Redbox 2013 Annual Report Download - page 94

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85
payment on the note and certain indemnification obligations we have previously undertaken, as a result of our evaluation we
did not record interest income on the note and also recorded a charge of $2.8 million against the note balance to arrive at a
carrying value which approximated its estimated fair value and was reported within notes receivable in our Consolidated
Balance Sheets. During the fourth quarter of 2013, we received $24.8 million in cash from Sigue for full settlement of the
Sigue Note, interest and a release of certain indemnification claims. We recorded a benefit of $2.5 million from the release of
indemnification related reserves.
Fair Value of Other Financial Instruments
The carrying value of our term loan approximates its fair value and falls under Level 2 of the fair value hierarchy.
We estimate the fair value of our convertible debt outstanding using a market rate of approximately 6.0% and 4.5% for similar
high-yield debt at December 31, 2013, and December 31, 2012, respectively. The estimated fair value of our convertible debt
was approximately $50.5 million and $183.7 million at December 31, 2013, and December 31, 2012, respectively, and was
determined based on its stated terms, maturing on September 1, 2014, and an annual interest rate of 4.0%. The fair value
estimate of our convertible debt falls under Level 3 of the fair value hierarchy. We have reported the carrying value of our
convertible debt, face value less the unamortized debt discount, in our Consolidated Balance Sheets.
We estimated the fair value of our senior unsecured notes outstanding using a market rate of approximately 6.0% for similar
high-yield debt at December 31, 2013. The estimated fair value of our senior unsecured notes was approximately $350.0
million at December 31, 2013, and was determined based on their stated terms, maturing on March 15, 2019, and an annual
interest rate of 6.0%. The fair value estimate of our senior unsecured notes falls under Level 3 of the fair value hierarchy. We
have reported the carrying value of our senior unsecured notes, issued at par, in our Consolidated Balance Sheets.
NOTE 19: COMMITMENTS AND CONTINGENCIES
Lease Commitments
Operating Leases
We lease our corporate administrative, marketing, and product development facilities in Bellevue, Washington under operating
leases that expire December 31, 2019 and December 31, 2017.
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.
We lease office space in San Diego, California for our ecoATM business under operating leases. These offices consist of an
administrative facility and a temporary facility supporting administration, customer service and inventory processing. We also
lease an unoccupied facility that will be renovated and will serve as a multi-purpose central location for the ecoATM business.
The ecoATM offices currently occupy 93,597 square feet, and the two occupied buildings are under a lease that expires in 2015
and the multi-purpose facility is under lease through 2023.
Rent expense under our operating lease agreements was $12.3 million, $9.0 million and $8.9 million during 2013, 2012 and
2011, 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.
Assets held under capital leases are included in property and equipment, net on the Consolidated Balance Sheets and include
the following:
Dollars in thousands
December 31,
2013 2012
Gross property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,992 $ 48,636
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,489)(18,974)
Net property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,503 $ 29,662