Coinstar, Inc. Announces Third Quarter 2009 Results
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Solid Performance In Core DVD and Coin Businesses
BELLEVUE, Wash.--(BUSINESS WIRE)-- Coinstar, Inc. (NASDAQ: CSTR) today announced financial results for the third quarter and nine-month period ended September 30, 2009, which reflect the sale of its entertainment services business on September 8, 2009.
As a result of the sale, Coinstar recorded income from discontinued operations, net of tax, of $31.7 million, or $1.03 per diluted share, for the third quarter. The $31.7 million included a loss from the operations of the discontinued business for the third quarter of $0.7 million, or a loss of $0.02 per share. In addition, Coinstar recorded a pre-tax loss on disposal of $49.8 million and a one-time tax benefit of $82.2 million on the sale of the entertainment services business, netting to $32.4 million, or $1.05 per share. All prior period results have been adjusted to reflect the results of the entertainment services business as discontinued operations.
Highlights for the quarter ended September 30, 2009, were as follows:
-- Revenue $ 296.0 million
-- Adjusted EBITDA from continuing operations (See $ 54.9 million
Appendix A)
-- Income from continuing operations $ 9.7 million
-- Income from discontinued operations, net of tax $ 31.7 million
-- Net income attributable to Coinstar, Inc. $ 41.4 million
-- Earnings from continuing operations per diluted share $ 0.31
-- Earnings per diluted share $ 1.34
Highlights for the nine-month period ended September 30, 2009, were as follows:
-- Revenue $ 816.8 million
-- Adjusted EBITDA from continuing operations (See $ 147.6 million
Appendix A)
-- Income from continuing operations $ 25.9 million
-- Income from discontinued operations, net of tax $ 28.0 million
-- Net income attributable to Coinstar, Inc. $ 50.3 million
-- Earnings from continuing operations per diluted share $ 0.74
-- Earnings per diluted share $ 1.66
Financial results for the third quarter of 2009 included the following:
Revenue for the third quarter of 2009 totaled $296.0 million, an increase of 45.5 percent compared with revenue of $203.5 million in the third quarter of 2008. Income from operations for the quarter was $27.1 million, resulting in a 9.2 percent operating margin, compared with income from operations of $20.2 million and a 9.9 percent operating margin in the third quarter of 2008. Income from continuing operations for the quarter was $9.7 million, or $0.31 per diluted share, an increase of 22.5 percent compared with income from continuing operations of $7.9 million, or $0.27 per diluted share, in the third quarter of 2008. Net income attributable to Coinstar for the quarter was $41.4 million, or $1.34 per diluted share, compared with net income attributable to Coinstar of $4.5 million, or $0.16 per diluted share, in the third quarter of 2008.
"In the third quarter, our core DVD rental and coin-counting businesses continued to produce solid results at both the top and bottom line," said Paul Davis, chief executive officer of Coinstar, Inc. "Our performance reflects Coinstar's strength in self-service automated retail and our consistent ability to deliver value and convenience to our consumers and retailers."
Other Information
On September 16, 2009, Coinstar completed a debt offering of $200 million of convertible senior notes and raised $193.3 million, net of expenses. The net proceeds of the convertible offering were used to pay the outstanding balance of the company's Term Loan under its senior secured credit facility, which was $87.5 million. The company used the remaining proceeds of $105.8 million to pay down part of its existing credit facility.
Cash paid for capital expenditures for the third quarter ended September 30, 2009 was $29.6 million, compared with $49.5 million in the third quarter of 2008.
At September 30, 2009, Coinstar had federal and state cumulative net operating loss carryforwards of approximately $248.6 million and $242.3 million, respectively. In addition, Coinstar had foreign net operating loss carryforwards of approximately $33.6 million. The state and foreign loss carryforwards are subject to certain limitations that may prevent or delay utilization of the losses against future income. Although Coinstar recorded $6.8 million in tax expense for the continuing operations for the quarter, cash paid for taxes during the quarter totaled $0.3 million.
Full Year 2009 Guidance
Guidance provided by management reflects the sale of the entertainment services business and the increased GAAP interest expense from the convertible debt offering. For 2009, management expects revenue in the range of $1.115 to $1.165 billion. Management expects adjusted EBITDA from continuing operations in the range of $200 to $210 million. In addition, management announced that for 2009, on a fully diluted basis, it expects GAAP EPS from continuing operations in the range of $0.98 to $1.04 and GAAP EPS attributable to Coinstar, Inc. in the range of $1.90 to $1.96.
Conference Call
Coinstar management will host a conference call today at 2:00 p.m. PST (5:00 p.m. EST) to review the results. A live webcast of the conference call will be accessible on the Investor Relations section of Coinstar's website at www.coinstar.com, where it will be archived. A telephonic replay of the call will be available approximately two hours after the call ends through November 19, 2009, at 1-888-286-8010 or 1-617-801-6888, passcode 88829130.
About Coinstar, Inc.
Coinstar, Inc. (NASDAQ: CSTR) is a leading provider of automated retail solutions offering convenient products and services that make life easier for consumers and drive incremental traffic and revenue for its retailers. The company's core automated retail businesses are self-service coin counting and self-service DVD rental. Other Coinstar products and services include e-payment products - such as gift cards, prepaid debit cards and other prepaid products - and money transfer services. The company's products and services can be found at more than 90,000 points of presence including supermarkets, drug stores, mass merchants, financial institutions, convenience stores, restaurants, and money transfer agents. For more information, visit www.coinstar.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," "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 Coinstar, Inc.'s anticipated growth and future operating 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 Coinstar, Inc., as well as from risks and uncertainties beyond Coinstar, Inc.'s control. Such risks and uncertainties include, but are not limited to, the termination, non-renewal or renegotiation on materially adverse terms of our contracts with our significant retailers, payment of increased service fees to retailers, the ability to attract new retailers, penetrate new markets and distribution channels, cross-sell our products and services and react to changing consumer demands, the ability to achieve the strategic and financial objectives for our entry into or expansion of new businesses, 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 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission. These forward-looking statements reflect Coinstar, Inc.'s expectations as of the date of this release. Coinstar, Inc. undertakes no obligation to update the information provided herein.
(Financial Statements Follow)
Appendix A
(in thousands)
Non-GAAP Measures
Non-GAAP measures may be provided as a complement to results provided in accordance with United States generally accepted accounting principles ("GAAP"). Non-GAAP measures are not a substitute for measures computed in accordance with GAAP. The definition of adjusted EBITDA from continuing operations, a non-GAAP measure, is provided below to allow the reader to reconcile non-GAAP data to that presented in accordance with GAAP. Our non-GAAP measure may be different from the presentation of financial information by other companies.
Adjusted EBITDA from continuing operations, as defined, represents earnings before net interest expense, income taxes, depreciation, amortization and certain other non-cash charges including the write-off from early retirement of debt, and stock-based compensation and share-based expenses from continuing operations. We believe adjusted EBITDA from continuing operations is an important non-GAAP measure as it provides useful information to investors regarding our ability to service, incur or pay down indebtedness. In addition, management uses this non-GAAP measure internally to evaluate performance and manage operations. See below for reconciliation of the most comparable GAAP measure, income from continuing operations, to adjusted EBITDA from continuing operations.
Three-Month Period Three-Month Period
Ended September 30, 2009 Ended September 30, 2008
Income from continuing $ 9,641 $ 7,870
operations
Depreciation, amortization 25,461 17,425
and other
Interest expense, net 9,342 5,214
Income taxes 6,761 6,357
Stock-based compensation 2,660 2,291
and share-based expense
Early retirement of debt 1,082 -
Adjusted EBITDA from $ 54,947 $ 39,157
continuing operations
Nine-Month Period Nine-Month Period
Ended September 30, 2009 Ended September 30, 2008
Income from continuing $ 25,904 $ 23,573
operations
Depreciation, amortization 72,805 48,220
and other
Interest expense, net 24,326 15,010
Income taxes 16,231 13,272
Stock-based compensation 7,297 6,175
and share-based expense
Early retirement of debt 1,082 -
Adjusted EBITDA from $ 147,645 $ 106,250
continuing operations
Coinstar, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Nine Month Periods Three Month Periods
Ended September 30, Ended September 30,
2009 2008 2009 2008
REVENUE $ 816,786 $ 533,817 $ 295,970 $ 203,452
EXPENSES:
Direct operating 559,054 344,232 203,650 134,342
Marketing 16,605 13,946 5,833 7,372
Research and development 3,916 3,578 1,360 1,157
General and administrative 96,524 65,789 32,570 22,997
Depreciation and other 66,864 41,997 23,432 15,384
Amortization of intangible 5,941 6,223 2,029 2,041
assets
Proxy, write-off of
acquisition costs, and - 3,084 - -
litigation settlement
Income from operations 67,882 54,968 27,096 20,159
OTHER INCOME (EXPENSE):
Foreign currency loss and (339 ) (2,775 ) (270 ) (717 )
other, net
Interest income 184 1,063 30 180
Interest expense (24,510 ) (16,073 ) (9,372 ) (5,394 )
Loss from equity investments - (338 ) - (1 )
Early retirement of debt (1,082 ) - (1,082 ) -
Income from continuing
operations before income 42,135 36,845 16,402 14,227
taxes
Income tax expense (16,231 ) (13,272 ) (6,761 ) (6,357 )
Income from continuing 25,904 23,573 9,641 7,870
operations
Income (loss) from
discontinued operations, net 28,007 (2,892 ) 31,722 (12 )
of tax
Net income 53,911 20,681 41,363 7,858
Less: Net income
attributable to (3,627 ) (10,789 ) - (3,347 )
non-controlling interests
NET INCOME ATTRIBUTABLE TO $ 50,284 $ 9,892 $ 41,363 $ 4,511
COINSTAR, INC.
BASIC EARNINGS PER SHARE:
Basic earnings per share
from continuing operations $ 0.75 $ 0.45 $ 0.32 $ 0.16
attributable to Coinstar,
Inc
Basic earnings per share
from discontinued operations 0.94 (0.10 ) 1.04 -
attributable to Coinstar,
Inc
Basic earnings per share
attributable to Coinstar, $ 1.69 $ 0.35 $ 1.36 $ 0.16
Inc.
DILUTED EARNINGS PER SHARE:
Diluted earnings per share
from continuing operations $ 0.74 $ 0.45 $ 0.31 $ 0.16
attributable to Coinstar,
Inc
Diluted earnings per share
from discontinued operations 0.92 (0.10 ) 1.03 -
attributable to Coinstar,
Inc
Diluted earnings per share
attributable to Coinstar, $ 1.66 $ 0.35 $ 1.34 $ 0.16
Inc.
WEIGHTED SHARES OUTSTANDING:
Basic 29,829 27,992 30,437 28,170
Diluted 30,209 28,507 30,840 28,685
Coinstar, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
September 30, December 31,
2009 2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 68,411 $ 66,408
Cash in machine or in transit 49,290 34,583
Cash being processed 65,679 91,044
Accounts receivable, net of allowance for doubtful
accounts of $4,076 and $2,702
at September 30, 2009 and December 31, 2008, 57,235 51,908
respectively
Inventory 88,041 92,247
Deferred income taxes 8,594 6,881
Prepaid expenses and other current assets 24,990 24,715
Total current assets 362,240 367,786
PROPERTY AND EQUIPMENT, NET 382,184 348,949
DEFERRED INCOME TAXES 103,567 4,338
OTHER ASSETS 16,511 11,865
INTANGIBLE ASSETS, NET 32,877 43,385
GOODWILL 292,361 290,391
TOTAL ASSETS $ 1,189,740 $ 1,066,714
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $ 100,919 $ 132,194
Accrued payable to retailers and agents 115,303 132,490
Other accrued liabilities 82,027 87,500
Current portion of long-term debt 6,682 11,655
Current portion of capital lease obligations 27,428 20,264
Total current liabilities 332,359 384,103
LONG-TERM DEBT AND OTHER 418,667 295,942
CAPITAL LEASE OBLIGATIONS 31,950 23,509
DEFERRED TAX LIABILITY 60 12,072
TOTAL LIABILITIES 783,036 715,626
EQUITY:
Preferred stock, $0.001 par value--Authorized,
5,000,000 shares; no shares issued and outstanding - -
at September 30, 2009 and December 31, 2008
Common stock, $0.001 par value--Authorized,
45,000,000 shares; 32,894,913 and 30,181,151
issued and 30,968,832 and 28,255,070 shares 401,532 369,735
outstanding at September 30, 2009 and December 31,
2008, respectively
Retained earnings (accumulated deficit) 47,612 (2,672 )
Treasury stock (40,831 ) (40,831 )
Accumulated other comprehensive loss (1,609 ) (6,204 )
Total stockholders' equity 406,704 320,028
Non-controlling interest - 31,060
Total equity 406,704 351,088
TOTAL LIABILITIES AND EQUITY $ 1,189,740 $ 1,066,714
Coinstar, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Month Periods
Ended September 30,
2009 2008
OPERATING ACTIVITIES:
Net income $ 53,911 $ 20,681
Adjustments to reconcile net income to net cash
provided by operating activities from continuing
operations:
Depreciation and other 66,864 41,997
Amortization of intangible assets and deferred 6,907 6,608
financing fees
Write-off of acquisition costs 1,262 1,004
Non-cash stock-based compensation for employees 6,232 6,288
Share-based payments for DVD agreement 1,091 -
Excess tax benefit on share-based awards - (615 )
Deferred income taxes 3,582 9,231
Income from equity investments - 3,449
(Income) loss from discontinued operations, net of (28,007 ) 2,892
tax
Loss on early retirement of debt 1,082 -
Other 632 835
Cash (used) provided by changes in operating assets
and liabilities, net of effects of business (70,480 ) 14,996
acquisitions
Net cash provided by operating activities from 43,076 107,366
continuing operations
INVESTING ACTIVITIES:
Purchase of property and equipment (105,141 ) (115,740 )
Acquisitions, net of cash acquired of $43,621 in (1,229 ) (24,829 )
2008
Proceeds from sale of fixed assets 214 290
Net cash used by investing activities from (106,156 ) (140,279 )
continuing operations
FINANCING ACTIVITIES:
Principal payments on capital lease obligations and (18,642 ) (12,119 )
other
Proceeds from capital lease financing 22,020 -
Net (payments) borrowings on credit facility (35,000 ) 34,000
Convertible debt borrowings, net of underwriting 194,000 -
discount and commissions of $6,000
Financing costs associated with revolving line of (3,984 ) -
credit and convertible debt
Cash used to purchase remaining non-controlling (113,867 ) -
interests in Redbox
Excess tax benefit on share-based awards - 615
Proceeds from exercise of stock options 10,889 8,547
Net cash provided by financing activities from 55,416 31,043
continuing operations
Effect of exchange rate changes on cash 2,996 (2,462 )
NET DECREASE IN CASH AND CASH EQUIVALENTS, CASH IN
MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED FROM (4,668 ) (4,332 )
CONTINUING OPERATIONS
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating cash flows 14,872 2,761
Investing cash flows (16,397 ) (8,130 )
Financing cash flows (2,462 ) (4,140 )
(3,987 ) (9,509 )
NET DECREASE IN CASH AND CASH EQUIVALENTS, CASH IN (8,655 ) (13,841 )
MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED
CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN
TRANSIT, AND CASH BEING PROCESSED:
Beginning of period 192,035 196,592
End of period $ 183,380 $ 182,751
Source: Coinstar, Inc.
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