Blockbuster's ( BBI) fourth-quarter earnings rose sharply from a year ago, as cost cuts and less advertising spending helped offset an 11% slide in sales. The video-rental chain also said it would restate several previous years' financial statements to adjust the way it accounts for its rental library. Blockbuster earned $18 million, or 9 cents a share, in the quarter, compared with $2.8 million, or 2 cents a share, a year ago. Adjusted for special items, earnings were $34.2 million, or 17 cents a share, in the latest quarter. That compares to the Thomson First Call consensus estimate of 15 cents a share. Revenue was $1.53 billion in the latest quarter, compared with $1.72 billion a year ago. Analysts had been expecting sales of $1.70 billion, according to Thomson First Call. The company said worldwide same-store sales fell 10.1% in the fourth quarter, while worldwide same-store rental revenue fell 7.9%. Shares rose 3 cents to $3.90 on Instinet following release of the results. The lower sales were "primarily due to the elimination of extended viewing fees, which accounted for over 13.2% of rental revenues in the fourth quarter of 2004, and a decline in the overall rental industry," Blockbuster said. The comparison was also hurt by aggressive promotional and advertising activity last year. Blockbuster's fourth-quarter operating income rose 118.9% to $54.5 million, driven by a 21.5% decline in selling, general and administrative expenses "primarily as a result of a cost management strategy and lower advertising expenses." Gross margin for the fourth quarter declined to 51.8% from 55.6% as a result of growth in revenues from Blockbuster Online, which generates lower gross margin, and higher rental product purchases to improve availability in stores. Blockbuster hopes to cut another $100 million from its SG&A costs this year, targeting overhead, advertising and operational expenses. Capital spending should fall to $90 million from $140 million. "The Company believes that its 'No Late Fees' program and Blockbuster Online will have a positive impact on its domestic same-store rental revenues and enable it to outperform the domestic rental industry in 2006." Blockbuster said it will restate results for 2003, 2004 and the first three quarters of 2005 to adjust the accounting for its video-library spending. It said the action followed discussions with the Securities and Exchange Commission.