BLOCKBUSTER INC - FORM 8-K - EX-99.1 - MONTHLY OPERATING REPORT - June 7, 2011

Attached files

file filename
8-K - FORM 8-K - BLOCKBUSTER INCd8k.htm

Exhibit 99.1

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

       X      
In re:      :      

Chapter 11

     :      
BLOCKBUSTER INC., et al. 1      :      

Case No: 10-14997

     :      
Debtors.      :      

Jointly Administered

       X      

Monthly Operating Report For the Period

From April 4, 2011 to May 1, 2011

 

DEBTORS’ ADDRESS:    1201 Elm Street
   Dallas, Texas 75270
   Telephone: (214) 854-3000
   Facsimile: (214) 854-4848
DEBTORS’ ATTORNEYS:    Stephen Karotkin
   WEIL, GOTSHAL & MANGES LLP
   767 Fifth Avenue
   New York, New York 10153
   Telephone: (212) 310-8800
   Facsimile: (212) 310-8007
   -and-
   Martin A. Sosland (admitted pro hac vice)
   WEIL, GOTSHAL & MANGES LLP
   200 Crescent Court, Suite 300
   Dallas, Texas 75201
   Telephone: (214) 746-7700
   Facsimile: (214) 746-7700

This Monthly Operating Report (“MOR”) has been prepared solely for the purpose of complying with the monthly reporting requirements applicable in these chapter 11 cases and is in a format acceptable to the United States Trustee. The financial information contained herein is limited in scope and covers a limited time period. Moreover, such information is preliminary and unaudited, and is not prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States.

I declare under penalty of perjury (28 U.S.C. Section 1746) that this report and the attached documents are true and correct to the best of my knowledge and belief.

 

/s/ Bruce Lewis     5/31/2011

Bruce Lewis

Senior Vice President and Controller

Blockbuster Inc.

    

 

1 

The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are Blockbuster Inc. (5102); Blockbuster Canada Inc. (1269); Blockbuster Digital Technologies Inc. (9222); Blockbuster Distribution, Inc. (0610); Blockbuster Gift Card, Inc. (1855); Blockbuster Global Services Inc. (3019); Blockbuster International Spain Inc. (7615); Blockbuster Investments LLC (6313); Blockbuster Procurement LP (2546); Blockbuster Video Italy, Inc (5068); Movielink, LLC (5575); Trading Zone Inc. (8588); and B2 LLC (5219).

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

 

In re    BLOCKBUSTER INC., et al.    Case No.    10-14997
   Debtor    Reporting Period:    4/4/2011 to 5/1/2011
      Federal Tax I.D. #    52-1655102

CORPORATE MONTHLY OPERATING REPORT

 

REQUIRED DOCUMENTS

   

Form No.

   

Document

Attached

   

Explanation

Attached

Schedule of Cash Receipts and Disbursements

    MOR-1    x   

Bank Reconciliation (or copies of debtor’s bank reconciliations)

    MOR-1 (CON’T)    x   

Copies of bank statements

          x

Cash disbursements journals

          x

Statement of Operations

    MOR-2    x   

Balance Sheet

    MOR-3    x   

Status of Post-petition Taxes

    MOR-4    x   

Copies of IRS Form 6123 or payment receipt

          x

Copies of tax returns filed during reporting period

          x

Summary of Unpaid Post-petition Debts

    MOR-4    x   

Listing of Aged Accounts Payable

          x

Accounts Receivable Reconciliation and Aging

    MOR-5    x   

Taxes Reconciliation and Aging

    MOR-5    x   

Payments to Insiders and Professionals

    MOR-6    x   

Post Petition Status of Secured Notes, Leases Payable

    MOR-6    x   

Debtor Questionnaire

    MOR-7    x   

 

FORM MOR

Page 2 of 10

In re    BLOCKBUSTER INC., et al.    Case No.    10-14997
   Debtor    Reporting Period:    4/4/2011 to 5/1/2011

 

SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

(in millions)

 

     4 weeks ended
5/1/2011		     For the Period
1/3/2011-5/1/2011		  

Cash flows from operating activities:

     

Net income (loss)

    $ (78.2 )    $ (192.8 ) 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

     

Depreciation and intangible amortization

      (2.8 )      39.4   

Rental library purchases

      (6.9 )      (66.7 ) 

Rental library amortization

      24.4        113.3   

Loss on sale/disposal of store operations

      —          —     

Impairment of long-lived assets

      —          0.6   

Non-cash share-based compensation

      —          —     

Gain on sale of store operations

      —          —     

Deferred taxes and other

      (2.0 )      2.1   

Changes in operating assets and liabilities:

     

Change in receivables

      4.1        13.1   

Change in merchandise inventories

      4.8        44.2   

Change in prepaid and other assets

      23.2        27.8   

Change in accounts payable

      17.5        10.4   

Change in accrued expenses and other liabilities

      21.9        24.9   
                

Net cash provided by (used in) operating activities

      6.0        16.3   
                

Cash flows from investing activities:

     

Capital expenditures

      (0.9 )      (5.1 ) 

Change in restricted cash

      0.7        0.8   

Proceeds from sale of store operations

      —          —     

Other investing activities

      1.0        3.4   
                

Net cash provided by (used in) investing activities

      0.8        (0.9 ) 
                

Cash flows from sale of assets to DISH Network:

     

Loss on Sale

      (581.9 )      (581.9 ) 

Change in rental library on sale

      143.4        143.4   

Change in merchandise inventories on sale

      56.2        56.2   

Change in receivables on sale

      53.3        53.3   

Change in prepaid and other assets on sale

      382.2        382.2   

Change in fixed assets on sale

      87.2        87.2   

Change in restricted cash on sale

      (20.0 )      (20.0 ) 
                

Net cash provided by sale to Dish Network

      120.4        120.4   
                

Cash flows from financing activities:

     

Proceeds from DIP Financing

      —          —     

Repayments on DIP Financing

      —          —     

Repayments on senior secured notes

      —          —     

Debt financing costs

      —          —     

Capital lease payments

      (0.1 )      (0.8 ) 
                

Net cash provided by (used in) financing activities

      (0.1 )      (0.8 ) 
                

Effect of exchange rate changes on cash

      —          —     
                

Net (decrease) increase in cash and cash equivalents

      127.1        135.0   

Cash and cash equivalents at beginning of period

      74.1        66.2   
                

Cash and cash equivalents at end of period

    $ 201.2      $ 201.2   
                

 

FORM MOR-1

Page 3 of 10

In re    BLOCKBUSTER INC., et al.    Case No.    10-14997
   Debtor    Reporting Period:    4/4/2011 to 5/1/2011

 

BANK RECONCILIATIONS

Continuation Sheet for MOR-1

 

GL#

   

Bank Name

    Bank Balance      Deposits &
Transfers  in
Transit		      O/S, Bank
Service Charges,
Adjustments
to GL		      Other
Reconciling
Items		      GL Balance  

Cash

    Bank of America    $ 201,177,327       $ —         $ —         $ —         $ 201,177,327   
                                               

Total Cash & Cash Equivalents

       $ 201,177,327       $ —         $ —         $ —         $ 201,177,327   
                                               

After the sale of substanitally all of the Debtors’ assets to DISH Network on April 26, 2011, the Debtors have one remaining bank account.

 

FORM MOR-1 (CONT.)

Page 4 of 10

In re    BLOCKBUSTER INC., et al.    Case No.    10-14997
   Debtor    Reporting Period:    4/4/2011 to 5/1/2011

 

STATEMENT OF OPERATIONS (Income Statement)

(in millions)

 

     4 weeks ended
5/1/2011		     For the Period
1/3/2011-5/1/2011		  

Revenues:

     

Base rental revenues

    $ 45.5      $ 303.5   

Previously rented product (“PRP”) revenues

      15.3        140.2   
                

Total rental revenues

      60.8        443.7   

Merchandise sales

      8.2        63.0   

Other revenues

      2.5        12.6   
                

Total Revenue

      71.5        519.3   
                

Cost of sales:

     

Cost of rental revenues

      27.7        175.9   

Cost of merchandise sold

      7.1        68.7   
                

Total cost of sales

      34.8        244.6   
                

Gross profit

      36.7        274.7   
                

Operating expenses:

     

General and administrative

      151.3        452.3   

Advertising

      0.5        5.5   

Depreciation and intangible amortization

      (2.8 )      39.4   

Impairment of goodwill and other long-lived assets

      —          0.6   
                

Total Operating Expenses

      149.0        497.8   
                

Operating income (loss)

      (112.3 )      (223.1 ) 

Interest expense

      0.1        0.6   

Interest income

      (0.1 )      (0.1 ) 

Other items, net

      0.2        (1.4 ) 
                

Income (loss) from continuing operations before reorganization items and income taxes

      (112.1 )      (224.0 ) 

Reorganization items, net (income)/loss

      (39.1 )      (46.9 ) 

(Benefit)/provision for income taxes

      0.2        1.0   

Equity in (income)/loss of non-debtor subsidiaries

      4.9        14.7   
                

Income (loss) from continuing operations

      (78.1 )      (192.8 ) 

(Loss) from sale of assets to DISH Network

      (581.9 )      (581.9 ) 

Income (loss) from discontinued operations, net of tax

      (0.1 )      —     
                

Net income (loss)

      (660.1 )      (774.7 ) 

Preferred stock dividends

      —          —     
                

Net income (loss) applicable to common stockholders

    $ (660.1 )    $ (774.7 ) 
                

 

FORM MOR-2

Page 5 of 10

In re

    BLOCKBUSTER INC., et al.    Case No.    10-14997
  

Debtor

    Reporting Period:    4/4/2011 to 5/1/2011

 

BALANCE SHEET

(in millions)

 

     As of 5/1/2011  

Assets

   

Current assets:

   

Cash and cash equivalents

    $ 201.2   

Receivables, less allowances

      —     

Receivables from non-debtor subsidiaries

      —     

Merchandise inventories

      —     

Rental library, net

      —     

Prepaid and other current assets

      —     
        

Total current assets

      201.2   

Property and equipment, net

      —     

Deferred income taxes

      69.0   

Investment in non-debtor subsidiaries

      —     

Intangibles, net

      —     

Restricted cash

      53.5   

Other assets

      —     
        

Total Assets

    $ 323.7   
        

Liabilities and Stockholders’ Equity (Deficit)

   

Current liabilities:

   

Accounts payable

    $ 153.9   

Accrued expenses

      145.0   

Debtor-in-possession loan

      —     

Deferred income taxes

      69.0   
        

Total current liabilities

      367.9   

Other liabilities

      9.2   
        

Total Liabilities before LSTC

      377.1   

Liabilities subject to compromise

      1,247.6   
        

Total Liabilities

      1,624.7   
        

Total stockholders’ equity (deficit)

      (1,301.0 ) 
        

Total Liabilities and Stockholders’ Equity (Deficit)

    $ 323.7   
        

 

FORM MOR-3

Page 6 of 10

In re

    BLOCKBUSTER INC., et al.    Case No.    10-14997
  

Debtor

    Reporting Period:    4/4/2011 to 5/1/2011

 

STATUS OF POST-PETITION TAXES

 

Federal

    Beginning Tax      Amount
Withheld and/or
Accrued		      Amount Paid     Ending Tax  

Withholding

    $ 2,020,552       $ 2,574,893       $ (4,608,986 )    $ (13,542 ) 

FICA-Employee

      783,815         921,493         (1,705,308 )      —     

FICA-Employer

      421,976         1,252,339         (1,690,029 )      (15,713 ) 

Unemployment

      656,173         50,201         (597,241 )      109,133   

Income

      —           —           —          —     

Other:

      —           —           —       
                                  

Total Federal Taxes

      3,882,516         4,798,926         (8,601,564 )      79,878   
                                  

State and Local

                           

Withholding

      453,700         529,512         (900,011 )      83,201   

Sales

      7,039,623         4,534,281         (8,303,975 )      3,269,929   

Excise

      —           —           —       

Unemployment

      3,009,892         260,405         (2,694,764 )      575,532   

Real Property1,2

      38,231         16,748         —          54,979   

Personal Property2

      2,561,115         326,798         (186,386 )      2,701,526   

Other: Income/Franchise3

      2,222,236         146,384         (48,140 )      2,320,480   
                                  

Total State and Local

      15,324,797         5,814,128         (12,133,277 )      9,005,648   
                                  

Total Taxes

    $ 19,207,312       $ 10,613,054       $ (20,734,841 )    $ 9,085,525   
                                  

SUMMARY OF UNPAID POST-PETITION DEBTS

Attach aged listing of accounts payable.

 

     Number of Days Past Due  

DESCRIPTION

    Current      0-30      31-60      61-90      Over 91      Total  

AP - Product

    $ 34,725,736       $ 21,853,771       $ 11,173,824       $ 33,107,656       $ 498,256       $ 101,359,244   

AP - Legal & Professional Fees

      3,076,653         2,285,995         342,471         223,688         320,161         6,248,968   

AP - Other

      5,227,828         6,497,063         4,649,936         321,211         7,161         16,703,198   
                                                     

TOTAL POST-PETITION DEBTS4

    $ 43,030,218       $ 30,636,828       $ 16,166,230       $ 33,652,556       $ 825,578       $ 124,311,410   
                                                     

Explain how and when the Debtor intends to pay any past due post-petition debts.

Past due product amounts pending accommodation agreements. Past due legal amounts pending other requirements.

Other past due amounts reflect normal processing lag time, vendors not submitting invoices in a timely manner and certain contracts under negotiation.

Past due Other amounts pending claim neutrality analysis.

Items delayed by processing lag are normally paid within 60 days.

Past due credits reflect payments in advance and product return credits.

 

1  - Blockbuster leases the substantial majority of its stores. Accordingly, real property taxes paid pursuant to such lease obligations are not reported herein as such payments are captured within leases payable.
2  - The Real Property and Personal Property taxes are considered “postpetition” based off of when the payment is assessed by the taxing authority.
3  - Although Franchise/Income taxes are “incurred” on an accrual basis, we have included prepetition accruals since the payments for these taxes will be based on the entire year.
4  - Variance to total accounts payable on Balance Sheet is due to pre-petition balances that are not subject to compromise and have been approved for payment by order of the Bankruptcy Court or relate to various accounts payable accrual amounts that are not aged.
5  - Due to the voluminous nature of the request for the Debtors’ listing of aged accounts, a summary has been provided.
6  - Due to the voluminous nature of this request, the Debtors have not included copies of Form 6123 and tax returns filed during this period.

 

FORM MOR-4

Page 7 of 10

In re

    BLOCKBUSTER INC., et al.    Case No.    10-14997
  

Debtor

    Reporting Period:    4/4/2011 to 5/1/2011

 

ACCOUNTS RECEIVABLE RECONCILIATION AND AGING

 

Accounts Receivable Reconciliation

    Amount  

Total Accounts Receivable at the beginning of the reporting period

    $ 26,351,205   

Plus: Amounts billed during the period

      (1,281,599 ) 

Less: Amounts collected during the period

      814,162   

Less: Amounts written off during the period

      (1,879,680 ) 

Less: Amounts reserved during the period

      (1,737,633 ) 

Change in store accounts receivable, net

      (15,623 ) 

Accounts Receivables sold to DISH Network

      (22,250,833 ) 
        

Total Accounts Receivable at the end of the reporting period

    $ —     
        

Accounts Receivable Aging

    4/25/2011  

0 - 30 days old

    $ —     

31 - 60 days old

      —     

61 - 90 days old

      —     

91 - 120 days old

      —     

121+ days old

      —     

Total Aged Accounts Receivable

      —     

Store Accounts Receivable

      —     

Total Accounts Receivable

      —     

Less: Bad Debts (Amount considered uncollectible)

      —     
        

Net Accounts Receivable***

    $ —     
        

TAXES RECONCILIATION AND AGING

 

Taxes Payable

    Current     1-30 Days      31-60 Days      61-90 Days      91+ Days      Total  

Federal

    $ (79,878 )                $ (79,878 ) 

State and Local

      (9,005,648 )                  (9,005,648 ) 

Other

      —                   
                            

Total Taxes Payable

    $ (9,085,525 )                $ (9,085,525 ) 
                            

 

FORM MOR-5

Page 8 of 10

In re

    BLOCKBUSTER INC., et al.    Case No.    10-14997
  

Debtor

    Reporting Period:    4/4/2011 to 5/1/2011

 

PAYMENTS TO INSIDERS AND PROFESSIONALS

INSIDERS

 

NAME

    TYPE OF PAYMENT      AMOUNT PAID      TOTAL PAID TO DATE  

(1) NONE

         

TOTAL PAYMENTS TO INSIDERS

         

 

(1) No payments other than ordinary wages and benefits occurred during the reporting period.

PROFESSIONALS

 

NAME

   DATE OF
COURT  ORDER
AUTHORIZING
PAYMENT		     AMOUNT
APPROVED		     AMOUNT PAID
04/03/2011 - 04/25/2011		     TOTAL PAID
TO DATE		     TOTAL INCURRED
& UNPAID*		  

SIDLEY AUSTIN LLP (1)

     9/27/2010      $ 3,621,930      $ —        $ 2,909,389      $ 712,541   

JEFFERIES & COMPANY INC (1)

     9/27/2010        956,496        —          830,048        126,448   

ALVAREZ & MARSAL NORTH

          

AMERICA LLC (3)

     10/27/2010        2,329,714        428,927        2,329,714        —     

ROTHSCHILD INC (3)

     11/2/2010        927,396        104,680        554,524        372,871   

KURTZMAN CARSON CONSULTANTS

          

LLC (3)

     9/23/2010        3,214,365        148,380        3,214,365        —     

DJM ASSET MANAGEMENT LLC (3)

     11/23/2010        150,000        —          150,000        —     

RETAIL REGROUP INC (3)

     11/23/2010        150,000        —          150,000        —     

DELOITTE TAX LLP (3)

     11/9/2010        565,181        104,882        435,608        129,573   

SKADDEN ARPS SLATE MEAGHER &

          

FLOM LLP (1)

     9/27/2010        211,440        11,640        201,543        9,897   

KORN/FERRY INTERNATIONAL (3)

     11/10/2010        161,056        —          142,132        18,924   

COOLEY GODWARD KRONISH LLP (2)

     11/23/2010        2,115,397        —          1,506,432        608,965   

FTI CONSULTING (2)

     12/2/2010        818,192        100,823        534,838        283,353   

BLOODWORTH CARROLL &

          

BANOWSKY PC (3)

     11/23/2010        164,395        47,516        114,516        49,879   

RAY & GLICK LTD. (3)

     11/23/2010        959,250        238,000        471,000        488,250   

CHAIKEN LEGAL GROUP PC (3)

     11/23/2010        353,664        44,704        233,924        119,740   

SHEPPARD MULLIN (1)

     9/27/2010        500,385        —          327,327        173,058   

WEIL GOTSHAL (3)

     10/27/2010        3,180,844        —          2,565,089        615,754   

PRICEWATERHOUSE COOPERS (3)

     2/8/2011        1,636,028        169,213        1,311,887        324,141   

DELOITTE FINANCIAL ADVISORY (3)

     2/8/2011        360,866        —          288,837        72,030   

ERNST & YOUNG (3)

     4/4/2011        416,514        —          —          416,514   
                                 

TOTAL PAYMENTS TO PROFESSIONALS

     $ 22,793,112      $ 1,398,765      $ 18,271,173      $ 4,521,939   
                                 

 

* INCLUDE ALL FEES INCURRED, BOTH APPROVED AND UNAPPROVED
(1) Fees paid pursuant to the DIP Financing Order for professionals of the DIP lenders and DIP Agent.
(2) Fees for professionals retained to represent Unsecured Creditors’ Committee
(3) Fees for professionals retained to represent Blockbuster Inc.

POST-PETITION STATUS OF SECURED NOTES, LEASES PAYABLE

AND ADEQUATE PROTECTION PAYMENTS

 

NAME OF CREDITOR

    SCHEDULED
MONTHLY
PAYMENT DUE		      AMOUNT PAID
DURING MONTH		      TOTAL UNPAID
POST-PETITION		  

DIP Financing

    $ —         $ —         $ —     

DIP Interest

         —           —     

Leases Payable

      1,121,414         444,010         678,374   

Adequate Assurance Payments - Utilities

      —           —           —     

Adequate Assurance Payments - Insurance

      —           —           —     
              

TOTAL PAYMENTS

       $ 444,010      
              

 

FORM MOR-6

Page 9 of 10

In re

    BLOCKBUSTER INC., et al.    Case No.    10-14997
  

Debtor

    Reporting Period:    4/4/2011 to 5/1/2011

 

DEBTOR QUESTIONNAIRE

 

    

Must be completed each month. If the answer to any of the questions is “Yes”,

provide a detailed explanation of each item. Attach additional sheets if necessary.

    Yes      No  
1    Have any assets been sold or transferred outside the normal course of business this reporting period?      X      
2    Have any funds been disbursed from any account other than a debtor in possession account this reporting period?         X   
3    Is the Debtor delinquent in the timely filing of any post-petition tax returns?         X   
4    Are workers compensation, general liability or other necessary insurance coverages expired or cancelled, or has the debtor received notice of expiration or cancellation of such policies?      X      
5    Is the Debtor delinquent in paying any insurance premium payment?         X   
6    Have any payments been made on pre-petition liabilities this reporting period?      X      
7    Are any post petition receivables (accounts, notes or loans) due from related parties?         X   
8    Are any post petition payroll taxes past due?         X   
9    Are any post petition State or Federal income taxes past due?         X   
10    Are any post petition real estate taxes past due?         X   
11    Are any other post petition taxes past due?         X   
12    Have any pre-petition taxes been paid during this reporting period?      X      
13    Are any amounts owed to post petition creditors delinquent?      X      
14    Are any wage payments past due?         X   
15    Have any post petition loans been received by the Debtor from any party?         X   
16    Is the Debtor delinquent in paying any U.S. Trustee fees?         X   
17    Is the Debtor delinquent with any court ordered payments to attorneys or other professionals?      X      
18    Have the owners or shareholders received any compensation outside of the normal course of business?         X   

 

1 Substantially all of the Debtors’ assets were sold to DISH Network on 4/26/11
4 On April 26, 2011, the Debtors had only one employee and were no longer required to maintain workers compensation insurance.
6 Pre-petition amounts have been paid under respective Court orders.
12 Pre-petition taxes have been paid under the Final Order Pursuant to 11 U.S.C. §§ 105(a), 363(b), 507(a)(8), and 541 and Fed R. Bank. P.6003 and 6004 Authorizing Debtors to Pay Prepetition Taxes and Assessments [Docket No. 355].
13 Past due amounts reflect normal processing lag time, vendors not submitting invoices in a timely manner, certain contracts under negotiation, and Pre-Sale Period Administrative Claims (as defined in the Order Pursuant to 11 U.S.C. §§ 105, 363, 364, 365 and 503 and Fed. R. Banker. P. 2002, 4001, 6004, 6006, 9008, 9014, and 9019 Approving (A) Bid Procedures, (B) Stalking Horse Expense Reimbursement, (C) Notice of Sale, Auction and Sale Hearing, (D) Assumption Procedures and Related Notices, (E) Incurrence of Sale-Related Administrative Priority Claims, and (F) Imposition of an Administrative Stay [Doc. No. 1223]). Items delayed by processing lag are normally paid within 60 days.
17 As of May 11, 2011, the Debtors were reviewing bills and fees from certain professionals due prior to that date. The firms are current as of May 11, 2011.

 

FORM MOR-7

Page 10 of 10

BLOCKBUSTER INC Reports