GC posts losses as old theaters close
Multiplex moves leave analysts wondering
The exhib's operating loss blew out from $5.1 million to $68.7 million, it said, mainly as a result of the writedowns. General Cinema's revenues fell 2.6% to $86.1 million in the quarter, it said.
The writedowns reflect GC's planned "realignment" as the national player shifts to a focus on the Northeast and Midwest regions, as well as pressure put on GC's older theaters by newer megaplexes in competitive markets, the company said in a statement.
GC is still negotiating the potential sale of its Southern California theaters to WestStar, an investment group led by exhibition veteran Jeff Lewine, owner of the Mann Theater chain (Daily Variety, Oct. 14).
Contradictory moves confuse insiders
But despite GC's stated goal of consolidating its strength in the country's Northeastern quadrant, the circuit has recently added modern megaplexes in such far-flung markets as Seattle and Dallas.
The seemingly contradictory moves have left some industry insiders scratching their heads about GC's long-term strategy. Some have speculated that the new theaters are intended to make the company's holdings in the West and Northwest more attractive to potential buyers.
Of the writedowns, almost $40 million was to cover the "estimated costs of exiting leases for certain domestic theaters." These losses relate "primarily to the company's older, smaller multiplexes, which have been adversely affected by new competition from larger megaplexes," GC said.
"As the company continues to move from a national to a regional strategy, it will continue to evaluate its future plans, which may include closing additional theaters, selling theaters and/or subleasing these properties to alternative users," GC added in a statement.
The company also wrote down the balance sheet value of "certain domestic theater assets." GC execs did not return calls seeking comment.
In the past couple of years GC has been closing older theaters and building a smaller number of new plexes. Its total number of screens has dropped from 1,168 at 185 locations on July 31, 1997, to 1,067 at 151 theaters at the end of October.
GC president Robert Smith said in a statement that the company plans to open another eight theaters with 131 screens by the end of next year.
