OUTR Outerwall Inc. (MM)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 18, 2015

 

 

OUTERWALL INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		000-22555		94-3156448
(State or other jurisdiction of incorporation)		(Commission file number)		(I.R.S. Employer Identification Number)

 

1800 – 114th Avenue SE Bellevue, Washington		98004
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (425) 943-8000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On January 20, 2015, Outerwall Inc. (the “Company”) issued a press release, which included a brief discussion regarding financial information relating to the Company, including certain guidance relating to fourth quarter and full-year 2014 and full-year 2015. A copy of the press release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

 

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On January 20, 2015, the Board of Directors (the “Board”) of Outerwall Inc. (the “Company”) announced that Nora M. Denzel, a director of the Company, has been appointed by the Board to serve as Interim Chief Executive Officer of the Company, effective January 18, 2015, and that J. Scott Di Valerio has stepped down as the Company’s Chief Executive Officer, effective January 18, 2015, and resigned from the Board, effective January 19, 2015.

Ms. Denzel, age 52, has been a director of the Company since January 2013. While serving as Interim Chief Executive Officer, Ms. Denzel will continue serving on the Board but no longer serves on the Board’s independent audit committee and compensation committee.

From February 2008 through August 2012, Ms. Denzel held various management positions at Intuit Inc. (a provider of small business and consumer financial management software), including senior vice president of marketing, big data and social product design, and senior vice president and general manager of QuickBooks employee management business unit. From August 2000 to February 2006, Ms. Denzel served as senior vice president of the global software business unit and the storage and consulting divisions at Hewlett-Packard Company (a software and technology hardware provider). From February 1997 to August 2000, Ms. Denzel served as senior vice president, product operations, at Legato Systems Inc. (a data storage management software company). Ms. Denzel served as director, global storage software, at International Business Machines Corporation (a technology services, enterprise software and systems provider) from June 1984 to February 1997. Ms. Denzel served as a director of Overland Storage, Inc. (a provider of data management and protection products and services) from 2007 to 2013. Ms. Denzel is a member of the board of directors of Telefonaktiebolaget L.M. Ericsson (a telecommunications equipment and services provider), Saba Software, Inc. (a provider of learning and talent management solutions software and services), and Advanced Micro Devices, Inc. (a semiconductor company).

On January 18, 2015, the Company entered into an “at-will” employment arrangement with Ms. Denzel for her service as the Company’s Interim Chief Executive Officer (the “Interim CEO Agreement”), pursuant to which it agreed to pay Ms. Denzel a base salary of $65,000 per month (with a minimum of 6 months of salary to be paid) and a cash bonus of between 50-75% of base salary paid, to be determined by the compensation committee of the Board. The Company will reimburse Ms. Denzel for all reasonable expenses incurred by her in the course of her duties, including commuting and temporary relocation expenses, and she will be eligible to participate in employee benefit programs, such as medical, vision, and dental, during her tenure as Interim Chief Executive Officer. Ms. Denzel will receive a lump sum payment of $15,000 for transition expenses. Due to the temporary nature of this employment, pursuant to the Interim CEO Agreement, Ms. Denzel will not participate in any of the Company’s executive incentive plans, including equity programs. While Ms. Denzel serves as the Company’s Interim Chief Executive Officer, she will not be eligible to receive cash, equity, or any other compensation under the Company’s non-employee director compensation programs. If Ms. Denzel terminates her employment as Interim Chief Executive Officer at her accord prior to July 18, 2015 or is terminated for cause, she will receive base salary only for the period during which she was employed and will not receive the minimum base salary described above; if Ms. Denzel terminates her employment as Interim Chief Executive Officer at her accord or is terminated for cause, she will not receive the cash bonus described above.

The foregoing description of the Interim CEO Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Interim CEO Agreement, which is attached to this Current Report on Form 8-K as Exhibit 10.1 and incorporated herein by reference.

 

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For additional information regarding Ms. Denzel, please review the relevant disclosures in the Company’s 2014 Proxy Statement, filed with the Securities and Exchange Commission (the “SEC”) on April 30, 2014 (the “2014 Proxy Statement”), which disclosures are incorporated by reference herein.

Mr. Di Valerio is expected to continue his employment with the Company through the end of February 2015. For information regarding Mr. Di Valerio’s employment arrangement (including severance provisions), please review the relevant disclosures in the 2014 Proxy Statement, which disclosures are incorporated by reference herein. Mr. Di Valerio’s separation from the Company is a termination “without Cause” within the meaning of the Amended and Restated Employment Agreement, entered into on January 2, 2013 and effective as of April 1, 2013, between the Company and Mr. Di Valerio (which agreement has previously been filed with the SEC).

 

Item 7.01

Regulation FD Disclosure.

The press release relating to Ms. Denzel’s appointment as the Company’s Interim Chief Executive Officer and Mr. Di Valerio’s departure, as well as certain financial information relating to the Company, including certain guidance relating to fourth quarter and full-year 2014 and full-year 2015, is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

The information furnished pursuant to this Item 7.01 and Item 2.02, including in Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act.

Certain statements in this Current Report on Form 8-K are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words indicating future events, performance, results and actions, such as “will” and “expect,” and 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 Current Report on Form 8-K include statements regarding management succession matters and certain financial information, including updated guidance. 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, among other things, actions taken by the Company or its management, including those beyond the Company’s control. Such risks and uncertainties include, but are not limited to, execution and integration of management changes, actions by the Company’s board and management, changes resulting from completing our financial statements and guidance analysis processes, changes in strategic and financial objectives, and the ability to attract new retailers, penetrate new markets and distribution channels, and react to changing consumer demands. 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 the Company’s expectations as of the date hereof. The Company undertakes no obligation to update the information provided herein.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit No.		Description
10.1		Interim CEO Agreement between Outerwall Inc. and Nora M. Denzel, dated January 18, 2015.
99.1		Press Release, dated January 20, 2015.

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				OUTERWALL INC.
Date: January 20, 2015				By:		/s/ Donald R. Rench
						Donald R. Rench
						Chief Legal Officer, General Counsel and Corporate Secretary

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Exhibit Index

 

Exhibit No.		Description
10.1		Interim CEO Agreement between Outerwall Inc. and Nora M. Denzel, dated January 18, 2015.
99.1		Press Release, dated January 20, 2015.

Exhibit 10.1

January 18, 2015

Nora M. Denzel

Dear Nora:

You have agreed to serve as Interim Chief Executive Officer (“Interim CEO”) of Outerwall Inc. (the “Company”) during the Company’s search for a permanent Chief Executive Officer. This letter agreement (the “Agreement”) sets forth the terms of your employment as the Company’s Interim CEO and is effective as of January 18, 2015 (the “Effective Date”).

1. Position. In your position as Interim CEO, you will report to the Company’s Board of Directors (the “Board”) and serve at its direction. The Interim CEO position is a full-time position with its principal work place at the Company’s headquarters in Bellevue, Washington. While you render services to the Company as Interim CEO, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company; provided, however, that you may continue to serve on any boards of directors or committees thereof on which you served as of the Effective Date. By signing this Agreement, you confirm to the Company that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.

2. Term. From the Effective Date, your position as Interim CEO may continue, at the latest, until the date on which a permanent successor Chief Executive Officer is hired and commences employment with the Company (the “Interim Term”). While you serve as Interim CEO, you will continue to serve on the Board. Notwithstanding the foregoing, your employment is “at will,” and may be terminated by you or the Company at any time with or without Cause (as defined in Section 10.2).

3. Board Service; Equity Awards.

3.1 While you serve as Interim CEO, you will continue to serve on the Board. During the Interim Term, you will not earn any non-employee director cash retainers, equity grants or other compensation under the Company’s director compensation programs for your services as director.

3.2 Your existing outstanding equity awards will continue to vest during and after the Interim Term in accordance with their original schedules, provided you continue to provide services to the Company.

4. Compensation and Benefits.

4.1 During the Interim Term, the Company will pay you at the annualized salary rate of Seven Hundred Eighty Thousand Dollars ($780,000) per year, payable at such times as the Company’s normal payroll. You will be paid a minimum of Three Hundred Ninety Thousand Dollars ($390,000) for serving as the Interim CEO, unless you terminate your employment as Interim CEO of your own accord before the expiration of the first six (6) months of the Interim Term, or the Board terminates your employment for Cause.

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4.2 You will be eligible for a cash bonus to be paid at the end of the Interim Term. The bonus will be calculated based on 50% to 75% of the monthly salary of Sixty-Five Thousand Dollars ($65,000) multiplied by the number of months you serve as Interim CEO. Payment of the bonus is subject to the discretion of the Compensation Committee of the Board and successful fulfillment of Interim CEO duties as outlined by the Board. You will not be eligible for a cash bonus if you terminate your employment as Interim CEO during the Interim Term of your own accord or are terminated by the Board for Cause.

4.3 The Company will pay you a lump sum payment of $15,000 for transition expenses. The transition payment will be paid within the first 30 days of employment.

4.4 During the Interim Term, you will be entitled to participate, subject to and in accordance with applicable eligibility requirements, in fringe benefit programs as shall be provided from time to time by, to the extent required, action of the Board.

4.5 During the Interim Term unless the Compensation Committee of the Board otherwise determines in its sole discretion and to the extent consistent with applicable law, you will not be eligible to participate in any Company cash-based or equity-based incentive plans or programs applicable to the Company’s executives or otherwise, except as otherwise set forth in this Agreement or as otherwise required by applicable regulations.

5. Expenses. The Company will reimburse you for all reasonable and necessary expenses, including but not limited to expenses as a result of commuting and temporary housing, incurred by you in connection with your performance of services as Interim CEO on behalf of the Company.

6. Indemnification. The Company shall indemnify you with respect to activities in connection with your employment hereunder to the fullest extent provided by applicable law and to the same extent as the Company indemnifies other Company officers or directors. You will also be named as an insured in your capacities as Interim CEO and as director of the Company on the director and officer liability insurance policy currently maintained or as may be maintained by the Company from time to time.

7. Required Employment Forms. You will be required, as a condition of your employment with the Company, to sign all of the Company’s standard forms applicable to new employees (including, but not limited to, the Company’s Proprietary Information and Inventions Agreement), as well as the Company’s Code of Conduct.

8. Reimbursement of Legal Fees. The Company will reimburse you for reasonable legal and/or advisory fees incurred in connection with your review and negotiation of this Agreement and any other agreement at the end of your Interim Term in an aggregate amount not to exceed Five Thousand Dollars ($5,000).

9. Tax Matters. All forms of compensation referred to in this Agreement are subject to applicable withholding and payroll taxes and other deductions required by law.

 

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10. Termination.

10.1 Company will give you thirty (30) days’ written notice of termination of employment, during which period your compensation and benefits will continue, but Company may, at its sole discretion, excuse you from any and all duties as Interim CEO.

10.2 For Purposes of this Agreement, Cause is limited to the occurrence of one or more of the following events:

 

a.

Failure or refusal by you to carry out your lawful duties as Interim CEO described in Section 1 hereof or any directions of the Board, which directions are reasonably consistent with the duties herein set forth to be performed by you;

 

b.

Violation by you of a state or federal criminal law involving the commission of a crime against Company or a felony;

 

c.

Current use by you of illegal substances; deception, fraud, misrepresentation or dishonesty by you; any act or omission by you which substantially impairs the Company’s business, good will or reputation; or

 

d.

Any other material violation of any provision of this Agreement.

10.3. The Company expects that you will remain on the Board as a non-employee director following the end of the Interim Term; provided, however, you will present your resignation as a member of the Board for acceptance or rejection by the Board at the end of the Interim Term.

11. Entire Agreement. This Agreement supersedes and replaces any prior agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company regarding matters covered hereby, and constitutes the complete agreement between you and the Company, regarding your position as Interim CEO. This Agreement may not be amended or modified, except by an express written agreement signed by both you and the Chair of the Board. The terms of this Agreement and the resolution of any disputes as to the meaning, effect, performance or validity of this Agreement or arising out of, related to, or in any way connected with, this Agreement, your employment with the Company or any other relationship between you and the Company will be governed by Washington law, excluding laws relating to conflicts or choice of law. In any action between the parties arising out of or relating to any such disputes, each of the parties irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the state and federal courts located in King County, Washington.

 

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I have read and accept this employment offer:

 

 

AGREED TO AND ACKNOWLEDGED

/s/ Nora M. Denzel

Nora M. Denzel

 

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Exhibit 99.1

OUTERWALL ANNOUNCES LEADERSHIP CHANGE

Director Nora M. Denzel Appointed Interim Chief Executive Officer

J. Scott Di Valerio Steps Down as CEO

Provides Narrowed Fourth Quarter 2014 Guidance At or Above Previous Guidance Ranges

BELLEVUE, Wash. – January 20, 2015 – Outerwall Inc. (Nasdaq: OUTR) today announced that Nora M. Denzel, a member of Outerwall’s Board of Directors since 2013, has been appointed by the Board to serve as interim chief executive officer and that J. Scott Di Valerio has stepped down as Outerwall’s chief executive officer and resigned from the Board.

“On behalf of the company, we want to thank Scott for his many contributions to Outerwall. We believe the company is well-positioned due to its strong operating and financial foundation and a deep and talented team of employees. Outerwall continues to capitalize on its market-leading brands to drive profitability and deliver value for shareholders, partners and customers,” said Nelson Chan, chair of Outerwall’s Board of Directors. “To accelerate the progress we are making, the Board believes that now is the right time for a leadership change.”

“We are pleased that Nora has agreed to serve as interim CEO and share her significant technology experience and expertise in this role,” continued Chan. “Nora has been an active and valuable contributor to the Outerwall Board since she joined in 2013, including service on the Audit and Compensation Committees. She has a deep understanding of our business, operations and the strategies we are implementing to drive results.”

“I look forward to continuing to work alongside the Outerwall Board and management team in this expanded role,” said Nora M. Denzel, interim CEO of Outerwall. “With the support of our management team and dedicated employees, I am confident that we will continue to successfully execute on our business priorities.”

The Outerwall Board will immediately initiate a search process to identify the next CEO.

Company Narrows Fourth Quarter 2014 Guidance Ranges

Outerwall currently expects consolidated revenue for the fourth quarter of 2014 to be approximately $598 million to $602 million. Core adjusted EBITDA from continuing operations is expected to be approximately $140 million to $142 million, and core diluted EPS from continuing operations is expected to be between $2.40 and $2.52. In addition, Outerwall expects free cash flow for the full-year 2014 to be between $235 million and $240 million.

Outerwall will provide 2015 annual guidance on its upcoming fourth quarter 2014 earnings conference call. The company currently expects low single-digit revenue growth and core adjusted EBITDA from continuing operations to be approximately in-line with expected 2014 actuals.

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FOURTH QUARTER 2014 EARNINGS CONFERENCE CALL

On February 5, 2015, Outerwall will report its fourth quarter and full-year 2014 financial results after the market close. The company’s earnings press release and prepared remarks will be available in the Investor Relations section of Outerwall’s website at www.outerwall.com.

Outerwall also will host a conference call on February 5, 2015 at 2:30 p.m. PST (5:30 p.m. EST) to discuss fourth quarter and full-year 2014 results and full-year 2015 guidance in more detail. The conference call will be webcast live and archived in the Investor Relations section of Outerwall’s website at www.outerwall.com.

ABOUT NORA M. DENZEL

Nora M. Denzel has been a Director of Outerwall since February 2013. From February 2008 through August 2012, Denzel held various management positions at Intuit Inc., including senior vice president of marketing, big data and social product design, and senior vice president and general manager of QuickBooks employee management business unit. Previously, Denzel served as senior vice president of the global software business unit and the storage and consulting divisions at Hewlett-Packard Company from August 2000 to February 2006. Denzel has also worked at Legato Systems Inc., a data storage management software company, and International Business Machines Corporation.

ABOUT OUTERWALL INC.

Outerwall Inc. (Nasdaq: OUTR) has more than 20 years of experience creating some of the most profitable spaces for their retail partners. Outerwall deliveries breakthrough kiosk experiences that delight consumers and generate revenue for retailers. As the company that brought consumers Redbox® entertainment, Coinstar® money services, and ecoATM® electronics recycling kiosks, Outerwall is leading the next generation of automated retail and paving the way for inventive, scalable businesses. Outerwall™ kiosks are in neighborhood grocery stores, drug stores, mass merchants, malls, and other retail locations in the United States, Canada, Puerto Rico, the United Kingdom, and Ireland. Learn more at www.outerwall.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,” “forecast,” “intend,” “anticipate,” “goals,” “guidance,” 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, among other things, statements regarding Outerwall Inc.’s management changes and certain financial information, including updated guidance. Forward-looking statements are not guarantees of performance and actual results may vary materially from the results expressed or implied in such statements. Differences may result from actions taken by Outerwall Inc., as well as from risks and uncertainties beyond Outerwall Inc.’s control. Such risks and uncertainties include, but are not limited to,

 

•

execution and integration of management changes,

 

•

actions by Outerwall Inc.’s board and management,

 

•

changes resulting from completing our financial statements and guidance analysis process,

 

•

changes in rental prices,

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competition from other entertainment providers,

 

•

the ability to achieve the strategic and financial objectives for our entry into new businesses, including ecoATM and SAMPLEit,

 

•

our ability to repurchase stock and the availability of an open trading window,

 

•

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 timing of new DVD releases and the inability to receive delivery of DVDs on the date of their initial releases to the general public, or shortly thereafter, or in sufficient quantity, for home entertainment viewing,

 

•

the effective management of our content library,

 

•

the timing of the release slate and the relative attractiveness of titles in a particular quarter or year,

 

•

the ability to attract new retailers, penetrate new markets and distribution channels and react to changing consumer demands,

 

•

the ability to generate sufficient cash flow to timely and fully service indebtedness and adhere to certain covenants and restrictions,

 

•

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 performance (including future results), 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 Outerwall Inc.’s expectations as of the date of this press release. Outerwall Inc. undertakes no obligation to update the information provided herein.

Investor Contact:

Angie McCabe, Vice President, Investor Relations

Tel: 425-943-8754

angie.mccabe@outerwall.com

Media Contact:

Art Pettigrue, Senior Director of Corporate Communications

Tel: 425-943-8576

art.pettigrue@outerwall.com