Coinstar boss's departure is a surprise

Dan Gerrity, president and chief executive officer of Coinstar, is resigning after nine months in the top job, a day after the company announced it is considering divorcing itself from a money-losing subsidiary.

The news came yesterday as the Bellevue company, which makes coin-counting machines stationed in supermarkets, announced mixed results in its quarterly earnings release.

Gerrity, 39, started with the company seven years ago as chief technology officer and took the helm from company founder Jens Molbak in February.

After meeting with surprised employees in the afternoon, he said he would take three months off before deciding what to do next.

Gerrity said he was leaving for a combination of reasons. He said he reached his goal of making Coinstar "a decent, humane place to work," but didn't reach financial-performance goals as chief executive.

"I'm very proud of Coinstar," Gerrity said. "I'm confident in our financial performance, and confident in our management. It's hard to leave."

The announcement came as the company announced sales for its U.S. core business were $28.5 million in the third quarter, up 32 percent from $21.6 million in the same quarter a year ago.

It also reported its pro-forma profit -- before interest, taxes, depreciation and amortization--increased to $5.6 million in the third quarter, a 14 percent gain from $4.9 million in the quarter a year ago. The company, which takes an 8.9 percent cut when customers cash in coins, has 450 employees and 8,100 machines in 43 states, the District of Columbia, Canada and the United Kingdom.

Other numbers weren't as bright. On its consolidated statement of operations, the company posted a widening loss for the quarter of $5.9 million, compared with a $4.6 million loss in the same quarter a year ago.

Some of that can be traced to Meals.com, an 89 percent-owned subsidiary of Coinstar that offers consumers recipes and meal planning tools. It posted sales of $44,000, compared with quarterly operating expenses of $3.5 million.

On Wednesday, Coinstar announced it was considering separating Meals.com to give investors a clear look at the parent company's financial performance. After the news, the company's stock dropped 6 cents to close at $13.50--far from its past peak of more than $30 in 1999.

Mario Cibelli, an analyst with Robotti & Co. in New York, said some shareholders were impatient with the losses at Meals.com. He was surprised Gerrity was leaving, considering he seemed interested in the long term a couple of months ago and the company appears headed toward profitability.

"This company has the heart of a start-up and the mind of a mature company," Cibelli said. "They do something simple, they're very good at it, and they dominate the market. But when now that they're going nationwide, there's slower growth unless they develop a growth business."