Guarantor Subsidiaries | 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 June 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 $ 171,245 $ 23,961 $ 42,502 $ — $ 237,708 Accounts receivable, net of allowances 3,558 29,103 771 — 33,432 Content library — 146,348 208 — 146,556 Prepaid expenses and other current assets 36,874 26,083 1,129 (4,022 ) 60,064 Intercompany receivables 30,171 541,671 428 (572,270 ) — Total current assets 241,848 767,166 45,038 (576,292 ) 477,760 Property and equipment, net 112,823 231,284 16,338 — 360,445 Deferred income taxes — 4,890 2,480 (4,890 ) 2,480 Goodwill and other intangible assets, net 249,709 281,737 — — 531,446 Other long-term assets 5,828 985 285 — 7,098 Investment in related parties 916,223 30,486 — (946,709 ) — Total assets $ 1,526,431 $ 1,316,548 $ 64,141 $ (1,527,891 ) $ 1,379,229 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 10,845 $ 136,143 $ 221 $ — $ 147,209 Accrued payable to retailers 69,668 32,295 12,852 — 114,815 Other accrued liabilities 57,665 72,296 2,064 2,541 134,566 Current portion of long-term debt and other long-term liabilities 18,116 — 374 — 18,490 Deferred income taxes — 32,239 — (6,563 ) 25,676 Intercompany payables 445,218 109,170 17,882 (572,270 ) — Total current liabilities 601,512 382,143 33,393 (576,292 ) 440,756 Long-term debt and other long-term liabilities 873,656 18,182 237 — 892,075 Deferred income taxes 27,102 — 25 (4,890 ) 22,237 Total liabilities 1,502,270 400,325 33,655 (581,182 ) 1,355,068 Commitments and contingencies Stockholders’ Equity: Preferred stock — — — — — Common stock 591,772 234,729 18,393 (367,635 ) 477,259 Treasury stock (1,055,447 ) — — — (1,055,447 ) Retained earnings 488,055 681,494 8,857 (579,074 ) 599,332 Accumulated other comprehensive income (loss) (219 ) — 3,236 — 3,017 Total stockholders’ equity 24,161 916,223 30,486 (946,709 ) 24,161 Total liabilities and stockholders’ equity $ 1,526,431 $ 1,316,548 $ 64,141 $ (1,527,891 ) $ 1,379,229 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 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: 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 97,379 917,234 (5,115 ) (912,120 ) 97,378 Total liabilities and stockholders’ equity $ 1,553,835 $ 1,363,217 $ 92,888 $ (1,426,621 ) $ 1,583,319 CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) Three Months Ended June 30, 2015 (in thousands) Outerwall Inc. Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations and Consolidation Reclassifications Total Revenue $ 68,687 $ 465,039 $ 11,643 $ — $ 545,369 Expenses: Direct operating 35,397 328,952 5,270 — 369,619 Marketing 1,477 6,543 27 — 8,047 Research and development 1 2,038 — — 2,039 General and administrative 11,767 36,820 196 — 48,783 Depreciation and other 8,051 36,063 1,060 — 45,174 Amortization of intangible assets 4 3,305 — — 3,309 Goodwill impairment (Note 6) — 85,890 — — 85,890 Total expenses 56,697 499,611 6,553 — 562,861 Operating income (loss) 11,990 (34,572 ) 5,090 — (17,492 ) Other income (expense), net: Loss from equity method investments, net (133 ) — — — (133 ) Interest income (expense), net (12,485 ) 317 (15 ) — (12,183 ) Other, net 3,142 80 (2,580 ) — 642 Total other income (expense), net (9,476 ) 397 (2,595 ) — (11,674 ) Income (loss) from continuing operations before income taxes 2,514 (34,175 ) 2,495 — (29,166 ) Income tax benefit (expense) 5,981 (23,736 ) (430 ) — (18,185 ) Income (loss) from continuing operations 8,495 (57,911 ) 2,065 — (47,351 ) Income (loss) from discontinued operations, net of tax (856 ) 1,221 1,370 — 1,735 Equity in income (loss) of subsidiaries (53,255 ) 3,435 — 49,820 — Net income (loss) (45,616 ) (53,255 ) 3,435 49,820 (45,616 ) Foreign currency translation adjustment (1) 638 — (165 ) — 473 Comprehensive income (loss) $ (44,978 ) $ (53,255 ) $ 3,270 $ 49,820 $ (45,143 ) (1) Foreign currency translation adjustment had no tax effect for the three months ended June 30, 2015 . CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) Three Months Ended June 30, 2014 (in thousands) Outerwall Inc. Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations and Consolidation Reclassifications Total Revenue $ 68,085 $ 466,639 $ 11,803 $ — $ 546,527 Expenses: Direct operating 35,401 340,591 5,742 — 381,734 Marketing 1,651 7,351 134 — 9,136 Research and development 832 2,580 — — 3,412 General and administrative 10,365 37,995 236 — 48,596 Depreciation and other 9,469 37,221 1,122 — 47,812 Amortization of intangible assets 536 3,304 — — 3,840 Total expenses 58,254 429,042 7,234 — 494,530 Operating income 9,831 37,597 4,569 — 51,997 Other income (expense), net: Loss from equity method investments, net (224 ) (10,317 ) — — (10,541 ) Interest income (expense), net (12,971 ) 91 (52 ) — (12,932 ) Other, net 4,114 58 (2,558 ) — 1,614 Total other expense, net (9,081 ) (10,168 ) (2,610 ) — (21,859 ) Income from continuing operations before income taxes 750 27,429 1,959 — 30,138 Income tax benefit (expense) 920 (6,935 ) (290 ) — (6,305 ) Income from continuing operations 1,670 20,494 1,669 — 23,833 Loss from discontinued operations, net of tax (94 ) (58 ) (1,928 ) — (2,080 ) Equity in income (loss) of subsidiaries 20,177 (259 ) — (19,918 ) — Net income (loss) 21,753 20,177 (259 ) (19,918 ) 21,753 Foreign currency translation adjustment (1) 297 — (633 ) — (336 ) Comprehensive income (loss) $ 22,050 $ 20,177 $ (892 ) $ (19,918 ) $ 21,417 (1) Foreign currency translation adjustment had no tax effect for the three months ended June 30, 2014 . CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) Six Months Ended June 30, 2015 (in thousands) Outerwall Inc. Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations and Consolidation Reclassifications Total Revenue $ 127,497 $ 1,004,320 $ 22,188 $ — $ 1,154,005 Expenses: Direct operating 69,123 695,363 10,317 — 774,803 Marketing 2,991 13,449 27 — 16,467 Research and development (83 ) 4,206 — — 4,123 General and administrative 23,823 73,115 401 — 97,339 Restructuring and lease termination costs 551 15,300 — — 15,851 Depreciation and other 12,700 73,046 2,114 — 87,860 Amortization of intangible assets 7 6,611 — — 6,618 Goodwill impairment (Note 6) — 85,890 — — 85,890 Total expenses 109,112 966,980 12,859 — 1,088,951 Operating income 18,385 37,340 9,329 — 65,054 Other income (expense), net: Loss from equity method investments, net (265 ) — — — (265 ) Interest income (expense), net (24,881 ) 692 (65 ) — (24,254 ) Other, net 5,578 64 (7,346 ) — (1,704 ) Total other income (expense), net (19,568 ) 756 (7,411 ) — (26,223 ) Income (loss) from continuing operations before income taxes (1,183 ) 38,096 1,918 — 38,831 Income tax benefit (expense) 5,433 (49,046 ) (414 ) — (44,027 ) Income (loss) from continuing operations 4,250 (10,950 ) 1,504 — (5,196 ) Income (loss) from discontinued operations, net of tax 668 (27,833 ) 22,344 — (4,821 ) Equity in income (loss) of subsidiaries (14,935 ) 23,848 — (8,913 ) — Net income (loss) (10,017 ) (14,935 ) 23,848 (8,913 ) (10,017 ) Foreign currency translation adjustment (1) 574 — 2,753 — 3,327 Comprehensive income (loss) $ (9,443 ) $ (14,935 ) $ 26,601 $ (8,913 ) $ (6,690 ) (1) Foreign currency translation adjustment had no tax effect for the six months ended June 30, 2015 . CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) Six Months Ended June 30, 2014 (in thousands) Outerwall Inc. Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations and Consolidation Reclassifications Total Revenue $ 126,262 $ 995,633 $ 22,394 $ — $ 1,144,289 Expenses: Direct operating 68,469 721,692 11,215 — 801,376 Marketing 2,778 13,161 190 — 16,129 Research and development 1,728 5,158 — — 6,886 General and administrative 20,617 80,147 440 — 101,204 Restructuring and lease termination costs 23 534 — — 557 Depreciation and other 18,571 74,961 2,222 — 95,754 Amortization of intangible assets 1,072 6,610 — — 7,682 Total expenses 113,258 902,263 14,067 — 1,029,588 Operating income 13,004 93,370 8,327 — 114,701 Other income (expense), net: Loss from equity method investments, net (448 ) (19,461 ) — — (19,909 ) Interest income (expense), net (22,602 ) 123 (101 ) — (22,580 ) Other, net 5,721 122 (4,877 ) — 966 Total other expense, net (17,329 ) (19,216 ) (4,978 ) — (41,523 ) Income (loss) from continuing operations before income taxes (4,325 ) 74,154 3,349 — 73,178 Income tax benefit (expense) 3,248 (24,450 ) (537 ) — (21,739 ) Income (loss) from continuing operations (1,077 ) 49,704 2,812 — 51,439 Loss from discontinued operations, net of tax (803 ) (205 ) (5,503 ) — (6,511 ) Equity in income (loss) of subsidiaries 46,808 (2,691 ) — (44,117 ) — Net income (loss) 44,928 46,808 (2,691 ) (44,117 ) 44,928 Foreign currency translation adjustment (1) 30 — 509 — 539 Comprehensive income (loss) $ 44,958 $ 46,808 $ (2,182 ) $ (44,117 ) $ 45,467 (1) Foreign currency translation adjustment had no tax effect for the six months ended June 30, 2014 . CONSOLIDATING STATEMENTS OF CASH FLOWS (unaudited) Six Months Ended June 30, 2015 (in thousands) Outerwall Inc. Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations and Consolidation Reclassifications Total Operating Activities: Net income (loss) $ (10,017 ) $ (14,935 ) $ 23,848 $ (8,913 ) $ (10,017 ) Adjustments to reconcile net income (loss) to net cash flows from (used in) operating activities: Depreciation and other 12,700 74,892 6,126 — 93,718 Amortization of intangible assets 7 6,611 44 — 6,662 Share-based payments expense 3,681 3,511 — — 7,192 Windfall excess tax benefits related to share-based payments (686 ) — — — (686 ) Deferred income taxes (8,029 ) (3,903 ) 7,993 — (3,939 ) Restructuring and lease termination costs 136 1,544 — — 1,680 Loss from equity method investment, net 265 — — — 265 Amortization of deferred financing fees and debt discount 1,385 — — — 1,385 Goodwill impairment (Note 6) — 85,890 — — 85,890 Other (265 ) 176 (727 ) — (816 ) Equity in (income) losses of subsidiaries 14,935 (23,848 ) — 8,913 — Cash flows from changes in operating assets and liabilities: Accounts receivable, net (357 ) 14,773 661 — 15,077 Content library — 31,236 3,423 — 34,659 Prepaid expenses and other current assets (17,957 ) (4,455 ) 330 — (22,082 ) Other assets 47 245 30 — 322 Accounts payable (2,022 ) (13,438 ) (2,237 ) — (17,697 ) Accrued payable to retailers 479 (10,682 ) (1,307 ) — (11,510 ) Other accrued liabilities 1,674 426 (988 ) — 1,112 Net cash flows from (used in) operating activities (1) (4,024 ) 148,043 37,196 — 181,215 Investing Activities: Purchases of property and equipment (13,869 ) (25,818 ) (530 ) — (40,217 ) Proceeds from sale of property and equipment 17 2,923 — — 2,940 Investments in and advances to affiliates 161,753 (119,126 ) (42,627 ) — — Net cash flows from (used in) investing activities (1) 147,901 (142,021 ) (43,157 ) — (37,277 ) Financing Activities: Proceeds from new borrowing of Credit Facility 112,000 — — — 112,000 Principal payments on Credit Facility (185,750 ) — — — (185,750 ) Repurchases of common stock (62,731 ) — — — (62,731 ) Dividends paid (Note 19) (11,019 ) — — — (11,019 ) Principal payments on capital lease obligations and other debt (6,080 ) — (198 ) — (6,278 ) Windfall excess tax benefits related to share-based payments 686 — — — 686 Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options (1,201 ) — — — (1,201 ) Net cash flows from (used in) financing activities (1) (154,095 ) — (198 ) — (154,293 ) Effect of exchange rate changes on cash 574 — 4,793 — 5,367 Increase (decrease) in cash and cash equivalents (9,644 ) 6,022 (1,366 ) — (4,988 ) Cash and cash equivalents: Beginning of period 180,889 17,939 43,868 — 242,696 End of period $ 171,245 $ 23,961 $ 42,502 $ — $ 237,708 (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) Six Months Ended June 30, 2014 (in thousands) Outerwall Inc. Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations and Consolidation Reclassifications Total Operating Activities: Net income (loss) $ 44,928 $ 46,808 $ (2,691 ) $ (44,117 ) $ 44,928 Adjustments to reconcile net income (loss) to net cash flows from operating activities: Depreciation and other 18,554 75,912 3,792 — 98,258 Amortization of intangible assets 1,072 6,623 — — 7,695 Share-based payments expense 5,451 1,393 — — 6,844 Windfall excess tax benefits related to share-based payments (1,953 ) — — — (1,953 ) Deferred income taxes (2,451 ) (10,855 ) (1,698 ) — (15,004 ) Loss from equity method investments, net 448 19,461 — — 19,909 Amortization of deferred financing fees and debt discount 2,522 — — — 2,522 Loss from early extinguishment of debt 1,963 — — — 1,963 Other (1,011 ) (180 ) 27 — (1,164 ) Equity in (income) losses of subsidiaries (46,808 ) 2,691 — 44,117 — Cash flows from changes in operating assets and liabilities: Accounts receivable, net 528 4,514 289 — 5,331 Content library 36 47,037 413 — 47,486 Prepaid expenses and other current assets 20,618 1,105 98 182 22,003 Other assets 42 979 15 — 1,036 Accounts payable (3,201 ) (67,218 ) (576 ) — (70,995 ) Accrued payable to retailers 4,146 (13,460 ) 2,591 — (6,723 ) Other accrued liabilities (3,874 ) (978 ) 318 (182 ) (4,716 ) Net cash flows from (used in) operating activities (1) 41,010 113,832 2,578 — 157,420 Investing Activities: Purchases of property and equipment (17,458 ) (31,412 ) (4,146 ) — (53,016 ) Proceeds from sale of property and equipment 750 1,043 — — 1,793 Cash paid for equity investments — (10,500 ) — — (10,500 ) Investments in and advances to affiliates 69,392 (71,176 ) 1,784 — — Net cash flows from (used in) investing activities (1) 52,684 (112,045 ) (2,362 ) — (61,723 ) Financing Activities: Proceeds from issuance of senior unsecured notes 295,500 — — — 295,500 Proceeds from new borrowing on Credit Facility 505,000 — — — 505,000 Principal payments on Credit Facility (534,375 ) — — — (534,375 ) Financing costs associated with Credit Facility and senior unsecured notes (2,082 ) — — — (2,082 ) Settlement and conversion of convertible debt (17,724 ) — — — (17,724 ) Repurchases of common stock (474,480 ) — — — (474,480 ) Principal payments on capital lease obligations and other debt (6,863 ) (3 ) (215 ) — (7,081 ) Windfall excess tax benefits related to share-based payments 1,953 — — — 1,953 Withholding tax paid on vesting of restricted stock net of proceeds from exercise of stock options (1,025 ) — — — (1,025 ) Net cash flows from (used in) financing activities (1) (234,096 ) (3 ) (215 ) — (234,314 ) (in thousands) Outerwall Inc. Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations and Consolidation Reclassifications Total Effect of exchange rate changes on cash 5 — 401 — 406 Increase (decrease) in cash and cash equivalents (140,397 ) 1,784 402 — (138,211 ) Cash and cash equivalents: Beginning of period 315,250 9,639 46,548 — 371,437 End of period $ 174,853 $ 11,423 $ 46,950 $ — $ 233,226 (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. |