Regarding MOVI, several years ago they revised their amortization policies which were in the past far too liberal.
Now, I believe they are in line with reality. The biggest concern I have is decreasing demand over time as video on demand gets stronger. Also note that there has been some insider buying in the past year.
From the 10k.."The concept of revenue sharing and risk sharing between major retailers and
the movie studios was embraced by the industry in 1998 and continued to grow
during 1999. Revenue sharing is a concept whereby retailers and movie studios
share the risks associated with the rental performance of individual titles.
Generally, retailers pay a small upfront fee for each copy leased under revenue
sharing, typically $0 to $10. As the movies are rented by consumers, the movie
studio receives a percentage of the revenue generated based on a predetermined
formula, which is generally less than fifty percent. After a period of time,
generally six months to a year, these movies are no longer subject to revenue
sharing and are either owned outright by the retailer, purchased from the movie
studio for a nominal amount or returned to the studio. Revenue sharing allows
retailers to vastly increase both copy depth and breadth for the consumers."
Some stolen comments from another MOVI holder.."While the comment made about capitalizing new inventory is parially true, the conclusion is way off the mark. Revenue sharing movies, the majority of inventory is expensed immediately, thus not helping cashflow at all. Also when the amount of $$ put into new stores and relocations is taken into account there is a lot of real cash being spent on growth. The debt did decrease and they say new stores are doing better than the average. I'll predict that debt will be cut in half in the next year and that new stores will continue to open and that "real cashflow will grow". As for chapter 11, that may be reality for Hollywood but couldn't be further off the mark for movi. JMHO " |
