Dish CEO: 'Blockbuster is All About Movies and Families'9 Aug, 2011 By: Erik Gruenwedel
Blockbuster LLC posts first operating profit when freed from previous long-term debt following acquisition by Dish Network Corp.
Blockbuster LLC Aug. 9 reported partial second-quarter (ended June 30) operating income of $3.5 million on revenue of nearly $254 million. The income was the first for the Dallas-based movie rental service since being formally acquired April 26 by Dish Networks Corp. for $321 million.
Noteworthy, Englewood, Colo.-based Dish said it actually paid $238 million in cash to acquire Blockbuster, which included $12 million in assumed liabilities. It subsequently received a $4 million escrow refund lowering the net purchase price to $234 million.
“The historical operations of Blockbuster materially changed during the [fiscal] periods preceding the acquisition as a result of Blockbuster’s bankruptcy proceedings, and any historical pro forma information would not prove useful in assessing our post-acquisition earnings and cash flows,” Dish wrote in its regulatory report.
Blockbuster ended the period with $67.8 million in rental (disc) inventory and nearly $70 million in merchandise inventory. The company, which recently confirmed it would operate 1,500 Blockbuster stores going forward, entered into new store leases totaling more than $219 million through 2015.
“During the second quarter, we elected not to assume the leases of 10 stores in the United States,” Dish said. “During July, we elected not to assume the leases of an additional 155 stores in the U.S.”
Dish listed Blockbuster’s total assets at $360 million.
In a call with analysts, CEO John Clayton was asked if he was concerned regarding reports the company would spend $1 billion incrementally returning Blockbuster to prosperity.
“I don’t have any concerns about spending $1 billion because we’re not,” Clayton said. “But I will tell you in regards to the brand, and I’m an old brand guy, maybe some of your folks on Wall Street think that image is tarnished a bit, maybe it is. But to mainstream America, Blockbuster is all about movies and families, and we think that plays well within our corporate assets.”
Dish reported overall revenue of nearly $3.6 billion, up 12.5% from revenue of $3.2 billion during the previous-year period. Net income increased 30% to more than $334 million compared to income of nearly $257 million last year.
Separately, the satellite TV operator said it would be making annual payments of $190 million to TiVo Inc. from 2012 to 2017 as part of digital video recording patent litigation settlement between it and EchoStar Communications. The companies already have paid TiVo more than $290 million in court-ordered settlements.
Notably, Dish said it lost 130,000 subscribers during the quarter compared to a loss of 19,000 subscribers during the previous-year period. Dish cited the ongoing weak economy, depressed housing market and competitive pressures from other services, including upstart fiber-optic pay-TV platforms from telecommunications companies such as AT&T and Verizon, for the decline.
Dish ended the quarter with 14 million subscribers. Company executives will discuss the results in a conference call later this morning.