EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

  

Contact: Brian Turner

Chief Financial Officer

425-943-8000

  

 

Media Contact: Marci Maule

Director Public Relations

425-943-8277

COINSTAR ANNOUNCES FOURTH QUARTER AND FULL YEAR 2006 RESULTS

BELLEVUE, Wash.—February 8, 2007—Coinstar, Inc. (NASDAQ: CSTR) today announced results for the three-month and full year periods ended December 31, 2006.

Highlights for the full year 2006 were as follows:

 

  •  

Revenue - $534.4 million

 

  •  

EBITDA - $104.4 million (see Appendix A)

 

  •  

Free cash flow - $53.2 million (see Appendix A)

 

  •  

Adjusted earnings per fully taxed, fully diluted share - $0.98 (see reconciliation below)

 

  •  

Net income - $18.6 million

Included in GAAP net income for the year were certain non-cash charges including $6.2 million in amortization of intangible assets, $6.3 million in non-cash stock based compensation and $2.1 million related to the Company’s portion of non-cash losses associated with investments in DVD kiosk companies and amortization of financing fees. Excluding these items, net of taxes, Coinstar reported adjusted net income of $27.5 million. A reconciliation of GAAP earnings per share to adjusted earnings per share is as follows:

 

    

Year ended

12/31/06

GAAP fully taxed, fully diluted earnings per share

    $ 0.66

Amortization of intangibles, net of tax

      0.14

Stock based compensation, net of tax

      0.14

Non-cash losses in investments in DVD kiosk companies and amortization of financing fees, net of tax

      0.04
      

Adjusted fully taxed, fully diluted earnings per share

    $ 0.98
      

Highlights for the three months ended December 31, 2006, were as follows:

 

  •  

Revenue - $138.0 million

 

  •  

EBITDA - $25.4 million (see Appendix A)

 

  •  

Free cash flow - $6.0 million (see Appendix A)

 

  •  

Adjusted earnings per fully taxed, fully diluted share - $0.28 (see reconciliation below)

 

  •  

Net income - $5.0 million

Included in GAAP net income for the fourth quarter of 2006 were certain non-cash charges including $1.7 million in amortization of intangible assets, $1.9 million in non-cash stock based compensation, and $0.3 million related to the Company’s portion of non-cash losses associated with investments in DVD kiosk companies and amortization of financing fees. Excluding these items, net of taxes, Coinstar reported adjusted net income of $8.0 million. A reconciliation of GAAP earnings per share to adjusted earnings per share is as follows:

 

    

Three Months ended

12/31/06

GAAP fully taxed, fully diluted earnings per share

    $ 0.18

Amortization of intangibles, net of tax

      0.04

Stock based compensation expense, net of tax

      0.05

Non-cash losses in investments in DVD kiosk companies and amortization of financing fees, net of tax

      0.01
      

Adjusted fully taxed, fully diluted earnings per share

    $ 0.28
      

At December 31, 2006, Coinstar had approximately $64.4 million in cumulative net operating loss carryforwards. Although Coinstar recorded $1.7 million in tax expense for the fourth quarter, as a result of these net operating loss carryforwards, cash paid for taxes during the three-month period totaled only $578,000.

“Our results demonstrate our ability to balance execution, investment and growth. In fact, we achieved solid gains while successfully integrating our operations. We anticipate similar results in 2007 as we realize the ongoing efficiency that comes with national scale and a turnkey, 4th Wall management solution,” Dave Cole, Chief Executive Officer of Coinstar, Inc. stated. “Coinstar is ideally positioned to maintain its industry leadership. Our infrastructure and technology advantage is unique and sustainable, and we have the financial flexibility to invest in our business as we see new opportunities to create shareholder value. By continuing our focus on operational excellence, financial performance and seizing market opportunities, we are confident Coinstar will continue to drive value for our shareholders.”

Other Information

 

    

Year ended

12/31/06

   

Year ended

12/31/05

Cash paid for capital expenditures (in thousands)

    $ 44,365    $ 43,905

Installed Base

      

Coin

      13,500      12,800

- Coin to card, e-payment or e-certificate enabled

      8,200      5,800

Crane

      30,000      30,000

Bulk heads and other

      271,000      271,000

POSA terminals

      14,000      19,000

Share Repurchase

For the full year, Coinstar repurchased 333,925 shares of common stock at an average price of $24.02 per share. The aggregate expenditure for the year totaled $8.0 million. For the three months ended December 31, 2006, Coinstar was not active repurchasing shares. This was primarily due to the three month period coinciding with Coinstar’s seasonal peak period for cash use in our Coin business. In 2007, Coinstar expects to remain active in the repurchase of its shares subject to market and other conditions.

First Quarter Expectations

Management estimates that revenue for the first quarter ending March 31, 2007, will range from $125 million to $135 million. In addition, management estimates that for the first quarter GAAP earnings per fully taxed, fully diluted share will range from $0.06 to $0.13 with adjusted earnings per fully taxed, fully diluted share ranging from $0.14 to $0.21.

Conference Call

A conference call to discuss the fourth quarter and full year 2006 results will be broadcast live over the Internet today, Thursday, February 8, 2007, at 5:00 p.m. Eastern Time. The Webcast will be hosted at the About Us – Investor Relations section of Coinstar’s Web site at www.coinstar.com.

About Coinstar, Inc.

Coinstar, Inc. (NASDAQ:CSTR) is a multi-national company offering a range of 4th Wall™ solutions for the retailers’ front of store consisting of self-service coin counting, electronic payment solutions, entertainment services, money transfer and self-service DVD rental. The company’s products and services can be found at more than 60,000 retail locations including supermarkets, drug stores, mass merchants, financial institutions, convenience stores and restaurants.

# # #

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 effect of and financing of recent acquisitions, the ability to successfully integrate acquired businesses, the ability to bring new and repeat customers to Coinstar® machines, the ability to obtain new agreements with potential retailers for the installation of Coinstar machines and the retention of the current agreements with our existing retailers on terms that are not materially adverse to Coinstar, Inc., and legal or governmental regulatory action and uncertainties relating to the ultimate success of new business initiatives. 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 Item 1A of Part II of our most recent 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.

Appendix A

(in thousands unless otherwise noted)

Non GAAP measures

Non GAAP measures are provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Non GAAP measures are not a substitute for measures computed in accordance with GAAP. Definitions of such non GAAP measurements are provided below. These definitions are provided 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.

EBITDA represents earnings before net interest expense, income taxes, depreciation, amortization and other. We believe EBITDA is an important non GAAP measure as it provides useful information regarding our ability to service, incur or pay down indebtedness and for purposes of calculating certain debt covenants. In addition, management uses such non GAAP measures internally to evaluate the Company’s performance and manage its operations. See below for reconciliation of most comparable GAAP measurements to EBITDA.

 

    

Three months ended

12/31/06

   

Year ended

12/31/06

Net income

    $ 5,040    $ 18,627

Depreciation, amortization and other

      14,994      59,056

Interest expense, net

      3,709      14,366

Early retirement of debt

      —        238

Income taxes

      1,689      12,073
             

EBITDA

    $ 25,432    $ 104,360
             

Free cash flow: 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. We use free cash flow as a measure to reflect cash available to service our debt as well as to fund our discretionary and non-discretionary expenditures. Free cash flow may be reconciled from net cash provided by operating activities, the most directly comparable GAAP measure, as follows:

 

    

Three months ended

12/31/06

    

Year ended

12/31/06

  

Net cash provided by operating activities

    $ 45,435     $ 114,338  

Changes in operating assets and liabilities, net of acquisitions

      (20,022 )     (16,767 )

Cash paid for capital expenditures

      (19,461 )     (44,365 )
                

FREE CASH FLOW

    $ 5,952     $ 53,206  
                

Adjusted earnings per share: we believe adjusted earnings per share is an important non GAAP measure as it provides useful information about our results from operations excluding certain non-cash charges. We believe this measure provides an important comparison to prior period earnings and is representative of our operating results.

Coinstar, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

     Three months ended     Year ended  
     Dec. 31,
2006		     Dec. 31,
2005		     Dec. 31,
2006		     Dec. 31,
2005		  

REVENUE

    $ 138,047     $ 125,607     $ 534,442     $ 459,739  

EXPENSES:

         

Direct operating

      91,923       83,871       355,378       309,162  

Marketing

      5,481       5,031       14,420       10,748  

Research and development

      1,155       1,446       5,246       5,716  

General and administrative

      13,902       9,800       55,133       36,625  

Depreciation and other

      13,272       11,887       52,836       45,347  

Amortization of intangible assets

      1,722       1,281       6,220       4,556  
                                

Income from operations

      10,592       12,291       45,209       47,585  

OTHER INCOME (EXPENSE):

         

Interest income and other, net

      165       499       1,543       1,549  

Interest expense

      (3,910 )     (3,613 )     (15,748 )     (12,916 )

Income (loss) from equity investments

      (118 )     (161 )     (66 )     281  

Early retirement of debt

      —         —         (238 )     —    
                                

Income before income taxes

      6,729       9,016       30,700       36,499  

Income taxes

      (1,689 )     (3,497 )     (12,073 )     (14,227 )
                                

NET INCOME

    $ 5,040     $ 5,519     $ 18,627     $ 22,272  
                                

NET INCOME PER SHARE:

         

Basic

    $ 0.18     $ 0.20     $ 0.67     $ 0.86  

Diluted

    $ 0.18     $ 0.20     $ 0.66     $ 0.86  

WEIGHTED SHARES OUTSTANDING:

         

Basic

      27,668       26,950       27,686       25,767  

Diluted

      28,180       27,219       28,028       26,033  

Coinstar, Inc.

Non GAAP Consolidated Statements of Operations

Excluding Stock Based Compensation Expense*

(in thousands, except per share data)

(unaudited)

Income from operations before stock based compensation expense is a financial measure we use to evaluate the underlying results and operating performance of our business. The difference between income from operations (the most comparable GAAP measure) and income from operations before stock based compensation expense (the non GAAP measure) reflects the impact of adopting SFAS 123(R) on the current period results. We believe income from operations before stock based compensation expense is a useful measure that allows investors to draw comparisons between operating results reported prior to adoption of SFAS 123(R) and the current period which may mask underlying trends and make it difficult to give investors perspective on underlying business results.

 

     Three months ended Dec. 31, 2006    

Three months
ended

Dec. 31,

2005

  
     GAAP
Results		    

Stock Based

Compensation
Expense*

     Pro Forma
Results		    

REVENUE

    $ 138,047     $       $ 138,047     $ 125,607  

EXPENSES:

         

Direct operating

      91,923       (359 )     91,564       83,871  

Marketing

      5,481       (31 )     5,450       5,031  

Research and development

      1,155       (99 )     1,056       1,446  

General and administrative

      13,902       (1,265 )     12,637       9,800  

Depreciation and other

      13,272         13,272       11,887  

Amortization of intangible assets

      1,722         1,722       1,281  
                                

Income from operations

      10,592       1,754       12,346       12,291  

OTHER INCOME (EXPENSE):

         

Interest income and other, net

      165         165       499  

Interest expense

      (3,910 )       (3,910 )     (3,613 )

Income (loss) from equity investments

      (118 )       (118 )     (161 )

Early retirement of debt

      —           —         —    
                                

Income before income taxes

      6,729       1,754       8,483       9,016  

Income taxes

      (1,689 )     (389 )     (2,078 )     (3,497 )
                                

NET INCOME

    $ 5,040     $ 1,365     $ 6,405     $ 5,519  
                                

NET INCOME PER SHARE:

         

Basic

    $ 0.18       $ 0.23     $ 0.20  

Diluted

    $ 0.18       $ 0.23     $ 0.20  
* Stock-based compensation expense represents the incremental expense recorded as a result of adopting SFAS 123(R), Share-Based Payment.

Coinstar, Inc.

Non GAAP Consolidated Statements of Operations

Excluding Stock Based Compensation Expense*

(in thousands, except per share data)

(unaudited)

 

     Year ended Dec. 31, 2006    

Year

ended

Dec. 31,
2005

  
     GAAP
Results		     Stock Based
Compensation
Expense*		     Pro Forma
Results		    

REVENUE

    $ 534,442     $       $ 534,442     $ 459,739  

EXPENSES:

         

Direct operating

      355,378       (1,126 )     354,252       309,162  

Marketing

      14,420       (135 )     14,285       10,748  

Research and development

      5,246       (343 )     4,903       5,716  

General and administrative

      55,133       (4,025 )     51,108       36,625  

Depreciation and other

      52,836         52,836       45,347  

Amortization of intangible assets

      6,220         6,220       4,556  
                                

Income from operations

      45,209       5,629       50,838       47,585  

OTHER INCOME (EXPENSE):

         

Interest income and other, net

      1,543         1,543       1,549  

Interest expense

      (15,748 )       (15,748 )     (12,916 )

Income (loss) from equity investments

      (66 )       (66 )     281  

Early retirement of debt

      (238 )       (238 )     —    
                                

Income before income taxes

      30,700       5,629       36,329       36,499  

Income taxes

      (12,073 )     (1,352 )     (13,425 )     (14,227 )
                                

NET INCOME

    $ 18,627     $ 4,277     $ 22,904     $ 22,272  
                                

NET INCOME PER SHARE:

         

Basic

    $ 0.67       $ 0.83     $ 0.86  

Diluted

    $ 0.66       $ 0.82     $ 0.86  
* Stock-based compensation expense represents the incremental expense recorded as a result of adopting SFAS 123(R), Share-Based Payment.

Coinstar, Inc.

Consolidated Balance Sheets

(in thousands)

(unaudited)

 

    

Dec. 31,

2006

    

Dec. 31,

2005

  

CURRENT ASSETS:

     

Cash and cash equivalents

    $ 24,726     $ 45,365  

Cash in machine or in transit

      63,740       60,070  

Cash being processed

      89,698       69,832  

Trade accounts receivable, net of allowance for doubtful accounts of $869 and $469 in 2006 and 2005, respectively

      21,339       9,046  

Inventory

      39,334       31,234  

Deferred income taxes

      16,441       17,330  

Prepaid expenses and other current assets

      13,371       11,020  
                

Total current assets

      268,649       243,897  

PROPERTY AND EQUIPMENT, NET

      160,962       148,811  

DEFERRED INCOME TAXES

      1,311       5,385  

OTHER ASSETS

      3,807       5,392  

EQUITY INVESTMENTS

      31,259       19,966  

INTANGIBLE ASSETS, NET

      43,121       40,139  

GOODWILL

      208,917       179,811  
                

TOTAL ASSETS

    $ 718,026     $ 643,401  
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

CURRENT LIABILITIES:

     

Accounts payable

    $ 57,536     $ 34,760  

Accrued liabilities payable to retailers

      95,737       77,175  

Other accrued liabilities

      35,693       26,941  

Current portion of long-term debt and capital lease obligations

      7,883       3,850  
                

Total current liabilities

      196,849       142,726  

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

      192,372       206,628  

DEFERRED TAX LIABILITY

      7,431       —    
                

Total liabilities

      396,652       349,354  

STOCKHOLDERS’ EQUITY:

     

Common stock

      343,229       328,951  

Retained earnings (accumulated deficit)

      5,478       (13,158 )

Treasury stock

      (30,806 )     (22,783 )

Accumulated other comprehensive income

      3,473       1,037  
                

Total stockholders’ equity

      321,374       294,047  
                

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

    $ 718,026     $ 643,401  
                

COINSTAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

     Year Ended December 31,  
     2006     2005  

OPERATING ACTIVITIES:

     

Net income

    $ 18,627     $ 22,272  

Adjustments to reconcile income to net cash provided by operating activities:

     

Depreciation and other

      52,836       45,347  

Amortization of intangible assets

      6,220       4,556  

Amortization of deferred financing fees

      760       785  

Loss on early retirement of debt

      238       —    

Non-cash stock-based compensation

      6,258       340  

Excess tax benefit from exercise of stock options

      (335 )     —    

Deferred income taxes

      11,733       14,315  

Income from equity investments

      66       (281 )

Return on equity investments

      929       974  

Other

      239       (31 )

Cash provided (used) by changes in operating assets and liabilities, net of effects of business acquisitions:

      16,767       14,846  
                

Net cash provided by operating activities

      114,338       103,123  

INVESTING ACTIVITIES:

     

Purchase of property and equipment

      (44,365 )     (43,905 )

Acquisitions, net of cash acquired of $2,801 in 2006 and $4,574 in 2005, respectively

      (31,252 )     (20,832 )

Equity Investments

      (12,109 )     (20,327 )

Proceeds from sale of fixed assets

      334       432  
                

Net cash used by investing activities

      (87,392 )     (84,632 )

FINANCING ACTIVITIES:

     

Principal payments on long-term debt and capital lease obligations

      (24,216 )     (3,762 )

Proceeds from exercise of stock options and issuance of shares under employee stock purchase plan

      5,357       5,548  

Excess tax benefit from exercise of stock options

      335       —    

Repurchase of common stock

      (8,022 )     —    
                

Net cash (used by) provided by financing activities

      (26,546 )     1,786  

Effect of exchange rate changes on cash

      2,497       (1,797 )
                

NET INCREASE IN CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED

      2,897       18,480  

CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED:

     

Beginning of period

      175,267       156,787  
                

End of period

    $ 178,164     $ 175,267  
                

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

     

Cash paid during the period for interest

    $ 14,862     $ 11,516  

Cash paid during the period for income taxes

      1,982       1,089  

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

     

Purchase of vehicles financed by capital lease obligations

    $ 14,247     $ 2,280  

Common stock issued in conjunction with acquisition, net of issue costs of $44 in 2005

      —         39,969  

Accrued acquisition costs

      217       —