Two weeks after the film stopped rolling for Schwartz Brothers Inc., the music is fading.
The Lanham-based wholesaler, whose cash-flow problems drove it from the videocassette distribution business, sought court protection from its creditors yesterday to clear the way for an orderly liquidation of its remaining business, distributing recorded music.
Patrick Labriola, chief financial officer, said the Chapter 11 filing in federal bankruptcy court in Rockville was intended to buy time so that the company can continue to operate while it completes the sale.
The company said in a statement that it thinks an agreement is imminent on a sale to another major audio distributor. Mr. Labriola said the bankruptcy petition was forced by "adverse actions" taken by Signet Bank/Maryland, Schwartz Brothers' principal lender.
He said he did not know the exact amounts but that the assets listed in the petition exceeded the liabilities. "Both sides of the business were healthy. We just didn't have the cash to run them," he said. "We couldn't get the bank to understand that."
Schwartz Brothers' filing was no surprise. Two weeks ago, the company stopped delivering movies to video rental stores and laid off its video-distribution staff of about 40 after an expected cash infusion fell through.
"They said the music business was strong enough to fend off creditors," said Seth Goldstein, publisher of Seth Goldstein's Video Report. "I guess it was not."
He said the video business accounted for about 75 percent of Schwartz's revenues, which came to $104.7 million in the fiscal year that ended Jan. 31, 1991, but were running far behind that pace for the most recent fiscal year.
Schwartz Brothers, a lightly traded public company, has been bleeding 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 that ended Jan. 31, 1991, the company lost $4.3 million, or $2.41 a share.
Yesterday's announcement came after the markets closed for the day. The company's stock traded over-the-counter yesterday at a bid price of 25 cents a share.
Mr. Labriola said it was premature to speculate whether the company's stock would have any value after its creditors were paid.