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Global Cash Access Holdings Inc. Reports Operating Results (10-Q)

May 07, 2009 | About:

Global Cash Access Holdings Inc. (GCA) filed Quarterly Report for the period ended 2009-03-31.

Global Cash Access Holdings Inc. has a market cap of $576.2 million; its shares were traded at around $7.49 with a P/E ratio of 11 and P/S ratio of 0.9.

Highlight of Business Operations:

An increase in automated teller machines (ATM) revenue of $26.7 million resulted from the increased number of ATM transactions by 38.3%. The added transactions resulted from the CGS and CSI acquisitions, which occurred in the second and third quarters of 2008, but were not present in the numbers of the first quarter of 2008. CGS and CSI combined accounted for $24.8 of the $26.7 million increase. Although the number of transactions increased by 6.2 million the average withdrawal per ATM transaction decreased by $16.20 or 8.0%.

Our principal source of liquidity is cash flows from operating activities, which were $11.8 million and $19.2 million for the three months ended March 31, 2009 and 2008, respectively. Changes in operating assets and liabilities accounted for a net decrease of $12.3 million in cash flow from operating activities. Offsetting this is $9.1 million of net income, and approximately $15.0 million of non-cash expenses.

Net cash used in investing activities totaled $2.9 million and $2.0 million for the three months ended March 31, 2009 and 2008, respectively. Included in net cash used in investing activities for the three months ended March 31, 2009 and 2008, respectively, is $2.2 million and $2.0 million for capital investments.

Net cash used in financing activities was $15.3 million for the three months ended March 31, 2009 compared to $74.4 million provided for the three months ended March 31, 2008. For the three months ended March 31, 2009, we made payments totaling $15.3 million against our credit facility as compared to borrowings of $84 million for the same period of 2008. In addition, we purchased $9.3 million of treasury shares under our Board authorized share repurchase program during the three months ended March 31, 2008.

At March 31, 2009, we had a net deferred income tax asset of $151.1 million. We recognized a deferred tax asset upon our conversion from a limited liability company to a corporation on May 14, 2004. Prior to that time, all tax attributes flowed through to the members of the limited liability company. The principal component of the deferred tax asset is a difference between our assets for financial accounting and tax purposes. This difference results from a significant balance of Acquired Goodwill of approximately $687 million that was generated as part of the conversion to a corporation plus approximately $98 million in pre-existing goodwill carried over from periods prior to the conversion. Both of these assets are recorded for tax purposes but not for accounting purposes. This asset is amortized over 15 years for tax purposes, resulting in annual pretax income being $52.3 million lower for tax purposes than for financial accounting purposes. At an estimated blended domestic effective tax rate of 36.0%, this results in tax payments being approximately $18.8 million less than the provision for income taxes shown on the income statement for financial accounting purposes. This is an expected aggregate of $190.0 million in cash savings over the remaining life of the portion of our deferred tax asset related to the conversion.

Bank of America supplies us with currency needed for normal operating requirements of the domestic ATMs and ACMs we operate pursuant to the Amendment of the Treasury Services Agreement. Under the terms of this agreement, we pay a monthly cash usage fee based upon the product of the average daily dollars outstanding in all such ATMs and ACMs multiplied by the average LIBOR for one-month United States dollar deposits for each day that rate is published in that month plus a margin of 25 basis points. We are therefore exposed to interest rate risk to the extent that the applicable LIBOR increases. As of March 31, 2009, the rate in effect, inclusive of the 25 basis points margin, was 0.8% and the currency supplied by Bank of America pursuant to this agreement was $344.2 million. Based upon the average outstanding amount of currency to be supplied by Bank of America pursuant to this agreement during the first three months of 2009, which was $368.9 million, each 1% increase in the applicable LIBOR would have a $3.7 million impact on income before taxes over a 12-month period. Foreign gaming establishments supply the currency needs for the ATMs located on their premises.

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