EX-99.1 2 v50303exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
     
 
  Contact: Brian Turner
 
  Chief Financial Officer
  425-943-8000
 
    
 
  Media Contact: Marci Maule
 
  Director Public Relations
 
  425-943-8277
COINSTAR ANNOUNCES RECORD THIRD QUARTER 2008 RESULTS
Company Increases Revenue and EBITDA Expectations for 2008
BELLEVUE, Wash.—October 30, 2008—Coinstar, Inc. (NASDAQ: CSTR) today announced results for the three months ended September 30, 2008.
Despite continued weakness in the overall economy due primarily to the credit crisis and the housing downturn, Coinstar’s 4th Wall™ bundle of product and services continued to show resilience. Led by the DVD product line which experienced a dramatic increase in revenue from a year ago, and the Coin product line which had solid installations during the quarter, Coinstar saw consolidated revenue grow 68% from the prior year period. This was combined with the continued integration of the money transfer business, double-digit growth in E-payment revenue, offset by a decline in Entertainment revenue.
Highlights for the three months ended September 30, 2008, were as follows:
                 
Revenue
   $ 240.5     million    
EBITDA
   $ 42.1     million   (see Appendix A)
Free Cash Flow
   $ (5.1 )   million   (see Appendix A)
Adjusted fully taxed, fully diluted earnings per share
   $ 0.20         (see reconciliation below)
Net Income
   $ 4.5     million    
Highlights for the nine months ended September 30, 2008, were as follows:
                 
Revenue
   $ 650.9     million    
EBITDA
   $ 114.5     million   (see Appendix A)
Free Cash Flow
   $ (6.9 )   million   (see Appendix A)
Adjusted fully taxed, fully diluted earnings per share
   $ 0.61         (see reconciliation below)
Net Income
   $ 9.9     million    
Included in GAAP net income for the third quarter of 2008 were certain non-cash charges including $2.4 million in amortization of intangible assets and deferred financing fees, and $2.3 million in non-cash stock based compensation. Excluding these items, net of taxes $3.0 million, Coinstar reported adjusted net income of $6.2 million.
Included in GAAP net income for the nine months of 2008 were certain non-cash charges including $7.3 million in amortization of intangible assets and deferred financing fees, $6.3 million in non-cash stock based compensation, and unique charges of $3.1 million. Excluding these items, net of taxes $9.5 million, Coinstar reported adjusted net income of $17.1 million.

 

 

A reconciliation of GAAP earnings per share to adjusted earnings per share for the three and nine months ended September 30, 2008, is as follows:
                 
    Three Months Ended     Nine Months Ended  
    September 30, 2008     September 30, 2008  
GAAP fully taxed, fully diluted earnings per share
   $ 0.16     $ 0.35  
 
                
Amortization of intangibles, net of tax
     0.02       0.11  
Stock based compensation expense, net of tax
     0.02       0.09  
Proxy, litigation and acquisition charges
             0.06  
 
                
 
            
Adjusted fully taxed, fully diluted earnings per share
   $ 0.20     $ 0.61  
 
            
At September 30, 2008, Coinstar had federal and state cumulative net operating loss carryforwards of approximately $3.5 million and $5.8 million, respectively. In addition, there were foreign net operating loss carryforwards of approximately $25.5 million.
“We’re generally pleased with our third quarter and year-to-date results, which underscore our team’s ability to navigate volatile fuel prices, unpredictable retail traffic and lower consumer confidence. We credit Coinstar’s product diversity, bundled approach, and our ability to proactively manage our mix on behalf of retail customers,” Dave Cole, Chief Executive Officer of Coinstar, Inc. stated. “In the current environment, our portfolio of businesses is increasingly valuable as retailers look for cost effective ways to monetize their under-utilized square footage.”
Other Information
Additional Other Information is posted in the “About Us — Investor Relations” section of Coinstar’s website at www.coinstar.com. A copy of today’s earnings conference call and accompanying slides are also posted to the “About Us — Investor Relations” section of our website.
Expectations
Management estimates that revenue for the fourth quarter ending December 31, 2008, will range from $250 million to $275 million. In addition, management estimates that for the fourth quarter GAAP earnings per fully taxed, fully diluted share will range from $0.11 to $0.17.
Conference Call
A conference call to discuss third quarter 2008 results will be broadcast live over the Internet today, Thursday, October 30, 2008, at 5:00 p.m. Eastern Time. The Webcast will be hosted at the About Us — Investor Relations section of Coinstar’s Web site at www.coinstar.com.
About Coinstar, Inc.
Coinstar, Inc. (NASDAQ:CSTR) is a multi-national company offering a range of 4th Wall™ solutions for the retailers’ front of store consisting of self-service coin counting, electronic payment solutions, entertainment services, money transfer and self-service DVD rental. The company’s products and services can be found at more than 50,000 retail locations including supermarkets, drug stores, mass merchants, financial institutions, convenience stores and restaurants.

 

 

# # #
Certain statements in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “goals,” variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. The forward-looking statements in this release include statements regarding Coinstar, Inc.’s anticipated growth and future operating results. Forward-looking statements are not guarantees of future performance and actual results may vary materially from the results expressed or implied in such statements. Differences may result from actions taken by Coinstar, Inc., as well as from risks and uncertainties beyond Coinstar, Inc.’s control. Such risks and uncertainties include, but are not limited to, the termination, non-renewal or renegotiation on materially adverse terms of our contracts with our significant retailers, payment of increased service fees to retailers, the ability to attract new retailers, penetrate new markets and distribution channels, cross-sell our products and services and react to changing consumer demands, the ability to achieve the strategic and financial objectives for our entry into or expansion of new businesses, the ability to adequately protect our intellectual property, and the application of substantial federal, state, local and foreign laws and regulations specific to our business. The foregoing list of risks and uncertainties is illustrative, but by no means exhaustive. For more information on factors that may affect future performance, please review “Risk Factors” described in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission. These forward-looking statements reflect Coinstar, Inc.’s expectations as of the date of this release. Coinstar, Inc. undertakes no obligation to update the information provided herein.

 

 

Appendix A
(in thousands unless otherwise noted)
Non GAAP measures
Non GAAP measures are provided as a complement to results provided in accordance with United States generally accepted accounting principles (“GAAP”). Non GAAP measures are not a substitute for measures computed in accordance with GAAP. Definitions of such non GAAP measurements are provided below. These definitions are provided to allow the reader to reconcile non GAAP data to that presented in accordance with GAAP. Our non GAAP measures may be different from the presentation of financial information by other companies.
EBITDA, as defined, represents earnings before net interest expense, income taxes, depreciation, amortization and certain other non-cash charges including stock based compensation expense and minority interest. We believe EBITDA is an important non GAAP measure as it provides useful information regarding our ability to service, incur or pay down indebtedness. In addition, management uses such non GAAP measures internally to evaluate performance and manage operations. See below for reconciliation of most comparable GAAP measurements to EBITDA, which includes 100% EBITDA generated by Redbox.
                 
    Three Months Ended     Nine Months Ended  
in thousands   September 30, 2008     September 30, 2008  
Net income
   $ 4,511     $ 9,892  
Depreciation, amortization and other
     20,017       60,562  
Interest expense, net
     5,224       15,160  
Income taxes
     6,676       11,773  
Stock based compensation
     2,304       6,288  
Minority interest
     3,347       10,789  
 
            
EBITDA
   $ 42,079     $ 114,464  
 
            
Free cash flow, excluding Redbox: we believe free cash flow is an important non GAAP measure as it provides useful cash flow information regarding our ability to service, incur or pay down indebtedness and repurchase our common stock. We use free cash flow as a measure to reflect cash available to service our debt as well as to fund our expenditures. Free cash flow may be reconciled from net cash provided by operating activities, the most directly comparable GAAP measure. The table below reflects Coinstar’s free cash flow excluding any net cash flow from Redbox.
                 
    Three Months Ended     Nine Months Ended  
in thousands   September 30, 2008     September 30, 2008  
Net cash provided by operating activities
   $ 48,364     $ 110,126  
Changes in operating assets and liabilities
     (13,952 )     (8,385 )
Cash paid for capital expenditures, net
     (52,684 )     (123,579 )
Net free cash flow used by Redbox
     13,146       14,979  
 
            
FREE CASH FLOW, excluding Redbox
   $ (5,126 )   $ (6,859 )
 
            
Adjusted fully taxed, fully diluted earning per share: we believe that adjusted earnings per share is an important non GAAP measure as it provides useful information about our results from operations excluding certain non-cash and unique charges. We believe this measure provides an important comparison to prior period earnings and is representative of our operating results.

 

 

Coinstar, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
                                 
    Nine Month Periods     Three Month Periods  
    Ended September 30     Ended September 30  
    2008     2007     2008     2007  
REVENUE
   $ 650,919     $ 412,983     $ 240,497     $ 143,291  
 
                                
EXPENSES
                                
Direct operating
     453,340       270,930       168,721       86,721  
Marketing
     13,992       9,890       7,374       5,650  
Research and development
     3,578       4,083       1,157       1,397  
General and administrative
     65,762       41,336       22,760       15,685  
Depreciation and other
     53,572       44,117       17,746       15,100  
Amortization of intangible assets
     6,911       5,369       2,271       1,813  
Proxy, write-off of acquisition costs, and litigation settlement
     3,084       —       —       —  
 
                        
Income from operations
     50,680       37,258       20,468       16,925  
OTHER INCOME (EXPENSE):
                                
Interest income and other expense, net
     (1,662 )     2,056       (529 )     1,808  
Interest expense
     (16,226 )     (12,464 )     (5,404 )     (4,365 )
(Loss) Income from equity investments
     (338 )     861       (1 )     2,217  
Minority interest
     (10,789 )     —       (3,347 )     —  
 
                        
Income before income taxes
     21,665       27,711       11,187       16,585  
Income tax expense
     (11,773 )     (12,742 )     (6,676 )     (7,520 )
 
                        
NET INCOME
   $ 9,892     $ 14,969     $ 4,511     $ 9,065  
 
                        
 
                                
NET INCOME PER SHARE:
                                
Basic
   $ 0.35     $ 0.54     $ 0.16     $ 0.33  
Diluted
   $ 0.35     $ 0.53     $ 0.16     $ 0.32  
 
                                
WEIGHTED SHARES OUTSTANDING:
                                
Basic
     27,992       27,796       28,170       27,846  
Diluted
     28,507       28,336       28,685       28,405  

 

 

Coinstar, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
                 
    September 30,     December 31,  
    2008     2007  
ASSETS
                
CURRENT ASSETS:
                
Cash and cash equivalents
   $ 64,362     $ 18,497  
Cash in machine or in transit
     45,506       78,097  
Cash being processed
     72,883       99,998  
Trade accounts receivable, net of allowance for doubtful accounts of $1,831 and $1,489 at September 30, 2008 and December 31, 2007, respectively
     57,435       49,809  
Inventory
     82,169       33,360  
Deferred income taxes
     6,724       3,459  
Prepaid expenses and other current assets
     28,479       18,747  
 
            
Total current assets
     357,558       301,967  
PROPERTY AND EQUIPMENT, NET
     331,214       146,041  
DEFERRED INCOME TAXES
     790       16,447  
OTHER ASSETS
     10,195       15,150  
EQUITY INVESTMENTS
     —       33,052  
INTANGIBLE ASSETS, NET
     45,714       34,457  
GOODWILL
     289,185       221,459  
 
            
TOTAL ASSETS
   $ 1,034,656     $ 768,573  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
CURRENT LIABILITIES:
                
Accounts payable
   $ 120,322     $ 49,829  
Accrued payable to retailers and agents
     108,914       99,998  
Other accrued liabilities
     76,280       40,911  
Current portion of long-term debt and capital lease obligations
     30,011       6,505  
 
            
Total current liabilities
     335,527       197,243  
LONG-TERM DEBT, CAPITAL LEASE OBLIGATIONS AND OTHER
     337,103       266,146  
DEFERRED TAX LIABILITY
     57       54  
MINORITY INTEREST
     34,915       —  
 
            
TOTAL LIABILITIES
     707,602       463,443  
 
                
STOCKHOLDERS’ EQUITY:
                
Preferred stock, $0.001 par value—Authorized, 5,000,000 shares; no shares issued and outstanding at September 30, 2008 and December 31, 2007
     —       —  
Common stock, $0.001 par value—Authorized, 45,000,000 shares; 30,174,494 and 29,665,125 issued and 28,248,413 and 27,739,044 shares outstanding at September 30, 2008 and December 31, 2007, respectively
     369,280       354,509  
Accumulated deficit
     (6,892 )     (16,784 )
Treasury stock
     (40,831 )     (40,831 )
Accumulated other comprehensive income
     5,497       8,236  
 
            
Total stockholders’ equity
     327,054       305,130  
 
            
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 1,034,656     $ 768,573  
 
            

 

 

COINSTAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                 
    Nine Month Periods  
    Ended September 30  
    2008     2007  
OPERATING ACTIVITIES:
                
Net income
   $ 9,892     $ 14,969  
Adjustments to reconcile income from operations to net cash provided by operating activities:
                
Depreciation and other
     53,572       44,117  
Amortization of intangible assets and deferred financing fees
     7,297       5,931  
Write-off of acquisition costs
     1,004       —  
Non-cash stock-based compensation
     6,288       4,886  
Excess tax benefit from exercise of stock options
     (615 )     (3,921 )
Deferred income taxes
     9,231       10,737  
Loss (income) from equity investments
     3,449       (1,328 )
Minority interest
     10,789       —  
Other
     834       (388 )
Cash provided (used) by changes in operating assets and liabilities, net of effects of business acquisitions:
     8,385       (40,133 )
 
            
Net cash provided by operating activities
     110,126       34,870  
INVESTING ACTIVITIES:
                
Purchase of property and equipment
     (126,814 )     (64,374 )
Acquisitions, net of cash acquired
     (24,829 )     (81 )
Loan to equity investee
     —       (10,000 )
Proceeds from sale of fixed assets
     3,235       937  
 
            
Net cash used by investing activities
     (148,408 )     (73,518 )
FINANCING ACTIVITIES:
                
Principal payments on long-term debt, revolver loan, and capital lease obligations
     (299,759 )     (30,667 )
Additional borrowings on credit facility
     317,500       46,500  
Excess tax benefit from exercise of stock options
     615       3,921  
Repurchase of common stock
     —       (3,495 )
Proceeds from exercise of stock options
     8,547       3,936  
 
            
Net cash provided by financing activities
     26,903       20,195  
Effect of exchange rate changes on cash
     (2,462 )     1,435  
NET DECREASE IN CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED
     (13,841 )     (17,018 )
CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED:
                
Beginning of period
     196,592       178,164  
 
            
End of period
   $ 182,751     $ 161,146