Published: July 29, 2010
Coinstar, Inc. Announces 2010 Second Quarter Results
BELLEVUE, Wash., July 29, 2010 /PRNewswire-FirstCall/ -- Coinstar, Inc. (Nasdaq: CSTR) today announced financial results for the second quarter and six months ended June 30, 2010, which reflect its E-payment and Money Transfer businesses as discontinued operations.
"We are very pleased with our second quarter results and the performance of our core businesses," said Paul Davis, chief executive officer of Coinstar, Inc. "We continue to have great momentum in our DVD business as demonstrated by our increasing market share and expanding relationships with key partners. Our Coin business is showing impressive growth in same store sales, and our outlook for the remainder of 2010 is positive as we continue to execute on our automated retail strategy."
Second quarter financial highlights included:
--Revenue $ 342.4 million
--Income from operations $ 29.3 million
--Adjusted EBITDA from continuing operations
(See Appendix A) $ 65.5 million
--Diluted earnings per share from continuing
operations $ 0.39
--Diluted earnings per share attributable to
Coinstar, Inc. $ 0.41
--Net cash provided by operating activities from
continuing operations $ 104.7 million
--Free cash flow from continuing operations
(See Appendix A) $ 51.8 million
"With the sale of our E-payment business and the decision to dispose of Money Transfer, we are better positioned to build on the solid operating performance of our DVD and Coin businesses and have raised our guidance for 2010," said J. Scott Di Valerio, chief financial officer of Coinstar, Inc. "We will continue to focus on consumers and partners while making investments to drive profitable growth."
Revenue for the second quarter of 2010 increased 34.9% to $342.4 million compared with the second quarter of 2009, driven primarily by growth in DVD revenue, which increased 43.9% to $271.9 million, and by Coin revenue which grew 8.5% to $70.4 million.
Income from operations for the second quarter of 2010 was $29.3 million, which resulted in an operating margin of 8.6%, including a pre-tax charge of approximately $2.0 million in accelerated depreciation related to the company's decision to exit the DVDXpress-branded business and $2.2 million in share-based payments expense related to the company's agreements with Sony Pictures Home Entertainment and Paramount Home Entertainment Inc. This compares with income from operations of $25.8 million and an operating margin of 10.2% in the second quarter of 2009.
Income from continuing operations for the second quarter of 2010 was $12.8 million, or diluted earnings per share of $0.39, including the accelerated depreciation and share-based payments expense reflected in income from operations as well as 2.4 million additional shares outstanding, compared with $10.5 million, or $0.35, in the second quarter of 2009.
In the second quarter, Coinstar completed the sale of its E-payment business and committed to a formal plan to sell its Money Transfer business and, as a result, the second quarter and all prior periods have been adjusted to reflect these businesses as discontinued operations. Coinstar recorded income from discontinued operations of $0.5 million, or earnings per diluted share of $0.02, in the second quarter, which included a gain, net of tax, on the sale of the E-payment business and an anticipated loss, net of tax, upon disposal of the Money Transfer business.
Net income attributable to Coinstar, Inc. for the second quarter of 2010, which includes both continuing and discontinued operations, was $13.4 million, or diluted earnings per share of $0.41, compared with $7.0 million, or diluted earnings per share of $0.23, in the second quarter of 2009.
Revenue for the first six months of 2010 was $665.5 million, an increase of 42.6% compared with the first six months of 2009. Income from operations for the first six months of 2010 was $53.9 million, which resulted in an operating margin of 8.1%, compared with income from operations of $46.3 million and an operating margin of 9.9% in the first six months of 2009. Net income attributable to Coinstar, Inc. for the first six months of 2010 was $19.8 million, or $0.62 per diluted share compared with net income of $8.9 million, or $0.30 per share, in the first six months of 2009, which included a loss of $3.6 million attributable to non-controlling interests.
Cash paid for capital expenditures for continuing operations for the second quarter of 2010 was $52.8 million, compared with $38.3 million in the second quarter of 2009, with the increase primarily due to increased investment in redbox® DVD kiosks as well as investment in infrastructure. Free cash flow from continuing operations for the second quarter of 2010 was $51.8 million, compared with negative $5.3 million in the second quarter of 2009.
2010 Third Quarter and Full Year Guidance
For the 2010 full year, Coinstar management raised guidance provided on May 26 after adjusting for the reclassification of Money Transfer as discontinued operations and now expects:
-- Revenue between $1.425 billion and $1.505 billion;
-- EBITDA between $275 million and $290 million;
-- GAAP EPS from continuing operations between $1.88 and $2.00 on a fully
diluted basis;
-- Free cash flow from continuing operations between $80 million and $100
million.
For the 2010 third quarter, Coinstar management expects:
-- Revenue between $370 million and $390 million;
-- EBITDA between $69 million and $74 million;
-- GAAP EPS from continuing operations between $0.46 and $0.52 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 second 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.coinstar.com. A recording of the call will be available approximately two hours after the call ends through August 13, 2010, at 1-888-286-8010 or 1-617-801-6888, passcode 11131953.
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 26,900 DVD kiosks and 19,000 coin-counting kiosks in supermarkets, drug stores, mass merchants, financial institutions, convenience stores, and restaurants. For more information, visit www.coinstar.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, 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
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, 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 Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2010 2009 2010 2009
---- ---- ---- ----
(in thousands)
Income from
continuing
operations $12,841 $10,530 $22,080 $20,431
Depreciation,
amortization and
other 31,612 22,175 64,292 42,325
Interest expense,
net 9,073 8,611 18,339 15,077
Income taxes 7,389 6,702 13,395 10,729
Stock-based
compensation and
share-based
expense 4,570 1,942 7,787 4,737
Adjusted EBITDA from
continuing
operations $65,485 $49,960 $125,893 $93,299
======= ======= ======== =======
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 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 Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2010 2009 2010 2009
---- ---- ---- ----
(in thousands)
Net cash
provided by
operating
activities from
continuing
operations $104,651 $32,965 $157,381 $19,760
Purchase of
property and
equipment (52,822) (38,288) (84,339) (73,276)
Free cash flow
from continuing
operations $51,829 $(5,323) $73,042 $(53,516)
======= ======= ======= ========
Coinstar, Inc.
Consolidated Statements of Net Income
(in thousands, except per share data)
(unaudited)
Three Months Ended
June 30,
--------
2010 2009
--- ---
REVENUE $342,356 $253,844
EXPENSES:
Direct operating 241,796 174,871
Marketing 5,934 3,696
Research and development 1,805 1,299
General and administrative 31,876 25,977
Depreciation and other 30,627 21,293
Amortization of intangible assets 985 882
Litigation settlement 0 0
Income from operations 29,333 25,826
OTHER INCOME (EXPENSE):
Foreign currency (loss) gain and other,
net (30) 17
Interest income 85 4
Interest expense (9,158) (8,615)
Income from continuing operations before
income taxes 20,230 17,232
Income tax expense (7,389) (6,702)
------ ------
Income from continuing operations 12,841 10,530
Income (loss) from discontinued
operations, net of tax 526 (3,572)
--- ------
Net income 13,367 6,958
Less: Net income attributable to non-
controlling interests 0 0
NET INCOME ATTRIBUTABLE TO COINSTAR, INC. $13,367 $6,958
======= ======
BASIC EARNINGS PER SHARE:
Basic earnings per share from continuing
operations attributable to Coinstar,
Inc. $0.40 $0.35
Basic earnings (loss) per share from
discontinued operations attributable to
Coinstar, Inc. 0.02 (0.12)
---- -----
Basic earnings per share attributable to
Coinstar, Inc. $0.42 $0.23
===== =====
DILUTED EARNINGS PER SHARE:
Diluted earnings per share from
continuing operations attributable to
Coinstar, Inc. $0.39 $0.35
Diluted earnings (loss) per share from
discontinued operations attributable to
Coinstar, Inc. 0.02 (0.12)
---- -----
Diluted earnings per share attributable
to Coinstar, Inc. $0.41 $0.23
===== =====
WEIGHTED SHARES OUTSTANDING:
Basic 31,731 30,117
Diluted 32,938 30,575
Six Months Ended
June 30,
--------
2010 2009
--- ---
REVENUE $665,478 $466,597
EXPENSES:
Direct operating 466,755 318,401
Marketing 8,564 6,683
Research and development 3,229 2,556
General and administrative 63,398 50,364
Depreciation and other 62,428 40,569
Amortization of intangible assets 1,864 1,756
Litigation settlement 5,379 0
Income from operations 53,861 46,268
OTHER INCOME (EXPENSE):
Foreign currency (loss) gain and other,
net (47) (31)
Interest income 87 36
Interest expense (18,426) (15,113)
Income from continuing operations before
income taxes 35,475 31,160
Income tax expense (13,395) (10,729)
------- -------
Income from continuing operations 22,080 20,431
Income (loss) from discontinued
operations, net of tax (2,271) (7,883)
------ ------
Net income 19,809 12,548
Less: Net income attributable to non-
controlling interests 0 (3,627)
NET INCOME ATTRIBUTABLE TO COINSTAR, INC. $19,809 $8,921
======= ======
BASIC EARNINGS PER SHARE:
Basic earnings per share from continuing
operations attributable to Coinstar,
Inc. $0.70 $0.57
Basic earnings (loss) per share from
discontinued operations attributable to
Coinstar, Inc. (0.07) (0.27)
----- -----
Basic earnings per share attributable to
Coinstar, Inc. $0.63 $0.30
===== =====
DILUTED EARNINGS PER SHARE:
Diluted earnings per share from
continuing operations attributable to
Coinstar, Inc. $0.69 $0.56
Diluted earnings (loss) per share from
discontinued operations attributable to
Coinstar, Inc. (0.07) (0.26)
----- -----
Diluted earnings per share attributable
to Coinstar, Inc. $0.62 $0.30
===== =====
WEIGHTED SHARES OUTSTANDING:
Basic 31,340 29,525
Diluted 32,077 29,893
Coinstar, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
June 30, December 31,
2010 2009
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $132,607 $61,280
Cash in machine or in transit 48,401 57,141
Cash being processed 76,125 73,875
Accounts receivable, net of allowance
for doubtful accounts of $953 and
$4,379
at June 30, 2010 and December 31, 2009,
respectively 19,458 61,371
DVD library and inventory 87,328 104,367
Deferred income taxes 11,295 12,350
Prepaid expenses and other current
assets 19,413 20,364
Assets of business held for sale 77,945 0
Total current assets 472,572 390,748
PROPERTY AND EQUIPMENT, NET 416,228 400,289
DEFERRED INCOME TAXES 90,731 99,195
OTHER ASSETS 14,453 17,172
INTANGIBLE ASSETS, NET 11,013 30,893
GOODWILL 267,750 284,502
ASSETS OF BUSINESS HELD FOR SALE 24,100 0
TOTAL ASSETS $1,296,847 $1,222,799
========== ==========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $108,650 $118,918
Accrued payable to retailers and agents 96,402 131,103
Other accrued liabilities 104,331 91,413
Current portion of long-term debt 7,157 6,812
Current portion of capital lease
obligations 23,162 26,396
Liabilities of business held for sale 59,309 0
Total current liabilities 399,011 374,642
LONG-TERM DEBT AND OTHER 409,551 409,423
CAPITAL LEASE OBLIGATIONS 14,072 26,326
DEFERRED TAX LIABILITY 17 17
TOTAL LIABILITIES 822,651 810,408
EQUITY:
Preferred stock, $0.001 par
value-Authorized, 5,000,000 shares; no
shares issued
and outstanding at June 30, 2010 and
December 31, 2009 0 0
Common stock, $0.001 par
value-Authorized: 60,000,000 shares at
June 30, 2010 and
45,000,000 at December 31, 2009;
34,643,176 and 33,002,865 issued and
32,717,095
and 31,076,784 shares outstanding at
June 30, 2010 and December 31, 2009, 448,955 406,333
respectively
Retained earnings 70,780 50,971
Treasury stock (40,831) (40,831)
Accumulated other comprehensive loss (4,708) (4,082)
Total stockholders' equity 474,196 412,391
------- -------
TOTAL LIABILITIES AND EQUITY $1,296,847 $1,222,799
========== ==========
Coinstar, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended
June 30,
--------
2010 2009
--- ---
OPERATING ACTIVITIES:
Net income $13,367 $6,958
Adjustments to reconcile net income
to net cash provided by operating
activities from continuing
operations:
Depreciation and other 30,627 21,293
Amortization of intangible assets
and deferred financing fees 1,493 1,202
Non-cash stock-based compensation
for employees 2,339 1,942
Share-based payments for DVD
agreement 2,231 0
Excess tax benefit on share-based
awards (5,477) (92)
Deferred income taxes 5,607 2,747
(Gain) loss from discontinued
operations, net of tax (526) 3,572
Non-cash interest on convertible
debt 1,499 0
Other 33 (106)
Cash provided (used) by changes in
operating assets and liabilities
from continuing operations: 53,458 (4,551)
Net cash provided by operating
activities from continuing
operations 104,651 32,965
INVESTING ACTIVITIES:
Purchase of property and equipment (52,822) (38,288)
Proceeds from sale of electronic
payment services business 26,078 0
Proceeds from sale of property and
equipment 230 59
Net cash used by investing
activities from continuing
operations (26,514) (38,229)
FINANCING ACTIVITIES:
Principal payments on capital lease
obligations and other debt (10,668) (5,858)
Net borrowings on credit facility 0 18,000
Borrowings on term loan 0 87,500
Financing costs associated with
revolving line of credit and
convertible debt 0 (1,329)
Cash used to purchase remaining
non-controlling interests in
Redbox 0 (92,270)
Excess tax benefit on share-based
awards 5,477 92
Proceeds from exercise of stock
options 25,023 1,841
Net cash provided by financing
activities from continuing
operations 19,832 7,976
Effect of exchange rate changes on
cash (354) 3,050
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS, CASH IN MACHINE
OR IN TRANSIT,
AND CASH BEING PROCESSED FROM
CONTINUING OPERATIONS 97,615 5,762
CASH FLOWS FROM DISCONTINUED
OPERATIONS:
Operating cash flows (26,279) 6,840
Investing cash flows (32,716) (2,269)
Financing cash flows (145) (887)
---- ----
(59,140) 3,684
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS, CASH IN
MACHINE OR IN TRANSIT, AND CASH
BEING PROCESSED 38,475 9,446
CASH AND CASH EQUIVALENTS, CASH IN
MACHINE OR IN TRANSIT, AND CASH
BEING PROCESSED:
Beginning of period 218,658 178,806
End of period $257,133 $188,252
======== ========
Six Months Ended
June 30,
--------
2010 2009
--- ---
OPERATING ACTIVITIES:
Net income $19,809 $12,548
Adjustments to reconcile net income
to net cash provided by operating
activities from continuing
operations:
Depreciation and other 62,428 40,569
Amortization of intangible assets
and deferred financing fees 2,880 2,262
Non-cash stock-based compensation
for employees 4,964 4,737
Share-based payments for DVD
agreement 2,823 0
Excess tax benefit on share-based
awards (6,225) (125)
Deferred income taxes 8,755 4,489
(Gain) loss from discontinued
operations, net of tax 2,271 7,883
Non-cash interest on convertible
debt 2,958 0
Other 229 126
Cash provided (used) by changes in
operating assets and liabilities
from continuing operations: 56,489 (52,729)
Net cash provided by operating
activities from continuing
operations 157,381 19,760
INVESTING ACTIVITIES:
Purchase of property and equipment (84,339) (73,276)
Proceeds from sale of electronic
payment services business 26,078 0
Proceeds from sale of property and
equipment 267 152
Net cash used by investing
activities from continuing
operations (57,994) (73,124)
FINANCING ACTIVITIES:
Principal payments on capital lease
obligations and other debt (19,343) (11,693)
Net borrowings on credit facility 0 73,000
Borrowings on term loan 0 87,500
Financing costs associated with
revolving line of credit and
convertible debt 0 (3,234)
Cash used to purchase remaining
non-controlling interests in
Redbox 0 (102,353)
Excess tax benefit on share-based
awards 6,225 125
Proceeds from exercise of stock
options 27,250 2,260
Net cash provided by financing
activities from continuing
operations 14,132 45,605
Effect of exchange rate changes on
cash (851) 2,829
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS, CASH IN MACHINE
OR IN TRANSIT,
AND CASH BEING PROCESSED FROM
CONTINUING OPERATIONS 112,668 (4,930)
CASH FLOWS FROM DISCONTINUED
OPERATIONS:
Operating cash flows (14,115) 7,455
Investing cash flows (33,550) (4,486)
Financing cash flows (166) (1,822)
---- ------
(47,831) 1,147
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS, CASH IN
MACHINE OR IN TRANSIT, AND CASH
BEING PROCESSED 64,837 (3,783)
CASH AND CASH EQUIVALENTS, CASH IN
MACHINE OR IN TRANSIT, AND CASH
BEING PROCESSED:
Beginning of period 192,296 192,035
End of period $257,133 $188,252
======== ========
Coinstar, Inc.
Business Segment
Information
(in thousands)
(unaudited)
At June 30, 2010, we reflected both the E-payment and Money Transfer businesses as discontinued operations for all periods presented. As a result, our business segments are now DVD services and Coin services. The operating costs related to continuing corporate activities have been reallocated to these two segments.
As a complement to our Consolidated Statements of Net Income, we are providing the following information related to our business segments:
Three Months Six Months
Ended June 30, Ended June 30,
2010 2009 2010 2009
--- --- --- ---
(in thousands) (in thousands)
Revenue:
DVD services $271,929 $188,925 $535,058 $343,622
Coin services 70,427 64,919 130,420 122,975
Consolidated
revenue $342,356 $253,844 $665,478 $466,597
======== ======== ======== ========
Three Months
Ended June 30,
2010 2009
--- ---
(in thousands)
Operating income before depreciation/
amortization and stock-based compensation/
share-based payments:
DVD services $39,049 $24,157
Coin services 26,466 25,786
Subtotal 65,515 49,943
Depreciation, amortization and other (31,612) (22,175)
Stock-based compensation and share-based
payments (4,570) (1,942)
Consolidated income from operations $29,333 $25,826
======= =======
Six Months
Ended June 30,
2010 2009
--- ---
(in thousands)
Operating income before depreciation/
amortization and stock-based compensation/
share-based payments:
DVD services $83,480 $45,056
Coin services 42,460 48,274
Subtotal 125,940 93,330
Depreciation, amortization and other (64,292) (42,325)
Stock-based compensation and share-based
payments (7,787) (4,737)
Consolidated income from operations $53,861 $46,268
======= =======
SOURCE Coinstar, Inc.
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