Blockbuster to Restate Results as Profit Soars9 Mar, 2006 By: Erik Gruenwedel
Blockbuster Inc. March 9 disclosed it would restate financial statements dating back to 2003 based on how it accounted for its rental library and rental-library activities.
Dallas-based Big Blue, which has been in discussions with the Securities and Exchange Commission (SEC) regarding the accounting practices, said the restated results would not affect net income and revenue during those periods.
Previously, Blockbuster classified its rental library as a non-current asset on the balance sheet. Upon further review, it was determined all rental-library purchases (trade-ins) should be classified as an operating cash outflow, and the rental library should be classified as a current asset.
Blockbuster expects to include the restated statements for years 2003 and 2004 with the SEC by March 16.
The news comes as Blockbuster reported quarterly profit of $18 million for fourth-quarter 2005 (ended Dec. 31), compared to income of $2.8 million during the same period last year.
Revenue was $1.53 billion, compared to $1.72 billion last year. Revenues for fiscal 2005 declined 3.1% to $5.86 billion, from $6.05 billion last year.
Same-store sales declined 10.1%, and same-store rental revenues dropped 7.9%, due largely to the elimination of extended viewing fees, according to quarterly filings.
Late fees represented 13.2% of rental revenues during the same period last year.
Other impacts on fourth-quarter revenue included marketing costs associated with the in-store Movie Pass, which were partially offset by increased revenue from Blockbuster Online.
Blockbuster said the online service had 1.2 million subscribers as of Dec. 31.