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Redbox revs drive 42% rise in Coinstar 3Q results

October 28, 2010

Coinstar Inc. late yesterday reported third quarter revenues of $382 million, a rise of 42 percent from the same period a year ago, driven primarily by growth in DVD revenue, which increased 54 percent to $306 million, and by coin revenue which grew 7.3 percent to $74.7 million.

Income from operations for the third quarter of 2010 was $46.2 million, which resulted in an operating margin of 12 percent, including $1.4 million in share-based payments expense related to the company's agreements with Sony Pictures Home Entertainment (Sony) and Paramount Home Entertainment Inc. This compares with income from operations of $28.7 million and an operating margin of 10.7 percent in the third quarter of 2009 that included $1.1 million in share-based payments expense related to the Sony agreement.

Income from continuing operations for the third quarter of 2010 was $21.4 million, or diluted earnings per share of $0.66, compared with $11.6 million, or $0.38, in the third quarter of 2009.

Coinstar recorded a loss from discontinued operations of $1.9 million, net of tax, or a loss of $0.06 per share, in the third quarter. Coinstar agreed to sell its Money Transfer business to Sigue Corporation in the third quarter and all prior periods have been adjusted to reflect discontinued operations.

Net income attributable to Coinstar Inc. for the third quarter of 2010, which includes both continuing and discontinued operations, was $19.5 million, or diluted earnings per share of $0.60. This compares with $41.4 million, or diluted earnings per share of $1.34, in the third quarter of 2009, which included a pre-tax loss on disposal of $49.8 million and a one-time tax benefit of $82.2 million related to the sale of Coinstar's entertainment services business.

Revenue for the first nine months of 2010 was $1.05 billion, an increase of 42 percent compared with the first nine months of 2009. Income from operations for the first nine months of 2010 was $100 million, which resulted in an operating margin of 9.6 percent, compared with income from operations of $75 million and an operating margin of 10 percent in the first nine months of 2009. Net income attributable to Coinstar for the first nine months of 2010 was $39.3 million, or $1.22 per diluted share. This compares with net income attributable to Coinstar Inc. of $50.3 million, or $1.66 per share, in the first nine months of 2009, which included a deduction of $3.6 million attributable to non-controlling interests as well as the previously mentioned pre-tax loss on disposal of $49.8 million and one-time tax benefit of $82.2 million related to the sale of Coinstar's entertainment services business that occurred in the third quarter of 2009.

Cash paid for capital expenditures for continuing operations for the third quarter of 2010 was $48.1 million, compared with $28.6 million in the third quarter of 2009, with the increase primarily due to increased investment in redbox DVD kiosks as well as investment in infrastructure. Free cash flow from continuing operations for the third quarter of 2010 was $16.8 million, compared with negative $1.7 million in the third quarter of 2009.