Note 17: 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 September 30, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations and Consolidation Reclassifications			Total
Assets
Current Assets:
Cash and cash equivalents	$	139,233		$	14,453	$	41,917	$	—		$	195,603
Accounts receivable, net of allowances	2,484			20,459		805		—			23,748
Content library	—			126,769		—		—			126,769
Prepaid expenses and other current assets	23,577			25,021		797		(6,989		)	42,406
Intercompany receivables	31,137			563,167		428		(594,732		)	—
Total current assets	196,431			749,869		43,947		(601,721		)	388,526
Property and equipment, net	106,173			219,614		15,215		—			341,002
Deferred income taxes	—			6,331		2,712		(6,331		)	2,712
Goodwill and other intangible assets, net	249,706			278,432		—		—			528,138
Other long-term assets	5,232			1,017		194		—			6,443
Investment in related parties	942,221			30,105		—		(972,326		)	—
Total assets	$	1,499,763		$	1,285,368	$	62,068	$	(1,580,378	)	$	1,266,821
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Accounts payable	$	12,168		$	106,782	$	198	$	—		$	119,148
Accrued payable to retailers	62,765			26,517		11,819		—			101,101
Other accrued liabilities	66,040			77,712		2,336		1,820			147,908
Current portion of long-term debt and other long-term liabilities	17,530			—		338		—			17,868
Deferred income taxes	—			18,310		—		(8,809		)	9,501
Intercompany payables	484,166			93,511		17,055		(594,732		)	—
Total current liabilities	642,669			322,832		31,746		(601,721		)	395,526
Long-term debt and other long-term liabilities	835,771			20,315		189		—			856,275
Deferred income taxes	23,373			—		28		(6,330		)	17,071
Total liabilities	1,501,813			343,147		31,963		(608,051		)	1,268,872
Commitments and contingencies
Stockholders’ Equity (Deficit):
Preferred stock	—			—		3,000		(3,000		)	—
Common stock	595,795			234,729		18,393		(367,636		)	481,281
Treasury stock	(1,116,205		)	—		—		—			(1,116,205		)
Retained earnings	519,027			707,492		6,679		(601,691		)	631,507
Accumulated other comprehensive income (loss)	(667		)	—		2,033		—			1,366
Total stockholders’ equity (deficit)	(2,050		)	942,221		30,105		(972,327		)	(2,051		)
Total liabilities and stockholders’ equity (deficit)	$	1,499,763		$	1,285,368	$	62,068	$	(1,580,378	)	$	1,266,821



CONSOLIDATING BALANCE SHEETS
(unaudited)
	As of December 31, 2014
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Assets
Current Assets:
Cash and cash equivalents	$	180,889		$	17,939		$	43,868		$	—		$	242,696
Accounts receivable, net of allowances	3,203			43,874			1,513			—			48,590
Content library	—			176,490			3,631			—			180,121
Prepaid expenses and other current assets	21,442			23,923			1,030			(6,558		)	39,837
Intercompany receivables	40,762			467,181			—			(507,943		)	—
Total current assets	246,296			729,407			50,042			(514,501		)	511,244
Property and equipment, net	133,923			263,412			31,133			—			428,468
Deferred income taxes	—			—			11,378			—			11,378
Goodwill and other intangible assets, net	249,717			374,281			—			—			623,998
Other long-term assets	6,665			1,231			335			—			8,231
Investment in related parties	917,234			(5,114		)	—			(912,120		)	—
Total assets	$	1,553,835		$	1,363,217		$	92,888		$	(1,426,621	)	$	1,583,319
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Accounts payable	$	12,899		$	153,260		$	2,474		$	—		$	168,633
Accrued payable to retailers	69,189			42,977			14,124			—			126,290
Other accrued liabilities	59,770			74,536			2,820			—			137,126
Current portion of long-term debt and other long-term liabilities	20,020			—			396			—			20,416
Deferred income taxes	—			27,961			29			(6,558		)	21,432
Intercompany payables	309,932			121,015			76,996			(507,943		)	—
Total current liabilities	471,810			419,749			96,839			(514,501		)	473,897
Long-term debt and other long-term liabilities	949,588			22,946			1,135			—			973,669
Deferred income taxes	35,058			3,288			29			—			38,375
Total liabilities	1,456,456			445,983			98,003			(514,501		)	1,485,941
Commitments and contingencies
Stockholders’ Equity (Deficit):
Preferred stock	—			—			—			—			—
Common stock	588,105			225,729			12,393			(352,635		)	473,592
Treasury stock	(996,293		)	—			—			—			(996,293		)
Retained earnings	506,360			691,505			(17,991		)	(559,485		)	620,389
Accumulated other comprehensive income (loss)	(793		)	—			483			—			(310		)
Total stockholders’ equity (deficit)	97,379			917,234			(5,115		)	(912,120		)	97,378
Total liabilities and stockholders’ equity (deficit)	$	1,553,835		$	1,363,217		$	92,888		$	(1,426,621	)	$	1,583,319



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
	Three Months Ended September 30, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	72,992		$	426,337		$	12,726		$	—		$	512,055
Expenses:
Direct operating	36,657			297,857			5,685			—			340,199
Marketing	1,592			5,414			125			—			7,131
Research and development	—			1,514			—			—			1,514
General and administrative	11,745			35,843			230			—			47,818
Depreciation and other	7,573			31,236			1,071			—			39,880
Amortization of intangible assets	3			3,305			—			—			3,308
Total expenses	57,570			375,169			7,111			—			439,850
Operating income	15,422			51,168			5,615			—			72,205
Other income (expense), net:
Loss from equity method investments, net	(328		)	—			—			—			(328		)
Interest income (expense), net	23,448			(35,164		)	(257		)	—			(11,973		)
Other, net	3,412			8			(4,804		)	—			(1,384		)
Total other income (expense), net	26,532			(35,156		)	(5,061		)	—			(13,685		)
Income from continuing operations before income taxes	41,954			16,012			554			—			58,520
Income tax benefit (expense)	(31,826		)	10,604			294			—			(20,928		)
Income from continuing operations	10,128			26,616			848			—			37,592
Income (loss) from discontinued operations, net of tax	6			(235		)	(27		)	—			(256		)
Equity in income (loss) of subsidiaries	27,202			821			—			(28,023		)	—
Net income	37,336			27,202			821			(28,023		)	37,336
Foreign currency translation adjustment⁽¹⁾	(448		)	—			(1,203		)	—			(1,651		)
Comprehensive income (loss)	$	36,888		$	27,202		$	(382	)	$	(28,023	)	$	35,685


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



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
	Three Months Ended September 30, 2014
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	71,616		$	464,814		$	13,469		$	—		$	549,899
Expenses:
Direct operating	36,930			335,780			6,732			—			379,442
Marketing	1,945			7,059			139			—			9,143
Research and development	861			2,138			—			—			2,999
General and administrative	10,789			36,558			239			—			47,586
Depreciation and other	8,173			36,983			1,224			—			46,380
Amortization of intangible assets	358			3,307			—			—			3,665
Total expenses	59,056			421,825			8,334			—			489,215
Operating income	12,560			42,989			5,135			—			60,684
Other income (expense), net:
Loss from equity method investments, net	(224		)	(11,128		)	—			—			(11,352		)
Interest income (expense), net	(12,570		)	163			(58		)	—			(12,465		)
Other, net	1,941			344			(3,637		)	—			(1,352		)
Total other expense, net	(10,853		)	(10,621		)	(3,695		)	—			(25,169		)
Income from continuing operations before income taxes	1,707			32,368			1,440			—			35,515
Income tax benefit (expense)	(1,915		)	(10,957		)	(520		)	—			(13,392		)
Income from continuing operations	(208		)	21,411			920			—			22,123
Loss from discontinued operations, net of tax	—			(176		)	(4,057		)	—			(4,233		)
Equity in income (loss) of subsidiaries	18,098			(3,137		)	—			(14,961		)	—
Net income (loss)	17,890			18,098			(3,137		)	(14,961		)	17,890
Foreign currency translation adjustment⁽¹⁾	(680		)	—			(15		)	—			(695		)
Comprehensive income (loss)	$	17,210		$	18,098		$	(3,152	)	$	(14,961	)	$	17,195


(1)	Foreign currency translation adjustment had no tax effect for the three months ended September 30, 2014.



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
	Nine Months Ended September 30, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	200,489		$	1,430,657		$	34,914		$	—		$	1,666,060
Expenses:
Direct operating	105,780			993,220			16,002			—			1,115,002
Marketing	4,583			18,863			152			—			23,598
Research and development	(83		)	5,720			—			—			5,637
General and administrative	35,568			108,958			631			—			145,157
Restructuring and lease termination costs	551			15,300			—			—			15,851
Depreciation and other	20,273			104,282			3,185			—			127,740
Amortization of intangible assets	10			9,916			—			—			9,926
Goodwill impairment (Note 6)	—			85,890			—			—			85,890
Total expenses	166,682			1,342,149			19,970			—			1,528,801
Operating income	33,807			88,508			14,944			—			137,259
Other income (expense), net:
Loss from equity method investments, net	(593		)	—			—			—			(593		)
Interest income (expense), net	(1,433		)	(34,472		)	(322		)	—			(36,227		)
Other, net	8,990			72			(12,150		)	—			(3,088		)
Total other income (expense), net	6,964			(34,400		)	(12,472		)	—			(39,908		)
Income from continuing operations before income taxes	40,771			54,108			2,472			—			97,351
Income tax expense	(26,393		)	(38,442		)	(120		)	—			(64,955		)
Income from continuing operations	14,378			15,666			2,352			—			32,396
Income (loss) from discontinued operations, net of tax	674			(28,068		)	22,317			—			(5,077		)
Equity in income (loss) of subsidiaries	12,267			24,669			—			(36,936		)	—
Net income	27,319			12,267			24,669			(36,936		)	27,319
Foreign currency translation adjustment⁽¹⁾	126			—			1,550			—			1,676
Comprehensive income	$	27,445		$	12,267		$	26,219		$	(36,936	)	$	28,995


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



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
	Nine Months Ended September 30, 2014
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	197,878		$	1,460,447		$	35,863		$	—		$	1,694,188
Expenses:
Direct operating	105,399			1,057,472			17,947			—			1,180,818
Marketing	4,723			20,220			329			—			25,272
Research and development	2,589			7,296			—			—			9,885
General and administrative	31,406			116,705			679			—			148,790
Restructuring and lease termination costs	23			534			—			—			557
Depreciation and other	26,744			111,944			3,446			—			142,134
Amortization of intangible assets	1,430			9,917			—			—			11,347
Total expenses	172,314			1,324,088			22,401			—			1,518,803
Operating income	25,564			136,359			13,462			—			175,385
Other income (expense), net:
Loss from equity method investments, net	(672		)	(30,589		)	—			—			(31,261		)
Interest income (expense), net	(35,172		)	286			(159		)	—			(35,045		)
Other, net	7,662			466			(8,514		)	—			(386		)
Total other expense, net	(28,182		)	(29,837		)	(8,673		)	—			(66,692		)
Income (loss) from continuing operations before income taxes	(2,618		)	106,522			4,789			—			108,693
Income tax benefit (expense)	1,333			(35,407		)	(1,057		)	—			(35,131		)
Income (loss) from continuing operations	(1,285		)	71,115			3,732			—			73,562
Loss from discontinued operations, net of tax	(803		)	(381		)	(9,560		)	—			(10,744		)
Equity in income (loss) of subsidiaries	64,906			(5,828		)	—			(59,078		)	—
Net income (loss)	62,818			64,906			(5,828		)	(59,078		)	62,818
Foreign currency translation adjustment⁽¹⁾	(650		)	—			494			—			(156		)
Comprehensive income (loss)	$	62,168		$	64,906		$	(5,334	)	$	(59,078	)	$	62,662


(1)	Foreign currency translation adjustment had no tax effect for the nine months ended September 30, 2014.



CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited)
	Nine Months Ended September 30, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Operating Activities:
Net income	$	27,319		$	12,267		$	24,669		$	(36,936	)	$	27,319
Adjustments to reconcile net income to net cash flows from (used in) operating activities:
Depreciation and other	20,273			106,127			7,198			—			133,598
Amortization of intangible assets	10			9,916			44			—			9,970
Share-based payments expense	6,500			5,521			—			—			12,021
Windfall excess tax benefits related to share-based payments	(715		)	—			—			—			(715		)
Deferred income taxes	(13,932		)	(19,271		)	7,523			—			(25,680		)
Restructuring and lease termination costs	136			1,544			—			—			1,680
Loss from equity method investment, net	593			—			—			—			593
Amortization of deferred financing fees and debt discount	2,078			—			—			—			2,078
Goodwill impairment (Note 6)	—			85,890			—			—			85,890
Other	(409		)	636			(728		)	—			(501		)
Equity in (income) losses of subsidiaries	(12,267		)	(24,669		)	—			36,936			—
Cash flows from changes in operating assets and liabilities:
Accounts receivable, net	717			23,416			599			—			24,732
Content library	—			49,573			3,632			—			53,205
Prepaid expenses and other current assets	(1,693		)	(3,394		)	193			—			(4,894		)
Other assets	56			214			136			—			406
Accounts payable	(2,677		)	(41,218		)	(2,185		)	—			(46,080		)
Accrued payable to retailers	(6,423		)	(16,460		)	(1,404		)	—			(24,287		)
Other accrued liabilities	10,391			7,509			(461		)	—			17,439
Net cash flows from (used in) operating activities⁽¹⁾	29,957			197,601			39,216			—			266,774
Investing Activities:
Purchases of property and equipment	(18,837		)	(40,123		)	(1,204		)	—			(60,164		)
Proceeds from sale of property and equipment	17			3,051			—			—			3,068
Investments in and advances to affiliates	207,470			(164,015		)	(43,455		)	—			—
Net cash flows from (used in) investing activities⁽¹⁾	188,650			(201,087		)	(44,659		)	—			(57,096		)
Financing Activities:
Proceeds from new borrowing of Credit Facility	147,000			—			—			—			147,000
Principal payments on Credit Facility	(258,563		)	—			—			—			(258,563		)
Repurchases of common stock	(123,489		)	—			—			—			(123,489		)
Dividends paid (Note 19)	(16,158		)	—			—			—			(16,158		)
Principal payments on capital lease obligations and other debt	(8,640		)	—			(298		)	—			(8,938		)
Financing costs associated with Credit Facility and senior unsecured notes	(9		)	—			—			—			(9		)
Windfall excess tax benefits related to share-based payments	715			—			—			—			715
Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options	(1,246		)	—			—			—			(1,246		)
Net cash flows from (used in) financing activities⁽¹⁾	(260,390		)	—			(298		)	—			(260,688		)
Effect of exchange rate changes on cash	127			—			3,790			—			3,917
Increase (decrease) in cash and cash equivalents	(41,656		)	(3,486		)	(1,951		)	—			(47,093		)
Cash and cash equivalents:
Beginning of period	180,889			17,939			43,868			—			242,696
End of period	$	139,233		$	14,453		$	41,917		$	—		$	195,603


(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 12: Discontinued Operations for cash flow disclosures related to our discontinued Redbox operations in Canada.



CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited)
	Nine Months Ended September 30, 2014
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Operating Activities:
Net income (loss)	$	62,818		$	64,906		$	(5,828	)	$	(59,078	)	$	62,818
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and other	26,728			113,408			6,020			—			146,156
Amortization of intangible assets	1,430			9,936			—			—			11,366
Share-based payments expense	8,227			1,866			—			—			10,093
Windfall excess tax benefits related to share-based payments	(1,988		)	—			—			—			(1,988		)
Deferred income taxes	5,746			(13,965		)	(3,105		)	(6,084		)	(17,408		)
Loss from equity method investments, net	672			30,589			—			—			31,261
Amortization of deferred financing fees and debt discount	3,423			—			—			—			3,423
Loss from early extinguishment of debt	2,018			—			—			—			2,018
Other	(1,149		)	(368		)	40			—			(1,477		)
Equity in (income) losses of subsidiaries	(64,906		)	5,828			—			59,078			—
Cash flows from changes in operating assets and liabilities:
Accounts receivable, net	395			16,157			912			—			17,464
Content library	36			48,988			(224		)	—			48,800
Prepaid expenses and other current assets	16,024			1,026			(87		)	6,084			23,047
Other assets	55			1,546			46			—			1,647
Accounts payable	(2,427		)	(94,130		)	(449		)	—			(97,006		)
Accrued payable to retailers	(11,177		)	(15,003		)	(1,642		)	—			(27,822		)
Other accrued liabilities	(5,049		)	(331		)	35			—			(5,345		)
Net cash flows from (used in) operating activities⁽¹⁾	40,876			170,453			(4,282		)	—			207,047
Investing Activities:
Purchases of property and equipment	(24,933		)	(41,663		)	(5,715		)	—			(72,311		)
Proceeds from sale of property and equipment	750			1,085			—			—			1,835
Cash paid for equity investments	—			(24,500		)	—			—			(24,500		)
Investments in and advances to affiliates	98,892			(101,884		)	2,992			—			—
Net cash flows from (used in) investing activities⁽¹⁾	74,709			(166,962		)	(2,723		)	—			(94,976		)
Financing Activities:
Proceeds from issuance of senior unsecured notes	295,500			—			—			—			295,500
Proceeds from new borrowing on Credit Facility	635,000			—			—			—			635,000
Principal payments on Credit Facility	(621,250		)	—			—			—			(621,250		)
Financing costs associated with Credit Facility and senior unsecured notes	(2,906		)	—			—			—			(2,906		)
Settlement and conversion of convertible debt	(51,149		)	—			—			—			(51,149		)
Repurchases of common stock	(545,078		)	—			—			—			(545,078		)
Principal payments on capital lease obligations and other debt	(10,263		)	(3		)	(331		)	—			(10,597		)
Windfall excess tax benefits related to share-based payments	1,988			—			—			—			1,988
Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options	(1,084		)	—			—			—			(1,084		)
Net cash flows from (used in) financing activities⁽¹⁾	(299,242		)	(3		)	(331		)	—			(299,576		)



(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications		Total
Effect of exchange rate changes on cash	(650		)	—		1,619			—		969
Increase (decrease) in cash and cash equivalents	(184,307		)	3,488		(5,717		)	—		(186,536		)
Cash and cash equivalents:
Beginning of period	315,250			9,639		46,548			—		371,437
End of period	$	130,943		$	13,127	$	40,831		$	—	$	184,901


(1)	2014 includes the wind-down process of certain new ventures that were discontinued during 2013. Cash flows from these discontinued operations were not significant and are not segregated from cash flows from continuing operations in all periods presented.