BELLEVUE, Wash., July 28,
2016 /PRNewswire/ -- Outerwall Inc. (Nasdaq: OUTR) today
reported financial results for the second quarter ended
June 30, 2016.
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"Outerwall achieved strong results in the second quarter,
underscoring our ability to generate continued profitability and
cash flow, and deliver shareholder value," said Erik E. Prusch, chief executive officer. "Our
second quarter results reflect solid execution company-wide, with
improved sequential results at Redbox and the highest second
quarter revenue in Coinstar's 25-year history. We also made
substantial progress at ecoATM and continue to expect the business
to achieve segment operating profitability for 2016."
Prusch continued, "Earlier this week we announced that we
completed our comprehensive process reviewing alternatives to
maximize value for all shareholders and reached an agreement to be
acquired by affiliates of Apollo Global Management. We are pleased
with the agreement and the immediate and substantial cash premium
it provides to our shareholders, and look forward to working with
Apollo to continue serving our millions of loyal customers and
unparalleled network of retail partners."
Outerwall's GAAP results for the second quarter of 2015 include
the impact of a non-cash, non-tax deductible charge for goodwill
impairment of $85.9 million related
to its ecoATM business segment. The company's Core results exclude
the impact of the impairment charge as a non-core adjustment.
|
2016
|
|
2015
|
|
Change
|
Dollars in
millions, except per share data
|
Second
Quarter
|
|
Second
Quarter
|
|
%
|
GAAP
Results
|
|
|
|
|
|
• Consolidated
revenue
|
$
|
518.0
|
|
|
$
|
545.4
|
|
|
(5.0)%
|
• Income (loss) from
continuing operations
|
$
|
40.5
|
|
|
$
|
(47.4)
|
|
|
NM*
|
• Net income
(loss)
|
$
|
40.5
|
|
|
$
|
(45.6)
|
|
|
NM*
|
• Diluted earnings
(loss) from continuing operations per common share
|
$
|
2.38
|
|
|
$
|
(2.66)
|
|
|
NM*
|
• Net cash provided
by operating activities
|
$
|
75.0
|
|
|
$
|
75.1
|
|
|
(0.2)%
|
|
|
|
|
|
|
Core
Results**
|
|
|
|
|
|
• Core adjusted
EBITDA from continuing operations
|
$
|
115.9
|
|
|
$
|
121.8
|
|
|
(4.9)%
|
• Core diluted EPS
from continuing operations***
|
$
|
2.41
|
|
|
$
|
2.20
|
|
|
9.5%
|
• Free cash
flow
|
$
|
60.1
|
|
|
$
|
55.6
|
|
|
8.0%
|
|
|
*
|
Not
meaningful
|
**
|
Refer to Appendix A
for a discussion of the Use of Non-GAAP Financial Measures and Core
and Non-Core Results
|
***
|
Beginning in the
first quarter of 2016, to better align with our GAAP presentation
of EPS, we adjusted our non-GAAP financial measure of core diluted
EPS from continuing operations to be defined as diluted earnings
per share from continuing operations utilizing the two-class method
excluding non-core adjustments, net of applicable taxes.
Historically, we had defined this measure using diluted earnings
per share from continuing operations utilizing the treasury stock
method excluding non-core adjustments, net of applicable taxes.
Prior period results have been updated to reflect this
change.
|
Highlights from the second quarter 2016 include:
- Delivered $115.9 million in core
adjusted EBITDA from continuing operations, down $6.0 million from the second quarter of 2015,
despite $27.3 million in lower
revenue
- Produced $2.41 in core diluted
EPS from continuing operations
- Generated $60.1 million in free
cash flow
- Distributed $10.2 million in
quarterly cash dividends
- Repurchased $2.6 million in face
value of 2021 Notes and reduced the outstanding balance on its
credit facility by $44.7 million
"We generated solid margins and strong profitability in the
second quarter by continuing to align expenses with revenue across
the enterprise," said Galen C.
Smith, chief financial officer of Outerwall Inc. "During the
quarter, we continued our disciplined expense management and
reduced operating costs, G&A and marketing expenses while
improving overall productivity. In line with our commitment to
return substantial free cash flow to our investors, we distributed
$10.2 million in cash dividends,
opportunistically repurchased $2.6
million in face value of our senior notes, and further
reduced the outstanding balance on our credit facility by
$44.7 million."
CONSOLIDATED RESULTS
GAAP Results
In the second quarter of 2016, consolidated revenue was
$518.0 million, a decrease of
$27.3 million, or 5.0%, compared with
$545.4 million in the second quarter
of 2015, primarily reflecting a $49.9
million decrease in Redbox revenue, partially offset by an
$18.7 million increase in revenue
from ecoATM and a $3.9 million
increase from Coinstar.
Income from continuing operations for the second quarter of 2016
was $40.5 million, or $2.38 of diluted earnings from continuing
operations per common share, compared with a $47.4 million loss from continuing operations, or
a $2.66 loss per common share, in the
second quarter of 2015. Income from continuing operations for the
second quarter of 2016 increased $2.0
million from the second quarter of 2015, excluding the
$85.9 million goodwill impairment
charge recognized in the second quarter of 2015, primarily due to a
$4.2 million decrease in operating
loss from ecoATM, a $4.5 million
decrease in operating loss in the All Other reporting category
related to the shutdown of SAMPLEit in the fourth quarter of 2015,
and a $2.1 million increase in
operating income from Coinstar, partially offset by a $5.6 million decrease in operating income from
Redbox. The $1.9 million decrease in
net interest expense due to lower outstanding borrowings and gain
from early extinguishment of debt in the second quarter of 2016
partially offset the higher income tax expense in the second
quarter of 2016.
In the second quarter of 2016, net cash flows provided by
operating activities was $75.0
million, compared with $75.1
million in the second quarter of 2015.
Cash capital expenditures for the second quarter of 2016
decreased $4.6 million, or 23.5%, to
$14.9 million, compared with
$19.5 million in the second
quarter of 2015, with the decrease primarily related to reduced
spending on property and equipment for kiosks.
Core Results
In the second quarter of 2016, core adjusted EBITDA from
continuing operations was $115.9
million, a decrease of $6.0
million, compared with $121.8
million in the second quarter of 2015. The year-over-year
decline was primarily due to lower segment operating income in the
Redbox segment, partially offset by decreased segment operating
losses in the ecoATM segment and All Other reporting category and
an increase in segment operating income in the Coinstar
segment.
Core diluted EPS from continuing operations for the second
quarter of 2016 was $2.41, an
increase of 9.5% compared with $2.20
per diluted share in the second quarter of 2015. The increase was
primarily attributable to a reduction in the number of weighted
average shares used in the diluted per share calculation due to
stock repurchases in the second half of 2015.
Free cash flow for the second quarter of 2016 was $60.1 million, an increase of $4.5 million, or 8.0%, compared with $55.6 million in the second quarter of 2015,
driven primarily by lower capital expenditures.
SEGMENT RESULTS
Redbox
Redbox segment revenue for the second quarter of 2016 was
$389.1 million, compared with
$439.0 million in the second
quarter of 2015. Revenue decreased $49.9
million, or 11.4%, primarily due to a $42.8 million decrease from a 10.0% decline in
same store sales reflecting lower total disc rentals primarily
driven by a higher impact from secular decline in the physical
market on movie rentals in the second quarter of 2016, compared
with the second quarter of 2015. Kiosks removed or relocated
subsequent to the second quarter of 2015 accounted for $7.1 million of the decline in revenue as the
company continued its efforts to optimize its kiosk network by
removing underperforming kiosks. The decline in revenue was
partially offset by an increase in video game rentals as the market
penetration of new generation game consoles continued to increase,
and a 44.5% higher total box office of movie titles released in the
second quarter of 2016, including one title that represented 30.9%
of the total box office.
Redbox generated approximately 123.6 million rentals in the
second quarter of 2016, down from approximately 146.0 million
rentals in the second quarter of 2015.
Net revenue per rental was $3.13
in the second quarter of 2016, compared with $3.00 in the second quarter of 2015. The
$0.13 increase in net revenue per
rental was primarily due to lower promotional spend as compared
with the second quarter of 2015 and higher video game rentals.
Redbox segment operating income in the second quarter of 2016
was $82.1 million, a decrease of
$16.9 million, or 17.0%, compared
with $98.9 million in the second
quarter of 2015. The decrease was primarily due to the decrease in
revenue described above, partially offset by a decrease in other
direct operating expenses, primarily due to lower contractual fees
paid to retail partners due to lower revenue and lower credit card
fees driven by lower rental volume. The decline in revenue was
further offset by lower movie content costs primarily due to
content mix and fewer locations as compared with the second quarter
of 2015, as the company continued to remove underperforming kiosks
to maximize profitability, and a $3.0
million decrease in general and administrative expenses
primarily related to ongoing cost reduction initiatives. Segment
operating margin was 21.1% in the second quarter of 2016, compared
with 22.5% in the second quarter of 2015. Sequentially,
Redbox segment operating margin increased 110 basis points
from 20.0% in the first quarter of 2016, reflecting an increase in
gross margin, lower credit card fees and retailer revenue share
rates, and savings in general and administrative expense due to
restructuring actions taken in the first quarter of 2016.
Coinstar
Coinstar segment revenue for the second quarter of 2016 was
$84.2 million, compared with
$80.3 million in the second
quarter of 2015. Revenue increased $3.9
million, or 4.8%, primarily due to continued strength in the
core U.S. business, while foreign exchange rates continued to
negatively impact revenue in the U.K. and Canada in the second quarter of 2016. The
average transaction size increased $2.43, or 5.6% on a year-over-year basis, to
$45.46, while the total number of
transactions decreased slightly.
Coinstar segment operating income was $33.2 million in the second quarter of 2016,
an increase of $1.3 million, or 3.9%,
compared with $31.9 million in
the second quarter of 2015. Coinstar segment operating margin
declined 40 basis points to 39.4% for the second quarter of
2016, compared with 39.8% for the second quarter of 2015, primarily
due to an increase in direct operating expenses associated with the
higher revenue discussed above. General and administrative expenses
also increased in the second quarter of 2016, as the result of
increased corporate allocations associated with the increase in
Coinstar's proportionate share of the company's total revenue
compared to the second quarter of 2015, partially offset by ongoing
cost reduction initiatives in the segment.
The company continues to expand its testing of Coinstar kiosks
in Spain as part of its efforts to
explore further international opportunities.
ecoATM
Revenue in the ecoATM segment increased $18.7 million, or 71.9%, to $44.8 million in the second quarter of 2016,
primarily due to revenue included in the second quarter of 2016
from devices acquired and sold through Gazelle. The results of
Gazelle have also favorably impacted the mix of value devices and
the average selling price of value devices sold. The average
selling price of value devices sold increased $2.81 to $64.53,
compared with $61.72 for the second
quarter of 2015.
In the second quarter of 2016, ecoATM segment operating loss
decreased to $700,000, which included
$384,000 of restructuring and related
costs, compared with a loss of $92.8 million in the second quarter of 2015.
Excluding the $85.9 million goodwill
impairment charge recognized in the second quarter of 2015, the
segment operating loss in the second quarter of 2016 was reduced by
$6.3 million, or 89.9%, as the growth
in revenue outpaced the increase in direct operating expenses,
primarily due to operating efficiencies, ongoing cost reduction
initiatives, and synergies recognized as a result of the Gazelle
acquisition. The business unit continues to be on track to achieve
segment operating profitability for 2016.
CAPITAL ALLOCATION
During the second quarter of 2016, the company repurchased
$2.6 million in face value of its
5.875% Senior Notes due 2021 for $2.2
million, reducing the outstanding principal balance to
$228.6 million. The gain from early
extinguishment of these notes reduced net interest expense by
approximately $418,000 in the
quarter. In addition to the notes repurchased, the company also
reduced the outstanding balance on its credit facility by
$44.7 million.
On June 21, 2016, the company paid
a cash dividend of $0.60 per
outstanding share of its common stock totaling approximately
$10.2 million. On July 24, 2016, the company's board of directors
declared a quarterly cash dividend of $0.60 per share to be paid on September 6, 2016, to stockholders of record as
of the close of business on August 23, 2016.
As a result of the pending transaction with Apollo Global
Management, there will not be additional repurchases of common
stock or senior notes.
THE APOLLO ACQUISITION
On July 24, 2016, the company
entered into an agreement and plan of merger with affiliates of
certain funds managed by affiliates of Apollo Global Management,
LLC (Apollo), whereby the company would be acquired by an Apollo
affiliate in an all cash transaction, consisting of a tender offer,
followed by a subsequent back-end merger. Under the terms of the
merger agreement, an Apollo affiliate would soon commence a cash
tender offer for all of the company's outstanding shares of common
stock at a purchase price of $52.00
per share, without interest and subject to any withholding taxes.
The consummation of the tender offer is conditioned on shares of
common stock having been validly tendered and not properly
withdrawn that represent, together with the shares of common stock
then owned by the Apollo affiliate, of at least a majority of the
then outstanding shares, the expiration or early termination of the
Hart-Scott-Rodino antitrust waiting period and various other
conditions. In addition, other than the company's regular quarterly
cash dividend for the third quarter of 2016, the company is
restricted from declaring or paying any dividend or distribution
and authorizing or making any capital stock repurchases.
After closing the tender offer, subject to meeting certain
customary conditions in the merger agreement, the company merger
will be effected without a meeting or vote of the company's
stockholders. At merger closing, shares of common stock then issued
and outstanding will be automatically cancelled and converted into
the right to receive $52.00, without
interest and subject to any withholding taxes. After the closing of
the merger, the company will be a wholly owned subsidiary of an
Apollo affiliate and will cease to be a publicly-traded
company.
For more detailed information about the transaction, please see
our filings with the SEC as well as all materials filed relating to
the tender offer.
2016 ANNUAL GUIDANCE
In light of the merger agreement with Apollo, Outerwall is
suspending full-year 2016 guidance.
ADDITIONAL INFORMATION
Additional information regarding Outerwall's 2016 second quarter
operating and financial results is included in the company's
prepared remarks. This press release and the prepared remarks are
posted on the Investor Relations section of the corporate website
at ir.outerwall.com.
ABOUT OUTERWALL INC.
Outerwall Inc. (Nasdaq: OUTR) has more than 20 years of
experience creating some of the most profitable spaces for their
retail partners. The company delivers breakthrough kiosk
experiences that delight consumers and generate revenue for
retailers. As the company that brought consumers Redbox®
entertainment, Coinstar® money services, and
ecoATM® electronics recycling kiosks, Outerwall is
leading the next generation of automated retail and paving the way
for inventive, scalable businesses. Outerwall™ kiosks are in
neighborhood grocery stores, drug stores, mass merchants, malls,
and other retail locations in the United
States, Canada,
Puerto Rico, the United Kingdom, and Ireland. Learn more at www.outerwall.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," "will," "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 Outerwall Inc.'s anticipated growth
and future operating results, including 2016 full year 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 Outerwall Inc. or its subsidiaries, as well as from risks
and uncertainties beyond Outerwall Inc.'s control. Such risks and
uncertainties include, but are not limited to,
- risks that the proposed acquisition, including the tender
offer and the mergers, may not be completed in a timely manner or
at all,
- competition from other entertainment providers,
- the ability to achieve the strategic and financial
objectives for our entry into new businesses, including ecoATM and
Gazelle,
- the timing of the release slate and the relative
attractiveness of titles in a particular quarter or year,
- our ability to repurchase stock and the availability of an
open trading window,
- our declaration and payment of dividends, including our
board's discretion to change the dividend policy,
- 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, suppliers and other
third-party providers, including financial service
providers,
- the timing of new DVD releases and the inability to receive
delivery of DVDs on the date of their initial release to the
general public, or shortly thereafter, or in sufficient quantity,
for home entertainment viewing,
- the effective management of our content library,
- the ability to attract new retailers, penetrate new markets
and distribution channels and react to changing consumer
demands,
- loss of key personnel or the inability of replacements to
quickly and successfully perform in those new roles,
- the ability to generate sufficient cash flow to timely and
fully service indebtedness and adhere to certain covenants and
restrictions,
- 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 any subsequent Quarterly Reports on Form 10-Q filed with the
Securities and Exchange Commission. These forward-looking
statements reflect Outerwall Inc.'s expectations as of the date of
this press release. Outerwall Inc. undertakes no obligation to
update the information provided herein.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
The tender offer for the outstanding shares of Outerwall
referenced in this press release has not yet commenced. This
communication is for informational purposes only and is neither an
offer to purchase nor a solicitation of an offer to sell shares,
nor is it a substitute for the tender offer materials that Apollo
and its acquisition subsidiary will file with the U.S.
Securities and Exchange Commission (the "SEC") upon
commencement of the tender offer. At the time the tender offer is
commenced, Apollo and its acquisition subsidiary will file tender
offer materials on Schedule TO, and Outerwall thereafter will file
a Solicitation/Recommendation Statement on Schedule 14D-9 with
the SEC with respect to the tender offer. THE TENDER
OFFER MATERIALS (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER
OF TRANSMITTAL AND CERTAIN OTHER TENDER OFFER DOCUMENTS) AND THE
SOLICITATION/RECOMMENDATION STATEMENT WILL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF SHARES OF OUTERWALL ARE URGED TO READ THESE
DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION THAT HOLDERS OF THE OUTERWALL
SECURITIES SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING
TENDERING THEIR SECURITIES.
The Offer to Purchase, the related Letter of Transmittal and
certain other tender offer documents, as well as the
Solicitation/Recommendation Statement, will be made available to
all holders of shares of Outerwall at no expense to them. The
tender offer materials, the Solicitation/Recommendation Statement
and other related documents (when available) will be made available
for free at the SEC's web site at www.sec.gov. Investors and
securityholders may access copies of the
Solicitation/Recommendation Statement and other related documents
(when available) that Outerwall files with the SEC at
ir.outerwall.com or by contacting the Company's Investor Relations
Department by phone at (425) 943-8242 or by e-mail at
investor.relations@outerwall.com.
(Consolidated Financial Statements, Business
Segment Information and Appendix A Follow)
OUTERWALL
INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands,
except per share data)
(unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
$
|
518,027
|
|
|
$
|
545,369
|
|
|
$
|
1,053,983
|
|
|
$
|
1,154,005
|
|
Expenses:
|
|
|
|
|
|
|
|
Direct
operating(1)
|
351,581
|
|
|
369,619
|
|
|
727,548
|
|
|
774,803
|
|
Marketing
|
7,422
|
|
|
8,047
|
|
|
16,644
|
|
|
16,467
|
|
Research and
development
|
1,317
|
|
|
2,039
|
|
|
2,362
|
|
|
4,123
|
|
General and
administrative
|
47,681
|
|
|
48,783
|
|
|
95,451
|
|
|
97,339
|
|
Restructuring and
related costs
|
401
|
|
|
—
|
|
|
3,676
|
|
|
15,851
|
|
Goodwill
impairment
|
—
|
|
|
85,890
|
|
|
—
|
|
|
85,890
|
|
Depreciation and
other
|
33,988
|
|
|
45,174
|
|
|
70,106
|
|
|
87,860
|
|
Amortization of
intangible assets
|
3,790
|
|
|
3,309
|
|
|
7,580
|
|
|
6,618
|
|
Total
expenses
|
446,180
|
|
|
562,861
|
|
|
923,367
|
|
|
1,088,951
|
|
Operating income
(loss)
|
71,847
|
|
|
(17,492)
|
|
|
130,616
|
|
|
65,054
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
Loss from equity
method investments, net
|
(208)
|
|
|
(133)
|
|
|
(415)
|
|
|
(265)
|
|
Interest expense,
net
|
(10,301)
|
|
|
(12,183)
|
|
|
(10,543)
|
|
|
(24,254)
|
|
Other, net
|
223
|
|
|
642
|
|
|
1,452
|
|
|
(1,704)
|
|
Total other income
(expense), net
|
(10,286)
|
|
|
(11,674)
|
|
|
(9,506)
|
|
|
(26,223)
|
|
Income (loss) from
continuing operations before income taxes
|
61,561
|
|
|
(29,166)
|
|
|
121,110
|
|
|
38,831
|
|
Income tax
expense
|
(21,013)
|
|
|
(18,185)
|
|
|
(42,111)
|
|
|
(44,027)
|
|
Income (loss) from
continuing operations
|
40,548
|
|
|
(47,351)
|
|
|
78,999
|
|
|
(5,196)
|
|
Income (loss) from
discontinued operations, net of tax
|
—
|
|
|
1,735
|
|
|
—
|
|
|
(4,821)
|
|
Net income
(loss)
|
40,548
|
|
|
(45,616)
|
|
|
78,999
|
|
|
(10,017)
|
|
Foreign currency
translation adjustment(2)
|
(1,680)
|
|
|
473
|
|
|
(2,229)
|
|
|
3,327
|
|
Comprehensive income
(loss)
|
$
|
38,868
|
|
|
$
|
(45,143)
|
|
|
$
|
76,770
|
|
|
$
|
(6,690)
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations attributable to common shares:
|
|
|
|
|
|
|
|
Basic
|
$
|
38,615
|
|
|
$
|
(47,472)
|
|
|
$
|
75,665
|
|
|
$
|
(5,465)
|
|
Diluted
|
$
|
38,626
|
|
|
$
|
(47,472)
|
|
|
$
|
75,681
|
|
|
$
|
(5,465)
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per common share:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
2.39
|
|
|
$
|
(2.66)
|
|
|
$
|
4.69
|
|
|
$
|
(0.30)
|
|
Discontinued
operations
|
—
|
|
|
0.10
|
|
|
—
|
|
|
(0.27)
|
|
Basic earnings (loss)
per common share
|
$
|
2.39
|
|
|
$
|
(2.56)
|
|
|
$
|
4.69
|
|
|
$
|
(0.57)
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per common share:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
2.38
|
|
|
$
|
(2.66)
|
|
|
$
|
4.67
|
|
|
$
|
(0.30)
|
|
Discontinued
operations
|
—
|
|
|
0.10
|
|
|
—
|
|
|
(0.27)
|
|
Diluted earnings
(loss) per common share
|
$
|
2.38
|
|
|
$
|
(2.56)
|
|
|
$
|
4.67
|
|
|
$
|
(0.57)
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares used in basic and diluted per share
calculations:
|
|
|
|
|
|
|
|
Basic
|
16,149
|
|
|
17,848
|
|
|
16,122
|
|
|
18,057
|
|
Diluted
|
16,244
|
|
|
17,848
|
|
|
16,216
|
|
|
18,057
|
|
|
|
|
|
|
|
|
|
Dividends paid per
common share
|
$
|
0.60
|
|
|
$
|
0.30
|
|
|
$
|
0.90
|
|
|
$
|
0.60
|
|
|
|
(1)
|
"Direct operating"
excludes depreciation and other of $24.9 million and $51.1
million for the three and six months ended June 30,
2016, respectively, and $29.6 million and $58.0 million for the
three and six months ended June 30, 2015,
respectively.
|
(2)
|
Foreign currency
translation adjustment had no tax effect for the three and six
months ended June 30, 2016 and 2015, respectively.
|
OUTERWALL
INC.
CONSOLIDATED
BALANCE SHEETS
(in thousands,
except share data)
(unaudited)
|
|
|
June 30,
2016
|
|
December 31,
2015
|
Assets
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
199,048
|
|
|
$
|
222,549
|
|
Accounts receivable,
net of allowances of $806 and $1,272
|
25,386
|
|
|
38,464
|
|
Content
library
|
147,815
|
|
|
188,490
|
|
Prepaid expenses and
other current assets
|
47,122
|
|
|
51,368
|
|
Total current
assets
|
419,371
|
|
|
500,871
|
|
Property and
equipment, net
|
270,414
|
|
|
316,013
|
|
Deferred income
taxes
|
2,456
|
|
|
2,606
|
|
Goodwill and other
intangible assets, net
|
532,934
|
|
|
540,514
|
|
Other long-term
assets
|
1,489
|
|
|
2,207
|
|
Total
assets
|
$
|
1,226,664
|
|
|
$
|
1,362,211
|
|
Liabilities and
Stockholders' Equity (Deficit)
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$
|
126,654
|
|
|
$
|
184,010
|
|
Accrued payable to
retailers
|
100,332
|
|
|
115,098
|
|
Other accrued
liabilities
|
155,347
|
|
|
141,437
|
|
Current portion of
long-term debt and other long-term liabilities
|
18,418
|
|
|
17,131
|
|
Total current
liabilities
|
400,751
|
|
|
457,676
|
|
Long-term debt and
other long-term liabilities
|
766,570
|
|
|
893,517
|
|
Deferred income
taxes
|
13,442
|
|
|
33,092
|
|
Total
liabilities
|
1,180,763
|
|
|
1,384,285
|
|
Commitments and
contingencies
|
|
|
|
Stockholders' Equity
(Deficit):
|
|
|
|
Preferred stock,
$0.001 par value - 5,000,000 shares authorized; no shares issued or
outstanding
|
—
|
|
|
—
|
|
Common stock, $0.001
par value - 60,000,000 authorized;
|
|
|
|
37,272,647 and
36,720,579 shares issued;
|
|
|
|
17,209,584 and
16,607,516 shares outstanding;
|
489,879
|
|
|
485,163
|
|
Treasury
stock
|
(1,149,261)
|
|
|
(1,151,063)
|
|
Retained
earnings
|
707,138
|
|
|
643,452
|
|
Accumulated other
comprehensive income (loss)
|
(1,855)
|
|
|
374
|
|
Total stockholders'
equity (deficit)
|
45,901
|
|
|
(22,074)
|
|
Total liabilities and
stockholders' equity (deficit)
|
$
|
1,226,664
|
|
|
$
|
1,362,211
|
|
OUTERWALL
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in
thousands)
(unaudited)
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Operating
Activities:
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
40,548
|
|
|
$
|
(45,616)
|
|
|
$
|
78,999
|
|
|
$
|
(10,017)
|
|
Adjustments to
reconcile net income (loss) to net cash flows from operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
other
|
33,988
|
|
|
45,174
|
|
|
70,106
|
|
|
93,718
|
|
Amortization of
intangible assets
|
3,790
|
|
|
3,309
|
|
|
7,580
|
|
|
6,662
|
|
Share-based payments
expense
|
5,174
|
|
|
3,289
|
|
|
9,504
|
|
|
7,192
|
|
Windfall excess tax
benefits related to share-based payments
|
—
|
|
|
(160)
|
|
|
—
|
|
|
(686)
|
|
Deferred income
taxes
|
(10,736)
|
|
|
(1,392)
|
|
|
(18,558)
|
|
|
(3,939)
|
|
Restructuring,
impairment and related costs(2)
|
—
|
|
|
—
|
|
|
361
|
|
|
1,680
|
|
Loss from equity
method investments, net
|
208
|
|
|
133
|
|
|
415
|
|
|
265
|
|
Amortization of
deferred financing fees and debt discount
|
613
|
|
|
692
|
|
|
1,251
|
|
|
1,385
|
|
Gain from early
extinguishment of debt
|
(418)
|
|
|
—
|
|
|
(11,446)
|
|
|
—
|
|
Goodwill
impairment
|
—
|
|
|
85,890
|
|
|
—
|
|
|
85,890
|
|
Other
|
(244)
|
|
|
383
|
|
|
(280)
|
|
|
(816)
|
|
Cash flows from
changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
6,322
|
|
|
3,254
|
|
|
13,185
|
|
|
15,077
|
|
Content
library
|
7,723
|
|
|
24,703
|
|
|
40,849
|
|
|
34,659
|
|
Prepaid expenses and
other current assets
|
(759)
|
|
|
(18,976)
|
|
|
5,263
|
|
|
(22,082)
|
|
Other
assets
|
170
|
|
|
154
|
|
|
333
|
|
|
322
|
|
Accounts
payable
|
(17,055)
|
|
|
(20,617)
|
|
|
(52,460)
|
|
|
(17,697)
|
|
Accrued payable to
retailers
|
10,248
|
|
|
6,931
|
|
|
(14,398)
|
|
|
(11,510)
|
|
Other accrued
liabilities
|
(4,552)
|
|
|
(12,008)
|
|
|
11,521
|
|
|
1,112
|
|
Net cash flows
from operating activities(1)
|
75,020
|
|
|
75,143
|
|
|
142,225
|
|
|
181,215
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(14,921)
|
|
|
(19,508)
|
|
|
(28,374)
|
|
|
(40,217)
|
|
Proceeds from sale of
property and equipment
|
18
|
|
|
2,817
|
|
|
92
|
|
|
2,940
|
|
Net cash flows
used in investing activities(1)
|
(14,903)
|
|
|
(16,691)
|
|
|
(28,282)
|
|
|
(37,277)
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
Proceeds from new
borrowing on Credit Facility
|
91,000
|
|
|
77,000
|
|
|
176,000
|
|
|
112,000
|
|
Principal payments on
Credit Facility
|
(135,687)
|
|
|
(68,875)
|
|
|
(244,000)
|
|
|
(185,750)
|
|
Repurchases of
notes
|
(2,179)
|
|
|
—
|
|
|
(47,507)
|
|
|
—
|
|
Repurchases of common
stock
|
—
|
|
|
(22,023)
|
|
|
—
|
|
|
(62,731)
|
|
Dividends
paid
|
(10,084)
|
|
|
(5,417)
|
|
|
(15,122)
|
|
|
(11,019)
|
|
Principal payments on
capital lease obligations and other debt
|
(1,451)
|
|
|
(3,033)
|
|
|
(3,077)
|
|
|
(6,278)
|
|
Windfall excess tax
benefits related to share-based payments
|
—
|
|
|
160
|
|
|
—
|
|
|
686
|
|
Withholding tax paid
on vesting of restricted stock net of proceeds from exercise of
stock options
|
(47)
|
|
|
1,887
|
|
|
(1,472)
|
|
|
(1,201)
|
|
Net cash flows
used in financing activities(1)
|
(58,448)
|
|
|
(20,301)
|
|
|
(135,178)
|
|
|
(154,293)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Effect of exchange
rate changes on cash
|
(1,471)
|
|
|
1,623
|
|
|
(2,266)
|
|
|
5,367
|
|
Change in cash and
cash equivalents
|
198
|
|
|
39,774
|
|
|
(23,501)
|
|
|
(4,988)
|
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
Beginning of
period
|
198,850
|
|
|
197,934
|
|
|
222,549
|
|
|
242,696
|
|
End of
period
|
$
|
199,048
|
|
|
$
|
237,708
|
|
|
$
|
199,048
|
|
|
$
|
237,708
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
$
|
8,620
|
|
|
$
|
10,933
|
|
|
$
|
20,670
|
|
|
$
|
22,846
|
|
Cash paid during the
period for income taxes, net
|
$
|
38,890
|
|
|
$
|
53,905
|
|
|
$
|
40,951
|
|
|
$
|
66,896
|
|
Supplemental
disclosure of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
Purchases of property
and equipment financed by capital lease obligations
|
$
|
1,146
|
|
|
$
|
257
|
|
|
$
|
2,902
|
|
|
$
|
977
|
|
Purchases of property
and equipment included in ending accounts payable
|
$
|
654
|
|
|
$
|
4,436
|
|
|
$
|
654
|
|
|
$
|
4,436
|
|
|
|
(1)
|
During the first
quarter of 2015 we discontinued our Redbox operations in Canada.
Cash flows from these discontinued operations are not segregated
from cash flows from continuing operations in the 2015 periods
presented.
|
(2)
|
The non-cash
restructuring, impairment and related costs in the six months ended
June 30, 2015 of $1.7 million is composed of $6.9 million in
impairments of lease related assets partially offset by a $5.2
million benefit resulting from the lease termination.
|
OUTERWALL INC.
BUSINESS
SEGMENT AND ENTERPRISEWIDE INFORMATION
(unaudited)
Comparability of Results
We regularly assess the performance of our concepts to determine
whether continued funding or other alternatives are appropriate and
as a result, we discontinued operating SAMPLEit in the
fourth quarter of 2015. As SAMPLEit did not represent a
major component of our operations or financial results, the results
of SAMPLEit did not qualify to be reported as a discontinued
operation and remain in our All Other reporting category.
On November 10, 2015, we acquired
certain assets and liabilities of Gazelle, Inc. ("Gazelle").
Results of operations for Gazelle are included in ecoATM for the
three and six months ended June 30,
2016.
Our analysis and reconciliation of our segment information to
the consolidated financial statements that follows covers our
results of operations, which consists of our Redbox, Coinstar and
ecoATM segments, Corporate Unallocated expenses and All Other. All
Other includes the results of other self-service concepts, which we
regularly assess to determine whether continued funding or other
alternatives are appropriate.
OUTERWALL
INC.
BUSINESS SEGMENT
AND ENTERPRISEWIDE INFORMATION
(unaudited)
|
|
|
Dollars in
thousands
|
|
|
|
Three Months Ended
June 30, 2016
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
389,059
|
|
|
$
|
84,168
|
|
|
$
|
44,800
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
518,027
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
271,731
|
|
|
42,095
|
|
|
37,291
|
|
|
83
|
|
|
381
|
|
|
351,581
|
|
Marketing
|
3,919
|
|
|
399
|
|
|
3,058
|
|
|
7
|
|
|
39
|
|
|
7,422
|
|
Research and
development
|
—
|
|
|
—
|
|
|
1,194
|
|
|
—
|
|
|
123
|
|
|
1,317
|
|
General and
administrative
|
31,325
|
|
|
8,494
|
|
|
3,573
|
|
|
2
|
|
|
4,287
|
|
|
47,681
|
|
Restructuring and
related costs
|
14
|
|
|
3
|
|
|
384
|
|
|
—
|
|
|
—
|
|
|
401
|
|
Segment operating
income (loss)
|
82,070
|
|
|
33,177
|
|
|
(700)
|
|
|
(92)
|
|
|
(4,830)
|
|
|
109,625
|
|
Less: depreciation,
amortization and other
|
(21,806)
|
|
|
(7,595)
|
|
|
(8,398)
|
|
|
21
|
|
|
—
|
|
|
(37,778)
|
|
Operating income
(loss)
|
60,264
|
|
|
25,582
|
|
|
(9,098)
|
|
|
(71)
|
|
|
(4,830)
|
|
|
71,847
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(208)
|
|
|
(208)
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,301)
|
|
|
(10,301)
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
223
|
|
|
223
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
60,264
|
|
|
$
|
25,582
|
|
|
$
|
(9,098)
|
|
|
$
|
(71)
|
|
|
$
|
(15,116)
|
|
|
$
|
61,561
|
|
|
|
|
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2015
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
438,976
|
|
|
$
|
80,279
|
|
|
$
|
26,062
|
|
|
$
|
52
|
|
|
$
|
—
|
|
|
$
|
545,369
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
301,444
|
|
|
39,358
|
|
|
27,227
|
|
|
1,078
|
|
|
512
|
|
|
369,619
|
|
Marketing
|
4,266
|
|
|
1,232
|
|
|
2,149
|
|
|
258
|
|
|
142
|
|
|
8,047
|
|
Research and
development
|
—
|
|
|
—
|
|
|
1,549
|
|
|
1
|
|
|
489
|
|
|
2,039
|
|
General and
administrative
|
34,336
|
|
|
7,768
|
|
|
2,094
|
|
|
2,644
|
|
|
1,941
|
|
|
48,783
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
—
|
|
|
85,890
|
|
Segment operating
income (loss)
|
98,930
|
|
|
31,921
|
|
|
(92,847)
|
|
|
(3,929)
|
|
|
(3,084)
|
|
|
30,991
|
|
Less: depreciation,
amortization and other
|
(33,063)
|
|
|
(8,437)
|
|
|
(6,305)
|
|
|
(678)
|
|
|
—
|
|
|
(48,483)
|
|
Operating income
(loss)
|
65,867
|
|
|
23,484
|
|
|
(99,152)
|
|
|
(4,607)
|
|
|
(3,084)
|
|
|
(17,492)
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(133)
|
|
|
(133)
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,183)
|
|
|
(12,183)
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
642
|
|
|
642
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
65,867
|
|
|
$
|
23,484
|
|
|
$
|
(99,152)
|
|
|
$
|
(4,607)
|
|
|
$
|
(14,758)
|
|
|
$
|
(29,166)
|
|
OUTERWALL
INC.
BUSINESS SEGMENT
AND ENTERPRISEWIDE INFORMATION
(unaudited)
|
|
|
Dollars in
thousands
|
|
|
|
Six Months Ended
June 30, 2016
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
810,547
|
|
|
$
|
156,547
|
|
|
$
|
86,889
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,053,983
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
570,732
|
|
|
80,740
|
|
|
75,185
|
|
|
169
|
|
|
722
|
|
|
727,548
|
|
Marketing
|
7,743
|
|
|
1,174
|
|
|
7,638
|
|
|
12
|
|
|
77
|
|
|
16,644
|
|
Research and
development
|
—
|
|
|
—
|
|
|
2,129
|
|
|
—
|
|
|
233
|
|
|
2,362
|
|
General and
administrative
|
63,354
|
|
|
16,358
|
|
|
7,575
|
|
|
349
|
|
|
7,815
|
|
|
95,451
|
|
Restructuring and
related costs
|
2,422
|
|
|
465
|
|
|
789
|
|
|
—
|
|
|
—
|
|
|
3,676
|
|
Segment operating
income (loss)
|
166,296
|
|
|
57,810
|
|
|
(6,427)
|
|
|
(530)
|
|
|
(8,847)
|
|
|
208,302
|
|
Less: depreciation,
amortization and other
|
(46,101)
|
|
|
(15,004)
|
|
|
(16,602)
|
|
|
21
|
|
|
—
|
|
|
(77,686)
|
|
Operating income
(loss)
|
120,195
|
|
|
42,806
|
|
|
(23,029)
|
|
|
(509)
|
|
|
(8,847)
|
|
|
130,616
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(415)
|
|
|
(415)
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,543)
|
|
|
(10,543)
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,452
|
|
|
1,452
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
120,195
|
|
|
$
|
42,806
|
|
|
$
|
(23,029)
|
|
|
$
|
(509)
|
|
|
$
|
(18,353)
|
|
|
$
|
121,110
|
|
|
|
|
Dollars in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2015
|
Redbox
|
|
Coinstar
|
|
ecoATM
|
|
All
Other
|
|
Corporate
Unallocated
|
|
Total
|
Revenue
|
$
|
958,509
|
|
|
$
|
149,609
|
|
|
$
|
45,811
|
|
|
$
|
76
|
|
|
$
|
—
|
|
|
$
|
1,154,005
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating
|
644,379
|
|
|
76,621
|
|
|
50,033
|
|
|
2,269
|
|
|
1,501
|
|
|
774,803
|
|
Marketing
|
9,091
|
|
|
2,410
|
|
|
3,879
|
|
|
578
|
|
|
509
|
|
|
16,467
|
|
Research and
development
|
—
|
|
|
—
|
|
|
3,005
|
|
|
(84)
|
|
|
1,202
|
|
|
4,123
|
|
General and
administrative
|
68,071
|
|
|
15,563
|
|
|
4,062
|
|
|
5,151
|
|
|
4,492
|
|
|
97,339
|
|
Restructuring and
related costs
|
15,174
|
|
|
550
|
|
|
127
|
|
|
—
|
|
|
—
|
|
|
15,851
|
|
Goodwill
impairment
|
—
|
|
|
—
|
|
|
85,890
|
|
|
—
|
|
|
—
|
|
|
85,890
|
|
Segment operating
income (loss)
|
221,794
|
|
|
54,465
|
|
|
(101,185)
|
|
|
(7,838)
|
|
|
(7,704)
|
|
|
159,532
|
|
Less: depreciation,
amortization and other
|
(64,670)
|
|
|
(16,255)
|
|
|
(12,207)
|
|
|
(1,346)
|
|
|
—
|
|
|
(94,478)
|
|
Operating income
(loss)
|
157,124
|
|
|
38,210
|
|
|
(113,392)
|
|
|
(9,184)
|
|
|
(7,704)
|
|
|
65,054
|
|
Loss from equity
method investments, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(265)
|
|
|
(265)
|
|
Interest expense,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,254)
|
|
|
(24,254)
|
|
Other, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,704)
|
|
|
(1,704)
|
|
Income (loss) from
continuing operations before income taxes
|
$
|
157,124
|
|
|
$
|
38,210
|
|
|
$
|
(113,392)
|
|
|
$
|
(9,184)
|
|
|
$
|
(33,927)
|
|
|
$
|
38,831
|
|
APPENDIX A
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").
We use the following non-GAAP financial measures to evaluate our
financial results:
- Core adjusted EBITDA from continuing operations;
- Core diluted earnings per share ("EPS") from continuing
operations;
- Free cash flow; and
- Net debt and net leverage ratio.
These measures, the definitions of which are presented below,
are non-GAAP because they exclude certain amounts which are
included in the most directly comparable measure calculated and
presented in accordance with GAAP. Our non-GAAP financial measures
are not meant to be considered in isolation or as a substitute for
our GAAP financial measures and may not be comparable with
similarly titled measures of other companies.
Core and Non-Core Results
We distinguish our core activities, those associated with our
primary operations which we directly control, from non-core
activities. Non-core activities may include nonrecurring events or
events we do not directly control. Our non-core adjustments for the
periods presented include i) goodwill impairment, ii) restructuring
costs (including severance and early lease termination costs, and
the related asset impairments) associated with actions to reduce
costs in our continuing operations across the company, iii)
compensation expense for rights to receive cash issued in
conjunction with our acquisition of ecoATM and attributable to
post-combination services as they are fixed amount acquisition
related awards and not indicative of the directly controllable
future business results, and iv) loss from equity method
investments, which represents our share of loss from entities we do
not consolidate or control ("Non-Core Adjustments").
We believe investors should consider our core results because
they are more indicative of our ongoing performance and trends, are
more consistent with how management evaluates our operational
results and trends, provide meaningful supplemental information to
investors through the exclusion of certain expenses which are
either nonrecurring or may not be indicative of our directly
controllable business operating results, allow for greater
transparency in assessing our performance, help investors better
analyze the results of our business and assist in forecasting
future periods.
Core Adjusted EBITDA from continuing operations
Our non-GAAP financial measure core adjusted EBITDA from
continuing operations is defined as earnings from continuing
operations before depreciation, amortization and other; interest
expense, net; income taxes; share-based payments expense; and
Non-Core Adjustments.
A reconciliation of core adjusted EBITDA from continuing
operations to net income from continuing operations, the most
comparable GAAP financial measure, is presented in the following
table:
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
Dollars in
thousands
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income (loss)
from continuing operations
|
$
|
40,548
|
|
|
$
|
(47,351)
|
|
|
$
|
78,999
|
|
|
$
|
(5,196)
|
|
Depreciation,
amortization and other
|
37,778
|
|
|
48,483
|
|
|
77,686
|
|
|
94,478
|
|
Interest expense,
net
|
10,301
|
|
|
12,183
|
|
|
10,543
|
|
|
24,254
|
|
Income
taxes
|
21,013
|
|
|
18,185
|
|
|
42,111
|
|
|
44,027
|
|
Share-based payments
expense(1)
|
5,298
|
|
|
3,320
|
|
|
9,690
|
|
|
7,261
|
|
Adjusted EBITDA from
continuing operations
|
114,938
|
|
|
34,820
|
|
|
219,029
|
|
|
164,824
|
|
Non-Core
Adjustments:
|
|
|
|
|
|
|
|
Goodwill
impairment
|
—
|
|
|
85,890
|
|
|
—
|
|
|
85,890
|
|
Restructuring and
related costs
|
401
|
|
|
—
|
|
|
3,676
|
|
|
15,851
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
345
|
|
|
1,005
|
|
|
785
|
|
|
2,925
|
|
Loss from equity
method investments, net
|
208
|
|
|
133
|
|
|
415
|
|
|
265
|
|
Core adjusted EBITDA
from continuing operations
|
$
|
115,892
|
|
|
$
|
121,848
|
|
|
$
|
223,905
|
|
|
$
|
269,755
|
|
|
|
(1)
|
Includes both
non-cash share-based compensation for executives, non-employee
directors and employees as well as share-based payments for content
arrangements.
|
Core Diluted EPS from continuing operations
Beginning in the first quarter of 2016, to align better with our
GAAP presentation of EPS, we adjusted our non-GAAP financial
measure of core diluted EPS from continuing operations to be
defined as diluted earnings per share from continuing operations
utilizing the two class method excluding non-core adjustments, net
of applicable taxes. Historically we had defined this measure using
diluted earnings per share from continuing operations utilizing the
treasury stock method excluding non-core adjustments, net of
applicable taxes. Prior period results have been updated to reflect
this change.
A reconciliation of core diluted EPS from continuing operations
to diluted EPS from continuing operations, the most comparable GAAP
financial measure, is presented in the following table:
|
Three Months
Ended
|
|
Six Months
Ended
|
June
30,
|
|
June
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Diluted EPS from
continuing operations per common share
|
$
|
2.38
|
|
|
$
|
(2.66)
|
|
|
$
|
4.67
|
|
|
$
|
(0.30)
|
|
Non-Core
Adjustments:
|
|
|
|
|
|
|
|
Goodwill
impairment(1)
|
—
|
|
|
4.81
|
|
|
—
|
|
|
4.75
|
|
Restructuring and
related costs (pre-tax)
|
0.02
|
|
|
—
|
|
|
0.21
|
|
|
0.89
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
(pre-tax)
|
0.02
|
|
|
0.06
|
|
|
0.04
|
|
|
0.16
|
|
Loss from equity
method investments, net (pre-tax)
|
0.01
|
|
|
0.01
|
|
|
0.02
|
|
|
0.01
|
|
Tax impact of
non-core adjustments(1)(2)
|
(0.02)
|
|
|
(0.02)
|
|
|
(0.09)
|
|
|
(0.40)
|
|
Core diluted EPS from
continuing operations
|
$
|
2.41
|
|
|
$
|
2.20
|
|
|
$
|
4.85
|
|
|
$
|
5.11
|
|
|
|
(1)
|
The goodwill
impairment recognized in 2015 is non-tax deductible.
|
(2)
|
Using the applicable
effective tax rate for the respective periods.
|
Free Cash Flow
Our non-GAAP financial measure free cash flow is defined as net
cash provided by operating activities after capital expenditures.
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 securities. A reconciliation of
free cash flow to net cash provided by operating activities, the
most comparable GAAP financial measure, is presented in the
following table:
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
Dollars in
thousands
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net cash provided by
operating activities
|
$
|
75,020
|
|
|
$
|
75,143
|
|
|
$
|
142,225
|
|
|
$
|
181,215
|
|
Purchase of property
and equipment
|
(14,921)
|
|
|
(19,508)
|
|
|
(28,374)
|
|
|
(40,217)
|
|
Free cash
flow
|
$
|
60,099
|
|
|
$
|
55,635
|
|
|
$
|
113,851
|
|
|
$
|
140,998
|
|
Net Debt and Net Leverage Ratio
Our non-GAAP financial measure net debt is defined as the total
face value of outstanding debt, including capital leases, less cash
and cash equivalents held in financial institutions domestically.
Our non-GAAP financial measure net leverage ratio is defined as net
debt divided by core adjusted EBITDA from continuing operations for
the last twelve months (LTM). We believe net debt and net leverage
ratio are important non-GAAP measures because they:
- are used to assess the degree of leverage by management;
- provide additional information to users of the financial
statements regarding our ability to service, incur or pay down
indebtedness and repurchase our securities as well as additional
information about our capital structure; and
- are reported quarterly to support covenant compliance under our
credit agreement.
A reconciliation of net debt to total outstanding debt including
capital leases, the most comparable GAAP financial measure, is
presented in the following table:
|
June 30,
2016
|
|
December 31,
2015
|
Dollars in
thousands
|
|
Senior unsecured
notes
|
$
|
549,212
|
|
|
$
|
608,908
|
|
Term loans
|
129,375
|
|
|
136,875
|
|
Revolving line of
credit
|
80,000
|
|
|
140,500
|
|
Capital
leases
|
5,531
|
|
|
5,889
|
|
Total principal value
of outstanding debt including capital leases
|
764,118
|
|
|
892,172
|
|
Less domestic cash
and cash equivalents held in financial institutions
|
(41,742)
|
|
|
(46,192)
|
|
Net debt
|
722,376
|
|
|
845,980
|
|
LTM Core adjusted
EBITDA from continuing operations(1)
|
$
|
439,435
|
|
|
$
|
485,285
|
|
Net leverage
ratio
|
1.64
|
|
|
1.74
|
|
|
|
(1)
|
LTM Core Adjusted
EBITDA from continuing operations for the twelve months ended
June 30, 2016 and December 31, 2015 was determined as
follows:
|
Dollars in
thousands
|
|
Core adjusted EBITDA
from continuing operations for the six months ended June 30,
2016
|
$
|
223,905
|
|
Add: Core adjusted
EBITDA from continuing operations for the twelve months ended
December 31, 2015(1)
|
485,285
|
|
Less: Core adjusted
EBITDA from continuing operations for the six months ended June 30,
2015
|
(269,755)
|
|
LTM Core adjusted
EBITDA from continuing operations for the twelve months ended June
30, 2016
|
$
|
439,435
|
|
|
|
(1)
|
Core adjusted EBITDA
from continuing operations for the twelve months ended December 31,
2015 is obtained from our Annual Report on Form 10-K for the period
ended December 31, 2015, where it is reconciled to net income from
continuing operations, the most comparable GAAP financial measure,
and represents the LTM core adjusted EBITDA from continuing
operations we use in our calculation of net leverage ratio as of
December 31, 2015.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/outerwall-inc-announces-2016-second-quarter-results-300305811.html
SOURCE Outerwall Inc.