Press release from PR Newswire
Coinstar, Inc. Announces 2010 First Quarter Results
Thursday, April 29, 2010
Coinstar, Inc. Announces 2010 First Quarter Results16:01 EDT Thursday, April 29, 2010Strong Revenue Growth Drives EarningsBELLEVUE, Wash., April 29 /PRNewswire-FirstCall/ -- Coinstar, Inc. (Nasdaq: CSTR) today announced financial results for the first quarter ended March 31, 2010. �"We are very pleased with our outstanding first quarter results that underscore the strength in our DVD and Coin businesses," said Paul Davis, chief executive officer of Coinstar, Inc. "We have made significant progress in strengthening and enhancing our relationships with retailers and suppliers, and extending our value proposition to existing and new consumers. Our achievements give us confidence that we have the right strategy in place to lead in automated retail."Financial highlights for the quarter ended March 31, 2010, included:Revenue$ � �350.1millionAdjusted EBITDA from continuing operations (See Appendix A)$ � � �58.6millionIncome from operations � � $ � � �20.5millionIncome from continuing operations$ � � � �6.4millionNet income attributable to Coinstar, Inc.$ � � � �6.4millionDiluted earnings per share attributable to Coinstar, Inc. $ � � �0.21Net cash provided by operating activities from continuing operations$ � � �65.7millionFree cash flow from continuing operations (See Appendix A) $ � � �33.3million"Solid execution in our core businesses drove our strong financial results across the board," said J. Scott Di Valerio, chief financial officer of Coinstar, Inc. "We invested in the business to support our growth initiatives and at the same time generated $33 million in free cash flow, a substantial increase over last year. The traction we gained in the first quarter indicates we are well-positioned for continued success in our DVD business, renewed growth in Coin and increased profitability."Revenue for the first quarter of 2010 was $350.1 million, an increase of 46.6% compared with revenue of $238.8 million in the first quarter of 2009. The increase is primarily due to the growth in DVD revenue, which was $263.2 million in the first quarter of 2010, an increase of 70.1% compared with $154.7 million in the first quarter of 2009. �Income from operations for the first quarter of 2010 was $20.5 million, which resulted in an operating margin of 5.9%, including pre-tax charges totaling approximately $7.9 million primarily from the accelerated depreciation on the company's first generation coffee and DVDXpress branded DVD kiosks that the company has determined will be taken out of service and not redeployed, as well as a pre-tax charge of approximately $5.4 million related to the settlement of Coinstar's litigation with ScanCoin. This is compared with income from operations of $16.8 million and an operating margin of 7.0% in the first quarter of 2009. The decrease in operating margin was partially offset by results for the DVD business segment which experienced an increase in segment operating profit of over 100% to $44.8 million in the first quarter of 2010 and an operating margin of 17.0%, compared with 13.4% in the first quarter of 2009. The improvement in operating margin reflects the ongoing improvement in leverage we are seeing as we scale the business and expand our footprint. Net income attributable to Coinstar, Inc. for the first quarter of 2010 was $6.4 million, or $0.21 per diluted share, including a loss of ($0.15) per share primarily from the accelerated depreciation on the company's first generation coffee and DVDXpress branded DVD kiosks that the company has determined will be taken out of service and not redeployed, as well as a loss of ($0.10) per share related to the settlement of Coinstar's litigation with ScanCoin. This is compared with $2.0 million, or $0.07 per diluted share which included a loss of approximately ($0.06) per diluted share related to discontinued operations in the first quarter of 2009 and ($0.12) associated with the company's non-controlling interest in Redbox. Other InformationCash paid for capital expenditures for the first quarter of 2010 was $32.3 million, compared with $36.0 million in the first quarter of 2009, with the decrease primarily due to the timing of purchases and installations related to our ongoing investment in DVD kiosks during the first quarter of 2010. 2010 Full Year and Second Quarter Guidance Coinstar management updated guidance for the full year 2010 from what was previously provided on February 23, 2010.For 2010, management expects revenue in the range of $1.530 billion to $1.630 billion, EBITDA in the range of $275 million to $290 million and GAAP EPS attributable to Coinstar, Inc. in the range of $1.82 to $1.94 on a fully diluted basis. For the second quarter of 2010, management expects revenue in the range of $370.0 million to $390.0 million, EBITDA in the range of $58.0 million to $63.0 million and GAAP EPS attributable to Coinstar, Inc. in the range of $0.30 to $0.34 on a fully diluted basis.Guidance for 2010 and for the second quarter of 2010 includes the impact on revenue and costs related to the impact of the company's agreements with studios, as well as the number and timing of planned kiosk installations. �Conference CallPaul Davis, Coinstar's chief executive officer, and J. Scott Di Valerio, Coinstar's chief financial officer, will host a conference call today at 2:00 p.m. PDT (5:00 p.m. EDT) to review the first quarter results and discuss guidance. The conference call will be webcast live on the Investor Relations section of Coinstar's website at www.coinstar.com, where it will be archived. A recording of the call will be available approximately two hours after the call ends through May 13, 2010, at 1-888-286-8010 or 1-617-801-6888, passcode 64421253. �About Coinstar, Inc.Coinstar, Inc. (NASDAQ: CSTR) is a leading provider of automated retail solutions offering convenient services that make life easier for consumers and drive incremental traffic and revenue for its retailers. The company's core automated retail businesses are self-service coin counting and self-service DVD rental. Other Coinstar services include e-payment and money transfer services. The company's services can be found at more than 95,000 points of presence including supermarkets, drug stores, mass merchants, financial institutions, convenience stores, restaurants, and money transfer agents. For more information, visit www.coinstar.com.Safe Harbor for Forward-Looking StatementsCertain 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 inability to receive delivery of DVDs on the date of their initial release to the general public, or shortly thereafter, for home entertainment viewing, the effective management of our DVD inventory, the ability to attract new retailers, penetrate new markets and distribution channels 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.(Financial Statements Follow)Appendix A(in thousands) Non-GAAP MeasuresNon-GAAP measures may be 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. The definitions of such non-GAAP measures are provided below 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.Adjusted EBITDA from continuing operations is defined as earnings before net interest expense, income taxes, depreciation, amortization and certain other non-cash charges including the write-off from early retirement of debt, goodwill impairment, and stock-based compensation and share-based expenses from continuing operations. We believe adjusted EBITDA from continuing operations is an important non-GAAP measure as it provides useful information to investors regarding our ability to service, incur or pay down indebtedness. In addition, management uses this non-GAAP measure internally to evaluate performance and manage operations. See below for reconciliation of the most comparable GAAP measure, income from continuing operations, to adjusted EBITDA from continuing operations. Three-Month Periods Ended March 31,20102009 Income from continuing operations $ � 6,442$ � 7,309 Depreciation, amortization and other 35,37422,539 Interest expense, net 9,2536,402 Income taxes 4,2262,960 Stock-based compensation and share-based expense 3,3022,795 Adjusted EBITDA from continuing operations $ 58,597$ 42,005Free cash flow from continuing operations is defined as net cash provided by operating activities after cash paid for capital expenditures for continuing operations. 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. See below for reconciliation of the most comparable GAAP measure, net cash provided by operating activities from continuing operations, to free cash flow from continuing operations. Three-Month Periods Ended March 31,20102009 Net cash provided (used) by operating activities from continuing operations $ 65,692$ (14,684) Purchase of property and equipment (32,351)(35,980) Free cash flow from continuing operations $ 33,341$ (50,664)Coinstar, Inc.Consolidated Statements of Net Income(in thousands, except per share data)(unaudited)Three-Month Periods Ended March 31, 2010 2009 REVENUE$ 350,061$ 238,768EXPENSES:Direct operating244,930161,463Marketing4,1875,101Research and development1,4241,257General and administrative38,28930,313Depreciation and other33,48120,588Amortization of intangible assets1,8931,951Litigation settlement and write-off of acquisition costs5,3791,262Income from operations20,47816,833OTHER INCOME (EXPENSE):Foreign currency loss and other, net(557)(162)Interest income17108Interest expense(9,270)(6,510)Income from continuing operations before income taxes10,66810,269Income tax expense(4,226)(2,960)Income from continuing operations6,4427,309Loss from discontinued operations, net of tax-(1,719)Net income6,4425,590Less: Net income attributable to non-controlling interests-(3,627)NET INCOME ATTRIBUTABLE TO COINSTAR, INC.$ � � 6,442$ � � 1,963BASIC EARNINGS PER SHARE:Basic earnings per share from continuing operations attributable to Coinstar, Inc.$ � � � 0.21$ � � � 0.13Basic loss per share from discontinued operations attributable to Coinstar, Inc.-(0.06)Basic earnings per share attributable to Coinstar, Inc.$ � � � 0.21$ � � � 0.07DILUTED EARNINGS PER SHARE:Diluted earnings per share from continuing operations attributable to Coinstar, Inc.$ � � � 0.21$ � � � 0.13Diluted loss per share from discontinued operations attributable to Coinstar, Inc.-(0.06)Diluted earnings per share attributable to Coinstar, Inc.$ � � � 0.21$ � � � 0.07WEIGHTED SHARES OUTSTANDING:Basic30,95028,933Diluted31,21729,212Coinstar, Inc.Consolidated Balance Sheets(in thousands, except share data)(unaudited)March 31,December 31,20102009ASSETSCURRENT ASSETS:Cash and cash equivalents$ � �100,333$ � � � � �61,280Cash in machine or in transit50,62557,141Cash being processed67,70073,875Accounts receivable, net of allowance for doubtful accounts of $4,283 and $4,379 at � March 31, 2010 and December 31, 2009, respectively64,89361,371DVD library and inventory93,478104,367Deferred income taxes13,18612,350Prepaid expenses and other current assets23,72620,364Total current assets413,941390,748PROPERTY AND EQUIPMENT, NET405,262400,289DEFERRED INCOME TAXES95,21799,195OTHER ASSETS17,96617,172INTANGIBLE ASSETS, NET26,62830,893GOODWILL282,788284,502TOTAL ASSETS$ 1,241,802$ � � 1,222,799LIABILITIES AND EQUITYCURRENT LIABILITIES:Accounts payable$ � �133,752$ � � � �118,918Accrued payable to retailers and agents137,814131,103Other accrued liabilities87,59191,413Current portion of long-term debt7,0146,812Current portion of capital lease obligations25,25326,396Total current liabilities391,424374,642LONG-TERM DEBT AND OTHER409,305409,423CAPITAL LEASE OBLIGATIONS21,26126,326DEFERRED TAX LIABILITY1717TOTAL LIABILITIES822,007810,408EQUITY:Preferred stock, $0.001 par value?Authorized, 5,000,000 shares; no shares issued � and outstanding at March 31, 2010 and December 31, 2009--Common stock, $0.001 par value?Authorized, 45,000,000 shares; 33,435,772 and � 33,002,865 issued and 31,509,691 and 31,076,784 shares outstanding at March 31, � 2010 and December 31, 2009, respectively411,654406,333Retained earnings57,41350,971Treasury stock(40,831)(40,831)Accumulated other comprehensive loss(8,441)(4,082)Total stockholders? equity419,795412,391TOTAL LIABILITIES AND EQUITY$ 1,241,802$ � � 1,222,799Coinstar, Inc.Consolidated Statements of Cash Flows(in thousands)(unaudited)Three-Month PeriodsEnded March 31, 2010 2009 OPERATING ACTIVITIES:Net income$ � � 6,442$ � � 5,590Adjustments to reconcile net income to net cash provided (used) by operating � activities from continuing operations:Depreciation and other33,48120,588Amortization of intangible assets and deferred financing fees2,4011,951Write-off of acquisition costs-1,428Non-cash stock-based compensation for employees2,7102,795Share-based payments for DVD agreement592-Excess tax benefit on share-based awards(748)(33)Deferred income taxes4,0431,742Loss from discontinued operations, net of tax-1,719Non-cash interest on convertible debt1,459-Other108235Cash provided (used) by changes in operating assets and liabilities �from continuing � operations:15,204(50,699)Net cash provided �(used) by operating activities from continuing operations65,692(14,684)INVESTING ACTIVITIES:Purchase of property and equipment(32,351)(35,980)Proceeds from sale of fixed assets3893Net cash used by investing activities from continuing operations(32,313)(35,887)FINANCING ACTIVITIES:Principal payments on capital lease obligations and other debt(8,696)(5,838)Net borrowings on credit facility-55,000Financing costs associated with revolving line of credit and convertible debt-(1,905)Cash used to purchase remaining non-controlling interests in Redbox-(10,083)Excess tax benefit on share-based awards74833Proceeds from exercise of stock options2,227418Net cash (used) provided by financing activities from continuing operations(5,721)37,625Effect of exchange rate changes on cash(1,296)(1,041)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR � �IN TRANSIT, AND CASH BEING PROCESSED FROM CONTINUING OPERATIONS26,362(13,987)CASH FLOWS FROM DISCONTINUED OPERATIONS:Operating cash flows-2,914Investing cash flows-(1,223)Financing cash flows-(933)-758NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR � IN TRANSIT, AND CASH BEING PROCESSED26,362(13,229)CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN � TRANSIT, AND CASH BEING PROCESSED:Beginning of period192,296192,035End of period$ 218,658$ 178,806Coinstar, Inc.Segment Revenue and Operating Income (Loss) BeforeDepreciation, Amortization and Stock-Based Compensation/Shared-Based Payments(in thousands)(unaudited)Segment Reporting: As a complement to our Consolidated Statements of Net Income, we are providing the following information related to our business segments:Three-Month PeriodsEnded March 31, 2010 2009 (in thousands)Revenue:DVD services$ 263,130$ 154,697Coin services59,93557,987Money transfer services21,42519,931E-payment services5,5716,153Consolidated revenue$ 350,061$ 238,768Three-Month PeriodsEnded March 31, 2010 2009 (in thousands)Operating income before depreciation/amortization and stock-based compensation/share-based payments:DVD services$ 44,834$ 20,830Coin services14,33421,995Money transfer services(1,665)(2,261)E-payment services1,6511,603 � � � � Subtotal59,15442,167Depreciation, amortization and other(35,374)(22,539)Stock-based compensation and share-based payments(3,302)(2,795)Consolidated income from operations$ 20,478$ 16,833SOURCE Coinstar, Inc.For further information: Media, Marci Maule, Director of Public Relations, +1-425-943-8277, firstname.lastname@example.org, or Investors, Rosemary Moothart, Director of Investor Relations, +1-425-943-8140, email@example.com, both of Coinstar, Inc.