Redbox 2009 Annual Report Download - page 101

COINSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
In 2005, Apparel Sales, Inc. (“ASI”) filed an action against one of our E-Payment services subsidiaries,
CellCards of Illinois, LLC (“CellCards”) in the Circuit Court of Cook County, Illinois. The complaint was later
amended to add Coinstar, Inc. as a defendant. ASI sought monetary damages for commissions allegedly owed to
ASI under a 2003 agreement ASI entered into with CellCards. On February 19, 2010, we settled all of ASI’s
claims for $4.0 million, and ASI has agreed to dismiss its complaint with prejudice. Of the $4.0 million
settlement expense, $0.5 million was previously accrued for and $3.5 million was included in the “Proxy, write-
off of acquisition costs, and litigation settlement” line item in the Consolidated Statement of Operations for the
year ended December 31, 2009.
NOTE 17: RELATED PARTY AND OTHER TRANSACTIONS
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 March 1, 2003 through July 31, 2006 were improperly
collected by the United States government. The $11.8 million represents the refund amount as filed on our fiscal
year 2006 federal income tax return. This telecommunication fee refund, along with the $5.5 million amount
received by us on behalf of our equity investment related party and accrued interest, totaling of $17.6 million is
included in accounts receivable, net as of December 31, 2007. In February 2008, we received the refund in the
amount that we estimated.
In the second quarter of 2008 we settled a proxy contest which resulted in one additional member to our
Board of Directors, and one additional independent director to be added by March 1, 2009. Expenses related to
this proxy contest, including the solicitation of stockholders, were approximately $4.1 million. We also incurred
expenses associated with the write-off of in-process acquisition expenses of $1.0 million for due diligence and
professional service costs in connection with acquisitions that were being considered in the past and for which
discussions have now been terminated.
During the second quarter of 2008, we entered into a settlement agreement with Incomm Holding, Inc. and
certain of its affiliates (“Incomm”). As a result, we and Incomm have agreed to dissolve a related party of our
E-payment subsidiary of which we own 49%. A previous liability owed to the related party was relieved. The net
settlement, after attorney fees, was approximately $2.0 million of income.
NOTE 18: FAIR VALUE
The carrying amounts for cash and cash equivalents, our receivables and our payables approximate fair
value, which is the amount for which the instrument could be exchanged in a current transaction between willing
parties. The fair value of our revolving line of credit approximates its carrying amount.
In 2008, we elected to defer the guidance of FAS 157, now incorporated within FASB ASC Subtopic 820-10,
related to our non-financial assets and non-financial liabilities that are recognized and disclosed at fair value in the
financial statements on a non-recurring basis until January 1, 2009. The adoption of FAS 157 for our non-financial
assets and non-financial liabilities did not have a material impact to our Consolidated Financial Statements.
FASB ASC Subtopic 820-10, guidance for fair value measurement and disclosure, establishes a hierarchy
that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques.
The levels of the hierarchy are described below:
• Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities
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