EX-99.3 5 catm-20130807ex99327e5bf.htm EX-99.3 993 - Pro Forma Financial Statements

Exhibit 99.3

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

On August 7, 2013, Cardtronics Europe Limited (“Cardtronics Europe”), a newly formed wholly-owned subsidiary of Cardtronics, Inc. (the “Company”), entered into, and consummated the transactions contemplated by, the Share Sale and Purchase Agreement (the “Purchase Agreement”) with Payzone Ventures Limited (the “Seller”) and Jonathan Simpson-Dent, Rikki Dinsmore, Mark Edwards, Andreas Raabe, Alastair Mayne and Tim Halford (collectively, the “Warrantors”) to purchase all of the outstanding shares issued by Cardpoint Limited (“Cardpoint” or “Cashzone,” which is the primary trading name of the business in the U.K.) from the Seller. The significant terms of the Purchase Agreement were previously reported by the Company on August 7, 2013 in the Current Report on Form 8-K filed on that date.

 

Pursuant to the Purchase Agreement, Cardtronics Europe acquired all of the outstanding shares issued by Cardpoint for purchase consideration of £99,999,999 (the “Purchase Price”) in cash, or approximately U.S. $152 million, which includes the aggregate amount required to be paid (including principal and interest) in order to fully discharge all of Cardpoint’s outstanding indebtedness to the Seller at closing. Additionally, as part of the Purchase Agreement, Cardtronics Europe entered into a locked box agreement, under which additional cash at closing was paid to the Seller in the amount of £5,885,680 or approximately U.S. $9 million as additional consideration for earnings since February 28, 2013.  No further working capital adjustments are required under the Purchase Agreement.  The Company also paid to certain members of Cardpoint’s management, transaction bonuses on behalf of the Seller in an aggregate amount of £463,729 or approximately U.S. $0.7 million, pursuant to the Purchase Agreement. The total amount paid for the acquisition was £105,421,950 at closing, which was financed through borrowings under the Company’s amended revolving credit facility, and has been preliminarily allocated as disclosed below in Note 1, Preliminary Acquisition Accounting.

 

The unaudited pro forma condensed consolidated financial statements presented give effect to the acquisition of Cardpoint as if it had occurred on June 30, 2013 for the presentation of the unaudited pro forma condensed consolidated balance sheet as of June 30, 2013, and on January 1, 2012 for the presentation of the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2012 and for the six months ended June 30, 2013. The pro forma condensed consolidated balance sheet as of June 30, 2013 was based on the historical unaudited consolidated balance sheets of the Company and Cardpoint as of June 30, 2013. The pro forma condensed consolidated statement of operations for the six months ended June 30, 2013 was based on the historical unaudited consolidated statements of operations of the Company and Cardpoint for the six months ended June 30, 2013. The pro forma condensed consolidated statement of operations for the year ended December 31, 2012 was based on the historical audited statement of operations of the Company for the year ended December 31, 2012 combined with the historical audited statement of operations of Cardpoint for the year ended September 30, 2012. Cardpoint’s revenue and net income for the three months ended December 31, 2012 were $25.4 million and $2.5 million, respectively. Certain amounts from Cardpoint’s historical combined financial statements have been reclassified to conform to the Company’s presentation. Additionally, the unaudited pro forma condensed consolidated financial statements give effect to certain adjustments necessary to conform Cardpoint’s historical combined financial statements that were prepared under U.K. generally accepted accounting principles (“GAAP”) to U.S. GAAP.

 

The unaudited pro forma condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").  The unaudited pro forma condensed consolidated financial statements should be read along with the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and Quarterly Report on Form 10-Q for the quarter and six months ended June 30, 2013, which include a summary of the Company's significant accounting policies and other disclosures.

 

The pro forma adjustments presented are based on certain estimates and assumptions in accordance with the Company’s accounting policies. The Company’s management believes that its assumptions provide a reasonable basis for presenting all of the significant effects of the transactions contemplated and that the pro forma adjustments give appropriate effect to these assumptions and are properly applied in the unaudited pro forma condensed consolidated financial statements.  The unaudited pro forma condensed consolidated financial statements do not reflect the impacts of any potential operating efficiencies, savings from expected synergies, or costs to integrate the operations. The unaudited pro forma condensed consolidated financial statements are presented for informational purposes only and are not necessarily indicative of the financial position or the results of operations of the combined company had the acquisition been completed as of the indicated dates or of the results that may be achieved in the future.

 

PF-1

 


 

CARDTRONICS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of June 30, 2013

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

Pro Forma

 

 

 

Pro Forma

 

Cardtronics, Inc.

 

Cardpoint

 

Adjustments

 

Note 2

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

22,341 

 

$

3,271 

 

$

 —

 

 

 

$

25,612 

Accounts and notes receivable, net

 

50,094 

 

 

1,690 

 

 

 —

 

 

 

 

51,784 

Inventory

 

5,435 

 

 

722 

 

 

 —

 

 

 

 

6,157 

Restricted cash

 

4,247 

 

 

7,058 

 

 

 —

 

 

 

 

11,305 

Current portion of deferred tax asset, net

 

14,133 

 

 

 —

 

 

5,194 

 

a

 

 

19,327 

Prepaid expenses, deferred costs, and other current assets

 

19,471 

 

 

10,384 

 

 

(5,098)

 

a

 

 

24,757 

Total current assets

 

115,721 

 

 

23,125 

 

 

96 

 

 

 

 

138,942 

Property and equipment, net

 

222,443 

 

 

19,440 

 

 

3,822 

 

b

 

 

245,705 

Intangible assets, net

 

105,838 

 

 

 —

 

 

73,947 

 

c, f

 

 

179,785 

Goodwill

 

301,512 

 

 

7,904 

 

 

48,019 

 

c

 

 

357,435 

Deferred tax asset, net

 

7,777 

 

 

 —

 

 

22,975 

 

a

 

 

30,752 

Prepaid expenses, deferred costs, and other assets

 

2,693 

 

 

 —

 

 

 —

 

 

 

 

2,693 

Total assets

$

755,984 

 

$

50,469 

 

$

148,859 

 

 

 

$

955,312 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of longterm debt and notes payable

$

1,469 

 

$

51,224 

 

$

(51,224)

 

e

 

$

1,469 

Current portion of other longterm liabilities

 

27,544 

 

 

 —

 

 

 —

 

 

 

 

27,544 

Accounts payable

 

22,272 

 

 

12,776 

 

 

 —

 

 

 

 

35,048 

Accrued liabilities

 

75,862 

 

 

8,977 

 

 

4,390 

 

h, f

 

 

89,229 

Current portion of deferred tax liability, net

 

1,110 

 

 

 —

 

 

 —

 

 

 

 

1,110 

Total current liabilities

 

128,257 

 

 

72,977 

 

 

(46,834)

 

 

 

 

154,400 

Longterm liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Longterm debt

 

334,124 

 

 

 —

 

 

160,326 

 

e

 

 

494,450 

Asset retirement obligations

 

39,466 

 

 

 —

 

 

16,490 

 

d

 

 

55,956 

Deferred tax liability, net

 

172 

 

 

 —

 

 

 —

 

 

 

 

172 

Other longterm liabilities

 

49,312 

 

 

 —

 

 

 —

 

 

 

 

49,312 

Total liabilities

 

551,331 

 

 

72,977 

 

 

129,982 

 

 

 

 

754,290 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity (deficit)

 

204,653 

 

 

(22,508)

 

 

18,877 

 

i

 

 

201,022 

Total liabilities and stockholders’ equity (deficit)

$

755,984 

 

$

50,469 

 

$

148,859 

 

 

 

$

955,312 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

PF-2

 


 

CARDTRONICS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2013

(In thousands, excluding share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

Pro Forma

 

 

 

Pro Forma

 

Cardtronics, Inc.

 

Cardpoint 1

 

Adjustments

 

Note 2

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

ATM operating revenues

$

396,959 

 

$

51,183 

 

$

 —

 

 

 

$

448,142 

ATM product sales and other revenues

 

8,763 

 

 

689 

 

 

 —

 

 

 

 

9,452 

Total revenues

 

405,722 

 

 

51,872 

 

 

 —

 

 

 

 

457,594 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of ATM operating revenues (excludes depreciation, accretion, and amortization shown separately below)

 

263,042 

 

 

35,430 

 

 

 —

 

 

 

 

298,472 

Cost of ATM product sales and other revenues

 

8,357 

 

 

 —

 

 

 —

 

 

 

 

8,357 

Total cost of revenues

 

271,399 

 

 

35,430 

 

 

 —

 

 

 

 

306,829 

Gross profit

 

134,323 

 

 

16,442 

 

 

 —

 

 

 

 

150,765 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

37,921 

 

 

4,323 

 

 

247 

 

g

 

 

42,491 

Acquisition-related expenses

 

4,006 

 

 

 —

 

 

(929)

 

h

 

 

3,077 

Depreciation and accretion expense

 

32,166 

 

 

3,628 

 

 

(442)

 

b, d

 

 

35,352 

Amortization expense

 

11,829 

 

 

1,460 

 

 

4,267 

 

c

 

 

17,556 

Loss on disposal of assets

 

360 

 

 

303 

 

 

 —

 

 

 

 

663 

Total operating expenses

 

86,282 

 

 

9,714 

 

 

3,143 

 

 

 

 

99,139 

Income from operations

 

48,041 

 

 

6,728 

 

 

(3,143)

 

 

 

 

51,626 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

10,125 

 

 

1,898 

 

 

(13)

 

e

 

 

12,010 

Amortization of deferred financing costs

 

460 

 

 

 —

 

 

129 

 

f

 

 

589 

Other income

 

(2,471)

 

 

 —

 

 

 —

 

 

 

 

(2,471)

Total other expense

 

8,114 

 

 

1,898 

 

 

116 

 

 

 

 

10,128 

Income before income taxes

 

39,927 

 

 

4,830 

 

 

(3,259)

 

 

 

 

41,498 

Income tax expense

 

16,014 

 

 

219 

 

 

(993)

 

j

 

 

15,240 

Net income

 

23,913 

 

 

4,611 

 

 

(2,266)

 

 

 

 

26,258 

Net (loss) attributable to noncontrolling interests

 

(844)

 

 

 —

 

 

 —

 

 

 

 

(844)

Net income attributable to controlling interests and available to common stockholders

$

24,757 

 

$

4,611 

 

$

(2,266)

 

 

 

$

27,102 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share – basic

$

0.54 

 

 

 

 

 

 

 

 

 

$

0.59 

Net income per common share – diluted

$

0.54 

 

 

 

 

 

 

 

 

 

$

0.59 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

44,321,069 

 

 

 

 

 

 

 

 

 

 

44,336,069 

Weighted average shares outstanding – diluted

 

44,547,851 

 

 

 

 

 

 

 

 

 

 

44,562,851 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1  Cardpoint's financial statements were derived by adding the nine months ended June 30, 2013 and removing the three months ended December 31, 2012. 

 

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

PF-3

 


 

CARDTRONICS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2012

(In thousands, excluding share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

Pro Forma

 

 

 

Pro Forma

 

Cardtronics, Inc.

 

Cardpoint

 

Adjustments

 

Note 2

 

Consolidated

 

 

 

 

 

 

 

(unaudited)

 

 

 

(unaudited)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

ATM operating revenues

$

743,662 

 

$

100,773 

 

$

 —

 

 

 

$

844,435 

ATM product sales and other revenues

 

36,787 

 

 

1,228 

 

 

 —

 

 

 

 

38,015 

Total revenues

 

780,449 

 

 

102,001 

 

 

 —

 

 

 

 

882,450 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of ATM operating revenues (excludes depreciation, accretion, and amortization shown separately below)

 

502,682 

 

 

69,099 

 

 

 —

 

 

 

 

571,781 

Cost of ATM product sales and other revenues

 

33,405 

 

 

 —

 

 

 —

 

 

 

 

33,405 

Total cost of revenues

 

536,087 

 

 

69,099 

 

 

 —

 

 

 

 

605,186 

Gross profit

 

244,362 

 

 

32,902 

 

 

 —

 

 

 

 

277,264 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

65,525 

 

 

5,854 

 

 

459 

 

g

 

 

71,838 

Acquisition-related expenses

 

3,332 

 

 

 —

 

 

 —

 

h

 

 

3,332 

Depreciation and accretion expense

 

61,499 

 

 

8,497 

 

 

(1,339)

 

b, d

 

 

68,657 

Amortization expense

 

21,712 

 

 

5,006 

 

 

6,686 

 

c

 

 

33,404 

Loss on disposal of assets

 

1,787 

 

 

571 

 

 

 —

 

 

 

 

2,358 

Total operating expenses

 

153,855 

 

 

19,928 

 

 

5,806 

 

 

 

 

179,589 

Income from operations

 

90,507 

 

 

12,974 

 

 

(5,806)

 

 

 

 

97,675 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

21,161 

 

 

4,451 

 

 

(630)

 

e

 

 

24,982 

Amortization of deferred financing costs

 

896 

 

 

 —

 

 

258 

 

f

 

 

1,154 

Other income

 

(1,821)

 

 

 —

 

 

 —

 

 

 

 

(1,821)

Total other expense

 

20,236 

 

 

4,451 

 

 

(372)

 

 

 

 

24,315 

Income before income taxes

 

70,271 

 

 

8,523 

 

 

(5,434)

 

 

 

 

73,360 

Income tax expense

 

27,009 

 

 

618 

 

 

(2,009)

 

j

 

 

25,618 

Net income

 

43,262 

 

 

7,905 

 

 

(3,425)

 

 

 

 

47,742 

Net (loss) attributable to noncontrolling interests

 

(329)

 

 

 —

 

 

 —

 

 

 

 

(329)

Net income attributable to controlling interests and available to common stockholders

$

43,591 

 

$

7,905 

 

$

(3,425)

 

 

 

$

48,071 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share – basic

$

0.97 

 

 

 

 

 

 

 

 

 

$

1.07 

Net income per common share – diluted

$

0.96 

 

 

 

 

 

 

 

 

 

$

1.06 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

43,469,175 

 

 

 

 

 

 

 

 

 

 

43,484,175 

Weighted average shares outstanding – diluted

 

43,875,332 

 

 

 

 

 

 

 

 

 

 

43,890,332 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

 

PF-4

 


 

CARDTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

(1) Preliminary Acquisition Accounting

 

The unaudited pro forma condensed consolidated financial statements reflect a total consideration transferred of approximately £105.4 million, or $160.3 million, which has been preliminarily allocated as follows as of June 30, 2013:

 

 

 

 

 

 

 

 

(In thousands)

Cash and cash equivalents

$

3,271 

Accounts and notes receivable

 

1,690 

Inventory

 

722 

Restricted cash

 

7,058 

Prepaid expenses, deferred costs, and other current assets

 

5,286 

Property and equipment

 

23,262 

Deferred tax asset

 

28,169 

Intangible assets

 

73,188 

Goodwill

 

55,923 

Total assets acquired

$

198,569 

 

 

 

Accounts payable and other accrued and current liabilities

 

21,753 

Asset retirement obligations

 

16,490 

Total liabilities assumed

$

38,243 

 

 

 

Net assets acquired

$

160,326 

 

The acquisition of Cardpoint has been accounted for under the purchase method of accounting in which assets acquired and liabilities assumed are recorded at their estimated fair values. Goodwill is generated to the extent that the consideration exceeds the fair value of assets acquired. The Company is in the process of determining the purchase price allocation, which will allocate the excess of purchase price over the fair value of the acquired assets to goodwill, and has performed a preliminary allocation of the purchase price. Estimates of useful lives and estimated fair values of tangible and amortizable intangible assets will be finalized after the Company reviews all available data including, but not limited to, appraisals and internal assessments. As a result, the final allocation of the excess purchase price over the fair value of the identifiable assets acquired could differ from what is presented herein.

 

(2) Pro Forma Adjustments

 

a.Estimated fair value adjustments

 

The following pro forma adjustments were made to Cardpoint’s historical balance sheet accounts to reflect the estimated fair value of the assets acquired and liabilities assumed as of the acquisition date:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical Amount

 

Estimated Fair Value

 

Estimated Fair Value Adjustment

 

 

(In thousands)

Prepaid expenses, deferred costs, and other current assets

 

$ 

10,384 

 

$ 

5,286 

 

$ 

(5,098)

Current portion of deferred tax asset

 

 

 —

 

 

5,194 

 

 

5,194 

Deferred tax asset

 

 

 —

 

 

22,975 

 

 

22,975 

 

The adjustment for Prepaid expenses, deferred costs, and other current assets above relates primarily to the reduction in upfront merchant payments that has been included in the valuation of certain customer contracts included in Intangible assets (see note c. below).

 

PF-5

 


 

CARDTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Various entities in the Cardpoint group have accumulated net operating loss (“NOL”) carryforwards and capital allowances (excess unused depreciation deductions for U.K. tax purposes) that may be used or claimed in the future, and under current U.K. law, may be carried forward indefinitely.  The Deferred tax asset adjustment represents the amount of deferred tax assets that has been recorded as of the acquisition date that has been determined to be more likely than not to be realized in the future based on Cardpoint’s recent operating history and expectations for future profitability. 

 

b.Property and equipment, net

 

The fair value of property and equipment acquired and the related depreciation (using the straight-line method) are as follows (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Depreciation

 

 

Estimated

Fair Value

 

Estimated Useful Lives

 

For the Six Months Ended June 30, 2013

 

For the Year Ended December 31, 2012

 

 

 

 

 

 

 

ATM equipment and other equipment

 

$  

23,262 

 

0 to 5 years

 

$  

2,791 

 

$  

6,395 

Elimination of historical Cardpoint balance

 

 

(19,440)

 

 

 

 

(3,628)

 

 

(8,497)

Pro forma adjustment

 

$  

3,822 

 

 

 

$  

(837)

 

$  

(2,102)

 

c.Goodwill and Intangible assets, excluding deferred financing costs

 

The historical goodwill balance of Cardpoint was eliminated as of June 30, 2013 and the goodwill resulting from the transaction, as calculated in Note 1, Preliminary Acquisition Accounting above, was recorded.

 

The estimated fair value of identified finite-lived intangible assets, excluding deferred financing costs, that were recorded and the related amortization (using the straight-line method) are as follows (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Amortization

 

 

Estimated Fair Value

 

Estimated Useful Lives

 

For the Six Months Ended June 30, 2013

 

For the Year Ended December 31, 2012

 

 

 

 

 

 

 

Customer contracts

 

$  

62,240 

 

7 years

 

$  

4,514 

 

$  

9,218 

Trade name

 

 

9,468 

 

5 years

 

 

962 

 

 

1,963 

Non-compete agreements

 

 

1,480 

 

3 years

 

 

251 

 

 

511 

Total

 

$  

73,188 

 

 

 

$  

5,727 

 

$  

11,692 

 

 

 

 

 

 

 

 

 

 

 

 

Elimination of historical Cardpoint balance

 

 

 —

 

 

 

 

(1,460)

 

 

(5,006)

Pro forma adjustment

 

$  

73,188 

 

 

 

$  

4,267 

 

$  

6,686 

 

Under U.K. GAAP, identifiable intangible assets are not required to be separately identified and recorded on the balance sheet in connection with a business combination.  Additionally under U.K. GAAP, goodwill is amortized over an estimated period of time on a straight-line basis.  Under U.S. GAAP, identifiable intangible assets are required to be separately identified and determined to be indefinite-lived or finite-lived subject to amortization over an estimated useful life using a systematic and rational method to match the pattern of use of the asset.  Under U.S. GAAP, goodwill is not amortized, but instead is tested at least annually for impairment or more frequently as events may trigger a need for an impairment analysis.  Identifiable indefinite-lived intangible assets are also required to be tested for impairment under U.S. GAAP at least annually or more frequently as events may trigger a need for an impairment analysis. The amount of amortization expense eliminated above related to the historical Cardpoint balance represents the elimination of goodwill amortization that was recorded under U.K. GAAP, and is replaced by the amortization of the estimated fair value of identified intangible assets in connection with the acquisition.

PF-6

 


 

CARDTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

d.Asset retirement obligations

 

Historically, Cardpoint did not record a liability for asset retirement obligations (“AROs”) due to its assessment that the probability of incurring costs to restore ATM sites to their original condition was remote.  However, the Company believes that these costs are probable based on its experience and expectations in the future; therefore, has recorded the following AROs for the estimated costs to deinstall its ATMs and estimated costs to restore the ATM sites to their original condition, consistent with the Company’s accounting policy.  The estimated liabilities recorded as of the acquisition date and the related accretion (using the effective interest method) are as follows (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Accretion

 

 

Estimated Fair Value

 

Estimated Accretion Period

 

For the Six Months Ended June 30, 2013

 

For the Year Ended December 31, 2012

 

 

 

 

 

 

 

AROs for acquired ATMs

 

$  

16,490 

 

5 years

 

$  

395 

 

$  

763 

 

e.Current and long-term debt

 

The historical long-term debt balances of Cardpoint, which were all with its previous parent company and were classified as current as they were payable on demand, were eliminated as of June 30, 2013 as these amounts were satisfied on the acquisition date in accordance with the terms of the Purchase Agreement.

 

To fund the acquisition, the Company borrowed £50.0 million (approximately $76.0 million) in British pounds and approximately $84.3 million in U.S. dollars under its amended revolving credit facility, for a total of approximately $160.3 million, which has a termination date of July 2016.  The interest rates below represent the interest rates effective as of the acquisition date and are variable based on a floating interest rate index and a fixed spread. The pro forma adjustments made to current and long-term debt and interest expense are as follows (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Interest Expense

 

 

Principal Balance

 

Interest Rate

 

For the Six Months Ended June 30, 2013

 

For the Year Ended December 31, 2012

 

 

 

 

 

 

 

Revolving credit facility - USD denominated

 

$  

84,286 

 

2.19%

 

$  

923 

 

$  

1,846 

Revolving credit facility - GBP denominated

 

 

76,040 

 

2.49%

 

 

962 

 

 

1,975 

Total

 

$  

160,326 

 

 

 

$  

1,885 

 

$  

3,821 

 

 

 

 

 

 

 

 

 

 

 

 

Elimination of historical Cardpoint balance

 

 

(51,224)

 

 

 

 

(1,898)

 

 

(4,451)

Pro forma adjustment

 

$  

109,102 

 

 

 

$  

(13)

 

$  

(630)

 

A variance of 1/8 percent variance from the above interest rate would have affected the pro forma interest expense by $0.1 million and $0.2 million for the six months ended June 30, 2013 and the year ended December 31, 2012, respectively.

 

f.Deferred financing costs

 

In connection with the $160.3 million in incremental borrowings described in note e. above, the Company incurred costs totaling approximately $759,000 to amend its existing credit facility, which are being amortized over the remaining term of the facility of approximately three years. The pro forma adjustment made to deferred financing costs (which are included in the Intangible assets, net line) and amortization of deferred financing costs (using the straight-line method) are as follows (amounts in thousands):

PF-7

 


 

CARDTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Amortization

 

 

Intangible Assets

 

Estimated Amortization Period

 

For the Six Months Ended June 30, 2013

 

For the Year Ended December 31, 2012

 

 

 

 

 

 

 

Deferred financing costs related to the new debt

 

$  

759 

 

3 years

 

$  

129 

 

$  

258 

 

g.Equity compensation

 

In connection with the acquisition, the Company granted 60,000 Restricted Stock Units (“RSUs”) to certain members of Cardpoint’s management. The related expenses, which vest ratably over four years, are included as pro forma adjustments to Selling, general and administrative expenses line.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma Selling, General and Administrative Expenses

 

 

For the Six Months Ended June 30, 2013

 

For the Year Ended December 31, 2012

 

 

(In thousands)

Stock-based compensation related to new RSUs

 

$ 

247 

 

$ 

459 

 

h.Transaction costs

 

No transaction costs were expensed for the year ended December 31, 2012 related to the Cardpoint acquisition.  For the six months ended June 30, 2013, the Company incurred $929,000 in transaction costs related to the acquisition, which have been eliminated from the pro forma condensed consolidated statement of operations.  Included in the pro forma condensed consolidated balance sheet are, approximately $3.6 million in estimated transaction costs.

 

i. Stockholders’ equity

 

The following pro forma adjustments were made to stockholders’ equity as of June 30, 2013:

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Elimination of historical Cardpoint stockholders’ deficit

 

$

22,508 

Additional transaction costs accrued (see note h. above)

 

 

(3,631)

Total adjustment to equity as of June 30, 2013

 

$

18,877 

 

j.Income tax provision

 

The following estimated statutory rates for each country were used to calculate the income tax provision adjustment for the effects of pro forma adjustments on the pro forma condensed consolidated statement of operations:

PF-8

 


 

CARDTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statutory Income Tax Rates

 

 

For the Six Months Ended June 30, 2013

 

For the Year Ended December 31, 2012

United States

 

 

38.5% 

 

 

38.5% 

United Kingdom

 

 

23.5% 

 

 

25.0% 

Germany

 

 

30.0% 

 

 

30.0% 

 

(3) Pro forma Earnings per Share

 

The Company reports its earnings per share under the two-class method. Under this method, potentially dilutive securities are excluded from the calculation of diluted earnings per share (as well as their related impact on the statements of operations) when their impact on net income available to common stockholders is anti-dilutive. Potentially dilutive securities for the six months ended June 30, 2013 and for the year ended December 31, 2012 included all outstanding stock options and shares of restricted stock, which were included in the calculation of pro forma diluted earnings per share for these periods.

 

Additionally, the shares of restricted stock issued by the Company have a non-forfeitable right to cash dividends, if and when declared by the Company.  Accordingly, restricted shares are considered to be participating securities and, as such, the Company has allocated the undistributed pro forma earnings for the six months ended June 30, 2013 and for the year ended December 31, 2012 among the Company's outstanding shares of common stock and issued but unvested restricted shares, as follows:

 

 Pro Forma Earnings per Share (in thousands, excluding share and per share amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2013

 

Year Ended December 31, 2012

 

 

Pro forma Income 

 

Pro forma Weighted Average Shares Outstanding

 

Pro forma Earnings Per Share

 

Pro forma Income 

 

Pro forma Weighted Average Shares Outstanding

 

Pro forma Earnings Per Share

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma net income attributable to controlling interests and available to common stockholders

 

$ 

27,102 

 

 

 

 

 

 

 

$ 

48,071 

 

 

 

 

 

 

Less: Pro forma undistributed earnings allocated to unvested restricted shares

 

 

(737)

 

 

 

 

 

 

 

 

(1,666)

 

 

 

 

 

 

Pro forma net income available to common stockholders

 

$ 

26,365 

 

 

44,336,069 

 

$ 

0.59 

 

$ 

46,405 

 

 

43,484,175 

 

$ 

1.07 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Pro forma undistributed earnings allocated to restricted shares

 

$ 

737 

 

 

 

 

 

 

 

$ 

1,666 

 

 

 

 

 

 

Stock options added to the denominator under the treasury stock method 

 

 

 

 

 

226,782 

 

 

 

 

 

 

 

 

406,157 

 

 

 

Less: Pro forma undistributed earnings reallocated to restricted shares

 

 

(671)

 

 

 

 

 

 

 

 

(1,498)

 

 

 

 

 

 

Pro forma net income available to common stockholders and assumed conversions

 

$ 

26,431 

 

 

44,562,851 

 

$ 

0.59 

 

$ 

46,573 

 

 

43,890,332 

 

$ 

1.06 

 

PF-9

 


 

CARDTRONICS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

The computation of pro forma diluted earnings per share excluded potentially dilutive common shares related to restricted stock (including both Restricted Stock Awards and RSUs) of 466,152 and 630,537 shares for the six months ended June 30, 2013 and for the year ended December 31, 2013, respectively, because the effect of including these shares in the computation would have been anti-dilutive.

 

(4) Foreign Currency Exchange

 

The functional currency of the Company is the U.S. dollars (USD). As such, all amounts in British pounds (GBP) have been translated using the appropriate GBP-USD rates in effect during the reported periods.  The following are the exchange rates that were used to prepare these unaudited pro forma condensed consolidated financial statements:

 

 

 

 

 

 

 

 

GBP to USD Exchage Rate

As of June 30, 2013

 

1.5208

For the six months ended June 30, 2013

 

1.5445

For the year ended December 31, 2012

 

1.5848

For the year ended September 30, 2012

 

1.5766

 

PF-10