Summary of GLOBAL CASH ACCESS HOLDINGS, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Management's Discussion and Analysis of our Financial Condition and Results of Operations ("MD&A") begins with an overview of our business which includes our business goals, key events occurring in the nine months ended September 30, 2009 and certain trends, risks and challenges. We then discuss our results of operations for the three and nine months ended September 2009 as compared to the same periods for 2008, respectively. This is followed by a description of our liquidity and capital resources, including discussions about sources and uses of cash, our borrowings, deferred tax asset, other liquidity needs and off-balance sheet arrangements. We conclude with a discussion of critical accounting policies and their impact on our unaudited condensed consolidated financial statements.
You should read the following discussion together with our condensed consolidated financial statements and the notes to those financial statements included in this Quarterly Report on Form 10-Q and our 2008 Annual Report on Form 10-K (our "2008 10-K"). When reviewing our MD&A, you should also refer to the description of our Critical Accounting Policies and Estimates in our 2008 10-K because understanding these policies and estimates is important in order to fully understand our reported financial results and our business outlook for future periods. In addition to historical information, this discussion contains "forward-looking statements" as defined in the U.S. Private Securities Litigation Reform Act of 1995. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," or "will". Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could adversely or positively affect our future results include: the future financial performance of the gaming industry, the behavior of financial markets, including fluctuations in interest rates; the impact of regulation and regulatory changes, investigative and legal actions; strategic actions, including acquisitions and dispositions; future integration of acquired businesses and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. All forward-looking statements are subject to various risks and uncertainties that could cause our actual future results to differ materially from those presently anticipated due to a variety of factors, including those discussed in Item 1A of our 2008 10-K and in Item 1A of our Quarterly Report on Form 10-Q for the quarters ended March 31, and June 30, 2009. Overview
We are a provider of cash access products and related services to the gaming industry in the United States and several international markets. Our products and services provide gaming establishment patrons access to cash through a variety of methods, including ATM cash withdrawals, credit card cash advances, point-of-sale debit cash advances, check services and money transfers. In addition, we also provide products and services that improve credit decision-making, automate cashier operations and enhance patron marketing activities for gaming establishments.
In April 2008, we completed the acquisition of Certegy Gaming Services, Inc. ("CGS"), an enterprise providing cash access products and services to the gaming industry similar to Global Cash Access, Inc. ("GCA"). The results of operations of CGS have been reflected in the applicable business segment financial information following this acquisition. In August 2008, we completed the acquisition of Cash Systems, Inc. ("CSI"). CSI is a wholly owned subsidiary of GCA. The results of operations have been reflected in the applicable business segment financial information following this acquisition. Key Events During the Three Months Ended September 30, 2009
• We signed an agreement with Total System Services, Inc. (TSYS) such that TSYS agreed to provide certain processing services for GCA for a term of four years beginning in July 2009,

• We completed the migration of our processing activities from USA Payment Systems and USA Payments (together, "USAP") to TSYS,

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• We settled the various claims and counter claims between GCA and USAP such settlement resulting in a payment from USAP to GCA of $1.75 million,

• We continue to make progress towards the resolution of the Arizona matter and have established a reserve reflective of our estimated financial obligations that will result due to the anticipated settlement. Additionally, we settled the EFTA class action lawsuit during the quarter. The aggregate amounts reserved in connection with the anticipated settlement of the Arizona matter and the settlement of the EFTA class action approximate the proceeds received from the settlement of the USAP matter,

• We signed a definitive agreement to acquire Western Money Systems, a provider of redemption kiosks to the gaming industry.

Trends
Our strategic planning and forecasting processes include the consideration of economic and industry-wide trends that may impact our business. We would identify the more material positive and negative trends affecting our business as the following:
• The gaming sector in the United States continues to experience declines in gaming revenue as compared to the equivalent prior period,

• Patrons to gaming properties continue to migrate from credit card based transactions to debit transactions as a result of diminished credit access, consumer deleveraging or other consumer initiatives intended to manage spending patterns,

• There continues to be a migration from the use of traditional paper checks and cash to electronic payments.

• There has been an increase in regulatory and legislative activity regarding notice requirements associated with incidents involving the misappropriation of consumer data, causing participants in the financial service and other industries to devote additional efforts to maintaining the security of their data files.

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Results of Operations
Three and nine months ended September 30, 2009 compared to three and nine months
ended September 30, 2008
The following table presents our unaudited condensed consolidated results of
operations for the three months and nine months ended September 30, 2009 and
2008 (dollars in thousands):

                               Three Months Ended September 30,                   Nine Months Ended September 30,
                              2009               2008            %              2009               2008            %
REVENUES:
Cash advance              $      69,741       $   89,102          (22 )%    $     225,899       $  244,320           (8 )%
ATM                              81,544           79,863            2 %           252,585          210,670           20 %
Check services                    9,464           12,962          (27 )%           30,791           31,479           (2 )%
Central Credit and
other revenues                    3,570            3,132           14 %             9,689            8,883            9 %

Total revenues                  164,319          185,059          (11 )%          518,964          495,352            5 %

Cost of revenues
(exclusive of
depreciation and
amortization)                  (123,996 )       (136,694 )         (9 )%         (390,662 )       (362,226 )          8 %
Operating expenses              (18,595 )        (22,229 )        (16 )%          (58,722 )        (61,681 )         (5 )%
Amortization                     (1,883 )         (1,955 )         (4 )%           (6,212 )         (4,546 )         37 %
Depreciation                     (2,376 )         (2,865 )        (17 )%           (7,338 )         (6,702 )          9 %


OPERATING INCOME                 17,469           21,316          (18 )%           56,030           60,197           (7 )%

INTEREST INCOME
(EXPENSE), NET
Interest income                      63              287          (78 )%              262            1,735          (85 )%
Interest expense                 (4,463 )         (7,814 )        (43 )%          (13,886 )        (23,034 )        (40 )%


Total interest income
(expense), net                   (4,400 )         (7,527 )        (42 )%          (13,624 )        (21,299 )        (36 )%


INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAX PROVISION             13,069           13,789           (5 )%           42,406           38,898            9 %

INCOME TAX PROVISION             (4,966 )         (5,385 )         (8 )%          (16,114 )        (15,976 )          1 %


INCOME FROM CONTINUING
OPERATIONS, NET OF TAX            8,103            8,404           (4 )%           26,292           22,922           15 %

INCOME (LOSS) FROM
DISCONTINUED
OPERATIONS, NET OF TAX                -              156         (100 )%               44           (4,006 )       (101 )%


NET INCOME                        8,103            8,560           (5 )%           26,336           18,916           39 %

PLUS: NET LOSS
ATTRIBUTABLE TO
MINORITY INTEREST                    12                -            -                  45               86          (48 )%


NET INCOME
ATTRIBUTABLE TO GCA,
INC.                      $       8,115       $    8,560           (5 )%    $      26,381       $   19,002           39 %


OTHER DATA:
Aggregate dollar
amount processed (in
billions):
Cash advance              $         1.4       $      1.8          (22 )%    $         4.5       $      4.9           (8 )%
ATM                       $         3.6       $      3.9           (8 )%    $        11.2       $     10.4            8 %
Check warranty            $         0.4       $      0.5          (20 )%    $         1.3       $      1.3            -

Number of transactions
completed (in
millions):
Cash advance                        2.8              3.3          (15 )%              9.1              9.1            -
ATM                                20.7             21.3           (3 )%             64.7             56.8           14 %
Check warranty                      1.5              1.9          (21 )%              5.0              4.8            4 %

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Revenues
Total revenues for the three months ended September 30, 2009 were $164.3 million, a decrease of $20.8 million or 11% compared to the equivalent period in the prior year. Total revenue for the nine months ended September 30, 2009 were $519.0 million, an increase of $24 million, or 5%, compared to the equivalent period in the prior year. The primary driver of decreased revenue in the three month period ended September 30, 2009 compared to the same period in the prior year was a same store revenue decline of approximately 13%. This decline was somewhat offset by the inclusion of the operating results of CSI for the month of July in 2009 as the acquisition of CSI closed at the beginning of August 2008. We also experienced a net loss of customers during the quarter resulting in a modest decline in revenue on a year over year basis. Revenue increased on a year over year basis during the nine months in the period ended September 30, 2009 primarily due to the acquisitions of CGS and CSI which were acquired in April and August of 2008, respectively. The revenue contributed by these acquisitions has been partially offset by a same-store decline of approximately 12% during nine months ended September 30, 2009 as compared to the same period of 2008.
Throughout 2008 and 2009 we have experienced a shift in patron preference from credit card cash advance transactions to ATM transactions. This shift had a negative impact on our financial results as revenue generated from a credit card cash advance transaction generally is more profitable than revenue generated from an ATM transaction. This shift has contributed to the decline in total revenue discussed above.
Revenue generated from a property in which we serve is included in same-store revenues if it contributed cash advance revenue or ATM revenue during both the current year and prior year reference periods. Same store revenue does not include check services or other revenue.
We believe that revenue will continue to decline on a year over year basis during the fourth quarter of 2009 as gaming revenue continues to weaken across the United States and as patrons to casinos continue to move from credit card cash advance to ATM transactions.
The change in revenue is further discussed on a product basis below:
Cash advance revenues for the three months ended September 30, 2009 decreased by 22% due to a decline in the number of transactions compounded by a decrease in the cash advance revenue per transaction as compared to the same period of 2008. This decline was somewhat offset by the inclusion of the operating results of CSI for the month of August in 2009 as the acquisition of CSI closed at the beginning of August 2008. Cash advance revenues for the nine months ended September 30, 2009 decreased by 8% due to a decrease in the cash advance revenue per transaction as compared to the same period of 2008. This decrease in cash advance revenues for the nine months ended September 30, 2009 resulted from both a decrease in transactions and a decrease in the average amount dispensed per transaction. The decrease in revenue was offset by the inclusion of cash advance revenue resulting from the acquisitions of CGS and CSI.
Automated teller machines ("ATM") revenues for the three months ended September 30, 2009 increased by 2%. The increase in ATM revenue is primarily the result of the inclusion of CSI results for the month of August 2009 such results having been omitted in the prior year and an increase in the average surcharge per transaction and the shift away from credit card cash advance transactions to ATM transactions. ATM revenues for the nine months ended September 30, 2009 increased by 20% as a result of the increased number of ATM transactions compounded by the slight increase in the ATM revenue per transaction as compared to the same period of 2008. The added transactions resulted from the CGS acquisition, which was included in the results of all three quarters of 2009 but only in the results of the second and third quarters of 2008, and from the CSI acquisition, which was included in the results of all three quarters of 2009 but only in the results of the third quarter of 2008.

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Check services revenues for the three months ended September 30, 2009 decreased by 27% as a result of the decrease in the number of check services transactions compounded by a decrease in the check services revenue per transaction as compared to the same period of 2008. Check services revenues for the nine months ended September 30, 2009 decreased as the increase in the number of check warranty transactions was offset by a decrease in check warranty revenue per transactions as compared to the same period of 2008. Check services revenue is also generally adversely impacted by a long-term trend whereby consumers are moving from physical checks to electronic forms of transactions. Costs and Expenses
Cost of revenues (exclusive of depreciation and amortization) decreased by 9% and increased by 8% during the three and nine months ended September 30, 2009, respectively as compared to the same period of 2008. The decreases during the three months ended September 30, 2009 were the result of decreased revenues as compared to the same period of 2008. The increases during the nine months ended September 30, 2009 were largely the result of increased commission-related expenses, which are the largest single cost element of cost of revenues, as compared to the same period of 2008. The increase in commission expense during the nine months ended September 30, 2009 as compared to the same period of 2008 is due primarily to:
• the additional commission expenses resulting from the CGS and CSI acquisitions that were included in 2009 but were not included for all of 2008, and

• the migration of transactions from credit card cash advance transactions to ATM transactions, (ATM transactions have a higher proportion of commission expense to revenue than do credit card cash advance transactions)

Operating expenses, exclusive of depreciation and amortization decreased by 16% and 5% during the three and nine months ended September 30, 2009, respectively, as compared to the same period of 2008. The decrease in operating expenses during the three and nine months ended September 30, 2009 as compared to 2008 was primarily the result the elimination of expenses that were assumed upon the acquisition CGS and CSI.
We continue to incur high external legal expenses driven by various litigation matters that are ongoing or concluded during the three months ended September 30, 2009. External legal expenses approximated $1.4 and $3.7 million for the three and nine months ended September 30, 2009, respectively. During the three months ended September 30, 2009, we settled ongoing litigation between GCA and USAP. In connection with this settlement, we received $1.75 million from USAP which was recognized as a reduction in operating expenses during the quarter. Additionally, we recognized as expense approximately the same amount related to the amounts that we expect to pay in connection with our agreement in principle with the Arizona Department of Gaming and the settlement of the EFTA class action suit. These amounts were recognized in operating expense.
Our current expectation is that we will not meet the financial objectives that are required to be met in order to pay management bonuses at target. Accordingly, we have reduced our estimate of the amounts payable under our incentive plan. This adjustment resulted in lower incentive compensation expense in the quarter compared to earlier quarters in the year and compared to the equivalent prior year quarter.

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Depreciation and amortization decreased by 12% and increased by 20% for the three and nine months ended September 30, 2009, respectively, as compared to the same period in 2008 due to certain assets reaching their depreciable lives and a lower level of capital expenditure compared to the prior year. The increase for the nine-month period is due to the acquisitions of CGS and CSI.
Primarily as a result of the factors described above, operating income decreased by 18% and 7% for the three and nine months ended September 30, 2009, respectively, as compared to the same periods in 2008.
Interest income (expense), net decreased by 42% and 36% for the three and nine months ended September 30, 2009, respectively, as compared to the same period in 2008 as a result of a decrease in interest expense due to significantly lower interest rates compared to the prior period moderated by higher average outstanding borrowings and a higher average draw on the Bank of America Amended ATM Treasury Services Agreement ("Bank of America ATM Agreement"). The average balances drawn on this agreement were $356.8 million and $369.7 million for the three and nine months ended September 30, 2009 as compared to $352.5 million and $310.7 million for the same period in 2008. Interest income was also lower resulting primarily from lower invested cash balances and lower interest rates earned on invested cash balances during the quarter and year to date periods. The provision for income tax reflected an effective income tax rate of approximately 38.0% for both the three and nine months ended September 30, 2009 as compared to an effective tax rates for same periods in 2008 of 39% and 41%. This decrease is due primarily to a decrease in the expense related to the expiration of non-qualified stock options and related impact on income tax expense.

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LIQUIDITY AND CAPITAL RESOURCES
Overview
Information about our financial position as of September 30, 2009 and
December 31, 2008 is presented below:

                                     September 30,       December 31,         %
        (in thousands)                   2009                2008          Change

        Cash and cash equivalents   $        73,712     $       77,148          -4 %
        Borrowings                          250,000            265,750          -6 %
        Stockholders' equity                154,668            160,878          -4 %

Cash Resources
Our cash balance, cash flows and credit facilities are expected to be sufficient to meet our recurring operating commitments and to fund our planned capital expenditures for the foreseeable future. Cash and cash equivalents at September 30, 2009 included cash in non-U.S. jurisdictions of approximately $12.0 million. Generally, these funds are available for operating and investment purposes within the jurisdiction in which they reside but are subject to taxation in the U.S. upon repatriation.
We provide cash settlement services to our customers. These services involve the movement of funds between the various parties associated with cash access transactions, and this activity results in a balance due to us at the end of each business day that we recoup over the next few business days. The balances due to us are included in settlement receivables. As of September 30, 2009, approximately $4.2 million was due to us, and we received these funds in early October 2009. This receivable declined significantly compared to prior periods as the funding cycle of our new processor is significantly shorter than that of our previous processor resulting in lower receivable balances. As of September 30, 2009, we had approximately $36.5 million in settlement liabilities due to our customers for these settlement services which were paid in early October 2009.
Due to the timing differences between receipt of settlement receivables and payments to customers for settlement liabilities our actual net cash position available for other corporate purposes is determined as the sum of the cash on hand and our settlement receivables minus our settlement liabilities.

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Sources and Uses of Cash
The following table sets forth a summary of our cash flow activity for the nine
month period ended September 30, 2009 and 2008 and should be read in conjunction
with our unaudited condensed consolidated statements of cash flows:

                                                                 Nine Months Ended
                                                         September 30,        September 30,
                                                             2009                 2008

Net cash provided by operating activities               $        58,826      $        25,057
Net cash used in investing activities                            (5,315 )            (61,277 )
Net cash (used in) provided by financing activities             (55,157 )             23,058
Net effect of exchange rate changes on cash and cash
equivalents                                                      (1,790 )              1,492

Net (decrease) in cash and cash equivalents                      (3,436 )            (11,670 )

Cash and cash equivalents, beginning of period                   77,148               71,063


Cash and cash equivalents, end of period                $        73,712      $        59,393

Our principal source of liquidity is cash flows from operating activities, which were $58.8 million and $25.1 million for the nine months ended September 30, 2009 and 2008, respectively. Changes in operating assets and liabilities accounted for a net decrease of $6.4 million in cash flow from operating activities. Offsetting this is $26.3 million of net income, and approximately $38.9 million of non-cash expenses.
Net cash used in investing activities totaled $5.3 million and $61.3 million for the nine months ended September 30, 2009 and 2008, respectively. Included in net cash used in investing activities for the nine months ended September 30, 2008 is $55.1 million for acquisitions. We did not complete any significant acquisitions in 2009. We did invest $5.3 million and $7.5 million, respectively, for capital investments during the three and nine month period ended September 30, 2009.
Net cash used in financing activities was $55.2 million for the nine months ended September 30, 2009 compared to $23.1 million provided for the nine months ended September 30, 2008. For the nine months ended September 30, 2009, we made payments totaling $15.7 million against our credit facility and had no borrowings as compared to payments totaling $88.5 million and borrowings of 121.0 million against our credit facility for the same period of 2008. In addition, we repurchased $42.0 million of shares of treasury stock during the nine months ended September 30, 2009 as compared to $9.5 million during the nine months ended September 30, 2008.
Deferred Tax Asset
As of September 30, 2009, we had a net deferred income tax asset of $156.0 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, subject to certain limitations, 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 $180.6 million in cash savings over the remaining life of the portion of our deferred tax asset related to the conversion. These deferred tax assets may be subject to certain limitations.

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Other Liquidity Needs and Resources
Bank of America Amended Treasury Services Agreement. We obtain currency to meet the normal operating requirements of our domestic ATMs and automated cashier machines ("ACM") pursuant to the Bank of America Funding ATM Agreement. Under this agreement, all currency supplied by Bank of America, N.A. remains the sole property of Bank of America at all times until it is dispensed, at which time Bank of America obtains an interest in the corresponding settlement receivable. Because it is never an asset of ours, supplied cash is not reflected on our balance sheet. As of September 30, 2009, the total currency obtained from Bank . . .