Cineplex Inc.
TSX : CGX

Cineplex Inc.

February 10, 2011 06:15 ET

Cineplex Galaxy Income Fund Reports Record Annual Results

TORONTO, ONTARIO--(Marketwire - Feb. 10, 2011) -

NOT FOR RELEASE OVER US NEWSWIRE SERVICES

Cineplex Inc. ("Cineplex") (TSX:CGX) today released its financial results for the fourth quarter and full year of 2010 for the Cineplex Galaxy Income Fund (the "Fund").

Full Year Results
  2010   2009   Year over Year Change  
Total Revenues $ 1,010.8 million   $ 964.3 million   4.8 %
Attendance   69.4 million     70.0 million   -0.9 %
Other Revenue $ 113.7 million   $ 95.0 million   19.7 %
Net Income $ 63.0 million   $ 53.4 million   17.8 %
Adjusted EBITDA $ 169.3 million   $ 159.9 million   5.8 %
Adjusted EBITDA Margin   16.7 %   16.6 % 0.1 %
Distributable Cash Per Unit $ 2.217   $ 2.141   3.5 %
Year over Year change calculated based on thousands of dollars except percentage and per unit values.
 
Fourth Quarter Results
  Three months ended December 31, 2010   Three months ended December 31, 2009   Period over Period Change  
Total Revenues $ 240.8 million   $ 247.2 million   -2.6 %
Attendance   15.7 million     17.1 million   -7.9 %
Other Revenue $ 34.1 million   $ 30.7 million   11.0 %
Net Income $ 10.9 million   $ 9.5 million   14.8 %
Adjusted EBITDA $ 37.1 million   $ 38.1 million   -2.5 %
Adjusted EBITDA Margin   15.4 %   15.4 % 0.0 %
Distributable Cash Per Unit $ 0.458   $ 0.462   -0.9 %
Period over period change calculated based on thousands of dollars except percentage and per unit values.

"2010 was an extraordinary year for Cineplex. For the first time in our history, we exceeded the $1 billion mark in total revenues, up 4.8% versus 2009," said Ellis Jacob, President and CEO, Cineplex Inc. "Additionally, we continued to generate record results in several key performance metrics throughout the year. All three revenue areas delivered new highs – box office, up 3.4% to $601.1 million; concessions, up 2.7% to $296.0 million; and other revenues up 19.7%, to $113.7 million. These culminated in our best ever results for Adjusted EBITDA, up 5.8% to $169.3 million; net income up 17.8% to $63.0 million; and distributable cash per unit of $2.217, up 3.5%."

"Box office revenues exceeded the prior year by $20.0 million largely due to the tremendous performance of Avatar in the first quarter of the year and the overall success of many 3D films presented throughout 2010," said Jacob. "While attendance was marginally lower at 69.4 million versus 70.0 million in 2010, the premiums charged for 3D tickets offset this slight attendance decline. Our speed of service initiatives helped contribute to a new record annual CPP of $4.27, up from $4.12 in 2009. Other revenues increased $18.7 million to $113.7 million in 2010 and is the first time that other revenues have exceeded the $100 million mark. This increase was due primarily to increased advertiser spending in our Cineplex Media group in addition to the revenues generated by our acquisition of Digital Display and Communications Inc."

"Throughout 2010 we continued to install digital and 3D equipment enabling us to capitalize on the expanded number of 3D movies available. Today, more than 30% of our screens are equipped with digital projectors and 27% are 3D capable," said Jacob. "SCENE, our loyalty rewards program, continued to grow, reaching more than 2.7 million members at December 31st. We installed UltraAVX™, our enhanced audio visual experience, into 11 theatres across Canada with more planned for 2011. We also launched Cineplex mobile ticketing, mobile Apps, and our digital download service from the Cineplex Store which further expands our reach outside the theatre and into the home," said Jacob.

EBITDA and distributable cash are not measures recognized by generally accepted accounting principles ("GAAP") and do not have standardized meanings in accordance with such principles. Therefore, EBITDA and distributable cash 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, extraordinary gains and gains or losses on disposal of assets. Distributable cash is a non-GAAP measure generally used in Canadian open-ended trusts, 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. Management uses adjusted EBITDA and distributable cash to evaluate performance primarily because of the significant effect certain unusual or non-recurring charges and other items have on EBITDA from period to period. For a detailed reconciliation of net income to EBITDA and adjusted EBITDA and from cash used in operating activities to distributable cash, please refer to Cineplex's management's discussion and analysis filed on www.sedar.com.

Fourth Quarter and Full Year Results

The results of the Fund for the three and twelve months ended December 31, 2010 as compared to the three and twelve months ended December 31, 2009 are presented below.

Total revenues

Total revenues for the three months ended December 31, 2010 decreased $6.4 million (2.6%) to $240.8 million as compared to the prior year period. Total revenues for 2010 increased $46.4 million (4.8%) to $1.0 billion as compared to the prior year, representing the first year that the Fund's revenue has exceeded one billion dollars. A discussion of the factors affecting the changes in box office, concession and other revenues for the periods is provided on the following pages.

Box office revenues

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

Box office revenues Fourth Quarter   Full Year  
  2010   2009   Change   2010   2009   Change  
                                 
Box office revenues $ 138,351   $ 143,570   -3.6 % $ 601,097   $ 581,114   3.4 %
Attendance   15,743     17,096   -7.9 %   69,361     69,997   -0.9 %
Box office revenue per patron $ 8.79   $ 8.40   4.6 % $ 8.67   $ 8.30   4.5 %
Canadian industry revenues (1)             -6.2 %             1.8 %
Same store box office revenues $ 133,372   $ 141,873   -6.0 % $ 585,580   $ 575,784   1.7 %
Same store attendance   15,202     16,885   -10.0 %   67,610     69,295   -2.4 %
% Total box from IMAX & 3D   28.0 %   19.8 % 41.4 %   28.3 %   14.4 % 96.5 %
(1) The Motion Picture Theatre Associations of Canada ("MPTAC") reported that the Canadian exhibition industry reported a box office decrease of 8.0% for the period from October 1, 2010 to December 30, 2010 as compared to the period from October 2, 2009 to December 31, 2009. On a basis consistent with the Fund's calendar reporting period (October 1 to December 31), the Canadian industry box office decrease is estimated to be 6.2%. The MPTAC reported a box office increase of 1.8% for the period from January 1, 2010 to December 30, 2010 as compared to the period from January 2, 2009 to December 31, 2009. On a basis consistent with the Fund's calendar reporting period (January 1 to December 31), the Canadian industry box office increase is also estimated to be 1.8%.
 
Box office continuity Fourth Quarter   Full Year  
In thousands Box Office   Attendance   Box Office   Attendance  
2009 as reported $ 143,570   17,096   $ 581,114   69,997  
Same store attendance change   (14,142 ) (1,683 )   (14,005 ) (1,685 )
Impact of same store BPP change   5,642   -     23,801   -  
New and acquired theatres   3,554   370     12,020   1,324  
Disposed and closed theatres   (273 ) (40 )   (1,833 ) (275 )
2010 as reported $ 138,351   15,743   $ 601,097   69,361  

Fourth quarter

Q4 2010 Top Cineplex Films % Total Box   Q4 2009 Top Cineplex Films % Total Box
1 Harry Potter and the Deathly Hallows (i) 12.1%   1 Avatar (i)(ii) 11.8%
2 Tangled (ii) 5.9%   2 The Twilight Saga: New Moon 10.7%
3 Jackass 3D (ii) 5.6%   3 2012 6.7%
4 Megamind (i)(ii) 5.4%   4 Disney's A Christmas Carol (i)(ii) 5.6%
5 The Social Network 5.0%   5 Couples Retreat 4.4%
(i) = Film screened in IMAX.
(ii) = Film screened in 3D.

Box office revenues decreased $5.2 million, or 3.6%, to $138.4 million during the fourth quarter of 2010, compared to $143.6 million recorded in the same period in 2009. This decrease was due to the lower attendance, partially offset by the higher BPP period over period (7.9% decrease and 4.6% increase, respectively). The decrease in box office revenue during the fourth quarter of 2010 as compared to the prior year period was primarily due to the films released during the holiday period in 2010 being unable to match the record-breaking performance of Avatar from December 2009.

BPP increased $0.39, from $8.40 in the fourth quarter of 2009 to $8.79 in the same period in 2010. Three of the top five films during the quarter were screened in 3D, and two of the top five were screened in IMAX (2009 - two of the top five in IMAX and 3D). The percentage of box office revenues earned from the 3D and IMAX titles represented 28.0% of the Fund's total box office results for the quarter, up from 19.8% from the same period in the prior year. These premium priced offerings as well as select ticket price increases introduced at the end of March 2010 contributed to the increase in the BPP amount.

The Fund's continued investment in digital and 3D technology in 2010 allowed it to capitalize on the success of the 3D releases, contributing to the Fund outperforming the Canadian film exhibition industry during the fourth quarter of 2010.

Full Year

2010 Top Cineplex Films % Total Box   2009 Top Cineplex Films % Total Box
1 Avatar (i)(ii) 7.0%   1 Transformers: Revenge of the Fallen (i) 3.7%
2 Alice in Wonderland (i)(ii) 3.9%   2 Harry Potter and the Half-Blood Prince (i) 3.2%
3 Inception (i) 3.6%   3 Avatar (i)(ii) 2.9%
4 Toy Story 3 (i)(ii) 3.1%   4 UP (ii) 2.8%
5 Harry Potter and the Deathly Hallows (i) 2.8%   5 The Twilight Saga: New Moon 2.6%
(i) = Film screened in IMAX.
(ii) = Film screened in 3D.

Box office revenues for 2010 exceeded the prior year by $20.0 million, or 3.4%. The $601.1 million in total box office revenue represents an annual record for the Fund. The record-breaking performance of Avatar during the first quarter of the year contributed to this increase, as did the overall success of 3D product during the year. The Fund's investment in digital and 3D technology in 2009 and 2010 has allowed it to capitalize on the success of the 3D releases, contributing to the Fund outperforming the Canadian film exhibition industry during the year.

BPP for 2010 increased $0.37, or 4.5%, from $8.30 in 2009 to an annual record of $8.67 in 2010. The percentage of box office revenues earned from 3D and IMAX titles represented 28.3% of the Fund's total box office results during the period, up from 14.4% from the prior year period. These premium priced offerings, as well as select ticket price increases introduced at the end of March 2010, contributed to the higher BPP. This increased BPP amount was partially offset by the impact of the Fund's reduced price Tuesday program, which features a reduced price movie and concession offering. The program was launched during September 2009 and is therefore not fully reflected in the prior year's comparatives. The Fund believes the program drives incremental attendance on Tuesdays.

Concession revenues

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

Concession revenues Fourth Quarter   Full Year  
  2010 2009 Change   2010 2009 Change  
                 
Concession revenues $ 68,382 $ 72,909 -6.2 % $ 295,961 $ 288,255 2.7 %
Attendance   15,743 $ 17,096 -7.9 %   69,361   69,997 -0.9 %
Concession revenue per patron $ 4.34   4.26 1.9 % $ 4.27 $ 4.12 3.6 %
Same store concession revenues $ 65,849 $ 71,946 -8.5 % $ 288,058 $ 285,208 1.0 %
Same store attendance   15,202   16,885 -10.0 %   67,610   69,295 -2.4 %
                         
Concession revenue continuity Fourth Quarter   Full Year  
In thousands Concession   Attendance   Concession   Attendance  
2009 as reported $ 72,909   17,096   $ 288,255   69,997  
Same store attendance change   (7,172 ) (1,683 )   (6,937 ) (1,685 )
Impact of same store CPP change   1,075   -     9,786   -  
New and acquired theatres   1,728   370     5,805   1,324  
Disposed and closed theatres   (158 ) (40 )   (948 ) (275 )
2010 as reported $ 68,382   15,743   $ 295,961   69,361  

Fourth Quarter

Concession revenues decreased 6.2% as compared to the prior year quarter, due to the 7.9% decrease in attendance, partially offset by the 1.9% increase in CPP. CPP increased from $4.26 in the fourth quarter of 2009 to $4.34 in the fourth quarter of 2010.

Full Year

Concession revenues increased 2.7% as compared to the prior year period, due to the 3.6% increase in CPP, partially offset by the 0.9% decrease in attendance. CPP increased from $4.12 in 2009 to $4.27 in 2010, representing the highest annual CPP the Fund has recorded in its history.

Cineplex believes that revised concession offerings, as well as process improvements designed to increase speed of service contributed to the period-over-period CPP increases, as well as nominal concession price increases introduced in May 2010. While the 10% SCENE discount and the reduced price concession offering included in the Tuesday program introduced in September 2009 both had a negative impact on CPP, Cineplex believes that these programs drive incremental visits and concession purchases, resulting in higher overall concession revenues.

Other revenues

The following table highlights the movement in media, games and other revenues for the quarter and the year (in thousands of dollars):

Other revenues Fourth Quarter   Full Year  
  2010 2009 Change   2010 2009 Change  
                         
Media $ 25,159 $ 23,081 9.0 % $ 82,264 $ 66,773 23.2 %
Games   1,218   1,193 2.1 %   4,862   4,832 0.6 %
Other   7,684   6,417 19.7 %   26,598   23,374 13.8 %
Total $ 34,061 $ 30,691 11.0 % $ 113,724 $ 94,979 19.7 %

Fourth Quarter

Other revenues increased 11.0% from $30.7 million in the fourth quarter of 2009 to $34.1 million in the fourth quarter of 2010. Media revenues for the fourth quarter of 2010 were $25.2 million, up $2.1 million, or 9.0%, from the prior year period. The increase is primarily due to higher CDM revenue, which increased $1.9 million period over period, and increased full-motion and digital pre-show advertising sales, up $1.8 million period over period. These increases were offset by a $1.4 million decrease in non-cash barter revenue in the 2010 period compared to 2009. CDM results in the fourth quarter of 2010 includes the operations of DDC, which was acquired in July 2010 and therefore not included in the prior year comparative. The increase in Other is primarily due to higher breakage revenues associated with increased sales of gift cards and coupons. The Games revenue increase is due in part to the addition of the Fund's second XSCAPE entertainment centre at the SilverCity CrossIron Mills Cinemas in Calgary, Alberta, which opened on June 30, 2010.

Full Year

Other revenues increased 19.7% from $95.0 million in 2009 to $113.7 million in 2010. This represents the first time the Fund's annual other revenues have exceeded $100 million. Media revenues for 2010 were $82.3 million, up $15.5 million, or 23.2%, from the prior year. This increase was primarily due to increased spending by the automotive and telecommunications sectors during 2010 compared to the prior year, as advertisers returned to the screens starting in the fourth quarter of 2009 after the reduction in full motion and digital pre-show advertising during the first three quarters of 2009 due to the challenging economic environment. CDM revenues increased $4.4 million during the year, which contributed 28.7% of the media increase. The acquisition of DDC in July 2010 contributed to this increase. The increase in the other category is primarily due to higher breakage revenues associated with increased sales of gift cards and coupons.

Film cost

The following table highlights the movement in film cost and film cost as a percentage of box office revenue ("film cost percentage") for the quarter and the year (in thousands of dollars, except film cost percentage):

Film cost Fourth Quarter   Full Year  
  2010   2009   Change   2010   2009   Change  
                         
Film cost $ 71,388   $ 75,759   -5.8 % $ 318,495   $ 305,095   4.4 %
Film cost percentage   51.6 %   52.8 % -2.3 %   53.0 %   52.5 % 1.0 %

Fourth Quarter

Film cost varies primarily with box office revenue, and can vary from quarter to quarter based on the relative strength of the titles exhibited during the period. The decrease in 2010 compared to the prior year period was due to the decrease in attendance and the impact of the 2.3% decrease in film cost.

Full Year

The increase in film cost in 2010 compared to 2009 was due to the 3.4% increase in box office revenues and the 1.0% increase in film cost percentage during the year. The increase in film cost percentage as compared to the prior year period is primarily due to the settlement rate on certain strong performing titles during the first and second quarters of 2010 being higher than the average film settlement rate.

Cost of concessions

The following table highlights the movement in concession cost and concession cost as a percentage of concession revenues ("concession cost percentage") for the quarter and the year (in thousands of dollars, except concession cost percentage and concession margin per patron):

Cost of concessions Fourth Quarter   Full Year  
  2010   2009   Change   2010   2009   Change  
                                 
Concession cost $ 14,121   $ 14,654   -3.6 % $ 62,504   $ 59,267   5.5 %
Concession cost percentage   20.7 %   20.1 % 3.0 %   21.1 %   20.6 % 2.4 %
Concession margin per patron $ 3.45   $ 3.41   1.2 % $ 3.37   $ 3.27   3.1 %

Fourth Quarter

Cost of concessions varies primarily with theatre attendance as well as the quantity and mix of concession offerings sold. The decrease in concession cost as compared to the prior year period was due to the 6.2% decrease in concession revenues, partially offset by the 3.0% increase in concession cost percentage. The concession margin per patron increased from $3.41 in the fourth quarter of 2009 to $3.45 in the same period in 2010, reflecting the impact of the higher CPP during the period.

Full Year

The increase in concession cost period over period was due to the 2.7% increase in concession revenues and the 2.4% increase in the concession cost percentage. Concession margin per patron increased 3.1%, from $3.27 in 2009 to $3.37 in 2010, representing an annual record for the Fund.

The increase in the concession cost percentage in each period was primarily due to the continued growth of the SCENE loyalty program and the associated 10% discount on concession products. The concession cost percentage was also negatively impacted by the reduced price Tuesday program, which is included in the 2010 results but not in the January to August 2009 results as the program was launched in September 2009.

Occupancy expenses

The following table highlights the movement in occupancy expenses for the quarter and the year (in thousands of dollars):

Occupancy expense Fourth Quarter   Full Year  
  2010   2009   Change   2010   2009   Change  
                                 
Rent $ 27,350   $ 26,465   3.3 % $ 109,494   $ 106,143   3.2 %
Other occupancy   12,834     12,281   4.5 %   53,813     52,331   2.8 %
Non-recurring lease guarantee payment   -     1,463   NM     -     1,463   NM  
Non-recurring legal contingency   -     720   NM     -     1,407   -100.0 %
One-time items   (482 ) $ (174 ) 177.0 %   (1,819 ) $ (2,417 ) -24.7 %
Total $ 39,702   $ 40,755   -2.6 % $ 161,488   $ 158,927   1.6 %
         
Occupancy continuity Fourth Quarter   Full Year  
In thousands Occupancy   Occupancy  
2009 as reported $ 40,755   $ 158,927  
Impact of new theatres   1,140     4,587  
Impact of disposed theatres   (85 )   (555 )
Same store rent change   34     709  
Non-recurring items   (2,491 )   (2,272 )
Other   349     92  
2010 as reported $ 39,702   $ 161,488  

Fourth Quarter

Occupancy expense decreased $1.1 million during the fourth quarter of 2010 compared to the prior year period. During the fourth quarter of 2009, the Fund recorded a non-recurring net occupancy expense of $1.5 million relating to lease guarantees triggered by landlords for theatres sold by the Partnership in 2006. Also during the fourth quarter of 2009, the Fund increased its reserve for certain liabilities incurred by Famous Players prior to the Partnership's acquisition of Famous Players in 2005 by $0.7 million. The $1.1 million decrease from the fourth quarter of 2009 to the fourth quarter of 2010 was due to these $2.2 million non-recurring charges, partially offset by $1.1 million due to the impact of new theatres.

Full Year

Occupancy expense increased $2.6 million during 2010 compared to the prior year. The increase is primarily due to the net impact of new and disposed theatres ($4.0 million) and higher same-store rent expenses ($0.7 million), partially offset by the $2.3 million impact of non-recurring items, which include the 2009 non-recurring expenses described above ($1.5 million relating to the lease guarantees and $1.4 million relating to the pre-acquisition liabilities) net of other non-recurring lease-related amounts.

Other operating expenses

The following table highlights the movement in other operating expenses during the quarter and the year (in thousands of dollars):

Other operating expenses Fourth Quarter   Full Year  
  2010 2009 Change   2010 2009 Change  
                 
Other operating expenses $ 62,555 $ 62,812 -0.4 % $ 239,938 $ 228,129 5.2 %
         
Other operating continuity Fourth Quarter   Full Year  
In thousands Other Operating   Other Operating  
2009 as reported $ 62,812   $ 228,129  
Impact of new theatres   1,453     4,624  
Impact of disposed theatres   (236 )   (1,179 )
Same store payroll change   291     2,228  
Marketing change   (933 )   (635 )
New business initiatives   1,466     4,004  
Other   (2,298 )   2,767  
2010 as reported $ 62,555   $ 239,938  

Fourth Quarter

Other operating expenses decreased $0.3 million during the fourth quarter of 2010 compared to the prior year period primarily as a result of lower business volumes in 2010. Total theatre payroll accounted for 43.9% of the total expenses in other operating expenses during the fourth quarter of 2010, as compared to 42.1% for the same period one year earlier. Payroll expenses were marginally higher in the fourth quarter of 2010 compared to the prior year period due to minimum wage increases.

The $2.3 million decrease in Other is primarily due to lower theatre operating costs due to the lower business volumes during the fourth quarter of 2010 compared to the prior year period

Full Year

Other operating expenses increased $11.8 million during 2010 compared to the prior year. This increase was primarily due to higher spending on new business initiatives ($4.0 million, includes spending on CDM, the www.cineplex.com website and the Cineplex Store), the net impact of new and disposed theatres ($3.4 million) and higher same-store payroll costs ($2.2 million). Total theatre payroll accounted for 45.1% of the total expenses in other operating expenses during 2010, as compared to 45.6% for the prior year.

The $2.8 million increase in Other includes technology enhancements and expanded service offerings including the cost of online ticketing and 3D technology licensing payments ($1.4 million) and increased costs relating to the higher business volumes during the year ($1.4 million).

General and administrative expenses

The following table highlights the movement in general and administrative ("G&A") expenses during the quarter and the year, including the LTIP and Option Plan costs, and G&A net of these costs (in thousands of dollars):

G&A expenses Fourth Quarter   Full Year  
  2010 2009 Change   2010 2009 Change  
                         
G&A excluding LTIP, Option Plan expense and pension settlement $ 10,457 $ 9,816 6.5 % $ 39,975 $ 37,364 7.0 %
LTIP   2,161   1,991 8.5 %   9,986   9,059 10.2 %
Option plan   3,279   3,282 -0.1 %   9,119   4,220 116.1 %
Pension plan settlement   -   - NM     -   2,360 -100.0 %
G&A expenses as reported $ 15,897 $ 15,089 5.4 % $ 59,080 $ 53,003 11.5 %

Fourth Quarter

General and administrative costs increased $0.8 million during the fourth quarter of 2010 compared to the same period in the prior year. This increase was primarily due to a $1.0 million increase in professional fees relating to the Fund's conversion to international financial reporting standards ("IFRS") and the Fund's conversion to a corporation, both of which were effective January 1, 2011.

Full Year

General and administrative costs increased $6.1 million primarily as a result of increased costs under the Option Plan ($4.9 million) and the Fund's LTIP program ($0.9 million). The Fund's closing unit price at December 31, 2010 was $22.41, as compared to $18.33 at December 31, 2009. The increased unit price resulted in the increased Option Plan expense during the period. Higher head office payroll costs ($1.0 million) also contributed to the increased G&A costs. These increases were offset by the one-time settlement loss of $2.4 million relating to the retirement plan for salaried employees of Famous Players that was recorded in the third quarter of 2009.

Earnings before interest, taxes, depreciation and amortization ("EBITDA")

The following table represents the Fund's EBITDA and adjusted EBITDA for the fourth quarter and full year for 2010 as compared to the prior year periods (expressed in thousands of dollars, except adjusted EBITDA margin):

EBITDA Fourth Quarter   Full Year  
  2010   2009   Change   2010   2009   Change  
                                 
EBITDA $ 36,604   $ 35,320   3.6 % $ 168,830   $ 158,000   6.9 %
Adjusted EBITDA $ 37,131   $ 38,101   -2.5 % $ 169,277   $ 159,927   5.8 %
Adjusted EBITDA margin   15.4 %   15.4 % 0.0 %   16.7 %   16.6 % 0.1 %

Adjusted EBITDA for the fourth quarter of 2010 decreased $1.0 million, or 2.5%, as compared to the fourth quarter of 2009. The decrease is primarily due to the lower attendance during the quarter resulting in lower box office and concession revenues, partially offset by media revenue growth as a result of the improved economic climate as well as the growing contribution of CDM. Adjusted EBITDA margin, calculated as adjusted EBITDA divided by total revenues, was 15.4% for both periods.

Adjusted EBITDA for 2010 increased $9.4 million, or 5.8%, as compared to the prior year. Adjusted EBITDA margin was 16.7%, up from 16.6% in the prior year. The increase is primarily due to the higher revenues, specifically the higher media revenues as a result of increased advertising spending due to the improved economic climate 2010 compared to 2009.

Distributable Cash

For 2010, distributable cash per unit was $2.217 as compared to $2.141 in 2009. The declared distributions per unit were $1.260 in both years. The payout ratios for these periods were 57% and 59%, respectively. For the three months ended December 31, 2010, distributable cash per Fund unit was $0.458 as compared to $0.462 for the three months ended December 31, 2009. The declared distributions per Fund unit were $0.315 for both the three months ended December 31, 2009 and 2008. The payout ratios were approximately 69% and 68% for each of these periods.

Presentation

Prior to 2009, Cineplex presented and discussed the results of Cineplex Entertainment Limited Partnership (the "Partnership") as the Fund equity accounted for its investment in the Partnership prior to Q2 2007 and, as such, the consolidated financial statements of the Fund did not provide comparative results on a line-by-line basis. As a result of the Fund's step acquisitions in the Partnership, there are differences in the valuation bases of certain assets and liabilities between the Fund and the Partnership. These valuation differences give rise to differences in certain non-cash expenses (primarily included in the occupancy category) which result in differences in reported results between the Fund and the Partnership. In its filed Management's Discussion and Analysis, the Fund provides a reconciliation of the Fund's reported results to the Partnership's reported results. For 2010, the Fund reported Adjusted EBITDA of $169.3 million, and the Partnership reported Adjusted EBITDA of $173.4 million (Q4 – Fund reported Adjusted EBITDA of $37.1 million and the Partnership reported Adjusted EBITDA of $38.1 million).

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 national and world events, including war, terrorism, international conflicts, natural disasters, extreme weather conditions, 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 Cineplex Inc., Cineplex Galaxy Income Fund or Cineplex Entertainment Limited Partnership, their financial or operating results or their securities.

About Cineplex Inc.

Cineplex is the largest motion picture exhibitor in Canada and owns, leases or has a joint-venture interest in 131 theatres with 1,362 screens serving approximately 70 million guests annually. Headquartered in Toronto, Canada, Cineplex operates theatres from British Columbia to Quebec and is the exclusive provider of UltraAVX and the largest exhibitor of digital, 3D and IMAX projection technologies in the country. Proudly Canadian and with a workforce of approximately 10,000 employees, the company operates the following top tier brands: Cineplex Odeon, Galaxy, Famous Players, Colossus, Coliseum, SilverCity, Cinema City and Scotiabank Theatres. Cineplex shares are traded on the Toronto Stock Exchange ("TSX") under the symbol "CGX". The Debentures are listed on the TSX under the symbol CGX.DB. For more information, visit www.cineplex.com.

Further information can be found in the disclosure documents filed by the Fund with the 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 quarterly results. Ellis Jacob, President and Chief Executive Officer and Gord Nelson, Chief Financial Officer, will host the call. The teleconference call is scheduled for:

Thursday, February 10, 2011
10:00 a.m. Eastern Time

In order to participate in the conference call, please dial 416-644-3414 or outside of Toronto dial 1-800-814-4859 at least five to ten minutes prior to 10:00 a.m. Eastern Time. Please quote the conference ID 4399110 to access the call.

  • 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 4399110#. The replay will begin at 12:00 p.m. Eastern Time on Thursday, February 10, 2011 and end at 11:59 p.m. Eastern Time on Thursday, February 17, 2011.
  • Note that media will be participating in the call in listen – only mode.
  • Thank you in advance for your interest and participation.
Cineplex Galaxy Income Fund
Consolidated Supplemental Information
(Unaudited)
(expressed in thousands of Canadian dollars)
 
Reconciliation to Adjusted EBITDA
         
  Three months ended December 31,   Year ended December 31,  
  2010   2009   2010   2009  
   
Net income $ 10,852   $ 9,450   $ 62,956   $ 53,446  
   
Amortization   19,341     20,067     81,996     80,403  
Interest and accretion expense on convertible debentures   1,825     1,851     7,429     7,447  
Interest on long-term debt and capital lease obligations   3,906     3,798     15,340     15,929  
Interest income   (195 )   (69 )   (534 )   (330 )
Provision for income taxes   875     223     1,643     1,105  
   
EBITDA   36,604     35,320     168,830     158,000  
   
Non-controlling interests   25     23     179     420  
Extraordinary gain   -     -     -     (1,059 )
Loss on disposal of assets   502     2,758     268     2,566  
   
Adjusted EBITDA $ 37,131   $ 38,101   $ 169,277   $ 159,927  
 
 
Cineplex Galaxy Income Fund
Consolidated Supplemental Information
(Unaudited)
(expressed in thousands of Canadian dollars, except number of units and per unit data)
 
Distributable Cash
   
  Three months ended December 31,   Year ended December 31,  
  2010   2009   2010   2009  
   
Cash provided by operating activities $ 60,411   $ 88,706   $ 147,303   $ 178,863  
Less: Total capital expenditures   (18,823 )   (10,353 )   (57,112 )   (44,025 )
   
Standardized distributable cash   41,588     78,353     90,191     134,838  
   
Less:                        
Changes in operating assets and liabilities (i)   (29,076 )   (53,602 )   236     (31,568 )
Tenant inducements (ii)   (262 )   (2,938 )   (2,489 )   (9,990 )
Principal component of capital lease obligations   (520 )   (437 )   (2,004 )   (1,700 )
   
Add:                        
New build capital expenditures and other (iii)   14,745     5,220     41,881     31,496  
Non-cash components in operating assets and liabilities (iv)   (235 )   (180 )   (939 )   (699 )
   
Distributable cash $ 26,240   $ 26,416   $ 126,876   $ 122,377  
   
Less: Non-controlling interests share of distributable cash   (79 )   (115 )   (457 )   (1,799 )
   
Distributable cash available to Fund unitholders $ 26,161   $ 26,301   $ 126,419   $ 120,578  
   
Average number of Fund units outstanding   57,182,396     56,901,057     57,030,442     56,310,507  
   
Distributable cash per Fund unit $ 0.458   $ 0.462   $ 2.217   $ 2.141  
   
(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) New build capital expenditures and other represent expenditures on Board approved projects as well as any expenditures for digital equipment anticipated to be incorporated into a third-party digital integrator financing structure, and exclude maintenance capital expenditures. The Partnership's revolving credit facility is available to the Fund for use to fund Board approved projects.
(iv) Certain non-cash components of other assets and liabilities are indirectly excluded from distributable cash to the extent they reflect permanent, not timing differences. Such items include the amortization of deferred gains on sale-leaseback transactions and non-cash pension adjustments relating to the Fund's acquisition of the Partnership.
   
   
Cineplex Galaxy Income Fund
Consolidated Balance Sheets
 
(expressed in thousands of Canadian dollars)
     
  December 31, 2010 December 31, 2009
 
Assets        
 
Current assets        
Cash and cash equivalents $ 87,111 $ 95,791
Accounts receivable   59,111   54,892
Inventories   3,778   4,260
Prepaid expenses and other current assets   3,854   4,310
 
    153,854   159,253
 
Property, equipment and leaseholds   415,951   428,253
 
Future income taxes   19,435   20,221
 
Deferred charges   688   820
 
Intangible assets   92,705   103,674
 
Goodwill   609,035   600,564
 
 
  $ 1,291,668 $ 1,312,785
     
Liabilities        
 
Current liabilities        
Accounts payable and accrued expenses $ 101,454 $ 109,900
Distributions payable   -   6,001
Income taxes payable   50   34
Deferred revenue   95,571   85,501
Capital lease obligations - current portion   2,242   2,004
Fair value of interest rate swap agreements   5,482   6,881
         
    204,799   210,321
 
Long-term debt   233,875   233,459
 
Fair value of interest rate swap agreements   3,298   5,382
 
Capital lease obligations – long-term portion   28,885   31,127
 
Accrued pension benefit liability   2,452   2,012
 
Other liabilities   107,350   114,941
 
Convertible debentures - liability component   96,953   100,982
         
         
    677,612   698,224
 
Non-controlling interests   1,790   2,669
 
Unitholders' equity   612,266   611,892
 
  $ 1,291,668 $ 1,312,785
Cineplex Galaxy Income Fund
Consolidated Statements of Operations
 
(expressed in thousands of Canadian dollars)
   
  Three months   Three months   Year   Year  
  ended   ended   ended   ended  
  December 31,   December 31,   December 31,   December 31,  
  2010   2009   2010   2009  
Revenues                        
Box office $ 138,351   $ 143,570   $ 601,097   $ 581,114  
Concessions   68,382     72,909     295,961     288,255  
Other   34,061     30,691     113,724     94,979  
    240,794     247,170     1,010,782     964,348  
Expenses                        
Film cost   71,388     75,759     318,495     305,095  
Cost of concessions   14,121     14,654     62,504     59,267  
Occupancy   39,702     40,755     161,488     158,927  
Other operating   62,555     62,812     239,938     228,129  
General and administrative   15,897     15,089     59,080     53,003  
    203,663     209,069     841,505     804,421  
   
Income before undernoted   37,131     38,101     169,277     159,927  
   
Amortization   19,341     20,067     81,996     80,403  
Loss on disposal of assets   502     2,758     268     2,566  
Interest and accretion expense on convertible debentures   1,825     1,851     7,429     7,447  
Interest on long-term debt and capital lease obligations   3,906     3,798     15,340     15,929  
Interest income   (195 )   (69 )   (534 )   (330 )
   
Income before income taxes, extraordinary gain and non-controlling interests   11,752     9,696     64,778     53,912  
   
Provision for income taxes                        
Current   27     -     32     7  
Future   848     223     1,611     1,098  
    875     223     1,643     1,105  
   
Income before extraordinary gain and non-controlling interests   10,877     9,473     63,135     52,807  
Extraordinary gain   -     -     -     1,059  
   
Income before non-controlling interests   10,877     9,473     63,135     53,866  
Non-controlling interests   25     23     179     420  
   
Net income $ 10,852   $ 9,450   $ 62,956   $ 53,446  
 
Cineplex Galaxy Income Fund
Consolidated Statements of Unitholders' Equity and Comprehensive Income
 
(expressed in thousands of Canadian dollars)
 
For the year ended December 31, 2010 
        Accumulated                
        distributions   Accumulated            
        in excess of   other       Total    
  Accumulated Accumulated   accumulated   comprehensive   Unitholders'   unitholders'   Comprehensive
  income distributions   income   loss   capital   equity   income
                         
Balance - December 31, 2009 $ 155,981 $ (262,094 ) $ (106,113 ) $ (4,852 ) $ 722,857   $ 611,892   $ -
Issuance of Fund units under Exchange Agreement   -   -     -     -     833     833     -
LTIP compensation obligation   -   -     -     -     935     935     -
                                       
Issuance of Fund units on conversion of debentures   -   -     -     -     5,253     5,253     -
LTIP Fund units   -   -     -     -     (1,063 )   (1,063 )   -
Distributions declared   -   (71,878 )   (71,878 )   -     -     (71,878 )   -
Net income   62,956   -     62,956     -     -     62,956     62,956
                                       
Other comprehensive income - interest rate swap agreements, including $944 of future income tax recovery   -   -     -     3,338     -     3,338     3,338
Comprehensive income for the year   -   -     -     -     -     -   $ 66,294
Balance – December 31, 2010 $ 218,937 $ (333,972 ) $ (115,035 ) $ (1,514 ) $ 728,815   $ 612,266      

The sum of the accumulated distributions in excess of accumulated income and accumulated other comprehensive loss as at December 31, 2010 is $116,549.

For the year ended December 31, 2009
                     
        Accumulated                
        distributions   Accumulated            
        in excess of   other       Total    
  Accumulated Accumulated   accumulated   comprehensive   Unitholders'   unitholders'   Comprehensive
  income distributions   income   loss   capital   equity   income
                         
                         
Balance - December 31, 2008 $ 102,535 $ (190,881 ) $ (88,346 ) $ (13,683 ) $ 571,401   $ 469,372   $ -
Issuance of Fund units under exchange agreement   -   -     -     -     150,935     150,935     -
LTIP compensation obligation   -   -     -     -     3,433     3,433     -
LTIP Fund units   -   -     -     -     (2,912 )   (2,912 )   -
Distributions declared   -   (71,213 )   (71,213 )   -     -     (71,213 )   -
Net income   53,446   -     53,446     -     -     53,446     53,446
Other comprehensive income - interest rate swap agreements, net of $952 future income tax provision   -   -     -     8,831     -     8,831     8,831
                                       
Comprehensive income for the year   -   -     -     -     -     -   $ 62,277
                                       
                                       
Balance – December 31, 2009 $ 155,981 $ (262,094 ) $ (106,113 ) $ (4,852 ) $ 722,857   $ 611,892      

The sum of the accumulated distributions in excess of accumulated income and accumulated other comprehensive loss as at December 31, 2009 is $110,965.

Cineplex Galaxy Income Fund
Consolidated Statements of Cash Flows
 
(expressed in thousands of Canadian dollars)
                 
  Three months   Three months   Year   Year  
  ended   ended   ended   ended  
  December 31,   December 31,   December 31,   December 31,  
  2010   2009   2010   2009  
   
Cash provided by (used in)                        
Operating activities                        
Net income $ 10,852   $ 9,450   $ 62,956   $ 53,446  
Adjustments to reconcile net income to net cash provided by operating activities                        
  Amortization of property, equipment and leaseholds, deferred charges and intangible assets   19,341     20,067     81,996     80,403  
  Amortization of tenant inducements, rent averaging liabilities and fair value lease contract liabilities   (836 )   (535 )   (3,075 )   (1,166 )
  Amortization of debt issuance costs   151     150     598     598  
  Loss on disposal of assets   502     2,758     268     2,566  
  Future income taxes   848     223     1,611     1,098  
  Cash flow hedges - non-cash interest   (139 )   (277 )   (707 )   (148 )
  Extraordinary gain   -     -     -     (1,059 )
  Non-controlling interests   25     23     179     420  
  Accretion of convertible debentures   329     307     1,224     1,147  
Tenant inducements   262     2,938     2,489     9,990  
Changes in operating assets and liabilities   29,076     53,602     (236 )   31,568  
    60,411     88,706     147,303     178,863  
Investing activities                        
Proceeds from sale of assets   34     39     2,247     535  
Purchases of property, equipment and leaseholds   (18,823 )   (10,353 )   (57,112 )   (44,025 )
Cash acquired in exchanges of LP units   -     -     -     639  
Acquisition of businesses, net of cash acquired   (6,494 )   -     (11,358 )   (1,933 )
    (25,283 )   (10,314 )   (66,223 )   (44,784 )
Financing activities                        
Distributions paid   (24,016 )   (17,923 )   (77,853 )   (69,795 )
Distributions paid by the Partnership to non-controlling interests   (72 )   (79 )   (283 )   (2,215 )
Borrowings under credit facility   30,000     5,000     67,000     35,000  
Repayment of credit facility   (30,000 )   (5,000 )   (67,000 )   (35,000 )
Payments under capital leases   (520 )   (437 )   (2,004 )   (1,700 )
Acquisition of long-term incentive plan Fund units   -     -     (9,620 )   (9,163 )
    (24,608 )   (18,439 )   (89,760 )   (82,873 )
   
(Decrease) increase in cash and cash equivalents during the period   10,520     59,953     (8,680 )   51,206  
   
Cash and cash equivalents - Beginning of period   76,591     35,838     95,791     44,585  
   
Cash and cash equivalents - End of period $ 87,111   $ 95,791   $ 87,111   $ 95,791  
   
Supplemental Information                        
Cash paid for interest $ 6,959   $ 6,951   $ 21,669   $ 19,454  
Cash paid for income taxes - net $ 89   $ 10   $ 119   $ 21  
Cash received for interest $ 184   $ 59   $ 511   $ 296  

Contact Information

  • Cineplex Inc.
    Gord Nelson
    Chief Financial Officer
    (416) 323-6602
    or
    Cineplex Inc.
    Pat Marshall
    Vice President Communications and Investor Relations
    (416) 323-6648
    www.cineplex.com