UPDATE:Blockbuster Swings To 4Q Loss On Write-Down;Shares Jump
19 Março 2009 - 9:38PM
Dow Jones News
Blockbuster Inc. (BBI) said Thursday it reached agreements with
JPMorgan Chase & Co. (JPM) and two of its largest lenders to
amend and extend its revolving credit facility, easing concerns the
video-rental chain is headed for a liquidity crunch.
Shares initially rose in after-hours trading but recently
slipped back and were down 6.7% at 83 cents. Fourth-quarter
earnings excluding items trumped analysts' expectations, but
Blockbuster's 2009 earnings guidance was slightly below analyst
estimates.
In addition, Blockbuster said it was unable to complete
negotiations in time for the planned filing Friday of its annual
10-K form to the Securities and Exchange Commission. As a result,
it will delay the filing until April 6 and believes auditors could
raise doubts about the company's ability to continue as a going
concern at that time.
The commitments from lenders representing 65% of expected $250
million principal amount would extend the revolver through Sept.
30, 2010, but reduce the principal available from $350 million.
Chairman Jim Keyes said $250 million would be adequate to meet
Blockbuster's needs. "We're mostly concerned about the cost of
capital," he said, adding that most companies refinancing in the
current credit market are paying "irrational" costs.
The Dallas company has been scrambling in a tough credit climate
to restructure debt coming due in August, and earlier this month it
hired a law firm to explore restructuring options, but said it
doesn't intend to file for bankruptcy. Shares are down two-thirds
in the past six months.
"The financing seems to be moving in the right direction, and it
seems to me they're on track to meet all the necessary
requirements," said Sterne, Agee & Leach analyst Arvind
Bhatia.
Executives on Thursday outlined a more conservative approach to
capital-intensive initiatives and said they plan to cut costs by
$200 million, mostly through lease expense reductions, cuts in
compensation and increased used of outsourcing. The cost cuts would
represent about 10% of Blockbuster's current selling, general and
administrative expenses.
Keyes said executives have been meeting with movie studios and
other suppliers to keep them posted on Blockbuster's liquidity and
its refinancing progress.
Blockbuster swung to a fourth-quarter net loss on a $435 million
non-cash charge to write down goodwill. The Dallas company reported
a net loss of $359.8 million, or $1.89 a share, compared with
year-earlier net income of $41 million, or 18 cents a share.
Excluding items such as the write-down, which Blockbuster warned
about earlier this month, earnings rose to 40 cents a share from 26
cents a share.
Revenue dropped 12% to $1.38 billion on the stronger dollar and
weaker results from the company's by-mail rental service.
Analysts polled by Thomson Reuters expected per-share earnings
of 25 cents on revenue of $1.52 billion.
Gross margin fell to 49.3% from 50.9% on the revenue drop.
Earlier this month, the company reported U.S. same-store sales
rose 4%, driven by increased sales of games, game merchandise and
consumer electronics. U.S. same-store sales grew in all four
quarters of the year, a good sign for the company after five years
of declines.
For the full year, U.S. same-store sales rose 6.4%, representing
the first annual increase in eight years. Rental revenues rose 1.2%
on a same-store basis, while retail revenues jumped 37.4%.
Blockbuster's goodwill charge led to a full-year net loss of $374.1
million but adjusted earnings before interest, taxes, depreciation
and amortization topped company guidance and came in at $319.1
million.
Looking ahead, the company expects adjusted earnings before
interest, taxes, depreciation and amortization of $305 million to
$325 million, compared with Wall Street's view of $336.8
million.
Blockbuster has been looking for ways to diversify its business,
mulling a $1 billion-plus bid for Circuit City Stores Inc. (CCTYQ),
which it ultimately dropped last summer. Circuit City has since
gone out of business.
Additionally, Blockbuster is facing stiff competition from
online rival Netflix Inc. (NFLX), pioneer of DVD rentals by mail,
as well as Internet sites that let consumers stream movies and
television shows, often for free.
(John Kell contributed to this report)
-By Mary Ellen Lloyd, Dow Jones Newswires; 704-948-9145;
maryellen.lloyd@dowjones.com