BELLEVUE, Wash., May 1, 2014 /PRNewswire/ -- Outerwall Inc.
(Nasdaq: OUTR) today reported financial results for the first
quarter ended March 31, 2014.
(Logo:
http://photos.prnewswire.com/prnh/20130701/AQ41388LOGO)
"We are off to a solid start this year as demonstrated by our
first quarter 2014 results," said J. Scott Di Valerio,chief
executive officer of Outerwall Inc. "As the leader in automated
retail, we are focused on bringing innovative products and services
to consumers. We believe we are well-positioned to execute in 2014
as we continue to leverage our core capabilities and achieve
greater operational efficiencies to drive shareholder value."
|
2014
|
|
2013
|
Change
|
|
First
Quarter
|
|
First
Quarter
|
%
|
GAAP
Results
|
|
|
|
|
|
|
|
• Consolidated
revenue
|
$
|
600.4
|
million
|
|
$
|
573.3
|
million
|
4.7
|
%
|
• Net
income
|
$
|
23.2
|
million
|
|
$
|
22.6
|
million
|
2.5
|
%
|
• Income from
continuing operations
|
$
|
23.9
|
million
|
|
$
|
28.0
|
million
|
(14.7)
|
%
|
• Diluted EPS from
continuing operations
|
$
|
0.96
|
|
|
$
|
0.97
|
|
(1.0)
|
%
|
• Net cash provided
by operating activities
|
$
|
94.3
|
million
|
|
$
|
41.1
|
million
|
129.4
|
%
|
|
|
|
|
|
|
|
|
Core
Results*
|
|
|
|
|
|
|
|
• Core adjusted
EBITDA from continuing operations
|
$
|
117.6
|
million
|
|
$
|
110.2
|
million
|
6.7
|
%
|
• Core diluted EPS
from continuing operations
|
$
|
1.27
|
|
|
$
|
1.12
|
|
13.4
|
%
|
• Free cash
flow
|
$
|
67.6
|
million
|
|
$
|
7.9
|
million
|
759.4
|
%
|
|
*Refer to Appendix A
for a discussion of Use of Non-GAAP Financial Measures and Core and
Non-Core Results.
|
Highlights from the first quarter of 2014 include:
- Consolidated revenue of $600.4
million, an increase of 4.7% compared with the first quarter
of 2013
- Core diluted earnings per share from continuing operations were
$1.27, an increase of 13.4% compared
with $1.12 in the first quarter of
2013
- The company repurchased approximately 6.0 million shares for
$420.8 million, including
approximately 5.3 million shares of common stock through a
tender offer at a purchase price of $70.07 per share, excluding fees and expenses
related to the tender offer
- Free cash flow increased substantially year-over-year to
$67.6 million reflecting working
capital benefits, lower capital expenditures and higher
profitability compared with the first quarter of 2013
- Mark Horak, formerly president
of the Americas at Warner Bros., joined Outerwall as president of
Redbox on March 17, 2014;
James Gaherity was promoted to
president of Coinstar; and Maria
Stipp was appointed president of ecoATM
"Our financial results in the first quarter of 2014 were
stronger than expected," said Galen C.
Smith, Outerwall's chief financial officer. "Our focus on
growing the business and managing expenses resulted in higher
revenues, improved Redbox and Coinstar segment operating margins
and strong free cash flow in the quarter. In addition, we
repurchased approximately 6.0 million shares during the quarter,
reflecting our commitment to returning cash to shareholders and our
confidence in the future performance of the company. As a result,
we are raising our 2014 earnings guidance.
"Our second quarter 2014 guidance reflects significantly lower
box office and fewer titles than the second quarter of 2013,"
continued Smith. "However, we continue to expect that rents and
revenue per kiosk will be up year-over-year in the third and fourth
quarters."
CONSOLIDATED RESULTS
Consolidated revenue for the first quarter of 2014 increased
$27.1 million, or 4.7% to
$600.4 million compared with
$573.3 million for the first quarter
of 2013. The year-over-year revenue growth was primarily due to the
inclusion of the ecoATM business that the company acquired on
July 23, 2013, and an increase in same store sales and newly
installed and relocated kiosks in both the Redbox and Coinstar
lines of business.
Operating income for the first quarter of 2014 was $58.7 million compared with operating income of
$56.7 million in the first quarter of
2013. The operating margin was 9.8% in the first quarter of 2014
compared with 9.9% in the first quarter of 2013.
Income from continuing operations for the first quarter of 2014
was $23.9 million, or
$0.96 earnings per diluted share from
continuing operations, compared with $28.0 million, or $0.97 per diluted share, in the first quarter of
2013. The decrease in income from continuing operations in the
first quarter of 2014 compared with the first quarter of 2013 was
primarily due to increased interest expense related to the
$350.0 million in Senior Notes issued
on March 12, 2013 and an increased loss from equity method
investments.
Core adjusted EBITDA from continuing operations for the first
quarter of 2014 was $117.6 million, compared with $110.2 million in the first quarter of 2013.
The year-over-year increase was primarily due to an increase in
Redbox and Coinstar segment operating income.
Core diluted earnings per share from continuing operations for
the first quarter of 2014 were $1.27,
compared with $1.12 per diluted share
in the first quarter of 2013. Non-core adjustments for the first
quarter of 2014 include restructuring costs, compensation expense
for rights to receive cash issued in connection with the company's
acquisition of ecoATM, loss from equity method investments, and a
tax benefit from a net operating loss adjustment.
Net cash provided by operating activities in the first quarter
of 2014 was $94.3 million,
compared with $41.1 million in
the first quarter of 2013. The increase was primarily due to an
increase in net operating cash inflows from changes in working
capital, including a $24.0 million
cash tax refund from 2013 that was received in January 2014.
Cash capital expenditures for the first quarter of 2014 were
$26.7 million compared with
$33.2 million in the first
quarter of 2013.
Free cash flow for the first quarter of 2014 was $67.6 million, compared with $7.9 million in the first quarter of 2013,
primarily driven by higher net operating cash flow and lower
capital expenditures.
SEGMENT RESULTS
Redbox
Redbox segment revenue increased $7.7 million, or 1.5%, to $515.7 million in the first quarter of 2014
from $507.9 million in the first
quarter of 2013. Redbox generated approximately 200.0 million
rentals in the quarter, an increase of 1.2% compared with the first
quarter of 2013.
Redbox same store sales increased 1.0% in the first quarter of
2014 compared with a decrease of 11.8% in the first quarter of
2013, primarily due to a stronger movie slate release in the first
quarter of 2014 and despite the Winter Olympics in February. Net
revenue per rental was $2.58, an
increase of $0.02, or 0.8%, from the
first quarter of 2013. The increase was primarily the result of a
38.1% reduction in promotional spend as the company continued its
focus on increasing promotional efficiency.
Redbox segment operating income in the first quarter of 2014 was
$102.9 million, an increase of
11.7% compared with the first quarter of 2013. Segment operating
margin was 20.0%, an increase of 190 basis points from the first
quarter of 2013, primarily due to a $7.7 million increase in revenue and a
$3.8 million decrease in general
and administrative expenses resulting from the restructuring that
the company announced in December
2013 and the company's focus on general and administrative
expense reductions.
Coinstar
Coinstar segment revenue was $68.8
million, an increase of 5.2%, compared with $65.4 million in the first quarter of 2013. Same
store sales grew 3.1% in the first quarter of 2014 compared with
0.2% in the first quarter of 2013 primarily due to the price
increase for all U.S. grocery retail locations for the coin voucher
product that was implemented on October 1, 2013. The average
transaction size in the first quarter of 2014 increased 3.9% to
$40.76 from the first quarter of
2013.
Coinstar segment operating income was $22.7 million, an increase of 22.1% compared
with the first quarter of 2013, and Coinstar segment operating
margin was 33.1%, an increase of 460 basis points compared with the
first quarter of 2013. Both increases were primarily the result of
the U.S. price increase and cost reductions across its field
organization.
New Ventures
During 2013, the company discontinued the Orango,
Rubi™, Crisp Market™ and Star
Studio™ ventures previously included in its New Ventures
operating segment. The company reclassified the results of these
four ventures to discontinued operations for all periods presented.
The shutdown process was substantially complete as of March 31, 2014.
New Ventures segment revenue was $16.0
million in the first quarter of 2014, primarily due to the
inclusion of the ecoATM business that the company acquired in
July 2013. The segment operating loss
in the first quarter of 2014 included an increase in direct
operating expenses related to the ecoATM business, including the
costs for servicing the kiosks and payment to the retailers for use
of their space. As the company installs additional ecoATM kiosks
and the existing kiosks continue to ramp, the company expects to
leverage a greater share of the direct operating expenses. During
the first quarter of 2014, ecoATM expanded its pilot in the mass
channel and ended the quarter with more than 900 kiosks.
SHARE REPURCHASES AND CAPITAL STRUCTURE
On January 30, 2014, Outerwall's
board of directors approved an additional repurchase program of up
to $500.0 million of common
stock plus the cash proceeds received from the exercise of stock
options to its remaining authority of $201.3 million.
During the first quarter of 2014, the company repurchased
approximately 6.0 million shares of its common stock for
$420.8 million, including 736,000
shares at an average price of $67.93
per share under a 10b5-1 plan and approximately 5.3 million shares
at a final purchase price of $70.07
per share through a modified Dutch auction tender offer. The
aggregate cost of share repurchase through the Dutch auction was
approximately $370.8 million,
excluding related fees and expenses.
At March 31, 2014, there was
approximately $282.5 million in
authority remaining under the company's stock repurchase
authorization.
The company's net leverage ratio* was 1.85x at March 31, 2014. The company continues to expect a
target net leverage ratio of 1.75x to 2.25x for 2014.
GUIDANCE
A comprehensive 2014 guidance table is included in the "Earnings
Release Schedules" section at the end of this release. Beginning in
2015, Outerwall will provide annual guidance only. The company
believes annual guidance is a more relevant measurement of the
business given its stage of growth, and full-year results capture
the varying seasonal patterns of each of its businesses.
For the 2014 full year, the company expects:
- Consolidated revenue between $2.378
billion and $2.488 billion;
- Core adjusted EBITDA from continuing operations between
$487 million and $527 million;
- Core diluted EPS from continuing operations between
$6.68 and $7.18 on a fully diluted
basis;
- Free cash flow between $200 million and
$240 million; and
- Average diluted shares outstanding between 21.5 million and
21.6 million**.
For the 2014 second quarter, the company expects:
- Consolidated revenue between $546
million and $576 million;
- Core adjusted EBITDA from continuing operations between
$103 million and $118 million;
- Core diluted EPS from continuing operations between
$1.24 and $1.44 on a fully diluted
basis; and
- Average diluted shares outstanding between 20.4 million and
20.5 million**.
ADDITIONAL INFORMATION
Additional information regarding the company's 2014 first
quarter operating and financial results and guidance are included
in the company's prepared remarks and supplemental slides. These
items, as well as this press release, are posted on the Investor
Relations section of the corporate website at ir.outerwall.com. The
Segment Supplement, which provides historical data in Excel format,
is also posted on the website.
CONFERENCE CALL
The company will host a conference call today at 2:00 p.m. PDT (5:00 p.m.
EDT) to discuss first quarter 2014 earnings results and
second quarter 2014 guidance. The conference call will be webcast
live and archived on the Investor Relations section of Outerwall's
website at ir.outerwall.com. A recording of the call will be
available approximately two hours after the call ends through
May 15, 2014, at 1-888-843-7419 or
1-630-652-3042, passcode 3698 5543.
*Refer to Appendix A for a discussion of Use of Non-GAAP
Financial Measures and Core and Non-Core Results.
**Excludes the impact of any future share repurchases for the
remainder of 2014
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. The company mission is to create a better everyday
by delivering 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,"
"intend," "will," "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 Outerwall Inc.'s anticipated growth
and future operating results, including 2014 second quarter and
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 Outerwall Inc. or its subsidiaries, as
well as from risks and uncertainties beyond Outerwall Inc.'s
control. Such risks and uncertainties include, but are not limited
to,
- competition from other entertainment providers,
- the ability to achieve the strategic and financial
objectives for our entry into new businesses, including ecoATM,
SAMPLEit and Redbox Instant™ by Verizon,
- 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 release 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 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 Outerwall Inc.'s expectations as of the date of
this press release. Outerwall Inc. undertakes no obligation to
update the information provided herein.
OUTERWALL INC.
EARNINGS RELEASE SCHEDULES
Quarter
Ended March 31, 2014
- Consolidated Statements of Comprehensive Income
- Consolidated Balance Sheets
- Consolidated Statements of Cash Flows
- Business Segment and Enterprisewide Information
- 2014 Second Quarter and Full Year Guidance
- APPENDIX A
- Use of Non-GAAP Financial Measures
- Core and Non-Core Results
- Core Adjusted EBITDA From Continuing Operations
- Core Diluted EPS From Continuing
Operations
- Free Cash Flow
- Net Debt and Net Leverage Ratio
OUTERWALL
INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands,
except per share data)
(unaudited)
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2014
|
|
2013
|
Revenue
|
$
|
600,369
|
|
$
|
573,307
|
Expenses:
|
|
|
|
Direct
operating
|
424,645
|
|
404,895
|
Marketing
|
7,597
|
|
7,386
|
Research and
development
|
3,474
|
|
2,307
|
General and
administrative
|
52,991
|
|
53,461
|
Depreciation and
other
|
49,095
|
|
46,580
|
Amortization of
intangible assets
|
3,848
|
|
2,017
|
Total
expenses
|
541,650
|
|
516,646
|
Operating
income
|
58,719
|
|
56,661
|
Other income
(expense), net:
|
|
|
|
Loss from equity
method investments, net
|
(9,368)
|
|
(7,025)
|
Interest expense,
net
|
(9,645)
|
|
(5,533)
|
Other, net
|
(1,744)
|
|
59
|
Total other expense,
net
|
(20,757)
|
|
(12,499)
|
Income from
continuing operations before income taxes
|
37,962
|
|
44,162
|
Income tax
expense
|
(14,076)
|
|
(16,155)
|
Income from
continuing operations
|
23,886
|
|
28,007
|
Loss from
discontinued operations, net of tax
|
(711)
|
|
(5,403)
|
Net income
|
23,175
|
|
22,604
|
Foreign currency
translation adjustment
|
875
|
|
(1,914)
|
Comprehensive
income
|
$
|
24,050
|
|
$
|
20,690
|
Basic earnings (loss)
per share:
|
|
|
|
Continuing
operations
|
$
|
1.00
|
|
$
|
1.02
|
Discontinued
operations
|
(0.03)
|
|
(0.20)
|
Basic earnings per
share
|
$
|
0.97
|
|
$
|
0.82
|
Diluted earnings
(loss) per share:
|
|
|
|
Continuing
operations
|
$
|
0.96
|
|
$
|
0.97
|
Discontinued
operations
|
(0.02)
|
|
(0.19)
|
Diluted earnings per
share
|
$
|
0.94
|
|
$
|
0.78
|
Weighted average
shares used in basic per share calculations
|
23,944
|
|
27,493
|
Weighted average
shares used in diluted per share calculations
|
24,775
|
|
28,937
|
OUTERWALL
INC.
CONSOLIDATED
BALANCE SHEETS
(in thousands,
except share data)
(unaudited)
|
|
|
|
|
March
31,
2014
|
|
December
31,
2013
|
Assets
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
251,546
|
|
$
|
371,437
|
Accounts receivable,
net of allowances of $1,710 and $1,826
|
56,223
|
|
50,296
|
Content
library
|
179,887
|
|
199,868
|
Prepaid expenses and
other current assets
|
46,665
|
|
84,709
|
Total current
assets
|
534,321
|
|
706,310
|
Property and
equipment, net
|
501,127
|
|
520,865
|
Deferred income
taxes
|
7,952
|
|
6,443
|
Goodwill and other
intangible assets
|
634,842
|
|
638,690
|
Other long-term
assets
|
24,330
|
|
24,392
|
Total
assets
|
$
|
1,702,572
|
|
$
|
1,896,700
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
|
209,219
|
|
$
|
236,018
|
Accrued payable to
retailers
|
118,558
|
|
134,140
|
Other accrued
liabilities
|
146,775
|
|
134,127
|
Current callable
convertible debt
|
50,245
|
|
49,702
|
Current portion of
long-term debt and other long-term liabilities
|
44,531
|
|
42,190
|
Current portion of
capital lease obligations
|
11,989
|
|
11,997
|
Deferred income
taxes
|
25,612
|
|
23,143
|
Total current
liabilities
|
606,929
|
|
631,317
|
Long-term debt and
other long-term liabilities
|
920,763
|
|
677,356
|
Capital lease
obligations
|
8,712
|
|
9,364
|
Deferred income
taxes
|
44,039
|
|
58,528
|
Total
liabilities
|
1,580,443
|
|
1,376,565
|
Commitments and
contingencies
|
|
|
|
Debt conversion
feature
|
899
|
|
1,446
|
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 authorized;
|
|
|
|
36,623,708 and
36,356,357 shares issued;
|
|
|
|
20,390,589 and
26,150,900 shares outstanding;
|
485,537
|
|
482,481
|
Treasury
stock
|
(901,361)
|
|
(476,796)
|
Retained
earnings
|
536,946
|
|
513,771
|
Accumulated other
comprehensive income (loss)
|
108
|
|
(767)
|
Total stockholders'
equity
|
121,230
|
|
518,689
|
Total liabilities and
stockholders' equity
|
$
|
1,702,572
|
|
$
|
1,896,700
|
OUTERWALL
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands)
(unaudited)
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2014
|
|
2013
|
Operating
Activities:
|
|
|
|
Net income
|
$
|
23,175
|
|
$
|
22,604
|
Adjustments to
reconcile net income to net cash flows from operating
activities:
|
|
|
|
Depreciation and
other
|
49,104
|
|
46,892
|
Amortization of
intangible assets and deferred financing fees
|
4,607
|
|
2,577
|
Share-based payments
expense
|
3,765
|
|
4,837
|
Excess tax benefits
on share-based payments
|
(1,710)
|
|
(2,069)
|
Deferred income
taxes
|
(9,564)
|
|
10,416
|
Impairment
expense
|
—
|
|
2,546
|
Loss from equity
method investments, net
|
9,368
|
|
7,025
|
Non-cash interest on
convertible debt
|
547
|
|
1,663
|
Other
|
(124)
|
|
609
|
Cash flows from
changes in operating assets and liabilities
|
15,137
|
|
(55,998)
|
Net cash flows
from operating activities
|
94,305
|
|
41,102
|
Investing
Activities:
|
|
|
|
Purchases of property
and equipment
|
(26,658)
|
|
(33,231)
|
Proceeds from sale of
property and equipment
|
831
|
|
132
|
Purchases of short
term investments
|
—
|
|
(53,000)
|
Receipt of note
receivable principal
|
—
|
|
95
|
Cash paid for equity
investments
|
(10,500)
|
|
(14,000)
|
Net cash flows
used in investing activities
|
(36,327)
|
|
(100,004)
|
Financing
Activities:
|
|
|
|
Proceeds from
issuance of senior unsecured notes
|
—
|
|
343,769
|
Proceeds from new
borrowing on Credit Facility
|
275,000
|
|
—
|
Principal payments on
Credit Facility
|
(29,375)
|
|
(3,281)
|
Financing costs
associated with Credit Facility and senior unsecured
notes
|
—
|
|
(302)
|
Repurchase of
convertible debt
|
(4)
|
|
(62,455)
|
Repurchases of common
stock
|
(421,067)
|
|
(46,482)
|
Principal payments on
capital lease obligations and other debt
|
(3,697)
|
|
(3,251)
|
Excess tax benefits
related to share-based payments
|
1,710
|
|
2,069
|
Withholding tax paid
on vesting of restricted stock net of proceeds from exercise of
stock options
|
(1,588)
|
|
1,093
|
Net cash flows
from (used in) financing activities
|
(179,021)
|
|
231,160
|
Effect of exchange
rate changes on cash
|
1,152
|
|
(1,700)
|
Increase
(decrease) in cash and cash equivalents
|
(119,891)
|
|
170,558
|
Cash and cash
equivalents:
|
|
|
|
Beginning of
period
|
371,437
|
|
282,894
|
End of
period
|
$
|
251,546
|
|
$
|
453,452
|
OUTERWALL INC.
BUSINESS SEGMENT AND
ENTERPRISEWIDE INFORMATION
(unaudited)
The analysis and reconciliation of the company's segment
information to the consolidated financial statements that follows
covers the company's results of operations, which consists of the
Redbox, Coinstar and New Ventures segments. Unallocated general and
administrative expenses relate to share-based compensation and
expense related to the rights to receive cash issued in connection
with our acquisition of ecoATM.
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2014
|
Redbox
|
|
Coinstar
|
|
New
Ventures
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
515,656
|
|
|
$
|
68,753
|
|
|
$
|
15,960
|
|
|
$
|
—
|
|
|
$
|
600,369
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
368,604
|
|
|
37,723
|
|
|
16,339
|
|
|
1,979
|
|
|
424,645
|
|
Marketing
|
5,064
|
|
|
1,006
|
|
|
829
|
|
|
698
|
|
|
7,597
|
|
Research and
development
|
8
|
|
|
269
|
|
|
2,416
|
|
|
781
|
|
|
3,474
|
|
General and
administrative
|
39,061
|
|
|
7,020
|
|
|
3,800
|
|
|
3,110
|
|
|
52,991
|
|
Segment operating
income (loss)
|
102,919
|
|
|
22,735
|
|
|
(7,424)
|
|
|
(6,568)
|
|
|
111,662
|
|
Less: depreciation,
amortization and other
|
(40,563)
|
|
|
(8,563)
|
|
|
(3,817)
|
|
|
—
|
|
|
(52,943)
|
|
Operating income
(loss)
|
62,356
|
|
|
14,172
|
|
|
(11,241)
|
|
|
(6,568)
|
|
|
58,719
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,368)
|
|
|
(9,368)
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,645)
|
|
|
(9,645)
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,744)
|
|
|
(1,744)
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
62,356
|
|
|
$
|
14,172
|
|
|
$
|
(11,241)
|
|
|
$
|
(27,325)
|
|
|
$
|
37,962
|
|
|
|
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2013
|
Redbox
|
|
Coinstar
|
|
New
Ventures
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
507,920
|
|
|
$
|
65,383
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
573,307
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
366,681
|
|
|
37,656
|
|
|
217
|
|
|
341
|
|
|
404,895
|
|
Marketing
|
6,199
|
|
|
1,053
|
|
|
67
|
|
|
67
|
|
|
7,386
|
|
Research and
development
|
4
|
|
|
1,768
|
|
|
455
|
|
|
80
|
|
|
2,307
|
|
General and
administrative
|
42,862
|
|
|
6,289
|
|
|
1,606
|
|
|
2,704
|
|
|
53,461
|
|
Segment operating
income (loss)
|
92,174
|
|
|
18,617
|
|
|
(2,341)
|
|
|
(3,192)
|
|
|
105,258
|
|
Less: depreciation,
amortization and other
|
(40,377)
|
|
|
(8,184)
|
|
|
(36)
|
|
|
—
|
|
|
(48,597)
|
|
Operating income
(loss)
|
51,797
|
|
|
10,433
|
|
|
(2,377)
|
|
|
(3,192)
|
|
|
56,661
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,025)
|
|
|
(7,025)
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,533)
|
|
|
(5,533)
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
59
|
|
|
59
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
51,797
|
|
|
$
|
10,433
|
|
|
$
|
(2,377)
|
|
|
$
|
(15,691)
|
|
|
$
|
44,162
|
|
OUTERWALL
INC.
2014 SECOND
QUARTER AND FULL YEAR GUIDANCE
(as of May 1,
2014)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions,
except per share amounts)
|
|
|
|
|
|
|
2014 SECOND
QUARTER GUIDANCE
|
RANGE
|
|
Consolidated
revenue
|
|
$546
|
to
|
$576
|
|
Core adjusted EBITDA
from continuing operations
|
|
$103
|
to
|
$118
|
|
Core diluted EPS from
continuing operations(1)
|
|
$1.24
|
to
|
$1.44
|
|
Average diluted
shares outstanding(1)
|
|
20.4
|
to
|
20.5
|
|
|
|
|
|
|
|
|
2014 FULL YEAR
GUIDANCE
|
|
|
|
|
|
|
Consolidated
results:
|
|
|
|
|
|
|
Revenue
|
|
$2,378
|
to
|
$2,488
|
|
Core adjusted EBITDA
from continuing operations
|
|
$487
|
to
|
$527
|
|
Core diluted EPS from
continuing operations(1)
|
|
$6.68
|
to
|
$7.18
|
|
Free cash
flow
|
|
$200
|
to
|
$240
|
|
Average diluted
shares outstanding(1)
|
|
21.5
|
to
|
21.6
|
|
Effective tax
rate
|
|
38.5%
|
to
|
39.5%
|
|
Segment
revenue:
|
|
|
|
|
|
|
Redbox
|
|
$1,949
|
to
|
$2,044
|
|
Coinstar
|
|
$307
|
to
|
$312
|
|
New
Ventures
|
|
$122
|
to
|
$132
|
|
|
|
|
|
|
|
|
Capital
expenditures:
|
|
|
|
|
|
|
Redbox
CAPEX
|
|
$22
|
to
|
$27
|
|
Kiosk, software and
other
|
|
$7
|
to
|
$9
|
|
Maintenance
|
|
$15
|
to
|
$18
|
|
Coinstar
CAPEX
|
|
$15
|
to
|
$19
|
|
New
|
|
$11
|
to
|
$14
|
|
Maintenance
|
|
$4
|
to
|
$5
|
|
New
Ventures
|
|
$35
|
to
|
$44
|
|
Corporate
|
|
$28
|
to
|
$35
|
|
Total
CAPEX
|
|
$100
|
to
|
$125
|
|
|
|
|
|
|
|
|
Net kiosk
installations:
|
|
|
|
|
|
|
Redbox
|
|
(50)
|
to
|
(450)
|
|
U.S.
|
|
(500)
|
to
|
(700)
|
|
Canada
|
|
250
|
to
|
450
|
|
Coinstar
|
|
250
|
to
|
450
|
|
New
Ventures
|
|
1,000
|
to
|
1,300
|
|
|
(1) Excludes the
impact of any future share repurchases for the remainder of
2014
|
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").
We use the following non-GAAP financial measures to evaluate our
financial results:
- Core adjusted EBITDA from continuing operations;
- Core diluted earnings per share ("EPS") from continuing
operations;
- Free cash flow; and
- Net debt and net leverage ratio.
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.
Core and Non-Core Results
We distinguish our core activities, those associated with our
primary operations which we directly control, from non-core
activities. Non-core activities are primarily nonrecurring events
or events we do not directly control. Our non-core adjustments
include i) restructuring costs associated with actions to reduce
costs in our continuing operations primarily through workforce
reductions across the Company, ii) compensation expense for rights
to receive cash issued in conjunction with our acquisition of
ecoATM and attributable to post-combination services as they are
fixed amount acquisition related awards and not indicative of the
directly controllable future business results, iii) income or loss
from equity method investments, which represents our share of
income or loss from entities we do not consolidate or control, and
iv) a tax benefit related to a net operating loss adjustment
("Non-Core Adjustments").
We believe investors should consider our core results because
they are more indicative of our ongoing performance and trends, are
more consistent with how management evaluates our operational
results and trends, provide meaningful supplemental information to
investors through the exclusion of certain expenses which are
either non-recurring or may not be indicative of our directly
controllable business operating results, allow for greater
transparency in assessing our performance, help investors better
analyze the results of our business and assist in forecasting
future periods.
Core Adjusted EBITDA from continuing operations
Our non-GAAP financial measure core adjusted EBITDA from
continuing operations is defined as earnings from continuing
operations before depreciation, amortization and other; interest
expense, net; income taxes; share-based payments expense; and
Non-Core Adjustments.
A reconciliation of core adjusted EBITDA from continuing
operations to net income from continuing operations, the most
comparable GAAP financial measure, is presented in the following
table:
|
Three Months
Ended
|
|
March
31,
|
Dollars in
thousands
|
2014
|
|
2013
|
Net income from
continuing operations
|
$
|
23,886
|
|
$
|
28,007
|
Depreciation,
amortization and other
|
52,943
|
|
48,597
|
Interest expense,
net
|
9,645
|
|
5,533
|
Income
taxes
|
14,076
|
|
16,155
|
Share-based payments
expense(1)
|
3,765
|
|
4,837
|
Adjusted EBITDA from
continuing operations
|
104,315
|
|
103,129
|
Non-Core
Adjustments:
|
|
|
|
Restructuring
costs
|
469
|
|
—
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
3,421
|
|
—
|
Loss from equity
method investments
|
9,368
|
|
7,025
|
Core adjusted EBITDA
from continuing operations
|
$
|
117,573
|
|
$
|
110,154
|
|
(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.
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,
|
|
2014
|
|
2013
|
Diluted EPS from
continuing operations
|
$
|
0.96
|
|
$
|
0.97
|
Non-Core Adjustments,
net of tax:(1)
|
|
|
|
Restructuring
costs
|
0.01
|
|
—
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
0.11
|
|
—
|
Loss from equity
method investments
|
0.23
|
|
0.15
|
Tax benefit from net
operating loss adjustment
|
(0.04)
|
|
—
|
Core diluted EPS from
continuing operations
|
$
|
1.27
|
|
$
|
1.12
|
|
(1)
|
Non-Core Adjustments
are presented after-tax using the applicable effective tax rate for
the respective periods.
|
Free Cash Flow
Our non-GAAP financial measure free cash flow is defined as net
cash provided by operating activities after capital expenditures.
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 securities.
A reconciliation of free cash flow to net cash provided by
operating activities, the most comparable GAAP financial measure,
is presented in the following table:
|
Three Months
Ended
|
|
March
31,
|
Dollars in
thousands
|
2014
|
|
2013
|
Net cash provided by
operating activities
|
$
|
94,305
|
|
$
|
41,102
|
Purchase of property
and equipment
|
(26,658)
|
|
(33,231)
|
Free cash
flow
|
$
|
67,647
|
|
$
|
7,871
|
Net Debt and Net Leverage Ratio
Our non-GAAP financial measure net debt is defined as the total
face value of outstanding debt, including capital leases, less cash
and cash equivalents held in financial institutions domestically.
Our non-GAAP financial measure net leverage ratio is defined as net
debt divided by core adjusted EBITDA from continuing operations for
the last twelve months (LTM). We believe net debt and net leverage
ratio are important non-GAAP measures because they:
- are used to assess the degree of leverage by management;
- provide additional information to users of the financial
statements regarding our ability to service, incur or pay down
indebtedness and repurchase our securities as well as additional
information about our capital structure; and
- are reported quarterly to support covenant compliance under our
credit agreement.
A reconciliation of net debt to total outstanding debt including
capital leases, the most comparable GAAP financial measure, is
presented in the following table:
|
March
31,
|
|
December
31,
|
Dollars in
thousands
|
2014
|
|
2013
|
Senior unsecured
notes
|
$
|
350,000
|
|
$
|
350,000
|
Term loans
|
335,000
|
|
344,375
|
Revolving line of
credit
|
255,000
|
|
—
|
Convertible
debt(1)
|
51,144
|
|
51,148
|
Capital
leases
|
20,701
|
|
21,361
|
Total principal value
of outstanding debt including capital leases
|
1,011,845
|
|
766,884
|
Less domestic cash
and cash equivalents held in financial institutions
|
(90,863)
|
|
(199,027)
|
Net debt
|
920,982
|
|
567,857
|
LTM Core adjusted
EBITDA from continuing operations(2)
|
$
|
499,071
|
|
$
|
491,652
|
Net leverage
ratio
|
1.85
|
|
1.15
|
|
|
|
|
(1)
|
The Convertible debt
balance on our Consolidated Balance Sheets as of March 31, 2014 and
December 31, 2013 included $0.9 million and $1.4 million,
respectively, in associated debt discount.
|
|
(2)
|
LTM Core Adjusted
EBITDA from continuing operations for the twelve months ended March
31, 2014 and December 31, 2013 was determined as
follows:
|
|
|
Dollars in
thousands
|
|
Core adjusted EBITDA
from continuing operations for the three months ended March 31,
2014
|
$
|
117,573
|
Add: Core adjusted
EBITDA from continuing operations for the twelve months ended
December 31, 2013(A)
|
491,652
|
Less: Core adjusted
EBITDA from continuing operations for the three months ended March
31, 2013
|
(110,154)
|
LTM Core adjusted
EBITDA from continuing operations for the twelve months ended March
31, 2014
|
$
|
499,071
|
|
|
|
|
(A)
|
Core adjusted EBITDA
from continuing operations for the twelve months ended December 31,
2013 is obtained from our Annual Report on Form 10-K for the period
ended December 31, 2013, where it is reconciled to net income from
continuing operations, the most comparable GAAP financial measure,
and represents the LTM core adjusted EBITDA from continuing
operations we use in our calculation of net leverage ratio as of
December 31, 2013.
|
SOURCE Outerwall Inc.