Note 15: 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 March 31, 2016
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations and Consolidation Reclassifications			Total
Assets
Current Assets:
Cash and cash equivalents	$	139,285		$	21,445	$	38,120	$	—		$	198,850
Accounts receivable, net of allowances	2,064			28,422		1,197		—			31,683
Content library	—			156,352		—		—			156,352
Prepaid expenses and other current assets	12,397			33,619		373		—			46,389
Intercompany receivables	33,494			586,159		304		(619,957		)	—
Total current assets	187,240			825,997		39,994		(619,957		)	433,274
Property and equipment, net	91,542			185,369		13,849		—			290,760
Deferred income taxes	—			—		2,508		—			2,508
Goodwill and other intangible assets, net	249,699			287,025		—		—			536,724
Other long-term assets	583			1,150		141		—			1,874
Investment in related parties	946,069			29,001		—		(975,070		)	—
Total assets	$	1,475,133		$	1,328,542	$	56,492	$	(1,595,027	)	$	1,265,140
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	11,269		$	133,934	$	184	$	—		$	145,387
Accrued payable to retailers	52,268			27,182		11,022		—			90,472
Other accrued liabilities	74,513			83,434		1,835		—			159,782
Dividend payable	10,463			—		—		—			10,463
Current portion of long-term debt and other long-term liabilities	17,651			5		256		—			17,912
Intercompany payables	501,456			104,468		14,033		(619,957		)	—
Total current liabilities	667,620			349,023		27,330		(619,957		)	424,016
Long-term debt and other long-term liabilities	794,301			19,529		137		—			813,967
Deferred income taxes	11,011			13,922		24		—			24,957
Total liabilities	1,472,932			382,474		27,491		(619,957		)	1,262,940
Commitments and contingencies
Stockholders’ Equity:
Preferred stock	—			—		3,000		(3,000		)	—
Common stock	599,684			252,512		4,635		(371,660		)	485,171
Treasury stock	(1,149,261		)	—		—		—			(1,149,261		)
Retained earnings	552,800			693,556		20,519		(600,410		)	666,465
Accumulated other comprehensive income (loss)	(1,022		)	—		847		—			(175		)
Total stockholders’ equity	2,201			946,068		29,001		(975,070		)	2,200
Total liabilities and stockholders’ equity	$	1,475,133		$	1,328,542	$	56,492	$	(1,595,027	)	$	1,265,140



CONSOLIDATING BALANCE SHEETS
(unaudited)
	As of December 31, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations and Consolidation Reclassifications			Total
Assets
Current Assets:
Cash and cash equivalents	$	160,167		$	19,372	$	43,010	$	—		$	222,549
Accounts receivable, net of allowances	3,983			33,269		1,212		—			38,464
Content library	—			188,490		—		—			188,490
Prepaid expenses and other current assets	17,720			33,049		599		—			51,368
Intercompany receivables	35,654			527,996		426		(564,076		)	—
Total current assets	217,524			802,176		45,247		(564,076		)	500,871
Property and equipment, net	97,659			204,081		14,273		—			316,013
Deferred income taxes	—			—		2,606		—			2,606
Goodwill and other intangible assets, net	249,703			290,811		—		—			540,514
Other long-term assets	747			1,293		167		—			2,207
Investment in related parties	921,456			27,798		—		(949,254		)	—
Total assets	$	1,487,089		$	1,326,159	$	62,293	$	(1,513,330	)	$	1,362,211
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Accounts payable	$	16,127		$	167,694	$	189	$	—		$	184,010
Accrued payable to retailers	71,947			30,157		12,994		—			115,098
Other accrued liabilities	57,025			82,401		2,011		—			141,437
Current portion of long-term debt and other long-term liabilities	16,832			—		299		—			17,131
Intercompany payables	459,789			85,487		18,800		(564,076		)	—
Total current liabilities	621,720			365,739		34,293		(564,076		)	457,676
Long-term debt and other long-term liabilities	873,476			19,882		159		—			893,517
Deferred income taxes	13,965			19,083		44		—			33,092
Total liabilities	1,509,161			404,704		34,496		(564,076		)	1,384,285
Commitments and contingencies
Stockholders’ Equity (Deficit):
Preferred stock	—			—		3,000		(3,000		)	—
Common stock	599,675			252,727		4,636		(371,875		)	485,163
Treasury stock	(1,151,063		)	—		—		—			(1,151,063		)
Retained earnings	530,140			668,728		18,963		(574,379		)	643,452
Accumulated other comprehensive income (loss)	(824		)	—		1,198		—			374
Total stockholders’ equity (deficit)	(22,072		)	921,455		27,797		(949,254		)	(22,074		)
Total liabilities and stockholders’ equity (deficit)	$	1,487,089		$	1,326,159	$	62,293	$	(1,513,330	)	$	1,362,211



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
	Three Months Ended March 31, 2016
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	62,246		$	463,577		$	10,133		$	—		$	535,956
Expenses:
Direct operating	34,356			336,941			4,670			—			375,967
Marketing	799			8,423			—			—			9,222
Research and development	—			1,045			—			—			1,045
General and administrative	10,914			36,664			192			—			47,770
Restructuring and related costs	462			2,813			—			—			3,275
Depreciation and other	6,414			28,713			991			—			36,118
Amortization of intangible assets	3			3,787			—			—			3,790
Total expenses	52,948			418,386			5,853			—			477,187
Operating income	9,298			45,191			4,280			—			58,769
Other income (expense), net:
Loss from equity method investments, net	(207		)	—			—			—			(207		)
Interest income (expense), net	7,947			(8,142		)	(47		)	—			(242		)
Other, net	2,766			387			(1,924		)	—			1,229
Total other income (expense), net	10,506			(7,755		)	(1,971		)	—			780
Income from continuing operations before income taxes	19,804			37,436			2,309			—			59,549
Income tax expense	(7,822		)	(12,686		)	(590		)	—			(21,098		)
Income from continuing operations	11,982			24,750			1,719			—			38,451
Equity in income of subsidiaries	26,469			1,719			—			(28,188		)	—
Net income	38,451			26,469			1,719			(28,188		)	38,451
Foreign currency translation adjustment⁽¹⁾	(198		)	—			(351		)	—			(549		)
Comprehensive income	$	38,253		$	26,469		$	1,368		$	(28,188	)	$	37,902


(1)	Foreign currency translation adjustment had no tax effect for the three months ended March 31, 2016.



CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
	Three Months Ended March 31, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Revenue	$	58,810		$	539,281		$	10,545		$	—		$	608,636
Expenses:
Direct operating	33,726			366,411			5,047			—			405,184
Marketing	1,514			6,906			—			—			8,420
Research and development	(84		)	2,168			—			—			2,084
General and administrative	12,056			36,295			205			—			48,556
Restructuring and related costs	550			15,301			—			—			15,851
Depreciation and other	4,649			36,983			1,054			—			42,686
Amortization of intangible assets	3			3,306			—			—			3,309
Total expenses	52,414			467,370			6,306			—			526,090
Operating income	6,396			71,911			4,239			—			82,546
Other income (expense), net:
Loss from equity method investments, net	(132		)	—			—			—			(132		)
Interest income (expense), net	(12,396		)	375			(50		)	—			(12,071		)
Other, net	2,436			(16		)	(4,766		)	—			(2,346		)
Total other income (expense), net	(10,092		)	359			(4,816		)	—			(14,549		)
Income (loss) from continuing operations before income taxes	(3,696		)	72,270			(577		)	—			67,997
Income tax benefit (expense)	(548		)	(25,310		)	16			—			(25,842		)
Income (loss) from continuing operations	(4,244		)	46,960			(561		)	—			42,155
Income (loss) from discontinued operations, net of tax	1,524			(29,054		)	20,974			—			(6,556		)
Equity in income of subsidiaries	38,319			20,413			—			(58,732		)	—
Net income	35,599			38,319			20,413			(58,732		)	35,599
Foreign currency translation adjustment⁽¹⁾	(64		)	—			2,918			—			2,854
Comprehensive income	$	35,535		$	38,319		$	23,331		$	(58,732	)	$	38,453


(1)	Foreign currency translation adjustment had no tax effect for the three months ended March 31, 2015.



CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited)
	Three Months Ended March 31, 2016
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Operating Activities:
Net income	$	38,451		$	26,469		$	1,719		$	(28,188	)	$	38,451
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and other	6,414			28,713			991			—			36,118
Amortization of intangible assets	3			3,787			—			—			3,790
Share-based payments expense	3,146			1,184			—			—			4,330
Deferred income taxes	(2,928		)	(5,161		)	267			—			(7,822		)
Restructuring, impairment and related costs	57			304			—			—			361
Loss from equity method investment, net	207			—			—			—			207
Amortization of deferred financing fees and debt discount	638			—			—			—			638
Gain from early extinguishment of debt	(11,028		)	—			—			—			(11,028		)
Other	(112		)	76			—			—			(36		)
Equity in income of subsidiaries	(26,469		)	(1,719		)	—			28,188			—
Cash flows from changes in operating assets and liabilities:
Accounts receivable, net	1,919			4,846			98			—			6,863
Content library	—			33,126			—			—			33,126
Prepaid expenses and other current assets	5,278			465			279			—			6,022
Other assets	—			143			20			—			163
Accounts payable	(2,121		)	(33,280		)	(4		)	—			(35,405		)
Accrued payable to retailers	(19,678		)	(2,975		)	(1,993		)	—			(24,646		)
Other accrued liabilities	15,994			331			(252		)	—			16,073
Net cash flows from operating activities	9,771			56,309			1,125			—			67,205
Investing Activities:
Purchases of property and equipment	(7,428		)	(5,504		)	(521		)	—			(13,453		)
Proceeds from sale of property and equipment	—			74			—			—			74
Investments in and advances to affiliates	53,614			(48,806		)	(4,808		)	—			—
Net cash flows from (used in) investing activities	46,186			(54,236		)	(5,329		)	—			(13,379		)
Financing Activities:
Proceeds from new borrowing of Credit Facility	85,000			—			—			—			85,000
Principal payments on Credit Facility	(108,313		)	—			—			—			(108,313		)
Repurchases of notes	(45,328		)	—			—			—			(45,328		)
Dividends paid	(5,038		)	—			—			—			(5,038		)
Principal payments on capital lease obligations and other debt	(1,537		)	—			(89		)	—			(1,626		)
Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options	(1,425		)	—			—			—			(1,425		)
Net cash flows used in financing activities	(76,641		)	—			(89		)	—			(76,730		)
Effect of exchange rate changes on cash	(198		)	—			(597		)	—			(795		)
Increase (decrease) in cash and cash equivalents	(20,882		)	2,073			(4,890		)	—			(23,699		)
Cash and cash equivalents:
Beginning of period	160,167			19,372			43,010			—			222,549
End of period	$	139,285		$	21,445		$	38,120		$	—		$	198,850



CONSOLIDATING STATEMENTS OF CASH FLOWS
(unaudited)
	Three Months Ended March 31, 2015
(in thousands)	Outerwall Inc.			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Eliminations and Consolidation Reclassifications			Total
Operating Activities:
Net income	$	35,599		$	38,319		$	20,413		$	(58,732	)	$	35,599
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and other	4,649			38,828			5,066			—			48,543
Amortization of intangible assets	3			3,306			44			—			3,353
Share-based payments expense	1,916			1,987			—			—			3,903
Windfall excess tax benefits related to share-based payments	(526		)	—			—			—			(526		)
Deferred income taxes	(6,070		)	(6,347		)	9,870			—			(2,547		)
Restructuring, impairment and related costs	136			1,544			—			—			1,680
Loss from equity method investments, net	132			—			—			—			132
Amortization of deferred financing fees and debt discount	693			—			—			—			693
Other	(149		)	(322		)	(727		)	—			(1,198		)
Equity in income of subsidiaries	(38,319		)	(20,413		)	—			58,732			—
Cash flows from changes in operating assets and liabilities:
Accounts receivable, net	712			14,518			(3,407		)	—			11,823
Content library	—			6,663			3,293			—			9,956
Prepaid expenses and other current assets	(2,759		)	(591		)	244			—			(3,106		)
Other assets	15			122			31			—			168
Accounts payable	2,895			1,202			(1,177		)	—			2,920
Accrued payable to retailers	(10,800		)	(5,730		)	(1,911		)	—			(18,441		)
Other accrued liabilities	9,718			3,994			(592		)	—			13,120
Net cash flows from (used in) operating activities⁽¹⁾	(2,155		)	77,080			31,147			—			106,072
Investing Activities:
Purchases of property and equipment	(5,607		)	(14,721		)	(381		)	—			(20,709		)
Proceeds from sale of property and equipment	—			123			—			—			123
Investments in and advances to affiliates	106,713			(65,229		)	(41,484		)	—			—
Net cash flows from (used in) investing activities⁽¹⁾	101,106			(79,827		)	(41,865		)	—			(20,586		)
Financing Activities:
Proceeds from new borrowing on Credit Facility	35,000			—			—			—			35,000
Principal payments on Credit Facility	(116,875		)	—			—			—			(116,875		)
Dividends paid	(5,602		)	—			—			—			(5,602		)
Repurchases of common stock	(40,708		)	—			—			—			(40,708		)
Principal payments on capital lease obligations and other debt	(3,143		)	—			(102		)	—			(3,245		)
Windfall excess tax benefits related to share-based payments	526			—			—			—			526
Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options	(3,088		)	—			—			—			(3,088		)
Net cash flows used in financing activities⁽¹⁾	(133,890		)	—			(102		)	—			(133,992		)
Effect of exchange rate changes on cash	(36		)	—			3,780			—			3,744
Decrease in cash and cash equivalents	(34,975		)	(2,747		)	(7,040		)	—			(44,762		)
Cash and cash equivalents:
Beginning of period	180,889			17,939			43,868			—			242,696
End of period	$	145,914		$	15,192		$	36,828		$	—		$	197,934


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