BELLEVUE, Wash., Oct. 30, 2014 /PRNewswire/ -- Outerwall Inc.
(Nasdaq: OUTR) today reported financial results for the third
quarter ended September 30, 2014.
(Logo:
http://photos.prnewswire.com/prnh/20130701/AQ41388LOGO)
"We made substantial progress on a number of fronts during the
third quarter, including the disciplined execution of our
initiatives to improve efficiency," said J.
Scott Di Valerio, Outerwall's chief executive officer. "Our
focus on managing Outerwall for profitability is driving tangible
results, including solid core adjusted EBITDA from continuing
operations and improvement of operating margins. On the content
side, our studio relationships remain strong. We signed a new
agreement with Lionsgate and extended our existing agreement with
Universal Studios. Finally, we are scaling our ecoATM business
through significant kiosk installations and several new agreements
with our retail partners."
For purposes of year-over-year comparisons of third quarter 2014
GAAP results, the company noted that it completed the acquisition
of ecoATM in the third quarter of 2013. As a result, Outerwall
recognized a pretax gain on the re-measurement of its previously
held 23% equity interest in ecoATM. This non-core item benefitted
third quarter 2013 income from continuing operations by
$68.4 million and third quarter 2013
diluted EPS from continuing operations by $2.36.
|
2014
|
|
2013
|
|
Change
|
|
Third
Quarter
|
|
Third
Quarter
|
|
%
|
GAAP
Results
|
|
|
|
|
|
• Consolidated
revenue
|
$
|
552.9 million
|
|
$
|
586.5 million
|
|
(5.7)%
|
• Income from
continuing operations
|
$
|
17.9 million
|
|
$
|
86.8 million
|
|
(79.4)%
|
• Net
income
|
$
|
17.9 million
|
|
$
|
82.7 million
|
|
(78.4)%
|
• Diluted EPS from
continuing operations
|
$
|
0.93
|
|
$
|
3.10
|
|
(70.0)%
|
• Net cash provided
by operating activities
|
$
|
49.6 million
|
|
$
|
60.9 million
|
|
(18.6)%
|
|
|
|
|
|
|
Core
Results*
|
|
|
|
|
|
• Core adjusted
EBITDA from continuing operations
|
$
|
111.6 million
|
|
$
|
114.3 million
|
|
(2.3)%
|
• Core diluted EPS
from continuing operations
|
$
|
1.44
|
|
$
|
1.12
|
|
28.6%
|
• Free cash
flow
|
$
|
30.3 million
|
|
$
|
21.8 million
|
|
38.9%
|
|
*Refer to Appendix A
for a discussion of Non-GAAP Financial Measures and Core and
Non-Core Results.
|
Highlights from the third quarter of 2014 include:
- Managed the business for profitability as demonstrated by solid
core adjusted EBITDA from continuing operations despite lower
revenue that was driven primarily by soft flow-through from the
second quarter of 2014 and the unfavorable timing of releases in
the third quarter of 2014
- General and administrative (G&A) expenses improved 21.6%
compared with the third quarter of 2013 as a result of the
company's ongoing focus on expense management initiatives
- Segment operating margins in the Redbox and Coinstar businesses
increased both year-over-year and sequentially
- Extended the existing content agreement with Universal and
recently signed a new content agreement with Lionsgate
- Installed more than 530 net new
ecoATM® kiosks in the quarter and
signed several new installation agreements with retail
partners
- Generated $30.3 million in free
cash flow in the quarter, bringing the year-to-date total to
$134.7 million
- Repurchased $70.6 million, or
approximately 1.2 million shares, of common stock in the
quarter
- Settled all outstanding conversions on the company's 4.0%
Senior Convertible Notes that matured on September 2, 2014
"Our third quarter results reflect our ongoing efforts to align
costs and capital expenditures across the business with our revenue
growth opportunities," said Galen C.
Smith, chief financial officer of Outerwall. "We are on
track to achieve our commitment of $22
million in G&A savings in 2014, with a substantial
year-over-year improvement in G&A expense resulting in an
increase in operating income margins year-over-year and
sequentially. We achieved this improvement despite a weaker content
release schedule in the quarter. Importantly, we continue to
generate strong cash flow and repurchased more than $70 million of our common stock in the
quarter."
CONSOLIDATED RESULTS
Consolidated revenue for the third quarter of 2014 decreased
$33.7 million, or 5.7% to
$552.9 million compared with
$586.5 million for the third quarter
of 2013. The year-over-year decline in consolidated revenue was
primarily due to a $53.6 million
decrease in revenue from the company's Redbox segment. The decrease
in Redbox revenue was primarily due to soft flow-through from a
weak release schedule in the second quarter of 2014 and the
unfavorable timing and mix of content released in the third quarter
of 2014.
G&A expenses were $47.9
million in the third quarter of 2014, a decrease of 21.6%
from $61.0 million in the third
quarter of 2013. The improvement was primarily due to the company's
ongoing focus on expense management initiatives and also reflects a
shift in the timing of expenses as certain initiatives and new
hires moved from the third quarter to the fourth quarter of
2014.
Operating income for the third quarter of 2014 was $56.6 million and operating margin was 10.2%
compared with operating income of $55.2
million and operating margin of 9.4% in the third quarter of
2013. The year-over-year increase in operating margin primarily
reflects the improvement in G&A and direct operating
expenses.
Income from continuing operations for the third quarter of 2014
was $17.9 million, or
$0.93 earnings per diluted share from
continuing operations, compared with $86.8 million, or $3.10 per diluted share, in the third quarter of
2013. Income from continuing operations in the third quarter of
2013 benefitted from a $68.4 million
gain on the company's previously held equity interest in ecoATM
that added $2.36 to earnings per
diluted share from continuing operations.
Core adjusted EBITDA from continuing operations for the third
quarter of 2014 was $111.6 million compared with $114.3 million in the third quarter of 2013.
The year-over-year decline was primarily due to lower segment
operating income in the Redbox segment partially offset by an
increase in segment operating income in the Coinstar segment and
lower segment operating losses in the New Ventures segment.
Core diluted earnings per share from continuing operations in
the third quarter of 2014 was $1.44
compared with $1.12 per diluted share
in the third quarter of 2013.
Net cash provided by operating activities in the third quarter
of 2014 was $49.6 million
compared with $60.9 million in
the third quarter of 2013. The decrease was primarily due to lower
net income in the third quarter of 2014, an increase in net
non-cash income and expense primarily related to the one-time gain
of $68.4 million in the third quarter
of 2013 on the company's previously held equity interest in ecoATM
and changes in working capital.
Cash capital expenditures for the third quarter of 2014 were
$19.3 million compared with
$39.1 million in the third
quarter of 2013. In 2013, the higher level of capital expenditures
was due to the vertical merchandising zone retrofit at Redbox and
higher corporate expenditures related to enterprise software
development initiatives.
Free cash flow for the third quarter of 2014 was $30.3 million, compared with $21.8 million in the third quarter of 2013,
primarily driven by lower capital expenditures partially offset by
lower operating cash flow.
SEGMENT RESULTS
Redbox
Redbox segment revenue in the third quarter of 2014 was
$438.0 million compared with
$491.7 million in the third
quarter of 2013. The year-over-year decrease in revenues was
primarily due to soft flow-through from a weak release schedule in
the second quarter of 2014 and the unfavorable timing and mix of
content released in the third quarter of 2014. Rentals declined
13.7% compared with the third quarter of 2013 to approximately
172.2 million. Same store sales decreased 11.8% in the third
quarter of 2014 compared with an increase of 2.1% in the third
quarter of 2013, reflecting lower revenues in the quarter.
Net revenue per rental increased $0.08, or 3.3% to $2.54 from $2.46 in
the third quarter of 2013. The increase was primarily the result of
a higher percentage of Blu-ray and video game rentals as a percent
of total disc rentals and a continued stabilization in single night
rentals primarily due to more effective marketing promotions.
Redbox segment operating income in the third quarter of 2014 was
$85.7 million compared with
$91.0 million in the third quarter of
2013. Segment operating margin was 19.6% in the third quarter of
2014 compared with 18.5% in the third quarter of 2013, as the
company continued to focus on managing G&A expenses and direct
operating costs.
Coinstar
Coinstar segment revenue was $85.1
million, an increase of 6.9%, compared with $79.6 million in the third quarter of 2013,
primarily due to the U.S. price increase that was implemented on
October 1, 2013. Additional factors
impacting revenue included higher volume in the U.K. due to an
increase in the U.K. kiosk base, a price increase in the U.K., and
an increase in the number of Coinstar™ Exchange kiosks. Same store
sales grew 5.8% in the third quarter of 2014 compared with 0.4% in
the third quarter of 2013, reflecting the higher revenue. The
average transaction size in the third quarter of 2014 increased
$0.67 to $41.92 from the third quarter of 2013.
Effective August 1, 2014, the
company implemented a price increase for all U.K. grocery retail
locations for the coin voucher product, increasing the fee from
8.9% to 9.9%.
Coinstar segment operating income was $33.4 million in the third quarter of 2014,
an increase of 20.9% compared with the third quarter of 2013, and
Coinstar segment operating margin was 39.3% in the third quarter of
2014, an increase of 460 basis points compared with 34.7% in the
third quarter of 2013. The increases reflect the increase in
revenue as well as continued efforts to manage costs and increase
productivity in the business.
New Ventures
New Ventures segment revenue was $29.7
million compared with $15.2
million in the third quarter of 2013, primarily due to the
inclusion of the ecoATM business that was acquired in July 2013 and an increase in the number of
installed ecoATM kiosks and the continued ramping of ecoATM kiosks
deployed in the 12 months following the end of the third quarter of
2013. New Ventures segment revenue also increased sequentially from
the second quarter of 2014 primarily due to an increase in the
number of devices collected in the ecoATM business primarily as a
result of competitive pricing, kiosk enhancements, and a higher
installed kiosk base.
New Ventures segment operating loss of $4.4 million in the third quarter of 2014
decreased from a loss of $5.4 million in the third quarter of 2013.
The operating loss in the third quarter of 2013 included
$4.0 million in costs associated with
the acquisition of ecoATM. Direct operating costs increased
year-over-year as the company continued to invest in the teams and
infrastructure needed to scale the ecoATM business and support the
ongoing testing of SAMPLEit.
During the quarter, ecoATM signed several new kiosk installation
agreements with retail partners, primarily in the grocery channel,
and installed approximately 530 net new ecoATM kiosks. At
September 30, 2014, New Ventures had approximately 1,550
kiosks installed, including approximately 1,510 ecoATM kiosks.
REDBOX INSTANT BY VERIZON JOINT VENTURE
On October 22, 2014, the company
announced that Redbox withdrew as a member of the Redbox Instant by
Verizon joint venture. As part of the agreement, Redbox received a
cash payment of $16.8 million in the
fourth quarter of 2014. Over the life of the joint venture,
Outerwall received $70.5 million in
cash, including the $16.8 million,
from payments for services and kiosk nights and invested
$77.0 million in capital
contributions, including $14.0
million in the third quarter of 2014. In addition, the
company realized approximately $29.9
million in cash tax savings through deductions arising from
the recognition of the company's share of the joint venture's
losses through September 30, 2014.
The company will make no further capital contributions related to
the joint venture. The company does not expect a material net
financial impact in the fourth quarter of 2014.
SHARE REPURCHASES AND CAPITAL STRUCTURE
During the third quarter of 2014, the company repurchased
approximately $70.6 million of its
common stock, representing approximately 1.2 million shares at an
average price of $59.52 per share. At
September 30, 2014, there was
approximately $162.9 million in
authority remaining under the company's stock repurchase
authorization.
On September 2, 2014, the
company's remaining outstanding 4.0% Convertible Senior Notes
matured. During the quarter, the company retired or settled upon
maturity $33.4 million in face value
of convertible notes for $33.4 million in cash and the issuance of
248,944 shares of its common stock.
The company's net leverage ratio1 was 2.10x at
September 30, 2014. The company
continues to target a net leverage ratio in the range of 1.75x to
2.25x in 2014.
___________________________
|
1 Refer to
Appendix A for a discussion of Non-GAAP Financial Measures and Core
and Non-Core Results.
|
|
GUIDANCE
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
better capture the varying seasonal patterns of each of its
businesses.
The company provided guidance for the fourth quarter of 2014 and
narrowed the range for its full-year 2014 guidance to reflect:
- a shift in costs related to key initiatives and hiring to the
fourth quarter of 2014;
- lapping the price increase in the Coinstar business for U.S.
retail grocery locations;
- a lower average selling price for devices in our ecoATM
business due to the iPhone® 6 launch and
the timing of ecoATM kiosk installations; and
- share repurchases in the third quarter of 2014.
The following table presents the company's fourth quarter 2014
and full-year 2014 guidance:
OUTERWALL INC.
2014 FOURTH QUARTER AND FULL YEAR GUIDANCE
|
|
In millions,
except per share amounts
|
2014 FOURTH
QUARTER GUIDANCE
|
As
of
October 30,
2014
|
Consolidated
revenue
|
$575 ‒
$605
|
Core adjusted EBITDA
from continuing operations
|
$123 ‒
$138
|
Core diluted EPS from
continuing operations(1)
|
$1.85 ‒
$2.15
|
Average diluted
shares outstanding(1)
|
18.5 ‒
18.6
|
|
|
In millions,
except per share amounts
|
|
2014 FULL YEAR
GUIDANCE
|
As
of
October 30,
2014
|
Consolidated
results
|
|
Revenue
|
$2,277 ‒
$2,307
|
Core adjusted EBITDA
from continuing operations
|
$462 ‒
$477
|
Core diluted EPS from
continuing operations(1)
|
$5.98 ‒
$6.28
|
Free cash
flow
|
$210 ‒
$240
|
Average diluted
shares outstanding(1)
|
20.6 ‒
20.7
|
Effective tax
rate
|
37% ‒ 39%
|
|
|
Segment
revenue
|
|
Redbox
|
$1,868 ‒
$1,890
|
Coinstar
|
$312 ‒
$315
|
New
Ventures
|
$97 ‒ $102
|
|
|
Capital
expenditures
|
|
Redbox:
|
|
Kiosk, software and
other
|
$8 ‒ $9
|
Maintenance
|
$16 ‒ $18
|
Total
Redbox
|
$24 ‒
$27
|
|
|
Coinstar:
|
|
New
|
$13 ‒ $14
|
Maintenance
|
$4 ‒ $5
|
Total
Coinstar
|
$17 ‒
$19
|
|
|
New
Ventures
|
$41 ‒
$44
|
Corporate
|
$18 ‒
$20
|
TOTAL
CAPEX
|
$100 ‒
$110
|
|
|
Net kiosk
installations:
|
|
Redbox:
|
|
U.S.
|
(700) ‒
(500)
|
Canada
|
300 ‒ 400
|
Redbox
total
|
(400) ‒
(100)
|
Coinstar
|
300 ‒
400
|
New
Ventures
|
1,000 ‒
1,200
|
(1) Excludes the
impact of any future share repurchases for the remainder of
2014
|
ADDITIONAL INFORMATION
Additional information regarding the company's 2014 third
quarter operating and financial results and guidance are included
in the company's prepared remarks. 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 2:30 p.m. PDT (5:30 p.m.
EDT) to discuss third quarter 2014 earnings results and
fourth quarter and full-year 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 November 14, 2014, at
1-888-843-7419 or 1‑630-652-3042, passcode 3815 8258.
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 fourth 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 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 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.
(Financial Statements Follow)
OUTERWALL
INC.
EARNINGS RELEASE
SCHEDULES
Three Months and
Nine Months Ended September 30, 2014
|
|
•
Consolidated
Statements of Comprehensive Income
|
10
|
•
Consolidated
Balance Sheets
|
11
|
•
Consolidated
Statements of Cash Flows
|
12
|
•
Business
Segment and Enterprisewide Information
|
14
|
•
APPENDIX
A
|
|
◦
Non-GAAP Financial Measures
|
16
|
◦ Core
and Non-Core Results
|
16
|
◦ Core
Adjusted EBITDA From Continuing Operations
|
17
|
◦ Core Diluted EPS From Continuing
Operations
|
17
|
◦ Free
Cash Flow
|
18
|
◦ Net
Debt and Net Leverage Ratio
|
18
|
OUTERWALL
INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands,
except per share data)
(unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenue
|
$
|
552,864
|
|
$
|
586,539
|
|
$
|
1,702,403
|
|
$
|
1,712,896
|
Expenses:
|
|
|
|
|
|
|
|
Direct
operating(1)
|
384,111
|
|
405,973
|
|
1,194,815
|
|
1,174,818
|
Marketing
|
9,762
|
|
8,395
|
|
27,142
|
|
22,903
|
Research and
development
|
2,999
|
|
3,510
|
|
9,885
|
|
8,171
|
General and
administrative
|
47,864
|
|
61,031
|
|
149,829
|
|
168,786
|
Depreciation and
other
|
47,896
|
|
49,245
|
|
146,171
|
|
143,156
|
Amortization of
intangible assets
|
3,671
|
|
3,191
|
|
11,366
|
|
7,085
|
Total
expenses
|
496,303
|
|
531,345
|
|
1,539,208
|
|
1,524,919
|
Operating
income
|
56,561
|
|
55,194
|
|
163,195
|
|
187,977
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
Income (loss) from
equity method investments, net
|
(11,352)
|
|
57,934
|
|
(31,261)
|
|
41,280
|
Interest expense,
net
|
(12,463)
|
|
(8,402)
|
|
(35,037)
|
|
(25,953)
|
Other, net
|
(3,015)
|
|
(2,402)
|
|
(1,857)
|
|
(3,323)
|
Total other income
(expense), net
|
(26,830)
|
|
47,130
|
|
(68,155)
|
|
12,004
|
Income from
continuing operations before income taxes
|
29,731
|
|
102,324
|
|
95,040
|
|
199,981
|
Income tax
expense
|
(11,841)
|
|
(15,529)
|
|
(31,454)
|
|
(34,766)
|
Income from
continuing operations
|
17,890
|
|
86,795
|
|
63,586
|
|
165,215
|
Loss from
discontinued operations, net of tax
|
—
|
|
(4,139)
|
|
(768)
|
|
(13,098)
|
Net income
|
17,890
|
|
82,656
|
|
62,818
|
|
152,117
|
Foreign currency
translation adjustment(2)
|
(695)
|
|
1,852
|
|
(156)
|
|
(304)
|
Comprehensive
income
|
$
|
17,195
|
|
$
|
84,508
|
|
$
|
62,662
|
|
$
|
151,813
|
Basic earnings (loss)
per share:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
0.95
|
|
$
|
3.19
|
|
$
|
3.06
|
|
$
|
6.03
|
Discontinued
operations
|
—
|
|
(0.16)
|
|
(0.04)
|
|
(0.48)
|
Basic earnings per
share
|
$
|
0.95
|
|
$
|
3.03
|
|
$
|
3.02
|
|
$
|
5.55
|
Diluted earnings
(loss) per share:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
0.93
|
|
$
|
3.10
|
|
$
|
2.98
|
|
$
|
5.78
|
Discontinued
operations
|
—
|
|
(0.15)
|
|
(0.04)
|
|
(0.46)
|
Diluted earnings per
share
|
$
|
0.93
|
|
$
|
2.95
|
|
$
|
2.94
|
|
$
|
5.32
|
Weighted average
shares used in basic per share calculations
|
18,798
|
|
27,244
|
|
20,792
|
|
27,391
|
Weighted average
shares used in diluted per share calculations
|
19,147
|
|
28,016
|
|
21,372
|
|
28,582
|
|
|
(1)
|
"Direct operating"
excludes depreciation and other of $32.0 million and $96.5 million
for the three and nine months ended September 30, 2014,
respectively, and $33.0 million and $97.3 million for the three and
nine months ended September 30, 2013, respectively.
|
(2)
|
Foreign currency
translation adjustment had no tax effect for the three and nine
months ended September 30, 2014 and 2013,
respectively.
|
OUTERWALL
INC.
CONSOLIDATED
BALANCE SHEETS
(in thousands,
except share data)
(unaudited)
|
|
|
September 30,
2014
|
|
December 31,
2013
|
Assets
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
184,901
|
|
$
|
371,437
|
Accounts receivable,
net of allowances of $1,700 and $1,826
|
32,787
|
|
50,296
|
Content
library
|
151,068
|
|
199,868
|
Prepaid expenses and
other current assets
|
59,807
|
|
84,709
|
Total current
assets
|
428,563
|
|
706,310
|
Property and
equipment, net
|
451,346
|
|
520,865
|
Deferred income
taxes
|
9,290
|
|
6,443
|
Goodwill and other
intangible assets, net
|
627,324
|
|
638,690
|
Other long-term
assets
|
11,510
|
|
19,075
|
Total
assets
|
$
|
1,528,033
|
|
$
|
1,891,383
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
|
138,123
|
|
$
|
236,018
|
Accrued payable to
retailers
|
105,989
|
|
134,140
|
Other accrued
liabilities
|
129,873
|
|
134,127
|
Current portion of
long-term debt and other long-term liabilities
|
20,595
|
|
103,889
|
Deferred income
taxes
|
33,154
|
|
23,143
|
Total current
liabilities
|
427,734
|
|
631,317
|
Long-term debt and
other long-term liabilities
|
1,022,803
|
|
681,403
|
Deferred income
taxes
|
29,370
|
|
58,528
|
Total
liabilities
|
1,479,907
|
|
1,371,248
|
Commitments and
contingencies
|
|
|
|
Debt conversion
feature
|
—
|
|
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;
|
|
|
|
36,593,850 and
36,356,357 shares issued;
|
|
|
|
18,894,926 and
26,150,900 shares outstanding;
|
470,157
|
|
482,481
|
Treasury
stock
|
(997,697)
|
|
(476,796)
|
Retained
earnings
|
576,589
|
|
513,771
|
Accumulated other
comprehensive loss
|
(923)
|
|
(767)
|
Total stockholders'
equity
|
48,126
|
|
518,689
|
Total liabilities and
stockholders' equity
|
$
|
1,528,033
|
|
$
|
1,891,383
|
OUTERWALL
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands)
(unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Operating
Activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
17,890
|
|
$
|
82,656
|
|
$
|
62,818
|
|
$
|
152,117
|
Adjustments to
reconcile net income to net cash flows from operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
other
|
47,898
|
|
49,664
|
|
146,156
|
|
144,173
|
Amortization of
intangible assets
|
3,671
|
|
3,191
|
|
11,366
|
|
7,085
|
Share-based payments
expense
|
3,249
|
|
2,774
|
|
10,093
|
|
11,454
|
Windfall excess tax
benefits related to share-based payments
|
(35)
|
|
(318)
|
|
(1,988)
|
|
(3,347)
|
Deferred income
taxes
|
(2,404)
|
|
24,813
|
|
(17,408)
|
|
(12,098)
|
Impairment
expense
|
—
|
|
2,586
|
|
—
|
|
5,262
|
Loss (income) from
equity method investments, net
|
11,352
|
|
(57,934)
|
|
31,261
|
|
(41,280)
|
Amortization of
deferred financing fees and debt discount
|
901
|
|
1,158
|
|
3,423
|
|
5,205
|
Loss from early
extinguishment of debt
|
55
|
|
1
|
|
2,018
|
|
5,950
|
Other
|
(313)
|
|
2,831
|
|
(1,477)
|
|
1,020
|
Cash flows from
changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
12,133
|
|
2,344
|
|
17,464
|
|
(306)
|
Content
library
|
1,314
|
|
4,534
|
|
48,800
|
|
9,446
|
Prepaid expenses and
other current assets
|
1,044
|
|
(20,845)
|
|
23,047
|
|
(31,456)
|
Other
assets
|
611
|
|
(633)
|
|
1,647
|
|
269
|
Accounts
payable
|
(26,011)
|
|
(14,722)
|
|
(97,006)
|
|
(70,180)
|
Accrued payable to
retailers
|
(21,099)
|
|
(9,368)
|
|
(27,822)
|
|
(9,641)
|
Other accrued
liabilities
|
(629)
|
|
(11,789)
|
|
(5,345)
|
|
(26,552)
|
Net cash flows
from operating activities(1)
|
49,627
|
|
60,943
|
|
207,047
|
|
147,121
|
Investing
Activities:
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(19,295)
|
|
(39,102)
|
|
(72,311)
|
|
(123,346)
|
Proceeds from sale of
property and equipment
|
42
|
|
56
|
|
1,835
|
|
12,888
|
Sales of short term
investments
|
—
|
|
10,000
|
|
—
|
|
—
|
Acquisition of
ecoATM, net of cash acquired
|
—
|
|
(244,036)
|
|
—
|
|
(244,036)
|
Receipt of note
receivable principal
|
—
|
|
—
|
|
—
|
|
95
|
Cash paid for equity
investments
|
(14,000)
|
|
(14,000)
|
|
(24,500)
|
|
(28,000)
|
Net cash flows
used in investing activities(1)
|
(33,253)
|
|
(287,082)
|
|
(94,976)
|
|
(382,399)
|
Financing
Activities:
|
|
|
|
|
|
|
|
Proceeds from
issuance of senior unsecured notes
|
—
|
|
—
|
|
295,500
|
|
343,769
|
Proceeds from new
borrowing on Credit Facility
|
130,000
|
|
150,000
|
|
635,000
|
|
150,000
|
Principal payments on
Credit Facility
|
(86,875)
|
|
(54,376)
|
|
(621,250)
|
|
(60,938)
|
Financing costs
associated with Credit Facility and senior unsecured
notes(2)
|
(824)
|
|
—
|
|
(2,906)
|
|
(444)
|
Settlement and
conversion of convertible debt
|
(33,425)
|
|
(30)
|
|
(51,149)
|
|
(169,664)
|
Repurchases of common
stock(3)
|
(70,598)
|
|
(23,616)
|
|
(545,078)
|
|
(95,004)
|
Principal payments on
capital lease obligations and other debt
|
(3,516)
|
|
(3,373)
|
|
(10,597)
|
|
(10,824)
|
Windfall excess tax
benefits related to share-based payments
|
35
|
|
318
|
|
1,988
|
|
3,347
|
Withholding tax paid
on vesting of restricted stock net of proceeds from exercise of
stock options
|
(59)
|
|
1,018
|
|
(1,084)
|
|
7,763
|
Net cash flows
from (used in) financing activities(1)
|
(65,262)
|
|
69,941
|
|
(299,576)
|
|
168,005
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Effect of exchange
rate changes on cash
|
563
|
|
1,183
|
|
969
|
|
(391)
|
Decrease in cash
and cash equivalents
|
(48,325)
|
|
(155,015)
|
|
(186,536)
|
|
(67,664)
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
Beginning of
period
|
233,226
|
|
370,245
|
|
371,437
|
|
282,894
|
End of
period
|
$
|
184,901
|
|
$
|
215,230
|
|
$
|
184,901
|
|
$
|
215,230
|
|
|
|
|
|
|
|
|
|
|
(1)
|
During 2013, we
discontinued four ventures previously included in our New Ventures
operating segment, Orango, Rubi, Crisp Market, and Star Studio.
Cash flows from these discontinued operations are not segregated
from cash flows from continuing operations in all periods presented
because they were not material.
|
(2)
|
Total financing costs
associated with the Credit Facility and senior unsecured notes
issued in the second quarter of 2014 were $8.2 million composed of
non-cash debt issue costs of $4.5 million recorded as debt discount
associated with our issuance of $300.0 million senior unsecured
notes due 2021, $1.5 million in deferred financing fees
associated with the senior unsecured notes, and $2.2 million in
deferred financing fees associated with the refinancing of our
credit facility. The cash payments for financing costs associated
with the Credit Facility and senior unsecured notes during the
three and nine months ended September 30, 2014 were $0.8 million
and $2.9 million, respectively. The remaining accrued balance of
the total financing cost as of September 30, 2014 was $0.8
million.
|
(3)
|
The total cost of
repurchases of common stock during the three and nine months ended
September 30, 2014 was $70.6 million and $545.2 million,
respectively, which includes $3.8 million in fees and expenses
relating to the tender offer recorded as part of the cost of
treasury stock in our Consolidated Balance Sheets. The cash
payments for the tender offer fees during the three and nine months
ended September 30, 2014 was $0.01 million and
$3.7 million, respectively. The remaining accrued balance of
the tender offer fees as of September 30, 2014 is $0.1
million.
|
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
September 30, 2014
|
Redbox
|
|
Coinstar
|
|
New
Ventures
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
438,048
|
|
$
|
85,074
|
|
$
|
29,742
|
|
$
|
—
|
|
$
|
552,864
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
312,792
|
|
42,428
|
|
26,988
|
|
1,903
|
|
384,111
|
Marketing
|
6,038
|
|
1,834
|
|
1,212
|
|
678
|
|
9,762
|
Research and
development
|
15
|
|
64
|
|
2,088
|
|
832
|
|
2,999
|
General and
administrative
|
33,527
|
|
7,313
|
|
3,885
|
|
3,139
|
|
47,864
|
Segment operating
income (loss)
|
85,676
|
|
33,435
|
|
(4,431)
|
|
(6,552)
|
|
108,128
|
Less: depreciation,
amortization and other
|
(38,207)
|
|
(8,989)
|
|
(4,371)
|
|
—
|
|
(51,567)
|
Operating income
(loss)
|
47,469
|
|
24,446
|
|
(8,802)
|
|
(6,552)
|
|
56,561
|
Loss from equity
method investments, net
|
—
|
|
—
|
|
—
|
|
(11,352)
|
|
(11,352)
|
Interest expense,
net
|
—
|
|
—
|
|
—
|
|
(12,463)
|
|
(12,463)
|
Other, net
|
—
|
|
—
|
|
—
|
|
(3,015)
|
|
(3,015)
|
Income (loss) from
continuing operations before income taxes
|
$
|
47,469
|
|
$
|
24,446
|
|
$
|
(8,802)
|
|
$
|
(33,382)
|
|
$
|
29,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2013
|
Redbox
|
|
Coinstar
|
|
New
Ventures
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
491,694
|
|
$
|
79,611
|
|
$
|
15,234
|
|
$
|
—
|
|
$
|
586,539
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
350,759
|
|
41,833
|
|
12,114
|
|
1,267
|
|
405,973
|
Marketing
|
5,883
|
|
1,352
|
|
421
|
|
739
|
|
8,395
|
Research and
development
|
69
|
|
1,428
|
|
1,358
|
|
655
|
|
3,510
|
General and
administrative
|
44,017
|
|
7,349
|
|
6,692
|
|
2,973
|
|
61,031
|
Segment operating
income (loss)
|
90,966
|
|
27,649
|
|
(5,351)
|
|
(5,634)
|
|
107,630
|
Less: depreciation,
amortization and other
|
(41,478)
|
|
(8,539)
|
|
(2,419)
|
|
—
|
|
(52,436)
|
Operating income
(loss)
|
49,488
|
|
19,110
|
|
(7,770)
|
|
(5,634)
|
|
55,194
|
Income from equity
method investments, net
|
—
|
|
—
|
|
—
|
|
57,934
|
|
57,934
|
Interest expense,
net
|
—
|
|
—
|
|
—
|
|
(8,402)
|
|
(8,402)
|
Other, net
|
—
|
|
—
|
|
—
|
|
(2,402)
|
|
(2,402)
|
Income (loss) from
continuing operations before income taxes
|
$
|
49,488
|
|
$
|
19,110
|
|
$
|
(7,770)
|
|
$
|
41,496
|
|
$
|
102,324
|
OUTERWALL
INC.
BUSINESS SEGMENT
AND ENTERPRISEWIDE INFORMATION
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2014
|
Redbox
|
|
Coinstar
|
|
New
Ventures
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
1,399,185
|
|
$
|
233,707
|
|
$
|
69,511
|
|
$
|
—
|
|
$
|
1,702,403
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
1,003,097
|
|
120,354
|
|
66,150
|
|
5,214
|
|
1,194,815
|
Marketing
|
17,282
|
|
4,397
|
|
3,188
|
|
2,275
|
|
27,142
|
Research and
development
|
41
|
|
486
|
|
6,570
|
|
2,788
|
|
9,885
|
General and
administrative
|
106,658
|
|
21,502
|
|
11,822
|
|
9,847
|
|
149,829
|
Segment operating
income (loss)
|
272,107
|
|
86,968
|
|
(18,219)
|
|
(20,124)
|
|
320,732
|
Less: depreciation,
amortization and other
|
(118,928)
|
|
(26,473)
|
|
(12,136)
|
|
—
|
|
(157,537)
|
Operating income
(loss)
|
153,179
|
|
60,495
|
|
(30,355)
|
|
(20,124)
|
|
163,195
|
Loss from equity
method investments, net
|
—
|
|
—
|
|
—
|
|
(31,261)
|
|
(31,261)
|
Interest expense,
net
|
—
|
|
—
|
|
—
|
|
(35,037)
|
|
(35,037)
|
Other, net
|
—
|
|
—
|
|
—
|
|
(1,857)
|
|
(1,857)
|
Income (loss) from
continuing operations before income taxes
|
$
|
153,179
|
|
$
|
60,495
|
|
$
|
(30,355)
|
|
$
|
(88,279)
|
|
$
|
95,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2013
|
Redbox
|
|
Coinstar
|
|
New
Ventures
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
1,478,132
|
|
$
|
219,520
|
|
$
|
15,244
|
|
$
|
—
|
|
$
|
1,712,896
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
1,040,706
|
|
119,290
|
|
12,848
|
|
1,974
|
|
1,174,818
|
Marketing
|
18,057
|
|
3,357
|
|
596
|
|
893
|
|
22,903
|
Research and
development
|
73
|
|
5,107
|
|
2,155
|
|
836
|
|
8,171
|
General and
administrative
|
128,963
|
|
20,077
|
|
11,611
|
|
8,135
|
|
168,786
|
Segment operating
income (loss)
|
290,333
|
|
71,689
|
|
(11,966)
|
|
(11,838)
|
|
338,218
|
Less: depreciation,
amortization and other
|
(122,219)
|
|
(25,493)
|
|
(2,529)
|
|
—
|
|
(150,241)
|
Operating income
(loss)
|
168,114
|
|
46,196
|
|
(14,495)
|
|
(11,838)
|
|
187,977
|
Income from equity
method investments, net
|
—
|
|
—
|
|
—
|
|
41,280
|
|
41,280
|
Interest expense,
net
|
—
|
|
—
|
|
—
|
|
(25,953)
|
|
(25,953)
|
Other, net
|
—
|
|
—
|
|
—
|
|
(3,323)
|
|
(3,323)
|
Income (loss) from
continuing operations before income taxes
|
$
|
168,114
|
|
$
|
46,196
|
|
$
|
(14,495)
|
|
$
|
166
|
|
$
|
199,981
|
APPENDIX A
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 for
the periods presented include i) restructuring costs associated
with actions to reduce costs in our continuing operations primarily
through workforce reductions across the Company, ii) acquisition
costs primarily related to the acquisition of ecoATM, iii)
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, iv) income or loss from equity method
investments, which represents our share of income or loss from
entities we do not consolidate or control and includes the impacts
of the gain on re-measurement of our previously held equity
interest in ecoATM upon acquisition, and v) tax benefits related to
a net operating loss adjustment and the recognition of a worthless
stock deduction in a corporate subsidiary ("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 nonrecurring 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
|
|
Nine Months
Ended
|
|
September
30,
|
September
30,
|
Dollars in
thousands
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net income from
continuing operations
|
$
|
17,890
|
|
$
|
86,795
|
|
$
|
63,586
|
|
$
|
165,215
|
Depreciation,
amortization and other
|
51,567
|
|
52,436
|
|
157,537
|
|
150,241
|
Interest expense,
net
|
12,463
|
|
8,402
|
|
35,037
|
|
25,953
|
Income
taxes
|
11,841
|
|
15,529
|
|
31,454
|
|
34,766
|
Share-based payments
expense(1)
|
3,249
|
|
2,774
|
|
10,093
|
|
11,454
|
Adjusted EBITDA from
continuing operations
|
97,010
|
|
165,936
|
|
297,707
|
|
387,629
|
Non-Core
Adjustments:
|
|
|
|
|
|
|
|
Restructuring
costs
|
—
|
|
—
|
|
469
|
|
—
|
Acquisition
costs
|
—
|
|
4,003
|
|
—
|
|
5,669
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
3,274
|
|
2,300
|
|
10,033
|
|
2,300
|
Loss from equity
method investments
|
11,352
|
|
10,442
|
|
31,261
|
|
27,096
|
Gain on previously
held equity interest in ecoATM
|
—
|
|
(68,376)
|
|
—
|
|
(68,376)
|
Core adjusted EBITDA
from continuing operations
|
$
|
111,636
|
|
$
|
114,305
|
|
$
|
339,470
|
|
$
|
354,318
|
(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
|
|
Nine Months
Ended
|
September
30,
|
|
September
30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Diluted EPS from
continuing operations
|
$
|
0.93
|
|
$
|
3.10
|
|
$
|
2.98
|
|
$
|
5.78
|
Non-Core Adjustments,
net of tax:(1)
|
|
|
|
|
|
|
|
Restructuring
costs
|
—
|
|
—
|
|
0.01
|
|
—
|
Acquisition
costs
|
—
|
|
0.09
|
|
—
|
|
0.14
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
0.14
|
|
0.06
|
|
0.37
|
|
0.06
|
Loss from equity
method investments
|
0.36
|
|
0.23
|
|
0.89
|
|
0.58
|
Gain on previously
held equity interest on ecoATM
|
—
|
|
(2.36)
|
|
—
|
|
(2.32)
|
Tax benefit from net
operating loss adjustment
|
—
|
|
—
|
|
(0.04)
|
|
—
|
Tax (benefit) expense
of worthless stock deduction
|
0.01
|
|
—
|
|
(0.10)
|
|
—
|
Core diluted EPS from
continuing operations
|
$
|
1.44
|
|
$
|
1.12
|
|
$
|
4.11
|
|
$
|
4.24
|
(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
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
Dollars in
thousands
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net cash provided by
operating activities
|
$
|
49,627
|
|
$
|
60,943
|
|
$
|
207,047
|
|
$
|
147,121
|
Purchase of property
and equipment
|
(19,295)
|
|
(39,102)
|
|
(72,311)
|
|
(123,346)
|
Free cash
flow
|
$
|
30,332
|
|
$
|
21,841
|
|
$
|
134,736
|
|
$
|
23,775
|
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:
|
September 30,
2014
|
|
December 31,
2013
|
Dollars in
thousands
|
|
Senior unsecured
notes(1)
|
$
|
650,000
|
|
$
|
350,000
|
Term
loans(1)
|
148,125
|
|
344,375
|
Revolving line of
credit
|
210,000
|
|
—
|
Convertible
debt(2)
|
—
|
|
51,148
|
Capital
leases
|
18,051
|
|
21,361
|
Total principal value
of outstanding debt including capital leases
|
1,026,176
|
|
766,884
|
Less domestic cash
and cash equivalents held in financial institutions
|
(26,003)
|
|
(199,027)
|
Net debt
|
1,000,173
|
|
567,857
|
LTM Core adjusted
EBITDA from continuing operations(3)
|
$
|
476,804
|
|
$
|
491,652
|
Net leverage
ratio
|
2.10
|
|
1.15
|
(1)
|
The senior unsecured
notes on our Consolidated Balance Sheets as of September 30,
2014 and December 31, 2013 included $8.9 million and $5.3
million in associated debt discount, respectively. The Term loan on
our Consolidated Balance Sheets as of September 30, 2014
included $0.4 million in associated debt discount. There was no
associated debt discount with the Term loans as of
December 31, 2013.
|
(2)
|
The convertible debt
balance on our Consolidated Balance Sheet as of December 31,
2013 included $1.4 million in associated debt discount.
|
(3)
|
LTM Core Adjusted
EBITDA from continuing operations for the twelve months ended
September 30, 2014 and December 31, 2013 was determined
as follows:
|
|
|
|
|
|
|
|
|
Dollars in
thousands
|
|
|
|
|
Core adjusted EBITDA
from continuing operations for the nine months ended September 30,
2014
|
$
|
339,470
|
|
|
|
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 nine months ended
September 30, 2013
|
(354,318)
|
|
|
|
LTM Core adjusted
EBITDA from continuing operations for the twelve months ended
September 30, 2014
|
$
|
476,804
|
|
|
|
(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.