Redbox 2011 Annual Report Download - page 88

the sale transaction, we were required to provide an additional loan of $4.0 million which was added to the
balance of the Sigue Note. We estimate the fair value of the Sigue Note based on the future note payments
discounted at a market rate for similar risk profile companies, which represented our best estimate of default risk,
and was not an exit price based measure of fair value or the stated value on the face of the Sigue Note. The
estimated fair value of the Sigue Note at December 31, 2011 was $24.4 million. We have reported the estimated
fair value of the Sigue Note in our Consolidated Balance Sheets. We evaluate the Sigue Note for collectability on
a quarterly basis. Based on our evaluation at December 31, 2011, an allowance for credit losses was not
established. We recognize interest income on the Sigue Note on an accrual basis unless it is determined that
collection of all principal and interest is unlikely. See Note 4: Discontinued Operations, Sale of Assets and Assets
of Business Held for Sale for additional information about the sale of our Money Transfer Business.
Long-Lived Assets, Goodwill and Other Intangible Assets
During the second quarter of 2011, we performed nonrecurring fair value measurements in connection with
assigning goodwill to our segments. See Note 11: Business Segments and Enterprise-Wide Information for
additional information.
Fair Value of Other Financial Instruments
The carrying value of our cash equivalents, accounts receivable, accounts payable, and our revolving line of
credit approximate their respective fair values due to their short-term nature.
We estimate the fair value of our convertible debt outstanding using the market rate for similar high-yield debt.
The estimated fair value of our convertible debt was $183.4 million and $180.9 million at December 31, 2011
and December 31, 2010, respectively, and was determined based on its stated terms, maturing on September 1,
2014 and an annual interest rate of 4%. We have reported the carrying value of our convertible debt, face value
less the unamortized debt discount, in our Consolidated Balance Sheets.
NOTE 18: COMMITMENTS AND CONTINGENCIES
Lease Commitments
Operating Leases
We lease our corporate administrative, marketing, and product development facility in Bellevue, Washington
under operating leases that expire December 31, 2019.
We lease our Redbox facility in Oakbrook Terrace, Illinois under an operating lease that expires on July 31,
2021. Under certain circumstances, we have the ability to extend the lease for a five-year period, rent additional
office space under a right of first offer and refusal and have the option to terminate the lease in July 2016. Under
the terms of the lease, we are responsible for certain tax, construction and operating costs associated with the
rented space.
Rent expense under our operating lease agreements was $8.9 million, $8.3 million and $6.0 million during 2011,
2010 and 2009, respectively.
Capital Leases
We lease automobiles and computer equipment under capital leases expiring at various dates through 2019. In
most circumstances, we expect that, in the normal course of business, these leases will be renewed or replaced by
other leases.
During 2009, we entered into a sales-leaseback transaction in which we sold certain kiosks and leased them back
for the same amount as the sales proceeds. The transaction was considered a financing arrangement and
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