Note 15: Guarantor Subsidiaries

Certain of our wholly owned subsidiaries have, jointly and severally, fully and unconditionally guaranteed the Senior Notes. Pursuant to SEC regulations, we have presented in columnar format the condensed consolidating financial information for Outerwall Inc., the guarantor subsidiaries on a combined basis, and all non-guarantor subsidiaries on a combined basis in the following tables:



CONSOLIDATING BALANCE SHEETS
(unaudited)
	As of June 30, 2016
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Assets
Current Assets:
Cash and cash equivalents	$	152,729		$	17,455	$	28,864		$	—		$	199,048
Accounts receivable, net of allowances	1,640			23,663		83			—			25,386
Content library	—			147,815		—			—			147,815
Prepaid expenses and other current assets	12,501			34,291		330			—			47,122
Intercompany receivables	15,212			636,566		1,207			(652,985		)	—
Total current assets	182,082			859,790		30,484			(652,985		)	419,371
Property and equipment, net	87,236			170,440		12,738			—			270,414
Deferred income taxes	—			—		2,456			—			2,456
Goodwill and other intangible assets, net	249,696			283,238		—			—			532,934
Other long-term assets	377			1,001		111			—			1,489
Investment in related parties	974,379			28,373		—			(1,002,752		)	—
Total assets	$	1,493,770		$	1,342,842	$	45,789		$	(1,655,737	)	$	1,226,664
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	8,857		$	117,574	$	223		$	—		$	126,654
Accrued payable to retailers	68,924			25,048		6,360			—			100,332
Other accrued liabilities	65,424			89,249		674			—			155,347
Current portion of long-term debt and other long-term liabilities	18,193			5		220			—			18,418
Intercompany payables	527,722			115,511		9,752			(652,985		)	—
Total current liabilities	689,120			347,387		17,229			(652,985		)	400,751
Long-term debt and other long-term liabilities	747,114			19,294		162			—			766,570
Deferred income taxes	11,634			1,784		24			—			13,442
Total liabilities	1,447,868			368,465		17,415			(652,985		)	1,180,763
Commitments and contingencies
Stockholders’ Equity:
Preferred stock	—			—		3,000			(3,000		)	—
Common stock	604,392			252,512		4,635			(371,660		)	489,879
Treasury stock	(1,149,261		)	—		—			—			(1,149,261		)
Retained earnings	591,844			721,865		21,521			(628,092		)	707,138
Accumulated other comprehensive income (loss)	(1,073		)	—		(782		)	—			(1,855		)
Total stockholders’ equity	45,902			974,377		28,374			(1,002,752		)	45,901
Total liabilities and stockholders’ equity	$	1,493,770		$	1,342,842	$	45,789		$	(1,655,737	)	$	1,226,664



CONSOLIDATING BALANCE SHEETS
(unaudited)
	As of December 31, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations and Consolidation Reclassifications			Total
Assets
Current Assets:
Cash and cash equivalents	$	160,167		$	19,372	$	43,010	$	—		$	222,549
Accounts receivable, net of allowances	3,983			33,269		1,212		—			38,464
Content library	—			188,490		—		—			188,490
Prepaid expenses and other current assets	17,720			33,049		599		—			51,368
Intercompany receivables	35,654			527,996		426		(564,076		)	—
Total current assets	217,524			802,176		45,247		(564,076		)	500,871
Property and equipment, net	97,659			204,081		14,273		—			316,013
Deferred income taxes	—			—		2,606		—			2,606
Goodwill and other intangible assets, net	249,703			290,811		—		—			540,514
Other long-term assets	747			1,293		167		—			2,207
Investment in related parties	921,456			27,798		—		(949,254		)	—
Total assets	$	1,487,089		$	1,326,159	$	62,293	$	(1,513,330	)	$	1,362,211
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Accounts payable	$	16,127		$	167,694	$	189	$	—		$	184,010
Accrued payable to retailers	71,947			30,157		12,994		—			115,098
Other accrued liabilities	57,025			82,401		2,011		—			141,437
Current portion of long-term debt and other long-term liabilities	16,832			—		299		—			17,131
Intercompany payables	459,789			85,487		18,800		(564,076		)	—
Total current liabilities	621,720			365,739		34,293		(564,076		)	457,676
Long-term debt and other long-term liabilities	873,476			19,882		159		—			893,517
Deferred income taxes	13,965			19,083		44		—			33,092
Total liabilities	1,509,161			404,704		34,496		(564,076		)	1,384,285
Commitments and contingencies
Stockholders’ Equity (Deficit):
Preferred stock	—			—		3,000		(3,000		)	—
Common stock	599,675			252,727		4,636		(371,875		)	485,163
Treasury stock	(1,151,063		)	—		—		—			(1,151,063		)
Retained earnings	530,140			668,728		18,963		(574,379		)	643,452
Accumulated other comprehensive income (loss)	(824		)	—		1,198		—			374
Total stockholders’ equity (deficit)	(22,072		)	921,455		27,797		(949,254		)	(22,074		)
Total liabilities and stockholders’ equity (deficit)	$	1,487,089		$	1,326,159	$	62,293	$	(1,513,330	)	$	1,362,211



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
	Three Months Ended June 30, 2016
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	73,700		$	433,859		$	10,468		$	—		$	518,027
Expenses:
Direct operating	37,633			309,105			4,843			—			351,581
Marketing	410			7,010			2			—			7,422
Research and development	—			1,317			—			—			1,317
General and administrative	11,949			35,529			203			—			47,681
Restructuring and related costs	3			398			—			—			401
Depreciation and other	6,547			26,417			1,024			—			33,988
Amortization of intangible assets	4			3,786			—			—			3,790
Total expenses	56,546			383,562			6,072			—			446,180
Operating income	17,154			50,297			4,396			—			71,847
Other income (expense), net:
Loss from equity method investments, net	(208		)	—			—			—			(208		)
Interest income (expense), net	(2,715		)	(7,539		)	(47		)	—			(10,301		)
Other, net	3,229			122			(3,128		)	—			223
Total other income (expense), net	306			(7,417		)	(3,175		)	—			(10,286		)
Income from continuing operations before income taxes	17,460			42,880			1,221			—			61,561
Income tax expense	(6,850		)	(13,944		)	(219		)	—			(21,013		)
Income from continuing operations	10,610			28,936			1,002			—			40,548
Equity in income of subsidiaries	29,938			1,002			—			(30,940		)	—
Net income (loss)	40,548			29,938			1,002			(30,940		)	40,548
Foreign currency translation adjustment⁽¹⁾	(51		)	—			(1,629		)	—			(1,680		)
Comprehensive income (loss)	$	40,497		$	29,938		$	(627	)	$	(30,940	)	$	38,868


(1)	Foreign currency translation adjustment had no tax effect for the three months ended June 30, 2016.



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
	Three Months Ended June 30, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications		Total
Revenue	$	68,687		$	465,039		$	11,643		$	—	$	545,369
Expenses:
Direct operating	35,397			328,952			5,270			—		369,619
Marketing	1,477			6,543			27			—		8,047
Research and development	1			2,038			—			—		2,039
General and administrative	11,767			36,820			196			—		48,783
Restructuring and related costs	—			—			—			—		—
Depreciation and other	8,051			36,063			1,060			—		45,174
Amortization of intangible assets	4			3,305			—			—		3,309
Goodwill impairment	—			85,890			—			—		85,890
Total expenses	56,697			499,611			6,553			—		562,861
Operating income	11,990			(34,572		)	5,090			—		(17,492		)
Other income (expense), net:
Loss from equity method investments, net	(133		)	—			—			—		(133		)
Interest income (expense), net	(12,485		)	317			(15		)	—		(12,183		)
Other, net	3,142			80			(2,580		)	—		642
Total other income (expense), net	(9,476		)	397			(2,595		)	—		(11,674		)
Income (loss) from continuing operations before income taxes	2,514			(34,175		)	2,495			—		(29,166		)
Income tax benefit (expense)	5,981			(23,736		)	(430		)	—		(18,185		)
Income (loss) from continuing operations	8,495			(57,911		)	2,065			—		(47,351		)
Income (loss) from discontinued operations, net of tax	(856		)	1,221			1,370			—		1,735
Equity in income of subsidiaries	(53,255		)	3,435			—			49,820		—
Net income (loss)	(45,616		)	(53,255		)	3,435			49,820		(45,616		)
Foreign currency translation adjustment⁽¹⁾	638			—			(165		)	—		473
Comprehensive income (loss)	$	(44,978	)	$	(53,255	)	$	3,270		$	49,820	$	(45,143	)


(1)	Foreign currency translation adjustment had no tax effect for the three months ended June 30, 2015.



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
	Six Months Ended June 30, 2016
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	135,946		$	897,436		$	20,601		$	—		$	1,053,983
Expenses:
Direct operating	71,989			646,046			9,513			—			727,548
Marketing	1,209			15,433			2			—			16,644
Research and development	—			2,362			—			—			2,362
General and administrative	22,863			72,193			395			—			95,451
Restructuring and related costs	465			3,211			—			—			3,676
Depreciation and other	12,961			55,130			2,015			—			70,106
Amortization of intangible assets	7			7,573			—			—			7,580
Total expenses	109,494			801,948			11,925			—			923,367
Operating income	26,452			95,488			8,676			—			130,616
Other income (expense), net:
Loss from equity method investments, net	(415		)	—			—			—			(415		)
Interest income (expense), net	5,232			(15,681		)	(94		)	—			(10,543		)
Other, net	5,995			509			(5,052		)	—			1,452
Total other income (expense), net	10,812			(15,172		)	(5,146		)	—			(9,506		)
Income from continuing operations before income taxes	37,264			80,316			3,530			—			121,110
Income tax expense	(14,672		)	(26,630		)	(809		)	—			(42,111		)
Income from continuing operations	22,592			53,686			2,721			—			78,999
Equity in income of subsidiaries	56,407			2,721			—			(59,128		)	—
Net income (loss)	78,999			56,407			2,721			(59,128		)	78,999
Foreign currency translation adjustment⁽¹⁾	(249		)	—			(1,980		)	—			(2,229		)
Comprehensive income	$	78,750		$	56,407		$	741		$	(59,128	)	$	76,770


(1)	Foreign currency translation adjustment had no tax effect for the six months ended June 30, 2016.



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
	Six Months Ended June 30, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	127,497		$	1,004,320		$	22,188		$	—		$	1,154,005
Expenses:
Direct operating	69,123			695,363			10,317			—			774,803
Marketing	2,991			13,449			27			—			16,467
Research and development	(83		)	4,206			—			—			4,123
General and administrative	23,823			73,115			401			—			97,339
Restructuring and related costs	551			15,300			—			—			15,851
Depreciation and other	12,700			73,046			2,114			—			87,860
Amortization of intangible assets	7			6,611			—			—			6,618
Goodwill impairment	—			85,890			—			—			85,890
Total expenses	109,112			966,980			12,859			—			1,088,951
Operating income	18,385			37,340			9,329			—			65,054
Other income (expense), net:
Loss from equity method investments, net	(265		)	—			—			—			(265		)
Interest income (expense), net	(24,881		)	692			(65		)	—			(24,254		)
Other, net	5,578			64			(7,346		)	—			(1,704		)
Total other income (expense), net	(19,568		)	756			(7,411		)	—			(26,223		)
Income (loss) from continuing operations before income taxes	(1,183		)	38,096			1,918			—			38,831
Income tax benefit (expense)	5,433			(49,046		)	(414		)	—			(44,027		)
Income (loss) from continuing operations	4,250			(10,950		)	1,504			—			(5,196		)
Income (loss) from discontinued operations, net of tax	668			(27,833		)	22,344			—			(4,821		)
Equity in income of subsidiaries	(14,935		)	23,848			—			(8,913		)	—
Net income (loss)	(10,017		)	(14,935		)	23,848			(8,913		)	(10,017		)
Foreign currency translation adjustment⁽¹⁾	574			—			2,753			—			3,327
Comprehensive income (loss)	$	(9,443	)	$	(14,935	)	$	26,601		$	(8,913	)	$	(6,690	)


(1)	Foreign currency translation adjustment had no tax effect for the six months ended June 30, 2015.



CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited)
	Six Months Ended June 30, 2016
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Operating Activities:
Net income	$	78,999		$	56,407		$	2,721		$	(59,128	)	$	78,999
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and other	12,961			55,130			2,015			—			70,106
Amortization of intangible assets	7			7,573			—			—			7,580
Share-based payments expense	6,984			2,520			—			—			9,504
Deferred income taxes	(1,559		)	(17,300		)	301			—			(18,558		)
Restructuring, impairment and related costs	57			304			—			—			361
Loss from equity method investment, net	415			—			—			—			415
Amortization of deferred financing fees and debt discount	1,251			—			—			—			1,251
Gain from early extinguishment of debt	(11,446		)	—			—			—			(11,446		)
Other	(242		)	(38		)	—			—			(280		)
Equity in income of subsidiaries	(56,407		)	(2,721		)	—			59,128			—
Cash flows from changes in operating assets and liabilities:
Accounts receivable, net	2,343			9,605			1,237			—			13,185
Content library	—			40,849			—			—			40,849
Prepaid expenses and other current assets	5,229			(207		)	241			—			5,263
Other assets	—			291			42			—			333
Accounts payable	(2,539		)	(49,970		)	49			—			(52,460		)
Accrued payable to retailers	(3,022		)	(5,109		)	(6,267		)	—			(14,398		)
Other accrued liabilities	6,872			5,993			(1,344		)	—			11,521
Net cash flows from (used in) operating activities	39,903			103,327			(1,005		)	—			142,225
Investing Activities:
Purchases of property and equipment	(16,424		)	(10,989		)	(961		)	—			(28,374		)
Proceeds from sale of property and equipment	—			92			—			—			92
Investments in and advances to affiliates	104,336			(94,347		)	(9,989		)	—			—
Net cash flows from (used in) investing activities	87,912			(105,244		)	(10,950		)	—			(28,282		)
Financing Activities:
Proceeds from new borrowing on Credit Facility	176,000			—			—			—			176,000
Principal payments on Credit Facility	(244,000		)	—			—			—			(244,000		)
Repurchases of notes	(47,507		)	—			—			—			(47,507		)
Dividends paid	(15,122		)	—			—			—			(15,122		)
Principal payments on capital lease obligations and other debt	(2,902		)	—			(175		)	—			(3,077		)
Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options	(1,472		)	—			—			—			(1,472		)
Net cash flows used in financing activities	(135,003		)	—			(175		)	—			(135,178		)
Effect of exchange rate changes on cash	(250		)	—			(2,016		)	—			(2,266		)
Increase (decrease) in cash and cash equivalents	(7,438		)	(1,917		)	(14,146		)	—			(23,501		)
Cash and cash equivalents:
Beginning of period	160,167			19,372			43,010			—			222,549
End of period	$	152,729		$	17,455		$	28,864		$	—		$	199,048



CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited)
	Six Months Ended June 30, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Operating Activities:
Net income	$	(10,017	)	$	(14,935	)	$	23,848		$	(8,913	)	$	(10,017	)
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and other	12,700			74,892			6,126			—			93,718
Amortization of intangible assets	7			6,611			44			—			6,662
Share-based payments expense	3,681			3,511			—			—			7,192
Windfall excess tax benefits related to share-based payments	(686		)	—			—			—			(686		)
Deferred income taxes	(8,029		)	(3,903		)	7,993			—			(3,939		)
Restructuring, impairment and related costs	136			1,544			—			—			1,680
Loss from equity method investments, net	265			—			—			—			265
Amortization of deferred financing fees and debt discount	1,385			—			—			—			1,385
Goodwill impairment	—			85,890			—			—			85,890
Other	(265		)	176			(727		)	—			(816		)
Equity in income of subsidiaries	14,935			(23,848		)	—			8,913			—
Cash flows from changes in operating assets and liabilities:
Accounts receivable, net	(357		)	14,773			661			—			15,077
Content library	—			31,236			3,423			—			34,659
Prepaid expenses and other current assets	(17,957		)	(4,455		)	330			—			(22,082		)
Other assets	47			245			30			—			322
Accounts payable	(2,022		)	(13,438		)	(2,237		)	—			(17,697		)
Accrued payable to retailers	479			(10,682		)	(1,307		)	—			(11,510		)
Other accrued liabilities	1,674			426			(988		)	—			1,112
Net cash flows from (used in) operating activities⁽¹⁾	(4,024		)	148,043			37,196			—			181,215
Investing Activities:
Purchases of property and equipment	(13,869		)	(25,818		)	(530		)	—			(40,217		)
Proceeds from sale of property and equipment	17			2,923			—			—			2,940
Investments in and advances to affiliates	161,753			(119,126		)	(42,627		)	—			—
Net cash flows from (used in) investing activities⁽¹⁾	147,901			(142,021		)	(43,157		)	—			(37,277		)
Financing Activities:
Proceeds from new borrowing on Credit Facility	112,000			—			—			—			112,000
Principal payments on Credit Facility	(185,750		)	—			—			—			(185,750		)
Dividends paid	(11,019		)	—			—			—			(11,019		)
Repurchases of common stock	(62,731		)	—			—			—			(62,731		)
Principal payments on capital lease obligations and other debt	(6,080		)	—			(198		)	—			(6,278		)
Windfall excess tax benefits related to share-based payments	686			—			—			—			686
Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options	(1,201		)	—			—			—			(1,201		)
Net cash flows used in financing activities⁽¹⁾	(154,095		)	—			(198		)	—			(154,293		)
Effect of exchange rate changes on cash	574			—			4,793			—			5,367
Decrease in cash and cash equivalents	(9,644		)	6,022			(1,366		)	—			(4,988		)
Cash and cash equivalents:
Beginning of period	180,889			17,939			43,868			—			242,696
End of period	$	171,245		$	23,961		$	42,502		$	—		$	237,708


(1)	During the first quarter of 2015 we discontinued our Redbox operations in Canada. Cash flows from these discontinued operations are not segregated from cash flows from continuing operations in all periods presented. See Note 10: Discontinued Operations for cash flow disclosures related to our discontinued Redbox operations in Canada.