Cineplex Inc. Reports Record Third Quarter Results
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TORONTO, ONTARIO -- (Marketwired) -- 11/08/16 -- Cineplex Inc. ("Cineplex") (TSX: CGX) today released its financial results for the three and nine months ended September 30, 2016. Unless otherwise specified, all amounts are in Canadian dollars.
Third Quarter Results
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Period
over Period
2016 2015 Change (i)
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Total revenues $376.0 million $328.2 million 14.5%
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Attendance 19.2 million 19.4 million -1.0%
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Net income $ 26.0 million $ 21.4 million 21.3%
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Box office revenues per patron
("BPP") (ii) $ 9.37 $ 8.89 5.4%
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Concession revenues per patron
("CPP") (ii) $ 5.69 $ 5.43 4.8%
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Adjusted EBITDA (ii) $ 67.3 million $ 59.1 million 13.8%
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Adjusted EBITDA margin (ii) 17.9% 18.0% -0.1%
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Adjusted free cash flow (ii) $ 46.9 million $ 35.9 million 30.8%
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Adjusted free cash flow per
common share of Cineplex
("Share") (ii) $ 0.739 $ 0.568 30.1%
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Earnings per Share attributable
to owners of Cineplex ("EPS")
- basic $ 0.42 $ 0.34 23.5%
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EPS - diluted $ 0.41 $ 0.34 20.6%
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Year to Date Results
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Period
over Period
2016 2015 Change (i)
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Total revenues $ 1,092.9 million $ 963.6 million 13.4%
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Attendance 56.7 million 56.6 million -%
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Net income $ 54.7 million $ 57.4 million -4.8%
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BPP (ii) $ 9.44 $ 9.09 3.9%
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CPP (ii) $ 5.61 $ 5.38 4.3%
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Adjusted EBITDA (ii) $ 167.2 million $ 164.6 million 1.5%
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Adjusted EBITDA margin (ii) 15.3% 17.1% -1.8%
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Adjusted free cash flow (ii) $ 116.4 million $ 104.3 million 11.6%
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Adjusted free cash flow per
Share (ii) $ 1.835 $ 1.655 10.9%
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EPS - basic $ 0.88 $ 0.91 -3.3%
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EPS - diluted $ 0.88 $ 0.90 -2.2%
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(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 delivered a record third quarter with total revenue up 14.5% to $376.0 million and adjusted EBITDA up 13.8% to $67.3 million - both third quarter records," said Ellis Jacob, President and CEO, Cineplex Entertainment.
"Key accomplishments during the quarter included the opening of the first location of The Rec Room in South Edmonton in addition to opening two theatres, one in each of Barrie and Kitchener, Ontario. The Rec Room brings together incredible dining experiences with exciting live entertainment and amusement gaming, all under one roof. We are very pleased with the results to date."
"Subsequent to quarter end, we announced the acquisition of Tricorp Amusements Inc., a leading provider of interactive video, redemption and amusement gaming services in the United States. This acquisition continues our goal of expanding CSI further throughout the USA."
"Overall, it was a successful quarter. Looking ahead, I am excited about the strategic opportunities that will help us achieve meaningful growth in the future."
"We would also like to extend our thanks and best wishes to Phyllis Yaffe, who in light of her new role as Consul General in New York has stepped down from the Cineplex board. In addition, we extend a warm welcome to Donna Hayes, the retired Publisher and CEO of Harlequin, who has joined our board of directors."
KEY DEVELOPMENTS IN THE THIRD QUARTER OF 2016
The following describes certain key business initiatives undertaken and results achieved during the third quarter in each of Cineplex's core business areas:
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
-- Reported record third quarter box office revenues of $180.1 million, an
increase of $7.6 million (4.4%) from the $172.6 million reported in the
prior year period. The increase is due to higher BPP resulting from a
higher proportion of box office revenues from premium priced product in
the current period compared to the prior year period.
-- BPP of $9.37 was 5.4% higher than the $8.89 reported in the prior year
period, and represents a third quarter record for Cineplex.
-- Opened Cineplex Cinemas North Barrie in Barrie, Ontario, an eight screen
theatre featuring an UltraAVX auditorium.
-- Opened Cineplex Cinemas Kitchener and VIP at Fairview Park Commons in
Kitchener, Ontario, an 11 screen theatre featuring four VIP auditoriums
and one UltraAVX auditorium. The six regular and one UltraAVX
auditoriums all feature luxurious, extra-wide lounger seats.
-- Announced further expansion of Cineplex's agreement with D-BOX to
install D-BOX in 10 Cineplex auditoriums across Canada by the end of
2016.
Theatre Food Service
-- Reported record third quarter food services revenues of $109.6 million,
an increase of 3.9% from the $105.5 million reported in the prior year
period. Included in this amount is $0.3 million of food service revenues
from The Rec Room, which opened in mid-September.
-- CPP in the third quarter of 2016 was $5.69, a third quarter record for
Cineplex, $0.26 (4.8%) higher than the $5.43 reported during the prior
year period.
Alternative Programming
-- Alternative programming in the third quarter of 2016 included strong
performances from international film programming and concert
presentations.
-- Partnered with the Canadian Broadcasting Corporation to offer screenings
of The Tragically Hip: A National Celebration to raise funds for the
Canadian Cancer Society.
Digital Commerce
-- Launched a fully transactional Cineplex Store Android app, allowing
guests to rent, buy and watch movies directly from their Android tablet
or mobile phone.
-- Updated the Cineplex Store app to support all LG 2016 WebOS Smart TVs.
MEDIA
-- Reported record third quarter total media revenues of $44.8 million,
which increased $10.5 million, or 30.7% compared to the prior year
period.
Cineplex Media
-- Reported record third quarter Cineplex Media revenues of $29.1 million,
compared to $25.0 million in the prior year period, an increase of 16.2%
due to increases in showtime and pre-show advertising as well as growth
in new media offerings.
Cineplex Digital Media
-- Cineplex Digital Media reported record third quarter revenues of $15.7
million, an increase of $6.5 million (69.8%) compared to the prior year.
An expanded client base contributed to increased project installation
revenues and advertising revenue growth in the period.
AMUSEMENT GAMING AND LEISURE
Cineplex Starburst Inc.
-- CSI reported third quarter revenues of $26.8 million ($2.7 million due
to Cineplex theatre gaming and $24.0 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.
-- Announced the acquisition of Tricorp Amusements Inc. ("Tricorp"), a
leading provider of interactive video, redemption and amusement gaming
services in the United States. Tricorp has a diversified client
portfolio focusing on the theatrical exhibition vertical as well as
community-based family entertainment destinations. The transaction was
completed on October 1, 2016.
The Rec Room
-- Opened the first location at South Edmonton Commons in Edmonton, Alberta
in mid-September. The 60,000 square foot multi-level entertainment
facility offers guests 'Eats & Entertainment', bringing together dining,
amusement gaming, technology and live entertainment experiences all
under one roof.
eSports
-- WGN hosted its first multi-player Canadian championship, featuring the
game Uncharted 4, which included online qualifiers followed by regional
and national final events hosted at Cineplex theatres.
-- Collegiate StarLeague Inc. ("CSL"), a subsidiary of WGN, announced a
partnership with Riot Games to present the 2017 season of CSL's League
of Legends collegiate league, called 'uLoL Campus Series', which will
see over 500 schools in North America competing to qualify for the
regional and national championships.
LOYALTY
-- Membership in the SCENE loyalty program increased by 0.2 million members
in the period, reaching 7.9 million at September 30, 2016.
CORPORATE
-- Named one of Canadian Business magazine's "25 Best Brands in Canada" for
2017. The rankings are based on consumer opinions of a company's
reputation based on the quality of its products and/or services; its
customer service; its commitment to innovation; community involvement;
and overall view of the brand.
-- Named one of Strategy magazine's 2016 Brands of the Year. The selections
were made focusing on companies' with unique position in a category and
distinct brand image in the consumer's mind.
OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016
Total revenues
Total revenues for the three months ended September 30, 2016 increased $47.7 million (14.5%) to $376.0 million as compared to the prior year period. Total revenues for the nine months ended September 30, 2016 increased $129.3 million (13.4%) as compared to the prior year period to $1.1 billion. A discussion of the factors affecting the changes in box office, food service, media and other revenues for the period is provided below.
Non-GAAP measures discussed throughout this MD&A, including adjusted EBITDA, adjusted free cash flow, attendance, BPP, premium priced product, same theatre metrics, CPP, film cost percentage, theatre concession cost percentage and theatre concession margin per patron are defined and discussed in the non-GAAP measures section of this news release.
Box office revenues
The following table highlights the movement in box office revenues, attendance and BPP for the quarter and the year to date (in thousands of dollars, except attendance reported in thousands of patrons, and per patron amounts, unless otherwise noted):
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Box office revenues Third Quarter Year to Date
--------------------------------------------------------
2016 2015 Change 2016 2015 Change
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Box office revenues $180,146 $172,571 4.4% $534,930 $514,814 3.9%
Attendance (i) 19,219 19,407 -1.0% 56,660 56,640 -%
Box office revenue
per patron (i) $ 9.37 $ 8.89 5.4% $ 9.44 $ 9.09 3.9%
BPP excluding
premium priced
product (i) $ 8.20 $ 8.10 1.2% $ 8.26 $ 8.25 0.1%
Canadian industry
revenues (ii) 5.1% 3.2%
Same theatre box
office revenues (i) $178,403 $172,333 3.5% $520,912 $507,067 2.7%
Same theatre
attendance (i) 19,052 19,375 -1.7% 55,337 55,838 -0.9%
% Total box from
premium priced
product (i) 46.5% 34.5% 12.0% 45.5% 36.0% 9.5%
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(i) See Non-GAAP measures section of this news release.
(ii) The Movie Theatre Association of Canada ("MTAC") reported that the
Canadian exhibition industry reported a box office revenue increase of
6.8% for the period from July 1, 2016 to September 29, 2016 as
compared to the period from July 3, 2015 to October 1, 2015. On a
basis consistent with Cineplex's calendar reporting period (July 1 to
September 30), the Canadian industry box office revenue change is
estimated to be an increase of 5.1%. For the period from January 1,
2016 to September 29, 2016 as compared to the period from January 2,
2015 to October 1, 2015, MTAC reported a box office revenue increase
of 3.4%. On a basis consistent with Cineplex's calendar reporting
period (January 1 to September 30), the Canadian industry box office
revenues are estimated to be an increase of 3.2%.
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Box office continuity Third Quarter Year to Date
Box Box
Office Attendance Office Attendance
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2015 as reported $ 172,571 19,407 $ 514,814 56,640
Same theatre attendance change (2,867) (322) (4,543) (501)
Impact of same theatre BPP
change 8,938 - 18,396 -
New and acquired theatres (i) 1,742 167 7,418 664
Disposed and closed theatres (i) (238) (33) (1,155) (143)
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2016 as reported $ 180,146 19,219 $ 534,930 56,660
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(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.
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Third Quarter
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Third Quarter 2016 Top % Third Quarter 2015 Top %
Cineplex Films 3D Box Cineplex Films 3D Box
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1 Suicide Squad x 12.0% 1 Minions x 13.7%
2 The Secret Life of Pets x 11.2% 2 Mission: Impossible -
Rogue Nation 9.3%
3 Star Trek Beyond x 6.9% 3 Ant-Man x 6.9%
4 Jason Bourne 6.6% 4 Jurassic World x 6.0%
5 Finding Dory x 5.8% 5 Inside Out x 5.4%
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Box office revenues increased $7.6 million, or 4.4%, to a third quarter record of $180.1 million during the period, compared to $172.6 million reported in the third quarter of 2015. The increase was due to the record third quarter BPP more than offsetting the impact of the 1.0% decrease in attendance.
BPP for the three months ended September 30, 2016 was $9.37, a $0.48 increase from the prior year period and a third quarter record for Cineplex. The increase in BPP was due to the higher percentage of box office revenues from premium product, which accounted for 46.5% of box office revenues in the current period, up from 34.5% in the prior year period. This increase was due to a higher proportion of strong performing 3D product versus 2D product in the current period, as compared to the prior year period.
Year to Date
----------------------------------------------------------------------------
Year to Date 2016 Top % Year to Date 2015 Top %
Cineplex Films 3D Box Cineplex Films 3D Box
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1 Deadpool 5.3% 1 Jurassic World x 7.7%
2 Finding Dory x 4.7% 2 The Avengers: Age of
Ultron x 5.8%
3 Star Wars: The Force 3 Minions x 4.6%
Awakens x 4.7%
4 Captain America: Civil 4 Furious 7 4.3%
War x 4.6%
5 The Jungle Book x 4.5% 5 Inside Out x 3.7%
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Box office revenues for the nine months ended September 30, 2016 were $534.9 million, an increase of $20.1 million or 3.9% over the prior year due to the higher BPP in the current year period compared to the 2015 period, with attendance flat period over period.
Cineplex's BPP for the period increased $0.35, or 3.9%, from $9.09 in the prior year period to $9.44 in the current period. This increase was primarily due to the increase in revenues from 3D product in the current period compared to the prior year period. Premium priced offerings accounted for 45.5% of Cineplex's box office revenues in the nine months ended September 30, 2016, compared to 36.0% in the prior year period.
Food service revenues
The following table highlights the movement in food service revenues, attendance and CPP for the quarter and the year to date (in thousands of dollars, except attendance and same theatre attendance reported in thousands of patrons, and per patron amounts):
----------------------------------------------------------------------------
Food service
revenues Third Quarter Year to Date
--------------------------------------------------------
2016 2015 Change 2016 2015 Change
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Food service -
theatres $ 109,278 $ 105,464 3.6% $ 318,098 $ 304,646 4.4%
Food service - The
Rec Room 287 - NM $ 287 - NM
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Total food service
revenues $ 109,565 $ 105,464 3.9% $ 318,385 $ 304,646 4.5%
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Attendance (i) 19,219 19,407 -1.0% 56,660 56,640 -%
CPP (i) $ 5.69 $ 5.43 4.8% $ 5.61 $ 5.38 4.3%
Same theatre food
service revenues
(i) $ 108,163 $ 105,329 2.7% $ 309,870 $ 299,964 3.3%
Same theatre
attendance (i) 19,052 19,375 -1.7% 55,337 55,838 -0.9%
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(i) See non-GAAP measures section of this news release.
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----------------------------------------------------------------------------
Theatre food service revenue
continuity Third Quarter Year to Date
Theatre Theatre
Food Food
Service Attendance Service Attendance
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2015 as reported $ 105,464 19,407 $ 304,646 56,640
Same theatre attendance change (1,751) (322) (2,691) (501)
Impact of same theatre CPP
change 4,587 - 12,599 -
New and acquired theatres (i) 1,113 167 4,044 664
Disposed and closed theatres
(i) (135) (33) (500) (143)
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2016 as reported $ 109,278 19,219 $ 318,098 56,660
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release. Represents
theatres opened, acquired, disposed or closed subsequent to the start
of the prior year comparative period.
----------------------------------------------------------------------------
Third Quarter
Food service revenues are comprised primarily of concession revenues, which includes food sales at theatre locations. Food service revenues also include food sales at The Rec Room. Food service revenues increased $4.1 million, or 3.9% as compared to the prior year period due to the increase in CPP partially offset by the impact of the 1.0% decrease in attendance. The operations of The Rec Room in Edmonton, which opened mid-September, contributed $0.3 million to the increase, and are excluded from the CPP calculation.
CPP increased 4.8% to $5.69, a third quarter record for Cineplex. Expanded offerings outside of core food service products, including offerings at Cineplex's VIP Cinemas and Outtakes locations, have contributed to increased visitation and higher average transaction values, resulting in the higher CPP in the period.
Year to Date
Food service revenues increased $13.7 million, or 4.5% as compared to the prior year, due to the 4.3% increase in CPP. The CPP of $5.61 in the current period is the highest CPP Cineplex has reported through the first nine months of a year.
While the 10% SCENE discount and SCENE points issued on food service 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 and the year to date (in thousands of dollars):
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Media revenues Third Quarter Year to Date
----------------------------------------------------
2016 2015 Change 2016 2015 Change
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Cineplex Media $ 29,093 $ 25,029 16.2% $ 76,432 $ 70,363 8.6%
Cineplex Digital Media 15,735 9,267 69.8% 41,640 28,025 48.6%
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Total media revenues $ 44,828 $ 34,296 30.7% $118,072 $ 98,388 20.0%
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Third Quarter
Total media revenues increased $10.5 million (30.7%) to $44.8 million in the third quarter of 2016 compared to the prior year period, representing a third quarter media revenue record for Cineplex. This increase was primarily due to higher Cineplex Digital Media revenues, which increased $6.5 million as expansion of the client base resulted in increased project installation revenues including clients Dairy Queen and A&W Canada as well as advertising and other media revenue growth. Cineplex Media revenues increased $4.1 million due to higher showtime and pre-show revenues as well as growth in new media initiatives.
Year to Date
Total media revenues increased $19.7 million in the nine months ended September 30, 2016 compared to the prior year period. The increase resulted from the $6.1 million increase in Cineplex Media revenues due to higher showtime and pre-show revenues as well as growth in new media initiatives, and a $13.6 million increase in Cineplex Digital Media revenues earned from higher project installation and advertising revenue growth due to an expansion of the client base.
Other revenues
The following table highlights the movement in games and other revenues for the quarter and the year to date (in thousands of dollars):
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Other revenues Third Quarter Year to Date
----------------------------------------------------
2016 2015 Change 2016 2015 Change
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Games - Cineplex
exhibition (i) $ 2,725 $ 2,523 8.0% $ 7,882 $ 7,016 12.3%
The Rec Room - amusement
and gaming 204 - NM 204 - NM
CSI excluding Cineplex
exhibition games (i) 24,042 - NM 69,525 - NM
Other 14,442 13,392 7.8% 43,892 38,707 13.4%
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Total other revenues $ 41,413 $ 15,915 160.2% $121,503 $ 45,723 165.7%
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(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. CSI excluding Cineplex exhibition games reflects CSI's
gross gaming revenues, net of the venue revenue share paid to Cineplex
reflected in Games - Cineplex exhibition above.
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Third Quarter
Other revenues increased 160.2% or $25.5 million in the third 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 ($24.0 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." Excluding CSI, Other revenues increased $1.5 million, or 9.1%.
Cineplex exhibition gaming revenues were higher than the prior year period despite the decrease in attendance due to more XSCAPE locations open during the current period, leading to more opportunities for game play by those in attendance. The opening of The Rec Room in Edmonton in mid-September contributed $0.2 million in revenues. The increase of $1.1 million (7.8%) in Other in the period was primarily due to higher revenues relating to enhanced guest service initiatives and the inclusion of WGN which was acquired in September 2015 and is not fully reflected in the prior year comparative.
Year to Date
For the year to date period, Other revenues have increased 165.7% or $75.8 million, compared to the prior year period primarily due to the consolidation of CSI ($69.5 million). Excluding CSI, Other revenues increased $6.3 million, or 13.7%.
Cineplex exhibition gaming revenues increased 12.3% due to a higher number of XSCAPE entertainment centres open in the current period compared to the prior year period. The increase of $5.2 million in Other in the period was primarily additional revenues arising from enhanced guest service initiatives and increased SCENE related revenues.
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):
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Film cost Third Quarter Year to Date
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2016 2015 Change 2016 2015 Change
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Film cost $ 95,471 $ 91,567 4.3% $ 293,534 $ 273,893 7.2%
Film cost
percentage (i) 53.0% 53.1% -0.1% 54.9% 53.2% 1.7%
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(i) See non-GAAP measures section of this news release.
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Third Quarter
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. This is due to film cost terms varying by title and distributor. Film cost percentage during the third quarter of 2016 was 53.0%, a 0.1% decrease from the prior year period.
Year to Date
The year to date increase in film cost expense was due to a combination of the 1.7% increase in the film cost percentage and the higher box office revenues in the current period compared to the prior year period.
Cost of food service
The following table highlights the movement in cost of food service for both theatres and The Rec Room for the quarter and the year to date (in thousands of dollars, except percentages and margins per patron):
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Cost of food service Third Quarter Year to Date
--------------------------------------------------------
2016 2015 Change 2016 2015 Change
----------------------------------------------------------------------------
Cost of food service
- theatre $ 24,286 $ 22,325 8.8% $ 71,203 $ 65,694 8.4%
Cost of food service
- The Rec Room 70 - NM 70 - NM
----------------------------------------------------------------------------
Total cost of food
service $ 24,356 $ 22,325 9.1% $ 71,273 $ 65,694 8.5%
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Theatre concession
cost percentage (i) 22.2% 21.2% 1.0% 22.4% 21.6% 0.8%
Theatre concession
margin per patron
(i) $ 4.42 $ 4.28 3.3% $ 4.36 $ 4.22 3.3%
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(i) See non-GAAP measures section of this news release.
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Third Quarter
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 The Rec Room 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 increase in the theatre cost of food service as compared to the prior year period was due to the higher food service revenues as well as the 1.0% 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. The addition of VIP theatres at three locations since the prior year period has contributed to the changing mix including more items outside of the core concession offerings, which tend to have higher costs.
The theatre concession margin per patron increased 3.3% from $4.28 in the third quarter of 2015 to $4.42 in the same period in 2016, reflecting the impact of the higher CPP during the period, partially offset by the impact of the higher theatre concession cost percentage.
Cost of food service at The Rec Room reflects the costs incurred for the partial month of operations in the period.
Year to Date
The increase in the theatre cost of food service as compared to the prior year period was due to the higher theatre food service revenues, driven by the CPP increase. The theatre concession margin per patron increased from $4.22 in the prior year period to $4.36 in the current period, reflecting the impact of the higher CPP in the current period.
Despite the 10% discount offered to SCENE members and SCENE points offered on select offerings, which contributes to a higher concession cost percentage, Cineplex believes the SCENE program drives incremental attendance and purchase incidence which increases food service revenues and CPP.
Depreciation and amortization
The following table highlights the movement in depreciation and amortization expenses during the quarter and the year to date (in thousands of dollars):
----------------------------------------------------------------------------
Depreciation and
amortization expenses Third Quarter Year to Date
----------------------------------------------------
2016 2015 Change 2016 2015 Change
----------------------------------------------------------------------------
Depreciation of
property, equipment and
leaseholds $ 23,023 $ 20,225 13.8% $ 66,828 $ 59,098 13.1%
Amortization of
intangible assets and
other 3,680 1,886 95.1% 10,859 5,715 90.0%
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Depreciation and
amortization expenses
as reported $ 26,703 $ 22,111 20.8% $ 77,687 $ 64,813 19.9%
----------------------------------------------------------------------------
The quarterly increase in depreciation of property, equipment and leaseholds of $2.8 million and year to date increase of $7.7 million was primarily due to the addition of equipment and leasehold improvements relating to assets acquired through acquisitions and new construction. 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 and the year to date (in thousands of dollars):
----------------------------------------------------------------------------
Loss on disposal of assets Third Quarter Year to Date
------------------------------------------------
2016 2015 Change 2016 2015 Change
----------------------------------------------------------------------------
Loss on disposal of assets $ 468 $ 987 -52.6% $ 1,402 $ 2,337 -40.0%
----------------------------------------------------------------------------
During the third quarter of 2016, Cineplex recorded a loss of $0.5 million on the disposal of assets that were sold or otherwise disposed (2015 - $1.0 million). For the nine months ended September 30, 2016, disposal of assets resulted in a loss of $1.4 million on the disposal of assets that were sold or otherwise disposed of (2015 - $2.3 million).
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 (including CSI, The Rec Room and WGN) 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 and the year to date (in thousands of dollars):
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Other costs Third Quarter Year to Date
--------------------------------------------------------
2016 2015 Change 2016 2015 Change
----------------------------------------------------------------------------
Theatre occupancy
expenses $ 51,699 $ 51,239 0.9% $ 155,052 $ 152,821 1.5%
Other operating
expenses 120,398 89,801 34.1% 352,425 259,952 35.6%
General and
administrative
expenses 17,030 15,703 8.5% 54,386 50,238 8.3%
----------------------------------------------------------------------------
Total other costs $ 189,127 $ 156,743 20.7% $ 561,863 $ 463,011 21.3%
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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 Third Quarter Year to Date
----------------------------------------------------------
2016 2015 Change 2016 2015 Change
----------------------------------------------------------------------------
Rent $ 34,192 $ 34,055 0.4% $ 102,568 $ 101,512 1.0%
Other occupancy 18,009 17,806 1.1% 54,933 53,928 1.9%
One-time items (i) (502) (622) -19.3% (2,449) (2,619) -6.5%
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Total $ 51,699 $ 51,239 0.9% $ 155,052 $ 152,821 1.5%
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(i) One-time items include amounts related to both theatre rent and other
theatre occupancy costs. They are isolated here to illustrate
Cineplex's theatre rent and other theatre occupancy costs excluding
these one-time, non-recurring items.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Theatre occupancy continuity Third Quarter Year to Date
Occupancy Occupancy
----------------------------------------------------------------------------
2015 as reported $ 51,239 $ 152,821
Impact of new and acquired theatres 438 2,073
Impact of disposed theatres (43) (276)
Same theatre rent change (i) (88) (141)
One-time items 119 170
Other 34 405
----------------------------------------------------------------------------
2016 as reported $ 51,699 $ 155,052
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release.
----------------------------------------------------------------------------
Third Quarter
Theatre occupancy expenses increased $0.5 million during the third 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 less one-time credits as compared to the prior year period ($0.1 million).
Year to Date
The increase in theatre occupancy expenses of $2.2 million for the 2016 period compared to the prior year was due to the impact of new and acquired theatres net of disposed theatres ($1.8 million) and higher other costs (including higher real estate taxes) ($0.4 million) 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):
----------------------------------------------------------------------------
Other operating
expenses Third Quarter Year to Date
--------------------------------------------------------
2016 2015 Change 2016 2015 Change
----------------------------------------------------------------------------
Theatre payroll $ 35,532 $ 35,530 -% $ 107,430 $ 103,554 3.7%
Media 17,929 12,819 39.9% 50,399 39,464 27.7%
CSI 20,421 - NM 60,165 - NM
The Rec Room (i) 357 - NM 357 - NM
Other 46,159 41,452 11.4% 134,074 116,934 14.7%
----------------------------------------------------------------------------
Other operating
expenses $ 120,398 $ 89,801 34.1% $ 352,425 $ 259,952 35.6%
----------------------------------------------------------------------------
(i) Includes operating costs of The Rec Room location in Edmonton. Pre-
opening costs relating to The Rec Room locations and overhead relating
to management of The Rec Room portfolio are included in the 'Other'
line.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other operating continuity Third Quarter Year to Date
Other Operating Other Operating
----------------------------------------------------------------------------
2015 as reported $ 89,801 $ 259,952
Impact of new and acquired theatres 961 3,556
Impact of disposed theatres (79) (356)
Same theatre payroll change (i) (211) 2,391
Marketing change (435) 1,653
Media change 5,110 10,935
CSI change 20,421 60,165
Amusement gaming and leisure, excluding
CSI 4,178 10,138
Other 652 3,991
----------------------------------------------------------------------------
2016 as reported $ 120,398 $ 352,425
----------------------------------------------------------------------------
(i) See non-GAAP measures section of this news release.
----------------------------------------------------------------------------
Third Quarter
Other operating expenses during the third quarter of 2016 increased $30.6 million or 34.1% 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 ($20.4 million).
Excluding CSI, the remainder of the increase is primarily due to higher media costs as a result of increased business volumes ($5.1 million) and incremental amusement gaming and leisure costs (excluding CSI) of $4.2 million due to the prior period not including a full quarter of WGN and minimal amounts from The Rec Room.
Year to Date
For the nine months ended September 30, 2016, other operating expenses increased $92.5 million or 35.6% compared to the prior year period. The major component of the increase is the inclusion of CSI ($60.2 million). Excluding CSI operating expenses increased $32.3 million, with the increases due to new theatre openings, higher business volumes in the media businesses, as well as costs relating to WGN (which did not have a full period of operations in the prior year period) and The Rec Room.
The $4.0 million increase in Other is due in part to higher same theatre costs, SCENE program costs ($1.2 million) and 3D and IMAX royalty costs which are due to stronger performing premium product ($0.7 million).
General and administrative expenses
The following table highlights the movement in general and administrative ("G&A") expenses during the quarter and the year to date, including Share based compensation costs, and G&A net of these costs (in thousands of dollars):
----------------------------------------------------------------------------
G&A expenses Third Quarter Year to Date
----------------------------------------------------
2016 2015 Change 2016 2015 Change
----------------------------------------------------------------------------
G&A excluding LTIP and
option plan expense $ 15,039 $ 13,342 12.7% $ 44,835 $ 40,948 9.5%
LTIP (i) 1,579 1,931 -18.2% 8,314 8,023 3.6%
Option plan 412 430 -4.2% 1,237 1,267 -2.4%
----------------------------------------------------------------------------
G&A expenses as reported $ 17,030 $ 15,703 8.5% $ 54,386 $ 50,238 8.3%
----------------------------------------------------------------------------
(i) LTIP includes the expense for the LTIP program as well as the expense
for the executive and Board deferred share unit plans.
----------------------------------------------------------------------------
Third Quarter
G&A expenses increased $1.3 million during the third quarter of 2016 compared to the prior year period due to higher head office payroll expenses.
Year to Date
G&A expenses for the year to date period increased $4.1 million compared to the prior year period primarily due to higher head office payroll expenses.
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 September 30, 2016 as compared to the prior year period (in thousands of dollars, except adjusted EBITDA margin):
----------------------------------------------------------------------------
EBITDA Third Quarter Year to Date
----------------------------------------------------------
2016 2015 Change 2016 2015 Change
----------------------------------------------------------------------------
EBITDA $ 67,441 $ 57,884 16.5% $ 166,898 $ 161,222 3.5%
Adjusted EBITDA $ 67,260 $ 59,081 13.8% $ 167,168 $ 164,639 1.5%
Adjusted EBITDA
margin 17.9% 18.0% -0.1% 15.3% 17.1% -1.8%
----------------------------------------------------------------------------
Adjusted EBITDA for the third quarter of 2016 increased $8.2 million, or 13.8%, as compared to the prior year period. Adjusted EBITDA margin, calculated as adjusted EBITDA divided by total revenues, was 17.9% in the current period, down from 18.0% in the prior year period. The increase in adjusted EBITDA was due to stronger results in all of Cineplex's key businesses as well as the contribution from CSI due to 100% ownership in the current period compared to 50% in the prior period. Higher costs attributable to Cineplex's emerging businesses as it executes on its diversification strategy impacted margins in the current period, resulting in the small decrease period over period.
Adjusted EBITDA for the nine months ended September 30, 2016 increased $2.5 million, or 1.5%, as compared to the prior year period. The increase was due to stronger operating results in all areas of the business. Adjusted EBITDA margin for the period was 15.3%, a decrease of 1.8% from 17.1% in the prior year period. The adjusted EBITDA margin was impacted by the higher costs attributable to Cineplex's emerging businesses as it executes on its diversification strategy.
ADJUSTED FREE CASH FLOW (see non-GAAP measures section of this news release)
For the third quarter of 2016, adjusted free cash flow per common share of Cineplex was $0.74 as compared to $0.57 in the prior year period. The declared dividends per common share of Cineplex were $0.41 in the third quarter of 2016 and $0.39 in the prior year period. During the year ended September 30, 2016, Cineplex generated adjusted free cash flow per Share of $2.67, compared to $2.33 per Share in the year ended September 30, 2015. Cineplex declared dividends per Share of $1.59 and $1.53, respectively, in each year. The payout ratios for these periods were approximately 59.3% and 65.5%, 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 adjusted 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 theatre food service revenues divided by total paid attendance for the period.
Premium priced product: Defined as 3D, UltraAVX, IMAX and VIP film product.
Theatre concession margin per patron: Calculated as total theatre food service revenues less total theatre food service cost, divided by total paid 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 September 30, 2016 the impact of the three locations that have been opened or acquired and the one location that has been closed have been excluded, resulting in 161 theatres being included in the same theatre metrics. For the nine months ended September 30, 2016 the impact of the six locations that have been opened or acquired and the three locations that have been closed have been excluded, resulting in 158 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.
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, The Rec Room, 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 165 theatres with 1,683 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, November 8, 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, November 8, 2016
and end at 1:00 p.m. Eastern Time on Tuesday, November 15, 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)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
September 30, December 31,
2016 2015
Assets
Current assets
Cash and cash equivalents $ 23,685 $ 35,713
Trade and other receivables 67,116 121,398
Income taxes receivable 1,806 -
Inventories 21,071 19,691
Prepaid expenses and other current assets 16,650 10,025
-----------------------------
130,328 186,827
Non-current assets
Property, equipment and leaseholds 543,837 533,192
Deferred income taxes 5,710 6,517
Interests in joint ventures 34,768 35,288
Intangible assets 123,120 132,140
Goodwill 807,953 807,953
-----------------------------
$ 1,645,716 $ 1,701,917
-----------------------------
-----------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 121,831 $ 209,657
Share-based compensation 9,730 9,742
Dividends payable 8,571 8,238
Income taxes payable 4,419 30,464
Deferred revenue 133,688 159,568
Current debt - 3,737
Finance lease obligations 3,123 2,957
Fair value of interest rate swap agreements 2,055 1,414
-----------------------------
283,417 425,777
-----------------------------
Non-current liabilities
Share-based compensation 18,687 18,907
Long-term debt 332,352 222,340
Fair value of interest rate swap agreements 5,021 4,188
Finance lease obligations 9,688 12,052
Post-employment benefit obligations 7,498 7,296
Other liabilities 128,706 131,874
Deferred income taxes 7,658 6,283
Convertible debentures 102,287 100,703
-----------------------------
611,897 503,643
-----------------------------
Total liabilities 895,314 929,420
-----------------------------
Equity
Share capital 859,210 858,305
Deficit (106,149) (86,296)
Hedging reserves and other (5,614) (4,979)
Contributed surplus (159) (491)
Cumulative translation adjustment (39) 934
-----------------------------
Total equity attributable to owners of Cineplex 747,249 767,473
Non-controlling interests 3,153 5,024
Total equity 750,402 772,497
-----------------------------
-----------------------------
$ 1,645,716 $ 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 Nine months ended
September 30, September 30,
------------------------------------------------
2016 2015 2016 2015
Revenues
Box office $ 180,146 $ 172,571 $ 534,930 $ 514,814
Food service 109,565 105,464 318,385 304,646
Media 44,828 34,296 118,072 98,388
Other 41,413 15,915 121,503 45,723
------------------------------------------------
375,952 328,246 1,092,890 963,571
------------------------------------------------
Expenses
Film cost 95,471 91,567 293,534 273,893
Cost of food service 24,356 22,325 71,273 65,694
Depreciation and
amortization 26,703 22,111 77,687 64,813
Loss on disposal of assets 468 987 1,402 2,337
Other costs 189,127 156,743 561,863 463,011
Share of income of joint
ventures (911) (1,260) (2,080) (2,586)
Interest expense 4,575 5,919 14,296 17,149
Interest income (46) (46) (164) (134)
------------------------------------------------
339,743 298,346 1,017,811 884,177
------------------------------------------------
Income before income taxes 36,209 29,900 75,079 79,394
------------------------------------------------
Provision for income taxes
Current 9,002 8,761 17,853 21,836
Deferred 1,211 (300) 2,563 114
------------------------------------------------
10,213 8,461 20,416 21,950
------------------------------------------------
Net income $ 25,996 $ 21,439 $ 54,663 $ 57,444
------------------------------------------------
------------------------------------------------
Attributable to:
Owners of Cineplex $ 26,410 $ 21,520 $ 55,962 $ 57,525
Non-controlling interests (414) (81) (1,299) (81)
------------------------------------------------
Net income $ 25,996 $ 21,439 $ 54,663 $ 57,444
------------------------------------------------
------------------------------------------------
Basic net income per share
attributable to owners of
Cineplex $ 0.42 $ 0.34 $ 0.88 $ 0.91
Diluted net income per share
attributable to owners of
Cineplex $ 0.41 $ 0.34 $ 0.88 $ 0.90
Cineplex Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(expressed in thousands of Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
----------------------------------------
2016 2015 2016 2015
Net income $ 25,996 $ 21,439 $ 54,663 $ 57,444
----------------------------------------
Other comprehensive income (loss)
Items that will be reclassified
subsequently to net income:
Income (loss) on hedging instruments 467 (189) (881) (2,689)
Associated deferred income taxes
(expense) recovery (125) 50 246 718
Foreign currency translation
adjustment 539 324 (1,209) 324
----------------------------------------
Other comprehensive income (loss) 881 185 (1,844) (1,647)
----------------------------------------
Comprehensive income $ 26,877 $ 21,624 $ 52,819 $ 55,797
----------------------------------------
Attributable to:
Owners of Cineplex $ 27,244 $ 21,705 $ 54,354 $ 55,878
Non-controlling interests (367) (81) (1,535) (81)
----------------------------------------
Comprehensive income $ 26,877 $ 21,624 $ 52,819 $ 55,797
----------------------------------------
----------------------------------------
Cineplex Inc.
Interim Condensed Consolidated Statements of Changes in Equity
(Unaudited)
(expressed in thousands of Canadian dollars)
For the nine months ended September 30, 2016 and 2015
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Hedging Cumulative
Share Contributed and other translation
capital surplus reserves adjustment
Balance - January 1, 2016 $ 858,305 $ (491) $ (4,979) $ 934
Net income - - - -
Other comprehensive
(loss) - - (635) (973)
---------------------------------------------------
Total comprehensive
income - - (635) (973)
Dividends declared - - - -
Share option expense - 1,237 - -
Issuance of shares on
exercise of options 905 (905) - -
CSI non-controlling
interests acquired - - - -
---------------------------------------------------
Balance - September 30,
2016 $ 859,210 $ (159) $ (5,614) $ (39)
---------------------------------------------------
---------------------------------------------------
Balance - January 1, 2015 $ 854,073 $ 4,952 $ (3,405) $ -
Net income - - - -
Other comprehensive
(loss) - - (1,971) 324
---------------------------------------------------
Total comprehensive
income (1,971) 324
Dividends declared - - - -
Share option expense - 1,267 - -
Issuance of shares on
exercise of options 522 (522) - -
WGN purchase obligation - (4,939) - -
WGN non-controlling
interests recognized on
acquisition - - - -
---------------------------------------------------
Balance - September 30,
2015 $ 854,595 $ 758 $ (5,376) $ 324
---------------------------------------------------
---------------------------------------------------
Non-
controlling
Deficit interests Total
Balance - January 1, 2016 $ (86,296) $ 5,024 $ 772,497
Net income 55,962 (1,299) 54,663
Other comprehensive
(loss) - (236) (1,844)
-------------------------------------
Total comprehensive
income 55,962 (1,535) 52,819
Dividends declared (75,815) - (75,815)
Share option expense - - 1,237
Issuance of shares on
exercise of options - - -
CSI non-controlling
interests acquired - (336) (336)
-------------------------------------
Balance - September 30,
2016 $(106,149) $ 3,153 $ 750,402
-------------------------------------
-------------------------------------
Balance - January 1, 2015 $(123,771) $ - $ 731,849
Net income 57,525 (81) 57,444
Other comprehensive
(loss) - - (1,647)
-------------------------------------
Total comprehensive
income 57,525 (81) 55,797
Dividends declared (72,529) - (72,529)
Share option expense - - 1,267
Issuance of shares on
exercise of options - - -
WGN purchase obligation - - (4,939)
WGN non-controlling
interests recognized on
acquisition - 4,939 4,939
-------------------------------------
Balance - September 30,
2015 $(138,775) $ 4,858 $ 716,384
-------------------------------------
-------------------------------------
Cineplex Inc.
Interim Condensed Consolidated Statements of Cash Flows
(Unaudited)
(expressed in thousands of Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
--------------------------------------------
2016 2015 2016 2015
Cash provided by (used in)
Operating activities
Net income $ 25,996 $ 21,439 $ 54,663 $ 57,444
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and amortization
of property, equipment and
leaseholds, and intangible
assets 26,703 22,111 77,687 64,813
Amortization of tenant
inducements, rent averaging
liabilities and fair value
lease contract liabilities (2,657) (1,947) (7,143) (5,950)
Accretion of debt issuance
costs and other non-cash
interest, net 259 1,403 402 3,995
Loss on disposal of assets 468 987 1,402 2,337
Deferred income taxes 1,211 (300) 2,563 114
Interest rate swap agreements
- non-cash interest (39) 62 767 149
Non-cash share-based
compensation 412 429 1,237 1,266
Accretion of convertible
debentures 531 493 1,583 1,484
Net change in interests in
joint ventures (1,553) 875 (1,851) (2,224)
Tenant inducements 1,291 - 3,685 757
Changes in operating assets and
liabilities (16,025) (9,280) (100,395) (49,937)
--------------------------------------------
Net cash provided by operating
activities 36,597 36,272 34,600 74,248
--------------------------------------------
Investing activities
Proceeds from sale of assets - - 108 108
Purchases of property, equipment
and leaseholds (28,787) (25,560) (76,325) (72,885)
Acquisition of businesses, net
of cash acquired - (12,472) (407) (15,630)
Intangible assets additions (329) (355) (610) (469)
Net cash received from CDCP 1,568 407 2,370 1,163
--------------------------------------------
Net cash used in investing
activities (27,548) (37,980) (74,864) (87,713)
--------------------------------------------
Financing activities
Dividends paid (25,713) (24,603) (75,482) (72,204)
Borrowings under credit
facilities, net 5,798 28,000 107,634 78,000
Payments under finance leases (746) (671) (2,197) (1,980)
Deferred financing fees (22) - (1,426) -
--------------------------------------------
Net cash (used in) provided by
financing activities (20,683) 2,726 28,529 3,816
--------------------------------------------
Effect of exchange rate
differences on cash 231 77 (293) 77
(Decrease) increase in cash and
cash equivalents (11,403) 1,095 (12,028) (9,572)
Cash and cash equivalents -
Beginning of period 35,088 23,700 35,713 34,367
--------------------------------------------
Cash and cash equivalents - End
of period $ 23,685 $ 24,795 $ 23,685 $ 24,795
--------------------------------------------
--------------------------------------------
Supplemental information
Cash paid for interest $ 2,965 $ 2,354 $ 10,839 $ 9,632
Cash paid for income taxes $ (712) $ 1,998 $ 45,434 $ 13,674
Cineplex Inc. Interim Consolidated Supplemental Information (Unaudited) (expressed in thousands of Canadian dollars) ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Reconciliation to Adjusted EBITDA
------------------------------------------------------- --------------------
Three months ended Nine months ended
September 30, September 30,
2016 2015 2016 2015
-------------------- --------------------
Net income $ 25,996 $ 21,439 $ 54,663 $ 57,444
Depreciation and amortization 26,703 22,111 77,687 64,813
Interest expense 4,575 5,919 14,296 17,149
Interest income (46) (46) (164) (134)
Current income tax expense 9,002 8,761 17,853 21,836
Deferred income tax expense
(recovery) 1,211 (300) 2,563 114
-------------------- --------------------
EBITDA $ 67,441 $ 57,884 $166,898 $161,222
Loss on disposal of assets 468 987 1,402 2,337
CDCP equity income (i) (889) (428) (1,945) (720)
Non-controlling interests adjusted
EBITDA of WGN and BSL 218 34 746 34
Depreciation and amortization -
joint ventures (ii) 10 522 29 1,539
Joint venture taxes and interest
(ii) 12 82 38 227
-------------------- --------------------
Adjusted EBITDA $ 67,260 $ 59,081 $167,168 $164,639
------------------------------------------------------- --------------------
(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 Nine months ended
September 30, September 30,
2016 2015 2016 2015
----------------------------------------------------
Cash provided by
operating activities $ 36,597 $ 36,272 $ 34,600 $ 74,248
Less: Total capital
expenditures net of
proceeds on sale of
assets (28,787) (25,560) (76,217) (72,777)
----------------------------------------------------
Standardized free cash
flow 7,810 10,712 (41,617) 1,471
Add/(Less):
Changes in operating
assets and liabilities
(i) 16,025 9,280 100,395 49,937
Changes in operating
assets and liabilities
of joint ventures (i) 642 (2,135) (229) (362)
Tenant inducements (ii) (1,291) - (3,685) (757)
Principal component of
finance lease
obligations (746) (671) (2,197) (1,980)
Growth capital
expenditures and other
(iii) 22,621 16,797 60,438 51,211
Share of income of joint
ventures, net of non-
cash depreciation (iv) 44 1,436 202 3,632
Non-controlling interest
EBITDA of WGN and BSL 218 34 746 34
Net cash received from
CDCP (iv) 1,568 407 2,370 1,163
----------------------------------------------------
Adjusted free cash flow $ 46,891 $ 35,860 $ 116,423 $ 104,349
----------------------------------------------------
----------------------------------------------------
Average number of Shares
outstanding 63,491,658 63,086,232 63,436,252 63,064,784
Adjusted free cash flow
per Share $ 0.739 $ 0.568 $ 1.835 $ 1.655
Dividends declared $ 0.405 $ 0.390 $ 1.195 $ 1.150
----------------------------------------------------------------------------
(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.
Contacts: Cineplex Inc. Gord Nelson Chief Financial Officer (416) 323-6602 Cineplex Inc. Pat Marshall Vice President Communications and Investor Relations (416) 323-6648 www.cineplex.com
Source: Cineplex Inc.
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