net of refunds |
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$ |
47 |
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$ |
111 |
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|
See notes to unaudited condensed consolidated financial statements.
6
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. |
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BUSINESS AND BASIS OF PRESENTATION |
Overview
The Company is a provider of cash access products and related services to the gaming industry
in the United States and several international markets. Our products and services provide
gaming establishment patrons access to cash through a variety of methods, including Automated
Teller Machine (ATM) cash withdrawals, credit card cash advances, point-of-sale (POS)
debit card transactions, check verification and warranty services and money transfers. In
addition, we also provide products and services that improve credit decision-making, automate
cashier operations and enhance patron marketing activities for gaming establishments.
Commencing in the third quarter of 2006, we began offering, through Arriva, the Arriva Card, a
private-label revolving credit card aimed at consumers who perform cash advance transactions
in gaming establishments. On February 7, 2008, the Companys Board of Directors approved a
plan to exit the Arriva business. The Company has since actively marketed the Arriva business
for sale. The assets associated with the Arriva operations have been segregated and reported
as held for sale in the accompanying condensed consolidated balance sheets as of March 31,
2009 and December 31, 2008, and the results of operations for the Arriva line of business have
been classified to discontinued operations for the three months ended March 31, 2009 and 2008.
Due to general market declines, we have been unable to dispose of Arrivas assets for an
amount reasonably acceptable to the Company. The Company considers Arrivas assets available
for immediate sale. Upon an acceptable offer, the Company will dispose of Arrivas assets.
See further discussion in Note 10 of notes to unaudited condensed consolidated financial statements.
The Company also owns and operates a credit reporting agency for the gaming industry through a
wholly-owned subsidiary, Central Credit, LLC (Central), which provides credit-information
services and credit-reporting history on gaming patrons to various gaming establishments.
Central operates in both international and domestic gaming markets.
The Companys cash access products and services enable three primary types of electronic
payment transactions: ATM cash withdrawals, credit card cash advances and POS debit card
transactions. Consumers can complete any of these transactions at many of our Casino Cash
Plus ATMs enabled with our patented 3-in-1 technology and redemption devices enabled with
our patented 3-in-1 technology. In addition, consumers can complete credit card cash
advances and POS debit card transactions at any of our QuikCash kiosks, all of which we own.
The Company also provides check verification and check warranty services to gaming
establishments that cash patron checks.
Basis of PresentationThe unaudited condensed consolidated financial statements included
herein have been prepared by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission. Some of the information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted accounting
principles in the United States have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of management, all adjustments (which
include normal recurring adjustments) necessary for a fair presentation of results for the
interim periods have been made. The results for the three months ended March 31, 2009 are not
necessarily indicative of results to be expected for the full fiscal year.
These unaudited condensed consolidated financial statements should be read in conjunction with
the annual consolidated financial statements and notes thereto included within the Companys
Annual Report on Form 10-K for the year ended December 31, 2008.
7
On February 7, 2008, the Companys Board of Directors approved a plan to exit the Arriva Card
business. The Company has since actively marketed the Arriva Card business for sale. The
assets associated with the Companys Arriva Card operations, have been segregated and reported
as held for sale in the accompanying unaudited condensed consolidated balance sheet as of March 31,
2009, and the results of operations for the Arriva Card line of business have been classified
to discontinued operations for the three months ended March 31, 2009 and 2008. Due to general
market declines, we have been unable to dispose of Arrivas assets for an amount reasonably
acceptable to the Company. The Company considers Arrivas assets available for immediate
sale. Upon an acceptable offer, the Company will dispose of Arrivas assets.
Use of EstimatesThe Company has made estimates and judgments affecting the amounts reported
in these financial statements and the accompanying notes. The actual results may differ from
these estimates. The significant accounting estimates incorporated into the Companys
unaudited condensed consolidated financial statements include:
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|
|
the estimated reserve for warranty expense associated with our check warranty receivables, |
|
|
|
|
the valuation and recognition of share-based compensation, |
|
|
|
|
the valuation allowance on our deferred tax asset, |
|
|
|
|
the expected loss on discontinuation of the operations of Arriva, |
|
|
|
|
the estimated cash flows in assessing the recoverability of long-lived assets. |
2. |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Principles of ConsolidationThe unaudited condensed consolidated financial statements
presented for the three months ended March 31, 2009 and 2008 and as of March 31, 2009 and
December 31, 2008 include the accounts of Global Cash Access Holdings, Inc. and its
subsidiaries.
All significant intercompany transactions and balances have been eliminated in
consolidation.
Earnings Applicable to Common StockIn accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings per Share, (SFAS No. 128) basic
earnings per share is calculated by dividing net income by the weighted-average number of
common shares outstanding for the period. Earnings per share reflects the effect of
potentially dilutive common stock, which consists of non-vested shares of restricted stock
outstanding and assumed stock option exercises. The weighted-average number of common
shares outstanding used in the computation of basic and diluted earnings per share is as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
Weighted average common shares outstanding basic (1) |
|
|
77,368 |
|
|
|
77,182 |
|
Potential dilution from equity grants (2)(3) |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding diluted |
|
|
77,368 |
|
|
|
77,184 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
- Included in the calculation of weighted average common shares outstanding basic
are 609,455 unvested shares of restricted stock granted in share-based payment
transactions that are participating securities as determined under Financial Accounting Standards Board (FASB) Staff Position
EITF 03-6-1: Determining Whether Instruments Granted in Share-Based Payment Transactions
Are Participating Securities. |
|
(2) |
|
- The potential dilution excludes the weighted average effect of stock options to
acquire 7,944,142 and 6,667,642 shares of common stock for the three months ended March
31, 2009 and 2008, respectively, as the application of the treasury stock method, as
required by SFAS No. 128, makes them anti-dilutive. |
|
(3) |
|
- The potential dilution excludes the weighted average effect of shares of time-based
restricted stock of 184,429 and 341,335 shares for the three months ended March 31, 2009 and
2008, respectively, because the application of the treasury stock method, as required by SFAS
No. 128, makes them anti-dilutive. |
Business
CombinationsThe Company completed its acquisition of
Cash Systems, Inc. in August 2008, and is in the process of
finalizing its preliminary estimates of assets acquired and
liabilities assumed. Accordingly, those preliminary estimates are
subject to change.
8
Central Credit Check Warranty ReceivablesIn the check services transactions provided by
Central, Central warrants check cashing transactions performed at gaming establishments.
If a gaming establishment accepts a payroll or personal check from a patron that we
warrant, Central is obligated to reimburse the gaming establishment for the full face
value of any dishonored checks. All amounts paid out to the gaming establishment related
to these items result in a warranty receivable from the patron. This amount is recorded
in other receivables, net on the unaudited condensed consolidated balance sheets. On a monthly
basis, Central evaluates the collectibility of the outstanding balances and establishes a
reserve for the face amount of the expected losses on these receivables. The warranty
expense associated with this reserve is included within cost of revenues (exclusive of
depreciation and amortization) in the unaudited condensed consolidated statements of income. The
Companys policy is to write off all warranty receivables that are older than one year in
age.
A summary of the activity for the check warranty reserve for the three months ended
March 31, 2009, is as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Additions |
|
|
|
|
|
|
Balance at |
|
|
|
Beginning of |
|
|
Charged to |
|
|
|
|
|
|
End of |
|
|
|
Period |
|
|
Expense |
|
|
Deductions |
|
|
Period |
|
Quarter ended March 31, 2009 |
|
$ |
11,115 |
|
|
$ |
2,657 |
|
|
$ |
(1,760 |
) |
|
$ |
12,012 |
|
Fair Value MeasuresWe adopted SFAS No. 157, Fair Value Measurements, (SFAS No. 157),
as of January 1, 2008 as it relates to financial assets and liabilities. In February
2008, the FASB deferred the adoption of SFAS
No. 157 for one year as it applies to certain items, including assets and liabilities
initially measured at fair value in a business combination, reporting units and certain
assets and liabilities measured at fair value in connection with goodwill impairment tests
in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, and long-lived
assets measured at fair value for impairment assessments under SFAS No. 144, Accounting
for the Impairment and Disposal of Long-Lived Assets. We adopted SFAS No. 157 on January
1, 2009 as it relates to these items. SFAS No. 157 requires enhanced disclosures about
investments that are measured and reported at fair value. SFAS No. 157 establishes a
hierarchal disclosure framework that prioritizes and ranks the level of market price
observability used in measuring investments at fair value. Market price observability is
impacted by a number of factors, including the type of investment and the characteristics
specific to the investment. Investments with readily available active quoted prices or for
which fair value can be measured from actively quoted prices generally will have a higher
degree of market price observability and a lesser degree of judgment used in measuring
fair value.
Financial assets and liabilities measured and reported at fair value are classified and disclosed in one of the
following categories:
Level 1 Quoted prices are available in active markets for identical investments as
of the reporting date. The type of investments included in Level I include listed
equities and listed derivatives. As required by SFAS No. 157, we do not adjust the
quoted price for these investments, even in situations where we hold a large position
and a sale could reasonably impact the quoted price.
9
Level 2 Pricing inputs are other than quoted prices in active markets, which are
either directly or indirectly observable as of the reporting date, and fair value is
determined through the use of models or other valuation methodologies. Investments
which are generally included in this category include corporate bonds and loans, less
liquid and restricted equity securities and certain over-the-counter derivatives.
Level 3 Pricing inputs are unobservable for the investment and include situations
where there is little, if any, market activity for the investment. The inputs into the
determination of fair value require significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels
of the fair value hierarchy. In such cases, an investments level within the fair value
hierarchy is based on the lowest level of input that is significant to the fair value
measurement. Our assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment and considers factors specific to the
investment.
As of March 31, 2009, the Company maintained as held for sale a portfolio of revolving
credit receivables. These receivables represented the primary assets of Arriva. As
discussed in Note 10, these receivables were adjusted to fair value using the expected net
present value of future discounted cash flows, a Level 3 input. As a result of this
assessment, the Company recorded a pretax valuation adjustment as a charge to income of $0
and $5.5 million for the three months ended March 31, 2009 and 2008, respectively.
Fair
Value Measurements Using Significant Unobservable Inputs
(Level 3) (in thousands):
|
|
|
|
|
Receivable
balance, 12/31/08 |
|
$ |
1,540 |
|
Collections
and write-offs |
|
|
(591 |
) |
|
|
|
|
Carrying
value, 3/31/09 |
|
$ |
949 |
|
|
|
|
|
Recently
Adopted Accounting PronouncementsIn December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations (SFAS No. 141(R)). Under SFAS No. 141(R), an
entity is required to recognize the assets acquired, liabilities assumed, contractual
contingencies, and contingent consideration at their fair value on the acquisition date.
It further requires that acquisition-related costs are recognized separately from the
acquisition and expensed as incurred, restructuring costs generally are expensed in
periods subsequent to the acquisition date, and changes in accounting for deferred tax
asset valuation allowances and acquired income tax uncertainties after the measurement
period impact income tax expense. SFAS No. 141(R) is effective for business combinations
completed subsequent to January 1, 2009. The Company adopted SFAS 141(R) on January 1,
2009.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements (SFAS No. 160), which establishes standards for the accounting and
reporting of noncontrolling interests in subsidiaries (that is, minority interests) in
consolidated financial statements and for the loss of control of subsidiaries. SFAS No.
160 requires: (1) the equity interest of noncontrolling shareholders, partners, or other
equity holders in subsidiaries to be accounted for and presented in equity, separately
from the parent shareholders equity, rather than as liabilities or as mezzanine items
between liabilities and equity; (2) the amount of consolidated net income attributable to
the parent and to the noncontrolling interests be clearly identified and presented on the
face of the consolidated statement of income; and (3) when a subsidiary is deconsolidated,
any retained noncontrolling equity investment in the former subsidiary be initially
measured at fair value. The gain or loss on the deconsolidation of the subsidiary is
measured using the fair value of any noncontrolling equity investment rather than the
carrying amount of that retained investment. SFAS No. 160 is effective beginning on
January 1, 2009. Early adoption of the statement is prohibited. The Company adopted SFAS
No. 160 on January 1, 2009.
10
The table below presents the activity in stockholders equity for the three months ended
March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Equity |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Attributable |
|
|
Attributable |
|
|
|
|
|
|
Common |
|
|
Paid in |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury |
|
|
to GCA |
|
|
to Minority |
|
|
Total |
|
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
Income |
|
|
Stock |
|
|
Holdings |
|
|
Interest |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008 |
|
$ |
83 |
|
|
$ |
172,119 |
|
|
$ |
37,659 |
|
|
$ |
1,243 |
|
|
$ |
(50,226 |
) |
|
$ |
160,878 |
|
|
|
|
|
|
$ |
160,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
9,109 |
|
|
|
|
|
|
|
|
|
|
|
9,109 |
|
|
|
(22 |
) |
|
|
9,087 |
|
Foreign currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(146 |
) |
|
|
|
|
|
|
(146 |
) |
|
|
|
|
|
|
(146 |
) |
Share-based
compensation expense |
|
|
|
|
|
|
1,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,840 |
|
|
|
|
|
|
|
1,840 |
|
Treasury shares, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2009 |
|
$ |
83 |
|
|
$ |
173,959 |
|
|
$ |
46,768 |
|
|
$ |
1,097 |
|
|
$ |
(50,244 |
) |
|
$ |
171,663 |
|
|
$ |
(22 |
) |
|
$ |
171,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
3. |
|
ATM FUNDING AGREEMENTS |
Bank of America Amended Treasury Services AgreementOn March 13, 2008, the Company entered
into an Amendment of the Treasury Services Agreement (Bank of America ATM Funding Agreement)
with Bank of America, N.A. (Bank of America), which allows for the Company to utilize up to
$410 million in funds owned by Bank of America to provide the currency needed for normal
operating requirements for all the ATMs operated by the Company. The amount provided by Bank
of America can be increased above $410 million at the option of Bank of America. For use of
these funds, GCA pays Bank of America a cash usage fee equal to the average daily balance of
funds utilized multiplied by the one-month LIBOR plus 25 basis points.
For the three months ended March 31, 2009 and 2008, $0.7 million and $2.3 million,
respectively, of cash usage fees have been included in interest expense in the accompanying
unaudited condensed consolidated statements of income. At March 31, 2009
and December 31, 2008, the
outstanding balance of cash used by GCA under the Bank of America ATM Funding Agreement was
$344.2 million and $521.8 million, respectively, and the cash usage interest rate in effect
was 0.8% and 1.4% respectively.
Site Funded ATMsGCA operates some ATMs at customer locations where the customer provides the
cash required for ATM operational needs. GCA is required to reimburse the customer for the
amount of cash dispensed from these site-funded ATMs. The site-funded ATM liability is
included within settlement liabilities in the accompanying balance sheets and was $29.6
million and $50.6 million as of March 31, 2009 and December 31, 2008, respectively. As of
March 31, 2009 and December 31, 2008, GCA operated 1,345 and 1,299 devices (ATMs and
redemption kiosks), respectively, that were site funded.
Stock OptionsThe Company has issued stock options to directors, officers and key employees
under the 2005 Stock Incentive Plan (the 2005 Plan). Generally, options under the 2005 Plan
(other than those granted to non-employee directors) will vest at a rate of 25% of the shares
underlying the option after one year and the remaining shares vest in equal portions over the
following 36 months, such that all shares are vested after four years. Stock options are
issued at the current market price on the date of grant, with a contractual term of 10 years.
A summary of award activity under the Companys stock option plans as of March 31, 2009 and
changes during the three month periods then ended is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Exercise |
|
|
Average Life |
|
|
Aggregate |
|
|
|
Options |
|
|
Prices |
|
|
Remaining |
|
|
Intrinsic Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Outstanding December 31, 2008 |
|
|
6,833,325 |
|
|
$ |
8.90 |
|
|
8.5 years |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
2,796,500 |
|
|
|
2.20 |
|
|
|
|
|
|
|
3,414 |
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(148,425 |
) |
|
|
9.57 |
|
|
|
|
|
|
|
(717 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding March 31, 2009 |
|
|
9,481,400 |
|
|
$ |
6.91 |
|
|
8.8 years |
|
$ |
2,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable March 31, 2009 |
|
|
2,738,079 |
|
|
$ |
10.89 |
|
|
7.5 years |
|
$ |
14,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were stock options granted to acquire 2.8 million shares of common stock during the
three months ended March 31, 2009. During the three months ended March 31, 2009, the Company
received no proceeds
from the exercise of stock options. During the three months ended March 31, 2009, the Company
recorded $1.3 million in non-cash compensation expense related to options granted that are
expected to vest. As of March 31, 2009, there was $16.4 million in unrecognized compensation
expense related to options expected to vest. This cost is expected to be recognized on a
straight-line basis over a weighted average period of 2.4 years.
12
There were stock options granted to acquire 4.1 million shares of common stock during the
three months ended March 31, 2008. During the three months ended March 31, 2008, we received
no proceeds from the exercise of stock options. During the three months ended March 31, 2008,
we recorded $1.7 million in non-cash compensation expense related to options granted that are
expected to vest.
Restricted StockThe Company began granting restricted stock to directors, officers and key
employees in the first quarter of 2006. The vesting provisions are similar to those
applicable to stock options. Because these shares of restricted stock are issued primarily to
employees of the Company, some of the shares issued will be withheld by the Company to satisfy
the minimum statutory tax withholding requirements applicable to the restricted stock grants.
Therefore, as these awards vest the actual number of shares outstanding as a result of the
restricted stock awards is reduced and the number of shares included within treasury stock is
increased by the amount of shares withheld. During the three months ended March 31, 2009, the
Company withheld 8,000 shares of restricted stock from employees with a cumulative vesting
commencement date fair value of $20,000. These amounts have been included as part of the
total treasury stock repurchased during the period. Prior to vesting, the restricted stock
has rights to the dividends declared and voting rights; therefore they are considered issued
and outstanding.
A summary of all non-vested share awards for the Companys time-based restricted stock as of
March 31, 2009 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
Shares |
|
|
Grant Date Fair |
|
|
Aggregate Fair |
|
|
|
Outstanding |
|
|
Value |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Balance December 31, 2008 |
|
|
190,251 |
|
|
$ |
15.67 |
|
|
$ |
2,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,047,875 |
|
|
|
2.20 |
|
|
|
2,305 |
|
Vested |
|
|
(26,392 |
) |
|
|
15.71 |
|
|
|
(415 |
) |
Canceled |
|
|
(3,456 |
) |
|
|
16.60 |
|
|
|
(57 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2009 |
|
|
1,208,278 |
|
|
$ |
3.98 |
|
|
$ |
4,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
There were 26,000 shares of time-based restricted stock vested during the three months ended
March 31, 2009. During the three months ended March 31, 2009 and 2008, we recorded $0.5
million and $0.3 million in non-cash compensation expense
respectively, related to the restricted stock
granted that is expected to vest. As of March 31, 2009, there
was approximately $4.8 million in
unrecognized compensation expense related to shares of time-based restricted stock expected to
vest. This cost is expected to be recognized on a straight-line basis over a weighted average
period of 3.2 years.
5. |
|
COMMITMENTS AND CONTINGENCIES |
Litigation Claims and Assessments
On December 12, 2007, a derivative action was filed by a stockholder on behalf of the Company
in the United States District Court, District of Nevada against certain of our current and
former directors, our former chief
executive officer and our former chief financial officer, alleging breach of fiduciary duties,
waste of corporate assets, unjust enrichment and violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 as amended (the Exchange Act). On February 8, 2008, an
additional derivative action was filed by a separate stockholder on behalf of the Company in
the United States District Court, District of Nevada against certain of our current and former
directors, our former chief executive officer and our former chief financial officer, alleging
breach of fiduciary duties, insider trading and waste of corporate assets. On May 5, 2008, the
foregoing actions were consolidated and an amended complaint was filed that continues to pursue
only state law claims but not violations of Sections 10(b) or 20(a) of the Exchange Act.
Following the filing of motions to dismiss by the defendants, a second amended complaint was
filed. Thereafter, plaintiffs amended again in December 2008. The third amended complaint
alleges essentially the same legal claims as the former complaints and seeks, among other
things, damages in favor of the Company, certain corporate actions to purportedly improve the
Companys corporate governance, and an award of costs and expenses to the plaintiff
stockholders including attorneys fees. The defendants are seeking to dismiss the third amended
complaint. The Company has indemnification agreements with each of the individual defendants
that may cause the Company to incur expenses associated with the defense of this action and
that may also protect such individuals from liability to the Company. The Company also
maintains director and officer liability insurance that may provide for reimbursement of some
of the expenses associated with this action. At this stage of the litigation, the Company is
unable to make an evaluation of whether the likelihood of an unfavorable outcome is either
probable or remote or the amount or range of potential loss; however, the Company believes it
has meritorious defenses and will vigorously defend this action.
13
On April 11, 2008, a class action was filed by a stockholder in the United States District
Court, Southern District of New York against the Company, certain of our former directors, our
former chief executive officer, M&C International, Summit Partners, L.P., and certain
underwriters of two prior stock offerings to the public. On June 10, 2008, an additional class
action was filed, naming essentially the same defendants and stating similar claims. On June
26, 2008, the foregoing actions were consolidated in New York, and the Court appointed a lead
plaintiff and lead counsel. In August 2008, the lead plaintiff filed a consolidated amended
complaint. The consolidated amended complaint names as additional defendants our former chief
financial officer, certain current and former directors and additional underwriters and
defendants and purports to allege violations of Sections 11, 12(a)(2) and 15 the Securities Act
of 1933, as amended (the Securities Act). The plaintiffs seek, among other things, damages
and rescission. Following motions by defendants, the action was transferred to the District of
Nevada in October 2008 and consolidated with the pending derivative action for pretrial
purposes. Defendants are seeking to dismiss the class action complaint. The Company has
indemnification agreements with each of the individual defendants and certain of the other
defendants that may cause the Company to incur expenses associated with the defense of this
action and that may also protect such defendants from liability to the Company. The Company
also maintains director and officer liability insurance that may provide for reimbursement of
some of the expenses associated with this action. At this stage of the litigation, the Company
is unable to make an evaluation of whether the likelihood of an unfavorable outcome is either
probable or remote or the amount or range of potential loss; however the Company believes it
has meritorious defenses and will vigorously defend this action.
We are threatened with or named as a defendant in various lawsuits arising in the ordinary
course of business, such as personal injury claims and
employment-related claims as well as being
threatened or named as a defendant in lawsuits arising in the ordinary course of business and
assumed as a result of the acquisition of Certegy Gaming Services,
Inc. (CGS), for which we have
indemnification rights, and as a result of the acquisition of Cash
Systems, Inc. (CSI). It is not possible to
determine the ultimate disposition of these matters; however, we are of the opinion that the
final resolution of any such threatened or pending litigation, individually or in the
aggregate, is not likely to have a material adverse effect on our business, cash flows, results
of operations or financial position.
Commitments
USA Payments Processing Commitments. The Company obtains transaction processing services
pursuant to the Amended and Restated Agreement for Electronic Payment Processing from USA
Payment Systems a company controlled by Karim Maskatiya and Robert Cucinotta, who are founders
and significant stockholders of the Company and former members of our Board of Directors. Under
terms of this agreement, GCA is
obligated to pay USA Payment Systems a minimum of $2.3 million annually in fixed monthly
processing fees and minimum annual transaction volume fees through the termination of this
agreement in March 2014.
14
Fiserv Processing Commitments. Arriva entered into a Letter of Understanding with Fiserv
Solutions, Inc. (Fiserv), which was effective March 10, 2008, related to the processing of
the Arriva Card, the private label credit card offered by Arriva. Under the terms of the
agreement with Fiserv, Arriva is committed to pay the greater of 120% of the prevailing prices
for the services utilized or $25,000 in monthly minimum processing fees until the services are
no longer utilized.
Innovative
Funds Transfer, LLC Required Capital Investment. (IFT) Pursuant to the terms of
our agreement with International Gaming Technology, we are obligated to invest up to our pro rata share of $10.0 million in
capital to IFT. Our obligation to invest additional capital in IFT is conditioned upon capital
calls, which are in our sole discretion. As of March 31, 2009, we had invested a total of $4.6
million in IFT, and are committed to invest up to $1.4 million in additional capital
investments if required.
First Data Sponsorship Indemnification Agreement. On March 10, 2004, GCA and First Data entered
into a Sponsorship Indemnification Agreement whereby First Data agreed to continue its
guarantee of performance by us to Bank of America for our sponsorship as a Bank Identification
Number and Interbank Card Association licensee under the applicable VISA U.S.A. and MasterCard
International rules. GCA has agreed to indemnify First Data and its affiliates against any and
all losses and expenses arising from its indemnification obligations pursuant to that
agreement. As collateral security for prompt and complete performance of GCAs obligations
under this agreement, GCA was required to cause a letter of credit in the amount of $3.0
million to be issued to First Data to cover any indemnified amounts not paid under terms of
this agreement. The required amount of this letter of credit will be adjusted annually based
upon the underlying cash advance volume covered by the Sponsorship Indemnification Agreement.
In March 2008, the $3.2 million letter of credit expired. In April 2008, the letter of credit
was reissued for $3.4 million.
Second Amended and Restated Credit Agreement. On November 1, 2006, GCA and Holdings entered
into a Second Amended and Restated Credit Agreement with certain lenders. The Second Amended
and Restated Credit Agreement significantly amended and restated the terms of GCAs existing
senior secured credit facilities to provide for a $100.0 million term loan facility and a
$100.0 million five-year revolving credit facility, with a $25.0 million letter of credit
sublimit and a $5.0 million swingline loan sublimit.
As of March 31, 2009 and December 31, 2008, the Company had $97.8 million and $98.0 million,
respectively, in borrowings under the term loan facility, $0 and $15.0 million, respectively,
under the revolving credit facility portion, and $3.7 million, in
letters of credit issued and outstanding. The letters of credit issued and outstanding reduce
amounts available under the revolving portion of the Second Amended and Restated Credit
Agreement. Borrowings under this loan facility bear interest at a specified number of basis
points above a specified base interest rate. At March 31, 2009, the weighted average interest
rate, inclusive of the applicable margin of 112.5 basis points, was 1.64%. At December 31, 2008, the weighted average
interest rate, inclusive of the applicable margin of 112.5 basis points, was 2.09%.
The Second Amended and Restated Credit Agreement contains customary affirmative and negative
covenants, financial covenants, representations and warranties and events of default, which
are subject to important exceptions and qualifications, as set forth in the Second Amended and
Restated Credit Agreement. As of March 31, 2009, the Company is in compliance with the
required covenants.
Senior Subordinated Notes. On March 10, 2004, GCA completed a private placement offering of
$235 million 8.75% Senior Subordinated Notes due March 15, 2012 (the Notes Offering). On
October 14, 2004, we completed an exchange offer of the notes for registered notes of like
tenor and effect. Interest on the notes accrues based upon a 360-day year comprised of twelve
30-day months and is payable semiannually on March 15th and September 15th. All of the
Companys existing and future domestic wholly owned subsidiaries are guarantors of the notes
on a senior subordinated basis. As of March 31, 2009 and December 31, 2008, the Company had
$152.8 million in borrowings outstanding under the Notes
Offering. As of March 31, 2009, the Company is in compliance
with the required covenants.
15
Common Stock Repurchase Program. On February 6, 2007, the Companys Board of Directors
authorized the repurchase of up to $50.0 million of the Companys issued and outstanding
common stock, subject to compliance with any contractual limitations on such repurchases under
the Companys financing agreements in effect from time to time, including but not limited to
those relating to the Companys senior secured indebtedness and senior subordinated notes.
The Company completed the repurchases under this authorization on February 11, 2008.
During the three months ended March 31, 2009, the Company repurchased or withheld from
restricted stock awards to satisfy the minimum applicable tax withholding obligations incident
to the vesting of such restricted stock awards 8,000 shares of common stock at an aggregate
purchase price of $20,000.
8. |
|
RELATED PARTY TRANSACTIONS |
At March 31, 2009, two former Board of Directors, Karim Maskatiya and Robert Cucinotta, were
the owners of approximately 25.5% of the outstanding equity interests of the Company. The
Company made payments for software development costs and system maintenance to Infonox on the
Web (Infonox) pursuant to agreements with Infonox. At the time we entered into these
agreements, Infonox was controlled by two former members of the Companys Board of Directors,
Messrs. Maskatiya and Cucinotta. In November 2008, Infonox was sold to Total System Services,
Inc. (TSYS). The Company also obtains transaction processing services from USA Payments, a
company controlled by Messrs. Maskatiya and Cucinotta, pursuant to the Amended and Restated
Agreement for Electronic Payment Processing. Messrs. Maskatiya and Cucinotta also control MCA
Processing LLC, an assembler and distributor of redemption devices. From time to time, GCA
has procured those devices from MCA Processing, LLC, for usage by or sale to our customers.
The following table represents the transactions with related parties for the three months
ended March 31, 2009 and March 31, 2008 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Name of |
|
March 31, |
|
Related Party Description of Transaction |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
USA Payments and USA Payment Systems: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction processing charges included in cost of revenues (exclusive of depreciation and amortization) |
|
|
1,574 |
|
|
|
950 |
|
|
|
|
|
|
|
|
|
|
Pass through billing related to gateway fees, telecom and other items included in cost of revenues
(exclusive of depreciation and amortization) and operating expenses |
|
|
333 |
|
|
|
278 |
|
|
|
|
|
|
|
|
|
|
Sublease income earned for leasing out corporate office space for backup servers |
|
|
(6 |
) |
|
|
(6 |
) |
16
The following table details the amounts receivable from or (liabilities to) these related
parties that are recorded as part of other receivables, net, accounts payable or accrued
expenses in the unaudited condensed consolidated balance sheets (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
M&C and related companies |
|
$ |
|
|
|
$ |
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total included within other receivables, net |
|
$ |
|
|
|
$ |
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Payment Systems |
|
$ |
(780 |
) |
|
$ |
(212 |
) |
Infonox on the Web |
|
|
|
|
|
|
(447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total included within accounts payable and
accrued expenses |
|
$ |
(780 |
) |
|
$ |
(659 |
) |
|
|
|
|
|
|
|
The Companys effective income tax rate for continuing operations was 38.0% for the three
months ended March 31, 2009 compared to 46.9% for the three months ended March 31, 2008. The
effective tax rate for the three months ended March 31, 2008 was negatively impacted by the
expiration of non-qualified stock options. Due to the amortization of our deferred tax assets
for income tax purposes, actual cash taxes paid on pretax income generated in the first
quarter of 2009 are expected to be substantially lower than the provision.
The following table presents the recorded income tax expense for the three months ended March
31, (amounts are in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
Provision for income taxes: |
|
|
|
|
|
|
|
|
Provision for income taxes on continuing operations, as
reported |
|
$ |
5,555 |
|
|
$ |
5,430 |
|
Income tax provision (benefit), discontinued operations |
|
|
17 |
|
|
|
(2,476 |
) |
|
|
|
|
|
|
|
Provision for income taxes, consolidated |
|
$ |
5,572 |
|
|
$ |
2,954 |
|
Provision for income taxes, minority loss |
|
|
8 |
|
|
|
26 |
|
|
|
|
|
|
|
|
Provision for income taxes attributable to Global Cash Access
Holdings, Inc. |
|
$ |
5,580 |
|
|
$ |
2,980 |
|
|
|
|
|
|
|
|
The Company accounts for uncertain tax positions in accordance with FASB Interpretation No.
48, Accounting for Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109,
(FIN 48). As of March 31, 2009, there has been no change to the balance of unrecognized tax
benefits reported at December 31, 2008.
17
10. |
|
DISCONTINUED OPERATIONS |
On February 7, 2008, the Companys Board of Directors approved a plan to exit the Arriva Card
business. The Company has since actively marketed the Arriva Card business for sale and
accordingly, has classified the net assets of Arriva as available for sale on the unaudited
condensed consolidated balance sheets. The Company estimated the fair value of Arrivas net
assets as of March 31, 2008 based on preliminary offers the
Company had received in connection with its marketing efforts as well as through the
application of a net present value methodology. The Company recorded a pre-tax loss of $5.5
million to reduce the net assets of the Arriva Card business to their estimated fair value at
February 7, 2008. Due to general market declines, the Company has been unable to dispose of
Arrivas assets for an amount reasonably acceptable to the Company. The Company considers
Arrivas assets available for immediate sale. Upon an acceptable offer, the Company will
dispose of Arrivas assets. As of March 31, 2009 and
December 31, 2008, the components of
Arrivas assets held for sale were as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
989 |
|
|
$ |
1,616 |
|
Total liabilities |
|
|
(40 |
) |
|
|
(76 |
) |
|
|
|
|
|
|
|
Assets held for sale |
|
$ |
949 |
|
|
$ |
1,540 |
|
|
|
|
|
|
|
|
As a result of the implementation of the plan to dispose of the Arriva Card business, the
operating results of the Arriva Card business have been removed from continuing operations and
reported as discontinued operations in the unaudited condensed consolidated statements of income and
comprehensive income. Selected financial information that has been reported as discontinued
operations for the three months ended March 31, 2009 and 2008 are as follows (amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
223 |
|
|
$ |
859 |
|
Pretax income (loss) |
|
$ |
49 |
|
|
$ |
(6,879 |
) |
Cash flows from discontinued operations for the periods ended March 31, 2009 and 2008 have not
been separately identified in the unaudited condensed consolidated statement of cash flows.
Operating segments as defined by SFAS No. 131, Disclosures About Segments of an Enterprise and
Related Information, are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating decision maker, or
decision-making group, in deciding how to allocate resources and in assessing performance. The
Companys chief operating decision-making group consists of the Chief Executive Officer and
Chief Financial Officer. The operating segments are reviewed separately because each
represents products or services that can be, and often are, marketed and sold separately to
our customers.
The Company operates in three distinct business segments: (1) cash advance, (2) ATM and (3)
check services. The Other lines of business category, none of which exceed the established
materiality for segment reporting, include credit reporting services, Western Union, direct
marketing and IFT, among others.
These segments are monitored separately by the Chief Executive Officer and Chief Financial
Officer for performance against our internal forecast and are consistent with our internal
management reporting. The Companys internal management reporting does not allocate overhead
or depreciation and amortization expenses to the respective business segments. For the segment
information presented below, these amounts have been allocated to the respective segments
based upon relation to the business segment (where identifiable) or on respective revenue
contribution.
The Companys business is predominantly domestic, with no specific regional concentrations and
no significant assets in foreign locations.
18
Major customersFor the three months ended March 31, 2009 and 2008, the combined revenues
from all segments from our largest customer was approximately
$24.7 million and $28.0 million, representing 13.7% and 19.4% of the Companys total consolidated revenues,
respectively.
For the three months ended March 31, 2009 and 2008, the combined revenues from all segments
for our second largest customer was approximately $11.8 million
and $15.0 million, representing 6.5% and 10.4%, of the
Companys total consolidated revenues, respectively.
The accounting policies of the operating segments are the same as those described in the
summary of significant accounting policies. The tables below present the results of operations
by operating segment for the three months ended March 31, 2009 and 2008 and total assets by
operating segment as of March 31, 2009 and December 31, 2008 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
|
|
|
Check |
|
|
|
|
|
|
|
|
|
|
|
|
Advance |
|
|
ATM |
|
|
Services |
|
|
Other |
|
|
Corporate |
|
|
Total |
|
Three Months Ended March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
81,366 |
|
|
$ |
86,423 |
|
|
$ |
10,827 |
|
|
$ |
3,059 |
|
|
$ |
|
|
|
$ |
181,675 |
|
Operating income exclusive of
depreciation and
amortization (1) |
|
|
18,261 |
|
|
|
11,617 |
|
|
|
5,345 |
|
|
|
2,418 |
|
|
|
(13,598 |
) |
|
|
24,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
73,388 |
|
|
$ |
59,772 |
|
|
$ |
7,681 |
|
|
$ |
2,644 |
|
|
$ |
|
|
|
$ |
143,485 |
|
Operating income exclusive of
depreciation and
amortization (1) |
|
|
17,501 |
|
|
|
10,941 |
|
|
|
3,121 |
|
|
|
1,965 |
|
|
|
(12,111 |
) |
|
|
21,471 |
|
|
|
|
(1) |
|
- Depreciation and amortization expenses for segment presentation purposes have been included
within the Corporate segment, and have not been allocated to individual operating segments. |
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
Total Assets |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Cash advance |
|
$ |
147,560 |
|
|
$ |
172,882 |
|
ATM |
|
|
111,846 |
|
|
|
111,781 |
|
Check services |
|
|
43,618 |
|
|
|
39,412 |
|
Other |
|
|
33,348 |
|
|
|
22,732 |
|
Discontinued
operations |
|
|
949 |
|
|
|
1,560 |
|
Corporate |
|
|
185,948 |
|
|
|
210,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
523,269 |
|
|
$ |
559,150 |
|
|
|
|
|
|
|
|
Scott Betts and Steven Lazarus Employment Contracts. On April 27, 2009, the Company filed a
Form 8-K with the Securities and Exchange Commission (the SEC) disclosing the terms of the
second amendment to the employment agreement between the Company and Scott Betts, Chief
Executive Officer, which amended certain employment terms and disclosing the terms of the
amendment to the employment agreement between the Company and Steven Lazarus, Executive Vice
President, which amended certain employment terms.
19
Amended
and Restated Certificate of Incorporation. On April 30,
2009, the Company filed a
Form 8-K with the SEC disclosing the Amended and Restated Certificate of Incorporation, which
amendment permits the Company to redeem shares of its capital stock that are owned by
stockholders that are found to be unsuitable stockholders for gaming regulatory purposes.
Share Repurchase Program. On April 30, 2009, the Companys Board of Directors authorized a
share repurchase program not to exceed $25 million.
13. |
|
GUARANTOR INFORMATION |
In March 2004, pursuant to the Notes Offering, GCA issued $235 million in aggregate principal
amount of 8 3/4% senior subordinated notes due 2012 (the Notes). At March 31, 2009 and December 31,
2008, there were $152.8 million in Notes outstanding. The Notes are guaranteed by all of GCAs
existing domestic 100% owned subsidiaries. In addition, effective upon the closing of the Companys
initial public offering of common stock, Holdings guaranteed, on a subordinated basis, GCAs
obligations under the Notes. These guarantees are full, unconditional, joint and several. GCA
Canada, GCA UK, BVI, GCA Switzerland, GCA Belgium, GCA HK, GCA Macau and GCA SA, which are 100%
owned non-domestic subsidiaries, and IFT, which is a consolidated joint venture, do not guaranty
the Notes. The following consolidating schedules present separate unaudited condensed financial
statement information on a combined basis for the parent only, the issuer, as well as the Companys
guarantor subsidiaries and non-guarantor subsidiaries and affiliate, as of March 31, 2009 and
December 31, 2008, and for the three months ended March 31, 2009 and 2008:
20
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING SCHEDULE BALANCE SHEET INFORMATION
MARCH 31, 2009
(amounts in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Elimination * |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
57,655 |
|
|
$ |
2,966 |
|
|
$ |
10,031 |
|
|
$ |
|
|
|
$ |
70,652 |
|
Restricted cash and cash equivalents |
|
|
|
|
|
|
808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
808 |
|
Settlement receivables |
|
|
|
|
|
|
32,625 |
|
|
|
|
|
|
|
4,393 |
|
|
|
|
|
|
|
37,018 |
|
Other receivables, net |
|
|
|
|
|
|
17,473 |
|
|
|
67,106 |
|
|
|
330 |
|
|
|
(74,932 |
) |
|
|
9,977 |
|
Prepaid and other assets |
|
|
|
|
|
|
11,271 |
|
|
|
90 |
|
|
|
391 |
|
|
|
|
|
|
|
11,752 |
|
Investment in subsidiaries |
|
|
171,645 |
|
|
|
84,688 |
|
|
|
|
|
|
|
|
|
|
|
(256,333 |
) |
|
|
|
|
Assets held for sale |
|
|
|
|
|
|
|
|
|
|
949 |
|
|
|
|
|
|
|
|
|
|
|
949 |
|
Property, equipment and leasehold
improvements, net |
|
|
|
|
|
|
22,446 |
|
|
|
546 |
|
|
|
680 |
|
|
|
|
|
|
|
23,672 |
|
Goodwill, net |
|
|
|
|
|
|
128,168 |
|
|
|
55,298 |
|
|
|
672 |
|
|
|
|
|
|
|
184,138 |
|
Other intangibles, net |
|
|
|
|
|
|
31,419 |
|
|
|
1,521 |
|
|
|
241 |
|
|
|
|
|
|
|
33,181 |
|
Deferred income taxes, net |
|
|
|
|
|
|
151,132 |
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
151,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
171,645 |
|
|
$ |
537,685 |
|
|
$ |
128,476 |
|
|
$ |
16,728 |
|
|
$ |
(331,265 |
) |
|
$ |
523,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement liabilities |
|
$ |
|
|
|
$ |
41,145 |
|
|
$ |
44 |
|
|
$ |
5,426 |
|
|
$ |
|
|
|
$ |
46,615 |
|
Accounts payable |
|
|
|
|
|
|
40,036 |
|
|
|
370 |
|
|
|
208 |
|
|
|
|
|
|
|
40,614 |
|
Accrued expenses |
|
|
|
|
|
|
34,357 |
|
|
|
49,505 |
|
|
|
4,965 |
|
|
|
(74,932 |
) |
|
|
13,895 |
|
Borrowings |
|
|
|
|
|
|
250,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
366,038 |
|
|
|
49,919 |
|
|
|
10,599 |
|
|
|
(74,932 |
) |
|
|
351,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity attributable to
GCA, Inc. |
|
|
171,667 |
|
|
|
171,669 |
|
|
|
78,557 |
|
|
|
6,129 |
|
|
|
(256,355 |
) |
|
|
171,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MINORITY INTEREST |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
(22 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders equity |
|
$ |
171,645 |
|
|
$ |
537,685 |
|
|
$ |
128,476 |
|
|
$ |
16,728 |
|
|
$ |
(331,265 |
) |
|
$ |
523,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Eliminations include intercompany investments and management fees |
21
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING SCHEDULE BALANCE SHEET INFORMATION
DECEMBER 31, 2008
(amounts in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Elimination * |
|
|
Consolidated |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
45,122 |
|
|
$ |
17,555 |
|
|
$ |
14,471 |
|
|
$ |
|
|
|
$ |
77,148 |
|
Restricted cash and cash equivalents |
|
|
|
|
|
|
388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
388 |
|
Settlement receivables |
|
|
|
|
|
|
48,649 |
|
|
|
87 |
|
|
|
2,868 |
|
|
|
|
|
|
|
51,604 |
|
Other receivables, net |
|
|
|
|
|
|
36,305 |
|
|
|
69,868 |
|
|
|
474 |
|
|
|
(89,888 |
) |
|
|
16,759 |
|
Prepaid and other assets |
|
|
|
|
|
|
10,888 |
|
|
|
670 |
|
|
|
309 |
|
|
|
|
|
|
|
11,867 |
|
Investment in subsidiaries |
|
|
162,973 |
|
|
|
78,820 |
|
|
|
|
|
|
|
|
|
|
|
(241,793 |
) |
|
|
|
|
Assets held for sale |
|
|
|
|
|
|
|
|
|
|
1,540 |
|
|
|
|
|
|
|
|
|
|
|
1,540 |
|
Property, equipment and leasehold
improvements, net |
|
|
|
|
|
|
22,808 |
|
|
|
906 |
|
|
|
705 |
|
|
|
|
|
|
|
24,419 |
|
Goodwill, net |
|
|
|
|
|
|
128,191 |
|
|
|
55,061 |
|
|
|
677 |
|
|
|
|
|
|
|
183,929 |
|
Other intangibles, net |
|
|
|
|
|
|
21,911 |
|
|
|
12,788 |
|
|
|
283 |
|
|
|
|
|
|
|
34,982 |
|
Deferred income taxes, net |
|
|
|
|
|
|
156,522 |
|
|
|
13 |
|
|
|
(21 |
) |
|
|
|
|
|
|
156,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
162,973 |
|
|
$ |
549,604 |
|
|
$ |
158,488 |
|
|
$ |
19,766 |
|
|
$ |
(331,681 |
) |
|
$ |
559,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement liabilities |
|
$ |
|
|
|
$ |
70,132 |
|
|
$ |
322 |
|
|
$ |
8,696 |
|
|
$ |
|
|
|
$ |
79,150 |
|
Accounts payable |
|
|
|
|
|
|
34,445 |
|
|
|
927 |
|
|
|
189 |
|
|
|
|
|
|
|
35,561 |
|
Accrued expenses |
|
|
|
|
|
|
20,709 |
|
|
|
82,327 |
|
|
|
4,660 |
|
|
|
(89,885 |
) |
|
|
17,811 |
|
Borrowings |
|
|
|
|
|
|
265,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
391,036 |
|
|
|
83,576 |
|
|
|
13,545 |
|
|
|
(89,885 |
) |
|
|
398,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity attributable to
GCA, Inc. |
|
|
162,973 |
|
|
|
158,568 |
|
|
|
74,912 |
|
|
|
6,221 |
|
|
|
(241,796 |
) |
|
|
160,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MINORITY INTEREST |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
162,973 |
|
|
|
158,568 |
|
|
|
74,912 |
|
|
|
6,221 |
|
|
|
(241,796 |
) |
|
|
160,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders equity |
|
$ |
162,973 |
|
|
$ |
549,604 |
|
|
$ |
158,488 |
|
|
$ |
19,766 |
|
|
$ |
(331,681 |
) |
|
$ |
559,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Eliminations include intercompany investments and management fees |
22
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING SCHEDULE STATEMENT OF INCOME INFORMATION
THREE MONTHS ENDED MARCH 31, 2009
(amounts in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations * |
|
|
Consolidated |
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash advance |
|
$ |
|
|
|
$ |
78,678 |
|
|
$ |
|
|
|
$ |
2,688 |
|
|
$ |
|
|
|
$ |
81,366 |
|
ATM |
|
|
|
|
|
|
86,217 |
|
|
|
(48 |
) |
|
|
254 |
|
|
|
|
|
|
|
86,423 |
|
Check services |
|
|
|
|
|
|
4,392 |
|
|
|
6,435 |
|
|
|
|
|
|
|
|
|
|
|
10,827 |
|
Central Credit and other revenues |
|
|
5,151 |
|
|
|
3,810 |
|
|
|
2,146 |
|
|
|
|
|
|
|
(8,048 |
) |
|
|
3,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
5,151 |
|
|
|
173,097 |
|
|
|
8,533 |
|
|
|
2,942 |
|
|
|
(8,048 |
) |
|
|
181,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues (exclusive of depreciation and amortization) |
|
|
|
|
|
|
(132,101 |
) |
|
|
(2,913 |
) |
|
|
(2,156 |
) |
|
|
|
|
|
|
(137,170 |
) |
Operating expenses |
|
|
|
|
|
|
(19,286 |
) |
|
|
(813 |
) |
|
|
(479 |
) |
|
|
116 |
|
|
|
(20,462 |
) |
Amortization |
|
|
|
|
|
|
(1,855 |
) |
|
|
(323 |
) |
|
|
(42 |
) |
|
|
|
|
|
|
(2,220 |
) |
Depreciation |
|
|
|
|
|
|
(2,287 |
) |
|
|
(191 |
) |
|
|
(73 |
) |
|
|
|
|
|
|
(2,551 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
|
5,151 |
|
|
|
17,568 |
|
|
|
4,293 |
|
|
|
192 |
|
|
|
(7,932 |
) |
|
|
19,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST INCOME (EXPENSE), NET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
114 |
|
Interest expense |
|
|
|
|
|
|
(4,768 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,768 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income (expense), net |
|
|
|
|
|
|
(4,668 |
) |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
(4,654 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAX PROVISION |
|
|
5,151 |
|
|
|
12,900 |
|
|
|
4,293 |
|
|
|
206 |
|
|
|
(7,932 |
) |
|
|
14,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION |
|
|
|
|
|
|
(5,441 |
) |
|
|
|
|
|
|
(114 |
) |
|
|
|
|
|
|
(5,555 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM CONTINUING OPERATIONS, NET OF TAX |
|
|
5,151 |
|
|
|
7,459 |
|
|
|
4,293 |
|
|
|
92 |
|
|
|
(7,932 |
) |
|
|
9,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS ON DISCONTINUED OPERATIONS, NET OF TAX |
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
|
5,151 |
|
|
|
7,459 |
|
|
|
4,325 |
|
|
|
92 |
|
|
|
(7,932 |
) |
|
|
9,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLUS: NET LOSS ATTRIBUTABLE TO MINORITY INTEREST LOSS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO GCA, INC. |
|
$ |
5,151 |
|
|
$ |
7,459 |
|
|
$ |
4,325 |
|
|
$ |
106 |
|
|
$ |
(7,932 |
) |
|
$ |
9,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Eliminations include earnings on subsidiaries and management fees |
23
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING SCHEDULE STATEMENT OF INCOME INFORMATION
THREE MONTHS ENDED MARCH 31, 2008
(amounts in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations * |
|
|
Consolidated |
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash advance |
|
$ |
|
|
|
$ |
70,542 |
|
|
$ |
|
|
|
$ |
2,846 |
|
|
$ |
|
|
|
$ |
73,388 |
|
ATM |
|
|
|
|
|
|
59,499 |
|
|
|
|
|
|
|
273 |
|
|
|
|
|
|
|
59,772 |
|
Check services |
|
|
|
|
|
|
3,373 |
|
|
|
4,308 |
|
|
|
|
|
|
|
|
|
|
|
7,681 |
|
Central Credit and other revenues |
|
|
1,745 |
|
|
|
(865 |
) |
|
|
2,202 |
|
|
|
14 |
|
|
|
(452 |
) |
|
|
2,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
1,745 |
|
|
|
132,549 |
|
|
|
6,510 |
|
|
|
3,133 |
|
|
|
(452 |
) |
|
|
143,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues (exclusive of depreciation and amortization) |
|
|
|
|
|
|
(98,507 |
) |
|
|
(2,784 |
) |
|
|
(2,083 |
) |
|
|
|
|
|
|
(103,374 |
) |
Operating expenses |
|
|
|
|
|
|
(17,136 |
) |
|
|
(804 |
) |
|
|
(830 |
) |
|
|
130 |
|
|
|
(18,640 |
) |
Amortization |
|
|
|
|
|
|
(1,303 |
) |
|
|
(9 |
) |
|
|
(50 |
) |
|
|
|
|
|
|
(1,362 |
) |
Depreciation |
|
|
|
|
|
|
(1,761 |
) |
|
|
(16 |
) |
|
|
(78 |
) |
|
|
|
|
|
|
(1,855 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
|
1,745 |
|
|
|
13,842 |
|
|
|
2,897 |
|
|
|
92 |
|
|
|
(322 |
) |
|
|
18,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST INCOME (EXPENSE), NET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
871 |
|
|
|
8 |
|
|
|
63 |
|
|
|
|
|
|
|
942 |
|
Interest expense |
|
|
|
|
|
|
(7,645 |
) |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
(7,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income (expense), net |
|
|
|
|
|
|
(6,774 |
) |
|
|
8 |
|
|
|
44 |
|
|
|
|
|
|
|
(6,722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAX PROVISION |
|
|
1,745 |
|
|
|
7,068 |
|
|
|
2,905 |
|
|
|
136 |
|
|
|
(322 |
) |
|
|
11,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION |
|
|
|
|
|
|
(5,369 |
) |
|
|
|
|
|
|
(61 |
) |
|
|
|
|
|
|
(5,430 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM CONTINUING OPERATIONS, NET OF TAX |
|
|
1,745 |
|
|
|
1,699 |
|
|
|
2,905 |
|
|
|
75 |
|
|
|
(322 |
) |
|
|
6,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS ON DISCONTINUED OPERATIONS, NET OF TAX |
|
|
|
|
|
|
|
|
|
|
(4,403 |
) |
|
|
|
|
|
|
|
|
|
|
(4,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
|
1,745 |
|
|
|
1,699 |
|
|
|
(1,498 |
) |
|
|
75 |
|
|
|
(322 |
) |
|
|
1,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLUS: NET LOSS ATTRIBUTABLE TO MINORITY INTEREST LOSS |
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO GCA, INC. |
|
$ |
1,745 |
|
|
$ |
1,745 |
|
|
$ |
(1,498 |
) |
|
$ |
75 |
|
|
$ |
(322 |
) |
|
$ |
1,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Eliminations include earnings on subsidiaries and management fees |
24
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING SCHEDULE STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2009
(amounts in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations * |
|
|
Consolidated |
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
9,095 |
|
|
$ |
9,095 |
|
|
$ |
4,324 |
|
|
$ |
32 |
|
|
$ |
(13,451 |
) |
|
$ |
9,095 |
|
Adjustments to reconcile net income (loss) to
cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of financing costs |
|
|
|
|
|
|
243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243 |
|
Amortization of intangibles |
|
|
|
|
|
|
1,854 |
|
|
|
371 |
|
|
|
42 |
|
|
|
|
|
|
|
2,267 |
|
Depreciation |
|
|
|
|
|
|
2,288 |
|
|
|
191 |
|
|
|
72 |
|
|
|
|
|
|
|
2,551 |
|
Provision for bad debts |
|
|
|
|
|
|
|
|
|
|
2,657 |
|
|
|
|
|
|
|
|
|
|
|
2,657 |
|
Deferred income taxes |
|
|
|
|
|
|
5,390 |
|
|
|
17 |
|
|
|
(10 |
) |
|
|
|
|
|
|
5,397 |
|
Stock-based compensation |
|
|
1,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,840 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement receivables |
|
|
|
|
|
|
16,024 |
|
|
|
87 |
|
|
|
(1,525 |
) |
|
|
|
|
|
|
14,586 |
|
Other receivables, net |
|
|
|
|
|
|
18,852 |
|
|
|
(1,549 |
) |
|
|
251 |
|
|
|
(12,873 |
) |
|
|
4,681 |
|
Prepaid and other assets |
|
|
|
|
|
|
(627 |
) |
|
|
579 |
|
|
|
(80 |
) |
|
|
|
|
|
|
(128 |
) |
Settlement liabilities |
|
|
|
|
|
|
(28,986 |
) |
|
|
(278 |
) |
|
|
(3,271 |
) |
|
|
|
|
|
|
(32,535 |
) |
Accounts payable |
|
|
|
|
|
|
5,591 |
|
|
|
(563 |
) |
|
|
26 |
|
|
|
|
|
|
|
5,054 |
|
Accrued expenses |
|
|
|
|
|
|
13,625 |
|
|
|
(30,636 |
) |
|
|
203 |
|
|
|
12,864 |
|
|
|
(3,944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating
activities |
|
|
10,935 |
|
|
|
43,349 |
|
|
|
(24,800 |
) |
|
|
(4,260 |
) |
|
|
(13,460 |
) |
|
|
11,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Eliminations include intercompany investments and management fees |
(Continued)
25
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2009
(amounts in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations * |
|
|
Consolidated |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, equipment and leasehold
improvements |
|
$ |
|
|
|
$ |
(1,925 |
) |
|
$ |
169 |
|
|
$ |
(49 |
) |
|
$ |
|
|
|
$ |
(1,805 |
) |
Purchase of other intangibles |
|
|
|
|
|
|
(11,263 |
) |
|
|
10,845 |
|
|
|
|
|
|
|
|
|
|
|
(418 |
) |
Investment in subsidiaries |
|
|
(10,761 |
) |
|
|
(3,549 |
) |
|
|
|
|
|
|
|
|
|
|
14,310 |
|
|
|
|
|
Other |
|
|
|
|
|
|
(495 |
) |
|
|
(126 |
) |
|
|
|
|
|
|
|
|
|
|
(621 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
(10,761 |
) |
|
|
(17,232 |
) |
|
|
10,888 |
|
|
|
(49 |
) |
|
|
14,310 |
|
|
|
(2,844 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments under credit facility |
|
|
|
|
|
|
(15,250 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,250 |
) |
Purchase of treasury stock |
|
|
(20 |
) |
|
|
1,820 |
|
|
|
(678 |
) |
|
|
(1,142 |
) |
|
|
|
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(20 |
) |
|
|
(13,430 |
) |
|
|
(678 |
) |
|
|
(1,142 |
) |
|
|
|
|
|
|
(15,270 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS |
|
|
147 |
|
|
|
(154 |
) |
|
|
(677 |
) |
|
|
(131 |
) |
|
|
292 |
|
|
|
(523 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
12,533 |
|
|
|
(14,589 |
) |
|
|
(4,440 |
) |
|
|
|
|
|
|
(6,496 |
) |
CASH AND CASH EQUIVALENTSBeginning of period |
|
|
|
|
|
|
45,122 |
|
|
|
17,555 |
|
|
|
14,471 |
|
|
|
|
|
|
|
77,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTSEnd of period |
|
$ |
|
|
|
$ |
57,655 |
|
|
$ |
2,966 |
|
|
$ |
10,031 |
|
|
$ |
|
|
|
$ |
70,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Eliminations include intercompany investments and management fees |
26
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING SCHEDULE STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2008
(amounts in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations * |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,745 |
|
|
$ |
1,699 |
|
|
$ |
(1,499 |
) |
|
$ |
75 |
|
|
$ |
(321 |
) |
|
$ |
1,699 |
|
Adjustments to reconcile net income to
cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of financing costs |
|
|
|
|
|
|
243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243 |
|
Amortization of intangibles |
|
|
|
|
|
|
1,303 |
|
|
|
56 |
|
|
|
50 |
|
|
|
|
|
|
|
1,409 |
|
Depreciation |
|
|
|
|
|
|
1,761 |
|
|
|
17 |
|
|
|
77 |
|
|
|
|
|
|
|
1,855 |
|
Provision for bad debts |
|
|
|
|
|
|
|
|
|
|
9,092 |
|
|
|
|
|
|
|
|
|
|
|
9,092 |
|
Deferred income taxes |
|
|
|
|
|
|
2,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,919 |
|
Equity income in subsidiaries |
|
|
(1,745 |
) |
|
|
1,424 |
|
|
|
|
|
|
|
|
|
|
|
321 |
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
1,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,945 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement receivables |
|
|
|
|
|
|
20,590 |
|
|
|
(428 |
) |
|
|
(170 |
) |
|
|
54 |
|
|
|
20,046 |
|
Other receivables, net |
|
|
929 |
|
|
|
3,101 |
|
|
|
(8,022 |
) |
|
|
(563 |
) |
|
|
8,229 |
|
|
|
3,674 |
|
Prepaid and other assets |
|
|
|
|
|
|
(867 |
) |
|
|
540 |
|
|
|
(15 |
) |
|
|
|
|
|
|
(342 |
) |
Settlement liabilities |
|
|
|
|
|
|
(20,996 |
) |
|
|
54 |
|
|
|
(1,620 |
) |
|
|
(54 |
) |
|
|
(22,616 |
) |
Accounts payable |
|
|
|
|
|
|
4,722 |
|
|
|
(137 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
4,568 |
|
Accrued expenses |
|
|
(929 |
) |
|
|
3,082 |
|
|
|
(66 |
) |
|
|
875 |
|
|
|
(8,229 |
) |
|
|
(5,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities |
|
|
|
|
|
|
20,926 |
|
|
|
(393 |
) |
|
|
(1,308 |
) |
|
|
|
|
|
|
19,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Eliminations include intercompany investments and management fees |
(Continued)
27
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2008
(amounts in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations * |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, equipment and leasehold
improvements |
|
$ |
|
|
|
$ |
(1,943 |
) |
|
$ |
4 |
|
|
$ |
(16 |
) |
|
$ |
|
|
|
$ |
(1,955 |
) |
Purchase of other intangibles |
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16 |
) |
Changes in restricted cash and cash equivalents |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
Investments in subsidiaries |
|
|
9,347 |
|
|
|
4,600 |
|
|
|
|
|
|
|
|
|
|
|
(13,947 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
9,347 |
|
|
|
2,638 |
|
|
|
4 |
|
|
|
(16 |
) |
|
|
(13,947 |
) |
|
|
(1,974 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments under credit facility |
|
|
|
|
|
|
84,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,000 |
|
Debt issuance costs |
|
|
|
|
|
|
(250 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(250 |
) |
Purchase of treasury stock |
|
|
(9,347 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,347 |
) |
Capital contributions |
|
|
|
|
|
|
(9,347 |
) |
|
|
(4,600 |
) |
|
|
|
|
|
|
13,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(9,347 |
) |
|
|
74,403 |
|
|
|
(4,600 |
) |
|
|
|
|
|
|
13,947 |
|
|
|
74,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
386 |
|
|
|
|
|
|
|
131 |
|
|
|
|
|
|
|
517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
98,353 |
|
|
|
(4,989 |
) |
|
|
(1,193 |
) |
|
|
|
|
|
|
92,171 |
|
CASH AND CASH EQUIVALENTSBeginning of period |
|
|
|
|
|
|
54,411 |
|
|
|
5,411 |
|
|
|
11,241 |
|
|
|
|
|
|
|
71,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTSEnd of period |
|
$ |
|
|
|
$ |
152,764 |
|
|
$ |
422 |
|
|
$ |
10,048 |
|
|
$ |
|
|
|
$ |
163,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Eliminations include intercompany investments and management fees |
28
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Managements Discussion and Analysis of our Financial Condition and Results of Operations
(MD&A) begins with an overview of our business which includes our business goals, key events
occurring in the three months ended March 31, 2009 and certain trends, risks and challenges. We
then discuss our results of operations for the three months ended March 31, 2009 as compared to
the same period for 2008, respectively. This is followed by a description of our liquidity and
capital resources, including discussions about sources and uses of cash, our borrowings,
deferred tax asset, other liquidity needs and off-balance sheet arrangements. We conclude with
a discussion of critical accounting policies and their impact on our unaudited condensed
consolidated financial statements.
You
should read the following discussion together with our unaudited condensed consolidated financial
statements and the notes to those financial statements included in this Quarterly Report on
Form 10-Q and our 2008 Annual Report on Form 10-K (our 2008 10-K). When reviewing our MD&A,
you should also refer to the description of our Critical Accounting Policies and Estimates in
our 2008 10-K because understanding these policies and estimates is important in order to fully
understand our reported financial results and our business outlook for future periods. In
addition to historical information, this discussion contains forward-looking statements as
defined in the U.S. Private Securities Litigation Reform Act of 1995. In this context,
forward-looking statements often address our expected future business and financial
performance, and often contain words such as expect, anticipate, intend, plan,
believe, seek, or will. Forward-looking statements by their nature address matters that
are, to different degrees, uncertain. For us, particular uncertainties that could adversely or
positively affect our future results include: the future financial performance of the gaming
industry, the behavior of financial markets, including fluctuations in interest rates; the
impact of regulation and regulatory changes, investigative and legal actions; strategic
actions, including acquisitions and dispositions; future integration of acquired businesses and
numerous other matters of national, regional and global scale, including those of a political,
economic, business and competitive nature. All forward-looking statements are subject to
various risks and uncertainties that could cause our actual future results to differ materially
from those presently anticipated due to a variety of factors, including those discussed in
Item 1A of our 2008 10-K.
Overview
We are a provider of cash access products and related services to the gaming industry in the
United States and several international markets. Our products and services provide gaming
establishment patrons access to cash through a variety of methods, including ATM cash
withdrawals, credit card cash advances, POS debit card transactions, check cashing and money
transfers. In addition, we also provide products and services that improve credit
decision-making, automate cashier operations and enhance patron marketing activities for
gaming establishments.
In April 2008, we completed the acquisition of Certegy Gaming Services, Inc. (CGS), an enterprise
providing cash access and check products and services to the gaming industry similar to GCA. The
results of operations of CGS have been reflected in the applicable business segment financial information following this acquisition. In August 2008, we completed the acquisition of Cash
Systems, Inc. (CSI), a provider of cash access and related services to the retail and gaming
industries similar to GCA. The results of operations of CSI have been reflected in the applicable
business segment financial information following this acquisition.
Commencing
in the third quarter of 2006, through Arriva, we began marketing a
private-label revolving credit card aimed at consumers who perform cash advance transactions
in gaming establishments. We announced on February 7, 2008 that
we intended to exit
the Arriva Card business. We have since began marketing the Arriva Card business for sale and
accordingly, have classified the net assets of Arriva Card as held for sale on our unaudited
condensed consolidated balance sheets as of March 31, 2009 and 2008 and have classified the
operating results of Arriva Card as discontinued operations in the
unaudited condensed consolidated statement of income for the three months ended March 31, 2009 and 2008,
respectively.
29
Three months ended March 31, 2009 compared to three months ended March 31, 2008
The following table sets forth the unaudited condensed consolidated results of operations for
the three months ended March 31, 2009 and 2008 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, 2009 |
|
|
March 31, 2008 |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash advance |
|
$ |
81,366 |
|
|
|
44.8 |
% |
|
$ |
73,388 |
|
|
|
51.1 |
% |
ATM |
|
|
86,423 |
|
|
|
47.6 |
% |
|
|
59,772 |
|
|
|
41.7 |
% |
Check services |
|
|
10,827 |
|
|
|
6.0 |
% |
|
|
7,681 |
|
|
|
5.4 |
% |
Central Credit and other revenues |
|
|
3,059 |
|
|
|
1.7 |
% |
|
|
2,644 |
|
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
181,675 |
|
|
|
100.0 |
% |
|
|
143,485 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues (exclusive of depreciation
and amortization) |
|
|
(137,170 |
) |
|
|
(75.5 |
)% |
|
|
(103,374 |
) |
|
|
(72.0 |
)% |
Operating expenses |
|
|
(20,462 |
) |
|
|
(11.3 |
)% |
|
|
(18,640 |
) |
|
|
(13.0 |
)% |
Amortization |
|
|
(2,220 |
) |
|
|
(1.2 |
)% |
|
|
(1,362 |
) |
|
|
(0.9 |
)% |
Depreciation |
|
|
(2,551 |
) |
|
|
(1.4 |
)% |
|
|
(1,855 |
) |
|
|
(1.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
|
19,272 |
|
|
|
10.6 |
% |
|
|
18,254 |
|
|
|
12.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST INCOME (EXPENSE), NET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
114 |
|
|
|
0.1 |
% |
|
|
942 |
|
|
|
0.7 |
% |
Interest expense |
|
|
(4,768 |
) |
|
|
(2.6 |
)% |
|
|
(7,664 |
) |
|
|
(5.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income (expense), net |
|
|
(4,654 |
) |
|
|
(2.6 |
)% |
|
|
(6,722 |
) |
|
|
(4.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAX PROVISION |
|
|
14,618 |
|
|
|
8.0 |
% |
|
|
11,532 |
|
|
|
8.0 |
% |
INCOME TAX PROVISION |
|
|
(5,555 |
) |
|
|
(3.1 |
)% |
|
|
(5,430 |
) |
|
|
(3.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS, NET OF TAX |
|
|
9,063 |
|
|
|
5.0 |
% |
|
|
6,102 |
|
|
|
4.3 |
% |
INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
NET OF TAX |
|
|
32 |
|
|
|
0.0 |
% |
|
|
(4,403 |
) |
|
|
(3.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
9,095 |
|
|
|
5.0 |
% |
|
|
1,699 |
|
|
|
1.2 |
% |
PLUS: NET LOSS ATTRIBUTABLE TO MINORITY
INTEREST |
|
|
14 |
|
|
|
0.0 |
% |
|
|
46 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO GLOBAL CASH ACCESS
HOLDINGS, INC. AND SUBSIDIARIES |
|
$ |
9,109 |
|
|
|
5.0 |
% |
|
$ |
1,745 |
|
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate dollar amount processed (in billions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash advance |
|
$ |
1.6 |
|
|
|
|
|
|
$ |
1.5 |
|
|
|
|
|
ATM |
|
|
4.2 |
|
|
|
|
|
|
|
3.3 |
|
|
|
|
|
Check warranty |
|
|
0.4 |
|
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of transactions completed (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash advance |
|
|
3.2 |
|
|
|
|
|
|
|
2.7 |
|
|
|
|
|
ATM |
|
|
22.4 |
|
|
|
|
|
|
|
16.2 |
|
|
|
|
|
Check warranty |
|
|
1.8 |
|
|
|
|
|
|
|
1.3 |
|
|
|
|
|
30
Total Revenues
Total revenues for the quarter ended March 31, 2009 were $181.7 million, an increase of
$38.2 million, or 26.6%, as compared to the quarter ended March 31, 2008. The increase in
revenues from the first quarter of 2008 as compared to the first quarter of 2009 was primarily
due to the reasons described below. Same store revenue is represented by accounts that had
revenue in both periods of comparison. Same store revenue was down 9.2% during the first
three months of 2009 as compared to the same period of 2008. The increase in revenue is
further discussed on a product basis below:
An increase in cash advance revenue of $8.0 million in the three months ended March 31, 2009
directly resulted from the revenue generated from the CGS and CSI acquisitions. This increase
was partially offset by the decline in the average face amount of cash advance transactions
conducted by patrons to our gaming customers properties, resulting in a decline in the
average revenue per cash advance transaction.
An
increase in automated teller machines (ATM) revenue of $26.7 million resulted from the increased number of ATM
transactions by 38.3%. The added transactions resulted from the CGS and CSI acquisitions, which
occurred in the second and third quarters of 2008, but were not present in the numbers of the
first quarter of 2008. CGS and CSI combined accounted for $24.8 of the $26.7 million increase.
Although the number of transactions increased by 6.2 million the average withdrawal per ATM
transaction decreased by $16.20 or 8.0%.
An increase in check services revenue of $3.1 million resulted from the increase in the number
of check warranty transactions by 38.5%. The increase in the number of check warranty
transactions was partially offset by a decrease of $8.55 in the average transaction per check
warranty transaction. The overall impact was to increase check services revenues by 41.0% for
the three months ended March 31, 2009 as compared to the same period for 2008.
Costs and Expenses
Cost of revenues (exclusive of depreciation and amortization) increased by 32.7% during the
three months ended March 31, 2009 as compared to the same period of 2008. This increase was
largely the result of increased commission-related expenses which are the largest single cost
element of cost of revenues. The increase in commission expense during the three months
ended March 31, 2009 as compared to the same period of 2008 is
due primarily to:
|
|
|
the additional commission expenses resulting from the CGS and CSI acquisitions that
were not present during the three months ended March 31, 2008, |
|
|
|
|
the migration of transactions from credit card cash advance transaction to ATM
transactions, (ATM transactions have a higher proportion of commission expense to
revenue than do credit card cash advance transactions.) and |
|
|
|
|
the increasing of patron surcharges on ATM transactions that result in increased
revenue but also increased commission expenses at approximately equivalent levels. |
Overall, cost of revenue, exclusive of depreciation and amortization, as a percentage of
revenues is expected to increase for the remainder of 2009, as compared to the same period of
2008, due to expected higher commission costs as a result of the CSI acquisition, which will
be present in the second quarter of 2009 but were not present in the same period of 2008.
Operating expenses, exclusive of depreciation and amortization increased by 9.8% during the
three months ended March 31, 2009 as compared to the same period of 2008. The increase was
primarily the result of increased operating expenses due to the CGS and CSI acquisitions.
Operating expenses, exclusive of depreciation and amortization are expected to increase for the
remainder of 2009 due to the CSI acquisition.
Depreciation and amortization increased by 48.3% for the three months ended March 31, 2009 as
compared to the same period in 2008 due to increased expenses related to the CGS and CSI
acquisitions.
Primarily as a result of the factors described above, operating income for the quarter ended
March 31, 2009 was $19.3 million, an increase of $1.0 million, or 5.6%, as compared to the
quarter ended March 31, 2008.
31
Interest income (expense) net decreased by 30.8% for the three months ended March 31, 2009 as
compared to the same period in 2008 due to a decrease in interest income primarily resulting
from lower invested cash balances and lower interest rates earned on invested cash balances
during the quarter and year to date periods. The decrease in interest income was more than
offset by a decrease in interest expense also due to significantly lower interest rates
compared to the prior period moderated by higher average outstanding borrowings and a higher
average draw on the Bank of America Treasury Services Agreement. The average balances drawn
on this agreement were $369.5 million for the three months ended March 31, 2009 as compared to
$254.4 million for the same period in 2008. Income from continuing operations before income
tax increased by 26.8% for the three months ended March 31, 2009 as compared to the same
period in 2008, due to the aforementioned factors.
The provision for income tax reflected an effective income tax rate of approximately 38.0% for
the three months ended March 31, 2009 as compared to an effective tax rate for same period in
2008 of 47.0%. This decrease is due primarily to a decrease in the expense related to the
expiration of non-qualified stock options and related impact on income tax expense.
Income from discontinued operations increased by $4.4 million or 100.7% for the three months
ended March 31, 2009 as compared to the same period in 2008, due to a $5.5 million loss
recorded, for the three months ended March 31, 2008, to record the held for sale Arriva
assets at fair value.
32
LIQUIDITY AND CAPITAL RESOURCES
Overview
Information about our financial position as of March 31, 2009 and December 31, 2008 is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
% |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
70,652 |
|
|
$ |
77,148 |
|
|
|
-8 |
% |
Borrowings |
|
|
250,500 |
|
|
|
265,750 |
|
|
|
-6 |
% |
Stockholders equity |
|
|
171,645 |
|
|
|
160,878 |
|
|
|
7 |
% |
Cash Resources
Our cash balance, cash flows and credit facilities are expected to be sufficient to meet our
recurring operating commitments and to fund our planned capital expenditures. Cash and cash
equivalents at March 31, 2009 included cash in non-U.S. jurisdictions of approximately $9.6
million. Generally, these funds are available for operating and investment purposes within the
jurisdiction in which they reside but are subject to taxation in the U.S. upon repatriation.
We provide cash settlement services to our customers. These services involve the movement of
funds between the various parties associated with cash access transactions, and this activity
results in a balance due to us at the end of each business day that we recoup over the next few
business days. The balances due to us are included in settlement receivables. As of March 31,
2009, approximately $37.0 million was due to us, and we received these funds in early April
2009. As of March 31, 2009, we had approximately $46.6 million in settlement liabilities due
to our customers for these settlement services which were paid in early April 2009.
Due to the timing differences between receipt of settlement receivables and payments to
customers for settlement liabilities our actual net cash position available for other corporate
purposes is determined as the sum of the cash on hand and our settlement receivables minus our
settlement liabilities.
Cash Flows
The following table summarizes our cash flows for the three months ended March 31, 2009 and
2008, respectively (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2009 |
|
|
2008 |
|
Net cash provided by operating activities |
|
$ |
11,764 |
|
|
$ |
19,225 |
|
Net cash used in investing activities |
|
|
(2,844 |
) |
|
|
(1,974 |
) |
Net cash provided by (used in) financing activities |
|
|
(15,270 |
) |
|
|
74,403 |
|
Net effect of exchange rate changes on cash
and cash equivalents |
|
|
(146 |
) |
|
|
517 |
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(6,496 |
) |
|
|
92,171 |
|
Cash and cash equivalents, beginning of period |
|
|
77,148 |
|
|
|
71,063 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
70,652 |
|
|
$ |
163,234 |
|
|
|
|
|
|
|
|
33
Our principal source of liquidity is cash flows from operating activities, which were $11.8
million and $19.2 million for the three months ended March 31, 2009 and 2008, respectively.
Changes in operating assets and liabilities accounted for a net decrease of $12.3 million in
cash flow from operating activities. Offsetting this is $9.1 million of net income, and
approximately $15.0 million of non-cash expenses.
Net cash used in investing activities totaled $2.9 million and $2.0 million for the three
months ended March 31, 2009 and 2008, respectively. Included in net cash used in investing
activities for the three months ended March 31, 2009 and 2008, respectively, is $2.2 million and $2.0 million
for capital investments.
Net cash used in financing activities was $15.3 million for the three months ended March 31,
2009 compared to $74.4 million provided for the three months ended March 31, 2008. For the three
months ended March 31, 2009, we made payments totaling $15.3 million against our credit
facility as compared to borrowings of $84 million for the same period of 2008. In addition, we purchased $9.3 million of treasury shares under our Board authorized
share repurchase program during the three months ended March 31, 2008.
Deferred Tax Asset
At March 31, 2009, we had a net deferred income tax asset of $151.1 million. We recognized a
deferred tax asset upon our conversion from a limited liability company to a corporation on
May 14, 2004. Prior to that time, all tax attributes flowed through to the members of the
limited liability company. The principal component of the deferred tax asset is a difference
between our assets for financial accounting and tax purposes. This difference results from a
significant balance of Acquired Goodwill of approximately $687 million that was generated as
part of the conversion to a corporation plus approximately $98 million in pre-existing
goodwill carried over from periods prior to the conversion. Both of these assets are recorded
for tax purposes but not for accounting purposes. This asset is amortized over 15 years for
tax purposes, resulting in annual pretax income being $52.3 million lower for tax purposes
than for financial accounting purposes. At an estimated blended domestic effective tax rate of
36.0%, this results in tax payments being approximately $18.8 million less than the provision
for income taxes shown on the income statement for financial accounting purposes. This is an
expected aggregate of $190.0 million in cash savings over the remaining life of the portion of
our deferred tax asset related to the conversion.
Other Liquidity Needs and Resources
Bank of America Amended Treasury Services Agreement. We obtain currency to meet the normal
operating requirements of domestic ATMs and automated cashier machines (ACM) that we operate
pursuant to the Amendment of Treasury Services Agreement with Bank of America. Under this
agreement, all currency supplied by Bank of America remains the sole property of Bank of
America at all times until it is dispensed, at which time Bank of America obtains an interest
in the corresponding settlement receivable. Because it is never an asset of ours, supplied
cash is not reflected on our balance sheet. At March 31, 2009, the total currency obtained
from Bank of America pursuant to this agreement was $344.2 million. Because Bank of America
obtains an interest in our settlement receivables, there is no liability corresponding to the
supplied cash reflected on our balance sheet. The fees that we pay to Bank of America for cash
usage pursuant to the Amendment of the Treasury Services Agreement are reflected as interest
expense in our financial statements.
On March 13, 2008, GCA entered into an Agreement to Amend the Amendment of Treasury Services
Agreement with Bank of America that increased the limit on the aggregate allowed currency that
Bank of America would provide us with $360 million to $410 million. All other
terms and conditions of the Amendment to the Treasury Services Agreement remain in full force
and effect.
Pursuant
to the terms of our agreement with International Gaming Technology, we are obligated to invest up to our pro rata
share of $10.0 million in capital to Innovative Funds Transfer,
LLC Required Capital Investment (IFT). Our obligation to invest additional capital in IFT
is conditioned upon capital calls, which are in our sole discretion. As of March 31, 2009, we
had invested a total of $4.6 million in IFT, and are committed to invest up to $1.4 million in
additional capital investments if required.
Senior Secured Credit FacilityAs of March 31, 2009, we had $3.7 million in standby letters
of credit issued and outstanding as collateral on surety bonds for certain licenses held
related to our Nevada check cashing licenses.
34
Effects of Inflation
Our monetary assets, consisting primarily of cash and receivables, are not significantly
affected by inflation. Our non-monetary assets, consisting primarily of our deferred tax
asset, goodwill and other intangible assets, are not affected by inflation. We believe that
replacement costs of equipment, furniture and leasehold improvements will not materially
affect our operations. However, the rate of inflation affects our operating expenses, such as
those for salaries and benefits, armored carrier expenses, telecommunications expenses and
equipment repair and maintenance services, which may not be readily recoverable in the
financial terms under which we provide our cash access products and services to gaming
establishments and their patrons.
Critical Accounting Policies
The preparation of our financial statements in conformity with accounting principles generally
accepted in the United States of America requires us to make estimates and assumptions that
affect our reported amounts of assets and liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities in our consolidated financial statements.
The Securities and Exchange Commission (SEC) defines a companys critical accounting policies as the ones that are most important
to the portrayal of the financial condition and results of operations, and which require
management to make its most difficult and subjective judgments, often as a result of the need
to make estimates about matters that are inherently uncertain.
There were no material changes to the critical accounting policies and estimates discussed in
our audited consolidated financial statements for the year ended December 31, 2008,
included in the our Annual Report on Form 10-K filed on March 10, 2009.
35
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, we are exposed to foreign currency exchange risk. We operate
and conduct business in foreign countries and, as a result, are exposed to movements in
foreign currency exchange rates. Our exposure to foreign currency exchange risk related to our
foreign operations is not material to our results of operations, cash flows or financial
position. At present, we do not hedge this risk, but continue to evaluate such foreign
currency translation risk exposure. At present, we do not hold any derivative securities of
any kind.
Bank of America supplies us with currency needed for normal operating requirements of the
domestic ATMs and ACMs we operate pursuant to the Amendment of the Treasury Services
Agreement. Under the terms of this agreement, we pay a monthly cash usage fee based upon the
product of the average daily dollars outstanding in all such ATMs and ACMs multiplied by the
average LIBOR for one-month United States dollar deposits for each day that rate is published
in that month plus a margin of 25 basis points. We are therefore exposed to interest rate risk
to the extent that the applicable LIBOR increases. As of March 31, 2009, the rate in effect,
inclusive of the 25 basis points margin, was 0.8% and the currency supplied by Bank of America
pursuant to this agreement was $344.2 million. Based upon the average outstanding amount of
currency to be supplied by Bank of America pursuant to this agreement during the first three
months of 2009, which was $368.9 million, each 1% increase in the applicable LIBOR would have
a $3.7 million impact on income before taxes over a 12-month period. Foreign gaming
establishments supply the currency needs for the ATMs located on their premises.
Our senior secured credit facilities bear interest at rates that can vary over time. We have
the option of having interest on the outstanding amounts under these credit facilities paid
based on a base rate (equivalent to the prime rate) or based on the Eurodollar rate
(equivalent to LIBOR). We have historically elected to pay interest based on the one month
United States dollar LIBOR, and we expect to continue to pay interest based on LIBOR of
various maturities. At March 31, 2009, the weighted average interest rate, inclusive of the
applicable margin of 112.5 basis points, was 1.64%. Based upon the outstanding balance on the
senior secured credit facility of $97.8 million on March 31, 2009, each 1% increase in the
applicable LIBOR would add an additional $1.0 million of interest expense over a 12-month
period.
36
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Companys management, with the participation of the Chief Executive Officer (CEO) and
Chief Financial Officer (CFO), evaluated the effectiveness of the Companys disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO
concluded that the Companys disclosure controls and procedures are effective, in that they
provide a reasonable level of assurance that information required to be disclosed by the
Company in the reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SECs rules and forms. The
Companys disclosure controls and procedures are designed to provide reasonable assurance that
information required to be disclosed by the Company in such reports is accumulated and
communicated to the Companys management, including our CEO and CFO, as appropriate, to allow
timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2009 that
has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
37
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 12, 2007, a derivative action was filed by a stockholder on behalf of the Company
in the United States District Court, District of Nevada against certain of our current and
former directors, our former chief executive officer and our former chief financial officer,
alleging breach of fiduciary duties, waste of corporate assets, unjust enrichment and
violations of Sections 10(b) and 20(a) of the Exchange Act, as amended. On February 8, 2008,
an additional derivative action was filed by a separate stockholder on behalf of the Company
in the United States District Court, District of Nevada against certain of our current and
former directors, our former chief executive officer and our former chief financial officer,
alleging breach of fiduciary duties, insider trading and waste of corporate assets. On May 5,
2008, the foregoing actions were consolidated and an amended complaint was filed that
continues to pursue only state law claims but not violations of Sections 10(b) or 20(a) of the
Exchange Act, as amended. Following the filing of motions to dismiss by the defendants, a
second amended complaint was filed. Thereafter, plaintiffs amended again in December 2008. The
third amended complaint alleges essentially the same legal claims as former complaints and
seeks, among other things, damages in favor of the Company, certain corporate actions to
purportedly improve the Companys corporate governance, and an award of costs and expenses to
the plaintiff stockholders including attorneys fees. The defendants are seeking to dismiss
the third amended complaint. The Company has indemnification agreements with each of the
individual defendants that may cause the Company to incur expenses associated with the defense
of this action and that may also protect such individuals from liability to the Company. The
Company also maintains director and officer liability insurance that may provide for
reimbursement of some of the expenses associated with this action. At this stage of the
litigation, the Company is unable to make an evaluation of whether the likelihood of an
unfavorable outcome is either probable or remote or the amount or range of potential loss;
however, the Company believes it has meritorious defenses and will vigorously defend this
action.
On April 11, 2008, a class action was filed by a stockholder in the United States District
Court, Southern District of New York against the Company, certain of our former directors, our
former chief executive officer, M&C International, Summit Partners, L.P., and certain
underwriters to two prior stock offerings to the public. On June 10, 2008, an additional class
action was filed, naming essentially the same defendants and stating similar claims. On June
26, 2008, the foregoing actions were consolidated in New York, and the Court appointed a lead
plaintiff and lead counsel. In August 2008, the lead plaintiff filed a consolidated amended
complaint. The consolidated amended complaint names as additional defendants our former chief
financial officer, certain current and former directors and additional underwriters and
defendants and purports to allege violations of Sections 11, 12(a)(2) and 15 the Securities
Act. The plaintiffs seek, among other things, damages and rescission. Following motions by
defendants, the action was transferred to the District of Nevada in October 2008 and
consolidated with the pending derivative action for pretrial purposes. Defendants are seeking
to dismiss the class action complaint. The Company has indemnification agreements with each of
the individual defendants and certain of the other defendants that may cause the Company to
incur expenses associated with the defense of this action and that may also protect such
defendants from liability to the Company. The Company also maintains director and officer
liability insurance that may provide for reimbursement of some of the expenses associated with
this action. At this stage of the litigation, the Company is unable to make an evaluation of
whether the likelihood of an unfavorable outcome is either probable or remote or the amount or
range of potential loss; however the Company believes it has meritorious defenses and will
vigorously defend this action.
We are threatened with or named as a defendant in various lawsuits arising in the ordinary
course of business, such as personal injury claims and
employment-related claims as well as being
threatened or named as a defendant in lawsuits arising in the ordinary course of business and
assumed as a result of the acquisition of CGS for which we have certain indemnification
rights, and as a result of the acquisition of CSI. It is not possible to determine the
ultimate disposition of these matters; however, we are of the opinion that the final
resolution of any such threatened or pending litigation, individually or in the aggregate, is
not likely to have a material adverse effect on our business, cash flows, results of
operations or financial position.
On January 9, 2009, the Company filed an action in the Eighth Judicial District Court of Nevada,
against USA Payments and USA Payment Systems, companies in which Karim Maskatiya and Robert
Cucinotta, who are former directors of the Company and who each hold more than 5% of the Companys
outstanding shares, hold substantial ownership interests. In the action, the Company sought
declaratory and injunctive relief relating to matters arising under the Amended and Restated
Agreement for Electronic Payment Processing by and among the Company, USA Payments and USA Payment
Systems. On April 23, 2009, following receipt of USA Payment Systems February 13, 2009 notice of
termination of the Amended and Restated Agreement for Electronic Payment Processing, the Company
filed an amended complaint to include claims for direct, incidental, consequential and punitive
damages arising from the wrongful termination of such agreement. A reply to the amended complaint
has not yet been filed. At this stage of the litigation, the Company is unable to make an
evaluation of whether the likelihood of an unfavorable outcome is either probable or remote;
however, the Company believes it has meritorious claims and intends to vigorously pursue this
action.
38
ITEM 1A. RISK FACTORS
There are a number of factors that may affect the Companys business and financial results or
stock price. A complete description of these factors is set forth in our Annual Report on Form
10-K for the year ended December 31, 2008. There have been no material changes to those factors
in the three months ended March 31, 2009.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES AND WITHHOLDING OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Approximate Dollar |
|
|
|
|
|
|
|
|
|
|
|
Total Number of Shares |
|
|
Value of Shares that May Yet Be |
|
|
|
Total Number of Shares |
|
|
Average Price per Share |
|
|
Purchased as Part of Publicly |
|
|
Purchased Under the Plans or |
|
|
|
Purchased or Withheld |
|
|
Purchased or Withheld |
|
|
Announced Plans or Programs |
|
|
Programs |
|
1/1/09 1/31/09 |
|
|
2,416 |
(1) |
|
$ |
2.35 |
(2) |
|
|
2,416 |
(1) |
|
$ |
|
|
2/1/09 2/28/09 |
|
|
2,851 |
(1) |
|
|
2.52 |
(2) |
|
|
2,843 |
(1) |
|
|
|
|
3/1/09 3/31/09 |
|
|
2,343 |
(1) |
|
|
2.93 |
(2) |
|
|
2,343 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotals |
|
|
7,610 |
(2) |
|
|
2.59 |
(4) |
|
|
7,602 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
7,610 |
|
|
$ |
2.59 |
|
|
|
7,602 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents shares of common stock that were withheld from restricted stock awards to satisfy
the minimum applicable tax withholding obligations incident to the vesting of such
restricted stock awards. |
|
(2) |
|
Represents the average price per share of shares withheld from restricted stock awards
on the date of withholding. |
39
ITEM 6. EXHIBITS
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
10.1 |
(1) |
|
Amendment No. 2 to Employment Agreement with Scott Betts, dated April 24, 2009. |
|
|
|
|
|
|
3.3 |
|
|
Certificate of Amendment to Amended and Restated Certificate of Incorporation. |
|
|
|
|
|
|
31.1 |
* |
|
Certification of Scott Betts, Chief Executive Officer of Global Cash Access
Holdings, Inc. dated May 7, 2009 in accordance with 18 U.S.C. 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
31.2 |
* |
|
Certification of George Gresham, Chief Financial Officer of Global Cash Access
Holdings, Inc. dated May 7, 2009 in accordance with Rules 13a-14(a) and
15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.1 |
* |
|
Certification of Scott Betts, Chief Executive Officer and Chief Financial
Officer of Global Cash Access Holdings, Inc. dated May 7, 2009 in accordance
with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. |
|
|
|
|
|
|
32.2 |
* |
|
Certification of George Gresham, Chief Financial Officer of Global Cash Access
Holdings, Inc. dated May 7, 2009 in accordance with 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
(1) |
|
Incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K filed
April 27, 2009. |
|
(2) |
|
Incorporated by reference to Exhibit 3.1 of the Companys Current Report on Form 8-K filed
April 30, 2009. |
|
* |
|
Filed herewith. |
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended the
registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
|
|
|
|
May 7, 2009 (Date) |
GLOBAL CASH ACCESS HOLDINGS, INC.
(Registrant)
|
|
|
By: |
/s/ George Gresham
|
|
|
|
George Gresham |
|
|
|
Chief Financial Officer
(For the Registrant as
Principal Financial Officer) |
|
41
EXHIBIT INDEX
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
10.1 |
(1) |
|
Amendment No. 2 to Employment Agreement with Scott Betts, dated April 24, 2009. |
|
|
|
|
|
|
3.3 |
|
|
Certificate of Amendment to Amended and Restated Certificate of Incorporation. |
|
|
|
|
|
|
31.1 |
* |
|
Certification of Scott Betts, Chief Executive Officer of Global Cash Access
Holdings, Inc. dated May 7, 2009 in accordance with 18 U.S.C. 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
31.2 |
* |
|
Certification of George Gresham, Chief Financial Officer of Global Cash Access
Holdings, Inc. dated May 7, 2009 in accordance with Rules 13a-14(a) and
15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.1 |
* |
|
Certification of Scott Betts, Chief Executive Officer and Chief Financial
Officer of Global Cash Access Holdings, Inc. dated May 7, 2009 in accordance
with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. |
|
|
|
|
|
|
32.2 |
* |
|
Certification of George Gresham, Chief Financial Officer of Global Cash Access
Holdings, Inc. dated May 7, 2009 in accordance with 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
(1) |
|
Incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K filed
April 27, 2009. |
|
(2) |
|
Incorporated by reference to Exhibit 3.1 of the Companys Current Report on Form 8-K filed
April 30, 2009. |
|
* |
|
Filed herewith |
42