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  • Stock Alert for Blockbuster Inc. (BLOAQ)
  • Stock Alert for Blockbuster Inc. (BLOAQ)
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    Stock Alert for Blockbuster Inc. (BLOKA)

    Blockbuster Inc. (BLOKA) is a global provider of rental and retail movie and game entertainment, with over 6,500 stores in the United States, its territories and 17 other countries as of January 3, 2010. The Company operates in two segments: Domestic and International. The Domestic segment consists of the United States store operations and by-mail subscription service operations, in addition to vending kiosks and the digital delivery of movies, through blockbuster.com and BLOCKBUSTER On Demand. The International segment consists of the non-United States store operations, including operations in Europe, Latin America, Australia, Canada, Mexico and Asia. On August 28, 2009, the Company completed the sale of Xtra-vision Ltd., a 184 store entertainment retailer in Ireland to Birchhall Investments Ltd.

    The Company was founded in 1982 and is based in Dallas, Texas.

    Share Statistics (Aug-27-10) FY

    2007

    FY

    2008

    %

    Chg

    Q4 2008 Q4 2009 %

    Chg

    Symbol BLOKA Revenue, $Mn 5.52B 5.29B 4.2% 1.39B 1.08B 22.3%
    Current price $0.07 Gross marg. n/a 51.7% n/a n/a 49.6% n/a
    52wk Range: $1.56-0.07 Oper. margin n/a -6.0% n/a n/a -36.5% n/a
    Avg Vol (3m): 4,172,810 Net margin n/a -1.4% n/a n/a -40.3% n/a
    Market Cap. 15.97M
    Shares Outst. 148.8M EPS, $ -0.45 -2.01 346.7% -1.89 -2.23 18.0%

    Source: Reuters.com, SEC Filings.

    Financial Summary

    BLOKA recently announced financial results for the second quarter ended July 4, 2010. The Company also reported that it has reached agreement with certain of its senior secured noteholders on a new Forbearance Agreement as it continues to engage in productive discussions with certain of these noteholders and other strategic parties regarding various recapitalization opportunities. The new Forbearance Agreement is substantially similar to the prior forbearance agreement and is effective until September 30, 2010, unless earlier terminated in accordance with its terms. The extension of the forbearance period to September 30, 2010, provides Blockbuster with additional time and flexibility as it seeks to implement a more appropriate capital structure to support the Company’s strategies for long-term growth and enhanced financial performance.

    Consolidated Second-Quarter Financial Results

    Total revenues for the second quarter of 2010 were $788 million, compared to total revenues of $982 million for the same period one year ago.

    Net loss for the second quarter of 2010 was $69 million, or $0.32 per share, compared to a net loss of $37 million, or $0.21 per share, in the second quarter of 2009. Net loss for the second quarter was affected by the closure of company-operated stores, the decline in same-store sales, and liquidity issues including costs associated with recapitalization initiatives and lease termination costs.

    Additional details regarding the Company’s second-quarter 2010 results may be found in its Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2010, filed with the Securities and Exchange Commission (“SEC”).

    New Forbearance Agreement

    The new Forbearance Agreement was reached with noteholders who have, collectively, represented that they hold approximately 70% of the Company’s 11.75% senior secured notes due 2014. The executing noteholders have agreed to forbear from exercising certain rights and remedies they may have under the indenture and related collateral documents arising from not receiving payments due under the senior secured notes on July 1, 2010. The forbearance period, under the new Forbearance Agreement, will expire on September 30, 2010, unless earlier terminated in accordance with its terms. The forbearance period may be extended upon written agreement by the parties.

    Additional information

    Additional details regarding the Company’s second-quarter 2010 results may be found in its quarterly report on Form 10-Q for the fiscal quarter ended July 4, 2010, filed with the SEC. Information may also be found in the Company’s Annual Report on Form 10-K for the year ended January 3, 2010, and in other filings from time-to-time with the SEC.

    Financial Strength (Aug-27-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 0.46 1.06 0.85 0.83
    Current Ratio (MRQ) 0.64 1.17 1.13 0.97
    Long-Term Debt to Equity(MRQ) 15.77 27.53 126.88
    Total Debt to Equity (MRQ) 28.55 41.46 186.85

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among two polled investment analysts. Against the Blockbuster Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 0 0 1 0 1 0
    4 weeks ago 0 0 2 0 2 0
    2 months ago 0 0 3 0 2 0
    3 months ago 0 0 4 0 2 0
    Last year 2 0 4 0 1 0

    Source: www.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Quarter Ending Sep-10 1 705.80 705.80 705.80 1,003.70
    Quarter Ending Dec-10 1 849.70 849.70 849.70 1,249.37
    Year Ending Dec-10 1 3,283.10 3,283.10 3,283.10 4,305.08
    Year Ending Dec-11 1 2,830.60 2,830.60 2,830.60
    EARNINGS (per share)
    Quarter Ending Sep-10 1 -0.53 -0.53 -0.53 -0.13
    Quarter Ending Dec-10 1 -0.07 -0.07 -0.07 0.21
    Year Ending Dec-10 2 -0.75 -0.29 -1.22 0.15
    Year Ending Dec-11 2 -0.57 -0.51 -0.64

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=BLOKA.PK

    Investment Highlights

    BLOKA and its senior debt holders had a meeting last week with six major movie studios discussing their intention to enter a preplanned bankruptcy for about five months, the Los Angeles Times reported.

    It would be essential for the Company to retain the support of movie studios amid a bankruptcy filing, in order to ensure receiving new releases and continue business uninterrupted.

    A preplanned bankruptcy would allow BLOKA to escape leases at some of its underperforming stores, and could result in the closure of another 500 to 800 locations.

    The flailing retailer is due to repay $42 million from its mounting $1 billion in debt on September 30, but if this report proves true, the prepackaged bankruptcy would come as soon as mid-September. The Company had already postponed the payment two times.

    “The Company does not have enough assets to cover its debt, and debt is superior to equity in bankruptcy,” says Wedbush analyst Michael Pachter. “This is not a liquidation, so shareholders won’t be wiped out, but in the reorganization, it’s unlikely that shareholders will get much more than a hope that the Company can recover, repay all of its debt, and return to a positive equity value.”

    Eventually, however, Pachter does believe all equity holders will be wiped out.

    For the second quarter of 2010, the Company reported a wider loss of $69 million, or 32 cents a share. This was significantly larger than the loss of 24 cents analysts expected.

    The Company’s revenue dropped 20% to $788 million from $982 million, also missing forecasts of $840.1 million. BLOKA attributes the decline to worse-than-expected results on the shuttering of stores over the past year, fewer store customers, and a nearly 30% drop in average subscribers to its by-mail service.

    Management said it continues to expect same-store sales to decline in the high-single-digits for the remainder of the year.

    Blockbusters’ stock was delisted from the New York Stock Exchange last month and is now trading on the over-the-counter market.

    Operational Update

    In August, BLOKA launched a marketing partnership with Comcast covering store and by-mail channels. This partnership includes the launch of DVDs by Mail, a co-branded by-mail offer available at http://www.dvdsbymail.com/. As part of the marketing partnership, BLOKA is installing Comcast-dedicated kiosks in select stores that allow customers to quickly and easily learn about, and sign up for, Comcast services.

    As a result of the partnership, Comcast customers now have access to BLOKA’s DVDs by-mail service through the new co-branded Web site. On the site, customers can browse the 95,000 movies and television titles that are available on DVD and Blu-ray, create a queue of titles they want to rent and then get the DVDs through the mail or at a store, where they can also exchange their rentals. Additionally, Comcast customers now have a range of options for getting their movies and television programs. They can rent new releases the same day the titles are available in stores for purchase, in many cases a full 28 days before other entertainment providers have them. Customers also have the option of exchanging by-mail rentals at Blockbuster stores.

    In early August, the Company announced the incorporation of games into its national by-mail offering. Subscribers can now select from more than 3,000 games and add them to their queue, just as they would movies, at no additional charge. These available titles represent approximately 90% of game titles released since 2000 for Xbox, Xbox 360, PlayStation 2, PlayStation 3 and Wii.

    Source:http://www.thestreet.com/_yahoo/story/10846081/1/blockbuster-bankruptcy-weeks-away.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

    Technical Analysis

    Source: http://stockcharts.com

    BLOKA is below its 13-day moving average. This bearish sign is even more significant because the moving average is also trending lower.

    BLOKA is trading below its lower Bollinger Band. Relative to recent price action, the stock is currently overextended to the downside and due for either a pause or retracement.

    The MACD for BLOKA currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of zero, which implies that the underlying moving averages are trending lower.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Aug27-2010 symbol Share, $ $ Mn 2010 2011 2010 2011
    Quickflix Ltd. QFX 0.04 8.92M n/a n/a 1.45 n/a
    Hastings Entertainment Inc. HAST 7.30 67.92M 10.85 n/a 0.13 n/a
    Trans World Entertainment Corp. TWMC 1.63 51.22M n/a n/a 0.06 n/a
    Recreational Activities Median 42.68M n/a n/a 0.54 n/a
    Blockbuster Inc. BLOKA 0.07 15.97M n/a n/a 0.01 n/a

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHASE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases n/a n/a
    Sales n/a n/a
    Net Shares Purchased (Sold) n/a n/a
    Total Insider Shares Held n/a n/a
    % Net Shares Purchased (Sold) n/a n/a

    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) n/a
    % Change in Institutional Shares Held n/a

    Source: Yahoo Finance

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