##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarter ended June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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
    
    (IRS Employerincorporation or organization)
    
    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)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated
filer o(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
 o þ
  Class
    
    Outstanding at July 24, 2009Common Stock, $0.001 par value
    
    30,498,958




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##### 



COINSTAR, INC.
 FORM 10-Q
Index
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Consolidated Balance Sheets as of June 30, 2009 (unaudited) and December 31, 2008
    
    Page 3Consolidated Statements of Operations for the six and three month periods ended June 30, 2009 and June 30, 2008
(unaudited)
    
    Page 4Consolidated Statement of Equity and Comprehensive Income for the six month period ended June 30, 2009
(unaudited)
    
    Page 5Consolidated Statements of Cash Flows for the six month periods ended June 30, 2009 and June 30, 2008 (unaudited)
    
    Page 6Notes to Consolidated Financial Statements for the six and three month periods ended June 30, 2009 and June
30, 2008 (unaudited)
    
    Page 7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    Page 18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    Page 28Item 4. Controls and Procedures
    
    Page 28PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    Page 28Item 1A. Risk Factors
    
    Page 29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    Page 29Item 4. Submission of Matters to a Vote of Security Holders
    
    Page 29Item 6. Exhibits
    
    Page 29SIGNATURE
    
    Page 31EX-10.9EX-10.10EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 COINSTAR, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    58,407
    
    
    $
    66,408Cash in machine or in transit
    
    
    48,712
    
    
    
    34,583Cash being processed
    
    
    81,133
    
    
    
    91,044Accounts receivable, net of allowance for doubtful accounts of $4,029 and $2,702
at June 30, 2009 and December 31, 2008, respectively
    
    
    60,468
    
    
    
    51,908Inventory
    
    
    97,438
    
    
    
    92,247Deferred income taxes
    
    
    7,191
    
    
    
    6,881Prepaid expenses and other current assets
    
    
    27,407
    
    
    
    24,715Total current assets
    
    
    380,756
    
    
    
    367,786PROPERTY AND EQUIPMENT, NET
    
    
    384,912
    
    
    
    348,949DEFERRED INCOME TAXES
    
    
    41,713
    
    
    
    4,338OTHER ASSETS
    
    
    12,494
    
    
    
    11,865INTANGIBLE ASSETS, NET
    
    
    39,038
    
    
    
    43,385GOODWILL
    
    
    290,300
    
    
    
    290,391TOTAL ASSETS
    
    $
    1,149,213
    
    
    $
    1,066,714LIABILITIES AND EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    109,697
    
    
    $
    132,194Accrued payable to retailers and agents
    
    
    129,687
    
    
    
    132,490Other accrued liabilities
    
    
    78,186
    
    
    
    87,500Current portion of long-term debt
    
    
    6,545
    
    
    
    11,655Current portion of capital lease obligations
    
    
    19,374
    
    
    
    20,264Total current liabilities
    
    
    343,489
    
    
    
    384,103LONG-TERM DEBT AND OTHER
    
    
    459,144
    
    
    
    295,942CAPITAL LEASE OBLIGATIONS
    
    
    15,641
    
    
    
    23,509DEFERRED TAX LIABILITY
    
    
    1,750
    
    
    
    12,072TOTAL LIABILITIES
    
    
    820,024
    
    
    
    715,626EQUITY:Preferred stock, $0.001 par valueAuthorized, 5,000,000 shares; no shares issued
and outstanding at June 30, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $0.001 par valueAuthorized, 45,000,000 shares; 32,184,942 and
30,181,151 issued and 30,258,861 and 28,255,070 shares outstanding at
June 30, 2009 and December 31, 2008, respectively
    
    
    367,653
    
    
    
    369,735Retained earnings (accumulated deficit)
    
    
    6,249
    
    
    
    (2,672
    )Treasury stock
    
    
    (40,831
    )
    
    
    (40,831
    )Accumulated other comprehensive loss
    
    
    (3,882
    )
    
    
    (6,204
    )Total stockholders equity
    
    
    329,189
    
    
    
    320,028Non-controlling interest
    
    
    
    
    
    
    31,060Total equity
    
    
    329,189
    
    
    
    351,088TOTAL LIABILITIES AND EQUITY
    
    $
    1,149,213
    
    
    $
    1,066,714
  3




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COINSTAR, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 Six Month Periods
    
    
    Three Month PeriodsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUE
    
    $
    585,123
    
    
    $
    410,422
    
    
    $
    313,968
    
    
    $
    219,903EXPENSES:Direct operating (1)
    
    
    416,179
    
    
    
    281,819
    
    
    
    224,153
    
    
    
    150,509Marketing
    
    
    10,849
    
    
    
    6,618
    
    
    
    5,714
    
    
    
    3,815Research and development
    
    
    2,556
    
    
    
    2,421
    
    
    
    1,299
    
    
    
    1,175General and administrative
    
    
    67,385
    
    
    
    45,802
    
    
    
    34,087
    
    
    
    24,706Depreciation and other (1)
    
    
    48,858
    
    
    
    35,826
    
    
    
    25,713
    
    
    
    18,855Amortization of intangible assets
    
    
    4,372
    
    
    
    4,640
    
    
    
    2,191
    
    
    
    2,298Proxy, write-off of acquisition costs, and litigation
settlement
    
    
    
    
    
    
    3,084
    
    
    
    
    
    
    
    3,084Income from operations
    
    
    34,924
    
    
    
    30,212
    
    
    
    20,811
    
    
    
    15,461OTHER INCOME (EXPENSE):Foreign currency (loss) gain and other, net
    
    
    (63
    )
    
    
    (2,018
    )
    
    
    96
    
    
    
    (890
    )Interest income
    
    
    161
    
    
    
    885
    
    
    
    47
    
    
    
    626Interest expense
    
    
    (15,186
    )
    
    
    (10,822
    )
    
    
    (8,647
    )
    
    
    (5,906
    )(Loss) income from equity investments
    
    
    
    
    
    
    (337
    )
    
    
    
    
    
    
    243Income before income taxes
    
    
    19,836
    
    
    
    17,920
    
    
    
    12,307
    
    
    
    9,534Income tax expense
    
    
    (7,288
    )
    
    
    (5,097
    )
    
    
    (5,349
    )
    
    
    (2,585
    )NET INCOME
    
    
    12,548
    
    
    
    12,823
    
    
    
    6,958
    
    
    
    6,949Less: Net income attributable to non-controlling interests
    
    
    (3,627
    )
    
    
    (7,442
    )
    
    
    
    
    
    
    (4,269
    )NET INCOME ATTRIBUTABLE TO COINSTAR, INC.
    
    $
    8,921
    
    
    $
    5,381
    
    
    $
    6,958
    
    
    $
    2,680(1) Direct operating above excludes depreciation and other of $40.1 million and $21.2 million for the six and three month periods ended
June 30, 2009 and $30.2 million and $15.0 million for the six and three month periods ended June 30, 2008, respectively.EARNINGS PER SHARE:Basic earnings per share attributable to Coinstar, Inc.
    
    $
    0.30
    
    
    $
    0.19
    
    
    $
    0.23
    
    
    $
    0.10Diluted earnings per share attributable to Coinstar, Inc.
    
    $
    0.30
    
    
    $
    0.19
    
    
    $
    0.23
    
    
    $
    0.09WEIGHTED SHARES OUTSTANDING:Basic
    
    
    29,525
    
    
    
    27,903
    
    
    
    30,117
    
    
    
    28,022Diluted
    
    
    29,893
    
    
    
    28,418
    
    
    
    30,575
    
    
    
    28,600
  4




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COINSTAR, INC.
 
 CONSOLIDATED STATEMENT OF EQUITY AND COMPREHENSIVE INCOME
Six Month Period Ended June 30, 2009
(in thousands, except share data)
(unaudited)
 AccumulatedRetained Earnings

    
    
    
    
    
    OtherCommon Stock
    
    
    (Accumulated
    
    
    Treasury
    
    
    Comprehensive
    
    
    Non-controlling
    
    
    
    
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Deficit)
    
    
    Stock
    
    
    Loss
    
    
    Interest
    
    
    Total
    
    
    Income (Loss)BALANCE, December 31, 2008
    
    
    28,255,070
    
    
    $
    369,735
    
    
    $
    (2,672
    )
    
    $
    (40,831
    )
    
    $
    (6,204
    )
    
    $
    31,060
    
    
    $
    351,088Proceeds from exercise of stock options, net
    
    
    109,265
    
    
    
    1,748
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,748Stock-based compensation expense
    
    
    146,624
    
    
    
    4,388
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    349
    
    
    
    4,737Tax benefit on stock-based compensation expense
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Purchase of non-controlling interest in Redbox, net of $55,778 deferred
tax benefit
    
    
    
    
    
    
    (56,751
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,036
    )
    
    
    (91,787
    )Share issuance for purchase of Redbox non-controlling interest
    
    
    1,747,902
    
    
    
    48,493
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,493Net income
    
    
    
    
    
    
    
    
    
    
    8,921
    
    
    
    
    
    
    
    
    
    
    
    3,627
    
    
    
    12,548
    
    
    $
    12,548Loss on short-term investments
net of tax benefit of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Foreign currency translation adjustments
net of tax expense of $153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,605
    
    
    
    
    
    
    
    1,605
    
    
    
    1,605Interest rate hedges on long-term debt
net of tax expense of $461
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    720
    
    
    
    
    
    
    
    720
    
    
    
    720Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,870Less: Comprehensive income attributable to non-controlling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,627
    )Total
comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    11,243BALANCE, June 30, 2009
    
    
    30,258,861
    
    
    $
    367,653
    
    
    $
    6,249
    
    
    $
    (40,831
    )
    
    $
    (3,882
    )
    
    $
    
    
    
    $
    329,189
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COINSTAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six Month PeriodsEnded June 30,2009
    
    
    2008OPERATING ACTIVITIES:Net income
    
    $
    12,548
    
    
    $
    12,823Adjustments to reconcile income from operations to net cash provided by operating activities:Depreciation and other
    
    
    48,858
    
    
    
    35,826Amortization of intangible assets and deferred financing fees
    
    
    4,878
    
    
    
    4,923Write-off of acquisition costs
    
    
    1,262
    
    
    
    1,004Non-cash stock-based compensation
    
    
    4,737
    
    
    
    3,984Excess tax benefit on share-based awards
    
    
    (125
    )
    
    
    (531
    )Deferred income taxes
    
    
    7,871
    
    
    
    5,276Income from equity investments
    
    
    
    
    
    
    3,449Other
    
    
    126
    
    
    
    575Cash (used) provided by changes in operating assets and liabilities, net of effects of business acquisitions:Accounts receivable
    
    
    (7,329
    )
    
    
    5,418Inventory
    
    
    (5,249
    )
    
    
    (16,308
    )Prepaid expenses and other current assets
    
    
    (3,196
    )
    
    
    (4,031
    )Other assets
    
    
    245
    
    
    
    (311
    )Accounts payable
    
    
    (23,825
    )
    
    
    24,494Accrued payable to retailers and agents
    
    
    9,816
    
    
    
    16,179Other accrued liabilities
    
    
    (22,217
    )
    
    
    (31,008
    )Net cash provided by operating activities
    
    
    28,400
    
    
    
    61,762INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (78,044
    )
    
    
    (72,793
    )Acquisitions, net of cash acquired of $43,621
    
    
    
    
    
    
    (24,834
    )Proceeds from sale of fixed assets
    
    
    435
    
    
    
    1,898Net cash used by investing activities
    
    
    (77,609
    )
    
    
    (95,729
    )FINANCING ACTIVITIES:Principal payments on capital lease obligations
    
    
    (13,515
    )
    
    
    (7,948
    )Net borrowings on credit facility
    
    
    73,000
    
    
    
    57,000Borrowings on term loan
    
    
    87,500
    
    
    
    Financing costs associated with revolving line of credit
    
    
    (3,234
    )
    
    
    Cash used to purchase remaining non-controlling interests in Redbox
    
    
    (102,353
    )
    
    
    Excess tax benefit on share-based awards
    
    
    125
    
    
    
    531Proceeds from exercise of stock options
    
    
    2,260
    
    
    
    8,149Net cash provided by financing activities
    
    
    43,783
    
    
    
    57,732Effect of exchange rate changes on cash
    
    
    1,643
    
    
    
    1,953NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS, CASH IN
MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED
    
    
    (3,783
    )
    
    
    25,718CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND
CASH BEING PROCESSED:Beginning of period
    
    
    192,035
    
    
    
    196,592End of period
    
    $
    188,252
    
    
    $
    222,310SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    11,390
    
    
    $
    6,297Cash paid during the period for income taxes
    
    
    918
    
    
    
    4,963SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES:Non-cash consideration for purchase of Redbox non-controlling interest
    
    $
    59,301
    
    
    $
    Purchase of vehicles financed by capital lease obligations
    
    
    2,029
    
    
    
    727Accrued acquisition costs
    
    
    
    
    
    
    10,039
  6




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COINSTAR, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Six and Three Month Periods Ended June 30, 2009 and 2008
(unaudited)
 NOTE 1: ORGANIZATION, BUSINESS, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Description of company:
 Coin-counting kiosks
    
    
    18,400
    *Entertainment services machines
    
    
    142,000DVD kiosks
    
    
    17,900Money transfer services locations
    
    
    44,000E-payment point-of-sale terminals
    
    
    24,000
 
 *
    
    Amount includes 12,300 coin to
card, e-payment or e-certificate kiosks. Basis of presentation:
  Principles of consolidation: Consolidation of Variable Interest Entities
 Use of estimates
 7




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.
 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 kiosks. Cash deposited in kiosks 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;
 
    
    Net revenue from DVD movie rentals is recognized on a ratable
basis during the term of a
customers rental transaction. Revenue from the sale directly out of the kiosk of
previously rented movies is recognized at the time of sale. On rental transactions for
which the related DVDs have not yet been returned to the kiosk at month-end, revenue is
recorded with a corresponding receivable recorded in the balance sheet, net of a reserve
for uncollectibility. We record revenue net of refunds and applicable sales taxes
collected from customers.
 
    
    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 $3.6 million and $3.0 million at June 30, 2009 and December 31, 2008,
respectively;
 
    
    E-payment revenue is recognized at the point of sale based on our commissions earned,
net of retailer fees.
 Interest rate swap: Accounting for Derivative Instruments and Hedging Activities
 Fair valueJune 30,
    
    December 31,Balance sheet location
    
    2009
    
    2008(in thousands)Interest rate swap
    
    Other accrued liabilities
    
    $
    6,286
    
    
    $
    7,466
 Fair value
 Fair Value Measures
 8




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
    
    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 June 30, 2009Level 1
    
    Level 2
    
    Level 3Short-term investment
    
    $
    1,943
    
    
    
    
    
    
    
    Interest rate swap liability
    
    
    
    
    
    $
    6,286
    
    
    
    
 Recent accounting pronouncements Business Combinations
 Noncontrolling Interests in
Consolidated Financial StatementsAn Amendment of ARB No. 51
 Disclosures about Derivative Instruments and Hedging Activities
 Subsequent
Events
 1.
    
    The period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements;
 9




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2.
    
    The circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial statements; and
 3.
    
    The disclosures that an entity should make about events or transactions
that occurred after the balance sheet date.
  The
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles
 Contingency
 NOTE 2: PURCHASE OF NON-CONTROLLING INTERESTS IN REDBOX
     10




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Noncontrolling Interests in Consolidated Financial
Statements
 Secured credit facility:
  Pricing Level
    
    Consolidated Leverage Ratio
    
    Eurodollar Rate +
    
    Base Rate +1
    
    £1.50 to 1.00
    
    3.75
    
    2.752
    
    >1.50 to 1.00 but
£2.00 to 1.00
    
    4.00
    
    3.003
    
    >2.00 to 1.00 but
£2.50 to 1.00
    
    4.25
    
    3.254
    
    >2.50 to 1.00 but
£3.00 to 1.00
    
    4.50
    
    3.505
    
    >3.00 to 1.00
    
    4.75
    
    3.75
   11




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NOTE 3: PROPERTY AND EQUIPMENT
 June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Machines
    
    $
    679,909
    
    
    $
    608,779Computers
    
    
    33,972
    
    
    
    32,277Office furniture and equipment
    
    
    14,956
    
    
    
    13,202Vehicles
    
    
    21,783
    
    
    
    21,611Leasehold improvements
    
    
    3,827
    
    
    
    3,715754,447
    
    
    
    679,584Accumulated depreciation and amortization
    
    
    (369,535
    )
    
    
    (330,635
    )$
    384,912
    
    
    $
    348,949
 NOTE 4: STOCK-BASED COMPENSATION
 Stock-based compensation: ), Share-Based Payment
  Six Month Periods
    
    Three Month PeriodsEnded June 30,
    
    Ended June 30,2009
    
    2008
    
    2009
    
    2008Expected term (in years)
    
    
    3.7
    
    
    
    3.7
    
    
    
    3.7
    
    
    
    3.7Expected stock price volatility
    
    
    40
    %
    
    
    35
    %
    
    
    41
    %
    
    
    35
    %Risk-free interest rate
    
    
    1.5
    %
    
    
    2.5
    %
    
    
    2.1
    %
    
    
    3.1
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Estimated fair value per option granted
    
    $
    9.27
    
    
    $
    9.54
    
    
    $
    10.29
    
    
    $
    9.80
  12




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Six Month Periods
    
    Three Month PeriodsEnded June 30,
    
    Ended June 30,2009
    
    2008
    
    2009
    
    2008(in thousands)
    
    (in thousands)Stock-based compensation expense
    
    $
    4,737
    
    
    $
    3,191
    
    
    $
    1,942
    
    
    $
    1,572Related deferred tax benefit
    
    
    1,592
    
    
    
    877
    
    
    
    748
    
    
    
    443
 Stock options:
  Weightedaverage exerciseShares
    
    price(in thousands)OUTSTANDING, December 31, 2008
    
    
    2,689
    
    
    
    $25.24Granted
    
    
    618
    
    
    
    29.22Exercised
    
    
    (109
    )
    
    
    20.68Cancelled, expired or forfeited
    
    
    (179
    )
    
    
    29.94OUTSTANDING, June 30, 2009
    
    
    3,019
    
    
    
    25.94EXERCISABLE, June 30, 2009
    
    
    1,963
    
    
    
    $23.80
  Restricted stock awards:
  Weightedaveragegrant dateShares
    
    fair value(in thousands)NON-VESTED, December 31, 2008
    
    
    135
    
    
    $
    30.36Granted
    
    
    207
    
    
    
    29.20Vested
    
    
    (89
    )
    
    
    30.72Forfeited
    
    
    (41
    )
    
    
    30.12NON-VESTED, June 30, 2009
    
    
    212
    
    
    $
    29.71
 13




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NOTE 5: INCOME PER SHARE
   Six Month Periods
    
    
    Three Month PeriodsEnded  June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Numerator:Net income attributable to Coinstar, Inc.
    
    $
    8,921
    
    
    $
    5,381
    
    
    $
    6,958
    
    
    $
    2,680Denominator:Weighted average shares for basic calculation
    
    
    29,525
    
    
    
    27,903
    
    
    
    30,117
    
    
    
    28,022Incremental shares from employee stock options and awards
    
    
    368
    
    
    
    515
    
    
    
    458
    
    
    
    578Weighted average shares for diluted calculation
    
    
    29,893
    
    
    
    28,418
    
    
    
    30,575
    
    
    
    28,600
  NOTE 6: BUSINESS SEGMENT INFORMATION
 Disclosure about Segments of an Enterprise and Related Information
 14




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Six Month Periods
    
    
    Three Month PeriodsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Revenue:Coin and entertainment services:Coin revenue
    
    $
    122,838
    
    
    $
    123,744
    
    
    $
    64,851
    
    
    $
    64,502Entertainment revenue
    
    
    64,307
    
    
    
    80,057
    
    
    
    31,920
    
    
    
    35,831Subtotal
    
    
    187,145
    
    
    
    203,801
    
    
    
    96,771
    
    
    
    100,333DVD services
    
    
    343,622
    
    
    
    150,469
    *
    
    
    188,925
    
    
    
    89,956
    *Money transfer services
    
    
    42,085
    
    
    
    44,256
    
    
    
    22,154
    
    
    
    23,786E-payment services
    
    
    12,271
    
    
    
    11,896
    
    
    
    6,118
    
    
    
    5,828Consolidated revenue
    
    $
    585,123
    
    
    $
    410,422
    
    
    $
    313,968
    
    
    $
    219,903
 
 *
    
    DVD services revenue above for 2008 does not include
$11.0 million for the period January 1, 2008 through January 17, 2008 when we did not consolidate Redbox. See Note 2.   Six Month Periods
    
    
    Three Month PeriodsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Operating income before depreciation/amortization and stock-based
compensation:Coin and entertainment services
    
    $
    41,642
    
    
    $
    46,814
    
    
    $
    22,092
    
    
    $
    21,983DVD services
    
    
    57,571
    
    
    
    32,074
    
    
    
    30,954
    
    
    
    19,205Money transfer services
    
    
    (6,117
    )
    
    
    (5,944
    )
    
    
    (2,309
    )
    
    
    (4,121
    )E-payment services
    
    
    (205
    )
    
    
    1,798
    
    
    
    (80
    )
    
    
    1,469Subtotal
    
    
    92,891
    
    
    
    74,742
    
    
    
    50,657
    
    
    
    38,536Depreciation/amortization and stock-based compensation:Depreciation, amortization and other
    
    
    (53,230
    )
    
    
    (40,546
    )
    
    
    (27,904
    )
    
    
    (21,205
    )Stock-based compensation
    
    
    (4,737
    )
    
    
    (3,984
    )
    
    
    (1,942
    )
    
    
    (1,870
    )Subtotal
    
    
    (57,967
    )
    
    
    (44,530
    )
    
    
    (29,846
    )
    
    
    (23,075
    )Consolidated income from operations
    
    $
    34,924
    
    
    $
    30,212
    
    
    $
    20,811
    
    
    $
    15,461
 15




---



##### Table of Contents



June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)
    
    
    (in thousands)Total assets:Coin and entertainment services
    
    $
    512,304
    
    
    $
    473,256DVD services
    
    
    409,167
    
    
    
    378,092Money transfer services
    
    
    114,244
    
    
    
    105,645E-payment services
    
    
    39,253
    
    
    
    35,963Unallocated corporate assets
    
    
    74,245
    
    
    
    73,758Consolidated assets
    
    $
    1,149,213
    
    
    $
    1,066,714
  Six Month Periods
    
    
    Three Month PeriodsEnded June 30,
    
    
    Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)
    
    
    (in thousands)Revenue:North America
    
    $
    553,360
    
    
    $
    376,655
    
    
    $
    296,704
    
    
    $
    202,281International
    
    
    31,763
    
    
    
    33,767
    
    
    
    17,264
    
    
    
    17,622Total revenue
    
    $
    585,123
    
    
    $
    410,422
    
    
    $
    313,968
    
    
    $
    219,903Net income (loss) attributable to Coinstar, Inc.:North America
    
    $
    13,632
    
    
    $
    13,869
    
    
    $
    8,920
    
    
    $
    7,301International
    
    
    (4,711
    )
    
    
    (8,488
    )
    
    
    (1,962
    )
    
    
    (4,621
    )Total net income
    
    $
    8,921
    
    
    $
    5,381
    
    
    $
    6,958
    
    
    $
    2,680
 June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Total assets:North America
    
    $
    1,166,383
    
    
    $
    1,025,362International
    
    
    139,419
    
    
    
    138,868Intercompany eliminations
    
    
    (156,589
    )
    
    
    (97,516
    )Total assets
    
    $
    1,149,213
    
    
    $
    1,066,714
  Six Month Periods
    
    Three Month PeriodsEnded June 30,
    
    Ended June 30,2009
    
    2008
    
    2009
    
    2008Walmart
Stores Inc.
    
    
    22.6
    %
    
    
    16.9
    %
    
    
    22.8
    %
    
    
    16.3
    %McDonalds
    
    
    9.1
    %
    
    
    10.1
    %
    
    
    8.7
    %
    
    
    11.2
    %
 NOTE 7: SUBSEQUENT EVENT
 Sony license agreement
  16




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17




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q .
Except for the consolidated historical information, the following discussion contains
forward-looking statements that involve risks and uncertainties, such as our objectives,
expectations and intentions. Our actual results could differ materially from results that may be
anticipated by such forward-looking statements and discussed elsewhere herein. Factors that could
cause or contribute to such differences include, but are not limited to, those discussed below and
those discussed under Risk Factors in Item IA of Part II of this Quarterly Report on Form 10-Q
and in Item IA of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31,
2008 (the  Form 10-K ). Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. We undertake no obligation to revise
any forward-looking statements in order to reflect events or circumstances that may subsequently
arise. Readers are urged to carefully review and consider the various disclosures made in this
report and in our other reports filed with the SEC that attempt to advise interested parties of the
risks and factors that may affect our business, prospects and results of operations.
 Overview
  Management of Business Segments
  
    
    Coin and Entertainment services  We offer self-service coin-counting services and
entertainment services such as skill-crane machines, bulk vending machines and kiddie
rides. We own and service all of our coin-counting and entertainment services
machines, providing a convenient and trouble-free service to retailers. We own and
operate the only multi-national fully-automated network of self-service coin-counting
kiosks across the United States, Canada, Puerto Rico, Ireland and in the United
Kingdom. We generate revenue from coin-counting transaction fees from our customers
and business partners. We also generate revenue from money deposited into our
entertainment machines for plush toys, novelties and other items.
    
    DVD services  Through Redbox and DVDXpress, we offer self-service DVD offerings
through kiosks where consumers can rent or purchase movies. Our DVD kiosks supply the
functionality of a traditional video rental store, yet usually occupy an area of less
than ten square feet. Consumers use a touch screen to select their DVD, swipe a valid
credit or debit card, and go. The process is designed to be fast, efficient and fully
automated with no upfront or membership fees. We generate revenue primarily through
fees charged to rent or purchase a DVD.
    
    Money Transfer services  Through Coinstar Money Transfer (CMT) and GroupEx
Financial Corporation, JRJ Express Inc. and Kimeco, LLC (collectively, GroupEx), we
offer money transfer services primarily in the United Kingdom, European countries,
North America, and Central America. Our money transfer services provide an
easy to use, reliable and cost-effective way to send money around the world. We
generate revenue primarily through commissions earned on money transfer transactions.
    
    E-payment services  We offer E-payment services, including activating and
reloading value on prepaid wireless accounts, selling stored value cards, loading and
reloading prepaid debit cards and prepaid phone cards, selling prepaid phones and
providing payroll card services. We generate revenue primarily through commissions or
fees charged per E-payment transaction and pay our retailers a fee based on
commissions earned on the sales of E-payment services.
 18




---



##### Table of Contents



Strategy
 
  Purchase of the remaining non-controlling interests in Redbox
    Subsequent Event
 Sony license agreement
   Results of Operations
 Summary of operating results
 Total
revenue/Total operating income
 Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngTotal consolidated revenue
    
    $
    585.1
    
    
    $
    410.4
    
    
    $
    174.7
    
    
    
    42.6
    %
    
    $
    314.0
    
    
    $
    219.9
    
    
    $
    94.1
    
    
    
    42.8
    %Total consolidated income from operations
    
    $
    34.9
    
    
    $
    30.2
    
    
    $
    4.7
    
    
    
    15.5
    %
    
    $
    20.9
    
    
    $
    15.5
    
    
    $
    5.4
    
    
    
    34.6
    %Income from
operations as a % of Total Revenue
    
    
    6.0
    %
    
    
    7.4
    %
    
    
    
    
    
    
    
    
    
    
    6.6
    %
    
    
    7.0
    %
  19




---



##### Table of Contents



Segment Revenue/Operating income (loss)
 Coin and Entertainment services
 Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngCoin and Entertainment services revenue
    
    $
    187.1
    
    
    $
    203.8
    
    
    $
    (16.7
    )
    
    
    -8.2
    %
    
    $
    96.8
    
    
    $
    100.3
    
    
    $
    (3.5
    )
    
    
    -3.5
    %Coin and Entertainment services
operating income
    
    $
    41.6
    
    
    $
    46.8
    
    
    $
    (5.2
    )
    
    
    -11.0
    %
    
    $
    22.1
    
    
    $
    22.0
    
    
    $
    0.1
    
    
    
    0.4
    %Operating income as a % of segment revenue
    
    
    22.3
    %
    
    
    23.0
    %
    
    
    
    
    
    
    
    
    
    
    22.8
    %
    
    
    21.9
    %
   DVD services
 Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngDVD services revenue
    
    $
    343.6
    
    
    $
    150.4
    
    
    $
    193.2
    
    
    
    128.5
    %
    
    $
    188.9
    
    
    $
    90.0
    
    
    $
    98.9
    
    
    
    109.9
    %DVD services operating income
    
    $
    57.6
    
    
    $
    32.1
    
    
    $
    25.5
    
    
    
    79.3
    %
    
    $
    31.0
    
    
    $
    19.2
    
    
    $
    11.8
    
    
    
    61.2
    %Operating
income as a % of segment revenue
    
    
    16.8
    %
    
    
    21.3
    %
    
    
    
    
    
    
    
    
    
    
    16.4
    %
    
    
    21.3
    %
  20




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Money Transfer services
 Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngMoney Transfer services revenue
    
    $
    42.1
    
    
    $
    44.3
    
    
    $
    (2.2
    )
    
    
    -5.0
    %
    
    $
    22.2
    
    
    $
    23.8
    
    
    $
    (1.6
    )
    
    
    -6.7
    %Money Transfer services operating loss
    
    $
    (6.1
    )
    
    $
    (5.9
    )
    
    $
    (0.2
    )
    
    
    3.7
    %
    
    $
    (2.3
    )
    
    $
    (4.1
    )
    
    $
    1.8
    
    
    
    -43.7
    %Operating
loss as a % of segment revenue
    
    
    -14.5
    %
    
    
    -13.3
    %
    
    
    
    
    
    

    
    
    
    
    -10.4
    %
    
    
    -17.2
    %
   E-payment services
 Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngE-payment revenue
    
    $
    12.3
    
    
    $
    11.9
    
    
    $
    0.4
    
    
    
    3.4
    %
    
    $
    6.1
    
    
    $
    5.8
    
    
    $
    0.3
    
    
    
    5.2
    %E-payment operating (loss) income
    
    $
    (0.2
    )
    
    $
    1.8
    
    
    $
    (2.0
    )
    
    
    -111.4
    %
    
    $
    (0.1
    )
    
    $
    1.5
    
    
    $
    (1.6
    )
    
    
    -105.3
    %Operating
loss or income as a % of segment revenue
    
    
    -1.7
    %
    
    
    15.1
    %
    
    
    
    
    
    

    
    
    
    
    -1.3
    %
    
    
    25.9
    %
   Expenses
 Direct Operating Expenses
  21




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Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngDirect operating expenses
    
    $
    416.2
    
    
    $
    281.8
    
    
    $
    134.4
    
    
    
    47.7
    %
    
    $
    224.2
    
    
    $
    150.5
    
    
    $
    73.7
    
    
    
    49.0
    %as a % of Total Revenue
    
    
    71.1
    %
    
    
    68.7
    %
    
    
    
    
    
    
    
    
    
    
    71.4
    %
    
    
    68.4
    %
  Marketing
  Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngMarketing
    
    $
    10.8
    
    
    $
    6.6
    
    
    $
    4.2
    
    
    
    63.6
    %
    
    $
    5.7
    
    
    $
    3.8
    
    
    $
    1.9
    
    
    
    50.0
    %as a % of Total Revenue
    
    
    1.8
    %
    
    
    1.6
    %
    
    
    
    
    
    
    
    
    
    
    1.8
    %
    
    
    1.7
    %
  Research and Development
  Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngResearch and development
    
    $
    2.6
    
    
    $
    2.4
    
    
    $
    0.2
    
    
    
    8.3
    %
    
    $
    1.3
    
    
    $
    1.2
    
    
    $
    0.1
    
    
    
    8.3
    %as a % of Total Revenue
    
    
    0.4
    %
    
    
    0.6
    %
    
    
    
    
    
    
    
    
    
    
    0.4
    %
    
    
    0.5
    %
  22




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General and Administrative
  Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngGeneral and administrative
    
    $
    67.4
    
    
    $
    45.8
    
    
    $
    21.6
    
    
    
    47.2
    %
    
    $
    34.1
    
    
    $
    24.7
    
    
    $
    9.4
    
    
    
    38.0
    %as a % of Total Revenue
    
    
    11.5
    %
    
    
    11.2
    %
    
    
    
    
    
    
    
    
    
    
    10.9
    %
    
    
    11.2
    %
  Proxy, write-off of acquisition costs, and litigation settlement
  Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngProxy, write-off of
acquisition costs, and
litigation settlement
    
    $
    
    
    
    $
    3.1
    
    
    $
    (3.1
    )
    
    
    -100.0
    %
    
    $
    
    
    
    $
    3.1
    
    
    $
    (3.1
    )
    
    
    -100.0
    %as a % of Total Revenue
    
    
    0.0
    %
    
    
    0.8
    %
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    1.4
    %
 Depreciation and Other
  Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngDepreciation and other
    
    $
    48.9
    
    
    $
    35.8
    
    
    $
    13.1
    
    
    
    36.6
    %
    
    $
    25.7
    
    
    $
    18.9
    
    
    $
    6.8
    
    
    
    36.0
    %as a % of Total Revenue
    
    
    8.4
    %
    
    
    8.7
    %
    
    
    
    
    
    
    
    
    
    
    8.2
    %
    
    
    8.6
    %
  Amortization of Intangible Assets
  Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngAmortization of intangible
assets
    
    $
    4.4
    
    
    $
    4.6
    
    
    $
    (0.2
    )
    
    
    -4.3
    %
    
    $
    2.2
    
    
    $
    2.3
    
    
    $
    (0.1
    )
    
    
    -4.3
    %as a % of Total Revenue
    
    
    0.8
    %
    
    
    1.1
    %
    
    
    
    
    
    
    
    
    
    
    0.7
    %
    
    
    1.0
    %
  Other Income and Expense
 Six Month Periods Ended June 30,
    
    Three Month Periods Ended June 30,(In millions, except percentages)
    
    2009
    
    2008
    
    $ Chng
    
    % Chng
    
    2009
    
    2008
    
    $ Chng
    
    % ChngForeign currency (loss) gain
and other, net
    
    $
    (0.1
    )
    
    $
    (2.0
    )
    
    $
    1.9
    
    
    
    -95.0
    %
    
    $
    0.1
    
    
    $
    (0.9
    )
    
    $
    1.0
    
    
    
    -111.1
    %Interest income
    
    $
    0.2
    
    
    $
    0.9
    
    
    $
    (0.7
    )
    
    
    -77.8
    %
    
    $
    
    
    
    $
    0.6
    
    
    $
    (0.6
    )
    
    
    -100.0
    %Interest expense
    
    $
    (15.2
    )
    
    $
    (10.8
    )
    
    $
    (4.4
    )
    
    
    40.7
    %
    
    $
    (8.6
    )
    
    $
    (5.9
    )
    
    $
    (2.7
    )
    
    
    45.8
    %(Loss) income from equity investments
    
    $
    
    
    
    $
    (0.3
    )
    
    $
    0.3
    
    
    
    -100.0
    %
    
    $
    
    
    
    $
    0.2
    
    
    $
    (0.2
    )
    
    
    -100.0
    %Non-controlling interest
    
    $
    (3.6
    )
    
    $
    (7.4
    )
    
    $
    3.8
    
    
    
    -51.4
    %
    
    $
    
    
    
    $
    (4.3
    )
    
    $
    4.3
    
    
    
    -100.0
    %
 23




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##### Table of Contents



Income Tax Expense
  Liquidity and Capital Resources
 Cash and Liquidity
    24




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##### Table of Contents



Credit Facility
  Letters of Credit
  Interest rate swap
 Accounting for Derivative Instruments and Hedging Activities
 Redbox Rollout Agreement
  25




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##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations
  26




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##### Table of Contents



Quarterly Financial Results
  Three Month Periods EndedJune 30,
    
    March 31,
    
    Dec. 31,
    
    Sept. 30,
    
    June 30,
    
    March 31,
    
    Dec. 31,
    
    Sept. 30,2009
    
    2009
    
    2008
    
    2008
    
    2008 (1)
    
    2008 (2)
    
    2007 (3)
    
    2007 (4)(in thousands, except per share data)(unaudited)Consolidated
Statement of Operations:Revenue
    
    $
    313,968
    
    
    $
    271,155
    
    
    $
    260,981
    
    
    $
    240,497
    
    
    $
    219,903
    
    
    $
    190,519
    
    
    $
    133,314
    
    
    $
    143,291Expenses:Direct operating
    
    
    224,153
    
    
    
    192,026
    
    
    
    179,545
    
    
    
    167,421
    
    
    
    150,509
    
    
    
    131,310
    
    
    
    85,112
    
    
    
    86,721Marketing
    
    
    5,714
    
    
    
    5,135
    
    
    
    5,311
    
    
    
    7,374
    
    
    
    3,815
    
    
    
    2,803
    
    
    
    2,009
    
    
    
    5,650Research and
development
    
    
    1,299
    
    
    
    1,257
    
    
    
    1,180
    
    
    
    1,157
    
    
    
    1,175
    
    
    
    1,246
    
    
    
    1,070
    
    
    
    1,397General and
administrative
    
    
    34,087
    
    
    
    33,298
    
    
    
    30,872
    
    
    
    24,060
    
    
    
    24,706
    
    
    
    21,096
    
    
    
    13,857
    
    
    
    15,685Depreciation and other
    
    
    25,713
    
    
    
    23,145
    
    
    
    23,089
    
    
    
    17,746
    
    
    
    18,855
    
    
    
    16,971
    
    
    
    14,724
    
    
    
    15,100Amortization of intangible assets
    
    
    2,191
    
    
    
    2,181
    
    
    
    2,213
    
    
    
    2,271
    
    
    
    2,298
    
    
    
    2,342
    
    
    
    1,962
    
    
    
    1,813Impairment and excess inventory
charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,220
    
    
    
    Proxy, write-off
of acquisition costs,
and
litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,084
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from
operations
    
    
    20,811
    
    
    
    14,113
    
    
    
    18,771
    
    
    
    20,468
    
    
    
    15,461
    
    
    
    14,751
    
    
    
    (50,640
    )
    
    
    16,925Foreign currency (loss) gain and other,
net
    
    
    96
    
    
    
    (159
    )
    
    
    (1,149
    )
    
    
    (709
    )
    
    
    (890
    )
    
    
    (1,128
    )
    
    
    91
    
    
    
    699Interest income
    
    
    47
    
    
    
    114
    
    
    
    155
    
    
    
    180
    
    
    
    626
    
    
    
    259
    
    
    
    201
    
    
    
    1,109Interest expense
    
    
    (8,647
    )
    
    
    (6,539
    )
    
    
    (5,490
    )
    
    
    (5,404
    )
    
    
    (5,906
    )
    
    
    (4,916
    )
    
    
    (4,605
    )
    
    
    (4,365
    )Income (loss) from equity investments and
other
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    (1
    )
    
    
    243
    
    
    
    (580
    )
    
    
    472
    
    
    
    2,217Early retirement of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,794
    )
    
    
    Income (loss) before
income taxes
    
    
    12,307
    
    
    
    7,529
    
    
    
    12,288
    
    
    
    14,534
    
    
    
    9,534
    
    
    
    8,386
    
    
    
    (56,275
    )
    
    
    16,585Income taxes
    
    
    (5,349
    )
    
    
    (1,939
    )
    
    
    (4,421
    )
    
    
    (6,676
    )
    
    
    (2,585
    )
    
    
    (2,512
    )
    
    
    19,053
    
    
    
    (7,520
    )Net income (loss)
    
    
    6,958
    
    
    
    5,590
    
    
    
    7,867
    
    
    
    7,858
    
    
    
    6,949
    
    
    
    5,874
    
    
    
    (37,222
    )
    
    
    9,065Less: Net income attributable to
non-controlling
interests
    
    
    
    
    
    
    (3,627
    )
    
    
    (3,647
    )
    
    
    (3,347
    )
    
    
    (4,269
    )
    
    
    (3,173
    )
    
    
    
    
    
    
    Net income (loss) attributable to
Coinstar, Inc.
    
    $
    6,958
    
    
    $
    1,963
    
    
    $
    4,220
    
    
    $
    4,511
    
    
    $
    2,680
    
    
    $
    2,701
    
    
    $
    (37,222
    )
    
    $
    9,065Earnings (loss) per share:Basic
    
    $
    0.23
    
    
    $
    0.07
    
    
    $
    0.15
    
    
    $
    0.16
    
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    (1.34
    )
    
    $
    0.33Diluted
    
    $
    0.23
    
    
    $
    0.07
    
    
    $
    0.15
    
    
    $
    0.16
    
    
    $
    0.09
    
    
    $
    0.10
    
    
    $
    (1.34
    )
    
    $
    0.32
 
 (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. 27




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##### Table of Contents



Seasonality
  Critical Accounting Policies
  
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
 The following discussion about our market risk involves forward-looking statements. Actual
results could differ from those projected in our forward-looking statements.
    
 Item 4.
    
    Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  28




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##### Table of Contents



Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    Total Number of
    
    
    Maximum ApproximateShares Purchased as
    
    
    Dollar Value of SharesTotal Number of
    
    
    
    
    
    
    part of the Publicly
    
    
    that May Yet beShares Repurchased
    
    
    Average Price Paid
    
    
    Announced
    
    
    Purchased Under the(1)
    
    
    per Share
    
    
    Repurchase Plans
    
    
    Programs4/1/09 - 4/30/09
    
    
    662
    
    
    $
    29.73
    
    
    
    
    
    
    $
    24,304,9205/1/09 - 5/31/09
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    25,464,7106/1/09 - 6/30/09
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    25,705,328662
    
    
    $
    29.73
    
    
    
    
    
    
    $
    25,705,328
 
 (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. 
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 Item 6.
    
    Exhibits
  29




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##### Table of Contents



Exhibit Number
    
    Description10.1*
    
    Amended and Restated Employment Agreement, dated as of April 1, 2009, between Coinstar, Inc. and Paul D. Davis. (1)10.2*
    
    Amended and Restated Change of Control Agreement, dated as of April 1, 2009, between Coinstar, Inc. and Paul D.
Davis. (2)10.3*
    
    Employment Agreement, dated as of April 1, 2009, between Coinstar, Inc. and Gregg A. Kaplan. (1)10.4*
    
    Change of Control Agreement, dated as of April 1, 2009, between Coinstar, Inc. and Gregg A. Kaplan. (1)10.5*
    
    Employment Agreement, dated as of June 1, 2009, between Coinstar, Inc. and John C. Harvey. (1)10.6*
    
    Change of Control Agreement, dated as of June 1, 2009, between Coinstar, Inc. and John C. Harvey. (2)10.7*
    
    Letter Agreement, dated as of April 1, 2009, between Coinstar, Inc. and Gregg A. Kaplan. (1)10.8*
    
    Letter Agreement, dated as of April 1, 2009, between Coinstar, Inc. and John C. Harvey. (1)10.9*
    
    Amendment to Letter Agreement, dated as of May 8, 2009, between Coinstar, Inc. and Gregg A. Kaplan.10.10*
    
    Amendment to Letter Agreement, dated as of May 8, 2009, between Coinstar, Inc. and John C. Harvey.10.11*
    
    Coinstar, Inc. 1997 Amended and Restated Equity Incentive Plan. (3)10.12
    
    First Amendment to Office Lease Agreement as of April 15, 2009, by and between W2007 Seattle Office Bellefield
Office Park Realty, L.L.C. and Coinstar, Inc. (4)10.13
    
    Amended and Restated Credit Agreement, dated as of November 20, 2007 and amended and restated as of April 29,
2009, among Coinstar, Inc., as borrower, Bank of America, N.A., as administrative agent, swing line lender, and
letter of credit issuer, and the other lenders party thereto. (5)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.32.1
    
    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 2002.32.2
    
    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.
 
 *
    
    Includes a management contract or compensatory plan or arrangement.(1)
    
    Incorporated by reference to the Registrants Form 8-K filed on April 6, 2009 (File Number
000-22555).(2)
    
    Incorporated by reference to the Registrants Form 10-Q filed on May 11, 2009 (File Number
000-22555).(3)
    
    Incorporated by reference to Appendix A of the Registrants Definitive Proxy Statement on
Form DEF 14A filed on May 4, 2009 (File Number 000-22555).(4)
    
    Incorporated by reference to the Registrants Form 8-K filed on April 21, 2009 (File Number
000-22555).(5)
    
    Incorporated by reference to the Registrants Form 8-K filed on May 1, 2009 (File Number
000-22555). 30




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##### Table of Contents



SIGNATURE
  Coinstar,
inc.By:
    /s/ JOHN C. HARVEYJohn C. HarveyChief Financial Officer   August 6, 2009 31