UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

CARDTRONICS, INC.

(Exact name of registrant as specified in its charter)

Delaware		76-0681190
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

3110 Hayes Road, Suite 300		77082
Houston, TX		(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (281) 596-9988

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes o       No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o      Accelerated filer o       Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No þ

Common Stock, par value: $0.0001 per share.		Shares outstanding on November 14, 2006: 1,760,798.

 

 

CARDTRONICS, INC.

TABLE OF CONTENTS

		Page
Caption		Number
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005			1
Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2006 and 2005			2
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005			3
Notes to Condensed Consolidated Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosures about Market Risk			33
Item 4. Controls and Procedures			35
Part II. Other Information
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 3. Defaults Upon Senior Securities			37
Item 4. Submission of Matters to a Vote of Security Holders			37
Item 5. Other Information			37
Item 6. Exhibits			37
Signatures			38
Certification of CEO pursuant to Section 13a-14a
Certification of CFO pursuant to Section 13a-14a
Certification of CEO pursuant to Section 13a-14b
Certification of CFO pursuant to Section 13a-14b

When we refer to “us’”, “we”, “our”, “ours”’, “the Company’” or “Cardtronics”, we are describing Cardtronics, Inc. and/or our subsidiaries.

PART I –FINANCIAL INFORMATION

Item 1. Financial Statements

CARDTRONICS, INC.

		September 30,				December 31,
		2006				2005
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	475			$	1,699
Accounts and notes receivable, net of allowance of $242 and $624 as of September 30, 2006 and December 31, 2005, respectively			12,455				9,746
Inventory			5,715				2,747
Prepaid expenses, deferred costs, and other current assets			10,289				4,244
Restricted cash, short-term			1,507				4,232
Deferred tax asset, net			835				1,105
Total current assets			31,276				23,773
Restricted cash			34				33
Property and equipment, net			82,835				74,151
Intangible assets, net			68,215				75,965
Goodwill			167,756				161,557
Prepaid expenses and other assets			4,798				8,272
Total assets		$	354,914			$	343,751
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Notes payable and capital leases		$	145			$	3,168
Current portion of other long-term liabilities			2,180				2,251
Accounts payable and accrued liabilities			45,285				42,438
Total current liabilities			47,610				47,857
Long-term liabilities:
Long-term debt, net of related discount			252,850				244,456
Deferred tax liability, net			8,147				9,800
Other long-term liabilities and minority interest in subsidiaries			14,666				14,393
Total liabilities			323,273				316,506
Redeemable preferred stock			76,528				76,329
Stockholders’ deficit:
Common stock, $0.0001 par value; 2,500,000 shares authorized; 2,394,509 shares issued at September 30, 2006 and December 31, 2005; 1,760,798 and 1,771,349 outstanding at September 30, 2006 and December 31, 2005, respectively			—				—
Subscriptions receivable (at face value)			(324	)			(1,476	)
Additional paid-in capital			2,607				2,033
Accumulated other comprehensive income (loss), net			6,230				(346	)
Accumulated deficit			(5,133	)			(2,252	)
Treasury stock; 633,711 and 623,160 shares at cost at September 30, 2006 and December 31, 2005, respectively			(48,267	)			(47,043	)
Total stockholders’ deficit			(44,887	)			(49,084	)
Total liabilities and stockholders’ deficit		$	354,914			$	343,751

See accompanying notes to condensed consolidated financial statements.

CARDTRONICS, INC.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Revenues:
ATM operating revenues		$	72,887			$	69,603			$	209,542			$	191,731
ATM product sales and other revenues			3,478				2,131				9,218				7,457
Total revenues			76,365				71,734				218,760				199,188
Cost of revenues:
Cost of ATM operating revenues (includes stock-based compensation of $15 and $0 for the three months ended September 30, 2006 and 2005, respectively, and $35 and $172 for the nine months ended September 30, 2006 and 2005, respectively)			54,280				53,612				157,225				148,699
Cost of ATM product sales and other revenues			3,105				2,173				8,142				6,976
Total cost of revenues			57,385				55,785				165,367				155,675
Gross profit			18,980				15,949				53,393				43,513
Operating expenses:
Selling, general and administrative expenses (includes stock-based compensation of $240 and $131 for the three months ended September 30, 2006 and 2005, respectively, and $600 and $2,070 for the nine months ended September 30, 2006 and 2005, respectively)			5,811				4,512				15,709				13,212
Depreciation and accretion expense			5,214				3,388				14,072				8,530
Amortization expense			2,263				1,980				9,610				5,689
Total operating expenses			13,288				9,880				39,391				27,431
Income from operations			5,692				6,069				14,002				16,082
Other (income) expense:
Interest expense, net			5,871				4,741				17,193				10,010
Amortization and write-off of financing costs and bond discount			362				5,453				1,576				6,584
Minority interest in subsidiary			(71	)			—				(128	)			15
Other			(83	)			435				(740	)			867
Total other expenses			6,079				10,629				17,901				17,476
Loss before income taxes			(387	)			(4,560	)			(3,899	)			(1,394	)
Income tax benefit			(60	)			(1,696	)			(1,217	)			(545	)
Net loss			(327	)			(2,864	)			(2,682	)			(849	)
Preferred stock dividends and accretion expense			67				67				199				1,329
Net loss available to common stockholders		$	(394	)		$	(2,931	)		$	(2,881	)		$	(2,178	)

See accompanying notes to condensed consolidated financial statements.

CARDTRONICS, INC.

		Nine Months Ended
		September 30,
		2006				2005
Cash flows from operating activities:
Net loss		$	(2,682	)		$	(849	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, amortization and accretion expense			23,682				14,219
Amortization and write-off of financing costs and bond discount			1,576				6,584
Non-cash compensation expense			635				411
Deferred income taxes			(1,316	)			(1,137	)
Minority interest			(128	)			15
Loss on sale or disposal of assets			731				856
Changes in assets and liabilities, net of acquisitions:
(Increase) decrease in accounts and notes receivables, net			(938	)			3,188
(Increase) decrease in prepaid, deferred costs and other current assets			(3,598	)			881
(Increase) decrease in inventory			(1,184	)			240
Increase in other assets			(907	)			(365	)
Increase in accounts payable and accrued liabilities			3,972				9,687
Decrease in other liabilities			(2,976	)			(4,659	)
Net cash provided by operating activities			16,867				29,071
Cash flows from investing activities:
Additions to property and equipment			(24,179	)			(24,466	)
Payments for exclusive license agreements			(1,842	)			(1,025	)
Disposals of property and equipment			100				60
Acquisitions, net of cash acquired			(12	)			(105,765	)
Net cash used in investing activities			(25,933	)			(131,196	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			30,300				468,994
Repayments of long-term debt			(22,000	)			(357,541	)
Issuance of Series B preferred stock			—				73,297
Redemption of Series A preferred stock			—				(24,795	)
Issuance of capital stock			—				84
Purchase of treasury stock			(50	)			(46,453	)
Debt issuance and modification costs			(477	)			(10,519	)
Distributions			—				(30	)
Repayment of subscriptions receivable			—				386
Net cash provided by financing activities			7,773				103,423
Effect of exchange rate changes on cash			69				(193	)
Net increase (decrease) in cash and cash equivalents			(1,224	)			1,105
Cash and cash equivalents at beginning of period			1,699				1,412
Cash and cash equivalents at end of period			475				2,517
Supplemental disclosure of cash flow information:
Cash paid for interest		$	21,554			$	7,501
Cash paid for income taxes		$	49			$	32

See accompanying notes to condensed consolidated financial statements.

CARDTRONICS, INC.

1. General and Basis of Presentation

General

     Cardtronics, Inc., along with its wholly owned subsidiaries, owns and operates approximately 24,100 automated teller machines (“ATMs”) in all 50 states and approximately 1,300 ATMs located throughout the United Kingdom. Additionally, the Company owns a majority interest in an entity that operates approximately 300 ATMs located throughout Mexico. The Company provides ATM management and equipment-related services (typically under multi-year contracts) to large, nationally known retail merchants as well as smaller retailers and operators of facilities such as shopping malls and airports. Additionally, the Company operates the largest surcharge-free ATM network within the United States (based on number of participating ATMs) and works with financial institutions to brand the Company’s ATMs in order to provide their banking customers with convenient, surcharge-free ATM access.

Basis of Presentation

     The unaudited interim condensed consolidated financial statements include the accounts of Cardtronics, Inc. and its wholly and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

     We prepared this Quarterly Report on Form 10-Q under the rules and regulations of the United States Securities and Exchange Commission (“SEC”) applicable to interim financial information. Because 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 United States of America. You should read this Quarterly Report on Form 10-Q along with Cardtronics’ Registration Statement on Form S-4 dated August 25, 2006, which includes the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2005, and a summary of our significant accounting policies and other disclosures.

     The financial statements as of September 30, 2006, and for the three and nine month periods ended September 30, 2006 and 2005, are unaudited. We derived the balance sheet as of December 31, 2005, from the audited balance sheet filed in our Registration Statement on Form S-4 dated August 25, 2006. In our opinion, we have made all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the Company’s interim period results. The results of operations for the three and nine month periods ended September 30, 2006 and 2005, are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year. Additionally, our financial statements for prior periods include reclassifications that were made to conform to the current period presentation. Those reclassifications did not impact our reported net loss or stockholders’ deficit.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and such differences could be material to the financial statements.

2. Business Combinations

Acquisition of Bank Machine (Acquisitions) Limited

     On May 17, 2005, the Company acquired all of the issued and outstanding shares of Bank Machine (Acquisitions) Limited (“Bank Machine”), a privately held independent owner and operator of approximately 1,000 ATMs in the United Kingdom. Such acquisition provided the Company with an existing platform outside of the United States from which it can expand its operations in the United Kingdom and potentially other European markets.

     The purchase price totaled approximately $95.0 million and consisted of $92.0 million in cash and the issuance of 35,221 shares of the Company’s Series B Convertible Preferred Stock, which was valued by the Company at approximately $3.0 million. Additionally, the Company incurred approximately $2.2 million in transaction costs associated with the acquisition. The total purchase consideration was allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the date of acquisition. Such allocation resulted in approximately $77.0 million in goodwill, which has been assigned to a reporting unit that is currently comprised solely of the acquired Bank Machine operations.

     The Company utilized May 1, 2005, as the effective date of the acquisition date for accounting purposes. Accordingly, the accompanying condensed consolidated financial statements include Bank Machine’s results of operations only for those periods subsequent to April 30, 2005.

     The following table presents the unaudited pro forma combined results of operations (in thousands) of the Company and Bank Machine for the nine months ended September 30, 2005, after giving effect to certain pro forma adjustments, including the effects of the issuance of the Company’s senior subordinated notes in August 2005 (see Note 8). Such pro forma results include the effects of the senior subordinated notes financing as such notes were utilized in part to finance the Bank Machine acquisition. Such unaudited pro forma financial results do not reflect the impact of the smaller acquisitions consummated by the Company in 2005 and 2006. The unaudited pro forma financial results assume that the acquisition and the debt issuance occurred on January 1, 2005, and are not necessarily indicative of the actual results that would have occurred had those transactions been consummated on such date. Furthermore, such pro forma results are not necessarily indicative of the future results to be expected for the consolidated operations.

		Nine Months Ended
		September 30, 2005
Revenues		$	209,372
Income from operations		$	17,444
Net income		$	109

Acquisition of ATM National, Inc.

     On December 21, 2005, the Company acquired all of the outstanding shares of ATM National, Inc., the owner and operator of Allpoint, a nationwide surcharge-free ATM network. The consideration for such acquisition totaled $4.8 million and was comprised of $2.6 million in cash; 21,111 shares of the Company’s common stock; and the assumption of approximately $0.4 million in additional liabilities. Such consideration was allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values as of the acquisition date. Such allocation resulted in goodwill of approximately $3.7 million, which was assigned to a separate reporting unit representing the acquired ATM National, Inc. operations. Additionally, such allocation resulted in approximately $3.2 million in identifiable intangible assets, including $3.0 million for the acquired customer contracts and $0.2 million for the acquired Allpoint trade name.

Acquisition of CCS Mexico

     In February 2006, the Company acquired a majority ownership stake in CCS Mexico, an independent ATM operator located in Mexico, for approximately $1.0 million in cash consideration and the assumption of approximately $0.4 million in additional liabilities. Additionally, the Company incurred approximately $0.3 million in transaction costs associated with this acquisition. CCS Mexico, which was renamed Cardtronics Mexico upon the completion of the Company’s investment, currently operates approximately 300 surcharging ATMs in selected retail locations throughout Mexico. With Mexico having recently approved surcharging for off-premise ATMs, the Company anticipates placing additional surcharging ATMs in other retail establishments throughout Mexico as those opportunities arise.

     The Company has allocated the total purchase consideration to the assets acquired and liabilities assumed based on their respective fair values as of the acquisition date. Such allocation resulted in goodwill of approximately $0.7 million. Such goodwill, which is not deductible for tax purposes, has been assigned to a separate reporting unit representing the acquired CCS Mexico operations. Additionally, such allocation resulted in approximately $0.4 million in identifiable intangible assets, including $0.3 million for certain acquired customer contracts and $0.1 million related to non-compete agreements entered into with the minority interest shareholders of Cardtronics Mexico.

     Because the Company owns a majority interest in Cardtronics Mexico, such entity is reflected as a consolidated subsidiary in the accompanying condensed consolidated financial statements, with the remaining ownership interest not held by the Company being reflected as a minority interest.

Other 2005 Acquisitions

     On March 1, 2005, the Company acquired a portfolio of approximately 475 ATMs and related contracts located in independent grocery stores in and around the New York metropolitan area for approximately $8.2 million in cash. The purchase price was allocated $0.6 million to ATM equipment and $7.6 million to the acquired merchant contracts/relationships.

     On April 21, 2005, the Company acquired a portfolio of approximately 330 ATMs and related contracts at BP Amoco locations throughout the Midwest for approximately $9.0 million in cash. The purchase price was allocated $0.2 million to ATM equipment and $8.8 million to the acquired merchant contracts/relationships.

3. Stock-Based Compensation

     The following table reflects the total stock-based compensation expense amounts included in the accompanying condensed consolidated statements of operations (in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Cost of ATM operating revenues		$	15			$	—			$	35			$	172
Selling, general and administrative expenses			240				131				600				2,070
Total stock-based compensation expense		$	255			$	131			$	635			$	2,242

     Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), Share-Based Payment, (“SFAS No. 123R”). Under SFAS No. 123R, the Company records the grant date fair value of share-based compensation arrangements, net of estimated forfeitures, as compensation expense on a straight-line basis over the underlying service periods of the related awards. Prior to the adoption of SFAS No. 123R, the Company utilized the intrinsic value method of accounting for stock-based compensation awards in accordance with Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”), which generally resulted in no compensation expense for employee stock options issued with an exercise price greater than or equal to the fair value of the Company’s common stock on the date of grant. Furthermore, the Company historically utilized the minimum value method of measuring equity share option values for pro forma disclosure purposes under SFAS No. 123. Accordingly, the Company’s adoption of SFAS No. 123R on January 1, 2006, was done utilizing the prospective application method. Under the prospective application method, the fair value approach outlined under SFAS No. 123R is applied only to new awards granted subsequent to December 31, 2005, and to existing awards only in the event that such awards are modified, repurchased or cancelled subsequent to the SFAS No. 123R adoption date. Accordingly, the Company’s financial statements for all periods prior to January 1, 2006, do not reflect any adjustments resulting from the adoption of SFAS No. 123R. Additionally, the adoption of SFAS No. 123R did not result in the recording of a cumulative effect of a change in accounting principle.

Stock-Based Compensation Plan

     In June 2001, the Company’s Board of Directors approved the Cardtronics Group, Inc. 2001 Stock Incentive Plan (the “2001 Plan”). The 2001 Plan allows for the issuance of equity-based awards in the form of non-qualified stock options and stock appreciation rights, as determined at the sole discretion of the compensation committee of the Company’s Board of Directors. As of September 30, 2006, only non-qualified stock options had been issued under the 2001 Plan. The persons eligible to receive awards under the 2001 Plan include employees, directors, and consultants of the Company, including its affiliates and subsidiaries. Under the 2001 Plan, no award may be granted more than ten years after the plan’s initial approval date. As of September 30, 2006, the maximum number of shares of common stock that could be issued under the 2001 Plan totaled 750,000 shares. The Company currently has no other stock-based compensation plans in place.

Stock Option Grants

     The Company has historically used the Black-Scholes valuation model to determine the fair value of stock options granted for pro forma reporting purposes under SFAS No. 123. The Company’s outstanding stock options generally vest annually over a four-year period from the date of grant and expire 10 years after the date of grant. There have been no stock option grants made under the 2001 Plan that are subject to performance-based vesting criteria.

     A summary of the status of the Company’s outstanding stock options as of September 30, 2006, and changes during the nine months ended September 30, 2006, is presented below:

						Weighted
		Number of				Average
		Shares				Exercise Price
Balance January 1, 2006			464,164			$	48.70
Granted			100,000			$	83.84
Exercised			(4,703	)		$	0.04
Forfeited			(47,500	)		$	82.16
Balance September 30, 2006			511,961			$	52.91
Options vested and exercisable at September 30, 2006			278,586			$	31.96

     As of September 30, 2006, the remaining weighted average contractual life for options outstanding and exercisable was 7.3 years and 6.2 years, respectively. The aggregate intrinsic value of options outstanding and exercisable at September 30, 2006, was $15.8 million and $14.5 million, respectively. The intrinsic value of options exercised during the nine months ended September 30, 2006, was approximately $394,000, which resulted in a tax benefit to the Company of approximately $146,000. However, because the Company is currently in a net operating loss position, such benefit has not been reflected in the accompanying condensed consolidated financial statements, as required by SFAS No. 123R. Furthermore, no cash was utilized by the Company in the settlement of such awards during the nine months ended September 30, 2006.

     As indicated in the table above, the Company granted an additional 100,000 non-qualified stock options to certain employees during the nine months ended September 30, 2006. Such options were granted with an exercise price of $83.84 per share, which was equal to the estimated fair market value of the Company’s common equity as of the date of grant, and vest ratably over a four-year service period with a 10-year contractual term.

Fair Value Assumptions

     The Company estimates the fair value of its options for financial accounting purposes by utilizing the Black–Scholes option pricing model. Such model requires the input of certain subjective assumptions, including the expected life of the options, a risk-free interest rate, a dividend rate, and the future volatility of the Company’s common equity. Additional information with respect to the fair value of the options issued during 2006 is as follows:

		Three Months Ended				Nine Months Ended
		September 30, 2006				September 30, 2006
Weighted average fair value per stock option granted		$	32.73			$	33.69
Valuation assumptions:
Expected option term (years)			6.25				6.25
Expected volatility			35.90	%			34.54	%
Expected dividend yield			0.00	%			0.00	%
Risk-free interest rate			4.74	%			4.85	%

     The expected option term of 6.25 years was determined based on the simplified method outlined in Staff Accounting Bulletin (“SAB”) No. 107, as issued by the SEC. Such method is based on the vesting period and the contractual term for each grant and is calculated by taking the average of the expiration date and the vesting period for each vesting tranche. In the future, as information regarding post vesting termination becomes more accessible, the Company may change this method of deriving the expected term. Such a change could impact the fair value of options granted in the future. Furthermore, the Company expects to refine the method of deriving the expected term by no later than January 1, 2008, as required by SAB No. 107. The estimated forfeiture rates utilized by the Company are based on the Company’s historical option forfeiture rates and represent the Company’s best estimate of future forfeiture rates. In future periods, the Company will monitor the level of actual forfeitures to determine if such estimate should be modified prospectively.

     The Company’s common stock is not publicly-traded; therefore, the weighted average expected volatility factor was determined based on historical volatility rates obtained for certain companies with publicly-traded equity that operate in the same or related businesses as that of the Company. The volatility factor utilized represents the simple average of the historical daily volatility rates obtained for each company within this designated peer group over multiple periods of time, up to and including a period of time commensurate with the expected option term discussed above. The Company utilized this peer group approach, as the historical transactions involving the Company’s private equity have been very limited and infrequent in nature. The Company believes that the historical peer group volatility rate utilized above is a reasonable estimate of the Company’s expected future volatility.

     The expected dividend yield was assumed to be zero as the Company has not historically paid, and does not anticipate paying, dividends with respect to its common equity. The risk-free interest rate reflects the rate in effect as of the grant date for U.S. treasury securities with a term similar to that of the expected option term referenced above.

Non-vested Stock Awards

     A summary of the status of the Company’s non-vested stock options as of September 30, 2006, and changes during the nine months ended September 30, 2006, is presented below:

		Number of				Weighted
		Shares Under				Average
		Outstanding				Grant Date
		Options				Fair Value
Non-vested options at January 1, 2006			270,562			$	6.69
Granted			100,000			$	33.69
Vested			(92,187	)		$	6.02
Forfeited			(45,000	)		$	8.16
Non-vested options at September 30, 2006			233,375			$	18.23

     As of September 30, 2006, there was $2.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s stock option plan. That cost is expected to be recognized on a straight-line basis over a remaining weighted-average contractual period of approximately 3.4 years. The total fair value of shares vested during the nine months ended September 30, 2006, was $555,000. Compensation expense recognized related to stock options totaled approximately $200,000 and $457,000, respectively, for the three and nine month periods ended September 30, 2006. For the nine months ended September 30, 2005, the Company recognized approximately $1.8 million in stock option-based compensation expense related to the repurchase of shares underlying certain employee stock options in connection with the Company’s series B preferred stock financing transaction.

Restricted Stock

     Pursuant to a restricted stock agreement dated January 20, 2003, the Company sold the President and Chief Executive Officer of the Company 80,000 shares of common stock in exchange for a promissory note in the amount of $940,800 (“Exchange Proceeds”). Such shares vest ratably over a four-year basis on each anniversary of the original grant date. The underlying restricted stock agreement permits the Company to repurchase a portion of such shares prior to January 20, 2007, in certain circumstances. The agreement also contained a provision allowing the shares to be “put” to the Company in an amount sufficient to retire the entire unpaid principal balance of the promissory note plus accrued interest. On February 4, 2004, the Company amended the restricted stock agreement to remove such “put” right. As a result of this amendment, the Company determined that it would need to recognize approximately $3.2 million in compensation expense on a graded-basis over the four-year vesting period associated with these restricted shares. Additionally, in connection with such amendment, the Company paid a $1.8 million bonus to its Chief Executive Officer as reimbursement of the tax liability associated with such grant.

     As of January 1, 2006, the number of non-vested shares for the aforementioned restricted stock grant totaled 40,000, and the remaining unrecognized compensation cost to be recognized on a graded-basis was approximately $227,000. Compensation expense associated with this restricted stock grant totaled approximately $51,000 and $165,000, respectively, for the three and nine month periods ended September 30, 2006, and approximately $118,000 and $373,000, respectively, for the three and nine month periods ended September 30, 2005. No additional restricted shares were granted or forfeited during these periods. During the three months ended March 31, 2006, an additional 20,000 shares of the restricted stock grant vested. These vested shares had a total fair value of approximately $805,000 (net of the Exchange Proceeds), approximately $741,000 of which had been recognized as compensation expense in previous periods as a result of the graded-basis of amortization utilized by the Company. No additional restricted shares vested during the nine months ended September 30, 2006.

     As of September 30, 2006, there was approximately $62,000 of unrecognized compensation cost associated with the aforementioned restricted stock grant. The majority of this cost is expected to be recognized as compensation expense during the remainder of 2006, as these shares will fully vest in January 2007.

Other Stock-Based Compensation

     In addition to the compensation expense reflected above for the stock options granted during the nine months ended September 30, 2006, the accompanying condensed consolidated financial statements include compensation expense amounts relating to the aforementioned restricted stock grant as well as certain compensatory options that were granted in 2004. Because the Company utilized the prospective method of adoption for SFAS No. 123R, all unvested awards as of January 1, 2006, will continue to be accounted for pursuant to APB No. 25 and SFAS No. 123. Accordingly, the accompanying condensed consolidated statements of operations include approximately $4,000 and $13,000, respectively, in compensation expense for the three and nine month periods ended September 30, 2006, and approximately $12,000 and $37,000 in compensation expense for the three and nine month periods ended September 30, 2005, respectively, associated with such compensatory option grants.

4. Related Party Transactions

     During the three months ended September 30, 2006, the Company repurchased 15,255 shares of the Company’s common stock held by certain of the Company’s executive officers for approximately $1.3 million in proceeds. Such proceeds were primarily utilized by the executive officers to repay certain loans, including all accrued and unpaid interest related thereto, made between such executive officers and the Company in 2003. Such loans were required to be repaid pursuant to SEC rules and regulations prohibiting registrants from having loans with executive officers. This was effective as a result of the successful registration of the Company’s senior subordinated notes with the SEC in September 2006.

5. Comprehensive Income (Loss)

     SFAS No. 130, Reporting Comprehensive Income, establishes standards for reporting comprehensive income (loss) and its components in the financial statements. Accumulated other comprehensive income (loss) is displayed as a separate component of stockholders’ deficit in the accompanying consolidated balance sheets and consists of unrealized gains, net of related income taxes, related to changes in the fair values of the Company’s interest rate swap derivative transactions and the cumulative amount of foreign currency translation adjustments associated with the Company’s foreign operations.

     The following table presents the calculation of comprehensive income (loss) (in thousands), which includes our (i) net loss, (ii) foreign currency translation adjustments, and (iii) unrealized gains (losses) associated with the Company’s interest rate hedging activities.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2006				2005				2006				2005
Net loss		$	(327	)		$	(2,864	)		$	(2,682	)		$	(849	)
Foreign currency translation adjustments			1,706				(1,446	)			7,015				(3,876	)
Unrealized gains (losses) on interest rate hedges, net of tax			(3,919	)			2,179				(439	)			3,100
Total comprehensive income (loss)		$	(2,540	)		$	(2,131	)		$	3,894			$	(1,625	)

     The following table sets forth the components of accumulated other comprehensive income (loss), net of taxes, as of September 30, 2006 and December 31, 2005 (in thousands):

		Foreign Currency				Unrealized Gains				Accumulated Other
		Translation				on Interest				Comprehensive
		Adjustments				Rate Hedges				Income (Loss)
Balance as of December 31, 2005		$	(5,491	)		$	5,145			$	(346	)
Current period changes			7,015				(439	)			6,576
Balance as of September 30, 2006		$	1,524			$	4,706			$	6,230

     The Company currently believes that the unremitted earnings of its foreign subsidiaries will be reinvested in the foreign countries in which those subsidiaries operate for an indefinite period of time. Accordingly, no deferred taxes have been provided for on the differences between the Company’s book basis and underlying tax basis in those subsidiaries or on the foreign currency translation adjustment amounts reflected in the tables above.

6. Intangible Assets

Intangible Assets with Indefinite Lives

     The following is a summary of the changes in the carrying amount of the Company’s intangible assets with indefinite lives for the nine months ended September 30, 2006 (in thousands):

		Goodwill				Tradename				Total
Balance as of January 1, 2006		$	161,557			$	3,671			$	165,228
Acquisitions			1,146				—				1,146
Purchase price adjustments			(329	)			—				(329	)
Foreign currency translation adjustments			5,382				265				5,647
Balance as of September 30, 2006		$	167,756			$	3,936			$	171,692

Intangible Assets with Definite Lives

     The following is a summary of the Company’s intangible assets that are subject to amortization as of September 30, 2006 (in thousands):

		Gross				Accumulated				Net Carrying
		Carrying Amount				Amortization				Amount
Customer contracts and relationships		$	81,532			$	(29,078	)		$	52,454
Exclusive license agreements			4,261				(904	)			3,357
Non-compete agreements			98				(17	)			81
Deferred financing costs			10,990				(2,603	)			8,387
Total		$	96,881			$	(32,602	)		$	64,279

     The Company’s intangible assets with definite lives are being amortized over the assets’ estimated useful lives utilizing the straight-line method. Estimated useful lives range from three to twelve years for customer contracts and relationships and four to eight years for exclusive license agreements. The Company has also assumed an estimated life of four years for its non-compete agreements. Deferred financing costs are amortized through interest expense over the contractual term of the underlying borrowings utilizing the effective interest method. The Company periodically reviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in a reduction in fair value or a revision of those estimated useful lives.

     Amortization of customer contracts and relationships, exclusive license agreements, and non-compete agreements totaled $2.3 million and $2.0 million for the three month periods ended September 30, 2006 and 2005, respectively, and $9.6 million and $5.7 million for the nine month periods ended September 30, 2006 and 2005, respectively. Included in the 2006 year-to-date figure was approximately $2.8 million in additional amortization expense related to the impairment of the intangible asset associated with the acquired BAS Communications, Inc. ATM portfolio. Such impairment relates to a reduction in anticipated future cash flows resulting from a higher than anticipated attrition rate associated with this acquired portfolio.

     Amortization of deferred financing costs and bond discount totaled $0.4 million and $0.7 million for the three month periods ended September 30, 2006 and 2005, respectively, and $1.1 million and $1.6 million for the nine month periods ended September 30, 2006 and 2005, respectively. Additionally, the Company wrote-off approximately $0.5 million in deferred financing costs in February 2006 in connection with certain modifications made to the Company’s existing revolving credit facilities. For the three and nine month periods ended September 30, 2005, the Company wrote-off approximately $4.8 million and $5.0 million, respectively, of deferred financing costs as a result of amendments to its bank credit facility in May 2005 and the repayment of its term loans in August 2005.

     Estimated amortization expense for the Company’s intangible assets with definite lives for the remaining three months of 2006, each of the next five years, and thereafter is as follows (in thousands):

		Customer				Exclusive
		Contracts				License				Non-compete				Deferred
		and Relationships				Agreements				Agreements				Financing Costs				Total
2006		$	2,282			$	162			$	6			$	317			$	2,767
2007			9,031				636				24				1,309				11,000
2008			9,038				576				24				1,379				11,017
2009			8,697				571				24				1,455				10,747
2010			7,430				475				3				1,133				9,041
2011			5,531				361				—				977				6,869
Thereafter			10,445				576				—				1,817				12,838
Total		$	52,454			$	3,357			$	81			$	8,387			$	64,279

7. Accounts Payable and Accrued Liabilities

     Accounts payable and accrued liabilities consist of the following (in thousands):

		September 30, 2006				December 31, 2005
Accounts payable		$	14,070			$	7,285
Accrued merchant fees			9,116				7,923
Accrued interest			3,261				7,328
Accrued cash management fees			3,117				3,430
Accrued compensation			3,014				1,722
Accrued armored fees			2,964				2,662
Accrued maintenance fees			1,473				1,431
Accrued purchases			420				2,292
Other accrued expenses			7,850				8,365
Total		$	45,285			$	42,438

8. Long-Term Debt

     The Company’s long-term debt borrowings consisted of the following (in thousands):

		September 30, 2006				December 31, 2005
Revolving credit facility		$	54,100			$	45,800
Senior subordinated notes due August 2013 (net of unamortized discount of $1.2 million and $1.3 million as of September 30, 2006 and December 31, 2005, respectively)			198,750				198,656
Total		$	252,850			$	244,456

Revolving Credit Facility

     On May 17, 2005, in connection with the acquisition of Bank Machine, the Company replaced its existing bank credit facility with new facilities provided by BNP Paribas and Bank of America, N.A. Such facilities were comprised of (i) a revolving credit facility of up to $100.0 million, (ii) a first lien term facility of up to $125.0 million, and (iii) and a second lien term facility of up to $75.0 million. Borrowings under the facilities were utilized to repay the Company’s existing bank credit facility and to fund the acquisition of Bank Machine. In connection with the issuance of the Company’s senior subordinated notes in August 2005 (as discussed below), the first and second lien term loan facilities were repaid in full, and the revolving credit facility was increased to a maximum borrowing capacity of $150.0 million. As of September 30, 2006, $54.1 million was outstanding under the revolving credit facility. Borrowings under the revolving credit facility bear interest at LIBOR plus 3.25%. Additionally, the Company pays a commitment fee of 0.5% per annum on the unused portion of the revolving credit facility.

     In February 2006, the Company amended the revolving credit facility to remove or modify certain restrictive covenants contained within the facility and to reduce the maximum borrowing capacity from $150.0 million to $125.0 million. As a result of this amendment, the Company recorded a pre-tax charge of approximately $0.5 million associated with the write-off of previously deferred financing costs related to the facility. Additionally, the Company incurred approximately $0.1 million in fees associated with such amendment. Although the maximum borrowing capacity was reduced, the overall effect of the amendment was to increase the Company’s liquidity and financial flexibility through the removal and modification of certain restrictive covenants, as contained in the facility. Such covenants, which were originally structured to accommodate an acquisitive growth strategy, have either been eliminated or modified to reflect a greater focus on the Company’s organic growth initiatives. The primary restrictive covenants within the facility now include (i) limitations on the amount of senior debt that the Company can have outstanding at any given point in time; (ii) the maintenance of a set ratio of earnings to fixed charges, as computed on a rolling 12-month basis; (iii) limitations on the amounts of restricted payments that can be made in any given year, including dividends; and (iv) limitations on the amount of capital expenditures that the Company can incur on a rolling 12-month basis. As of September 30, 2006, the Company was in compliance with all applicable covenants and ratios.

Senior Subordinated Notes

     On August 12, 2005, the Company sold $200.0 million in senior subordinated notes (the “Notes”) pursuant to Rule 144A of the Securities Act of 1933. The Notes, which are subordinate to borrowings made under the revolving credit facility, mature in August 2013 and carry a 9.25% coupon with an effective yield of 9.375%. Interest under the Notes is paid semi-annually in arrears on February 15^th and August 15^th of each year. Net proceeds from the offering, after taking into consideration direct offering costs,

totaled approximately $192.0 million. Such proceeds, along with cash on hand and borrowings under the Company’s revolving credit facility, were utilized to repay all of the outstanding borrowings, including accrued but unpaid interest, under the Company’s first and second lien term loan facilities. The Notes, which are guaranteed by the Company’s domestic subsidiaries, contain certain covenants that, among other things, limit the Company’s ability to incur additional indebtedness and make certain types of restricted payments, including dividends.

     In addition, a provision of the Notes required the Company to either (i) register the Notes with the SEC on or before June 8, 2006 and successfully complete an exchange offer with respect to such Notes within 30 days following such registration or (ii) be subject to higher interest rates on the Notes in subsequent periods. As a result of the Company’s inability to complete the registration of the Notes by the aforementioned deadline, the annual interest rate on the Notes increased from 9.25% to 9.50% on June 8^th and further increased to 9.75% on September 7^th, as required by the underlying indenture. However, on September 18, 2006, the Notes were successfully registered with the SEC, and on October 18, 2006, the Company successfully completed its exchange offer. Accordingly, on October 19, 2006, the interest rate associated with the Notes reverted back to the 9.25% stated rate. The Company is currently in compliance with all applicable covenants required under the Notes.

9. Other Long-Term Liabilities

     Other long-term liabilities consisted of the following (in thousands):

		September 30, 2006				December 31, 2005
Asset retirement obligations		$	9,908			$	8,339
Deferred revenue			247				1,075
Minority interest in subsidiary			175				25
Other long-term liabilities			4,336				4,954
Total		$	14,666			$	14,393

10. Asset Retirement Obligations

     The Company accounts for asset retirement obligations in accordance with SFAS No. 143, Asset Retirement Obligations. Asset retirement obligations consist primarily of deinstallation costs of the ATM and the costs to restore the ATM site to its original condition. The Company is legally required to perform this deinstallation and restoration work. In accordance with SFAS No. 143, for each group of ATMs, the Company recognized the fair value of a liability for an asset retirement obligation and capitalized that cost as part of the cost basis of the related asset. The related assets are being depreciated on a straight-line basis over the estimated useful lives of the underlying ATMs, and the related liabilities are being accreted to their full value over the same period of time.

     The following table is a summary of the changes in Company’s asset retirement obligation liability for the nine months ended September 30, 2006 (in thousands):

Asset retirement obligation as of January 1, 2006		$	8,339
Additional obligations			1,074
Accretion expense			1,186
Payments			(785	)
Foreign currency translation adjustments			94
Asset retirement obligation as of September 30, 2006		$	9,908

11. Preferred Stock

     On February 10, 2005, the Company issued 894,568 shares of its Series B preferred stock for $75.0 million in proceeds to TA Associates. The net proceeds from the offering were utilized to redeem the Company’s outstanding Series A preferred stock as well as a portion of the Company’s outstanding common stock and vested options. On May 17, 2005, the Company issued an additional 35,221 shares of its Series B preferred stock as partial consideration for the Bank Machine acquisition. Such shares were valued at approximately $3.0 million, consistent with the value per share received in connection with the February 10, 2005 issuance.

     The Series B preferred shareholders have certain preferences to the Company’s common shareholders, including board representation rights and the right to receive their original issue price prior to any distributions being made to the common shareholders as part of a liquidation, dissolution or winding up of the Company. As of September 30, 2006 and December 31, 2005, the liquidation value of the Series B preferred shared totaled $78.0 million. The Series B preferred shares are convertible into the

same number of shares of the Company’s common stock, as adjusted for future stock splits and the issuance of dilutive securities. The Series B preferred shares have no stated dividends and are redeemable at the option of a majority of the Series B holders at any time on or after the earlier of (i) December 2013 and (ii) the date that is 123 days after the first day that none of the Company’s 9.25% senior subordinated notes remain outstanding, but in no event earlier than February 2012.

     The carrying value of the Company’s Series B preferred stock was $76.5 million as of September 30, 2006, and has been reflected net of unaccreted issuance costs of approximately $1.5 million. Such issuance costs are being accreted on a straight-line basis through February 2012, which represents the earliest optional redemption date outlined above.

12. Commitments and Contingencies

     As of September 30, 2006, the Company had no material purchase commitments. However, the Company does expect to make capital expenditures to upgrade its ATMs to be both Encrypting PIN Pad and Triple DES compliant over the next two years. The Company currently expects to spend approximately $11.8 million, the majority of which will be spent in 2007, to accomplish the upgrades on all of its company-owned ATMs by the end of next year.

     In addition to the above, the Company may be required to make additional capital expenditures in future periods to comply with anticipated new regulations resulting from the Americans with Disabilities Act (“ADA”) or the outcome of the lawsuit involving the National Federation of the Blind (“NFB”) and the Commonwealth of Massachusetts (described below).

     National Federation of the Blind. In connection with its acquisition of the E*TRADE Access, Inc. (“ETA”) ATM portfolio, the Company assumed ETA’s interests and liability for a lawsuit instituted in the United States District Court for the District of Massachusetts (the “Court”) by the NFB, the NFB’s Massachusetts chapter, and several individual blind persons (collectively, the “Private Plaintiffs”) as well as the Commonwealth of Massachusetts with respect to claims relating to the alleged inaccessibility of ATMs for those persons who are visually-impaired. After the acquisition of the ETA ATM portfolio, the Private Plaintiffs named Cardtronics as a co-defendant with ETA and ETA’s parent, E*Trade Bank, and the scope of the lawsuit has expanded to include both ETA’s ATMs as well as the Company’s pre-existing ATM portfolio.

     In this lawsuit, the Private Plaintiffs have sought to require ETA and Cardtronics to make all of the ATMs “voice-enabled,” or capable of providing audible instructions to a visually-impaired person upon that person inserting a headset plug into an outlet at the ATM. The Court has ruled twice (in February 2005 and February 2006) that the NFB is not entitled to a “voice-enabled” remedy. Nonetheless, in response to an order to describe the relief they seek, the Private Plaintiffs have subsequently stated that they demand either (i) voice-guidance technology on each ATM; (ii) “Braille” instructions on each ATM that allow individuals who are blind to understand every screen (which, we assume, may imply a dynamic Braille pad); or (iii) a telephone on each ATM so the user could speak with a remote operator who can either see the screen on the ATM or can enter information for the user.

     Cardtronics has asserted numerous defenses to the lawsuit. One defense is that, for ATMs owned by third parties, the Company arguably does not have the right to make changes to the ATMs without the consent of the third parties. Another defense is that the ADA arguably does not require the Company to make changes to ATMs if the changes are not feasible or achievable, or if the costs outweigh the benefits. The costs of retrofitting or replacing existing ATMs with voice technology, dynamic Braille keypads, or telephones and interactive data lines would be significant. Additionally, in situations in which the ATMs are owned by third parties and Cardtronics provides processing services, the costs are extremely disproportionate to the Company’s interests in the ATMs.

     Cardtronics has also challenged the Private Plaintiffs’ standing to file this lawsuit. In response to the Company’s challenge, the Private Plaintiffs have requested the Court’s permission to (i) amend their complaint to name additional individual plaintiffs and (ii) certify the lawsuit as a class action under the Federal Rules of Civil Procedure. Briefing on these motions is not complete as of the filing of this report. Cardtronics expects to object to the Private Plaintiffs’ motion, on the grounds that the plaintiffs who initially filed the lawsuit lacked standing and this deficiency arguably cannot be cured by amending the complaint. A hearing on the standing issue has not yet been set but is expected to occur in the first quarter of 2007.

     Accessibility Guidelines under the ADA. Recently proposed Accessibility Guidelines under the ADA would require voice-enabling technology for newly installed ATMs and for ATMs that are otherwise retrofitted or substantially modified. The Company currently estimates that it would cost approximately $1.5 million in capital expenditures to make all of its company-owned ATMs voice-enabled. Although these new rules have not yet been adopted by the Department of Justice, the Company plans to incur most of these costs in 2007 as part of its Triple DES security upgrade efforts.

     Other Matters. In June 2006, Duane Reade, Inc. (“Customer”), one of the Company’s merchant customers, filed a complaint in the United States District Court for the Southern District of New York (the “Federal Action”). The complaint, which was formally served to the Company in September 2006, alleged that Cardtronics had breached an ATM operating agreement between the parties by failing to pay the Customer the proper amount of fees under the agreement. On October 6, 2006, Cardtronics filed a petition in the District Court of Harris County, Texas, seeking a declaratory judgment that Cardtronics had not breached the ATM operating agreement. On October 10, 2006, the Customer filed a second complaint, this time in New York State Supreme Court, alleging the same claims it had alleged in the Federal Action. Subsequently, the Customer dismissed the Federal Action because the federal court did not have subject matter jurisdiction. The Customer is claiming that it is owed no less than $600,000 in lost revenues, exclusive of interests and costs, and projects that additional damages will accrue to them at a rate of approximately $100,000 per month, exclusive of interest and costs. It is the Company’s position that the Customer’s claims in the New York lawsuit are without merit and the Company will move to dismiss those claims at the appropriate time. The Company also believes that it will ultimately prevail upon the merits in this matter, although it gives no assurance as to the final outcome. Furthermore, the Company believes that the ultimate resolution of this dispute will not have a material adverse impact on the Company’s financial condition or results of operations.

     The Company is also subject to various legal proceedings and claims arising in the ordinary course of its business. The Company’s management does not expect the outcome in any of these legal proceedings, individually or collectively, to have a material adverse effect on the Company’s financial condition or results of operations.

13. Derivative Financial Instruments

     As a result of its variable-rate debt and ATM cash management activities, the Company is exposed to changes in interest rates (LIBOR and TIIE). It is the Company’s policy to limit the variability of a portion of its expected future interest payments as a result of changes in LIBOR by utilizing certain types of derivative financial instruments.

     To meet the above objective, the Company entered into several LIBOR-based interest rate swaps during 2004 and 2005 to fix the interest rate paid on $300.0 million of the Company’s current and anticipated outstanding ATM cash balances in the United States. The effect of such swaps was to fix the interest rate paid on the following notional amounts for the periods identified (in thousands):

		Weighted Average
Notional Amount		Fixed Rate				Period
$300,000			3.82	%		October 1, 2006-December 31, 2006
$300,000			3.86	%		January 1, 2007-December 31, 2007
$300,000			4.35	%		January 1, 2008-December 31, 2008
$200,000			4.36	%		January 1, 2009-December 31, 2009
$100,000			4.34	%		January 1, 2010-December 31, 2010

     Net amounts paid or received under such swaps are recorded as adjustments to the Company’s “Cost of ATM operating revenues” in the accompanying condensed consolidated statements of operations. During the three and nine month periods ended September 30, 2006 and 2005, there were no gains or losses recorded in the condensed consolidated statements of operations as a result of ineffectiveness associated with the Company’s interest rate swaps.

     The Company’s interest rate swaps have been classified as cash flow hedges pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. Accordingly, changes in the fair values of the Company’s interest rate swaps have been reported in accumulated other comprehensive income (loss) in the accompanying condensed consolidated balance sheets. As of September 30, 2006, the unrealized gain on such swaps totaled approximately $4.7 million, net of tax.

     As of September 30, 2006, the Company has not entered into any derivative financial instruments to hedge its variable interest rate exposure in the United Kingdom or Mexico.

14. Segment Information

     During the nine months ended September 30, 2006, and as a result of the Company’s acquisition of a majority interest in Cardtronics Mexico in February 2006, the Company renamed its domestic and international reportable segments to the United States and United Kingdom segments, respectively, and added a third segment, Mexico. All intercompany transactions between the Company’s reportable segments have been eliminated. The following summarizes certain financial data by reportable segment as of September 30, 2006 and December 31, 2005, and for the three and nine month periods ended September 30, 2006 and 2005 (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2006				2005				2006				2005
Revenues:
United States		$	64,392			$	63,425			$	189,119			$	185,443
United Kingdom			11,748				8,309				29,384				13,745
Mexico			271				—				473				—
Intercompany eliminations			(46	)			—				(216	)			—
Total		$	76,365			$	71,734			$	218,760			$	199,188
Income (loss) before income taxes:
United States		$	(1,190	)		$	(5,386	)		$	(4,702	)		$	(2,130	)
United Kingdom			931				826				1,034				732
Mexico			(159	)			—				(215	)			—
Intercompany eliminations			31				—				(16	)			4
Total		$	(387	)		$	(4,560	)		$	(3,899	)		$	(1,394	)
Intersegment revenues:
United States		$	46			$	—			$	216			$	—

		September 30, 2006				December 31, 2005
Identifiable assets:
United States		$	240,550			$	240,600
United Kingdom			113,220				103,151
Mexico			1,144				—
Total		$	354,914			$	343,751

15. New Accounting Pronouncements

     Accounting for Uncertainty in Income Taxes. In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. The interpretation prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 31, 2006. The Company is currently evaluating what impact, if any, this statement will have on its financial statements.

     Fair Value Measurements. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which provides guidance on measuring the fair value of assets and liabilities in the financial statements. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the impact, if any, this statement will have on its financial statements.

     Evaluation of Prior Period Misstatements in Current Financial Statements. In September 2006, the SEC released Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 provides guidance on how to evaluate the impact of financial statement misstatements from prior periods that have been identified in the current year. The provisions of SAB No. 108 are effective for fiscal years ending on or after November 15, 2006. The Company does not expect this statement to have a material impact on it financial statements.

16. Supplemental Guarantor Financial Information

     The Company’s senior subordinated notes issued in August 2005 are guaranteed on a full and unconditional basis by the Company’s domestic subsidiaries. The following information sets forth the condensed consolidating statements of operations and cash flows for the three and nine month periods ended September 30, 2006 and 2005, and the condensed consolidating balance sheets as of September 30, 2006 and December 31, 2005, of (i) Cardtronics, Inc., the parent company and issuer of the senior subordinated notes (“Parent”); (ii) the Company’s domestic subsidiaries on a combined basis (collectively, the “Guarantors”); and (iii) the Company’s international subsidiaries on a combined basis (collectively, the “Non-Guarantors”) (in thousands):

Condensed Consolidating Statements of Operations

		Three Months Ended September 30, 2006
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
Revenues		$	—			$	64,392			$	12,019			$	(46	)		$	76,365
Operating costs and expenses			311				60,037				10,353				(28	)			70,673
Operating income			(311	)			4,355				1,666				(18	)			5,692
Interest expense, net			2,229				3,187				817				—				6,233
Equity in (earnings) losses of subsidiaries			(1,778	)			—				—				1,778				—
Other expense (income), net			—				(184	)			78				(48	)			(154	)
Income (loss) before income taxes			(762	)			1,352				771				(1,748	)			(387	)
Income tax provision (benefit)			(405	)			63				282				—				(60	)
Net income (loss)			(357	)			1,289				489				(1,748	)			(327	)
Preferred stock dividends and accretion expense			67				—				—				—				67
Net income (loss) available to common stockholders		$	(424	)		$	1,289			$	489			$	(1,748	)		$	(394	)

		Three Months Ended September 30, 2005
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
Revenues		$	—			$	63,425			$	8,309			$	—			$	71,734
Operating costs and expenses			173				58,445				7,047				—				65,665
Operating income			(173	)			4,980				1,262				—				6,069
Interest expense, net			5,193				4,579				422				—				10,194
Equity in (earnings) losses of subsidiaries			(716	)			—				—				716				—
Other expense, net			—				420				15				—				435
Income (loss) before income taxes			(4,650	)			(19	)			825				(716	)			(4,560	)
Income tax provision (benefit)			(1,786	)			(159	)			249				—				(1,696	)
Net income (loss)			(2,864	)			140				576				(716	)			(2,864	)
Preferred stock dividends and accretion expense			67				—				—				—				67
Net income (loss) available to common stockholders		$	(2,931	)		$	140			$	576			$	(716	)		$	(2,931	)

Condensed Consolidating Statements of Operations – Continued

		Nine Months Ended September 30, 2006
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
Revenues		$	—			$	189,119			$	29,857			$	(216	)		$	218,760
Operating costs and expenses			796				177,627				26,489				(154	)			204,758
Operating income			(796	)			11,492				3,368				(62	)			14,002
Interest expense, net			6,335				10,018				2,416				—				18,769
Equity in (earnings) losses of subsidiaries			(2,898	)			—				—				2,898				—
Other expense (income), net			—				(956	)			133				(45	)			(868	)
Income (loss) before income taxes			(4,233	)			2,430				819				(2,915	)			(3,899	)
Income tax provision (benefit)			(1,568	)			37				314				—				(1,217	)
Net income (loss)			(2,665	)			2,393				505				(2,915	)			(2,682	)
Preferred stock dividends and accretion expense			199				—				—				—				199
Net income (loss) available to common stockholders		$	(2,864	)		$	2,393			$	505			$	(2,915	)		$	(2,881	)

		Nine Months Ended September 30, 2005
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
Revenues		$	—			$	185,443			$	13,745			$	—			$	199,188
Operating costs and expenses			2,349				168,871				11,890				(4	)			183,106
Operating income			(2,349	)			16,572				1,855				4				16,082
Interest expense, net			6,164				9,340				1,090				—				16,594
Equity in (earnings) losses of subsidiaries			(6,909	)			—				—				6,909				—
Other expense, net			—				848				34				—				882
Income (loss) before income taxes			(1,604	)			6,384				731				(6,905	)			(1,394	)
Income tax provision (benefit)			(751	)			(17	)			223				—				(545	)
Net income (loss)			(853	)			6,401				508				(6,905	)			(849	)
Preferred stock dividends and accretion expense			1,329				—				—				—				1,329
Net income (loss) available to common stockholders		$	(2,182	)		$	6,401			$	508			$	(6,905	)		$	(2,178	)

Condensed Consolidating Balance Sheets

		As of September 30, 2006
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
Assets:
Cash and cash equivalents		$	17			$	677			$	(219	)		$	—			$	475
Receivables, net			1,231				10,868				1,669				(1,313	)			12,455
Other current assets			1,465				10,761				6,137				(17	)			18,346
Total current assets			2,713				22,306				7,587				(1,330	)			31,276
Property and equipment, net			—				61,817				21,188				(170	)			82,835
Intangible assets, net			7,206				47,804				13,205				—				68,215
Goodwill			4,287				87,692				75,777				—				167,756
Investments and advances to subsidiaries			70,049				—				81				(70,130	)			—
Intercompany receivable			697				2,813				(3,510	)			—				—
Prepaid and other assets			208,745				4,795				37				(208,745	)			4,832
Total assets		$	293,697			$	227,227			$	114,365			$	(280,375	)		$	354,914
Liabilities and Stockholders’ Deficit:
Current portion of notes payable and capital leases		$	—			$	—			$	145			$	—			$	145
Current portion of other long-term liabilities			—				2,180				—				—				2,180
Accounts payable and accrued liabilities			4,215				31,318				11,081				(1,329	)			45,285
Total current liabilities			4,215				33,498				11,226				(1,329	)			47,610
Long-term debt, less current portion			252,850				134,551				74,194				(208,745	)			252,850
Other non-current liabilities and minority interest			4,991				14,139				3,755				(72	)			22,813
Total liabilities			262,056				182,188				89,175				(210,146	)			323,273
Preferred stock			76,528				—				—				—				76,528
Stockholders’ equity (deficit)			(44,887	)			45,039				25,190				(70,229	)			(44,887	)
Total liabilities and stockholders’ deficit		$	293,697			$	227,227			$	114,365			$	(280,375	)		$	354,914

		As of December 31, 2005
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
Assets:
Cash and cash equivalents		$	118			$	1,544			$	37			$	—			$	1,699
Receivables, net			2,047				10,706				836				(3,843	)			9,746
Other current assets			1,669				4,968				5,691				—				12,328
Total current assets			3,834				17,218				6,564				(3,843	)			23,773
Property and equipment, net			—				58,283				15,991				(123	)			74,151
Intangible assets, net			10,906				52,243				12,816				—				75,965
Goodwill			5,907				85,122				70,528				—				161,557
Investments and advances to subsidiaries			60,339				—				—				(60,339	)			—
Intercompany receivable			487				2,288				(2,775	)			—				—
Prepaid and other assets			205,389				8,988				27				(206,099	)			8,305
Total assets		$	286,862			$	224,142			$	103,151			$	(270,404	)		$	343,751
Liabilities and Stockholders’ Deficit:
Current portion of long-term debt and notes payable		$	—			$	42			$	3,126			$	—			$	3,168
Current portion of other long-term liabilities			—				2,251				—				—				2,251
Accounts payable and accrued liabilities			8,650				29,444				8,203				(3,859	)			42,438
Total current liabilities			8,650				31,737				11,329				(3,859	)			47,857
Long-term debt, less current portion			244,456				139,551				66,548				(206,099	)			244,456
Other non-current liabilities and minority interest			6,511				14,629				3,053				—				24,193
Total liabilities			259,617				185,917				80,930				(209,958	)			316,506
Preferred stock			76,329				—				—				—				76,329
Stockholders’ equity (deficit)			(49,084	)			38,225				22,221				(60,446	)			(49,084	)
Total liabilities and stockholders’ deficit		$	286,862			$	224,142			$	103,151			$	(270,404	)		$	343,751