Business Segments

9 Months Ended

Sep. 30, 2011

Business Segments [Abstract]

Business Segments

NOTE 11: BUSINESS SEGMENTS

Management, including our chief operating decision maker, who is our chief executive officer ("CEO"), evaluates the performances of our business segments primarily on segment revenue and segment operating income from continuing operations before depreciation, amortization and other, and certain share-based payments ("segment operating income"). Segment operating income contains internally allocated costs of shared service functions, including corporate executive management, business development, sales, finance, legal, human resources, information technology, and risk management. We also review depreciation and amortization allocated to each segment. Shared-based payments expense related to share-based compensation granted to executives, non-employee directors and employees is not allocated to our segments and is included in the corporate unallocated column in the analysis and reconciliation below; however, share-based payments expense related to our DVD arrangements has been allocated to our redbox segment and is included within direct operating expense. Our performance evaluation does not include segment assets.

Changes in our Organizational Structure

During the first quarter of 2011, in addition to our existing segments redbox and Coin, we added a third reportable segment, New Ventures, to reflect changes in how our CEO manages our businesses and allocates resources for the future growth of the company. Our New Ventures segment consists primarily of our Coffee self-service concept and certain other self-service concepts that are under development.

As part of our new reporting structure, during the second quarter of 2011, we completed our evaluation of the reassignment of goodwill to our New Ventures segment by using a relative fair value approach that is similar to the approach used when a portion of a segment is to be disposed. We used both the income and cost methods to estimate the fair value of our New Ventures segment and both the income and market methods to estimate the fair values of our redbox and Coin segments. As a result of our evaluation, we did not assign any goodwill to our New Ventures segment because the amount was immaterial.

During the second quarter of 2011, we exited one of the self-service concepts we were testing, which was included in our New Ventures segment. Based on our materiality assessment, we consider the results of the self-service concept to be immaterial and therefore have elected not to present it as a discontinued operation in our Consolidated Statements of Net Income.

Comparability of Segment Results

We have recast prior period results for the following:

— The addition of our New Ventures segment, which includes our self-service concepts, which were part of our Coin and redbox segments prior to the first quarter of 2011; and

— The allocation of share-based payments made to certain movie studios as part of content agreements from corporate unallocated to direct operating in our redbox segment beginning in the first quarter of 2011.

Our analysis and reconciliation of our segment information to the consolidated financial statements that follows covers our results from continuing operations, which consists of our redbox, Coin and New Ventures segments. Unallocated general and administrative expenses relate to share-based compensation.

Three Months Ended September 30, 2011		redbox				Coin				New Ventures				Corporate   Unallocated				Total
Revenue	$		389,801		$		75,506		$		310		$		-		$		465,617
Expenses:
Direct operating			271,678				37,580				681				162				310,101
Marketing			5,466				1,985				259				13				7,723
Research and development			2				1,449				1,711				77				3,239
General and administrative			29,156				6,613				2,084				2,223				40,076
Segment operating income (loss)			83,499				27,879				(4,425	)			(2,475	)			104,478
Less: depreciation and amortization			(30,910	)			(7,924	)			(5	)			-				(38,839	)
Operating income (loss)			52,589				19,955				(4,430	)			(2,475	)			65,639
Other expense			-				-				-				(553	)			(553	)
Interest expense, net			-				-				-				(5,416	)			(5,416	)
Income (loss) from continuing operations
before income taxes	$		52,589		$		19,955		$		(4,430	)	$		(8,444	)	$		59,670
Three Months Ended September 30, 2010		redbox				Coin				New Ventures				Corporate Unallocated				Total
Revenue	$		305,365		$		74,669		$		153		$		-		$		380,187
Expenses:
Direct operating			217,982				37,053				350				64				255,449
Marketing			5,024				2,440				342				5				7,811
Research and development			-				1,578				59				62				1,699
General and administrative			28,711				5,726				1,650				1,568				37,655
Segment operating income (loss)			53,648				27,872				(2,248	)			(1,699	)			77,573
Less: depreciation and amortization			(23,955	)			(7,468	)			41				-				(31,382	)
Operating income (loss)			29,693				20,404				(2,207	)			(1,699	)			46,191
Other expense			-				-				-				(130	)			(130	)
Interest expense, net			-				-				-				(8,693	)			(8,693	)
Income (loss) from continuing operations
before income taxes	$		29,693		$		20,404		$		(2,207	)	$		(10,522	)	$		37,368

Nine Months Ended September 30, 2011		redbox				Coin				New   Ventures				Corporate   Unallocated				Total
Revenue	$		1,116,007		$		207,934		$		976		$		-		$		1,324,917
Expenses:
Direct operating			808,197				106,632				2,483				375				917,687
Marketing			15,870				4,254				540				33				20,697
Research and development			64				4,695				2,548				232				7,539
General and administrative			83,539				17,065				7,152				7,039				114,795
Segment operating income (loss)			208,337				75,288				(11,747	)			(7,679	)			264,199
Less: depreciation and amortization			(85,368	)			(22,746	)			(859	)			-				(108,973	)
Operating income (loss)			122,969				52,542				(12,606	)			(7,679	)			155,226
Other expense			-				-				-				(1,004	)			(1,004	)
Interest expense, net			-				-				-				(18,878	)			(18,878	)
Income (loss) from continuing operations
before income taxes	$		122,969		$		52,542		$		(12,606	)	$		(27,561	)	$		135,344
Nine Months Ended September 30, 2010		redbox				Coin				New Ventures				Corporate Unallocated				Total
Revenue	$		840,312		$		204,949		$		404		$		-		$		1,045,665
Expenses:
Direct operating			616,744				103,968				869				623				722,204
Marketing			11,291				4,614				457				13				16,375
Research and development			-				4,480				277				171				4,928
General and administrative			75,161				15,573				4,464				5,855				101,053
Litigation settlement			-				5,379				-				-				5,379
Segment operating income (loss)			137,116				70,935				(5,663	)			(6,662	)			195,726
Less: depreciation and amortization			(69,942	)			(22,089	)			(3,643	)			-				(95,674	)
Operating income (loss)			67,174				48,846				(9,306	)			(6,662	)			100,052
Other expense			-				-				-				(177	)			(177	)
Interest expense, net			-				-				-				(27,032	)			(27,032	)
Income (loss) from continuing operations before income taxes	$		67,174		$		48,846		$		(9,306	)	$		(33,871	)	$		72,843

Significant Retailer Relationships

Our redbox and Coin kiosks are primarily located within retailers. The following retailers accounted for 10% or more of our consolidated revenue from continuing operations:

	Three Months Ended     September  30,						Nine Months Ended     September  30,
	2011			2010			2011			2010
Wal-Mart Stores Inc.		17.4	%		19.0	%		17.6	%		19.9	%
Walgreen Co.		16.0	%		14.0	%		15.8	%		13.4	%
The Kroger Company		11.4	%		11.2	%		11.3	%		10.4	%