Note 8: Equity Method Investments and Related Party Transactions

Redbox Instant^™ by Verizon

In February 2012, Redbox and Verizon Ventures IV LLC (“Verizon”), a wholly owned subsidiary of Verizon Communications Inc., entered into a Limited Liability Company Agreement (the “LLC Agreement”) and related arrangements. The LLC Agreement governs the relationship of the parties with respect to a joint venture, Redbox Instant by Verizon (the “Joint Venture”) formed for the primary purpose of developing, launching, marketing and operating a nationwide “over-the-top” video distribution service to provide consumers with access to video programming content, including linear content, delivered via broadband networks to video enabled viewing devices and offering rental of physical DVDs and Blu-ray^™ discs from Redbox kiosks. Redbox initially acquired a 35.0% ownership interest in the Joint Venture and made an initial capital contribution of $14.0 million in cash in February 2012 subsequent to the formation of the Joint Venture. The Joint Venture board of managers may request each member to make additional capital contributions, on a pro rata basis relative to its respective ownership interest. If a member does not make any or all of its requested capital contributions, as the case may be, the other contributing member generally may make such capital contributions. So long as Redbox contributes its pro rata share of the first $450.0 million of capital contributions to the Joint Venture, Redbox’s interest cannot be diluted below 10.0%. The following table summarizes Redbox's initial cash capital contribution and subsequent cash capital contributions representing its pro-rata share of requests made by the Joint Venture board of managers:



Dollars in thousands	Cash Contributions
2012	$	24,500
2013	28,000
2014	10,500
Total cash capital contributions	$	63,000

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, the earliest point we could provide our notice of intent to withdraw is expected to be in March 2015) 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. Our equity method investments and ownership percentages as of June 30, 2014, were as follows:



Dollars in thousands	Equity Investment		Ownership Percentage
Joint Venture	$	—	35%
SoloHealth, Inc.	1,550		10%
Equity method investments	$	1,550

Our equity method investments are included within other long-term assets on our Consolidated Balance Sheets.

Since we acquired ecoATM on July 23, 2013, the results of ecoATM operations, with the exception of expense for rights to receive cash which are unallocated corporate expenses, are included in our New Ventures segment. See Note 15: Business Segments and Enterprise-Wide Information for more information.

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:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
Dollars in thousands	2014			2013			2014			2013
Proportionate share of net loss of equity method investees:
Joint Venture	$	(9,567	)	$	(7,575	)	$	(17,961	)	$	(13,397	)
Other	(224		)	(1,435		)	(448		)	(2,019		)
Total proportionate share of net loss of equity method investees	(9,791		)	(9,010		)	(18,409		)	(15,416		)
Amortization of difference in carrying amount and underlying equity in Joint Venture	(750		)	(619		)	(1,500		)	(1,238		)
Total loss from equity method investments	$	(10,541	)	$	(9,629	)	$	(19,909	)	$	(16,654	)

Our proportional share of the Joint Venture summarized financial information presented in the table below, as provided to us by the Joint Venture, is based on our ownership percentage of 35%:



	Six Months Ended
Statement of Operations	June 30,
Dollars in thousands	2014		2013
Revenue	$	12,714	$	1,112
Cost of sales and service	22,273		8,040
Net loss and loss from continuing operations	51,167		37,568

Related Party Transactions

At June 30, 2014 and December 31, 2013, included within accounts receivable, net of allowance, on our Consolidated Balance Sheets, was $4.0 million and $5.9 million, respectively, due from the Joint Venture related to costs incurred by Redbox on behalf of the Joint Venture during the normal course of business.