(8) Long-Term Debt

The Company's long-term debt consisted of the following:



	June 30, 2014		December 31, 2013
	(In thousands)
8.25% Senior subordinated notes due September 2018	$	179,442	$	200,000
1.00% Convertible senior notes due December 2020, net of discount		220,950		216,635
Revolving credit facility, including swing-line credit facility (weighted-average combined interest rate of 2.2% and 2.5% as of June 30, 2014 and December 31, 2013, respectively)		73,220		72,547
Equipment financing notes		616		1,332
Total		474,228		490,514
Less: current portion		615		1,289
Total long-term debt, excluding current portion	$	473,613	$	489,225

Revolving Credit Facility

On April 24, 2014, the Company entered into an amended and restated credit agreement (the “Credit Agreement”). The Credit Agreement provides for a $375 million revolving credit facility (the “Revolving Credit Facility”) and includes an accordion feature that will allow us to increase the available borrowings under the Revolving Credit Facility to $500 million, subject to the approval of one or more existing lenders or one or more lenders that become party to the Credit Agreement. In addition, the Revolving Credit Facility includes a sub-limit of up to $30 million for letters of credit, a sub- limit of up to $25 million for swingline loans and a sub-limit of up to the equivalent amount of $125 million for loans in currencies other than U.S. Dollars. The Revolving Credit Facility has a termination date of April 2019.

Borrowings (not including swingline loans and alternative currency loans) under the Revolving Credit Facility accrue interest at our option at either the Alternate Base Rate (as defined in the Credit Agreement) or the Adjusted LIBO Rate (as defined in the Credit Agreement) plus a margin depending on our most recent Total Net Leverage Ratio (as defined in the Credit Agreement). Swingline loans bear interest at the Alternate Base Rate plus a margin as described above. The alternative currency loans bear interest at the Adjusted LIBO Rate as described above. Substantially all of our domestic assets, including the stock of our wholly-owned domestic subsidiaries and 66% of the stock of our first-tier foreign subsidiaries, are pledged to secure borrowings made under the Revolving Credit Facility. Furthermore, each of our material wholly-owned domestic subsidiaries has guaranteed the full and punctual payment of our obligations under the Revolving Credit Facility. There are currently no restrictions on the ability of our subsidiaries to declare and pay dividends to us.

The primary restrictive covenants within the credit agreement governing our revolving credit facility include (1) limitations on the amount of senior secured net debt and total net debt that we can have outstanding at any given point in time and (2) the maintenance of a set ratio of earnings to fixed charges, as computed quarterly on a trailing 12-month basis, adjusted for the pro forma effect of acquisitions. Additionally, we are limited on the amount of restricted payments, including dividends, which we can make pursuant to the terms of the credit agreement; however, we may generally make restricted payments so long as no event of default has occurred and is continuing and the total net leverage ratio is less than 3.0 to 1.0 at the time such restricted payment is made.

As of June 30, 2014, the Company was in compliance with all applicable covenants and ratios under the Credit Agreement.

As of June 30, 2014, $73.2 million was outstanding under the Revolving Credit Facility. Additionally, the Company has posted a $2.0 million letter of credit serving to secure the overdraft facility of its U.K. subsidiary (further discussed below) and a $0.1 million letter of credit serving to secure a third-party processing contract in Canada. These letters of credit, which the applicable third-parties may draw upon in the event the Company defaults on the related obligations, reduce the Company’s borrowing capacity under the Revolving Credit Facility. As of June 30, 2014, the Company’s available borrowing capacity under the Revolving Credit Facility totaled approximately $299.7 million.

$200.0 Million 8.25% Senior Subordinated Notes Due 2018

The $200.0 million 8.25% senior subordinated notes due September 2018 (the "2018 Notes"), which are guaranteed by all of the Company's domestic subsidiaries, contain no maintenance covenants and only limited incurrence covenants, under which the Company has considerable flexibility. Interest under the 2018 Notes is paid semi-annually in arrears on March 1st and September 1st of each year. As of June 30, 2014, the Company was in compliance with all applicable covenants required under the 2018 Notes.

During the six months ended June 30, 2014, the Company repurchased $20.6 million of the 2018 Notes in the open market. In connection with the repurchase, the Company recorded a $0.4 million pre-tax charge to write off a portion of the unamortized deferred financing costs associated with the repurchased 2018 Notes, which is included in the Amortization of deferred financing costs and note discount line item in the accompanying Consolidated Statements of Operations. Additionally, the Company recorded a $1.4 million pre-tax charge related to the premium paid for the repurchase, which is included in the Redemption costs for early extinguishment of debt line item in the accompanying Consolidated Statements of Operations.

$287.5 Million 1.00% Convertible Senior Notes Due 2020 and Related Equity Instruments

On November 19, 2013, the Company issued $250.0 million of 1.00% convertible senior notes due December 2020 (the "Convertible Notes") at par value. The Company also granted to the initial purchasers the option to purchase, during the 13 day period following the issuance of the notes, up to an additional $37.5 million of Convertible Notes (the “Over-allotment Option”). The initial purchasers exercised the Over-allotment Option on November 21, 2013. The Company received $254.2 million in net proceeds from the offering after deducting underwriting fees paid to the initial purchasers and the amount paid to repurchase its outstanding common stock concurrently with the offering. The Company used a portion of the net proceeds from the offering to pay the net cost of the convertible note hedge transaction, as described below. The convertible note hedge and warrant transactions were entered into with the initial purchasers on November 19, 2013, concurrently with the pricing of the Convertible Notes, and on November 21, 2013, concurrent with the exercise of the Over-allotment Option. The Company pays interest semi-annually (payable in arrears) on June 1st and December 1st of each year, beginning on June 1, 2014. Under U.S. GAAP, certain convertible debt instruments that may be settled in cash (or other assets) upon conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. The Company, with assistance from a valuation professional, determined that the fair value of the debt component was $215.8 million and the fair value of the embedded option was $71.7 million as of the issuance date. Under U.S. GAAP, the Company recognizes effective interest expense on the debt component and that interest expense effectively accretes the debt component to the total principal amount due at maturity of $287.5 million. The effective rate of interest to accrete the debt balance is approximately 5.26%, which corresponds to the Company’s estimated conventional debt instrument borrowing rate at the date of issuance.

The Convertible Notes have an initial conversion price of $52.35 per share, which equals an initial conversion rate of 19.1022 shares of common stock per $1,000 principal amount of notes, for a total of approximately 5.5 million shares of our common stock initially underlying the debt. The conversion rate, however, is subject to adjustment under certain circumstances. Conversion can occur: (1) any time on or after September 1, 2020; (2) after March 31, 2014, during any calendar quarter that follows a calendar quarter in which the price of the Company’s common stock exceeds 135% of the conversion price for at least 20 days during the 30 consecutive trading-day period ending on the last trading day of the quarter; (3) during the ten consecutive trading-day period following any five consecutive trading-day period in which the trading price of the Convertible Notes is less than 98% of the closing price of the Company’s common stock multiplied by the applicable conversion rate on each such trading day; (4) upon specified distributions to the Company’s shareholders upon recapitalizations, reclassifications or changes in stock; and (5) upon a make-whole fundamental change. A fundamental change is defined as any one of the following: (1) any person or group that acquires 50% or more of the total voting power of all classes of common equity that is entitled to vote generally in the election of the Company’s directors; (2) the Company engages in any recapitalization, reclassification or changes of common stock as a result of which the common stock would be converted into or exchanged for, stock, other securities, or other assets or property; (3) the Company engages in any share exchange, consolidation or merger where the common stock is converted into cash, securities or other property; (4) the Company engages in any sales, lease or other transfer of all or substantially all of the consolidated assets; or (5) the Company’s stock is not listed for trading on any U.S. national securities exchange.

As of June 30, 2014, none of the contingent conversion thresholds described above were met in order for the Convertible Notes to be convertible at the option of the note holders. As a result, the Convertible Notes have been classified as a noncurrent liability on the Company’s Consolidated Balance Sheets at June 30, 2014. In future financial reporting periods, the classification of the Convertible Notes may change depending on whether any of the above contingent criteria have been subsequently satisfied.

Upon conversion, holders of the Convertible Notes are entitled to receive cash, shares of the Company’s common stock or a combination of cash and common stock, at the Company’s election. In the event of a change in control, as defined in the indenture under which the Convertible Notes have been issued, holders can require the Company to purchase all or a portion of their Convertible Notes for 100% of the notes' par value plus any accrued and unpaid interest.

Interest expense related to the Convertible Notes for the three and six months ended June 30, 2014, consisted of the following:



	Three Months Ended
	June 30,
	2014		2013
	(In thousands)
Cash interest per contractual coupon rate	$	719	$	—
Amortization of note discount		2,167		—
Amortization of deferred financing costs		129		—
Total interest expense related to Convertible Notes	$	3,015	$	—



	Six Months Ended
	June 30,
	2014		2013
	(In thousands)
Cash interest per contractual coupon rate	$	1,438	$	—
Amortization of note discount		4,315		—
Amortization of deferred financing costs		254		—
Total interest expense related to Convertible Notes	$	6,007	$	—

The carrying value of the Convertible Notes consisted of the following as of June 30, 2014 and December 31, 2013:



	June 30, 2014		December 31, 2013
	(In thousands)
Principal balance	$	287,500	$	287,500
Discount, net of accumulated amortization		(66,550)		(70,865)
Net carrying amount of Convertible Notes	$	220,950	$	216,635

In connection with the issuance of the Convertible Notes, the Company entered into separate convertible note hedge and warrant transactions with certain of the initial purchasers to reduce the potential dilutive impact upon the conversion of the Convertible Notes. The net effect of these transactions effectively raised the price at which dilution would occur from the $52.35 initial conversion price of the Convertible Notes to $73.29. Pursuant to the convertible note hedge, the Company purchased call options granting the Company the right to acquire up to approximately 5.5 million shares of its common stock with an initial strike price of $52.35. The call options automatically become exercisable upon conversion of the Convertible Notes, and will terminate on the second scheduled trading day immediately preceding December 1, 2020. The Company also sold to the initial purchasers warrants to acquire up to approximately 5.5 million shares of its common stock with a strike price of $73.29. The warrants will expire incrementally on a series of expiration dates subsequent to the maturity date of the Convertible Notes through August 30, 2021. If the conversion price of the Convertible Notes remains between the strike prices of the call options and warrants, the Company’s shareholders will not experience any dilution in connection with the conversion of the Convertible Notes; however, to the extent that the price of the Company’s common stock exceeds the strike price of the warrants on any or all of the series of related expiration dates of the warrants, the Company will be required to issue additional shares of its common stock to the warrant holders. The amounts allocated to both the note hedge and warrants were recorded in equity, within the Additional paid-in capital line item.

Other Borrowing Facilities

Cardtronics Mexico equipment financing agreements. Between 2007 and 2010, Cardtronics Mexico entered into several separate five-year equipment financing agreements with a single lender, of which four agreements have outstanding balances as of June 30, 2014. These agreements, which are denominated in pesos and bear interest at an average fixed rate of 9.79%, were utilized for the purchase of ATMs to support growth in the Company’s Mexico operations. As of June 30, 2014, approximately $8.0 million pesos ($0.6 million U.S.) were outstanding under the agreements. Pursuant to the terms of the loan agreements, the Company has issued guarantees for 51.0% of the obligations under these agreements (consistent with its ownership percentage in Cardtronics Mexico). As of June 30, 2014, the total amount of these guarantees was $4.1 million pesos ($0.3 million U.S.).

Cardtronics U.K. overdraft facility. Cardtronics U.K. has a £1.0 million overdraft facility. This overdraft facility, which bears interest at 1.0% over the Bank of England’s base rate (0.5% as of June 30, 2014) and is secured by a letter of credit posted under our revolving credit facility, is utilized for general corporate purposes for our U.K. operations. The letter of credit the Company has posted that is associated with this overdraft facility reduces the available borrowing capacity under its corporate revolving credit facility discussed above. As of June 30, 2014, there were no amounts outstanding under the overdraft facility.