Schwartz Brothers Inc., a troubled wholesale distributor of videocassettes and recorded music, said yesterday that "serious cash flow problems" have left it unable to supply video rental stores with movies scheduled for release this week.
The Lanham-based company said it had lined up Ingram Entertainment Inc. of Nashville to fill these orders.
The cash crunch puts the company's future in serious doubt. Marilyn Schwartz, a spokeswoman who is no relation to the founding family, said the company's managers were "looking at six or seven options" and that an announcement was expected within 48 hours.
Seth Goldstein, publisher of Seth Goldstein's Video Report, said "Schwartz has been in financial hot water for a long time." After yesterday's announcement, he said, "One possibility is that they will seek Chapter 11 court protection."
Schwartz, a thinly traded public company, was reported in January to be close to obtaining an infusion of capital from a potential investor. Ms. Schwartz said yesterday that that deal was "down the drain, didn't work out."
Mr. Goldstein said there was some possibility that Schwartz could be acquired by another distributor, perhaps Ingram,which he said was in "an acquisitive mood." The newsletter publisher said Schwartz was one of half a dozen regional video distributors that are "all hurting to varying degrees"during a "consolidation phase" in the industry.
Schwartz has been losing money steadily for about two years. For the nine months that ended Oct. 31, the company reported a loss of $2.5 million, or $1.42 a share. For the year ended Jan. 31, 1991, the company lost $4.3 million, or $2.41 a share.
The company's stock traded over-the-counter yesterday at a bid price of 25 cents a share and an asking price of 50 cents.