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Blockbuster On The Brink: 10-K Report

2/25/2010 01:14:00 PM Eastern
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.
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