9. Blockbuster Administration

Blockbuster Entertainment Limited and Blockbuster GB Limited, our Blockbuster operating subsidiaries in the United Kingdom (collectively, the “Blockbuster UK Operating Entities”), entered into administration proceedings in the United Kingdom on January 16, 2013 (the “Administration”). Administrators were appointed by the English courts to sell or liquidate the assets of the Blockbuster UK Operating Entities for the benefit of their creditors. Since we no longer exercise control over operating decisions for the Blockbuster UK Operating Entities, we were required to deconsolidate our Blockbuster entities in the United Kingdom (collectively, “Blockbuster UK”) on January 16, 2013. As a result of the Administration, we wrote down the assets of Blockbuster UK to their estimated net realizable value on our Consolidated Balance Sheets as of December 31, 2012, and we recorded a charge to “Cost of sales - equipment, merchandise, services, rental and other” of $21 million during the year ended December 31, 2012 on our Consolidated Statements of Operations and Comprehensive Income (Loss).

As of December 31, 2012, we had intercompany receivables due from Blockbuster UK of approximately $37 million that were previously eliminated in consolidation on our Consolidated Balance Sheets. As a result of deconsolidation of Blockbuster UK on January 16, 2013, the intercompany receivables are no longer eliminated in consolidation. We believe we will not receive the entire amount for these intercompany receivables in the Administration and accordingly, we recorded a $25 million impairment charge related to these intercompany receivables, to adjust these amounts to their estimated net realizable value for the year ended December 31, 2012. This impairment charge was recorded in “Other, net” within “Other Income (Expense)” on our Consolidated Statements of Operations and Comprehensive Income (Loss) and the resulting liability was recorded in “Other accrued expenses” on our Consolidated Balance Sheets as of December 31, 2012. In total, we recorded charges described above of approximately $46 million on a pre-tax basis on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2012 related to the Administration.

As of December 31, 2012, Blockbuster UK had total assets and liabilities as follows (in thousands):

Cash	$	14,072
Trade accounts receivable	1,153
Inventory	34,937
Other current assets	10,243
Restricted cash and marketable securities	484
Property and equipment	186
Trade accounts payable	(13,081		)
Intercompany payable	(36,676		)
Deferred revenue and other	(1,369		)
Other accrued expenses	(9,949		)
Total net assets	$	—

Upon deconsolidation on January 16, 2013, the above amounts were combined into one net asset and the intercompany receivables of $37 million, net of the impairment liability of $25 million described above, were recorded in “Other noncurrent assets, net” on our Condensed Consolidated Balance Sheets as a component of our investment in Blockbuster UK.

On March 25, 2013, Gordon Brothers Europe purchased certain assets and assumed certain liabilities of the Blockbuster UK Operating Entities through the Administration. As a result, we recorded an additional $2 million impairment charge related to the intercompany receivables, to adjust these amounts to their estimated net realizable value. This impairment charge was recorded in “Other, net” within “Other Income (Expense)” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2013. In total, as of March 31, 2013, we have recorded charges of approximately $48 million on a pre-tax basis related to the Administration. The proceeds that we actually receive from the Administration and the actual impairment charge may differ from our estimates.

For the three months ended March 31, 2012, Blockbuster UK had $71 million of revenue and an operating loss of $4 million. Upon deconsolidation on January 16, 2013, the revenue and expenses related to Blockbuster UK are no longer recorded in our Condensed Consolidated Financial Statements.