#1EX-99.2 3 dex992.htm BLOCKBUSTER INC. PRESENTATION t BLOCKBUSTER circuit Exhibit 99.2 Blockbuster Proposes Combination With Circuit City Investor Update April 14, 2008#2Safe Harbor The matters set forth in this presentation include forward-looking statements related to our operations and business outlook, our financial and operational strategies and goals, and our financial and operational strategies and goals for the combined company. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These forward-looking statements are based on management's current intent, belief, expectations, estimates and projections regarding our company, our industry and the proposed combination with Circuit City. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict. Therefore, actual results may vary materially from what is expressed in or indicated by the forward-looking statements. Factors that may cause actual results to vary materially include, among others: (1) consumer appeal of our existing and planned product and service offerings, and the related impact of competitor pricing and product and service offerings; (2) overall industry performance and the accuracy of our estimates and judgments regarding trends impacting the home video industry; (3) our ability to obtain favorable terms from suppliers, including on such matters as copy depth and uses of product; (4) the studios' dependence on revenues generated from retail home video and their related determinations with respect to pricing and the timing of distribution of their product; (5) the variability in consumer appeal of the movie titles and games software released for rental and sale; (6) our ability to comply with operating and financial restrictions and covenants in our debt agreements and any adverse publicity relating thereto; (7) our ability to respond to changing consumer preferences, including with respect to new technologies and alternative methods of content delivery, and to effectively adjust our offerings if and as necessary; (8) the extent and timing of our continued investment of incremental operating expenses and capital expenditures to continue to develop and implement our initiatives and our corresponding ability to effectively control overall operating expenses and capital expenditures; (9) our ability to effectively and timely prioritize and implement our initiatives and to timely implement and maintain the necessary information technology systems and infrastructure to support our initiatives; (10) our ability to capitalize on anticipated industry consolidation; (11) the application and impact of future accounting policies or interpretations of existing accounting policies; (12) the impact of developments affecting our outstanding and any future litigation and claims against us; (13) shifts in strategy in connection with recent changes in the composition of our key management; (14) our ability to achieve revenue and cost synergies in a combination with Circuit City, including as a result of the factors outlined above; (15) the availability and nature of financing for our proposed combination with Circuit City; and (16) other factors, as described in our filings with the Securities and Exchange Commission, including the factors discussed under the heading "Risk Factors" in our annual report on Form 10-K for the year ended January 6, 2008. This cautionary statement is provided pursuant to Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The forward-looking statements in this release and in our related conference call and investor update are made only as of the date hereof and we undertake no obligation to update publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future. CIRCUIT CITY SHAREHOLDERS ARE URGED TO READ ANY PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION IF AND WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. BLOCKBUSTER AND ITS DIRECTORS AND EXECUTIVE OFFICERS MAY BE DEEMED TO BE PARTICIPANTS IN THE SOLICITATION OF PROXIES IN RESPECT OF THE PROPOSED TRANSACTION BETWEEN CIRCUIT CITY AND BLOCKBUSTER. CIRCUIT CITY SHAREHOLDERS WILL BE ABLE TO OBTAIN A COPY OF ANY PROXY STATEMENT, AS WELL AS OTHER FILINGS CONTAINING INFORMATION ABOUT THE PARTIES (INCLUDING INFORMATION REGARDING THE PARTICIPANTS IN THE PROXY SOLICITATION AND A DESCRIPTION OF THEIR DIRECT AND INDIRECT INTERESTS, BY SECURITY HOLDINGS OR OTHERWISE), FREE AT THE SEC'S WEBSITE AT WWW.SEC.GOV OR FROM BLOCKBUSTER AT WWW.BLOCKBUSTER.COM. BLOCKBUSTER city BLOCKBUSTER "Page 2#3Summary Of Proposal Blockbuster proposes to acquire Circuit City for at least $6 in cash per share, subject to due diligence All-cash offer represents a minimum 54% premium to Circuit City's April 11, 2008 closing price We believe we have the resources necessary to complete an all-cash transaction A proposal was initially made in a letter sent to Circuit City on February 17, 2008 Combination would create an $18 billion global retail enterprise Both companies would benefit from complementary products, marketing, management strengths, systems and distribution • Significant revenue and cost synergies expected Blockbuster's Board of Directors fully supports the proposed transaction BLOCKBUSTER city BLOCKBUSTER Page 3#4Strategic Fit Cacat city Products Scale Retail Format Consumer Interface Strategic Focus • Leading global provider of movie and game entertainment via retail and direct channels ‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒ ‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒ BLOCKBUSTER • Massive global scale: nearly 8,000 stores in the United States, its territories and 21 other countries ‒‒‒‒‒‒‒ . Convenience oriented, small-scale format . Currently expanding customer touch-points through online and relevant devices ‒‒‒‒‒‒‒‒‒ ‒‒‒‒‒ Successfully pursuing a strategic repositioning to compete with new business models and new technologies Curcint Leading specialty retailer of consumer electronics, home office products, entertainment software and related services ‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒ 693 domestic and 779 international stores . Large scale format, broad product line . Highly integrated multi-channel business model, which allows customers to shop in its stores, on the Web and via the telephone ‒‒‒‒‒‒‒‒ . Currently, in the midst of a retail and merchandising transformation, with the goal of continuing to improve its core business An $18 billion global retail enterprise uniquely positioned to capitalize on the growing convergence of media content and electronic devices BLOCKBUSTER "Page 4#5Combination Creates Immediate Benefits Compelling Consumer proposition Drives revenues - - Improves margin Compelling cost savings BLOCKBUSTER cacat City New Products and Services In-store technical support service to sell electronics and serve customers - BLOCKBUSTER - Sell digital devices with personalized and preloaded movies and digital subscriptions . Convenience Breadth and depth of product assortment Circuit City • New Products and Services Movie and game rental drives traffic Subscription services . Convenience Additional 5,000 domestic retail locations . Real estate rationalization • Efficient logistics . G&A savings • Systems savings . Advertising efficiency BLOCKBUSTER Page 5#6Breadth Of Offerings Provides Significant Competitive Advantage Blockbuster Circuit City New Blockbuster Best-Buy Wal-Mart Radio Shack Apple Amazon Netflix carcat City Rental Media Content 3 Retail Subscription Physical Digital Physical Digital Physical Digital Devices and Services Consumer In-Store Electronics Services At-Home Services Unmatched offering can be further differentiated with exclusive content and content-enabled devices Warranties BLOCKBUSTER Page 6#7Global Geographic Presence Blockbuster and Circuit City Opportunities • Retail network rationalization - 90% of domestic Circuit City stores within 5 miles of a Blockbuster Store Count United States 4,855 Great Britain 706 Canada Australia Mexico Italy Ireland Brazil All others BLOCKBUSTER Total BLOCKBUSTER carcat city 454 370 323 240 188 175 519 7,830 Cot city 693 779 1,472 Total 5,548 706 1,233 370 323 240 188 175 519 9,302 • Retail square footage utilization - Games - Kids Beverage Lounge - Kiosks • Logistics optimization - Inventory management - Hub and spoke distribution Source: Company filings. Blockbuster figures reflected as of January 6, 2008. Circuit City figures reflected as of February 29, 2008. BLOCKBUSTER Page 7#8Blockbuster Undergoing Successful Transformation Cacat city Grow Core Rental Business Enhance Retail Develop Digital Content Delivery Channels . We are expecting significant year-over-year improvement in our Q1 2008 performance For the first time in 5 years we expect to post positive domestic same-store sales in Q1 2008 - Driven by strong performance in our domestic same-store revenues, we expect Q1 2008 adjusted EBITDA to be approximately $110 million versus $23 million for the same period last year Net income for Q1 2008 should be $30 million compared to a net loss of $49 million for the Q1 2007 • Blockbuster's credit profile has strengthened: - Q1 2008 gross leverage as measured by Total Debt/LTM EBITDA is now less than 3.0x BLOCKBUSTER Page 8#9Accelerates Blockbuster Strategic Transformation Blockbuster has successfully undertaken a series of strategic initiatives designed to provide our customers with media entertainment content when and how they want it This combination will accelerate the success of these initiatives Grow Core Rental Business Real estate rationalization Improved availability (breadth and depth) Exclusive products Expand rental model to select Circuit City stores New channel for in-store and by-mail subscription BLOCKBUSTER city Enhance Retail Strong presence in Consumer Electronics Big box for assortment breadth Small box for convenience and service In-store technical support service to sell electronics and serve customers Develop Digital Content Delivery Channels Digital content aggregation (Movielink) Content-enabled devices (e.g. TVs, portable players, set-top boxes) "Blockbuster Inside" BLOCKBUSTER Page 9#10Unique Opportunity For Shareholders Combination would create a global retailer Uniquely positioned to drive the growing convergence of media content and electronic devices city Combination would allow significant improvement in financial performance Revenue and margin advantages made possible by complementary products and services Substantial cost synergies - With unmatched breadth of product offering Superior competitive positioning Enhanced shopping experience for customers of both formats BLOCKBUSTER Accelerates transformation of both companies Creates game-changing retail concept with sustainable competitive advantage BLOCKBUSTER Page 10#11The New Blockbuster city BLOCKBUSTER MEDIA Bringing convenient access to media entertainment and devices BLOCKBUSTER Page 11#12Reconciliation of Non-GAAP Financial Measures Adjusted EBITDA is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission and is not a measure of operating performance calculated in accordance with GAAP. As a result, adjusted EBITDA should not be considered in isolation of, or as a substitute for, net income (loss) as an indicator of operating performance. Adjusted EBITDA, as the Company calculates it, may not be comparable to similarly titled measures employed by other companies. Management believes that, because the items listed under EBITDA below are non-recurring in nature, adjusting the Company's financial results to exclude these amounts provides investors with a clearer perspective of the current underlying operating performance of the Company, a clearer comparison to current period results and greater transparency regarding supplemental information used by management in its financial and operational decision-making. In addition, management believes that adjusting the Company's financial results to exclude income (loss) from discontinued operations, net of tax, taxes, interest and other income, impairment of long-lived assets and depreciation and amortization of intangibles also provides investors with a clearer perspective of the current underlying operating performance of the Company and a clearer comparison to current period results. Management uses adjusted EBITDA as an internal measure of business operating performance, to establish operational goals, to allocate resources and to analyze trends. Net income (loss) is the financial measure calculated and presented in accordance with GAAP that is most comparable to adjusted EBITDA. BLOCKBUSTER city Reconciliation of adjusted EBITDA: Net Income (loss) Adjustments to reconcile net income (loss) to adjusted EBITDA: Discontinued operations, net of tax Taxes Interest and other income, net Impairment of long-lived assets Depreciation and Amortization of intangibles EBITDA Termination of Brazilian franchise agreement Lease termination costs incurred for store closures Severance costs Stock compensation Adjusted EBITDA Thirteen Weeks Ended April 6, 2008 (Estimated) 30.0 8.0 25.0 41.0 104.0 1.0 1.0 4.0 110.0 Thirteen Weeks Ended April 1, 2007 (As Restated) (49.0) (2.6) 8.5 23.7 49.8 30.4 (20.0) 3.0 1.8 8.1 23.3 BLOCKBUSTER Page 12#13as w 117 BLOCKBUSTER Blockbuster Proposes Combination With Circuit City Investor Update April 14, 2008 circuit city