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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 
For The Quarter Ended September 30, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 
Commission File Number: 000-22555
 
 
COINSTAR, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
     
94-3156448
(State or other jurisdiction of incorporation or organization)
     
(IRS Employer Identification No.)
 
1800 114th Avenue SE, Bellevue, Washington
   
98004
(Address of principal executive offices)
   
(Zip Code)
 
(425) 943-8000
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x  No  ¨
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Class
     
Outstanding at October 31, 2002
Common Stock, $0.001 par value
     
22,023,823
 

Table of Contents
 
COINSTAR, INC.
 
FORM 10-Q
Index
 
PART I. FINANCIAL INFORMATION
Item 1.
   
Consolidated Financial Statements:
     
       
Page 3
       
Page 4
       
Page 5
       
Page 6
       
Page 7
Item 2.
      
Page 11
Item 3.
      
Page 23
Item 4.
      
Page 23
PART II. OTHER INFORMATION
Item 4.
      
Page 24
Item 6.
      
Page 24
  
Page 25
  
Page 26

Table of Contents
 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Consolidated Financial Statements
 
COINSTAR, INC.
 
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
    
September 30,
2002
     
December 31,
2001
  
    
(unaudited)
         
ASSETS
                  
CURRENT ASSETS:
                  
Cash and cash equivalents
   
$
44,563
 
   
$
52,267
 
Cash due to retailers
   
 
56,077
 
   
 
53,668
 
Prepaid expenses and other current assets
   
 
2,474
 
   
 
1,978
 
    
  
Total current assets
   
 
103,114
 
   
 
107,913
 
PROPERTY AND EQUIPMENT:
                  
Coinstar units
   
 
151,003
 
   
 
137,308
 
Computers
   
 
8,861
 
   
 
7,751
 
Office furniture and equipment
   
 
1,287
 
   
 
1,490
 
Leased vehicles
   
 
4,358
 
   
 
4,183
 
Leasehold improvements
   
 
684
 
   
 
572
 
    
  
    
 
166,193
 
   
 
151,304
 
Accumulated depreciation
   
 
(105,987
)
   
 
(89,215
)
    
  
    
 
60,206
 
   
 
62,089
 
OTHER ASSETS
   
 
1,144
 
   
 
1,185
 
    
  
TOTAL
   
$
164,464
 
   
$
171,187
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
CURRENT LIABILITIES:
                  
Accounts payable
   
$
5,554
 
   
$
5,810
 
Accrued liabilities payable to retailers
   
 
56,077
 
   
 
53,668
 
Accrued liabilities
   
 
9,003
 
   
 
11,839
 
Current portion of long-term debt and capital lease obligations
   
 
13,769
 
   
 
898
 
    
  
Total current liabilities
   
 
84,403
 
   
 
72,215
 
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
   
 
25,413
 
   
 
61,745
 
    
  
Total liabilities
   
 
109,816
 
   
 
133,960
 
STOCKHOLDERS’ EQUITY:
                  
Convertible preferred stock, $0.001 par value—Authorized, 5,000,000 shares; no shares issued and outstanding
   
 
—  
 
   
 
—  
 
Common stock, $0.001 par value—Authorized, 45,000,000 shares; issued and outstanding, 22,017,531 and 21,403,656 shares at September 30, 2002 and December 31, 2001, respectively
   
 
178,968
 
   
 
171,059
 
Accumulated other comprehensive income
   
 
438
 
   
 
34
 
Accumulated deficit
   
 
(124,758
)
   
 
(133,866
)
    
  
Total stockholders’ equity
   
 
54,648
 
   
 
37,227
 
    
  
TOTAL
   
$
164,464
 
   
$
171,187
 
    
  
 
See notes to consolidated financial statements.

3

Table of Contents
COINSTAR, INC.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
    
Nine Month Periods Ended September 30,
     
Three Month Periods Ended September 30,
  
    
2002
     
2001
     
2002
     
2001
  
REVENUE
   
$
114,024
 
   
$
93,621
 
   
$
42,941
 
   
$
35,176
 
EXPENSES:
                                    
Direct operating
   
 
49,778
 
   
 
42,343
 
   
 
18,141
 
   
 
15,667
 
Regional sales and marketing
   
 
6,034
 
   
 
6,047
 
   
 
2,711
 
   
 
3,176
 
Product research and development
   
 
3,748
 
   
 
3,094
 
   
 
1,170
 
   
 
1,108
 
Selling, general and administrative
   
 
16,630
 
   
 
16,314
 
   
 
5,284
 
   
 
5,400
 
Depreciation and amortization.
   
 
19,382
 
   
 
19,640
 
   
 
6,409
 
   
 
6,394
 
    
  
  
  
Income from operations.
   
 
18,452
 
   
 
6,183
 
   
 
9,226
 
   
 
3,431
 
OTHER INCOME (EXPENSE):
                                    
Interest income
   
 
266
 
   
 
598
 
   
 
86
 
   
 
215
 
Interest expense
   
 
(3,253
)
   
 
(6,237
)
   
 
(535
)
   
 
(2,078
)
Other
   
 
(49
)
   
 
5
 
   
 
(19
)
   
 
1
 
    
  
  
  
Income from continuing operations
   
 
15,416
 
   
 
549
 
   
 
8,758
 
   
 
1,569
 
DISCONTINUED OPERATIONS:
                                    
Loss from discontinued operations
   
 
—  
 
   
 
(5,737
)
   
 
—  
 
   
 
—  
 
Loss on disposal of discontinued operations
   
 
—  
 
   
 
(3,552
)
   
 
—  
 
   
 
—  
 
    
  
  
  
Net loss from discontinued operations
   
 
—  
 
   
 
(9,289
)
   
 
—  
 
   
 
—  
 
    
  
  
  
Income (loss) before extraordinary item
   
 
15,416
 
   
 
(8,740
)
   
 
8,758
 
   
 
1,569
 
EXTRAORDINARY ITEM:
                                    
Loss related to early retirement of debt
   
 
(6,308
)
   
 
—  
 
   
 
—  
 
   
 
—  
 
    
  
  
  
NET INCOME (LOSS)
   
$
9,108
 
   
$
(8,740
)
   
$
8,758
 
   
$
1,569
 
    
  
  
  
NET INCOME (LOSS) PER SHARE:
                                    
Basic:
                                    
Continuing operations
   
$
0.71
 
   
$
0.03
 
   
$
0.40
 
   
$
0.07
 
Discontinued operations
   
 
—  
 
   
 
(0.45
)
   
 
—  
 
   
 
—  
 
Extraordinary item
   
 
(0.29
)
   
 
—  
 
   
 
—  
 
   
 
—  
 
    
  
  
  
Net income (loss) per share
   
$
0.42
 
   
$
(0.42
)
   
$
0.40
 
   
$
0.07
 
    
  
  
  
Diluted:
                                    
Continuing operations
   
$
0.68
 
   
$
0.03
 
   
$
0.38
 
   
$
0.07
 
Discontinued operations
   
 
—  
 
   
 
(0.43
)
   
 
—  
 
   
 
—  
 
Extraordinary item
   
 
(0.28
)
   
 
—  
 
   
 
—  
 
   
 
—  
 
    
  
  
  
Net income (loss) per share
   
$
0.40
 
   
$
(0.40
)
   
$
0.38
 
   
$
0.07