Cineplex Inc. ("Cineplex") (TSX:CGX) today released its financial results for
the three months ended March 31, 2014.
First Quarter Results
----------------------------------------------------------------------------
Period over
Period
2014 2013 Change (i)
----------------------------------------------------------------------------
Total Revenues $ 280.0 million $ 248.1 million 12.9%
----------------------------------------------------------------------------
Attendance 17.3 million 16.2 million 6.7%
----------------------------------------------------------------------------
Net Income $ 5.1 million $ 8.8 million -42.5%
----------------------------------------------------------------------------
Box office revenues per patron
("BPP") (ii) $ 9.04 $ 8.97 0.8%
----------------------------------------------------------------------------
Concession revenues per patron
("CPP") (ii) $ 5.05 $ 4.69 7.7%
----------------------------------------------------------------------------
Adjusted EBITDA (ii) $ 30.9 million $ 31.7 million -2.6%
----------------------------------------------------------------------------
Adjusted EBITDA Margin (ii) 11.0% 12.8% -1.8%
----------------------------------------------------------------------------
Adjusted Free Cash Flow per
Share (ii) $0.2921 $0.3838 -23.9%
----------------------------------------------------------------------------
Earnings per Share ("EPS") -
Basic $ 0.08 $ 0.14 -42.9%
----------------------------------------------------------------------------
EPS - Diluted $ 0.08 $ 0.14 -42.9%
----------------------------------------------------------------------------
i. Period over period change calculated based on thousands of dollars
except percentage and per share values. Changes in percentage amounts
are calculated as 2014 value less 2013 value.
ii. 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.
"Total revenues for the first quarter of 2014 increased 12.9%, or $31.9 million
compared to the prior year, due largely to the contributions from our 2013
acquisitions of 24 Empire theatres and digital media company EK3 Technologies
Inc., subsequently renamed Cineplex Digital Networks," said Ellis Jacob,
President and CEO, Cineplex Entertainment. "Media revenues increased 49.3% year
over year primarily due to the acquisition of EK3 and a 13.0% increase in
pre-show and showtime advertising. New first quarter records were established
for BPP of $9.04 and CPP of $5.05 exceeding the records of $8.97 and $4.69 set
in the prior year period. The CPP of $5.05 set a new all-time record."
"Weaker film product during the quarter, combined with extreme weather
conditions in several areas of the country, and our continued investment in new
initiatives and increased promotional activity were the primary factors behind
adjusted EBITDA decreasing 2.6% to $30.9 million. In other areas of the
business, our SCENE loyalty program added 300,000 members to reach 5.6 million
during the quarter, the Cineplex Mobile app has now been downloaded more than 9
million times, and we announced a national partnership with Tim Hortons to
launch TimsTV in 2,200 existing Tim Hortons locations."
"Cineplex's strong balance sheet, continued investment in the enhancement of the
exhibition experience and the diversification of our business model positions us
well for the future. As such, we are pleased to announce a 4.2% dividend
increase to $1.50 per share on an annual basis from the current $1.44 per share.
This increase will be effective with the May 2014 dividend which will be paid in
June 2014. Cineplex has increased its dividend every year since the company
converted to a corporation."
KEY DEVELOPMENTS IN THE THREE MONTHS ENDED MARCH 31, 2014
The following describes certain key business initiatives and results undertaken
and achieved during the first quarter of 2014 in each of Cineplex's core
business areas:
THEATRE EXHIBITION
-- Reported first quarter box office revenues of $156.2 million, an
increase of $11.1 million over the $145.2 million reported in the prior
year period, primarily due to the impact of the Atlantic Theatres.
-- BPP was $9.04 for the period, a first quarter record for Cineplex, $0.07
higher than the previous record set in the prior year period.
-- Opened Cineplex's popular VIP Cinema concept at Cineplex Cinemas
Queensway and VIP, which includes a licensed lounge and valet parking.
MERCHANDISING
-- Reported first quarter food service revenues of $87.1 million, an
increase of $11.3 million over the $75.9 million reported in the prior
year period, primarily due to the impact of the Atlantic Theatres.
-- CPP was $5.05 for the period, the first time Cineplex's CPP has exceeded
$5.00 in a quarter, and $0.36 higher than the previous first quarter
record of $4.69 set in 2013.
-- Cineplex announced the acquisition of a 50% stake in YoYo's Yogurt Cafe
("YoYo's"), a London, Ontario-based self-serve frozen yogurt chain with
stores throughout the province. Cineplex plans to open new YoYo's
franchises in a number of new and existing theatres and standalone
locations in the future.
MEDIA
-- Reported first quarter Cineplex Media revenues of $16.0 million, which
exceeded the prior year media revenues by $1.8 million (13.0%), with
showtime and pre-show revenues accounting for the increase.
-- Cineplex Digital Media revenues were $8.4 million, $6.2 million higher
than the prior year period due to the acquisition of CDN in the third
quarter of 2013, which contributed revenues of $6.3 million in the
current period.
-- CDN and Tim Hortons announced national launch plans for TimsTV, one of
the largest digital programming networks in the Canadian restaurant and
retail sectors: an in-restaurant television channel showcasing Tim
Hortons content in a creative, informative and entertaining manner,
broadcast to 2,200 existing Tim Hortons restaurants in Canada and most
new Tim Hortons restaurants currently in development. Cineplex Media
will be selling the advertising to be shown on the TimsTV circuit when
the circuit is launched in the latter half of 2014.
-- Cineplex and the Bank of Nova Scotia ("Scotiabank") announced an
expanded sponsorship agreement, pursuant to which Scotiabank will be the
presenting sponsor for Cineplex VIP Cinemas, as well as expanding naming
rights for Scotiabank Theatres to three additional locations.
-- Announced an expansion of Cineplex TimePlay as part of the pre-show to
include 725 auditoriums across all ten provinces in Canada.
ALTERNATIVE PROGRAMMING
-- Alternative programming in the first quarter of 2014 included strong
performances from the Metropolitan Opera: Live in HD series, ethnic film
programming, performances from the National Theatre in London, sports
programming as well as the performance of Moulin Rouge performed by the
Royal Winnipeg Ballet and broadcast at select Cineplex theatres across
the country.
INTERACTIVE
-- Cineplex.com registered a 7% increase in page views, a 16% increase in
unique visitors and a 12% increase in visits during the first quarter of
2014 compared to the prior year period.
-- At March 31, 2014, the Cineplex app had been downloaded 9 million times
and recorded 274 million app sessions, ranking it as the 9th most
popular mobile brand with a 14.8% penetration of the Canadian mobile
market.
LOYALTY
-- Membership in the SCENE loyalty program increased 0.3 million members in
the period, reaching a membership of 5.6 million at March 31, 2014.
CORPORATE
-- Cineplex teamed up with the Canadian Olympic Committee to support its
#WeAreWinter Campaign to showcase and tell the stories of Canadian
Olympians on Cineplex's screens across Canada. This new collaboration
made Cineplex the Official Movie Partner of the Canadian Olympic Team.
Subsequent to the period end, on April 10, 2014, Cineplex committed to acquire
the 50% of the issued and outstanding equity of Cineplex Starburst Inc. ("CSI")
that Cineplex does not already own, for a minimum of $17.5 million in cash.
After the transaction closes in the third quarter of 2015, Cineplex will own
100% of the issued and outstanding equity of CSI.
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2014
Total revenues
Total revenues for the three months ended March 31, 2014 increased $31.9 million
(12.9%) to $280.0 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 news release, including adjusted
EBITDA, adjusted free cash flow, attendance, BPP, premium priced product, same
store metrics, CPP, film cost percentage, food service cost percentage and
concession margin per patron are defined and discussed in the non-GAAP measures
section at the end of this news release.
Box office revenues
The following table highlights the movement in box office revenues, attendance
and BPP for the quarter (in thousands of Canadian dollars, except attendance
reported in thousands of patrons, and per patron amounts, unless otherwise
noted):
----------------------------------------------------------------------------
Box office revenues First Quarter
2014 2013 Change
----------------------------------------------------------------------------
Box office revenues $ 156,225 $ 145,165 7.6%
Attendance (i) 17,272 16,191 6.7%
Box office revenue per patron
(i) $ 9.04 $ 8.97 0.8%
BPP excluding premium priced
product (i) $ 8.20 $ 8.19 0.1%
Canadian industry revenues (ii) -3.1%
Same store box office revenues
(i) $ 142,248 $ 143,398 -0.8%
Same store attendance (i) 15,567 15,996 -2.7%
% Total box from premium priced
product (i) 38.3% 35.5% 2.8%
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release
----------------------------------------------------------------------------
(ii) The Movie Theatre Association of Canada reported that the Canadian
exhibition industry reported a box office revenue decrease of 2.7% for the
period from January 3, 2014 to April 3, 2014 as compared to the period from
January 4, 2013 to April 4, 2013. On a basis consistent with Cineplex's
calendar reporting period (January 1 to March 31), the Canadian industry box
office revenue change is estimated to be a decrease of 3.1%.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Box office continuity First Quarter
Box
Office Attendance
----------------------------------------------------------------------------
2013 as reported $ 145,165 16,191
Same store attendance change (3,849) (429)
Impact of same store BPP change 2,699 -
New and acquired theatres (i) 13,785 1,686
Disposed and closed theatres (i) (1,575) (176)
----------------------------------------------------------------------------
2014 as reported $ 156,225 17,272
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release. Represents theatres
opened, acquired, disposed or closed subsequent to the start of the prior
year comparative period.
----------------------------------------------------------------------------
First Quarter
----------------------------------------------------------------------------
First Quarter 2014 Top First Quarter 2013 Top
Cineplex Films 3D % Box Cineplex Films 3D % Box
----------------------------------------------------------------------------
1 The Lego Movie X 12.8% 1 Oz: The Great and Powerful X 6.8%
2 Frozen X 5.8% 2 The Hobbit: An Unexpected X 6.0%
Journey
3 300: Rise of an Empire X 5.1% 3 Identity Thief 5.9%
4 The Wolf of Wall Street 5.0% 4 Django Unchained 5.1%
5 The Hobbit: The Desolation X 4.7% 5 Jack the Giant Slayer X 4.0%
of Smaug
----------------------------------------------------------------------------
Box office revenues increased $11.1 million, or 7.6%, to $156.2 million during
the first quarter of 2014, compared to $145.2 million recorded in the same
period in 2013. The increase was due to the impact of the Atlantic Theatres,
which contributed $10.8 million to box office revenues during the period, net of
a 0.8% decrease in same store box office revenues due to a 2.7% decrease in same
store attendance as compared to the prior year period. The Canadian industry
under performed as compared to the US industry in the period, as certain films
in the current period slate performed stronger in certain regions of the US
market than they did in Canada. Also impacting Cineplex's box office revenues
was the impact of extreme weather conditions in certain areas of the country in
the period, particularly in the Atlantic provinces, where theatre closures,
power outages and poor driving conditions deterred guests from visiting the
theatres.
BPP for the three months ended March 31, 2014 was $9.04, a $0.07 increase from
the prior year period. The increase in BPP was due to the impact of premium
priced product, which accounted for 38.3% of box office revenues in the current
period, compared to 35.5% in the prior year period. The increase in the
percentage of box office revenues from premium priced product was positively
impacted by additional installations of UltraAVX, 3D, IMAX and VIP screens since
March 31, 2013. The film slate in the current period had four of the top five
films screened in 3D, as compared to three in 3D in the prior year period.
Cineplex continues to invest in premium priced formats including 3D, UltraAVX,
IMAX and VIP thereby positioning itself to benefit from the premiums charged for
these offerings. The strong performance of Cineplex's premium-priced product
resulted in Cineplex's same-store results declining less than the Canadian
industry in the period, with the industry estimated to be down 3.1% in the
period compared to Cineplex's same-store decline of 0.8%.
Food service revenues
The following table highlights the movement in food service revenues, attendance
and CPP for the quarter (in thousands of Canadian dollars, except attendance and
same store attendance reported in thousands of patrons, and per patron amounts):
----------------------------------------------------------------------------
Food service revenues First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Food service revenues $ 87,143 $ 75,879 14.8%
Attendance (i) 17,272 16,191 6.7%
CPP (i) $ 5.05 $ 4.69 7.7%
Same store food service
revenues (i) $ 78,214 $ 75,248 3.9%
Same store attendance (i) 15,567 15,996 -2.7%
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Food service revenue continuity First Quarter
Food
Service Attendance
----------------------------------------------------------------------------
2013 as reported $ 75,879 16,191
Same store attendance change (2,020) (429)
Impact of same store CPP change 4,986 -
New and acquired theatres (i) 8,877 1,686
Disposed and closed theatres (i) (579) (176)
----------------------------------------------------------------------------
2014 as reported $ 87,143 17,272
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release. Represents theatres
opened, acquired, disposed or closed subsequent to the start of the prior
year comparative period.
----------------------------------------------------------------------------
First Quarter
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 $11.3 million, or 14.8% as compared to the prior year
period primarily due to the acquisition of the Atlantic Theatres, which
contributed $7.5 million to food service revenues in the period, and the CPP
increase from $4.69 in the first quarter of 2013 to $5.05 in the same period in
2014, a 7.7% increase and a quarterly record for Cineplex. Higher average
transaction values led to the higher revenues in the period, as expanded
offerings outside of core food service products are driving a higher average
order value. Despite a decline in same-store attendance of 2.7% in the period
compared to the prior year period, same store food service revenues increased
3.9% due to the record CPP.
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
(in thousands of Canadian dollars):
----------------------------------------------------------------------------
Media revenues First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Cineplex Media $ 15,951 $ 14,112 13.0%
Cineplex Digital Media 8,404 2,198 282.3%
---------------------------------------------
Total $ 24,355 $ 16,310 49.3%
----------------------------------------------------------------------------
Media revenues increased 49.3% to $24.4 million in the first quarter of 2014
compared to the prior year period. This increase was primarily due to higher
Cineplex Digital Media revenues, up $6.2 million as compared to the prior year
period due to the inclusion of CDN's revenues of $6.3 million. During the
period, CDN and Tim Hortons announced national launch plans for TimsTV, which is
expected to be deployed in the latter half of 2014.
Cineplex Media revenues exceeded the prior year period by $1.8 million primarily
due to higher showtime and pre-show revenues. While Cineplex sold pre-show and
showtime advertising for the Atlantic Theatres prior to their acquisition, the
acquisition benefited the current period results as Cineplex now retains 100% of
the media revenue where previously only a share was retained.
Other revenues
The following table highlights the movement in games and other revenues for the
quarter (in thousands of Canadian dollars):
----------------------------------------------------------------------------
Other revenues First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Games $ 1,878 $ 2,103 -10.7%
Other 10,418 8,613 21.0%
---------------------------------------------
Total other revenues $ 12,296 $ 10,716 14.7%
----------------------------------------------------------------------------
First 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".
Other revenues increased 14.7% to $12.3 million in the first quarter of 2014
compared to the prior year period. This increase was primarily due to additional
revenues arising from enhanced guest service initiatives and new business
initiatives, partially offset by a decrease of $0.2 million in games revenues.
The net games revenue decrease is due to a life-to-date one-time increase to
games revenues in the 2013 period of $0.5 million arising from a change in
accounting policy regarding the recognition of revenue on the sale of XSCAPE
gaming cards. Excluding this one-time amount, games revenues increased $0.3
million in the 2014 period compared to the same period in 2013.
Film cost
The following table highlights the movement in film cost and the film cost
percentage for the quarter (in thousands of Canadian dollars, except film cost
percentage):
----------------------------------------------------------------------------
Film cost First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Film cost $ 80,458 $ 73,389 9.6%
Film cost percentage (i) 51.5% 50.6% 0.9%
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release
----------------------------------------------------------------------------
First Quarter
Film cost varies primarily with box office revenue, and can vary from quarter to
quarter based on the relative strength of the titles exhibited during the
period. The increase in the first quarter of 2014 compared to the prior year
period was due to the increase in box office revenue and the impact of the 0.9%
increase in film cost percentage. The increase in film cost percentage is
primarily due to the settlement rate on the top films during the first quarter
of 2014 being higher than the average film settlement rate in the 2013 period.
Cost of food service
The following table highlights the movement in cost of food service and food
service cost as a percentage of food service revenues ("concession cost
percentage") for the quarter (in thousands of Canadian dollars, except
percentages and margins per patron):
----------------------------------------------------------------------------
Cost of food service First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Cost of food service $ 18,881 $ 16,274 16.0%
Concession cost percentage (i) 21.7% 21.4% 0.3%
Concession margin per patron
(i) $ 3.95 $ 3.68 7.3%
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release
----------------------------------------------------------------------------
First 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 the higher food service revenues
and the 0.3% increase in the concession cost percentage during the period. The
concession margin per patron increased from $3.68 in the first quarter of 2013
to $3.95 in the same period in 2014, reflecting the impact of the higher CPP
during the period.
Depreciation and amortization
The following table highlights the movement in depreciation and amortization
expenses during the quarter (in thousands of Canadian dollars):
----------------------------------------------------------------------------
Depreciation and amortization
expenses First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Depreciation of property,
equipment and leaseholds $ 16,830 $ 13,779 22.1%
Amortization of intangible
assets and other 1,838 3,519 -47.8%
---------------------------------------------
Depreciation and amortization
expenses as reported $ 18,668 $ 17,298 7.9%
----------------------------------------------------------------------------
The quarterly increase in depreciation of property, equipment and leaseholds of
$3.1 million is primarily due to the impact of equipment and leasehold
improvements relating to assets acquired through acquisitions and new theatre
construction.
The decrease in amortization of intangible assets and other in the first quarter
of 2014 compared to the prior year periods is due to the amortization of certain
trade name assets included in the prior year period that were phased out by
Cineplex at the end of 2013. These assets were previously classified as
indefinite life assets however during the fourth quarter of 2012 their
classification was changed to finite life with amortization recorded through
December 31, 2013. The 2014 period includes intangible amortization relating to
customer relationships and internally developed software acquired as part of the
acquisition of CDN which closed during the third quarter of 2013.
(Gain) loss on disposal of assets
The following table shows the movement in the (gain) loss on disposal of assets
during the quarter (in thousands of Canadian dollars):
----------------------------------------------------------------------------
(Gain) loss on disposal of
assets First Quarter
--------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
(Gain) loss on disposal of
assets $ (56) $ 1,062 NM
----------------------------------------------------------------------------
During the first quarter of 2014, Cineplex recorded a gain of $0.1 million on
the disposal of assets that were sold or otherwise disposed (2012 - loss of $1.1
million on certain assets that were sold or otherwise disposed of). The current
period gain is due to the sale of land that was previously a drive-in theatre
which resulted in a gain of $0.6 million, partially 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 the head office expenses. Please see the discussions below
for more details on these categories. The following table highlights the
movement in other costs for the quarter (in thousands of Canadian dollars):
----------------------------------------------------------------------------
Other costs First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Theatre occupancy expenses $ 51,024 $ 46,558 9.6%
Other operating expenses 84,211 64,468 30.6%
General and administrative
expenses 15,211 16,507 -7.9%
----------------------------------------------------------------------------
Total other costs $ 150,446 $ 127,533 18.0%
----------------------------------------------------------------------------
Theatre occupancy expenses
The following table highlights the movement in theatre occupancy expenses for
the quarter (in thousands of Canadian dollars):
----------------------------------------------------------------------------
Theatre occupancy expenses First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Rent $ 33,508 $ 31,099 7.7%
Other occupancy 17,793 16,447 8.2%
One-time items (i) (277) (988) -72.0%
----------------------------------------------------------------------------
Total $ 51,024 $ 46,558 9.6%
----------------------------------------------------------------------------
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 First Quarter
Occupancy
----------------------------------------------------------------------------
2013 as reported $ 46,558
Impact of new and acquired theatres 3,939
Impact of disposed theatres (479)
Same store rent change (i) 518
One-time items 711
Other (223)
----------------------------------------------------------------------------
2014 as reported $ 51,024
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release
----------------------------------------------------------------------------
First Quarter
Theatre occupancy expenses increased $4.5 million during the first quarter of
2014 compared to the prior year period. This increase was primarily due to the
impact of new and acquired theatres net of disposed theatres ($3.5 million, of
which $3.1 million relates to the Atlantic Theatres). The remaining increase was
due to higher same store rent expenses due to rent increases as certain theatre
properties and the impact of one-time items.
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 First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Theatre payroll $ 32,353 $ 28,016 15.5%
Media 12,410 5,660 119.3%
Other 39,448 30,792 28.1%
---------------------------------------------
Other operating expenses $ 84,211 $ 64,468 30.6%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other operating continuity First Quarter
Other Operating
----------------------------------------------------------------------------
2013 as reported $ 64,468
Impact of new and acquired theatres 6,863
Impact of disposed theatres (509)
Same store payroll change (i) 1,385
Marketing change 1,179
Media acquisitions 6,645
Media change, excluding media acquisitions 105
New business initiatives change 2,752
Other 1,323
----------------------------------------------------------------------------
2014 as reported $ 84,211
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release
----------------------------------------------------------------------------
First Quarter
Other operating expenses during the first quarter of 2014 increased $19.7
million or 30.6% compared to the prior year period. The major components of the
increase were the impact of CDN which was acquired in the third quarter of 2013
($6.6 million), the impact of new and acquired theatres net of disposed theatres
($6.4 million), developing business initiatives including the Cineplex Store
($2.8 million), higher same-store payroll costs ($1.4 million) due to in part to
minimum wage increases, higher marketing costs ($1.2 million) due to advertising
initiatives undertaken as part of Cineplex's partnership with the Canadian
Olympic Committee, and other expenses ($1.4 million, discussed below).
The major movements in the Other category include the following:
-- Higher same-store utility costs ($0.7 million) due in part to the cold
temperatures across parts of the country during the period;
-- The increase in 3D attendance due to stronger 3D product and the
additional 187 3D screens added since March 31, 2013 resulted in higher
3D royalty costs ($0.2 million) as well as contributing to the higher
cost of projector bulbs ($0.3 million) as 3D features require bulbs with
higher output which significantly reduces the life of the bulbs; and
-- Higher credit card service fees due to higher sales volumes ($0.3
million).
General and administrative expenses
The following table highlights the movement in general and administrative
("G&A") expenses during the quarter, including Share based compensation costs,
and G&A net of these costs (in thousands of Canadian dollars):
----------------------------------------------------------------------------
G&A expenses First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
G&A excluding LTIP and option
plan expense $ 13,729 $ 12,739 7.8%
LTIP (i) 1,079 3,360 -67.9%
Option plan 403 408 -1.2%
---------------------------------------------
G&A expenses as reported $ 15,211 $ 16,507 -7.9%
----------------------------------------------------------------------------
(i) LTIP includes the expense for the LTIP program as well as the expense for
the executive and Board deferred share unit plans.
First Quarter
G&A expenses decreased $1.3 million during the first quarter of 2014 compared to
the prior year period due to a $2.3 million decrease in LTIP expense partially
offset by higher head office payroll and higher professional fees. The LTIP
decrease is due in part to Cineplex's Share price decreasing from $44.06 at
December 31, 2013 to $42.07 at March 31, 2014 compared to an increase from
$31.83 at December 31, 2013 to $34.48 at March 31, 2013. G&A excluding LTIP and
option plan expense increased $1.0 million, primarily due to a $0.6 million
increase in head office payroll due to developing business initiatives and a
$0.2 million increase in professional fees relating to certain business
initiatives.
Share of income of joint ventures
Cineplex's joint ventures in the 2014 period include its 78.2% interest in the
Canadian Digital Cinema Partnership ("CDCP"), 50% interest in CSI, 50% interest
in one theatre in Quebec, 50% interest in one IMAX screen in Ontario and 50%
interest in YoYo's. For the 2013 period, Cineplex's joint ventures included its
78.2% interest in CDCP, 50% interest in CSI, 50% interest in one theatre in
Quebec and 50% interest in one IMAX screen in Ontario. The following table
highlights the components of share of income of joint ventures during the
quarter (in thousands of Canadian dollars):
----------------------------------------------------------------------------
Share of income of joint
ventures First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Share of loss (income) of CDCP $ 55 $ (333) NM
Share of (income) of CSI (163) (251) -35.1%
Share of loss of other joint
ventures 53 43 23.3%
----------------------------------------------------------------------------
Total (income) of joint
ventures $ (55) $ (541) -89.8%
----------------------------------------------------------------------------
First Quarter
The decrease from income of $0.5 million in the first quarter of 2013 to income
of $0.1 million in the current period is due to a $0.4 million movement in CDCP
from income of $0.3 million to a loss of $0.1 million, with the decrease due in
part to certain films during the period staying on screens for extended periods
which decreases the virtual print fee revenues earned by CDCP.
EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")
(see "Non-GAAP Financial Measures" section of this news release)
The following table presents EBITDA and adjusted EBITDA for the three months
ended March 31, 2014 as compared to the three months ended March 31, 2013
(expressed in thousands of Canadian dollars, except adjusted EBITDA margin):
----------------------------------------------------------------------------
EBITDA First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
EBITDA $ 30,345 $ 30,353 -%
Adjusted EBITDA $ 30,881 $ 31,690 -2.6%
Adjusted EBITDA margin 11.0% 12.8% -1.8%
----------------------------------------------------------------------------
Adjusted EBITDA for the first quarter of 2014 decreased $0.8 million, or 2.6%,
as compared to the prior year period. The decrease as compared to the prior year
period was primarily due higher costs relating to acquisitions and Cineplex's
new business initiatives, including CDN and the Cineplex Store. Adjusted EBITDA
margin, calculated as adjusted EBITDA divided by total revenues, was 11.0% in
the current period, down from 12.8% in the prior year period.
ADJUSTED FREE CASH FLOW
For the first quarter of 2014, adjusted free cash flow per common share of
Cineplex was $0.2921 as compared to $0.3838 in the prior year period. The
declared dividends per common share of Cineplex were $0.3600 in the first
quarter of 2014 and $0.3375 in the prior year period. During the twelve months
ended March 31, 2014, Cineplex generated adjusted free cash flow per Share of
$2.3656, compared to $1.9784 per Share in the prior year period. Cineplex
declared dividends per Share of $1.4325 and $1.3450, respectively, in each
period. The payout ratios for these periods were approximately 60.6% and 68.0%,
respectively. Adjusted free cash flow per common share and the payout ratios for
the 2014 and 2013 periods are 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 2013 and 2014 being
substantially reduced.
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 gains and losses
on disposal of assets, the share of income or loss 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 used in 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 concession revenues less total
concession cost, 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 March 31,
2014, the impact of the 29 locations that have been opened or acquired and two
locations that have been closed or otherwise disposed of have been excluded,
resulting in 130 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 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
1,639 screens from coast to coast, serving approximately 77 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 www.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:
Thursday, May 8, 2014
10:00 a.m. Eastern Time
In order to participate in the conference call, please dial 416-644-3415 or
outside of Toronto dial 1-877-974-0445 at least five to ten minutes prior to
10:00 a.m. Eastern Time. Please quote the conference ID 4665019 to access the
call.
-- If you cannot participate in the live mode, a replay will be available.
Please dial 416-640-1917 or 1-877-289-8525 and enter code 4665019#. The
replay will begin at 12:00 p.m. Eastern Time on Thursday, May 8, 2014
and end at 11:59 p.m. Eastern Time on Thursday, May 15, 2014.
-- 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)
----------------------------------------------------------------------------
March 31, December 31,
2014 2013
Assets
Current assets
Cash and cash equivalents $ 10,359 $ 44,140
Trade and other receivables 45,471 100,891
Inventories 6,237 7,234
Prepaid expenses and other current assets 10,482 6,838
------------------------------
72,549 159,103
Non-current assets
Property, equipment and leaseholds 472,698 459,112
Deferred income taxes 16,697 17,635
Fair value of interest rate swap agreements 291 92
Interests in joint ventures 45,689 44,359
Intangible assets 111,763 113,601
Goodwill 797,476 797,476
------------------------------
$1,517,163 $1,591,378
------------------------------
------------------------------
March 31, December 31,
2014 2013
Liabilities
Current liabilities
Accounts payable and accrued expenses $ 96,534 $ 157,333
Share-based compensation 6,100 12,151
Dividends payable 7,556 7,552
Income taxes payable 1,808 2,656
Deferred revenue 109,866 136,373
Finance lease obligations 2,459 2,394
Fair value of interest rate swap agreements 1,075 635
------------------------------
225,398 319,094
------------------------------
Non-current liabilities
Share-based compensation 10,971 15,622
Long-term debt 257,297 217,151
Fair value of interest rate swap agreements 328 -
Finance lease obligations 17,066 17,722
Post-employment benefit obligations 6,461 6,522
Other liabilities 171,640 170,125
Convertible debentures 97,341 96,870
------------------------------
561,104 524,012
------------------------------
Total liabilities 786,502 843,106
------------------------------
Equity
Share capital 853,668 853,411
Deficit (124,913) (107,323)
Accumulated other comprehensive loss (2,139) (1,715)
Contributed surplus 4,045 3,899
------------------------------
730,661 748,272
------------------------------
$1,517,163 $1,591,378
------------------------------
------------------------------
Cineplex Inc.
Interim Condensed Consolidated Statements of Operations
(Unaudited)
(expressed in thousands of Canadian dollars, except net income per share)
----------------------------------------------------------------------------
Three months ended March 31,
------------------------------
2014 2013
Revenues
Box office $ 156,225 $ 145,165
Food service 87,143 75,879
Media 24,355 16,310
Other 12,296 10,716
------------------------------
280,019 248,070
------------------------------
Expenses
Film cost 80,458 73,389
Cost of food service 18,881 16,274
Depreciation and amortization 18,668 17,298
(Gain) loss on disposal of assets (56) 1,062
Other costs 150,446 127,533
Share of income of joint ventures (55) (541)
Interest expense 5,217 1,716
Interest income (70) (78)
------------------------------
273,489 236,653
------------------------------
Income before income taxes 6,530 11,417
------------------------------
Provision for (recovery of) income taxes
Current 370 (727)
Deferred 1,089 3,328
------------------------------
1,459 2,601
------------------------------
Net income $ 5,071 $ 8,816
------------------------------
------------------------------
Basic net income per share $ 0.08 $ 0.14
Diluted net income per share $ 0.08 $ 0.14
Cineplex Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(expressed in thousands of Canadian dollars)
----------------------------------------------------------------------------
Three months ended March 31,
------------------------------
2014 2013
Net income $ 5,071 $ 8,816
------------------------------
Other comprehensive loss
Items that will be reclassified subsequently
to net income:
Loss on hedging instruments (575) (766)
Associated deferred income taxes recovery 151 111
------------------------------
Other comprehensive loss (424) (655)
------------------------------
Comprehensive income $ 4,647 $ 8,161
------------------------------
------------------------------
Cineplex Inc.
Interim Condensed Consolidated Statements of Changes in Equity
(Unaudited)
(expressed in thousands of Canadian dollars)
For the three months ended March 31, 2014 and 2013
----------------------------------------------------------------------------
Accumulated
other
Share Contributed comprehensive
capital surplus loss Deficit Total
Balance - January
1, 2014 $853,411 $ 3,899 $ (1,715) $(107,323) $748,272
Net income - - - 5,071 5,071
Other
comprehensive
income - - (424) - (424)
----------------------------------------------------------
Total
comprehensive
income (424) 5,071 4,647
Dividends declared - - - (22,661) (22,661)
Share option
expense - 403 - - 403
Issuance of shares
on exercise of
options 257 (257) - - -
----------------------------------------------------------
Balance - March
31, 2014 $853,668 $ 4,045 $ (2,139) $(124,913) $730,661
----------------------------------------------------------
----------------------------------------------------------
Balance - January
1, 2013 $847,235 $ 3,768 $ (1,142) $(102,547) $747,314
Net income - - - 8,816 8,816
Other
comprehensive
loss - - (655) - (655)
----------------------------------------------------------
Total
comprehensive
income (655) 8,816 8,161
Dividends declared - - - (21,198) (21,198)
Long-term
incentive plan
obligation 248 - - - 248
Share option
expense - 409 - - 409
Issuance of shares
on exercise of
options 739 (739) - - -
----------------------------------------------------------
Balance - March
31, 2013 $848,222 $ 3,438 $ (1,797) $(114,929) $734,934
----------------------------------------------------------
----------------------------------------------------------
Cineplex Inc.
Interim Condensed Consolidated Statements of Cash Flows
(Unaudited)
(expressed in thousands of Canadian dollars)
----------------------------------------------------------------------------
Three months ended March 31,
------------------------------
2014 2013
Cash (used in) provided by
Operating activities
Net income $ 5,071 $ 8,816
Adjustments to reconcile net income to net
cash used in operating activities
Depreciation and amortization of property,
equipment and leaseholds, and intangible
assets 18,668 17,298
Amortization of tenant inducements, rent
averaging liabilities and fair value lease
contract liabilities (1,400) (1,569)
Accretion of debt issuance costs and other
non-cash interest 1,164 141
(Gain) loss on disposal of assets (56) 1,062
Deferred income taxes 1,089 3,328
Interest rate swap agreements - non-cash
interest 16 (335)
Non-cash share-based compensation 403 656
Accretion of convertible debentures 471 -
Net change in interests in joint ventures (380) (708)
Tenant inducements 2,842 2,957
Changes in operating assets and liabilities (46,405) (38,443)
------------------------------
Net cash used in operating activities (18,517) (6,797)
------------------------------
Investing activities
Proceeds from sale of assets 404 -
Purchases of property, equipment and
leaseholds (31,470) (16,897)
Acquisition of business, net of cash acquired (950) (3,822)
Net cash invested in CDCP - (146)
------------------------------
Net cash used in investing activities (32,016) (20,865)
------------------------------
Financing activities
Dividends paid (22,657) (21,191)
Borrowings under credit facility, net 40,000 15,000
Payments under finance leases (591) (540)
------------------------------
Net cash provided by (used in) financing
activities 16,752 (6,731)
------------------------------
Increase (decrease) in cash and cash
equivalents (33,781) (34,393)
Cash and cash equivalents - Beginning of
period 44,140 48,665
------------------------------
Cash and cash equivalents - End of period $ 10,359 $ 14,272
------------------------------
------------------------------
Supplemental information
Cash paid for interest $ 2,403 $ 1,858
Cash paid for income taxes $ 1,218 $ 12,199
Cineplex Inc.
Interim Consolidated Supplemental Information
(Unaudited)
(expressed in thousands of Canadian dollars)
----------------------------------------------------------------------------
Reconciliation to Adjusted EBITDA
----------------------------------------------------------------------------
Three months ended March 31,
2014 2013
------------------------------
Net income $ 5,071 $ 8,816
Depreciation and amortization 18,668 17,298
Interest expense 5,217 1,716
Interest income (70) (78)
Current income tax expense (recovery) 370 (727)
Deferred income tax expense 1,089 3,328
------------------------------
EBITDA $ 30,345 $ 30,353
(Gain) loss on disposal of assets (56) 1,062
CDCP equity loss (income) (i) 55 (333)
Depreciation and amortization - joint ventures
(ii) 520 519
Joint venture taxes and interest (ii) 17 89
------------------------------
Adjusted EBITDA $ 30,881 $ 31,690
----------------------------------------------------------------------------
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 with the exception of CDCP (see (i) above).
Components of Other Costs
----------------------------------------------------------------------------
Other costs First Quarter
---------------------------------------------
2014 2013 Change
----------------------------------------------------------------------------
Theatre occupancy expenses $ 51,024 $ 46,558 9.6%
Other operating expenses 84,211 64,468 30.6%
General and administrative
expenses 15,211 16,507 -7.9%
---------------------------------------------
Total other costs $ 150,446 $ 127,533 18.0%
----------------------------------------------------------------------------
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 March 31,
2014 2013
------------------------------
Cash used in operating activities $ (18,517) $ (6,797)
Less: Total capital expenditures net of
proceeds on sale of assets (31,066) (16,897)
------------------------------
Standardized free cash flow (49,583) (23,694)
Add/(Less):
Changes in operating assets and liabilities
(i) 46,405 38,443
Changes in operating assets and liabilities of
joint ventures (i) 325 167
Tenant inducements (ii) (2,842) (2,957)
Principal component of finance lease
obligations (591) (540)
Growth capital expenditures and other (iii) 24,047 12,034
Share of income of joint ventures, net of non-
cash depreciation (iv) 623 800
Net cash invested in CDCP (iv) - (146)
------------------------------
Adjusted free cash flow $ 18,384 $ 24,107
------------------------------
------------------------------
Average number of Shares outstanding 62,941,40 62,803,71
5 6
Adjusted free cash flow per Share $ 0.2921 $ 0.3838
----------------------------------------------------------------------------
i. Changes in operating assets and liabilities are not considered a source
or use of adjusted free cash flow.
ii. Tenant inducements received are for the purpose of funding new theatre
capital expenditures and are not considered a source of adjusted free
cash flow.
iii.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.
iv. Excludes the share of (loss) 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Cineplex Inc.
Gord Nelson
Chief Financial Officer
(416) 323-6602
Cineplex Inc.
Pat Marshall
Vice President Communications and Investor Relations
(416) 323-6648
Altus (TSX:AIF)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Altus (TSX:AIF)
Historical Stock Chart
Von Jul 2023 bis Jul 2024
