Redbox 2008 Annual Report Download

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Table of contents

  • Page 1

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  • Page 3
    ... aggregate market value of the common stock held by non-affiliates of the registrant, based upon the closing price of our common stock on June 30, 2008 as reported on the NASDAQ Global Select Market, was approximately $381.7 million. Shares of Common Stock held by each executive officer and director...

  • Page 4
    ... of Operations ...Quantitative and Qualitative Disclosures About Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...Directors, Executive Officers and...

  • Page 5
    ... self-service DVD kiosks where consumers can rent or purchase movies, entertainment services such as skill-crane machines, bulk vending machines and kiddie rides, money transfer services, and electronic payment ("E-payment") services such as stored value cards, payroll cards, prepaid debit cards and...

  • Page 6
    ... the fee. Our DVD kiosks are available in all states in the continental United States, Puerto Rico and the United Kingdom and offer our consumers a more convenient home entertainment solution. We generate revenue primarily through fees charged to rent or purchase a DVD, and pay our retail partners...

  • Page 7
    ... wireless accounts, selling stored value cards, loading and reloading prepaid debit cards and prepaid phone cards, selling prepaid phones and providing payroll card services. We offer various E-payment services in the United States and the United Kingdom through 23,000 point-of-sale terminals, 400...

  • Page 8
    ... financial condition, operating results and liquidity as well as our business generally. There are many risks related to our DVD services business that may negatively impact our business. The home video industry is highly competitive with many factors affecting our ability to profitably manage our...

  • Page 9
    ... Blu-ray), disposable or download-to-burn DVDs, more use of personal video recorders (e.g., TiVo), pay-per-view/cable/satellite and similar technologies, computer downloads, portable devices, and other mediums, and less demand for a high volume of new movie content due to such things as larger home...

  • Page 10
    ... plan for locating kiosks. Because of our limited operating history and because the DVD rental kiosk market and our business model for DVD services is rapidly evolving, we have very limited data and track records for predicting kiosk and market performance in future periods. As a result, we may make...

  • Page 11
    ... agreements covering, among other things, the installation and service of coin-counting machines and DVD kiosks. At December 31, 2008, we had over 2,700 coin-counting units installed and over 3,200 DVD kiosks installed in Wal-Mart locations. We expect to complete the roll-out of approximately 500...

  • Page 12
    ... necessary to develop and commercialize such product and service offerings. For example, our DVD kiosks must make available on a timely basis a variety of movie titles and our entertainment services machines must carry toy and other products, that appeal to a broad range of customers whose...

  • Page 13
    ... year, as part of Wal-Mart's efforts to reset and optimize its store entrances, it reduced the overall number of our entertainment machines and equipment used in its stores. Our E-payment services, including our money transfer services, prepaid wireless and long distance accounts, stored value cards...

  • Page 14
    ... kiosks in convenience stores. We may be unable to attract new retailers or drive down costs relating to the manufacture, installation or servicing of coin-counting, DVD, entertainment, money transfer and E-payment services machines and equipment to levels that would enable us to operate profitably...

  • Page 15
    ...with information security policies or to safeguard against breaches of such policies could adversely affect our operations and could damage our business, reputation, financial position and results of operations. As our business expands to provide new products and services, including additional money...

  • Page 16
    ... and services, our ability to develop and commercialize new products and services and the costs incurred to do so, and our ability to successfully integrate newer lines of business into our operations, including, for example, DVD and money transfer services. Our operating results have a history of...

  • Page 17
    the year. Our DVD product line generates lower revenues in the first half of the year. Our E-payment and Money Transfer product lines generally provide its highest revenue in the fourth quarter. We have not experienced significant seasonality in our entertainment services. We expect our results of ...

  • Page 18
    .... We currently have coin operations in Canada and the United Kingdom and Ireland, DVD operations in the United Kingdom and entertainment services operations in Mexico. We expect to continue increasing our deployment of machines and equipment internationally. In addition, as of December 31, 2008, our...

  • Page 19
    ... in which the money transfer services business operates could also increase our compliance and other costs of doing business, require significant systems redevelopment, reduce the market for or value of our products or services or render our products or services less profitable or obsolete, lead...

  • Page 20
    ...-related costs. Petroleum-based resins are used in the manufacture of these products. In addition, we operate a large number of vehicles used by our field service personnel for the purpose of servicing and maintaining our coin-counting, DVD, entertainment and E-payment services machines...

  • Page 21
    ...investment and disposition activities, • operating results below market expectations and changes in, or our failure to meet, financial estimates of securities analysts or our own guidance, • trends and fluctuations in the use of our coin, DVD, entertainment, money transfer and E-payment services...

  • Page 22
    ..., our primary E-payment office is located in Chicago, Illinois and we have our main money transfer offices in La Mirada, California and London, England. Our corporate administrative, marketing and product development facility is located in a 46,070 square foot facility in Bellevue, Washington, under...

  • Page 23
    ... of Equity Securities. Market Information Our common stock is traded on the NASDAQ Global Select Market under the symbol "CSTR." The following table sets forth the high and low bid prices per share as reported by the NASDAQ Global Select Market for our common stock for each quarter during the...

  • Page 24
    ... during the quarter ended December 31, 2008: Total Number of Shares Purchased as Part of the Publicly Announced Repurchase Programs Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs Total Number of Shares Repurchased(1) Average Price Paid per Share 10/01...

  • Page 25
    ...Consolidated Financial Statements of Coinstar, Inc. and related Notes thereto included elsewhere in this Annual Report. 2008 Year Ended December 31, 2007 2006 2005 (In thousands, except per share data) 2004 CONSOLIDATED STATEMENT OF OPERATIONS: REVENUE ...$ 911,900 EXPENSES: Direct operating ...634...

  • Page 26
    ...purchase movies, entertainment services such as skill-crane machines, bulk vending machines and kiddie rides, money transfer services, and electronic payment ("E-payment") services such as stored value cards, payroll cards, prepaid debit cards and prepaid wireless products via point-ofsale terminals...

  • Page 27
    ... and DVD machines going in to, Wal-Mart locations. Our Coin and Entertainment services segment revenue and segment operating income for 2008 totaled $411.5 million and $98.9 million (24% of segment revenue). The costs relating to this segment included $267.0 million of direct operating expenses...

  • Page 28
    ..., we are currently operating at a negative segment margin, but are focusing on key send and receive markets to improve segment profitability. E-payment services We offer E-payment services, including activating and reloading value on prepaid wireless accounts, selling stored value cards, loading and...

  • Page 29
    ... pay our retailers a fee based on commissions earned on the sales of E-payment services. Our E-payment segment revenue and segment operating income for 2008 were $24.5 and $2.2 million (9% of segment revenue). The costs included $16.0 million of direct operating expenses, $1.3 million of marketing...

  • Page 30
    .... On any date we make any payment of Deferred Consideration in the form of shares of Common Stock, we also would be required to file a registration statement on Form S-3 covering such shares, provided that such date of payment occurs prior to six months from closing date. Further, we will...

  • Page 31
    ...balance sheet under the caption "Cash in machine or in transit". Our revenue represents the fee charged for coin-counting; • DVD revenue is recognized during the term of a customer's rental transaction or purchase and is recorded net of applicable sales taxes; • Money transfer revenue represents...

  • Page 32
    ... and declines over time. In establishing residual values for our DVD product, we consider the sales prices and volume of our previously rented product and other used product. Income taxes: Deferred income taxes are provided for the temporary differences between the financial reporting basis and the...

  • Page 33
    ... processed represents cash which we are obligated to use to settle our accrued liabilities payable to retailers. Stock-based compensation: Effective January 1, 2006, we adopted the fair value recognition provisions of FASB Statement No. 123 (revised 2004), Share-Based Payment ("SFAS 123R") using...

  • Page 34
    ...are accounted for and how derivative instruments and related hedged items affect a company's financial position, financial performance and cash flows. The provisions of SFAS 161 are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. SFAS...

  • Page 35
    ... year of revenue in 2007 from CMT, which we acquired in the second quarter of 2006. Our E-payment revenues increased in 2008 compared to 2007 and 2006 as a result of an increase in the amount of transactions and the number of locations offering our E-payment services. Total point-of-sale terminals...

  • Page 36
    ...major international markets in which we operate our Money Transfer services. For example, we have been using advertising to introduce E-payment features on our coin-counting machines and other E-payment product channels such as our stored value card offerings. This directed marketing and advertising...

  • Page 37
    ... of depreciation charges on our installed service machines as well as on computer equipment and leased automobiles. (In millions, except percentages) 2008 2007 Year Ended December 31, $ Chng % Chng 2006 $ Chng % Chng Depreciation and other ...$76.7 $58.8 $17.9 as a% of Total Revenue ...8.4% 10...

  • Page 38
    ... retirement of debt expense in 2006 related to accelerated deferred financing fees related to our mandatory pay down of $16.9 million under our previous debt facility in the first quarter of 2006. Minority interest for 2008 represented the operating results for the 49% stake in Redbox that we did...

  • Page 39
    ... with state operating loss carryforwards, the impact of recognizing an increase to our available research and development credit, as well as the impact of recognition of a valuation allowance to offsetting foreign deferred tax assets relating to our acquisition of CMT. As of December 31, 2008 and...

  • Page 40
    ... financing activities represented the borrowings on both our current and prior credit facilities of $400.5 million, proceeds of employee stock option exercises of $4.3 million and the excess tax benefit from exercise of stock options of $3.8 million, offset by cash used to make principal payments on...

  • Page 41
    ...our credit facility limitations, our board of directors authorized the repurchase of up to $22.5 million of our common stock plus additional shares equal to the aggregate amount of net proceeds received after January 1, 2003, from our employee equity compensation plans. As of December 31, 2008, this...

  • Page 42
    ... of available installable machines, the type and scope of service enhancements and the cost of developing potential new product and service offerings and enhancements. Redbox Debt As of December 31, 2008, included in our Consolidated Financial Statements was debt associated with Redbox totaling $35...

  • Page 43
    ... fair value of a liability related to the machine removal costs following contract expiration. (6) Liability for uncertain tax positions represents amounts that we are contingently liable for based on our tax positions with their respective statute of limitations ending within 4 to 5 years. Amount...

  • Page 44
    .... 30, 2008 Three Month Periods Ended June 30, March 31, Dec. 31, Sept. 30, 2008(1) 2008(2) 2007(3) 2007(4) (In thousands, except per share data) (unaudited) June 30, 2007 March 31, 2007 Consolidated Statement of Operations: Revenue ...$260,981 Expenses: Direct operating ...Marketing ...Research and...

  • Page 45
    ... of the year. Our DVD product line generates lower revenues in the first half of the year. Our Money Transfer and E-payment product lines generally provide its highest revenue in the fourth quarter. We have not experienced significant seasonality in our entertainment services. We expect our results...

  • Page 46
    ... Index to Financial Statements Page Reports of Independent Registered Public Accounting Firm - KPMG LLP ...Consolidated Balance Sheets ...Consolidated Statements of Operations ...Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) ...Consolidated Statements of Cash Flows...

  • Page 47
    ... Agreement for the Sale and Purchase of the Entire Issued Share Capital of Travelex Money Transfer Limited dated April 30, 2006 by and among Travelex Limited, Registrant and Travelex Group Limited.(22) Stock Purchase Agreement dated July 19, 2007 by and among Coinstar E-Payment Services Inc., Jose...

  • Page 48
    ... Levine & Riggle Rental Company Limited Partnership and Adventure Vending Inc., a wholly-owned subsidiary of Registrant.(21) Form of Restricted Stock Award under the 1997 Amended And Restated Equity Incentive Plan for Awards Made to Nonemployee Directors.(23) Form of Stock Option Grant under 1997...

  • Page 49
    ... Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * Indicates a management contract or compensatory plan or arrangement. (1) Incorporated by reference to the Registrant's Form 8-K filed on July 7, 2004 (File Number 000...

  • Page 50
    ...Proxy Statement on Form DEF 14A filed on April 27, 2008 (File Number 000-22555). (9) Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File Number 000-22555). (10) Incorporated by reference to the Registrant's Quarterly Report on Form 10...

  • Page 51
    ... by the undersigned, thereunto duly authorized. Coinstar, Inc. By: /s/ BRIAN V. TURNER Brian V. Turner Chief Financial Officer Date: February 26, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the...

  • Page 52
    ... Company Accounting Oversight Board (United States), the consolidated balance sheets of Coinstar, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders' equity and comprehensive income (loss), and cash flows for each of the years...

  • Page 53
    ... with the standards of the Public Company Accounting Oversight Board (United States), Coinstar, Inc.'s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations...

  • Page 54
    ...CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2008 2007 ASSETS CURRENT ASSETS: Cash and cash equivalents ...Cash in machine or in transit ...Cash being processed ...Accounts receivable, net of allowance for doubtful accounts of $2,702 and $1,489 at December 31, 2008 and...

  • Page 55
    COINSTAR, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 2008 2007 2006 REVENUE ...EXPENSES: Direct operating(1) ...Marketing ...Research and development ...General and administrative ...Depreciation and other ...Amortization of intangible ...

  • Page 56
    ...tax benefit of $34 ...Total comprehensive income ...BALANCE, December 31, 2006 ...27,816,011 Proceeds from exercise of stock options, net ...Stock-based compensation expense ...Tax benefit on share-based compensation ...Treasury stock purchase ...Net loss ...Short-term investments net of tax expense...

  • Page 57
    ...cash used by investing activities ...FINANCING ACTIVITIES: Principal payments on long-term debt, revolver loan and Borrowings on previous and current credit facilities ...Financing costs associated with revolving line of credit . Excess tax benefit on share based awards ...Repurchase of common stock...

  • Page 58
    ...bulk vending machines and kiddie rides, self-service DVD kiosks where consumers can rent or purchase movies, money transfer services, and electronic payment ("E-payment") services such as stored value cards, payroll cards, prepaid debit cards and prepaid wireless products via point-of-sale terminals...

  • Page 59
    ..., rental items in the case of DVDs, or items for use in vending operations. Included in inventory are DVDs, plush toys and other products dispensed from our entertainment services machines, prepaid airtime, prepaid phones, and prepaid phone cards. Inventory is stated at the lower of cost or market...

  • Page 60
    ...United Kingdom as well as other European operations of our Coinstar Money Transfer subsidiary). Our reporting units for purposes of our goodwill impairment tests are the same as our business segments. Based on the annual goodwill test for impairment we performed for the years ended December 31, 2008...

  • Page 61
    ...balance sheet under the caption "Cash in machine or in transit". Our revenue represents the fee charged for coin-counting; • DVD revenue is recognized during the term of a customer's rental transaction or purchase and is recorded net of applicable sales taxes; • Money transfer revenue represents...

  • Page 62
    ... grant date fair value estimated in accordance with the original provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation. Prior to the adoption of SFAS 123R we presented all tax benefits resulting from the exercise of stock options as operating cash inflows in the consolidated...

  • Page 63
    ... position, results of operations or cash flows. The adoption of SFAS 157 with respect to financial assets and liabilities did not have a material impact on our financial results for the year ended December 31, 2008. SFAS 157 establishes a hierarchy that prioritizes fair value measurements based...

  • Page 64
    ... $2.1 million in transaction costs, including legal, accounting, and other directly related charges. The total purchase price, net of cash acquired, was $45.3 million. The results of operations of GroupEx from January 1, 2008 are included in our Consolidated Financial Statements. The acquisition was...

  • Page 65
    ... as the performance conditions have been met and we expect the payment will be made in 2009. We used forecasted future cash flows to estimate the fair value of the acquired intangible assets and a portion of the purchase price was allocated to the following identifiable intangible assets: (In...

  • Page 66
    ...the additional purchase of 3.7% in 2008 is expected to be deductible for tax purposes. We used forecasted future cash flows to estimate the fair value of Redbox intangible assets. Intangible assets of $1.9 million represent the internal-use software and customer relations acquired when payments were...

  • Page 67
    ... annual estimated amortization expense will be as follows: (In thousands) 2009 2010 2011 2012 2013 ... ... $ 496 415 192 192 121 $1,416 The following unaudited pro forma information represents the results of operations for Coinstar, Inc. inclusive of Redbox for the years ended December 31, 2008...

  • Page 68
    ... carrying amounts and related accumulated amortization as well as the range of estimated useful lives of identifiable intangible assets at the reported balance sheet dates were as follows: Range of Estimated Useful Lives (in years) Estimated Weighted Average Useful Lives (in years) December 31, (In...

  • Page 69
    ... swap agreements, we receive or make payments on a monthly basis, based on the differential between a specific interest rate and onemonth LIBOR. The interest rate swaps are accounted for as a cash flow hedge in accordance with SFAS 133. As of December 31, 2008, the fair value of the swaps, which was...

  • Page 70
    ... on May 1, 2010. In November 2006, Redbox and McDonald's USA entered into the Rollout Agreement giving McDonald's USA and its franchisees and franchise marketing cooperatives the right to purchase DVD rental kiosks to be located at selected McDonald's restaurant sites for which Redbox subsequently...

  • Page 71
    ...: STOCK-BASED COMPENSATION PLANS Stock-based compensation: Stock-based compensation is accounted for in accordance with the provisions of FASB Statement No. 123 (revised 2004), Share-Based Payment ("SFAS 123R"). Under SFAS 123R, the fair value of stock awards is estimated at the date of grant using...

  • Page 72
    ... future. The following table summarizes stock-based compensation expense, and the related deferred tax benefit for stock option and award expense, which excludes stock-based compensation for Redbox in the amount of $2.2 million and the related tax benefit of zero for the year ended December 31, 2008...

  • Page 73
    ... awards are granted to certain officers and non-employee directors under the 1997 Plan, which vests annually over four years and one year, respectively. The restricted share units require no payment from the grantee and compensation cost is recorded based on the market price on the grant date and...

  • Page 74
    ... Class B interests are accounted for under SFAS 123R based on the fair value of awards at the end of the period. Total compensation expense under the REEIP was $2.2 million and the related tax benefit was zero for Redbox for the year ended 2008. The unrecognized stock compensation under the REEIP...

  • Page 75
    ... $34.8 million of net operating losses and United States federal tax credits of $8.1 million. The tax credits consist of $1.5 million of foreign tax credits that expire from the years 2016 to 2019, $2.1 million of research and development tax credits that expire from the years 2012 to 2029 and...

  • Page 76
    ... expenditures used in computing the research and development tax credit. As a result of these studies, we adjusted the carrying amount of the related deferred tax balances resulting in a charge of $1.1 million and a benefit of $1.0 million, respectively. The income tax benefit from stock option...

  • Page 77
    ...well as our organizational structure. We redefined our business segments from North America and International to Coin and Entertainment services, DVD services, Money Transfer services and E-payment services. The following table demonstrated our revenues by product lines: Year Ended December 31, 2008...

  • Page 78
    ... that management can actively influence, and gauging our investments and our ability to service, incur or pay down debt. Specifically, our CEO evaluates segment revenue and segment operating income (loss), and assesses the performance of each business segment based on these measures, as well as...

  • Page 79
    ...have coin-counting machines, DVD kiosks, entertainment machines and e-payment machines that are placed with retailers that accounted for the following percentages of our consolidated revenue: Year Ended December 31, 2008 2007 2006 Wal-Mart Stores Inc ...McDonald's USA...The Kroger Company...NOTE 16...

  • Page 80
    ...in the amount estimated in February 2008. During the third quarter of 2007, direct operating expenses in our income statement included a telecommunication fee refund in the amount of $11.8 million as a result of an Internal Revenue Service ruling that telecommunication fees paid during the period of...

  • Page 81
    ... Stock with similar registration rights to those of GAM or newly issued shares of Common Stock for which we already have an existing effective registration statement. The total consideration to be paid in these transactions is expected to be between $21.5 million and $24.9 million. Secured Credit...

  • Page 82
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  • Page 83
    ... aggregate market value of the common stock held by non-affiliates of the registrant, based upon the closing price of our common stock on June 30, 2008 as reported on the NASDAQ Global Select Market, was approximately $381.7 million. Shares of Common Stock held by each executive officer and director...

  • Page 84
    ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Item 13. Certain Relationships and Related Transactions, and Director Independence ...Item 14. Principal Accounting Fees and Services ...PART IV Item 15. Exhibits, Financial Statement Schedules...

  • Page 85
    ...the fiscal year ended December 31, 2008 (the "Form 10-K"), as filed with the Securities and Exchange Commission ("SEC") on February 26, 2009, for the purpose of including the information that was to be incorporated by reference to its definitive proxy statement relating to its 2009 Annual Meeting of...

  • Page 86
    ... of Equity Securities. Market Information Our common stock is traded on the NASDAQ Global Select Market under the symbol "CSTR." The following table sets forth the high and low bid prices per share as reported by the NASDAQ Global Select Market for our common stock for each quarter during the...

  • Page 87
    ... during the quarter ended December 31, 2008: Total Number of Shares Purchased as Part of the Publicly Announced Repurchase Programs Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs Total Number of Shares Repurchased(1) Average Price Paid per Share 10/01...

  • Page 88
    ... Eskenazy has been a director of Coinstar since August 2000. He has been a principal in Esky Advisors LLC (a business advisory services firm) since October 2008. He served as the chief operating officer of Investco Financial Corporation (a real estate development and management company in the Puget...

  • Page 89
    ... initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. To our knowledge, other than the late transactions disclosed in the Proxy Statement for the 2008 Annual Meeting of Stockholders, all of our current directors, officers, and...

  • Page 90
    ... Financial Officer, principal accounting officer, and controller (or persons performing similar functions) and a Code of Conduct that applies to all directors, officers, and employees of the Company. A copy of each is available on the Investor Relations section of Coinstar's website at www.coinstar...

  • Page 91
    ... Officer, Chief Financial Officer and Chief Operating Officer, and to make recommendations for changes based on Coinstar's pay philosophy, business objectives and stockholder expectations. For all other executives, the Committee did not rely on a new market analysis but instead aged the data used...

  • Page 92
    ... value of the position; • the experience and skills of the individual filling the position; and • market data for comparable positions in peer group companies. Base salaries are reviewed annually and are effective January 1 of the new fiscal year. The Committee may adjust base salaries from time...

  • Page 93
    ... Committee based this determination on a review of market data for comparable positions in peer group companies. Short-Term Incentives. The 2008 short-term incentives awarded to our Named Executive Officers were awarded under the 2008 Incentive Compensation Plan, which consisted of a cash bonus to...

  • Page 94
    ...* Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) ...$135-145 million Revenue ...$800-850 million Coin Machine Installations ...1,250-1,750 DVD Machine Installations ...3,500-4,500 Cross-Selling (selling a different product line to an existing Company customer as evidenced by...

  • Page 95
    ... purchase of Redbox shares from McDonald's; established strategic relationship with Wal-Mart; led proxy contest settlement; led process to hire Chief Operating Officer and implement succession plan; restructured Entertainment and E-Pay line of business leadership. Gained respect of leadership team...

  • Page 96
    ...retain the services of a valued executive officer; • market data for comparable positions at our peer group companies; • the number of stock options or restricted stock awards currently held by the executive officer; and • the value of long-term incentives as a percentage of total compensation...

  • Page 97
    ... 2010 and 2011, provided the executive continues to provide services to us. As noted above, the performance-based restricted stock awards (at target) comprised 20% of the value of longterm incentive compensation delivered to each Named Executive Officer for 2008. The following table shows the number...

  • Page 98
    ...program requirements. Executive officers must show progress of 25% per year until the four-year target is met. The shares owned are valued at the greater of (i) the price at the time of purchase/acquisition or (ii) the current market value. The stock ownership guidelines are annually reviewed by the...

  • Page 99
    ...discretion, require reimbursement of any annual incentive payment or long-term incentive payment to an executive officer or standing officer where (a) the payment (in shares of the Company's common stock or otherwise) was predicated upon achieving financial results that were subsequently the subject...

  • Page 100
    ... cash bonuses paid to Named Executive Officers for fiscal year 2008 based on individual and Company performance pursuant to the 2008 Incentive Compensation Plan, which is further described in "Compensation Discussion and Analysis." (4) Amount reflects the amount recognized for financial statement...

  • Page 101
    ..."), for the fiscal year ended December 31, 2008. All Other Stock Awards: Number of Shares of Stock or Units (#)(1) All Other Option Awards: Number of Securities Underlying Options (#) Exercise or Base Price of Option Awards ($ / Sh) Grant Date Fair Value of Stock and Option Awards ($) Name Grant...

  • Page 102
    ... percentage of stock options, restricted stock awards, and performance-based short-term incentives. Accordingly, executive compensation for higher-level executives is set to align closely with stockholders' and Coinstar's long-term shared interests. In 2008, the percentage of total cash compensation...

  • Page 103
    ... Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Option Exercise Price(1) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock...

  • Page 104
    ...the date of grant. (2) Market value was determined by multiplying the number of shares of stock by $19.51 (the closing price of the Company's common stock on December 31, 2008). (3) These options were granted on January 13, 2005 pursuant to the 1997 Plan with a term of ten years, and the awards vest...

  • Page 105
    ...based on achievement of certain performance milestones. 2008 Option Exercises and Stock Vested Table The following table shows for the fiscal year ended December 31, 2008 the options exercised and vested restricted stock for the Named Executive Officers. Option Awards Number of Shares Acquired Value...

  • Page 106
    ... Named Executive Officers regarding aggregate earnings for 2008 and year-end account balances under the EDCP. There were no executive or Company contributions under the EDCP for 2008. Prior to 2005, we allowed executives to defer portions of their annual cash compensation into tax-deferred accounts...

  • Page 107
    ...: • termination payments equal to 12 months' annual base salary; • any unpaid annual base salary that has accrued for services already performed as of the date of termination; • any prorated cash bonus consistent with the existing program for executive officers (provided performance targets...

  • Page 108
    ... • the executive's annual base salary through the date of termination; • the product of (a) the executive's annual bonus with respect to the fiscal year in which the date of termination occurs and (b) a fraction, the numerator of which is the number of days in the current fiscal year through the...

  • Page 109
    ...: • the employee's annual base salary through the date of termination; • the product of (a) the employee's annual bonus with respect to the fiscal year in which the date of termination occurs and (b) a fraction, the numerator of which is the number of days in the current fiscal year through the...

  • Page 110
    ... vested options in exchange for a cash payment upon such terms and conditions as determined by the Board of Directors at the time of the event. Since December 2005, the Compensation Committee has granted stock options and restricted stock awards under the 1997 Plan to certain executive officers that...

  • Page 111
    ... to our Named Executive Officers in the event a termination or change of control had occurred on December 31, 2008. The table does not include amounts payable under the EDCP, benefits generally available to all employees, or payments and benefits that the Named Executive Officers would have already...

  • Page 112
    .... (2) Amount reflects cash severance of one year's annual base salary based on the executive's 2008 annual base salary. (3) Calculated by multiplying the number of accelerated shares of restricted stock by $19.51 (the closing price of the Company's common stock on December 31, 2008). For purposes of...

  • Page 113
    ... in notes 2 and 10 to the Company's audited financial statements included in the Form 10-K. On June 3, 2008, each non-employee director received an annual award of restricted stock with a grant date fair value of $75,000, based on the closing price of our common stock on the date of grant ($36.89...

  • Page 114
    ...the end of each fiscal quarter. Annual cash retainers for service as a director or committee chairperson are paid in quarterly installments at the same time as committee meeting fees are paid. Directors may elect to receive their compensation in the form of Coinstar common stock rather than cash. If...

  • Page 115
    ...his service on the Redbox board of directors, Coinstar paid Mr. Grinstein $1,500 per in-person meeting and $750 per phone meeting attended in the first quarter of 2008. Thereafter, he was paid $8,000 per quarter by Redbox. Directors are also reimbursed for reasonable Coinstar-related travel expenses...

  • Page 116
    ... 2010, unless earlier terminated by the Board. Non-Plan Grants In October 2001, in connection with his joining Coinstar as our Chief Executive Officer, we granted Mr. Cole a nonqualified stock option to purchase 200,000 shares of Coinstar common stock with an exercise price equal to the fair market...

  • Page 117
    ... the Board of Directors, a nonqualified stock option to purchase 7,500 shares. Each of these options has a ten-year term, has an exercise price equal to the fair market value of Coinstar common stock on the date of grant ($27.60) and vested at the rate of 8.333% of the total grant for each month of...

  • Page 118
    ...or entity by the sum of 30,019,563 shares of Coinstar common stock outstanding as of March 5, 2009, plus the number of shares of common stock, if any, that such person or entity had the right to acquire pursuant to the exercise of stock options within 60 days of March 5, 2009. Except as indicated by...

  • Page 119
    ... shares credited to Mr. Sznewajs's deferred account under the Outside Directors' Deferred Compensation Plan, (b) 39,301 shares issuable upon the exercise of options exercisable within 60 days of March 5, 2009, and (c) 2,033 shares of unvested restricted stock. (12) The number of shares beneficially...

  • Page 120
    ... with Related Persons Our Board of Directors has adopted a written policy for the review and approval or ratification of related person transactions. Under the policy, our directors and executive officers and the beneficial owners of 5% of our common stock or other voting securities are expected to...

  • Page 121
    ...independent registered public accounting firm. In the review, the placement of Coinstar products and services in West Coast Bank locations, which are owned and operated by West Coast Bancorp, of which Mr. Sznewajs is the president, chief executive officer, and a member of the board of directors, was...

  • Page 122
    ... filings or engagements, including relating to the SEC. Audit Fees for 2008 included $955,097 in connection with the audit of Redbox financial statements for the fiscal years ended December 31, 2005, 2006, 2007, and 2008, which had been approved by the Redbox board of directors prior to Coinstar...

  • Page 123
    ..., Audit-Related Fees, Tax Fees, and All Other Fees listed above, other than those Audit Fees approved by the Redbox board of directors prior to Coinstar's acquisition of a majority ownership interest in the voting equity of Redbox on January 18, 2008. PART IV Item 15. Exhibits, Financial Statement...

  • Page 124
    ... of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Coinstar, Inc. By: /s/ DAVID W. COLE Name: David W. Cole Title: Chief Executive Officer Date: March 27, 2009 42

  • Page 125
    EXHIBIT INDEX Exhibit Number Description of Document 31.1 31.2 Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. 43

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    ... are plotted below as of December 31 of each fiscal year shown. The stock price performance shown in the graph is historical and not necessarily indicative of future price performance COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG COINSTAR, INC., THE NASDAQ COMPOSITE INDEX AND THE RUSSELL 2000...

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