Conserving Cash is Blockbuster’s “Winning” Initiative
Speaking to analysts during a second-quarter financial call on August 13, Blockbuster chief executive Jim Keyes said the video rental chain had drafted new revenue-sharing agreements with studios — “win-win” initiatives designed to increase the number of rentals at Blockbuster and improve profits for the studios on the backend. To the contrary, given the company’s existing debt-service obligations on its levered capital structure, I remain skeptical that the motivation behind the new purchase arrangements was not for growth, but an attempt by Blockbuster to continue managing the business for cash conservation, as additional credit restrictions were forced on the company by its suppliers, according to its 10-Q regulatory filing: Given our liquidity limitations and uncertainty surrounding our ability to finance…
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