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ORIGINAL: Cineplex Inc. Reports Fourth Quarter and Year End Results

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

Cineplex Inc. Reports Fourth Quarter and Year End Results

Canada NewsWire

Cineworld acquisition pending remaining regulatory approvals

TORONTO, Feb. 12, 2020 /CNW/ - (TSX: CGX) - Cineplex Inc. ("Cineplex") today released its financial results for the three months and year ended December 31, 2019.  Unless otherwise specified, all amounts are in Canadian dollars.

Fourth Quarter Results






2019

2018

Revised and Restated (i)

Period over Period Change

(ii)

Total revenues (iii)

$

443.2

million

$

427.8

million

3.6%

Theatre attendance


16.8

 million

17.0

million

-0.8%

Net income from continuing operations

$

4.7

million

$

29.3

million

-84.0%

Net loss from discontinued operations

$

(1.2)

million

$

(2.1)

million

NM

Net income*

$

3.5

million

$

27.2

million

-87.2%

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

$

10.79


$

10.73


0.6%

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

$

6.81


$

6.53


4.3%

Adjusted EBITDA (iv) (v)

$

106.5

 million

$

83.4

million

27.8%

Adjusted EBITDAaL (i) (iv) (v)

$

62.3

million

$

80.0

million

-22.1%

Adjusted EBITDAaL margin (i) (iv) (v)

14.1%


18.7%


-4.6%

Adjusted free cash flow (v)

$

39.1

million

$

60.8

million

-35.7%

Adjusted free cash flow per common share of Cineplex
("Share") (v)

$

0.618


$

0.961


-35.7%

Earnings per Share ("EPS") from continuing operations -

basic and diluted (iv)

$

0.08


$

0.46


-82.6%

EPS from discontinued operations - basic and diluted

$

(0.02)


$

(0.03)


-33.3%

EPS - basic and diluted* (iv)

$

0.06


$

0.43


-86.0%

*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 $3.4 million in the current period and approximately $5.8 million as compared to the fourth quarter of 2018. In total, after tax, net income was negatively impacted by $23.4 million or $0.37 per Share.

 

Full YearResults






2019

2018
Revised and Restated (i)

Period over Period Change

(ii)

Total revenues (iii)

$

1,665.1

million

$

1,612.4

million

3.3%

Theatre attendance

66.4

million

69.3

million

-4.2%

Net income from continuing operations

$

36.5

million

$

85.5

million

-57.3%

Net loss from discontinued operations

$

(7.6)

million

$

(8.5)

million

NM

Net income*

$

28.9

million

$

77.0

million

-62.5%

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

$

10.63


$

10.46


1.6%

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

$

6.73


$

6.36


5.8%

Adjusted EBITDA (iv) (v)

$

405.8

million

$

262.4

million

54.7%

Adjusted EBITDAaL (i) (iv) (v)

$

230.5

million

$

247.3

million

-6.8%

Adjusted EBITDAaL margin (i) (iv) (v)

13.8%


15.3%


-1.5%

Adjusted free cash flow (v)

$

168.5

million

$

182.8

million

-7.9%

Adjusted free cash flow per common share of Cineplex

("Share") (v)

$

2.660


$

2.887


-7.9%

Earnings per Share ("EPS") from continuing operations - basic and diluted (iv)

$

0.58


$

1.35


-57.0%

EPS from discontinued operations - basic and diluted

$

(0.12)


$

(0.13)


-7.7%

EPS - basic and diluted* (iv)

$

0.46


$

1.22


-62.3%

*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 to 2018. In total, after

tax, net income was negatively impacted by $43.1 million or $0.68 per Share.

i.

Prior period figures have been revised as applicable per IFRS 16 and restated as applicable per IFRS 5 to confirm to current period presentation.

ii.

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

as 2019 value less 2018 value.

iii.

All amounts are from continuing operations.

iv. 

2019 includes expenses related to the Cineworld Transaction in the amount of $11.7 million.

v.

Adjusted EBITDA, adjusted EBITDAaL, adjusted EBITDAaL margin, adjusted free cash flow per common share of Cineplex, BPP and CPP are measures

that do not have a standardized meaning under generally accepted accounting principles ("GAAP").  These measures as well as other Non-GAAP financial measures reported by Cineplex are defined in the 'Non-GAAP Financial Measures' section at the end of this news release.

 

"Cineplex reported strong results for 2019, as our diversified businesses showed more meaningful returns," said Ellis Jacob, President and CEO, Cineplex. "Total revenue increased 3.3% 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 $0.68 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 December 15, 2019, Cineplex entered into an arrangement agreement (the "Arrangement Agreement") with Cineworld Group, plc, ("Cineworld") , whereby Cineworld agreed to indirectly acquire all of the issued and outstanding common shares of Cineplex ("Shares") for $34.00 per Share in cash pursuant to a statutory plan of arrangement (the "Cineworld Transaction"). 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% decrease from 2018 due to a 4.2% decrease in theatre attendance, despite a 1.6% increase in BPP to $10.63.
  • Reported an annual record BPP of $10.63 for Cineplex, $0.17 or 1.6% higher than $10.46 reported during 2018.
  • Opened two new theatres, Cineplex Cinemas Park Royal and VIP in Vancouver, British Columbia, an eleven 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, Saskatchewan, 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, Ontario in December at Cineplex Cinemas Winston Churchilland 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, Alberta; Cineplex Odeon South Edmonton Cinemas in Alberta; Scotiabank Theatre Vancouver in British Columbia; Scotiabank Theatre Toronto in Ontario; and Cineplex Cinemas Yorkdale in Toronto, Ontario.
  • 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. ("VRstudios") and a food hall which will include a bar and an indoor food truck. Cineplex plans to open 8-10 Junxion locations with the first location at the Erin Mills Town Centre in Mississauga, Ontario which is scheduled to open in 2020.
  • Announced plans for a new all-in-one entertainment complex at Kildonan Place in Winnipeg, Manitoba 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, Quebec: 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% increase from 2018 due to an annual record CPP of $6.73, a $0.37 or 5.8% 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

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

MEDIA

  • Reported record annual media revenues of $196.8 million, 20.8% 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% higher than 2018, primarily due to increases in show-time and pre-show 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%, compared to 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%) as compared to 2018.
  • Opened two additional locations of The Rec Room: one located at the Square One Shopping Centre in Mississauga, Ontario and the other at the Avalon Mall in St. John's, Newfoundland.
  • Opened Canada's first reinvented Playdium entertainment complex in Brampton, Ontario and the second complex in Whitby, Ontario.
  • Announced plans for two new locations of The Rec Room: one in the Granville Entertainment District in Vancouver, British Columbia which is expected to open in 2021, and the other, Quebec's first location of The Rec Room at Royalmount in Montreal, Quebec, which is expected to open in 2022.
  • Announced plans for two Playdium locations: one in Dartmouth, Nova Scotia at the Dartmouth Crossing Shopping Centre, and the other at Quartier DIX30 in Brossard, Quebec. Both locations are expected to open in 2020.

LOYALTY

  • Membership in the SCENE loyalty program increased by 0.7 million in 2019, reaching 10.3 million members at December 31, 2019.
  • SCENE celebrated 10 million members with National No Excuses Day on September 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 December 15, 2019.
  • Effective with the May 2019 dividend, the Board of Directors of Cineplex (the "Board") announced a monthly dividend increase of 3.4% to $0.150 per share ($1.80 on an annual basis) up from $0.145 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 February 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.

OPERATING RESULTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2019

Total revenues

Total revenues for the three months ended December 31, 2019 increased $15.4 million (3.6%) to $443.2 million as compared to the prior year period. Total revenues for the year ended December 31, 2019 increased $52.7 million (3.3%) to $1.7 billion as compared to the prior year. A discussion of the factors affecting the changes in box office, food service, media, amusement and other revenues for the two periods is provided below.

Non-GAAP measures discussed throughout this MD&A, including adjusted EBITDA, adjusted EBITDAaL, adjusted store level EBITDAaL, adjusted EBITDAaL margin, adjusted store level EBITDAaL margin, adjusted free cash flow, theatre attendance, BPP, premium priced product, same theatre metrics, CPP, film cost percentage, food service cost percentage and concession margin per patron are defined and discussed in Non-GAAP measures section of this news release.

Box office revenues

The following table highlights the movement in box office revenues, theatre attendance and BPP for the quarter and the full year (in thousands of dollars, except theatre attendance reported in thousands of patrons and per patron amounts, unless otherwise noted):




Box office revenues

Fourth Quarter

Full Year


2019

2018

Change

2019

2018

Change

Box office revenues

$

181,789

$

182,352

-0.3%

$

705,521

$

724,244

-2.6%

Theatre attendance (i)

16,849

16,992

-0.8%

66,360

69,272

-4.2%

Box office revenue per patron (i)

$

10.79

$

10.73

0.6%

$

10.63

$

10.46

1.6%

BPP excluding premium priced product (i)

$

9.40

$

9.22

2.0%

$

9.17

$

8.94

2.6%

Canadian industry revenues (ii)



3.1%



-0.5%

Same theatre box office revenues (i)

$

178,652

181,660

-1.7%

$

681,298

$

711,074

-4.2%

Same theatre attendance (i)

16,593

16,913

-1.9%

64,396

68,017

-5.3%

% Total box from premium priced product (i)

38.7%

44.6%

-5.9%

41.7%

44.1%

-2.4%

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

(ii) Source: Gross box office receipts (inclusive of all taxes) from The Movie Theatre Association of Canada industry data adjusted for calendar quarter dates.

 




Box office continuity

Fourth Quarter

Full Year


Box Office

Theatre

Attendance

Box Office

Theatre

Attendance

2018 as reported

$

182,352

16,992

$

724,244

69,272

Same theatre attendance change

(3,433)

(320)

(37,847)

(3,620)

Impact of same theatre BPP change

425

8,071

New and acquired theatres (i)

3,092

249

15,539

1,216

Disposed and closed theatres (i)

(647)

(72)

(4,486)

(508)

2019 as reported

$

181,789

16,849

$

705,521

66,360

(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.

 

Fourth Quarter







Fourth Quarter 2019 Top Cineplex Films

3D

% Box

Fourth Quarter 2018 Top Cineplex Films

3D

% Box

1

Joker


15.4%

1

Dr. Seuss' The Grinch

8.9%

2

Frozen II

14.4%

2

A Star Is Born


8.9%

3

Star Wars: The Rise Of Skywalker

13.9%

3

Venom

8.7%

4

Jumanji : The Next Level

7.3%

4

Bohemian Rhapsody


8.6%

5

Maleficent: Mistress Of Evil

3.6%

5

Fantastic Beasts: The Crimes Of Grindelwald

7.2%

 

Box office revenues decreased $0.6 million, or 0.3%, to $181.8 million during the fourth quarter of 2019, compared to $182.4 million recorded in the same period in 2018. This decrease was due to a 0.8% decrease in theatre attendance more than offsetting the impact of a 0.6% increase in BPP.

BPP for the three months ended December 31, 2019 was a fourth quarter record of $10.79, a $0.06 increase from the prior year period as a result of price increases in selective markets as compared to the prior year period.

Full Year







Full Year 2019 Top Cineplex Films

3D

% Box

Full Year 2018 Top Cineplex Films

3D

% Box

1

Avengers: Endgame

8.6%

1

Avengers: Infinity War

6.3%

2

The Lion King

4.7%

2

Black Panther

6.1%

3

Captain Marvel

4.3%

3

Incredibles 2

4.1%

4

Joker


4.0%

4

Jurassic World: Fallen Kingdom

3.4%

5

Frozen II

3.7%

5

Deadpool 2

3.1%

 

Box office revenues for the year ended December 31, 2019 were $705.5 million, a decrease of $18.7 million or 2.6% from the prior year. This was due to a 4.2% decrease in theatre attendance year over year despite the increase in BPP.  The prior year was a tough comparator due to Avengers: Infinity War, Black Panther and Incredibles 2 all which finished in the top ten highest grossing films of all-time in North America while only Avengers: Endgame finished in the top ten in 2019. In particular, the first quarter experienced a 15.6% decrease in attendance resulting in a $24.9 million decrease in box office revenues as compared to the prior year period due to the weaker film slate.

Cineplex's BPP for the year ended December 31, 2019 increased $0.17, or 1.6%, from $10.46 in 2018 to an annual record of $10.63 in 2019. This increase was primarily due to price increases in selective markets as compared to the prior year.

Food service revenues

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




Food service revenues

Fourth Quarter

Full Year


2019

2018

Change

2019

2018

Change

Food service - theatres

$

114,678

$

111,015

3.3%

$

446,639

$

440,733

1.3%

Food service - LBE

10,481

9,711

7.9%

36,691

34,768

5.5%

Total food service revenues

$

125,159

$

120,726

3.7%

$

483,330

$

475,501

1.6%

Theatre attendance (i)

16,849

16,992

-0.8%

66,360

69,272

-4.2%

CPP (i) (ii)

$

6.81

$

6.53

4.3%

$

6.73

$

6.36

5.8%

Same theatre food service revenues (i)

$

112,551

$

110,536

1.8%

$

427,546

$

430,912

-0.8%

Same theatre attendance (i)

16,593

16,913

-1.9%

64,396

68,017

-5.3%

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

(ii) Food service revenue from LBE is not included in the CPP calculation.

 




Theatre food service revenue continuity

Fourth Quarter

Full Year


Theatre Food

Service

Theatre

Attendance

Theatre Food

Service

Attendance

2018 as reported

$

111,015

16,992

$

440,733

69,272

Same theatre attendance change

(2,089)

(320)

(22,935)

(3,620)

Impact of same theatre CPP change

4,104

19,569

New and acquired theatres (i)

2,081

249

12,053

1,216

Disposed and closed theatres (i)

(433)

(72)

(2,781)

(508)

2019 as reported

$

114,678

16,849

$

446,639

66,360

(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.

 

Fourth Quarter

Food service revenues are comprised primarily of concession revenues, which includes food service sales at theatre locations and through delivery services including Uber Eats and Skip the Dishes. Food service revenues also include food and beverage sales at LBE venues including The Rec Room and Playdium. Theatre food service revenues increased $3.7 million (3.3%) as compared to the prior year period to a fourth quarter record of $114.7 million due to a 4.3% increase in CPP more than offsetting the impact of a 0.8% decrease in theatre attendance. The operations of LBE contributed $10.5 million in the period resulting in a $4.4 million (3.7%) increase in total food service revenues to a fourth quarter record of $125.2 million. Expanded offerings outside of core food service products, including offerings at Cineplex's VIP Cinemas and Outtakes locations and expanded beverage services, have contributed to increased visitation and higher average transaction values, resulting in the record CPP in the period.

Food service revenues from LBE increased $0.8 million (7.9%) compared to the prior year period primarily due to the increase in locations from six in 2018 to nine for the full quarter and one for part of the quarter in 2019.

CPP of $6.81, an increase of 4.3% compared to the prior year period was an fourth quarter record for Cineplex. Expanded offerings outside of core food service products, including offerings at Cineplex's VIP Cinemas and Outtakes locations and expanded beverage services, have contributed to increased visitation and higher average transaction values, resulting in the record CPP in the period.

Full Year

Food service revenues increased $7.8 million, or 1.6% as compared to the prior year to an annual record of $483.3 million due to a 5.5% increase in LBE revenues and the record CPP more than offsetting the impact of the lower theatre attendance. CPP of $6.36 in 2018 increased 5.8% to $6.73 in 2019, an annual record for Cineplex. The operations of LBE contributed $36.7 million in 2019. Newer locations typically experience higher sales volumes in the first year of operations (honeymoon period) before settling into their expected long-term run-rate levels resulting in a leveling off of results for older locations.

While programs including SCENE offers provided on food service purchases impact 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 full year (in thousands of dollars):




Media revenues

Fourth Quarter

Full Year


2019

2018

Restated

Change

2019

2018

Restated

Change

Cinema media

$

42,171

$

40,167

5.0%

$

115,415

$

106,834

8.0%

Digital place-based media

27,374

17,740

54.3%

81,340

55,986

45.3%

Total media revenues from continuing operations

$

69,545

$

57,907

20.1%

$

196,755

$

162,820

20.8%

Media revenues from discontinued operations

248

311

-20.3%

1,075

2,189

-50.9%

Total media revenues

$

69,793

$

58,218

19.9%

$

197,830

$

165,009

19.9%

 

Fourth Quarter

Total media revenues from continuing operations increased 20.1% to an all-time quarterly record of $69.5 million in the fourth quarter of 2019 compared to the prior year period. This increase was due to higher cinema media and digital place-based media revenues. Cinema media increased by $2.0 million, or 5.0% higher than the prior year period to an all-time quarter record of $42.2 million as a result of increased pre-show and show-time. Digital place-based media revenues increased $9.6 million (54.3%) to an all-time quarterly record of $27.4 million. The increase as compared to the prior year period was primarily due to increased project installation revenues which included rollouts for new and growth with existing clients.

During the fourth quarter of 2019, digital place-based media added 752 new locations, an increase of 5.2% over the third quarter of 2019.

Full Year

Total media revenues from continuing operations increased $33.9 million, or 20.8%, in the year ended December 31, 2019 compared to the prior year, to an all-time annual record of $196.8 million. This increase was due to the performance of Cinema media, which reported an increase of $8.6 million (8.0%) compared to the prior year due primarily to higher pre-show results. Digital place-based media revenues increased $25.4 million due to higher project installation revenues.

Full year, digital place-based media added 1,809 new locations (an increase of 13.4%) for a total of 15,311 locations as at December 31, 2019.

Amusement Revenues

The following table highlights the movement in amusement revenues for the quarter and the full year (in thousands of dollars):




Amusement revenues

Fourth Quarter

Full Year


2019

2018

Change

2019

2018

Change

Amusement - P1AG excluding Cineplex exhibition and LBE (i)

$

39,931

$

43,307

-7.8%

$

178,209

$

165,486

7.7%

Amusement - Cineplex exhibition (i)

2,668

2,697

-1.1%

10,907

10,664

2.3%

Amusement - LBE

10,872

7,469

45.6%

39,115

29,643

32.0%

Total amusement revenues

$

53,471

$

53,473

—%

$

228,231

$

205,793

10.9%

(i) Cineplex receives a venue revenue share on games revenues earned at in-theatre game rooms and XSCAPE Entertainment Centres.  Amusement - Cineplex

exhibition reports the total of this venue revenue share which is consistent with the historical presentation of Cineplex's amusement revenues.  Amusement - P1AG

excluding Cineplex exhibition and LBE reflects P1AG's gross amusement revenues, net of the venue revenue share paid to Cineplex reflected in Amusement -

Cineplex exhibition above.

 

Fourth Quarter

Amusement revenues of $53.5 million were flat compared to the prior year period. Amusement revenues from P1AG decreased $3.4 million (7.8%) primarily due to a decrease in route revenues in the United States from theatres, non-family entertainment centres and the retail segment. Amusement revenues from LBE increased 45.6% or $3.4 million compared to the prior year period as a result of the additional locations and VR offerings.

Full Year

For the full year period, amusement revenues increased by $22.4 million (10.9%) to an all-time annual record of $228.2 million. The increase as compared to the prior year is due to increased distribution revenue as well as route business, in part due to the P1AG agreement with Cinemark, entered in 2018, as well as strong growth in revenue from the additional locations of LBE venues as compared to the prior year period.

Other revenues

The following table highlights the other revenues which includes revenues from the Cineplex Store, promotional activities, screenings, private parties, corporate events, breakage on gift card sales and revenues from management fees for the quarter and the full year (in thousands of dollars):




Other revenues

Fourth Quarter

Full Year


2019

2018
Restated

Change

2019

2018
Restated

Change

Other revenues from continuing operations

$

13,256

$

13,385

-1.0%

$

51,309

$

44,080

16.4%

Other revenues from discontinued operations

29

NM

16

196

-91.8%

Total other revenues

$

13,256

$

13,414

-1.2%

$

51,325

$

44,276

15.9%

 

Other revenues from continuing operations decreased 1.0% in the fourth quarter of 2019 compared to the prior year period. In 2019, the increase of 16.4% in other revenues was due primarily to higher volume of digital commerce sales.

Film cost

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




Film cost

Fourth Quarter

Full Year


2019

2018

Change

2019

2018

Change

Film cost

$

93,925

$

91,562

2.6%

$

369,386

$

379,325

-2.6%

Film cost percentage (i)

51.7%

50.2%

1.5%

52.4%

52.4%

—%

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

 

Fourth Quarter

Film cost varies primarily with box office revenues, and can vary from quarter to quarter usually based on the relative strength and concentration of the titles exhibited during the prior period. The 1.5% increase in film cost percentage in the current period was as a result of higher settlement rates attributable to the top films in 2019 compared to 2018.

Full Year

Film cost percentage remained flat year over year as a result of the top films having comparable settlement rates.

Cost of food service

The following table highlights the movement in cost of food service and food service cost as a percentage of food service revenues ("concession cost percentage") for both theatres and LBE for the quarter and the full year (in thousands of dollars, except percentages and margins per patron):




Cost of food service

Fourth Quarter

Full Year


2019

2018

Change

2019

2018

Change

Cost of food service - theatre

$

25,223

$

23,805

6.0%

$

97,306

$

91,001

6.9%

Cost of food service - LBE

2,478

2,333

6.2%

9,517

9,190

3.6%

Total cost of food service

$

27,701

$

26,138

6.0%

$

106,823

$

100,191

6.6%

Theatre concession cost percentage (i)

22.0%

21.4%

0.6%

21.8%

20.6%

1.2%

LBE food cost percentage (i)

23.6%

24.0%

-0.4%

25.9%

26.4%

-0.5%

Theatre concession margin per patron (i)

$

5.31

$

5.13

3.5%

$

5.26

$

5.05

4.2%

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




 

Fourth 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 LBE venues varies primarily with the volume of guests who visit the locations 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 a 0.6% increase in the concession cost percentage during the period and higher theatre food service revenues due to sales from an expanded menu and shift in product mix.

The theatre concession margin per patron increased 3.5% from $5.13 in the fourth quarter of 2018 to $5.31 in the same period in 2019, reflecting the impact of the higher CPP more than offsetting the higher theatre concession cost percentage during the quarter.

The increase in LBE cost of food service as compared to the prior year period was due to the higher food service revenues as a result of the increase in operating locations. This was partially offset by the decrease of 0.4% in LBE food cost percentage during the quarter compared to the prior period as a result of improved cost management and menu optimization as new locations opened.

Full Year

The increase in the theatre cost of food service as compared to the prior year was due to a 1.2% increase in the theatre concession cost percentage and higher theatre food service revenues. The theatre concession margin per patron increased from $5.05 in the prior year to $5.26 in 2019, reflecting the impact of the higher CPP in 2019.

The increase in LBE cost of food service as compared to the prior year was due to the higher food service revenues as a result of the increase in operating locations. This was partially offset by the decrease of 0.5% in LBE food cost percentage as a result of improved cost management and menu optimization with the rollout of new locations.

Depreciation and amortization

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




Depreciation and amortization expenses

Fourth Quarter

Full Year


2019

2018
Restated

Change

2019

2018
Restated

Change

Depreciation of property, equipment and leaseholds

$

29,967

$

30,387

-1.4%

$

116,911

$

115,016

1.6%

Amortization of intangible assets and other

3,168

3,293

-3.8%

11,972

12,407

-3.5%

Sub-total - depreciation and amortization - other assets

$

33,135

$

33,680

-1.6%

$

128,883

$

127,423

1.1%

Depreciation - right-of-use assets

36,471

NM

145,946

NM

Total depreciation and amortization from continuing operations

$

69,606

$

33,680

106.7%

$

274,829

$

127,423

115.7%

Depreciation and amortization from discontinued operations

1,119

NM

3,623

4,429

-18.2%

Total depreciation and amortization

$

69,606

$

34,799

100.0%

$

278,452

$

131,852

111.2%

 

The quarterly decrease in depreciation of property, equipment and leaseholds from continuing operations of $0.4 million was due to the reduction in depreciation resulting from fully depreciated assets more than offsetting the incremental depreciation from new build and expansions.  The annual increase in depreciation of $1.9 million was primarily due to the investments in route equipment, furniture and fixtures and leasehold improvements.

The quarterly and year to date increase in depreciation of right-of-use assets from continuing operations was as a result of the adoption of IFRS 16. The right-of-use assets are depreciated over the lease term. The current quarter and year to date expense represents the depreciation charge for the periods.

The quarterly and annual decrease in amortization of intangible assets and other from continuing operations was primarily due to certain assets being fully amortized.

Loss on disposal of assets

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




Loss on disposal of assets

Fourth Quarter

Full Year


2019

2018

Change

2019

2018

Change

Loss on disposal from continuing operations

$

868

$

1,064

-18.4%

$

1,764

$

2,681

-34.2%

Loss on disposal from discontinued operations

NM

16

-100.0%

Loss on disposal of assets

$

868

$

1,064

-18.4%

$

1,764

$

2,697

-34.6%

 

Other costs

Other costs include three main sub-categories of expenses: theatre occupancy expenses, which capture the rent and associated occupancy costs for Cineplex's theatre operations; other operating expenses, which include the costs related to running Cineplex's film entertainment and content, media, as well as amusement and leisure; and general and administrative expenses, which includes costs related to managing Cineplex's operations, including head office expenses. Please see the discussions below for more details on these categories.

The following table highlights the movement in other costs for the quarter and the year to date (in thousands of dollars):




Other costs

Fourth Quarter

Full Year


2019

2018

Restated

Change

2019

2018
Restated

Change

Theatre occupancy expenses

$

18,493

$

51,991

-64.4%

$

71,867

$

209,838

-65.8%

Other operating expenses

167,416

161,741

3.5%

629,849

593,736

6.1%

General and administrative expenses

29,014

12,779

127.0%

80,977

66,783

21.3%

Total other costs from continuing operations

$

214,923

$

226,511

-5.1%

$

782,693

$

870,358

-10.1%

Other costs from discontinued operations

1,471

2,054

-28.4%

7,001

8,377

-16.4%

Total other costs

$

216,394

$

228,565

-5.3%

$

789,694

$

878,735

-10.1%

 

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) with the prior period presentation revised to provide comparability to the impact of the transition to IFRS 16:




Theatre occupancy expenses

Fourth Quarter

Year to Date


2019

2018

Revised

Change

2019

2018
Revised

Change

Cash rent - theatre (i) (vii)

$

39,042

$

38,625

1.1%

$

156,921

$

154,545

1.5%

Other occupancy

18,545

17,578

5.5%

73,736

73,435

0.4%

One-time items (ii)

(62)

(550)

-88.7%

(2,275)

(2,776)

-18.0%

Total theatre occupancy including cash lease payments

$

57,525

$

55,653

3.4%

$

228,382

$

225,204

1.4%

Non-cash rent (iii) (vi)

(2,672)

NM

(11,410)

NM

Rent previously recognized as a finance lease (iv)

(990)

NM

(3,956)

NM

Cash rent related to lease obligations (v)

(39,032)

NM

(156,515)

NM

Theatre occupancy as reported

$

18,493

$

51,991

-64.4%

$

71,867

$

209,838

-65.8%

(i) Represents the cash payments for theatre rent during the quarter. See Reconciliation section of the MD&A for further details.

(ii) One-time items include amounts related to both theatre rent and other theatre occupancy costs.  They are isolated here to illustrate Cineplex's theatre rent and other theatre occupancy costs excluding these one-time, non-recurring items.

(iii) Non-cash rent included in the 2018 balances in the previous reporting period. See Reconciliation section of the MD&A for further details.

(iv) Rent payments that were charged to the finance lease obligations in the previous reporting period. See Reconciliation section of the MD&A for further details.

(v) Cash rent that has been reallocated to offset the lease obligations.

(vi) See Non-GAAP measures section of this news release.

 




Theatre occupancy continuity

Fourth Quarter

Year to Date


Occupancy

Occupancy

2018 as reported

$

51,991

$

209,838

Impact of new and acquired theatres

920

4,182

Impact of disposed theatres

(501)

(2,232)

Same theatre rent change (i)

22

750

One-time items

488

502

Other

944

(24)




Impact of IFRS 16 adoption:



Impact of non-cash rent in prior period

2,672

11,410

Cash rent previously recognized as a finance lease

989

3,956

Cash rent related to lease obligations

(39,032)

(156,515)

2019 as reported

$

18,493

$

71,867

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

 

Fourth Quarter

Theatre occupancy expenses decreased $33.5 million during the fourth quarter of 2019 compared to the prior year period.  This decrease was primarily due to the impact of the adoption of IFRS 16 partially offset by the impact of non-cash rent in the prior period.

Total theatre occupancy including cash lease payments increased $1.9 million (3.4%) during the fourth quarter of 2019 compared to the prior year period. This increase was due to a decrease in one-time credits and increase in taxes and insurance.

Full Year

The decrease in theatre occupancy expenses of $138.0 million for the 2019 year compared the prior year was mainly due to the impact of the adoption of IFRS 16 partially offset by the impact of non-cash rent in the prior year period.

For the year to date period, theatre occupancy including cash payments increased $3.1 million (1.4%) as compared to the prior year period. The increase was primarily due to the impact of new theatres net of disposed theatres.

Other operating expenses

The following table highlights the movement in other operating expenses during the quarter and the year to date (in thousands of dollars) with the prior period presentation revised and restated to provide comparability to the impact of the transition to IFRS 16 and application of IFRS 5:




Other operating expenses

Fourth Quarter

Year to Date


2019

2018
Revised
and
Restated

Change

2019

2018
Revised
and
Restated

Change

Theatre payroll

$

41,925

$

38,663

8.4%

$

160,593

$

152,465

5.3%

Theatre operating expenses

32,986

29,940

10.2%

121,833

117,424

3.8%

Media (i)

27,762

18,881

47.0%

88,621

66,825

32.6%

P1AG (i)

36,818

40,096

-8.2%

156,687

150,558

4.1%

LBE (i) (ii)

14,692

11,665

25.9%

53,110

44,733

18.7%

LBE pre-opening (i) (iii)

603

(87)

NM

2,447

1,260

94.2%

SCENE

2,470

6,991

-64.7%

15,549

17,447

-10.9%

Marketing

5,128

6,663

-23.0%

16,254

19,959

-18.6%

Business interruption insurance proceeds

(1,749)

NM

(5,449)

NM

Other (iv)

9,686

10,329

-6.2%

32,879

28,212

16.5%

Other operating expenses including cash lease payments

$

172,070

$

161,392

8.0%

$

647,973

$

593,434

9.2%

Non-cash rent (v) (vi)

348

NM

302

NM

Cash rent related to lease obligations (vii)

(4,654)

NM

(18,124)

NM

Other operating expenses from continuing operations

$

167,416

$

161,740

3.5%

$

629,849

$

593,736

6.1%

Other operating expenses from discontinued operations

1,471

2,055

NM

7,001

8,378

-16.4%

Total other operating expenses

$

168,887

$

163,795

3.1%

$

636,850

$

602,114

5.8%

(i) Prior period balances were revised to exclude non-cash rent.  See Reconciliation section of the MD&A for further details.

(ii) Includes operating costs of LBE locations.  Overhead relating to management of LBE portfolio are included in the 'Other' line.

(iii) Includes pre-opening costs of LBE.

(iv) Other category includes overhead costs related to LBE and other Cineplex internal departments.

(v) Non-cash rent included in the 2018 balances in the previous reporting period. See Reconciliation section of the MD&A for further details.

(vi) See Non-GAAP measures section of this news release.

(vii) Cash rent that has been reallocated to offset the lease obligations.

 




Other operating continuity from continuing operations

Fourth Quarter

Year to Date


Other Operating

Other Operating

2018 as restated

$

161,740

$

593,736

Impact of new and acquired theatres

1,291

7,129

Impact of disposed theatres

(357)

(1,827)

Same theatre payroll change (i)

2,607

4,307

Same theatre operating expenses change (i)

2,767

2,968

Media operating expenses change

8,881

21,796

P1AG operating expenses change

(3,278)

6,129

LBE operating expenses change

3,027

8,377

LBE pre-opening change

690

1,187

SCENE change

(4,521)

(1,898)

Marketing change

(1,535)

(3,705)

Business interruption insurance proceeds change

1,749

5,449

Other

(643)

4,627

Impact of IFRS 16 adoption:



Non-cash rent in prior period

(348)

$

(302)

Cash rent related to lease obligations

(4,654)

$

(18,124)

2019 as reported

$

167,416

$

629,849

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

 

Fourth Quarter

Other operating expenses during the fourth quarter of 2019 increased $5.7 million or 3.5% compared to the prior year period. The increase was primarily due to higher media operating expenses as a result of higher digital place-based media project installation revenue as compared to the prior year period. Same theatre payroll expenses increased due to higher minimum wages in Alberta, Quebec and British Columbia. Payroll and other costs associated with expanded service offerings also resulted in higher costs. Higher LBE operating expenses were due to an increase in the number of LBE locations from six in the fourth quarter of 2018 to ten at the end of 2019. These were partially offset by the $3.2 million decrease in P1AG costs due to a decrease in the route business and $4.5 million decrease in SCENE due to timing of expenses.

Full Year

For the year ended December 31, 2019, other operating expenses increased $36.1 million or 6.1% compared to the prior year. Media operating expenses increased due to higher CDM project installation revenue and cinema media volumes as compared to the prior year period. The increase in other operating expenses can also be attributed to the net impact of new and acquired theatres. Cineplex incurred higher amusement and leisure costs due to an increase in distribution sales and route revenue from P1AG and from the impact of the increase in the number of LBE venues. Same theatre payroll expenses increased due to higher minimum wages in Alberta, Quebec and British Columbia. During 2018, Cineplex recognized business interruption insurance proceeds of $5.4 million, as a result of a fire at Cineplex Seton and VIP. Cost increases were partially offset by a decrease in marketing due to the timing of campaigns and cash rent allocated to lease obligations arising upon the adoption of IFRS 16.

General and administrative expenses

The following table highlights the movement in general and administrative ("G&A") expenses during the quarter and the year to date, including Share-based compensation costs, and G&A expenses net of these costs (in thousands of dollars) with the prior period presentation revised to provide comparability to the impact of the transition to IFRS 16:




G&A expenses

Fourth Quarter

Year to Date


2019

2018
Revised

Change

2019

2018
Revised

Change

G&A excluding LTIP and option plan expense (i)

$

16,403

$

13,437

22.1%

$

64,108

$

60,568

5.8%

Restructuring

189

1,022

-81.5%

1,078

5,842

-81.5%

Transaction costs (vi)

11,711

NM

11,711

NM

LTIP (ii)

466

(2,076)

NM

3,076

(1,347)

NM

Option plan

407

395

3.0%

1,605

1,718

-6.6%

G&A expenses including cash lease payments

$

29,176

$

12,778

128.3%

$

81,578

$

66,781

22.2%

Non-cash rent (iii) (iv)

1

-100.0%

2

-100.0%

Cash rent included as part of lease obligations (v)

(162)

NM

(601)

NM

G&A expenses as reported

$

29,014

$

12,779

127.0%

$

80,977

$

66,783

21.3%

(i) Prior period balance was revised to exclude non-cash rent. See Reconciliation section of the MD&A for further details.

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

(iii) Non-cash rent included in the 2018 balances in the previous reporting period.  See Reconciliation section of the MD&A for further details.

(iv) See Non-GAAP measures section of this news release.

(v) Cash rent that has been reallocated to offset the lease obligations.

(vi) Transaction costs include share-based compensation costs and out-of-pocket expenses.

 

Fourth Quarter

G&A expenses increased $16.2 million during the fourth quarter of 2019 compared to the prior year primarily due to higher expenses resulting from the proposed Cineworld Transaction. Included in transaction costs of $11.7 million are share-based compensation costs of $8.4 million. These expenses are due to the impact of the combination of the valuation of the expected benefits at $34.00 as compared to the share price preceding the announcement of the Arrangement Agreement and an accelerated vesting period. The vesting service period was revised to March 31, 2020, to reflect the estimated earliest closing date of the Cineworld Transaction which is expected to occur in during the first half of 2020. Revised vesting terms of the options as a result of the Cineworld Transaction also resulted in increased costs in the quarter. The transaction costs also include $3.3 million of professional fees arising from the Cineworld Transaction. Excluding the impact of the Cineworld Transaction, LTIP costs increased $2.5 million due to an increase in share price in the current quarter as compared to a decrease in share price in the prior year period.

Full Year

G&A expenses for 2019 increased $14.2 million (21.3%) as compared to the prior year, primarily due to expenses related to the Cineworld Transaction in the amount of $11.7 million. Included in $11.7 million of transaction costs are the share-based compensation costs of $8.4 million, resulting from the combination of the valuation of the expected benefits at $34.00 (the price per Share in the Cineworld Transaction) as compared to the share price preceding the announcement of the Arrangement Agreement and an accelerated vesting period. The vesting service period was revised to March 31, 2020, to reflect the estimated earliest closing date of the Cineworld Transaction which is expected to occur in during the first half of 2020. Professional fees relating to the Cineworld Transaction in the amount of $3.3 million are also included in the transaction costs. The increase in G&A can also be attributed to professional fees relating to the software upgrade undertaken for IFRS 16. The prior year included expenses incurred relating to a cost reduction initiative implemented in 2018. Excluding the impact of the Cineworld Transaction, LTIP costs increased $4.4 million due to an increase in share price in the current year period as compared to a decrease in the share price 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, adjusted EBITDA and adjusted EBITDAaL for the three months and year ended December 31, 2019 as compared to the prior year periods (expressed in thousands of dollars, except adjusted EBITDAaL margin):




EBITDA

Fourth Quarter

Full Year


2019

2018

Restated

Change

2019

2018

Restated

Change

EBITDA

$

106,905

$

85,009

25.8%

$

407,584

$

265,612

53.5%

Adjusted EBITDA

$

106,529

$

83,351

27.8%

$

405,786

$

262,357

54.7%

Adjusted EBITDAaL (i)

$

62,327

$

80,039

-22.1%

$

230,546

$

247,295

-6.8%

Adjusted EBITDAaL margin (i)

14.1%

18.7%

-4.6%

13.8%

15.3%

-1.5%

(i) Prior period figures have been revised to conform to current period presentation. See Reconciliation section of the MD&A.

 

Adjusted EBITDAaL for the fourth quarter of 2019 decreased $17.7 million, or 22.1%, as compared to the prior year period, to $62.3 million. This decrease was due to additional costs including transaction costs incurred as a result of the Cineworld Transaction as well as weaker results from theatre exhibition business partially offset by strong results from other businesses. As a result of the Cineworld Transaction, G&A expenses increased as a result of expenses related to the Cineworld Transaction in the amount of $11.7 million. Adjusted EBITDAaL margin, calculated as adjusted EBITDAaL divided by total revenues, was 14.1% in the current period, a decrease of 4.6% from 18.7% in the prior year period.

Adjusted EBITDAaL for the year ended December 31, 2019 decreased $16.7 million, or 6.8%, to $230.5 million as compared to $247.3 million in the prior year period with the decrease primarily due to the transaction costs and accounting adjustments related to the Cineworld Transaction. These were partially offset by the increases in food service, media and amusement revenues. Adjusted EBITDAaL margin was down 0.6% to 13.8% in 2019 compared to 15.3% in 2018.

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

For the fourth quarter of 2019, adjusted free cash flow per common share of Cineplex was $0.62 as compared to $0.96 in the prior year period. The declared dividends per common share of Cineplex were $0.45 in the fourth quarter of 2019 and $0.44 in the prior year period. During the 12 months ended December 31, 2019, Cineplex generated adjusted free cash flow per Share of $2.66, compared to $2.89 in the prior 12 month period. Cineplex declared dividends per Share of $1.78 and $1.72, respectively, in each 12 month period. The payout ratios for these periods were 66.9% and 59.6%, 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.  As a result of the adoption of IFRS 16, Leases on January 1, 2019, new non-GAAP measures including adjusted EBITDAaL and associated adjusted EBITDAaL margin have been introduced to ensure comparability of periods.

EBITDA is calculated by adding back to net income or net loss, income tax expense, depreciation and amortization expense, and interest income from continuing operations.  Adjusted EBITDA excludes the change in fair value of financial instrument, loss on disposal of assets, foreign exchange gain, the equity income of CDCP, the non-controlling interests' share of adjusted EBITDA of TG-CPX Limited Partnership, and depreciation, amortization, interest and taxes of Cineplex's other joint ventures and associates.  Adjusted EBITDAaL modifies adjusted EBITDA to deduct current period cash rent related to lease obligations. Prior year adjusted EBITDAaL deducts rent previously recognized as a reduction in finance lease obligations, and non-cash rent previously presented as amortization of tenant inducements, rent averaging liabilities, density right and fair-value lease contract liabilities. EBITDA, adjusted EBITDA and adjusted EBITDAaL measure Cineplex's operational performance from continuing operations, and prior year measurements have been restated to exclude discontinued operations accordingly.

Cineplex's management believes that adjusted EBITDAaL is an important supplemental measure of Cineplex's profitability at an operational level and provides analysts and investors with comparability in evaluating and valuing Cineplex's performance period over period.  EBITDA, adjusted for various unusual items, is also used to define certain financial covenants in Cineplex's Credit Facilities.  Management calculates adjusted EBITDAaL margin by dividing adjusted EBITDAaL by total revenues.

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

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

Earnings per Share Metrics
Cineplex has presented basic and diluted earnings per share net of this item to provide a more comparable earnings per share metric between the current periods and prior year periods. In the non-GAAP measure, earnings is defined as net income or net loss excluding the change in fair value of financial instrument.

Per Patron Revenue Metrics
Cineplex reviews per patron metrics as they relate to box office revenue and theatre food service revenue such as BPP, CPP, BPP excluding premium priced product, and concession margin per patron, as these are key measures used by investors to value and assess Cineplex's performance, and are widely used in the theatre exhibition industry. Management of Cineplex defines these metrics as follows:

Theatre Attendance: Theatre attendance is calculated as the total number of paying patrons that frequent Cineplex's theatres during the period.

BPP: Calculated as total box office revenues divided by total paid theatre attendance for the period.

BPP excluding premium priced product: Calculated as total box office revenues for the period, less box office revenues from 3D, 4DX, UltraAVX, VIP and IMAX product; divided by total paid theatre attendance for the period, less paid theatre attendance for 3D, 4DX, UltraAVX, VIP and IMAX product.

CPP: Calculated as total theatre food service revenues divided by total paid total theatre attendance for the period.

Premium priced product: Defined as 3D, 4DX, UltraAVX, IMAX and VIP film product.

Theatre concession margin per patron: Calculated as total theatre food service revenues less total theatre food service cost, divided by theatre attendance for the period.

Same Theatre Analysis
Cineplex reviews and reports same theatre metrics relating to box office revenues, theatre food service revenues, theatre rent expense and theatre payroll expense, as these measures are widely used in the theatre exhibition industry as well as other retail industries.

Same theatre metrics are calculated by removing the results for all theatres that have been opened, acquired, closed or otherwise disposed of subsequent to the start of the prior year comparative period. For the three months ended December 31, 2019 the impact of the 3 locations that have been opened or acquired and 2 locations that have been closed have been excluded, resulting in 161 theatres being included in the same theatre metrics. For the year ended December 31, 2019 the impact of the 3 locations that have been opened or acquired and the 4 locations that have been closed have been excluded, resulting in 161 theatres being included in the same theatre metrics.

Cost of sales percentages
Cineplex reviews and reports cost of sales percentages for its two largest revenue sources, box office revenues and food service revenues as these measures are widely used in the theatre exhibition industry. These measures are reported as film cost percentage and concession cost percentage, respectively, and are calculated as follows:

Film cost percentage: Calculated as total film cost expense divided by total box office revenues for the period.

Theatre concession cost percentage: Calculated as total theatre food service costs divided by total theatre food service revenues for the period.

LBE food cost percentage: Calculated as total LBE food costs divided by total LBE food service revenues for the period.

Non-cash rent
Calculated as the total amortization of tenant inducements, rent averaging liabilities, density rights and fair-value lease contract liabilities. This accounting treatment was applicable under IAS 17 in 2018 but not applicable under IFRS 16 in 2019 and onwards.

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

Cineplex (TSX:CGX) 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. In addition to being Canada's largest and most innovative film exhibitor, Cineplex also operates successful businesses in digital commerce (CineplexStore.com), food service, alternative programming (Cineplex Events), cinema media (Cineplex Media), digital place-based media (Cineplex Digital Media), amusement solutions (Player One Amusement Group) and an online esports platform for competitive and passionate gamers (WorldGaming Network). Additionally, Cineplex operates location based entertainment complexes specially designed for teens and families (Playdium) as well as Canada's favourite destination for 'Eats & Entertainment' (The Rec Room). Cineplex is a joint venture partner in SCENE, Canada's largest entertainment loyalty program.

Proudly recognized as having one of the country's Most Admired Corporate Cultures, Cineplex employs approximately 13,000 people in its offices across Canada and the United States. To learn more visit Cineplex.com or download the Cineplex App.

You are cordially invited to participate in a conference call with the management of Cineplex (TSX: CGX) to review our 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 February 12, 2020
10:00 am Eastern Time

In order to participate in the conference call please dial 647-484-0477, or from outside Toronto and from the U.S., dial 1-800-458-4121 at least five to ten minutes prior to 10:00am 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 passcode is 2521681.

The replay will begin at 1:00pm ET on Wednesday February 12, 2020 and end at 1:00pm ET on Wednesday February 19, 2020.

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

Cineplex Inc.
Consolidated Balance Sheets
(expressed in thousands of Canadian dollars)





December 31,

December 31,


2019

2018




Assets






Current assets



Cash and cash equivalents

$

26,080

$

25,242

Trade and other receivables

168,065

165,586

Income taxes receivable

9,757

4,944

Inventories

30,995

30,592

Prepaid expenses and other current assets

14,226

13,862

Fair value of interest rate swap agreements

1,022

1,457

Assets held for sale

6,573


256,718

241,683




Non-current assets



Property, equipment and leaseholds

662,798

634,354

Right-of-use assets

1,232,849

Deferred income taxes

14,197

13,444

Fair value of interest rate swap agreements

472

2,063

Interests in joint ventures and associates

28,221

38,912

Intangible assets

88,367

108,758

Goodwill

816,790

817,235


$

3,100,412

$

1,856,449

 

Cineplex Inc.
Consolidated Balance Sheets … continued     
(expressed in thousands of Canadian dollars)





December 31,

December 31,


2019

2018




Liabilities






Current liabilities



Accounts payable and accrued liabilities

$

220,188

$

186,407

Share-based compensation

25,681

4,862

Dividends payable

9,500

9,183

Income taxes payable

1,183

12,167

Deferred revenue

222,998

214,016

Lease obligations

106,352

3,058

Fair value of interest rate swap agreements

1,874

1,184

Liabilities related to assets held for sale

2,808


590,584

430,877




Non-current liabilities



Share-based compensation

8,210

Long-term debt

625,000

580,000

Fair value of interest rate swap agreements

10,837

7,674

Lease obligations

1,261,243

10,789

Post-employment benefit obligations

10,678

9,250

Other liabilities

9,813

119,110

Deferred income taxes

1,263

11,528


1,918,834

746,561

Total liabilities

2,509,418

1,177,438




Equity






Share capital

852,379

852,379

Deficit

(264,310)

(179,721)

Hedging reserves and other

(131)

(3,678)

Contributed surplus

4,052

7,815

Cumulative translation adjustment

(887)

2,301

Total equity attributable to owners of Cineplex

591,103

679,096

Non-controlling interests

(109)

(85)

Total equity

590,994

679,011


$

3,100,412

$

1,856,449

 

Cineplex Inc.
Consolidated Statements of Operations
(expressed in thousands of Canadian dollars, except per share amounts)






Three months ended December 31,


Year ended December 31,


2019

2018


2019

2018



Restated



Restated

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 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

(44)

(69)


(252)

(274)

Foreign exchange

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

(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

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

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

(0.02)

(0.03)


(0.12)

(0.13)

Total operations

$

0.06

$

0.43


$

0.46

$

1.22

 

Cineplex Inc.
Consolidated Statements of Comprehensive Income
(expressed in thousands of Canadian dollars)





Three months ended December 31,


Year ended December 31,


2019

2018


2019

2018



Restated



Restated

Net income from continuing operations

$

4,668

$

29,262


$

36,516

$

85,459







Other comprehensive income from continuing
operations






Items that will be reclassified subsequently to net income:






Income (loss) on hedging instruments

7,295

(9,593)


(4,853)

(7,008)

Associated deferred income taxes (expense) recovery

(1,943)

2,648


1,306

1,998

Foreign currency translation adjustment

(1,189)

3,180


(3,398)

5,422







Items that will not be reclassified to net income:






Actuarial gains of post-employment benefit obligations

1,054

296


1,054

296

Associated deferred income taxes expense

(282)

(79)


(282)

(79)

Other comprehensive income (loss)

4,935

(3,548)


(6,173)

629

Comprehensive income from continuing operations

9,603

25,714


30,343

86,088

Net loss from discontinued operations, net of taxes

(1,196)

(2,108)


(7,625)

(8,503)

Foreign currency translation adjustment from discontinued
operations

116

(212)


210

(304)

Comprehensive income

$

8,523

$

23,394


$

22,928

$

77,281













Comprehensive income from continuing operations
attributable to:






Owners of Cineplex

$

9,607

$

25,739


$

30,367

$

86,185

Non-controlling interests

(4)

(25)


(24)

(97)

Comprehensive income

$

9,603

$

25,714


$

30,343

$

86,088







Comprehensive income attributable to:






Owners of Cineplex

$

8,527

$

23,419


$

22,952

$

77,378

Non-controlling interests

(4)

(25)


(24)

(97)

Comprehensive income

$

8,523

$

23,394


$

22,928

$

77,281

 

Cineplex Inc.
Consolidated Statements of Changes in Equity
(expressed in thousands of Canadian dollars)
For the years ended December 31, 2019 and 2018










Share
capital

Contributed
surplus

Hedging
reserves and
other

Cumulative
translation
adjustment

Deficit

Non-
controlling
interests

Total

















January 1, 2019

$

852,379

$

7,815

$

(3,678)

$

2,301

$

(179,721)

$

(85)

$

679,011









Net income

28,915

(24)

28,891

Other comprehensive loss

3,547

(3,188)

(772)

(413)

Total comprehensive income

3,547

(3,188)

28,143

(24)

28,478

Dividends declared

(112,732)

(112,732)

Share option expense

1,607

1,607

Conversion to cash-settled option plan

(5,370)

(5,370)









December 31, 2019

$

852,379

$

4,052

$

(131)

$

(887)

$

(264,310)

$

(109)

$

590,994

















January 1, 2018

$

856,761

$

1,647

$

1,332

$

(2,817)

$

(148,060)

$

$

708,863









Net income

77,053

(97)

76,956

Other comprehensive income

(5,010)

5,118

217

325

Total comprehensive income

(5,010)

5,118

77,270

(97)

77,281

Dividends declared

(108,931)

(108,931)

Transfer on repayment of convertible
   debentures

(4,471)

4,471

Share option expense

1,718

1,718

Issuance of shares on exercise of options

89

(21)

68

TGLP non-controlling interests recognized on
   formation

12

12









December 31, 2018

$

852,379

$

7,815

$

(3,678)

$

2,301

$

(179,721)

$

(85)

$

679,011

 

Cineplex Inc.
Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)








Three months ended December 31,


Year ended December 31,



2019

2018


2019

2018




Restated



Restated

Cash provided by (used in)







Operating activities







Net income from continuing operations


$

4,668

$

29,262


$

36,516

$

85,459

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







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


33,135

33,680


128,883

127,423

Depreciation of right-of-use assets


36,471


145,946

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


(2,323)


(11,106)

Unrealized foreign exchange


309

(1,112)


698

(1,231)

Interest rate swap agreements - non-cash interest


11,891

1,073


10,472

1,466

Accretion of convertible debentures


605


2,420

Other non-cash interest


408

893


1,745

1,194

Financing fees included in interest expenses


1,718


1,718

Loss on disposal of assets


868

1,064


1,764

2,681

Deferred income taxes


(3,228)

1,521


(9,990)

(6,580)

Non-cash share-based compensation


407

395


1,608

1,718

Net change in interests in joint ventures and associates


(1,466)

620


(4,704)

(3,139)

Changes in operating assets and liabilities


40,670

15,532


8,727

(3,659)

Net cash provided by operating activities


124,133

82,928


321,665

198,364








Investing activities







Proceeds from disposal of assets, including asset-related
insurance recoveries


100


1,930

Purchases of property, equipment and leaseholds


(51,448)

(24,533)


(146,367)

(110,079)

Acquisition of businesses, net of cash acquired



(4,685)

Intangible assets additions


(2,709)

(1,826)


(7,865)

(4,908)

Tenant inducements


4,832

3,113


13,985

14,842

Net cash received from CDCP


2,882

684


15,394

4,266

Net cash used in investing activities


(46,443)

(22,462)


(124,853)

(98,634)








Financing activities







Dividends paid


(28,498)

(27,550)


(112,415)

(108,614)

Borrowings under credit facilities, net


(24,000)

71,000


45,000

111,000

Options exercised for cash



68

Repayments of lease obligations - principal


(32,352)

(878)


(128,252)

(3,420)

Financing fees


(1,718)


(243)

(1,718)

Repayment of convertible debentures at maturity


(107,500)


(107,500)

Net cash used in financing activities


(84,850)

(66,646)


(195,910)

(110,184)

Effect of exchange rate differences on cash


345

137


483

600

(Decrease) increase in cash and cash equivalents from
continuing operations


(6,815)

(6,043)


1,385

(9,854)

Cash flows provided by (used in) discontinued operations


2,821

(1,277)


(547)

(5,501)

Cash and cash equivalents - Beginning of period


30,074

32,562


25,242

40,597

Cash and cash equivalents - End of period


$

26,080

$

25,242


$

26,080

$

25,242








Supplemental information







Cash paid for interest - lease obligation


$

11,443

$

110


$

47,018

$

535

Cash paid for interest - other


$

6,634

$

7,923


$

25,302

$

26,306

Cash paid for income taxes, net


$

7,315

$

6,781


$

36,402

$

29,048

 

Cineplex Inc.
Consolidated Supplemental Information         
(expressed in thousands of Canadian dollars)

Reconciliation to Adjusted EBITDAaL           





Three months ended December 31,


Year ended December 31,


2019

2018


2019

2018



Restated



Restated

Net income from continuing operations

$

4,668

$

29,262


$

36,516

$

85,459







Depreciation and amortization - other

33,135

33,680


128,883

127,423

Depreciation - right-of-use assets

36,471


145,946

Interest expense - lease obligations

11,879

110


48,659

535

Interest expense - other

18,610

10,619


36,063

30,155

Interest income

(44)

(69)


(252)

(274)

Current income tax expense

5,414

9,886


21,759

28,894

Deferred income tax (recovery) expense

(3,228)

1,521


(9,990)

(6,580)







EBITDA from continuing operations

$

106,905

$

85,009


$

407,584

$

265,612







Loss on disposal of assets

868

1,064


1,764

2,681

CDCP equity income (i)

(1,803)

(1,311)


(4,827)

(4,186)

Foreign exchange loss (gain)

496

(1,543)


1,065

(1,981)

Non-controlling interest

4

25


24

78

Depreciation and amortization - joint ventures and associates (ii)

23

26


99

33

Taxes and interest of joint ventures and associates (ii)

36

81


77

120







Adjusted EBITDA from continuing operations

$

106,529

$

83,351


$

405,786

$

262,357







Cash rent related to lease obligation (iii)

(43,849)


(175,240)

Cash rent paid not pertaining to current period

(353)


Cash rent previously recognized as a finance lease (iv)

(989)


(3,956)

Non-cash rent (v) (vi)

(2,323)


(11,106)







Adjusted EBITDAaL (vi) (vii)

$

62,327

$

80,039


$

230,546

$

247,295

(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 and associates with the exception of CDCP (see (i) above).

(iii)

Balance of cash rents that have been reallocated to offset the lease obligations.

(iv)

Rent payments that were charged to the finance lease obligations in the previous reporting period. See Reconciliation section of the MD&A for further
details.

(v) 

Non-cash rent included in the 2018 balances in the previous reporting period. See Reconciliation section of the MD&A for further details.

(vi)

See Non-GAAP measures section of this news release.

(vii)

Prior period figures have been revised to conform to current period presentation. See Reconciliation section of the MD&A for further details.

 

Cineplex Inc.
Consolidated Supplemental Information
(expressed in thousands of Canadian dollars, except number of shares and per share data)

Adjusted Free Cash Flow






Three months ended December 31,


Year ended December 31,


2019


2018


2019

2018




Restated



Restated








Cash provided by operating activities (i)

$

124,133

$

82,928


$

321,665

$

198,364

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

(51,448)


(24,433)


(146,367)

(108,149)








Standardized free cash flow

72,685


58,495


175,298

90,215








Add/(Less):







Changes in operating assets and liabilities (ii)

(40,670)


(15,531)


(8,727)

3,660

Changes in operating assets and liabilities of joint ventures and
associates (ii)

(131)


(1,518)


535

(609)

Principal component of lease obligations

(32,352)


(878)


(128,252)

(3,420)

Principal portion of cash rent paid not pertaining to current period

(346)



Growth capital expenditures and other (iii)

37,202


19,871


114,665

88,941

Share of income of joint ventures and associates, net of non-cash depreciation

(147)


(306)


(482)

(285)

Non-controlling interest

4


25


24

78

Net cash received from CDCP (iv)

2,882


684


15,394

4,266

Adjusted free cash flow

$

39,127

$

60,842


$

168,455

$

182,846

Average number of Shares outstanding

63,333,238


63,333,137


63,333,238

63,332,159

Adjusted free cash flow per Share

$

0.618

$

0.961


$

2.660

$

2.887

Dividends declared

$

0.450

$

0.435


$

1.780

$

1.720

(i)

Prior period figures have been revised to conform to current period presentation. See Reconciliation section of the MD&A for further details.

(ii)

Changes in operating assets and liabilities are not considered a source or use 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

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/February2020/12/c7493.html

Contact:

Gord Nelson, Chief Financial Officer, T: (416) 323-7262, E: investorrelations@cineplex.com

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