Redbox 2010 Annual Report Download - page 84

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Share-Based Payments for DVD Arrangements
Sony
As part of a copy depth license agreement with Sony, we granted Sony 193,348 shares of restricted stock in July
2009. As of December 31, 2010, 19,335 shares were vested and the remaining 174,013 shares will vest over the
next 3.6 years in accordance with our agreement with Sony. Share-based payment expense related to the
agreement with Sony totaled $4.0 million and $1.4 million in 2010 and 2009, respectively, and was recorded to
direct operating expenses in the Consolidated Statements of Net Income. The expense related to this agreement is
adjusted based on the number of unvested shares and the market price of our common stock each reporting
period. At December 31, 2010, the estimated expense to be amortized over the next 3.6 years for the unvested
shares was approximately $5.0 million.
Paramount
On June 15, 2010, Paramount exercised its option to extend the term of the revenue sharing license agreement
between Paramount and our Redbox subsidiary. As a result of the extension, we granted Paramount
200,000 shares of restricted stock, of which 20,000 shares vested upon Paramount’s exercise of the extension.
The remaining 180,000 shares, which were unvested at December 31, 2010, will vest over the next 4 years in
accordance with our agreement with Paramount. During 2010, we recorded share-based payment expense of
$3.3 million related to this agreement to direct operating expenses in the Consolidated Statements of Net Income.
The expense related to this agreement is adjusted based on the number of unvested shares and the market price of
our common stock each reporting period. At December 31, 2010, the estimated expense to be amortized over the
next 4 years for the unvested shares was approximately $7.9 million.
For additional information related to our studio agreements see Note 9: Commitments and Contingencies.
NOTE 12: INCOME TAXES
The components of income from continuing operations before income taxes and non-controlling interest were as
follows (in thousands):
Year Ended December 31,
2010 2009 2008
U.S. operations ......................................... $106,653 $67,283 $61,531
Foreign operations ...................................... 2,273 2,130 3,234
Total income from continuing operations before income
taxes ........................................... $108,926 $69,413 $64,765
The components of income tax expense were as follows (in thousands):
Year Ended December 31,
2010 2009 2008
Current:
U.S. federal ......................................... $ 0 $ 8,305 $ 4,602
State and local ...................................... 1,003 1,511 1,520
Foreign ............................................ 634 1,222 1,381
Total current .................................... 1,637 11,038 7,503
Deferred:
U.S. federal ......................................... 36,957 12,581 9,746
State and local ...................................... 4,703 2,738 2,265
Foreign ............................................ (265) (637) (476)
Total deferred ................................... 41,395 14,682 11,535
Total income tax expense .................................. $43,032 $25,720 $19,038
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