Redbox 2014 Annual Report Download

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Table of contents

  • Page 1

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    ... and manage automated retail businesses that offer consumers value and convenience while helping our retail partners drive incremental traffic and revenue. We will continue to build on those strengths going forward. In 2014, we successfully executed on our strategy of optimizing our core Redbox and...

  • Page 4
    ... President Merrill Gardens LLC Ross G. Landsbaum Chief Financial Officer ReachLocal, Inc. Robert D. Sznewajs Past President, Chief Executive Officer and Director West Coast Bancorp Ronald B. Woodard Director and Past Chairperson MagnaDrive Corporation BOARD COMMITTEES Audit Robert D. Sznewajs...

  • Page 5

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  • Page 7
    ... as of June 30, 2014 (the last business day of the registrant's most recently completed second fiscal quarter), based upon the closing price as reported in the NASDAQ Global Select Market System, was approximately $1.2 billion. The number of shares outstanding of the registrant's Common Stock as of...

  • Page 8

  • Page 9
    ... Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security...

  • Page 10
    ... future results, performance or achievements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. Unless the context requires otherwise, the terms "Outerwall," the "Company...

  • Page 11
    ... locations, where consumers can rent or purchase movies and video games. Our Redbox kiosks are available in every U.S. state, Puerto Rico, and Canada, and are installed primarily at leading grocery stores, mass retailers, drug stores, restaurants and convenience stores including Walgreens, Walmart...

  • Page 12
    ...kiosk total is a limited number of kiosks that exchange gift cards for a voucher redeemable for cash. Our Coinstar kiosks are available across the U.S., where they provide a convenient and troublefree service to retailers such as Kroger and Walmart, and in Canada, Puerto Rico, Ireland and the United...

  • Page 13
    ... DVD kiosk businesses; other retailers like Walmart and other chain stores selling DVDs and video games; video game rental providers, like GameFly; noncommercial sources like libraries; and; general competition from other forms of entertainment, such as movie theaters, television and sporting events...

  • Page 14
    ...options and preferences, including increased use of online streaming, video-on-demand, subscription video-on-demand and time- and place-shifting technologies Decreased quantity and quality of movie content availability for DVD distribution due to changes in quantity of new releases by studios, movie...

  • Page 15
    ... windows, including making video-on-demand or other digital delivery methods available prior to or simultaneous with the physical DVD release. For example, certain movie studios have made new release titles available on video-on-demand or for online purchase on the same date as the DVD release...

  • Page 16
    ... demand for offered DVD titles and consumer satisfaction with our services or negatively impacting margins. If studios that do not have a delayed rental window elect to delay the general release of DVDs to the rental market for significant periods after they are released for retail sales, demand for...

  • Page 17
    ...in service fees paid, or other financial concessions made, to our retailers could significantly increase our direct operating expenses in future periods and harm our business. In addition, we accept payment for movie and game rentals through debit and credit card transactions. For these payments, we...

  • Page 18
    ...structures of these new businesses and products could create conflicting priorities, constrain limited resources, and negatively impact our core businesses. We may use our financial resources and management's time and focus to invest in other companies offering automated retail services, such as our...

  • Page 19
    ... from such acquisitions and investments. As part of our business strategy, we have in the past sought, and may in the future seek, to acquire or invest in businesses, products or technologies that we feel could complement or expand our business. For example, in July 2013, we acquired ecoATM. However...

  • Page 20
    ... DVD in the market, we are permitted to re-sell it, rent it or otherwise dispose of it. Although the majority of our content library is licensed directly from studios, and not purchased, if Congress or the courts were to change, or substantially limit, this First Sale Doctrine, our ability to obtain...

  • Page 21
    ... use of and the ability to operate and service our kiosks used in our business. Severe weather, natural disasters and other events beyond our control can, for extended periods of time, significantly reduce consumer use of our products and services as well as interrupt the ability of our employees...

  • Page 22
    ... team, including changes in the presidents of our business lines in 2013 and 2014 and the departure of our CEO in 2015. Further changes in senior management could result in disruptions to our operations. If we lose or terminate the services of one or more of our current executives or key employees...

  • Page 23
    ...fluctuations in the use of our different lines of business; operating results below market expectations and changes in, or our failure to meet, financial estimates of securities analysts or our own guidance; acquisition, merger, investment and disposition activities; period-to-period fluctuations in...

  • Page 24
    ... to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; limiting our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate...

  • Page 25
    ... development facility in Bellevue, Washington is located in three office buildings, totaling 156,644 square feet under three leases, two of which expire December 31, 2019, and the third will expire December 9, 2017. Our Coinstar and New Ventures segments each use part of this space. Our Redbox...

  • Page 26
    ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 18

  • Page 27
    ...traded on the NASDAQ Global Select Market under the symbol "OUTR." The following table sets forth the high and low sale prices per share as reported by the NASDAQ Global Select Market for our common stock for each quarter during the last two fiscal years. The quotations represent inter-dealer prices...

  • Page 28
    ... Consolidated Financial Statements. The one-year extension requires us to issue 50,000 shares of unregistered restricted common stock to Paramount during the first quarter of 2015. Securities Authorized for Issuance Under Equity Compensation Plans For information regarding securities authorized for...

  • Page 29
    ... used in basic per share calculations ...Shares used in diluted per share calculations... 5.15 20,192 20,699 $ 6.16 27,216 28,381 $ 4.67 30,305 32,174 $ 3.26 30,520 31,869 $ 1.57 31,268 32,397 As of December 31, Balance Sheet Data 2014 2013 2012 2011 2010 Cash and cash equivalents ...Total...

  • Page 30
    ... to stored value products. We also offer self-service kiosks that exchange gift cards for cash under our Coinstar Exchange brand. New Ventures We identify, evaluate, build or acquire and develop innovative new self-service concepts in the automated retail space in our New Ventures business segment...

  • Page 31
    ... growing Redbox through increased revenue generation and improved kiosk-operations efficiency. We expect to grow revenue through attracting new customers, testing pricing strategies, improving the Blu-ray rental mix, and utilizing our customer management tools. Blu-ray drives revenue growth by...

  • Page 32
    ... 2015. Future quarterly dividend payments will be subject to approval by our board of directors. • • • Q4 2014 Events • On November 24, 2014, Redbox announced that, effective December 2, 2014, the rental price for DVDs would increase by 30 cents to $1.50 a day, and the price for Blu-ray...

  • Page 33
    Q3 2014 Events • • On September 26, 2014, Universal Studios Home Entertainment LLC exercised its option to extend the term of the revenue sharing license agreement between Redbox and Universal through December 31, 2015. On September 2, 2014, our remaining outstanding 4.0% Convertible Senior ...

  • Page 34
    ... to 2013 Revenue decreased $3.6 million, or 0.2%, primarily due to: • $81.4 million decrease from our Redbox segment primarily due to 4.9% decrease in same store sales primarily due to the relative attractiveness and timing of title releases while total box office for content released during 2014...

  • Page 35
    ...reduction in product costs due to the content library amortization change as explained in Note 2: Summary of Significant Accounting Policies in our Notes to Consolidated Financial Statements, as well as a weaker release schedule in the fourth quarter of 2013, down 21.0% from a year ago; • • 27

  • Page 36
    ... Increases in other direct operating expenses including revenue share, payment card processing fees, customer service and support function costs directly attributable to our revenue and kiosk growth and certain costs incurred to service the kiosks that were under the transition services agreement...

  • Page 37
    ... operating income contains internally allocated costs of our shared services support functions, including but not limited to, corporate executive management, business development, sales, customer service, finance, legal, human resources, information technology, and risk management. We also review...

  • Page 38
    ... purchase a movie or video game, and we pay retailers a percentage of our revenue. Our Coinstar segment generates revenue primarily through transaction fees from our consumers and product partners and we pay retailers a percentage of our revenue. Our New Ventures segment generates revenue primarily...

  • Page 39
    ... periods when kiosk installations were increasing and helping drive growth, Redbox revenue and other operating results may be more affected by these factors. We also anticipate negative impacts in future periods arising from the expected secular decline in the physical rental market. 2014 Events...

  • Page 40
    ...previously expensed in 2012; Direct operating expenses were also impacted by lower retailer revenue sharing expenses primarily due to lower revenue, lower payment card processing fees due to fewer rentals and general cost containment initiatives. The 2014 period also included a one-time benefit from...

  • Page 41
    ... million reduction in product costs due to the content library amortization change as explained in Note 2: Summary of Significant Accounting Policies in our Notes to Consolidated Financial Statements, as well as a weaker release schedule in the fourth quarter of 2013, down 21.0% from a year ago; 33

  • Page 42
    ... and future content purchases are adjusted if results in the current period do not meet expectations but it impacts operating income in the short-term. Increases in revenue share, payment card processing fees, customer service and support function costs directly attributable to our revenue and kiosk...

  • Page 43
    ...expenses primarily due to increased expenses associated with the growth of our Coinstar Exchange business; $2.7 million increase in direct operating expenses due to increased revenue sharing, selling and customer service costs to support higher revenues; and $1.6 million increase in depreciation and...

  • Page 44
    ... due to timing of advertising and spending to support our programs in 2013; $2.8 million increase in direct operating expenses primarily due to higher revenue share expense attributable to both revenue growth and increased revenue share rates with certain retail partners as a result of long-term...

  • Page 45
    ... Ventures Years Ended December 31, Dollars in thousands, except per share amounts Revenue ...$ Expenses: Direct operating...Marketing ...Research and development ...General and administrative ...Segment operating loss...Less: depreciation and amortization...Operating loss...$ Ending number of kiosks...

  • Page 46
    ....6 million increase in direct operating expenses mainly due to costs associated with the acquisition, transportation and processing of mobile devices in our ecoATM business, as well as costs for servicing of our kiosks and payments to our retailers. Additionally, in 2014 the highly successful launch...

  • Page 47
    .... In 2015 we expect reduced impact from equity method investments as a result of our withdrawal from the Joint Venture in 2014. See Note 5: Equity Method Investments and Related Party Transactions in our Notes to Consolidated Financial Statements for more information. Comparing 2013 to 2012 Income...

  • Page 48
    ... the Canadian dollar exchange rates on our Redbox Canada and Coinstar Canada operations; offset by $2.8 million in expense incurred to write-down the carrying value of a note receivable from Sigue incurred during 2013 which did not recur in 2014. Comparing 2013 to 2012 Other expense, increased by...

  • Page 49
    ... cash issued in conjunction with our acquisition of ecoATM and attributable to post-combination services as they are fixed amount acquisition related awards and not indicative of the directly controllable future business results, iv) income or loss from equity method investments, which represents...

  • Page 50
    ... both non-cash share-based compensation for executives, non-employee directors and employees as well as share-based payments for content arrangements. Comparing 2014 to 2013 The decrease in our core adjusted EBITDA from continuing operations was primarily due to Lower segment operating income in...

  • Page 51
    ... % 5.19 $ 2013 7.33 $ 2012 4.99 $ 2014 vs. 2013 $ (2.14) % (29.2)% $ 2013 vs. 2012 $ 2.34 % 46.9 % * (1) Not Meaningful Non-Core Adjustments are presented after-tax using the applicable effective tax rate for the respective periods. Free Cash Flow Our non-GAAP financial measure free cash flow is...

  • Page 52
    ...timing and number of machine installations, the number of available installable kiosks, the type and scope of service enhancements, the cost of developing potential new product service offerings, and enhancements, and cash required to fund potential future acquisitions, investment or capital returns...

  • Page 53
    ... in net re-payments on our Credit Facility. The revolving line of credit had an average daily balance of $163.2 million in 2014 and was used to support the activities discussed above relative to the timing of cash flows from operations throughout the same period; $14.0 million to pay capital lease...

  • Page 54
    ...,523 (6,763) 738,760 (91,889) 646,871 Principal ...$ Discount ...Total ...Less: current portion ...Total long-term portion...$ Senior Unsecured Notes Due 2019 On March 12, 2013, we entered into an indenture pursuant to which we issued $350.0 million principal amount of 6.000% Senior Notes due 2019...

  • Page 55
    ...; pay dividends or make distributions in respect of capital stock; purchase or redeem capital stock; make investments or certain other restricted payments; sell assets; enter into transactions with stockholders or affiliates; or effect a consolidation or merger. However, these and other limitations...

  • Page 56
    ... and Restated Credit Agreement requires principal amortization payments under the Term Loan as follows: Dollars in thousands 2015 ...$ 2016 ...2017 ...2018 ...2019 ...Total ...$ Repayment Amount 9,376 13,126 15,000 18,750 89,998 146,250 The Revolving Line matures on June 24, 2019, at which time all...

  • Page 57
    ... For additional information see Note 17: Commitments and Contingencies in our Notes to Consolidated Financial Statements. Inflation We believe that the impact of inflation was minimal on our business in 2014, 2013 and 2012. Critical Accounting Policies Our consolidated financial statements have been...

  • Page 58
    ... the cost of the movies and video games, labor, overhead, freight, and studio revenue sharing expenses. The content purchases are capitalized and amortized to their estimated salvage value as a component of direct operating expenses over the usage period. For purchased content that we expect to sell...

  • Page 59
    ...and operating loss and tax credit carryforwards are expected to be recovered or settled. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances and information available at the reporting date. For...

  • Page 60
    ... be entitled in exchange for those goods or services. ASU 2014-09 sets forth a new revenue recognition model that requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing...

  • Page 61
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Unaudited quarterly financial data for each of the eight quarters in the two-year period ended December 31, 2014 is as follows: 2014 (In thousands, except per share data) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Revenue ...Income from ...

  • Page 62
    ... financial statements, the Company elected to change its method of accounting for content library amortization in 2013. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Outerwall Inc.'s internal control over financial reporting...

  • Page 63
    ... in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our...

  • Page 64
    ... INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2014 Assets Current Assets: Cash and cash equivalents ...$ Accounts receivable, net of allowances of $2,223 and $1,826 ...Content library...Prepaid expenses and other current assets...Total current assets...Property and...

  • Page 65
    ... OF COMPREHENSIVE INCOME (in thousands, except per share data) Year Ended December 31, 2014 2013 2012 Revenue...$ 2,303,003 $ 2,306,601 $ 2,199,884 Expenses: Direct operating(1) ...1,601,748 1,575,277 1,498,819 Marketing...38,240 32,402 25,979 Research and development ...13,047 13,084 6,757 General...

  • Page 66
    ......Foreign currency translation adjustment(1) . BALANCE, December 31, 2012 ...Proceeds from exercise of stock options, net ...Adjustments related to tax withholding for share-based compensation ...Share-based payments expense ...Excess tax benefit on share-based compensation expense Repurchases of...

  • Page 67
    ... ...Content library...Prepaid expenses and other current assets...Other assets ...Accounts payable...Accrued payable to retailers ...Other accrued liabilities...Net cash flows from operating activities(1) ...Investing Activities: Purchases of property and equipment ...Proceeds from sale of property...

  • Page 68
    Year Ended December 31, 2014 2013 2012 Effect of exchange rate changes on cash ...$ Increase (decrease) in cash and cash equivalents ...Cash and cash equivalents: Beginning of period...End of period ...$ Supplemental disclosure of cash flow information: Cash paid during the period for interest ...$...

  • Page 69
    ... ...Debt and Other Long-Term Liabilities...Repurchases of Common Stock ...Share-Based Payments ...Restructuring ...Income Taxes From Continuing Operations ...Discontinued Operations ...Earnings Per Share ...Business Segments and Enterprise-Wide Information ...Retirement Plans ...Fair Value...

  • Page 70
    ..., convenience stores, malls and restaurants. Our kiosk and location counts as of December 31, 2014, are as follows: Redbox ...Coinstar ...New Ventures ...Total...Note 2: Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include...

  • Page 71
    ... the cost of the movies and video games, labor, overhead, freight, and studio revenue sharing expenses. The content purchases are capitalized and amortized to their estimated salvage value as a component of direct operating expenses over the usage period. For purchased content that we expect to sell...

  • Page 72
    ... the costs of movie and game titles. The Company anticipates that this new method will better align the recognition of costs with the related revenue. The Company believes that the change in its content library amortization methodology, made on a prospective basis, is a change in accounting estimate...

  • Page 73
    ...and operating loss and tax credit carryforwards are expected to be recovered or settled. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances and information available at the reporting date. For...

  • Page 74
    ...of a reserve for potentially uncollectible amounts. We record revenue net of refunds and applicable sales taxes collected from consumers. In the fourth quarter of 2014, Redbox launched Redbox Play Pass, a new loyalty program, where customers can earn points redeemable for movie rentals. As customers...

  • Page 75
    ... newly issued shares. The expense related to restricted stock granted to movie studios as part of license agreements is adjusted based on the number of unvested shares and market price of our common stock each reporting period. Share-based payment expense is only recognized on awards that ultimately...

  • Page 76
    ... in the following table: 2013 Dollars in thousands As Reported Adjustment As Revised As Reported 2012 Adjustment As Revised Cash flows from changes in operating assets and liabilities: Accounts payable ...$ Net cash flows from operating activities...$ Investing Activities: Purchases of property and...

  • Page 77
    ... be entitled in exchange for those goods or services. ASU 2014-09 sets forth a new revenue recognition model that requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing...

  • Page 78
    ...our goodwill bearing reporting units using both the income and market approaches. Our estimates of fair value can change significantly based on factors such as revenue growth rates, profit margins, discount rates, market conditions, market prices, and changes in business strategies. As the estimated...

  • Page 79
    ... its pro-rata share of requests made by the Joint Venture board of managers: Dollars in thousands Cash Contributions 2012 ...$ 2013 ...2014 ...Total cash capital contributions ...$ 24,500 28,000 24,500 77,000 On October 19, 2014, the Company and Verizon entered into an agreement whereby we would...

  • Page 80
    ... 31, 2014 and the period ended December 31, 2014 for SoloHealth: Balance Sheets Dollars in thousands October 20, December 31, 2014 (1) 2014 (2) 2013 Current assets...Noncurrent assets...Current liabilities ...Long-term liabilities ...Redeemable preferred stock ...(1) (2) $ $ $ $ $ 9,095...

  • Page 81
    ... December 31, Dollars in thousands 2014 2013 Payroll related expenses ...$ Accrued content library expense ...Business taxes...Insurance...Deferred revenue ...Accrued interest expense ...Deferred rent expense ...Service contract provider expenses ...Other ...Total other accrued liabilities...

  • Page 82
    ......$ Discount...Total...Less: current portion ...Total long-term portion ...$ Unamortized deferred financing fees(1) ...$ $ $ 15,391 (11,026) 4,365 $ $ 13,576 - 13,576 $ $ 17,651 - 17,651 $ $ 994,085 (20,416) 973,669 649 $ 1,372 $ - $ 2,965 $ 4,986 $ 4,986 Debt Credit Facility...

  • Page 83
    Interest Expense Year Ended December 31, Dollars in thousands 2014 2013 2012 Cash interest expense ...$ Non-cash interest expense: Amortization of debt discount ...Amortization of deferred financing fees...Other ...Total non-cash interest expense...Total cash and non-cash interest expense ...Loss ...

  • Page 84
    ...; pay dividends or make distributions in respect of capital stock; purchase or redeem capital stock; make investments or certain other restricted payments; sell assets; enter into transactions with stockholders or affiliates; or effect a consolidation or merger. However, these and other limitations...

  • Page 85
    ... and Restated Credit Agreement requires principal amortization payments under the Term Loan as follows: Dollars in thousands Repayment Amount 9,376 13,126 15,000 18,750 89,998 146,250 2015...$ 2016...2017...2018...2019...Total ...$ The Revolving Line matures on June 24, 2019, at which time all...

  • Page 86
    ... stock plus the cash proceeds received from the exercise of stock options by our officers, directors, and employees. The Board also authorized a tender offer for up to $350.0 million with the option to increase the tender by up to 2% of outstanding shares. The tender offer expired on March 7, 2014...

  • Page 87
    ... employees. Fees and expenses totaling $3.7 million associated with the tender offer do not impact the repurchase program approved by our Board, are excluded from the total purchase price shown here and were recorded as part of the cost of treasury stock in our Consolidated Balance Sheets. Credit...

  • Page 88
    ... except per share data 2014 2013 2012 Share-based payments expense: Share-based compensation - stock options ...Share-based compensation - restricted stock ...Share-based payments for content arrangements...Total share-based payments expense...Tax benefit on share-based payments expense ...Per...

  • Page 89
    ... Compensation Committee of the Board of Directors. The fair value of non-performance-based awards is based on the market price on the grant date and is recognized on a straight-line basis over the vesting period. Awards of performance-based restricted stock made prior to 2013, once earned, vest in...

  • Page 90
    ... direct operating expenses in our Consolidated Statements of Comprehensive Income and is adjusted based on the number of unvested shares and market price of our common stock each reporting period. See Note 17: Commitments and Contingencies for more information on changes in commitments to issue...

  • Page 91
    ... fourth quarter of 2013, as a result of a comprehensive operational review, we committed to a restructuring plan intended to, among other things, better align our cost structure with revenue growth in our core businesses. As part of the plan, we discontinued the Rubi, Crisp Market, and Star Studio...

  • Page 92
    ... income taxes as follows: Year Ended December 31, 2014 2013 2012 U.S Federal tax expense at statutory rates ...State income taxes, net of federal benefit ...Federal and state credits ...Domestic production activities deduction ...Recognition of outside basis differences...ecoATM option payments...

  • Page 93
    ... 2014 2013 2012 Balance, beginning of the year ...$ Additions based on tax positions related to the current year...Additions for tax positions related to prior years ...Reductions for tax positions related to prior years ...Reductions from lapse of applicable statute of limitations ...Settlements...

  • Page 94
    ... 2014 2013 Deferred tax assets: Income tax loss carryforwards ...$ Capital loss carryforwards ...Credit carryforwards ...Accrued liabilities and allowances...Stock-based compensation...Intangible assets ...Investment basis...Other ...Gross deferred tax assets ...Less: Valuation Allowance...Total...

  • Page 95
    ... charges related to the concepts and relevant shared service assets were recorded in 2013 as follows: Impairment Expense Dollars in thousands Rubi ...$ Orango ...Crisp Market...Star Studio ...Corporate assets utilized for discontinued concepts ...Total impairment expense ...$ 21,317 5,551 289...

  • Page 96
    ...employee directors and employees ("segment operating income"). Segment operating income contains internally allocated costs of our shared service support functions, including but not limited to, corporate executive management, business development, sales, finance, legal, human resources, information...

  • Page 97
    ... in thousands Year Ended December 31, 2014 Redbox Coinstar New Ventures Corporate Unallocated Total Revenue ...$ 1,893,135 $ Expenses: Direct operating...1,338,946 Marketing ...23,916 Research and development ...120 General and administrative ...136,756 Segment operating income (loss) ...393,397...

  • Page 98
    ...) (180) (34,259) $ Our Redbox and Coinstar kiosks are primarily located within retailers. The following retailers accounted for 10% or more of our consolidated revenue: Year Ended December 31, 2014 2013 2012 Wal-Mart Stores Inc...Walgreen Co...The Kroger Company ...Revenue and Long-lived Assets by...

  • Page 99
    ... 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...

  • Page 100
    ... 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. During 2014 we consolidated our ecoATM business offices and facilities into one new location in San Diego...

  • Page 101
    ... day-and-date access for our customers to Paramount titles through the end of 2015 and requires us to issue 50,000 shares of additional restricted stock to Paramount during the first quarter of 2015 which will vest immediately. See Note 9: Share-Based Payments for more information about our share...

  • Page 102
    ... rental on the same day and date as the retail release. Agreement includes, at the studio's sole discretion, the option of a one-year extension following the end date. Content licensed under the agreement is available for rental after a certain number of days following the retail release. Revenue...

  • Page 103
    ... for the Northern District of Illinois. The plaintiff alleges that Redbox retains personally identifiable information of consumers for a time period in excess of that allowed under the Video Privacy Protection Act, 18 U.S.C. §§ 2710, et seq. A substantially similar complaint was filed in the same...

  • Page 104
    ...long-term assets...Investment in related parties ...Total assets...$ Liabilities and Stockholders' Equity Current Liabilities: Accounts payable ...$ Accrued payable to retailers ...Other accrued liabilities ...Current portion of long-term debt and other long-term liabilities ...Deferred income taxes...

  • Page 105
    ...long-term assets...Investment in related parties ...Total assets...$ Liabilities and Stockholders' Equity Current Liabilities: Accounts payable ...$ Accrued payable to retailers ...Other accrued liabilities ...Current portion of long-term debt and other long-term liabilities ...Deferred income taxes...

  • Page 106
    ...in thousands) Expenses: Direct operating ...Marketing...Research and development ...General and administrative ...Depreciation and other...Amortization of intangible assets...Total expenses ...Operating income...Other income (expense), net: Loss from equity method investments, net ...Interest income...

  • Page 107
    ...) Expenses: Direct operating ...Marketing...Research and development ...General and administrative ...Depreciation and other...Amortization of intangible assets...Total expenses ...Operating income (loss)...Other income (expense), net: Income (loss) from equity method investments, net Interest...

  • Page 108
    ...thousands) Expenses: Direct operating ...Marketing ...Research and development ...General and administrative ...Depreciation and other ...Amortization of intangible assets ...Total expenses...Operating income (loss) ...Other income (expense), net: Loss from equity method investments, net ...Interest...

  • Page 109
    ...Content library ...Prepaid expenses and other current assets ...Other assets...Accounts payable ...Accrued payable to retailers ...Other accrued liabilities ...Net cash flows from (used in) operating activities(1) ...Investing Activities: Purchases of property and equipment ...Proceeds from sale of...

  • Page 110
    ...868 $ Eliminations and Consolidation Reclassifications - - - - $ Outerwall Inc. Effect of exchange rate changes on cash ...Increase (decrease) in cash and cash equivalents ...Cash and cash equivalents: Beginning of period...End of period ...$ (1) Total 2,683 (128,741) 371,437 242,696 368 (134,361...

  • Page 111
    ...Content library ...Prepaid expenses and other current assets ...Other assets...Accounts payable ...Accrued payable to retailers ...Other accrued liabilities ...Net cash flows from (used in) operating activities(1) ...Investing Activities: Purchases of property and equipment ...Proceeds from sale of...

  • Page 112
    ... $ Eliminations and Consolidation Reclassifications - 354 (354) - $ Outerwall Inc. Effect of exchange rate changes on cash ...Increase (decrease) in cash and cash equivalents ...Cash and cash equivalents: Beginning of period...End of period ...$ (1) Total 1,538 88,543 282,894 371,437 (105) 72,761...

  • Page 113
    ... tax benefits related to share-based payments ...Proceeds from exercise of stock options, net...Net cash flows from financing activities ...Effect of exchange rate changes on cash ...Increase (decrease) in cash and cash equivalents(1)...Cash and cash equivalents: Beginning of period ...End of period...

  • Page 114
    ....7 million. On February 3, 2015, our board of directors approved a dividend policy and declared a quarterly cash dividend of $0.30 per share to be paid on March 18, 2015, to all stockholders of record as of the close of business on March 3, 2015. Future quarterly dividend payments will be subject to...

  • Page 115
    ...Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2014 as required by the Exchange Act Rule 13a-15(c). In making this assessment, we used the criteria set forth in the framework in Internal Control-Integrated Framework issued...

  • Page 116
    ... indicated below: Page Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of December 31, 2014 and 2013 ...Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012...Consolidated Statements of Stockholders' Equity...

  • Page 117
    ...Redbox Digital Entertainment Services, LLC.(29) Verizon and Redbox Digital Entertainment Services, LLC Withdrawal and Extinguishment of Rights Agreement, dated as of October 19, 2014. Asset Purchase Agreement by and among Redbox Automated Retail, LLC and NCR Corporation, dated as of February 3, 2012...

  • Page 118
    ... of Restricted Stock Award Agreement under the 2011 Incentive Plan for Performance-Based Awards made to Executives on or after June 27, 2013.(24) Form of Stock Option Grant Notice and Form of Stock Option Agreement under the 2011 Incentive Plan for Option Grants made to Nonemployee Directors on or...

  • Page 119
    ... Form of Stock Option Grant under 1997 Amended and Restated Equity Incentive Plan For Grants Made to Nonemployee Directors.(10) Summary of Director Compensation.(33) Policy on Reimbursement of Incentive Payments.(6) Offer Letter, dated January 2, 2013, between Coinstar, Inc. and J. Scott Di Valerio...

  • Page 120
    ...Limited, and Sigue Corporation.(19) Second Amendment to Stock Purchase Agreement, by and between Coinstar, Inc., CUHL Holdings Inc., and Sigue Corporation, dated as of May 31, 2012.(22) Offer Letter for Mark Horak, dated January 28, 2014.(28) Employment Agreement between Redbox Automated Retail, LLC...

  • Page 121
    ... or compensatory plan or arrangement. Portions of this exhibit have been omitted pursuant to a confidential treatment order by the Securities and Exchange Commission. Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 (File Number 000...

  • Page 122
    (32) (33) Incorporated by reference to the Registrant's Form 8-K filed on January 20, 2015 (File Number 000-22555). Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013 (File Number 000-22555). 114

  • Page 123
    ... 2015: Signature Title /S/ Nora M. Denzel Nora M. Denzel Interim Chief Executive Officer and Director (Principal Executive Officer) Chief Financial Officer (Principal Financial Officer) Chief Accounting Officer (Principal Accounting Officer) Chair of the Board Director Director Director Director...

  • Page 124
    ... and are plotted below as of December 31 of each fiscal year shown. The stock price performance shown in the graph is historical and not necessarily indicative of future price performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG OUTERWALL INC., THE NASDAQ COMPOSITE INDEX, AND THE RUSSELL...

  • Page 125
    ... P.O. Box 91258 Bellevue, WA 98009 (425) 943-8242 E-mail [email protected] WEBSITE outerwall.com ANNUAL MEETING Thursday, June 11, 2015 10:00 a.m. Pacific Time Bellefield Conference Center 1150 114th Avenue SE Bellevue, WA 98004 ANNUAL REPORT The annual report is available online...

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