Blockbuster Reports Third Quarter 2008 Results
- Third Quarter Domestic Same-Store Sales Increase 5.1%
- Third Quarter Net Loss Narrows by 48% to $18 Million
- Adjusted EBITDA of $40 Million
- Reiterates Full-Year Adjusted EBITDA Guidance
DALLAS, Nov. 6 // PRNewswire-FirstCall // -- Blockbuster Inc. (NYSE: BBI, BBI.B) today reported financial results for the third quarter ended October 5, 2008.
Total revenues for the third quarter of 2008 decreased 2.7%, or $33.6 million, to $1.20 billion, as compared to $1.24 billion in the third quarter of 2007. Net loss for the quarter narrowed 48.3% to $17.8 million, or $0.11 per share, as compared with a net loss of $34.4 million or $0.20 per share in the third quarter of 2007.
"We are pleased with our third quarter results, particularly in light of the unusually limited slate of movie titles and strong viewership of the Olympics during the period. Key initiatives around merchandise assortment, in-stock availability and expense reduction allowed us to deliver our third consecutive quarter of positive domestic same-store sales and reduce our net loss by over 48%," said Jim Keyes, Blockbuster Chairman and CEO. "As we continue to transform Blockbuster, we believe the consumer value of our rental offering positions us well in this challenging economic environment and gives us confidence we can achieve our full-year adjusted EBITDA guidance. At the same time, we are aware of the uncertainties of the macroeconomic environment and are taking steps to more conservatively manage capital spending and improve cash flow to limit the need for new debt financing, as evidenced by the recent reduction in our various letters of credit."
Third Quarter Financial Results
Total revenues for the third quarter of 2008 decreased 2.7%, or $33.6 million, to $1.20 billion mostly due to lower rental revenues from subscription and a decline in the company-operated store base worldwide. This decline was partially offset by a 35.1% increase in domestic merchandise revenues driven by a significant increase in game sales.
Domestic same-store revenues increased 5.1% as compared to the third quarter of 2007, due to a 0.8% growth in same-store rental revenues and a 30.7% increase in same-store merchandise sales, largely driven by a significant increase in sales of games software and hardware. International same-store revenues decreased 3.4% as compared to the same period last year, reflecting a 2.2% decline in same-store rental revenues and a 5.0% decline in same-store merchandise sales. Worldwide same-store revenues grew 1.9% from the same period last year.
Gross profit for the third quarter of 2008 decreased $26.9 million to $643.3 million as compared to the third quarter of 2007, and gross margin declined 70 basis points to 53.4%. General and administrative expenses for the period decreased $28.1 million, largely offsetting a decline in gross profit. Advertising expense for the third quarter of 2008 totaled $32.4 million as compared to $27.5 million for the third quarter of 2007.
EBITDA for the third quarter declined $3.9 million to $34.8 million from $38.7 million last year. Adjusted EBITDA, which excludes lease termination costs and share-based compensation expenses, decreased to $40.2 million from $49.2 million in the third quarter of 2007.
Net loss for the third quarter 2008 narrowed $16.6 million -- or 48.3% -- to $17.8 million from $34.4 million in the third quarter of 2007.
Cash used for operating activities increased $1.1 million to $18.2 million for the third quarter of 2008 from cash used of $17.1 million for the third quarter of 2007. Free cash flow (net cash used for operating activities less capital expenditures) decreased $15.1 million to a negative $53.7 million for the third quarter of 2008 from a negative $38.6 million for the third quarter of 2007. The Company ended the quarter with $135 million outstanding under its revolving credit facility.
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 3:30 p.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, the Company's Form 10-Q for the quarter ended July 6, 2008 and in the Company's upcoming Form 10-Q for the quarter ended October 5, 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 7,500 stores throughout the Americas, Europe, Asia and Australia. The Company may be accessed worldwide at http://www.blockbuster.com.
Caution Concerning Forward Looking Statements:
This press release contains "forward looking statements" -- that is, statements related to future, not past, events. In this context, forward looking statements often address our expected future business and financial performance, and often contain words such as "expect," "intend," "plan," "believe," "seek," or "will." Forward looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could adversely or positively affect our future results include, among others, from time to time: (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 entertainment industry performance and the accuracy of our estimates and judgments regarding trends impacting the entertainment industry, particularly the home video segment; (3) our ability to obtain favorable terms from suppliers, including on such matters as copy depth and uses of product; (4) the variability in consumer appeal of the movie titles and games software released for rental and sale and the timing of such releases; (5) our ability to anticipate and respond to changing consumer preferences for entertainment, including with respect to new technologies and alternative methods of content delivery, and to effectively adjust our offerings if and as necessary; (6) the continued volatility and further deterioration of the capital markets and given such conditions, our ability to secure an amendment to our existing debt agreements or to obtain alternative financing or acceptable terms, if at all; (7) the sustained decrease in the market price of our common stock; (8) uncertainty surrounding capital and credit markets and any resulting difficulty we may experience in obtaining financing or funding normal operations could cause some of our trade creditors to impose less favorable terms; (9) while we believe that we will achieve our full-year adjusted EBITDA guidance, our ability to achieve our adjusted EBITDA guidance is subject to many risks and uncertainties, so there is no assurance that we will achieve our adjusted EBITDA guidance. Also, there is no assurance that the previously disclosed reconciliation between adjusted EBITDA and net income will remain the same; (10) regional, national and global conditions existing from time to time, including those of an economic, business and competitive nature; and (11) 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 and under the heading "Disclosure Regarding Forward-Looking Information" in our quarterly report on Form 10-Q for the quarter ended July 6, 2008. In addition, our revolving credit facility and Term A loan mature in August 2009, and the amounts we can borrow under our revolving credit facility prior to maturity will be reduced pursuant to the terms of our credit agreement. If we are unable to refinance our credit facility or obtain other financing, then we will be required to fund our business and operations without outside capital. There can be no assurance that we will be able to obtain adequate financing on acceptable terms or at all, and there is no guarantee that we will be able to fund our business without outside capital. If we are required to fund our business without outside capital, we will have to significantly reduce our spending and defer growth initiatives. These changes may impede our ability to execute our operational strategies and goals. 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. These uncertainties may cause our actual future results to be materially different than those expressed in our forward looking statements. We do not undertake to update our forward looking statements.
BLOCKBUSTER INC.
COMPARATIVE FINANCIAL HIGHLIGHTS
(In millions, except per share amounts)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 5, September 30, October 5, September 30,
2008 2007 2008 2007
(As restated) (As restated)
Revenues:
Rental revenues $751.4 $812.1 $2,465.1 $2,494.4
Previously rented
product ("PRP")
revenues 148.5 150.6 483.4 484.9
Total rental
revenues 899.9 962.7 2,948.5 2,979.3
Merchandise sales 297.9 267.6 931.5 945.0
Other revenues 6.8 7.9 23.2 51.0
1,204.6 1,238.2 3,903.2 3,975.3
Cost of sales:
Cost of rental revenues 329.3 365.4 1,137.3 1,194.0
Cost of merchandise sold 232.0 202.6 725.7 713.8
561.3 568.0 1,863.0 1,907.8
Gross profit 643.3 670.2 2,040.2 2,067.5
Operating expenses:
General and
administrative 576.1 604.2 1,782.4 1,882.2
Advertising 32.4 27.5 94.8 158.9
Depreciation and
amortization of
intangibles 37.1 43.5 114.9 142.0
Gain on sale of
Gamestation - (0.2) - (81.5)
645.6 675.0 1,992.1 2,101.6
Operating income (loss) (2.3) (4.8) 48.1 (34.1)
Interest expense (17.9) (20.7) (55.5) (65.4)
Interest income 0.5 1.3 2.2 5.1
Other items, net 5.8 (1.3) 6.1 (1.5)
Income (loss) before income
taxes (13.9) (25.5) 0.9 (95.9)
Provision for income taxes (3.9) (8.7) (14.9) (20.2)
Income (loss) from continuing
operations (17.8) (34.2) (14.0) (116.1)
Income (loss) from
discontinued operations,
net of tax - (0.2) (0.3) 1.3
Net income (loss) (17.8) (34.4) (14.3) (114.8)
Preferred stock dividends (2.8) (2.8) (8.4) (8.4)
Net income (loss) applicable
to common stockholders $(20.6) $(37.2) $(22.7) $(123.2)
Net income (loss) per common
share:
Basic and diluted
Continuing operations $(0.11) $(0.20) $(0.12) $(0.66)
Discontinued operations - - - 0.01
Net income (loss) $(0.11) $(0.20) $(0.12) $(0.65)
Weighted average common
shares outstanding:
Basic and diluted 192.1 190.6 191.7 190.0
BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
Revenues by Product Line:
Thirteen Weeks Ended Thirteen Weeks Ended
October 5, 2008 September 30, 2007
Percent Percent
Revenues of Total Revenues of Total
(As restated)
Domestic
Rental revenues
Movies $515.6 63.5% $563.0 67.5%
Games 50.5 6.2% 51.1 6.1%
PRP 113.9 14.0% 120.1 14.4%
Total rental revenues 680.0 83.7% 734.2 88.0%
Merchandise sales
Movies 43.0 5.3% 43.0 5.1%
Games 37.6 4.6% 9.7 1.2%
Other 46.9 5.8% 41.7 5.0%
Total merchandise sales 127.5 15.7% 94.4 11.3%
Other revenues 5.0 0.6% 5.6 0.7%
Total domestic revenues $812.5 100.0% $834.2 100.0%
International
Rental revenues
Movies $171.2 43.6% $183.7 45.5%
Games 14.1 3.6% 14.3 3.5%
PRP 34.6 8.8% 30.5 7.5%
Total rental revenues 219.9 56.0% 228.5 56.5%
Merchandise sales
Movies 41.8 10.7% 48.5 12.0%
Games 85.1 21.7% 81.9 20.3%
Other 43.5 11.1% 42.8 10.6%
Total merchandise sales 170.4 43.5% 173.2 42.9%
Other revenues 1.8 0.5% 2.3 0.6%
Total international revenues $392.1 100.0% $404.0 100.0%
Total consolidated revenues $1,204.6 $1,238.2
Thirty-Nine Weeks Thirty-Nine Weeks
October 5, 2008 September 30, 2007
Percent Percent
Revenues of Total Revenues of Total
(As restated)
Domestic
Rental revenues
Movies $1,720.6 64.5% $1,744.3 66.8%
Games 157.6 5.9% 161.1 6.2%
PRP 376.6 14.1% 392.3 15.0%
Total rental revenues 2,254.8 84.5% 2,297.7 88.0%
Merchandise sales
Movies 148.1 5.6% 139.6 5.3%
Games 100.9 3.8% 28.1 1.1%
Other 144.4 5.4% 127.2 4.9%
Total merchandise sales 393.4 14.8% 294.9 11.3%
Other revenues 17.6 0.7% 18.1 0.7%
Total domestic revenues $2,665.8 100.0% $2,610.7 100.0%
International
Rental revenues
Movies $544.1 43.9% $547.9 40.2%
Games 42.8 3.5% 41.1 3.0%
PRP 106.8 8.6% 92.6 6.8%
Total rental revenues 693.7 56.0% 681.6 50.0%
Merchandise sales
Movies 132.7 10.8% 142.7 10.4%
Games 273.8 22.1% 379.8 27.8%
Other 131.6 10.6% 127.6 9.4%
Total merchandise sales 538.1 43.5% 650.1 47.6%
Other revenues 5.6 0.5% 32.9 2.4%
Total international revenues $1,237.4 100.0% $1,364.6 100.0%
Total consolidated revenues $3,903.2 $3,975.3
Gross Profit by Product Line:
Thirteen Weeks Ended Thirteen Weeks Ended
October 5, 2008 September 30, 2007
Percent Percent
Gross of Gross of
Profit Revenue Profit Revenue
(As restated)
Domestic
Rental $419.5 61.7% $436.2 59.4%
Merchandise 24.5 19.2% 26.3 27.9%
Other 5.0 100.0% 5.6 100.0%
Total domestic 449.0 55.3% 468.1 56.1%
International
Rental 151.1 68.7% 161.1 70.5%
Merchandise 41.4 24.3% 38.7 22.3%
Other 1.8 100.0% 2.3 100.0%
Total international 194.3 49.6% 202.1 50.0%
Total consolidated $643.3 53.4% $670.2 54.1%
Gross Profit by Product Line:
Thirty-Nine Weeks Thirty-Nine Weeks
Ended Ended
October 5, 2008 September 30, 2007
Percent Percent
Gross of Gross of
Profit Revenue Profit Revenue
(As restated)
Domestic
Rental $1,334.0 59.2% $1,314.6 57.2%
Merchandise 77.9 19.8% 87.7 29.7%
Other 17.6 100.0% 18.1 100.0%
Total domestic 1,429.5 53.6% 1,420.4 54.4%
International
Rental 477.2 68.8% 470.7 69.1%
Merchandise 127.9 23.8% 143.5 22.1%
Other 5.6 100.0% 32.9 100.0%
Total international 610.7 49.4% 647.1 47.4%
Total consolidated $2,040.2 52.3% $2,067.5 52.0%
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
October 5, 2008 September 30, 2007
Percent Percent
SG&A of SG&A of
Expense Revenue Expense Revenue
(As restated)
Domestic
Advertising $23.7 2.0% $19.5 1.6%
G&A expense - store (4 wall) 331.5 27.5% 330.9 26.7%
G&A expense - corporate and other 79.6 6.6% 102.5 8.3%
International
Advertising 8.7 0.7% 8.0 0.6%
G&A expense 165.0 13.7% 170.8 13.8%
Total SG&A $608.5 50.5% $631.7 51.0%
Thirty-Nine Weeks Thirty-Nine Weeks
Ended Ended
October 5, 2008 September 30, 2007
Percent Percent
SG&A of SG&A of
Expense Revenue Expense Revenue
(As restated)
Domestic
Advertising $67.6 1.7% $127.8 3.2%
G&A expense - store (4 wall) 1,020.5 26.1% 1,040.5 26.2%
G&A expense - corporate and other 246.0 6.3% 305.6 7.7%
International
Advertising 27.2 0.7% 31.1 0.8%
G&A expense 515.9 13.2% 536.1 13.5%
Total SG&A $1,877.2 48.0% $2,041.1 51.4%
Facilities Statistics:
As of October 5, 2008
Domestic International
Total Avg Sq Total Sq Total Avg Sq Total Sq
Number Footage Footage Number Footage Footage
(in (in (in (in
thousands) thousands) thousands)(thousands)
Stores 3,909 5.5 21,675 1,934 3.0 5,784
Distribution
centers 39 N/A 1,121 7 N/A 177
Corporate/
regional offices 12 N/A 416 7 N/A 90
BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
Other Information: Revenue
Thirteen Weeks Thirty-Nine Weeks
Ended Ended
October 5, September 30, October 5, September 30,
2008 2007 2008 2007
(As restated) (As restated)
Domestic same-store revenues
increase (decrease)
Rental revenues 0.8% (9.9)% 2.5% (8.7)%
Merchandise sales 30.7% (3.9)% 37.9% (10.1)%
Total revenues 5.1% (9.3)% 7.2% (9.0)%
International same-store revenues
increase (decrease)
Rental revenues (2.2)% (2.8)% (1.8)% (3.9)%
Merchandise sales (5.0)% 28.2 % (1.8)% 25.0%
Total revenues (3.4)% 8.4 % (1.8)% 6.4%
Worldwide same-store revenues
increase (decrease)
Rental revenues (0.1)% (8.1)% 1.3% (7.5)%
Merchandise sales 7.8 % 14.2% 12.4% 8.8%
Total revenues 1.9 % (3.7)% 3.9% (4.3)%
Cash Flow Data:
Thirteen Weeks Thirty-Nine Weeks
Ended Ended
October September October September
5, 30, 5, 30,
2008 2007 2008 2007
(As (As
restated) restated)
Net cash provided by (used for)
operating activities $(18.2) $(17.1) $(101.1) $(201.4)
Net cash provided by (used for)
investing activities $(33.1) $(20.8) $(73.8) $86.0
Net cash provided by (used for)
financing activities $11.7 $16.5 $88.7 $(156.0)
Capital Expenditures $35.5 $21.5 $76.1 $52.0
Balance Sheet Information:
October 5, 2008 January 6, 2008
Cash and cash equivalents $95.3 $184.6
Merchandise inventories $471.0 $343.9
Rental library $377.6 $441.1
Accounts payable $411.4 $472.8
Total debt (including capital lease
obligations) $854.3 $757.8
BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION
Worldwide Store Count Information:
Thirty-Nine Weeks Ended
October 5, 2008 September 30, 2007
Domestic company-owned stores:
Beginning 4,005 4,255
Additions/purchases 30 35
Closures/sales (126) (260)
Ending 3,909 4,030
International company-owned stores:
Beginning 2,068 2,296
Additions/purchases 13 87
Closures/sales (147) (311)
Ending 1,934 2,072
Franchised stores:
Beginning 1,757 1,809
Additions/purchases 81 43
Closures/sales (156) (103)
Ending 1,682 1,749
Total stores worldwide:
Beginning 7,830 8,360
Additions/purchases 124 165
Closures/sales (429) (674)
Ending 7,525 7,851
BLOCKBUSTER INC.
DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(Dollars in millions)
For the thirteen and thirty-nine weeks ended October 5, 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, severance and costs incurred to explore
the acquisition of Circuit City Stores, Inc.
For the thirteen and thirty-nine weeks ended September 30, 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 and the gain on
sale of Gamestation. Additionally, for the thirty-nine weeks ended
September 30, 2007, the Company reports adjusted net income (loss),
adjusted net income (loss) per common share and adjusted operating
income (loss) excluding proceeds from the termination of our 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 are 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 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 Thirty-Nine Weeks
Ended Ended
October September October September
5, 30, 5, 30,
2008 2007 2008 2007
(As (As
restated) restated)
Reconciliation of adjusted
net income (loss):
Income (loss) from continuing
operations $(17.8) $(34.2) $(14.0) $(116.1)
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) 4.3 2.9 9.7 15.0
Severance costs (non-recurring) - 7.9 1.3 17.5
Costs incurred to explore the
acquisition of Circuit City
Stores, Inc. (non-recurring) - - 1.9 -
Gain on sale of Gamestation
(non-recurring) - (0.2) - (81.5)
Adjusted net income (loss) (13.5) (23.6) (1.1) (182.1)
Preferred stock dividends (2.8) (2.8) (8.4) (8.4)
Adjusted net income (loss)
applicable to common
stockholders $(16.3) $(26.4) $(9.5) $(190.5)
Adjusted net income (loss)
per common share $(0.08) $(0.14) $(0.05) $(1.00)
Reconciliation of adjusted operating
income (loss):
Operating income (loss) $(2.3) $(4.8) $48.1 $(34.1)
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) 4.3 2.9 9.7 15.0
Severance costs (non-recurring) - 7.9 1.3 17.5
Costs incurred to explore the
acquisition of Circuit City
Stores, Inc. (non-recurring) - - 1.9 -
Gain on sale of Gamestation
(non-recurring) - (0.2) - (81.5)
Adjusted operating income (loss) $2.0 $5.8 $61.0 $(103.1)
BLOCKBUSTER INC.
DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(Dollars in millions)
For the thirteen and thirty-nine weeks ended October 5, 2008, the
Company reports adjusted earnings before interest, taxes, depreciation
and amortization ("adjusted EBITDA") excluding costs incurred for store
closures, severance, costs incurred to explore the acquisition of
Circuit City Stores, Inc. and stock compensation.
For the thirteen and thirty-nine weeks ended September 30, 2007, the
Company reports adjusted EBITDA excluding costs incurred for store
closures, severance, the gain on sale of Gamestation and stock
compensation. Additionally, for the thirty-nine weeks ended September
30, 2007, the Company reports adjusted EBITDA excluding proceeds from
the termination of our 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 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, net 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 Thirty-Nine Weeks
Ended Ended
October September October September
5, 30, 5, 30,
2008 2007 2008 2007
(As (As
restated) restated)
Reconciliation of adjusted EBITDA:
Net income (loss) $(17.8) $(34.4) $(14.3) $(114.8)
Adjustments to reconcile net income
(loss) to adjusted EBITDA:
(Income) loss from discontinued
operations, net of tax - 0.2 0.3 (1.3)
Taxes 3.9 8.7 14.9 20.2
Interest and other income, net 11.6 20.7 47.2 61.8
Depreciation and amortization of
intangibles 37.1 43.5 114.9 142.0
EBITDA $34.8 $38.7 $163.0 $107.9
Lease termination costs incurred for
store closures (recurring) 2.5 1.6 4.0 8.7
Termination of Brazilian franchise
agreement (non-recurring) - - - (20.0)
Severance costs (non-recurring) - 7.9 1.3 17.5
Costs incurred to explore the
acquisition of Circuit City
Stores, Inc. (non-recurring) - - 1.9 -
Gain on sale of Gamestation
(non-recurring) - (0.2) - (81.5)
Stock compensation (recurring) 2.9 1.2 12.7 9.9
Adjusted EBITDA $40.2 $49.2 $182.9 $42.5
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 is 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 Thirty-Nine Weeks
Ended Ended
October September October September
5, 30, 5, 30,
2008 2007 2008 2007
(As (As
restated) restated)
Net cash provided by (used for)
operating activities $(18.2) $(17.1) $(101.1) $(201.4)
Adjustments to reconcile net cash
flow used for operating activities
to free cash flow:
Capital expenditures (35.5) (21.5) (76.1) (52.0)
Free cash flow $(53.7) $(38.6) $(177.2) $(253.4)
The following table provides a reconciliation of net income (loss)
to free cash flow:
Thirteen Weeks Thirty-Nine Weeks
Ended Ended
October September October September
5, 30, 5, 30,
2008 2007 2008 2007
(As (As
restated) restated)
Net income (loss) $(17.8) $(34.4) $(14.3) $(114.8)
Adjustments to reconcile net income
(loss) to free cash flow:
Depreciation and amortization of
intangibles 37.1 43.5 114.9 142.0
Non-cash share-based compensation
expense 2.9 1.2 12.7 9.9
Capital expenditures (35.5) (21.5) (76.1) (52.0)
Rental library purchases, net of
rental amortization 21.2 (10.3) 60.5 39.5
Changes in working capital (63.5) (18.2) (276.0) (196.5)
Changes in deferred taxes and other 1.9 1.3 1.1 -
Gain on sale of Gamestation - (0.2) - (81.5)
Free cash flow $(53.7) $(38.6) $(177.2) $(253.4)
SOURCE Blockbuster Inc.
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