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 March 31, 2008

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

For the transition period from       to

Commission File Number 333-113470

CARDTRONICS, INC.

(Exact name of registrant as specified in its charter)

Delaware		76-0681190
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
3110 Hayes Road, Suite 300 Houston, TX (Address of principal executive offices)		77082 (Zip Code)

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 þ No o

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

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

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 May 9, 2008: 38,667,914

 

 

CARDTRONICS, INC.

TABLE OF CONTENTS

			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)			1
Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007			1
Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007			2
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007			3
Notes to Consolidated Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Item 4T. Controls and Procedures			39
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			40
Item 1A. Risk Factors			40
Item 6. Exhibits			41
Signatures			42
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certifications of CEO and CFO

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.

		March 31, 2008				December 31, 2007
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	8,908			$	13,439
Accounts and notes receivable, net of allowance of $474 and $560 as of March 31, 2008 and December 31, 2007, respectively			26,324				23,248
Inventory			3,633				2,355
Restricted cash, short-term			8,419				5,900
Deferred tax asset, net			214				216
Prepaid expenses, deferred costs, and other current assets			14,558				11,627
Total current assets			62,056				56,785
Restricted cash			321				317
Property and equipment, net			174,225				163,912
Intangible assets, net			126,227				130,901
Goodwill			234,355				235,185
Prepaid expenses and other assets			4,336				4,185
Total assets		$	601,520			$	591,285
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	980			$	882
Current portion of capital lease obligations			922				1,147
Current portion of other long-term liabilities			23,173				16,201
Accounts payable			37,044				34,385
Accrued liabilities			49,981				70,524
Total current liabilities			112,100				123,139
Long-term liabilities:
Long-term debt, net of current portion and related discounts			343,190				307,733
Capital lease obligations, net of current portion			785				982
Deferred tax liability, net			11,884				11,480
Asset retirement obligations			18,374				17,448
Other long-term liabilities			27,413				23,392
Total liabilities			513,746				484,174
Stockholders’ equity:
Common stock, $0.0001 par value; 125,000,000 shares authorized; 43,659,816 and 43,571,956 shares issued as of March 31, 2008 and December 31, 2007, respectively; 38,654,067 and 38,566,207 shares outstanding as of March 31, 2008 and December 31, 2007, respectively			4				4
Subscriptions receivable (at face value)			(218	)			(229	)
Additional paid-in capital			190,625				190,508
Accumulated other comprehensive loss, net			(19,391	)			(4,518	)
Accumulated deficit			(35,025	)			(30,433	)
Treasury stock; 5,005,749 shares at cost as of March 31, 2008 and December 31, 2007			(48,221	)			(48,221	)
Total stockholders’ equity			87,774				107,111
Total liabilities and stockholders’ equity		$	601,520			$	591,285

See accompanying notes to consolidated financial statements.

CARDTRONICS, INC.

		Three Months Ended March 31,
		2008				2007
Revenues:
ATM operating revenues		$	115,062			$	71,656
Vcom operating revenues			1,235				—
ATM product sales and other revenues			4,278				2,862
Total revenues			120,575				74,518
Cost of revenues:
Cost of ATM operating revenues (includes stock-based compensation of $65 in 2008 and $16 in 2007. Excludes depreciation, accretion, and amortization shown separately below. See Note 1)			86,832				54,736
Cost of Vcom operating revenues			2,269				—
Cost of ATM product sales and other revenues			4,164				2,797
Total cost of revenues			93,265				57,533
Gross profit			27,310				16,985
Operating expenses:
Selling, general, and administrative expenses (includes stock-based compensation of $201 in 2008 and $206 in 2007)			8,551				6,444
Depreciation and accretion expense			9,082				6,398
Amortization expense			4,503				2,486
Total operating expenses			22,136				15,328
Income from operations			5,174				1,657
Other expense (income):
Interest expense, net			7,632				5,892
Amortization of deferred financing costs and bond discounts			508				356
Minority interest in subsidiary			—				(112	)
Other			1,061				(119	)
Total other expense			9,201				6,017
Loss before income taxes			(4,027	)			(4,360	)
Income tax expense (benefit)			565				(973	)
Net loss			(4,592	)			(3,387	)
Preferred stock accretion expense			—				67
Net loss available to common stockholders		$	(4,592	)		$	(3,454	)
Net loss per common share – basic and diluted		$	(0.12	)		$	(0.25	)
Weighted average shares outstanding – basic and diluted			38,589,878				13,965,875

See accompanying notes to consolidated financial statements.

CARDTRONICS, INC.

		Three Months Ended March 31,
		2008				2007
Cash flows from operating activities:
Net loss		$	(4,592	)		$	(3,387	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, accretion, and amortization expense			13,585				8,884
Amortization of deferred financing costs and bond discounts			508				356
Stock-based compensation expense			266				222
Deferred income taxes			430				(1,026	)
Gain on sale of Winn-Dixie equity securities			—				(569	)
Minority interest			—				(112	)
Loss on disposal of assets			1,150				492
Other reserves and non-cash items			(1,975	)			443
Changes in assets and liabilities, net of acquisitions:
(Increase) decrease in accounts and notes receivable, net			(2,964	)			2,051
Increase in prepaid, deferred costs, and other current assets			(2,595	)			(499	)
Increase in inventory			(932	)			(359	)
(Increase) decrease in other assets			217				(53	)
Decrease in accounts payable and accrued liabilities			(12,006	)			(3,130	)
Decrease in other liabilities			(1,417	)			(671	)
Net cash provided by (used in) operating activities			(10,325	)			2,642
Cash flows from investing activities:
Additions to property and equipment			(25,799	)			(13,332	)
Proceeds from sale of property and equipment			—				3
Payments for exclusive license agreements and site acquisition costs			(298	)			(567	)
Additions to equipment to be leased to customers			—				(203	)
Principal payments received under direct financing leases			13				4
Proceeds from sale of Winn-Dixie equity securities			—				3,950
Acquisition, net of cash acquired			—				876
Net cash used in investing activities			(26,084	)			(9,269	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			49,836				20,897
Repayments of long-term debt and capital leases			(14,995	)			(12,017	)
Repayments of borrowings under bank overdraft facility, net			(1,866	)			(3,222	)
Payments received on subscriptions receivable			11				—
Proceeds from exercises of stock options			123				46
Equity offering costs			(1,250	)			—
Debt issuance and modification costs			(4	)			—
Net cash provided by financing activities			31,855				5,704
Effect of exchange rate changes on cash			23				(13	)
Net decrease in cash and cash equivalents			(4,531	)			(936	)
Cash and cash equivalents at beginning of period			13,439				2,718
Cash and cash equivalents at end of period		$	8,908			$	1,782
Supplemental disclosure of cash flow information:
Cash paid for interest, including interest on capital leases		$	15,116			$	10,646
Cash paid for income taxes		$	—			$	27
Fixed assets financed with direct debt		$	—			$	1,101

See accompanying notes to consolidated financial statements.

CARDTRONICS, INC.

(1) General and Basis of Presentation

General

     Cardtronics, Inc., along with its wholly- and majority-owned subsidiaries (collectively, the “Company” or “Cardtronics”) owns and operates approximately 28,825 automated teller machines (“ATM”) in all 50 states, 2,350 ATMs located throughout the United Kingdom, and 1,425 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 network of ATMs within the United States (based on the number of participating ATMs) and works with financial institutions to place their logos on the Company’s ATM machines, thus providing convenient surcharge-free access to the financial institutions’ customers.

Basis of Presentation

     The unaudited interim 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. Because the Company owns a majority (51.0%) interest in and absorbs a majority of the losses or returns of Cardtronics Mexico, this entity is reflected as a consolidated subsidiary in the accompanying consolidated financial statements, with the remaining ownership interest not held by the Company being reflected as a minority interest. As of March 31, 2008 and December 31, 2007, the cumulative losses generated by Cardtronics Mexico and allocable to such minority interest shareholders exceeded the underlying equity amounts of such minority interest shareholders. Accordingly, all future losses generated by Cardtronics Mexico will be allocated 100% to Cardtronics until such time that Cardtronics Mexico generates a cumulative amount of earnings sufficient to cover all excess losses allocable to the Company, or until such time that the minority interest shareholders contribute additional equity to Cardtronics Mexico in an amount sufficient to cover such losses. As of March 31, 2008, the cumulative amount of excess losses allocated to Cardtronics totaled approximately $0.4 million. Such amount is net of contributions of $0.3 million made by the minority interest shareholders during 2007.

     This Quarterly Report on Form 10-Q has been prepared pursuant to the rules and regulations of the 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, which includes a summary of the Company’s significant accounting policies and other disclosures.

     The financial statements as of March 31, 2008 and for the three month periods ended March 31, 2008 and 2007 are unaudited. The balance sheet as of December 31, 2007 was derived from the audited balance sheet filed in the Company’s 2007 Annual Report on Form 10-K. In management’s opinion, all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the Company’s interim period results have been made. The results of operations for the three month periods ended March 31, 2008 and 2007 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year. Additionally, the financial statements for prior periods include reclassifications that were made to conform to the current period presentation. Those reclassifications did not impact the Company’s reported net loss or stockholders’ equity.

     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.

Cost of ATM Operating Revenues and Gross Profit Presentation

     The Company presents “Cost of ATM operating revenues” and “Gross profit” within its consolidated statements of operations exclusive of depreciation, accretion, and amortization expenses related to ATMs and ATM-related assets. The following table sets forth the amounts excluded from cost of ATM operating revenues and gross profit during the three month periods ended March 31, 2008 and 2007:

		2008				2007
		(In thousands)
Depreciation and accretion expenses related to ATMs and ATM-related assets		$	7,962			$	6,021
Amortization expense			4,503				2,486
Total depreciation, accretion, and amortization expenses excluded from cost of ATM operating revenues and gross profit		$	12,465			$	8,507

(2)  Acquisitions

   Acquisition of 7-Eleven Financial Services Business

     On July 20, 2007, the Company acquired substantially all of the assets of the financial services business of 7-Eleven, Inc. (the “7-Eleven Financial Services Business”) for approximately $137.3 million in cash. This acquisition (the “7-Eleven ATM Transaction”) was made as the Company believed the acquisition would provide it with substantial benefits and opportunities to execute its overall strategy, including the addition of high-volume ATMs in prime retail locations, organic growth potential, branding and surcharge-free network opportunities, and future outsourcing opportunities.

     The 7-Eleven ATM Transaction included approximately 5,500 ATMs located in 7-Eleven, Inc. (“7-Eleven”) stores throughout the United States, of which approximately 2,000 were advanced-functionality financial self-service kiosks, referred to as “Vcom” terminals, that are capable of providing more sophisticated financial services, such as check-cashing, remote deposit capture (which is deposit taking at ATMs not located on a bank’s premises using electronic imaging), money transfer, bill payment services, and other kiosk-based financial services (collectively, the “Vcom Services”). The Company funded the acquisition through the issuance of $100.0 million of 9.25% senior subordinated notes due 2013 — Series B (the “Series B Notes”) and additional borrowings under its revolving credit facility, which was amended in connection with the acquisition. See Note 8 for additional details on these financings. The Company has included the results of the operations of the 7-Eleven Financial Services Business for all periods subsequent to July 19, 2007.

     The Company accounted for the 7-Eleven ATM Transaction as a business combination pursuant to Statement of Financial Accounting Standard (“SFAS”) No. 141, Business Combinations. Accordingly, 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. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Cash		$	1,427
Trade accounts receivable, net			3,767
Surcharge and interchange receivable			3,769
Inventory			1,953
Other current assets			2,344
Property and equipment			18,315
Software			4,273
Intangible assets subject to amortization			78,000
Goodwill			62,191
Total assets acquired			176,039
Accounts payable			(688	)
Accrued liabilities and deferred income			(9,749	)
Current portion of capital lease obligations			(1,326	)
Current portion of other long-term liabilities			(7,777	)
Non-current portion of capital lease obligations			(1,378	)
Other long-term liabilities			(17,809	)
Total liabilities assumed			(38,727	)
Net assets acquired		$	137,312

     The purchase price allocation presented above resulted in a goodwill balance of approximately $62.2 million, which is deductible for tax purposes. Additionally, the purchase price allocation resulted in approximately $78.0 million in identifiable intangible assets subject to amortization, which was determined by utilizing a discounted cash flow approach. Of the total $78.0 million of intangible assets identified, $64.3 million relates to the 10-year ATM operating agreement that was entered into with 7-Eleven in conjunction with the acquisition, which is being amortized on a straight-line basis over the term of the agreement, and $13.7 million relates to a branding contract acquired in the transaction, which is being amortized over the remaining life of the underlying contract (8.4 years).

     In addition, the Company recorded $19.5 million of other liabilities ($7.8 million in current portion of other long-term liabilities and $11.7 million in other long-term liabilities) related to certain unfavorable equipment operating leases and an operating contract assumed as part of the 7-Eleven ATM Transaction. These liabilities are being amortized over the remaining terms of the underlying contracts and serve to reduce the corresponding ATM operating expense amounts to the fair value of these services as of the date of the acquisition.

     Pro Forma Results of Operations.  The following table presents the unaudited pro forma combined results of operations of the Company and the acquired 7-Eleven Financial Services Business for the three months ended March 31, 2007, after giving effect to certain pro forma adjustments, including the effects of the issuance of the Series B Notes and additional borrowings under its revolving credit facility, as amended (Note 8). The unaudited pro forma financial results assume that both the 7-Eleven ATM Transaction and the related financing transactions occurred on January 1, 2007. This pro forma information is presented for illustrative purposes only and is not necessarily indicative of the actual results that would have occurred had those transactions been consummated on such date. The pro forma results include approximately $4.2 million of placement fee revenues associated with the Vcom operations of the 7-Eleven Financial Services Business, which are not expected to recur in future periods. Furthermore, such pro forma results are not necessarily indicative of the future results to be expected for the consolidated operations. Amounts presented are in thousands, excluding per share amounts.

Revenues		$	116,039
Income from operations			6,820
Net loss available to common shareholders			(2,368	)
Net loss per share – basic and diluted		$	(0.17	)

(3) Stock-based Compensation

     The Company accounts for stock-based compensation arrangements under SFAS No. 123 (revised 2004), Share-Based Payment, which requires a company to record the grant date fair value of stock-based compensation arrangements, net of estimated forfeitures, as compensation expense on a straight-line basis over the underlying service periods of the related awards. The following table reflects the total stock-based compensation expense amounts included in the accompanying consolidated statements of operations for the three month periods ended March 31, 2008 and 2007.

		2008				2007
		(In thousands)
Cost of ATM operating revenues		$	65			$	16
Selling, general, and administrative expenses			201				206
Total stock-based compensation expense		$	266			$	222

     A summary of the status of the Company’s outstanding stock options as of March 31, 2008 and changes during the three months ended March 31, 2008 are presented below:

						Weighted
		Number				Average
		of Shares				Exercise Price
Options outstanding as of January 1, 2008			4,960,041			$	7.78
Exercised			(87,860	)		$	1.40
Forfeited			(130,156	)		$	11.22
Options outstanding as of March 31, 2008			4,742,025			$	7.80
Options vested and exercisable as of March 31, 2008			2,925,802			$	5.60

(4) Earnings per Share

     The Company reports its earnings per share in accordance with SFAS No. 128, Earnings per Share. In accordance with SFAS No. 128, potentially dilutive securities are excluded from the calculation of diluted earnings per share (as well as their related income statement impacts) when their impact on net income (loss) available to common stockholders is anti-dilutive. For the three month periods ended March 31, 2008 and 2007, the Company incurred net losses and, accordingly, excluded all potentially dilutive securities from the calculation of diluted earnings per share as their impact on the net loss available to common stockholders was anti-dilutive. Such anti-dilutive securities included outstanding stock options, restricted shares, and, for periods prior to their conversion in December 2007, the Company’s Series B redeemable convertible preferred stock. The following is a summary of the potentially dilutive securities that have been excluded from the computation of diluted net loss per share for the three month periods ended March 31, 2008 and 2007:

		2008				2007
Stock options			1,229,145				1,624,519
Restricted shares			—				19,789
Preferred stock			—				7,390,413
Total potentially dilutive securities			1,229,145				9,034,721

(5) Comprehensive Loss

     SFAS No. 130, Reporting Comprehensive Income, establishes standards for reporting comprehensive income (loss) and its components in the financial statements. Comprehensive loss for the three month periods ended March 31, 2008 and 2007 consisted of the following:

		2008				2007
		(In thousands)
Net loss		$	(4,592	)		$	(3,387	)
Unrealized losses on interest rate hedges			(13,465	)			(1,172	)
Foreign currency translation adjustments			(1,408	)			(160	)
Reclassifications of unrealized gains on available-for-sale securities, net of taxes			—				(498	)
Total comprehensive loss		$	(19,465	)		$	(5,217	)

     The significant increase in the total comprehensive loss figure for the three month period ended March 31, 2008 was due to the precipitous drop in current and forecasted interest rates that occurred during the period, which resulted in a corresponding decline in value associated with the Company’s interest rate hedges. For additional information on the Company’s interest rate hedges, see Note 12.

     Accumulated other comprehensive loss is displayed as a separate component of stockholders’ equity in the accompanying consolidated balance sheets and consisted of the following as of March 31, 2008 and December 31, 2007:

		March 31, 2008				December 31, 2007
		(In thousands)
Unrealized losses on interest rate hedges		$	(27,109	)		$	(13,644	)
Foreign currency translation adjustments			7,718				9,126
Total accumulated other comprehensive loss		$	(19,391	)		$	(4,518	)

     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. As a result of the Company’s overall net loss position for tax purposes, the Company has not recorded deferred tax benefits on the loss amounts related to these interest rate swaps as of March 31, 2008 or December 31, 2007, as management does not currently believe the Company will be able to realize the benefits associated with its net deferred tax asset positions.

(6) Intangible Assets

Intangible Assets with Indefinite Lives

     The following table presents the net carrying amount of the Company’s intangible assets with indefinite lives as of March 31, 2008 and December 31, 2007, as well as the changes in the net carrying amounts for the three months ended March 31, 2008, by geographic segment:

		Goodwill												Trade Name
		U.S.				U.K.				Mexico				U.S.				U.K.				Total
		(In thousands)
Balance as of December 31, 2007		$	150,445			$	84,050			$	690			$	200			$	4,015			$	239,400
Purchase price adjustments			6				—				—				—				—				6
Foreign currency translation adjustments			—				(833	)			(3	)			—				(41	)			(877	)
Balance as of March 31, 2008		$	150,451			$	83,217			$	687			$	200			$	3,974			$	238,529

Intangible Assets with Definite Lives

     The following is a summary of the Company’s intangible assets that are subject to amortization as of March 31, 2008:

		Gross								Net
		Carrying				Accumulated				Carrying
		Amount				Amortization				Amount
		(In thousands)
Customer and branding contracts/relationships		$	163,095			$	(53,848	)		$	109,247
Deferred financing costs			13,926				(4,636	)			9,290
Exclusive license agreements			5,420				(1,950	)			3,470
Non-compete agreements			101				(55	)			46
Total		$	182,542			$	(60,489	)		$	122,053

     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 and branding contracts/relationships and from 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 and branding contracts/relationships, exclusive license agreements, and non-compete agreements totaled $4.5 million and $2.5 million for the three months ended March 31, 2008 and 2007, respectively. Included in the 2007 amount is approximately $0.1 million in additional amortization expense related to the impairment of an intangible asset associated with an acquired ATM portfolio within the Company’s U.S reporting segment. This impairment was the result of the anticipated non-renewal of a contract included within a previously acquired portfolio. Amortization of deferred financing costs and bond discounts totaled approximately $0.5 million for the three months ended March 31, 2008 and $0.4 million for the three months ended March 31, 2007.

     Estimated amortization expense for the Company’s intangible assets with definite lives for the remaining nine months of 2008, each of the next five years, and thereafter is as follows:

						Deferred				Exclusive
		Customer and Branding				Financing				License				Non-compete
		Contracts/Relationships				Costs				Agreements				Agreements				Total
		(In thousands)
2008		$	12,907			$	1,154			$	558			$	19			$	14,638
2009			16,785				1,639				741				25				19,190
2010			15,257				1,764				644				2				17,667
2011			13,585				1,903				531				—				16,019
2012			12,744				1,767				463				—				14,974
2013			10,723				1,063				335				—				12,121
Thereafter			27,246				—				198				—				27,444
Total		$	109,247			$	9,290			$	3,470			$	46			$	122,053

(7) Accrued Liabilities

     Accrued liabilities consisted of the following as of March 31, 2008 and December 31, 2007:

		March 31, 2008				December 31, 2007
		(In thousands)
Accrued merchant fees		$	11,917			$	11,486
Accrued merchant settlement			7,294				4,254
Accrued interest			3,827				11,257
Accrued armored fees			3,779				5,879
Accrued cash management fees			3,480				5,574
Accrued maintenance fees			2,794				6,970
Accrued purchases			2,016				6,098
Accrued ATM telecommunications costs			1,727				1,424
Accrued compensation			1,569				3,832
Accrued processing costs			1,119				1,477
Accrued property and sales taxes			1,038				446
Accrued interest rate swap payments			892				147
Other accrued expenses			8,529				11,680
Total		$	49,981			$	70,524

(8) Long-term Debt

     The Company’s long-term debt consisted of the following as of March 31, 2008 and December 31, 2007:

		March 31, 2008				December 31, 2007
		(In thousands)
Revolving credit facility		$	39,500			$	4,000
Senior subordinated notes due August 2013 (net of unamortized discounts of $3.8 million as of March 31, 2008 and $3.9 million as of December 31, 2007)			296,220				296,088
Other			8,450				8,527
Total			344,170				308,615
Less current portion			980				882
Total excluding current portion		$	343,190			$	307,733

Credit Facility

     The Company’s revolving credit facility provides for $175.0 million in borrowings, subject to certain restrictions. Borrowings under the facility currently bear interest at the London Interbank Offered Rate (“LIBOR”) plus a spread, which is currently 2.25%. Additionally, the Company pays a commitment fee of 0.25% per annum on the unused portion of the revolving credit facility. Substantially all of the Company’s assets, including the stock of its wholly-owned domestic subsidiaries and 66.0% of the stock of its foreign subsidiaries, are pledged to secure borrowings made under the revolving credit facility. Furthermore, each of the Company’s domestic subsidiaries has guaranteed the Company’s obligations under such facility. The primary restrictive covenants within the facility 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. During March 2008, the Company amended its revolving credit facility to increase the amount of capital expenditures that it can incur on a rolling 12-month basis to $90.0 million. There are currently no restrictions on the ability of the Company’s wholly-owned subsidiaries to declare and pay dividends directly to the Company. As of March 31, 2008, the Company was in compliance with all applicable covenants and ratios under the facility.

     As of March 31, 2008, $39.5 million of borrowings were outstanding under the revolving credit facility. Additionally, the Company had posted $7.2 million in letters of credit under the facility in favor of the lessors under the ATM equipment leases that the Company assumed in connection with the 7-Eleven ATM Transaction. These letters of credit, which the lessors may draw upon in the event the Company fails to make payments under the leases, further reduce the Company’s borrowing capacity under the facility. As of March 31, 2008, the Company’s

available borrowing capacity under the amended facility, as determined under the earnings before interest expense, income taxes, depreciation and accretion expense, and amortization expense (“EBITDA”) and interest expense covenants contained in the agreement, totaled approximately $128.3 million.

Senior Subordinated Notes

     Series A Notes. In October 2006, the Company completed the registration of $200.0 million in senior subordinated notes (the “Series A Notes”), which were originally issued in August 2005 pursuant to Rule 144A of the Securities Act of 1933, as amended. The Series A Notes, which are subordinate to borrowings made under the revolving credit facility, mature in August 2013, carry a 9.25% coupon, and were issued with an effective yield of 9.375%. Interest under the notes is paid semiannually in arrears on February 15th and August 15th of each year. 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. Under the terms of the indenture, at any time prior to August 15, 2008, the Company may redeem up to 35% of the aggregate principal amount of the Series A Notes at a redemption price of 109.250% of the principal amount thereof, plus any accrued and unpaid interest, subject to certain conditions outlined in the indenture. Additionally, at any time prior to August 15, 2009, the Company may redeem all or part of the Series A Notes at a redemption price equal to the sum of 100% of the principal amount plus an “Applicable Premium”, as defined in the indenture, plus any accrued and unpaid interest. On or after August 15, 2009, the Company may redeem all or a part of the Series A Notes at the redemption prices set forth by the indenture plus any accrued and unpaid interest.

     Series B Notes. On July 20, 2007, the Company sold $100.0 million of 9.25% senior subordinated notes due 2013 — Series B (the “Series B Notes”) pursuant to Rule 144A of the Securities Act of 1933. Net proceeds from the offering, which totaled $95.3 million, were used to fund a portion of the 7-Eleven ATM Transaction and to pay fees and expenses related to the acquisition. The form and terms of the Series B Notes are substantially the same as the form and terms of the Series A Notes, except that (i) the Series A Notes have been registered with the SEC while the Series B Notes remain subject to transfer restrictions until the Company completes an exchange offer, and (ii) the Series B Notes were issued with Original Issue Discount and with an effective yield of 9.54%. Pursuant to the terms of the registration rights agreement entered into in conjunction with the offering, the Company was required to file a registration statement with the SEC within 240 days of the issuance of the Series B Notes with respect to an offer to exchange each of the Series B Notes for a new issue of our debt securities registered under the Securities Act with terms identical to those of the Series B Notes (except for the provisions relating to the transfer restrictions and payment of additional interest) and use reasonable best efforts to have the exchange offer become effective as soon as reasonably practicable after filing but in any event no later than 360 days after the initial issuance date of the Series B Notes. The Company completed the first step of the registration process in February 2008 with the filing of a registration statement on Form S-4 with the SEC. However, if the Company fails to satisfy these obligations, it will be required, under certain circumstances, to pay additional interest to the holders of the Series B Notes.

     As of March 31, 2008, the Company was in compliance with all applicable covenants required under the Series A and Series B Notes.

Other Facilities

     Bank Machine overdraft facility. In addition to Cardtronics, Inc.’s revolving credit facility, Bank Machine (Acquisitions) Ltd. (“Bank Machine”) has a £2.0 million unsecured overdraft facility that expires in July 2008. Such facility, which bears interest at 1.75% over the bank’s base rate (currently 5.00%), is utilized for general corporate purposes for the Company’s United Kingdom operations. As of March 31, 2008, approximately £1.0 million ($2.0 million) of this facility had been utilized to help fund certain working capital commitments. Amounts outstanding under the overdraft facility are reflected in accounts payable in our consolidated balance sheet, as such amounts are automatically repaid once cash deposits are made to the underlying bank accounts.

     Cardtronics Mexico equipment financing agreements. During 2006 and 2007, Cardtronics Mexico entered into six separate five-year equipment financing agreements with a single lender. Such agreements, which are denominated in pesos and bear interest at an average fixed rate of 10.96%, were utilized for the purchase of additional ATMs to support our Mexico operations. As of March 31, 2008, approximately $90.4 million pesos ($8.5

million U.S.) were outstanding under the agreements in place at the time, with future borrowings to be individually negotiated between the lender and Cardtronics. Pursuant to the terms of the loan agreement, we have issued a guaranty for 51.0% of the obligations under this agreement (consistent with the Company’s ownership percentage in Cardtronics Mexico.) As of March 31, 2008, the total amount of the guaranty was $46.1 million pesos ($4.3 million U.S.).

(9) 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 has 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 three months ended March 31, 2008 (in thousands):

Asset retirement obligation as of January 1, 2008		$	17,448
Additional obligations			1,778
Accretion expense			395
Payments			(946	)
Change in estimates			(265	)
Foreign currency translation adjustments			(36	)
Asset retirement obligation as of March 31, 2008		$	18,374

     The change in estimates during the three months ended March 31, 2008 represents the write-off of residual liability amounts associated with a portfolio of ATMs previously installed at one of the Company’s merchant customers’ locations. As the entire portfolio of machines was deinstalled in conjunction with the Company’s Triple-DES security upgrade efforts in 2007 and 2008, the Company no longer has any further deinstallation obligations associated with the previously-installed ATMs. The amount shown as a change in estimates represents the difference in the costs that the Company originally estimated it would incur to deinstall the ATMs and the actual costs incurred on the deinstallations.

(10) Other Long-term Liabilities

     Other long-term liabilities consisted of the following as of March 31, 2008 and December 31, 2007:

		March 31, 2008				December 31, 2007
		(In thousands)
Interest rate swaps		$	15,522			$	9,155
Obligations associated with acquired unfavorable contracts			5,681				7,626
Deferred revenue			3,156				3,380
Other long-term liabilities			3,054				3,231
Total		$	27,413			$	23,392

(11) Commitments and Contingencies

     Legal and Other Regulatory Matters

     In 2006, Duane Reade, Inc. (“Customer”), one of the Company’s merchant customers, filed a complaint in the New York State Supreme Court alleging that Cardtronics had breached its ATM operating agreement with the Customer by failing to pay the Customer the proper amount of fees under the agreement. The Customer is claiming that it is owed no less than $600,000 in lost revenues, exclusive of interest 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. As the term of the Company’s operating agreement with the Customer extends to December 2014, the Customer’s claims

could exceed $12.0 million. In response to a motion for summary judgment filed by the Customer and a cross-motion filed by the Company, the New York State Supreme Court ruled in September 2007 that the Company’s interpretation of the ATM operating agreement was the appropriate interpretation and expressly rejected the Customer’s proposed interpretations. The Customer has appealed this ruling. Notwithstanding that appeal, the Company believes that the ultimate resolution of this dispute will not have a material adverse impact on its 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 has provided reserves where necessary for all claims and 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.

     Capital and Operating Leases

     Capital Lease Obligations. As a result of the 7-Eleven ATM Transaction, the Company assumed responsibility for certain capital lease contracts that will expire at various times through June 2010. Upon the fulfillment of certain payment obligations related to the capital leases, ownership of the ATMs transfers to the Company. As of March 31, 2008, approximately $1.7 million of capital lease obligations were included within the Company’s consolidated balance sheet.

     Operating Lease Obligations. In addition to the capital leases assumed in conjunction the 7-Eleven ATM Transaction, the Company also assumed certain operating leases in connection with the acquisition. In conjunction with its purchase price allocation related to the 7-Eleven ATM Transaction, the Company recorded approximately $8.7 million of other liabilities (current and long-term) to value certain unfavorable equipment operating leases assumed as part of the acquisition. These liabilities are being amortized over the remaining terms of the underlying leases, the majority of which expire in late 2009, and serve to reduce ATM operating lease expense amounts to the fair value of these services as of the date of the acquisition. During the three months ended March 31, 2008, the Company recognized approximately $0.9 million in lease expense reductions associated with the amortization of these liabilities, and the remaining balance as of March 31, 2008 was $6.1 million. Upon the expiration of the operating leases, the Company will be required to renew such lease contracts, enter into new lease contracts, or purchase new or used ATMs to replace the leased equipment.

     Related Letters of Credit. Additionally, in conjunction with the 7-Eleven ATM Transaction, the Company posted $7.5 million in letters of credit related to these operating and capital leases upon which the lessors can draw in the event the Company fails to make schedules payments under the leases. These letters of credit, which are reduced periodically as payments are made under the leases, will be released upon the expiration of the leases. As of March 31, 2008, the total outstanding balance under these letters of credit was $7.2 million.

     Other Commitments

     Asset retirement obligations. The Company’s 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. The Company had $18.4 million accrued for such liabilities as of March 31, 2008. For additional information on the Company’s asset retirement obligations, see Note 9.

     Registration payment arrangements. In conjunction with the issuance of its Series B Notes, the Company entered into a registration rights agreement under which it is required to take certain steps to exchange the Series B Notes for notes registered with the SEC within 360 days following the original issuance date (July 19, 2007). In the event it is unable to meet the deadlines set forth in the agreement, the Company will be subject to higher interest rates on the Series B Notes in subsequent periods until the exchange offer is completed. Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) No. 00-19-2, Accounting for Registration Payment Arrangements, requires that contingent obligations under registration payment arrangements be separately recognized and measured in accordance with SFAS No. 5, Accounting for Contingencies. The Company completed the first step of the registration process in February 2008 with the filing of a registration statement on Form S-4 with the SEC, and the Company currently believes it is not probable that incremental interest payments will be made as a result of the provisions of the registration rights agreement. As a result, the Company

has not recognized a liability as of March 31, 2008 related to the registration rights agreement. In the event it becomes probable that the Company will be unable to affect the exchange offer in a timely manner, the Company will reevaluate the need to record a liability at that time.

(12) 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 the federal funds effective rate in the United States, LIBOR in the United Kingdom, and the Mexican Interbank Rate in Mexico). 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 the underlying rates by utilizing certain types of derivative financial instruments.

     To meet the above objective, the Company has entered into several LIBOR-based and federal funds effective rate-based interest rate swaps to fix the interest rate paid on $550.0 million of the Company’s current and anticipated outstanding ATM cash balances in the United States. The swaps in place as of March 31, 2008 serve to fix the interest rate paid on the following notional amounts for the periods identified:

						Weighted Average
		Notional Amount				Fixed Rate				Period
		(In thousands)
		$	550,000				4.61	%		April 1, 2008 – December 31, 2008
		$	550,000				4.30	%		January 1, 2009 – December 31, 2009
		$	550,000				4.11	%		January 1, 2010 – December 31, 2010
		$	400,000				3.72	%		January 1, 2011 – December 31, 2011
		$	200,000				3.96	%		January 1, 2012 – December 31, 2012

     As of March 31, 2008 and December 31, 2007, the Company had a liability of $27.1 million and $13.6 million, respectively, recorded in its consolidated balance sheets related to the above interest rate swaps, which represented the fair value of such agreements based on third-party quotes for similar instruments with the same terms and conditions, as such instruments are required to be carried at fair value. These 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 such swaps have been reported in accumulated other comprehensive loss in the accompanying consolidated balance sheets. As a result of the Company’s overall net loss position for tax purposes, the Company has not recorded deferred tax benefits on the loss amounts related to these interest rate swaps as of March 31, 2008 or December 31, 2007, as management does not currently believe that the Company will be able to realize the benefits associated with its net deferred tax asset positions.

     Net amounts paid or received under such swaps are recorded as adjustments to the Company’s “Cost of ATM operating revenues” in the accompanying consolidated statements of operations. During the three months ended March 31, 2008, gains or losses incurred as a result of ineffectiveness associated with the Company’s interest rate swaps were immaterial.

     As of March 31, 2008, the Company has not entered into any derivative financial instruments to hedge its variable interest rate exposure in the United Kingdom or Mexico.

(13) Income Taxes

     Income tax expense (benefit) based on the Company’s loss before income taxes for the three month periods ended March 31, 2008 and 2007 was as follows:

		2008				2007
		(In thousands)
Income tax expense (benefit)		$	565			$	(973	)
Effective tax rate			(14.0	)%			22.3	%

     The Company computes its quarterly income tax provision amounts under the effective tax rate method based on applying an anticipated annual effective tax rate in each major tax jurisdiction to the pre-tax book income or loss amounts generated in such jurisdictions. During the three months ended March 31, 2008, the Company increased its

valuation allowance by approximately $1.2 million. Such increase was due to the Company’s determination that it is more likely than not that it will not be able to realize the benefit associated with the net deferred tax asset balance related to its domestic operations. The negative effective tax rate during the three months ended March 31, 2008 was due to the aforementioned domestic valuation allowance, the relative mix of pre-tax loss amounts in the Company’ foreign and domestic jurisdictions, and the fact that the Company is not currently recognizing any tax benefits associated with its Mexico operations. Furthermore, the Company was in a taxable income position with respect to its domestic state income taxes but in a taxable loss position with respect to its domestic federal income taxes, which also contributed to the overall negative effective tax rate.

(14) Segment Information

     As of March 31, 2008, the Company’s operations consisted of its United States, United Kingdom, Mexico, and Advanced Functionality segments. While each of these segments provides similar ATM-related services, each segment is managed separately, as they require different marketing and business strategies. Furthermore, the Company previously determined that the advanced functionality services provided through the acquired Vcom units exhibited different economic characteristics than the traditional ATM services provided by its other three segments, in large part due to the anticipated losses associated with providing such advanced-functionality services and the fact that these operations will be managed separately until they can achieve break-even status.

     Management uses earnings before interest expense, income taxes, depreciation and accretion expense, and amortization expense to assess the operating results and effectiveness of its business segments. Management believes EBITDA is useful because it allows them to more effectively evaluate the Company’s and its business segments’ operating performance and compare the results of its operations from period to period without regard to its financing methods or capital structure. Additionally, the Company excludes depreciation, accretion, and amortization expense as these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. EBITDA, as defined by the Company, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States (“GAAP”). Therefore, EBITDA should not be considered in isolation or as a substitute for operating income, net income, cash flows from operating, investing, and financing activities or other income or cash flow statement data prepared in accordance with GAAP. Below is a reconciliation of EBITDA to net loss for the three month periods ended March 31, 2008 and 2007:

		2008				2007
		(In thousands)
EBITDA		$	17,698			$	10,772
Depreciation and accretion expense			9,082				6,398
Amortization expense			4,503				2,486
Interest expense, net, including amortization of deferred financing costs and bond discounts			8,140				6,248
Income tax expense (benefit)			565				(973	)
Net loss		$	(4,592	)		$	(3,387	)

     The following tables reflect certain financial information for each of the Company’s reporting segments for the three month periods ended March 31, 2008 and 2007 and as of March 31, 2008 and December 31, 2007. All intercompany transactions between the Company’s reporting segments have been eliminated.

		For the Three Months Ended March 31, 2008
						United								Advanced
		United States				Kingdom				Mexico				Functionality				Eliminations				Total
		(In thousands)
Revenue from external customers		$	99,118			$	17,640			$	2,582			$	1,235			$	—			$	120,575
Intersegment revenues			195				—				—				—				(195	)			—
Cost of revenues			74,417				14,392				2,187				2,464				(195	)			93,265
Selling, general, and administrative expenses			7,236				928				298				89				—				8,551
EBITDA			16,945				1,944				127				(1,318	)			—				17,698
Depreciation and accretion expense			6,113				2,682				309				—				(22	)			9,082
Amortization expense			3,953				538				12				—				—				4,503
Interest expense, net			6,503				1,456				181				—				—				8,140
Capital expenditures, excluding acquisitions (1) (2)		$	15,642			$	10,187			$	67			$	201			$	—			$	26,097

		For the Three Months Ended March 31, 2007
						United								Advanced
		United States				Kingdom				Mexico				Functionality				Eliminations				Total
		(In thousands)
Revenue from external customers		$	60,955			$	12,960			$	603			$	—			$	—			$	74,518
Intersegment revenue			93				—				—				—				(93	)			—
Cost of revenues			47,984				9,070				540				—				(61	)			57,533
Selling, general, and administrative expenses			5,147				987				310				—				—				6,444
EBITDA			8,236				2,827				(259	)			—				(32	)			10,772
Depreciation and accretion expense			5,042				1,358				25				—				(27	)			6,398
Amortization expense			2,067				407				12				—				—				2,486
Interest expense, net			5,233				991				24				—				—				6,248
Capital expenditures, excluding acquisitions (1) (2)		$	8,191			$	5,674			$	34			$	—			$	—			$	13,899
Additions to equipment to be leased to customers			—				—				203				—				—				203

Identifiable Assets:

		March 31, 2008				December 31, 2007
		(In thousands)
United States		$	412,327			$	409,120
United Kingdom			167,250				163,464
Mexico			13,915				12,337
Advanced Functionality			8,028				6,364
Total		$	601,520			$	591,285

(15) New Accounting Pronouncements

     Fair Value Measurements. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which provides guidance on measuring the fair value of assets and liabilities in the financial statements. In summary, SFAS No. 157 does the following:

	1.		Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value;
	2.		Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date;
	3.		Eliminates large position discounts for financial instruments quoted in active markets and requires consideration of the Company’s creditworthiness when valuing liabilities; and
	4.		Expands disclosures about instruments measured at fair value.

     In addition, SFAS No. 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. “Level 1” inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. “Level 2” inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. “Level 3” inputs are unobservable inputs based on assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

     Subsequent to the issuance of SFAS No. 157, the FASB issued FSP No. 157-1 and FSP No. 157-2. FSP No. 157-1 amends SFAS No. 157 to exclude SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions, while FSP No. 157-2 delays the effective date of the application of SFAS No. 157 to fiscal years beginning after November 15, 2008 for all non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis.

     The Company adopted SFAS No. 157 as of January 1, 2008, with the exception of the application of the statement to nonrecurring non-financial assets and non-financial liabilities. Nonrecurring non-financial assets and non-financial liabilities for which the Company has not applied the provisions of SFAS No. 157 include those measured at fair value for impairment testing, including goodwill, other intangible assets, and property and equipment. As a result of the adoption of SFAS No. 157, the Company recorded a $1.6 million reduction of the unrealized loss associated with its interest rate swaps, which served to decrease the Company’s liability associated with the interest rate swaps and reduce its other comprehensive loss. Such adjustment reflects the consideration of nonperformance risk by the Company for interest rate swaps that were in a net liability position as of March 31, 2008, and the nonperformance risk of the Company’s counterparties for interest rate swaps that were in a net asset position as of March 31, 2008, as measured by the use of applicable credit default spreads.

     The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2008:

		Fair Value Measurements
		Total Carrying
		Value as of
		March 31, 2008				Level 1				Level 2				Level 3
Interest rate swaps		$	27,109			$	—			$	27,109			$	—

     The following is a description of the Company’s valuation methodology for assets and liabilities measured at fair value:

     Cash and cash equivalents, accounts and notes receivable, net of the allowance for doubtful accounts, other current assets, accounts payable, accrued expenses, and other current liabilities. These financial instruments are not carried at fair value, but are carried at amounts that approximate fair value due to their short-term nature and generally negligible credit risk.

     Interest rate swaps. These financial instruments are carried at fair value, calculated as the present value of amounts estimated to be received or paid to a marketplace participant in a selling transaction. These derivatives are valued using pricing models based on significant other observable inputs (Level 2 inputs), while taking into account the creditworthiness of the party that is in the liability position with respect to each trade.

     The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

     Fair Value Option. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which provides companies the option to measure certain financial instruments and other items at fair value. The Company has elected not to adopt the fair value option provisions of this statement.

     Issued But Not Yet Adopted

     As of March 31, 2008, the following accounting standards and interpretations had not yet been adopted by the Company:

     Business Combinations. In December 2007, the FASB issued SFAS No. 141R, Business Combinations, which provides revised guidance on the accounting for acquisitions of businesses. This standard changes the current guidance to require that all acquired assets, liabilities, minority interest, and certain contingencies, including contingent consideration, be measured at fair value, and certain other acquisition-related costs, including costs of a plan to exit an activity or terminate and relocate employees, be expensed rather than capitalized. SFAS No. 141R will apply to acquisitions that are effective after December 31, 2008, and application of the standard to acquisitions prior to that date is not permitted. The Company will adopt the provisions of SFAS No. 141R on January 1, 2009 and apply the requirements of the statement to business combinations that occur subsequent to its adoption.

     Noncontrolling Interests. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, which provides guidance on the presentation of minority interest in the financial statements and the accounting for and reporting of transactions between the reporting entity and the holders of such noncontrolling interest. This standard requires that minority interest be presented as a separate component of equity rather than as a “mezzanine” item between liabilities and equity and requires that minority interest be presented as a separate caption in the income statement. In addition, this standard requires all transactions with minority interest holders, including the issuance and repurchase of minority interests, be accounted for as equity transactions unless a change in control of the subsidiary occurs. The provisions of SFAS No. 160 are to be applied prospectively with the exception of reclassifying noncontrolling interests to equity and recasting consolidated net income (loss) to include net income (loss) attributable to both the controlling and noncontrolling interests, which are required to be adopted retrospectively. The Company will adopt the provisions of SFAS No. 160 on January 1, 2009 and is currently assessing the impact its adoption will have on the Company’s financial position and results of operations.

     Disclosures about Derivatives and Hedging Activities. In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivatives and Hedging Activities – an amendment of SFAS No. 133, which changes the disclosure requirements for derivative instruments and hedging activities. This standard requires a company to provide enhanced disclosures about (a) how and why the company uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133, and (c) how derivative instruments and related hedged items affect the company’s financial position, financial performance, and cash flows. The Company will adopt the provisions of SFAS No. 161 on January 1, 2009 and apply the disclosure requirements to disclosures made subsequent to its adoption.

     Useful Life of Intangible Assets. In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). The intent of FSP FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141R (discussed above) and other applicable accounting literature. The Company will adopt the provision of FSP FAS 142-3 on January 1, 2009 and is currently assessing its impact the adoption will have on the Company’s financial position and results of operations.

(16) Supplemental Guarantor Financial Information

     The Company’s Series A and Series B Notes 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 month periods ended March 31, 2008 and 2007 and the condensed consolidating

balance sheets as of March 31, 2008 and December 31, 2007 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”):

Condensed Consolidating Statements of Operations

		Three Months Ended March 31, 2008
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
		(In thousands)
Revenues		$	—			$	100,353			$	20,222			$	—			$	120,575
Operating costs and expenses			17				94,060				21,346				(22	)			115,401
Operating income (loss)			(17	)			6,293				(1,124	)			22				5,174
Interest expense, net, including amortization of deferred financing costs and bond discounts			49				6,454				1,637				—				8,140
Equity in (earnings) losses of subsidiaries			3,422				—				—				(3,422	)			—
Other (income) expense, net			(56	)			771				346				—				1,061
(Loss) income before income taxes			(3,432	)			(932	)			(3,107	)			3,444				(4,027	)
Income tax expense (benefit)			1,182				136				(753	)			—				565
Net (loss) income available to common stockholders		$	(4,614	)		$	(1,068	)		$	(2,354	)		$	3,444			$	(4,592	)

		Three Months Ended March 31, 2007
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
		(In thousands)
Revenues		$	—			$	61,048			$	13,563			$	(93	)		$	74,518
Operating costs and expenses			307				59,933				12,709				(88	)			72,861
Operating income (loss)			(307	)			1,115				854				(5	)			1,657
Interest expense, net, including amortization of deferred financing costs and bond discounts			2,201				3,032				1,015				—				6,248
Equity in (earnings) losses of subsidiaries			2,034				—				—				(2,034	)			—
Other (income) expense, net			(112	)			(207	)			88				—				(231	)
(Loss) income before income taxes			(4,430	)			(1,710	)			(249	)			2,029				(4,360	)
Income tax expense (benefit)			(1,048	)			53				22				—				(973	)
Net (loss) income			(3,382	)			(1,763	)			(271	)			2,029				(3,387	)
Preferred stock accretion expense			67				—				—				—				67
Net (loss) income available to common stockholders		$	(3,449	)		$	(1,763	)		$	(271	)		$	2,029			$	(3,454	)

Condensed Consolidating Balance Sheets

		As of March 31, 2008
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
		(In thousands)
Assets:
Cash and cash equivalents		$	166			$	6,877			$	1,865			$	—			$	8,908
Receivables, net			(204	)			23,018				3,691				(181	)			26,324
Other current assets			1,442				15,161				11,258				(1,037	)			26,824
Total current assets			1,404				45,056				16,814				(1,218	)			62,056
Property and equipment, net			—				104,947				69,468				(190	)			174,225
Intangible assets, net			8,498				102,858				14,871				—				126,227
Goodwill			—				150,451				83,904				—				234,355
Investments in and advances to subsidiaries			32,877				—				—				(32,877	)			—
Intercompany receivable			(2,098	)			7,540				(5,442	)			—				—
Prepaid expenses and other assets			395,531				3,107				1,550				(395,531	)			4,657
Total assets		$	436,212			$	413,959			$	181,165			$	(429,816	)		$	601,520
Liabilities and Stockholders’ Equity:
Current portion of long-term debt		$	—			$	—			$	980			$	—			$	980
Current portion of capital lease obligations			—				922				—				—				922
Current portion of other long-term liabilities			—				23,004				169				—				23,173
Accounts payable and accrued liabilities			4,149				59,581				24,507				(1,212	)			87,025
Total current liabilities			4,149				83,507				25,656				(1,212	)			112,100
Long-term debt, net of current portion			335,720				282,708				120,293				(395,531	)			343,190
Capital lease obligations, net of current portion			—				785				—				—				785
Deferred tax liability			8,569				981				2,334				—				11,884
Asset retirement obligations			—				12,750				5,624				—				18,374
Other non-current liabilities			—				26,920				493				—				27,413
Total liabilities			348,438				407,651				154,400				(396,743	)			513,746
Stockholders’ equity			87,774				6,308				26,765				(33,073	)			87,774
Total liabilities and stockholders’ equity		$	436,212			$	413,959			$	181,165			$	(429,816	)		$	601,520

		As of December 31, 2007
										Non-
		Parent				Guarantors				Guarantors				Eliminations				Total
		(In thousands)
Assets:
Cash and cash equivalents		$	76			$	11,576			$	1,787			$	—			$	13,439
Receivables, net			(292	)			20,894				2,713				(67	)			23,248
Other current assets			1,031				8,781				10,876				(590	)			20,098
Total current assets			815				41,251				15,376				(657	)			56,785
Property and equipment, net			—				99,764				64,360				(212	)			163,912
Intangible assets, net			8,768				106,808				15,325				—				130,901
Goodwill			—				150,445				84,740				—				235,185
Investments in and advances to subsidiaries			50,249				—				—				(50,249	)			—
Intercompany receivable			(863	)			6,395				(5,532	)			—				—
Prepaid expenses and other assets			368,424				2,970				1,532				(368,424	)			4,502
Total assets		$	427,393			$	407,633			$	175,801			$	(419,542	)		$	591,285
Liabilities and Stockholders’ Equity:
Current portion of long-term debt		$	—			$	—			$	882			$	—			$	882
Current portion of capital lease obligations			—				1,147				—				—				1,147
Current portion of other long-term liabilities			—				16,032				169				—				16,201
Accounts payable and accrued liabilities			12,808				66,726				26,027				(652	)			104,909
Total current liabilities			12,808				83,905				27,078				(652	)			123,139
Long-term debt, net of current portion			300,088				265,725				110,343				(368,423	)			307,733
Capital lease obligations, net of current portion			—				982				—				—				982
Deferred tax liability			7,386				980				3,114				—				11,480
Asset retirement obligations			—				12,332				5,116				—				17,448
Other non-current liabilities			—				22,868				524				—				23,392
Total liabilities			320,282				386,792				146,175				(369,075	)			484,174
Stockholders’ equity			107,111				20,841				29,626				(50,467	)			107,111
Total liabilities and stockholders’ equity		$	427,393			$	407,633			$	175,801			$	(419,542	)		$	591,285