Dallas - Blockbuster is facing insolvency,
the company's forthcoming 10-K filing will show.
The video-rental chain said its annual report will likely contain
a statement from its accounting firm indicating that "substantial doubt exists
with respect to the company's ability to continue as a going concern" due to illiquidity
from declining cash flow.
Blockbuster faces mounting challenges from DVD rental rivals like
Netflix and Coinstar/Redbox, and digital download services like Wal-Mart's
soon-to-be acquired Vudu, which are increasingly included with CE hardware.
The company said it will continue to explore strategic and
financing alternatives with its advisor, Rothschild Inc., and will continue to
close stores. Blockbuster shut 374 of its 7,000-plus locations in 2009 and
plans to close an additional 500 to 545 stores this year, including 253 which
shut in January.
At the same time, it continues to roll out its Blockbuster Express
kiosks, developed through an alliance with NCR, and expects to have at least
10,000 in place by year's end.
In a statement accompanying its fourth-quarter and full-year
results, chairman/CEO Jim Keyes acknowledged that "the next 12 to 18 months
will remain challenging as we balance the secular decline of a single channel
with the ascension of emerging channels, such as vending and digital."
Blockbuster posted a net loss of $558.2 million for 2009.
Revenues declined 20 percent to $4.1 billion from the prior year, while
same-store sales declined 15.6 percent.
The company expects
to file its 10-K with the Securities and Exchange Commission by March 19.