TORONTO, ONTARIO--(Marketwired - Nov. 10, 2015) - Cineplex Inc. ("Cineplex") (TSX:CGX) today released its financial results for the three and nine months ended September 30, 2015.
Third Quarter Results
| 2015 | 2014 | Period over Period Change (i) |
|||
| Total revenues | $ | 328.2 million | $ | 299.0 million | 9.8% |
| Attendance | 19.4 million | 18.0 million | 7.6% | ||
| Net income | $ | 21.4 million | $ | 15.9 million | 34.7% |
| Box office revenues per patron ("BPP") (ii) | $ | 8.89 | $ | 9.01 | -1.3% |
| Concession revenues per patron ("CPP") (ii) | $ | 5.43 | $ | 5.11 | 6.3% |
| Adjusted EBITDA (ii) | $ | 59.1 million | $ | 48.0 million | 23.0% |
| Adjusted EBITDA margin (ii) | 18.0% | 16.1% | 1.9% | ||
| Adjusted free cash flow (ii) | $ | 35.9 million | $ | 35.9 million | -0.1% |
| Adjusted free cash flow per common share of Cineplex ("Share") (ii) | $ | 0.568 | $ | 0.570 | -0.4% |
| Earnings per Share ("EPS") attributable to owners of Cineplex - basic | $ | 0.34 | $ | 0.25 | 36.0% |
| EPS attributable to owners of Cineplex - diluted | $ | 0.34 | $ | 0.25 | 36.0% |
Year to Date Results
| 2015 | 2014 | Period over Period Change (i) |
|||
| Total revenues | $ | 963.6 million | $ | 902.5 million | 6.8% |
| Attendance | 56.6 million | 54.6 million | 3.7% | ||
| Net income | $ | 57.4 million | $ | 44.2 million | 30.0% |
| Box office revenues per patron ("BPP") (ii) | $ | 9.09 | $ | 9.16 | -0.8% |
| Concession revenues per patron ("CPP") (ii) | $ | 5.38 | $ | 5.08 | 5.9% |
| Adjusted EBITDA (ii) | $ | 164.6 million | $ | 138.4 million | 19.0% |
| Adjusted EBITDA margin (ii) | 17.1 % | 15.3 % | 1.8% | ||
| Adjusted free cash flow (ii) | $ | 104.3 million | $ | 103.0 million | 1.3% |
| Adjusted free cash flow per common share of Cineplex ("Share") (ii) | $ | 1.655 | $ | 1.635 | 1.2% |
| Earnings per Share ("EPS") attributable to owners of Cineplex - basic | $ | 0.91 | $ | 0.70 | 30.0% |
| EPS attributable to owners of Cineplex - diluted | $ | 0.90 | $ | 0.70 | 28.6% |
- Period over period change calculated based on thousands of dollars except percentage and per share values. Changes in percentage amounts are calculated as 2015 value less 2014 value.
- Adjusted EBITDA, adjusted EBITDA 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.
"Cineplex had another strong quarter setting third quarter records for total revenue, up 9.8% to $328.2 million and adjusted EBITDA up 23.0% to $59.1 million. We established new third quarter records for all revenue sources including Box Office revenue which increased 6.1% to $172.6 million, Food Service revenue which grew 14.5% to $105.5 million, and CPP of $5.43, which was up 6.3% versus the same period in 2014. Media revenue increased 7.2% to $34.3 million, and Other revenue was up 29.1% to $15.9 million. In addition, attendance increased 7.6% to 19.4 million guests," said Ellis Jacob, President and CEO, Cineplex Entertainment.
"Key accomplishments during the period included the acquisition of an 80% interest in the operating assets of WG Limited, a leading online gaming platform that facilitates tournaments for the competitive gaming community; the announcement of our plans to build The Rec Room in Calgary, Alberta, our second location; and the expansion of our SCENE loyalty program benefits enabling members to earn and redeem points at CARA Operations Limited restaurant brands which include over 800 restaurants across Canada. Subsequent to quarter end, we completed the acquisition of the remaining 50% of issued and outstanding equity of Cineplex Starburst Inc. making Cineplex the 100% owner of its amusement gaming business in North America."
"Looking ahead, I believe the film slate for the final quarter of 2015 looks strong and I am excited about the strategic opportunities ahead that will help us achieve meaningful growth."
KEY DEVELOPMENTS IN THE THIRD QUARTER OF 2015
The following describes certain key business initiatives undertaken and results achieved during the third quarter in each of Cineplex's core business areas:
THEATRE EXHIBITION
- Reported third quarter box office revenues of $172.6 million, an increase of $10.0 million (6.1%) from the $162.6 million reported in the prior year period due to stronger performing film product in the current period compared to the prior year.
- Both box office revenues and attendance results are third quarter records for Cineplex.
FOOD SERVICE
- Reported record third quarter food service revenues of $105.5 million, an increase of $13.4 million (14.5%) over the $92.1 million reported in the prior year period.
- CPP was $5.43 for the period, a third quarter record for Cineplex, and $0.32 (6.3%) higher than the $5.11 reported in the prior year period.
- Opened six YoYo's Yogurt Cafe ("YoYo's") locations in the third quarter, bringing the total number of YoYo's locations operated by Cineplex to 69.
AMUSEMENT GAMING AND THE REC ROOM
- Acquired an 80% interest in the operating assets of WG Limited through Cineplex's subsidiary, WorldGaming Network LP ("WGN"). This acquisition resulted in the creation of a new company focused on eSports by creating a community that connects live online gaming with unique in-theatre tournament experiences to be held in Cineplex theatres across the country.
- Announced plans to build Cineplex's second The Rec Room location in Calgary, Alberta, a 50,000 square foot dining and entertainment complex scheduled to open in December 2016 in Deerfoot City.
- Opened two new XSCAPE Entertainment Centres in the period, bringing the total number of XSCAPE locations across the circuit to 22.
- Subsequent to the period end, on October 1, 2015, announced that Cineplex had completed the acquisition of the remaining 50% of issued and outstanding equity of Cineplex Starburst Inc. ("CSI") that it did not already own, for approximately $21.0 million cash.
MEDIA
- Total media revenues increased $2.3 million, or 7.2%, in the third quarter compared to the prior year period, with Cineplex Media increasing $2.6 million (11.4%), offset by a decrease in Cineplex Digital Media revenues of $0.3 million (2.7%) due to lower project revenues in the period, partially offset by higher advertising revenues including the TimsTV and Oxford shopping mall networks.
- Cineplex Media revenues increased due to robust showtime advertising sales, with strong results seen in the automotive sector advertising.
ALTERNATIVE PROGRAMMING
- Alternative programming in the third quarter of 2015 included live and encore performances from the Metropolitan Opera: Live in HD series, ethnic film programming, In The Gallery presentations and encore presentations of The National Theatre Live.
DIGITAL COMMERCE
- Cineplex.com registered a 23% increase in unique visitors and a 28% increase in visits during the third quarter of 2015 compared to the prior year period.
- As at September 30, 2015, the Cineplex app had been downloaded 12.8 million times and recorded over 708 million app sessions.
LOYALTY
- Membership in the SCENE loyalty program increased by 0.3 million members in the period, with membership reaching approximately 7.1 million at September 30, 2015.
- During the period, the ability to earn and redeem points was launched at CARA Operations Limited ("CARA") restaurant brands which includes over 800 restaurants across Canada. CARA brands include Swiss Chalet Rotisserie & Grill, Harvey's, Milestones Grill & Bar, Montana's BBQ & Bar, Kelsey's, East Side Mario's, Prime Pubs and Bier Markt.
- SCENE announced changes to the earn and redemption rates for premium movie experiences effective November 4, 2015, with members earning and redeeming SCENE points based on the type of movie experience they choose. Premium movies will earn 50% more points and require 50% more points for redemption, and VIP movies will earn 100% more points and require 100% more points for redemption.
OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2015
Total revenues
Total revenues for the three months ended September 30, 2015 increased $29.3 million (9.8%) to $328.2 million as compared to the prior year period. Total revenues for the nine months ended September 30, 2015 increased $61.1 million (6.8%) to $963.6 million as compared to the prior year period. A discussion of the factors affecting the changes in box office, food service, media and other revenues for the period is provided below.
Non-GAAP measures discussed throughout this MD&A, including adjusted EBITDA, adjusted free cash flow, attendance, BPP, premium priced product, same store metrics, CPP, film cost percentage, concession cost percentage and concession margin per patron are defined and discussed in the non-GAAP measures section of this news release.
Box office revenues
The following table highlights the movement in box office revenues, attendance and BPP for the quarter and the year to date (in thousands of Canadian dollars, except attendance reported in thousands of patrons, and per patron amounts):
| Box office revenues | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Box office revenues | $ | 172,571 | $ | 162,574 | 6.1% | $ | 514,814 | $ | 500,218 | 2.9% |
| Attendance (i) | 19,407 | 18,038 | 7.6% | 56,640 | 54,611 | 3.7% | ||||
| Box office revenue per patron (i) | $ | 8.89 | $ | 9.01 | -1.3% | $ | 9.09 | $ | 9.16 | -0.8% |
| BPP excluding premium priced product (i) | $ | 8.10 | $ | 8.03 | 0.9% | $ | 8.25 | $ | 8.23 | 0.2% |
| Canadian industry revenues (ii) | 4.3% | 1.8% | ||||||||
| Same store box office revenues (i) | $ | 168,866 | $ | 161,518 | 4.5% | $ | 501,677 | $ | 495,401 | 1.3% |
| Same store attendance (i) | 19,015 | 17,912 | 6.2% | 55,265 | 54,080 | 2.2% | ||||
| % Total box from premium priced product (i) | 34.5% | 41.7% | -7.2% | 36.0% | 40.7% | -4.7% | ||||
| (i) See non-GAAP measures section of this news release. | ||||||||||
| (ii) The Movie Theatre Association of Canada ("MTAC") reported that the Canadian exhibition industry reported a box office revenue increase of 4.5% for the period from July 3, 2015 to October 1, 2015 as compared to the period from July 4, 2014 to October 2, 2014. On a basis consistent with Cineplex's calendar reporting period (July 1 to September 30), the Canadian industry box office revenue change is estimated to be an increase of 4.3%. MTAC reported that the Canadian exhibition industry reported a box office revenue increase of 2.3% for the period from January 3, 2015 to October 1, 2015 as compared to the period from January 4, 2014 to October 2, 2014. On a basis consistent with Cineplex's calendar reporting period (January 1 to September 30), the Canadian industry box office revenues are estimated to be an increase of 1.8%. | ||||||||||
| Box office continuity | Third Quarter | Year to Date | ||||||||
| Box Office | Attendance | Box Office | Attendance | |||||||
| 2014 as reported | $ | 162,574 | 18,038 | $ | 500,218 | 54,611 | ||||
| Same store attendance change | 9,947 | 1,103 | 10,854 | 1,185 | ||||||
| Impact of same store BPP change | (2,599 | ) | - | (4,579 | ) | - | ||||
| New and acquired theatres (i) | 3,565 | 378 | 10,050 | 1,045 | ||||||
| Disposed and closed theatres (i) | (916 | ) | (112 | ) | (1,729 | ) | (201 | ) | ||
| 2015 as reported | $ | 172,571 | 19,407 | $ | 514,814 | 56,640 | ||||
| (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. | ||||||||||
Third Quarter
| Third Quarter 2015 Top Cineplex Films | 3D | % Box | Third Quarter 2014 Top Cineplex Films | 3D | % Box | |||
| 1 | Minions | a | 13.7% | 1 | Guardians of the Galaxy | a | 15.6% | |
| 2 | Mission: Impossible Rogue Nation | 9.3% | 2 | Dawn of the Planet of the Apes | a | 8.8% | ||
| 3 | Ant-Man | a | 6.9% | 3 | Teenage Mutant Ninja Turtles | a | 6.7% | |
| 4 | Jurassic World | a | 6.0% | 4 | Lucy | 5.6% | ||
| 5 | Inside Out | a | 5.4% | 5 | Transformers: Age of Extinction | a | 5.6% | |
Box office revenues increased $10.0 million, or 6.1%, to $172.6 million during the third quarter of 2015, compared to $162.6 million recorded in the same period in 2014. The increase was due to a 7.6% increase in attendance as a result of a stronger performing slate of films in the current period as compared to the prior year period.
BPP for the three months ended September 30, 2015 was $8.89, a $0.12 decrease from the prior year period. This decrease was due in part to the film mix in the period, with two of the top five films in the current period, which accounted for 19.1% of box office revenues, catering to family audiences, resulting in a higher percentage of child admissions which have a lower ticket price than adult admissions. Box office revenues from premium product accounted for 34.5% of box office revenues in the current period, down from 41.7% in the prior year period due in part to a lower percentage of 3D admissions in the current period compared to the prior year period more than offsetting higher revenues from UltraAVX, IMAX and VIP offerings. The decrease in 3D admissions is due in part to the higher proportion of family product in the current period compared to the prior year, which tends to have less 3D admissions, contributing to the lower BPP.
Year to Date
| Year to Date 2015 Top Cineplex Films | 3D | % Box | Year to Date 2014 Top Cineplex Films | 3D | % Box | |||
| 1 | Jurassic World | a | 7.7% | 1 | Guardians of the Galaxy | a | 5.1% | |
| 2 | The Avengers: Age Of Ultron | a | 5.8% | 2 | The Lego Movie | a | 4.2% | |
| 3 | Minions | a | 4.6% | 3 | Captain America: The Winter Soldier | a | 3.8% | |
| 4 | Furious 7 | 4.3% | 4 | X-Men: Days of Future Past | a | 3.4% | ||
| 5 | Inside Out | a | 3.7% | 5 | 22 Jump Street | 3.0% | ||
Box office revenues for the nine months ended September 30, 2015 were $514.8 million, an increase of $14.6 million or 2.9% over the prior year due to the 3.7% increase in attendance more than offsetting the impact of the lower BPP in the current year period compared to the 2014 period. The attendance and box office revenues increases in the period were due to the strong performance of the film product in the second and third quarters of 2015. These increases were partially offset by the impact of extreme weather conditions in Atlantic Canada in the first quarter negatively impacting theatre attendance in the Atlantic Provinces in 2015.
Cineplex's BPP for the period decreased $0.07, or 0.8%, from $9.16 in the prior year period to $9.09 in the current period. This decrease was primarily due to the decrease in revenues from 3D product in the current period compared to the prior year period, as well as a higher percentage of child admissions in the current period compared to the prior year period. Premium priced offerings accounted for 36.0% of Cineplex's box office revenues in the nine months ended September 30, 2015, compared to 40.7% in the prior year period.
Food service revenues
The following table highlights the movement in food service revenues, attendance and CPP for the quarter and the year to date (in thousands of Canadian dollars, except attendance and same store attendance reported in thousands of patrons, and per patron amounts):
| Food service revenues | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Food service revenues | $ | 105,464 | $ | 92,094 | 14.5% | $ | 304,646 | $ | 277,261 | 9.9% |
| Attendance (i) | 19,407 | 18,038 | 7.6% | 56,640 | 54,611 | 3.7% | ||||
| CPP (i) | $ | 5.43 | $ | 5.11 | 6.3% | $ | 5.38 | $ | 5.08 | 5.9% |
| Same store food service revenues (i) | $ | 102,839 | $ | 91,502 | 12.4% | $ | 295,430 | $ | 274,600 | 7.6% |
| Same store attendance (i) | 19,015 | 17,912 | 6.2% | 55,265 | 54,080 | 2.2% | ||||
| (i) See non-GAAP measures section of this news release. | ||||||||||
| Food service revenue continuity | Third Quarter | Year to Date | ||||||||
| Food Service |
Attendance | Food Service |
Attendance | |||||||
| 2014 as reported | $ | 92,094 | 18,038 | $ | 277,261 | 54,611 | ||||
| Same store attendance change | 5,635 | 1,103 | 6,016 | 1,185 | ||||||
| Impact of same store CPP change | 5,701 | - | 14,814 | - | ||||||
| New and acquired theatres (i) | 2,434 | 378 | 7,285 | 1,045 | ||||||
| Disposed and closed theatres (i) | (400 | ) | (112 | ) | (730 | ) | (201 | ) | ||
| 2015 as reported | $ | 105,464 | 19,407 | $ | 304,646 | 56,640 | ||||
| (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. | ||||||||||
Third Quarter
Food service revenues are comprised primarily of concession revenues, which includes food sales at theatre locations as well as non-theatre locations. Food service revenues increased $13.4 million, or 14.5% as compared to the prior year period primarily due to the 6.3% CPP increase and the 7.6% increase in attendance. CPP of $5.43 is a third quarter record for Cineplex. Expanded offerings outside of core food service products, including offerings at Cineplex's VIP Cinemas, have resulted in higher average transaction values, resulting in the higher CPP in the period.
Year to Date
Food service revenues increased $27.4 million, or 9.9% as compared to the prior year, due to the 5.9% increase in CPP and the 3.7% increase in attendance. The CPP of $5.38 in the current period is the highest CPP Cineplex has reported through the first nine months of a year.
While the 10% SCENE discount and SCENE points issued on food service combo purchases reduce individual transaction values which impacts CPP, Cineplex believes that this program drives incremental visits and food service purchases, resulting in higher overall food service revenues.
Media revenues
The following table highlights the movement in media revenues for the quarter and the year to date (in thousands of Canadian dollars):
| Media revenues | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Cineplex Media | $ | 25,029 | $ | 22,463 | 11.4% | $ | 70,363 | $ | 60,864 | 15.6% |
| Cineplex Digital Media | 9,267 | 9,529 | -2.7% | 28,025 | 26,473 | 5.9% | ||||
| Total media revenues | $ | 34,296 | $ | 31,992 | 7.2% | $ | 98,388 | $ | 87,337 | 12.7% |
| (i) Certain prior period comparatives have been reclassified to conform to the current period's presentation. | ||||||||||
Third Quarter
Total media revenues increased 7.2% to $34.3 million in the third quarter of 2015 compared to the prior year period, and represents a third quarter media revenues record for Cineplex. This increase was largely due to higher Cineplex Media revenues, up $2.6 million as compared to the prior year period due primarily to higher showtime revenues resulting from increases in the automotive sector advertising.
Cineplex Digital Media revenues decreased $0.3 million due to lower project revenues as compared to the prior year period due to the timing of project installations in 2015 as compared to 2014. This decrease was partially offset by higher advertising and service revenues on various networks including the TimsTV and Oxford shopping mall networks. Project revenues tend to fluctuate with the timing of clients' installation requirements, whereas other digital media revenue streams are more consistent period to period.
Year to Date
Total media revenues increased $11.1 million in the nine months ended September 30, 2015 compared to the prior year period. The increase was due to the $9.5 million increase in Cineplex Media revenues due primarily to higher showtime revenues and the $1.6 million increase in Cineplex Digital Media revenues, primarily due to higher digital advertising revenues including advertising on the TimsTV and Oxford shopping mall networks.
Other revenues
The following table highlights the movement in games and other revenues for the quarter and the year to date (in thousands of Canadian dollars):
| Other revenues | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Games | $ | 2,523 | $ | 1,813 | 39.2% | $ | 7,016 | $ | 5,450 | 28.7% |
| Other | 13,392 | 10,517 | 27.3% | 38,707 | 32,239 | 20.1% | ||||
| Total other revenues | $ | 15,915 | $ | 12,330 | 29.1% | $ | 45,723 | $ | 37,689 | 21.3% |
Third Quarter
Other revenues include gaming revenues as well as revenues from the Cineplex Store, promotional activities, screenings, private parties, corporate events, breakage on gift card and voucher sales, revenues from in-theatre guest service initiatives and management fees. Games revenues do not include Cineplex's 50% share of results of CSI, which are included in "Share of income of joint ventures". Subsequent to the period end, Cineplex acquired the 50% of CSI that it did not already own on October 1, 2015. Effective that date, Cineplex will cease to recognize its share of income of CSI and instead will consolidate the results of CSI.
Other revenues increased 29.1% to $15.9 million in the third quarter of 2015 compared to the prior year period. This increase was primarily due to additional revenues arising from enhanced guest service initiatives and increased SCENE partner revenues. Games revenues increased due in part to the increased attendance in the period as well as the conversion of select gaming rooms to XSCAPE Entertainment Centres. Included in Other are increases in various in-theatre revenues including auditorium rentals and film festival revenues.
Year to Date
For the year to date period, other revenues have increased 21.3% compared to the prior year period primarily due to additional revenues arising from enhanced guest service initiatives and increased SCENE partner revenues. The games revenues increase is due to increased attendance, the conversion of select gaming rooms to XSCAPE Entertainment Centres as well as the addition of new XSCAPE locations since the prior year period. A $0.4 million one-time adjustment in the second quarter of 2015 also impacted the games revenues increase period over period.
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 Canadian dollars, except film cost percentage):
| Film cost | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Film cost | $ | 91,567 | $ | 85,499 | 7.1% | $ | 273,893 | $ | 260,907 | 5.0% |
| Film cost percentage (i) | 53.1% | 52.6% | 0.5% | 53.2% | 52.2% | 1.0% | ||||
| (i) See non-GAAP measures section of this news release. | ||||||||||
Third Quarter
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. The increase in film cost was due to the higher attendance and the higher film cost percentage in the period compared to the prior year period. The increase in film cost percentage in the current period is primarily due to the settlement rate on the top films during the third quarter of 2015 being higher than the average film settlement rate in the 2014 period.
Year to Date
The year to date increase in film cost expense was due to the 1.0% increase in the film cost percentage and the 3.7% increase in attendance in the period. The increase in film cost percentage in the current year is as a result of the concentration of box office revenues from a few titles, with the top four films in the current period, which rank in the top ten grossing films of all-time, accounting for 22.4% of box office revenues (2014 - top four represented 16.5%).
Cost of food service
The following table highlights the movement in cost of food service and cost of food service as a percentage of food service revenues ("concession cost percentage") for the quarter and the year to date (in thousands of Canadian dollars, except percentages and margins per patron):
| Cost of food service | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Cost of food service | $ | 22,325 | $ | 19,848 | 12.5% | $ | 65,694 | $ | 59,876 | 9.7% |
| Concession cost percentage (i) | 21.2% | 21.6% | -0.4% | 21.6% | 21.6% | -% | ||||
| Concession margin per patron (i) | $ | 4.28 | $ | 4.01 | 6.7% | $ | 4.22 | $ | 3.98 | 6.0% |
| (i) See non-GAAP measures section of this news release. | ||||||||||
Third Quarter
Cost of food service varies primarily with theatre attendance as well as the quantity and mix of offerings sold. The increase in the cost of food service as compared to the prior year period was due to higher food service revenues, partially offset by the 0.4% decrease in the concession cost percentage during the period. The concession margin per patron increased from $4.01 in the third quarter of 2014 to $4.28 in the same period in 2015, reflecting the impact of higher CPP and lower concession cost percentage during the period.
Year to Date
The increase in the cost of food service as compared to the prior year period was due to the higher food service revenues. The concession margin per patron increased from $3.98 in the prior year period to $4.22 in the current period, reflecting the impact of the higher CPP in the current period.
Despite the 10% discount offered to SCENE members and SCENE points offered on select offerings, which contributes to a higher concession cost percentage, Cineplex believes the SCENE program drives incremental attendance and purchase incidence which increases food service revenues and CPP.
Depreciation and amortization
The following table highlights the movement in depreciation and amortization expenses during the quarter and year to date (in thousands of Canadian dollars):
| Depreciation and amortization expenses | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Depreciation of property, equipment and leaseholds | $ | 20,225 | $ | 17,762 | 13.9% | $ | 59,098 | $ | 51,925 | 13.8% |
| Amortization of intangible assets and other | 1,886 | 1,903 | -0.9% | 5,715 | 5,603 | 2.0% | ||||
| Depreciation and amortization expenses as reported | $ | 22,111 | $ | 19,665 | 12.4% | $ | 64,813 | $ | 57,528 | 12.7% |
The quarterly increase in depreciation of property, equipment and leaseholds of $2.5 million and year to date increase of $7.2 million is primarily due to the impact of equipment and leasehold improvements relating to assets acquired through acquisitions, new theatre construction and other growth projects.
Loss on disposal of assets
The following table shows the movement in the loss on disposal of assets during the quarter and year to date (in thousands of Canadian dollars):
| Loss on disposal of assets | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Loss on disposal of assets | $ | 987 | $ | 834 | 18.3% | $ | 2,337 | $ | 2,767 | -15.5% |
During the third quarter of 2015, Cineplex recorded a loss of $1.0 million on the disposal of assets that were sold or otherwise disposed (2014 - $0.8 million). For the nine months ended September 30, 2015, disposal of assets resulted in a loss of $2.3 million on the disposal of assets that were sold or otherwise disposed of (2014 - $2.8 million, including a $0.6 million gain on the sale of land that was previously a drive-in theatre which is offset by losses on certain assets that were sold or otherwise disposed of).
Other costs
Other costs include three main sub-categories of expenses, including theatre occupancy expenses, which capture the rent and associated occupancy costs for Cineplex's various operations; other operating expenses, which include the costs related to running Cineplex's theatres and ancillary businesses; 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 year to date (in thousands of Canadian dollars):
| Other costs | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Theatre occupancy expenses | $ | 51,239 | $ | 50,781 | 0.9% | $ | 152,821 | $ | 152,034 | 0.5% |
| Other operating expenses | 89,801 | 83,717 | 7.3% | 259,952 | 251,465 | 3.4% | ||||
| General and administrative expenses | 15,703 | 12,476 | 25.9% | 50,238 | 42,898 | 17.1% | ||||
| Total other costs | $ | 156,743 | $ | 146,974 | 6.6% | $ | 463,011 | $ | 446,397 | 3.7% |
Theatre occupancy expenses
The following table highlights the movement in theatre occupancy expenses for the quarter and year to date (in thousands of Canadian dollars):
| Theatre occupancy expenses | Third Quarter | Year to Date | ||||||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||
| Rent | $ | 34,055 | $ | 33,474 | 1.7% | $ | 101,512 | $ | 100,758 | 0.7% | ||||
| Other occupancy | 17,806 | 17,597 | 1.2% | 53,928 | 53,234 | 1.3% | ||||||||
| One-time items (i) | (622 | ) | (290 | ) | 114.5% | (2,619 | ) | (1,958 | ) | 33.8% | ||||
| Total | $ | 51,239 | $ | 50,781 | 0.9% | $ | 152,821 | $ | 152,034 | 0.5% | ||||
| (i) 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. | ||||||||||||||
| Theatre occupancy continuity | ||||||
| Third Quarter Occupancy |
Year to Date Occupancy |
|||||
| 2014 as reported | $ | 50,781 | $ | 152,034 | ||
| Impact of new and acquired theatres | 643 | 2,199 | ||||
| Impact of disposed theatres | (287 | ) | (1,414 | ) | ||
| Same store rent change (i) | 447 | 431 | ||||
| One-time items | (333 | ) | (661 | ) | ||
| Other | (12 | ) | 232 | |||
| 2015 as reported | $ | 51,239 | $ | 152,821 | ||
| (i) See non-GAAP measures section of this news release. | ||||||
Third Quarter
Theatre occupancy expenses increased $0.5 million during the third quarter of 2015 compared to the prior year period. This increase was primarily due to higher same store rent expense ($0.4 million) and the impact of new and acquired theatres net of disposed theatres ($0.4 million), partially offset by the impact of one-time credits ($0.3 million).
Year to Date
The increase in theatre occupancy expenses of $0.8 million for the 2015 period compared to the prior year was due to the impact of new and acquired theatres net of disposed theatres and higher same store rent expenses, partially offset by the impact of one-time credits.
Other operating expenses
The following table highlights the movement in other operating expenses during the quarter and the year to date (in thousands of Canadian dollars):
| Other operating expenses | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| Theatre payroll | $ | 35,530 | $ | 31,458 | 12.9% | $ | 103,554 | $ | 96,938 | 6.8% |
| Media | 12,819 | 13,793 | -7.1% | 39,464 | 39,670 | -0.5% | ||||
| Other | 41,452 | 38,466 | 7.8% | 116,934 | 114,857 | 1.8% | ||||
| Other operating expenses | $ | 89,801 | $ | 83,717 | 7.3% | $ | 259,952 | $ | 251,465 | 3.4% |
| Other operating continuity | ||||||
| Third Quarter Other Operating |
Year to Date Other Operating |
|||||
| 2014 as reported | $ | 83,717 | $ | 251,465 | ||
| Impact of new and acquired theatres | 2,087 | 5,191 | ||||
| Impact of disposed theatres | (334 | ) | (538 | ) | ||
| Same store payroll change (i) | 2,920 | 3,367 | ||||
| Marketing change | 1,504 | 1,513 | ||||
| Media change | (974 | ) | (206 | ) | ||
| New business initiatives change | 162 | (1,454 | ) | |||
| Other | 719 | 614 | ||||
| 2015 as reported | $ | 89,801 | $ | 259,952 | ||
| (i) See non-GAAP measures section of this news release. | ||||||
Third Quarter
Other operating expenses during the third quarter of 2015 increased $6.1 million or 7.3% compared to the prior year period. The major components of the increase were the net impact of new and acquired theatres net of disposed theatres ($1.8 million), higher marketing expenses ($1.5 million) due to expenses incurred supporting film product for which Cineplex has distribution rights as well as the timing of campaigns in the 2015 period compared to 2014, higher same store payroll due to higher business volumes and minimum wage increases in certain provinces ($2.9 million) and a $0.7 million increase in the Other category. These increases were partially offset by a $1.0 million decrease in media expenses due in part to the prior year period including more equipment sales for digital media, which have higher costs associated with fulfillment than advertising sales and digital media services.
Year to Date
For the nine months ended September 30, 2015, other operating expenses increased $8.5 million or 3.4% compared to the prior year period. The major components of this increase were the net impact of new and acquired theatres net of disposed theatres ($4.7 million), higher same store payroll costs of $3.4 million due to higher business volumes and minimum wage increases in certain provinces, and the higher marketing expenses ($1.5 million) discussed above. These increases were partially offset by lower spending on new business initiatives due in part to one-time digital platform development costs incurred in the prior year period ($1.5 million).
The $0.6 million increase in the Other category was primarily due to a $1.6 million increase in SCENE costs due to the growing membership base and support for the SportChek and CARA partnerships and a $0.7 million increase in same store utility costs. These increases were partially offset by lower 3D royalty expenses due to lower 3D attendance in the 2015 period compared to the prior year ($1.3 million) and lower ongoing theatre maintenance costs due to the timing of repairs in the 2015 and 2014 periods.
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 net of these costs (in thousands of Canadian dollars):
| G&A expenses | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| G&A excluding LTIP and option plan expense | $ | 13,342 | $ | 11,962 | 11.5% | $ | 40,948 | $ | 39,214 | 4.4% |
| LTIP (i) | 1,931 | 69 | NM | 8,023 | 2,393 | 235.3% | ||||
| Option plan | 430 | 445 | -3.4% | 1,267 | 1,291 | -1.9% | ||||
| G&A expenses as reported | $ | 15,703 | $ | 12,476 | 25.9% | $ | 50,238 | $ | 42,898 | 17.1% |
| (i) LTIP includes the expense for the LTIP program as well as the expense for the executive and Board deferred share unit plans. | ||||||||||
Third Quarter
G&A expenses increased $3.2 million during the third quarter of 2015 compared to the prior year period due to higher LTIP expenses. This increase was due to the prior year period including an adjustment relating to the variance in performance results for the 2014 period. The $1.4 million increase in G&A excluding LTIP and option plan expense is due primarily to higher head office payroll and higher professional fees.
Year to Date
G&A expenses for the year to date period increased $7.3 million compared to the prior year period, due to a $5.6 million increase in LTIP expense as a result of the larger increase in the average closing Share price for the 90 days prior to September 30, 2015 as compared to the prior year period as well as the prior year period including an adjustment relating to the variance in performance results for the 2014 period. The $1.9 million increase in G&A excluding LTIP and option expense is due to higher head office payroll and higher professional fees.
EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") (see non-GAAP measures section of this news release)
The following table presents EBITDA and adjusted EBITDA for the three and nine months ended September 30, 2015 as compared to the prior year periods (expressed in thousands of Canadian dollars, except adjusted EBITDA margin):
| EBITDA | Third Quarter | Year to Date | ||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||
| EBITDA | $ | 57,884 | $ | 46,898 | 23.4% | $ | 161,222 | $ | 134,654 | 19.7% |
| Adjusted EBITDA | $ | 59,081 | $ | 48,042 | 23.0% | $ | 164,639 | $ | 138,353 | 19.0% |
| Adjusted EBITDA margin | 18.0% | 16.1% | 1.9% | 17.1% | 15.3% | 1.8% | ||||
Adjusted EBITDA for the third quarter of 2015 increased $11.0 million, or 23.0%, as compared to the prior year period. The increase as compared to the prior year period was primarily due to the higher attendance resulting in higher exhibition revenues, and the higher contribution from Cineplex Media. Adjusted EBITDA margin, calculated as adjusted EBITDA divided by total revenues, was 18.0% in the current period, up from 16.1% in the prior year period.
Adjusted EBITDA for the nine months ended September 30, 2015 increased $26.3 million, or 19.0%, as compared to the prior year period, due to the higher revenues in all major categories compared to the prior year period. Adjusted EBITDA margin for the period was 17.1%, an increase of 1.8% from 15.3% in the prior year period.
ADJUSTED FREE CASH FLOW
For the third quarter of 2015, adjusted free cash flow per common share of Cineplex was $0.57 as compared to $0.57 in the prior year period. The declared dividends per common share of Cineplex were $0.39 in the third quarter of 2015 and $0.38 in the prior year period. During the twelve months ended September 30, 2015, Cineplex generated adjusted free cash flow per Share of $2.33, compared to $2.21 per Share in the year ended September 30, 2014. Cineplex declared dividends per Share of $1.53 and $1.47, respectively, in each year. The payout ratios for these periods were approximately 65.5% and 66.2%, respectively. Adjusted free cash flow per common share and the payout ratios for the 2014 periods were positively impacted by Cineplex's use of loss carryforwards acquired through Cineplex's acquisition of AMC Ventures Inc. in 2012, resulting in Cineplex's cash income taxes in 2014 being substantially reduced. None of those losses are available to be used to reduce taxable income in 2015.
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. Management uses adjusted EBITDA and adjusted free cash flow to evaluate performance primarily because of the significant effect certain unusual or non-recurring charges and other items have on EBITDA from period to period.
EBITDA is calculated by adding back to net income, income tax expense, depreciation and amortization expense, and interest expense net of interest income. Adjusted EBITDA is calculated by adjusting EBITDA for losses on disposal of assets, the share of income of CDCP and depreciation, amortization, interest and taxes of Cineplex's other joint ventures. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA 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 to EBITDA and adjusted EBITDA 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.
Per Patron Revenue Metrics
Cineplex reviews per patron metrics as they relate to box office revenue and concession 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:
Attendance: 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 attendance for the period.
BPP excluding premium priced product: Calculated as total box office revenues for the period, less box office revenues from 3D, UltraAVX, VIP and IMAX product; divided by total paid attendance for the period, less paid attendance for 3D, UltraAVX, VIP and IMAX product.
CPP: Calculated as total food service revenues divided by total paid attendance for the period.
Premium priced product: Defined as 3D, UltraAVX, IMAX and VIP film product.
Concession margin per patron: Calculated as total food service revenues less total cost of food service, divided by attendance for the period.
Same Store Analysis
Cineplex reviews and reports same store metrics relating to box office revenues, concession revenues, rent expense and payroll expense, as these measures are widely used in the theatre exhibition industry as well as other retail industries. Same store 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 September 30, 2015, the impact of the four locations that have been opened or acquired and the two locations that have been closed have been excluded, resulting in 158 theatres being included in the same store metrics. For the nine months ended September 30, 2015, the impact of the six locations that have been opened or acquired and the three locations that have been closed have been excluded, resulting in 156 theatres being included in the same store metrics.
Cost of sales percentages
Cineplex reviews and reports cost of sales percentages for its two largest revenue sources, box office revenues and concession 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.
Concession cost percentage: Calculated as total food service costs divided by total 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") 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, risks generally encountered in the relevant industry, competition, customer, legal, taxation and accounting matters.
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 "Risk Management" section of Cineplex's management's discussion and analysis.
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 or the Partnership, their financial or operating results or their 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, can be found on SEDAR at www.sedar.com.
About Cineplex Inc.
Cineplex is one of Canada's leading entertainment companies and operates one of the most modern and fully digitized motion picture theatre circuits in the world. A top-tier Canadian brand, Cineplex operates numerous businesses including theatrical exhibition, food services, gaming, alternative programming (Front Row Centre Events), Cineplex Media, Cineplex Digital Solutions, Cineplex Digital Networks, and the online sale of home entertainment content through CineplexStore.com and on apps embedded in various electronic devices. Cineplex is also a joint venture partner in SCENE - Canada's largest entertainment loyalty program.
Cineplex is headquartered in Toronto, Canada, and operates 162 theatres with 1,652 screens from coast to coast, serving approximately 74 million guests annually through the following theatre brands: Cineplex Odeon, SilverCity, Galaxy Cinemas, Scotiabank Theatres, Cineplex Cinemas and Cineplex VIP Cinemas. Cineplex also owns and operates the UltraAVX, Poptopia, and Outtakes brands. Cineplex trades on the Toronto Stock Exchange under the symbol CGX. More information is available at Cineplex.com.
Further information can be found in the disclosure documents filed by Cineplex with the securities regulatory authorities, available at www.sedar.com.
You are cordially invited to participate in a teleconference call with the management of Cineplex (TSX: CGX) to review our quarterly results. Ellis Jacob, President and Chief Executive Officer and Gord Nelson, Chief Financial Officer, will host the call. The teleconference call is scheduled for:
| Tuesday, November 10, 2015 |
| 10:00 a.m. Eastern Time |
In order to participate in the conference call, please dial 416-849-1847 or outside of Toronto dial 1-866-530-1554 at least five to ten minutes prior to 10:00 a.m. Eastern Time. Please quote the conference ID 2912996 to access the call.
- If you cannot participate in the live mode, a replay will be available. Please dial 647-436-0148 or 1-888-203-1112 and enter code 2912996#. The replay will begin at 1:00 p.m. Eastern Time on Tuesday, November 10, 2015 and end at 1:00 p.m. Eastern Time on Tuesday, November 17, 2015.
- Note that media will be participating in the call in listen-only mode.
- Thank you in advance for your interest and participation.
| Cineplex Inc. | ||||||
| Interim Condensed Consolidated Balance Sheets | ||||||
| (Unaudited) | ||||||
| (expressed in thousands of Canadian dollars) | ||||||
| September 30, | December 31, | |||||
| 2015 | 2014 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 24,795 | $ | 34,367 | ||
| Trade and other receivables | 56,576 | 101,462 | ||||
| Inventories | 8,086 | 7,978 | ||||
| Prepaid expenses and other current assets | 12,697 | 8,102 | ||||
| 102,154 | 151,909 | |||||
| Non-current assets | ||||||
| Property, equipment and leaseholds | 507,348 | 495,532 | ||||
| Deferred income taxes | 6,531 | 6,971 | ||||
| Interests in joint ventures | 47,307 | 46,457 | ||||
| Intangible assets | 123,247 | 109,746 | ||||
| Goodwill | 801,335 | 798,801 | ||||
| $ | 1,587,922 | $ | 1,609,416 | |||
| Liabilities | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued expenses | $ | 105,631 | $ | 159,152 | ||
| Share-based compensation | 7,225 | 6,160 | ||||
| Dividends payable | 8,201 | 7,877 | ||||
| Income taxes payable | 16,835 | 9,735 | ||||
| Deferred revenue | 107,103 | 149,644 | ||||
| Finance lease obligations | 2,888 | 2,670 | ||||
| Fair value of interest rate swap agreements | 1,372 | 692 | ||||
| 249,255 | 335,930 | |||||
| Non-current liabilities | ||||||
| Share-based compensation | 17,728 | 15,504 | ||||
| Long-term debt | 308,194 | 229,754 | ||||
| Fair value of interest rate swap agreements | 4,482 | 2,117 | ||||
| Finance lease obligations | 12,811 | 15,008 | ||||
| Post-employment benefit obligations | 7,154 | 6,977 | ||||
| Other liabilities | 171,703 | 173,550 | ||||
| Convertible debentures | 100,211 | 98,727 | ||||
| 622,283 | 541,637 | |||||
| Total liabilities | 871,538 | 877,567 | ||||
| Equity | ||||||
| Share capital | 854,595 | 854,073 | ||||
| Deficit | (138,775 | ) | (123,771 | ) | ||
| Hedging reserves and other | (5,376 | ) | (3,405 | ) | ||
| Contributed surplus | 758 | 4,952 | ||||
| Cumulative translation adjustment | 324 | - | ||||
| Total equity attributable to owners of Cineplex | 711,526 | 731,849 | ||||
| Non-controlling interests | 4,858 | - | ||||
| Total equity | 716,384 | 731,849 | ||||
| $ | 1,587,922 | $ | 1,609,416 | |||
| Cineplex Inc. | ||||||||||||
| Interim Condensed Consolidated Statements of Operations | ||||||||||||
| (Unaudited) | ||||||||||||
| (expressed in thousands of Canadian dollars, except net income per share) | ||||||||||||
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||
| Revenues | ||||||||||||
| Box office | $ | 172,571 | $ | 162,574 | $ | 514,814 | $ | 500,218 | ||||
| Food service | 105,464 | 92,094 | 304,646 | 277,261 | ||||||||
| Media | 34,296 | 31,992 | 98,388 | 87,337 | ||||||||
| Other | 15,915 | 12,330 | 45,723 | 37,689 | ||||||||
| 328,246 | 298,990 | 963,571 | 902,505 | |||||||||
| Expenses | ||||||||||||
| Film cost | 91,567 | 85,499 | 273,893 | 260,907 | ||||||||
| Cost of food service | 22,325 | 19,848 | 65,694 | 59,876 | ||||||||
| Depreciation and amortization | 22,111 | 19,665 | 64,813 | 57,528 | ||||||||
| Loss on disposal of assets | 987 | 834 | 2,337 | 2,767 | ||||||||
| Other costs | 156,743 | 146,974 | 463,011 | 446,397 | ||||||||
| Share of income of joint ventures | (1,260 | ) | (1,063 | ) | (2,586 | ) | (2,096 | ) | ||||
| Interest expense | 5,919 | 5,472 | 17,149 | 16,272 | ||||||||
| Interest income | (46 | ) | (172 | ) | (134 | ) | (285 | ) | ||||
| 298,346 | 277,057 | 884,177 | 841,366 | |||||||||
| Income before income taxes | 29,900 | 21,933 | 79,394 | 61,139 | ||||||||
| Provision for income taxes | ||||||||||||
| Current | 8,761 | 1,007 | 21,836 | 2,387 | ||||||||
| Deferred | (300 | ) | 5,012 | 114 | 14,562 | |||||||
| 8,461 | 6,019 | 21,950 | 16,949 | |||||||||
| Net income | $ | 21,439 | $ | 15,914 | $ | 57,444 | $ | 44,190 | ||||
| Attributable to: | ||||||||||||
| Owners of Cineplex | $ | 21,520 | $ | 15,914 | $ | 57,525 | $ | 44,190 | ||||
| Non-controlling interests | (81 | ) | - | (81 | ) | - | ||||||
| Net income | $ | 21,439 | $ | 15,914 | $ | 57,444 | $ | 44,190 | ||||
| Basic net income per share attributable to owners of Cineplex | $ | 0.34 | $ | 0.25 | $ | 0.91 | $ | 0.70 | ||||
| Diluted net income per share attributable to owners of Cineplex | $ | 0.34 | $ | 0.25 | $ | 0.90 | $ | 0.70 | ||||
| Cineplex Inc. | ||||||||||||
| Interim Condensed Consolidated Statements of Comprehensive Income | ||||||||||||
| (Unaudited) | ||||||||||||
| (expressed in thousands of Canadian dollars) | ||||||||||||
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||
| Net income | $ | 21,439 | $ | 15,914 | $ | 57,444 | $ | 44,190 | ||||
| Other comprehensive income (loss) | ||||||||||||
| Items that will be reclassified subsequently to net income: | ||||||||||||
| (Loss) income on hedging instruments | (189 | ) | 73 | (2,689 | ) | (1,483 | ) | |||||
| Associated deferred income taxes recovery (expense) | 50 | (19 | ) | 718 | 392 | |||||||
| Foreign currency translation adjustment | 324 | - | 324 | - | ||||||||
| Other comprehensive income (loss) | 185 | 54 | (1,647 | ) | (1,091 | ) | ||||||
| Comprehensive income | $ | 21,624 | $ | 15,968 | $ | 55,797 | $ | 43,099 | ||||
| Attributable to: | ||||||||||||
| Owners of Cineplex | $ | 21,705 | $ | 15,968 | $ | 55,878 | $ | 43,099 | ||||
| Non-controlling interests | (81 | ) | - | (81 | ) | - | ||||||
| Comprehensive income | $ | 21,624 | $ | 15,968 | $ | 55,797 | $ | 43,099 | ||||
| Cineplex Inc. | |||||||||||||||||||
| Interim Condensed Consolidated Statements of Changes in Equity | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| (expressed in thousands of Canadian dollars) | |||||||||||||||||||
| For the nine months ended September 30, 2015 and 2014 | |||||||||||||||||||
| Share capital |
Contributed surplus |
Hedging and other reserves |
Cumulative translation adjustment |
Deficit | Non-controlling interests | Total | |||||||||||||
| Balance - January 1, 2015 | $ | 854,073 | $ | 4,952 | $ | (3,405 | ) | $ | - | $ | (123,771 | ) | $ | - | $ | 731,849 | |||
| Net income | - | - | - | - | 57,444 | (81 | ) | 57,444 | |||||||||||
| Other comprehensive (loss) | - | - | (1,971 | ) | 324 | - | - | (1,647 | ) | ||||||||||
| Total comprehensive income | - | - | (1,971 | ) | 324 | 57,525 | (81 | ) | 55,797 | ||||||||||
| Dividends declared | - | - | - | - | (72,529 | ) | - | (72,529 | ) | ||||||||||
| Share option expense | - | 1,267 | - | - | - | - | 1,267 | ||||||||||||
| Issuance of shares on exercise of options | 522 | (522 | ) | - | - | - | - | - | |||||||||||
| WGN purchase obligation | - | (4,939 | ) | - | - | - | - | (4,939 | ) | ||||||||||
| WGN non-controlling interests recognized on acquisition | - | - | - | - | - | 4,939 | 4,939 | ||||||||||||
| Balance - September 30, 2015 | $ | 854,595 | $ | 758 | $ | (5,376 | ) | $ | 324 | $ | (138,775 | ) | $ | 4,858 | $ | 716,384 | |||
| Balance - January 1, 2014 | $ | 853,411 | $ | 3,899 | $ | (1,715 | ) | $ | - | $ | (107,323 | ) | $ | - | $ | 748,272 | |||
| Net income | - | - | - | - | 44,190 | - | 44,190 | ||||||||||||
| Other comprehensive (loss) | - | - | (1,091 | ) | - | - | - | (1,091 | ) | ||||||||||
| Total comprehensive income | (1,091 | ) | - | 44,190 | - | 43,099 | |||||||||||||
| Dividends declared | - | - | - | - | (69,582 | ) | - | (69,582 | ) | ||||||||||
| Share option expense | - | 1,291 | - | - | - | - | 1,291 | ||||||||||||
| Issuance of shares on exercise of options | 485 | (485 | ) | - | - | - | - | - | |||||||||||
| Balance - September 30, 2014 | $ | 853,896 | $ | 4,705 | $ | (2,806 | ) | $ | - | $ | (132,715 | ) | $ | - | $ | 723,080 | |||
| Cineplex Inc. | |||||||||||||
| Interim Condensed Consolidated Statements of Cash Flows | |||||||||||||
| (Unaudited) | |||||||||||||
| (expressed in thousands of Canadian dollars) | |||||||||||||
| Three months ended September 30, |
Nine months ended September 30, |
||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||
| Cash provided by (used in) | |||||||||||||
| Operating activities | |||||||||||||
| Net income | $ | 21,439 | $ | 15,914 | $ | 57,444 | $ | 44,190 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||||
| Depreciation and amortization of property, equipment and leaseholds, and intangible assets | 22,111 | 19,665 | 64,813 | 57,528 | |||||||||
| Amortization of tenant inducements, rent averaging liabilities and fair value lease contract liabilities | (1,947 | ) | (1,769 | ) | (5,950 | ) | (4,648 | ) | |||||
| Accretion of debt issuance costs and other non-cash interest | 1,403 | 1,230 | 3,995 | 3,581 | |||||||||
| Loss on disposal of assets | 987 | 834 | 2,337 | 2,767 | |||||||||
| Deferred income taxes | (300 | ) | 5,012 | 114 | 14,562 | ||||||||
| Interest rate swap agreements - non-cash interest | 62 | (27 | ) | 149 | (73 | ) | |||||||
| Non-cash share-based compensation | 429 | 445 | 1,266 | 1,291 | |||||||||
| Accretion of convertible debentures | 493 | 460 | 1,484 | 1,398 | |||||||||
| Net change in interests in joint ventures | 875 | 1,337 | (2,224 | ) | 97 | ||||||||
| Tenant inducements | - | 555 | 757 | 3,397 | |||||||||
| Changes in operating assets and liabilities | (9,280 | ) | (20,746 | ) | (49,937 | ) | (79,257 | ) | |||||
| Net cash provided by operating activities | 36,272 | 22,910 | 74,248 | 44,833 | |||||||||
| Investing activities | |||||||||||||
| Proceeds from sale of assets | - | 1 | 108 | 405 | |||||||||
| Purchases of property, equipment and leaseholds | (25,560 | ) | (33,466 | ) | (72,885 | ) | (84,161 | ) | |||||
| Acquisition of businesses, net of cash acquired | (12,472 | ) | - | (15,630 | ) | (2,466 | ) | ||||||
| Intangible assets addition | (355 | ) | - | (469 | ) | (2,750 | ) | ||||||
| Net cash received from CDCP | 407 | 140 | 1,163 | 909 | |||||||||
| Net cash used in investing activities | (37,980 | ) | (33,325 | ) | (87,713 | ) | (88,063 | ) | |||||
| Financing activities | |||||||||||||
| Dividends paid | (24,603 | ) | (23,620 | ) | (72,204 | ) | (69,260 | ) | |||||
| Borrowings under credit facility, net | 28,000 | 29,000 | 78,000 | 79,000 | |||||||||
| Payments under finance leases | (671 | ) | (592 | ) | (1,980 | ) | (1,778 | ) | |||||
| Net cash provided by financing activities | 2,726 | 4,788 | 3,816 | 7,962 | |||||||||
| Effect of exchange rate differences on cash | 77 | - | 77 | - | |||||||||
| Increase (decrease) in cash and cash equivalents | 1,095 | (5,627 | ) | (9,572 | ) | (35,268 | ) | ||||||
| Cash and cash equivalents - Beginning of period | 23,700 | 14,499 | 34,367 | 44,140 | |||||||||
| Cash and cash equivalents - End of period | $ | 24,795 | $ | 8,872 | $ | 24,795 | $ | 8,872 | |||||
| Supplemental information | |||||||||||||
| Cash paid for interest | $ | 2,354 | $ | 2,579 | $ | 9,632 | $ | 10,000 | |||||
| Cash paid for income taxes | $ | 1,998 | $ | 186 | $ | 13,674 | $ | 2,172 | |||||
| Cineplex Inc. | |||||||||
| Interim Consolidated Supplemental Information | |||||||||
| (Unaudited) | |||||||||
| (expressed in thousands of Canadian dollars) | |||||||||
| Reconciliation to Adjusted EBITDA | |||||||||
| Three months ended September 30, |
Nine months ended September 30, |
||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||
| Net income | $ | 21,439 | $ | 15,914 | $ | 57,444 | $ | 44,190 | |
| Depreciation and amortization | 22,111 | 19,665 | 64,813 | 57,528 | |||||
| Interest expense | 5,919 | 5,472 | 17,149 | 16,272 | |||||
| Interest income | (46) | (172) | (134) | (285) | |||||
| Current income tax expense | 8,761 | 1,007 | 21,836 | 2,387 | |||||
| Deferred income tax recovery (expense) | (300) | 5,012 | 114 | 14,562 | |||||
| EBITDA | $ | 57,884 | $ | 46,898 | $ | 161,222 | $ | 134,654 | |
| Loss on disposal of assets | 987 | 834 | 2,337 | 2,767 | |||||
| CDCP equity income (i) | (428) | (388) | (720) | (1,008) | |||||
| Non-controlling interest EBITDA of WGN | 34 | - | 34 | - | |||||
| Depreciation and amortization - joint ventures (ii) | 522 | 520 | 1,539 | 1,604 | |||||
| Joint venture taxes and interest (ii) | 82 | 178 | 227 | 336 | |||||
| Adjusted EBITDA | $ | 59,081 | $ | 48,042 | $ | 164,639 | $ | 138,353 | |
- CDCP equity income not included in adjusted EBITDA as CDCP is a limited-life financing vehicle that is funded by virtual print fees collected from distributors.
- Includes the joint ventures with the exception of CDCP (see (i) above).
| Cineplex Inc. | |||||||||||||
| Interim 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 September 30, |
Nine months ended September 30, |
||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||
| Cash provided by operating activities | $ | 36,272 | $ | 22,910 | $ | 74,248 | $ | 44,833 | |||||
| Less: Total capital expenditures net of proceeds on sale of assets | (25,560 | ) | (33,465 | ) | (72,777 | ) | (83,756 | ) | |||||
| Standardized free cash flow | 10,712 | (10,555 | ) | 1,471 | (38,923 | ) | |||||||
| Add/(Less): | |||||||||||||
| Changes in operating assets and liabilities (i) | 9,280 | 20,746 | 49,937 | 79,257 | |||||||||
| Changes in operating assets and liabilities of joint ventures (i) | (2,135 | ) | (2,400 | ) | (362 | ) | (2,193 | ) | |||||
| Tenant inducements (ii) | - | (555 | ) | (757 | ) | (3,397 | ) | ||||||
| Principal component of finance lease obligations | (671 | ) | (592 | ) | (1,980 | ) | (1,778 | ) | |||||
| Growth capital expenditures and other (iii) | 16,797 | 27,668 | 51,211 | 65,996 | |||||||||
| Share of income of joint ventures, net of non-cash depreciation (iv) | 1,436 | 1,431 | 3,632 | 3,095 | |||||||||
| Non-controlling interest EBITDA of WGN | 34 | - | 34 | - | |||||||||
| Net cash received from CDCP (iv) | 407 | 140 | 1,163 | 909 | |||||||||
| Adjusted free cash flow | $ | 35,860 | $ | 35,883 | $ | 104,349 | $ | 102,966 | |||||
| Average number of Shares outstanding | 63,086,232 | 62,987,992 | 63,064,784 | 62,965,606 | |||||||||
| Adjusted free cash flow per Share | $ | 0.568 | $ | 0.570 | $ | 1.655 | $ | 1.635 | |||||
| Dividends declared | $ | 0.390 | $ | 0.375 | $ | 1.150 | $ | 1.105 | |||||
- Changes in operating assets and liabilities are not considered a source or use of adjusted free cash flow.
- Tenant inducements received are for the purpose of funding new theatre capital expenditures and are not considered a source of adjusted free cash flow.
- Growth capital expenditures and other represent expenditures on Board approved projects as well as any expenditures for digital equipment that was contributed to CDCP, exclude maintenance capital expenditures, and are net of proceeds on asset sales. Cineplex's revolving facility is available to fund Board approved projects.
- 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.
Contact Information:
Gord Nelson
Chief Financial Officer
(416) 323-6602
Cineplex Inc.
Pat Marshall
Vice President Communications and Investor Relations
(416) 323-6648