Note 1: Basis of Presentation and Principles of Consolidation

The unaudited consolidated financial information included herein has been prepared by Outerwall Inc., pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited consolidated financial statements of Outerwall Inc. included herein reflect all adjustments, consisting only of normal recurring adjustments that, in the opinion of management, are necessary to present fairly our consolidated financial position, results of operations, and cash flows for the periods presented. The financial information as of December 31, 2013, is derived from our 2013 Annual Report on Form 10-K. The consolidated financial statements included within this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2013 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The accompanying consolidated financial statements include the accounts of Outerwall Inc. and our wholly-owned subsidiaries. Investments in companies of which we may have significant influence, but not a controlling interest, are accounted for using the equity method of accounting. All significant intercompany balances and transactions have been eliminated in consolidation.

Revision of Previously Issued Financial Statements

During the second quarter of 2014, we identified adjustments to prior periods related to the amount of purchases of property and equipment included in ending accounts payable which impact the amounts presented as cash paid for purchases of property and equipment in the investing activities section of our consolidated statements of cash flows, the change in accounts payable within the operating activities section of the cash flow statement and the supplemental non-cash investing and financing activities disclosure of purchases of property and equipment included in ending accounts payable. We concluded that the error was not material to any of our prior period financial statements under the guidance of SEC Staff Accounting Bulletin (“SAB”) No. 99, Materiality. We applied the guidance of SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, and revised the prior period financial statements presented.

The impact of the immaterial error on our prior period consolidated statements of cash flows is presented in the following table:



	As Reported						Adjustment						As Revised
	Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended
Dollars in thousands	June 30, 2013						June 30, 2013						June 30, 2013
Cash flows from changes in operating assets and liabilities:
Accounts payable	$	(41,001	)	$	(70,972	)	$	612		$	15,514		$	(40,389	)	$	(55,458	)
Net cash flows from operating activities	$	29,562		$	70,664		$	612		$	15,514		$	30,174		$	86,178
Investing Activities:
Purchases of property and equipment	$	(35,499	)	$	(68,730	)	$	(612	)	$	(15,514	)	$	(36,111	)	$	(84,244	)
Net cash flows from investing activities	$	20,201		$	(79,803	)	$	(612	)	$	(15,514	)	$	19,589		$	(95,317	)
Supplemental disclosure of non-cash investing and financing activities:
Purchases of property and equipment included in ending accounts payable	$	26,829		$	26,829		$	(17,369	)	$	(17,369	)	$	9,460		$	9,460

Accounting Pronouncements Adopted During the Current Year

In May 2013, the FASB issued ASU No. 2013-05, "Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. For public entities, the ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. Our adoption of ASU No. 2013-05 in the first quarter of 2014 did not have a material impact on our financial position, results of operations or cash flows.

In November 2013, the FASB issued ASU 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." This ASU requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when:


1.	the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction, and


2.	the entity intends to use the deferred tax asset for that purpose.

The ASU changes existing presentation requirements but does not require new recurring disclosures. The ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013 for public entities. Our adoption of ASU No. 2013-11 in the first quarter of 2014 did not have a material impact on our financial position, results of operations or cash flows.

Accounting Pronouncements Not Yet Adopted

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

ASU 2014-08 changes the requirements for reporting discontinued operations. Under the ASU discontinued operations is defined as either a:


•	Component of an entity, or group of components, that


◦	has been disposed of meets the criteria to be classified as held-for-sale, or has been abandoned/spun-off; and


◦	represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, or a


•	Business or nonprofit activity that, on acquisition, meets the criteria to be classified as held-for-sale.

We are currently evaluating the impact of ASU 2014-08, which is effective for the us in our fiscal year beginning on January 1, 2015.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 sets forth a new revenue recognition model that requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of performance obligations. The amendments in the ASU can be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of the initial application along with additional disclosures. We are currently evaluating the impact of ASU 2014-09, which is effective for us in our fiscal year beginning on January 1, 2017.