Cineplex Galaxy Income Fund
TSX : CGX.UN

Cineplex Galaxy Income Fund
Cineplex Galaxy LP

Cineplex Galaxy LP

August 10, 2005 08:26 ET

Cineplex Galaxy Income Fund Reports Second Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 10, 2005) - Cineplex Galaxy Income Fund (the "Fund") (TSX:CGX.UN) today released the financial results of Cineplex Galaxy Limited Partnership (the "Partnership"), for the second quarter of 2005.

Second Quarter Results

- Total revenues for the quarter were $84.1 million compared to $93.4 million for 2004 - down 10.0%.

- Box office revenue decreased by 13.2% compared to the Canadian industry decline of 16.9%.

- Concession per patron hits a record high of $3.22, the highest quarterly result to date, up 5.6% from the prior year.

- Other revenues increased 23.7% to $6.8 million primarily due to higher advertising sales.

- EBITDA for the quarter was $12.8 million compared to $19.8 million for 2004 - down 35.1% due to the decline in box office volume and other one-time charges.

- Distributable cash flow per unit for the quarter was $0.1664 compared to a declared distribution of $0.2874.

"The acquisition of Famous Players is a transforming event in our company's history," said Ellis Jacob, President and CEO. "The opportunity to acquire Famous Players was truly unique and will enable us to substantially grow our business in the most cost effective, efficient and accretive manner possible". Jacob went on to say: "our goal is to be the best motion picture exhibitor in the business and we are now well positioned to achieve this."

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 corporations. EBITDA is calculated by adding back to net income, income tax expense, amortization, interest expense, non-controlling interest and eliminating from net income, interest income.

Second Quarter Results

The acquisition of Famous Players was completed on July 22, 2005 and as such the second quarter results of Cineplex Galaxy do not include any results from Famous Players. The second quarter of 2005 was characterized by a lack of successful film product. Total revenue for the second quarter decreased 10.0% to $84.1 million for the quarter. Cineplex Galaxy's box office revenue was down 13.2% for the quarter, ahead of the Canadian exhibition industry which was down 16.9% for the quarter. Given that we do not control the quality of film product on-screen, our continued focus remains on increasing our concession revenues and other income while controlling expenses. Revenues from the new digital pre-show cinema network launched last quarter are on target and we are very pleased with the results. Concession revenue decreased 9.2% this quarter, as a result of a 14.1% attendance decline that was partially offset by a $0.17 or 5.6% increase in average concession revenue per patron. Our average concession revenue per patron amount of $3.22 was a new record for Cineplex Galaxy. Other income increased 23.7% this quarter, over the prior year to $6.8 million. This now makes four consecutive quarters where we have shown increases in other income greater than 20% versus the prior year.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter decreased 35.1% to $12.8 million. The decline in EBITDA versus the prior year is in part due to the decline in box office volume and the inclusion of one-time charges of approximately $1.0 million related to strategic acquisition opportunities and the establishment of an information technology department in the Canadian office as we repatriated our IT services back from the United States.

Distributable Cash

For the second quarter of 2005 distributable cash flow per unit was $0.1664 and the declared distribution per unit for this period was $0.2874.

Transaction Updates

On July 22, 2005, we completed the transaction to acquire the Famous Players theatre exhibition business from Viacom Inc. The transaction, valued at $500 million, inclusive of approximately $36 million in capital lease obligations, was completed only 40 days following the initial announcement.

The sale of real estate interests to RioCan, as announced on June 29, 2005, has been completed, generating proceeds of $67 million. The proceeds of this sale have been used to repay a portion of the debt financing related to the acquisition of Famous Players.

The divestiture process is proceeding and we expect to announce the completion of this process by the end of the third quarter.

With respect to synergies, we have reduced approximately 35% of the combined administrative team and are on track to achieve our target of $20 million in annual savings within 12 months of the closing of the acquisition.

Currently, we operate two offices, the former Famous Players head office and Cineplex Galaxy's head office. These offices will be merged into one location by the end of the year. We have also begun the Information Technology integration process to combine the operations previously at Famous Players into the Cineplex Galaxy system. This process is expected to be complete by the end of year as well.

About Cineplex Galaxy

The Partnership owns, operates or has an interest in 132 theatres with 1,278 screens (after giving effect to the 34 theatres and 282 screens to be divested) and is the largest film exhibition company in Canada. The Partnership operates theatres with the following five top-tier brands: Cineplex Odeon, Coliseum, Colossus, Galaxy and SilverCity. Proudly Canadian, Cineplex Galaxy Income Fund, which owns approximately 50.2% of Cineplex Galaxy LP, is a public company traded on the Toronto Stock Exchange under Cineplex Galaxy Income Fund (symbol CGX.UN). More information can be found at www.cineplexgalaxy.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 Cineplex Galaxy LP (TSX:CGX.UN) to review the Company's first quarter. Ellis Jacob, Chief Executive Officer and Gord Nelson, Chief Financial Officer, will host the call. The teleconference call is scheduled for:

Wednesday, August 10, 2005

10:30 a.m. Eastern Time

In order to participate in the conference call, please dial (416) 640-4127 or outside of Toronto dial 1-800-814-4862 at least ten minutes prior to 10:30 a.m. Eastern Time on Wednesday, August 10, 2005.

- 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 21131991#. The replay will begin at 1:30 p.m. on Wednesday, August 10, 2005 and end at 11:59 p.m. ET on Wednesday, August 17, 2005.

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

- Thank you in advance for your interest and participation.



Cineplex Galaxy Limited Partnership
Consolidated Balance Sheets
---------------------------------------------------------------------
(expressed in thousands of Canadian dollars)

June 30, December 31,
2005 2004
(Unaudited)
Assets

Current assets
Cash and cash equivalents $ 9,523 $ 38,663
Restricted cash - 7,637
Accounts receivable 7,411 10,937
Inventories 2,083 2,123
Prepaid expenses and other current assets 21,586 2,680
Due from related parties 7 4
--------------------------

40,610 62,044

Property, equipment and leaseholds 230,146 234,854
Goodwill 22,942 22,942
Future income taxes 1,698 1,615
Deferred charges and other intangibles 5,398 3,975
--------------------------

$ 300,794 $ 325,430
--------------------------
--------------------------
Liabilities

Current liabilities
Accounts payable and accrued expenses $ 24,551 $ 27,654
Distributions payable 3,390 10,996
Due to related parties - 373
Income taxes payable 21 153
Deferred revenue 6,888 13,580
Current portion of long-term debt 51 52
--------------------------

34,901 52,808

Long-term debt 141,000 125,512
Due to Cineplex Galaxy Trust 100,000 100,000
Accrued pension liability 529 589
Other liabilities 88,048 89,784
--------------------------

364,478 368,693

Partners' Deficiency

Partners' deficit (63,684) (43,263)
--------------------------

$ 300,794 $ 325,430
--------------------------
--------------------------



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

Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004

Revenue
Box office $ 54,029 $ 62,275 $ 105,427 $ 116,110
Concessions 23,324 25,699 44,950 46,830
Other 6,767 5,469 12,002 9,542
---------------------------------------

84,120 93,443 162,379 172,482
---------------------------------------

Expenses
Film cost 29,449 33,407 55,346 60,047
Cost of concessions 4,776 5,060 9,221 9,340
Occupancy 13,665 13,798 27,598 27,035
Other theatre operating
expenses 18,829 17,605 35,798 33,982
General and administrative 4,514 3,651 9,408 6,918
Management fee 71 170 224 335
---------------------------------------

71,304 73,691 137,595 137,657
---------------------------------------

Income before undernoted 12,816 19,752 24,784 34,825

Amortization 6,690 5,607 13,214 11,042

Gain on disposal of theatre
assets (19) (36) (19) (42)

Interest on long-term debt 2,344 1,904 4,550 3,905

Interest on loan from
Cineplex Galaxy Trust 3,500 3,500 7,000 7,000

Interest income (60) (61) (178) (155)
---------------------------------------

Income before income taxes 361 8,838 217 13,075

Current income taxes 119 61 174 97
---------------------------------------

Net income for the period $ 242 $ 8,777 $ 43 $ 12,978
---------------------------------------
---------------------------------------



Cineplex Galaxy Limited Partnership
Consolidated Statements of Partner's Deficiency
(Unaudited)
---------------------------------------------------------------------
(expressed in thousands of Canadian dollars)

For the six months ended June 30, 2005
Accum-
Accum- ulated
Partners' ulated distri-
capital Deficit earnings butions Total
Balance -
January 1,
2005 $ 110,203 $ (147,795) $ 38,949 $ (44,620) $ (43,263)

Distributions
declared - - - (20,342) (20,342)
Investment in
Cineplex
Galaxy Income
Fund units (282) - - - (282)
LTIP
compensation
obligation 160 - - - 160
Net income for
the period - - 43 - 43
-----------------------------------------------------

Balance -
June 30, 2005 $ 110,081 $ (147,795) $ 38,992 $ (64,962) $ (63,684)
-----------------------------------------------------
-----------------------------------------------------



For the six months ended June 30, 2004
Accum-
Accum- ulated
Partners' ulated distri-
capital Deficit earnings butions Total

Balance -
January 1,
2004, as
previously
reported $ 110,425 $ (147,698) $ 8,707 $ (3,937) $ (32,503)

Adoption of
asset
retirement
obligation
standard - (121) (6) - (127)
-----------------------------------------------------

Balance -
January 1,
2004, as
restated 110,425 (147,819) 8,701 (3,937) (32,630)

Distributions
declared - - - (20,342) (20,342)
Formation of
Partnership
issuance costs (102) - - - (102)
Contribution of
capital on
acquisition of
theatres - 24 - - 24
Net income for
the period - - 12,978 - 12,978
-----------------------------------------------------

Balance -
June 30, 2004 $ 110,323 $ (147,795) $ 21,679 $ (24,279) $ (40,072)
-----------------------------------------------------
-----------------------------------------------------



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

Three Three Six Six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004

Cash provided by (used in)
Operating activities
Net income for the period $ 242 $ 8,777 $ 43 $ 12,978
Adjustments to reconcile net
income to net cash used
in operating activities
Amortization of property,
equipment and leaseholds 6,690 5,607 13,214 11,042
Amortization of tenant
inducements and rent
averaging liabilities (1,426) (1,285) (2,727) (2,481)
Amortization of debt
issuance costs 234 210 469 414
Gain on disposal of
theatre assets (19) (36) (19) (42)
Changes in operating assets
and liabilities (2,532) (3,802) (8,861) (18,735)
----------------------------------------

3,189 9,471 2,119 3,176
----------------------------------------
Investing activities
Proceeds from sale of
theatre assets 19 44 25 50
Capital expenditures (3,225) (3,386) (8,366) (5,458)
Deposit paid for subsequent
acquisition (17,500) - (17,500) -
Cash received from
segregated account for
distribution - - 8,297 -
Cash transferred to
segregated account for
future distributions - (2,075) (691) (3,458)
----------------------------------------

(20,706) (5,417) (18,235) (8,866)
----------------------------------------
Financing activities
Borrowings under credit
facility 18,500 1,500 19,500 5,500
Formation of Partnership
issuance costs paid - (102) - (102)
Distributions paid (10,170) (8,142) (27,946) (17,432)
Tenant inducements 605 250 1,896 550
Repayment of long-term debt (4,000) (15) (4,013) (25)
Investment in Cineplex Galaxy
Income Fund units - - (423) -
Deferred financing fees (2,038) - (2,038) -
----------------------------------------

2,897 (6,509) (13,024) (11,509)
----------------------------------------

Decrease in cash and cash
equivalents during the
period (14,620) (2,455) (29,140) (17,199)

Cash and cash equivalents -
Beginning of period 24,143 28,783 38,663 43,527
----------------------------------------

Cash and cash equivalents -
End of period $ 9,523 $ 26,328 $ 9,523 $ 26,328
----------------------------------------
----------------------------------------

Supplemental information
Cash paid for interest $ 5,693 $ 5,005 $ 11,087 $ 9,907
Cash paid for income
taxes - net $ 313 $ 44 $ 377 $ 104



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

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

Three months Six months
ended June 30, ended June 30,
2005 2004 2005 2004
--------------------------------------------
--------------------------------------------

Net income $242 $8,777 $43 $12,978

Amortization 6,690 5,607 13,214 11,042
Interest on long-term
debt 2,344 1,904 4,550 3,905
Interest on loan from
Cineplex Galaxy Trust 3,500 3,500 7,000 7,000
Interest income (60) (61) (178) (155)
Income tax expense 119 61 174 97
--------------------------------------------

EBITDA $12,835 $19,788 $24,803 $34,867



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

Three months Six months
ended June 30, ended June 30,
2005 2004 2005 2004
--------------------------------------------
--------------------------------------------

Cash used in operating
activities $3,189 $9,471 $2,119 $3,176
Less:
Changes in operating
assets and liabilities
(i) 2,532 3,802 8,861 18,735
Total Capital
expenditures (3,225) (3,386) (8,366) (5,458)
Add:
Interest on loan from
Cineplex Galaxy Trust
(ii) 3,500 3,500 7,000 7,000
New theatre and Project
capital expenditures
(iii) 1,279 2,226 5,474 3,946
POS/Rebranding capital
expenditures (iv) 642 - 958 -
--------------------------------------------

Distributable $7,917 $15,613 $16,046 $27,399
--------------------------------------------
--------------------------------------------

Number of Units
outstanding
(fully diluted) 47,566,974 47,566,974 47,566,974 47,566,974

Distributable cash
per Unit
(fully diluted) $0.1664 $0.3282 $0.3373 $0.5760

(i) Changes in operating assets and liabilities are not considered
a source of distributable cash
(ii) Subject to "Catch-up Payment" provision and is considered part
of distributable cash
(iii) The total capital expenditures noted above includes new theatre
and maintenance capital expenditures of which the new theatre
capital expenditures are funded out of the Partnership's
Development Facility and therefore are added back to calculate
distributable cash
(iv) Point-of-Sale ("POS") and rebranding capital expenditures are
funded out of a $5.5 million reserve fund established on
November 26, 2003.


Contact Information

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