Redbox 2008 Annual Report Download - page 38

Amortization of Intangible Assets
Our amortization expense consists of amortization of intangible assets, which are mainly comprised of the
value assigned to our acquired retailer relationships and, to a lesser extent, internally developed software.
(In millions, except percentages) 2008 2007 $ Chng % Chng 2006 $ Chng % Chng
Year Ended December 31,
Amortization of intangible assets ...... $9.1 $7.3 $1.8 24.7% $6.2 $1.1 17.7%
as a% of Total Revenue ............. 1.0% 1.3% 1.2%
Amortization expense increased in 2008 compared to 2007 primarily as a result of intangible assets derived
from our Redbox and GroupEx acquisitions. Amortization of intangible assets increased in 2007 compared to 2006
due to the full-year amortization related to our various acquisitions, including CMT in 2006.
Other Income and Expense
(In millions, except percentages) 2008 2007 $ Chng % Chng 2006 $ Chng % Chng
Year Ended December 31,
Foreign currency (loss) gain
and other ............. $ (3.9) $ 0.7 $ (4.6) ⫺657.1% $ 0.2 $ 0.5 250.0%
Interest income .......... 1.2 1.7 (0.5) ⫺29.4% 1.4 0.3 21.4%
Interest expense .......... (21.7) (17.1) (4.6) 26.9% (15.7) (1.4) 8.9%
Loss (income) from equity
investments and other .... (0.3) 1.3 (1.6) ⫺123.1% (0.1) 1.4 ⫺1400.0%
Early retirement of debt .... — (1.8) 1.8 ⫺100.0% (0.2) (1.6) 800.0%
Minority interest ......... $(14.4) $ — $(14.4) 100.0% $ — $ — 0.0%
Foreign currency (loss) gain and other decreased in 2008 as compared to 2007 primarily due to the impact from
the unfavorable movement of foreign exchange rates related to our foreign subsidiaries during 2008. Foreign
currency gains increased from 2006 to 2007 due to increased international operations and the movement of foreign
exchange rates related to our foreign subsidiaries.
Interest income decreased for 2008 compared to 2007 due to lower invested balances and a decrease in interest
rates. Interest income increased in 2007 from 2006 primarily due to the recognition of interest income on our
telecommunication fee refund offset by lower average year over year investment balances.
Interest expense increased in 2008 compared to 2007 due to higher outstanding debt balances. Interest expense
increased in 2007 compared to 2006 primarily due to higher outstanding debt balances, higher interest rates and
increased capital leases.
Loss (income) from equity investments and other decreased in 2008 as compared to 2007 primarily as a result
of the consolidation of Redbox’s results beginning in the first quarter of 2008. Income (loss) from equity
investments and other increased in 2007 from 2006 primarily as a result of recording our portion of the
telecommunication fee refund expected to be collected by us on behalf of a related third party.
Early retirement of debt expense was $1.8 million in 2007 and $0.2 million in 2006. On November 20, 2007, in
connection with entering into our new debt facility, we retired the outstanding balance of our previous debt facility
dated July 7, 2004 resulting in a charge of $1.8 million for the write-off of deferred financing fees. The early
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 not own.
Income Taxes
Our effective income tax rate was 53.4% in 2008 compared with (22.1%) in 2007 and 39.3% in 2006. As
illustrated in Note 11 to the Consolidated Financial Statements, the effective income tax rate for 2008 varies from
the federal statutory tax rate of 35% primarily due to a change in valuation allowance on foreign net operating
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