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Recent Highlights
-- Completes funding of $250 million amended and extended single-draw
credit facility;
-- Announces $21.4 million (U.S. dollars) asset-based loan for Canadian
subsidiary;
-- Reports net income of $27.7 million, or $0.12 per diluted share;
-- Continues cash maximization initiatives and remains on track to reduce
G&A by over $200 million during fiscal 2009; and
-- Reiterates full-year adjusted EBITDA guidance
"We are pleased to have successfully completed funding of the $250 million amended and extended credit facility. Our new financing, combined with our cost savings initiatives and additional cash availability, provides sufficient liquidity to continue our business transformation," stated Jim Keyes, Chairman and Chief Executive Officer of Blockbuster. "Key elements of this strategy include ongoing efforts to improve our in-stock availability and secure strategic alliances that leverage our strong brand, while also launching a new advertising campaign that promotes our unique multi-channel customer offering. Looking forward, we believe these actions will allow Blockbuster to deliver solid EBITDA and improve the balance sheet through the substantial reduction of debt."
Consolidated First Quarter Financial Results
Total revenues for the first quarter of 2009 were $1.12 billion, compared to total revenues of $1.39 billion for the same period one year ago. Results for the first quarter reflect the Company's prudent approach to preserving liquidity as it completed its refinancing in the challenging macro environment. The reduction of inventory and lower advertising spend, combined with weaker DVD title strength and competition from strong theater box office traffic, had a dilutive impact on sales. Additionally, revenues reflect the negative impact of foreign currency exchange rates of $81.3 million and a decline in the company-operated store base worldwide. The decline in total revenues was partially offset by an increase in the average rental rate due to the favorable impact of price increases when compared to the first quarter of 2008.
Gross profit for the first quarter of 2009 was $590.7 million, compared to $741.7 million in the same period one year ago. The gross profit decline was primarily attributable to lower same-store revenues and the impact of foreign currency exchange rates of $40.3 million, resulting in a gross margin of 52.6 percent. This compares to gross margin of 53.2 percent in the first quarter of 2008.
Operating expenses for the quarter were $540.6 million, compared to $671.5 million in the same period one year ago. General and administrative ("G&A") expenses during the first quarter of 2009 were $493.4 million as compared to $601.1 million in the first quarter of 2008, representing a decrease of $107.7 million, or 17.9 percent, and largely offsetting the decline in gross profit dollars. The Company's G&A results for the first quarter of 2009 include the $33.1 million favorable impact of foreign currency exchange. Total selling, general and administrative expenses ("SG&A") decreased $125.8 million, or 19.9 percent, compared to the same period one year ago.
Operating income for the first quarter of 2009 was $50.1 million, compared to operating income of $70.2 million in the first quarter one year ago. Adjusted operating income, which excludes costs associated with store closures, severance, an adjustment for game inventory obsolescence and the favorable settlement of a future liability, was $63.7 million for the first quarter of 2009, compared to adjusted operating income of $73.0 million in the first quarter of 2008.
Net income for the first quarter of 2009 was $27.7 million, or $0.12 per diluted share, compared to net income of $45.4 million, or $0.20 per diluted share, in the first quarter of 2008. Adjusted net income for the first quarter of 2009, which excludes costs associated with store closures, severance, an adjustment for game inventory obsolescence and the favorable settlement of a future liability, totaled $41.3 million, or $0.19 per diluted share. This compares to adjusted net income of $48.5 million, or $0.21 per diluted share, in the first quarter of 2008.
First quarter 2009 earnings before interest, taxes, depreciation and amortization ("EBITDA") was $84.9 million, compared to $110.1 million in the first quarter of 2008. Adjusted EBITDA, which excludes stock-based compensation expenses, costs associated with lease terminations, severance, an adjustment for game inventory obsolescence and the favorable settlement of a future liability, was $98.2 million in the first quarter of 2009, compared to adjusted EBITDA of $114.5 million in the same period one year ago.
Blockbuster ended the first quarter of 2009 with $107.0 million in cash and cash equivalents. Cash used for operating activities during the quarter was $87.2 million, compared with $19.5 million of cash used for operating activities in the first quarter of 2008. First quarter free cash flow ("FCF") (net cash used for operating activities less capital expenditures) primarily reflects the Company's aggressive remuneration of accounts payable. As a result, FCF was negative $95.7 million in the first quarter of 2009, compared with negative FCF of $39.4 million in the same period in 2008.
Reconciliations of adjusted results and other non-GAAP financial measures are shown in the tables following the text of this press release.
Same-Store Sales
First quarter 2009 domestic same-store sales decreased 10.9 percent, compared to an increase of 2.9 percent in the same period in 2008. Same-store sales for the first quarter of 2009 were comprised of a 12.3 percent decrease in domestic same-store rental comparables and a 3.1 percent decrease in domestic same-store retail comparables. International same-store sales decreased 6.7 percent, reflecting an 8.4 percent decline in same-store rental comparables and a 4.2 percent decrease in same-store retail comparables for the same period in 2008. Worldwide same-store sales decreased 9.6 percent.
Asset-Based Loan
Blockbuster today announced that its subsidiary, Blockbuster Canada Co., entered into an agreement with Callidus Capital Corporation, a privately-held Canadian lender, to provide a non-revolving asset-based loan in the amount of $21.4 million (U.S. dollars) for Blockbuster Canada Co. Proceeds of the loan, which matures on September 30, 2010, will be used for general corporate purposes.
Additional information may be found, free of charge, in the Company's Current Report on Form 8-K at either www.sec.gov or http://investor.blockbuster.com.
7-1/2 Series A Cumulative Convertible Perpetual Preferred Stock
The Company also announced that its Board of Directors has determined not to declare or pay a dividend on its shares of 7-1/2 Series A convertible perpetual preferred stock with respect to the quarterly period beginning on January 5, 2009 and ending on April 5, 2009. Dividends on the Series A preferred stock are cumulative and will begin to accumulate beginning May 15, 2009. This action is consistent with the Company's efforts to manage cash, preserve liquidity and prevent any further unnecessary dilution to the Company's common stock.
Corporate Governance Update
After almost six years of service as a member of the Company's Audit Committee, director Jackie Clegg is transitioning off of the Audit Committee effective as of May 11, 2009. Ms. Clegg will continue to serve on the Board and as Chair of the Board's Nominating and Governance Committee. The Board will appoint a replacement Audit Committee member at the Board's meeting on May 28, 2009, following the Company's 2009 annual meeting of stockholders.
2009 Outlook
"We continue to expect that our same-store comparables will be lower in 2009 than in 2008, but expect strong EBITDA performance for the full year. As such, we remain comfortable with our prior guidance for fiscal 2009, which includes adjusted EBITDA in the range of $305 million to $325 million," stated Tom Casey, Executive Vice President and Chief Financial Officer of Blockbuster Inc. "Additionally, we remain on track to reduce G&A by over $200 million in fiscal 2009, which includes the contributions from our successful lease cost savings initiative. Our projections surrounding reductions in G&A exclude any impacts of foreign currency exchange rates or inflation."
The Company will provide additional business updates and a more detailed review of its financial and operational results for the first quarter ended April 5, 2009 in conjunction with the upcoming conference call as previously announced and referenced below.
First Quarter 2009 Financial Results Conference Call and Web Cast
Blockbuster will host a conference call today, May 14, 2009, at 4:30 p.m. Eastern Time ("ET"). Investors and analysts may join the conference call by dialing 800-374-0113. International callers may join the teleconference by dialing 706-758-9607. A telephonic replay will be available beginning two hours after the conclusion of the call and will be available until midnight ET on Thursday, May 21, 2009. The replay number is 800-642-1687, with the pass code of 94725263. International callers interested in listening to the replay should dial 706-645-9291 with the same pass code. Finally, a live web cast (voice only) of the conference call will be accessible from the Investor section of the Company's website at http://investor.blockbuster.com. Following the live voice only web cast, an archived version will be available on Blockbuster's web site. Additional details regarding the Company's results may be found in its upcoming Quarterly Report on Form 10-Q for the fiscal quarter ended April 5, 2009, which will be filed with the Securities and Exchange Commission ("SEC") on May 15, 2009, in the Company's Annual Report on Form 10-K for the year ended January 4, 2009, and in other filings from time-to-time with the Securities and Exchange Commission.
Forward Looking Statements
This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may also be included from time to time in our other public filings, press releases, our website and oral and written presentations by management. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as "may," "will," "expects," "believes," "anticipates," "plans," "estimates," "projects," "predicts," "targets," "seeks," "could," "intends," "foresees" or the negative of such terms or other variations on such terms or comparable terminology. Similarly, statements in this release under the heading "2009 Outlook" and statements that describe our strategies, initiatives, objectives, plans or goals are forward-looking. These forward-looking statements are based on management's current intent, belief, expectations, estimates and projections. 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. The risk factors set forth under "Item 1A. Risk Factors" in our Annual Reports on Form 10-K and other matters discussed from time to time in our filings with the Securities and Exchange Commission, including the "Disclosure Regarding Forward-Looking Information" and "Risk Factors" sections of our Quarterly Reports on Form 10-Q, among others, could affect future results, causing these results to differ materially from those expressed in our forward-looking statements. Currently, the risks and uncertainties that may most directly impact our future results include (i) whether, despite the amended credit facility having been funded on the terms contemplated, we will have sufficient liquidity to finance the ongoing obligations of our business; and (ii) whether we will be able to otherwise improve our liquidity position by managing cash and cutting expenses. In the event that the risks disclosed in our public filings and those discussed above cause results to differ materially from those expressed in our forward-looking statements, our business, financial condition, results of operations or liquidity could be materially adversely affected and investors in our securities could lose part or all of their investments. Accordingly, our investors are cautioned not to place undue reliance on these forward-looking statements because, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. Further, the forward-looking statements included in this release and those included from time to time in our other public filings, press releases, our website and oral and written presentations by management are only made as of the respective dates thereof. We undertake no obligation to update publicly any forward-looking statement in this release or in other documents, our website or oral statements for any reason, even if new information becomes available or other events occur in the future.
About Blockbuster Inc.
Blockbuster Inc. is a leading global provider of in-home movies and game entertainment, with more than 7,200 stores throughout the Americas, Europe, Asia and Australia. The company may be accessed worldwide at www.blockbuster.com.
Financial Tables to Follow
BLOCKBUSTER INC.
COMPARATIVE FINANCIAL HIGHLIGHTS
(In millions, except per share amounts)
Fiscal Quarter Ended
--------------------
April 5, 2009 April 6, 2008
------------- -------------
Revenues:
Base rental revenues $720.5 $901.7
Previously rented product ("PRP")
revenues 140.2 174.6
----- -----
Total rental revenues 860.7 1,076.3
Merchandise sales 255.5 309.8
Other revenues 6.0 8.0
--- ---
1,122.2 1,394.1
------- -------
Cost of sales:
Cost of rental revenues 314.2 410.5
Cost of merchandise sold 217.3 241.9
----- -----
Total cost of sales 531.5 652.4
----- -----
Gross profit 590.7 741.7
----- -----
Operating expenses:
General and administrative 493.4 601.1
Advertising 12.4 30.5
Depreciation and intangible
amortization 34.8 39.9
---- ----
540.6 671.5
----- -----
Operating income (loss) 50.1 70.2
Interest expense (17.4) (19.2)
Interest income 0.2 1.1
Other items, net 0.4 0.4
--- ---
Income (loss) from continuing
operations before income taxes 33.3 52.5
Provision for income taxes (5.6) (6.8)
---- ----
Income (loss) from continuing
operations 27.7 45.7
Income (loss) from discontinued
operations, net of tax - (0.3)
--- ----
Net income (loss) 27.7 45.4
Preferred stock dividends (2.8) (2.8)
---- ----
Net income (loss) applicable to
common stockholders $24.9 $42.6
===== =====
Net income (loss) per common share:
Basic
Continuing operations $0.13 $0.22
Discontinued operations - -
--- ---
Net income (loss) $0.13 $0.22
===== =====
Weighted average common shares
outstanding:
Basic 192.7 191.4
===== =====
Net income (loss) per common share:
Diluted
Continuing operations $0.12 $0.21
Discontinued operations - (0.01)
--- -----
Net income (loss) $0.12 $0.20
===== =====
Weighted average common shares
outstanding:
Diluted 222.8 221.5
===== =====
BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
Revenues by Product Line:
Fiscal Quarter Ended Fiscal Quarter Ended
April 5, 2009 April 6, 2008
------------- -------------
Percent Percent
Revenues of Total Revenues of Total
-------- -------- -------- --------
Domestic
--------
Rental revenues
Movies $516.2 64.1% $631.7 66.0%
Games 54.3 6.7% 54.6 5.7%
PRP 112.2 13.9% 139.1 14.5%
----- ---- ----- ----
Total rental revenues 682.7 84.7% 825.4 86.2%
----- ---- ----- ----
Merchandise sales
Movies 51.1 6.4% 57.6 6.0%
Games 22.0 2.7% 20.0 2.1%
Other 45.2 5.6% 47.5 5.0%
---- --- ---- ---
Total merchandise sales 118.3 14.7% 125.1 13.1%
----- ---- ----- ----
Royalties and other
revenues 5.2 0.6% 6.3 0.7%
------ ----- ------ -----
Total domestic revenues $806.2 100.0% $956.8 100.0%
====== ===== ====== =====
International
-------------
Rental revenues
Movies $137.2 43.3% $199.8 45.7%
Games 12.8 4.1% 15.6 3.6%
PRP 28.0 8.9% 35.5 8.1%
---- --- ---- ---
Total rental revenues 178.0 56.3% 250.9 57.4%
----- ---- ----- ----
Merchandise sales
Movies 38.5 12.1% 48.5 11.1%
Games 66.9 21.2% 92.4 21.1%
Other 31.8 10.1% 43.8 10.0%
---- ---- ---- ----
Total merchandise sales 137.2 43.4% 184.7 42.2%
----- ---- ----- ----
Royalties and other
revenues 0.8 0.3% 1.7 0.4%
------ ----- ------ -----
Total international
revenues $316.0 100.0% $437.3 100.0%
====== ===== ====== =====
Total consolidated
revenues $1,122.2 $1,394.1
======== ========
========================================================================
Gross Profit by Product Line:
Fiscal Quarter Ended Fiscal Quarter Ended
April 5, 2009 April 6, 2008
------------- -------------
Percent Percent
Gross Profit of Revenue Gross Profit of Revenue
------------ ---------- ------------ ----------
Domestic
--------
Rental $425.1 62.3% $488.9 59.2%
Merchandise 3.8 3.2% 24.4 19.5%
Other 5.2 100.0% 6.3 100.0%
--- ---
Total domestic 434.1 53.8% 519.6 54.3%
----- -----
International
-------------
Rental 121.4 68.2% 176.9 70.5%
Merchandise 34.4 25.1% 43.5 23.6%
Other 0.8 100.0% 1.7 100.0%
--- ---
Total international 156.6 49.6% 222.1 50.8%
----- -----
Total consolidated $590.7 52.6% $741.7 53.2%
====== ======
BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION
Selling, General and Administrative (SG&A) Comparison
(Dollars in millions)
Selling, General and Administrative Expenses:
Fiscal Quarter Ended Fiscal Quarter Ended
April 5, 2009 April 6, 2008
------------- -------------
Percent Percent
SG&A Expense of Revenue SG&A Expense of Revenue
------------ ---------- ------------ ----------
Domestic
Advertising $6.7 0.6% $19.0 1.4%
G&A expense -
store (4 wall) 304.8 27.2% 345.2 24.8%
G&A expense -
corporate and other 56.2 5.0% 78.5 5.6%
International
Advertising 5.7 0.5% 11.5 0.8%
G&A expense 132.4 11.8% 177.4 12.7%
------ ---- ------ ----
Total SG&A $505.8 45.1% $631.6 45.3%
====== ==== ====== ====
========================================================================
Facilities Statistics:
As of April 5, 2009
-------------------
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 3,826 5.5 21,171 1,916 3.1 5,912
Distribution
centers 39 N/A 1,121 7 N/A 190
Corporate/
regional
offices 13 N/A 428 7 N/A 107
========================================================================
BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
Other Information: Revenue
Fiscal Quarter Ended
--------------------
April 5, 2009 April 6, 2008
------------- -------------
Domestic same-store revenues increase (decrease)
Rental revenues (12.3)% 0.4%
Merchandise sales (3.1)% 19.7%
Total revenues (10.9)% 2.9%
International same-store revenues increase (decrease)
Rental revenues (8.4)% 0.9%
Merchandise sales (4.2)% (4.9)%
Total revenues (6.7)% (1.5)%
Worldwide same-store revenues increase (decrease)
Rental revenues (11.4)% 0.6%
Merchandise sales (3.7)% 4.2%
Total revenues (9.6)% 1.4%
==========================================================================
Cash Flow Data:
Fiscal Quarter Ended
--------------------
April 5, 2009 April 6, 2008
------------- -------------
Net cash provided by (used for)
operating activities $(87.2) $(19.5)
Net cash provided by (used for)
investing activities $(8.1) $(19.9)
Net cash provided by (used for)
financing activities $48.7 $(9.1)
Capital Expenditures $8.5 $19.9
==========================================================================
Balance Sheet Information:
April 5, 2009 January 4, 2009
------------- ---------------
Cash and cash equivalents $107.0 $154.9
Merchandise inventories $339.1 $432.8
Rental library $353.4 $355.8
Accounts payable $240.3 $427.3
Total debt (including capital lease
obligations) $881.2 $817.8
BLOCKBUSTER INC.
SUPPLEMENTAL FINANCIAL INFORMATION
Worldwide Store Count Information:
Company-Operated Franchised Total
---------------- ---------- -----
U.S. Int'l. Total U.S. Int'l. Total U.S. Int'l. Total
---- ------ ----- ---- ------ ----- ---- ------ -----
January
4, 2009 3,878 1,928 5,806 707 892 1,599 4,585 2,820 7,405
Opened 0 3 3 0 0 0 0 3 3
Closed (68) (15) (83) (47) (11) (58) (115) (26) (141)
Purchased/
(sold) 16 0 16 (16) 0 (16) 0 0 0
--- --- --- --- --- --- --- --- ---
Net
additions/
(closures) (52) (12) (64) (63) (11) (74) (115) (23) (138)
--- --- --- --- --- --- ---- --- ----
April 5,
2009 3,826 1,916 5,742 644 881 1,525 4,470 2,797 7,267
===== ===== ===== === === ===== ===== ===== =====
BLOCKBUSTER INC.
DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(Dollars in millions)
For the fiscal quarter ended April 5, 2009, 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 fiscal 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 and severance.
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).
Fiscal Quarter Ended
--------------------
April 5, 2009 April 6, 2008
------------- -------------
Reconciliation of adjusted net income (loss):
Income (loss) from continuing operations $27.7 $45.7
Adjustments to reconcile income (loss)
from continuing operations to adjusted
net income (loss):
Store closure costs including
lease terminations (recurring) 3.4 2.8
Severance costs (non-recurring) 1.1 -
Game inventory obsolescence
adjustment (non-recurring) 16.7 -
Settlement of future liability (non-
recurring) (7.6) -
---- ---
Adjusted net income (loss) 41.3 48.5
Preferred stock dividends (2.8) (2.8)
---- ----
Adjusted net income (loss)
applicable to common stockholders $38.5 $45.7
===== =====
Adjusted net income (loss) per
common share - diluted $0.19 $0.21
===== =====
Reconciliation of adjusted operating
income (loss):
Operating income (loss) $50.1 $70.2
Adjustments to reconcile operating
income (loss) to adjusted
operating income (loss):
Store closure costs including
lease terminations (recurring) 3.4 2.8
Severance costs (non-recurring) 1.1 -
Game inventory obsolescence
adjustment (non-recurring) 16.7 -
Settlement of future liability (non-
recurring) (7.6) -
---- ---
Adjusted operating income (loss) $63.7 $73.0
===== =====
BLOCKBUSTER INC.
DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(Dollars in millions)
For the fiscal quarter ended April 5, 2009, the Company reports adjusted
earnings before interest, taxes, depreciation and amortization ("adjusted
EBITDA") excluding costs incurred for stock compensation, severance and
store closures. For the fiscal 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.
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.
Fiscal Quarter Ended
--------------------
April 5, 2009 April 6, 2008
------------- -------------
Reconciliation of adjusted EBITDA:
Net income (loss) $27.7 $45.4
Adjustments to reconcile net income
(loss) to adjusted EBITDA:
(Income) loss from discontinued operations,
net of tax - 0.3
Provision for income taxes 5.6 6.8
Interest and other income, net 16.8 17.7
Depreciation and intangible amortization 34.8 39.9
---- ----
EBITDA 84.9 110.1
---- -----
Lease termination costs incurred for
store closures (recurring) 1.1 0.2
Severance costs (non-recurring) 1.1 -
Stock compensation (recurring) 2.0 4.2
Game inventory obsolescence adjustment (non-
recurring) 16.7 -
Settlement of future liability (non-
recurring) (7.6) -
---- ---
Adjusted EBITDA $98.2 $114.5
===== ======
The following table presents consolidated financial information, including
a reconciliation of adjusted EBITDA, a non-GAAP financial measure, to net
income, the most comparable GAAP financial measure.
Guidance Range
--------------
Full Year 2009 Guidance Reconciliation:
Low High
--- ----
Net income (loss) $40.0 $60.0
Adjustments to reconcile net income (loss) to
adjusted EBITDA:
Provision for income taxes 24.0 24.0
Interest and other income, net 99.0 99.0
Depreciation and intangible amortization 122.0 122.0
Stock compensation 8.0 8.0
Other adjusting items 12.0 12.0
---- ----
Adjusted EBITDA $305.0 $325.0
====== ======
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:
Fiscal Quarter Ended
--------------------
April 5, 2009 April 6, 2008
------------- -------------
Net cash provided by (used for)
operating activities $(87.2) $(19.5)
Adjustments to reconcile net cash flow
used for operating activities to free
cash flow:
Capital expenditures (8.5) (19.9)
---- -----
Free cash flow $(95.7) $(39.4)
====== ======
==========================================================================
The following table provides a reconciliation of net income (loss) to free
cash flow:
Fiscal Quarter Ended
--------------------
April 5, 2009 April 6, 2008
------------- -------------
Net income (loss) $27.7 $45.4
Adjustments to reconcile net income
(loss) to free cash flow:
Depreciation and intangible amortization 34.8 39.9
Non-cash share-based compensation expense 2.0 4.2
Capital expenditures (8.5) (19.9)
Rental library purchases, net of
rental amortization 3.1 (2.5)
Changes in operating assets and
liabilities (154.3) (106.9)
Changes in deferred taxes and other (0.5) 0.4
---- ---
Free cash flow $(95.7) $(39.4)
====== ======
SOURCE Blockbuster Inc.
http://www.blockbuster.com
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