- The Washington Times - Tuesday, March 17, 2009

SAN FRANCISCO (AP) - The troubled video rental chain Blockbuster Inc. is scheduled to report its fourth-quarter results after the stock market closes Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Management’s plans for bolstering Blockbuster’s frail financial condition is likely to overshadow the company’s report for the fiscal quarter ending Jan. 4.

Blockbuster rattled Wall Street recently by seeking outside help to restructure its debt, a move that raised the specter of a possible bankruptcy filing. The company expressed confidence that it will be able to avoid going to bankruptcy court, but jittery investors still bailed out of its long-slumping stock. The shares dropped to a new low of 13 cents earlier this month before recovering slightly.

The Dallas-based company received a vote of confidence on Monday from an unlikely ally _ Mark Wattles, the founder of Hollywood Video, a Blockbuster rival that was sold to Movie Gallery Inc. in 2005.

Wattles, who resigned from Hollywood Video four years ago after Blockbuster launched a hostile takeover bid, said he has built up a 5.7 percent stake in his former foe because he is convinced the company will generate enough cash to meet its obligations through the rest of this year

The law firm of Kirkland & Ellis is trying to refinance Blockbuster’s debts,including a $350 million revolving line of credit scheduled to expire in August. James Keyes, Blockbuster’s chief executive, is supposed to provide more details on how the company plans to cope with its debt in a Thursday conference call.

Blockbuster has gotten into a financial bind because its 7,500 stores around the world have been losing their appeal amid an array of alternative movie rental options that deliver entertainment through the mail, cable and satellite TV services, and high-speed Internet connections.

With its revenue from video rentals eroding, Blockbuster has been peddling more merchandise, such as DVD players and video game consoles, in its stores. The diversification has helped lift Blockbuster’s same-store sales in the United States through most of last year.

The company’s same-store sales, which measures growth at locations open for at least a year, rose 4.4 percent in the fourth quarter, according to preliminary figures released earlier this month.

But Blockbuster’s rental revenue fell by 2.6 percent in the United States during the period.

Meanwhile, online DVD rental pioneer Netflix Inc. enjoyed one of its biggest quarters ever as it added 718,000 new subscribers during 2008’s final three months to boost its fourth-quarter profit by 45 percent. Netflix said it attracted another 600,000 customers during the first six weeks of this year to exceed 10 million subscribers for the first time.

BY THE NUMBERS: Excluding charges for store closures and other unusual items, analysts on average expect Blockbuster to earn 25 cents per share on revenue of $1.5 billion.

ANALYST TAKE: Although she doubts a bankruptcy filing looms, Gimme Credit analyst Kimberly Noland remains worried about the company’s ability to survive the accelerating shift to the digital delivery of video.

“We have long been concerned that Blockbuster’s in-store rental business is a dinosaur,” she wrote in a recent research note.

WHAT’S AHEAD: Blockbuster is expected to expand recently-launched services for renting movies over the Internet while also expanding on its efforts to transform into a one-stop entertainment hub for everything from video games to concert tickets.

STOCK PERFORMANCE: Blockbuster shares plunged 34 percent during its fourth quarter, dragging down the decline for the entire fiscal year to 62 percent.

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