Cineplex Inc. Reports Record First Quarter Results, Announces Dividend Increase and Amended Credit Facilities

TORONTO, May 3, 2016 /CNW/ - (TSX: CGX) - Cineplex Inc. ("Cineplex") today released its financial results for the three months ended March 31, 2016.

First Quarter Results






2016

2015

Period over Period Change (i)

Total revenues

$

378.9million

$

289.8million

30.8%

Attendance

20.6million

17.5million

17.4%

Net income

$

21.5million

$

 10.5million

103.8%

Box office revenues per patron ("BPP") (ii)

$

9.36

$

8.90

5.2%

Concession revenues per patron ("CPP") (ii)

$

5.44

$

5.18

5.0%

Adjusted EBITDA (ii)

$

57.1million

$

40.2million

42.0%

Adjusted EBITDA margin (ii)

15.1%

13.9%

1.2%

Adjusted free cash flow (ii)

$

44.0million

$

 27.5million

60.1%

Adjusted free cash flow per common share of

Cineplex ("Share") (ii)

 

$

0.696

 

$

0.436

 

59.6%

Earnings per Share attributable to owners of

Cineplex ("EPS") - basic

 

$

0.35

 

$

0.17

 

105.9%

EPS - diluted

$

0.34

$

0.17

100.0%

 

i.

Period over period change calculated based on thousands of dollars except percentage and per share values.  Changes in percentage amounts are calculated as 2016 value less 2015 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.

 

"Cineplex achieved record first quarter results for 2016, with adjusted EBITDA of $57.1 million, an increase of 42.0% year over year," said Ellis Jacob, President and CEO, Cineplex Entertainment.

"Total revenue increased 30.8%, to $378.9 million, primarily due to strong performance from the film slate, resulting in record first quarter box office revenue of $192.6 million, which increased 23.5% and an all-time quarterly attendance record of 20.6 million guests. Record first quarter food service revenue, BPP and CPP, as well as the addition of $23.3 million in revenue resulting from our acquisition of Cineplex Starburst Inc. during the fourth quarter of 2015, also contributed to the strength of the quarter. Media revenue continued to grow increasing 13.7% to $33.1 million, largely due to Cineplex Digital Media revenue. "

"We are pleased to announce a 3.8% dividend increase to $1.62 per share on an annual basis from the current $1.56 per share. This increase will be effective with the May 2016 dividend which will be paid in June 2016."

On May 2, 2016, Cineplex entered into amended and extended credit facilities. The amendment includes an extended five year term, an increased revolving component, and additional flexibility in the permitted use of funds.  The amended facilities total $55 0.0 million and include a $150.0 million five-year senior secured non-revolving term credit facility and a $400.0 million five-year senior secured revolving credit facility.

In conjunction with the amended credit facilities, Cineplex entered into interest rate swap agreements that commenced April 25,2016 for an aggregate notional principal amount of $50.0 million, and mature on October 24, 2018, the maturity date of the existing credit facilities. Under these agreements, Cineplex pays a fixed rate of 1.07% per annum, plus an applicable margin, and receives a floating rate of interest equal to the three-month Canadian deposit offering rate set quarterly in advance. In addition, on April 25, 2016, Cineplex entered into interest rate swap agreements for an aggregate notional principal amount of $200.0 million which commence on October 24, 2018 and mature on April 26, 2021, the maturity of the amended credit facilities.  Under these new agreements, Cineplex pays a fixed rate of 1.484% per annum, plus an applicable margin, and receives a floating rate of interest equal to the three-month Canadian deposit offering rate set quarterly in advance.

KEY DEVELOPMENTS IN THE FIRST QUARTER OF 2016

The following describes certain key business initiatives undertaken and results achieved during the first quarter of 2016 in each of Cineplex's core business areas:

FILM ENTERTAINMENT AND CONTENT

Theatre Exhibition

  • Reported record first quarter box office revenues of $192.6 million, an increase of $36.6 million (23.5%) from the $156.0 million reported in the prior year period due to an all-time quarterly attendance record of 20.6 million patrons and record first quarter BPP of $9.36.
  • During the quarter, Star Wars: The Force Awakens became the highest grossing film of all-time in North America, and 2016 releases Deadpool and Batman v Superman: Dawn of Justice recorded the highest grossing February and March opening weekends of all-time.
  • Opened Cineplex Cinemas Marine Gateway & VIP in Vancouver, British Columbia, an 11 screen theatre featuring three VIP auditoriums and one UltraAVX auditorium.
  • Announced a significant expansion of Cineplex's agreement with D-BOX Technologies Inc., which will see the installation of D-BOX motion systems into 23 additional auditoriums across Canada.

 

Food Service

  • Reported record first quarter food service revenues of $112.0 million, an increase of $21.2 million (23.4%) over the $90.8 million reported in the prior year period.
  • CPP was $5.44 for the period, a first quarter record for Cineplex, and $0.26 (5.0%) higher than the $5.18 reported during the prior year period.

 

Alternative Programming

  • Alternative programming in the first quarter of 2016 included strong performances from international film programming, encore performances of the Metropolitan Opera: Live in HD series, an In the Gallery presentation, and performances of the Bolshoi Ballet from Moscow and the National Theatre from London.
  • Partnered with BBC Canada to present the television program Sherlock: The Abominable Bride on the big screen at select theatres across the country.

 

Digital Commerce

  • Cineplex.com registered a 48% increase in unique visitors and a 30% increase in visits during the first quarter of 2016 as compared to the prior year period.
  • As of March 31, 2016 the Cineplex app had been downloaded 14.3 million times and recorded over 780 million app sessions.

 

MEDIA

  • Reported record first quarter media revenues of $33.1 million, which increased $4.0 million, or 13.7% compared to the prior year period.

 

Cineplex Media

  • Reported record first quarter Cineplex Media revenues of $21.1 million, compared to $20.0 million in the prior year period, with the increase primarily due to new media initiatives including WGN sponsorship and Interactive Media Zone ("IMZ") revenues.

 

Cineplex Digital Media

  • Cineplex Digital Media revenues increased $2.9 million (32.0%) compared to the prior year as an expanded client base contributed to increased project installation revenues and advertising revenue growth.
  • Announced that Cineplex Digital Media had been selected by American Dairy Queen Corporation ("DQ") as the endorsed provider of in-store digital merchandising solutions for the Dairy Queen system in the US and Canada.

 

AMUSEMENT GAMING AND LEISURE

Cineplex Starburst Inc.

  • CSI reported first quarter revenues of $26.1 million ($2.8 million due to Cineplex theatre gaming and $23.3 million from all other sources of revenues). In the prior year period, Cineplex equity accounted for its 50% interest in CSI acquiring the remaining 50% of issued and outstanding equity that it did not already own in the fourth quarter of 2015.
  • During the period, CSI acquired the 20% of Brady Starburst Limited ("BSL") that it did not previously own for $0.4 million.

 

The Rec Room

  • Announced plans for Cineplex's third The Rec Room location which will be located in Toronto, Ontario at the historic John Street Roundhouse across from the CN Tower, and is scheduled to open in 2017.

 

eSports

  • During the period, Cineplex and WGN announced the signing of a comprehensive deal with Sony Computer Entertainment Canada ("Sony") making Sony the presenting sponsor of select national video game tournaments.
  • The first of these national tournaments occurred during the period and featured the game Call of Duty: Black Ops III, and included online qualifiers produced by WGN and regional and national final events hosted at Cineplex theatres.

 

LOYALTY

  • Membership in the SCENE loyalty program increased by 0.2 million members in the period, reaching 7.5 million members at March 31, 2016.

 

CORPORATE

  • As of March 31, 2016 Cineplex's short film "Lily and the Snowman" had received over 23 million views on Facebook and 11 million views on YouTube.
  • Gord Nelson, Chief Financial Officer of Cineplex, was named Canada's CFO of the Year for 2016 by Financial Executives International Canada, PwC Canada and Robert Half. The award is presented annually to honour senior financial leaders who have made significant contributions to business in Canada with demonstrated quality, insight and integrity.

 

OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2016

Total revenues

Total revenues for the three months ended March 31, 2016 increased $89.1 million (30.8%) to a first quarter record $378.9 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 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 dollars, except attendance reported in thousands of patrons, and per patron amounts, unless otherwise noted):

 



Box office revenues

First Quarter

2016

2015

Change

Box office revenues

$

192,639

$

156,041

23.5%

Attendance (i)

20,583

17,538

17.4%

Box office revenue per patron (i)

$

9.36

$

8.90

5.2%

BPP excluding premium priced product (i)

$

8.32

$

8.33

-0.1%

Canadian industry revenues (ii)



21.8%

Same store box office revenues (i)

$

188,366

$

155,180

21.4%

Same store attendance (i)

20,184

17,436

15.8%

% Total box from premium priced product (i)

40.4%

25.3%

15.1%

(i) See non-GAAP measures section of this news release

(ii) Source: The Movie Theatre Association of Canada industry data adjusted for calendar quarter dates.

 



Box office continuity

First Quarter

Box Office

Attendance

2015 as reported

$

156,041

17,538

Same store attendance change

24,468

2,749

Impact of same store BPP change

8,724

New and acquired theatres (i)

4,239

395

Disposed and closed theatres (i)

(833)

(99)

2016 as reported

$

192,639

20,583

(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 2016 Top Cineplex Films

3D

% Box

First Quarter 2015 Top Cineplex Films

3D

% Box

1

Deadpool


14.2%

1

American Sniper


8.3%

2

Star Wars: The Force Awakens

13.0 %

2

Kingsman: The Secret Service


7.0%

3

Zootopia

9.0%

3

Fifty Shades of Grey


6.8%

4

The Revenant


6.8 %

4

Cinderella


6.5%

5

Batman v Superman: Dawn of Justice

6.3 %

5

The Imitation Game


5.6%

 

Box office revenues increased $36.6 million, or 23.5%, to $192.6 million during the first quarter of 2016, compared to $156.0 million recorded in the same period in 2015. The increase was due to the 17.4% increase in attendance to 20.6 mi llion patrons, which is an all-time quarterly record for Cineplex.  This increase was due to the strength of the film slate, including Deadpool, which had the all-time highest grossing February opening weekend. The current period also benefited from the continued strong performance of the fourth quarter release Star Wars: The Force Awakens which became the highest box office grossing film of all time in North America during the period. There were strong performing family-focused animated releases including Zootopia and Kung Fu Panda and one week of Batman v Superman: Dawn of Justice which was the highest grossing March opening weekend of all-time.  The attendance increase over the prior year period was also partially due to less weather-related theatre closures, as extreme weather in the prior year period negatively impacted theatre attendance at certain locations, primarily in the Atlant ic provinces.

BPP for the three months ended March 31, 2016 was $9.36, a $0.46 increase (5.2%) from the prior year period and a first quarter record for Cineplex. The increase in BPP was due to the film mix featuring more 3D films than in the prior year period, with three of the top five available in 3D compared to none of the top five films in the prior period. Box office revenues from premium product accounted for 40.4% of box office revenues in the current period, up from 25.3% in the prior year period.

Food service revenues

The following table highlights the movement in food service revenues, attendance and CPP for the quarter (in thousands of dollars, except attendance and same store attendance reported in thousands of patrons, and per patron amounts):



Food service revenues

First Quarter

2016

2015

 Change

Food service revenues

$

112,006

$

90,785

23.4%

Attendance (i)

20,583

17,538

17.4%

CPP (i)

$ 5.44

$ 5.18

5.0%

Same store food service revenues (i)

$

109,598

$

90,426

21.2%

Same store attendance (i)

20,184

17,436

15.8%

(i) See non-GAAP Measures section of this news release

 

 



Food service revenue continuity

First Quarter


Food Service


Attendance

2015 as reported

$

90,785


17,538

Same store attendance change


14,254


2,749

Impact of same store CPP change


4,917


-

New and acquired theatres (i)


2,373


395

Disposed and closed theatres (i)


(323)


(99)

2016 as reported

$

112,006


20,583

(i) See non-GAAP measures section of this news release. Represents theatres opened, acquired, disposed or closed subsequent to the start of the prior year comparative period.

 

Food service revenues increased $21.2 million, or 23.4% as a result of the 17.4% increase in attendance as compared to the prior year period and the CPP increase from $5.18 in the first quarter of 2015 to $5.44 in the same period in 2016 (a 5.0% increase). CPP of $5.44 is a first quarter record for Cineplex.  Expanded offerings outside of core food service products, including offerings at Cineplex's VIP Cinemas, have resulted in higher average transaction values, resulting in the higher CPP in the period.

While the 10% SCENE discount and SCENE points issued on food service purchases reduce individual transaction values which impacts CPP, Cineplex believes that this loyalty 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 dollars):



Media revenues

First Quarter

2016

2015

Change

Cineplex Media

$

21,097

$

20,011

5.4%

Cineplex Digital Media

11,961

9,061

32.0%

Total media revenues

$

33,058

$

29,072

13.7%

 

Total media revenues increased 13.7% to $33.1 million in the first quarter of 2016 compared to the prior year period, representing record first quarter media revenues record for Cineplex. This increase was primarily due to higher Cineplex Digital Media revenues, which increased $2.9 million (32.0%) as expansion of the client base resulted in increased project installation revenues and advertising revenue growth.

Cineplex Media revenues increased 5.4% to $21.1 million, a first quarter record for Cineplex Media, with the increase primarily due to new media initiatives.

Other revenues

The following table highlights the movement in games and other revenues for the quarter (in thousands of dollars):



Other revenues

First Quarter

2016

2015

Change

Games - Cineplex exhibition (i)

$

2,791

$

2,020

38.2%

Games - CSI excluding Cineplex exhibition (i)

23,260

NM

Other

15,159

11,867

27.7%

Total other revenues

$

41,210

$

13,887

196.8%

(i) Cineplex receives a venue revenue share on games revenues earned at in-theatre game rooms and XSCAPE Entertainment Centres.  Games - Cineplex exhibition reports the total of this venue revenue share which is consistent with the historical presentation of Cineplex's Games revenues.  Games - CSI excluding Cineplex exhibition reflects CSI's gross gaming revenues, net of the venue revenue share paid to Cineplex reflected in Games - Cineplex exhibition above.

 

Other revenues increased 196.8%, or $27.3 million, to $41.2 million in the first quarter of 2016 compared to the prior year period primarily due to the consolidation of CSI following Cineplex's acquisition on October 1, 2015 of the 50% of CSI it did not already own ($23.3 million). Prior to October 1, 2015, Cineplex equity accounted for its 50% interest in CSI, with the results included in "Share of income of joint ventures".

Games revenues from Cineplex exhibition locations increased $0.8 million (38.2%) due to the higher attendance in the theatres and the addition of five XSCAPE Entertainment Centres since the prior year period.

The increase of $3.3 million (27.7%) in Other in the period was primarily due to additional revenues arising from enhanced guest service initiatives.

Film cost

The following table highlights the movement in film cost and the film cost percentage for the quarter (in thousands of dollars, except film cost percentage):



Film cost

First Quarter

2016

2015

Change

Film cost

$

107,386

$

80,171

33.9%

Film cost percentage (i)

55.7 %

51.4%

4.3%

(i) See non-GAAP measures section of this news release

 

Film cost varies primarily with box office revenues, and can vary from quarter to quarter based on the relative strength of the titles exhibited during the period. The increase in film cost percentage is attributable to the the concentration of box office revenues from a few titles, with the top five films in the current period accounting for 49.3% of box office revenues in the period (2015 period - 34.2%). These top films tend to have higher settlement rates than the other films in the slate due to their strong performance, and include the ongoing success of Star Wars: The Force Awakens which is the highest grossing film of all time in North America, as well as the strong performance of both Deadpool and Zootopia in the 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 dollars, except percentages and margins per patron):



Cost of food service

First Quarter

2016

2015

Change

Cost of food service

$

25,314

$

19,448

30.2%

Concession cost percentage (i)

22.6%

21.4%

1.2%

Concession margin per patron (i)

$

4.21

$

4.07

3.4%

(i) See non-GAAP measures section of this news release

 

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 1.2% increase in the concession cost percentage during the period.  The increase in the concession cost percentage is due in part to the mix of food offerings, with the addition of VIP theatres at four locations since the prior year period has contributed to the mix including more items outside of the core concession offerings, which tend to have higher costs. The concession margin per patron increased 3.4% from $4.07 in the first quarter of 2015 to $4.21 in the same period in 2016, reflecting the impact of the higher CPP during the period, partially offset by the impact of the higher concession cost percentage.

Despite the 10% discount offered to SCENE members and SCENE points offered on select offerings, which contributes to a higher concession cost percentage, Cineplex believes the SCENE program drives incremental attendance and purchase incidence which increases food service revenues and CPP.

Depreciation and amortization

The following table highlights the movement in depreciation and amortization expenses during the quarter (in thousands of dollars):



Depreciation and amortization expenses

First Quarter

2016

2015

 Change

Depreciation of property, equipment and leaseholds

$

21,601

$

18,994

13.7%

Amortization of intangible assets and other

3,404

1,906

78.6%

Depreciation and amortization expenses as reported

$

25,005

$

20,900

19.6%

 

The quarterly increase in depreciation of property, equipment and leaseholds of $2.6 million (13.7%) is primarily due to the impact of equipment and leasehold improvements relating to assets acquired through acquisitions, new theatre construction and digital media asset acquisitions. The increase in amortization of intangible assets and other is primarily due to intangible assets acquired in the WGN and CSI transactions.

Loss on disposal of assets

The following table shows the movement in the loss on disposal of assets during the quarter (in thousands of dollars):

 



Loss on disposal of assets

First Quarter

2016

2015

Change

Loss on disposal of assets

$

506

$

317

59.6%

 

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 film entertainment and content, media, amusement gaming and leisure as well as Cineplex's ancillary businesses; and general and administrative expenses, which include costs related to managing Cineplex's operations, including head office expenses.

Please see the discussions below for more details on these categories. The following table highlights the movement in other costs for the quarter (in thousands of dollars):



Other costs

First Quarter

2016

2015

Change

Theatre occupancy expenses

$

52,733

$

51,109

3.2%

Other operating expenses

117,611

80,914

45.4%

General and administrative expenses

19,060

18,911

0.8%

Total other costs

$

189,404

$

150,934

25.5%

 

Theatre occupancy expenses

The following table highlights the movement in theatre occupancy expenses for the quarter (in thousands of dollars):



Theatre occupancy expenses

First Quarter

2016

2015

Change

Rent

$

34,250

$

33,828

1.2%

Other occupancy

18,569

18,074

2.7%

One-time items (i)

(86)

(793)

-89.2%

Total

$

52,733

$

51,109

3.2%

(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

2015 as reported

$

51,109

Impact of new and acquired theatres

598

Impact of disposed theatres

(183)

Same store rent change (i)

257

One-time items

707

Other

245

2016 as reported

$

52,733

(i) See non-GAAP measures section of this news release

 

Theatre occupancy expenses increased $1.6 million (3.2%) during the first quarter of 2016 compared to the prior year period. This increase was primarily due to the impact of new and acquired theatres net of disposed theatres ($0.4 million) and a reduction in one- time credits of $0.7 million as compared to the prior year period.

Other operating expenses

The following table highlights the movement in other operating expenses during the quarter (in thousands of dollars):

 



Other operating expenses

First Quarter

2016

2015

 Change

Theatre payroll

$

38,068

$

32,553

16.9%

Media

15,873

13,010

22.0%

CSI

20,096

NM

Other

43,574

35,351

23.3%

Other operating expenses

$

117,611

$

80,914

45.4%

 



Other operating continuity

First Quarter

Other Operating

2015 as reported

$

80,914

Impact of new and acquired theatres

2,014

Impact of disposed theatres

(265)

Same store payroll change (i)

4,419

Marketing change

1,538

Media change

2,863

CSI change

20,096

Amusement gaming and leisure, excluding CSI

3,031

Other

3,001

2016 as reported

$

117,611

(i) See non-GAAP measures section of this news release

 

Other operating expenses during the first quarter of 2016 increased $36.7 million or 45.4% compared to the prior year period. The major component of the increase is the inclusion of CSI which is not included in the prior year comparative ($20.1 million). Additional increases include higher same-store payroll costs and media costs due to higher business volumes and higher amusement, gaming and leisure costs (excluding CSI) due to the addition of WGN which was acquired in the  third quarter of 2015 and not included in the prior year comparative.

The major movements in the Other category include higher 3D royalty costs due to higher 3D attendance in the period ($0.7 million), higher credit card service fees primarily due to increased online ticket sales in the period ($0.5 million) and higher same- store theatre operating costs due to the higher business volumes in the period compared to the prior year period.

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 dollars):



G&A expenses

First Quarter

2016

2015

Change

G&A excluding LTIP and option plan expense

$

14,988

$

14,116

6.2%

LTIP (i)

3,653

4,383

-16.7%

Option plan

419

412

1.7%

G&A expenses as reported

$

19,060

$

18,911

0.8%

(i) LTIP includes the expense for the LTIP program as well as the expense for the executive and Board deferred share unit plans.

 

G&A expenses increased $0.1 million (0.8%) during the first quarter of 2016 compared to the prior year period primarily due to higher head office payroll and professional fees, partially offset by a $0.7 million decrease in LTIP expense. The LTIP decrease was mainly due to Cineplex's Share price increasing less in the current period compared to the prior period (a 5.2% increase in the current period compared to an 11.3% increase in the prior year period).

EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") (see non-GAAP measures section of this news release)

The following table presents EBITDA and adjusted EBITDA for the three months ended March 31, 2016 as compared to the prior year period (expressed in thousands of dollars, except adjusted EBITDA margin):



EBITDA

First Quarter

2016

2015

Change

EBITDA

$

56,703

$

39,489

43.6%

Adjusted EBITDA

$

57,140

$

40,248

42.0%

Adjusted EBITDA margin

15.1 %

13.9%

1.2%

 

Adjusted EBITDA for the first quarter of 2016 increased $16.9 million, or 42.0%, as compared to the prior year period, and represents a first quarter record for Cineplex.  The increase compared to the prior year period was primarily due to the all-time quarterly attendance record resulting in record first quarter film entertainment revenues, higher media contribution primarily due to Cineplex Digital Media, and higher contribution from CSI due to 100% ownership in the current period compared to 50% in the prior period. Adjusted EBITDA margin, calculated as adjusted EBITDA divided by total revenues, was 15.1% in the current period, an increase of 1.2% from 13.9% in the prior year period.

ADJUSTED FREE CASH FLOW (see non-GAAP measures section of this news release)

For the first quarter of 2016, adjusted free cash flow per common share of Cineplex was $0.70 as compared to $0.44 in the prior year period. The declared dividends per common share of Cineplex were $0.39 in the first quarter of 2016 and $0.38 in the prior year period. During the year ended March 31, 2016, Cineplex generated adjusted free cash flow per Share of $2.75, compared to $2.45 per Share in the year ended March 31, 2015. Cineplex declared dividends per Share of $1.56 and $1.50, respectively, in each year. The payout ratios for these periods were approximately 56.5% and 60.9%, 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. Management uses adjusted EBITDA and adjusted free cash flow to evaluate performance primarily because of the significant effect certain unusual or non-recurring charges and other items have on EBITDA from period to period.

EBITDA is calculated by adding back to net income, income tax expense, depreciation and amortization expense, and interest expense net of interest income. Adjusted EBITDA is calculated by adjusting EBITDA for losses on disposal of assets, the equity income of CDCP, the non-controlling interests' share of EBITDA of WGN and BSL, and depreciation, amortization, interest and taxes of Cineplex's other joint ventures. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by total revenues.

Adjusted free cash flow is a non-GAAP measure generally used by Canadian corporations, as an indicator of financial performance and it should not be seen as a measure of liquidity or a substitute for comparable metrics prepared in accordance with GAAP.

For a detailed reconciliation of net income to EBITDA and adjusted EBITDA and from cash provided by operating activities to adjusted free cash flow, please refer to Cineplex's management's discussion and analysis filed on www.sedar.com.

Per Patron Revenue Metrics
Cineplex reviews per patron metrics as they relate to box office revenue and concession revenue such as BPP, CPP, BPP excluding premium priced product, and concession margin per patron, as these are key measures used by investors to value and assess Cineplex's performance, and are widely used in the theatre exhibition industry. Management of Cineplex defines these metrics as follows:
Attendance: Attendance is calculated as the total number of paying patrons that frequent Cineplex's theatres during the period.
BPP: Calculated as total box office revenues divided by total paid attendance for the period.
BPP excluding premium priced product: Calculated as total box office revenues for the period, less box office revenues from 3D, UltraAVX, VIP and IMAX product; divided by total paid attendance for the period, less paid attendance for 3D, UltraAVX, VIP and IMAX product.
CPP: Calculated as total food service revenues divided by total paid attendance for the period.
Premium priced product: Defined as 3D, UltraAVX, IMAX and VIP film product.
Concession margin per patron: Calculated as total food service revenues less total cost of food service, divided by attendance for the period.

Same Store Analysis
Cineplex reviews and reports same store metrics relating to box office revenues, concession revenues, rent expense and payroll expense, as these measures are widely used in the theatre exhibition industry as well as other retail industries. Same store metrics are calculated by removing the results for all theatres that have been opened, acquired, closed or otherwise disposed of subsequent to the start of the prior year comparative period. For the three months ended March 31, 2016, the impact of the four locations that have been opened or acquired and the two locations that have been closed have been excluded, resulting in 159 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"), Cineplex's management's discussion and analysis ("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, 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 "Risks and Uncertainties" section of Cineplex's MD&A.

Cineplex does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable Canadian securities law. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of Cineplex, its financial or operating results or its securities. All forward-looking statements in this news release are made as of the date hereof and are qualified by these cautionary statements. Additional information, including Cineplex's AIF and MD&A, can be found on SEDAR at www.sedar.com.

About Cineplex Inc.

Cineplex is one of Canada's leading entertainment companies and operates one of the most modern and fully digitized motion picture theatre circuits in the world.  A top-tier Canadian brand, Cineplex operates numerous businesses including theatrical exhibition, food service, amusement gaming, alternative programming (Cineplex Events), Cineplex Media, Cineplex Digital Media, 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 163 theatres with 1,666 screens from coast to coast, serving approximately 77 million guests annually through the following theatre brands: Cineplex Cinemas, Cineplex Odeon, Cineplex VIP Cinemas, Galaxy Cinemas, SilverCity Cinemas and Scotiabank Theatres. Cineplex also owns and operates the UltraAVX, Poptopia, and Outtakes brands. Cineplex trades on the Toronto Stock Exchange under the symbol CGX.  More information is available at Cineplex.com.  Further information can be found in the disclosure documents filed by Cineplex with the securities regulatory authorities, available at www.sedar.com.

You are cordially invited to participate in a teleconference call with the management of Cineplex (TSX: CGX) to review our quarterly results. Ellis Jacob, President and Chief Executive Officer, Gord Nelson, Chief Financial Officer and Pat Marshall, Investor Relations Officer will host the call. The teleconference call is scheduled for:

Tuesday, May 3, 2016
10:00 a.m. Eastern Time

In order to participate in the conference call, please dial 416-849-1847 or outside of Toronto dial 1-866-530-1554 at least five to ten minutes prior to 10:00 a.m. Eastern Time. Please quote the conference ID 7406912 to access the call.

 

  • If you cannot participate in the live mode, a replay will be available. Please dial 647-436-0148 or 1-888-203-1112 and enter code 7406912#. The replay will begin at 1:00 p.m. Eastern Time on Tuesday, May 3, 2016 and end at 1:00 p.m. Eastern Time on Tuesday, May 10, 2016.
  • 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,
2016


December 31,
2015







Assets












Current assets






Cash and cash equivalents

$

39,105


$

35,713

Trade and other receivables


69,030



121,398

Income taxes receivable


3,360



-

Inventories


20,597



19,691

Prepaid expenses and other current assets


13,926



10,025



146,018



186,827







Non-current assets






Property, equipment and leaseholds


530,399



533,192

Deferred income taxes


5,400



6,517

Interests in joint ventures


36,132



35,288

Intangible assets


127,584



132,140

Goodwill


807,953



807,953


$

1,653,486


$

1,701,917







Liabilities












Current liabilities






Accounts payable and accrued liabilities

$

150,282


$

209,657

Share-based compensation


7,644



9,742

Dividends payable


8,243



8,238

Income taxes payable


2,211



30,464

Deferred revenue


128,440



159,568

Current debt


3,701



3,737

Finance lease obligations


3,011



2,957

Fair value of interest rate swap agreements


1,621



1,414



305,153



425,777







Non-current liabilities






Share-based compensation


15,548



18,907

Long-term debt


303,487



222,340

Fair value of interest rate swap agreements


4,023



4,188

Finance lease obligations


11,278



12,052

Post-employment benefit obligations


7,225



7,296

Other liabilities


130,924



131,874

Deferred income taxes


6,579



6,283

Convertible debentures


101,230



100,703



580,294



503,643

Total liabilities


885,447



929,420







Equity






Share capital


858,631



858,305

Deficit


(89,111)



(86,296)

Hedging reserves and other


(4,764)



(4,979)

Contributed surplus


(398)



(491)

Cumulative translation adjustment


(294)



934







Total equity attributable to owners of Cineplex


764,064



767,473

Non-controlling interests


3,975



5,024

Total equity


768,039



772,497


$

1,653,486


$

1,701,917

 

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,


2016


2015







Revenues






Box office

$

192,639


$

156,041

Food service


112,006



90,785

Media


33,058



29,072

Other


41,210



13,887



378,913



289,785

Expenses






Film cost


107,386



80,171

Cost of food service


25,314



19,448

Depreciation and amortization


25,005



20,900

Loss on disposal of assets


506



317

Other costs


189,404



150,934

Share of income of joint ventures


(400)



(574)

Interest expense


4,826



5,710

Interest income


(67)



(47)



351,974



276,859

Income before income taxes


26,939



12,926

Provision for income taxes






Current


4,136



2,421

Deferred


1,348



(22)



5,484



2,399

Net income

$

21,455


$

10,527







Attributable to:






Owners of Cineplex

$

21,906


$

10,527

Non-controlling interests


(451)



-

Net income

$

21,455


$

10,527







Basic net income per share attributable to owners of Cineplex

$

0.35


$

0.17







Diluted net income per share attributable to owners of Cineplex

$

0.34


$

0.17

 

Cineplex Inc.

Interim Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(expressed in thousands of Canadian dollars)



Three months ended March 31,


2016


2015





Net income

$

21,455


$

10,527







Other comprehensive (loss)






Items that will be reclassified subsequently to net income:






Income (loss) on hedging instruments


280



(2,922)

Associated deferred income taxes (expense) recovery


(65)



768

Foreign currency translation adjustment


(1,490)



-

Other comprehensive (loss)


(1,275)



(2,154)

Comprehensive income

$

20,180


$

8,373







Attributable to:






Owners of Cineplex

$

20,893


$

8,373

Non-controlling interests


(713)



-

Comprehensive income

$

20,180


$

8,373

 

Cineplex Inc.

Interim Condensed Consolidated Statements of Changes in Equity

(Unaudited)

(expressed in thousands of Canadian dollars)

For the three months ended March 31, 2016 and 2015



Share
capital


Contributed
surplus


Hedging
and other
reserves


Cumulative
translation
adjustment


Deficit


Non-
controlling
interests


Total





























Balance - January 1, 2016

$

858,305


$

(491)


$

(4,979)


$

934


$

(86,296)


$

5,024


$

772,497

Net income


-



-



-



-



21,906



(451)



21,455

Other comprehensive (loss)


-



-



215



(1,228)



-



(262)



(1,275)

Total comprehensive income


-



-



215



(1,228)



21,906



(713)



20,180

Dividends declared


-



-



-



-



(24,721)



-



(24,721)

Share option expense


-



419



-



-



-



-



419

Issuance of shares on exercise of options


326



(326)



-



-



-



-



-

CSI non-controlling interests acquired (note 3 a)


-



-



-



-



-



(336)



(336)

Balance - March 31, 2016

$

858,631


$

(398)


$

(4,764)


$

(294)


$

(89,111)


$

3,975


$

768,039






















Balance - January 1, 2015

$

854,073


$

4,952


$

(3,405)


$

-


$

(123,771)


$

-


$

731,849

Net income


-



-



-



-



10,527



-



10,527

Other comprehensive (loss)


-



-



(2,154)



-



-



-



(2,154)

Total comprehensive income








(2,154)



-



10,527



-



8,373

Dividends declared


-



-



-



-



(23,641)



-



(23,641)

Share option expense


-



412



-



-



-



-



412

Issuance of shares on exercise of options


386



(386)



-



-



-



-



-

Balance - March 31, 2015

$

854,459


$

4,978


$

(5,559)


$

-


$

(136,885)


$

-


$

716,993

 

Cineplex Inc.

Interim Condensed Consolidated Statements of Cash Flows

(Unaudited)

(expressed in thousands of Canadian dollars)



Three months ended March 31,


2016


2015

Cash provided by (used in)






Operating activities






Net income

$

21,455


$

10,527

Adjustments to reconcile net income to net cash provided by operating activities







Depreciation and amortization of property, equipment and leaseholds, and intangible assets


25,005



20,900


Amortization of tenant inducements, rent averaging liabilities and fair value lease contract liabilities


(1,978)



(1,701)


Accretion of debt issuance costs and other non-cash interest


83



1,273


Loss on disposal of assets


506



317


Deferred income taxes


1,348



(22)


Interest rate swap agreements - non-cash interest


262



71


Non-cash share-based compensation


419



412


Accretion of convertible debentures


526



493


Net change in interests in joint ventures


(1,526)



(908)

Tenant inducements


231



757

Changes in operating assets and liabilities


(69,632)



(48,577)

Net cash used in operating activities


(23,301)



(16,458)







Investing activities






Proceeds from sale of assets


108



108

Purchases of property, equipment and leaseholds


(28,957)



(26,919)

Acquisition of businesses, net of cash acquired


(407)



(484)

Intangible assets additions


-



(114)

Net cash received from CDCP


682



427

Net cash used in investing activities


(28,574)



(26,982)







Financing activities






Dividends paid


(24,715)



(23,635)

Borrowings under credit facilities, net


81,210



50,000

Payments under finance leases


(719)



(650)

Net cash provided by financing activities


55,776



25,715







Effect of exchange rate differences on cash


(509)



-







Increase (decrease) in cash and cash equivalents


3,392



(17,725)

Cash and cash equivalents - Beginning of period


35,713



34,367

Cash and cash equivalents - End of period

$

39,105


$

16,642







Supplemental information






Cash paid for interest

$

2,568


$

2,477

Cash paid for income taxes

$

35,748


$

9,110

 

Cineplex Inc.

Interim Consolidated Supplemental Information

(Unaudited)

(expressed in thousands of Canadian dollars)



Reconciliation to Adjusted EBITDA




Three months ended March 31,


2016


2015

Net income

$

21,455


$

10,527







Depreciation and amortization


25,005



20,900

Interest expense


4,826



5,710

Interest income


(67)



(47)

Current income tax expense


4,136



2,421

Deferred income tax expense (recovery)


1,348



(22)







EBITDA

$

56,703


$

39,489







Loss on disposal of assets


506



317

CDCP equity income (i)


(375)



(129)

Non-controlling interests EBITDA of WGN and BSL


283



-

Depreciation and amortization - joint ventures (ii)


10



498

Joint venture taxes and interest (ii)


13



73

Adjusted EBITDA

$

57,140


$

40,248

(i) CDCP equity income not included in adjusted EBITDA as CDCP is a limited-life financing vehicle that is funded by virtual print fees collected from distributors.

(ii) Includes the joint ventures with the exception of CDCP (see (i) above).

 

 

Cineplex Inc.

Interim Consolidated Supplemental Information

(Unaudited)

(expressed in thousands of Canadian dollars, except number of shares and per share data)



Adjusted Free Cash Flow





Three months ended March 31,


2016


2015







Cash used in operating activities

$

(23,301)


$

(16,458)

Less: Total capital expenditures net of proceeds on sale of assets


(28,849)



(26,811)







Standardized free cash flow


(52,150)



(43,269)







Add/(Less):






Changes in operating assets and liabilities (i)


69,632



48,577

Changes in operating assets and liabilities of joint ventures (i)


1,126



334

Tenant inducements (ii)


(231)



(757)

Principal component of finance lease obligations


(719)



(650)

Growth capital expenditures and other (iii)


25,307



21,799

Share of income of joint ventures, net of non-cash depreciation (iv)


48



1,016

Non-controlling interest EBITDA of WGN and BSL


283



-

Net cash received from CDCP (iv)


682



427

Adjusted free cash flow

$

43,978


$

27,477

Average number of Shares outstanding

63,220,133


63,034,270







Adjusted free cash flow per Share

$

0.696


$

0.436

Dividends declared

$

0.390


$

0.375

 

(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, 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 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

For further information: Gord Nelson, Chief Financial Officer, (416) 323-6602; Pat Marshall, Vice President Communications and Investor Relations, (416) 323-6648

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