Tax Gain Boosts Blockbuster

Blockbuster Inc. posted a second-quarter profit Thursday, but its shares tumbled 12% as the nation’s largest movie-rental company would have lost money without a favorable tax settlement.

Blockbuster’s revenue fell 5% and its online service attracted fewer new subscribers than rival Netflix Inc.

Dallas-based Blockbuster earned $65.6 million, or 31 cents a share, after paying preferred dividends in the quarter ended June 30.

But the profit included $91.2 million from the settlement of a long-running tax audit. Without that gain and other one-time gains and expenses, Blockbuster posted an adjusted net loss of $21.4 million, or 13 cents a share.

Analysts had forecast a loss of 8 cents a share, according to a Thomson Financial poll.

Chief Financial Officer Larry Zine said the analysts’ forecast was too optimistic by 4 cents a share because they assumed that the company would recognize tax benefits for the second-quarter loss but it didn’t. But company officials acknowledged missing Wall Street’s target.

Shares of Blockbuster sank 56 cents to $4.12.

Chairman and Chief Executive John Antioco said that confusion over the analysts’ forecasts and Blockbuster’s tax issues probably caused the shares to fall.

Antioco said that Blockbuster was making progress in building its online business, paying down debt and improving its cash flow, and rejected any notion that the company was in serious trouble.

Blockbuster’s revenue fell to $1.32 billion from $1.39 billion a year ago, and was below the $1.35 billion forecast by analysts.