TORONTO, Aug. 14, 2020
/CNW/ - (TSX: CGX) - Cineplex Inc. ("Cineplex" or the "Company")
today released its financial results for the three and six months
ended June 30, 2020. The Company's
second 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.
"To immediately mitigate the impact of the closure of our
theatres and entertainment venues, we focused on reducing all
expenses to the greatest extent possible. We also shifted our
attention to plan for the safe return of our employees and guests
and to strengthen Cineplex's financial position over the short and
long term," said Ellis Jacob,
President and CEO, Cineplex. "The past four months have given
Canadians a new appreciation for the importance of friends and
family and the power of shared experiences with those we love and
we believe that this will only strengthen our business moving
forward."
"During the quarter, we significantly reduced operating costs
and capital expenditures and worked with our landlords to abate and
defer rents. We also focused on growing and supporting our
diversified and on-line businesses and in anticipation of
reopening, developed an industry-leading program with end-to-end
health and safety protocols to ensure that our employees and guests
return to a safe environment. We also benefited from the
government wage subsidy programs which allowed us to retain our
employees and reduce costs during this quarter.
"In addition, Cineplex has undertaken actions to provide further
financial stability throughout the recovery period and to ensure
that our long-term liquidity needs are met. These include obtaining
relief from certain financial covenants under our Credit Facilities
and securing additional financing in the form of Convertible
Unsecured Subordinated Debentures issued subsequent to quarter
end.
"While it is impossible to predict how long this crisis will
last and how significant the impact will be on our business,
Cineplex will continue to take the necessary steps to strengthen
the financial position of our company and ensure a healthy
future.
"Entertaining is what we do best, and we simply can't wait to
safely welcome guests back to our theatres, The Rec Room and
Playdium for some much-deserved fun and escape," 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 social 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.
On March 16, 2020, Cineplex
announced the temporary closure of all of its theatres and LBE
venues across Canada, as well as
substantially all route locations operated by P1AG. On April 1, 2020, 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 is provided by Canadian public
health authorities and applicable government authorities.
To mitigate the negative impact of COVID-19 and support its
long-term stability, Cineplex immediately undertook a variety of
measures including:
- temporary layoffs of all part-time and full-time 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 by agreement with such
employees;
- suspending or deferring current capital spending and reviewing
all capital projects to consider either deferral or
cancellation;
- reducing non-essential discretionary operational expenditures
(such as spending on marketing, travel and entertainment);
- 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 quantum of certain contractual payments;
- reviewing and applying for government subsidy programs where
available, including the Canada
Emergency Wage Subsidy ("CEWS"). This program, which was launched
by the Government of Canada,
provides a subsidy of 75% of employee wages, up to a maximum
benefit of $847.00, per week, for up
to 24 weeks, retroactive from March 15,
2020 to August 29, 2020. In
mid-July, the federal government announced an extension to the
program to December 19th, backdated
to July 5th with threshold amounts
and benefits amended, allowing for additional subsidies for those
businesses who are on a slower recovery track. It is expected that
most of Cineplex's businesses will be able to benefit from the
higher 85% subsidy maximum threshold available to those businesses
who have sustained a revenue decline greater than 50% during a
specified claim period;
- continuing the suspension of dividends; and
- focusing on revenue driving opportunities including the
expansion of Cineplex Store offerings and expansion of food home
delivery from theatres and LBE venues.
In addition to cost savings associated with the temporary
layoffs of its employees, reductions in salaries and other
mitigation efforts, Cineplex has suspended or deferred certain
capital spending and is reviewing all capital projects to consider
further deferrals or cancellations and has plans to reduce
purchases of property, plant and equipment (net of tenant
inducements) to approximately $50.0
million over the next 12 months.
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. Since March 15, 2020, Cineplex has experienced a net
cash burn of approximately $15 to
$20 million per month as a result of
having to close its theatres and LBE venues (for Q2 2020 net cash
burn was $53.9 million for the three
months or approximately $18.0 million
monthly) (see Non-GAAP measures section of this news release). When
used in this news release, net cash burn is calculated as adjusted
EBITDAaL less cash interest (excluding amounts with respect to
lease obligations), provision for income taxes and net capital
expenditures. Net cash burn assumes that all of Cineplex's theatres
and LBE venues remain closed, current government wage subsidies
continue in place, (originally in place only until August 29, 2020 subsequently extended to
December 19, 2020) with respect to
the CEWS and certain lease-related abatements and other
lease-related savings currently being negotiated are implemented as
expected by management.
As some of Cineplex's largest expenses, such as film cost and
cost of food services, are fully variable, during the closure of
its theatres and LBE venues Cineplex has focused on reducing its
largest fixed and semi-fixed expenses, including those attributed
to theatre payroll and theatre occupancy. As a result of the
measures described below, including receipt of assistance under the
CEWS, Cineplex has been able to materially reduce theatre payroll
expenses from $41.1 million reported
in the second quarter of 2019 to approximately $0.2 million in the second quarter of 2020. With
respect to theatre occupancy expenses, Cineplex is continuing to
work with its landlord partners to identify relief measures, which
resulted in no material cash rent being paid in the second quarter
of 2020. The focus has been on identifying opportunities for
lease-related abatements during the closure period, converting
fixed components of rent to variable rent during the reopening
period and looking for other opportunities to extract value under
its existing lease agreements. While Cineplex is still in the
process of finalizing these measures, and the accounting for any
amendments will be more complex under IFRS 16, Cineplex was able to
materially reduce cash payments during the second quarter of
2020.
Reopening Plans
Since the closure of its theatres and LBE venues in March 2020, Cineplex diligently prepared for
their safe reopening, with the health and wellbeing of its
employees and guests being its top priority. Cineplex has carefully
re-examined all of its buildings and processes, so that when its
theatres and LBE venues reopened, it has implemented an
industry-leading program with end-to-end health and safety
protocols. At Cineplex's theatres specifically, it has also be
launched 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, availability of first run film product, social norms
around social distancing and 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. 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. In all
markets where Cineplex is permitted by government and health
authorities, and it is economically feasible under those
limitations, it plans to reopen as many of its locations as it can
throughout July and August.
Some of the new measures implemented on reopening include:
- launching reserved seating in all auditoriums across
Canada; seating options will be
automatically blocked off to ensure proper distance in every
direction between guests;
- reducing capacity in all auditoriums to allow for physical
distancing;
- enhancing cleaning practices throughout our facilities, with
particular focus on high-contact surfaces, restrooms and
seats;
- accepting debit and credit payments only, with the exception of
gift card purchases;
- limiting food offerings in theatres to Cineplex's famous
popcorn and other core concessions;
- ensuring employees have the personal protective equipment they
need and as required by provincial regulations;
- making hand sanitizer readily available for guests and
employees throughout the buildings; and
- keeping VIP Cinemas closed until first run product is
available.
Although restrictions on social gatherings are being lifted in
many of the markets in which Cineplex operates, there is the
possibility that restrictions may be reinstituted in the future if
there are additional outbreaks of COVID-19 in Canada, a vaccine has not been developed and
other effective treatment options are not available. Any
reinstitution of restrictions on social gatherings that would
result in the closure of Cineplex's theatres and LBE venues would
have a significant negative impact on the ability and timing of
Cineplex's return to profitability.
Convertible Debentures
On July 7, 2020, Cineplex filed a
preliminary short form prospectus in connection with a marketed
public offering (the "Offering") of convertible unsecured
subordinated debentures (the "Debentures"). On July 15, 2020, Cineplex completed an Offering of
$275.0 million aggregate principal
amount of Debentures. On July 17,
2020, the underwriters purchased an additional $41.25 million aggregate principal amount of
Debentures pursuant to the exercise of their over-allotment
option.
Completion of the Offering satisfies the condition under the
Credit Agreement Amendment that Cineplex entered into with its
lenders on June 29, 2020 which
required Cineplex to raise $250.0
million of new financing by August
31, 2020, of which $100.0
million would be used to make a permanent repayment of the
Credit Facilities.
Other Matters
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. On July 3, 2020,
Cineplex announced that it had commenced an action in the Ontario
Superior Court of Justice against Cineworld and 1232743 B.C. Ltd. seeking damages arising from
what Cineplex claims was a wrongful repudiation of the Arrangement
Agreement. The claim seeks damages, including the
approximately $2.18 billion that
Cineworld would have paid upon the closing of the Cineworld
Transaction for Cineplex's securities, reduced by the value of the
Cineplex securities retained by its security holders, as well as
compensation for other losses including the failure of Cineworld to
repay or refinance Cineplex's approximately $664 million in debt and transaction expenses.
Cineplex has also advanced alternative claims for damages for the
loss of benefits to its security holders, and to require Cineworld
to disgorge the benefits it improperly received by wrongfully
repudiating the Cineworld Transaction.
Second Quarter Financial Results
|
|
|
|
|
2020
|
2019
Restated (i)
|
Period over Period
Change
(ii)
|
Total revenues
(iii)
|
$
|
22.0million
|
$
|
438.9million
|
-95.0%
|
Theatre
attendance
|
|
—million
|
|
17.0million
|
-100.0%
|
Net (loss) income
from continuing operations (iv)
|
$
|
(98.2)
million
|
$
|
22.1million
|
NM
|
Net loss from
discontinued operations
|
$
|
(0.7)
million
|
$
|
(2.7)
million
|
NM
|
Net (loss) income
(iv)
|
$
|
(98.9)
million
|
$
|
19.4million
|
NM
|
Box office revenues
per patron ("BPP") (v)
|
$
|
4.50
|
$
|
11.13
|
-59.6%
|
Concession revenues
per patron ("CPP") (v)
|
$
|
10.33
|
$
|
7.04
|
46.7%
|
Adjusted EBITDA
(v)
|
$
|
(41.3)
million
|
$
|
114.4million
|
NM
|
Adjusted EBITDAaL (i)
(iv) (v)
|
$
|
(72.5)
million
|
$
|
70.3million
|
NM
|
Adjusted EBITDAaL
margin (i) (iv) (v)
|
|
(329.9)%
|
|
16.0%
|
-345.9%
|
Adjusted free cash
flow (v)
|
$
|
(53.8)
million
|
$
|
51.0million
|
NM
|
Adjusted free cash
flow per common share of Cineplex ("Share") (v)
|
$
|
(0.849)
|
$
|
0.806
|
NM
|
Earnings per Share
("EPS") from continuing operations - basic and diluted
(iv)
|
$
|
(1.55)
|
$
|
0.35
|
NM
|
EPS from discontinued
operations - basic and diluted
|
$
|
(0.01)
|
$
|
(0.04)
|
NM
|
EPS - basic and
diluted (iv)
|
$
|
(1.56)
|
$
|
0.31
|
NM
|
Year to Date Financial Results
|
|
|
|
|
2020
|
2019
Restated (i)
|
Period over Period
Change
(ii)
|
Total revenues
(iii)
|
$
|
304.8million
|
$
|
803.5million
|
-62.1%
|
Theatre
attendance
|
|
10.7million
|
|
32.0million
|
-66.5%
|
Net (loss) income
from continuing operations (iv)
|
$
|
(272.4)million
|
$
|
16.7million
|
NM
|
Net loss from
discontinued operations
|
$
|
(5.0)
million
|
$
|
(4.7)
million
|
NM
|
Net (loss) income
(iv)
|
$
|
(277.3)
million
|
$
|
12.0million
|
NM
|
Box office revenues
per patron ("BPP") (v)
|
$
|
10.36
|
$
|
10.81
|
-4.2%
|
Concession revenues
per patron ("CPP") (v)
|
$
|
6.79
|
$
|
6.72
|
1.0%
|
Adjusted EBITDA
(v)
|
$
|
5.2million
|
$
|
193.1million
|
-97.3%
|
Adjusted EBITDAaL (i)
(iv) (v)
|
$
|
(70.1)
million
|
$
|
105.9million
|
NM
|
Adjusted EBITDAaL
margin (i) (iv) (v)
|
|
(23.0)%
|
|
13.2%
|
-36.2%
|
Adjusted free cash
flow (v)
|
$
|
(54.0)
million
|
$
|
81.1million
|
NM
|
Adjusted free cash
flow per common share of Cineplex ("Share") (v)
|
$
|
(0.853)
|
$
|
1.280
|
NM
|
Earnings per Share
("EPS") from continuing operations - basic and diluted
(iv)
|
$
|
(4.30)
|
$
|
0.26
|
NM
|
EPS from discontinued
operations - basic and diluted
|
$
|
(0.08)
|
$
|
(0.07)
|
NM
|
EPS - basic and
diluted (iv)
|
$
|
(4.38)
|
$
|
0.19
|
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 $1.1
million for the second quarter and $2.4 million for year to
date.
|
v.
|
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 SECOND QUARTER OF 2020
The following describes certain key business initiatives
undertaken and results achieved during the second quarter of 2020
in each of Cineplex's core business areas:
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
- During the second quarter, all of Cineplex's circuit of
theatres were closed. During June
2020, six theatres in Alberta re-opened with significant capacity
restrictions.
Theatre Food Service
- Despite the closure of theatres and LBE venues, Cineplex
reported food services revenues of $3.3
million primarily due to home delivery services from theatre
and LBE locations with Uber Eats and Skip the Dishes.
Digital Commerce
- Total registered users for Cineplex Store increased by 47% in
the second quarter of 2020 as compared to the prior year
period.
- Cineplex Store registered a 120% increase in device activation
over the prior year period.
- Quarterly active users of the Cineplex Store increased by 103%
as compared to the prior year period.
MEDIA
- Media revenues were impacted by the closure of theatres, retail
and digital out of home locations in the second quarter leading to
a decline in advertising revenue. During the second quarter media
revenues were primarily driven by Cineplex Digital Media revenues
specifically from creative services, software revenue and support
services.
AMUSEMENT AND LEISURE
Amusement Solutions
- P1AG's revenues were primarily earned through equipment sales
during the second quarter, in addition to a small contribution from
the opening of certain FEC locations in June
2020.
Location-based Entertainment
- During the second quarter, all of Cineplex's LBE venues were
closed. During June 2020, four
locations in western Canada
re-opened and The Roundhouse in Ontario was partially reopened.
LOYALTY
- Membership in the SCENE loyalty program increased by 0.1
million members in the period, reaching 10.5 million at
June 30, 2020.
CORPORATE
- On June 12, 2020, Cineworld
delivered the Termination Notice to Cineplex purporting to
terminate the Arrangement Agreement.
- On June 29, 2020, Cineplex and
Cineplex Entertainment Limited Partnership entered into an
amendment agreement (the "Credit Agreement Amendment") with The
Bank of Nova Scotia, as
administrative agent, and the lenders from time to time named
therein, to the seventh amended and restated credit agreement with
a syndicate of lenders.
- On June 29, 2020, Cineplex sold
all of its interest in World Gaming Network for a nominal
amount.
- On June 8, 2020, Cineplex offered
a collection of "Understanding Black Stories" films that were
available free to rent or stream to support the Black Lives Matter
movement.
- Beginning April 17 and running
through the end of May, 2020, Cineplex donated $1 to Food Banks Canada for every home delivery
order fulfilled at its theatre and LBE locations across
Canada.
OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2020
Total revenues
Total revenues for the three months ended June 30, 2020 decreased $416.9 million (95.0%) to $22.0 million as compared to the prior year
period. Total revenues for the six months ended June 30, 2020 decreased 498.7 million (62.1%) to
$304.8 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 news release,
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 and the year
to date (in thousands of dollars, except theatre attendance
reported in thousands of patrons and per patron amounts, unless
otherwise noted):
|
|
|
Box office
revenues
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
|
|
|
|
|
|
|
Box office
revenues
|
$
|
27
|
$
|
189,371
|
-100.0%
|
$
|
111,029
|
$
|
345,867
|
-67.9%
|
Theatre attendance
(i)
|
6
|
17,011
|
-100.0%
|
10,716
|
31,999
|
-66.5%
|
Box office revenue
per patron (i)
|
$
|
4.50
|
$
|
11.13
|
-59.6%
|
$
|
10.36
|
$
|
10.81
|
-4.2%
|
BPP excluding premium
priced product (i)
|
$
|
4.50
|
$
|
9.30
|
-51.6%
|
$
|
9.33
|
$
|
9.18
|
1.6%
|
Same theatre box
office revenues (i)
|
$
|
27
|
|
186,904
|
-100.0%
|
$
|
109,179
|
$
|
342,346
|
-68.1%
|
Same theatre
attendance (i)
|
|
6
|
|
16,811
|
-100.0%
|
|
10,566
|
|
31,685
|
-66.7%
|
% Total box from
premium priced product (i)
|
|
—%
|
|
50.9%
|
-50.9%
|
|
28.7%
|
46.3%
|
-17.6%
|
(i) See Non-GAAP
measures section of this news release.
|
|
|
|
Box office
continuity
|
Second
Quarter
|
Year to
Date
|
|
Box
Office
|
Theatre
Attendance
|
Box
Office
|
Theatre
Attendance
|
2019 as
reported
|
$
|
189,371
|
17,011
|
$
|
345,867
|
31,999
|
Same theatre
attendance change
|
(186,832)
|
(16,805)
|
(228,178)
|
(21,118)
|
Impact of same
theatre BPP change
|
(45)
|
—
|
(4,989)
|
—
|
New and acquired
theatres (i)
|
(1,857)
|
(130)
|
(202)
|
—
|
Disposed and closed
theatres (i)
|
(610)
|
(70)
|
(1,469)
|
(165)
|
2020 as
reported
|
$
|
27
|
|
6
|
$
|
111,029
|
10,716
|
(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.
|
Second Quarter and Year to Date
Box office revenues were materially impacted by the government
mandated closure of theatres during the second quarter. On
June 26, 2020, six theatres in
Alberta were reopened with reduced
seating occupancy to ensure physical distancing, enhanced cleaning
protocols and staff equipped with personal protective equipment.
BPP during the reopening period was $4.50 due to promotional pricing for all
screenings including the older and classic film products with
discounted prices.
Food service revenues
The following table highlights the movement in food service
revenues, theatre attendance and CPP for the quarter and the year
to date (in thousands of dollars, except theatre attendance and
same theatre attendance reported in thousands of patrons and per
patron amounts):
|
|
|
Food service
revenues
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
Food service -
theatres
|
$
|
62
|
$
|
119,741
|
-99.9%
|
$
|
72,743
|
$
|
214,913
|
-66.2%
|
Food service -
LBE
|
87
|
9,822
|
-99.1%
|
6,771
|
17,708
|
-61.8%
|
Food service -
delivery
|
3,107
|
—
|
NM
|
3,107
|
—
|
NM
|
Total food service
revenues
|
$
|
3,256
|
$
|
129,563
|
-97.5%
|
$
|
82,621
|
$
|
232,621
|
-64.5%
|
|
|
|
|
|
|
|
Theatre attendance
(i)
|
6
|
17,011
|
-100.0%
|
10,716
|
31,999
|
-66.5%
|
CPP (i)
(ii)
|
$
|
10.33
|
$
|
7.04
|
46.7%
|
$
|
6.79
|
$
|
6.72
|
1.0%
|
Same theatre food
service revenues (i)
|
$
|
62
|
$
|
118,071
|
-99.9%
|
$
|
71,394
|
$
|
212,607
|
-66.4%
|
Same theatre
attendance (i)
|
6
|
16,811
|
-100.0%
|
10,566
|
31,685
|
-66.7%
|
(i) See Non-GAAP
measures section of this news release.
|
(ii) Food service
revenue from LBE and delivery is not included in the CPP
calculation.
|
|
|
|
Theatre food
service revenue continuity
|
Second
Quarter
|
Year to
Date
|
|
Theatre Food
Service
|
Theatre
Attendance
|
Theatre Food
Service
|
Theatre
Attendance
|
2019 as
reported
|
$
|
119,741
|
17,011
|
$
|
214,913
|
31,999
|
Same theatre
attendance change
|
(120,957)
|
(16,805)
|
(144,730)
|
(21,118)
|
Impact of same
theatre CPP change
|
2,948
|
—
|
3,517
|
—
|
New and acquired
theatres (i)
|
(1,137)
|
(130)
|
26
|
—
|
Disposed and closed
theatres (i)
|
(533)
|
(70)
|
(983)
|
(165)
|
2020 as
reported
|
$
|
62
|
6
|
$
|
72,743
|
10,716
|
(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.
|
Second Quarter and Year to Date
With the closures of Cineplex's theatres and LBE venues due to
COVID-19, Cineplex has focused on its home delivery services for
the second quarter. Revenues related to the delivery services in
the second quarter are recognized in food service - delivery. In
June 2020, six theatres were able to
reopen with limited concession menu options and four LBE venues
opened in western Canada which
provided limited dining service, as well as The Roundhouse
in Ontario which was limited to
providing only patio food service. The reopening of LBE
locations and expansion of food services will continue to roll out
as provincial governments ease restrictions on businesses.
Media revenues
The following table highlights the movement in media revenues
for the quarter and the year to date (in thousands of dollars):
|
|
|
Media
revenues
|
Second
Quarter
|
Year to
Date
|
|
2020
|
|
2019
Restated
|
|
Change
|
2020
|
|
2019
Restated
|
|
Change
|
|
|
|
|
|
|
|
Cinema
media
|
$
|
1,604
|
|
$
|
29,596
|
|
-94.6%
|
$
|
18,866
|
|
$
|
50,672
|
|
-62.8%
|
Digital place-based
media
|
6,276
|
|
19,600
|
|
-68.0%
|
21,171
|
|
33,230
|
|
-36.3%
|
Total media revenues
from continuing operations
|
$
|
7,880
|
|
$
|
49,196
|
|
-84.0%
|
$
|
40,037
|
|
$
|
83,902
|
|
-52.3%
|
|
|
|
|
|
|
|
Media revenues from
discontinued operations
|
220
|
|
382
|
|
-42.4%
|
602
|
|
689
|
|
-12.6%
|
Total media
revenues
|
$
|
8,100
|
|
$
|
49,578
|
|
-83.7%
|
$
|
40,639
|
|
$
|
84,591
|
|
-52.0%
|
Second Quarter and Year to Date
Media revenues were materially negatively impacted by the
closure of theatres in the second quarter leading to a sharp
decline in advertising revenue. During the second quarter media
revenues were primarily driven by Cineplex Digital Media revenues
specifically from creative services, software revenue and support
services. Cinema media revenues for the quarter included certain
contractual commitments.
Amusement Revenues
The following table highlights the movement in amusement
revenues for the quarter and the year to date (in thousands of
dollars):
|
|
|
Amusement
revenues
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
|
|
|
|
|
|
|
Amusement - P1AG
excluding Cineplex exhibition and LBE (i)
|
$
|
3,687
|
$
|
45,817
|
-92.0%
|
$
|
38,648
|
$
|
93,490
|
-58.7%
|
Amusement - Cineplex
exhibition (i)
|
12
|
2,608
|
-99.5%
|
2,208
|
5,392
|
-59.1%
|
Amusement -
LBE
|
32
|
9,692
|
-99.7%
|
10,212
|
17,735
|
-42.4%
|
Total amusement
revenues
|
$
|
3,731
|
$
|
58,117
|
-93.6%
|
$
|
51,068
|
$
|
116,617
|
-56.2%
|
(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.
|
Second Quarter and Year to Date
Amusement revenues during the second quarter were impacted by
the temporary closures of P1AG route locations, Cineplex theatres
and location-based entertainment venues. P1AG's revenues were
primarily earned through equipment sales during the quarter, in
addition to a minimal contribution from the reopening of select FEC
locations in both Canada and
the United States in June 2020.
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 and
the year to date (in thousands of dollars):
|
|
|
Other
revenues
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
Restated
|
Change
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
|
|
|
Other revenues from
continuing operations
|
$
|
7,094
|
$
|
12,607
|
-43.7%
|
$
|
20,034
|
$
|
24,471
|
-18.1%
|
Other revenues from
discontinued operations
|
—
|
9
|
NM
|
199
|
16
|
NM
|
Total other
revenues
|
$
|
7,094
|
$
|
12,616
|
-43.8%
|
$
|
20,233
|
$
|
24,487
|
-17.4%
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter and Year to Date
The quarterly and year to date decreases in other revenues from
continuing operations were primarily due to the suspension of the
recognition of deferred revenues on gift card and other related
products during the shut down of theater and LBE venues. In
addition, the shut downs reduced other ancillary revenues generated
from theatres, such as venue rentals. This decrease was partially
offset by higher sales from the Cineplex Digital store during the
second quarter resulting from theatres not operating.
Film cost
The following table highlights the movement in film cost and the
film cost percentage for the quarter and the year to date (in
thousands of dollars, except film cost percentage):
|
|
|
Film
cost
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
|
|
|
|
|
|
|
Film cost
|
$
|
10
|
$
|
103,005
|
NM
|
$
|
56,510
|
$
|
181,726
|
-68.9%
|
Film cost percentage
(i)
|
37.0%
|
54.4%
|
-17.4%
|
50.9%
|
52.5%
|
-1.6%
|
(i) See Non-GAAP
measures section of this news release.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter and Year to Date
Film cost varies primarily with box office revenues and can vary
from quarter to quarter usually based on the relative strength of
the titles exhibited during the period, impacted by film cost terms
varying by title and distributor.
Film cost for the second quarter of 2020 decreased significantly
from the prior year period, which resulted in a decrease for the
year to date period as compared to the same period in 2019. With
the theatre closures for the majority of the second quarter and
limited reopenings at the end of June, film cost reflects the
limited revenue earned from discounted ticket prices on older and
classic film products available for exhibiting.
The decrease in film cost percentage for the second quarter of
2020 is attributable to the lower settlement rates on the limited
reopenings with older and classic film products being shown.
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 and the year to date (in thousands of
dollars, except percentages and margins per patron):
|
|
|
Cost of food
service
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
|
|
|
|
|
|
|
Cost of food service
- theatre
|
$
|
730
|
$
|
25,590
|
-97.1%
|
$
|
20,931
|
$
|
46,861
|
-55.3%
|
Cost of food service
- LBE
|
59
|
2,657
|
-97.8%
|
2,067
|
4,822
|
-57.1%
|
Total cost of food
service
|
$
|
789
|
$
|
28,247
|
-97.2%
|
$
|
22,998
|
$
|
51,683
|
-55.5%
|
|
|
|
|
|
|
|
Theatre concession
cost percentage (i)
|
23.7%
|
21.4%
|
2.3%
|
27.6%
|
21.8%
|
5.8%
|
LBE food cost
percentage (i)
|
34.7%
|
27.1%
|
7.6%
|
30.2%
|
27.2%
|
3.0%
|
Theatre concession
margin per patron (i)
|
$
|
—
|
$
|
5.53
|
NM
|
$
|
5.12
|
$
|
5.25
|
-7.8%
|
|
|
|
|
|
|
|
(i) See Non-GAAP
measures section of this news release.
|
|
|
|
Second Quarter and Year to Date
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 venues varies primarily with the
volume of guests who visit the location as well as the quantity and
mix between food and beverage items sold.
The quarterly and year to date decreases were due to the
temporary closure of Cineplex's theatre and LBE locations since
mid-March, 2020 in response to the COVID-19 pandemic. While a
minimal amount of food service costs were incurred with the
reopening in June of several theatre and LBE locations, the cost of
food service for the second quarter of 2020 was primarily driven by
home delivery sales.
Depreciation and amortization
The following table highlights the movement in depreciation and
amortization expenses during the quarter and the year to date (in
thousands of dollars):
|
|
|
Depreciation and
amortization expenses
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
Restated
|
Change
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
|
|
|
Depreciation of
property, equipment and leaseholds
|
$
|
28,373
|
$
|
29,464
|
-3.7%
|
$
|
59,062
|
$
|
58,230
|
1.4%
|
Amortization of
intangible assets and other
|
3,386
|
2,939
|
15.2%
|
6,659
|
5,806
|
14.7%
|
Sub-total -
depreciation and amortization - other assets
|
$
|
31,759
|
$
|
32,403
|
-2.0%
|
$
|
65,721
|
$
|
64,036
|
2.6%
|
|
|
|
|
|
|
|
Depreciation -
right-of-use assets
|
34,185
|
36,557
|
-6.5%
|
69,718
|
73,019
|
-4.5%
|
Total depreciation
and amortization from continuing operations
|
$
|
65,944
|
$
|
68,960
|
-4.4%
|
$
|
135,439
|
$
|
137,055
|
-1.2%
|
Depreciation and
amortization from discontinued operations
|
—
|
1,186
|
-100.0%
|
—
|
2,408
|
-100.0%
|
Total depreciation
and amortization
|
$
|
65,944
|
$
|
70,146
|
-6.0%
|
$
|
135,439
|
$
|
139,463
|
-2.9%
|
Second Quarter and Year to Date
The quarterly year over year decrease of $1.2 million in depreciation of property,
equipment and leaseholds from continuing operations was due to the
impact of the impairment recorded in the first quarter of 2020 on
the carrying value of long-lived assets. The year to date increase
of $0.8 million was primarily due to
the investments in amusement and leisure businesses prior to the
theatre closures in March 2020,
partially offset by the impact of the impairment of long-lived
assets recorded in the first quarter of 2020.
The quarterly and year to date movements in amortization of
intangible assets and other from continuing operations as compared
to the prior year periods were due to additions of internally
developed software for digital products including the Cineplex
mobile app and website platforms, net of the reallocation to
amortization of intangible assets from discontinued operations.
The quarterly decrease of $2.4
million and year to date decrease of $1.6 million in right-of-use assets from
continuing operations were due to the reduced carrying value, as a
result of the impact of the impairment recorded in the first
quarter of 2020 on the carrying value of long-lived assets.
Impairment of long-lived assets and goodwill
The following table highlights the movement in impairment of
long-lived assets and goodwill during the quarter and the year to
date (in thousands of dollars):
|
|
|
Impairment of
long-lived assets and goodwill
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
|
|
|
|
|
|
|
Impairment of
property, equipment and leaseholds
|
$
|
—
|
$
|
—
|
NM
|
$
|
(33,949)
|
|
$
|
—
|
NM
|
Impairment of
right-of-use assets
|
—
|
—
|
NM
|
(50,610)
|
|
—
|
NM
|
Impairment of
goodwill
|
—
|
—
|
NM
|
(88,495)
|
|
—
|
NM
|
Impairment of
long-lived assets and goodwill
|
$
|
—
|
$
|
—
|
NM
|
$
|
(173,054)
|
|
$
|
—
|
NM
|
Second Quarter and Year to Date
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 pandemic 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
pandemic 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.
A triggering event occurred on June 30,
2020 as a result of the material decrease in Cineplex's
market value due to a sharp decline in its share price at that date
from March 31, 2020. Cineplex
reassessed the underlying key assumptions and inputs used during
the impairment testing completed as at March
31, 2020. Cineplex determined that there were no
material changes in those key judgments and conclusions and
therefore concluded that there was no further impairment.
Impairment of intangible assets - discontinued
operations
The following table highlights the movement in impairment of
intangible assets - discontinued operations during the quarter and
the year to date (in thousands of dollars):
|
|
|
Impairment of
intangible assets - discontinued operations
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
|
|
|
|
|
|
|
Impairment of
intangible assets - discontinued operations
|
$
|
21
|
$
|
—
|
NM
|
$
|
5,156
|
$
|
—
|
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 and the year to date (in thousands of
dollars):
|
|
|
Loss on disposal
of assets
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
|
|
|
|
|
|
|
Loss on disposal from
continuing operations
|
$
|
478
|
$
|
116
|
312.1%
|
$
|
1,295
|
$
|
593
|
118.4%
|
Loss on disposal from
discontinued operations
|
129
|
—
|
NM
|
129
|
—
|
NM
|
Loss on disposal of
assets
|
$
|
607
|
$
|
116
|
423.3%
|
$
|
1,424
|
$
|
593
|
140.1%
|
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 and the year to date (in thousands of dollars):
|
|
|
Other
costs
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
Restated
|
Change
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
|
|
|
Theatre occupancy
expenses
|
$
|
17,735
|
$
|
16,748
|
5.9%
|
$
|
35,706
|
$
|
35,155
|
1.6%
|
Other operating
expenses
|
35,038
|
159,133
|
-78.0%
|
169,586
|
305,702
|
-44.5%
|
General and
administrative expenses
|
9,402
|
17,107
|
-45.0%
|
14,431
|
35,959
|
-59.9%
|
Total other costs
from continuing operations
|
$
|
62,175
|
$
|
192,988
|
-67.8%
|
$
|
219,723
|
$
|
376,816
|
-41.7%
|
|
|
|
|
|
|
|
Other costs from
discontinued operations
|
606
|
2,525
|
-76.0%
|
2,212
|
4,139
|
-46.6%
|
Total other
costs
|
$
|
62,781
|
$
|
195,513
|
-67.9%
|
$
|
221,935
|
$
|
380,955
|
-41.7%
|
Theatre occupancy expenses
The following table highlights the movement in theatre occupancy
expenses for the quarter and the year to date (in thousands of
dollars):
|
|
|
Theatre occupancy
expenses
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
|
Change
|
2020
|
2019
|
Change
|
|
|
|
|
|
|
|
Cash rent
paid/payable (i) (iv) (v)
|
$
|
37,659
|
$
|
38,889
|
-3.2%
|
$
|
78,015
|
$
|
78,768
|
-1.0%
|
Other
occupancy
|
18,368
|
18,543
|
-0.9%
|
36,804
|
36,961
|
-0.4%
|
One-time items
(ii)
|
(561)
|
(1,711)
|
-67.2%
|
(1,140)
|
(1,890)
|
-39.7%
|
Total theatre
occupancy including cash lease payments paid/payable
|
$
|
55,466
|
$
|
55,721
|
-0.5%
|
$
|
113,679
|
$
|
113,839
|
-0.1%
|
|
|
|
|
|
|
|
Cash rent
paid/payable related to lease obligations (iii) (v)
|
(37,731)
|
(38,973)
|
-3.2%
|
(77,973)
|
(78,684)
|
-0.9%
|
Theatre occupancy as
reported
|
$
|
17,735
|
$
|
16,748
|
5.9%
|
$
|
35,706
|
$
|
35,155
|
1.6%
|
(i) Represents the
cash payments for theatre rent paid or payable 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
paid/payable that has been reallocated to offset the lease
obligations.
|
(iv) The 2020 and
2019 year to date balance each includes $0.7 million of cash rent
paid not pertaining to the current period. See Non-GAAP measures
section of this new release.
|
(v) Does not reflect
the impact of quantified negotiated lease-related abatements
included in the total amount of $11.9 million in the 2020 quarter
and year to date figures.
|
|
|
|
|
Theatre occupancy
continuity
|
Second
Quarter
|
|
Year to
Date
|
|
Occupancy
|
|
Occupancy
|
2019 as
reported
|
$
|
16,748
|
|
$
|
35,155
|
Impact of new and
acquired theatres
|
214
|
|
891
|
Impact of disposed
theatres
|
(176)
|
|
(405)
|
Same theatre rent
change (i)
|
(1,292)
|
|
(1,231)
|
One-time
items
|
1,151
|
|
751
|
Other
|
(153)
|
|
(167)
|
|
|
|
|
Impact of IFRS 16
adoption:
|
|
|
|
Cash rent
paid/payable related to lease obligations
|
1,243
|
|
712
|
2020 as
reported
|
$
|
17,735
|
|
$
|
35,706
|
(i) See Non-GAAP
measures section of this news release.
|
|
|
|
Second Quarter
Total theatre occupancy increased $0.5
million (5.9%) during the second quarter of 2020 compared to
the prior year period. This increase was primarily due to higher
one-time credits and cash rent paid or payable related to lease
obligations which was partially offset by lower theatre rent
expense as compared to the prior year period.
Following the closure of all theatre and LBE locations in
March 2020, Cineplex has worked with
landlord partners to identify relief measures, which resulted in no
material cash rent being paid in the second quarter. While Cineplex
is still in the process of finalizing the measures, cash rent
payments in the second quarter were materially reduced.
Year to Date
For the year to date period, theatre occupancy including cash
payments was flat as compared to the prior year period.
Other operating expenses
The following table highlights the movement in other operating
expenses during the quarter and the year to date (in thousands of
dollars) with the prior period presentation restated to provide
comparability to the impact of application of IFRS 5:
|
|
|
Other operating
expenses
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
Restated
|
Change
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
|
|
|
Theatre
payroll
|
$
|
234
|
$
|
41,072
|
-99.4%
|
$
|
31,664
|
$
|
77,782
|
-59.3%
|
Theatre operating
expenses
|
8,812
|
30,225
|
-70.8%
|
35,301
|
58,787
|
-40.0%
|
Media
|
6,816
|
21,185
|
-67.8%
|
25,727
|
37,927
|
-32.2%
|
P1AG
|
9,604
|
40,529
|
-76.3%
|
44,026
|
81,494
|
-46.0%
|
LBE (i)
|
4,810
|
13,957
|
-65.5%
|
17,886
|
25,105
|
-28.8%
|
LBE pre-opening
(ii)
|
179
|
673
|
-73.4%
|
924
|
1,364
|
-32.3%
|
SCENE
|
1,635
|
4,060
|
-59.7%
|
4,208
|
9,098
|
-53.7%
|
Marketing
|
1,059
|
4,192
|
-74.7%
|
3,980
|
7,043
|
-43.5%
|
Other
(iii)
|
6,670
|
7,892
|
-15.5%
|
15,405
|
16,066
|
-4.1%
|
Other operating
expenses including cash lease payments paid/payable
|
$
|
39,819
|
$
|
163,785
|
-75.7%
|
$
|
179,121
|
$
|
314,666
|
-43.1%
|
Cash rent
paid/payable related to lease obligations (iv) (v)
|
(4,539)
|
(4,652)
|
-2.4%
|
(9,293)
|
(8,964)
|
3.7%
|
Other operating
expenses from continuing operations
|
$
|
35,038
|
$
|
159,133
|
-78.0%
|
$
|
169,586
|
$
|
305,702
|
-44.5%
|
|
|
|
|
|
|
|
Other operating
expenses from discontinued operations
|
606
|
2,525
|
-76.0%
|
2,212
|
4,139
|
-46.6%
|
Total other operating
expenses
|
$
|
35,644
|
$
|
161,658
|
-78.0%
|
$
|
171,798
|
$
|
309,841
|
-44.6%
|
(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
paid/payable that has been reallocated to offset the lease
obligations.
|
(v) Does not reflect
the impact of quantified negotiated lease-related abatements
included in the total amount of $11.9 million in the 2020 quarter
and year to date figures.
|
|
|
|
|
Other operating
continuity from continuing operations
|
Second
Quarter
|
|
Year to
Date
|
|
Other
Operating
|
|
Other
Operating
|
2019 as
restated
|
$
|
159,133
|
|
$
|
305,702
|
Impact of new and
acquired theatres
|
(583)
|
|
196
|
Impact of disposed
theatres
|
(290)
|
|
(592)
|
Same theatre payroll
change (i)
|
(40,176)
|
|
(45,839)
|
Same theatre
operating expenses change (i)
|
(21,202)
|
|
(23,371)
|
Media operating
expenses change
|
(14,369)
|
|
(12,200)
|
P1AG operating
expenses change
|
(30,925)
|
|
(37,468)
|
LBE operating
expenses change
|
(9,147)
|
|
(7,219)
|
LBE pre-opening
change
|
(494)
|
|
(440)
|
SCENE
change
|
(2,425)
|
|
(4,890)
|
Marketing
change
|
(3,133)
|
|
(3,063)
|
Other
|
(1,222)
|
|
(659)
|
|
|
|
|
Impact of IFRS 16
adoption:
|
|
|
|
|
|
|
|
Cash rent
paid/payable related to lease obligations (ii)
|
(129)
|
|
(571)
|
2020 as
reported
|
$
|
35,038
|
|
$
|
169,586
|
(i) See Non-GAAP
measures section of this news release.
|
(ii) Does not reflect
the impact of quantified negotiated lease-related abatements
included in the total amount of $11.9 million in the 2020 quarter
and year to date figures.
|
Second Quarter
The overall decrease in other operating expenses was a result of
the temporary closure of theatres, LBE locations and P1AG route
locations and the resulting impact on all other parts of the
business. In order to manage costs Cineplex took advantage of
government subsidy programs in Canada and the
United States, offsetting Other operating costs with
$16.5 million of subsidies in the
second quarter, including $7.3
million against theatre payroll, and focused on reducing
overall spending. The decrease in Other expenses due to the
closures was partially offset by the higher volume of digital
commerce sales during the quarter. In addition to wage subsidies
received, theatre and LBE payroll costs were reduced as a result of
the temporary layoff of part-time staff in March and payroll
reductions for full-time staff.
Year to Date
The overall decrease in other operating expenses was as a result
of the temporary closure of theatres, LBE locations and P1AG route
locations leading to a decrease in business volumes from
March 2020. The decrease in Other
expenses due to the closures was offset in part by the higher
volume of digital commerce sales during the second quarter of
2020.
General and administrative expenses
The following table highlights the movement in general and
administrative ("G&A") expenses during the quarter and the year
to date, including Share-based compensation costs, and G&A
expenses net of these costs (in thousands of dollars):
|
|
|
G&A
expenses
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
Revised
|
Change
|
2020
|
2019
Revised
|
Change
|
|
|
|
|
|
|
|
G&A excluding
LTIP and option plan expense
|
$
|
9,949
|
$
|
15,892
|
-37.4%
|
$
|
27,203
|
$
|
33,720
|
-19.3%
|
Restructuring
|
75
|
713
|
-89.5%
|
435
|
713
|
-39.0%
|
Transaction
costs
|
1,098
|
—
|
NM
|
2,369
|
—
|
NM
|
LTIP (i)
|
(1,572)
|
247
|
NM
|
(13,009)
|
1,009
|
NM
|
Option
plan
|
47
|
404
|
-88.4%
|
(2,194)
|
793
|
NM
|
G&A expenses
including cash lease payments
|
$
|
9,597
|
$
|
17,256
|
-44.4%
|
$
|
14,804
|
$
|
36,235
|
-59.1%
|
Cash rent
paid/payable included as part of lease obligations (ii)
(iii)
|
(195)
|
(149)
|
30.9%
|
(373)
|
(276)
|
35.1%
|
G&A expenses as
reported
|
$
|
9,402
|
$
|
17,107
|
-45.0%
|
$
|
14,431
|
$
|
35,959
|
-59.9%
|
(i) LTIP includes the
expense for the LTIP program as well as the expense for the
executive and Board deferred share unit plans.
|
(ii) Cash rent
paid/payable that has been reallocated to offset the lease
obligations.
|
(iii) Does not
reflect the impact of quantified negotiated lease-related
abatements included in the total amount of $11.9 million in the
2020 quarter and year to date figures.
|
Second Quarter and Year to Date
G&A expenses decreased $7.7
million during the second quarter of 2020 as compared to the
prior year period. This was primarily due to a $5.9 million decrease in G&A excluding LTIP
and option plan expense primarily as a result of the $3.8 million received under the COVID-19 CEWS
wage subsidy program and reduced payroll costs mainly due to
voluntary salary reductions for full-time employees. LTIP expense
decreased $1.9 million as a result of
the decrease in the Share price from $11.70 at March 31,
2020 to $8.04 at June 30, 2020. These expenses were partially
offset by an increase in transaction costs related to the Cineworld
Transaction and ensuing litigation resulting from the repudiation
of the Cineworld Transaction.
G&A expenses for the year to date period decreased
$21.5 million compared to the prior
year period due to a $14.1 million
decrease in LTIP expense, a $2.9
million decrease in option plan expense and the COVID-19
CEWS wages subsidy program. The impact of the COVID-19 pandemic on
Cineplex's business led to a sharp decline in the Share price which
decreased to $8.04 per Share at
June 30, 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 original
vesting periods (prior to the Arrangement Agreement).
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 and six months ended June 30, 2020 as compared to the prior year
periods (expressed in thousands of dollars, except adjusted
EBITDAaL margin):
|
|
|
EBITDA
|
Second
Quarter
|
Year to
Date
|
|
2020
|
2019
Restated
|
Change
|
2020
|
2019
Restated
|
Change
|
|
|
|
|
|
|
|
EBITDA
|
$
|
(45,715)
|
$
|
115,484
|
NM
|
$
|
(171,850)
|
$
|
193,654
|
NM
|
Adjusted
EBITDA
|
$
|
(41,313)
|
$
|
114,383
|
NM
|
$
|
5,159
|
$
|
193,125
|
-97.3%
|
Adjusted EBITDAaL
(i)
|
$
|
(72,532)
|
$
|
70,255
|
NM
|
$
|
(70,142)
|
$
|
105,907
|
NM
|
Adjusted EBITDAaL
margin (i)
|
-329.9%
|
16.0%
|
-345.9%
|
-23.0%
|
13.2%
|
-36.2%
|
(i) Prior period
figures have been revised to conform to current period
presentation. See Reconciliation section of the
MD&A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDAaL for the second quarter of 2020 decreased
$142.8 million from the prior year
period. For the six months ended June 30,
2020, adjusted EBITDAaL decreased 176.0 million, as compared
to the same period in 2019. The quarterly and year to date
decreases were primarily due the impact of the COVID-19 government
imposed restrictions and resulting closure of substantially all of
Cineplex businesses in March 2020. In
computing adjusted EBITDAaL, cash rents paid or payable have been
partially offset by the quantified lease-related savings negotiated
with landlords as a result of the COVID-19 disclosures. This
includes agreements with landlords that are evidenced by way of
written confirmation of the terms agreed upon up to the date of the
MD&A, and are in the process of being formally documented.
Adjusted EBITDAaL margin is calculated as adjusted EBITDAaL divided
by total revenues.
ADJUSTED FREE CASH FLOW (see Non-GAAP measures section of
this news release)
For the second quarter of 2020, adjusted free cash flow per
common share of Cineplex was $(0.85)
as compared to $0.81 in the prior
year period. The declared dividends per common share of Cineplex
were nil in the second quarter of 2020 and $0.45 in the prior year period. During the 12
months ended June 30, 2020, Cineplex
generated adjusted free cash flow per Share of $0.53, compared to $2.84 in the prior 12 month period. Cineplex
declared dividends per Share of $1.05
and $1.75, respectively, in each 12
month period. The payout ratios for these periods were 199.7% and
61.7%, 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 paid or payable related to lease obligations net of
quantified savings negotiated of $11.9
million with landlords as a result of the COVID-19 closures.
This includes agreements with landlords that are evidenced by way
of written confirmation of the terms agreed upon to the date of
approval of the financial statements and MD&A, and are in the
process of being formally documented.
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 June 30,
2020 the impact of two locations that have been opened or
acquired and three locations that have been closed or otherwise
disposed of have been excluded, resulting in 162 theatres being
included in the same theatre metrics. For the six months
ended June 30, 2020 the impact of the
two locations that have been opened or acquired and three locations
that have been closed or otherwise disposed of have been excluded,
resulting in 162 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.
Lease-related Cash Saving
Quantified savings negotiated with landlords as a result of the
COVID-19 disclosures. This includes agreements that are evidenced
by way of written confirmation of the terms agreed upon to the date
of the MD&A, and are in the process of formally documented.
Net Cash Burn
Calculated as adjusted EBITDAaL less cash interest expense
(excluding amounts with respect to lease obligations), provision
for income taxes and net capital expenditures.
|
|
Net cash
burn
|
Second
Quarter
|
|
2020
|
|
|
Adjusted
EBITDAaL
|
$
|
(72,532)
|
Cash interest expense
excluding lease obligations
|
(7,782)
|
Provision for income
taxes
|
34,440
|
Net capital
expenditures
|
(8,019)
|
|
|
Total net cash
burn
|
$
|
(53,893)
|
Average monthly net
cash burn
|
$
|
(17,964)
|
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. Forward-looking statements also include,
statements pertaining to:
- Cineplex's outlook, goals, expectations and projected
results of operations, including factors and assumptions underlying
Cineplex's projections regarding the duration and impact of a novel
strain of coronavirus ("COVID-19") pandemic on Cineplex, the movie
exhibition industry and the economy in general, as well as
Cineplex's response to the pandemic related to the closure of its
theatres and location-based entertainment ("LBE") 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 guests and employees;
- Cineplex's expectations with respect to net cash burn,
liquidity and capital expenditures, including its ability to meet
its ongoing capital, operating and other obligations, and
anticipated needs for, and sources of, funds; and
- Cineplex's ability to execute cost-cutting and revenue
enhancement initiatives in response to the COVID-19
pandemic.
The COVID-19 pandemic has had an unprecedented impact on
Cineplex, along with the rest of the movie exhibition industry and
other industries in which Cineplex operates, including material
decreases in revenues, results of operations and cash flows. The
situation continues to evolve and the social and economic effects
are widespread. As an entertainment and media company that operates
spaces where guests gather in close proximity, Cineplex's business
has been significantly impacted by the actions taken to control the
spread of COVID-19. These actions include, among other things, the
introduction of social distancing measures and restrictions on
freedom of movement. There is limited visibility on when these
restrictions will be lifted in many of the markets in which
Cineplex operates and how quickly guests will return to Cineplex's
locations once its operations resume due to prolonged safety
concerns and adverse economic conditions. Cineplex is
actively monitoring the situation and will respond as the impact of
the COVID-19 pandemic evolves.
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 news release. 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 2019 Annual
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.
SECOND 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 second
quarter. Ellis Jacob, President
and Chief Executive Officer and Gord Nelson, Chief Financial
Officer, will host the call scheduled for:
Friday, August 14,
2020
10:00 am Eastern
Time
In order to participate in the conference call, please dial
647-792-1240, or from outside Toronto and from the U.S.,
dial 1-800-437-2398 at least five to 10 minutes prior to 10:00
a.m. ET. Please quote the conference confirmation code 9829938 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 9829938.
The replay will begin at 1:00 p.m. ET on Friday, August 14, 2020 and end at 1:00 p.m.
ET on Friday, August 21, 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
Sheets (Unaudited) (expressed in thousands of
Canadian dollars)
|
|
June
30,
|
|
|
December
31,
|
|
2020
|
|
|
2019
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
13,806
|
|
|
$
|
26,080
|
Trade and other
receivables
|
50,960
|
|
|
168,065
|
Income taxes
receivable
|
5,812
|
|
|
9,757
|
Inventories
|
29,609
|
|
|
30,995
|
Prepaid expenses and
other current assets
|
10,713
|
|
|
14,226
|
Fair value of
interest rate swap agreements
|
—
|
|
|
1,022
|
Assets held for
sale
|
—
|
|
|
6,573
|
|
|
|
|
|
|
110,900
|
|
|
256,718
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
Property, equipment
and leaseholds
|
601,768
|
|
|
662,798
|
Right-of-use
assets
|
1,096,650
|
|
|
1,232,849
|
Deferred income
taxes
|
89,430
|
|
|
14,197
|
Fair value of
interest rate swap agreements
|
—
|
|
|
472
|
Interests in joint
ventures and associates
|
18,243
|
|
|
28,221
|
Intangible
assets
|
86,464
|
|
|
88,367
|
Goodwill
|
728,731
|
|
|
816,790
|
|
|
|
|
|
|
$
|
2,732,186
|
|
|
$
|
3,100,412
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
148,914
|
|
|
$
|
220,188
|
Share-based
compensation
|
1,916
|
|
|
25,681
|
Dividends
payable
|
—
|
|
|
9,500
|
Income taxes
payable
|
817
|
|
|
1,183
|
Deferred
revenue
|
212,471
|
|
|
222,998
|
Current portion of
long-term debt
|
664,000
|
|
|
—
|
Lease
obligations
|
159,776
|
|
|
106,352
|
Fair value of
interest rate swap agreements
|
5,020
|
|
|
1,874
|
Liabilities related
to assets held for sale
|
—
|
|
|
2,808
|
|
|
|
|
|
1,192,914
|
|
|
590,584
|
|
|
|
|
Non-current
liabilities
|
|
|
|
Share-based
compensation
|
4,457
|
|
|
—
|
Long-term
debt
|
—
|
|
|
625,000
|
Fair value of
interest rate swap agreements
|
18,588
|
|
|
10,837
|
Lease
obligations
|
1,185,767
|
|
|
1,261,243
|
Post-employment
benefit obligations
|
10,651
|
|
|
10,678
|
Other
liabilities
|
8,320
|
|
|
9,813
|
Deferred income
taxes
|
—
|
|
|
1,263
|
|
|
|
|
|
1,227,783
|
|
|
1,918,834
|
|
|
|
|
Total
liabilities
|
2,420,697
|
|
|
2,509,418
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Share
capital
|
852,379
|
|
|
852,379
|
Deficit
|
(551,306)
|
|
|
(264,310)
|
Hedging reserves and
other
|
(131)
|
|
|
(131)
|
Contributed
surplus
|
8,156
|
|
|
4,052
|
Cumulative
translation adjustment
|
2,505
|
|
|
(887)
|
|
|
|
|
Total equity
attributable to owners of Cineplex
|
311,603
|
|
|
591,103
|
Non-controlling
interests
|
(114)
|
|
|
(109)
|
|
|
|
|
Total
equity
|
311,489
|
|
|
590,994
|
|
|
|
|
|
$
|
2,732,186
|
|
|
$
|
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
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
Restated
|
|
|
|
|
Restated
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
Box office
|
$
|
27
|
|
|
$
|
189,371
|
|
|
$
|
111,029
|
|
|
$
|
345,867
|
Food
service
|
3,256
|
|
|
129,563
|
|
|
82,621
|
|
|
232,621
|
Media
|
7,880
|
|
|
49,196
|
|
|
40,037
|
|
|
83,902
|
Amusement
|
3,731
|
|
|
58,117
|
|
|
51,068
|
|
|
116,617
|
Other
|
7,094
|
|
|
12,607
|
|
|
20,034
|
|
|
24,471
|
|
|
|
|
|
|
|
|
|
21,988
|
|
|
438,854
|
|
|
304,789
|
|
|
803,478
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Film cost
|
10
|
|
|
103,005
|
|
|
56,510
|
|
|
181,726
|
Cost of food
service
|
789
|
|
|
28,247
|
|
|
22,998
|
|
|
51,683
|
Depreciation -
right-of-use assets
|
34,185
|
|
|
36,557
|
|
|
69,718
|
|
|
73,019
|
Depreciation and
amortization - other assets
|
31,759
|
|
|
32,403
|
|
|
65,721
|
|
|
64,036
|
Loss on disposal of
assets
|
478
|
|
|
116
|
|
|
1,295
|
|
|
593
|
Other
costs
|
62,175
|
|
|
192,988
|
|
|
219,723
|
|
|
376,816
|
Share of income of
joint ventures and associates
|
3,192
|
|
|
(1,643)
|
|
|
3,927
|
|
|
(2,012)
|
Interest expense -
lease obligations
|
11,353
|
|
|
12,469
|
|
|
23,031
|
|
|
24,689
|
Interest expense -
other
|
9,719
|
|
|
5,792
|
|
|
26,605
|
|
|
11,209
|
Interest
income
|
(57)
|
|
|
(59)
|
|
|
(129)
|
|
|
(133)
|
Foreign
exchange
|
1,059
|
|
|
657
|
|
|
(868)
|
|
|
1,018
|
Impairment of
long-lived assets and goodwill
|
—
|
|
|
—
|
|
|
173,054
|
|
|
—
|
|
|
|
|
|
|
|
|
|
154,662
|
|
|
410,532
|
|
|
661,585
|
|
|
782,644
|
|
|
|
|
|
|
|
|
(Loss) income from
continuing operations before income taxes
|
(132,674)
|
|
|
28,322
|
|
|
(356,796)
|
|
|
20,834
|
|
|
|
|
|
|
|
|
Provision for
income taxes
|
|
|
|
|
|
|
|
Current
|
(7,632)
|
|
|
7,647
|
|
|
(7,865)
|
|
|
8,413
|
Deferred
|
(26,808)
|
|
|
(1,402)
|
|
|
(76,542)
|
|
|
(4,327)
|
|
|
|
|
|
|
|
|
|
(34,440)
|
|
|
6,245
|
|
|
(84,407)
|
|
|
4,086
|
|
|
|
|
|
|
|
|
Net (loss) income
from continuing operations
|
$
|
(98,234)
|
|
|
$
|
22,077
|
|
|
$
|
(272,389)
|
|
|
$
|
16,748
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations, net of taxes
|
(693)
|
|
|
(2,680)
|
|
|
(4,952)
|
|
|
(4,711)
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
|
(98,927)
|
|
|
$
|
19,397
|
|
|
$
|
(277,341)
|
|
|
$
|
12,037
|
|
|
|
|
|
|
|
|
Net (loss) income
from continuing operations attributable to:
|
|
|
|
|
|
|
Owners of
Cineplex
|
$
|
(98,230)
|
|
|
$
|
22,085
|
|
|
$
|
(272,384)
|
|
|
$
|
16,766
|
Non-controlling
interests
|
(4)
|
|
|
(8)
|
|
|
(5)
|
|
|
(18)
|
|
|
|
|
|
|
|
|
Net (loss) income
from continuing operations
|
$
|
(98,234)
|
|
|
$
|
22,077
|
|
|
$
|
(272,389)
|
|
|
$
|
16,748
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to:
|
|
|
|
|
|
|
|
Owners of
Cineplex
|
$
|
(98,923)
|
|
|
$
|
19,405
|
|
|
$
|
(277,336)
|
|
|
$
|
12,055
|
Non-controlling
interests
|
(4)
|
|
|
(8)
|
|
|
(5)
|
|
|
(18)
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
|
(98,927)
|
|
|
$
|
19,397
|
|
|
$
|
(277,341)
|
|
|
$
|
12,037
|
|
|
|
|
|
|
|
|
Net (loss) income
per share attributable to owners of Cineplex - basic and
diluted:
|
|
|
|
|
Continuing
operations
|
$
|
(1.55)
|
|
|
$
|
0.35
|
|
|
$
|
(4.30)
|
|
|
$
|
0.26
|
Discontinued
operations
|
(0.01)
|
|
|
(0.04)
|
|
|
(0.08)
|
|
|
(0.07)
|
|
|
|
|
|
|
|
|
Total
operations
|
$
|
(1.56)
|
|
|
$
|
0.31
|
|
|
$
|
(4.38)
|
|
|
$
|
0.19
|
Cineplex
Inc. Interim Condensed Consolidated Statements of
Comprehensive Income (Unaudited) (expressed in
thousands of Canadian dollars)
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
Restated
|
|
|
|
|
Restated
|
|
|
|
|
|
|
|
|
Net (loss) income
from continuing operations
|
$
|
(98,234)
|
|
|
$
|
22,077
|
|
|
$
|
(272,389)
|
|
|
$
|
16,748
|
|
|
|
|
|
|
|
|
Other
comprehensive (loss) income from continuing
operations
|
|
|
|
|
|
|
|
Items that will be
reclassified subsequently to net income:
|
|
|
|
|
|
|
|
Loss on hedging
instruments
|
—
|
|
|
(3,827)
|
|
|
—
|
|
|
(11,621)
|
Associated deferred
income taxes recovery
|
—
|
|
|
1,028
|
|
|
—
|
|
|
3,121
|
Foreign currency
translation adjustment
|
(2,259)
|
|
|
(1,473)
|
|
|
3,385
|
|
|
(3,030)
|
Recognition of
currency translation adjustment on disposition of discontinued
operations
|
(160)
|
|
|
—
|
|
|
(160)
|
|
|
—
|
|
|
|
|
|
|
|
|
Other
comprehensive (loss) income
|
(2,419)
|
|
|
(4,272)
|
|
|
3,225
|
|
|
(11,530)
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income from continuing operations
|
(100,653)
|
|
|
17,805
|
|
|
(269,164)
|
|
|
5,218
|
|
|
|
|
|
|
|
|
Net loss from
discontinued operations, net of taxes
|
(693)
|
|
|
(2,680)
|
|
|
(4,952)
|
|
|
(4,711)
|
Foreign currency
translation adjustment from discontinued operations
|
545
|
|
|
116
|
|
|
7
|
|
|
159
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income
|
$
|
(100,801)
|
|
|
$
|
15,241
|
|
|
$
|
(274,109)
|
|
|
$
|
666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income from continuing operations attributable
to:
|
|
|
|
|
|
|
|
Owners of
Cineplex
|
$
|
(100,649)
|
|
|
$
|
17,813
|
|
|
$
|
(269,159)
|
|
|
$
|
5,236
|
Non-controlling
interests
|
(4)
|
|
|
(8)
|
|
|
(5)
|
|
|
(18)
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income
|
$
|
(100,653)
|
|
|
$
|
17,805
|
|
|
$
|
(269,164)
|
|
|
$
|
5,218
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income attributable to:
|
|
|
|
|
|
|
|
Owners of
Cineplex
|
$
|
(100,797)
|
|
|
$
|
15,249
|
|
|
$
|
(274,104)
|
|
|
$
|
684
|
Non-controlling
interests
|
(4)
|
|
|
(8)
|
|
|
(5)
|
|
|
(18)
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income
|
$
|
(100,801)
|
|
|
$
|
15,241
|
|
|
$
|
(274,109)
|
|
|
$
|
666
|
Cineplex
Inc. Interim Condensed Consolidated Statements of Changes
in Equity (Unaudited) (expressed in thousands
of Canadian dollars) For the periods ended June 30, 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
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(277,336)
|
|
|
(5)
|
|
|
(277,341)
|
Other comprehensive
income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,392
|
|
|
(160)
|
|
|
—
|
|
|
3,232
|
Total
comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,392
|
|
|
(277,496)
|
|
|
(5)
|
|
|
(274,109)
|
Dividends
declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,500)
|
|
|
—
|
|
|
(9,500)
|
Share option
expense
|
|
—
|
|
|
160
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
160
|
Conversion to
equity-settled option plan
|
|
—
|
|
|
3,944
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020
|
|
$
|
852,379
|
|
|
$
|
8,156
|
|
|
$
|
(131)
|
|
|
$
|
2,505
|
|
|
$
|
(551,306)
|
|
|
$
|
(114)
|
|
|
$
|
311,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1,
2019
|
|
$
|
852,379
|
|
|
$
|
7,815
|
|
|
$
|
(3,678)
|
|
|
$
|
2,301
|
|
|
$
|
(179,721)
|
|
|
$
|
(85)
|
|
|
$
|
679,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,055
|
|
|
(18)
|
|
|
12,037
|
Other comprehensive
loss
|
|
—
|
|
|
—
|
|
|
(8,500)
|
|
|
(2,871)
|
|
|
—
|
|
|
—
|
|
|
(11,371)
|
Total
comprehensive income
|
|
—
|
|
|
—
|
|
|
(8,500)
|
|
|
(2,871)
|
|
|
12,055
|
|
|
(18)
|
|
|
666
|
Dividends
declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55,734)
|
|
|
—
|
|
|
(55,734)
|
Share option
expense
|
|
—
|
|
|
793
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2019
|
|
$
|
852,379
|
|
|
$
|
8,608
|
|
|
$
|
(12,178)
|
|
|
$
|
(570)
|
|
|
$
|
(223,400)
|
|
|
$
|
(103)
|
|
|
$
|
624,736
|
Cineplex
Inc. Interim Condensed Consolidated Statements of Cash
Flows (Unaudited) (expressed in thousands of
Canadian dollars)
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
|
Restated
|
|
|
|
Restated
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net (loss) income
from continuing operations
|
$
|
(98,234)
|
|
$
|
22,077
|
|
|
$
|
(272,389)
|
|
$
|
16,748
|
Adjustments to
reconcile net income to net cash provided by operating
activities
|
|
|
|
|
|
Depreciation and
amortization of property, equipment and leaseholds, and intangible
assets
|
31,759
|
|
32,403
|
|
|
65,721
|
|
64,036
|
Depreciation of
right-of-use assets
|
34,185
|
|
36,557
|
|
|
69,718
|
|
73,019
|
Unrealized foreign
exchange
|
739
|
|
308
|
|
|
(690)
|
|
558
|
Interest rate swap
agreements - non-cash interest
|
1,909
|
|
(574)
|
|
|
11,295
|
|
(1,132)
|
Other non-cash
interest
|
328
|
|
291
|
|
|
677
|
|
850
|
Loss on disposal of
assets
|
478
|
|
116
|
|
|
1,295
|
|
593
|
Deferred income
taxes
|
(26,808)
|
|
(1,402)
|
|
|
(76,542)
|
|
(4,327)
|
Non-cash share-based
compensation
|
160
|
|
404
|
|
|
4,104
|
|
793
|
Impairment of
long-lived assets and goodwill
|
—
|
|
—
|
|
|
173,054
|
|
—
|
Net change in
interests in joint ventures and associates
|
4,178
|
|
(1,403)
|
|
|
6,069
|
|
(3,089)
|
Changes in operating
assets and liabilities
|
69,401
|
|
(30,432)
|
|
|
58,973
|
|
(28,277)
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
18,095
|
|
58,345
|
|
|
41,285
|
|
119,772
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Proceeds from
disposal of assets, including sale of discontinued
operations
|
50
|
|
—
|
|
|
50
|
|
—
|
Purchases of
property, equipment and leaseholds
|
(14,441)
|
|
(27,653)
|
|
|
(51,944)
|
|
(60,014)
|
Intangible assets
additions
|
(1,760)
|
|
(1,060)
|
|
|
(5,481)
|
|
(2,556)
|
Tenant
inducements
|
6,422
|
|
734
|
|
|
18,299
|
|
1,349
|
Net cash received
from CDCP
|
782
|
|
3,128
|
|
|
3,910
|
|
8,602
|
|
|
|
|
|
|
Net cash used in
investing activities
|
(8,947)
|
|
(24,851)
|
|
|
(35,166)
|
|
(52,619)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Dividends
paid
|
—
|
|
(27,867)
|
|
|
(19,000)
|
|
(55,417)
|
(Repayment)
borrowings under credit facilities, net
|
(1,000)
|
|
35,000
|
|
|
39,000
|
|
61,000
|
Repayments of lease
obligations - principal
|
(993)
|
|
(31,580)
|
|
|
(34,812)
|
|
(64,064)
|
Financing
fees
|
(800)
|
|
—
|
|
|
(800)
|
|
(243)
|
|
|
|
|
|
|
Net cash used in
financing activities
|
(2,793)
|
|
(24,447)
|
|
|
(15,612)
|
|
(58,724)
|
|
|
|
|
|
|
Effect of exchange
rate differences on cash
|
560
|
|
236
|
|
|
(390)
|
|
296
|
|
|
|
|
|
|
Increase (decrease)
in cash and cash equivalents from continuing operations
|
6,915
|
|
9,283
|
|
|
(9,883)
|
|
8,725
|
Cash flows used in
discontinued operations
|
(253)
|
|
(1,120)
|
|
|
(2,391)
|
|
(1,927)
|
Cash and cash
equivalents - Beginning of period
|
7,144
|
|
23,877
|
|
|
26,080
|
|
25,242
|
|
|
|
|
|
|
Cash and cash
equivalents - End of period
|
$
|
13,806
|
|
$
|
32,040
|
|
|
$
|
13,806
|
|
$
|
32,040
|
|
|
|
|
|
|
Supplemental
information
|
|
|
|
|
|
Cash paid for
interest - lease obligation
|
$
|
166
|
|
$
|
12,204
|
|
|
$
|
11,521
|
|
$
|
23,891
|
Cash paid for
interest - other
|
$
|
5,964
|
|
$
|
6,367
|
|
|
$
|
11,443
|
|
$
|
12,262
|
Cash (received) paid
for income taxes, net
|
$
|
(12,997)
|
|
$
|
8,227
|
|
|
$
|
(11,515)
|
|
$
|
26,088
|
Cineplex
Inc. Interim Condensed Consolidated Supplemental
Information (Unaudited)
(expressed in thousands of Canadian dollars)
|
|
Reconciliation to
Adjusted EBITDAaL
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
|
Restated
|
|
|
|
Restated
|
Net (loss) income
from continuing operations
|
$
|
(98,234)
|
|
$
|
22,077
|
|
|
$
|
(272,389)
|
|
$
|
16,748
|
|
|
|
|
|
|
Depreciation and
amortization - other
|
31,759
|
|
32,403
|
|
|
65,721
|
|
64,036
|
Depreciation -
right-of-use assets
|
34,185
|
|
36,557
|
|
|
69,718
|
|
73,019
|
Interest expense -
lease obligations
|
11,353
|
|
12,469
|
|
|
23,031
|
|
24,689
|
Interest expense -
other
|
9,719
|
|
5,792
|
|
|
26,605
|
|
11,209
|
Interest
income
|
(57)
|
|
(59)
|
|
|
(129)
|
|
(133)
|
Current income tax
(recovery) expense
|
(7,632)
|
|
7,647
|
|
|
(7,865)
|
|
8,413
|
Deferred income tax
recovery
|
(26,808)
|
|
(1,402)
|
|
|
(76,542)
|
|
(4,327)
|
|
|
|
|
|
|
EBITDA from
continuing operations
|
$
|
(45,715)
|
|
$
|
115,484
|
|
|
$
|
(171,850)
|
|
$
|
193,654
|
|
|
|
|
|
|
Loss on disposal of
assets
|
478
|
|
116
|
|
|
1,295
|
|
593
|
CDCP equity loss
(income) (i)
|
2,784
|
|
(1,917)
|
|
|
3,374
|
|
(2,234)
|
Foreign exchange loss
(gain)
|
1,059
|
|
657
|
|
|
(868)
|
|
1,018
|
Impairment of
long-lived assets and goodwill
|
—
|
|
—
|
|
|
173,054
|
|
—
|
Non-controlling
interest adjusted EBITDA
|
4
|
|
7
|
|
|
5
|
|
18
|
Depreciation and
amortization - joint ventures and associates (ii)
|
20
|
|
24
|
|
|
44
|
|
53
|
Taxes and interest of
joint ventures and associates (ii)
|
57
|
|
12
|
|
|
105
|
|
23
|
|
|
|
|
|
|
Adjusted EBITDA
from continuing operations
|
$
|
(41,313)
|
|
$
|
114,383
|
|
|
$
|
5,159
|
|
$
|
193,125
|
|
|
|
|
|
|
Cash rent
paid/payable related to lease obligations (iii)
|
(42,706)
|
|
(43,775)
|
|
|
(87,880)
|
|
(87,925)
|
Negotiated
lease-related cash savings for the period (iv)
|
11,851
|
|
—
|
|
|
11,851
|
|
—
|
Cash rent paid not
pertaining to current period
|
(364)
|
|
(353)
|
|
|
728
|
|
707
|
|
|
|
|
|
|
Adjusted EBITDAaL
(iv)
|
$
|
(72,532)
|
|
$
|
70,255
|
|
|
$
|
(70,142)
|
|
$
|
105,907
|
|
|
|
|
|
|
(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
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
|
|
Restated
|
|
|
|
Restated
|
|
|
|
|
|
|
Cash provided by
operating activities
|
$
|
18,095
|
|
$
|
58,345
|
|
|
$
|
41,285
|
|
$
|
119,772
|
Less: Total capital
expenditures net of proceeds on sale of assets
|
(14,391)
|
|
(27,653)
|
|
|
(51,894)
|
|
(60,014)
|
|
|
|
|
|
|
Standardized free
cash flow
|
3,704
|
|
30,692
|
|
|
(10,609)
|
|
59,758
|
|
|
|
|
|
|
Add/(Less):
|
|
|
|
|
|
Changes in operating
assets and liabilities (i)
|
(69,401)
|
|
30,432
|
|
|
(58,973)
|
|
28,277
|
Changes in operating
assets and liabilities of joint ventures and associates
(i)
|
(986)
|
|
(240)
|
|
|
(2,142)
|
|
1,077
|
Principal component
of lease obligations
|
(993)
|
|
(31,580)
|
|
|
(34,812)
|
|
(64,064)
|
Principal portion of
cash rent paid not pertaining to current period
|
(357)
|
|
(346)
|
|
|
714
|
|
691
|
Growth capital
expenditures and other (ii)
|
13,777
|
|
19,191
|
|
|
48,303
|
|
46,883
|
Share of income of
joint ventures and associates, net of non-cash
depreciation
|
(331)
|
|
(238)
|
|
|
(404)
|
|
(146)
|
Non-controlling
interest
|
4
|
|
7
|
|
|
5
|
|
18
|
Net cash received
from CDCP (iii)
|
782
|
|
3,128
|
|
|
3,910
|
|
8,602
|
Adjusted free cash
flow
|
$
|
(53,801)
|
|
$
|
51,046
|
|
|
$
|
(54,008)
|
|
$
|
81,096
|
|
|
|
|
|
|
Average number of
Shares outstanding
|
63,333,238
|
|
63,333,238
|
|
|
63,333,238
|
|
63,333,238
|
|
|
|
|
|
|
|
Adjusted free cash
flow per Share
|
$
|
(0.849)
|
|
$
|
0.806
|
|
|
$
|
(0.853)
|
|
$
|
1.280
|
Dividends
declared
|
$
|
—
|
|
$
|
0.445
|
|
|
$
|
0.150
|
|
$
|
0.880
|
(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