Redbox 2012 Annual Report Download - page 68

In addition to the initial cash capital contribution, Redbox granted the Joint Venture a limited, non-exclusive,
non-transferable, royalty-free right and license to use certain Redbox trademarks, of which the preliminary
estimated fair value was approximately $30.0 million based on an evaluation of information available as of the
date of the grant. As a result, we recognized a gain of $19.5 million related to the pro-rata amount of fair value
given up in exchange for our 35.0% interest in the Joint Venture. See Note 18: Fair Value for additional
information about how we estimated the fair value of the Redbox trademarks. The initial excess of our cost of the
investment in the Joint Venture over our share of the Joint Venture’s equity will be used to adjust future
amortization expense.
Redbox’s ownership interest in the Joint Venture will be accounted for using the equity method of accounting.
During the first quarter of 2012, the transaction related costs of $4.4 million were recorded as a part of the equity
investment in the Joint Venture. We recognized a loss of approximately $22.5 million from our equity method
investment, representing our share of the Joint Venture’s operating results as well as the amortization of
differences in carrying amount and underlying equity for the twelve month periods ended December 31, 2012.
Redbox has certain rights to cause Verizon to acquire Redbox’s interest in the Joint Venture at fair value
(generally following the fifth anniversary of the LLC Agreement or in limited circumstances, at an earlier period
of time) and Verizon has certain rights to acquire Redbox’s interest in the Joint Venture at fair value (generally
following the seventh anniversary of the LLC Agreement, or, in limited circumstances, the fifth anniversary of
the LLC Agreement).
Other Equity Method Investments
We make strategic equity investments in external companies that provide automated self-service kiosk solutions.
During the first quarter of 2012, we increased our ownership percentage in ecoATM, Inc. (“ecoATM”) through
the purchase of $10.0 million in series B preferred stock. EcoATM operates automated self-service kiosks that
evaluate and buy-back used electronics directly from consumers for cash.
Our equity method investments and ownership percentages as of December 31, 2012, were as follows:
Dollars in thousands
Equity
Investment
Ownership
Percentage
Redbox Instant by Verizon .............................. $25,845 35%
Other equity investments ................................ 13,294 11% - 26%
Equity method investments .......................... $39,139
Income (loss) from Equity Method Investments
Income (loss) from equity method investments within our Consolidated Statements of Comprehensive Income is
composed of the following:
Dollars in thousands Year Ended December 31,
2012 2011 2010
Trademark gain .................................................... $19,500 $ — $ —
Proportionate share of net loss of equity method investees .................. (22,415) (1,591) —
Amortization of differences in carrying amount and underlying equity ........ (2,269) — —
Total (loss) from equity method investments ......................... $ (5,184) $(1,591) $ —
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