BELLEVUE, Wash., Feb. 4,
2016 /PRNewswire/ -- Outerwall Inc. (Nasdaq: OUTR) today reported
financial results for the fourth quarter and full year ended
December 31, 2015.
(Logo -
http://photos.prnewswire.com/prnh/20130701/AQ41388LOGO)
"Due to our unrivaled network of retail partners and millions of
loyal customers who value our products and services, Outerwall
delivered solid 2015 results with strong free cash flow and core
diluted EPS from continuing operations, despite challenging
headwinds that continued to impact Redbox," said Erik E. Prusch, Outerwall's chief executive
officer and interim Redbox president. "We remain focused on
strengthening our businesses, while continuing to return
significant free cash flow to investors."
Prusch continued, "Redbox is a compelling business, providing
new movie releases to millions of loyal consumers at a great value.
We will manage the business for profitability and cash flow, and we
will continue our focus on expense management, operational
efficiencies and network optimization. We are confident that
millions of consumers will continue renting from Redbox for many
years to come, as a majority of our customers use Redbox to
complement digital alternatives. We fully intend to continue
meeting the entertainment needs of our customers as we maintain our
focus on providing value for all of our stakeholders."
|
Three Months Ended
December 31,
|
|
Change
|
|
Year Ended
December 31,
|
|
Change
|
|
Dollars in
millions, except per share data
|
2015
|
|
2014
|
|
%
|
|
2015
|
|
2014
|
|
%
|
|
GAAP
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
• Consolidated
revenue
|
$
|
527.2
|
|
|
$
|
597.4
|
|
|
(11.8)
|
%
|
|
$
|
2,193.2
|
|
|
$
|
2,291.6
|
|
|
(4.3)
|
%
|
|
• Income from
continuing operations
|
$
|
17.1
|
|
|
$
|
51.1
|
|
|
(66.6)
|
%
|
|
$
|
49.4
|
|
|
$
|
124.7
|
|
|
(60.3)
|
%
|
|
• Net
income
|
$
|
17.0
|
|
|
$
|
43.8
|
|
|
(61.1)
|
%
|
|
$
|
44.3
|
|
|
$
|
106.6
|
|
|
(58.4)
|
%
|
|
• Diluted earnings
from continuing operations per common share*
|
$
|
1.00
|
|
|
$
|
2.68
|
|
|
(62.7)
|
%
|
|
$
|
2.75
|
|
|
$
|
5.89
|
|
|
(53.3)
|
%
|
|
• Net cash
provided by operating activities
|
$
|
59.3
|
|
|
$
|
131.3
|
|
|
(54.8)
|
%
|
|
$
|
326.1
|
|
|
$
|
338.4
|
|
|
(3.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
Results**
|
|
|
|
|
|
|
|
|
|
|
|
|
• Core adjusted
EBITDA from continuing operations
|
$
|
95.8
|
|
|
$
|
147.7
|
|
|
(35.2)
|
%
|
|
$
|
485.3
|
|
|
$
|
496.8
|
|
|
(2.3)
|
%
|
|
• Core diluted
EPS from continuing operations
|
$
|
1.43
|
|
|
$
|
2.83
|
|
|
(49.5)
|
%
|
|
$
|
8.77
|
|
|
$
|
7.26
|
|
|
20.8
|
%
|
|
• Free cash
flow
|
$
|
41.9
|
|
|
$
|
105.7
|
|
|
(60.4)
|
%
|
|
$
|
248.5
|
|
|
$
|
240.4
|
|
|
3.4
|
%
|
|
|
*Beginning in the
first quarter of 2015, the company applied the two-class method of
calculating earnings per share for its GAAP results because the
impact of unvested restricted shares as a percentage of total
common shares outstanding became more dilutive given the level of
stock repurchases over the prior year. Core diluted EPS from
continuing operations continues to be reported under the treasury
stock method.
|
|
**Refer to Appendix A
for a discussion of Use of Non-GAAP Financial Measures and Core and
Non-Core Results.
|
2015 highlights include:
- Generated $248.5 million in free
cash flow, an increase of 3.4% from 2014, despite a 4.3% decline in
revenue as the company maintained focus on operational excellence
and expense management
- Delivered $485.3 million in core
adjusted EBITDA from continuing operations, which was down
$11.5 million from 2014, despite
$98.4 million less in revenue
- Repurchased approximately 2.5 million shares for $159.8 million and paid $21.3 million in cash quarterly dividends,
returning approximately 73% of free cash flow to shareholders
- Opportunistically repurchased $41.1
million in face value of the company's 5.875% Senior Notes
due 2021 in the fourth quarter
"Overall our 2015 performance reflects our ability to manage our
businesses for profitability and drive year-over-year growth in
core adjusted EPS and free cash flow through expense management,"
said Galen C. Smith, Outerwall's
chief financial officer. "At the same time, we continued to return
capital to shareholders, repurchasing 2.5 million shares and paying
$21 million in quarterly dividends.
In addition in December, we opportunistically repurchased
$41 million of our outstanding senior
notes for $35 million in cash."
Smith continued, "In 2016 we will continue to align costs with
revenue, optimize our kiosk networks and create operational
efficiencies to manage Redbox and Coinstar for profitability and
cash flow and move ecoATM to profitability. In 2016, we plan to
return 75% to 100% of annual free cash flow to investors through
share repurchases, dividends and senior note repurchases."
CONSOLIDATED RESULTS
GAAP Results
The company's full-year 2015 GAAP results include a non-cash,
non-tax deductible goodwill impairment charge of $85.9 million recorded in the second quarter
of 2015 related to the ecoATM segment and $27.2 million in one‑time restructuring and
related costs from continuing operations recorded over the year, as
the company continued to align costs with revenue across the
enterprise. The restructuring and related costs in 2015 reflect
$11.3 million recorded in the
fourth quarter of 2015, including costs associated with
organizational changes in the Redbox and ecoATM segments and an
$8.5 million cash payment to settle
the $15.4 million outstanding under
the $25.0 million purchase
commitment entered into as a part of the NCR asset acquisition in
2012. These costs were allocated to the lines of business and are
included in segment operating results for the fourth quarter of
2015.
For the fourth quarter of 2015, consolidated revenue was
$527.2 million, a decrease of 11.8%,
compared with $597.4 million in the
fourth quarter of 2014, primarily reflecting an $83.7 million decrease in revenue from Redbox,
partially offset by an increase in revenue of $12.1 million from ecoATM and $1.4 million from Coinstar. Consolidated revenue
was $2.2 billion for the full-year
2015, a decrease of 4.3% compared with full-year 2014.
Income from continuing operations for the fourth quarter of 2015
was $17.1 million, or $1.00 of diluted earnings from continuing
operations per common share, compared with income from continuing
operations of $51.1 million, or
$2.68 of diluted earnings from
continuing operations per common share, in the fourth quarter of
2014. The decreases were primarily due to the lower consolidated
revenue and the impact of the one-time restructuring and related
costs in the fourth quarter of 2015. For the full-year 2015, income
from continuing operations was $49.4 million, or $2.75 of diluted earnings from continuing
operations per common share, compared with $124.7 million and $5.89, respectively, for the full-year 2014.
Net cash provided by operating activities was $59.3 million in the fourth quarter of 2015, a
decline of 54.8% compared with $131.3
million in the fourth quarter of 2014. The decline was
primarily due to the decrease in net income and an increase in net
cash outflows from changes in working capital. For the full-year
2015, net cash provided by operating activities was $326.1 million, compared with $338.4 million for the full-year 2014.
Cash capital expenditures for the fourth quarter of 2015
decreased 32.0% to $17.4 million
compared with $25.6 million in
the fourth quarter of 2014, due to lower purchases of property and
equipment for kiosks and corporate infrastructure. For the
full-year 2015, cash capital expenditures decreased 20.8% to
$77.6 million compared with
$97.9 million for the full-year
2014.
Core Results
Core adjusted EBITDA from continuing operations for the fourth
quarter of 2015 was $95.8 million, compared with $147.7 million for the fourth quarter of
2014. The $51.9 million decrease was
primarily due to lower segment operating income in the Redbox
segment. For the full-year 2015, core adjusted EBITDA from
continuing operations was $485.3 million, a $11.5 million or 2.3% decrease compared with
$496.8 million for the full-year
2014.
Core diluted EPS from continuing operations for the fourth
quarter of 2015 was $1.43, a decrease
from $2.83 for the fourth quarter of
2014. For the full-year 2015, core diluted EPS from continuing
operations was $8.77 compared with
$7.26 per diluted share for 2014.
Non-core adjustments in the fourth quarter and the full-year 2015
netted to $0.41 and $5.97, respectively, compared with $0.09 and $1.24 for
the same periods in 2014. The fourth quarter 2015 adjustments
include $0.42 in one-time
restructuring and related costs, while the full-year 2015
adjustments include $0.94 in one-time
restructuring and related costs and $4.87 in goodwill impairment related to the
ecoATM segment.
Free cash flow for the fourth quarter of 2015 was $41.9 million, a decrease of $63.8 million, compared with $105.7 million in the fourth quarter of
2014, primarily due to lower net operating cash flow in the fourth
quarter of 2015, partially offset by lower capital expenditures.
For the full-year 2015, free cash flow increased $8.1 million to $248.5 million, compared with $240.4 million for the full-year 2014.
SEGMENT RESULTS
Redbox
Redbox segment revenue for the fourth quarter of 2015 was
$407.0 million compared with
$490.7 million in the fourth
quarter of 2014. The decrease of $83.7
million reflects the impact of a 24.3% decline in movie
rentals year-over-year.
Redbox generated 135.8 million rentals in the fourth quarter of
2015, down from 179.5 million rentals in the fourth quarter of
2014. The decline in rentals reflects the impact of several
factors, including an accelerated secular decline in the physical
market, high frequency renters returning more slowly to their
normal rental patterns following successive quarters of weak
content, fewer titles available to rent in the quarter compared
with the fourth quarter of 2014, lower demand from price-sensitive
customers following the price increase, and the impact of fewer
kiosks as the company continued efforts to optimize the network by
removing underperforming kiosks. Net revenue per rental was
$2.98 in the fourth quarter of 2015,
compared with $2.73 in the fourth
quarter of 2014, primarily due to the price increase for movies and
video games.
Redbox segment operating income in the fourth quarter of 2015
was $62.6 million, a decrease of
50.2%, compared with $125.8 million in the fourth quarter of
2014. Segment operating margin was 15.4% in the fourth quarter of
2015, compared with 25.6% in the fourth quarter of 2014. The lower
margin was the result of higher content purchases and promotions
intended to bring consumers back to the kiosk after an extended
period of weak content, as well as $8.4 million, or 210 basis points of segment
operating margin, in restructuring and related costs allocated to
the segment in the fourth quarter of 2015.
Coinstar
Coinstar segment revenue increased $1.4
million, or 1.7%, to $83.3 million in the fourth quarter of 2015,
compared with $81.9 million in
the fourth quarter of 2014, and same store sales increased 2.3
percentage points to 5.6% compared with the fourth quarter of
2014.
Coinstar segment operating income was $31.2 million in the fourth quarter of 2015,
a decrease of $2.3 million compared
with $33.6 million in the fourth
quarter of 2014, primarily due to a $2.0
million increase in general and administrative expenses due
in part to higher technology costs and $1.5 million in one-time restructuring and
related costs, partially offset by lower costs as a result of
ongoing cost containment initiatives. As a result, Coinstar segment
operating margin decreased 350 basis points to 37.5% for the fourth
quarter of 2015, compared with 41.0% in the fourth quarter of
2014.
ecoATM
On November 10, 2015, the company
acquired certain assets and liabilities of Gazelle, Inc. for
$18.0 million in cash. The
purchase is accounted for as a business combination and the results
of operations from Gazelle are included in ecoATM segment results
from the acquisition date.
Revenue in the ecoATM segment was $36.8 million in the fourth quarter of 2015,
an increase of $12.1 million or
48.9%, compared with $24.7 million in the fourth quarter of 2014,
due primarily to the revenue contribution from Gazelle following
the close of the acquisition.
There were 2,250 ecoATM kiosks installed at the end of the
fourth quarter of 2015, an increase of 360 kiosks from the end of
the fourth quarter of 2014. The number of value devices sold and
percentage of value devices to overall devices sold increased in
the fourth quarter compared with the fourth quarter of 2014. The
average selling price of value devices sold increased $1.93 to $61.70 in
the fourth quarter of 2015, compared with $59.77 in the fourth quarter of 2014.
Segment operating loss decreased approximately $1.3 million to $6.8 million in the fourth quarter of 2015,
compared with $8.1 million in
the fourth quarter of 2014, reflecting the company's focus on
controlling expenses and creating efficiencies. The segment
operating results include $0.6 million in one-time restructuring and
related costs and $0.3 million in
fees related to the Gazelle acquisition included in general and
administrative expense.
CAPITAL ALLOCATION
In the first quarter of 2015, the company's board of directors
initiated a quarterly cash dividend of $0.30 per outstanding share of our common stock
and paid a total of $21.3 million in
cash dividends in 2015. On February 3, 2016, the company's
board of directors declared a quarterly cash dividend of
$0.30 per share expected to be paid
on March 29, 2016, to all
stockholders of record as of the close of business on March 15, 2016.
During the fourth quarter of 2015, the company repurchased
673,821 shares of common stock at an average price per share of
$53.89. For the year, the company
repurchased 2.5 million shares at an average price per share of
$63.56 for a total of $159.8 million. As of December 31, 2015, there was approximately
$256.4 million remaining under the
company's stock repurchase authorization.
In December, the company repurchased $41.1 million in face value of its 5.875% Senior
Notes due 2021 for $34.6 million
in cash. The gain from early extinguishment of these notes was
approximately $5.9 million and is
included in net interest expense.
2016 ANNUAL GUIDANCE
Outerwall provides annual guidance only and expects to update
its annual guidance as appropriate each quarter when reporting its
financial results. Due to the difficulty in forecasting as a result
of the content release schedule, accelerating secular decline, and
the company's focus on profitability and cash flow, Outerwall will
not provide revenue guidance for 2016. The company will continue to
provide guidance for core adjusted EBITDA from continuing
operations, core diluted EPS from continuing operations and free
cash flow.
There are several factors that influence the company's 2016
expectations, including the new release schedule and strength of
content for movies and video games, Redbox's success in re-engaging
consumers to rent movies, the integration of Gazelle, the
redeployment of previously manufactured ecoATM kiosks, and the
company's ability to further align costs with revenue.
Outerwall's 2016 annual guidance reflects:
- A continued focus on expense management, operational
efficiencies and network optimization across the enterprise
- Managing the Redbox business for profitability and cash flow in
the face of an estimated 15% to 20% decline in rentals from secular
decline
- Moving ecoATM to segment operating profit breakeven in
2016
Outerwall's guidance for weighted-average diluted shares
outstanding does not include the impact from any potential share
repurchases in 2016.
The following table presents the company's full-year 2016
guidance:
|
2016 FULL-YEAR
GUIDANCE
|
As
of
|
|
Dollars in
millions, except per share data
|
February 4,
2016
|
|
Consolidated
results
|
|
|
Core adjusted EBITDA
from continuing operations(1)
|
$340 —
$380
|
|
Core diluted EPS from
continuing operations(1)(2)
|
$5.00 —
$6.30
|
|
Free cash
flow(1)
|
$140 —
$190
|
|
Weighted average
diluted shares outstanding(2) (in millions)
|
16.29 —
16.35
|
|
Core effective tax
rate
|
34.5% —
35.5%
|
|
Capital
expenditures
|
|
|
Redbox
|
$15 — $19
|
|
Coinstar
|
$7 — $9
|
|
ecoATM
|
$5 — $6
|
|
Corporate
|
$18 — $21
|
|
Total
CAPEX
|
$45 — $55
|
|
Net kiosk
installations
|
|
|
Redbox
|
(1,000) —
(2,000)
|
|
Coinstar
|
(150) —
(200)
|
|
ecoATM
|
50 — 100
|
|
|
1Refer to
Appendix A for a discussion of Use of Non-GAAP Financial Measures
and Core and Non-Core Results
|
|
2Excludes
the impact of any potential share repurchases in 2016
|
ADDITIONAL INFORMATION
Additional information regarding the company's 2015 fourth
quarter and full-year operating and financial results and 2016
guidance are included in the company's prepared remarks, which are
posted on the Investor Relations section of the corporate website
at ir.outerwall.com.
CONFERENCE CALL
The company will host a conference call today at 2:30 p.m. PST (5:30 p.m.
EST) to discuss fourth quarter and full-year 2015 earnings
results and 2016 annual 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 February 18, 2016, at
1-855-859-2056 or 1-404-537-3406, using conference ID 17508536.
ABOUT OUTERWALL
Outerwall Inc. (Nasdaq: OUTR) has more than 20 years of
experience creating some of the most profitable spaces for their
retail partners. The company delivers 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 2016 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 and
Gazelle,
- the timing of the release slate and the relative
attractiveness of titles in a particular quarter or year,
- our ability to repurchase stock and the availability of an
open trading window,
- our declaration and payment of dividends, including our
board's discretion to change the dividend policy,
- 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 ability to attract new retailers, penetrate new markets
and distribution channels and react to changing consumer
demands,
- loss of key personnel or the inability of replacements to
quickly and successfully perform in those new roles,
- 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.
(Consolidated Financial Statements, Business
Segment Information and Appendix A Follow)
|
OUTERWALL
INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands,
except per share data)
|
|
|
Three Months Ended
December 31,
|
|
Year
Ended
December
31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Revenue
|
$
|
527,151
|
|
|
$
|
597,398
|
|
|
$
|
2,193,211
|
|
|
$
|
2,291,586
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Direct
operating(1)
|
378,086
|
|
|
400,493
|
|
|
1,493,088
|
|
|
1,581,311
|
|
|
Marketing
|
12,076
|
|
|
10,021
|
|
|
35,674
|
|
|
35,293
|
|
|
Research and
development
|
1,561
|
|
|
3,162
|
|
|
7,198
|
|
|
13,047
|
|
|
General and
administrative
|
45,236
|
|
|
41,706
|
|
|
190,393
|
|
|
190,496
|
|
|
Restructuring and
related costs
|
11,302
|
|
|
—
|
|
|
27,153
|
|
|
557
|
|
|
Depreciation and
other
|
43,650
|
|
|
45,690
|
|
|
171,390
|
|
|
187,824
|
|
|
Amortization of
intangible assets
|
3,624
|
|
|
3,307
|
|
|
13,550
|
|
|
14,654
|
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
Total
expenses
|
495,535
|
|
|
504,379
|
|
|
2,024,336
|
|
|
2,023,182
|
|
|
Operating
income
|
31,616
|
|
|
93,019
|
|
|
168,875
|
|
|
268,404
|
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
|
Income (loss) from
equity method investments, net
|
(207)
|
|
|
2,527
|
|
|
(800)
|
|
|
(28,734)
|
|
|
Interest expense,
net
|
(6,126)
|
|
|
(12,599)
|
|
|
(42,353)
|
|
|
(47,644)
|
|
|
Other, net
|
431
|
|
|
(799)
|
|
|
(2,657)
|
|
|
(1,185)
|
|
|
Total other expense,
net
|
(5,902)
|
|
|
(10,871)
|
|
|
(45,810)
|
|
|
(77,563)
|
|
|
Income from
continuing operations before income taxes
|
25,714
|
|
|
82,148
|
|
|
123,065
|
|
|
190,841
|
|
|
Income tax
expense
|
(8,664)
|
|
|
(31,033)
|
|
|
(73,619)
|
|
|
(66,164)
|
|
|
Income from
continuing operations
|
17,050
|
|
|
51,115
|
|
|
49,446
|
|
|
124,677
|
|
|
Loss from
discontinued operations, net of tax
|
(32)
|
|
|
(7,315)
|
|
|
(5,109)
|
|
|
(18,059)
|
|
|
Net income
|
17,018
|
|
|
43,800
|
|
|
44,337
|
|
|
106,618
|
|
|
Foreign currency
translation adjustment(2)
|
(992)
|
|
|
613
|
|
|
684
|
|
|
457
|
|
|
Comprehensive
income
|
$
|
16,026
|
|
|
$
|
44,413
|
|
|
$
|
45,021
|
|
|
$
|
107,075
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations attributable to common shares:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
16,602
|
|
|
$
|
49,462
|
|
|
$
|
48,117
|
|
|
$
|
120,748
|
|
|
Diluted
|
$
|
16,602
|
|
|
$
|
49,468
|
|
|
$
|
48,118
|
|
|
$
|
120,806
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per common share:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
1.00
|
|
|
$
|
2.69
|
|
|
$
|
2.75
|
|
|
$
|
5.98
|
|
|
Discontinued
operations
|
—
|
|
|
(0.40)
|
|
|
(0.29)
|
|
|
(0.89)
|
|
|
Basic earnings per
common share
|
$
|
1.00
|
|
|
$
|
2.29
|
|
|
$
|
2.46
|
|
|
$
|
5.09
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per common share:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
1.00
|
|
|
$
|
2.68
|
|
|
$
|
2.75
|
|
|
$
|
5.89
|
|
|
Discontinued
operations
|
—
|
|
|
(0.40)
|
|
|
(0.29)
|
|
|
(0.88)
|
|
|
Diluted earnings per
common share
|
$
|
1.00
|
|
|
$
|
2.28
|
|
|
$
|
2.46
|
|
|
$
|
5.01
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares used in basic and diluted per share
calculations:
|
|
|
|
|
|
|
|
|
Basic
|
16,552
|
|
|
18,412
|
|
|
17,467
|
|
|
20,192
|
|
|
Diluted
|
16,575
|
|
|
18,473
|
|
|
17,487
|
|
|
20,503
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
0.30
|
|
|
$
|
—
|
|
|
$
|
1.20
|
|
|
$
|
—
|
|
|
|
|
(1)
|
"Direct operating"
excludes depreciation and other of $32.0
million and $118.7 million for the three months and
year ended December 31, 2015, respectively, and $31.4 million
and $125.7 million for the three months and
year ended December 31, 2014, respectively
|
|
|
|
(2)
|
Foreign currency
translation adjustment had no tax effect in 2015 and
2014.
|
|
OUTERWALL
INC.
CONSOLIDATED
BALANCE SHEETS
(in thousands,
except share data)
|
|
|
December
31,
|
|
2015
|
|
2014
|
|
Assets
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
222,549
|
|
|
$
|
242,696
|
|
|
Accounts receivable,
net of allowances of $1,272 and $2,223
|
38,464
|
|
|
48,590
|
|
|
Content
library
|
188,490
|
|
|
180,121
|
|
|
Prepaid expenses and
other current assets
|
51,368
|
|
|
39,819
|
|
|
Total current
assets
|
500,871
|
|
|
511,226
|
|
|
Property and
equipment, net
|
316,013
|
|
|
428,468
|
|
|
Deferred income
taxes
|
2,606
|
|
|
11,363
|
|
|
Goodwill and other
intangible assets, net
|
540,514
|
|
|
623,998
|
|
|
Other long-term
assets
|
6,056
|
|
|
8,231
|
|
|
Total
assets
|
$
|
1,366,060
|
|
|
$
|
1,583,286
|
|
|
Liabilities and
Stockholders' Equity (Deficit)
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
payable
|
$
|
184,010
|
|
|
$
|
168,633
|
|
|
Accrued payable to
retailers
|
115,098
|
|
|
126,290
|
|
|
Other accrued
liabilities
|
141,437
|
|
|
137,126
|
|
|
Current portion of
long-term debt and other long-term liabilities
|
17,131
|
|
|
20,416
|
|
|
Total current
liabilities
|
457,676
|
|
|
452,465
|
|
|
Long-term debt and
other long-term liabilities
|
897,366
|
|
|
973,669
|
|
|
Deferred income
taxes
|
33,092
|
|
|
59,774
|
|
|
Total
liabilities
|
1,388,134
|
|
|
1,485,908
|
|
|
Commitments and
contingencies
|
|
|
|
|
Stockholders' Equity
(Deficit):
|
|
|
|
|
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;
|
|
|
|
|
36,720,579 and
36,600,166 shares issued;
|
|
|
|
|
16,607,516 and
18,926,242 shares outstanding;
|
485,163
|
|
|
473,592
|
|
|
Treasury
stock
|
(1,151,063)
|
|
|
(996,293)
|
|
|
Retained
earnings
|
643,452
|
|
|
620,389
|
|
|
Accumulated other
comprehensive income (loss)
|
374
|
|
|
(310)
|
|
|
Total stockholders'
equity (deficit)
|
(22,074)
|
|
|
97,378
|
|
|
Total liabilities and
stockholders' equity (deficit)
|
$
|
1,366,060
|
|
|
$
|
1,583,286
|
|
|
OUTERWALL
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
|
Three Months Ended
December 31,
|
|
Year
Ended
December
31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
Net income
|
$
|
17,018
|
|
|
$
|
43,800
|
|
|
$
|
44,337
|
|
|
$
|
106,618
|
|
|
Adjustments to
reconcile net income to net cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
other
|
43,649
|
|
|
49,006
|
|
|
177,247
|
|
|
195,162
|
|
|
Amortization of
intangible assets
|
3,624
|
|
|
3,326
|
|
|
13,594
|
|
|
14,692
|
|
|
Share-based payments
expense
|
5,219
|
|
|
3,291
|
|
|
17,240
|
|
|
13,384
|
|
|
Windfall excess tax
benefits related to share-based payments
|
(24)
|
|
|
24
|
|
|
(739)
|
|
|
(1,964)
|
|
|
Deferred income
taxes
|
6,061
|
|
|
(5,203)
|
|
|
(19,619)
|
|
|
(22,611)
|
|
|
Restructuring,
impairment and related costs(2)
|
374
|
|
|
—
|
|
|
2,054
|
|
|
—
|
|
|
(Income) loss from
equity method investments, net
|
207
|
|
|
(2,527)
|
|
|
800
|
|
|
28,734
|
|
|
Amortization of
deferred financing fees and debt discount
|
683
|
|
|
693
|
|
|
2,761
|
|
|
4,116
|
|
|
(Gain) loss from
early extinguishment of debt
|
(5,854)
|
|
|
—
|
|
|
(5,854)
|
|
|
2,018
|
|
|
Gain on purchase of
Gazelle
|
(989)
|
|
|
—
|
|
|
(989)
|
|
|
—
|
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
Other
|
(471)
|
|
|
(273)
|
|
|
(972)
|
|
|
(1,750)
|
|
|
Cash flows from
changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
(14,721)
|
|
|
(8,793)
|
|
|
10,011
|
|
|
8,671
|
|
|
Content
library
|
(61,525)
|
|
|
(29,053)
|
|
|
(8,320)
|
|
|
19,747
|
|
|
Prepaid expenses and
other current assets
|
(5,171)
|
|
|
21,235
|
|
|
(10,065)
|
|
|
44,282
|
|
|
Other
assets
|
(244)
|
|
|
55
|
|
|
162
|
|
|
1,702
|
|
|
Accounts
payable
|
64,023
|
|
|
28,094
|
|
|
17,943
|
|
|
(68,912)
|
|
|
Accrued payable to
retailers
|
14,319
|
|
|
20,975
|
|
|
(9,968)
|
|
|
(6,847)
|
|
|
Other accrued
liabilities
|
(6,867)
|
|
|
6,654
|
|
|
10,572
|
|
|
1,309
|
|
|
Net cash flows
from operating activities(1)
|
59,311
|
|
|
131,304
|
|
|
326,085
|
|
|
338,351
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(17,427)
|
|
|
(25,613)
|
|
|
(77,591)
|
|
|
(97,924)
|
|
|
Proceeds from sale of
property and equipment
|
157
|
|
|
142
|
|
|
3,225
|
|
|
1,977
|
|
|
Acquisitions, net of
cash acquired
|
(17,980)
|
|
|
—
|
|
|
(17,980)
|
|
|
—
|
|
|
Cash paid for equity
investments
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,500)
|
|
|
Extinguishment
payment received from equity investment
|
—
|
|
|
5,000
|
|
|
—
|
|
|
5,000
|
|
|
Net cash flows
used in investing activities(1)
|
(35,250)
|
|
|
(20,471)
|
|
|
(92,346)
|
|
|
(115,447)
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of senior unsecured notes
|
—
|
|
|
—
|
|
|
—
|
|
|
295,500
|
|
|
Proceeds from new
borrowing on Credit Facility
|
163,500
|
|
|
7,000
|
|
|
310,500
|
|
|
642,000
|
|
|
Principal payments on
Credit Facility
|
(80,812)
|
|
|
(58,875)
|
|
|
(339,375)
|
|
|
(680,125)
|
|
|
Financing costs
associated with Credit Facility and senior unsecured
notes(3)
|
—
|
|
|
(5)
|
|
|
(9)
|
|
|
(2,911)
|
|
|
Settlement and
conversion of convertible debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(51,149)
|
|
|
Repurchase of
Notes
|
(34,589)
|
|
|
—
|
|
|
(34,589)
|
|
|
—
|
|
|
Repurchases of common
stock(4)
|
(36,311)
|
|
|
(13)
|
|
|
(159,800)
|
|
|
(545,091)
|
|
|
Dividends
paid
|
(5,052)
|
|
|
—
|
|
|
(21,210)
|
|
|
—
|
|
|
Principal payments on
capital lease obligations and other debt
|
(2,572)
|
|
|
(3,399)
|
|
|
(11,510)
|
|
|
(13,996)
|
|
|
Windfall excess tax
benefits related to share-based payments
|
24
|
|
|
(24)
|
|
|
739
|
|
|
1,964
|
|
|
Withholding tax paid
on vesting of restricted stock net of proceeds from exercise of
stock options
|
(215)
|
|
|
564
|
|
|
(1,461)
|
|
|
(520)
|
|
|
Net cash flows
from (used in) financing activities(1)
|
$
|
3,973
|
|
|
$
|
(54,752)
|
|
|
$
|
(256,715)
|
|
|
$
|
(354,328)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Year
Ended
December
31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Effect of exchange
rate changes on cash
|
$
|
(1,088)
|
|
|
$
|
1,714
|
|
|
$
|
2,829
|
|
|
$
|
2,683
|
|
|
Increase
(decrease) in cash and cash equivalents
|
26,946
|
|
|
57,795
|
|
|
(20,147)
|
|
|
(128,741)
|
|
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
Beginning of
period
|
195,603
|
|
|
184,901
|
|
|
242,696
|
|
|
371,437
|
|
|
End of
period
|
$
|
222,549
|
|
|
$
|
242,696
|
|
|
$
|
222,549
|
|
|
$
|
242,696
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
During 2015 we
discontinued our Redbox operations in Canada. 2014 also includes
the wind-down process of certain new ventures that were
discontinued during 2013. Cash flows from these discontinued
operations are not segregated from cash flows from continuing
operations in all periods presented.
|
|
|
|
(2)
|
The non-cash
restructuring, impairment and related costs in 2015 of $2.1
million is composed of $7.4 million in impairments of lease related
assets partially offset by a $5.3 million benefit resulting from
the lease termination. The 2013 non-cash charge represents asset
impairments of $32.7 million related to our four ventures
previously included in our former New Ventures segment, Orango,
Rubi, Crisp Market, and Star Studio, which were discontinued during
2013.
|
|
|
|
(3)
|
Total financing costs
associated with the Credit Facility and senior unsecured notes
issued in 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 in 2014 were $2.9 million.
|
|
|
|
(4)
|
The total cost of
repurchases of common stock in 2014 was $545.1 million, which
includes $3.7 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 in 2014 were $3.7 million.
|
OUTERWALL INC.
BUSINESS SEGMENTS AND ENTERPRISEWIDE INFORMATION
(unaudited)
Changes in our Organizational Structure
We regularly assess the performance of our concepts to determine
whether continued funding or other alternatives are appropriate and
as a result, we discontinued operating SAMPLEit in the
fourth quarter of 2015. As SAMPLEit did not represent a
major component of our operations or financial results, the results
of SAMPLEit did not qualify to be reported as a discontinued
operation and remain in our All Other reporting category.
During the first quarter of 2015, we added ecoATM, our
electronic device recycling business, as a separate reportable
segment. Previously, the results of ecoATM along with those of
other self-service concepts were included in our former New
Ventures segment. The combined results of the other self-service
concepts are now included in our All Other reporting category in
the reconciliation below, as they do not meet quantitative
thresholds to be reported as a separate segment. All goodwill
previously allocated to the New Ventures segment has been allocated
to the ecoATM segment.
Results of operations for Gazelle from the acquisition date,
November 10, 2015, are included in
our ecoATM segment.
Comparability of Segment Results
We have recast prior period results for the following:
- Discontinued operations, consisting of our Redbox operations in
Canada which we shut down during
the first quarter of 2015; and
- The addition of our ecoATM segment and our All Other reporting
category, which we added during the first quarter of 2015.
Our analysis and reconciliation of our segment information to
the consolidated financial statements that follows covers our
results of operations, which consists of our Redbox, Coinstar and
ecoATM segments, Corporate Unallocated expenses and our All Other
reporting category. All Other includes the results of other
self-service concepts, which we regularly assess to determine
whether continued funding or other alternatives are
appropriate.
|
OUTERWALL
INC.
BUSINESS SEGMENTS
AND ENTERPRISEWIDE INFORMATION
(unaudited)
|
|
|
|
Dollars in
thousands
|
|
|
Three Months Ended
December 31, 2015
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
|
Revenue
|
$
|
407,018
|
|
|
$
|
83,325
|
|
|
$
|
36,782
|
|
|
$
|
26
|
|
|
$
|
—
|
|
|
$
|
527,151
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
300,343
|
|
|
41,341
|
|
|
34,525
|
|
|
1,376
|
|
|
501
|
|
|
378,086
|
|
|
Marketing
|
6,533
|
|
|
1,717
|
|
|
3,468
|
|
|
288
|
|
|
70
|
|
|
12,076
|
|
|
Research and
development
|
—
|
|
|
—
|
|
|
1,339
|
|
|
—
|
|
|
222
|
|
|
1,561
|
|
|
General and
administrative
|
29,154
|
|
|
7,496
|
|
|
3,708
|
|
|
1,104
|
|
|
3,774
|
|
|
45,236
|
|
|
Restructuring and
related costs
|
8,366
|
|
|
1,526
|
|
|
560
|
|
|
850
|
|
|
—
|
|
|
11,302
|
|
|
Segment operating
income (loss)
|
62,622
|
|
|
31,245
|
|
|
(6,818)
|
|
|
(3,592)
|
|
|
(4,567)
|
|
|
78,890
|
|
|
Less: depreciation
and amortization
|
(26,478)
|
|
|
(7,674)
|
|
|
(7,387)
|
|
|
(5,735)
|
|
|
—
|
|
|
(47,274)
|
|
|
Operating income
(loss)
|
36,144
|
|
|
23,571
|
|
|
(14,205)
|
|
|
(9,327)
|
|
|
(4,567)
|
|
|
31,616
|
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(207)
|
|
|
(207)
|
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,126)
|
|
|
(6,126)
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
431
|
|
|
431
|
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
36,144
|
|
|
$
|
23,571
|
|
|
$
|
(14,205)
|
|
|
$
|
(9,327)
|
|
|
$
|
(10,469)
|
|
|
$
|
25,714
|
|
|
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, 2014
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
|
Revenue
|
$
|
490,748
|
|
|
$
|
81,921
|
|
|
$
|
24,709
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
597,398
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
329,409
|
|
|
40,860
|
|
|
27,453
|
|
|
1,400
|
|
|
1,371
|
|
|
400,493
|
|
|
Marketing
|
5,557
|
|
|
1,949
|
|
|
945
|
|
|
652
|
|
|
918
|
|
|
10,021
|
|
|
Research and
development
|
79
|
|
|
45
|
|
|
1,156
|
|
|
819
|
|
|
1,063
|
|
|
3,162
|
|
|
General and
administrative
|
29,912
|
|
|
5,510
|
|
|
3,303
|
|
|
1,170
|
|
|
1,811
|
|
|
41,706
|
|
|
Segment operating
income (loss)
|
125,791
|
|
|
33,557
|
|
|
(8,148)
|
|
|
(4,021)
|
|
|
(5,163)
|
|
|
142,016
|
|
|
Less: depreciation
and amortization
|
(34,364)
|
|
|
(8,998)
|
|
|
(5,210)
|
|
|
(425)
|
|
|
—
|
|
|
(48,997)
|
|
|
Operating income
(loss)
|
91,427
|
|
|
24,559
|
|
|
(13,358)
|
|
|
(4,446)
|
|
|
(5,163)
|
|
|
93,019
|
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,527
|
|
|
2,527
|
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,599)
|
|
|
(12,599)
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(799)
|
|
|
(799)
|
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
91,427
|
|
|
$
|
24,559
|
|
|
$
|
(13,358)
|
|
|
$
|
(4,446)
|
|
|
$
|
(16,034)
|
|
|
$
|
82,148
|
|
|
OUTERWALL
INC.
BUSINESS SEGMENTS
AND ENTERPRISEWIDE INFORMATION
(unaudited)
|
|
|
|
Dollars in
thousands
|
|
|
Year Ended
December 31, 2015
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
|
Revenue
|
$
|
1,760,899
|
|
|
$
|
318,611
|
|
|
$
|
113,558
|
|
|
$
|
143
|
|
|
$
|
—
|
|
|
$
|
2,193,211
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
1,213,744
|
|
|
159,211
|
|
|
113,141
|
|
|
4,431
|
|
|
2,561
|
|
|
1,493,088
|
|
|
Marketing
|
19,804
|
|
|
5,566
|
|
|
8,481
|
|
|
1,128
|
|
|
695
|
|
|
35,674
|
|
|
Research and
development
|
—
|
|
|
—
|
|
|
5,545
|
|
|
(84)
|
|
|
1,737
|
|
|
7,198
|
|
|
General and
administrative
|
129,013
|
|
|
31,561
|
|
|
10,875
|
|
|
7,188
|
|
|
11,756
|
|
|
190,393
|
|
|
Restructuring and
related costs
|
23,540
|
|
|
2,076
|
|
|
687
|
|
|
850
|
|
|
—
|
|
|
27,153
|
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
—
|
|
|
85,890
|
|
|
Segment operating
income (loss)
|
374,798
|
|
|
120,197
|
|
|
(111,061)
|
|
|
(13,370)
|
|
|
(16,749)
|
|
|
353,815
|
|
|
Less: depreciation
and amortization
|
(118,902)
|
|
|
(31,871)
|
|
|
(26,382)
|
|
|
(7,785)
|
|
|
—
|
|
|
(184,940)
|
|
|
Operating income
(loss)
|
255,896
|
|
|
88,326
|
|
|
(137,443)
|
|
|
(21,155)
|
|
|
(16,749)
|
|
|
168,875
|
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(800)
|
|
|
(800)
|
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42,353)
|
|
|
(42,353)
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,657)
|
|
|
(2,657)
|
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
255,896
|
|
|
$
|
88,326
|
|
|
$
|
(137,443)
|
|
|
$
|
(21,155)
|
|
|
$
|
(62,559)
|
|
|
$
|
123,065
|
|
|
|
|
Dollars in
thousands
|
|
|
Year Ended
December 31, 2014
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
|
Revenue
|
$
|
1,881,718
|
|
|
$
|
315,628
|
|
|
$
|
94,187
|
|
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
2,291,586
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
1,318,509
|
|
|
161,214
|
|
|
92,182
|
|
|
2,821
|
|
|
6,585
|
|
|
1,581,311
|
|
|
Marketing
|
20,969
|
|
|
6,346
|
|
|
3,513
|
|
|
1,272
|
|
|
3,193
|
|
|
35,293
|
|
|
Research and
development
|
120
|
|
|
531
|
|
|
5,691
|
|
|
2,854
|
|
|
3,851
|
|
|
13,047
|
|
|
General and
administrative
|
135,554
|
|
|
26,989
|
|
|
12,773
|
|
|
3,522
|
|
|
11,658
|
|
|
190,496
|
|
|
Restructuring and
related costs
|
534
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
557
|
|
|
Segment operating
income (loss)
|
406,032
|
|
|
120,525
|
|
|
(19,972)
|
|
|
(10,416)
|
|
|
(25,287)
|
|
|
470,882
|
|
|
Less: depreciation
and amortization
|
(149,236)
|
|
|
(35,471)
|
|
|
(17,031)
|
|
|
(740)
|
|
|
—
|
|
|
(202,478)
|
|
|
Operating income
(loss)
|
256,796
|
|
|
85,054
|
|
|
(37,003)
|
|
|
(11,156)
|
|
|
(25,287)
|
|
|
268,404
|
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28,734)
|
|
|
(28,734)
|
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47,644)
|
|
|
(47,644)
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,185)
|
|
|
(1,185)
|
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
256,796
|
|
|
$
|
85,054
|
|
|
$
|
(37,003)
|
|
|
$
|
(11,156)
|
|
|
$
|
(102,850)
|
|
|
$
|
190,841
|
|
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) goodwill impairment, ii)
restructuring costs (including severance and contract termination
costs, that include early lease terminations and the related asset
impairments) associated with actions to reduce costs in our
continuing operations across the Company, iii) acquisition costs
related to the acquisition of Gazelle, iv) 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, v) income or loss
from equity method investments, which represents our share of
income or loss from entities we do not consolidate or control, vi)
gain on bargain purchase of Gazelle, vii) tax benefits related to a
net operating loss adjustment and a worthless stock deduction
("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
|
|
Year
Ended
|
|
December
31,
|
December
31,
|
|
Dollars in
thousands
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net income from
continuing operations
|
$
|
17,050
|
|
|
$
|
51,115
|
|
|
$
|
49,446
|
|
|
$
|
124,677
|
|
|
Depreciation,
amortization and other
|
47,274
|
|
|
48,997
|
|
|
184,940
|
|
|
202,478
|
|
|
Interest expense,
net
|
6,126
|
|
|
12,599
|
|
|
42,353
|
|
|
47,644
|
|
|
Income tax
expense
|
8,664
|
|
|
31,033
|
|
|
73,619
|
|
|
66,164
|
|
|
Share-based payments
expense(1)
|
5,252
|
|
|
3,291
|
|
|
17,377
|
|
|
13,384
|
|
|
Adjusted EBITDA from
continuing operations
|
84,366
|
|
|
147,035
|
|
|
367,735
|
|
|
454,347
|
|
|
Non-Core
Adjustments:
|
|
|
|
|
|
|
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
Restructuring and
related costs
|
11,302
|
|
|
—
|
|
|
27,153
|
|
|
469
|
|
|
Acquisition
costs
|
342
|
|
|
—
|
|
|
342
|
|
|
—
|
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
575
|
|
|
3,237
|
|
|
4,354
|
|
|
13,270
|
|
|
(Income) loss from
equity method investments, net
|
207
|
|
|
(2,527)
|
|
|
800
|
|
|
28,734
|
|
|
Gain on purchase of
Gazelle
|
(989)
|
|
|
—
|
|
|
(989)
|
|
|
—
|
|
|
Core adjusted EBITDA
from continuing operations
|
$
|
95,803
|
|
|
$
|
147,745
|
|
|
$
|
485,285
|
|
|
$
|
496,820
|
|
|
|
|
(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 utilizing the treasury stock method 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
|
|
Year
Ended
|
|
December
31,
|
December
31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Diluted EPS from
continuing operations per common share (two-class
method)
|
$
|
1.00
|
|
|
$
|
2.68
|
|
|
$
|
2.75
|
|
|
$
|
5.89
|
|
|
Adjustment from
participating securities allocation and share differential to
treasury stock method(1)
|
0.02
|
|
|
0.06
|
|
|
0.05
|
|
|
0.13
|
|
|
Diluted EPS from
continuing operations (treasury stock method)
|
1.02
|
|
|
2.74
|
|
|
2.80
|
|
|
6.02
|
|
|
Non-Core Adjustments,
net of tax:(1)
|
|
|
|
|
|
|
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
4.87
|
|
|
—
|
|
|
Restructuring and
related costs
|
0.42
|
|
|
—
|
|
|
0.94
|
|
|
0.01
|
|
|
Acquisition
costs
|
0.01
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
0.03
|
|
|
0.17
|
|
|
0.17
|
|
|
0.53
|
|
|
(Income) loss from
equity method investments, net
|
0.01
|
|
|
(0.08)
|
|
|
0.03
|
|
|
0.85
|
|
|
Gain on purchase of
Gazelle
|
(0.06)
|
|
|
—
|
|
|
(0.05)
|
|
|
—
|
|
|
Tax benefits from net
operating loss adjustment and worthless stock deduction
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.15)
|
|
|
Core diluted EPS from
continuing operations
|
$
|
1.43
|
|
|
$
|
2.83
|
|
|
$
|
8.77
|
|
|
$
|
7.26
|
|
|
|
|
(1)
|
Non-Core Adjustments
are presented after-tax using the applicable effective tax rate for
the respective periods.
|
A reconciliation of amounts used in calculating core diluted EPS
from continuing operations in the table above is presented in the
following table:
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
In
thousands
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Income from
continuing operations attributable to common shares
|
$
|
16,602
|
|
|
$
|
49,462
|
|
|
$
|
48,117
|
|
|
$
|
120,748
|
|
|
Add: income from
continuing operations allocated to participating
securities
|
448
|
|
|
1,653
|
|
|
1,329
|
|
|
3,929
|
|
|
Income from
continuing operations
|
$
|
17,050
|
|
|
$
|
51,115
|
|
|
$
|
49,446
|
|
|
$
|
124,677
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted common shares
|
16,575
|
|
|
18,473
|
|
|
17,487
|
|
|
20,503
|
|
|
Add: diluted common
equivalent shares of participating securities
|
106
|
|
|
187
|
|
|
155
|
|
|
196
|
|
|
Weighted average
diluted shares (treasury stock method)
|
16,681
|
|
|
18,660
|
|
|
17,642
|
|
|
20,699
|
|
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
|
|
Year
Ended
|
|
December
31,
|
December
31,
|
|
Dollars in
thousands
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net cash provided by
operating activities
|
$
|
59,311
|
|
|
$
|
131,304
|
|
|
$
|
326,085
|
|
|
$
|
338,351
|
|
|
Purchase of property
and equipment
|
(17,427)
|
|
|
(25,613)
|
|
|
(77,591)
|
|
|
(97,924)
|
|
|
Free cash
flow
|
$
|
41,884
|
|
|
$
|
105,691
|
|
|
$
|
248,494
|
|
|
$
|
240,427
|
|
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:
|
December
31,
|
|
Dollars in
thousands
|
2015
|
|
2014
|
|
Senior unsecured
notes(1)
|
$
|
608,908
|
|
|
$
|
650,000
|
|
|
Term
loans(1)
|
136,875
|
|
|
146,250
|
|
|
Revolving line of
credit
|
140,500
|
|
|
160,000
|
|
|
Capital
leases
|
5,889
|
|
|
15,391
|
|
|
Total principal value
of outstanding debt including capital leases
|
892,172
|
|
|
971,641
|
|
|
Less domestic cash
and cash equivalents held in financial institutions
|
(46,192)
|
|
|
(66,546)
|
|
|
Net debt
|
845,980
|
|
|
905,095
|
|
|
LTM Core adjusted
EBITDA from continuing operations
|
$
|
485,285
|
|
|
$
|
496,820
|
|
|
Net leverage
ratio
|
1.74
|
|
|
1.82
|
|
|
|
|
(1)
|
The senior unsecured
notes on our Consolidated Balance Sheets as of December 31,
2015 and December 31, 2014 included $6.3 million and $8.4
million in associated debt discount, respectively. The Term loan on
our Consolidated Balance Sheets as of December 31, 2015 and
December 31, 2014 included $0.3 million and $0.3 million in
associated debt discount, respectively.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/outerwall-inc-announces-2015-fourth-quarter-and-full-year-results-300215561.html
SOURCE Outerwall Inc.