BELLEVUE, Wash., May 7, 2015 /PRNewswire/ -- Outerwall Inc. (Nasdaq: OUTR) today reported financial results for the first quarter ended March 31, 2015.

(Logo - http://photos.prnewswire.com/prnh/20130701/AQ41388LOGO)

"Outerwall's strong performance this quarter was the result of continued execution of our strategy of optimizing our core Redbox and Coinstar businesses, scaling ecoATM and improving operational efficiencies across the company," said Nora M. Denzel, Outerwall's interim chief executive officer. "We are leveraging our market-leading brands to drive profitability and deliver value for shareholders, partners and customers."



                           2015                  2014            Change

                  First Quarter           First Quarter                %
                  -------------           -------------               ---

    GAAP
     Results

    --
     Consolidated
     revenue               $608.6 million               $597.8 million      1.8%

    --
     Income
     from
     continuing
     operations             $42.2 million                $27.6 million     52.7%

    -- Net
     income                 $35.6 million                $23.2 million     53.6%

    --
     Diluted
     EPS
     from
     continuing
     operations
     per
     common
     share*                 $2.23                        $1.09            104.6%

    -- Net
     cash
     provided
     by
     operating
     activities            $106.1 million                $94.6 million     12.1%


    Core
     Results**

    -- Core
     adjusted
     EBITDA
     from
     continuing
     operations            $147.9 million               $121.5 million     21.7%

    -- Core
     diluted
     EPS
     from
     continuing
     operations*            $2.87                        $1.42            102.1%

    -- Free
     cash
     flow                   $85.4 million                $67.6 million     26.2%



    *Beginning in the first quarter
     of 2015, the company applied
     the two-class method of
     calculating earnings per share
     for its GAAP results because
     the impact of unvested
     restricted shares as a
     percentage of total common
     shares outstanding became more
     dilutive given the level of
     stock repurchases over the
     prior year. Core diluted EPS
     from continuing operations
     continues to be reported under
     the treasury stock method.


    **Refer to Appendix A for a
     discussion of Use of Non-GAAP
     Financial Measures and Core and
     Non-Core Results.

Highlights from the first quarter 2015 include:


    --  Reported consolidated revenue of $608.6 million, the highest quarter in
        the company's history
    --  Delivered 21.7% growth in core adjusted EBITDA from continuing
        operations to $147.9 million, reflecting continued expense management
        across the company, including 3.4% lower direct operating expense and
        7.7% lower G&A expense
    --  Increased core diluted earnings per share from continuing operations
        102.1% to $2.87
    --  Redbox generated its highest quarterly revenue in company history and
        delivered solid margin expansion, primarily driven by the price increase
        in December 2014
    --  Signed a new two-year content agreement with Warner Bros.
    --  Continued investing in growth by scaling ecoATM, installing
        approximately 250 kiosks in the quarter
    --  Generated free cash flow of  $85.4 million, an increase of 26.2%
        year-over-year
    --  Repurchased 617,195 shares for $40.7 million and paid the company's
        first quarterly dividend of $0.30 per share

"Our strong financial results demonstrate continued solid execution and operational excellence across the company," said Galen C. Smith, chief financial officer of Outerwall. "Our performance reaffirms our ability to generate strong profitability and free cash flow while simultaneously investing in the future of our business.

"We have maintained a disciplined approach to capital allocation and remain focused on returning capital to shareholders," said Smith. "Our board of directors has declared the company's second cash dividend payment of $0.30 per share. Also during the quarter, the board increased our share repurchase authorization by $250 million and we repurchased approximately $41 million of our common shares, leaving us with more than $373 million remaining under our current authorization, demonstrating our continued confidence in Outerwall's long-term prospects and future cash flow."

Outerwall also announced that Maria Stipp resigned as the president of ecoATM effective as of May 29, 2015, to take a chief executive officer role at another consumer company. The company expects to name an interim leader in the near future.

CHANGES IN REPORTING IN THE FIRST QUARTER OF 2015

During the first quarter of 2015, the company added ecoATM, its electronic device recycling business, as a separate reportable segment. Previously, the results of ecoATM along with those of other self-service concepts were included in the New Ventures segment. The combined results of the other self-service concepts are now included in the All Other category but are not presented as a separate reportable segment.

The results of the company's Redbox Canada operations, which were discontinued during the first quarter of 2015, are presented as discontinued operations in the company's consolidated financial statements and are no longer included in Redbox segment operating results. All prior periods have been recast to exclude Redbox Canada.

CONSOLIDATED RESULTS

Consolidated revenue for the first quarter of 2015 was a record for the company, increasing $10.9 million, or 1.8%, to $608.6 million compared with $597.8 million for the first quarter of 2014. The year-over-year revenue growth was primarily due to higher revenue from Redbox driven primarily by the price increase in December 2014, and an increase in revenue from ecoATM.

Operating income for the first quarter of 2015 was $82.5 million and the operating margin was 13.6% compared with operating income of $62.7 million and operating margin of 10.5% in the first quarter of 2014. The year-over-year increase in operating margin primarily reflects the higher consolidated revenue and lower direct operating expense resulting from lower product costs in the Redbox segment and a decrease in general and administrative expenses driven by ongoing cost reduction initiatives across the company. Both operating income and operating margin in the first quarter of 2015 were negatively impacted by $15.9 million in restructuring and lease termination costs from the early termination of operating leases for certain floors at Redbox headquarters and severance expense.

Income from continuing operations for the first quarter of 2015 was $42.2 million, or $2.23 of diluted earnings from continuing operations per common share, compared with $27.6 million, or $1.09 of diluted earnings from continuing operations per common share, in the first quarter of 2014.

Core adjusted EBITDA from continuing operations for the first quarter of 2015 was $147.9 million, compared with $121.5 million in the first quarter of 2014. The year-over-year increase was primarily due to higher Redbox segment operating income and lower losses from equity method investments as a result of Redbox's withdrawal from the Redbox Instant by Verizon joint venture during the fourth quarter of 2014.

Core diluted earnings per share from continuing operations for the first quarter of 2015 were $2.87, an increase of 102.1% compared with $1.42 per diluted share in the first quarter of 2014. The increase was primarily attributable to the results of operations described above, a 25.4% reduction in the number of weighted average shares used in the diluted per share calculations due primarily to stock repurchases, and $0.59 of non-core adjustments, net of tax, in the first quarter of 2015 compared with $0.31 in the first quarter of 2014.

Net cash provided by operating activities in the first quarter of 2015 was $106.1 million, compared with $94.6 million in the first quarter of 2014. The $11.5 million increase was primarily due to the increase in operating income.

Cash capital expenditures for the first quarter of 2015 were $20.7 million compared with $26.9 million in the first quarter of 2014, with the decrease primarily related to lower capital expenditures in the company's Redbox and Coinstar segments.

Free cash flow for the first quarter of 2015 was $85.4 million, compared with $67.6 million in the first quarter of 2014, primarily driven by higher net operating cash flow and lower capital expenditures.

SEGMENT RESULTS

Redbox

The results of the company's Redbox Canada operations, which were discontinued during the first quarter of 2015, are presented as discontinued operations in the company's consolidated financial statements and are no longer included in Redbox segment operating results. All prior periods have been recast to exclude Redbox Canada from Redbox segment results.

Redbox segment revenue increased $6.5 million, or 1.3%, to $519.5 million in the first quarter of 2015, a new quarterly record, from $513.0 million in the first quarter of 2014, primarily due to the price increase in December 2014 and strong seasonality in the first quarter of 2015.

Redbox generated approximately 173.0 million rentals in the first quarter of 2015, compared with 198.8 million rentals in the first quarter of 2014, as rentals were negatively impacted by a weaker content slate, lower demand from price-sensitive customers and ongoing secular decline in the physical rental market.

Net revenue per rental was $3.00, an increase of $0.42, or 16.3%, from the first quarter of 2014. The increase in net revenue per rental was primarily the result of the price increase partially offset by the expected increase in single night rental activity as a result of the price increase.

Redbox segment operating income in the first quarter of 2015 was $122.9 million, an increase of 16.2% compared with the first quarter of 2014. Segment operating margin was 23.6%, an increase of 300 basis points from the first quarter of 2014, despite the impact of the $15.2 million in restructuring and lease termination costs recognized in the first quarter of 2015, primarily due to lower direct operating expenses related to lower content costs and a decline in general and administrative expenses as a result of ongoing cost reduction initiatives.

Coinstar

Coinstar segment revenue was $69.3 million, an increase of $0.6 million, or 0.8%, compared with $68.8 million in the first quarter of 2014, primarily due to growth in the number of Coinstar Exchange kiosks and transactions partially offset by a decrease in Coinstar revenue in the U.S. due to a reduction in coin volume.

The impact of the increased coin voucher product transaction fee from 8.9% to 9.9% implemented in the U.K. in August 2014 was largely offset by the unfavorable exchange rate impact on U.K. revenue due to the recent strengthening of the U.S. dollar versus the British pound.

The average Coinstar transaction size continued to increase while the number of transactions has declined. The decline in transactions is the result of larger pours and less frequent visits and a slight decrease in the U.S. kiosk base year-over-year as a result of continued optimization efforts.

Coinstar segment operating income was $22.5 million compared with $22.7 million in the first quarter of 2014, and Coinstar segment operating margin was 32.5% compared with 33.1% in the first quarter of 2014.

ecoATM

During the first quarter of 2015, the company added ecoATM as a separate reportable segment. All goodwill previously allocated to the New Ventures segment has been allocated to the ecoATM segment.

ecoATM segment revenue was $19.7 million in the first quarter of 2015, an increase of $3.8 million compared with the first quarter of 2014 primarily due to the increase in the installed kiosk base and continued ramping of kiosks deployed in 2014. The company installed approximately 250 kiosks in the quarter and ended the quarter with approximately 2,140 kiosks installed.

The key revenue drivers for the segment are identified as devices collected per kiosk per day, the percentage of those devices that are value devices and the average selling price the business receives when reselling the devices. The collection of value devices on a per kiosk basis in the first quarter of 2015 was lower than in the first quarter of 2014 as a result of lower transactions at the kiosks due to a decline in retail foot traffic at ecoATM locations and expanded alternative recycling options such as carrier promotions. These factors also impacted the mix of value devices collected and was the primary reason for the decline in the average selling price of value devices in the first quarter of 2015 compared with the first quarter of 2014.

The segment operating loss in the first quarter of 2015 was $8.3 million compared with $5.3 million in the first quarter of 2014, due to an increase in direct operating expenses, including the costs associated with the acquisition, transportation and processing of electronic devices, as well as the costs of servicing the kiosks and payments to the retailers for use of their space. As ecoATM continues to expand its installed base and previously installed kiosks continue to ramp, ecoATM expects its direct operating expenses to increase in total but to decline as a percentage of revenue.

CAPITAL ALLOCATION

On May 5, the company's board of directors declared a quarterly cash dividend of $0.30 per share expected to be paid on June 23, 2015, to all stockholders of record as of the close of business on June 9, 2015.

On February 3, 2015, the board of directors approved an additional stock repurchase authorization of up to $250.0 million of its common stock plus the cash proceeds received from the exercise of stock options by the company's directors and employees. During the first quarter of 2015, the company repurchased 617,195 shares of common stock at an average price of $65.96 per share for approximately $40.7 million. As of March 31, 2015, there was approximately $373.3 million remaining under the company's stock repurchase authorization.

The company's net leverage ratio(1) was 1.62x at March 31, 2015.

(1)Refer to Appendix A for a discussion of Use of Non-GAAP Financial Measures and Core and Non-Core Results.

2015 ANNUAL GUIDANCE

Outerwall's 2015 annual guidance reflects the company's first quarter results and current outlook on the remainder of the year. The following table presents the company's updated full-year 2015 guidance:



    2015 FULL-YEAR GUIDANCE                          As of

    Dollars in millions, except per share
     data                                         May 7, 2015
                                                  -----------

    Consolidated results

    Revenue                                        $2,294 - $2,419

    Core adjusted EBITDA from continuing
     operations(1)                                     $472 - $514

    Core diluted EPS from continuing
     operations(1)(2)                                $7.49 - $8.49

    Free cash flow(1)                                  $215 - $255

    Weighted average diluted shares
     outstanding(2)                               18.0 - 18.1

    Core effective tax rate                          36.5% - 38.5%

    Segment revenue

    Redbox                                         $1,850 - $1,955

    Coinstar                                           $313 - $318

    ecoATM                                             $131 - $146

    Capital expenditures

    Redbox                                               $15 - $20

    Coinstar                                             $16 - $20

    ecoATM                                               $31 - $40

    Corporate                                            $31 - $38

    Total CAPEX                                         $93 - $118
                                                        ==========

    Net kiosk installations

    Redbox                                     (1,000) - (1,900)

    Coinstar                                       0 - (100)

    ecoATM                                        600 - 1,000



    (1)Refer to Appendix A for a
     discussion of Use of Non-GAAP
     Financial Measures and Core and
     Non-Core Results


    (2)Excludes the impact of any
     potential share repurchases for
     the remainder of 2015

ADDITIONAL INFORMATION

Additional information regarding the company's 2015 first quarter operating and financial results and guidance are included in the company's prepared remarks. These items, as well as this press release, are posted on the Investor Relations section of the corporate website at ir.outerwall.com.

CONFERENCE CALL

The company will host a conference call today at 2:30 p.m. PDT (5:30 p.m. EDT) to discuss first quarter 2015 earnings results and an update to 2015 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 May 21, 2015, at 1-855-859-2056 or 1-404-537-3406, conference ID 16684484.

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 delivers 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(TM) 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 2015 full year results. 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,
    --  the ability to achieve the strategic and financial objectives for our
        entry into new businesses, including ecoATM and SAMPLEit,
    --  our ability to repurchase stock and the availability of an open trading
        window,
    --  our declaration and payment of dividends, including our board's
        discretion to change the dividend policy,
    --  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 timing of the release slate and the relative attractiveness of
        titles in a particular quarter or year,
    --  the ability to attract new retailers, penetrate new markets and
        distribution channels and react to changing consumer demands,
    --  the ability to generate sufficient cash flow to timely and fully service
        indebtedness and adhere to certain covenants and restrictions,
    --  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 and any subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. 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.

(Consolidated Financial Statements, Business Segment Information and Appendix A follow)


                                                OUTERWALL INC.

                                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                     (in thousands, except per share data)

                                                  (unaudited)


                                                           Three Months Ended

                                                             March 31,
                                                             ---------

                                                   2015                     2014
                                                   ----                     ----

    Revenue                                                $608,636                          $597,762

    Expenses:

    Direct
     operating(1)                               405,184                            419,642

    Marketing                                     8,420                              6,993

    Research
     and
     development                                  2,084                              3,474

    General
     and
     administrative                              48,556                             52,608

     Restructuring
     and
     lease
     termination
     costs                                       15,851                                557

     Depreciation
     and
     other                                       42,686                             47,942

     Amortization
     of
     intangible
     assets                                       3,309                              3,842
                                                  -----                              -----

    Total
     expenses                                   526,090                            535,058
                                                -------                            -------

    Operating
     income                                      82,546                             62,704

    Other expense, net:

    Loss from
     equity
     method
     investments,
     net                                          (132)                           (9,368)

    Interest
     expense,
     net                                       (12,071)                           (9,648)

    Other,
     net                                        (2,346)                             (648)
                                                 ------                               ----

    Total
     other
     expense,
     net                                       (14,549)                          (19,664)
                                                -------                            -------

    Income
     from
     continuing
     operations
     before
     income
     taxes                                       67,997                             43,040

    Income
     tax
     expense                                   (25,842)                          (15,434)
                                                -------                            -------

    Income
     from
     continuing
     operations                                  42,155                             27,606

    Loss from
     discontinued
     operations,
     net of
     tax                                        (6,556)                           (4,431)
                                                 ------                             ------

    Net
     income                                      35,599                             23,175

    Foreign
     currency
     translation
     adjustment(2)                                2,854                                875
                                                  -----                                ---

     Comprehensive
     income                                                 $38,453                           $24,050
                                                            =======                           =======


    Income from continuing
     operations attributable to
     common shares:

    Basic                                                   $40,775                           $26,860

    Diluted                                                 $40,776                           $26,879


    Basic earnings (loss) per
     common share:

     Continuing
     operations                                               $2.23                             $1.12

     Discontinued
     operations                                  (0.36)                            (0.18)
                                                  -----                              -----

    Basic
     earnings
     per
     common
     share                                                    $1.87                             $0.94
                                                              =====                             =====


    Diluted earnings (loss) per
     common share:

     Continuing
     operations                                               $2.23                             $1.09

     Discontinued
     operations                                  (0.36)                            (0.18)
                                                  -----                              -----

    Diluted
     earnings
     per
     common
     share                                                    $1.87                             $0.91
                                                              =====                             =====


    Weighted average common
     shares used in basic and
     diluted per share
     calculations:

    Basic                                        18,269                             23,944

    Diluted                                      18,286                             24,575


    Dividends
     declared
     per
     common
     share                                                    $0.30                        $        -



             (1)    "Direct operating" excludes
                     depreciation and other of $30.2
                     million and $31.7 million for
                     the three months ended March 31,
                     2015 and 2014, respectively.


             (2)    Foreign currency translation
                     adjustment had no tax effect for
                     the three months ended March 31,
                     2015 and 2014, respectively.


                                                            OUTERWALL INC.

                                                     CONSOLIDATED BALANCE SHEETS

                                                  (in thousands, except share data)

                                                             (unaudited)


                                                           March 31, 2015                  December 31, 2014
                                                           --------------               -----------------

    Assets

    Current Assets:

    Cash and cash equivalents                                                  $197,934                          $242,696

    Accounts receivable, net of
     allowances of $1,128 and $2,223                               36,644                               48,590

    Content library                                               172,500                              180,121

    Prepaid expenses and other current
     assets                                                        42,908                               39,837
                                                                   ------                               ------

    Total current assets                                          449,986                              511,244

    Property and equipment, net                                   385,548                              428,468

    Deferred income taxes                                           2,231                               11,378

    Goodwill and other intangible
     assets, net                                                  620,645                              623,998

    Other long-term assets                                          7,651                                8,231
                                                                    -----                                -----

    Total assets                                                             $1,466,061                        $1,583,319
                                                                             ==========                        ==========

    Liabilities and Stockholders' Equity

    Current Liabilities:

    Accounts payable                                                           $165,336                          $168,633

    Accrued payable to retailers                                  107,082                              126,290

    Other accrued liabilities                                     146,921                              137,126

    Current portion of long-term debt
     and other long-term liabilities                               19,544                               20,416

    Deferred income taxes                                          20,926                               21,432

    Total current liabilities                                     459,809                              473,897

    Long-term debt and other long-term
     liabilities                                                  887,089                              973,669

    Deferred income taxes                                          26,432                               38,375
                                                                   ------                               ------

    Total liabilities                                           1,373,330                            1,485,941

    Commitments and contingencies

    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;

    36,740,097 and 36,600,166 shares issued;

    18,498,978 and 18,926,242 shares
     outstanding;                                                 473,225                              473,592

    Treasury stock                                            (1,033,424)                           (996,293)

    Retained earnings                                             650,386                              620,389

    Accumulated other comprehensive
     income (loss)                                                  2,544                                (310)
                                                                    -----                                 ----

    Total stockholders' equity                                     92,731                               97,378
                                                                   ------                               ------

    Total liabilities and stockholders'
     equity                                                                  $1,466,061                        $1,583,319
                                                                             ==========                        ==========




                                            OUTERWALL INC.

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                            (in thousands)

                                              (unaudited)


                                                  Three Months Ended

                                                    March 31,

                                                2015                   2014
                                                ----                   ----

    Operating Activities:

    Net income                                          $35,599                        $23,175

    Adjustments to reconcile net
     income to net cash flows
     from operating activities:

    Depreciation
     and other                                48,543                            49,104

    Amortization
     of
     intangible
     assets                                    3,353                             3,848

    Share-based
     payments
     expense                                   3,903                             3,765

    Windfall
     excess tax
     benefits
     related to
     share-based
     payments                                  (526)                          (1,710)

    Deferred
     income taxes                            (2,547)                          (9,564)

    Restructuring
     and lease
     termination
     costs(2)                                  1,680                                 -

    Loss from
     equity
     method
     investments,
     net                                         132                             9,368

    Amortization
     of deferred
     financing
     fees and
     debt
     discount                                    693                             1,306

    Other                                    (1,198)                            (124)

    Cash flows from changes in
     operating assets and
     liabilities:

    Accounts
     receivable,
     net                                      11,823                           (5,952)

    Content
     library                                   9,956                            19,981

    Prepaid
     expenses and
     other
     current
     assets                                  (3,106)                           46,955

    Other assets                                 168                               437

    Accounts
     payable                                   2,920                          (27,390)

    Accrued
     payable to
     retailers                              (18,441)                         (15,485)

    Other accrued
     liabilities                              13,120                           (3,127)
                                              ------                            ------

    Net cash
     flows from
     operating
     activities(1)                           106,072                            94,587

    Investing Activities:

    Purchases of
     property and
     equipment                              (20,709)                         (26,940)

    Proceeds from
     sale of
     property and
     equipment                                   123                               831

    Cash paid for
     equity
     investments                                   -                         (10,500)
                                                 ---                          -------

    Net cash
     flows used
     in investing
     activities(1)                          (20,586)                         (36,609)

    Financing Activities:

    Proceeds from
     new
     borrowing on
     Credit
     Facility                                 35,000                           275,000

    Principal
     payments on
     Credit
     Facility                              (116,875)                         (29,375)

    Settlement
     and
     conversion
     of
     convertible
     debt                                          -                              (4)

    Repurchases
     of common
     stock                                  (40,708)                        (421,067)

    Dividends
     paid                                    (5,602)                                -

    Principal
     payments on
     capital
     lease
     obligations
     and other
     debt                                    (3,245)                          (3,697)

    Windfall
     excess tax
     benefits
     related to
     share-based
     payments                                    526                             1,710

    Withholding
     tax paid on
     vesting of
     restricted
     stock net of
     proceeds
     from
     exercise of
     stock
     options                                 (3,088)                          (1,588)
                                              ------                            ------

    Net cash
     flows used
     in financing
     activities(1)                         (133,992)                        (179,021)


                                Three Months Ended

                                    March 31,

                           2015                  2014
                           ----                  ----

    Effect of exchange
     rate changes on
     cash                 3,744                            1,152
                          -----                            -----

    Decrease in cash
     and cash
     equivalents       (44,762)                       (119,891)

    Cash and cash
     equivalents:

    Beginning of
     period             242,696                          371,437

    End of period               $197,934                         $251,546
                                ========                         ========


    Supplemental
     disclosure of
     cash flow
     information:

    Cash paid during
     the period for
     interest                    $11,913                          $14,013

    Cash paid during
     the period for
     income taxes, net           $12,991                          $23,664

    Supplemental
     disclosure of
     non-cash
     investing and
     financing
     activities:

    Purchases of
     property and
     equipment
     financed by
     capital lease
     obligations                    $720                           $3,046

    Purchases of
     property and
     equipment
     included in
     ending accounts
     payable                      $2,025                           $7,240



             (1)    During the first quarter of
                     2015, we discontinued our
                     Redbox operations in Canada.
                     The first quarter of 2014 also
                     includes the wind-down process
                     of certain new ventures that
                     were discontinued during 2013.
                     Cash flows from these
                     discontinued operations are not
                     segregated from cash flows from
                     continuing operations in all
                     periods presented.


             (2)    The non-cash restructuring and
                     lease termination costs in the
                     first quarter of 2015 of $1.7
                     million is composed of $6.9
                     million in impairments of lease
                     related assets partially offset
                     by a $5.2 million benefit
                     resulting from the lease
                     termination.

OUTERWALL INC.
BUSINESS SEGMENT AND ENTERPRISEWIDE INFORMATION
(unaudited)

Changes in the Organizational Structure

During the first quarter of 2015, we added ecoATM, our electronic device recycling business, as a separate reportable segment. Previously, the results of ecoATM along with those of other self-service concepts were included in our New Ventures segment. The combined results of the other self-service concepts, which include product sampling kiosk concept SAMPLEit, are now included in the All Other category in the reconciliation below as they do not meet quantitative thresholds to be reported as a separate segment. All goodwill previously allocated to the New Ventures segment has been allocated to the ecoATM segment.

Comparability of Segment Results

We have recast prior period results for the following:


    --  Discontinued operations, consisting of our Redbox operations in Canada
        which we shut down during the first quarter of 2015; and
    --  The addition of our ecoATM segment which we added during the first
        quarter of 2015.

Our analysis and reconciliation of our segment information to the consolidated financial statements that follows covers our results of operations, which consists of our Redbox, Coinstar and ecoATM segments, Corporate Unallocated expenses and All Other. All Other includes the results of other self-service concepts which we regularly assess to determine whether continued funding or other alternatives are appropriate.



    Dollars in thousands

    Three Months Ended March   Redbox            Coinstar           ecoATM           All Other     Corporate
     31, 2015                                                                                     Unallocated            Total
                                 ------           --------            ------         ---------   ------------            -----

    Revenue                             $519,533                             $69,330                            $19,749                           $24               $           -  $608,636

    Expenses:

    Direct operating            342,935                      37,263                       22,806                   1,191                989                 405,184

    Marketing                     4,825                       1,178                        1,730                     320                367                   8,420

    Research and development          -                          -                       1,456                    (85)               713                   2,084

    General and administrative   33,735                       7,795                        1,968                   2,507              2,551                  48,556

    Restructuring and lease
     termination costs           15,174                         550                          127                       -                 -                 15,851
                                 ------                         ---                          ---                     ---               ---                 ------

    Segment operating income
     (loss)                     122,864                      22,544                      (8,338)                (3,909)           (4,620)                128,541

    Less: depreciation,
     amortization and other    (31,607)                    (7,818)                     (5,902)                  (668)                 -               (45,995)
                                -------                      ------                       ------                    ----                ---                -------

    Operating income (loss)      91,257                      14,726                     (14,240)                (4,577)           (4,620)                 82,546

    Loss from equity method
     investments, net                 -                          -                           -                      -             (132)                  (132)

    Interest expense, net             -                          -                           -                      -          (12,071)               (12,071)

    Other, net                        -                          -                           -                      -           (2,346)                (2,346)
                                    ---                        ---                         ---                    ---            ------                  ------

    Income (loss) from
     continuing operations
     before income taxes                 $91,257                             $14,726                          $(14,240)                     $(4,577)                  $(19,169)   $67,997
                                         =======                             =======                           ========                       =======                    ========    =======


    Dollars in thousands

    Three Months Ended March   Redbox            Coinstar           ecoATM           All Other     Corporate
     31, 2014                                                                                     Unallocated           Total
                                 ------           --------            ------         ---------   ------------           -----

    Revenue                             $513,049                             $68,753                           $15,946                          $14               $           -  $597,762

    Expenses:

    Direct operating            363,601                      37,723                       15,931                    408             1,979                 419,642

    Marketing                     4,460                       1,006                          668                    161               698                   6,993

    Research and development          8                         269                        1,784                    632               781                   3,474

    General and administrative   38,701                       6,997                        2,879                    921             3,110                  52,608

    Restructuring and lease
     termination costs              534                          23                            -                     -                -                    557
                                    ---                         ---                          ---                   ---              ---                    ---

    Segment operating income
     (loss)                     105,745                      22,735                      (5,316)               (2,108)          (6,568)                114,488

    Less: depreciation,
     amortization and other    (39,404)                    (8,563)                     (3,712)                 (105)                -               (51,784)
                                -------                      ------                       ------                   ----               ---                -------

    Operating income (loss)      66,341                      14,172                      (9,028)               (2,213)          (6,568)                 62,704

    Loss from equity method
     investments, net                 -                          -                           -                     -          (9,368)                (9,368)

    Interest expense, net             -                          -                           -                     -          (9,648)                (9,648)

    Other, net                        -                          -                           -                     -            (648)                  (648)
                                    ---                        ---                         ---                   ---             ----                    ----

    Income (loss) from
     continuing operations
     before income taxes                 $66,341                             $14,172                          $(9,028)                    $(2,213)                  $(26,232)   $43,040
                                         =======                             =======                           =======                      =======                    ========    =======

APPENDIX A

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;
    --  Free cash flow; and
    --  Net debt and net leverage ratio.

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 for the periods presented include i) restructuring costs (including severance and early lease termination costs and related impairment of assets) associated with actions to reduce costs in our continuing operations across the Company, ii) 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, iii) income or loss from equity method investments, which represents our share of income or loss from entities we do not consolidate or control and iv) tax benefits related to a net operating loss adjustment ("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 nonrecurring 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

                                            March 31,
                                            ---------

    Dollars in thousands          2015                     2014
                                  ----                     ----

    Net income from continuing
     operations                           $42,155                  $27,606

    Depreciation, amortization
     and other                  45,995                     51,784

    Interest expense, net       12,071                      9,648

    Income taxes                25,842                     15,434

    Share-based payments
     expense(1)                  3,941                      3,765
                                 -----                      -----

    Adjusted EBITDA from
     continuing operations     130,004                    108,237

    Non-Core Adjustments:

    Restructuring costs         15,851                        469

    Rights to receive cash
     issued in connection with
     the acquisition of ecoATM   1,920                      3,421

    Loss from equity method
     investments                   132                      9,368
                                                           -----

    Core adjusted EBITDA from
     continuing operations               $147,907                 $121,495
                                         ========                 ========



             (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 utilizing the treasury stock method excluding non-core adjustments, net of applicable taxes.

A reconciliation of core diluted EPS from continuing operations to diluted EPS from continuing operations, the most comparable GAAP financial measure, is presented in the following table:



                                                    Three Months Ended

                                         March 31,
                                         ---------

                                                   2015                2014
                                                   ----                ----

    Diluted EPS from
     continuing operations
     per common share (two-
     class method)                                         $2.23                    $1.09

    Adjustment from
     participating
     securities allocation
     and share differential
     to treasury stock
     method(1)                                     0.05                        0.02
                                                   ----                        ----

    Diluted EPS from
     continuing operations
     (treasury stock method)                       2.28                        1.11

    Non-Core Adjustments, net of tax:(1)

    Restructuring costs                            0.52                        0.01

    Rights to receive cash
     issued in connection
     with the acquisition of
     ecoATM                                        0.07                        0.11

    Loss from equity method
     investments                                      -                       0.23

    Tax benefit from net
     operating loss
     adjustment                                       -                     (0.04)
                                                    ---                      -----

    Core diluted EPS from
     continuing operations                                 $2.87                    $1.42
                                                           =====                    =====



             (1)    Non-Core Adjustments are
                     presented after-tax using the
                     applicable effective tax rate
                     for the respective periods.

A reconciliation of amounts used in core diluted EPS from continuing operations table above is presented in the following table:



                                      Three Months Ended

                                  March 31,
                                  ---------

    In thousands                2015                  2014
                                ----                  ----

    Income from continuing
     operations attributable
     to common shares                   $40,776                   $26,879

    Add: income from
     continuing operations
     allocated to
     participating securities  1,379                          727
                               -----                          ---

    Income from continuing
     operations                         $42,155                   $27,606
                                        =======                   =======


    Weighted average diluted
     common shares            18,286                       24,575

    Add: diluted common
     equivalent shares of
     participating securities    184                          200
                                 ---                          ---

    Weighted average diluted
     shares                   18,470                       24,775
                              ======                       ======

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

                                     March 31,
                                     ---------

    Dollars in thousands      2015                 2014
                              ----                 ----

    Net cash provided by
     operating activities             $106,072                    $94,587

    Purchase of property
     and equipment        (20,709)                      (26,940)
                           -------                        -------

    Free cash flow                     $85,363                    $67,647
                                       =======                    =======

Net Debt and Net Leverage Ratio

Our non-GAAP financial measure net debt is defined as the total face value of outstanding debt, including capital leases, less cash and cash equivalents held in financial institutions domestically. Our non-GAAP financial measure net leverage ratio is defined as net debt divided by core adjusted EBITDA from continuing operations for the last twelve months (LTM). We believe net debt and net leverage ratio are important non-GAAP measures because they:


    --  are used to assess the degree of leverage by management;
    --  provide additional information to users of the financial statements
        regarding our ability to service, incur or pay down indebtedness and
        repurchase our securities as well as additional information about our
        capital structure; and
    --  are reported quarterly to support covenant compliance under our credit
        agreement.

A reconciliation of net debt to total outstanding debt including capital leases, the most comparable GAAP financial measure, is presented in the following table:



                   March 31, 2015          December 31, 2014
                   --------------          -----------------

    Dollars
     in
     thousands

    Senior
     unsecured
     notes(1)                     $650,000                              $650,000

    Term
     loans(1)             144,375                              146,250

     Revolving
     line
     of
     credit                80,000                              160,000

    Capital
     leases                12,652                               15,391
                           ------                               ------

    Total
     principal
     value
     of
     outstanding
     debt
     including
     capital
     leases               887,027                              971,641

    Less
     domestic
     cash
     and
     cash
     equivalents
     held
     in
     financial
     institutions        (37,772)                            (66,546)
                          -------                              -------

    Net
     debt                 849,255                              905,095

    LTM
     Core
     adjusted
     EBITDA
     from
     continuing
     operations(2)                $523,232                              $496,820
                                                                       --------

    Net
     leverage
     ratio                   1.62                                 1.82



             (1)    The senior unsecured notes on our
                     Consolidated Balance Sheets as of
                     March 31, 2015 and December 31,
                     2014 included $8.0 million and
                     $8.4 million in associated debt
                     discount, respectively. The Term
                     loan on our Consolidated Balance
                     Sheets as of March 31, 2015 and
                     December 31, 2014 included $0.3
                     million and $0.3 million in
                     associated debt discount,
                     respectively.


             (2)    LTM Core Adjusted EBITDA from
                     continuing operations for the
                     twelve months ended March 31,
                     2015 and December 31, 2014 was
                     determined as follows:


    Dollars in thousands

    Core adjusted EBITDA from continuing
     operations for the three months
     ended March 31, 2015                                  $147,907

    Add: Core adjusted EBITDA from
     continuing operations for the twelve
     months ended December 31, 2014:

    Core adjusted EBITDA from continuing
     operations for the twelve months
     ended December 31, 2014 as reported
     in our Annual Report on Form 10-K
     for the period ended December 31,
     2014(1)                                    480,497

    Add: Core adjusted EBITDA loss from
     Redbox Canada operations for the
     twelve months ended December 31,
     2014                                        16,323
                                                 ------

    Core adjusted EBITDA from continuing
     operations for the twelve months
     ended December 31, 2014 as adjusted
     for discontinued operations                496,820

    Less: Core adjusted EBITDA from
     continuing operations for the three
     months ended March 31, 2014              (121,495)

    LTM Core adjusted EBITDA from
     continuing operations for the twelve
     months ended March 31, 2015                           $523,232
                                                           ========



             (1)    Core adjusted EBITDA from
                     continuing operations for the
                     twelve months ended December
                     31, 2014 is obtained from our
                     Form 10-K for the period
                     ended December 31, 2014,
                     where it is reconciled to net
                     income from continuing
                     operations, the most
                     comparable GAAP financial
                     measure, and represents the
                     LTM core adjusted EBITDA from
                     continuing operations we use
                     in our calculation of net
                     leverage ratio as of December
                     31, 2014.

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SOURCE Outerwall Inc.