Coinstar.com Redbox.com ecoATM.com gazelle.com

Follow  us:

share on Facebook share on Twitter share on LinkedIn

Press Releases 

Coinstar, Inc. Announces 2011 First Quarter Results

Solid Execution Drives Top and Bottom Line Growth

Company Announces National Rollout of Video Game Rentals

BELLEVUE, 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

$  424.1

million

Operating income

$  31.4

million

Adjusted EBITDA from continuing operations (See Appendix A)

$  69.1

million

Diluted earnings per share from continuing operations

$  0.46


Net cash flows from operating activities from continuing operations

$  60.0

million

Free cash flow from continuing operations (See Appendix A)

$  21.5

million



"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.

Guidance

For 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; and
  • Free 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; and
  • GAAP EPS from continuing operations between $0.76 and $0.86 on a fully diluted basis.

Conference Call

Paul 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 Statements

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 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 A

Use of Non-GAAP Financial Measures

Non-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 thousands


2011


2010

Income from continuing operations

$

14,842

$

9,239


Depreciation, amortization, and other


34,644


32,680


Interest expense, net


7,306


9,266


Income taxes


9,261


6,006


Share-based payments expense(1)


3,040


3,216



Adjusted 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 arrangements



Free 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 thousands


2011


2010

Net cash provided by operating activities from continuing operations

$

59,995

$

59,480

Purchase of property and equipment


(38,472)


(31,517)


Free cash flow from continuing operations

$

21,523

$

27,963



Coinstar, 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

$

323,122








Expenses:







Direct operating



315,073


224,959


Marketing



5,117


2,630


Research and development



2,207


1,424


General and administrative



35,662


31,522


Depreciation and other



33,959


31,801


Amortization of intangible assets



685


879


Litigation settlement



0


5,379

Total expenses



392,703


298,594








Operating Income



31,369


24,528








Other income (expense):







Foreign currency and other, net



40


(17)


Interest income



80


2


Interest expense



(7,386)


(9,268)





(7,266)


(9,283)









Income from continuing operations before income taxes



24,103


15,245

Income tax expense



(9,261)


(6,006)

Income from continuing operations



14,842


9,239

Loss from discontinued operations, net of tax



(6,346)


(2,797)

Net income


$

8,496

$

6,442








Basic Earnings (Loss) Per Share:







Continuing operations


$

0.47

$

0.30


Discontinued operations



(0.20)


(0.09)

Basic earnings per share


$

0.27

$

0.21








Diluted Earnings (Loss) Per Share:







Continuing operations


$

0.46

$

0.30


Discontinued operations



(0.20)


(0.09)

Diluted earnings per share


$

0.26

$

0.21







Weighted average shares used in basic per share calculations



31,067


30,950

Weighted average shares used in diluted per share calculations



32,142


31,217



Coinstar, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

(unaudited)






March 31,


December 31,





2011 


2010 








Assets





Current 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' Equity





Current 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 debt


0


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


0


0

Debt conversion feature


0


26,854 








Stockholders' Equity:






Preferred stock, $0.001 par value - 5,000,000 shares authorized; no







shares issued or outstanding


0


0


Common 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 and







31,815,085 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

$

6,442


Adjustments to reconcile net income to net cash flows from operating activities from continuing operations:





Depreciation and other


33,959


31,801

Amortization of intangible assets and deferred financing fees


1,193


1,387

Share-based payment expense


3,040


3,216

Excess tax benefits on share-based payments expense


(2,128)


(748)

Deferred income taxes


6,356


3,148

Loss from discontinued operations, net of tax


6,346


2,797

Non-cash interest on convertible debt


1,583


1,459

Other


138


197


Cash flows from changes in operating assets and liabilities from continuing operations:


1,012


9,781

Net cash flows from operating activities from continuing operations


59,995


59,480











Investing Activities:






Purchase of property and equipment


(38,472)


(31,517)


Proceeds from sale of property and equipment


176


37


Equity investment


(2,320)


0

Net 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 payments


2,128


748


Repurchase of common stock


(63,349)


0


Proceeds from exercise of stock options


260


2,227

Net cash flows from financing activities from continuing operations


(73,102)


(5,700)











Effect of exchange rate changes on cash


667


(497)

Increase (decrease) in cash and cash equivalents, cash in machine or in

  transit, and cash being processed from continuing operations


(53,056)


21,803











Cash flows from discontinued operations:





Operating cash flows


6,726


(9,938)

Investing cash flows


774


1,817

Financing cash flows


0


(21)








7,500


(8,142)

Increase (Decrease) in cash and cash equivalents, cash in machine or in

  transit, and cash being processed


(45,556)


13,661

Cash and cash equivalents, cash in machine or in transit, and cash being processed:






Beginning of period


183,416


145,857


End of period

$

137,860

$

159,518













Coinstar, 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 Months



Ended March 31,

 Dollars in thousands


2011


2010

Revenue:





redbox

$

362,344

$

263,078

Coin


61,363


59,918

New Ventures


365


126

Consolidated revenue

$

424,072

$

323,122









Segment operating income reconciled to GAAP operating income





Segment operating income(loss): (1)





redbox (2)

$

50,821

$

46,301

Coin


20,609


15,020

New Ventures


(2,555)


(1,488)

        Total segment operating income(loss)


68,875


59,833






Depreciation, amortization and other:





redbox


27,098


22,121

Coin


7,371


7,059

New Ventures


175


3,500

Total depreciation, amortization and other


34,644


32,680






Share-based compensation expense


2,862


2,625






Operating income(loss):





redbox


23,723


24,180

Coin


13,238


7,961

New 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 segment



SOURCE Coinstar, Inc.