BELLEVUE, Wash., April 28,
2016 /PRNewswire/ -- Outerwall Inc. (Nasdaq: OUTR) today reported
financial results for the first quarter ended March 31,
2016.
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"Outerwall delivered solid results in the first quarter,
demonstrating our continued ability to generate sustainable cash
flow and profitability," said Erik E.
Prusch, chief executive officer and interim Redbox
president. "We will continue to leverage our valued and compelling
brands, millions of loyal customers, and an unrivaled network of
kiosks and retail partners."
Prusch continued, "Outerwall also initiated a process to explore
strategic and financial alternatives to maximize value for
shareholders that is well underway. The Board is involved in a
comprehensive process and is committed to acting in the best
interest of all shareholders."
|
2016
|
|
2015
|
|
Change
|
Dollars in
millions, except per share data
|
First
Quarter
|
|
First
Quarter
|
|
%
|
GAAP
Results
|
|
|
|
|
|
• Consolidated
revenue
|
$
|
536.0
|
|
|
$
|
608.6
|
|
|
(11.9)%
|
|
• Income from
continuing operations
|
$
|
38.5
|
|
|
$
|
42.2
|
|
|
(8.8)%
|
|
• Net
income
|
$
|
38.5
|
|
|
$
|
35.6
|
|
|
8.0%
|
|
• Diluted earnings
from continuing operations per common share
|
$
|
2.29
|
|
|
$
|
2.23
|
|
|
2.7%
|
|
• Net cash provided
by operating activities
|
$
|
67.2
|
|
|
$
|
106.1
|
|
|
(36.6)%
|
|
|
|
|
|
|
|
Core
Results*
|
|
|
|
|
|
• Core adjusted
EBITDA from continuing operations
|
$
|
108.0
|
|
|
$
|
147.9
|
|
|
(27.0)%
|
|
• Core diluted EPS
from continuing operations**
|
$
|
2.44
|
|
|
$
|
2.81
|
|
|
(13.2)%
|
|
• Free cash
flow
|
$
|
53.8
|
|
|
$
|
85.4
|
|
|
(37.0)%
|
|
|
*Refer to Appendix A
for a discussion of the Use of Non-GAAP Financial Measures and Core
and Non-Core Results
|
**Beginning in the
first quarter of 2016, to better align with our GAAP presentation
of EPS, we adjusted our non-GAAP financial measure of core diluted
EPS from continuing operations to be defined as diluted earnings
per share from continuing operations utilizing the two-class method
excluding non-core adjustments, net of applicable taxes.
Historically we had defined this measure using diluted earnings per
share from continuing operations utilizing the treasury stock
method excluding non-core adjustments, net of applicable taxes.
Prior period results have been updated to reflect this
change.
|
Highlights from the first quarter 2016 include:
- Delivered $108.0 million in core
adjusted EBITDA from continuing operations, down $39.9 million from the first quarter of 2015,
despite $72.7 million in lower
revenue
- Produced $2.44 in core adjusted
EPS from continuing operations
- Generated $53.8 million in free
cash flow
- Repurchased $57.1 million in face
value of 2021 and 2019 Notes for $45.3
million in cash
"During the quarter, we continued to reduce expenses, create
efficiencies and optimize our kiosk networks to improve
profitability," said Galen C. Smith,
Outerwall's chief financial officer. "We also implemented further
organizational changes across the enterprise that will reduce
G&A expense going forward. On a sequential basis, Redbox
results improved from the fourth quarter, including driving growth
in rentals, revenue and margins."
Smith continued, "During the quarter we demonstrated our
commitment to delivering shareholder value. We announced the
doubling of our dividend to $0.60 per
share in the second quarter, underscoring our confidence in the
business. In addition, we opportunistically repurchased
$57 million in face value of our
senior notes for $45 million and paid down our credit facility
by $23.3 million, reducing our total
outstanding debt by over 9%. We remain committed to returning
substantial free cash flow to our investors."
CONSOLIDATED RESULTS
GAAP Results
The company's first quarter 2016 GAAP results include
$3.3 million in one-time
restructuring and related costs associated with workforce
reductions across the enterprise to further align costs with
revenue. These costs were allocated to the lines of business and
are included in segment operating results.
In the first quarter of 2016, consolidated revenue was
$536.0 million, a decrease of
$72.7 million or 11.9%, compared with
$608.6 million in the first quarter
of 2015, primarily reflecting a $98.0
million decrease in Redbox revenue, partially offset by a
$22.3 million increase in revenue
from ecoATM.
Income from continuing operations for the first quarter of 2016
was $38.5 million, or $2.29 of diluted earnings from continuing
operations per common share, compared with $42.2 million, or $2.23 per common share, in the first quarter of
2015. The first quarter of 2016 benefited from an $11.8 million decrease in net interest expense
primarily due to the gain on early extinguishment of debt and lower
borrowings, and a $4.7 million
decrease in income tax expense.
Net cash provided by operating activities in the first quarter
of 2016 was $67.2 million, compared
with $106.1 million in the first
quarter of 2015. The $38.9 million
decrease was primarily due to lower revenue partially offset by
better expense management and an increase in net cash outflows from
changes in working capital.
Cash capital expenditures for the first quarter of 2016 were
$13.5 million compared with
$20.7 million in the first quarter of
2015, with the decrease primarily due to reduced spending on
property and equipment for kiosks and corporate infrastructure.
Core Results
Core adjusted EBITDA from continuing operations for the first
quarter of 2016 was $108.0 million,
compared with $147.9 million in the
first quarter of 2015. The year-over-year decrease in the first
quarter of 2016 was primarily due to lower segment operating income
in the Redbox segment, which generated record quarterly revenue in
the first quarter of 2015, primarily due to the price increase in
December 2014.
Core diluted earnings per share from continuing operations for
the first quarter of 2016 was $2.44,
compared with $2.81 in the first
quarter of 2015. The decrease was primarily attributable to the
results of operations described above, partially offset by a
reduction in the number of weighted average shares used in the
diluted per share calculations as a result of stock repurchases
subsequent to the first quarter of 2015.
Free cash flow for the first quarter of 2016 was $53.8 million, compared with $85.4 million in the first quarter of 2015,
primarily driven by lower net operating cash flow in the first
quarter of 2016, partially offset by lower capital
expenditures.
SEGMENT RESULTS
Redbox
Redbox segment revenue for the first quarter of 2016 was
$421.5 million compared with
$519.5 million in the first quarter
of 2015. Revenue decreased $98.0
million, or 18.9%, primarily due to an $87.8 million decrease in same store sales and
$10.2 million attributable to kiosks
removed or relocated subsequent to the first quarter of 2015, as
the company continued efforts to optimize its network by removing
underperforming kiosks.
Redbox generated approximately 137.7 million rentals in the
first quarter of 2016, down from approximately 173.0 million
rentals in the first quarter of 2015. The decline in rentals in the
first quarter of 2016 was driven primarily by an 18.0% decline in
total disc rentals related to our same store kiosks primarily
driven by the impact of secular decline in the physical market,
fewer kiosks and lower demand from price sensitive customers
compared with the first quarter of 2015. The impact of these
factors was partially offset by a 16.4% higher total box office of
movie titles released than the prior year and an increase in video
game rentals, primarily due to 2015 holiday sales of new generation
platforms that increased demand for new generation content released
at the end of 2015.
The company continued to invest in customer-specific promotional
offerings in the first quarter of 2016 to drive revenue and profit,
but reduced overall promotional spend by driving further efficiency
in promotional programs.
Net revenue per rental was $3.06
in the first quarter of 2016, compared with $3.00 in the first quarter of 2015. The
$0.06 increase in net revenue per
rental was primarily due to higher video game rentals, which have a
higher per day rental price, and lower promotional spend as
compared with the first quarter of 2015.
Redbox segment operating income in the first quarter of 2016 was
$84.2 million, a decrease of
$38.6 million or 31.4%, compared with
$122.9 million in the first quarter
of 2015. The lower segment operating income was primarily due to
the decrease in revenue described above, partially offset by a
$43.9 million decrease in direct
operating expenses attributable to lower product costs due to
content mix and fewer locations compared with the first quarter of
2015, and a reduction in other direct operating expenses driven by
lower revenue and rental volume.
Ongoing initiatives to lower costs contributed to a $1.7 million decrease in general and
administrative expenses and reduced marketing expenses by
$1.0 million in the quarter. Segment
operating margin was 20.0% in the first quarter of 2016, compared
with 23.6% in the first quarter of 2015. Segment results for the
first quarter of 2016 included $2.4 million in one-time restructuring and
related costs that represented 60 basis points of segment operating
margin.
On a sequential basis, Redbox delivered growth in revenue,
rentals and margins. Redbox revenue increased $14.5 million, or 3.6%, on a 1.4% increase
in rentals in the first quarter of 2016, while segment operating
margin improved 460 basis points to 20.0% from 15.4% in the fourth
quarter of 2015. Redbox gross margin was 54.4% in the first quarter
of 2016, down from 59.5% in the first quarter of 2015, but improved
from 52.1% in the fourth quarter of 2015.
Coinstar
Coinstar segment revenue was $72.4 million in the first quarter of 2016,
an increase of $3.0 million or 4.4%,
compared with $69.3 million in
the first quarter of 2015, primarily due to higher revenue in the
U.S. due to increased volume. Coinstar revenue was negatively
impacted by unfavorable exchange rates in the U.K. and Canada related to the continued strengthening
of the U.S. dollar versus the British pound and Canadian dollar
compared with the prior year. Both the number of transactions and
average transaction size increased in the first quarter of 2016
compared with the first quarter of 2015.
Coinstar segment operating income was $24.6 million in the first quarter of 2016,
an increase of $2.1 million or 9.3%,
compared with $22.5 million in
the first quarter of 2015. Coinstar segment operating margin
increased 150 basis points to 34.0% for the first quarter of
2016, compared with 32.5% in the first quarter of 2015, as the
business continued to actively manage expenses and identify
opportunities to reduce costs. Segment results for the first
quarter of 2016 included $0.5 million in one-time restructuring and
related costs that represented 70 basis points of segment operating
margin.
During the first quarter, Coinstar installed its first
coin-counting kiosk in Spain to
begin testing the service in an additional country and plans to
expand the test as well as explore other international
opportunities.
ecoATM
Revenue in the ecoATM segment increased $22.3 million, or 113.1%, to $42.1 million in the first quarter of 2016,
primarily due to revenue earned from devices acquired and sold
through Gazelle. The results of operations for Gazelle have also
favorably impacted the mix of value devices and the average selling
price of value devices sold, which increased to $65.72 from $60.28
in the first quarter of 2015.
Segment operating loss decreased to $5.7 million in the first quarter of 2016,
compared with $8.3 million in
the first quarter of 2015, primarily due to the increase in revenue
described above, partially offset by a $15.1
million increase in direct operating expenses primarily due
to the addition of Gazelle and costs associated with the larger
installed ecoATM kiosk base. Segment results for the first quarter
of 2016 included $0.4 million in
one-time restructuring and related costs that represented 100 basis
points of segment operating margin. The business unit continues to
be on track to achieve segment operating profitability for
2016.
At the end of the quarter, ecoATM had an installed base of 2,540
kiosks, an increase of 400 compared with the first quarter of 2015
and an increase of 290 from the end of 2015.
CAPITAL ALLOCATION
During the first quarter of 2016, the company repurchased
$29.4 million in face value of its 6%
Senior Notes due 2019 for $23.4
million, and $27.7 million in
face value of its 5.875% Senior Notes due 2021 for $21.9 million in cash. The gain from early
extinguishment of these notes was approximately $11.0 million and is included in net
interest expense. In addition to the notes repurchased, the company
also reduced the outstanding balance on its credit facility by
$23.3 million, decreasing its total
outstanding debt by over 9%.
On March 14, 2016, the company's
board of directors declared a quarterly cash dividend of
$0.60 per share to be paid on
June 21, 2016, to stockholders of
record as of the close of business on June
7, 2016. On March 29, 2016,
the company paid a cash dividend of $0.30 per outstanding share of its common stock
totaling approximately $5.1 million.
The company did not repurchase any shares of its common stock
during the first quarter of 2016. As of March 31, 2016, there was approximately
$256.4 million remaining under
the company's stock repurchase authorization.
2016 ANNUAL GUIDANCE
The following table presents Outerwall's updated full-year 2016
guidance and reflects changes in the company's expectations based
on the company's first quarter results and outlook for the
year:
2016 FULL-YEAR
GUIDANCE
|
As
of
|
Dollars in
millions, except per share data
|
April 28,
2016
|
Consolidated
results
|
|
Core adjusted EBITDA
from continuing operations(1)
|
$340 —
$380
|
Core diluted EPS from
continuing operations(1)(2)(3)
|
$5.35 —
$6.55
|
Free cash
flow(1)
|
$140 —
$190
|
Weighted average
diluted shares outstanding(3) (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
|
|
(1)
|
Refer to Appendix A
for a discussion of Use of Non-GAAP Financial Measures and Core and
Non-Core Results
|
(2)
|
Defined as diluted
earnings per share from continuing operations utilizing the
two-class method excluding non-core adjustments, net of
adjustments
|
(3)
|
Excludes the impact
of any potential share repurchases for the remainder of
2016
|
ADDITIONAL INFORMATION
Additional information regarding the company's 2016 first
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 first quarter 2016 earnings results and 2016
guidance. The conference call will be webcast live and archived on
the Investor Relations section of Outerwall's website at
ir.outerwall.com. A recording of the call will be available
approximately two hours after the call ends through May 12, 2016, at 1-855-859-2056 or
1-404-537-3406, using conference ID 75276674.
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 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)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2016
|
|
2015
|
Revenue
|
$
|
535,956
|
|
|
$
|
608,636
|
|
Expenses:
|
|
|
|
Direct
operating(1)
|
375,967
|
|
|
405,184
|
|
Marketing
|
9,222
|
|
|
8,420
|
|
Research and
development
|
1,045
|
|
|
2,084
|
|
General and
administrative
|
47,770
|
|
|
48,556
|
|
Restructuring and
related costs
|
3,275
|
|
|
15,851
|
|
Depreciation and
other
|
36,118
|
|
|
42,686
|
|
Amortization of
intangible assets
|
3,790
|
|
|
3,309
|
|
Total
expenses
|
477,187
|
|
|
526,090
|
|
Operating
income
|
58,769
|
|
|
82,546
|
|
Other income
(expense), net:
|
|
|
|
Loss from equity
method investments, net
|
(207)
|
|
|
(132)
|
|
Interest expense,
net
|
(242)
|
|
|
(12,071)
|
|
Other, net
|
1,229
|
|
|
(2,346)
|
|
Total other income
(expense), net
|
780
|
|
|
(14,549)
|
|
Income from
continuing operations before income taxes
|
59,549
|
|
|
67,997
|
|
Income tax
expense
|
(21,098)
|
|
|
(25,842)
|
|
Income from
continuing operations
|
38,451
|
|
|
42,155
|
|
Loss from
discontinued operations, net of tax
|
—
|
|
|
(6,556)
|
|
Net income
|
38,451
|
|
|
35,599
|
|
Foreign currency
translation adjustment(2)
|
(549)
|
|
|
2,854
|
|
Comprehensive
income
|
$
|
37,902
|
|
|
$
|
38,453
|
|
|
|
|
|
Income from
continuing operations attributable to common shares:
|
|
|
|
Basic
|
$
|
36,986
|
|
|
$
|
40,775
|
|
Diluted
|
$
|
36,988
|
|
|
$
|
40,776
|
|
|
|
|
|
Basic earnings (loss)
per common share:
|
|
|
|
Continuing
operations
|
$
|
2.30
|
|
|
$
|
2.23
|
|
Discontinued
operations
|
—
|
|
|
(0.36)
|
|
Basic earnings per
common share
|
$
|
2.30
|
|
|
$
|
1.87
|
|
|
|
|
|
Diluted earnings
(loss) per common share:
|
|
|
|
Continuing
operations
|
$
|
2.29
|
|
|
$
|
2.23
|
|
Discontinued
operations
|
—
|
|
|
(0.36)
|
|
Diluted earnings per
common share
|
$
|
2.29
|
|
|
$
|
1.87
|
|
|
|
|
|
Weighted average
common shares used in basic and diluted per share
calculations:
|
|
|
|
Basic
|
16,094
|
|
|
18,269
|
|
Diluted
|
16,136
|
|
|
18,286
|
|
|
|
|
|
Dividends paid per
common share
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
(1)
|
"Direct operating"
excludes depreciation and other of $26.2 million and $30.2 million
for the three months ended March 31, 2016 and 2015,
respectively.
|
(2)
|
Foreign currency
translation adjustment had no tax effect for the three months ended
March 31, 2016 and 2015, respectively.
|
OUTERWALL
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands,
except share data)
|
(unaudited)
|
|
|
March
31, 2016
|
|
December
31, 2015
|
Assets
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
198,850
|
|
|
$
|
222,549
|
|
Accounts receivable,
net of allowances of $1,015 and $1,272
|
31,683
|
|
|
38,464
|
|
Content
library
|
156,352
|
|
|
188,490
|
|
Prepaid expenses and
other current assets
|
46,389
|
|
|
51,368
|
|
Total current
assets
|
433,274
|
|
|
500,871
|
|
Property and
equipment, net
|
290,760
|
|
|
316,013
|
|
Deferred income
taxes
|
2,508
|
|
|
2,606
|
|
Goodwill and other
intangible assets, net
|
536,724
|
|
|
540,514
|
|
Other long-term
assets
|
1,874
|
|
|
2,207
|
|
Total
assets
|
$
|
1,265,140
|
|
|
$
|
1,362,211
|
|
Liabilities and
Stockholders' Equity (Deficit)
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
|
145,387
|
|
|
$
|
184,010
|
|
Accrued payable to
retailers
|
90,472
|
|
|
115,098
|
|
Other accrued
liabilities
|
159,782
|
|
|
141,437
|
|
Dividend
payable
|
10,463
|
|
|
—
|
|
Current portion of
long-term debt and other long-term liabilities
|
17,912
|
|
|
17,131
|
|
Total current
liabilities
|
424,016
|
|
|
457,676
|
|
Long-term debt and
other long-term liabilities
|
813,967
|
|
|
893,517
|
|
Deferred income
taxes
|
24,957
|
|
|
33,092
|
|
Total
liabilities
|
1,262,940
|
|
|
1,384,285
|
|
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;
|
|
|
|
37,291,804 and
36,720,579 shares issued;
|
|
|
|
17,228,741 and
16,607,516 shares outstanding;
|
485,171
|
|
|
485,163
|
|
Treasury
stock
|
(1,149,261)
|
|
|
(1,151,063)
|
|
Retained
earnings
|
666,465
|
|
|
643,452
|
|
Accumulated other
comprehensive income (loss)
|
(175)
|
|
|
374
|
|
Total stockholders'
equity (deficit)
|
2,200
|
|
|
(22,074)
|
|
Total liabilities and
stockholders' equity
|
$
|
1,265,140
|
|
|
$
|
1,362,211
|
|
OUTERWALL
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2016
|
|
2015
|
Operating
Activities:
|
|
|
|
Net income
|
$
|
38,451
|
|
|
$
|
35,599
|
|
Adjustments to
reconcile net income to net cash flows from operating
activities:
|
|
|
|
Depreciation and
other
|
36,118
|
|
|
48,543
|
|
Amortization of
intangible assets
|
3,790
|
|
|
3,353
|
|
Share-based payments
expense
|
4,330
|
|
|
3,903
|
|
Windfall excess tax
benefits related to share-based payments
|
—
|
|
|
(526)
|
|
Deferred income
taxes
|
(7,822)
|
|
|
(2,547)
|
|
Restructuring,
impairment and related costs(2)
|
361
|
|
|
1,680
|
|
Loss from equity
method investments, net
|
207
|
|
|
132
|
|
Amortization of
deferred financing fees and debt discount
|
638
|
|
|
693
|
|
Gain from early
extinguishment of debt
|
(11,028)
|
|
|
—
|
|
Other
|
(36)
|
|
|
(1,198)
|
|
Cash flows from
changes in operating assets and liabilities:
|
|
|
|
Accounts receivable,
net
|
6,863
|
|
|
11,823
|
|
Content
library
|
33,126
|
|
|
9,956
|
|
Prepaid expenses and
other current assets
|
6,022
|
|
|
(3,106)
|
|
Other
assets
|
163
|
|
|
168
|
|
Accounts
payable
|
(35,405)
|
|
|
2,920
|
|
Accrued payable to
retailers
|
(24,646)
|
|
|
(18,441)
|
|
Other accrued
liabilities
|
16,073
|
|
|
13,120
|
|
Net cash flows
from operating activities(1)
|
67,205
|
|
|
106,072
|
|
Investing
Activities:
|
|
|
|
Purchases of property
and equipment
|
(13,453)
|
|
|
(20,709)
|
|
Proceeds from sale of
property and equipment
|
74
|
|
|
123
|
|
Net cash flows
used in investing activities(1)
|
(13,379)
|
|
|
(20,586)
|
|
Financing
Activities:
|
|
|
|
Proceeds from new
borrowing on Credit Facility
|
85,000
|
|
|
35,000
|
|
Principal payments on
Credit Facility
|
(108,313)
|
|
|
(116,875)
|
|
Repurchases of
notes
|
(45,328)
|
|
|
—
|
|
Repurchases of common
stock
|
—
|
|
|
(40,708)
|
|
Dividends
paid
|
(5,038)
|
|
|
(5,602)
|
|
Principal payments on
capital lease obligations and other debt
|
(1,626)
|
|
|
(3,245)
|
|
Windfall excess tax
benefits related to share-based payments
|
—
|
|
|
526
|
|
Withholding tax paid
on vesting of restricted stock net of proceeds from exercise of
stock options
|
(1,425)
|
|
|
(3,088)
|
|
Net cash flows
used in financing activities(1)
|
(76,730)
|
|
|
(133,992)
|
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2016
|
|
2015
|
Effect of exchange
rate changes on cash
|
(795)
|
|
3,744
|
Change in cash and
cash equivalents
|
(23,699)
|
|
(44,762)
|
Cash and cash
equivalents:
|
|
|
|
Beginning of
period
|
222,549
|
|
242,696
|
End of
period
|
$
|
198,850
|
|
$
|
197,934
|
Supplemental
disclosure of cash flow information:
|
|
|
|
Cash paid during the
period for interest
|
$
|
12,050
|
|
$
|
11,913
|
Cash paid during the
period for income taxes, net
|
$
|
2,061
|
|
$
|
12,991
|
Supplemental
disclosure of non-cash investing and financing
activities:
|
|
|
|
Purchases of property
and equipment financed by capital lease obligations
|
$
|
1,756
|
|
$
|
720
|
Purchases of property
and equipment included in ending accounts payable
|
$
|
2,462
|
|
$
|
2,025
|
|
(1)
|
During the first
quarter of 2015 we discontinued our Redbox operations in Canada.
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 the three months
ended March 31, 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)
Comparability of Results
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.
On November 10, 2015, we acquired
certain assets and liabilities of Gazelle, Inc. ("Gazelle").
Results of operations for Gazelle are included in ecoATM for the
three month period ended March 31,
2016.
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
March 31, 2016
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
421,488
|
|
|
$
|
72,379
|
|
|
$
|
42,089
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
535,956
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
299,001
|
|
|
38,645
|
|
|
37,894
|
|
|
86
|
|
|
341
|
|
|
375,967
|
|
Marketing
|
3,824
|
|
|
775
|
|
|
4,580
|
|
|
5
|
|
|
38
|
|
|
9,222
|
|
Research and
development
|
—
|
|
|
—
|
|
|
935
|
|
|
—
|
|
|
110
|
|
|
1,045
|
|
General and
administrative
|
32,029
|
|
|
7,864
|
|
|
4,002
|
|
|
347
|
|
|
3,528
|
|
|
47,770
|
|
Restructuring and
related costs
|
2,408
|
|
|
462
|
|
|
405
|
|
|
—
|
|
|
—
|
|
|
3,275
|
|
Segment operating
income (loss)
|
84,226
|
|
|
24,633
|
|
|
(5,727)
|
|
|
(438)
|
|
|
(4,017)
|
|
|
98,677
|
|
Less: depreciation,
amortization and other
|
(24,295)
|
|
|
(7,409)
|
|
|
(8,204)
|
|
|
—
|
|
|
—
|
|
|
(39,908)
|
|
Operating income
(loss)
|
59,931
|
|
|
17,224
|
|
|
(13,931)
|
|
|
(438)
|
|
|
(4,017)
|
|
|
58,769
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(207)
|
|
|
(207)
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(242)
|
|
|
(242)
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,229
|
|
|
1,229
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
59,931
|
|
|
$
|
17,224
|
|
|
$
|
(13,931)
|
|
|
$
|
(438)
|
|
|
$
|
(3,237)
|
|
|
$
|
59,549
|
|
Dollars in
thousands
|
|
Three Months Ended
March 31, 2015
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
519,533
|
|
|
$
|
69,330
|
|
|
$
|
19,749
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
608,636
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
342,935
|
|
|
37,263
|
|
|
22,806
|
|
|
1,191
|
|
|
989
|
|
|
405,184
|
|
Marketing
|
4,825
|
|
|
1,178
|
|
|
1,730
|
|
|
320
|
|
|
367
|
|
|
8,420
|
|
Research and
development
|
—
|
|
|
—
|
|
|
1,456
|
|
|
(85)
|
|
|
713
|
|
|
2,084
|
|
General and
administrative
|
33,735
|
|
|
7,795
|
|
|
1,968
|
|
|
2,507
|
|
|
2,551
|
|
|
48,556
|
|
Restructuring and
related costs
|
15,174
|
|
|
550
|
|
|
127
|
|
|
—
|
|
|
—
|
|
|
15,851
|
|
Segment operating
income (loss)
|
122,864
|
|
|
22,544
|
|
|
(8,338)
|
|
|
(3,909)
|
|
|
(4,620)
|
|
|
128,541
|
|
Less: depreciation,
amortization and other
|
(31,607)
|
|
|
(7,818)
|
|
|
(5,902)
|
|
|
(668)
|
|
|
—
|
|
|
(45,995)
|
|
Operating income
(loss)
|
91,257
|
|
|
14,726
|
|
|
(14,240)
|
|
|
(4,577)
|
|
|
(4,620)
|
|
|
82,546
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(132)
|
|
|
(132)
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,071)
|
|
|
(12,071)
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,346)
|
|
|
(2,346)
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
91,257
|
|
|
$
|
14,726
|
|
|
$
|
(14,240)
|
|
|
$
|
(4,577)
|
|
|
$
|
(19,169)
|
|
|
$
|
67,997
|
|
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 may include nonrecurring events or
events we do not directly control. Our non-core adjustments for the
periods presented include i) restructuring costs (including
severance and early lease termination costs, and the related asset
impairments) associated with actions to reduce costs in our
continuing operations across the company, ii) compensation expense
for rights to receive cash issued in conjunction with our
acquisition of ecoATM and attributable to post-combination services
as they are fixed amount acquisition related awards and not
indicative of the directly controllable future business results,
and iii) loss from equity method investments, which represents our
share of loss from entities we do not consolidate or control
("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
|
|
March
31,
|
Dollars in
thousands
|
2016
|
|
2015
|
Net income from
continuing operations
|
$
|
38,451
|
|
|
$
|
42,155
|
|
Depreciation,
amortization and other
|
39,908
|
|
|
45,995
|
|
Interest expense,
net
|
242
|
|
|
12,071
|
|
Income
taxes
|
21,098
|
|
|
25,842
|
|
Share-based payments
expense(1)
|
4,392
|
|
|
3,941
|
|
Adjusted EBITDA from
continuing operations
|
104,091
|
|
|
130,004
|
|
Non-Core
Adjustments:
|
|
|
|
Restructuring and
related costs
|
3,275
|
|
|
15,851
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
440
|
|
|
1,920
|
|
Loss from equity
method investments, net
|
207
|
|
|
132
|
|
Core adjusted EBITDA
from continuing operations
|
$
|
108,013
|
|
|
$
|
147,907
|
|
|
(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
Beginning in the first quarter of 2016, to align better with our
GAAP presentation of EPS, we adjusted our non-GAAP financial
measure of core diluted EPS from continuing operations to be
defined as diluted earnings per share from continuing operations
utilizing the two class method excluding non-core adjustments, net
of applicable taxes. Historically we had defined this measure using
diluted earnings per share from continuing operations utilizing the
treasury stock method excluding non-core adjustments, net of
applicable taxes. Prior period results have been updated to reflect
this change.
A reconciliation of core diluted EPS from continuing operations
to diluted EPS from continuing operations, the most comparable GAAP
financial measure, is presented in the following table:
|
Three Months
Ended
|
March
31,
|
|
2016
|
|
2015
|
Diluted EPS from
continuing operations per common share
|
$
|
2.29
|
|
|
$
|
2.23
|
|
Non-Core Adjustments,
net of tax:(1)
|
|
|
|
Restructuring and
related costs
|
0.12
|
|
|
0.51
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
0.02
|
|
|
0.07
|
|
Loss from equity
method investments, net
|
0.01
|
|
|
—
|
|
Core diluted EPS from
continuing operations
|
$
|
2.44
|
|
|
$
|
2.81
|
|
|
(1)
|
Non-Core Adjustments
are presented after-tax using the applicable effective tax rate for
the respective periods.
|
Free Cash Flow
Our non-GAAP financial measure free cash flow is defined as net
cash provided by operating activities after capital expenditures.
We believe free cash flow is an important non-GAAP measure as it
provides additional information to users of the financial
statements regarding our ability to service, incur or pay down
indebtedness and repurchase our securities. A reconciliation of
free cash flow to net cash provided by operating activities, the
most comparable GAAP financial measure, is presented in the
following table:
|
Three Months
Ended
|
|
March
31,
|
Dollars in
thousands
|
2016
|
|
2015
|
Net cash provided by
operating activities
|
$
|
67,205
|
|
|
$
|
106,072
|
|
Purchase of property
and equipment
|
(13,453)
|
|
|
(20,709)
|
|
Free cash
flow
|
$
|
53,752
|
|
|
$
|
85,363
|
|
Net Debt and Net Leverage Ratio
Our non-GAAP financial measure net debt is defined as the total
face value of outstanding debt, including capital leases, less cash
and cash equivalents held in financial institutions domestically.
Our non-GAAP financial measure net leverage ratio is defined as net
debt divided by core adjusted EBITDA from continuing operations for
the last twelve months (LTM). We believe net debt and net leverage
ratio are important non-GAAP measures because they:
- are used to assess the degree of leverage by management;
- provide additional information to users of the financial
statements regarding our ability to service, incur or pay down
indebtedness and repurchase our securities as well as additional
information about our capital structure; and
- are reported quarterly to support covenant compliance under our
credit agreement.
A reconciliation of net debt to total outstanding debt including
capital leases, the most comparable GAAP financial measure, is
presented in the following table:
|
March
31,
2016
|
|
December
31,
2015
|
Dollars in
thousands
|
|
Senior unsecured
notes
|
$
|
551,847
|
|
|
$
|
608,908
|
|
Term loans
|
134,063
|
|
|
136,875
|
|
Revolving line of
credit
|
120,000
|
|
|
140,500
|
|
Capital
leases
|
6,011
|
|
|
5,889
|
|
Total principal value
of outstanding debt including capital leases
|
811,921
|
|
|
892,172
|
|
Less domestic cash
and cash equivalents held in financial institutions
|
(44,855)
|
|
|
(46,192)
|
|
Net debt
|
767,066
|
|
|
845,980
|
|
LTM Core adjusted
EBITDA from continuing operations(1)
|
$
|
445,391
|
|
|
$
|
485,285
|
|
Net leverage
ratio
|
1.72
|
|
|
1.74
|
|
|
(1)
|
LTM Core Adjusted
EBITDA from continuing operations for the twelve months ended
March 31, 2016 and December 31, 2015 was determined as
follows:
|
|
Dollars in
thousands
|
|
Core adjusted EBITDA
from continuing operations for the three months ended March 31,
2016
|
$
|
108,013
|
|
Add: Core adjusted
EBITDA from continuing operations for the twelve months ended
December 31, 2014(1)
|
485,285
|
|
Less: Core adjusted
EBITDA from continuing operations for the three months ended
March 31, 2015
|
(147,907)
|
|
LTM Core adjusted
EBITDA from continuing operations for the twelve months ended March
31, 2016
|
$
|
445,391
|
|
|
(1)
|
Core adjusted EBITDA
from continuing operations for the twelve months ended December 31,
2015 is obtained from our Annual Report on Form 10-K for the period
ended December 31, 2015, 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, 2015.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/outerwall-inc-announces-2016-first-quarter-results-300259639.html
SOURCE Outerwall Inc.