- Domestic Same-Store Revenues Grew 2.9% DALLAS, May 15
/PRNewswire-FirstCall/ -- Blockbuster Inc. (NYSE: BBI; BBI.B) today
reported financial results for the first quarter ended April 6,
2008. Net income for the first quarter of 2008 was $45.4 million,
or $0.20 per diluted share, an improvement of $94.4 million as
compared with a net loss of $49.0 million, or $0.27 per share, for
the first quarter of 2007. Total revenues decreased 5.4% to $1.39
billion for the first quarter of 2008 from $1.47 billion for the
first quarter of 2007, as a result of fewer company-operated
stores. Domestic same-store revenues increased 2.9% as compared to
the first quarter of 2007, reflecting a 920 basis point improvement
over the first quarter of 2007. This increase was driven by a 0.4%
growth in same-store rental revenues and a 19.7% increase in
same-store merchandise sales. International same-store revenues
decreased 1.5% from the same period last year, reflecting a 0.9%
increase in same-store rental revenues and a 4.9% decline in
same-store merchandise sales. Worldwide same-store revenues grew
1.4% from the same period last year. "The significant improvement
in our first quarter results demonstrates the underlying strength
of our core rental and emerging retail business," said Jim Keyes,
Blockbuster Chairman and CEO. "BLOCKBUSTER Total Access(TM), our
subscription rental offering, is now profitable and positioned for
growth. Additionally, our stores achieved positive growth in both
sales and margin. We are particularly pleased that domestic
same-store revenues showed an improvement for the first time in
five years primarily as a result of several initiatives we have put
in place, including an increased availability of top new movies,
improved store merchandising and more effective pricing. Going
forward, we are confident we can continue to grow our core
business, which will enable us to focus on aggressive development
of our digital offerings. Our ability to provide convenient access
to both physical and electronic media entertainment will provide
Blockbuster a meaningful competitive advantage and allow us to
create enhanced shareholder value over the long-term." Consolidated
First Quarter Financial Results Total revenues for the first
quarter of 2008 decreased $79.8 million to $1.39 billion as
compared to the first quarter of last year primarily due to the
closure or sale of 412 company-operated stores worldwide, including
the divestiture of the GAMESTATION(R) chain in the U.K. This
decrease was partially offset by a $19.5 million increase in
domestic revenues. Additionally, total revenues for the first
quarter of 2007 included approximately $20 million in termination
fees received in connection with the termination of Blockbuster's
Brazilian franchise agreement and subsequent licensing of the
BLOCKBUSTER(R) brand in Brazil to Lojas Americanas. Gross profit
for the first quarter of 2008 decreased $20.8 million to $741.7
million as compared to the first quarter of 2007 largely as a
result of the decline in international gross profit reflecting the
impact of the divestiture of 217 GAMESTATION stores and the
termination of the Brazilian franchise agreement discussed above.
Domestic gross profit remained essentially flat at $519.6 million.
Gross margin increased 150 basis points to 53.2% for the first
quarter of 2008. Total selling, general and administrative
("SG&A") expenses for the first quarter of 2008 declined $100.5
million driven by (i) significantly reduced advertising expenses,
(ii) a lower worldwide company-operated store-base and (iii) a
reduction in corporate overhead. Operating income for the first
quarter of 2008 totaled $70.2 million, representing an $89.6
million increase, as compared to an operating loss of $19.4 million
for the same period last year. This improvement in profitability
drove a $124.5 million increase in cash flow provided by operating
activities for the first quarter of 2008 to a deficit of $19.5
million from a $144.0 million deficit for the first quarter of
2007. Free cash flow (net cash flow used for operating activities
less capital expenditures) for the first quarter of 2008 improved
by $115.6 million as compared to the same period last year to a
negative $39.4 million. Additional financial and operational
information, including the calculation of adjusted results and the
reconciliations of other non-GAAP financial measures used herein,
can be found in the tables accompanying this release. Earnings call
The Blockbuster earnings call will be webcast today at 9 a.m.
Central time. Following the conclusion of the webcast, a replay of
the call will be available via the Company's website. Additionally,
further detail on the Company's results can be found in the
Company's Form 10-K for the year ended January 6, 2008 and in the
Company's upcoming Form 10-Q for the quarter ended April 6, 2008.
The filings and the webcast can be accessed at
http://investor.blockbuster.com/. About Blockbuster Blockbuster
Inc. (NYSE: BBI; BBI.B) is a leading global provider of in-home
movie and game entertainment, with over 7,700 stores throughout the
Americas, Europe, Asia and Australia. The Company may be accessed
worldwide at http://www.blockbuster.com/. Forward-Looking
Statements This release and our related earnings conference call
include forward-looking statements related to our operations and
business outlook and financial and operational strategies and
goals. Specific forward-looking statements can be identified by the
fact that they do not relate strictly to historical or current
facts. These forward-looking statements are based on management's
current intent, belief, expectations, estimates and projections
regarding our company and our industry. These statements are not
guarantees of future performance and involve risks, uncertainties,
assumptions and other factors that are difficult to predict.
Therefore, actual results may vary materially from what is
expressed in or indicated by the forward-looking statements.
Factors that may cause actual results to vary materially include,
among others: (1) consumer appeal of our existing and planned
product and service offerings, and the related impact of competitor
pricing and product and service offerings; (2) overall industry
performance and the accuracy of our estimates and judgments
regarding trends impacting the home video industry; (3) our ability
to obtain favorable terms from suppliers, including on such matters
as copy depth and uses of product; (4) the studios' dependence on
revenues generated from retail home video and their related
determinations with respect to pricing and the timing of
distribution of their product; (5) the variability in consumer
appeal of the movie titles and games software released for rental
and sale; (6) our ability to comply with operating and financial
restrictions and covenants in our debt agreements and any adverse
publicity relating thereto; (7) our ability to respond to changing
consumer preferences, including with respect to new technologies
and alternative methods of content delivery, and to effectively
adjust our offerings if and as necessary; (8) the extent and timing
of our continued investment of incremental operating expenses and
capital expenditures to continue to develop and implement our
initiatives and our corresponding ability to effectively control
overall operating expenses and capital expenditures; (9) our
ability to effectively and timely prioritize and implement our
initiatives and to timely implement and maintain the necessary
information technology systems and infrastructure to support our
initiatives; (10) the risks and costs associated with our pursuit
of desired acquisitions, including the proposed acquisition of
Circuit City Stores, Inc., our ability to consummate such
acquisitions and the integration and other risks that may accompany
any acquisitions that are ultimately consummated; (11) our ability
to capitalize on anticipated industry consolidation; (12) the
application and impact of future accounting policies or
interpretations of existing accounting policies; (13) the impact of
developments affecting our outstanding and any future litigation
and claims against us; and (14) other factors, as described in our
filings with the Securities and Exchange Commission, including the
factors discussed under the heading "Risk Factors" in our annual
report on Form 10-K for the year ended January 6, 2008. This
cautionary statement is provided pursuant to Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. The forward-looking statements in this release and in
our related earnings conference call are made only as of the date
hereof and we undertake no obligation to update publicly any
forward-looking statement for any reason, even if new information
becomes available or other events occur in the future. BLOCKBUSTER
INC. COMPARATIVE FINANCIAL HIGHLIGHTS (In millions, except per
share amounts) Thirteen Weeks Ended April 6, 2008 April 1, 2007 (As
restated) Revenues: Base rental revenues $901.7 $883.8 Previously
rented product ("PRP") revenues 174.6 168.3 Total rental revenues
1,076.3 1,052.1 Merchandise sales 309.8 392.2 Other revenues 8.0
29.6 1,394.1 1,473.9 Cost of sales: Cost of rental revenues 410.5
414.5 Cost of merchandise sold 241.9 296.9 652.4 711.4 Gross profit
741.7 762.5 Operating expenses: General and administrative 601.1
655.5 Advertising 30.5 76.6 Depreciation and amortization of
intangibles 39.9 49.8 671.5 781.9 Operating income 70.2 (19.4)
Interest expense (19.2) (23.6) Interest income 1.1 1.9 Other items,
net 0.4 (2.0) Income (loss) before income taxes 52.5 (43.1)
Provision for income taxes (6.8) (8.5) Income (loss) from
continuing operations 45.7 (51.6) Income (loss) from discontinued
operations, net of tax (0.3) 2.6 Net income (loss) 45.4 (49.0)
Preferred stock dividends (2.8) (2.8) Net income (loss) applicable
to common stockholders $42.6 $(51.8) Net income (loss) per common
share: Basic Continuing operations $0.22 $(0.28) Discontinued
operations - 0.01 Net income (loss) $0.22 $(0.27) Weighted average
common shares outstanding: Basic 191.4 189.4 Net income (loss) per
common share: Diluted Continuing operations $0.21 $(0.28)
Discontinued operations (0.01) 0.01 Net income (loss) $0.20 $(0.27)
Weighted average common shares outstanding: Diluted 221.5 189.4
BLOCKBUSTER INC. SUPPLEMENTAL FINANCIAL INFORMATION (Dollars in
millions) Revenues by Product Line: Thirteen Weeks Thirteen Weeks
Ended Ended April 6, 2008 April 1, 2007 Percent Percent Revenues of
Total Revenues of Total (As restated) Domestic Rental revenues
Movies $468.0 48.9% $471.5 50.3% Games 54.6 5.7% 58.0 6.2%
Subscription rental 163.7 17.1% 154.2 16.5% PRP 139.1 14.5% 137.9
14.7% Total rental revenues 825.4 86.2% 821.6 87.7% Merchandise
sales Movies 57.6 6.0% 54.2 5.8% Games 20.0 2.1% 11.7 1.2% Other
47.5 5.0% 43.4 4.6% Total merchandise sales 125.1 13.1% 109.3 11.6%
Other revenues 6.3 0.7% 6.4 0.7% Total domestic revenues $956.8
100.0% $937.3 100.0% International Rental revenues Movies $199.8
45.7% $185.8 34.6% Games 15.6 3.6% 14.3 2.7% PRP 35.5 8.1% 30.4
5.7% Total rental revenues 250.9 57.4% 230.5 43.0% Merchandise
sales Movies 48.5 11.1% 50.8 9.5% Games 92.4 21.1% 189.6 35.3%
Other 43.8 10.0% 42.5 7.9% Total merchandise sales 184.7 42.2%
282.9 52.7% Other revenues 1.7 0.4% 23.2 4.3% Total international
revenues $437.3 100.0% $536.6 100.0% Total consolidated revenues
$1,394.1 $1,473.9 Gross Profit by Product Line: Thirteen Weeks
Thirteen Weeks Ended Ended April 6, 2008 April 1, 2007 Percent
Percent Gross of Gross of Profit Revenue Profit Revenue (As
restated) Domestic Rental $488.9 59.2% $479.6 58.4% Merchandise
24.4 19.5% 32.1 29.4% Other 6.3 100.0% 6.4 100.0% Total domestic
519.6 54.3% 518.1 55.3% International Rental 176.9 70.5% 158.0
68.5% Merchandise 43.5 23.5% 63.2 22.3% Other 1.7 100.0% 23.2
100.0% Total international 222.1 50.8% 244.4 45.6% Total
consolidated $741.7 53.2% $762.5 51.7% BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION Selling, General and
Administrative (G&A) Comparison (Dollars in millions) Selling,
General and Administrative Expenses: Thirteen Weeks Thirteen Weeks
Ended Ended April 6, 2008 April 1, 2007 Percent Percent SG&A of
SG&A of Expense Revenue Expense Revenue (As restated) Domestic
Advertising $19.0 1.4% $63.1 4.3% G&A expense - store (4 wall)
345.2 24.8% 364.4 24.7% G&A expense - corporate and other 78.5
5.6% 102.3 6.9% International Advertising 11.5 0.8% 13.5 0.9%
G&A expense 177.4 12.7% 188.8 12.8% Total SG&A $631.6 45.3%
$732.1 49.6% Facilities Statistics As of April 6, 2008 Domestic
International Avg Total Avg Total Total Sq Sq Total Sq Sq Number
Footage Footage Number Footage Footage (in (in (in (in thousands)
thousands) thousands) thousands) Stores 3,963 5.6 22,029 2,041 3.0
6,037 Distribution Centers 40 N/A 1,133 8 N/A 177
Corporate/Regional Offices 12 N/A 420 8 N/A 91 BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION (Dollars in millions) Other
Information: Revenue Thirteen Weeks Ended April 6, 2008 April 1,
2007 (As restated) Domestic same-store revenues increase (decrease)
Rental revenues 0.4 % (4.7)% Merchandise sales 19.7 % (15.0)% Total
revenues 2.9 % (6.3)% International same-store revenues increase
(decrease) Rental revenues 0.9 % (5.0)% Merchandise sales (4.9)%
31.7 % Total revenues (1.5)% 12.2 % Worldwide same-store revenues
increase (decrease) Rental revenues 0.6 % (4.7)% Merchandise sales
4.2 % 14.3 % Total revenues 1.4 % 0.0 % Cash Flow Data: Thirteen
Weeks Ended April 6, 2008 April 1, 2007 (As restated) Net cash used
for operating activities $(19.5) $(144.0) Net cash used for
investing activities (19.9) (2.6) Net cash used for financing
activities (9.1) (66.0) Capital Expenditures $19.9 $11.0 Balance
Sheet Information: April 6, 2008 January 6, 2008 Cash and cash
equivalents $137.7 $184.6 Merchandise inventories 397.4 343.9
Rental library 444.8 441.1 Accounts payable 453.8 472.8 Total debt
(including capital lease obligations) 751.4 757.8 BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION Worldwide Store Count
Information: Thirteen Weeks Ended April 6, 2008 April 1, 2007
Domestic Company-Owned Stores: Beginning 4,005 4,255
Additions/Purchases 1 3 Closures/Sales (43) (135) Ending 3,963
4,123 International Company-Owned Stores: Beginning 2,068 2,296
Additions/Purchases 1 11 Closures/Sales (28) (14) Ending 2,041
2,293 Franchised Stores: Beginning 1,757 1,809 Additions/Purchases
7 3 Closures/Sales (49) (27) Ending 1,715 1,785 Total Stores
Worldwide: Beginning 7,830 8,360 Additions/Purchases 9 17
Closures/Sales (120) (176) Ending 7,719 8,201 BLOCKBUSTER INC.
DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION (Dollars in
millions) For the quarter ended April 6, 2008, the Company reports
adjusted net income (loss), adjusted net income (loss) per common
share and adjusted operating income (loss) excluding costs incurred
for store closures. For the quarter ended April 1, 2007, the
Company reports adjusted net income (loss), adjusted net income
(loss) per common share and adjusted operating income (loss)
excluding charges related to costs incurred for store closures,
severance costs and proceeds from the termination of the Brazilian
franchise agreement. Adjusted net income (loss), adjusted net
income (loss) per common share and adjusted operating income (loss)
are non-GAAP financial measures within the meaning of Regulation G
of the Securities and Exchange Commission and not measures of
operating performance calculated in accordance with GAAP. As a
result, adjusted net income (loss), adjusted net income (loss) per
common share and adjusted operating income (loss) should not be
considered in isolation of, or as a substitute for, income (loss)
from continuing operations, net income (loss) per common share and
operating income (loss) as indicators of operating performance.
Adjusted net income (loss), adjusted net income (loss) per common
share and adjusted operating income (loss) as the Company
calculates them, may not be comparable to similarly titled measures
employed by other companies. Management believes excluding the
recurring and non-recurring in nature items listed below from the
Company's financial results provides investors with a clearer
perspective of the current underlying operating performance of the
Company, a clearer comparison to current period results and greater
transparency regarding supplemental information used by management
in its financial and operational decision-making. Management uses
these non-GAAP financial measures as an internal measure of
business operating performance, to establish operational goals, to
allocate resources and to analyze trends. Income (loss) from
continuing operations is the financial measure calculated and
presented in accordance with GAAP that is most comparable to
adjusted net income (loss). Operating income (loss) is the
financial measure calculated and presented in accordance with GAAP
that is most comparable to adjusted operating income (loss).
Thirteen Weeks Thirteen Weeks Ended Ended April 6, 2008 April 1,
2007 (As restated) Reconciliation of adjusted net income (loss):
Income (loss) from continuing operations $45.7 $(51.6) Adjustments
to reconcile income (loss) from continuing operations to adjusted
net income (loss): Termination of Brazilian franchise agreement,
net of tax (non- recurring) - (17.0) Store closure costs including
lease terminations (recurring) 2.8 4.8 Severance costs
(non-recurring) - 1.8 Adjusted net income (loss) 48.5 (62.0)
Preferred stock dividends (2.8) (2.8) Adjusted net income (loss)
applicable to common stockholders $45.7 $(64.8) Adjusted net income
(loss) per common share $0.21 $(0.34) Weighted average common
shares outstanding - diluted 221.5 189.4 Reconciliation of adjusted
operating income (loss): Operating income (loss) $70.2 $(19.4)%
Adjustments to reconcile operating income (loss) to adjusted
operating income (loss): Termination of Brazilian franchise
agreement (non-recurring) - (20.0) Store closure costs including
lease terminations (recurring) 2.8 4.8 Severance costs
(non-recurring) - 1.8 Adjusted operating income (loss) $73.0
$(32.8) BLOCKBUSTER INC. DISCLOSURES REGARDING NON-GAAP FINANCIAL
INFORMATION (Dollars in millions) For the quarter ended April 6,
2008, the Company reports adjusted earnings before interest, taxes,
depreciation and amortization ("adjusted EBITDA") excluding costs
incurred for stock compensation and store closures. For the quarter
ended April 1, 2007, the Company reports adjusted EBITDA excluding
charges related to costs incurred for store closures, severance
costs, stock compensation and proceeds from the termination of the
Brazilian franchise agreement. Adjusted EBITDA is a non-GAAP
financial measure within the meaning of Regulation G of the
Securities and Exchange Commission and is not a measure of
operating performance calculated in accordance with GAAP. As a
result, adjusted EBITDA should not be considered in isolation of,
or as a substitute for, net income (loss) as an indicator of
operating performance. Adjusted EBITDA, as the Company calculates
it, may not be comparable to similarly titled measures employed by
other companies. Management believes excluding the recurring and
non-recurring in nature items listed under EBITDA below from the
Company's financial results provides investors with a clearer
perspective of the current underlying operating performance of the
Company, a clearer comparison to current period results and greater
transparency regarding supplemental information used by management
in its financial and operational decision-making. In addition,
management believes that adjusting the Company's financial results
to exclude income (loss) from discontinued operations, net of tax,
taxes, interest and other income and depreciation and amortization
of intangibles also provides investors with a clearer perspective
of the current underlying operating performance of the Company and
a clearer comparison to current period results. Management uses
adjusted EBITDA as an internal measure of business operating
performance, to establish operational goals, to allocate resources
and to analyze trends. Net income (loss) is the financial measure
calculated and presented in accordance with GAAP that is most
comparable to adjusted EBITDA. Thirteen Weeks Thirteen Weeks Ended
Ended April 6, 2008 April 1, 2007 (As restated) Reconciliation of
adjusted EBITDA: Net income (loss) $45.4 $(49.0) Adjustments to
reconcile net income (loss) to adjusted EBITDA: (Income) loss from
discontinued operations, net of tax 0.3 (2.6) Taxes 6.8 8.5
Interest and other income, net 17.7 23.7 Depreciation and
amortization of intangibles 39.9 49.8 EBITDA $110.1 $30.4 Lease
termination costs incurred for store closures (recurring) 0.2 3.0
Termination of Brazilian franchise agreement (non-recurring) -
(20.0) Severance costs (non-recurring) - 1.8 Stock compensation
(recurring) 4.2 8.1 Adjusted EBITDA $114.5 $23.3 BLOCKBUSTER INC.
DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION (Dollars in
millions) Free cash flow reflects the Company's net cash flow
provided by (used for) operating activities less capital
expenditures. The Company uses free cash flow, among other things,
to evaluate its operating performance and as a measure of
liquidity. Management believes free cash flow provides investors
with an important perspective on the cash available for debt
service, acquisitions and stockholders after making the capital
investments required to support ongoing business operations and
long-term value creation. The Company believes the presentation of
free cash flow is relevant and useful for investors because it
allows investors to view performance in a manner similar to the
method used by management and helps improve their ability to
understand the Company's operating performance. In addition, free
cash flow is also a measure used by the Company's investors and
analysts for purposes of valuation and comparing the operating
performance of the Company to other companies in its industry. Free
cash flow is a non-GAAP financial measure within the meaning of
Regulation G of the Securities and Exchange Commission and not a
measure of performance calculated in accordance with GAAP. As a
result, free cash flow should not be considered in isolation of, or
as a substitute for, net income (loss) as an indicator of operating
performance or net cash flow provided by (used for) operating
activities as a measure of liquidity. Free cash flow, as the
Company calculates it, may not be comparable to similarly titled
measures employed by other companies. In addition, free cash flow
does not necessarily represent funds available for discretionary
use and is not necessarily a measure of the Company's ability to
fund its cash needs. As the Company uses free cash flow as a
measure of performance and as a measure of liquidity, the tables
below reconcile free cash flow to both net income (loss) and net
cash flow provided by (used for) operating activities, the most
directly comparable financial measures reported under GAAP. The
following table provides a reconciliation of net cash flow provided
by (used for) operating activities to free cash flow: Thirteen
Weeks Ended April 6, 2008 April 1, 2007 (As restated) Net cash
provided by (used for) operating activities $(19.5) $(144.0)
Adjustments to reconcile net cash flow used for operating
activities to free cash flow: Capital expenditures (19.9) (11.0)
Free cash flow $(39.4) $(155.0) The following table provides a
reconciliation of net income (loss) to free cash flow: Thirteen
Weeks Ended April 6, 2008 April 1, 2007 (As restated) Net income
(loss) $45.4 $(49.0) Adjustments to reconcile net income (loss) to
free cash flow: Depreciation and amortization of intangibles 39.9
49.9 Non-cash share-based compensation expense 4.2 8.1 Capital
expenditures (19.9) (11.0) Rental library purchases, net of rental
amortization (2.5) 24.4 Changes in working capital (106.9) (175.6)
Changes in deferred taxes and other 0.4 (1.8) Free cash flow
$(39.4) $(155.0) DATASOURCE: Blockbuster Inc. CONTACT: Karen
Raskopf, Senior Vice President, Corporate Communications, r Randy
Hargrove, Senior Director, Corporate Communications,
+1-214-854-3190, r investors Angelika Torres, Director, Investor
Relations, +1-214-854-4279, ll of Blockbuster Inc. Web site:
http://www.blockbuster.com/
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