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Basis of Presentation and Principles of Consolidation (Policies)
9 Months Ended
Sep. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Reclassifications
Reclassifications
To be consistent with our 2015 reporting, the following have been retrospectively reported in our Consolidated Statements of Comprehensive Income for all periods presented with no effect on net income, cash flows or stockholder's equity:
Results of our Redbox Canada operations which were discontinued during the first quarter of 2015. See Note 12: Discontinued Operations for additional information;
Restructuring and lease termination costs. See Note 11: Restructuring for additional information; and
Basic and diluted earnings per share as a result of applying the two-class method of calculating earnings per share (the “Two-Class Method”). During the first quarter of 2015, the Two-Class Method became significantly more dilutive than the previously applied treasury stock method as a result of stock repurchases increasing the average number of unvested restricted awards (“participating securities”) as a percentage of total common shares outstanding. The impact of applying the Two-Class Method on both income from continuing operations and basic and diluted weighted average shares used to calculate earnings per common share is as follows:
 
As Reported Under the Treasury Stock Method
 
Amount Allocated to Participating Securities
 
As Revised Under the Two-Class Method
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
In thousands, except per share data
September 30, 2014
 
September 30, 2014
 
September 30, 2014
Income from continuing operations used in basic per share calculation
$
22,123

 
$
73,562

 
$
(739
)
 
$
(2,294
)
 
$
21,384

 
$
71,268

Income from continuing operations used in diluted per share calculation
$
22,123

 
$
73,562

 
$
(731
)
 
$
(2,253
)
 
$
21,392

 
$
71,309

Weighted average shares used in basic per share calculation
18,798

 
20,792

 

 

 
18,798

 
20,792

Weighted average shares used in diluted per share calculation
19,147

 
21,372

 
(126
)
 
(186
)
 
19,021

 
21,186

Basic earnings per common share from continuing operations
$
1.18

 
$
3.54

 
$
(0.04
)
 
$
(0.11
)
 
$
1.14

 
$
3.43

Diluted earnings per common share from continuing operations
$
1.16

 
$
3.44

 
$
(0.04
)
 
$
(0.07
)
 
$
1.12

 
$
3.37


See Note 13: Earnings Per Share for additional information.
Accounting Pronouncements Adopted During the Current Year
Accounting Pronouncements Adopted During the Current Year
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 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 adopted the provisions of ASU 2014-08 during the first quarter of 2015 and applied the guidance to our disposition of our Redbox operations in Canada (“Redbox Canada”). See Note 12: Discontinued Operations for additional information.
Accounting Pronouncements Not Yet Adopted
Accounting Pronouncements Not Yet Adopted
There have been no developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on our consolidated financial statements, from those disclosed in our 2014 Annual Report on Form 10-K, except for the following:
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. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017. Early adoption is permitted to the original effective date of December 15, 2016. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We are currently in the process of evaluating the impact of ASU 2014-09.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30). This ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, instead of as a deferred charge. In August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Subtopic 835-30). This ASU provides additional guidance to ASU 2015-03, which did not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. ASU 2015-15 noted that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We are currently evaluating the impact of ASU 2015-03 and 2015-15, which are effective for us in our fiscal year beginning January 1, 2016. Early adoption is permitted.
In April 2015, the FASB issued ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer’s accounting for service contracts. We are currently evaluating the impact of ASU 2015-05, which is effective for us in our fiscal year beginning January 1, 2016, and do not expect this standard to have a material impact to our consolidated financial statements and related disclosures. Early adoption is permitted.
Earnings Per Share, Policy
Beginning in the first quarter of 2015, we began applying the two-class method of calculating basic and diluted earnings per share (the “Two-Class Method”) as it became significantly more dilutive than the previously applied treasury stock method as a result of stock repurchases increasing the average number of unvested restricted awards as a percentage of total common shares outstanding.
The Two-Class Method is an earnings allocation formula that treats a participating security, as having rights to earnings that otherwise would have been available to common shareholders and assumes all earnings for the period are distributed. Our unvested restricted stock awards granted are participating securities as they entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock.
Segment Reporting, Policy
Management, including our chief operating decision maker, who is our CEO, evaluates the performances of our business segments primarily on segment revenue and segment operating income (loss) before depreciation, amortization and other, and share-based compensation granted to executives, non-employee directors and employees (“segment operating income (loss)”). Segment operating income (loss) contains internally allocated costs of our shared service support functions, including but not limited to, 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. Share-based payments expense related to share-based compensation granted to executives, non-employee directors and employees and expense related to the rights to receive cash issued in connection with our acquisition of ecoATM are not allocated to our segments and are included in the Corporate Unallocated column in the analysis and reconciliation below; however, share-based payments expense related to our content arrangements with certain movie studios has been allocated to our Redbox segment and is included within direct operating expenses. Our performance evaluation does not include segment assets.
Fair Value of Financial Instruments, Policy
To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:
Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; or
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.