BELLEVUE, Wash., Dec. 10, 2013 /PRNewswire/ -- Outerwall Inc. (Nasdaq: OUTR), today announced progress on its previously announced operating review and capital structure initiatives. This progress includes:
- The discontinuation of three new venture concepts;
- A leadership transition at Redbox;
- Cost reduction initiatives that are expected to result in $22 million of annual cost savings beginning in the first quarter of 2014; and
- A $350 million expansion of Outerwall's existing senior secured credit facility, which will enable the company to meet its previously announced target leverage ratio in the first quarter of 2014.
"These actions are consistent with the plans we outlined earlier this year and ensure that Outerwall's operations drive enhanced value creation for both our shareholders and retail partners," said J. Scott Di Valerio, chief executive officer of Outerwall.
Discontinuation of Certain New VenturesOuterwall has concluded the previously announced review of its New Ventures business segment and will discontinue three new venture concepts, Rubi™, Crisp Market™ and Star Studio. The wind-down process is expected to be substantially complete by the end of the first quarter of 2014. Outerwall will continue to invest in the rollout of ecoATM®, as well as a limited investment in its SAMPLE it™ concept. Due to the decision to discontinue those three new venture concepts, the company expects to record an associated one-time, pre-tax charge of $26 – 29 million in the fourth quarter of 2013. Beginning with the company's fourth quarter 2013 results, the three concepts will be reported as discontinued operations, along with Orango, which was discontinued earlier this year. The company's shutdown of Crisp Market will result in a tax benefit of $0.56 to $0.59 in diluted EPS in the fourth quarter of 2013, through the use of a worthless stock deduction. The tax benefit will be reported in the company's non-core, continuing operations*; in addition, the company expects a related cash tax savings of $14.6 million to $15.3 million in the first quarter of 2014. Di Valerio stated, "This comprehensive review reaffirms our confidence in Outerwall's solid foundation, notably our core Coinstar and Redbox businesses and the company's strong cash flows. At the same time, ecoATM provides the potential for another meaningful pillar in our automated retail platform, and we believe SAMPLE it merits a continued investment based on the potential we see in the business. By focusing on the new ventures with the greatest opportunity, we expect to move toward breakeven segment operating results more quickly." * See Appendix A for a discussion of non-GAAP financial measures, including core and non-core results