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84
NOTE 18: FAIR VALUE
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:
• Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities;
• Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these
include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets
or liabilities in markets that are not active; or
• Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in
those securities.
Assets and Liabilities Measured and Reported at Fair Value on a Recurring Basis
The following table presents our financial assets and (liabilities) that are measured and reported at fair value in our
Consolidated Balance Sheets on a recurring basis, by level within the fair value hierarchy (in thousands):
Fair Value at December 31, 2013 Level 1 Level 2 Level 3
Money market demand accounts and investment grade fixed income
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,800 $ — $ —
Fair Value at December 31, 2012 Level 1 Level 2 Level 3
Money market demand accounts and investment grade fixed income
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,425 $ — $ —
Money Market Demand Accounts and Investment Grade Fixed Income Securities
We determine fair value for our money market demand accounts and investment grade fixed income securities based on quoted
market prices. The fair value of these assets is included in cash and cash equivalents on our Consolidated Balance Sheets.
Assets and Liabilities Measured and Reported at Fair Value on a Nonrecurring Basis
We recognize or disclose the fair value of certain assets such as notes receivable and non-financial assets, primarily long-lived
assets, goodwill, intangible assets and certain other assets in connection with impairment evaluations. All of our nonrecurring
valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy.
Trademarks License
During the first quarter of 2012, Redbox granted the Joint Venture a limited, non-exclusive, non-transferable, royalty-free right
and license to use certain Redbox trademarks. We estimated the fair value of the trademarks to be approximately $30.0 million
as of the date of grant based on the relief-from-royalty method. We estimated the preliminary fair value using the information
available on the grant date, which consisted of the expected future discounted and tax-effected cash flows attributable to the
projected gross revenue stream of the Joint Venture, estimated market royalty rates of approximately 1.5%, as well as a
discount rate of approximately 45.0%, which reflected our view of the risks and uncertainties associated with an early
development stage entity. See Note 6: Equity Method Investments and Related Party Transactions.
Notes Receivable
On June 9, 2011, we completed the sale transaction of the Money Transfer Business to Sigue Corporation (“Sigue”). We
received $19.5 million in cash and a note receivable of $29.5 million (the “Sigue Note”). In December 2011, as part of the sale
transaction, we were required to provide Sigue with an additional loan of $4.0 million under terms consistent with the Sigue
Note. We estimated the fair value of the Sigue Note based on the future note payments discounted at a market rate for similar
risk profile companies, approximately 18.0%, which reflected 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. We evaluate the Sigue Note for collectability on a
quarterly basis. Our evaluation at September 30, 2013 included consideration of ongoing discussions surrounding early