Redbox 2013 Annual Report Download - page 79

70
prior to each quarter-end date. If the Convertible Notes become convertible and should the holders elect to convert, we will be
required to pay them up to the full face value of the Convertible Notes in cash as well as deliver shares of our common stock
for any excess conversion value. The number of potentially issued shares increases as the market price of our common stock
increases. As of December 31, 2013, such early conversion event was met. As a result, the Convertible Notes were classified as
a current liability and the debt conversion feature was classified as temporary equity on our Consolidated Balance Sheets. In
the twelve months ended December 31, 2013, we retired a combined 133,835 Convertible Notes or $133.8 million in face value
of Convertible Notes, through open market purchases and the note holders electing to convert, for $172.2 million in cash and
the issuance of 272,336 shares of common stock. The amount by which the total consideration including cash paid and value of
the shares issued exceeds the fair value of the Notes is recorded as a reduction of stockholders’ equity. The loss from early
extinguishment of these Convertible Notes was approximately $6.0 million and is recorded in interest expense in our
Consolidated Statements of Comprehensive Income. Additional details of our Convertible Notes are as follows:
Dollars in thousands Principal Discount Net
Outstanding December 31, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 184,983 $ (12,173) $ 172,810
Early extinguishments and debt conversion . . . . . . . . . . . . . . . . . . . . (133,835) 6,861 (126,974)
Amortization of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,866 3,866
Outstanding December 31, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,148 $ (1,446) $ 49,702
The following interest expense was related to our Convertible Notes:
Years Ended December 31,
Dollars in thousands 2013 2012 2011
Contractual interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,873 $ 8,000 $ 8,000
Amortization of debt discount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,866 7,109 6,551
Total interest expense related to the Convertible Notes. . . . . . . . $ 7,739 $ 15,109 $ 14,551
The remaining unamortized debt discount of $1.4 million is expected to be recognized as non-cash interest expense in 2014.
Interest Expense
Total interest expense including the loss on early retirement of debt was $37.1 million, $20.3 million and $26.0 million for the
years ended December 31, 2013, 2012 and 2011 respectively. As of December 31, 2013, we were in compliance with all debt
covenants.
Asset Retirement Obligation
We have entered into agreements with our partners to place kiosks in their stores. Upon contract terminations, we are obligated
to remove the kiosks from the store locations and, accordingly, we recognize the estimated fair value of the liability under the
long-term section of our liabilities in our Consolidated Balance Sheets.
Other Long-Term Liabilities
Included in other long-term liabilities were primarily tenant improvements related to our office building renovation in
Oakbrook Terrace, Illinois and Bellevue, Washington as well as the related unrecognized tax benefits as follows:
Dollars in thousands
December 31,
2013 2012
Tenant improvement and deferred rent and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,301 $ 8,724
Unrecognized tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,781 1,250
Total other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,082 $ 9,974
NOTE 9: REPURCHASES OF COMMON STOCK
Board Authorization
On January 31, 2013, our Board of Directors approved an additional repurchase program of up to $250.0 million of our
common stock plus the cash proceeds received from the exercise of stock options by our officers, directors, and employees.