GLOBAL CASH ACCESS HOLDINGS, INC., 10-K filed on 3/12/2013
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Feb. 28, 2013
Jun. 30, 2012
Document and Entity Information
 
 
 
Entity Registrant Name
Global Cash Access Holdings, Inc. 
 
 
Entity Central Index Key
0001318568 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2012 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 466.3 
Entity Common Stock, Shares Outstanding
 
66,490,337 
 
Document Fiscal Year Focus
2012 
 
 
Document Fiscal Period Focus
FY 
 
 
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 
 
 
Revenues
$ 584,486 
$ 544,063 
$ 605,590 
Costs and expenses
 
 
 
Cost of revenues (exclusive of depreciation and amortization)
436,059 
419,606 
463,045 
Operating expenses
75,806 
69,517 
73,720 
Depreciation
6,843 
7,971 
9,323 
Amortization
9,796 
8,673 
6,872 
Total costs and expenses
528,504 
505,767 
552,960 
Operating income
55,982 
38,296 
52,630 
Other expenses
 
 
 
Interest expense, net of interest income
15,519 
18,638 
16,329 
Loss on early extinguishment of debt
 
943 
 
Total other expenses
15,519 
19,581 
16,329 
Income from operations before tax
40,463 
18,715 
36,301 
Income tax provision
14,774 
9,586 
18,751 
Net income
25,689 
9,129 
17,550 
Plus: net loss attributable to non-controlling interest
 
 
(56)
Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries
25,689 
9,129 
17,494 
Foreign currency translation
218 
(247)
397 
Comprehensive income
$ 25,907 
$ 8,882 
$ 17,891 
Earnings per share
 
 
 
Basic (in dollars per share)
$ 0.39 
$ 0.14 
$ 0.27 
Diluted (in dollars per share)
$ 0.38 
$ 0.14 
$ 0.26 
Weighted average common shares outstanding
 
 
 
Basic (in shares)
65,933 
64,673 
65,903 
Diluted (in shares)
67,337 
64,859 
67,272 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
ASSETS
 
 
Cash and cash equivalents
$ 153,020 
$ 55,535 
Restricted cash and cash equivalents
200 
455 
Settlement receivables
29,484 
80,246 
Other receivables, net
11,571 
16,885 
Inventory
7,126 
7,087 
Prepaid expenses and other assets
18,254 
15,406 
Property, equipment and leasehold improvements, net
15,441 
15,577 
Goodwill
180,141 
180,122 
Other intangible assets, net
33,994 
38,216 
Deferred income taxes, net
104,664 
119,538 
Total assets
553,895 
529,067 
Liabilities
 
 
Settlement liabilities
182,446 
141,827 
Accounts payable
35,374 
32,223 
Accrued expenses
15,816 
21,159 
Borrowings
121,500 
174,000 
Total liabilities
355,136 
369,209 
Commitments and Contingencies (Note 9)
   
   
Stockholders' Equity
 
 
Common stock, $0.001 par value, 500,000 shares authorized and 87,545 and 85,651 shares issued at December 31, 2012 and December 31, 2011, respectively
87 
86 
Convertible preferred stock, $0.001 par value, 50,000 shares authorized and 0 shares outstanding at December 31, 2012 and December 31, 2011, respectively
   
   
Additional paid-in capital
217,990 
204,735 
Retained earnings
123,614 
97,925 
Accumulated other comprehensive income
2,558 
2,340 
Treasury stock, at cost, 20,724 and 20,686 shares at December 31, 2012 and December 31, 2011, respectively
(145,490)
(145,228)
Total stockholders' equity
198,759 
159,858 
Total liabilities and stockholders' equity
$ 553,895 
$ 529,067 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
CONSOLIDATED BALANCE SHEETS
 
 
Common stock, par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, shares authorized
500,000 
500,000 
Common stock, shares issued
87,545 
85,651 
Convertible preferred stock, par value (in dollars per share)
$ 0.001 
$ 0.001 
Convertible preferred stock, shares authorized
50,000 
50,000 
Convertible preferred stock, shares outstanding
Treasury stock, shares
20,724 
20,686 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Cash flows from operating activities
 
 
 
Net income
$ 25,689 
$ 9,129 
$ 17,550 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
Depreciation
6,843 
7,971 
9,323 
Amortization of intangibles
9,796 
8,673 
6,872 
Amortization of financing costs
1,485 
1,343 
973 
Loss/(gain) on sale or disposal of assets
95 
991 
(366)
Provision for bad debts
5,182 
5,959 
5,908 
Loss on early extinguishment of debt
 
943 
 
Stock-based compensation
6,655 
6,809 
7,935 
Changes in operating assets and liabilities:
 
 
 
Settlement receivables
50,823 
(69,881)
1,660 
Other receivables, net
1,196 
(8,125)
2,757 
Inventory
134 
(3,146)
814 
Prepaid and other assets
(3,425)
(2,323)
1,567 
Deferred income taxes
14,376 
9,252 
17,505 
Settlement liabilities
40,530 
82,125 
(2,655)
Accounts payable
3,148 
3,658 
(715)
Accrued expenses
(5,039)
874 
(230)
Net cash provided by operating activities
157,488 
54,252 
68,898 
Cash flows from investing activities
 
 
 
Acquisitions, net of cash acquired
 
(10,763)
(15,354)
Capital expenditures
(13,654)
(7,420)
(9,051)
Proceeds from sale of fixed assets
868 
 
 
Changes in restricted cash and cash equivalents
255 
 
(87)
Net cash used in investing activities
(12,531)
(18,183)
(24,492)
Cash flows from financing activities
 
 
 
Repayments against old credit facility
 
(208,750)
(41,000)
Securing of new credit facility
 
214,000 
 
Issuance costs of new credit facility
(676)
(7,099)
 
Repayments against new credit facility
(52,500)
(40,000)
 
Proceeds from exercise of stock options
6,655 
812 
5,629 
Purchase of treasury stock
(262)
(190)
(33,474)
Net cash used in financing activities
(46,783)
(41,227)
(68,845)
Effect of exchange rates on cash
(689)
57 
307 
Cash and cash equivalents
 
 
 
Net increase/(decrease) for the period
97,485 
(5,101)
(24,132)
Balance, beginning of the period
55,535 
60,636 
84,768 
Balance, end of the period
153,020 
55,535 
60,636 
Supplemental cash flow disclosures
 
 
 
Cash paid for interest
13,724 
19,166 
15,922 
Cash paid for income tax, net of refunds
665 
366 
689 
Non-cash activities
 
 
 
Purchase of other intangibles
 
 
$ 1,500 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands, unless otherwise specified
Total
Equity Attributable to GCA Holdings, Inc.
Common Stock - Series A
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income
Treasury Stock
Equity Attributable to Non-Controlling Interest
Balance at Dec. 31, 2009
$ 145,409 
$ 145,497 
$ 83 
$ 183,486 
$ 71,302 
$ 2,190 
$ (111,564)
$ (88)
Balance (in shares) at Dec. 31, 2009
 
 
83,344 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
Net income
17,550 
17,494 
 
 
17,494 
 
 
56 
Foreign currency translation
397 
397 
 
 
 
397 
 
 
Share-based compensation expense
7,935 
7,935 
 
7,935 
 
 
 
 
Exercise of options
5,630 
5,630 
5,629 
 
 
 
 
Exercise of options (in shares)
 
 
1,200 
 
 
 
 
 
Treasury share repurchases
(32,675)
(32,675)
 
 
 
 
(32,675)
 
Restricted share vesting withholdings
(799)
(799)
 
 
 
 
(799)
 
Restricted shares vested
 
 
 
 
 
Restricted shares vested (in shares)
 
 
462 
 
 
 
 
 
Minority interest
32 
 
 
 
 
 
 
32 
Other
(2)
(2)
 
(2)
 
 
 
 
Balance at Dec. 31, 2010
143,478 
143,478 
85 
197,048 
88,796 
2,587 
(145,038)
 
Balance (in shares) at Dec. 31, 2010
 
 
85,006 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
Net income
9,129 
9,129 
 
 
9,129 
 
 
 
Foreign currency translation
(247)
(247)
 
 
 
(247)
 
 
Share-based compensation expense
6,809 
6,809 
 
6,809 
 
 
 
 
Exercise of options
879 
879 
878 
 
 
 
 
Exercise of options (in shares)
 
 
399 
 
 
 
 
 
Restricted share vesting withholdings
(190)
(190)
 
 
 
 
(190)
 
Restricted shares vested (in shares)
 
 
246 
 
 
 
 
 
Balance at Dec. 31, 2011
159,858 
159,858 
86 
204,735 
97,925 
2,340 
(145,228)
 
Balance (in shares) at Dec. 31, 2011
 
 
85,651 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
Net income
25,689 
25,689 
 
 
25,689 
 
 
 
Foreign currency translation
218 
218 
 
 
 
218 
 
 
Share-based compensation expense
6,655 
6,655 
 
6,655 
 
 
 
 
Exercise of options
6,601 
6,601 
6,600 
 
 
 
 
Exercise of options (in shares)
 
 
1,726 
 
 
 
 
 
Restricted share vesting withholdings
(262)
(262)
 
 
 
 
(262)
 
Restricted shares vested (in shares)
 
 
168 
 
 
 
 
 
Balance at Dec. 31, 2012
$ 198,759 
$ 198,759 
$ 87 
$ 217,990 
$ 123,614 
$ 2,558 
$ (145,490)
 
Balance (in shares) at Dec. 31, 2012
 
 
87,545 
 
 
 
 
 
BUSINESS AND BASIS OF PRESENTATION
BUSINESS AND BASIS OF PRESENTATION

1. BUSINESS AND BASIS OF PRESENTATION

        Global Cash Access Holdings, Inc. ("Holdings") is a holding company, the principal asset of which is the capital stock of Global Cash Access, Inc. ("GCA"). Unless otherwise indicated, the terms "the Company," "Holdings," "we," "us" and "our" refer to Holdings together with its consolidated subsidiaries. Holdings was formed on February 4, 2004 for the purpose of holding all of the outstanding capital stock of GCA and to guarantee the obligations under our senior secured credit facilities.

        We are a global provider of cash access and related equipment services and solutions to the gaming industry. Our services, equipment and solutions provide gaming establishment patrons access to cash through a variety of methods, including automated teller machine ("ATM") cash withdrawals, credit card cash access transactions, point-of-sale ("POS") debit card transactions, check verification and warranty services and money transfers. In addition, we also provide products and services that improve credit decision-making, automate cashier operations and enhance patron marketing activities for gaming establishments. We also sell and service cash access devices such as slot machine ticket redemption and jackpot kiosks to the gaming industry.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

        All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

        Cash and cash equivalents include cash and all balances on deposit in banks and financial institutions. The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash and cash equivalents. Such balances may at times exceed the federal insurance limits. However, the Company periodically evaluates the creditworthiness of these institutions to minimize risk.

Restricted Cash and Cash Equivalents

        As part of certain of our sponsorship agreements, we are required to maintain minimum deposits as collateral for any potential chargeback loss activity occurring as a result of the sponsorship arrangements. All interest received on these deposits is also recorded to restricted cash and cash equivalents. As of December 31, 2012, the total balance of restricted cash and cash equivalents was $0.2 million.

ATM Funding Agreements

        The Company obtains all of the cash required to operate its ATMs through various ATM Funding Agreements. Some gaming establishments provide the cash utilized within the ATM ("Site-Funded"). The Site-Funded receivables generated for the amount of cash dispensed from transactions performed at our ATMs are owned by GCA and GCA is liable to the gaming establishment for the face amount of the cash dispensed. In the consolidated balance sheets, the amount of the receivable for transactions processed on these ATM transactions is included within settlement receivables and the amount due to the gaming establishment for the face amount of dispensing transactions is included within settlement liabilities.

        For our non-Site-Funded locations, the Company's Contract Cash Solutions Agreement with Wells Fargo allows for the Company to utilize funds owned by Wells Fargo to provide the currency needed for normal operating requirements for the Company's ATMs. For the use of these funds, the Company pays Wells Fargo a cash usage fee on the average daily balance of funds utilized multiplied by a contractually defined cash usage rate. Under this agreement, all currency supplied by Wells Fargo remains the sole property of Wells Fargo at all times until it is dispensed, at which time Wells Fargo obtains an interest in the corresponding settlement receivable. As the cash is never an asset of ours, supplied cash is not reflected on our balance sheet. We are charged a cash usage fee for the cash used in these ATMs, which is included as interest expense in the consolidated statements of income. The Company recognizes the fees as interest expense due to the similar operational characteristics to a revolving line of credit, the fact that the fees are calculated on a financial index and the fees are paid for access to a capital resource.

Settlement Receivables and Settlement Liabilities

        In the credit card cash access and POS debit card cash access transactions provided by GCA, the gaming establishment is reimbursed for the cash disbursed to gaming patrons, in most instances, through the issuance of a negotiable instrument, and, in some instances, through electronic settlement. GCA receives reimbursement from the patron's credit or debit card issuer for the transaction in an amount equal to the amount owing to the gaming establishment plus the fee charged to the patron. This reimbursement is included within the settlement receivables on the consolidated balance sheets. The unpaid negotiable instrument amounts owing to gaming establishments are included within settlement liabilities on the consolidated balance sheets.

Warranty Receivables

        If a gaming establishment chooses to have a check warranted, it sends a request to a check warranty service provider, asking whether it would be willing to accept the risk of cashing the check. If the check warranty provider accepts the risk and warrants the check, the gaming establishment negotiates the patron's check by providing cash for the face amount of the check. If the check is dishonored by the patron's bank upon presentment, the gaming establishment invokes the warranty, and the check warranty service provider purchases the check from the gaming establishment for the full check amount and then pursues collection activities on its own. In our Central Credit Check Warranty product and under our agreement with TeleCheck, we receive all of the check warranty revenue. We are exposed to risk for the losses associated with any warranted items that we cannot collect from patrons issuing the items. Warranty expenses are defined as any amounts paid by TeleCheck or Central Credit to gaming establishments to purchase dishonored checks that will not be collectible from patrons. Additionally, we pay a portion of TeleCheck's operating expenses and certain operating expenses associated with our third party partners related to the provision of these services.

Unamortized Debt Issuance Costs

        Debt issuance costs incurred in connection with long-term borrowings are capitalized and amortized to interest expense based upon the related debt agreements using the straight-line method, which approximates the effective interest method. Unamortized debt issuance costs are included in prepaid and other assets on the consolidated balance sheets.

Property, Equipment and Leasehold Improvements

        Property, equipment and leasehold improvements are stated at cost, less accumulated depreciation, computed using the straight-line method over the lesser of the estimated life of the related assets, generally three to five years, or the related lease term.

        Repairs and maintenance costs are expensed as incurred.

        Upon sale or retirement, the costs and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the consolidated statements of income.

        Property, equipment and leasehold improvements are reviewed for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable. Impairment is indicated when undiscounted future cash flows do not exceed the asset's carrying value. As of December 31, 2012, the Company does not believe any of its property, equipment, or leasehold improvements are impaired.

Goodwill

        Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations.

        The Company tests for impairment annually on a reporting unit basis, as of October 1, or more often under certain circumstances. The annual impairment test is completed using either: a qualitative Step "0" assessment based on reviewing relevant events and circumstances; or a quantitative Step "1" assessment using an income approach that discounts future cash flows based on the estimated future results of the Company's reporting units and a market approach that compares market multiples of comparable companies to determine whether or not any impairment exists. If the fair value of a reporting unit is less than its carrying amount, the Company uses the Step "2" assessment to determine the impairment.

Fair Values of Financial Instruments

        The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument.

        The carrying amount of cash and cash equivalents, restricted cash and cash equivalents, other receivables, net, settlement receivables, settlement liabilities, accounts payable and accrued expenses approximates fair value due to the short-term maturities of these instruments. The fair value of our borrowings are estimated based on various inputs to determine a market price, such as: market demand and supply, size of tranche, maturity and similar instruments trading in more active markets. Due to the infrequency of trading for our borrowing instrument(s), our position is that we can no longer support a Level 1 input to determine fair value and we have changed the fair value of our borrowings to a Level 2 input as of December 31, 2012. The fair values of all other financial instruments, including amounts outstanding under the ATM funding agreements approximate their book values as the instruments are short-term in nature or contain market rates of interest.

Interest Rate Cap

        In conjunction with the terms and conditions of the New Senior Credit Facility, as described in Note 8, GCA purchased a $150.0 million notional amount interest rate cap with an effective date of January 5, 2012 and a term of three years. GCA purchased this interest rate cap to partially reduce the Company's exposure to increases in the London Interbank Offer Rate ("LIBOR') above 1.5% during the term of the interest rate cap with respect to its variable rate debt obligations under the New Senior Credit Facility and its obligations under the Contract Cash Solutions Agreement with Wells Fargo. This interest rate cap is recorded in other assets in the balance sheet, and is marked-to-market based on a quoted market price with the effects offset in the income statement. The interest rate cap carrying value and fair value approximate each other and these values are insignificant as of December 31, 2012.

        The following table presents the fair value and carrying value of GCA's borrowings (amounts in thousands):

 
  Level of
Hierarchy(*)
  Fair
Value
  Carrying
Value
 

December 31, 2012

                   

New senior secured credit facility

    2   $ 122,715   $ 121,500  

December 31, 2011

                   

New senior secured credit facility

    1   $ 173,565   $ 174,000  

(*)
Level 1 indicates that the fair value is determined by using quoted prices in active markets for identical investments. Level 2 indicates that the fair value is determined using pricing inputs other than quoted prices in active markets such as models or other valuation methodologies. Level 3 indicates that the fair value is determined using pricing inputs that are unobservable for the investment and include situations where there is little, if any, market activity for the investment. Significant management estimates and judgment are used in the determination of the fair value of level 3 pricing inputs.

Inventory

        Inventory primarily consists of parts as well as finished goods and work-in-progress. Inventory is stated at lower of cost or market accounted for using the average cost method. The cost of inventory includes cost of materials, labor, overhead and freight.

Revenue Recognition

        The Company recognizes revenue when evidence of an arrangement exists, services have been rendered, the price is fixed or determinable and collectability is reasonably assured. The Company evaluates its revenue streams for proper timing of revenue recognition. Revenue is recognized as products are delivered and or services are performed.

Cost of Revenues (exclusive of depreciation and amortization)

        The cost of revenues (exclusive of depreciation and amortization) represent the direct costs required to perform revenue generating transactions. The principal costs included within cost of revenues (exclusive of depreciation and amortization) are commissions paid to gaming establishments, interchange fees paid to credit and debit card networks, transaction processing fees to our transaction processor and check cashing warranties.

Advertising, Marketing and Promotional Costs

        The Company expenses advertising, marketing and promotional costs as incurred. Total advertising, marketing and promotional costs, included in operating expenses in the consolidated statements of income, were $0.7 million, $0.6 million and $0.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Income Taxes

        Income tax expense includes U.S. and international income taxes, plus the provision for U.S. taxes on undistributed earnings of international subsidiaries not deemed to be permanently invested. Since it is management's practice and intent to reinvest the earnings in the international operations of our foreign subsidiaries, U.S. federal income taxes have not been provided on the undistributed earnings of any foreign subsidiaries except for GCA Macau. Some items of income and expense are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes.

Foreign Currency Translation

        Foreign currency denominated assets and liabilities for those foreign entities for which the local currency is the functional currency are translated into U.S. dollars based on exchange rates prevailing at the end of each year. Revenues and expenses are translated at average exchange rates during the year. The effects of foreign exchange gains and losses arising from these translations are included as a component of other comprehensive income on the consolidated statements of income and comprehensive income. Translation adjustments on intercompany balances of a long-term investment nature are recorded as a component of accumulated other comprehensive income on the Company's consolidated balance sheets.

Use of Estimates

        The Company has made estimates and judgments affecting the amounts reported in these financial statements and the accompanying notes. The actual results may differ from these estimates. These accounting estimates incorporated into the Company's consolidated financial statements include, but are not limited to:

  • the estimated reserve for warranty expense associated with our check warranty receivables;

    the valuation and recognition of share-based compensation;

    the valuation allowance on our deferred income tax assets;

    the estimated cash flows in assessing the recoverability of long-lived assets; and

    the budgets for future performance, weighted average cost of capital ("WACC") and growth rates as well as other factors used in our annual goodwill impairment evaluation.

Earnings Applicable to Common Stock

        Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the effect of potential common stock resulting from assumed stock option exercises.

Share-Based Compensation

        Share-based payment awards result in a cost that is measured at fair value on the award's grant date. Stock options expected to be exercised currently and in future periods are measured at fair value using the Black-Scholes model with the expense associated with these awards being recognized on the straight-line basis over the awards' vesting period. Forfeitures are estimated at the time of grant, with such estimate updated periodically and with actual forfeitures recognized currently to the extent they differ from the estimates.

Recently Issued Accounting Pronouncements

        In July 2012, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2012-02, which provides amendments stating that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Accounting Standards Codification ("ASC") 350—Goodwill and Other. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. These amendments are intended to reduce cost and complexity by providing an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative test. The amendments also enhance the consistency of impairment testing guidance among long-lived asset categories by permitting an entity to assess qualitative factors to determine whether it is necessary to calculate the asset's fair value when testing an indefinite-lived intangible asset for impairment, which is equivalent to the impairment testing requirements for other long-lived assets. We assessed the impairment of our intangible assets and determined the most appropriate form of action, which was to perform a qualitative assessment to ascertain the validity of a quantitative measure rather than bypassing the qualitative assessment and conducting a quantitative impairment test. The adoption of this amended guidance did not have an impact on the Company's financial position, results of operations or cash flows.

ATM FUNDING AGREEMENTS
ATM FUNDING AGREEMENTS

3. ATM FUNDING AGREEMENTS

Wells Fargo Contract Cash Solutions Agreement

        Our Contract Cash Solutions Agreement with Wells Fargo allows for the Company to utilize funds owned by Wells Fargo to provide the currency needed for normal operating requirements for the Company's ATMs. For the use of these funds, we pay Wells Fargo a cash usage fee on the average daily balance of funds utilized multiplied by a contractually defined cash usage rate. Under this agreement, all currency supplied by Wells Fargo remains the sole property of Wells Fargo at all times until it is dispensed, at which time Wells Fargo obtains an interest in the corresponding settlement receivable. As the cash is never an asset of ours, supplied cash is not reflected on our balance sheet.

        In June 2012, the Company and Wells Fargo amended the Contract Cash Solutions Agreement to increase the maximum amount of cash to be provided to GCA from $400.0 million to $500.0 million, and the initial term of the Contract Cash Solutions Agreement was extended from November 30, 2013 until November 30, 2014.

        As of December 31, 2012 and 2011, the outstanding balances of ATM cash utilized by GCA from Wells Fargo were $360.4 million and $467.8 million, respectively.

        Under the terms of the Contract Cash Solutions Agreement, we pay a monthly cash usage fee based upon the product of the average daily dollars outstanding in all ATMs multiplied by a contractually defined cash usage rate. This cash usage rate is determined by an applicable LIBOR plus a mutually agreed upon margin.

        We are exposed to interest rate risk to the extent that the applicable LIBOR increases, subject to the interest rate cap purchased in January 2012.

        For the years ended December 31, 2012, 2011 and 2010, the cash usage fees incurred by us were $3.1 million, $2.8 million and $1.9 million, respectively, and are reflected as interest expense within the consolidated statement of income.

        We are responsible for any losses of cash in the ATMs under its agreement with Wells Fargo and we self-insure for this risk. For the years ended December 31, 2012 and 2011, we incurred no material losses related to this self-insurance.

Site-Funded ATMs

        The Company operates ATMs at certain customer gaming establishments where the gaming establishment provides the cash required for the ATM operational needs. We are required to reimburse the customer for the amount of cash dispensed from these Site-Funded ATMs. The Site-Funded ATM liability is included within settlement liabilities in the accompanying consolidated balance sheets and was $107.5 million and $85.9 million as of December 31, 2012 and 2011, respectively.

WARRANTY RESERVES
WARRANTY RESERVES

4. WARRANTY RESERVES

        The warranty receivables amount is recorded in other receivables, net on the consolidated balance sheets. On a monthly basis, the Company evaluates the collectability of the outstanding balances and establishes a reserve for the face amount of the expected losses on these receivables. The warranty expense associated with this reserve is included within cost of revenues (exclusive of depreciation and amortization) in the consolidated statement of income.

        A summary activity of the reserve for warranty losses is as follows (in thousands):

 
  Amount  

Balance, December 31, 2010

  $ 7,036  

Warranty expense provision

   
5,700
 

Charge offs against reserve

    (5,980 )
       

Balance, December 31, 2011

    6,756  

Warranty expense provision

   
5,226
 

Charge offs against reserve

    (5,074 )
       

Balance, December 31, 2012

  $ 6,908  
       
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS

5. BUSINESS COMBINATIONS

        The Company accounts for business combinations in accordance with the accounting standards, which require that the assets acquired and liabilities assumed be recorded at their estimated fair values.

Western Money

        The Company completed its acquisition of Western Money in May 2010, in which 100 percent of the outstanding common shares of Western Money were acquired for a purchase price net of cash of approximately $15.4 million. This acquisition did not have a material impact on the consolidated financial statements of the Company as of and for the year ended December 31, 2010. During the quarter ended June 30, 2011, the Company completed its determination of the estimated fair values of assets acquired and liabilities assumed in the Western Money acquisition.

        The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for Western Money (in thousands):

 
  Amount  

Net working capital

  $ 3,516  

Property, plant and equipment

    2,320  

Goodwill

    5,745  

Intangible assets

    6,284  

Deferred income tax liabilities

    (2,498 )
       

Net assets acquired (excluding cash)

  $ 15,367  
       

        In connection with the acquisition, the Company acquired approximately $6.3 million of intangible assets, of which $4.0 million was assigned to customer contracts, which will be amortized over eleven years on an accelerated basis. The adjustments to the preliminary fair value amounts have not been applied retrospectively to the consolidated balance sheet or the consolidated statements of income and comprehensive income during the prior year as the impact of the final purchase price allocations was not material to previously reported financial statements.

        Other intangibles acquired include $0.7 million of trademarks which will be amortized on a straight-line basis over 10 years and $1.4 million of developed technology and $0.2 million of non-compete agreements both of which will be amortized on a straight-line basis over their useful lives of 5 years and 2 years, respectively.

        As of December 31, 2012, the Western Money Systems subsidiary was merged with and into Global Cash Access, Inc.

MCA Processing

        On November 15, 2011, the Company acquired substantially all of the assets of MCA Processing LLC ("MCA"), a provider of ATM, debit card and credit card cash access services to gaming establishments and also a manufacturer, seller, licensor and servicer of redemption kiosk devices. The Company acquired MCA for approximately $13.4 million, of which approximately $2.6 million was paid one year from the closing date in November 2012.

        Although not currently a shareholder of the company, in conjunction with the purchase of certain of the assets of MCA Processing, LLC, a former shareholder of the Company, Robert Cucinotta, and USA Payment Systems, an entity affiliated with Robert Cucinotta, entered into non-competition agreements with the Company.

        The amount of revenue and earnings included in the Company's income statement for the year ended December 31, 2011, and the supplemental pro forma impact on the revenue and earnings of the combined entity had the acquisition date been January 1, 2011, or 2010, have not been presented as such amounts are not material.

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

6. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

        Property, equipment and leasehold improvements consist of the following (amounts in thousands):

 
   
  At December 31,  
 
  Useful Life
(years)
 
 
  2012   2011  

Cash advance equipment

  3   $ 3,461   $ 6,578  

ATM equipment

  5     29,512     55,800  

Office, computer and other equipment

  3     8,562     8,799  

Leasehold and building improvements

  Lease Term     4,308     2,788  
               

Sub-total

        45,843     73,965  

Less: accumulated depreciation

       
(30,402

)
 
(58,388

)

Total

     
$

15,441
 
$

15,577
 
               
GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL AND OTHER INTANGIBLE ASSETS

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

        The changes in the carrying amount of goodwill are as follows (in thousands):

 
  Cash Advance   ATM   Check Services   Other   Total  

Goodwill

                               

Balance, December 31, 2010

  $ 100,895   $ 33,051   $ 23,281   $ 27,883   $ 185,110  

Acquistion related—Western Money

                (5,011 )   (5,011 )

Foreign translation adjustment

    23                 23  
                       

Balance, December 31, 2011

  $ 100,918   $ 33,051   $ 23,281   $ 22,872   $ 180,122  
                       

Foreign translation adjustment

    19                 19  
                       

Balance, December 31, 2012

  $ 100,937   $ 33,051   $ 23,281   $ 22,872   $ 180,141  
                       

        In accordance with ASC 350, we test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company does not believe that any of its goodwill was impaired as of December 31, 2012 based upon the results of its impairment testing.

Goodwill Testing

        In performing the annual goodwill impairment test for 2012, we utilized the qualitative assessment approach, commonly known as the Step "0" approach, prescribed under ASC 350 as amended by Accounting Standards Update ("ASU") No. 2011-08. We assessed certain applicable qualitative factors to determine whether it was more likely than not that the fair value of our reporting units was less than the total assets carrying amounts. In evaluating whether it was more likely than not that the fair value of our reporting units was less than the total assets carrying amounts, we assessed relevant events and circumstances: (a) Macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets; (b) Industry and market considerations such as a deterioration in the environment in which we operate, an increased competitive environment, a decline in market-dependent multiples or metrics (considered in both absolute terms and relative to peers), a change in the market for our products or services, or a regulatory or political development; (c) Cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows; (d) Overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; (e) Other relevant entity-specific events such as changes in management, key personnel, strategy, or customers; contemplation of bankruptcy; or litigation; (f) Events affecting a reporting unit such as a change in the composition or carrying amount of its net assets, a more-likely-than-not expectation of selling or disposing all, or a portion, of a reporting unit, the testing for recoverability of a significant asset group within a reporting unit, or recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit; and (g) If applicable, a sustained decrease in share price (considered in both absolute terms and relative to peers).

        The Step "0" assessment as of October 1, 2012 was also based on the Company's estimation of the implied fair value of its reporting units as of October 1, 2011 (the most recent valuation date). In performing the annual impairment test for 2011, we utilized the two-step approach prescribed under ASC 350. The first step required a comparison of the carrying amount of each reporting unit to its estimated fair value. To estimate the fair value of our reporting units for Step 1, we used a combination of the income and the market approaches.

        The income approach is based on a discounted cash flow analysis, or DCF method. This method involves estimating the after-tax cash flows attributable to a reporting unit and then discounting the after-tax cash flows to a present value ("DCF"), using a risk-adjusted discount rate. Assumptions used in the DCF require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates and the amount and timing of expected future cash flows. The forecasted cash flows are based on our most recent budget and for years beyond the budget. Our budgets are based on estimated future growth rates. We believe our assumptions are consistent with the plans and estimates used to manage the underlying businesses. The discount rates, which are intended to reflect the risks inherent in future cash flow projections, used in the DCF are based on estimates of the weighted-average cost of capital, or WACC, of market participants relative to each respective reporting unit. Key assumptions used in estimating fair value under the discounted cash flow approach included a discount rate of 12.5%, projected compound average revenue growth rates of 2.0% to 3.0% and terminal value growth rates of 2.0%. The discounted cash flow analyses for our segments included estimated future cash inflows from operations and estimated future cash outflows for capital expenditures.

        The market approach considers comparable market data based on multiples of revenue or earnings before taxes, depreciation and amortization ("EBITDA"). Key assumptions used in estimating fair value under the market approach were based on observed market multiples of enterprise value to revenue and EBITDA for both comparable publicly-traded companies and recent merger and acquisition transactions involving similar companies to estimate appropriate controlling basis multiples to apply to each of the reporting units. Based on the multiples implied by this market data, we selected multiples of revenue of 0.3 to 2.7 times and multiples of EBITDA of 6.5 times.

        After assessing the totality of events and circumstances for 2012, such as those described in the preceding paragraphs, we determined that it was more likely than not that the fair value of our reporting units exceeded the total assets carrying amounts; and therefore, the first and second steps of the goodwill impairment test were determined to be unnecessary. We conducted our annual impairment test for our reporting units as of October 1, 2012 and no impairment was identified.

        The estimate of fair value requires significant judgment. We based our fair value estimates on assumptions that we believe to be reasonable, but that are unpredictable and inherently uncertain, including estimates of future growth rates and operating margins and assumptions about the overall economic climate and the competitive environment for our reporting units. There can be no assurance that our estimates and assumptions made for purposes of our goodwill and identifiable intangible asset testing as of the time of testing will prove to be accurate predictions of the future. If our assumptions regarding business plans, competitive environments or anticipated growth rates are not correct, we may be required to record goodwill and/or intangible asset impairment charges in future periods, whether in connection with our next annual impairment testing or earlier, if an indicator of an impairment is present before our next annual evaluation.

Other Intangible Assets

        Other intangible assets consist primarily of customer contracts (rights to provide cash access services to gaming establishment customers) acquired through business combinations and acquisitions, capitalized software development costs and the acquisition cost of our patent related to the "3-in-1 rollover" technology acquired in 2005. Customer contracts require the Company to make renewal assumptions, which impact the estimated useful lives of such assets. The acquisition cost of the 3-in-1 rollover patent is being amortized over the term of the patent, which expires in 2018.

        Other intangible assets consist of the following (in thousands):

 
   
  At December 31,  
 
  Useful Life
(years)
 
 
  2012   2011  

Intangible assets

                 

Computer software

  3   $ 26,007   $ 24,719  

Patents and trademarks

  17     11,149     11,134  

Customer contracts

  7 - 14     39,142     50,649  

Non-compete agreements

  3     1,200     1,400  
               

Gross carrying amount

        77,498     87,902  

Less: accumulated amortization

       
(43,504

)
 
(49,686

)
               

Net carrying amount

      $ 33,994   $ 38,216  
               

        Amortization expense related to these intangibles totaled approximately $9.8 million, $8.7 million and $6.9 million for the years ended December 31, 2012, 2011 and 2010, respectively.

        The total net book value of amortizable intangible assets was approximately $34.0 million at December 31, 2012. The anticipated amortization expense related to other intangible assets, assuming no subsequent impairment of the underlying assets, is as follows (in thousands):

 
  Amount  

2013

  $ 10,217  

2014

    8,305  

2015

    7,196  

2016

    4,768  

2017

    1,986  

Thereafter

    1,522  
       

Total

  $ 33,994  
       

        The Company accounts for the costs related to computer software developed or obtained for internal use in accordance with accounting guidance, which establishes that computer software costs that are incurred in the preliminary project stage should be expensed as incurred. Costs incurred in the application development phase and any upgrades and enhancements that modify the existing software and result in additional functionality are capitalized and amortized over their useful lives, generally not to exceed three years. These costs consist of outside professional fees related to the development of our systems. The Company capitalized $0.7 million, $0.2 million and $0.1 million of development costs for the years ended December 31, 2012, 2011 and 2010, respectively.

BORROWINGS
BORROWINGS

8. BORROWINGS

        On March 1, 2011, the Company refinanced all of its indebtedness outstanding under the Second Amended and Restated Credit Agreement (as described below) and repaid its obligations under the senior subordinated notes with proceeds from the New Senior Credit Facility as described below.

New Senior Credit Facility

        On March 1, 2011, GCA, together with its sole stockholder, Holdings entered into a Credit Agreement ("the Credit Agreement") with certain lenders, Deutsche Bank Trust Company Americas, as Administrative Agent and Wells Fargo Securities, LLC, as Syndication Agent. The Credit Agreement provides for a $210.0 million term loan facility and a $35.0 million revolving credit facility (the "New Senior Credit Facility"). The revolving credit facility includes provisions for the issuance of up to $10.0 million of letters of credit and up to $5.0 million in swing-line loans. We used the proceeds from the New Senior Credit Facility to repay all outstanding indebtedness under our then existing senior secured credit facility under the Second Amended and Restated Credit Agreement and to defease our senior subordinated notes.

        The Credit Agreement also contains an increase option permitting GCA to arrange with existing lenders and/or new lenders for them to provide up to an aggregate of $50.0 million in additional term loan commitments. All $210.0 million of available borrowings under the term loan facility were borrowed concurrent with the establishment of the New Senior Credit Facility. Once repaid, no amounts under the term loan facility may be re-borrowed. In addition, $4.0 million of available borrowings under the revolving credit facility were borrowed concurrent with the establishment of the New Senior Credit Facility. Once repaid, amounts under the revolving credit facility may be re-borrowed.

        The term loan requires principal repayments of one quarter of 1% of the aggregate initial principal amount of term loans, adjusted for any non-mandatory prepayments per quarter, as well as annual mandatory prepayment provisions based on an excess cash flow sweep equal to a fixed percentage of excess cash flow (as defined in the Credit Agreement). The remaining principal is due on the maturity date, March 1, 2016. GCA may prepay the loans and terminate the commitments at any time after the first year, without premium or penalty, subject to certain qualifications set forth in the Credit Agreement. Furthermore, the Credit Agreement contains mandatory prepayment provisions which, under certain circumstances, such as asset or equity sales, obligate GCA to apply defined portions of its cash flow to prepayment of the New Senior Credit Facility.

        Borrowings under the New Senior Credit Facility bear interest at either (x) a specified base rate plus a 4.50% margin, or (y) LIBOR plus a 5.50% margin. The base rate minimum is 2.50% and the LIBOR minimum is 1.50%. Interest in respect of base rate loans is payable quarterly in arrears and interest in respect of LIBOR loans is payable in arrears at the end of the applicable interest period and every three months in the case of interest periods in excess of three months. Interest is also payable at the time of repayment of any loans and at maturity. As of December 31, 2012, we had $121.5 million of outstanding indebtedness under the New Senior Credit Facility, all of which is outstanding under the term loan facility.

        The weighted average interest rate, inclusive of the applicable margin of 550 basis points, was 7.0%. We also had no amounts outstanding under our letter of credit sub facility that is part of our revolving credit facility as of December 31, 2012. The New Senior Credit Facility is unconditionally guaranteed by Holdings and each direct and indirect domestic subsidiary of GCA. All amounts owing under the New Senior Credit Facility are secured by a first priority perfected security interest in all stock (but only 65% of the stock of foreign subsidiaries), other equity interests and promissory notes owned by GCA and a first priority perfected security interest in all other tangible and intangible assets owned by GCA and the guarantors.

        On September 24, 2012, the Company entered into an amendment to its Credit Agreement. The amendment modifies certain financial covenants contained in the Credit Agreement with respect to the Company's ability to make capital expenditures, dividends and stock repurchases. Specifically, the Company, together with its subsidiaries, may make an additional $15.0 million of capital expenditures, as such term is defined in the Credit Agreement, during the remainder of the term of the Credit Agreement, which amount is in addition to any other permitted capital expenditures under the Credit Agreement. In addition, the Credit Agreement provided that the Company could make certain dividends or stock repurchases if, among other things, the Company's total leverage ratio (as calculated under the Credit Agreement) was less than 2.0 to 1. The amendment provides that the Company may now make certain dividends and stock repurchases if, among other things, its total leverage ratio is less than 2.5 to 1.

        The Credit Agreement contains customary affirmative and negative covenants, financial covenants, representations and warranties and events of defaults. As of December 31, 2012, the Company is in compliance with the required covenants.

Principal Repayments

        The maturities of the Company's borrowings at December 31, 2012 (excluding excess cash flow payments) are as follows (in thousands):

 
  Amount  

2013

  $ 1,215  

2014

    1,215  

2015

    1,215  

2016

    117,855  
       

Total

  $ 121,500  
       

Interest Rate Cap

        In conjunction with the terms and conditions of the New Senior Credit Facility, GCA purchased a $150.0 million notional amount interest rate cap with an effective date of January 5, 2012 and a term of three years. GCA purchased this interest rate cap to partially reduce the Company's exposure to increases in the London Interbank Offer Rate ("LIBOR') above 1.5% during the term of the interest rate cap with respect to its variable rate debt obligations under the New Senior Credit Facility and its obligations under the Contract Cash Solutions Agreement with Wells Fargo. This interest rate cap is recorded in other assets in the balance sheet, and is marked-to-market based on a quoted market price with the effects offset in the income statement. The interest rate cap carrying value and fair value approximate each other and these values are insignificant as of December 31, 2012.

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES

9. COMMITMENTS AND CONTINGENCIES

Lease Obligations

        The Company leases office facilities and operating equipment under cancelable and non-cancelable agreements. Total rent expense was approximately $0.7 million, $0.7 million and $0.9 million for the years ended December 31, 2012, 2011 and 2010, respectively.

        In October 2012, the Company entered into a long-term lease agreement related to office space for its new corporate headquarters located in Las Vegas, Nevada. The total estimated rental payments owing by the Company under the lease agreement total $11.8 million.

        The minimum aggregate rental commitment under all non-cancelable operating leases at December 31, 2012 were as follows (in thousands):

 
  Amount  

2013

  $ 440  

2014

    1,142  

2015

    1,013  

2016

    1,039  

2017

    1,064  

Thereafter

    6,038  
       

Total

  $ 10,736  
       

Litigation Claims and Assessments

Automated Systems America, Inc.

        On July 7, 2010, an action was commenced by Automated Systems America, Inc. in the United States District Court, Central District of California, against Holdings, GCA and certain current employees of GCA. The complaint seeks a declaratory judgment of invalidity, unenforceability and non-infringement of certain patents owned by the Company and alleges antitrust violations of Section 2 of the Sherman Act, unfair competition violations under the Lanham Act and tortuous interference and defamation per se. The plaintiff seeks damages in excess of $2.0 million, punitive damages, and a trebling of damages associated with the allegations under Section 2 of the Sherman Act. On March 3, 2011, the Company filed a motion to dismiss this action. In February 2012, the District Court entered an order granting the Company's motion to dismiss this action without prejudice, allowing the plaintiff to file a new complaint if it elected to do so. The plaintiff subsequently filed an amended complaint alleging substantially similar claims to those contained in the original complaint, and the Company has filed a motion to dismiss the amended complaint. The Company has not accrued any amounts related to this matter as the Company does not believe it is probable that a loss has been incurred and has meritorious defenses and will vigorously defend this action.

        We are also subject to a variety of other claims and suits that arise from time to time in the ordinary course of its business. We do not believe the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, will have a material adverse impact on our financial position, liquidity or results of operations.

SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY

10. SHAREHOLDERS' EQUITY

        Preferred Stock.    The Company's amended and restated certificate of incorporation allows our Board of Directors, without further action by stockholders, to issue up to 50,000,000 shares of preferred stock in one or more series and to fix the designations, powers, preferences, privileges and relative participating, optional, or special rights as well as the qualifications, limitations or restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences. As of December 31, 2012, we had no shares of preferred stock outstanding.

        Common Stock.    Subject to the preferences that may apply to shares of preferred stock that may be outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available at the times and in the amounts as our Board of Directors may from time to time determine. All dividends are non-cumulative. In the event of the liquidation, dissolution or winding up of the Company, the holders of common stock are entitled to share ratably in all assets remaining after the payment of liabilities, subject to the prior distribution rights of preferred stock, if any, then outstanding. Each stockholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. There are no sinking fund provisions applicable to the common stock. Each outstanding share of common stock is fully paid and non-assessable. As of December 31, 2012, we had 87,544,605 shares of common stock issued.

        Common Stock Repurchase Program.    In October 2012, the Company's Board of Directors authorized a new two year Common Stock Repurchase Program that supersedes all outstanding share repurchase authorizations. This new share repurchase program grants the Company the authority to repurchase up to $40.0 million of outstanding Company common stock over a two year period, which commenced in the first quarter of 2013. The Company intends to finance the share repurchases with cash on hand. The repurchase program authorizes the Company to buy its common stock from time to time through open market, privately negotiated or other transactions, including pursuant to trading plans established in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended, or by a combination of such methods. The share repurchase program is subject to prevailing market conditions and other considerations and may be suspended or discontinued at any time, and supersedes all other outstanding share repurchase programs of the Company.

        There were no common stock repurchases by the Company under the share repurchase program for the years ended December 31, 2012 and December 31, 2011.

        In April 2010, the Company repurchased in a privately negotiated transaction 3,105,590 shares of its outstanding common stock from various entities affiliated with an investment firm for an aggregate purchase price of $25.0 million at a purchase price of $8.05 per share of common stock. A member of our Board of Directors was a managing partner of the investment firm until his term expired in April 2010. We funded this repurchase with cash on hand. This repurchase was authorized by our Board of Directors in March 2010, separate and apart from the $25.0 million share repurchase program previously made in February 2010.

        In February 2010, pursuant to Rule 10b-18 under the Securities and Exchange Act of 1934, as amended, our Board of Directors authorized the repurchase of up to $25.0 million of outstanding common stock, subject to compliance with such contractual limitations on such repurchases under our financing agreements in effect from time to time, including but not limited to those relating to our senior secured indebtedness and senior subordinated notes. For the year ended December 31, 2010, we repurchased 2,000,000 of its shares of common stock pursuant to this repurchase authorization for an aggregate purchase price of $7.7 million.

        Treasury Stock.    In addition to open market purchases of common stock authorized under the Common Stock Repurchase Program, employees may direct the Company to withhold vested shares of restricted stock to satisfy the minimum statutory withholding requirements applicable to their restricted stock vesting. For the year ended December 31, 2012, the Company repurchased or withheld from restricted stock awards 38,331 shares of common stock at an aggregate purchase price of $0.3 million to satisfy the minimum applicable tax withholding obligations incident to the vesting of such restricted stock awards.

        The following table provides the treasury stock activity that occurred in 2012 (number of shares and cost in thousands):

 
  Total Number of
Shares Purchased
or Withheld
(in thousands)
  Average Price
Purchased or
Withheld
(per share)
  Cost of Shares
Purchased or
Withheld
(in thousdands)
 

Outstanding, December 31, 2011

    20,686   $ 7.02   $ 145,228  

Shares withheld from restricted stock vesting

    38     6.84   $ 262  
               

Outstanding, December 31, 2012

    20,724   $ 7.02   $ 145,490  
               
WEIGHTED AVERAGE COMMON SHARES
WEIGHTED AVERAGE COMMON SHARES

11. WEIGHTED AVERAGE COMMON SHARES

        The weighted average number of common shares outstanding used in the computation of basic and diluted earnings per share is as follows (in thousands):

 
  At December 31,  
 
  2012   2011   2010  

Weighted average number of common shares outstanding—basic

    65,933     64,673     65,903  

Potential dilution from equity grants(1)

    1,404     186     1,369  
               

Weighted average number of common shares outstanding—diluted

    67,337     64,859     67,272  
               

(1)
The potential dilution excludes the weighted average effect of stock options to acquire 5.1 million, 8.1 million and 6.9 million of common stock of Holdings for the years ended December 31, 2012, 2011 and 2010, respectively, because the application of the treasury stock method, as required, makes them anti-dilutive.
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION

12. SHARE-BASED COMPENSATION

Equity Incentive Awards

        In January 2005, the Company adopted the 2005 Stock Incentive Plan (the "2005 Plan") to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and thus to promote the success of the Company's business. The 2005 Plan is administered by the Board of Directors but may be administered by our Compensation Committee. The administrator of the 2005 Plan has the authority to select individuals who are to receive options or other equity incentive awards under the 2005 Plan and to specify the terms and conditions of grants of options or other equity incentive awards, the vesting provisions, the term and the exercise price.

        Generally, stock options and restricted stock granted under the 2005 Plan (other than those granted to non-employee directors) will vest at a rate of 25% of the shares underlying the option after one year and the remaining shares vest in equal portions over the following 36 months, such that all shares are vested after four years. Unless otherwise provided by the administrator, an option granted under the 2005 Plan generally expires ten years from the date of grant. Stock options are issued at the closing market price on the date of grant.

        We have estimated the fair value of options granted at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 
  Year Ended
December 31,
 
 
  2012   2011   2010  

Risk-free interest rate

    1 %   2 %   3 %

Expected life of options (in years)

    6     6     6  

Expected volatility

    62 %   63 %   60 %

Expected dividend yield

    0 %   0 %   0 %

        The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility for options granted in 2012 was based upon our historical volatility. The expected dividend yield is based on the Company's historical practice of not paying dividends. Stock-based compensation related to time-based restricted shares is calculated based on the closing market price of the Company's common stock on the date of grant, reduced by the present value of dividends expected to be paid, if any, on the Company's common stock prior to vesting of the restricted stock.

        As of December 31, 2012, the Company had reserved 18,179,520 shares of common stock for the grant of stock options and other equity incentive awards under the 2005 Plan. On the first business day of each fiscal year beginning with the fiscal year commencing on January 1, 2006, annual increases will be added to the 2005 Plan equal to the lesser of: 3,800,000 shares, 3% of all outstanding shares of our common stock immediately prior to such increase, or a lesser amount determined by our Board of Directors. The Company did not increase the shares under the 2005 Plan during the year ended December 31, 2012.

        The following table is a summary of award activity under the 2005 Plan (in thousands):

 
  Stock Options
Granted
  Restricted Stock
Granted
  Equity Awards
Available for Grant
 

Outstanding, December 31, 2011

    9,228     198     4,656  
               

Additional authorized shares

             

Granted

    2,375     85     (2,460 )

Exercised options or vested shares

    (1,726 )   (167 )    

Canceled or forfeited

    (428 )   (5 )   433  
               

Outstanding, December 31, 2012

    9,449     111     2,629  
               

Stock Options

        Stock options granted typically vest at a rate of 25% of the shares underlying the option after one year and the remaining shares vest in equal portions over the following 36 months, such that all shares are vested after four years and allow the option holder to purchase stock over specified periods of time, generally ten years, from the date of grant, at a fixed price equal to the market value of the common stock on date of grant.

        The following summarize additional information regarding the options that have been granted under the 2005 Plan:

 
  Number of
Common Shares
(in thousands)
  Weighted Average
Exercise Price
(per share)
  Weighted
Average Life
Remaining
(years)
  Aggregate
Intrinsic Value
(in thousands)
 

Outstanding, December 31, 2011

    9,228   $ 6.87     6.9   $ 5,186  
                   

Granted

    2,375     5.81              

Exercised

    (1,726 )   3.82              

Canceled or forfeited

    (428 )   6.14              
                   

Outstanding, December 31, 2012

    9,449   $ 7.19     6.4   $ 16,626  
                   

Vested and expected to vest, December 31, 2012

    8,919   $ 7.31     6.3   $ 15,235  
                   

Exercisable, December 31, 2012

    6,297   $ 8.16     5.3   $ 8,453  
                   

 

 
   
  Options Outstanding   Options Exercisable  
Range of Exercise Prices
  Number
Outstanding
(000's)
  Weighted
Average
Remaining
Contract
Life (Years)
  Weighted
Average
Exercise
Prices
  Number
Exercisable
(000's)
  Weighted
Average
Exercise
Price
 
$   $ 5.99     4,228     8.0   $ 4.37     1,726   $ 3.86  
  6.00     8.99     2,977     6.4     7.22     2,327     7.19  
  9.00     12.99     1,000     4.8     9.99     1,000     9.99  
  13.00     13.99     797     2.1     13.98     797     13.98  
  14.00     14.99     160     3.4     14.22     160     14.22  
  15.00     15.99     152     3.5     15.22     152     15.22  
  16.00     18.99     135     3.7     16.80     135     16.80  
                                     
              9,449                 6,297        
                                     

        The weighted average grant date fair value per share of the options granted was $2.93, $2.04 and $4.24 for the years ended December 2012, 2011 and 2010, respectively.

        There was $8.1 million in unrecognized compensation expense related to options expected to vest for the year ended December 31, 2012. This cost is expected to be recognized on a straight-line basis over a weighted average period of 2.6 years. For the year ended December 31, 2012, the Company granted options to acquire approximately 2.4 million shares of common stock, received $6.7 million in proceeds from the exercise of options and recorded $6.2 million in non-cash compensation expense related to options granted that are expected to vest.

        We recorded $6.8 million and $6.3 million, respectively, in non-cash compensation expense related to options granted that are expected to vest for the years ended December 31, 2011 and 2010, respectively. We received $0.8 million and $5.6 million in cash from the exercise of 0.4 million and 1.2 million options, for the years ended December 31, 2011 and 2010, respectively.

        The total intrinsic value of options exercised was $6.3 million, $0.4 million and $4.0 million for the years ended December 2012, 2011 and 2010, respectively.

Restricted Stock

        The vesting provisions of restricted stock are similar to those applicable to stock options. Because these restricted shares are issued primarily to employees of the Company, many of the shares issued will be withheld by the Company to satisfy the statutory withholding requirements applicable to the restricted stock grants. Therefore, as these awards vest the actual number of shares outstanding as a result of the restricted stock awards is reduced. These shares will vest over a period of four years.

        The following is a summary of non-vested share awards for the Company's time-based restricted shares:

 
  Shares
Outstanding
(in thousands)
  Weighted
Average Grant
Date Fair Value
(per share)
 

Outstanding, December 31, 2011

    198   $ 2.20  
             

Granted

    85     6.80  

Vested

    (167 )   2.21  

Forfeited

    (5 )   2.20  
             

Outstanding, December 31, 2012

    111   $ 5.72  
             

        The weighted average grant date fair value per share of restricted stock granted was $6.80 for the year ended December 2012. There were no restricted shares granted for the years ended December 2011 and 2010.

        We recorded approximately $0.4 million, $0.0 and $1.6 million in non-cash compensation expense related to the restricted stock granted that are expected to vest for the years ended December 31, 2012, 2011 and 2010, respectively. As of December 31, 2012, there was $0.5 million in unrecognized compensation expense related to time-based restricted shares expected to vest. This cost is expected to be recognized on a straight-line basis over a weighted average period of 3.2 years.

        The total fair value of shares vested were $1.3 million, $1.1 million and $1.5 million for the years ended December 31, 2012, 2011 and 2010, respectively.

EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN

13. EMPLOYEE BENEFIT PLAN

Defined Contribution Plan

        The Company has a retirement savings plan (the "401(k) Plan") under Section 401(k) of the Internal Revenue Code covering its employees. The 401(k) Plan allows employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plan. As a benefit to employees, the Company matches a percentage of these employee contributions. Expenses related to the matching portion of the contributions to the 401(k) Plan were $0.3 million, $0.2 million and $0.5 million for the years ended December 31, 2012, 2011 and 2010, respectively.

INCOME TAXES
INCOME TAXES

14. INCOME TAXES

        The following presents consolidated income before tax for domestic and foreign operations (in thousands):

 
  Year Ended December 31,  
 
  2012   2011   2010  

Consolidated income before tax

                   

Domestic

  $ 39,280   $ 18,705   $ 35,838  

Foreign

    1,183     10     463  
               

Total

  $ 40,463   $ 18,715   $ 36,301  
               

        The income tax provision attributable to income from operations before tax consists of the following components (in thousands):

 
  Year Ended December 31,  
 
  2012   2011   2010  

Income tax provision

                   

Domestic

  $ 14,358   $ 9,528   $ 17,680  

Foreign

    416     58     1,040  
               

Income tax provision before non-controlling interest loss

    14,774     9,586     18,720  

Income tax provision from non-controlling interest loss

   
   
   
31
 
               

Total income tax provision

  $ 14,774   $ 9,586   $ 18,751  
               

Income tax provision components

                   

Current

  $ 430   $ 334   $ 1,283  

Deferred

    14,344     9,252     17,468  
               

Total income tax provision

  $ 14,774   $ 9,586   $ 18,751  
               

        A reconciliation of the federal statutory rate and the Company's effective income tax rate is as follows:

 
  Year Ended December 31,  
 
  2012   2011   2010  

Income tax reconciliation

                   

Federal statutory rate

    35.0 %   35.0 %   35.0 %

Foreign provision

    (0.4 )%   0.1 %   (0.1 )%

State/province income tax

    1.7 %   2.4 %   1.7 %

Non-deductible compensation cost

    0.2 %   7.8 %   2.4 %

Change in valuation allowance

    1.0 %   2.1 %   (4.1 )%

Adjustment to carrying value

    (2.2 )%   3.6 %   0.0 %

Foreign dividends and IRC Sec. 956 inclusions, net of foreign tax deduction

    1.1 %   0.2 %   14.7 %

Non-deductible expenses and other items

    0.1 %   0.0 %   2.1 %
               

Effective tax rate

    36.5 %   51.2 %   51.7 %
               

        The major tax-effected components of the deferred tax assets and liabilities are as follows (in thousands):

 
  Year Ended December 31,  
 
  2012   2011   2010  

Deferred income tax assets related to:

                   

Intangibles

  $ 63,899   $ 82,088   $ 102,598  

Net operating losses

    32,171     29,733     16,576  

Stock compensation expense

    6,775     5,412     4,768  

Accounts receivable allowances

    1,968     2,770     6,675  

Accrued and prepaid expenses

    1,279     702     300  

Other

    367     492     734  

Property, equipment and leasehold improvements

    312         235  

Valuation allowance

    (1,307 )   (905 )    
               

Total deferred income tax assets

  $ 105,464   $ 120,292   $ 131,886  
               

Deferred income tax liabilities related to:

                   

Property, equipment and leasehold improvements

  $   $ 242   $  

Other

    800     512     339  
               

Total deferred income tax liabilities

  $ 800   $ 754   $ 339  
               

Deferred income taxes, net

  $ 104,664   $ 119,538   $ 131,547  
               

        For all of our investments in foreign subsidiaries, except for GCA (Macau), S.A. ("GCA Macau") and one-time repatriation events in 2010, deferred taxes have not been provided on unrepatriated foreign earnings. Unrepatriated earnings as of December 31, 2012, are approximately $2.7 million. These earnings are considered permanently reinvested, as it is management's intention to reinvest foreign earnings in foreign operations. The Company projects that it will have sufficient cash flow in the U.S. and does not need to repatriate these foreign earnings to finance U.S. operations.

        As a result of certain realization requirements under the accounting guidance on share-based payments, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets at December 31, 2012, 2011 and 2010 that arose directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting. Equity will be increased by $3.3 million if and when such deferred tax assets are ultimately realized. The Company uses the accounting guidance on income taxes ordering for purposes of determining when excess tax benefits have been realized.

        As of December 31, 2012, the Company has approximately $94.0 million accumulated federal net operating losses. The net operating losses can be carried forward and applied to offset taxable income for 20 years and will expire starting in 2025.

        The Company has state net operating loss carry forwards which began to expire in 2012 and will continue to expire in 2013 through 2031. The determination and utilization of these state net operating loss carry forwards are dependent upon apportionment percentages and other respective state laws, which can change from year to year. As of December 31, 2012, the Company has approximately $2.4 million accumulated state net operating losses. We have a valuation allowance of $1.3 million primarily related to certain state net operating loss carry forwards, which are expected to expire before utilization, due to shorter carry forward periods and decreased apportionment percentages in those states.

        At December 31, 2012, we had a net deferred income tax asset of $104.7 million. We recognized a deferred tax asset upon our conversion from a limited liability company to a corporation on May 14, 2004. Prior to that time, all tax attributes flowed through to the members of the limited liability company. The principal component of the deferred tax asset is a difference between our assets for financial accounting and tax purposes. This difference results from a significant balance of acquired goodwill of approximately $687.4 million that was generated as part of the conversion to a corporation plus approximately $97.6 million in pre-existing goodwill carried over from periods prior to the conversion. Both of these assets are recorded for tax purposes but not for accounting purposes. This asset is amortized over 15 years for tax purposes, resulting in annual pretax income being $52.3 million lower for tax purposes than for financial accounting purposes. At an estimated blended domestic statutory tax rate of 36.4%, this results in tax payments being approximately $19.1 million less than the annual provision for income taxes shown on the income statement for financial accounting purposes, or the amount of the annual provision, if less. There is an expected aggregate of $120.8 million in cash savings over the remaining life of the portion of our deferred tax asset related to the conversion. This deferred tax asset may be subject to certain limitations. We believe that it is more likely than not that we will be able to utilize our deferred tax asset. However, the utilization of this tax asset is subject to many factors including, but not limited to, a change of control of the Company and future earnings.

        The Company has analyzed filing positions in all of the federal, state and foreign jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company believes that its income tax filing positions and deductions will be sustained upon audit and does not anticipate any adjustments that will result in a material change to its financial position. We may from time to time be assessed interest or penalties by tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. The Company's policy for recording interest and penalties associated with audits and unrecognized tax benefits is to record such items as a component of income tax expenses.

        The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. The Company has a number of federal and state income tax years still open for examination as a result of the net operating loss carry forwards. Accordingly, the Company is subject to examination for both U.S. federal and a few state tax returns for the years 2005 to present. For the remaining state, local and foreign jurisdictions, with few exceptions, the Company is no longer subject to examination by tax authorities for years before 2009.

RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS

15. RELATED PARTY TRANSACTIONS

        In April 2010, the Company repurchased in a privately negotiated transaction 3,105,590 shares of its outstanding common stock from various entities affiliated with an investment firm for an aggregate purchase price of $25.0 million at a purchase price of $8.05 per share of common stock. A member of our Board of Directors was a managing partner of the investment firm until his term expired in April 2010. We funded this repurchase with cash on hand. This repurchase was authorized by our Board of Directors in March 2010, separate and apart from the $25.0 million share repurchase program previously made in February 2010.

        A member of our Board of Directors also serves as a member of the board of directors of a gaming company for which the Company provides various cash access products and services that are insignificant to the Company's net income. Our Board member receives both cash and equity compensation from this gaming company in consideration for serving on its board of directors, however, none of this consideration is tied in any manner to the Company's performance or obligations under its cash access agreements with the gaming company. In addition, our Board member was not involved in the negotiation of the Company's cash access agreements with this gaming company.

        In October 2012, the Company entered into a long-term lease agreement related to office space for its corporate headquarters, for which the Company engaged a brokerage firm. An executive officer of this brokerage firm is the brother of our Chief Financial Officer. The total estimated rental payments owing by the Company under the lease agreement total $11.8 million and the brokerage firm is entitled to receive approximately $0.4 million as compensation for acting as the Company's broker.

SEGMENT INFORMATION
SEGMENT INFORMATION

16. SEGMENT INFORMATION

        Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision-making group consists of the Chief Executive Officer and Chief Financial Officer. The operating segments are reviewed separately because each represents products that can be, and often are, sold separately to our customers.

        The Company operates in the following business segments: (1) cash advance, (2) ATM, (3) check services and (4) other. These segments are monitored separately by management for performance against its internal forecast and are consistent with the Company's internal management reporting. The other segment consists of certain lines of business, none of which exceeds the established materiality for segment reporting, include: Central Credit reporting services, Kiosk Sales and Services and Casino Marketing Services, among others.

        The Company does not allocate depreciation and amortization expenses to the business segments. Certain corporate overhead expenses have been allocated to the segments for identifiable items related to such segments or based on a reasonable methodology.

        The Company's business is predominantly domestic, with no specific regional concentrations and no significant assets in foreign locations.

        Major customers.    For the years ended December 31, 2012 and 2011, no single customer accounted for more than 10% of the Company's revenues. For the year ended December 31, 2010, the combined revenue from all segments for our largest customer, Caesars, was approximately $79.6 million, representing 13% of the Company's total consolidated revenues. Our five largest customers accounted for approximately 34%, 28% and 35% of our total revenue in 2012, 2011 and 2010, respectively.

        The accounting policies of the operating segments are generally the same as those described in the summary of significant accounting policies.

        The following tables present the Company's segment information (in thousands):

 
  For and At the Year Ended
December 31,
 
 
  2012   2011   2010  

Revenues

                   

Cash advance

  $ 227,517   $ 203,869   $ 244,139  

ATM

    303,159     283,727     314,627  

Check services

    25,401     26,269     28,357  

Other

    28,409     30,198     18,467  

Corporate

             
               

Total revenues

  $ 584,486   $ 544,063   $ 605,590  
               

Operating income

                   

Cash advance

  $ 63,785   $ 38,468   $ 49,439  

ATM

    32,333     34,832     41,102  

Check services

    13,930     14,197     15,798  

Other

    14,457     14,808     11,398  

Corporate

    (68,523 )   (64,009 )   (65,107 )
               

Total operating income

  $ 55,982   $ 38,296   $ 52,630  
               

Total assets

                   

Cash advance

  $ 149,113   $ 164,515        

ATM

    59,781     98,418        

Check services

    35,216     37,231        

Other

    39,838     39,570        

Corporate

    269,947     189,333        
                 

Total assets

  $ 553,895   $ 529,067        
                 
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

        The unaudited selected quarterly results of operations is as follows (in thousands, except for per share amounts):

 
  Quarter  
 
  First   Second   Third   Fourth   Year  

2012

                               

Revenues

  $ 151,065   $ 147,465   $ 149,824   $ 136,132   $ 584,486  

Operating income

    15,696     15,963     14,642     9,681     55,982  

Net income

    7,128     7,084     7,079     4,398     25,689  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

    7,128     7,084     7,079     4,398     25,689  

Basic earnings per share

                               

Net income

  $ 0.11   $ 0.11   $ 0.11   $ 0.07   $ 0.39  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

  $ 0.11   $ 0.11   $ 0.11   $ 0.07   $ 0.39  

Diluted earnings per share

                               

Net income

  $ 0.11   $ 0.11   $ 0.10   $ 0.06   $ 0.38  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

  $ 0.11   $ 0.11   $ 0.10   $ 0.06   $ 0.38  

Weighted average common shares outstanding

                               

Basic

    65,134     65,774     66,108     66,739     65,933  

Diluted

    66,190     67,383     67,601     67,996     67,337  

2011

                               

Revenues

  $ 134,389   $ 135,052   $ 136,889   $ 137,733   $ 544,063  

Operating income

    9,305     7,141     7,609     14,241     38,296  

Net income

    1,742     1,010     1,839     4,538     9,129  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

    1,742     1,010     1,839     4,538     9,129  

Basic earnings per share

                               

Net income

  $ 0.03   $ 0.02   $ 0.03   $ 0.07   $ 0.14  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

  $ 0.03   $ 0.02   $ 0.03   $ 0.07   $ 0.14  

Diluted earnings per share

                               

Net income

  $ 0.03   $ 0.02   $ 0.03   $ 0.07   $ 0.14  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

  $ 0.03   $ 0.02   $ 0.03   $ 0.07   $ 0.14  

Weighted average common shares outstanding

                               

Basic

    63,952     63,969     64,712     64,871     64,673  

Diluted

    64,182     64,094     64,751     65,227     64,859  
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS

18. SUBSEQUENT EVENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

Principles of Consolidation

        All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

        Cash and cash equivalents include cash and all balances on deposit in banks and financial institutions. The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash and cash equivalents. Such balances may at times exceed the federal insurance limits. However, the Company periodically evaluates the creditworthiness of these institutions to minimize risk.

Restricted Cash and Cash Equivalents

        As part of certain of our sponsorship agreements, we are required to maintain minimum deposits as collateral for any potential chargeback loss activity occurring as a result of the sponsorship arrangements. All interest received on these deposits is also recorded to restricted cash and cash equivalents. As of December 31, 2012, the total balance of restricted cash and cash equivalents was $0.2 million.

ATM Funding Agreements

        The Company obtains all of the cash required to operate its ATMs through various ATM Funding Agreements. Some gaming establishments provide the cash utilized within the ATM ("Site-Funded"). The Site-Funded receivables generated for the amount of cash dispensed from transactions performed at our ATMs are owned by GCA and GCA is liable to the gaming establishment for the face amount of the cash dispensed. In the consolidated balance sheets, the amount of the receivable for transactions processed on these ATM transactions is included within settlement receivables and the amount due to the gaming establishment for the face amount of dispensing transactions is included within settlement liabilities.

        For our non-Site-Funded locations, the Company's Contract Cash Solutions Agreement with Wells Fargo allows for the Company to utilize funds owned by Wells Fargo to provide the currency needed for normal operating requirements for the Company's ATMs. For the use of these funds, the Company pays Wells Fargo a cash usage fee on the average daily balance of funds utilized multiplied by a contractually defined cash usage rate. Under this agreement, all currency supplied by Wells Fargo remains the sole property of Wells Fargo at all times until it is dispensed, at which time Wells Fargo obtains an interest in the corresponding settlement receivable. As the cash is never an asset of ours, supplied cash is not reflected on our balance sheet. We are charged a cash usage fee for the cash used in these ATMs, which is included as interest expense in the consolidated statements of income. The Company recognizes the fees as interest expense due to the similar operational characteristics to a revolving line of credit, the fact that the fees are calculated on a financial index and the fees are paid for access to a capital resource.

Settlement Receivables and Settlement Liabilities

        In the credit card cash access and POS debit card cash access transactions provided by GCA, the gaming establishment is reimbursed for the cash disbursed to gaming patrons, in most instances, through the issuance of a negotiable instrument, and, in some instances, through electronic settlement. GCA receives reimbursement from the patron's credit or debit card issuer for the transaction in an amount equal to the amount owing to the gaming establishment plus the fee charged to the patron. This reimbursement is included within the settlement receivables on the consolidated balance sheets. The unpaid negotiable instrument amounts owing to gaming establishments are included within settlement liabilities on the consolidated balance sheets.

Warranty Receivables

        If a gaming establishment chooses to have a check warranted, it sends a request to a check warranty service provider, asking whether it would be willing to accept the risk of cashing the check. If the check warranty provider accepts the risk and warrants the check, the gaming establishment negotiates the patron's check by providing cash for the face amount of the check. If the check is dishonored by the patron's bank upon presentment, the gaming establishment invokes the warranty, and the check warranty service provider purchases the check from the gaming establishment for the full check amount and then pursues collection activities on its own. In our Central Credit Check Warranty product and under our agreement with TeleCheck, we receive all of the check warranty revenue. We are exposed to risk for the losses associated with any warranted items that we cannot collect from patrons issuing the items. Warranty expenses are defined as any amounts paid by TeleCheck or Central Credit to gaming establishments to purchase dishonored checks that will not be collectible from patrons. Additionally, we pay a portion of TeleCheck's operating expenses and certain operating expenses associated with our third party partners related to the provision of these services.

Unamortized Debt Issuance Costs

        Debt issuance costs incurred in connection with long-term borrowings are capitalized and amortized to interest expense based upon the related debt agreements using the straight-line method, which approximates the effective interest method. Unamortized debt issuance costs are included in prepaid and other assets on the consolidated balance sheets.

Property, Equipment and Leasehold Improvements

        Property, equipment and leasehold improvements are stated at cost, less accumulated depreciation, computed using the straight-line method over the lesser of the estimated life of the related assets, generally three to five years, or the related lease term.

        Repairs and maintenance costs are expensed as incurred.

        Upon sale or retirement, the costs and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the consolidated statements of income.

        Property, equipment and leasehold improvements are reviewed for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable. Impairment is indicated when undiscounted future cash flows do not exceed the asset's carrying value. As of December 31, 2012, the Company does not believe any of its property, equipment, or leasehold improvements are impaired.

Goodwill

        Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations.

        The Company tests for impairment annually on a reporting unit basis, as of October 1, or more often under certain circumstances. The annual impairment test is completed using either: a qualitative Step "0" assessment based on reviewing relevant events and circumstances; or a quantitative Step "1" assessment using an income approach that discounts future cash flows based on the estimated future results of the Company's reporting units and a market approach that compares market multiples of comparable companies to determine whether or not any impairment exists. If the fair value of a reporting unit is less than its carrying amount, the Company uses the Step "2" assessment to determine the impairment.

Fair Values of Financial Instruments

        The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument.

        The carrying amount of cash and cash equivalents, restricted cash and cash equivalents, other receivables, net, settlement receivables, settlement liabilities, accounts payable and accrued expenses approximates fair value due to the short-term maturities of these instruments. The fair value of our borrowings are estimated based on various inputs to determine a market price, such as: market demand and supply, size of tranche, maturity and similar instruments trading in more active markets. Due to the infrequency of trading for our borrowing instrument(s), our position is that we can no longer support a Level 1 input to determine fair value and we have changed the fair value of our borrowings to a Level 2 input as of December 31, 2012. The fair values of all other financial instruments, including amounts outstanding under the ATM funding agreements approximate their book values as the instruments are short-term in nature or contain market rates of interest.

Interest Rate Cap

        In conjunction with the terms and conditions of the New Senior Credit Facility, as described in Note 8, GCA purchased a $150.0 million notional amount interest rate cap with an effective date of January 5, 2012 and a term of three years. GCA purchased this interest rate cap to partially reduce the Company's exposure to increases in the London Interbank Offer Rate ("LIBOR') above 1.5% during the term of the interest rate cap with respect to its variable rate debt obligations under the New Senior Credit Facility and its obligations under the Contract Cash Solutions Agreement with Wells Fargo. This interest rate cap is recorded in other assets in the balance sheet, and is marked-to-market based on a quoted market price with the effects offset in the income statement. The interest rate cap carrying value and fair value approximate each other and these values are insignificant as of December 31, 2012.

        The following table presents the fair value and carrying value of GCA's borrowings (amounts in thousands):

 
  Level of
Hierarchy(*)
  Fair
Value
  Carrying
Value
 

December 31, 2012

                   

New senior secured credit facility

    2   $ 122,715   $ 121,500  

December 31, 2011

                   

New senior secured credit facility

    1   $ 173,565   $ 174,000  

(*)
Level 1 indicates that the fair value is determined by using quoted prices in active markets for identical investments. Level 2 indicates that the fair value is determined using pricing inputs other than quoted prices in active markets such as models or other valuation methodologies. Level 3 indicates that the fair value is determined using pricing inputs that are unobservable for the investment and include situations where there is little, if any, market activity for the investment. Significant management estimates and judgment are used in the determination of the fair value of level 3 pricing inputs.

Inventory

        Inventory primarily consists of parts as well as finished goods and work-in-progress. Inventory is stated at lower of cost or market accounted for using the average cost method. The cost of inventory includes cost of materials, labor, overhead and freight.

Revenue Recognition

        The Company recognizes revenue when evidence of an arrangement exists, services have been rendered, the price is fixed or determinable and collectability is reasonably assured. The Company evaluates its revenue streams for proper timing of revenue recognition. Revenue is recognized as products are delivered and or services are performed.

Cost of Revenues (exclusive of depreciation and amortization)

        The cost of revenues (exclusive of depreciation and amortization) represent the direct costs required to perform revenue generating transactions. The principal costs included within cost of revenues (exclusive of depreciation and amortization) are commissions paid to gaming establishments, interchange fees paid to credit and debit card networks, transaction processing fees to our transaction processor and check cashing warranties.

Advertising, Marketing and Promotional Costs

        The Company expenses advertising, marketing and promotional costs as incurred. Total advertising, marketing and promotional costs, included in operating expenses in the consolidated statements of income, were $0.7 million, $0.6 million and $0.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Income Taxes

        Income tax expense includes U.S. and international income taxes, plus the provision for U.S. taxes on undistributed earnings of international subsidiaries not deemed to be permanently invested. Since it is management's practice and intent to reinvest the earnings in the international operations of our foreign subsidiaries, U.S. federal income taxes have not been provided on the undistributed earnings of any foreign subsidiaries except for GCA Macau. Some items of income and expense are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes.

Foreign Currency Translation

        Foreign currency denominated assets and liabilities for those foreign entities for which the local currency is the functional currency are translated into U.S. dollars based on exchange rates prevailing at the end of each year. Revenues and expenses are translated at average exchange rates during the year. The effects of foreign exchange gains and losses arising from these translations are included as a component of other comprehensive income on the consolidated statements of income and comprehensive income. Translation adjustments on intercompany balances of a long-term investment nature are recorded as a component of accumulated other comprehensive income on the Company's consolidated balance sheets.

Use of Estimates

        The Company has made estimates and judgments affecting the amounts reported in these financial statements and the accompanying notes. The actual results may differ from these estimates. These accounting estimates incorporated into the Company's consolidated financial statements include, but are not limited to:

  • the estimated reserve for warranty expense associated with our check warranty receivables;

    the valuation and recognition of share-based compensation;

    the valuation allowance on our deferred income tax assets;

    the estimated cash flows in assessing the recoverability of long-lived assets; and

    the budgets for future performance, weighted average cost of capital ("WACC") and growth rates as well as other factors used in our annual goodwill impairment evaluation.

Earnings Applicable to Common Stock

        Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the effect of potential common stock resulting from assumed stock option exercises.

Share-Based Compensation

        Share-based payment awards result in a cost that is measured at fair value on the award's grant date. Stock options expected to be exercised currently and in future periods are measured at fair value using the Black-Scholes model with the expense associated with these awards being recognized on the straight-line basis over the awards' vesting period. Forfeitures are estimated at the time of grant, with such estimate updated periodically and with actual forfeitures recognized currently to the extent they differ from the estimates.

Recently Issued Accounting Pronouncements

        In July 2012, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2012-02, which provides amendments stating that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Accounting Standards Codification ("ASC") 350—Goodwill and Other. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. These amendments are intended to reduce cost and complexity by providing an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired to determine whether it should perform a quantitative test. The amendments also enhance the consistency of impairment testing guidance among long-lived asset categories by permitting an entity to assess qualitative factors to determine whether it is necessary to calculate the asset's fair value when testing an indefinite-lived intangible asset for impairment, which is equivalent to the impairment testing requirements for other long-lived assets. We assessed the impairment of our intangible assets and determined the most appropriate form of action, which was to perform a qualitative assessment to ascertain the validity of a quantitative measure rather than bypassing the qualitative assessment and conducting a quantitative impairment test. The adoption of this amended guidance did not have an impact on the Company's financial position, results of operations or cash flows.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
Schedule of fair value and carrying value of GCA's borrowings and interest rate cap

The following table presents the fair value and carrying value of GCA's borrowings (amounts in thousands):

 
  Level of
Hierarchy(*)
  Fair
Value
  Carrying
Value
 

December 31, 2012

                   

New senior secured credit facility

    2   $ 122,715   $ 121,500  

December 31, 2011

                   

New senior secured credit facility

    1   $ 173,565   $ 174,000  

(*)
Level 1 indicates that the fair value is determined by using quoted prices in active markets for identical investments. Level 2 indicates that the fair value is determined using pricing inputs other than quoted prices in active markets such as models or other valuation methodologies. Level 3 indicates that the fair value is determined using pricing inputs that are unobservable for the investment and include situations where there is little, if any, market activity for the investment. Significant management estimates and judgment are used in the determination of the fair value of level 3 pricing inputs.
WARRANTY RESERVES (Tables)
Schedule of the activity for the check warranty reserve

A summary activity of the reserve for warranty losses is as follows (in thousands):

 
  Amount  

Balance, December 31, 2010

  $ 7,036  

Warranty expense provision

   
5,700
 

Charge offs against reserve

    (5,980 )
       

Balance, December 31, 2011

    6,756  

Warranty expense provision

   
5,226
 

Charge offs against reserve

    (5,074 )
       

Balance, December 31, 2012

  $ 6,908  
       
BUSINESS COMBINATIONS (Tables)
Summary of estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for Western Money

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for Western Money (in thousands):

 
  Amount  

Net working capital

  $ 3,516  

Property, plant and equipment

    2,320  

Goodwill

    5,745  

Intangible assets

    6,284  

Deferred income tax liabilities

    (2,498 )
       

Net assets acquired (excluding cash)

  $ 15,367  
       
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Tables)
Schedule of property, equipment and leasehold improvements

Property, equipment and leasehold improvements consist of the following (amounts in thousands):

 
   
  At December 31,  
 
  Useful Life
(years)
 
 
  2012   2011  

Cash advance equipment

  3   $ 3,461   $ 6,578  

ATM equipment

  5     29,512     55,800  

Office, computer and other equipment

  3     8,562     8,799  

Leasehold and building improvements

  Lease Term     4,308     2,788  
               

Sub-total

        45,843     73,965  

Less: accumulated depreciation

       
(30,402

)
 
(58,388

)

Total

     
$

15,441
 
$

15,577
 
               
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

The changes in the carrying amount of goodwill are as follows (in thousands):

 
  Cash Advance   ATM   Check Services   Other   Total  

Goodwill

                               

Balance, December 31, 2010

  $ 100,895   $ 33,051   $ 23,281   $ 27,883   $ 185,110  

Acquistion related—Western Money

                (5,011 )   (5,011 )

Foreign translation adjustment

    23                 23  
                       

Balance, December 31, 2011

  $ 100,918   $ 33,051   $ 23,281   $ 22,872   $ 180,122  
                       

Foreign translation adjustment

    19                 19  
                       

Balance, December 31, 2012

  $ 100,937   $ 33,051   $ 23,281   $ 22,872   $ 180,141  
                       

Other intangible assets consist of the following (in thousands):

 
   
  At December 31,  
 
  Useful Life
(years)
 
 
  2012   2011  

Intangible assets

                 

Computer software

  3   $ 26,007   $ 24,719  

Patents and trademarks

  17     11,149     11,134  

Customer contracts

  7 - 14     39,142     50,649  

Non-compete agreements

  3     1,200     1,400  
               

Gross carrying amount

        77,498     87,902  

Less: accumulated amortization

       
(43,504

)
 
(49,686

)
               

Net carrying amount

      $ 33,994   $ 38,216  
               

The anticipated amortization expense related to other intangible assets, assuming no subsequent impairment of the underlying assets, is as follows (in thousands):

 
  Amount  

2013

  $ 10,217  

2014

    8,305  

2015

    7,196  

2016

    4,768  

2017

    1,986  

Thereafter

    1,522  
       

Total

  $ 33,994  
       
BORROWINGS (Tables)
Schedule of maturities of the Company's borrowings at (excluding excess cash flow payments)

The maturities of the Company's borrowings at December 31, 2012 (excluding excess cash flow payments) are as follows (in thousands):

 
  Amount  

2013

  $ 1,215  

2014

    1,215  

2015

    1,215  

2016

    117,855  
       

Total

  $ 121,500  
       
COMMITMENTS AND CONTINGENCIES (Tables)
Schedule of minimum aggregate rental commitment under all non-cancelable operating leases

The minimum aggregate rental commitment under all non-cancelable operating leases at December 31, 2012 were as follows (in thousands):

 
  Amount  

2013

  $ 440  

2014

    1,142  

2015

    1,013  

2016

    1,039  

2017

    1,064  

Thereafter

    6,038  
       

Total

  $ 10,736  
       
SHAREHOLDERS' EQUITY (Tables)
Schedule of treasury stock activity

The following table provides the treasury stock activity that occurred in 2012 (number of shares and cost in thousands):

 
  Total Number of
Shares Purchased
or Withheld
(in thousands)
  Average Price
Purchased or
Withheld
(per share)
  Cost of Shares
Purchased or
Withheld
(in thousdands)
 

Outstanding, December 31, 2011

    20,686   $ 7.02   $ 145,228  

Shares withheld from restricted stock vesting

    38     6.84   $ 262  
               

Outstanding, December 31, 2012

    20,724   $ 7.02   $ 145,490  
               
WEIGHTED AVERAGE COMMON SHARES (Tables)
Schedule of weighted-average number of common shares outstanding used in the computation of basic and diluted earnings per share

The weighted average number of common shares outstanding used in the computation of basic and diluted earnings per share is as follows (in thousands):

 
  At December 31,  
 
  2012   2011   2010  

Weighted average number of common shares outstanding—basic

    65,933     64,673     65,903  

Potential dilution from equity grants(1)

    1,404     186     1,369  
               

Weighted average number of common shares outstanding—diluted

    67,337     64,859     67,272  
               

(1)
The potential dilution excludes the weighted average effect of stock options to acquire 5.1 million, 8.1 million and 6.9 million of common stock of Holdings for the years ended December 31, 2012, 2011 and 2010, respectively, because the application of the treasury stock method, as required, makes them anti-dilutive.
SHARE-BASED COMPENSATION (Tables)
  Year Ended
December 31,
 
 
  2012   2011   2010  

Risk-free interest rate

    1 %   2 %   3 %

Expected life of options (in years)

    6     6     6  

Expected volatility

    62 %   63 %   60 %

Expected dividend yield

    0 %   0 %   0 %

The following table is a summary of award activity under the 2005 Plan (in thousands):

 
  Stock Options
Granted
  Restricted Stock
Granted
  Equity Awards
Available for Grant
 

Outstanding, December 31, 2011

    9,228     198     4,656  
               

Additional authorized shares

             

Granted

    2,375     85     (2,460 )

Exercised options or vested shares

    (1,726 )   (167 )    

Canceled or forfeited

    (428 )   (5 )   433  
               

Outstanding, December 31, 2012

    9,449     111     2,629  
               

  Number of
Common Shares
(in thousands)
  Weighted Average
Exercise Price
(per share)
  Weighted
Average Life
Remaining
(years)
  Aggregate
Intrinsic Value
(in thousands)
 

Outstanding, December 31, 2011

    9,228   $ 6.87     6.9   $ 5,186  
                   

Granted

    2,375     5.81              

Exercised

    (1,726 )   3.82              

Canceled or forfeited

    (428 )   6.14              
                   

Outstanding, December 31, 2012

    9,449   $ 7.19     6.4   $ 16,626  
                   

Vested and expected to vest, December 31, 2012

    8,919   $ 7.31     6.3   $ 15,235  
                   

Exercisable, December 31, 2012

    6,297   $ 8.16     5.3   $ 8,453  
                   

 


 
   
  Options Outstanding   Options Exercisable  
Range of Exercise Prices
  Number
Outstanding
(000's)
  Weighted
Average
Remaining
Contract
Life (Years)
  Weighted
Average
Exercise
Prices
  Number
Exercisable
(000's)
  Weighted
Average
Exercise
Price
 
$   $ 5.99     4,228     8.0   $ 4.37     1,726   $ 3.86  
  6.00     8.99     2,977     6.4     7.22     2,327     7.19  
  9.00     12.99     1,000     4.8     9.99     1,000     9.99  
  13.00     13.99     797     2.1     13.98     797     13.98  
  14.00     14.99     160     3.4     14.22     160     14.22  
  15.00     15.99     152     3.5     15.22     152     15.22  
  16.00     18.99     135     3.7     16.80     135     16.80  
                                     
              9,449                 6,297        
                                     

  Shares
Outstanding
(in thousands)
  Weighted
Average Grant
Date Fair Value
(per share)
 

Outstanding, December 31, 2011

    198   $ 2.20  
             

Granted

    85     6.80  

Vested

    (167 )   2.21  

Forfeited

    (5 )   2.20  
             

Outstanding, December 31, 2012

    111   $ 5.72  
             
INCOME TAXES (Tables)

The following presents consolidated income before tax for domestic and foreign operations (in thousands):

 
  Year Ended December 31,  
 
  2012   2011   2010  

Consolidated income before tax

                   

Domestic

  $ 39,280   $ 18,705   $ 35,838  

Foreign

    1,183     10     463  
               

Total

  $ 40,463   $ 18,715   $ 36,301  
               

The income tax provision attributable to income from operations before tax consists of the following components (in thousands):

 
  Year Ended December 31,  
 
  2012   2011   2010  

Income tax provision

                   

Domestic

  $ 14,358   $ 9,528   $ 17,680  

Foreign

    416     58     1,040  
               

Income tax provision before non-controlling interest loss

    14,774     9,586     18,720  

Income tax provision from non-controlling interest loss

   
   
   
31
 
               

Total income tax provision

  $ 14,774   $ 9,586   $ 18,751  
               

Income tax provision components

                   

Current

  $ 430   $ 334   $ 1,283  

Deferred

    14,344     9,252     17,468  
               

Total income tax provision

  $ 14,774   $ 9,586   $ 18,751  
               
  Year Ended December 31,  
 
  2012   2011   2010  

Income tax reconciliation

                   

Federal statutory rate

    35.0 %   35.0 %   35.0 %

Foreign provision

    (0.4 )%   0.1 %   (0.1 )%

State/province income tax

    1.7 %   2.4 %   1.7 %

Non-deductible compensation cost

    0.2 %   7.8 %   2.4 %

Change in valuation allowance

    1.0 %   2.1 %   (4.1 )%

Adjustment to carrying value

    (2.2 )%   3.6 %   0.0 %

Foreign dividends and IRC Sec. 956 inclusions, net of foreign tax deduction

    1.1 %   0.2 %   14.7 %

Non-deductible expenses and other items

    0.1 %   0.0 %   2.1 %
               

Effective tax rate

    36.5 %   51.2 %   51.7 %
               

The major tax-effected components of the deferred tax assets and liabilities are as follows (in thousands):

 
  Year Ended December 31,  
 
  2012   2011   2010  

Deferred income tax assets related to:

                   

Intangibles

  $ 63,899   $ 82,088   $ 102,598  

Net operating losses

    32,171     29,733     16,576  

Stock compensation expense

    6,775     5,412     4,768  

Accounts receivable allowances

    1,968     2,770     6,675  

Accrued and prepaid expenses

    1,279     702     300  

Other

    367     492     734  

Property, equipment and leasehold improvements

    312         235  

Valuation allowance

    (1,307 )   (905 )    
               

Total deferred income tax assets

  $ 105,464   $ 120,292   $ 131,886  
               

Deferred income tax liabilities related to:

                   

Property, equipment and leasehold improvements

  $   $ 242   $  

Other

    800     512     339  
               

Total deferred income tax liabilities

  $ 800   $ 754   $ 339  
               

Deferred income taxes, net

  $ 104,664   $ 119,538   $ 131,547  
               
SEGMENT INFORMATION (Tables)
Schedule of results of operations and total assets by operating segment

The following tables present the Company's segment information (in thousands):

 
  For and At the Year Ended
December 31,
 
 
  2012   2011   2010  

Revenues

                   

Cash advance

  $ 227,517   $ 203,869   $ 244,139  

ATM

    303,159     283,727     314,627  

Check services

    25,401     26,269     28,357  

Other

    28,409     30,198     18,467  

Corporate

             
               

Total revenues

  $ 584,486   $ 544,063   $ 605,590  
               

Operating income

                   

Cash advance

  $ 63,785   $ 38,468   $ 49,439  

ATM

    32,333     34,832     41,102  

Check services

    13,930     14,197     15,798  

Other

    14,457     14,808     11,398  

Corporate

    (68,523 )   (64,009 )   (65,107 )
               

Total operating income

  $ 55,982   $ 38,296   $ 52,630  
               

Total assets

                   

Cash advance

  $ 149,113   $ 164,515        

ATM

    59,781     98,418        

Check services

    35,216     37,231        

Other

    39,838     39,570        

Corporate

    269,947     189,333        
                 

Total assets

  $ 553,895   $ 529,067        
                 
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (Tables)
Schedule of quarterly results of operations

The unaudited selected quarterly results of operations is as follows (in thousands, except for per share amounts):

 
  Quarter  
 
  First   Second   Third   Fourth   Year  

2012

                               

Revenues

  $ 151,065   $ 147,465   $ 149,824   $ 136,132   $ 584,486  

Operating income

    15,696     15,963     14,642     9,681     55,982  

Net income

    7,128     7,084     7,079     4,398     25,689  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

    7,128     7,084     7,079     4,398     25,689  

Basic earnings per share

                               

Net income

  $ 0.11   $ 0.11   $ 0.11   $ 0.07   $ 0.39  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

  $ 0.11   $ 0.11   $ 0.11   $ 0.07   $ 0.39  

Diluted earnings per share

                               

Net income

  $ 0.11   $ 0.11   $ 0.10   $ 0.06   $ 0.38  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

  $ 0.11   $ 0.11   $ 0.10   $ 0.06   $ 0.38  

Weighted average common shares outstanding

                               

Basic

    65,134     65,774     66,108     66,739     65,933  

Diluted

    66,190     67,383     67,601     67,996     67,337  

2011

                               

Revenues

  $ 134,389   $ 135,052   $ 136,889   $ 137,733   $ 544,063  

Operating income

    9,305     7,141     7,609     14,241     38,296  

Net income

    1,742     1,010     1,839     4,538     9,129  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

    1,742     1,010     1,839     4,538     9,129  

Basic earnings per share

                               

Net income

  $ 0.03   $ 0.02   $ 0.03   $ 0.07   $ 0.14  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

  $ 0.03   $ 0.02   $ 0.03   $ 0.07   $ 0.14  

Diluted earnings per share

                               

Net income

  $ 0.03   $ 0.02   $ 0.03   $ 0.07   $ 0.14  

Net income attributable to Global Cash Access Holdings, Inc. and Subsidiaries

  $ 0.03   $ 0.02   $ 0.03   $ 0.07   $ 0.14  

Weighted average common shares outstanding

                               

Basic

    63,952     63,969     64,712     64,871     64,673  

Diluted

    64,182     64,094     64,751     65,227     64,859  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Restricted Cash and Cash Equivalents
 
 
Balance of restricted cash and cash equivalents
$ 200 
$ 455 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2)
12 Months Ended
Dec. 31, 2012
Minimum
 
Property, Equipment and Leasehold Improvements
 
Estimated life
3 years 
Maximum
 
Property, Equipment and Leasehold Improvements
 
Estimated life
5 years 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $)
1 Months Ended 12 Months Ended
Jan. 31, 2012
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Jan. 5, 2012
Advertising, Marketing and Promotional Costs
 
 
 
 
 
Total advertising, marketing and promotional costs
 
$ 700,000 
$ 600,000 
$ 800,000 
 
Inventory
 
 
 
 
 
Term of interest rate cap
3 years 
 
 
 
 
Variable rate basis
 
LIBOR 
 
 
 
Increase in LIBOR which is covered by interest rate cap (as a percent)
 
 
 
 
1.50% 
Notional amount of interest rate cap
 
 
 
 
150,000,000 
Fair Value, Level 1 |
New senior secured credit facility
 
 
 
 
 
Fair value and carrying value of borrowings and interest rate cap
 
 
 
 
 
New senior secured credit facility
 
 
173,565,000 
 
 
Fair Value, Level 1 |
Carrying Value |
New senior secured credit facility
 
 
 
 
 
Fair value and carrying value of borrowings and interest rate cap
 
 
 
 
 
New senior secured credit facility
 
 
174,000,000 
 
 
Fair Value, Level 2 |
New senior secured credit facility
 
 
 
 
 
Fair value and carrying value of borrowings and interest rate cap
 
 
 
 
 
New senior secured credit facility
 
122,715,000 
 
 
 
Fair Value, Level 2 |
Carrying Value |
New senior secured credit facility
 
 
 
 
 
Fair value and carrying value of borrowings and interest rate cap
 
 
 
 
 
New senior secured credit facility
 
$ 121,500,000 
 
 
 
ATM FUNDING AGREEMENTS (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Indemnification guarantee
Wells Fargo owned funds
Dec. 31, 2011
Indemnification guarantee
Wells Fargo owned funds
Dec. 31, 2010
Indemnification guarantee
Wells Fargo owned funds
Dec. 31, 2012
Indemnification guarantee
Contract Cash Solutions Agreement
Wells Fargo owned funds
Dec. 31, 2011
Indemnification guarantee
Contract Cash Solutions Agreement
Wells Fargo owned funds
Jun. 30, 2012
Indemnification guarantee
Second Amendment, Contract Cash Solutions Agreement
Wells Fargo owned funds
Maximum
Jun. 30, 2012
Indemnification guarantee
Second Amendment, Contract Cash Solutions Agreement
Wells Fargo owned funds
Minimum
ATM Funding Agreements
 
 
 
 
 
 
 
 
 
Maximum amount
 
 
 
 
 
 
 
$ 500.0 
$ 400.0 
Outstanding balance of ATM cash utilized
 
 
 
 
 
360.4 
467.8 
 
 
Cash usage fees incurred
 
 
3.1 
2.8 
1.9 
 
 
 
 
Site-Funded ATM liability
$ 107.5 
$ 85.9 
 
 
 
 
 
 
 
WARRANTY RESERVES (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Summary of the activity for the check warranty reserve
 
 
Balance at the beginning of the period
$ 6,756 
$ 7,036 
Warranty expense provision
5,226 
5,700 
Charge offs against reserve
(5,074)
(5,980)
Balance at the end of the period
$ 6,908 
$ 6,756 
BUSINESS COMBINATIONS (Details) (USD $)
3 Months Ended
Jun. 30, 2011
Western Money
May 31, 2010
Western Money
Jun. 30, 2011
Western Money
Customer contracts
Jun. 30, 2011
Western Money
Trademarks
Jun. 30, 2011
Western Money
Developed technology
Jun. 30, 2011
Western Money
Non-compete agreements
Nov. 15, 2011
MCA Processing
Business Combinations
 
 
 
 
 
 
 
Percentage of outstanding common shares of Western Money were acquired
 
100.00%