Attached files
file | filename |
---|---|
EX-99.2 - EX-99.2 - Cardtronics plc | a17-4159_2ex99d2.htm |
EX-99.1 - EX-99.1 - Cardtronics plc | a17-4159_2ex99d1.htm |
EX-23.1 - EX-23.1 - Cardtronics plc | a17-4159_2ex23d1.htm |
8-K/A - 8-K/A - Cardtronics plc | a17-4159_28ka.htm |
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On January 6, 2017, Cardtronics plc (the Company) and DirectCash Payments Inc. (DCP) completed the acquisition pursuant to the terms and conditions of the previously announced Arrangement Agreement, (Arrangement) dated October 3, 2016, (the Acquisition). The significant terms of the Arrangement were previously reported by the Company in the Current Report on Form 8-K filed on October 7, 2016.
Pursuant to the Arrangement, the Company acquired all of the issued and outstanding common shares of DCP and DCP became a wholly-owned indirect subsidiary of the Company. In connection with the closing of the Acquisition, each holder of DCP common shares received purchase consideration equal to Canadian Dollars (CAD) $19.00 in cash per common share and the Company repaid third party indebtedness of DCP, the combined aggregate of which represented a total transaction value of approximately $464 million U.S. Dollars (USD), net of estimated cash acquired and excluding transaction-related costs. The total amount paid for the Acquisition at closing was financed with cash on hand and borrowings under the Companys amended revolving credit facility, and has been preliminarily allocated as disclosed below in Note 2. Preliminary Acquisition Accounting.
The unaudited pro forma condensed combined financial statements presented herein give effect to the Acquisition as if it had occurred on September 30, 2016 for the presentation of the unaudited pro forma condensed combined balance sheets, and as if it had occurred on January 1, 2015 for the presentation of the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and for the nine months ended September 30, 2016. The unaudited pro forma condensed combined financial statements do not reflect the results of the Australian retail ATM and managed services ATM portfolio that DCPayments acquired from First Data Corporation on September 30, 2016. The acquisition of this portfolio of ATMs and associated service contracts is not material to the Company. The unaudited pro forma condensed combined balance sheets as of September 30, 2016 are based on the historical unaudited consolidated balance sheets of the Company and DCP as of September 30, 2016. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2016 are based on the historical unaudited consolidated statements of operations of the Company and DCP for the nine months ended September 30, 2016. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 are based on the historical audited statements of operations of the Company and DCP for the year ended December 31, 2015. Certain material amounts presented in DCPs historical consolidated financial statements have been reclassified and adjusted to conform to the Companys presentation under its accounting policies and accounting principles generally accepted in the United States (U.S. GAAP). The historical financial statements of DCP were prepared under International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and are presented in CAD and a foreign currency exchange rate translation has been prepared to present the unaudited pro forma condensed combined financial statements on a USD basis consistent with that of the Company.
The unaudited pro forma condensed combined financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The unaudited pro forma condensed combined financial statements should be read along with the Companys Annual Report on Form 10-K for the year ended December 31, 2015 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016, which include a summary of the Companys significant accounting policies and other disclosures.
The Acquisition will be accounted for as a business combination using the purchase method of accounting under the provisions of Accounting Standards Codification Topic 805, Business Combinations (ASC 805), with the Company as the acquirer of DCP. Under ASC 805, generally all assets acquired and liabilities assumed are recorded at their fair value as of the acquisition date. For purposes of the pro forma financial statements, the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of DCP are based on preliminary estimates of fair value as of January 6, 2017, the closing date of the Acquisition. Any excess of the purchase consideration over the fair value of identified assets acquired and liabilities assumed is recognized as goodwill. Management believes the fair values recognized in the unaudited pro forma condensed combined financial statements for the assets to be acquired and liabilities to be assumed are based on reasonable estimates and assumptions, including, where applicable, current market-based assumptions. Preliminary fair value estimates may change as additional information becomes available.
The pro forma adjustments presented herein are based on certain preliminary estimates and assumptions in accordance with the Companys accounting policies. The Companys management believes that its assumptions provide a reasonable basis for presenting all of the significant effects of the transactions contemplated and that the pro forma adjustments give appropriate effect to these assumptions and are properly applied in the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements do not reflect the impacts of any potential operating efficiencies, savings from expected synergies, or costs to integrate the operations. The unaudited pro forma condensed combined financial statements are presented for informational purposes only and are not necessarily indicative of the financial position or the results of operations of the combined company had the Acquisition been completed as of the indicated dates or of the results that may be achieved in the future.
CARDTRONICS PLC
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
As of September 30, 2016
(In thousands)
|
|
Historical |
|
|
|
|
|
|
| ||||||
|
|
Cardtronics |
|
DirectCash |
|
Pro Forma |
|
Notes |
|
Pro Forma |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| ||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
|
$ |
59,521 |
|
$ |
19,792 |
|
$ |
(15,339 |
) |
(a) |
|
$ |
63,974 |
|
Accounts and notes receivable, net |
|
73,140 |
|
10,877 |
|
|
|
|
|
84,017 |
| ||||
Inventory, net |
|
11,151 |
|
782 |
|
185 |
|
(c) |
|
12,118 |
| ||||
Restricted cash |
|
35,802 |
|
9,128 |
|
|
|
|
|
44,930 |
| ||||
Prepaid expenses, deferred costs, and other current assets |
|
64,039 |
|
3,135 |
|
675 |
|
(b) |
|
67,849 |
| ||||
Total current assets |
|
243,653 |
|
43,714 |
|
(14,479 |
) |
|
|
272,888 |
| ||||
Property and equipment, net |
|
374,820 |
|
63,512 |
|
878 |
|
(d) |
|
439,210 |
| ||||
Intangible assets, net |
|
128,743 |
|
62,578 |
|
104,758 |
|
(e) |
|
296,079 |
| ||||
Goodwill |
|
537,334 |
|
132,154 |
|
178,156 |
|
(e) |
|
847,644 |
| ||||
Deferred tax asset, net |
|
8,612 |
|
6,752 |
|
|
|
|
|
15,364 |
| ||||
Prepaid expenses, deferred costs, and other noncurrent assets |
|
19,964 |
|
2,057 |
|
|
|
|
|
22,021 |
| ||||
Total assets |
|
$ |
1,313,126 |
|
$ |
310,767 |
|
$ |
269,313 |
|
|
|
$ |
1,893,206 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
| ||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Current portion of other long-term liabilities |
|
$ |
32,970 |
|
$ |
3,463 |
|
$ |
|
|
|
|
$ |
36,433 |
|
Accounts payable and other accrued and current liabilities |
|
279,889 |
|
35,388 |
|
7,243 |
|
(i) |
|
322,520 |
| ||||
Total current liabilities |
|
312,859 |
|
38,851 |
|
7,243 |
|
|
|
358,953 |
| ||||
Long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
| ||||
Long-term debt |
|
485,647 |
|
222,903 |
|
261,197 |
|
(a) |
|
969,747 |
| ||||
Asset retirement obligations |
|
47,196 |
|
|
|
5,721 |
|
(f) |
|
52,917 |
| ||||
Deferred tax liability, net |
|
13,088 |
|
10,161 |
|
28,972 |
|
(i) |
|
52,221 |
| ||||
Other long-term liabilities |
|
47,708 |
|
3,703 |
|
|
|
|
|
51,411 |
| ||||
Total liabilities |
|
906,498 |
|
275,618 |
|
303,133 |
|
|
|
1,485,249 |
| ||||
Total stockholders equity |
|
406,628 |
|
35,149 |
|
(33,820 |
) |
(h) |
|
407,957 |
| ||||
Total liabilities and stockholders equity |
|
$ |
1,313,126 |
|
$ |
310,767 |
|
$ |
269,313 |
|
|
|
$ |
1,893,206 |
|
See accompanying notes to unaudited pro forma condensed combined financial statements.
CARDTRONICS PLC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2016
(In thousands, excluding share and per share amounts)
|
|
Historical |
|
|
|
|
|
|
| ||||||
|
|
Cardtronics plc |
|
DirectCash |
|
Pro Forma |
|
Notes |
|
Pro Forma |
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
| ||||
ATM operating revenues |
|
$ |
918,207 |
|
$ |
165,240 |
|
$ |
|
|
|
|
$ |
1,083,447 |
|
ATM product sales and other revenues |
|
37,335 |
|
23,886 |
|
|
|
|
|
61,221 |
| ||||
Total revenues |
|
955,542 |
|
189,126 |
|
|
|
|
|
1,144,668 |
| ||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets shown separately below) |
|
580,520 |
|
117,248 |
|
|
|
|
|
697,768 |
| ||||
Cost of ATM product sales and other revenues |
|
33,873 |
|
9,255 |
|
|
|
|
|
43,128 |
| ||||
Total cost of revenues |
|
614,393 |
|
126,503 |
|
|
|
|
|
740,896 |
| ||||
Gross profit |
|
341,149 |
|
62,623 |
|
|
|
|
|
403,772 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| ||||
Selling, general, and administrative expenses |
|
115,505 |
|
23,716 |
|
|
|
|
|
139,221 |
| ||||
Redomicile-related expenses |
|
12,201 |
|
|
|
|
|
|
|
12,201 |
| ||||
Acquisition and divestiture-related expenses |
|
4,938 |
|
1,369 |
|
(1,329 |
) |
(g) |
|
4,978 |
| ||||
Depreciation and accretion expense |
|
69,085 |
|
10,743 |
|
389 |
|
(d) |
|
80,217 |
| ||||
Amortization of intangible assets |
|
28,129 |
|
21,737 |
|
(6,534 |
) |
(e) |
|
43,332 |
| ||||
Gain on disposal of assets |
|
(475 |
) |
|
|
|
|
|
|
(475 |
) | ||||
Total operating expenses |
|
229,383 |
|
57,565 |
|
(7,474 |
) |
|
|
279,474 |
| ||||
Income from operations |
|
111,766 |
|
5,058 |
|
7,474 |
|
|
|
124,298 |
| ||||
Other expense: |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
|
13,227 |
|
11,177 |
|
(3,082 |
) |
(a) |
|
21,322 |
| ||||
Amortization of deferred financing costs and note discount |
|
8,636 |
|
166 |
|
(55 |
) |
(b) |
|
8,747 |
| ||||
Other expense (income) |
|
748 |
|
(111 |
) |
|
|
|
|
637 |
| ||||
Total other expense |
|
22,611 |
|
11,232 |
|
(3,137 |
) |
|
|
30,706 |
| ||||
Income (loss) before income taxes |
|
89,155 |
|
(6,174 |
) |
10,611 |
|
|
|
93,592 |
| ||||
Income tax expense (benefit) |
|
26,204 |
|
(2,967 |
) |
2,954 |
|
(i) |
|
26,191 |
| ||||
Net income (loss) |
|
62,951 |
|
(3,207 |
) |
7,657 |
|
|
|
67,401 |
| ||||
Net loss attributable to noncontrolling interests |
|
(71 |
) |
|
|
|
|
|
|
(71 |
) | ||||
Net income (loss) attributable to controlling interests and available to common stockholders |
|
$ |
63,022 |
|
$ |
(3,207 |
) |
$ |
7,657 |
|
|
|
$ |
67,472 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per common share basic |
|
$ |
1.39 |
|
|
|
|
|
|
|
$ |
1.49 |
| ||
Net income per common share diluted |
|
$ |
1.38 |
|
|
|
|
|
|
|
$ |
1.47 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares outstanding basic |
|
45,175,604 |
|
|
|
|
|
|
|
45,175,604 |
| ||||
Weighted average shares outstanding diluted |
|
45,765,235 |
|
|
|
|
|
|
|
45,765,235 |
|
See accompanying notes to unaudited pro forma condensed combined financial statements.
CARDTRONICS PLC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2015
(In thousands, excluding share and per share amounts)
|
|
Historical |
|
|
|
|
|
|
| ||||||
|
|
Cardtronics plc |
|
DirectCash |
|
Pro Forma |
|
Notes |
|
Pro Forma |
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
| ||||
ATM operating revenues |
|
$ |
1,134,021 |
|
$ |
221,947 |
|
$ |
|
|
|
|
$ |
1,355,968 |
|
ATM product sales and other revenues |
|
66,280 |
|
33,411 |
|
|
|
|
|
99,691 |
| ||||
Total revenues |
|
1,200,301 |
|
255,358 |
|
|
|
|
|
1,455,659 |
| ||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets shown separately below) |
|
720,925 |
|
151,840 |
|
|
|
|
|
872,765 |
| ||||
Cost of ATM product sales and other revenues |
|
62,012 |
|
13,343 |
|
|
|
|
|
75,355 |
| ||||
Total cost of revenues |
|
782,937 |
|
165,183 |
|
|
|
|
|
948,120 |
| ||||
Gross profit |
|
417,364 |
|
90,175 |
|
|
|
|
|
507,539 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| ||||
Selling, general, and administrative expenses |
|
140,501 |
|
41,669 |
|
|
|
|
|
182,170 |
| ||||
Acquisition and divestiture-related expenses |
|
27,127 |
|
|
|
|
|
|
|
27,127 |
| ||||
Depreciation and accretion expense |
|
85,030 |
|
14,835 |
|
307 |
|
(d) |
|
100,172 |
| ||||
Amortization of intangible assets |
|
38,799 |
|
30,050 |
|
(9,247 |
) |
(e) |
|
59,602 |
| ||||
Gain on disposal of assets |
|
(14,010 |
) |
|
|
|
|
|
|
(14,010 |
) | ||||
Total operating expenses |
|
277,447 |
|
86,554 |
|
(8,940 |
) |
|
|
355,061 |
| ||||
Income from operations |
|
139,917 |
|
3,621 |
|
8,940 |
|
|
|
152,478 |
| ||||
Other expense: |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
|
19,451 |
|
11,861 |
|
(1,066 |
) |
(a) |
|
30,246 |
| ||||
Amortization of deferred financing costs and note discount |
|
11,363 |
|
2,285 |
|
(2,137 |
) |
(b) |
|
11,511 |
| ||||
Other expense |
|
3,780 |
|
3,356 |
|
|
|
|
|
7,136 |
| ||||
Total other expense |
|
34,594 |
|
17,502 |
|
(3,203 |
) |
|
|
48,893 |
| ||||
Income (loss) before income taxes |
|
105,323 |
|
(13,881 |
) |
12,143 |
|
|
|
103,585 |
| ||||
Income tax expense (benefit) |
|
39,342 |
|
(9,287 |
) |
3,505 |
|
(i) |
|
33,560 |
| ||||
Net income (loss) |
|
65,981 |
|
(4,594 |
) |
8,638 |
|
|
|
70,025 |
| ||||
Net loss attributable to noncontrolling interests |
|
(1,099 |
) |
|
|
|
|
|
|
(1,099 |
) | ||||
Net income (loss) attributable to controlling interests and available to common stockholders |
|
$ |
67,080 |
|
$ |
(4,594 |
) |
$ |
8,638 |
|
|
|
$ |
71,124 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per common share basic |
|
$ |
1.50 |
|
|
|
|
|
|
|
$ |
1.59 |
| ||
Net income per common share diluted |
|
$ |
1.48 |
|
|
|
|
|
|
|
$ |
1.57 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares outstanding basic |
|
44,796,701 |
|
|
|
|
|
|
|
44,796,701 |
| ||||
Weighted average shares outstanding diluted |
|
45,368,687 |
|
|
|
|
|
|
|
45,368,687 |
|
See accompanying notes to unaudited pro forma condensed combined financial statements.
CARDTRONICS PLC
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) Description of Transaction and Basis of Pro Forma Presentation
On January 6, 2017, Cardtronics Holdings Limited (Holdings), a private company incorporated under English law and a wholly owned subsidiary of Cardtronics plc (the Company), completed the acquisition pursuant to the terms and conditions of the Arrangement Agreement (the Arrangement) between Holdings and DirectCash Payments Inc. (DCP) dated October 3, 2016 (the Acquisition). The Acquisition was affected by means of a statutory plan of arrangement under the Business Corporations Act (Alberta, Canada). As part of the Arrangement, a newly formed wholly-owned subsidiary of Holdings acquired all the issued and outstanding common shares of DCP and DCP became a wholly-owned indirect subsidiary of the Company. In connection with the closing of the Acquisition, each holder of DCP common shares received purchase consideration equal to Canadian Dollars (CAD) $19.00 in cash per common share and the Company repaid third party indebtedness of DCP, the combined aggregate of which represented a total transaction value of approximately $464 million USD, net of estimated cash acquired and excluding transaction-related costs. The total amount paid for the Acquisition at closing was financed with cash on hand and borrowings under the Companys amended revolving credit facility.
(2) Preliminary Acquisition Accounting
The unaudited pro forma condensed combined financial statements reflect a total purchase consideration and liabilities assumed of approximately $658 million CAD (approximately $500 million USD as of September 30, 2016), inclusive of fees to retire DCP outstanding indebtedness. The Company has performed a preliminary allocation of the purchase consideration, but has not yet completed its purchase accounting as it is still in the process of determining the fair values for several classes of assets and liabilities. This purchase consideration has been preliminarily allocated as follows, as if the transaction closed on September 30, 2016:
|
|
(In USD) |
| |
|
|
(In thousands) |
| |
Cash and cash equivalents |
|
$ |
19,792 |
|
Accounts and notes receivable, net |
|
10,877 |
| |
Inventory, net |
|
967 |
| |
Restricted cash |
|
9,128 |
| |
Prepaid expenses, deferred costs, and other current assets |
|
3,135 |
| |
Property and equipment, net |
|
64,390 |
| |
Intangible assets, net |
|
167,336 |
| |
Goodwill |
|
310,310 |
| |
Deferred tax asset, net |
|
6,752 |
| |
Prepaid expenses, deferred costs, and other noncurrent assets |
|
2,057 |
| |
Total assets acquired |
|
$ |
594,744 |
|
|
|
|
| |
Current portion of other long-term liabilities |
|
3,463 |
| |
Accounts payable and other accrued and current liabilities |
|
42,631 |
| |
Long-term debt |
|
|
| |
Asset retirement obligations |
|
5,721 |
| |
Deferred tax liability, net |
|
39,133 |
| |
Other long-term liabilities |
|
3,703 |
| |
Total liabilities assumed |
|
$ |
94,651 |
|
|
|
|
| |
Net assets acquired |
|
$ |
500,093 |
|
In accordance with accounting principles generally accepted in the United States (U.S. GAAP), the Acquisition has been accounted for as a business combination using the purchase method under the provisions of Accounting Standards Codification Topic 805, Business Combinations (ASC 805). Under ASC 805, all assets acquired and liabilities assumed are recorded at their fair value as of the Acquisition date. For purposes of the pro forma financial statements, the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of DCP are based on preliminary estimates
of fair value as of September 30, 2016. Any excess of the purchase consideration over the fair value of identified assets acquired and liabilities assumed is recognized as goodwill. Estimates of useful lives and estimated fair values of tangible and amortizable intangible assets will be finalized after the Company reviews all available data including, but not limited to, appraisals and internal assessments, and additionally has confirmed clearance from the U.K. Competition Markets Authority (CMA) with respect to the U.K. operations of DCP. As a result, the final allocation of the excess purchase consideration over the fair value of the identifiable net assets acquired could differ from what is presented herein.
(3) Pro Forma Adjustments
(a) Long-term debt
The historical long-term debt balances, net of deferred financing costs, of DCP were eliminated as of September 30, 2016 as these amounts were satisfied on the Acquisition date in accordance with the terms of the Arrangement.
To fund the Acquisition and the related repayment of the DCP indebtedness, the Company borrowed a total of $484.1 million prior to the close of the transaction on January 6, 2017. These borrowings were made under the Companys amended revolving credit facility and the remainder of the purchase consideration was paid using cash on hand, or approximately $15.3 million, accounting for the U.S. dollar purchase price paid using a September 30, 2016 exchange rate. The interest rate shown below represents the interest rate effective as of the Acquisition date; however, the applicable rate on the amended revolving credit facility is variable based on a floating interest rate index and a fixed spread. The pro forma adjustments made to current and long-term debt and interest expense are as follows:
|
|
|
|
|
|
Pro Forma Interest Expense |
| |||||
|
|
Principal |
|
Interest Rate |
|
For the Nine |
|
For the Year |
| |||
|
|
(In thousands) |
|
|
|
(In thousands) |
| |||||
Amended revolving credit facility - USD denominated |
|
$ |
484,100 |
|
2.23% |
|
$ |
8,095 |
|
$ |
10,795 |
|
Total |
|
$ |
484,100 |
|
|
|
$ |
8,095 |
|
$ |
10,795 |
|
|
|
|
|
|
|
|
|
|
| |||
Elimination of historical DCP balance |
|
(222,903 |
) |
|
|
(11,177 |
) |
(11,861 |
) | |||
Pro forma adjustment |
|
$ |
261,197 |
|
|
|
$ |
(3,082 |
) |
$ |
(1,066 |
) |
A variance of 1/8 percent from the above interest rate would have affected the pro forma interest expense by approximately $0.5 million and approximately $0.6 million for the nine months ended September 30, 2016 and the year ended December 31, 2015, respectively.
(b) Deferred financing costs
In connection with the $484.1 million in incremental borrowings described in note (a) Long-term debt above, the Company incurred deferred financing costs of approximately $675 thousand to amend its revolving credit facility. The pro forma adjustment made to deferred financing costs and amortization of deferred financing costs (using the straight-line method) are as follows:
|
|
|
|
|
|
Pro Forma Amortization |
| |||||
|
|
Amount of |
|
Estimated |
|
For the Nine |
|
For the Year |
| |||
|
|
(In thousands) |
|
|
|
(In thousands) |
| |||||
Deferred financing costs related to the amended revolving credit facility |
|
$ |
675 |
|
4.5 years |
|
$ |
111 |
|
$ |
148 |
|
Elimination of historical DCP deferred financing cost amortization |
|
|
|
|
|
(166 |
) |
(2,285 |
) | |||
Pro forma adjustment |
|
|
|
|
|
$ |
(55 |
) |
$ |
(2,137 |
) | |
Consistent with the Companys accounting policy, DCP classified the deferred financing costs related to its long-term debt in the Long-term debt line item. The elimination of the historical DCP balance in note (a) Long-term debt results in the pro forma elimination of the unamortized deferred financing costs pertaining to the DCP long-term debt.
(c) Inventory
The fair value of the inventory acquired has been preliminarily estimated as follows:
|
|
Estimated Fair Value |
| |
|
|
(In thousands) |
| |
Inventory |
|
$ |
967 |
|
Elimination of historical DCP balance |
|
(782 |
) | |
Pro forma adjustment |
|
$ |
185 |
|
(d) Property and equipment
The fair value of property and equipment acquired and the related incremental depreciation (using the straight-line method) have been preliminarily valued as follows:
|
|
|
|
|
|
Pro Forma Depreciation |
| |||||
|
|
Estimated Fair |
|
Estimated |
|
For the Nine |
|
For the Year |
| |||
|
|
(In thousands) |
|
|
|
(In thousands) |
| |||||
ATMs and other property and equipment |
|
$ |
64,390 |
|
4-5 years |
|
$ |
11,132 |
|
$ |
15,142 |
|
Elimination of historical DCP net carrying value |
|
(63,512 |
) |
|
|
(10,743 |
) |
(14,835 |
) | |||
Pro forma adjustment |
|
$ |
878 |
|
|
|
$ |
389 |
|
$ |
307 |
|
Due to the preliminary nature of the purchase consideration allocation, the final allocation will likely vary. An increase or decrease of 10% in the fair value of the acquired property and equipment would result in a change in the depreciation expense of approximately $1.1 million and approximately $1.5 million for the nine months ended September 30, 2016 and the year ended December 31, 2015, respectively.
(e) Goodwill and Intangible assets, excluding deferred financing costs
The historical goodwill balance of DCP was eliminated as of September 30, 2016 and the goodwill resulting from the transaction, as calculated in Note 2. Preliminary Acquisition Accounting above, was recorded.
The estimated fair value of identified amortizable intangible assets, excluding deferred financing costs, that were recorded and the related amortization (using the straight-line method) are as follows:
|
|
|
|
|
|
Pro Forma Amortization |
| |||||
|
|
Estimated |
|
Estimated |
|
For the Nine |
|
For the Year |
| |||
|
|
(In thousands) |
|
|
|
(In thousands) |
| |||||
Customer contracts |
|
$ |
154,280 |
|
7 years |
|
$ |
13,668 |
|
$ |
18,703 |
|
Trade names |
|
13,056 |
|
5 years |
|
1,535 |
|
2,100 |
| |||
Total |
|
$ |
167,336 |
|
|
|
$ |
15,203 |
|
$ |
20,803 |
|
|
|
|
|
|
|
|
|
|
| |||
Elimination of historical DCP balance |
|
(62,578 |
) |
|
|
(21,737 |
) |
(30,050 |
) | |||
Pro forma adjustment |
|
$ |
104,758 |
|
|
|
$ |
(6,534 |
) |
$ |
(9,247 |
) |
Due to the preliminary nature of the purchase consideration allocation, the final allocation will likely vary. An increase or decrease of 10% in the fair value of the acquired intangible assets would result in a change in the amortization expense of $1.5 million and approximately $2.1 million for the nine months ended September 30, 2016 and the year ended December 31, 2015, respectively.
Under U.S. GAAP, identifiable intangible assets are required to be separately identified and determined to be indefinite-lived or definite-lived subject to amortization over an estimated useful life using a systematic and rational method to match the pattern of use of the asset. Identifiable indefinite-lived intangible assets are required to be tested at least annually for impairment or more frequently as events may trigger a need for an impairment analysis. The amounts eliminated above represent the historical DCP intangible balance and the amortization that was recorded by DCP in the respective periods as these amounts are replaced by the estimated fair values and amortization of the newly identified intangible assets in connection with the Acquisition.
(f) Asset retirement obligations
Historically, DCP did not record a liability for its asset retirement obligations (AROs). However, the Company believes that these costs are probable based on its experience and expectations; therefore, consistent with the Companys accounting policy, a preliminary ARO estimate of approximately $5.7 million was recognized in the pro forma condensed combined balance sheets for the estimated cost to deinstall the acquired ATMs and restore the ATM sites to their original condition. The estimated value of accretion of the liabilities from their present value to future value in the periods presented is insignificant.
(g) Transaction costs
No transaction costs were expensed for the year ended December 31, 2015 related to the Acquisition. For the nine months ended September 30, 2016, the Company incurred $1.3 million in transaction costs directly attributable to the Acquisition, which have been eliminated from the pro forma condensed combined statements of operations.
(h) Stockholders equity
The following pro forma adjustments were made to stockholders equity as of September 30, 2016:
|
|
(In thousands) |
| |
Elimination of historical DCP stockholders equity |
|
$ |
(35,149 |
) |
Additional transaction costs incurred (see note (g) above) |
|
1,329 |
| |
Total adjustments to equity as of September 30, 2016 |
|
$ |
(33,820 |
) |
(i) Income tax provision
The following estimated statutory rates for each country were used to calculate the income tax provision adjustment for the effects of pro forma adjustments on the pro forma condensed combined statements of operations:
|
|
Statutory Income Tax Rates |
| ||
|
|
For the Nine Months Ended |
|
For the Year Ended |
|
United States |
|
35.00 |
% |
35.00 |
% |
United Kingdom |
|
19.25 |
% |
20.00 |
% |
Canada |
|
26.50 |
% |
26.50 |
% |
Australia |
|
30.00 |
% |
30.00 |
% |
Using the statutory rates applicable to the pro forma adjustments by jurisdiction, the income tax provision adjustments reflect a blended rate of 27.8% and 28.9% for the nine months ended September 30, 2016 and year ended December 31, 2015, respectively. The pro forma condensed combined balance sheets reflect a current deferred tax liability of approximately $7.2 million and a long-term deferred tax liability of approximately $29.0 million established relative to the fair value adjustments applied to the property and equipment and finite-lived intangible assets.
(4) Pro Forma Earnings per Share
The Company reports its earnings per share under the two-class method. Under this method, potentially dilutive securities are excluded from the calculation of diluted earnings per share (as well as their related impact on the net income available to common stockholders) when their impact on net income available to common stockholders is anti-dilutive. Potentially dilutive securities for the nine months ended September 30, 2016 and for the year ended December 31, 2015 included all outstanding stock options, restricted stock awards (RSAs), and restricted stock units (RSUs), which were included in the calculation of pro forma diluted earnings per share for these periods, if dilutive. The potentially dilutive effect of outstanding warrants and the underlying shares exercisable under the Companys $287.5 million of 1.00% Convertible Senior Notes due 2020 (the Convertible Notes) were excluded from diluted shares outstanding because the exercise price exceeded the average market price of the Companys common stock. The effect of the note hedge the Company purchased to offset the underlying conversion option embedded in the Convertible Notes was also excluded, as the effect is anti-dilutive.
Additionally, the shares of restricted stock issued by the Company under RSAs have a non-forfeitable right to cash dividends, if and when declared by the Company. Accordingly, restricted shares issued under RSAs are considered to be participating securities, and, as such, the Company has allocated the undistributed pro forma earnings for the nine months ended September 30, 2016 and for the year ended December 31, 2015 among the Companys outstanding shares of common stock and issued but unvested restricted shares, as follows:
Pro Forma Earnings per Share (in thousands, excluding share and per share amounts):
|
|
For the Nine Months Ended |
|
For the Year Ended December 31, 2015 |
| ||||||||||||
|
|
Pro Forma |
|
Pro Forma |
|
Pro |
|
Pro Forma |
|
Pro Forma |
|
Pro |
| ||||
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pro forma net income attributable to controlling interests and available to common stockholders |
|
$ |
67,472 |
|
|
|
|
|
$ |
71,124 |
|
|
|
|
| ||
Less: Pro forma undistributed earnings allocated to unvested RSAs |
|
(36 |
) |
|
|
|
|
(99 |
) |
|
|
|
| ||||
Pro forma net income available to common stockholders |
|
$ |
67,436 |
|
45,175,604 |
|
1.49 |
|
$ |
71,025 |
|
44,796,701 |
|
1.59 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Add: Pro forma undistributed earnings allocated to restricted shares |
|
$ |
36 |
|
|
|
|
|
$ |
99 |
|
|
|
|
| ||
Stock options added to the denominator under the treasury stock method |
|
|
|
29,451 |
|
|
|
|
|
63,657 |
|
|
| ||||
RSUs added to the denominator under the treasury stock method |
|
|
|
560,180 |
|
|
|
|
|
508,329 |
|
|
| ||||
Less: Pro forma undistributed earnings reallocated to RSAs |
|
(35 |
) |
|
|
|
|
(98 |
) |
|
|
|
| ||||
Pro forma net income available to common stockholders and assumed conversions |
|
$ |
67,437 |
|
45,765,235 |
|
$ |
1.47 |
|
$ |
71,026 |
|
45,368,687 |
|
$ |
1.57 |
|
The computation of pro forma diluted earnings per share excluded potentially dilutive common shares related to restricted stock awards of 12,920 and 31,005 shares for the nine months ended September 30, 2016 and for the year ended December 31, 2015, respectively, because the effect of including these shares in the computation would have been anti-dilutive.
(5) Conforming Accounting and Foreign Currency Exchange Rates
The Company prepares its financial statements in accordance with its accounting policies and U.S. GAAP. DCP prepared its financial statements in accordance with its accounting policies and IFRS. For purposes of the unaudited pro forma condensed combined financial statements, DCPs historical financial statements have been reclassified and adjusted to conform to the Companys accounting policies and presentation under U.S. GAAP.
The DCP historical financial statements are presented in CAD. Within these unaudited condensed combined pro forma financial statements, all amounts in CAD have been translated using the CAD to USD foreign currency exchange rates in effect as of and during the reported periods.
The following table presents the foreign currency exchange rates that were used to prepare these unaudited pro forma condensed combined financial statements:
|
|
CAD to USD Foreign Currency Exchange Rates |
|
As of September 30, 2016 |
|
0.76 |
|
For the nine months ended September 30, 2016 |
|
0.76 |
|
For the year ended December 31, 2015 |
|
0.78 |
|
The following tables present the conforming accounting adjustments and foreign currency exchange rate translation applied to the DCP historical financial statements.
DIRECTCASH PAYMENTS INC.
UNAUDITED BALANCE SHEETS
(In thousands)
|
|
As of September 30, 2016 |
| |||||||||||
|
|
Reporting Currency - CAD |
|
USD |
| |||||||||
|
|
Historical |
|
Conforming |
|
Adjusted |
|
Adjusted |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
|
$ |
26,042 |
|
$ |
|
|
$ |
26,042 |
|
$ |
19,792 |
| |
Accounts and notes receivable, net |
|
14,312 |
|
|
|
14,312 |
|
10,877 |
| |||||
Inventory, net |
|
22,201 |
|
(21,173 |
) |
(1) |
1,028 |
|
782 |
| ||||
Restricted cash |
|
12,011 |
(A) |
|
|
12,011 |
|
9,128 |
| |||||
Prepaid expenses, deferred costs, and other current assets |
|
4,125 |
|
|
|
4,125 |
|
3,135 |
| |||||
Total current assets |
|
78,691 |
|
(21,173 |
) |
57,518 |
|
43,714 |
| |||||
Property and equipment, net |
|
62,396 |
|
21,173 |
|
(1) |
83,569 |
|
63,512 |
| ||||
Intangible assets, net |
|
82,339 |
|
|
|
82,339 |
|
62,578 |
| |||||
Goodwill |
|
173,887 |
|
|
|
173,887 |
|
132,154 |
| |||||
Deferred tax asset, net |
|
8,884 |
|
|
|
8,884 |
|
6,752 |
| |||||
Prepaid expenses, deferred costs, and other noncurrent assets |
|
2,707 |
|
|
|
2,707 |
|
2,057 |
| |||||
Total assets |
|
$ |
408,904 |
|
$ |
|
|
$ |
408,904 |
|
$ |
310,767 |
| |
|
|
|
|
|
|
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
|
|
| |||||
Current portion of other long-term liabilities |
|
$ |
4,556 |
|
$ |
|
|
$ |
4,556 |
|
$ |
3,463 |
| |
Accounts payable and other accrued and current liabilities |
|
46,563 |
|
|
|
46,563 |
|
35,388 |
| |||||
Total current liabilities |
|
51,119 |
|
|
|
51,119 |
|
38,851 |
| |||||
Long-term liabilities: |
|
|
|
|
|
|
|
|
| |||||
Long-term debt |
|
293,293 |
|
|
|
293,293 |
|
222,903 |
| |||||
Deferred tax liability, net |
|
13,370 |
|
|
|
13,370 |
|
10,161 |
| |||||
Other long-term liabilities |
|
4,873 |
|
|
|
4,873 |
|
3,703 |
| |||||
Total liabilities |
|
362,655 |
|
|
|
362,655 |
|
275,618 |
| |||||
Total stockholders equity |
|
46,249 |
|
|
|
46,249 |
|
35,149 |
| |||||
Total liabilities and stockholders equity |
|
$ |
408,904 |
|
$ |
|
|
$ |
408,904 |
|
$ |
310,767 |
|
(A) The Restricted cash line item on the Companys consolidated balance sheets consists of amounts collected on behalf of, but not yet remitted to, certain of the Companys merchant customers or third-party service providers. The Restricted cash line item presented above includes the Cash in circulation line item reported in the DCP unaudited balance sheets as of September 30, 2016, which consists of currency used as ATM vault cash and located in the DCP ATMs, as well as cash owed to settlement networks and service providers.
Conforming Accounting Adjustments Unaudited Balance Sheets
(1) The Inventories balance presented in the DCP unaudited balance sheets as of September 30, 2016, includes ATMs assets that are expected to be deployed and not otherwise sold or consumed. This conforming accounting adjustment presents the reclassification of these amounts to the Property and equipment, net line item to conform to the Companys accounting policy.
DIRECTCASH PAYMENTS INC.
UNAUDITED STATEMENTS OF OPERATIONS
(In thousands)
|
|
For the Nine Months Ended September 30, 2016 |
| ||||||||||||
|
|
Reporting Currency - CAD |
|
USD |
| ||||||||||
|
|
Historical |
|
Conforming |
|
Adjusted |
|
Adjusted |
| ||||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||||
ATM operating revenues |
|
$ |
179,713 |
|
$ |
37,708 |
|
(1) |
$ |
217,421 |
|
$ |
165,240 |
| |
ATM product sales and other revenues |
|
31,429 |
|
|
|
31,429 |
|
23,886 |
| ||||||
Total revenues |
|
211,142 |
|
37,708 |
|
248,850 |
|
189,126 |
| ||||||
Cost of revenues: |
|
|
|
|
|
|
|
|
| ||||||
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets shown separately below) |
|
100,037 |
|
54,237 |
|
(1)(2)(3)(4) |
154,274 |
|
117,248 |
| |||||
Cost of ATM product sales and other revenues |
|
12,177 |
|
|
|
12,177 |
|
9,255 |
| ||||||
Total cost of revenues |
|
112,214 |
|
54,237 |
|
166,451 |
|
126,503 |
| ||||||
Gross profit |
|
98,928 |
|
(16,529 |
) |
82,399 |
|
62,623 |
| ||||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||||
Selling, general, and administrative expenses |
|
49,976 |
|
(A) |
(18,771 |
) |
(2)(3) |
31,205 |
|
23,716 |
| ||||
Acquisition and divestiture-related expenses |
|
1,801 |
|
|
|
|
1,801 |
|
1,369 |
| |||||
Depreciation and accretion expense |
|
13,516 |
|
|
620 |
|
(4) |
14,136 |
|
10,743 |
| ||||
Amortization of intangible assets |
|
28,601 |
|
|
|
|
28,601 |
|
21,737 |
| |||||
Total operating expenses |
|
93,894 |
|
|
(18,151 |
) |
75,743 |
|
57,565 |
| |||||
Income from operations |
|
5,034 |
|
|
1,622 |
|
6,656 |
|
5,058 |
| |||||
Other expense: |
|
|
|
|
|
|
|
|
|
| |||||
Interest expense, net |
|
15,182 |
|
(B) |
(475 |
) |
(5) |
14,707 |
|
11,177 |
| ||||
Amortization of deferred financing costs and note discount |
|
|
|
|
218 |
|
(5) |
218 |
|
166 |
| ||||
Other (income) expense |
|
(403 |
) |
(C) |
257 |
|
(5) |
(146 |
) |
(111 |
) | ||||
Total other expense |
|
14,779 |
|
|
|
14,779 |
|
11,232 |
| ||||||
(Loss) income before income taxes |
|
(9,745 |
) |
1,622 |
|
(8,123 |
) |
(6,174 |
) | ||||||
Income tax (benefit) expense |
|
(4,271 |
) |
367 |
|
(4) |
(3,904 |
) |
(2,967 |
) | |||||
Net (loss) income available to common stockholders |
|
$ |
(5,474 |
) |
$ |
1,255 |
|
$ |
(4,219 |
) |
$ |
(3,207 |
) |
(A) The Selling, general and administrative expenses line item presented above includes the Personnel expenses, Vault cash rental costs, and Other expenses line items reported in the DCP unaudited statements of operations for the nine months ended September 30, 2016.
(B) The Interest expense, net line item presented above includes the Finance costs line item reported in the DCP unaudited statements of operations for the nine months ended September 30, 2016.
(C) The Other (income) expense line item presented above includes the Realized loss on foreign exchange and Unrealized loss on foreign exchange line items reported in the DCP unaudited statement of operations for the nine months ended September 30, 2016.
Conforming Accounting Adjustments Unaudited Statements of Operations for the nine months ended September 30, 2016
(1) This conforming accounting adjustment is intended to recognize certain surcharge revenues on a gross basis (i.e. not reduced by merchant commission payments), consistent with the Companys accounting policies and U.S. GAAP. DCP has historically recognized the revenues associated with a subset of their contracts net of the associated merchant commissions.
(2) DCP presents Vault cash rental costs separately from the Cost of sales line item on its unaudited statements of operations. This conforming adjustment reclassifies $7.9 million CAD, for the nine months ended September 30, 2016, from a separate line item on the DCP unaudited statements of operations into the Cost of ATM operating revenues line item above to conform to the Companys reporting presentation.
(3) DCP presents Personnel expenses and Other expenses separately from the Cost of sales line item on its unaudited statements of operations. This conforming accounting adjustment reclassifies certain personnel and other expenses that are attributable to ATM Operations from their classification in Selling, general and administrative expenses to Cost of ATM operating revenues, during the nine months ended September 30, 2016. These costs include the direct cost of operations personnel and other expenses directly related to operations.
(4) DCP does not capitalize ATM deployment costs, but rather expenses those as incurred. This conforming accounting adjustment is presented net of the capitalization of approximately $1.6 million CAD of ATM deployment costs incurred during the nine months ended September 30, 2016. The associated tax impact was a tax benefit of approximately $0.4 million CAD. In addition, DCP does not recognize asset retirement obligations related to its ATM placements. This conforming accounting adjustment reclassifies approximately $0.6 million CAD of estimated deinstall costs incurred during the nine months ended September 30, 2016 to depreciation to conform to the Companys accounting policies.
(5) The Finance costs presented in Interest expense, net in the DCP financial statements included $0.3 million CAD of realized and unrealized losses on undesignated interest rate swaps and $0.2 million CAD of amortization of deferred financing costs. This conforming accounting adjustment reclassifies these amounts into the Other (income) expense and Amortization of deferred financing costs and note discount line items, during the nine months ended September 30, 2016, to conform to the Companys accounting policies.
DIRECTCASH PAYMENTS INC.
UNAUDITED STATEMENTS OF OPERATIONS
(In thousands)
|
|
For the Year Ended December 31, 2015 |
| |||||||||||
|
|
Reporting Currency - CAD |
|
USD |
| |||||||||
|
|
Historical |
|
Conforming |
|
Adjusted |
|
Adjusted |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
| |||||
ATM operating revenues |
|
$ |
240,878 |
|
$ |
43,669 |
|
(1) |
$ |
284,547 |
|
$ |
221,947 |
|
ATM product sales and other revenues |
|
42,835 |
|
|
|
42,835 |
|
33,411 |
| |||||
Total revenues |
|
283,713 |
|
43,669 |
|
327,382 |
|
255,358 |
| |||||
Cost of revenues: |
|
|
|
|
|
|
|
|
| |||||
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets shown separately below) |
|
130,640 |
|
64,027 |
|
(1)(2)(3)(4) |
194,667 |
|
151,840 |
| ||||
Cost of ATM product sales and other revenues |
|
17,106 |
|
|
|
17,106 |
|
13,343 |
| |||||
Total cost of revenues |
|
147,746 |
|
64,027 |
|
211,773 |
|
165,183 |
| |||||
Gross profit |
|
135,967 |
|
(20,358 |
) |
115,609 |
|
90,175 |
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
| |||||
Selling, general, and administrative expenses |
|
68,807 |
(A) |
(22,870 |
) |
(2)(3) |
45,937 |
|
35,831 |
| ||||
Litigation settlement |
|
7,485 |
|
|
|
7,485 |
|
5,838 |
| |||||
Depreciation and accretion expense |
|
18,312 |
|
707 |
|
(4) |
19,019 |
|
14,835 |
| ||||
Amortization of intangible assets |
|
38,525 |
|
|
|
38,525 |
|
30,050 |
| |||||
Total operating expenses |
|
133,129 |
|
(22,163 |
) |
110,966 |
|
86,554 |
| |||||
Income from operations |
|
2,838 |
|
1,805 |
|
4,643 |
|
3,621 |
| |||||
Other expense: |
|
|
|
|
|
|
|
|
| |||||
Interest expense, net |
|
19,547 |
(B) |
(4,341 |
) |
(5) |
15,206 |
|
11,861 |
| ||||
Amortization of deferred financing costs and note discount |
|
|
|
2,929 |
|
(5) |
2,929 |
|
2,285 |
| ||||
Other expense |
|
2,891 |
(C) |
1,412 |
|
(5) |
4,303 |
|
3,356 |
| ||||
Total other expense |
|
22,438 |
|
|
|
22,438 |
|
17,502 |
| |||||
(Loss) income before income taxes |
|
(19,600 |
) |
1,805 |
|
(17,795 |
) |
(13,881 |
) | |||||
Income tax (benefit) expense |
|
(12,331 |
) |
425 |
|
(4) |
(11,906 |
) |
(9,287 |
) | ||||
Net (loss) income available to common stockholders |
|
$ |
(7,269 |
) |
$ |
1,380 |
|
$ |
(5,889 |
) |
$ |
(4,594 |
) |
(A) The Selling, general and administrative expenses line item presented above includes the Personnel expenses, Vault cash rental costs, and Other expenses line items reported in the DCP unaudited statements of operations for the year ended December 31, 2015.
(B) The Interest expense, net line item presented above includes the Finance costs line item reported in the DCP unaudited statements of operations for the year ended December 31, 2015.
(C) The Other expense line item presented above includes the Realized loss on foreign exchange and Unrealized loss on foreign exchange line items reported in the DCP unaudited statements of operations for the year ended December 31, 2015.
Conforming Accounting Adjustments Unaudited Statements of Operations for the year ended December 31, 2015
(1) This conforming accounting adjustment is intended to recognize certain surcharge revenues on a gross basis (i.e. not reduced by merchant commission payments), consistent with the Companys accounting policies and U.S. GAAP. DCP has historically recognized the revenues associated with a subset of their contracts net of the associated merchant commissions.
(2) DCP presents Vault cash rental costs separately from the Cost of sales line item on its unaudited statements of operations. This conforming adjustment reclassifies $10.0 million CAD, for the year ended December 31, 2016, from a separate line item on the DCP unaudited statements of operations into the Cost of ATM operating revenues line item above to conform to the Companys reporting presentation.
(3) DCP presents Personnel expenses and Other expenses separately from the Cost of sales line item on its unaudited statements of operations. This conforming accounting adjustment reclassifies certain personnel and other expenses that are attributable to ATM Operations from their classification in Selling, general and administrative expenses to Cost of ATM operating revenues, during the year ended December 31, 2015. These costs include the direct cost of operations personnel and other expenses directly related to operations.
(4) DCP does not capitalize ATM deployment costs, but rather expenses those as incurred. This conforming accounting adjustment is presented net of the capitalization of approximately $1.8 million CAD of ATM deployment costs incurred during the year ended December 31, 2015. The associated tax impact was a tax benefit of approximately $0.4 million CAD. In addition, DCP does not recognize asset retirement obligations related to its ATM placements. This conforming accounting adjustment reclassifies approximately $0.7 million CAD of estimated deinstall costs incurred during the year ended December 31, 2015 to depreciation to conform to the Companys accounting policies.
(5) The Finance costs presented in Interest expense, net in the DCP financial statements included $1.4 million CAD of realized and unrealized losses on undesignated interest rate swaps and $2.9 million CAD of amortization of deferred financing costs. This conforming accounting adjustment presents the reclassification of these amounts into the Other expense and Amortization of deferred financing costs and note discount line items, during the year ended December 31, 2015, to conform to the Companys accounting policies.