Losses widen, while cash-strapped movie-rental company continues to flirt with bankruptcy
A day after it had initially promised to post its latest earnings, Blockbuster announced Friday that it has managed to delay massive debt payment until September, based on its latest quarterly results.
Still, the rental giant's endgame appears to be accelerating. The Dallas-based company, which has been hoping to avoid filing for bankruptcy, reported widening losses over the period.
Revenue fell 20 percent to $788 million from $982 million last year. As the same time, net losses widened to $69 million, or 32 cents per share, up from $37 million, or 21 cents per share, last year.
That beat Wall Street’s expectations — but in all the wrong ways. Analysts had predicted that Blockbuster would record second-quarter losses of 24 cents on revenue of $840 million.
Shares plunged 20 percent to 14 cents in over-the-counter trading. Blockbuster de-listed from the New York Stock Exchange in July.
The company said that if it cannot reach agreements with its creditors, it may have to liquidate its assets. As it continues to struggle with liquidity issues, Blockbuster has ramped up the pace of store closures. Nearly 1,000 locations have been shuttered so far this year.
One bright note was that Blockbuster said it reached a forbearance agreement with 70 percent of its note holders that pushes back the deadline for when it will need to make a $42 million debt payment by a month.
Blockbuster is struggling under over $900 million in debt, and was scheduled to make the first repayment to creditors on Friday.
“While making progress, this extension allows additional time to complete these complex, multiparty negotiations,” Blockbuster CEO Jim Keyes said in a statement. “To take advantage of its unique multi-channel model and revitalize its global brand, Blockbuster will require an improved capital structure. Our objective is to complete a recapitalization as soon as possible so we are better positioned to focus our attention and resources on the strategic opportunities to continue our business transformation."
Blockbuster has struggled to compete against rivals Redbox and Netflix in a rapidly shifting movie rental landscape. In that fight, studios have clearly sided with Blockbuster, preferring the more capacious price margins the company offers.
In the battle over rental windows on new releases, many major studios allowed Blockbuster to offer their latest films on the same day they hit stores. In contrast, Netflix and Redbox must honor a 28-day delay before they can rent new movies from studios such as Warner Brothers and Sony. Still that competitive advantage was not enough for Blockbuster to stem its massive losses.
The company has made some headway in recent months, through licensing agreements that use the Blockbuster brand on movie rental kiosks and on mobile phone applications. Moreover, last week, Blockbuster announced it will offer videogames through its DVD by-mail subscription service.
Earlier this week, Blockbuster said it would not hold a conference call following its earnings announcement owing to its recapitalization process.