By ,
Published January 13, 2015
Blockbuster Inc. (BBI), the No. 1 video rental chain, on Tuesday reported a quarterly loss and a wide-ranging program to cut costs, including a restructuring of its debt.
The company, whose shares rose as much as 7 percent following the announcement, is grappling with a downturn in the rental industry and a bruising battle with rival Netflix Inc. (NFLX).
Blockbuster's third-quarter net loss totaled $491.4 million, or $2.67 per share, including asset impairment and other charges.
Excluding special items, the loss was $24.6 million, or 13 cents per share. On that basis, analysts' average loss forecast was 12 cents per share, according to Reuters Estimates.
In last year's third quarter, Blockbuster reported a net loss of $1.4 billion, or $7.81 per share, including a hefty charge related to its spin-off from Viacom Inc. (VIAB).
The company's U.S. same-store rental revenue slipped less than 1 percent in the third quarter, Chief Financial Officer Larry Zine said on a conference call with analysts. That compares with an industrywide decline of nearly 12 percent, according to Rentrak Corp.
Blockbuster's total third-quarter revenue fell 1.7 percent to $1.39 billion.
Blockbuster invested heavily in the past year in its online service and is still showing the effects of its decision to forego revenue from late fees to compete with Netflix. The company said it plans to lower costs, reduce spending and sell non-core assets in the hope of shoring up its finances.
It said it intends to cut costs by more than $100 million in 2006 and $50 million in 2007 by reducing overhead and marketing spending and selling non-core assets.
Capital spending is expected to fall to $90 million in 2006 from an estimated $140 million this year, primarily because of fewer new store openings, Blockbuster said.
The company said it was reviewing its portfolio and had agreed to sell D.E.J. Productions Inc., a wholly owned subsidiary, for an undisclosed sum.
In a separate statement, Blockbuster said it was launching a private placement of convertible preferred stock and expected gross proceeds of at least $100 million, which it will use to pay down debt and for general corporate purposes.
The placement was in connection with amendments to its credit agreement executed on Nov. 4, which marked Blockbuster's third modification to its credit agreement this year.
Blockbuster shares were up 16 cents, or 3.7 percent, at $4.46 in morning trade on the New York Stock Exchange. The stock hit a high of $4.62 earlier in the session.
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