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59
Reclassifications
We ceased operation of our self-service concept for refurbished electronics called Orango during the second quarter of 2013
and on December 5, 2013, we decided to discontinue three additional new venture concepts, Rubi, Crisp Market and Star
Studio. We have reclassified the results of operations of these four ventures to discontinued operations for all periods presented
in our Consolidated Statements of Comprehensive Income. See Note 13: Discontinued Operations and Sale of Business for
more information.
On June 22, 2012, Redbox acquired certain assets of NCR Corporation (“NCR”) related to NCR’s self-service entertainment
DVD kiosk business (the “NCR Asset Acquisition”). The purchased assets included, among others, self-service DVD kiosks,
content library, intellectual property, and certain related contracts, including with certain retailers. In consideration, Redbox
paid NCR $100.0 million in cash and assumed certain liabilities of NCR related to the purchased assets.
We accounted for the NCR Asset Acquisition as a business combination. In accordance with US GAAP, the measurement
period for our purchase price allocation ended as soon as information regarding our assessment of the quality and quantity of
the kiosks acquired as well as certain facts and circumstances became available; such measurement period was not to exceed
twelve months from the acquisition date. In our originally issued FY 2012 10-K, we included a preliminary purchase price
allocation. During the second quarter of 2013, we obtained sufficient evidence regarding the quality and market value of the
kiosks acquired (See Note 3: Business Combination) to finalize our purchase price allocation. As a result, we retroactively
adjusted our purchase price allocation to increase the value assigned to such kiosks acquired by $14.8 million with a
corresponding decrease to goodwill in the period in which the NCR Asset Acquisition occurred resulting in a corresponding
change in our December 31, 2012 ending balances to our originally issued FY 2012 10-K.
NOTE 3: BUSINESS COMBINATIONS
Acquisition of ecoATM, Inc.,
On July 1, 2013, Outerwall Inc., entered into an agreement and plan of merger with ecoATM, Inc., a Delaware corporation
(“ecoATM”) that provides an automated self-service kiosk system to purchase used mobile phones, tablets and MP3 players for
cash. On July 23, 2013 all necessary approvals were obtained and we completed the acquisition of the remaining 77.0% equity
interest which we did not already own. The primary reason for the business combination was to expand Outerwall’s presence
in automated retail and gain exposure to the growing demand for refurbished products and mobile devices.
We accounted for the purchase of ecoATM as a business combination. Costs related to this acquisition of approximately $5.7
million were expensed during the second and third quarters 2013 and are included within general and administrative expenses
in our Consolidated Statements of Comprehensive Income.
The following table highlights the consideration transferred, the fair value of our previously held equity interest and the fair
value of replacement awards issued attributable to post-combination services.
Dollars in thousands July 23, 2013
Consideration Transferred:
Cash paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 262,882
Replacement awards attributable to pre-combination services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,398
Total consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264,280
Previously held equity interest:
Acquisition date fair value of previously held equity interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,359
Total consideration transferred and fair value of previously held equity interest . . . . . . . . . . . . . . . . . . . . . . . $ 340,639
Fair value of replacement awards attributable to post-combination services . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,671
As a part of the merger, we issued replacement awards for unvested restricted stock and options in ecoATM with rights to
receive cash equal to the per share merger consideration for restricted stock and net of the exercise price for options. The
replacement awards vest in accordance with the terms of the original replaced award. The fair value of the original and
replacement awards amounted to $32.1 million, $1.4 million of which was attributed to pre-combination services rendered and
included in the calculation of total consideration transferred. The replacement awards are considered liability classified as they
require settlement in cash. Expense associated with the post-combination awards will be recognized net of forfeitures, and cash
payments will be made, in accordance with the awards' vesting schedule, generally on a monthly basis.