TORONTO, June 29, 2020
/CNW/ - (TSX: CGX) - Cineplex Inc. ("Cineplex" or the
"Company") today released its financial results for the three
months ended March 31, 2020. The
Company's first quarter financial results were impacted by the
COVID-19 pandemic, as the Company temporarily closed all of its
theatres and location-based entertainment ("LBE") venues effective
March 16, 2020. Unless otherwise
specified, all amounts are in Canadian dollars.
"These are clearly unique and unparalleled times," said
Ellis Jacob, President and CEO,
Cineplex. "As a result of COVID-19, we closed all of our theatres
and LBE venues in mid-March and as such we needed to shift our
focus. Of paramount importance to us is, and always will be, the
safety of our employees and guests. We put in place physical
distancing procedures and ultimately closed our venues in
accordance with mandated government requirements. We have spent the
closure period developing an industry-leading program to ensure
that our employees and guests will return to a safe
environment. We focused on immediate cash and expense
mitigation strategies to ensure that the benefits of minimizing
cash burn would accrue through the full closure and reopening
period. We focused on growing and supporting our diversified and
on-line businesses which were not as impacted by the global
COVID-19 shutdowns such as expanded food delivery services and our
digital store. We focused on partner support, including
government programs, service cessations and abatements from our
landlords, government and supplier partners through the closure and
reopening periods. We focused on ensuring that we continued to
meet the conditions of the Cineworld Arrangement Agreement,
until it was repudiated by Cineworld. Lastly, and as a result of
Cineworld's repudiation of the Arrangement Agreement, we focused on
working with our financial partners to ensure that our long-term
liquidity needs are met."
"As of today, we are in the early days of our reopening process.
While it is impossible to predict how long this crisis will last
and how significant the impact will be on our business, we know
guests miss the magic of the big screen and sound, and have a new
appreciation for shared experiences with friends and family that
can't be replicated at home.
Throughout our history, Cineplex has demonstrated its agility
and resiliency time and again. We are taking the necessary steps to
navigate these uncertain times and remain focused on building a
strong, well-positioned company for the future," Mr. Jacob
concluded.
Impact of the COVID-19 Pandemic
In early 2020, the outbreak of COVID-19 was confirmed in
multiple countries throughout the world and, on March 11, 2020, it was declared a global pandemic
by the World Health Organization. In response, Cineplex immediately
introduced enhanced cleaning protocols and reduced theatre
capacities to promote physical distancing. By mid-March, each of
Canada's provinces and territories
had declared a state of emergency resulting in, among other things,
the mandated closure of non-essential businesses, restrictions on
public gatherings and quarantining of people who may have been
exposed to the virus.
In response to the outbreak of COVID-19, and in response to
applicable government directives and guidance from Canadian public
health authorities, Cineplex announced that the closure of its
theatres and LBE venues across Canada would remain in effect and that the
reopening of such locations would be reassessed as further guidance
and directives are provided by Canadian public health authorities
and applicable government authorities.
The COVID-19 pandemic has had a material negative effect on all
aspects of Cineplex's businesses resulting in material decreases in
revenues, results of operations and cash flows. To mitigate
the negative impact of COVID-19 and support its long-term
stability, the Company has taken a variety of measures to reduce
its expenses including:
- temporary layoffs of all hourly employees as well as a number
of full-time employees who chose a temporary layoff rather than a
salary reduction;
- reducing full-time employee salaries since March 21, 2020 by agreement with such
employees;
- reducing non-essential discretionary operational expenditures
(such as spending on marketing, travel and entertainment);
- reducing capital expenditures;
- implementing a more stringent review and approval process for
all outgoing procurement and payment requests;
- proactively negotiating with landlords for rent relief,
including abatements and converting fixed rent to variable rent
depending on attendance, until attendance returns to previous
levels;
- working with major suppliers and other business partners to
modify the timing and amount of certain contractual payments;
- reviewing and applying for government subsidy programs where
available, including the Canada
Emergency Wage Subsidy ("CEWS"); and
- continuing the suspension of dividends.
Reopening Plans
Since the closure of its theatres and LBE venues in March 2020, Cineplex has been diligently
preparing for their safe reopening, with the health and wellbeing
of its employees and guests being top priority. Cineplex has
carefully re-examined all of its buildings and processes, so that
when its theatres and LBE venues reopen, it will have implemented
an industry-leading program with end-to-end health and safety
protocols. At Cineplex's theatres specifically, it will also be
launching reserved seating in all auditoriums across the country to
ensure proper physical distancing between its guests.
Cineplex has been able to maintain connections with its guests
during the period of theatre and LBE venue closures through its
online Cineplex Store and home delivery of food offerings via Uber
Eats and Skip the Dishes, as well as through the SCENE loyalty
program and social media channels. Cineplex will use these
communication channels to ensure that its guests are made aware of
when its theatres and LBE venues will reopen, and the various
measures put in place to ensure their safety while enjoying a
long-deserved outing.
Cineplex will take a gradual approach to reopening its
consumer-facing segments in phases. The phases will be driven by
government regulations around public gathering sizes and safety
guidelines, the availability of first run film product, social
norms around physical distancing and the attendance levels at
theatres and other venues once reopened. Cineplex is also
implementing a number of pricing and marketing strategies to entice
its guests to return to theatres and LBE venues as the impact of
the COVID-19 pandemic in the markets which it operates subsides. As
a result of loosened provincial government restrictions on social
gatherings in certain markets in which it operates, Cineplex
resumed measured operations at The Rec Room in Winnipeg, Calgary and Edmonton during the week of June 15, 2020. Cineplex also reopened six
theatres in Alberta on
June 26, 2020, and will open select
theatres across British Columbia,
Saskatchewan, Quebec, New
Brunswick, Nova Scotia and
Newfoundland on July 3, 2020. Cineplex will continue to
assess how long it should extend the closure of its other theatres
and LBE venues across Canada as
additional government directives and guidance from Canadian public
health authorities are issued.
Credit Facility Waiver
On June 29, 2020, Cineplex entered
into an amendment agreement with its lenders. The amendment
provides Cineplex with immediate financial covenant suspension in
light of the COVID-19 pandemic and its effects on Cineplex's
businesses, which can be extended to the second and third
quarters of 2020 upon certain conditions, including a minimum
$250 million new financing, a portion
of the proceeds of which would be used to make certain mandatory
permanent repayments of the existing indebtedness. As at
June 29, 2020, an aggregate of
$664 million was outstanding under
the Credit Facilities.
Other Matters
Non-cash impairment charges: During the
quarter-ended March 31, 2020 the
Company recorded $173.1 million in
non-cash impairment charges related to goodwill ($88.5 million), right-of-use assets ($50.6 million) and property, equipment and
leaseholds ($33.9 million). The
triggering event for the re-evaluation was COVID-19 and the
mandatory closure of theatres. Key contributors to the
magnitude of the charge include the stock price decline, the
estimated losses to be incurred during the closure and re-opening
period and estimates regarding the timeline and impacts as the
business volumes return to normalized levels. The Company
will re-evaluate the carrying value of its property, equipment and
leaseholds at year-end with estimates based on the post reopening
performance and expects to benefit from the exclusion of the
near-term losses experienced to date in Q2 2020 and estimated in Q3
2020.
Repudiation of the Arrangement Agreement with Cineworld:
On June 12, 2020, Cineworld delivered
a notice to Cineplex purporting to terminate the Arrangement
Agreement dated December 15, 2019
between Cineplex and Cineworld (the "Arrangement
Agreement"). Cineplex believes that Cineworld had no
legal basis to terminate the Arrangement Agreement and that
instead, Cineworld breached the Arrangement Agreement and its other
contractual obligations including when Cineworld repudiated the
Arrangement Agreement on June 12,
2020. Cineplex expects to file a statement of claim in the
Ontario courts in the near term
seeking to recover damages arising from Cineworld's repudiation and
breaches of the Arrangement Agreement and its other contractual
obligations and failure to complete the Transaction at $34.00 per common share.
Director changes: The Company also announced
the appointment and return of Ms. Phyllis
Yaffe to the Board of Directors. Ms. Yaffe previously served
on the Board (including serving as a trustee of the predecessor
entity, Cineplex Galaxy Income Fund) from February 2008 through September 2016 and most recently served as
Canada's Consul General in
New York from September 2016 through December 2019. Ms. Yaffe has been appointed to
fill the role vacated by Mr. Ed
Sonshine, who tendered his resignation in May 2020 after serving on the Board from
January 2011. With Ms. Yaffe's return
to the Board, the Directors have elected that she return to the
role of Chair and thank Ian
Greenberg for his service as Chair during the period from
2016 to present.
First Quarter Financial Results
|
2020
|
2019
Restated (i)
|
Period over Period
Change
(ii)
|
Total revenues
(iii)
|
$
|
282.8
million
|
$
|
364.6 million
|
-22.4%
|
Theatre
attendance
|
|
10.7
million
|
|
15.0
million
|
-28.5%
|
Net loss from
continuing operations (iv)
|
$
|
(174.2)
million
|
$
|
(5.3)
million
|
NM
|
Net loss from
discontinued operations
|
$
|
(4.3) million
|
$
|
(2.0)
million
|
NM
|
Net loss (iv)
(v)
|
$
|
(178.4) million
|
$
|
(7.4)
million
|
NM
|
Box office revenues
per patron ("BPP") (vi)
|
$
|
10.36
|
|
$
|
10.44
|
|
-0.8%
|
Concession revenues
per patron ("CPP") (vi)
|
$
|
6.79
|
|
$
|
6.35
|
|
6.9%
|
Adjusted EBITDA (iv)
(vi)
|
$
|
46.5
million
|
$
|
78.7
million
|
-41.0%
|
Adjusted EBITDAaL (i)
(iv) (vi)
|
$
|
2.4
million
|
$
|
35.7
million
|
-93.3%
|
Adjusted EBITDAaL
margin (i) (iv) (vi)
|
0.8%
|
|
9.8%
|
|
-9.0%
|
Adjusted free cash
flow (v)
|
$
|
(0.2)million
|
$
|
30.1
million
|
NM
|
Adjusted free cash
flow per common share of Cineplex ("Share") (vi)
|
$
|
(0.003)
|
|
$
|
0.474
|
|
NM
|
Earnings per Share
("EPS") from continuing operations -
basic and diluted (iv)
|
$
|
(2.75)
|
|
$
|
(0.09)
|
|
NM
|
EPS from discontinued
operations - basic and diluted
|
$
|
(0.07)
|
|
$
|
(0.03)
|
|
NM
|
EPS - basic and
diluted* (iv)
|
$
|
(2.82)
|
|
$
|
(0.12)
|
|
NM
|
|
|
i
|
Certain prior period
figures have been restated as applicable per IFRS 5 to conform to
current period presentation.
|
ii
|
Period over period
change calculated based on thousands of dollars except percentage
and per share values. Changes in percentage amounts are
calculated as 2020 value less 2019 value.
|
iii
|
All amounts are from
continuing operations.
|
iv
|
2020 includes
expenses related to the Cineworld Transaction in the amount of $1.3
million.
|
v
|
Net loss for 2020 was
negatively impacted by impairment of long-lived assets and goodwill
of $173.1 million.
|
vi
|
Adjusted EBITDA,
adjusted EBITDAaL, adjusted EBITDAaL margin, adjusted free cash
flow per common share of Cineplex, BPP and CPP are measures that do
not have a standardized meaning under generally accepted accounting
principles ("GAAP"). These measures as well as other Non-GAAP
financial measures reported by Cineplex are defined in the
'Non-GAAP Financial Measures' section at the end of this news
release.
|
KEY DEVELOPMENTS IN THE FIRST QUARTER OF 2020
The following describes certain key business initiatives
undertaken and results achieved during the first quarter of 2020 in
each of Cineplex's core business areas:
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
- Reported first quarter box office revenues of $111.0 million, a decrease of $45.5 million (29.1%) from $156.5 million reported in the prior year period
due to the 28.5% decrease in theatre attendance from 15.0 million
in 2019 to 10.7 million in the first quarter of 2020 due mainly to
the closure of the theatre circuit in March as a result of
COVID-19. The prior year was also a tough comparator due to the
success of Captain Marvel which was released in the second
week of March 2019.
- BPP was $10.36, a decrease of
$0.08 (0.8%) versus the prior year
period BPP of $10.44.
- Opened two new ScreenX auditoriums: Scotiabank Theatre
Halifax in Nova Scotia and
CPX Ottawa in Ontario.
Theatre Food Service
- Reported first quarter theatre food service revenues of
$72.7 million, a decrease of
$22.5 million (23.6%) from
$95.2 million reported in the prior
year period as a result of the decrease in theatre attendance.
- CPP was $6.79 for the period, a
first quarter record for Cineplex, and $0.44 (6.9%) higher than the prior year
period.
- During the quarter, Cineplex expanded alcohol beverage service
to an additional four theatres, now totaling 91 (excluding
VIP)
- During the quarter, added five additional locations to the Uber
Eats delivery platform, and seven additional locations to Skip the
Dishes platform.
- Home delivery from the theatres continued despite the theatre
closures with 106 locations serviced by Uber Eats and 137 by Skip
the Dishes.
Alternative Programming
- First quarter Alternative Programming (Cineplex Events)
included the theatrical release of the feature film The Last Full
Measure, performances from The Metropolitan Opera and The Bolshoi
Ballet. Spotlight events included André Rieu: 70 Years Young, along
with the anime features Weathering With You and My Hero Academia:
Heroes Rising.
- Cineplex International film programming featured several strong
performing Hindi and Punjabi-language titles in select markets
across the country. Due to theatres closures in China in late January, the Canadian
distribution of several strong holiday Chinese titles were
postponed.
Digital Commerce
- With theatre closures and accelerated home entertainment
release dates, the Cineplex Store saw a substantial growth in
activity with total registered users for Cineplex Store increasing
37% in the first quarter of 2020 as compared to the prior year
period.
- Cineplex Store registered a 107% increase in device activation
over the prior year period.
- Quarterly active users of the Cineplex Store increased by 43%
as compared to the prior year period.
MEDIA
- Reported first quarter media revenues of $32.2 million, a decrease of $2.5 million, or 7.3% as compared to the prior
year period.
Cinema Media
- Reported first quarter cinema media revenues of $17.3 million, a decrease of $3.8 million (18.1%) compared to the prior year
period primarily due to lower show-time and pre-show advertising as
a result of the theatre closures.
Digital Place-Based Media
- Reported a first quarter record with revenues of $14.9 million, an increase of $1.3 million (9.3%) compared to the prior year
period due to higher project installation revenues and recurring
revenue.
AMUSEMENT AND LEISURE
Amusement Solutions
- Reported first quarter revenues of $37.2
million ($2.2 million from
Cineplex theatre gaming and $35.0
million from all other sources of revenues), a decrease of
$13.3 million (26.4%) as compared to
the prior year period. The decrease was due to a drop in route
revenues in Canada and
the United States as a result of
the closure of operating locations and a decrease in equipment
sales with the economic shutdown across all markets as a result of
COVID-19.
Location Based Entertainment
- The Rec Room reported first quarter revenues of
$17.7 million which included food
service revenues of $6.7 million,
amusement revenues of $10.2 million
and other revenues of $0.8 million,
an increase of $1.3 million (7.7%) as
compared to the prior year period. The growth was due to an
increase in locations from seven in 2019 to ten in 2020 which was
substantially offset by the closure of LBE locations in mid-March
as a result of COVID-19.
- Opened The Rec Room at Seasons of Tuxedo in Winnipeg, Manitoba, on February 18, 2020, the eighth location of The
Rec Room.
- Began rollout of home delivery from LBE locations via Skip the
Dishes in response to the location closures.
LOYALTY
- Membership in the SCENE loyalty program increased by 0.1
million members in the period, reaching 10.4 million members at
March 31, 2020.
- Announced a first-of-its-kind partnership between the National
Basketball Association (NBA), Tangerine Bank and SCENE that makes
SCENE the official entertainment loyalty partner of the NBA in
Canada.
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2020
Total revenues
Total revenues for the three months ended March 31, 2020 decreased $81.8 million (22.4%) to $282.8 million as compared to the prior year
period. A discussion of the factors affecting the changes in box
office, food service, media, amusement and other revenues for the
two periods is provided below.
Non-GAAP measures discussed throughout this MD&A, including
adjusted EBITDA, adjusted EBITDAaL, adjusted store level EBITDAaL,
adjusted EBITDAaL margin, adjusted store level EBITDAaL margin,
adjusted free cash flow, theatre attendance, BPP, premium priced
product, same theatre metrics, CPP, film cost percentage, food
service cost percentage and concession margin per patron are
defined and discussed in Non-GAAP measures section of this news
release.
Box office revenues
The following table highlights the movement in box office
revenues, theatre attendance and BPP for the quarter (in thousands
of dollars, except theatre attendance reported in thousands of
patrons and per patron amounts, unless otherwise noted):
|
|
Box office
revenues
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
Box office
revenues
|
$
|
111,002
|
$
|
156,496
|
-29.1%
|
Theatre attendance
(i)
|
10,710
|
14,988
|
-28.5%
|
Box office revenue
per patron (i)
|
$
|
10.36
|
$
|
10.44
|
-0.8%
|
BPP excluding premium
priced product
(i)
|
$
|
9.33
|
$
|
9.03
|
3.3%
|
Canadian industry
revenues (ii)
|
|
|
-36.0%
|
Same theatre box
office revenues (i)
|
$
|
109,347
|
155,888
|
-29.9%
|
Same theatre
attendance (i)
|
10,580
|
14,917
|
-29.1%
|
% Total box from
premium priced product (i)
|
28.7%
|
40.9%
|
-12.2%
|
(i) See Non-GAAP
measures section of this news release.
|
(ii) Source: Gross
box office receipts (inclusive of all taxes) from The Movie Theatre
Association of Canada industry data adjusted for calendar quarter
dates.
|
|
|
Box office
continuity
|
First
Quarter
|
|
Box
Office
|
Theatre
Attendance
|
2019 as
reported
|
$
|
156,496
|
14,988
|
Same theatre
attendance change
|
(45,331)
|
(4,338)
|
Impact of same
theatre BPP
change
|
(1,209)
|
—
|
New and acquired
theatres (i)
|
1,654
|
130
|
Disposed and closed
theatres (i)
|
(608)
|
(70)
|
2020 as
reported
|
$
|
111,002
|
10,710
|
(i) See Non-GAAP
measures section of this news release. Represents theatres
opened, acquired, disposed or closed subsequent to the start of the
prior year
comparative period.
|
|
|
|
First Quarter 2020
Top Cineplex Films
|
3D
|
%
Box
|
First Quarter 2019
Top Cineplex Films
|
3D
|
%
Box
|
1
|
1917
|
|
9.7%
|
1
|
Captain
Marvel
|
√
|
16.3%
|
2
|
Star Wars: The Rise
Of Skywalker
|
√
|
9.2%
|
2
|
How To Train Your
Dragon: The Hidden World
|
√
|
7.2%
|
3
|
Jumanji: The Next
Level
|
√
|
9.1%
|
3
|
Aquaman
|
√
|
7.0%
|
4
|
Bad Boys For
Life
|
|
8.7%
|
4
|
The Lego Movie 2: The
Second Part
|
√
|
5.1%
|
5
|
Sonic The
Hedgehog
|
|
6.4%
|
5
|
Spider-Man: Into The
Spider-Verse
|
√
|
4.3%
|
Box office revenues decreased $45.5
million, or 29.1%, to $111.0
million during the first quarter of 2020, compared to
$156.5 million reported in the same
period in 2019. The decrease was due to the 28.5% decrease in
theatre attendance to 10.7 million guests and the impact of lower
BPP. The theatre attendance decrease was due to the temporary
closures of all theatres on March 16,
2020 as a result of COVID-19. The week prior to the
temporary closure of all theatres, Cineplex also reduced the
maximum allowable capacity of theatres by a minimum of 50%.
During the first two months of the quarter, Cineplex attendance
exceeded the prior year period due in part to the success of
1917 and the carryover strength of Star Wars: The Rise Of
Skywalker and Jumanji: The Next Level from the fourth
quarter of 2019. March 2019
would have been a tough comparator without the theatre closures due
to a lack of high profile movies originally scheduled to open in
March 2020 while the prior year
included the highly successful Captain Marvel.
BPP for the three months ended March 31,
2020 was $10.36, a
$0.08 decrease (0.8%) from the prior
year period. The decrease in BPP was primarily due to a lower
percentage of box office revenue from premium priced offerings as
compared to the prior year period. In the prior year period, all of
the top five films were available in the 3D format, whereas only
two films in the current year period were available in the 3D
format. The BPP excluding premium priced product increased
3.3% from $9.03 to $9.33 due to ticket price increases in select
markets.
Food service revenues
The following table highlights the movement in food service
revenues, theatre attendance and CPP for the quarter (in thousands
of dollars, except theatre attendance and same theatre attendance
reported in thousands of patrons and per patron amounts):
Food service
revenues
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
Food service -
theatres
|
$
|
72,681
|
$
|
95,172
|
-23.6%
|
Food service -
LBE
|
6,684
|
7,886
|
-15.2%
|
Total food service
revenues
|
$
|
79,365
|
$
|
103,058
|
-23.0%
|
|
|
|
|
Theatre attendance
(i)
|
10,710
|
14,988
|
-28.5%
|
CPP (i)
(ii)
|
$
|
6.79
|
$
|
6.35
|
6.9%
|
Same theatre food
service revenues (i)
|
$
|
71,518
|
$
|
94,761
|
-24.5%
|
Same theatre
attendance (i)
|
10,580
|
14,917
|
-29.1%
|
(i) See Non-GAAP
measures section of this news release
|
(ii) Food service
revenue from LBE is not included in the CPP calculation
|
Theatre food
service revenue continuity
|
First
Quarter
|
|
Theatre Food
Service
|
Theatre
Attendance
|
2019 as
reported
|
$
|
95,172
|
14,988
|
Same theatre
attendance change
|
(27,556)
|
(4,338)
|
Impact of same
theatre CPP
change
|
4,312
|
—
|
New and acquired
theatres (i)
|
1,164
|
130
|
Disposed and closed
theatres (i)
|
(411)
|
(70)
|
2020 as
reported
|
$
|
72,681
|
10,710
|
(i) See Non-GAAP
measures section of this news release. Represents theatres
opened, acquired, disposed or closed subsequent to the start of the
prior year
comparative period.
|
Food service revenues are comprised primarily of concession
revenues, which includes food service sales at theatre
locations. Food service revenues also include food and
beverage sales at The Rec Room. Food service revenues
decreased $23.7 million, or 23.0%
mainly as a result of the $22.5
million (23.6%) decrease in theatre food service revenue.
The decrease in theatre food service revenue resulted from the
28.5% decrease in theatre attendance, partially offset by the 6.9%
($0.44) increase in CPP to
$6.79. Food services revenues from
location-based entertainment locations decreased $1.2 million (15.2%) compared to the prior year
period to $6.7 million. The decrease
in revenues was due to the temporary closures of all theatres and
LBE venues across Canada as a
result of COVID-19.
Despite the closures, Cineplex has focused on its expanded home
delivery service of concession products and alcohol. Cineplex will
continue to optimize food service products and offerings on the
restaurant side of the location-based entertainment business upon
the re-opening of locations.
CPP of $6.79 is a first quarter
record for Cineplex. Expanded offerings outside of core food
service products, including offerings at Cineplex's VIP Cinemas and
Outtakes locations and expanded beverage service, have
contributed to increased visitation and higher average transaction
values, resulting in the record CPP in the period.
Media revenues
The following table highlights the movement in media revenues
for the quarter (in thousands of dollars):
Media
revenues
|
First
Quarter
|
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
Cinema
media
|
$
|
17,262
|
$
|
21,076
|
-18.1%
|
Digital place-based
media
|
14,895
|
13,630
|
9.3%
|
Total media revenues
from continuing operations
|
$
|
32,157
|
$
|
34,706
|
-7.3%
|
|
|
|
|
Media revenues from
discontinued operations
|
382
|
307
|
24.4%
|
Total media
revenues
|
$
|
32,539
|
$
|
35,013
|
-7.1%
|
Total media revenues from continuing operations decreased
$2.5 million (7.3%) compared to the
prior year period to $32.2
million. Cinema media revenues decreased $3.8 million(18.1%) compared to the prior year
period primarily due to lower show-time and pre-show revenues in
the month of March as a result of the temporary closures of all
theatres as a result of COVID-19. This decrease was partially
offset by a 9.3% or $1.3 million
increase in digital place-based media revenues to a first quarter
record of $14.9 million as a result
of higher project installation revenues occurring prior to the
shutdown of businesses in North
America impacting the digital media client base and
recurring revenue from software and network management
services.
Digital place-based media had a total of 15,285 locations as of
March 31, 2020.
Amusement Revenues
The following table highlights the movement in amusement
revenues for the quarter (in thousands of dollars):
Amusement
revenues
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
Amusement - P1AG
excluding Cineplex exhibition and LBE
(i)
|
$
|
34,961
|
$
|
47,673
|
-26.7%
|
Amusement - Cineplex
exhibition (i)
|
2,196
|
2,784
|
-21.1%
|
Amusement -
LBE
|
10,180
|
8,043
|
26.6%
|
Total amusement
revenues
|
$
|
47,337
|
$
|
58,500
|
-19.1%
|
(i) Cineplex receives
a venue revenue share on games revenues earned at in-theatre game
rooms and XSCAPE Entertainment Centres. Amusement - Cineplex
exhibition reports the total of this venue revenue share which is
consistent with the historical presentation of Cineplex's amusement
revenues. Amusement - P1AG excluding Cineplex exhibition and
LBE reflects P1AG's gross amusement revenues, net of the venue
revenue share paid to Cineplex reflected in Amusement - Cineplex
exhibition above
|
Amusement revenues decreased 19.1%, or $11.2 million, to $47.3
million in the first quarter of 2020 compared to the prior
year period. The decrease was due to the temporary closures of P1AG
route locations, Cineplex theatres and location-based entertainment
locations as well as a decline in equipment sales in March 2020 as third parties were impacted by the
COVID-19 closures. This decrease was partially offset by an
increase in location-based entertainment amusement revenues as a
result of additional operating locations during the first quarter
of 2020 (ten locations) as compared to the prior year period (seven
locations).
Prior to the temporary closures, P1AG was reporting growth in
period over period results for Family Entertainment Centres ("FEC")
route locations in North America,
and theatre locations in Canada.
Other revenues
The following table highlights the other revenues which includes
revenues from the Cineplex Store, promotional activities,
screenings, private parties, corporate events, breakage on gift
card sales and revenues from management fees for the quarter (in
thousands of dollars):
Other
revenues
|
First
Quarter
|
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
Other revenues from
continuing operations
|
$
|
12,940
|
$
|
11,864
|
9.1%
|
Other revenues from
discontinued operations
|
199
|
7
|
NM
|
Total other
revenues
|
$
|
13,139
|
$
|
11,871
|
10.7%
|
Other revenues from continuing operations increased 9.1% in the
first quarter of 2020 compared to the prior year period due
primarily to higher volume of digital commerce sales, partially
offset by a decrease in venue rental revenue.
Film cost
The following table highlights the movement in film cost and the
film cost percentage for the quarter (in thousands of dollars,
except film cost percentage):
Film
cost
|
First
Quarter
|
|
2020
|
|
2019
|
Change
|
|
|
|
|
|
Film cost
|
$
|
56,500
|
$
|
78,721
|
-28.2%
|
Film cost percentage
(i)
|
50.9
|
50.3%
|
0.6%
|
(i) See Non-GAAP
measures section of this news release
|
Film cost varies primarily with box office revenues, and can
vary from quarter to quarter based on the relative strength of the
titles exhibited during the period. This is due to film cost terms
varying by title and distributor. Film cost percentage during the
first quarter of 2020 was 50.9%, a 0.6% increase from the prior
year period.
Cost of food service
The following table highlights the movement in cost of food
service and food service cost as a percentage of food service
revenues ("concession cost percentage") for both theatres and
LBE for the quarter (in thousands of dollars, except
percentages and margins per patron):
Cost of food
service
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
Cost of food service
- theatre
|
$
|
20,201
|
$
|
21,271
|
-5.0%
|
Cost of food service
- LBE
|
2,008
|
2,165
|
-7.3%
|
Total cost of food
service
|
$
|
22,209
|
$
|
23,436
|
-5.2%
|
|
|
|
|
Theatre concession
cost percentage (i)
|
27.8%
|
22.4%
|
5.4%
|
LBE food cost
percentage (i)
|
30.0%
|
27.5%
|
2.5%
|
Theatre concession
margin per patron (i)
|
$
|
4.90
|
$
|
4.93
|
-0.6%
|
(i) See Non-GAAP
measures section of this news release
|
Cost of food service at the theatres varies primarily with
theatre attendance as well as the quantity and mix of offerings
sold. Cost of food service at LBE varies primarily with the
volume of guests who visit the locations as well as the quantity
and mix of food and beverage items sold.
The decrease in the theatres and location-based entertainment
cost of food was due to lower food service revenues for both
segments as a result of the temporary closure of venues in
March 2020 as a result of COVID-19.
With the closure of locations, Cineplex donated perishable food
items that it would be unable to use to those in need, including
local food banks. This resulted in increased costs in the quarter
with theatre concession cost percentage increasing from 22.4% to
27.8% and the LBE food cost percentage from 27.5% to 30.0%.
The theatre concession margin per patron decreased 0.6% from
$4.93 in the first quarter of 2019 to
$4.90 in the same period in 2020.
Depreciation and amortization
The following table highlights the movement in depreciation and
amortization expenses during the quarter (in thousands of
dollars):
Depreciation and
amortization expenses
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
Depreciation of
property, equipment and leaseholds
|
$
|
30,689
|
$
|
28,766
|
6.7%
|
Amortization of
intangible assets and other
|
3,273
|
2,867
|
14.2%
|
Sub-total -
depreciation and amortization - other assets
|
$
|
33,962
|
$
|
31,633
|
7.4%
|
Depreciation -
right-of-use assets
|
35,533
|
36,462
|
-2.5%
|
Total depreciation
and amortization from continuing operations
|
$
|
69,495
|
$
|
68,095
|
2.1%
|
Depreciation and
amortization from discontinued operations
|
—
|
1,222
|
-100.0%
|
Total depreciation
and amortization
|
$
|
69,495
|
$
|
69,317
|
0.3%
|
The quarterly increase in depreciation of property, equipment
and leaseholds from continuing operations of $1.9 million (6.7%) is primarily due to
investments in the amusement and leisure businesses.
The increase of $0.4 million
(14.2%) in the amortization of intangible assets from continuing
operations was primarily due to internally developed software for
digital products including the Cineplex mobile app and website
platform.
Impairment of long-lived assets and goodwill
The following table highlights the movement in impairment of
long-lived assets and goodwill during the quarter (in thousands of
dollars):
Impairment of
long-lived assets and goodwill
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
Impairment of
property, equipment and leaseholds
|
$
|
(33,949)
|
$
|
—
|
NM
|
Impairment of
right-of-use assets
|
(50,610)
|
—
|
NM
|
Impairment of
goodwill
|
(88,495)
|
—
|
NM
|
Impairment of
long-lived assets and goodwill
|
$
|
(173,054)
|
$
|
—
|
NM
|
The closure of its operations on March
16, 2020 as a result of the declaration of a global
pandemic, was identified as a triggering event for purposes of
testing long-lived assets and goodwill for impairment.
Carrying values of assets were tested for recoverability measured
as the fair value based on internal budgets which reflect the
negative impact of COVID-19 on Cineplex's current and future
results. Where the carrying value of assets at March 31, 2020 was assessed as exceeding the
recoverable value of those assets at that point in time, an
impairment has been recognized. Because impairments are measured at
a point in time, the impact of COVID-19 on the 2020 results, which
will be reflected in the results of operations in 2020, has also
impacted the measurement of recoverable value, and is therefore
included in the impairment calculation. Where an impairment has
been recorded with respect to a long-lived asset, it will be
reversed when and if the recoverable value of the related asset
increases . Management will monitor and re-assess the recoverable
value of the impaired assets, reversing the impairments where it
increases. Impairments recorded with respect to goodwill cannot be
reversed.
Impairment of intangible assets - discontinued
operations
The following table highlights the movement in impairment of
intangible assets - discontinued operations during the quarter (in
thousands of dollars):
Impairment of
intangible assets - discontinued operations
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
Impairment of
intangible assets - discontinued operations
|
$
|
5,135
|
$
|
—
|
NM
|
Intangible assets included in assets held for sale were written
down to reflect their expected net realizable value.
Loss on disposal of assets
The following table shows the movement in the loss on disposal
of assets during the quarter (in thousands of dollars):
Loss on disposal
of assets
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
Loss on disposal of
assets
|
$
|
817
|
$
|
477
|
71.3%
|
Other costs
Other costs include three main sub-categories of expenses:
theatre occupancy expenses, which capture the rent and associated
occupancy costs for Cineplex's theatre operations; other operating
expenses, which include the costs related to running Cineplex's
film entertainment and content, media, as well as amusement and
leisure; and general and administrative expenses, which includes
costs related to managing Cineplex's operations, including head
office expenses. Please see the discussions below for more details
on these categories.
The following table highlights the movement in other costs for
the quarter (in thousands of dollars):
|
|
Other
costs
|
First
Quarter
|
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
Theatre occupancy
expenses
|
$
|
17,971
|
$
|
18,407
|
-2.4%
|
Other operating
expenses
|
134,548
|
146,569
|
-8.2%
|
General and
administrative expenses
|
5,029
|
18,852
|
-73.3%
|
Total other costs
from continuing operations
|
$
|
157,548
|
$
|
183,828
|
-14.3%
|
Other costs from
discontinued operations
|
1,606
|
1,614
|
-0.5%
|
Total other
costs
|
$
|
159,154
|
$
|
185,442
|
-14.2%
|
Theatre occupancy expenses
The following table highlights the movement in theatre occupancy
expenses for the quarter (in thousands of dollars):
Theatre occupancy
expenses
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
Cash rent - theatre
(i) (iv)
|
$
|
40,356
|
$
|
39,879
|
1.2%
|
Other
occupancy
|
18,437
|
18,418
|
0.1%
|
One-time items
(ii)
|
(580)
|
(179)
|
224.0%
|
Total theatre
occupancy including cash lease
payments
|
$
|
58,213
|
$
|
58,118
|
0.2%
|
Cash rent related to
lease obligations (iii)
|
(40,242)
|
(39,711)
|
1.3%
|
Theatre occupancy as
reported
|
$
|
17,971
|
$
|
18,407
|
-2.4%
|
(i) Represents the
cash payments for theatre rent during the quarter
|
(ii) One-time items
include amounts related to both theatre rent and other theatre
occupancy costs. They are isolated here to illustrate
Cineplex's theatre rent and other theatre occupancy costs excluding
these one-time, non-recurring items
|
(iii) Cash rent that
has been reallocated to offset the lease obligations
|
(iv) The 2020 balance
includes $1.1 million (2019 - $1.1 million) of cash rent paid not
pertaining to the current period. See Non-GAAP measures section of
this news release
|
Theatre occupancy
continuity
|
First
Quarter
|
|
Occupancy
|
2019 as
reported
|
$
|
18,407
|
Impact of new and
acquired theatres
|
677
|
Impact of disposed
theatres
|
(235)
|
Same theatre rent
change (i)
|
62
|
One-time
items
|
(400)
|
Other
|
(9)
|
|
|
Impact of IFRS 16
adoption:
|
|
Cash rent related to
lease obligations
|
(531)
|
2020 as
reported
|
$
|
17,971
|
(i) See Non-GAAP
measures section of this news release
|
|
Theatre occupancy expenses as reported decreased $0.4 million (2.4%) during the first quarter of
2020 compared to the prior year period. This decrease was primarily
due to one-time occupancy related credits recognized in the first
quarter of 2020.
Other operating expenses
The following table highlights the movement in other operating
expenses during the quarter (in thousands of dollars) with the
prior period presentation restated to provide comparability to the
impact of application of IFRS 5:
Other operating
expenses
|
First
Quarter
|
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
Theatre
payroll
|
$
|
31,430
|
$
|
36,710
|
-14.4%
|
Theatre operating
expenses
|
26,489
|
28,562
|
-7.3%
|
Media
|
18,911
|
16,742
|
13.0%
|
P1AG
|
34,422
|
40,965
|
-16.0%
|
LBE (i)
|
13,076
|
11,148
|
17.3%
|
LBE pre-opening
(ii)
|
745
|
691
|
7.8%
|
SCENE
|
2,573
|
5,038
|
-48.9%
|
Marketing
|
2,921
|
2,851
|
2.5%
|
Other
(iii)
|
8,735
|
8,174
|
6.9%
|
Other operating
expenses including cash lease payments
|
$
|
139,302
|
$
|
150,881
|
-7.7%
|
Cash rent related to
lease obligations (iv)
|
(4,754)
|
(4,312)
|
10.3%
|
Other operating
expenses from continuing operations
|
$
|
134,548
|
$
|
146,569
|
-8.2%
|
Other operating
expenses from discontinued operations
|
1,606
|
1,614
|
-0.5%
|
Total other operating
expenses
|
$
|
136,154
|
$
|
148,183
|
-8.1%
|
(i) Includes
operating costs of LBE locations. Overhead relating to
management of LBE portfolio are included in the 'Other'
line.
|
(ii) Includes
pre-opening costs of LBE
|
(iii) Other category
includes overhead costs related to LBE and other Cineplex internal
departments
|
(iv) Cash rent that
has been reallocated to offset the lease obligations
|
Other operating
continuity from continuing operations
|
First
Quarter
|
|
Other
Operating
|
2019 as
restated
|
$
|
146,569
|
Impact of new and
acquired theatres
|
779
|
Impact of disposed
theatres
|
(269)
|
Same theatre payroll
change (i)
|
(5,680)
|
Same theatre
operating expenses change (i)
|
(2,183)
|
Media operating
expenses change
|
2,169
|
P1AG operating
expenses change
|
(6,543)
|
LBE operating
expenses change
|
1,928
|
LBE pre-opening
change
|
54
|
SCENE
change
|
(2,465)
|
Marketing
change
|
70
|
Other
|
560
|
Impact of IFRS 16
adoption:
|
|
Cash rent related to
lease obligations
|
(441)
|
2020 as
reported
|
$
|
134,548
|
(i) See Non-GAAP
measures section of this news release
|
Other operating expenses from continuing operations during the
first quarter of 2020 decreased $12.0
million or 8.2% compared to the prior year period. The
overall decrease was as a result of the temporary closure of
theatres and P1AG route locations leading to a decrease in business
volumes in March 2020. The decreases
were partially offset by an increase in LBE, media and other
expenses. The growth in LBE operating expenses was due to an
increase in the number of operating locations (with ten locations
operating as compared to seven in the prior year period), partially
offset by the closure of all LBE locations in March 2020 as a result of COVID-19. The growth in
Media expenses was due to increased Cineplex Digital Media project
installations rolled out prior to widespread business closures. The
increase in other expenses was mainly due to higher digital
commerce business volumes. Same theatre payroll expenses decreased
as a result of the temporary layoff of theatre staff with the
theatre closures in March. The reduction was partially offset by a
voluntary lump-sum payment made to laid off staff to bridge the
period until government programs including employment insurance,
were available to them.
General and administrative expenses
The following table highlights the movement in general and
administrative ("G&A") expenses during the quarter, including
Share-based compensation costs, and G&A expenses net of these
costs (in thousands of dollars):
G&A
expenses
|
First
Quarter
|
|
2020
|
2019
|
Change
|
|
|
|
|
G&A excluding
LTIP and option plan expense
|
$
|
17,254
|
$
|
17,828
|
-3.2%
|
Restructuring
|
360
|
—
|
NM
|
Transaction costs
(i)
|
1,271
|
—
|
NM
|
LTIP (ii)
|
(11,437)
|
762
|
NM
|
Option
plan
|
(2,241)
|
389
|
NM
|
G&A expenses
including cash lease payments
|
$
|
5,207
|
$
|
18,979
|
-72.6%
|
Cash rent included as
part of lease obligations (iii)
|
(178)
|
(127)
|
40.2%
|
G&A expenses as
reported
|
$
|
5,029
|
$
|
18,852
|
-73.3%
|
(i) Transaction costs
include out-of-pocket expenses
|
(ii) LTIP includes
the expense for the LTIP program as well as the expense for the
executive and Board deferred share unit plans.
|
(iii) Cash rent that
has been reallocated to offset the lease obligations.
|
G&A expenses decreased $13.8
million (72.6%) during the first quarter of 2020 compared to
the prior year period primarily due to a $12.2 million decrease in LTIP expense and a
$2.6 million decrease in Option plan
expense. The impact of the COVID-19 pandemic on Cineplex's business
led to a sharp decline in the Share price. Share based compensation
reflects the fair value of the share price which fell to
$11.70 per Share at March 31, 2020. With the termination of the
Arrangement Agreement, options have been reclassified to being
accounted for as equity-settled and both LTIP and option expenses
have been accounted for over their former vesting period.
Transaction costs of $1.3 million
were incurred during the quarter with respect to the Cineworld
Transaction.
EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND
AMORTIZATION ("EBITDA") (see Non-GAAP measures section of this news
release)
The following table presents EBITDA, adjusted EBITDA and
adjusted EBITDAaL for the three months ended March 31, 2020 as compared to the prior year
periods (expressed in thousands of dollars, except adjusted
EBITDAaL margin):
EBITDA
|
First
Quarter
|
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
EBITDA
|
$
|
(126,135)
|
$
|
78,170
|
NM
|
Adjusted
EBITDA
|
$
|
46,472
|
$
|
78,742
|
-41.0%
|
Adjusted EBITDAaL
(i)
|
$
|
2,390
|
$
|
35,652
|
-93.3%
|
Adjusted EBITDAaL
margin
(i)
|
0.8%
|
9.8%
|
-9.0%
|
(i) Prior period
figures have been revised to conform to current period
presentation. See Reconciliation section of the MD&A
|
Adjusted EBITDAaL for the first quarter of 2020 decreased
$33.3 million, or 93.3%, as compared
to the prior year period. The decrease compared to the prior year
period was primarily due to the impact of the COVID-19 government
imposed restrictions and resulting closure of substantially all of
Cineplex businesses in March 2020.
Adjusted EBITDAaL margin, calculated as Adjusted EBITDAaL divided
by total revenues, was 0.8% in the current period, a decrease of
9.0% from 9.8% in the prior year period.
ADJUSTED FREE CASH FLOW (see Non-GAAP measures section of
this news release)
For the first quarter of 2020, adjusted free cash flow per
common share of Cineplex was $0.00 as
compared to $0.47 in the prior year
period. The declared dividends per common share of Cineplex were
$0.15 in the first quarter of 2020
and $0.44 in the prior year period.
During the 12 months ended March 31,
2020, Cineplex generated adjusted free cash flow per Share
of $2.18, compared to $2.74 in the prior 12 month period. Cineplex
declared dividends per Share of $1.50
and $1.74, respectively, in each 12
month period. The payout ratios for these periods were 68.7% and
63.3%, respectively.
NON-GAAP FINANCIAL MEASURES
EBITDA and Adjusted Free Cash Flow
EBITDA and adjusted free cash flow are not measures recognized
by GAAP and do not have standardized meanings in accordance with
such principles. Therefore, EBITDA and adjusted free cash
flow may not be comparable to similar measures presented by other
issuers.
EBITDA is calculated by adding back to net income or net loss,
income tax expense, depreciation and amortization expense, and
interest income from continuing operations. Adjusted EBITDA
excludes the change in fair value of financial instrument, loss on
disposal of assets, foreign exchange, impairment of long-lived
assets and goodwill, the equity loss (income) of CDCP, the
non-controlling interests' share of adjusted EBITDA of TG-CPX
Limited Partnership, and depreciation, amortization, interest and
taxes of Cineplex's other joint ventures and associates.
Adjusted EBITDAaL modifies adjusted EBITDA to deduct current period
cash rent related to lease obligations.
Cineplex's management believes that adjusted EBITDAaL is an
important supplemental measure of Cineplex's profitability at an
operational level and provides analysts and investors with
comparability in evaluating and valuing Cineplex's performance
period over period. EBITDA, adjusted for various unusual
items, is also used to define certain financial covenants in
Cineplex's Credit Facilities. Management calculates adjusted
EBITDAaL margin by dividing adjusted EBITDAaL by total
revenues.
Adjusted free cash flow is a non-GAAP measure generally used by
Canadian corporations, as an indicator of financial performance and
it should not be seen as a measure of liquidity or a substitute for
comparable metrics prepared in accordance with GAAP. For a
detailed reconciliation of net income or net loss to EBITDA,
adjusted EBITDA and adjusted EBITDAaL and from cash provided by
operating activities to adjusted free cash flow, please refer to
Cineplex's management's discussion and analysis filed on
www.sedar.com.
Earnings per Share Metrics
Cineplex has presented basic and diluted earnings per share net
of this item to provide a more comparable earnings per share metric
between the current periods and prior year periods. In the non-GAAP
measure, earnings is defined as net income or net loss excluding
the change in fair value of financial instrument.
Per Patron Revenue Metrics
Cineplex reviews per patron metrics as they relate to box office
revenue and theatre food service revenue such as BPP, CPP, BPP
excluding premium priced product, and concession margin per patron,
as these are key measures used by investors to value and assess
Cineplex's performance, and are widely used in the theatre
exhibition industry. Management of Cineplex defines these metrics
as follows:
Theatre Attendance: Theatre attendance is calculated as
the total number of paying patrons that frequent Cineplex's
theatres during the period.
BPP: Calculated as total box office revenues divided
by total paid theatre attendance for the period.
BPP excluding premium priced product: Calculated as total
box office revenues for the period, less box office revenues from
3D, 4DX, UltraAVX, VIP and IMAX product; divided by total paid
theatre attendance for the period, less paid theatre attendance for
3D, 4DX, UltraAVX, VIP, ScreenX and IMAX product.
CPP: Calculated as total theatre food service
revenues divided by total paid total theatre attendance for the
period.
Premium priced product: Defined as 3D, 4DX,
UltraAVX, IMAX, ScreenX and VIP film product.
Theatre concession margin per patron: Calculated as total
theatre food service revenues less total theatre food service cost,
divided by theatre attendance for the period.
Same Theatre Analysis
Cineplex reviews and reports same theatre metrics relating to
box office revenues, theatre food service revenues, theatre rent
expense and theatre payroll expense, as these measures are widely
used in the theatre exhibition industry as well as other retail
industries.
Same theatre metrics are calculated by removing the results for
all theatres that have been opened, acquired, closed or otherwise
disposed of subsequent to the start of the prior year comparative
period. For the three months ended March 31, 2020 the impact of the two locations
that have been opened or acquired and two locations that have been
closed or otherwise disposed of have been excluded, resulting in
163 theatres being included in the same theatre metrics.
Cost of sales percentages
Cineplex reviews and reports cost of sales percentages for its
two largest revenue sources, box office revenues and food service
revenues as these measures are widely used in the theatre
exhibition industry. These measures are reported as film cost
percentage and concession cost percentage, respectively, and are
calculated as follows:
Film cost percentage: Calculated as total film cost
expense divided by total box office revenues for the period.
Theatre concession cost percentage: Calculated as total
theatre food service costs divided by total theatre food service
revenues for the period.
LBE food cost percentage: Calculated as total LBE food
costs divided by total LBE food service revenues for the
period.
Certain information included in this news release contains
forward-looking statements within the meaning of applicable
securities laws. These forward-looking statements include,
among others, statements with respect to Cineplex's objectives,
goals and strategies to achieve those objectives and goals, as well
as statements with respect to Cineplex's beliefs, plans,
objectives, expectations, anticipations, estimates and
intentions. The words "may", "will", "could", "should",
"would", "suspect", "outlook", "believe", "plan", "anticipate",
"estimate", "expect", "intend", "forecast", "objective" and
"continue" (or the negative thereof), and words and expressions of
similar import, are intended to identify forward-looking
statements.
By their very nature, forward-looking statements involve
inherent risks and uncertainties, including those described in
Cineplex's Annual Information Form ("AIF"), its MD&A for the
year ended December 31, 2019 ("Annual
MD&A") and in this MD&A. Those risks and
uncertainties, both general and specific, give rise to the
possibility that predictions, forecasts, projections and other
forward-looking statements will not be achieved. Certain material
factors or assumptions are applied in making forward-looking
statements and actual results may differ materially from those
expressed or implied in such statements. Cineplex cautions readers
not to place undue reliance on these statements, as a number of
important factors, many of which are beyond Cineplex's control,
could cause actual results to differ materially from the beliefs,
plans, objectives, expectations, anticipations, estimates and
intentions expressed in such forward-looking statements. These
factors include, but are not limited to, the duration and impact of
the COVID-19 pandemic on Cineplex, the movie exhibition industry
and the economy in general, as well as Cineplex's response to the
COVID-19 pandemic as it relates to the closure of its theatres and
location-based entertainment venues, employee reductions and other
cost-cutting initiatives, and increased expenses relating to safety
measures taken at its facilities to protect the health and
well-being of customers and employees; Cineplex's
expectations with respect to liquidity and capital expenditures,
including its ability to meet its ongoing capital, operating and
other obligations, and anticipated needs for, and sources of,
funds; Cineplex's ability to execute cost-cutting and
revenue enhancement initiatives in response to the COVID-19
pandemic; risks generally encountered in the relevant industry,
competition, customer, legal, taxation and accounting matters; the
outcome of any litigation surrounding the termination of the
Cineworld transaction; and diversion of management time on
litigation related to the Cineworld transaction.
The foregoing list of factors that may affect future results
is not exhaustive. When reviewing Cineplex's forward-looking
statements, readers should carefully consider the foregoing factors
and other uncertainties and potential events. Additional
information about factors that may cause actual results to differ
materially from expectations and about material factors or
assumptions applied in making forward-looking statements may be
found in the "Risks and Uncertainties" section of Cineplex's
MD&A.
Cineplex does not undertake to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable
Canadian securities law. Additionally, we undertake no obligation
to comment on analyses, expectations or statements made by third
parties in respect of Cineplex, its financial or operating results
or its securities. All forward-looking statements in this news
release are made as of the date hereof and are qualified by these
cautionary statements. Additional information, including Cineplex's
AIF and MD&A, can be found on SEDAR at www.sedar.com.
FIRST QUARTER 2020 ANALYST CONFERENCE CALL
You are cordially invited to participate in a conference call
with the management of Cineplex (TSX: CGX) to review our first
quarter. Ellis Jacob, President
and Chief Executive Officer and Gord Nelson, Chief Financial
Officer, will host the call scheduled for:
Tuesday, June 30,
2020
8:00 am Eastern
Time
In order to participate in the conference call, please dial
647-490-5367, or from outside Toronto and from the U.S.,
dial 1-800-367-2403 at least five to 10 minutes prior to 8:00
a.m. ET. Please quote the conference confirmation code 3382128 to
access the call.
If you cannot participate in a live mode, a replay will be
available. Please dial 647-436-0148, or from
outside Toronto and from the U.S., dial 1-888-203-1112.
The replay passcode is 3382128.
The replay will begin at 11:00 a.m. ET on Tuesday, June 30, 2020 and end at 11:00 a.m.
ET on Tuesday, July 7, 2020.
Note that media are welcome to join the call in listen-only
mode.
About Cineplex
Cineplex (TSX: CGX) is a top-tier Canadian brand that operates
in the film entertainment and content, amusement and leisure, and
media sectors. As a leading entertainment and media company,
Cineplex welcomes millions of guests annually through its circuit
of theatres and location-based entertainment ("LBE") venues across
the country. In addition to being Canada's largest and most innovative film
exhibitor, Cineplex also operates successful businesses in digital
commerce (CineplexStore.com), food service, alternative programming
(Cineplex Events), cinema media (Cineplex Media), digital
place-based media (Cineplex Digital Media "CDM") and amusement
solutions (Player One Amusement Group "P1AG"). Additionally,
Cineplex operates an LBE business through Canada's newest destinations for 'Eats &
Entertainment' (The Rec Room), and entertainment complexes
specifically designed for teens and families (Playdium).
Cineplex is a joint venture partner in SCENE, Canada's largest entertainment loyalty
program.
Proudly recognized as having one of the country's Most Admired
Corporate Cultures, Cineplex employs approximately 13,000 people in
its offices across Canada and the
United States. To learn more visit Cineplex.com or download
the Cineplex
App.
Cineplex Inc.
Interim Condensed Consolidated
Balance Sheet
(Unaudited)
(expressed in
thousands of Canadian dollars)
|
|
|
|
|
March
31,
|
|
December
31,
|
|
2020
|
|
2019
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
7,144
|
|
$
|
26,080
|
Trade and other
receivables
|
80,273
|
|
168,065
|
Income taxes
receivable
|
5,860
|
|
9,757
|
Inventories
|
30,631
|
|
30,995
|
Prepaid expenses and
other current assets
|
14,317
|
|
14,226
|
Fair value of interest
rate swap agreements
|
—
|
|
1,022
|
Assets held for
sale
|
985
|
|
6,573
|
|
|
|
|
|
139,210
|
|
256,718
|
|
|
|
|
Non-current
assets
|
|
|
|
Property, equipment and
leaseholds
|
627,526
|
|
662,798
|
Right-of-use
assets
|
1,143,062
|
|
1,232,849
|
Deferred income
taxes
|
63,984
|
|
14,197
|
Fair value of interest
rate swap agreements
|
—
|
|
472
|
Interests in joint
ventures and associates
|
23,203
|
|
28,221
|
Intangible
assets
|
89,022
|
|
88,367
|
Goodwill
|
729,111
|
|
816,790
|
|
|
|
|
|
$
|
2,815,118
|
|
$
|
3,100,412
|
Cineplex Inc.
Interim Condensed Consolidated
Balance Sheets …
continued
(Unaudited)
(expressed in thousands of Canadian
dollars)
|
|
|
|
March
31,
|
December
31,
|
|
2020
|
2019
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
Accounts payable and
accrued liabilities
|
$
|
143,871
|
$
|
220,188
|
Share-based
compensation
|
2,463
|
25,681
|
Dividends
payable
|
—
|
9,500
|
Income taxes
payable
|
1,017
|
1,183
|
Deferred
revenue
|
195,659
|
222,998
|
Lease
obligations
|
115,032
|
106,352
|
Fair value of interest
rate swap agreements
|
3,335
|
1,874
|
Liabilities related to
assets held for sale
|
978
|
2,808
|
|
|
|
|
462,355
|
590,584
|
|
|
|
Non-current
liabilities
|
|
|
Share-based
compensation
|
5,595
|
—
|
Long-term
debt
|
665,000
|
625,000
|
Fair value of interest
rate swap agreements
|
17,228
|
10,837
|
Lease
obligations
|
1,231,864
|
1,261,243
|
Post-employment
benefit obligations
|
10,469
|
10,678
|
Other
liabilities
|
9,066
|
9,813
|
Deferred income
taxes
|
1,411
|
1,263
|
|
|
|
|
1,940,633
|
1,918,834
|
|
|
|
Total
liabilities
|
2,402,988
|
2,509,418
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Share
capital
|
852,379
|
852,379
|
Deficit
|
(452,223)
|
(264,310)
|
Hedging reserves and
other
|
(131)
|
(131)
|
Contributed
surplus
|
7,996
|
4,052
|
Cumulative translation
adjustment
|
4,219
|
(887)
|
|
|
|
Total equity
attributable to owners of Cineplex
|
412,240
|
591,103
|
Non-controlling
interests
|
(110)
|
(109)
|
|
|
|
Total
equity
|
412,130
|
590,994
|
|
|
|
|
$
|
2,815,118
|
$
|
3,100,412
|
Cineplex Inc.
Interim Condensed Consolidated
Statements of Operations
(Unaudited)
(expressed
in thousands of Canadian dollars, except per share amounts)
|
|
|
Three months ended
March 31,
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
Restated
|
|
|
|
|
Revenues
|
|
|
|
Box office
|
$
|
111,002
|
|
$
|
156,496
|
Food
service
|
79,365
|
|
103,058
|
Media
|
32,157
|
|
34,706
|
Amusement
|
47,337
|
|
58,500
|
Other
|
12,940
|
|
11,864
|
|
|
|
|
|
282,801
|
|
364,624
|
|
|
|
|
Expenses
|
|
|
|
Film cost
|
56,500
|
|
78,721
|
Cost of food
service
|
22,209
|
|
23,436
|
Depreciation -
right-of-use assets
|
35,533
|
|
36,462
|
Depreciation and
amortization - other assets
|
33,962
|
|
31,633
|
Loss on disposal of
assets
|
817
|
|
477
|
Other
costs
|
157,548
|
|
183,828
|
Share of income of
joint ventures and associates
|
735
|
|
(369)
|
Interest expense -
lease obligations
|
11,678
|
|
12,220
|
Interest expense -
other
|
16,886
|
|
5,417
|
Interest
income
|
(72)
|
|
(74)
|
Foreign
exchange
|
(1,927)
|
|
361
|
Impairment of
long-lived assets and goodwill
|
173,054
|
|
—
|
|
|
|
|
|
506,923
|
|
372,112
|
|
|
|
|
Loss from
continuing operations before income taxes
|
(224,122)
|
|
(7,488)
|
|
|
|
|
Provision for
income taxes
|
|
|
|
|
Current
|
(233)
|
|
766
|
Deferred
|
(49,734)
|
|
(2,925)
|
|
|
|
|
|
(49,967)
|
|
(2,159)
|
|
|
|
|
Net loss from
continuing operations
|
$
|
(174,155)
|
|
$
|
(5,329)
|
|
|
|
|
Net loss from
discontinued operations, net of taxes
|
(4,259)
|
|
(2,031)
|
|
|
|
|
Net
loss
|
$
|
(178,414)
|
|
$
|
(7,360)
|
|
|
|
|
Net loss from
continuing operations attributable to:
|
|
|
|
Owners of
Cineplex
|
$
|
(174,154)
|
|
$
|
(5,319)
|
Non-controlling
interests
|
(1)
|
|
(10)
|
|
|
|
|
Net loss from
continuing operations
|
$
|
(174,155)
|
|
$
|
(5,329)
|
|
|
|
|
Net loss
attributable to:
|
|
|
|
Owners of
Cineplex
|
$
|
(178,413)
|
|
$
|
(7,350)
|
Non-controlling
interests
|
(1)
|
|
(10)
|
|
|
|
|
Net
loss
|
$
|
(178,414)
|
|
$
|
(7,360)
|
|
|
|
|
Net loss per share
attributable to owners of Cineplex - basic and
diluted:
|
|
|
|
Continuing
operations
|
$
|
(2.75)
|
|
$
|
(0.09)
|
Discontinued
operations
|
(0.07)
|
|
(0.03)
|
|
|
|
|
Total
operations
|
$
|
(2.82)
|
|
$
|
(0.12)
|
Cineplex Inc.
Interim Condensed Consolidated
Statements of Comprehensive
Income
(Unaudited)
(expressed in thousands of
Canadian dollars)
|
|
|
Three months ended
March 31,
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
Restated
|
|
|
|
|
Net loss from
continuing operations
|
$
|
(174,155)
|
|
$
|
(5,329)
|
|
|
|
|
Other
comprehensive income (loss) from continuing
operations
|
|
|
|
Items that will be
reclassified subsequently to net income:
|
|
|
|
Income (loss) on
hedging instruments
|
—
|
|
(7,794)
|
Associated deferred
income taxes (expense) recovery
|
—
|
|
2,093
|
Foreign currency
translation adjustment
|
5,644
|
|
(1,557)
|
|
|
|
|
Other
comprehensive income (loss)
|
5,644
|
|
(7,258)
|
|
|
|
|
Comprehensive loss
from continuing operations
|
(168,511)
|
|
(12,587)
|
|
|
|
|
Net loss from
discontinued operations, net of taxes
|
(4,259)
|
|
(2,031)
|
Foreign currency
translation adjustment from discontinued operations
|
(538)
|
|
43
|
|
|
|
|
Comprehensive
loss
|
$
|
(173,308)
|
|
$
|
(14,575)
|
|
|
|
|
|
|
|
|
Comprehensive loss
from continuing operations attributable to:
|
|
|
|
Owners of
Cineplex
|
$
|
(168,510)
|
|
$
|
(12,577)
|
Non-controlling
interests
|
(1)
|
|
(10)
|
|
|
|
|
Comprehensive
loss
|
$
|
(168,511)
|
|
$
|
(12,587)
|
|
|
|
|
Comprehensive loss
attributable to:
|
|
|
|
Owners of
Cineplex
|
$
|
(173,307)
|
|
$
|
(14,565)
|
Non-controlling
interests
|
(1)
|
|
(10)
|
|
|
|
|
Comprehensive
loss
|
$
|
(173,308)
|
|
$
|
(14,575)
|
Cineplex Inc.
Interim Condensed Consolidated
Statements of Changes in
Equity
(Unaudited)
(expressed in thousands of
Canadian dollars)
For the three months ended March 31, 2020 and 2019
|
|
|
|
|
|
|
|
|
Share
capital
|
Contributed surplus
|
Hedging
reserves and
other
|
Cumulative
translation
adjustment
|
Deficit
|
Non-
controlling
interests
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2020
|
$
|
852,379
|
$
|
4,052
|
$
|
(131)
|
$
|
(887)
|
$
|
(264,310)
|
$
|
(109)
|
$
|
590,994
|
|
|
|
|
|
|
|
|
Net loss
|
—
|
—
|
—
|
—
|
(178,413)
|
(1)
|
(178,414)
|
Other comprehensive
income
|
—
|
—
|
—
|
5,106
|
—
|
—
|
5,106
|
Total
comprehensive loss
|
—
|
—
|
—
|
5,106
|
(178,413)
|
(1)
|
(173,308)
|
Dividends
declared
|
—
|
—
|
—
|
—
|
(9,500)
|
—
|
(9,500)
|
Conversion to
cash-settled option plan
|
—
|
3,944
|
—
|
—
|
—
|
—
|
3,944
|
|
|
|
|
|
|
|
|
March 31,
2020
|
$
|
852,379
|
$
|
7,996
|
$
|
(131)
|
$
|
4,219
|
$
|
(452,223)
|
$
|
(110)
|
$
|
412,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2019
|
$
|
852,379
|
$
|
7,815
|
$
|
(3,678)
|
$
|
2,301
|
$
|
(179,721)
|
$
|
(85)
|
$
|
679,011
|
|
|
|
|
|
|
|
|
Net loss
|
—
|
—
|
—
|
—
|
(7,350)
|
(10)
|
(7,360)
|
Other comprehensive
loss
|
—
|
—
|
(5,701)
|
(1,514)
|
—
|
—
|
(7,215)
|
Total
comprehensive loss
|
—
|
—
|
(5,701)
|
(1,514)
|
(7,350)
|
(10)
|
(14,575)
|
Dividends
declared
|
—
|
—
|
—
|
—
|
(27,550)
|
—
|
(27,550)
|
Share option
expense
|
—
|
389
|
—
|
—
|
—
|
—
|
389
|
TGLP non-controlling
interests recognized on formation
|
—
|
—
|
—
|
—
|
—
|
33
|
33
|
|
|
|
|
|
|
|
|
March 31,
2019
|
$
|
852,379
|
$
|
8,204
|
$
|
(9,379)
|
$
|
787
|
$
|
(214,621)
|
$
|
(62)
|
$
|
637,308
|
Cineplex Inc.
Interim Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(expressed
in thousands of Canadian dollars)
|
|
|
Three months ended March 31,
|
|
2020
|
2019
|
|
|
Restated
|
Cash provided by
(used in)
|
|
|
|
|
|
Operating
activities
|
|
|
Net loss from
continuing operations
|
$
|
(174,155)
|
$
|
(5,329)
|
Adjustments to
reconcile net income to net cash provided by operating
activities
|
|
|
Depreciation and
amortization of property, equipment and leaseholds, and intangible
assets
|
33,962
|
31,633
|
Depreciation of
right-of-use assets
|
35,533
|
36,462
|
Unrealized foreign
exchange
|
(1,429)
|
250
|
Interest rate swap
agreements - non-cash interest
|
9,386
|
(558)
|
Other non-cash
interest
|
349
|
559
|
Loss on disposal of
assets
|
817
|
477
|
Deferred income
taxes
|
(49,734)
|
(2,925)
|
Non-cash share-based
compensation
|
3,944
|
389
|
Impairment of
long-lived assets and goodwill
|
173,054
|
—
|
Net change in
interests in joint ventures and associates
|
1,891
|
(1,686)
|
Changes in operating
assets and liabilities
|
(10,428)
|
2,155
|
|
|
|
Net cash provided by
operating activities
|
23,190
|
61,427
|
|
|
|
Investing
activities
|
|
|
Purchases of
property, equipment and leaseholds
|
(37,503)
|
(32,361)
|
Intangible assets
additions
|
(3,721)
|
(1,496)
|
Tenant
inducements
|
11,877
|
615
|
Net cash received
from CDCP
|
3,128
|
5,474
|
|
|
|
Net cash used in
investing activities
|
(26,219)
|
(27,768)
|
|
|
|
Financing
activities
|
|
|
Dividends
paid
|
(19,000)
|
(27,550)
|
Borrowings under
credit facilities, net
|
40,000
|
26,000
|
Repayments of lease
obligations - principal
|
(33,819)
|
(32,484)
|
Financing
fees
|
—
|
(243)
|
|
|
|
Net cash used in
financing activities
|
(12,819)
|
(34,277)
|
|
|
|
Effect of exchange
rate differences on cash
|
(950)
|
60
|
|
|
|
Decrease in cash and
cash equivalents from continuing operations
|
(16,798)
|
(558)
|
Cash flows used in
discontinued operations
|
(2,138)
|
(807)
|
Cash and cash
equivalents - Beginning of period
|
26,080
|
25,242
|
|
|
|
Cash and cash
equivalents - End of period
|
$
|
7,144
|
$
|
23,877
|
|
|
|
Supplemental
information
|
|
|
Cash paid for
interest - lease obligation
|
$
|
11,355
|
$
|
11,687
|
Cash paid for
interest - other
|
$
|
5,479
|
$
|
5,895
|
Cash paid for income
taxes, net
|
$
|
1,482
|
$
|
17,861
|
Cineplex Inc.
Interim Condensed Consolidated
Supplemental
Information
(Unaudited)
(expressed in thousands of Canadian dollars)
Reconciliation to Adjusted
EBITDAaL
|
|
|
|
|
Three months ended
March 31,
|
|
2020
|
2019
|
|
|
Restated
|
Net loss from
continuing operations
|
$
|
(174,155)
|
$
|
(5,329)
|
|
|
|
Depreciation and
amortization - other
|
33,962
|
31,633
|
Depreciation -
right-of-use assets
|
35,533
|
36,462
|
Interest expense -
lease obligations
|
11,678
|
12,220
|
Interest expense -
other
|
16,886
|
5,417
|
Interest
income
|
(72)
|
(74)
|
Current income tax
(recovery) expense
|
(233)
|
766
|
Deferred income tax
recovery
|
(49,734)
|
(2,925)
|
|
|
|
EBITDA from
continuing operations
|
$
|
(126,135)
|
$
|
78,170
|
|
|
|
Loss on disposal of
assets
|
817
|
477
|
CDCP equity loss
(income) (i)
|
590
|
(317)
|
Foreign exchange
(gain) loss
|
(1,927)
|
361
|
Impairment of
long-lived assets and goodwill
|
173,054
|
—
|
Non-controlling
interest adjusted EBITDA
|
1
|
11
|
Depreciation and
amortization - joint ventures and associates (ii)
|
24
|
29
|
Taxes and interest of
joint ventures and associates (ii)
|
48
|
11
|
|
|
|
Adjusted EBITDA
from continuing operations
|
$
|
46,472
|
$
|
78,742
|
|
|
|
Cash rent related to
lease obligation (iii)
|
(45,174)
|
(44,150)
|
Cash rent paid not
pertaining to current period
|
1,092
|
1,060
|
|
|
|
Adjusted EBITDAaL
(iv)
|
$
|
2,390
|
$
|
35,652
|
(i)
|
CDCP equity loss
(income) not included in adjusted EBITDA as CDCP is a limited-life
financing
vehicle that is funded by virtual print fees collected from
distributors.
|
(ii)
|
Includes the joint
ventures and associates with the exception of CDCP (see (i)
above).
|
(iii)
|
Balance of cash rents
that have been reallocated to offset the lease
obligations.
|
(iv)
|
See Non-GAAP measures
section of this news release.
|
Cineplex Inc.
Interim Condensed Consolidated
Supplemental Information
(Unaudited)
(expressed
in thousands of Canadian dollars, except number of shares and per
share data)
Adjusted Free Cash Flow
|
Three months ended March 31,
|
|
|
|
|
2020
|
2019
|
|
|
Restated
|
|
|
|
Cash provided by
operating activities
|
$
|
23,190
|
$
|
61,427
|
Less: Total capital
expenditures net of proceeds on sale of assets
|
(37,503)
|
(32,361)
|
|
|
|
Standardized free
cash flow
|
(14,313)
|
29,066
|
|
|
|
Add/(Less):
|
|
|
Changes in operating
assets and liabilities (i)
|
10,428
|
(2,155)
|
Changes in operating
assets and liabilities of joint ventures and associates
(i)
|
(1,156)
|
1,317
|
Principal component
of lease obligations
|
(33,819)
|
(32,484)
|
Principal portion of
cash rent paid not pertaining to current period
|
1,071
|
1,037
|
Growth capital
expenditures and other (ii)
|
34,526
|
27,692
|
Share of income of
joint ventures and associates, net of non-cash
depreciation
|
(73)
|
92
|
Non-controlling
interest
|
1
|
11
|
Net cash received
from CDCP (iii)
|
3,128
|
5,474
|
Adjusted free cash
flow
|
$
|
(207)
|
$
|
30,050
|
|
|
|
Average number of
Shares outstanding
|
63,333,238
|
63,333,238
|
|
|
|
Adjusted free cash
flow per Share
|
$
|
(0.003)
|
$
|
0.474
|
Dividends
declared
|
$
|
0.150
|
$
|
0.435
|
(i)
|
Changes in operating
assets and liabilities are not considered a source or use of
adjusted free cash flow.
|
(ii)
|
Growth capital
expenditures and other represent expenditures on Board approved
projects, exclude maintenance capital expenditures, and
are net of proceeds on asset sales. Cineplex's revolving
facility is available to fund Board approved projects.
|
(iii)
|
Excludes the share of
income of CDCP, as CDCP is a limited-life financing vehicle funded
by virtual print fees collected from distributors.
|
|
Cash invested into
CDCP, as well as cash distributions received from CDCP, are
considered to be uses and sources of adjusted free cash
flow.
|
SOURCE Cineplex