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EARNINGS ROUNDUP

Loss at Video Chain Narrows

But Blockbuster says it is facing a credit crunch and might have to seek bankruptcy protection.

November 09, 2005|From Associated Press

Blockbuster Inc. posted a $491.4-million third-quarter loss Tuesday as the elimination of most late fees continued to chip away at revenue and the growth of the company's online service stalled.

Executives said Blockbuster would cut spending and raise at least $100 million through a private placement of convertible preferred stock.

In a filing Tuesday with the Securities and Exchange Commission, Blockbuster said "a very large majority" of its assets were already pledged as collateral on loans and that trade creditors were imposing stricter terms.

The company said it could be forced into bankruptcy protection if a new credit agreement with lenders didn't go into effect or if lenders recalled loans because of failure to meet debt covenants -- typically things such as exceeding debt ratios.

Blockbuster's loss of $2.67 a share during the three months ended Sept. 30 contrasts with a loss of $1.41 billion, or $7.81, a year earlier. Both periods included big charges.

Blockbuster shares fell 10 cents to $4.20.

Excluding a $347-million charge in the latest quarter for lost goodwill from former parent Viacom Inc.'s purchase of Blockbuster several years ago, Blockbuster said it would have lost 24.6 million, or 13 cents. That matched the average forecast of analysts surveyed by Thomson Financial.

Revenue fell 2% to $1.39 billion. Analysts had expected sales to match the year-ago figure of $1.41 billion, but growth in rental revenue was offset by a sharp drop in money from late fees, which Blockbuster scaled back in January to draw customers back to its stores.

Sales at stores open at least a year, a key measure of retail health, fell 3.8%, including 2.5% in rentals and 7.8% in merchandise sales.

Blockbuster is facing tough competition from Netflix Inc., whose online service is bigger and growing faster than Blockbuster's, and from cheap DVDs sold at mass marketers such as Wal-Mart Stores Inc.

Chairman and Chief Executive John Antioco said Dallas-based Blockbuster might sell some game stores, but he stood by the decision to cut late fees, which accounted for 13% of Blockbuster's revenue a year ago.

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