##### Table of Contents





UNITED STATES
    SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C.
    20549
      FORM 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES AND EXCHANGE ACT OF 1934For
    the fiscal year ended December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES AND EXCHANGE ACT OF 1934   Commission File Number:
    000-22555
 COINSTAR, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

94-3156448(State or other jurisdiction of
    incorporation or organization)

(IRS Employer
    Identification No.)1800 114th Avenue SE, Bellevue, Washington

98004(Address of principal executive
    offices)

(Zip Code)   (425) 943-8000
 (Registrants telephone
    number, including area code)
 Securities registered pursuant to
    Section 12(b) of the Act:
  Common Stock, $0.001 par value

The NASDAQ Stock Market LLC(Title of Each Class)

(Name of Each Exchange on Which
    Registered)    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 Large accelerated
    filer  o

Accelerated
    filer  þNon-accelerated
    filer  o  (Do
    not check if a smaller reporting company)

Smaller reporting company
    o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





FORM 10-K
    Index
   
 PART IItem 1.


Business


Page 3Item 1A.


Risk Factors


Page 5Item 2.


Properties


Page 20Item 3.


Legal Proceedings


Page 20Item 4.


Submission of Matters to a Vote of Security
    Holders


Page 21PART IIItem 5.


Market for the Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


Page 21Item 6.


Selected Financial Data


Page 23Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


Page 24Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


Page 41Item 8.


Financial Statements and Supplementary Data


Page 41Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


Page 43Item 9A.


Controls and Procedures


Page 43Item 9B.


Other Information


Page 43PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


Page 44Item 11.


Executive Compensation


Page 44Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


Page 44Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


Page 44Item 14.


Principal Accounting Fees and Services


Page 44PART IVItem 15.


Exhibits and Financial Statement Schedules


Page 44SIGNATURES


Page 49EX-10.44EX-10.45EX-10.46EX-10.47EX-10.48EX-10.49EX-21.1EX-23.1EX-31.1EX-31.2EX.32.1EX-32.2




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PART I  Special
    Note Regarding Forward-Looking Statements
  Form 10-K Risk Factors
  Item 1.
    Business.  Summary
  ® (E-payment)
  ® E-payment E-payment
     3




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E-payment
  E-payment
  E-payments
  Coin and
    Entertainment services
    E-payment e-certificate
  E-payment
    DVD
    services
   4




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Money
    Transfer services
    E-payment
    services
  E-payment E-payment E-payment E-payment-enabled
  Subsequent
    Events
    Financial
    and Other Information About Segments, Geographic Areas and Our
    Business
    Where You
    Can Get Information We File with the SEC
  Form 10-K, Form 10-Q, Form 8-K,
  Item 1A.
    Risk
    Factors  You should carefully consider the following risk factors that
    may affect our business, including our financial condition and
    results of operations. The risks and uncertainties described
    below are not the only risks we face. Additional risks and
    uncertainties not presently known to us or that we currently
    deem immaterial also may impair our business. If any of the
    following risks actually occur, our business could be harmed,
    the trading price of our common stock could decline and you
    could lose all or part of your investment in us.
 5




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The
    termination, non-renewal or renegotiation on materially adverse
    terms of our contracts with one or more of our significant
    retailers could seriously harm our business, financial condition
    and results of operations.
      Events
    outside of our control, including the current economic crisis,
    has and could continue to negatively affect customers use
    of our products and services.
      There
    are many risks related to our DVD services business that may
    negatively impact our business.
    
    Competition from other providers, including those using other
    distribution channels, having more experience, greater or more
    appealing inventory, better financing, and better relationships
    with those in the movie industry, than we have, including:  
    traditional video retailers, like Blockbuster, and other local
    and regional video stores, and other DVD kiosk businesses, 6




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
    mail-delivery and online retailers like Netflix or Amazon,
    other retailers like Wal-Mart and other chain stores selling
    DVDs,
    pay-per-view/cable/satellite
    and similar movie content providers like Comcast or HBO,
    other forms of movie content providers like Internet sites
    including iTunes, Hulu or Google, and
    noncommercial sources like libraries;    
    Changes in the sequential timing of when movie content is made
    available to the various movie content distribution channels.
    Businesses that rent movies in physical formats such as DVDs
    currently enjoy a competitive advantage over other movie
    distribution rental channels because of the early timing of the
    distribution window for physical formats by movie studios. After
    the initial theatrical release of a movie, the movie
    studios current practice is generally to make their movies
    available on physical formats for a 30 to
    45-day
    release window before release to other movie distribution rental
    channels. However, movie studios could change, including
    shortening or discontinuing altogether, movie distribution
    windows, including simultaneous
    video-on-demand/computer
    downloads and DVD releases. For example, there have been recent
    announcements that certain movie studios will make new release
    titles available on
    video-on-demand
    or for online purchase on the same date as the DVD release.
    Studios also could attempt to lengthen the time that certain
    video retailers must wait before renting movies following their
    release on physical format (e.g., waiting at least 45 days
    following DVD release before making certain movies available for
    rental as recently proposed by Universal Studios).
    Changes in consumer content delivery preferences, including DVDs
    with higher picture/sound quality (e.g., Blu-ray), disposable or
    download-to-burn DVDs, more use of personal video recorders
    (e.g., TiVo),
    pay-per-view/cable/satellite
    and similar technologies, computer downloads, portable devices,
    and other mediums, and less demand for a high volume of new
    movie content due to such things as larger home DVD and
    downloaded movie libraries.
    Increased availability of movie content inventory through
    personal video recorders,
    pay-per-view/cable/satellite
    and similar technologies, computer downloads, portable devices,
    and other mediums.
    Decreased quantity and quality of movie content availability for
    DVD distribution due to:  
    general-industry-related factors, including financial
    disruptions, labor conflicts (e.g., actor/writer strikes) or
    movie content failing to appeal to consumers
    tastes, and
    distribution-related factors, including restrictions relating to
    the number of DVD selections made available to DVD kiosks and
    the manner in which DVD kiosks may distribute movies, i.e., only
    through rental (as recently proposed by Universal Studios).  
    Decreased costs related to purchasing or receipt of movie
    content, including less expensive DVDs, including more
    aggressive competitor pricing strategies and piracy, and cheaper
    use of
    pay-per-view/cable/satellite
    and similar technologies.   7




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Our
    DVD services business has a limited operating history and a
    history of operating losses.
    If we
    do not manage our DVD inventory effectively, our business,
    financial condition and results of operations could be
    materially and adversely affected.
    If our
    sell-back prices to distributors continue to decrease or we are
    restricted from selling DVDs at all, or if there is an increase
    in customer demand for titles or formats that are more expensive
    for us to acquire, our margins in the DVD services business
    could be adversely affected.
   8




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Litigation,
    arbitration, mediation, regulatory actions, investigations or
    other legal proceedings could result in material rulings,
    decisions, settlements, fines, penalties or publicity that could
    adversely affect our business, financial condition and results
    of operations.
    Our
    most extensive business relationship is with Wal-Mart, and
    changes to this relationship have had and are expected to
    continue to have material effects on our operations and
    results.
      We
    have substantial indebtedness.
   9




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We may
    be unable to identify and define product and service trends or
    anticipate, gauge and react to changing consumer demands in a
    timely manner.
  E-payment
  Competitive
    pressures could seriously harm our business, financial condition
    and results of operations.
     10




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E-payment E-payment E-payment E-payment E-payment
    We may
    be unable to adequately protect or enforce our patents and other
    proprietary rights.
  E-payment
     11




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E-payment
  Our
    strategy to cross-sell our products and services to retailers
    may be unsuccessful.
    We may
    be unable to attract new retailers and penetrate new markets and
    distribution channels.
  E-payment E-payment
  Payment
    of increased service fees to retailers could negatively affect
    our business results.
  E-payment E-payment
 12




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The
    entertainment services market has brought with it risks that
    have and could continue to adversely affect our business,
    operating results and financial condition.
    Defects,
    failures or security breaches in and inadequate upgrade of our
    operating systems could harm our business.
  e-payment
    back-up back-up
  Failure
    to adequately comply with information security policies or to
    safeguard against breaches of such policies could adversely
    affect our operations and could damage our business, reputation,
    financial position and results of operations.
  E-payment
 13




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Lack
    of consumer confidence, whether real or perceived, in our
    coin-counting machines could harm our business.
    Our
    future operating results may fluctuate.
  E-payment
  
    the transaction fees we charge consumers to use our services,
    the amount of service fees that we pay to our retailers,
    our ability to establish or maintain relationships with
    significant retailers on acceptable terms,
    the successful operation of our coin-counting, DVD, money
    transfer and
    E-payment
    network,
    the commercial success of our retailers, which could be affected
    by such factors as general economic conditions, severe weather
    or strikes,
    fluctuations in revenue generated by our coin-counting, DVD,
    entertainment, money transfer and
    E-payment
    products and services,
    fluctuations in operating expenses caused by various factors,
    including petroleum costs, labor costs and transportation costs,
    our ability to effectively manage the product mix of our
    entertainment services equipment to maximize consumer
    preferences,
    fluctuations in interest rates, which affects our debt service
    obligations,
    the timing of, and our ability to develop and successfully
    commercialize, new or enhanced products and services,
    the level of product and price competition,
    activities of and acquisitions or announcements by competitors,
    the impact from any impairment of inventory, goodwill, fixed
    assets or intangibles related to our acquisitions,
    fluctuations in consumer spending patterns, and
    relationships with manufacturers and suppliers.   14




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E-payment E-payment
  We
    depend upon third-party manufacturers, suppliers and service
    providers for key components and substantial support for our
    coin-counting, entertainment,
    E-payment
    and DVD services machines and equipment.
  E-payment E-payment
  E-payment E-payment
  pick-up, back-up
  We are
    subject to substantial federal, state, local and foreign laws
    and government regulation specific to our
    business.
  E-payment E-payment
 15




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There
    are risks associated with conducting our business and sourcing
    goods internationally.
      Our
    money transfer services business requires us to meet specific
    federal, state, local and foreign laws and government
    regulations, subjecting us to additional risk.
       16




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and/or
  Our
    money transfer service is and will remain reliant on an
    effective agent network.
      Our
    business involves the movement of large sums of money, and, as a
    result, our business is particularly dependent on our ability to
    process and settle transactions accurately and
    efficiently.
   17




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Volatile
    petroleum prices may adversely affect our operating results and
    reduce our profitability.
  E-payment
  Our
    customers ability to access our products and services can
    be adversely affected by severe weather, natural disasters and
    other events beyond our control, such as fires, power failures,
    telecommunication loss and terrorist attacks.
  E-payment
  Acquisitions
    and investments involve risks that could harm our business and
    impair our ability to realize potential benefits from such
    acquisitions and investments.
    
    the assumption of known and unknown liabilities of an acquired
    company, including employee and intellectual property claims and
    other violations of applicable law,
    managing relationships with other investors and the companies in
    which we have made investments,
    use of cash resources and incurrence of debt and contingent
    liabilities in funding acquisitions and investments, 18




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
    difficulties and expenses in assimilating the operations,
    products, technology, information systems or personnel of an
    acquired company,
    stockholder dilution if an acquisition is consummated through an
    issuance of our securities,
    amortization expenses related to acquired intangible assets and
    other adverse accounting consequences,
    costs incurred in identifying and performing due diligence on
    potential targets that may or may not be successful,
    impairment of relationships with employees, retailers and
    affiliates of our business and the acquired business,
    entrance into markets in which we have no direct prior
    experience, and
    impairment of goodwill arising from our acquisitions and
    investments.  Recall
    of any of the products dispensed by our entertainment services
    machines or by the entertainment services industry generally
    could adversely affect our entertainment services
    business.
    We may
    be subject to product liability claims if property or people are
    harmed by our products and services.
    Our
    stock price has been and may continue to be
    volatile.
    
    the termination, non-renewal or re-negotiation of one or more
    retailer relationships,
    economic or other external factors, for example those relating
    to the current economic crisis,
    acquisition, merger, investment and disposition activities,
    operating results below market expectations and changes in, or
    our failure to meet, financial estimates of securities analysts
    or our own guidance,
    trends and fluctuations in the use of our coin, DVD,
    entertainment, money transfer and
    E-payment
    services, 19




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
    release of analyst reports,
    period-to-period fluctuations in our financial results,
    announcements regarding the establishment, modification or
    termination of relationships regarding the development of new or
    enhanced products and services,
    announcements of technological innovations or new products or
    services by us or our competitors,
    ineffective internal controls, and
    industry developments.    Our
    anti-takeover mechanisms may affect the price of our common
    stock and make it harder for a third party to acquire us without
    the consent of our board of directors.
    Item 2.
    Properties.  E-payment
        Item 3.
    Legal
    Proceedings.   20




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Item 4.
    Submission
    of Matters to a Vote of Security Holders.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Market
    Information
    High


LowFiscal 2007:First Quarter

$
31.65


$
28.30Second Quarter


34.97



30.20Third Quarter


34.00



30.36Fourth Quarter


34.74



24.69Fiscal 2008:First Quarter

$
32.82


$
25.10Second Quarter


38.90



28.11Third Quarter


35.91



30.13Fourth Quarter


33.36



15.71     Holders
    Dividends
    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Unregistered
    Sales and Repurchases of Equity Securities
   21




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MaximumTotal Number


Approximateof Shares


Dollar ValuePurchased as


of Shares thatTotal Number


Average


Part of the


May Yet beof Shares


Price Paid


Publicly Announced


Purchased UnderRepurchased(1)


per Share


Repurchase Programs


the Programs10/01/08 - 10/31/08





$







$
23,764,09211/01/08 - 11/30/08





$







$
23,816,54212/01/08 - 12/31/08


2,743


$
17.90



2,743


$
23,891,7032,743


$
17.90



2,743


$
23,891,703     (1)
    
    Represents shares tendered for tax withholding on vesting of
    restricted stock awards. None of these transactions are included
    against the dollar value of shares that may yet be purchased
    under the programs. 22




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Item 6.
    Selected
    Financial Data.    Year Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share data)CONSOLIDATED STATEMENT OF OPERATIONS:REVENUE

$
911,900


$
546,297


$
534,442


$
459,739


$
307,100EXPENSES:Direct operating


634,285



356,042



359,534



313,299



186,926Marketing


19,303



11,899



14,420



10,748



12,925Research and development


4,758



5,153



5,246



5,716



5,465General and administrative


95,234



55,193



50,977



32,488



27,475Depreciation and other


76,661



58,841



52,836



45,347



35,302Amortization of intangible assets


9,124



7,331



6,220



4,556



2,014Proxy, write-off of acquisition costs, and litigation settlement


3,084















Impairment and excess inventory charges






65,220











Income (loss) from operations


69,451



(13,382
)


45,209



47,585



36,993OTHER INCOME (EXPENSE):Foreign currency (loss) gain and other


(3,876
)


650



161



198



148Interest income


1,220



1,698



1,382



1,279



196Interest expense


(21,716
)


(17,069
)


(15,748
)


(12,916
)


(6,271
)Minority interest


(14,436
)














(Loss) income from equity investments and other


(337
)


1,333



(66
)


353



177Early retirement of debt






(1,794
)


(238
)






(706
)Income (loss) before income taxes


30,306



(28,564
)


30,700



36,499



30,537Income tax (expense) benefit


(16,194
)


6,311



(12,073
)


(14,227
)


(10,169
)NET INCOME (LOSS)

$
14,112


$
(22,253
)

$
18,627


$
22,272


$
20,368NET INCOME (LOSS) PER SHARE:Basic(1)

$
0.50


$
(0.80
)

$
0.67


$
0.86


$
0.94Diluted(1)

$
0.50


$
(0.80
)

$
0.66


$
0.86


$
0.93CONSOLIDATED BALANCE SHEET DATA:Cash and cash equivalents

$
66,408


$
21,397


$
18,687


$
45,365


$
61,878Cash in machine or in transit(2)


34,583



87,858



63,740



60,070



35,751Cash being processed(3)


91,044



87,337



95,737



69,832



59,158Total assets


1,066,714



768,573



718,083



643,401



547,134Total debt, capital lease obligations and other


351,370



272,651



200,264



210,478



211,410Common stock


369,735



354,509



343,229



328,951



282,046Total stockholders equity


320,028



305,130



321,365



294,047



226,146  23




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On January 1, 2008, we exercised our option to acquire a
    majority ownership interest in the voting equity of Redbox
    Automated Retail, LLC (Redbox) under the terms of
    the LLC Interest Purchase Agreement dated November 17,
    2005. In conjunction with the option exercise and payment of
    $5.1 million, our ownership interest increased from 47.3%
    to 51.0%. Since our original investment in Redbox, we had been
    accounting for our 47.3% ownership interest under the equity
    method in our Consolidated Financial Statements. Effective with
    the close of this transaction, January 18, 2008, we now
    consolidate Redboxs financial results into our
    Consolidated Financial Statements.  (1)
    
    See Note 12 to Consolidated Financial Statements for an
    explanation of the determination of the number of shares used in
    computing net income per share information, basic and diluted.(2)
    
    Cash in machines or in transit is unavailable for immediate cash
    requirements as it represents cash being processed by carriers,
    cash deposits in transit, or cash residing in our coin-counting
    or entertainment services machines.(3)
    
    Cash being processed represents cash residing in our
    coin-counting or entertainment services machines or being
    processed by carriers, which we are specifically obligated to
    use to settle our accrued liabilities payable to retailers.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  The following discussion and analysis should be read in
    conjunction with our Consolidated Financial Statements and
    related Notes thereto included elsewhere in this Annual Report.
    Except for the consolidated historical information, the
    following discussion contains forward-looking statements. Actual
    results could differ from those projected in the forward-looking
    statements. Please refer to Special Note Regarding
    Forward-Looking Statements and Risk Factors
    elsewhere in this Annual Report.
  Overview
  ® (E-payment)
  Management
    of Business Segments
  E-payment
   24




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Coin
    and Entertainment services
    E-payment e-certificate
  ® E-payment
      pick-up
  DVD
    services
   25




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Money
    Transfer services
        E-payment
    services
  E-payment E-payment
 26




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E-payment E-payment-enabled
  T-Mobile, E-payment E-payment
  E-payment E-payment
  Subsequent
    Events
    and/or
    and/or
 27




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and/or
  and/or and/or
  Form S-3 Form S-3 Form S-3
    Strategy
     28




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Critical
    Accounting Policies and Estimates
    Revenue recognition:
  
    Coin-counting revenue, which is collected from either consumers
    or card issuers (in stored value card or
    e-certificate
    transactions), is recognized at the time the consumers
    coins are counted by our coin-counting machines. Cash deposited
    in machines that has not yet been collected is referred to as
    cash in machine and is reported in our consolidated balance
    sheet under the caption Cash in machine or in
    transit. Our revenue represents the fee charged for
    coin-counting;
    DVD revenue is recognized during the term of a customers
    rental transaction or purchase and is recorded net of applicable
    sales taxes;
    Money transfer revenue represents the commissions earned on a
    money transfer transaction and is recognized at the time the
    customer completes the transaction;
    Entertainment revenue is recognized at the time cash is
    deposited in our machines. Cash deposited in the machines that
    has not yet been collected is referred to as cash in machine and
    is estimated at period end and reported on the balance sheet
    under the caption Cash in machine or in transit.
    This estimate is based on the average daily revenue per machine,
    multiplied by the number of days since the coin in the machine
    has been collected. The estimated value of our entertainment
    services
    coin-in-machine
    was approximately $3.0 million and $8.4 million at
    December 31, 2008 and December 31, 2007, respectively;
    E-payment
    revenue is recognized at the point of sale based on our
    commissions earned, net of retailer fees.  Purchase price allocations:
  Goodwill and intangible assets: Goodwill and Other Intangible Assets
  E-payment
 29




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Impairment of long-lived assets:
    DVD library:
  Income taxes:
  Accounting for Uncertainty
    in Income Taxes Accounting for
    Income Taxes
 30




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Cash in machine or in transit and cash being processed:
  Stock-based compensation: ),
    Share-Based Payment Accounting for Stock-Based
    Compensation
  Recent
    Accounting Pronouncements
  Fair Value Measures No. FAS 157-2, Effective Date of FASB Statement No. 157
    
    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
    Level 3:  Unobservable inputs that reflect
    the reporting entitys own assumptions    Balance as ofDecember 31, 2008Level 1

Level 2

Level 3Short-term investment

$
822







Interest rate swap liability





$
7,466



  31




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Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  An Amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities
  Reclassifications
    Results
    of Operations  Years Ended December 31, 2008,
    2007 and 2006
  Revenue
  Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngCoin revenues

$
261.3


$
250.9


$
10.4



4.1
%

$
229.9


$
21.0



9.1
%Entertainment revenues


150.2



238.9



(88.7
)


−37.1
%


273.5



(34.6
)


−12.7
%DVD revenues


388.5



9.5



379.0



3989.5
%


4.4



5.1



115.9
%Money transfer revenues


87.4



24.2



63.2



261.2
%


9.0



15.2



168.9
%E-payment
    revenues


24.5



22.8



1.7



7.5
%


17.6



5.2



29.5
%Total Revenue

$
911.9


$
546.3


$
365.6



66.9
%

$
534.4


$
11.9



2.2
%      32




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##### Table of Contents



E-payment E-payment
  Direct
    Operating Expenses
  pick-up, E-payment and/or
  Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngDirect operating expenses

$
634.3


$
356.0


$
278.3



78.2
%

$
359.5


$
(3.5
)


−1.0
%as a% of Total Revenue


69.6
%


65.2
%










67.3
%   E-payment E-payment
   33




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##### Table of Contents



Marketing
  E-payment E-payment E-payment
  Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngMarketing

$
19.3


$
11.9


$
7.4



62.2
%

$
14.4


$
(2.5
)


−17.4
%as a% of Total Revenue


2.1
%


2.2
%










2.7
%     Research
    and Development
    Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngResearch and development

$
4.8


$
5.2


$
(0.4
)


−7.7
%

$
5.2


$




0.0
%as a% of Total Revenue


0.5
%


1.0
%










1.0
%     General
    and Administrative
    Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngGeneral and administrative

$
95.2


$
55.2


$
40.0



72.5
%

$
51.0


$
4.2



8.2
%as a% of Total Revenue


10.4
%


10.1
%










9.5
%      34




---



##### Table of Contents



Proxy,
    write-off of acquisition costs, and litigation
    settlement
    Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngProxy, write-off of acquisition costs, and litigation settlement

$
3.1


$



$
3.1



100.0
%

$



$




0.0
%as a% of Total Revenue


0.3
%


0.0
%










0.0
%   Impairment
    and excess inventory charges
  Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngImpairment and excess inventory charges

$



$
65.2


$
(65.2
)


−100.0
%

$



$
65.2



100.0
%as a% of Total Revenue


0.0
%


11.9
%










0.0
%     Depreciation
    and Other
    Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngDepreciation and other

$
76.7


$
58.8


$
17.9



30.4
%

$
52.8


$
6.0



11.4
%as a% of Total Revenue


8.4
%


10.8
%










9.9
%   E-payment
 35




---



##### Table of Contents



Amortization
    of Intangible Assets
    Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngAmortization of intangible assets

$
9.1


$
7.3


$
1.8



24.7
%

$
6.2


$
1.1



17.7
%as a% of Total Revenue


1.0
%


1.3
%










1.2
%     Other
    Income and Expense
  Year Ended December 31,(In millions, except percentages)

2008


2007


$ Chng


% Chng


2006


$ Chng


% ChngForeign currency (loss) gain and other

$
(3.9
)

$
0.7


$
(4.6
)


−657.1
%

$
0.2


$
0.5



250.0
%Interest income


1.2



1.7



(0.5
)


−29.4
%


1.4



0.3



21.4
%Interest expense


(21.7
)


(17.1
)


(4.6
)


26.9
%


(15.7
)


(1.4
)


8.9
%Loss (income) from equity investments and other


(0.3
)


1.3



(1.6
)


−123.1
%


(0.1
)


1.4



−1400.0
%Early retirement of debt






(1.8
)


1.8



−100.0
%


(0.2
)


(1.6
)


800.0
%Minority interest

$
(14.4
)

$



$
(14.4
)


100.0
%

$



$




0.0
%               Income
    Taxes
   36




---



##### Table of Contents



Accounting
    for Income Taxes  Special Areas
    Liquidity
    and Capital Resources
  Cash and
    Liquidity
         37




---



##### Table of Contents



Credit
    Facility
  5-year
   38




---



##### Table of Contents



Accounting for Derivative Instruments and
    Hedging Activities
             39




---



##### Table of Contents



Redbox
    Debt
        Contractual
    Obligations
    Payments Due by PeriodLess than


1-3


4-5


After 5Contractual Obligations

Total


1 year


years


years


years(In thousands)Long-term debt(1)

$
305,000


$
11,700


$
23,300


$
270,000



Capital lease obligations(2)


47,933



22,841



23,846



1,246



Operating leases(3)


29,714



10,096



13,123



4,690



1,805Purchase obligations(4)


4,648



4,648











Asset retirement obligations(5)


2,790















2,790Liability for uncertain tax positions(6)


1,200











1,200



Total contractual cash obligations

$
391,285


$
49,285


$
60,269


$
277,136


$
4,595     (1)
    
    Long-term debt, excluding Redbox
    debt, does not include contractual interest payments as they are
    variable in nature. The revolving line of credit totaled
    $270.0 million at December 31, 2008. The remaining
    amounts above relate to Redbox debt. 40




---



##### Table of Contents



(2)
    
    Capital lease obligations represent
    gross minimum lease payments, which includes interest.(3)
    
    One of our lease agreements is a
    triple net operating lease. We are responsible for obligations
    including, but not limited to, taxes, insurance, utilities and
    maintenance as incurred. These obligations are not reported in
    the amounts above.(4)
    
    Purchase obligations consist of
    outstanding purchase orders issued in the ordinary course of our
    business.(5)
    
    Asset retirement obligations
    represent the fair value of a liability related to the machine
    removal costs following contract expiration.(6)
    
    Liability for uncertain tax
    positions represents amounts that we are contingently liable for
    based on our tax positions with their respective statute of
    limitations ending within 4 to 5 years.  Amount of Commitment Expiration by PeriodLess than


1-3


4-5


After 5Other Commercial Commitments

Total


1 year


years


years


years(In thousands)Letters of credit

$
12,406


$
12,406











Total commercial commitments

$
12,406


$
12,406


$



$



$
   Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.        Item 8.
    Financial
    Statements and Supplementary Data.   41




---



##### Table of Contents



Supplemental
    Quarterly Financial Information
    Three Month Periods EndedDec. 31,


Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,2008


2008


2008(1)


2008(2)


2007(3)


2007(4)


2007


2007(In thousands, except per share data)(unaudited)Consolidated Statement of Operations:Revenue

$
260,981


$
240,497


$
219,903


$
190,519


$
133,314


$
143,291


$
137,356


$
132,336Expenses:Direct operating


180,945



168,721



152,009



132,610



85,112



86,721



92,570



91,639Marketing


5,311



7,374



3,815



2,803



2,009



5,650



2,614



1,626Research and development


1,180



1,157



1,175



1,246



1,070



1,397



1,345



1,341General and administrative


29,472



22,760



23,206



19,796



13,857



15,685



13,404



12,247Depreciation and other


23,089



17,746



18,855



16,971



14,724



15,100



14,549



14,468Amortization of intangible assets


2,213



2,271



2,298



2,342



1,962



1,813



1,817



1,739Impairment and excess inventory charges


















65,220











Proxy, write-off of acquisition costs, and litigation settlement










3,084



















Income (loss) from operations


18,771



20,468



15,461



14,751



(50,640
)


16,925



11,057



9,276Foreign currency (loss) gain and other


(1,149
)


(709
)


(890
)


(1,128
)


91



699



(20
)


(120
)Interest income


155



180



626



259



201



1,109



193



195Interest expense


(5,490
)


(5,404
)


(5,906
)


(4,916
)


(4,605
)


(4,365
)


(4,125
)


(3,974
)(Loss) income from equity investments and other


1



(1
)


243



(580
)


472



2,217



(1,101
)


(255
)Minority interest


(3,647
)


(3,347
)


(4,269
)


(3,173
)














Early retirement of debt


















(1,794
)










Income (loss) before income taxes


8,641



11,187



5,265



5,213



(56,275
)


16,585



6,004



5,122Income taxes


(4,421
)


(6,676
)


(2,585
)


(2,512
)


19,053



(7,520
)


(2,656
)


(2,566
)Net income (loss)

$
4,220


$
4,511


$
2,680


$
2,701


$
(37,222
)

$
9,065


$
3,348


$
2,556Net income (loss) per share:Basic

$
0.15


$
0.16


$
0.10


$
0.10


$
(1.34
)

$
0.33


$
0.12


$
0.09Diluted

$
0.15


$
0.16


$
0.09


$
0.10


$
(1.34
)

$
0.32


$
0.12


$
0.09     (1)
    
    In the second quarter of 2008, we
    recognized $3.1 million in expense related to a proxy
    contest, the write-off of in-process acquisition costs and a
    litigation settlement.(2)
    
    In the first quarter of 2008, we
    acquired GroupEx and the majority ownership interest of Redbox.(3)
    
    In the fourth quarter of 2007, we
    recorded an impairment and excess inventory charge.(4)
    
    In the third quarter of 2007, we
    recognized a telecommunication fee refund. The net income effect
    of the refund, net of taxes, monies owed to a joint venture and
    other effects was approximately $6.5 million in the third
    quarter of 2007. 42




---



##### Table of Contents



Seasonality
  E-payment E-payment
  Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure.    Item 9A.
    Controls
    and Procedures.  (i)
    Disclosure
    Controls and Procedures.  Rule 13a-15(e)
  (ii)
    Internal
    Control over Financial Reporting.  (a) Managements report on internal control over
    financial reporting.
  Rule 13a-15(f). Rule 13a-15(c).
  (b) Attestation report of the independent registered
    public accounting firm.
    (c) Changes in internal control over financial
    reporting.
    Item 9B.
    Other
    Information.   43




---



##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.    Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    Item 14.
    Principal
    Accountant Fees and Services.    PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.      PageReports of Independent Registered Public
    Accounting Firm  KPMG LLP


50Consolidated Balance Sheets


52Consolidated Statements of Operations


53Consolidated Statements of Stockholders
    Equity and Comprehensive Income (Loss)


54Consolidated Statements of Cash Flows


55Notes to Consolidated Financial Statements


56          Exhibit Number

Description of Document2
.1

Agreement and Plan of Merger, dated May 23, 2004, by and
    among Registrant, Sesame Mergeco, Inc., ACMI Holdings, Inc.,
    American Coin Merchandising, Inc. and Wellspring Capital
    Management LLC, as Stockholder Representative.(1)2
.2

LLC Interest Purchase Agreement dated November 17, 2005 by
    and among Redbox Automated Retail, LLC, McDonalds
    Ventures, LLC and Registrant.(2) 44




---



##### Table of Contents



Exhibit Number

Description of Document2
.3

Asset Purchase Agreement by and among The Amusement Factory,
    L.L.C., Levine Investments Limited Partnership, American Coin
    Merchandising, Inc., Adventure Vending Inc. and Registrant.(3)2
.4

Agreement for the Sale and Purchase of the Entire Issued Share
    Capital of Travelex Money Transfer Limited dated April 30,
    2006 by and among Travelex Limited, Registrant and Travelex
    Group Limited.(22)2
.5

Stock Purchase Agreement dated July 19, 2007 by and among
    Coinstar
    E-Payment
    Services Inc., Jose Francisco Leon, Benjamin Knoll, Martin
    Barrett, Frank Joseph Lawrence, David Mard and Robert Duran.(29)2
.6

First Amendment of Stock Purchase Agreement dated
    January 1, 2008 by and among Coinstar
    E-Payment
    Services Inc., Jose Francisco Leon, Benjamin Knoll, Martin
    Barrett, Frank Joseph Lawrence, David Mard and Robert Duran.(33)3
.1

Amended and Restated Certificate of Incorporation.(4)3
.2

Amended and Restated Bylaws.(31)4
.1

Reference is made to Exhibits 3.1 through 3.2.(4)4
.2

Specimen Stock Certificate.(4)4
.3

Second Amended and Restated Investor Rights Agreement, dated
    August 27, 1996, between Registrant and certain investors,
    as amended October 22, 1996.(4)4
.4

Rights Agreement dated as of November 12, 1998 between
    Registrant and American Securities Transfer and Trust, Inc.(5)4
.5

Certificate of Designation of Series A Preferred Stock.
    Reference is made to Exhibit A of Exhibit 4.4.(5)4
.6

Form of Rights Certificate. Reference is made to Exhibit B
    of Exhibit 4.4.(5)4
.7

Amendment to the Rights Agreement, dated as of April 17,
    2008, between Coinstar, Inc. and Computershare
    Trust Company N.A.(34)4
.8

Certificate of Elimination with respect to Series A Junior
    Participating Preferred Stock of Coinstar, Inc.(38)10
.1*

1997 Employee Stock Purchase Plan.(4)10
.2*

Amended and Restated 1997 Non-Employee Directors Stock
    Option Plan.(6)10
.3*

Outside Directors Deferred Compensation Plan.(7)10
.4*

1997 Amended and Restated Equity Incentive Plan.(8)10
.5*

2000 Amended and Restated Equity Incentive Plan.(9)10
.6*

Executive Deferred Compensation Plan.(7)10
.7*

Form of 1997 Amended and Restated Equity Incentive Plan Stock
    Option Grant Notice for option grants made prior to
    December 12, 2005.(10)10
.8*

Form of 1997 Amended and Restated Equity Incentive Plan Stock
    Option Grant Notice for option grants made after
    December 12, 2005 to the CEO or CFO.(20)10
.9*

Form of 1997 Amended and Restated Equity Incentive Plan Stock
    Option Grant Notice for option grants made after
    December 12, 2005 to plan participants other than the CEO
    or CFO.(20)10
.10*

Form of 2000 Amended and Restated Equity Incentive Plan Stock
    Option Grant Notice.(10)10
.11*

Form of Indemnity Agreement between Registrant and its Executive
    Officers and Directors.(4)10
.12*

Form of Release Agreement.(11)10
.13*

Form of Restricted Stock Award under the 1997 Amended and
    Restated Equity Incentive Plan for awards made prior to
    December 12, 2005.(12)10
.14*

Form of Restricted Stock Award under the 1997 Amended and
    Restated Equity Incentive Plan for awards made after
    December 12, 2005 to the CEO or CFO.(20)10
.15*

Form of Restricted Stock Award under the 1997 Amended and
    Restated Equity Incentive Plan for awards made after
    December 12, 2005 to plan participants other than the CEO
    or CFO.(20) 45




---



##### Table of Contents



Exhibit Number

Description of Document10
.16*

Summary of Director Fees.(30)10
.17

Credit Agreement, dated July 7, 2004, among Registrant, as
    Borrower, Bank of America, N.A., Keybank National Association
    and Wells Fargo Bank, National Association, as Documentation
    Agents, Lehman Commercial Paper, Inc., as Syndication Agent, and
    JPMorgan Chase Bank, as Administrative Agent.(1)10
.18

First Amendment, dated December 21, 2004, to the Credit
    Agreement, dated July 7, 2004, among Registrant, as
    Borrower, Bank of America, N.A., Keybank National Association
    and Wells Fargo Bank, National Association, as Documentation
    Agents, Lehman Commercial Paper, Inc., as Syndication Agent, and
    JPMorgan Chase Bank, as Administrative Agent.(13)10
.19

Lease Agreement, dated January 1, 2004, by and between
    Registrant and EOP Operating Limited Partnership.(14)10
.20

Industrial Building Lease, dated October 24, 2002, by and
    between FCF Properties, LLC and American Coin Merchandising,
    Inc., a wholly-owned subsidiary of Registrant, as amended
    June 6, 2003.(15)10
.21*

Employment Agreement between Brian V. Turner and Registrant
    dated August 5, 2005.(16)10
.22*

Change of Control Agreement between Brian V. Turner and
    Registrant dated August 5, 2005.(16)10
.23*

Employment Agreement between David W. Cole and Registrant dated
    January 1, 2004.(14)10
.24*

Stock Option Agreement, Grant to Chief Executive Officer dated
    October 8, 2001.(17)10
.25

Voting Agreement between Levine Investments Limited Partnership
    and Registrant dated November 1, 2005.(18)10
.26*

2006 Incentive Compensation Plan.(19)10
.27

Lease Agreement dated November 1, 2005, by and between Van
    Nuys Airpark Building 5, LLC and Adventure Vending Inc., a
    wholly-owned subsidiary of Registrant for premises located at
    7725 Airport Business Parkway, Van Nuys, CA.(21)10
.28

Lease Agreement dated November 1, 2005, by and between
    Levine & Riggle Rental Company Limited Partnership and
    Adventure Vending Inc., a wholly-owned subsidiary of
    Registrant.(21)10
.29*

Form of Restricted Stock Award under the 1997 Amended And
    Restated Equity Incentive Plan for Awards Made to Nonemployee
    Directors.(23)10
.30*

Form of Stock Option Grant under 1997 Amended and Restated
    Equity Incentive Plan For Grants Made to Nonemployee
    Directors.(23)10
.31*

Employment Agreement effective as of July 7, 2006, between
    Randall J. Fagundo and Registrant.(24)10
.32*

Amended and Restated Equity Grant Program for Nonemployee
    Directors under the Coinstar, Inc. 1997 Amended and Restated
    Equity Incentive Plan.(25)10
.33*

Form of Restricted Stock Award for CEO or CFO for
    Performance-Based Awards Made to the CEO or CFO under the 1997
    Amended and Restated Equity Incentive Plan.(26)10
.34*

Form of Restricted Stock Award for Participants Other than the
    CEO or CFO for Performance-Based Awards to Plan Participants
    Other than the CEO or CFO under the 1997 Amended and Restated
    Equity Incentive Plan.(26)10
.35*

2007 Incentive Compensation Plan.(27)10
.36*

Form of Change of Control Agreement.(28)10
.37*

Amended and Restated Equity Grant Program for Nonemployee
    Directors under the Coinstar, Inc. 1997 Amended and Restated
    Equity Incentive Plan.(30)10
.38

Credit Agreement, dated November 20, 2007, among Coinstar,
    Inc., as borrower, Bank of America, N.A., as administrative
    agent, swing line lender, and letter of credit issuer, Banc of
    America Securities LLC and J.P. Morgan Securities Inc., as
    joint lead arrangers and joint book managers, JPMorgan Chase
    Bank, N.A., as syndication agent, Keybank National Association,
    U.S. Bank National Association and Wells Fargo Bank, N.A., as
    co-documentation agents, and the other lenders party
    thereto.(32) 46




---



##### Table of Contents



Exhibit Number

Description of Document10
.39*

Form of Employment Agreement to be effective April 7, 2008
    between Coinstar, Inc. and Paul Davis.(35)10
.40*

Employment Offer Letter for Paul Davis dated March 20,
    2008.(35)10
.41*

Form of Change of Control Agreement to be effective
    April 7, 2008 between Coinstar, Inc. and Paul Davis.(35)10
.42*

Agreement dated May 28, 2008 by and among Coinstar and the
    Shamrock Group.(36)10
.43*

2008 Incentive Compensation Plan.(37)10
.44*

First Amendment to Employment Agreement between David W. Cole
    and Registrant dated December 31, 200810
.45*

First Amendment to Change of Control Agreement between David W.
    Cole and Registrant dated December 31, 200810
.46*

First Amendment to Employment Agreement between Paul Davis and
    Registrant dated December 31, 200810
.47*

First Amendment to Change of Control Agreement between Paul
    Davis and Registrant dated December 31, 200810
.48*

First Amendment to Employment Agreement between Brian V. Turner
    and Registrant dated December 31, 200810
.49*

First Amendment to Change of Control Agreement between Brian V.
    Turner and Registrant dated December 31, 200810
.50

Purchase and Sale Agreement dated February 12, 2009 by and
    between Coinstar, Inc. and GetAMovie, Inc.(39)10
.51

Form of Registration Rights Agreement to be dated the closing
    date of the GAM Purchase Agreement by and between Coinstar, Inc.
    and GetAMovie, Inc.(39)10
.52

Form of First Amendment, Consent and Waiver to Credit Agreement,
    dated February 12, 2009, among Coinstar, Inc., as borrower,
    Bank of America, N.A., as administrative agent, swing line
    lender, and letter of credit issuer, Banc of America Securities
    LLC and J.P. Morgan Securities, as joint lead arrangers and
    joint book managers, JPMorgan Chase Bank, N.A., as syndication
    agent, Keybank National Association, U.S. Bank National
    Association and Wells Fargo Bank, N.A., as co-documentation
    agents, and the other lenders party thereto.(39)21
.1

Subsidiaries23
.1

Consent of Independent Registered Public Accounting
    Firm  KPMG LLP31
.1

Certification of Chief Executive Officer pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 200231
.2

Certification of Chief Financial Officer pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 200232
.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200232
.2

Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Indicates a management contract or
    compensatory plan or arrangement.(1)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on July 7, 2004 (File Number
    000-22555).(2)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on November 18, 2005 (File Number
    000-22555).(3)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on October 19, 2005 (File Number
    000-22555).(4)
    
    Incorporated by reference to the
    Registrants Registration Statement on
    Form S-4
    filed on August 8, 1997
    (No. 333-33233).(5)
    
    Incorporated by reference to the
    Registrants Quarterly Report on Form
    10-Q for the
    quarter ended September 30, 1998 (File Number
    000-22555).(6)
    
    Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2000 (File Number
    000-22555). 47




---



##### Table of Contents



(7)
    
    Incorporated by reference to the
    Registrants Quarterly Report on Form
    10-Q for the
    quarter ended March 31, 2002 (File Number
    000-22555).(8)
    
    Incorporated by reference to
    Appendix A the Registrants Definitive Proxy Statement
    on Form DEF 14A filed on April 27, 2008 (File Number
    000-22555).(9)
    
    Incorporated by reference to the
    Registrants Quarterly Report on Form
    10-Q for the
    quarter ended June 30, 2003 (File Number
    000-22555).(10)
    
    Incorporated by reference to the
    Registrants Quarterly Report on Form
    10-Q for the
    quarter ended March 31, 2005 (File Number
    000-22555).(11)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on June 22, 2001 (File Number
    000-22555).(12)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on January 20, 2005 (File Number
    000-22555).(13)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on December 22, 2004 (File Number
    000-22555).(14)
    
    Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2003 (File Number
    000-22555).(15)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on December 6, 2004 (File Number
    000-22555).(16)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on August 10, 2005 (File Number
    000-22555).(17)
    
    Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2001 (File Number
    000-22555).(18)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on November 2, 2005 (File Number
    000-22555).(19)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on February 16, 2006 (File Number
    000-22555).(20)
    
    Incorporated by reference to the
    Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005 (File Number
    000-22555).(21)
    
    Incorporated by reference to the
    Registrants Quarterly Report on Form
    10-Q for the
    quarter ended March 31, 2006 (File Number
    000-22555).(22)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on May 4, 2006 (File Number
    000-22555).(23)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on June 14, 2006 (File Number
    000-22555).(24)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on July 5, 2006 (File Number
    000-22555).(25)
    
    Incorporated by reference to the
    Registrants Quarterly Report on Form
    10-Q for the
    quarter ended June 30, 2006 (File Number
    000-22555).(26)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on February 6, 2007 (File Number
    000-22555).(27)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on February 8, 2007 (File Number
    000-22555).(28)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on March 7, 2007 (File Number
    000-22555).(29)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on July 25, 2007 (File Number
    000-22555).(30)
    
    Incorporated by reference to the
    Registrants Quarterly Report on Form
    10-Q for the
    quarter ended June 30, 2007 (File Number
    000-22555).(31)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on April 3, 2008 (File Number
    000-22555).(32)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on November 26, 2007 (File Number
    000-22555).(33)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on January 7, 2008 (File Number
    000-22555).(34)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on April 22, 2008 (File Number
    000-22555).(35)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on April 4, 2008 (File Number
    000-22555).(36)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on May 29, 2008 (File Number
    000-22555).(37)
    
    Incorporated by reference to the
    Registrants Quarterly Report on Form
    10-Q for the
    quarter ended June 30, 2008 (File Number
    000-22555).(38)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on November 25, 2008 (File Number
    000-22555).(39)
    
    Incorporated by reference to the
    Registrants
    Form 8-K
    filed on February 12, 2009 (File Number
    000-22555). 48




---



##### Table of Contents



SIGNATURES      By:
    /s/  Brian
    V. Turner   Chief Financial Officer
     Signature

Title

Date/s/  David
    W. ColeDavid
    W. Cole

Chief Executive Officer and Director

February 26, 2009/s/  Brian
    V. TurnerBrian
    V. Turner

Chief Financial Officer

February 26, 2009/s/  Richard
    C. DeckRichard
    C. Deck

Chief Accounting Officer

February 26, 2009/s/  Deborah
    L. BevierDeborah
    L. Bevier

Chair of the Board

February 26, 2009/s/  Arik
    A. AhitovArik
    A. Ahitov

Director

February 26, 2009/s/  David
    M. EskenazyDavid
    M. Eskenazy

Director

February 26, 2009/s/  Robert
    D. SznewajsRobert
    D. Sznewajs

Director

February 26, 2009/s/  Ronald
    B. WoodardRonald
    B. Woodard

Director

February 26, 2009  49




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                     50




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 51




---



##### Table of Contents



COINSTAR,
    INC.
  CONSOLIDATED
    BALANCE SHEETS
 (in
    thousands, except share data)
  December 31,2008


2007ASSETSCURRENT ASSETS:Cash and cash equivalents

$
66,408


$
21,397Cash in machine or in transit


34,583



87,858Cash being processed


91,044



87,337Accounts receivable, net of allowance for doubtful accounts of
    $2,702 and $1,489 at December 31, 2008 and 2007,
    respectively


51,908



49,809Inventory


92,247



33,360Deferred income taxes


6,881



3,459Prepaid expenses and other current assets


24,715



18,747Total current assets


367,786



301,967PROPERTY AND EQUIPMENT, NET


352,753



146,041DEFERRED INCOME TAXES


4,338



16,447OTHER ASSETS


8,061



15,150EQUITY INVESTMENTS






33,052INTANGIBLE ASSETS, NET


43,385



34,457GOODWILL


290,391



221,459TOTAL ASSETS

$
1,066,714


$
768,573LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable

$
136,194


$
49,829Accrued payable to retailers and agents


118,503



99,998Other accrued liabilities


97,487



40,911Current portion of long-term debt and capital lease obligations


31,919



6,505Total current liabilities


384,103



197,243LONG-TERM DEBT, CAPITAL LEASE OBLIGATIONS AND OTHER


319,451



266,146DEFERRED TAX LIABILITY


12,072



54MINORITY INTEREST


31,060



TOTAL LIABILITIES


746,686



463,443STOCKHOLDERS EQUITY:Preferred stock, $0.001 par value  Authorized,
    5,000,000 shares; no shares issued and outstanding at
    December 31, 2008 and 2007






Common stock, $0.001 par value  Authorized,
    45,000,000 shares; 30,181,151 and 29,665,125 issued and
    28,255,070 and 27,739,044 shares outstanding at
    December 31, 2008 and 2007, respectively


369,735



354,509Accumulated deficit


(2,672
)


(16,784
)Treasury stock


(40,831
)


(40,831
)Accumulated other comprehensive (loss) income


(6,204
)


8,236Total stockholders equity


320,028



305,130TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
1,066,714


$
768,573    52




---



##### Table of Contents



COINSTAR,
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 (in
    thousands, except per share data)
  Year Ended December 31,2008


2007


2006REVENUE

$
911,900


$
546,297


$
534,442EXPENSES:Direct operating(1)


634,285



356,042



359,534Marketing


19,303



11,899



14,420Research and development


4,758



5,153



5,246General and administrative


95,234



55,193



50,977Depreciation and other


76,661



58,841



52,836Amortization of intangible assets


9,124



7,331



6,220Proxy, write-off of acquisition costs, and litigation settlement


3,084







Impairment and excess inventory charges






65,220



Income (loss) from operations


69,451



(13,382
)


45,209OTHER INCOME (EXPENSE):Foreign currency (loss) gain and other


(3,876
)


650



161Interest income


1,220



1,698



1,382Interest expense


(21,716
)


(17,069
)


(15,748
)(Loss) income from equity investments and other


(337
)


1,333



(66
)Minority interest


(14,436
)






Early retirement of debt






(1,794
)


(238
)Income (loss) before income taxes


30,306



(28,564
)


30,700Income tax (expense) benefit


(16,194
)


6,311



(12,073
)NET INCOME (LOSS)

$
14,112


$
(22,253
)

$
18,627(1) Direct operating above excludes depreciation and
    other of $63.7 million, $50.5 million and $43.8 for
    the years ended 2008, 2007 and 2006.NET INCOME (LOSS) PER SHARE:Basic

$
0.50


$
(0.80
)

$
0.67Diluted

$
0.50


$
(0.80
)

$
0.66WEIGHTED SHARES OUTSTANDING:Basic


28,041



27,805



27,686Diluted


28,464



27,805



28,028    53




---



##### Table of Contents



COINSTAR,
    INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
    AND COMPREHENSIVE INCOME (LOSS)
    (in thousands, except share data)
  AccumulatedRetained Earnings





OtherCommon Stock


(Accumulated





Comprehensive





ComprehensiveShares


Amount


Deficit)


Treasury Stock


Income (Loss)


Total


Income (Loss)BALANCE, December 31, 2005


27,775,628


$
328,951


$
(13,158
)

$
(22,783
)

$
1,037


$
294,047Proceeds from exercise of stock options, net


310,840



5,368















5,368Stock-based compensation expense






6,258















6,258Tax benefit on share-based compensation






979















979Equity purchase of assets


63,468



1,673















1,673Treasury stock purchase


(333,925
)










(8,023
)






(8,023
)Net income










18,627











18,627


$
18,627Short-term investments net of tax expense of $8


















12



12



12Foreign currency translation adjustments net of tax expense of
    $732


















2,482



2,482



2,482Interest rate hedges on long-term debt net of tax benefit of $34


















(58
)


(58
)


(58
)Total comprehensive income

























$
21,063BALANCE, December 31, 2006


27,816,011



343,229



5,469



(30,806
)


3,473



321,365Proceeds from exercise of stock options, net


218,229



4,232















4,232Stock-based compensation expense


63,746



6,421















6,421Tax benefit on share-based compensation






627















627Treasury stock purchase


(358,942
)










(10,025
)






(10,025
)Net loss










(22,253
)










(22,253
)

$
(22,253
)Short-term investments net of tax expense of $2


















1



1



1Foreign currency translation adjustments net of tax expense of
    $205


















4,828



4,828



4,828Interest rate hedges on long-term debt net of tax benefit of $44


















(66
)


(66
)


(66
)Total comprehensive loss

























$
(17,490
)BALANCE, December 31, 2007


27,739,044



354,509



(16,784
)


(40,831
)


8,236



305,130Proceeds from exercise of stock options, net


425,410



8,629















8,629Stock-based compensation expense


90,616



6,597















6,597Net income










14,112











14,112


$
14,112Loss on short-term investments net of tax benefit of $27


















(41
)


(41
)


(41
)Foreign currency translation adjustments net of tax benefit of
    $544


















(9,845
)


(9,845
)


(9,845
)Interest rate hedges on long-term debt net of tax benefit of
    $2,912


















(4,554
)


(4,554
)


(4,554
)Total comprehensive loss

























$
(328
)BALANCE, December 31, 2008


28,255,070


$
369,735


$
(2,672
)

$
(40,831
)

$
(6,204
)

$
320,028    54




---



##### Table of Contents



COINSTAR,
    INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (in
    thousands)
  Year Ended December 31,2008


2007


2006OPERATING ACTIVITIES:Net income (loss)

$
14,112


$
(22,253
)

$
18,627Adjustments to reconcile (loss) income from operations to net
    cash provided by operating activities:Depreciation and other


76,661



58,841



52,836Amortization of intangible assets and deferred financing fees


9,612



8,043



6,980Write-off of acquisition costs


1,004







Loss on early retirement of debt






1,794



238Impairment and excess inventory charges






65,220



Non-cash stock-based compensation


8,811



6,421



6,258Excess tax benefit on share based awards






(3,764
)


(1,033
)Deferred income taxes


12,121



(9,142
)


10,183Loss (income) from equity investments


3,449



(1,624
)


66Return on equity investments










929Minority interest


14,436







Other


1,083



(656
)


38Cash (used) provided by changes in operating assets and
    liabilities, net of effects of business acquisitions:Accounts receivable


26,503



(27,016
)


(8,464
)Inventory


(33,078
)


(3,547
)


(9,253
)Prepaid expenses and other current assets


(8,772
)


(8,594
)


(3,138
)Other assets


(481
)


(4,773
)


(444
)Accounts payable


60,801



(7,624
)


25,507Accrued payable to retailers and agents


4,526



2,535



9,977Other accrued liabilities


1,039



4,205



6,073Net cash provided by operating activities


191,827



58,066



115,380INVESTING ACTIVITIES:Purchase of property and equipment


(163,643
)


(84,318
)


(45,867
)Acquisitions, net of cash acquired


(24,829
)


(7,249
)


(31,254
)Equity investments










(12,109
)Loan to equity investee






(10,000
)


Proceeds from sale of fixed assets


3,237



2,294



254Net cash used by investing activities


(185,235
)


(99,273
)


(88,976
)FINANCING ACTIVITIES:Principal payments on long-term debt, revolver loan and capital
    lease obligations


(442,731
)


(338,543
)


(24,209
)Borrowings on previous and current credit facilities


433,500



400,500



Financing costs associated with revolving line of credit






(1,692
)


Excess tax benefit on share based awards






3,764



1,033Repurchase of common stock






(10,025
)


(8,023
)Proceeds from exercise of stock options


8,629



4,281



5,357Net cash (used) provided by financing activities


(602
)


58,285



(25,842
)Effect of exchange rate changes on cash


(10,547
)


1,350



2,335NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS, CASH IN
    MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED


(4,557
)


18,428



2,897CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND
    CASH BEING PROCESSED:Beginning of period


196,592



178,164



175,267End of period

$
192,035


$
196,592


$
178,164SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest

$
18,990


$
18,901


$
14,795Cash paid during the period for income taxes


3,636



3,480



1,982SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
    ACTIVITIES:Purchase of machines and vehicles financed by capital lease
    obligations

$
21,497


$
9,700


$
13,811Common stock issued in conjuction with acquisition










1,673Accrued acquisition costs


10,000



1,051



217    55




---



##### Table of Contents



COINSTAR,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
    ENDED DECEMBER 31, 2008, 2007, AND 2006
  NOTE 1:
    ORGANIZATION
    AND BUSINESS  Description of company: ® (E-payment)
  Coin-counting machines


18,400
*Entertainment services machines


145,000DVD kiosks


13,700Money transfer services locations


38,000E-payment
    point-of-sale terminals


23,000E-payment
    enabled coin-counting kiosks


11,000     *
    Amount includes 11,000 E-payment enabled coin-counting kiosks.  NOTE 2:
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Principles of consolidation: Consolidation of Variable Interest Entities
    Use of estimates:
  Cash in machine or in transit and cash being
    processed:
  Securities available-for-sale:
 56




---



##### Table of Contents



Accounts receivable:
  Inventory:
    Property and equipment:
  Useful LifeCoin-counting and
    e-payment
    machines

5 to 10 yearsDVD kiosks

5 yearsEntertainment service machines

3 to 10 yearsVending machines

3 to 5 yearsComputers

3 yearsOffice furniture and equipment

5 yearsLeased vehicles

lease termLeasehold improvements

shorter of lease term or useful
    life of improvement   Equity investments:
  Purchase price allocations:
 57




---



##### Table of Contents



Goodwill and intangible assets: Goodwill and Other Intangible Assets
  E-payment
    Patent costs:
  Impairment of long-lived assets: asset(s),
   58




---



##### Table of Contents



Settlement of liabilities: Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of Liabilities
  Revenue recognition:
  
    Coin-counting revenue, which is collected from either consumers
    or card issuers (in stored value card or
    e-certificate
    transactions), is recognized at the time the consumers
    coins are counted by our coin-counting machines. Cash deposited
    in machines that has not yet been collected is referred to as
    cash in machine and is reported in our consolidated balance
    sheet under the caption Cash in machine or in
    transit. Our revenue represents the fee charged for
    coin-counting;
    DVD revenue is recognized during the term of a customers
    rental transaction or purchase and is recorded net of applicable
    sales taxes;
    Money transfer revenue represents the commissions earned on a
    money transfer transaction and is recognized at the time the
    customer completes the transaction;
    Entertainment revenue is recognized at the time cash is
    deposited in our machines. Cash deposited in the machines that
    has not yet been collected is referred to as cash in machine and
    is estimated at period end and reported on the balance sheet
    under the caption Cash in machine or in transit.
    This estimate is based on the average daily revenue per machine,
    multiplied by the number of days since the coin in the machine
    has been collected. The estimated value of our entertainment
    services
    coin-in-machine
    was approximately $3.0 million and $8.4 million at
    December 31, 2008 and December 31, 2007, respectively;
    E-payment
    revenue is recognized at the point of sale based on our
    commissions earned, net of retailer fees.  Fees paid to retailers: e-payment and/or
  Fair value of financial instruments:
  Foreign currency translation:
  Interest rate swap:
 59




---



##### Table of Contents



Accounting for
    Derivative Instruments and Hedging Activities
  Stock-based compensation: ),
    Share-Based Payment Accounting for Stock-Based
    Compensation
  No. 00-15, Classification in the Statement of Cash Flows of the Income
    Tax Benefit Received by a Company upon Exercise of a
    Nonqualified Employee Stock Option
  Income taxes:
  Accounting for Uncertainty
    in Income Taxes Accounting for
    Income Taxes
     60




---



##### Table of Contents



Research and development: 98-1, Accounting for the Costs of Computer Software Developed or
    Obtained for Internal Use.
  Recent accounting pronouncements: Fair Value
    Measures No. FAS 157-2, Effective Date of FASB Statement No. 157
    
    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
    Level 3:  Unobservable inputs that reflect
    the reporting entitys own assumptions    Balance as of December 31, 2008Level 1


Level 2


Level 3Short-term investment

$
822







Interest rate swap liability





$
7,466



   Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  An Amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities
 61




---



##### Table of Contents



Reclassifications:
  NOTE 3:
    ACQUISITIONS    Coinstar
    Money Transfer
    GroupEx
        (In thousands )Cash paid for acquisition of GroupEx

$
60,000Additional payout


10,000Acquisition related costs


2,100$
72,100  62




---



##### Table of Contents



(In thousands)Assets acquired:Cash and cash equivalents

$
26,807Trade accounts receivable


13,531Prepaid expenses and other assets


2,053Property and equipment


4,015Intangible assets


15,300Goodwill


56,930118,636Liabilities assumed:Accounts payable and accrued liabilities


46,536$
72,100   Goodwill and Other
    Intangible Assets
    (In thousands)Intangible assets:Internal use software

$
1,600Agent relationships


12,300Trademark


1,400Total

$
15,300     (In thousands)2009

$
2,0172010


2,0172011


1,5502012


1,5502012


1,230Thereafter


4,919$
13,283   Redbox
   63




---



##### Table of Contents



(In thousands)Cash paid for the initial Redbox investment of 47.3% ownership

$
32,000Cash paid for the additional investment of 3.7% ownership in
    January 2008


5,106Estimated acquisition related costs


392Equity investment (loss) from December 2005 to January 2008


(3,689
)Total investment in Redbox at the acquisition date

$
33,809     (In thousands)Assets acquired:Cash and cash equivalents

$
13,470Trade accounts receivable


10,175Inventory


27,072Prepaid expenses and other assets


7,142Property and equipment


100,691Intangible assets


1,905Goodwill


11,898172,353Liabilities assumed:Accounts payable and accrued liabilities


112,521Deferred tax liability


2,101Minority interest


23,922Total investment in Redbox

$
33,809   Business Combination Consolidated
    Financial Statements
   64




---



##### Table of Contents



(In thousands)2009

$
4962010


4152011


1922012


1922013


121$
1,416     Year Ended December 31,2008


2007(In thousands)Revenue

$
922,910


$
680,412Net income (loss)

$
14,123


$
(23,348
)Net income (loss) per shareBasic

$
0.50


$
(0.84
)Diluted

$
0.50


$
(0.84
)Shares:Basic


28,041



27,805Diluted


28,464



27,805     NOTE 4:
    PROPERTY
    AND EQUIPMENT  e-payment
  2008


2007(In thousands)Machines

$
612,583


$
364,564Computers


32,277



15,238Office furniture and equipment


20,715



10,119Vehicles


14,098



24,655Leasehold improvements


3,715



2,548683,388



417,124Accumulated depreciation and amortization


(330,635
)


(271,083
)$
352,753


$
146,041    65




---



##### Table of Contents



NOTE 5:
    INTANGIBLE
    ASSETS    Estimated


December 31,Range of


Weighted


(In thousands)Estimated


Average


2008


2007Useful Lives


Useful Lives


Gross


Accumulated


Gross


Accumulated(in years)


(in years)


Amount


Amortization


Amount


AmortizationIntangible assets:Retailer and agent relationships


3 - 10



9.17


$
57,661


$
(23,287
)

$
44,005


$
(17,180
)Other identifiable intangible assets


1 - 40



8.02



13,765



(4,754
)


10,686



(3,054
)Total









$
71,426


$
(28,041
)

$
54,691


$
(20,234
)     (In thousands)2009

$
9,0042010


8,2782011


6,5622012


6,1722013


4,825Thereafter


8,544$
43,385   NOTE 6:
    ACCRUED
    LIABILITIES    2008


2007(In thousands)Payroll related expenses

$
25,460


$
12,442Interest payable


2,268



616Taxes payable


16,758



4,068Accrued rent


12,981



Accrued professional fees


3,697



1,659Service contract providers


5,031



5,451Accrued medical insurance


1,564



1,951Payable to related party for telecommunication fee refund






5,547Accrued acquisition costs


10,000



Interest rate swap


7,467



Other


12,261



9,177$
97,487


$
40,911  66




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##### Table of Contents



NOTE 7:
    LONG-TERM
    DEBT    2008


2007(In thousands)Revolving line of credit

$
270,000


$
257,000Long-term debt

$
270,000


$
257,000   5-year
         67




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##### Table of Contents



Redbox
    Debt
          NOTE 8:
    COMMITMENTS  Lease commitments:
     68




---



##### Table of Contents



Capital


OperatingLeases


Leases *(In thousands)2009

$
22,841


$
10,0962010


16,718



7,9512011


7,128



5,1722012


1,246



3,3202013






1,370Thereafter






1,805Total minimum lease commitments


47,933


$
29,714Less amounts representing interest


(4,160
)Present value of lease obligation


43,773Less current portion


(20,264
)Long-term portion

$
23,509     *
    
    One of our lease agreements is a triple net operating lease.
    Accordingly, we are responsible for other obligations under the
    lease including, but not limited to, taxes, insurance, utilities
    and maintenance as incurred.    Purchase commitments:
  Letters of credit:
  NOTE 9:
    STOCKHOLDERS
    EQUITY  Treasury stock:
    NOTE 10:
    STOCK-BASED
    COMPENSATION PLANS  Stock-based compensation: ), Share-Based
    Payment
 69




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##### Table of Contents



Year Ended December 31,2008


2007


2006Expected term (in years)


3.7



3.7



3.6Expected stock price volatility


35
%


41
%


47
%Risk-free interest rate


2.5
%


4.4
%


4.6
%Expected dividend yield


0.0
%


0.0
%


0.0
%Estimated fair value per option granted

$
9.62


$
10.91


$
9.87       Year EndedDecember 31,2008


2007


2006(In thousands)Stock-based compensation expense

$
6,597


$
6,421


$
6,258Related deferred tax benefit


1,845



1,700



1,590   Stock options:
     70




---



##### Table of Contents



2008


2007


2006Weighted





Weighted





WeightedShares


average


Shares


average


Shares


average(In thousands)


exercise price


(In thousands)


exercise price


(In thousands)


exercise priceOUTSTANDING, Beginning of year


2,668


$
23.07



2,514


$
21.52



2,657


$
20.81Granted


529



32.23



503



30.09



232



24.83Exercised


(443
)


20.19



(224
)


19.88



(311
)


17.78Cancelled, expired or forfeited


(65
)


27.47



(125
)


26.05



(64
)


22.04OUTSTANDING, End of year


2,689



25.24



2,668



23.07



2,514



21.52EXERCISABLE, End of year


1,722



22.47



1,825



21.29



1,652



20.87     Restricted stock awards:
      2008


2007


2006Weighted





Weighted





Weightedaverage





average





averageShares


grant date


Shares


grant date


Shares


grant date(In thousands)


fair value


(In thousands)


fair value


(In thousands)


fair valueNON-VESTED,
    Beginning of year


105


$
28.25



70


$
24.30



83


$
24.49Granted


91



33.67



69



30.48



8



22.77Vested


(55
)


28.85



(28
)


24.03



(21
)


24.49Forfeited


(6
)


32.96



(6
)


27.52







NON-VESTED,
    End of year


135



30.36



105



28.25



70



24.30    71




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##### Table of Contents



90-day
  NOTE 11:
    INCOME
    TAXES    December 31,2008


2007


2006(In thousands)United States operations

$
40,429


$
(17,945
)

$
36,175Foreign operations


(10,123
)


(10,619
)


(5,475
)Total income (loss) before taxes

$
30,306


$
(28,564
)

$
30,700     December 31,2008


2007


2006(In thousands)Current:United States federal

$
2,962


$
1,216


$
826State and local


159



1,692



617Foreign


952



(77
)


447Total current


4,073



2,831



1,890Deferred:United States federal

$
10,279


$
(6,707
)

$
9,519State and local


2,248



(1,461
)


2,079Foreign


(406
)


(974
)


(1,415
)Total deferred


12,121



(9,142
)


10,183Total tax expense (benefit)

$
16,194


$
(6,311
)

$
12,073     December 31,2008


2007


2006U.S. federal tax expense (benefit) at the statutory rate


35.0
%


−35.0
%


35.0
%State income taxes, net of federal impact


5.2
%


−1.9
%


4.8
%Incentive stock options


2.4
%


1.9
%


2.1
%Impact of meeting the indefinite reversal criteria for
    unremitted foreign earnings


0.0
%


0.0
%


−4.8
%State net operating loss carryforward adjustment


−0.1
%


2.6
%


3.7
%R&D credit


−1.5
%


−0.2
%


−3.4
%Change in valuation allowance for deferred tax asset


11.0
%


7.0
%


1.2
%Foreign rate differential


2.4
%


1.9
%


0.0
%Other


−1.0
%


1.6
%


0.7
%53.4
%


−22.1
%


39.3
%  72




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##### Table of Contents



December 31,2008


2007(In thousands)Deferred tax assets:Tax loss carryforwards

$
34,838


$
12,030Credit carryforwards


6,574



4,423Accrued liabilities and allowances


7,806



2,638Stock compensation


3,771



2,835Inventory






832Foreign tax credit


1,478



1,134Property and equipment






12,311Other


3,716



249Gross deferred tax assets


58,183



36,452Less valuation allowance


(6,897
)


(2,508
)Total deferred tax assets


51,286



33,944Deferred tax liabilities:Property and equipment


(27,524
)


Inventory


(916
)


Intangible assets


(11,767
)


(11,065
)Minority interest


(11,932
)


Unremitted earnings






(3,027
)Total deferred tax liabilities


(52,139
)


(14,092
)Net deferred tax (liabilities) assets

$
(853
)

$
19,852      73




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##### Table of Contents



Accounting for Income
    Taxes  Special Areas
      NOTE 12:
    NET
    INCOME (LOSS) PER SHARE      Year Ended December 31,2008


2007


2006(In thousands)Numerator:Net income (loss)

$
14,112


$
(22,253
)

$
18,627Denominator:Weighted average shares for basic calculation


28,041



27,805



27,686Incremental shares from employee stock options and awards


423







342Weighted average shares for diluted calculation


28,464



27,805



28,028     NOTE 13:
    RETIREMENT
    PLAN     74




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##### Table of Contents



NOTE 14:
    TERMINATION
    OF SUPPLIER RELATIONSHIP    NOTE 15:
    BUSINESS
    SEGMENT INFORMATION  Disclosure about Segments of an
    Enterprise and Related Information E-payment
  Year Ended December 31,2008


2007


2006(In thousands)Revenue:Coin and entertainment services:Coin revenue

$
261,303


$
250,876


$
229,908Entertainment revenue


150,220



238,912



273,490Subtotal


411,523



489,788



503,398DVD services


388,453



9,530



4,453Money transfer services


87,424



24,155



9,002E-payment
    services


24,500



22,824



17,589Consolidated revenue

$
911,900


$
546,297


$
534,442  75




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##### Table of Contents



Year EndedDecember 31,2008(In thousands)Operating income before depreciation/amortization and
    unallocated expenses:Coin and entertainment services

$
98,891DVD services


72,974Money transfer services


(10,070
)E-payment
    services


2,252Subtotal


164,047Depreciation/amortization and unallocated corporate expenses:Depreciation, amortization and other


(85,785
)Unallocated expense  stock-based compensation


(8,811
)Subtotal


(94,596
)Consolidated income from operations

$
69,451   December 31,2008(In thousands)Total assets, by segment, for the period indicated:Coin and entertainment services

$
473,256DVD services


378,092Money transfer services


105,645E-payment
    services


35,963Unallocated corporate assets


73,758Consolidated assets

$
1,066,714   76




---



##### Table of Contents



December 31,2008(In thousands)Total goodwill, by segment, for the period indicated:Coin and entertainment services

$
156,351DVD services


111,399Money transfer services


13,602E-payment
    services


9,039Consolidated goodwill

$
290,391     Year Ended December 31,2008


2007


2006(In thousands)Revenue:North America

$
844,153


$
489,462


$
500,462International


67,747



56,835



33,980Total revenue

$
911,900


$
546,297


$
534,442Net income (loss):North America

$
25,221


$
(13,059
)

$
22,935International


(11,109
)


(9,194
)


(4,308
)Total net income (loss)

$
14,112


$
(22,253
)

$
18,627   December 31,2008


2007(In thousands)Total assets:North American business

$
1,025,362


$
726,098International business


138,868



129,092Intercompany eliminations


(97,516
)


(86,617
)Total assets

$
1,066,714


$
768,573   e-payment
  Year Ended December 31,2008


2007


2006Wal-Mart Stores Inc


18.6
%


24.9
%


27.0
%McDonalds USA


10.0
%


0.0
%


0.0
%The Kroger Company


7.5
%


11.6
%


11.4
%   NOTE 16:
    CERTAIN
    SIGNIFICANT RISKS AND UNCERTAINTIES  Current
    Vulnerability Due to Supplier Concentrations:
   77




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##### Table of Contents



NOTE 17:
    RELATED
    PARTY AND OTHER TRANSACTIONS  e-payment e-payment
      E-payment
  NOTE 18:
    SUBSEQUENT
    EVENTS  Acquisition of Redbox:
 78




---



##### Table of Contents



and/or
    and/or and/or
  Secured Credit Facility:
 79