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Coinstar Announces Second Quarter 2008 Results
Record Quarterly Revenues and EBITDA Despite Weak Retail Economy
BELLEVUE, Wash.--(BUSINESS WIRE)--July 31, 2008--Coinstar, Inc.
(NASDAQ: CSTR) today announced results for the three months ended June
30, 2008.
Despite weaknesses in the overall economy due to oil prices, the
credit crisis and the housing slowdown, Coinstar's 4th Wall bundle of
product and services continued to show resilience. Led by the DVD
product line which experienced 200% revenue growth from a year ago,
and Coin product line which had record installations during the
quarter, Coinstar saw consolidated revenue grow 60% from the prior
year period. This was combined with the continued integration in the
money transfer business, as well as double-digit growth in E-payment
revenue.
Highlights for the three months ended June 30, 2008, were as
follows:
Revenue $ 219.9 million
EBITDA $ 37.9 million (see Appendix A)
Free Cash Flow $ (3.1)million (see Appendix A)
Adjusted fully taxed, fully (see reconciliation
diluted earnings per share $ 0.23 below)
Net Income $ 2.7 million
Highlights for the six months ended June 30, 2008, were as
follows:
Revenue $ 410.4 million
EBITDA $ 72.4 million (see Appendix A)
Free Cash Flow $ (1.7)million (see Appendix A)
Adjusted fully taxed, fully (see reconciliation
diluted earnings per share $ 0.41 below)
Net Income $ 5.4 million
Included in GAAP net income for the second quarter of 2008 were
certain non-cash charges including $2.5 million in amortization of
intangible assets and deferred financing fees, and $1.9 million in
non-cash stock based compensation. Excluding these items, net of
taxes, Coinstar reported adjusted net income of $4.9 million.
Included in GAAP net income for the first half of 2008 were
certain non-cash charges including $4.9 million in amortization of
intangible assets and deferred financing fees, and $4.0 million in
non-cash stock based compensation. Excluding these items, net of
taxes, Coinstar reported adjusted net income of $9.9 million.
A reconciliation of GAAP earnings per share to adjusted earnings
per share for the three and six months ended June 30, 2008, is as
follows:
Three Months Ended Six Months Ended
June 30, 2008 June 30, 2008
-----------------------------------
GAAP fully taxed, fully diluted
earnings per share $ 0.09 $ 0.19
Amortization of intangibles,
net of tax 0.05 0.09
Stock based compensation
expense, net of tax 0.03 0.07
Proxy, litigation and
acquisition charges 0.06 0.06
------------------ ----------------
Adjusted fully taxed, fully
diluted earnings per share $ 0.23 $ 0.41
================== ================
Results for the three- and six-month periods also reflect certain
unique charges including the following: 1) proxy contest fees, net of
tax, of $2.1 million or $0.07 per diluted share; 2) litigation
settlement gain, net of tax, of $1.0 million or $0.03 per diluted
share; and 3) write-off of acquisition costs, net of tax, of $0.5
million or $0.02 per diluted share. A reconciliation of GAAP earnings
per share to adjusted earnings per share excluding these unique
charges for the three months ended June 30, 2008, is as follows:
Three Months
Ended
June 30, 2008
Three Months Proxy, litigation, excluding
Ended and unique
June 30, 2008 acquisition charges charges
------------- -------------------- --------------
Fully taxed, fully
diluted earnings
per share $ 0.09 $ 0.06 $0.15
Amortization of
intangibles,
net of tax 0.05 0.05
Stock based
compensation
expense, net of
tax 0.03 0.03
------------- -------------------- --------------
Adjusted fully
taxed, fully
diluted earnings
per share $ 0.17 $ 0.06 0.23
============= ==================== ==============
Results for the six-month period reflect the acquisition of
GroupEx and the consolidation of Redbox Automated Retail, LLC
("Redbox") into the Company's results. Effective January 1, 2008, the
Company completed the previously disclosed acquisition of GroupEx
Financial Corporation, JRJ Express, Inc., and Kimeco, LLC
(collectively, "GroupEx"), for an aggregate purchase price of up to
$70.0 million. On January 18, 2008, the Company increased its
ownership interest in Redbox from 47.3% to 51.0%. Accordingly, the
results were consolidated into the Company's financial statements with
an offset recorded in minority interests for the 49% that Coinstar
does not own. The consolidation of Redbox resulted in a material
increase to revenue and EBITDA for the first six months and three
months of fiscal 2008 of $144.7 million and $29.8 million, $86.9
million and $18.3 million, respectively.
At June 30, 2008, Coinstar had federal and state cumulative net
operating loss carryforwards of approximately $22.2 million and $22.8
million, respectively. In addition, there were foreign net operating
loss carryforwards of approximately $22.3 million.
"We're pleased with our first half results, particularly in light
of the macro-economic environment. Consolidated revenues continue to
be in line with expectations, but cost increases, particularly
gasoline, continue to adversely affect our cost structure," Dave Cole,
Chief Executive Officer of Coinstar, Inc. stated. "That said, our
portfolio of businesses are generally performing well, and managing an
optimal product-mix for our retailers is more important than ever as
they look for ways to monetize their under-utilized square footage and
create additional foot traffic. We believe we remain ideally
positioned to navigate the current environment and have no reason to
modify our longer term outlook that includes a $1 billion in revenue
run-rate beginning in mid-2009."
Other Information
Installed Base June 30, 2008 June 30, 2007
-------------- -------------
Coin 16,500 14,200
Coin to card, e-payment
or e-certificate
enabled 10,900 8,900
Crane 22,000 29,500
Bulk heads and other 138,000 267,000
POSA terminals 18,900 14,500
Redbox and DVDXpress kiosks 9,600 4,300
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.
Share Repurchase
During the second quarter, Coinstar did not repurchase shares of
common stock. For the remainder of 2008, Coinstar expects to
repurchase shares of its stock subject to market and other conditions.
Expectations
Management estimates that revenue for the third quarter ending
September 30, 2008, will range from $240 million to $250 million. In
addition, management estimates that for the third quarter GAAP
earnings per fully taxed, fully diluted share will range from $0.11 to
$0.17 with adjusted earnings per fully taxed, fully diluted share
ranging from $0.18 to $0.25.
Conference Call
A conference call to discuss second quarter 2008 results will be
broadcast live over the Internet today, Thursday, July 31, 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(TM) 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 Six Months
Ended Ended
in thousands June 30, 2008 June 30, 2008
---------------------------------
Net income $ 2,680 $ 5,381
Depreciation, amortization and other 21,232 40,545
Interest expense, net 5,280 9,936
Income taxes 2,585 5,097
Stock based compensation 1,870 3,984
Minority interest 4,269 7,442
---------------- ----------------
EBITDA $ 37,916 $ 72,385
================ ================
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 Six Months
Ended Ended
in thousands June 30, June 30,
2008 2008
------------- ------------
Net cash provided by operating activities $ 39,246 $ 61,762
Changes in operating assets and liabilities (2,197) 5,567
Cash paid for capital expenditures, net (39,781) (70,895)
Net free cash flow used by Redbox (413) 1,833
------------- ------------
FREE CASH FLOW, excluding Redbox $ (3,145) $ (1,733)
============= ============
Adjusted fully taxed, fully diluted earning per share: we believe
the 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)
Six Month Periods Three Month Periods
Ended June 30 Ended June 30
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
REVENUE $410,422 $269,692 $219,903 $137,356
EXPENSES
Direct operating 284,619 184,209 152,009 92,570
Marketing 6,618 4,240 3,815 2,614
Research and development 2,421 2,686 1,175 1,345
General and administrative 43,002 25,651 23,206 13,404
Depreciation and other 35,826 29,017 18,855 14,549
Amortization of intangible
assets 4,640 3,556 2,298 1,817
Proxy, write-off of
acquisition costs, and
litigation settlement 3,084 - 3,084 -
--------- --------- --------- ---------
Income from operations 30,212 20,333 15,461 11,057
OTHER INCOME (EXPENSE):
Interest income and other
expense, net (1,133) 248 (264) 173
Interest expense (10,822) (8,099) (5,906) (4,125)
(Loss) income from equity
investments (337) (1,356) 243 (1,101)
Minority interest (7,442) - (4,269) -
--------- --------- --------- ---------
Income before income taxes 10,478 11,126 5,265 6,004
Income tax expense (5,097) (5,222) (2,585) (2,656)
--------- --------- --------- ---------
NET INCOME $ 5,381 $ 5,904 $ 2,680 $ 3,348
========= ========= ========= =========
NET INCOME PER SHARE:
Basic $ 0.19 $ 0.21 $ 0.10 $ 0.12
Diluted $ 0.19 $ 0.21 $ 0.09 $ 0.12
WEIGHTED SHARES OUTSTANDING:
Basic 27,903 27,772 28,022 27,766
Diluted 28,418 28,301 28,600 28,314
Coinstar, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, December 31,
2008 2007
----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 55,985 $ 18,497
Cash in machine or in transit 35,394 78,097
Cash being processed 130,931 99,998
Trade accounts receivable, net of allowance
for doubtful accounts of $1,827 and $1,489
at June 30, 2008 and December 31, 2007,
respectively 72,791 49,809
Inventory 76,010 33,360
Deferred income taxes 3,286 3,459
Prepaid expenses and other current assets 32,938 18,747
----------- ------------
Total current assets 407,335 301,967
PROPERTY AND EQUIPMENT, NET 292,667 146,041
DEFERRED INCOME TAXES 9,125 16,447
OTHER ASSETS 8,920 15,150
EQUITY INVESTMENTS - 33,052
INTANGIBLE ASSETS, NET 48,286 34,457
GOODWILL 291,678 221,459
----------- ------------
TOTAL ASSETS $1,058,011 $ 768,573
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 103,292 $ 49,829
Accrued payable to retailers and agents 130,931 99,998
Other accrued liabilities 71,782 40,911
Current portion of long-term debt and
capital lease obligations 37,602 6,505
----------- ------------
Total current liabilities 343,607 197,243
LONG-TERM DEBT, CAPITAL LEASE OBLIGATIONS AND
OTHER 353,005 266,146
DEFERRED TAX LIABILITY 62 54
MINORITY INTEREST 32,477 -
----------- ------------
TOTAL LIABILITIES 729,151 463,443
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value--
Authorized, 5,000,000 shares; no shares
issued and outstanding at June 30, 2008 and
December 31, 2007 - -
Common stock, $0.001 par value--Authorized,
45,000,000 shares; 30,159,221 and
29,665,125 issued and 28,233,140 and
27,739,044 shares outstanding at June 30,
2008 and December 31, 2007, respectively 367,158 354,509
Accumulated deficit (11,403) (16,784)
Treasury stock (40,831) (40,831)
Accumulated other comprehensive income 13,936 8,236
----------- ------------
Total stockholders' equity 328,860 305,130
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,058,011 $ 768,573
=========== ============
COINSTAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Month Periods
Ended June 30
--------------------
2008 2007
---------- ---------
OPERATING ACTIVITIES:
Net income $ 5,381 $ 5,904
Adjustments to reconcile income from operations
to net cash provided by operating activities:
Depreciation and other 35,826 29,017
Amortization of intangible assets and deferred
financing fees 4,923 3,931
Write-off of acquisition fees 1,004 -
Non-cash stock-based compensation 3,984 3,279
Excess tax benefit from exercise of stock
options (531) (1,754)
Deferred income taxes 5,276 4,032
Loss from equity investments 3,449 750
Minority interest 7,442 -
Other 575 (110)
Cash provided (used) by changes in operating
assets and liabilities, net of effects of
business acquisitions:
Accounts receivable 5,418 (117)
Inventory (16,308) 1,726
Prepaid expenses and other current assets (4,031) (2,467)
Other assets (311) (2,108)
Accounts payable 24,494 (7,283)
Accrued liabilities payable to retailers 2,192 (6,014)
Accrued liabilities (17,021) (1,291)
---------- ---------
Net cash provided by operating activities 61,762 27,495
INVESTING ACTIVITIES:
Purchase of property and equipment (72,793) (42,449)
Acquisitions, net of cash acquired (24,834) (81)
Loan to equity investee - (10,000)
Proceeds from sale of fixed assets 1,898 399
---------- ---------
Net cash used by investing activities (95,729) (52,131)
FINANCING ACTIVITIES:
Principal payments on long-term debt, revolver
loan, and capital lease obligations (205,448) (4,744)
Additional borrowings on credit facility 254,500 7,000
Excess tax benefit from exercise of stock
options 531 1,754
Repurchase of common stock - (3,495)
Proceeds from exercise of stock options 8,149 2,743
---------- ---------
Net cash provided by financing activities 57,732 3,258
Effect of exchange rate changes on cash 1,953 729
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND
CASH BEING PROCESSED 25,718 (20,649)
CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN
TRANSIT, AND CASH BEING PROCESSED:
Beginning of period 196,592 178,164
---------- ---------
End of period $ 222,310 $157,515
========== =========
CONTACT: Coinstar, Inc.
Brian Turner, 425-943-8000
Chief Financial Officer
or
Media Contact:
Marci Maule, 425-943-8277
Director Public Relations
SOURCE: Coinstar, Inc.
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