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Blockbuster Posts $68 Million Loss

29 Mar, 2011 By: Erik Gruenwedel

Rental icon goes on the auction block April 4

Bankrupt Blockbuster Inc. generated a net loss of $68.4 million from Jan. 3 through Feb. 27 — a sobering reality that likely contributed to the packaged media rental icon Feb. 21 announcing plans to put itself up for sale.

Blockbuster generated revenue of $274.8 million during the period, which included $175 million in basic rental revenue, $60.3 million in previously rented (used product) revenue, $33.1 million in merchandise revenue and $6.4 million in undisclosed revenue, according to a filing with the U.S. Bankruptcy Court in New York.

The rental chain posted a gross profit of $154 million, which was undermined by $183.5 million in general and administrative costs, $11 million in depreciation expenses and $3.2 million in advertising costs.

Blockbuster also spent $16 million on related bankruptcy restructuring costs. The company ended the period with $146 million in accounts payables (vendors owed), compared with just $33.4 million in accounts receivables (monies owed) and $61.2 million in cash.

Separately, Blockbuster officially goes on the auction block April 4, with bids accepted beginning at 10 a.m. EDT. If no legitimate offers exceed the opening “stalking horse” bid of $290 million, that bid by a group of senior lenders dubbed Cobalt Video Holdings would likely be declared the purchase price at a post-auction hearing slated for April 7.

U.S. Bankruptcy Judge Burton Lifland overruled objections to the “stalking horse” bid, amid other concerns, in a hearing March 17.

In that hearing, Lifland ruled that monies generated from the auction sale be administered to numerous debtors, including payments (not exceeding $4.4 million each) to select studios for revenue-sharing agreements. In addition, the studios each will receive cash payments totaling $3 million for rental disks earmarked for destruction.

The judge said the rulings do not preclude the studios from enforcing their respective rights against Blockbuster Canada, which was put up as collateral by the Dallas-based parent when filing Chapter 11.

Blockbuster must also pay the studios “all costs and expenses of administration” from Feb. 25 through the closing date of the sale, in addition to any rev-share agreement payments from March 7 through the closing date.

Studio balance claims frozen by the court include Sony Pictures Home Entertainment ($28 million), 20th Century Fox Home Entertainment ($20 million), Warner Home Video ($19.2 million), Universal Studios Home Entertainment ($15.9 million), Walt Disney Studios Home Entertainment ($9.4 million), Summit Home Entertainment ($9.3 million) and Paramount Home Entertainment ($4.4 million).

About the Author: Erik Gruenwedel

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