Redbox 2009 Annual Report Download - page 82

COINSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
expense of $1.7 million in the second quarter of 2009. The remaining payment for deferred consideration of
$10.5 million plus interest expense of $1.0 million was made during the third quarter of 2009. The obligation was
paid in full as of December 31, 2009. The total consideration paid for the 2009 Redbox transaction was $162.4
million, including cash of $113.9 million and Coinstar common stock of $48.5 million.
The purchase of the non-controlling interest in Redbox was a change of our ownership interest in a
previously consolidated subsidiary. Such change was accounted for as an equity transaction in accordance with
FASB ASC 810-10-65, Non-controlling Interest in the Consolidated Financial Statements. There was no gain or
loss recorded in the consolidated net income or comprehensive income. The difference between the fair value of
the total considerations at the closing and the carrying value of the non-controlling interest was recognized as a
reduction to equity attributable to Coinstar. This difference of $112.5 million would be amortized over fifteen
years for tax purposes, which resulted in tax benefits of $43.8 million for the company in the future years and
offset the reduction to the equity attributable to Coinstar. In addition, we made an IRS code section 754 election
resulting in an additional deferred tax benefit of $11.9 million, which further offset the reduction in equity. As a
result of recognizing these two tax benefits, totaling $55.7 million, the net amount recorded as a reduction to our
equity section was $56.8 million at close of the transaction. Subsequent to the purchase of the remaining Redbox
interest transaction, a portion of deferred tax benefit was adjusted during 2009 due to a change in tax rate, which
resulted in the increase of the deferred tax benefit of $0.5 million. As of December 31, 2009, the net difference
was $56.3 million in the equity section of our Consolidated Balance Sheets.
NOTE 4: SALE OF ENTERTAINMENT BUSINESS
On September 8, 2009, we sold our subsidiaries comprising our Entertainment Business to National
Entertainment Network, Inc. (“National”) for nominal consideration. With the transaction, National assumed the
operations of the Entertainment Business, including substantially all of the Entertainment Business’s related
assets and liabilities. The disposed assets and liabilities primarily consisted of current assets of $29.4 million, net
property, plant and equipment of $35.2, intangible assets of $4.4 million, other assets of $3.1 million, and current
liabilities of $24.3 million. As a result of the sale, we recorded a pre-tax loss on disposal of $49.8 million and a
one-time tax benefit of $82.2 million during the third quarter of 2009. We have presented the result of the
disposition of our Entertainment Business as well as the operating loss from our Entertainment Business as
discontinued operations in our Consolidated Statement of Operations, for all periods presented. The cash flows
related to our Entertainment Business discontinued operations have been separately disclosed in our
Consolidated Statement of Cash Flows.
Revenue from discontinued operations was $90.6 million for 2009, $150.2 million for 2008, and $238.9
million for 2007. The pretax loss from discontinued operations was $7.0 million for 2009 (excluding the loss on
disposal), $7.0 million for 2008, and $73.5 million for 2007, which included a non-cash impairment charge of
$65.2 million.
Our tax basis in the Entertainment Business was determined to be approximately $256.8 million which has
been written off as worthless stock. The net tax benefit resulting from the worthless stock deduction was reduced
by $16.8 million of net deferred tax assets recorded on the Entertainment Business’s books which were written
off at the time of sale, resulting in a net one-time tax benefit of $82.2 million.
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