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Despite SEC Filing Warning of Possible Chapter 11, Blockbuster Remains Defiant

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At this late date, is there even any need to recount Blockbuster's myriad woes? They are innumerable, but to the list add this one: the possibility of having to file for Chapter 11. CEO Jim Keyes says that's so much nonsense, the doing of attorneys who have to give fair warning. But in the 148-page Form 10-K filed today with the Securities and Exchange Commission, the Elm Street-based company puts it out there in black and white:

If we cannot meet our capital needs using cash on hand and cash from operations, in addition to the actions set forth above, we may have to take actions such as modifying our business plan to close additional stores, pursuing additional external liquidity generating events, seeking additional financing to the extent available, further reducing or delaying capital expenditures, further restructuring our existing indebtedness or filing for protection under the U.S. Bankruptcy Code.

It was exactly one year ago that Bloomberg News erroneously reported that Blockbuster had hired outside counsel to "explore a possible bankruptcy filing," causing the stock to plummet -- a nosedive from which it never rebounded. The mammoth filing today makes for fascinating reading, as it outlines rather starkly the issues facing Blockbuster, chief among them: "The increasingly competitive industry conditions under which we operate has negatively impacted our results of operations and cash flows and may continue to in the future."

Today, Jim Keyes tells Bloomberg, look, the company's not going anywhere.

[Keyes] discounted the likelihood of a bankruptcy in an interview today. He said last week he has been discussing new deals with Hollywood studios, including consignment arrangements that would give the moviemakers a bigger share of revenue while lowering what Blockbuster pays.

"The studios want us to survive," Keyes said. The language in the company's filing was required by the company's lawyers as a risk the company faces, he said.

Today's news comes one day after Blockbuster announced changes on its board of directors and word began circulating that, finally, it was offloading its international operations. The shareholders' meeting, incidentally, is but two months away in Dallas -- May 26, to be exact. Stock continues to take a beating in after-hours trading: It's already down 25 percent, from 40 cents to 30 cents.

Update: I've read the entirety of the report and posted more thoughts on the subject here.

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