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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 15, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COINSTAR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7299 91-3156448
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) INDUSTRIAL CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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1800 -- 114TH AVENUE S.E.
BELLEVUE, WASHINGTON 98004
(425) 943-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JENS H. MOLBAK
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
COINSTAR, INC.
1800 -- 114TH AVENUE S.E.
BELLEVUE, WASHINGTON 98004
(425) 943-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
SUSAN L. PRESTON, ESQ.
JEFFRY A. SHELBY, ESQ.
ERIC SCOTT CARNELL, ESQ.
COOLEY GODWARD LLP
5200 CARILLON POINT
KIRKLAND, WA 98033-7356
(425) 893-7700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(2) SHARE(3) PRICE REGISTRATION FEE
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Common stock, $.001 par value(1)... 30,000 $8.71875 $261,563 $73
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(1) Consists of 30,000 shares of common stock being registered on behalf of Cash
Technologies Inc., parent company of Coinbank Automated Systems Inc.
(2) In addition to the shares set forth in the table, the amount to be
registered includes an indeterminate number of shares of common stock issued
upon exercise of or in respect of the warrants, as such number may be
adjusted as a result of stock splits, stock dividends and antidilition
provisions (including adjustments to the exercise price) in accordance with
Rule 416.
(3) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) and (g) based on the average of the high
($10.375) and low ($7.0625) prices of Coinstar's common stock as reported on
the Nasdaq National Market on November 8, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING STOCKHOLDER MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED NOVEMBER 15, 1999.
30,000 SHARES OF COMMON STOCK
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COINSTAR, INC.
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[COINSTAR LOGO]
The Selling Stockholder: The selling stockholder identified in this
prospectus may sell up to 30,000 shares of our
common stock, $0.001 par value per share. We
are not selling any shares of our common stock
under this prospectus and will not receive any
of the proceeds from the sale of the shares by
the selling stockholder.
Offering Price: The selling stockholder may sell the shares of
common stock described in this prospectus in a
number of different ways and at varying prices.
We provide more information about how it may
sell its shares in the section titled "Plan of
Distribution" on page .
Trading Market: Our common stock is quoted on the Nasdaq
National Market under the symbol "CSTR". The
last reported sale price of the common stock on
November 12, 1999 was $10.5625 per share.
Risks: Investing in our common stock involves a high
degree of risk. See "Risk Factors" beginning on
page 2.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY EITHER THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE
ORGANIZATIONS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated , 1999.
<PAGE> 3
PROSPECTUS SUMMARY
The following is a summary of our business. You should carefully read the
section entitled "Risk Factors" in this prospectus, our Annual Report on Form
10-K for the year ended December 31, 1998 and our Quarterly Reports on Form 10-Q
for the quarters ended March 31, June 30 and September 30, 1999 filed with the
Securities and Exchange Commission (the "SEC") for more information on our
business and the risks involved in investing in our common stock.
OVERVIEW
We are the first and only company to own and operate a national network of
self-service coin-counting machines in the United States. Our Coinstar units
provide consumers with a fun, convenient and reliable means of converting
accumulated change into cash. We currently derive substantially all our revenue
from coin processing services generated by our installed base of over 6,700
Coinstar units located in supermarket chains in 39 states across the United
States. We launched the Coinstar network with the installation of our first
Coinstar unit in 1994, and have installed an average of 1,749 annually in the
three years ended September 30, 1999. Since our inception, the Coinstar network
has counted and processed over 44 billion coins with a value of over $1.7
billion in more than 58 million customer transactions. Coinstar units, which are
about the size of an ATM, rapidly count coins deposited by consumers and issue
vouchers for the dollar value of the coins processed, less our processing fee of
8.9% at most locations. Consumers can redeem the vouchers at cashiers in the
stores where our units are located for store credit or cash. We believe our
services also benefit our retail partners by enhancing customer service,
increasing store traffic, promoting sales, reducing internal store coin handling
expenses and providing an additional source of revenue.
We established a wholly-owned subsidiary, Coinstar International, Inc., in
March 1998 to explore expanding our operations internationally. We currently
have Coinstar units in 19 stores in Canada. We are also piloting nine Coinstar
units in the United Kingdom to determine the viability of the United Kingdom
market for our services. In addition, Coinstar International is investigating
the viability of our services in certain European countries. We also established
a wholly-owned subsidiary, MyShoppinglist.com, Inc., in December 1998 to explore
the development and deployment of electronic commerce technology, including
Coinstar Shopper(TM), our multifunction Internet portal.
Our principal executive offices are located at 1800 114th Avenue, Bellevue,
Washington 98004. Our telephone number is (425) 943-8000, and our Web site is
located at www.coinstar.com. Information contained on our Web site is not a
constitute part of this prospectus.
Coinstar's logo is a registered trademark of Coinstar, Inc., in the United
States, Canada and the European Union. This prospectus also contains trademarks
and trade names of other companies. Our use or display of other parties'
trademarks or trade names is not intended to and does not imply a relationship
with the trademark or trade name owners.
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FORWARD-LOOKING STATEMENTS
In addition to the historical information contained in this prospectus,
this prospectus and the documents incorporated herein by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Any statements contained
herein (including without limitation statements to the effect that we or our
management "believes," "expects," "anticipates," "plans" and similar
expressions) that are not statements of historical fact should be considered
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those set forth
in the "Risk Factors" section below and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" in our Annual
Report and Quarterly Reports incorporated herein by reference.
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. If any of the following risks actually occur, our business could be
harmed. In such case, the trading price of our common stock could decline and
you may lose all or part of your investment.
WE HAVE A HISTORY OF SUSTAINED OPERATING LOSSES AND WE EXPECT SUCH LOSSES TO
CONTINUE
We have incurred substantial losses since inception in 1991. Our net loss
was $16.0 million for 1996, $29.6 million for 1997 and $24.0 million for 1998.
As of September 30, 1999 we had an accumulated deficit of $95.7 million. Our
operating losses to date have resulted primarily from expenses incurred in the
development, marketing and operation of the Coinstar units, expansion and
maintenance of the network, administrative and occupancy expenses at our
headquarters and depreciation and amortization. We expect to continue to incur
operating losses as we continue to increase our installed base of Coinstar units
and seek to develop and market new products, services and enhancements,
including the development and deployment of our electronic commerce technology,
including Coinstar Shopper(TM).
WE HAVE A LIMITED OPERATING HISTORY AND FACE UNCERTAINTY IN OUR ABILITY TO
BECOME A PROFITABLE COMPANY
After several years of development, we commenced commercial deployment of
Coinstar units in 1994 and placed approximately 96% of our current installed
base in 1996, 1997, 1998 and the first nine months of 1999. Therefore, you have
limited historical financial information on which to base an evaluation of our
performance. You should consider our prospects in light of the risks, expenses
and difficulties frequently encountered by companies in an early stage of
development and operation, particularly companies in new or rapidly evolving
markets. We cannot be certain that we will install a sufficient number of our
Coinstar units or obtain sufficient market acceptance to allow us to achieve or
sustain profitability, or generate sufficient cash flow to meet our capital and
operating expenses and debt service obligations.
OUR COIN PROCESSING SERVICE IS OUR SOLE SOURCE OF REVENUE AND OUR CURRENT MARKET
IS LIMITED
We have derived until now, and expect for the foreseeable future to derive,
substantially all of our revenue from the operation of Coinstar units.
Accordingly, market acceptance of our coin processing service is critical to our
future success. Since there is only a limited current market for our coin
processing service, we cannot assure you that an acceptable level of demand will
be achieved or sustained. If sufficient demand for our coin processing service
does not develop due to lack of market acceptance, technological change,
competition or other factors, our business, financial condition and results of
operations and ability to achieve sufficient cash flow to service our
indebtedness could be seriously harmed. To date, we have not derived any
significant revenue from our Coinstar Shopper Internet portal.
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OUR FUTURE OPERATING RESULTS REMAIN UNCERTAIN
You should not consider prior growth rates in our revenue to be indicative
of our future operating results. The timing and amount of future revenues will
depend almost entirely on our ability to obtain new agreements with potential
retail partners for the installation of Coinstar units, the successful
deployment and operation of our coin processing network and on customer
utilization of our service. Our future operating results will depend upon many
other factors, including:
- the level of product and price competition,
- the processing fee we charge consumers to use our service, which we
changed to 8.9% in December 1998 and may change in the future,
- the amount of our processing fee that we share with our retail partners,
- our success in expanding our network and managing our growth,
- our ability to develop and market product enhancements and new products,
such as our Coinstar Shopper,
- our ability to enter into and penetrate new international markets, such
as the United Kingdom, Canada, the European Union and other selected
foreign markets,
- the timing of product enhancements, activities of and acquisitions by
competitors,
- the ability to hire additional employees, and
- the timing of such hiring and the ability to control costs.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE
Our common stock price has fluctuated substantially since our initial
public offering in July 1997. The market price of our common stock could decline
from current levels or continue to fluctuate. The market price of our common
stock may be significantly affected by the following factors, including:
- operating results below market expectations,
- trends and fluctuations in use of Coinstar units,
- changes in, or our failure to meet, financial estimates by securities
analysts,
- period-to-period fluctuations in our financial results.
- announcements of technological innovations or new products or services by
us or our competitors,
- the termination of one or more retail distribution contracts,
- timing of installations relative to financial reporting periods,
- release of reports,
- industry developments,
- market acceptance of the Coinstar service by retail partners and
consumers, and
- economic and other external factors.
In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. These market fluctuations may seriously
harm the market price of our common stock.
OUR BUSINESS IS DEPENDENT ON CONTINUED MARKET ACCEPTANCE BY CONSUMERS
We are substantially dependent on continued market acceptance of our coin
processing service by consumers. The self-service coin processing market is
relatively new and evolving and we cannot predict the
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future growth rate and size of this market. While consumers to date have been
somewhat receptive to our existing installed base of Coinstar units, we cannot
be certain that the operating results of the installed units will continue to be
favorable or that past results will be indicative of future market acceptance of
our service.
We believe that market acceptance of the Coinstar unit is dependent on the
consumer's perception that the units are convenient, easy to use and reliable.
Even if we are successful in promoting awareness of the Coinstar unit among
consumers, consumers may not utilize the Coinstar units in sufficient numbers
and frequency to make us profitable. In addition, the increasing use of
alternatives to coin and currency transactions such as credit and debit cards,
checks, wire transfers, smart cards and other forms of electronic payment may
adversely affect market acceptance and ongoing use of the Coinstar service. If
our coin-processing service does not achieve general market acceptance among
consumers or does so less rapidly than expected, our business, financial
condition and results of operations and ability to achieve sufficient cash flow
to service our indebtedness could be seriously harmed.
OUR BUSINESS IS DEPENDENT ON OUR RETAIL PARTNERS, WHICH ARE PRIMARILY
SUPERMARKET CHAINS
Market acceptance of the Coinstar unit depends on the willingness of
potential retail partners to agree to installation and retention of Coinstar
units in their stores, primarily supermarkets. We believe that market acceptance
by potential retail partners will depend on our ability to demonstrate the
utility of the Coinstar unit as a customer service and as a means to provide
other tangible benefits to potential and existing retail partners, including
increased customer traffic and customer spending in the form of voucher dollars
in the store. If our service does not achieve market acceptance, especially
among supermarket chains, or does so less rapidly than expected, our business,
financial condition and results of operations and ability to achieve sufficient
cash flow to service our indebtedness could be seriously harmed.
We generally have separate agreements with each of our retail partners,
providing for our exclusive right to provide coin processing services in retail
locations. These contracts generally have terms ranging from two to three years
and are generally terminable by either party with advance notice of at least 90
days. Coinstar units in service in two supermarket chains, Fred Meyer Inc. and
The Kroger Co., accounted for approximately 18.7% and 18.9%, respectively, of
our revenue in 1998. In May 1999, Kroger and Fred Meyer merged. In the nine
months ended September 30, 1999, these chains accounted for approximately 33.4%
of our revenue. The termination of any one or more of our contracts with our
retail partners could seriously harm our business, financial condition, results
of operations and ability to achieve sufficient cash flow to service our
indebtedness.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE DUE TO DIFFERENT USAGE RATES OF
INDIVIDUAL COINSTAR UNITS, SEASONALITY OF USE AND OTHER FACTORS
Customer utilization of our coin processing service varies substantially
from unit to unit, making our revenue difficult to forecast. Customer
utilization is affected by the timing and success of promotions by us and our
retail partners, age of the installed unit, adverse weather conditions and other
factors, many of which are not in our control. Based on our limited operating
history, we believe that coin processing volumes are affected by seasonality; in
particular we believe that on a relative basis, coin processing volumes have
been lower in the months of January, February, September and October. We cannot
be certain, however, that such seasonal trends will continue. Any projections of
future trends in use are inherently uncertain due to a variety of factors,
including:
- success in the timely deployment of a substantial number of additional
Coinstar units,
- consumer awareness and demand for our coin processing services
- our limited operating history, and
- the lack of comparable companies engaged in the coin processing business.
Our quarterly operating results are affected by the timing and number of
Coinstar units installed during the quarter. The timing of Coinstar unit
installations during a particular quarter is largely dependent on
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installation schedules determined by agreements with our retail partners, the
variable length of trial periods of our retail partners and the planned
coordination of multiple installations in a given geographic region.
As a result of these and other factors, revenue for any quarter is subject
to significant variation, and we believe that period-to-period comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Because our operating expenses
are based on anticipated revenue trends and because a large percentage of our
expenses are relatively fixed, revenue variability could cause significant and
disproportionate variations in operating results from quarter to quarter and
could result in significant losses. To the extent such expenses precede, or are
not followed by, increased revenue, our operating results would be seriously
harmed.
WE HAVE SUBSTANTIAL INDEBTEDNESS
As of November 1, 1999 we had outstanding indebtedness of $62.8 million,
which included $61.0 million of our 13.0% Senior Subordinated Discount Notes due
2006 (the "Notes") and our capital lease obligations. We must begin paying cash
interest on the Notes in April 2000. Beginning at that time, we will have debt
service obligations of approximately $7.9 million per year until October 2006,
when the principal amount of $61.0 million will be due. Our ability to meet our
debt service requirements will depend upon achieving significant and sustained
growth in our expected cash flow, which will be affected by our success in
implementing our business strategy, prevailing economic conditions and
financial, business and other factors, some of which are beyond our control.
Accordingly, we cannot be certain as to whether or when we will have sufficient
resources to meet our debt service obligations. If we are unable to generate
sufficient cash flow to service our indebtedness, we will have to reduce or
delay planned capital expenditures, sell assets, restructure or refinance our
indebtedness or seek additional equity capital. We cannot assure you that any of
these strategies can be effected on satisfactory terms, if at all, particularly
in light of our high levels of indebtedness. In addition, the extent to which we
continue to have substantial indebtedness could have significant consequences,
including:
- our ability to obtain additional financing in the future for working
capital, capital expenditures, product research and development,
acquisitions and other general corporate purposes may be materially
limited or impaired,
- a substantial portion of our cash flow from operations may need to be
dedicated to the payment of principal and interest on our indebtedness
and therefore not available to finance our business, and
- our high degree of indebtedness may make us more vulnerable to economic
downturns, limit our ability to withstand competitive pressures or reduce
our flexibility in responding to changing business and economic
conditions.
OUR MARKET IS INCREASINGLY COMPETITIVE
We are the first company to provide a national network of self-service coin
processing machines that provide a convenient, reliable means for consumers to
convert loose coins into cash. We compete regionally with several direct
competitors that operate self-service coin processing machines. We cannot be
certain that these competitors have not or will not substantially increase their
installed units and expand their service nationwide. We compete indirectly with
manufacturers of machines and devices that enable consumers to count or sort
coins themselves, and we also compete or may compete directly or indirectly with
banks and similar depository institutions for coin conversion customers.
Currently, we believe banks are the primary alternative available to consumers
for converting coins into cash, and they generally do not charge a fee for
accepting rolled coins. As the market for coin processing develops, banks and
other businesses may decide to offer additional coin processing services, either
as a customer service or on a self-service basis, and compete directly with us.
Moreover, we may face direct competition from Scan Coin AB of Malmo, Sweden, our
prior supplier of coin-counting devices, or other third parties to whom Scan
Coin may sell its coin-counting device. See "Risk Factors -- Our business could
be harmed by a dispute with our supplier" for discussion of our dispute with
Scan Coin.
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In addition, we may face new competition as we seek to expand into
international markets and develop new products, services and enhancements. Our
ability to expand internationally may subject us to competition with banks that
offer services competitive with ours and with manufacturers and other companies
that have established or are seeking to establish coin-counting networks
competitive with ours. Many of the competitors have greater experience than we
do in operating in these international markets. Moreover, new products that we
intend to develop, such as those involving the Internet, may subject us to
competition from companies with significantly greater technological resources
and experience.
Many of our potential competitors have longer operating histories, greater
name recognition, larger customer bases and significantly greater financial,
technical, marketing and public relations resources than we have. These
competitors may be able to undertake more extensive marketing campaigns, adopt
more aggressive pricing policies and make more attractive offers to consumers
and businesses. Our competitors might succeed in developing technologies,
products or services that are more effective, less costly or more widely used
than those that have been or are being developed by us or that would render our
technologies or products obsolete or noncompetitive. We cannot be certain that
we will be able to compete effectively with current or future competitors.
Competitive pressures could seriously harm our business, financial condition and
results of operations and our ability to achieve sufficient cash flow to service
our indebtedness.
THE SUCCESS OF OUR POTENTIAL NEW SERVICES AND PRODUCTS IS UNCERTAIN
We have committed, and expect to continue to commit, significant resources
and capital to develop and market existing product and service enhancements and
new products and services such as through value-added services and promotions.
One example is Coinstar Shopper, which is a multifunction Internet portal. These
products and services are relatively untested, and we cannot assure you that we
will achieve market acceptance for these products and services, or other new
products and services. Moreover, these and other new products and services may
be subject to significant competition with offerings by potential competitors in
addition to companies that compete in our coin processing business. Many of
these potential competitors have significantly greater technological expertise
and financial and other resources than we do. In addition, new products,
services and enhancements may pose a variety of technical challenges and require
us to enhance the capabilities of our network and attract additional qualified
employees. The failure to develop and market new products, services or
enhancements successfully could seriously harm our business, financial condition
and results of operations and ability to achieve sufficient cash flow to service
our indebtedness.
OUR FAILURE TO MANAGE GROWTH COULD HARM OUR BUSINESS
We have experienced rapid growth and intend to continue to expand our
operations aggressively. The growth in the size and scale of our business has
placed, and we expect it will continue to place, significant demands on our
operational, administrative and financial personnel and operating systems. Our
additional planned expansion may further strain management and other resources.
Our ability to manage growth effectively will depend on our ability to improve
our operating systems, to expand, train and manage our employee base, to
identify additional manufacturing capacity and to develop additional service
capacity. In particular, we will be required to rapidly expand our operating
systems and processes in order to support the projected installations of
Coinstar units and the potential addition of value-added services. In addition,
we will be required to establish relationships with additional third-party
service providers. We may be unable to effectively manage the expansion of our
operations, to implement and develop our systems, procedures or controls, to
adequately support our operations or to achieve and manage the currently
projected installations. If we are unable to manage growth effectively, our
business, financial condition and results of operations and our ability to
achieve sufficient cash flow to service our indebtedness could be seriously
harmed.
OUR BUSINESS COULD BE HARMED BY A DISPUTE WITH OUR SUPPLIER
Our sole source of coin counter components has been Scan Coin, pursuant to
an agreement originally entered into in 1993 and subsequently amended. Scan Coin
claims that this agreement requires that only Scan Coin coin counters may be
used in Coinstar units. Additionally, Scan Coin claims that the agreement gives
ownership to Scan Coin of any improvements or developments to the coin counter.
We believe that Scan Coin
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has no claim on any of our intellectual property. On September 8, 1998 Scan Coin
informed us that we were in violation of the original agreement and we had 30
days to correct the violation. Scan Coin also restated its claim to our
intellectual property. We responded on September 16, 1998 indicating that we
rejected all claims made by Scan Coin in its letter. On May 5, 1999 Scan Coin
informed us that it was terminating the agreement. Scan Coin also reiterated its
claims to our intellectual property and stated that it will seek full
compensation for all damages suffered. On May 28, 1999, we received a letter
indicating that Scan Coin intended to commence arbitration proceedings without
delay. Scan Coin stated that it would seek compensation for its financial losses
and seek a declaratory judgment regarding ownership of certain intellectual
property. On June 3, 1999, we responded to Scan Coin's letter in an effort to
settle this dispute amicably. Discussions to attempt to settle this dispute with
Scan Coin are ongoing. However, even if it is determined that our use of the new
coin-counting technology violates the agreement, we believe that the amount of
damages to which Scan Coin would be entitled would not be material to our
business. Our evaluation of the amount of damages to which Scan Coin could be
entitled is subject to significant uncertainty, and it is possible that we could
be found to be liable for damages that would be material to our business. We
cannot be certain that we will resolve the dispute with Scan Coin, nor can we
assure you that if litigation commences, we will prevail. Our failure to prevail
in litigation may result in a payment of monetary damages, the forfeiture of
certain intellectual property rights, or both. The occurrence of either event
could seriously harm our business, financial condition and results of operations
and ability to achieve sufficient cash flow to service our indebtedness.
Currently, coin counter devices supplied by Scan Coin are installed in most
commercially deployed Coinstar units. To date, replacement parts for the coin
counter devices installed in these units have been supplied by Scan Coin. We
believe that we have enough parts to meet our estimated demand for replacement
parts through the end of 2001. We believe we can satisfy future replacement
parts needs from third party suppliers. However, we may not be able to source,
on a timely basis, if at all, all necessary parts from outside suppliers for the
parts previously supplied Scan Coin. Our failure to secure necessary replacement
parts on a timely basis may result in a slowdown of installation or in machine
downtime, either of which could seriously harm our business, financial condition
and results of operations and ability to achieve sufficient cash flow to service
our indebtedness.
WE DEPEND UPON THIRD-PARTY MANUFACTURERS AND SERVICE PROVIDERS
We do not conduct manufacturing operations and depend, and will continue to
depend, on outside parties for the manufacture of the Coinstar unit and its key
components. We intend to significantly expand our installed base, and such
expansion may be limited by the manufacturing capacity of our third-party
manufacturers and suppliers. Although we expect that our current contract
manufacturer, SeaMed Corporation, will be able to produce sufficient units to
meet projected demand, SeaMed or other manufacturers may not be able to meet our
manufacturing needs in a satisfactory and timely manner. If there is an
unanticipated increase in demand for Coinstar unit installations, we may be
unable to meet such demand due to manufacturing constraints. Although we have a
contract with SeaMed, SeaMed does not have a long-term obligation to continue
the manufacture of the Coinstar unit or its components. Further, SeaMed is
principally engaged in the manufacture of electronic medical instruments for
medical technology companies. We believe that we are SeaMed's only material
non-medical customer. As such, we face an increased risk that SeaMed may choose
to focus exclusively on manufacturing medical products and cease making our
products. Should SeaMed cease manufacturing Coinstar units, we would be required
to locate and qualify additional suppliers. We may be unable to locate alternate
manufacturers on a timely basis.
In July 1999, SeaMed merged with Plexus Corp. of Neenah, Wisconsin.
SeaMed's management has assured us that the combined entity will continue to
meet our manufacturing needs. However, we cannot be certain that Plexus will
continue to operate in Redmond, Washington or continue to meet our manufacturing
needs.
In addition, we obtain some key hardware components used in the Coinstar
units from sole source suppliers. We cannot be certain that we will be able to
continue to obtain an adequate supply of these components in a timely manner or,
if necessary, from alternative sources. If we are unable to obtain sufficient
7
<PAGE> 10
quantities of components or to locate alternative sources of supply on a timely
basis, we may experience delays in installing or maintaining Coinstar units,
either of which could seriously harm our business, financial condition and
results of operations and ability to achieve sufficient cash flow to service our
indebtedness.
We rely on third-party service providers for substantial support and
service efforts that we currently do not provide directly. In particular, we
contract with armored carriers and other third party providers to arrange for
pick-up, processing and deposit of coins. We generally contract with one
transportation provider and coin processor to service a particular region. Many
of these service providers do not have long-standing relationships with us and
our contracts with them generally can be terminated by either party with advance
notice ranging from 30 to 90 days. We do not currently have nor do we expect to
have in the foreseeable future the internal capability to provide back up
service in the event of sudden disruption in service from an armored carrier
company. Any failure by us to maintain our existing relationships or to
establish new relationships on a timely basis or on acceptable terms would harm
our business, financial condition and results of operations and our ability to
achieve sufficient cash flow to service our indebtedness. Moreover, as with any
business that handles large volumes of cash, we are susceptible to theft,
counterfeit and other forms of fraud, including security breaches of our
computing system that performs important accounting functions. We cannot be
certain that we will be successful in developing product enhancements and new
services to thwart such attempts.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OR ENFORCE OUR PATENTS AND PROPRIETARY
RIGHTS
Our future success depends, in part, on our ability to protect our
intellectual property and maintain the proprietary nature of our technology
through a combination of patents, licenses and other intellectual property
arrangements, without infringing the proprietary rights of third parties. We
have five issued patents relating to the removal of debris from coins processed
in a self-service environment and other aspects of self-service coin processing.
We cannot assure you that any of our patents will be held valid if
challenged, that any pending patent applications will issue, or that other
parties will not claim rights in or ownership of our patents and other
proprietary rights. Moreover, patents issued to us may be circumvented or fail
to provide adequate protection. Our competitors might independently develop or
patent technologies that are substantially equivalent or superior to our
technologies.
We recently settled litigation with Cash Technologies Inc., the parent
company of CoinBank Automated Systems Inc., involving patent infringement claims
and counter-claims. The settlement provides for the dismissal with prejudice of
each party's respective claims in the litigation. As part of the settlement,
CoinBank granted us a worldwide, perpetual, non-exclusive license to certain
CoinBank technology and a 45 day right of first refusal to purchase CoinBank
Automated Systems Inc., which expires November 15, 1999. In consideration for
the right of first refusal, CoinBank received $600,000 and was provided 30,000
shares of our common stock which are being registered under this Registration
Statement. If the companies consummate a purchase agreement for CoinBank, the
cash and stock payment would be credited toward the purchase price. On November
15, 1999 we verbally agreed with Cash Technologies Inc. to extend the 45 day
right of refusal up to an additional 10 days. The settlement effectively ends
the dispute over the patents-in-suit and includes a release and covenant not to
sue. Future lawsuits of this type, whether meritorious or not, could be costly
for us, divert management attention, result in increased costs of doing
business, require us to enter into royalty or licensing agreements, or could
otherwise seriously harm our business.
Since patent applications in the United States are not publicly disclosed
until the patent is issued, applications may have been filed by others which, if
issued as patents, could cover our products. We cannot be certain that others
will not assert patent infringement claims or claims of misappropriation against
us based on current or pending U.S. and/or foreign patents, copyrights or trade
secrets or that such claims will not be successful. In addition, defending our
company and our retail partners against these types of claims, regardless of
their merits, could require us to incur substantial costs and divert the
attention of key personnel. Parties making these types of claims may be able to
obtain injunctive or other equitable relief which could effectively block our
ability to provide our coin processing service and use our processing equipment
in the United States and abroad, and could result in an award of substantial
damages. In the event of a successful claim of
8
<PAGE> 11
infringement, we may need or be required to obtain one or more licenses from, as
well as grant one or more licenses to, others. We cannot assure you that we
could obtain necessary licenses from others at a reasonable cost or at all.
We also rely on trade secrets to develop and maintain our competitive
position. Although we protect our proprietary technology in part by
confidentiality agreements with our employees, consultants and corporate
partners, we cannot assure you that these agreements will not be breached, that
we will have adequate remedies for any breach or that our trade secrets will not
otherwise become known or be discovered independently by our competitors. The
failure to protect our intellectual property rights effectively or to avoid
infringing the intellectual property rights of others could seriously harm our
business, financial condition and results of operations and ability to achieve
sufficient cash flow to service our indebtedness.
THERE ARE MANY RISKS ASSOCIATED WITH DOING BUSINESS IN INTERNATIONAL MARKETS
We intend to increase our deployment of Coinstar units in select
international markets. We have only recently begun to expand our business
internationally in the United Kingdom and Canada and, accordingly, have limited
experience in operating in international markets. We anticipate that our
international operations will become increasingly significant to our business.
International transactions pose a number of risks, including:
- failure of customer acceptance,
- risks of regulatory delays or disapprovals with respect to our products
and services,
- competition from potential and current coin-counting businesses,
- exposure to exchange rate risks,
- restrictions on the repatriation of funds,
- political instability,
- adverse changes in tax, tariff and trade regulations,
- difficulties with foreign distributors,
- difficulties in managing an organization spread over several countries,
and
- weaker legal protection for intellectual property rights.
These risks could seriously harm our business, financial condition, results of
operations and ability to achieve sufficient cash flow to service our
indebtedness.
Our expansion into Europe will present challenges different from those
faced in the United States. We expect to face greater competition than currently
is the case in the United States because banks in Europe typically offer
coin-counting services to their customers and most of the world's self-service
coin-counting machine manufacturers are located in Europe. Some of these
manufacturers have been involved in attempts to set up networks similar to ours.
In addition, local laws and market conditions may require us to change our fee
structure. We also will face a number of technical challenges as we attempt to
expand into Europe. In several areas, close national borders may require that
our units be able to handle as many as six different national coin sets, as well
as the new Euro coin. Supermarkets in Europe tend to be smaller than those in
the United States. Because of this, floor space is more of an issue than in the
typical supermarket in the United States. As a result, it may be necessary for
us to reduce the size of our unit to succeed in Europe. Reducing our unit size
could present technical challenges, and the smaller capacity that might result
from a smaller unit could increase operating costs in servicing the units. Many
local laws do not permit stores to be operated on a 24-hour, seven day per week
basis. This could reduce volumes and present challenges in our servicing of the
units. We also expect to face higher telecommunications costs in Europe than in
the United States, and a European network may need to make extensive use of
cellular communications.
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<PAGE> 12
WE DEPEND UPON KEY PERSONNEL AND NEED TO HIRE ADDITIONAL PERSONNEL
Our performance is substantially dependent on the continued services of our
executive officers and key employees, all of whom we employ on an at-will basis.
Our long-term success will depend on our ability to recruit, retain and motivate
highly skilled personnel. Competition for such personnel is intense. We have at
times experienced difficulties in recruiting qualified personnel, and we may
experience difficulties in the future. The inability to attract and retain
necessary technical and managerial personnel could seriously harm our business,
financial condition and results of operations and our ability to achieve
sufficient cash flow to service our indebtedness. Currently, we maintain a "key
man" life insurance policy on our chairman and chief executive officer, Jens
Molbak, in the amount of $2.0 million.
DEFECTS IN OR FAILURES OF OUR OPERATING SYSTEM COULD HARM OUR BUSINESS
We collect financial and operating data, and monitor performance of
Coinstar units, through a wide-area communications network connecting each of
the Coinstar units with a central computing system at our headquarters. This
information is used to track the flow of coins, verify coin counts and schedule
the dispatch unit service and coin pickup. The operation of Coinstar units
depends on sophisticated software, computing systems and communication services
that may contain undetected errors or may be subject to failures. These errors
may arise particularly when new services or service enhancements are added or
when the volume of services provided increases. Although each Coinstar unit is
designed to store all data collected, thereby helping to ensure that critical
data is not lost due to an operating systems failure, our inability to collect
the data from our Coinstar units could lead to a delay in processing coins and
crediting the accounts of our retail partners for vouchers already redeemed. The
design of the operating systems to prevent loss of data may not operate as
intended. Any loss or delay in collecting coin processing data would seriously
harm our operations.
We have in the past experienced limited delays and disruptions resulting
from upgrading or improving our operating systems. Although such disruptions
have not had a material effect on our operations, future upgrades or
improvements could result in delays or disruptions that would seriously harm our
operations. In particular, we are currently planning some significant
improvements in our operating platform in order to support our projected
expansion of the installed base of Coinstar units and the potential addition of
value-added services. While we are taking steps to ensure that the potential
adverse impact of such improvements on our operations is minimized, we cannot be
certain that the platform will be able to handle the increased volume of
services expected from the continued expansion of our network and the potential
addition of value-added services or that the improvements will occur on a timely
basis so as not to disrupt such continued expansion and potential addition of
value-added services.
The communications network on which we rely is not owned by us and is
subject to service disruptions. Further, while we have taken significant steps
to protect the security of our network, any breach of security whether
intentional or from a computer virus could seriously harm us. Any service
disruptions, either due to errors or delays in our software or computing systems
or interruptions or breaches in the communications network, or security breaches
of the system, could seriously harm our business, financial condition and
results of operations and ability to achieve sufficient cash flow to service our
indebtedness.
WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES TO REMAIN COMPETITIVE
The self-service coin processing market is relatively new and evolving. We
anticipate that, as the market matures, it will be subject to technological
change, new services and product enhancements, particularly as we expand our
service offerings. Accordingly, our success may depend in part upon our ability
to keep pace with continuing changes in technology and consumer preferences
while remaining price competitive. Our failure to develop technological
improvements or to adapt our products and services to technological change on a
timely basis could, over time, seriously harm our business, financial condition
and results of operations and our ability to achieve sufficient cash flow to
service our indebtedness.
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<PAGE> 13
OUR BUSINESS COULD BE HARMED BY YEAR 2000 COMPLIANCE ISSUES
Many currently installed computer systems and software programs were
designed to use only a two-digit year field. These year fields will need to
accept four digit entries to distinguish 21st century dates from 20th century
dates. Until the date fields are updated, the systems and programs could fail or
give erroneous results when referencing dates following December 31, 1999. Such
failure or errors could occur prior to the actual change of the century. We rely
on computer applications for our coin processing machines and to manage and
monitor our accounting and administrative functions. Such failure or malfunction
could cause disruptions of operations, including among other things a temporary
inability to process transactions or engage in normal business activities. In
addition, our retail partners, suppliers and service providers, including
financial institutions, rely upon computer applications, some of which may
contain software that may fail or give erroneous results as a result of the
upcoming change in century, with respect to functions that materially affect
their interactions with us. Failure or malfunction of our software or that of
our retail partners, suppliers or service providers could seriously harm our
business, financial condition and results of operations and on our ability to
achieve sufficient cash flow service to our indebtedness.
During the second and third quarters of 1998, we undertook a program to
identify, test, and evaluate our internal operating systems to determine the
impact of the year 2000 on these systems. Additionally, we retested our systems
during the third quarter of 1999. These tests involved simulating transactional
activity before, during and after the various impacted dates and assessing the
results to ensure the proper handling of the information by the internal
operating system. As a result of these tests performed on the internal operating
systems, we do not believe our computer systems or applications currently in use
will be harmed by the upcoming change in century.
We completed our review of the year 2000 impact on our retail partners,
suppliers, and service providers in the first quarter of 1999. Our partners have
made, and continue to make, significant progress towards completing their year
2000 projects. We have not incurred any significant costs in reviewing our
systems or those of our retail distribution partners, suppliers or service
providers for year 2000 compliance. We do not foresee any significant harm from
our partners' year 2000 issues. We will continue to monitor the status of our
partners' year 2000 activities. While we do not believe our computer systems or
applications currently in use will be harmed by the upcoming change in century
and we have not encountered any material year 2000 problems with any systems
provided by third parties, we have not received assurances from all of our
retail partners, suppliers or service providers that their systems will be year
2000 compliant.
We have assessed our critical operations to address situations that may
result if we are unable to achieve year 2000 readiness. Based on our assessment
to date and our readiness activities, we do not anticipate a material impact to
our critical operations from year 2000 problems and accordingly we do not
anticipate needing to develop a formal contingency plan beyond our disaster
recovery and critical systems backup procedures already in place.
WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
SOME ANTI-TAKEOVER PROVISIONS MAY AFFECT THE PRICE OF OUR COMMON STOCK
Provisions of our certificate of incorporation, bylaws and rights plan and
of Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholder.
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<PAGE> 14
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock offered by the selling stockholder.
DIVIDEND POLICY
We have never paid any dividends and do not anticipate declaring or paying
cash dividends in the foreseeable future. We intend to retain future earnings,
if any, to reinvest in our business and repay indebtedness. Instruments
governing certain of our debt restrict our ability to pay dividends.
SELLING STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of the common stock, as of November 12, 1999, by the selling
stockholder.
The information provided in the table below with respect to the selling
stockholder has been obtained from the selling stockholder. Except as otherwise
disclosed below, the selling stockholder has not within the past three years had
any position, office or other material relationship with us. Because the selling
stockholder may sell all or some portion of the shares of common stock
beneficially owned by it, we cannot estimate the number of shares of common
stock that will be beneficially owned by the selling stockholder after this
offering. In addition, the selling stockholder may have sold, transferred or
otherwise disposed of, or may sell, transfer or otherwise dispose of, at any
time or from time to time since the date on which it provided information
regarding the shares of common stock beneficially owned by it, all or a portion
of the shares of common stock beneficially owned by it, in transactions exempt
from the registration requirements of the Securities Act.
Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the SEC under the Exchange Act. Unless otherwise noted, each
person or group identified possesses sole voting and investment power with
respect to shares, subject to community property laws where applicable. None of
the share amounts set forth below represents more than 1% of our outstanding
stock as of October 31, 1999, adjusted as required by rules promulgated by the
SEC.
<TABLE>
<CAPTION>
PERCENTAGE OF COMMON NUMBER THAT
STOCK OUTSTANDING AFTER WILL BE
SELLING STOCKHOLDER NUMBER COMPLETION OF THE OFFERING OFFERED
------------------- ------ -------------------------- -----------
<S> <C> <C> <C>
Cash Technologies Inc. ................. 30,000 Less than 1% 30,000
</TABLE>
PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling
stockholder in one or more transactions at fixed prices, at market prices at the
time of sale, at varying prices determined at the time of sale or at negotiated
prices. As used in this prospectus, "selling stockholder" includes donees,
pledgees, transferees and other successors in interest selling shares received
from the selling stockholder after the date of this prospectus as a gift,
pledge, partnership distribution or other non-sale transfer. The selling
stockholder may offer its shares of common stock in one or more of the following
transactions:
- on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Market,
- in the over-the-counter market,
- in private transactions,
- by pledge to secure debts and other obligations, or
- a combination of any of the above transactions.
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<PAGE> 15
If required, we will distribute a supplement to this prospectus to describe
material changes in the terms of the offering.
The shares of common stock described in this prospectus may be sold from
time to time directly by the selling stockholder. Alternatively, the selling
stockholder may from time to time offer shares of common stock to or through
underwriters, broker/dealers or agents. The selling stockholder and any
underwriters, broker/dealers or agents that participate in the distribution of
the shares of common stock may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act. Any profits on the resale of shares of
common stock and any compensation received by any underwriter, broker/dealer or
agent may be deemed to be underwriting discounts and commissions under the
Securities Act. The selling stockholder is solely responsible for bearing all
costs, including commissions and discounts, in connection with any sale of the
shares. We have agreed to indemnify the selling stockholder against certain
liabilities, including liabilities arising under the Securities Act. The selling
stockholder may agree to indemnify any agent, dealer or broker-dealer that
participates in the sale of shares of common stock described in this prospectus
against certain liabilities, including liabilities arising under the Securities
Act.
Any shares covered by this prospectus that qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus. The selling stockholder may choose not to sell all
of the shares they hold. The selling stockholder may also transfer, devise or
gift such shares by other means not described in this prospectus.
To comply with the securities laws of certain jurisdictions, the common
stock must be offered or sold only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions, the shares of common stock may
not be offered or sold unless they have been registered or qualified for sale or
an exemption is available and complied with.
Under the Exchange Act, any person engaged in a distribution of the common
stock may not simultaneously engage in market-making activities with respect to
the common stock for five business days prior to the start of the distribution.
In addition, the selling stockholder and any other person participating in a
distribution will be subject to the Exchange Act, which may limit the timing of
purchases and sales of common stock by the selling stockholder or any such other
person. These factors may affect the marketability of the common stock and the
ability of brokers or dealers to engage in market-making activities.
All expenses of this registration (other than broker's commissions and
similar changes), estimated at approximately $46,000, will be paid by us. These
expenses include the SEC's filing fees and fees under state securities or "blue
sky" laws.
VALIDITY OF COMMON STOCK
For purposes of this offering, Cooley Godward LLP, Kirkland, Washington is
giving an opinion as to the validity of the common stock offered by this
prospectus. Mark P. Tanoury, a partner of Cooley Godward, is Coinstar's
Secretary.
EXPERTS
The consolidated financial statements for the year ended December 31, 1998,
incorporated in this prospectus by reference from Item 5 of the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, (which report expresses an unqualified opinion and includes an
explanatory paragraph for a change in accounting for loss per share), which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
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ADDITIONAL INFORMATION
We have filed with the SEC a Registration Statement on Form S-3 under the
Securities Act with respect to the shares of common stock offered hereby. This
prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. We file annual, quarterly and special
reports, proxy statements and other information with the SEC. For further
information with respect to us and the common stock offered hereby, you should
refer to reference is made to the Registration Statement and the exhibits
thereto. Statements contained in this prospectus regarding the contents of any
contract or any other document to which reference is made are not necessarily
complete, and, in each instance, you should refer to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. You may read and
copy any document we file with the SEC, including the Registration Statement and
the exhibits thereto at the SEC's offices at 450 Fifth Street N.W, Washington,
D.C. 20549. You can also review our filings by accessing the web site maintained
by the SEC at http://www.sec.gov. This site contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means we can disclose important information to you by referring
you to those documents. The information included in the following documents is
incorporated by reference and is considered to be a part of this prospectus. The
most recent information that we file with the SEC automatically updates and
supersedes more dated information. We have previously filed the following
documents with the SEC and are incorporating them by reference into this
prospectus:
(a) Our Annual Report on Form 10-K for the fiscal year ended December
31, 1998 (except for Item 8), filed on or about March 31, 1999, including
all material incorporated by reference therein,
(b) Our Current Reports on Form 8-K, filed on or about March 3 and
October 12, 1999,
(c) Our Proxy Statement for our annual meeting of stockholder held on
June 16, 1999, filed on or about April 30, 1999,
(d) Our Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, June 30 and September 30, 1999, filed on or about May 17, August
16 and November 15, 1999, respectively, including the financial statements
and Independent Auditors' Report incorporated by reference to Item 5 of
Form 10-Q for the fiscal quarter ended September 30, 1999 and all material
incorporated by reference therein, and
(e) The description of our common stock contained in our Registration
Statement on Form S-1, filed on or about May 9, 1997.
We also incorporate by reference all documents subsequently filed by us pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Investor Relations
Coinstar, Inc.
1800 -- 114th Avenue
Bellevue, Washington 98004
Telephone: (425) 943-8000
This prospectus is part of a Registration Statement on Form S-3 we filed
with the SEC. You should rely only on the information incorporated by reference
or provided in this prospectus and the registration Statement. We have
authorized no one to provide you with different information. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of the document.
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<PAGE> 17
===============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL ONLY THE SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES
AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 2
COMMON STOCK
Use of Proceeds....................... 12
COINSTAR, INC.
Dividend Policy....................... 12
------------------------
Selling Stockholder................... 12
[COINSTAR LOGO]
Plan of Distribution.................. 12
------------------------
Validity of Common Stock.............. 13
Experts............................... 13
Additional Information................ 14
Incorporation of Certain Documents by
Reference........................... 14
</TABLE>
===============================================================================
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses to be paid by us in
connection with the sale of the shares of common stock being registered hereby.
All amounts are estimates except for the Securities and Exchange Commission
registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 73
Accounting fees and expenses................................ 5,000
Legal fees and expenses..................................... 30,000
Printing and engraving expenses............................. 10,000
Transfer agent and registrar fees and expenses.............. 250
Miscellaneous............................................... 677
-------
Total............................................. $46,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Securities
Act").
As permitted by the Delaware General Corporation Law, Coinstar's
certificate of incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty as
a director, except for liability (1) for any breach of the director's duty of
loyalty to Coinstar or its stockholder, (2) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law, (3)
under section 174 of the Delaware General Corporation Law (regarding unlawful
dividends and stock purchases) or (4) for any transaction from which the
director derived an improper personal benefit.
As permitted by the Delaware General Corporation Law, Coinstar's bylaws
provide that (1) Coinstar is required to indemnify its directors and officers to
the fullest extent permitted by the Delaware General Corporation Law, subject to
certain very limited exceptions, (2) Coinstar is required to advance expenses,
as incurred, to its directors and officers in connection with a legal proceeding
to the fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions and (3) the rights conferred in the bylaws
are not exclusive.
Coinstar has entered into indemnification agreements with certain of its
current directors and officers to give such directors and officers additional
contractual assurances regarding the scope of the indemnification set forth in
Coinstar's certificate of incorporation and bylaws and to provide additional
procedural protections. At present, there is no pending litigation or proceeding
involving a director, officer or employee of Coinstar regarding which
indemnification is sought, nor is Coinstar aware of any threatened litigation
that may result in claims for indemnification.
The indemnification provision in Coinstar's certificate of incorporation,
bylaws and the Indemnity Agreements entered into between Coinstar and each of
its directors and officers may be sufficiently broad to permit indemnification
of Coinstar's directors and officers for liabilities arising under the
Securities Act. Coinstar has obtained directors' and officers' liability
insurance.
Reference is made to Item 17 of this Registration Statement for additional
information regarding indemnification of officers and directors.
II-1
<PAGE> 19
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
5.1 Opinion of Cooley Godward LLP as to the legality of the
common stock being registered
23.1 Consent of Cooley Godward LLP (included in Exhibit 5.1)
23.2 Independent Auditors' Consent
24.1 Power of attorney (included on signature pages of this
registration statement)
</TABLE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Coinstar
pursuant to the foregoing provisions, or otherwise, Coinstar has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Coinstar of expenses
incurred or paid by a director, officer or controlling person of Coinstar in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Coinstar will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
Coinstar's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Coinstar, Inc.
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bellevue, King County, State of Washington on this
15th day of November, 1999.
COINSTAR, INC.
By: /s/ JENS H. MOLBAK
------------------------------------
Jens H. Molbak
Chairman, Chief Executive Officer
and Director
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jens H. Molbak and Kirk A. Collamer as
his true and lawful attorneys-in-fact each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead in any
and all capacities to sign any or all amendments (including post-effective
amendments) to this registration statement, and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933 in connection with the
registration under the Securities Act of 1933 of equity securities of Coinstar,
Inc., and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully for all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact, or their substitutes,
each acting alone, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JENS H. MOLBAK Chairman, Chief Executive November 15, 1999
- --------------------------------------------------- Officer and Director
Jens H. Molbak (Principal Executive Officer)
/s/ KIRK A. COLLAMER Vice President and Chief November 15, 1999
- --------------------------------------------------- Financial Officer (Principal
Kirk A. Collamer Financial and Accounting
Officer)
/s/ ROBERT O. ADERS Director November 15, 1999
- ---------------------------------------------------
Robert O. Aders
/s/ GEORGE H. CLUTE Director November 15, 1999
- ---------------------------------------------------
George H. Clute
Director
- ---------------------------------------------------
Larry A. Hodges
/s/ WILLIAM D. RUCKELSHAUS Director November 15, 1999
- ---------------------------------------------------
William D. Ruckelshaus
/s/ DAVID E. STITT Director November 15, 1999
- ---------------------------------------------------
David E. Stitt
/s/ RONALD A. WEINSTEIN Director November 15, 1999
- ---------------------------------------------------
Ronald A. Weinstein
</TABLE>
II-3
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
5.1 Opinion of Cooley Godward LLP as to the legality of the
common stock being registered
23.1 Consent of Cooley Godward LLP (included in Exhibit 5.1)
23.2 Independent Auditors' Consent
24.1 Power of attorney (included on signature pages of this
registration statement)
</TABLE>
<PAGE> 1
November 12, 1999
Coinstar, Inc.
1800 - 114th Avenue S.E.
Bellevue, WA 98004
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Coinstar, Inc. (the "Company") of the Registration Statement
on Form S-3 (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") covering the sale by a selling stockholder of
30,000 shares of the Company's common stock (the "Selling Stockholder Shares").
In connection with this opinion, we have examined the Registration Statement,
the Company's Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws, each as amended and such other documents, records,
certificates, memoranda and other instruments as we deem necessary as a basis
for this opinion. We have assumed the genuineness and authenticity of all
documents submitted to us as originals, the conformity to originals of all
documents submitted to us as copies thereof, and the due execution and delivery
of all documents where due execution and delivery are a prerequisite to the
effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Selling Stockholder Shares are validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the caption "Legal Maters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ Susan L. Preston
__________________________
Susan L. Preston
1.
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Coinstar, Inc. on Form S-3 of our report dated February 5, 1999,
(May 15, 1999, as to Notes 4, 12 and 15), (which report expresses an unqualified
opinion and includes an explanatory paragraph for a change in accounting for
loss per share), incorporated by reference in Item 5 of Form 10-Q of Coinstar,
Inc. for the quarter ended September 30, 1999 and to the reference to us under
the heading "Experts" in the Prospectus, which is a part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Seattle, Washington
November 11, 1999
