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, 2004
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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 15, 2004 | |
| Common Stock, $0.001 par value | 21,571,414 |
FORM 10-Q
Index
| PART I. FINANCIAL INFORMATION |
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| Item 1. | Consolidated Financial Statements: | |||||
| Consolidated Balance Sheets as of September 30, 2004 (unaudited) and December 31, 2003 |
Page 3 | |||||
| Page 4 | ||||||
| Page 5 | ||||||
| Page 6 | ||||||
| Page 7 | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | Page 15 | ||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | Page 32 | ||||
| Item 4. | Controls and Procedures | Page 33 | ||||
| PART II. OTHER INFORMATION |
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| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | Page 33 | ||||
| Item 6. | Exhibits | Page 33 | ||||
| Page 34 | ||||||
Item 1. Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 45,584 | $ | 38,882 | ||||
| Cash being processed |
53,784 | 60,782 | ||||||
| Trade accounts receivable, net of allowance for doubtful accounts of $369 |
3,045 | — | ||||||
| Inventory |
23,151 | — | ||||||
| Deferred income taxes |
11,091 | 10,161 | ||||||
| Prepaid expenses and other current assets |
11,248 | 3,043 | ||||||
| Total current assets |
147,903 | 112,868 | ||||||
| PROPERTY AND EQUIPMENT, NET |
127,908 | 60,770 | ||||||
| DEFERRED INCOME TAXES |
22,552 | 28,665 | ||||||
| OTHER ASSETS |
5,955 | 699 | ||||||
| INTANGIBLE ASSETS, net of accumulated amortization of $1,159 in 2004 and $138 in 2003 |
34,926 | 618 | ||||||
| GOODWILL |
136,996 | 454 | ||||||
| TOTAL ASSETS |
$ | 476,240 | $ | 204,074 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 16,178 | $ | 2,128 | ||||
| Accrued liabilities payable to retailers |
53,035 | 60,782 | ||||||
| Other accrued liabilities |
19,431 | 9,513 | ||||||
| Current portion of long-term debt and capital lease obligations |
3,662 | 14,188 | ||||||
| Total current liabilities |
92,306 | 86,611 | ||||||
| LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS |
248,693 | 3,273 | ||||||
| Total liabilities |
340,999 | 89,884 | ||||||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Preferred stock, $0.001 par value—Authorized, 5,000,000 shares; no shares issued and outstanding in 2004 or 2003 |
— | — | ||||||
| Common stock, $0.001 par value—Authorized, 45,000,000 shares; 22,785,878 and 22,461,525 shares issued and 21,552,664 and 21,228,311 shares outstanding at September 30, 2004 and December 31, 2003, respectively |
196,521 | 191,370 | ||||||
| Accumulated deficit |
(39,981 | ) | (55,798 | ) | ||||
| Treasury stock |
(22,783 | ) | (22,783 | ) | ||||
| Accumulated other comprehensive income |
1,484 | 1,401 | ||||||
| Total stockholders’ equity |
135,241 | 114,190 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 476,240 | $ | 204,074 | ||||
See notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Nine Month Periods Ended September 30, |
Three Month Periods Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| REVENUE |
$ | 197,307 | $ | 129,770 | $ | 106,430 | $ | 48,671 | ||||||||
| EXPENSES: |
||||||||||||||||
| Direct operating |
113,248 | 57,683 | 69,937 | 20,870 | ||||||||||||
| Sales and marketing |
8,358 | 7,954 | 3,642 | 3,440 | ||||||||||||
| Research and development |
4,407 | 4,383 | 1,410 | 1,566 | ||||||||||||
| General and administrative |
18,052 | 14,966 | 8,098 | 4,783 | ||||||||||||
| Depreciation and other |
25,186 | 19,761 | 9,821 | 6,764 | ||||||||||||
| Amortization of intangible assets |
1,021 | 101 | 884 | 38 | ||||||||||||
| Income from operations |
27,035 | 24,922 | 12,638 | 11,210 | ||||||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Interest income and other, net |
320 | 222 | 190 | 38 | ||||||||||||
| Interest expense |
(3,165 | ) | (994 | ) | (2,793 | ) | (300 | ) | ||||||||
| Income before income taxes |
24,190 | 24,150 | 10,035 | 10,948 | ||||||||||||
| Income taxes |
(8,373 | ) | (9,025 | ) | (3,386 | ) | (4,014 | ) | ||||||||
| NET INCOME |
$ | 15,817 | $ | 15,125 | $ | 6,649 | $ | 6,934 | ||||||||
| NET INCOME PER SHARE: |
||||||||||||||||
| Basic |
$ | 0.74 | $ | 0.70 | $ | 0.31 | $ | 0.32 | ||||||||
| Diluted |
$ | 0.73 | $ | 0.69 | $ | 0.30 | $ | 0.32 | ||||||||
| WEIGHTED SHARES OUTSTANDING: |
||||||||||||||||
| Basic |
21,381 | 21,565 | 21,491 | 21,389 | ||||||||||||
| Diluted |
21,650 | 21,889 | 21,818 | 21,580 | ||||||||||||
See notes to consolidated financial statements.
4
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Nine Month Period Ended September 30, 2004
(in thousands, except share data)
(unaudited)
| Common Stock |
Accumulated Deficit |
Treasury Stock |
Accumulated Other Comprehensive Income |
Total |
Comprehensive Income |
||||||||||||||||||||
| Shares |
Amount |
||||||||||||||||||||||||
| BALANCE, January 1, 2004 |
21,228,311 | $ | 191,370 | $ | (55,798 | ) | $ | (22,783 | ) | $ | 1,401 | $ | 114,190 | ||||||||||||
| Issuance of shares under employee stock purchase plan |
66,126 | 770 | 770 | ||||||||||||||||||||||
| Exercise of stock options |
251,515 | 3,074 | 3,074 | ||||||||||||||||||||||
| Stock-based compensation expense |
3,145 | 29 | 29 | ||||||||||||||||||||||
| Warrants issued in connection with acquisition |
595 | 595 | |||||||||||||||||||||||
| Net exercise of common stock warrants |
3,567 | ||||||||||||||||||||||||
| Tax benefit on options and employee stock purchase plan |
683 | 683 | |||||||||||||||||||||||
| Comprehensive income: |
|||||||||||||||||||||||||
| Net income |
15,817 | 15,817 | $ | 15,817 | |||||||||||||||||||||
| Other comprehensive income: |
|||||||||||||||||||||||||
| Short-term investments, net of tax expense of $3 |
4 | 4 | 4 | ||||||||||||||||||||||
| Foreign currency translation adjustments, net of tax benefit of $3 |
(6 | ) | (6 | ) | (6 | ) | |||||||||||||||||||
| Interest rate hedges on long-term debt, net of tax expense of $52 |
85 | 85 | 85 | ||||||||||||||||||||||
| Total comprehensive income |
$ | 15,900 | |||||||||||||||||||||||
| BALANCE, September 30, 2004 |
21,552,664 | $ | 196,521 | $ | (39,981 | ) | $ | (22,783 | ) | $ | 1,484 | $ | 135,241 | ||||||||||||
See notes to consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine Month Periods Ended September 30, |
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| 2004 |
2003 |
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| OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 15,817 | $ | 15,125 | ||||
| Adjustments to reconcile income to net cash provided by operating activities: |
||||||||
| Depreciation and other |
25,186 | 19,761 | ||||||