BELLEVUE, Wash., Feb. 6, 2014 /PRNewswire/ -- Outerwall Inc. (Nasdaq: OUTR) today reported financial results for the fourth quarter and full year ended December 31, 2013.

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

"Outerwall reported a strong finish to 2013 as we delivered solid results at the top and bottom line and executed on strategic decisions to drive increased profitability and value creation for our consumers, partners, employees, and shareholders," said J. Scott Di Valerio, chief executive officer of Outerwall. "Our results reflect the value consumers recognize in our core Redbox and Coinstar brands, with Redbox driving over 775 million rentals in 2013 and Coinstar pushing through $300 million in annual revenue for the first time. We are managing these strong, profitable, cash-generating businesses for additional profitability and cash flow by optimizing our consumer relationships and kiosk networks. We will continue to invest in ecoATM and other targeted, compelling growth opportunities."

Di Valerio continued, "We believe strong, effective leadership is a cornerstone in extracting the most value from our businesses, and today we separately announced a new president for Redbox and executive leadership transitions at Coinstar and ecoATM. We believe that each candidate will build on the respective business' strong foundation in order to continue to drive success and new avenues for growth and enhanced profitability."

"We also announced our intent to purchase $350 million of Outerwall's common stock via a modified 'Dutch auction' tender offer, demonstrating our confidence in Outerwall's business and long-term growth potential," said Di Valerio.

Outerwall's 2013 fourth quarter and full year financial highlights included:



                                   2013                    2013

                              Fourth
                             Quarter            Full Year

    -- Consolidated revenue    $593.7    million     $2,306.6    million

    -- Net income               $22.7    million       $174.8    million

    -- Income from continuing
     operations                $42.9    million       $208.1    million

    -- Core adjusted EBITDA
     from continuing
     operations*              $137.3    million       $491.7    million

    -- Diluted EPS from
     continuing operations     $1.55                   $7.33

    -- Core diluted EPS from
     continuing operations*    $1.68                   $5.92

    -- Net cash provided by
     operating activities     $191.7    million       $324.1    million

    -- Free cash flow*         $142.6    million       $166.4    million

*Refer to Appendix A for a discussion of non-GAAP financial measures, including the exclusion of certain non-core items.

"We continue to execute on several initiatives, including working to reach our recently adjusted targeted leverage ratio in the first quarter, that build on our strong financial foundation, optimize our capital structure and create value for our shareholders," said Galen C. Smith, chief financial officer of Outerwall. "In 2013, we were pleased to return more than 100% of our free cash flow to shareholders. Looking ahead, we remain committed to our capital return priorities, as illustrated by a $350 million tender offer we expect to launch tomorrow."

Smith concluded, "We are focused on operating Outerwall efficiently and will continue to manage costs and capital expenditures across the organization, keeping them aligned with our revenue growth opportunities. We are also on track to achieve $22 million of savings in 2014. We intend to further leverage the shared services organization we built over the past few years to deliver improved results."

Consolidated Results

Revenue for the fourth quarter of 2013 increased 5.4% to $593.7 million compared with $563.1 million for the fourth quarter of 2012. Redbox segment revenue increased 1.7% to $496.4 million compared with $488.3 million for the fourth quarter of 2012. Coinstar segment revenue increased 8.4% to $80.7 million from $74.5 million in the prior year quarter. New Ventures segment reported revenue of $16.6 million in the fourth quarter compared with $293,000 for the fourth quarter of 2012, with the increase primarily due to the acquisition of the ecoATM business completed in July 2013.

Operating income for the fourth quarter of 2013 was $73.0 million, which resulted in an operating margin of 12.3%, compared with operating income of $52.0 million and an operating margin of 9.2% in the fourth quarter of 2012. The change in operating margin was driven by several factors, including the reversal of a bonus accrual; a benefit from the change in amortization for content costs in the Redbox business; and greater efficiencies in shared services.

Income from continuing operations for the fourth quarter of 2013 was $42.9 million, or diluted earnings per share from continuing operations of $1.55, compared with $25.5 million, or $0.83 per diluted share, in the fourth quarter of 2012. Core diluted earnings per share from continuing operations for the fourth quarter of 2013 was $1.68, which excluded non-core adjustments, net of tax, of $0.13 per share, compared with $1.01 per diluted share, which excluded non-core adjustments, net of tax, of $0.18 per share, in the fourth quarter of 2012. Non-core adjustments for the fourth quarter of 2013 included restructuring costs associated with actions to reduce costs in our continuing operations primarily through workforce reductions across the company, compensation expense for rights to receive cash issued in conjunction with our acquisition of ecoATM, the loss from equity method investments, benefits from release of indemnification reserves upon settlement of the Sigue Note, and a tax benefit of $16.7 million related to the recognition of a worthless stock deduction in a corporate subsidiary.

For 2013, full year revenue was $2.3 billion, an increase of 4.9% compared with 2012. Operating income for 2013 was $261.0 million, which resulted in an operating margin of 11.3%, compared with operating income of $279.4 million and an operating margin of 12.7% in 2012. The decrease in operating margin reflects the increased operating loss in the New Ventures segment, which was primarily the result of investments to support ecoATM. Income from continuing operations for 2013 was $208.1 million, or $7.33 per diluted share, compared with income from continuing operations of $160.5 million, or $4.99 per diluted share, in 2012, an increase in diluted earnings per share of 46.9%, primarily attributable to the impacts of a decrease in income tax expense, income from equity method investments arising from the gain on our acquisition of ecoATM and higher interest expense. Core diluted earnings per share from continuing operations for the full year 2013 was $5.92, which excluded non-core adjustments of $(1.41) per share, compared with $5.15 per diluted share, which excluded non-core adjustments of $0.16 per share, in 2012.

Net cash provided by operating activities in the fourth quarter of 2013 was $191.7 million, compared with $152.2 million in the fourth quarter of 2012. Cash capital expenditures for the fourth quarter of 2013 were $49.1 million, compared with $74.9 million in the fourth quarter of 2012. Free cash flow for the fourth quarter of 2013 was $142.6 million, compared with $77.3 million in the fourth quarter of 2012, primarily driven by changes in working capital, higher non-cash expenses included in net income in the current period and lower capital expenditures, bringing total free cash flow to $166.4 million for the full year 2013.

Capital Structure and Share Repurchases

During the fourth quarter, the company repurchased $100.0 million of its common stock representing approximately 1.51 million shares at an average price of $66.06 per share. For full year 2013, the company repurchased $195.0 million of its common stock representing approximately 3.31 million shares at an average price of $58.98 per share, which represents a return to shareholders of more than 100% of free cash flow for the year. In January 2014, the company executed on an additional $50 million share repurchase through a 10b5-1 stock trading plan, which was completed by the end of the month.

On January 30, 2014, Outerwall's Board of Directors increased the share repurchase authorization by $500 million, bringing the total available for repurchases to approximately $650 million.

In connection with this increased authorization, the Board of Directors also authorized a tender offer for $350 million of Outerwall's common stock through a modified Dutch auction that is expected to launch on February 7, 2014. We expect to launch with a price range based on a 5-20% premium over today's last reported sale price.

During the fourth quarter, the company amended its existing credit facility to increase its debt capacity by $350.0 million through a combination of a $200 million term loan and an additional $150 million of capacity under the revolving line of credit. As of December 31, 2013, the company had no outstanding borrowing on the revolving line of credit. The company previously announced a target net leverage ratio of 1.75x to 2.25x net debt to core adjusted EBITDA from continuing operations, and expects to move into this range in the first quarter of 2014 pending the successful execution of the tender offer.

Segment Results

Redbox

Redbox segment revenue increased 1.7% to $496.4 million from the fourth quarter of 2012. Redbox generated 192.0 million rentals in the quarter, up 2.2% year over year. Net revenue per rental was $2.58, up 0.4% from the fourth quarter of 2012.

Redbox segment operating income was $111.3 million, an increase of 39.2% over the fourth quarter of 2012, and segment operating margin was 22.4%, up 6.0 percentage points from the fourth quarter of 2012. Gross margin for the fourth quarter of 2013 was 58.5%, up 4.6 percentage points from 53.9% in the fourth quarter of 2012, as the company adjusted its content purchases to better align with revised rental and revenue expectations. Gross margin also benefitted from $7.0 million lower amortization than expected as a result of the accounting change implemented in the second quarter of 2013. The benefit is expected to reverse in the first quarter of 2014.

Coinstar

Coinstar segment revenue was $80.7 million, an increase of 8.4%, and same store sales were up 5.9% in the fourth quarter of 2013 compared with a decline of 1.2% in the fourth quarter of 2012, primarily due to the price increase for all U.S. grocery retail locations for the coin voucher product implemented on October 1, 2013. The average transaction size was also up 5.8% to $43.82.

Coinstar segment operating income was $30.8 million, an increase of 17.2% over the fourth quarter of 2012, and segment operating margin was 38.2%, up 2.9 percentage points from the fourth quarter of 2012. Segment operating income increased due to the U.S. price increase and cost reductions driven by efficiencies implemented across its field organization.

New Ventures

New Ventures reported segment revenue of $16.6 million in the fourth quarter, compared with $0.3 million in the fourth quarter of 2012, with the increase driven by the acquisition of ecoATM. During the fourth quarter, ecoATM expanded its pilot in the mass channel and ended the year with approximately 880 kiosks. Outerwall continued to invest to support the growth of ecoATM as it begins to scale the business in 2014. SAMPLEit(TM) is included in the New Ventures segment and the company expects to continue testing the concept with a limited investment in 2014.

In December 2013, Outerwall exited three New Ventures concepts, Rubi(TM), Crisp Market(TM) and Star Studio(TM), which were classified as discontinued operations, and recorded associated impairment and restructuring charges of $29.5 million for the fourth quarter. The company expects to complete the shutdown process by the end of the first quarter of 2014.

Guidance

For the 2014 full year, Outerwall management expects:


    --  Consolidated revenue between $2.358 billion and $2.498 billion;
    --  Core adjusted EBITDA from continuing operations between $472 million and
        $517 million;
    --  Core diluted EPS from continuing operations between $5.16 and $5.76 on a
        fully diluted basis; and
    --  Free cash flow between $200 million and $240 million.

For the 2014 first quarter, Outerwall management expects:


    --  Consolidated revenue between $570 million and $600 million;
    --  Core adjusted EBITDA from continuing operations between $93 million and
        $108 million; and
    --  Core diluted EPS from continuing operations between $0.77 and $0.97 on a
        fully diluted basis.

Additional Information

Outerwall has provided additional comments on guidance in prepared remarks that also review the company's 2013 fourth quarter and full year operating and financial results. The prepared remarks and supplemental slides, as well as this press release, are posted on the Investor Relations section of the corporate website at ir.outerwall.com. The 2013 fourth quarter Segment Supplement, which provides historical data in Excel format, is also posted on the website.

Conference Call

CEO J. Scott Di Valerio and CFO Galen C. Smith will host a conference call today at 2:00 p.m. PST (5:00 p.m. EST) to answer questions related to the company's performance and 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 February 20, 2014, at 1-888-843-7419 or 1-630-652-3042, passcode 3641 5281.

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 mission is to create a better everyday by delivering 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 2014 first quarter and full year results, as well as stock repurchases, including the announced tender offer, bank loans, potential cost savings and tax benefits, leadership transitions and timing and integration of such leadership changes. 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,
    --  individual personnel decisions,
    --  the ability to achieve the strategic and financial objectives for our
        entry into new businesses, including ecoATM, SAMPLEit and Redbox
        Instant(TM) by Verizon,
    --  our ability to complete the tender offer, the occurrence of any
        conditions to completing the tender offer, and our decision to waive the
        occurrence of any condition to completing the tender offer,
    --  our ability to repurchase stock and the availability of an open trading
        window,
    --  the achievement of anticipated cost savings and tax benefits,
    --  results of our restructuring and cost initiatives, including
        discontinuation of affected new ventures and workforce reduction,
    --  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 ability to attract new retailers, penetrate new markets and
        distribution channels and react to changing consumer demands,
    --  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 filed with the Securities and Exchange Commission and other documents filed therewith. 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.

Important Information Regarding the Expected Tender Offer

This press release is for informational purposes only and is neither an offer to buy nor the solicitation of an offer to sell any shares of Outerwall's common stock. The expected tender offer described in this press release has not yet commenced, and there can be no assurances that Outerwall will commence the tender offer on the terms and conditions described in this press release or at all. If Outerwall commences the tender offer, the tender offer will be made solely by an Offer to Purchase, the Letter of Transmittal and related materials, as they may be amended or supplemented. Stockholders should read Outerwall's commencement tender offer statement on Schedule TO expected to be filed with the SEC in connection with the tender offer, which will include as exhibits the Offer to Purchase, the Letter of Transmittal and related materials, as well as any amendments or supplements to the Schedule TO when they become available, because they will contain important information. If Outerwall commences the tender offer, each of these documents will be filed with the SEC, and, when available, stockholders may obtain them for free from the SEC at its website (www.sec.gov) or from the Company's information agent in connection with the tender offer.

(Financial Statements Follow)

Appendix A

Use of 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; and
    --  Free cash flow.

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 include i) restructuring costs associated with actions to reduce costs in our continuing operations primarily through workforce reductions across the Company, ii) acquisition costs primarily related to the NCR Asset Acquisition and acquisition of ecoATM, iii) 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, iv) income or loss from equity method investments, which represents our share of income or loss from entities we do not consolidate or control and the impact of the gain on re-measurement of our previously held equity interest in ecoATM upon acquisition, v) a gain on the grant of a license to use certain Redbox trademarks to Redbox Instant(TM) by Verizon, vi) benefits from release of indemnification reserves upon settlement of the Sigue Note and vii) a tax benefit related to the recognition of a worthless stock deduction in a corporate subsidiary ("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 non-recurring 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                      Twelve Months
                                            Ended                              Ended

                                        December 31,                       December 31,
                                        ------------                       ------------

    Dollars in
     thousands                       2013                2012                2013              2012
                                     ----                ----                ----              ----

    Net income
     from
     continuing
     operations                             $42,876             $25,535            $208,091          $160,452

    Depreciation,
     amortization
     and other                     52,853               47,496               203,094             184,405

    Interest
     expense, net                   6,848               4,615               32,801             15,648

    Income taxes                     (289)              12,404               34,477             97,941

    Share-based
     payments
     expense(1)                     5,377               6,218               16,831             19,362
                                    -----               -----               ------             ------

    Adjusted
     EBITDA from
     continuing
     operations                   107,665               96,268               495,294             477,808

    Non-Core
     Adjustments:

    Restructuring
     costs                          4,495                  -               4,495                -

    Acquisition
     costs                              -                  -               5,669             3,235

    Rights to
     receive cash
     issued in
     connection
     with the
     acquisition
     of ecoATM                      6,364                  -               8,664                -

    Loss from
     equity
     method
     investments                   21,352               9,278               48,448             24,684

    Sigue
     indemnification
     reserve
     releases                     (2,542)                  -               (2,542)                -

    Gain on
     previously
     held equity
     interest on
     ecoATM                             -                  -                (68,376)               -

    Gain on
     formation of
     Redbox
     Instant by
     Verizon                            -                  -                  -              (19,500)
                                      ---                ---                ---             -------

    Core adjusted
     EBITDA from
     continuing
     operations                            $137,334            $105,546            $491,652          $486,227
                                             ======              ======              ======            ======


    (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 excluding Non-Core Adjustments, net of applicable taxes.

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


                                                                                                  
                                           Three                            Twelve
                                          Months                            Months
                                           Ended                            Ended
                                           
            December 31,                 December
                                                31,
            ------------                    ---------
                                                                                                   
                                     2013              2012                   2013                2012
                                     ----              ----                   ----                ----
                                                                                                                  
    Diluted EPS from continuing
     operations                            $1.55             $0.83                   $7.33              $4.99
                                                                                                  
    Non-Core Adjustments, net of
     tax:(1)
                                                                                                            
    Restructuring costs              0.10                -                   0.10                  -
                                                                                                            
    Acquisition costs                0.02                -                   0.17                0.06
                                                                                                            
    Rights to receive cash
     issued in connection with
     the acquisition of ecoATM       0.20                -                   0.25                  -
                                                                                                            
    Loss from equity method
     investments                     0.47              0.18                   1.04                0.47
                                                                                                            
    Sigue indemnification
     reserve releases               (0.06)               -                  (0.05)                 -
                                                                                                            
    Gain on previously held
     equity interest on ecoATM          -                -                  (2.33)                 -
                                                                                                            
    Gain on formation of Redbox
     Instant by Verizon                 -                -                     -                (0.37)
                                                                                                 
    Tax benefit of worthless
     stock deduction                (0.60)                -              (0.59)               -
                                     ----               ---               ----              ---
                                                                                                                  
    Core diluted EPS from
     continuing operations                 $1.68             $1.01                   $5.92              $5.15
                                             ===               ===                   =====                ===
                                                                                                               
                                                                                                               
    (1) Non-Core Adjustments are presented after-tax using the applicable
     effective tax rate for the respective periods.

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                 Twelve Months
                                                       Ended                         Ended

                                                   December 31,                  December 31,
                                                   ------------                  ------------

    Dollars in thousands                         2013             2012             2013           2012
                                                 ----             ----             ----           ----

    Net cash provided by operating activities          $191,700         $152,212         $324,091       $463,906

    Purchase of property and equipment        (49,053)            (74,873)            (157,669)          (208,054)
                                              -------            -------            -------          -------

    Free cash flow                                     $142,647          $77,339         $166,422       $255,852
                                                         ======          =======           ======         ======


                                           OUTERWALL INC.

                          CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                               (in thousands, except per share data)

                                            (unaudited)


                                      Three Months
                                         Ended                            Year Ended

                                     December 31,                        December 31,
                                     ------------                        ------------

                                   2013                2012                2013              2012
                                   ----                ----                ----              ----

    Revenue                              $593,705            $563,082            $2,306,601        $2,199,884

    Expenses:

    Direct
     operating                  400,459               402,580               1,575,277             1,498,819

    Marketing                     9,499               7,174               32,402             25,979

    Research and
     development                  4,913               1,900               13,084             6,757

    General and
     administrative              52,990               51,957               221,776             204,519

    Depreciation
     and other                   49,005               45,448               192,161             179,027

    Amortization
     of intangible
     assets                       3,848               2,048               10,933             5,378
                                  -----               -----               ------             -----

    Total expenses              520,714               511,107               2,045,633             1,920,479
                                -------               -------               ---------             ---------

    Operating
     income                      72,991               51,975               260,968             279,405

    Other income
     (expense), net:

    Income (loss)
     from equity
     method
     investments,
     net                        (21,352)              (9,278)               19,928             (5,184)

    Interest
     expense, net                (6,848)              (4,615)               (32,801)             (15,648)

    Other, net                   (2,204)              (143)               (5,527)             (180)
                                 ------                ----               ------              ----

    Total other
     income
     (expense),
     net                        (30,404)               (14,036)              (18,400)             (21,012)
                                -------               -------               -------             -------

    Income from
     continuing
     operations
     before income
     taxes                       42,587               37,939               242,568             258,393

    Income tax
     benefit
     (expense)                      289                (12,404)              (34,477)             (97,941)
                                    ---               -------               -------             -------

    Income from
     continuing
     operations                  42,876               25,535               208,091             160,452

    Loss from
     discontinued
     operations,
     net of tax                 (20,201)              (2,650)               (33,299)             (10,222)
                                -------               ------               -------             -------

    Net income                   22,675               22,885               174,792             150,230
                                 ------               ------               -------             -------

    Foreign
     currency
     translation
     adjustment                   1,160               (294)                 856             1,048
                                  -----                ----                 ---             -----

    Comprehensive
     income                               $23,835             $22,591              $175,648          $151,278
                                          =======             =======              ========          ========

    Basic earnings (loss)
     per share:

    Continuing
     operations                             $1.61               $0.87                 $7.65             $5.30

    Discontinued
     operations                   (0.76)              (0.09)               (1.23)             (0.34)

    Basic earnings
     per share                              $0.85               $0.78                 $6.42             $4.96
                                            =====               =====                 =====             =====

    Diluted earnings
     (loss) per share

    Continuing
     operations                             $1.55               $0.83                 $7.33             $4.99

    Discontinued
     operations                   (0.73)              (0.08)               (1.17)             (0.32)

    Diluted
     earnings per
     share                                  $0.82               $0.75                 $6.16             $4.67
                                            =====               =====                 =====             =====

    Weighted
     average
     shares used
     in basic per
     share
     calculations                26,696               29,380               27,216             30,305

    Weighted
     average
     shares used
     in diluted
     per share
     calculations                27,598               30,619               28,381             32,174




                                OUTERWALL INC.

                          CONSOLIDATED BALANCE SHEETS

                       (in thousands, except share data)

                                  (unaudited)


                                     December             December
                                        31,                  31,

                                         2013                2012
                                         ----                ----

    Assets                                                 (As
                                                          adjusted)

    Current Assets:

    Cash and cash equivalents                    $371,437            $282,894

    Accounts receivable, net of
     allowances of $1,826 and
     $2,003                            50,296               58,331

    Content library                   199,868               177,409

    Deferred income taxes                  11               7,187

    Prepaid expenses and other
     current assets                    84,698               29,686
                                       ------               ------

    Total current assets              706,310               555,507

    Property and equipment, net       520,865               586,124

    Notes receivable                        -               26,731

    Deferred income taxes               6,443               1,373

    Goodwill and other intangible
     assets                           638,690               344,063

    Other long-term assets             24,392               47,927
                                       ------               ------

    Total assets                               $1,896,700          $1,561,725
                                                 ========            ========

    Liabilities and Stockholders'
     Equity

    Current Liabilities:

    Accounts payable                             $236,018            $250,588

    Accrued payable to retailers      134,140               138,413

    Other accrued liabilities         134,127               146,125

    Current callable convertible
     debt                              49,702                  -

    Current portion of long-term
     debt and other                    42,190               15,529

    Current portion of capital
     lease obligations                 11,997               13,350

    Deferred income taxes              23,143                  -
                                       ------                ---

    Total current liabilities         631,317               564,005

    Long-term debt and other
     long-term liabilities            677,356               341,179

    Capital lease obligations           9,364               15,702

    Deferred income taxes              58,528               91,751
                                       ------               ------

    Total liabilities               1,376,565               1,012,637

    Commitments and contingencies

    Debt conversion feature             1,446                  -

    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;

    36,356,357 and 35,797,592
     shares issued;

    26,150,900 and 28,626,323
     shares outstanding               482,481               504,881

    Treasury stock                  (476,796)               (293,149)

    Retained earnings                 513,771               338,979

    Accumulated other
     comprehensive loss                  (767)              (1,623)
                                         ----               ------

    Total stockholders' equity        518,689               549,088
                                      -------               -------

    Total liabilities and
     stockholders' equity                      $1,896,700          $1,561,725
                                                 ========            ========




                                      OUTERWALL INC.

                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                      (in thousands)

                                       (unaudited)


                                    Three Months
                                       Ended                           Year Ended

                                   December 31,                       December 31,
                                   ------------                       ------------

                                  2013                2012               2013             2012
                                  ----                ----               ----             ----

    Operating Activities:

    Net income                           $22,675             $22,885           $174,792         $150,230

    Adjustments to
     reconcile net income
     to net cash flows:

    Depreciation and
     other                      44,265               45,568              193,700            179,147

    Amortization of
     intangible
     assets and
     deferred
     financing fees              4,494               2,579              13,461            7,504

    Share-based
     payments
     expense                     5,377               6,218              16,831            19,362

    Excess tax
     benefits on
     share-based
     payments                     (351)               (67)              (3,698)            (5,740)

    Deferred income
     taxes                       1,165               14,383               (10,933)           87,573

    Impairment
     expense                    32,732                  -              32,732               -

    (Income) loss
     from equity
     method
     investments,
     net                        21,352               9,278               (19,928)           5,184

    Non-cash
     interest on
     convertible
     debt                          543               1,839              3,866            7,109

    Loss from
     extinguishments
     of callable
     convertible
     debt                           63                  -              6,013               -

    Other                       (3,059)                  7              (2,039)            (4,100)

    Cash flows from
     changes in
     operating
     assets and
     liabilities                62,444               49,522               (80,706)           17,637
                                ------               ------              -------            ------

    Net cash flows
     from operating
     activities                191,700               152,212              324,091            463,906

    Investing Activities:

    Acquisition of
     ecoATM, net of
     cash acquired                   -                  -               (244,036)              -

    Purchases of
     property and
     equipment                 (49,053)               (74,873)              (157,669)            (208,054)

    Proceeds from
     sale of
     property and
     equipment                     456                 312              13,344            1,131

    Receipt of note
     receivable
     principal                  22,818                  -              22,913               -

    Acquisition of
     NCR DVD kiosk
     business                        -                  -                 -             (100,000)

    Cash paid for
     equity
     investments                     -                  -            (28,000)            (39,727)
                                   ---                ---            -------            -------

    Net cash flows
     from investing
     activities                (25,779)               (74,561)              (393,448)            (346,650)

    Financing Activities:

    Proceeds from
     issuance of
     senior
     unsecured notes                 -                  -            343,769               -

    Proceeds from
     new borrowing
     of Credit
     Facility                  250,000                  -              400,000               -

    Principal
     payments on
     Credit Facility          (154,375)              (3,270)               (215,313)            (10,938)

    Financing costs
     associated with
     Credit Facility
     and senior
     unsecured notes            (1,759)                 -              (2,203)               -

    Repurchase of
     convertible
     debt                       (2,547)               (20,575)              (172,211)            (20,575)

    Repurchases of
     common stock             (100,000)               (76,654)              (195,004)            (139,724)

    Principal
     payments on
     capital lease
     obligations and
     other debt                 (4,010)              (3,190)               (14,834)            (16,392)

    Excess tax
     benefits
     related to
     share-based
     payments                      351                  67              3,698            5,740

    Proceeds from
     exercise of
     stock options,
     net                           697                 558              8,460            4,592
                                   ---                 ---              -----            -----

    Net cash flows
     from financing
     activities                (11,643)               (103,064)             156,362             (177,297)

    Effect of
     exchange rate
     changes on cash             1,929               (151)              1,538            1,080
                                 -----                ----              -----            -----

    Increase
     (decrease) in
     cash and cash
     equivalents               156,207                (25,564)             88,543             (58,961)

    Cash and cash
     equivalents:

    Beginning of
     period                    215,230               308,458              282,894            341,855
                               -------               -------              -------            -------

    End of period                       $371,437            $282,894           $371,437         $282,894
                                          ======              ======             ======           ======

OUTERWALL INC.
BUSINESS SEGMENT INFORMATION
(in thousands)
(unaudited)

As a complement to our consolidated Statements of Comprehensive Income, we are providing the following information related to our business segments, which includes segment operating income (loss).

We manage our business by evaluating the financial results of our segments, focusing primarily on segment revenue and segment operating income before depreciation, amortization and other and share-based compensation granted to executives, non-employee directors and employees ("segment operating income"). Segment operating income contains internally allocated costs of our shared services support functions, including but not limited to, corporate executive management, business development, sales, customer service, finance, legal, human resources, information technology, and risk management. We also review depreciation and amortization allocated to each segment.

We utilize segment revenue and segment operating income because we believe they provide useful information for effectively allocating resources among business segments, evaluating the health of our business segments based on metrics that management can actively influence, and gauging our investments and our ability to service, incur or pay down debt or return capital to shareholders such as through share repurchases.



                        Three Months
                           Ended                      Year Ended

                       December 31,                  December 31,
                       ------------                  ------------

     Dollars
     in
     thousands      2013              2012            2013             2012
                    ----              ----            ----             ----

    Revenue:

    Redbox                $496,399          $488,325        $1,974,531       $1,908,773

    Coinstar      80,698             74,464           300,218            290,761

    New
     Ventures     16,608               293           31,852              350
                  ------               ---           ------              ---

     Consolidated
     revenue              $593,705          $563,082        $2,306,601       $2,199,884




    Reconciliation of segment operating income to GAAP operating income:


                                        Three Months
                                           Ended                           Year Ended

                                       December 31,                       December 31,
                                       ------------                       ------------

    Dollars in
     thousands                       2013                2012               2013           2012
                                     ----                ----               ----           ----

    Segment
     operating
     income
     (loss)(1)

    Redbox(2)                              $111,347            $80,012            $401,680       $386,753

    Coinstar                       30,817               26,300              102,506          99,261

    New
     Ventures                      (7,424)               (3,143)              (19,390)         (8,957)
                                   ------               ------              -------          ------

    Subtotal                      134,740               103,169              484,796          477,057

     Depreciation,
     amortization
     and other:

    Redbox                         40,418               38,812              162,637          148,068

    Coinstar                        8,428               8,520              33,921          36,108

    New
     Ventures                       4,007                 164              6,536            229
                                    -----                 ---              -----            ---

    Total
     depreciation,
     amortization
     and other                     52,853               47,496              203,094          184,405

    Share-
     based
     compensation
     and rights
     to receive
     cash
     expense                        8,896               3,698              20,734          13,247

    Operating
     income
     (loss):

    Redbox                         70,929               41,200              239,043          238,685

    Coinstar                       22,389               17,780              68,585          63,153

    New
     Ventures                     (11,431)               (3,307)              (25,926)         (9,186)

    Share-
     based
     compensation
     and rights
     to receive
     cash
     expense                       (8,896)               (3,698)              (20,734)          (13,247)
                                   ------               ------              -------          -------

    Total
     operating
     income                                 $72,991            $51,975            $260,968       $279,405
                                            =======              =====              ======         ======


    (1) Operating income (loss) before depreciation, amortization and other, and
     share-based compensation and rights to receive cash expense.

    (2) Share-based payments expense related to our content arrangements have been
     allocated to our Redbox segment.

SOURCE Outerwall Inc.