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Coinstar, Inc. Announces 2012 First Quarter Results

Date : 04/26/2012 @ 4:01PM
Source : PR Newswire (US)
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Coinstar, Inc. Announces 2012 First Quarter Results

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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:

Consolidated revenue

$

568.2

million

Operating income

$

78.3

million

Core adjusted EBITDA from continuing operations* (See Appendix A)

$

129.1

million

Diluted earnings per share from continuing operations

$

1.65



Core diluted earnings per share from continuing operations* (See Appendix A)

$

1.39



Net cash flows from operating activities from continuing operations

$

54.9

million

Free cash flow from continuing operations* (See Appendix A)

$

16.9

million

"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:







Three Months Ended







March 31,

Dollars in thousands



2012



2011

Income from continuing operations

$

53,696

$

14,842



Depreciation, amortization and other



40,791



34,644



Interest expense, net



4,114



7,306



Income taxes



35,672



9,261



Share-based payments expense(1)



8,792



3,040





Adjusted EBITDA from continuing operations



143,065



69,093

Non-core adjustments:











Deal fees



1,203



168



Loss from equity method investments



4,341



150



Gain on formation of the Joint Venture



(19,500)



-





Core Adjusted EBITDA from continuing operations

$

129,109

$

69,411

















(1) Includes both non-cash share-based compensation for executives, non-employee directors and employees as well as share-based payments for content arrangements.

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:











Three Months Ended











March 31,





2012



2011

Diluted EPS from continuing operations

$

1.65

$

0.46

Non-core adjustments, net of tax:(1)











Deal fees



0.02



-



Loss from equity method investments



0.08



-



Gain on formation of the Joint Venture



(0.36)



-

Core diluted EPS from continuing operations

$

1.39

$

0.46













(1) Non-core adjustments are presented after-tax using an estimated tax rate of 40.0%.

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:









Three Months Ended









March 31,

Dollars in thousands



2012



2011

Net cash provided by operating activities

$

54,918

$

59,995

Purchase of property and equipment



(38,007)



(38,472)



Free cash flow from continuing operations

$

16,911

$

21,523

 

COINSTAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)















Three Months Ended







March 31,







2012



2011













Revenue

$

568,179

$

424,072













Expenses:











Direct operating



390,410



315,073



Marketing



6,957



5,117



Research and development



3,930



2,207



General and administrative



47,811



35,662



Depreciation and other  



40,104



33,959



Amortization of intangible assets



687



685

Total expenses



489,899



392,703











Operating income



78,280



31,369













Other income (expense):











Income (loss) from equity method investments



15,159



(150)



Interest expense, net



(4,114)



(7,306)



Other, net



43



190

Total other income (expense)



11,088



(7,266)











Income from continuing operations before income taxes



89,368



24,103

Income tax expense



(35,672)



(9,261)

Income from continuing operations



53,696



14,842

Loss from discontinued operations, net of tax



-



(6,346)

Net income



53,696



8,496













Other comprehensive income, before tax:











Foreign currency translation adjustment



727



745



Interest rate hedges on long-term debt



-



896



Gain on short-term investments



-



4



Income tax expense related to items of other comprehensive income



-



(351)

Other comprehensive income, net of tax



727



1,294

Comprehensive income

$

54,423

$

9,790













Basic earnings (loss) per share attributable to Coinstar, Inc.:











Continuing operations  

$

1.76

$

0.47



Discontinued operations



-



(0.20)

Basic earnings per share attributable to Coinstar, Inc.

$

1.76

$

0.27













Diluted earnings (loss) per share attributable to Coinstar, Inc.:











Continuing operations  

$

1.65

$

0.46



Discontinued operations



-



(0.20)

Diluted earnings per share attributable to Coinstar, Inc.

$

1.65

$

0.26











Weighted average shares used in basic per share calculations



30,590



31,067

Weighted average shares used in diluted per share calculations



32,628



32,142

 

COINSTAR, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)



























March 31,



December 31,











2012



2011



















Assets











Current Assets:













Cash and cash equivalents

$

329,628

$

341,855





Accounts receivable, net of allowances of $1,863 and $1,586



43,035



41,246





Content library



145,704



142,386





Deferred income taxes



80,089



101,341





Prepaid expenses and other current assets



30,858



25,274







Total current assets



629,314



652,102



















Property and equipment, net



498,302



499,178



Notes receivable



25,444



24,374



Deferred income taxes



485



647



Goodwill and other intangible assets



274,025



274,583



Other long-term assets



59,254



17,066



Total assets

$

1,486,824

$

1,467,950



















Liabilities and Stockholders' Equity











Current Liabilities:













Accounts payable

$

137,979

$

175,550





Accrued payable to retailers



113,795



127,450





Other accrued liabilities



147,396



148,996





Current callable convertible debt



181,415



-





Current portion of long-term debt



14,007



13,986





Current portion of capital lease obligations



10,573



12,057







Total current liabilities



605,165



478,039

















Long-term debt and other long-term liabilities



176,616



359,288



Capital lease obligations



11,007



11,768



Deferred tax liabilities



94,264



87,840



Total liabilities



887,052



936,935















Commitments and contingencies



-



-



Debt conversion feature



18,585



-















Stockholders' Equity:













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















issued or outstanding



-



-





Common stock, $0.001 par value - 60,000,000 and 45,000,000 authorized;















35,670,257 and 35,251,932 shares issued; 31,297,299 and















30,879,778 shares outstanding



476,998



481,249





Treasury stock



(153,425)



(153,425)





Retained earnings



259,558



205,862





Accumulated other comprehensive loss



(1,944)



(2,671)







Total stockholders' equity



581,187



531,015





Total liabilities and stockholders' equity

$

1,486,824

$

1,467,950

 

COINSTAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)































Three Months Ended















March 31,





2012



2011

Operating Activities:









Net income

$

53,696

$

8,496

Adjustments to reconcile net income to net cash flows from











operating activities from continuing operations:











Depreciation and other





40,104



33,959



Amortization of intangible assets and deferred financing fees





1,219



1,193



Share-based payments expense





8,792



3,040



Excess tax benefits on share-based payments





(3,139)



(2,128)



Deferred income taxes





31,184



6,356



Loss from discontinued operations, net of tax





-



6,346



(Income) loss from equity method investments





(15,159)



150



Non-cash interest on convertible debt





1,717



1,583



Other





(1,511)



(12)

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



(61,985)



1,012



Net cash flows from operating activities from continuing operations





54,918



59,995















Investing Activities:









Purchases of property and equipment



(38,007)



(38,472)

Proceeds from sale of property and equipment



144



176

Equity investments



(28,350)



(2,320)



Net cash flows from investing activities from continuing operations





(66,213)



(40,616)





















Financing Activities:









Principal payments on capital lease obligations and other debt



(4,683)



(12,141)

Principal payments on term loan



(2,188)



-

Excess tax benefits related to share-based payments



3,139



2,128

Repurchases of common stock and ASR program



-



(63,349)

Proceeds from exercise of stock options, net



2,213



260



Net cash flows from financing activities from continuing operations





(1,519)



(73,102)





















Effect of exchange rate changes on cash



587



667

Decrease in cash and cash equivalents from continuing operations



(12,227)



(53,056)

Cash flows from discontinued operations:









Operating cash flows



-



6,726

Investing cash flows



-



774

Financing cash flows



-



-



Net cash flows from discontinued operations





-



7,500

Decrease in cash and cash equivalents



(12,227)



(45,556)

Cash and cash equivalents:









Beginning of period



341,855



183,416

End of period

$

329,628

$

137,860











 

Coinstar, Inc.

Business Segment Information

(in thousands)

(unaudited)



As a complement to our Consolidated Statements of Comprehensive Income, we are providing the following information related to our business segments, which includes segment operating income (loss). 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 certain 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



2012



2011

Revenue:











Redbox

$

502,942

$

362,344



Coin



64,826



61,363



New Ventures



411



365

Consolidated revenue

$

568,179

$

424,072





















Segment operating income reconciled to GAAP operating income

















Three Months Ended









March 31,

Dollars in thousands



2012



2011

Segment operating income (loss)(1)











Redbox(2)

$

108,818

$

50,821



Coin



19,319



20,609



New Ventures



(5,617)



(2,555)





Subtotal



122,520



68,875















Depreciation, amortization and other:











Redbox



32,443



27,098



Coin



8,341



7,371



New Ventures



7



175





Total depreciation, amortization and other



40,791



34,644

















Share-based compensation expense



3,449



2,862















Operating income (loss):











Redbox



76,375



23,723



Coin



10,978



13,238



New Ventures



(5,624)



(2,730)



Share-based compensation expense



(3,449)



(2,862)





Total operating income

$

78,280

$

31,369

















(1) Operating income (loss) before depreciation, amortization and other, and share-based compensation expense.

(2) Share-based payments expense related to our content arrangements have been allocated to our Redbox segment.

 

SOURCE Coinstar, Inc.

Copyright 2012 PR Newswire



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