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Cineplex Inc
Symbol CGX
Shares Issued 63,333,238
Close 2020-11-13 C$ 6.61
Recent Sedar Documents

Cineplex loses $121.2-million in Q3

2020-11-13 07:57 ET - News Release

Mr. Ellis Jacob reports

CINEPLEX INC. REPORTS THIRD QUARTER RESULTS

Cineplex Inc. has released its financial results for the three and nine months ended Sept. 30, 2020. The company's third quarter financial results were impacted by the COVID-19 pandemic, as the company temporarily closed all of its theatres and location-based entertainment (LBE) venues effective March 16, 2020, only beginning to reopen in select markets during the last few weeks of June.

"Cineplex is a resilient organization and we remain confident in our financial position and business recovery plans, despite the tough industry and economic conditions," said Ellis Jacob, president and chief executive officer, Cineplex.

"Building on our response to the pandemic, we continued to focus on adapting our operations, significantly reducing expenses and strengthening Cineplex's financial position. In addition to this focus, since Q2, we have raised $303-million (net of fees) in additional financing, obtained extended relief under our credit facilities, reduced net cash outflows with respect to leases by approximately $58-million, received approximately $22.5-million in wage subsidies and are generating a substantial tax asset which we will realize upon in 2021.

"In the third quarter, we reopened all of our theatres and with the first major film in five months, Tenet, we welcomed over 1.6 million guests to our theatres. This signals to us, as well as our studio partners, that Canadians have missed the magic of the big screen and are confident in the rigorous health and safety protocols we have put in place in our venues. Keeping our guests and staff safe is our top priority and we are proud that no major outbreaks or transmission of COVID-19 can be attributed to movie theatres.

"We are always reviewing and refining our operating plans across the entire business and will take the necessary steps that ensure Cineplex remains on solid financial ground and is well positioned for a strong and healthy future," Mr. Jacob concluded.

Impact of the COVID-19 pandemic

On March 16, 2020, Cineplex announced the temporary closure of all of its theatres and LBE venues across Canada, as well as substantially all route locations operated by P1AG. On April 1, 2020, in response to applicable government directives and guidance from Canadian public health authorities, Cineplex announced the continued closure of its theatres and LBE venues across Canada.

Cineplex was able to reopen a limited number of venues in late June, and as government restrictions across the country were eased, additional locations were opened. On Aug. 21, 2020, Cineplex became one of the first of all the major film exhibitors in the world to reopen its entire circuit of theatres with all 164 Cineplex theatres and 1,687 screens across Canada reopened, including 22 VIP Cinemas locations, as well as 10 location-based entertainment venues.

The COVID-19 pandemic has had a material negative effect on all aspects of Cineplex's businesses resulting in material decreases in revenues, results of operations and cash flows. Since March 15, 2020, Cineplex has experienced a net cash burn of approximately $15-million to $20-million per month as a result of having to close its theatres and LBE venues (for Q3 2020 net cash burn was $49.7-million for the three months or approximately $16.6-million monthly). When used in this news release, net cash burn is calculated as adjusted EBITDAaL (earnings before interest, taxes, depreciation and amortization, and is adjusted for cash lease payments and therefore comparative EBITDA prior to the adoption of IFRS 16) less cash interest (excluding amounts with respect to lease obligations), provision for income taxes and net capital expenditures. Net cash burn assumes that all of Cineplex's theatres and LBE venues remain closed or have limitations on capacity, current government wage subsidies continue in place, with respect to the Canada emergency wage subsidy (CEWS) and certain lease-related abatements and other lease-related savings currently being negotiated are implemented as expected by management.

As some of Cineplex's largest expenses, such as film cost and cost of food services, are fully variable, during the closure of its theatres and LBE venues Cineplex focused on reducing its largest fixed and semi-fixed expenses, including those attributed to theatre payroll and theatre occupancy. Cineplex was able to materially reduce theatre payroll expenses from $40.9-million reported in the third quarter of 2019 to approximately $3.9-million in the third quarter of 2020 as a result of assistance received under CEWS. With respect to theatre occupancy expenses, Cineplex worked with its landlord partners to identify relief measures, which resulted in significantly reduced cash rent being paid in the third quarter of 2020. The focus was on identifying opportunities for lease-related abatements during the closure period, converting fixed components of rent to variable rent during the reopening period and looking for other opportunities to extract value under its existing lease agreements.

Reopening plans

Although restrictions on social gatherings are being lifted in many of the markets in which Cineplex operates, there has been a reinstatement of restrictions in certain markets and there is the possibility that further restrictions may be reinstituted in the future if there are additional outbreaks of COVID-19 in Canada. Reinstitution of restrictions on social gatherings that would result in the closure of Cineplex's theatres and LBE venues would have a significant negative impact on the ability and timing of Cineplex's return to profitability.

Subsequent to Sept. 30, 2020, social gathering restrictions were reinstituted in several key markets that Cineplex operates including select regions in Ontario, Quebec and Manitoba. The restrictions resulted in the mandated temporary closure of certain theatres and LBE locations. In addition, with the global delay of exhibitors reopening, specifically those in California and New York, distributors have shifted the release dates of major movie titles out of 2020 into 2021 and beyond, in an effort to maximize box office revenues on their eventual release. This included No Time To Die and Dune. In addition, some previously expected theatrical releases have instead been redirected to streaming services. The impact of the reduction of new releases in the fourth quarter as a result of these postponements in combination with the continuing and potentially expanded restrictions on the reopening of Cineplex's businesses, has also negatively impacted the timing of Cineplex's return to profitability.

Cineplex has also undertaken the sale of assets and lease rights unlocking value where available. During the third quarter, Cineplex sold certain restrictive lease rights to landlords resulting in the receipt of $21-million during the quarter. Cineplex also announced during the quarter that it was pursuing the sale of its head office location, with the potential for a leaseback transaction, expected to close in early 2021.

Credit facility waiver

On Nov. 12, 2020, Cineplex and Cineplex Entertainment LP entered into the second credit agreement amendment with its lenders. The amendment provides Cineplex with immediate financial covenant suspension in light of the COVID-19 pandemic and its effects on Cineplex's businesses, which will be extended to the second quarter of 2021. As at Sept. 30, 2020, an aggregate of $460-million was outstanding under the credit facilities.

                         THIRD QUARTER FINANCIAL RESULTS

                                                            2020             2019

Total revenues                                     $61.0-million   $418.4-million
Theatre attendance                                   1.6-million     17.5-million  
Net (loss) income from continuing operations    $(121.2)-million    $15.1-million 
Net loss from discontinued operations                         $-   $(1.7)-million
Net (loss) income                               $(121.2)-million    $13.4-million 
Box office revenues per patron (BPP)                       $9.30           $10.16        
Concession revenues per patron (CPP)                       $7.37            $6.68         
Adjusted EBITDA                                  $(28.9)-million   $106.1-million
Adjusted EBITDAaL                                $(46.7)-million    $62.3-million 
Adjusted EBITDAaL margin                                   (76.6)%           14.9%        
Adjusted free cash flow                          $(77.3)-million    $48.2-million 
Adjusted free cash flow per common share of 
Cineplex                                                 $(1.221)          $0.762        
Earnings per share (EPS) from continuing 
operations -- basic and diluted                           $(1.91)           $0.24         
EPS from discontinued operations -- basic and 
diluted                                                       $-           $(0.03)       
EPS -- basic and diluted                                  $(1.91)           $0.21         


  

                                 YEAR TO DATE FINANCIAL RESULTS

                                                                        2020               2019

Total revenues                                                $365.8-million   $1,221.9-million
Theatre attendance                                              12.3 million       49.5 million    
Net (loss) income from continuing operations (iii)          $(393.6)-million      $31.8-million   
Net loss from discontinued operations                         $(5.0)-million     $(6.4)-million  
Net (loss) income                                           $(398.6)-million      $25.4-million   
Box office revenues per patron (BPP) (iv)                             $10.23             $10.58          
Concession revenues per patron (CPP) (iv)                              $6.86              $6.70           
Adjusted EBITDA                                              $(23.8)-million     $299.3-million  
Adjusted EBITDAaL                                           $(116.9)-million     $168.2-million  
Adjusted EBITDAaL margin                                               (31.9)%             13.8%          
Adjusted free cash flow (iv)                                $(131.3)-million     $129.3-million  
Adjusted free cash flow per common share of Cineplex                 $(2.074)            $2.042          
Earnings per share (EPS) from continuing operations -- 
basic and diluted                                                     $(6.21)             $0.50           
EPS from discontinued operations -- basic and diluted                 $(0.08)            $(0.10)         
EPS -- basic and diluted                                              $(6.29)             $0.40           

Operating results for the three and nine months ended Sept. 30, 2020

Total revenues

Total revenues for the three months ended Sept. 30, 2020, decreased $357.4-million (85.4 per cent) to $61.0-million as compared with the prior year period. Total revenues for the nine months ended Sept. 30, 2020, decreased $856.1-million (70.1 per cent) to $365.8-million as compared with the prior year period. A discussion of the factors affecting the changes in box office, food service, media, amusement and other revenues for the two periods is provided below.

Third quarter and year to date

As of Aug. 21, 2020, Cineplex had reopened its entire circuit of theatres with limited show times and reduced seating capacity to ensure physical distancing, enhanced cleaning protocols and staff equipped with personal protective equipment. As a result of these restrictions, the gradual reopening of the theatres throughout the summer, and limited film product, box office revenues decreased $163.3-million, or 91.8 per cent, to $14.5-million during the period, compared with $177.9-million reported in the third quarter of 2019.

Cineplex's BPP for the period decreased 86 cents, or 8.5 per cent, from $10.23 in the prior year to $9.30 in the current period. The decrease was due to lower ticket pricing on previously released content, Scene promotions and reduced premium offerings. The quarter included the release of the much anticipated Christopher Nolan's film Tenet on Aug. 26, one week before it was released in the United States. Distributors have continued to push their film slates further out in the calendar and into 2021 and beyond in response to the impact of COVID-19 on exhibitors.

Box office revenues for the nine months ended Sept. 30, 2020, were $125.6-million, a decrease of $398.2-million or 76.0 per cent compared with the prior year. The decrease in box office revenues was primarily due to the decrease in attendance as a result of the government mandated restrictions that have kept theatres closed or operating below full capacity for the majority of the year.

Third quarter 2020 analyst conference call

You are cordially invited to participate in a conference call with the management of Cineplex to review the company's third quarter. Ellis Jacob, president and chief executive officer, and Gord Nelson, chief financial officer, will host the call scheduled for:

  • Friday, Nov. 13, 2020;
  • 10 a.m. Eastern Time.

In order to participate in the conference call, please dial 647-792-1240, or from outside Toronto and from the U.S., dial 1-800-437-2398 at least five to 10 minutes prior to 10 a.m. ET. Please quote the conference confirmation code 9829938 to access the call.

If you cannot participate in a live mode, a replay will be available. Please dial 647-436-0148, or from outside Toronto and from the United States, dial 1-888-203-1112. The replay passcode is 9829938.

The replay will begin at 1 p.m. ET on Friday, Nov. 13, 2020, and end at 1 p.m. ET on Friday, Nov. 20, 2020.

Note that media are welcome to join the call in listen-only mode.

About Cineplex Inc.

Cineplex is a top-tier Canadian brand that operates in the film entertainment and content, amusement and leisure, and media sectors. As a leading entertainment and media company, Cineplex welcomes millions of guests annually through its circuit of theatres and location-based entertainment (LBE) venues across the country. In addition to being Canada's largest and most innovative film exhibitor, Cineplex also operates successful businesses in digital commerce, food service, alternative programming (Cineplex Events), cinema media (Cineplex Media), digital place-based media (Cineplex Digital Media (CDM)) and amusement solutions (Player One Amusement Group (P1AG)). Additionally, Cineplex operates an LBE business through Canada's newest destinations for eats and entertainment (the Rec Room), and entertainment complexes specifically designed for teens and families (Playdium). Cineplex is a joint venture partner in Scene, Canada's largest entertainment loyalty program.

  
                           INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (expressed in thousands of dollars, except per share amounts)
   
                                                               Three months ended           Nine months ended
                                                                         Sept. 30,                   Sept. 30,
                                                               2020          2019          2020          2019

Box office                                                  $14,531      $177,865      $125,560      $523,732
Food service                                                 15,468       125,550        98,089       358,171
Media                                                        12,825        43,308        52,862       127,210
Amusement                                                    13,236        58,143        64,304       174,760
Other                                                         4,962        13,582        24,996        38,053
                                                             61,022       418,448       365,811     1,221,926
Expenses
Film cost                                                     7,261        93,735        63,771       275,461
Cost of food service                                          3,680        27,439        26,678        79,122
Depreciation -- right-of-use assets                          30,539        36,456       100,257       109,475
Depreciation and amortization -- other assets                30,375        31,712        96,096        95,748
(Gain)/loss on disposal of assets                           (14,113)          303       (12,818)          896
Other costs                                                  78,754       190,955       298,477       567,771
Share of income of joint ventures and associates              2,137          (560)        6,064        (2,572)
Interest expense -- lease obligations                        11,854        12,091        34,885        36,780
Interest expense -- other                                    15,503         6,244        42,108        17,453
Interest income                                                 (20)          (75)         (149)         (208)
Foreign exchange                                                166          (449)         (702)          569
Impairment of long-lived assets and goodwill                 65,634             -       238,688             -
                                                            231,770       397,851       893,355     1,180,495

(Loss) income from continuing operations before
income taxes                                               (170,748)       20,597      (527,544)       41,431
Provision for income taxes
Current                                                         146         7,932        (7,719)       16,345
Deferred                                                    (49,685)       (2,435)     (126,227)       (6,762)
                                                            (49,539)        5,497      (133,946)        9,583
Net (loss) income from continuing operations               (121,209)       15,100      (393,598)       31,848
Net loss from discontinued operations, net of taxes               -        (1,718)       (4,952)       (6,429)
Net (loss) income                                          (121,209)       13,382      (398,550)       25,419
Net (loss) income from continuing operations
attributable to
Owners of Cineplex                                         (121,209)       15,102      (393,593)       31,868
Non-controlling interests                                         -            (2)           (5)          (20)
Net (loss) income from continuing operations               (121,209)       15,100      (393,598)       31,848
Net (loss) income attributable to
Owners of Cineplex                                         (121,209)       13,384      (398,545)       25,439
Non-controlling interests                                         -            (2)           (5)          (20)
Net (loss) income                                          (121,209)       13,382      (398,550)       25,419
Net (loss) income per share attributable to owners
of Cineplex -- basic and diluted
Continuing operations                                         (1.91)         0.24         (6.21)         0.50
Discontinued operations                                           -         (0.03)        (0.08)        (0.10)
Total operations                                              (1.91)         0.21         (6.29)         0.40


We seek Safe Harbor.

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