Cineplex Galaxy Income Fund
TSX : CGX.UN

Cineplex Galaxy Income Fund

August 04, 2006 07:30 ET

Cineplex Galaxy Income Fund Reports Second Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 4, 2006) -

Not for release over US newswire services

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

Second Quarter Results

- Distributable income per unit for the quarter increased 204% to $0.3394 from $0.1664 reported in the prior year.

- Total revenues for the quarter were $183.6 million compared to $75.2 million reported for 2005 and $174.6 million on a pro forma basis for 2005.

- Adjusted EBITDA for the quarter was $27.2 million compared to $11.5 million reported for 2005 and $12.9 million on a pro forma basis for 2005.

- Adjusted EBITDA margin for the quarter was 14.8% compared to 7.4% on a pro forma basis for 2005.

"We are very pleased with our second quarter results, especially when compared to the Canadian industry results," said Ellis Jacob, President and CEO. "Although box office revenues for the Canadian industry were up only 0.7% in the second quarter, Cineplex Entertainment's box office revenues were up 3.0%. We are attributing this increase to a combination of film product and increased awareness for the movie-going experience resulting from our recent GO BIG marketing campaign. With the increase in revenues and the continued achievement of acquisition-related synergies, our distributable income per unit for the quarter increased 204% to $0.3394, our adjusted EBITDA increased 210.9% to $27.2 million and our adjusted EBITDA margin for the quarter doubled to 14.8%."

Second Quarter Results

Total revenues for the first quarter increased to $183.6 million for the quarter from $75.2 million reported and $174.6 million on a pro forma basis for the prior year. The revenue contribution from Famous Players for the quarter was $99.2 million. Same store box office revenues increased 5.4%. With the inclusion of the Famous Players locations, our combined average ticket price was $7.87 for the quarter versus $7.50 reported and $7.85 on a pro forma basis for the prior year.

Our combined average concession revenue per patron of $3.72 equalled the new record set during the first quarter and compared to $3.26 reported and $3.53 on a pro forma basis for the prior year. Other income of $15.8 million compared to $6.1 million reported and $14.2 million on a pro forma basis for the prior year. As with the first quarter, 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 and modifications to the structuring of game supplier relationships.

Adjusted EBITDA for the first quarter increased to $27.2 million from a reported Adjusted EBITDA of $11.5 million and a pro forma Adjusted EBITDA of $12.9 million for the prior year. The Adjusted EBDITA margin of 14.8% increased significantly from the 7.4% 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 second quarter, distributable income per unit increased 204% to $0.3394 as compared to $0.1664 reported in the prior year. The declared distributions per unit for this period were $0.2874.

Trustee Changes

The Fund announced the resignation of John Bailey from the Board of Trustees. Ellis Jacob, President and CEO said, "On behalf of the Board I would like to thank John for his invaluable contributions especially during the past year, integrating the Famous Players business into Cineplex Entertainment."

The Fund also announced the appointment of Krystyna T. Hoeg, President and Chief Executive Officer of Corby Distilleries Limited, to the Board of Trustees. Ms. Hoeg will also assume a role on the Audit Committee of the Fund. "Krystyna's extensive business experience and many talents will be a tremendous addition to our Board. We are very pleased that she will be joining us and believe her expertise will add great value to our business," said Ellis Jacob.

This news release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements concerning synergies and divestitures 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; 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 1,301 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 58.8% of Cineplex Entertainment LP, are traded on the Toronto Stock Exchange under the symbol CGX.UN. More information can be found at 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 second quarter. Ellis Jacob, Chief Executive Officer and Gord Nelson, Chief Financial Officer, will host the call. The teleconference call is scheduled for:



Friday, August 4, 2006
10:00 a.m. Eastern Time


In order to participate in the conference call, please dial 416-644-3415 or outside of Toronto dial 1-800-796-7558 at least five to ten minutes prior to 10:00 a.m. Eastern Time on Friday, August 4th, 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 21194966#. The replay will begin at 12:00 p.m. ET on Friday, August 4th, 2006 and end at 11:59 p.m. ET on Friday, August 11, 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 Operations (including Pro Forma)
(Unaudited)
---------------------------------------------------------------------
---------------------------------------------------------------------
(expressed in thousands of Canadian dollars)

Pro Pro
Forma Forma
Three Three Three Six Six Six
months months months months months months
ended ended ended ended ended ended
June 30, June 30, June 30, June 30, June 30, June 30,
2006 2005 2005 2006 2005 2005

Revenue

Box
office $ 114,013 $ 110,723 $ 48,152 $ 217,027 $ 212,115 $ 93,919

Concess-
ions 53,849 49,750 20,909 102,881 93,751 40,305

Other 15,780 14,152 6,136 26,396 26,361 11,010
---------------------------- -----------------------------

183,642 174,625 75,197 346,304 332,227 145,234
---------------------------- -----------------------------
Expenses

Film cost 60,384 60,651 26,234 111,691 111,330 49,320

Cost of
concess-
ions 11,793 10,040 4,317 21,489 18,432 8,341

Occupancy 35,879 37,948 11,849 72,904 75,850 23,912

Other
theatre
operating
expenses 39,938 41,680 16,704 78,207 85,424 31,708

General and
administ-
rative 8,436 11,286 4,513 16,519 25,436 9,406

Management
fee - 71 71 - 224 224
---------------------------- -----------------------------

156,430 161,676 63,688 300,810 316,696 122,911
---------------------------- -----------------------------

Income
before
undernoted 27,212 12,949 11,509 45,494 15,531 22,323

Amorti-
zation 15,834 17,099 6,364 31,072 34,432 12,577
Gain on
disposal
of
theatre
assets (1,173) (64) (19) (989) (97) (19)
Interest on
long-term
debt and
capital
lease
obligations 8,026 7,265 2,344 15,440 14,749 4,550
Interest on
loan from
Cineplex
Galaxy
Trust 3,500 3,500 3,500 7,000 7,000 7,000
Interest
Income (156) (109) (60) (260) (306) (178)
---------------------------- -----------------------------
Income
(loss)
before
income
taxes,
non-
controlling
interest
and
discontinued
operations 1,181 (14,742) (620) (6,769) (40,247) (1,607)
Provision
for
current
income
taxes (346) 119 119 (291) 174 174
Provision
for future
income taxes 589 - - 589 - -
---------------------------- -----------------------------

Provision
for income
taxes 243 119 119 298 174 174
Income
(loss)
before
non-
controlling
interest and
discontinued
operations 938 (14,861) (739) (7,067) (40,421) (1,781)
Non-
controlling
interest 352 (689) - 389 (1,016) -
---------------------------- -----------------------------
Income
(loss) from
continuing
operations 1,290 (15,550) (739) (6,678) (41,437) (1,781)
Income from
discontinued
operations 1,607 1899 981 649 1,024 1,824
---------------------------- -----------------------------

Net income
(loss)
for the
period $ 2,897 $ (13,651) $ 242 $ (6,029) $(40,413) $ 43
---------------------------- -----------------------------


Cineplex Entertainment Limited Partnership
Consolidated Supplemental Information
(Unaudited)
---------------------------------------------------------------------
---------------------------------------------------------------------
(expressed in thousands of Canadian dollars)

Reconciliation to Adjusted EBITDA

Three months ended June 30, Six months ended June 30,

Pro Forma Pro Forma
2006 2005 2005 2006 2005 2005
-------------------------- --------------------------
Net income
(loss) $2,897 ($13,651) $242 ($6,029) ($40,413) $43

Amortization 15,834 17,099 6,364 31,072 34,432 12,577
Interest on
long-term debt 8,026 7,265 2,344 15,440 14,749 4,550
Interest on
loan from
Cineplex
Galaxy Trust 3,500 3,500 3,500 7,000 7,000 7,000
Interest income (156) (109) (60) (260) (306) (178)
Income tax
expense 243 119 119 298 174 174
-------------------------- --------------------------

EBITDA $30,344 $14,223 $12,509 $47,521 $15,636 $24,166

Non-controlling
interest (352) 689 - (389) 1,016 -
Income from
discontinued
operations (1,607) (1,899) (981) (649) (1,024) (1,824)
Gain on
disposal of
theatre
assets (1,173) (64) (19) (989) (97) (19)
Lease shutdown
costs - - - - 3900 -
-------------------------- --------------------------

Adjusted EBITDA $27,212 $12,949 $11,509 $45,494 $19,431 $22,323
-------------------------- --------------------------
-------------------------- --------------------------


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 months For the six months
ended June 30, ended June 30,
--------------------- -------------------
2006 2005 2006 2005
Cash used in operating
activities (i) $15,109 $6,710 ($9,010) $5,144
Less: Changes in
operating assets and
liabilities (ii) 4,487 (384) 36,945 7,732
Tenant Inducements (iii) (2,907) (605) (3,881) (1,896)
Capital lease payments (339) - (666) -
Dividends paid by
subsidiary to non
controlling interest (196) - (196) -
Maintenance capital
expenditures (iv) (1,057) (1,304) (1,906) (1,934)
Add: Interest on loan
from Cineplex
Galaxy Trust (v) 3,500 3,500 7,000 7,000
Non cash components in
operating
assets and liabilities
(vi) 312 - 632 -
Expenses funded through
Integration and
restructuring reserve
(vii) 32 - 76 -
--------------------- -------------------

Distributable cash $18,941 $7,917 $28,994 $16,046
--------------------- -------------------
--------------------- -------------------

Number of LP Units
outstanding (viii) 55,809,762 47,566,974 55,481,913 47,566,974

Distributable cash
per LP Unit $0.3394 $0.1664 $0.5226 $0.3373



(i) Comparative amounts for tenant inducements have been reclassified from a financing activity to an operating activity in the consolidated statements of cash flows to conform to the current year's financial statement presentation.

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

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

(iv) 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.

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

(vi) 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.

(vii) 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.

(viii) 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
June 30, December 31,
2006 2005
(Unaudited)
Assets

Current assets
Cash and cash equivalents $ 21,276 $ 45,190
Accounts receivable 28,955 21,752
Inventories 3,778 4,162
Prepaid expenses and other current
assets 10,830 3,803
Due from related parties 66 32
Assets held for sale - current 639 789
---------- -----------

65,544 75,728

Property, equipment and leaseholds 447,176 435,002

Goodwill 201,009 206,218

Intangible assets 60,706 63,464

Future income taxes 4,950 5,539

Deferred charges 8,713 9,319

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

$ 788,098 $ 798,751
---------- -----------
---------- -----------

Liabilities

Current liabilities
Accounts payable and accrued expenses $ 71,154 $ 88,243
Distributions payable 4,308 4,117
Due to related parties 384 2,442
Income taxes payable 298 667
Deferred revenue 30,561 41,003
Current portion of capital lease
obligations 1,418 1,383
Current portion of long-term debt 26,418 35
Liabilities related to property held for
sale - current 419 843
---------- -----------

134,960 138,733

Capital lease obligations -- long-term 37,160 38,078

Long-term debt 235,000 243,500

Due to Cineplex Galaxy Trust 100,000 100,000

Accrued pension liability 4,725 5,229

Other liabilities 130,712 123,950

Class C Limited Partnership units -
liability component 98,786 97,555

Liabilities related to property held for
sale -- long-term 10 3,235
---------- -----------

741,353 750,280
---------- -----------

Non-controlling interest 444 1,030
---------- -----------

Partners' Equity 46,301 47,441
---------- -----------

$ 788,098 $ 798,751
---------- -----------
---------- -----------

Cineplex Entertainment Limited Partnership
Consolidated Statements of Operations
(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,
2006 2005 2006 2005
Revenue
Box office $ 114,013 $ 48,152 $ 217,027 $ 93,919
Concessions 53,849 20,909 102,881 40,305
Other 15,780 6,136 26,396 11,010
---------------------- ----------------------
183,642 75,197 346,304 145,234
---------------------- ----------------------
Expenses
Film cost 60,384 26,234 111,691 49,320
Cost of concessions 11,793 4,317 21,489 8,341
Occupancy 35,879 11,849 72,904 23,912
Other theatre
operating expenses 39,938 16,704 78,207 31,708
General and
administrative 8,436 4,513 16,519 9,406
Management fee - 71 - 224
---------------------- ----------------------
156,430 63,688 300,810 122,911
---------------------- ----------------------
Income before
undernoted 27,212 11,509 45,494 22,323
Amortization 15,834 6,364 31,072 12,577
Gain on disposal of
theatre assets (1,173) (19) (989) (19)
Interest on
long-term debt and
capital
lease obligations 8,026 2,344 15,440 4,550
Interest on loan
from Cineplex Galaxy
Trust 3,500 3,500 7,000 7,000
Interest income (156) (60) (260) (178)
---------------------- ----------------------
Income (loss) before
income taxes, non
controlling interest
and discontinued
operations 1,181 (620) (6,769) (1,607)
---------------------- ----------------------
Provision for
(recovery of) income
taxes
Current (346) 119 (291) 174
Future 589 - 589 -
---------------------- ----------------------
243 119 298 174
---------------------- ----------------------
Income (loss) before
non-controlling
interest and
discontinued
operations 938 (739) (7,067) (1,781)
Non-controlling
interest 352 - 389 -
---------------------- ----------------------
Income (loss) from
continuing
operations 1,290 (739) (6,678) (1,781)

Income from
discontinued
operations 1,607 981 649 1,824
---------------------- ----------------------
Net income (loss)
for the period $ 2,897 $ 242 $ (6,029) $ 43
---------------------- ----------------------


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

For the six months ended June 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 31,800 - - - 31,800

Issuance of
Partnership
units
- costs (2,056) - - - (2,056)
Distributions
declared - - - (24,892) (24,892)
Vesting of
Fund
Units 142 - - - 142
LTIP
compensation
obligation (105) - - - (105)
Net loss for
the period - - (6,029) - (6,029)
--------------------------------------------------------

Balance -
June
30, 2006 $ 262,756 $ (147,795) $ 45,896 $ (114,556) 46,301
--------------------------------------------------------
--------------------------------------------------------


For the six months ended June 30, 2005

Partners' Accumulated Accumulated
capital Deficit earnings distributions Total
Balance -
January 1,
2005 $ 110,203 $ (147,795) $ 38,949 $ (44,620) $(43,263)
Distri-
butions
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)
--------------------------------------------------------
--------------------------------------------------------


Cineplex Entertainment 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,
2006 2005 2006 2005

Cash provided by (used in)

Operating activities
Net income (loss) for the
period $ 2,897 $ 242 $ (6,029) $ 43
Adjustments to reconcile
net income to
net cash used in
operating activities
Amortization of property,
equipment and
leaseholds, deferred
charges and
intangible assets 15,834 6,690 31,072 13,214
Amortization of tenant
inducements and
rent averaging
liabilities (189) (1,426) (273) (2,727)
Amortization of debt
issuance costs 667 234 1,319 469
Gain on disposal of
theatre assets (2,757) (19) (2,235) (19)
Future income taxes 589 - 589 -
Non-controlling interest (352) - (389) -
Tenant inducements 2,907 605 3,881 1,896
Change in operating
assets and liabilities (4,487) 384 (36,945) (7,732)
------------------ ---------------------
15,109 6,710 (9,010) 5,144
------------------ ---------------------
Investing activities
Proceeds from sale of
theatre assets 150 19 722 25
Capital expenditures (20,956) (6,141) (36,062) (9,495)
Theatre shut down payment (900) - (900) -
Deposit paid for Famous
Players acquisition - (17,500) - (17,500)
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)
------------------ ---------------------
(21,706) (23,622) (37,340) (19,364)
------------------ ---------------------
Financing activities
Borrowings under credit
facility 20,400 18,500 51,000 19,500
Issuance of Partnership
units - net of
issuance costs 30,166 - 30,166 -
Distributions paid (12,350) (10,170) (24,700) (27,946)
Dividends paid to
non-controlling interest (196) - (196) -
Payments under capital
leases (339) - (666) -
Repayment of credit
facility (30,108) (4,000) (33,117) (4,013)
Investment in Cineplex
Galaxy Income
Fund units - - - (423)
Deferred financing fees (115) (2,038) (115) (2,038)
------------------ ---------------------
7,458 2,292 22,372 (14,920)
------------------ ---------------------
Increase (decrease) in
cash and cash
equivalents during the
period 861 (14,620) (23,978) (29,140)
Cash and cash equivalents
- Beginning
of period 20,956 24,143 45,795 38,663
------------------ ---------------------
Cash and cash equivalents
- End of
period $ 21,817 $ 9,523 $ 21,817 $ 9,523
------------------ ---------------------
------------------ ---------------------
Supplemental Information
Cash paid for interest $ 8,875 $ 5,693 $ 17,551 $ 11,087
Class C LP distributions
paid and classified as
interest 3,161 - 3,161 -
Cash paid for income
taxes - net 263 313 315 377



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