Cineplex Galaxy Income Fund
TSX : CGX.UN

Cineplex Galaxy Income Fund

February 11, 2010 06:25 ET

Cineplex Galaxy Income Fund Reports Record Fourth Quarter and Full Year Results

TORONTO, ONTARIO--(Marketwire - Feb. 11, 2010) -

NOT FOR RELEASE OVER US NEWSWIRE SERVICES

Cineplex Galaxy Income Fund (the "Fund") (TSX:CGX.UN) today released its financial results for the fourth quarter and full year of 2009.



Full Year Results
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Year over
2009 2008 Year Change
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Total Revenues $964.3 million $849.7 million +13.5%
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Attendance 70.0 million 63.5 million +10.2%
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Other Revenue $95.0 million $87.1 million +9.0%
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Net Income $53.4 million $29.0 million +84.3%
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Adjusted EBITDA $159.9 million $140.5 million +13.8%
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Adjusted EBITDA Margin 16.6% 16.5% +0.1%
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Distributable Cash Per
Unit $2.141 $1.855 +15.4%
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Fourth Quarter Results
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Three months ended Three months Period over
December 31, 2009 ended December Period
31, 2008 Change
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Total Revenues $247.2 million $211.4 million +16.9%
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Attendance 17.1 million 15.2 million +12.3%
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Other Revenue $30.7 million $27.3 million +12.6%
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Net Income $9.5 million $6.9 million +37.6%
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Adjusted EBITDA $38.1 million $35.0 million +8.7%
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Adjusted EBITDA Margin 15.4% 16.6% -1.2%
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Distributable Cash Per
Unit $0.462 $0.451 +2.4%
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Period over period change calculated based on thousands of dollars except
percentage and per unit values.


"Cineplex Entertainment experienced a tremendous fourth quarter and full-year performance resulting in our best year ever," said Ellis Jacob, President and CEO. "We achieved all-time records in key performance metrics including box office, concession, other and total revenues. This culminated in record annual Adjusted EBITDA of $159.9 million, up 13.8%, and distributable cash of $2.141 per unit, up 15.4% versus 2008. Adjusted EBITDA for 2009 was negatively impacted by non-recurring items including a pension settlement loss of $2.4 million recorded in the third quarter and charges of $2.9 million (of which $2.2 million was recorded in the fourth quarter) related to a lease guarantee claim and pre-Famous Players acquisition legal reserves. Excluding these items, Adjusted EBITDA would have been $165.2 million and Adjusted EBITDA margin would have been 17.1%. Of particular note is the 10.2% growth in annual attendance to 70 million guests and the 84.3% increase in net income to $53.4 million versus 2008," said Jacob.

"Avatar played just 13 days during 2009 and was the top performing film of the fourth quarter. Avatar's success combined with the year's other 3D films support our installation of 100 additional 3D projection systems during 2009 in advance of the Industry rollout. In 2010, additional 3D systems will be added to ensure we are well positioned to capitalize on the ever expanding 3D film schedule. During 2009 we continued to diversify our business beyond the traditional movie exhibition model. Our SCENE loyalty program added approximately 735,000 new members, reaching the milestone of 2 million members in October and to date has surpassed 2.2 million members. In our Merchandising business, we focused on speed of service initiatives and product mix modifications. These are just some of the many initiatives that have contributed to our success," Jacob said.

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, 2009 as compared to the three and twelve months ended December 31, 2008 are presented below.

Total revenues for the three months and year ended December 31, 2009 increased $35.7 million (16.9%) and $114.7 million (13.5%) to $247.2 million and $964.3 million, respectively. A discussion of the factors affecting the changes in box office, concession and other revenues for the fourth quarter and the full year compared to 2008 is provided on the following pages.

Box office revenues

The following table highlights the movement in box office revenues, attendance and box office revenues per patron ("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):



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Box office
revenues Fourth Quarter Full Year
------------------------------------------------------------
2009 2008 Change 2009 2008 Change
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Box office
revenues $ 143,570 $ 122,797 16.9% $ 581,114 $ 510,934 13.7%
Attendance 17,096 15,229 12.3% 69,997 63,491 10.2%
Box office
revenue per
patron $ 8.40 $ 8.06 4.1% $ 8.30 $ 8.05 3.2%
Canadian
industry
revenues (1) 16.0% 12.8%
Same store box
office revenues $ 137,414 $ 118,895 15.6% $ 557,781 $ 500,280 11.5%
Same store
attendance 16,379 14,612 12.1% 67,288 61,918 8.7%
% Total box from
IMAX & 3D 19.8% 3.5% 465.7% 14.4% 3.4% 323.5%

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(1) The Motion Picture Theatre Associations of Canada ("MPTAC") reported
that the Canadian Exhibition Industry reported a box office increase of
27.9% for the period from October 2, 2009 to December 31, 2009 as compared
to the period from September 26, 2008 to December 25, 2008. On a basis
consistent with the Fund's calendar reporting period (October 1 to December
31), the Canadian industry box office increase is estimated to be 16.0%.
The MPTAC reported a box office increase of 14.1% for the period from
January 2, 2009 to December 31, 2009 as compared to the period from
December 28, 2007 to December 25, 2008. On a basis consistent with the
Fund's calendar reporting period (January 1 to December 31), the Canadian
industry box office increase is estimated to be 12.8%.
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Box office continuity Fourth Quarter Full Year
In thousands Box Office Attendance Box Office Attendance
--------------------------------------------------- ------------------------
2008 as reported $ 122,797 15,229 $ 510,934 63,491
Same store attendance
change 14,378 1,767 43,388 5,370
Impact of same store BPP
change 4,141 - 14,113 -
New and acquired theatres 3,963 458 17,399 1,995
Disposed and closed
theatres (1,709) (358) (4,720) (859)
--------------------------------------------------- ------------------------
2009 as reported $ 143,570 17,096 $ 581,114 69,997
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Fourth quarter

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Top Cineplex Films - Fourth Quarter 2009 compared to Fourth Quarter 2008
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% Total % Total
Q4 2009 Top Cineplex Films Box Q4 2008 Top Cineplex Films Box
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1 Avatar 11.8% 1 Quantum of Solace 10.3%
2 The Twilight Saga: New 10.7% 2 Twilight 7.2%
Moon
3 2012 6.7% 3 Madagascar: Escape 2 6.5%
Africa
4 Disney's A Christmas Carol 5.6% 4 Four Christmases 3.9%
5 Couples Retreat 4.4% 5 High School Musical 3: 3.7%
Senior Year
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The fourth quarter of 2009 marked the fifth consecutive quarter that the Fund has reported its highest-ever box office revenue for a given quarter. The quarter benefited from two blockbuster titles that performed strongly, the highly- anticipated 3D film Avatar from director James Cameron, and the second release in the Twilight franchise, The Twilight Saga: New Moon. Avatar was the Fund's top release for the quarter despite the film being screened for only thirteen days during the quarter.

Box office revenue per patron increased $0.34 (4.1%) from $8.06 in the fourth quarter of 2008 to $8.40 in the fourth quarter of 2009. The success of Avatar released in both 3D and IMAX, as well as Disney's A Christmas Carol which was also released in both 3D and IMAX, increased the Fund's overall box office revenue per patron, as these films are priced at a premium over regular ticket prices. 3D and IMAX box office revenues represented 19.8% of the Fund's total box office results during the fourth quarter of 2009, up from 3.5% in the prior year period. These premium priced products also contributed to the Fund outperforming the industry results as the Fund's circuit contains the largest number of 3D and IMAX systems in Canada. Select ticket price increases implemented in November 2008 also contributed to this increase.



Full Year

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Top Cineplex Films - Full Year 2009 compared to Full Year 2008
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% Total % Total
2009 Top Cineplex Films Box 2008 Top Cineplex Films Box
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1 Transformers: Revenge of 3.7% 1 The Dark Knight 4.9%
the Fallen
2 Harry Potter and the Half- 3.2% 2 Iron Man 2.9%
Blood Prince
3 Avatar 2.9% 3 Indiana Jones and the 2.9%
Kingdom of the Crystal
Skull
4 UP 2.8% 4 Quantum of Solace 2.5%
5 The Twilight Saga: New 2.6% 5 Hancock 2.0%
Moon
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Box office revenues for 2009 were up 13.7% from the prior year due to a 10.2% increase in attendance and a 3.2% increase in box office revenue per patron. The increase in attendance was due to strong film product released throughout the year, as all four quarters in 2009 were record box office revenue results for the Fund. While 2008 was dominated by one strong performing title (The Dark Knight), 2009 featured a larger number of strong performing blockbuster releases which resulted in strong box office performance throughout the year. The Fund continued to outperform the industry box office in 2009.

The Fund's box office revenue per patron was $8.30 for 2009 and $8.05 for the prior year. This increase was due to select ticket price increases introduced in November 2008 as well as the success of IMAX and 3D product during the period, as these films are priced at a premium over regular ticket prices. The top three films of 2009 (Transformers: Revenge of the Fallen, Harry Potter and the Half-Blood Prince and Avatar) were shown in select theatres across the circuit in IMAX, and both Avatar and UP were shown in select theatres across the circuit in 3D.

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):



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Concession revenues Fourth Quarter Full Year
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2009 2008 Change 2009 2008 Change
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Concession revenues $ 72,909 $ 61,373 18.8% $ 288,255 $ 251,645 14.5%
Attendance 17,096 15,229 12.3% 69,997 63,491 10.2%
Concession revenue per
patron $ 4.26 $ 4.03 5.8% $ 4.12 $ 3.96 3.9%
Same store concession
revenues $ 69,633 $ 59,202 17.6% $ 276,206 $ 245,551 12.5%
Same store attendance 16,379 14,612 12.1% 67,288 61,918 8.7%
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Concession revenue
continuity Fourth Quarter Full Year
In thousands Concession Attendance Concession Attendance
-------------------------------------------------- ------------------------
2008 as reported $ 61,373 15,229 $ 251,645 63,491
Same store attendance
change 7,159 1,767 21,296 5,370
Impact of same store CPP
change 3,272 - 9,359 -
New and acquired theatres 2,138 458 9,075 1,995
Disposed and closed
theatres (1,033) (358) (3,120) (859)
-------------------------------------------------- ------------------------
2009 as reported $ 72,909 17,096 $ 288,255 69,997
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Fourth Quarter

Concession revenues increased 18.8% as compared to the prior year period, due to the 12.3% increase in attendance and a 5.8% increase in average concession revenue per patron, which increased from $4.03 in the fourth quarter of 2008 to $4.26 in the fourth quarter of 2009. The $4.26 CPP represents the Fund's highest ever quarterly CPP, $0.09 higher than the third quarter of 2009. This represents the third quarter in a row where the Fund established a new CPP record. The Fund believes that revised offerings, as well as process improvements designed to increase speed of service contributed to this year-over-year increase. The fourth quarter of 2009 also represents the first full quarter of the 'Telus Tuesdays' program which it believes drives incremental attendance and concession purchase incidence on Tuesdays.

Full Year

Concession revenues increased 14.5% as compared to the prior year, due to the 10.2% increase in attendance and a $0.16 or 3.9% increase in the average concession revenue per patron, which increased from $3.96 in 2008 to $4.12 for 2009, a new annual record for the Fund. Three of the top five movies during the 2009 appealed to the family demographic, who tend to be higher concession spenders, contributing to the higher concession spending in 2009, whereas the top five films for 2008 catered primarily to adult audiences. Selected price increases implemented on June 1, 2008, as well as improved product offering mix designed to encourage consumers to make purchases outside of the core concession offerings contributed to this increase in CPP. Process improvements designed to increase the speed of service also contributed to this increase.

Other revenues

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



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Other revenues Fourth Quarter Full Year
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2009 2008 Change 2009 2008 Change
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Media $ 23,081 $ 19,926 15.8% $ 66,773 $ 60,966 9.5%
Games 1,193 1,149 3.8% 4,832 4,999 -3.3%
Other 6,417 6,176 3.9% 23,374 21,145 10.5%
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Total $ 30,691 $ 27,251 12.6% $ 94,979 $ 87,110 9.0%
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Fourth Quarter

Media revenues for the fourth quarter of 2009 were $23.1 million, up $3.2 million from the prior year period. The fourth quarter of 2009 includes a $3.2 million increase in non-cash barter revenue, with cash-settled media revenue amounts flat quarter over quarter. Rather than settling cash-based transactions, during 2008 and 2009 the Fund entered into a number of cross-promotional non-cash barter agreements with certain promotional partners to provide radio and television promotions for the Fund's business initiatives. During the fourth quarter of 2009 the Fund recognized $3.7 million in media revenue and $2.8 million in marketing costs related to these transactions (fourth quarter of 2008: $0.5 million in media revenue and $0.9 million in marketing costs). Other revenues are up $0.2 million, primarily due to higher breakage revenues associated with increased sales of gift cards and coupons.

Full Year

Media revenues increased $5.8 million to $66.8 million during 2009 compared to the prior year. The increase was due to a $7.7 million increase in non-cash barter revenue and a $1.9 million decrease in cash-settled media revenue. Games revenues are down 3.3% compared to the prior year. Other revenues are up $2.2 million, 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 to date (in thousands of dollars, except film cost percentage):



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Film cost Fourth Quarter Full Year
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2009 2008 Change 2009 2008 Change
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Film cost $ 75,759 $ 62,360 21.5% $ 305,095 $ 265,210 15.0%
Film cost
percentage 52.8% 50.8% 3.9% 52.5% 51.9% 1.1%
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Fourth Quarter

Film cost varies primarily with box office revenue. The quarterly increase was due to the 16.9% increase in box office revenues and the 3.9% increase in the film cost percentage as compared to the prior year period. The increase in film cost percentage is primarily due to the settlement rate on the quarter's top film, Avatar, being higher than the average film settlement rate.

Full Year

The 15.0% increase in film cost from 2008 was due to the 13.7% increase in box office revenues and the 1.1% increase in the film cost percentage as compared to the prior year. This increase in the film cost percentage is due to the impact of more blockbuster films in 2009 compared to 2008, which tend to attract a higher than 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):



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Cost of concessions Fourth Quarter Full Year
---------------------------------------------------------
2009 2008 Change 2009 2008 Change
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Concession cost $ 14,654 $ 12,192 20.2% $ 59,267 $ 52,192 13.6%
Concession cost
percentage 20.1% 19.9% 1.2% 20.6% 20.7% -0.9%
Concession margin
per patron $ 3.41 $ 3.23 5.5% $ 3.27 $ 3.14 4.1%
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Fourth Quarter

Cost of concessions varies primarily with theatre attendance as well as the quantity and mix of concession offerings sold. The increase in concession cost as compared to the prior year period was due to the 12.3% increase in attendance, increased purchase incidence and the higher concession cost percentage. This increase in concession cost percentage was due to the enhanced product offering mix, designed to encourage consumers to make purchases outside of the core concession offerings. These non-core offerings tend to have lower margins than popcorn and fountain drinks. The continued growth of the SCENE loyalty program and the associated 10% discount on concession products also contributed to the higher concession cost percentage. Despite this increase in concession cost percentage, the concession margin per patron increased from $3.23 in the fourth quarter of 2008 to $3.41 in the same period in 2009. The 'Telus Tuesdays' program is designed to increase concession purchase incidence on Tuesdays, however due to the discounted nature of the combo offering, does have a negative impact on the concession cost percentage.

Full Year

The increase in concession cost from the prior year was due to the 10.2% increase in attendance and increased concession purchase incidence. The decrease in the concession cost percentage was due to the higher proportion of films catering to the family demographic in 2009 as compared to the prior year, as families tend to purchase concession items with higher margins. This decrease due to the demographic mix was partially offset by the improved product offering mix, as non-core offerings tend to have lower margins than popcorn and fountain drinks, which helped concession margin per patron increase 4.1% from $3.14 in the prior year to $3.27 in 2009.

Occupancy expenses

The following table highlights the movement in occupancy expenses for the quarter and the year, including non-recurring one-time amounts recognized during the period (in thousands of dollars):



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Occupancy expenses Fourth Quarter Full Year
----------------------------------------------------------
2009 2008 Change 2009 2008 Change
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Rent $ 26,465 $ 26,551 -0.3% $ 106,143 $ 105,812 0.3%
Other occupancy 12,281 12,151 1.1% 52,331 52,085 0.5%
Non-recurring
lease guarantee
payment 1,463 - NM 1,463 - NM
Non-recurring
legal provision 720 - NM 1,407 - NM
Other one-time
items (174) (312) -44.2% (2,417) (2,982) -18.9%
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Total $ 40,755 $ 38,390 6.2% $ 158,927 $ 154,915 2.6%
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Occupancy continuity Fourth Quarter Full Year
In thousands Occupancy Occupancy
----------------------------------------------- -------------
2008 as reported $ 38,390 $ 154,915
Impact of new theatres 821 3,600
Impact of disposed theatres (132) (1,782)
Same store rent change (327) (613)
Non-recurring items 2,321 3,435
Other (318) (628)
----------------------------------------------- -------------
2009 as reported $ 40,755 $ 158,927
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Fourth Quarter

Occupancy expense increased $2.4 million, primarily due to non-recurring expenses recognized during the quarter ($2.2 million). During the fourth quarter of 2009, the Fund recorded a non-recurring occupancy expense of $1.8 million relating to lease guarantees triggered by landlords for theatres sold by the Partnership in 2006. This expense was mitigated by the cancellation of related media contract obligations, resulting in a net charge of $1.5 million to occupancy expense during the current year period. 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.

Full Year

Occupancy expenses increased $4.0 million during 2009 as compared to the prior period primarily due to the non- recurring expenses described above ($1.5 million relating to the lease guarantees and $1.4 million related to the pre- acquisition liabilities) and lower one-time benefits of lease related items than those recognized during 2008. New theatre openings also contributed to the increased occupancy costs, partially offset by closed theatres and lower same store rent expenses and other occupancy (primarily real estate taxes and insurance related expenses).

Other operating expenses

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



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Other operating
expenses Fourth Quarter Full Year
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2009 2008 Change 2009 2008 Change
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Other operating
expenses $ 62,812 $ 52,212 20.3% $ 228,129 $ 196,546 16.1%

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Other operating continuity Fourth Quarter Full Year
In thousands Other Operating Other Operating
------------------------------------------------ -------------------
2008 as reported $ 52,212 $ 196,546
Impact of new theatres 1,600 5,302
Impact of disposed theatres (1,091) (2,119)
Same store payroll change 3,574 10,542
Marketing change 2,667 7,328
New business initiatives 144 1,690
Other 3,706 8,840
------------------------------------------------ -------------------
2009 as reported $ 62,812 $ 228,129
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Fourth Quarter

Other operating expenses increased $10.6 million during the fourth quarter of 2009 compared to the prior year period primarily as a result of increased business volumes due to the 12.3% increase in attendance. Theatre payroll for same store locations increased $3.6 million due to minimum wage increases and increased theatre staffing in response to higher theatre attendance in the fourth quarter of 2009. Marketing costs increased $2.7 million, of which $1.9 million relates to the non-cash barter agreements previously discussed under 'Other revenues'. New business initiatives include costs for the Fund's SCENE loyalty program, costs relating to the Cineplex Store and costs relating to Cineplex Digital Media. Other includes technology enhancements and expanded service offerings including the elimination of charges for online ticketing, and 3D technology licensing payments ($1.7 million) and increased costs relating to the higher business volumes ($2.0 million). Total theatre payroll accounted for 42.1% of the total expenses in other operating expenses during the fourth quarter of 2009, as compared to 43.4% for the same period in 2008.

Full Year

Other operating expenses increased $31.6 million in 2009 compared to the prior year primarily due to business volumes generated by the 10.2% increase in attendance. Theatre payroll for same store locations increased $10.5 million due to minimum wage increases and increased theatre staffing due to the higher theatre attendance. Marketing costs increased $7.3 million, of which $5.5 million relates to the non-cash barter agreements. Other includes the cost of technology enhancements and expanded service offerings including the elimination of charges for online ticketing, and 3D technology licensing payments ($4.1 million) and $4.7 million relating to increased costs due to the higher business volumes in 2009 as compared to the prior year. For the year, total theatre payroll accounted for 45.6% of total operating expenses compared to 46.6% for the same period in 2008.

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 the Fund's Long-Term Incentive Plan ("LTIP") and unit option plan costs, and G&A net of these costs (in thousands of dollars):



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G&A expenses Fourth Quarter Full Year
-----------------------------------------------------
2009 2008 Change 2009 2008 Change
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G&A excluding LTIP,
option plan expense
and pension settlement $ 9,816 $ 8,907 10.2% $ 37,364 $ 33,007 13.2%
LTIP 1,991 2,313 -13.9% 9,059 7,278 24.5%
Option plan 3,282 - NM 4,220 - NM
Pension plan settlement - - NM 2,360 - NM
-----------------------------------------------------
G&A expenses as
reported $ 15,089 $ 11,220 34.5% $ 53,003 $ 40,285 31.6%
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Fourth Quarter

General and administrative costs increased $3.9 million as a result of increased costs under the option plans ($3.3 million) and increased direct costs ($0.9 million), offset by lower LTIP expenses ($0.3 million).

Full Year

General and administrative costs increased $12.7 million as a result of increased costs under the LTIP and option plans ($6.0 million), the one-time settlement loss of $2.4 million relating to the Retirement Plan for Salaried Employees of Famous Players, and increased direct costs ($4.3 million). The direct costs increased due to increased head office payroll ($3.0 million) and higher professional fees ($1.2 million). Professional fees for the year include the costs relating to the secondary offering of Fund Units discussed previously ($0.4 million), costs relating to the Fund's ongoing project to prepare for the 2011 conversion to IFRS ($0.4 million), and costs relating to the Fund's general ledger system upgrade undertaken to provide reporting enhancements in preparation for the Fund's transition to IFRS ($0.7 million).

Earnings before interest, taxes, depreciation and amortization

The Fund reported income before undernoted ("adjusted EBITDA") for the three months ended December 31, 2009 of $38.1 million, as compared to $35.0 million during the prior year period. Adjusted EBITDA margin, calculated as adjusted EBITDA divided by total revenues, was 15.4%, down from 16.6% from the prior year period. The decrease is primarily due to the non-recurring occupancy expenses described previously and the increased LTIP and option expense recorded in the fourth quarter of 2009. Excluding the previously discussed provisions for lease guarantees and legal reserves ($2.2 million), adjusted EBITDA would have been $40.3 million and the adjusted EBITDA margin would have been 16.3% for the fourth quarter of 2009.

For the year ended December 31, 2009, adjusted EBITDA increased $19.4 million, or 13.8% compared to the prior period, and adjusted EBITDA margin increased from 16.5% to 16.6%. These increases in EBITDA margin were realized as a result of higher revenues achieved due to the strong film product screened during the year, partially offset by the one-time settlement loss of $2.4 million related to the settlement of the Famous Players defined benefit pension plan recorded in 2009, as well as the non-recurring occupancy expenses and increased LTIP and option expense recorded during the year. Excluding the $2.4 million pension settlement loss, and the previously discussed provisions for lease guarantees and legal reserves ($2.9 million), 2009 adjusted EBITDA would have been $165.2 million and the 2009 adjusted EBITDA margin would have been 17.1%.

Distributable Cash

For 2009, distributable cash per unit was $2.141 as compared to $1.855 in 2008. The declared distributions per unit were $1.260 in 2009 and $1.240 in 2008. The payout ratios for these periods were 59% and 67%, respectively. For the three months ended December 31, 2009, distributable cash per Fund unit was $0.462 as compared to $0.451 for the three months ended December 31, 2008. 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 68% and 70% for each of these periods.

Board of Directors Change

The members of the Board of Directors of Cineplex Entertainment Corporation are pleased to announce the appointment of Edward Sonshine, Q.C., President and Chief Executive Officer of RioCan Real Estate Investment Trust, and Ian Greenberg, President and Chief Executive Officer of Astral Media Inc., to the Board of Directors. The appointments were effective February 10, 2010.

"Ed Sonshine and Ian Greenberg are two of the most well respected and successful CEO's in Canada. Their business expertise, particularly in the areas of real estate and media, will be invaluable to the Board and we are both delighted and very fortunate to have them," said Ellis Jacob.

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 and the Partnership reported results. For 2009, the Fund reported Adjusted EBITDA of $159.9 million, and the Partnership reported Adjusted EBITDA of $164.2 million (Q4 - Fund reported Adjusted EBITDA of $38.1 million and the Partnership reported Adjusted EBITDA of $39.2 million). Excluding the $2.4 million pension settlement loss and previously discussed provisions for lease guarantees and legal reserves ($2.9 million), 2009 adjusted EBITDA for the Fund would have been $165.2 million and 2009 adjusted EBITDA margin for the Fund would have been 17.1%

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 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 Cineplex Entertainment, its financial or operating results or its securities.

About Cineplex Entertainment LP

As the largest motion picture exhibitor in Canada, Cineplex Entertainment LP owns, leases or has a joint-venture interest in 130 theatres with 1,347 screens serving approximately 70 million guests annually. Headquartered in Toronto, Canada, Cineplex Entertainment operates theatres from British Columbia to Quebec and is 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. The units of Cineplex Galaxy Income Fund, which owns approximately 99.6% of Cineplex Entertainment LP, are traded on the Toronto Stock Exchange (symbol CGX.UN). For more information, visit 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 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 11th, 2010
10:00 a.m. Eastern Time


In order to participate in the conference call, please dial (416) 644-3415 or outside of Toronto dial 1-800-814-4861 at least five to ten minutes prior to 10:00 a.m. Eastern Time. Please quote the conference ID 4201935 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 4201935#. The
replay will begin at 12:00 p.m. Eastern Time on Thursday, February 11th,
2010 and end at 11:59 p.m. Eastern Time on Thursday, February 18th,
2010.
-- 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 Year ended
December 31, December 31,
2009 2008 2009 2008
--------------------- ----------------------

Net income $ 9,450 $ 6,870 $ 53,446 $ 29,003

Amortization 20,067 20,973 80,403 84,280
Interest and accretion expense
on convertible debentures 1,851 1,836 7,447 7,386
Interest on long-term debt and
capital lease obligations 3,798 3,664 15,929 17,081
Interest income (69) (161) (330) (777)
Provision for (recovery of)
income taxes 223 (1,474) 1,105 (3,539)
--------------------- ----------------------

EBITDA 35,320 31,708 158,000 133,434

Non-controlling interests 23 333 420 2,519
Extraordinary gain - - (1,059) -
Loss on disposal of assets 2,758 3,006 2,566 4,588
--------------------- ----------------------

Adjusted EBITDA $ 38,101 $ 35,047 $ 159,927 $ 140,541
--------------------- ----------------------
--------------------- ----------------------



Cineplex Galaxy Income Fund
Consolidated Supplemental Information
(Unaudited)
-----------------------------------------------
(expressed in thousands of Canadian dollars, except number of units and per
unit data)

Distributable Cash
------------------

For the three months For the year
ended December 31, ended December 31,
2009 2008 2009 2008
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Cash provided by
operating activities $ 88,706 $ 74,363 $ 178,863 $ 140,630
Less: Total capital
expenditures (10,353) (32,138) (44,025) (60,177)
------------- ------------ ------------ ------------
Standardized
distributable cash 78,353 42,225 134,838 80,453

Less:

Changes in operating
assets and liabilities (i) (53,602) (39,072) (31,568) (12,656)
Tenant inducements (ii) (2,938) (5,112) (9,990) (8,113)
Principal component of
capital lease obligations (437) (406) (1,700) (1,581)

Add:
New build capital
expenditures and other (iii) 5,220 28,333 31,496 48,588
Non-cash components in
operating assets and
liabilities (iv) (180) (168) (699) (656)
------------- ------------ ------------ ------------

Distributable cash $ 26,416 $ 25,800 $ 122,377 $ 106,035
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------

Less: Non-controlling
interests share of
distributable cash (115) (6,201) (1,799) (25,541)
------------- ------------ ------------ ------------

Distributable cash
available to Fund
unitholders $ 26,301 $ 19,599 $ 120,578 $ 80,494
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------

Average number of Fund
units outstanding 56,901,057 43,414,217 56,310,507 43,384,657
Distributable cash per
Fund unit $ 0.462 $ 0.451 $ 2.141 $ 1.855

(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 December
31, 2009 31, 2008

Assets

Current assets
Cash and cash equivalents $ 95,791 $ 44,585
Accounts receivable 54,892 45,507
Inventories 4,260 4,014
Prepaid expenses and other current assets 4,310 3,733
------------- --------------
159,253 97,839
Property, equipment and leaseholds 428,253 455,885
Future income taxes 20,221 13,099
Deferred charges 820 953
Intangible assets 103,674 117,476
Goodwill 600,564 600,564
----------------------------

$ 1,312,785 $ 1,285,816
---------------------------
---------------------------

December 31, December 31,
2009 2008

Liabilities

Current liabilities
Accounts payable and accrued expenses $ 109,900 $ 86,140
Distributions payable 6,001 6,001
Income taxes payable 34 48
Deferred revenue 85,501 76,929
Capital lease obligations - current portion 2,004 1,700
Fair value of interest rate swap agreements 6,881 5,213
----------------------------
210,321 176,031

Long-term debt 233,459 232,861

Fair value of interest rate swap
agreements 5,382 15,415

Capital lease obligations - long-term portion 31,127 33,131

Accrued pension benefit liability 2,012 932

Other liabilities 114,941 108,380

Convertible debentures - liability component 100,982 99,834
----------------------------

698,224 666,584

Non-controlling interests 2,669 149,860

Unitholders' equity 611,892 469,372
----------------------------
$ 1,312,785 $ 1,285,816
----------------------------
----------------------------


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,
2009 2008 2009 2008
Revenues
Box office $ 143,570 $ 122,797 $ 581,114 $ 510,934
Concessions 72,909 61,373 288,255 251,645
Other 30,691 27,251 94,979 87,110
--------------------------- ---------------------------
247,170 211,421 964,348 849,689
--------------------------- ---------------------------
Expenses
Film cost 75,759 62,360 305,095 265,210
Cost of concessions 14,654 12,192 59,267 52,192
Occupancy 40,755 38,390 158,927 154,915
Other operating 62,812 52,212 228,129 196,546
General and
administrative 15,089 11,220 53,003 40,285
--------------------------- ---------------------------
209,069 176,374 804,421 709,148
--------------------------- ---------------------------

Income before
undernoted 38,101 35,047 159,927 140,541

Amortization 20,067 20,973 80,403 84,280
Loss on disposal of
assets 2,758 3,006 2,566 4,588
Interest and
accretion expense on
convertible debentures 1,851 1,836 7,447 7,386

Interest on
long-term debt and
capital lease
obligations 3,798 3,664 15,929 17,081
Interest income (69) (161) (330) (777)

--------------------------- ---------------------------
Income before income
taxes, extraordinary
gain and non-
controlling
interests 9,696 5,729 53,912 27,983
--------------------------- ---------------------------

Provision for
(recovery of) income
taxes
Current - - 7 (4)
Future 223 (1,474) 1,098 (3,535)
--------------------------- ---------------------------
223 (1,474) 1,105 (3,539)
--------------------------- ---------------------------

Income before
extraordinary gain
and non-controlling
interests 9,473 7,203 52,807 31,522
Extraordinary gain - - 1,059 -
--------------------------- ---------------------------

Income before
non-controlling
interests 9,473 7,203 53,866 31,522
Non-controlling
interests 23 333 420 2,519
--------------------------- ---------------------------

Net income $ 9,450 $ 6,870 $ 53,446 $ 29,003
--------------------------- ---------------------------
--------------------------- ---------------------------



Cineplex Galaxy Income Fund
Consolidated Statements of Unitholders' Equity and Comprehensive Income

--------------------------------------------
(expressed in thousands of Canadian dollars)


For the year ended December 31, 2009

Accumulated
distributions in
excess of
Accumulated Accumulated accumulated
income distributions income
Balance - December
31, 2008 $ 102,535 $ (190,881) $ (88,346)
Issuance of Fund units
under exchange
agreement - - -
LTIP compensation
obligation - - -
LTIP Fund units - - -
Distributions declared - (71,213) (71,213)
Net income 53,446 - 53,446
Other comprehensive
income - interest rate
swap agreements, net
of $952 of future income
tax provision - - -

Comprehensive
income for the year - - -
--------------------------------------------------
Balance - December
31, 2009 $ 155,981 $ (262,094) $ (106,113)
--------------------------------------------------
--------------------------------------------------


Accumulated
other Total
comprehensive Unitholders' Unitholders' Comprehensive
loss capital equity income

Balance -
December
31, 2008 $ (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) -
Net income - - 53,446 53,446
Other
comprehensive
income -
interest rate
swap
agreements,
net
of $952 of
future income
tax provision 8,831 - 8,831 8,831

Comprehensive
income for
the year - - - $ 62,277
--------------------------------------------------------------
---------------
Balance -
December
31, 2009 $ (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.



For the year ended December 31, 2008

Accumulated
distributions in
excess of
Accumulated Accumulated accumulated
income distributions income
Balance - December
31, 2007 $ 73,532 $ (137,082) $ (63,550)
Issuance of Fund units
under exchange
agreement - - -
LTIP compensation
obligation - - -
LTIP Fund units - - -
Distributions declared - (53,799) (53,799)
Net income 29,003 - 29,003
Other comprehensive
loss - interest rate swap
agreements, net of
$1,857 future income
tax recovery - - -

Comprehensive
income for the year - - -
--------------------------------------------------

Balance - December
31, 2008 $ 102,535 $ (190,881) $ (88,346)
--------------------------------------------------
--------------------------------------------------


Accumulated
other Total
comprehensive Unitholders' Unitholders' Comprehensive
loss capital equity income
Balance -
December
31, 2007 $ 290 $ 570,728 $ 507,468 $ -
Issuance of
Fund units
under
exchange
agreement - 2,139 2,139 -
LTIP
compensation
obligation - 2,225 2,225 -
LTIP Fund
units - (3,691) (3,691) -
Distributions
declared - - (53,799) -
Net income - - 29,003 29,003
Other
comprehensive
loss -
interest rate
swap
agreements,
net of
$1,857 future
income
tax recovery (13,973) - (13,973) (13,973)

Comprehensive
income for
the year - - - $ 15,030
--------------------------------------------------------------
----------------
Balance -
December
31, 2008 $ (13,683) $ 571,401 $ 469,372
---------------------------------------------
---------------------------------------------


The sum of the accumulated distributions in excess of accumulated income and accumulated other comprehensive loss as at December 31, 2008 is $102,029.



Cineplex Galaxy Income Fund
Consolidated Statements of Cash Flows

--------------------------------------------
(expressed in thousands of Canadian dollars)

Three Three
months months Year Year
ended ended ended ended
December December December December
31, 31, 31, 31,
2009 2008 2009 2008
Cash provided by (used in)
Operating activities
Net income $ 9,450 $ 6,870 $ 53,446 $ 29,003
Adjustments to reconcile net
income to net cash provided
by operating activities

Amortization of property,
equipment and leaseholds,
deferred charges and
intangible assets 20,067 20,973 80,403 84,280
Amortization of tenant
inducements, rent averaging
liabilities and fair value
lease contract liabilities (535) 33 (1,166) 13
Amortization of debt
issuance costs 150 150 598 595
Loss on disposal of assets 2,758 3,006 2,566 4,588
Future income taxes 223 (1,259) 1,098 (3,535)
Cash flow hedges - non-cash
interest (277) 2 (148) 1,312
Extraordinary gain - - (1,059) -
Non-controlling interests 23 118 420 2,519
Accretion of convertible
debentures 307 286 1,147 1,086
Tenant inducements 2,938 5,112 9,990 8,113
Changes in operating assets
and liabilities 53,602 39,072 31,568 12,656
----------------------- -----------------------
88,706 74,363 178,863 140,630
----------------------- -----------------------
Investing activities
Proceeds from sale of assets 39 17 535 2,470
Purchases of property,
equipment and leaseholds (10,353) (32,138) (44,025) (60,177)
Cash acquired in exchanges
of LP units - - 639 -
Theatre shutdown payment - (2,406) - (3,156)
Acquisition of businesses - - (1,933) (387)
----------------------- -----------------------
(10,314) (34,527) (44,784) (61,250)
----------------------- -----------------------
Financing activities
Distributions paid (17,923) (13,675) (69,795) (53,564)
Distributions paid by the
Partnership to
non-controlling
interests (79) (4,327) (2,215) (17,017)
Borrowings under credit
facility 5,000 - 35,000 13,000
Repayment of credit facility (5,000) - (35,000) (13,000)
Payments under capital
leases (437) (406) (1,700) (1,581)
Acquisition of long-term
incentive plan Fund units - - (9,163) (6,887)
----------------------- -----------------------
(18,439) (18,408) (82,873) (79,049)
----------------------- -----------------------

Increase in cash and cash
equivalents during the year 59,953 21,428 51,206 331

Cash and cash equivalents -
Beginning of year 35,838 23,157 44,585 44,254
----------------------- -----------------------
Cash and cash equivalents -
End of year $ 95,791 $ 44,585 $ 95,791 $ 44,585
----------------------- -----------------------
----------------------- -----------------------
Supplemental Information
Cash paid for interest $ 6,951 $ 7,190 $ 19,454 $ 20,307
Cash paid for income taxes -
net $ 10 $ - $ 21 $ 13
Cash received for interest $ 59 $ 156 $ 296 $ 751

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