updated 11/3/2010 12:15:29 AM ET 2010-11-03T04:15:29

HOUSTON, Nov. 2, 2010 (GLOBE NEWSWIRE) -- Cardtronics, Inc. (Nasdaq:CATM) (the "Company"), the world's largest non-bank owner of ATMs, today announced its financial and operational results for the quarter ended September 30, 2010.

Key financial and operational statistics related to the quarter include:

  • Consolidated revenues of $136.6 million, up over 6% from the third quarter of 2009
  • Revenue growth of approximately 10% for the Company's core business operations, which include the Company's domestic Company-owned ATM placement, surcharge-free and managed services businesses as well as its international operations
  • Adjusted EBITDA of $34.9 million, up approximately 8% from the third quarter of 2009
  • Adjusted Net Income per diluted share of $0.28, up from $0.25 in the third quarter of 2009
  • GAAP Net Income of $17.4 million compared to $6.4 million in the third quarter of 2009. GAAP Net Income for the current quarter reflects the recognition of $14.5 million of pre-tax non-recurring losses related to the early extinguishment of debt and the refinancing of the Company's credit facility as well as the reversal of previously-recognized valuation allowances on the Company's domestic deferred tax assets, resulting in an income tax benefit during the current quarter of $20.7 million.
  • Growth of the Company's managed services business, to which 882 ATMs were added under this type of arrangement since the end of the second quarter
  • Gross margins of 33.1%, up from 31.8% in the third quarter of 2009
  • Continued improvements in several key operating metrics when compared to the third quarter of 2009. Amounts presented exclude the impact of the Company's managed services offerings:
  • Total transactions increased by over 8%;
  • Total transactions per ATM increased by 7%; and
  • ATM operating gross profit per ATM increased by 7%

Please refer to the "Disclosure of Non-GAAP Financial Information" contained later in this release for definitions of Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow. For additional financial information, including reconciliations to comparable GAAP measures, please refer to the supplemental schedules of selected financial information at the end of this release.

"The record third quarter revenue and Adjusted net income per share results were driven by the successful execution of several of our key strategic initiatives, including continued organic growth of machine count and transactions within our core business, expansion of our managed services business, and our continued ability to manage our operating costs and leverage our fixed costs," commented Steven Rathgaber, the Company's Chief Executive Officer. "With our network of premier ATM locations and recent organization changes designed to better capitalize on traditional growth engines as well as new complementary services, we believe the Company is well-positioned to continue to generate solid revenue and earnings growth."

RECENT HIGHLIGHTS

  • Execution of a new bank branding agreement with Scotiabank, one of the world's leading financial institutions, to provide surcharge-free ATM access to Scotiabank's cardholders at over 200 ATMs in high-profile retail locations throughout Puerto Rico. The long-term deal is the first between the Company and Scotiabank and the first bank branding arrangement for the Company covering ATMs located in Puerto Rico.
  • Execution of an exclusive alliance with MasterCard Worldwide under which the Company will provide prepaid MasterCard issuers and program managers the opportunity to expand their ATM footprints through the Company's Allpoint Network.
  • Expansion of the Company's Allpoint Network into Australia through a partnership with Customers Limited, the largest owner/operator of ATMs in Australia. This expansion increases Allpoint's coverage by more than 5,000 locations, to over 40,000 ATMs, and provides surcharge-free access to both United States and Australian participating financial institution cardholders.
  • Expansion of the Company's bank branding relationship with Huntington Bank, which renewed its existing branding agreement for 122 locations and will be placing its brand on 50 additional locations in Ohio, Kentucky, and Indiana.
  • Completion of a series of financing transactions designed to extend the maturity of the Company's debt facilities and reduce its long-term borrowing costs, including (1) the execution of a new $175.0 million bank credit facility; (2) the redemption of the Company's $200.0 million 9.25% senior subordinated notes – Series A and its $100.0 million 9.25% senior subordinated notes – Series B, both of which were due in 2013; and (3) the issuance of $200.0 million 8.25% senior subordinated notes due 2018. -Please refer to the "Liquidity" section below for additional details on these transactions.
  • Successful completion of a secondary offering in August 2010 of over 7.6 million shares of existing common stock by selling shareholders at a price to the public of $14 per share. The offering consisted entirely of already outstanding common shares held by the Company's long-time private equity investors, The CapStreet Group and TA Associates, who, after this offering, own approximately 10% of the Company's outstanding shares on a combined basis.
  • Adoption of certain strategic organizational changes, which the Company believes will better align the management structure with its key business and strategic initiatives and provide the additional focus and resources needed for the Company to meet and exceed expected revenue and profit growth targets.

THIRD QUARTER RESULTS

For the third quarter of 2010, consolidated revenues totaled $136.6 million, representing a 6.2% increase from the $128.6 million in revenues generated during the third quarter of 2009. The 6.2% year-over-year increase reflects 10% revenue growth in the Company's core business operations, which was driven by a combination of increases in transactions per machine, year-over-year surcharge rate increases implemented in the United States, and unit growth in the Company's United Kingdom and Mexico operating segments. Additionally, the Company continued to see increased bank branding and surcharge-free network revenues in the United States due to the continued growth of its surcharge-free offerings.  Partially offsetting these increases was a decline in revenues from the Company's lower-margin merchant-owned account base.

Adjusted EBITDA for the third quarter of 2010 totaled $34.9 million, compared to $32.4 million during the third quarter of 2009, and Adjusted Net Income totaled $11.4 million ($0.28 per diluted share) compared to $9.9 million ($0.25 per diluted share) during the third quarter of 2009. These increases were primarily attributable to the increase in revenues (discussed above), the continued shift of revenues from lower-margin revenues earned under merchant-owned accounts to higher-margin Company-owned and surcharge-free network and bank branding revenues, as well as the Company's ability to leverage its fixed-cost infrastructure to generate strong margins from those higher revenues. Specific costs excluded from Adjusted EBITDA and Adjusted Net Income are detailed in a reconciliation included at the end of this press release.

GAAP Net Income for the third quarter of 2010 totaled $17.4 million, compared to $6.4 million during the same quarter in 2009. The year-over-year increase was attributable to the factors identified above in the discussion of Adjusted EBITDA and Adjusted Net Income and the release of valuation allowances related to the Company's domestic deferred tax assets, which resulted in a net income tax benefit for the quarter of $20.7 million. Partially offsetting the non-recurring tax benefit was approximately $14.5 million in pre-tax non-recurring charges associated with the Company's early retirement of its senior subordinated notes and the refinancing of its $175.0 million credit facility, as explained further in the "Liquidity" section below.

NINE MONTH RESULTS

Revenues totaled $397.3 million for the nine months ended September 30, 2010, representing a 7.8% increase over the $368.6 million in revenues recorded during the same period in 2009. As was the case with the Company's quarterly results, the year-over-year increase in revenues was primarily attributable to revenue growth in its core business operations, slightly offset by a decline in the Company's merchant-owned account base.

Adjusted EBITDA totaled $98.0 million for the nine months ended September 30, 2010, representing an 18.4% increase over the $82.8 million in Adjusted EBITDA for the same period in 2009, and Adjusted Net Income totaled $30.2 million ($0.74 per diluted share) for the first nine months of 2010, which represented a 48.8% increase from the $20.3 million ($0.51 per diluted share) generated during the same period in 2009. Increases in both Adjusted EBITDA and Adjusted Net Income were primarily due to the same factors noted above for the Company's quarterly results, in addition to reduced operating costs per unit compared to the same period in the prior year.

GAAP Net Income for the nine months ended September 30, 2010 totaled $29.6 million, compared to $3.8 million during the same period last year. As was the case with the quarterly results, the results for the nine-month period ended September 30, 2010 include certain non-recurring items associated with the Company's financing activities and reversal of deferred tax valuation allowances. Excluding these one-time effects, the improvement in the Company's GAAP results was primarily driven by the same factors outlined above with respect to Adjusted EBITDA and Adjusted Net Income. 

GUIDANCE

Update of Full-Year 2010 Guidance

The Company is updating the guidance it previously issued regarding its anticipated full-year 2010 results, and now expects the following:

  • Revenues of $528.0 million to $529.5 million, at the higher end of the range of the previous guidance;
  • Overall gross margins of approximately 32.1% to 32.2%, up from 31.5% to 32.0% in the previous guidance;
  • Adjusted EBITDA of $127.0 million to $129.0 million, up from $123.0 million to $127.0 million in the previous guidance;
  • Depreciation and accretion expense of $41.5 million to $42.0 million, up from the previous guidance of $40.5 million to 41.0 million;
  • Cash interest expense of $26.0 million to $26.3 million, down from $26.5 million to $27.0 million in the previous guidance;
  • Adjusted Net Income of $0.95 to $0.98 per diluted share, based on approximately 41.5 million weighted average diluted shares outstanding, up from $0.87 to $0.93 per diluted share in the previous guidance; and
  • Capital expenditures of approximately $48.0 million, net of noncontrolling interests, up from the previous guidance of approximately $45.0 million.

The above guidance excludes the impact of certain one-time items, such as the refinancing charges incurred by the company during the third quarter, as well as approximately $6.1 million of anticipated stock-based compensation expense and approximately $15.2 million of intangible asset amortization expense.

Preliminary 2011 Guidance

The Company is also providing the following preliminary high-level guidance for financial performance in 2011:

  • Revenues of $559.0 million to $569.0 million;
  • Adjusted EBITDA of $136.0 million to $141.0 million; and
  • Adjusted Net Income of $1.14 to $1.20 per diluted share.

The above preliminary 2011 guidance is based on average foreign currency exchange rates of $1.50 U.S. to £1.00 U.K. and $13.00 Mexican pesos to $1.00 U.S. Additional details will be provided during the Company's 2010 year-end earnings conference call, which is expected to occur in February 2011.

LIQUIDITY

The Company continues to maintain a very strong liquidity position, with $97.7 million in available borrowing capacity under the Company's $175.0 million revolving credit facility as of September 30, 2010. The Company's outstanding indebtedness as of September 30, 2010 consisted of $200.0 million in senior subordinated notes due 2018, $73.0 million in borrowings under its revolving credit facility, and $9.2 million in equipment financing notes associated with its majority-owned Mexico subsidiary.

During the third quarter of 2010, the Company undertook a series of actions to modify its debt structure. Specifically, the Company: (1) refinanced its existing $175.0 million revolving credit facility and extended its term from 2012 to 2015, (2) redeemed its $100.0 million 9.25% Senior Subordinated Notes – Series B due 2013, (3) redeemed its $200.0 million 9.25% Senior Subordinated Notes – Series A due 2013, and (4) issued $200.0 million 8.25% Senior Subordinated Notes due 2018.  As a result of these transactions, the Company extended the maturity on the majority of its debt from three years to eight years, reduced its overall level of debt outstanding, and converted its long-term capital structure to one with lower risk and more financial flexibility. Additionally, the Company now expects to save approximately $8.6 million in annual pre-tax interest costs on a go-forward basis.

DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION

EBITDA, Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow are non-GAAP financial measures provided as a complement to results prepared in accordance with accounting principles generally accepted within the United States of America ("GAAP") and may not be comparable to similarly-titled measures reported by other companies. Management believes that the presentation of these measures and the identification of unusual, non-recurring, or non-cash items enhance an investor's understanding of the underlying trends in the Company's business and provide for better comparability between periods in different years.

Adjusted EBITDA excludes depreciation, accretion, and amortization expense as these amounts can vary substantially from company to company within the Company's industry depending upon accounting methods and book values of assets, capital structures, and the method by which the assets were acquired.  During the three and nine month periods ended September 30, 2010, as a result of certain financing activities, the Company recorded a $7.2 million charge associated with the early extinguishment of debt and a $7.3 million charge to write off certain unamortized deferred financing costs and bond discounts related to the instruments retired. These charges have been excluded from EBITDA, Adjusted EBITDA, and Adjusted Net Income as the Company views these charges as one-time, non-recurring events specifically related to the Company's decision to improve its capital structure and financial flexibility and not related to the Company's ongoing operations. Furthermore, management feels the inclusion of such a charge in EBITDA would not contribute to management's understanding of the operating results and effectiveness of its business.  Since Adjusted EBITDA and Adjusted Net Income exclude certain non-recurring or non-cash items, these measures may not be comparable to similarly-titled measures employed by other companies. Free Cash Flow is cash provided by operating activities less payments for capital expenditures, including those financed through direct debt. The non-GAAP financial measures presented herein should not be considered in isolation or as a substitute for operating income, net income, cash flows from operating, investing, or financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

A reconciliation of Net Income Attributable to Controlling Interests to EBITDA, Adjusted EBITDA, and Adjusted Net Income and a calculation of Free Cash Flow are presented in tabular form at the end of this press release.

CONFERENCE CALL INFORMATION

The Company will host a conference call today, Tuesday, November 2, 2010, at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its financial results for the quarter ended September 30, 2010. To access the call, please call the conference call operator at:

Please call in fifteen minutes prior to the scheduled start time and request to be connected to the "Cardtronics Third Quarter Earnings Conference Call." Additionally, a live audio webcast of the conference call will be available online through the investor relations section of the Company's website at http://www.cardtronics.com .

A digital replay of the conference call will be available through Tuesday, November 16, 2010, and can be accessed by calling (800) 642-1687 or (706) 645-9291 and entering 18722693 for the conference ID. A replay of the conference call will also be available online through the Company's website subsequent to the call through December 2, 2010.

ABOUT CARDTRONICS

Cardtronics (Nasdaq:CATM) is the world's largest non-bank owner of ATMs. We operate over 33,500 ATMs in the United States, the United Kingdom, Mexico, and the Caribbean, primarily in well-known retailers such as  7-Eleven®, Chevron®, Costco®, CVS®/pharmacy, ExxonMobil®, Hess®, Rite Aid®, Safeway®, Target®, and Walgreens®. We also assist in the operation of over 2,900 ATMs under managed services contracts with customers such as Kroger®, Travelex®, and Circle K®. Cardtronics also provides services to large and small banks, credit unions, and prepaid card issuers by allowing them to place their brands on over 11,700 Cardtronics' ATMs, and by providing surcharge-free access through Cardtronics' Allpoint network. For more information, visit http://www.cardtronics.com .

The Cardtronics logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=991

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give the Company's current expectations or forecasts of future events, future financial performance, strategies, expectations, competitive environment, regulation, and availability of resources. The forward-looking statements contained in this release include, among other things, statements concerning projections, predictions, expectations, estimates or forecasts as to the Company's business, financial and operational results and future economic performance, and statements of management's goals and objectives and other similar expressions concerning matters that are not historical facts. These statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the following:

  • the Company's financial outlook and the financial outlook of the ATM industry;
  • the Company's ability to respond to recent and future regulatory changes that may impact the ATM and financial services industries;
  • the Company's ability to respond to potential reductions in the amount of interchange fees that it receives from global and regional debit networks for transactions conducted on its ATMs;
  • the Company's ability to provide new ATM solutions to financial institutions;
  • the Company's ATM vault cash rental needs, including potential liquidity issues with its vault cash providers;
  • the implementation of the Company's corporate strategy, including successful implementation of certain strategic organizational changes that were recently initiated;
  • the Company's ability to compete successfully with new and existing competitors;
  • the Company's ability to renew and strengthen its existing customer relationships and add new customers;
  • the Company's ability to meet the service levels required by its service level agreements with its customers;
  • the Company's ability to pursue and successfully integrate acquisitions;
  • the Company's ability to successfully manage its existing international operations and to continue to expand internationally;
  • the Company's ability to prevent security breaches;
  • the Company's ability to manage the risks associated with its third-party service providers failing to perform their contractual obligations;
  • the Company's ability to manage concentration risks with key vendors and service providers;
  • changes in interest rates and foreign currency rates; and
  • the additional risks the Company is exposed to in its armored transport business.


Other factors that could cause the Company's actual performance or results to differ from its projected results are described in its filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. You should not read forward-looking statements as a guarantee of future performance or results. They will not necessarily be accurate indications of the times at or by which such performance or results will be achieved. Forward-looking statements speak only as of the date the statements are made and are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events. The Company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information.

SELECTED INCOME STATEMENT DETAIL:

Total revenues by segment:

Breakout of ATM operating revenues:

Total cost of revenues by segment (exclusive of depreciation, accretion, and amortization):

Breakout of cost of ATM operating revenues (exclusive of depreciation, accretion, and amortization):

Breakout of selling, general, and administrative expenses:

Depreciation and accretion expense by segment:

SELECTED BALANCE SHEET DETAIL:

Long-term debt and capital lease obligations:

Share count rollforward:

SELECTED CASH FLOW DETAIL:

Selected cash flow statement amounts:

 

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