Blockbuster Inc. (NYSE: BBI) became the latest company to get a vote of no confidence from its auditor yesterday as a declining economy, tight capital markets, and better-managed competitors have put the company in a tough spot.
In its report attached to the company's 10-K, the company's independent auditor PricewaterhouseCoopers wrote:
"The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the risk the Company may not successfully complete a refinancing of its credit facility scheduled to mature in August 2009 and obtain related amendments of financial covenants included therein, and/or the risk the Company may not have adequate liquidity to fund their operations raise substantial doubt about the Company's ability to continue as a going concern."
The company has said that it was successful in amending its revolving and term loan agreement, but yesterday the company said that the funding is subject to the company meeting certain obligations and cautioned that it it cannot guarantee its ability to meet its obligations. And even if the loan is funded, Blockbuster said that it still "may not have sufficient liquidity to finance the ongoing obligations of our business, which raises substantial doubt about our ability to continue as a going concern."
There's no real news here, and the company had already told investors that it would likely receive a so-called going concern notice in its 2008 annual report. But for investors, the caveat emptor is now there in bold letters: A share in Blockbuster could well be worthless within a year.
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