Redbox 2001 Annual Report Download - page 6

We also announced in May 2002 that, at that time, we
did not intend to expand the pilot or initiate rollout of
the prepaid MasterCard project. For six months,
through the end of 2001 and into 2002, we conducted a
52-store pilot of the card. Unfortunately, we have been
unable to reach agreement with the parties involved on
all material terms necessary to proceed. Nonetheless,
we remain committed to the prepaid category and
believe that Coinstar’s nearly 10,000 convenient locations
and network capabilities provide the framework to tap
the growing market for prepaid products.
As we look to expand the market and introduce new
products and services, we rely more than ever on the
insight and active involvement of our board of directors.
In particular, we would like to thank Ron Weinstein, our
chairman, and Dave Stitt, who are retiring from the board
this year after many years of service to our company.
financial strength
With respect to our balance sheet, our priority has been to
refinance our high-yield debt. In the first quarter of 2002,
we called $25 million of the 13% high-yield debt. We
completed the process in April, announcing the closing of
a $90 million senior secured credit facility that enabled us
to call the remaining $36 million of high-yield notes.
Due to premium and deferred financing fees related to the
early retirement of debt, we will realize an extraordinary
loss of approximately $6.3 million in 2002. However,
the net result of the refinancing is to reduce interest
expense by an estimated $3.4 million, or $0.15 per
diluted share, in 2002. And with a full year benefit
4
recent events
In early 2002, we introduced the next phase in our
evolution, redefining the boundaries of our market as we
continue to expand. To date, we have focused our growth
almost exclusively on high-traffic supermarkets, a market
we have estimated at between 11,000 to 15,000 stores in the
United States. We are now developing new, more flexible
cost and service models that may enable us to expand into
new geographies, including rural areas, and into new
formats, including mass merchants, drug stores, and banks.
In May 2002, we began the deployment of our new
machine design, backlit to provide higher visibility
in the store. During two years of testing, the backlit unit
achieved overwhelming consumer acceptance and
produced an average volume lift of 10 percent. Planning
ahead, the new design can facilitate the introduction
of new products and services, with an advanced
touch-screen monitor and the right side of the machine
designed to accept necessary new equipment. Between
new installations and the retrofit of existing units,
we expect to have more than 1,000 backlit units in
the field by the end of 2002.