Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

(15) Commitments and Contingencies

Legal Matters

The Company is subject to various legal proceedings and claims arising in the ordinary course of its business. The Company has provided accruals where necessary for contingent liabilities, based on ASC 450, Contingencies, when it has determined that a liability is probable and reasonably estimable. The Company’s management does not expect the outcome in any legal proceedings or claims, individually or collectively, to have a material adverse financial or operational impact on the Company. Additionally, the Company currently expenses all legal costs as they are incurred.

On March 1, 2019, the Company was named as a defendant in a purported class action lawsuit stylized as Kristen Schertzer, et al. v. Bank of America, N.A., et al., Case No. 3:19-cv-00264, in the United States District Court for the Southern District of California, which makes allegations of harm related to balance inquiry transactions. On September 28, 2020, the district court issued a denial of the Company’s motion to dismiss and the matter is proceeding to the discovery phase. Due to the early stages of this matter, including uncertainty related to class certification and potential amount claimed by the class, the Company is unable to determine if liability will arise from this matter or estimate the range of any potential liability. The Company will vigorously defend this matter.

Gain Contingency

In 2014, the Valuation Office Agency (or “VOA”), an executive agency of HM Revenue & Customs in England and Wales, took action to amend its business ratings list going back to 2010, to create separate entries on these lists for the sites of thousands of ATMs. Similar steps were taken by the equivalent agencies to the VOA in Scotland and Northern Ireland in their respective jurisdictions. Before 2014, the ATM sites in each location had not been distinguished from the host store. Therefore, the ATMs located in host stores such as supermarkets and convenience stores were not subject to business rates, a tax on commercial property. The effect of each of the amendments was to include the ATM sites in the business ratings lists as separate hereditaments with their own ratable value, subjecting the sites to business rates taxation. The Company and its merchant partners paid the business rates, as required.

In 2018, various appellants, including a number of large supermarkets and the Company (together, the “Appellants”), appealed the matter to the England and Wales Court of Appeal (the “Court of Appeal”) after having lost appeals to the Valuation Tribunal for England (“VTE”) and Upper Tribunal (Lands Chamber) in 2016 and 2017, respectively. In late 2018, the Court of Appeal ruled in favor of the Appellants and found that the amendments to the ratings list for a large number of ATM location types should not have been affected by the VOA, or sustained by the VTE and Upper Tribunal. The VOA appealed to the U.K. Supreme Court, and on May 20, 2020, the Supreme Court dismissed the VOA appeal and upheld the decision of the Court of Appeal.

Following the Supreme Court ruling, the VOA is in process of amending the business rating lists for England and Wales and the Company has recovered some of the amounts paid to the tax authorities in respect of the ATMs subject to the amended lists in numerous local tax jurisdictions for the periods spanning from 2010 to October 2020. The Company estimates that approximately 31 million U.K. pounds sterling remains recoverable from the various tax authorities, net of amounts that have already been recovered or are estimated to be due to merchant partners of the Company, some of which had paid indirectly these business rates. During the three and nine months ended September 30, 2020, the Company recorded net cash recoveries of approximately $11.8 million, which is reflected as a reduction to the Cost of ATM operating revenues line in the Consolidated Statements of Operations. The Company seeks to ensure that all necessary amendments to the ratings list are made and that all recoverable amounts paid to the tax authorities are collected. The Company's estimate of the total recoverable amount is subject to change as the Company continues its analysis of the business rates paid during the 10 year period. Due to the complexity in administering and uncertainty of these collections, the Company will recognize the business rates recoveries only when received.

The Supreme Court ruling does not apply to Scotland or Northern Ireland and business rates in those jurisdictions are still subject to valuation tribunal appeals and assessments. Accordingly, the Company continues to recognize business rate taxes in Scotland and Northern Ireland, net of any amounts recorded as receivables that are deemed recoverable under contracts with merchants.

Other Commitments

Asset retirement obligations. The Company’s ARO consist primarily of costs to remove the Company’s ATMs and to restore the ATM sites to their original condition. In most cases, the Company is contractually required to perform this deinstallation of its owned ATMs, and in some cases, site restoration work. As of September 30, 2020, the Company had $60.3 million accrued for these liabilities. For additional information, see Note 10. Asset Retirement Obligations.

Acquisition related contingent consideration. During the nine months ended September 30, 2020, the Company paid $5.2 million to satisfy the 2019 portion of its obligation under the Spark acquisition contingent consideration arrangement. As of September 30, 2020, the Company had $6.8 million accrued for its 2020 obligation. For additional information related to the Spark acquisition related contingent consideration, see Note 14. Fair Value Measurements.