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Cineplex Inc
Symbol CGX
Shares Issued 63,333,238
Close 2020-02-11 C$ 33.83
Recent Sedar Documents

Cineplex's 2019 earnings drop to $28.89-million

2020-02-12 06:46 ET - News Release

Mr. Ellis Jacob reports

CINEPLEX INC. REPORTS FOURTH QUARTER AND YEAR END RESULTS

Cineplex Inc. has released its financial results for the three months and year ended Dec. 31, 2019.

                                        FOURTH QUARTER RESULTS
                                                                2019         2018 revised and restated

Total revenues                                        $443.2-million                    $427.8-million
Theatre attendance                                      16.8 million                      17.0 million
Net income from continuing operations                   $4.7-million                     $29.3-million
Net (loss) from discontinued operations                ($1.2 million)                    ($2.1-million)
Net income*                                             $3.5-million                     $27.2-million
Box office revenues per patron (BPP)                           10.79                             10.73
Concession revenues per patron (CPP)                            6.81                              6.53
Adjusted EBITDA                                       $106.5-million                     $83.4-million
Adjusted EBITDAaL                                      $62.3-million                     $80.0-million
Adjusted EBITDAaL margin                                       14.1%                             18.7%
Adjusted free cash flow                                $39.1-million                     $60.8-million
Adjusted free cash flow per
common share of Cineplex                                       0.618                             0.961
Earnings per share (EPS) from
continuing operations -- basic and diluted                      0.08                              0.46
EPS (loss) from discontinued
operations -- basic and diluted                                (0.02)                            (0.03)
EPS -- basic and diluted*                                       0.06                              0.43

* Net income was negatively impacted by costs of $11.7-million and non-cash interest of $12.1-million 
arising as a result of the Cineworld transaction. The adoption of IFRS 16 (international financial
reporting standards) negatively impacted the net income by approximately $3.4-million in the 
current period and approximately $5.8-million as compared with the fourth quarter of 2018. In total, 
after tax, net income was negatively impacted by $23.4-million or 37 cents per share.
 
                     FULL-YEAR RESULTS
  
  
                                                             2019   2018 revised and restated

Total revenues                                   $1,665.1-million            $1,612.4-million
Theatre attendance                                   66.4 million                69.3 million
Net income from continuing operations               $36.5-million               $85.5-million
Net (loss) from discontinued operations             ($7.6-million)              ($8.5-million)
Net income*                                         $28.9-million               $77.0-million
Box office revenues per patron (BPP)                       $10.63                      $10.46
Concession revenues per patron (CPP)                        $6.73                       $6.36
Adjusted EBITDA                                    $405.8-million              $262.4-million
Adjusted EBITDAaL                                  $230.5-million              $247.3-million
Adjusted EBITDAaL margin                                    13.8%                       15.3%
Adjusted free cash flow                            $168.5-million              $182.8-million
Adjusted free cash flow per
common share of Cineplex                                   $2.660                      $2.887
Earnings per share (EPS) from
continuing operations -- basic and diluted                  $0.58                       $1.35
EPS (loss) from discontinued
operations -- basic and diluted                            ($0.12)                     ($0.13)
EPS -- basic and diluted*                                   $0.46                       $1.22

* Net income was negatively impacted by costs of $11.7-million and non-cash interest of 
$12.1-million arising as a result of the Cineworld transaction. The adoption of IFRS 16 
negatively impacted the net income by approximately $14.3-million in the current period 
and approximately $25.5-million as compared with 2018. In total, after tax, net income was 
negatively impacted by $43.1-million or 68 cents per share.     

"Cineplex reported strong results for 2019, as our diversified businesses showed more meaningful returns," said Ellis Jacob, president and chief executive officer, Cineplex. "Total revenue increased 3.3 per cent to $1.7-billion with all-time annual records reported for media, amusement and food service revenue. Our earnings measure comparisons were impacted by the proposed Cineworld transaction and the adoption of IFRS 16. Adjusted EBITDAaL was negatively impacted by transaction related costs of $11.7-million and net income was negatively impacted by these transaction costs and non-cash interest expenses of $12.1-million. The adoption of IFRS 16 negatively impacted net income by approximately $25.5-million as compared to 2018. In total, after tax, net income was negatively impacted by $43.1-million or 68 cents per share as compared to 2018.

"Subsequent to year-end, Cineplex and Cineworld shareholders approved the proposed acquisition by Cineworld and we are working to obtain the remaining required approvals to complete the transaction. Since going public in 2003, Cineplex has remained steadfast in providing value for its shareholders and delivering a superior guest and customer experience across our ecosystem of businesses.

"Thank you to our shareholders for their continued support and to our employees for their hard work in achieving these strong results."

Key developments in 2019

On Dec. 15, 2019, Cineplex entered into an arrangement agreement with Cineworld Group PLC, whereby Cineworld agreed to indirectly acquire all of the issued and outstanding common shares of Cineplex for $34 per share in cash pursuant to a statutory plan of arrangement. The Cineworld transaction is supported by Cineplex's board of directors, and is subject to approval by the shareholders of both Cineplex and Cineworld and receipt of required regulatory and court approvals. The transaction is expected to close during the first half of 2020. Upon closing, the Cineplex shares will cease trading on the Toronto Stock Exchange and Cineplex would become a wholly owned subsidiary of Cineworld.

The following describes certain key business initiatives undertaken and results achieved during 2019 in each of Cineplex's core business areas:

Film entertainment and content

Theatre exhibition:

  • Reported annual box office revenues of $705.5-million, a 2.6-per-cent decrease from 2018 due to a 4.2-per-cent decrease in theatre attendance, despite a 1.6-per-cent increase in BPP to $10.63;
  • Reported an annual record BPP of $10.63 for Cineplex, 17 cents or 1.6 per cent higher than $10.46 reported during 2018;
  • Opened two new theatres, Cineplex Cinemas Park Royal and VIP in Vancouver, B.C., an 11-screen theatre featuring all recliner seating as well as an UltraAVX screen, D-Box Motion Seats and four VIP auditoriums; and the other, Cineplex Cinemas at the Centre in Saskatoon, Sask., a seven-screen theatre featuring all recliner seating as well as an UltraAVX screen, D-Box Motion Seats and Cineplex Clubhouse;
  • Opened a new VIP Cinema in Oakville, Ont., in December at Cineplex Cinemas Winston Churchill and VIP with five retrofitted luxury auditoriums;
  • Opened five new 4DX auditoriums, two in Alberta at the Scotiabank Theatre Chinook in Calgary and the Scotiabank Theatre Edmonton; and three in Ontario at the Cineplex Cinemas Winston Churchill in Oakville, Cineplex Cinemas Hamilton Mountain and the Scotiabank Theatre Ottawa;
  • Opened five new ScreenX auditoriums: Cineplex Odeon Sunridge Spectrum Cinemas in Calgary, Alta.; Cineplex Odeon South Edmonton Cinemas in Alberta; Scotiabank Theatre Vancouver in British Columbia; Scotiabank Theatre Toronto in Ontario; and Cineplex Cinemas Yorkdale in Toronto, Ont.
  • Announced plans for Junxion, a new entertainment concept which will feature a cinema with reclining seats and in-seat food service, a space for outdoor screenings, an open lobby and stage for events, performances, amusement games, virtual reality experiences (VR) from VRstudios Inc. and a food hall which will include a bar and an indoor food truck. Cineplex plans to open eight to 10 Junxion locations with the first location at the Erin Mills Town Centre in Mississauga, Ont., which is scheduled to open in 2020;
  • Announced plans for a new all-in-one entertainment complex at Kildonan Place in Winnipeg, Man., scheduled to open in 2021. The entertainment complex will include a six-screen theatre featuring all recliner seating, an UltraAVX screen, a large amusement game and attractions area featuring VR and a range of dining experiences;
  • Announced plans for two new Cineplex VIP Cinemas in Montreal, Que.: one at the Cineplex Cinemas Forum, which is expected to open in 2020, and the other at the Royalmount, which is expected to open in 2022. Both locations will include five luxury auditoriums and a fully licensed lounge.

Theatre food service:

  • Reported record annual theatre food service revenues of $446.6-million, a 1.3-per-cent increase from 2018 due to an annual record CPP of $6.73, a 37-cent or 5.8-per-cent increase from 2018;
  • During the year, Cineplex expanded alcohol beverage service to an additional 52 theatres, now totalling 87 (excluding VIP);
  • During the year, added nine additional locations to the Uber Eats delivery platform, which now provides home delivery from 101 theatres;
  • Announced an expanded partnership with Skip the Dishes, which now provides home delivery from 130 theatres.

Alternative programming:

  • Alternative programming (Cineplex Events) included the theatrical release of the family feature Arctic Dogs, opera performances from the Metropolitan Opera, the Bolshoi Ballet, Fleabag from the National Theatre along with concerts from Metallica and Roger Waters.
  • Cineplex International film programming featured strong performing Chinese-, Filipino-, Hindi- and Punjabi-language titles in select markets across the country.

Digital commerce:

  • On-line and mobile ticketing represented 35 per cent of total theatre admissions during the year, up from 28 per cent in the prior year.
  • Cineplex Store continued to show significant growth with a 57-per-cent increase in active monthly users, reaching over 1.3 million users.

Media:

  • Reported record annual media revenues of $196.8-million, 20.8 per cent higher than 2018 as a result of record cinema media and digital place-based media revenues.

Cinema media:

  • Cinema media reported record revenue of $115.4-million in 2019, $8.6-million or 8.0 per cent higher than 2018, primarily due to increases in showtime and preshow advertising.
  • Cineplex Media, in partnership with Tangerine Bank, announced Tangerine Tuesdays, a continuation of the popular Tuesday ticket program where guests can enjoy discounted movie admission at theatres, as well as free popcorn upgrades.

Digital place-based media:

  • Reported record revenues of $81.3-million in 2019, an increase of $25.4-million or 45.3 per cent, compared with 2018 mainly due to higher project installation revenues;
  • Completed the deployment of AMC theatres' digital network at approximately 630 locations across the United States, including its box office signage, theatre menu boards and other ancillary signage;
  • Announced a new partnership with Mountain Equipment Co-op (MEC) to deliver a unique digital signage to optimize the retail experience for customers at MEC stores across Canada.

Amusement and leisure

Amusement solutions:

  • Reported record annual revenues of $189.1-million in 2019 ($10.9-million from Cineplex theatre gaming and $178.2-million from all other sources of revenues). This $13.0-million increase over the prior year is mainly due to increased route operations revenues and distribution sales.

Location-based entertainment:

  • Reported total annual revenues of $79.2-million including food service revenues of $36.7-million, amusement revenues of $39.1-million and other revenues of $3.4-million, an increase of $12.7-million (19.1 per cent) as compared with 2018;
  • Opened two additional locations of the Rec Room: one located at the Square One Shopping Centre in Mississauga, Ont., and the other at the Avalon Mall in St. John's, Nfld.;
  • Opened Canada's first reinvented Playdium entertainment complex in Brampton, Ont., and the second complex in Whitby, Ont.;
  • Announced plans for two new locations of the Rec Room: one in the Granville entertainment district in Vancouver, B.C., which is expected to open in 2021, and the other, Quebec's first location of the Rec Room at Royalmount in Montreal, Que., which is expected to open in 2022;
  • Announced plans for two Playdium locations: one in Dartmouth, N.S., at the Dartmouth Crossing Shopping Centre, and the other at Quartier DIX30 in Brossard, Que. Both locations are expected to open in 2020.

Loyalty:

  • Membership in the Scene loyalty program increased by 700,000 in 2019, reaching 10.3 million members at Dec. 31, 2019.
  • Scene celebrated 10 million members with national no excuses day on Sept. 27, 2019, offering Scene members exclusive promotional offers, including half off point redemptions.

Corporate:

  • Cineplex was named by Waterstone Human Capital one of Canada's 10 most admired corporate cultures in the large enterprise category for 2018, the third time that Cineplex has won the award that celebrates best-in-class Canadian organizations.
  • Cineplex was recognized by Brand Z as one of the top 40 most valuable Canadian brands and honoured with the best brand experience award, one of three special awards presented by Brand Z.
  • Entered into the arrangement agreement with Cineworld on Dec. 15, 2019.
  • Effective with the May, 2019, dividend, the board of directors of Cineplex announced a monthly dividend increase of 3.4 per cent to 15 cents per share ($1.80 on an annual basis) up from 14.5 cents per share ($1.74 on an annual basis). As a result of the arrangement agreement, Cineplex does not expect to pay any further dividends after the dividend payable on Feb. 28, 2020, assuming the Cineworld transaction is completed.
  • Cineplex held its ninth annual community day, raising over $175,000 in support of the Boys and Girls Clubs of Canada.

About Cineplex Inc.

Cineplex is a top-tier Canadian brand that operates in the film entertainment and content, amusement and leisure, and media sectors. A leading entertainment and media company, Cineplex welcomes over 70 million guests annually through its circuit of theatres and location-based entertainment venues across the country.

You are cordially invited to participate in a conference call with the management of Cineplex to review the company's fourth quarter and year-end results. Ellis Jacob, president and chief executive officer, and Gord Nelson, chief financial officer, will host the call scheduled for: Wednesday, Feb. 12, 2020, at 10 a.m. Eastern Time.

In order to participate in the conference call please dial 647-484-0477, or from outside Toronto and from the United States, dial 1-800-458-4121 at least five to 10 minutes prior to 10 a.m. ET. Please quote the conference confirmation code 2521681 to access the call.

If you cannot participate in a live mode, a replay will be available. Please dial 647-436-0148, or from outside Toronto and from the U.S., dial 1-888-203-1112. The replay pass code is 2521681.

The replay will begin at 1 p.m. ET on Wednesday, Feb. 12, 2020, and end at 1 p.m. ET on Wednesday, Feb. 19, 2020.

Note that media will be participating in listen-only mode.

                                  CONSOLIDATED STATEMENTS OF OPERATIONS
                     (expressed in thousands of dollars, except per-share amounts)

                                                      Three months ended Dec. 31,       Year ended Dec. 31,
                                                                2019         2018         2019         2018
Revenues
Box office                                                  $181,789     $182,352     $705,521     $724,244
Food service                                                 125,159      120,726      483,330      475,501
Media                                                         69,545       57,907      196,755      162,820
Amusement                                                     53,471       53,473      228,231      205,793
Other                                                         13,256       13,385       51,309       44,080
                                                             443,220      427,843    1,665,146    1,612,438
Expenses
Film cost                                                     93,925       91,562      369,386      379,325
Cost of food service                                          27,701       26,138      106,823      100,191
Depreciation -- right-of-use assets                           36,471            -      145,946            -
Depreciation and amortization -- other assets                 33,135       33,680      128,883      127,423
Loss on disposal of assets                                       868        1,064        1,764        2,681
Other costs                                                  214,922      226,511      782,693      870,358
Share of income (loss) of joint ventures and associates       (1,597)        (898)      (4,169)      (3,748)
Interest expense -- lease obligations                         11,879          110       48,659          535
Interest expense -- other                                     18,610       10,619       36,063       30,155
Interest income (loss)                                           (44)         (69)        (252)        (274)
Foreign exchange (loss)                                          496       (1,543)       1,065       (1,981)
                                                             436,366      387,174    1,616,861    1,504,665
Income from continuing operations before income taxes          6,854       40,669       48,285      107,773
Provision for income taxes
Current                                                        5,414        9,886       21,759       28,894
Deferred (loss)                                               (3,228)       1,521       (9,990)      (6,580)
                                                               2,186       11,407       11,769       22,314
Net income from continuing operations                          4,668       29,262       36,516       85,459
Net (loss) from discontinued operations, net of taxes         (1,196)      (2,108)      (7,625)      (8,503)
Net income                                                     3,472       27,154       28,891       76,956
Net income from continuing
operations attributable to
owners of Cineplex                                             4,672       29,287       36,540       85,556
Net income (loss) from continuing
operations attributable to
non-controlling interests                                         (4)         (25)         (24)         (97)
Net income from continuing operations                          4,668       29,262       36,516       85,459
Net income attributable to
owners of Cineplex                                             3,476       27,179       28,915       77,053
Net income (loss) attributable to
non-controlling interests                                         (4)         (25)         (24)         (97)
Net income                                                     3,472       27,154       28,891       76,956
Net income per share attributable
to owners of Cineplex -- basic and diluted
Continuing operations                                           0.08         0.46         0.58         1.35
Discontinued operations (loss)                                 (0.02)       (0.03)       (0.12)       (0.13)
Total operations                                                0.06         0.43         0.46         1.22

We seek Safe Harbor.

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