Coinstar, Inc. Announces Revised 2009 Fourth Quarter and Full Year Results Reflecting Legal Settlement Involving E-Payment Business
Settlement Decreases 2009 Fourth Quarter and Full Year EPS by $0.07; Management Reaffirms 2010 First Quarter and Full Year Guidance
BELLEVUE, Wash., Feb. 23 /PRNewswire-FirstCall/ -- Coinstar, Inc. (Nasdaq: CSTR) today announced that the company revised financial results for the fourth quarter and full year ended December 31, 2009, due to a legal settlement involving its E-Payment services business. The revised results are reflected in the Annual Report on Form 10-K to be filed by the company today.
On February 19, 2010, Coinstar settled an action filed by Apparel Sales, Inc. ("ASI") in 2005 against one of the subsidiaries of its E-Payment services business for $4.0 million and ASI has agreed to dismiss its complaint with prejudice. The company had previously accrued for $0.5 million of the $4.0 million settlement expense and as a result, $3.5 million of expense, or approximately ($0.07) per diluted share, is included in the "Proxy, write-off of acquisition costs, and litigation settlement" line item in the Consolidated Statement of Operations for the fourth quarter and full year ended December 31, 2009.
The impact of the settlement is included in the revised financial highlights below.
For the quarter ended December 31, 2009:
-- Revenue $ 328.0 million -- Adjusted EBITDA from continuing operations (See Appendix A) $ 52.0 million -- Income from operations $ 16.5 million -- Income from continuing operations $ 3.4 million -- Net income attributable to Coinstar, Inc. $ 3.4 million -- Diluted earnings per share from continuing operations attributable to Coinstar, Inc. $ 0.11 -- Diluted earnings per share attributable to Coinstar, Inc. $ 0.11
For the full year ended December 31, 2009:
-- Revenue $ 1,144.8 million -- Adjusted EBITDA from continuing operations (See Appendix A) $ 199.6 million -- Income from operations $ 84.3 million -- Income from continuing operations $ 29.3 million -- Net income attributable to Coinstar, Inc. $ 53.7 million -- Diluted earnings per share from continuing operations attributable to Coinstar, Inc. $ 0.84 -- Diluted earnings per share attributable to Coinstar, Inc. $ 1.76
Revenue for the fourth quarter of 2009 was $328.0 million, an increase of 43.9 percent compared with revenue of $227.9 million in the fourth quarter of 2008. The increase is primarily due to the growth in DVD revenue, which was $231.8 million in the fourth quarter of 2009, an increase of 73.2 percent compared with $133.8 million in the fourth quarter of 2008.
Income from operations for the fourth quarter was $16.5 million, which includes a pre-tax, non-cash charge of approximately $7.4 million related to goodwill impairment in Coinstar's Money Transfer services business and $3.5 million of expense recognized in the quarter for the ASI settlement. This resulted in an operating margin of 5.0 percent, compared with income from operations of $21.4 million and an operating margin of 9.4 percent in the fourth quarter of 2008. Operating margin also decreased as a result of higher DVD product costs.
Income from continuing operations for the fourth quarter was $3.4 million, including approximately $4.5 million, net of tax, related to the non-cash goodwill impairment charge and $2.1 million of expense, net of tax, related to the ASI settlement, compared with $9.9 million in the fourth quarter of 2008.
Net income attributable to Coinstar, Inc. for the fourth quarter was $3.4 million, or $0.11 per diluted share, including approximately ($0.14) per diluted share related to the non-cash goodwill impairment charge and approximately ($0.07) per diluted share related to the ASI settlement, compared with $4.2 million, or $0.15 per diluted share, in the fourth quarter of 2008.
Revenue for 2009 was $1.1 billion, an increase of 50.3 percent compared with revenue of $761.7 million in 2008. The increase reflects the growth in DVD revenue, which was $773.5 million in 2009, an increase of 99.1 percent compared with $388.5 million in 2008. The growth in DVD revenue for the fourth quarter and the full year was driven by the 8,700 DVD kiosks installed during the year, as well as revenue growth at existing machines.
Income from operations for 2009 was $84.3 million, including approximately $7.4 million related to the pre-tax non-cash charge related to goodwill impairment in Coinstar's Money Transfer services business and $3.5 million of expense recognized for the ASI settlement. This resulted in an operating margin of 7.4 percent, compared with income from operations of $76.4 million and an operating margin of 10.0 percent in 2008. Operating margin for the year also decreased as a result of higher DVD product costs.
Income from continuing operations for the year was $29.3 million, including approximately $4.5 million, net of tax, related to the non-cash goodwill impairment charge and $2.1 million of expense, net of tax, related to the ASI settlement, compared with $33.5 million in 2008.
Net income attributable to Coinstar, Inc. for the year was $53.7 million, or $1.76 per diluted share, including approximately ($0.15) per diluted share related to the non-cash goodwill impairment charge and approximately ($0.07) per diluted share related to the ASI settlement, compared with $14.1 million, or $0.50 per diluted share, in 2008. Both 2009 and 2008 include the impact from discontinued operations from the sale of our Entertainment business of $28.0 million, or $0.92 per diluted share, in 2009 and a loss of ($5.0) million, or ($0.17) per diluted share, in 2008.
Other Information
Cash paid for capital expenditures for the fourth quarter ended December 31, 2009 was $48.3 million, compared with $35.0 million in the fourth quarter of 2008, with the increase primarily due to our investment in DVD kiosks during the fourth quarter of 2009.
2010 Full Year and First Quarter Guidance
Coinstar management reaffirmed guidance for the full year 2010 that was previously provided on February 11, 2010, and guidance for the first quarter of 2010 that was previously provided on February 16, 2010.
For 2010, management expects revenue in the range of $1.465 billion to $1.565 billion, EBITDA in the range of $250 million to $265 million and GAAP EPS attributable to Coinstar, Inc. in the range of $1.50 to $1.65 on a fully diluted basis. For the first quarter of 2010, management expects revenue in the range of $315 million to $335 million, EBITDA in the range of $43 million to $48 million and GAAP EPS attributable to Coinstar, Inc. in the range of $0.08 to $0.14 on a fully diluted basis.
This guidance includes the impact on revenue and costs related to challenges in securing DVD content, as well as the number and timing of planned kiosk installations.
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 filed with the Securities and Exchange Commission on February 23, 2010. 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.
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Appendix A |
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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, 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.
Three-Month Periods Ended December 31, ------------------- 2009 2008 ------- ------- Income from continuing operations $3,359 $9,928 Depreciation, amortization and other 26,965 21,455 Goodwill impairment 7,371 - Interest expense, net 9,797 5,298 Income taxes 2,719 5,018 Stock-based compensation and share-based expense 1,758 2,523 ------- ------- Adjusted EBITDA from continuing operations $51,969 $44,222 ======= ======= Twelve-Month Periods Ended December 31, -------------------- 2009 2008 -------- -------- Income from continuing operations $29,263 $33,501 Depreciation, amortization and other 99,770 69,675 Goodwill impairment 7,371 - Interest expense, net 34,123 20,308 Income taxes 18,950 18,290 Stock-based compensation and share-based expense 9,081 8,811 Early retirement of debt 1,082 - -------- -------- Adjusted EBITDA from continuing operations $199,640 $150,585 ======== ======== Coinstar, Inc. Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Twelve Month Periods Three Month Periods Ended December 31, Ended December 31, -------------------- ------------------- 2009 2008 2009 2008 ---------- -------- -------- -------- REVENUE $1,144,791 $761,681 $328,005 $227,864 EXPENSES: Direct operating 793,444 494,311 234,390 150,079 Marketing 22,757 19,197 6,152 5,251 Research and development 5,312 4,758 1,396 1,180 General and administrative 127,033 94,292 31,771 28,503 Depreciation and other 91,858 61,469 24,994 19,472 Amortization of intangible assets 7,912 8,206 1,971 1,983 Proxy, write-off of acquisition costs, and litigation settlement 4,762 3,084 3,500 - Goodwill impairment loss 7,371 - 7,371 - ---------- -------- -------- -------- Income from operations 84,342 76,364 16,460 21,396 OTHER INCOME (EXPENSE): Foreign currency loss and other, net (924) (3,928) (585) (1,153) Interest income 208 1,218 24 155 Interest expense (34,331) (21,526) (9,821) (5,453) (Loss) income from equity investments - (337) - 1 Early retirement of debt (1,082) - - - ---------- -------- -------- -------- Income from continuing operations before income taxes 48,213 51,791 6,078 14,946 Income tax expense (18,950) (18,290) (2,719) (5,018) ---------- -------- -------- -------- Income from continuing operations 29,263 33,501 3,359 9,928 Income (loss) from discontinued operations, net of tax 28,007 (4,953) - (2,061) ---------- -------- -------- -------- Net income 57,270 28,548 3,359 7,867 Less: Net income attributable to non- controlling interests (3,627) (14,436) - (3,647) ---------- -------- -------- -------- NET INCOME ATTRIBUTABLE TO COINSTAR, INC. $53,643 $14,112 $3,359 $4,220 ========== ======== ======== ======== BASIC EARNINGS (LOSS) PER SHARE: Basic earnings per share from continuing operations attributable to Coinstar, Inc. $0.85 $0.68 $0.11 $0.22 Basic earnings (loss) per share from discontinued operations attributable to Coinstar, Inc. 0.93 (0.18) - (0.07) ---------- -------- -------- -------- Basic earnings per share attributable to Coinstar, Inc. $1.78 $0.50 $0.11 $0.15 ========== ======== ======== ======== DILUTED EARNINGS (LOSS) PER SHARE: Diluted earnings per share from continuing operations attributable to Coinstar, Inc. $0.84 $0.67 $0.11 $0.22 Diluted earnings (loss) per share from discontinued operations attributable to Coinstar, Inc. 0.92 (0.17) - (0.07) ---------- -------- -------- -------- Diluted earnings per share attributable to Coinstar, Inc. $1.76 $0.50 $0.11 $0.15 ========== ======== ======== ======== WEIGHTED SHARES OUTSTANDING: Basic 30,152 28,041 30,979 28,190 Diluted 30,514 28,464 31,288 28,334 Coinstar, Inc. Consolidated Balance Sheets (in thousands, except share data) (unaudited) December 31, December 31, 2009 2008 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $61,280 $66,408 Cash in machine or in transit 57,141 34,583 Cash being processed 73,875 91,044 Accounts receivable, net of allowance for doubtful accounts of $4,379 and $3,461 at December 31, 2009 and December 31, 2008, respectively 61,371 51,908 Inventory and DVD library 104,367 92,247 Deferred income taxes 12,350 6,881 Prepaid expenses and other current assets 20,364 24,715 ---------- ---------- Total current assets 390,748 367,786 PROPERTY AND EQUIPMENT, NET 400,289 348,949 DEFERRED INCOME TAXES 99,195 4,338 OTHER ASSETS 17,172 11,865 INTANGIBLE ASSETS, NET 30,893 43,385 GOODWILL 284,502 290,391 ---------- ---------- TOTAL ASSETS $1,222,799 $1,066,714 ========== ========== LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable $118,918 $132,194 Accrued payable to retailers and agents 131,103 132,490 Other accrued liabilities 91,413 87,500 Current portion of long-term debt 6,812 11,655 Current portion of capital lease obligations 26,396 20,264 ---------- ---------- Total current liabilities 374,642 384,103 LONG-TERM DEBT AND OTHER 409,423 295,942 CAPITAL LEASE OBLIGATIONS 26,326 23,509 DEFERRED TAX LIABILITY 17 12,072 ---------- ---------- TOTAL LIABILITIES 810,408 715,626 EQUITY: Preferred stock, $0.001 par value-Authorized, 5,000,000 shares; no shares issued and outstanding at December 31, 2009 and December 31, 2008 - - Common stock, $0.001 par value-Authorized, 45,000,000 shares; 33,002,865 and 30,181,151 issued and 31,076,784 and 28,255,070 shares outstanding at December 31, 2009 and December 31, 2008, respectively 406,333 369,735 Retained earnings (accumulated deficit) 50,971 (2,672) Treasury stock (40,831) (40,831) Accumulated other comprehensive loss (4,082) (6,204) ---------- ---------- Total stockholders’ equity 412,391 320,028 ---------- ---------- Non-controlling interest - 31,060 ---------- ---------- Total equity 412,391 351,088 ---------- ---------- TOTAL LIABILITIES AND EQUITY $1,222,799 $1,066,714 ========== ========== Coinstar, Inc. Consolidated Statements of Cash Flows (in thousands) (unaudited) Year Ended December 31, ------------------ 2009 2008 -------- -------- OPERATING ACTIVITIES: Net income $57,270 $28,548 Adjustments to reconcile net income to net cash provided by operating activities from continuing operations: Depreciation and other 91,858 61,469 Amortization of intangible assets and deferred financing fees 9,386 8,694 Write-off of acquisition costs 1,262 1,004 Non-cash stock-based compensation for employees 7,671 8,811 Share-based payments for DVD agreement 1,410 - Deferred income taxes 14,494 12,121 Income from equity investments - 3,449 (Income) loss from discontinued operations, net of tax (28,007) 4,953 Goodwill impairment loss 7,371 - Loss on early retirement of debt 1,082 - Other 2,514 1,083 Cash (used) provided by changes in operating assets and liabilities from continuing operations, net of effects of business acquisitions (50,648) 55,480 -------- -------- Net cash provided by operating activities from continuing operations 115,663 185,612 INVESTING ACTIVITIES: Purchase of property and equipment (153,470) (150,819) Acquisitions, net of cash acquired (1,229) (24,829) Proceeds from sale of fixed assets 315 - -------- -------- Net cash used by investing activities from continuing operations (154,384) (175,648) FINANCING ACTIVITIES: Principal payments on capital lease obligations and other debt (27,278) (17,056) Proceeds from capital lease financing 22,020 - Net borrowings on credit facility 42,500 13,000 Payoff of term loan (87,500) - Convertible debt borrowings, net of underwriting discount and commissions of $6,000 194,000 - Financing costs associated with revolving line of credit and convertible debt (3,984) - Cash used to purchase remaining non- controlling interests in Redbox (113,867) - Proceeds from exercise of stock options 15,973 8,629 -------- -------- Net cash provided by financing activities from continuing operations 41,864 4,573 Effect of exchange rate changes on cash 1,105 (10,106) NET INCREASE IN CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED FROM CONTINUING OPERATIONS 4,248 4,431 CASH FLOWS FROM DISCONTINUED OPERATIONS (3,987) (8,988) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED 261 (4,557) CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED: Beginning of period 192,035 196,592 -------- -------- End of period $192,296 $192,035 ======== ========
SOURCE Coinstar, Inc.
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