Coinstar Announces Second Quarter Results

Coinstar, Inc. (NASDAQ:CSTR) today announced results for the three-month and six-month periods ended June 30, 2006.

Highlights for the second quarter ended June 30, 2006, were as follows:

-- Revenue -- $130.3 million

-- EBITDA -- $25.6 million (see Appendix A)

-- Free cash flow -- $14.2 million (see Appendix A)

-- Adjusted earnings per fully taxed, fully diluted share of $0.22 (see reconciliation below)

-- Net income of $4.1 million

Highlights for the six months ended June 30, 2006, were as follows:

-- Revenue -- $256.4 million

-- EBITDA -- $50.7 million (see Appendix A)

-- Free cash flow -- $29.8 million (see Appendix A)

-- Adjusted earnings per fully taxed, fully diluted share of $0.44 (see reconciliation below)

-- Net income of $8.3 million

Included in GAAP net income for the second quarter were certain non-cash charges including $1.5 million in amortization of intangible assets, $1.5 million in non-cash stock based compensation and non-cash losses in investments in DVD kiosk companies and amortization of financing fees totaling $0.5 million. Excluding these items, net of taxes, Coinstar, Inc. reported adjusted net income of $6.1 million. A reconciliation of GAAP earnings per share to adjusted earnings per share is as follows:

                                                               Quarter
                                                                ended
                                                               6/30/06
                                                               -------
GAAP fully taxed, fully diluted earnings per share              $0.15
   Amortization of intangibles, net of tax                       0.03
   Stock-based compensation, net of tax                          0.03
   Non-cash losses in investments in DVD kiosk companies
    and amortization of financing fees, net of tax               0.01
                                                                 -----
Adjusted fully taxed, fully diluted earnings per share          $0.22
                                                                 =====

Included in GAAP net income for the first half of 2006 were certain non-cash charges including $2.8 million in amortization of intangible assets, $0.6 million in amortization of financing fees, $2.9 million in non-cash stock based compensation, and our portion of the non-cash losses associated with our investments in DVD kiosk companies totaling $0.6 million. Excluding these items, net of taxes, Coinstar, Inc. reported adjusted net income of $12.2 million. A reconciliation of GAAP earnings per share to adjusted earnings per share is as follows:

                                                            Six Months
                                                               ended
                                                              6/30/06
                                                            ----------
GAAP fully taxed, fully diluted earnings per share          $    0.30
   Amortization of intangibles, net of tax                       0.06
   Stock based compensation expense, net of tax                  0.06
   Non-cash losses in investments in DVD kiosk
    companies and amortization of financing fees, net
    of tax                                                       0.02
                                                            ----------
Adjusted fully taxed, fully diluted earnings per
 share                                                      $    0.44
                                                            ==========

At June 30, 2006, Coinstar, Inc. had approximately $87.7 million in cumulative net operating loss carryforwards. Although Coinstar recorded $3.1 million in tax expense for the second quarter, cash paid for taxes during the three-month period ended June 30, 2006, totaled only $857,000 as a result of these net operating loss carryforwards.

"We are pleased with our second quarter results, particularly our ability to generate solid financial performance while continuing to integrate our recently acquired businesses. We are making measurable strides in this regard and expect continued success in the form of new retail customer relationships, increased sales penetration with existing retail accounts, and margin expansion as we leverage our infrastructure," Dave Cole, Chief Executive Officer of Coinstar, Inc. stated. "Beyond the current period, the underlying trend in the business is overwhelmingly positive with regard to the 4th Wall strategy. In fact, we are seeing many of our retail customers embrace more than one Coinstar product, and in the process, materially increasing their square foot profitability. This value proposition should drive our longer term performance and create significant value for our shareholders."

Other Information
                                                    Quarter   Quarter
                                                     ended     ended
                                                    6/30/06   6/30/05
                                                   --------- ---------
Cash paid for capital expenditures (in thousands)  $  8,447  $ 11,176

Installed Base
  Coin                                               13,100    12,400
    - Coin to card or e-certificate enabled           6,700     1,300
    - E-payment enabled                               3,800     3,500
  Crane                                              31,000    21,000
  Bulk heads and other                              267,000   154,500
  POSA terminals                                     19,500    17,000

Share Repurchase

For the three months ended June 30, 2006, Coinstar repurchased 213,307 shares of common stock at an average price of $22.59 per share. The aggregate expenditure during the quarter totaled $4.8 million.

Year to date, Coinstar has repurchased 228,007 shares at an average price of $22.82. The aggregate expenditure for the year to date period totaled $5.2 million.

Third Quarter Expectations

Management estimates that revenue for the third quarter ending September 30, 2006, will range from $140 million to $150 million. Management estimates that for the third quarter ending September 30, 2006, GAAP earnings per fully diluted, fully taxed, share will range from $0.15 to $0.22 and adjusted fully diluted, fully taxed earnings per share will range from $0.22 to $0.29.

Conference Call

Coinstar, Inc. announced that a conference call to discuss the second quarter will be broadcast live over the Internet today, Thursday, July 27, 2006, at 4:30 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 and self-service DVD rental. The company's products and services can be found at more than 60,000 retail locations including supermarkets, drug stores, mass merchants, financial institutions, convenience stores and restaurants.

This press release contains forward-looking statements relating to Coinstar, Inc.'s anticipated growth and future operating results. These are forward-looking statements for purposes of the safe harbor provisions under 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 are not guarantees of future performance and actual results may vary materially from the results expressed or implied in such statements. Differences may result from actions taken by Coinstar, Inc., as well as from risks and uncertainties beyond Coinstar, Inc.'s control. Such risks and uncertainties include, but are not limited to, the effect of and financing of recent acquisitions, the ability to successfully integrate acquired businesses, the ability to bring new and repeat customers to Coinstar(R) machines, the ability to obtain new agreements with potential retailers for the installation of Coinstar machines and the retention of the current agreements with our existing retailers on terms that are not materially adverse to Coinstar, Inc., legal or governmental regulatory action and uncertainties relating to the ultimate success of new business initiatives. The foregoing list of risks and uncertainties is illustrative, but by no means exhaustive. For more information on factors that may affect future performance, please review "Risk Factors" described in Item 1A of Part II of our most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission. These forward-looking statements reflect Coinstar, Inc.'s expectations as of July 27, 2006. Coinstar, Inc. undertakes no obligation to update the information provided herein.

Appendix A

(in thousands unless otherwise noted)

Non GAAP measures

Non GAAP measures are provided as a complement to results provided in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Non GAAP measures are not a substitute for measures computed in accordance with GAAP. Definitions of such non GAAP measurements are provided below. These definitions are provided to allow the reader to reconcile non GAAP data to that presented in accordance with GAAP. Our non GAAP measures may be different from the presentation of financial information by other companies.

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

                                        Quarter ended Six Months ended
                                          06/30/06        06/30/06
                                        ------------- ----------------
Net income                              $      4,119    $       8,298
Depreciation, amortization and other          14,805           28,991
Interest expense, net                          3,594            6,945
Early retirement of debt                          --              238
Income taxes                                   3,111            6,240
                                         ------------    -------------
EBITDA                                  $     25,629    $      50,712
                                         ============    =============

Free cash flow: we believe free cash flow is an important non GAAP measure as it provides useful cash flow information regarding our ability to service, incur or pay down indebtedness and repurchase our common stock. We use free cash flow as a measure to reflect cash available to service our debt as well as to fund our discretionary and non-discretionary expenditures. Free cash flow may be reconciled from net cash provided by operating activities, the most directly comparable GAAP measure, as follows:

                                       Quarter ended Six Months ended
                                         06/30/06        06/30/06
                                       ------------- -----------------
Net cash provided by operating
 activities                            $     38,707    $       43,406
Changes in operating assets and
 liabilities,
 net of acquisitions                        (16,033)            2,258
Cash paid for capital expenditures           (8,447)          (15,864)
                                        ------------    --------------
FREE CASH FLOW                         $     14,227    $       29,800
                                        ============    ==============

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

                            Coinstar, Inc.
                 Consolidated Statements of Operations
                 (in thousands, except per share data)
                              (unaudited)

                                Three months ended   Six months ended
                               ---------------------------------------
                                June 30,  June 30,  June 30,  June 30,
                                  2006      2005      2006      2005
                                --------  --------- --------  --------
REVENUE                        $130,327  $109,840  $256,359  $215,425
EXPENSES:
 Direct operating                86,437    74,389   172,736   147,269
 Marketing                        3,389     1,975     4,313     2,932
 Research and development         1,393     1,516     2,634     2,825
 General and administrative      13,811     8,687    26,577    17,279
 Depreciation and other          13,295    10,958    26,154    21,764
 Amortization of intangible
  assets                          1,510     1,104     2,837     2,135
                                --------  --------- --------  --------
 Income from operations          10,492    11,211    21,108    21,221

OTHER INCOME (EXPENSE):
 Interest income and other,
  net                               420       379       891       705
 Interest expense                (3,986)   (3,100)   (7,718)   (5,950)
 Income from equity
  investments                       304       153       495       315
 Early retirement of debt            --        --      (238)       --
                                --------  --------- --------  --------
 Income before income taxes       7,230     8,643    14,538    16,291
 Income taxes                    (3,111)   (3,378)   (6,240)   (6,358)
                                --------  --------- --------  --------
NET INCOME                     $  4,119  $  5,265  $  8,298  $  9,933
                                ========  ========= ========  ========
NET INCOME PER SHARE:
 Basic                         $   0.15  $   0.21  $   0.30  $   0.39
 Diluted                       $   0.15  $   0.21  $   0.30  $   0.39

WEIGHTED SHARES OUTSTANDING:
 Basic                           27,754    25,354    27,735    25,313
 Diluted                         28,034    25,561    28,011    25,613

CASH PAID FOR CAPITAL
 EXPENDITURES                  $  8,447  $ 11,176  $ 15,864  $ 24,985


                            Coinstar, Inc.
            Non GAAP Consolidated Statements of Operations
              Excluding Stock Based Compensation Expense(a)
                 (in thousands, except per share data)
                              (unaudited)

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

                        
                        Three months ended June 30, 2006
                        --------------------------------- Three months
                                  Stock Based                 ended
                          GAAP     Compensation Pro Forma    June 30,
                         Results    Expense(a)   Results       2005
                        --------- ------------- --------- ------------
REVENUE                 $130,327  $             $130,327   $  109,840
EXPENSES:
 Direct operating         86,437         (264)    86,173       74,389
 Marketing                 3,389          (35)     3,354        1,975
 Research and
  development              1,393          (85)     1,308        1,516
 General and
  administrative          13,811         (871)    12,940        8,687
 Depreciation and other   13,295                  13,295       10,958
 Amortization of
  intangible assets        1,510                   1,510        1,104
                         -------- ------------  --------   ----------
 Income from operations   10,492        1,255     11,747       11,211

OTHER INCOME (EXPENSE):
 Interest income and
  other, net                 420                    420          379
 Interest expense         (3,986)                (3,986)      (3,100)
 Income from equity
  investments                304                    304          153
 Early retirement of
  debt                        --                     --           --
                         -------- ------------  --------   ----------
 Income before income
  taxes                    7,230        1,255      8,485        8,643
 Income taxes             (3,111)        (282)    (3,393)      (3,378)
                         --------  ------------  --------   ----------
NET INCOME              $  4,119  $       973   $  5,092   $    5,265
                         ========  ============  ========   ==========

 NET INCOME PER SHARE:
    Basic               $   0.15               $   0.18   $     0.21
    Diluted             $   0.15               $   0.18   $     0.21

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

                            Coinstar, Inc.
                      Consolidated Balance Sheets
                            (in thousands)
                              (unaudited)
                                                   June 30,  Dec. 31,
                                                      2006      2005
                                                   -------------------
CURRENT ASSETS:
  Cash and cash equivalents                        $ 23,700  $ 45,365
  Cash in machine or in transit                      61,567    60,070
  Cash being processed                               65,747    69,832
  Trade accounts receivable, net of allowance for
   doubtful accounts of $962 and $469 at June 30,
   2006 and December 31, 2005, respectively          14,947     9,046
  Inventory                                          35,019    31,234
  Deferred income taxes                              16,441    17,330
  Prepaid expenses and other current assets           9,222    11,020
                                                    --------- --------
    Total current assets                            226,643   243,897

PROPERTY AND EQUIPMENT, NET                         153,832   148,811
DEFERRED INCOME TAXES                                   496     5,385
OTHER ASSETS                                          5,069     5,392
EQUITY INVESTMENTS                                   19,727    19,966
INTANGIBLE ASSETS, NET                               46,110    40,139
GOODWILL                                            204,582   179,811
                                                    --------- --------
TOTAL ASSETS                                       $656,459  $643,401
                                                    ========= ========

      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                 $ 44,310  $ 34,760
  Accrued liabilities payable to retailers           73,048    77,175
  Other accrued liabilities                          30,554    26,941
  Current portion of long-term debt and capital
   lease obligations                                  7,749     3,850
                                                    --------- --------
    Total current liabilities                       155,661   142,726
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS        194,542   206,628
DEFERRED TAX LIABILITY - NON-CURRENT                  2,927        --
                                                    --------- --------
    Total liabilities                               353,130   349,354

STOCKHOLDERS' EQUITY:
  Common stock                                      334,456   328,951
  Accumulated deficit                                (4,860)  (13,158)
  Treasury stock                                    (27,986)  (22,783)
  Accumulated other comprehensive income              1,719     1,037
                                                    --------- --------
    Total stockholders' equity                      303,329   294,047
                                                    --------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $656,459  $643,401
                                                    ========= ========

Related Stocks:
Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here