On the Bill at Edwards: Chapter 11
Edwards Theatres Circuit Inc., the giant Newport Beach movie-house chain that helped define today’s glitzy shopping and entertainment centers, filed for bankruptcy protection Wednesday.
The family-owned company, by far the largest theater operator in Orange County, said it expects to conduct “business as usual” during bankruptcy restructuring.
But the move is a staggering blow to the credibility of the 70-year-old company, and it raises doubts about some new retail projects that had counted on Edwards to be a major tenant, according to retail experts.
Edwards’ bankruptcy filing came after months of trying to renegotiate leases on smaller, older venues that were draining the company as it continued on a costly expansion. Even as box office receipts have been strong, Edwards’ financial troubles reflected 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, Edwards invested more than $140 million in new theaters last year, while the cash generated by its existing operations totaled just $571,000, according to documents filed in U.S. Bankruptcy Court in Santa Ana.
The firm, which was founded by James Edwards Sr. early in the Great Depression with a single theater in Monterey Park, ended 1999 with a net loss of $40 million on revenue of $299 million, the filing said.
“By availing ourselves of the Chapter 11 process, we expect to be able to reduce the company’s operating expenses and make necessary improvements to the business, thereby creating a strong competitive future for Edwards Theatres,” Edwards President Stephen Coffey said in a statement.
James Edwards III, Edwards’ chief executive who has been running the company since the elder Edwards’ death in 1997, was unavailable for comment.
The company has a total of 70 theaters with 736 screens, most of them in Southern California. Companywide it employs 3,700 people.
Edwards is Southern California’s largest movie-house chain, and it operates about 70% of Orange County’s movie screens. Many of the cinemas serve as important anchors for local shopping centers.
Edwards’ Irvine Spectrum 21--the Southland’s highest-grossing movie house--helped set the standard for a new age of shopping and entertainment centers when it opened in 1995 at the Irvine Spectrum Center.
The success of that center and its thriving movie house--which includes a massive IMAX--has been studied by other developers nationwide and internationally, said Greg Stoffel, a retail consultant with Greg Stoffel & Associates in Irvine.
“Irvine Spectrum probably wouldn’t have gotten off the ground without [Edwards],” Stoffel said. “It’s the primary driver of customer traffic for that center.”
Edwards also provided an important boost to the redevelopment of downtown Brea when it opened a 22-screen theater there, he said.
In addition to heavy debts from its rapid expansion, the company also has been saddled with antiquated theaters that moviegoers now shun in favor of 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, among other things, Edwards said in its filing.
Each of the nation’s four largest movie chains--Regal Cinemas Inc., Loews Cineplex Entertainment Corp., Carmike Cinemas Inc. and AMC Entertainment Inc.--lost money in the past two years, more than $340 million combined.
Earlier this month, Carmike, the No. 3 chain, filed for bankruptcy protection. Regal, the largest exhibitor, was reportedly in talks with its bankers to avoid breaching loan covenants. Silver Cinemas, the nation’s largest art film exhibitor, filed for Chapter 11 protection in May.
A bankruptcy filing can help companies shake free of leases when they can’t reach agreements with landlords.
But the Edwards move throws into question the fate of the company’s future expansion plans as well as various projects already 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 Stoffel, the Irvine retail consultant.
One of the creditors listed in Edwards’ filing is Triangle Square Investment, operator of the Triangle Square shopping center in Costa Mesa, which claims Edwards owes it more than $627,000.
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 and Universal Studios.
Jerry Snyder, managing partner of developer Orix Snyder LA Venture LLC--Edwards largest unsecured creditor--said he was not surprised by Edwards’ bankruptcy. About six weeks ago, Orix Snyder canceled an Edwards lease on a 19-screen theater now under construction at the corner of the San Diego Freeway and Howard Hughes Parkway in Westchester. Edwards had defaulted on the rent, Snyder said.
Other major creditors include the Irvine Co., which installed Edwards theaters as magnets at its most prominent shopping centers while developing its trademark planned communities. Irvine Co., owner of the Irvine Spectrum Center, is owed $266,246; it expressed confidence in the future of Edwards, which has seven theater complexes on its property in Irvine, Newport Beach and Tustin.
Michael Stewart, an attorney representing Franciscan Plaza in San Juan Capistrano, where Edwards closed its five-screen complex in April after a decade, said Edwards hasn’t paid its $34,300 monthly rent since April. The shopping center’s owners have so far been unable to find a suitable theater operator to take over the space, and estimate it would cost $1 million to $3 million to convert to another retail use, he said. Worse, a restaurant at the complex has asked to renegotiate its lease, claiming that the theater’s closure has hurt business.
Edwards said the four theaters that it closed Tuesday employed about 50 people, most of whom were reassigned to other movie houses. Coffey said the company may shut down 10 to 12 additional theaters in Southern California.
“Everything that’s currently open we have not made a determination on yet,” he said, although he noted that future closures are likely to involve older, smaller theaters that are failing to turn a profit.
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The Big Screen
Edwards Theatres is the leading movie house operator in Southern California. Market share in 1999:
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Theater chain # of locations % of box office receipts OC SO CAL* OC SO CAL* Edwards 42 75 71% 27% AMC 3 29 16% 24% Other 15 177 13% 49%
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*Los Angeles, Orange, San Diego, Riverside and San Bernardino counties
TIMELINE: Edwards Theatres Circuit Inc.
Oct. 9, 1930: James Edwards Sr., at age 23, opens his first theater in Monterey Park, a year after the collapse of the stock market and as the country plunges into the Great Depression. The movie: Howard Hughes’ ‘Hell’s Angels.’ Admission: 25 cents for adults, 10 cents for children.
1934: Renovates and reopens the Raymond Theater in Pasadena, relying on what would become a blueprint for future Edwards theaters--a combination of comfort and presentation.
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1939: Opens what is believed to be the nation’s first multiplex, a two-screen venue in Alhambra.
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1961: With two partners, Edwards expands his empire to 90 screens. But he suffers a heart attack, sells all but 10 screens he owned outright in San Gabriel Valley, and retires to Newport Beach.
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1963: Edwards jumps back into the theater business, opening a movie house at Harbor Boulevard and Adams Avenue in Costa Mesa. His son, James Edwards III, joins the family business.
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1967: Edwards opens Newport Cinema in Newport Beach. The chain’s flagship also becomes company headquarters.
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1989: The chain reaches 220 screens in Southern California, including a 16-screen complex in Ontario--believed at the time to be the largest in the world.
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1996: Edwards opens its first IMAX 3-D theater in Southern California as part of its 21-screen complex at the Irvine Spectrum.
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April 26, 1997: James Edwards Sr. dies after an apparent heart attack. He is 90 years old.
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May 1999: A 26-screen theater, the chain’s largest in Southern California, opens at Long Beach Towne Center.
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March 2000: The movie chain announces it will shed 25 older theaters. Edwards also hires Stutman Tresiter and Glatt, a law firm that specializes in bankruptcies, but says it is not in financial trouble.
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August 23, 2000: Edwards Theatres Circuit Inc. announces it is filing for Chapter 11 bankruptcy protection.
Source: Gregory Stoffel & Associates, Edwards Theatres Circuit Inc. bankruptcy petition, Times reports
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Major Creditors
Edwards theater chain’s bankruptcy filing listed the 20 largest unsecured creditors and debt owed (in thousands).
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Major Creditor Amount Owed (in thousands) Orix Snyder LA Venture $3,100 IMAX Limited 2,900 Town Center Plaza, LLC 2,400 Moorefield Construction, Inc. 1,500 Perkowitz & Ruth Architects 1,300 Alhambra Redelopment Agency 1,200 Metropolia Provisions 1,100 Dreamworks SKG 713 Triangle Square Investment, Costa Mesa 627 Superior Electrical Advertising 438 Buena Vista Pictures Dist. 409 Warner Bros. Dist. 389 Media Technology Source 363 Universal Studios 308 Twentieth Century Fox Film Corp. 306 Miramax 297 Andrew L. Youngquist Const. 285 Paramount Pictures Corp. 280 New Line Distribution Inc. 268 Irvine Retail Properties, Newport Beach 266
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