EVERI HOLDINGS INC., 10-Q filed on 11/9/2015
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2015
Oct. 29, 2015
Document and Entity Information
 
 
Entity Registrant Name
Everi Holdings Inc. 
 
Entity Central Index Key
0001318568 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2015 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
65,956,802 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q3 
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 
 
 
 
Revenues
$ 208,746 
$ 145,481 
$ 622,583 
$ 440,998 
Costs and expenses
 
 
 
 
Cost of revenues (exclusive of depreciation and amortization)
129,817 
108,568 
384,062 
331,181 
Operating expenses
26,295 
20,934 
68,982 
62,233 
Research and Development
5,463 
 
15,369 
 
Depreciation
10,943 
1,856 
32,037 
5,702 
Amortization
21,512 
3,352 
62,941 
8,476 
Total costs and expenses
194,030 
134,710 
563,391 
407,592 
Operating income
14,716 
10,771 
59,192 
33,406 
Other expenses
 
 
 
 
Interest expense, net of interest income
24,696 
1,996 
75,309 
5,625 
Loss on extinguishment of debt
87 
 
13,063 
 
Total other (income) expenses
24,783 
1,996 
88,372 
5,625 
(Loss) income from operations before tax
(10,067)
8,775 
(29,180)
27,781 
Income tax (benefit) provision
(3,957)
3,099 
(10,798)
9,892 
Net (loss) income
(6,110)
5,676 
(18,382)
17,889 
Foreign currency translation
(788)
(839)
(850)
(457)
Comprehensive (loss) income
$ (6,898)
$ 4,837 
$ (19,232)
$ 17,432 
(Loss) earnings per share
 
 
 
 
Basic (in dollars per share)
$ (0.09)
$ 0.09 
$ (0.28)
$ 0.27 
Diluted (in dollars per share)
$ (0.09)
$ 0.09 
$ (0.28)
$ 0.27 
Weighted average common shares outstanding
 
 
 
 
Basic (in shares)
65,941 
65,589 
65,804 
65,853 
Diluted (in shares)
65,941 
66,747 
65,804 
67,051 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Current assets
 
 
Cash and cash equivalents
$ 111,473 
$ 89,095 
Settlement receivables
25,482 
43,288 
Trade receivables, net of allowances for doubtful accounts of $3.2 million and $2.8 million at September 30, 2015 and December 31, 2014, respectively
47,702 
37,697 
Other receivables
5,331 
20,553 
Inventory
25,481 
27,163 
Prepaid expenses and other assets
19,262 
18,988 
Total current assets
244,322 
246,375 
Non-current assets
 
 
Property, equipment and leasehold improvements, net
102,101 
106,085 
Goodwill
863,907 
857,913 
Other intangible assets, net
397,161 
436,785 
Other receivables, non-current
7,076 
9,184 
Other assets, non-current
36,279 
50,943 
Total non-current assets
1,406,524 
1,460,910 
Total assets
1,650,846 
1,707,285 
Current Liabilities
 
 
Settlement liabilities
106,579 
119,157 
Accounts payable and accrued expenses
106,602 
104,668 
Current portion of long-term debt
10,000 
10,000 
Total current liabilities
223,181 
233,825 
Non-current liabilities
 
 
Deferred tax liability, non-current
45,434 
57,333 
Long-term debt, less current portion
1,155,542 
1,178,787 
Other accrued expenses and liabilities
4,366 
5,867 
Total non-current liabilities
1,205,342 
1,241,987 
Total liabilities
1,428,523 
1,475,812 
Commitments and Contingencies (Note 13)
   
   
Stockholders' Equity
 
 
Common stock, $0.001 par value, 500,000 shares authorized and 90,777 and 90,405 shares issued at September 30, 2015 and December 31, 2014, respectively
91 
90 
Additional paid-in capital
255,817 
245,682 
Retained earnings
141,770 
160,152 
Accumulated other comprehensive income
719 
1,569 
Treasury stock, at cost, 24,824 and 24,816 shares at September 30, 2015 and December 31, 2014, respectively
(176,074)
(176,020)
Total stockholders' equity
222,323 
231,473 
Total liabilities and stockholders' equity
$ 1,650,846 
$ 1,707,285 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
Allowances for doubtful accounts
$ 3.2 
$ 2.8 
Common stock par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, shares authorized
500,000,000 
500,000,000 
Common stock, shares issued
90,777,000 
90,405,000 
Convertible preferred stock, par value (in dollars per share)
$ 0.001 
$ 0.001 
Convertible preferred stock, shares authorized
50,000,000 
50,000,000 
Convertible preferred stock, shares outstanding
Treasury stock, shares
24,824,000 
24,816,000 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Cash flows from operating activities
 
 
Net (loss) income
$ (18,382)
$ 17,889 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
Depreciation and Amortization
94,978 
14,178 
Amortization of financing costs
5,459 
1,412 
Loss/(gain) on sale or disposal of assets
(3,412)
79 
Accretion of contract rights
6,006 
 
Provision for bad debts
6,967 
6,770 
Loss on early extinguishment of debt
13,063 
 
Stock-based compensation
6,088 
7,533 
Other non-cash items
127 
 
Changes in operating assets and liabilities:
 
 
Trade and other receivables
1,873 
(6,547)
Settlement receivables
17,672 
10,828 
Inventory
1,833 
(1,430)
Prepaid and other assets
(1,662)
(2,927)
Deferred income taxes
(11,899)
8,554 
Settlement liabilities
(12,120)
(28,125)
Accounts payable and accrued expenses
(3,228)
1,226 
Net cash provided by operating activities
103,363 
29,440 
Cash flows from investing activities
 
 
Acquisitions, net of cash acquired
(10,857)
(11,845)
Capital expenditures
(49,534)
(11,035)
Proceeds from sale of fixed assets
2,103 
298 
Repayments under development agreements
3,104 
 
Advances under development and placement agreements
(2,813)
 
Changes in restricted cash and cash equivalents
(66)
(77)
Net cash used in investing activities
(58,063)
(22,659)
Cash flows from financing activities
 
 
Repayments against prior credit facility
 
(7,258)
Repayments of credit facility
(7,500)
 
Repayments of secured notes
(350,000)
 
Proceeds from issuance of secured notes
335,000 
 
Debt issuance costs
(1,146)
 
Proceeds from exercise of stock options
1,833 
5,251 
Purchase of treasury stock
(54)
(12,117)
Net cash used in financing activities
(21,867)
(14,124)
Effect of exchange rates on cash
(1,055)
(412)
Cash and cash equivalents
 
 
Net increase for the period
22,378 
(7,755)
Balance, beginning of the period
89,095 
114,254 
Balance, end of the period
111,473 
106,499 
Supplemental cash disclosures
 
 
Cash paid for interest
59,655 
5,154 
Cash (refunded) paid for income tax, net
(13,166)
874 
Supplemental non-cash disclosures
 
 
Accrued and unpaid capital expenditures
1,912 
2,260 
Accrued and unpaid contingent liability for acquisitions
4,681 
2,463 
Issuance of stock warrants
$ 2,246 
 
BUSINESS
BUSINESS

1.BUSINESS

 

Overview

 

Everi Holdings Inc. (formerly known as Global Cash Access Holdings, Inc.)  (“Everi Holdings”, “Holdings”, “Everi”) is a holding company, the assets of which are the issued and outstanding shares of capital stock of each of Everi Games Holding Company Inc. (formerly known as Multimedia Games Holding Company, Inc.), which owns all of the issued and outstanding shares of capital stock of Everi Games Inc. (formerly known as Multimedia Games, Inc.)  (“Everi Games”, “Games”) and Everi Payments Inc. (formerly known as Global Cash Access, Inc.)  (“Everi Payments”, “Payments”). Unless otherwise indicated, the terms the “Company,” “we,” “us” and “our” refer to Holdings together with its consolidated subsidiaries.

 

Everi is dedicated to providing video and mechanical reel gaming content and technology solutions, integrated gaming payments solutions and compliance and efficiency software. Everi Games provides: (a) comprehensive content, electronic gaming units and systems for Native American and commercial casinos, including the award winning TournEvent® slot tournament solution; and (b) the central determinant system for the video lottery terminals installed at racetracks in the State of New York. Everi Payments provides: (a) access to cash at gaming facilities via Automated Teller Machine cash withdrawals, credit card cash access transactions, point of sale debit card transactions, and check verification and warranty services; (b) fully integrated gaming industry kiosks that provide cash access and related services; (c) products and services that improve credit decision making, automate cashier operations and enhance patron marketing activities for gaming establishments; (d) compliance, audit and data solutions; and (e) online payment processing solutions for gaming operators in states that offer intrastate, Internet-based gaming and lottery activities.

 

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

Our unaudited condensed consolidated financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Some of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the three and nine months ended September 30, 2015 are not necessarily indicative of results to be expected for the full fiscal year.  The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.

 

There have been no changes to our basis of presentation and significant accounting policies since the most recent filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, except for the following:

 

Cost of Revenues (exclusive of depreciation and amortization)

 

The cost of revenues (exclusive of depreciation and amortization) represents the direct costs required to perform revenue generating transactions. The principal costs included within cost of revenues (exclusive of depreciation and amortization) are field service and network operations personnel, those direct costs related to the inventory sold for electronic gaming machines (“EGMs”), fully integrated kiosks and system sales, commissions paid to gaming establishments, interchange fees paid to credit and debit card networks and transaction processing fees to our transaction processor.

 

Research and Development Costs

We conduct research and development activities primarily to develop and enhance our Games and Payments platforms, as well as game content and features. We believe our ability to deliver differentiated, appealing products and services to the marketplace is based in part on our research and development investments, and we expect to continue to make such investments in the future. These research and development costs consist primarily of salaries and benefits, consulting fees, and game lab testing fees. Once the technological feasibility of a project has been established, it is transferred from research to development, and capitalization of development costs continues until the product is available for general release.

 

Advertising, Marketing and Promotional Costs

 

We expense advertising, marketing and promotional costs as incurred. Total advertising, marketing and promotional costs, included in operating expenses in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income, were $1.1 million and $1.9 million and $0.2 million and $0.6 million, for the three and nine months ended September 30, 2015 and 2014, respectively.

 

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.

 

In determining fair value, we use a hierarchy that includes three levels which are based on the extent to which inputs used in measuring fair value are observable in the market. 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 observable 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.

 

The carrying amount of cash and cash equivalents, settlement receivables, trade receivables, other 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.

 

The following table presents the fair value and outstanding balance of our long-term debt as of September 30, 2015 (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Level of

    

 

 

    

Outstanding

 

 

 

Hierarchy

 

Fair Value

 

Balance

 

Term loan

 

1

 

$

490,653

 

$

492,500

 

Senior secured notes

 

3

 

$

331,650

 

$

335,000

 

Senior unsecured notes

 

1

 

$

315,000

 

$

350,000

 

 

The senior secured notes were fair valued using a Level 3 input by evaluating the trading activities of similar debt instruments as there was no market activity as of September 30, 2015.  The senior unsecured notes were syndicated in April 2015 and transitioned from level 3 to level 1 on the fair value hierarchy

 

At December 31, 2014, the fair value of our long-term debt was considered to approximate the carrying amount as our acquisition of Everi Games occurred on December 19, 2014, for which our long-term debt was incurred.

 

Operating Segments

 

During the first quarter of 2015, we changed our organizational structure as part of our transformation to a Games and Payments company providing solutions to the gaming industry. As a result, information that our chief operating decision-making group regularly reviews for purposes of allocating resources and assessing performance changed. Therefore, beginning in the first quarter of 2015, we are reporting our financial performance based on our new segments described in “Note 18.  Segment Information”. We have presented prior period amounts to conform to the way we now internally manage and monitor segment performance beginning in 2015. This change had no impact on our condensed consolidated financial statements.

 

Recent Accounting Guidance

 

Recent Accounting Guidance Not Yet Adopted

 

In September 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2015-16, which provides guidance on business combinations.  The ASU requires an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The standard is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In July 2015, the FASB issued ASU No. 2015-11, which provides guidance on the measurement of inventory value.  The amendments require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. The pronouncement is effective for annual periods beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In April 2015, the FASB issued ASU No. 2015-03, which provides guidance to simplify the presentation of debt issuance costs.  These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The pronouncement is effective for annual periods beginning after December 15, 2015, and interim periods within those fiscal years, and early adoption is permitted for financial statements that have not been previously issued. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In January 2015, the FASB issued ASU No. 2015-01, which requires that an entity separately classify, present and disclose extraordinary events and transactions. The pronouncement is effective for annual periods ending after December 15, 2015. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In August 2014, the FASB issued ASU No. 2014-15, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The pronouncement is effective for annual periods ending after December 15, 2016, and interim periods thereafter, and early adoption is permitted. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In June 2014, the FASB issued ASU No. 2014-12, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. The standard is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In May 2014, the FASB issued ASU No. 2014-09, which creates FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” and supersedes ASC Topic 605, “Revenue Recognition”. The guidance replaces industry specific guidance and establishes a single five-step model to identify and recognize revenue. The core principle of the guidance is that an entity should recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires the entity to disclose further quantitative and qualitative information regarding the nature and amount of revenues arising from contracts with customers, as well as other information about the significant judgments and estimates used in recognizing revenues from contracts with customers. This guidance was originally effective for interim and annual reporting periods beginning after December 15, 2016; however, in August 2015, the FASB issued ASU No. 2015-14, which extended the effective date to interim and annual periods beginning after December 15, 2017. Early adoption is not permitted. This guidance may be adopted retrospectively or under a modified retrospective method where the cumulative effect is recognized at the date of initial application. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within our Notes to the Condensed Consolidated Financial Statements.

BUSINESS COMBINATIONS
BUSINESS COMBINATIONS

3. BUSINESS COMBINATIONS

 

Multimedia Games Holding Company, Inc.

 

On December 19, 2014, Holdings completed its acquisition of Everi Games (formerly known as Multimedia Games Holding Company, Inc.). Pursuant to the terms of the Agreement and Plan of Merger, dated as of September 8, 2014 (the “Merger Agreement”), by and among Holdings, Movie Merger Sub, Inc., a wholly owned subsidiary of Holdings (“Merger Sub”), and Everi Games, Merger Sub merged with and into Everi Games, with Everi Games continuing as the surviving corporation (the “Merger”). In the Merger, Everi Games became a wholly owned subsidiary of Holdings. Also, as a result of the Merger, each outstanding share of common stock, par value $0.01 per share, of Everi Games, other than shares held by Holdings, Everi Games, Merger Sub or their respective subsidiaries, was cancelled and converted into the right to receive $36.50 in cash, without interest (the “Merger Consideration”), together with the consideration paid in connection with the acceleration and full vesting of certain Everi Games equity awards, (collectively, the “Total Merger Consideration”).

 

Everi Games designs, manufactures and supplies gaming machines and systems to commercial and Native American casino operators as well as select lottery operators and commercial bingo facility operators. Everi Games’ revenues were generated from the operation of gaming machines in revenue sharing or lease arrangements and from the sale of gaming machines and systems that feature proprietary game themes.

 

The total purchase consideration for Everi Games was as follows (in thousands, except per share amounts):

 

 

 

 

 

 

 

    

Amount

 

Purchase consideration

 

 

 

 

Total purchase price for Everi Games common stock (29,948 shares at $36.50 per share)

 

$

1,093,105

 

Payment in respect to Everi Games outstanding equity awards

 

 

56,284

 

Total merger consideration

 

 

1,149,389

 

Repayments of Everi Games debt and other obligations

 

 

25,065

 

Less: Everi Games outstanding cash at acquisition date

 

 

(118,299)

 

Total purchase consideration

 

$

1,056,155

 

 

 

 

The Merger was accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and liabilities assumed be recognized at their respective fair values as of the acquisition date. The excess of the purchase price over those fair values was recorded as goodwill, none of which is deductible for tax purposes. The goodwill recognized is attributable primarily to the income potential from Everi Games penetrating into the Class III commercial casino market, the assembled workforce of Everi Games and expected synergies.

 

The estimates and assumptions used include the projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future cash flows. The estimated fair values of Everi Games’ assets acquired and liabilities assumed and resulting goodwill are subject to adjustment as we finalize our fair value analysis. The significant items for which a final fair value has not been determined include, but not limited to: accrued liabilities, the valuation and estimated useful lives of tangible and intangible assets and deferred income taxes. We expect to complete our fair value determinations no later than the fourth quarter of 2015. We do not expect our fair value determinations to materially change; however, there may be differences compared to those amounts originally recorded as we complete our fair value analysis.

 

The information below reflects the preliminary purchase price allocation (in thousands):

 

 

 

 

 

 

 

    

Amount

 

Purchase price allocation

 

 

 

 

Current assets

 

$

68,548

 

Property, equipment and leasehold improvements, net

 

 

87,283

 

Goodwill

 

 

669,542

 

Other intangible assets, net

 

 

403,300

 

Other receivables, non-current

 

 

5,030

 

Other assets, long-term

 

 

3,392

 

Deferred tax asset, non-current

 

 

22,287

 

Total assets

 

 

1,259,382

 

Current liabilities

 

 

44,291

 

Deferred tax liability, non-current

 

 

158,418

 

Other accrued expenses and liabilities

 

 

518

 

Total liabilities

 

 

203,227

 

Net assets acquired

 

$

1,056,155

 

 

Trade receivables acquired of $24.7 million were considered to be collectible and therefore the carrying amounts were considered to approximate fair value. Inventory acquired of $16.5 million was fair valued based on model-based valuations for which inputs and value drivers were observable.

 

The following table summarizes acquired tangible assets (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Useful Life

 

Estimated

 

 

    

(years)

    

Fair Value

  

Property, equipment and leased assets

 

 

 

 

 

 

 

 

Gaming equipment

 

2

-

4

 

$

78,201

 

Leasehold and building improvements

 

Lease Term

 

 

2,105

 

Machinery and equipment

 

3

-

5

 

 

4,126

 

Other

 

2

-

7

 

 

2,851

 

Total property, equipment and leased assets

 

 

 

 

 

$

87,283

 

 

The fair value of property, equipment and leased assets was determined using the cost approach as the primary approach for valuing the majority of the personal property. The market approach was used to estimate the value of vehicles. The income approach was used to quantify any economic obsolescence that may be present in the personal property. No economic obsolescence adjustments were made to the personal property, as the business enterprise valuation indicated sufficient cash flows to support the values established through the cost and market approaches.

 

The following table summarizes acquired intangible assets (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Useful Life

 

Estimated

 

 

    

(years)

    

Fair Value

 

Other intangible assets

 

 

 

 

 

 

 

 

Tradenames and trademarks

 

3

-

7

 

$

14,800

 

Computer software

 

3

-

5

 

 

3,755

 

Developed technology

 

2

-

6

 

 

139,645

 

Customer relationships

 

8

-

12

 

 

231,100

 

Contract rights

 

1

-

7

 

 

14,000

 

Total other intangible assets

 

 

 

 

 

$

403,300

 

 

The fair values of trade names and trademarks and developed technology were determined by applying the income approach utilizing the relief from royalty methodology. The fair value of customer relationships was determined by applying the income approach utilizing the excess earnings methodology. The fair value of contract rights was considered to approximate the carrying amount based on contractual obligations associated with these other intangible assets. The discount rates utilized to estimate the fair value of these other intangible assets ranged from 10.0% to 11.0%

 

We expensed approximately $0.1 million and $2.0 million of costs incurred related to the acquisition of Everi Games for financial advisory services, financing related fees, accounting and legal fees and other transaction-related expenses during the three and nine months ended September 30, 2015, respectively. These expenses are included in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income within operating expenses. These costs do not include any costs related to additional site consolidation or rationalization that we might consider in the future.

 

NEWave, Inc.

 

In April 2014, we acquired all of the outstanding capital stock of NEWave, Inc. (“NEWave”) for an aggregate purchase price of approximately $14.9 million, of which we estimated that approximately $2.5 million would be paid in the second quarter of 2015. As of June 30, 2015, a final payment of $2.3 million was remitted. NEWave is a supplier of anti-money laundering compliance, audit and data efficiency software to the gaming industry. The NEWave acquisition did not have a material impact on our results of operations or financial condition.

 

We have not provided the supplemental pro forma impact of the NEWave acquisition on the revenue and earnings of the combined entity as if the acquisition date had been January 1, 2013, and the amount of revenue and earnings derived from NEWave have not been presented on a supplemental basis as such amounts are not material for the three and nine months ended September 30, 2014, respectively.

 

Resort Advantage, LLC

 

In August 2015, we acquired certain assets of Resort Advantage, LLC (“Resort Advantage”) for an aggregate purchase price of approximately $13.3 million, of which we estimated that approximately $4.7 million would be paid under the provisions of the agreement over a period of 40 months. Resort Advantage is a supplier of comprehensive and integrated solutions for complete Financial Crimes Enforcement Network (“FinCEN”) and IRS regulatory compliance to the gaming industry. The Resort Advantage acquisition did not have a material impact on our results of operations or financial condition.

 

We have not provided the supplemental pro forma impact of the Resort Advantage acquisition on the revenue and earnings of the combined entity as if the acquisition date had been January 1, 2014, and the amount of revenue and earnings derived from Resort Advantage have not been presented on a supplemental basis as such amounts are not material for the three and nine months ended September 30, 2015 and 2014, respectively.

ATM FUNDING AGREEMENTS
ATM FUNDING AGREEMENTS

4. ATM FUNDING AGREEMENTS

 

Contract Cash Solutions Agreement

 

Our Contract Cash Solutions Agreement with Wells Fargo Bank, N.A. (“Wells Fargo”) allows us to use funds owned by Wells Fargo to provide the currency needed for normal operating requirements for our 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. These cash usage fees, reflected as interest expense within the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income, were $0.5 million and $1.6 million and $0.6 million and $1.8 million for the three and nine months ended September 30, 2015 and 2014, respectively. We are exposed to interest rate risk to the extent that the applicable LIBOR increases.

 

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 which is recorded on a net basis. As these funds are not our assets, supplied cash is not reflected on the Condensed Consolidated Balance Sheets. The outstanding balances of ATM cash utilized by us from Wells Fargo were $289.4 million and $396.3 million as of September 30, 2015 and December 31, 2014, respectively.

 

In November 2014, we amended the Contract Cash Solutions Agreement to extend the term one year until November 30, 2015.

 

In June 2015, we amended the Contract Cash Solutions Agreement to decrease the maximum amount of cash to be provided to us from $500.0 million to $425.0 million and to extend the term of the agreement from November 30, 2015 to June 30, 2018. 

 

We are responsible for any losses of cash in the ATMs under this agreement and we self‑insure for this risk. We incurred no material losses related to this self‑insurance for the three and nine months ended September 30,  2015 and 2014.

 

Site-Funded ATMs

 

We operate 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 Condensed Consolidated Balance Sheets and was $54.7 million and $69.3 million as of September 30, 2015 and December 31, 2014, respectively.

 

TRADE RCEIVABLES
TRADE RECEIVABLES

5. TRADE RECEIVABLES

 

Trade receivables represent short-term credit granted to customers for which collateral is generally not required. The balance of trade receivables consists of outstanding balances owed to us by gaming establishments and casino patrons. The balance of trade receivables consisted of the following (in thousands):

 

 

 

 

 

 

 

 

.

At September 30,

 

At December 31,

 

 

2015

    

2014

 

 

 

 

 

 

 

 

Trade receivables, net

 

 

 

 

 

 

Games trade receivables

$

34,871

 

$

28,270

 

Payments trade receivables

 

12,831

 

 

9,427

 

Total trade receivables, net

$

47,702

 

$

37,697

 

 

The material balance of the allowance for doubtful accounts for trade receivables is from warranty receivables. On a monthly basis, we evaluate the collectability of the outstanding balances and establish 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 Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. The outstanding balance of the warranty reserve was $3.2 and $2.8 million as of September 30,  2015 and December 31, 2014, respectively.

OTHER RECEIVABLES
OTHER RECEIVABLES

6. OTHER RECEIVABLES

 

Other receivables include the balance of notes and loans receivable on our games and fully integrated kiosk products, development agreements, which are generated from reimbursable amounts advanced to tribal customers generally used by the customer to build, expand or renovate its facility, and an agreement with Bee Caves Games, Inc. (“Bee Caves Games”) in July 2014, under which the Company agreed to make a loan pursuant to a secured promissory note in the amount of $4.5 million. In association with the promissory note, the Company received warrants to purchase Bee Caves Games common stock, and recorded a discount to the note for the fair value of the warrants received. The warrants are included in the balance of other assets, non-current.  The note, which bears interest at 7%, requires interest only payments for the first 24 months followed by repayments of principal and interest in 48 equal monthly installments.

 

Other receivables also include income taxes receivable and other miscellaneous receivables. The balance of other receivables consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

2015

    

2014

 

Other receivables

 

 

 

 

 

 

Notes and loans receivable, net of discount of $737 and $853, respectively

$

9,676

 

$

13,939

 

Federal and state income tax receivable

 

455

 

 

15,092

 

Other

 

2,276

 

 

706

 

Total other receivables

 

12,407

 

 

29,737

 

Less: Notes and loans receivable, non-current

 

7,076

 

 

9,184

 

Total other receivables, current portion

$

5,331

 

$

20,553

 

 

 

PREPAID AND OTHER ASSETS
PREPAID AND OTHER ASSETS

7. PREPAID AND OTHER ASSETS

 

Prepaid and other assets include the balance of prepaid expenses, deposits, debt issuance costs and other assets. The short-term portion of these assets is included in prepaid and other assets and the long-term portion is included in other assets, non-current.

 

The balance of prepaid and other assets consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

 

2015

    

2014

 

 

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

 

 

 

 

 

Prepaid expenses

$

5,799

 

$

7,163

 

 

Deposits

 

9,640

 

 

8,781

 

 

Other

 

3,823

 

 

3,044

 

 

Total prepaid expenses and other assets

$

19,262

 

$

18,988

 

 

 

The balance of other assets, non-current consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

 

2015

    

2014

    

 

Other assets, non-current

 

 

 

 

 

 

 

Debt issuance costs

$

25,333

 

$

41,109

 

 

Prepaid expenses and deposits, non-current

 

4,253

 

 

3,956

 

 

Other

 

6,693

 

 

5,878

 

 

Total other assets, non-current

$

36,279

 

$

50,943

 

 

 

INVENTORY
INVENTORY

8. INVENTORY

 

We currently maintain separate inventories for our Games and Payments businesses. Our Games inventory primarily consists of component parts, completed player terminals and back office computer equipment. This inventory was stated at the lower of cost or market and accounted for using the first in, first out method during the current reporting period; whereas the inventory that existed at the time of the Merger was stated at fair value. The cost of inventory includes cost of materials, labor, overhead and freight. Our Payments inventory primarily consists of parts as well as finished goods and work-in-progress.  This inventory was stated at the lower of cost or market accounted for using the average cost method.  

 

Inventory consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

 

2015

    

2014

 

 

Inventory

 

 

 

 

 

 

 

Raw materials and component parts, net of reserves of $257 and $22, respectively

$

14,096

 

$

21,151

 

 

Work in progress

 

8,383

 

 

803

 

 

Finished goods

 

3,002

 

 

5,209

 

 

Total inventory

$

25,481

 

$

27,163

 

 

 

PROPERTY, EQUIPMENT AND LEASED ASSETS
PROPERTY, EQUIPMENT AND LEASED ASSETS

9. PROPERTY, EQUIPMENT AND LEASED ASSETS

 

Property, equipment and leased assets consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2015

 

At December 31, 2014

 

 

 

Useful Life

 

 

 

 

Accumulated

 

Net Book

 

 

 

Accumulated

 

Net Book

 

 

    

(Years)

   

  Cost  

   

Depreciation

   

Value

   

Cost

   

Depreciation

   

Value

 

Property, equipment and leased assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental pool - deployed

 

2

-

4

 

$

85,090

 

$

20,900

 

$

64,190

 

$

70,295

 

$

876

 

$

69,419

 

Rental pool - undeployed

 

2

-

4

 

 

13,305

 

 

3,144

 

 

10,161

 

 

10,562

 

 

151

 

 

10,411

 

ATM equipment

 

 

5

 

 

 

18,492

 

 

12,322

 

 

6,170

 

 

23,572

 

 

16,544

 

 

7,028

 

Leasehold and building improvements

 

Lease Term

 

 

6,474

 

 

1,742

 

 

4,732

 

 

6,289

 

 

895

 

 

5,394

 

Cash advance equipment

 

 

3

 

 

 

7,187

 

 

2,424

 

 

4,763

 

 

3,372

 

 

1,873

 

 

1,499

 

Machinery, office and other equipment

 

2

-

5

 

 

24,944

 

 

12,859

 

 

12,085

 

 

21,405

 

 

9,071

 

 

12,334

 

Total

 

 

 

 

 

$

155,492

 

$

53,391

 

$

102,101

 

$

135,495

 

$

29,410

 

$

106,085

 

 

Depreciation expense related to other property, equipment and leased assets totaled approximately $10.9 million and $32.0 million and $1.9 million and $5.7 million for the three and nine months ended September 30, 2015 and 2014, respectively. Our property, equipment and leased assets were not impaired for the three and nine months ended September 30, 2015 and 2014.

 

In connection with the sale of certain assets related to our PokerTek products during the three months ended September 30, 2015 for a purchase price of $5.4 million, we recorded a gain of approximately $3.9 million, which was included in operating expenses in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL AND OTHER INTANGIBLE ASSETS

10. GOODWILL AND OTHER INTANGIBLE ASSETS

 

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 balance of goodwill was $863.9 million and $857.9 million at September 30,  2015 and December 31, 2014, respectively. Our goodwill was not impaired for the three and nine months ended September 30, 2015 and 2014. Additionally, no impairment was identified during our annual impairment testing as of October 1, 2014.

 

In accordance with ASC 350, we test goodwill at the reporting unit level, which in certain cases may be a component of an operating segment, 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 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.

 

Other Intangible Assets

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2015

 

At December 31, 2014

 

 

Useful 

Life

 

 

 

 

Accumulated

 

Net Book

 

 

 

 

Accumulated

 

Net Book

 

    

(years)

    

Cost

    

Amortization

    

Value

    

Cost

    

Amortization

    

Value

Other intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract rights under development and placement fee agreements

 

1

-

7

 

$

16,454

 

$

6,006

 

$

10,448

 

$

14,000

 

$

301

 

$

13,699

Customer contracts

 

7

-

14

 

 

49,764

 

 

33,393

 

 

16,371

 

 

43,938

 

 

29,931

 

 

14,007

Customer relationships

 

8

-

12

 

 

231,100

 

 

16,481

 

 

214,619

 

 

231,100

 

 

733

 

 

230,367

Developed technology and software

 

1

-

6

 

 

194,795

 

 

54,610

 

 

140,185

 

 

174,417

 

 

14,604

 

 

159,813

Patents, trademarks and other

 

1

-

17

 

 

27,829

 

 

12,291

 

 

15,538

 

 

27,856

 

 

8,957

 

 

18,899

Total

 

 

 

 

 

$

519,942

 

$

122,781

 

$

397,161

 

$

491,311

 

$

54,526

 

$

436,785

 

Amortization expense related to other intangible assets totaled approximately $21.5 million and $62.9 million, and $3.4 million and $8.5 million, for the three and nine months ended September 30, 2015 and 2014, respectively. We capitalized and placed into service $6.7 million and $12.3 million, and $0.7 million and $5.6 million, of software development costs for the three and nine months ended September 30, 2015 and 2014, respectively.

 

On a quarterly basis, we evaluate our other intangible assets for potential impairment as part of our quarterly review process. No impairment was identified for our other intangible assets during our assessment for the three and nine months ended September 30, 2015 and 2014.

 

We enter into development and placement fee agreements to provide financing for new gaming facilities or for the expansion or improvement of existing facilities. All or a portion of the funds provided under development agreements are reimbursed to us, while funding under placement fee agreements is not reimbursed. In return for the fees under these agreements, each facility dedicates a percentage of its floor space, or an agreed upon unit count, for the placement of our EGMs over the term of the agreement, generally 12 to 83 months, and we receive a fixed percentage or flat fee of those machines’ hold per day. Certain of the agreements contain EGM performance standards that could allow the respective facility to reduce a portion of our guaranteed floor space.

 

In addition, certain development agreements allow the facilities to buy out floor space after advances that are subject to repayment have been repaid. The development agreements typically provide for a portion of the amounts retained by each facility for its share of the operating profits of the facility to be used to repay some or all of the advances recorded as notes receivable. Placement fees and amounts advanced in excess of those to be reimbursed by the customer for real property and land improvements are allocated to intangible assets and are generally amortized over the term of the contract, which is recorded as a reduction of revenue generated from the facility. In the past we have, and in the future, we may, by mutual agreement, amend these agreements to reduce our floor space at the facilities. Any proceeds received for the reduction of floor space is first applied against the intangible asset for that particular development or placement fee agreement, if any, and the remaining net book value of the intangible asset is prospectively amortized on a straight-line method over the remaining estimated useful life.

 

During the nine months ended September 30, 2015, we paid approximately $2.8 million to a customer for certain of its locations in Oklahoma to extend the placement of nearly 300 units for an additional term of up to 60 months. 

ACCOUNTS PAYABLE AND ACCRUED EXPENSES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES

11.ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

The following table presents our accounts payable and accrued expenses (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

2015

    

2014

  

Accounts payable and accrued expenses

 

 

 

 

 

 

Trade accounts payable

$

46,351

 

$

48,962

 

Accrued interest

 

15,424

 

 

3,387

 

Payroll and related expenses

 

7,791

 

 

10,889

 

Deferred and unearned revenues

 

9,979

 

 

8,016

 

Cash access processing and related expenses

 

4,949

 

 

4,414

 

Accrued taxes

 

2,482

 

 

3,195

 

Other

 

19,626

 

 

25,805

 

Total accounts payable and accrued expenses

$

106,602

 

$

104,668

 

 

 

 

 

 

 

 

 

 

LONG-TERM DEBT
LONG-TERM DEBT

12. LONG-TERM DEBT

 

The following table summarizes our outstanding indebtedness (in thousands):

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

 

2015

    

2014

 

 

Long-term debt

 

 

 

 

 

 

 

Senior secured term loan

$

492,500

 

$

500,000

 

 

Senior secured notes

 

335,000

 

 

350,000

 

 

Senior unsecured notes

 

350,000

 

 

350,000

 

 

Total debt

 

1,177,500

 

 

1,200,000

 

 

Less: original issue and warrant discount

 

(11,958)

 

 

(11,213)

 

 

Total debt after discount

 

1,165,542

 

 

1,188,787

 

 

Less: current portion of long-term debt

 

(10,000)

 

 

(10,000)

 

 

Long-term debt, less current portion

$

1,155,542

 

$

1,178,787

 

 

 

Credit Facilities

 

In December 2014, we entered into a credit agreement that provided for a $500.0 million six-year senior secured term loan that matures in 2020 (the “Term Loan”) and a $50.0 million five-year revolver that matures in 2019 (the “Revolving Credit Facility”, and together with the Term Loan, the “Credit Facilities”). The fees associated with the Credit Facilities included original issue discounts of approximately $7.5 million and debt issuance costs of approximately $13.9 million.

 

We are required to repay the Term Loan in an amount equal to 0.50% per quarter of the initial aggregate principal with the final principal repayment installment on the maturity date.  Interest is due in arrears each March, June, September and December and at the maturity date; however, interest may be remitted within one to three months of such dates.

 

The Revolving Credit Facility remained undrawn as of September 30,  2015.

 

The interest rate per annum applicable to the Revolving Credit Facility is, at our option, the base rate or LIBOR plus, in each case, an applicable margin. The interest rate per annum applicable to the Term Loan is also, at our option, the base rate or LIBOR plus, in each case, an applicable margin. LIBOR will be reset at the beginning of each selected interest period based on the LIBOR rate then in effect; provided that, with respect to the Revolving Credit Facility, if LIBOR is below zero, then such rate will be equal to zero plus the applicable margin, and, with respect to the Term Loan, if LIBOR is below 1.0%, then such rate will be equal to 1.0% plus the applicable margin. The base rate is a fluctuating interest rate equal to the highest of (a) the prime lending rate announced by the administrative agent, (b) the federal funds effective rate from time to time plus 0.50%, and (c) LIBOR (after taking account of any applicable floor) applicable for an interest period of one month plus 1.00%. The applicable margins of 4.75% and 5.25% for the Revolving Credit Facility and Term Loan, respectively, are subject to adjustment based on our consolidated secured leverage ratio.

 

Voluntary prepayments of the Term Loan and the Revolving Credit Facility and voluntary reductions in the unused commitments are permitted in whole or in part, in minimum amounts as set forth in the credit agreement governing the Credit Facilities, with prior notice but without premium or penalty, except that certain refinancing transactions of the Term Loan within twelve months after the closing of the Credit Facilities will be subject to a prepayment premium of 1.00% of the principal amount repaid.

 

Subject to certain exceptions, the obligations under the Credit Facilities are secured by substantially all of the present and after acquired assets of each of Everi Payments,  Everi Holdings and the subsidiary guarantors (the “Collateral”) including: (a) a perfected first priority pledge of all the capital stock of Everi Payments and each domestic direct, wholly owned material restricted subsidiary held by Everi Holdings, Everi Payments or any such subsidiary guarantor; and (b) a perfected first priority security interest in substantially all other tangible and intangible assets of Everi Holdings, Everi Payments, and such subsidiary guarantors (including, but not limited to, accounts receivable, inventory, equipment, general intangibles, investment property, real property, intellectual property and the proceeds of the foregoing). Subject to certain exceptions, the Credit Facilities are unconditionally guaranteed by Everi Holdings and such subsidiary guarantors and Everi Games and its material domestic subsidiaries.

 

The Term Loan had an applicable interest rate of 6.25% as of September 30,  2015 and December 31, 2014.  

 

We were in compliance with the terms of the Credit Facilities as of September 30,  2015 and December 31, 2014.

 

Senior Secured Notes and Refinance of Senior Secured Notes

 

In December 2014, we issued $350.0 million in aggregate principal amount of 7.75% Senior Secured Notes due 2021 (the “Secured Notes”). The fees associated with the Secured Notes included debt issuance costs of approximately $13.6 million.

 

Interest is due quarterly in arrears each January, April, July and October.

 

The Secured Notes were acquired by the initial purchasers pursuant to the terms of a purchase agreement.  Under the terms of the purchase agreement, during a one year period following the closing and upon prior notice from the initial purchasers, the Company was required to use commercially reasonable efforts to aid the initial purchasers in the resale of the Secured Notes, including by preparing an updated offering memorandum and participating in reasonable marketing efforts including road shows, to the extent required therein. Alternatively, we had the ability to redeem the Secured Notes from the initial purchasers without penalty.

 

On April 15, 2015, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) among Everi Payments, CPPIB Credit Investments III Inc. (the “Purchaser”), and Deutsche Bank Trust Company Americas, as collateral agent (the “Collateral Agent”), and issued $335.0 million in aggregate principal amount of its 7.25% Senior Secured Notes due 2021 (the “Refinanced Secured Notes”) to the Purchaser in a private offering. With the proceeds from the issuance of the Refinanced Secured Notes, Everi Payments redeemed, in full, the Company’s then outstanding Secured Notes from the initial purchasers in accordance with the terms of the indenture governing the Secured Notes. In connection with the issuance of the Refinanced Secured Notes during the second quarter of 2015, we expensed $13.0 million of related debt issuance costs and fees to “Loss on extinguishment of debt” associated with the redeemed Senior Secured Notes that were outstanding prior to the refinance transaction.

 

In connection with the issuance of the Refinanced Secured Notes and pursuant to the terms of the Note Purchase Agreement, the Company issued to the Purchaser a warrant to purchase 700,000 shares of Everi Holdings’ common stock, with an exercise price equal to $9.88 per share, representing a 30% premium to the volume-weighted average price of Everi Holdings’ common stock for the ten trading days prior to the issuance of the warrant. The warrant expires on the sixth anniversary of the date of issuance. The number of shares issuable pursuant to the warrant and the warrant exercise price are subject to adjustment for stock splits, reverse stock splits, stock dividends, mergers and certain other events. The warrants were valued at $2.2 million using a modified Black-Scholes model and were accounted for as a debt discount.

 

Interest is due quarterly in arrears each January, April, July and October.

 

We were in compliance with the terms of the Refinanced Secured Notes as of September 30,  2015 and the Secured Notes as of December 31, 2014.

 

Senior Unsecured Notes

 

In December 2014, we issued $350 million in aggregate principal amount of 10.0% Senior Unsecured Notes due 2022 (the “Unsecured Notes”). The fees associated with the Unsecured Notes included original issue discounts of approximately $3.8 million and debt issuance costs of approximately $14.0 million.

 

Interest is due semi-annually in arrears each January and July.

 

The Unsecured Notes were acquired by the initial purchasers pursuant to the terms of a purchase agreement.  Under the terms of the purchase agreement, during a one-year period following the closing and upon prior notice from the initial purchasers, the Company was required to use commercially reasonable efforts to aid the initial purchasers in the resale of the Unsecured Notes, including by preparing an updated offering memorandum and participating in reasonable marketing efforts including road shows, to the extent required therein. The Unsecured Notes were resold by the initial purchasers to third parties in the second quarter of 2015.

 

In connection with the issuance of the Unsecured Notes, the Company entered into a registration rights agreement pursuant to which the Company agreed, for the benefit of the initial holders of the Unsecured Notes, to file with the SEC, and use its commercially reasonable efforts to cause to become effective, a registration statement relating to an offer to exchange the Unsecured Notes for an issue of SEC-registered notes (the “Exchange Notes”) with terms identical to the Unsecured Notes (except that the Exchange Notes will not be subject to restrictions on transfer or to any increase in annual interest rate as described below). The obligation to complete the exchange offer and/or file a shelf registration statement will terminate on the second anniversary of the date of the Registration Rights Agreement. If the exchange offer is not completed (or, if required, the shelf registration statement is not declared effective) on or before December 19, 2015, the annual interest rate borne by the Unsecured Notes will be increased by 0.25% per annum for the first 90-day period immediately following such date and by an additional 0.25% per annum with respect to each subsequent 90-day period, up to a maximum additional rate of 1.00% per annum thereafter until the exchange offer is completed or the shelf registration statement is declared effective, at which time the interest rate will revert to the original interest rate on the date the Unsecured Notes were originally issued. The registration statement for the Exchange Notes was filed with the Securities and Exchange Commission (“SEC”) on October 23, 2015 and declared effective on November 3, 2015.  The Company launched the exchange offer on November 4, 2015 and the exchange offer will expire at 5:00 p.m., New York City time, on December 4, 2015, unless extended.

 

We were in compliance with the terms of the Unsecured Notes as of September 30,  2015 and December 31, 2014.

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES

13.COMMITMENTS AND CONTINGENCIES

 

Everi Games Shareholder Litigation

 

Putative shareholders of Everi Games filed suits in the United States District Court for the Western District of Texas (the “Texas Federal Action”) and the District Court of Travis County, Texas (the “Texas State Court Action”) alleging that Everi Games’ directors breached their fiduciary duties in connection with the Merger. The complaints further alleged that Everi Holdings and its formerly wholly-owned merger subsidiary, Merger Sub, aided and abetted those purported breaches of fiduciary duty.

 

The parties agreed to settle all claims asserted in the Texas Federal Action. Everi Games agreed to make certain additional disclosures in its proxy statement related to the Merger, and made those disclosures in a Current Report on Form 8-K filed on November 21, 2014. In addition, the defendants agreed not to oppose plaintiffs’ application for an attorneys’ fee award of up to $310,000. The court in the Texas Federal Action approved the settlement, awarded attorneys’ fees of $310,000, and entered judgment. The deadline to file any appeal from the judgment has expired and no appeal has been filed.

 

The judgment in the Texas Federal Action includes a release of the claims asserted in the Texas State Court Action. The Texas State Court Action has been dismissed with prejudice.

 

Alabama Litigation

 

The Company is currently involved in one lawsuit related to Everi Games’ former charity bingo operations in the State of Alabama, which we believe is not material from a damages perspective. The lawsuit is currently pending in federal court and includes claims related to the alleged illegality of electronic charity bingo in the State of Alabama.

 

Ozetta Hardy v. Whitehall Gaming Center, LLC, et al., a civil action, was filed against Whitehall Gaming Center, LLC (an entity that does not exist), Cornerstone Community Outreach, Inc., and Freedom Trail Ventures, Ltd., in the Circuit Court of Lowndes County, Alabama. On June 3, 2010, Everi Games and other manufacturers were added as defendants. The plaintiffs, who claim to have been patrons of White Hall, allege that Everi Games participated in gambling operations that violated Alabama state law by supplying to White Hall purportedly unlawful electronic bingo machines played by the plaintiffs, and the plaintiffs seek recovery of the monies lost on all electronic bingo games played by the plaintiffs in the six months prior to the filing of the complaint under Ala. Code, Sec 8-1-150(A). The plaintiffs requested that the court certify the action as a class action. On July 2, 2010, the defendants removed the case to the United States District Court for the Middle District of Alabama, Northern Division. The court has not ruled on the plaintiffs' motion for class certification. The Company continues to vigorously defend this matter. Given the inherent uncertainties in this litigation, however, the Company is unable to make any prediction as to the ultimate outcome.

 

Gain Contingency Settlement

 

In January 2014, we filed a complaint against certain third party defendants alleging conspiracy in restraint of competition regarding interchange fees, monopolization by defendants in the relevant market, and attempted monopolization of the defendants in the relevant market. We demanded a trial by jury of all issues so triable. The defendants filed a motion to dismiss on March 13, 2014. A settlement agreement was made as of January 16, 2015 and on January 22, 2015 the settlement agreement was executed and delivered for which we received $14.4 million in cash and recorded the settlement proceeds in the first quarter of 2015. This settlement is included as a reduction of operating expenses in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the nine months ended September 30, 2015.

 

We are also subject to other claims and suits that arise from time to time in the ordinary course of 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

14.SHAREHOLDERS’ EQUITY

 

Preferred Stock. Our amended and restated certificate of incorporation, as amended, 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 September 30,  2015 and December 31, 2014, we had no shares outstanding of preferred stock.

 

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 Everi, 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 September 30,  2015 and December 31, 2014, we had 90,777,414 and 90,405,450 shares of common stock issued, respectively.

 

Treasury Stock. Employees may direct us to withhold vested shares of restricted stock to satisfy the minimum statutory withholding requirements applicable to their restricted stock vesting. We repurchased or withheld from restricted stock awards 2,456 and 7,900, and 3,345 and 46,474, shares of common stock, at an aggregate purchase price of $14,214 and $54,124, and $27,361 and $396,057, for the three and nine months ended September 30, 2015 and 2014, respectively, to satisfy the minimum applicable tax withholding obligations related to the vesting of such restricted stock awards.

 

WEIGHTED AVERAGE COMMON SHARES
WEIGHTED AVERAGE COMMON SHARES

15.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):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2015

    

2014

 

    

2015

    

2014

 

Weighted average shares

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic

 

65,941

 

65,589

 

 

65,804

 

65,853

 

Potential dilution from equity grants(1)

 

 —

 

1,158

 

 

 —

 

1,198

 

Weighted average number of common shares outstanding - diluted

 

65,941

 

66,747

 

 

65,804

 

67,051

 

 


(1)

The Company was in a net loss position for the three and nine months ended September 30, 2015, and therefore, no potential dilution from the application of the treasury stock method was applicable. The potential dilution excludes the weighted average effect of equity awards to acquire 8.0 million and 7.0 million shares of our common stock for the three and nine months ended September 30, 2014 as the application of the treasury stock method, as required, makes them anti-dilutive.

SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION

16.SHARE-BASED COMPENSATION

 

Equity Incentive Awards

 

Our 2014 Equity Incentive Plan (the “2014 Plan”) is used to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of our business.  The 2014 Plan superseded the then current 2005 Stock Incentive Plan (the “2005 Plan”). The 2014 Plan is administered by the Compensation Committee of our Board of Directors, which has the authority to select individuals who are to receive options or other equity incentive awards 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, we grant the following award types: (a) time-based options, (b) cliff-vesting time-based options, (c) market-based options and (d) restricted stock.   These awards have varying vesting provisions and expiration periods. For the three and nine months ended September 30, 2015, we granted time-based options and market-based options.  

 

Our time-based stock options granted under the 2014 Plan vest at a rate of 25% per year on each of the first four yearly anniversaries of the option grant dates. These options expire after a ten-year period.

 

Our market-based stock options granted under the 2014 Plan vest if our average stock price in any period of 30 consecutive trading days meets certain target prices during a four-year period that commenced on the date of grant for these options.  If these target prices are not met during such four-year period, the unvested shares underlying the options will terminate; however, upon the Participant’s termination of Service, if the Participant’s Service is terminated by the Company without Cause within ten days prior to, or within 18 months after, the date a Change in Control is consummated, the unvested options granted would become fully vested.  These options expire after a seven-year period.

 

A summary of award activity is as follows (in thousands):

 

 

 

 

 

 

 

 

    

Stock Options

    

Restricted Stock

 

 

 

Granted

 

Granted

 

Outstanding, December 31, 2014

 

13,626

 

440

 

Additional authorized shares

 

 —

 

 —

 

Granted

 

6,509

 

 —

 

Exercised options or vested shares

 

(340)

 

(32)

 

Canceled or forfeited

 

(2,069)

 

(1)

 

Outstanding, September 30, 2015

 

17,726

 

407

 

 

The maximum number of shares available for future equity awards under the 2014 Plan is approximately 6.3 million shares of our common stock. There are no shares available for future equity awards under the 2005 Plan.

 

 

Stock Options

 

The fair value of time-based options was determined as of the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

September 30,

 

    

2015

    

2014

    

Risk-free interest rate

 

1

%  

1

%  

Expected life of options (in years)

 

4

 

4

 

Expected volatility

 

43

%  

54

%  

Expected dividend yield

 

0

%  

0

%  

 

The fair value of market-based options was determined as of the date of grant using a lattice-based option valuation model. For the market-based options issued this year, the assumptions were: (a) risk-free interest rate of 1%; (b) measurement period of four years; (c) expected volatility of 43%; and (d) no expected dividend yield.

 

The following tables present the options activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Weighted

    

 

 

 

 

 

Number of

 

Weighted Average

 

Average Life

 

Aggregate

 

 

 

Common Shares

 

Exercise Price

 

Remaining

 

Intrinsic Value

 

 

 

(in thousands)

 

(per share)

 

(years)

 

(in thousands)

 

Outstanding, December 31, 2014

 

13,626

 

$

7.64

 

6.5

 

$

9,148

 

Granted

 

6,509

 

 

7.68

 

 

 

 

 

 

Exercised

 

(340)

 

 

5.37

 

 

 

 

 

 

Canceled or forfeited

 

(2,069)

 

 

10.11

 

 

 

 

 

 

Outstanding, September 30, 2015

 

17,726

 

$

7.41

 

6.9

 

$

2,035

 

Vested and expected to vest, September 30, 2015

 

14,706

 

$

7.36

 

6.7

 

$

2,033

 

Exercisable, September 30, 2015

 

6,554

 

$

7.14

 

4.4

 

$

2,022

 

 

There were 0.4 and 6.5 million options granted for the three and nine months ended September 30, 2015. There were 10,000 and 5.0 million options granted for the three and nine months ended September 30, 2014, respectively. The weighted average grant date fair value per share of the options granted was $2.32 and $2.48 for the three and nine months ended September 30, 2015. The weighted average grant date fair value per share of the options granted was $3.54 and $3.27 for the three and nine months ended September 30, 2014, respectively. The total intrinsic value of options exercised was $30,561 and $0.8 million and $0.4 million and $2.8 million for the three and nine months ended September 30, 2015 and 2014, respectively.

 

There was $20.4 million in unrecognized compensation expense related to options expected to vest as of September 30,  2015. This cost is expected to be recognized on a straight-line basis over a weighted average period of 2.8 years. We received $1.8 million in proceeds from the exercise of options and recorded $5.4 million in non-cash compensation expense related to options granted that were expected to vest for the nine months ended September 30,  2015.

 

There was $13.4 million in unrecognized compensation expense related to options expected to vest as of September 30,  2014.  This cost was expected to be recognized on a straight-line basis over a weighted average period of 2.8 years. We recorded $5.3 million in non-cash compensation expense related to options granted that were expected to vest as of September 30,  2014. We received $6.6 million in cash from the exercise of options for the nine months ended September 30, 2014.

 

Restricted Stock

 

The following is a summary of non-vested share awards for our time-based restricted stock:

 

 

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

 

Shares

 

Average Grant

 

 

 

Outstanding

 

Date Fair Value

 

 

 

(in thousands)

 

(per share)

 

Outstanding, December 31, 2014

 

440

 

$

7.11

 

Granted

 

 —

 

 

 —

 

Vested

 

(32)

 

 

7.09

 

Forfeited

 

(1)

 

 

7.09

 

Outstanding, September 30, 2015

 

407

 

$

7.11

 

 

There were no shares of restricted stock granted for the three and nine months ended September 30, 2015. The total fair value of restricted stock vested was $0.1 million and $0.2 million and $0.1 million and $1.1 million for the three and nine months ended September 30, 2015 and 2014, respectively.

 

There was $2.2 million in unrecognized compensation expense related to shares of time based restricted stock expected to vest as of September 30,  2015. This cost is expected to be recognized on a straight-line basis over a weighted average period of 2.6 years. There were 32,500,  shares of restricted stock that vested and we recorded $0.6 million in non-cash compensation expense related to the restricted stock granted that was expected to vest during the nine months ended September 30, 2015.

 

There was $1.2 million in unrecognized compensation expense related to shares of time-based restricted stock expected to vest as of September 30,  2014. This cost was expected to be recognized on a straight-line basis over a weighted average period of 2.3 years. There were 0.2 million shares of time-based restricted shares vested and we recorded $0.9 million in non-cash compensation expense related to the restricted stock granted that was expected to vest for the nine months ended September 30, 2014.

INCOME TAXES
INCOME TAXES

17.INCOME TAXES

 

The provision for income tax reflected an effective income tax rate benefit of 39.3% and 37.0% for the three and nine months ended September 30, 2015, respectively, which was higher than the statutory federal rate of 35.0% primarily due to state taxes and the lower foreign tax rate applicable to our foreign source income, partially offset by non-statutory stock options that expired in 2015. The provision for income tax reflected an effective income tax rate expense of 35.3% and 35.6% for the same periods in the prior year, which was higher than the statutory federal rate of 35.0% primarily due to state taxes, an increase in our valuation allowance for certain foreign losses and non-cash compensation expenses related to stock options, partially offset by a lower foreign tax rate applicable to our foreign source income.

 

We have analyzed filing positions in all of the federal, state and foreign jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. As part of the Merger, the Company recorded $0.7 million of unrecognized tax benefits as of December 31, 2014, which is consistent with the balance as of September 30, 2015. Other than the unrecognized tax benefit related to the Merger, we believe that our income tax filing positions and deductions will be sustained upon audit and we do not anticipate any adjustments that will result in a material change to our 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. Our policy for recording interest and penalties associated with audits and unrecognized tax benefits is to record such items as a component of income tax expense.

 

SEGMENT INFORMATION
SEGMENT INFORMATION

18.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-making group in deciding how to allocate resources and in assessing performance. Our chief operating decision-making group consists of the Chief Executive Officer and the Chief Financial Officer. The operating segments are reviewed separately because each represents products that can be sold separately to our customers.

 

Since the most recent filing of our Form 10-K, and in connection with the Merger, our chief operating decision-making group has determined the following to be the operating segments for which we conduct business: (a) Games, and (b) Payments. Each of these segments is monitored by our management for performance against its internal forecast and is consistent with our internal management reporting. Our chief operating decision-making group manages the business, allocates resources and measures profitability based on the Games and Payments operating segments.

 

The Games segment provides solutions directly to gaming establishments to offer their patrons gaming entertainment related experiences including: leased gaming equipment; sales and maintenance related services of gaming equipment; gaming systems; and ancillary products and services.

 

The Payments segment provides solutions directly to gaming establishments to offer their patrons cash access related services and products, including: access to cash at gaming facilities via ATM cash withdrawals, credit card cash access transactions and point of sale debit card transactions; check-related services; fully integrated kiosks and maintenance services; compliance, audit and data software; casino credit data and reporting services and other ancillary offerings.

 

Corporate overhead and depreciation and amortization expenses were allocated to the segments either through specific identification or based on a reasonable methodology.

 

Our business is predominantly domestic, with no specific regional concentrations and no significant assets in foreign locations.

 

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 segment information (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

    

2015

    

2014

    

 

2015

    

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Games

 

$

53,983

 

$

 —

 

 

$

163,896

 

$

 —

Payments

 

 

154,763

 

 

145,481

 

 

 

458,687

 

 

440,998

Total revenues

 

$

208,746

 

$

145,481

 

 

$

622,583

 

$

440,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

Games

 

$

2,368

 

$

 —

 

 

$

7,180

 

$

 —

Payments

 

 

12,348

 

 

10,771

 

 

 

52,012

 

 

33,406

Total operating income

 

$

14,716

 

$

10,771

 

 

$

59,192

 

$

33,406

 

 

 

 

 

 

 

 

 

 

At

 

   

September 30, 2015

    

December 31, 2014

Total assets

 

 

 

 

 

 

Games

 

$

1,190,354

 

$

1,242,822

Payments

 

 

460,492

 

 

464,463

Total assets

 

$

1,650,846

 

$

1,707,285

 

Major Customers. For the three and nine months ended September 30, 2015 and 2014,  no single customer accounted for more than 10% of our revenues. Our five largest customers accounted for approximately 29% and 30% and 29% and 29% of our total revenue for the three and nine months ended September 30, 2015 and 2014, respectively.

CONDENSED CONSOLIDATING FINANCIAL INFORMATION
CONDENSED CONSOLIDATING FINANCIAL INFORMATION

19.CONDENSED CONSOLIDATING FINANCIAL INFORMATION

 

We conduct substantially all of our business through our U.S. and foreign subsidiaries. Everi Payments (“Subsidiary Issuer”) obligations under the Unsecured Notes are fully and unconditionally guaranteed, subject to certain customary release provisions, on a joint and several basis by Everi Holdings (“Parent”) and substantially all of our 100% owned U.S. subsidiaries other than Subsidiary Issuer (the “Guarantor Subsidiaries” and, together with Parent, the “Guarantors” and each a “Guarantor”). The guarantees of our Unsecured Notes will be released under the following customary circumstances: (i) the sale or disposition of all or substantially all of the assets of the Guarantor (by way of merger, consolidation, or otherwise) to a person that is not (either before or after giving effect to such transaction) Parent, Subsidiary Issuer or a restricted subsidiary; (ii) the sale or disposition of sufficient capital stock of the Guarantor

to a person that is not (either before or after giving effect to such transaction) Parent, Subsidiary Issuer or a restricted subsidiary and the Guarantor ceases to be a restricted subsidiary of Subsidiary Issuer as a result of the sale or other disposition; (iii) the designation of the Guarantor as an unrestricted subsidiary in accordance with the indenture governing the Unsecured Notes; or (iv) the legal or covenant defeasance of the Unsecured Notes or the satisfaction and discharge of the indenture governing the Unsecured Notes.

 

Presented below is condensed consolidating financial information for (a) Parent, (b) Subsidiary Issuer, (c) the Guarantor Subsidiaries and (d) our U.S. subsidiaries that are not Guarantor Subsidiaries and our foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) as of September 30, 2015 and for the three and nine month periods ended September 30, 2015 and 2014. The condensed consolidating financial information has been presented to show the nature of assets held and the results of operations and cash flows of Parent, Subsidiary Issuer, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries assuming that the guarantee structure of the Unsecured Notes had been in effect at the beginning of the periods presented.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2015

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 —

 

$

143,031

 

$

61,110

 

$

4,767

 

$

(162)

 

$

208,746

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (exclusive of depreciation and amortization)

 

 —

 

 

112,344

 

 

14,970

 

 

2,503

 

 

 —

 

 

129,817

Operating expenses

 

 —

 

 

19,085

 

 

6,932

 

 

440

 

 

(162)

 

 

26,295

Research and development

 

 —

 

 

 —

 

 

5,463

 

 

 —

 

 

 —

 

 

5,463

Depreciation

 

 —

 

 

1,881

 

 

9,018

 

 

44

 

 

 —

 

 

10,943

Amortization

 

 —

 

 

2,448

 

 

18,487

 

 

577

 

 

 —

 

 

21,512

Total costs and expenses

 

 —

 

 

135,758

 

 

54,870

 

 

3,564

 

 

(162)

 

 

194,030

Operating income

 

 —

 

 

7,273

 

 

6,240

 

 

1,203

 

 

 —

 

 

14,716

Other expense (income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 —

 

 

1,365

 

 

23,266

 

 

65

 

 

 —

 

 

24,696

Equity in loss (income) of subsidaries

 

6,110

 

 

(3,365)

 

 

 —

 

 

 —

 

 

(2,745)

 

 

 —

Loss on extinguishment of debt

 

 —

 

 

87

 

 

 —

 

 

 —

 

 

 —

 

 

87

Total other expense (income)

 

6,110

 

 

(1,913)

 

 

23,266

 

 

65

 

 

(2,745)

 

 

24,783

(Loss) income from operations before tax

 

(6,110)

 

 

9,186

 

 

(17,026)

 

 

1,138

 

 

2,745

 

 

(10,067)

Income tax expense (benefit)

 

 —

 

 

2,356

 

 

(6,606)

 

 

293

 

 

 —

 

 

(3,957)

Net (loss) income

 

(6,110)

 

 

6,830

 

 

(10,420)

 

 

845

 

 

2,745

 

 

(6,110)

Foreign currency translation

 

(788)

 

 

 —

 

 

 —

 

 

(788)

 

 

788

 

 

(788)

Comprehensive (loss) income

$

(6,898)

 

$

6,830

 

$

(10,420)

 

$

57

 

$

3,533

 

$

(6,898)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2014

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 —

 

$

134,452

 

$

7,207

 

$

4,006

 

$

(184)

 

$

145,481

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (exclusive of depreciation and amortization)

 

 —

 

 

103,720

 

 

2,575

 

 

2,273

 

 

 —

 

 

108,568

Operating expenses

 

 —

 

 

19,593

 

 

787

 

 

738

 

 

(184)

 

 

20,934

Research and development

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Depreciation

 

 —

 

 

1,810

 

 

1

 

 

45

 

 

 —

 

 

1,856

Amortization

 

 —

 

 

3,252

 

 

 —

 

 

100

 

 

 —

 

 

3,352

Total costs and expenses

 

 —

 

 

128,375

 

 

3,363

 

 

3,156

 

 

(184)

 

 

134,710

Operating income

 

 —

 

 

6,077

 

 

3,844

 

 

850

 

 

 —

 

 

10,771

Other (income) expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 —

 

 

1,902

 

 

 —

 

 

94

 

 

 —

 

 

1,996

Equity in income of subsidaries

 

(5,676)

 

 

(2,490)

 

 

 —

 

 

 —

 

 

8,166

 

 

 —

Loss on extinguishment of debt

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Total other (income) expense

 

(5,676)

 

 

(588)

 

 

 —

 

 

94

 

 

8,166

 

 

1,996

Income from operations before tax

 

5,676

 

 

6,665

 

 

3,844

 

 

756

 

 

(8,166)

 

 

8,775

Income tax expense

 

 —

 

 

1,197

 

 

1,721

 

 

181

 

 

 —

 

 

3,099

Net income

 

5,676

 

 

5,468

 

 

2,123

 

 

575

 

 

(8,166)

 

 

5,676

Foreign currency translation

 

(839)

 

 

 —

 

 

 —

 

 

(839)

 

 

839

 

 

(839)

Comprehensive income (loss)

$

4,837

 

$

5,468

 

$

2,123

 

$

(264)

 

$

(7,327)

 

$

4,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 —

 

$

424,259

 

$

185,919

 

$

12,853

 

$

(448)

 

$

622,583

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (exclusive of depreciation and amortization)

 

 —

 

 

333,592

 

 

43,716

 

 

6,754

 

 

 —

 

 

384,062

Operating expenses

 

 —

 

 

42,084

 

 

26,027

 

 

1,319

 

 

(448)

 

 

68,982

Research and development

 

 —

 

 

 —

 

 

15,369

 

 

 —

 

 

 —

 

 

15,369

Depreciation

 

 —

 

 

5,442

 

 

26,440

 

 

155

 

 

 —

 

 

32,037

Amortization

 

 —

 

 

6,858

 

 

54,222

 

 

1,861

 

 

 —

 

 

62,941

Total costs and expenses

 

 —

 

 

387,976

 

 

165,774

 

 

10,089

 

 

(448)

 

 

563,391

Operating income

 

 —

 

 

36,283

 

 

20,145

 

 

2,764

 

 

 —

 

 

59,192

Other expense (income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 —

 

 

5,977

 

 

69,089

 

 

243

 

 

 —

 

 

75,309

Equity in loss (income) of subsidiaries

 

18,382

 

 

(10,077)

 

 

 —

 

 

 —

 

 

(8,305)

 

 

 —

Loss on extinguishment of debt

 

 —

 

 

13,063

 

 

 —

 

 

 —

 

 

 —

 

 

13,063

Total other (income) expense

 

18,382

 

 

8,963

 

 

69,089

 

 

243

 

 

(8,305)

 

 

88,372

(Loss) income from operations before tax

 

(18,382)

 

 

27,320

 

 

(48,944)

 

 

2,521

 

 

8,305

 

 

(29,180)

Income tax expense (benefit)

 

 —

 

 

7,378

 

 

(19,050)

 

 

874

 

 

 —

 

 

(10,798)

Net (loss) income

 

(18,382)

 

 

19,942

 

 

(29,894)

 

 

1,647

 

 

8,305

 

 

(18,382)

Foreign currency translation

 

(850)

 

 

 —

 

 

 —

 

 

(850)

 

 

850

 

 

(850)

Comprehensive (loss) income

$

(19,232)

 

$

19,942

 

$

(29,894)

 

$

797

 

$

9,155

 

$

(19,232)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 —

 

$

408,971

 

$

21,117

 

$

11,457

 

$

(547)

 

$

440,998

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (exclusive of depreciation and amortization)

 

 —

 

 

319,976

 

 

6,861

 

 

4,344

 

 

 —

 

 

331,181

Operating expenses

 

 —

 

 

58,339

 

 

2,384

 

 

2,057

 

 

(547)

 

 

62,233

Research and development

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Depreciation

 

 —

 

 

5,563

 

 

3

 

 

136

 

 

 —

 

 

5,702

Amortization

 

 —

 

 

8,127

 

 

 —

 

 

349

 

 

 —

 

 

8,476

Total costs and expenses

 

 —

 

 

392,005

 

 

9,248

 

 

6,886

 

 

(547)

 

 

407,592

Operating income

 

 —

 

 

16,966

 

 

11,869

 

 

4,571

 

 

 —

 

 

33,406

Other (income) expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 —

 

 

5,926

 

 

 —

 

 

(301)

 

 

 —

 

 

5,625

Equity in income of subsidiaries

 

(17,889)

 

 

(10,915)

 

 

 —

 

 

 —

 

 

28,804

 

 

 —

Loss on extinguishment of debt

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Total other (income) expense

 

(17,889)

 

 

(4,989)

 

 

 —

 

 

(301)

 

 

28,804

 

 

5,625

Income from operations before tax

 

17,889

 

 

21,955

 

 

11,869

 

 

4,872

 

 

(28,804)

 

 

27,781

Income tax expense

 

 —

 

 

4,066

 

 

4,535

 

 

1,291

 

 

 —

 

 

9,892

Net income

 

17,889

 

 

17,889

 

 

7,334

 

 

3,581

 

 

(28,804)

 

 

17,889

Foreign currency translation

 

(457)

 

 

 —

 

 

 —

 

 

(457)

 

 

457

 

 

(457)

Comprehensive income

$

17,432

 

$

17,889

 

$

7,334

 

$

3,124

 

$

(28,347)

 

$

17,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2015

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 —

 

$

85,812

 

$

14,359

 

$

11,302

 

$

 —

 

$

111,473

Settlement receivables

 

 —

 

 

21,778

 

 

 —

 

 

3,704

 

 

 —

 

 

25,482

Trade receivables, net

 

 —

 

 

9,211

 

 

38,491

 

 

 —

 

 

 —

 

 

47,702

Other receivables

 

 —

 

 

4,648

 

 

619

 

 

64

 

 

 —

 

 

5,331

Inventory

 

 —

 

 

9,519

 

 

15,962

 

 

 —

 

 

 —

 

 

25,481

Prepaid expenses and other assets

 

 —

 

 

6,866

 

 

2,985

 

 

9,411

 

 

 —

 

 

19,262

Deferred tax asset

 

 —

 

 

2,743

 

 

6,848

 

 

 —

 

 

 —

 

 

9,591

Intercompany balances

 

 —

 

 

37,777

 

 

164,309

 

 

1,514

 

 

(203,600)

 

 

 —

Total current assets

 

 —

 

 

178,354

 

 

243,573

 

 

25,995

 

 

(203,600)

 

 

244,322

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, equipment and leasehold improvements, net

 

 —

 

 

19,316

 

 

82,433

 

 

352

 

 

 —

 

 

102,101

Goodwill

 

 —

 

 

154,367

 

 

708,923

 

 

617

 

 

 —

 

 

863,907

Other intangible assets, net

 

 —

 

 

31,980

 

 

357,827

 

 

7,354

 

 

 —

 

 

397,161

Other receivables, non-current

 

 —

 

 

3,469

 

 

3,607

 

 

 —

 

 

 —

 

 

7,076

Investment in subsidiaries

 

222,323

 

 

156,621

 

 

 —

 

 

86

 

 

(379,030)

 

 

 —

Deferred tax asset, non-current

 

 —

 

 

66,477

 

 

46,118

 

 

 —

 

 

(112,595)

 

 

 —

Other assets, non-current

 

 —

 

 

31,767

 

 

4,018

 

 

494

 

 

 —

 

 

36,279

Intercompany balances

 

 —

 

 

1,134,916

 

 

 —

 

 

 —

 

 

(1,134,916)

 

 

 —

Total non-current assets

 

222,323

 

 

1,598,913

 

 

1,202,926

 

 

8,903

 

 

(1,626,541)

 

 

1,406,524

Total assets

$

222,323

 

$

1,777,267

 

$

1,446,499

 

$

34,898

 

$

(1,830,141)

 

$

1,650,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement liabilities

$

 —

 

$

100,506

 

$

132

 

$

5,941

 

$

 —

 

$

106,579

Accounts payable and accrued expenses

 

 —

 

 

77,685

 

 

27,541

 

 

1,376

 

 

 —

 

 

106,602

Current portion of long-term debt

 

 —

 

 

10,000

 

 

 —

 

 

 —

 

 

 —

 

 

10,000

Intercompany balances

 

 —

 

 

165,791

 

 

30,728

 

 

7,081

 

 

(203,600)

 

 

 —

Total current liabilities

 

 —

 

 

353,982

 

 

58,401

 

 

14,398

 

 

(203,600)

 

 

223,181

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liability, non-current

 

 —

 

 

1,072

 

 

156,957

 

 

 —

 

 

(112,595)

 

 

45,434

Long-term debt, less current portion

 

 —

 

 

1,155,542

 

 

 —

 

 

 —

 

 

 —

 

 

1,155,542

Other accrued expenses and liabilities

 

 —

 

 

3,925

 

 

441

 

 

 —

 

 

 —

 

 

4,366

Intercompany balances

 

 —

 

 

 —

 

 

1,134,916

 

 

 —

 

 

(1,134,916)

 

 

 —

Total non-current liabilities

 

 —

 

 

1,160,539

 

 

1,292,314

 

 

 —

 

 

(1,247,511)

 

 

1,205,342

Total liabilities

 

 —

 

 

1,514,521

 

 

1,350,715

 

 

14,398

 

 

(1,451,111)

 

 

1,428,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

222,323

 

 

262,746

 

 

95,784

 

 

20,500

 

 

(379,030)

 

 

222,323

Total liabilities and stockholders’ equity

$

222,323

 

$

1,777,267

 

$

1,446,499

 

$

34,898

 

$

(1,830,141)

 

$

1,650,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2014

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 —

 

$

68,143

 

$

6,489

 

$

14,463

 

$

 —

 

$

89,095

Settlement receivables

 

 —

 

 

40,157

 

 

 —

 

 

3,131

 

 

 —

 

 

43,288

Trade receivables, net

 

 —

 

 

6,578

 

 

31,116

 

 

3

 

 

 —

 

 

37,697

Other receivables

 

 —

 

 

3,416

 

 

16,992

 

 

145

 

 

 —

 

 

20,553

Inventory

 

 —

 

 

10,595

 

 

16,568

 

 

 —

 

 

 —

 

 

27,163

Prepaid expenses and other assets

 

 —

 

 

7,143

 

 

2,821

 

 

9,024

 

 

 —

 

 

18,988

Deferred tax asset

 

 —

 

 

2,743

 

 

6,848

 

 

 —

 

 

 —

 

 

9,591

Intercompany balances

 

 —

 

 

18,038

 

 

151,179

 

 

1,623

 

 

(170,840)

 

 

 —

Total current assets

 

 —

 

 

156,813

 

 

232,013

 

 

28,389

 

 

(170,840)

 

 

246,375

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, equipment and leasehold improvements, net

 

 —

 

 

17,864

 

 

87,898

 

 

323

 

 

 —

 

 

106,085

Goodwill

 

 —

 

 

148,278

 

 

708,922

 

 

713

 

 

 —

 

 

857,913

Other intangible assets, net

 

 —

 

 

24,771

 

 

402,816

 

 

9,198

 

 

 —

 

 

436,785

Other receivables, non-current

 

 —

 

 

4,411

 

 

4,773

 

 

 —

 

 

 —

 

 

9,184

Investment in subsidiaries

 

231,473

 

 

147,195

 

 

 —

 

 

86

 

 

(378,754)

 

 

 —

Deferred tax asset, non-current

 

 —

 

 

78,229

 

 

 —

 

 

 —

 

 

(78,229)

 

 

 —

Other assets, non-current

 

 —

 

 

47,508

 

 

3,366

 

 

69

 

 

 —

 

 

50,943

Intercompany balances

 

 —

 

 

1,130,380

 

 

 —

 

 

 —

 

 

(1,130,380)

 

 

 —

Total non-current assets

 

231,473

 

 

1,598,636

 

 

1,207,775

 

 

10,389

 

 

(1,587,363)

 

 

1,460,910

Total assets

$

231,473

 

$

1,755,449

 

$

1,439,788

 

$

38,778

 

$

(1,758,203)

 

$

1,707,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement liabilities

$

 —

 

$

111,375

 

$

140

 

$

7,642

 

$

 —

 

$

119,157

Accounts payable and accrued expenses

 

 —

 

 

61,544

 

 

41,395

 

 

1,729

 

 

 —

 

 

104,668

Current portion of long-term debt

 

 —

 

 

10,000

 

 

 —

 

 

 —

 

 

 —

 

 

10,000

Intercompany balances

 

 —

 

 

152,802

 

 

8,159

 

 

9,879

 

 

(170,840)

 

 

 —

Total current liabilities

 

 —

 

 

335,721

 

 

49,694

 

 

19,250

 

 

(170,840)

 

 

233,825

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liability, non-current

 

 —

 

 

1,072

 

 

134,490

 

 

 —

 

 

(78,229)

 

 

57,333

Long-term debt, less current portion

 

 —

 

 

1,178,787

 

 

 —

 

 

 —

 

 

 —

 

 

1,178,787

Other accrued expenses and liabilities

 

 —

 

 

5,377

 

 

490

 

 

 —

 

 

 —

 

 

5,867

Intercompany balances

 

 —

 

 

 —

 

 

1,130,380

 

 

 —

 

 

(1,130,380)

 

 

 —

Total non-current liabilities

 

 —

 

 

1,185,236

 

 

1,265,360

 

 

 —

 

 

(1,208,609)

 

 

1,241,987

Total liabilities

 

 —

 

 

1,520,957

 

 

1,315,054

 

 

19,250

 

 

(1,379,449)

 

 

1,475,812

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

231,473

 

 

234,492

 

 

124,734

 

 

19,528

 

 

(378,754)

 

 

231,473

Total liabilities and stockholders’ equity

$

231,473

 

$

1,755,449

 

$

1,439,788

 

$

38,778

 

$

(1,758,203)

 

$

1,707,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

$

(18,382)

 

$

19,942

 

$

(29,894)

 

$

1,647

 

$

8,305

 

$

(18,382)

Adjustments to reconcile net (loss) income to cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 —

 

 

12,300

 

 

80,662

 

 

2,016

 

 

 —

 

 

94,978

Amortization of financing costs

 

 —

 

 

5,459

 

 

 —

 

 

 —

 

 

 —

 

 

5,459

Gain on sale or disposal of assets

 

 —

 

 

(60)

 

 

(3,352)

 

 

 —

 

 

 —

 

 

(3,412)

Accretion of contract rights

 

 —

 

 

 —

 

 

6,006

 

 

 —

 

 

 —

 

 

6,006

Provision for bad debts

 

 —

 

 

 —

 

 

6,967

 

 

 —

 

 

 —

 

 

6,967

Loss on early extinguishment of debt

 

 —

 

 

13,063

 

 

 —

 

 

 —

 

 

 —

 

 

13,063

Equity in income (loss) of subsidiaries

 

18,382

 

 

(10,077)

 

 

 —

 

 

 —

 

 

(8,305)

 

 

 —

Stock-based compensation

 

 —

 

 

5,144

 

 

944

 

 

 —

 

 

 —

 

 

6,088

Other non-cash items

 

 —

 

 

 —

 

 

127

 

 

 —

 

 

 —

 

 

127

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net settlement receivables and liabilities

 

 —

 

 

7,510

 

 

(9)

 

 

(1,949)

 

 

 —

 

 

5,552

Other changes in operating assets and liabilities

 

(5)

 

 

8,163

 

 

(20,360)

 

 

(881)

 

 

 —

 

 

(13,083)

Net cash (used in) provided by operating activities

 

(5)

 

 

61,444

 

 

41,091

 

 

833

 

 

 —

 

 

103,363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 —

 

 

(10,857)

 

 

 —

 

 

 —

 

 

 —

 

 

(10,857)

Capital expenditures

 

 —

 

 

(13,688)

 

 

(35,512)

 

 

(334)

 

 

 —

 

 

(49,534)

Proceeds from sale of fixed assets

 

 —

 

 

103

 

 

2,000

 

 

 —

 

 

 —

 

 

2,103

Repayments under development agreements

 

 —

 

 

 —

 

 

3,104

 

 

 —

 

 

 —

 

 

3,104

Advances under development and placement agreements

 

 —

 

 

 —

 

 

(2,813)

 

 

 —

 

 

 —

 

 

(2,813)

Changes in restricted cash and cash equivalents

 

 —

 

 

(66)

 

 

 —

 

 

 —

 

 

 —

 

 

(66)

Intercompany investing activities

 

(4,020)

 

 

6,600

 

 

 —

 

 

(58)

 

 

(2,522)

 

 

 —

Net cash used in investing activities

 

(4,020)

 

 

(17,908)

 

 

(33,221)

 

 

(392)

 

 

(2,522)

 

 

(58,063)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repayments of prior credit facility

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Repayments of credit facility

 

 —

 

 

(7,500)

 

 

 —

 

 

 —

 

 

 —

 

 

(7,500)

Repayments of secured notes

 

 —

 

 

(350,000)

 

 

 —

 

 

 —

 

 

 —

 

 

(350,000)

Proceeds from issuance of secured notes

 

 —

 

 

335,000

 

 

 —

 

 

 —

 

 

 —

 

 

335,000

Debt issuance costs

 

 —

 

 

(1,146)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,146)

Issuance of warrants

 

2,246

 

 

(2,246)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Proceeds from exercise of stock options

 

1,833

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,833

Purchase of treasury stock

 

(54)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(54)

Intercompany financing activities

 

 —

 

 

25

 

 

 —

 

 

(2,547)

 

 

2,522

 

 

 —

Net cash provided by (used in) financing activities

 

4,025

 

 

(25,867)

 

 

 —

 

 

(2,547)

 

 

2,522

 

 

(21,867)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash

 

 —

 

 

 —

 

 

 —

 

 

(1,055)

 

 

 —

 

 

(1,055)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) for the period

 

 —

 

 

17,669

 

 

7,870

 

 

(3,161)

 

 

 —

 

 

22,378

Balance, beginning of the period

 

 —

 

 

68,143

 

 

6,489

 

 

14,463

 

 

 —

 

 

89,095

Balance, end of the period

$

 —

 

$

85,812

 

$

14,359

 

$

11,302

 

$

 —

 

$

111,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

17,889

 

$

17,889

 

$

7,334

 

$

3,581

 

$

(28,804)

 

$

17,889

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 —

 

 

13,690

 

 

3

 

 

485

 

 

 —

 

 

14,178

Amortization of financing costs

 

 —

 

 

1,412

 

 

 —

 

 

 —

 

 

 —

 

 

1,412

Loss on sale or disposal of assets

 

 —

 

 

79

 

 

 —

 

 

 —

 

 

 —

 

 

79

Accretion of contract rights

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Provision for bad debts

 

 —

 

 

 —

 

 

6,770

 

 

 —

 

 

 —

 

 

6,770

Loss on early extinguishment of debt

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Equity in (loss) income of subsidiaries

 

(17,889)

 

 

(10,915)

 

 

 —

 

 

 —

 

 

28,804

 

 

 —

Stock-based compensation

 

 —

 

 

7,533

 

 

 —

 

 

 —

 

 

 —

 

 

7,533

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net settlement receivables and liabilities

 

 —

 

 

(15,244)

 

 

182

 

 

(2,235)

 

 

 —

 

 

(17,297)

Other changes in operating assets and liabilities

 

(52)

 

 

23,237

 

 

(13,953)

 

 

(10,356)

 

 

 —

 

 

(1,124)

Net cash (used in) provided by operating activities

 

(52)

 

 

37,681

 

 

336

 

 

(8,525)

 

 

 —

 

 

29,440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 —

 

 

(11,845)

 

 

 —

 

 

 —

 

 

 —

 

 

(11,845)

Capital expenditures

 

 —

 

 

(9,897)

 

 

(298)

 

 

(840)

 

 

 —

 

 

(11,035)

Proceeds from sale of fixed assets

 

 —

 

 

298

 

 

 —

 

 

 —

 

 

 —

 

 

298

Repayments under development agreements

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Advances under development and placement agreements

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Changes in restricted cash and cash equivalents

 

 —

 

 

(77)

 

 

 —

 

 

 —

 

 

 —

 

 

(77)

Intercompany Investing Activities

 

6,918

 

 

(18,756)

 

 

 —

 

 

68

 

 

11,770

 

 

 —

Net cash used in (provided by)  investing activities

 

6,918

 

 

(40,277)

 

 

(298)

 

 

(772)

 

 

11,770

 

 

(22,659)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repayments of prior credit facility

 

 —

 

 

(7,258)

 

 

 —

 

 

 —

 

 

 —

 

 

(7,258)

Repayments of credit facility

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Repayments of secured notes

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Proceeds from issuance of secured notes

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Debt issuance costs

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Issuance of warrants

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Proceeds from exercise of stock options

 

5,251

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

5,251

Purchase of treasury stock

 

(12,117)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(12,117)

Intercompany financing activities

 

 —

 

 

1,512

 

 

 —

 

 

10,258

 

 

(11,770)

 

 

 —

Net cash (provided by) used in financing activities

 

(6,866)

 

 

(5,746)

 

 

 —

 

 

10,258

 

 

(11,770)

 

 

(14,124)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash

 

 —

 

 

 —

 

 

 —

 

 

(412)

 

 

 —

 

 

(412)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase for the period

 

 —

 

 

(8,342)

 

 

38

 

 

549

 

 

 —

 

 

(7,755)

Balance, beginning of the period

 

 —

 

 

100,573

 

 

2,149

 

 

11,532

 

 

 —

 

 

114,254

Balance, end of the period

$

 —

 

$

92,231

 

$

2,187

 

$

12,081

 

$

 —

 

$

106,499

 

SUBSEQUENT EVENTS
SUBSEQUENT EVENTS

20.SUBSEQUENT EVENTS

 

As of November 9, 2015 we had not identified, and were not aware of, any subsequent events for the three and nine months ended September 30, 2015.

 

 

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

Basis of Presentation

 

Our unaudited condensed consolidated financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Some of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the three and nine months ended September 30, 2015 are not necessarily indicative of results to be expected for the full fiscal year.  The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.

 

There have been no changes to our basis of presentation and significant accounting policies since the most recent filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, except for the following:

Cost of Revenues (exclusive of depreciation and amortization)

 

The cost of revenues (exclusive of depreciation and amortization) represents the direct costs required to perform revenue generating transactions. The principal costs included within cost of revenues (exclusive of depreciation and amortization) are field service and network operations personnel, those direct costs related to the inventory sold for electronic gaming machines (“EGMs”), fully integrated kiosks and system sales, commissions paid to gaming establishments, interchange fees paid to credit and debit card networks and transaction processing fees to our transaction processor.

Research and Development Costs

We conduct research and development activities primarily to develop and enhance our Games and Payments platforms, as well as game content and features. We believe our ability to deliver differentiated, appealing products and services to the marketplace is based in part on our research and development investments, and we expect to continue to make such investments in the future. These research and development costs consist primarily of salaries and benefits, consulting fees, and game lab testing fees. Once the technological feasibility of a project has been established, it is transferred from research to development, and capitalization of development costs continues until the product is available for general release.

 

Advertising, Marketing and Promotional Costs

 

We expense advertising, marketing and promotional costs as incurred. Total advertising, marketing and promotional costs, included in operating expenses in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income, were $1.1 million and $1.9 million and $0.2 million and $0.6 million, for the three and nine months ended September 30, 2015 and 2014, respectively.

 

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.

 

In determining fair value, we use a hierarchy that includes three levels which are based on the extent to which inputs used in measuring fair value are observable in the market. 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 observable 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.

 

The carrying amount of cash and cash equivalents, settlement receivables, trade receivables, other 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.

 

The following table presents the fair value and outstanding balance of our long-term debt as of September 30, 2015 (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Level of

    

 

 

    

Outstanding

 

 

 

Hierarchy

 

Fair Value

 

Balance

 

Term loan

 

1

 

$

490,653

 

$

492,500

 

Senior secured notes

 

3

 

$

331,650

 

$

335,000

 

Senior unsecured notes

 

1

 

$

315,000

 

$

350,000

 

 

The senior secured notes were fair valued using a Level 3 input by evaluating the trading activities of similar debt instruments as there was no market activity as of September 30, 2015.  The senior unsecured notes were syndicated in April 2015 and transitioned from level 3 to level 1 on the fair value hierarchy

 

At December 31, 2014, the fair value of our long-term debt was considered to approximate the carrying amount as our acquisition of Everi Games occurred on December 19, 2014, for which our long-term debt was incurred.

Operating Segments

 

During the first quarter of 2015, we changed our organizational structure as part of our transformation to a Games and Payments company providing solutions to the gaming industry. As a result, information that our chief operating decision-making group regularly reviews for purposes of allocating resources and assessing performance changed. Therefore, beginning in the first quarter of 2015, we are reporting our financial performance based on our new segments described in “Note 18.  Segment Information”. We have presented prior period amounts to conform to the way we now internally manage and monitor segment performance beginning in 2015. This change had no impact on our condensed consolidated financial statements.

Recent Accounting Guidance

 

Recent Accounting Guidance Not Yet Adopted

 

In September 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2015-16, which provides guidance on business combinations.  The ASU requires an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The standard is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In July 2015, the FASB issued ASU No. 2015-11, which provides guidance on the measurement of inventory value.  The amendments require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. The pronouncement is effective for annual periods beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In April 2015, the FASB issued ASU No. 2015-03, which provides guidance to simplify the presentation of debt issuance costs.  These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The pronouncement is effective for annual periods beginning after December 15, 2015, and interim periods within those fiscal years, and early adoption is permitted for financial statements that have not been previously issued. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In January 2015, the FASB issued ASU No. 2015-01, which requires that an entity separately classify, present and disclose extraordinary events and transactions. The pronouncement is effective for annual periods ending after December 15, 2015. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In August 2014, the FASB issued ASU No. 2014-15, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The pronouncement is effective for annual periods ending after December 15, 2016, and interim periods thereafter, and early adoption is permitted. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In June 2014, the FASB issued ASU No. 2014-12, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. The standard is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within Notes to the Condensed Consolidated Financial Statements.

 

In May 2014, the FASB issued ASU No. 2014-09, which creates FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” and supersedes ASC Topic 605, “Revenue Recognition”. The guidance replaces industry specific guidance and establishes a single five-step model to identify and recognize revenue. The core principle of the guidance is that an entity should recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires the entity to disclose further quantitative and qualitative information regarding the nature and amount of revenues arising from contracts with customers, as well as other information about the significant judgments and estimates used in recognizing revenues from contracts with customers. This guidance was originally effective for interim and annual reporting periods beginning after December 15, 2016; however, in August 2015, the FASB issued ASU No. 2015-14, which extended the effective date to interim and annual periods beginning after December 15, 2017. Early adoption is not permitted. This guidance may be adopted retrospectively or under a modified retrospective method where the cumulative effect is recognized at the date of initial application. We are currently evaluating the impact of adopting this guidance on our condensed consolidated financial statements and disclosures included within our Notes to the Condensed Consolidated Financial Statements

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
Schedule of fair value and carrying value of our borrowings

 

The following table presents the fair value and outstanding balance of our long-term debt as of September 30, 2015 (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Level of

    

 

 

    

Outstanding

 

 

 

Hierarchy

 

Fair Value

 

Balance

 

Term loan

 

1

 

$

490,653

 

$

492,500

 

Senior secured notes

 

3

 

$

331,650

 

$

335,000

 

Senior unsecured notes

 

1

 

$

315,000

 

$

350,000

 

 

BUSINESS COMBINATIONS (Tables)

The total purchase consideration for Everi Games was as follows (in thousands, except per share amounts):

 

 

 

 

 

 

 

    

Amount

 

Purchase consideration

 

 

 

 

Total purchase price for Everi Games common stock (29,948 shares at $36.50 per share)

 

$

1,093,105

 

Payment in respect to Everi Games outstanding equity awards

 

 

56,284

 

Total merger consideration

 

 

1,149,389

 

Repayments of Everi Games debt and other obligations

 

 

25,065

 

Less: Everi Games outstanding cash at acquisition date

 

 

(118,299)

 

Total purchase consideration

 

$

1,056,155

 

 

 

 

The information below reflects the preliminary purchase price allocation (in thousands):

 

 

 

 

 

 

 

    

Amount

 

Purchase price allocation

 

 

 

 

Current assets

 

$

68,548

 

Property, equipment and leasehold improvements, net

 

 

87,283

 

Goodwill

 

 

669,542

 

Other intangible assets, net

 

 

403,300

 

Other receivables, non-current

 

 

5,030

 

Other assets, long-term

 

 

3,392

 

Deferred tax asset, non-current

 

 

22,287

 

Total assets

 

 

1,259,382

 

Current liabilities

 

 

44,291

 

Deferred tax liability, non-current

 

 

158,418

 

Other accrued expenses and liabilities

 

 

518

 

Total liabilities

 

 

203,227

 

Net assets acquired

 

$

1,056,155

 

 

The following table summarizes acquired tangible assets (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Useful Life

 

Estimated

 

 

    

(years)

    

Fair Value

  

Property, equipment and leased assets

 

 

 

 

 

 

 

 

Gaming equipment

 

2

-

4

 

$

78,201

 

Leasehold and building improvements

 

Lease Term

 

 

2,105

 

Machinery and equipment

 

3

-

5

 

 

4,126

 

Other

 

2

-

7

 

 

2,851

 

Total property, equipment and leased assets

 

 

 

 

 

$

87,283

 

 

The following table summarizes acquired intangible assets (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Useful Life

 

Estimated

 

 

    

(years)

    

Fair Value

 

Other intangible assets

 

 

 

 

 

 

 

 

Tradenames and trademarks

 

3

-

7

 

$

14,800

 

Computer software

 

3

-

5

 

 

3,755

 

Developed technology

 

2

-

6

 

 

139,645

 

Customer relationships

 

8

-

12

 

 

231,100

 

Contract rights

 

1

-

7

 

 

14,000

 

Total other intangible assets

 

 

 

 

 

$

403,300

 

 

TRADE RECEIVABLES (Tables)
Schedule of trade receivables

The balance of trade receivables consisted of the following (in thousands):

 

 

 

 

 

 

 

 

.

At September 30,

 

At December 31,

 

 

2015

    

2014

 

 

 

 

 

 

 

 

Trade receivables, net

 

 

 

 

 

 

Games trade receivables

$

34,871

 

$

28,270

 

Payments trade receivables

 

12,831

 

 

9,427

 

Total trade receivables, net

$

47,702

 

$

37,697

 

 

OTHER RECEIVABLES (Tables)
Schedule of other receivables

The balance of other receivables consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

2015

    

2014

 

Other receivables

 

 

 

 

 

 

Notes and loans receivable, net of discount of $737 and $853, respectively

$

9,676

 

$

13,939

 

Federal and state income tax receivable

 

455

 

 

15,092

 

Other

 

2,276

 

 

706

 

Total other receivables

 

12,407

 

 

29,737

 

Less: Notes and loans receivable, non-current

 

7,076

 

 

9,184

 

Total other receivables, current portion

$

5,331

 

$

20,553

 

 

PREPAID AND OTHER ASSETS (Tables)

 

The balance of prepaid and other assets consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

 

2015

    

2014

 

 

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

 

 

 

 

 

Prepaid expenses

$

5,799

 

$

7,163

 

 

Deposits

 

9,640

 

 

8,781

 

 

Other

 

3,823

 

 

3,044

 

 

Total prepaid expenses and other assets

$

19,262

 

$

18,988

 

 

 

The balance of other assets, non-current consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

 

2015

    

2014

    

 

Other assets, non-current

 

 

 

 

 

 

 

Debt issuance costs

$

25,333

 

$

41,109

 

 

Prepaid expenses and deposits, non-current

 

4,253

 

 

3,956

 

 

Other

 

6,693

 

 

5,878

 

 

Total other assets, non-current

$

36,279

 

$

50,943

 

 

 

INVENTORY (Tables)
Schedule of inventory

 

Inventory consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

 

2015

    

2014

 

 

Inventory

 

 

 

 

 

 

 

Raw materials and component parts, net of reserves of $257 and $22, respectively

$

14,096

 

$

21,151

 

 

Work in progress

 

8,383

 

 

803

 

 

Finished goods

 

3,002

 

 

5,209

 

 

Total inventory

$

25,481

 

$

27,163

 

 

 

PROPERTY, EQUIPMENT AND LEASED ASSETS (Tables)
Schedule of property, equipment and leased assets

 

Property, equipment and leased assets consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2015

 

At December 31, 2014

 

 

 

Useful Life

 

 

 

 

Accumulated

 

Net Book

 

 

 

Accumulated

 

Net Book

 

 

    

(Years)

   

  Cost  

   

Depreciation

   

Value

   

Cost

   

Depreciation

   

Value

 

Property, equipment and leased assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental pool - deployed

 

2

-

4

 

$

85,090

 

$

20,900

 

$

64,190

 

$

70,295

 

$

876

 

$

69,419

 

Rental pool - undeployed

 

2

-

4

 

 

13,305

 

 

3,144

 

 

10,161

 

 

10,562

 

 

151

 

 

10,411

 

ATM equipment

 

 

5

 

 

 

18,492

 

 

12,322

 

 

6,170

 

 

23,572

 

 

16,544

 

 

7,028

 

Leasehold and building improvements

 

Lease Term

 

 

6,474

 

 

1,742

 

 

4,732

 

 

6,289

 

 

895

 

 

5,394

 

Cash advance equipment

 

 

3

 

 

 

7,187

 

 

2,424

 

 

4,763

 

 

3,372

 

 

1,873

 

 

1,499

 

Machinery, office and other equipment

 

2

-

5

 

 

24,944

 

 

12,859

 

 

12,085

 

 

21,405

 

 

9,071

 

 

12,334

 

Total

 

 

 

 

 

$

155,492

 

$

53,391

 

$

102,101

 

$

135,495

 

$

29,410

 

$

106,085

 

 

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)
Schedule of other intangible assets

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2015

 

At December 31, 2014

 

 

Useful 

Life

 

 

 

 

Accumulated

 

Net Book

 

 

 

 

Accumulated

 

Net Book

 

    

(years)

    

Cost

    

Amortization

    

Value

    

Cost

    

Amortization

    

Value

Other intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract rights under development and placement fee agreements

 

1

-

7

 

$

16,454

 

$

6,006

 

$

10,448

 

$

14,000

 

$

301

 

$

13,699

Customer contracts

 

7

-

14

 

 

49,764

 

 

33,393

 

 

16,371

 

 

43,938

 

 

29,931

 

 

14,007

Customer relationships

 

8

-

12

 

 

231,100

 

 

16,481

 

 

214,619

 

 

231,100

 

 

733

 

 

230,367

Developed technology and software

 

1

-

6

 

 

194,795

 

 

54,610

 

 

140,185

 

 

174,417

 

 

14,604

 

 

159,813

Patents, trademarks and other

 

1

-

17

 

 

27,829

 

 

12,291

 

 

15,538

 

 

27,856

 

 

8,957

 

 

18,899

Total

 

 

 

 

 

$

519,942

 

$

122,781

 

$

397,161

 

$

491,311

 

$

54,526

 

$

436,785

 

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)
Schedule of accounts payable and accrued expenses

The following table presents our accounts payable and accrued expenses (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

2015

    

2014

  

Accounts payable and accrued expenses

 

 

 

 

 

 

Trade accounts payable

$

46,351

 

$

48,962

 

Accrued interest

 

15,424

 

 

3,387

 

Payroll and related expenses

 

7,791

 

 

10,889

 

Deferred and unearned revenues

 

9,979

 

 

8,016

 

Cash access processing and related expenses

 

4,949

 

 

4,414

 

Accrued taxes

 

2,482

 

 

3,195

 

Other

 

19,626

 

 

25,805

 

Total accounts payable and accrued expenses

$

106,602

 

$

104,668

 

 

 

 

 

 

 

 

 

LONG-TERM DEBT (Tables)
Schedule of total amounts of borrowings

 

The following table summarizes our outstanding indebtedness (in thousands):

 

 

 

 

 

 

 

 

 

 

At September 30,

 

At December 31,

 

 

 

2015

    

2014

 

 

Long-term debt

 

 

 

 

 

 

 

Senior secured term loan

$

492,500

 

$

500,000

 

 

Senior secured notes

 

335,000

 

 

350,000

 

 

Senior unsecured notes

 

350,000

 

 

350,000

 

 

Total debt

 

1,177,500

 

 

1,200,000

 

 

Less: original issue and warrant discount

 

(11,958)

 

 

(11,213)

 

 

Total debt after discount

 

1,165,542

 

 

1,188,787

 

 

Less: current portion of long-term debt

 

(10,000)

 

 

(10,000)

 

 

Long-term debt, less current portion

$

1,155,542

 

$

1,178,787

 

 

 

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):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2015

    

2014

 

    

2015

    

2014

 

Weighted average shares

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic

 

65,941

 

65,589

 

 

65,804

 

65,853

 

Potential dilution from equity grants(1)

 

 —

 

1,158

 

 

 —

 

1,198

 

Weighted average number of common shares outstanding - diluted

 

65,941

 

66,747

 

 

65,804

 

67,051

 

 


The Company was in a net loss position for the three and nine months ended September 30, 2015, and therefore, no potential dilution from the application of the treasury stock method was applicable. The potential dilution excludes the weighted average effect of equity awards to acquire 8.0 million and 7.0 million shares of our common stock for the three and nine months ended September 30, 2014 as the application of the treasury stock method, as required, makes them anti-dilutive.

SHARE-BASED COMPENSATION (Tables)

A summary of award activity is as follows (in thousands):

 

 

 

 

 

 

 

 

    

Stock Options

    

Restricted Stock

 

 

 

Granted

 

Granted

 

Outstanding, December 31, 2014

 

13,626

 

440

 

Additional authorized shares

 

 —

 

 —

 

Granted

 

6,509

 

 —

 

Exercised options or vested shares

 

(340)

 

(32)

 

Canceled or forfeited

 

(2,069)

 

(1)

 

Outstanding, September 30, 2015

 

17,726

 

407

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

September 30,

 

    

2015

    

2014

    

Risk-free interest rate

 

1

%  

1

%  

Expected life of options (in years)

 

4

 

4

 

Expected volatility

 

43

%  

54

%  

Expected dividend yield

 

0

%  

0

%  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

Weighted

    

 

 

 

 

 

Number of

 

Weighted Average

 

Average Life

 

Aggregate

 

 

 

Common Shares

 

Exercise Price

 

Remaining

 

Intrinsic Value

 

 

 

(in thousands)

 

(per share)

 

(years)

 

(in thousands)

 

Outstanding, December 31, 2014

 

13,626

 

$

7.64

 

6.5

 

$

9,148

 

Granted

 

6,509

 

 

7.68

 

 

 

 

 

 

Exercised

 

(340)

 

 

5.37

 

 

 

 

 

 

Canceled or forfeited

 

(2,069)

 

 

10.11

 

 

 

 

 

 

Outstanding, September 30, 2015

 

17,726

 

$

7.41

 

6.9

 

$

2,035

 

Vested and expected to vest, September 30, 2015

 

14,706

 

$

7.36

 

6.7

 

$

2,033

 

Exercisable, September 30, 2015

 

6,554

 

$

7.14

 

4.4

 

$

2,022

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

 

Shares

 

Average Grant

 

 

 

Outstanding

 

Date Fair Value

 

 

 

(in thousands)

 

(per share)

 

Outstanding, December 31, 2014

 

440

 

$

7.11

 

Granted

 

 —

 

 

 —

 

Vested

 

(32)

 

 

7.09

 

Forfeited

 

(1)

 

 

7.09

 

Outstanding, September 30, 2015

 

407

 

$

7.11

 

 

SEGMENT INFORMATION (Tables)
Schedule of results of operations and total assets by operating segment

The following tables present segment information (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

    

2015

    

2014

    

 

2015

    

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Games

 

$

53,983

 

$

 —

 

 

$

163,896

 

$

 —

Payments

 

 

154,763

 

 

145,481

 

 

 

458,687

 

 

440,998

Total revenues

 

$

208,746

 

$

145,481

 

 

$

622,583

 

$

440,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

Games

 

$

2,368

 

$

 —

 

 

$

7,180

 

$

 —

Payments

 

 

12,348

 

 

10,771

 

 

 

52,012

 

 

33,406

Total operating income

 

$

14,716

 

$

10,771

 

 

$

59,192

 

$

33,406

 

 

 

 

 

 

 

 

 

 

At

 

   

September 30, 2015

    

December 31, 2014

Total assets

 

 

 

 

 

 

Games

 

$

1,190,354

 

$

1,242,822

Payments

 

 

460,492

 

 

464,463

Total assets

 

$

1,650,846

 

$

1,707,285

 

CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Tables)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2014

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 —

 

$

134,452

 

$

7,207

 

$

4,006

 

$

(184)

 

$

145,481

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (exclusive of depreciation and amortization)

 

 —

 

 

103,720

 

 

2,575

 

 

2,273

 

 

 —

 

 

108,568

Operating expenses

 

 —

 

 

19,593

 

 

787

 

 

738

 

 

(184)

 

 

20,934

Research and development

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Depreciation

 

 —

 

 

1,810

 

 

1

 

 

45

 

 

 —

 

 

1,856

Amortization

 

 —

 

 

3,252

 

 

 —

 

 

100

 

 

 —

 

 

3,352

Total costs and expenses

 

 —

 

 

128,375

 

 

3,363

 

 

3,156

 

 

(184)

 

 

134,710

Operating income

 

 —

 

 

6,077

 

 

3,844

 

 

850

 

 

 —

 

 

10,771

Other (income) expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 —

 

 

1,902

 

 

 —

 

 

94

 

 

 —

 

 

1,996

Equity in income of subsidaries

 

(5,676)

 

 

(2,490)

 

 

 —

 

 

 —

 

 

8,166

 

 

 —

Loss on extinguishment of debt

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Total other (income) expense

 

(5,676)

 

 

(588)

 

 

 —

 

 

94

 

 

8,166

 

 

1,996

Income from operations before tax

 

5,676

 

 

6,665

 

 

3,844

 

 

756

 

 

(8,166)

 

 

8,775

Income tax expense

 

 —

 

 

1,197

 

 

1,721

 

 

181

 

 

 —

 

 

3,099

Net income

 

5,676

 

 

5,468

 

 

2,123

 

 

575

 

 

(8,166)

 

 

5,676

Foreign currency translation

 

(839)

 

 

 —

 

 

 —

 

 

(839)

 

 

839

 

 

(839)

Comprehensive income (loss)

$

4,837

 

$

5,468

 

$

2,123

 

$

(264)

 

$

(7,327)

 

$

4,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2015

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 —

 

$

424,259

 

$

185,919

 

$

12,853

 

$

(448)

 

$

622,583

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (exclusive of depreciation and amortization)

 

 —

 

 

333,592

 

 

43,716

 

 

6,754

 

 

 —

 

 

384,062

Operating expenses

 

 —

 

 

42,084

 

 

26,027

 

 

1,319

 

 

(448)

 

 

68,982

Research and development

 

 —

 

 

 —

 

 

15,369

 

 

 —

 

 

 —

 

 

15,369

Depreciation

 

 —

 

 

5,442

 

 

26,440

 

 

155

 

 

 —

 

 

32,037

Amortization

 

 —

 

 

6,858

 

 

54,222

 

 

1,861

 

 

 —

 

 

62,941

Total costs and expenses

 

 —

 

 

387,976

 

 

165,774

 

 

10,089

 

 

(448)

 

 

563,391

Operating income

 

 —

 

 

36,283

 

 

20,145

 

 

2,764

 

 

 —

 

 

59,192

Other expense (income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 —

 

 

5,977

 

 

69,089

 

 

243

 

 

 —

 

 

75,309

Equity in loss (income) of subsidiaries

 

18,382

 

 

(10,077)

 

 

 —

 

 

 —

 

 

(8,305)

 

 

 —

Loss on extinguishment of debt

 

 —

 

 

13,063

 

 

 —

 

 

 —

 

 

 —

 

 

13,063

Total other (income) expense

 

18,382

 

 

8,963

 

 

69,089

 

 

243

 

 

(8,305)

 

 

88,372

(Loss) income from operations before tax

 

(18,382)

 

 

27,320

 

 

(48,944)

 

 

2,521

 

 

8,305

 

 

(29,180)

Income tax expense (benefit)

 

 —

 

 

7,378

 

 

(19,050)

 

 

874

 

 

 —

 

 

(10,798)

Net (loss) income

 

(18,382)

 

 

19,942

 

 

(29,894)

 

 

1,647

 

 

8,305

 

 

(18,382)

Foreign currency translation

 

(850)

 

 

 —

 

 

 —

 

 

(850)

 

 

850

 

 

(850)

Comprehensive (loss) income

$

(19,232)

 

$

19,942

 

$

(29,894)

 

$

797

 

$

9,155

 

$

(19,232)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 —

 

$

408,971

 

$

21,117

 

$

11,457

 

$

(547)

 

$

440,998

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (exclusive of depreciation and amortization)

 

 —

 

 

319,976

 

 

6,861

 

 

4,344

 

 

 —

 

 

331,181

Operating expenses

 

 —

 

 

58,339

 

 

2,384

 

 

2,057

 

 

(547)

 

 

62,233

Research and development

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Depreciation

 

 —

 

 

5,563

 

 

3

 

 

136

 

 

 —

 

 

5,702

Amortization

 

 —

 

 

8,127

 

 

 —

 

 

349

 

 

 —

 

 

8,476

Total costs and expenses

 

 —

 

 

392,005

 

 

9,248

 

 

6,886

 

 

(547)

 

 

407,592

Operating income

 

 —

 

 

16,966

 

 

11,869

 

 

4,571

 

 

 —

 

 

33,406

Other (income) expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 —

 

 

5,926

 

 

 —

 

 

(301)

 

 

 —

 

 

5,625

Equity in income of subsidiaries

 

(17,889)

 

 

(10,915)

 

 

 —

 

 

 —

 

 

28,804

 

 

 —

Loss on extinguishment of debt

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Total other (income) expense

 

(17,889)

 

 

(4,989)

 

 

 —

 

 

(301)

 

 

28,804

 

 

5,625

Income from operations before tax

 

17,889

 

 

21,955

 

 

11,869

 

 

4,872

 

 

(28,804)

 

 

27,781

Income tax expense

 

 —

 

 

4,066

 

 

4,535

 

 

1,291

 

 

 —

 

 

9,892

Net income

 

17,889

 

 

17,889

 

 

7,334

 

 

3,581

 

 

(28,804)

 

 

17,889

Foreign currency translation

 

(457)

 

 

 —

 

 

 —

 

 

(457)

 

 

457

 

 

(457)

Comprehensive income

$

17,432

 

$

17,889

 

$

7,334

 

$

3,124

 

$

(28,347)

 

$

17,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2015

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 —

 

$

85,812

 

$

14,359

 

$

11,302

 

$

 —

 

$

111,473

Settlement receivables

 

 —

 

 

21,778

 

 

 —

 

 

3,704

 

 

 —

 

 

25,482

Trade receivables, net

 

 —

 

 

9,211

 

 

38,491

 

 

 —

 

 

 —

 

 

47,702

Other receivables

 

 —

 

 

4,648

 

 

619

 

 

64

 

 

 —

 

 

5,331

Inventory

 

 —

 

 

9,519

 

 

15,962

 

 

 —

 

 

 —

 

 

25,481

Prepaid expenses and other assets

 

 —

 

 

6,866

 

 

2,985

 

 

9,411

 

 

 —

 

 

19,262

Deferred tax asset

 

 —

 

 

2,743

 

 

6,848

 

 

 —

 

 

 —

 

 

9,591

Intercompany balances

 

 —

 

 

37,777

 

 

164,309

 

 

1,514

 

 

(203,600)

 

 

 —

Total current assets

 

 —

 

 

178,354

 

 

243,573

 

 

25,995

 

 

(203,600)

 

 

244,322

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, equipment and leasehold improvements, net

 

 —

 

 

19,316

 

 

82,433

 

 

352

 

 

 —

 

 

102,101

Goodwill

 

 —

 

 

154,367

 

 

708,923

 

 

617

 

 

 —

 

 

863,907

Other intangible assets, net

 

 —

 

 

31,980

 

 

357,827

 

 

7,354

 

 

 —

 

 

397,161

Other receivables, non-current

 

 —

 

 

3,469

 

 

3,607

 

 

 —

 

 

 —

 

 

7,076

Investment in subsidiaries

 

222,323

 

 

156,621

 

 

 —

 

 

86

 

 

(379,030)

 

 

 —

Deferred tax asset, non-current

 

 —

 

 

66,477

 

 

46,118

 

 

 —

 

 

(112,595)

 

 

 —

Other assets, non-current

 

 —

 

 

31,767

 

 

4,018

 

 

494

 

 

 —

 

 

36,279

Intercompany balances

 

 —

 

 

1,134,916

 

 

 —

 

 

 —

 

 

(1,134,916)

 

 

 —

Total non-current assets

 

222,323

 

 

1,598,913

 

 

1,202,926

 

 

8,903

 

 

(1,626,541)

 

 

1,406,524

Total assets

$

222,323

 

$

1,777,267

 

$

1,446,499

 

$

34,898

 

$

(1,830,141)

 

$

1,650,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement liabilities

$

 —

 

$

100,506

 

$

132

 

$

5,941

 

$

 —

 

$

106,579

Accounts payable and accrued expenses

 

 —

 

 

77,685

 

 

27,541

 

 

1,376

 

 

 —

 

 

106,602

Current portion of long-term debt

 

 —

 

 

10,000

 

 

 —

 

 

 —

 

 

 —

 

 

10,000

Intercompany balances

 

 —

 

 

165,791

 

 

30,728

 

 

7,081

 

 

(203,600)

 

 

 —

Total current liabilities

 

 —

 

 

353,982

 

 

58,401

 

 

14,398

 

 

(203,600)

 

 

223,181

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liability, non-current

 

 —

 

 

1,072

 

 

156,957

 

 

 —

 

 

(112,595)

 

 

45,434

Long-term debt, less current portion

 

 —

 

 

1,155,542

 

 

 —

 

 

 —

 

 

 —

 

 

1,155,542

Other accrued expenses and liabilities

 

 —

 

 

3,925

 

 

441

 

 

 —

 

 

 —

 

 

4,366

Intercompany balances

 

 —

 

 

 —

 

 

1,134,916

 

 

 —

 

 

(1,134,916)

 

 

 —

Total non-current liabilities

 

 —

 

 

1,160,539

 

 

1,292,314

 

 

 —

 

 

(1,247,511)

 

 

1,205,342

Total liabilities

 

 —

 

 

1,514,521

 

 

1,350,715

 

 

14,398

 

 

(1,451,111)

 

 

1,428,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

222,323

 

 

262,746

 

 

95,784

 

 

20,500

 

 

(379,030)

 

 

222,323

Total liabilities and stockholders’ equity

$

222,323

 

$

1,777,267

 

$

1,446,499

 

$

34,898

 

$

(1,830,141)

 

$

1,650,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2014

 

Parent

    

Subsidiary
Issuer

    

Guarantor
Subsidiaries

    

Non-Guarantor
Subsidiaries

    

Eliminations

    

Total

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 —

 

$

68,143

 

$

6,489

 

$

14,463

 

$

 —

 

$

89,095

Settlement receivables

 

 —

 

 

40,157

 

 

 —

 

 

3,131

 

 

 —

 

 

43,288

Trade receivables, net

 

 —

 

 

6,578

 

 

31,116

 

 

3

 

 

 —

 

 

37,697

Other receivables

 

 —

 

 

3,416

 

 

16,992

 

 

145

 

 

 —

 

 

20,553

Inventory

 

 —

 

 

10,595

 

 

16,568

 

 

 —

 

 

 —

 

 

27,163

Prepaid expenses and other assets

 

 —

 

 

7,143

 

 

2,821

 

 

9,024

 

 

 —

 

 

18,988

Deferred tax asset

 

 —

 

 

2,743

 

 

6,848

 

 

 —

 

 

 —

 

 

9,591

Intercompany balances

 

 —

 

 

18,038

 

 

151,179

 

 

1,623

 

 

(170,840)

 

 

 —

Total current assets

 

 —

 

 

156,813

 

 

232,013

 

 

28,389

 

 

(170,840)

 

 

246,375

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, equipment and leasehold improvements, net

 

 —

 

 

17,864

 

 

87,898

 

 

323

 

 

 —

 

 

106,085

Goodwill

 

 —

 

 

148,278

 

 

708,922

 

 

713

 

 

 —

 

 

857,913

Other intangible assets, net

 

 —

 

 

24,771

 

 

402,816

 

 

9,198

 

 

 —

 

 

436,785

Other receivables, non-current

 

 —

 

 

4,411

 

 

4,773

 

 

 —

 

 

 —

 

 

9,184

Investment in subsidiaries

 

231,473

 

 

147,195

 

 

 —

 

 

86

 

 

(378,754)

 

 

 —

Deferred tax asset, non-current

 

 —

 

 

78,229

 

 

 —

 

 

 —

 

 

(78,229)

 

 

 —

Other assets, non-current

 

 —

 

 

47,508

 

 

3,366

 

 

69

 

 

 —

 

 

50,943

Intercompany balances

 

 —

 

 

1,130,380

 

 

 —

 

 

 —

 

 

(1,130,380)

 

 

 —

Total non-current assets

 

231,473

 

 

1,598,636

 

 

1,207,775

 

 

10,389

 

 

(1,587,363)

 

 

1,460,910

Total assets

$

231,473

 

$

1,755,449

 

$

1,439,788

 

$

38,778

 

$

(1,758,203)

 

$

1,707,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement liabilities

$

 —

 

$

111,375

 

$

140

 

$

7,642

 

$

 —

 

$

119,157

Accounts payable and accrued expenses

 

 —

 

 

61,544

 

 

41,395

 

 

1,729

 

 

 —

 

 

104,668

Current portion of long-term debt

 

 —

 

 

10,000

 

 

 —

 

 

 —

 

 

 —

 

 

10,000

Intercompany balances

 

 —

 

 

152,802

 

 

8,159

 

 

9,879

 

 

(170,840)

 

 

 —

Total current liabilities

 

 —

 

 

335,721

 

 

49,694

 

 

19,250

 

 

(170,840)

 

 

233,825

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liability, non-current

 

 —

 

 

1,072

 

 

134,490

 

 

 —

 

 

(78,229)

 

 

57,333

Long-term debt, less current portion

 

 —

 

 

1,178,787

 

 

 —

 

 

 —

 

 

 —

 

 

1,178,787

Other accrued expenses and liabilities

 

 —

 

 

5,377

 

 

490

 

 

 —

 

 

 —

 

 

5,867

Intercompany balances

 

 —

 

 

 —

 

 

1,130,380

 

 

 —

 

 

(1,130,380)

 

 

 —

Total non-current liabilities

 

 —

 

 

1,185,236

 

 

1,265,360

 

 

 —

 

 

(1,208,609)

 

 

1,241,987

Total liabilities

 

 —

 

 

1,520,957

 

 

1,315,054

 

 

19,250

 

 

(1,379,449)

 

 

1,475,812

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

231,473

 

 

234,492

 

 

124,734

 

 

19,528

 

 

(378,754)

 

 

231,473

Total liabilities and stockholders’ equity

$

231,473

 

$

1,755,449

 

$

1,439,788

 

$

38,778

 

$

(1,758,203)

 

$

1,707,285

 

 

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Advertising, Marketing and Promotional Costs
 
 
 
 
Total advertising, marketing and promotional costs
$ 1.1 
$ 0.2 
$ 1.9 
$ 0.6 
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Fair Value Inputs Level1 [Member] |
Fair Value |
Term Loan [Member]
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Long-term debt
$ 490,653 
Fair Value Inputs Level1 [Member] |
Outstanding Balance |
Term Loan [Member]
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Long-term debt
492,500 
Level 3 |
Fair Value |
Senior secured notes
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Long-term debt
331,650 
Level 3 |
Fair Value |
Senior unsecured notes
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Long-term debt
315,000 
Level 3 |
Outstanding Balance |
Senior secured notes
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Long-term debt
335,000 
Level 3 |
Outstanding Balance |
Senior unsecured notes
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
Long-term debt
$ 350,000 
BUSINESS COMBINATIONS (Details)
Sep. 30, 2015
Dec. 31, 2014
Dec. 19, 2014
Everi Games
Business Combinations
 
 
 
Common stock par value (in dollars per share)
$ 0.001 
$ 0.001 
$ 0.01 
BUSINESS COMBINATIONS (Details 2) (Everi Games, USD $)
In Thousands, except Per Share data, unless otherwise specified
0 Months Ended
Dec. 19, 2014
Dec. 19, 2014
Total purchase price for Multimedia Games common stock (29,948 shares at $36.50 per share)
$ 1,093,105 
 
Common stock shares issued (in shares)
29,948 
 
Share price (in dollars per share)
 
$ 36.50 
Total merger consideration
1,149,389 
 
Repayments of debt and other obligations
25,065 
 
Outstanding cash at acquisition date
(118,299)
 
Total purchase consideration
1,056,155 
 
Equity Award Holders
 
 
Cash consideration paid
$ 56,284 
 
BUSINESS COMBINATIONS (Details 3) (USD $)
Sep. 30, 2015
Dec. 31, 2014
Dec. 19, 2014
Everi Games
Current Assets
 
 
$ 68,548,000 
Property, equipment and leasehold improvements, net
 
 
87,283,000 
Goodwill
863,907,000 
857,913,000 
669,542,000 
Other intangible assets, net
 
 
403,300,000 
Other receivables, non-current
 
 
5,030,000 
Other assets, long-term
 
 
3,392,000 
Deferred tax asset, non-current
 
 
22,287,000 
Total assets
 
 
1,259,382,000 
Current Liabilities
 
 
44,291,000 
Deferred tax liability, non-current
 
 
158,418,000 
Other accrued expenses and liabilities
 
 
518,000 
Total liabilities
 
 
203,227,000 
Net assets acquired
 
 
1,056,155,000 
Receivables acquired
 
 
24,700,000 
Inventory acquired
 
 
$ 16,500,000 
BUSINESS COMBINATIONS (Details 4) (USD $)
1 Months Ended 3 Months Ended 6 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 1 Months Ended 40 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 0 Months Ended
Apr. 30, 2014
NEWave, Inc.
Jun. 30, 2015
NEWave, Inc.
Jun. 30, 2015
NEWave, Inc.
Dec. 19, 2014
Everi Games
Sep. 30, 2015
Everi Games
Sep. 30, 2015
Everi Games
Dec. 19, 2014
Everi Games
Dec. 19, 2014
Everi Games
Tradenames and trademarks
Dec. 19, 2014
Everi Games
Computer software
Dec. 19, 2014
Everi Games
Developed technology
Dec. 19, 2014
Everi Games
Customer relationships
Dec. 19, 2014
Everi Games
Contract Rights
Dec. 19, 2014
Everi Games
Gaming Equipment
Dec. 19, 2014
Everi Games
Leasehold and building improvements
Dec. 19, 2014
Everi Games
Machinery, office and other equipment
Dec. 19, 2014
Everi Games
Other
Aug. 31, 2015
Resort Advantage, LLC
Aug. 31, 2015
Resort Advantage, LLC
Scenario Forecast
Nov. 30, 2018
Resort Advantage, LLC
Scenario Forecast
Sep. 30, 2015
Minimum
Customer relationships
Sep. 30, 2015
Minimum
Other intangible asset
Sep. 30, 2015
Minimum
Machinery, office and other equipment
Dec. 19, 2014
Minimum
Everi Games
Tradenames and trademarks
Dec. 19, 2014
Minimum
Everi Games
Computer software
Dec. 19, 2014
Minimum
Everi Games
Developed technology
Dec. 19, 2014
Minimum
Everi Games
Customer relationships
Dec. 19, 2014
Minimum
Everi Games
Contract Rights
Dec. 19, 2014
Minimum
Everi Games
Gaming Equipment
Dec. 19, 2014
Minimum
Everi Games
Machinery, office and other equipment
Dec. 19, 2014
Minimum
Everi Games
Other
Sep. 30, 2015
Maximum
Customer relationships
Sep. 30, 2015
Maximum
Other intangible asset
Sep. 30, 2015
Maximum
Machinery, office and other equipment
Dec. 19, 2014
Maximum
Everi Games
Tradenames and trademarks
Dec. 19, 2014
Maximum
Everi Games
Computer software
Dec. 19, 2014
Maximum
Everi Games
Developed technology
Dec. 19, 2014
Maximum
Everi Games
Customer relationships
Dec. 19, 2014
Maximum
Everi Games
Contract Rights
Dec. 19, 2014
Maximum
Everi Games
Gaming Equipment
Dec. 19, 2014
Maximum
Everi Games
Machinery, office and other equipment
Dec. 19, 2014
Maximum
Everi Games
Other
Property, Equipment and Leased Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Useful Life (years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 years 
 
 
 
 
 
2 years 
3 years 
2 years 
 
 
5 years 
 
 
 
 
 
4 years 
5 years 
7 years 
Estimated Fair Value
 
 
 
 
 
 
$ 87,283,000 
 
 
 
 
 
$ 78,201,000 
$ 2,105,000 
$ 4,126,000 
$ 2,851,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchased intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Useful Life (years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8 years 
 
 
3 years 
3 years 
2 years 
8 years 
1 year 
 
 
 
12 years 
 
 
7 years 
5 years 
6 years 
12 years 
7 years 
 
 
 
Estimated Fair Value
 
 
 
 
 
 
403,300,000 
14,800,000 
3,755,000 
139,645,000 
231,100,000 
14,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.00% 
 
 
 
 
 
 
 
 
 
 
11.00% 
 
 
 
 
 
 
 
 
 
Aggregate purchase price
14,900,000 
 
 
1,149,389,000 
 
 
 
 
 
 
 
 
 
 
 
 
13,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate purchase price expected to be paid
 
2,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period following the acquisition during which a certain portion of the purchase price is expected to be paid, dependant upon financial performance of the acquired assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Final Payment
 
 
2,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition related costs
 
 
 
 
$ 100,000 
$ 2,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ATM FUNDING AGREEMENTS (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 1 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Sep. 30, 2015
Indemnification Guarantee [Member]
Cash [Member]
Sep. 30, 2014
Indemnification Guarantee [Member]
Cash [Member]
Sep. 30, 2015
Indemnification Guarantee [Member]
Cash [Member]
Sep. 30, 2014
Indemnification Guarantee [Member]
Cash [Member]
Nov. 30, 2014
Indemnification Guarantee [Member]
Contract Cash Solutions Agreement [Member]
Jun. 30, 2015
Indemnification Guarantee [Member]
Contract Cash Solutions Agreement [Member]
Cash [Member]
Mar. 31, 2015
Indemnification Guarantee [Member]
Contract Cash Solutions Agreement [Member]
Cash [Member]
Sep. 30, 2015
Indemnification Guarantee [Member]
Second Amendment Contract Cash Solutions Agreement [Member]
Cash [Member]
Dec. 31, 2014
Indemnification Guarantee [Member]
Second Amendment Contract Cash Solutions Agreement [Member]
Cash [Member]
ATM Funding Agreements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash usage fees incurred
 
 
 
 
 
$ 0.5 
$ 0.6 
$ 1.6 
$ 1.8 
 
 
 
 
 
Maximum amount
 
 
 
 
 
 
 
 
 
 
 
 
289.4 
396.3 
Outstanding balance of ATM cash utilized
 
 
 
 
 
 
 
 
 
 
425.0 
500.0 
 
 
Extended agreement term
 
 
 
 
 
 
 
 
 
1 year 
 
 
 
 
Site-Funded ATM liability
54.7 
 
54.7 
 
69.3 
 
 
 
 
 
 
 
 
 
Gains (losses) related to self-insurance
$ 0 
$ 0 
$ 0 
$ 0 
 
 
 
 
 
 
 
 
 
 
TRADE RECEIVABLES (Details) (USD $)
Sep. 30, 2015
Dec. 31, 2014
TRADE RECEIVABLES
 
 
Trade receivables, net
$ 47,702,000 
$ 37,697,000 
Outstanding balance of warranty reserve
3,200,000 
2,800,000 
Gaming
 
 
TRADE RECEIVABLES
 
 
Trade receivables, net
34,871,000 
28,270,000 
Payments
 
 
TRADE RECEIVABLES
 
 
Trade receivables, net
$ 12,831,000 
$ 9,427,000 
OTHER RECEIVABLES (Details) (USD $)
0 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Jul. 17, 2014
Bee Caves Games, Inc
Jul. 17, 2014
Bee Caves Games, Inc
Financing Receivable
 
 
 
 
Note receivable, Face Amount
 
 
 
$ 4,500,000 
Note receivable, stated interest rate (as a percent)
 
 
 
7.00% 
Note receivable, interest only payments term
 
 
24 months 
 
Note receivable, Repayment of principle and interest term
 
 
48 months 
 
Notes and loans receivables, net of discount of $737 and $853, respectively
9,676,000 
13,939,000 
 
 
Federal and state income tax receivable
455,000 
15,092,000 
 
 
Other
2,276,000 
706,000 
 
 
Total Other receivables
12,407,000 
29,737,000 
 
 
Less: Notes and loans receivable, non-current
7,076,000 
9,184,000 
 
 
Total other receivables, current portion
5,331,000 
20,553,000 
 
 
Discount of notes receivable other
$ 737,000 
$ 853,000 
 
 
PREPAID AND OTHER ASSETS (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Prepaid expenses and other assets
 
 
Prepaid expenses
$ 5,799 
$ 7,163 
Deposits
9,640 
8,781 
Other
3,823 
3,044 
Total prepaid expenses and other assets
19,262 
18,988 
Other assets non-current
 
 
Debt issuance costs
25,333 
41,109 
Prepaid expense And Deposits non-current
4,253 
3,956 
Other
6,693 
5,878 
Total other assets, non-current
$ 36,279 
$ 50,943 
INVENTORY (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
INVENTORY
 
 
Raw materials and component parts, net of reserves of $257 and $22, respectively
$ 14,096 
$ 21,151 
Work in progress
8,383 
803 
Finished goods
3,002 
5,209 
Inventory, Net, Total
25,481 
27,163 
Raw materials and component parts, reserves
$ 257 
$ 22 
PROPERTY, EQUIPMENT AND LEASED ASSETS (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Cost
$ 155,492,000 
 
$ 155,492,000 
 
$ 135,495,000 
Accumulated Depreciation
53,391,000 
 
53,391,000 
 
29,410,000 
Net Book Value
102,101,000 
 
102,101,000 
 
106,085,000 
Depreciation expense
10,943,000 
1,856,000 
32,037,000 
5,702,000 
 
Proceeds from sale of assets
 
 
2,103,000 
298,000 
 
Certain assets related to PokerTek products
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Proceeds from sale of assets
5,400,000 
 
 
 
 
Certain assets related to PokerTek products |
Operating expenses
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Gain on sale of assets
3,900,000 
 
 
 
 
Rental pool - deployed
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Cost
85,090,000 
 
85,090,000 
 
70,295,000 
Accumulated Depreciation
20,900,000 
 
20,900,000 
 
876,000 
Net Book Value
64,190,000 
 
64,190,000 
 
69,419,000 
Rental pool - deployed |
Minimum
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Useful Life (years)
 
 
2 years 
 
 
Rental pool - deployed |
Maximum
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Useful Life (years)
 
 
4 years 
 
 
Rental pool - undeployed
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Cost
13,305,000 
 
13,305,000 
 
10,562,000 
Accumulated Depreciation
3,144,000 
 
3,144,000 
 
151,000 
Net Book Value
10,161,000 
 
10,161,000 
 
10,411,000 
Rental pool - undeployed |
Minimum
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Useful Life (years)
 
 
2 years 
 
 
Rental pool - undeployed |
Maximum
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Useful Life (years)
 
 
4 years 
 
 
ATM equipment
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Useful Life (years)
 
 
5 years 
 
 
Cost
18,492,000 
 
18,492,000 
 
23,572,000 
Accumulated Depreciation
12,322,000 
 
12,322,000 
 
16,544,000 
Net Book Value
6,170,000 
 
6,170,000 
 
7,028,000 
Leasehold and building improvements
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Cost
6,474,000 
 
6,474,000 
 
6,289,000 
Accumulated Depreciation
1,742,000 
 
1,742,000 
 
895,000 
Net Book Value
4,732,000 
 
4,732,000 
 
5,394,000 
Cash advance equipment
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Useful Life (years)
 
 
3 years 
 
 
Cost
7,187,000 
 
7,187,000 
 
3,372,000 
Accumulated Depreciation
2,424,000 
 
2,424,000 
 
1,873,000 
Net Book Value
4,763,000 
 
4,763,000 
 
1,499,000 
Machinery, office and other equipment
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Cost
24,944,000 
 
24,944,000 
 
21,405,000 
Accumulated Depreciation
12,859,000 
 
12,859,000 
 
9,071,000 
Net Book Value
$ 12,085,000 
 
$ 12,085,000 
 
$ 12,334,000 
Machinery, office and other equipment |
Minimum
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Useful Life (years)
 
 
2 years 
 
 
Machinery, office and other equipment |
Maximum
 
 
 
 
 
PROPERTY, EQUIPMENT AND LEASED ASSETS
 
 
 
 
 
Useful Life (years)
 
 
5 years 
 
 
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Changes in the carrying amount of goodwill
 
 
 
 
 
Goodwill
$ 863,907 
 
$ 863,907 
 
$ 857,913 
Key assumptions used in estimating fair value under the discounted cash flow approach and under the income approach
 
 
 
 
 
Goodwill impairment
$ 0 
$ 0 
$ 0 
$ 0 
 
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 2) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Other Intangible Assets
 
 
 
 
 
Cost
$ 519,942,000 
 
$ 519,942,000 
 
$ 491,311,000 
Accumulated Amortization
122,781,000 
 
122,781,000 
 
54,526,000 
Net Book Value
397,161,000 
 
397,161,000 
 
436,785,000 
Amortization of Intangible Assets
21,500,000 
3,400,000 
62,900,000 
8,500,000 
 
Contract rights under development and placement fee agreements
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Cost
16,454,000 
 
16,454,000 
 
14,000,000 
Accumulated Amortization
6,006,000 
 
6,006,000 
 
301,000 
Net Book Value
10,448,000 
 
10,448,000 
 
13,699,000 
Contract rights under development and placement fee agreements |
Minimum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
1 year 
 
 
Contract rights under development and placement fee agreements |
Maximum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
7 years 
 
 
Customer contracts
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Cost
49,764,000 
 
49,764,000 
 
43,938,000 
Accumulated Amortization
33,393,000 
 
33,393,000 
 
29,931,000 
Net Book Value
16,371,000 
 
16,371,000 
 
14,007,000 
Customer contracts |
Minimum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
7 years 
 
 
Customer contracts |
Maximum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
14 years 
 
 
Customer relationships
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Cost
231,100,000 
 
231,100,000 
 
231,100,000 
Accumulated Amortization
16,481,000 
 
16,481,000 
 
733,000 
Net Book Value
214,619,000 
 
214,619,000 
 
230,367,000 
Customer relationships |
Minimum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
8 years 
 
 
Customer relationships |
Maximum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
12 years 
 
 
Developed technology and software
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Cost
194,795,000 
 
194,795,000 
 
174,417,000 
Accumulated Amortization
54,610,000 
 
54,610,000 
 
14,604,000 
Net Book Value
140,185,000 
 
140,185,000 
 
159,813,000 
Development costs capitalized
6,700,000 
700,000 
12,300,000 
5,600,000 
 
Developed technology and software |
Minimum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
1 year 
 
 
Developed technology and software |
Maximum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
6 years 
 
 
Patents, trademarks and other
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Cost
27,829,000 
 
27,829,000 
 
27,856,000 
Accumulated Amortization
12,291,000 
 
12,291,000 
 
8,957,000 
Net Book Value
$ 15,538,000 
 
$ 15,538,000 
 
$ 18,899,000 
Patents, trademarks and other |
Minimum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
1 year 
 
 
Patents, trademarks and other |
Maximum
 
 
 
 
 
Other Intangible Assets
 
 
 
 
 
Useful Life (years)
 
 
17 years 
 
 
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 3) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2015
item
Units Located Across Oklahoma
 
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
 
Payment advances made under development and placement fee agreements
$ 2.8 
Number of unit placement with period coverage extension
300 
Minimum
 
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
 
General term of the agreement
12 months 
Maximum
 
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
 
General term of the agreement
83 months 
Maximum |
Units Located Across Oklahoma
 
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
 
Additional term
60 months 
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Accounts payable and accrued expenses
 
 
Trade accounts payable
$ 46,351 
$ 48,962 
Accrued interest
15,424 
3,387 
Payroll and related expenses
7,791 
10,889 
Deferred and unearned revenues
9,979 
8,016 
Cash access processing and related expenses
4,949 
4,414 
Accrued taxes
2,482 
3,195 
Other
19,626 
25,805 
Total accounts payable and accrued expenses
$ 106,602 
$ 104,668 
LONG-TERM DEBT (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
BORROWINGS
 
 
Total Debt
$ 1,177,500 
$ 1,200,000 
Less: original issue discount
(11,958)
(11,213)
Total debt after discount
1,165,542 
1,188,787 
Less: current portion of long-term debt
(10,000)
(10,000)
Long-term debt, less current portion
1,155,542 
1,178,787 
Senior secured term Loan
 
 
BORROWINGS
 
 
Total Debt
492,500 
500,000 
Senior secured notes
 
 
BORROWINGS
 
 
Total Debt
335,000 
350,000 
Senior unsecured notes
 
 
BORROWINGS
 
 
Total Debt
350,000 
350,000 
Less: original issue discount
 
$ (3,800)
LONG-TERM DEBT (Details 2) (USD $)
12 Months Ended 1 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended 1 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Dec. 31, 2014
Senior secured notes
Dec. 31, 2014
Term Loan [Member]
Sep. 30, 2015
Term Loan [Member]
Sep. 30, 2015
Term Loan [Member]
London Interbank Offered Rate L I B O R [Member]
Sep. 30, 2015
Term Loan [Member]
London Interbank Offered Rate L I B O R [Member]
Minimum
Dec. 31, 2014
Revolving Credit Facility [Member]
Sep. 30, 2015
Revolving Credit Facility [Member]
London Interbank Offered Rate L I B O R [Member]
Sep. 30, 2015
Revolving Credit Facility [Member]
London Interbank Offered Rate L I B O R [Member]
Minimum
Dec. 31, 2014
Credit Facilities
Sep. 30, 2015
Credit Facilities
Sep. 30, 2015
Credit Facilities
Federal funds effective rate
Sep. 30, 2015
Credit Facilities
LIBOR (after taking account of any applicable floor) applicable for an interest period of one month
Dec. 31, 2014
Credit Facilities
Senior secured term Loan
Sep. 30, 2015
Credit Facilities
Senior secured term Loan
London Interbank Offered Rate L I B O R [Member]
Dec. 31, 2014
Credit Facilities
Senior secured notes
BORROWINGS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt issuance costs and fees
 
 
 
 
 
 
 
 
 
 
$ 13,900,000 
 
 
 
 
 
 
Less: original issue discount
11,958,000 
11,213,000 
 
 
 
 
 
 
 
 
7,500,000 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
$ 500,000,000 
 
 
 
 
 
 
$ 50,000,000 
 
 
Debt instrument term
 
 
1 year 
 
 
 
 
6 years 
 
 
 
 
 
 
 
 
5 years 
Interest rate margin
 
 
 
 
 
 
 
 
4.75% 
 
 
 
0.50% 
1.00% 
 
5.25% 
 
Percentage of initial aggregate principal used to calculate quarterly term loan repayment amount
 
 
 
0.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable rate basis
 
 
 
 
 
LIBOR 
 
 
 
 
 
 
 
 
 
 
 
Variable rate of debt (as a percent)
 
 
 
 
 
 
1.00% 
 
 
0.00% 
 
 
 
 
 
 
 
Premium on principal repayment
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
 
 
 
 
Notes stated interest percentage
 
 
 
6.25% 
6.25% 
 
 
 
 
 
 
 
 
 
 
 
 
LONG-TERM DEBT (Details 3) (USD $)
12 Months Ended 12 Months Ended 0 Months Ended 9 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Dec. 31, 2014
Senior secured notes
Sep. 30, 2015
Senior secured notes
Dec. 31, 2014
Senior secured notes
7.75% Senior Secured Notes Due 2021
Apr. 15, 2015
Senior secured notes
7.25% Senior Secured Notes Due 2021
Sep. 30, 2015
Senior secured notes
7.25% Senior Secured Notes Due 2021
item
Apr. 15, 2015
Senior secured notes
7.25% Senior Secured Notes Due 2021
BORROWINGS
 
 
 
 
 
 
 
 
Debt issuance costs and fees
 
 
 
 
$ 13,600,000 
$ 13,000,000 
 
 
Debt instrument term
 
 
1 year 
 
 
 
 
 
Total Debt
$ 1,177,500,000 
$ 1,200,000,000 
$ 350,000,000 
$ 335,000,000 
$ 350,000,000 
 
 
$ 335,000,000 
Notes stated interest percentage
 
 
 
 
7.75% 
 
 
7.25% 
Number of shares exercisable
 
 
 
 
 
 
700,000 
 
Exercise price
 
 
 
 
 
 
$ 9.88 
 
Percentage of premium to volume-weighted average price
 
 
 
 
 
 
30.00% 
 
Number of trading days
 
 
 
 
 
 
10 
 
LONG-TERM DEBT (Details 4) (USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2015
Dec. 31, 2014
BORROWINGS
 
 
Total Debt
$ 1,177,500,000 
$ 1,200,000,000 
Less: original issue discount
11,958,000 
11,213,000 
Senior unsecured notes
 
 
BORROWINGS
 
 
Debt issuance costs and fees
 
14,000,000 
Total Debt
350,000,000 
350,000,000 
Notes stated interest percentage
 
10.00% 
Less: original issue discount
 
$ 3,800,000 
First 90-day period
0.25% 
 
Subsequent 90-day period
0.25% 
 
Senior unsecured notes |
Maximum
 
 
BORROWINGS
 
 
Maximum additional interest rate
1.00% 
 
COMMITMENTS AND CONTINGENCIES (Details) (Gain Contingency, USD $)
In Millions, unless otherwise specified
Mar. 31, 2015
Gain Contingency
 
Litigation Settlement Awards
 
Amount received and recorded from settlement
$ 14.4 
SHAREHOLDERS' EQUITY (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
SHAREHOLDERS' EQUITY
 
 
 
 
 
Preferred stock, shares authorized
50,000,000 
 
50,000,000 
 
50,000,000 
Preferred stock, shares outstanding
 
 
Common stock, votes per share
 
 
 
 
Common stock, shares issued
90,777,000 
 
90,777,000 
 
90,405,000 
Total Number of Shares Purchased or Withheld
 
 
 
 
 
Shares withheld from restricted stock vesting
2,456 
3,345 
7,900 
46,474 
 
Cost of Shares Purchased or Withheld
 
 
 
 
 
Shares withheld from restricted stock vesting (in dollars)
$ 14,214 
$ 27,361 
$ 54,124 
$ 396,057 
 
WEIGHTED AVERAGE COMMON SHARES (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Weighted-average number of common shares outstanding used in the computation of basic and diluted earnings per share
 
 
 
 
Weighted average number of common shares outstanding - basic
65,941,000 
65,589,000 
65,804,000 
65,853,000 
Potential dilution from equity awards(1)
 
1,158,000 
 
1,198,000 
Weighted average number of common shares outstanding - diluted
65,941,000 
66,747,000 
65,804,000 
67,051,000 
Anti-dilutive equity awards excluded from computation of earnings per share (in shares)
8,000,000 
 
7,000,000 
 
SHARE-BASED COMPENSATION - Award Activity (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
2005 Plan
 
 
 
 
Equity Awards Available for Grant
 
 
 
 
Shares of reserved common stock increased annually
 
 
 
2014 Plan
 
 
 
 
Equity Awards Available for Grant
 
 
 
 
Shares of reserved common stock increased annually
 
 
6,300,000 
 
Stock Option [Member]
 
 
 
 
Stock Options Granted
 
 
 
 
Balance outstanding at the beginning of the period (in shares)
 
 
13,626,000 
 
Granted (in shares)
400,000 
10,000,000,000 
6,509,000 
5,000,000 
Exercised options (in shares)
 
 
(340,000)
 
Canceled or forfeited (in shares)
 
 
(2,069,000)
 
Balance outstanding at the end of the period (in shares)
17,726,000 
 
17,726,000 
 
Time Based Options [Member] |
2014 Plan
 
 
 
 
Equity Incentive Awards
 
 
 
 
Vesting rate (as a percent)
 
 
25.00% 
 
Vesting period for 25% of shares
 
 
4 years 
 
Expiration period
 
 
10 years 
 
Market Performance Based Options [Member]
 
 
 
 
Equity Incentive Awards
 
 
 
 
Expiration period
 
 
7 years 
 
Number of consecutive trading days the Company's average stock price meets certain target prices, which satisfy vesting requirements
 
 
30 days 
 
Vesting period
 
 
4 years 
 
Restricted Stock [Member]
 
 
 
 
Restricted Stock Granted
 
 
 
 
Balance outstanding at the beginning of the period (in shares)
 
 
440,000 
 
Granted (in shares)
 
 
Vested (in shares)
 
 
(32,500)
(200,000)
Forfeited (in shares)
 
 
(1,000)
 
Balance outstanding at the end of the period (in shares)
407,000 
 
407,000 
 
SHARE-BASED COMPENSATION - Stock Options, Weighted Average Assumptions (Details)
9 Months Ended 3 Months Ended
Sep. 30, 2015
Time Based Options [Member]
Sep. 30, 2014
Time Based Options [Member]
Sep. 30, 2015
Market Performance Based Options [Member]
Weighted-average assumptions used in estimating fair value
 
 
 
Risk-free interest rate (as a percent)
1.00% 
1.00% 
1.00% 
Expected life of options
4 years 
4 years 
4 years 
Expected volatility (as a percent)
43.00% 
54.00% 
43.00% 
Expected dividend yield (as a percent)
0.00% 
0.00% 
0.00% 
SHARE-BASED COMPENSATION - Stock Options, Activity (Details) (USD $)
Share data in Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
Additional disclosures
 
 
 
 
 
Proceeds from exercise of stock options
 
 
$ 1,833,000 
$ 5,251,000 
 
Stock Option [Member]
 
 
 
 
 
Stock Options Granted
 
 
 
 
 
Balance outstanding at the beginning of the period (in shares)
 
 
13,626 
 
 
Granted (in shares)
400 
10,000,000 
6,509 
5,000 
 
Exercised options (in shares)
 
 
(340)
 
 
Canceled or forfeited (in shares)
 
 
(2,069)
 
 
Balance outstanding at the end of the period (in shares)
17,726 
 
17,726 
 
13,626 
Vested and expected to vest (in shares)
14,706 
 
14,706 
 
 
Balance exercisable at the end of the period (in shares)
6,554 
 
6,554 
 
 
Weighted Average Exercise Price
 
 
 
 
 
Balance outstanding at the beginning of the period (in dollars per share)
 
 
$ 7.64 
 
 
Granted (in dollars per share)
 
 
$ 7.68 
 
 
Exercised options (in dollars per share)
 
 
$ 5.37 
 
 
Canceled or forfeited (in dollars per share)
 
 
$ 10.11 
 
 
Balance outstanding at the end of the period (in dollars per share)
$ 7.41 
 
$ 7.41 
 
$ 7.64 
Vested and expected to vest (in dollars per share)
$ 7.36 
 
$ 7.36 
 
 
Balance exercisable at the end of the period (in dollars per share)
$ 7.14 
 
$ 7.14 
 
 
Weighted Average Life Remaining
 
 
 
 
 
Balance outstanding at the beginning of the period
 
 
6 years 10 months 24 days 
 
6 years 6 months 
Balance outstanding at the beginning of the period
 
 
6 years 10 months 24 days 
 
6 years 6 months 
Vested and expected to vest
 
 
6 years 8 months 12 days 
 
 
Balance exercisable at the end of the period
 
 
4 years 4 months 24 days 
 
 
Aggregate Intrinsic Value
 
 
 
 
 
Balance outstanding at the beginning of the period (in dollars)
 
 
9,148,000 
 
 
Balance outstanding at the end of the period (in dollars)
2,035,000 
 
2,035,000 
 
9,148,000 
Vested and expected to vest (in dollars)
2,033,000 
 
2,033,000 
 
 
Balance exercisable at the end of the period (in dollars)
2,022,000 
 
2,022,000 
 
 
Additional disclosures
 
 
 
 
 
Weighted average grant date fair value (in dollars per share)
$ 2.32 
$ 3.54 
$ 2.48 
$ 3.27 
 
Total intrinsic value of options exercised
30,561 
400,000 
800,000 
2,800,000 
 
Unrecognized compensation expense
20,400,000 
13,400,000 
20,400,000 
13,400,000 
 
Weighted-average period for recognition of unrecognized compensation expense
 
 
2 years 9 months 18 days 
2 years 9 months 18 days 
 
Non-cash compensation expense
 
 
5,400,000 
5,300,000 
 
Proceeds from exercise of stock options
 
 
$ 1,800,000 
$ 6,600,000 
 
SHARE-BASED COMPENSATION - Restricted Stock (Details) (Restricted Stock [Member], USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2015
Sep. 30, 2014
Restricted Stock [Member]
 
 
 
Restricted Stock Granted
 
 
 
Balance outstanding at the beginning of the period (in shares)
 
440,000 
 
Granted (in shares)
 
Vested (in shares)
 
(32,500)
(200,000)
Forfeited (in shares)
 
(1,000)
 
Balance outstanding at the end of the period (in shares)
407,000 
407,000 
 
Weighted Average Grant Date Fair Value (in dollars per share)
 
 
 
Balance outstanding at the beginning of the period (in dollars per share)
 
$ 7.11 
 
Vested (in dollars per share)
 
$ 7.09 
 
Forfeited (in dollars per share)
 
$ 7.09 
 
Balance outstanding at the end of the period (in dollars per share)
$ 7.11 
$ 7.11 
 
SHARE-BASED COMPENSATION - Restricted Stock, Additional Details (Details) (Restricted Stock [Member], USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Restricted Stock [Member]
 
 
 
 
Additional disclosures
 
 
 
 
Total fair value of shares vested
$ 0.1 
$ 0.1 
$ 0.2 
$ 1.1 
Unrecognized compensation expense
2.2 
1.2 
2.2 
1.2 
Weighted-average period for recognition of unrecognized compensation expense
 
 
2 years 7 months 6 days 
2 years 3 months 18 days 
Non-cash compensation expense
 
 
$ 0.6 
$ 0.9 
Vested (in shares)
 
 
32,500 
200,000 
INCOME TAXES (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Dec. 31, 2014
INCOME TAXES
 
 
 
 
 
Effective tax rate (as a percent)
39.30% 
35.30% 
37.00% 
35.60% 
 
Statutory federal rate (as a percent)
35.00% 
35.00% 
35.00% 
35.00% 
 
Unrecognized tax benefits
 
 
 
 
$ 0.7 
SEGMENT INFORMATION (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2015
item
Sep. 30, 2014
item
Sep. 30, 2015
item
Sep. 30, 2014
item
Major Customers
 
 
 
 
Number of customers individually exceeding 10% of consolidated revenue
Number of major customers
Five Largest Customers [Member]
 
 
 
 
Major Customers
 
 
 
 
Concentration risk (as a percent)
29.00% 
29.00% 
30.00% 
29.00% 
SEGMENT INFORMATION (Details 2) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Results of operations by operating segment
 
 
 
 
Revenues
$ 208,746 
$ 145,481 
$ 622,583 
$ 440,998 
Operating income
14,716 
10,771 
59,192 
33,406 
Payments
 
 
 
 
Results of operations by operating segment
 
 
 
 
Revenues
154,763 
145,481 
458,687 
440,998 
Operating income
12,348 
10,771 
52,012 
33,406 
Gaming Operations Member
 
 
 
 
Results of operations by operating segment
 
 
 
 
Revenues
53,983 
 
163,896 
 
Operating income
$ 2,368 
 
$ 7,180 
 
SEGMENT INFORMATION (Details 3) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Assets by operating segment
 
 
Total Assets
$ 1,650,846 
$ 1,707,285 
Payments
 
 
Assets by operating segment
 
 
Total Assets
460,492 
464,463 
Gaming Operations Member
 
 
Assets by operating segment
 
 
Total Assets
$ 1,190,354 
$ 1,242,822 
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Ops) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Condensed Income Statements, Captions [Line Items]
 
 
 
 
Revenues
$ 208,746 
$ 145,481 
$ 622,583 
$ 440,998 
Costs and expenses
 
 
 
 
Cost of revenues (exclusive of depreciation and amortization)
129,817 
108,568 
384,062 
331,181 
Operating expenses
26,295 
20,934 
68,982 
62,233 
Research and Development
5,463 
 
15,369 
 
Depreciation
10,943 
1,856 
32,037 
5,702 
Amortization
21,512 
3,352 
62,941 
8,476 
Total costs and expenses
194,030 
134,710 
563,391 
407,592 
Operating income
14,716 
10,771 
59,192 
33,406 
Other expenses
 
 
 
 
Interest expense, net of interest income
24,696 
1,996 
75,309 
5,625 
Loss on extinguishment of debt
87 
 
13,063 
 
Total other (income) expenses
24,783 
1,996 
88,372 
5,625 
(Loss) income from operations before tax
(10,067)
8,775 
(29,180)
27,781 
Income tax (benefit) provision
(3,957)
3,099 
(10,798)
9,892 
Net (loss) income
(6,110)
5,676 
(18,382)
17,889 
Foreign currency translation
(788)
(839)
(850)
(457)
Comprehensive (loss) income
(6,898)
4,837 
(19,232)
17,432 
Eliminations
 
 
 
 
Condensed Income Statements, Captions [Line Items]
 
 
 
 
Revenues
(162)
(184)
(448)
(547)
Costs and expenses
 
 
 
 
Operating expenses
(162)
(184)
(448)
(547)
Total costs and expenses
(162)
(184)
(448)
(547)
Other expenses
 
 
 
 
Equity in loss (income) of subsidiaries
(2,745)
8,166 
(8,305)
28,804 
Total other (income) expenses
(2,745)
8,166 
(8,305)
28,804 
(Loss) income from operations before tax
2,745 
(8,166)
8,305 
(28,804)
Net (loss) income
2,745 
(8,166)
8,305 
(28,804)
Foreign currency translation
788 
839 
850 
457 
Comprehensive (loss) income
3,533 
(7,327)
9,155 
(28,347)
Parent |
Reportable Legal Entities
 
 
 
 
Other expenses
 
 
 
 
Equity in loss (income) of subsidiaries
6,110 
(5,676)
18,382 
(17,889)
Total other (income) expenses
6,110 
(5,676)
18,382 
(17,889)
(Loss) income from operations before tax
(6,110)
5,676 
(18,382)
17,889 
Net (loss) income
(6,110)
5,676 
(18,382)
17,889 
Foreign currency translation
(788)
(839)
(850)
(457)
Comprehensive (loss) income
(6,898)
4,837 
(19,232)
17,432 
Subsidiary Issuer |
Reportable Legal Entities
 
 
 
 
Condensed Income Statements, Captions [Line Items]
 
 
 
 
Revenues
143,031 
134,452 
424,259 
408,971 
Costs and expenses
 
 
 
 
Cost of revenues (exclusive of depreciation and amortization)
112,344 
103,720 
333,592 
319,976 
Operating expenses
19,085 
19,593 
42,084 
58,339 
Depreciation
1,881 
1,810 
5,442 
5,563 
Amortization
2,448 
3,252 
6,858 
8,127 
Total costs and expenses
135,758 
128,375 
387,976 
392,005 
Operating income
7,273 
6,077 
36,283 
16,966 
Other expenses
 
 
 
 
Interest expense, net of interest income
1,365 
1,902 
5,977 
5,926 
Equity in loss (income) of subsidiaries
(3,365)
(2,490)
(10,077)
(10,915)
Loss on extinguishment of debt
87 
 
13,063 
 
Total other (income) expenses
(1,913)
(588)
8,963 
(4,989)
(Loss) income from operations before tax
9,186 
6,665 
27,320 
21,955 
Income tax (benefit) provision
2,356 
1,197 
7,378 
4,066 
Net (loss) income
6,830 
5,468 
19,942 
17,889 
Comprehensive (loss) income
6,830 
5,468 
19,942 
17,889 
Guarantor Subsidiaries |
Reportable Legal Entities
 
 
 
 
Condensed Income Statements, Captions [Line Items]
 
 
 
 
Revenues
61,110 
7,207 
185,919 
21,117 
Costs and expenses
 
 
 
 
Cost of revenues (exclusive of depreciation and amortization)
14,970 
2,575 
43,716 
6,861 
Operating expenses
6,932 
787 
26,027 
2,384 
Research and Development
5,463 
 
15,369 
 
Depreciation
9,018 
26,440 
Amortization
18,487 
 
54,222 
 
Total costs and expenses
54,870 
3,363 
165,774 
9,248 
Operating income
6,240 
3,844 
20,145 
11,869 
Other expenses
 
 
 
 
Interest expense, net of interest income
23,266 
 
69,089 
 
Total other (income) expenses
23,266 
 
69,089 
 
(Loss) income from operations before tax
(17,026)
3,844 
(48,944)
11,869 
Income tax (benefit) provision
(6,606)
1,721 
(19,050)
4,535 
Net (loss) income
(10,420)
2,123 
(29,894)
7,334 
Comprehensive (loss) income
(10,420)
2,123 
(29,894)
7,334 
Non-Guarantor Subsidiaries |
Reportable Legal Entities
 
 
 
 
Condensed Income Statements, Captions [Line Items]
 
 
 
 
Revenues
4,767 
4,006 
12,853 
11,457 
Costs and expenses
 
 
 
 
Cost of revenues (exclusive of depreciation and amortization)
2,503 
2,273 
6,754 
4,344 
Operating expenses
440 
738 
1,319 
2,057 
Depreciation
44 
45 
155 
136 
Amortization
577 
100 
1,861 
349 
Total costs and expenses
3,564 
3,156 
10,089 
6,886 
Operating income
1,203 
850 
2,764 
4,571 
Other expenses
 
 
 
 
Interest expense, net of interest income
65 
94 
243 
(301)
Total other (income) expenses
65 
94 
243 
(301)
(Loss) income from operations before tax
1,138 
756 
2,521 
4,872 
Income tax (benefit) provision
293 
181 
874 
1,291 
Net (loss) income
845 
575 
1,647 
3,581 
Foreign currency translation
(788)
(839)
(850)
(457)
Comprehensive (loss) income
$ 57 
$ (264)
$ 797 
$ 3,124 
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (BalSh) (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Sep. 30, 2014
Dec. 31, 2013
Current assets
 
 
 
 
Cash and cash equivalents
$ 111,473 
$ 89,095 
$ 106,499 
$ 114,254 
Settlement receivables
25,482 
43,288 
 
 
Trade receivables, net
47,702 
37,697 
 
 
Other receivables
5,331 
20,553 
 
 
Inventory
25,481 
27,163 
 
 
Prepaid expenses and other assets
19,262 
18,988 
 
 
Deferred tax asset
9,591 
9,591 
 
 
Total current assets
244,322 
246,375 
 
 
Non-current assets
 
 
 
 
Property, equipment and leasehold improvements, net
102,101 
106,085 
 
 
Goodwill
863,907 
857,913 
 
 
Other intangible assets, net
397,161 
436,785 
 
 
Other receivables, non-current
7,076 
9,184 
 
 
Other assets, non-current
36,279 
50,943 
 
 
Total non-current assets
1,406,524 
1,460,910 
 
 
Total assets
1,650,846 
1,707,285 
 
 
Current Liabilities
 
 
 
 
Settlement liabilities
106,579 
119,157 
 
 
Accounts payable and accrued expenses
106,602 
104,668 
 
 
Current portion of long-term debt
10,000 
10,000 
 
 
Total current liabilities
223,181 
233,825 
 
 
Non-current liabilities
 
 
 
 
Deferred tax liability, non-current
45,434 
57,333 
 
 
Long-term debt, less current portion
1,155,542 
1,178,787 
 
 
Other accrued expenses and liabilities
4,366 
5,867 
 
 
Total non-current liabilities
1,205,342 
1,241,987 
 
 
Total liabilities
1,428,523 
1,475,812 
 
 
Stockholders' Equity
 
 
 
 
Total stockholders' equity
222,323 
231,473 
 
 
Total liabilities and stockholders' equity
1,650,846 
1,707,285 
 
 
Reportable Legal Entities |
Parent
 
 
 
 
Non-current assets
 
 
 
 
Investment in subsidiaries
222,323 
231,473 
 
 
Total non-current assets
222,323 
231,473 
 
 
Total assets
222,323 
231,473 
 
 
Stockholders' Equity
 
 
 
 
Total stockholders' equity
222,323 
231,473 
 
 
Total liabilities and stockholders' equity
222,323 
231,473 
 
 
Reportable Legal Entities |
Subsidiary Issuer
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
85,812 
68,143 
92,231 
100,573 
Settlement receivables
21,778 
40,157 
 
 
Trade receivables, net
9,211 
6,578 
 
 
Other receivables
4,648 
3,416 
 
 
Inventory
9,519 
10,595 
 
 
Prepaid expenses and other assets
6,866 
7,143 
 
 
Deferred tax asset
2,743 
2,743 
 
 
Intercompany balances
37,777 
18,038 
 
 
Total current assets
178,354 
156,813 
 
 
Non-current assets
 
 
 
 
Property, equipment and leasehold improvements, net
19,316 
17,864 
 
 
Goodwill
154,367 
148,278 
 
 
Other intangible assets, net
31,980 
24,771 
 
 
Other receivables, non-current
3,469 
4,411 
 
 
Investment in subsidiaries
156,621 
147,195 
 
 
Deferred tax asset, non-current
66,477 
78,229 
 
 
Other assets, non-current
31,767 
47,508 
 
 
Intercompany balances
1,134,916 
1,130,380 
 
 
Total non-current assets
1,598,913 
1,598,636 
 
 
Total assets
1,777,267 
1,755,449 
 
 
Current Liabilities
 
 
 
 
Settlement liabilities
100,506 
111,375 
 
 
Accounts payable and accrued expenses
77,685 
61,544 
 
 
Current portion of long-term debt
10,000 
10,000 
 
 
Intercompany balances
165,791 
152,802 
 
 
Total current liabilities
353,982 
335,721 
 
 
Non-current liabilities
 
 
 
 
Deferred tax liability, non-current
1,072 
1,072 
 
 
Long-term debt, less current portion
1,155,542 
1,178,787 
 
 
Other accrued expenses and liabilities
3,925 
5,377 
 
 
Total non-current liabilities
1,160,539 
1,185,236 
 
 
Total liabilities
1,514,521 
1,520,957 
 
 
Stockholders' Equity
 
 
 
 
Total stockholders' equity
262,746 
234,492 
 
 
Total liabilities and stockholders' equity
1,777,267 
1,755,449 
 
 
Reportable Legal Entities |
Guarantor Subsidiaries
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
14,359 
6,489 
2,187 
2,149 
Trade receivables, net
38,491 
31,116 
 
 
Other receivables
619 
16,992 
 
 
Inventory
15,962 
16,568 
 
 
Prepaid expenses and other assets
2,985 
2,821 
 
 
Deferred tax asset
6,848 
6,848 
 
 
Intercompany balances
164,309 
151,179 
 
 
Total current assets
243,573 
232,013 
 
 
Non-current assets
 
 
 
 
Property, equipment and leasehold improvements, net
82,433 
87,898 
 
 
Goodwill
708,923 
708,922 
 
 
Other intangible assets, net
357,827 
402,816 
 
 
Other receivables, non-current
3,607 
4,773 
 
 
Deferred tax asset, non-current
46,118 
 
 
 
Other assets, non-current
4,018 
3,366 
 
 
Total non-current assets
1,202,926 
1,207,775 
 
 
Total assets
1,446,499 
1,439,788 
 
 
Current Liabilities
 
 
 
 
Settlement liabilities
132 
140 
 
 
Accounts payable and accrued expenses
27,541 
41,395 
 
 
Intercompany balances
30,728 
8,159 
 
 
Total current liabilities
58,401 
49,694 
 
 
Non-current liabilities
 
 
 
 
Deferred tax liability, non-current
156,957 
134,490 
 
 
Other accrued expenses and liabilities
441 
490 
 
 
Intercompany balances
1,134,916 
1,130,380 
 
 
Total non-current liabilities
1,292,314 
1,265,360 
 
 
Total liabilities
1,350,715 
1,315,054 
 
 
Stockholders' Equity
 
 
 
 
Total stockholders' equity
95,784 
124,734 
 
 
Total liabilities and stockholders' equity
1,446,499 
1,439,788 
 
 
Reportable Legal Entities |
Non-Guarantor Subsidiaries
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
11,302 
14,463 
12,081 
11,532 
Settlement receivables
3,704 
3,131 
 
 
Trade receivables, net
 
 
 
Other receivables
64 
145 
 
 
Prepaid expenses and other assets
9,411 
9,024 
 
 
Intercompany balances
1,514 
1,623 
 
 
Total current assets
25,995 
28,389 
 
 
Non-current assets
 
 
 
 
Property, equipment and leasehold improvements, net
352 
323 
 
 
Goodwill
617 
713 
 
 
Other intangible assets, net
7,354 
9,198 
 
 
Investment in subsidiaries
86 
86 
 
 
Other assets, non-current
494 
69 
 
 
Total non-current assets
8,903 
10,389 
 
 
Total assets
34,898 
38,778 
 
 
Current Liabilities
 
 
 
 
Settlement liabilities
5,941 
7,642 
 
 
Accounts payable and accrued expenses
1,376 
1,729 
 
 
Intercompany balances
7,081 
9,879 
 
 
Total current liabilities
14,398 
19,250 
 
 
Non-current liabilities
 
 
 
 
Total liabilities
14,398 
19,250 
 
 
Stockholders' Equity
 
 
 
 
Total stockholders' equity
20,500 
19,528 
 
 
Total liabilities and stockholders' equity
34,898 
38,778 
 
 
Eliminations
 
 
 
 
Current assets
 
 
 
 
Intercompany balances
(203,600)
(170,840)
 
 
Total current assets
(203,600)
(170,840)
 
 
Non-current assets
 
 
 
 
Investment in subsidiaries
(379,030)
(378,754)
 
 
Deferred tax asset, non-current
(112,595)
(78,229)
 
 
Intercompany balances
(1,134,916)
(1,130,380)
 
 
Total non-current assets
(1,626,541)
(1,587,363)
 
 
Total assets
(1,830,141)
(1,758,203)
 
 
Current Liabilities
 
 
 
 
Intercompany balances
(203,600)
(170,840)
 
 
Total current liabilities
(203,600)
(170,840)
 
 
Non-current liabilities
 
 
 
 
Deferred tax liability, non-current
(112,595)
(78,229)
 
 
Intercompany balances
(1,134,916)
(1,130,380)
 
 
Total non-current liabilities
(1,247,511)
(1,208,609)
 
 
Total liabilities
(1,451,111)
(1,379,449)
 
 
Stockholders' Equity
 
 
 
 
Total stockholders' equity
(379,030)
(378,754)
 
 
Total liabilities and stockholders' equity
$ (1,830,141)
$ (1,758,203)
 
 
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CFS) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Cash flows from operating activities
 
 
 
 
Net (loss) income
$ (6,110)
$ 5,676 
$ (18,382)
$ 17,889 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
Depreciation and Amortization
 
 
94,978 
14,178 
Amortization of financing costs
 
 
5,459 
1,412 
Loss/(gain) on sale or disposal of assets
 
 
(3,412)
79 
Accretion of contract rights
 
 
6,006 
 
Provision for bad debts
 
 
6,967 
6,770 
Loss on extinguishment of debt
87 
 
13,063 
 
Stock-based compensation
 
 
6,088 
7,533 
Other non-cash items
 
 
127 
 
Changes in operating assets and liabilities:
 
 
 
 
Net settlement receivables and liabilities
 
 
5,552 
(17,297)
Other changes in operating assets and liabilities
 
 
(13,083)
(1,124)
Net cash provided by operating activities
 
 
103,363 
29,440 
Cash flows from investing activities
 
 
 
 
Acquisitions, net of cash acquired
 
 
(10,857)
(11,845)
Capital expenditures
 
 
(49,534)
(11,035)
Proceeds from Sale of Productive Assets
 
 
2,103 
298 
Repayments under development agreements
 
 
3,104 
 
Advances under development and placement agreements
 
 
(2,813)
 
Changes in restricted cash and cash equivalents
 
 
(66)
(77)
Net cash used in investing activities
 
 
(58,063)
(22,659)
Cash flows from financing activities
 
 
 
 
Repayments against prior credit facility
 
 
 
(7,258)
Repayments of credit facility
 
 
(7,500)
 
Repayments of secured notes
 
 
(350,000)
 
Proceeds from issuance of secured notes
 
 
335,000 
 
Debt issuance costs
 
 
(1,146)
 
Proceeds from exercise of stock options
 
 
1,833 
5,251 
Purchase of treasury stock
 
 
(54)
(12,117)
Net cash used in financing activities
 
 
(21,867)
(14,124)
Effect of exchange rates on cash
 
 
(1,055)
(412)
Cash and cash equivalents
 
 
 
 
Net increase for the period
 
 
22,378 
(7,755)
Balance, beginning of the period
 
 
89,095 
114,254 
Balance, end of the period
111,473 
106,499 
111,473 
106,499 
Reportable Legal Entities |
Parent
 
 
 
 
Cash flows from operating activities
 
 
 
 
Net (loss) income
(6,110)
5,676 
(18,382)
17,889 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
Equity in income (loss) of subsidiaries
 
 
18,382 
(17,889)
Changes in operating assets and liabilities:
 
 
 
 
Other changes in operating assets and liabilities
 
 
(5)
(52)
Net cash provided by operating activities
 
 
(5)
(52)
Cash flows from investing activities
 
 
 
 
Intercompany investing activities
 
 
(4,020)
6,918 
Net cash used in investing activities
 
 
(4,020)
6,918 
Cash flows from financing activities
 
 
 
 
Issuance of warrants
 
 
2,246 
 
Proceeds from exercise of stock options
 
 
1,833 
5,251 
Purchase of treasury stock
 
 
(54)
(12,117)
Net cash used in financing activities
 
 
4,025 
(6,866)
Reportable Legal Entities |
Subsidiary Issuer
 
 
 
 
Cash flows from operating activities
 
 
 
 
Net (loss) income
6,830 
5,468 
19,942 
17,889 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
Depreciation and Amortization
 
 
12,300 
13,690 
Amortization of financing costs
 
 
5,459 
1,412 
Loss/(gain) on sale or disposal of assets
 
 
(60)
79 
Loss on extinguishment of debt
87 
 
13,063 
 
Equity in income (loss) of subsidiaries
 
 
(10,077)
(10,915)
Stock-based compensation
 
 
5,144 
7,533 
Changes in operating assets and liabilities:
 
 
 
 
Net settlement receivables and liabilities
 
 
7,510 
(15,244)
Other changes in operating assets and liabilities
 
 
8,163 
23,237 
Net cash provided by operating activities
 
 
61,444 
37,681 
Cash flows from investing activities
 
 
 
 
Acquisitions, net of cash acquired
 
 
(10,857)
(11,845)
Capital expenditures
 
 
(13,688)
(9,897)
Proceeds from Sale of Productive Assets
 
 
103 
298 
Changes in restricted cash and cash equivalents
 
 
(66)
(77)
Intercompany investing activities
 
 
6,600 
(18,756)
Net cash used in investing activities
 
 
(17,908)
(40,277)
Cash flows from financing activities
 
 
 
 
Repayments against prior credit facility
 
 
 
(7,258)
Repayments of credit facility
 
 
(7,500)
 
Repayments of secured notes
 
 
(350,000)
 
Proceeds from issuance of secured notes
 
 
335,000 
 
Debt issuance costs
 
 
(1,146)
 
Issuance of warrants
 
 
(2,246)
 
Intercompany financing activities
 
 
25 
1,512 
Net cash used in financing activities
 
 
(25,867)
(5,746)
Cash and cash equivalents
 
 
 
 
Net increase for the period
 
 
17,669 
(8,342)
Balance, beginning of the period
 
 
68,143 
100,573 
Balance, end of the period
85,812 
92,231 
85,812 
92,231 
Reportable Legal Entities |
Guarantor Subsidiaries
 
 
 
 
Cash flows from operating activities
 
 
 
 
Net (loss) income
(10,420)
2,123 
(29,894)
7,334 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
Depreciation and Amortization
 
 
80,662 
Loss/(gain) on sale or disposal of assets
 
 
(3,352)
 
Accretion of contract rights
 
 
6,006 
 
Provision for bad debts
 
 
6,967 
6,770 
Stock-based compensation
 
 
944 
 
Other non-cash items
 
 
127 
 
Changes in operating assets and liabilities:
 
 
 
 
Net settlement receivables and liabilities
 
 
(9)
182 
Other changes in operating assets and liabilities
 
 
(20,360)
(13,953)
Net cash provided by operating activities
 
 
41,091 
336 
Cash flows from investing activities
 
 
 
 
Capital expenditures
 
 
(35,512)
(298)
Proceeds from Sale of Productive Assets
 
 
2,000 
 
Repayments under development agreements
 
 
3,104 
 
Advances under development and placement agreements
 
 
(2,813)
 
Net cash used in investing activities
 
 
(33,221)
(298)
Cash and cash equivalents
 
 
 
 
Net increase for the period
 
 
7,870 
38 
Balance, beginning of the period
 
 
6,489 
2,149 
Balance, end of the period
14,359 
2,187 
14,359 
2,187 
Reportable Legal Entities |
Non-Guarantor Subsidiaries
 
 
 
 
Cash flows from operating activities
 
 
 
 
Net (loss) income
845 
575 
1,647 
3,581 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
Depreciation and Amortization
 
 
2,016 
485 
Changes in operating assets and liabilities:
 
 
 
 
Net settlement receivables and liabilities
 
 
(1,949)
(2,235)
Other changes in operating assets and liabilities
 
 
(881)
(10,356)
Net cash provided by operating activities
 
 
833 
(8,525)
Cash flows from investing activities
 
 
 
 
Capital expenditures
 
 
(334)
(840)
Intercompany investing activities
 
 
(58)
68 
Net cash used in investing activities
 
 
(392)
(772)
Cash flows from financing activities
 
 
 
 
Intercompany financing activities
 
 
(2,547)
10,258 
Net cash used in financing activities
 
 
(2,547)
10,258 
Effect of exchange rates on cash
 
 
(1,055)
(412)
Cash and cash equivalents
 
 
 
 
Net increase for the period
 
 
(3,161)
549 
Balance, beginning of the period
 
 
14,463 
11,532 
Balance, end of the period
11,302 
12,081 
11,302 
12,081 
Eliminations
 
 
 
 
Cash flows from operating activities
 
 
 
 
Net (loss) income
2,745 
(8,166)
8,305 
(28,804)
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
Equity in income (loss) of subsidiaries
 
 
(8,305)
28,804 
Cash flows from investing activities
 
 
 
 
Intercompany investing activities
 
 
(2,522)
11,770 
Net cash used in investing activities
 
 
(2,522)
11,770 
Cash flows from financing activities
 
 
 
 
Intercompany financing activities
 
 
2,522 
(11,770)
Net cash used in financing activities
 
 
$ 2,522 
$ (11,770)