TORONTO, ONTARIO--(Marketwired - Aug. 8, 2013) - Cineplex Inc. ("Cineplex") (TSX:CGX) today released its financial results for the three and six months ended June 30, 2013.
Second Quarter Results
| 2013 | 2012 (i) | Period over Period Change (ii) |
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| Total Revenues | $ | 301.6 million | $ | 263.7 million | 14.4 | % | ||
| Attendance | 18.6 million | 17.1 million | 8.6 | % | ||||
| Other Revenues | $ | 37.6 million | $ | 27.5 million | 36.6 | % | ||
| Net Income | $ | 28.5 million | $ | 21.0 million | 36.2 | % | ||
| Adjusted EBITDA (iii) | $ | 58.7 million | $ | 47.3 million | 24.2 | % | ||
| Adjusted EBITDA Margin (iii) | 19.5 | % | 17.9 | % | 1.6 | % | ||
| Adjusted Free Cash Flow per Share (iii) | $ | 0.7347 | $ | 0.4816 | 52.6 | % | ||
| Basic Earnings per Share | $ | 0.45 | $ | 0.34 | 32.4 | % | ||
| Diluted Earnings per Share | $ | 0.45 | $ | 0.34 | 32.4 | % | ||
Year to Date Results
| 2013 | 2012 (i) | Period over Period Change (ii) |
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| Total Revenues | $ | 549.7 million | $ | 512.7 million | 7.2 | % | ||
| Attendance | 34.8 million | 34.3 million | 1.6 | % | ||||
| Other Revenues | $ | 64.6 million | $ | 50.0 million | 29.1 | % | ||
| Net Income | $ | 37.4 million | $ | 36.1 million | 3.6 | % | ||
| Adjusted EBITDA (iii) | $ | 90.4 million | $ | 88.4 million | 2.3 | % | ||
| Adjusted EBITDA Margin (iii) | 16.4 | % | 17.2 | % | -0.8 | % | ||
| Adjusted Free Cash Flow per Share (iii) | $ | 1.1186 | $ | 0.9493 | 17.8 | % | ||
| Basic Earnings per Share | $ | 0.60 | $ | 0.60 | - | % | ||
| Diluted Earnings per Share | $ | 0.59 | $ | 0.60 | -1.7 | % | ||
| i. | Effective January 1, 2013, Cineplex implemented International Financial Reporting Standard ("IFRS") 11, Joint Arrangements, retrospectively. As a result, certain comparative items presented in this news release for 2012 have been revised. |
| ii. | Period over period change calculated based on thousands of dollars except percentage and per share values. Changes in percentage amounts are calculated as 2013 value less 2012 value. |
| iii. | Adjusted EBITDA, adjusted EBITDA margin and adjusted free cash flow per common share of Cineplex are measures that do not have a standardized meaning under generally accepted accounting principles ("GAAP"). These measures as well as other non-GAAP financial measures monitored by Cineplex are defined in the 'Non-GAAP Financial Measures' section in this news release. |
"It was a record quarter for Cineplex," said Ellis Jacob, President and CEO, Cineplex Inc. "New all-time records were set for total revenues and adjusted EBITDA. Media revenues continued to be strong increasing 44.7% to $26.4 million. Our SCENE program continued to increase its membership adding a further 200,000 members to reach 4.7 million. Increased attendance resulting from strong film product during the period and increased revenues generated from concession, box office and media, all contributed to the tremendous gains in adjusted EBITDA.
"In addition to this very strong financial performance, we continued to strengthen our core exhibition business with the announcement of our agreement to acquire 26 Empire theatres. This proposed acquisition will enable us to extend our brand into Atlantic Canada, which will provide us with a truly national presence from coast to coast. It also provides growth opportunities for SCENE, cineplex.com, the Cineplex mobile app and other programs. We also launched SuperTicket, which is the world's first-ever bundled offering from multiple studios that enables movie-goers to purchase a movie admission ticket and pre-order the UltraViolet digital download of a movie at the same time. The pre-ordered digital version will be available before the movie is released for home viewing and will also include a variety of additional value, such as bonus SCENE points and more that will vary by film. Subsequent to the quarter end, we announced our offer to acquire a market leading in-store digital signage company, EK3 Technologies Inc. This acquisition complements our existing Cineplex Digital Media business and combined with EK3, will make us a leader in the indoor digital signage industry and provide a platform for significant growth throughout North America."
KEY DEVELOPMENTS IN THE SECOND QUARTER OF 2013
During the second quarter of 2013, the board of directors of Cineplex (the "Board") announced a monthly dividend increase of 6.7% to $0.1200 per Share ($1.44 on an annual basis) up from $0.1125 per Share ($1.35 on an annual basis) effective with the May 2013 dividend. Also during the second quarter of 2013, Cineplex announced that it had agreed to acquire 26 theatres from Empire Theatres Ltd ("Empire"). The closing of the transaction is subject to customary conditions, including receipt of relevant regulatory approval and is expected to close in the third quarter of 2013.
The following describes certain key business initiatives and results undertaken and achieved during the second quarter of 2013 in each of Cineplex's core business areas:
THEATRE EXHIBITION
- Second quarter BPP was $9.36, an increase of 2.7% over the prior year period, representing a quarterly record for Cineplex, $0.18 higher than the previous quarterly record set in the fourth quarter of 2012.
- Opened Galaxy Cinemas Sarnia in Sarnia, Ontario and acquired Cineplex Cinemas Empress Walk in Toronto, Ontario. These two theatres replaced existing Cineplex theatre assets which closed with the opening of the new theatres.
- Continued the expansion of UltraAVX, Cineplex's premium large format experience targeting patrons looking for an enhanced presentation experience, with six new UltraAVX auditoriums added to the circuit in the second quarter of 2013. At June 30, 2013, Cineplex had 50 UltraAVX auditoriums.
- Added 3D screens in strategic locations across the circuit, increasing the number of 3D screens to 632 at June 30, 2013.
MERCHANDISING
- Second quarter CPP was $4.81, an increase of 3.2% over the prior year period, and a quarterly record for Cineplex, exceeding the previous record of $4.69 set in the first quarter of 2013.
- Continued the retail branded outlet optimization at theatre locations, with the continued expansion of Cineplex's Outtakes and Poptopia branded locations, with 13 new or rebranded outlets opened in the second quarter.
- Renewed the annual summer concession program, this year entitled Your Name in Lights, reaching across all Cineplex food and beverage outlets and launched key partner promotions with Toys R Us and the Calgary Stampede during the period.
MEDIA
- Media revenues in the second quarter of 2013 exceeded the same period in 2012 by 44.7%. Showtime and digital pre-show revenues were the major contributors to the increase.
- Top advertising categories in the quarter included automotive, electronics and telecommunications, all of which recorded large increases in revenue compared to the prior year period.
- Entered into an agreement to provide specialty media services to ten Oxford Property malls and shopping centres.
- During the second quarter of 2013 Cineplex Media hosted its first Upfront presentation at the Scotiabank Theatre in downtown Toronto, with agencies and clients in attendance.
ALTERNATIVE PROGRAMMING
- Alternative programming events in the second quarter of 2013 included performances from the Metropolitan Opera live from New York, the National Theatre in London including performances of The Audience featuring Helen Mirren, sports programming as well as film and concert performances.
- Distributed and presented the faith-based, family-focused film Home Run in select theatres.
INTERACTIVE
- Launched SuperTicket, a first-ever bundled offering that allows movie-goers to purchase a movie admission ticket and pre-order the UltraViolet digital download of a movie at the same time. The first feature film to offer SuperTicket was Pacific Rim, released in July, with additional releases to be announced in the future.
- The Cineplex online store ("Cineplex Store") added new content partners and launched high definition content for electronic sell-through and video on demand ("VoD") digital movies.
- Cineplex.com registered a 36.6% increase in page views and a 27.4% increase in visits in the second quarter of 2013 compared to the prior year period, registering 127 million page views and 20 million visits during the quarter.
- As of June 30, 2013, the Cineplex app has been downloaded 6.5 million times and recorded 155.7 million app session. The app now reaches 11.4% of Canadian mobile subscribers.
- Cineplex was recognized with a national industry award for the Cineplex eGift Card and related marketing program, along with its partner Buyatab Online, at the 2013 PX Prepaid & Payment Awards.
LOYALTY
- Membership in the SCENE loyalty program surpassed the 4.7 million member mark during the quarter, increasing by approximately 0.2 million members during the second quarter of 2013.
- SCENE ran programs with various partners including Adidas, Cara Foods, Rogers, Virgin Mobile and Colgate-Palmolive during the second quarter of 2013.
OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013
Total revenues
Total revenues for the three months ended June 30, 2013 increased $38.0 million (14.4%) to $301.6 million as compared to the prior year period. Total revenues for the six months ended June 30, 2013 increased $37.1 million (7.2%) to $549.7 million as compared to the prior year period. A discussion of the factors affecting the changes in box office, concession and other revenues for the period is provided on the following pages.
Non-GAAP measures discussed throughout this news release, such as adjusted EBITDA, adjusted free cash flow, attendance, BPP, premium priced product, same store metrics, CPP, film cost percentage, concession cost percentage and concession margin per patron are defined and discussed in the 'Non-GAAP Financial Measures' section in this news release.
Box office revenues
The following table highlights the movement in box office revenues, attendance and BPP for the quarter and the year to date (in thousands of Canadian dollars, except attendance reported in thousands of patrons, and per patron amounts, unless otherwise noted):
| Box office revenues | Second Quarter | Year to Date | ||||||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
| Box office revenues | $ | 174,383 | $ | 156,226 | 11.6 | % | $ | 319,548 | $ | 305,639 | 4.6 | % | ||||
| Attendance (i) | 18,629 | 17,146 | 8.6 | % | 34,820 | 34,273 | 1.6 | % | ||||||||
| Box office revenue per patron (i) | $ | 9.36 | $ | 9.11 | 2.7 | % | $ | 9.18 | $ | 8.92 | 2.9 | % | ||||
| BPP excluding premium priced product (i) | $ | 8.37 | $ | 8.23 | 1.7 | % | $ | 8.30 | $ | 8.18 | 1.5 | % | ||||
| Canadian industry revenues (ii) | 4.0 | % | -4.1 | % | ||||||||||||
| Same store box office revenues (i) | $ | 161,599 | $ | 153,609 | 5.2 | % | $ | 295,571 | $ | 301,012 | -1.8 | % | ||||
| Same store attendance (i) | 17,341 | 16,877 | 2.7 | % | 32,365 | 33,769 | -4.2 | % | ||||||||
| % Total box from premium priced product (i) | 42.2 | % | 36.0 | % | 6.2 | % | 38.9 | % | 31.6 | % | 7.3 | % | ||||
| (i) See 'Non-GAAP Financial Measures' section in this news release |
| (ii) The Movie Theatre Association of Canada ("MTAC") reported that the Canadian exhibition industry reported a box office revenue increase of 2.8% for the period from March 29, 2013 to June 27, 2013 as compared to the period from March 30, 2012 to June 28, 2012. On a basis consistent with Cineplex's calendar reporting period (April 1 to June 30), the Canadian industry box office revenue increase is estimated to be 4.0%. MTAC reported that the Canadian exhibition industry reported a box office revenue decrease of 4.1% for the period from December 29, 2012 to June 27, 2013 as compared to the period from December 30, 2011 to June 28, 2012 . On a basis consistent with Cineplex's calendar reporting period (January 1 to June 30), the Canadian industry box office revenue is estimated to also be a decrease of 4.1%. |
| Box office continuity | Second Quarter | Year to Date | ||||||||
| Box Office | Attendance | Box Office | Attendance | |||||||
| 2012 as reported | $ | 156,226 | 17,146 | $ | 305,639 | 34,273 | ||||
| Same store attendance change | 4,219 | 464 | (12,513 | ) | (1,404 | ) | ||||
| Impact of same store BPP change | 3,771 | - | 7,072 | - | ||||||
| New and acquired theatres | 10,312 | 1,051 | 19,929 | 2,042 | ||||||
| Disposed and closed theatres | (145 | ) | (32 | ) | (579 | ) | (91 | ) | ||
| 2013 as reported | $ | 174,383 | 18,629 | $ | 319,548 | 34,820 | ||||
Second Quarter
| Second Quarter 2013 Top Cineplex Films |
IMAX | 3D | % Box |
Second Quarter 2012 Top Cineplex Films |
IMAX | 3D | % Box |
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| 1 | Iron Man 3 | X | X | 13.6 | % | 1 | Marvel's The Avengers | X | X | 22.6 | % | |
| 2 | Star Trek: Into Darkness | X | X | 9.6 | % | 2 | The Hunger Games | X | 7.7 | % | ||
| 3 | Man of Steel | X | X | 7.9 | % | 3 | Men in Black III | X | X | 5.5 | % | |
| 4 | Fast and Furious 6 | X | 6.8 | % | 4 | Madagascar 3: Europe's Most Wanted | X | X | 5.0 | % | ||
| 5 | The Great Gatsby | X | 4.4 | % | 5 | Prometheus | X | X | 4.7 | % | ||
Box office revenues increased $18.2 million, or 11.6%, to $174.4 million during the second quarter of 2013, compared to $156.2 million recorded in the same period in 2012. The increase was primarily due to a 8.6% increase in attendance as a result of the strong depth of the film slate during the current period. The prior year period was dominated by Marvel's The Avengers, whereas in the current period multiple blockbusters delivered strong results. The acquisition of the four theatres from AMC during the third quarter of 2012 also contributed to the box office revenue increase in the current year period.
BPP for the three months ended June 30, 2013 was $9.36 compared to $9.11 in the prior year period. This represents a quarterly BPP record for Cineplex, exceeding the previous record of $9.18 established in the fourth quarter of 2012. The BPP increase was due to premium priced product accounting for 42.2% of box office revenues in the current period, compared to 36.0% in the prior year period. The increase in the percentage of box office revenues from premium priced product was due in part to increased installations of UltraAVX, 3D, IMAX and VIP screens since the second quarter of 2012.
Cineplex continues to invest in premium priced formats including 3D, UltraAVX, IMAX and VIP thereby positioning itself to benefit from the premiums charged for these offerings.
Year to Date
| Year to Date 2013 Top Cineplex Films |
IMAX | 3D | % Box |
Year to Date 2012 Top Cineplex Films |
IMAX | 3D | % Box |
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| 1 | Iron Man 3 | X | X | 7.4 | % | 1 | Marvel's The Avengers | X | X | 11.6 | % | |
| 2 | Star Trek: Into Darkness | X | X | 5.2 | % | 2 | The Hunger Games | X | 3.9 | % | ||
| 3 | Man of Steel | X | X | 4.3 | % | 3 | Dr. Seuss' The Lorax | X | X | 2.8 | % | |
| 4 | Fast and Furious 6 | X | 3.7 | % | 4 | 21 Jump Street | 2.6 | % | ||||
| 5 | Oz: The Great and Powerful | X | X | 3.7 | % | 5 | Men in Black III | X | X | 2.4 | % | |
Box office revenues for the six months ended June 30, 2013 were $319.5 million or 4.6% higher than the prior year period. The strong performance of the blockbuster releases in the second quarter of 2013 more than offset the decline in box office revenues reported in the first quarter of 2013. The acquisition of the four theatres from AMC during the third quarter of 2012 also contributed to the box office revenue increase in the current year period.
Cineplex's BPP for the six months ended June 30, 2013 increased $0.26, or 2.9%, from $8.92 in the 2012 period to $9.18. This increase was primarily due to the increase in revenues from premium-priced product. Premium-priced offerings accounted for 38.9% of Cineplex's box office revenues in the six months ended June 30, 2013, compared to 31.6% in the prior year period. The top five films in the current period were all screened in IMAX and four in 3D (2012 period - four in IMAX and three in 3D).
Cineplex's investment in premium-priced formats over the last five years has positioned it to take advantage of the price premiums charged for these formats, which has contributed to Cineplex's BPP growth in the current period compared to the prior year period. This investment in premium-priced offerings was a key factor resulting in Cineplex outperforming the Canadian industry box office revenue growth during the 2013 periods.
Concession revenues
The following table highlights the movement in concession revenues, attendance and CPP for the quarter and the year to date (in thousands of Canadian dollars, except attendance and same store attendance reported in thousands of patrons, and per patron amounts):
| Concession revenues | Second Quarter | Year to Date | ||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||
| Concession revenues | $ | 89,693 | $ | 79,962 | 12.2 | % | $ | 165,572 | $ | 156,999 | 5.5 | % |
| Attendance (i) | 18,629 | 17,146 | 8.6 | % | 34,820 | 34,273 | 1.6 | % | ||||
| Concession revenue per patron (i) | $ | 4.81 | $ | 4.66 | 3.2 | % | $ | 4.76 | $ | 4.58 | 3.9 | % |
| Same store concession revenues (i) | $ | 84,203 | $ | 78,480 | 7.3 | % | $ | 155,482 | $ | 154,765 | 0.5 | % |
| Same store attendance (i) | 17,341 | 16,877 | 2.7 | % | 32,365 | 33,769 | -4.2 | % | ||||
| (i) See 'Non-GAAP Financial Measures' section in this news release |
| Concession revenue continuity | Second Quarter | Year to Date | ||||||||
| Concession | Attendance | Concession | Attendance | |||||||
| 2012 as reported | $ | 79,962 | 17,146 | $ | 156,999 | 34,273 | ||||
| Same store attendance change | 2,156 | 464 | (6,433 | ) | (1,404 | ) | ||||
| Impact of same store CPP change | 3,568 | - | 7,151 | - | ||||||
| New and acquired theatres | 4,107 | 1,051 | 8,128 | 2,042 | ||||||
| Disposed and closed theatres | (100 | ) | (32 | ) | (273 | ) | (91 | ) | ||
| 2013 as reported | $ | 89,693 | 18,629 | $ | 165,572 | 34,820 | ||||
Second Quarter
Concession revenues increased 12.2% as compared to the prior year period primarily due to the 8.6% increase in attendance. CPP increased from $4.66 in the second quarter of 2012 to $4.81 in the same period in 2013, a 3.2% increase and quarterly record for Cineplex. Increased visitation at concession outlets led to the record concession revenues in the period, and the record CPP in the period was due in part to the expanded offerings outside of core concession products driving higher average order value. Brand optimization continues with the expansion of Cineplex's Outtakes and Poptopia brands, with 13 new or rebranded outlets opened in the period.
Year to Date
Concession revenues increased 5.5% as compared to the prior year period, due to the 1.6% increase in attendance and the 3.9% increase in CPP. CPP increased from $4.58 in 2012 to $4.76 in 2013. This represents the highest CPP Cineplex has reported through the first six months of any year.
While the 10% SCENE discount and SCENE points issued on concession combo purchases reduce individual transaction values which impacts CPP, Cineplex believes that this program drives incremental visits and concession purchases, resulting in higher overall concession revenues.
Other revenues
The following table highlights the movement in media, games and other revenues for the quarter and the year to date (in thousands of Canadian dollars):
| Other revenues | Second Quarter | Year to Date | ||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||
| Media | $ | 26,350 | $ | 18,208 | 44.7 | % | $ | 42,660 | $ | 30,894 | 38.1 | % |
| Games | 1,776 | 1,452 | 22.3 | % | 3,879 | 3,374 | 15.0 | % | ||||
| Other | 9,430 | 7,826 | 20.5 | % | 18,043 | 15,746 | 14.6 | % | ||||
| Total | $ | 37,556 | $ | 27,486 | 36.6 | % | $ | 64,582 | $ | 50,014 | 29.1 | % |
Second Quarter
Other revenues increased 36.6% to $37.6 million in the second quarter of 2013 compared to the prior year period. This increase was primarily due to higher media revenues, which were $26.4 million, up $8.1 million, or 44.7%, when compared to the prior year period. This increase was primarily due to higher showtime and digital pre-show revenues, with the automotive, electronics and telecommunications sectors providing the largest revenue increases.
The games revenue increase is primarily due to the addition of six new XSCAPE entertainment centres since the second quarter of 2012. On January 31, 2012, Cineplex deconsolidated New Way Sales ("NWS") and merged its operations with the amusement game and vending assets of Starburst Coin Machines Inc. ("SCM"), to create Cineplex Starburst Inc ("CSI"). Cineplex and SCM both have a 50% interest in CSI. Cineplex's share of revenues and expenses from CSI for the periods subsequent to January 31, 2012 are included in the 'Share of income of joint ventures' line in the statements of operations.
The increase in the other category is primarily due to higher auditorium rental and screening revenues as well as additional revenues arising from enhanced guest service initiatives.
Year to Date
Other revenues increased 29.1% from $50.0 million in 2012 to $64.6 million during 2013. Media revenues for 2013 increased $11.8 million, or 38.1%, from the prior year period, with the increase primarily due to higher showtime and digital pre-show revenues. CDM contributed $0.8 million to this revenue growth in the period.
The year-to-date period includes a life-to-date one-time increase to games revenue of $0.5 million recorded in the first quarter of 2013 due to a change in accounting policy regarding the recognition of revenue on the sale of XSCAPE gaming cards, which was offset by the games revenues for the first quarter of 2012 including the results of NWS for January 2012 ($0.4 million). The increase in the other category is primarily due to higher auditorium rental and screening revenues as well as additional revenues arising from enhanced guest service initiatives.
Film cost
The following table highlights the movement in film cost and the film cost percentage for the quarter and the year to date (in thousands of Canadian dollars, except film cost percentage):
| Film cost | Second Quarter | Year to Date | ||||||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
| Film cost | $ | 92,973 | $ | 83,465 | 11.4 | % | $ | 166,362 | $ | 160,172 | 3.9 | % | ||||
| Film cost percentage (i) | 53.3 | % | 53.4 | % | -0.1 | % | 52.1 | % | 52.4 | % | -0.3 | % | ||||
| (i) See 'Non-GAAP Financial Measures' section in this news release | ||||||||||||||||
Second Quarter
Film cost varies primarily with box office revenue, and can vary from quarter to quarter based on the relative strength of the titles exhibited during the period. The increase in the second quarter of 2013 compared to the prior year period was due to the increase in box office revenue and the impact of the 0.1% decrease in film cost percentage. The decrease in film cost percentage is primarily due to the settlement rate on the top films during the second quarter of 2013 being higher than the average film settlement rate on certain strong performing titles in the 2012 period.
Year to Date
The year to date increase in film cost was due to the 4.6% increase in box office revenues partially offset by the 0.3% decrease in film cost percentage during the period. The decrease in the film cost percentage as compared to the prior year period is primarily due to the settlement rate on certain strong performing titles during the 2012 period being higher than the average settlement rate in the 2013 period.
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 to date (in thousands of Canadian dollars, except concession cost percentage and concession margin per patron):
| Cost of concessions | Second Quarter | Year to Date | |||||||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | ||||||||||||
| Concession cost | $ | 19,173 | $ | 16,720 | 14.7 | % | $ | 35,447 | $ | 32,490 | 9.1 | % | |||||
| Concession cost percentage (i) | 21.4 | % | 20.9 | % | 0.5 | % | 21.4 | % | 20.7 | % | 0.7 | % | |||||
| Concession margin per patron (i) | $ | 3.79 | $ | 3.69 | 2.7 | % | $ | 3.74 | $ | 3.63 | 3.0 | % | |||||
| (i) See 'Non-GAAP Financial Measures' section in this news release | |||||||||||||||||
Second 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 12.2% increase in concession revenues and the 0.5% increase in the concession cost percentage during the period. The concession margin per patron increased from $3.69 in the second quarter of 2012 to $3.79 in the same period in 2013, reflecting the impact of the higher CPP during the period.
Year to Date
The increase in concession cost during the period was due to the 5.5% increase in concession revenues and the 0.7% increase in the concession cost percentage during the period. The concession margin per patron increased from $3.63 in the 2012 period to $3.74 in the current period, reflecting the impact of the higher CPP during the period.
Despite the 10% discount offered to SCENE members and SCENE points offered on select combo offerings, which contributes to a higher concession cost percentage, Cineplex believes the SCENE program drives incremental attendance and purchase incidence which increases concession revenues and CPP.
Depreciation and amortization
The following table highlights the movement in depreciation and amortization expenses during the quarter and the year to date (in thousands of Canadian dollars):
| Amortization expenses | Second Quarter | Year to Date | ||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||
| Amortization of property, equipment and leaseholds | $ | 14,209 | $ | 14,450 | -1.7 | % | $ | 27,988 | $ | 28,984 | -3.4 | % |
| Amortization of intangible assets and other | 2,318 | 228 | 916.7 | % | 5,837 | 2,167 | 169.4 | % | ||||
| Amortization expenses as reported | $ | 16,527 | $ | 14,678 | 12.6 | % | $ | 33,825 | $ | 31,151 | 8.6 | % |
The quarterly decrease in amortization of property, equipment and leaseholds of $0.2 million and year-to-date decrease of $1.0 million is due to certain assets becoming fully amortized in the third quarter of 2012, partially offset by the impact of the purchases of equipment and leaseholds relating to new theatre construction.
The increase in amortization of intangible assets and other in the second quarter of 2013 and the year to date period compared to the prior year periods is due to the amortization of certain trade name assets that are being phased out by Cineplex. These assets were previously classified as indefinite life assets however during the fourth quarter of 2012 their classification was changed to definite life with amortization being recorded over the anticipated rebranding schedule of the associated theatres. During the second quarter of 2013, the timeframe over which certain assets were being amortized was adjusted to reflect the revised completion date for the rebranding of the impacted theatres.
Loss on disposal of assets
The following table shows the movement in the loss on disposal of assets during the quarter and the year to date (in thousands of Canadian dollars):
| Loss on disposal of assets | Second Quarter | Year to Date | ||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||
| Loss on disposal of assets | $ | 1,314 | $ | 727 | 80.7 | % | $ | 2,376 | $ | 672 | 253.6 | % |
During the second quarter of 2013, Cineplex recorded a loss of $1.3 million on the disposal of assets that were sold or otherwise disposed (2012 - $0.7 million). For the six months ended June 30, 2013, disposal of assets resulted in a loss of $2.4 million on the disposal of assets that were sold or otherwise disposed (2012 - $0.7 million).
Other costs
Other costs include three main sub-categories of expenses, including theatre occupancy expenses, which capture the rent and associated occupancy costs for Cineplex's various operations; other operating expenses, which include the costs related to running Cineplex's theatres and ancillary businesses; and general and administrative expenses, which includes costs related to managing Cineplex's operations, including the head office expenses. Please see the discussions below for more details on these categories. The following table highlights the movement in other costs for the quarter and the year to date (in thousands of Canadian dollars):
| Other costs | Second Quarter | Year to Date | ||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||
| Theatre occupancy expenses | $ | 46,826 | $ | 41,182 | 13.7 | % | $ | 93,384 | $ | 82,890 | 12.7 | % |
| Other operating expenses | 68,449 | 62,444 | 9.6 | % | 132,917 | 120,979 | 9.9 | % | ||||
| General and administrative expenses | 16,600 | 13,370 | 24.2 | % | 33,107 | 29,096 | 13.8 | % | ||||
| Total other costs | $ | 131,875 | $ | 116,996 | 12.7 | % | $ | 259,408 | $ | 232,965 | 11.4 | % |
Theatre occupancy expenses
The following table highlights the movement in theatre occupancy expenses for the quarter and the year to date (in thousands of Canadian dollars):
| Theatre occupancy expenses | Second Quarter | Year to Date | ||||||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
| Rent | $ | 31,434 | $ | 27,512 | 14.3 | % | $ | 62,533 | $ | 55,270 | 13.1 | % | ||||
| Other occupancy | 16,340 | 14,460 | 13.0 | % | 32,786 | 28,668 | 14.4 | % | ||||||||
| One-time items (i) | (948 | ) | (790 | ) | 20.0 | % | (1,935 | ) | (1,048 | ) | 84.6 | % | ||||
| Total | $ | 46,826 | $ | 41,182 | 13.7 | % | $ | 93,384 | $ | 82,890 | 12.7 | % | ||||
(i) One-time items include amounts related to both theatre rent and other theatre occupancy costs. They are isolated here to illustrate Cineplex's theatre rent and other theatre occupancy costs excluding these one-time, non-recurring items.
| Theatre occupancy continuity | Second Quarter Occupancy |
Year to Date Occupancy |
||||
| 2012 as reported | $ | 41,182 | $ | 82,890 | ||
| Impact of new and acquired theatres | 5,748 | 11,092 | ||||
| Impact of disposed theatres | (19 | ) | (210 | ) | ||
| Same store rent change (i) | 123 | (6 | ) | |||
| One-time items | (158 | ) | (887 | ) | ||
| Other | (50 | ) | 505 | |||
| 2013 as reported | $ | 46,826 | $ | 93,384 | ||
| (i) See 'Non-GAAP Financial Measures' section in this news release | ||||||
Second Quarter
Theatre occupancy expenses increased $5.6 million during the second quarter of 2013 compared to the prior year period. This increase was primarily due to the impact of new and acquired theatres, primarily the four theatres acquired from AMC in the third quarter of 2012 ($4.9 million).
Year to Date
The increase in theatre occupancy expenses of $10.5 million for 2013 compared to the prior year was due to the new and acquired theatres, primarily the four theatres acquired from AMC in the third quarter of 2012 ($9.8 million). This increase was partially offset by the impact of favourable real estate tax reassessments included in the 'one-time items' category.
Other operating expenses
The following table highlights the movement in other operating expenses during the quarter and the year to date (in thousands of Canadian dollars):
| Other operating expenses | Second Quarter | Year to Date | ||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||
| Other operating expenses | $ | 68,449 | $ | 62,444 | 9.6 | % | $ | 132,917 | $ | 120,979 | 9.9 | % |
| Other operating continuity | Second Quarter Other Operating |
Year to Date Other Operating |
||||
| 2012 as reported | $ | 62,444 | $ | 120,979 | ||
| Impact of new and acquired theatres | 3,095 | 6,164 | ||||
| Impact of disposed theatres | (269 | ) | (469 | ) | ||
| Same store payroll change (i) | 581 | 253 | ||||
| Marketing change | 497 | 630 | ||||
| Media | 992 | 2,265 | ||||
| New Way Sales | - | (299 | ) | |||
| Other | 1,109 | 3,394 | ||||
| 2013 as reported | $ | 68,449 | $ | 132,917 | ||
| (i) See 'Non-GAAP Financial Measures' section in this news release | ||||||
Second Quarter
Other operating expenses during the second quarter of 2013 increased $6.0 million or 9.6% compared to the prior year period. The impact of new and acquired net of disposed theatres was a $2.8 million increase to the category primarily due to the four theatres acquired from AMC which accounted for $2.2 million of the $2.8 million increase. Media expenses increased $1.0 million due to the higher volume of media sales activity in the quarter. As a result of higher business volumes at the theatres during the current year period, same-store payroll costs increased $0.6 million.
The major movement in the Other category included the following:
- The increase in 3D attendance due to stronger 3D product and the additional 140 3D screens added since June 30, 2012 resulted in higher 3D royalty costs ($0.5 million).
- Increased online ticket sales and higher business volumes resulted in an increase in credit card service fees ($0.3 million).
Total theatre payroll costs accounted for 43.5% of total operating expenses during the second quarter of 2013 as compared to 44.3% for the same period one year earlier.
Year to Date
For the six months ended June 30, 2013, other operating expenses increased $11.9 million. The impact of new and acquired net of disposed theatres was a $5.7 million increase to the category primarily due to the four theatres acquired from AMC which accounted for $4.3 million of the $5.7 million increase. Cost increases included higher media costs due to the higher media sales during the period ($2.3 million), higher same-store payroll expenses related to the increased business volumes ($0.3 million), higher marketing costs ($0.6 million) and a $3.4 million increase in the Other category.
The major movement in the Other category included the following:
- The increase in 3D attendance due to stronger 3D product and the additional 140 3D screens added since June 30, 2012 resulted in higher 3D royalty costs ($0.9 million).
- Higher credit card service fees due to higher sales volumes during the period ($0.5 million).
- Increased spending for new business initiatives including Cineplex's interactive business ($0.3 million).
- Higher same-store utility costs during 2013 compared to the prior year period ($0.2 million).
- Higher theatre operating costs including cleaning, ticket paper, and projector bulb expenses.
Total theatre payroll accounted for 43.5% of total other operating expenses in the 2013 period, compared to 45.0% in the prior year period.
General and administrative expenses
The following table highlights the movement in general and administrative ("G&A") expenses during the quarter and year to date, including Share based compensation costs, and G&A net of these costs (in thousands of Canadian dollars):
| G&A expenses | Second Quarter | Year to Date | ||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||
| G&A excluding LTIP and option plan expense | $ | 12,384 | $ | 10,679 | 16.0 | % | $ | 25,123 | $ | 23,175 | 8.4 | % |
| LTIP (i) | 3,824 | 2,131 | 79.4 | % | 7,184 | 4,716 | 52.3 | % | ||||
| Option plan | 392 | 560 | -30.0 | % | 800 | 1,205 | -33.6 | % | ||||
| G&A expenses as reported | $ | 16,600 | $ | 13,370 | 24.2 | % | $ | 33,107 | $ | 29,096 | 13.8 | % |
(i) LTIP includes the expense for the LTIP program as well as the expense for the executive and Board deferred share unit plans.
Second Quarter
G&A expenses increased $3.2 million during the second quarter of 2013 compared to the prior year period, due to a $1.7 million increase in LTIP expense. The increase in Cineplex's share price during the period, which closed the second quarter at a record high of $36.88, was the main contributor to the increase in LTIP expense. G&A excluding LTIP and option plan expense increased due in part to higher head office payroll expenses.
Year to Date
G&A expenses for 2013 increased $4.0 million compared to the prior year period, due to the $2.5 million increase in LTIP expense. Head office payroll expenses increased $1.8 million due to new business initiatives resulting in additional headcount.
Share of income of joint ventures
Cineplex's joint ventures in the 2013 period include its 50% share of one theatre in Quebec and one IMAX screen in Ontario, its 78.2% interest in CDCP and its 50% interest in CSI. For the 2012 period, Cineplex's joint ventures included one theatre in Quebec, one IMAX screen in Ontario, its 78.2% interest in CDCP and its 50% interest in CSI for February and March as CSI was formed January 31, 2012. The following table highlights the components of share of income of joint ventures during the quarter and the year to date (in thousands of Canadian dollars):
| Share of income of joint ventures | Second Quarter | Year to Date | ||||||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
| Share of (income) of CDCP | $ | (779 | ) | $ | (851 | ) | (8.5 | )% | $ | (1,112 | ) | $ | (926 | ) | 20.1 | % |
| Share of (income) of CSI | (285 | ) | (272 | ) | 4.8 | % | (536 | ) | (498 | ) | 7.6 | % | ||||
| Share of (income) loss of other joint ventures | (152 | ) | 20 | NM | (109 | ) | (6 | ) | NM | |||||||
| Total (income) of joint ventures | $ | (1,216 | ) | $ | (1,103 | ) | 10.2 | % | $ | (1,757 | ) | $ | (1,430 | ) | 22.9 | % |
Second Quarter
The increase from income of $1.1 million in the second quarter of 2012 to income of $1.2 million in the current period is due to nominal increases in income from Cineplex's theatre joint ventures and CSI.
Under IFRS 11, Cineplex's 50% interest in SCENE LP is classified as a joint operation and not a joint venture resulting in Cineplex recognizing its share of the assets, liabilities, revenues and expenses of SCENE in its consolidated financial statements on a line-by-line basis.
Year to Date
The increase from income of $1.4 million in the 2012 period to income of $1.8 million in the current year is due to nominal income increases in all of Cineplex's joint ventures.
EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")
The following table presents EBITDA and adjusted EBITDA for the three and six months ended June 30, 2013 as compared to the three and six months ended June 30, 2012 (expressed in thousands of Canadian dollars, except adjusted EBITDA margin):
| EBITDA | Second Quarter | Year to Date | ||||||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
| EBITDA | $ | 57,513 | $ | 46,869 | 22.7 | % | $ | 87,866 | $ | 87,783 | 0.1 | % | ||||
| Adjusted EBITDA | $ | 58,711 | $ | 47,263 | 24.2 | % | $ | 90,401 | $ | 88,402 | 2.3 | % | ||||
| Adjusted EBITDA margin | 19.5 | % | 17.9 | % | 1.6 | % | 16.4 | % | 17.2 | % | (0.8 | )% | ||||
Adjusted EBITDA for the second quarter of 2013 increased $11.4 million, or 24.2%, as compared to the prior year period. The increase as compared to the prior year period was primarily due to the higher attendance in the period resulting in higher exhibition and concession revenues, as well as the strong media revenues in the period. The four theatres acquired from AMC in the third quarter of 2012 contributed $0.5 million to adjusted EBITDA in the period. Adjusted EBITDA margin, calculated as adjusted EBITDA divided by total revenues, was 19.5% compared to 17.9% in the prior year period.
Adjusted EBITDA for the six months ended June 30, 2013 was $90.4 million compared to $88.4 million in the prior year period. This increase was due to the record second quarter exhibition results as well as the strong media revenues recorded throughout the 2013 period compared to the prior year.
Cineplex believes its operating and programming expertise, combined with its merchandising, media, marketing, interactive and SCENE loyalty programs will positively and significantly improve the operations of the four theatres acquired from AMC. Cineplex has added UltraAVX auditoriums to these locations and will continue to invest in each of the locations by potentially adding VIP auditoriums or XSCAPE entertainment centres to one or more of the locations.
ADJUSTED FREE CASH FLOW
For the second quarter of 2013, adjusted free cash flow per common share of Cineplex was $0.7347 as compared to $0.4816 in the prior year period. The declared dividends per common share of Cineplex were $0.3525 in the second quarter of 2013 and $0.3325 in the prior year period. During the twelve months ended June 30, 2013, Cineplex generated adjusted free cash flow per Share of $2.2326, compared to $2.0331 in the prior year period. Cineplex declared dividends per Share of $1.3650 and $1.3000, respectively, in each period. The payout ratios for these periods were approximately 61.1% and 63.9%, respectively.
NON-GAAP FINANCIAL MEASURES
EBITDA and Adjusted Free Cash Flow
EBITDA and adjusted free cash flow are not measures recognized by GAAP and do not have standardized meanings in accordance with such principles. Therefore, EBITDA and adjusted free cash flow may not be comparable to similar measures presented by other issuers. Management uses adjusted EBITDA and adjusted free cash flow 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.
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 gains and losses on disposal of assets and the share of income of the Canadian Digital Cinema Partnership ("CDCP").
Adjusted free cash flow is a non-GAAP measure generally used by Canadian corporations, 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.
For a detailed reconciliation of net income to EBITDA and adjusted EBITDA and from cash used in or provided by operating activities to adjusted free cash flow, please refer to Cineplex's management's discussion and analysis filed on www.sedar.com.
Per Patron Revenue Metrics
Cineplex reviews per patron metrics as they relate to box office revenue and concession revenue such as BPP, CPP, BPP excluding premium priced product, and concession margin per patron, as these are key measures used by investors to value and assess Cineplex's performance, and are widely used in the theatre exhibition industry. Management of Cineplex defines these metrics as follows:
| Attendance: Attendance is calculated as the total number of paying patrons that frequent Cineplex's theatres during the period. |
| BPP: Calculated as total box office revenues divided by total paid attendance for the period. |
| BPP excluding premium priced product: Calculated as total box office revenues for the period, less box office revenues from 3D, UltraAVX, VIP and IMAX product; divided by total paid attendance for the period, less paid attendance for 3D, UltraAVX, VIP and IMAX product. |
| CPP: Calculated as total concession revenues divided by total paid attendance for the period. |
| Premium priced product: Defined as 3D, UltraAVX, IMAX and VIP film product. |
| Concession margin per patron: Calculated as total concession revenues less total concession cost, divided by attendance for the period. |
Same Store Analysis
Cineplex reviews and reports same store metrics relating to box office revenues, concession revenues, rent expense and payroll expense, as these measures are widely used in the theatre exhibition industry as well as other retail industries.
Same store metrics are calculated by removing the results for all theatres that have been opened, acquired, closed or otherwise disposed of during the periods. For the three and six months ended June 30, 2013 and 2012, ten locations that have been opened or acquired and four locations that have been closed or otherwise disposed of have been excluded, resulting in 130 theatres being included in the same store metrics.
Cost of sales percentages
Cineplex reviews and reports cost of sales percentages for its two largest revenue sources, box office revenues and concession revenues as these measures are widely used in the theatre exhibition industry. These measures are reported as film cost percentage and concession cost percentage, respectively, and are calculated as follows:
| Film cost percentage: Calculated as total film cost expense divided by total box office revenues for the period. |
| Concession cost percentage: Calculated as total concession costs divided by total concession revenues for the period. |
This news release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in our Annual Information Form and in this news release. Those risks and uncertainties include adverse factors generally encountered in the film exhibition industry such as poor film product and unauthorized copying; the risks associated with national and world events, including war, terrorism, international conflicts, natural disasters, extreme weather conditions, infectious diseases, changes in income tax legislation; and general economic conditions. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. All forward-looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of Cineplex Inc. or Cineplex Entertainment Limited Partnership, their financial or operating results or their securities.
About Cineplex Inc.
Cineplex is one of Canada's leading entertainment companies and operates one of the most modern and fully digitized motion picture circuits in the world. A top-tier Canadian brand, Cineplex operates numerous businesses including theatrical exhibition, food services, gaming, alternative programming (Front Row Centre Events), Cineplex Media, Cineplex Digital Solutions and the online sale of home entertainment content through CineplexStore.com and on apps embedded in various electronic devices. Cineplex is also a joint venture partner in SCENE - Canada's largest entertainment loyalty program.
Cineplex is headquartered in Toronto, Canada, and operates 136 theatres with 1,454 screens from British Columbia to Quebec, serving approximately 71 million guests annually through the following theatre brands: Cineplex Odeon, SilverCity, Galaxy Cinemas, Colossus, Coliseum, Scotiabank Theatres, Cineplex VIP Cinemas, Famous Players and Cinema City. Cineplex also owns and operates the UltraAVX, Poptopia, and Outtakes brands. Cineplex trades on the Toronto Stock Exchange under the symbol CGX. More information is available at cineplex.com.
Further information can be found in the disclosure documents filed by Cineplex 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 (TSX:CGX) 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, August 8, 2013 |
| 10:00 a.m. Eastern Time |
In order to participate in the conference call, please dial 416-644-3418 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 4630857 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 4630857#. The replay will begin at 12:00 p.m. Eastern Time on Thursday, August 8, 2013 and end at 11:59 p.m. Eastern Time on Thursday, August 15, 2013.
- Note that media will be participating in the call in listen-only mode.
- Thank you in advance for your interest and participation.
| Cineplex Inc. |
| Consolidated Balance Sheets |
| (unaudited) |
| (expressed in thousands of Canadian dollars) |
| June 30, | December 31, | |||||
| 2013 | 2012 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 28,788 | $ | 48,665 | ||
| Trade and other receivables | 55,559 | 77,278 | ||||
| Inventories | 5,344 | 5,193 | ||||
| Prepaid expenses and other current assets | 14,362 | 3,047 | ||||
| 104,053 | 134,183 | |||||
| Non-current assets | ||||||
| Property, equipment and leaseholds | 416,226 | 418,498 | ||||
| Deferred income taxes | 41,254 | 53,528 | ||||
| Fair value of interest rate swap agreements | 1,176 | - | ||||
| Interests in joint ventures | 42,997 | 41,623 | ||||
| Intangible assets | 72,622 | 78,460 | ||||
| Goodwill | 612,170 | 608,929 | ||||
| $ | 1,290,498 | $ | 1,335,221 | |||
| Liabilities | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued expenses | $ | 115,391 | $ | 129,499 | ||
| Share-based compensation | 10,023 | - | ||||
| Dividends payable | 7,541 | 7,063 | ||||
| Income taxes payable | 2,343 | 13,654 | ||||
| Deferred revenue | 83,595 | 106,253 | ||||
| Finance lease obligations | 2,304 | 2,222 | ||||
| Fair value of interest rate swap agreements | 614 | 513 | ||||
| 221,811 | 259,204 | |||||
| Non-current liabilities | ||||||
| Share-based compensation | 10,575 | 12,223 | ||||
| Long-term debt | 148,325 | 148,066 | ||||
| Fair value of interest rate swap agreements | - | 273 | ||||
| Finance lease obligations | 19,375 | 20,548 | ||||
| Post-employment benefit obligations | 6,394 | 6,274 | ||||
| Other liabilities | 141,172 | 141,319 | ||||
| 325,841 | 328,703 | |||||
| Total liabilities | 547,652 | 587,907 | ||||
| Equity | ||||||
| Share capital | 848,235 | 847,235 | ||||
| Deficit | (108,539 | ) | (102,547 | ) | ||
| Accumulated other comprehensive loss | (666 | ) | (1,142 | ) | ||
| Contributed surplus | 3,816 | 3,768 | ||||
| 742,846 | 747,314 | |||||
| $ | 1,290,498 | $ | 1,335,221 | |||
| Cineplex Inc. |
| Consolidated Statements of Operations |
| (unaudited) |
| (expressed in thousands of Canadian dollars, except net income per share) |
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||
| Revenues | ||||||||||||
| Box office | $ | 174,383 | $ | 156,226 | $ | 319,548 | $ | 305,639 | ||||
| Concessions | 89,693 | 79,962 | 165,572 | 156,999 | ||||||||
| Other | 37,556 | 27,486 | 64,582 | 50,014 | ||||||||
| 301,632 | 263,674 | 549,702 | 512,652 | |||||||||
| Expenses | ||||||||||||
| Film cost | 92,973 | 83,465 | 166,362 | 160,172 | ||||||||
| Cost of concessions | 19,173 | 16,720 | 35,447 | 32,490 | ||||||||
| Depreciation and amortization | 16,527 | 14,678 | 33,825 | 31,151 | ||||||||
| Loss on disposal of assets | 1,314 | 727 | 2,376 | 672 | ||||||||
| Other costs | 131,875 | 116,996 | 259,408 | 232,965 | ||||||||
| Share of income of joint ventures | (1,216 | ) | (1,103 | ) | (1,757 | ) | (1,430 | ) | ||||
| Interest expense | 1,998 | 3,612 | 3,714 | 7,996 | ||||||||
| Interest income | (59 | ) | (23 | ) | (137 | ) | (103 | ) | ||||
| 262,585 | 235,072 | 499,238 | 463,913 | |||||||||
| Income before income taxes | 39,047 | 28,602 | 50,464 | 48,739 | ||||||||
| Provision for (recovery of) income taxes | ||||||||||||
| Current | 1,926 | 7,946 | 1,199 | 13,588 | ||||||||
| Deferred | 8,578 | (304 | ) | 11,906 | (917 | ) | ||||||
| 10,504 | 7,642 | 13,105 | 12,671 | |||||||||
| Net income | $ | 28,543 | $ | 20,960 | $ | 37,359 | $ | 36,068 | ||||
| Basic net income per share | $ | 0.45 | $ | 0.34 | $ | 0.60 | $ | 0.60 | ||||
| Diluted net income per share | $ | 0.45 | $ | 0.34 | $ | 0.59 | $ | 0.60 | ||||
| Cineplex Inc. |
| Consolidated Statements of Comprehensive Income |
| (unaudited) |
| (expressed in thousands of Canadian dollars) |
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||
| Net income | $ | 28,543 | $ | 20,960 | $ | 37,359 | $ | 36,068 | ||||
| Other comprehensive income (loss) | ||||||||||||
| Items that may be reclassified subsequently to net income: | ||||||||||||
| Income (loss) on hedging instruments | 1,610 | (1,063 | ) | 844 | 2,261 | |||||||
| Associated deferred income taxes (expense) recovery | (479 | ) | 195 | (368 | ) | (715 | ) | |||||
| Other comprehensive income (loss) | 1,131 | (868 | ) | 476 | 1,546 | |||||||
| Comprehensive income | $ | 29,674 | $ | 20,092 | $ | 37,835 | $ | 37,614 | ||||
| Cineplex Inc. |
| Consolidated Statements of Changes in Equity |
| (unaudited) |
| (expressed in thousands of Canadian dollars) |
| For the six months ended June 30, 2013 and 2012 |
| Share capital |
Contributed surplus |
Accumulated other comprehensive loss |
Deficit | Total | |||||||||||
| Balance - January 1, 2013 | $ | 847,235 | $ | 3,768 | $ | (1,142 | ) | $ | (102,547 | ) | $ | 747,314 | |||
| Net income | - | - | - | 37,359 | 37,359 | ||||||||||
| Other comprehensive income | - | - | 476 | - | 476 | ||||||||||
| Total comprehensive income | 476 | 37,359 | 37,835 | ||||||||||||
| Dividends declared | - | - | - | (43,351 | ) | (43,351 | ) | ||||||||
| Long-term incentive plan obligation | 248 | - | - | - | 248 | ||||||||||
| Share option expense | - | 800 | - | - | 800 | ||||||||||
| Issuance of shares on exercise of options | 752 | (752 | ) | - | - | - | |||||||||
| Balance - June 30, 2013 | $ | 848,235 | $ | 3,816 | $ | (666 | ) | $ | (108,539 | ) | $ | 742,846 | |||
| Balance - January 1, 2012 | $ | 764,801 | $ | - | $ | (2,723 | ) | $ | (140,469 | ) | $ | 621,609 | |||
| Share option liabilities reclassified | - | 6,850 | - | - | 6,850 | ||||||||||
| Net income | - | - | - | 36,068 | 36,068 | ||||||||||
| Other comprehensive income | - | - | 1,546 | - | 1,546 | ||||||||||
| Total comprehensive income | 1,546 | 36,068 | 37,614 | ||||||||||||
| Dividends declared | - | - | - | (39,601 | ) | (39,601 | ) | ||||||||
| Long-term incentive plan obligation | (5,324 | ) | - | - | - | (5,324 | ) | ||||||||
| Long-term incentive plan shares | 6,471 | - | - | - | 6,471 | ||||||||||
| Share option expense | - | 1,206 | - | - | 1,206 | ||||||||||
| Issuance of shares on exercise of options | 5,334 | (5,334 | ) | - | - | - | |||||||||
| Issuance of shares on conversion of debentures | 58,173 | - | - | - | 58,173 | ||||||||||
| Issuance of shares for cash | 501 | - | - | - | 501 | ||||||||||
| Shares repurchased and cancelled | (936 | ) | - | - | (850 | ) | (1,786 | ) | |||||||
| Balance - June 30, 2012 | $ | 829,020 | $ | 2,722 | $ | (1,177 | ) | $ | (144,852 | ) | $ | 685,713 | |||
| Cineplex Inc. |
| Consolidated Statements of Cash Flows |
| (unaudited) |
| (expressed in thousands of Canadian dollars) |
| Three months ended June 30, |
Six months ended June 30, |
||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||
| Cash provided by (used in) | |||||||||||||
| Operating activities | |||||||||||||
| Net income | $ | 28,543 | $ | 20,960 | $ | 37,359 | $ | 36,068 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||||
| Depreciation and amortization of property, equipment and leaseholds, and intangible assets | 16,527 | 14,678 | 33,825 | 31,151 | |||||||||
| Amortization of tenant inducements, rent averaging liabilities and fair value lease contract liabilities | (1,708 | ) | (1,230 | ) | (3,277 | ) | (2,165 | ) | |||||
| Accretion of debt issuance costs and other non-cash interest | 260 | 139 | 401 | 279 | |||||||||
| Loss on disposal of assets | 1,314 | 727 | 2,376 | 672 | |||||||||
| Deferred income taxes | 8,578 | (304 | ) | 11,906 | (917 | ) | |||||||
| Interest rate swap agreements - non-cash interest | (234 | ) | 848 | (569 | ) | 1,764 | |||||||
| Non-cash share-based compensation | 391 | 560 | 1,047 | 1,242 | |||||||||
| Accretion of convertible debentures | - | 84 | - | 256 | |||||||||
| Net change in interests in joint ventures | (117 | ) | (287 | ) | (825 | ) | 5,666 | ||||||
| Tenant inducements | 348 | 1,948 | 3,305 | 5,245 | |||||||||
| 20,542 | (12,154 | ) | (17,901 | ) | (52,168 | ) | |||||||
| Net cash provided by operating activities | 74,444 | 25,969 | 67,647 | 27,093 | |||||||||
| Investing activities | |||||||||||||
| Proceeds from sale of assets | 2 | 9 | 2 | 1,129 | |||||||||
| Purchases of property, equipment and leaseholds | (17,294 | ) | (19,702 | ) | (34,191 | ) | (33,715 | ) | |||||
| Acquisition of business, net of cash acquired | - | - | (3,822 | ) | (7,399 | ) | |||||||
| Deposit for business acquisition | (5,000 | ) | (5,000 | ) | - | - | |||||||
| Additional equity funding of joint ventures | (403 | ) | - | (549 | ) | (244 | ) | ||||||
| Net cash used in investing activities | (22,695 | ) | (19,693 | ) | (43,560 | ) | (40,229 | ) | |||||
| Financing activities | |||||||||||||
| Dividends paid | (21,682 | ) | (20,064 | ) | (42,873 | ) | (38,931 | ) | |||||
| (Repayments) borrowings under credit facility, net | (15,000 | ) | 20,000 | - | 20,000 | ||||||||
| Payments under finance leases | (551 | ) | (512 | ) | (1,091 | ) | (1,053 | ) | |||||
| Proceeds from issuance of shares | - | - | - | 501 | |||||||||
| Shares repurchased and cancelled | - | - | - | (1,786 | ) | ||||||||
| Net cash used in financing activities | (37,233 | ) | (576 | ) | (43,964 | ) | (21,269 | ) | |||||
| Increase (decrease) in cash and cash equivalents | 14,516 | 5,700 | (19,877 | ) | (34,405 | ) | |||||||
| Cash and cash equivalents - Beginning of period | 14,272 | 10,040 | 48,665 | 50,145 | |||||||||
| Cash and cash equivalents - End of period | $ | 28,788 | $ | 15,740 | $ | 28,788 | $ | 15,740 | |||||
| Supplemental information | |||||||||||||
| Cash paid for interest | $ | 1,989 | $ | 2,930 | $ | 3,847 | $ | 5,472 | |||||
| Cash paid for income taxes | $ | 311 | $ | 6,482 | $ | 12,510 | $ | 24,602 | |||||
| Cineplex Inc. |
| Consolidated Supplemental Information |
| (Unaudited) |
| (expressed in thousands of Canadian dollars) |
Reconciliation to Adjusted EBITDA
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||
| Net income | $ | 28,543 | $ | 20,960 | $ | 37,359 | $ | 36,068 | ||||
| Depreciation and amortization | 16,527 | 14,678 | 33,825 | 31,151 | ||||||||
| Interest expense | 1,998 | 3,612 | 3,714 | 7,996 | ||||||||
| Interest income | (59 | ) | (23 | ) | (137 | ) | (103 | ) | ||||
| Current income tax expense | 1,926 | 7,946 | 1,199 | 13,588 | ||||||||
| Deferred income tax expense | 8,578 | (304 | ) | 11,906 | (917 | ) | ||||||
| EBITDA | $ | 57,513 | $ | 46,869 | $ | 87,866 | $ | 87,783 | ||||
| Loss on disposal of assets | 1,314 | 727 | 2,376 | 672 | ||||||||
| CDCP equity income (i) | (779 | ) | (851 | ) | (1,112 | ) | (926 | ) | ||||
| Depreciation and amortization - joint ventures (ii) | 562 | 518 | 1,081 | 873 | ||||||||
| Future income taxes - joint ventures (ii) | 72 | - | 145 | - | ||||||||
| Current income taxes - joint ventures (ii) | 29 | - | 45 | - | ||||||||
| Adjusted EBITDA | $ | 58,711 | $ | 47,263 | $ | 90,401 | $ | 88,402 | ||||
| (i) | CDCP equity income not included in adjusted EBITDA as CDCP is a limited-life financing vehicle that is funded by virtual print fees collected from distributors. |
| (ii) | Includes the joint ventures with the exception of CDCP (see (i) above). |
Components of Other Costs
| Other costs | Second Quarter | Year to Date | ||||||||||
| 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||
| Theatre occupancy expenses | $ | 46,826 | $ | 41,182 | 13.7 | % | $ | 93,384 | $ | 82,890 | 12.7 | % |
| Other operating expenses | 68,449 | 62,444 | 9.6 | % | 132,917 | 120,979 | 9.9 | % | ||||
| General and administrative expenses | 16,600 | 13,370 | 24.2 | % | 33,107 | 29,096 | 13.8 | % | ||||
| Total other costs | $ | 131,875 | $ | 116,996 | 12.7 | % | $ | 259,408 | $ | 232,965 | 11.4 | % |
| Cineplex Inc. |
| Consolidated Supplemental Information |
| (Unaudited) |
| (expressed in thousands of Canadian dollars, except number of shares and per share data) |
Adjusted Free Cash Flow
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||
| Cash provided by operating activities | $ | 74,444 | $ | 25,969 | $ | 67,647 | $ | 27,093 | ||||
| Less: Total capital expenditures net of proceeds on sale of assets | (17,292 | ) | (19,693 | ) | (34,189 | ) | (32,586 | ) | ||||
| Standardized free cash flow | 57,152 | 6,276 | 33,458 | (5,493 | ) | |||||||
| Add/(Less): | ||||||||||||
| Changes in operating assets and liabilities (i) | (20,542 | ) | 12,154 | 17,901 | 52,168 | |||||||
| Changes in operating assets and liabilities of joint ventures (i) | (1,099 | ) | (816 | ) | (932 | ) | (7,096 | ) | ||||
| Tenant inducements (ii) | (348 | ) | (1,948 | ) | (3,305 | ) | (5,245 | ) | ||||
| Principal component of finance lease obligations | (551 | ) | (512 | ) | (1,091 | ) | (1,053 | ) | ||||
| Growth capital expenditures and other (iii) | 10,890 | 13,595 | 22,924 | 23,369 | ||||||||
| Share of income of joint ventures, net of non-cash depreciation (iv) | 1,071 | 770 | 1,871 | 1,377 | ||||||||
| Cash invested in CDCP (iv) | (403 | ) | - | (549 | ) | (244 | ) | |||||
| Adjusted free cash flow | $ | 46,170 | $ | 29,519 | $ | 70,277 | $ | 57,783 | ||||
| Average number of Shares outstanding | 62,844,730 | 61,289,181 | 62,824,336 | 60,868,454 | ||||||||
| Adjusted free cash flow per Share | $ | 0.7347 | $ | 0.4816 | $ | 1.1186 | $ | 0.9493 | ||||
| (i) | Changes in operating assets and liabilities are not considered a source or use of adjusted free cash flow. |
| (ii) | Tenant inducements received are for the purpose of funding new theatre capital expenditures and are not considered a source of adjusted free cash flow. |
| (iii) | Growth capital expenditures and other represent expenditures on Board approved projects as well as any expenditures for digital equipment that was contributed to CDCP, exclude maintenance capital expenditures, and are net of proceeds on asset sales. Cineplex's revolving facility is available to fund Board approved projects. |
| (iv) | Excludes the share of income of CDCP, as CDCP is a limited-life financing vehicle funded by virtual print fees collected from distributors. Cash invested into CDCP, as well as cash distributions received from CDCP, are considered to be uses and sources of adjusted free cash flow. |
Contact Information:
Gord Nelson
Chief Financial Officer
(416) 323-6602
Cineplex Inc.
Pat Marshall
Vice President Communications and Investor Relations
(416) 323-6648
www.cineplex.com