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Coinstar Announces Fourth Quarter and Full Year 2007 Results
BELLEVUE, Wash., Feb 07, 2008 (BUSINESS WIRE) -- Coinstar, Inc. (NASDAQ:CSTR) today announced results for the three
month and full-year periods ended December 31, 2007.
Highlights for the three months ended December 31, 2007, were as
follows:
Revenue $ 133.3 million
EBITDA $ 33.4 million (see Appendix A)
Free Cash Flow $ 7.6 million (see Appendix A)
Adjusted earnings per
fully taxed, fully
diluted share $ 0.29 (see reconciliation below)
Net loss $ (37.2) million
Highlights for the full year 2007 were as follows:
Revenue $ 546.3 million
EBITDA $ 126.4 million (see Appendix A)
Free Cash Flow $ 18.2 million (see Appendix A)
Adjusted earnings per
fully taxed, fully
diluted share $ 1.38 (see reconciliation below)
Net loss $ (22.3) million
Coinstar today announced an agreement with Wal-Mart to reset and
optimize Wal-Mart store entrances and add new product offerings to
further enhance the customer experience at the front of the store. As
a result, Coinstar will be significantly increasing the number of
Redbox DVD kiosks and Coinstar coin-counting machines in Wal-Mart
locations over the next twelve to eighteen months and will be removing
or relocating roughly 50% of Wal-Mart cranes, bulk heads and kiddie
rides over the next two quarters. This decision, along with other
contract terminations or decisions to scale-back the number of
entertainment machines with other retail partners as well as
macro-economic trends negatively affecting the entertainment service
industry, resulted in excess equipment and inventory. As a result,
Coinstar has recorded a pre-tax charge for entertainment assets of
$65.2 million for the three month period ended December 31, 2007.
Also included in GAAP net income for the full year of 2007 was a
claimed refund of fees previously paid to the U.S. government for
telecommunication infrastructure access. These fees were paid for
Coinstar's e-payment business from 2003 through 2006, and the refund
claim is a result of an Internal Revenue Service ruling that telecom
fees paid during this period were improperly collected by the U.S.
government. The net effect of the claimed refund was approximately
$6.5 million.
On November 20, 2007, the Company entered into a new five-year
$400 million senior credit facility, which resulted in the
extinguishment of the prior credit facility. As a result, the Company
recorded a non-recurring pre-tax charge of $1.8 million related to the
write-off of financing fees on the prior credit facility, which are
included in GAAP net income for the three month period ended December
31, 2007.
Included in non-cash charges during the fourth quarter of 2007
were $65.2 million related to the impairment charge, $1.9 million in
financing fees including the amortization and write-off from the early
retirement of debt, $2.0 million in amortization of intangible assets,
$1.5 million in non-cash stock based compensation, and $0.5 million
related to the Company's portion of non-cash gains associated with
investments in DVD kiosk companies.
A reconciliation of GAAP earnings per share to adjusted earnings
per share for the three months ended December 31, 2007, is as follows:
Three Months Ended
December 31, 2007
------------------
GAAP fully taxed, fully diluted earnings $ (1.34)
Amortization of intangibles, net of tax 0.05
Stock based compensation expense, net of tax 0.04
Amortization and write-off of financing fees, net
of tax 0.04
Impairment and excess inventory charges, net of
tax 1.51
Non-cash gains from investments in DVD kiosk
companies, net of tax (0.01)
------------------
Adjusted fully taxed, fully diluted earnings $ 0.29
==================
Included in GAAP net income for the full year of 2007 were $65.2
million for the non-cash impairment charge, $7.3 million in
amortization of intangible assets, $6.4 million in non-cash stock
based compensation, $2.5 million in financing fees, including
amortization and write-off from the early retirement of debt, and $0.8
million related to the Company's portion of non-cash losses associated
with investments in DVD kiosk companies.
A reconciliation of GAAP earnings per share to adjusted earnings
per share for the twelve months ended December 31, 2007, is as
follows:
Twelve Months
Ended
December 31, 2007
------------------
GAAP fully taxed, fully diluted earnings $ (0.80)
Amortization of intangibles, net of tax 0.19
Stock based compensation expense, net of tax 0.17
Amortization and write-off of financing fees, net
of tax 0.07
Impairment and excess inventory charges, net of
tax 1.73
Non-cash losses in investments in DVD kiosk
companies, net of tax 0.02
------------------
Adjusted fully taxed, fully diluted earnings $ 1.38
==================
At December 31, 2007, Coinstar had federal and state cumulative
net operating loss carryforwards of approximately $20.4 million and
$17.0 million, respectively. In addition, there were foreign net
operating loss carryforwards of approximately $14.1 million. As a
result of these net operating loss carryforwards, cash paid for taxes
during the year totaled only $3.5 million. In 2007, Coinstar recorded
$6.3 million in tax benefit for the year, primarily due to the
impairment charges of our Entertainment assets.
Other Information
Installed Base
Dec. 31, Dec. 31,
2007 2006
-------- --------
Coin 15,400 13,500
Coin to card, e-payment or e-certificate enabled 10,700 8,200
Crane 28,000 30,000
Bulk heads and other 252,000 271,000
POSA terminals 17,500 14,000
Cash paid for capital expenditures for the three months and full
year ended December 31, 2007, was $19.9 million and $84.3 million,
respectively.
Share Repurchase
For the fourth quarter of 2007, Coinstar repurchased 238,142
shares of common stock, totaling $6.5 million. For the full year,
Coinstar repurchased 358,942 shares of common stock at an average
price of $27.93 per share. The aggregate expenditure for the year
totaled $10.0 million. In 2008, Coinstar expects to remain active in
the repurchase of its shares subject to market and other conditions.
First Quarter and Full Year 2008 Guidance
Management estimates that revenue for the first quarter of 2008
will range from $175 million to $190 million. In addition, management
estimates GAAP earnings per fully taxed, fully diluted share will
range from $0.01 to $0.08.
Management also estimates that revenue for the full year 2008 will
range from $800 million to $875 million with EBITDA between $135
million to $145 million range. In addition, management estimates GAAP
earnings per fully taxed, fully diluted share will range from $0.47 to
$0.67.
Conference Call
A conference call to discuss the fourth quarter and full year 2007
results will be broadcast live over the Internet today, Thursday,
February 7, 2008, 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(TM) 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
56,000 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 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 Item 1A of Part I of our most recent Annual
Report on Form 10-K 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 United States generally accepted accounting
principles ("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, as defined, represents earnings before net interest
expense, income taxes, depreciation, amortization and certain other
non-cash charges including impairment and excess inventory charges,
write-off from early retirement of debt, and stock based compensation
expense. Stock based compensation expense was not included in the
EBITDA reconciliation table in prior year periods. Including stock
based compensation expense, EBITDA for the three and twelve months
ended December 31, 2006 was $27,376 and $110,616, respectively. We
believe EBITDA is an important non GAAP measure as it provides useful
information regarding our ability to service, incur or pay down
indebtedness. In addition, management uses such non GAAP measures
internally to evaluate performance and manage operations. See below
for reconciliation of most comparable GAAP measurements to EBITDA.
Three Twelve
Months Months
Ended Ended
in thousands December December
31, 2007 31, 2007
-------------------
Net income (loss) $(37,222) $(22,253)
Depreciation, amortization and other 16,686 66,172
Impairment and excess inventory charge 65,220 65,220
Interest expense, net 4,403 15,371
Write-off from early retirement of debt 1,794 1,794
Income tax benefit (19,053) (6,311)
Stock based compensation 1,535 6,421
--------- ---------
EBITDA $ 33,363 $126,414
========= =========
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 expenditures.
Free cash flow may be reconciled from net cash provided by operating
activities, the most directly comparable GAAP measure, as follows:
Three Twelve
Months Months
Ended Ended
in thousands December December
31, 2007 31, 2007
-------------------
Net cash provided by operating activities $ 23,167 $ 58,066
Changes in operating assets and liabilities 4,348 44,452
Cash paid for capital expenditures (19,944) (84,318)
--------- ---------
FREE CASH FLOW $ 7,571 $ 18,200
========= =========
Adjusted earnings per share: we believe the adjusted earnings per
share are 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)
Twelve Month Periods Three Month Periods
Ended December 31 Ended December 31
-------------------- -------------------
2007 2006 2007 2006
---------- --------- --------- ---------
REVENUE $ 546,297 $534,442 $133,314 $138,047
Operating Expenses 494,459 489,233 118,734 127,455
Impairment loss and
inventory write-off 65,220 - 65,220 -
---------- --------- --------- ---------
Income (loss) from
operations (13,382) 45,209 (50,640) 10,592
OTHER INCOME (EXPENSE):
Interest income and other,
net 2,348 1,543 292 165
Interest expense (17,069) (15,748) (4,605) (3,910)
Income (loss) from equity
investments 1,333 (66) 472 (118)
Early retirement of debt (1,794) (238) (1,794) -
---------- --------- --------- ---------
Income (loss) before
income taxes (28,564) 30,700 (56,275) 6,729
Income tax benefit
(provision) 6,311 (12,073) 19,053 (1,689)
---------- --------- --------- ---------
NET INCOME (LOSS) $ (22,253) $ 18,627 $(37,222) $ 5,040
========== ========= ========= =========
NET INCOME (LOSS) PER SHARE:
Basic $ (0.80) $ 0.67 $ (1.34) $ 0.18
Diluted $ (0.80) $ 0.66 $ (1.34) $ 0.18
WEIGHTED SHARES OUTSTANDING:
Basic 27,805 27,686 27,832 27,668
Diluted 27,805 28,028 27,832 28,180
Coinstar, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
Dec. 31, Dec. 31,
2007 2006
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 18,497 $ 18,687
Cash in machine or in transit 78,097 63,740
Cash being processed 99,998 95,737
Trade accounts receivable, net of allowance for
doubtful accounts of $1,489 and $1,050 at
December 31, 2007 and December 31, 2006,
respectively 49,809 21,339
Inventory 33,360 39,334
Deferred income taxes 10,663 17,775
Prepaid expenses and other current assets 18,954 13,371
--------- ---------
Total current assets 309,378 269,983
PROPERTY AND EQUIPMENT, NET 146,041 160,962
DEFERRED INCOME TAXES 9,036 34
OTHER ASSETS 15,150 3,807
EQUITY INVESTMENTS 33,052 31,259
INTANGIBLE ASSETS, NET 34,457 43,121
GOODWILL 221,459 208,917
--------- ---------
TOTAL ASSETS $768,573 $718,083
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 49,829 $ 57,536
Accrued liabilities payable to retailers 99,998 95,737
Other accrued liabilities 40,911 35,693
Current portion of long-term debt and capital
lease obligations 6,505 7,883
--------- ---------
Total current liabilities 197,243 196,849
LONG-TERM DEBT, CAPITAL LEASE OBLIGATIONS AND OTHER 266,146 192,381
DEFERRED TAX LIABILITY 54 7,488
--------- ---------
TOTAL LIABILITIES 463,443 396,718
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value--Authorized,
5,000,000 shares; no shares issued and outstanding
at December 31, 2007 and December 31, 2006 - -
Common stock, $0.001 par value--Authorized,
45,000,000 shares; 29,665,135 and 29,383,150
issued and 27,739,054 and 27,816,011 shares
outstanding at December 31, 2007 and December 31,
2006, respectively 354,509 343,229
Retained earnings (deficit) (16,784) 5,469
Treasury stock (40,831) (30,806)
Accumulated other comprehensive income 8,236 3,473
--------- ---------
Total stockholders' equity 305,130 321,365
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $768,573 $718,083
========= =========
COINSTAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Twelve Month Periods
Ended December 31
--------------------
2007 2006
---------- ---------
OPERATING ACTIVITIES:
Net income (loss) $ (22,253) $ 18,627
Adjustments to reconcile income (loss) from
operations to net cash provided by operating
activities:
Depreciation and other 58,841 52,836
Amortization of intangible assets 7,331 6,220
Amortization of deferred financing fees 712 760
Impairment loss and inventory write-off
65,220 -
Loss on early retirement of debt 1,794 238
Non-cash stock-based compensation 6,421 6,258
Excess tax benefit from exercise of stock
options (3,764) (1,033)
Deferred income taxes (9,504) 10,183
Income from equity investments (1,624) 66
Return on equity investments - 929
Other (656) 38
Cash provided (used) by changes in operating
assets and liabilities, net of effects of
business acquisitions:
Accounts receivable (27,016) (8,464)
Inventory (3,547) (9,253)
Prepaid expenses and other current assets (8,594) (3,138)
Other assets (4,773) (444)
Accounts payable (7,624) 25,507
Accrued liabilities payable to retailers 2,535 9,977
Accrued liabilities 4,567 6,073
---------- ---------
Net cash provided by operating activities 58,066 115,380
INVESTING ACTIVITIES:
Purchase of property and equipment (84,318) (45,867)
Acquisitions, net of cash acquired (7,249) (31,254)
Loan to equity investee (10,000)
Equity investments (12,109)
Proceeds from sale of fixed assets 2,294 254
---------- ---------
Net cash used by investing activities (99,273) (88,976)
FINANCING ACTIVITIES:
Principal payments on long-term debt, revolver
loan, and capital lease obligations (338,543) (24,209)
Additional borrowings on credit facility 400,500 -
Financing fees associated with line of credit (1,692) -
Excess tax benefit from exercise of stock
options 3,764 1,033
Repurchase of common stock (10,025) (8,023)
Proceeds from exercise of stock options 4,281 5,357
---------- ---------
Net cash provided (used) by financing activities 58,285 (25,842)
Effect of exchange rate changes on cash 1,350 2,335
NET INCREASE IN CASH AND CASH EQUIVALENTS, CASH IN
MACHINE OR IN TRANSIT, AND CASH BEING PROCESSED 18,428 2,897
CASH AND CASH EQUIVALENTS, CASH IN MACHINE OR IN
TRANSIT, AND CASH BEING PROCESSED:
Beginning of period 178,164 175,267
---------- ---------
End of period $ 196,592 $178,164
========== =========
SOURCE: Coinstar, Inc.
Coinstar, Inc.
Brian Turner, Chief Financial Officer
425-943-8000
or
Media Contact:
Marci Maule, Director Public Relations
425-943-8277
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