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I like these prices, Buying more, eom.
Ouch, looking for lower entry point ~ $50-$54
Best Buy Co. (BBY) said it will sell on-demand access to movies and TV shows through some Blu-ray players, high-definition TVs and personal computers, joining the crowd of providers offering video in a downloadable capacity.
The biggest U.S. consumer-electronic seller said its new CinemaNow service will offer same-day instant access to new-release movies and TV shows beginning this month through all new connected Blu-ray Disc players and home-theater systems from LG Electronics Inc. (066570.SE). The service is expected to launch on devices from various other manufacturers, including Insignia, later this year.
Several companies, including Netflix Inc. (NFLX) and Apple Inc. (AAPL) through its iTunes store, have in recent years made movies and television shows available for download and rental so users can watch them on demand.
"With the introduction of CinemaNow, Best Buy continues our commitment to evolve with our customers as their demand for digital entertainment grows," said Chris Homeister, senior vice president of entertainment for Best Buy.
Best Buy said the initial product will be followed by an improved and updated version later this year. CinemaNow is the product of a collaboration between Best Buy and Sonic Solutions (SNIC), which had traditionally provided software used to format, press and distribute about 90% of DVD and Blu-ray discs but recently teamed up with Best Buy for the transition to downloadable content.
Best Buy in March said its fiscal fourth-quarter earnings rose 37% following prior-year charges as it saw sales rebound.
Shares of Best Buy and Sonic closed at $43.24 and $12.57, respectively, on Monday and were inactive premarket. Best Buy stock has risen 19% in the past year, while Sonic was below $2 a year ago.
Source: http://online.wsj.com/article/BT-CO-20100518-705035.html?mod=WSJ_World_MIDDLEHeadlinesAsia
STRONG SELL
Is It Too Late to Save Blockbuster?
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Shares of Blockbuster (NYSE: BBI) tumbled 19% on Friday, as an ominous quarterly loss reignited bankruptcy concerns at the DVD rental specialist.
CEO Jim Keyes attempted to calm frayed nerves after the stock's slide. Blockbuster's Friday afternoon press release was peppered with upbeat quotes. The chain has "adequate liquidity" to get through the year. There are "promising negotiations" with its partners. However, even Keyes concedes that there are "execution risks" in seeing the retailer's objectives through.
How could things have gotten this bad?
DVDs aren't dead yet
In theory, Blockbuster should be doing okay. Movie theaters set box office records last year. This should be good for the chain in two regards.
Hot movies hitting the big screen last year should be popular rentals when they reach the retail market several months later.
Scintillating results for exhibitors validate the theory that cinematic escapism is a winner during an economic downturn. If folks are going out to watch a movie, they should also be willing to head to the local video store to rent one.
But reality bites. Revenue slipped 13.8% during the first quarter, and a year-ago profit turned into a significant loss this time around.
The top line deserves an asterisk. Blockbuster has been closing stores, exaggerating the loss. Comps actually fell by a more modest -- though still problematic -- 7.1% globally and 7.8% domestically.
There's no need to organize a lineup of likely suspects. We know that Blockbuster's loss is a gain for Netflix (Nasdaq: NFLX), Coinstar's (Nasdaq: CSTR) Redbox, and the growing number of digital and pay-per-view alternatives.
After all, consumer appetite for movies isn't waning. Even as Blockbuster declines, Netflix has seen its subscribership grow 35%, to 14 million this year. Coinstar is growing even more quickly. Its DVD revenue has climbed 70% over the past year, with Redbox now accounting for 75% of the company's revenue.
In other words, Blockbuster can't blame the industry. The combined $208 million in revenue growth that Coinstar's DVD business and Netflix have drummed up over the past year far exceeds Blockbuster's $146 million top-line shortfall.
Movie studios have been bellyaching over waning DVD sales for a couple of years, but rentals are alive and well in the digital age -- at least for now.
The clock is ticking
Antsy creditors and worrywart auditors are making things tense at Blockbuster. That's a pity, because the company recent caught several unusual breaks:
Its nearest old school rival -- Movie Gallery -- announced earlier this month that it would liquidate its stores.
Blockbuster is taking the Redbox challenge head-on. NCR (NYSE: NCR) has teamed up with the chain to deploy more than 4,000 Blockbuster Express kiosks. That number exceeds the 3,240 stateside Blockbuster stores remaining at the end of the quarter.
Netflix and Redbox have struck deals with several major studios to delay new releases by 28 days. But Blockbuster has been able to maintain its ability to rent new releases the day they hit the market. Blockbuster's been flaunting that great edge (especially over Redbox) in its marketing.
A cockier Blockbuster with a cleaner balance sheet would be eating this up. Instead, as a consumer-facing company, all of the bankruptcy chatter may be eating away at its potential renter base. The typical Hurt Locker renter doesn't know the difference between bankruptcy reorganization and liquidation.
This isn't Blockbuster's only problem. Advertising and G&A costs are rising (as a percent of sales) as the chain shrinks. Interest expense nearly doubled over the past year. Merchandise sales -- at the domestic store level -- are also fading faster than rental revenue. This is a bit of a shock, given CEO Keyes' retailing pedigree.
I still like Blockbuster's long-term chances, but I'm certainly concerned about the fate of common shareholders, given the real possibility of a bankruptcy reorganization that will likely wipe them out.
Some closing optimistic thoughts
With a more benevolent balance sheet, it'd be easy to warm up to Blockbuster.
If folks are willing to pay a premium for 3-D and IMAX (Nasdaq: IMAX) screenings at the corner multiplex, they should also be willing to pay more to rent the emerging wave of 3-D Blu-ray discs at Blockbuster. There may also be some big-ticket opportunities for Blockbuster to take on Best Buy's (NYSE: BBY) booming home theater business, despite the limitations of its shrinking square footage.
Technology doesn't have to be Blockbuster's enemy, especially if richer platforms give optical discs some advantages over streaming video. Broadband providers are starting to get nervous about the data abuse of their "unlimited" connectivity plans. If they crack down on bandwidth use, they could destroy the digital streaming revolution in its infancy.
Blockbuster hasn't been asleep at the tech wheel. It teamed up with Deutsche Telekom's (NYSE: DT) T-Mobile to offer Blockbuster On Demand through its HTC HD2 smartphone two months ago. Enjoying piecemeal movie rentals on tiny smartphones may seem ludicrous, but if the tech takes off, it's better to be early than late.
Blockbuster sorely needs to hop on the Netflix streaming smorgasbord bandwagon -- instead of simply selling individual digital rentals -- and it certainly has the working relationships with Hollywood to do just that.
Given its dire financial straits, it would be a huge gamble to buy into Blockbuster these days. However, over the long haul, the market's not giving Blockbuster due credit for its potential as an entertainment retailer.
Source: http://www.fool.com/investing/general/2010/05/17/is-it-too-late-to-save-blockbuster.aspx
STRONG SELL
Double Post
Blockbuster (NYSE:BBI) Inc. Q1 Results Raises More Questions Than Answers
Often times when a company is struggling there are two opposing views. One person is looking for proof of failure, another person is looking for proof of life and sustainability. Unfortunately after Blockbuster Inc. (NYSE:BBI) released their first quarter results last week neither would be convinced, yet a strong case can be made for both views. If this sentence is ambiguous, Blockbusters numbers are just as much.
For every place they show signs of life, looming doubts remain, or continued losses grip everything in a base of reality. For instance, they burned threw less cash this Q1 than in 2009, yet they are still burning through cash. Q1 is a cash heavy quarter, paying $45 million dollars to a payment to principle on outstanding debt, as well as interest payments on other notes. So you can see reasons for the cash loss, but yet still there it is. Operating income when your cash on hand is only $110 million being a negative of any kind is dangerous, and hence not surprising to once again see many warnings throughout the report of possible bankruptcy being an option. Going through the numbers and comments from Jim Keyes and Tom Casey may be able to offer some clarification to these questions of viability. As the company transitions into the digital age, the brick and mortar model strengthens with the closing of Hollywood Video, time seems to be all this company may need. Will they get their before needing new capital? Probably not, as they are attempting to dilute their stockholders by giving Class A stock for debt.
Total revenue for Q1 came in at 934 million, down from from 1.09 billion(Q1 of 2009). They attributed this drop to a 7% drop in international sales, and the closing of weaker stores. This revenue drop isn’t altogether surprising due to a lagging reaction to their transition to other cheaper forms of revenue streams, such as mail order and kiosk sales, as well as on demand revenue, which did see an increase year over year. Revenue for Q2 should be down to flat from these numbers.
Operating expenses came in at 531 million, up from last years total of 523 million. This increase was due to one time charges of 20 million associated with the closing of stores, almost 10 million in severance, and 9 million in associated fees from the company’s recapitalization initiatives. I would expect this total to drop in Q2.
Net loss for Q1 comes in at 65.4 million dollars, or .33 cents a share, compared to net loss of 27 million dollars, or .12 cents a share in 2009.
Free cash flow was negative 54.8 million compared to a negative 95.7 in 2009.
Cash on hand came in at 109 million dollars.
Here are some comments on the numbers and their business from Jim Keyes, CEO of Blockbuster:
“During the quarter, we experienced better same-store sales trends and achieved one of our key goals: establishing a significant cross-channel competitive advantage by securing agreements with three of the major studio partners.”
“These are movies that are national competitors like, Netflix or Redbox, will not have for 28 days.”
The company has admitted this advantage will be hard to vocalize for the company until their cash flow position improves, but the realization that only Blockbuster has certain titles early should be noticeable to the consumer. This is a huge advantage for BBI, and will provide a nice bonus to their kiosk sales.
In regards to their recapitalization plans, Keyes said, ” As you know, we’ve delayed the shareholder meeting until late June to have the opportunity to report progress on our recapitalization plans.” Seems we will receive some sort of clarity on this issue soon. As it looks right now, they will indeed need new capital at some point. Just how long can they hold serve with their current metrics? The filing offered this information on this topic, as well as the usual bankruptcy warnings required of a company this close to major cash flow issues and their current debt load versus net income.
“We expect cash on hand, cash from operations, cash generated from our cash management strategy and, if necessary, the liquidity benefit resulting from the recapitalization of our debt and equity structure to be sufficient to fund our anticipated cash requirements for minimum capital expenditures, working capital purposes including rental library purchases, as well as commitments and payments of principal and interest on borrowings for at least the next twelve months. ” – From Q1 Filing
Expecting 12 months of survival without new capital is realistic in my opinion. They should be ok for now, but as I stated earlier, they are looking for new capital for a reason. Sale of their international unit should help this in the near future.
They are experiencing some improvements in same store sales. Closing underperforming stores was necessary to reduce costs, as the company is now focusing more on cost reduction than growth. The growth will come in the kiosk, on demand, and mail order model. Also brand name selling to cable companies and smart phone applications may drive in new revenue down the road.
Here are comments from the conference call on this issue from Keyes.
“During the quarter, we made steady improvement in top line performance with sequential improvement of domestic rental same-store sales comps coming from approximately minus 15% in the third quarter of 2009 to minus 11% in the fourth quarter of ‘09, and now minus 6% in the first quarter of 2010.”
Here are more important comments from Keyes on how their growth model business plans are moving along. These are important areas to the future of Blockbuster and where their recovery hopes may lie once the bleeding from the brick and mortar model stops.
“And with NCR, we significantly increased kiosk deployments recently adding, for example, 1,400 machines in Safeway stores throughout California. Through this alliance, we now have over 4,000 Blockbuster Express kiosks deployed and NCR remains on track to deploy a total of 10,000 kiosks by the end of 2010.”
“Finally, we expanded our digital presence. When looking at video and demand rentals, the first quarter increased 78%, when compared to the fourth quarter. And we expect exponential increases going forward as more and more connected and embedded devices become available in the marketplace.
“Through our alliance with Samsung for BLOCKBUSTER ONDEMAND, we’ve now been embedded in over 60 products, including Internet-ready televisions, Blu-ray players and home theater systems. Most exciting about this service is the access to BLOCKBUSTER ONDEMAND with the simplicity of a button on the remote control. We continue to make progress with all leading consumer electronics and device manufacturers. And we’ll have additional news over the next several months.”
“We remain optimistic about the long-term viability and success of Blockbuster’s iconic brand, especially now with the completion of our cross-channel capability, the emergence of a new rental window and the closing of Movie Gallery and Hollywood stores, our largest brick-and-mortar competitor.”
As you can see, Blockbuster is making strides in expanding their revenue abilities, as well as entering into a low cost model as well. The key issue going forward right now is how they will deal with their recapitalization efforts, and the company sights this avenue as their major focus right now. Appears they are intent on offering Class A shares for removal of debt, which would come as a substantial dilution. Stockholders of this company should be aware of dilution risks. If this way is not accomplished, chapter 11 bankruptcy is warned as an options. This paragraph from their filing might be their focus and plan on getting themselves out of this situation.
“One initiative we are pursuing involves an exchange of all or part of our senior subordinated notes for Class A common stock. We also may seek certain modifications to the senior secured notes from the holders thereof. Consistent with this approach, the holders of the senior secured notes and the senior subordinated notes have been contacted and have formed respective note holder committees, have retained advisors, with which we are engaged in negotiations, and are conducting due diligence. Assuming that we can reach agreement with such holders on the terms of an exchange, we will seek to implement an exchange during the latter part of the second quarter or early part of the third quarter of this year, depending on the timing of SEC clearance of the exchange documentation and when we receive, if necessary, shareholder approval. In connection with pursuing an exchange, we will also be involved in discussions with holders of our Series A convertible preferred stock regarding the possible conversion of such Series A convertible preferred stock into our Class A common stock. We can give no assurance that we can successfully execute an exchange and preferred stock conversion strategy or any of the other strategies we are pursuing and our ability to do so could be significantly impacted by numerous factors including changes in the economic or business environment, financial market volatility, the performance of our business, and the terms and conditions of our various debt agreements and indentures as well as the certificate of designations governing our Series A convertible preferred stock. It is possible that a successful and efficient implementation of an exchange or any of the other strategies we are pursuing will require us to make a pre-packaged, pre-arranged or other type of filing for protection under Chapter 11 of the U.S. Bankruptcy Code.”
As is evident in the numbers and comments from the company, their are clues and signs of life, and definitely reasons to be cautious going forward. As the company continues to transition its model into the digital age, some more growing pains can be expected.
Source: http://www.kingofalltrades.com/2010/05/17/12100.html
STRONG SELL
There has been NO NEWS or ANY UPDATES on Scratch: The Ultimate DJ since February 1st!!!
Scratch was supposed to be released in "Early 2010". You would think if they are releasing the game, they would continue to provide updates / continue to market the game.
Interestingly enough, remember how Scratch was an exhibitor at the 2009 E3 gaming expo? According to the upcoming 2010 E3 Expo (June 15-17 2010) Scratch / Genius Products / Commotion Interactive / Bedlam Games are not going to attend. Check it out:
http://www.e3expo.com/exhibitors/92/exhibitor-list/
Likewise, there have been no updates on the Scratch webpage / forum:
http://community.scratchvideogame.com/forum
Nor have there been any updates on the Scratch Twitter / Myspace / Youtube channels:
http://twitter.com/ScratchDJgame
http://www.myspace.com/scratchvideogame
http://www.youtube.com/user/ScratchDJVideoGame (note: last sign is 3 months ago.)
If you look at the webpage for Bedlam Games (developer of Scratch: The Ultimate DJ) there has also been NO updates on Scratch since Mid January. Click on "home" at top, then click on "read more" under news on the right.
http://www.bedlamgames.com/
You mentioned how most of the recent trading activity in GNPR has been Short Sales. Maybe the shorts are on to something. DJ Hero, a similar game from Activision last year, did not do so well. If funding has dried up, and key investors "bailed" on the project, the Shorts could very well be right, imo.
GLTA
"Recapitalization of our debt and equity structure to improve liquidity." was stated in the 10-Q in regards to upcoming plans for late Q2 (July).
Keyes went on to say: "We are simultaneously pursuing a recapitalization and are in discussions with bond holders and other parties to improve our liquidity,” and “We remain optimistic about our ability to recapitalize Blockbuster."
In other terms, this translates to:
Blockbuster will undergo a Debt to Equity Swap, sometime in July converting the 300M in 9% senior subordinated notes (bonds) into common equity. While this will improve liquidity (no more debt and interest payments on the 9% Bonds), Common Shareholders will ultimately be wiped out in the process. Bondholders will end up owning 90 - 99% of the company!
While this will stall bankruptcy for a few years until the 630M in 11.75% senior secured notes which are due in 2014 can be dealt with (and possibly "save" Blockbuster long-term as company) the common shareholders are basically being lulled into a false sense of security, and will ultimately see the value of their investment diminish by 90 to 99% overnight. imo.
GLTA
http://www.sec.gov/Archives/edgar/data/1085734/000119312510120521/d10q.htm
STRONG SELL
I agree, the decrease in free cash was the icing on the cake for me. With the current European financial crisis, BBI will have a hard time selling the European assets for much needed cash. With talk of a debt to equity swap towards the end of Q2 (I am guessing Late May to early June) in the latest 10-Q I would not want to be long. I might go long a few months AFTER the bond / debt to equity swap and reverse split / conversion, or pre packaged chapter 11 Bankruptcy.
Note to self:
The FIRST rule of Ihub Club is: Have no loyalty or emotional attachment to ANY stock.
The SECOND rule of Ihub Club is: Have no loyalty or emotional attachment to ANY stock.
GLTY
Pre Packaged Bankruptcy discussed in latest BBI 10-Q
Even with a successful and efficient implementation of the cash management strategy, the successful achievement of our planned revenues for 2010, and the successful recapitalization of our debt and equity structure, we may not achieve anticipated results and we may have to take other actions such as modifying our business plan to close additional stores, pursuing additional external liquidity generating events, seeking additional financing to the extent available, further reducing or delaying capital expenditures or making a pre-packaged, pre-arranged or other type of filing for protection under Chapter 11 of the U.S. Bankruptcy Code.
ALSO on the BBI 10-Q:
One strategy we are pursuing involves an exchange of all or part of our Senior Subordinated Notes for Class A common stock.
...Assuming that we can reach agreement with such holders on the terms of an exchange, we will seek to implement an exchange during the latter part of the second quarter or early part of the third quarter of 2010.
Source: http://www.sec.gov/Archives/edgar/data/1085734/000119312510120521/d10q.htm
STRONG SELL!!!!
Blockbuster's Terrible Q1
Blockbuster (BBI) is not a stock any sane investor should buy. First, it's under a buck. Second, it is currently down over 20% in afternoon trading, backed by significant volume. I'm seeing a price of just under 40 cents as I write this. Not a good situation.
Yet, I'm sure there are a fair amount of professional speculators out there making bets on the business. Hey, I can't predict the future, but I just don't see how anyone can take a chance on the shares. The one-year chart is terrible. And the most recent earnings report, released yesterday after the bell, is likewise a horrible sight to behold.
Maybe some event will come along and act as a positive catalyst, giving the speculators the pop they need to make a lot of money. But, in my opinion, there's nothing to indicate a solid likelihood of such a dream scenario occurring.
In the end, we're left with a risky business model whose latest quarterly numbers support the thesis that a struggling management team will continue to struggle for a long time to come.
An adjusted loss of 14 cents per share was booked in this year's Q1 compared to a profit last year. That was the same figure analysts were looking for.
Worse, domestic same-store sales declined 7.8%. Let's face it: alternative ways to score movie rentals, such as ones offered by Netflix (NFLX), Coinstar's (CSTR) Redbox, and Comcast's (CMCSA) on-demand platform, are destroying the mighty home-video brand that isn't so mighty anymore.
I doubt many investors need this advice, but here it is anyway: avoid Blockbuster like the proverbial plague. Your portfolio will thank you.
Source: http://www.bloggingstocks.com/2010/05/14/blockbusters-terrible-q1/
109M free cash at the end of Q1, and getting lower every day. I would not be surprised if the current free cash is ~ 80M, maybe closer to 65m by the end of Q2. I agree, bankruptcy is the last resort, but still possible. A Debt for Equity Swap / 90 - 99% dilution for commons is very likely. BBI Bonds are the way to go, imo.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Paid YouTube Could Disrupt the Home Entertainment Market
The day may come when consumers purchasing video on YouTube may force Apple (APPL), NetFlix (NFLX), Amazon (AMZN), Best Buy (BBY), Walmart (WMT), Cablevision (CVC), DirecTV and (DTV) their ilk out of the entertainment-at-home market — and even if that day’s a very long way off, it’s still a very real possibility
The Google (GOOG)-owned site has planned to offer video rentals for some time. Recently, YouTube expanded some preliminary tests into a full-bore commercial operation, providing movies, television shows and animations to consumers for fees ranging from 99 cents $5.99. Now YouTube is expanding its paid service and allowing some content producers to charge for viewing their videos.
With the paid programs, just as with purchasing a video from the Apple Store, interested customers open an account and plunks down credit card information via what’s called the YouTube Store. Then they can stream movies and other video entertainment. Theatrical releases such as Brothers are in the line up, but so are more obscure film festival flicks such as Metropia, a feature-length digitally animated thriller voiced by Vincent Gallo and Juliette Lewis. Rental categories range from Bollywood to Learning & Education. Big blockbusters may be lacking, but give YouTube time.
What will be fascinating is to see is whether Google can leverage the free viewers who flock to YouTube –- the site claims that “hundreds of millions” of videos are viewed daily on its site -– and turn them into paying customers. Just as NetFlix has been pushing Blockbuster (BBI) toward bankruptcy, YouTube could, if it gets the service right, put pressure on existing entertainment providers. YouTube viewers not only are a potential market for paid-for video, they also are the draw for advertisers on the site. Because it already generates advertising revenue, YouTube Store costs are substantially covered.
In providing access to paid, independently produced entertainment, YouTube is adding a unique, potentially market-changing service that also costs it almost nothing. The service could provide filmmakers big and small with alternative access to viewers, and not one that’s free or advertising based, but one that generates income based on popularity.
Sure, James Cameron isn’t going to distribute the Avatar sequel through YouTube, but what if he had the notion to polish the test animations of some tentative projects and push them through YouTube? Not only could he gauge audience reaction, he could generate income to forward the project and generate substantial — i.e. monetary — evidence of its viability that could be used to woo investors.
The YouTube route could prove attractive to established, independently minded filmmakers both famous and obscure and to newcomers who need to break through. A Kevin Smith or Jim Jarmusch starting out today might not have to max out credit cards or borrow film stock to get their careers going, not with YouTube to assist them.
Even if it never becomes a paradigm changer, YouTube’s paid services will at least get Google basic data and credit card numbers from users, which it can use in market research and promotions for other kinds of moneymaking ventures.
YouTube is providing a new twist on home video entertainment and the Internet likes new twists, as the existence of this blog attests. And it comes cheap. As they look to the future, in-home entertainment providers that compete with the service should consider its potential.
Source: http://industry.bnet.com/retail/10009522/paid-youtube-could-overturn-home-entertainment-order/
Analyst: Blockbuster Burning Cash at ‘Alarming Rate’
Faced with $150 million in debt principal and interest payments due this year and $146 million available in cash at the end of the first quarter (ended April 4), Blockbuster’s ability to continue operations through the year has again come under question.
Analyst Michael Pachter with Wedbush Morgan Securities in Los Angeles May 14 said the Dallas-based DVD rental icon has painted itself into corner burdened by a massive ($920 million) debt load (much of it inherited) and striking short-sighted distribution deals with three major studios that could backfire with consumers.
Blockbuster May 13 posted a first quarter net loss of $65 million on revenue of $939 million.
The longtime Blockbuster analyst, who also covers rivals Netflix and Redbox, said the company has increasingly put its fortunes on the success partner NCR Corp. has financing and rolling out 10,000 Blockbuster Express kiosks, in addition to the involvement of unnamed financial and strategic investors (including bondholders) to be disclosed at the annual shareholders meeting next month.
Specifically, Pachter said the deals struck with Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment give Blockbuster a 28-day advantage over Netflix and Redbox but at the expense of charging consumers higher ($5 from $4) street date rentals fees.
The analyst, who does not believe this advantage to be a “game changer” for Blockbuster, said street dates are irrelevant to the average movie renter seeking inexpensive entertainment.
“If the average value-oriented customer is willing to pass on the more expensive movie theater, video store and [transactional video-on-demand] in order to pay $1 per [day per] rental, waiting another 28 days should not be a problem,” Pachter wrote in a note.
Blockbuster CEO Jim Keyes, in a call discussing the financial results, reiterated that kiosks and video stores are primarily driven by new release movies and that 28 days is “an eternity” in the rental industry.
Pachter also questioned the impact should other studios’ (Paramount Home Entertainment, Sony Pictures Home Entertainment, Lionsgate, etc.) titles emerge from the box office as must-see rentals.
“For releases such as The Lovely Bones (Paramount), Blockbuster management seemed unconcerned whether it had sufficient number of copies in stock or not,” he wrote, adding that the full impact of the 28-day window on Redbox and Netflix will not be felt until the third quarter.
In addition, Pachter said rollout of Blockbuster Express kiosks (4,000 to date) lag significantly behind Redbox with more than 24,000 units. But it is more than a numbers game after the analyst found four Express and 33 Redbox kiosks within a five-mile radius of his office – the latter spread out over more than six major retail chains.
The Express units were all found at separate (but identical) 99 Cents Only Store locations.
“We see diversity of locations as a key advantage for Redbox,” Pachter wrote.
He said that regardless of Keyes’ statement that there are 1,400 Express kiosks in Safeway stores in California, he said expansion within the state’s major cities continues to move too slowly.
“Given all of the issues that it faces, it is unclear what (if anything) Blockbuster can do to defend its core [store-based] business,” Pachter wrote.
Blockbuster shares were down more than 21% to 39 cents per share in heavy midday trading.
Source: http://www.homemediamagazine.com/blockbuster/analyst-blockbuster-burning-cash-alarming-rate-19409
Bond prices headed lower, yields up, not looking good.
Last Bond Trade 1M @ $18.00 120.277%
The cash burn from 188M Free Cash to 109M Free Cash since last Q is what is killing this stock.
Blockbuster intends to close ~ 1000 more stores in the next year. Every time a store closes, the numbers get hit with a big impairment charge. Things do not bode well for the upcoming quarters.
At this rate, bankruptcy (or a massive debt to equity swap) is a REAL possibility, imo.
Source: http://cxa.marketwatch.com/finra/BondCenter/BondDetail.aspx?ID=MDkzNjc5QUMy
Blockbuster Q1 2010 Earnings Call Transcript
Blockbuster (BBI)
Q1 2010 Earnings Call
May 13, 2010 4:30 pm ET
Executives
Kellie Nugent - IR - The Shelton Group
Thomas Casey - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
James Keyes - Chairman and Chief Executive Officer
Analysts
Emily Shanks - Lehman Brothers
Tony Wible - Janney Montgomery Scott LLC
Colleen Burns - Oppenheimer
Carla Casella - J.P.
Karru Martinson - Deutsche Bank AG
Mary Ross Gilbert
Presentation
Operator
Good afternoon, and Welcome to Blockbuster's First Quarter 2010 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Kellie Nugent, Blockbuster's Director of Investor Relations. Kelly, please go ahead.
Kellie Nugent
Thank you, Jonathan, and thank you everyone for joining us today to discuss Blockbuster's first quarter 2010 financial results. With me on today's call are: Jim Keyes, Chairman and CEO; and Tom Casey, Executive Vice President and CFO. As Jonathan mentioned, this conference call is being recorded. It is also being broadcast via live in voice mode over the Internet and may be accessed within Blockbuster's website at blockbuster.com. After the market closed today, Blockbuster issued a press release regarding its financial results for the first quarter ended April 4, 2010. By now, everyone should have access to the press release and financial tables. However, if you do not, they are available via the company's website.
Please be advised that matters discussed in today's teleconference contain forward-looking statements relating to the company's operations and business outlook, financial and operational strategies and goals, including expectations regarding the company's financial and operational performance in 2010, and other matters that do not strictly relate to historical or current facts. We caution you that statements are, in fact, such predictions that are subject to risks and uncertainties that could cause actual events or results to differ materially. Additional risks and uncertainties that could cause actual events or results to differ materially from these forward-looking statements may be found in the company's filings with the Securities and Exchange Commission on Form 10-K.
Forward-looking statements are based on the company's beliefs as of today, Thursday, May 13, 2010. Blockbuster undertakes no obligation or responsibility to publicly update any forward-looking statements for any reason, except as required by law, even if new information becomes available or other events occur in the future. Additionally, in the company's press release and during the teleconference, management will discuss certain measures and information in both GAAP and non-GAAP terms. A reconciliation of GAAP to non-GAAP is provided in the financial tables following the text of the release.
I will now turn the call over to the Blockbuster's Chairman and CEO, Jim Keyes.
James Keyes
Thank you, Kelly, and thank you, everyone, for joining us this afternoon. During the first quarter, we continue to make progress to recapitalize our business. We've now received several proposals from bondholders and both financial and strategic investors. And we appreciate the support these constituencies have provided. And we're conducting due diligence now to carefully evaluate each of these opportunities. As you know, we’ve delayed the shareholder meeting until late June to have the opportunity to report progress on our recapitalization plans.
During the quarter, we experienced better same-store sales trends and achieved one of our key goals: establishing a significant cross-channel competitive advantage by securing agreements with three of the major studio partners. With these agreements, we not only demonstrated positive studio support, but we established a significant competitive advantage, receiving day-and-date cross-channel access on nearly 50% of major new releases. These are movies that are national competitors like, Netflix or Redbox, will not have for 28 days.
In March, we announced an agreement with Warner Home Video providing a 28-day advantage beginning with the movies: The Blind Side and Sherlock Holmes. Two weeks later, we announced similar agreements with Fox and Universal.
Since over 60% of the industry's $22 billion rental and retail business represents new releases during the first 28 days of street date, we believe that these agreements provide a significant competitive advantage for Blockbuster's stores and for our cross-channel offerings.
Ideally, we'd support these new release windows with aggressive advertising. But given the continued need to manage the business to maximize liquidity, we've been unable to spend incremental dollars to date or significant incremental dollars at least, on advertising. We do believe this is a significant opportunity going forward and for the first time in many years, we now have a tangible advantage to communicate. And we hope that additional funds and studio co-op advertising can be used to promote this advantage.
Finally, we believe more studios are likely to introduce a window and that, over time, this will strengthen this virtual exclusivity, if you will, in new release rentals in DVD.
We have taken important steps also to improve our comparable trends, including the rollout of additional daily rates, improving the customer shopping experience, introducing direct access that allows our customers, By Mail access to as many as 100,000 titles, and providing exclusive products.
As I said in the third quarter of last year, when you manage the business for liquidity, you have to sacrifice in some cases top line growth. And I also said that it would take several quarters to restore our ability to improve same-store sales.
During the quarter, we made steady improvement in top line performance with sequential improvement of domestic rental same-store sales comps coming from approximately minus 15% in the third quarter of 2009 to minus 11% in the fourth quarter of '09, and now minus 6% in the first quarter of 2010.
We believe the windows associated with The Blind Side and Sherlock Holmes, for example, contributed to actually positive same-store sales comps during the month of March.
We continued also the portfolio rationalization during the quarter to achieve the optimal balance between domestic company-owned stores and our franchised stores and our new Blockbuster Express kiosks through our alliance with NCR.
We ended the first four months of the year with almost 3,500 domestic, company-owned and franchised stores. And with NCR, we significantly increased kiosk deployments recently adding, for example, 1,400 machines in Safeway stores throughout California. Through this alliance, we now have over 4,000 Blockbuster Express kiosks deployed and NCR remains on track to deploy a total of 10,000 kiosks by the end of 2010.
The net points of presence between our full-service stores and our new automated retail kiosks provide our customers with about 7,500 convenient locations today, with many more to come as we continue to rollout to this target of 10,000 kiosks during the year.
The way we're looking at this business going forward is not stores versus kiosks, but rather increasing consumer availability for Blockbuster content through a combination of full-service stores and automated retail locations.
We continue to enhance also our By Mail offering. First, due to the 28-day window, we now offer day-and-date on all new releases and are the only competitor able to provide that promise to its customers. Second, based on the success for our test, we are going to rollout games By Mail region-by-region during the remaining months of the year 2010. And third, we have continued to make progress towards strategic partnerships. And we'll have more to discuss about that during our shareholders' meeting in June.
Finally, we expanded our digital presence. When looking at video and demand rentals, the first quarter increased 78%, when compared to the fourth quarter. And we expect exponential increases going forward as more and more connected and embedded devices become available in the marketplace.
In addition, we became the premier movie download experience embedded in T-Mobile's new HTC smartphone, which was officially launched in the U.S. in March.
Through our alliance with Samsung for BLOCKBUSTER ONDEMAND, we've now been embedded in over 60 products, including Internet-ready televisions, Blu-ray players and home theater systems. Most exciting about this service is the access to BLOCKBUSTER ONDEMAND with the simplicity of a button on the remote control. We continue to make progress with all leading consumer electronics and device manufacturers. And we'll have additional news over the next several months.
With our unique multichannel capability to offer DVDs in store, By Mail and via kiosk, and with a world-class digital offering that is gaining momentum, we believe we are very well-positioned for the future. With all of these exciting opportunities for future growth, I can assure you that we are working very hard to successfully recapitalize the company today. And the challenge, as it continues, as it has been for the past year and still remains, is our liquidity, given the heavy debt amortization that we face.
We remain optimistic about the long-term viability and success of Blockbuster's iconic brand, especially now with the completion of our cross-channel capability, the emergence of a new rental window and the closing of Movie Gallery and Hollywood stores, our largest brick-and-mortar competitor.
As we continue to transform this business model and to restore top line growth, we do require adequate liquidity, of course, to succeed. Given the reality of continued tightness in our non-studio credit terms and the high one-time costs of advisory fees, both offset by the positive but uncertain timing of favorable effects of the windows and of the Movie Gallery, Hollywood video store closings, in our 10-Q filing you'll see cautionary language as required by the SEC.
We hope that our various stakeholders will allow us to the stay the course towards a continued and successful recapitalization that will allow Blockbuster to continue this exciting business transformation. We're optimistic that a recapitalization is possible. And we're pleased that we have several excellent options that we believe can provide the balance sheet improvements necessary to continue our transformation.
I'll now turn the call to Tom, who will review the first quarter results in more detail and then we'll go to Q&A. Tom?
Thomas Casey
Thanks, Jim, and good afternoon, everyone. My comments today will focus primarily on how we're tracking to our cash maximization strategy.
Beginning with the cash maximization items that we successfully completed during the first quarter. First, we enhanced our payment terms with several of the major studios by granting a lien on our Canadian assets. Additionally, we eliminated our letter of credit requirements related to Viacom lease guarantees. Second, we continue to optimize our domestic store portfolio. We reduced the number of unprofitable domestic company-owned stores from 30% to 15% of total domestic stores, while minimizing lease termination payments and realizing good value for product and liquidation.
In line with our full-year expectations, we closed 470 underperforming domestic company-owned stores so far this year, including 288 in the first quarter and an additional 182 in April.
Consistent with our September 2009 8-K filing, we expect significant benefit to 2010 adjusted EBITDA from revenue transfer and loss avoidance from 2009 and 2010 domestic company-owned store closures. And for the first four months of 2010, we successfully renegotiated leases on 536 domestic company-owned stores.
Finally, we simplified our domestic stores’ movie rental terms and prices. In addition, we implemented an additional daily rate in all of our company-operated stores. These two accretive pricing actions will improve rental gross profit.
So in addition to what we accomplished in the first quarter, we continue to work on the following cash maximization alternatives. First, we remain on track to reduce G&A expenses by approximately $200 million, excluding certain items. You'll note during the first quarter, G&A was about $7 million above last year, but that increase was primarily attributable to a few items: A $20 million cost related to store closures, $10 million related to severance, $4 million related to professional fees for our recapitalization initiatives. We also incurred unfavorable foreign currency exchange of $15 million. Excluding these items, G&A was reduced by $43 million year-on-year.
Second, we continue to pursue the sale of our international assets, while maintaining our brand presence in those countries. We're pleased with progress we've made and are in advanced discussions with respect to the sale of Europe.
Finally, we will maintain capital expenditure levels of approximately $30 million for the full year, and aggressively manage working capital through the sale of less productive rental inventory and more efficient retail product size.
Turning to the balance sheet. Our cash and cash equivalents balance was $110 million for the quarter ended April 4, as compared to $189 million at the end of fiscal 2009. Primary use of cash during the first quarter was over $80 million related to January and April interest payments on the senior secured notes and principal payments for the 11 3/4 senior secured notes. There's a $13.5 million interest payment in March with the 9% senior sub-notes, all of which was offset by a $23 million positive from the release of the Viacom letter of credit in January.
Then looking at working capital. Due to the seasonality of our business, first quarter is typically a use-of-cash. In first quarter 2010 it was a use of only $16 million, a significant improvement over the $153 million used during the same period a year ago. That represents about $140 million improvement in cash from working capital, principally related to changes in vendor payment terms year-on-year. So that concludes my prepared remarks.
Operator, we'll now open the call to questions.
Question-and-Answer Session
Operator
[Operator Instructions] Your first question comes from the line of Karru Martinson with Deutsche Bank.
Karru Martinson - Deutsche Bank AG
The changes in the vendor payment terms that you just referenced, is that a timing in terms of the payments, so that we'll see that cash flow out in the second quarter?
Thomas Casey
We achieved that success as I noted, Karru, in the first quarter in payment terms with the film studios in exchange for first lien on Canada. That agreement was struck in the middle of March. So that benefit will inure to us through the balance of the year. So that's the first part of it. And then the other part is just sort of normal vendor management.
Karru Martinson - Deutsche Bank AG
And outside of the film vendors, the studios who obviously are your largest, what kind of terms you are seeing from your other vendor partners?
James Keyes
We're pleased with the support of our vendors, generally speaking.
Karru Martinson - Deutsche Bank AG
And in terms of the 50% agreement on the window here, is that just against Redbox? Or is that against Netflix as well?
James Keyes
That's both against Redbox and Netflix. Both of them have now signed agreements with three of the major studios that give them in exchange for a lower cost of goods, they traded that off for a 28-day window, which we believe is a good thing. Basically, what they're saying is Netflix is committed to their longer tail content and saying that their customers will willingly wait for a new release. Our business model, as you know, is somewhat different. We think when people want Avatar they want it from us and expect it from us immediately, day-and-date upon release. We are pleased to be able to offer Avatar in stores, By Mail and as soon as it was available, which I believe was just last week in video-on-demand, we had it, of course, available electronically for streaming BLOCKBUSTER ONDEMAND. And many of you may notice, but Netflix won't have that for their Watch Now streaming service for, I would guess quite some time, potentially several years.
Karru Martinson - Deutsche Bank AG
And in terms of the comp trends that you saw, I think if I heard you correctly, some positive March comps, correct?
James Keyes
We did. We don't want to -- generally, we don't provide inter-quarter numbers. But to us, it was significant that we have made steady improvements in our comps over the last three quarters, as I referenced. And we were pleased that contributing to that improvement, there are a lot of things that went into it, including putting on a daily rate and improving our exclusive offerings. And then a lot of in-store initiatives. But the availability of a 28-day window on two very important titles, we think certainly contributed to our improvement. We expect our comps to be choppy going forward. We don't want people to expect that every month now going forward we're going to have same-store sales comp increases. We are still vulnerable to month-by-month differences in title strength. Certainly, we still have a strong competitive environment. And as I referenced, we don't have the ability to get out with an aggressive advertising campaign right now. In the future, we see that as an opportunity and we'll certainly complement our ability going forward to sustain and hopefully improve our same-store sales comps.
Karru Martinson - Deutsche Bank AG
You mentioned that you were in advanced discussions with the sale of the European assets. How does that fit in with the proposal that you’ve gotten from bondholders, strategic and financial investors? Or is that in conflict or are both of those separate things?
James Keyes
It's not really directly related. I would look at them as separate things. Of course, everything in that we're doing is complementary. All of these various initiatives are designed to improve our balance sheet and improve our liquidity going forward, to provide the access to capital that we needed to keep this transformation moving in the right direction.
Operator
You're next question comes from the line of Mary Gilbert with Imperial Capital.
Mary Ross Gilbert
I just wanted to confirm the cash balance is after making the interest and amortization payments on the 11 3/4, correct?
James Keyes
Correct.
Mary Ross Gilbert
I wondered if you could characterize the types of strategic interests that you're receiving in the company's business. And what kind of form we might see that take place?
James Keyes
We can't be specific, but we have referenced over the last couple of years the desire to partner with cable, telecoms, satellite or other strategic partners that are like-minded in being able to provide, let's say, an enhanced consumer offering in the movie arena. There are partners that can help us on the digital side of the business. There are partners that can help us on the physical side of the business. And in many cases, those partnerships, strategic partnerships are actually complementary that they don't overlap. And that we can go down a path with both a strategic partner for physical. As we already have, you'll note that our NCR agreement is a good example of a strategic partnership that provides a win-win, both for them and for us, in providing a world-class, automated retail capability. At the same time, we have similar opportunities in the digital side of our business to partner with those who can help enhance and maybe even accelerate our digital offerings. So those are the kinds of initiatives that we're pursuing.
Mary Ross Gilbert
So it would be a combination. It's not that it's going to be one strategic partner. It could have to be several. And is that the potential strategic partnering, is that going to be separate from a recapitalization or part of a recapitalization? And is that the reason why we haven't seen additional strategic partnering before?
James Keyes
As I said before, all of these transactions that we're pursuing are complementary. And I wouldn't characterize them as individually part of a strategic recapitalization. I think they all contribute, whether it's the sale of our European assets, partnering with a -- perhaps someone on the digital side of our business. All potentially enhance our liquidity and our ability to recapitalize the business going forward. So they are complementary. I wouldn't look for just one strategic partner. I'd look for us to continue to partner going forward. This isn't something new. And it's not something triggered by our liquidity needs. It's actually a strategy that we set forth about almost three years ago now where we said the transformation of this business is not going to be done by Blockbuster alone, on our own balance sheet. It would require strategic partnerships with others. NCR being a great example on the automated retail side and certainly in the digital side, we know we can't go it alone. And we don't think anyone is going to win that game in terms of digital capabilities by themselves. We think that strategic alliances will be the name of the game going forward.
Mary Ross Gilbert
Can you talk about the comps in April? I wanted to get an idea of what you're seeing with a 28-day window. So do we have some good comps coming out in April that's showing that you are getting some traction? Or is the fact that you're not able to advertise holding you back somewhat?
James Keyes
I did reference the fact that we aren't able to advertise. It is going to hold us back in a sense. I mean, let's face it, our competitors aren't rolling over. I haven't seen any advertising from Netflix bragging about the fact that their customers are going to have to wait 30 days. I doubt they'll do that. Redbox is still putting up Avatar signage saying, coming soon. They're not announcing the fact that they are not going to -- that soon is 28 days, which is an eternity for a new release. So realistically, it's up to us to take advantage of this strategic opportunity. We don't have the liquidity at the moment to get out with an aggressive campaign. We are doing some things. We're relying on our studio partners for co-op advertising. They've been helpful there. You've seen some print advertising. We've had full-page ads in the USA Today talking about this advantage. And if you go to any of our stores, it's all over the front of our store that we have cross-channel day-and-date availability. But that approach to communicating this strategic advantage is going to take time. So back to your question, what about April? We aren't going to get into the habit of trying to provide month-to-month sales comps. I did reference that it is going to be choppy for a while. And that you shouldn’t expect continued same-store sales improvement month after month, but we are optimistic that we will be able to continue over time a favorable trend in restoring our top line.
Mary Ross Gilbert
With regard to the first quarter EBITDA, how much of the $31 million reflected foreign exchange?
Thomas Casey
A $15 million hit relative to unfavorable foreign exchange.
Mary Ross Gilbert
Unfavorable?
Thomas Casey
Yes.
Mary Ross Gilbert
And that's to EBITDA as well. So does that suggest that the EBITDA would’ve really been over $40 million?
Thomas Casey
No, no, no. That's basically the $15 million is in our -- what I referenced was the $15 million hit to our G&A in connection. So that's really the nominal impact on EBITDA.
Operator
You're next question comes from the line of Richard Greenfield with BTIG.
Richard Greenfield
I just wanted to follow up on the question about the better comps in March. Because I think it is very important that you're getting a benefit from the exclusive content that you have for this window. But curious, you obviously did spend a lot. When you looked online, there was a lot of Blockbuster advertisements online promoting the fact that you didn't have a window and that other By Mail and kiosk companies did. And I'm just curious, when you look at the kind of the ROI of the month, how did that look in Q? And any type of color you could give us on the spend, the incremental spend from February versus March as the comps turned would be great.
James Keyes
Yes, Rich, actually we spent less in the month of March than you might think. We got a lot of presence for it, but we didn't spend even as much as we did in the month of January on advertising. So I'd say we haven't had sufficient presence at this point to really get a meaningful return number. We do believe there's a benefit. If you just go back to the fundamental of 60% or more of the business of the consumption being new releases in the first 28 days. Customers aren't going to immediately change their patterns and decide that they're okay waiting another 30 days to see Avatar. They're going to want to see it day-and-date. It will take a while to get that message across the way we're doing it now. But as we get improved liquidity, we believe going forward, there certainly is an opportunity. This is one of the first places we would go to spend incremental capital as we have it available to us that will provide us the opportunity to get out with that message in a bigger and broader way. More to come.
Operator
You're next question comes from the line of Carla Casella with JPMorgan.
Carla Casella - J.P.
I have one follow up on the working capital question that Karru had. So given where working capital is so much better than we expected for the first quarter, should it be a source of cash or use of cash for the second quarter? And then for the year, do you still expect it to be a source of cash?
James Keyes
Yes. For the year, Carla, as we've said previously, we expect working capital to be a source of cash. So that continues to be our expectation.
Carla Casella - J.P.
But second quarter, given that first quarter was so much better than we expected, will some of that reverse in second quarter? Or will more of the use be in second? Or could that be a source of cash?
James Keyes
No, second and third quarter, as you know, are seasonally weak. And working capital is something that we aggressively manage. So we intend to do our best to stay on track with it and I guess is what I would say.
Carla Casella - J.P.
I missed the number of stores that you added an additional daily rate. Is that a late fee?
James Keyes
No. We're very careful not to call it a late fee. Late fee is a thing that you get at the library when you keep a book out for too long and it's actually a punitive charge to keep you from doing that again. In some cases, it could be more than the cost of the book. This is what we used to have when we charged late fees. In many cases, it would rack up a charge that was greater than the cost of the movie itself. That's not what we're doing. What we're doing is, actually, a nod to our kiosk competitors that got the customer comfortable with a thing called a daily rate. Well, that's what we've done. Instead of providing a 30-day forgiveness, which in effect is what we had, we let you keep a $18 wholesale-price DVD for 30 days and only charged you $1.25 when you brought it back. It may only be worth $5 when you brought it back, but we'd only charged you a $1.25 restocking fee. That wasn't fair to our shareholders. And realistically it wasn't fair to our customers who wanted new releases available on the shelf. So what we've done is not to go back to a late fee, but to let our customers know after a five-day rent that is now in most of our stores, we allow our customers to keep the movie for five days, which we think is a bit of an advantage versus those who have only a daily rate. After five days, then we have begun charging our customers a $1 per day rate for as many days as they want to keep it. That gives them the flexibility. If they want to keep it out another week, they can keep it. And they'll pay on a daily basis for the amount of time they keep the movie. We added that to about 2,400 stores for movies alone, in the first quarter. And that has been actually accretive to our results, slightly accretive as customers have been willing to pay it. And frankly, we haven't had much feedback. There was a little bit of a smattering of press the first week we did it about a return to late fees. But customers, thankfully, haven't seen it as that.
Carla Casella - J.P.
And has it capped at a certain amount? Or could it end up being more than the cost of the movie?
James Keyes
No, it caps out, I believe, after 10 days. We then charge the customer the retail price for the movie. So it's fair. It's exactly the same thing competition has been doing with their daily rates. And we think our customers will be fine with it.
Carla Casella - J.P.
Now that Redbox has been up and running for some time and your own kiosk program has been up and running, have you seen any kind of a -- how much cannibalization you get from a store that's within say, a mile or less? Or is there any kind of metric that you're looking at yet?
James Keyes
No. The difference actually between our approach and the Redbox approach is that we're seeing the automated retail location, as we're now trying to call it, as complementary to the store. So instead of looking at cannibalization, we're looking at this as an extension of the trade area. We have a lot more work to do with NCR to fully integrate this automated retailing into our store with a hub-and-spoke kind of distribution advantage. But it's not a question of taking business away from the store, it's a question of being able to complement that store by balancing the inventory between stores and kiosks and providing greater convenience and availability. I mean ultimately we want, between our kiosks, and our stores, and our By Mail service, we want to make the Blockbuster brand ubiquitous. And make it virtually everywhere you go that our customers have ready access to it. Whether they're wanting the convenience of DVDs By Mail, or to pick up a movie at the supermarket on the way home, or to have the retail experience of discovery, if you will, of browsing in the store, perhaps on a Friday night, we can provide that all.
Carla Casella - J.P.
And just one clarification on Mary's question, the $15 million hit was to G&A? Or that was the full hit to EBITDA for FX?
James Keyes
To EBITDA.
Carla Casella - J.P.
Okay. That was the EBITDA impact.
Thomas Casey
No, no, no, I’m sorry, G&A impact.
Carla Casella - J.P.
G&A, right. And did you give the gross profit impact?
Thomas Casey
The EBITDA impact was $3 million.
Operator
You're next question comes from Tony Wible from JMS.
Tony Wible - Janney Montgomery Scott LLC
If we could talk about the advertising lead time that you would need to the extent you do the successful refinancing. How long would it take you to reinvest in advertising?
James Keyes
We've got storyboards already done that are pretty much interchangeable for new movies. You've probably seen some of the print ads that we've had. It's very easy for us to modify that print ad to adapt to the new titles coming out. And we've got TV ready to go. We'll basically plug-and-play the new titles. So we can move pretty quickly.
Tony Wible - Janney Montgomery Scott LLC
On a more recent Viacom title, The Lovely Bones, I just happen to notice from store check that you're running very thin inventory in all the stores on that particular title. Is there something just with that title? Or is there some kind of negotiation still ongoing with Viacom and windows and cutting a new deal?
James Keyes
Frankly, it's pretty simple. There’s some studios working proactively with us with day-and-date windows. And we want to support them and reward them. They’ve been very helpful to us in being able to provide a competitive advantage. Those studios who are still providing our competitors with an advantage, you know, not so much. We're going to work with them, but if we’re out of stock on a movie that is in-stock with our competitor, so be it. We're going to help those who are helping us.
Operator
You're next question comes from the line of Colleen Burns with Oppenheimer.
Colleen Burns - Oppenheimer
Just to clarify, the impact in EBITDA on the FX was a $3 million a negative impact? Or a positive impact?
Thomas Casey
Yes, a $3 million positive with EBITDA. $15 million negative FX.
Colleen Burns - Oppenheimer
So it was a $3 million positive benefit. And then just as far as kind of your working capital, do you expect your first quarter to be like your peak use here, for the year?
Thomas Casey
First quarter is typically the peak use. And obviously, historically, it’s been more of a use than what it was, this quarter. And as we've said before, typically fourth quarter is the significant positive quarter. And Q2 and Q3 are the seasonal low points and there’s some variability in there, but they matter less than Q1 and Q4.
Emily Shanks - Lehman Brothers
And then as far as cash balances, what is the cash in the system at peak in the October timeframe?
Thomas Casey
Yes. It varies somewhat through the year. In the earnings call back in February, I mentioned the number of $40 million, which is a good working assumption with respect to that. I wouldn't go beyond that to talk about seasonal variances in that, but that's a good working assumption.
Emily Shanks - Lehman Brothers
And that you wouldn't go using even a peak? That would be the number you think is helping the system?
Thomas Casey
That's a good number to use.
Emily Shanks - Lehman Brothers
And then just on kind of all the store closures, what's your dark store lease cash cost running?
Thomas Casey
This will be some disclosure in our 10-Q that breaks that out. It’s about, in the first quarter, $3 million.
Emily Shanks - Lehman Brothers
$3 million. And what do you expect it to be on an annual basis? Do you expect it to accelerate? $3 million a quarter? Or should it be higher than that by the end of the year?
Thomas Casey
Yes. I mean, we don't expect to close that many more stores this year. So I think maybe slightly higher as a run rate.
Emily Shanks - Lehman Brothers
And then just lastly on the cost save that you laid out kind of the $70 million that you're kind of expecting in overhead. Are you expecting to see most of that in the back half of the year, hitting G&A?
Thomas Casey
Well, we referenced when you back out the things I've talked about, the store closures, severance, professional fees and ForEx of $43 million reduction in G&A, on sort of an apples-to-apples basis, if you will, so relative to our target of 200. That's basically on track. The actions that we took; a number of actions early this year. But I think that basically what you see flowing through the year are obviously the benefits of the store rationalization program as it relates to cost as well as some specific overhead cost reductions that we took in the first couple of months of this year. So there's a bit more on a quarterly run rate basis than Q1. But basically, the headline is we're on track.
Operator
You're next question comes from Mary Gilbert with Imperial Capital.
Mary Ross Gilbert
I wondered where your By Mail subscribers stand at the end of the quarter.
James Keyes
Mary, we haven't provided any data on individual subscriber numbers. And as I said, we're really retooling that business as we look now at trying to leverage the day-and-date availability, the gaming business and the addition of games to our mix, and the continued work that we've been having toward finding the appropriate strategic partners to move forward with that business. So we're not really giving any numbers at this point. Stay tuned for more to come as we reposition that business going forward with it. I think what you'll find to be a very different approach.
Mary Ross Gilbert
And then can you give us any granularity on what form of a recapitalization we might be looking at? And the timing of when you expect to complete your negotiations?
James Keyes
We really can't provide any details at this point. We're shooting for having more clarity around this for the June shareholder meeting. In fact, that's why we backed it back for about 30 days so that we could provide more clarity around it. As I said, we're actually in the favorable position right now of looking at several different alternatives. It's not as if we only had one or two, even. We have a number of different avenues and possible combinations that we're looking at. So as I said, we're in due diligence now and more to come on that in the next few weeks or certainly between now and the shareholders’ meeting.
Mary Ross Gilbert
In looking at your sources and uses of cash in the first quarter, and I know we don't have complete statements until the Q is out, but were there any timing differences at all in the quarter that could've benefited cash? Or would you say that all the payments, everything that has been made, is sort of more typical for the quarter?
Thomas Casey
I think it's pretty straightforward. I mean, there’s nothing really that significant. I mean, we had all the debt items are as you would expect in terms of the interest payments January 4, and April and March and the principal payments of January and April, offset by the Viacom benefit. So you sort of had a net use of cash related to those transactions of around $75 million. And then you just look at our financial tables with the press release, you see what the adjusted EBITDA is, the lease termination costs severance and professional fees, CapEx, taxes, working capital. You really get to the difference between the $189 million and the $110 million. There's nothing really unusual in there.
Operator
You're next question comes from Carla Casella with JPMorgan.
Carla Casella - J.P.
On the store closings that happened in April, the 182. Would you say what the store closing costs were?
Thomas Casey
No, we don't disclose that, Carla.
Carla Casella - J.P.
I think you’d said $30 million for the year. So is that still fair? Being that you did $20 million in the first quarter, it’d be maybe $10 million left?
James Keyes
What we’re paying in store closure costs is a, obviously, an important negotiation with landlords. I would just tell you that we're pleased with how we've been able to do that. And then if you go back to our 8-K in last September, it's consistent with our assumptions in that disclosure.
Carla Casella - J.P.
And then on the SG&A, the run rate was running a little bit higher than we expected in the first quarter. And I’m wondering if it was just timing of the store closures, potentially. Should we see, I mean, I guess, can you say how much of your general and administrative expenses were related to stores that are now no longer open?
James Keyes
Yes. So we said $20 million of the G&A change was related to store closure expenses.
Carla Casella - J.P.
So $20 million of the change year-over-year from first quarter last year was because of store closures?
James Keyes
Right.
Carla Casella - J.P.
There’s probably more to come though? Wouldn’t second quarter be higher than that number? Because you would have had a bit more stores closed for the full fourth period?
James Keyes
No, Carla. I wouldn't make that assumption.
Operator
Ladies and gentlemen, that concludes our Q&A portion. I'll now turn the call back over to Mr. Keyes for closing remarks.
James Keyes
Thank you, operator. Thanks, everybody, for your questions. As you can see, we're continuing to focus both on the recapitalization of the company, but also on transforming the core business, and making the necessary adjustments to position ourselves for the future. I just want to highlight in closing the very unique opportunities that we have. We are now the only national chain with day-and-date availability cross-channel across virtually all movies, a 28-day window advantage on a number of new releases. We have the advantage of the Movie, Hollywood closings that will provide some tailwinds to us. We have strategic partnerships in vending now and very active discussions underway for By Mail and digital. And we have what we think is a world-class digital streaming offering, one of the few that offers new releases, availability of new releases. So we have a lot going for us. Yes, we have our near-term challenges. But we have every reason to stay the course and to make sure that we have adequate liquidity going forward, and doing the things that we can do to provide the balance sheet necessary to continue with this exciting transformation. We appreciate your continued support. I know it's been challenging, not only for you, but for us. But we're really looking forward to sharing more with you at the shareholder's meeting coming up at the end of June. Thank you very much for your continued support. Okay, operator, that concludes our call for today. And you can go ahead and release the call. Thank you.
Operator
Ladies and gentlemen, thank you for your participation on today's call. The call has ended. You may now disconnect. Good day.
Source: http://seekingalpha.com/article/205054-blockbuster-q1-2010-earnings-call-transcript?page=-1
FILMMAKER BOOTCAMP FRIDAY IN WASHINGTON, DC
The award-winning GI Film Festival is hosting a one-day Filmmaker Bootcamp in Washington, DC this Friday, May 14, 2010. Led by a panel of Hollywood’s top financiers, agents, directors, and producers, the Bootcamp will cover nuts and bolts of film finance, distribution, marketing, and pitching. The Chairman of Genius Products Stephen K. Bannon will host the event, while scheduled panelists include producer Steve McEveety (BRAVEHEART); James “Jay” Rosenstock of the Discovery Network; literary agent Alan Nevins, and many more impressive industry players. Register today to expand your professional network, gain visibility for your latest film, and to meet Hollywood’s top financiers and producers!
Source: http://cifej.org/?p=18
*******************************
Filmmaker Boot Camp
All Day Workshop Hosted by Stephen K. Bannon
Spend 20 years knocking on doors in Hollywood---
Or kick them down in one day with us.
?Get an insider’s perspective on film finance, distribution, marketing and pitching!
?Expand your professional network and get visibility for your projects!
?Meet Hollywood’s top producers and film financiers!
On Friday, May 14th, from 9 am to 4:30 pm, the GI Film Festival will host Stephen K. Bannon’s “Filmmaker Boot Camp” at the Carnegie Institution in Washington, DC. Led by a panel of Hollywood’s top producers and financiers, the GI Film Festival Filmmaker Boot Camp will teach independent filmmakers the “nuts and bolts” of film finance, distribution, marketing, and pitching.
Source: http://www.gifilmfestival.com/ticketing-2010/bootcamp.htm
“During the first quarter we continued progress to recapitalize our business. We have had encouraging discussions with both financial and strategic partners and expect to have additional details to report by our annual stockholders’ meeting in late June,” stated Jim Keyes, Chairman and Chief Executive Officer of Blockbuster Inc. “In spite of competitive challenges, we experienced better domestic rental same-store comparables trends and achieved a number of goals to establish a significant competitive advantage going forward. Most important was our success in securing agreements with key studio partners to ensure our customers receive day-and-date cross-channel access to hot new releases. We now have a 28 day rental advantage on nearly 50 percent of major new releases.”
Source: http://www.sec.gov/Archives/edgar/data/1085734/000119312510119118/dex991.htm
I agree. I plan on adding more BBI. Blockbuster EXCEEDED earnings expectations and the loss per share was the same as analysts predicted. The future is bright with the 28 Day Window and continued Blockbuster Express Kiosk rollout. During the conference call, BBI managmenet hinted on positive developments including they are in an "advanced stage" in the european asset sale, and they have "quite a few" options at hand. My guess is several companies are interested in purchasing Blockbuster including, NCR, and possibly several major movie studios, imo.
Blockbuster posts 1Q loss, sees 'challenging' year
Blockbuster Inc. posted a first-quarter loss as the movie-rental chain suffered a drop in revenue caused in part by its bruising competition with Netflix Inc.
Blockbuster's CEO, Jim Keyes, said Blockbuster has had "encouraging" talks with investors that might help the company avoid having to file for Chapter 11 bankruptcy court protection, a possibility that has loomed over the company as its business has faltered.
Blockbuster said after the market closed that its net loss was $65.4 million, or 33 cents per share, for the three months ended April 4. That compares with a net profit of $27.7 million, or $0.12 per share, in the year-ago period.
Excluding severance payments, costs for closing stores and other one-time expenses, the company would have lost 14 cents per share, which matched analysts' forecasts on that basis.
Analysts polled by Thomson Reuters expected $933 million in revenue. Blockbuster posted revenue of $939.4 million, topping Wall Street's forecasts but still representing a 13.5 percent decline from the year-ago period, when it brought in $1.09 billion in revenue.
The company's chief financial officer, Tom Casey, said he expects that the next 12 to 18 months will be "challenging" for the company.
Source: http://www.cnbc.com/id/37138043
As Blockbuster Inc. (BBI, BBIB) gets set to report first-quarter results later Thursday, investors have their eyes on whether recent agreements with movie studios can shore up the declining movie-rental business and on any progress in debt-restructuring talks.
Five sell-side analysts surveyed by Thomson Reuters expect Blockbuster to post a loss of 14 cents a share, or earnings before interest, taxes, depreciation and amortization of about $48.8 million.
Revenue is expected to have declined 17% to $933.3 million as the chain continues to lose market share to by-mail DVD rental service Netflix Inc. (NFLX) and to rental-kiosk operator Redbox Automated Retail, owned by Coinstar Inc. (CSTR).
Smaller rental chain Movie Gallery's (MVGRQ) move, confirmed this week, to close the remaining 1,026 stores it hadn't already tagged for liquidation should be positive for Blockbuster over the next year, Wedbush Morgan analyst Michael Pachter said in a recent note to clients.
But he's skeptical Blockbuster's 28-day head start over competitors to rent new releases from several major movie studios is a long-term answer to the company's strategic woes. Most consumers, he said, are unaware of the average DVD's first release day. "Most are likely to discover availability when visiting their local Redbox kiosk," Pachter said.
Blockbuster's class A shares recently traded up 17.9% at 51 cents, while class B shares rose 12.5% to 41 cents.
Meanwhile, an investor waging a proxy fight for a seat on Blockbuster's board said he'll form a committee to represent shareholders' interests, saying one restructuring proposal being floated is harmful to equity holders and unnecessary.
Blockbuster in March warned it may have to file for bankruptcy protection, though Chief Executive Jim Keyes has repeatedly said the company has sufficient liquidity to meet debt obligations this year.
"Nobody's representing shareholders," Greg Meyer said in an interview. "The board is supposed to be representing shareholders, but they do not appear to be taking that role."
Meyer, who founded a movie-kiosk business he sold in 2007 to Redbox owner Coinstar Inc. (CSTR), is trying to unseat director James Crystal, 72, who was appointed in 2007. Meyer owns about 0.44% of outstanding class A shares and a small number of class B shares, but he says his industry experience will be advantageous to the company.
Meyer, though, is concerned that the movie-rental chain is in talks with holders of $300 million in 9% senior subordinated notes due 2012 to swap the debt for most of the company's shares, a new unsecured note and some cash.
Citing sources familiar with the situation, financial website Debtwire.com said earlier this week that holders of the subordinated debt have proposed receiving about 95% of Blockbuster's equity and a new $125 million senior unsecured payment-in-kind note. In exchange, subordinated debt holders would tender their bonds and contribute $25 million to $30 million in cash.
"In a nutshell, its a very attractive proposal for the subordinated holders and very unattractive for the equity holders," he said. "Importantly, it's not something the firm has to do."
Meanwhile, Meyer has pitched to Blockbuster advisers his own financial transaction that he wouldn't detail but he argues could conserve liquidity and save Blockbuster money without diluting equity interests.
"It basically leverages an asset that the company has in a manner that could bring cash into the company in the near term when it's really needed," Meyer said.
Blockbuster said in a statement it could not comment on ongoing talks tied to its recapitalization efforts, though it said discussions continue and are positive.
"We are pleased with the progress we are making to improve liquidity and reduce the company's debt levels," the company said. "We have been in constructive dialogue with, and received several proposals from, various parties including debtholders, equity holders and strategic investors. We are assessing these opportunities in real time and expect to have more to communicate by our Annual Shareholder Meeting in late June."
Blockbuster's board apparently rejected Meyer's offer from earlier this month to settle his proxy contest by placing him on the board. Meyer had held out the promise of ending the dispute ahead of the June 24 annual meeting, paying associated costs and developing mutual pledges against bad-mouthing or filing lawsuits against each other. Blockbuster never responded, Meyer said.
Source: http://online.wsj.com/article/BT-CO-20100513-714313.html?mod=WSJ_latestheadlines
STRONG BUY!!!!!
4:30 is golden! The positive developments lately are sure to help the bottom line. Sorry shorts, you are not getting my shares!!!
STRONG BUY!!!
$2.50 - $3.00 at the least, imo. It all depends on how many bonds either BBI retires or the potential suitor acquires at the current discount. GLTY!
I agree, someone knows something. Tomorrow will be fun!
I think NCR would be the most logical buyer of BBI.
A prime example of vertical integration in order to streamline and become more competitive and profitable.
http://en.wikipedia.org/wiki/Vertical_integration
.75 at least!!!! Over 13.4m BBI traded so far, Blockbuster is on FIRE! GLTY
Bond Prices going up and Bond Yields are going down, great sign of stability and recovery in BBI!!! Last trade 1M Bonds @ $22.88 100.52% yield.
Source: http://cxa.marketwatch.com/finra/BondCenter/BondDetail.aspx?ID=MDkzNjc5QUMy
Q1 results must have been leaked. The squeeze is on!
50 million is what all of us Ihubbers are going to make on Blockbuster after Q1 results are released and improved guidance is issued tomorrow evening. The media currently thinks of Blockbuster as outdated / VHS / soooo behind the times. The tides are changing and we are witnessing the resurgence of the NEW Blockbuster, ready to take on Netflix and Redbox. The 28 day window in itself is a "game changer" as well as the end of Blockbusters #1 competitor, Movie Gallery / Hollywood Video / Game Crazy. There are just to many recent positive developments to dismiss Blockbuster as headed for certain demise. Better to get in now, rather than later. Shorts are going to get burned, imo. glty
An Interview With the Shareholder Who Will Fight to Save Blockbuster, an "American Icon"
Had a long talk with Greg Meyer last night. He's the guy who owns 645,000 shares of Blockbuster -- more than any exec at Blockbuster, save for CEO Jim Keyes, whose stock comes with the title, and more than anyone on the board of directors. He's the former managing director of DVDXpress who, in 2005, told Blockbuster to get into the kiosk business (it didn't). He's the guy giving Keyes all kinda fits in advance of the June 24 shareholders meeting at 1201 Elm Street downtown. He's the guy who wants to be on the Blockbuster board; only, Keyes doesn't want him. Right. That guy.
For somebody I'd never heard of till a few weeks ago, when Meyer made public in docs filed with the Securities and Exchange Commission his intentions to stage a proxy fight, he's gotten quite a bit of press. He's surprised too.
"It's been absolutely unexpected, unplanned for," he told Unfair Park last night, after dropping off his Definitive Proxy Statement with the SEC. But he knows why people care.
"Because Blockbuster is an American icon," he says. "It's a name people know. Love it or hate it, they grew up renting movies there, and it's always sad to see a company so well known and that employs tens of thousands of people mismanaged and not having the proper guidance from a board to ensure its longevity and survival. When they see someone they know has skins in the game and who's paying attention to the situation and is willing to dedicate time and energy and his own money to what he thinks is right, they respect that."
In the next couple of days, he will send to Blockbuster shareholders a gold card asking them to vote him to the board of directors, rather than Keyes's selection, James Crystal, an insurance man. It's a rather undramatic fight, all things considered -- he won't, for instance, get up at the meeting on June 24 and give a Gordon Gekko-style speech. Chances are, he might not even fly in from New York if he's not elected. "But I'm not planning on that outcome," he says. He expects to win a seat on the board.
Why? And, to what end? Jump for our extensive Q&A in which he says Blockbuster -- " one of the most reviled companies in the country, possibly the world" -- owes its customers a big ol' apology.
Why are you willing to put so much time and energy into saving a company that, five years ago, blew you off when you suggested, well before the advent of Redbox, that it get into the kiosk business?
Many reasons. The company is absolutely poised for a turnaround if the right decisions are made at the highest levels. If you look at the amount of revenue Blockbuster generates, it's still well in excess of Netflix and Redbox. Even though the stock is trading at 43 cents versus Netflix at $107 a share, more revenue is spent in Blockbuster stores each year than any of its competitors. There's real business.
And there have been some developments over the last couple of months that are extraordinarily positive, among them the 28-day exclusive new-release window Blockbuster now enjoys versus Netflix and Redbox with key studios such as Warner Bros., Universal and Fox. For example, when Avatar -- the biggest movie of all time -- was released on DVD April 22, you could go into a Blockbuster to rent that movie, but you couldn't get it on Netflix or in a Redbox. Today is May 11, and you still can't get it on Netflix or Redbox. They won't have it for 28 days.
Never in the history of the video rental industry has this type of window existed, and it's real positive. It should result in increased traffic into the Blockbuster stores and increase profitability. And that's just one major positive.
But at the same time, Blockbuster cut major deals with the studios: Blockbuster pays less for the DVDs upfront but more on the back end. And, in some instances, they gave up the first lien on their Canadian properties to make this happen.
My understanding is there may be higher revenue sharing on the back end, but the upfront cost is lower. And that's obviously something that helps Blockbuster's cash position.
When you refer to positives, are you also talking about the T-Mobile deal that allows, for the first time, Blockbuster's content to stream over a mobile device?
Those initiatives are great, but they're not going to add up to a lot of dollars in the near term. What will add up, or what has the potential to be pretty important, is the fact the company's No. 1 brick-and-mortar competitor, Movie Gallery, has announced they'll be shuttering all 2,400 stores. If you run McDonald's and all the Burger Kings go out of business, what do you think will happen to the sales of your hamburgers? And these are the customers who were previously frequenting Movie Gallery and Hollywood Video stores. By their past rental behavior they have demonstrated they in fact prefer to rent from a physical store for one reason or another.
You're a real believer in the stores, aren't you -- the man who pushed kiosks believes the brick-and-mortars will help save Blockbuster in the end?
I wouldn't misinterpret that. Brick-and-mortar is still a very real business, and again it currently accounts for the lion's share spent on DVD rentals. With the significant reduction of industry capacity we've seen in the last couple of years, that means those stores that remain have a real chance of being solidly profitable for several years into the future. So what that means is the company should be able to generate enough cash to service its debt over the next couple of years, but clearly they need a long-term plan to transition customers into the channels that won't become obsolete.
You refer, of course, to the kiosks, digital on demand, by-mail ...
Blockbuster has some advantages on the digital on demand side because they have access to new-release movies on demand, which Netflix does not. Netflix has a great streaming program, but it's mostly for older content. Ultimately if Blockbuster is properly marketed it should gain those subscribers who care more about new releases, and Netflix will take those subscribers who care more about the streaming of catalog, older titles.
With the kiosks, Blockbuster is partner with NCR, and Blockbuster has licensed their brand and is competing with Redbox. If they had entered the kiosk business in 2005, they would be dominating the space right now and be in a sound position strategically and financially.
Why did they ignore you in 2005?
They'll say that in 2004 Viacom saddled us with $1 billion in debt and couldn't do any initiatives. They'll say, "We didn't have options." That's a bunch of baloney. If you look at the amount of money the company has wasted ... One thing Jim Keyes has done well is cut costs, and we're talking hundreds of millions taken out of corporate overhead. There was a definite opportunity to invest a hundred million in the kiosk business in 2005, which would have resulted in a billion dollars' worth of value today. The reason I think they didn't do it: complacency.
Viacom is an excuse. That was an easy thing to point to. They didn't need to think too hard and see where the industry was going.
How far up the food chain did your proposal get?
The proposal was sent to the board.
Do you think anyone at the company seriously considered it?
[Long pause] I don't want to speculate. I can tell you I didn't receive a formal response. As a matter of pure business profesionalism, I would say it probably wasn't given too much consideration. This is something you see with companies that dominate their space for decades. The human nature is to become complacent and think that the company is invincible. It's been the No. 1 player and always will be. When, in reality, they need to be taken a look at: What's changing? What competitors are coming on the scene? How are they better serving our customers and how do we need to adapt to address that?
If you look at any article posted about Blockbuster and read the comments underneath, it's atrocious. Sometimes they're former store managers or customers who were abused by excessive and erroneous late fees. But there's a big segment of the U.S. consumer base that has sworn off Blockbuster forever. Why did that happen? That happened because for years the company was in the dominant position and mistreated its customers. Not every store, but it happened enough that a lot of animosity built up.
It would make sense for someone in a leadership position at Blockbuster to come clean and issue a formal apology to the U.S. moviewatcher for past practices at Blockbuster and let them acknowledge that prior iterations of management may not have treated the customer with the respect they deserve, but there are a lot of benefits of going to Blockbuster and renting movies from Blockbuster at the store, from a kiosk, by mail or by demand. A simple communication from the highest level of the company to consumers would change the overall tone with which a lot of customers view the company.
All the comments boil down to the same thing: "I can't believe it's still in business." It's amazing. It's one of the most reviled companies in the country, possibly the world. But it's reviled for its past practices. Things have changed. But word needs to get out that change has occured and it's not being done by the company right now. I think their reaction to my bid for a board seat demonstrates a similar type of complacency.
I am surprised at the force with which Keyes is keeping you from getting on the board.
I am equally surprised. I haven't been given a good reason by Mr. Keyes as to why he objects to my serving on the board. My intention is to do nothing but help the company. It almost makes one wonder what is there to hide that he wouldn't feel comfortable having an independent director with more shares than any other director on the board, who has 10 years of experience in this industry and an energy level and willingness to work for the betterment of the company. Why would you turn that down when your stock's trading at 40 cents and there are rumors of imminent bankruptcy? And that view is shared by other stockholders?
Have you spoken to many during this process?
I have, and they're very supportive. They say, "We're obviously not happy with the direction of the company and the stock." There are those who think management has done a decent job and those who think it's done not such a decent job, but all think the incumbent board doesn't have the level of engagement, industry experetise and share alignment it needs to and think my participation will be a step in the right direction.
How do you think it'll go? Because the last thing Blockbuster needs is an expensive, messy and very public proxy fight at this point.
It's extremely poor busines judgment that the board and, really, Keyes would opt to spend the company's precious capital, which it needs to conserve to service its debt let alone spend on operations and advertising. So, again, it's very baffling why anyone would make that decision. Why would you choose to spend a precious resource to keep a qualified individual off the board when the money is needed elsewhere? I can't see how it's viewed as a sound business decision. It's just a distraction, which is the last thing Blockbuster needs right now.
Source: http://blogs.dallasobserver.com/unfairpark/2010/05/the_shareholder_who_wants_to_save_blockbuster.php
The current market cap is only 1.13m!
It is either short covering or new short positions.
Once Scratch is released, the shorts will drive the price up when they are forced to cover, imo.
Blockbuster kiosks to expand in Midwest
NCR Corp., a technology company that serves as a partner to Blockbuster Inc., said Wednesday it will deploy Blockbuster Express kiosks in more than 300 Kwik Trip convenience stores across the Midwest.
The stores will be set up in Iowa, Minnesota and Wisconsin. The kiosks are already being placed in Chicago, Detroit and Indianapolis.
Using the kiosks, Kwik Trip customers will have access to DVD movies supplied by Blockbuster. The additions are part of Blockbuster’s ongoing initiative to compete with video rental kiosks.
Dallas-based Blockbuster partners with NCR Corp., which provides the services and tools needed to operate DVD-rental kiosks.
Source: http://www.bizjournals.com/dallas/stories/2010/05/10/daily29.html
The new API / Blockbuster Everywhere strategy is a winner, imo.
http://www.readwriteweb.com/cloud/2010/05/blockbuster-video-launches-api.php
BBI Short Interest now a whopping 30,529,600
UP from previous 23,826,800 Short Interest.
Prepare for a massive rally as shorts cover!
Source: http://www.shortsqueeze.com/?symbol=bbi&submit=Short+Quote%99
Bond prices are climbing! Most recent trade: 1m BBI bonds @ $22.25
BBI is going higher, imo. Short covering will start ramping up as we get closer to, and after the conference call.
Source: http://cxa.marketwatch.com/finra/BondCenter/BondDetail.aspx?ID=MDkzNjc5QUMy
Blockbuster now available on TOSHIBA Blu-Ray Players!!!
http://www.blockbuster.com/download/waystowatch/toshibabd
STRONG BUY!!!
Rental Exclusivity Window
At BLOCKBUSTER, we're all about bringing you the movies you want, when you want them. So when some of the major movie studios instituted a 28-day waiting period for new release rentals, it gave us a big frowny face, like this
Luckily, we love the good folks at the studios. We think they're smart, attractive people with really nice families. We worked with them to ensure that we're able to bring you the hottest new releases as soon as they're available. As a result, we'll not only have new releases available to rent in our stores from the first day of release, but also by mail, via download, and on select electronic devices.
Companies like Redbox and Netflix can't rent those movies to you until 28 days after they're released on DVD and Blu-ray. It's kind of a big deal.
Source: http://www.blockbuster.com/browse/newReleases/window
Avatar can only be rented at Blockbuster! It is in the top 10 DVD and Blu Ray Rentals @ both instore/kiosk AND ONLINE/On Demand! Also look at what is coming up for the 28 day window (competitive advantage) for Blockbuster.
Valentine's Day
Invictus
The Spy Next Door
Extraordinary Measures
The Messenger
The Girl on the Train
Dukes
Misconceptions
The New Daughter
Gunfight at La Mesa
Everyman's War
Fray Justicia
STRONG BUY!
***********************************************************
It's Complicated' Tops Weekly Blockbuster® Hit List of Top 10 Renting DVDs For Second Week in a Row
DALLAS, May 11 /PRNewswire-FirstCall/ -- Topping the BLOCKBUSTER® (NYSE: BBI, BBI.B) Hit List of "Top 10 Renting DVD Titles" for the second week in a row is "It's Complicated." In this romantic comedy about family, marriage, and divorce, Meryl Streep's character, Jane, and her ex-husband (played by Alec Baldwin) have an affair ten years after their divorce. Jane's love life becomes further complicated when she begins a romance with her architect (Steve Martin). Nancy Meyers directs this heart-warming comedy.
BLOCKBUSTER® Hit List
Top 10 Renting DVD Titles at U.S. BLOCKBUSTER stores for the week ending May 9, 2010:
It's Complicated
Avatar
Tooth Fairy
Leap Year
Crazy Heart
The Blind Side
Sherlock Holmes
Nine
Bad Lieutenant
Iron Man
Top 10 Selling DVD Titles at U.S. BLOCKBUSTER stores for the week ending May 9, 2010:
Avatar
It's Complicated
Tooth Fairy
Iron Man
Leap Year
The Blind Side
Fear and Loathing in Las Vegas
Nine
The Boondock Saints
The Princess and the Frog
Top 10 Online Renting DVD Titles at Blockbuster.com for the week ending May 9, 2010:
Tooth Fairy
Leap Year
It's Complicated
Avatar
Sherlock Holmes
The Blind Side
Nine
Crazy Heart
Up in the Air
Brothers
Top 10 Renting Blu-Ray Titles at U.S. BLOCKBUSTER stores for the week ending May 9, 2010:
Avatar
Sherlock Holmes
It's Complicated
The Blind Side
Bad Lieutenant
2012
Imaginarium of Doctor Parnassus
Brothers
Nine
Tooth Fairy
Top 10 Renting Digital Titles on BLOCKBUSTER On Demand® for the week ending May 9, 2010:
Leap Year
It's Complicated
Did You Hear About The Morgans?
The Lovely Bones
Sherlock Holmes
Avatar
Ferris Bueller's Day Off
Crazy Heart
The Blind Side
2012
Top 10 Selling Digital Titles on BLOCKBUSTER On Demand® for the week ending May 9, 2010:
Avatar
Tooth Fairy
Imaginarium of Doctor Parnassus
The Hangover (Unrated)
The Blind Side
Iron Man
Sherlock Holmes
Ninja Assassin
2012
Nine
Top 10 Renting Video Game Titles at U.S. BLOCKBUSTER stores for the week ending May 9, 2010:
Tom Clancy's Splinter Cell: Conviction – X360
Iron Man 2- X360
Battlefield: Bad Company 2- X360
Iron Man 2- PS3
Just Cause 2- X360
God of War III- PS3
Dead to Rights: Retribution- X360
New Super Mario Brothers- Wii
Major League Baseball 2K10- X360
Halo 3: ODST- X360
These DVD Rental New Releases are hitting the streets Tuesday, May 18, 2010:
Valentine's Day
Invictus
The Spy Next Door
Extraordinary Measures
The Messenger
The Girl on the Train
Dukes
Misconceptions
The New Daughter
Gunfight at La Mesa
Everyman's War
Fray Justicia
For more information, check participating BLOCKBUSTER stores and online at blockbuster.com.
About Blockbuster Inc.
Blockbuster Inc. is a leading global provider of rental and retail movie and game entertainment. The company provides customers with convenient access to media entertainment anywhere, any way they want it - whether in-store, by mail, through vending kiosks or digitally to their homes and mobile devices. With a highly recognized brand and a library of more than 125,000 movie and game titles, Blockbuster leverages its multichannel presence to serve nearly 47 million global customers annually. The company may be accessed worldwide at www.blockbuster.com.
Source: http://blockbuster.mediaroom.com/index.php?s=119&item=895
Fredman Groupies are a dime a dozen these days, how many would you like? ;oD
http://www.walmart.com/ip/Men-s-Stud-Muffin-Tee/14097420
Earnings Preview : Blockbuster Inc. (NYSE: BBI) First Quarter 2010
Blockbuster Inc. (NYSE: BBI: 0.427, 0.0411) is scheduled to report its Q1 2010 results after the market closes on May 13, 2010. Looking forward to 2010, the Company remains cautiously optimistic. Over the longer term, the recent announcement of store closings by Movie Gallery will affect favorably hundreds of Blockbuster locations as Movie Gallery liquidates and closes a number of their U.S. locations. Furthermore, the recently announced transaction between Warner and both Netflix and Redbox will provide Blockbuster with a 28-day head start on Warner titles in their stores. This reinforces an important element of differentiation and enhances Blockbuster's consumer relevance since 60% of the industry's $22 billion rental and retail business represents new releases during the first 30 days of street date.
Blockbuster Inc. is a world''s leading retailer of rentable home videocassettes, DVDs and video games. The company may be accessed internationally at www.blockbuster.com. Blockbuster Inc. is a subsidiary of Viacom Inc., one of the world''s largest entertainment companies and aleading force in nearly every segment of the international media marketplace.
As for Q4 2009, total revenues were $1.08 billion as compared to total revenue of $1.31 billion for the same period one year ago. Gross profit for Q4 of 2009 was $540.4 million, compared to $658.9 million in the same period one year ago.Operating expenses for the Q4 of 2009 decreased by $73.2 million, or approximately 7%, to $934.0 million as compared to operating expenses of $1.01 billion for the same period one year ago. In the Q4 of 2009, the Company incurred a non-cash charge of $369.2 million for the impairment of goodwill and other long-lived assets, compared to a $435.0 million non-cash charge for the impairment of goodwill and other long-lived assets for the same period one year ago. General and administrative expenses during the Q4 of 2009 were $487.6 million as compared to $509.6 million in the Q4 of 2008, representing a decrease of $22.0 million, or approximately 4%. Operating loss for the Q4 of 2009 was $393.6 million as compared to an operating loss of $348.3 million in the Q4 one year ago, which includes non-cash charges for the impairment of goodwill and other long-lived assets.Net loss in the Q4 of 2009 was $434.9 million, or $2.24 per share, which includes the non-cash charge of $369.2 million for the impairment of goodwill and other long-lived assets. Q4 2009 EBITDA was $16.5 million, compared to $122.8 million for the Q4 of 2008. Adjusted EBITDA, which excludes stock-based compensation, costs associated with lease terminations and severance, was $31.3 million in the Q4 of 2009, compared to adjusted EBITDA of $128.1 million in the same period one year ago. Blockbuster ended the Q4 of 2009 with $188.7 million in cash and cash equivalents and $58.5 million in restricted cash related to the Company's letters of credit.
Analysts' estimates for Q1 2010 range from a low of $-0.21 to a high of $-0.06, compared to a consensus estimate of $-0.06, with number of estimates being 6 and the co-efficient variance -42.56. In Q1 2010, Blockbuster expects a significantly lower use of cash for working capital. Studio partners will continue to be a support of Blockbuster and embrace their multichannel approach. BBI will continue to work closely with their studio partners to improve revenue sharing arrangements, and will likely increase their consigned retail product.
The stock closed at $0.39, down 2.03% on May 6, 2010 and most analysts' recommend holding the stock with an average price target of $0.75.
Source: http://alphaearnings.com/news/3542700
MOBILE USERS, BLOCKBUSTER IS HERE
Blockbuster Going Mobile and Digital
There is no doubt that watching movies from home has changes. First, Pay-Per-View made watching movies through the television possible free of commercials and not edited for TV. Next companies like NetFlix began the online revolution, allowing streaming of video through the television provider for a small subscription fee, DVD's through the mail and now streaming television through game consoles, phones and tablets like the iPad. Now well known movie rental chain Blockbuster (BBI) is entering the arena through its newly announced "application programming interface" which seeks to upgrade their services to be web 2.0 compatible. This includes streaming and digital downloads of new releases to any supporting mobile platform.
BBI suffered dropping sales and stock price for some time as movie watchers migrated away from the now outdated stores to get faster and easier access to movies. Stock price in 2002 was as high as $29 per share, and now resides close to the $0.40 area. One thing that serves Blockbuster very well even now is their strong branding, which cannot be said to many penny stocks. This is a huge potential for them, since any campaign undertaken by them will be more widely received than more unknown companies. This makes the potential growth for BBI huge for investors. They have the benefit of low stock price, which allows explosive growth, and some of the strength of a larger cap stock through their years of branding.
It is unknown if it is too late for BBI to step into the game. One reason why stock prices fell so far was of their slow reaction speed towards change. It seems that now BBI has got the hint, and is looking to capitalize on the multi-platform possibilities for movies, especially since more and more developers are looking to create tablets that can compete with the iPad.
One edge that could let BBI make a strong comeback is their access to the newest releases. NetFlix cannot offer the newest movies the same way Blockbuster can, with up to one month more of delays than BBI. The two services also differ when it comes to payment. NetFlix offers monthly fees that allow you to exchange movies at will whereas BBI would allow customers to pay for only the movies they want to see and forgo the required monthly costs. This is more flexible but may not attract the frequent movie watchers.
BBI has chosen to go with Sonoa Systems to power their expansive project, called "Blockbuster Everywhere." Sonoa is a company that is widely used by many large companies and their help will likely be a huge benefit for BBI.
The near future will give some indication on whether or not BBI can take back some of the stage against its newer competitors. Keep an eye out for the preliminary results of their newest efforts to strengthen themselves, it may prove to be just what they needed to get back on track.
Source: http://monsterstox.com/articles/bbi-going-mobile-6may2010
Yep! BBI is up 12% and climbing fast too!
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;oD