By Relmor Demitrius
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 through 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.
Read the rest of this entry »
