Cineplex Galaxy Income Fund
TSX : CGX.UN

Cineplex Galaxy Income Fund

May 01, 2007 07:00 ET

Cineplex Galaxy Income Fund Reports First Quarter Results and Announces Distribution Increase

TORONTO, ONTARIO--(CCNMatthews - May 1, 2007) -

NOT FOR RELEASE OVER US NEWSWIRE SERVICES

Cineplex Galaxy Income Fund (TSX:CGX.UN) (the "Fund") today released the financial results of Cineplex Entertainment Limited Partnership (the "Partnership") for the first quarter of 2007.

First Quarter Results

- Total revenues for the quarter were $178.6 million compared to $162.7 million reported for 2006, an increase of 9.8%.

- Other revenue for the quarter was $13.4 million compared to $10.6 million reported for 2006, an increase of 26.1%.

- Adjusted EBITDA was $24.7 million for the quarter compared to $18.3 million reported for 2006, an increase of 34.9%.

- Adjusted EBITDA margin for the quarter was 13.8% compared to 11.2% for 2006.

- Distributable cash per unit for the quarter of $0.2794 compared to $0.1823 reported for 2006, an increase of 53.3%.

"We are pleased with our first quarter results and in particular the strength of our box office revenues which are up 9.6% compared to the prior year. Box office revenues exceeded our expectations due to a combination of films performing ahead of projections and the success of our Metropolitan Opera -- Live in High Definition series this quarter," said Ellis Jacob, President and CEO. "In addition, Cineplex Media generated a revenue increase of 23.7% this quarter versus the same period last year and we continue to focus on growing this business as we bring all of our media vehicles together."

Additionally, the Board of Trustees approved an increase in cash distributions per unit to an annual rate of $1.20 from the current annual rate of $1.1496. This change will be effective for the month of May 2007 to be paid on June 29, 2007 to unitholders of record on May 31, 2007. The monthly cash distribution rate will be $0.10 per unit, up from $0.0958 per unit.

First Quarter Results

Total revenues for the first quarter increased 9.8% to $178.6 million for the quarter from $162.7 million for the prior year. The Partnership's box office revenues increased 9.6% to $112.9 million from $103.0 million in the prior year. The Partnership exceeded the Canadian industry box office increase of 2-3% due in part to the success of its alternate programming strategies which included such presentations as the Met Opera and NHL hockey series.

The continued focus on other revenue sources led to the other revenue growth of 26.1% compared to the prior year principally on the strength of the Media business.

Adjusted EBITDA for the first quarter increased 34.9% to a first quarter record of $24.7 million and the Adjusted EBITDA margin of 13.8% increased from 11.2% reported for the prior year.

EBITDA is not an earnings measure recognized by generally accepted accounting principles and does not have a standardized meaning in accordance with such principles. Therefore, EBITDA may not be comparable to similar measures presented by other issuers. EBITDA is calculated by adding back to net income, income tax expense, amortization and interest expense net of interest income. Adjusted EBITDA is calculated by adjusting EBITDA for non-controlling interests, gains or losses on disposal of theatre assets and income from discontinued operations.

Distributable Cash

Distributable cash per unit for the seasonally weak first quarter was a first quarter record of $0.2794 as compared to $0.1823 reported in the prior year, an increase of 53.3% . The declared distributions per unit for this period were $0.2874. For the last twelve months, distributable cash per unit amounted to $1.5247 as compared to declared distributions of $1.1496.

This news release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in our annual information form and in this news release. Those risks and uncertainties include adverse factors generally encountered in the film exhibition industry such as poor film product and unauthorized copying; the risks associated with world events, including war, terrorism, international conflicts, natural disasters, extreme weather conditions and infectious diseases, changes in income tax legislation and general economic conditions. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. All forward-looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of the Fund or the Partnership, its financial or operating results or its securities.

About Cineplex Entertainment

Headquartered in Toronto, Canada, Cineplex Entertainment LP owns, leases or has a joint venture interest in 128 theatres with 1,290 screens serving approximately 60 million guests annually. Cineplex Entertainment LP is the largest motion picture exhibitor in Canada operating theatres with the following brands: Cineplex Odeon, Galaxy, Famous Players (including Coliseum, Colossus and SilverCity) and Scotiabank Theatre Toronto. The units of Cineplex Galaxy Income Fund, which owns approximately 75.7% (excluding conversion of Class C units) of Cineplex Entertainment LP, are traded on the Toronto Stock Exchange (symbol CGX.UN). For more information, visit us at www.cineplex.com.

Further information can be found in the disclosure documents filed by the Fund with the Canadian securities regulatory authorities, available at www.sedar.com.

You are cordially invited to participate in a teleconference call with the management of the Partnership (TSX:CGX.UN) to review our first quarter results. Ellis Jacob, Chief Executive Officer and Gord Nelson, Chief Financial Officer, will host the call. The teleconference call is scheduled for:



Tuesday, May 1, 2007
10:00 a.m. Eastern Time


In order to participate in the conference call, please dial (416) 644-3417 or outside of Toronto dial 1-800-732-0232 at least five to ten minutes prior to 10:00 a.m. Eastern Time on Tuesday, May 1, 2007.

- If you cannot participate in the live mode, a replay will be available. Please dial 416-640-1917 or 1-877-289-8525 and enter code 21226426#. The replay will begin at 12:00 p.m. ET on Tuesday, May 1, 2007 and end at 11:59 p.m. ET on Tuesday, May 8, 2007.

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

Thank you in advance for your interest and participation.



Cineplex Entertainment Limited Partnership
Consolidated Supplemental Information
(Unaudited)
-------------------------------------------------------------------
(expressed in thousands of Canadian dollars, except number of units
and per unit data)

Reconciliation to Adjusted EBITDA
---------------------------------

Three months ended March 31,
2007 2006
---------------------------------
---------------------------------

Net loss $ (3,775) $ (8,926)

Amortization 16,274 15,238
Interest on long-term debt 7,506 7,414
Interest on loan from
Cineplex Galaxy Trust 3,500 3,500
Interest income (252) (104)
Income tax (recovery) expense (465) 55
---------------------------------

EBITDA 22,788 17,177

Non-controlling interest - (37)
Loss from
discontinued operations - 958
Loss on disposal of theatre assets 1,867 184
--------------------------------

Adjusted EBITDA $ 24,655 $ 18,282
--------------------------------
--------------------------------



Cineplex Entertainment Limited Partnership
Consolidated Supplemental Information
(Unaudited)
-------------------------------------------------------------------
(expressed in thousands of Canadian dollars, except number of units
and per unit data)


Distributable Cash
------------------
For the three months ended
March 31,
-----------------------------
2007 2006

Cash used in operating activities $ (14,091) $ (24,119)
Less: Changes in operating assets and
liabilities (i) 28,591 32,458
Tenant inducements (ii) (617) (974)
Capital lease payments (357) (327)
Maintenance capital expenditures (iii) (1,495) (849)
Add: Interest on loan from Cineplex Galaxy
Trust (iv) 3,500 3,500
Non-cash components in operating assets and
liabilities (v) 421 320
Expenses funded through integration and
restructuring reserve (vi) 16 44
-----------------------------
Distributable cash $ 15,968 $ 10,053
-----------------------------
-----------------------------

Number of LP Units outstanding (vii) 57,150,421 55,150,421

Distributable cash per LP Unit (vii) $ 0.2794 $ 0.1823


(i) Changes in operating assets and liabilities are not considered a
source or use of distributable cash.

(ii) Tenant inducements received are for the purpose of funding new
theatre capital expenditures and are not considered a source of
distributable cash.

(iii) Maintenance capital expenditures are funded out of distributable
cash. Board approved projects are funded out of the Partnership's
development facility. Certain integration related capital
expenditures are funded out of reserve funds established on
November 26, 2003 and July 22, 2005. Maintenance capital
expenditures for the three months ended March 31, 2006 and 2007 are
not representative of the expected run-rate due to seasonality
fluctuations and timing of commitments.

(iv) Subject to "Catch-up Payment" provision and is considered part of
distributable cash.

(v) Reflects non-cash expenses including accretion on Class C LP Units,
amortization of deferred gain on a RioCan Real Estate Investment
Trust sale-leaseback transaction. 2006 also includes non-cash
amortization of swap on extinguished debt.

(vi) Amounts financed by the $25 million reserve set up upon completion
of the acquisition of Famous Players are not considered a use of
distributable cash.

(vii) Excluding Class C LP Units



Cineplex Entertainment Limited Partnership
Consolidated Balance Sheets

--------------------------------------------------------------------------
(expressed in thousands of Canadian dollars)
As at As at
March 31, December 31,
2007 2006
(Unaudited)

Assets

Current assets
Cash and cash equivalents $ 27,504 $ 56,383
Accounts receivable 19,908 35,500
Inventories 2,749 3,193
Prepaid expenses and other current assets 7,501 4,297
Income taxes recievable 15 34
Due from related parties 11 11
--------------------------

57,688 99,418

Property, equipment and leaseholds 438,387 447,932

Goodwill 196,911 200,910

Fair value of interest rate swap agreements 2,121 -

Intangible assets 56,567 57,946

Future income taxes 6,627 6,156

Deferred charges 1,185 7,329
--------------------------
$ 759,486 $ 819,691
--------------------------
---------------------------

Liabilities

Current liabilities
Accounts payable and accrued expenses $ 53,176 $ 90,596
Distributions payable 4,308 4,308
Due to related parties 4,548 3,143
Deferred revenue 38,325 50,184
Current portion of capital lease obligations 1,497 1,470
Bank indebtedness 5,000 -
--------------------------

106,854 149,701

Long-term debt 250,280 248,000

Capital lease obligations - long-term 36,042 36,426

Due to Cineplex Galaxy Trust 100,000 100,000

Accrued pension benefit liability 3,401 3,840

Other liabilities 144,439 146,791

Class C Limited Partnership Units - liability
component 100,317 100,037
--------------------------

741,333 784,795

Non-controlling interest 561 561

Partners' Equity 17,592 34,335
--------------------------
$ 759,486 $ 819,691
--------------------------
--------------------------



Cineplex Entertainment Limited Partnership
Consolidated Statements of Operations
(Unaudited)
--------------------------------------------------------------------------
(expressed in thousands of Canadian dollars)

For the three For the three
months months
ended ended
March 31, March 31,
2007 2006
Revenue
Box office $ 112,887 $ 103,014
Concessions 52,324 49,032
Other 13,385 10,616
---------------------------------
178,596 162,662
---------------------------------
Expenses
Film cost 56,877 51,307
Cost of concessions 10,423 9,696
Occupancy 36,632 37,025
Other theatre operating expenses 41,654 38,269
General and administrative 8,355 8,083
---------------------------------
153,941 144,380
---------------------------------

Income before undernoted 24,655 18,282
Amortization 16,274 15,238

Loss on disposal of theatre assets-net 1,867 184
Interest on long-term debt and capital
lease obligations 7,506 7,414
Interest on loan from Cineplex Galaxy
Trust 3,500 3,500
Interest income (252) (104)
---------------------------------
Loss before income taxes, non-controlling
interest and discontinued operations (4,240) (7,950)
---------------------------------
Provision for (recovery of) income taxes
Current 6 55
Future (471) -
--------------------------------
(465) 55
---------------------------------
Loss before non-controlling interest and
discontinued operations (3,775) (8,005)
Non-controlling interest - (37)
---------------------------------
Loss from continuing operations (3,775) (7,968)
Loss from discontinued operations - (958)
---------------------------------
Net loss for the period $ (3,775) $ (8,926)
---------------------------------
---------------------------------


Cineplex Entertainment Limited Partnership
Consolidated Statements of Partners' Equity and Comprehensive Loss
(Unaudited)
---------------------------------------------------------------------------
(expressed in thousands of Canadian dollars)

For the three months ended March 31, 2007

Accumulated
distributions in Accumulated
excess of Other
Accumulated Accumulated accumulated Comprehensive
earnings distributions earnings Income

Balance -
December
31, 2006 $ 59,761 $ (140,405) $ (80,644) -

Adoption of
new accounting
standards (1,894) - (1,894) 2,427
-----------------------------------------------------------
Balance -
January 1,
2007 57,867 (140,405) (82,538) 2,427
Distributions
declared - (12,925) (12,925) -
Investment in
Cineplex
Galaxy
Income Fund
units - - - -
LTIP
compensation
obligation - - - -
Net loss for
the period (3,775) - (3,775) -
Other
comprehensive
income -
interest rate
swaps - - - 370

Comprehensive loss
for the period
---------------------------------------------------------------------------
Balance -
March 31,
2007 $ 54,092 $ (153,330) $ (99,238) $ 2,797
---------------------------------------------------------------------------
---------------------------------------------------------------------------

For the three months ended March 31, 2007 (continued from table above)

Formation of Total
Partners' Partnership Partners' Comprehensive
capital deficit equity loss
Balance - December
31, 2006 $ 262,774 $ (147,795) $ 34,335 $ -

Adoption of new
accounting standards - - 533 -
----------------------------------------------------
Balance - January 1,
2007 262,774 (147,795) 34,868 -

Distributions declared - - (12,925) -
Investment in
Cineplex Galaxy
Income Fund units (1,677) - (1,677) -
LTIP compensation
obligation 731 - 731 -
Net loss for the
period - - (3,775) (3,775)
Other comprehensive
income - interest
rate swaps - - 370 370
------------

Comprehensive loss
for the period $ (3,405)
---------------------------------------------------
-------------
Balance - March 31,
2007 $ 261,828 $ (147,795) $ 17,592
---------------------------------------------------
---------------------------------------------------

The sum of accumulated distributions in excess of accumulated earnings and
accumulated other comprehensive income as at March 31, 2007 is $(96,441).



Accum-
ulated
distribu-
tions in
excess Formation
Accum- of of
Accum- ulated Accum- Partner- Total
ulated distri- ulated Partners' ship Partners
earnings butions earnings capital deficit equity

Balance -
January
1, 2006 $ 51,925 $ (89,664) $ (37,739) $ 232,975 $ (147,795) $ 47,441
Distrib-
utions
declared - (12,350) (12,350) - - (12,350)
Issuance
of
Partner-
ship
units
cost - - - (72) - (72)
Invest-
ment in
Cineplex
Galaxy
Income
Fund
units - - - 142 - 142

LTIP
compen-
sation
oblig-
ation - - - (116) - (116)
Net loss
for the
period (8,926) - (8,926) - - (8,926)
-----------------------------------------------------------------
Balance -
March
31, 2006 $ 42,999 $ (102,014) $ (59,015) $ 232,929 $ (147,795) $ 26,119
-----------------------------------------------------------------
-----------------------------------------------------------------



Cineplex Entertainment Limited Partnership
Consolidated Statements of Cash Flows
(Unaudited)
--------------------------------------------------------------------------
(expressed in thousands of Canadian dollars)

Three Three
months ended months ended
March March
31, 2007 31, 2006
Cash provided by (used in)
Operating activities
Net loss for the period $ (3,775) $ (8,926)
Adjustments to reconcile net income to net
cash used in operating activites
Amortization of property, equipment and
leaseholds, deferred charges and
intangible assets 16,274 15,238
Amortization of tenant inducements, rent
averaging liabilities and fair value
lease contract liabilites (447) (84)
Amortization of debt issuance costs 186 652
Loss on disposal of theatre assets 1,867 522
Future income taxes (471) -
Cash flow hedges - interest rate swaps,
ineffective portion 249 -
Non-controlling interest - (37)
Tenant inducements 617 974
Changes in operating assets and liabilities (28,591) (32,458)
---------------------------
(14,091) (24,119)
---------------------------
Investing activities
Proceeds from sale of theatre assets 2,475 70
Proceeds from sale of discontinued
operations - 502
Purchases of property, equipment and
leaseholds (4,928) (15,106)
Theatre shutdown payment (1,445) -
Acquisition of Famous branded magazines (406) (1,100)
Lease guarantee payment and acquisition of
theatre assets (4,500) -
---------------------------
(8,804) (15,634)
---------------------------
Financing activities
Borrowings under credit facility 21,000 30,600
Repayment of credit facility (11,000) (3,009)
Payments under capital leases (357) (327)
Distributions paid (12,925) (12,350)
Investment in Cineplex Galaxy Income Fund units (2,702) -
---------------------------
(5,984) 14,914
---------------------------

Decrease in cash and cash equivalents during
the period (28,879) (24,839)

Cash and cash equivalents - Beginning of period 56,383 45,795
---------------------------
---------------------------
Cash and cash equivalents - End of period $ 27,504 $ 20,956
---------------------------
---------------------------
Supplemental Information
Cash paid for interest $ 8,377 $ 8,676
Cash paid for income taxes - net 6 52


Contact Information

  • Cineplex Galaxy Income Fund
    Gord Nelson
    Chief Financial Officer
    (416) 323-6602
    or
    Cineplex Galaxy Income Fund
    Pat Marshall
    Vice President Communications and Investor Relations
    (416) 323-6648