A Blockbuster Bankruptcy?

Movie rental chain Blockbuster Inc. said in a Securities and Exchange Commission filing that it may have to file for Chapter 11 bankruptcy protection if unable to generate enough cash flow to meet or restructure its debt commitments.

In the filing, the Dallas-based movie rental chain attributed its weakened operations and cash flow to increasing competition. The company indicated that its cash flow situation has “threatened the company’s ability to continue as a going concern.”

For the year ending Jan. 3, 2010, Blockbuster reported a net loss from operations and a stockholders’ deficit.

The company added in the March 16 filing that if its operating results continue to drop, it may lack the cash flow needed to meet its liquidity needs.

Blockbuster's struggles have been no secret.

Aggressive competition from new movie rental sources and disappointing holiday sales at Blockbuster Inc. resulted in the movie rental company reporting a net loss of $558.2 million for fiscal 2009.

CEO Jim Keyes spoke honestly about those results earlier in the year saying “the next 12 to 18 months will remain challenging as we balance the secular decline of a single channel with the ascension of emerging channels.”

Blockbuster's net loss of $558 million, or $2.93 per share, was based on revenue of $5.065 billion. That is a much deeper loss when compared with fiscal year 2008 when the company lost $374.1 million, or $2.01 per share, on revenue of $4.062 billion.

The company’s fourth-quarter results also showed signs of a business that is struggling against emerging media trends and a business cycle that has been unforgiving to companies in general.

To compete, Blockbuster said earlier in the year it intends to grow its by-mail video rental channel and continue to expand its digital movie offerings through On Demand to compete against new movie rental mediums.

Blockbuster declined to comment on rumors earlier this week that the company intends to offload its European arm.