Blockbuster loses $360M in Q4, restructures debt

Dallas Blockbuster posted a net loss of $359.7 million in the fourth quarter, mainly due to a non-cash charge of $435 million for impairment of goodwill and other assets. In last year's fourth quarter, Blockbuster reported a net profit of $41 million. The struggling chain also said it had reached agreements with most creditors to restructure debt due in August.

Excluding impairments, stock-based compensation expenses and costs associated with lease terminations and severance, Blockbuster posted a profit of $80.4 million for the quarter. Total revenues fell 12% to $1.38 billion, from $1.57 billion a year earlier.

The company's results were affected by a shorter fiscal year, by a decline in rental revenues, negative foreign currency exchange rates and a smaller store base.

In other news, Blockbuster reached agreements with JPMorgan Chase Bank, and two of the largest lenders under its existing revolving credit facility, to amend and extend the facility through Sept. 30, 2010.

The principle amount of the facility will be reduced to $250 million, and the company also is working to restructure a $40 million term loan due in August.

The company warned that the new loans will be expensive, and it plans to temporarily pull back on plans to spend on stores to conserve capital in tough economic times.

Blockbuster chief executive Jim Keyes told Reuters the company's plans to diversify entertainment offerings and retail products at its 6,000 U.S. stores "have been slowed down because of these credit markets and given the increased cost of capital."

Keyes said Blockbuster will rely more on consigned product to grow retail inventory and pursue new digital offerings through partnerships. Selling products on consignment allows Blockbuster to get inventory from manufacturers without investing its own capital.

Blockbuster plans to sell some overseas stores to raise capital, Keyes said. The company plans to slash $200 million in costs this year, mainly through renegotiation of above-market leases and by aggressively closing underperforming stores and replacing them with DVD-rental kiosks.