Exhibit 99.2
COINSTAR, INC. ANNOUNCES 2011 FIRST QUARTER RESULTS
Solid Execution Drives Top and Bottom Line Growth
Company Announces National Rollout of Video Game Rentals
BELLEVUE, Wash.—April 28, 2011—Coinstar, Inc. (NASDAQ: CSTR) today announced financial results for the first quarter ended March 31, 2011.
“Strong growth in our redbox business and consistent performance in the Coin business delivered better-than-expected earnings in the first quarter,” said Paul Davis, chief executive officer of Coinstar, Inc. “The quarter was marked by solid execution across our businesses and the enhancements to operations are showing progress. In addition, I’m very pleased to announce our decision to rollout video games at redbox kiosks nationwide, which we believe will expand our user base by tapping into the growing video game rental market.”
Redbox will offer video game rentals alongside movies at more than 21,000 locations beginning in June.
First quarter financial highlights included:
• Revenue | $ | 424.1 million | ||
• Operating income | $ | 31.4 million | ||
• Adjusted EBITDA from continuing operations(See Appendix A) | $ | 69.1 million | ||
• Diluted earnings per share from continuing operations | $ | 0.46 | ||
• Net cash flows from operating activities from continuing operations | $ | 60.0 million | ||
• Free cash flow from continuing operations(See Appendix A) | $ | 21.5 million |
“During the first quarter we made progress in driving improvements in our operations and in building scale by investing in infrastructure, while continuing to deliver profitable growth,” said J. Scott Di Valerio, chief financial officer of Coinstar, Inc. “We’re gaining traction as we’ve added more rigor to our processes and we will continue to monitor and refine as we progress through the year.”
Revenue for the first quarter of 2011 increased 31.2% to $424.1 million compared with the first quarter of 2010, driven primarily by growth in redbox (formerly DVD Services) revenue, which increased 37.7% to $362.3 million, and by Coin revenue which grew 2.4% to $61.4 million.
Operating income for the first quarter of 2011 was $31.4 million, which resulted in an operating margin of 7.4%, compared with operating income of $24.5 million and an operating margin of 7.6% in the first quarter of 2010. The decrease in operating margin percentage primarily reflects increased DVD product costs due in part to higher than optimal purchases of DVD titles.
Income from continuing operations for the first quarter of 2011 was $14.8 million, or diluted earnings per share from continuing operations of $0.46, compared with $9.2 million, or $0.30 per share, in the first quarter of 2010.
Net income for the first quarter of 2011, which includes both continuing and discontinued operations, was $8.5 million, or diluted earnings per share of $0.26. This compares with $6.4 million, or diluted earnings per share of $0.21, in the first quarter of 2010.
Net cash flows from operating activities from continuing operations was $60.0 million in the first quarter of 2011, compared with $59.5 million in the first quarter of 2010. Cash paid for capital expenditures for
continuing operations for the first quarter of 2011 was $38.5 million, compared with $31.5 million in the first quarter of 2010, reflecting increased investment in kiosks, as well as investment in corporate infrastructure. Free cash flow from continuing operations for the first quarter of 2011 was $21.5 million, compared with $28.0 million in the first quarter of 2010.
During the first quarter, Coinstar repurchased $13.3 million of common stock on the open market. In addition, the company announced a $50 million accelerated share repurchase (ASR) program, which is expected to close in the second quarter. As of the end of the first quarter, the company had a remaining total authorization to repurchase $11.5 million of Coinstar’s common stock.
Guidance
For the 2011 full year, Coinstar management updated guidance and now expects:
| • | Consolidated revenue between $1.73 billion and $1.85 billion; |
| • | Adjusted EBITDA from continuing operations between $335 million and $355 million; |
| • | GAAP EPS from continuing operations between $2.75 and $3.10 on a fully diluted basis; and |
| • | Free cash flow from continuing operations between $110 million and $135 million. |
For the 2011 second quarter, Coinstar management expects:
| • | Consolidated revenue between $430 million and $450 million; |
| • | Adjusted EBITDA from continuing operations between $83 million and $93 million; and |
| • | GAAP EPS from continuing operations between $0.76 and $0.86 on a fully diluted basis. |
Conference Call
Paul Davis and J. Scott Di Valerio will host a conference call today at 2:00 p.m. PDT (5:00 p.m. EDT) to review the first quarter results and discuss guidance. The conference call will be webcast live and archived on theInvestor Relations section of Coinstar’s website atwww.coinstarinc.com. A recording of the call will be available approximately two hours after the call ends through May 12, 2011, at 1-888-286-8010 or 1-617-801-6888, passcode 65266451.
About Coinstar, Inc.
Coinstar, Inc. (NASDAQ: CSTR) is a leading provider of automated retail solutions offering convenient services that make life easier for consumers and drive incremental traffic and revenue for retailers. The company’s core automated retail businesses include the well-knownredbox® self-service DVD rental andCoinstar® self-service coin-counting brands. The company has approximately 31,800 DVD kiosks and 18,800 coin-counting kiosks in supermarkets, drug stores, mass merchants, financial institutions, convenience stores, and restaurants. For more information, visitwww.coinstarinc.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 and suppliers, payment of increased fees to retailers and suppliers, the inability to receive delivery of DVDs on the date of their initial release to the general public, or shortly thereafter, for home entertainment viewing, the effective management of our DVD inventory, the ability to attract new retailers, penetrate new markets and distribution channels 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)
Contacts:
Media:
Marci Maule
Director of Public Relations
425-943-8277
marci.maule@coinstar.com
Financial Analysts and Investors:
Rosemary Moothart
Director of Investor Relations
425-943-8140
rosemary.moothart@coinstar.com
Appendix A
Use of 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”). Non-GAAP measures are not a substitute for measures computed in accordance with GAAP. The definitions of such non-GAAP measures are provided below to allow the reader to reconcile non-GAAP data to that presented in accordance with GAAP. Our non-GAAP measures may be different from the presentation of financial information by other companies.
Adjusted EBITDA from continuing operationsis defined as 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 share-based expenses from continuing operations. We believe adjusted EBITDA from continuing operations 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. 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 Months Ended March 31, | ||||||||
Dollars in thousands | 2011 | 2010 | ||||||
Income from continuing operations | $ | 14,842 | $ | 9,239 | ||||
Depreciation, amortization, and other | 34,644 | 32,680 | ||||||
Interest expense, net | 7,306 | 9,266 | ||||||
Income taxes | 9,261 | 6,006 | ||||||
Share-based payments expense(1) | 3,040 | 3,216 | ||||||
Adjusted EBITDA from continuing operations | $ | 69,093 | $ | 60,407 | ||||
| (1) | Share-based payments expense includes both non-cash share-based compensation expense as well as share-based payments related to DVD arrangements |
Free cash flow from continuing operationsis defined as net cash provided by operating activities from continuing operations after cash paid for capital expenditures for continuing operations. 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 common stock. See below for reconciliation of the most comparable GAAP measure, net cash flows from operating activities from continuing operations, to free cash flow from continuing operations.
| Three Months Ended March 31, | ||||||||
Dollars in thousands | 2011 | 2010 | ||||||
Net cash provided by operating activities from continuing operations | $ | 59,995 | $ | 59,480 | ||||
Purchase of property and equipment | (38,472 | ) | (31,517 | ) | ||||
Free cash flow from continuing operations | $ | 21,523 | $ | 27,963 | ||||
Coinstar, Inc.
Consolidated Statements of Net Income
(in thousands, except per share data)
(unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2011 | 2010 | |||||||
Revenue | $ | 424,072 | $ | 323,122 | ||||
Expenses: | ||||||||
Direct operating | 315,073 | 224,959 | ||||||
Marketing | 5,117 | 2,630 | ||||||
Research and development | 2,207 | 1,424 | ||||||
General and administrative | 35,662 | 31,522 | ||||||
Depreciation and other | 33,959 | 31,801 | ||||||
Amortization of intangible assets | 685 | 879 | ||||||
Litigation settlement | 0 | 5,379 | ||||||
Total expenses | 392,703 | 298,594 | ||||||
Operating Income | 31,369 | 24,528 | ||||||
Other income (expense): | ||||||||
Foreign currency and other, net | 40 | (17 | ) | |||||
Interest income | 80 | 2 | ||||||
Interest expense | (7,386 | ) | (9,268 | ) | ||||
| (7,266 | ) | (9,283 | ) | |||||
Income from continuing operations before income taxes | 24,103 | 15,245 | ||||||
Income tax expense | (9,261 | ) | (6,006 | ) | ||||
Income from continuing operations | 14,842 | 9,239 | ||||||
Loss from discontinued operations, net of tax | (6,346 | ) | (2,797 | ) | ||||
Net income | $ | 8,496 | $ | 6,442 | ||||
Basic Earnings (Loss) Per Share: | ||||||||
Continuing operations | $ | 0.47 | $ | 0.30 | ||||
Discontinued operations | (0.20 | ) | (0.09 | ) | ||||
Basic earnings per share | $ | 0.27 | $ | 0.21 | ||||
Diluted Earnings (Loss) Per Share: | ||||||||
Continuing operations | $ | 0.46 | $ | 0.30 | ||||
Discontinued operations | (0.20 | ) | (0.09 | ) | ||||
Diluted earnings per share | $ | 0.26 | $ | 0.21 | ||||
Weighted average shares used in basic per share calculations | 31,067 | 30,950 | ||||||
Weighted average shares used in diluted per share calculations | 32,142 | 31,217 | ||||||
Coinstar, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
| March 31, 2011 | December 31, 2010 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 23,024 | $ | 71,287 | ||||
Cash in machine or in transit | 48,867 | 39,603 | ||||||
Cash being processed | 65,969 | 72,526 | ||||||
Accounts receivable, net of allowances of $1,048 and $1,131 | 21,100 | 25,958 | ||||||
DVD library | 93,992 | 140,324 | ||||||
Deferred income taxes | 16,278 | 13,644 | ||||||
Prepaid expenses and other current assets | 13,998 | 14,736 | ||||||
Assets of businesses held for sale | 96,481 | 110,316 | ||||||
Total current assets | 379,709 | 488,394 | ||||||
Property and equipment, net | 457,673 | 444,687 | ||||||
Deferred income taxes | 49,494 | 59,696 | ||||||
Other assets | 14,819 | 12,612 | ||||||
Intangible assets, net | 8,888 | 9,572 | ||||||
Goodwill | 267,750 | 267,750 | ||||||
Total assets | $ | 1,178,333 | $ | 1,282,711 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 124,228 | $ | 161,551 | ||||
Accrued payable to retailers | 90,692 | 96,764 | ||||||
Other accrued liabilities | 106,331 | 108,422 | ||||||
Current callable convertible debt | 0 | 173,146 | ||||||
Current portion of long-term debt | 6,930 | 7,523 | ||||||
Current portion of capital lease obligations | 11,102 | 17,233 | ||||||
Liabilities of businesses held for sale | 64,549 | 68,662 | ||||||
Total current liabilities | 403,832 | 633,301 | ||||||
Long-term debt and other | 343,759 | 167,261 | ||||||
Capital lease obligations | 10,362 | 12,158 | ||||||
Deferred tax liability | 16 | 15 | ||||||
Total liabilities | 757,969 | 812,735 | ||||||
Commitments and contingencies | 0 | 0 | ||||||
Debt conversion feature | 0 | 26,854 | ||||||
Stockholders’ Equity: | ||||||||
Preferred stock, $0.001 par value—5,000,000 shares authorized; no shares issued or outstanding | 0 | 0 | ||||||
Common stock, $0.001 par value—60,000,000 and 45,000,000 authorized; 35,063,559 and 34,813,203 shares issued; 31,370,483 and 31,815,085 shares outstanding | 464,970 | 434,169 | ||||||
Treasury stock | (153,425 | ) | (90,076 | ) | ||||
Retained earnings | 110,475 | 101,979 | ||||||
Accumulated comprehensive loss | (1,656 | ) | (2,950 | ) | ||||
Total stockholders’ equity | 420,364 | 443,122 | ||||||
Total liabilities and stockholders’ equity | $ | 1,178,333 | $ | 1,282,711 | ||||
Coinstar, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2011 | 2010 | |||||||
Operating Activities: | ||||||||
Net income | $ | 8,496 | $ | 6,442 | ||||
Adjustments to reconcile net income to net cash flows from operating activities from continuing operations: | ||||||||
Depreciation and other | 33,959 | 31,801 | ||||||
Amortization of intangible assets and deferred financing fees | 1,193 | 1,387 | ||||||
Share-based payment expense | 3,040 | 3,216 | ||||||
Excess tax benefits on share-based payments expense | (2,128 | ) | (748 | ) | ||||
Deferred income taxes | 6,356 | 3,148 | ||||||
Loss from discontinued operations, net of tax | 6,346 | 2,797 | ||||||
Non-cash interest on convertible debt | 1,583 | 1,459 | ||||||
Other | 138 | 197 | ||||||
Cash flows from changes in operating assets and liabilities from continuing operations: | 1,012 | 9,781 | ||||||
Net cash flows from operating activities from continuing operations | 59,995 | 59,480 | ||||||
Investing Activities: | ||||||||
Purchase of property and equipment | (38,472 | ) | (31,517 | ) | ||||
Proceeds from sale of property and equipment | 176 | 37 | ||||||
Equity investment | (2,320 | ) | 0 | |||||
Net cash flows from investing activities from continuing operations | (40,616 | ) | (31,480 | ) | ||||
Financing Activities: | ||||||||
Principal payments on capital lease obligations and other debt | (12,141 | ) | (8,675 | ) | ||||
Excess tax benefits related to share-based payments | 2,128 | 748 | ||||||
Repurchase of common stock | (63,349 | ) | 0 | |||||
Proceeds from exercise of stock options | 260 | 2,227 | ||||||
Net cash flows from financing activities from continuing operations | (73,102 | ) | (5,700 | ) | ||||
Effect of exchange rate changes on cash | 667 | (497 | ) | |||||
Increase (decrease) in cash and cash equivalents, cash in machine or in transit, and cash being processed from continuing operations | (53,056 | ) | 21,803 | |||||
Cash flows from discontinued operations: | ||||||||
Operating cash flows | 6,726 | (9,938 | ) | |||||
Investing cash flows | 774 | 1,817 | ||||||
Financing cash flows | 0 | (21 | ) | |||||
| 7,500 | (8,142 | ) | ||||||
Increase (Decrease) in cash and cash equivalents, cash in machine or in transit, and cash being processed | (45,556 | ) | 13,661 | |||||
Cash and cash equivalents, cash in machine or in transit, and cash being processed: | ||||||||
Beginning of period | 183,416 | 145,857 | ||||||
End of period | $ | 137,860 | $ | 159,518 | ||||
Coinstar, Inc.
Business Segment Information
(in thousands)
(unaudited)
During the first quarter of 2011, we added a segment, New Ventures, to our existing segments redbox, formerly named DVD Services, and Coin, formerly named Coin Services, to reflect changes in how our chief executive officer manages our businesses and allocates resources for the future growth of the company.
As a complement to our Consolidated Statements of Net Income, we are providing the following information related to our business segments, which includes segment operating income (loss), a non-GAAP financial measure. Management, including our chief executive officer, evaluates the performances of our business segments primarily on segment revenue and segment operating income from continuing operations before depreciation, amortization and other, and share-based payments (“segment operating income”). We utilize segment revenue and segment operating income because we believe they provide useful information for effectively allocating resources among business segments, evaluating the health of our business segments based on metrics that management can actively influence, and gauging our investments and our ability to service, incur or pay down debt.
| Three Months Ended March 31, | ||||||||
Dollars in thousands | 2011 | 2010 | ||||||
Revenue: | ||||||||
redbox | $ | 362,344 | $ | 263,078 | ||||
Coin | 61,363 | 59,918 | ||||||
New Ventures | 365 | 126 | ||||||
Consolidated revenue | $ | 424,072 | $ | 323,122 | ||||
| Segment operating income reconciled to GAAP operating income | ||||||||
Segment operating income (loss): (1) | ||||||||
redbox(2) | $ | 50,821 | $ | 46,301 | ||||
Coin | 20,609 | 15,020 | ||||||
New Ventures | (2,555 | ) | (1,488 | ) | ||||
Total segment operating income (loss) | 68,875 | 59,833 | ||||||
Depreciation, amortization and other: | ||||||||
redbox | 27,098 | 22,121 | ||||||
Coin | 7,371 | 7,059 | ||||||
New Ventures | 175 | 3,500 | ||||||
Total depreciation, amortization and other | 34,644 | 32,680 | ||||||
Share-based compensation expense | 2,862 | 2,625 | ||||||
Operating income (loss): | ||||||||
redbox | 23,723 | 24,180 | ||||||
Coin | 13,238 | 7,961 | ||||||
New Ventures | (2,730 | ) | (4,988 | ) | ||||
Share-based compensation expense | (2,862 | ) | (2,625 | ) | ||||
Total operating income | $ | 31,369 | $ | 24,528 | ||||
| (1) | Operating income (loss) before depreciation, amortization and other, and share-based compensation expense |
| (2) | Share-based payments expense related to our DVD arrangements has been allocated to our redbox segment |