DALLAS, May 14 /PRNewswire-FirstCall/ -- Blockbuster Inc. (NYSE: BBI, BBI.B), a leading global provider of media entertainment, today announced financial results for the first quarter ended April 5, 2009.

Recent Highlights

• Completes funding of $250 million amended and extended single-draw credit facility;
• Announces $21.4 million (U.S. dollars) asset-based loan for Canadian subsidiary;
• Reports net income of $27.7 million, or $0.12 per diluted share;
• Continues cash maximization initiatives and remains on track to reduce G&A by over $200 million during fiscal 2009; and
• Reiterates full-year adjusted EBITDA guidance

'We are pleased to have successfully completed funding of the $250 million amended and extended credit facility. Our new financing, combined with our cost savings initiatives and additional cash availability, provides sufficient liquidity to continue our business transformation,' stated Jim Keyes, Chairman and Chief Executive Officer of Blockbuster. 'Key elements of this strategy include ongoing efforts to improve our in-stock availability and secure strategic alliances that leverage our strong brand, while also launching a new advertising campaign that promotes our unique multi-channel customer offering. Looking forward, we believe these actions will allow Blockbuster to deliver solid EBITDA and improve the balance sheet through the substantial reduction of debt.'

Consolidated First Quarter Financial Results

Total revenues for the first quarter of 2009 were $1.12 billion, compared to total revenues of $1.39 billion for the same period one year ago. Results for the first quarter reflect the Company's prudent approach to preserving liquidity as it completed its refinancing in the challenging macro environment. The reduction of inventory and lower advertising spend, combined with weaker DVD title strength and competition from strong theater box office traffic, had a dilutive impact on sales. Additionally, revenues reflect the negative impact of foreign currency exchange rates of $81.3 million and a decline in the company-operated store base worldwide. The decline in total revenues was partially offset by an increase in the average rental rate due to the favorable impact of price increases when compared to the first quarter of 2008.

Gross profit for the first quarter of 2009 was $590.7 million, compared to $741.7 million in the same period one year ago. The gross profit decline was primarily attributable to lower same-store revenues and the impact of foreign currency exchange rates of $40.3 million, resulting in a gross margin of 52.6 percent. This compares to gross margin of 53.2 percent in the first quarter of 2008.

Operating expenses for the quarter were $540.6 million, compared to $671.5 million in the same period one year ago. General and administrative ('G&A') expenses during the first quarter of 2009 were $493.4 million as compared to $601.1 million in the first quarter of 2008, representing a decrease of $107.7 million, or 17.9 percent, and largely offsetting the decline in gross profit dollars. The Company's G&A results for the first quarter of 2009 include the $33.1 million favorable impact of foreign currency exchange. Total selling, general and administrative expenses ('SG&A') decreased $125.8 million, or 19.9 percent, compared to the same period one year ago.

Operating income for the first quarter of 2009 was $50.1 million, compared to operating income of $70.2 million in the first quarter one year ago. Adjusted operating income, which excludes costs associated with store closures, severance, an adjustment for game inventory obsolescence and the favorable settlement of a future liability, was $63.7 million for the first quarter of 2009, compared to adjusted operating income of $73.0 million in the first quarter of 2008.

Net income for the first quarter of 2009 was $27.7 million, or $0.12 per diluted share, compared to net income of $45.4 million, or $0.20 per diluted share, in the first quarter of 2008. Adjusted net income for the first quarter of 2009, which excludes costs associated with store closures, severance, an adjustment for game inventory obsolescence and the favorable settlement of a future liability, totaled $41.3 million, or $0.19 per diluted share. This compares to adjusted net income of $48.5 million, or $0.21 per diluted share, in the first quarter of 2008.

First quarter 2009 earnings before interest, taxes, depreciation and amortization ('EBITDA') was $84.9 million, compared to $110.1 million in the first quarter of 2008. Adjusted EBITDA, which excludes stock-based compensation expenses, costs associated with lease terminations, severance, an adjustment for game inventory obsolescence and the favorable settlement of a future liability, was $98.2 million in the first quarter of 2009, compared to adjusted EBITDA of $114.5 million in the same period one year ago.

Blockbuster ended the first quarter of 2009 with $107.0 million in cash and cash equivalents. Cash used for operating activities during the quarter was $87.2 million, compared with $19.5 million of cash used for operating activities in the first quarter of 2008. First quarter free cash flow ('FCF') (net cash used for operating activities less capital expenditures) primarily reflects the Company's aggressive remuneration of accounts payable. As a result, FCF was negative $95.7 million in the first quarter of 2009, compared with negative FCF of $39.4 million in the same period in 2008.

Reconciliations of adjusted results and other non-GAAP financial measures are shown in the tables following the text of this press release.

Same-Store Sales

First quarter 2009 domestic same-store sales decreased 10.9 percent, compared to an increase of 2.9 percent in the same period in 2008. Same-store sales for the first quarter of 2009 were comprised of a 12.3 percent decrease in domestic same-store rental comparables and a 3.1 percent decrease in domestic same-store retail comparables. International same-store sales decreased 6.7 percent, reflecting an 8.4 percent decline in same-store rental comparables and a 4.2 percent decrease in same-store retail comparables for the same period in 2008. Worldwide same-store sales decreased 9.6 percent.

Asset-Based Loan

Blockbuster today announced that its subsidiary, Blockbuster Canada Co., entered into an agreement with Callidus Capital Corporation, a privately-held Canadian lender, to provide a non-revolving asset-based loan in the amount of $21.4 million (U.S. dollars) for Blockbuster Canada Co. Proceeds of the loan, which matures on September 30, 2010, will be used for general corporate purposes.

Additional information may be found, free of charge, in the Company's Current Report on Form 8-K at either www.sec.gov or http://investor.blockbuster.com.

7-1/2 Series A Cumulative Convertible Perpetual Preferred Stock

The Company also announced that its Board of Directors has determined not to declare or pay a dividend on its shares of 7-1/2 Series A convertible perpetual preferred stock with respect to the quarterly period beginning on January 5, 2009 and ending on April 5, 2009. Dividends on the Series A preferred stock are cumulative and will begin to accumulate beginning May 15, 2009. This action is consistent with the Company's efforts to manage cash, preserve liquidity and prevent any further unnecessary dilution to the Company's common stock.

Corporate Governance Update

After almost six years of service as a member of the Company's Audit Committee, director Jackie Clegg is transitioning off of the Audit Committee effective as of May 11, 2009. Ms. Clegg will continue to serve on the Board and as Chair of the Board's Nominating and Governance Committee. The Board will appoint a replacement Audit Committee member at the Board's meeting on May 28, 2009, following the Company's 2009 annual meeting of stockholders.

2009 Outlook

'We continue to expect that our same-store comparables will be lower in 2009 than in 2008, but expect strong EBITDA performance for the full year. As such, we remain comfortable with our prior guidance for fiscal 2009, which includes adjusted EBITDA in the range of $305 million to $325 million,' stated Tom Casey, Executive Vice President and Chief Financial Officer of Blockbuster Inc. 'Additionally, we remain on track to reduce G&A by over $200 million in fiscal 2009, which includes the contributions from our successful lease cost savings initiative. Our projections surrounding reductions in G&A exclude any impacts of foreign currency exchange rates or inflation.'

The Company will provide additional business updates and a more detailed review of its financial and operational results for the first quarter ended April 5, 2009 in conjunction with the upcoming conference call as previously announced and referenced below.

First Quarter 2009 Financial Results Conference Call and Web Cast

Blockbuster will host a conference call today, May 14, 2009, at 4:30 p.m. Eastern Time ('ET'). Investors and analysts may join the conference call by dialing 800-374-0113. International callers may join the teleconference by dialing 706-758-9607. A telephonic replay will be available beginning two hours after the conclusion of the call and will be available until midnight ET on Thursday, May 21, 2009. The replay number is 800-642-1687, with the pass code of 94725263. International callers interested in listening to the replay should dial 706-645-9291 with the same pass code. Finally, a live web cast (voice only) of the conference call will be accessible from the Investor section of the Company's website at http://investor.blockbuster.com. Following the live voice only web cast, an archived version will be available on Blockbuster's web site. Additional details regarding the Company's results may be found in its upcoming Quarterly Report on Form 10-Q for the fiscal quarter ended April 5, 2009, which will be filed with the Securities and Exchange Commission ('SEC') on May 15, 2009, in the Company's Annual Report on Form 10-K for the year ended January 4, 2009, and in other filings from time-to-time with the Securities and Exchange Commission.

Forward Looking Statements

This release contains 'forward-looking statements' within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may also be included from time to time in our other public filings, press releases, our website and oral and written presentations by management. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as 'may,' 'will,' 'expects,' 'believes,' 'anticipates,' 'plans,' 'estimates,' 'projects,' 'predicts,' 'targets,' 'seeks,' 'could,' 'intends,' 'foresees' or the negative of such terms or other variations on such terms or comparable terminology. Similarly, statements in this release under the heading '2009 Outlook' and statements that describe our strategies, initiatives, objectives, plans or goals are forward-looking. These forward-looking statements are based on management's current intent, belief, expectations, estimates and projections. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict. Therefore, actual results may vary materially from what is expressed in or indicated by the forward-looking statements. The risk factors set forth under 'Item 1A. Risk Factors' in our Annual Reports on Form 10-K and other matters discussed from time to time in our filings with the Securities and Exchange Commission, including the 'Disclosure Regarding Forward-Looking Information' and 'Risk Factors' sections of our Quarterly Reports on Form 10-Q, among others, could affect future results, causing these results to differ materially from those expressed in our forward-looking statements. Currently, the risks and uncertainties that may most directly impact our future results include (i) whether, despite the amended credit facility having been funded on the terms contemplated, we will have sufficient liquidity to finance the ongoing obligations of our business; and (ii) whether we will be able to otherwise improve our liquidity position by managing cash and cutting expenses. In the event that the risks disclosed in our public filings and those discussed above cause results to differ materially from those expressed in our forward-looking statements, our business, financial condition, results of operations or liquidity could be materially adversely affected and investors in our securities could lose part or all of their investments. Accordingly, our investors are cautioned not to place undue reliance on these forward-looking statements because, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. Further, the forward-looking statements included in this release and those included from time to time in our other public filings, press releases, our website and oral and written presentations by management are only made as of the respective dates thereof.