Press release from PR Newswire
Coinstar, Inc. Announces 2011 First Quarter Results
Thursday, April 28, 2011
Coinstar, Inc. Announces 2011 First Quarter Results16:01 EDT Thursday, April 28, 2011Solid Execution Drives Top and Bottom Line Growth Company Announces National Rollout of Video Game RentalsBELLEVUE, Wash., April 28, 2011 /PRNewswire/ -- Coinstar, Inc. (NASDAQ: CSTR) today announced financial results for the first quarter ended March 31, 2011. "Strong growth in our redbox business and consistent performance in the Coin business delivered better-than-expected earnings in the first quarter," said Paul Davis, chief executive officer of Coinstar, Inc. "The quarter was marked by solid execution across our businesses and the enhancements to operations are showing progress. In addition, I'm very pleased to announce our decision to rollout video games at redbox kiosks nationwide, which we believe will expand our user base by tapping into the growing video game rental market."Redbox will offer video game rentals alongside movies at more than 21,000 locations beginning in June.First quarter financial highlights included:Revenue$ 424.1millionOperating income$ 31.4millionAdjusted EBITDA from continuing operations (See Appendix A)$ 69.1millionDiluted earnings per share from continuing operations $ 0.46Net cash flows from operating activities from continuing operations$ 60.0millionFree cash flow from continuing operations (See Appendix A)$ 21.5million"During the first quarter we made progress in driving improvements in our operations and in building scale by investing in infrastructure, while continuing to deliver profitable growth," said J. Scott Di Valerio, chief financial officer of Coinstar, Inc. "We're gaining traction as we've added more rigor to our processes and we will continue to monitor and refine as we progress through the year."Revenue for the first quarter of 2011 increased 31.2% to $424.1 million compared with the first quarter of 2010, driven primarily by growth in redbox (formerly DVD Services) revenue, which increased 37.7% to $362.3 million, and by Coin revenue which grew 2.4% to $61.4 million.Operating income for the first quarter of 2011 was $31.4 million, which resulted in an operating margin of 7.4%, compared with operating income of $24.5 million and an operating margin of 7.6% in the first quarter of 2010. The decrease in operating margin percentage primarily reflects increased DVD product costs due in part to higher than optimal purchases of DVD titles.Income from continuing operations for the first quarter of 2011 was $14.8 million, or diluted earnings per share from continuing operations of $0.46, compared with $9.2 million, or $0.30 per share, in the first quarter of 2010.Net income for the first quarter of 2011, which includes both continuing and discontinued operations, was $8.5 million, or diluted earnings per share of $0.26. This compares with $6.4 million, or diluted earnings per share of $0.21, in the first quarter of 2010. Net cash flows from operating activities from continuing operations was $60.0 million in the first quarter of 2011, compared with $59.5 million in the first quarter of 2010. Cash paid for capital expenditures for continuing operations for the first quarter of 2011 was $38.5 million, compared with $31.5 million in the first quarter of 2010, reflecting increased investment in kiosks, as well as investment in corporate infrastructure. Free cash flow from continuing operations for the first quarter of 2011 was $21.5 million, compared with $28.0 million in the first quarter of 2010.During the first quarter, Coinstar repurchased $13.3 million of common stock on the open market. In addition, the company announced a $50 million accelerated share repurchase (ASR) program, which is expected to close in the second quarter. As of the end of the first quarter, the company had a remaining total authorization to repurchase $11.5 million of Coinstar's common stock.GuidanceFor the 2011 full year, Coinstar management updated guidance and now expects:Consolidated revenue between $1.73 billion and $1.85 billion;Adjusted EBITDA from continuing operations between $335 million and $355 million;GAAP EPS from continuing operations between $2.75 and $3.10 on a fully diluted basis; andFree cash flow from continuing operations between $110 million and $135 million.For the 2011 second quarter, Coinstar management expects:Consolidated revenue between $430 million and $450 million;Adjusted EBITDA from continuing operations between $83 million and $93 million; andGAAP EPS from continuing operations between $0.76 and $0.86 on a fully diluted basis.Conference CallPaul Davis and J. Scott Di Valerio 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 and archived on the Investor Relations section of Coinstar's website at www.coinstarinc.com. A recording of the call will be available approximately two hours after the call ends through May 12, 2011, at 1-888-286-8010 or 1-617-801-6888, passcode 65266451.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 retailers. The company's core automated retail businesses include the well-known redbox® self-service DVD rental and Coinstar® self-service coin-counting brands. The company has approximately 31,800 DVD kiosks and 18,800 coin-counting kiosks in supermarkets, drug stores, mass merchants, financial institutions, convenience stores, and restaurants. For more information, visit www.coinstarinc.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 and suppliers, payment of increased fees to retailers and suppliers, 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 AUse of Non-GAAP Financial 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 and share-based expenses from continuing operations. We believe adjusted EBITDA from continuing operations is an important non-GAAP measure as it provides additional information to users of the financial statements 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 Months Ended March 31,Dollars in thousands20112010Income from continuing operations$14,842$9,239Depreciation, amortization, and other34,64432,680Interest expense, net7,3069,266Income taxes9,2616,006Share-based payments expense(1)3,0403,216Adjusted EBITDA from continuing operations$69,093$60,407(1) Share-based payments expense includes both non-cash share-based compensation expense as well as share-based payments related to DVD arrangementsFree cash flow from continuing operations is defined as net cash provided by operating activities from continuing operations after cash paid for capital expenditures for continuing operations. We believe free cash flow is an important non-GAAP measure as it provides additional information to users of the financial statements 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 flows from operating activities from continuing operations, to free cash flow from continuing operations.Three Months Ended March 31,Dollars in thousands20112010Net cash provided by operating activities from continuing operations$59,995$59,480Purchase of property and equipment(38,472)(31,517)Free cash flow from continuing operations$21,523$27,963Coinstar, Inc.Consolidated Statements of Net Income(in thousands, except per share data)(unaudited)For the Three Months Ended March 31,2011 2010 Revenue$424,072$323,122Expenses:Direct operating315,073224,959Marketing5,1172,630Research and development2,2071,424General and administrative35,66231,522Depreciation and other 33,95931,801Amortization of intangible assets685879Litigation settlement05,379Total expenses392,703298,594Operating Income31,36924,528Other income (expense):Foreign currency and other, net40(17)Interest income802Interest expense(7,386)(9,268)(7,266)(9,283)Income from continuing operations before income taxes24,10315,245Income tax expense(9,261)(6,006)Income from continuing operations14,8429,239Loss from discontinued operations, net of tax(6,346)(2,797)Net income$8,496$6,442Basic Earnings (Loss) Per Share:Continuing operations $0.47$0.30Discontinued operations(0.20)(0.09)Basic earnings per share $0.27$0.21Diluted Earnings (Loss) Per Share:Continuing operations $0.46$0.30Discontinued operations(0.20)(0.09)Diluted earnings per share $0.26$0.21Weighted average shares used in basic per share calculations31,06730,950Weighted average shares used in diluted per share calculations32,14231,217Coinstar, Inc.Consolidated Balance Sheets(in thousands, except share data)(unaudited)March 31,December 31,2011 2010 AssetsCurrent Assets:Cash and cash equivalents$ 23,024 $ 71,287 Cash in machine or in transit 48,867 39,603 Cash being processed 65,969 72,526 Accounts receivable, net of allowances of $1,048 and $1,131 21,100 25,958 DVD library 93,992 140,324 Deferred income taxes 16,278 13,644 Prepaid expenses and other current assets 13,998 14,736 Assets of businesses held for sale 96,481 110,316 Total current assets 379,709 488,394 Property and equipment, net 457,673 444,687 Deferred income taxes 49,494 59,696 Other assets 14,819 12,612 Intangible assets, net 8,888 9,572 Goodwill 267,750 267,750 Total assets$ 1,178,333 $ 1,282,711 Liabilities and Stockholders' EquityCurrent Liabilities:Accounts payable$ 124,228 $ 161,551 Accrued payable to retailers 90,692 96,764 Other accrued liabilities 106,331 108,422 Current callable convertible debt0 173,146 Current portion of long-term debt 6,930 7,523 Current portion of capital lease obligations 11,102 17,233 Liabilities of businesses held for sale 64,549 68,662 Total current liabilities 403,832 633,301 Long-term debt and other 343,759 167,261 Capital lease obligations 10,362 12,158 Deferred tax liability 16 15 Total liabilities 757,969 812,735 Commitments and contingencies 00Debt conversion feature0 26,854 Stockholders' Equity:Preferred stock, $0.001 par value - 5,000,000 shares authorized; no shares issued or outstanding00Common stock, $0.001 par value - 60,000,000 and 45,000,000 authorized;35,063,559 and 34,813,203 shares issued; 31,370,483 and31,815,085 shares outstanding 464,970 434,169 Treasury stock (153,425) (90,076)Retained earnings 110,475 101,979 Accumulated comprehensive loss (1,656) (2,950)Total stockholders' equity 420,364 443,122 Total liabilities and stockholders' equity$ 1,178,333 $ 1,282,711 Coinstar, Inc.Consolidated Statements of Cash Flows(in thousands)(unaudited)For the Three Months Ended March 31,2011 2010 Operating Activities:Net income$8,496$6,442Adjustments to reconcile net income to net cash flows from operating activities from continuing operations:Depreciation and other33,95931,801Amortization of intangible assets and deferred financing fees1,1931,387Share-based payment expense3,0403,216Excess tax benefits on share-based payments expense(2,128)(748)Deferred income taxes6,3563,148Loss from discontinued operations, net of tax6,3462,797Non-cash interest on convertible debt1,5831,459Other138197Cash flows from changes in operating assets and liabilities from continuing operations:1,0129,781Net cash flows from operating activities from continuing operations59,99559,480Investing Activities:Purchase of property and equipment(38,472)(31,517)Proceeds from sale of property and equipment17637Equity investment(2,320)0Net cash flows from investing activities from continuing operations(40,616)(31,480)Financing Activities:Principal payments on capital lease obligations and other debt(12,141)(8,675)Excess tax benefits related to share-based payments2,128748Repurchase of common stock(63,349)0Proceeds from exercise of stock options2602,227Net cash flows from financing activities from continuing operations(73,102)(5,700)Effect of exchange rate changes on cash667(497)Increase (decrease) in cash and cash equivalents, cash in machine or in transit, and cash being processed from continuing operations (53,056)21,803Cash flows from discontinued operations:Operating cash flows6,726(9,938)Investing cash flows7741,817Financing cash flows0(21)7,500(8,142)Increase (Decrease) in cash and cash equivalents, cash in machine or in transit, and cash being processed(45,556)13,661Cash and cash equivalents, cash in machine or in transit, and cash being processed:Beginning of period183,416145,857End of period$137,860$159,518Coinstar, Inc.Business Segment Information(in thousands)(unaudited)During the first quarter of 2011, we added a segment, New Ventures, to our existing segments redbox, formerly named DVD Services, and Coin, formerly named Coin Services, to reflect changes in how our chief executive officer manages our businesses and allocates resources for the future growth of the company.As a complement to our Consolidated Statements of Net Income, we are providing the following information related to our business segments, which includes segment operating income (loss), a non-GAAP financial measure. Management, including our chief executive officer, evaluates the performances of our business segments primarily on segment revenue and segment operating income from continuing operations before depreciation, amortization and other, and share-based payments ("segment operating income"). We utilize segment revenue and segment operating income because we believe they provide useful information for effectively allocating resources among business segments, evaluating the health of our business segments based on metrics that management can actively influence, and gauging our investments and our ability to service, incur or pay down debt.Three MonthsEnded March 31, Dollars in thousands20112010Revenue:redbox$ 362,344$263,078Coin61,36359,918New Ventures365126Consolidated revenue$ 424,072$323,122Segment operating income reconciled to GAAP operating incomeSegment operating income(loss): (1)redbox (2)$ 50,821$46,301Coin20,60915,020New Ventures(2,555)(1,488) Total segment operating income(loss)68,87559,833Depreciation, amortization and other:redbox27,09822,121Coin7,3717,059New Ventures1753,500Total depreciation, amortization and other34,64432,680Share-based compensation expense2,8622,625Operating income(loss):redbox23,72324,180Coin13,2387,961New Ventures(2,730)(4,988)Share-based compensation expense(2,862)(2,625)Total operating income$31,369$24,528(1) Operating income (loss) before depreciation, amortization and other, and share-based compensation expense(2) Share-based payments expense related to our DVD arrangements has been allocated to our redbox segmentSOURCE Coinstar, Inc.For further information: Media, Marci Maule, Director of Public Relations, +1-425-943-8277, firstname.lastname@example.org, or Financial Analysts and Investors, Rosemary Moothart, Director of Investor Relations, +1-425-943-8140, email@example.com, both of Coinstar, Inc.