Blockbuster to File Bankruptcy Reorganization Plan by Nov. 30

Blockbuster closed another 300 stores in Q3 as it prepared to file a bankruptcy reorganization plan by Nov. 30, with a goal of having it confirmed by March 15, the company said. The chain, which filed for bankruptcy protection on Sept. 23, has been operating under a $125 million debtor-in-possession financing, $20 million of which is being used for a TV advertising campaign touting Blockbuster’s advantages that started Monday and runs through Christmas.

Blockbuster operated more than 5,550 stores in the U.S. and 16 countries as of Oct. 3, the company said in a filing with the SEC. Blockbuster had 6,520 and 5,800 stores as of Jan. 3 and July 4. Blockbuster incurred $13.5 million in store closure expenses in Q3 ended Oct. 3, up from $8 million a year earlier. It expected to have at least 7,500 Blockbuster Express kiosks, which are being deployed by NCR, installed by year-end, the company said.

With a bankruptcy reorganization plan pending, the unsecured creditors committee sought bankruptcy court approval Tuesday to hire FTI Consulting as a financial advisor. The outcome of a hearing before U.S. Bankruptcy Court Judge Burton Lifland, New York, on the committee’s request to hire FTI wasn’t available at our deadline Tuesday. FTI would be paid a $150,000 monthly fee for its service and $500,000 to $750,000 once the bankruptcy case is complete, court records state. FTI also served as an advisor in Movie Gallery’s bankruptcy case in which it received a $1 million fee, according to court records. Movie Gallery liquidated earlier this year. Lifland approved hiring executive recruitment firm Korn Ferry to help in find a new Blockbuster CEO. Korn Ferry will be paid $400,000 within 30 days of a CEO being hired, the company said.

As Blockbuster winds its way through bankruptcy, the chain’s Q3 net loss narrowed to $53.5 million from $114.1 million a year earlier as total revenue slid to $736.6 million from $910.5 million. A year earlier, Blockbuster took a $38.7 million loss on the sale of its 184-store Xtra-vision chain in Ireland to Birchall Investment Ltd. Rental revenue dropped to $470.8 million from $581.8 million, while those from merchandise sales fell to $161.4 million from $195 million, the company said. Revenue from sales of previously rented product declined to $99.9 million from $129 million. Blockbuster’s U.S, operating income decreased to $2.7 million from $12.2 million a year ago as rental revenue fell to $472.3 million from $621.2 million. International operating income improved to $10 million from $8.9 million as revenue declined to $264.3 million from $289.3 million. It made $7.2 million in payments for rent and lease termination costs in Q3. Blockbuster had a $3.5 million severance-related liability as of Oct. 3, the company said.

Blockbuster released earnings as it launched new three-tier pricing that shortens the rental period to three days from five. DVD rentals will be priced at 99 cents, $2.99 and $4.99, the latter for new DVD releases and Blu-ray. Family titles, typically merchandised in the center of a store, are priced at 99 cents, while some new releases and top picks are $2.99. The changes, which took effect Nov. 19, mark the second time the chain has altered the rental period. It moved to five days from seven in March. If the title is returned within 30 days, the customer gets a store credit for the movie’s price, less $10 in late fees.