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Blockbuster profit drops 28 percent

Movie rental company Blockbuster Inc. said Tuesday its fourth-quarter earnings declined 28 percent on increased operating costs.
EARNS BLOCKBUSTER
Customers enter a Blockbuster video store in Dallas in this July 23, 2006 file photo. Movie rental company Blockbuster Inc. said Tuesday, Feb. 27, 2007 its fourth-quarter earnings declined 28 percent on increased operating costs. Ron Heflin / AP
/ Source: The Associated Press

Movie rental company Blockbuster Inc. said Tuesday its fourth-quarter earnings declined 28 percent on increased operating costs.

Quarterly net income dropped to $10 million, or 5 cents per share, versus $18 million, or 9 cents per share, a year ago.

Adjusted earnings, which factored in a $5.1 million goodwill impairment charge, were $20.4 million or 9 cents per share in the October-December period. That compared with earnings of $25 million, or 12 cents per share, a year earlier that were adjusted for a reserve charge.

The adjusted earnings were ahead of the 5 cents per share expected by analysts surveyed by Thomson Financial.

Revenue edged up 1 percent to $1.51 billion from $1.49 billion in the prior year, surpassing Wall Street's estimate of $1.47 billion.

Blockbuster shares dropped 19 cents to $6.75 in morning trading on the New York Stock Exchange.

John Antioco, chairman and chief executive, said in a statement accompanying the report that it was "an exciting year" for the company.

"We delivered four consecutive quarters of positive same-store domestic movie rental revenues," he said. "We also significantly reduced operating costs, sizably increased our online subscriber base and substantially improved our profitability and cash flow."

Dallas-based Blockbuster has been trying to offset the decline in instore rentals by beefing up online offerings.

Antioco predicted that online subscriber growth in 2007 would exceed 2006 levels. The service was designed to compete with the popular Netflix Inc. operation.

Operating expenses climbed to $738.5 million in the fourth quarter from $719.5 million a year earlier, as advertising costs rose to $47.6 million from $27.8 million. But expenses were down for the year.

Merchandise sales grew to $501.7 million from $444.6 million, while base rental revenue fell to $828.7 million from $860.6 million.

The current quarter's revenue results were also impacted by favorable foreign exchange rates and an approximately $30 million revenue increase in its online rental service.

For the full year, profits were $54.7 million, or 23 cents a share, compared with a loss of $588.1 million, or $3.20 a share in 2005. Revenue was down 3.5 percent at $5.52 billion "mostly due to the closure of stores," Blockbuster said.