BELLEVUE, Wash., July 30,
2015 /PRNewswire/ -- Outerwall Inc. (Nasdaq: OUTR) today
reported financial results for the second quarter ended
June 30, 2015.
(Logo
- http://photos.prnewswire.com/prnh/20130701/AQ41388LOGO)
"In the second quarter we continued to execute on our key
strategies and delivered core results that were up significantly
year-over-year across the board," said Nora
M. Denzel, Outerwall's interim chief executive officer.
"Although we recognized a goodwill impairment for ecoATM during the
quarter, given its unique value proposition, we still expect ecoATM
revenue growth and profitability over time as the business scales.
Overall, our outlook for the second half of 2015 remains
positive, with a strong box office expected in the fourth
quarter."
The company also separately announced today that its board of
directors has appointed Erik E.
Prusch as chief executive officer effective July 31, 2015. Prusch will succeed Denzel, who
will remain on the board.
"Erik joins Outerwall with more than 25 years of successful
leadership and operations experience in consumer, retail, and
technology companies, and I look forward to working with him to
ensure a smooth transition," said Denzel.
During the three months ended June 30,
2015, the company recognized a non-cash, non-tax deductible
charge for goodwill impairment of $85.9
million related to its ecoATM business segment. The
impairment charge reflects the impact of competitive pressures on
ecoATM and lowered expectations for future revenue growth. The
charge resulted in a GAAP reported loss. Core results exclude the
impact of the impairment charge as a non-core adjustment.
|
2015
|
|
2014
|
|
Change
|
|
Second
Quarter
|
|
Second
Quarter
|
|
%
|
|
GAAP
Results
|
|
|
|
|
|
|
• Consolidated
revenue
|
$
|
545.4
|
million
|
|
$
|
546.5
|
million
|
|
(0.2)
|
%
|
|
• Income (loss) from
continuing operations
|
$
|
(47.4)
|
million
|
|
$
|
23.8
|
million
|
|
(298.7)
|
%
|
|
• Net income
(loss)
|
$
|
(45.6)
|
million
|
|
$
|
21.8
|
million
|
|
(309.7)
|
%
|
|
• Diluted earnings
(loss) from continuing operations per common share*
|
$
|
(2.66)
|
|
|
$
|
1.15
|
|
|
(331.3)
|
%
|
|
• Net cash provided
by operating activities
|
$
|
75.1
|
million
|
|
$
|
62.8
|
million
|
|
19.6
|
%
|
|
|
|
|
|
|
|
Core
Results**
|
|
|
|
|
|
|
• Core adjusted
EBITDA from continuing operations
|
$
|
121.8
|
million
|
|
$
|
111.7
|
million
|
|
9.1
|
%
|
|
• Core diluted EPS
from continuing operations*
|
$
|
2.19
|
|
|
$
|
1.52
|
|
|
44.1
|
%
|
|
• Free cash
flow
|
$
|
55.6
|
million
|
|
$
|
36.8
|
million
|
|
51.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
*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.
|
Highlights from the second quarter 2015 include:
- Delivered 9.1% growth in core adjusted EBITDA from continuing
operations to $121.8 million on
essentially flat revenue reflecting solid execution and continued
expense management
- Core diluted EPS from continuing operations grew 44.1% to
$2.19 driven by higher profitability,
a lower tax rate and lower share count
- Twentieth Century Fox Home Entertainment signed a new two-year,
28-day delay agreement with Redbox and Sony Pictures Home
Entertainment recently extended the existing day and date agreement
through September 2016
- Free cash flow grew 51.4% to $55.6
million bringing the year to date total to $141.0 million
- Repurchased 284,537 shares of common stock for $22.0 million and paid another quarterly dividend
of $0.30 per share
"In the second quarter, we delivered solid growth in core
adjusted EBITDA, core diluted EPS from continuing operations and
free cash flow through solid execution as we continue to align
costs and capital expenditures with revenue and optimize the kiosk
networks. Our performance allows us to raise expectations for core
adjusted EBITDA and core diluted EPS from continuing operations and
free cash flow for 2015," said Galen C.
Smith, Outerwall's chief financial officer.
"We remain committed to our disciplined approach to capital
allocation and returning 75-to-100 percent of annual free cash flow
to shareholders," continued Smith. "In addition to paying out the
quarterly dividend, we repurchased another $22 million in common stock in the quarter."
CONSOLIDATED RESULTS
GAAP Results
Consolidated revenue for the second quarter of 2015 was down
slightly to $545.4 million, compared
with $546.5 million in the second
quarter of 2014, on lower revenue from Redbox nearly offset by
higher revenue from ecoATM and Coinstar.
The loss from continuing operations for the second quarter of
2015 was $47.4 million, or
$2.66 of diluted loss from continuing
operations per common share, compared with income from continuing
operations of $23.8 million, or
$1.15 of diluted earnings from
continuing operations per common share, in the second quarter of
2014, primarily due to the non-cash $85.9
million goodwill impairment charge recognized in the second
quarter of 2015.
Net cash provided by operating activities increased 19.6% to
$75.1 million in the second quarter
of 2015, compared with $62.8 million
in the second quarter of 2014. The increase was primarily due to
higher Redbox segment operating income and a change in net non-cash
income and expense included in net income and a decrease in net
cash outflows from changes in working capital.
Cash capital expenditures for the second quarter of 2015
decreased 25.2% to $19.5 million,
compared with $26.1 million in
the second quarter of 2014, with the decrease primarily related to
lower capital expenditures in the company's Redbox and Coinstar
segments.
Core Results
Core adjusted EBITDA from continuing operations for the second
quarter of 2015 was $121.8 million,
which excludes the $85.9 million
non-cash goodwill impairment charge and other non-core adjustments,
an increase of $10.2 million, or
9.1%, compared with $111.7 million
for the second quarter of 2014. The year-over-year increase was
primarily due to higher Redbox segment operating income in the
second quarter of 2015.
Core diluted EPS from continuing operations for the second
quarter of 2015 was $2.19, an
increase of 44.1% compared with $1.52
per diluted share in the second quarter of 2014. The increase was
primarily attributable to the results of operations described and a
reduction in the number of weighted average shares used in the
diluted per share calculation due to stock repurchases. Non-core
adjustments in the second quarter of 2015 amounted to $4.82 compared with $0.34 in the second quarter of 2014.
Free cash flow for the second quarter of 2015 was $55.6 million, an increase of $18.9 million, or 51.4%, compared with
$36.8 million in the second quarter
of 2014, primarily driven by higher net operating cash flow and
lower capital expenditures.
SEGMENT RESULTS
Redbox
Redbox segment revenue for the second quarter of 2015 was
$439.0 million, compared with
$442.8 million in the second quarter
of 2014, a modest 0.9% year-over-year decline despite a 13.1%
decrease in rentals, as the recent price increases largely offset
the impact of lower rentals.
Redbox generated approximately 146.0 million rentals in the
second quarter of 2015, down from approximately 168.1 million
rentals in the second quarter of 2014, primarily driven by a
decline in video game rentals from a consumer transition to new
generation platforms, lower demand from price-sensitive customers
following the price increases, the expected secular decline in the
physical market, and the removal of underperforming kiosks. Movie
rentals were further impacted by weaker content and the timing of
the release slate, as well as an increase in competition for
viewing time from several significant theatrical releases during
the second quarter of 2015.
Net revenue per rental was $3.00
in the second quarter of 2015, an increase of $0.37, or 14.1%, from $2.63 in the second quarter of 2014. The increase
in net revenue per rental was primarily the result of the price
increases, partially offset by an expected increase in single night
rental activity as a result of the price increases.
Redbox segment operating income in the second quarter of 2015
was $98.9 million, an increase of
14.7%, compared with $86.2 million in
the second quarter of 2014. Segment operating margin increased 300
basis points to 22.5% in the second quarter of 2015, compared with
segment operating margin of 19.5% in the second quarter of 2014,
primarily attributable to a decrease in direct operating expenses,
driven by gross margin improvement. Direct operating and marketing
expense also improved as the company continued to drive operating
efficiencies in the business to align the cost structure with an
anticipated gradual decline in physical rental demand.
Coinstar
Coinstar segment revenue was $80.3
million, an increase of $0.4
million, or 0.5%, compared with $79.9
million in the second quarter of 2014, primarily due to the
growth in the number of Coinstar Exchange kiosks and transactions
partially offset by decreased revenue for Coinstar in the U.S. due
to a reduction in volume.
The U.K. business continued to benefit from the increased coin
voucher product transaction fee implemented in August 2014, however the benefit was offset by
the unfavorable exchange rate impact on U.K. revenue in the second
quarter of 2015 due to the strengthening of the U.S. dollar versus
the British pound as compared with the second quarter of 2014.
The average Coinstar transaction size increased on a
year-over-year basis, while the number of transactions declined for
the second quarter of 2015, reflecting larger pours and less
frequent visits and a slight decrease in the U.S. kiosk base
year-over-year as a result of continued optimization efforts.
Coinstar segment operating income was $31.9 million in the second quarter of 2015, an
increase of $1.1 million, or 3.6%,
compared with $30.8 million in the
second quarter of 2014. Coinstar segment operating margin increased
120 basis points to 39.8% for the second quarter of 2015,
compared with 38.6% in the second quarter of 2014, as the business
continues to identify opportunities to reduce costs and actively
manage expenses.
ecoATM
Revenue in the ecoATM segment was $26.1
million in the second quarter of 2015, an increase of
$2.3 million, or 9.5%, compared with
$23.8 million in the second quarter
of 2014, primarily due to the increase in the number of ecoATM
installed kiosks, offset by a lower average selling price on value
devices due to a lower mix of higher value devices and lower
collections per kiosk compared with the second quarter of 2014.
ecoATM installed approximately 120 net new kiosks in the
quarter, primarily in the mass merchant channel, and ended the
quarter with a total of 2,260 kiosks installed. During the quarter,
ecoATM also redeployed approximately 70 underperforming kiosks from
the grocery channel to the mall and mass merchant channels to
optimize the profitability of the ecoATM kiosk network.
Collections of value devices on a per kiosk basis were lower in
the second quarter of 2015 than in the second quarter of 2014 as a
result of fewer transactions at the kiosks, primarily due to
competition from carriers. Carrier marketing also impacted the
number of higher value devices and the mix of overall value devices
collected in the second quarter of 2015, which were the primary
reasons for the decline in the average selling price of value
devices compared with the second quarter of 2014. Compared with the
first quarter of 2015, collections of higher value devices,
collections per kiosk and the average selling price improved
slightly in the second quarter of 2015 but were below our
expectations and historical seasonal trends.
The segment operating loss increased $88.4 million in the second quarter of 2015 to
$92.8 million, compared with
$4.5 million in the second quarter of
2014, primarily due to the $85.9
million goodwill impairment charge recognized in the second
quarter of 2015. Excluding the $85.9
million goodwill impairment charge, the segment operating
loss increased $2.5 million,
primarily due to an increase in direct operating expenses
associated with the increase in the installed kiosk base. As the
company continues to install additional ecoATM kiosks and existing
kiosks continue to ramp, the company expects to leverage the fixed
cost portions of direct operating expenses.
CAPITAL ALLOCATION
On July 28, 2015, the company's
board of directors declared a quarterly cash dividend of
$0.30 per share expected to be paid
on September 15, 2015, to all
stockholders of record as of the close of business on
August 28, 2015.
During the second quarter of 2015, the company repurchased
284,537 shares of common stock at an average price per share of
$77.40 for $22.0 million. As of June
30, 2015, there was approximately $353.4 million remaining under the company's
stock repurchase authorization.
2015 ANNUAL GUIDANCE
The following table presents the company's updated full-year
2015 guidance and reflects the company's second quarter results and
current outlook on the remainder of the year:
|
2015 FULL-YEAR
GUIDANCE
|
As
of
|
|
Dollars in
millions, except per share data
|
July 30,
2015
|
|
Consolidated
results
|
|
|
Revenue
|
$2,263 —
$2,353
|
|
Core adjusted EBITDA
from continuing operations(1)
|
$481 —
$515
|
|
Core diluted EPS from
continuing operations(1)(2)
|
$8.12 —
$9.12
|
|
Free cash
flow(1)
|
$231 —
$271
|
|
Weighted average
diluted shares outstanding(2)
|
17.9 —
18.0
|
|
Core effective tax
rate
|
35.5% —
37.5%
|
|
Segment
revenue
|
|
|
Redbox
|
$1,850 —
$1,925
|
|
Coinstar
|
$313 —
$318
|
|
ecoATM
|
$100 —
$110
|
|
Capital
expenditures
|
|
|
Redbox
|
$15 — $20
|
|
Coinstar
|
$16 — $20
|
|
ecoATM
|
$25 — $34
|
|
Corporate
|
$26 — $33
|
|
Total
CAPEX
|
$82 — $107
|
|
Net kiosk
installations
|
|
|
Redbox
|
(1,000) —
(1,900)
|
|
Coinstar
|
0 — (100)
|
|
ecoATM
|
400 — 500
|
|
|
|
1
|
Refer to Appendix A
for a discussion of Use of Non-GAAP Financial Measures and Core and
Non-Core Results
|
|
|
|
2
|
Excludes the impact
of any potential share repurchases for the remainder of
2015
|
ADDITIONAL INFORMATION
Additional information regarding the company's 2015 second
quarter operating and financial results and guidance is included in
the company's prepared remarks, which, as well as this press
release, 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. PDT (5:30 p.m.
EDT) to discuss second quarter 2015 earnings results and an
update to 2015 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
August 13, 2015, at 1-855-859-2056 or
1-404-537-3406, using conference ID 74496002.
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 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 2015 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
SAMPLEit,
- 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 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,
- 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 (LOSS)
|
|
(in thousands,
except per share data)
|
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Revenue
|
$
|
545,369
|
|
|
$
|
546,527
|
|
|
$
|
1,154,005
|
|
|
$
|
1,144,289
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Direct
operating(1)
|
369,619
|
|
|
381,734
|
|
|
774,803
|
|
|
801,376
|
|
|
Marketing
|
8,047
|
|
|
9,136
|
|
|
16,467
|
|
|
16,129
|
|
|
Research and
development
|
2,039
|
|
|
3,412
|
|
|
4,123
|
|
|
6,886
|
|
|
General and
administrative
|
48,783
|
|
|
48,596
|
|
|
97,339
|
|
|
101,204
|
|
|
Restructuring and
lease termination costs
|
—
|
|
|
—
|
|
|
15,851
|
|
|
557
|
|
|
Goodwill
impairment
|
85,890
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
Depreciation and
other
|
45,174
|
|
|
47,812
|
|
|
87,860
|
|
|
95,754
|
|
|
Amortization of
intangible assets
|
3,309
|
|
|
3,840
|
|
|
6,618
|
|
|
7,682
|
|
|
Total
expenses
|
562,861
|
|
|
494,530
|
|
|
1,088,951
|
|
|
1,029,588
|
|
|
Operating income
(loss)
|
(17,492)
|
|
|
51,997
|
|
|
65,054
|
|
|
114,701
|
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
|
Loss from equity
method investments, net
|
(133)
|
|
|
(10,541)
|
|
|
(265)
|
|
|
(19,909)
|
|
|
Interest expense,
net
|
(12,183)
|
|
|
(12,932)
|
|
|
(24,254)
|
|
|
(22,580)
|
|
|
Other income
(expense), net
|
642
|
|
|
1,614
|
|
|
(1,704)
|
|
|
966
|
|
|
Total other income
(expense), net
|
(11,674)
|
|
|
(21,859)
|
|
|
(26,223)
|
|
|
(41,523)
|
|
|
Income (loss) from
continuing operations before income taxes
|
(29,166)
|
|
|
30,138
|
|
|
38,831
|
|
|
73,178
|
|
|
Income tax
expense
|
(18,185)
|
|
|
(6,305)
|
|
|
(44,027)
|
|
|
(21,739)
|
|
|
Income (loss) from
continuing operations
|
(47,351)
|
|
|
23,833
|
|
|
(5,196)
|
|
|
51,439
|
|
|
Income (loss) from
discontinued operations, net of tax
|
1,735
|
|
|
(2,080)
|
|
|
(4,821)
|
|
|
(6,511)
|
|
|
Net income
(loss)
|
(45,616)
|
|
|
21,753
|
|
|
(10,017)
|
|
|
44,928
|
|
|
Foreign currency
translation adjustment(2)
|
473
|
|
|
(336)
|
|
|
3,327
|
|
|
539
|
|
|
Comprehensive income
(loss)
|
$
|
(45,143)
|
|
|
$
|
21,417
|
|
|
$
|
(6,690)
|
|
|
$
|
45,467
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations attributable to common shares:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(47,472)
|
|
|
$
|
23,016
|
|
|
$
|
(5,465)
|
|
|
$
|
49,880
|
|
|
Diluted
|
$
|
(47,472)
|
|
|
$
|
23,036
|
|
|
$
|
(5,465)
|
|
|
$
|
49,918
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per common share:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
(2.66)
|
|
|
$
|
1.18
|
|
|
$
|
(0.30)
|
|
|
$
|
2.30
|
|
|
Discontinued
operations
|
0.10
|
|
|
(0.11)
|
|
|
(0.27)
|
|
|
(0.30)
|
|
|
Basic earnings (loss)
per common share
|
$
|
(2.56)
|
|
|
$
|
1.07
|
|
|
$
|
(0.57)
|
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per common share:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
(2.66)
|
|
|
$
|
1.15
|
|
|
$
|
(0.30)
|
|
|
$
|
2.24
|
|
|
Discontinued
operations
|
0.10
|
|
|
(0.10)
|
|
|
(0.27)
|
|
|
(0.29)
|
|
|
Diluted earnings
(loss) per common share
|
$
|
(2.56)
|
|
|
$
|
1.05
|
|
|
$
|
(0.57)
|
|
|
$
|
1.95
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares used in basic and diluted per share
calculations:
|
|
|
|
|
|
|
|
|
Basic
|
17,848
|
|
|
19,541
|
|
|
18,057
|
|
|
21,730
|
|
|
Diluted
|
17,848
|
|
|
20,048
|
|
|
18,057
|
|
|
22,298
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
0.30
|
|
|
$
|
—
|
|
|
$
|
0.60
|
|
|
$
|
—
|
|
|
|
|
(1)
|
"Direct operating"
excludes "Depreciation and other" of $29.6 million and $58.0
million for the three and six months ended June 30, 2015,
respectively, and $31.4 million and $63.1 million for the three and
six months ended June 30, 2014, respectively.
|
|
|
|
(2)
|
Foreign currency
translation adjustment had no tax effect for the three and six
months ended June 30, 2015 and 2014, respectively.
|
|
OUTERWALL
INC.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(in thousands,
except share data)
|
|
(unaudited)
|
|
|
June 30,
2015
|
|
December 31,
2014
|
|
Assets
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
237,708
|
|
|
$
|
242,696
|
|
|
Accounts receivable,
net of allowances of $979 and $2,223
|
33,432
|
|
|
48,590
|
|
|
Content
library
|
146,556
|
|
|
180,121
|
|
|
Prepaid expenses and
other current assets
|
60,064
|
|
|
39,837
|
|
|
Total current
assets
|
477,760
|
|
|
511,244
|
|
|
Property and
equipment, net
|
360,445
|
|
|
428,468
|
|
|
Deferred income
taxes
|
2,480
|
|
|
11,378
|
|
|
Goodwill and other
intangible assets, net
|
531,446
|
|
|
623,998
|
|
|
Other long-term
assets
|
7,098
|
|
|
8,231
|
|
|
Total
assets
|
$
|
1,379,229
|
|
|
$
|
1,583,319
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
payable
|
$
|
147,209
|
|
|
$
|
168,633
|
|
|
Accrued payable to
retailers
|
114,815
|
|
|
126,290
|
|
|
Other accrued
liabilities
|
134,566
|
|
|
137,126
|
|
|
Current portion of
long-term debt and other long-term liabilities
|
18,490
|
|
|
20,416
|
|
|
Deferred income
taxes
|
25,676
|
|
|
21,432
|
|
|
Total current
liabilities
|
440,756
|
|
|
473,897
|
|
|
Long-term debt and
other long-term liabilities
|
892,075
|
|
|
973,669
|
|
|
Deferred income
taxes
|
22,237
|
|
|
38,375
|
|
|
Total
liabilities
|
1,355,068
|
|
|
1,485,941
|
|
|
Commitments and
contingencies
|
|
|
|
|
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;
|
|
|
|
|
36,695,640 and
36,600,166 shares issued;
|
|
|
|
|
18,169,984 and
18,926,242 shares outstanding;
|
477,259
|
|
|
473,592
|
|
|
Treasury
stock
|
(1,055,447)
|
|
|
(996,293)
|
|
|
Retained
earnings
|
599,332
|
|
|
620,389
|
|
|
Accumulated other
comprehensive income (loss)
|
3,017
|
|
|
(310)
|
|
|
Total stockholders'
equity
|
24,161
|
|
|
97,378
|
|
|
Total liabilities and
stockholders' equity
|
$
|
1,379,229
|
|
|
$
|
1,583,319
|
|
|
OUTERWALL
INC.
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(45,616)
|
|
|
$
|
21,753
|
|
|
$
|
(10,017)
|
|
|
$
|
44,928
|
|
|
Adjustments to
reconcile net income (loss) to net cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
other
|
45,174
|
|
|
49,154
|
|
|
93,718
|
|
|
98,258
|
|
|
Amortization of
intangible assets
|
3,309
|
|
|
3,847
|
|
|
6,662
|
|
|
7,695
|
|
|
Share-based payments
expense
|
3,289
|
|
|
3,079
|
|
|
7,192
|
|
|
6,844
|
|
|
Windfall excess tax
benefits related to share-based payments
|
(160)
|
|
|
(243)
|
|
|
(686)
|
|
|
(1,953)
|
|
|
Deferred income
taxes
|
(1,392)
|
|
|
(5,440)
|
|
|
(3,939)
|
|
|
(15,004)
|
|
|
Restructuring and
lease termination costs(2)
|
—
|
|
|
—
|
|
|
1,680
|
|
|
—
|
|
|
Loss from equity
method investments, net
|
133
|
|
|
10,541
|
|
|
265
|
|
|
19,909
|
|
|
Amortization of
deferred financing fees and debt discount
|
692
|
|
|
1,216
|
|
|
1,385
|
|
|
2,522
|
|
|
Loss from early
extinguishment of debt
|
—
|
|
|
1,963
|
|
|
—
|
|
|
1,963
|
|
|
Goodwill
impairment
|
85,890
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
Other
|
383
|
|
|
(1,040)
|
|
|
(816)
|
|
|
(1,164)
|
|
|
Cash flows from
changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
3,254
|
|
|
11,283
|
|
|
15,077
|
|
|
5,331
|
|
|
Content
library
|
24,703
|
|
|
27,505
|
|
|
34,659
|
|
|
47,486
|
|
|
Prepaid expenses and
other current assets
|
(18,976)
|
|
|
(24,952)
|
|
|
(22,082)
|
|
|
22,003
|
|
|
Other
assets
|
154
|
|
|
599
|
|
|
322
|
|
|
1,036
|
|
|
Accounts
payable
|
(20,617)
|
|
|
(43,605)
|
|
|
(17,697)
|
|
|
(70,995)
|
|
|
Accrued payable to
retailers
|
6,931
|
|
|
8,762
|
|
|
(11,510)
|
|
|
(6,723)
|
|
|
Other accrued
liabilities
|
(12,008)
|
|
|
(1,589)
|
|
|
1,112
|
|
|
(4,716)
|
|
|
Net cash flows
from operating activities(1)
|
75,143
|
|
|
62,833
|
|
|
181,215
|
|
|
157,420
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(19,508)
|
|
|
(26,076)
|
|
|
(40,217)
|
|
|
(53,016)
|
|
|
Proceeds from sale of
property and equipment
|
2,817
|
|
|
962
|
|
|
2,940
|
|
|
1,793
|
|
|
Cash paid for equity
investments
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,500)
|
|
|
Net cash flows
used in investing activities(1)
|
(16,691)
|
|
|
(25,114)
|
|
|
(37,277)
|
|
|
(61,723)
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of senior unsecured notes
|
—
|
|
|
295,500
|
|
|
—
|
|
|
295,500
|
|
|
Proceeds from new
borrowing on Credit Facility
|
77,000
|
|
|
230,000
|
|
|
112,000
|
|
|
505,000
|
|
|
Principal payments on
Credit Facility
|
(68,875)
|
|
|
(505,000)
|
|
|
(185,750)
|
|
|
(534,375)
|
|
|
Financing costs
associated with Credit Facility and senior unsecured
notes
|
—
|
|
|
(2,082)
|
|
|
—
|
|
|
(2,082)
|
|
|
Settlement and
conversion of convertible debt
|
—
|
|
|
(17,720)
|
|
|
—
|
|
|
(17,724)
|
|
|
Repurchases of common
stock
|
(22,023)
|
|
|
(53,413)
|
|
|
(62,731)
|
|
|
(474,480)
|
|
|
Dividends
paid
|
(5,417)
|
|
|
—
|
|
|
(11,019)
|
|
|
—
|
|
|
Principal payments on
capital lease obligations and other debt
|
(3,033)
|
|
|
(3,384)
|
|
|
(6,278)
|
|
|
(7,081)
|
|
|
Windfall excess tax
benefits related to share-based payments
|
160
|
|
|
243
|
|
|
686
|
|
|
1,953
|
|
|
Withholding tax paid
on vesting of restricted stock net of proceeds from exercise of
stock options
|
1,887
|
|
|
563
|
|
|
(1,201)
|
|
|
(1,025)
|
|
|
Net cash flows
used in financing activities(1)
|
(20,301)
|
|
|
(55,293)
|
|
|
(154,293)
|
|
|
(234,314)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Effect of exchange
rate changes on cash
|
1,623
|
|
|
(746)
|
|
|
5,367
|
|
|
406
|
|
|
Change in cash and
cash equivalents
|
39,774
|
|
|
(18,320)
|
|
|
(4,988)
|
|
|
(138,211)
|
|
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
Beginning of
period
|
197,934
|
|
|
251,546
|
|
|
242,696
|
|
|
371,437
|
|
|
End of
period
|
$
|
237,708
|
|
|
$
|
233,226
|
|
|
$
|
237,708
|
|
|
$
|
233,226
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
$
|
10,933
|
|
|
$
|
3,198
|
|
|
$
|
22,846
|
|
|
$
|
17,210
|
|
|
Cash paid during the
period for income taxes, net
|
$
|
53,905
|
|
|
$
|
32,853
|
|
|
$
|
66,896
|
|
|
$
|
9,189
|
|
|
Supplemental
disclosure of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment financed by capital lease obligations
|
$
|
257
|
|
|
$
|
2,467
|
|
|
$
|
977
|
|
|
$
|
5,513
|
|
|
Purchases of property
and equipment included in ending accounts payable
|
$
|
2,411
|
|
|
$
|
1,724
|
|
|
$
|
4,436
|
|
|
$
|
1,724
|
|
|
Common stock issued
on conversion of callable convertible debt
|
$
|
—
|
|
|
$
|
12,715
|
|
|
$
|
—
|
|
|
$
|
12,715
|
|
|
Non-cash debt issue
costs
|
$
|
—
|
|
|
$
|
6,069
|
|
|
$
|
—
|
|
|
$
|
6,069
|
|
|
|
|
(1)
|
During the first
quarter of 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 and lease termination costs in the six months ended
June 30, 2015 of $1.7 million is composed of $6.9 million in
impairments of lease related assets partially offset by a $5.2
million benefit resulting from the lease termination.
|
OUTERWALL INC.
BUSINESS SEGMENT AND
ENTERPRISEWIDE INFORMATION
(unaudited)
Changes in our Organizational Structure
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 New Ventures
segment. The combined results of the other self-service concepts,
which include product sampling kiosk concept SAMPLEit, are now
included in the 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.
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 an 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 All Other. 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 SEGMENT
AND ENTERPRISEWIDE INFORMATION
|
|
(unaudited)
|
|
|
Dollars in
thousands
|
|
|
Three Months Ended
June 30, 2015
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
|
Revenue
|
$
|
438,976
|
|
|
$
|
80,279
|
|
|
$
|
26,062
|
|
|
$
|
52
|
|
|
$
|
—
|
|
|
$
|
545,369
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
301,444
|
|
|
39,358
|
|
|
27,227
|
|
|
1,078
|
|
|
512
|
|
|
369,619
|
|
|
Marketing
|
4,266
|
|
|
1,232
|
|
|
2,149
|
|
|
258
|
|
|
142
|
|
|
8,047
|
|
|
Research and
development
|
—
|
|
|
—
|
|
|
1,549
|
|
|
1
|
|
|
489
|
|
|
2,039
|
|
|
General and
administrative
|
34,336
|
|
|
7,768
|
|
|
2,094
|
|
|
2,644
|
|
|
1,941
|
|
|
48,783
|
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
—
|
|
|
85,890
|
|
|
Segment operating
income (loss)
|
98,930
|
|
|
31,921
|
|
|
(92,847)
|
|
|
(3,929)
|
|
|
(3,084)
|
|
|
30,991
|
|
|
Less: depreciation,
amortization and other
|
(33,063)
|
|
|
(8,437)
|
|
|
(6,305)
|
|
|
(678)
|
|
|
—
|
|
|
(48,483)
|
|
|
Operating income
(loss)
|
65,867
|
|
|
23,484
|
|
|
(99,152)
|
|
|
(4,607)
|
|
|
(3,084)
|
|
|
(17,492)
|
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(133)
|
|
|
(133)
|
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,183)
|
|
|
(12,183)
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
642
|
|
|
642
|
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
65,867
|
|
|
$
|
23,484
|
|
|
$
|
(99,152)
|
|
|
$
|
(4,607)
|
|
|
$
|
(14,758)
|
|
|
$
|
(29,166)
|
|
|
|
|
|
|
Dollars in
thousands
|
|
|
Three Months Ended
June 30, 2014
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
|
Revenue
|
$
|
442,838
|
|
|
$
|
79,880
|
|
|
$
|
23,799
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
546,527
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
317,376
|
|
|
40,203
|
|
|
22,387
|
|
|
436
|
|
|
1,332
|
|
|
381,734
|
|
|
Marketing
|
5,533
|
|
|
1,557
|
|
|
927
|
|
|
220
|
|
|
899
|
|
|
9,136
|
|
|
Research and
development
|
18
|
|
|
153
|
|
|
1,391
|
|
|
675
|
|
|
1,175
|
|
|
3,412
|
|
|
General and
administrative
|
33,692
|
|
|
7,169
|
|
|
3,564
|
|
|
573
|
|
|
3,598
|
|
|
48,596
|
|
|
Segment operating
income (loss)
|
86,219
|
|
|
30,798
|
|
|
(4,470)
|
|
|
(1,894)
|
|
|
(7,004)
|
|
|
103,649
|
|
|
Less: depreciation,
amortization and other
|
(38,783)
|
|
|
(8,921)
|
|
|
(3,812)
|
|
|
(136)
|
|
|
—
|
|
|
(51,652)
|
|
|
Operating income
(loss)
|
47,436
|
|
|
21,877
|
|
|
(8,282)
|
|
|
(2,030)
|
|
|
(7,004)
|
|
|
51,997
|
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,541)
|
|
|
(10,541)
|
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,932)
|
|
|
(12,932)
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,614
|
|
|
1,614
|
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
47,436
|
|
|
$
|
21,877
|
|
|
$
|
(8,282)
|
|
|
$
|
(2,030)
|
|
|
$
|
(28,863)
|
|
|
$
|
30,138
|
|
|
OUTERWALL
INC.
|
|
BUSINESS SEGMENT
AND ENTERPRISEWIDE INFORMATION
|
|
(unaudited)
|
|
|
Dollars in
thousands
|
|
|
Six Months Ended
June 30, 2015
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
|
Revenue
|
$
|
958,509
|
|
|
$
|
149,609
|
|
|
$
|
45,811
|
|
|
$
|
76
|
|
|
$
|
—
|
|
|
$
|
1,154,005
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
644,379
|
|
|
76,621
|
|
|
50,033
|
|
|
2,269
|
|
|
1,501
|
|
|
774,803
|
|
|
Marketing
|
9,091
|
|
|
2,410
|
|
|
3,879
|
|
|
578
|
|
|
509
|
|
|
16,467
|
|
|
Research and
development
|
—
|
|
|
—
|
|
|
3,005
|
|
|
(84)
|
|
|
1,202
|
|
|
4,123
|
|
|
General and
administrative
|
68,071
|
|
|
15,563
|
|
|
4,062
|
|
|
5,151
|
|
|
4,492
|
|
|
97,339
|
|
|
Restructuring and
lease termination costs
|
15,174
|
|
|
550
|
|
|
127
|
|
|
—
|
|
|
—
|
|
|
15,851
|
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
—
|
|
|
85,890
|
|
|
Segment operating
income (loss)
|
221,794
|
|
|
54,465
|
|
|
(101,185)
|
|
|
(7,838)
|
|
|
(7,704)
|
|
|
159,532
|
|
|
Less: depreciation,
amortization and other
|
(64,670)
|
|
|
(16,255)
|
|
|
(12,207)
|
|
|
(1,346)
|
|
|
—
|
|
|
(94,478)
|
|
|
Operating income
(loss)
|
157,124
|
|
|
38,210
|
|
|
(113,392)
|
|
|
(9,184)
|
|
|
(7,704)
|
|
|
65,054
|
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(265)
|
|
|
(265)
|
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,254)
|
|
|
(24,254)
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,704)
|
|
|
(1,704)
|
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
157,124
|
|
|
$
|
38,210
|
|
|
$
|
(113,392)
|
|
|
$
|
(9,184)
|
|
|
$
|
(33,927)
|
|
|
$
|
38,831
|
|
|
|
|
|
|
|
|
Dollars in
thousands
|
|
|
Six Months Ended
June 30, 2014
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
|
Revenue
|
$
|
955,887
|
|
|
$
|
148,633
|
|
|
$
|
39,745
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
1,144,289
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
680,977
|
|
|
77,926
|
|
|
38,318
|
|
|
844
|
|
|
3,311
|
|
|
801,376
|
|
|
Marketing
|
9,993
|
|
|
2,563
|
|
|
1,595
|
|
|
381
|
|
|
1,597
|
|
|
16,129
|
|
|
Research and
development
|
26
|
|
|
422
|
|
|
3,175
|
|
|
1,307
|
|
|
1,956
|
|
|
6,886
|
|
|
General and
administrative
|
72,393
|
|
|
14,166
|
|
|
6,443
|
|
|
1,494
|
|
|
6,708
|
|
|
101,204
|
|
|
Restructuring and
lease termination costs
|
534
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
557
|
|
|
Segment operating
income (loss)
|
191,964
|
|
|
53,533
|
|
|
(9,786)
|
|
|
(4,002)
|
|
|
(13,572)
|
|
|
218,137
|
|
|
Less: depreciation,
amortization and other
|
(78,187)
|
|
|
(17,484)
|
|
|
(7,524)
|
|
|
(241)
|
|
|
—
|
|
|
(103,436)
|
|
|
Operating income
(loss)
|
113,777
|
|
|
36,049
|
|
|
(17,310)
|
|
|
(4,243)
|
|
|
(13,572)
|
|
|
114,701
|
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,909)
|
|
|
(19,909)
|
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,580)
|
|
|
(22,580)
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
966
|
|
|
966
|
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
113,777
|
|
|
$
|
36,049
|
|
|
$
|
(17,310)
|
|
|
$
|
(4,243)
|
|
|
$
|
(55,095)
|
|
|
$
|
73,178
|
|
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 early lease
termination costs and related impairment of assets) associated with
actions to reduce costs in our continuing operations across the
Company, 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, v) tax
benefits related to a net operating loss adjustment, and vi) tax
benefit related to 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
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
Dollars in
thousands
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net income (loss)
from continuing operations
|
$
|
(47,351)
|
|
|
$
|
23,833
|
|
|
$
|
(5,196)
|
|
|
$
|
51,439
|
|
|
Depreciation,
amortization and other
|
48,483
|
|
|
51,652
|
|
|
94,478
|
|
|
103,436
|
|
|
Interest expense,
net
|
12,183
|
|
|
12,932
|
|
|
24,254
|
|
|
22,580
|
|
|
Income
taxes
|
18,185
|
|
|
6,305
|
|
|
44,027
|
|
|
21,739
|
|
|
Share-based payments
expense(1)
|
3,320
|
|
|
3,079
|
|
|
7,261
|
|
|
6,844
|
|
|
Adjusted EBITDA from
continuing operations
|
34,820
|
|
|
97,801
|
|
|
164,824
|
|
|
206,038
|
|
|
Non-Core
Adjustments:
|
|
|
|
|
|
|
|
|
Goodwill
impairment
|
85,890
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
Restructuring
costs
|
—
|
|
|
—
|
|
|
15,851
|
|
|
469
|
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
1,005
|
|
|
3,338
|
|
|
2,925
|
|
|
6,759
|
|
|
Loss from equity
method investments, net
|
133
|
|
|
10,541
|
|
|
265
|
|
|
19,909
|
|
|
Core adjusted EBITDA
from continuing operations
|
$
|
121,848
|
|
|
$
|
111,680
|
|
|
$
|
269,755
|
|
|
$
|
233,175
|
|
|
|
|
(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
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Diluted EPS from
continuing operations per common share (two-class
method)
|
$
|
(2.66)
|
|
|
$
|
1.15
|
|
|
$
|
(0.30)
|
|
|
$
|
2.24
|
|
|
Adjustment from
participating securities allocation and share differential to
treasury stock method(1)
|
0.03
|
|
|
0.03
|
|
|
0.01
|
|
|
0.05
|
|
|
Diluted EPS from
continuing operations (treasury stock method)
|
(2.63)
|
|
|
1.18
|
|
|
(0.29)
|
|
|
2.29
|
|
|
Non-Core Adjustments,
net of tax:(1)
|
|
|
|
|
|
|
|
|
Goodwill
impairment
|
4.77
|
|
|
—
|
|
|
4.71
|
|
|
|
—
|
|
|
Restructuring
costs
|
—
|
|
|
—
|
|
|
0.53
|
|
|
0.01
|
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
0.04
|
|
|
0.13
|
|
|
0.11
|
|
|
0.23
|
|
|
Loss from equity
method investments, net
|
0.01
|
|
|
0.32
|
|
|
0.01
|
|
|
0.53
|
|
|
Tax benefit from net
operating loss adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.04)
|
|
|
Tax benefit of
worthless stock deduction
|
—
|
|
|
(0.11)
|
|
|
—
|
|
|
(0.10)
|
|
|
Core diluted EPS from
continuing operations
|
$
|
2.19
|
|
|
$
|
1.52
|
|
|
$
|
5.07
|
|
|
$
|
2.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
In
thousands
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Income (loss) from
continuing operations attributable to common shares
|
$
|
(47,472)
|
|
|
$
|
23,036
|
|
|
$
|
(5,465)
|
|
|
$
|
49,918
|
|
|
Add: income from
continuing operations allocated to participating
securities
|
121
|
|
|
797
|
|
|
269
|
|
|
1,521
|
|
|
Income (loss) from
continuing operations
|
$
|
(47,351)
|
|
|
$
|
23,833
|
|
|
$
|
(5,196)
|
|
|
$
|
51,439
|
|
|
|
|
|
|
|
|
|
|
Weighted average
diluted common shares
|
17,848
|
|
|
20,048
|
|
|
18,057
|
|
|
22,298
|
|
|
Add: diluted common
equivalent shares of participating securities
|
127
|
|
|
133
|
|
|
181
|
|
|
190
|
|
|
Add: dilutive
securities under treasury stock method
|
14
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
Weighted average
diluted shares (treasury stock method)
|
17,989
|
|
|
20,181
|
|
|
18,254
|
|
|
22,488
|
|
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
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
Dollars in
thousands
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
Net cash provided by
operating activities
|
$
|
75,143
|
|
|
$
|
62,833
|
|
|
$
|
181,215
|
|
|
$
|
157,420
|
|
|
Purchase of property
and equipment
|
(19,508)
|
|
|
(26,076)
|
|
|
(40,217)
|
|
|
(53,016)
|
|
|
Free cash
flow
|
$
|
55,635
|
|
|
$
|
36,757
|
|
|
$
|
140,998
|
|
|
$
|
104,404
|
|
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:
|
June 30,
2015
|
|
December 31,
2014
|
|
Dollars in
thousands
|
|
|
Senior unsecured
notes
|
$
|
650,000
|
|
|
$
|
650,000
|
|
|
Term loans
|
142,500
|
|
|
146,250
|
|
|
Revolving line of
credit
|
90,000
|
|
|
160,000
|
|
|
Capital
leases
|
9,876
|
|
|
15,391
|
|
|
Total principal value
of outstanding debt including capital leases
|
892,376
|
|
|
971,641
|
|
|
Less domestic cash
and cash equivalents held in financial institutions
|
(62,609)
|
|
|
(66,546)
|
|
|
Net debt
|
829,767
|
|
|
905,095
|
|
|
LTM Core adjusted
EBITDA from continuing operations(1)
|
$
|
533,400
|
|
|
$
|
496,820
|
|
|
Net leverage
ratio
|
1.56
|
|
|
1.82
|
|
|
|
|
(1)
|
LTM Core Adjusted
EBITDA from continuing operations for the twelve months ended
June 30, 2015 and December 31, 2014 was determined as
follows:
|
|
|
|
Dollars in
thousands
|
|
|
Core adjusted EBITDA
from continuing operations for the six months ended June 30,
2015
|
$
|
269,755
|
|
|
Add: Core adjusted
EBITDA from continuing operations for the twelve months ended
December 31, 2014 (1)
|
496,820
|
|
|
Less: Core adjusted
EBITDA from continuing operations for the six months ended June 30,
2014
|
(233,175)
|
|
|
LTM Core adjusted
EBITDA from continuing operations for the twelve months ended June
30, 2015
|
$
|
533,400
|
|
|
|
|
(1)
|
Core adjusted EBITDA
from continuing operations for the twelve months ended December 31,
2014 is obtained from our Form 8-K filed on May 8, 2015 for the
period ended December 31, 2014, 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, 2014.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/outerwall-inc-announces-2015-second-quarter-results-300121533.html
SOURCE Outerwall Inc.