Guarantor Subsidiaries (Tables)

9 Months Ended

Sep. 30, 2013

Guarantor Subsidiaries Disclosure [Abstract]

Schedule of Condensed Balance Sheet

CONSOLIDATED BALANCE SHEETS
(in thousands)
As of September 30, 2013
	Outerwall Inc.			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Assets
Current Assets:
Cash and cash equivalents	$	163,679		$	14,057	$	37,494		$	—		$	215,230
Accounts receivable, net of allowances	1,284			54,395		2,945			—			58,624
Content library	488			164,884		2,591			—			167,963
Deferred income taxes	3,682			—		—			(3,682		)	—
Prepaid expenses and other current assets	34,349			30,465		855			(69		)	65,600
Intercompany receivables	233,523			229,212		4,241			(466,976		)	—
Total current assets	437,005			493,013		48,126			(470,727		)	507,417
Property and equipment, net	183,957			339,821		36,297			—			560,075
Notes receivable	23,877			—		—			—			23,877
Deferred income taxes	—			—		5,466			—			5,466
Goodwill and other intangible assets	251,709			390,851		—			54			642,614
Other long-term assets	11,714			33,191		13			—			44,918
Investment in related parties	748,684			23,230		—			(771,914		)	—
Total assets	$	1,656,946		$	1,280,106	$	89,902		$	(1,242,587	)	$	1,784,367
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	15,273		$	148,276	$	1,561		$	—		$	165,110
Accrued payable to retailers	69,303			43,241		15,991			—			128,535
Other accrued liabilities	42,697			76,392		3,838			(69		)	122,858
Current callable convertible debt	51,625			—		—			—			51,625
Current portion of long-term debt and other	18,594			5		—			—			18,599
Current portion of capital lease obligations	13,023			—		363			—			13,386
Deferred income taxes	—			16,377		17			(3,682		)	12,712
Intercompany payables	194,971			217,590		54,415			(466,976		)	—
Total current liabilities	405,486			501,881		76,185			(470,727		)	512,825
Long-term debt and other long-term liabilities	586,504			18,874		315			—			605,693
Capital lease obligations	10,885			—		460			—			11,345
Deferred income taxes	44,255			21,071		35			—			65,361
Total liabilities	1,047,130			541,826		76,995			(470,727		)	1,195,224
Commitments and contingencies
Debt conversion feature	2,080			—		—			—			2,080
Stockholders’ Equity:
Preferred stock	—			—		—			—			—
Common stock	545,783			512,521		12,393			(595,293		)	475,404
Treasury stock	(377,510		)	—		—			—			(377,510		)
Retained earnings	440,435			225,759		1,469			(176,567		)	491,096
Accumulated other comprehensive loss	(972		)	—		(955		)	—			(1,927		)
Total stockholders’ equity	607,736			738,280		12,907			(771,860		)	587,063
Total liabilities and stockholders’ equity	$	1,656,946		$	1,280,106	$	89,902		$	(1,242,587	)	$	1,784,367

CONSOLIDATED BALANCE SHEETS
(in thousands)
As of December 31, 2012
	Outerwall Inc.			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Assets
Current Assets:
Cash and cash equivalents	$	242,489		$	—	$	40,759		$	(354	)	$	282,894
Accounts receivable, net of allowances	887			56,293		1,151			—			58,331
Content library	1,130			173,339		2,940			—			177,409
Deferred income taxes	27,372			—		899			(21,084		)	7,187
Prepaid expenses and other current assets	11,748			17,504		434			—			29,686
Intercompany receivables	119,848			76,878		3,581			(200,307		)	—
Total current assets	403,474			324,014		49,764			(221,745		)	555,507
Property and equipment, net	188,251			368,620		29,253			—			586,124
Notes receivable	26,731			—		—			—			26,731
Deferred income taxes	—			—		1,334			39			1,373
Goodwill and other intangible assets	253,395			90,614		—			54			344,063
Other long-term assets	18,992			28,906		29			—			47,927
Investment in related parties	90,828			24,395		—			(115,223		)	—
Total assets	$	981,671		$	836,549	$	80,380		$	(336,875	)	$	1,561,725
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	21,368		$	225,463	$	4,111		$	(354	)	$	250,588
Accrued payable to retailers	77,266			46,493		14,654			—			138,413
Other accrued liabilities	50,314			92,724		3,087			—			146,125
Current portion of long-term debt and other	15,312			217		—			—			15,529
Current portion of capital lease obligations	13,002			—		348			—			13,350
Deferred income taxes	—			21,084		—			(21,084		)	—
Intercompany payables	56,473			108,347		35,487			(200,307		)	—
Total current liabilities	233,735			494,328		57,687			(221,745		)	564,005
Long-term debt and other long-term liabilities	322,279			18,724		176			—			341,179
Capital lease obligations	15,180			—		522			—			15,702
Deferred income taxes	54,855			36,857		—			39			91,751
Total liabilities	626,049			549,909		58,385			(221,706		)	1,012,637
Commitments and contingencies
Stockholders’ Equity:
Preferred stock	—			—		—			—			—
Common stock	574,842			145,425		12,444			(227,830		)	504,881
Treasury stock	(293,149		)	—		—			—			(293,149		)
Retained earnings	74,985			141,215		10,118			112,661			338,979
Accumulated other comprehensive loss	(1,056		)	—		(567		)	—			(1,623		)
Total stockholders’ equity	355,622			286,640		21,995			(115,169		)	549,088
Total liabilities and stockholders’ equity	$	981,671		$	836,549	$	80,380		$	(336,875	)	$	1,561,725

Schedule of Condensed Income Statement

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands)
Three Months Ended September 30, 2013
	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	68,301		$	505,101		$	13,951		$	—		$	587,353
Expenses:
Direct operating	38,641			358,224			15,393			(3,545		)	408,713
Marketing	1,971			6,465			687			—			9,123
Research and development	2,103			1,716			—			—			3,819
General and administrative	12,269			45,483			533			3,553			61,838
Depreciation and other	10,033			40,867			1,350			—			52,250
Amortization of intangible assets	569			2,622			—			—			3,191
Total expenses	65,586			455,377			17,963			8			538,934
Operating income (loss)	2,715			49,724			(4,012		)	(8		)	48,419
Other income (expense), net:
Income (loss) from equity method investments, net	67,069			(9,135		)	—			—			57,934
Interest expense, net	(8,246		)	(115		)	(41		)	—			(8,402		)
Other, net	(2,352		)	8			(66		)	8			(2,402		)
Total other income (expense), net	56,471			(9,242		)	(107		)	8			47,130
Income (loss) before income taxes	59,186			40,482			(4,119		)	—			95,549
Income tax benefit (expense)	564			(14,962		)	1,505			—			(12,893		)
Equity in income (losses) of subsidiaries	20,214			(2,614		)	—			(17,600		)	—
Net income (loss)	79,964			22,906			(2,614		)	(17,600		)	82,656
Foreign currency translation adjustment	63			—			1,789			—			1,852
Comprehensive income (loss)	$	80,027		$	22,906		$	(825	)	$	(17,600	)	$	84,508

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands)
Three Months Ended September 30, 2012
	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	66,449		$	458,834		$	12,279		$	—		$	537,562
Expenses:
Direct operating	36,187			308,259			9,830			(2,735		)	351,541
Marketing	1,742			5,366			405			—			7,513
Research and development	2,697			443			—			—			3,140
General and administrative	9,625			43,338			320			2,727			56,010
Depreciation and other	9,628			39,956			886			—			50,470
Amortization of intangible assets	570			1,449			—			—			2,019
Total expenses	60,449			398,811			11,441			(8		)	470,693
Operating income	6,000			60,023			838			8			66,869
Other income (expense), net:
Income (loss) from equity method investments, net	(484		)	(5,537		)	—			—			(6,021		)
Interest income (expense), net	(4,345		)	466			(13		)	—			(3,892		)
Other, net	41			(66		)	12			(8		)	(21		)
Total other income (expense), net	(4,788		)	(5,137		)	(1		)	(8		)	(9,934		)
Income before income taxes	1,212			54,886			837			—			56,935
Income tax benefit (expense)	(287		)	(20,123		)	249			—			(20,161		)
Equity in income (losses) of subsidiaries	35,849			1,086			—			(36,935		)	—
Net income	36,774			35,849			1,086			(36,935		)	36,774
Foreign currency translation adjustment	39			—			1,438			—			1,477
Comprehensive income	$	36,813		$	35,849		$	2,524		$	(36,935	)	$	38,251

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands)
Nine Months Ended September 30, 2013
	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	189,923		$	1,488,842		$	37,504		$	—		$	1,716,269
Expenses:
Direct operating	111,805			1,040,581			39,483			(8,256		)	1,183,613
Marketing	5,002			17,777			1,840			—			24,619
Research and development	10,386			1,719			—			—			12,105
General and administrative	31,899			131,388			1,249			8,264			172,800
Depreciation and other	27,351			118,440			3,644			—			149,435
Amortization of intangible assets	1,708			5,377			—			—			7,085
Total expenses	188,151			1,315,282			46,216			8			1,549,657
Operating income (loss)	1,772			173,560			(8,712		)	(8		)	166,612
Other income (expense), net:
Income (loss) from equity method investments, net	65,050			(23,770		)	—			—			41,280
Interest income (expense), net	(26,200		)	338			(91		)	—			(25,953		)
Other, net	(3,442		)	219			(108		)	8			(3,323		)
Total other income (expense), net	35,408			(23,213		)	(199		)	8			12,004
Income (loss) before income taxes	37,180			150,347			(8,911		)	—			178,616
Income tax benefit (expense)	27,314			(56,767		)	2,954			—			(26,499		)
Equity in income (losses) of subsidiaries	90,313			(3,266		)	—			(87,047		)	—
Net income (loss)	154,807			90,314			(5,957		)	(87,047		)	152,117
Foreign currency translation adjustment	84			—			(388		)	—			(304		)
Comprehensive income (loss)	$	154,891		$	90,314		$	(6,345	)	$	(87,047	)	$	151,813

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands)
Nine Months Ended September 30, 2012
	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	185,701		$	1,419,678		$	32,582		$	—		$	1,637,961
Expenses:
Direct operating	104,508			975,729			23,751			(5,238		)	1,098,750
Marketing	4,976			13,794			1,310			—			20,080
Research and development	8,940			1,744			—			—			10,684
General and administrative	28,984			121,539			856			5,230			156,609
Depreciation and other	23,485			107,626			2,468			—			133,579
Amortization of intangible assets	1,776			1,554			—			—			3,330
Total expenses	172,669			1,221,986			28,385			(8		)	1,423,032
Operating income	13,032			197,692			4,197			8			214,929
Other income (expense), net:
Income (loss) from equity method investments, net	(1,580		)	5,674			—			—			4,094
Interest income (expense), net	(13,181		)	2,167			(19		)				(11,033		)
Other, net	175			(199		)	(5		)	(8		)	(37		)
Total other income (expense), net	(14,586		)	7,642			(24		)	(8		)	(6,976		)
Income (loss) before income taxes	(1,554		)	205,334			4,173			—			207,953
Income tax benefit (expense)	(970		)	(80,084		)	446			—			(80,608		)
Equity in income of subsidiaries	129,869			4,619			—			(134,488		)	—
Net income	127,345			129,869			4,619			(134,488		)	127,345
Foreign currency translation adjustment	(184		)	—			1,526			—			1,342
Comprehensive income	$	127,161		$	129,869		$	6,145		$	(134,488	)	$	128,687

Schedule of Condensed Cash Flow Statement

CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended September 30, 2013
	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Operating Activities:
Net income	$	154,807		$	90,314		$	(5,957	)	$	(87,047	)	$	152,117
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and other	27,351			118,440			3,644			—			149,435
Amortization of intangible assets and deferred financing fees	3,590			5,377			—			—			8,967
Share-based payments expense	7,206			4,248			—			—			11,454
Excess tax benefits on share-based payments	(3,347		)	—			—			—			(3,347		)
Deferred income taxes	17,698			(26,759		)	(3,037		)	—			(12,098		)
(Income) loss from equity method investments, net	(65,050		)	23,770			—			—			(41,280		)
Non-cash interest on convertible debt	3,323			—			—			—			3,323
Loss from extinguishments of callable convertible debt	5,950			—			—			—			5,950
Other	1,195			(175		)	—			—			1,020
Equity in (income) losses of subsidiaries	(90,313		)	3,266			—			87,047			—
Cash flows from changes in operating assets and liabilities:
Accounts receivable	(398		)	1,916			(1,824		)	—			(306		)
Content library	641			8,455			350			—			9,446
Prepaid expenses and other current assets	(22,600		)	(8,511		)	(414		)	69			(31,456		)
Other assets	163			91			15			—			269
Accounts payable	18			(84,145		)	(1,137		)	354			(84,910		)
Accrued payable to retailers	(7,963		)	(3,252		)	1,574			—			(9,641		)
Other accrued liabilities	(5,366		)	(21,857		)	740			(69		)	(26,552		)
Net cash flows from operating activities	26,905			111,178			(6,046		)	354			132,391
Investing Activities:
Acquisition of ecoATM, net of cash acquired	(244,036		)	—			—			—			(244,036		)
Purchases of property and equipment	(46,496		)	(49,928		)	(12,192		)	—			(108,616		)
Proceeds from sale of property and equipment	12,078			803			7			—			12,888
Receipt of note receivable principal	95			—			—			—			95
Cash paid for equity investments	—			(28,000		)	—			—			(28,000		)
Investments in and advances to affiliates	4,031			(19,782		)	15,751			—			—
Net cash flows from investing activities	(274,328		)	(96,907		)	3,566			—			(367,669		)
Financing Activities:
Proceeds from issuance of senior unsecured notes	343,769			—			—			—			343,769
Proceeds from new borrowing of credit facility	150,000			—			—			—			150,000
Principal payments on credit facility	(60,938		)	—			—			—			(60,938		)
Financing costs associated with senior unsecured notes	(444		)	—			—			—			(444		)
Repurchase of convertible debt	(169,664		)	—			—			—			(169,664		)
Repurchases of common stock	(95,004		)	—			—			—			(95,004		)
Principal payments on capital lease obligations and other debt	(10,300		)	(214		)	(310		)	—			(10,824		)
Excess tax benefits related to share-based payments	3,347			—			—			—			3,347
Proceeds from exercise of stock options, net	7,763			—			—			—			7,763
Net cash flows from financing activities	168,529			(214		)	(310		)	—			168,005
Effect of exchange rate changes on cash	84			—			(475		)	—			(391		)
Increase (decrease) in cash and cash equivalents	(78,810		)	14,057			(3,265		)	354			(67,664		)
Cash and cash equivalents:
Beginning of period	242,489			—			40,759			(354		)	282,894
End of period	$	163,679		$	14,057		$	37,494		$	—		$	215,230

CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended September 30, 2012
	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Operating Activities:
Net income	$	127,345		$	129,869		$	4,619		$	(134,488	)	$	127,345
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and other	23,485			107,626			2,468			—			133,579
Amortization of intangible assets and deferred financing fees	3,371			1,554			—			—			4,925
Share-based payments expense	7,933			5,211			—			—			13,144
Excess tax benefits on share-based payments	(5,673		)	—			—			—			(5,673		)
Deferred income taxes	23,371			49,597			222			—			73,190
(Income) loss from equity method investments, net	1,580			(5,674		)	—			—			(4,094		)
Non-cash interest on convertible debt	5,270			—			—			—			5,270
Other	(1,905		)	(2,202		)	—			—			(4,107		)
Equity in (income) losses of subsidiaries	(129,869		)	(4,619		)	—			134,488			—
Cash flows from changes in operating assets and liabilities:
Accounts receivable	(162		)	(2,275		)	(555		)	—			(2,992		)
Content library	(190		)	8,674			(2,083		)	—			6,401
Prepaid expenses and other current assets	(2,339		)	(7,351		)	(342		)	24			(10,008		)
Other assets	364			872			(44		)	(771		)	421
Accounts payable	(2,844		)	(37,910		)	1,780			(1,228		)	(40,202		)
Accrued payable to retailers	5,734			(520		)	(42		)	—			5,172
Other accrued liabilities	(2,649		)	12,293			(1,068		)	747			9,323
Net cash flows from operating activities	52,822			255,145			4,955			(1,228		)	311,694
Investing Activities:
Purchases of property and equipment	(43,301		)	(81,727		)	(8,153		)	—			(133,181		)
Proceeds from sale of property and equipment	270			494			55			—			819
Acquisition of NCR DVD kiosk business	—			(100,000		)	—			—			(100,000		)
Cash paid for equity investments	(10,877		)	(28,850		)	—			—			(39,727		)
Investments in and advances to affiliates	35,149			(37,772		)	2,623			—			—
Net cash flows from investing activities	(18,759		)	(247,855		)	(5,475		)	—			(272,089		)
Financing Activities:
Principal payments on credit facility	(7,668		)	—			—			—			(7,668		)
Repurchases of common stock	(63,070		)	—			—			—			(63,070		)
Principal payments on capital lease obligations and other debt	(5,652		)	(7,290		)	(260		)	—			(13,202		)
Excess tax benefits related to share-based payments	5,673			—			—			—			5,673
Proceeds from exercise of stock options, net	4,034			—			—			—			4,034
Net cash flows from financing activities	(66,683		)	(7,290		)	(260		)	—			(74,233		)
Effect of exchange rate changes on cash	(181		)	—			1,412			—			1,231
Increase (decrease) in cash and cash equivalents	(32,801		)	—			632			(1,228		)	(33,397		)
Cash and cash equivalents:
Beginning of period	310,259			—			31,766			(170		)	341,855
End of period	$	277,458		$	—		$	32,398		$	(1,398	)	$	308,458