Cineplex Galaxy Income Fund
TSX : CGX.UN

Cineplex Galaxy Income Fund
Cineplex Entertainment

November 02, 2006 07:17 ET

Cineplex Galaxy Income Fund Reports Record Third Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Nov. 2, 2006) -

Not for release over US newswire services

Cineplex Galaxy Income Fund (the "Fund") (TSX:CGX.UN) today released the financial results of Cineplex Entertainment Limited Partnership (the "Partnership") for the third quarter of 2006.

Third Quarter Results

- Achieved record distributable income per unit for the quarter of $0.4628, up 124% from $0.2063 reported in the prior year.

- Distributable income per unit for the 12 months ended September 30, 2006 amounted to $1.45 as compared to declared distributions of $1.15.

- Achieved record total revenues for the quarter of $199.0 million compared to $151.9 million reported for 2005 and $179.1 million on a pro forma basis for 2005.

- Achieved record concession revenue per patron of $3.77 for the quarter compared to $3.40 reported for 2005 and $3.40 on a pro forma basis for 2005.

- Achieved record adjusted EBITDA of $35.7 million for the quarter compared to $11.0 million reported for 2005 and $15.6 million on a pro forma basis.

- Adjusted EBITDA margin for the quarter was 17.9% compared to 8.7% on a pro forma basis for 2005.

"This has been a record third quarter for Cineplex," said Ellis Jacob, President and CEO. "These results reflect the work that has been done during the past year by our management and staff in bringing Cineplex and Famous Players together. We have realized greater synergies than we originally planned, and have identified new ways to capitalize on opportunities to grow revenues and profits. We now have the infrastructure in place to build upon the recent investment and installation of our new point-of-sale system, our digital pre-show network and Cineplex Media to name a few" said Jacob.

"We are also very pleased to announce that we have signed a partnership agreement with Scotiabank that includes the creation of a new loyalty program, naming rights for five Cineplex Entertainment theatres as well as advertising through Cineplex Media," said Ellis Jacob. This program is targeted to launch in 2007.

Third Quarter Results

Total revenues for the third quarter increased to $199.0 million for the quarter from $151.9 million reported and $179.1 million on a pro forma basis for the prior year. Same store box office revenues increased 5.5%. With the inclusion of the Famous Players locations, our combined average ticket price was a new record of $8.09 for the quarter versus $7.76 reported and $7.81 on a pro forma basis for the prior year.

Our combined average concession revenue per patron amount established a new record of $3.77 and compared to $3.40 reported and $3.40 on a pro forma basis for the prior year. Other income of $16.6 million compared to $12.7 million reported and $14.8 million on a pro forma basis for the prior year. As with the first two quarters, other income for the quarter was adversely impacted when compared to the pro forma amount as a result of the standardization and net extension of expiry dates on the Partnership's gift certificate and discount ticket programs.

Adjusted EBITDA for the third quarter established a new record of $35.7 million compared to a reported Adjusted EBITDA of $11.0 million and a pro forma Adjusted EBITDA of $15.6 million for the prior year. The Adjusted EBDITA margin of 17.9% increased significantly from the 8.7% on a pro forma basis for the prior year.

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

Distributable Income

For the third quarter, distributable income per unit established a new record and increased 124% to $0.4628 as compared to $0.2063 reported in the prior year. The declared distributions per unit for this period were $0.2874. For the 12 months ending September 30, 2006, distributable income per unit amounted to $1.45 compared to declared distributions per unit of $1.15. On October 31, 2006 the Department of Finance (Canada) announced modifications to income tax rules that will result in the taxation of distributions made by the Fund beginning in the year 2011. Management is reviewing the proposed changes.

Trustee Changes

The Fund announced the resignation of Bruce Birmingham from the Board of Trustees. Ellis Jacob, President and CEO said, "On behalf of the Board I would like to thank Bruce for his contributions since the inception of the Fund. He has been a valuable member of the Board and we appreciate his efforts."

The Fund also announced the appointment of Joan T. Dea, Executive Vice President, Head of Strategic Management for BMO Financial Group, to the Board of Trustees. "We are very pleased to have Joan joining the Board and believe that her background and experience will add tremendous value" said Ellis Jacob.

This news release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements concerning synergies and similar 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 of film and development of alternative distribution methods; risks associated with integrating Famous Players; the risks associated with world events, including war, terrorism, international conflicts, natural disasters, extreme weather conditions and infectious diseases; 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

The Partnership owns, leases or has a joint-venture interest in 132 theatres with 1,309 screens and is the largest motion picture exhibitor in Canada. The Partnership operates theatres with the following six top-tier brands: Cineplex Odeon, Galaxy and Famous Players including: Coliseum, Colossus and SilverCity. Proudly Canadian, the units of Cineplex Galaxy Income Fund, which owns approximately 59.7% of Cineplex Entertainment LP, are traded on the Toronto Stock Exchange under the symbol CGX.UN. More information can be found at www.cineplex.com.

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

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

Thursday, November 2nd, 2006

10:00 a.m. Eastern Time

In order to participate in the conference call, please dial (416) 644-3420 or outside of Toronto dial 1-866-250-4892 at least five to ten minutes prior to 10:00 a.m. Eastern Time on Thursday, November 2, 2006.

- 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 21206753#. The replay will begin at 12:00 p.m. ET on Thursday, November 2, 2006 and end at 11:59 p.m. ET on Thursday, November 9, 2006.

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

- Thank you in advance for your interest and participation.



Cineplex Entertainment Limited Partnership
Consolidated Supplemental Information
Consolidated Statements of Income (including Pro Forma)
(Unaudited)
---------------------------------------------------------------------------
(expressed in thousands of Canadian dollars)

Pro Forma Pro Forma
Three Three Three Nine Nine Nine
months months months months months months
ended ended ended ended ended ended
September September September September September September
30, 2006 30, 2005 30, 2005 30, 2006 30, 2005 30, 2005
Revenue
Box office 124,382 114,509 96,713 341,409 326,624 190,632
Concessions 57,966 49,869 42,440 160,847 143,620 82,745
Other 16,628 14,761 12,726 43,024 41,122 23,736
-----------------------------------------------------------
198,976 179,139 151,879 545,280 511,366 297,113
-----------------------------------------------------------
Expenses
Film cost 64,676 57,521 48,760 176,367 168,851 98,080
Cost of
concessions 11,282 9,806 8,409 32,771 28,238 16,750
Occupancy 36,391 38,046 32,117 109,295 113,896 56,029
Other theatre
operating
expenses 42,628 40,816 35,073 120,835 126,240 66,781
General and
administrative 8,296 17,362 16,524 24,815 42,798 25,930
Management fee - - - - 224 224
-----------------------------------------------------------
163,273 163,551 140,883 464,083 480,247 263,794
-----------------------------------------------------------
Income before
undernoted 35,703 15,588 10,996 81,197 31,119 33,319
Amortization 16,340 16,925 14,136 47,412 51,357 26,713
Loss (gain) on
disposal of
theatre assets 344 198 195 (645) 101 176
Loss on
extinguishment
of debt - 4,156 4,156 - 4,156 4,156
Impairment of
long-lived
assets - 4,296 4,296 - 4,296 4,296
Interest on
long-term debt
and capital
lease
obligations 8,002 7,872 6,160 23,442 22,621 10,710
Interest on
loan from
Cineplex
Galaxy Trust 3,500 3,500 3,500 10,500 10,500 10,500
Interest income (237) (127) (109) (497) (433) (287)
-----------------------------------------------------------
Income (loss)
before income
taxes,
non-controlling
interest and
discontinued
operations 7,754 (21,232) (21,338) 985 (61,479) (22,945)
-----------------------------------------------------------
Provision for
(recovery of)
income taxes
Current 7 1,121 854 (284) 1,295 1,028
Future (1,457) (1,566) (1,566) (868) (1,566) (1,566)
-----------------------------------------------------------
(1,450) (445) (712) (1,152) (271) (538)
-----------------------------------------------------------
Income (loss)
before
non-controlling
interest and
discontinued
operations 9,204 (20,787) (20,626) 2,137 (61,208) (22,407)
Non-controlling
interest 10 860 614 (379) 1,876 614
-----------------------------------------------------------
Income (loss)
from continuing
operations 9,194 (21,647) (21,240) 2,516 (63,084) (23,021)
Income from
discontinued
operations 108 27,760 26,912 757 28,784 28,736
-----------------------------------------------------------
Net income for
the period 9,302 6,113 5,672 3,273 (34,300) 5,715
-----------------------------------------------------------



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

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

Three months ended Nine months ended
September 30, September 30,

Pro Pro
Forma Forma
2006 2005 2005 2005 2005 2006
------------------------------------------------------

Net income (loss) $ 9,302 $ 6,113 $ 5,672 $ 3,273 $(35,510) $ 5,715

Amortization 16,340 16,925 14,136 47,412 51,357 26,713
Interest on
long-term debt 8,002 7,872 6,160 23,442 22,621 10,710
Interest on loan
from Cineplex
Galaxy Trust 3,500 3,500 3,500 10,500 10,500 10,500
Interest income (237) (127) (109) (497) (433) (287)
Income tax expense (1,450) (445) (712) (1,152) (271) (538)
------------------------------------------------------

EBITDA 35,457 33,838 28,647 82,978 48,264 52,813

Non-controlling
interest 10 860 614 (379) 1,187 614
Loss on
extinguishment
of debt - 4,156 4,156 - 4,156 4,156
Impairment of
long-lived assets - 4,296 4,296 - 4,296 4,296
Income from
discontinued
operations (108) (27,760) (26,912) (757) (26,885) (28,736)
Loss (gain) on
disposal of
theatre assets 344 198 195 (645) 101 176
------------------------------------------------------

Adjusted EBITDA $ 35,703 $ 15,588 $ 10,996 $ 81,197 $ 31,119 $ 33,319
------------------------------------------------------
------------------------------------------------------



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

Distributable Income
--------------------

For the three For the nine
months ended months ended
September 30, September 30,
-----------------------------------------------
2006 2005 2006 2005

Cash used in operating
activities $ 30,415 $ 327 $ 21,405 $ 5,471
Less: Changes in operating
assets and liabilities (i) 5,027 8,922 41,972 16,654
Tenant inducements (ii) (10,604) (269) (14,485) (2,165)
Capital lease payments (345) (210) (1,011) (210)
Dividends paid by
subsidiary to
non-controlling interest - (1,372) (196) (1,372)
Maintenance capital
expenditures (iii) (1,905) (590) (3,811) (2,524)
Add: Interest on loan from
Cineplex Galaxy Trust (iv) 3,500 3,500 10,500 10,500
Non cash components in
operating assets and
liabilities (v) 333 283 965 283
Expenses funded through
integration and
restructuring
reserve (vi) 27 784 103 784
-----------------------------------------------

Distributable cash $ 26,448 $ 11,375 $ 55,442 $ 27,421
-----------------------------------------------
-----------------------------------------------

Number of LP Units
outstanding (vii) 57,150,421 55,150,421 56,044,194 50,122,568

Distributable cash
per LP Unit $ 0.4628 $ 0.2063 $ 0.9893 $ 0.5471

(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 flow.
(iii) Maintenance capital expenditures are funded out of distributable
income. Board approved projects are funded out of the Partnership's
Development facility. Certain integration related capital
expenditures are funded out of reserve funds established on November
26, 2003 and July 22, 2005. Maintenance capital expenditures for the
nine-months ended September 30, 2006 are not representative of the
expected run-rate as the Partnership has focused on integrating the
two circuits and evaluating capital requirements.
(iv) Subject to "Catch-up Payment" provision and is considered part of
distributable cash.
(v) Reflects non-cash expenses including accretion on Class C LP Units,
amortization of deferred gain on RioCan sale-leaseback transaction
and amortization of swap on extinguished debt.
(vi) Amounts financed by the $25 million reserve set up upon completion
of the acquisition of Famous Players are not considered a use of
distributable cash flow.
(vii) LP units outstanding reflect the issuance on June 20, 2006 of
2,000,000 Class A LP units.



Cineplex Entertainment Limited Partnership
Consolidated Balance Sheets

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

As at As at
September 30, December 31,
2006 2005
(Unaudited)

Assets

Current assets
Cash and cash equivalents $ 23,697 $ 45,190
Accounts receivable 24,964 21,752
Inventories 3,689 4,162
Prepaid expenses and other current assets 8,236 3,803
Due from related parties 20 32
Assets held for sale - current - 789
----------------------------

60,606 75,728

Property, equipment and leaseholds 451,424 435,002

Goodwill 201,009 206,218

Intangible assets 59,326 63,464

Future income taxes 6,407 5,539

Deferred charges 8,021 9,319

Assets held for sale - long term - 3,481
----------------------------

$ 786,793 $ 798,751
----------------------------
----------------------------



Cineplex Entertainment Limited Partnership
Consolidated Balance Sheets ... continued

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

September 30, December 31,
2006 2005
(Unaudited)
Liabilities

Current liabilities
Accounts payable and accrued expenses $ 57,098 $ 88,243
Distributions payable 4,308 4,117
Due to related parties 3,246 2,442
Income taxes payable 332 667
Deferred revenue 26,402 41,003
Bank indebtedness 19,909 35
Current portion of capital lease obligations 1,443 1,383
Liabilities related to property held
for sale - current - 843
----------------------------

112,738 138,733

Long-term debt 248,000 243,500

Capital lease obligations - long-term 36,795 38,078

Due to Cineplex Galaxy Trust 100,000 100,000

Accrued pension liability 4,106 5,229

Other liabilities 142,594 123,950

Class C Limited Partnership units - liability
component 99,418 97,555

Liabilities related to property held
for sale - long-term - 3,235
----------------------------

743,651 750,280
----------------------------

Non-controlling interest 455 1,030
----------------------------

Partners' Equity 42,687 47,441
----------------------------

$ 786,793 $ 798,751
----------------------------
----------------------------



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

Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005

Revenue
Box office $ 124,382 $ 96,713 $ 341,409 $ 190,632
Concessions 57,966 42,440 160,847 82,745
Other 16,628 12,726 43,024 23,736
----------------------------------------------------
198,976 151,879 545,280 297,113
----------------------------------------------------
Expenses
Film cost 64,676 48,760 176,367 98,080
Cost of concessions 11,282 8,409 32,771 16,750
Occupancy 36,391 32,117 109,295 56,029
Other theatre
operating expenses 42,628 35,073 120,835 66,781
General and
administrative 8,296 16,524 24,815 25,930
Management fee - - - 224
----------------------------------------------------
163,273 140,883 464,083 263,794
----------------------------------------------------

Income before
undernoted 35,703 10,996 81,197 33,319
Amortization 16,340 14,136 47,412 26,713
Loss (gain) on
disposal of theatre
assets 344 195 (645) 176
Loss on
extinguishment of debt - 4,156 - 4,156
Impairment of
long-lived assets - 4,296 - 4,296
Interest on
long-term debt and
capital lease
obligations 8,002 6,160 23,442 10,710
Interest on loan
from Cineplex Galaxy
Trust 3,500 3,500 10,500 10,500
Interest income (237) (109) (497) (287)
----------------------------------------------------
Income (loss) before
income taxes,
non-controlling
interest and
discontinued
operations 7,754 (21,338) 985 (22,945)
----------------------------------------------------
Provision for
(recovery of) income
taxes
Current 7 854 (284) 1,028
Future (1,457) (1,566) (868) 1,566
----------------------------------------------------
(1,450) (712) (1,152) (538)
----------------------------------------------------

Income (loss) before
non-controlling
interest and
discontinued
operations 9,204 (20,626) 2,137 (22,407)
Non-controlling
interest 10 614 (379) 614
----------------------------------------------------
Income (loss) from
continuing operations 9,194 (21,240) 2,516 (23,021)

Income from
discontinued
operations 108 26,912 757 28,736
----------------------------------------------------
Net income for
the period $ 9,302 $ 5,672 $ 3,273 $ 5,715
----------------------------------------------------



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

For the nine months ended September 30, 2006

Partners' Accumulated Accumulated
capital Deficit earnings distributions Total

Balance -
January 1, 2006 $ 232,975 $ (147,795) $ 51,925 $ (89,664) $ 47,441

Issuance of
Partnership
units 30,210 - - - 30,210

Other issuance
costs (466) - - - (466)
Distributions
declared - - - (37,817) (37,817)
Vesting of
Fund units 142 - - - 142
LTIP compensation
obligation (96) - - - (96)
Net income for
the period - - 3,273 - 3,273
---------------------------------------------------------

Balance -
September
30, 2006 $ 262,765 $ (147,795) $ 55,198 $ (127,481) $ 42,687
---------------------------------------------------------



For the nine months ended September 30, 2005

Partners' Accumulated Accumulated
capital Deficit earnings distributions Total

Balance -
January 1, 2005 $ 110,203 $ (147,795) $ 38,949 $ (44,620) $(43,263)

Issuance of
Partnership
units 116,591 - - - 116,591
Other issuance
costs (2,294) - - - (2,294)
Distributions
declared - - - (32,693) (32,693)
Issuance of
Class C
Partnership
units - equity
component 8,546 - - - 8,546
Investment in
Cineplex Galaxy
Income Fund units (282) - - - (282)

LTIP compensation
obligation 191 - - - 191
Net Income for
the period - - 5,715 - 5,715
---------------------------------------------------------

Balance -
September 30,
2005 $ 232,955 $ (147,795) $ 44,664 $ (77,313) $ 52,511
---------------------------------------------------------



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

Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 2006 30, 2005 30, 2006 30, 2005
Cash provided by (used in)
Operating activities
Net income for the period $ 9,302 $ 5,672 $ 3,273 $ 5,715
Adjustments to reconcile net
income to net cash used in
operating activities
Amortization of property,
equipment and leaseholds,
deferred charges and
intangible assets 16,340 14,214 47,412 27,428
Amortization of tenant
inducements, rent averaging
liabilities and fair value
lease contract liabilites (389) (519) (662) (3,246)
Amortization of debt
issuance costs 659 466 1,978 935
Loss on extinguishment of debt - 4,156 - 4,156
Impairment of long-lived assets - 4,296 - 4,296
Issuance of Class D LP Units
non cash compensation - 8,050 - 8,050
Loss (gain) on disposal of
theatre assets 373 (26,403) (1,862) (26,422)
Future income taxes (1,457) (1,566) (868) (1,566)
Non-controlling interest 10 614 (379) 614
Tenant inducements 10,604 269 14,485 2,165
Changes in operating assets
and liabilities (5,027) (8,922) (41,972) (16,654)
-----------------------------------------
30,415 327 21,405 5,471
-----------------------------------------
Investing activities
Proceeds from sale of
theatre assets - 152,005 722 152,030
Capital expenditures (21,257) (7,488) (57,319) (16,983)
Theatre shutdown payment (500) - (1,400) -
Acquisition of Famous
Players Limited Partnership
and Famous Players Co. - net
of cash acquired - (431,188) - (448,688)
Acquisition of Famous Players
branded magazines - - (1,100) -
Cash received from segregated
account for distribution - - - 8,297
Cash transferred to segregated
account for future distributions - - - (691)
-----------------------------------------
(21,757) (286,671) (59,097) (306,035)
-----------------------------------------
Financing activities
Borrowings under credit facility 31,000 263,000 82,000 282,500
Issuance of Partnership units
- net of issuance costs - 207,247 30,166 207,247
Distributions paid (12,924) (11,625) (37,624) (39,571)
Dividends paid to
non-controlling interest - (1,372) (196) (1,372)
Payments under capital leases (345) (210) (1,011) (210)
Repayment of credit facility (24,509) (147,005) (57,626) (151,018)
Investment in Cineplex Galaxy
Income Fund units - - - (423)
Deferred financing fees - (7,780) (115) (9,818)
-----------------------------------------
(6,778) 302,255 15,594 287,335
-----------------------------------------
Increase (decrease) in cash
and cash equivalents during
the period 1,880 15,911 (22,098) (13,229)
Cash and cash equivalents
- Beginning of period 21,817 9,523 45,795 38,663
-----------------------------------------
Cash and cash equivalents
- End of period $ 23,697 $ 25,434 $ 23,697 $ 25,434
-----------------------------------------
-----------------------------------------
Supplemental Information
Cash paid for interest $ 8,789 $ 7,541 $ 26,340 $ 18,628
Class C LP distributions paid
and classified as interest - - 3,161 -
Cash paid for income
taxes - net 5 223 320 600


Contact Information

  • Cineplex Galaxy Income Fund
    Gord Nelson
    Chief Financial Officer
    (416) 323-6602