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Coinstar Announces Record Third Quarter 2008 Results
Company Increases Revenue and EBITDA Expectations for 2008
BELLEVUE, Wash.--(BUSINESS WIRE)--Oct. 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(TM)
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 Nine Months
Ended Ended
September 30, September 30,
2008 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(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 Nine Months
Ended Ended
in thousands September 30, September 30,
2008 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 Nine Months
Ended Ended
in thousands September 30, September 30,
2008 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
========== =========
CONTACT: Coinstar, Inc.
Brian Turner, Chief Financial Officer
425-943-8000
or
Media Contact:
Marci Maule, Director Public Relations
425-943-8277
SOURCE: Coinstar, Inc.
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