General and Basis of Presentation

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

(1) General and Basis of Presentation

(a) General

Cardtronics plc, together with its wholly and majority-owned subsidiaries (collectively, the “Company”), provides convenient automated financial related services to consumers through its global network of automated teller machines and multi-function financial services kiosks (collectively referred to as “ATMs”). As of March 31, 2020, the Company was the world’s largest ATM owner/operator, providing services to over 285,000 ATMs globally, approximately 25% of which are Company-owned.

During the three months ended March 31, 2020, approximately 68% of the Company’s revenues were derived from operations in North America (including its ATM operations in the United States ("U.S."), Canada, and Mexico), approximately 27% of the Company’s revenues were derived from operations in Europe and Africa (including its ATM operations in the United Kingdom ("U.K."), Ireland, Germany, Spain, and South Africa), and approximately 5% of the Company’s revenues were derived from the Company’s operations in Australia and New Zealand. As of March 31, 2020, the Company provided processing only services or various forms of managed services solutions to approximately 198,000 ATMs. Under a managed services arrangement, retailers, financial institutions, and ATM distributors rely on Cardtronics to handle some or all of the operational aspects associated with operating and maintaining ATMs, typically in exchange for a monthly service fee, fee per transaction, or fee per service provided.

Through its network, the Company delivers financial related services to cardholders and provides ATM management and ATM equipment-related services (typically under multi-year contracts) to large retail merchants, smaller retailers, and operators of facilities such as shopping malls, casinos, airports, and train stations. In doing so, the Company provides its retail partners with a compelling automated solution that helps attract and retain customers, and in turn, increases the likelihood that the ATMs placed at their facilities will be utilized. The Company also owns and operates electronic funds transfer (“EFT”) transaction processing platforms that provide transaction processing services to its network of ATMs, as well as to other ATMs under managed services arrangements. Additionally, the Company provides processing services for issuers of debit cards.

In addition to its retail merchant relationships, the Company also partners with leading financial institutions to brand selected ATMs within its network. These financial institutions include, but are not limited to, BBVA Compass Bancshares, Inc. (“BBVA”), Citibank, N.A. (“Citibank”), Citizens Financial Group, Inc. (“Citizens”), Cullen/Frost Bankers, Inc. (“Cullen/Frost”), Discover Bank (“Discover”), PNC Bank, N.A. (“PNC Bank”), Santander Bank, N.A. (“Santander”), TD Bank, N.A. (“TD Bank”), United Services Automobile Association ("USAA"), US Bank Corp ("US Bank") in the U.S.; BMO Bank of Montreal (“BMO”), the Bank of Nova Scotia (“Scotiabank”), Canadian Imperial Bank Commerce (“CIBC”), and TD Bank in Canada; the Bank of Queensland Limited (“BOQ”) and HSBC Holdings plc (“HSBC”) in Australia; and Capitec Bank ("Capitec"), Mercantile Bank ("Mercantile") and Old Mutual ("Old Mutual") in South Africa. In Mexico, the Company partners with Scotiabank and Banco Multiva by putting their brands on our ATMs in exchange for certain services provided by them. As of March 31, 2020, approximately 25,000 of the Company’s ATMs were under contract with approximately 500 financial institutions to place their logos on the ATMs and to provide convenient surcharge-free access for their banking customers. The Company also provides managed services offerings for financial institutions, which generally include full outsourcing of a portion or all of the financial institution's ATMs.

The Company owns and operates the Allpoint network (“Allpoint”), the largest retail based surcharge-free ATM network (based on the number of participating ATMs). Allpoint has over 55,000 participating ATMs and provides surcharge-free ATM access to approximately 1,200 participating credit unions, banks, and stored-value debit card issuers. For participants, Allpoint provides scale, density, and convenience of surcharge-free ATMs that surpasses the largest banks in the U.S. Allpoint earns either a fixed monthly fee per cardholder or a fixed fee per transaction that is paid by the participants. Allpoint includes a majority of the Company’s owned ATMs in the U.S. and certain ATMs in the U.K., Canada, Mexico, and Australia. Allpoint also provides services to organizations that manage stored-value debit card programs on behalf of corporate entities and governmental agencies, including general purpose, payroll, and electronic benefits transfer cards. Under these programs, the issuing organizations pay Allpoint a fee per issued stored-value debit card or per transaction in return for allowing the users of those cards surcharge-free access to Allpoint’s participating ATM network.

The Company’s revenues are generally recurring in nature and historically have been derived primarily from convenience transaction fees, which are paid by cardholders, as well as other transaction-based fees, including interchange fees, which are paid by the cardholder’s financial institution for the use of the ATMs serving their customers and connectivity to the applicable EFT network that transmits data between the ATM and the cardholder’s financial institution. Other revenue sources include: (i) fees from financial institutions that participate in Allpoint, (ii) fees for bank-branding ATMs and providing financial institution cardholders with surcharge-free access, (iii) revenues earned by providing managed services (including transaction processing services) solutions to retailers and financial institutions, (iv) fees earned from foreign currency exchange transactions at the ATM, known as dynamic currency conversion, and (v) revenues from the sale of ATMs and ATM-related equipment and other ancillary services.

(b) Basis of Presentation

This Quarterly Report on Form 10-Q (this “Form 10-Q”) has been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial information. As this is an interim period filing presented using a condensed format, it does not include all of the disclosures required by accounting principles generally accepted in the U.S. (“U.S. GAAP” or “GAAP”), although the Company believes that the disclosures are adequate to make the information not misleading. This Form 10-Q should be read along with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”), which includes a summary of the Company’s significant accounting policies and other disclosures.

In management’s opinion, all normal recurring adjustments necessary for a fair presentation of the Company’s interim and prior period results have been made. The results of operations for the three months ended March 31, 2020 and 2019 are not necessarily indicative of results of operations that may be expected for any other interim period or for the full fiscal year.

The unaudited interim financial statements include the accounts of the Company. All material intercompany accounts and transactions have been eliminated in consolidation. The Company owns a majority (95.7%) interest in, and realizes a majority of the earnings and/or losses of, Cardtronics Mexico, S.A. de C.V.; thus this entity is reflected as a consolidated subsidiary in the financial statements, with the remaining ownership interests not held by the Company being reflected as noncontrolling interests.

The preparation of the unaudited interim financial statements to conform with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of this Form 10-Q and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and these differences could be material to the financial statements.

The Company presents the Cost of ATM operating revenues in the accompanying Consolidated Statements of Operations exclusive of depreciation, accretion, and amortization of intangible assets related to ATMs and ATM-related assets.

The following table reflects the amounts excluded from the Cost of ATM operating revenues line in the accompanying Consolidated Statements of Operations for the periods presented:


	Three Months Ended March 31,
	2020		2019
	(In thousands)
Depreciation and accretion expenses related to ATMs and ATM-related assets	$	22,781	$	24,607
Amortization of intangible assets	8,413		12,412
Total depreciation, accretion, and amortization of intangible assets excluded from Cost of ATM operating revenues	$	31,194	$	37,019

(d) Restructuring Expenses

During the three months ended March 31, 2020, the Company continued certain corporate reorganization and cost reduction initiatives that began in 2019. The Company incurred approximately $1.2 million of pre-tax expenses related to this activity that primarily included facility closures, workforce reductions, professional fees and other related charges.

The following table reflects the amounts recorded in the Restructuring expenses line in the accompanying Consolidated Statements of Operations for the periods presented:


		Three Months Ended March 31,
		2020		2019
	(In thousands)
Europe & Africa		$	1,000	$	—
Corporate		$	209	$	—
Total		$	1,209	$	—

The costs incurred in Europe & Africa included facility related costs consisting of non-cash asset write-offs and accelerated lease expenses, presented as a reduction of the associated operating lease assets, and an insignificant amount pertaining to workforce reductions. The costs incurred in Corporate included professional fees. The restructuring liability balance as of March 31, 2020 was $0.6 million and there were no outstanding restructuring liabilities as of March 31, 2019. Restructuring liabilities were $1.0 million and $1.5 million as of December 31, 2019 and 2018, respectively.

(e) Cash, Cash Equivalents, and Restricted Cash

For purposes of reporting financial condition, cash and cash equivalents include cash in bank and short-term deposit accounts. Additionally, the Company maintains cash on deposit with banks that is pledged for a particular use or restricted to support a liability. These balances are recorded in Restricted cash line in the accompanying Consolidated Balance Sheets based on when the Company expects this cash to be paid. Current restricted cash primarily consists of amounts collected on behalf of, but not yet remitted to, certain of the Company’s merchant customers or third-party service providers. Restricted cash in current assets is offset by a corresponding liability balance in the Accrued liabilities line in the accompanying Consolidated Balance Sheets. The changes in the settlement liabilities corresponding to the changes in the balance of restricted cash during the three months ended March 31, 2020 and 2019 are presented in the Statements of Cash Flows within the increase in restricted cash liabilities line.

The following table provides a reconciliation of the ending cash, cash equivalents, and restricted cash balances as of March 31, 2020 and 2019, corresponding with the balances in the accompanying Consolidated Statements of Cash Flows.


	March 31,
	2020		2019
	(In thousands)
Cash and cash equivalents	$	613,728	$	35,444
Restricted cash	44,796		84,790
Total cash, cash equivalents, and restricted cash in the Consolidated Statements of Cash Flows	$	658,524	$	120,234

See Note 9. Current and Long-Term Debt for discussion of the borrowings made by the Company from its Credit Agreement in March 2020.

(f) Inventory

The Company’s inventory is determined using the average cost method. The Company periodically assesses its inventory, and as necessary, adjusts the carrying values to the lower of cost or net realizable value.

The following table reflects the Company’s primary inventory components:


	March 31, 2020		December 31, 2019
	(In thousands)
ATMs	$	3,554	$	3,330
ATM spare parts and supplies	8,142		7,673
Total inventory	11,696		11,003
Less: Inventory reserves	(302)		(385)
Inventory, net	$	11,394	$	10,618

(g) Accounts and Notes Receivable-Credit Losses

During the three months ended March 31, 2020, the Company recognized additional estimated credit losses of approximately $0.9 million. As of March 31, 2020, 73% of the Accounts and Notes Receivable balance was current and not yet due and the Company held an allowance for estimated credit losses of $8.1 million.