OUTR Outerwall Inc. (MM)

BELLEVUE, Wash., April 26, 2012 /PRNewswire/ -- Coinstar, Inc. (Nasdaq: CSTR) today announced financial results for the first quarter ended March 31, 2012.

"Coinstar delivered strong financial results in the first quarter demonstrating the strength of our core businesses and the value we offer consumers," said Paul Davis, chief executive officer of Coinstar, Inc.  "As we move forward in 2012, we continue to execute on a number of important initiatives including the launch of our Redbox digital solution with Verizon via our joint venture and the rollout of one to two of our new venture businesses."

Coinstar's 2012 first quarter financial highlights included:

"Solid execution and operational excellence across Coinstar drove top and bottom line growth," said J. Scott Di Valerio, chief financial officer of Coinstar, Inc. "Our performance underscores the ability to generate profitable growth and simultaneously invest in the future of our core businesses and new automated retail concepts."

Revenue for the first quarter of 2012 increased 34.0% to $568.2 million compared with the first quarter of 2011, driven primarily by Redbox revenue growth of 38.8% to $502.9 million, reflecting growth in same store sales, new kiosk installations, strong performance of new release titles, and consumer acceptance of the price increase implemented on October 31, 2011. Coin revenue grew 5.6% to $64.8 million, reflecting growth in transactions, transaction size and same store sales.

Operating income for the first quarter of 2012 was $78.3 million, which resulted in an operating margin of 13.8%, compared with operating income of $31.4 million and an operating margin of 7.4% in the first quarter of 2011.

Income from continuing operations for the first quarter of 2012 was $53.7 million, or diluted earnings per share from continuing operations of $1.65, an increase in diluted earnings per share of 258.7% compared with $14.8 million, or $0.46 per share, in the first quarter of 2011.

Net cash flows from operating activities from continuing operations in the first quarter of 2012 was $54.9 million, compared with $60.0 million in the first quarter of 2011. Cash paid for capital expenditures for continuing operations for the first quarter of 2012 was $38.0 million, compared with $38.5 million in the first quarter of 2011. Free cash flow from continuing operations for the first quarter of 2012 was $16.9 million, compared with $21.5 million in the first quarter of 2011.

Guidance

For the 2012 full year, Coinstar management expects:

• Consolidated revenue between $2.155 billion and $2.280 billion;
• Core adjusted EBITDA from continuing operations* between $465 million and $495 million;
• Core diluted EPS from continuing operations* between $4.40 and $4.80 on a fully diluted basis; and
• Free cash flow from continuing operations* between $130 million and $155 million.

For the 2012 second quarter, Coinstar management expects:

• Consolidated revenue between $525 million and $550 million;
• Core adjusted EBITDA from continuing operations* between $114 million and $124 million; and
• Core diluted EPS from continuing operations* between $1.09 and $1.24 on a fully diluted basis.

Additional Information

Coinstar has provided additional comments on guidance in prepared remarks that also review the company's 2012 first quarter operating and financial results. The prepared remarks are posted on the Investor Relations section of the corporate website at www.coinstarinc.com along with this press release and the 2012 first quarter Investor Update.

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 answer questions related to the company's performance and 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 two hours after the call through May 10, 2012, at 1-888-286-8010 or 1-617-801-6888, passcode 71453847.

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 and video game rental and Coinstar® self-service coin-counting brands. The company has approximately 36,800 DVD kiosks and 20,200 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, including 2012 second quarter and 2012 full year 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. and Redbox, as well as from risks and uncertainties beyond Coinstar, Inc.'s control.  Such risks and uncertainties include, but are not limited to,

• competition from other digital entertainment providers,
• the ability to achieve the strategic and financial objectives for our entry into a new business,
• our limited ability to direct the management or policies of the new joint venture with Verizon Communications,
• failure to receive the expected benefits of the NCR relationship,
• 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, suppliers and other third-party providers, including financial service providers,
• the inability to receive delivery of DVDs on the date of their initial release to the general public, or shortly thereafter, or in sufficient quantity, for home entertainment viewing,
• noteholders electing to convert our convertible notes,
• the effective management of our content library,
• 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 any subsequent Quarterly Reports 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.

* Refer to Appendix A for a discussion of non-GAAP financial measures, including the exclusion of certain non-core items.

(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 Financial Measures

We use the following non-GAAP financial measures to evaluate our financial results:

• Core adjusted EBITDA from continuing operations;
• Core diluted earnings per share from continuing operations; and
• Free cash flow from continuing operations.

These measures, the definitions of which are presented below, are non-GAAP because they exclude certain amounts which are included in the most directly comparable measure calculated and presented in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for our GAAP financial measures and may not be comparable with similarly titled measures of other companies. We believe investors should consider our core results because they are more indicative of our ongoing performance and trends and are more consistent with how management evaluates our operational results and trends.

Core Adjusted EBITDA from Continuing Operations

Our non-GAAP financial measure core adjusted EBITDA from continuing operations is defined as earnings before depreciation, amortization and other; interest expense, net; income taxes; share-based payments expense; and non-core adjustments, including i) deal fees primarily related to the acquisition of certain assets of NCR's self-service entertainment DVD kiosk business, ii) loss from equity method investments, which represents our share of income or loss from entities we do not consolidate or control, and iii) a gain on the grant of a license to use certain Redbox trademarks to our joint venture with Verizon Communications (the "Joint Venture").

A reconciliation of core adjusted EBITDA from continuing operations to income from continuing operations, the most comparable GAAP financial measure, is presented in the following table:

Core Diluted EPS from Continuing Operations

Our non-GAAP financial measure core diluted EPS from continuing operations is defined as diluted earnings per share from continuing operations excluding non-core adjustments, net of applicable taxes, which include i) deal fees primarily related to the acquisition of certain assets of NCR's self-service entertainment DVD kiosk business, ii) loss from equity method investments, which represents our share of income or loss from entities we do not consolidate or control, and iii) a gain on the grant of a license to use certain Redbox trademarks to the Joint Venture.

A reconciliation of core diluted EPS from continuing operations to diluted EPS from continuing operations, the most comparable GAAP financial measure, is presented in the following table:

Free Cash Flow from Continuing Operations

Our non-GAAP financial measure, free cash flow from continuing operations is defined as net cash provided by operating activities from continuing operations after capital expenditures. We believe free cash flow 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 and repurchase our common stock. The table below provides a reconciliation of net cash flows from operating activities from continuing operations, the most comparable GAAP financial measure, to free cash flow from continuing operations:

SOURCE Coinstar, Inc.