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1. BUSINESS AND BASIS OF PRESENTATION
Overview
Global Cash Access Holdings, Inc. (Holdings) is a holding company, the principal asset of which is the capital stock of Global Cash Access, Inc. (GCA). Unless otherwise indicated, the terms the Company, Holdings, we, us and our refer to Holdings together with its consolidated subsidiaries. Holdings was formed on February 4, 2004 for the purpose of holding all of the outstanding capital stock of GCA and to guarantee the obligations under our senior secured credit facilities.
The Company is a provider in the United States and several international jurisdictions of cash access products and data intelligence services and solutions to the gaming industry. Our services and solutions provide gaming establishment patrons access to cash through a variety of methods, including automated teller machine (ATM) cash withdrawals, credit card cash access transactions, point-of-sale (POS) debit card transactions, check verification and warranty services and money transfers. In addition, the Company also provides products and services that improve credit decision-making, automate cashier operations and enhance patron marketing activities for gaming establishments. These services are provided either directly by GCA or through one of its subsidiaries.
The Company also owns and operates a credit reporting agency for the gaming industry through a wholly-owned subsidiary, Central Credit, LLC (Central Credit), which provides credit-information services and credit-reporting history on gaming patrons to various gaming establishments. Central Credit operates in both international and domestic gaming markets.
In May 2010, we completed the acquisition of Western Money Systems (Western Money), a manufacturer of redemption kiosks devices. The results of operations of Western Money have been reflected in Central Credit and other revenues.
Innovative Funds Transfer, LLC (IFT), formerly known as QuikPlay, LLC, was a joint venture that was formed on December 6, 2000, and owned 60% by GCA and 40% by International Game Technology (IGT). IGT is one of the largest manufacturers of gaming equipment in the United States. GCA was the managing member of this entity. IFT was consolidated in the Companys consolidated financial statements prior to April 19, 2010, at which time GCA and IGT dissolved IFT. The dissolution of IFT did not have a material impact on the condensed consolidated financial statements of the Company.
Basis of Presentation
The unaudited condensed consolidated financial statements included herein have been prepared by the Company 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 the Company believes that 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, 2011 are not necessarily indicative of results to be expected for the full fiscal year.
These unaudited condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto included within the Companys Annual Report on Form 10-K for the year ended December 31, 2010 (the 2010 10-K).
Use of Estimates
The Company has made estimates and judgments affecting the amounts reported in these financial statements and the accompanying notes. The actual results may differ from these estimates. The significant accounting estimates incorporated into the Companys unaudited condensed consolidated financial statements include:
· the estimated reserve for warranty expense associated with our check warranty receivables;
· the valuation and recognition of share-based compensation;
· the valuation allowance on our deferred tax asset;
· the estimated effective income tax rate; and
· the estimated cash flows in assessing the recoverability of long-lived assets. |
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The unaudited condensed consolidated financial statements presented for the three and nine months ended September 30, 2011 and 2010 and as of September 30, 2011 and December 31, 2010 include the accounts of Holdings and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Earnings Applicable to Common Stock
Basic earnings per share are calculated by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflect the effect of potential common stock resulting from assumed stock option exercises.
The weighted-average number of common shares outstanding used in the computation of basic and diluted earnings per share is as follows (in thousands):
(1) Included in the calculation of weighted average common shares outstanding basic are 16 and 44 and 220 and 470 unvested shares of restricted common stock of Holdings granted in share-based payment transactions for the three and nine months ended September 30, 2011 and 2010, respectively, that are participating securities because such shares have voting rights as well as the right to participate in dividend distributions made by the Company to its common stockholders.
(2) The potential dilution excludes the weighted average effect of stock options to acquire 20 and 61 and 618 and 7,533 shares of common stock of Holdings for the three and nine months ended September 30, 2011 and 2010, respectively, because the application of the treasury stock method, as required, makes them anti-dilutive.
(3) The potential dilution excludes the weighted average effect of shares of time-based shares of restricted common stock of Holdings of 20 and 49 and 238 and 477 shares for the three and nine months ended September 30, 2011 and 2010, respectively, because the application of the treasury stock method, as required, makes them anti-dilutive.
Warranty Receivables
In the check services transactions provided by Central Credit, Central Credit warrants check cashing transactions performed at gaming establishments. If a gaming establishment chooses to have a check warranted, it sends a request to a check warranty service provider asking whether it will warrant the check. The gaming establishment then pays the patron the check amount and deposits the check. If the check is dishonored by the patrons bank, the gaming establishment invokes the warranty and the check warranty service provider purchases the check from the gaming establishment for the full check amount and then pursues collection activities on its own. All amounts paid out to the gaming establishment related to these items result in a warranty receivable from the patron. This amount is recorded in other receivables, net on the condensed consolidated balance sheets. On a monthly basis, Central Credit evaluates the collectability of the outstanding balances and establishes a reserve for the face amount of the expected losses on these receivables. The warranty expense associated with this reserve is included within cost of revenues (exclusive of depreciation and amortization) in the condensed consolidated statements of income. The Company writes off substantially all warranty receivables that are practically older than one year in age.
A summary of the activity for the check warranty reserve for the nine months ended September 30, 2011, is as follows (amounts in thousands):
Fair Values of Financial Instruments
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument.
The carrying amount of cash and cash equivalents, other receivables, net, settlement receivables and settlement liabilities approximates fair value due to the short-term maturities of these instruments. The fair value of GCAs borrowings are estimated based on quoted market prices for the same issue or in instances where no market exists the quoted market prices for similar issues with similar terms are used to estimate fair value. The fair values of all other financial instruments, including amounts outstanding under the ATM funding agreements approximate their book values as the instruments are short-term in nature or contain market rates of interest.
GCA uses the market approach when measuring the fair value of an asset or liability for recurring and nonrecurring fair value measurements categorized within Levels 1 and 2 of the fair value hierarchy. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted market prices that are directly or indirectly observable for the asset or liability. The market approach uses prices and other relevant information from market transactions involving identical or comparable assets or liabilities to measure fair value. Level 3 inputs indicate 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 Company does not have any assets or liabilities with level 3 inputs. The following table presents the fair value and carrying value of GCAs borrowings (amounts in thousands):
Inventory
Inventory consists of finished goods such as redemption kiosk devices, work-in-progress and raw materials and is stated at lower of cost or market. The cost of inventory includes cost of materials, labor, overhead and freight. Inventory is accounted for using the average cost method. Inventory as of September 30, 2011 and December 31, 2010 was $6.5 million and $3.8 million, respectively. All inventory was acquired as part of the Western Money acquisition in May 2010.
Acquisitions
The Company accounts for business combinations in accordance with the accounting standards, which require that the assets acquired and liabilities assumed be recorded at their estimated fair values. The Company completed its acquisition of Western Money in May 2010, in which 100 percent of the outstanding common shares of Western Money were acquired for a purchase price net of cash of $15.4 million. This acquisition did not have a material impact on the consolidated financial statements of the Company as of and for the year ended December 31, 2010. During the quarter ended June 30, 2011, the Company completed its determination of the estimated fair values of assets acquired and liabilities assumed in the Western Money acquisition.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for Western Money (in thousands):
In connection with the acquisition, the Company acquired $6.3 million of intangible assets, of which $4.0 million was assigned to customer contracts, which will be amortized over eleven years on an accelerated basis as illustrated below. The adjustments to the preliminary fair value amounts have not been applied retrospectively to the condensed consolidated balance sheet as of December 31, 2010 or the condensed consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2010, as the impact of the final purchase price allocations was not material to previously reported financial statements.
The following table shows the amortization of the customer contracts (in thousands):
Other intangibles acquired include $0.7 million of trademarks which will be amortized on a straight-line basis over 10 years and $1.4 million of developed technology and $0.2 million of non-compete agreements both of which will be amortized on a straight-line basis over their useful lives of 5 years and 2 years, respectively. |
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3. ATM FUNDING AGREEMENTS
On December 19, 2007, GCA entered into the Treasury Services Agreement with Bank of America to utilize up to $360 million in funds owned by Bank of America to provide currency needed for normal operating requirements for the Companys ATMs. For the use of these funds, the Company paid Bank of America a cash usage fee equal to the average daily balance of funds utilized multiplied by the one-month LIBOR plus a contractually defined margin.
In December 2010, the Company terminated the Treasury Services Agreement with Bank of America, and began utilizing funds of up to $400 million owned by Wells Fargo pursuant to a Contract Cash Solutions Agreement entered into with Wells Fargo on November 12, 2010. The Contract Cash Solutions Agreement provides essentially the same services as provided under the Treasury Services Agreement.
As of September 30, 2011 and December 31, 2010, the outstanding balances of ATM cash utilized by GCA from Wells Fargo and Bank of America were $339.7 million and $368.4 million, respectively. For the three and nine months ended September 30, 2011 and 2010, the cash usage fees incurred by the Company were $0.6 million and $1.9 million and $0.5 million and $1.4 million, respectively, and is reflected as interest expense within the condensed consolidated statements of income.
The Company is responsible for any losses of cash in the ATMs under its agreements with Wells Fargo and Bank of America. The Company is self-insured related to this risk. For the three and nine months ended September 30, 2011 and 2010, the Company incurred no material losses related to this self-insurance.
Site Funded ATMs
The Company operates some ATMs at customer locations where the customer provides the cash required for the ATM operational needs. The Company is 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 $36.2 million and $28.6 million as of September 30, 2011 and December 31, 2010, respectively. |
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4. BENEFIT PLANS
The Company has issued stock options to acquire shares of the common stock of the Company to directors, officers and key employees under the Companys 2005 Stock Incentive Plan (the 2005 Plan). Options under the 2005 Plan (other than those granted to non-employee directors) will vest at a rate of 25% of the shares underlying the option after one year and the remaining shares vest in equal portions over the following 36 months, such that all shares are vested after four years. Options are issued at the current market price on the date of grant, with a contractual term of 10 years.
A summary of award activity under the 2005 Plan as of September 30, 2011 and changes during the nine months ended is as follows:
The fair value of options was determined as of the date of grant using Black-Scholes option pricing model with the following weighted-average assumption in the period ended September 30, 2011 and 2010, respectively.
As of September 30, 2011, there was $8.2 million in unrecognized compensation expense related to options expected to vest. This cost is expected to be recognized on a straight-line basis over a weighted average period of 0.9 years. During the nine months ended September 30, 2011, the Company granted options to acquire 2.1 million shares of common stock, received $0.6 million in proceeds from the exercise of options and recorded $5.4 million in non-cash compensation expense related to options granted that are expected to vest.
As of September 30, 2010, there was $12.6 million in unrecognized compensation expense related to options expected to vest. This cost was expected to be recognized on a straight-line basis over a weighted average period of 1.1 years. During the nine months ended September 30, 2010, the Company granted options to acquire 1.8 million shares of common stock, received $5.6 million in proceeds from the exercise of options and recorded $5.1 million in non-cash compensation expense related to options granted that are expected to vest.
Restricted Stock
The Company began issuing shares of restricted common stock of the Company to directors, officers and key employees in the first quarter of 2006. The vesting provisions are similar to those applicable to options. Because these shares of restricted stock are issued primarily to employees of the Company, some of the shares issued will be withheld by the Company to satisfy the minimum statutory tax withholding requirements applicable to such restricted stock awards. Therefore, as these awards vest the actual number of shares outstanding as a result of the restricted stock awards is reduced and the number of shares included within treasury stock is increased by the amount of shares withheld. During the nine months ended September 30, 2011, the Company withheld 49,447 shares of restricted stock from employees with a cumulative vesting commencement date fair value of $0.2 million. These amounts have been included as part of the total treasury stock repurchased during the period.
A summary of all non-vested awards for the Companys time-based restricted stock awards as of September 30, 2011 is as follows:
As of September 30, 2011, there was $0.6 million in unrecognized compensation expense related to shares of time-based restricted shares expected to vest. This cost is expected to be recognized on a straight-line basis over a weighted average period of 0.5 years. During the nine months ended September 30, 2011, there were 201,991 shares of time-based restricted shares vested, and we recorded a credit of $0.1 million in non-cash compensation expense related to restricted stock granted that is expected to vest.
As of September 30, 2010, there was $1.7 million in unrecognized compensation expense related to shares of time-based restricted shares expected to vest. This cost was expected to be recognized on a straight-line basis over a weighted average period of 1.0 years. During the nine months ended September 30, 2010, there were 394,023 shares of time-based restricted shares vested, and we recorded $1.3 million in non-cash compensation expense related to the restricted stock granted that is expected to vest. |
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5. COMMITMENTS AND CONTINGENCIES
Litigation Claims and Assessments
Sightline Payments, LLC
On March 22, 2010, an action was commenced by Sightline Payments, LLC in the United States District Court, District of Nevada, against Holdings and GCA (the Federal Court Action). The complaint alleged antitrust violations of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. The plaintiff sought damages in the amount of $300 million and that such damages be trebled. On August 9, 2010, the District Court issued an Order and Judgment granting the Companys motion to dismiss this action. On August 13, 2010, Sightline Payments, LLC filed a Notice of Appeal of the Order and Judgment granting the Companys Motion to Dismiss (the Appellate Action).
On April 16, 2010, the Company commenced an action in the District Court of Nevada, Clark County, against the three current principals of Sightline Payments, LLC, all of whom are former executives of the Company (the State Court Action). The Company alleged misappropriation of trade secrets, breach of contract, breach of duty of good faith and fair dealing and sought damages and declaratory and injunctive relief. The Company has received a temporary restraining order barring the defendants in this action from making any continued disclosure of the Companys proprietary and confidential information.
On August 9, 2011, GCA and Holdings entered into a settlement agreement with Sightline Payments, LLC and the three current principals of Sightline Payments, LLC pursuant to which GCA agreed to release its claims against Sightline, and its principals, arising in connection with the State Court Action, and Sightline Payments, LLC agreed to release its claims against GCA and Holdings arising in connection with the Federal Court Action and the Appellate Action. The United States Court of Appeals dismissed the Appellate Action with prejudice on August 18, 2011 and the District Court of Nevada, Clark County dismissed the State Court Action with prejudice on September 21, 2011.
Automated Systems America, Inc.
On July 7, 2010, an action was commenced by Automated Systems America, Inc. in the United States District Court, Central District of California, against Holdings, GCA and certain current employees of GCA. The complaint seeks a declaratory judgment of invalidity, unenforceability and non-infringement of certain patents owned by the Company and alleges antitrust violations of Section 2 of the Sherman Act, unfair competition violations under the Lanham Act and tortuous interference and defamation per se. The plaintiff seeks damages in excess of $2 million, punitive damages, and a trebling of damages associated with the allegations under Section 2 of the Sherman Act. On March 3, 2011, the Company filed a motion to dismiss this action. The Company maintains insurance that may provide for reimbursement of some of the expenses associated with this action. At this stage of the litigation, the Company is unable to make an evaluation of whether the likelihood of an unfavorable outcome is either probable or remote or the amount or range of potential loss; however, the Company believes it has meritorious defenses and will vigorously defend this action.
Commitments
TSYS Acquiring Solutions, Inc. (TSYS) Processing Commitments. The Company obtains transaction processing services from TSYS. Under terms of this agreement, GCA is obligated to pay TSYS monthly processing and hosting fees during the term of this Agreement which expires in June 2013. |
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6. BORROWINGS
On March 1, 2011, the Company refinanced all of its indebtedness outstanding under the Second Amended and Restated Credit Agreement (as described below) and repaid its obligations under the senior subordinated notes with proceeds from the New Senior Credit Facility as described below.
New Senior Credit Facility
As of December 31, 2010, we had total indebtedness of $208.8 million in principal amount (of which $127.8 million consisted of senior subordinated notes described below and $81.0 million consisted of senior secured debt under the Second Amended and Restated Credit Agreement described below). On March 1, 2011, we entered into a new $245 million senior secured credit facility, consisting of a $210.0 million term loan and a $35.0 million revolving credit facility (the New Senior Credit Facility). We used the proceeds from the New Senior Credit Facility to repay all outstanding indebtedness under our existing senior secured credit facility under the Second Amended and Restated Credit Agreement and to defease our senior subordinated notes.
On March 1, 2011, GCA, together with its sole stockholder, Holdings entered into a Credit Agreement (the Credit Agreement) with certain lenders, Deutsche Bank Trust Company Americas, as Administrative Agent and Wells Fargo Securities, LLC, as Syndication Agent. The New Senior Credit Facility established by the Credit Agreement provides for a $210.0 million term loan facility and a $35.0 million revolving credit facility. The revolving credit facility includes provisions for the issuance of up to $10.0 million of letters of credit and up to $5.0 million in swingline loans. The Credit Agreement also contains an increase option permitting GCA to arrange with existing lenders and/or new lenders for them to provide up to an aggregate of $50.0 million in additional term loan commitments. All $210 million of available borrowings under the term loan facility were borrowed concurrent with the establishment of the New Senior Credit Facility. Once repaid, no amounts under the term loan facility may be reborrowed. In addition, $4 million of available borrowings under the revolving credit facility were borrowed concurrent with the establishment of the New Senior Credit Facility. Once repaid, amounts under the revolving credit facility may be reborrowed.
The term loan requires principal repayments of one quarter of 1% of the aggregate initial principal amount of term loans, or $525,000 per quarter as well as annual mandatory prepayment provisions based on an excess cash flow sweep equal to a fixed percentage of excess cash flow (as defined in the Credit Agreement). The remaining principal is due on the maturity date, March 1, 2016. GCA may prepay the loans and terminate the commitments at any time after the first year, without premium or penalty, subject to certain qualifications set forth in the Credit Agreement. Furthermore, the Credit Agreement contains mandatory prepayment provisions which, under certain circumstances, such as asset or equity sales, obligate GCA to apply defined portions of its cash flow to prepayment of the New Senior Credit Facility.
Borrowings under the New Senior Credit Facility bear interest at either (x) a specified base rate plus a 4.50% margin, or (y) LIBOR plus a 5.50% margin. The base rate minimum is 2.50% and the LIBOR minimum is 1.50%. Interest in respect of base rate loans is payable quarterly in arrears and interest in respect of LIBOR loans is payable in arrears at the end of the applicable interest period and every three months in the case of interest periods in excess of three months. Interest is also payable at the time of repayment of any loans and at maturity. As of September 30, 2011, we had $179.0 million of outstanding indebtedness under the New Senior Credit Facility, consisting of $179.0 million under the term loan facility. The weighted average interest rate, inclusive of the applicable margin of 550 basis points, was 7.0%. We also had a balance of $2.8 million under our letter of credit sub facility that is part of our revolving credit facility as of September 30, 2011.
The New Senior Credit Facility is unconditionally guaranteed by Holdings and each direct and indirect domestic subsidiary of GCA. All amounts owing under the New Senior Credit Facility are secured by a first priority perfected security interest in all stock (but only 65% of the stock of foreign subsidiaries), other equity interests and promissory notes owned by GCA and a first priority perfected security interest in all other tangible and intangible assets owned by GCA and the guarantors.
The Credit Agreement contains customary affirmative and negative covenants, financial covenants, representations and warranties and events of defaults. As of September 30, 2011, the Company is in compliance with the required covenants.
Second Amended and Restated Credit Agreement
On November 1, 2006, GCA and Holdings entered into the Second Amended and Restated Credit Agreement with certain lenders, Bank of America, N.A., as Administrative Agent and Wachovia Bank, N.A., as Syndication Agent.
The Second Amended and Restated Credit Agreement significantly amended and restated the terms of GCAs existing senior secured credit facilities to provide for a $100.0 million term loan facility and a $100.0 million five-year revolving credit facility, with a $25.0 million letter of credit sublimit and a $5.0 million swingline loan sublimit.
Borrowings under the Second Amended and Restated Credit Agreement bore interest at LIBOR plus an applicable margin, which was based on the Companys Senior Leverage Ratio (as defined under the Second Amended and Restated Credit Agreement). As of December 31, 2010, the applicable margin was 112.5 basis points and the effective rate of interest was 1.39%. Principal, together with accrued and unpaid interest, was due on the maturity date, November 1, 2011. As of December 31, 2010, the balance of this financial instrument was $81.0 million with $0 under the revolving portion.
Senior Subordinated Notes
On March 10, 2004, GCA completed a private placement offering of $235.0 million of 8.75% senior subordinated notes due 2012 (the Notes). All of GCAs existing and future domestic wholly owned subsidiaries were guarantors of the Notes on a senior subordinated basis. In addition, effective upon the closing of our initial public offering of common stock, Holdings guaranteed, on a subordinated basis, all of GCAs obligations under the Notes.
Interest on the Notes accrued based upon a 360-day year comprised of twelve 30-day months and was payable semiannually on March 15th and September 15th. On October 31, 2005, $82.3 million or 35% of these Notes were redeemed at a price of 108.75% of face, out of the net proceeds from our initial public offering. GCA could have redeemed all or a portion of the Notes at redemption prices of 104.375%, on or after March 15, 2008, 102.19% on or after March 15, 2009, or 100.00% on or after March 15, 2010. On May 3, 2010, GCA redeemed prior to their maturity $25.0 million in the aggregate principal amount of the Notes at a redemption price of 100% of the principal amount of such Notes. As of December 31, 2010, the Company had $127.8 million in borrowings outstanding under the indenture governing the Notes. |
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7. RELATED PARTY TRANSACTIONS
Michael Rumbolz, who serves as a member of our Board of Directors, also serves as a member of the board of directors of Affinity Gaming, LLC (Affinity), formerly Herbst Gaming, LLC. The Company provides various cash access products and services to Affinity. Mr. Rumbolz receives both cash and equity compensation from Affinity in consideration for serving on the board of directors of Affinity, however, none of this consideration is tied in any manner to the Companys performance or obligations under its cash access agreements with Affinity. In addition, Mr. Rumbolz was not involved in the negotiation of the Companys cash access agreements with Affinity. |
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8. INCOME TAXES
The Companys effective income tax rate from continuing operations for the three and nine months ended September 30, 2011 and 2010 was 42.4%, 48.7% and 47.6% and 41.0%, respectively.
The following table presents the recorded income tax expense for the three and nine months ended September 30, 2011 and 2010, respectively (amounts in thousands):
The Company accounts for uncertain tax positions in accordance with the accounting guidance issued in July 2006, which clarifies the accounting and disclosure for uncertainty in tax positions. As of September 30, 2011, there has been no material change to the balance of unrecognized tax benefits reported at December 31, 2010. |
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9. SEGMENT INFORMATION
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Companys chief operating decision-making group consists of the Chief Executive Officer and Chief Financial Officer. The operating segments are reviewed separately because each represents products or services that can be, and often are, marketed and sold separately to our customers.
The Company operates in three distinct business segments: (1) cash advance transactions, (2) ATM transactions, and (3) check services. These segments are monitored separately by management for performance against its internal forecasts and are consistent with the Companys internal management reporting.
Other lines of business, none of which exceed the established materiality for segment reporting, include Western Money, Arriva, credit reporting services, Western Union and Casino Marketing Services, among others.
The Companys internal management reporting does not allocate overhead or depreciation and amortization expenses to the respective business segments.
The Companys business is predominantly domestic, with no specific regional concentrations and no significant assets in foreign locations.
Major Customers
For the three and nine months ended September 30, 2011, none of our customers had combined revenues from all segments equal to or exceeding 10.0%. For the three and nine months ended September 30, 2010, the combined revenues from our largest customer, Caesars Entertainment Corporation (Caesars) (formerly Harrahs Operating Company, Inc.) and its subsidiaries and affiliates, was approximately $21.3 million and $64.3 million, respectively, representing 14.2% and 13.8% of the Companys total consolidated revenues, respectively. For the three and nine months ended September 30, 2011 and 2010, our five largest customers accounted for approximately 29.1% and 29.1% and 35.5% and 34.8%, respectively, of our total revenue.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.
The tables below present the results of operations by operating segment for the three and nine months ended September 30, 2011 and 2010, respectively (amounts in thousands):
(1) Depreciation and amortization expense for segment presentation purposes have been included within the Corporate segment, and have not been allocated to individual operating segments.
The table below presents total assets by operating segment as of September 30, 2011 and December 31, 2010, respectively (amounts in thousands):
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10. SUBSEQUENT EVENTS
On November 3, 2011, the Company entered into a definitive agreement to acquire substantially all of the assets of MCA Processing LLC, the terms of which have not been disclosed. MCA is a provider of ATM, debit card, and credit card cash access services to gaming establishments and also manufactures, sells, licenses and services redemption kiosk devices. The Company anticipates that that the acquisition will close in the fourth quarter of 2011 and is subject to the fulfillment of customary closing conditions. The Company does not believe that the acquisition of MCA will have a material impact on the results of operations and financial condition of the Company for the year ended December 31, 2011. |
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