Coinstar, Inc. Announces 2010 First Quarter Results

BELLEVUE, Wash., April 29 /PRNewswire-FirstCall/ -- Coinstar, Inc. (Nasdaq: CSTR) today announced financial results for the first quarter ended March 31, 2010.  

"We are very pleased with our outstanding first quarter results that underscore the strength in our DVD and Coin businesses," said Paul Davis, chief executive officer of Coinstar, Inc. "We have made significant progress in strengthening and enhancing our relationships with retailers and suppliers, and extending our value proposition to existing and new consumers. Our achievements give us confidence that we have the right strategy in place to lead in automated retail."

Financial highlights for the quarter ended March 31, 2010, included:

"Solid execution in our core businesses drove our strong financial results across the board," said J. Scott Di Valerio, chief financial officer of Coinstar, Inc. "We invested in the business to support our growth initiatives and at the same time generated $33 million in free cash flow, a substantial increase over last year. The traction we gained in the first quarter indicates we are well-positioned for continued success in our DVD business, renewed growth in Coin and increased profitability."

Revenue for the first quarter of 2010 was $350.1 million, an increase of 46.6% compared with revenue of $238.8 million in the first quarter of 2009. The increase is primarily due to the growth in DVD revenue, which was $263.2 million in the first quarter of 2010, an increase of 70.1% compared with $154.7 million in the first quarter of 2009.  

Income from operations for the first quarter of 2010 was $20.5 million, which resulted in an operating margin of 5.9%, including pre-tax charges totaling approximately $7.9 million primarily from the accelerated depreciation on the company's first generation coffee and DVDXpress branded DVD kiosks that the company has determined will be taken out of service and not redeployed, as well as a pre-tax charge of approximately $5.4 million related to the settlement of Coinstar's litigation with ScanCoin. This is compared with income from operations of $16.8 million and an operating margin of 7.0% in the first quarter of 2009. The decrease in operating margin was partially offset by results for the DVD business segment which experienced an increase in segment operating profit of over 100% to $44.8 million in the first quarter of 2010 and an operating margin of 17.0%, compared with 13.4% in the first quarter of 2009. The improvement in operating margin reflects the ongoing improvement in leverage we are seeing as we scale the business and expand our footprint.

Net income attributable to Coinstar, Inc. for the first quarter of 2010 was $6.4 million, or $0.21 per diluted share, including a loss of ($0.15) per share primarily from the accelerated depreciation on the company's first generation coffee and DVDXpress branded DVD kiosks that the company has determined will be taken out of service and not redeployed, as well as a loss of ($0.10) per share related to the settlement of Coinstar's litigation with ScanCoin. This is compared with $2.0 million, or $0.07 per diluted share which included a loss of approximately ($0.06) per diluted share related to discontinued operations in the first quarter of 2009 and ($0.12) associated with the company's non-controlling interest in Redbox.

Other Information

Cash paid for capital expenditures for the first quarter of 2010 was $32.3 million, compared with $36.0 million in the first quarter of 2009, with the decrease primarily due to the timing of purchases and installations related to our ongoing investment in DVD kiosks during the first quarter of 2010.

2010 Full Year and Second Quarter Guidance

Coinstar management updated guidance for the full year 2010 from what was previously provided on February 23, 2010.

For 2010, management expects revenue in the range of $1.530 billion to $1.630 billion, EBITDA in the range of $275 million to $290 million and GAAP EPS attributable to Coinstar, Inc. in the range of $1.82 to $1.94 on a fully diluted basis.

For the second quarter of 2010, management expects revenue in the range of $370.0 million to $390.0 million, EBITDA in the range of $58.0 million to $63.0 million and GAAP EPS attributable to Coinstar, Inc. in the range of $0.30 to $0.34 on a fully diluted basis.

Guidance for 2010 and for the second quarter of 2010 includes the impact on revenue and costs related to the impact of the company's agreements with studios, as well as the number and timing of planned kiosk installations.  

Conference Call

Paul Davis, Coinstar's chief executive officer, and J. Scott Di Valerio, Coinstar's chief financial officer, 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 on the Investor Relations section of Coinstar's website at www.coinstar.com, where it will be archived. A recording of the call will be available approximately two hours after the call ends through May 13, 2010, at 1-888-286-8010 or 1-617-801-6888, passcode 64421253.  

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 its retailers. The company's core automated retail businesses are self-service coin counting and self-service DVD rental. Other Coinstar services include e-payment and money transfer services. The company's services can be found at more than 95,000 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 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.

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 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 operations is 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, goodwill impairment, 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.

Free cash flow from continuing operations is defined as net cash provided by operating activities after cash paid for capital expenditures for continuing operations. We believe free cash flow is an important non-GAAP measure as it provides useful cash flow information 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 provided by operating activities from continuing operations, to free cash flow from continuing operations.

Segment Reporting: As a complement to our Consolidated Statements of Net Income, we are providing the following information related to our business segments:

SOURCE Coinstar, Inc.