1277856--3/31/2008--CARDTRONICS

related topics

{system, service, information}

{customer, product, revenue}

{control, financial, internal}

{operation, international, foreign}

{debt, indebtedness, cash}

{product, market, service}

{cost, operation, labor}

{tax, income, asset}

{regulation, government, change}

{operation, natural, condition}

{competitive, industry, competition}

{condition, economic, financial}

{stock, price, operating}

{capital, credit, financial}

We have incurred substantial losses in the past and may continue to incur losses in the future. Interchange fees, which comprise a substantial portion of our ATM transaction revenues, may be lowered at the discretion of the various EFT networks through which our ATM transactions are routed, thus reducing our future revenues. We derive a substantial portion of our revenue from ATMs placed with a small number of merchants. If one or more of our top merchants were to cease doing business with us, or to substantially reduce its dealings with us, our revenues could decline. A substantial portion of our future revenues and operating profits will be generated by the new 7-Eleven merchant relationship. Accordingly, if 7-Eleven s financial condition deteriorates in the future and it is required to close some or all of its store locations, or if our ATM placement agreement with 7-Eleven expires or is terminated, our future financial results would be significantly impaired. We rely on EFT network providers, transaction processors, armored courier providers, and maintenance providers; if they fail or no longer agree to provide their services, we could suffer a temporary loss of transaction revenues or the permanent loss of any merchant contract affected by such disruption. If we, our transaction processors, our EFT networks or other service providers experience system failures, the ATM products and services we provide could be delayed or interrupted, which would harm our business. If not done properly, the transitioning of our ATMs from third-party processors to our own in-house transaction processing platform could lead to service interruptions and/or the inaccurate settlement of funds between the various parties to our ATM transactions, which would harm our business and our relationships with our merchants. Security breaches could harm our business by compromising customer information and disrupting our ATM transaction processing services, thus damaging our relationships with our merchant customers and exposing us to liability. Computer viruses could harm our business by disrupting our ATM transaction processing services, causing non-compliance with network rules and damaging our relationships with our merchant customers. Operational failures in our ATM transaction processing facilities could harm our business and our relationships with our merchant customers. Errors or omissions in the settlement of merchant funds could damage our relationships with our merchant customers and expose us to liability. We rely on third parties to provide us with the cash we require to operate many of our ATMs. If these third parties were unable or unwilling to provide us with the necessary cash to operate our ATMs, we would need to locate alternative sources of cash to operate our ATMs or we would not be able to operate our business. The recent deterioration experienced in global credit markets could have a negative impact on financial institutions that we conduct business with. Changes in interest rates could increase our operating costs by increasing interest expense under our credit facilities and our vault cash rental costs. We maintain a significant amount of cash within our Company-owned ATMs, which is subject to potential loss due to theft or other events, including natural disasters. The ATM industry is highly competitive and such competition may increase, which may adversely affect our profit margins. The election of our merchant customers to not participate in our surcharge-free network offerings could impact the networks effectiveness, which would negatively impact our financial results. We may be unable to integrate our recent and future acquisitions in an efficient manner and inefficiencies would increase our cost of operations and reduce our profitability. Our international operations involve special risks and may not be successful, which would result in a reduction of our gross profits. Our proposed expansion efforts into new international markets involve unique risks and may not be successful. We operate in a changing and unpredictable regulatory environment. If we are subject to new legislation regarding the operation of our ATMs, we could be required to make substantial expenditures to comply with that legislation, which may reduce our net income and our profit margins. The passing of legislation banning or limiting surcharge fees would severely impact our revenue. The passing of legislation requiring modifications to be made to ATMs could severely impact our cash flows. The passing of anti-money laundering legislation could cause us to lose certain merchant accounts and reduce our revenues. In connection with the 7-Eleven ATM Transaction, we acquired advanced-functionality Vcom machines with significant potential for providing new services. Failure to achieve market acceptance among users could lead to continued losses from the Vcom Services, which could adversely affect our operating results. We have identified material weaknesses in our internal control over financial reporting. These material weaknesses, if not corrected, could affect the reliability of our financial statements and have other adverse consequences. Our operating results have fluctuated historically and could continue to fluctuate in the future, which could affect our ability to maintain our current market position or expand. If our goodwill or other intangible assets become impaired, we may be required to record a significant charge to earnings. We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness. The terms of our credit agreement and the indentures governing our senior subordinated notes may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.

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1277856--3/31/2008--CARDTRONICS_INC