Cineplex Inc. Reports Second Quarter Results
TORONTO, Aug. 14, 2020 /CNW/ - (TSX: CGX) - Cineplex Inc. ("Cineplex" or the "Company") today released its financial results for the three and six months ended June 30, 2020. The Company's second quarter financial results were impacted by the COVID-19 pandemic, as the Company temporarily closed all of its theatres and location-based entertainment ("LBE") venues effective March 16, 2020. Unless otherwise specified, all amounts are in Canadian dollars.
"To immediately mitigate the impact of the closure of our theatres and entertainment venues, we focused on reducing all expenses to the greatest extent possible. We also shifted our attention to plan for the safe return of our employees and guests and to strengthen Cineplex's financial position over the short and long term," said Ellis Jacob, President and CEO, Cineplex. "The past four months have given Canadians a new appreciation for the importance of friends and family and the power of shared experiences with those we love and we believe that this will only strengthen our business moving forward."
"During the quarter, we significantly reduced operating costs and capital expenditures and worked with our landlords to abate and defer rents. We also focused on growing and supporting our diversified and on-line businesses and in anticipation of reopening, developed an industry-leading program with end-to-end health and safety protocols to ensure that our employees and guests return to a safe environment. We also benefited from the government wage subsidy programs which allowed us to retain our employees and reduce costs during this quarter.
"In addition, Cineplex has undertaken actions to provide further financial stability throughout the recovery period and to ensure that our long-term liquidity needs are met. These include obtaining relief from certain financial covenants under our Credit Facilities and securing additional financing in the form of Convertible Unsecured Subordinated Debentures issued subsequent to quarter end.
"While it is impossible to predict how long this crisis will last and how significant the impact will be on our business, Cineplex will continue to take the necessary steps to strengthen the financial position of our company and ensure a healthy future.
"Entertaining is what we do best, and we simply can't wait to safely welcome guests back to our theatres, The Rec Room and Playdium for some much-deserved fun and escape," Mr. Jacob concluded.
Impact of the COVID-19 Pandemic
In early 2020, the outbreak of COVID-19 was confirmed in multiple countries throughout the world and on March 11, 2020, it was declared a global pandemic by the World Health Organization. In response, Cineplex immediately introduced enhanced cleaning protocols and reduced theatre capacities to promote social distancing. By mid-March, each of Canada's provinces and territories had declared a state of emergency resulting in, among other things, the mandated closure of non-essential businesses, restrictions on public gatherings and quarantining of people who may have been exposed to the virus.
On March 16, 2020, Cineplex announced the temporary closure of all of its theatres and LBE venues across Canada, as well as substantially all route locations operated by P1AG. On April 1, 2020, in response to applicable government directives and guidance from Canadian public health authorities, Cineplex announced that the closure of its theatres and LBE venues across Canada would remain in effect and that the reopening of such locations would be reassessed as further guidance is provided by Canadian public health authorities and applicable government authorities.
To mitigate the negative impact of COVID-19 and support its long-term stability, Cineplex immediately undertook a variety of measures including:
- temporary layoffs of all part-time and full-time hourly employees as well as a number of full-time employees who chose a temporary layoff rather than a salary reduction;
- reducing full-time employee salaries by agreement with such employees;
- suspending or deferring current capital spending and reviewing all capital projects to consider either deferral or cancellation;
- reducing non-essential discretionary operational expenditures (such as spending on marketing, travel and entertainment);
- implementing a more stringent review and approval process for all outgoing procurement and payment requests;
- proactively negotiating with landlords for rent relief, including abatements and converting fixed rent to variable rent depending on attendance, until attendance returns to previous levels;
- working with major suppliers and other business partners to modify the timing and quantum of certain contractual payments;
- reviewing and applying for government subsidy programs where available, including the Canada Emergency Wage Subsidy ("CEWS"). This program, which was launched by the Government of Canada, provides a subsidy of 75% of employee wages, up to a maximum benefit of $847.00, per week, for up to 24 weeks, retroactive from March 15, 2020 to August 29, 2020. In mid-July, the federal government announced an extension to the program to December 19th, backdated to July 5th with threshold amounts and benefits amended, allowing for additional subsidies for those businesses who are on a slower recovery track. It is expected that most of Cineplex's businesses will be able to benefit from the higher 85% subsidy maximum threshold available to those businesses who have sustained a revenue decline greater than 50% during a specified claim period;
- continuing the suspension of dividends; and
- focusing on revenue driving opportunities including the expansion of Cineplex Store offerings and expansion of food home delivery from theatres and LBE venues.
In addition to cost savings associated with the temporary layoffs of its employees, reductions in salaries and other mitigation efforts, Cineplex has suspended or deferred certain capital spending and is reviewing all capital projects to consider further deferrals or cancellations and has plans to reduce purchases of property, plant and equipment (net of tenant inducements) to approximately $50.0 million over the next 12 months.
The COVID-19 pandemic has had a material negative effect on all aspects of Cineplex's businesses resulting in material decreases in revenues, results of operations and cash flows. Since March 15, 2020, Cineplex has experienced a net cash burn of approximately $15 to $20 million per month as a result of having to close its theatres and LBE venues (for Q2 2020 net cash burn was $53.9 million for the three months or approximately $18.0 million monthly) (see Non-GAAP measures section of this news release). When used in this news release, net cash burn is calculated as adjusted EBITDAaL less cash interest (excluding amounts with respect to lease obligations), provision for income taxes and net capital expenditures. Net cash burn assumes that all of Cineplex's theatres and LBE venues remain closed, current government wage subsidies continue in place, (originally in place only until August 29, 2020 subsequently extended to December 19, 2020) with respect to the CEWS and certain lease-related abatements and other lease-related savings currently being negotiated are implemented as expected by management.
As some of Cineplex's largest expenses, such as film cost and cost of food services, are fully variable, during the closure of its theatres and LBE venues Cineplex has focused on reducing its largest fixed and semi-fixed expenses, including those attributed to theatre payroll and theatre occupancy. As a result of the measures described below, including receipt of assistance under the CEWS, Cineplex has been able to materially reduce theatre payroll expenses from $41.1 million reported in the second quarter of 2019 to approximately $0.2 million in the second quarter of 2020. With respect to theatre occupancy expenses, Cineplex is continuing to work with its landlord partners to identify relief measures, which resulted in no material cash rent being paid in the second quarter of 2020. The focus has been on identifying opportunities for lease-related abatements during the closure period, converting fixed components of rent to variable rent during the reopening period and looking for other opportunities to extract value under its existing lease agreements. While Cineplex is still in the process of finalizing these measures, and the accounting for any amendments will be more complex under IFRS 16, Cineplex was able to materially reduce cash payments during the second quarter of 2020.
Reopening Plans
Since the closure of its theatres and LBE venues in March 2020, Cineplex diligently prepared for their safe reopening, with the health and wellbeing of its employees and guests being its top priority. Cineplex has carefully re-examined all of its buildings and processes, so that when its theatres and LBE venues reopened, it has implemented an industry-leading program with end-to-end health and safety protocols. At Cineplex's theatres specifically, it has also be launched reserved seating in all auditoriums across the country to ensure proper physical distancing between its guests.
Cineplex has been able to maintain connections with its guests during the period of theatre and LBE venue closures through its online Cineplex Store and home delivery of food offerings via Uber Eats and Skip the Dishes, as well as through the SCENE loyalty program and social media channels. Cineplex will use these communication channels to ensure that its guests are made aware of when its theatres and LBE venues will reopen, and the various measures put in place to ensure their safety while enjoying a long-deserved outing.
Cineplex will take a gradual approach to reopening its consumer-facing segments in phases. The phases will be driven by government regulations around public gathering sizes and safety guidelines, availability of first run film product, social norms around social distancing and attendance levels at theatres and other venues once reopened. Cineplex is also implementing a number of pricing and marketing strategies to entice its guests to return to theatres and LBE venues as the impact of the COVID-19 pandemic in the markets which it operates subsides. As a result of loosened provincial government restrictions on social gatherings in certain markets in which it operates, Cineplex resumed measured operations at The Rec Room in Winnipeg, Calgary and Edmonton during the week of June 15, 2020. Cineplex also reopened six theatres in Alberta on June 26, 2020. Cineplex will continue to assess how long it should extend the closure of its other theatres and LBE venues across Canada as additional government directives and guidance from Canadian public health authorities are issued. In all markets where Cineplex is permitted by government and health authorities, and it is economically feasible under those limitations, it plans to reopen as many of its locations as it can throughout July and August.
Some of the new measures implemented on reopening include:
- launching reserved seating in all auditoriums across Canada; seating options will be automatically blocked off to ensure proper distance in every direction between guests;
- reducing capacity in all auditoriums to allow for physical distancing;
- enhancing cleaning practices throughout our facilities, with particular focus on high-contact surfaces, restrooms and seats;
- accepting debit and credit payments only, with the exception of gift card purchases;
- limiting food offerings in theatres to Cineplex's famous popcorn and other core concessions;
- ensuring employees have the personal protective equipment they need and as required by provincial regulations;
- making hand sanitizer readily available for guests and employees throughout the buildings; and
- keeping VIP Cinemas closed until first run product is available.
Although restrictions on social gatherings are being lifted in many of the markets in which Cineplex operates, there is the possibility that restrictions may be reinstituted in the future if there are additional outbreaks of COVID-19 in Canada, a vaccine has not been developed and other effective treatment options are not available. Any reinstitution of restrictions on social gatherings that would result in the closure of Cineplex's theatres and LBE venues would have a significant negative impact on the ability and timing of Cineplex's return to profitability.
Convertible Debentures
On July 7, 2020, Cineplex filed a preliminary short form prospectus in connection with a marketed public offering (the "Offering") of convertible unsecured subordinated debentures (the "Debentures"). On July 15, 2020, Cineplex completed an Offering of $275.0 million aggregate principal amount of Debentures. On July 17, 2020, the underwriters purchased an additional $41.25 million aggregate principal amount of Debentures pursuant to the exercise of their over-allotment option.
Completion of the Offering satisfies the condition under the Credit Agreement Amendment that Cineplex entered into with its lenders on June 29, 2020 which required Cineplex to raise $250.0 million of new financing by August 31, 2020, of which $100.0 million would be used to make a permanent repayment of the Credit Facilities.
Other Matters
Repudiation of the Arrangement Agreement with Cineworld: On June 12, 2020, Cineworld delivered a notice to Cineplex purporting to terminate the Arrangement Agreement dated December 15, 2019 between Cineplex and Cineworld (the "Arrangement Agreement"). Cineplex believes that Cineworld had no legal basis to terminate the Arrangement Agreement and that instead, Cineworld breached the Arrangement Agreement and its other contractual obligations including when Cineworld repudiated the Arrangement Agreement on June 12, 2020. On July 3, 2020, Cineplex announced that it had commenced an action in the Ontario Superior Court of Justice against Cineworld and 1232743 B.C. Ltd. seeking damages arising from what Cineplex claims was a wrongful repudiation of the Arrangement Agreement. The claim seeks damages, including the approximately $2.18 billion that Cineworld would have paid upon the closing of the Cineworld Transaction for Cineplex's securities, reduced by the value of the Cineplex securities retained by its security holders, as well as compensation for other losses including the failure of Cineworld to repay or refinance Cineplex's approximately $664 million in debt and transaction expenses. Cineplex has also advanced alternative claims for damages for the loss of benefits to its security holders, and to require Cineworld to disgorge the benefits it improperly received by wrongfully repudiating the Cineworld Transaction.
Second Quarter Financial Results
2020 | 2019 | Period over Period Change | ||||||
Total revenues (iii) | $ | 22.0million | $ | 438.9million | -95.0% | |||
Theatre attendance | —million | 17.0million | -100.0% | |||||
Net (loss) income from continuing operations (iv) | $ | (98.2) million | $ | 22.1million | NM | |||
Net loss from discontinued operations | $ | (0.7) million | $ | (2.7) million | NM | |||
Net (loss) income (iv) | $ | (98.9) million | $ | 19.4million | NM | |||
Box office revenues per patron ("BPP") (v) | $ | 4.50 | $ | 11.13 | -59.6% | |||
Concession revenues per patron ("CPP") (v) | $ | 10.33 | $ | 7.04 | 46.7% | |||
Adjusted EBITDA (v) | $ | (41.3) million | $ | 114.4million | NM | |||
Adjusted EBITDAaL (i) (iv) (v) | $ | (72.5) million | $ | 70.3million | NM | |||
Adjusted EBITDAaL margin (i) (iv) (v) | (329.9)% | 16.0% | -345.9% | |||||
Adjusted free cash flow (v) | $ | (53.8) million | $ | 51.0million | NM | |||
Adjusted free cash flow per common share of Cineplex ("Share") (v) | $ | (0.849) | $ | 0.806 | NM | |||
Earnings per Share ("EPS") from continuing operations - basic and diluted (iv) | $ | (1.55) | $ | 0.35 | NM | |||
EPS from discontinued operations - basic and diluted | $ | (0.01) | $ | (0.04) | NM | |||
EPS - basic and diluted (iv) | $ | (1.56) | $ | 0.31 | NM | |||
Year to Date Financial Results
2020 | 2019 | Period over Period Change | ||||||
Total revenues (iii) | $ | 304.8million | $ | 803.5million | -62.1% | |||
Theatre attendance | 10.7million | 32.0million | -66.5% | |||||
Net (loss) income from continuing operations (iv) | $ | (272.4)million | $ | 16.7million | NM | |||
Net loss from discontinued operations | $ | (5.0) million | $ | (4.7) million | NM | |||
Net (loss) income (iv) | $ | (277.3) million | $ | 12.0million | NM | |||
Box office revenues per patron ("BPP") (v) | $ | 10.36 | $ | 10.81 | -4.2% | |||
Concession revenues per patron ("CPP") (v) | $ | 6.79 | $ | 6.72 | 1.0% | |||
Adjusted EBITDA (v) | $ | 5.2million | $ | 193.1million | -97.3% | |||
Adjusted EBITDAaL (i) (iv) (v) | $ | (70.1) million | $ | 105.9million | NM | |||
Adjusted EBITDAaL margin (i) (iv) (v) | (23.0)% | 13.2% | -36.2% | |||||
Adjusted free cash flow (v) | $ | (54.0) million | $ | 81.1million | NM | |||
Adjusted free cash flow per common share of Cineplex ("Share") (v) | $ | (0.853) | $ | 1.280 | NM | |||
Earnings per Share ("EPS") from continuing operations - basic and diluted (iv) | $ | (4.30) | $ | 0.26 | NM | |||
EPS from discontinued operations - basic and diluted | $ | (0.08) | $ | (0.07) | NM | |||
EPS - basic and diluted (iv) | $ | (4.38) | $ | 0.19 | NM | |||
i. | Certain prior period figures have been restated as applicable per IFRS 5 to conform to current period presentation. |
ii. | Period over period change calculated based on thousands of dollars except percentage and per share values. Changes in percentage amounts are calculated as 2020 value less 2019 value. |
iii. | All amounts are from continuing operations. |
iv. | 2020 includes expenses related to the Cineworld Transaction in the amount of $1.1 million for the second quarter and $2.4 million for year to date. |
v. | Adjusted EBITDA, adjusted EBITDAaL, adjusted EBITDAaL margin, adjusted free cash flow per common share of Cineplex, BPP and CPP are measures that do not have a standardized meaning under generally accepted accounting principles ("GAAP"). These measures as well as other Non-GAAP financial measures reported by Cineplex are defined in the 'Non-GAAP Financial Measures' section at the end of this news release. |
KEY DEVELOPMENTS IN THE SECOND QUARTER OF 2020
The following describes certain key business initiatives undertaken and results achieved during the second quarter of 2020 in each of Cineplex's core business areas:
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
- During the second quarter, all of Cineplex's circuit of theatres were closed. During June 2020, six theatres in Alberta re-opened with significant capacity restrictions.
Theatre Food Service
- Despite the closure of theatres and LBE venues, Cineplex reported food services revenues of $3.3 million primarily due to home delivery services from theatre and LBE locations with Uber Eats and Skip the Dishes.
Digital Commerce
- Total registered users for Cineplex Store increased by 47% in the second quarter of 2020 as compared to the prior year period.
- Cineplex Store registered a 120% increase in device activation over the prior year period.
- Quarterly active users of the Cineplex Store increased by 103% as compared to the prior year period.
MEDIA
- Media revenues were impacted by the closure of theatres, retail and digital out of home locations in the second quarter leading to a decline in advertising revenue. During the second quarter media revenues were primarily driven by Cineplex Digital Media revenues specifically from creative services, software revenue and support services.
AMUSEMENT AND LEISURE
Amusement Solutions
- P1AG's revenues were primarily earned through equipment sales during the second quarter, in addition to a small contribution from the opening of certain FEC locations in June 2020.
Location-based Entertainment
- During the second quarter, all of Cineplex's LBE venues were closed. During June 2020, four locations in western Canada re-opened and The Roundhouse in Ontario was partially reopened.
LOYALTY
- Membership in the SCENE loyalty program increased by 0.1 million members in the period, reaching 10.5 million at June 30, 2020.
CORPORATE
- On June 12, 2020, Cineworld delivered the Termination Notice to Cineplex purporting to terminate the Arrangement Agreement.
- On June 29, 2020, Cineplex and Cineplex Entertainment Limited Partnership entered into an amendment agreement (the "Credit Agreement Amendment") with The Bank of Nova Scotia, as administrative agent, and the lenders from time to time named therein, to the seventh amended and restated credit agreement with a syndicate of lenders.
- On June 29, 2020, Cineplex sold all of its interest in World Gaming Network for a nominal amount.
- On June 8, 2020, Cineplex offered a collection of "Understanding Black Stories" films that were available free to rent or stream to support the Black Lives Matter movement.
- Beginning April 17 and running through the end of May, 2020, Cineplex donated $1 to Food Banks Canada for every home delivery order fulfilled at its theatre and LBE locations across Canada.
OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020
Total revenues
Total revenues for the three months ended June 30, 2020 decreased $416.9 million (95.0%) to $22.0 million as compared to the prior year period. Total revenues for the six months ended June 30, 2020 decreased 498.7 million (62.1%) to $304.8 million as compared to the prior year period. A discussion of the factors affecting the changes in box office, food service, media, amusement and other revenues for the two periods is provided below.
Non-GAAP measures discussed throughout this news release, including adjusted EBITDA, adjusted EBITDAaL, adjusted store level EBITDAaL, adjusted EBITDAaL margin, adjusted store level EBITDAaL margin, adjusted free cash flow, theatre attendance, BPP, premium priced product, same theatre metrics, CPP, film cost percentage, food service cost percentage and concession margin per patron are defined and discussed in Non-GAAP measures section of this news release.
Box office revenues
The following table highlights the movement in box office revenues, theatre attendance and BPP for the quarter and the year to date (in thousands of dollars, except theatre attendance reported in thousands of patrons and per patron amounts, unless otherwise noted):
Box office revenues | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Box office revenues | $ | 27 | $ | 189,371 | -100.0% | $ | 111,029 | $ | 345,867 | -67.9% | ||||||
Theatre attendance (i) | 6 | 17,011 | -100.0% | 10,716 | 31,999 | -66.5% | ||||||||||
Box office revenue per patron (i) | $ | 4.50 | $ | 11.13 | -59.6% | $ | 10.36 | $ | 10.81 | -4.2% | ||||||
BPP excluding premium priced product (i) | $ | 4.50 | $ | 9.30 | -51.6% | $ | 9.33 | $ | 9.18 | 1.6% | ||||||
Same theatre box office revenues (i) | $ | 27 | 186,904 | -100.0% | $ | 109,179 | $ | 342,346 | -68.1% | |||||||
Same theatre attendance (i) | 6 | 16,811 | -100.0% | 10,566 | 31,685 | -66.7% | ||||||||||
% Total box from premium priced product (i) | —% | 50.9% | -50.9% | 28.7% | 46.3% | -17.6% | ||||||||||
(i) See Non-GAAP measures section of this news release. | ||||||||||||||||
Box office continuity | Second Quarter | Year to Date | ||||||||
Box Office | Theatre | Box Office | Theatre | |||||||
2019 as reported | $ | 189,371 | 17,011 | $ | 345,867 | 31,999 | ||||
Same theatre attendance change | (186,832) | (16,805) | (228,178) | (21,118) | ||||||
Impact of same theatre BPP change | (45) | — | (4,989) | — | ||||||
New and acquired theatres (i) | (1,857) | (130) | (202) | — | ||||||
Disposed and closed theatres (i) | (610) | (70) | (1,469) | (165) | ||||||
2020 as reported | $ | 27 | 6 | $ | 111,029 | 10,716 | ||||
(i) See Non-GAAP measures section of this news release. Represents theatres opened, acquired, disposed or closed subsequent to the start of the prior year | ||||||||||
Second Quarter and Year to Date
Box office revenues were materially impacted by the government mandated closure of theatres during the second quarter. On June 26, 2020, six theatres in Alberta were reopened with reduced seating occupancy to ensure physical distancing, enhanced cleaning protocols and staff equipped with personal protective equipment. BPP during the reopening period was $4.50 due to promotional pricing for all screenings including the older and classic film products with discounted prices.
Food service revenues
The following table highlights the movement in food service revenues, theatre attendance and CPP for the quarter and the year to date (in thousands of dollars, except theatre attendance and same theatre attendance reported in thousands of patrons and per patron amounts):
Food service revenues | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Food service - theatres | $ | 62 | $ | 119,741 | -99.9% | $ | 72,743 | $ | 214,913 | -66.2% | ||||||
Food service - LBE | 87 | 9,822 | -99.1% | 6,771 | 17,708 | -61.8% | ||||||||||
Food service - delivery | 3,107 | — | NM | 3,107 | — | NM | ||||||||||
Total food service revenues | $ | 3,256 | $ | 129,563 | -97.5% | $ | 82,621 | $ | 232,621 | -64.5% | ||||||
Theatre attendance (i) | 6 | 17,011 | -100.0% | 10,716 | 31,999 | -66.5% | ||||||||||
CPP (i) (ii) | $ | 10.33 | $ | 7.04 | 46.7% | $ | 6.79 | $ | 6.72 | 1.0% | ||||||
Same theatre food service revenues (i) | $ | 62 | $ | 118,071 | -99.9% | $ | 71,394 | $ | 212,607 | -66.4% | ||||||
Same theatre attendance (i) | 6 | 16,811 | -100.0% | 10,566 | 31,685 | -66.7% | ||||||||||
(i) See Non-GAAP measures section of this news release. | ||||||||||||||||
(ii) Food service revenue from LBE and delivery is not included in the CPP calculation. | ||||||||||||||||
Theatre food service revenue continuity | Second Quarter | Year to Date | ||||||||
Theatre Food | Theatre | Theatre Food | Theatre | |||||||
2019 as reported | $ | 119,741 | 17,011 | $ | 214,913 | 31,999 | ||||
Same theatre attendance change | (120,957) | (16,805) | (144,730) | (21,118) | ||||||
Impact of same theatre CPP change | 2,948 | — | 3,517 | — | ||||||
New and acquired theatres (i) | (1,137) | (130) | 26 | — | ||||||
Disposed and closed theatres (i) | (533) | (70) | (983) | (165) | ||||||
2020 as reported | $ | 62 | 6 | $ | 72,743 | 10,716 | ||||
(i) See Non-GAAP measures section of this news release. Represents theatres opened, acquired, disposed or closed subsequent to the start of the prior year comparative period. | ||||||||||
Second Quarter and Year to Date
With the closures of Cineplex's theatres and LBE venues due to COVID-19, Cineplex has focused on its home delivery services for the second quarter. Revenues related to the delivery services in the second quarter are recognized in food service - delivery. In June 2020, six theatres were able to reopen with limited concession menu options and four LBE venues opened in western Canada which provided limited dining service, as well as The Roundhouse in Ontario which was limited to providing only patio food service. The reopening of LBE locations and expansion of food services will continue to roll out as provincial governments ease restrictions on businesses.
Media revenues
The following table highlights the movement in media revenues for the quarter and the year to date (in thousands of dollars):
Media revenues | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 Restated | Change | 2020 | 2019 Restated | Change | |||||||||||
Cinema media | $ | 1,604 | $ | 29,596 | -94.6% | $ | 18,866 | $ | 50,672 | -62.8% | ||||||
Digital place-based media | 6,276 | 19,600 | -68.0% | 21,171 | 33,230 | -36.3% | ||||||||||
Total media revenues from continuing operations | $ | 7,880 | $ | 49,196 | -84.0% | $ | 40,037 | $ | 83,902 | -52.3% | ||||||
Media revenues from discontinued operations | 220 | 382 | -42.4% | 602 | 689 | -12.6% | ||||||||||
Total media revenues | $ | 8,100 | $ | 49,578 | -83.7% | $ | 40,639 | $ | 84,591 | -52.0% | ||||||
Second Quarter and Year to Date
Media revenues were materially negatively impacted by the closure of theatres in the second quarter leading to a sharp decline in advertising revenue. During the second quarter media revenues were primarily driven by Cineplex Digital Media revenues specifically from creative services, software revenue and support services. Cinema media revenues for the quarter included certain contractual commitments.
Amusement Revenues
The following table highlights the movement in amusement revenues for the quarter and the year to date (in thousands of dollars):
Amusement revenues | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Amusement - P1AG excluding Cineplex exhibition and LBE (i) | $ | 3,687 | $ | 45,817 | -92.0% | $ | 38,648 | $ | 93,490 | -58.7% | ||||||
Amusement - Cineplex exhibition (i) | 12 | 2,608 | -99.5% | 2,208 | 5,392 | -59.1% | ||||||||||
Amusement - LBE | 32 | 9,692 | -99.7% | 10,212 | 17,735 | -42.4% | ||||||||||
Total amusement revenues | $ | 3,731 | $ | 58,117 | -93.6% | $ | 51,068 | $ | 116,617 | -56.2% | ||||||
(i) Cineplex receives a venue revenue share on games revenues earned at in-theatre game rooms and XSCAPE Entertainment Centres. Amusement - Cineplex exhibition reports the total of this venue revenue share which is consistent with the historical presentation of Cineplex's amusement revenues. Amusement - P1AG excluding Cineplex exhibition and LBE reflects P1AG's gross amusement revenues, net of the venue revenue share paid to Cineplex reflected in Amusement - Cineplex exhibition above. | ||||||||||||||||
Second Quarter and Year to Date
Amusement revenues during the second quarter were impacted by the temporary closures of P1AG route locations, Cineplex theatres and location-based entertainment venues. P1AG's revenues were primarily earned through equipment sales during the quarter, in addition to a minimal contribution from the reopening of select FEC locations in both Canada and the United States in June 2020.
Other revenues
The following table highlights the other revenues which includes revenues from the Cineplex Store, promotional activities, screenings, private parties, corporate events, breakage on gift card sales and revenues from management fees for the quarter and the year to date (in thousands of dollars):
Other revenues | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Other revenues from continuing operations | $ | 7,094 | $ | 12,607 | -43.7% | $ | 20,034 | $ | 24,471 | -18.1% | ||||||
Other revenues from discontinued operations | — | 9 | NM | 199 | 16 | NM | ||||||||||
Total other revenues | $ | 7,094 | $ | 12,616 | -43.8% | $ | 20,233 | $ | 24,487 | -17.4% | ||||||
Second Quarter and Year to Date
The quarterly and year to date decreases in other revenues from continuing operations were primarily due to the suspension of the recognition of deferred revenues on gift card and other related products during the shut down of theater and LBE venues. In addition, the shut downs reduced other ancillary revenues generated from theatres, such as venue rentals. This decrease was partially offset by higher sales from the Cineplex Digital store during the second quarter resulting from theatres not operating.
Film cost
The following table highlights the movement in film cost and the film cost percentage for the quarter and the year to date (in thousands of dollars, except film cost percentage):
Film cost | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Film cost | $ | 10 | $ | 103,005 | NM | $ | 56,510 | $ | 181,726 | -68.9% | ||||||
Film cost percentage (i) | 37.0% | 54.4% | -17.4% | 50.9% | 52.5% | -1.6% | ||||||||||
(i) See Non-GAAP measures section of this news release. | ||||||||||||||||
Second Quarter and Year to Date
Film cost varies primarily with box office revenues and can vary from quarter to quarter usually based on the relative strength of the titles exhibited during the period, impacted by film cost terms varying by title and distributor.
Film cost for the second quarter of 2020 decreased significantly from the prior year period, which resulted in a decrease for the year to date period as compared to the same period in 2019. With the theatre closures for the majority of the second quarter and limited reopenings at the end of June, film cost reflects the limited revenue earned from discounted ticket prices on older and classic film products available for exhibiting.
The decrease in film cost percentage for the second quarter of 2020 is attributable to the lower settlement rates on the limited reopenings with older and classic film products being shown.
Cost of food service
The following table highlights the movement in cost of food service and food service cost as a percentage of food service revenues ("concession cost percentage") for both theatres and LBE for the quarter and the year to date (in thousands of dollars, except percentages and margins per patron):
Cost of food service | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Cost of food service - theatre | $ | 730 | $ | 25,590 | -97.1% | $ | 20,931 | $ | 46,861 | -55.3% | ||||||
Cost of food service - LBE | 59 | 2,657 | -97.8% | 2,067 | 4,822 | -57.1% | ||||||||||
Total cost of food service | $ | 789 | $ | 28,247 | -97.2% | $ | 22,998 | $ | 51,683 | -55.5% | ||||||
Theatre concession cost percentage (i) | 23.7% | 21.4% | 2.3% | 27.6% | 21.8% | 5.8% | ||||||||||
LBE food cost percentage (i) | 34.7% | 27.1% | 7.6% | 30.2% | 27.2% | 3.0% | ||||||||||
Theatre concession margin per patron (i) | $ | — | $ | 5.53 | NM | $ | 5.12 | $ | 5.25 | -7.8% | ||||||
(i) See Non-GAAP measures section of this news release. | ||||||||||||||||
Second Quarter and Year to Date
Cost of food service at the theatres varies primarily with theatre attendance as well as the quantity and mix of offerings sold. Cost of food service at LBE venues varies primarily with the volume of guests who visit the location as well as the quantity and mix between food and beverage items sold.
The quarterly and year to date decreases were due to the temporary closure of Cineplex's theatre and LBE locations since mid-March, 2020 in response to the COVID-19 pandemic. While a minimal amount of food service costs were incurred with the reopening in June of several theatre and LBE locations, the cost of food service for the second quarter of 2020 was primarily driven by home delivery sales.
Depreciation and amortization
The following table highlights the movement in depreciation and amortization expenses during the quarter and the year to date (in thousands of dollars):
Depreciation and amortization expenses | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Depreciation of property, equipment and leaseholds | $ | 28,373 | $ | 29,464 | -3.7% | $ | 59,062 | $ | 58,230 | 1.4% | ||||||
Amortization of intangible assets and other | 3,386 | 2,939 | 15.2% | 6,659 | 5,806 | 14.7% | ||||||||||
Sub-total - depreciation and amortization - other assets | $ | 31,759 | $ | 32,403 | -2.0% | $ | 65,721 | $ | 64,036 | 2.6% | ||||||
Depreciation - right-of-use assets | 34,185 | 36,557 | -6.5% | 69,718 | 73,019 | -4.5% | ||||||||||
Total depreciation and amortization from continuing operations | $ | 65,944 | $ | 68,960 | -4.4% | $ | 135,439 | $ | 137,055 | -1.2% | ||||||
Depreciation and amortization from discontinued operations | — | 1,186 | -100.0% | — | 2,408 | -100.0% | ||||||||||
Total depreciation and amortization | $ | 65,944 | $ | 70,146 | -6.0% | $ | 135,439 | $ | 139,463 | -2.9% | ||||||
Second Quarter and Year to Date
The quarterly year over year decrease of $1.2 million in depreciation of property, equipment and leaseholds from continuing operations was due to the impact of the impairment recorded in the first quarter of 2020 on the carrying value of long-lived assets. The year to date increase of $0.8 million was primarily due to the investments in amusement and leisure businesses prior to the theatre closures in March 2020, partially offset by the impact of the impairment of long-lived assets recorded in the first quarter of 2020.
The quarterly and year to date movements in amortization of intangible assets and other from continuing operations as compared to the prior year periods were due to additions of internally developed software for digital products including the Cineplex mobile app and website platforms, net of the reallocation to amortization of intangible assets from discontinued operations.
The quarterly decrease of $2.4 million and year to date decrease of $1.6 million in right-of-use assets from continuing operations were due to the reduced carrying value, as a result of the impact of the impairment recorded in the first quarter of 2020 on the carrying value of long-lived assets.
Impairment of long-lived assets and goodwill
The following table highlights the movement in impairment of long-lived assets and goodwill during the quarter and the year to date (in thousands of dollars):
Impairment of long-lived assets and goodwill | Second Quarter | Year to Date | ||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
Impairment of property, equipment and leaseholds | $ | — | $ | — | NM | $ | (33,949) | $ | — | NM | ||||
Impairment of right-of-use assets | — | — | NM | (50,610) | — | NM | ||||||||
Impairment of goodwill | — | — | NM | (88,495) | — | NM | ||||||||
Impairment of long-lived assets and goodwill | $ | — | $ | — | NM | $ | (173,054) | $ | — | NM | ||||
Second Quarter and Year to Date
The closure of its operations on March 16, 2020 as a result of the declaration of a global pandemic, was identified as a triggering event for purposes of testing long-lived assets and goodwill for impairment. Carrying values of assets were tested for recoverability measured as the fair value based on internal budgets which reflect the negative impact of COVID-19 pandemic on Cineplex's current and future results. Where the carrying value of assets at March 31, 2020 was assessed as exceeding the recoverable value of those assets at that point in time, an impairment has been recognized. Because impairments are measured at a point in time, the impact of COVID-19 pandemic on the 2020 results, which will be reflected in the results of operations in 2020, has also impacted the measurement of recoverable value, and is therefore included in the impairment calculation. Where an impairment has been recorded with respect to a long-lived asset, it will be reversed when and if the recoverable value of the related asset increases. Management will monitor and re-assess the recoverable value of the impaired assets, reversing the impairments where it increases. Impairments recorded with respect to goodwill cannot be reversed.
A triggering event occurred on June 30, 2020 as a result of the material decrease in Cineplex's market value due to a sharp decline in its share price at that date from March 31, 2020. Cineplex reassessed the underlying key assumptions and inputs used during the impairment testing completed as at March 31, 2020. Cineplex determined that there were no material changes in those key judgments and conclusions and therefore concluded that there was no further impairment.
Impairment of intangible assets - discontinued operations
The following table highlights the movement in impairment of intangible assets - discontinued operations during the quarter and the year to date (in thousands of dollars):
Impairment of intangible assets - discontinued operations | Second Quarter | Year to Date | ||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||
Impairment of intangible assets - discontinued operations | $ | 21 | $ | — | NM | $ | 5,156 | $ | — | NM | ||||
Intangible assets included in assets held for sale were written down to reflect their expected net realizable value.
Loss on disposal of assets
The following table shows the movement in the loss on disposal of assets during the quarter and the year to date (in thousands of dollars):
Loss on disposal of assets | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Loss on disposal from continuing operations | $ | 478 | $ | 116 | 312.1% | $ | 1,295 | $ | 593 | 118.4% | ||||||
Loss on disposal from discontinued operations | 129 | — | NM | 129 | — | NM | ||||||||||
Loss on disposal of assets | $ | 607 | $ | 116 | 423.3% | $ | 1,424 | $ | 593 | 140.1% | ||||||
Other costs
Other costs include three main sub-categories of expenses: theatre occupancy expenses, which capture the rent and associated occupancy costs for Cineplex's theatre operations; other operating expenses, which include the costs related to running Cineplex's film entertainment and content, media, as well as amusement and leisure; and general and administrative expenses, which includes costs related to managing Cineplex's operations, including head office expenses. Please see the discussions below for more details on these categories.
The following table highlights the movement in other costs for the quarter and the year to date (in thousands of dollars):
Other costs | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 Restated | Change | 2020 | 2019 | Change | |||||||||||
Theatre occupancy expenses | $ | 17,735 | $ | 16,748 | 5.9% | $ | 35,706 | $ | 35,155 | 1.6% | ||||||
Other operating expenses | 35,038 | 159,133 | -78.0% | 169,586 | 305,702 | -44.5% | ||||||||||
General and administrative expenses | 9,402 | 17,107 | -45.0% | 14,431 | 35,959 | -59.9% | ||||||||||
Total other costs from continuing operations | $ | 62,175 | $ | 192,988 | -67.8% | $ | 219,723 | $ | 376,816 | -41.7% | ||||||
Other costs from discontinued operations | 606 | 2,525 | -76.0% | 2,212 | 4,139 | -46.6% | ||||||||||
Total other costs | $ | 62,781 | $ | 195,513 | -67.9% | $ | 221,935 | $ | 380,955 | -41.7% | ||||||
Theatre occupancy expenses
The following table highlights the movement in theatre occupancy expenses for the quarter and the year to date (in thousands of dollars):
Theatre occupancy expenses | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Cash rent paid/payable (i) (iv) (v) | $ | 37,659 | $ | 38,889 | -3.2% | $ | 78,015 | $ | 78,768 | -1.0% | ||||||
Other occupancy | 18,368 | 18,543 | -0.9% | 36,804 | 36,961 | -0.4% | ||||||||||
One-time items (ii) | (561) | (1,711) | -67.2% | (1,140) | (1,890) | -39.7% | ||||||||||
Total theatre occupancy including cash lease payments paid/payable | $ | 55,466 | $ | 55,721 | -0.5% | $ | 113,679 | $ | 113,839 | -0.1% | ||||||
Cash rent paid/payable related to lease obligations (iii) (v) | (37,731) | (38,973) | -3.2% | (77,973) | (78,684) | -0.9% | ||||||||||
Theatre occupancy as reported | $ | 17,735 | $ | 16,748 | 5.9% | $ | 35,706 | $ | 35,155 | 1.6% | ||||||
(i) Represents the cash payments for theatre rent paid or payable during the quarter. | ||||||||||||||||
(ii) One-time items include amounts related to both theatre rent and other theatre occupancy costs. They are isolated here to illustrate Cineplex's theatre rent and other theatre occupancy costs excluding these one-time, non-recurring items. | ||||||||||||||||
(iii) Cash rent paid/payable that has been reallocated to offset the lease obligations. | ||||||||||||||||
(iv) The 2020 and 2019 year to date balance each includes $0.7 million of cash rent paid not pertaining to the current period. See Non-GAAP measures section of this new release. | ||||||||||||||||
(v) Does not reflect the impact of quantified negotiated lease-related abatements included in the total amount of $11.9 million in the 2020 quarter and year to date figures. | ||||||||||||||||
Theatre occupancy continuity | Second Quarter | Year to Date | ||||
Occupancy | Occupancy | |||||
2019 as reported | $ | 16,748 | $ | 35,155 | ||
Impact of new and acquired theatres | 214 | 891 | ||||
Impact of disposed theatres | (176) | (405) | ||||
Same theatre rent change (i) | (1,292) | (1,231) | ||||
One-time items | 1,151 | 751 | ||||
Other | (153) | (167) | ||||
Impact of IFRS 16 adoption: | ||||||
Cash rent paid/payable related to lease obligations | 1,243 | 712 | ||||
2020 as reported | $ | 17,735 | $ | 35,706 | ||
(i) See Non-GAAP measures section of this news release. | ||||||
Second Quarter
Total theatre occupancy increased $0.5 million (5.9%) during the second quarter of 2020 compared to the prior year period. This increase was primarily due to higher one-time credits and cash rent paid or payable related to lease obligations which was partially offset by lower theatre rent expense as compared to the prior year period.
Following the closure of all theatre and LBE locations in March 2020, Cineplex has worked with landlord partners to identify relief measures, which resulted in no material cash rent being paid in the second quarter. While Cineplex is still in the process of finalizing the measures, cash rent payments in the second quarter were materially reduced.
Year to Date
For the year to date period, theatre occupancy including cash payments was flat as compared to the prior year period.
Other operating expenses
The following table highlights the movement in other operating expenses during the quarter and the year to date (in thousands of dollars) with the prior period presentation restated to provide comparability to the impact of application of IFRS 5:
Other operating expenses | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
Theatre payroll | $ | 234 | $ | 41,072 | -99.4% | $ | 31,664 | $ | 77,782 | -59.3% | ||||||
Theatre operating expenses | 8,812 | 30,225 | -70.8% | 35,301 | 58,787 | -40.0% | ||||||||||
Media | 6,816 | 21,185 | -67.8% | 25,727 | 37,927 | -32.2% | ||||||||||
P1AG | 9,604 | 40,529 | -76.3% | 44,026 | 81,494 | -46.0% | ||||||||||
LBE (i) | 4,810 | 13,957 | -65.5% | 17,886 | 25,105 | -28.8% | ||||||||||
LBE pre-opening (ii) | 179 | 673 | -73.4% | 924 | 1,364 | -32.3% | ||||||||||
SCENE | 1,635 | 4,060 | -59.7% | 4,208 | 9,098 | -53.7% | ||||||||||
Marketing | 1,059 | 4,192 | -74.7% | 3,980 | 7,043 | -43.5% | ||||||||||
Other (iii) | 6,670 | 7,892 | -15.5% | 15,405 | 16,066 | -4.1% | ||||||||||
Other operating expenses including cash lease payments paid/payable | $ | 39,819 | $ | 163,785 | -75.7% | $ | 179,121 | $ | 314,666 | -43.1% | ||||||
Cash rent paid/payable related to lease obligations (iv) (v) | (4,539) | (4,652) | -2.4% | (9,293) | (8,964) | 3.7% | ||||||||||
Other operating expenses from continuing operations | $ | 35,038 | $ | 159,133 | -78.0% | $ | 169,586 | $ | 305,702 | -44.5% | ||||||
Other operating expenses from discontinued operations | 606 | 2,525 | -76.0% | 2,212 | 4,139 | -46.6% | ||||||||||
Total other operating expenses | $ | 35,644 | $ | 161,658 | -78.0% | $ | 171,798 | $ | 309,841 | -44.6% | ||||||
(i) Includes operating costs of LBE locations. Overhead relating to management of LBE portfolio are included in the 'Other' line. | ||||||||||||||||
(ii) Includes pre-opening costs of LBE. | ||||||||||||||||
(iii) Other category includes overhead costs related to LBE and other Cineplex internal departments. | ||||||||||||||||
(iv) Cash rent paid/payable that has been reallocated to offset the lease obligations. | ||||||||||||||||
(v) Does not reflect the impact of quantified negotiated lease-related abatements included in the total amount of $11.9 million in the 2020 quarter and year to date figures. | ||||||||||||||||
Other operating continuity from continuing operations | Second Quarter | Year to Date | |||
Other Operating | Other Operating | ||||
2019 as restated | $ | 159,133 | $ | 305,702 | |
Impact of new and acquired theatres | (583) | 196 | |||
Impact of disposed theatres | (290) | (592) | |||
Same theatre payroll change (i) | (40,176) | (45,839) | |||
Same theatre operating expenses change (i) | (21,202) | (23,371) | |||
Media operating expenses change | (14,369) | (12,200) | |||
P1AG operating expenses change | (30,925) | (37,468) | |||
LBE operating expenses change | (9,147) | (7,219) | |||
LBE pre-opening change | (494) | (440) | |||
SCENE change | (2,425) | (4,890) | |||
Marketing change | (3,133) | (3,063) | |||
Other | (1,222) | (659) | |||
Impact of IFRS 16 adoption: | |||||
Cash rent paid/payable related to lease obligations (ii) | (129) | (571) | |||
2020 as reported | $ | 35,038 | $ | 169,586 | |
(i) See Non-GAAP measures section of this news release. | |||||
(ii) Does not reflect the impact of quantified negotiated lease-related abatements included in the total amount of $11.9 million in the 2020 quarter and year to date figures. | |||||
Second Quarter
The overall decrease in other operating expenses was a result of the temporary closure of theatres, LBE locations and P1AG route locations and the resulting impact on all other parts of the business. In order to manage costs Cineplex took advantage of government subsidy programs in Canada and the United States, offsetting Other operating costs with $16.5 million of subsidies in the second quarter, including $7.3 million against theatre payroll, and focused on reducing overall spending. The decrease in Other expenses due to the closures was partially offset by the higher volume of digital commerce sales during the quarter. In addition to wage subsidies received, theatre and LBE payroll costs were reduced as a result of the temporary layoff of part-time staff in March and payroll reductions for full-time staff.
Year to Date
The overall decrease in other operating expenses was as a result of the temporary closure of theatres, LBE locations and P1AG route locations leading to a decrease in business volumes from March 2020. The decrease in Other expenses due to the closures was offset in part by the higher volume of digital commerce sales during the second quarter of 2020.
General and administrative expenses
The following table highlights the movement in general and administrative ("G&A") expenses during the quarter and the year to date, including Share-based compensation costs, and G&A expenses net of these costs (in thousands of dollars):
G&A expenses | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||
G&A excluding LTIP and option plan expense | $ | 9,949 | $ | 15,892 | -37.4% | $ | 27,203 | $ | 33,720 | -19.3% | ||||||
Restructuring | 75 | 713 | -89.5% | 435 | 713 | -39.0% | ||||||||||
Transaction costs | 1,098 | — | NM | 2,369 | — | NM | ||||||||||
LTIP (i) | (1,572) | 247 | NM | (13,009) | 1,009 | NM | ||||||||||
Option plan | 47 | 404 | -88.4% | (2,194) | 793 | NM | ||||||||||
G&A expenses including cash lease payments | $ | 9,597 | $ | 17,256 | -44.4% | $ | 14,804 | $ | 36,235 | -59.1% | ||||||
Cash rent paid/payable included as part of lease obligations (ii) (iii) | (195) | (149) | 30.9% | (373) | (276) | 35.1% | ||||||||||
G&A expenses as reported | $ | 9,402 | $ | 17,107 | -45.0% | $ | 14,431 | $ | 35,959 | -59.9% | ||||||
(i) LTIP includes the expense for the LTIP program as well as the expense for the executive and Board deferred share unit plans. | ||||||||||||||||
(ii) Cash rent paid/payable that has been reallocated to offset the lease obligations. | ||||||||||||||||
(iii) Does not reflect the impact of quantified negotiated lease-related abatements included in the total amount of $11.9 million in the 2020 quarter and year to date figures. | ||||||||||||||||
Second Quarter and Year to Date
G&A expenses decreased $7.7 million during the second quarter of 2020 as compared to the prior year period. This was primarily due to a $5.9 million decrease in G&A excluding LTIP and option plan expense primarily as a result of the $3.8 million received under the COVID-19 CEWS wage subsidy program and reduced payroll costs mainly due to voluntary salary reductions for full-time employees. LTIP expense decreased $1.9 million as a result of the decrease in the Share price from $11.70 at March 31, 2020 to $8.04 at June 30, 2020. These expenses were partially offset by an increase in transaction costs related to the Cineworld Transaction and ensuing litigation resulting from the repudiation of the Cineworld Transaction.
G&A expenses for the year to date period decreased $21.5 million compared to the prior year period due to a $14.1 million decrease in LTIP expense, a $2.9 million decrease in option plan expense and the COVID-19 CEWS wages subsidy program. The impact of the COVID-19 pandemic on Cineplex's business led to a sharp decline in the Share price which decreased to $8.04 per Share at June 30, 2020. With the termination of the Arrangement Agreement, options have been reclassified to being accounted for as equity-settled and both LTIP and option expenses have been accounted for over their original vesting periods (prior to the Arrangement Agreement).
EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") (see Non-GAAP measures section of this news release)
The following table presents EBITDA, adjusted EBITDA and adjusted EBITDAaL for the three and six months ended June 30, 2020 as compared to the prior year periods (expressed in thousands of dollars, except adjusted EBITDAaL margin):
EBITDA | Second Quarter | Year to Date | ||||||||||||||
2020 | 2019 Restated | Change | 2020 | 2019 Restated | Change | |||||||||||
EBITDA | $ | (45,715) | $ | 115,484 | NM | $ | (171,850) | $ | 193,654 | NM | ||||||
Adjusted EBITDA | $ | (41,313) | $ | 114,383 | NM | $ | 5,159 | $ | 193,125 | -97.3% | ||||||
Adjusted EBITDAaL (i) | $ | (72,532) | $ | 70,255 | NM | $ | (70,142) | $ | 105,907 | NM | ||||||
Adjusted EBITDAaL margin (i) | -329.9% | 16.0% | -345.9% | -23.0% | 13.2% | -36.2% | ||||||||||
(i) Prior period figures have been revised to conform to current period presentation. See Reconciliation section of the MD&A. | ||||||||||||||||
Adjusted EBITDAaL for the second quarter of 2020 decreased $142.8 million from the prior year period. For the six months ended June 30, 2020, adjusted EBITDAaL decreased 176.0 million, as compared to the same period in 2019. The quarterly and year to date decreases were primarily due the impact of the COVID-19 government imposed restrictions and resulting closure of substantially all of Cineplex businesses in March 2020. In computing adjusted EBITDAaL, cash rents paid or payable have been partially offset by the quantified lease-related savings negotiated with landlords as a result of the COVID-19 disclosures. This includes agreements with landlords that are evidenced by way of written confirmation of the terms agreed upon up to the date of the MD&A, and are in the process of being formally documented. Adjusted EBITDAaL margin is calculated as adjusted EBITDAaL divided by total revenues.
ADJUSTED FREE CASH FLOW (see Non-GAAP measures section of this news release)
For the second quarter of 2020, adjusted free cash flow per common share of Cineplex was $(0.85) as compared to $0.81 in the prior year period. The declared dividends per common share of Cineplex were nil in the second quarter of 2020 and $0.45 in the prior year period. During the 12 months ended June 30, 2020, Cineplex generated adjusted free cash flow per Share of $0.53, compared to $2.84 in the prior 12 month period. Cineplex declared dividends per Share of $1.05 and $1.75, respectively, in each 12 month period. The payout ratios for these periods were 199.7% and 61.7%, respectively.
NON-GAAP FINANCIAL MEASURES
EBITDA and Adjusted Free Cash Flow
EBITDA and adjusted free cash flow are not measures recognized by GAAP and do not have standardized meanings in accordance with such principles. Therefore, EBITDA and adjusted free cash flow may not be comparable to similar measures presented by other issuers.
EBITDA is calculated by adding back to net income or net loss, income tax expense, depreciation and amortization expense, and interest income from continuing operations. Adjusted EBITDA excludes the change in fair value of financial instrument, loss on disposal of assets, foreign exchange, impairment of long-lived assets and goodwill, the equity loss (income) of CDCP, the non-controlling interests' share of adjusted EBITDA of TG-CPX Limited Partnership, and depreciation, amortization, interest and taxes of Cineplex's other joint ventures and associates. Adjusted EBITDAaL modifies adjusted EBITDA to deduct current period cash rent paid or payable related to lease obligations net of quantified savings negotiated of $11.9 million with landlords as a result of the COVID-19 closures. This includes agreements with landlords that are evidenced by way of written confirmation of the terms agreed upon to the date of approval of the financial statements and MD&A, and are in the process of being formally documented.
Cineplex's management believes that adjusted EBITDAaL is an important supplemental measure of Cineplex's profitability at an operational level and provides analysts and investors with comparability in evaluating and valuing Cineplex's performance period over period. EBITDA, adjusted for various unusual items, is also used to define certain financial covenants in Cineplex's Credit Facilities. Management calculates adjusted EBITDAaL margin by dividing adjusted EBITDAaL by total revenues.
Adjusted free cash flow is a non-GAAP measure generally used by Canadian corporations, as an indicator of financial performance and it should not be seen as a measure of liquidity or a substitute for comparable metrics prepared in accordance with GAAP. For a detailed reconciliation of net income or net loss to EBITDA, adjusted EBITDA and adjusted EBITDAaL and from cash provided by operating activities to adjusted free cash flow, please refer to Cineplex's management's discussion and analysis filed on www.sedar.com.
Earnings per Share Metrics
Cineplex has presented basic and diluted earnings per share net of this item to provide a more comparable earnings per share metric between the current periods and prior year periods. In the non-GAAP measure, earnings is defined as net income or net loss excluding the change in fair value of financial instrument.
Per Patron Revenue Metrics
Cineplex reviews per patron metrics as they relate to box office revenue and theatre food service revenue such as BPP, CPP, BPP excluding premium priced product, and concession margin per patron, as these are key measures used by investors to value and assess Cineplex's performance, and are widely used in the theatre exhibition industry. Management of Cineplex defines these metrics as follows:
Theatre Attendance: Theatre attendance is calculated as the total number of paying patrons that frequent Cineplex's theatres during the period.
BPP: Calculated as total box office revenues divided by total paid theatre attendance for the period.
BPP excluding premium priced product: Calculated as total box office revenues for the period, less box office revenues from 3D, 4DX, UltraAVX, VIP and IMAX product; divided by total paid theatre attendance for the period, less paid theatre attendance for 3D, 4DX, UltraAVX, VIP, ScreenX and IMAX product.
CPP: Calculated as total theatre food service revenues divided by total paid total theatre attendance for the period.
Premium priced product: Defined as 3D, 4DX, UltraAVX, IMAX, ScreenX and VIP film product.
Theatre concession margin per patron: Calculated as total theatre food service revenues less total theatre food service cost, divided by theatre attendance for the period.
Same Theatre Analysis
Cineplex reviews and reports same theatre metrics relating to box office revenues, theatre food service revenues, theatre rent expense and theatre payroll expense, as these measures are widely used in the theatre exhibition industry as well as other retail industries.
Same theatre metrics are calculated by removing the results for all theatres that have been opened, acquired, closed or otherwise disposed of subsequent to the start of the prior year comparative period. For the three months ended June 30, 2020 the impact of two locations that have been opened or acquired and three locations that have been closed or otherwise disposed of have been excluded, resulting in 162 theatres being included in the same theatre metrics. For the six months ended June 30, 2020 the impact of the two locations that have been opened or acquired and three locations that have been closed or otherwise disposed of have been excluded, resulting in 162 theatres being included in the same theatre metrics.
Cost of sales percentages
Cineplex reviews and reports cost of sales percentages for its two largest revenue sources, box office revenues and food service revenues as these measures are widely used in the theatre exhibition industry. These measures are reported as film cost percentage and concession cost percentage, respectively, and are calculated as follows:
Film cost percentage: Calculated as total film cost expense divided by total box office revenues for the period.
Theatre concession cost percentage: Calculated as total theatre food service costs divided by total theatre food service revenues for the period.
LBE food cost percentage: Calculated as total LBE food costs divided by total LBE food service revenues for the period.
Lease-related Cash Saving
Quantified savings negotiated with landlords as a result of the COVID-19 disclosures. This includes agreements that are evidenced by way of written confirmation of the terms agreed upon to the date of the MD&A, and are in the process of formally documented.
Net Cash Burn
Calculated as adjusted EBITDAaL less cash interest expense (excluding amounts with respect to lease obligations), provision for income taxes and net capital expenditures.
Net cash burn | Second Quarter | |
2020 | ||
Adjusted EBITDAaL | $ | (72,532) |
Cash interest expense excluding lease obligations | (7,782) | |
Provision for income taxes | 34,440 | |
Net capital expenditures | (8,019) | |
Total net cash burn | $ | (53,893) |
Average monthly net cash burn | $ | (17,964) |
Certain information included in this news release contains forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include, among others, statements with respect to Cineplex's objectives, goals and strategies to achieve those objectives and goals, as well as statements with respect to Cineplex's beliefs, plans, objectives, expectations, anticipations, estimates and intentions. The words "may", "will", "could", "should", "would", "suspect", "outlook", "believe", "plan", "anticipate", "estimate", "expect", "intend", "forecast", "objective" and "continue" (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements. Forward-looking statements also include, statements pertaining to:
- Cineplex's outlook, goals, expectations and projected results of operations, including factors and assumptions underlying Cineplex's projections regarding the duration and impact of a novel strain of coronavirus ("COVID-19") pandemic on Cineplex, the movie exhibition industry and the economy in general, as well as Cineplex's response to the pandemic related to the closure of its theatres and location-based entertainment ("LBE") venues, employee reductions and other cost-cutting initiatives and increased expenses relating to safety measures taken at its facilities to protect the health and well-being of guests and employees;
- Cineplex's expectations with respect to net cash burn, liquidity and capital expenditures, including its ability to meet its ongoing capital, operating and other obligations, and anticipated needs for, and sources of, funds; and
- Cineplex's ability to execute cost-cutting and revenue enhancement initiatives in response to the COVID-19 pandemic.
The COVID-19 pandemic has had an unprecedented impact on Cineplex, along with the rest of the movie exhibition industry and other industries in which Cineplex operates, including material decreases in revenues, results of operations and cash flows. The situation continues to evolve and the social and economic effects are widespread. As an entertainment and media company that operates spaces where guests gather in close proximity, Cineplex's business has been significantly impacted by the actions taken to control the spread of COVID-19. These actions include, among other things, the introduction of social distancing measures and restrictions on freedom of movement. There is limited visibility on when these restrictions will be lifted in many of the markets in which Cineplex operates and how quickly guests will return to Cineplex's locations once its operations resume due to prolonged safety concerns and adverse economic conditions. Cineplex is actively monitoring the situation and will respond as the impact of the COVID-19 pandemic evolves.
By their very nature, forward-looking statements involve inherent risks and uncertainties, including those described in Cineplex's Annual Information Form ("AIF"), its MD&A for the year ended December 31, 2019 ("Annual MD&A") and in this news release. Those risks and uncertainties, both general and specific, give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. Cineplex cautions readers not to place undue reliance on these statements, as a number of important factors, many of which are beyond Cineplex's control, could cause actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, the duration and impact of the COVID-19 pandemic on Cineplex, the movie exhibition industry and the economy in general, as well as Cineplex's response to the COVID-19 pandemic as it relates to the closure of its theatres and location-based entertainment venues, employee reductions and other cost-cutting initiatives, and increased expenses relating to safety measures taken at its facilities to protect the health and well-being of customers and employees; Cineplex's expectations with respect to liquidity and capital expenditures, including its ability to meet its ongoing capital, operating and other obligations, and anticipated needs for, and sources of, funds; Cineplex's ability to execute cost-cutting and revenue enhancement initiatives in response to the COVID-19 pandemic; risks generally encountered in the relevant industry, competition, customer, legal, taxation and accounting matters; the outcome of any litigation surrounding the termination of the Cineworld transaction; and diversion of management time on litigation related to the Cineworld transaction.
The foregoing list of factors that may affect future results is not exhaustive. When reviewing Cineplex's forward-looking statements, readers should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements may be found in the "Risks and Uncertainties" section of 2019 Annual MD&A.
Cineplex does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable Canadian securities law. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of Cineplex, its financial or operating results or its securities. All forward-looking statements in this news release are made as of the date hereof and are qualified by these cautionary statements. Additional information, including Cineplex's AIF and MD&A, can be found on SEDAR at www.sedar.com.
SECOND QUARTER 2020 ANALYST CONFERENCE CALL
You are cordially invited to participate in a conference call with the management of Cineplex (TSX: CGX) to review our second quarter. Ellis Jacob, President and Chief Executive Officer and Gord Nelson, Chief Financial Officer, will host the call scheduled for:
Friday, August 14, 2020
10:00 am Eastern Time
In order to participate in the conference call, please dial 647-792-1240, or from outside Toronto and from the U.S., dial 1-800-437-2398 at least five to 10 minutes prior to 10:00 a.m. ET. Please quote the conference confirmation code 9829938 to access the call.
If you cannot participate in a live mode, a replay will be available. Please dial 647-436-0148, or from outside Toronto and from the U.S., dial 1-888-203-1112. The replay passcode is 9829938.
The replay will begin at 1:00 p.m. ET on Friday, August 14, 2020 and end at 1:00 p.m. ET on Friday, August 21, 2020.
Note that media are welcome to join the call in listen-only mode.
About Cineplex
Cineplex (TSX: CGX) is a top-tier Canadian brand that operates in the film entertainment and content, amusement and leisure, and media sectors. As a leading entertainment and media company, Cineplex welcomes millions of guests annually through its circuit of theatres and location-based entertainment ("LBE") venues across the country. In addition to being Canada's largest and most innovative film exhibitor, Cineplex also operates successful businesses in digital commerce (CineplexStore.com), food service, alternative programming (Cineplex Events), cinema media (Cineplex Media), digital place-based media (Cineplex Digital Media "CDM") and amusement solutions (Player One Amusement Group "P1AG"). Additionally, Cineplex operates an LBE business through Canada's newest destinations for 'Eats & Entertainment' (The Rec Room), and entertainment complexes specifically designed for teens and families (Playdium). Cineplex is a joint venture partner in SCENE, Canada's largest entertainment loyalty program.
Proudly recognized as having one of the country's Most Admired Corporate Cultures, Cineplex employs approximately 13,000 people in its offices across Canada and the United States. To learn more visit Cineplex.com or download the Cineplex App.
Cineplex Inc. | ||||||
June 30, | December 31, | |||||
2020 | 2019 | |||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 13,806 | $ | 26,080 | ||
Trade and other receivables | 50,960 | 168,065 | ||||
Income taxes receivable | 5,812 | 9,757 | ||||
Inventories | 29,609 | 30,995 | ||||
Prepaid expenses and other current assets | 10,713 | 14,226 | ||||
Fair value of interest rate swap agreements | — | 1,022 | ||||
Assets held for sale | — | 6,573 | ||||
110,900 | 256,718 | |||||
Non-current assets | ||||||
Property, equipment and leaseholds | 601,768 | 662,798 | ||||
Right-of-use assets | 1,096,650 | 1,232,849 | ||||
Deferred income taxes | 89,430 | 14,197 | ||||
Fair value of interest rate swap agreements | — | 472 | ||||
Interests in joint ventures and associates | 18,243 | 28,221 | ||||
Intangible assets | 86,464 | 88,367 | ||||
Goodwill | 728,731 | 816,790 | ||||
$ | 2,732,186 | $ | 3,100,412 | |||
Liabilities | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | $ | 148,914 | $ | 220,188 | ||
Share-based compensation | 1,916 | 25,681 | ||||
Dividends payable | — | 9,500 | ||||
Income taxes payable | 817 | 1,183 | ||||
Deferred revenue | 212,471 | 222,998 | ||||
Current portion of long-term debt | 664,000 | — | ||||
Lease obligations | 159,776 | 106,352 | ||||
Fair value of interest rate swap agreements | 5,020 | 1,874 | ||||
Liabilities related to assets held for sale | — | 2,808 | ||||
1,192,914 | 590,584 | |||||
Non-current liabilities | ||||||
Share-based compensation | 4,457 | — | ||||
Long-term debt | — | 625,000 | ||||
Fair value of interest rate swap agreements | 18,588 | 10,837 | ||||
Lease obligations | 1,185,767 | 1,261,243 | ||||
Post-employment benefit obligations | 10,651 | 10,678 | ||||
Other liabilities | 8,320 | 9,813 | ||||
Deferred income taxes | — | 1,263 | ||||
1,227,783 | 1,918,834 | |||||
Total liabilities | 2,420,697 | 2,509,418 | ||||
Equity | ||||||
Share capital | 852,379 | 852,379 | ||||
Deficit | (551,306) | (264,310) | ||||
Hedging reserves and other | (131) | (131) | ||||
Contributed surplus | 8,156 | 4,052 | ||||
Cumulative translation adjustment | 2,505 | (887) | ||||
Total equity attributable to owners of Cineplex | 311,603 | 591,103 | ||||
Non-controlling interests | (114) | (109) | ||||
Total equity | 311,489 | 590,994 | ||||
$ | 2,732,186 | $ | 3,100,412 | |||
Cineplex Inc. | ||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||
Restated | Restated | |||||||||||||
Revenues | ||||||||||||||
Box office | $ | 27 | $ | 189,371 | $ | 111,029 | $ | 345,867 | ||||||
Food service | 3,256 | 129,563 | 82,621 | 232,621 | ||||||||||
Media | 7,880 | 49,196 | 40,037 | 83,902 | ||||||||||
Amusement | 3,731 | 58,117 | 51,068 | 116,617 | ||||||||||
Other | 7,094 | 12,607 | 20,034 | 24,471 | ||||||||||
21,988 | 438,854 | 304,789 | 803,478 | |||||||||||
Expenses | ||||||||||||||
Film cost | 10 | 103,005 | 56,510 | 181,726 | ||||||||||
Cost of food service | 789 | 28,247 | 22,998 | 51,683 | ||||||||||
Depreciation - right-of-use assets | 34,185 | 36,557 | 69,718 | 73,019 | ||||||||||
Depreciation and amortization - other assets | 31,759 | 32,403 | 65,721 | 64,036 | ||||||||||
Loss on disposal of assets | 478 | 116 | 1,295 | 593 | ||||||||||
Other costs | 62,175 | 192,988 | 219,723 | 376,816 | ||||||||||
Share of income of joint ventures and associates | 3,192 | (1,643) | 3,927 | (2,012) | ||||||||||
Interest expense - lease obligations | 11,353 | 12,469 | 23,031 | 24,689 | ||||||||||
Interest expense - other | 9,719 | 5,792 | 26,605 | 11,209 | ||||||||||
Interest income | (57) | (59) | (129) | (133) | ||||||||||
Foreign exchange | 1,059 | 657 | (868) | 1,018 | ||||||||||
Impairment of long-lived assets and goodwill | — | — | 173,054 | — | ||||||||||
154,662 | 410,532 | 661,585 | 782,644 | |||||||||||
(Loss) income from continuing operations before income taxes | (132,674) | 28,322 | (356,796) | 20,834 | ||||||||||
Provision for income taxes | ||||||||||||||
Current | (7,632) | 7,647 | (7,865) | 8,413 | ||||||||||
Deferred | (26,808) | (1,402) | (76,542) | (4,327) | ||||||||||
(34,440) | 6,245 | (84,407) | 4,086 | |||||||||||
Net (loss) income from continuing operations | $ | (98,234) | $ | 22,077 | $ | (272,389) | $ | 16,748 | ||||||
Net loss from discontinued operations, net of taxes | (693) | (2,680) | (4,952) | (4,711) | ||||||||||
Net (loss) income | $ | (98,927) | $ | 19,397 | $ | (277,341) | $ | 12,037 | ||||||
Net (loss) income from continuing operations attributable to: | ||||||||||||||
Owners of Cineplex | $ | (98,230) | $ | 22,085 | $ | (272,384) | $ | 16,766 | ||||||
Non-controlling interests | (4) | (8) | (5) | (18) | ||||||||||
Net (loss) income from continuing operations | $ | (98,234) | $ | 22,077 | $ | (272,389) | $ | 16,748 | ||||||
Net (loss) income attributable to: | ||||||||||||||
Owners of Cineplex | $ | (98,923) | $ | 19,405 | $ | (277,336) | $ | 12,055 | ||||||
Non-controlling interests | (4) | (8) | (5) | (18) | ||||||||||
Net (loss) income | $ | (98,927) | $ | 19,397 | $ | (277,341) | $ | 12,037 | ||||||
Net (loss) income per share attributable to owners of Cineplex - basic and diluted: | ||||||||||||||
Continuing operations | $ | (1.55) | $ | 0.35 | $ | (4.30) | $ | 0.26 | ||||||
Discontinued operations | (0.01) | (0.04) | (0.08) | (0.07) | ||||||||||
Total operations | $ | (1.56) | $ | 0.31 | $ | (4.38) | $ | 0.19 | ||||||
Cineplex Inc. | ||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||
Restated | Restated | |||||||||||||
Net (loss) income from continuing operations | $ | (98,234) | $ | 22,077 | $ | (272,389) | $ | 16,748 | ||||||
Other comprehensive (loss) income from continuing operations | ||||||||||||||
Items that will be reclassified subsequently to net income: | ||||||||||||||
Loss on hedging instruments | — | (3,827) | — | (11,621) | ||||||||||
Associated deferred income taxes recovery | — | 1,028 | — | 3,121 | ||||||||||
Foreign currency translation adjustment | (2,259) | (1,473) | 3,385 | (3,030) | ||||||||||
Recognition of currency translation adjustment on disposition of discontinued operations | (160) | — | (160) | — | ||||||||||
Other comprehensive (loss) income | (2,419) | (4,272) | 3,225 | (11,530) | ||||||||||
Comprehensive (loss) income from continuing operations | (100,653) | 17,805 | (269,164) | 5,218 | ||||||||||
Net loss from discontinued operations, net of taxes | (693) | (2,680) | (4,952) | (4,711) | ||||||||||
Foreign currency translation adjustment from discontinued operations | 545 | 116 | 7 | 159 | ||||||||||
Comprehensive (loss) income | $ | (100,801) | $ | 15,241 | $ | (274,109) | $ | 666 | ||||||
Comprehensive (loss) income from continuing operations attributable to: | ||||||||||||||
Owners of Cineplex | $ | (100,649) | $ | 17,813 | $ | (269,159) | $ | 5,236 | ||||||
Non-controlling interests | (4) | (8) | (5) | (18) | ||||||||||
Comprehensive (loss) income | $ | (100,653) | $ | 17,805 | $ | (269,164) | $ | 5,218 | ||||||
Comprehensive (loss) income attributable to: | ||||||||||||||
Owners of Cineplex | $ | (100,797) | $ | 15,249 | $ | (274,104) | $ | 684 | ||||||
Non-controlling interests | (4) | (8) | (5) | (18) | ||||||||||
Comprehensive (loss) income | $ | (100,801) | $ | 15,241 | $ | (274,109) | $ | 666 | ||||||
Cineplex Inc. | |||||||||||||||||||||||||||
Share | Contributed surplus | Hedging reserves and other | Cumulative translation adjustment | Deficit | Non-controlling interests | Total | |||||||||||||||||||||
January 1, 2020 | $ | 852,379 | $ | 4,052 | $ | (131) | $ | (887) | $ | (264,310) | $ | (109) | $ | 590,994 | |||||||||||||
Net loss | — | — | — | — | (277,336) | (5) | (277,341) | ||||||||||||||||||||
Other comprehensive income | — | — | — | 3,392 | (160) | — | 3,232 | ||||||||||||||||||||
Total comprehensive loss | — | — | — | 3,392 | (277,496) | (5) | (274,109) | ||||||||||||||||||||
Dividends declared | — | — | — | — | (9,500) | — | (9,500) | ||||||||||||||||||||
Share option expense | — | 160 | — | — | — | — | 160 | ||||||||||||||||||||
Conversion to equity-settled option plan | — | 3,944 | — | — | — | — | 3,944 | ||||||||||||||||||||
June 30, 2020 | $ | 852,379 | $ | 8,156 | $ | (131) | $ | 2,505 | $ | (551,306) | $ | (114) | $ | 311,489 | |||||||||||||
January 1, 2019 | $ | 852,379 | $ | 7,815 | $ | (3,678) | $ | 2,301 | $ | (179,721) | $ | (85) | $ | 679,011 | |||||||||||||
Net income | — | — | — | — | 12,055 | (18) | 12,037 | ||||||||||||||||||||
Other comprehensive loss | — | — | (8,500) | (2,871) | — | — | (11,371) | ||||||||||||||||||||
Total comprehensive income | — | — | (8,500) | (2,871) | 12,055 | (18) | 666 | ||||||||||||||||||||
Dividends declared | — | — | — | — | (55,734) | — | (55,734) | ||||||||||||||||||||
Share option expense | — | 793 | — | — | — | — | 793 | ||||||||||||||||||||
June 30, 2019 | $ | 852,379 | $ | 8,608 | $ | (12,178) | $ | (570) | $ | (223,400) | $ | (103) | $ | 624,736 | |||||||||||||
Cineplex Inc. | |||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||
Restated | Restated | ||||||||||||
Cash provided by (used in) | |||||||||||||
Operating activities | |||||||||||||
Net (loss) income from continuing operations | $ | (98,234) | $ | 22,077 | $ | (272,389) | $ | 16,748 | |||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||||
Depreciation and amortization of property, equipment and leaseholds, and intangible assets | 31,759 | 32,403 | 65,721 | 64,036 | |||||||||
Depreciation of right-of-use assets | 34,185 | 36,557 | 69,718 | 73,019 | |||||||||
Unrealized foreign exchange | 739 | 308 | (690) | 558 | |||||||||
Interest rate swap agreements - non-cash interest | 1,909 | (574) | 11,295 | (1,132) | |||||||||
Other non-cash interest | 328 | 291 | 677 | 850 | |||||||||
Loss on disposal of assets | 478 | 116 | 1,295 | 593 | |||||||||
Deferred income taxes | (26,808) | (1,402) | (76,542) | (4,327) | |||||||||
Non-cash share-based compensation | 160 | 404 | 4,104 | 793 | |||||||||
Impairment of long-lived assets and goodwill | — | — | 173,054 | — | |||||||||
Net change in interests in joint ventures and associates | 4,178 | (1,403) | 6,069 | (3,089) | |||||||||
Changes in operating assets and liabilities | 69,401 | (30,432) | 58,973 | (28,277) | |||||||||
Net cash provided by operating activities | 18,095 | 58,345 | 41,285 | 119,772 | |||||||||
Investing activities | |||||||||||||
Proceeds from disposal of assets, including sale of discontinued operations | 50 | — | 50 | — | |||||||||
Purchases of property, equipment and leaseholds | (14,441) | (27,653) | (51,944) | (60,014) | |||||||||
Intangible assets additions | (1,760) | (1,060) | (5,481) | (2,556) | |||||||||
Tenant inducements | 6,422 | 734 | 18,299 | 1,349 | |||||||||
Net cash received from CDCP | 782 | 3,128 | 3,910 | 8,602 | |||||||||
Net cash used in investing activities | (8,947) | (24,851) | (35,166) | (52,619) | |||||||||
Financing activities | |||||||||||||
Dividends paid | — | (27,867) | (19,000) | (55,417) | |||||||||
(Repayment) borrowings under credit facilities, net | (1,000) | 35,000 | 39,000 | 61,000 | |||||||||
Repayments of lease obligations - principal | (993) | (31,580) | (34,812) | (64,064) | |||||||||
Financing fees | (800) | — | (800) | (243) | |||||||||
Net cash used in financing activities | (2,793) | (24,447) | (15,612) | (58,724) | |||||||||
Effect of exchange rate differences on cash | 560 | 236 | (390) | 296 | |||||||||
Increase (decrease) in cash and cash equivalents from continuing operations | 6,915 | 9,283 | (9,883) | 8,725 | |||||||||
Cash flows used in discontinued operations | (253) | (1,120) | (2,391) | (1,927) | |||||||||
Cash and cash equivalents - Beginning of period | 7,144 | 23,877 | 26,080 | 25,242 | |||||||||
Cash and cash equivalents - End of period | $ | 13,806 | $ | 32,040 | $ | 13,806 | $ | 32,040 | |||||
Supplemental information | |||||||||||||
Cash paid for interest - lease obligation | $ | 166 | $ | 12,204 | $ | 11,521 | $ | 23,891 | |||||
Cash paid for interest - other | $ | 5,964 | $ | 6,367 | $ | 11,443 | $ | 12,262 | |||||
Cash (received) paid for income taxes, net | $ | (12,997) | $ | 8,227 | $ | (11,515) | $ | 26,088 | |||||
Cineplex Inc. | |||||||||||||
Reconciliation to Adjusted EBITDAaL | |||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||
Restated | Restated | ||||||||||||
Net (loss) income from continuing operations | $ | (98,234) | $ | 22,077 | $ | (272,389) | $ | 16,748 | |||||
Depreciation and amortization - other | 31,759 | 32,403 | 65,721 | 64,036 | |||||||||
Depreciation - right-of-use assets | 34,185 | 36,557 | 69,718 | 73,019 | |||||||||
Interest expense - lease obligations | 11,353 | 12,469 | 23,031 | 24,689 | |||||||||
Interest expense - other | 9,719 | 5,792 | 26,605 | 11,209 | |||||||||
Interest income | (57) | (59) | (129) | (133) | |||||||||
Current income tax (recovery) expense | (7,632) | 7,647 | (7,865) | 8,413 | |||||||||
Deferred income tax recovery | (26,808) | (1,402) | (76,542) | (4,327) | |||||||||
EBITDA from continuing operations | $ | (45,715) | $ | 115,484 | $ | (171,850) | $ | 193,654 | |||||
Loss on disposal of assets | 478 | 116 | 1,295 | 593 | |||||||||
CDCP equity loss (income) (i) | 2,784 | (1,917) | 3,374 | (2,234) | |||||||||
Foreign exchange loss (gain) | 1,059 | 657 | (868) | 1,018 | |||||||||
Impairment of long-lived assets and goodwill | — | — | 173,054 | — | |||||||||
Non-controlling interest adjusted EBITDA | 4 | 7 | 5 | 18 | |||||||||
Depreciation and amortization - joint ventures and associates (ii) | 20 | 24 | 44 | 53 | |||||||||
Taxes and interest of joint ventures and associates (ii) | 57 | 12 | 105 | 23 | |||||||||
Adjusted EBITDA from continuing operations | $ | (41,313) | $ | 114,383 | $ | 5,159 | $ | 193,125 | |||||
Cash rent paid/payable related to lease obligations (iii) | (42,706) | (43,775) | (87,880) | (87,925) | |||||||||
Negotiated lease-related cash savings for the period (iv) | 11,851 | — | 11,851 | — | |||||||||
Cash rent paid not pertaining to current period | (364) | (353) | 728 | 707 | |||||||||
Adjusted EBITDAaL (iv) | $ | (72,532) | $ | 70,255 | $ | (70,142) | $ | 105,907 | |||||
(i) | CDCP equity loss (income) not included in adjusted EBITDA as CDCP is a limited-life financing vehicle that is funded by virtual print fees collected from distributors. |
(ii) | Includes the joint ventures and associates with the exception of CDCP (see (i) above). |
(iii) | Balance of cash rents that have been reallocated to offset the lease obligations. |
(iv) | See Non-GAAP measures section of this news release. |
Cineplex Inc. | ||||||||||||
Adjusted Free Cash Flow | ||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Restated | Restated | |||||||||||
Cash provided by operating activities | $ | 18,095 | $ | 58,345 | $ | 41,285 | $ | 119,772 | ||||
Less: Total capital expenditures net of proceeds on sale of assets | (14,391) | (27,653) | (51,894) | (60,014) | ||||||||
Standardized free cash flow | 3,704 | 30,692 | (10,609) | 59,758 | ||||||||
Add/(Less): | ||||||||||||
Changes in operating assets and liabilities (i) | (69,401) | 30,432 | (58,973) | 28,277 | ||||||||
Changes in operating assets and liabilities of joint ventures and associates (i) | (986) | (240) | (2,142) | 1,077 | ||||||||
Principal component of lease obligations | (993) | (31,580) | (34,812) | (64,064) | ||||||||
Principal portion of cash rent paid not pertaining to current period | (357) | (346) | 714 | 691 | ||||||||
Growth capital expenditures and other (ii) | 13,777 | 19,191 | 48,303 | 46,883 | ||||||||
Share of income of joint ventures and associates, net of non-cash depreciation | (331) | (238) | (404) | (146) | ||||||||
Non-controlling interest | 4 | 7 | 5 | 18 | ||||||||
Net cash received from CDCP (iii) | 782 | 3,128 | 3,910 | 8,602 | ||||||||
Adjusted free cash flow | $ | (53,801) | $ | 51,046 | $ | (54,008) | $ | 81,096 | ||||
Average number of Shares outstanding | 63,333,238 | 63,333,238 | 63,333,238 | 63,333,238 | ||||||||
Adjusted free cash flow per Share | $ | (0.849) | $ | 0.806 | $ | (0.853) | $ | 1.280 | ||||
Dividends declared | $ | — | $ | 0.445 | $ | 0.150 | $ | 0.880 | ||||
(i) | Changes in operating assets and liabilities are not considered a source or use of adjusted free cash flow. |
(ii) | Growth capital expenditures and other represent expenditures on Board approved projects, exclude maintenance capital expenditures, and are net of proceeds on asset sales. Cineplex's revolving facility is available to fund Board approved projects. |
(iii) | Excludes the share of income of CDCP, as CDCP is a limited-life financing vehicle funded by virtual print fees collected from distributors. Cash invested into CDCP, as well as cash distributions received from CDCP, are considered to be uses and sources of adjusted free cash flow. |
SOURCE Cineplex
Investor Relations contact: Melissa Pressacco, Senior Manager, Communications and Investor Relations, [email protected]; Media Relations contact: Sarah Van Lange, Executive Director, Communications, [email protected]
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