BELLEVUE, Wash., Feb. 6, 2014 /PRNewswire/ -- Outerwall Inc.
(Nasdaq: OUTR) today reported financial results for the fourth
quarter and full year ended December 31,
2013.
(Logo:
http://photos.prnewswire.com/prnh/20130701/AQ41388LOGO)
"Outerwall reported a strong finish to 2013 as we delivered
solid results at the top and bottom line and executed on strategic
decisions to drive increased profitability and value creation for
our consumers, partners, employees, and shareholders," said
J. Scott Di Valerio, chief executive
officer of Outerwall. "Our results reflect the value consumers
recognize in our core Redbox and Coinstar brands, with Redbox
driving over 775 million rentals in 2013 and Coinstar pushing
through $300 million in annual
revenue for the first time. We are managing these strong,
profitable, cash-generating businesses for additional profitability
and cash flow by optimizing our consumer relationships and kiosk
networks. We will continue to invest in ecoATM and other targeted,
compelling growth opportunities."
Di Valerio continued, "We believe
strong, effective leadership is a cornerstone in extracting the
most value from our businesses, and today we separately announced a
new president for Redbox and executive leadership transitions at
Coinstar and ecoATM. We believe that each candidate will build on
the respective business' strong foundation in order to continue to
drive success and new avenues for growth and enhanced
profitability."
"We also announced our intent to purchase $350 million of Outerwall's common stock via a
modified 'Dutch auction' tender offer, demonstrating our confidence
in Outerwall's business and long-term growth potential," said
Di Valerio.
Outerwall's 2013 fourth quarter and full year financial
highlights included:
|
2013
|
|
2013
|
|
Fourth
Quarter
|
|
Full
Year
|
• Consolidated
revenue
|
$
|
593.7
|
|
million
|
|
$
|
2,306.6
|
|
million
|
• Net
income
|
$
|
22.7
|
|
million
|
|
$
|
174.8
|
|
million
|
• Income from
continuing operations
|
$
|
42.9
|
|
million
|
|
$
|
208.1
|
|
million
|
• Core adjusted
EBITDA from continuing operations*
|
$
|
137.3
|
|
million
|
|
$
|
491.7
|
|
million
|
• Diluted EPS from
continuing operations
|
$
|
1.55
|
|
|
|
$
|
7.33
|
|
|
• Core diluted EPS
from continuing operations*
|
$
|
1.68
|
|
|
|
$
|
5.92
|
|
|
• Net cash provided
by operating activities
|
$
|
191.7
|
|
million
|
|
$
|
324.1
|
|
million
|
• Free cash
flow*
|
$
|
142.6
|
|
million
|
|
$
|
166.4
|
|
million
|
*Refer to Appendix A for a discussion of non-GAAP financial
measures, including the exclusion of certain non-core items.
"We continue to execute on several initiatives, including
working to reach our recently adjusted targeted leverage ratio in
the first quarter, that build on our strong financial foundation,
optimize our capital structure and create value for our
shareholders," said Galen C. Smith,
chief financial officer of Outerwall. "In 2013, we were pleased to
return more than 100% of our free cash flow to shareholders.
Looking ahead, we remain committed to our capital return
priorities, as illustrated by a $350
million tender offer we expect to launch tomorrow."
Smith concluded, "We are focused on operating Outerwall
efficiently and will continue to manage costs and capital
expenditures across the organization, keeping them aligned with our
revenue growth opportunities. We are also on track to achieve
$22 million of savings in 2014. We
intend to further leverage the shared services organization we
built over the past few years to deliver improved results."
Consolidated Results
Revenue for the fourth quarter of 2013 increased 5.4% to
$593.7 million compared with
$563.1 million for the fourth quarter
of 2012. Redbox segment revenue increased 1.7% to $496.4 million compared with $488.3 million for the fourth quarter of 2012.
Coinstar segment revenue increased 8.4% to $80.7 million from $74.5
million in the prior year quarter. New Ventures segment
reported revenue of $16.6 million in
the fourth quarter compared with $293,000 for the fourth quarter of 2012, with the
increase primarily due to the acquisition of the ecoATM business
completed in July 2013.
Operating income for the fourth quarter of 2013 was $73.0 million, which resulted in an operating
margin of 12.3%, compared with operating income of $52.0 million and an operating margin of 9.2% in
the fourth quarter of 2012. The change in operating margin was
driven by several factors, including the reversal of a bonus
accrual; a benefit from the change in amortization for content
costs in the Redbox business; and greater efficiencies in shared
services.
Income from continuing operations for the fourth quarter of 2013
was $42.9 million, or diluted
earnings per share from continuing operations of $1.55, compared with $25.5
million, or $0.83 per diluted
share, in the fourth quarter of 2012. Core diluted earnings per
share from continuing operations for the fourth quarter of 2013 was
$1.68, which excluded non-core
adjustments, net of tax, of $0.13 per
share, compared with $1.01 per
diluted share, which excluded non-core adjustments, net of tax, of
$0.18 per share, in the fourth
quarter of 2012. Non-core adjustments for the fourth quarter of
2013 included restructuring costs associated with actions to reduce
costs in our continuing operations primarily through workforce
reductions across the company, compensation expense for rights to
receive cash issued in conjunction with our acquisition of ecoATM,
the loss from equity method investments, benefits from release of
indemnification reserves upon settlement of the Sigue Note, and a
tax benefit of $16.7 million related
to the recognition of a worthless stock deduction in a corporate
subsidiary.
For 2013, full year revenue was $2.3
billion, an increase of 4.9% compared with 2012. Operating
income for 2013 was $261.0 million,
which resulted in an operating margin of 11.3%, compared with
operating income of $279.4 million
and an operating margin of 12.7% in 2012. The decrease in operating
margin reflects the increased operating loss in the New Ventures
segment, which was primarily the result of investments to support
ecoATM. Income from continuing operations for 2013 was $208.1 million, or $7.33 per diluted share, compared with income
from continuing operations of $160.5
million, or $4.99 per diluted
share, in 2012, an increase in diluted earnings per share of 46.9%,
primarily attributable to the impacts of a decrease in income tax
expense, income from equity method investments arising from the
gain on our acquisition of ecoATM and higher interest expense. Core
diluted earnings per share from continuing operations for the full
year 2013 was $5.92, which excluded
non-core adjustments of $(1.41) per
share, compared with $5.15 per
diluted share, which excluded non-core adjustments of $0.16 per share, in 2012.
Net cash provided by operating activities in the fourth quarter
of 2013 was $191.7 million, compared
with $152.2 million in the fourth
quarter of 2012. Cash capital expenditures for the fourth quarter
of 2013 were $49.1 million, compared
with $74.9 million in the fourth
quarter of 2012. Free cash flow for the fourth quarter of 2013 was
$142.6 million, compared with
$77.3 million in the fourth quarter
of 2012, primarily driven by changes in working capital, higher
non-cash expenses included in net income in the current period and
lower capital expenditures, bringing total free cash flow to
$166.4 million for the full year
2013.
Capital Structure and Share Repurchases
During the fourth quarter, the company repurchased $100.0 million of its common stock representing
approximately 1.51 million shares at an average price of
$66.06 per share. For full year 2013,
the company repurchased $195.0
million of its common stock representing approximately 3.31
million shares at an average price of $58.98 per share, which represents a return to
shareholders of more than 100% of free cash flow for the year. In
January 2014, the company executed on
an additional $50 million share
repurchase through a 10b5-1 stock trading plan, which was completed
by the end of the month.
On January 30, 2014, Outerwall's
Board of Directors increased the share repurchase authorization by
$500 million, bringing the total
available for repurchases to approximately $650 million.
In connection with this increased authorization, the Board of
Directors also authorized a tender offer for $350 million of Outerwall's common stock through
a modified Dutch auction that is expected to launch on February 7, 2014. We expect to launch with a
price range based on a 5-20% premium over today's last reported
sale price.
During the fourth quarter, the company amended its existing
credit facility to increase its debt capacity by $350.0 million through a combination of a
$200 million term loan and an
additional $150 million of capacity
under the revolving line of credit. As of December 31, 2013, the company had no outstanding
borrowing on the revolving line of credit. The company previously
announced a target net leverage ratio of 1.75x to 2.25x net debt to
core adjusted EBITDA from continuing operations, and expects to
move into this range in the first quarter of 2014 pending the
successful execution of the tender offer.
Segment Results
Redbox
Redbox segment revenue increased 1.7% to $496.4 million from the fourth quarter of 2012.
Redbox generated 192.0 million rentals in the quarter, up 2.2%
year over year. Net revenue per rental was $2.58, up 0.4% from the fourth quarter of
2012.
Redbox segment operating income was $111.3 million, an increase of 39.2% over the
fourth quarter of 2012, and segment operating margin was 22.4%, up
6.0 percentage points from the fourth quarter of 2012. Gross margin
for the fourth quarter of 2013 was 58.5%, up 4.6 percentage points
from 53.9% in the fourth quarter of 2012, as the company adjusted
its content purchases to better align with revised rental and
revenue expectations. Gross margin also benefitted from
$7.0 million lower amortization than
expected as a result of the accounting change implemented in the
second quarter of 2013. The benefit is expected to reverse in the
first quarter of 2014.
Coinstar
Coinstar segment revenue was $80.7
million, an increase of 8.4%, and same store sales were up
5.9% in the fourth quarter of 2013 compared with a decline of 1.2%
in the fourth quarter of 2012, primarily due to the price increase
for all U.S. grocery retail locations for the coin voucher product
implemented on October 1, 2013. The
average transaction size was also up 5.8% to $43.82.
Coinstar segment operating income was $30.8 million, an increase of 17.2% over the
fourth quarter of 2012, and segment operating margin was 38.2%, up
2.9 percentage points from the fourth quarter of 2012. Segment
operating income increased due to the U.S. price increase and cost
reductions driven by efficiencies implemented across its field
organization.
New Ventures
New Ventures reported segment revenue of $16.6 million in the fourth quarter, compared
with $0.3 million in the fourth
quarter of 2012, with the increase driven by the acquisition of
ecoATM. During the fourth quarter, ecoATM expanded its pilot in the
mass channel and ended the year with approximately 880 kiosks.
Outerwall continued to invest to support the growth of ecoATM as it
begins to scale the business in 2014. SAMPLEit™ is included
in the New Ventures segment and the company expects to continue
testing the concept with a limited investment in 2014.
In December 2013, Outerwall exited
three New Ventures concepts, Rubi™, Crisp Market™ and Star Studio™,
which were classified as discontinued operations, and recorded
associated impairment and restructuring charges of $29.5 million for the fourth quarter. The company
expects to complete the shutdown process by the end of the first
quarter of 2014.
Guidance
For the 2014 full year, Outerwall management expects:
- Consolidated revenue between $2.358
billion and $2.498 billion;
- Core adjusted EBITDA from continuing operations between
$472 million and $517 million;
- Core diluted EPS from continuing operations between
$5.16 and $5.76 on a fully diluted
basis; and
- Free cash flow between $200 million and
$240 million.
For the 2014 first quarter, Outerwall management expects:
- Consolidated revenue between $570
million and $600 million;
- Core adjusted EBITDA from continuing operations between
$93 million and $108 million;
and
- Core diluted EPS from continuing operations between
$0.77 and $0.97 on a fully diluted
basis.
Additional Information
Outerwall has provided additional comments on guidance in
prepared remarks that also review the company's 2013 fourth quarter
and full year operating and financial results. The prepared remarks
and supplemental slides, as well as this press release, are posted
on the Investor Relations section of the corporate website at
ir.outerwall.com. The 2013 fourth quarter Segment Supplement, which
provides historical data in Excel format, is also posted on the
website.
Conference Call
CEO J. Scott Di Valerio and CFO
Galen C. Smith will host a
conference call today at 2:00 p.m.
PST (5:00 p.m. EST) to answer
questions related to the company's performance and guidance. The
conference call will be webcast live and archived on the Investor
Relations section of Outerwall's website at ir.outerwall.com. A
recording of the call will be available approximately two hours
after the call ends through February 20,
2014, at 1-888-843-7419 or 1-630-652-3042, passcode
3641 5281.
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 mission is to create a better everyday
by delivering 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 2014 first quarter and full
year results, as well as stock repurchases, including the announced
tender offer, bank loans, potential cost savings and tax benefits,
leadership transitions and timing and integration of such
leadership changes. 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,
- competition from other entertainment providers,
- individual personnel decisions,
- the ability to achieve the strategic and financial
objectives for our entry into new businesses, including ecoATM,
SAMPLEit and Redbox Instant™ by Verizon,
- our ability to complete the tender offer, the occurrence of
any conditions to completing the tender offer, and our decision to
waive the occurrence of any condition to completing the tender
offer,
- our ability to repurchase stock and the availability of an
open trading window,
- the achievement of anticipated cost savings and tax
benefits,
- results of our restructuring and cost initiatives, including
discontinuation of affected new ventures and workforce
reduction,
- 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,
- 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 and other
documents filed therewith. 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.
Important Information Regarding the Expected Tender
Offer
This press release is for informational purposes only and is
neither an offer to buy nor the solicitation of an offer to sell
any shares of Outerwall's common stock. The expected tender offer
described in this press release has not yet commenced, and there
can be no assurances that Outerwall will commence the tender offer
on the terms and conditions described in this press release or at
all. If Outerwall commences the tender offer, the tender offer will
be made solely by an Offer to Purchase, the Letter of Transmittal
and related materials, as they may be amended or supplemented.
Stockholders should read Outerwall's commencement tender offer
statement on Schedule TO expected to be filed with the SEC in
connection with the tender offer, which will include as exhibits
the Offer to Purchase, the Letter of Transmittal and related
materials, as well as any amendments or supplements to the Schedule
TO when they become available, because they will contain important
information. If Outerwall commences the tender offer, each of these
documents will be filed with the SEC, and, when available,
stockholders may obtain them for free from the SEC at its website
(www.sec.gov) or from the Company's information agent
in connection with the tender offer.
(Financial Statements Follow)
Appendix A
Use of 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; and
- Free cash flow.
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 are primarily nonrecurring events
or events we do not directly control. Our non-core adjustments
include i) restructuring costs associated with actions to reduce
costs in our continuing operations primarily through workforce
reductions across the Company, ii) acquisition costs primarily
related to the NCR Asset Acquisition and acquisition of ecoATM,
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, iv) income or loss from equity method
investments, which represents our share of income or loss from
entities we do not consolidate or control and the impact of the
gain on re-measurement of our previously held equity interest in
ecoATM upon acquisition, v) a gain on the grant of a license to use
certain Redbox trademarks to Redbox Instant™ by Verizon, vi)
benefits from release of indemnification reserves upon settlement
of the Sigue Note and vii) a tax benefit related to the recognition
of a worthless stock deduction in a corporate subsidiary ("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 non-recurring 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
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
Dollars in
thousands
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Net income from
continuing operations
|
$
|
42,876
|
|
|
$
|
25,535
|
|
|
$
|
208,091
|
|
|
$
|
160,452
|
|
Depreciation,
amortization and other
|
52,853
|
|
|
47,496
|
|
|
203,094
|
|
|
184,405
|
|
Interest expense,
net
|
6,848
|
|
|
4,615
|
|
|
32,801
|
|
|
15,648
|
|
Income
taxes
|
(289)
|
|
|
12,404
|
|
|
34,477
|
|
|
97,941
|
|
Share-based payments
expense(1)
|
5,377
|
|
|
6,218
|
|
|
16,831
|
|
|
19,362
|
|
Adjusted EBITDA from
continuing operations
|
107,665
|
|
|
96,268
|
|
|
495,294
|
|
|
477,808
|
|
Non-Core
Adjustments:
|
|
|
|
|
|
|
|
Restructuring
costs
|
4,495
|
|
|
—
|
|
|
4,495
|
|
|
—
|
|
Acquisition
costs
|
—
|
|
|
—
|
|
|
5,669
|
|
|
3,235
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
6,364
|
|
|
—
|
|
|
8,664
|
|
|
—
|
|
Loss from equity
method investments
|
21,352
|
|
|
9,278
|
|
|
48,448
|
|
|
24,684
|
|
Sigue indemnification
reserve releases
|
(2,542)
|
|
|
—
|
|
|
(2,542)
|
|
|
—
|
|
Gain on previously
held equity interest on ecoATM
|
—
|
|
|
—
|
|
|
(68,376)
|
|
|
—
|
|
Gain on formation of
Redbox Instant by Verizon
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,500)
|
|
Core adjusted EBITDA
from continuing operations
|
$
|
137,334
|
|
|
$
|
105,546
|
|
|
$
|
491,652
|
|
|
$
|
486,227
|
|
|
(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
Our non-GAAP financial measure core diluted EPS from continuing
operations is defined as diluted earnings per share from continuing
operations excluding Non-Core Adjustments, net of applicable
taxes.
A reconciliation of core diluted EPS from continuing operation
to diluted EPS from continuing operations, the most comparable GAAP
financial measure, is presented in the following table:
|
Three Months
Ended
|
|
Twelve Months
Ended
|
December
31,
|
December
31,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Diluted EPS from
continuing operations
|
$
|
1.55
|
|
|
$
|
0.83
|
|
|
$
|
7.33
|
|
|
$
|
4.99
|
|
Non-Core Adjustments,
net of tax:(1)
|
|
|
|
|
|
|
|
Restructuring
costs
|
0.10
|
|
|
—
|
|
|
0.10
|
|
|
—
|
|
Acquisition
costs
|
0.02
|
|
|
—
|
|
|
0.17
|
|
|
0.06
|
|
Rights to receive
cash issued in connection with the acquisition of ecoATM
|
0.20
|
|
|
—
|
|
|
0.25
|
|
|
—
|
|
Loss from equity
method investments
|
0.47
|
|
|
0.18
|
|
|
1.04
|
|
|
0.47
|
|
Sigue indemnification
reserve releases
|
(0.06)
|
|
|
—
|
|
|
(0.05)
|
|
|
—
|
|
Gain on previously
held equity interest on ecoATM
|
—
|
|
|
—
|
|
|
(2.33)
|
|
|
—
|
|
Gain on formation of
Redbox Instant by Verizon
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.37)
|
|
Tax benefit of
worthless stock deduction
|
(0.60)
|
|
|
|
—
|
|
|
(0.59)
|
|
|
—
|
|
Core diluted EPS from
continuing operations
|
$
|
1.68
|
|
|
$
|
1.01
|
|
|
$
|
5.92
|
|
|
$
|
5.15
|
|
|
(1) Non-Core
Adjustments are presented after-tax 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
|
|
Twelve Months
Ended
|
|
|
December
31,
|
|
December
31,
|
Dollars in
thousands
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Net cash provided by
operating activities
|
|
$
|
191,700
|
|
|
$
|
152,212
|
|
|
$
|
324,091
|
|
|
$
|
463,906
|
|
Purchase of property
and equipment
|
|
(49,053)
|
|
|
(74,873)
|
|
|
(157,669)
|
|
|
(208,054)
|
|
Free cash
flow
|
|
$
|
142,647
|
|
|
$
|
77,339
|
|
|
$
|
166,422
|
|
|
$
|
255,852
|
|
|
|
OUTERWALL
INC.
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Revenue
|
$
|
593,705
|
|
|
$
|
563,082
|
|
|
$
|
2,306,601
|
|
|
$
|
2,199,884
|
|
Expenses:
|
|
|
|
|
|
|
|
Direct
operating
|
400,459
|
|
|
402,580
|
|
|
1,575,277
|
|
|
1,498,819
|
|
Marketing
|
9,499
|
|
|
7,174
|
|
|
32,402
|
|
|
25,979
|
|
Research and
development
|
4,913
|
|
|
1,900
|
|
|
13,084
|
|
|
6,757
|
|
General and
administrative
|
52,990
|
|
|
51,957
|
|
|
221,776
|
|
|
204,519
|
|
Depreciation and
other
|
49,005
|
|
|
45,448
|
|
|
192,161
|
|
|
179,027
|
|
Amortization of
intangible assets
|
3,848
|
|
|
2,048
|
|
|
10,933
|
|
|
5,378
|
|
Total
expenses
|
520,714
|
|
|
511,107
|
|
|
2,045,633
|
|
|
1,920,479
|
|
Operating
income
|
72,991
|
|
|
51,975
|
|
|
260,968
|
|
|
279,405
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
Income (loss) from
equity method investments, net
|
(21,352)
|
|
|
(9,278)
|
|
|
19,928
|
|
|
(5,184)
|
|
Interest expense,
net
|
(6,848)
|
|
|
(4,615)
|
|
|
(32,801)
|
|
|
(15,648)
|
|
Other, net
|
(2,204)
|
|
|
(143)
|
|
|
(5,527)
|
|
|
(180)
|
|
Total other income
(expense), net
|
(30,404)
|
|
|
(14,036)
|
|
|
(18,400)
|
|
|
(21,012)
|
|
Income from
continuing operations before income taxes
|
42,587
|
|
|
37,939
|
|
|
242,568
|
|
|
258,393
|
|
Income tax benefit
(expense)
|
289
|
|
|
(12,404)
|
|
|
(34,477)
|
|
|
(97,941)
|
|
Income from
continuing operations
|
42,876
|
|
|
25,535
|
|
|
208,091
|
|
|
160,452
|
|
Loss from
discontinued operations, net of tax
|
(20,201)
|
|
|
(2,650)
|
|
|
(33,299)
|
|
|
(10,222)
|
|
Net income
|
22,675
|
|
|
22,885
|
|
|
174,792
|
|
|
150,230
|
|
Foreign currency
translation adjustment
|
1,160
|
|
|
(294)
|
|
|
856
|
|
|
1,048
|
|
Comprehensive
income
|
$
|
23,835
|
|
|
$
|
22,591
|
|
|
$
|
175,648
|
|
|
$
|
151,278
|
|
Basic earnings (loss)
per share:
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
1.61
|
|
|
$
|
0.87
|
|
|
$
|
7.65
|
|
|
$
|
5.30
|
|
Discontinued
operations
|
(0.76)
|
|
|
(0.09)
|
|
|
(1.23)
|
|
|
(0.34)
|
|
Basic earnings per
share
|
$
|
0.85
|
|
|
$
|
0.78
|
|
|
$
|
6.42
|
|
|
$
|
4.96
|
|
Diluted earnings
(loss) per share
|
|
|
|
|
|
|
|
Continuing
operations
|
$
|
1.55
|
|
|
$
|
0.83
|
|
|
$
|
7.33
|
|
|
$
|
4.99
|
|
Discontinued
operations
|
(0.73)
|
|
|
(0.08)
|
|
|
(1.17)
|
|
|
(0.32)
|
|
Diluted earnings per
share
|
$
|
0.82
|
|
|
$
|
0.75
|
|
|
$
|
6.16
|
|
|
$
|
4.67
|
|
Weighted average
shares used in basic per share calculations
|
26,696
|
|
|
29,380
|
|
|
27,216
|
|
|
30,305
|
|
Weighted average
shares used in diluted per share calculations
|
27,598
|
|
|
30,619
|
|
|
28,381
|
|
|
32,174
|
|
|
|
OUTERWALL
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands,
except share data)
|
(unaudited)
|
|
|
|
December
31,
|
|
December
31,
|
|
|
2013
|
|
2012
|
Assets
|
|
|
|
(As
adjusted)
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
371,437
|
|
|
$
|
282,894
|
|
Accounts receivable,
net of allowances of $1,826 and $2,003
|
|
50,296
|
|
|
58,331
|
|
Content
library
|
|
199,868
|
|
|
177,409
|
|
Deferred income
taxes
|
|
11
|
|
|
7,187
|
|
Prepaid expenses and
other current assets
|
|
84,698
|
|
|
29,686
|
|
Total current
assets
|
|
706,310
|
|
|
555,507
|
|
Property and
equipment, net
|
|
520,865
|
|
|
586,124
|
|
Notes
receivable
|
|
—
|
|
|
26,731
|
|
Deferred income
taxes
|
|
6,443
|
|
|
1,373
|
|
Goodwill and other
intangible assets
|
|
638,690
|
|
|
344,063
|
|
Other long-term
assets
|
|
24,392
|
|
|
47,927
|
|
Total
assets
|
|
$
|
1,896,700
|
|
|
$
|
1,561,725
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
236,018
|
|
|
$
|
250,588
|
|
Accrued payable to
retailers
|
|
134,140
|
|
|
138,413
|
|
Other accrued
liabilities
|
|
134,127
|
|
|
146,125
|
|
Current callable
convertible debt
|
|
49,702
|
|
|
—
|
|
Current portion of
long-term debt and other
|
|
42,190
|
|
|
15,529
|
|
Current portion of
capital lease obligations
|
|
11,997
|
|
|
13,350
|
|
Deferred income
taxes
|
|
23,143
|
|
|
—
|
|
Total current
liabilities
|
|
631,317
|
|
|
564,005
|
|
Long-term debt and
other long-term liabilities
|
|
677,356
|
|
|
341,179
|
|
Capital lease
obligations
|
|
9,364
|
|
|
15,702
|
|
Deferred income
taxes
|
|
58,528
|
|
|
91,751
|
|
Total
liabilities
|
|
1,376,565
|
|
|
1,012,637
|
|
Commitments and
contingencies
|
|
|
|
|
Debt conversion
feature
|
|
1,446
|
|
|
—
|
|
Stockholders'
Equity:
|
|
|
|
|
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;
|
|
|
|
|
36,356,357 and
35,797,592 shares issued;
|
|
|
|
|
26,150,900 and
28,626,323 shares outstanding
|
|
482,481
|
|
|
504,881
|
|
Treasury
stock
|
|
(476,796)
|
|
|
(293,149)
|
|
Retained
earnings
|
|
513,771
|
|
|
338,979
|
|
Accumulated other
comprehensive loss
|
|
(767)
|
|
|
(1,623)
|
|
Total stockholders'
equity
|
|
518,689
|
|
|
549,088
|
|
Total liabilities and
stockholders' equity
|
|
$
|
1,896,700
|
|
|
$
|
1,561,725
|
|
|
|
OUTERWALL
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Operating
Activities:
|
|
|
|
|
|
|
|
Net income
|
$
|
22,675
|
|
|
$
|
22,885
|
|
|
$
|
174,792
|
|
|
$
|
150,230
|
|
Adjustments to
reconcile net income to net cash flows:
|
|
|
|
|
|
|
|
|
Depreciation and
other
|
44,265
|
|
|
45,568
|
|
|
193,700
|
|
|
179,147
|
|
Amortization of
intangible assets and deferred financing fees
|
4,494
|
|
|
2,579
|
|
|
13,461
|
|
|
7,504
|
|
Share-based payments
expense
|
5,377
|
|
|
6,218
|
|
|
16,831
|
|
|
19,362
|
|
Excess tax benefits
on share-based payments
|
(351)
|
|
|
(67)
|
|
|
(3,698)
|
|
|
(5,740)
|
|
Deferred income
taxes
|
1,165
|
|
|
14,383
|
|
|
(10,933)
|
|
|
87,573
|
|
Impairment
expense
|
32,732
|
|
|
—
|
|
|
32,732
|
|
|
—
|
|
(Income) loss from
equity method investments, net
|
21,352
|
|
|
9,278
|
|
|
(19,928)
|
|
|
5,184
|
|
Non-cash interest on
convertible debt
|
543
|
|
|
1,839
|
|
|
3,866
|
|
|
7,109
|
|
Loss from
extinguishments of callable convertible debt
|
63
|
|
|
—
|
|
|
6,013
|
|
|
—
|
|
Other
|
(3,059)
|
|
|
7
|
|
|
(2,039)
|
|
|
(4,100)
|
|
Cash flows from
changes in operating assets and liabilities
|
62,444
|
|
|
49,522
|
|
|
(80,706)
|
|
|
17,637
|
|
Net cash flows
from operating activities
|
191,700
|
|
|
152,212
|
|
|
324,091
|
|
|
463,906
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
Acquisition of
ecoATM, net of cash acquired
|
—
|
|
|
—
|
|
|
(244,036)
|
|
|
—
|
|
Purchases of property
and equipment
|
(49,053)
|
|
|
(74,873)
|
|
|
(157,669)
|
|
|
(208,054)
|
|
Proceeds from sale of
property and equipment
|
456
|
|
|
312
|
|
|
13,344
|
|
|
1,131
|
|
Receipt of note
receivable principal
|
22,818
|
|
|
—
|
|
|
22,913
|
|
|
—
|
|
Acquisition of NCR
DVD kiosk business
|
—
|
|
|
—
|
|
|
—
|
|
|
(100,000)
|
|
Cash paid for equity
investments
|
—
|
|
|
—
|
|
(28,000)
|
|
|
(39,727)
|
|
Net cash flows
from investing activities
|
(25,779)
|
|
|
(74,561)
|
|
|
(393,448)
|
|
|
(346,650)
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
Proceeds from
issuance of senior unsecured notes
|
—
|
|
|
—
|
|
343,769
|
|
|
—
|
|
Proceeds from new
borrowing of Credit Facility
|
250,000
|
|
|
—
|
|
|
400,000
|
|
|
—
|
|
Principal payments on
Credit Facility
|
(154,375)
|
|
|
(3,270)
|
|
|
(215,313)
|
|
|
(10,938)
|
|
Financing costs
associated with Credit Facility and senior unsecured
notes
|
(1,759)
|
|
|
—
|
|
|
(2,203)
|
|
|
—
|
|
Repurchase of
convertible debt
|
(2,547)
|
|
|
(20,575)
|
|
|
(172,211)
|
|
|
(20,575)
|
|
Repurchases of common
stock
|
(100,000)
|
|
|
(76,654)
|
|
|
(195,004)
|
|
|
(139,724)
|
|
Principal payments on
capital lease obligations and other debt
|
(4,010)
|
|
|
(3,190)
|
|
|
(14,834)
|
|
|
(16,392)
|
|
Excess tax benefits
related to share-based payments
|
351
|
|
|
67
|
|
|
3,698
|
|
|
5,740
|
|
Proceeds from
exercise of stock options, net
|
697
|
|
|
558
|
|
|
8,460
|
|
|
4,592
|
|
Net cash flows
from financing activities
|
(11,643)
|
|
|
(103,064)
|
|
|
156,362
|
|
|
(177,297)
|
|
Effect of exchange
rate changes on cash
|
1,929
|
|
|
(151)
|
|
|
1,538
|
|
|
1,080
|
|
Increase
(decrease) in cash and cash equivalents
|
156,207
|
|
|
(25,564)
|
|
|
88,543
|
|
|
(58,961)
|
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
Beginning of
period
|
215,230
|
|
|
308,458
|
|
|
282,894
|
|
|
341,855
|
|
End of
period
|
$
|
371,437
|
|
|
$
|
282,894
|
|
|
$
|
371,437
|
|
|
$
|
282,894
|
|
OUTERWALL INC.
BUSINESS SEGMENT
INFORMATION
(in thousands)
(unaudited)
As a complement to our consolidated Statements of Comprehensive
Income, we are providing the following information related to our
business segments, which includes segment operating income
(loss).
We manage our business by evaluating the financial results of
our segments, focusing primarily on segment revenue and segment
operating income before depreciation, amortization and other and
share-based compensation granted to executives, non-employee
directors and employees ("segment operating income"). Segment
operating income contains internally allocated costs of our shared
services support functions, including but not limited to, corporate
executive management, business development, sales, customer
service, finance, legal, human resources, information technology,
and risk management. We also review depreciation and amortization
allocated to each segment.
We utilize segment revenue and segment operating income because
we believe they provide useful information for effectively
allocating resources among business segments, evaluating the health
of our business segments based on metrics that management can
actively influence, and gauging our investments and our ability to
service, incur or pay down debt or return capital to shareholders
such as through share repurchases.
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
December
31,
|
Dollars in
thousands
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Revenue:
|
|
|
|
|
|
|
|
|
Redbox
|
|
$
|
496,399
|
|
|
$
|
488,325
|
|
|
$
|
1,974,531
|
|
|
$
|
1,908,773
|
|
Coinstar
|
|
80,698
|
|
|
74,464
|
|
|
300,218
|
|
|
290,761
|
|
New
Ventures
|
|
16,608
|
|
|
293
|
|
|
31,852
|
|
|
350
|
|
Consolidated
revenue
|
|
$
|
593,705
|
|
|
$
|
563,082
|
|
|
$
|
2,306,601
|
|
|
$
|
2,199,884
|
|
|
|
Reconciliation of
segment operating income to GAAP operating income:
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
December
31,
|
Dollars in
thousands
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Segment operating
income (loss)(1)
|
|
|
|
|
|
|
|
|
Redbox(2)
|
|
$
|
111,347
|
|
|
$
|
80,012
|
|
|
$
|
401,680
|
|
|
$
|
386,753
|
|
Coinstar
|
|
30,817
|
|
|
26,300
|
|
|
102,506
|
|
|
99,261
|
|
New
Ventures
|
|
(7,424)
|
|
|
(3,143)
|
|
|
(19,390)
|
|
|
(8,957)
|
|
Subtotal
|
|
134,740
|
|
|
103,169
|
|
|
484,796
|
|
|
477,057
|
|
Depreciation,
amortization and other:
|
|
|
|
|
|
|
|
|
Redbox
|
|
40,418
|
|
|
38,812
|
|
|
162,637
|
|
|
148,068
|
|
Coinstar
|
|
8,428
|
|
|
8,520
|
|
|
33,921
|
|
|
36,108
|
|
New
Ventures
|
|
4,007
|
|
|
164
|
|
|
6,536
|
|
|
229
|
|
Total depreciation,
amortization and other
|
|
52,853
|
|
|
47,496
|
|
|
203,094
|
|
|
184,405
|
|
Share-based
compensation and rights to receive cash expense
|
|
8,896
|
|
|
3,698
|
|
|
20,734
|
|
|
13,247
|
|
Operating income
(loss):
|
|
|
|
|
|
|
|
|
Redbox
|
|
70,929
|
|
|
41,200
|
|
|
239,043
|
|
|
238,685
|
|
Coinstar
|
|
22,389
|
|
|
17,780
|
|
|
68,585
|
|
|
63,153
|
|
New
Ventures
|
|
(11,431)
|
|
|
(3,307)
|
|
|
(25,926)
|
|
|
(9,186)
|
|
Share-based
compensation and rights to receive cash expense
|
|
(8,896)
|
|
|
(3,698)
|
|
|
(20,734)
|
|
|
(13,247)
|
|
Total operating
income
|
|
$
|
72,991
|
|
|
$
|
51,975
|
|
|
$
|
260,968
|
|
|
$
|
279,405
|
|
|
|
|
|
|
|
|
|
|
(1) Operating income
(loss) before depreciation, amortization and other, and share-based
compensation and rights to receive cash expense.
|
(2) Share-based
payments expense related to our content arrangements have been
allocated to our Redbox segment.
|
SOURCE Outerwall Inc.