Redbox 2005 Annual Report Download - page 46

COINSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003
NOTE 1: ORGANIZATION AND BUSINESS
Description of company: Incorporated as a Delaware company in 1993, Coinstar is a multi-national
company offering a range of 4th Wall ™solutions for the retailers’ front of store consisting of self-service coin
counting, electronic payment (“e-payment”) services such as stored value cards, payroll cards, prepaid
MasterCard®cards and prepaid wireless products via point-of-sale terminals and non-coin-counting kiosks, and
entertainment services such as skill-crane machines, bulk vending machines and kiddie rides. We have also made
strategic investments in Video Vending New York, Inc. (d.b.a. “DVDXpress”) and Redbox Automated Retail,
LLC (“Redbox”), to offer self-service DVD kiosks where consumers can rent or purchase movies. Our services,
in one form or another, are currently offered in supermarkets, mass merchandisers, warehouse clubs, drugstores,
universities, shopping malls and convenience stores in the United States, Canada, Mexico, Puerto Rico and the
United Kingdom. As of December 31, 2005, we had a total of approximately 12,800 coin-counting machines
installed, approximately 320,000 entertainment services machines installed and over 19,600 locations where our
point-of-sale and non-coin-counting kiosks were installed.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation: The accompanying consolidated financial statements include the accounts of
Coinstar, Inc., our wholly-owned subsidiaries and other entities where we hold a controlling interest. All
significant intercompany balances and transactions have been eliminated in consolidation.
Use of estimates: The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. These judgments are difficult as matters that are inherently uncertain directly impact their
valuation and accounting. Actual results may vary from management’s estimates and assumptions.
We have estimated the value of our entertainment services coin-in-machine which was approximately $5.0
million and $4.4 million at December 31, 2005 and 2004, respectively. Coin-in-machine represents the cash
deposited into our entertainment services machines at period end which has not yet been collected. Based on our
estimate of coin-in-machine, we have recognized the related revenue, the corresponding reduction to inventory
and increase to accrued liabilities which represents the direct operating expenses associated with the
coin-in-machine estimate.
Cash and cash equivalents, cash in machine or in transit, and cash being processed: We consider all
highly liquid securities purchased with a maturity at purchase of three months or less to be cash equivalents.
Cash in machine or in transit represents coin residing in our coin-counting or entertainment services
machines, cash being processed by carriers, or cash deposits in transit. Cash being processed represents cash
which we are obligated to use to settle our accrued liabilities payable to retailers. We have the contractual right
and obligation to pick up and process all coins in our machines, although in certain circumstances, we may not be
able to immediately access the coins until they have been deposited into one of our regional bank accounts.
Securities available-for-sale: Our investments are classified as available-for-sale and are stated at fair
value. Our available-for-sale securities have maturities of one year or less and are reported at fair value based on
quoted market prices and are included in the balance sheet caption “prepaid expenses and other current assets.”
Changes in unrealized gains and losses are reported as a separate component of accumulated other
comprehensive income.
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