Question-and-Answer Session
(Operator Instructions) Your first question comes from John Kraft - D.A. Davidson
John Kraft - D.A. Davidson
John, just going back to what you were talking about last, the debt and the non-cash interest expense you said $0.03 roughly in Q4. Is it going to be fairly steady throughout the life and as we, analysts, I think most of us are using some sort of a pro forma number to exclude that we kind of need that.
John Harvey
Yes, it’s probably going to trail up through the life, it’s sort of an amortize or like a capital lease, but built upon an 8.5% effective interest rate and as we come out with 2010 guidance, we’ll kind of give you guys an annual feel for that.
John Kraft - D.A. Davidson
The interim $0.03 is??
John Harvey
$0.03 in Q4, yes, sir.
John Kraft - D.A. Davidson
Looking at the same-store sales on DVD, last year in Q3, we saw a dip too. Is there some seasonality here that we should be thinking about?
John Harvey
Well there is seasonality in same-store sales, that’s definitely the case, but DVD sales are impacted tremendously by events over and above seasonality. For instance, August of last year, you had the Olympics in place, you also had some political conventions late August, early September and that was a tremendous dip in same-store sales.
This year we didn’t have those events in August and September, so we had probably what looks like a little more traditional. The hard thing with Redbox is we haven’t been around that long and so we don’t exactly have a lot of data points quarter-over-quarter over say a five to 10 year period where we can give you exact numbers especially given the growth of the company in which we’re basically doubling it year-over-year.
So yes, there is some seasonality, but that dip last year or the improvement year-over-year a lot of that last year was driven by people watching the Olympics in the month of August.
Paul Davis
Also our retail partners, we saw a similar kind of comp dip during the same quarter. I mean granted there was a fairly big delta here, but that had some softness during the same timeframe.
John Kraft - D.A. Davidson
Last question here and I’ll let someone else jump in. It maybe a bit early to really read this, but with your experience at Universal, the difficulty getting the Fox and Warner titles, when a customer comes up to a Redbox and doesn’t find what they’re looking for, are you finding that they’re just picking another movie or are they going to Blockbuster to get that title? Is there any way to track that?
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