Note 16: Commitments and Contingencies

Lease Commitments

Operating Leases

We lease our corporate administrative, marketing, and product development facilities in Bellevue, Washington under operating leases that expire December 31, 2019.

We lease our Redbox facility in Oakbrook Terrace, Illinois under an operating lease that expires on July 31, 2021. Under certain circumstances, we have the ability to extend the lease for a five-year period, rent additional office space under a right of first offer and refusal and have the option to terminate the lease in July 2016. Under the terms of the lease, we are responsible for certain tax, construction and operating costs associated with the rented space. We early terminated our operating lease of certain floors of our Redbox headquarters and recognized the fair value of the ongoing lease payments and other related costs through the effective date of termination, July 31, 2016, as of the cease use date, March 31, 2015. See Note 11: Restructuring for additional information;

We entered into a new operating lease of 16,085 square feet of office space for Redbox in Woodland Hills, California which expires May 31, 2022.

We lease our ecoATM facility in San Diego, California. The lease for this space will expire on August 10, 2025. Additionally, with the acquisition of Gazelle in the fourth quarter of 2015, we acquired facilities in Boston, Massachusetts and Louisville, Kentucky. The leases for these spaces will expire on November 30, 2020 and February 28, 2018, respectively.

Rent expense, net of sublease income under our operating lease agreements was $18.0 million, $16.8 million and $12.3 million during 2015, 2014 and 2013, respectively.

Capital Leases

We lease automobiles and computer equipment under capital leases expiring at various dates through 2022. We assess these leases as they come due as to whether we should purchase, enter into new capital leases, or enter into operating leases.

Assets held under capital leases are included in property and equipment, net on the Consolidated Balance Sheets and include the following:



Dollars in thousands	December 31,
Dollars in thousands	2015			2014
Gross property and equipment	$	26,394		$	41,336
Accumulated depreciation	(20,735		)	(26,831		)
Net property and equipment	$	5,659		$	14,505

As of December 31, 2015, our future minimum lease payments, net of sublease income are as follows:



Dollars in thousands	Capital Leases			Operating Leases⁽¹⁾
2016	$	4,144		$	18,969
2017	1,011			13,445
2018	429			10,215
2019	305			7,986
2020	209			4,936
Thereafter	123			7,132
Total minimum lease commitments	6,221			62,683
Less: sublease income	—			(1,332		)
Total minimum lease commitments, net	6,221			$	61,351
Less: amounts representing interest	(332		)
Present value of capital lease obligations	5,889
Less: Current portion of capital lease obligations	(4,006		)
Long-term portion of capital lease obligations	$	1,883


(1)	Includes all operating leases having an initial or remaining non-cancelable lease term in excess of one year.

Purchase Commitments

Pursuant to the manufacturing and services agreement entered into as part of the NCR Asset Acquisition, Outerwall, Redbox or an affiliate were committed to purchase goods and services from NCR for a period of five years from June 22, 2012. At the end of the five-year period, if the aggregate amount paid in margin to NCR for goods and services delivered were to equal less than $25.0 million, Outerwall was to pay NCR the difference between such aggregate amount and $25.0 million. We made purchases in 2015, 2014 and 2013 that reduced this commitment by $0.4 million, $2.1 million and $7.1 million, respectively. During the fourth quarter of 2015, we made a one-time payment of $8.5 million in cash to satisfy all outstanding obligations related to, and to effectively settle, our remaining purchase commitment of $15.4 million established by the manufacturing and services agreement. The one-time payment was recognized as restructuring and related costs in our Consolidated Statements of Comprehensive Income.

We have entered into certain miscellaneous purchase agreements, primarily related to purchases of equipment, which resulted in total purchase commitments of $24.5 million as of December 31, 2015.

Content License Agreements

On January 21, 2016, Redbox entered into an amendment to the existing agreement with Universal Home Entertainment LLC (“Universal”), extending the agreement through December 31, 2017. See Note 21: Subsequent Events in our Notes to Consolidated Financial Statements for additional information.

On October 16, 2015, Paramount elected to exercise its option to extend our existing content license agreement. This extended the license period through December 31, 2016, with no further options to renew, and required us to issue 50,000 shares of additional restricted stock to Paramount during the first quarter of 2016, which we issued on January 4, 2016.

On July 14, 2015, Sony elected to exercise its option to extend our existing content license agreement. This extended the license period through September 30, 2016, with no further options to renew, and required us to issue 25,000 shares of additional restricted stock to Sony during the fourth quarter of 2015, which we issued on October 2, 2015.

On June 5, 2015, Redbox entered into an amendment to the existing April 22, 2010, agreement with Twentieth Century Fox Home Entertainment LLC (“Fox”) that maintains a 28-day window on Blu-ray Disc and DVD titles through June 30, 2017, and includes a revenue sharing arrangement between Redbox and Fox.

On March 26, 2015, we entered into a revenue sharing agreement with Warner Home Video, a division of Warner Bros. Home Entertainment Inc., (the “Warner Agreement”) under which Redbox agreed to license minimum quantities of theatrical and direct-to-video titles for rental through March 31, 2017. The Warner Agreement maintains a 28-day window on such titles.

We have entered into certain license agreements to obtain content for movie and video game rentals. A summary of the estimated movie commitments in relation to these agreements as of December 31, 2015, is presented in the following table:



Dollars in thousands	December 31,
Dollars in thousands	Total		2016		2017
Total estimated movie commitments⁽¹⁾	$	448,718	$	381,275	$	67,443


(1)	Subsequent to year end and not included in this table, Redbox entered into an amendment to the existing agreement with Universal, extending the agreement through December 31, 2017. See Note 21: Subsequent Events for additional information.

General terms of our content license agreements with studios are as follows as of December 31, 2015:



Studio	End Date		Release Date
Fox	6/30/2017		Delay	⁽¹⁾
Sony	9/30/2016		Day & Date	⁽²⁾
Paramount	12/31/2016		Day & Date	⁽²⁾
Warner	3/31/2017		Delay	⁽¹⁾
Lionsgate	9/30/2016	⁽³⁾	Day & Date	⁽²⁾
Universal	12/31/2015	⁽⁴⁾	Delay	⁽¹⁾


(1)	Content licensed under the agreement is available for rental after a certain number of days following the retail release.


(2)	Content licensed under the agreement is available for rental on the same day and date as the retail release.


(3)	Agreement extends the term of the arrangement automatically for an additional year under certain conditions.


(4)	Subsequent to year end, Redbox entered into an amendment to the existing agreement with Universal, extending the agreement through December 31, 2017. See Note 21: Subsequent Events for additional information.

Revenue Share Commitments

Certain of our Retailer agreements include minimum revenue share commitments through the term of the arrangement. Our minimum commitments under these agreements are presented in the following table:



Dollars in thousands	December 31,
Dollars in thousands	Total		2016		2017		2018
Redbox	$	2,365	$	1,711	$	523	$	131

Letters of Credit

As of December 31, 2015, we had five irrevocable standby letters of credit that totaled $6.5 million. These standby letters of credit, which expire at various times through November 2016, are used to collateralize certain obligations to third parties. As of December 31, 2015, no amounts were outstanding under these standby letter of credit agreements.

Legal Matters

In October 2009, an Illinois resident, Laurie Piechur, individually and on behalf of all others similarly situated, filed a putative class action complaint against our Redbox subsidiary in the Circuit Court for the Twentieth Judicial Circuit, St. Clair County, Illinois. The plaintiff alleged that, among other things, Redbox charges consumers illegal and excessive late fees in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and that Redbox's rental terms violate the Illinois Rental Purchase Agreement Act or the Illinois Automatic Contract Renewal Act and the plaintiff is seeking monetary damages and other relief. In November 2009, Redbox removed the case to the U.S. District Court for the Southern District of Illinois. In February 2010, the District Court remanded the case to the Circuit Court for the Twentieth Judicial Circuit, St. Clair County, Illinois. In May 2010, the court denied Redbox's motion to dismiss the plaintiff's complaint. In November 2011, the plaintiff moved for class certification, and Redbox moved for summary judgment. The court denied Redbox's motion for summary judgment in February 2012. The plaintiff filed an amended complaint on April 19, 2012, and an amended motion for class certification on June 5, 2012. The court denied Redbox's motion to dismiss the amended complaint. The amended class certification motion was briefed and argued. At the hearing on plaintiff's amended motion for class certification, the plaintiff dismissed all claims but two and is pursuing only her claims under the Illinois Rental Purchase Agreement Act and the Illinois Automatic Contract Renewal Act. On May 21, 2013, the court denied plaintiff's amended class action motion. On January 29, 2014, the Illinois Supreme Court denied plaintiff’s petition for leave to appeal the trial court’s denial of class certification. Redbox has moved to dismiss all remaining claims on mootness grounds, and the Court granted Redbox’s motion on December 11, 2014. The plaintiffs appealed on January 7, 2015. Oral argument was held November 10, 2015. The Appellate Court affirmed the trial court’s rulings on January 11, 2016. We continue to believe that the claims against us are without merit and intend to defend ourselves vigorously in this matter should plaintiff seek further appellate review. Currently, no accrual has been established as it was not possible to estimate the possible loss or range of loss because this matter had not advanced to a stage where we could make any such estimate.

Other Contingencies

During the year ended December 31, 2013, we resolved a previously disclosed loss contingency related to a supply agreement and recorded a benefit of $11.4 million in the direct operating line item in our Consolidated Statements of Comprehensive Income.