Redbox 2009 Annual Report Download - page 74

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COINSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
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.
Accounts receivable: Accounts receivable represents receivables, net of allowances for doubtful accounts.
The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts
receivable balance. We determine the allowance based on known troubled accounts, historical experience and
other currently available evidence. When a specific account is deemed uncollectible, the account is written off
against the allowance. In 2009, the amount expensed for uncollectible accounts was approximately $2.1 million
and the amount charged against the allowance was $1.5 million. In 2008, the amount expensed for uncollectible
accounts was approximately $2.0 million and the amount charged against the allowance was $1.0 million. The
accounts receivable balance at December 31, 2008 included $1.3 million, net of allowance for doubtful accounts
of $0.2 million, for our Entertainment Business which was sold on September 8, 2009.
Inventory and DVD library: Inventory and DVD library, which is considered finished goods, consists of
purchased items ready for resale, rental items in the case of DVDs, or items for use in vending operations.
Included in inventory are plush toys and other products dispensed from our entertainment services machines
prior to the sale of the Entertainment Business on September 8, 2009, prepaid airtime, prepaid phones, and
prepaid phone cards. Inventory is stated at the lower of cost or market. DVD library is capitalized and amortized
to direct operating expense over the usage period of the discs. Our Redbox subsidiary DVD library was $93.2
million and $62.5 million as of December 31, 2009 and December 31, 2008, respectively. E-Payment services
inventory was $8.8 million and $7.4 million as of December 31, 2009 and December 31, 2008, respectively. The
Entertainment Business inventory was $17.1 million at December 31, 2008. We did not maintain any
Entertainment Business inventory at December 31, 2009 as a result of its sale during 2009. The cost of inventory
and DVD library includes mainly the cost of materials, and to a lesser extent, labor, overhead and freight.
DVDs are initially recorded at cost and are amortized over an assumed useful life to their estimated salvage
value. Estimated salvage value is based on the amounts that we have historically recovered on disposal of the
DVDs. The amortization charges are recorded on an accelerated basis, reflecting higher rentals of the DVD in the
first few weeks after release, and substantially all of the amortization expense is recognized within one year of
the assumed life of the DVDs.
The cost for our E-payment services inventory is determined using the first-in first-out method. Prior to the
sale of our Entertainment Business, entertainment inventory was stated at the lower of cost (moving average
cost) or market, and factored in the estimated shrinkage from physical inventory counts.
Property and equipment: Property and equipment are stated at cost, net of accumulated depreciation.
Expenditures that extend the life, increase the capacity, or improve the efficiency of property and equipment are
capitalized, while expenditures for repairs and maintenance are expensed as incurred. Depreciation is recognized
using the straight-line method over the following approximate useful lives.
Useful Life
Coin-counting and e-payment kiosks ...................................... 3to10years
DVD kiosks ......................................................... 5years
Computers .......................................................... 3years
Office furniture and equipment .......................................... 5years
Leased vehicles ....................................................... Lease term
Leasehold improvements ............................................... Shorter of lease term or
useful life of improvement
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