Redbox 2015 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    CREATING A BETTER EVER y DAY. TM

  • Page 3
    ... Redbox for new release movies and video games at the best value. Coinstar continues to deliver substantial margins and is exploring international expansion of its proven business model. With respect to ecoATM, we have a singular focus in 2016-achieving segment operating profitability for the year...

  • Page 4
    ...Chair) Past Chief Executive Officer Magellan Corporation Jeffrey J. Brown Chief Executive Officer and Founding Member Brown Equity Partners, LLC Nora M. Denzel Past Senior Vice President Intuit Inc. David M. Eskenazy President Merrill Gardens LLC Ross G. Landsbaum Chief Financial Officer ReachLocal...

  • Page 5
    2015 FORM 10-K

  • Page 6

  • Page 7
    ...2015 (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 January 29, 2016...

  • 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
    ... drive incremental retail traffic and revenue for retailers. In 2013, we changed our name from Coinstar, Inc. to Outerwall Inc. Our core offerings in automated retail include our Redbox business, where consumers can rent or purchase movies and video games from self-service kiosks ("Redbox" segment...

  • Page 12
    ...location totals are a limited number of Coinstar Exchange 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 trouble-free service to retailers such as Kroger and Walmart, and in Canada, Puerto Rico...

  • Page 13
    ... of movie titles, and the total box office in a particular quarter or year which may have lingering effects in subsequent periods. Significant recurring events that compete with customer interest for movie content such as the Olympics also have a negative impact on revenue from our Redbox segment...

  • Page 14
    ... movie content and changes in consumer content delivery and viewing options and preferences, including increased use of online streaming, video-on-demand, subscription video-on-demand and time- and place-shifting technologies; Increased availability and quality of original programming and similar...

  • 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
    ... lose consumers to our competitors because of the timing of our library. We have entered into licensing agreements with certain studios to allow rental of their titles on the "street date," and with other studios to make DVDs available for rent 28 days or more after the street date. Our business...

  • Page 17
    ...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 pay...

  • Page 18
    ... of movie titles, and the total box office in a particular quarter or year which may have lingering effects in subsequent periods. Significant recurring events that compete with customer interest for movie content such as the Olympics also have a negative impact on revenue from our Redbox segment...

  • Page 19
    ...may use our financial resources and management's time and focus to invest in other companies offering retail services, such as our acquisition of ecoATM, we may seek to grow businesses organically, or we may seek to offer new products or services on our current kiosks, such as Coinstar Exchange gift...

  • Page 20
    ... not have the right or power to direct the management or policies of companies we have invested in. Further, the evaluation and negotiation of potential acquisitions and investments, as well as the integration of acquired businesses, divert management time and other resources. Accordingly, we cannot...

  • Page 21
    ... 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 22
    ... planning, failures of information technology systems, interruptions in the communications network, or other factors, could seriously harm our business, financial condition and results of operations. In addition, our operational and financial performance is a direct reflection of consumer use...

  • Page 23
    ... of our business lines. 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 or if one or more of our current or former executives or key employees joins a competitor or...

  • Page 24
    ...fluctuations in the use of our different lines of business; changes in management; acquisition, merger, investment and disposition activities; share repurchases and dividends; announcements of technological innovations or new products or services by us or our competitors; announcements regarding the...

  • Page 25
    ... cash flow to fund our operations, capital expenditures, share repurchases, dividends and future business opportunities; restricting us from making strategic acquisitions or investments or causing us to make non-strategic divestitures; limiting our ability to obtain additional financing for working...

  • Page 26
    .... Our corporate administrative, marketing and product development facility in Bellevue, Washington is located in two office buildings, totaling 80,780 square feet under two leases, which expire December 31, 2019. Our Coinstar segment uses part of this space. Our Redbox subsidiary has offices in...

  • Page 27
    ... 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 without retail markup, markdown or commission and...

  • Page 28
    ... the quarter ended December 31, 2015: Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs Maximum Approximate Dollar Value (in thousands) of Shares that May Yet be Purchased Under the Plans or Programs Total Number of Shares Repurchased(1) Average Price Paid...

  • Page 29
    ...for all periods presented includes the results of operations from: our Redbox Canada operations, which we shut down during the first quarter of 2015; four ventures previously included in our former New Ventures segment, Orango, Rubi, Crisp Market, and Star Studio, which were discontinued during 2013...

  • Page 30
    ... Report. Overview We are a leading provider of automated retail solutions offering convenient products and services that benefit consumers and drive incremental retail traffic and revenue for retailers. Our automated retail business model leverages technology advancements that allow delivery of new...

  • Page 31
    ...customer base, attracting new customers, testing pricing strategies, leveraging the variable cost structure of the business, improving the Blu-ray rental mix, expanding the availability and depth of new generation video game content and utilizing our customer management tools. Blu-ray drives revenue...

  • Page 32
    ...of our Redbox operations in Canada ("Redbox Canada"), which we shut down during the first quarter of 2015. See Note 12: Discontinued Operations in our Notes to Consolidated Financial Statements for additional information; In the first quarter of 2015, we added ecoATM as a separate reportable segment...

  • Page 33
    ... LLC ("Fox") that maintains a 28-day window on Blu-ray Disc and DVD titles through June 30, 2017, and includes a revenue sharing arrangement between Redbox and Fox; During the three months ended June 30, 2015, we repurchased 284,537 shares of our common stock at an average price per share...

  • Page 34
    ... movie content from price-sensitive customers in the first eleven months of 2015 following the price increases which is heightened in periods of weak content; and A decline in video game rentals due to consumer transition to new generation platforms, limited new release titles available for the new...

  • Page 35
    ... stock as part of our acquisition of ecoATM in the third quarter of 2013; and $3.3 million increase in operating income within our Coinstar segment primarily due to a $3.0 million increase in revenue and lower operating expenses including direct operating, depreciation and amortization, marketing...

  • Page 36
    ... segment, primarily due to growth in U.S. same store sales driven by a price increase effective October 1, 2013, higher volume in the U.K. due to an increased kiosk base, growth in U.K. same store sales driven by a price increase effective August 1, 2014 and growth in the number of Coinstar Exchange...

  • Page 37
    ...granted to executives, non-employee directors and employees ("segment operating income"). Segment 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...

  • Page 38
    ...Note 14: Business Segments and Enterprise-Wide Information in our Notes to Consolidated Financial Statements. Revenue Our Redbox segment generates revenue primarily through fees charged to rent or purchase a movie or video game, and we pay retailers a percentage of our revenue. Our Coinstar segment...

  • Page 39
    ... of movie titles, and the total box office in a particular quarter or year, which may have lingering effects in subsequent periods. Now that we have substantially completed our U.S. build-out of Redbox kiosks, optimizing our Redbox business in the United States will depend substantially upon growth...

  • Page 40
    ...revenue, lower credit card fees driven by the lower volume of rentals, lower wireless network charges tied to data usage under new contracts starting in January 2015, and lower costs due to cost containment initiatives related to our field service operations and third party fees for customer service...

  • Page 41
    ...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 42
    ... in direct operating expenses due to lower wireless charges tied to data usage under new contracts in 2015, lower vehicle fleet expenses including fuel cost savings from reduced gas prices and a reduction in selling and customer service costs, partially offset by increased revenue sharing costs from...

  • Page 43
    ... across all grocery locations effective October 1, 2013; Higher volume in the United Kingdom due to an increased U.K. kiosk base; Same store sales growth in the United Kingdom driven by a price increase on August 1, 2014; and Growth in the number of Coinstar Exchange kiosks. The average transaction...

  • Page 44
    ... Notes to Consolidated Financial Statements for additional information. During the first quarter of 2015, we added ecoATM as a separate reportable segment. Previously, the results of ecoATM along with those of other self-service concepts were included in our former New Ventures segment. The combined...

  • Page 45
    ... the following; • $64.9 million increase in direct operating expenses mainly due to costs associated with the acquisition, transportation and processing of mobile devices, as well as costs for servicing of our kiosks and payments to our retailers. Additionally, in 2014 the highly successful launch...

  • Page 46
    ... information about our equity method investments is provided in Note 7: Equity Method Investments in our Notes to Consolidated Financial Statements. Interest Expense, Net Years Ended December 31, Dollars in thousands Cash interest expense ...$ Non-cash interest expense: Amortization of debt discount...

  • Page 47
    ... dollar exchange rates on our Coinstar operations, partially offset by a $1.0 million gain on the purchase of Gazelle recognized in 2015. See Note 3: Business Combinations in our Notes to Consolidated Financial Statements for more information on the gain on the purchase of Gazelle. Comparing 2014...

  • Page 48
    ... cash issued in conjunction with our acquisition of ecoATM and attributable to postcombination services as they are fixed amount acquisition related awards and not indicative of the directly controllable future business results, v) loss from equity method investments, which represents our share...

  • Page 49
    ... indemnification reserve releases ...Gain on previously held equity interest in ecoATM...Core adjusted EBITDA from continuing operations ...$ * (1) Not Meaningful Includes both non-cash share-based compensation for executives, non-employee directors and employees as well as share-based payments for...

  • Page 50
    ... continuing operations ...$ Weighted average diluted common shares ...Add: diluted common equivalent shares of participating securities ...Weighted average diluted shares (treasury stock method) ...2015 48,117 1,329 49,446 17,487 155 17,642 $ $ 2014 120,748 3,929 124,677 20,503 196 20,699 $ $ 2013...

  • Page 51
    ... information to users of the financial statements regarding our ability to service, incur or pay down indebtedness and repurchase our securities as well as additional information about our capital structure; and are reported quarterly to support covenant compliance under our credit agreement...

  • Page 52
    ... planned levels or if our Redbox, Coinstar or ecoATM kiosks generate lower than anticipated revenue or operating results, then our cash needs may increase. Furthermore, our future capital requirements will depend on a number of factors, including consumer use of our products and services, the timing...

  • Page 53
    ...879,719 (13,125) 866,594 2019 Notes 2021 Notes Credit Facility Term Loans Revolving Line of Credit Total Debt Senior Notes Dollars in thousands As of December 31, 2014: Principal ...$ Discount ...Total ...Less: current portion ...Total long-term portion...$ 350,000 (4,296) 345,704 - 345,704 $ $ 300...

  • Page 54
    ... and Restated Credit Agreement requires principal amortization payments under the Term Loan as follows: Dollars in thousands 2016 ...$ 2017 ...2018 ...2019 ...Total ...$ Repayment Amount 13,125 15,000 18,750 90,000 136,875 The Revolving Line matures on June 24, 2019, at which time all outstanding...

  • Page 55
    ... letter of credit agreements. Other Contingencies During the year ended December 31, 2013, we resolved a previously disclosed loss contingency related to a supply agreement and recorded a benefit of $11.4 million in the direct operating line item in our Consolidated Statements of Comprehensive...

  • Page 56
    ... we make may change in the future and could have a material effect on our financial statements. Content Library Content library consists of movies and video games available for rent or purchase. We obtain our movie and video game content primarily through revenue sharing agreements and license...

  • Page 57
    ... of future cash flows predicated on estimated growth in kiosks, revenue and profitability measures. Additionally, fair value may be negatively impacted by changes in our strategy related to ecoATM and increased competition from companies whose primary business consists of the purchase of used...

  • Page 58
    ...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 59
    ... 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 60
    .... Based on the principal balance of our outstanding term loans of $136.9 million as of December 31, 2015, an increase or decrease of one percentage point in the interest rate over the next year would increase or decrease our annual interest expense by approximately $1.4 million, before tax benefits...

  • Page 61
    ...quarterly financial data for each of the eight quarters in the two-year period ended December 31, 2015 is as follows: 2015 (In thousands, except per share data) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Revenue ...$ Income (loss) from continuing operations before income taxes . . $ Income tax...

  • 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
    ... over financial reporting of Gazelle. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Outerwall Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements...

  • Page 64
    .... CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2015 2014 Assets Current Assets: Cash and cash equivalents ...$ Accounts receivable, net of allowances of $1,272 and $2,223...Content library ...Prepaid expenses and other current assets ...Total current assets ...Property...

  • Page 65
    OUTERWALL INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands, except per share data) Year Ended December 31, 2015 2014 2013 Revenue...$ Expenses: Direct operating(1) ...Marketing ...Research and development ...General and administrative ...Restructuring and related costs (Note 11) ...

  • Page 66
    ...) Common Stock Shares Amount Treasury Stock Retained Earnings Total 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...

  • 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
    ... $3.7 million in fees and expenses relating to the tender offer recorded as part of the cost of treasury stock in our Consolidated Balance Sheets. The cash payments for the tender offer fees in 2014 were $3.7 million. (2) (3) (4) See accompanying Notes to Consolidated Financial Statements 60

  • Page 69
    ... Other Intangible Assets ...Equity Method Investments ...Debt and Other Long-Term Liabilities...Repurchases of Common Stock ...Share-Based Payments ...Restructuring ...Discontinued Operations ...Earnings Per Share ...Business Segments and Enterprise-Wide Information ...Fair Value ...Commitments and...

  • Page 70
    ... FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2015, 2014, 2013 Note 1: Organization and Business Description of Business We are a leading provider of automated retail solutions offering convenient products and services that benefit consumers and drive incremental retail traffic and revenue...

  • Page 71
    ... to discontinue operating SAMPLEit in the fourth quarter of 2015, all SAMPLEit kiosks were removed from their locations during January 2016. Note 2: Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of...

  • Page 72
    ... Library Content library consists of movies and video games available for rent or purchase. We obtain our movie and video game content primarily through revenue sharing agreements and license agreements with studios and game publishers, as well as through distributors and other suppliers. The cost...

  • Page 73
    ...shut down our Redbox Canada operations as the business was not meeting the Company's performance expectations. On March 31, 2015, we completed the disposal of the Redbox Canada operations. As a result, we updated certain estimates used in the preparation of the financial statements and the remaining...

  • Page 74
    ... 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 accumulate points, we...

  • Page 75
    ... our net movie or video game rental revenue or a fixed fee and is recorded in our Consolidated Statements of Comprehensive Income within Direct operating expenses. The fee arrangements are based on our negotiations and evaluation of certain factors with the retailers such as total revenue, long-term...

  • Page 76
    ... quarter of 2015, the Two-Class Method became significantly more dilutive than the previously applied treasury stock method as a result of stock repurchases increasing the average number of unvested restricted awards ("participating securities") as a percentage of total common shares outstanding...

  • Page 77
    ... January 1, 2016. We elected to early adopt this new guidance in the fourth quarter of 2015 and have applied the changes retrospectively. The changes to our 2014 Consolidated Balance Sheet as a result of adopting the new guidance are as follow: In thousands, except per share data As Reported...

  • Page 78
    ... to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are currently in the process of evaluating the impact of ASU 2014-09. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern...

  • Page 79
    ... the sale and purchase of used mobile phones, computers and tablets. This taxable transaction closed on November 10, 2015. The primary reasons for the business combination were to help drive our ecoATM business to profitability, provide margin and revenue uplift opportunities, and leverage a direct...

  • Page 80
    ...31, Dollars in thousands 2015 2014 Payroll related expenses ...$ Studio revenue share and other content related expenses ...Business taxes...Insurance ...Deferred revenue ...Income taxes payable ...Accrued interest expense ...Accrued early lease termination and sublease expenses ...Service contract...

  • Page 81
    ... approach and a guideline public company market based approach. The DCF methodology requires significant judgment in selecting appropriate inputs including the risk adjusted market cost of capital for the discount rate, the terminal growth rate and projections of future cash flows, all of which are...

  • Page 82
    ... growth in kiosks, revenue and profitability measures. Additionally, fair value may be negatively impacted by changes in our strategy related to the ecoATM reporting unit and factors outside of our control such as increased competition from companies whose primary business consists of the purchase...

  • Page 83
    ...,800 (6,109) 4,691 $ 67,097 $ 64,691 Amortization expense was as follows: Year Ended December 31, Dollars in thousands 2015 2014 2013 Retailer relationships...$ Developed technology...Trade names ...Other ...Total amortization of intangible assets ...$ Less: amortization included in discontinued...

  • Page 84
    ...Income (Loss) from Equity Method Investments and Summarized Financial Information Income (loss) from equity method investments within our Consolidated Statements of Comprehensive Income is composed of the following: Year Ended December 31, Dollars in thousands 2015 2014 2013 Gain on previously held...

  • Page 85
    ... Dollars in thousands 2015 Year Ended December 31, 2014 2013 Revenue...$ Cost of sales and service ...$ Net loss from continuing operations ...$ 7,389 10,129 6,107 $ $ $ 29,963 68,732 140,919 $ $ $ 15,824 25,092 134,911 Note 8: Debt and Other Long-Term Liabilities Debt Senior Notes Credit...

  • Page 86
    Interest Expense Year Ended December 31, Dollars in thousands 2015 2014 2013 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 ...(Gain)...

  • Page 87
    ...our office building renovation in Oakbrook Terrace, Illinois; Bellevue, Washington; and San Diego, California as well as the related unrecognized tax benefits as follows: December 31, Dollars in thousands 2015 2014 Tenant improvement and deferred rent and other ...$ Unrecognized tax benefit...Total...

  • Page 88
    ... 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. Note 10: Share-Based Payments We currently grant share-based awards to our employees...

  • Page 89
    ... Life Dollars in thousands Unrecognized share-based payments expense: Share-based compensation - stock options ...$ Share-based compensation - restricted stock ...Share-based payments for content arrangements...Total unrecognized share-based payments expense...$ 149 19,032 1,090 20,271 0.9 years...

  • Page 90
    ...license agreements with certain movie studios. The expense related to these agreements is included within 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...

  • Page 91
    ... the fourth quarter of 2015 under ASC 712, consistent with management's approval and commitment to the restructuring plan. We had a substantive plan in place, for purposes of ASC 712, based on the fact that the termination benefits to be paid to our employees were similar to the termination benefits...

  • Page 92
    Year Ended December 31, Dollars in thousands 2015 Redbox Severance...$ Lease termination and related costs (excluding related asset impairments) ...Purchase commitment settlement costs ...Total Redbox restructuring costs ...Coinstar Severance...Lease termination and related costs (excluding related...

  • Page 93
    ... related to the terminated leases. 2013 Restructuring During the 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...

  • Page 94
    ... table sets forth the components of discontinued operations included in our Consolidated Statements of Comprehensive Income: Year Ended December 31, Dollars in thousands 2015 2014 2013 Redbox Canada revenue ...$ Certain new ventures revenue ...Total revenue ...$ Redbox Canada loss before income tax...

  • Page 95
    ... ...Content library...Prepaid and other current assets ...Accounts payable ...Accrued payables to retailers ...Other accrued liabilities ...Net cash flows from operating activities ...$ Investing activities: Purchase of property, plant and equipment...Total cash flows used in investing activities...

  • Page 96
    ... of stock repurchases increasing the average number of unvested restricted awards as a percentage of total common shares outstanding. The Two-Class Method is an earnings allocation formula that treats a participating security, as having rights to earnings that otherwise would have been available to...

  • Page 97
    ... to executives, non-employee directors and employees ("segment operating income (loss)"). Segment operating income (loss) contains internally allocated costs of our shared service support functions, including but not limited to, corporate executive management, business development, sales, finance...

  • Page 98
    Dollars in thousands Year Ended December 31, 2015 Redbox Coinstar ecoATM All Other Corporate Unallocated Total Revenue ...$ 1,760,899 Expenses: Direct operating ...Marketing...Research and development ...General and administrative ...Restructuring and related costs (Note 11) ...Goodwill impairment ...

  • Page 99
    Dollars in thousands Year Ended December 31, 2013 Redbox Coinstar ecoATM All Other Corporate Unallocated Total Revenue ...$ 1,967,715 Expenses: Direct operating ...Marketing...Research and development ...General and administrative ...Restructuring and related costs (Note 11) ...Segment operating ...

  • Page 100
    ... 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...

  • Page 101
    ... 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...

  • Page 102
    ... stock to Sony during the fourth quarter of 2015, which we issued on October 2, 2015. On June 5, 2015, Redbox entered into an amendment to the existing April 22, 2010, agreement with Twentieth Century Fox Home Entertainment LLC ("Fox") that maintains a 28-day window on Blu-ray Disc and DVD titles...

  • Page 103
    ... 9/30/2016 12/31/2016 3/31/2017 9/30/2016 12/31/2015 (3) (4) Delay Day & Date Day & Date Delay Day & Date Delay (1) (2) (2) (1) (2) (1) Content licensed under the agreement is available for rental after a certain number of days following the retail release. Subsequent to year end, Redbox entered...

  • Page 104
    ... we could make any such estimate. Other Contingencies During the year ended December 31, 2013, we resolved a previously disclosed loss contingency related to a supply agreement and recorded a benefit of $11.4 million in the direct operating line item in our Consolidated Statements of Comprehensive...

  • Page 105
    ... income taxes...Goodwill and other intangible assets, net ...Other 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...

  • Page 106
    ... income taxes...Goodwill and other intangible assets, net ...Other 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...

  • Page 107
    ...$ $ (in thousands) Expenses: Direct operating ...Marketing ...Research and development ...General and administrative ...Restructuring and related costs ...Depreciation and other ...Amortization of intangible assets ...Goodwill impairment ...Total expenses...Operating income ...Other income (expense...

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

  • Page 109
    ... equity method investments, net...Interest income (expense), net ...Other, net...Total other income (expense), net...Income from continuing operations before income taxes. . Income tax benefit (expense) ...Income from continuing operations ...Loss from discontinued operations, net of tax ...Equity...

  • Page 110
    ..., net...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...

  • Page 111
    ... 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 2,829 (20,147) 242,696 222,549 - (20,722) 180,889 160,167 During 2015 we discontinued our Redbox operations in Canada. Cash flows...

  • Page 112
    ... ...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 Investing Activities: Purchases of property and equipment ...Proceeds from sale of...

  • Page 113
    ... of period ...End of period ...$ (1) 315,250 180,889 368 (134,361) Total 2,683 (128,741) 371,437 242,696 During the first quarter of 2015, we discontinued our Redbox operations in Canada and during 2013, we discontinued four ventures, Orango, Rubi, Crisp Market, and Star Studio. Cash flows...

  • Page 114
    ...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 115
    ... of period ...End of period ...$ (1) 242,489 315,250 (105) 72,761 Total 1,538 88,543 282,894 371,437 During the first quarter of 2015, we discontinued our Redbox operations in Canada and during 2013, we discontinued four ventures, Orango, Rubi, Crisp Market, and Star Studio. Cash flows from...

  • Page 116
    ...: Year Ended December 31, 2015 2014 2013 U.S Federal tax expense at statutory rates...State income taxes, net of federal benefit ...Federal and state credits ...Domestic production activities deduction ...Goodwill Impairment ...Recognition of outside basis differences...ecoATM option payments...

  • Page 117
    .... Unrecognized Tax Benefits The aggregate changes in the balance of unrecognized tax benefits were as follows: Year Ended December 31, Dollars in thousands 2015 2014 2013 Balance, beginning of the year ...$ Additions based on tax positions related to the current year...Additions for tax positions...

  • Page 118
    ...411) (30,486) $ Dollars in thousands 2015 2013 Increase in valuation allowance ...$ 243 $ - $ 6,898 The increase in our valuation allowance is due to changes in the expected future and actual utilization of capital losses and state tax credit carryforwards. Deferred Tax Assets Relating to...

  • Page 119
    ...our total estimated movie commitments to purchase content was approximately $640.5 million. Dividend On February 3, 2016, the Board declared a quarterly cash dividend of $0.30 per share expected to be paid on March 29, 2016, to all stockholders of record as of the close of business on March 15, 2016...

  • Page 120
    ...management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2015, as required by the Exchange Act Rule 13a-15(c). In making this assessment, we used the criteria set...

  • Page 121
    ... indicated below: Page Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of December 31, 2015 and 2014 ...Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013...Consolidated Statements of Stockholders' Equity...

  • Page 122
    ... of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Annual Report on Form 10-K and the Company's other public filings, which are available without charge through the SEC's website at http:// www.sec.gov. Exhibit Number Description...

  • Page 123
    ... the 2011 Incentive Plan for Performance-Based Awards made to Executives on or after June 27, 2013 and before February 12, 2015.(17) Form of Notice of Restricted Stock Award and Restricted Stock Award Agreement under the 2011 Incentive Plan for Performance-Based Awards made to Executives on or after...

  • Page 124
    ... Stock Award Agreement under the 1997 Amended and Restated Equity Incentive Plan for awards made after December 12, 2005 to Plan Participants other than the CEO, COO or CFO.(4) Policy on Reimbursement of Incentive Payments.(4) Offer Letter, dated January 2, 2013, between Coinstar, Inc. and J. Scott...

  • Page 125
    ... 29, 2015.(25) Change of Control Agreement between Outerwall Inc. and Erik E. Prusch, executed on July 29, 2015.(25) Offer Letter between Outerwall Inc. and Jeffrey W. Kist.(26) Subsidiaries. Consent of Independent Registered Public Accounting Firm-KPMG LLP. Certification of Chief Executive Officer...

  • Page 126
    ... a management contract 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 Form 10-Q for the quarter ended September 30, 2013 (File Number...

  • Page 127
    ...signed on its behalf by the undersigned thereunto duly authorized. OUTERWALL INC. By: /s/ Galen C. Smith Galen C. Smith Chief Financial Officer February 4, 2016 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 128

  • Page 129
    ... July 7, 2016 10:00 a.m. Pacific Time Bellefield Office Park Conifer Building 1450 114th Avenue SE Bellevue, WA 98004 ANNUAL REPORT Enclosed is a copy of our Annual Report and Form 10-K as filed with the U.S. Securities and Exchange Commission. Additional copies are available without charge upon...

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