Wednesday, May 12, 2010

Blockbuster Inc.(NYSE: BBI): Q1 Earnings Preview

Blockbuster Inc.(NYSE: BBI) is scheduled to release its first-quarter 2010 financial results after the closing bell on Thursday, May 13, 2010. Analysts, on average, expect the company to report a loss of 14 cents a share on revenue of $933.25 million. In the year ago period, the company posted earnings of 12 cents per share on revenue of $1.12 billion.

Blockbuster Inc., together with its subsidiaries, primarily operates and franchises entertainment-related stores. The company offers movies and video games for in-store rental, and sale and trade, as well as sells other entertainment-related merchandise. As of September 2, 2009, the company operated approximately 7,100 stores throughout the Americas, Europe, Asia, and Australia.

The embattled company has seen its market share eroded in the past several years due to stiff competition from online DVD rental firm Netflix and Redbox kiosks. Coinstar’s RedBox self-service DVD kiosks offer movie rentals for $1 per day, while Netflix’s online DVD subscription allows customers to rent unlimited movies for $13.99 with two DVDs out at a time.Blockbuster has responded with its own $1-a-day movie kiosks, as well as with an online by-mail subscription service and instant movie downloading. But it appears that the innovations might be too little, too late. The company has continued to struggle with its heavy debt load and declining bricks-and-mortar business as it simultaneously attacks the digital space and kiosk business.

In the preceding fourth quarter, the Dallas, Texas-based company posted a loss o$435 million, or $2.24 a share, compared with a loss of $359.8 million, or $1.89 a share, in the year-earlier period. Excluding items, Blockbuster said its adjusted net loss was $44.3 million, or 24 cents a share, in the latest three months. Revenue fell to $1.08 billion from $1.31 billion. Analysts, on average, expected the company to report a loss of $0.14 per share on revenue of $1.08 billion for the quarter.

In a regulatory filing in March, the company said that it will likely file for bankruptcy if it's unable to address its debt load.Blockbuster's debt, including capital lease obligations, totaled $964 million as of Dec. 31, according to its financial filings. The company issued a similar warning nearly a year ago, but was able to improve its liquidity through widespread store closings and amended agreements with creditors to delay debt payments. It will have to make $112.5 million in principal payments on its debt this year.

As part of its plan to stave off bankruptcy, Blockbuster plans to close more stores and cut expenses by more than $200 million. It hopes to do a debt-for-equity swap with holders of its senior subordinated notes and intends to hold talks with holders of its Series A convertible preferred stock, the company said in the filing.

In 2009, Blockbuster closed 718 company-operated and franchised stores worldwide, including 572 in the U.S. It also sold its 184-store chain in Ireland. Blockbuster may shut as many as 545 stores this year, reducing the total to about 3,500, the company said in a regulatory filing.

Shares of the Blockbuster also got a boost in recent times from the closure of Movie Gallery, its closest competitor.

Earlier in April, the company said it is not in compliance with the New York Stock Exchange requirements for minimum market value. Management also said that it will ask shareholders to vote on a reverse stock split during the annual meeting to be held on June 26.

In terms of stock performance, Blockbuster shares have lost almost 66 percent over the past year.

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