UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-15153
BLOCKBUSTER INC.
(Exact name of registrant as specified in its charter)
| Delaware |
52-1655102 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1201 Elm Street
Dallas, Texas 75270
Telephone (214) 854-3000
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
Number of shares of common stock outstanding at May 1, 2003:
Class A common stock, par value $.01 per share: 35,763,744
Class B common stock, par value $.01 per share: 144,000,000
INDEX TO FORM 10-Q
| Page | ||||
| PART I—FINANCIAL INFORMATION | ||||
| Item 1. |
||||
| 3 | ||||
| Consolidated Balance Sheets—at December 31, 2002 and March 31, 2003 (Unaudited) |
4 | |||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 | ||
| Item 3. |
21 | |||
| Item 4. |
22 | |||
| PART II—OTHER INFORMATION | ||||
| Item 1. |
23 | |||
| Item 6. |
24 | |||
2
PART I—FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per share amounts)
| Three Months Ended March 31, |
||||||||
| 2002 |
2003 |
|||||||
| Revenues: |
||||||||
| Rental revenues |
$ |
1,110.1 |
|
$ |
1,195.5 |
| ||
| Merchandise sales |
|
193.7 |
|
|
298.9 |
| ||
| Other revenues |
|
22.2 |
|
|
23.4 |
| ||
|
|
1,326.0 |
|
|
1,517.8 |
| |||
| Cost of sales: |
||||||||
| Cost of rental revenues |
|
374.3 |
|
|
383.8 |
| ||
| Cost of merchandise sold |
|
153.2 |
|
|
247.9 |
| ||
|
|
527.5 |
|
|
631.7 |
| |||
| Gross profit |
|
798.5 |
|
|
886.1 |
| ||
| Operating expenses: |
||||||||
| Selling, general and administrative |
|
623.2 |
|
|
675.7 |
| ||
| Depreciation |
|
55.5 |
|
|
61.4 |
| ||
| Amortization of intangibles |
|
0.4 |
|
|
0.3 |
| ||
|
|
679.1 |
|
|
737.4 |
| |||
| Operating income |
|
119.4 |
|
|
148.7 |
| ||
| Interest expense |
|
(12.6 |
) |
|
(10.7 |
) | ||
| Interest income |
|
1.1 |
|
|
0.8 |
| ||
| Other items, net |
|
(1.7 |
) |
|
(0.4 |
) | ||
| Income before income taxes |
|
106.2 |
|
|
138.4 |
| ||
| Provision for income taxes |
|
(40.4 |
) |
|
(52.8 |
) | ||
| Equity in income (loss) of affiliated companies, net of tax |
|
0.2 |
|
|
(0.7 |
) | ||
| Income before cumulative effect of change in accounting principle |
|
66.0 |
|
|
84.9 |
| ||
| Cumulative effect of change in accounting principle, net of tax |
|
(1,817.0 |
) |
|
(4.4 |
) | ||
| Net income (loss) |
$ |
(1,751.0 |
) |
$ |
80.5 |
| ||
| Income per share before cumulative effect of change in accounting principle: |
||||||||
| Basic and diluted |
$ |
0.37 |
|
$ |
0.47 |
| ||
| Cumulative effect of change in accounting principle per share: |
||||||||
| Basic |
$ |
(10.25 |
) |
$ |
(0.02 |
) | ||
| Diluted |
$ |
(10.08 |
) |
$ |
(0.02 |
) | ||
| Net income (loss) per share: |
||||||||
| Basic |
$ |
(9.88 |
) |
$ |
0.45 |
| ||
| Diluted |
$ |
(9.72 |
) |
$ |
0.45 |
| ||
| Weighted-average shares outstanding: |
||||||||
| Basic |
|
177.3 |
|
|
179.6 |
| ||
| Diluted |
|
180.2 |
|
|
180.1 |
| ||
| Cash dividends per common share |
$ |
0.02 |
|
$ |
0.02 |
| ||
See notes to unaudited consolidated financial statements.
3
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
| December 31, 2002 |
March 31, 2003 |
|||||||
| (Unaudited) |
||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
152.5 |
|
$ |
133.7 |
| ||
| Receivables, less allowances of $7.4 and $8.7 for 2002 and 2003, respectively |
|
184.8 |
|
|
160.3 |
| ||
| Merchandise inventories |
|
452.1 |
|
|
366.6 |
| ||
| Prepaid assets and other current assets |
|
169.5 |
|
|
151.7 |
| ||
| Total current assets |
|
958.9 |
|
|
812.3 |
| ||
| Rental library |
|
423.1 |
|
|
358.7 |
| ||
| Receivable from Viacom, net |
|
23.0 |
|
|
— |
| ||
| Property and equipment, net |
|
874.9 |
|
|
842.7 |
| ||
| Intangibles, net |
|
27.4 |
|
|
27.2 |
| ||
| Goodwill |
|
3,883.5 |
|
|
3,885.1 |
| ||
| Other assets |
|
53.0 |
|
|
55.0 |
| ||
| $ |
6,243.8 |
|
$ |
5,981.0 |
| |||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
757.0 |
|
$ |
423.0 |
| ||
| Accrued expenses |
|
582.6 |
|
|
528.2 |
| ||
| Current portion of long-term debt |
|
109.8 |
|
|
211.0 |
| ||
| Current portion of capital lease obligations |
|
23.0 |
|
|
21.9 |
| ||
| Payable to Viacom, net |
|
— |
|
|
18.9 |
| ||
| Deferred taxes |
|
5.2 |
|
|
5.2 |
| ||
| Total current liabilities |
|
1,477.6 |
|
|
1,208.2 |
| ||
| Long-term debt, less current portion |
|
328.9 |
|
|
253.2 |
| ||
| Capital lease obligations, less current portion |
|
79.8 |
|
|
76.4 |
| ||
| Deferred taxes |
|
116.0 |
|
|
124.2 |
| ||
| Other liabilities |
|
74.5 |
|
|
72.2 |
| ||
|
|
2,076.8 |
|
|
1,734.2 |
| |||
| Commitments and contingencies (Note 5) |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, par value $.01 per share; 100.0 shares authorized; no shares issued or outstanding |
|
— |
|
|
— |
| ||
| Class A common stock, par value $.01 per share; 400.0 shares authorized; |
|
0.4 |
|
|
0.4 |
| ||
| Class B common stock, par value $.01 per share; 500.0 shares authorized; |
|
1.4 |
|
|
1.4 |
| ||
| Additional paid-in capital |
|
6,220.8 |
|
|
6,217.7 |
| ||
| Retained deficit |
|
(1,954.7 |
) |
|
(1,874.3 |
) | ||
| Accumulated comprehensive loss |
|
(100.9 |
) |
|
(98.4 |
) | ||
| Total stockholders’ equity |
|
4,167.0 |
|
|
4,246.8 |
| ||
| $ |
6,243.8 |
|
||||||