Caught in a financial undertow that's been pulling down the industry, Southern California's largest movie exhibitor, Edwards Theatres Circuit Inc., said Wednesday it has filed for bankruptcy protection.
The chain, which has 70 theaters with 736 screens, mostly in Southern California, said it expects to conduct "business as usual" during bankruptcy restructuring.
The move is the latest fallout in an industry that is reeling from a five-year building binge that left Edwards and other theater chains with too many screens and too much debt.
Indeed, closely held Edwards invested more than $140 million in new theaters last year, while its operating income totaled just $571,000, according to documents filed in U.S. Bankruptcy Court in Santa Ana.
The family-owned firm, which was founded 70 years ago with a single theater in Monterey Park, ended 1999 with a net loss of $40 million on revenue of $299 million, the filing said.
In addition to heavy debts from its rapid expansion, the company has been saddled with antiquated theaters that moviegoers now shun in favor of glitzy megaplexes with cushy stadium seating and ear-splitting sound systems.
Edwards began trying to renegotiate leases last spring on a couple dozen of its older, smaller venues, closing the most unprofitable locations where possible. It closed four theaters Tuesday, bringing to 23 the number of locations shuttered so far this year.
The problems are similar to those weighing down other major chains, Edwards said.
Theater companies have been buffeted by cost overruns, construction delays and higher-than-expected lease costs even as competing new megaplexes cut into market share and revenue from smaller, older theaters fell, the filing said. It quoted analysts as saying the industry needs to drop from its current level of 38,000 screens to fewer than 30,000.
The nation's four largest movie chains--Regal Cinemas Inc., Loews Cineplex Entertainment Corp., Carmike Cinemas Inc. and AMC Entertainment Inc.--all lost money in the last two years, more than $340 million combined.
Earlier this month, Carmike, the No. 3 chain, filed for bankruptcy protection. Regal, the largest exhibitor, reportedly was in talks with its bankers to avoid breaching loan agreements this quarter. Silver Cinemas, the nation's largest art film exhibitor, filed for Chapter 11 protection in May.
Industry insiders agree that the situation is so grim that even bankruptcy filings no longer come as a surprise.
"They seem to be tumbling one by one," said Francesca Dinglasan, senior editor for Box Office magazine in Pasadena. "Every time I look at the quarterly earnings, they're all dismal."
Edwards opted to file for Chapter 11 bankruptcy protection "to reduce the company's operating expenses and make necessary improvements to the business," Edwards President Stephen Coffey said.
A bankruptcy filing also helps companies shake free of leases when they can't reach agreements with landlords.
But the move throws into question the fate of the company's expansion plans as well as various projects underway.
"Longer term, you'd have to say this has a significant economic impact for areas around Southern California," said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.
Already, Kyser said, the Queensway Bay shopping and entertainment development in Long Beach has "come to a grinding halt because Edwards was supposed to be a major tenant in the project, but could never get a lease."
In Orange County, the cinema company has been unable to get approval from lenders to proceed on some projects "until their finances are straightened out," said Greg Stoffel, a retail consultant with Greg Stoffel & Associates in Irvine.
The list of unsecured creditors on the bankruptcy filing reads like a corporate who's who of the movie industry.
The top 20 creditors include DreamWorks SKG, Warner Bros. Distributing, Universal Studios, 20th Century Fox Film Corp., Miramax and Paramount Pictures Corp.
Other major creditors include Imax Limited, which says it's owed $2.9 million, and Town Center Plaza in Pasadena, nearly $2.4 million.
Jerry Snyder, managing partner of developer Orix Snyder LA Venture--Edwards' largest unsecured creditor--said he was not surprised by Edwards' bankruptcy. About six weeks ago, Orix Snyder canceled Edwards' lease on a 19-screen theater under construction at the 405 Freeway and Howard Hughes Parkway. Edwards had defaulted on the rent, Snyder said.
Snyder said he is talking to three prospective tenants interested in the theater space, which is part of a massive development known as the Howard Hughes Promenade.
"We haven't missed a step and plan to make a deal within the next week," Snyder said. Orix Snyder is owed nearly $3.1 million, according Edwards' bankruptcy filing.
Edwards said the four theaters that it closed Tuesday employed about 50 people, most of whom were reassigned to other movie houses.
The company may shutter 10 to 12 more theaters in Southern California, Coffey said.
Future closures are likely to involve older, smaller theaters that are failing to turn a profit, he said.
Times staff writer E. Scott Reckard also contributed to this report.
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No Day at the Movies
The family-owned Edwards Theatres filed for bankruptcy protection Wednesday but plans to operate during restructuring.
The chain has seen enormous growth since the 1960s...
Total number of screens
... but at what price?
The bankruptcy filing listed five of the largest unsecured creditors and debt owed (in millions).
Orix Snyder LA Venture: $3.1
IMAX Limited: 2.9
Town Center Plaza, LLC: 2.4
Moorefield Construction: 1.5
Perkowitz & Ruth Architects: 1.3
*Year to date
Sources: Gregory Stoffel & Associates, bankruptcy filing