THIRD QUARTER
September 30, 2022
2022
LETTER TO SHAREHOLDERS
Dear fellow shareholders,
I am pleased to report that the third quarter marked another significant step in the resurgence of
Cineplex and the theatrical exhibition industry. The North American box office reached $1.9
billion during the quarter, which was 44 per cent higher than Q3 2021. Leading the box office was
Minions: Rise of Gru, Thor: Love and Thunder, and the continued success of Top Gun: Maverick.
Top Gun which has become one of only six films to ever exceed $700 million in North America.
Leading up to the quarter, Cineplex – and the industry as a whole – anticipated limited Hollywood
content in August and September as result of pandemic related production delays. In response, we
undertook a series of targeted marketing initiatives to drive attendance and diversify our film slate
by increasing focus on international products where Cineplex consistently takes an industry
leading market share in North America. In addition, our commitment to growing our diversified
businesses continues to deliver results, including an all-time quarterly record adjusted EBITDAaL
in the P1AG and Location-Based Entertainment businesses.
The momentum at the box office combined with growth in our diversified businesses fueled the
third quarter year-over-year revenue increase of 36 per cent, and adjusted EBITDAaL of $20.4
million, which constitutes a 90 per cent growth when compared to the same quarter last year.
This quarter we are celebrating a few important milestones from across the business, including
the overwhelming turnout for National Cinema Day on September 3, 2022, where we welcomed
over half a million guests, which proved to be Cineplex’s busiest day so far in 2022 and third
busiest day in the last five years. Also, during the quarter, we welcomed Empire Company
Limited to the Scene+ loyalty program as co-owners alongside Cineplex and Scotiabank, and we
have seen strong membership growth in recent months. We are also excited about the addition of
Home Hardware Stores Limited as a Scene+ loyalty partner with a launch expected to take place
in the summer of 2023.
With respect to the Cineworld litigation, on September 7, 2022, Cineworld filed for Chapter 11
Bankruptcy in the United States and the following day, the US Bankruptcy Court ordered a
worldwide stay of all enforcement proceedings against Cineworld. We attempted to lift the stay
with respect to the ongoing appeal in Ontario, but our request was denied, and the litigation is on
hold for now. With that said, we continue to work closely with our advisors to monetize and
maximize the judgement claim.
As we look forward, we are excited about opening the first location of our new entertainment
concept, Junxion, later this year in Winnipeg. Our studio partners and non-traditional studios
recognize the underlying importance of an exclusive theatrical window, and we look forward to a
robust film slate of blockbuster titles for the remainder of the year and into 2023. In closing, we
remain focused on maximizing value across all our businesses and driving shareholder returns.
Sincerely,
Ellis Jacob
President and CEO
MANAGEMENT’S DISCUSSION AND ANALYSIS
November 9, 2022
The following management’s discussion and analysis (“MD&A”) of Cineplex Inc. (“Cineplex”) financial condition
and results of operations should be read together with the consolidated financial statements and related notes of
Cineplex (see Section 1, Overview of Cineplex). These financial statements, presented in Canadian dollars, were
prepared in accordance with Canadian generally accepted accounting principles (“GAAP”), defined as
International Financial Reporting Standards (“IFRS”) as set out in the Handbook of the Canadian Institute of
Chartered Professional Accountants.
Unless otherwise specified, all information in this MD&A is as of September 30, 2022 and all amounts are in
Canadian dollars.
MANAGEMENT’S DISCUSSION AND ANALYSIS CONTENTS
Section Contents Page
1 Overview of Cineplex 3
2 Cineplex's businesses and strategy 12
3 Overview of operations 13
4 Results of operations 17
5 Balance sheets 35
6 Liquidity and capital resources 37
7 Adjusted free cash flow and dividends 44
8 Share activity 45
9 Seasonality and quarterly results 47
10 Related party transactions 49
11 Significant accounting judgments and estimation uncertainties 49
12 Accounting policies 51
13 Risks and uncertainties 52
14 Controls and procedures 62
15 Subsequent events 63
16 Outlook 63
17 Non-GAAP and other financial measures 66
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Non-GAAP and Other Financial Measures
Cineplex reports on certain non-GAAP measures, non-GAAP ratios, supplementary financial measures and total
segments measures that are used by management to evaluate the performance of Cineplex. In addition, non-GAAP
measures are used in measuring compliance with debt covenants. Non-GAAP measures do not have standardized
meaning under GAAP and may not be comparable to similar measures provided by other issuers. Cineplex includes
these measures because management believes that they assist investors in assessing financial performance. The
definition, calculation and reconciliation of non-GAAP measures are provided in Section 17, Non-GAAP and other
financial measures.
Forward-Looking Statements
Certain information included in this MD&A contains forward-looking statements within the meaning of applicable
securities laws. These forward-looking statements include, among others, statements with respect to Cineplex’s
objectives, goals and strategies to achieve those objectives and goals, as well as statements with respect to
Cineplex’s beliefs, plans, objectives, expectations, anticipations, estimates and intentions. The words “may”, “will”,
“could”, “should”, “would”, “suspect”, “outlook”, “believe”, “plan”, “anticipate”, “estimate”, “expect”,
“intend”, “forecast”, “objective” and “continue” (or the negative thereof), and words and expressions of similar
import, are intended to identify forward-looking statements. Forward-looking statements also include, statements
pertaining to:
• Cineplex’s outlook, goals, expectations and projected results of operations, including factors and
assumptions underlying Cineplex’s projections regarding the duration and impact of a novel strain of
coronavirus (“COVID-19”) pandemic on Cineplex, the movie exhibition industry and the economy in
general, as well as Cineplex’s response to the pandemic related to the closure or operational
restrictions of its theatres and location-based entertainment (“LBE”) venues, employee reductions and
other cost-cutting initiatives and increased expenses relating to safety measures taken at its facilities to
protect the health and well-being of guests and employees;
• Cineplex’s expectations with respect to liquidity and capital expenditures, including its ability to meet
its ongoing capital, operating and other obligations, and anticipated needs for, and sources of, funds;
and
• Cineplex’s ability to execute cost-cutting and revenue enhancement initiatives in response to the
COVID-19 pandemic.
The COVID-19 pandemic has had an unprecedented impact on Cineplex, along with the rest of the movie exhibition
industry and other industries in which Cineplex operates, including material decreases in revenues, results of
operations and cash flows. As an entertainment and media company that operates spaces where guests gather in
close proximity, Cineplex’s business has been significantly impacted by the actions taken to control the spread of
COVID-19. These actions included, among other things, the introduction of vaccine passports or proof of
vaccination mandates, social distancing measures and restrictions including those on capacity. During the second
quarter of 2022, as COVID-19 cases declined across the country, restrictions relating to capacity limits, vaccine
passports and mask mandates were lifted in all of the markets in which Cineplex operates, providing clearer
visibility for Cineplex’s business and the return to normalcy. Cineplex is actively monitoring the situation and is
adapting its business strategies as the impact of the COVID-19 pandemic evolves.
By their very nature, forward-looking statements involve inherent risks and uncertainties, including those described
in Cineplex’s Annual Information Form (“AIF”), and MD&A for the year ended December 31, 2021 (“Annual
MD&A”) and in this MD&A. Those risks and uncertainties, both general and specific, give rise to the possibility
that predictions, forecasts, projections and other forward-looking statements will not be achieved. Certain material
factors or assumptions are applied in making forward-looking statements and actual results may differ materially
from those expressed or implied in such statements. Cineplex cautions readers not to place undue reliance on these
statements, as a number of important factors, many of which are beyond Cineplex’s control, could cause actual
results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions
expressed in such forward-looking statements. These factors include, but are not limited to the movie exhibition
industry and the economy in general, as well as Cineplex’s response to the COVID-19 pandemic as it related to the
closure or capacity restrictions of its theatres and LBE venues, employee reductions and other cost-cutting
initiatives, and increased expenses relating to safety measures taken at its facilities to protect the health and well-
being of customers and employees; Cineplex’s expectations with respect to liquidity and capital expenditures,
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including its ability to meet its ongoing capital, operating and other obligations, and anticipated needs for, and
sources of, funds; Cineplex’s ability to execute cost-cutting and revenue enhancement initiatives in response to the
COVID-19 pandemic; risks generally encountered in the relevant industry, competition, customer, legal, taxation
and accounting matters; the outcome of the litigation surrounding the termination of the Cineworld transaction
(described below); and diversion of management time on litigation related to the Cineworld transaction.
The foregoing list of factors that may affect future results is not exhaustive. When reviewing Cineplex’s forward-
looking statements, readers should carefully consider the foregoing factors and other uncertainties and potential
events. Additional information about factors that may cause actual results to differ materially from expectations and
about material factors or assumptions applied in making forward-looking statements may be found in the “Risks and
Uncertainties” section of this MD&A.
Cineplex does not undertake to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable Canadian securities law. Additionally,
Cineplex undertakes no obligation to comment on analyses, expectations or statements made by third parties in
respect of Cineplex, its financial or operating results or its securities. All forward-looking statements in this MD&A
are made as of the date hereof and are qualified by these cautionary statements. Additional information, including
Cineplex’s AIF, can be found on SEDAR at www.sedar.com.
1. OVERVIEW OF CINEPLEX
Cineplex (TSX:CGX) is a top-tier Canadian brand that operates in the Film Entertainment and Content, Amusement
and Leisure, and Media sectors. Cineplex offers a unique escape from the everyday to millions of guests through its
circuit of over 170 movie theatres and location-based entertainment venues. In addition to being Canada’s largest
and most innovative film exhibitor, the company operates Canada’s favourite destination for ‘Eats &
Entertainment’ (The Rec Room) and complexes specially designed for teens and families (Playdium). It also operates
successful businesses in digital commerce (CineplexStore.com), alternative programming (Cineplex Events), cinema
media (Cineplex Media), digital place-based media (Cineplex Digital Media “CDM”) and amusement solutions
(Player One Amusement Group “P1AG”). Providing even more value for its guests, Cineplex is a partner in Scene
LP, the operator of the Scene+ loyalty program, Canada’s largest entertainment and lifestyle loyalty program.
Cineplex’s theatre circuit is concentrated in major metropolitan and mid-sized markets. As of September 30, 2022,
Cineplex owned, leased or had a joint venture interest in 1,637 screens in 158 theatres from coast to coast as well as
13 LBE venues in six provinces.
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MANAGEMENT’S DISCUSSION & ANALYSIS 3
Cineplex
Theatre locations and screens at September 30, 2022
Province
Locations Screens
3D Digital
Screens UltraAVX
IMAX
Screens (i)
VIP
Auditoriums
D-BOX
Auditoriums
Recliner
Auditoriums
Other
Screens (ii)
Ontario 66 710 350 41 13 48 48 108 11
Quebec 17 220 88 10 3 9 7 17 1
British Columbia 25 236 125 16 3 20 16 43 2
Alberta 20 213 114 20 2 16 16 83 6
Nova Scotia 10 87 43 1 1 — 2 — 1
Saskatchewan 6 54 28 3 1 3 3 16 1
Manitoba 5 49 26 1 1 3 2 — 1
New Brunswick 5 41 20 2 — — 2 — —
Newfoundland &
Labrador 2 14 9 — 1 — 1 — —
Prince Edward Island 2 13 6 — — — 1 — —
TOTALS 158 1,637 809 94 25 99 98 267 23
Percentage of
screens 49 % 6 % 2 % 6 % 6 % 16 % 1 %
(i) All IMAX screens are 3D enabled. Total 3D screens including IMAX screens are 834 screens or 51% of the circuit.
(ii) Other screens includes 4DX, Cineplex Clubhouse and ScreenX.
Cineplex - Theatres, screens and premium offerings in the last eight quarters
2022 2021 2020
Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Theatres 158 159 159 160 161 160 161 162
Screens 1,637 1,640 1,640 1,652 1,656 1,651 1,657 1,667
3D Digital Screens 809 809 810 815 816 816 816 819
UltraAVX Screens 94 94 94 94 94 94 94 94
IMAX Screens 25 25 24 25 25 25 25 25
VIP Auditoriums 99 99 99 99 94 89 84 84
D-BOX Locations 98 98 98 98 98 98 98 98
Recliner Screens 267 267 267 267 262 258 253 253
Other Screens 23 22 22 22 19 19 19 19
Cineplex - LBE - at September 30, 2022 and 2021 2022 2021
Province The Rec Room Playdium The Rec Room Playdium
Ontario 4 2 4 2
Alberta 3 — 3 —
Manitoba 1 — 1 —
Newfoundland & Labrador 1 — 1 —
British Columbia 1 — 1 —
Nova Scotia — 1 — 1
TOTALS 10 3 10 3
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MANAGEMENT’S DISCUSSION & ANALYSIS 4
1.1 RECENT DEVELOPMENTS
COVID-19 business impacts, risks and liquidity
In early 2020, the outbreak of COVID-19 was confirmed in multiple countries throughout the world and on March
11, 2020, it was declared a global pandemic by the World Health Organization (“WHO”). In response, Cineplex
immediately introduced enhanced cleaning protocols and reduced theatre capacities to promote social distancing. By
mid-March 2020, each of Canada’s provinces and territories had declared a state of emergency resulting in, among
other things, the mandated closure of non-essential businesses, restrictions on public gatherings and quarantining of
people who may have been exposed to the virus. On March 16, 2020, Cineplex announced the temporary closure of
all of its theatres and LBE venues across Canada, as well as substantially all route locations operated by P1AG. On
August 21, 2020, Cineplex reopened its entire circuit of theatres and LBE venues, however, theatre operations and
LBE venues were continuously impacted by additional government mandated restrictions and closures over the next
several quarters.
As of July 17, 2021, Cineplex had reopened its entire circuit of theatres subject to capacity restrictions, in some
cases after months of extended closure periods. The reopening included Cineplex’s then 161 theatre locations,
encompassing 1,656 screens across Canada including 18 VIP Cinemas locations. As restrictions were temporarily
eased in markets in which Cineplex operated, Cineplex also reopened its LBE venues across Canada as well as route
locations operated by P1AG. All theatres, LBE venues and P1AG route locations continue to operate with enhanced
safety and cleaning measures to ensure the safety of Cineplex’s employees and customers.
Effective December 18, 2021, due to the rise of the Omicron variant, capacity restrictions were reinstated in Ontario,
Cineplex’s largest market, limiting indoor capacity to 50% along with prohibiting the consumption of concessions in
theatres. Theatres in Quebec were also mandated to temporarily close effective December 20, 2021. During the
beginning of the first quarter of 2022, social gathering restrictions were further modified or reinstituted in several
key markets in which Cineplex operates, resulting in theatre closures in Ontario. Cineplex was also required to
temporarily close or reduce capacity in other provinces. Effective January 29, 2022, January 31, 2022 and February
7, 2022, theatres in New Brunswick, Ontario and Quebec were permitted to reopen at reduced capacity levels,
respectively. During the second quarter of 2022, all remaining capacity restrictions and mask mandates were
removed in all markets in which Cineplex operates theatres and LBE venues across Canada. Cineplex is currently
operating at full capacity but is continuously monitoring for any government directives on operating capacities.
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To mitigate the negative impact of COVID-19 and support its long-term stability, Cineplex has undertaken a variety
of measures including:
Liquidity measures:
• June 2020: entered into the First Credit Agreement Amendment with The Bank of Nova Scotia as
administrative agent of Cineplex’s seventh amended and restated credit agreement (as amended, the “Credit
Facilities”) providing certain financial covenant relief in light of the COVID-19 pandemic and its impact on
Cineplex’s business (Section 6.4, Long-term debt);
• July 2020: issued convertible unsecured subordinated debentures (the “Debentures”) for net proceeds of
$303.3 million (Section 6.4, Long-term debt);
• November 2020: entered into the Second Credit Agreement Amendment providing further financial
covenant relief (Section 6.4, Long-term debt);
• December 2020: entered into an agreement to enhance and expand the SCENE loyalty program receiving
$60.0 million with respect to the reorganization;
• January 2021: completed the sale and leaseback transaction of Cineplex’s head office buildings located at
1303 Yonge Street and 1257 Yonge Street, Toronto, Ontario for gross proceeds of $57.0 million;
• January 2021: filed tax returns for the 2020 taxation year claiming a $62.6 million recovery of income taxes
paid in prior periods (all of which had been received by December 31, 2021);
• February 2021: entered into the Third Credit Agreement Amendment providing further financial covenant
relief (Section 6.4, Long-term debt);
• February 2021: issued 7.50% senior secured second lien notes due February 26, 2026 (the “Notes Payable”)
for net proceeds of $243.3 million (Section 6.4, Long-term debt);
• December 2021: entered into the Fourth Credit Agreement Amendment providing further financial
covenant relief (Section 6.4, Long-term debt); and
• August 2022: entered into the Fifth Credit Agreement Amendment providing further financial covenant
relief (Section 6.4, Long-term debt).
Cost reduction and subsidy measures:
• temporary layoffs of all part-time and full-time hourly employees as well as a number of full-time
employees who chose a temporary layoff rather than a salary reduction during the second quarter of 2020,
and additional temporary layoffs of part-time employees beginning in December 2021 and further
expanding into the first quarter of 2022;
• reduced full-time employee salaries by agreement with such employees during the second and third
quarters of 2020;
• suspended or deferred current capital spending, reviewing all capital projects to consider either deferral or
cancellation;
• reduced non-essential discretionary operational expenditures (such as spending on marketing, travel and
entertainment);
• implemented a more stringent review and approval process for all outgoing procurement and payment
requests;
• continued negotiations with landlords for cash payments in exchange for the sale of contractual rights or
negotiating rent relief, including abatements, reductions and deferrals;
• worked with major suppliers and other business partners to modify the timing and quantum of certain
contractual payments;
• reviewed and applied for government subsidy programs where available, including municipal and
provincial property tax and energy rebates or subsidies;
• applied for the ongoing Canada Emergency Wage Subsidy (“CEWS”), which was launched by the
Government of Canada, providing a variable subsidy for employee wages incurred from March 2020 to
October 23, 2021;
• applied for the ongoing Canada Emergency Rent Subsidy (“CERS”), which was launched by the
Government of Canada as a result of government mandated lockdowns, providing a variable subsidy for
rent and other occupancy-related costs incurred from September 27, 2020 through October 23, 2021;
• applied for Canada’s Tourism and Hospitality Recovery Program (“THRP”) which began on October 24,
2021 and provided wage and rent subsidies for businesses that have faced revenue losses, with a subsidy
rate of up to 75% until March 12, 2022 and 37.5% until May 7, 2022;
• continued evaluation of Cineplex’s eligibility under other relief programs; and
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• continued the suspension of dividends.
As some of Cineplex’s largest expenses, such as film cost and cost of food services, are fully variable, during the
closure of its theatres and LBE venues Cineplex focused on reducing its largest fixed and semi-fixed expenses,
including those attributed to theatre and LBE payroll and occupancy. Cineplex remains focused on identifying
opportunities to extract value under its existing lease agreements.
Since the closure of its theatres and LBE venues in March 2020, Cineplex diligently prepared for their safe
reopening, carefully re-examining all of its buildings and processes and implementing an industry-leading program
with end-to-end health and safety protocols. In June 2021, Cineplex introduced its VenueSafe program, which
encompasses all of Cineplex’s health and safety protocols, in accordance with Canada’s public health guidelines.
With the VenueSafe seal of approval, Cineplex believes that guests can feel confident in the company’s commitment
to provide a safe and comfortable environment to be entertained in both our theatres and other entertainment venues.
While the specific protocols will evolve over time, VenueSafe will remain across all of Cineplex’s venues as health
and safety remain a top priority and top of mind for our guests. For further details refer to www.cineplex.com/
Global/health-and-safety, www.therecroom.com/healthandsafety and www.playdium.com/healthandsafety.
With the uncertainty of future government-imposed restrictions and the potential long-term effect that the pandemic
may have on Cineplex’s businesses, COVID-19 may continue to have a prolonged material negative impact on
Cineplex’s operations and return to profitability.
As expected, box office results during the third quarter were impacted by delays in film releases due to COVID-19
production delays. In spite of this, Top Gun: Maverick, became one of six films to exceed $700 million in North
America and the fifth largest domestic film of all-time, earning $1.5 billion globally up to September 30, 2022,.
Minions: The Rise of Gru was released during the third quarter, generating $107.0 million during its North American
opening weekend and earning $366.1 million since its release up to September 30, 2022. Marvel’s Thor: Love and
Thunder was also released during the third quarter, generating $144.2 million during its North American opening
weekend and earning $343.2 million in North America since its release up to September 30, 2022. Lastly, Avatar,
which is the highest grossing film of all time, was re-released during the third quarter and generated $15.1 million in
North America during the first week of its re-release. This speaks highly of the demand for its highly anticipated
sequel, Avatar: The Way of Water, which will be released during the fourth quarter of 2022.
As at September 30, 2022, Cineplex had a cash balance of $28.9 million and $199.6 million available under its
Revolving Facility subject to the liquidity covenants set forth in the Credit Facilities as amended (Section 6.4, Long-
term debt). Combined with the continued focus on reducing costs and capital expenditures, management believes
that it has adequate liquidity to fund operations in the regions in which Cineplex operates.
Cineworld Transaction and Bankruptcy Filing
On December 15, 2019, Cineplex entered into an arrangement agreement (the “Arrangement Agreement”) with
Cineworld Group plc (“Cineworld”), pursuant to which an indirect wholly-owned subsidiary of Cineworld agreed to
acquire all of the issued and outstanding common shares of Cineplex Inc. (“Cineplex”) for $34.00 per share in cash
(the “Cineworld Transaction”). The Cineworld Transaction was to be implemented by way of a statutory plan of
arrangement under the Business Corporation Act (Ontario).
On June 12, 2020, Cineworld delivered a notice (the “Termination Notice”) to Cineplex purporting to terminate the
Arrangement Agreement. In the Termination Notice, Cineworld alleged that Cineplex took certain actions that
constituted breaches of Cineplex’s covenants under the Arrangement Agreement including failing to operate its
business in the ordinary course. In addition, Cineworld alleged that a material adverse effect had occurred with
respect to Cineplex. Cineworld’s repudiation of the Arrangement Agreement was acknowledged by Cineplex and
the Cineworld Transaction did not proceed. Cineplex vigorously denied Cineworld’s allegations.
On July 3, 2020, Cineplex announced that it had commenced an action in the Ontario Superior Court of Justice (the
“Court”) against Cineworld and 1232743 B.C. Ltd. seeking damages arising from what Cineplex claimed was a
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wrongful repudiation of the Arrangement Agreement. The claim sought damages, including the approximately $2.18
billion that Cineworld would have paid upon the closing of the Cineworld Transaction for Cineplex’s securities,
reduced by the value of the Cineplex securities retained by its security holders, as well as compensation for other
losses including the loss to Cineplex of expected synergies, the failure of Cineworld to repay or refinance Cineplex’s
approximately $664.0 million in debt, and transaction expenses. Cineplex also advanced alternative claims for
damages for the loss of benefits to its security holders, and to require Cineworld to disgorge the benefits it
improperly received by wrongfully repudiating the Cineworld Transaction.
A trial of the action commenced before the Court on September 13, 2021 and continued until November 4, 2021.
On December 14, 2021, the Court released its decision in the action. The Court held that Cineplex did not breach
any of its covenants in the Arrangement Agreement, and that Cineworld had no basis for terminating the
Arrangement Agreement. The Court held that Cineworld breached the Arrangement Agreement and repudiated the
transaction to acquire Cineplex, which actions precluded Cineplex from seeking specific performance and entitled
Cineplex to monetary damages. The Court awarded damages for breach of contract to Cineplex in the amount of
$1.24 billion on account of lost synergies, and $5.5 million for transaction costs, exclusive of pre-judgment interest
(the “Judgment”). The Court also held that Cineplex’s shareholders did not have any rights under the Arrangement
Agreement to enforce the agreement or sue Cineworld for any breach. The Court also denied Cineworld’s
counterclaim against Cineplex.
On January 12, 2022, Cineworld filed a Notice of Appeal with the Court of Appeal for Ontario and on January 27,
2022, Cineplex filed its Notice of Cross Appeal (the “Appeal”). The Appeal was originally scheduled to be heard on
October 12 and 13, 2022. On September 7, 2022, Cineworld and certain of its subsidiaries (the “Cineworld Parties”)
filed a petition in the United States Bankruptcy Court for the Southern District of Texas, (the “U.S. Bankruptcy
Court”), commencing bankruptcy proceedings under Chapter 11 of the United States Bankruptcy Code (“Chapter
11”). On September 8, 2022, the U.S. Bankruptcy Court granted relief requested by the Cineworld Parties in the
Chapter 11 proceedings, including an order confirming and enforcing a worldwide stay of all enforcement
proceedings by Cineworld’s creditors. Cineworld took the position that the Appeal was therefore stayed. On
September 9, 2022, Cineplex filed an emergency motion with the U.S. Bankruptcy Court, seeking to lift the stay
with respect to the Appeal. Cineplex’s emergency motion was heard on September 28, 2022, at which time the U.S.
Bankruptcy Court declined Cineplex’s requested relief, without prejudice to Cineplex’s ability to seek such relief at
a later date. On September 30, 2022, on consent of counsel for Cineplex and Cineworld, the Court of Appeal for
Ontario adjourned the Appeal until a date to be determined. Accordingly, the hearing of Appeal has been delayed.
Cineplex continues to evaluate and advance all options against Cineworld to maximize and monetize the value of the
Judgment. As part of these ongoing efforts, Cineplex has engaged Moelis & Company, a leading global investment
bank with significant expertise in these areas, as financial advisors, and Goodmans LLP, as lead counsel. Cineplex
has also been appointed as a member of the unsecured creditors’ committee in the Cineworld Parties’ Chapter 11
proceedings.
While the Judgment and next steps are a key focus for Cineplex and its advisors, due to uncertainties inherent in
appeals and Cineworld’s insolvency proceedings, it is not possible for Cineplex to predict the timing or final
outcome of the Appeal. Further, even if the Appeal by Cineworld is not successful, Cineworld may not have the
ability to pay the full amount of any damages or costs awarded by the Court. Therefore, no amount has been accrued
as a receivable.
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1.2 FINANCIAL HIGHLIGHTS
Financial highlights Third Quarter Year to Date
(in thousands of dollars, except theatre attendance in
thousands of patrons and per share and per patron
amounts) 2022 2021 Change (i) 2022 2021 Change (i)
Total revenues $ 339,837 $ 250,380 35.7 % $ 918,438 $ 356,718 157.5 %
Theatre attendance 11,084 8,272 34.0 % 28,837 9,835 193.2 %
Net income (loss) (ii) $ 30,857 $ (33,552) NM $ (10,055) $ (226,944) -95.6 %
Net income (loss) as a percentage of sales (ii) 9.1 % (13.4) % 22.5 % (1.1) % (63.6) % 62.5 %
Cash provided by operating activities $ 5,811 $ 52,023 -88.8 % $ 47,526 $ 33,524 41.8 %
Box office revenues per patron (“BPP”) (iii) $ 11.25 $ 11.38 -1.1 % $ 11.83 $ 11.23 5.3 %
Concession revenues per patron (“CPP”) (iii) $ 8.35 $ 8.58 -2.7 % $ 8.65 $ 8.39 3.1 %
Adjusted EBITDA (iv) $ 63,094 $ 48,606 29.8 % $ 177,508 $ 1,599 NM
Adjusted EBITDAaL (ii) (iv) $ 20,430 $ 10,762 89.8 % $ 50,475 $ (104,493) NM
Adjusted EBITDAaL margin (ii) (v) 6.0 % 4.3 % 1.7 % 5.5 % (29.3) % 34.8 %
Adjusted free cash flow (iv) $ 1,568 $ (5,753) NM $ 1,667 $ (150,485) NM
Adjusted free cash flow per share (v) $ 0.025 $ (0.091) NM $ 0.026 $ (2.376) NM
Earnings per share (“EPS”) - basic (ii) $ 0.49 $ (0.53) NM $ (0.16) $ (3.58) -95.5 %
EPS - diluted (ii) $ 0.43 $ (0.53) NM $ (0.16) $ (3.58) -95.5 %
(i) Throughout this MD&A, changes in percentage amounts are calculated as 2022 value less 2021 value.
(ii) 2022 includes expenses related to the Cineworld Transaction and associated litigation and claims recovery in the amount of $1.2 million
(2021 - $4.1 million) for the third quarter and $2.7 million (2021 - $9.1 million) for the year-to-date.
(iii) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
(iv) Represents a non-GAAP financial measure. See Section 17, Non-GAAP and other financial measures.
(v) Represents a non-GAAP ratio. See Section 17, Non-GAAP and other financial measures.
Total revenues for the third quarter of 2022 increased by 35.7%, or $89.5 million to $339.8 million as compared to
the prior year period. For the first time since the start of the COVID-19 pandemic, Cineplex’s entire circuit of
theatres and LBE venues were open and operating without any government mandated restrictions for the entirety of
the third quarter of 2022. In the prior year period, Cineplex had only reopened its entire circuit of theatres and LBE
venues fully as of July 17, 2021, subject to capacity restrictions and under operating restrictions with the
introduction of proof of vaccination programs in September of 2021.
Despite the third quarter box office being negatively impacted by delays in film releases, the continued success of
Top Gun: Maverick, and the release of highly anticipated films during the third quarter of 2022 including Thor: Love
and Thunder, contributed to a theatre attendance increase of 2.8 million to 11.1 million as compared to 8.3 million in
the prior year period. As a result of the increase in attendance, box office revenues increased 32.5% to
$124.7 million and food service revenues increased 31.5% to $105.2 million in the third quarter of 2022, as
compared to the prior year period. Amusement revenues increased by 30.5% or $16.3 million to an all-time quarterly
record of $69.6 million in the third quarter, primarily from P1AG route operations including family entertainment
centres (“FEC”) locations and theatres in the United States and Canada and the growth in the results from The Rec
Room and Playdium. Media revenues of $25.2 million were mainly from cinema media and network management
and services. As a result of the growth in total revenue, adjusted EBITDAaL increased by $9.7 million (89.8%) to
$20.4 million and adjusted free cash flow per share increased from a loss in the prior year period of $(0.091) to a
positive adjusted free cash flow per share of $0.025 in the current period. Cineplex’s income increased from a
reported loss of $33.6 million in the prior year period to an income position of $30.9 million, with net income per
share increasing from a $0.53 loss in the prior year period to an earnings per share of $0.49 in the current period.
Cineplex recognized a gain of $50.1 million in the third quarter on the disposition of its 1/6th interest in Scene+,
leaving a 1/3rd ownership interest in Scene+ (Section 4.2, Operating Results, (Gain) loss on disposal of assets).
Despite ongoing film release shifts caused by COVID-19 related production delays, operating results reflect the
strong reopening of Cineplex’s businesses as total revenues for the year to date period increased by $561.7 million
(157.5%) to $918.4 million as compared to the prior year period. Adjusted EBITDAaL for the year to date period
was $50.5 million as compared to a loss of $104.5 million in the prior year period and adjusted free cash flow per
share was $0.026 during the year to date period, compared to a loss in the prior year of $2.376. Cineplex’s net loss
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decreased from a reported loss of $226.9 million in the prior year period to a loss of $10.1 million in the year to date
period, with a net loss per share decreasing from $3.58 in the prior year period to a net loss of $0.16 during the year
to date period.
The reorganization of SCENE in December 2020 resulted in the cost of Scene+ points issued being recognized as
marketing costs, as opposed to reductions of revenue prior to this. During the third quarter of 2022, Cineplex
recognized an increase in box office and concession revenues of $2.2 million and $2.3 million, respectively ($4.5
million total). During the year to date period, Cineplex recognized an increase in box office and concession revenues
of $6.3 million and $6.3 million, respectively ($12.6 million total). The change in revenue recognition led to an
increase in both BPP and CPP of approximately $0.20 each, during the third quarter and an increase of $0.22 each
during the year to date period. There was a corresponding increase in marketing costs during the third quarter and
year to date period of $4.5 million and $12.6 million, respectively, including other sales transactions with respect to
the Scene+ points issued, resulting in no impact on Cineplex’s net income (loss).
1.3 KEY DEVELOPMENTS IN THE THIRD QUARTER OF 2022
The following describes certain key business initiatives undertaken and results achieved during 2022 in each of
Cineplex’s core business areas:
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
• Reported third quarter box office revenues of $124.7 million, an increase of $30.6 million (32.5%) from
$94.1 million due to a 34.0% increase in theatre attendance.
• Celebrated National Cinema Day on September 3, 2022, welcoming approximately 550,000 guests across
the theatre exhibition circuit, representing the largest attendance for a single day for the year to date, and
the third largest attendance for a single day in the last five years, following Avengers: Endgame that opened
in April 2019 and Avengers: Infinity War that opened in April 2018.
• BPP was $11.25, $(0.13) or 1.1% lower than $11.38 reported during the prior year period. The decrease
was primarily due to product offerings at discounted prices on National Cinema Day.
• Opened British Columbia’s second ScreenX auditorium at Cineplex Cinemas Langley.
Theatre Food Service
• Reported third quarter theatre food service revenues of $92.5 million, an increase of $21.6 million (30.4%)
compared to the prior year period primarily due to a 34.0% increase in theatre attendance.
• National Cinema Day held on September 3, 2022, resulted in the second highest grossing food service
revenue day of 2022.
• CPP was $8.35, representing a decrease of $0.23 or 2.7% when compared to the prior year period, primarily
due to the impact of National Cinema Day held on September 3, 2022, attracting discount seekers, resulting
in lower average consumer spend and purchase incidence among total guests visiting Cineplex’s theatre
circuit on that day.
Alternative Programming
• Alternative Programming (Cineplex Events) in the third quarter of 2022 featured the return of violinist and
conductor André Rieu’s summer concerts from Maastricht, Netherlands, the faith-based film Lifemark, and
the return of stage events to the big screen with the National Theatre’s production of Prima Facie starring
Jodie Comer.
• Cineplex Distribution (Cineplex Pictures) released the anime hit Dragon Ball Super: Super Hero, along
with three international films Chili Laugh Story (China), The Killer (South Korea) and Khetet Mazinger
(Egypt).
• Featured numerous strong performing international films, including Chhalla Mud Ke Nahi Aaya (Punjabi),
Laal Singh Chaddha (Hindi) and Maid in Malacanang (Tagalog), of which Cineplex represented 80.0%,
42.0% and 37.5%, respectively, of the total North American market share.
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Digital Commerce
• Total registered users for Cineplex Store increased 7% from the prior year period, reaching approximately
2.3 million registered users.
MEDIA
• Reported third quarter media revenues of $25.2 million, an increase of $11.2 million or 79.4% as compared
to the prior year period.
Cinema Media
• Reported third quarter cinema media revenues of $15.1 million, an increase of $8.5 million or 127.4% over
the prior year period, due to increases in cinema advertising as a result of increased theatre attendance and a
return by advertisers to cinema.
Digital Place-Based Media
• Reported third quarter revenues of $10.1 million, an increase of $2.7 million or 36.5% due to increased
advertising at digital out of home networks and higher project installation revenues.
AMUSEMENT AND LEISURE
• Reported all-time quarterly record revenues in the third quarter of $69.6 million, an increase of $16.3
million or 30.5% compared to the prior year period.
Player One Amusement Group
• Reported third quarter record revenues of $45.5 million, an increase of $10.1 million or 28.4% compared to
the prior year period. Adjusted EBITDAaL during the third quarter was an all-time quarterly record of $9.0
million, an increase of $2.0 million or 28.4% compared to the prior year period. The increase in revenues
and adjusted EBITDAaL were primarily due to increases in P1AG amusement revenues from US and
Canada route locations at FEC’s and theatres, along with an increase in distribution sales.
Location-based Entertainment
• Reported all-time record revenues in the third quarter of $31.0 million, an increase of $9.3 million or 42.5%
compared to the prior year period. The current period included a third quarter record for food service
revenues of $10.4 million, all-time quarterly record amusement revenues of $20.2 million and $0.5 million
of media and other revenues. Adjusted EBITDAaL for the third quarter was an all-time quarterly record of
$9.7 million, an increase of $0.5 million or 5.6% compared to the prior year period. The increase in
revenues and adjusted EBITDAaL were primarily due to all LBE venues being open during the entire
period compared to the prior year period that was subject to capacity restrictions.
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MANAGEMENT’S DISCUSSION & ANALYSIS 11
LOYALTY
• Membership in the Scene+ loyalty program increased to 10.8 million members during the period ended
September 30, 2022.
Scene+ Members
(millions)
9.4
10.1
10.5 10.5
10.8
Q3 18 Q3 19 Q3 20 Q3 21 Q3 22
• Welcomed Empire Company Limited as a co-owner of Scene+ during the third quarter, providing members
with increased opportunities to earn and redeem points through Empire’s family of brands firstly in Atlantic
Canada on August 11, 2022, in Western Canada on September 22, 2022, and across Canada by early 2023.
• Recognized a gain of $50.1 million on the disposition of its 1/6th ownership interest in Scene+, leaving a
1/3rd ownership interest in Scene+ with the satisfaction of specific non-financial milestones related to the
reorganization of Scene+.
• Announced that Home Hardware Stores Limited will be joining Scene+ with a launch expected to take
place in the summer of 2023, providing members with additional opportunities to earn and redeem points.
CORPORATE
• In recognition of National Indigenous Peoples Day, Cineplex donated $1 from every movie ticket sold, plus
every purchase on the Cineplex Store, at The Rec Room and Playdium, to imagineNATIVE, the world’s
largest presenter of Indigenous screen content.
• Commemorated National Day for Truth and Reconciliation on September 30, 2022 by partnering with the
Orange Shirt Society to raise awareness and honour Indigenous communities through Pre-Show content
and through donations to the Orange Shirt Society.
• Fundraised and sponsored local Pride celebrations across Canada, including employee participation in
select Pride parades, as well as made a corporate donation to Rainbow Railroad in support of LGBTQ2IA+
programs.
• Donated the proceeds raised during National Accessibility Week to the Canadian Paralympic Committee,
an organization with a mission ensuring that people, programs, and equipment are in place so that
Canadians with disabilities can be active in sports.
2. CINEPLEX’S BUSINESS AND STRATEGY
Cineplex’s mission statement is “Passionately delivering exceptional experiences.” All of its efforts are focused on
this mission and it is Cineplex’s goal to consistently provide guests and customers with exceptional experiences.
Cineplex’s operations are primarily conducted in four main areas: film entertainment and content, media,
amusement and leisure, and location-based entertainment, all supported by the Scene+ loyalty program. Cineplex’s
key strategic areas of focus include the following:
• Continue to enhance and expand Cineplex’s presence as an entertainment destination for Canadians in-
theatre, at-home and on-the-go;
• Capitalize on core media strengths and infrastructure to provide continued growth of Cineplex’s media
business both inside and outside theatres;
• Develop and scale amusement and leisure concepts by extending existing capabilities and infrastructure;
• Drive growth within businesses by leveraging opportunities to optimize value, realize synergies,
implement customer-centric technology and leverage big data across the Cineplex ecosystems; and
• Pursue opportunities that capitalize on Cineplex’s core strengths.
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Cineplex uses the Scene+ loyalty program and database as a strategic asset to link these areas of focus and drive
customer acquisition and spending across all lines of business.
Diversified Entertainment and Media Company
Key elements of this strategy include going beyond movies to reach customers in new ways and maximizing
revenue per patron. Cineplex has implemented in-theatre initiatives to improve the overall entertainment experience,
including increased premium offerings, enhanced in-theatre services, alternative pricing strategies, continued
development of the Scene+ loyalty and CineClub subscription programs, and initiatives in theatre food service such
as optimizing and adding product offerings and improving service execution. The ultimate goal of these in-theatre
customer service initiatives is to maximize revenue per patron and increase the frequency of movie-going at
Cineplex’s theatres.
While box office revenues (which include alternative programming) typically account for the largest portion of
Cineplex’s revenues, Cineplex has diversified its revenue streams through expanded theatre food service offerings,
cinema media, digital place-based media, amusement and leisure, the Cineplex Store, promotions and other revenue
streams which have increased as a share of total revenues.
3. OVERVIEW OF OPERATIONS
Revenues
Cineplex generates revenues primarily from box office and food service sales. These revenues are affected primarily
by theatre attendance levels and by changes in BPP and CPP. Box office revenue represented 36.7% of revenue in
the third quarter of 2022.
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MANAGEMENT’S DISCUSSION & ANALYSIS 13
The following table presents the revenue mix for comparative years:
Revenue mix % by period Q3 2022 Q3 2021 Q3 2020 Q3 2019 Q3 2018
Box office 36.7 % 37.6 % 23.8 % 42.5 % 44.9 %
Food service 31.0 % 31.9 % 25.3 % 30.0 % 29.9 %
Media 7.4 % 5.6 % 21.0 % 10.3 % 8.6 %
Amusement 20.5 % 21.3 % 21.7 % 13.9 % 13.9 %
Other 4.4 % 3.6 % 8.2 % 3.3 % 2.7 %
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cineplex has four reportable segments, film entertainment and content, media, amusement and leisure and location-
based entertainment. The reportable segments are business units offering differing products and services and are
managed separately due to their distinct natures and are based on the information used by Cineplex’s chief operating
decision makers.
Revenue mix % by year
Third Quarter Year to Date
2022 2021 2022 2021
Film Entertainment and Content 70.2 % 71.5 % 70.5 % 64.6 %
Media 7.3 % 5.6 % 7.2 % 9.1 %
Amusement and Leisure 13.4 % 14.2 % 13.7 % 19.2 %
LBE 9.1 % 8.7 % 8.6 % 7.1 %
Total 100.0 % 100.0 % 100.0 % 100.0 %
A key component of Cineplex’s business strategy is to position itself as the leading exhibitor in the Canadian market
by focusing on providing customers with an exceptional entertainment experience. For periods in 2020 and 2021,
Cineplex focused on optimizing revenues during the COVID-19 closures by offering a catalog of classic film
products along with new releases and expanding product offerings through the Cineplex Store. In addition, prior to
COVID-19, as a result of Cineplex’s focus on diversifying the business beyond the traditional movie exhibition
model, its revenue mix has shifted from box office revenue to other revenue sources.
The commercial appeal of the films and alternative content released during a given period, and the success of
marketing as well as promotion for those films by film studios, distributors and content providers all drive theatre
attendance. BPP is affected by the mix of film and alternative content product that appeals to certain audiences (such
as children or seniors who pay lower ticket prices), ticket prices during a given period and the appeal of available
premium priced product that increases BPP. While BPP is impacted by CineClub, the Cineplex Tuesdays program
and the Scene+ loyalty program, these programs are designed to increase theatre attendance frequency at Cineplex’s
theatres. Cineplex’s main focus is to drive incremental visits to theatres, to employ a ticket price strategy which
takes into account the local demographics at each theatre and to maximize BPP through premium offerings.
Food service revenues are comprised primarily of concession revenues, arising from food and beverage sales at
theatre locations, as well as food and beverage sales at LBE venues including The Rec Room and Playdium. In
addition, food service revenues include home delivery serviced by Uber Eats and Skip the Dishes. CPP represents
theatre food service revenues divided by theatre attendance, and is impacted by the theatre food service product mix,
theatre food service prices, film genre, promotions, discounts for CineClub members, and the Scene+ loyalty
program. CPP can fluctuate from quarter to quarter depending on the genre of film product playing. Cineplex
believes the Scene+ and CineClub programs drive incremental purchase incidence, increasing overall revenues.
Cineplex focuses primarily on growing CPP by optimizing the product offerings, improving operational excellence
and strategic pricing to increase purchase incidence and transaction value. Food service revenues from LBE include
food and beverage revenues from the various bars and restaurants located throughout the venues.
Media revenues include both cinema media (Cineplex Media) and digital place-based media (Cineplex Digital
Media) revenues. Cineplex Media generates revenues primarily from selling pre-show and show-time advertising in
Cineplex’s theatres as well as other circuits through representation sales agreements. Cineplex’s media advertising
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arrangements are impacted by theatre attendance levels which drive impressions and ultimately impact media
revenue generated by Cineplex. Additionally, Cineplex Media sells media placements throughout Cineplex’s circuit
including digital poster cases, as well as sponsorship and advertising in LBE venues. Cineplex Media also sells
digital advertising for cineplex.com, the Cineplex mobile app and on third party networks operated by Cineplex
Digital Media. Cineplex Digital Media designs, installs, maintains and operates digital signage networks in four
verticals including digital out of home (“DOOH”) (in public spaces such as shopping malls and office towers), quick
service restaurants, financial institutions and retailers. Cineplex Digital Media revenue is impacted by mall
attendance which affect impressions and revenue generated.
Amusement revenues include amusement solutions revenues from P1AG, which supplies and services all the games
in Cineplex’s theatre circuit while also supplying equipment to third party arcades, amusement parks and centres,
bowling alleys and theatre circuits across Canada and the United States, in addition to owning and operating FECs.
Additionally, included in amusement revenues are revenues generated by Cineplex’s XSCAPE Entertainment
Centres and game rooms in theatres as well as revenues generated at LBE venues.
Cineplex generates other revenues from the Cineplex Store, online booking fees, promotional activities, screenings,
private parties, corporate events and breakage on gift card sales.
Cost of Sales and Expenses
Film cost represents the film rental fees paid to distributors for films exhibited in Cineplex’s theatres. Film costs are
calculated as a percentage of box office revenue and are dependent on various factors including the performance of
the film. Film costs are accrued on the related box office receipts at either mutually agreed-upon terms established
prior to the opening of a film, or estimated terms where a mutually agreed settlement is reached upon conclusion of
a film’s run, depending upon the film licensing arrangement. There can be significant variances in film cost
percentage between quarters due to, among other things, the concentration of box office revenues amongst the top
films in the period with stronger performing films typically having a higher film cost percentage.
Cost of food service represents the cost of concession items and other theatre food service items sold, and varies
with changes in concession and other theatre food service revenues as well as the quantity and mix of concession
and other food service offerings sold. Cost of food and beverages sold at LBE is also included in cost of food
service.
Depreciation - right-of-use assets, represents the depreciation of Cineplex’s right-of-use assets related to leases.
Depreciation is calculated on a straight-line basis from the date of commencement of the lease to the earlier of the
end of the useful life of the asset or the end of the lease term.
Depreciation and amortization - other, represents the depreciation and amortization of Cineplex’s property,
equipment and leaseholds, as well as certain of its intangible assets. Depreciation and amortization are calculated on
a straight-line basis over the useful lives of the assets.
Loss (gain) on disposal of assets represents the gain recognized on assets or components of assets that were sold or
otherwise disposed.
Other costs are comprised of theatre occupancy expenses, other operating expenses and general and administrative
expenses. These categories are described below.
Theatre occupancy expenses include lease related expenses, percentage rent, property related taxes, business related
taxes and insurance and exclude cash rent accounted for as obligations or interest under IFRS 16, Leases.
Other operating expenses consist of fixed and variable expenses, with the largest component being theatre salaries
and wages. Although theatre salaries and wages net of subsidies (CEWS and THRP) include a fixed cost component,
these expenses vary in relation to revenues as theatre staffing levels are adjusted to handle fluctuations in theatre
attendance. Other components of this category include marketing which includes the cost of Scene+ points issued,
advertising, media, amusement and leisure (including P1AG and LBE), loyalty, digital commerce, supplies and
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services, utilities and maintenance. To the extent these costs are variable, they can be managed with changes in
business volumes.
General and administrative expenses are primarily costs associated with managing Cineplex’s business, including
film buying, marketing and promotions, operations and theatre food service management, accounting and financial
reporting, legal, treasury, design and construction, real estate development, communications and investor relations,
information systems and administration. Included in these costs are payroll (including Cineplex’s Omnibus Incentive
Plan costs), occupancy costs related to Cineplex’s corporate offices, professional fees (such as public accountant and
legal fees) and travel and related costs. Cineplex maintains general and administrative staffing and associated costs
at a level that it deems appropriate to manage and support the size and nature of its theatre and LBE portfolio and its
business activities.
Accounting for Joint Arrangements
The financial statements incorporate the operating results of joint arrangements in which Cineplex has an interest
using either the equity accounting method (for joint ventures and associates) or recognizing Cineplex’s share of the
assets, liabilities, revenues and expenses in Cineplex’s consolidated results (for joint operations).
Under IFRS 11, Cineplex’s 50% share of one IMAX auditorium in Ontario, its 78.2% interest in the Canadian
Digital Cinema Partnership (“CDCP”), 50% interest in YoYo’s Yogurt Cafe (“YoYo’s”), and 33.3% interest in
Scene+ are classified as joint ventures or associates. Through equity accounting, Cineplex’s share of the results of
operations for these joint ventures and associates are reported as a single item in the statements of operations, ‘Share
of income of joint ventures and associates’. Theatre attendance for the IMAX auditorium held in a joint venture is
not reported in Cineplex’s consolidated theatre attendance as the line-by-line results of the joint venture are not
included in the relevant lines in the statement of operations.
In addition to the joint ventures which are equity accounted, Cineplex consolidates its 50% share of assets,
liabilities, revenues and expenses of its joint operation, which includes Scene GP, and up to December 12, 2021,
Scene LP.
As part of the ongoing reorganization of Scene GP (“SCENE”) which began in December 2020, Cineplex and its
loyalty partner launched Scene+ on December 13, 2021 and as a result, Cineplex began equity accounting for its
50% economic interest in Scene LP, the operator of the Scene+ loyalty program.
In the fourth quarter of 2020, Cineplex announced that it had entered into an agreement with its existing partner
Scotiabank to enhance and expand the SCENE loyalty program. Cineplex received $60.0 million in December 2020
from its existing partner with respect to the agreement to reorganize the program and reposition it for future growth.
In conjunction with the agreement, Cineplex’s ownership in Scene+ was reduced to 33.3%. As a result of the
December 13, 2021 step in the reorganization, Cineplex equity accounts for its interest in Scene LP, and continues to
consolidate 50% of Scene GP which subsequent to December 12, 2021 holds the deferred revenue obligation for
SCENE points issued up to December 12, 2021. During the third quarter of 2022, Empire Company Limited became
a one-third partner of Scene+ and Cineplex continues to maintain a 33.3% interest in Scene+.
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4. RESULTS OF OPERATIONS
4.1. SELECTED FINANCIAL DATA
The following table presents summarized financial data for Cineplex for the three and nine months ended September
30, 2022 and 2021 (expressed in thousands of dollars except shares outstanding, per share data and per patron data,
unless otherwise noted):
Three months
ended
September 30,
2022
Three months
ended
September 30,
2021
Variance
(%)
Nine months
ended
September 30,
2022
Nine months
ended
September 30,
2021
Variance
(%)
Box office revenues $ 124,700 $ 94,114 32.5 % $ 341,024 $ 110,430 208.8 %
Food service revenues 105,193 79,971 31.5 % 284,218 99,754 184.9 %
Media revenues 25,224 14,060 79.4 % 67,175 32,535 106.5 %
Amusement revenues 69,607 53,319 30.5 % 185,754 89,377 107.8 %
Other revenues 15,113 8,916 69.5 % 40,267 24,622 63.5 %
Total revenues 339,837 250,380 35.7 % 918,438 356,718 157.5 %
Film cost 66,356 45,838 44.8 % 175,330 52,684 232.8 %
Cost of food service 24,839 16,362 51.8 % 65,031 20,641 215.1 %
Depreciation - right-of-use assets 23,277 25,151 -7.5 % 72,026 77,206 -6.7 %
Depreciation and amortization - other assets 26,079 28,297 -7.8 % 79,622 85,541 -6.9 %
(Gain) loss on disposal of assets (49,848) 22 NM (54,341) (29,859) 82.0 %
Other costs (a) 185,048 139,527 32.6 % 500,141 281,584 77.6 %
Costs of operations 275,751 255,197 8.1 % 837,809 487,797 71.8 %
Net income (loss) $ 30,857 $ (33,552) NM $ (10,055) $ (226,944) -95.6 %
Adjusted EBITDA (i) (v) $ 63,094 $ 48,606 29.8 % $ 177,508 $ 1,599 NM
Adjusted EBITDAaL (i) (v) $ 20,430 $ 10,762 89.8 % $ 50,475 $ (104,493) NM
(a) Other costs include:
Theatre occupancy expenses 17,714 15,638 13.3 % 46,874 27,769 68.8 %
Other operating expenses 150,441 108,694 38.4 % 404,968 210,290 92.6 %
General and administrative expenses (v) 16,893 15,195 11.2 % 48,299 43,525 11.0 %
Total other costs $ 185,048 $ 139,527 32.6 % $ 500,141 $ 281,584 77.6 %
EPS - basic (v) $ 0.49 $ (0.53) NM $ (0.16) $ (3.58) -95.5 %
EPS - diluted (v) $ 0.43 $ (0.53) NM $ (0.16) $ (3.58) -95.5 %
Total assets $ 2,089,732 $ 2,108,846 -0.9 % $ 2,089,732 $ 2,108,846 -0.9 %
Long-term debt (iv) $ 825,043 $ 734,046 12.4 % $ 825,043 $ 734,046 12.4 %
Shares outstanding at period end 63,362,713 63,343,113 — % 63,362,713 63,343,113 — %
Adjusted free cash flow per share (ii) $ 0.025 $ (0.091) NM $ 0.026 $ (2.376) NM
Box office revenue per patron (iii) $ 11.25 $ 11.38 -1.1 % $ 11.83 $ 11.23 5.3 %
Concession revenue per patron (iii) $ 8.35 $ 8.58 -2.7 % $ 8.65 $ 8.39 3.1 %
Film cost as a percentage of box office revenues 53.2 % 48.7 % 4.5 % 51.4 % 47.7 % 3.7 %
Theatre attendance (in thousands of patrons) (iii) 11,084 8,272 34.0 % 28,837 9,835 193.2 %
Theatre locations (at period end) 158 161 -1.9 % 158 161 -1.9 %
Theatre screens (at period end) 1,637 1,656 -1.1 % 1,637 1,656 -1.1 %
(i) Represents a non-GAAP financial measure. See Section 17, Non-GAAP and other financial measures.
(ii) Represents a non-GAAP ratio. See Section 17, Non-GAAP and other financial measures.
(iii) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
(iv) Represents the principal component as presented on the financial statements net of any equity component and unamortized costs of long-
term debt, Debentures, and Notes Payable. Excludes share-based compensation, lease obligations, fair value of interest rate swap agreements,
post-employment benefit obligations and other liabilities.
(v) 2022 includes expenses related to the Cineworld Transaction and associated litigation and claims recovery in the amount of $1.2 million
(2021 - $4.1 million) for the third quarter and $2.7 million (2021 - $9.1 million) for the year-to-date.
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MANAGEMENT’S DISCUSSION & ANALYSIS 17
4.2. OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
Total revenues
Total revenues for the three months ended September 30, 2022 increased $89.5 million (35.7%) to $339.8 million as
compared to the prior year period. Total revenues for the nine months ended September 30, 2022 increased $561.7
million (157.5%) to $918.4 million as compared to the prior year period. A discussion of the factors affecting the
changes in box office, food service, media, amusement and other revenues for the period is provided below.
Non-GAAP and other financial measures discussed throughout this MD&A, including adjusted EBITDA, adjusted
EBITDAaL, adjusted store level EBITDAaL, adjusted EBITDAaL margin, adjusted store level EBITDAaL margin,
adjusted free cash flow, theatre attendance, BPP, premium priced product, same theatre metrics, CPP, film cost
percentage, food service cost percentage and concession margin per patron are defined and discussed in Section 17,
Non-GAAP and other financial measures.
Box office revenues
The following table highlights the movement in box office revenues, theatre attendance and BPP for the quarter and
the year to date (in thousands of dollars, except theatre attendance reported in thousands of patrons and per patron
amounts, unless otherwise noted):
Box office revenues Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Box office revenues $ 124,700 $ 94,114 32.5 % $ 341,024 $ 110,430 208.8 %
Theatre attendance (i) 11,084 8,272 34.0 % 28,837 9,835 193.2 %
Box office revenue per patron (i) $ 11.25 $ 11.38 -1.1 % $ 11.83 $ 11.23 5.3 %
BPP excluding premium priced product (i) $ 9.90 $ 10.21 -3.0 % $ 10.27 $ 10.13 1.4 %
Same theatre box office revenues (i) $ 123,369 $ 93,079 32.5 % $ 336,902 $ 109,361 208.1 %
Same theatre attendance (i) 11,015 8,198 34.4 % 28,630 9,757 193.4 %
% Total box from premium priced product (i) 36.5 % 30.4 % 6.1 % 38.9 % 28.9 % 10.0 %
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
Box office continuity Third Quarter Year to Date
Box Office
Theatre
Attendance Box Office
Theatre
Attendance
2021 as reported $ 94,114 8,272 $ 110,430 9,835
Same theatre attendance change 31,975 2,816 211,541 18,873
Impact of same theatre BPP change (2,630)
—
11,178 —
New and acquired theatres (i) 697 36 3,419 165
Disposed and closed theatres (i) (401) (40) (366) (36)
Scene+ points issued presented as marketing costs 945 — 4,822 —
2022 as reported $ 124,700 11,084 $ 341,024 28,837
(i) See Section 17, Non-GAAP and other financial measures. Represents theatres opened, acquired, disposed or closed subsequent to the start of
the prior year comparative period and is used to report on Cineplex’s supplementary financial measures.
Third Quarter 2022 Top Cineplex Films 3D % Box Third Quarter 2021 Top Cineplex Films 3D % Box
1 Thor: Love and Thunder
a
18.2 % 1
Shang-Chi and The Legend Of The Ten Rings
a
17.7 %
2 Minions: The Rise of Gru
a
18.2 % 2
Free Guy
a
9.9 %
3 Top Gun: Maverick 11.6 % 3
Black Widow
a
9.9 %
4 Bullet Train 5.8 % 4
The Suicide Squad 7.6 %
5 Elvis 5.1 % 5
Jungle Cruise
a
7.3 %
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Management’s Discussion and Analysis
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 18
Year to Date 2022 Top Cineplex Films 3D % Box Year to Date 2021 Top Cineplex Films 3D % Box
1 Top Gun: Maverick 12.6 % 1
Shang-Chi And The Legend Of The Ten Rings
a
15.0 %
2 Doctor Strange In The Multiverse of Madness
a
7.9 % 2
Free Guy
a
8.4 %
3 The Batman 7.2 % 3
Black Widow
a
8.4 %
4 Thor: Love and Thunder
a
6.8 % 4
F9: The Fast Saga 7.2 %
5 Minions: The Rise of Gru
a
6.8 % 5
The Suicide Squad 6.5 %
Third Quarter and Year to Date
Box office revenues increased $30.6 million to $124.7 million during the third quarter of 2022, compared to $94.1
million recorded in the same period in 2021. This increase was due to a 2.8 million increase in theatre attendance, as
Cineplex’s theatre circuit was open, operating without capacity restrictions during the quarter, compared to the prior
year period that was not fully open until July 17, 2021, was subject to capacity restrictions and had operating
restrictions with the introduction of proof of vaccination programs in September 2021. Despite box office revenues
being impacted by shifts in film releases due to production delays, the release of highly anticipated films also
contributed to the significant increase in box office revenues. This included the continued success of Top Gun:
Maverick which has exceeded $700.0 million in North America and has become the fifth largest domestic film of
all-time, Thor: Love and Thunder and Minions: The Rise of Gru.
BPP for the three months ended September 30, 2022 was $11.25, representing an decrease of $0.13 or 1.1% from
$11.38 reported in the prior year period. The decrease in BPP was primarily due to National Cinema Day on
September 3; admission was $3.00 for all films including all premium priced product and represented 5% of the
attendance for the third quarter, reducing BPP by $0.43. The reorganization of SCENE resulted in a change in
revenue recognition leading to higher box office revenues during the quarter of $2.2 million, a BPP increase of
$0.20 with a corresponding increase in marketing costs of $2.2 million, with respect to Scene+ points issued on box
office transactions.
For the year to date period, box office revenues increased $230.6 million to $341.0 million, compared to $110.4
million recorded in the prior year period. This increase was primarily due to a 19.0 million increase in theatre
attendance as Cineplex’s theatre circuit was open for the entire period with increased operating capacity, compared
to closure requirements or operating restrictions that remained in effect for a majority of the prior year period.
BPP during the year to date period was $11.83, which increased $0.60 or 5.3% from $11.23 reported in the prior
year period. This increase was partially due to higher percentage of box office revenue from premium priced
offerings, which accounted for 38.9% of Cineplex’s box office revenues in the nine months ended September 30,
2022, as compared to 28.9% in the prior year period. The reorganization of SCENE resulted in a change in revenue
recognition leading to higher box office revenues during the year to date period of $6.3 million, a BPP increase of
$0.22 with a corresponding increase in marketing costs of $6.3 million, with respect to Scene+ points issued on box
office transactions.
Box Office Revenue per
Patron
$10.07 $10.16
$9.30
$11.38
$11.25
Q3 18 Q3 19 Q3 20 Q3 21 Q3 22
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 19
Box Office Revenues
(millions)
$173.3
$177.9
$14.5
$94.1
$124.7
Q3 18 Q3 19 Q3 20 Q3 21 Q3 22
Theatre Attendance (millions)
17.2
17.5
1.6
8.3
11.1
Q3 18 Q3 19 Q3 20 Q3 21 Q3 22
Food service revenues
The following table highlights the movement in food service revenues, theatre attendance and CPP for the quarter
and the year to date (in thousands of dollars, except theatre attendance and same store attendance reported in
thousands of patrons and per patron amounts):
Food service revenues Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Food service - theatres $ 92,520 $ 70,945 30.4 % $ 249,325 $ 82,506 202.2 %
Food delivery - theatres 2,285 2,599 -12.1 % 7,924 10,053 -21.2 %
Food service - LBE 10,373 6,402 62.0 % $ 26,910 7,089 279.6 %
Food delivery - LBE 15 25 -40.8 % 59 106 -44.2 %
Total food service revenues $ 105,193 $ 79,971 31.5 % $ 284,218 $ 99,754 184.9 %
Theatre attendance (i) $ 11,084 $ 8,272 34.0 % 28,837 9,835 193.2 %
CPP (i) (ii) $ 8.35 $ 8.58 -2.7 % $ 8.65 $ 8.39 3.1 %
Same theatre food service revenues (i) $ 91,184 $ 70,046 30.2 % $ 245,229 $ 81,563 200.7 %
Same theatre attendance (i) 11,015 8,198 34.4 % 28,630 9,757 193.4 %
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
(ii) Food service revenue from LBE and delivery is not included in the CPP calculation.
Theatre food service revenue continuity Third Quarter Year to Date
Theatre Food
Service
Theatre
Attendance
Theatre Food
Service
Theatre
Attendance
2021 as reported $ 70,945 8,272 $ 82,506 9,835
Same theatre attendance change 24,063 2,816 157,770 18,873
Impact of same theatre CPP change (3,752) — 1,355 —
New and acquired theatres (i) 726 36 3,418 165
Disposed and closed theatres (i) (288) (40) (264) (36)
Scene+ points issued presented as marketing costs 826 — 4,540 —
2022 as reported $ 92,520 11,084 $ 249,325 28,837
(i) See Section 17, Non-GAAP and other financial measures. Represents theatres opened, acquired, disposed or closed subsequent to the start of
the prior year comparative period and is used to report on Cineplex’s supplementary financial measures.
Third Quarter and Year to Date
Food service revenues are comprised primarily of concession revenues, which includes food service sales at theatre
locations and through delivery services including Uber Eats and Skip the Dishes. Food service revenues also include
food and beverage sales at The Rec Room and Playdium.
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 20
Food service revenues increased by $25.2 million during the third quarter primarily due to the $21.6 million increase
in theatre food service revenues to $92.5 million in the quarter. During the current period, Cineplex’s theatre circuit
and LBE businesses operated during the entire period without government mandated capacity restrictions compared
to the prior year period that was subject to operating and capacity restrictions. Food service revenues from LBE
businesses increased by $4.0 million during the third quarter from $6.4 million to a third quarter record of $10.4
million, further contributing to the increase in food service revenue. CPP for three months ended September 30,
2022 was $8.35, which decreased by $0.23 or 2.7%. The decrease in CPP was impacted by National Cinema Media
Day held on September 3, 2022 which attracted discount seekers, resulting in lower average consumer spend and
purchase incidence among total guests visiting Cineplex’s theatre circuit on that day which negatively impacted CPP
by approximately $0.15. In addition, purchase incidence was slightly lower in the current quarter compared to the
prior year likely due to film product mix in the current period. The reorganization of SCENE resulted in a change in
revenue recognition leading to higher concession revenues during the quarter of $2.3 million, a CPP increase of
$0.20 with a corresponding increase in marketing costs of $2.3 million, with respect to Scene+ points issued on
concession transactions.
For the year to date period, food service revenues increased by $184.5 million, primarily due to a $166.8 million
increase in theatre food service revenues. The increase in theatre food service revenues is primarily due to increases
in theatre attendance which increased by 19.0 million to 28.8 million. The prior year period was materially impacted
by government mandated theatre and LBE venues closures, restrictions on indoor dining and operating restrictions.
Contributing to the increase in total food service, food service revenues from LBE businesses increased $19.8
million during the year to date period from $7.1 million to $26.9 million. CPP during the year to date period was
$8.65, which increased by $0.26 or 3.1%. Contributing to the increase in CPP was higher theatre food service
revenues from VIP auditoriums which have a higher average spend. The reorganization of SCENE resulted in a
change in revenue recognition leading to higher concession revenues during the year to date period of $6.3 million, a
CPP increase of $0.22 with a corresponding increase in marketing costs of $6.3 million, with respect to Scene+
points issued on concession transactions.
Theatre Food Revenues
(millions)
$107.5
$117.0
$13.9
$73.5
$94.8
Q3 18 Q3 19 Q3 20 Q3 21 Q3 22
Concession Revenue per
Patron
$6.25
$6.68
$7.37
$8.58
$8.35
Q3 18 Q3 19 Q3 20 Q3 21 Q3 22
Media revenues
The following table highlights the movement in media revenues for the quarter and the year to date (in thousands of
dollars):
Media revenues Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Cinema media $ 15,097 $ 6,640 127.4 % $ 42,046 $ 10,951 283.9 %
Digital place-based media 10,127 7,420 36.5 % 25,129 21,584 16.4 %
Total media revenues $ 25,224 $ 14,060 79.4 % $ 67,175 $ 32,535 106.5 %
Third Quarter and Year to Date
Total media revenues increased $11.2 million or 79.4% to $25.2 million during the third quarter of 2022 compared
to the prior year period. For the year to date period, total media revenues increased $34.6 million or 106.5% to $67.2
million. The increase during both periods was primarily due to an increase in cinema media due to significant
Cineplex Inc.
Management’s Discussion and Analysis
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 21
increases in pre-show and show-time advertising revenues, resulting in a quarterly and year to date increase of $8.5
million and $31.1 million, respectively. Cineplex’s cinema media arrangements are impacted by theatre attendance
levels which drive impressions and ultimately impact media revenue generated by Cineplex. The prior year periods
were subject to capacity restrictions negatively impacting media revenues, while the increase in cinema media
revenue during the quarter and year to date period reflect an increase in attendance levels when compared to the
prior year period. However, attendance in the third quarter was impacted by delays in film releases due to
COVID-19 production delays. During the third quarter and year to date periods, digital placed-based media revenues
increased $2.7 million and $3.5 million, respectively, compared to the prior year periods as a result of digital
advertising on DOOH networks and higher project installation revenues.
Media Revenues
(millions)
$33.2
$43.3
$12.8
$14.1
$25.2
Q3 18 Q3 19 Q3 20 Q3 21 Q3 22
The following table shows a breakdown of the nature of digital place-based media revenues for the quarter and the
year to date (in thousands of dollars):
Digital place-based media revenues Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Project revenues (i) $ 4,110 $ 2,194 87.3 % $ 10,270 $ 7,014 46.4 %
Other revenues (ii) 6,017 5,226 15.1 % 14,859 14,570 2.0 %
Total digital place-based media revenues $ 10,127 $ 7,420 36.5 % $ 25,129 $ 21,584 16.4 %
(i) Project revenues include hardware sales and professional services.
(ii) Other revenues include sales of software and its support as well as media advertising.
Amusement revenues
The following table highlights the movement in amusement revenues for the quarter and the year to date (in
thousands of dollars):
Amusement revenues Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Amusement - P1AG excluding Cineplex exhibition and
LBE (i) $ 45,541 $ 35,473 28.4 % $ 125,477 $ 68,478 83.2 %
Amusement - Cineplex exhibition (i) 3,910 2,709 44.4 % 9,249 2,980 210.4 %
Amusement - LBE 20,156 15,137 33.2 % 51,028 17,919 184.8 %
Total amusement revenues $ 69,607 $ 53,319 30.5 % $ 185,754 $ 89,377 107.8 %
(i) Cineplex receives a venue revenue share on games revenues earned at in-theatre game rooms and XSCAPE Entertainment Centres.
Amusement - Cineplex exhibition reports the total of this venue revenue share which is consistent with the historical presentation of Cineplex’s
amusement revenues. Amusement - P1AG excluding Cineplex exhibition and LBE reflects P1AG’s gross amusement revenues, net of the venue
revenue share paid to Cineplex reflected in Amusement - Cineplex exhibition above.
Third Quarter and Year to Date
Amusement revenues increased $16.3 million or 30.5% to an all-time quarterly record of $69.6 million during the
third quarter as compared to the prior year period. The increase was primarily due to a $10.1 million increase in
P1AG amusement revenues from US and Canada route locations at FEC’s and theatres, along with an increase in
Cineplex Inc.
Management’s Discussion and Analysis
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MANAGEMENT’S DISCUSSION & ANALYSIS 22
distribution sales, despite the long lead times and logistical challenges. The increase is also attributable to a $5.0
million increase in LBE amusement revenues, resulting in an all-time quarterly record of $20.2 million. The increase
in amusement revenues is attributed to increased operating activities at P1AG US and Canada route locations at
FEC’s and theatres, as well as LBE businesses during the quarter, compared to the prior year period that was subject
to government mandated operating and capacity restrictions.
For the year to date period, amusement revenues increased $96.4 million or 107.8% to $185.8 million. The increase
was primarily due to a $57.0 million increase in P1AG amusement revenues from US and Canada route locations at
FEC’s and theatres. Further contributing to the increase was a $33.1 million increase in LBE amusement revenues.
The increase is also attributable to increased operating activities during the year to date period, compared to the
government mandated closure requirements or capacity restrictions that remained in effect for a majority of the prior
year period.
The following table presents the adjusted EBITDAaL for the quarter and the year to date for P1AG (in thousands of
dollars):
P1AG Summary Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Amusement revenues $ 45,541 $ 35,473 28.4 % $ 125,477 $ 68,478 83.2 %
Operating Expenses 35,541 27,515 29.2 % 100,393 60,639 65.6 %
Cash rent related to lease obligations (i) 999 948 5.4 % 2,980 3,081 -3.3 %
Total $ 36,540 $ 28,463 28.4 % $ 103,373 $ 63,720 62.2 %
P1AG adjusted EBITDAaL (ii) $ 9,001 $ 7,010 28.4 % $ 22,104 $ 4,758 364.6 %
P1AG adjusted EBITDAaL Margin (iii) 19.8 % 19.8 % — % 17.6 % 6.9 % 10.7 %
(i) Cash rent that has been reallocated to offset the lease obligations.
(ii) Represents a non-GAAP financial measure. See Section 17, Non-GAAP and other financial measures.
(iii) Represents a non-GAAP ratio. See Section 17, Non-GAAP and other financial measures.
When compared to the prior year period, P1AG’s amusement revenues increased by $10.1 million to $45.5 million
during the quarter and $57.0 million to $125.5 million during the year to date period. The increase in revenues is
attributed to P1AG US and Canadian route locations at FEC’s and theatres operating without any government
mandated restrictions during the period, compared to the prior year period that was subject to capacity restrictions in
Canada, in some cases after months of extended closure periods. P1AG adjusted EBITDAaL margin remained flat at
19.8% in the current period. For the year to date period, P1AG adjusted EBITDAaL margin increased from 6.9% to
17.6%. P1AG adjusted EBITDAaL during the third quarter was an all-time quarterly record of $9.0 million and was
$22.1 million during the year to date period, representing an increase of $2.0 million and $17.3 million, respectively.
Continued management of operating expenses, including realizing the benefits of subsidy programs where available,
allowed for the growth in margins for the year to date period when compared to the prior year period. Payroll costs
were reduced by the CEWS and THRP wage subsidy programs for the year to date period by $0.8 million (2021 -
$2.8 million).
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 23
The following table presents the adjusted store level EBITDAaL for the quarter and the year to date for LBE (in
thousands of dollars):
LBE Summary Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Food service revenues $ 10,388 $ 6,427 61.6 % $ 26,969 $ 7,195 274.8 %
Amusement revenues 20,156 15,137 33.2 % 51,028 17,919 184.8 %
Media and other revenues 495 212 133.4 % 1,209 247 389.1 %
Total revenues $ 31,039 $ 21,776 42.5 % $ 79,206 $ 25,361 212.3 %
Cost of food service 2,990 1,750 70.9 % 7,699 2,010 283.0 %
Operating expenses before adjustments (i) 15,694 9,110 72.3 % 38,457 13,125 193.0 %
Cash rent related to lease obligations (ii) 2,697 1,772 52.2 % 7,941 5,514 44.0 %
Total $ 21,381 $ 12,632 69.3 % $ 54,097 $ 20,649 162.0 %
Adjusted store level EBITDAaL (iii) $ 9,658 $ 9,144 5.6 % $ 25,109 $ 4,712 432.9 %
Adjusted store level EBITDAaL Margin (iv) 31.1 % 42.0 % (10.9) % 31.7 % 18.6 % 13.1 %
(i) Includes operating costs of LBE. Pre-opening costs relating to LBE and overhead relating to management of LBE portfolio are not included
as they are non-recurring costs.
(ii) Cash rent that has been reallocated to offset the lease obligations.
(iii) Represents a non-GAAP financial measure. See Section 17, Non-GAAP and other financial measures.
(iv) Represents a non-GAAP ratio. See Section 17, Non-GAAP and other financial measures.
During the third quarter of 2022, revenues increased by $9.3 million to an all-time quarterly record of $31.0 million
when compared to the prior year period. Revenues for the year to date period increased by $53.8 million to $79.2
million when compared to the prior year period. The increase in revenues during both periods is due to increased
operating levels as Cineplex operated during the entire period with no government mandated restrictions, whereas
the prior year period was subject to operating and capacity restrictions. LBE revenues also increased from higher
groups and events bookings in the third quarter of 2022.
Adjusted EBITDAaL for the third quarter of 2022 was an all-time quarterly record of $9.7 million and adjusted
EBITDAaL for the year to date period was $25.1 million. Adjusted EBITDAaL for the third quarter of 2021
included approximately $1.8 million of government subsidies. The increase in adjusted EBITDAaL is consistent
with the increase in amusement revenues, which have historically contributed the highest margin to LBE locations.
During the prior year period, Cineplex’s LBE venues were subject to capacity restrictions, in some cases after
months of extended closure periods leading to lower adjusted EBITDAaL. Management was able to reduce costs
where applicable including the receipt of funds under the CEWS and THRP wage subsidy programs, CERS rent
subsidy program, utility and realty tax subsidy programs for total cost reductions during the year to date period of
$2.7 million (2021 - $5.7 million).
Other revenues
The following table highlights the other revenues which includes revenues from online booking fees, the Cineplex
Store, promotional activities, screenings, private parties, corporate events, breakage on gift card sales and revenues
from management fees for the quarter and the year to date (in thousands of dollars):
Other revenues Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Total other revenues $ 15,113 $ 8,916 69.5 % $ 40,267 $ 24,622 63.5 %
Third Quarter and Year to Date
The increase in other revenues during the third quarter of 2022 and year to date period is primarily due to the
implementation of an online booking fee introduced on June 15, 2022 that applies to tickets purchased through
Cineplex’s mobile app and website. This online booking fee generated $5.2 million and $6.5 million during the third
quarter and year to date periods, respectively. The increase in other revenues in both the quarter and year to date
period is also attributed to breakage revenues relating to higher gift card redemptions.
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Management’s Discussion and Analysis
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 24
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 dollars, except film cost percentage):
Film cost Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Film cost $ 66,356 $ 45,838 44.8 % $ 175,330 $ 52,684 232.8 %
Film cost percentage (i) 53.2 % 48.7 % 4.5 % 51.4 % 47.7 % 3.7 %
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
Third Quarter and Year to Date
Film cost varies primarily with box office revenues and can vary from quarter to quarter usually based on the
relative strength of the titles exhibited during the period, impacted by film cost terms which vary by title and
distributor.
The increase in film cost and film cost percentage in the third quarter of 2022 and year to date over the prior year
periods is due to the release of first run film product including Minions: The Rise of Gru, Thor: Love and Thunder
and Bullet Train. Film cost percentage increased 4.5% and 3.7% for the third quarter and year to date as compared to
the prior year periods due to the top films in the third quarter of 2022 having higher settlement rates and making up a
larger percentage of box office revenues.
Film Cost Percentage
52.1% 52.7%
50.0%
48.7%
53.2%
Q3 18 Q3 19 Q3 20 Q3 21 Q3 22
Cost of food service
The following table highlights the movement in cost of food service and food service cost as a percentage of food
service revenues (“concession cost percentage”) for both theatres and LBE for the quarter and the year to date (in
thousands of dollars, except percentages and margins per patron):
Cost of food service Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Cost of food service - theatre $ 21,849 $ 14,612 49.5 % $ 57,332 $ 18,631 207.7 %
Cost of food service - LBE 2,990 1,750 70.9 % 7,699 2,010 283.0 %
Total cost of food service $ 24,839 $ 16,362 51.8 % $ 65,031 $ 20,641 215.1 %
Theatre concession cost percentage (i) 23.0 % 19.9 % 3.1 % 22.3 % 20.1 % 2.2 %
LBE food cost percentage (i) 28.8 % 27.2 % 1.6 % 28.5 % 27.9 % 0.6 %
Theatre concession margin per patron (i) $ 6.42 $ 6.87 -6.6 % $ 6.72 $ 6.70 0.3 %
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 25
Third Quarter and Year to Date
Cost of food service at the theatres varies primarily with theatre attendance, the cost of food and materials purchases
as well as the quantity and mix of offerings sold. Cost of food service at LBE venues varies primarily with the
volume of guests who visit the location as well as the quantity and mix between food and beverage items sold.
The increase in cost of food service during the third quarter of 2022 and year to date period is positively correlated
to the increase in food service revenues recognized during the quarter and year to date period as Cineplex’s theatre
circuit and LBE businesses were open and operating for the entire period, compared to closures or capacity
restrictions that remained in effect for a majority of the prior year periods. Theatre concession cost percentage for
the third quarter and year to date period increased when compared to the prior year period as a result of food cost
increases and sales mix, including a higher percentage of sales in VIP auditoriums which have lower margins. LBE
food cost percentage increased during both the third quarter and year to date period when compared to the prior year
period due to inflation on food costs from vendors.
Theatre Concession Cost
Percentage
20.5% 21.5%
23.0%
19.9%
23.0%
Q3 18 Q3 19 Q3 20 Q3 21 Q3 22
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 dollars):
Depreciation and amortization expenses Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Depreciation of property, equipment and leaseholds $ 23,176 $ 25,543 -9.3 % $ 71,308 $ 77,523 -8.0 %
Amortization of intangible assets and other 2,903 2,754 5.4 % 8,314 8,018 3.7 %
Sub-total - depreciation and amortization - other assets $ 26,079 $ 28,297 -7.8 % $ 79,622 $ 85,541 -6.9 %
Depreciation - right-of-use assets 23,277 25,151 -7.5 % 72,026 77,206 -6.7 %
Total depreciation and amortization $ 49,356 $ 53,448 -7.7 % $ 151,648 $ 162,747 -6.8 %
Third Quarter and Year to Date
Depreciation of property, equipment and leaseholds decreased by $2.4 million, or 9.3% during the quarter compared
to the prior year period, and by $6.2 million or 8.0% for the year to date period compared to the prior year period.
The decrease was primarily due to fully depreciated property, equipment and leaseholds.
The quarterly and year to date increase in amortization of intangible assets and other as compared to the prior year
period is due to software developments and additions.
Depreciation of right-of-use decreased by $1.9 million and $5.2 million during the quarter and year to date period,
respectively. The decrease is primarily due to modifications to lease agreements as a result of COVID-19 which
reduced the corresponding right-of-use asset and related depreciation recognized.
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
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(Gain) 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 dollars):
(Gain) loss on disposal of assets Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
(Gain) loss on disposal of assets $ (49,848) $ 22 NM $ (54,341) $ (29,859) 82.0 %
Third Quarter and Year to Date
The change in the (gain) loss on disposal of assets for the third quarter as compared to the prior year period was due
to the recognition of a $50.1 million gain related to the reorganization of Scene LP as specific non-financial
milestones were completed during the third quarter, compared to nominal activity in the prior year period.
The gain in the 2021 year to date period related primarily to the sale of Cineplex’s head office buildings for gross
proceeds of $57.0 million in the first quarter of 2021.
Other costs
Other costs include three main sub-categories of expenses: theatre occupancy expenses, which capture associated
occupancy costs for Cineplex’s theatre operations; other operating expenses, which include the costs related to
running Cineplex’s film entertainment and content, media, as well as amusement and leisure; and general and
administrative expenses, which includes costs related to managing Cineplex’s operations, including 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
dollars):
Other costs Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Theatre occupancy expenses $ 17,714 $ 15,638 13.3 % $ 46,874 $ 27,769 68.8 %
Other operating expenses 150,441 108,694 38.4 % 404,968 210,290 92.6 %
General and administrative expenses 16,893 15,195 11.2 % 48,299 43,525 11.0 %
Total other costs $ 185,048 $ 139,527 32.6 % $ 500,141 $ 281,584 77.6 %
Theatre occupancy expenses
The following table highlights the movement in theatre occupancy expenses for the quarter and the year to date (in
thousands of dollars):
Theatre occupancy expenses Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Cash rent paid/payable (i) $ 37,866 $ 32,913 15.0 % $ 110,629 $ 80,665 37.1 %
Other occupancy 18,157 16,555 9.7 % 51,316 43,066 19.2 %
One-time items (ii) (1,013) (608) 66.6 % (2,296) (3,827) -40.0 %
Total theatre occupancy including cash lease payments $ 55,010 $ 48,860 12.6 % $ 159,649 $ 119,904 33.1 %
Cash rent paid/payable related to lease obligations (iii) (37,296) (33,222) 12.3 % (112,775) (92,135) 22.4 %
Theatre occupancy as reported $ 17,714 $ 15,638 13.3 % $ 46,874 $ 27,769 68.8 %
(i) Represents the cash payments for theatre rent paid or payable during the quarter.
(ii) One-time items include amounts related to both theatre rent and other theatre occupancy costs including real estate taxes, business taxes and
common area maintenance. They are isolated here to illustrate Cineplex’s theatre rent and other theatre occupancy costs excluding these one-
time, non-recurring items.
(iii) Cash rent paid/payable that has been reallocated to offset the lease obligations.
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 27
Theatre occupancy continuity Third Quarter Year to Date
Occupancy Occupancy
2021 as reported $ 15,638 $ 27,769
Impact of new and acquired theatres 192 865
Impact of disposed theatres 331 1,006
Same store rent change (i) 3,746 20,007
One-time items (405) 1,531
Decrease in subsidies 1,530 15,177
Other 755 1,158
Impact of IFRS 16:
Cash rent related to lease obligations (4,073) (20,639)
2022 as reported $ 17,714 $ 46,874
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
Third Quarter and Year to Date
Theatre occupancy expenses increased $2.1 million or 13.3% during the third quarter of 2022 compared to the prior
year period. This increase was primarily due to the reduction in subsidies received as a result of the reopening of
Cineplex’s businesses. The increase was also attributable to higher theatre rent related expenses including common
area maintenance and taxes incurred as Cineplex’s theatres were open during the entire period. During the prior year
period, Cineplex recognized lower theatre occupancy expenses as theatres were subject to capacity restrictions, in
some cases after months of extended closure periods. Same-store rent increased $3.7 million primarily due to lower
rent relief measures negotiated with landlord partners which were $4.9 million higher in the prior year period.
For the year to date period, theatre occupancy expenses increased $19.1 million or 68.8% compared to the prior
year. This increase was primarily due to increased theatre rent related expenses, including common area
maintenance and taxes, as Cineplex’s theatres were permitted to operate during the entire period. During the prior
year period, Cineplex recognized lower theatre occupancy expenses as theatres were subject to capacity restrictions,
in some cases after months of extended closure periods. Same-store rent increased $20.0 million primarily due to
lower rent relief measures negotiated with landlord partners, which were $22.3 million higher in the prior year
period. Similarly, due to the reopening of Cineplex’s businesses, Cineplex received a lower amount of subsidy relief
when compared to the prior year period and recognized realty tax and rent subsidies of $7.2 million (2021 - $24.0
million).
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 28
Other operating expenses
The following table highlights the movement in other operating expenses during the quarter and the year to date (in
thousands of dollars):
Other operating expenses Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Theatre payroll $ 36,911 $ 23,944 54.2 % $ 90,383 $ 33,052 173.5 %
Theatre operating expenses 28,719 21,611 32.9 % 77,258 39,042 97.9 %
Media 12,952 7,874 64.5 % 35,148 24,117 45.7 %
P1AG 36,540 28,463 28.4 % 103,373 63,720 62.2 %
LBE (i) 18,391 10,882 69.0 % 46,398 18,639 148.9 %
LBE pre-opening (ii) — 448 -100.0 % — 1,354 -100.0 %
SCENE 7,195 9,980 -27.9 % 25,699 20,378 26.1 %
Marketing 2,718 3,259 -16.6 % 6,539 5,499 18.9 %
Scene+ point issuance 4,452 — NM 12,573 — NM
Other (iii) 6,958 5,922 17.5 % 20,508 17,071 20.1 %
Other operating expenses including cash lease payments $ 154,836 $ 112,383 37.8 % $ 417,879 $ 222,873 87.5 %
Cash rent paid/payable related to lease obligations (iv) (4,395) (3,689) 19.1 % (12,911) (12,583) 2.6 %
Total other operating expenses $ 150,441 $ 108,694 38.4 % $ 404,968 $ 210,290 92.6 %
(i) Includes operating costs of LBE locations. Overhead relating to management of LBE portfolio are included in the ‘Other’ line.
(ii) Includes pre-opening costs of LBE.
(iii) Other category includes overhead costs related to LBE and other Cineplex internal departments.
(iv) Cash rent paid/payable that has been reallocated to offset the lease obligations.
Other operating expenses continuity Third Quarter Year to Date
2021 as reported $ 108,694 $ 210,290
Impact of new and acquired theatres 671 2,272
Impact of disposed theatres (306) (418)
Same theatre payroll change (i) 12,710 56,027
Same theatre operating expenses change (i) 7,079 37,864
Media operating expenses change 5,078 11,030
P1AG operating expenses change 8,077 39,653
LBE operating expenses change 7,509 27,760
LBE pre-opening change (448) (1,354)
SCENE change (2,785) 5,320
Marketing change (542) 1,040
Scene+ point issuance change 4,452 12,573
Other 958 3,239
Impact of IFRS 16:
Cash rent related to lease obligations (706) $ (328)
2022 as reported $ 150,441 $ 404,968
(i) See Section 17, Non-GAAP and other financial measures. These are measures included as part of Cineplex’s supplementary financial
measure calculations.
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 29
Third Quarter and Year to Date
Other operating expenses increased $41.7 million or 38.4% during the third quarter of 2022 compared to the prior
year period. The increase was primarily driven by increases in same store theatre payroll and theatre operating
expenses of $12.7 million and $7.1 million, respectively, as Cineplex’s theatres were permitted to operate for the
entire period as compared to the prior year period that was subject to capacity restrictions, in some cases after
months of extended closure periods. Cineplex also recognized P1AG other operating expenses of $36.5 million, an
increase of $8.1 million when compared to the prior year period. There were no government mandated restrictions
imposed during the third quarter, resulting in increased operating activities at P1AG US and Canadian route
locations at FEC’s and theatres. Similarly, LBE businesses operated without any government-imposed restrictions,
leading to a $7.5 million increase in LBE other operating expenses when compared to the prior year period.
Cineplex also recognized a $2.8 million decrease in SCENE operating costs, and a $4.5 million increase in
marketing expenses relating to the presentation of the cost of issuance of Scene+ points. Cineplex recognized $15.7
million payroll and other subsidies in the third quarter of 2021, and substantially none in the current quarter.
For the year to date, the overall increase in other operating expenses from the prior year resulted from operating
without any government mandated restrictions at Cineplex’s theatres, LBE businesses and P1AG US and Canada
route locations at FEC’s and theatres as compared to the closure requirements and capacity restrictions that remained
in effect during the prior year period. The increase was primarily driven by increases in same theatre payroll and
theatre operating expenses of $57.3 million and $38.2 million, respectively, as Cineplex’s theatres operated for the
entire period as compared to government mandated restrictions and closures in the prior year. Similarly, due to
increased operating activities at P1AG US and Canadian route locations at FEC’s and theatres, Cineplex also
recognized P1AG other operating expenses of $103.4 million, an increase of $39.7 million when compared to the
prior year. LBE businesses operated without any government imposed restrictions, resulting in a $27.8 million
increase in LBE other operating expenses when compared to the prior year. Cineplex also recognized a $5.3 million
increase in SCENE operating costs, and a $12.6 million increase in marketing expenses relating to the presentation
of the cost of issuance of Scene+ points. Cineplex received $22.0 million (2021 - $45.9 million) of subsidies in the
current period, comprised of $19.6 million (2021 - $39.6 million) of payroll subsidies of which $14.7 million (2021 -
$24.1 million) was offset against theatre payroll, and $2.4 million (2021 - $6.3 million) of non-theatre rent, realty
tax and utility subsidies.
General and administrative expenses
The following table highlights the movement in general and administrative (“G&A”) expenses during the quarter
and the year to date, including share-based compensation costs, and G&A net of these costs (in thousands of
dollars):
G&A expenses Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
G&A excluding the following items $ 15,372 $ 10,830 41.9 % $ 41,976 $ 30,911 35.8 %
Restructuring 358 121 195.9 % 1,811 598 202.8 %
Transaction / Litigation costs 1,246 4,099 -69.6 % 2,735 9,120 -70.0 %
LTIP (i) 175 166 5.4 % 2,268 3,265 -30.5 %
Option plan 326 536 -39.2 % 1,242 1,380 -10.0 %
G&A expenses including cash lease payments $ 17,477 $ 15,752 11.0 % $ 50,032 $ 45,274 10.5 %
Cash rent paid/payable included as part of lease obligations
(ii) (584) (557) 4.8 % (1,733) (1,749) -0.9 %
G&A expenses as reported $ 16,893 $ 15,195 11.2 % $ 48,299 $ 43,525 11.0 %
(i) LTIP includes the expense for RSUs and PSUs, as well as the expense for the executive and Board deferred share unit plans.
(ii) Cash rent paid/payable that has been reallocated to offset the lease obligations.
Third Quarter and Year to Date
G&A expenses increased $1.7 million during the third quarter of 2022 compared to the prior year period. Cineplex
recognized $1.3 million of labour subsidies in the third quarter of 2021, and an immaterial amount in the third
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 30
quarter of 2022. Cineplex incurred $1.2 million (2021 - $4.1 million) of expenses related to litigation and claims
recovery arising from the Cineworld Transaction during the quarter (Section 1.1, Cineworld Transaction).
G&A expenses for the year to date period increased $4.8 million compared to the prior year period. The change was
primarily due to a $5.1 million increase in payroll expenses and a $5.0 million decrease in labour subsidies received
in the current year as compared to the prior year period. Cineplex received $2.0 million of labour subsidies in 2022,
compared to $7.0 million received in 2021. Cineplex incurred year to date costs relating to litigation and claims
recovery arising from the Cineworld Transaction of $2.7 million (2021 - $9.1 million) (Section 1.1, Cineworld
Transaction).
Share of loss (income) of joint ventures and associates
Cineplex’s joint ventures and associates include its 78.2% interest in CDCP (2021 - 78.2%), 33.3% interest in
Scene+, 50% interest in one IMAX screen in Ontario (2021 - 50%) and a 50% interest in YoYo’s (2021 - 50%).
The following table highlights the components of share of (income) loss of joint ventures and associates during the
quarter and the year to date (in thousands of dollars):
Share of loss (income) of joint ventures and associates Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Share of loss (income) of CDCP $ 30 $ (988) -103.0 % $ (492) $ 2,293 -121.5 %
Share of loss of Scene LP 673 — NM 841 — NM
Share of (income) loss of other joint ventures and
associates (30) 58 -151.7 % 22 243 -90.9 %
Total loss (income) of joint ventures and associates $ 673 $ (930) -172.4 % $ 371 $ 2,536 -85.4 %
Third Quarter and Year to Date
During the current period, CDCP stopped charging distributors virtual print fees as part of the planned end of the
limited life financing entity. Cineplex recorded a nominal loss from CDCP during the third quarter and income of
$0.5 million for the year to date period. CDCP expects to distribute its assets to its partners during the fourth quarter
of 2022, and Cineplex will recognize a return of capital under IAS 28, Investments in Associates and Joint Ventures
(Section 15, Subsequent events). Cineplex recorded a loss of $0.7 million and $0.8 million during the quarter and
year to date period, respectively, from Scene LP.
Interest expense
The following table highlights the movement in interest expense during the quarter and the year to date (in
thousands of dollars):
Interest expense
Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Interest expense on long-term debt $ 15,382 $ 15,983 -3.8 % $ 47,119 $ 44,791 5.2 %
Lease interest expense 15,866 14,682 8.1 % 45,032 43,211 4.2 %
Financing fees 542 — NM 542 321 68.8 %
Sub-total - cash interest expense $ 31,790 $ 30,665 3.7 % $ 92,693 $ 88,323 4.9 %
Deferred financing fee accretion and other non-cash
interest, net 114 188 -39.4 % 460 812 -43.3 %
Accretion expense on Debentures and Notes Payable 4,622 4,050 14.1 % 13,832 11,809 17.1 %
Interest rate swap - non-cash (4,277) (2,071) 106.5 % (21,398) (7,448) 187.3 %
Sub-total - non-cash interest expense 459 2,167 -78.8 % (7,106) 5,173 NM
Total interest expense $ 32,249 $ 32,832 -1.8 % $ 85,587 $ 93,496 -8.5 %
Total cash interest paid $ 32,777 $ 26,151 25.3 % $ 95,109 $ 74,435 27.8 %
Cineplex Inc.
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 31
Third Quarter and Year to Date
Total interest expense decreased $0.6 million for the quarter when compared to the prior year period. The decrease
was caused by changes in the fair value of the interest rate swap resulting in a $2.2 million decrease in non-cash
interest expense. Cash interest expense relating to the issuance of Notes Payable (Section 6.4, Long-term debt)
completed in the first quarter of 2021 and Debentures (Section 6.4, Long-term debt) during the third quarter of 2020,
resulted in Notes Payable cash interest expense of $4.8 million (2021 - $4.7 million) and Debentures cash interest of
$4.6 million (2021 - $4.6 million). Cineplex recognized accretion expense relating to the issuance of Notes Payable
and Debentures of $0.2 million (2021 - $0.2 million) and $4.5 million (2021 - $3.8 million), respectively.
For the year to date, interest expense decreased $7.9 million compared to the prior year period. The decrease was
due to changes in the fair value of the interest rate swap resulting in a $13.9 million decrease in non-cash interest
expense. This was partially offset by a $3.0 million increase in cash interest expense primarily relating to the
issuance of Notes Payable (Section 6.4, Long-term debt) completed in the first quarter of 2021 and Debentures
(Section 6.4, Long-term debt) during the third quarter of 2020, resulting in a Notes Payable cash interest expense of
$14.0 million (2021 - $11.1 million) and a Debentures cash interest of $13.6 million (2021 - $13.6 million). Lease
interest expense increased by $1.8 million when compared to the prior period as a result of higher incremental
borrowing rates due to lease modifications negotiated with landlord partners. Cineplex recognized an accretion
expense relating to the issuance of Notes Payable and Debentures of $0.8 million (2021 - $0.6 million) and $13.0
million (2021 - $11.3 million), respectively.
Interest income
Interest income during the quarter and the year to date was as follows (in thousands of dollars):
Interest income Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Interest income $ 84 $ 68 23.5 % $ 152 $ 202 -24.8 %
Foreign exchange
The following table highlights the movement in foreign exchange during the third quarter of 2022 and the nine
months ended September 30, 2022 (in thousands of dollars):
Foreign exchange Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Foreign exchange loss (gain) $ (1,239) $ (529) 134.2 % $ (1,628) $ 66 NM
Third Quarter and Year to Date
The movement in the foreign exchange during the quarter was due to the change in the CAD/USD foreign exchange
month end rate from 1.2866 at June 30, 2022 to 1.3707 at September 30, 2022.
For the nine months ended September 30, 2022, the movement in the foreign exchange was due to the increase in the
CAD/USD foreign exchange month end rate from 1.2678 at December 31, 2021 to 1.3707 at September 30, 2022.
Change in fair value of financial instruments
The following table highlights the movement in change in fair value of financial instruments during the quarter and
the year to date (in thousands of dollars):
Change in fair value of financial instruments Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Loss (gain) on financial instruments recorded at fair value $ 1,630 $ (2,570) NM $ 7,230 $ (3,370) NM
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
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Third Quarter and Year to Date
The loss on financial instruments recorded at fair value in the current period was due to the revaluation of
Cineplex’s call option relating to the Notes Payable that were issued in the first quarter of 2021 (Section 6.4, Long-
term debt).
Income taxes
The following table highlights the movement in current and deferred income tax expense during the quarter and the
year to date (in thousands of dollars):
Income taxes Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Provision for income taxes $ — $ — NM $ (724) $ 3,339 NM
Third Quarter and Year to Date
At December 31, 2020 the recoverability of the net deferred income tax assets in the normal course of business was
uncertain and accordingly the net deferred tax assets were derecognized. Cineplex will evaluate the likelihood of
recoverability in the ordinary course of business at each balance sheet date, and will recognize net deferred tax assets
when and if appropriate. Cineplex has not recognized any deferred tax assets and has not reversed any previously
derecognized deferred tax assets as at September 30, 2022.
The 2022 current tax recovery represents the expected tax refund as a result of losses realized in 2021 that have been
carried back to offset prior period taxable income, in excess of the 2021 tax provision.
Cineplex’s combined statutory income tax rate at September 30, 2022 was 26.3% (2021 - 26.3%).
By Notice of Reassessment (“NOR”) dated January 22, 2019, the Canada Revenue Agency (“CRA”), disallowed the
deduction of $26.6 million of losses of AMC Ventures Inc. (“AMC”) that Cineplex had obtained on the acquisition
of AMC in 2012. The disallowance of the losses, which offset taxable income generated in 2014, increased taxes
and interest payable by approximately $8.6 million, 50% of which was required to be paid immediately (interest
continues to accrue on the unpaid amount). Cineplex disagrees with the CRA’s position, and has commenced an
appeal to the Tax Court of Canada in respect of the NOR. On June 28, 2021, Cineplex received a response from the
Attorney General of Canada representing the CRA confirming its position with respect to the disallowance of the
losses. The appeals process is continuing and Cineplex believes that it should prevail in defending its original filing
position, although no assurance can be given in this regard as the appeal process proceeds.
Cineplex Inc.
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 33
4.3. NET INCOME (LOSS), EBITDA AND ADJUSTED EBITDAaL (see Section 17, Non-GAAP and other
financial measures)
The following table presents net loss, EBITDA, adjusted EBITDA and adjusted EBITDAaL for the nine months
ended September 30, 2022 as compared to the prior year period (expressed in thousands of dollars, except adjusted
EBITDAaL margin):
NET INCOME (LOSS), EBITDA AND ADJUSTED
EBITDAaL Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Net income (loss) $ 30,857 $ (33,552) NM $ (10,055) $ (226,944) -95.6 %
Net income (loss) as a percentage of sales 9.1 % (13.4) % 22.5 % (1.1) % (63.6) % 62.5 %
EBITDA $ 112,378 $ 52,660 113.4 % $ 226,304 $ 32,436 597.7 %
Adjusted EBITDA $ 63,094 $ 48,606 29.8 % $ 177,508 $ 1,599 NM
Adjusted EBITDAaL $ 20,430 $ 10,762 89.8 % $ 50,475 $ (104,493) NM
Adjusted EBITDAaL margin 6.0 % 4.3 % 1.7 % 5.5 % (29.3) % 34.8 %
Third Quarter and Year to Date
Net income and adjusted EBITDAaL for the third quarter of 2022 was $30.9 million and $20.4 million, respectively,
as compared to a net loss of $33.6 million and an adjusted EBITDAaL of $10.8 million, respectively, in the prior
year period. The removal of operating restrictions on Cineplex’s theatres and LBE venues across Canada and gain
on the disposition of Cineplex’s partial interest in Scene+ resulted in significantly improved performance when
compared to the prior year period.
Net loss and adjusted EBITDAaL for the nine months ended September 30, 2022 was $10.1 million and $50.5
million, respectively, as compared to a net loss of $226.9 million and an adjusted EBITDAaL loss of $104.5 million,
respectively, in the prior year period. The movement in both net loss and adjusted EBITDAaL was due primarily to
the improved performance related to removal of operating restrictions on Cineplex theatres and LBE venues across
Canada, compared to operating restrictions that remained in effect for a majority of the prior year period.
Cineplex Inc.
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CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 34
5. BALANCE SHEETS
The following sets out significant changes to Cineplex’s consolidated balance sheets during the nine months ended
September 30, 2022 as compared to December 31, 2021 (in thousands of dollars):
September 30, 2022 December 31, 2021 Change ($) Change (%)
Assets
Current assets
Cash and cash equivalents $ 28,854 $ 26,938 $ 1,916 7.1 %
Trade and other receivables 63,138 80,679 (17,541) -21.7 %
Income taxes receivable 2,077 1,984 93 4.7 %
Inventories 35,001 24,899 10,102 40.6 %
Prepaid expenses and other current assets 19,384 13,365 6,019 45.0 %
Fair value of interest rate swap agreements 5,500 — 5,500 NM
153,954 147,865 6,089 4.1 %
Non-current assets
Property, equipment and leaseholds 430,521 464,439 (33,918) -7.3 %
Right-of-use assets 778,455 768,675 9,780 1.3 %
Fair value of interest rate swap agreements 4,190 — 4,190 NM
Interests in joint ventures 3,695 7,423 (3,728) -50.2 %
Intangible assets 80,662 81,651 (989) -1.2 %
Goodwill 636,245 635,545 700 0.1 %
Derivative financial instrument 2,010 9,240 (7,230) -78.2 %
$ 2,089,732 $ 2,114,838 $ (25,106) -1.2 %
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 143,966 $ 157,950 $ (13,984) -8.9 %
Income taxes payable 1,823 1,945 (122) -6.3 %
Deferred revenue and other 209,045 293,206 (84,161) -28.7 %
Lease obligations 92,454 101,058 (8,604) -8.5 %
Fair value of interest rate swap agreements — 8,063 (8,063) -100.0 %
447,288 562,222 (114,934) -20.4 %
Non-current liabilities
Share-based compensation 3,906 4,940 (1,034) -20.9 %
Long-term debt 825,043 739,211 85,832 11.6 %
Fair value of interest rate swap agreements — 6,160 (6,160) -100.0 %
Lease obligations 1,019,226 1,004,465 14,761 1.5 %
Post-employment benefit obligations 9,258 9,973 (715) -7.2 %
Other liabilities 7,026 7,590 (564) -7.4 %
2,311,747 2,334,561 (22,814) -1.0 %
Shareholders’ deficit
Total shareholders’ deficit (222,015) (219,723) (2,292) 1.0 %
$ 2,089,732 $ 2,114,838 $ (25,106) -1.2 %
Cash and cash equivalents. Cash and cash equivalents includes operations petty cash and outstanding deposits and
fluctuates with business activities.
Trade and other receivables. The decrease in trade and other receivables is primarily due to the collection of
receivables from the sales of gift cards, vouchers and media sales from the 2021 holiday period, as well as the
collection of approximately $15.7 million of subsidies outstanding at year end. December represents the highest
volume month for gift card and voucher sales is one of the strongest months for media during the year.
Income taxes receivable. The increase in income taxes receivable is primarily due to expected tax refunds resulting
from loss carrybacks realized in 2021 to offset taxable income in prior years.
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Inventories. The increase in inventories is primarily due to higher amusement equipment related to distribution
sales and LBE installations expected to be completed in the fourth quarter, as well as to higher business volumes
resulting from the entire circuit of theatres and LBE venues operating at full capacity without restrictions.
Prepaid expenses and other current assets. The increase in prepaid expenses and other current assets is primarily
due to technology service contracts extending into the next period and real estate and business taxes that are paid in
the first half of the year and expensed over the applicable period.
Property, equipment and leaseholds. The decrease in property, equipment and leaseholds is due to amortization
expense ($71.3 million), asset dispositions ($0.5 million), and foreign exchange impact ($1.3 million). This is offset
by additions to new build and other capital expenditures ($24.4 million) and maintenance capital expenditures
($12.1 million). As Cineplex’s businesses continue to recover and return to profitability, reversal of previously
recognized impairments may be appropriate.
Right-of-use assets. The increase in right-of-use assets is due to lease additions ($4.6 million), and lease extensions
and modifications ($77.0 million), offset by amortization expense ($72.0 million), asset dispositions ($0.1 million),
and foreign exchange impact ($0.3 million). As Cineplex’s businesses continue to recover and return to profitability,
reversal of previously recognized impairments may be appropriate.
Interests in joint ventures. The decrease in interest in joint ventures is primarily due to $5.3 million cash received
from CDCP during the second quarter of 2022 and $0.4 million equity loss realized from its investment in joint
ventures. This was partially offset by a $2.3 million capital contribution made to Scene LP.
Intangible assets. The decrease in intangible assets is due to amortization expense ($8.3 million), partially offset by
the capitalization of software development costs ($7.3 million).
Derivative financial instrument. The decrease in derivative financial instrument is due to the change in fair value
of the Notes Payable prepayment option.
Accounts payable and accrued expenses. The decrease in accounts payable and accrued liabilities is primarily due
to the settlement of year end liabilities.
Share-based compensation. The decrease in share-based compensation is primarily due to the decrease in share
price, which was $9.10 per share at September 30, 2022 as compared to $13.61 at December 31, 2021 (see Section
8, Share activity).
Income taxes payable. The decrease in income taxes payable reflects the effects of changes in exchange rates.
Deferred revenue and other. The deferred revenue decrease is primarily due to the redemption of gift cards and
vouchers in excess of current period sales. In addition, as a result of the SCENE reorganization, Scene+ point
issuances are no longer proportionately consolidated as of December 2021. During the quarter, Cineplex recognized
a gain of $50.1 million on the disposition of its 1/6th ownership interest in Scene+ with the satisfaction of specific
non-financial milestones related to the reorganization of Scene+.
Lease obligations. The increase in lease obligations is primarily due to additions and lease extensions and
modifications which was offset by the payment of lease obligations.
Fair value of interest rate swap agreements. Represents the fair values of Cineplex’s outstanding interest rate
swap agreements which have increased due to the increases in floating rates and expected rate yield curves (see
Section 6.4, Long-term debt).
Long-term debt. Long-term debt consists of the Credit Facilities, Debentures and Notes Payable. The increase in
long-term debt is primarily due to an increase in borrowings under the Credit Facilities and the accretion of the
Debentures and Notes Payable (Section 6.4, Long-term debt).
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6. LIQUIDITY AND CAPITAL RESOURCES
6.1. OPERATING ACTIVITIES
Cash flow is generated primarily from film entertainment (the sale of admission tickets and food service sales),
media sales and services, amusement and leisure (amusement and food service sales) and other revenues. Generally,
this provides Cineplex with positive working capital, since certain cash revenues are normally collected in advance
of the payment of certain expenses. Box office revenues are directly related to the success and appeal of the film
product produced and distributed by the studios. The following table highlights the movements in cash from
operating activities for the three and nine months ended September 30, 2022 and 2021 (in thousands of dollars):
Cash flows provided by operating activities Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Net income (loss) from operations $ 30,857 $ (33,552) $ 64,409 $ (10,055) $ (226,944) $ 216,889
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization of other assets (i) 26,079 28,297 (2,218) 79,622 85,541 (5,919)
Depreciation of right-of-use assets 23,277 25,151 (1,874) 72,026 77,206 (5,180)
Unrealized foreign exchange (1,028) (479) (549) (1,364) (23) (1,341)
Interest rate swap agreements - non-cash interest (4,277) (2,071) (2,206) (21,398) (7,448) (13,950)
Accretion of convertible debentures 4,622 4,050 572 13,832 11,809 2,023
Other non-cash interest (ii) 114 188 (74) 460 812 (352)
(Gain) loss on disposal of assets (49,848) 22 (49,870) (54,341) (29,859) (24,482)
Non-cash share-based compensation 1,419 1,246 173 5,115 3,064 2,051
Change in fair value of financial instrument 1,630 (2,570) 4,200 7,230 (3,370) 10,600
Net change in interests in joint ventures and associates (1,219) (899) (320) (1,589) 3,893 (5,482)
Changes in operating assets and liabilities (25,815) 32,640 (58,455) (42,012) 118,843 (160,855)
Net cash provided by operating activities $ 5,811 $ 52,023 $ (46,212) $ 47,526 $ 33,524 $ 14,002
(i) Includes depreciation of property, equipment and leaseholds and amortization of intangible assets.
(ii) Includes accretion of asset retirement obligations and non-cash interest costs on lease obligations.
Third Quarter
Cash provided by operating activities during the third quarter of 2022 was $5.8 million as compared to $52.0 million
in the prior year period, primarily due to higher income, offset by changes in working capital.
Year to Date
Cash provided by operating activities during the nine months ended September 30, 2022 was $47.5 million as
compared to $33.5 million in the prior year period. The increase was primarily due to significant increases in
revenues from box office and food service sales as a result of increased operations, compared to closures or
operating restrictions that remained in effect for a majority of the prior year comparative period, and working capital
management in 2021, including the extension of accounts payable and accrued liabilities and the receipt of
approximately $65.7 million income tax refunds in 2021.
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6.2. INVESTING ACTIVITIES
The following table highlights the movements in cash used in investing activities for the three and nine months
ended September 30, 2022 and 2021 (in thousands of dollars):
Cash flows (used in) provided by investing activities Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Proceeds from disposal of assets, net $ 152 $ 3,231 $ (3,079) $ 1,822 $ 63,147 $ (61,325)
Purchases of property, equipment and leaseholds (14,618) (4,834) (9,784) (36,758) (18,575) (18,183)
Intangible assets additions (3,638) (2,130) (1,508) (8,419) (7,208) (1,211)
Tenant inducements 3,581 1,359 2,222 4,186 7,024 (2,838)
Net cash received from joint ventures and associates — — — 5,318 — 5,318
Net cash (used in) provided by investing activities $ (14,523) $ (2,374) $ (12,149) $ (33,851) $ 44,388 $ (78,239)
Third Quarter
Cash used in investing activities during the third quarter of 2022 was $14.5 million, as compared to $2.4 million in
the prior year period. The movement was primarily due to increased capital spend on previously committed projects.
Year to Date
Cash used in investing activities during the nine months ended September 30, 2022 was $33.9 million as compared
to cash provided by investing activities of $44.4 million. The decrease was primarily due to cash proceeds received
in the prior year period from the sale of Cineplex’s head office building, which was partially offset by cash received
from CDCP.
Cineplex’s management continues to focus on managing capital expenditures and believes that it has adequate
liquidity to fund operations for the anticipated duration of the pandemic in the regions in which Cineplex operates.
Components of capital expenditures include (in thousands of dollars):
Capital expenditures Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Gross capital expenditures $ 14,618 $ 4,834 $ 9,784 $ 36,758 $ 18,575 $ 18,183
Less: tenant inducements (3,581) (1,359) (2,222) (4,186) (7,024) 2,838
Net capital expenditures $ 11,037 $ 3,475 $ 7,562 $ 32,572 $ 11,551 $ 21,021
Net capital expenditures consists of:
Growth and acquisition capital expenditures (i) $ 8,055 $ 2,150 $ 5,905 $ 16,879 $ 10,585 $ 6,294
Tenant inducements (3,581) (1,359) (2,222) (4,186) (7,024) 2,838
Media growth capital expenditures 2,518 402 2,116 3,288 1,591 1,697
Premium formats (ii) 1,683 10 1,673 3,314 (141) 3,455
Amusement and leisure growth capital expenditures
(excluding LBE build expenditures) 419 387 32 967 688 279
Maintenance capital expenditures 4,739 865 3,874 12,077 1,602 10,475
Other (iii) (2,796) 1,020 (3,816) 233 4,250 (4,017)
$ 11,037 $ 3,475 $ 7,562 $ 32,572 $ 11,551 $ 21,021
(i) Growth and acquisition capital expenditures include expenditures on the construction of new locations (including VIP cinemas) and other
Board approved growth projects with the exception of premium formats, media growth, and amusement gaming and leisure growth capital
expenditures.
(ii) Premium formats include capital expenditures for recliner seating, IMAX, UltraAVX, 3D, 4DX and ScreenX.
(iii) Primary component of Other is the impact of the timing of cash payments relating to the purchases of property, equipment and leaseholds.
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6.3. FINANCING ACTIVITIES
The following table highlights the movements in cash from financing activities for the three and nine months ended
September 30, 2022 and 2021 (in thousands of dollars):
Cash flows used in financing activities Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Borrowings repayments under credit facility, net $ 38,000 $ (26,000) $ 64,000 72,000 (247,000) $ 319,000
Repayments of lease obligations - principal (26,330) (24,191) (2,139) (83,025) (62,734) (20,291)
Exercise of cash option — — — 113 — 113
Issuance of notes payable, net — — — — 243,996 (243,996)
Financing fees (542) — (542) (542) (321) (221)
Net cash provided by (used in) financing activities $ 11,128 $ (50,191) $ 61,319 $ (11,454) $ (66,059) $ 54,605
Third Quarter
Cash flows provided by financing activities were $11.1 million during the third quarter of 2022, as compared to cash
used in financing activities of $50.2 million in the prior year period. The movement was mainly due to repayments
under the Credit Facilities and lease obligations compared to increased borrowings under the Credit Facilities in the
current period.
Year to Date
Cash flows used in financing activities for the nine months ended September 30, 2022 were $11.5 million, as
compared to $66.1 million in the prior year period. The movement is due to increased borrowings under the Credit
Facilities which was offset by higher rent payments due to lower abatements received from landlords. In the prior
year period, financing activities mainly consisted of proceeds raised from Cineplex’s Notes Payable which were
used to repay the Credit Facilities ($100.0 million of which was a permanent repayment) and repayment of lease
obligations.
In response to the impact of the COVID-19 pandemic, Cineplex is closely monitoring its liquidity. Details with
respect to its ongoing measures to maximize liquidity are detailed in Section 1.1, COVID-19 business impacts, risks
and liquidity.
6.4. LONG-TERM DEBT
Credit facilities
Cineplex has bank facilities with a syndicate of lenders which includes a revolving facility (the “Revolving
Facility”) and non-revolving credit facility (the “Term Facility”, and together with the Revolving Facility, the
“Credit Facilities”) pursuant to a seventh amended and restated credit agreement dated November 13, 2018 between
Cineplex, Cineplex Entertainment Limited Partnership, the guarantors from time to time party thereto, and a
syndicate of lenders (as further amended from time to time, the “Credit Agreement”). The Term Facility was repaid
in full in the first quarter of 2021 and is no longer available for future borrowing.
At September 30, 2022, the Credit Facilities consisted of the following (in millions of dollars), subject to
amendments described below pursuant to the Credit Agreement Amendments described below:
Available Drawn Reserved Remaining
Revolving Facility $ 541.7 $ 332.0 $ 10.1 $ 199.6
Letters of credit outstanding at September 30, 2022 of $10.1 million are reserved against the Revolving Facility.
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The Credit Facilities bear interest at a floating rate based on the Canadian dollar prime rate, U.S. Base Rate, SOFR
or bankers’ acceptances rates plus, in each case, an applicable margin to those rates. The Revolving Facility matures
in November 2023. Borrowings on the Revolving Facility can be made in either Canadian or US dollars.
Cineplex’s Credit Facilities contain restrictive covenants that limit the discretion of Cineplex’s management with
respect to certain business matters. These covenants place limits and restrictions on, among other things, the ability
of Cineplex to create liens or other encumbrances, to pay dividends or make certain other payments, minimum
liquidity covenants, anti-hoarding provisions, investments, loans and guarantees and to sell or otherwise dispose of
assets and merge or consolidate with another entity. The Credit Facilities are secured by all of Cineplex’s assets. The
Revolving Facility is drawn upon and repaid on a regular basis and as such is presented on a net basis in the
Statement of Cash flows.
On June 29, 2020, Cineplex entered into the First Credit Agreement Amendment, following which, on November
12, 2020 Cineplex entered into the Second Credit Agreement Amendment, on February 8, 2021 Cineplex entered
into the Third Credit Agreement Amendment, on December 30, 2021 Cineplex entered into the Fourth Credit
Agreement Amendment and on August 10, 2022 Cineplex entered into the Fifth Credit Agreement Amendment. The
amendments provided certain financial covenant relief in light of the COVID-19 pandemic and its effects on
Cineplex’s businesses, while applying additional restrictive covenants and required repayments in certain
circumstances.
On December 30, 2021, Cineplex entered into the Fourth Credit Agreement Amendment, which, among other
things, extended the suspension of financial covenant testing until the second quarter of 2022 and liquidity covenant
requirement until June 30, 2022. The following is a summary of the key terms of the Fourth Credit Agreement
Amendment that are updated from the First, Second and Third Credit Agreement Amendments (certain of which
have been modified further by the Fifth Credit Agreement Amendment described below):
• The suspension of financial covenant testing was extended until the second quarter of 2022. On
resumption of financial covenant testing in the second quarter of 2022:
• for the second quarter of 2022, testing was based on an annualized calculation of
Adjusted EBITDA (as further adjusted in accordance with the Credit Agreement
definitions) based on the actual results for such quarter multiplied by 4;
• for the quarter ending on September 30, 2022, testing will be based on an annualized
calculation of Adjusted EBITDA based on actual results for the second quarter of 2022
and the third quarter of 2022 multiplied by 2; and
• for the quarter ending on December 31, 2022, testing will be based on an annualized
calculation of Adjusted EBITDA based on the actual results of the second quarter of
2022, the third quarter of 2022 and the fourth quarter of 2022 multiplied by 4/3.
▪ Thereafter, testing will be based on an annualized calculation of the cumulative Adjusted EBITDA
on a trailing four fiscal quarter basis;
▪ The Total Leverage Ratio of 3.75x will apply when financial covenants are reinstated, and will be
reduced quarterly by 0.25x until the first quarter of 2023 at which point it will reach a level of
3.00x;
▪ The liquidity covenant will continue and be amended requiring available liquidity (as defined) to
be maintained at all times at no less than $100.0 million;
▪ The Senior Leverage Ratio to be based on annualized Adjusted EBITDA and set at 1.0x lower
than the Total Leverage Ratio. Senior Leverage Ratio is defined as (i) Total Debt (as defined in the
Credit Agreement) less any Notes Payable to (ii) Adjusted EBITDA; and
▪ From and after April 1, 2022, a fixed charge coverage ratio of greater than 1.25x will apply.
On August 10, 2022 Cineplex entered into a fifth amending agreement to the Credit Agreement, (the “Fifth Credit
Agreement Amendment”), which among other things, extended the suspension of financial covenant testing until the
fourth quarter of 2022 and liquidity covenant requirement until March 2023. The following is a summary of the key
terms of the Fifth Credit Agreement Amendment:
• The suspension of financial covenant testing was extended until the fourth quarter of 2022. On
resumption of financial covenant testing in the fourth quarter of 2022:
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• for the fourth quarter of 2022, testing will be based on an annualized calculation of
Adjusted EBITDA (as further adjusted in accordance with the Credit Agreement
definitions) based on the actual results for the fourth quarter multiplied by 4;
• for the quarter ending on March 31, 2023, testing will be based on an annualized
calculation of Adjusted EBITDA based on actual results for the fourth quarter of 2022
and the first quarter of 2023 multiplied by 2; and
• for the quarter ending on June 30, 2023, testing will be based on an annualized
calculation of Adjusted EBITDA based on the actual results of the fourth quarter of 2022,
the first quarter of 2023 and the second quarter of 2023 multiplied by 4/3.
▪ Thereafter, testing will be based on an annualized calculation of the cumulative Adjusted EBITDA
on a trailing four fiscal quarter basis;
▪ The Total Leverage Ratio of 3.75x will apply when financial covenants are reinstated, and will be
reduced quarterly by 0.25x until the third quarter of 2023 at which point it will reach a level of
3.00x;
▪ The liquidity covenant will continue and be amended requiring available liquidity (as defined) to
be maintained at all times until March 31, 2023 at no less than $100.0 million;
▪ The Senior Leverage Ratio to be based on annualized Adjusted EBITDA and set at 1.0x lower
than the Total Leverage Ratio. Senior Leverage Ratio is defined as (i) Total Debt (as defined in the
Credit Agreement) less any Notes Payable to (ii) Adjusted EBITDA; and
▪ A fixed charge coverage ratio of greater than 1.25x will continue to apply.
This summary of the Fifth Credit Agreement Amendment is qualified in its entirety by reference to the provisions of
the Credit Agreement which contains a complete statement of those terms and conditions. The Credit Agreement
and each of the First, Second, Third, Fourth and Fifth Credit Agreement Amendment were filed on SEDAR on June
30, 2020, November 13, 2020, February 8, 2021, January 4, 2022, and August 10, 2022, respectively, for each of
Credit Agreement Amendments.
During the first quarter of 2021, Cineplex completed a sale-leaseback transaction for its head office buildings
located at 1303 Yonge Street and 1257 Yonge Street, Toronto, Ontario for gross proceeds of $57.0 million,
recognizing a gain of $30.1 million. Net proceeds from the sale, in addition to the net proceeds from the issuance of
the Notes Payable (discussed below) were used to repay the Credit Facilities, a portion of which was permanent. As
a result, Cineplex permanently repaid the remaining $50.0 million balance of its outstanding Term Facility.
Additional transactions focused on enhancing Cineplex’s liquidity included amendments to the Credit Facilities that
have provided Cineplex with financial covenant relief in light of the COVID-19 pandemic and its effects on
Cineplex’s businesses, and the issuance of Notes Payable for gross proceeds of $250.0 million. Cineplex used the
net proceeds from the issuance of the Notes Payable to permanently repay $50.0 million of its Revolving Facility
and $50.0 million of its Term Facility. Cineplex remains focused on exploring other measures to maintain adequate
liquidity for the duration of the pandemic and beyond.
Interest rate swap agreements. Cineplex entered into interest rate swap agreements where Cineplex agreed to pay
fixed rates per annum, plus an applicable margin and receive a floating rate of interest equal to the three-month
Canadian deposit offering rate set quarterly in advance, with net settlements quarterly.
The following table outlines Cineplex’s current interest rate swap agreements as of September 30, 2022:
Interest rate swap agreements
Notional amount Inception date Effective date Maturity date Fixed rate payable
Swap - 1 $200.0 million November 13, 2018 April 26, 2021 November 14, 2023 2.945 %
Swap - 2 $100.0 million November 13, 2018 November 13, 2018 November 14, 2023 2.830 %
Swap - 3 $150.0 million November 13, 2018 November 13, 2018 November 14, 2025 2.898 %
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Cineplex ceased the use of hedge accounting for the interest rate swaps during the fourth quarter of 2019 as a result
of the terms of the Arrangement Agreement. The interest rate swaps are measured at fair market value at each
reporting period with changes in fair market value recorded in interest expense - other, in the consolidated statement
of operations.
Despite the termination of the Arrangement Agreement, the swaps can only be re-designated on a prospective basis
for hedge accounting treatment.
Based on the Credit Agreement in effect at September 30, 2022 Cineplex’s effective cost of borrowing on the $450.0
million hedged borrowings was 6.904% (September 30, 2021 - $450.0 million hedged borrowings - 6.904%).
Convertible debentures
On July 17, 2020, Cineplex issued $316.3 million aggregate principal amount of convertible unsecured subordinated
debentures, which mature on September 30, 2025 (the “Maturity Date”) and bear interest at a rate of 5.75% per
annum, payable semi-annually in arrears on September 30 and March 31 in each year.
The Debentures are not redeemable by Cineplex prior to September 30, 2023. On or after September 30, 2023 and
prior to September 30, 2024, Cineplex may, at its option, redeem the Debentures in whole or in part from time to
time provided that the volume weighted average trading price of the share on the Toronto Stock Exchange during the
20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of redemption is
given is not less than 125% of the conversion price. On or after September 30, 2024, the Debentures may be
redeemed in whole or in part from time to time at the option of Cineplex at a price equal to their principal amount
plus accrued and unpaid interest. Redemption may be in the form of cash or in the form of shares, at the option of
Cineplex.
At the holder’s option, the Debentures may be converted into shares at a conversion price of $10.94 per share at any
time prior to the close of business on the earlier of: (i) five business days prior to the Maturity Date, and (ii) if called
for redemption, five business days immediately preceding the dated fixed for redemption of the Debentures, at a
conversion price to be determined at the time of pricing. Holders who convert their Debentures into shares will
receive accrued and unpaid interest for the period from the date of the latest Interest Payment Date to the date of
conversion. Conversion of outstanding Debentures will result in the issuance of shares from treasury.
The fair value of the liability component of the Debentures was assessed at inception based on an estimated market
discount rate of 14.1% less the pro-rata portion of transaction costs, and will be accreted to the full face value over
the term of the Debentures. Cineplex recorded cash interest expense on the Debentures during the quarter and year
to date period of $4.6 million (2021 - $4.6 million) and $13.6 million (2021 - $13.6 million), respectively.
Furthermore, Cineplex recorded accretion expense during the quarter and year to date period of $4.5 million (2021 -
$3.9 million) and $13.0 million (2021 - $11.3 million), respectively, both of which are included as part of the
interest expense in the consolidated statement of operations. As at September 30, 2022, Cineplex has $316.3 million
principal amount of Debentures outstanding. The residual value was allocated to the equity component less the pro-
rata portion of transaction costs as prescribed by IFRS 9, Financial instruments and IAS 32, Financial instruments:
Presentation.
The foregoing is a summary of the key terms of the Debentures. This summary is qualified in its entirety by
reference to the provisions of the Debentures trust indenture which contains a complete statement of those terms and
conditions. The Debenture trust indenture was filed on SEDAR on July 15, 2020.
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Notes Payable
On February 26, 2021, Cineplex completed the $250.0 million Notes Payable offering. The Notes Payable mature on
February 26, 2026 and bear interest at a rate of 7.50% per annum, payable semi-annually in arrears on January 31
and July 31 of each year, commencing July 31, 2021. The Notes Payable are subordinate to the security granted for
the obligations under the Credit Facilities, and are subject to the terms of an intercreditor agreement with the agent
under the Credit Facilities.
Cineplex recorded cash interest expense on the Notes Payable during the quarter and year to date period of $4.8
million (2021 - $4.7 million) and $14.0 million (2021 - $11.1 million), respectively. Furthermore, Cineplex recorded
accretion expense during the quarter and year to date period of $0.2 million (2021 $0.2 million) and $0.8 million
(2021 - $0.6 million), respectively, both of which are included as part of interest expense in the consolidated
statement of operations As at September 30, 2022, Cineplex has $250.0 million principal amount of Notes Payable
outstanding. Cineplex’s derivative financial instrument relates to the early prepayment option that fluctuates in value
based on market interest rates. The fair value of the embedded derivative was determined using an option pricing
model with observable market inputs and is consistent with accepted methods for valuing financial instruments.
Cineplex has estimated the fair value of this embedded derivative at $2.0 million as at September 30, 2022, which is
presented on the consolidated balance sheets.
The foregoing is a summary of the key terms of the Notes Payable. This summary is qualified in its entirety by
reference to the provisions of the Notes Payable trust indenture which contain a complete statement of those terms
and conditions. The Notes Payable trust indenture was filed on SEDAR on February 26, 2021.
6.5. FUTURE OBLIGATIONS
Cineplex has aggregate gross capital commitments of $57.5 million ($39.9 million net of tenant inducements)
related to the completion of construction of five operating locations including both theatres and location-based
entertainment locations.
As a result of the negative impact of COVID-19 on its business, Cineplex continues to focus on reducing capital
expenditures and believes that it has adequate liquidity to fund operations. Management will continue to assess its
future capital spending taking into consideration its legal commitments, restrictions imposed by the Credit Facilities
(as amended) and requirements of the business on a short and long-term basis.
Cineplex conducts a significant part of its operations in leased premises. Cineplex’s leases generally provide for
minimum rent and a number of the leases also include percentage rent based primarily upon sales volume.
Cineplex’s leases may also include escalation clauses, guarantees and certain other restrictions, and generally require
it to pay a portion of the real estate taxes and other property operating expenses. Initial lease terms generally range
from 15 to 20 years and contain various renewal options, generally in intervals of five to ten years.
Cineplex is guarantor under the leases for the remainder of the lease terms for certain theatres that it has sold in the
event that the purchaser of the theatres does not fulfill its obligations under the respective lease; nine or fewer of
those theatres are still operated by a third-party lease under which Cineplex arguably could be responsible as a
guarantor. Cineplex has assessed the fair value of the lease guarantees and determined that the fair value of these
guarantees at September 30, 2022 is nominal. As such, no additional amounts have been provided in the
consolidated financial statements for these guarantees. Should the purchasers of the theatres fail to fulfill their lease
commitment obligations, Cineplex could face a substantial financial burden, which could be mitigated by Cineplex
operating any theatres under default.
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7. ADJUSTED FREE CASH FLOW AND DIVIDENDS (see Section 17, Non-GAAP and other financial
measures)
Cineplex’s dividend policy is subject to the discretion of the Board and may vary depending on, among other things,
Cineplex’s results of operations, cash requirements, financial condition, contractual restrictions, business
opportunities, provisions of applicable law and other factors that the Board may deem relevant. As a result of the
Arrangement Agreement, Cineplex stopped paying dividends after the monthly dividend that was paid on February
28, 2020. Cineplex does not expect to return to paying dividends until the negative impact of the COVID-19 crisis
has been addressed, the contractual restrictions imposed by the terms of its long-term debt agreements permit, and
liquidity has improved. Cineplex hereby currently designates all dividends paid or deemed to be paid as “eligible
dividends” for purposes of subsection 89(14) of the Income Tax Act (Canada), and similar provincial and territorial
legislation, unless indicated otherwise.
7.1. ADJUSTED FREE CASH FLOW
Prior to the dividend that was paid on February 28, 2020, Cineplex distributed cash to its shareholders on a monthly
basis. The following table illustrates adjusted free cash flow per share for the three and nine months ended
September 30, 2022 and 2021 and measures relevant to the discussion of adjusted free cash flow per share
(expressed in thousands of dollars except shares outstanding):
Third Quarter Year to Date
2022 2021 Change 2022 2021 Change
Cash flows provided by operations $ 5,811 $ 52,023 -88.8 % $ 47,526 $ 33,524 41.8 %
Net income (loss) $ 30,857 $ (33,552) NM $ (10,055) $ (226,944) -95.6 %
Standardized free cash flow (i) $ (8,655) $ 50,420 NM $ 12,590 $ 18,214 -30.9 %
Adjusted free cash flow (i) $ 1,568 $ (5,753) NM $ 1,667 $ (150,485) NM
Average number of shares outstanding 63,362,713 63,342,557 — % 63,356,694 63,339,070 — %
Adjusted free cash flow per share (i) $ 0.025 $ (0.091) NM $ 0.026 $ (2.376) NM
(i) Represents a non-GAAP financial measure. See Section 17, Non-GAAP and other financial measures.
Adjusted free cash flow per share for the third quarter of 2022 and year to date period increased mainly due to
significantly improved operating results with the removal of COVID-19 restrictions on Cineplex’s theatres and LBE
businesses. During the current period, Cineplex’s businesses operated without any government mandated
restrictions, compared to closure periods and operating restrictions that remained in effect for a majority of the prior
year resulting in significantly reduced operations.
7.2. DIVIDENDS
Cineplex has not paid any dividends after the dividend that was paid on February 28, 2020 and is currently restricted
from paying any dividends under the Credit Facilities.
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The following table outlines Cineplex’s distribution and dividend history:
Distribution and dividend history
Effective Date Monthly Distribution/Dividend per Unit/Share
January 2004 (i) $0.0958
May 2007 $0.1000
May 2008 $0.1050
May 2011 $0.1075
May 2012 $0.1125
May 2013 $0.1200
May 2014 $0.1250
May 2015 $0.1300
May 2016 $0.1350
May 2017 $0.1400
May 2018 $0.1450
May 2019 - January 2020 $0.1500
(i) Cineplex Galaxy Income Fund, the predecessor to Cineplex (“The Fund”) declared and paid distributions at a rate of $0.1050 per month
from May 2008 until December 2010. The Fund converted to a corporation on January 1, 2011, at which time distributions ceased and
dividends began at the same rate of $0.1050 per month.
8. SHARE ACTIVITY
Share capital at September 30, 2022 and the transactions during the third quarter of 2022 are as follows (expressed
in thousands of dollars except share amounts):
Shares Amount
Number of common
shares issued and
outstanding
Common shares Total
Balance - December 31, 2021 63,344,298 $ 852,465 $ 852,465
Issuance of shares on exercise of options 18,415 196 196
Balance - September 30, 2022 63,362,713 $ 852,661 $ 852,661
Shares Amount
Number of common
shares issued and
outstanding
Common shares Total
Balance - December 31, 2020 63,333,238 $ 852,379 $ 852,379
Issuance of convertible debentures 9,875 77 77
Balance - September 30, 2021 63,343,113 $ 852,456 $ 852,456
Omnibus Incentive Plan
On November 12, 2020, the Board of Directors approved an Omnibus Incentive Plan (the “Incentive Plan”). This
plan supersedes the former incentive plans (collectively, the “Legacy Plan”) that included Options, Performance
Share Units (“PSUs”) and Restricted Share Units (“RSUs”). All employees and consultants are eligible to participate
in the Incentive Plan. The Incentive Plan consists of stock options, RSUs and PSUs. Awards of RSUs and PSUs
granted during a service year will be subject to a service period as determined by management at the time of
issuance. The aggregate number of shares that may be issued under the Incentive Plan is 3,709,066 provided that no
more than 1,904,538 shares may be issued in aggregate pursuant to the settlement of RSUs and PSUs. Options that
were issued under the Legacy Plan and are subsequently cancelled will be available to be issued under the Incentive
Plan. The base share equivalents granted as RSU and PSU awards attract compounding notional dividends at the
same rate as outstanding shares, which are notionally re-invested as additional base share equivalents. PSU and RSU
awards may be settled in shares issued from treasury, cash, or a mix of shares and cash, at Cineplex’s option at the
time of settlement. Awards outstanding under prior plans shall remain in full force and effect under the prior plans
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according to their respective terms. Under the prior plans, the effects of changes in estimates of performance results
are recognized in the year of change. As at September 30, 2022, 1,100,952 shares are available to be issued under
the Incentive Plan (2021 - 1,462,182).
Stock Options
Stock options issued under the Incentive Plan will be administered by the Board of Directors which will establish the
exercise price at the time each option is granted, which in all cases will not be less than the market price on the grant
date. All of the options must be exercised over specified periods not to exceed ten years from the date granted.
Options issued under the Incentive Plan may be exercised for cash or on a cashless basis, both of which result in the
issuance of shares from treasury. Options granted will be accounted for as equity-settled.
Cineplex recognized employee benefits expense of $0.3 million and $1.2 million with respect to the options during
the three and nine months ended September 30, 2022 (2021 - $0.5 million and $1.4 million, respectively). In the first
quarter of 2021, 165,146 stock options issued under the Legacy Plan were cancelled for total consideration of $60
thousand as part of a voluntary stock option cancellation program that was initiated in the fourth quarter of 2020.
A summary of option activities for the nine months ended September 30, 2022 and 2021 is as follows:
2022 2021
Weighted
average
remaining
contractual life
(years)
Number of
underlying
shares
Weighted
average
exercise price
Number of
underlying
shares
Weighted
average
exercise price
Options outstanding - January 1 7.44 2,198,805 $ 21.48 2,042,019 25.37
Granted 223,578 13.39 459,501 12.69
Cancelled — — (188,303) 43.90
Forfeited (285,371) 35.75 (67,280) 17.32
Exercised (26,309) 8.25 (24,220) 8.25
Options outstanding – end of period 7.26 2,110,703 $ 18.86 2,221,717 $ 21.60
Upon cashless exercises, the options exercised in excess of shares issued are cancelled and returned to the pool
available for future grants. At September 30, 2022, 602,447 (2021 - 1,711,033) options are available for grant.
RSU and PSU awards
PSU share
equivalents
granted
RSU share
equivalents
granted
PSU share
equivalents
minimum payout
PSU share
equivalents
maximum payout
2022 LTIP awards granted in Q1 2022 177,973 284,661 — 355,946
2021 LTIP awards granted in Q2 2021 167,546 315,619 — 335,092
2020 LTIP award granted in Q3 2020 284,214 277,105 — 568,428
During the first quarter of 2022, Cineplex issued 284,661 equity settled RSUs with a fair value $13.39 per unit (total
fair value of $3.8 million on issuance) and 177,973 equity settled PSUs with a fair value of $13.39 per unit (total fair
value of $2.4 million on issuance). The fair value was assessed based on Cineplex’s closing Share price on the grant
date. The RSU and PSU awards issued will vest in the fourth quarter of 2024.
Compensation expense is recorded based on the number of units expected to vest, the current market price of
Cineplex’s common shares, and the application of a performance multiplier that ranges from a minimum of zero to a
maximum of two. Performance multipliers are developed based on Total Shareholder Return percentile rank relative
to a select peer group and composite group. Participants will receive one fully paid share issued from treasury that
can vary depending on the achievement of established performance targets. Performance conditions are reflected in
Cineplex’s estimate of the grant-date fair value for equity instruments granted.
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Incentive Plan costs are estimated at the grant date based on expected performance results then accrued and
recognized on a graded basis over the vesting period. Forfeitures are estimated to be nominal, based on historical
forfeiture rates. Cineplex recognized compensation expense of $1.1 million and $4.0 million for the three and nine
months ended September 30, 2022 (2021 - $0.7 million and $2.1 million, respectively) under the Incentive Plan
relating to RSU and PSU awards. At September 30, 2022, $0.3 million (2021 - $0.8 million) was included in share-
based compensation liability, and $6.6 million in contributed surplus (2021 - $2.1 million).
Deferred equity units
Members of the Board of Directors and certain officers of Cineplex may elect to defer a portion of their
compensation in the form of deferred equity units. For the period ended September 30, 2022, Cineplex recognized
compensation recovery of $(0.9) million and $(1.7) million during the three and nine months ended September 30,
2022 (2021 - recovery of $(0.6) million and expense of $1.2 million, respectively) associated with the deferred
equity units. At September 30, 2022, $3.6 million (2021 - $4.7 million) was included in share-based compensation
liability.
9. SEASONALITY AND QUARTERLY RESULTS
Historically, Cineplex’s revenues have been seasonal, coinciding with the timing of major film releases as the most
marketable motion pictures were traditionally released during the summer and holiday seasons in Canada. This
caused changes from quarter to quarter in theatre attendance, affecting theatre exhibition and Cinema Media
revenues and operating cash flows. The seasonality of theatre attendance has become less pronounced as film
studios have have trended to releasing content more evenly throughout the year, but the unexpected emergence of a
hit film can impact seasonality results. The timing, quantity, and quality of film releases can have a significant
impact on Cineplex’s results of operations, and the results of one period are not necessarily indicative of future
results. COVID-19 has also impacted the timing of major film releases due to unforeseen production delays related
to government imposed restrictions in different countries. Cineplex’s diversification into other businesses such as
digital media and amusement and leisure, which are not dependent on motion picture content, has contributed to
reduce the impact of this seasonality on Cineplex’s consolidated results. To meet working capital requirements
during lower revenue quarters, Cineplex can draw upon the Revolving Facility, which had $332.0 million drawn and
$199.6 million available as of September 30, 2022, subject to restrictions under the Credit Facilities including the
liquidity covenant described above (Section 6.4, Long-term debt). In response to the impact of the COVID-19
pandemic, Cineplex is closely monitoring its liquidity. Details with respect to its ongoing measures are detailed in
Section 1.1, COVID-19 business impacts, risks and liquidity.
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Summary of Quarterly Results (in thousands of dollars except per share, per patron, theatre attendance and theatre
location and screen data, unless otherwise noted):
2022 2021 2020
Q3 Q2
Q1 Q4 Q3 Q2 Q1 Q4
Revenues
Box office revenues
$ 124,700
$ 136,372
$ 79,952
$ 125,890
$ 94,114 $ 12,498 $ 3,818 $ 7,260
Food service revenues 105,193 110,637 68,388 87,244 79,971 13,258 6,525 10,543
Media revenues 25,224 26,406 15,545 32,795 14,060 9,401 9,074 12,496
Amusement revenues 69,607 65,723 50,424 45,096 53,319 22,184 13,874 13,597
Other revenues 15,113 10,740 14,414 8,926 8,916 7,585 8,121 8,556
339,837 349,878 228,723 299,951 250,380 64,926 41,412 52,452
Expenses and other income
Film cost 66,356 69,958 39,016 61,990 45,838 5,611 1,235 3,151
Cost of food service 24,839 25,335 14,857 21,042 16,362 2,867 1,412 3,989
Depreciation - right-of-use assets 23,277 24,486 24,263 25,041 25,151 25,737 26,318 28,136
Depreciation and amortization - other 26,079 26,651 26,892 27,501 28,297 27,735 29,509 28,750
(Gain) loss on disposal of assets (49,848) (4,650) 157 1,576 22 179 (30,060) (283)
Other costs 185,048 176,741 138,352 157,970 139,527 73,352 68,705 77,213
Impairment of long-lived assets and
goodwill — — — 3,717 — — — 56,175
275,751 318,521 243,537 298,837 255,197 135,481 97,119 197,131
Income (loss) before income taxes $ 64,086 $ 31,357 $ (14,814) $ 1,114 $ (4,817) $ (70,555) $ (55,707)
$ (144,679)
Adjusted EBITDA (i) $ 63,094 $ 77,939 $ 36,475 $ 58,328 $ 48,606 $ (16,902) $ (30,105) $ (32,097)
Adjusted EBITDAaL (i) $ 20,430 $ 35,764 $ (5,719) $ 20,198 $ 10,762 $ (53,165) $ (62,090) $ (65,948)
Net income (loss) $ 30,857 $ 1,313 $ (42,225) $ (21,778) $ (33,552)
$ (103,704)
$ (89,688)
$ (230,403)
EPS - basic $ 0.49 $ 0.02 $ (0.67) $ (0.34) $ (0.53) $ (1.64) $ (1.42) $ (3.64)
EPS - diluted $ 0.43 $ 0.02 $ (0.67) $ (0.34) $ (0.53) $ (1.64) $ (1.42) $ (3.64)
Cash provided by (used in) operating
activities $ 5,811 $ 47,152 $ (5,437) $ 27,480 $ 52,023 $ 17,133 $ (35,632) $ (61,041)
Cash (used in) provided by investing
activities (14,523) (8,132) (11,196) (3,937) (2,374) (1,761) 48,523 50,492
Cash (used in) provided by financing
activities 11,128 (36,349) 13,767 (25,067) (50,191) (6,086) (9,782) 12,977
Effect of exchange rate differences on
cash (146) (181) 22 (9) (189) 413 140 650
Net change in cash $ 2,270 $ 2,490 $ (2,844) $ (1,533) $ (731) $ 9,699 $ 3,249 $ 3,078
BPP (ii) $ 11.25 $ 12.29 $ 12.00 $ 12.29 $ 11.38 $ 10.89 $ 9.20 $ 9.23
CPP (ii) $ 8.35 $ 8.84 $ 8.82 $ 7.49 $ 8.58 $ 7.86 $ 6.12 $ 9.06
Film cost percentage (ii) 53.2 % 51.3 % 48.8 % 49.2 % 48.7 % 44.9 % 32.3 % 43.4 %
Theatre attendance (in thousands of
patrons) (ii) 11,084 11,092 6,661 10,245 8,272 1,148 415 786
Theatre locations (at period end) 158 159 159 160 161 160 161 162
Theatre screens (at period end) 1,637 1,640 1,640 1,652 1,656 1,651 1,657 1,667
(i) Represents a non-GAAP financial measure. See Section 17, Non-GAAP and other financial measures.
(ii) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
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Summary of adjusted free cash flow by quarter
Management calculates adjusted free cash flow per share as follows (see Section 17, Non-GAAP and other financial
measures, for a discussion of adjusted free cash flow) (in thousands of dollars except per share data and number of
shares outstanding):
2022 2021 2020
Q3 Q2
Q1 Q4 Q3 Q2 Q1 Q4
Cash (used in) provided by operating
activities $ 5,811 $ 47,152 $ (5,437) $ 27,480 $ 52,023 $ 17,133 $ (35,632) $ (61,041)
Less: Total capital expenditures net of
proceeds on sale of assets (14,466) (10,885) (9,585) (4,985) (1,603) (4,992) (8,715) (10,099)
Standardized free cash flow (8,655) 36,267 (15,022) 22,495 50,420 12,141 (44,347) (71,140)
Add/(Less):
Changes in operating assets and liabilities 25,815 1,120 15,077 1,405 (32,640) (62,622) (23,581) 67,257
Changes in operating assets and liabilities
of joint ventures 1,892 775 (707) 307 (31) (524) (802) (2,699)
Principal component of lease obligations (26,330) (27,428) (29,267) (25,525) (24,191) (19,086) (19,457) (32,323)
Principal portion of cash rent paid not
pertaining to current period (381) (381) 1,143 (737) — (369) 1,106 (357)
Growth capital expenditures and other 9,727 6,078 7,054 (350) 736 4,511 8,461 8,928
Share of income of joint ventures, net of
non-cash depreciation (500) 95 (23) (622) (47) 2 (165) (196)
Net cash received from CDCP — 5,318 — 1,995 — — — —
Adjusted free cash flow $ 1,568 $ 21,844 $ (21,745) $ (1,032) $ (5,753) $ (65,947) $ (78,785) $ (30,530)
Average number of shares outstanding
63,362,713 63,360,746 63,346,444 63,343,223 63,342,557 63,339,618 63,334,317 63,333,238
Adjusted free cash flow per share $ 0.025 $ 0.345 $ (0.343) $ (0.016) $ (0.091) $ (1.041) $ (1.244) $ (0.482)
10. RELATED PARTY TRANSACTIONS
Cineplex may have transactions in the normal course of business with entities whose management, directors or
trustees are also directors of Cineplex. Any such transactions are in the normal course of operations and are
measured at market-based exchange amounts. Unless otherwise noted, these transactions are not considered related
party transactions for financial statement purposes.
11. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATION UNCERTAINTIES
Cineplex makes estimates and assumptions concerning the future that may not equal actual results. The following
are the estimates and judgments applied by management that most significantly impact Cineplex’s consolidated
financial statements. These estimates and judgments have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
Goodwill and long lived assets - recoverable amount
Cineplex tests at least annually whether goodwill suffered any impairment. Assessment of impairment for long-lived
assets, including property, equipment, leaseholds, right-of-use assets, intangible assets and goodwill is performed
more frequently as specific events or circumstances dictate triggering events and changes in circumstances indicate
that the carrying amount of the asset group may not be fully recoverable. Management makes key assumptions and
estimates in determining the recoverable amount of its long lived assets and groups of CGUs’ goodwill, including
attendance and the related revenue growth rates, variable and fixed cash flows, operating margins and discount rates.
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At the end of each future reporting period Cineplex will assess whether there are indications that the impairment loss
recognized for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists,
the Company will estimate the recoverable amount of that asset and may reverse previously recorded impairment.
Financial instruments - fair value of over-the-counter derivatives
Cineplex’s over-the-counter derivatives include interest rate swaps used to economically hedge exposure to variable
cash flows associated with interest payments on Cineplex’s borrowings. Management estimates the fair values of
these derivatives as the present value of expected future cash flows to be received or paid, based on available market
data, which includes market yields and counterparty credit spreads. Cineplex also has a prepayment option on the
Notes Payable. The fair market value of prepayment option on Notes Payable was determined using an option
pricing model with observable market inputs consistent with accepted methods for valuing financial instruments.
Revenue recognition - gift cards
Management estimates the value of gift cards that are not expected to be redeemed by customers, based on the terms
of the gift cards and historical redemption patterns, including industry data. The estimates are reviewed annually, or
when evidence indicates the existing estimate is not valid.
Revenue recognition - Scene+
The timing and number of points redeemed by Scene+ members affects the timing and amount of both revenue and
cost of redemptions recognized by Cineplex. If the number of points actually redeemed by members is lower than
Cineplex’s estimate of points expected to be redeemed, the estimate of average revenue per point will be
prospectively revised, and net income would be higher over time.
Income taxes
The timing of reversal of timing differences and the expected income allocation to various tax jurisdictions within
Canada affect the effective income tax rate used to compute the deferred income tax asset. Management will assess
the recoverability of deferred tax assets as economic conditions improve. There are material uncertainties relating to
the recoverability of losses incurred in the current year. Accordingly, no deferred tax assets were recognized in the
current period. Management estimates the reversals and income allocation based on historical and budgeted
operating results and income tax laws existing at the consolidated balance sheet dates. In addition, management
occasionally estimates the current or future deductibility of certain expenditures, affecting current or deferred
income tax balances and expenses.
Fair value of identifiable assets acquired and liabilities assumed in business combinations
Significant judgment is required in the identifying tangible and intangible assets and liabilities of the acquired
businesses, as well as determining their fair values.
Share-based compensation
Management is required to make certain assumptions and to estimate future financial performance to estimate the
fair value of share-based awards at each consolidated balance sheet date. The LTIP and Incentive Plan requires
management to estimate future non-GAAP earnings measures, future revenue growth relative to specified industry
peers, and total shareholder return, both absolutely and relative to specified industry peers. Future non-GAAP
earnings are estimated based on current projections, updated at least annually, taking into account actual
performance since the grant of the award. Future revenue growth relative to peers is based on historical performance
and current projections, updated at least annually for actual performance since the grant of the award by Cineplex
and its peers. Total shareholder return for Cineplex and its peers is updated at each consolidated balance sheet date
based on financial models, taking into account financial market observable inputs.
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Lease terms
Some leases of property contain extension options exercisable by Cineplex up to one year before the end of the non-
cancellable contract period. Where practicable, Cineplex seeks to include extension options in new leases to provide
operational flexibility. In determining the lease term, Cineplex considers all facts and circumstances that create an
economic incentive to exercise an extension option, or not exercise a termination option. The assessment is reviewed
upon a trigger by a significant event or a significant change in circumstances.
12. ACCOUNTING POLICIES
Basis of preparation and measurement
Cineplex prepares its unaudited interim condensed consolidated financial statements in accordance with Canadian
generally accepted accounting principles (“Canadian GAAP”), defined as International Financial Reporting
Standards (“IFRS”) as set out in the CPA Canada Handbook. The preparation of consolidated financial statements in
accordance with IFRS requires the use of certain critical accounting estimates. It also requires that management
exercise judgment in applying Cineplex’s accounting policies. These unaudited interim condensed consolidated
financial statements are presented in accordance with International Accounting Standard (“IAS”) 34, Interim
Financial Reporting. The disclosures contained in these unaudited interim condensed consolidated financial
statements do not contain all requirements of Canadian GAAP for annual consolidated financial statements and
should be read in conjunction with the audited consolidated financial statements for the year ended December 31,
2021. These unaudited interim condensed consolidated financial statements follow the same accounting policies and
methods of application as the audited financial statements for the year ended December 31, 2021.
The International Accounting Standards Board (“IASB”) has published a number of amendments to existing
accounting standards effective for years beginning on or after January 1, 2023. Cineplex continues the evaluate the
impact of the amended accounting standards on Cineplex’s consolidated financial statements and has not early
adopted any amendments to existing accounting standards.
The following amendments are currently being evaluated by Cineplex:
IAS 12, Deferred taxes related to assets and liabilities arising from a single transaction
In May 2021, the IASB issued deferred tax related to assets and liabilities arising from a single transaction. The
amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 (recognition
exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and
deductible temporary differences.
IAS 1, Classification of liabilities as current or non-current
In January 2020 the IASB issued classification of liabilities as current or non-current (2020 amendments). The 2020
amendments clarified aspects of how entities classify liabilities as current or non-current.
IAS 8, Definition of accounting estimates
In February 2021, the IASB issued definition of accounting estimates, which amended IAS 8, Accounting Policies,
Changes in Accounting Estimates and Errors. The amendments introduced the definition of accounting estimates
and included other amendments to IAS 8 to help entities distinguish changes in accounting estimates from changes
in accounting policies.
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13. RISKS AND UNCERTAINTIES
Cineplex is exposed to a number of risks and uncertainties in the normal course of business that have the potential to
affect operating performance. Cineplex has operating and risk management strategies and insurance programs to
help minimize these operating risks and uncertainties. In addition, Cineplex has entity level controls and governance
procedures including a corporate code of business conduct and ethics, whistle blowing procedures, clearly
articulated corporate values and detailed policies outlining the delegation of authority within Cineplex.
Cineplex conducts an annual enterprise risk management assessment which is overseen by Cineplex’s executive
management team and the Audit Committee, and is reported to the Board. The enterprise risk management
framework sets out principles and tools for identifying, evaluating, prioritizing and managing risk effectively and
consistently across Cineplex. On an annual basis, all members of senior management participate in a detailed review
of enterprise risk in four major categories: environment risks, process risks, information risks and business unit
risks. The results of such analysis are presented to the Audit Committee for their review and then reviewed with the
whole of the Board. In addition, Cineplex monitors risks and changing economic conditions on an ongoing basis
and adapts its operating strategies as required.
This section describes the principal risks and uncertainties that could have a material adverse effect on Cineplex’s
business and financial results. The risks and uncertainties described below are not the only risks that may impact
Cineplex’s business. Additional risks not currently known to Cineplex or that management currently believes are
immaterial may also have a material adverse effect on future business and operations. Any discussion about risks
should be read in conjunction with “Forward-Looking Statements”.
Impact of COVID-19 on the Business, Financial Condition and Results of Operations of Cineplex
The outbreak of the COVID-19 pandemic has had an unprecedented impact on all of Cineplex’s business segments.
As an entertainment company that operates in spaces where guests gather in close proximity, including theatres and
LBE venues, Cineplex has been significantly impacted by the actions taken to control the spread of COVID-19. On
March 16, 2020, Cineplex announced the temporary closure of all of its theatres and LBE venues across Canada, as
well as substantially all route locations operated by P1AG. On April 1, 2020, in response to applicable government
directives and guidance from Canadian public health authorities, Cineplex announced that the closure of its theatres
and LBE venues across Canada would remain in effect and that the reopening of such locations would be reassessed
as further guidance was provided by Canadian public health authorities and applicable government authorities.
Although restrictions on social gatherings were temporarily lifted in many of the markets in which Cineplex
operated over the summer and into the fall of 2020, social gathering restrictions were reinstituted in the late fall and
winter with the increased number of COVID-19 cases and the onset of a third wave in the latter half of the first
quarter of 2021, involving more transmissible variants. As of July 17, 2021, Cineplex had reopened its entire circuit
of theatres after months of extended closure periods, subject to capacity limitations. The reopening included
Cineplex’s then 161 theatre locations, encompassing 1,656 screens across Canada including 18 VIP Cinemas
locations. However, during the fourth quarter of 2021, capacity restrictions were reinstated in Ontario, Cineplex’s
largest market, limiting indoor capacity to 50% along with prohibiting the consumption of concessions in theatres
effective December 18, 2021. Theatres in Quebec were also mandated to temporarily close effective December 20,
2021. During the beginning of the first quarter of 2022, social gathering restrictions were further modified or
reinstituted in several key markets that Cineplex operates, resulting in theatre closures and prohibiting indoor dining
in Ontario, Newfoundland and New Brunswick. Effective January 29, 2022, January 31, 2022 and February 7, 2022,
theatres in New Brunswick, Ontario and Quebec were permitted to reopen at reduced capacity levels, respectively.
During the second quarter of 2022, all remaining operating restrictions were removed. The potential of future
government imposed mandatory closure requirements or restrictions will negatively impact Cineplex’s business
operations and delay Cineplex’s return to profitability.
Additional significant impacts on Cineplex’s business caused by the COVID-19 pandemic may include, among
others:
• lack of availability of films in the short or long-term, including as a result of (i) potential delays in film
releases; (ii) release of scheduled films on alternative channels, (iii) disruptions or suspensions of film
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production, or (iv) the reduction or elimination of the theatrical exclusive release window including the
introduction of a premium video on demand (“PVOD”) window and direct to streaming services releases;
• increased operating costs resulting from additional regulatory requirements enacted in response to the
COVID-19 pandemic and from precautionary measures it voluntarily takes at Cineplex’s locations for the
health and well being of its guests and employees;
• unavailability of employees and/or their inability or unwillingness to conduct work;
• reductions and delays associated with planned operating and capital expenditures;
• Cineplex’s inability to generate significant cash flow from operations if Cineplex’s theatres continue to
operate at significantly lower than historical levels, which could, in the long-term, lead to a substantial
increase in indebtedness and may negatively impact Cineplex’s ability to comply with the financial
covenants in the Credit Facilities;
• Cineplex’s inability to further access lending, capital markets and other sources of liquidity, if needed, on
reasonable terms, or at all, or obtain amendments, extensions and waivers of financial maintenance or other
material terms;
• Cineplex’s inability to effectively meet short-term and long-term obligations which it does not have the
ability to eliminate or reduce (including interest payments, critical maintenance capital expenditures and
compensation and benefits payments);
• Cineplex’s inability to service its existing and future indebtedness;
• decreased attendance at Cineplex’s theatres and LBE locations after they reopen, including due to (i)
continued health and safety concerns or (ii) a change in consumer behaviour in favour of alternative forms
of entertainment; and
• reduction of government support programs as the government phases out COVID-19 support measures.
The COVID-19 pandemic, including future outbreaks may continue to negatively impact Cineplex’s business,
financial conditions and results of operations. Cineplex cannot guarantee that it will recover as rapidly as other
industries, or as other operators within the movie exhibition industry, due to its strong footprint in densely populated
areas. If Canada experiences new outbreaks of COVID-19 or variants thereof, governmental officials may order new
closures, impose restrictions on travel or introduce social distancing measures such as limiting the number of people
allowed in a theatre or other venue at any given time.
If there are further shutdowns, Cineplex cannot be certain that it will have access to sufficient liquidity to meet its
obligations for the time required to allow its operations to resume or normalize. Cineplex may not be able to obtain
additional liquidity and any relief provided by lenders, governmental agencies and business partners may not be
adequate or may include onerous terms.
Cineplex continues to actively monitor all aspects of its business and operations in order to minimize the impact of
COVID-19 on its operations wherever possible. However, the outbreak of COVID-19 has caused significant
disruptions to Cineplex’s ability to generate profitability and cash flows. Cineplex will continue to monitor the
ongoing COVID-19 pandemic. The events and circumstances resulting from the COVID-19 and any future
pandemics could have a material negative impact on its business, financial condition and results for the remainder of
2022 and potentially longer.
Litigation Arising Out of the Cineworld Transaction and Bankruptcy
Cineplex commenced an action against Cineworld as a result of Cineworld’s repudiation of the Arrangement
Agreement. Cineworld filed a counterclaim against Cineplex for an unspecified amount of costs that it incurred as a
result of Cineplex’s alleged breaches of the Arrangement Agreement (Section 1.1, Cineworld Transaction).
On December 14, 2021, the Court released its Decision. The Court held that Cineplex did not breach any of its
covenants in the Arrangement Agreement, and that Cineworld had no basis for terminating the Arrangement
Agreement. The Court held that Cineworld breached the Arrangement Agreement and repudiated the transaction to
acquire Cineplex, which actions precluded Cineplex from seeking specific performance and entitled Cineplex to
monetary damages. The Court awarded damages for breach of contract to Cineplex in the amount of $1.24 billion on
account of lost synergies, and $5.5 million for transaction costs, exclusive of pre-judgment interest. The Court also
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held that Cineplex’s shareholders did not have any rights under the Arrangement Agreement to enforce the
agreement or sue Cineworld for any breach. The Court also denied Cineworld’s counterclaim against Cineplex.
On January 12, 2022, Cineworld filed a Notice of Appeal with the Court of Appeal for Ontario and on January 27,
2022, Cineplex filed its Appeal. The Appeal was originally scheduled to be heard on October 12 and 13, 2022. On
September 7, 2022, the Cineworld Parties filed a petition, in the U.S. Bankruptcy Court, commencing bankruptcy
proceedings under Chapter 11. On September 8, 2022, the U.S. Bankruptcy Court granted relief requested by the
Cineworld Parties in the Chapter 11 proceedings, including an order confirming and enforcing a worldwide stay of
all enforcement proceedings by Cineworld’s creditors. Cineworld took the position that the Appeal was therefore
stayed. On September 9, 2022, Cineplex filed an emergency motion with the U.S. Bankruptcy Court, seeking to lift
the stay with respect to the Appeal. Cineplex’s emergency motion was heard on September 28, 2022, at which time
the U.S. Bankruptcy Court declined Cineplex’s requested relief, without prejudice to Cineplex’s ability to seek such
relief at a later date. On September 30, 2022, on consent of counsel for Cineplex and Cineworld, the Court of Appeal
for Ontario adjourned the Appeal on a sine die basis. Accordingly, the hearing of the Appeal has been delayed.
Cineplex continues to evaluate and advance all options against Cineworld to maximize and monetize the value of the
Judgment. As part of these ongoing efforts, Cineplex has engaged Moelis & Company, a leading global investment
bank with significant expertise in these areas, as financial advisors, and Goodmans LLP, as lead counsel. Cineplex
has also been appointed as a member of the unsecured creditors’ committee in the Cineworld Parties’ Chapter 11
proceedings.
While the Judgment and next steps are a key focus for Cineplex and its advisors, due to uncertainties inherent in
appeals and Cineworld’s insolvency proceedings, it is not possible for Cineplex to predict the timing or final
outcome of the Appeal. Further, even if the Appeal by Cineworld is not successful, Cineworld may not have the
ability to pay the full amount of any damages or costs awarded by the Court. Therefore, no amount has been accrued
as a receivable.
General Economic Conditions
Entertainment companies compete for guests’ entertainment time and spending, and as such can be sensitive to
global, national or regional economic conditions and any changes in the economy may either adversely influence
these revenues in times of an economic downturn or positively influence these revenue streams should economic
conditions improve. Historical data shows that movie theatre attendance has not been negatively affected by
economic downturns over the past 25 years. Cineplex has never previously experienced a sustained complete halt of
its operations across Canada and, as a result, its ability to predict the impact of such a halt on its operations and
future prospects is uncertain.
Business Continuity Risk
Cineplex’s primary sources of revenues are derived from providing an out of home entertainment experience.
Business results could be significantly impacted by a terrorist threat, severe weather incidents, and have been by the
outbreak of a pandemic or general fear of community gatherings that may cause people to stay away from public
places including movie theatres, malls and amusement and leisure locations. Cineplex operates in locations spread
throughout North America which mitigates the risk to a specific location or locations. Cineplex has procedures to
manage such events should they occur. These procedures identify risks, prioritize key services, plan for large staff
absences and clarify communication and public relations processes. However, should there be a large-scale threat or
occurrence, it is uncertain to what extent Cineplex could mitigate this risk and the costs that may be associated with
any such crises. Further, Cineplex purchases insurance coverage from third-party insurance companies to cover
certain operational risks, and is self-insured for other matters.
There is a risk that locations may operate at significantly lower levels than prior to the COVID-19 pandemic and as a
result this may negatively impact the ability of Cineplex to meet its financial covenants, access debt or equity capital
markets for sources of additional liquidity on reasonable terms, or at all, and meet its short and long-term
obligations.
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Customer Risk
In its consumer-facing entertainment businesses, Cineplex competes for the leisure time and disposable income of
all potential customers. All other forms of entertainment are substantial competitors to the movie-going experience
including home and online consumption of content, sporting events, streaming services, gaming, live music
concerts, live theatre, other entertainment venues and restaurants. Cineplex aims to deliver value to its guests
through a wide variety of entertainment experiences and price points. However, the COVID-19 pandemic has
created supply shortages and imbalances in the supply and demand of products causing commodity prices to
increase, escalating the risk of inflation to which consumers will be exposed. Significant price increases may deter
consumer spending on entertainment options to other alternatives which will negatively impact Cineplex’s business
operations. Cineplex monitors pricing in all markets to ensure that it offers a reasonably priced out of home
experience compared to other entertainment alternatives. If Cineplex is too aggressive in raising ticket prices or
concession prices, there may be an adverse effect on theatre attendance and food service revenues.
To mitigate this risk, Cineplex offers CineClub membership, providing members with benefits accessible across
Cineplex’s businesses nationwide including Cineplex theatres, the Cineplex Store and LBE venues. Cineplex also
offers the Scene+ loyalty program, which rewards guests for their patronage with special offers as well as the ability
to earn and redeem points. However, loyalty programs also carry a risk that customers may not be satisfied with the
offering or any change in offerings. Cineplex monitors customer needs to try and ensure that its entertainment
experiences meet the anticipated needs of key demographic groups. Cineplex is differentiating the movie-going
experience by providing premium alternatives such as UltraAVX, VIP, 4DX, ScreenX, Cineplex Clubhouse and D-
BOX seating. Cineplex also includes XSCAPE Entertainment Centres in select theatres and provides alternative
programming which appeals to specific demographic groups.
In the event that consumer preferences change, Cineplex may need to incur further capital expenditures to redevelop
or upgrade existing locations. Cineplex continues to improve the quality of its theatre assets through ongoing
renovations and theatre recliner retrofits. If Cineplex’s does not consistently meet or exceed customer expectations
due to poor customer service or poor quality of assets, movie theatre attendance may be adversely affected.
Cineplex monitors customer satisfaction through surveys and focus groups and maintains a guest services
department to address customer concerns. Guest satisfaction is tied to performance measures for theatre management
ensuring alignment between corporate and operational objectives.
There is the potential for misinformation to be spread virally through social media relating to Cineplex’s assets as
well as the quality of its customer service. In response to this risk, Cineplex monitors commentary on social media
in order to respond quickly to potential social media misinformation or service issues.
Cineplex developed its Cineplex Store in response to the risk created by in-home and on-the-go entertainment
offerings. Certain components of offerings through the Cineplex Store of transactional video-on-demand (“TVOD”)
movies are delivered online via third-party technology platforms. Technological issues relating to online delivery of
content could negatively impact customer satisfaction. Cineplex monitors performance metrics for electronic
delivery in order to proactively manage any potential customer satisfaction issues.
Regarding its media sales businesses, certain of Cineplex’s media customers have signed contracts of finite lengths
or that allow for early termination. There is a risk that these customers could choose not to renew these contracts at
their maturity, or take steps to terminate them prior to maturity, which would have adverse effects on Cineplex’s
media revenues.
In its digital place-based media and amusement solutions businesses, Cineplex engages with multiple businesses
where it provides products and services. These arrangements include the risk that businesses could decide to source
the same products or similar services from a competitor, delay the timing of contract fulfillment or curtail spending
due to economic conditions, which would have a negative impact on Cineplex’s results.
Film Entertainment and Content Risk
Cineplex’s ability to operate successfully depends upon the availability, diversity and appeal of filmed content, the
ability of Cineplex to license films and the performance of these films in Cineplex’s markets. Cineplex primarily
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licenses first-run films, the success of which is dependent upon their quality, as well as on the marketing efforts of
film studios and distributors. To mitigate this risk, Cineplex continues to diversify its entertainment offerings.
Nonetheless, Cineplex is highly dependent on film product and film performance, including the number and success
of blockbuster films. A reduction in quality or quantity of both 2D and 3D film product, any disruption or delay in
the production or release of films, the introduction of new delivery platforms for first run product, a strike or threat
of a strike in film production, a reduction in the marketing efforts of film studios and distributors or a significant
change in film release patterns, would have a negative effect on movie theatre attendance and adversely affect
Cineplex’s business and results of operations.
The impact of COVID-19 has led to less film productions by studios, delayed film releases, reductions to the
exclusive theatrical release window, introduction of PVOD and redirection of a limited number of theatrical releases
to streaming services. Certain film studios have also launched their own streaming services resulting in a change in
release strategies.
Cineplex’s box office revenues depend upon movie production and its relationships with film distributors, including
a number of major Hollywood and Canadian distributors. In 2019, the last full year of unrestricted operations, seven
major film distributors accounted for approximately 86% of Cineplex’s box office revenues, which is consistent with
industry standards. Deterioration in Cineplex’s relationships with any of the major film distributors or an increase in
studio concentration or consolidation could affect its ability to negotiate film licenses on favourable terms or its
ability to obtain commercially successful films. Cineplex actively works on maintaining good relations with these
distributors, as this affects its ability to negotiate commercially favourable licensing terms for first-run films or to
obtain licenses at all. In addition, a change in the type and breadth of movies offered by studios may adversely affect
the demographic base of moviegoers.
Cineplex competes with other consumption platforms, including cable, satellite, internet television, and Blu-rays, as
well as TVOD, subscription video-on-demand (“SVOD”) and other over the top operators via the Internet. The
release date of a film in other channels of distribution such as over the top internet streaming, pay television and
SVOD is at the discretion of each distributor and day and date release or earlier release windows for these or new
alternative channels including the recent pilots by certain studios with PVOD models could have a negative impact
on Cineplex’s business.
Exhibition Industry Risk
Cineplex operates in each of its local markets with other forms of entertainment, as well as in some of its markets
with national and regional film exhibition circuits and independent film exhibitors. In respect of other film
exhibitors, Cineplex primarily competes with respect to film licensing, attracting guests and acquiring and
developing new theatre sites and acquiring existing theatres. Movie-goers are generally not brand conscious and
usually choose a theatre based on its location, the films showing, showtimes available and the theatre’s amenities.
As a result, the building of new theatres, renovations or upgrades to existing theatres, or the addition of screens to
existing theatres by competitors in areas in which Cineplex operates theatres may result in reduced theatre
attendance levels at Cineplex’s theatres.
In response to this risk, management continually reviews and upgrades its existing locations. Cineplex also fosters
strong ties with the real estate and development communities and monitors potential development sites. Most prime
locations in larger markets have been developed such that significant further development would be generally
uneconomical. In addition, the exhibition industry is capital intensive with high operating costs and long-term
contractual commitments. Significant increases in construction and real estate costs could make it increasingly
difficult to develop new sites profitably.
In response to risks to theatre attendance, Cineplex continues to pursue other revenue opportunities including media
in the form of in-theatre and out of home advertising, amusement and leisure, promotions and alternative uses of its
theatres during non-peak hours. Amusement and leisure includes amusement solutions offered by P1AG, in-theatre
gaming locations, XSCAPE Entertainment Centres and in-theatre at select Cineplex locations and location-based
entertainment including The Rec Room and Playdium. Cineplex’s ability to achieve its business objectives may
depend in part on its ability to successfully increase these revenue streams.
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Media Risk
Media revenue has been shown to be particularly sensitive to economic conditions and any changes in the economy
may either adversely influence this revenue stream in times of a downturn or positively influence this revenue
stream should economic conditions improve. Cineplex has numerous large media and digital place-based media
customers, the loss of which could impact Cineplex’s results. There is no guarantee that Cineplex could replace the
revenues generated by these large customers if their business was lost.
The majority of Cineplex’s advertising revenue is earned at Cineplex theatres. There is a risk of decreased
attendance at theatres and a reduction of advertising spending due to adverse economic conditions. This could result
in media customers electing to reduce their spending in cinemas and advertise through alternative channels.
Cineplex’s media advertising arrangements are impacted by theatre attendance levels which drive impressions and
ultimately impact media revenue generated by Cineplex.
Amusement and Leisure Risk
Cineplex’s amusement and leisure operations compete against other offerings for guests’ entertainment spending. In
each of the local markets in which Cineplex operates and will operate, it faces competition from local, national or
international brands that also offer a wide variety of restaurant and/or amusement and gaming experiences, including
sporting events, bowling alleys, entertainment centres, nightclubs and restaurants. Competition for guests’
entertainment time and spending also extends to in-home entertainment such as internet or video gaming and other
in-home leisure activities. Cineplex’s inability to compete favourably in these markets could have a material adverse
effect on Cineplex’s business, results of operations and financial condition.
Any new Cineplex location-based entertainment locations may not meet or exceed the performance of its existing
locations or its performance targets. New locations may even operate at a loss, which could have a significant
adverse effect on the overall operating results.
Cineplex’s results of operations are subject to fluctuations due to the timing of location-based entertainment
openings which may result in significant fluctuations in our quarterly performance. Cineplex typically incurs most
cash pre-opening costs for a new location within the two months immediately preceding, and the month of, the
location’s opening. In addition, the labor and operating costs for a newly opened store during the first three to six
months of operation are materially greater than what can be expected after that time, both in aggregate dollars and as
a percentage of revenues. Additionally, a portion of a current fiscal year new location capital expenditures is related
to locations that are not expected to open until the following fiscal year.
To mitigate these risks, Cineplex leverages its core competencies in food service execution, its partnership in Scene+
and its knowledge of the trends in amusement and gaming via its P1AG operations to continuously update its
amusement and leisure offerings in order to provide guests with the most compelling offerings available in Canada.
Any future outbreaks of the COVID-19 pandemic or variants thereof could lead to a decrease in guests and corporate
events frequenting LBE locations. Cineplex’s LBE venues have a larger guest-facing footprint and higher levels of
customer traffic than other concepts in the dining and entertainment industry. The effects of the COVID-19
pandemic as a result of continued concerns over safety and social distancing and/or depressed consumer sentiment
due to adverse economic conditions could have an adverse effect on Cineplex’s business, financial conditional and
results of operations.
P1AG’s procurement of games and amusement offerings is dependent upon a few suppliers, the ability to continue
to procure new games, amusement offerings and other entertainment-related equipment. To the extent that the
number of suppliers declines, P1AG could be subject to the risk of distribution delays, pricing pressure, lack of
innovation and other associated risks. In addition, any increase in cost or decrease in availability of new amusement
offerings that appeal to customers could have a negative impact on Cineplex’s revenues from its amusement and
leisure businesses.
P1AG competes with other providers of amusement and gaming services across North America. P1AG manages the
risk of customers switching gaming providers by continually monitoring the performance of its amusement solutions
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and reacting quickly to replace underperforming solutions with newer or more relevant equipment. P1AG’s
expertise and experience in the industry and proven success maximizing revenue for its customers helps mitigate this
switching risk. A material amount of P1AG’s revenue is dependent on customer traffic in venues in which it
operates. The COVID-19 pandemic in North America resulted in extended closure periods of venues in which P1AG
operates gaming equipment which materially impacted its results of operations. There is a risk that these venues
could have long term decreased customer traffic. Any reduction in traffic or permanent shutdown of venues could
have a material impact on its business.
Technology Risk
Technological advances have made it easier to create, transmit and electronically share unauthorized high-quality
copies of films during theatrical release. Some consumers may choose to obtain unauthorized copies of films rather
than attending the theatre which may have an adverse effect on Cineplex’s business. In addition, as home
entertainment technology becomes more sophisticated and additional technologies become available to consume
content, consumers may choose other technology options rather than attending a theatre.
To mitigate these risks, Cineplex continues to enhance the out of home experience through the addition of new
technologies and experiences including 3D, VIP, UltraAVX, D-BOX, 4DX, ScreenX and digital projection in order
to further differentiate the theatrical product from the home product. Cineplex has also diversified its offerings to
customers by operating the Cineplex Store which sells TVOD and PVOD movies in order to participate in the in-
home and on-the-go entertainment markets.
Changing platform technologies and new emerging technologies in the digital commerce industry, and specifically
relating to the delivery of TVOD and SVOD services, present a risk to the Cineplex Store’s operations. Should
Cineplex’s technology partners cease operations or have its technology platform rendered obsolete, Cineplex’s sales
of TVOD products could be jeopardized.
Cineplex relies on various information technology solutions to provide its services to guests and customers, as well
in running its operations from its various office locations. Cineplex may be subject to information technology
malfunctions, outages, thefts or other unlawful acts that could result in loss of communication, unauthorized access
to data, change in data, or loss of data which could compromise Cineplex’s operations and/or the privacy of
Cineplex’s guests, customers and suppliers.
Cyber Security and Information Management Risk
Cineplex needs effective information technology infrastructure including hardware, networks, software, people and
processes to effectively support the current and future needs of the business in an efficient, cost-effective and well-
controlled fashion. To mitigate this risk, Cineplex is continually upgrading systems and infrastructure to meet
business needs.
Cineplex requires relevant and reliable information to support the execution of its business model and reporting on
performance. The integrity, reliability and security of information are critical to Cineplex’s daily and strategic
operations. Inaccurate, incomplete or unavailable information or inappropriate access to information could lead to
incorrect financial or operational reporting, poor decisions, privacy breaches or inappropriate disclosure of sensitive
information. To mitigate this risk, Cineplex continues to strengthen general information technology controls by
developing operating policies and procedures in the areas of change management, computer operations and security
access.
At select times during the normal course of business, Cineplex and its joint venture partners including Scene+, store
sensitive data, including intellectual property, point balances and gift card and certificate balances, proprietary
business information including data with respect to suppliers, employees and business partners, as well as some
personally identifiable information of their customers and employees. Further, Cineplex regularly works with third
party suppliers in the delivery of services to its customers and employees where such data is provided in the normal
course of the commercial relationship. The secure processing, maintenance and transmission of this information is
critical to Cineplex’s operations and business strategies. As such Cineplex adheres to industry standards for the
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payment card industry (“PCI”) data security standard (“DSS”) compliance, as well as undertaking commercially
reasonable efforts to safeguard non-financial data.
Cineplex recognizes that security breaches of the information systems of Cineplex, its joint venture partners
including Scene+, or any one of its third-party suppliers could compromise this information and expose Cineplex to
liability, which could cause its businesses or reputation to suffer. Despite security measures, information technology
and infrastructure may be vulnerable to unforeseen attacks by hackers or breached due to employee error,
malfeasance, computer viruses, malware, phishing, denial of service attacks, unauthorized access to confidential,
proprietary or sensitive information, industrial espionage or other disruptions. Any such breach could compromise
networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access,
disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect
the privacy of personal information, regulatory penalties, disrupt operations and the services provided to customers,
damage reputation and cause a loss of confidence in products and services, which could adversely affect business,
financial condition, results of operations and cash flows. In response to these risks, Cineplex has a team of
technology and cybersecurity professionals whose role is to monitor information technology and processes and
collaborate with joint venture partners and third-party suppliers to ensure appropriate security and controls are in
place. Cineplex continues to place an increased focus on its cybersecurity environment through analysis of internal
and external threats and alerting of suspicious incidents to its technology environment. Currently, as the majority of
Cineplex’s corporate employees have moved to a work-from-home platform, there is an increased risk to Cineplex’s
technology systems. In response, Cineplex has implemented additional security measures, including training,
monitoring and testing and contingency plans, to protect systems.
Real Estate Risk
The acquisition and development of potential operating locations by Cineplex is dependent on the ability of
Cineplex to identify, acquire and develop suitable sites for these locations with favourable economic terms in both
new and existing markets, while competing with other entertainment and non-entertainment companies for site
locations. The cost to develop a new building is substantial and its success is not assured. The negative economic
impact of the COVID-19 pandemic magnifies inflationary risks and consequently impacts Cineplex’s capital
expenditures to generate future economic benefits. The inflationary risks increases the costs to execute planned
capital investments and the timing of investments which will delay Cineplex’s return to profitability. While Cineplex
is diligent in selecting sites, the significant time lag from identifying a new site to opening can result in a change in
local market circumstances and could negatively impact the location’s chance of success. In addition, building new
operating locations may draw audiences away from existing sites operated by Cineplex. Cineplex considers the
overall return for the theatres in a geographic area when making the decision to build new locations. The majority of
Cineplex’s operating sites are subject to long-term leases. In accordance with the terms of these leases, Cineplex is
responsible for costs associated with property maintenance, utilities consumed at the location and property taxes
associated with the location. Cineplex has no control over these costs and these costs have been increasing over the
last number of years. Furthermore, due to the outbreak of the COVID-19 pandemic, Cineplex continued its
negotiations with landlord partners with respect to reductions in rent payments for current and future periods. While
Cineplex works hard to maintain positive relationships with its landlords, we cannot guarantee continued reductions
in future rent payments and there exists a potential for a default on existing lease obligations should the pandemic
continue.
Cineplex continues to be liable for obligations under theatre leases in respect of certain divested theatres. If the
transferee of any such theatres fails to satisfy the obligations under such leases, Cineplex may be required to assume
the lease obligations.
Sourcing Risk
Cineplex relies on a small number of companies for the distribution of a substantial portion of its concession
supplies. If these distribution relationships were disrupted, Cineplex could be forced to negotiate a number of
substitute arrangements with alternative distributors that could, in the aggregate, be less favourable to Cineplex than
the current arrangements.
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Substantially all of Cineplex’s non-alcohol beverage concessions are products of one major beverage company. If
this relationship was disrupted, Cineplex may be forced to negotiate a substitute arrangement that could be less
favourable to Cineplex than the current arrangement. Any such disruptions could therefore increase the cost of
concessions and harm Cineplex’s operating margins, which would adversely affect its business and results of
operations.
Cineplex relies on one major supplier to source popcorn seed, and has entered contracts with this supplier to
guarantee a fixed supply. As crop yields can be affected by drought or other environmental factors, the supplier may
be unable to fulfill the whole of its contractual commitments, such that Cineplex would need to source the remaining
needed corn product from other suppliers at a potentially higher cost.
In order to minimize these operating risks, Cineplex actively monitors and manages its relationships with its key
suppliers.
The economic impacts of COVID-19 may have a negative impact on Cineplex’s suppliers, and as a result, its
suppliers may not be able to sustain operations after the pandemic or be forced to increase costs to combat
inflationary risks associated with input materials. The COVID-19 pandemic has caused supply chain disruptions
across the globe substantially increasing production and transportation costs as well as delaying and curtailing the
production of products potentially effecting the procurement of services that are impacted by the delays. A reduction
in the number of suppliers, the loss of critical suppliers, or delays in supplier production may result in increased
costs or the inability to find satisfactory replacement goods and services in the short or long-term which will
negatively impact Cineplex’s operating margins and cash flows.
Human Resources Risk
Cineplex’s success depends upon the retention of senior executive management, including its Chief Executive
Officer, Ellis Jacob. The loss of services of one or more members of the management team could adversely affect
Cineplex’s business, results of operations and Cineplex’s ability to effectively pursue its business strategy. Cineplex
does not maintain key-man life insurance for any of its employees but does provide long-term incentive programs to
retain key personnel and undertakes a comprehensive succession planning program.
Cineplex typically employs approximately over 10,000 people, of whom approximately 90% are hourly workers
whose compensation is based on the prevailing provincial minimum wages with incremental adjustments as required
to match market conditions. Wage inflation and any increase in minimum wages will have an adverse effect on
employee related costs. In order to mitigate the impact of the proposed increases, Cineplex works to expand
automation, take advantage of technological efficiencies and continually reviews pricing. Approximately 6% of
Cineplex’s employees are represented by unions, located primarily in the province of Quebec. Because of the small
percentage of employees represented by unions, the impact of labour disruption nationally is low.
As a result of previous government mandated closures and capacity restrictions due to the impact of the COVID-19
pandemic, Cineplex had to temporarily lay off some or all of its part-time staff members. There is a risk that
Cineplex may not be able to rehire enough staff to sustain operations due to their unavailability, inability,
unwillingness to rejoin the workforce. There is also a risk that Cineplex will have a shortage of staff in the short-
term due to employee illnesses caused by COVID-19.
Health and Safety Risk
Cineplex is subject to risks associated with food safety, alcohol consumption by guests, product handling and the
operation of machinery. Cineplex is in compliance with health and safety legislation and conducts employee
awareness and training programs on a regular basis. Health and safety issues related to our guests such as pandemics
and bedbug concerns are risks that may deter people from attending places of public gathering, potentially including
movie theatres, gaming centres, malls and dining locations. For those risks that it can control, Cineplex has
programs in place to mitigate its exposure. Cineplex will investigate further methods in order to keep guests and
employees safe at both locations and corporate offices.
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There is a risk that concerns over health and safety as a result of COVID-19 will be long lasting and will have an
adverse impact on Cineplex’s business. In order to help mitigate these risks, Cineplex has made changes to its
operations including promoting cashless transactions where possible and by cleaning and disinfecting surfaces on a
regular basis.
Environment/Sustainability Risk
Cineplex’s approach to environmental, social and governance factors (“ESG”) has its foundation in three key pillars:
Good Governance, Environmental Sustainability and Business & Social Responsibility. Cineplex’s ESG practices
permit positive social, cultural and environmental changes at the national and local levels, benefiting Cineplex’s
employees, guests, partners and drives and creates value for shareholders.
Cineplex’s business is primarily a service and retail business which delivers guest experiences rather than physical
commercial products and thus does not have substantial environmental risk. Cineplex operates multiple locations in
major urban markets and does not anticipate any significant changes to operations due to climate change. Should
legislation change to require more stringent management of carbon emissions or more stringent reporting of
environmental impacts, Cineplex anticipates this will result in minimal cost increases or changes to operating
procedures. Severe weather incidents (as a result of environmental changes or otherwise) have potential to
negatively impact Cineplex’s operation. See “Business Continuity Risk” above.
Integration Risk
While Cineplex has successfully integrated businesses acquired in the past, there can be no assurance that all
acquisitions, including recent acquisitions, will be successfully integrated or that Cineplex will be able to realize
expected operating and economic efficiencies from such acquisitions.
Financial and Markets Risk
Cineplex requires efficient access to capital in order to fuel growth, execute strategies and generate future financial
returns. For this reason Cineplex entered into the Revolving Facility. Cineplex hedges interest rates up to $450.0
million of the Revolving Facility, thereby minimizing the impact of significant fluctuations in the market rates.
Cineplex’s exposure to currency and commodity risk is minimal as the majority of its transactions are in Canadian
dollars and commodity costs are not a significant component of the overall cost structure. Counter party risk on the
interest rate swap agreements is minimized through entering into these transactions with Cineplex’s lenders. Upon
the maturity of the Credit Facilities in November 2023, there is a risk that Cineplex may not be able to renegotiate
under favourable terms in the then current economic environment.
If there is an unexpected prolonged impact of COVID-19, Cineplex may not have sufficient funds available under its
current financing sources to fund operations on a short and/or long-term basis. The effects of COVID-19 on the
financial markets could significantly impact Cineplex’s ability to raise capital and could increase the cost of
borrowing. There is a risk that Cineplex may not be able to find timely sources of financing, which could have an
adverse effect on its business, financial condition and results of operations.
Foreign Currency Risk
Cineplex is exposed to foreign currency risk related to transactions in its normal course of business that are
denominated in currencies other than the Canadian dollar. Cineplex’s largest foreign currency exposure is to the US
dollar, as its amusement solutions and digital place-based media all operate in the United States and represented
10.3% of Cineplex’s revenues in 2019 (the last full year not impacted by the COVID-19 pandemic). These revenues
are naturally hedged by Cineplex’s US-based operating costs.
Interest Rate Risk
Cineplex is exposed to risk on the interest rates applicable on its Credit Facilities. To mitigate this risk, Cineplex has
entered into interest rate swap agreements as outlined in Section 6.4, Long-term debt.
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Cineplex is exposed to the risk of refinancing its debt obligations at higher interest rates, negatively impacting its
future cash flows.
Inflation Risk
Cineplex’s fixed and variable operating costs are exposed to inflation risk. To mitigate this risk, Cineplex has
increased its inventory levels due to increases in anticipated distribution sales and theatres and LBE venues
operating at full capacity without any capacity restrictions. Cineplex also considers the prices of its products and
services in response to market conditions including inflation and competition to provide fair pricing to its customers.
Legal, Regulatory, Taxation and Accounting Risk
Changes to any of the various international, federal, provincial and municipal laws, tariffs, treaties, rules and
regulations related to Cineplex’s business could have a material impact on its financial results. Compliance with any
changes could also result in significant cost to Cineplex. Failure to fully comply with various laws, rules and
regulations may expose Cineplex to proceedings which may materially affect its performance.
On an ongoing basis, Cineplex may be involved in various judicial, administrative, regulatory and litigation
proceedings concerning matters arising in the ordinary course of business operations, including but not limited to,
personal injury claims, landlord-tenant disputes, alcohol-related incidents, commercial disputes, tax disputes,
employment disputes and other contractual disputes. Many of these proceedings seek an indeterminate amount of
damages.
To mitigate these risks, Cineplex promotes a strong ethical culture through its values and code of conduct. Cineplex
employs in-house counsel and uses third party tax and legal experts to assist in structuring significant transactions
and contracts. Cineplex has systems and controls that ensure efficient and orderly operations. Cineplex also has
systems and controls that ensure the timely production of financial information in order to meet contractual and
regulatory requirements and has implemented disclosure controls and internal controls over financial reporting
which are tested for effectiveness on an ongoing basis. In situations where management believes that a loss arising
from a proceeding is probable and can be reasonably estimated, Cineplex records the amount of the probable loss.
As additional information becomes available, any potential liability related to these proceedings is assessed and the
estimates are revised, if necessary.
14. CONTROLS AND PROCEDURES
14.1. DISCLOSURE CONTROLS AND PROCEDURES
Cineplex’s management is responsible for establishing and maintaining disclosure controls and procedures for
Cineplex as defined under National Instrument 52-109 issued by the Canadian Securities Administrators.
Management has designed such disclosure controls and procedures, or caused them to be designed under its
supervision, to provide reasonable assurance that material information relating to Cineplex, including its
consolidated subsidiaries, is made known to the Chief Executive Officer and the Chief Financial Officer by others
within those entities, particularly during the period in which the annual filings are being prepared.
14.2. INTERNAL CONTROLS OVER FINANCIAL REPORTING
Cineplex’s management is responsible for designing and evaluating the effectiveness of internal controls over
financial reporting for Cineplex as defined under National Instrument 52-109 issued by the Canadian Securities
Administrators. Management has designed such internal controls over financial reporting using the Integrated
Control - Integrated Framework: 2013 issued by the Committee of Sponsoring Organizations of the Treadway
Commission, or caused them to be designed under its supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the financial statements for external purposes in accordance
with GAAP.
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There has been no change in Cineplex’s internal controls over financial reporting that occurred during the most
recently completed interim period that has materially affected, or is reasonably likely to materially affect, Cineplex’s
internal control over financial reporting.
15. SUBSEQUENT EVENTS
CDCP expects to distribute its assets to its partners in 2022 and Cineplex will recognize a return of capital under
IAS 28, Investments in Associates and Joint Ventures. Cineplex expects to recognize a gain of $4.2 million on the
dissolution of its investment in CDCP.
16. OUTLOOK
The following discussion is qualified in its entirety by the caution regarding forward-looking statements at the
beginning of this MD&A and Section 13, Risks and uncertainties.
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
Cineplex reported third quarter BPP of $11.25 and an increase of 32.5% in box office revenue as compared to the
prior year period.
Top Gun: Maverick, became one of six films to exceed $700 million in North America and the fifth largest domestic
film of all-time, earning $1.5 billion globally up to September 30, 2022. Minions: The Rise of Gru was released
during the third quarter, generating $107.0 million during its North American opening weekend and earning $366.1
million since its release up to September 30, 2022. Marvel’s Thor: Love and Thunder was also released during the
third quarter, generating $144.2 million during its North American opening weekend and earning $343.2 million in
North America since its release up to September 30, 2022. Upcoming film releases for the year include the
following: Black Panther: Wakanda Forever, Strange World, The Fabelmans, The Whale, A Man Called Otto,
Avatar: The Way of Water, I Wanna Dance With Somebody, Puss in Boots: The Last Wish, Glass Onion: A Knives
Out Mystery, Babylon and Women Talking. The negative impact of COVID-19 has resulted in significant shifts in
product releases, delaying the release of highly anticipated feature films.
Cineplex continues to focus on providing guests with a variety of premium viewing options through which to enjoy
the theatre experience. These premium-priced offerings, which include UltraAVX, VIP Cinemas, IMAX, D-BOX,
3D, 4DX, Cineplex Clubhouse and ScreenX generate higher revenues per patron and expand the customer base.
Cineplex believes that these premium formats provide an enhanced guest experience and will continue to charge a
ticket price premium for films and events presented in these formats. Cineplex offers CineClub membership,
providing members with benefits accessible across Cineplex’s businesses nationwide including Cineplex theatres,
the Cineplex Store and LBE venues.
Cineplex is also focused on providing guests with a variety of premium viewing options, including recliner seating,
through which to enjoy the theatre experience, and will continue to expand premium viewing options throughout its
circuit in 2022 and beyond. VIP Cinemas and other premium viewing options are a key component to Cineplex’s
theatre exhibition strategy, and have been well received by audiences. Cineplex announced plans for Junxion, a new
entertainment concept which will feature a cinema with reclining seats and in-seat food service, a space for outdoor
screenings, an open lobby and stage for events and performances, amusement gaming and a food hall.
Cineplex plans to open its first Junxion location in Winnipeg, Manitoba during the fourth quarter of 2022 and a
second location at the Erin Mills Town Centre in Mississauga, Ontario scheduled to open during the second quarter
of 2023. Cineplex plans to open a new Cineplex Cinema, Royalmount in Montreal, Quebec which is expected to
open in 2024.
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Based on how the exhibition industry has historically performed during depressed economic environments, Cineplex
believes, but cannot guarantee, that the industry will continue to recover as consumer demand for the theatrical
experience combined with a build-up of anticipated content will help drive visitation as people look to return to
normalcy. The reopening of theatres and easing of restrictions has resulted in increases in box office revenues.
Cineplex remains confident that the strong slate of upcoming film releases for the year coupled with strong return to
movie-going will result in strong box office performance as its business returns to pre-pandemic levels. The latter
half of the third quarter was impacted by delays in film releases due to COVID-19 related production delays and
these delays could continue into the fourth quarter of 2022.
Month 2019 Box office (i) 2022 Box office (i) 2022 as a percentage of 2019
January $52,034 $11,220 22%
February $41,892 $25,054 60%
March $62,571 $43,678 70%
April $63,759 $35,994 56%
May $68,698 $49,546 72%
June $56,914 $50,832 89%
July $76,935 $65,618 85%
August $56,537 $36,060 64%
September $44,393 $23,022 52%
(i) Amounts are in thousands of dollars.
Cineplex’s business could be significantly negatively impacted by changes in consumer behaviors as a result of
COVID-19 or further revisions to the theatrical release window. Further, the effect of COVID-19 on financial
markets could significantly impact the ability to raise capital and increase the cost of borrowing. There are
limitations on Cineplex’s ability to mitigate the adverse financial impact of the foregoing. The COVID-19 pandemic
also creates challenges for Cineplex in predicting future performance of its businesses or its liquidity needs in the
near term.
Theatre Food Service
Cineplex’s core focus is on operational execution, promotions and providing the optimal product mix to provide
further growth in this area. As part of this strategy, Cineplex continues to expand its product offering through its in-
house brands across the circuit, as well as leveraging digital menu board technologies which provide guests with
more interactive messaging during visits to the theatre food service locations, and expanding VIP cinema menu
offerings. Cineplex also leverages mobile technology to enhance the food service experience in its theatres and has
VIP in seat ordering. Cineplex continues to expand its home delivery services of concessions in partnership with
Uber Eats and Skip The Dishes.
Alternative Programming
Cineplex offers a wide variety of alternative programming, including international film programming, the popular
Metropolitan Opera live in HD series, sports programming and various concert performances by popular recording
artists. Cineplex continues to look for compelling content to offer as alternative content to attract a wider audience to
its locations, in addition to adding dedicated event screens. Cineplex Pictures focuses on the acquisition of feature
film rights for both theatrical release and in home in Canada.
Digital Commerce
As at-home and on-the-go content distribution and consumption continues to grow and evolve, Cineplex believes it
is well positioned to take advantage of this market with its transactional TVOD digital commerce platform, the
Cineplex Store, which offers thousands of movies and other content that can be rented or purchased digitally and
viewed on multiple devices. The Cineplex Store supports a wide range of devices in Canada on which to buy or rent
digital movies, and continues to add new transactional storefronts on connected devices. The wide range of device
integration and the breadth of our content offering provides exciting opportunities for Cineplex in this market.
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MEDIA
Cinema Media
Cineplex believes that no other medium engages viewers like the cinema experience: engaged moviegoers, sitting in
a darkened theatre, ready to be entertained and fully focused on the screen. Research has shown that cinema media
advertising reaches the most sought-after demographics, as well as Canada’s high-income households and educated
populations. In addition to its successful show-time and pre-show advertising opportunities, Cineplex believes its
cinema media business will continue to grow through its innovative media opportunities within Cineplex’s theatres,
including digital signage within theatre lobbies. Cineplex also sells media for Cineplex Digital Media clients and
LBE. Consistent with prior experience of box office declines, Cineplex Media revenues have lagged the return of
exhibition audiences but continue to grow as attendance returns and advertisers return to cinema.
Digital Place-Based Media
Cineplex’s digital place-based media business will continue to roll out its world-class solutions in quick service
restaurants, financial service and retail sectors as well as immersive digital place-based media networks. Cineplex
will continue to explore opportunities outside of Canada, in order to better service its current customer base and to
attract new clients. Cineplex believes that the strengths of its digital place-based media business makes Cineplex a
leader in the indoor digital signage industry and will provide a platform for significant growth throughout Canada
and the United States. CDM manages and sells advertising in mall networks covering greater than 50% of mall
traffic in Canada. However, advertising revenues have lagged the return of mall traffic but continue to grow as
attendance returns and advertisers return to cinema.
AMUSEMENT AND LEISURE
Amusement Solutions
P1AG supplies and services all of the games in Cineplex’s theatre circuit and LBE venues, while also supplying
equipment to third party arcades, amusement centres, bowling alleys, amusement parks and theatre circuits, in
addition to owning and operating family entertainment centres. P1AG continues to expand its operations throughout
both Canada and the United States.
Cineplex’s amusement businesses have resumed operations at full capacity levels resulting in significant increases in
revenues, adjusted EBITDAaL and adjusted EBITDAaL margins that are consistent with or exceed 2019 pre-
pandemic levels, largely in part to the removal of government mandated restrictions and pent up consumer demand
for Cineplex’s entertainment offerings.
Location Based Entertainment
Cineplex’s LBE business features entertainment destination locations that cater to a wide range of guests. The Rec
Room, a social entertainment destination targeting millennials featuring a wide range of entertainment options
including an attractions area featuring recreational gaming, a live entertainment venue and high definition screens
for watching a wide range of entertainment programming. This entertainment is complemented with an upscale
casual dining environment, as well as an expansive bar with a wide range of digital monitors and a large screen
above the bar for watching events. Cineplex plans to open a location in Vancouver, British Columbia in 2024, as
well as a location in Montreal, Quebec in 2024.
Playdium is an entertainment concept targeting families and teens, which has been rolled out in mid-sized
communities across Canada.
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LOYALTY
Membership in the Scene+ loyalty program increased to 10.8 million members during the period ended September
30, 2022. During the fourth quarter of 2021, Cineplex and Scotiabank launched Scene+ to bring together the full
benefits of SCENE with Scotia Rewards, Scotiabank’s flexible customer loyalty program. Cineplex welcomed
Empire Company Limited as a co-owner of Scene+ during the third quarter of 2022, providing members with
increased opportunities to earn and redeem points through Empire’s family of brands firstly in Atlantic Canada on
August 11, 2022, in Western Canada on September 22, 2022, in Ontario on November 3, 2022 and across the rest of
Canada by early 2023.
FINANCIAL OUTLOOK
Cineplex continues to evaluate and advance all options against Cineworld to maximize and monetize the value of the
Judgment. As part of these ongoing efforts, Cineplex has engaged Moelis & Company, a leading global investment
bank with significant expertise in these areas, as financial advisors, and Goodmans LLP, as lead counsel. While the
Judgment and next steps are a key focus for Cineplex and its advisors, due to uncertainties inherent in appeals and
Cineworld’s insolvency proceedings, it is not possible for Cineplex to predict the timing or final outcome of the
Appeal. Further, even if the Appeal by Cineworld is not successful, Cineworld may not have the ability to pay the
full amount of any damages or costs awarded by the Court.
Cineplex’s management continues to focus on managing capital expenditures and believes that it has adequate
liquidity to fund operations.
17. NON-GAAP AND OTHER FINANCIAL MEASURES
National Instrument 52-112, Non-GAAP and Other Financial Measures Disclosure (“NI 52-112”) imposes
obligations regarding disclosure of non-GAAP financial measures, non-GAAP ratios, and other financial measures.
Cineplex reports on certain non-GAAP measures, non-GAAP ratios, supplementary financial measures and total
segment measures that are used by management to evaluate Cineplex’s performance. The following measures
included in this MD&A do not have a standardized meaning under GAAP and may not be comparable to similar
measures provided by other issuers. Cineplex includes these measures because its management believes that they
assist investors in assessing financial performance. These non-GAAP and other financial measures are used
throughout this report and are defined below.
NON-GAAP FINANCIAL MEASURES
Non-GAAP financial measures are defined in 52-112 as a financial measure disclosed that (a) depicts the historical
or expected future financial performance, financial position or cash flow of an entity, (b) with respect to its
composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition
of the most directly comparable financial measure disclosed in the primary financial statements of the entity, (c) is
not disclosed in the financial statements of the entity, and (d) is not a ratio, fraction, percentage or similar
representation.
NON-GAAP RATIOS
A non-GAAP ratio is defined by 52-112 as a financial measure disclosed that (a) is in the form of a ratio, fraction,
percentage or similar representation, (b) has a non-GAAP financial measure as one or more of its components, and
(c) is not disclosed in the financial statements.
The below are non-GAAP financial measures or non-GAAP ratios that are reported by Cineplex.
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17.1 EBITDA, ADJUSTED EBITDA AND ADJUSTED EBITDAaL
Management defines EBITDA as earnings before interest income and expense, income taxes and depreciation and
amortization expense. Adjusted EBITDA excludes the change in fair value of financial instrument, gain on disposal
of assets, foreign exchange, the equity income (loss) of CDCP, and impairment, depreciation, amortization, interest
and taxes of Cineplex’s other joint ventures and associates. Adjusted EBITDAaL modifies adjusted EBITDA to
deduct current period cash rent paid or payable related to lease obligations. During the year, Cineplex agreed to a
variety of arrangements with landlords to reduce or defer cash rent paid or payable as a result of the impact of
COVID-19.
Subsequent to the adoption of IFRS 16, Leases, by Cineplex effective January 1, 2019, the calculation of EBITDA
no longer includes a charge for amounts paid or payable with respect to leased property and equipment. Given the
majority of Cineplex’s businesses are carried on in leased premises, Cineplex introduced the measure of adjusted
EBITDAaL which includes a deduction for cash rent paid/payable related to lease obligations. Cineplex’s
management believes that adjusted EBITDAaL is an important supplemental measure of Cineplex’s profitability at
an operational level and provides analysts and investors with comparability in evaluating and valuing Cineplex’s
performance period over period. EBITDA, adjusted for various unusual items, is also used to define certain financial
covenants in Cineplex’s Credit Facilities. Management calculates adjusted EBITDAaL margin by dividing adjusted
EBITDAaL by total revenues.
EBITDA, adjusted EBITDA and adjusted EBITDAaL are non-GAAP measures generally used as an indicator of
financial performance and they should not be seen as a measure of liquidity or a substitute for comparable metrics
prepared in accordance with GAAP. Cineplex’s EBITDA, adjusted EBITDA and adjusted EBITDAaL may differ
from similar calculations as reported by other entities and accordingly may not be comparable to EBITDA, adjusted
EBITDA or adjusted EBITDAaL as reported by other entities.
P1AG Adjusted EBITDAaL
Calculated as amusement revenues of P1AG less the total operating expenses of P1AG, which excludes foreign
exchange.
P1AG Adjusted EBITDAaL Margin
Calculated as P1AG Adjusted EBITDAaL divided by total amusement revenues for P1AG for the period.
Adjusted Store Level EBITDAaL Metrics
Cineplex reviews and reports adjusted EBITDAaL at the location level for the LBE which is calculated as total LBE
revenues from all locations less the total of operating expenses of LBE, which excludes pre-opening costs and
overhead relating to the management of LBE.
Adjusted Store Level EBITDAaL Margin
Calculated as adjusted store level EBITDAaL divided by total revenues for LBE for the period.
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The following represents management’s calculation of EBITDA, adjusted EBITDA, and adjusted EBITDAaL
(expressed in thousands of dollars):
Reconciliation of reported net income (loss) to adjusted
EBITDAaL
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Net income (loss) $ 30,857 $ (33,552) $ (10,055) $ (226,944)
Depreciation and amortization - other 26,079 28,297 79,622 85,541
Depreciation - right-of-use assets 23,277 25,151 72,026 77,206
Interest expense - lease obligations 15,946 14,842 45,389 43,942
Interest expense - other 16,303 17,990 40,198 49,554
Interest income (84) (68) (152) (202)
Current income tax (recovery) expense — — (724) 3,339
EBITDA $ 112,378 $ 52,660 $ 226,304 $ 32,436
(Gain) loss on disposal of assets (49,848) 22 (54,341) (29,859)
Loss (gain) on financial instruments recorded at fair value 1,630 (2,570) 7,230 (3,370)
CDCP equity loss (income) (i) 30 (988) (492) 2,293
Foreign exchange (gain) loss (1,239) (529) (1,628) 66
Depreciation and amortization - joint ventures and associates (ii) 130 — 394 —
Taxes and interest of joint ventures and associates (ii) 13 11 41 33
Adjusted EBITDA $ 63,094 $ 48,606 $ 177,508 $ 1,599
Cash rent paid/payable related to lease obligations (iii) (42,275) (37,469) (127,419) (106,467)
Negotiated lease-related cash savings for the period (iii) (iv) — — — —
Cash rent paid not pertaining to current period (389) (375) 386 375
Adjusted EBITDAaL (iv) $ 20,430 $ 10,762 $ 50,475 $ (104,493)
(i) CDCP equity loss (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).
(iii) The cash rent paid or payable includes negotiated lease obligation savings of $0.8 million (2021 - $29.5 million) through September 30,
2022. The negotiated lease obligation savings represent forgiveness of lease payments.
(iv) See Section 17, Non-GAAP and other financial measures.
17.2 ADJUSTED FREE CASH FLOW
Free cash flow is a non-GAAP measure generally used by Canadian corporations as an indicator of financial
performance and it should not be viewed as a measure of liquidity or a substitute for comparable metrics prepared in
accordance with GAAP. Standardized free cash flow adjusts the amount of cash from operating activities to deduct
capital expenditures net of proceeds on sale of assets in ordinary business operations. Standardized free cash flow is
a non-GAAP measure recommended by the CICA in its 2008 interpretive release, Improved Communication with
Non-GAAP Financial Measures: General Principles and Guidance for Reporting EBITDA and Free Cash Flow, and
is designed to enhance comparability. Adjusted free cash flow is also a non-GAAP measure used by Cineplex to
modify standardized free cash flow to exclude certain cash flow activities and to measure the amount available for
activities such as repayment of debt, dividends to owners and investments in future growth through acquisitions.
Beginning with the MD&A for the three months ending March 31, 2019, Adjusted free cash flow included
repayments of lease obligations that represented the principal portion of rent expenses that were included in net
income calculation prior to the adoption of accounting standard IFRS 16, Leases, by Cineplex effective January 1,
2019. Given that the materiality of the principal portion of the rent expenses and comparability of adjusted free cash
flow disclosure for comparative periods, adjusted free cash flow also adjusts standard free cash flow to deduct
principal amount of repayment of lease obligation.
Cineplex presents standardized free cash flow and adjusted free cash flow per share because they are key measures
used by investors to value and assess Cineplex. Management of Cineplex defines adjusted free cash flow as
standardized free cash flow adjusted for certain items, and considers adjusted free cash flow the amount available for
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distribution to shareholders. Standardized free cash flow is defined by the CICA as cash from operating activities as
reported in the GAAP financial statements, less total capital expenditures minus proceeds from the disposition of
capital assets other than those of discontinued operations, as reported in the GAAP financial statements; and
dividends, when stipulated, unless deducted in arriving at cash flows from operating activities. The standardized free
cash flow calculation excludes common dividends and others that are declared at the Board’s discretion.
Management calculates adjusted free cash flow per share as follows (expressed in thousands of dollars except shares
outstanding and per share data):
Reconciliation of reported cash provided by operating activities
to adjusted free cash flow per share
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Cash provided by operating activities $ 5,811 $ 52,023 $ 47,526 $ 33,524
Less: Total capital expenditures net of proceeds on sale of assets (14,466) (1,603) (34,936) (15,310)
Standardized free cash flow (8,655) 50,420 12,590 18,214
Add/(Less):
Changes in operating assets and liabilities (i) 25,815 (32,640) 42,012 (118,843)
Changes in operating assets and liabilities of joint ventures and
associates (i) 1,892 (31) 1,960 (1,357)
Repayments of lease obligations - principal (26,330) (24,191) (83,025) (62,734)
Principal portion of cash rent paid not pertaining to current period (381) — 381 737
Growth capital expenditures and other (ii) 9,727 736 22,859 13,708
Share of income of joint ventures and associates, net of non-cash
depreciation (500) (47) (428) (210)
Net cash received from CDCP (iii) — — 5,318 —
Adjusted free cash flow $ 1,568 $ (5,753) $ 1,667 $ (150,485)
Average number of shares outstanding 63,362,713 63,342,557 63,356,694 63,339,070
Adjusted free cash flow per share $ 0.025 $ (0.091) $ 0.026 $ (2.376)
(i) Changes in operating assets and liabilities are not considered a source or use of adjusted free cash flow. Refer to Note 26 of Cineplex’s
2021 Annual Consolidated Financial Statements for further details.
(ii) Growth capital expenditures and other represent expenditures on Board approved projects, exclude maintenance capital expenditures
and are net of proceeds on asset sales. The Revolving Facility (discussed above in Section 6.4 Credit Facilities) is available to Cineplex to
fund Board approved projects.
(iii) Excludes the share of loss 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 distributions received from CDCP, are considered to be uses and sources of adjusted
free cash flow.
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 69
Alternatively, the calculation of adjusted free cash flow using the income statement as a reference point would be as
follows (expressed in thousands of dollars):
Reconciliation of reported net income (loss) to adjusted free
cash flow
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Net income (loss) $ 30,857 $ (33,552) $ (10,055) $ (226,944)
Adjust for:
Depreciation and amortization - other 26,079 28,297 79,622 85,541
Depreciation - right-of-use assets 23,277 25,151 72,026 77,206
Change in fair value of financial instrument 1,630 (2,570) 7,230 (3,370)
(Gain) loss on disposal of assets (49,848) 22 (54,341) (29,859)
Non-cash interest (i) 459 2,167 (7,106) 5,173
Non-cash foreign exchange (1,028) (479) (1,364) (23)
Share of loss (income) of CDCP (ii) 30 (988) (492) 2,293
Non-cash depreciation of joint ventures and associates 130 — 394 —
Taxes and interest of joint ventures and associates 13 11 41 33
Maintenance capital expenditures (4,739) (867) (12,077) (1,602)
Repayments of lease obligations - principal (26,330) (24,191) (83,025) (62,734)
Principal portion of cash rent paid not pertaining to current
period (381) — 381 737
Net cash received from CDCP (ii) — — 5,318 —
Non-cash items:
Non-cash share-based compensation 1,419 1,246 5,115 3,064
Adjusted free cash flow $ 1,568 $ (5,753) $ 1,667 $ (150,485)
(i) Non-cash interest includes amortization of deferred financing costs on the long-term debt, accretion expense on the convertible debentures,
and other non-cash interest expense items.
(ii) 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.
SUPPLEMENTARY FINANCIAL MEASURES
Supplementary financial measures are financial measures that are not (a) presented in the financial statements and
(b) is, or is intended to be, disclosed periodically to depict the historical or expected future financial performance,
financial position or cash flow, that is not a non-GAAP financial measure or a non-GAAP ratio as defined in the
instrument. The below are supplementary financial measures that Cineplex uses to depict its financial performance,
financial position or cash flows.
Earnings per Share Metrics
Cineplex has presented basic and diluted earnings per share net of this item to provide a more comparable earnings
per share metric between the current periods and prior year periods. In the non-GAAP and other financial measure,
earnings is defined as net income or net loss attributable to Cineplex excluding the change in fair value of financial
instruments.
Per Patron Revenue Metrics
Cineplex reviews per patron metrics as they relate to box office revenue and theatre food service 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:
Theatre attendance: Theatre 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 theatre attendance for the period.
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 70
BPP excluding premium priced product: Calculated as total box office revenues for the period, less box office
revenues from 3D, 4DX, UltraAVX, VIP, ScreenX and IMAX product; divided by total paid theatre attendance for
the period, less paid theatre attendance for 3D, 4DX, UltraAVX, VIP, ScreenX and IMAX product.
CPP: Calculated as total theatre food service revenues divided by total paid theatre attendance for the period.
Premium priced product: Defined as 3D, 4DX, UltraAVX, IMAX, ScreenX and VIP film product.
Theatre concession margin per patron: Calculated as total theatre food service revenues less total theatre food
service cost, divided by theatre attendance for the period.
Same Theatre Analysis
Cineplex reviews and reports same theatre metrics relating to box office revenues, theatre food service revenues,
theatre rent expense and theatre payroll expense, as these measures are widely used in the theatre exhibition industry
as well as other retail industries.
Same theatre metrics are calculated by removing the results for all theatres that have been opened, acquired, closed
or otherwise disposed of subsequent to the start of the prior year comparative period. For the three months ended
September 30, 2022 the impact of two locations that have been opened or acquired and four locations that have been
closed or otherwise disposed of have been excluded, resulting in 152 theatres being included in the same theatre
metrics. For the nine months ended September 30, 2022 the impact of two locations that have been opened or
acquired and six locations that have been closed or otherwise disposed of have been excluded, resulting in 150
theatres being included in the same theatre metrics.
Cost of sales percentages
Cineplex reviews and reports cost of sales percentages for its two largest revenue sources, box office revenues and
food service 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.
Theatre concession cost percentage: Calculated as total theatre food service costs divided by total theatre food
service revenues for the period.
LBE food cost percentage: Calculated as total LBE food costs divided by total LBE food service revenues for the
period.
Lease-related cash saving
Quantified savings negotiated with landlords as a result of the COVID-19 disclosures.
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
CINEPLEX INC. 2022 THIRD QUARTER REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS 71
September 30, December 31,
2022 2021
Assets
Current assets
Cash and cash equivalents $ 28,854 $ 26,938
Trade and other receivables 63,138 80,679
Income taxes receivable 2,077 1,984
Inventories 35,001 24,899
Prepaid expenses and other current assets 19,384 13,365
Fair value of interest rate swap agreements 5,500 —
153,954 147,865
Non-current assets
Property, equipment and leaseholds 430,521 464,439
Right-of-use assets (note 3) 778,455 768,675
Fair value of interest rate swap agreements
4,190 —
Interests in joint ventures and associates 3,695 7,423
Intangible assets 80,662 81,651
Goodwill 636,245 635,545
Derivative financial instrument (note 6) 2,010 9,240
$ 2,089,732 $ 2,114,838
COVID-19 business impacts, risks and liquidity (note 2)
Subsequent events (note 15)
Cineplex Inc.
Interim Condensed Consolidated Balance Sheets
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - CONSOLIDATED BALANCE SHEETS
(1)
September 30, December 31,
2022 2021
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 143,966 $ 157,950
Income taxes payable 1,823 1,945
Deferred revenue and other (note 7) 209,045 293,206
Lease obligations (note 8) 92,454 101,058
Fair value of interest rate swap agreements — 8,063
447,288 562,222
Non-current liabilities
Share-based compensation (note 5) 3,906 4,940
Long-term debt (note 6) 825,043 739,211
Fair value of interest rate swap agreements — 6,160
Lease obligations (note 8) 1,019,226 1,004,465
Post-employment benefit obligations 9,258 9,973
Other liabilities 7,026 7,590
1,864,459 1,772,339
Total liabilities 2,311,747 2,334,561
Shareholders’ deficit
Share capital (note 9) 852,661 852,465
Deficit (1,161,449) (1,151,394)
Hedging reserves and other (131) (131)
Contributed surplus 85,059 80,027
Cumulative translation adjustment 1,845 (690)
Total shareholders’ deficit (222,015) (219,723)
$ 2,089,732 $ 2,114,838
Approved by the Board of Directors
“Phyllis Yaffe”
“Janice Fukakusa”
Director Director
Cineplex Inc.
Interim Condensed Consolidated Balance Sheets...continued
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - CONSOLIDATED BALANCE SHEETS
(2)
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Revenues (note 7)
Box office $ 124,700 $ 94,114 $ 341,024 $ 110,430
Food service 105,193 79,971 284,218 99,754
Media 25,224 14,060 67,175 32,535
Amusement 69,607 53,319 185,754 89,377
Other 15,113 8,916 40,267 24,622
339,837 250,380 918,438 356,718
Expenses and other income
Film cost 66,356 45,838 175,330 52,684
Cost of food service 24,839 16,362 65,031 20,641
Depreciation - right-of-use assets 23,277 25,151 72,026 77,206
Depreciation and amortization - other assets 26,079 28,297 79,622 85,541
(Gain) loss on disposal of assets (note 7) (49,848) 22 (54,341) (29,859)
Other costs (note 10) 185,048 139,527 500,141 281,584
Share of loss (income) of joint ventures and associates 673 (930) 371 2,536
Interest expense - lease obligations 15,946 14,842 45,389 43,942
Interest expense - other 16,303 17,990 40,198 49,554
Interest income (84) (68) (152) (202)
Foreign exchange (1,239) (529) (1,628) 66
Loss (gain) on financial instruments recorded at fair value
(note 6) 1,630 (2,570) 7,230 (3,370)
308,980 283,932 929,217 580,323
Income (loss) before income taxes 30,857 (33,552) (10,779) (223,605)
Income tax (recovery) expense (note 4)
Current — — (724) 3,339
Net income (loss) $ 30,857 $ (33,552) $ (10,055) $ (226,944)
Net income (loss) per share - basic (note 11) $ 0.49 $ (0.53) $ (0.16) $ (3.58)
Net income (loss) per share - diluted (note 11) $ 0.43 $ (0.53) $ (0.16) $ (3.58)
Cineplex Inc.
Interim Condensed Consolidated Statements of Operations
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - CONSOLIDATED STATEMENTS OF OPERATIONS
(3)
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Net income (loss) $ 30,857 $ (33,552) $ (10,055) $ (226,944)
Other comprehensive income (loss)
Items that will be reclassified subsequently to net income:
Foreign currency translation adjustment 2,035 861 2,535 (47)
Other comprehensive income (loss) 2,035 861 2,535 (47)
Comprehensive income (loss) $ 32,892 $ (32,691) $ (7,520) $ (226,991)
Cineplex Inc.
Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(4)
Share
capital
Contributed
surplus
Hedging
reserves and
other
Cumulative
translation
adjustment Deficit Total
January 1, 2022 $ 852,465 $ 80,027 $ (131) $ (690) $ (1,151,394) $ (219,723)
Net loss — — — — (10,055) (10,055)
Other comprehensive income (page 4) — — — 2,535 — 2,535
Total comprehensive loss
— —
— 2,535 (10,055) (7,520)
Share option expense — 1,242 — — — 1,242
PSU/RSU expense — 3,873 — — — 3,873
Issuance of shares on exercise of
options 196 (83) — — — 113
September 30, 2022 $ 852,661 $ 85,059 $ (131) $ 1,845 $ (1,161,449) $ (222,015)
January 1, 2021 $ 852,379 $ 75,882 $ (131) $ (502) $ (903,394) $ 24,234
Net loss — — — — (226,944) (226,944)
Other comprehensive loss (page 4) — — — (47) — (47)
Total comprehensive loss — — — (47) (226,944) (226,991)
Share option expense — 1,380 — — — 1,380
PSU/RSU expense
—
1,683
— — —
1,683
Settlement for cancelled options — (60) — — — (60)
Issuance of shares on exercise of
options 77 (77) — — — —
September 30, 2021 $ 852,456 $ 78,808 $ (131) $ (549) $ (1,130,338) $ (199,754)
Cineplex Inc.
Interim Condensed Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2022 and 2021
(Unaudited)
————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(5)
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Cash provided by (used in)
Operating activities
Net income (loss) $ 30,857 $ (33,552) $ (10,055) $ (226,944)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization - other assets 26,079 28,297 79,622 85,541
Depreciation - right-of-use assets 23,277 25,151 72,026 77,206
Unrealized foreign exchange (1,028) (479) (1,364) (23)
Interest rate swap agreements - non-cash interest (4,277) (2,071) (21,398) (7,448)
Accretion of convertible debentures and notes payable 4,622 4,050 13,832 11,809
Other non-cash interest 114 188 460 812
(Gain) loss on disposal of assets (49,848) 22 (54,341) (29,859)
Non-cash share-based compensation 1,419 1,246 5,115 3,064
Change in fair value of financial instruments 1,630 (2,570) 7,230 (3,370)
Net change in interests in joint ventures and associates (1,219) (899) (1,589) 3,893
Changes in operating assets and liabilities (note 12) (25,815) 32,640 (42,012) 118,843
Net cash provided by operating activities 5,811 52,023 47,526 33,524
Investing activities
Proceeds from disposal of assets, net 152 3,231 1,822 63,147
Purchases of property, equipment and leaseholds (14,618) (4,834) (36,758) (18,575)
Intangible assets additions (3,638) (2,130) (8,419) (7,208)
Tenant inducements 3,581 1,359 4,186 7,024
Net cash received from CDCP — — 5,318 —
Net cash (used in) provided by investing activities (14,523) (2,374) (33,851) 44,388
Financing activities
Borrowings (repayments) under credit facilities, net (note 6) 38,000 (26,000) 72,000 (247,000)
Repayments of lease obligations - principal (26,330) (24,191) (83,025) (62,734)
Exercise of cash option — —
113 —
Issuance of notes payable, net (note 6)
— —
—
243,996
Financing fees (542) — (542) (321)
Net cash provided by (used in) financing activities 11,128 (50,191) (11,454) (66,059)
Effect of exchange rate differences on cash (146) (189) (305) 364
Increase (decrease) in cash and cash equivalents 2,270 (731) 1,916 12,217
Cash and cash equivalents - Beginning of period 26,584 29,202 26,938 16,254
Cash and cash equivalents - End of period $ 28,854 $ 28,471 $ 28,854 $ 28,471
Supplemental information
Cash paid for interest - lease obligation $ 15,682 $ 15,355 $ 44,475 $ 42,127
Cash paid for interest - other $ 17,095 $ 10,796 $ 50,634 $ 32,308
Cash received for income taxes, net $ (652) $ (8,814) $ (688) $ (62,329)
Cineplex Inc.
Interim Condensed Consolidated Statements of Cash Flows
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
The accompanying notes are an integral part of these condensed consolidated financial statements.
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - CONSOLIDATED STATEMENTS OF CASH FLOWS
(6)
1. General information
Cineplex Inc. (“Cineplex”) an Ontario, Canada corporation, is one of Canada’s largest entertainment organizations,
with theatres and location-based entertainment venues in ten provinces. Cineplex also operates businesses in digital
commerce, cinema media, digital place-based media and amusement solutions through its wholly owned
subsidiaries, Cineplex Entertainment Limited Partnership (the “Partnership”), Famous Players Limited Partnership
(“Famous Players”), Galaxy Entertainment Inc. (“GEI”), Cineplex Digital Media Inc. (“CDM”), and Player One
Amusement Group Inc. (“P1AG”). Cineplex is headquartered at 1303 Yonge Street, Toronto, Ontario, M4T 2Y9.
Cineworld Transaction and Bankruptcy Filing
On December 15, 2019, Cineplex entered into an arrangement agreement (the “Arrangement Agreement”) with
Cineworld Group plc (“Cineworld”), pursuant to which an indirect wholly-owned subsidiary of Cineworld agreed to
acquire all of the issued and outstanding common shares of Cineplex Inc. (“Cineplex”) for $34.00 per share in cash
(the “Cineworld Transaction”). The Cineworld Transaction was to be implemented by way of a statutory plan of
arrangement under the Business Corporation Act (Ontario).
On June 12, 2020, Cineworld delivered a notice (the “Termination Notice”) to Cineplex purporting to terminate the
Arrangement Agreement. In the Termination Notice, Cineworld alleged that Cineplex took certain actions that
constituted breaches of Cineplex’s covenants under the Arrangement Agreement including failing to operate its
business in the ordinary course. In addition, Cineworld alleged that a material adverse effect had occurred with
respect to Cineplex. Cineworld’s repudiation of the Arrangement Agreement was acknowledged by Cineplex and
the Cineworld Transaction did not proceed. Cineplex vigorously denied Cineworld’s allegations.
On July 3, 2020, Cineplex announced that it had commenced an action in the Ontario Superior Court of Justice (the
“Court”) against Cineworld and 1232743 B.C. Ltd. seeking damages arising from what Cineplex claimed was a
wrongful repudiation of the Arrangement Agreement. The claim sought damages, including the approximately
$2,180,000 that Cineworld would have paid upon the closing of the Cineworld Transaction for Cineplex’s securities,
reduced by the value of the Cineplex securities retained by its security holders, as well as compensation for other
losses including the loss to Cineplex of expected synergies, the failure of Cineworld to repay or refinance Cineplex’s
approximately $664,000 in debt, and transaction expenses. Cineplex also advanced alternative claims for damages
for the loss of benefits to its security holders, and to require Cineworld to disgorge the benefits it improperly
received by wrongfully repudiating the Cineworld Transaction.
A trial of the action commenced before the Court on September 13, 2021 and continued until November 4, 2021.
On December 14, 2021, the Court released its decision in the action. The Court held that Cineplex did not breach
any of its covenants in the Arrangement Agreement, and that Cineworld had no basis for terminating the
Arrangement Agreement. The Court held that Cineworld breached the Arrangement Agreement and repudiated the
transaction to acquire Cineplex, which actions precluded Cineplex from seeking specific performance and entitled
Cineplex to monetary damages. The Court awarded damages for breach of contract to Cineplex in the amount of
$1,240,000 on account of lost synergies, and $5,500 for transaction costs, exclusive of pre-judgment interest (the
“Judgment”). The Court also held that Cineplex’s shareholders did not have any rights under the Arrangement
Agreement to enforce the agreement or sue Cineworld for any breach. The Court also denied Cineworld’s
counterclaim against Cineplex.
On January 12, 2022, Cineworld filed a Notice of Appeal with the Court of Appeal for Ontario and on January 27,
2022, Cineplex filed its Notice of Cross Appeal (the “Appeal”). The Appeal was originally scheduled to be heard on
October 12 and 13, 2022. On September 7, 2022, Cineworld and certain of its subsidiaries (the “Cineworld Parties”)
filed a petition in the United States Bankruptcy Court for the Southern District of Texas, (the “U.S. Bankruptcy
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7)
Court”), commencing bankruptcy proceedings under Chapter 11 of the United States Bankruptcy Code (“Chapter
11”). On September 8, 2022, the U.S. Bankruptcy Court granted relief requested by the Cineworld Parties in the
Chapter 11 proceedings, including an order confirming and enforcing a worldwide stay of all enforcement
proceedings by Cineworld’s creditors. Cineworld took the position that the Appeal was therefore stayed. On
September 9, 2022, Cineplex filed an emergency motion with the U.S. Bankruptcy Court, seeking to lift the stay
with respect to the Appeal. Cineplex’s emergency motion was heard on September 28, 2022, at which time the U.S.
Bankruptcy Court declined Cineplex’s requested relief, without prejudice to Cineplex’s ability to seek such relief at
a later date. On September 30, 2022, on consent of counsel for Cineplex and Cineworld, the Court of Appeal for
Ontario adjourned the Appeal until a date to be determined. Accordingly, the hearing of Appeal has been delayed.
Cineplex continues to evaluate and advance all options against Cineworld to maximize and monetize the value of the
Judgment. As part of these ongoing efforts, Cineplex has engaged Moelis & Company, a leading global investment
bank with significant expertise in these areas, as financial advisors, and Goodmans LLP, as lead counsel. Cineplex
has also been appointed as a member of the unsecured creditors’ committee in the Cineworld Parties’ Chapter 11
proceedings.
While the Judgment and next steps are a key focus for Cineplex and its advisors, due to uncertainties inherent in
appeals and Cineworld’s insolvency proceedings, it is not possible for Cineplex to predict the timing or final
outcome of the Appeal. Further, even if the Appeal by Cineworld is not successful, Cineworld may not have the
ability to pay the full amount of any damages or costs awarded by the Court. Therefore, no amount has been accrued
as a receivable.
The Board of Directors approved these consolidated financial statements on November 9, 2022.
2. COVID-19 business impacts, risks and liquidity
In early 2020, the outbreak of COVID-19 was confirmed in multiple countries throughout the world and on March
11, 2020, it was declared a global pandemic by the World Health Organization (“WHO”). In response, Cineplex
immediately introduced enhanced cleaning protocols and reduced theatre capacities to promote social distancing. By
mid-March 2020, each of Canada’s provinces and territories had declared a state of emergency resulting in, among
other things, the mandated closure of non-essential businesses, restrictions on public gatherings and quarantining of
people who may have been exposed to the virus. On March 16, 2020, Cineplex announced the temporary closure of
all of its theatres and LBE venues across Canada, as well as substantially all route locations operated by P1AG. On
August 21, 2020, Cineplex reopened its entire circuit of theatres and LBE venues, however, theatre operations and
LBE venues were continuously impacted by additional government mandated restrictions and closures over the next
several quarters.
As of July 17, 2021, Cineplex had reopened its entire circuit of theatres subject to capacity restrictions, in some
cases after months of extended closure periods. The reopening included Cineplex’s then 161 theatre locations,
encompassing 1,656 screens across Canada including 18 VIP Cinemas locations. As restrictions were temporarily
eased in markets in which Cineplex operated, Cineplex also reopened its LBE venues across Canada as well as route
locations operated by P1AG. All theatres, LBE venues and P1AG route locations continue to operate with enhanced
safety and cleaning measures to ensure the safety of Cineplex’s employees and customers.
Effective December 18, 2021, due to the rise of the Omicron variant, capacity restrictions were reinstated in Ontario,
Cineplex’s largest market, limiting indoor capacity to 50% along with prohibiting the consumption of concessions in
theatres. Theatres in Quebec were also mandated to temporarily close effective December 20, 2021. During the
beginning of the first quarter of 2022, social gathering restrictions were further modified or reinstituted in several
key markets in which Cineplex operates, resulting in theatre closures in Ontario. Cineplex was also required to
temporarily close or reduce capacity in other provinces. Effective January 29, 2022, January 31, 2022 and February
7, 2022, theatres in New Brunswick, Ontario and Quebec were permitted to reopen at reduced capacity levels,
respectively. During the second quarter of 2022, all remaining capacity restrictions and mask mandates were
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (8)
removed in all markets in which Cineplex operates theatres and LBE venues across Canada. Cineplex is currently
operating at full capacity but is prepared to react to any government directives affecting operations.
Liquidity measures:
• June 2020: entered into the First Credit Agreement Amendment with The Bank of Nova Scotia as
administrative agent of Cineplex’s seventh amended and restated credit agreement (as amended, the “Credit
Facilities”) providing certain financial covenant relief in light of the COVID-19 pandemic and its impact on
Cineplex’s business (note 6, Long-term debt);
• July 2020: issued convertible unsecured subordinated debentures (the “Debentures”) for net proceeds of
$303,000, (note 6, Long-term debt)
• November 2020: entered into the Second Credit Agreement Amendment providing further financial
covenant relief (note 6, Long-term debt);
• December 2020: entered into an agreement to enhance and expand the SCENE loyalty program receiving
$60,000 with respect to the reorganization;
• January 2021: completed the sale and leaseback of Cineplex’s head office buildings located at 1303 Yonge
Street and 1257 Yonge Street, Toronto, Ontario for gross proceeds of $57,000, (note 6, Long-term debt);
• January 2021: filed tax returns for the 2020 taxation year claiming a $62,624 recovery of income taxes paid
in prior periods (all of which had been received by December 31, 2021);
• February 2021: entered into the Third Credit Agreement Amendment providing further financial covenant
relief (note 6, Long-term debt);
• February 2021: issued 7.50% senior secured second lien notes due February 26, 2026 (the “Notes Payable”)
for net proceeds of $243,266, (note 6, Long-term debt);
• December 2021: entered into the Fourth Credit Agreement Amendment providing further financial
covenant relief (note 6, Long-term debt); and
• August 2022: entered into the Fifth Credit Agreement Amendment providing further financial covenant
relief (note 6, Long-term debt).
Cost reduction and subsidy measures:
• temporary layoffs of all part-time and full-time hourly employees as well as a number of full-time
employees who chose a temporary layoff rather than a salary reduction during the second quarter of 2020,
and additional temporary layoffs of part-time employees beginning in December 2021 and further
expanding into the first quarter of 2022;
• reduced full-time employee salaries by agreement with such employees during the second and third
quarters of 2020;
• suspended or deferred current capital spending, reviewing all capital projects to consider either deferral or
cancellation;
• reduced non-essential discretionary operational expenditures (such as spending on marketing, travel and
entertainment);
• implemented a more stringent review and approval process for all outgoing procurement and payment
requests;
• continued negotiations with landlords for cash payments in exchange for the sale of contractual rights or
negotiating rent relief, including abatements, reductions and deferrals;
• worked with major suppliers and other business partners to modify the timing and quantum of certain
contractual payments;
• reviewed and applied for government subsidy programs where available, including municipal and
provincial property tax and energy rebates or subsidies;
• applied for the ongoing Canada Emergency Wage Subsidy (“CEWS”), which was launched by the
Government of Canada, providing a variable subsidy for employee wages incurred from March 2020 to
October 23, 2021;
• applied for the ongoing Canada Emergency Rent Subsidy (“CERS”), which was launched by the
Government of Canada as a result of government mandated lockdowns, providing a variable subsidy for
rent and other occupancy-related costs incurred from September 27, 2020 through October 23, 2021;
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (9)
• applied for Canada’s Tourism and Hospitality Recovery Program (“THRP”) which began on October 24,
2021 and provided wage and rent subsidies for businesses that have faced revenue losses, with a subsidy
rate of up to 75% until March 12, 2022 and 37.5% until May 7, 2022;
• continued evaluation of Cineplex’s eligibility under other relief programs; and
• continued the suspension of dividends.
Since the closure of its theatres and LBE venues in March 2020, Cineplex diligently prepared for their safe
reopening, carefully re-examining all of its buildings and processes and implementing an industry-leading program
with end-to-end health and safety protocols. In June 2021, Cineplex introduced its VenueSafe program, which
encompasses all of Cineplex’s health and safety protocols, in accordance with Canada’s public health guidelines.
Canada’s vaccination rate has made tremendous progress with a high percentage of the eligible population receiving
at least two doses of a COVID-19 vaccine. The Canadian government accelerated the rollout of COVID-19 vaccine
booster doses providing extra protection against COVID-19 and its variants. As a result of the declining
hospitalizations related to COVID-19, high vaccination rate and wide availability of COVID-19 vaccines, the
Canadian government removed all remaining proof of vaccination requirements and mask mandates during the
second quarter of 2022. With the uncertainty of future government-imposed restrictions and the potential long-term
effect that the pandemic may have on Cineplex’s businesses, COVID-19 may continue to have a prolonged material
negative impact on Cineplex’s operations and return to profitability.
As at September 30, 2022, Cineplex had a cash balance of $28,854 and $199,614 available under its Revolving
Facility subject to the liquidity covenants set forth in the Credit Facilities as amended (note 6, Long-term debt).
Cineplex generally performs its annual test for impairment of goodwill and indefinite-lived intangible assets in the
fourth quarter, in accordance with the policy described in its annual consolidated financial statements. Assessment
of impairment for long-lived assets, including property, equipment, leaseholds, right-of-use assets, intangible assets
and goodwill is performed more frequently as specific events or circumstances dictate triggering events and changes
in circumstances indicate that the carrying amount of the asset group may not be fully recoverable.
While no specific triggering events were noted, in light of significant interest rate increases and the impact on film
production, post-production and marketing and scheduling into 2022, on September 30, 2022 Cineplex reassessed
the underlying key assumptions and inputs used during the impairment testing completed at December 31, 2021 and
determined that there were no material changes in conclusions.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (10)
3. Right-of-use-assets
The following tables present right-of-use assets for Cineplex for the nine months ended September 30, 2022 and
2021.
Right-of-use assets consists of:
At September 30, 2022
Cost $ 1,194,021 $ 24,311 $ 1,218,332
Accumulated depreciation (423,324) (16,553) (439,877)
Net book value $ 770,697 $ 7,758 $ 778,455
Nine months ended September 30, 2022
Balance - December 31, 2021 $ 757,197 $ 11,478 $ 768,675
Additions 4,212 384 4,596
Extensions and modifications 78,160 (1,141) 77,019
Disposals (119) — (119)
Foreign exchange rate changes 309 1 310
Depreciation for the period (69,062) (2,964) (72,026)
Closing net book value $ 770,697 $ 7,758 $ 778,455
Property Equipment Total
At September 30, 2021
Cost $ 1,112,100 $ 19,411 $ 1,131,511
Accumulated depreciation (331,629) (12,455) (344,084)
Net book value $ 780,471 $ 6,956 $ 787,427
Nine months ended September 30, 2021
Balance - December 31, 2020 $ 871,741 $ 9,677 $ 881,418
Additions 10,428 30 10,458
Extensions and modifications (27,981) 632 (27,349)
Disposals 129 — 129
Foreign exchange rate changes (23) — (23)
Depreciation for the period (73,823) (3,383) (77,206)
Closing net book value $ 780,471 $ 6,956 $ 787,427
Property Equipment Total
COVID-19 resulted in closures of substantially all leased properties and the suspension of the use of most equipment
for the first quarter of 2021 continuing into the second quarter of 2021. The rise of the Omicron variant in December
2021 resulted in theatre closures in Ontario and capacity and food service restrictions reinstated in other provinces
for a certain period of time during the first quarter of 2022. During the second quarter of 2022, all remaining
capacity restrictions were removed and proof of vaccination programs ended.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (11)
Beginning in the third quarter of 2020, Cineplex agreed to a variety of arrangements with landlords to reduce or
defer payments. The effect of those reductions or deferrals reduced both lease obligations and right-of-use assets by
approximately $1,018 and $4,037 for the three months ended September 30, 2022 and 2021 and $8,448 and $31,849
for the nine months ended September 30, 2022 and 2021, respectively.
4. Deferred income taxes
Based on substantively enacted corporate tax rates, expected timing of reversals and expected taxable income
allocation to various tax jurisdictions, deferred income taxes are as follows:
September 30, 2022 December 31, 2021
Deferred income tax assets
Property, equipment and leaseholds and deferred tenant
inducements - difference between net carrying value and
undepreciated capital cost $ 13,442 $ 11,653
Accounting provisions not currently deductible 90,376 93,663
Deferred revenue 1,987 15,929
Interest rate swap agreements (2,667) 3,614
Income tax credits available 3,789 3,789
Operating losses available for carry-forward 105,061 81,844
Other 10,009 8,909
Total gross deferred income tax assets 221,997 219,401
Future deferred tax liabilities
Intangible assets (10,099) (9,854)
Goodwill (31,891) (29,909)
Convertible debentures (23,976) (23,961)
Total gross deferred income tax liabilities (65,966) (63,724)
Net deferred income tax recognized $ — $ —
At December 31, 2020 the recoverability of the net deferred income tax assets in the normal course of business was
uncertain and accordingly the net deferred tax assets were derecognized. Cineplex will evaluate the likelihood of
recoverability in the ordinary course of business at each balance sheet date, and will recognize net deferred tax assets
when and if appropriate. As Cineplex’s businesses continue to recover and return to profitability, deferred income
tax assets and liabilities may be recognized, and reversal of previously recognized impairments may be appropriate.
Cineplex has not recognized any deferred tax assets and has not reversed any previously derecognized deferred tax
assets as at September 30, 2022.
The 2022 current tax recovery represents losses reported on the 2021 tax returns that have been carried back to
offset prior period taxable income, in excess of the 2021 tax provision.
Cineplex’s combined statutory income tax rate at September 30, 2022 was 26.3% (2021 - 26.3%).
By Notice of Reassessment (“NOR”) dated January 22, 2019, the Canada Revenue Agency (“CRA”), disallowed the
deduction of $26,600 of losses of AMC Ventures Inc. (“AMC”) that Cineplex had obtained on the acquisition of
AMC in 2012. The disallowance of the losses, which offset taxable income generated in 2014, increased taxes and
interest payable by approximately $8,600, 50% of which was required to be paid immediately (interest continues to
accrue on the unpaid amount). Cineplex disagrees with the CRA’s position, and has commenced an appeal to the
Tax Court of Canada in respect of the NOR. On June 28, 2021, Cineplex received a response from the Attorney
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (12)
General of Canada representing the CRA confirming its position with respect to the disallowance of the losses. The
appeals process is continuing and Cineplex believes that it should prevail in defending its original filing position,
although no assurance can be given in this regard as the appeal process proceeds.
5. Share-based compensation
Omnibus Incentive Plan
On November 12, 2020, the Board of Directors approved an Omnibus Incentive Plan (the “Incentive Plan”). This
plan supersedes the former incentive plans (collectively, the “Legacy Plan”) that included Options, Performance
Share Units (“PSUs”) and Restricted Share Units (“RSUs”). All employees and consultants are eligible to participate
in the Incentive Plan. The Incentive Plan consists of stock options, RSUs and PSUs. Awards of RSUs and PSUs
granted during a service year will be subject to a service period as determined by management at the time of
issuance. The aggregate number of Shares that may be issued under the Incentive Plan is 3,709,066 provided that no
more than 1,904,538 Shares may be issued in aggregate pursuant to the settlement of RSUs and PSUs. Options that
were issued under the Legacy Plan and are subsequently cancelled will be available to be issued under the Incentive
Plan. The base Share equivalents granted as RSU and PSU awards attract compounding notional dividends at the
same rate as outstanding Shares, which are notionally re-invested as additional base Share equivalents. PSU and
RSU awards may be settled in Shares issued from treasury, cash, or a mix of Shares and cash, at Cineplex’s option at
the time of settlement. Awards outstanding under prior plans shall remain in full force and effect under the prior
plans according to their respective terms. Under the prior plans, the effects of changes in estimates of performance
results are recognized in the year of change. As at September 30, 2022, 1,100,952 Shares are available to be issued
under the Incentive Plan (2021 - 1,462,182).
Stock Options
Stock options issued under the Incentive Plan will be administered by the Board of Directors which will establish the
exercise price at the time each option is granted, which in all cases will not be less than the market price on the grant
date. All of the options must be exercised over specified periods not to exceed ten years from the date granted.
Options issued under the Incentive Plan may be exercised for cash or on a cashless basis, both of which result in the
issuance of Shares from treasury. Options granted will be accounted for as equity-settled.
Cineplex recognized employee benefits expense of $326 and $1,242 with respect to the options during the three and
nine months ended September 30, 2022 (2021 - $536 and 1,380, respectively). In the first quarter of 2021, 165,146
stock options issued under the Legacy Plan were cancelled for total consideration of $60 as part of a voluntary stock
option cancellation program that was initiated in the fourth quarter of 2020.
The fair value of options granted during the period ended September 30, 2022 and 2021 were determined using the
Black-Scholes valuation model using the following significant inputs:
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (13)
September 30,
2022
September 30,
2021
Number of options granted
223,578 459,501
Share price $ 13.39 $12.41 - $12.87
Exercise price $ 13.39 $12.41 - $12.87
Expected option life (years) 4.0 4.0
Volatility 49.39 % 47.00 %
Dividend yield — % — %
Annual risk-free rate 1.58 % 0.68% - 0.72%
Fair value of options granted $ 5.33 $3.70 - $3.83
Upon cashless exercises, the options exercised in excess of Shares issued are cancelled and returned to the pool
available for future grants. At September 30, 2022, 602,447 (2021 - 1,711,033) options are available for grant.
A summary of option activities in 2022 and 2021 is as follows:
2022 2021
Weighted
average
remaining
contractual life
(years)
Number of
underlying
shares
Weighted
average
exercise
price
Number of
underlying
shares
Weighted
average
exercise
price
Options outstanding, January 1
7.44 2,198,805 $ 21.48 2,042,019 $ 25.37
Granted
223,578 13.39 459,501 12.69
Cancelled
— — (188,303) 43.90
Exercised
(26,309) 8.25 (24,220) 8.25
Forfeited
(285,371) 35.75 (67,280) 17.32
Options outstanding, September 30
7.26 2,110,703 $ 18.86 2,221,717 $ 21.60
Options vested and exercisable
1,276,369 940,935
The exercise price was equal to the market price of Cineplex shares at the grant date.
RSU and PSU awards
The grants of Share equivalents were as follows:
PSU Share
equivalents
granted
RSU Share
equivalents
granted
PSU Share
equivalents
minimum payout
PSU Share
equivalents
maximum payout
2022 LTIP awards granted in Q1 2022 177,973 284,661 — 355,946
2021 LTIP awards granted in Q2 2021 167,546 315,619 — 335,092
2020 LTIP awards granted in Q3 2020 284,214 277,105 — 568,428
During the first quarter of 2022, Cineplex issued 284,661 equity settled RSUs with a fair value $13.39 per unit (total
fair value of $3,812 on issuance) and 177,973 equity settled PSUs with a fair value of $13.39 per unit (total fair
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (14)
value of $2,383 on issuance). The fair value was assessed based on Cineplex’s closing Share price on the grant date.
The RSU and PSU awards issued will vest in the fourth quarter of 2024.
Compensation expense is recorded based on the number of units expected to vest, the current market price of
Cineplex’s common shares, and the application of a performance multiplier that ranges from a minimum of zero to a
maximum of two. Performance multipliers are developed based on Total Shareholder Return percentile rank relative
to a select peer group and composite group. Participants will receive one fully paid Share issued from treasury that
can vary depending on the achievement of established performance targets. Performance conditions are reflected in
Cineplex’s estimate of the grant-date fair value for equity instruments granted.
Incentive Plan costs are estimated at the grant date based on expected performance results then accrued and
recognized on a graded basis over the vesting period. Forfeitures are estimated to be nominal, based on historical
forfeiture rates. Cineplex recognized compensation expense of $1,082 and $3,966 for the three and nine months
ended September 30, 2022 (2021 - $747 and $2,057, respectively) under the Incentive Plan relating to RSU and PSU
awards. At September 30, 2022, $301 (2021 - $757) was included in share-based compensation liability, and $6,649
in contributed surplus (2021 - $2,070).
Deferred equity units
Members of the Board of Directors and certain officers of Cineplex may elect to defer a portion of their
compensation in the form of deferred equity units. For the period ended September 30, 2022, Cineplex recognized
compensation recovery of $(907) and $(1,698) during the three and nine months ended September 30, 2022 (2021 -
recovery of $(581) and expense of $1,208, respectively) associated with the deferred equity units. At September 30,
2022, $3,606 (2021 - $4,659) was included in share-based compensation liability.
6. Long-term debt
Long-term debt consists of the following as at September 30, 2022 and December 31, 2021:
September 30, 2022 December 31, 2021
Credit Facilities $ 332,000 $ 260,000
Convertible Debentures 247,469 234,472
Notes Payable 245,574 244,739
Total $ 825,043 $ 739,211
Credit facilities
Cineplex has bank facilities with a syndicate of lenders which includes a revolving facility (the “Revolving
Facility”) and non-revolving credit facility (the “Term Facility”, and together with the Revolving Facility, the
“Credit Facilities”) pursuant to a seventh amended and restated credit agreement dated November 13, 2018 between
Cineplex, Cineplex Entertainment Limited Partnership, the guarantors from time to time party thereto, and a
syndicate of lenders (as further amended from time to time, the “Credit Agreement”). The Term Facility was repaid
in full in the first quarter of 2021 and is no longer available for future borrowing.
The Credit Facilities bear interest at a floating rate based on the Canadian dollar prime rate, U.S. Base Rate, SOFR
or bankers’ acceptances rates plus, in each case, an applicable margin to those rates. The Revolving Facility matures
in November 2023. Borrowings on the Revolving Facility can be made in either Canadian or US dollars.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (15)
Cineplex’s Credit Facilities contain restrictive covenants that limit the discretion of Cineplex’s management with
respect to certain business matters. These covenants place limits and restrictions on, among other things, the ability
of Cineplex to create liens or other encumbrances, to pay dividends or make certain other payments, minimum
liquidity covenants, anti-hoarding provisions, investments, loans and guarantees and to sell or otherwise dispose of
assets and merge or consolidate with another entity. The Credit Facilities are secured by all of Cineplex’s assets. The
Revolving Facility is drawn upon and repaid on a regular basis and as such is presented on a net basis in the
Statement of Cash flows.
On June 29, 2020, Cineplex entered into the First Credit Agreement Amendment, following which, on November
12, 2020 Cineplex entered into the Second Credit Agreement Amendment, on February 8, 2021 Cineplex entered
into the Third Credit Agreement Amendment, on December 30, 2021 Cineplex entered into the Fourth Credit
Agreement Amendment, and on August 10, 2022 Cineplex entered into the Fifth Credit Agreement Amendment.
The amendments provided certain financial covenant relief in light of the COVID-19 pandemic and its effects on
Cineplex’s businesses, while applying additional restrictive covenants and required repayments in certain
circumstances.
On December 30, 2021, Cineplex entered into the Fourth Credit Agreement Amendment, which, among other
things, extended the suspension of financial covenant testing until the second quarter of 2022 and liquidity covenant
requirement until June 30, 2022. The following is a summary of the key terms of the Fourth Credit Agreement
Amendment that are updated from the First, Second and Third Credit Agreement Amendments (certain of which
have been modified further by the Fifth Credit Agreement Amendment described below):
• The suspension of financial covenant testing was extended until the second quarter of 2022. On
resumption of financial covenant testing in the second quarter of 2022:
• for the second quarter of 2022, testing was based on an annualized calculation of
Adjusted EBITDA (as further adjusted in accordance with the Credit Agreement
definitions) based on the actual results for such quarter multiplied by 4;
• for the quarter ending on September 30, 2022, testing will be based on an annualized
calculation of Adjusted EBITDA based on actual results for the second quarter of 2022
and the third quarter of 2022 multiplied by 2; and
• for the quarter ending on December 31, 2022, testing will be based on an annualized
calculation of Adjusted EBITDA based on the actual results of the second quarter of
2022, the third quarter of 2022 and the fourth quarter of 2022 multiplied by 4/3.
▪ Thereafter, testing will be based on an annualized calculation of the cumulative Adjusted EBITDA
on a trailing four fiscal quarter basis;
▪ The Total Leverage Ratio of 3.75x will apply when financial covenants are reinstated, and will be
reduced quarterly by 0.25x until the first quarter of 2023 at which point it will reach a level of
3.00x;
▪ The liquidity covenant will continue and be amended requiring available liquidity (as defined) to
be maintained at all times at no less than $100,000;
▪ The Senior Leverage Ratio to be based on annualized Adjusted EBITDA and set at 1.0x lower
than the Total Leverage Ratio. Senior Leverage Ratio is defined as (i) Total Debt (as defined in the
Credit Agreement) less any Notes Payable to (ii) Adjusted EBITDA; and
▪ From and after April 1, 2022, a fixed charge coverage ratio of greater than 1.25x will apply.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (16)
On August 10, 2022 Cineplex entered into a fifth amending agreement to the Credit Agreement, (the “Fifth Credit
Agreement Amendment”), which among other things, extended the suspension of financial covenant testing until the
fourth quarter of 2022 and liquidity covenant requirement until March 2023. The following is a summary of the key
terms of the Fifth Credit Agreement Amendment:
• The suspension of financial covenant testing was extended until the fourth quarter of 2022. On
resumption of financial covenant testing in the fourth quarter of 2022:
• for the fourth quarter of 2022, testing will be based on an annualized calculation of
Adjusted EBITDA (as further adjusted in accordance with the Credit Agreement
definitions) based on the actual results for the fourth quarter multiplied by 4;
• for the quarter ending on March 31, 2023, testing will be based on an annualized
calculation of Adjusted EBITDA based on actual results for the fourth quarter of 2022
and the first quarter of 2023 multiplied by 2; and
• for the quarter ending on June 30, 2023, testing will be based on an annualized
calculation of Adjusted EBITDA based on the actual results of the fourth quarter of 2022,
the first quarter of 2023 and the second quarter of 2023 multiplied by 4/3.
▪ Thereafter, testing will be based on an annualized calculation of the cumulative Adjusted EBITDA
on a trailing four fiscal quarter basis;
▪ The Total Leverage Ratio of 3.75x will apply when financial covenants are reinstated, and will be
reduced quarterly by 0.25x until the third quarter of 2023 at which point it will reach a level of
3.00x;
▪ The liquidity covenant will continue and be amended requiring available liquidity (as defined) to
be maintained at all times until March 31, 2023 at no less than $100,000;
▪ The Senior Leverage Ratio to be based on annualized Adjusted EBITDA and set at 1.0x lower
than the Total Leverage Ratio. Senior Leverage Ratio is defined as (i) Total Debt (as defined in the
Credit Agreement) less any Notes Payable to (ii) Adjusted EBITDA; and
▪ A fixed charge coverage ratio of greater than 1.25x will continue to apply.
This summary of the Fifth Credit Agreement Amendment is qualified in its entirety by reference to the provisions of
the Credit Agreement which contains a complete statement of those terms and conditions. The Credit Agreement
and each of the First, Second, Third, Fourth and Fifth Credit Agreement Amendment were filed on SEDAR on June
30, 2020, November 13, 2020, February 8, 2021, January 4, 2022, and August 10, 2022, respectively, for each of
Credit Agreement Amendments.
Following the Fifth Credit Agreement Amendment, including mandatory repayments, the Credit Facilities consist of
the following:
a) a five-year, $541,668 senior secured Revolving Facility; $332,000 that has been drawn; $10,054
reserved and $199,614 remaining available balance.
During the first quarter of 2021, Cineplex completed a sale-leaseback transaction for its head office buildings
located at 1303 Yonge Street and 1257 Yonge Street, Toronto Ontario for gross proceeds of $57,000, recognizing a
gain of $30,061. Net proceeds from the sale, in addition to net proceeds from the issuance of the Notes Payable
(discussed below) were used to repay the Credit Facilities, a portion of which was permanent. As a result, Cineplex
permanently repaid the remaining $50,000 balance of its outstanding Term Facility.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (17)
Convertible debentures
Convertible debentures outstanding as of September 30, 2022 and December 31, 2021 are as follows:
September 30, 2022 December 31, 2021
Face value of convertible debentures outstanding
$ 316,250 $ 316,250
Unaccreted deferred financing fees and discount (68,781) (81,778)
Convertible debentures
$ 247,469 $ 234,472
On July 17, 2020, Cineplex issued $316,250 aggregate principal amount of convertible unsecured subordinated
debentures, which mature on September 30, 2025 (the “Maturity Date”) and bear interest at a rate of 5.75% per
annum, payable semi-annually in arrears on September 30 and March 31 in each year.
The Debentures are not redeemable by Cineplex prior to September 30, 2023. On or after September 30, 2023 and
prior to September 30, 2024, Cineplex may, at its option, redeem the Debentures in whole or in part from time to
time provided that the volume weighted average trading price of the Shares on the Toronto Stock Exchange during
the 20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of redemption
is given is not less than 125% of the conversion price. On or after September 30, 2024, the Debentures may be
redeemed in whole or in part from time to time at the option of Cineplex at a price equal to their principal amount
plus accrued and unpaid interest. Redemption may be in the form of cash or in the form of Shares, at the option of
Cineplex.
At the holder’s option, the Debentures may be converted into Shares at a conversion price of $10.94 per Share at any
time prior to the close of business on the earlier of: (i) five business days prior to the Maturity Date, and (ii) if called
for redemption, five business days immediately preceding the dated fixed for redemption of the Debentures, at a
conversion price to be determined at the time of pricing. Holders who convert their Debentures into Shares will
receive accrued and unpaid interest for the period from the date of the latest Interest Payment Date to the date of
conversion. Conversion of outstanding Debentures will result in the issuance of Shares from treasury.
The fair value of the liability component of the Debentures was assessed at inception based on an estimated market
discount rate of 14.1% less the pro-rata portion of transaction costs, and will be accreted to the full face value over
the term of the Debentures. Cineplex recorded cash interest expense on the Debentures during the quarter and year
to date period of $4,559 (2021 - $4,558) and $13,602 (2021 - $13,551), respectively. Furthermore, Cineplex
recorded accretion expense during the quarter and year to date period of $4,467 (2021 - $3,857) and $12,997 (2021 -
$11,259), respectively, both of which are included as part of the interest expense in the consolidated statement of
operations. As at September 30, 2022, Cineplex has $316,250 principal amount of Debentures outstanding. The
residual value was allocated to the equity component less the pro-rata portion of transaction costs as prescribed by
IFRS 9, Financial instruments and IAS 32, Financial instruments: Presentation.
The foregoing is a summary of the key terms of the Debentures. This summary is qualified in its entirety by
reference to the provisions of the Debentures trust indenture which contains a complete statement of those terms and
conditions. The Debenture trust indenture was filed on SEDAR on July 15, 2020.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (18)
Notes payable
Notes Payable outstanding as of September 30, 2022 and December 31, 2021 are as follows:
September 30, 2022 December 31, 2021
Face value of Notes Payable
$ 250,000 $ 250,000
Unaccreted deferred financing fees and discount (4,426) (5,261)
Notes Payable
$ 245,574 $ 244,739
On February 26, 2021, Cineplex completed the $250,000 Notes Payable offering. The Notes Payable mature on
February 26, 2026 and bear interest at a rate of 7.50% per annum, payable semi-annually in arrears on January 31
and July 31 of each year, commencing July 31, 2021. The Notes Payable are subordinate to the security granted for
the obligations under the Credit Facilities, and are subject to the terms of an intercreditor agreement with the agent
under the Credit Facilities.
Cineplex recorded cash interest expense on the Notes Payable during the quarter and year to date period of $4,803
(2021 - $4,726) and $14,024 (2021 - $11,096), respectively. Furthermore, Cineplex recorded accretion expense
during the quarter and year to date period of $155 (2021 $217) and $835 (2021 - $550), respectively, both of which
are included as part of interest expense in the consolidated statement of operations. As at September 30, 2022,
Cineplex has $250,000 principal amount of Notes Payable outstanding. Cineplex’s derivative financial instrument
on the Notes Payable relates to the early prepayment option that fluctuates in value based on market interest rates.
The fair value of the embedded derivative was determined using an option pricing model with observable market
inputs and is consistent with accepted methods for valuing financial instruments. Cineplex has estimated the fair
value of this embedded derivative at $2,010 as at September 30, 2022, which is presented on the consolidated
balance sheets as a derivative financial instrument.
The foregoing is a summary of the key terms of the Notes Payable. This summary is qualified in its entirety by
reference to the provisions of the Notes Payable trust indenture which contain a complete statement of those terms
and conditions. The Notes Payable trust indenture was filed on SEDAR on February 26, 2021.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (19)
7. Revenue
The following tables disclose the changes in deferred revenue and other for the nine months ended September 30,
2022 and 2021:
December 31,
2021 Additions Recognized
September 30,
2022
Gift cards
$ 169,380 $ 34,473 $ 51,253 $ 152,600
SCENE loyalty program
47,997 — 18,338 29,659
Advances, deposits and other
75,829 19,548 68,591 26,786
$ 293,206 $ 54,021 $ 138,182 $ 209,045
SCENE loyalty program deferred revenue balance relates to SCENE point obligations issued up to December 12,
2021. New Scene+ points issued are recognized as advertising and promotion in other costs in the Consolidated
Statement of Operations.
December 31,
2020 Additions Recognized
September 30,
2021
Gift cards
$ 164,025 $ 8,709 $ 18,246 $ 154,488
SCENE loyalty program
36,109 25,111 14,876 46,344
Advances, deposits and other
19,849 11,526 14,237 17,138
$ 219,983 $ 45,346 $ 47,359 $ 217,970
In December 2020, Cineplex received $60,000 from its existing partner with respect to the agreement to reorganize
the program and reposition it for future growth. During the third quarter, Cineplex completed specific non-financial
milestones and as result recognized a gain of $50,100 (classified under gain (loss) on disposal of assets on the
Consolidated Statement of Operations) related to the reorganization of Scene LP, realizing $50,500 of advances,
deposits and other. Approximately $7,000 remains in advances, deposits and other and will be recognized as future
performance obligations are completed. Approximately $2,500 remains in accounts payable and accrued liabilities,
and will be recognized as funding occurs. Recognition for both items is expected to occur in 2023.
The following tables provide the disaggregation of revenue into categories by nature for the three and nine months
ended September 30, 2022 and 2021:
Box revenues
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Box office revenues $ 124,700 $ 94,114 $ 341,024 $ 110,430
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (20)
Food service revenues
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Food service - theatres $ 92,520 $ 70,945 $ 249,325 $ 82,506
Food delivery - theatres 2,285 2,599 7,924 10,053
Food service - location-based entertainment 10,373 6,402 26,910 7,089
Food delivery - location-based entertainment 15 25 59 106
Total food service revenues $ 105,193 $ 79,971 $ 284,218 $ 99,754
Media revenues
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Cinema media $ 15,097 $ 6,640 $ 42,046 $ 10,951
Digital place-based media 10,127 7,420 25,129 21,584
Total media revenues $ 25,224 $ 14,060 $ 67,175 $ 32,535
Amusement revenues
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Amusement solutions excluding exhibition and
LBE $ 45,541 $ 35,473 $ 125,477 $ 68,478
Amusement solutions - exhibition 3,910 2,709 9,249 2,980
Amusement solutions - location based
entertainment 20,156 15,137 51,028 17,919
Total amusement revenues $ 69,607 $ 53,319 $ 185,754 $ 89,377
Other revenues
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Other revenues $ 15,113 $ 8,916 $ 40,267 $ 24,622
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (21)
8. Lease obligation
The following table presents lease obligations for Cineplex for the nine months ended September 30, 2022 and 2021:
Property Equipment Total
Nine months ended September 30, 2022
Opening balance $ 1,092,674 $ 12,849 $ 1,105,523
Additions 4,212 384 4,596
Extensions and modifications 79,251 (1,141) 78,110
Tenant inducements 5,326 — 5,326
Lease payments (125,962) (1,723) (127,685)
Interest expense 44,949 440 45,389
Foreign exchange rate changes 421 — 421
Closing lease obligations 1,100,871 10,809 1,111,680
Less: current portion 88,315 4,139 92,454
Non-current portion of lease obligations $ 1,012,556 $ 6,670 $ 1,019,226
Property Equipment Total
Nine months ended September 30, 2021
Opening balance $ 1,160,849 $ 10,076 $ 1,170,925
Additions 25,146 30 25,176
Extensions and modifications (21,546) 632 (20,914)
Tenant inducements 6,580 — 6,580
Lease payments (101,468) (3,209) (104,677)
Interest expense 43,697 245 43,942
Foreign exchange rate changes (27) — (27)
Closing lease obligations $ 1,113,231 $ 7,774 $ 1,121,005
Less: current portion 102,544 3,167 105,711
Non-current portion of lease obligations $ 1,010,687 $ 4,607 $ 1,015,294
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (22)
9. Share capital
Cineplex is authorized to issue an unlimited number of common shares and 10,000,000 preferred shares of which
none are outstanding.
Share capital balances at September 30, 2022 and 2021 and transactions during the periods are as follows:
2022 Amount
Number of
common shares
issued and
outstanding Common shares Total
Balance - December 31, 2021 63,344,298 $ 852,465 $ 852,465
Issuance of shares on exercise of options 18,415 196 196
Balance - September 30, 2022 63,362,713 $ 852,661 $ 852,661
2021 Amount
Number of
common shares
issued and
outstanding Common shares Total
Balance - December 31, 2020 63,333,238 $ 852,379 $ 852,379
Issuance of shares on exercise of options 9,875 77 77
Balance - September 30, 2021 63,343,113 $ 852,456 $ 852,456
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (23)
10. Other costs
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Employee wages, salaries and benefits $ 70,416 $ 48,432 $ 183,976 $ 92,359
Rent 1,027 (1,679) (991) (13,575)
Realty and occupancy taxes and maintenance fees 18,222 16,738 51,705 41,630
Utilities 8,912 6,831 22,968 13,671
Purchased services 16,359 12,511 44,143 25,280
Other inventories consumed, including
amusement and digital place-based media 21,281 19,189 67,888 41,921
Venue revenue share 15,041 10,993 39,264 19,419
Repairs and maintenance 10,541 6,896 27,700 15,211
Advertising and promotion 7,501 4,121 19,920 6,922
Office and operating supplies 3,286 2,182 8,141 3,278
Licenses and franchise fees 3,684 3,850 12,216 10,766
Insurance 1,754 1,638 5,283 4,865
Professional and consulting fees 2,772 4,986 6,438 12,769
Telecommunications and data 1,483 1,154 4,169 3,582
Bad debts 133 74 (434) (61)
Equipment rental 396 409 1,166 878
Other costs 2,240 1,202 6,589
2,669
$ 185,048 $ 139,527 $ 500,141 $ 281,584
During the third quarter, Cineplex operated at full capacity during the entire period, compared to the prior year
period that was subject to capacity restrictions, in some cases after months of extended closure periods. This resulted
in an increase in other costs during the current period. Cineplex recorded the following subsidies which have all
been offset against their related costs during the three and nine months ended September 30, 2022 and 2021:
Subsidies
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Wage subsidy (CEWS and THRP) $ 88 $16,206 $ 21,583 $ 46,706
Rent subsidy (CERS and THRP) — 705 3,461 12,553
Realty tax subsidy — 973 3,731 11,487
Utility subsidy — 665 2,069 4,553
Total $ 88 $ 18,549 $ 30,844 $ 75,299
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (24)
11. Net income (loss) loss per share
Basic
Basic earnings per share (“EPS”) is calculated by dividing the net loss by the weighted average number of shares
outstanding during the period.
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Net income (loss) $ 30,857 $ (33,552) $ (10,055) $ (226,944)
Weighted average number of shares
outstanding 63,362,713 63,342,557 63,356,694 63,339,070
Basic EPS $ 0.49 $ (0.53) $ (0.16) $ (3.58)
Diluted
Diluted EPS is calculated by adjusting the weighted average number of shares outstanding to assume conversion of
all dilutive potential shares. A calculation is done to determine the number of shares that could have been acquired at
fair value (determined as the average market share price of the outstanding shares for the period), based on the
monetary value of the rights attached to the potentially dilutive shares. The number of shares calculated above is
compared with the number of shares that would have been issued assuming exercise of conversions, exchanges or
options. For the third quarter, dilutive shares that have been included in the current period were 104,560 potential
shares that would have been issued under the treasury stock method and 28,907,678 potential shares that would have
been issued under the if-converted method relating to debenture units outstanding. For the year to date period, the
options and debentures are anti-dilutive and the anti-dilutive shares that have been excluded were 171,083 potential
shares that would be issued under the treasury stock method and 28,907,678 potential shares that would have been
issued under the if-converted method relating to debenture units outstanding. The options and debentures are anti-
dilutive for both the third quarter and year to date period of 2021, as applicable.
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Net income (loss) $ 30,857 $ (33,552) $ (10,055) $ (226,944)
Adjustments for convertible debentures 9,025 — — —
Diluted net income (loss) $ 39,882 $ (33,552) $ (10,055) $ (226,944)
Weighted average number of shares
outstanding 63,362,713 63,342,557 63,356,694 63,339,070
Adjustments for stock options 104,560 — — —
Adjustments for convertible debentures 28,907,678 — — —
Weighted average number of shares for
diluted EPS 92,374,951 63,342,557 63,356,694 63,339,070
Diluted EPS $ 0.43 $ (0.53) $ (0.16) $ (3.58)
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (25)
12. Changes in operating assets and liabilities
The following summarizes the changes in operating assets and liabilities:
Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Trade and other receivables $ 3,992 $ (4,218) $ 19,314 $ 5,324
Inventories (4,246) (3,157) (8,962) (2,482)
Prepaid expenses and other current assets (3,838) (667) (5,727) (1,884)
Accounts payable and accrued liabilities (143) 40,034 (4,744) 54,859
Income taxes receivable 651 8,814 (73) 65,657
Deferred revenue (21,671) (7,034) (39,355) (2,030)
Post-employment benefit obligations 52 22 (714) (844)
Share-based compensation (691) (542) (1,263) 1,583
Other liabilities 79 (612) (488) (1,340)
$ (25,815) $ 32,640 $ (42,012) $ 118,843
Property, equipment and leasehold purchases are included in accounts payable and accrued liabilities as at
September 30, 2022, in the amount of $6,590 (2021 - $531).
13. Operating segments
Cineplex has four reportable segments; Film Entertainment and Content, Media, Amusement and Leisure and
Location-Based Entertainment. The reportable segments are business units offering differing products and services
and managed separately due to their distinct natures. These four reportable segments have been determined by
Cineplex’s chief operating decision makers. The Film Entertainment and Content reporting segment does not charge
an access fee to the Media reporting segment. All other inter-segment transactions are eliminated in the Corporate
and other category, which includes all corporate general and administrative costs not directly associated with a
segment. Cineplex reports the total of its segments which is considered an other financial measure in accordance
with National Instrument 52-112, Non-GAAP and Other Financial Measures. The total segments measure includes a
non-GAAP measure, adjusted EBITDAaL and is described below.
Film Entertainment and Content
The Film Entertainment and Content reporting segment includes all direct and ancillary revenues from theatre
attendance, including box office and food service revenues and the associated costs to provide those products and
services. Also included in the Film Entertainment and Content segment are in-theatre amusement, theatre rentals and
digital commerce rental and sales and associated costs.
Media
The Media reporting segment is comprised of the aggregation of two operating segments, cinema media and digital
place-based media businesses. Cinema media consists of all in-theatre advertising revenues and costs, including pre-
show, showtime and lobby advertising. Digital place-based media is comprised of revenues and costs associated
with the design, installation and operations of digital signage networks, along with advertising on certain networks.
Aggregation of these operating segments is based on the segments having similar economic characteristics.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (26)
Amusement and Leisure
The Amusement and Leisure reporting segment includes the amusement solutions operating segment. Amusement
solutions is comprised of revenues and costs associated with operating and distributing amusement, gaming and
vending equipment. Previously reported periods included results for eSports in the Amusement and Leisure segment.
Location-Based Entertainment
Location-based entertainment is comprised of the social entertainment destinations featuring gaming, entertainment
and dining. These entertainment options are complemented with an upscale casual dining environment, featuring an
open kitchen and contemporary menu, as well as a larger bar with a wide range of digital monitors and a large screen
for watching sporting and other major events.
In accordance with IFRS 8, Operating Segments, Cineplex discloses information about its reportable segments based
upon the measures used by management in assessing the performance of those reportable segments. Cineplex uses
adjusted EBITDAaL to measure the performance of its reportable segments.
Management defines EBITDA as earnings before interest income and expense, income taxes and depreciation and
amortization expense. Adjusted EBITDA excludes the change in fair value of financial instrument, loss (gain) on
disposal of assets, foreign exchange, the equity (income) loss of CDCP, and impairment, depreciation, amortization,
interest and taxes of Cineplex’s other joint ventures and associates. Adjusted EBITDAaL modifies adjusted
EBITDA to deduct current period cash rent paid or payable related to lease obligations. During the year, Cineplex
agreed to a variety of arrangements with landlords to reduce or defer cash rent paid or payable as a result of the
impact of COVID-19.
Cineplex’s management believes that adjusted EBITDAaL is an important supplemental measure of Cineplex’s
profitability at an operational level and provides analysts and investors with comparability in evaluating and valuing
Cineplex’s performance period over period. EBITDA, adjusted for various unusual items, is also used to define
certain financial covenants in Cineplex’s Credit Facilities.
Cineplex’s cash management and other treasury functions are centralized; interest expense not related to the lease
obligations and interest income are not allocated to segments. Income taxes are accounted for by entity, and cannot
be attributable to individual segments. Cineplex does not report balance sheet information by segment because that
information is not used to evaluate performance or allocate resources between segments.
The following tables disclose the results of the Film Entertainment and Content, Media, Amusement and Leisure and
Location-Based Entertainment segments for the three and nine months ended September 30, 2022 and 2021:
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (27)
Three months ended September 30, 2022
Film
Entertainment
and Content
(i) Media (i)
Amusement
and Leisure
Location-
Based
Entertainment
Corporate and
other (iii) Consolidated
Major product and service lines
Box office $ 124,700 $ — $ — $ — $ — $ 124,700
Food service 94,805 — — 10,388 — 105,193
Media — 24,953 — 271 — 25,224
Amusement 3,909 — 45,541 20,156 — 69,606
Other 14,890 — — 223 — 15,113
Total revenues $ 238,304 $ 24,953 $ 45,541 $ 31,038 $ — $ 339,836
Primary geographical markets
Canada $ 238,304 $ 22,466 $ 16,739 $ 31,038 $ — $ 308,547
United States and other countries — 2,487 28,802 — — 31,289
Total revenues $ 238,304 $ 24,953 $ 45,541 $ 31,038 $ — $ 339,836
Timing of revenue recognition
Transferred at a point in time $ 238,304 $ 3,897 $ 45,541 $ 31,038 $ — $ 318,780
Transferred over time — 21,056 — — — 21,056
Total revenues $ 238,304 $ 24,953 $ 45,541 $ 31,038 $ — $ 339,836
Adjusted EBITDAaL $ 10,690 $ 12,001 $ 9,001 $ 8,989 $ (20,251) $ 20,430
Difference between the sum of depreciation of right-of-use assets and interest expense related
to the lease obligations as compared to the cash rent paid or payable related to lease
obligations with respect to the current period. (3,441)
Other adjustments (ii) (49,284)
Depreciation and amortization - other assets 26,079
Interest expense - other 16,303
Interest income (84)
Net Income $ 30,857
Other operating segment disclosures
Depreciation - right-of-use assets $ 20,974 $ 649 $ 659 $ 886 $ 110 $ 23,278
Depreciation and amortization - other assets $ 15,773 $ 1,268 $ 4,502 $ 4,536 $ — $ 26,079
Interest expense - lease obligations $ 14,129 $ 146 $ 161 $ 1,299 $ 211 $ 15,946
Goodwill balance $ 413,915 $ 206,385 $ 15,945 $ — $ — $ 636,245
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (28)
Three months ended September 30, 2021
Film
Entertainment
and Content
(i) Media (i)
Amusement
and Leisure
Location-
Based
Entertainment
Corporate and
other (iii) Consolidated
Major product and service lines
Box office $ 94,114 $ — $ — $ — $ — $ 94,114
Food service 73,544 — — 6,427 — 79,971
Media — 13,901 — 159 — 14,060
Amusement 2,709 — 35,473 15,137 — 53,319
Other 8,863 — — 53 — 8,916
Total revenues $ 179,230 $ 13,901 $ 35,473 $ 21,776 $ — $ 250,380
Primary geographical markets
Canada $ 179,230 $ 11,669 $ 10,895 $ 21,776 $ — $ 223,570
United States and other countries — 2,232 24,578 — — 26,810
Total revenues $ 179,230 $ 13,901 $ 35,473 $ 21,776 $ — $ 250,380
Timing of revenue recognition
Transferred at a point in time $ 179,230 $ 2,929 $ 35,473 $ 21,776 $ — $ 239,408
Transferred over time — 10,972 — — — 10,972
Total revenues $ 179,230 $ 13,901 $ 35,473 $ 21,776 $ — $ 250,380
Adjusted EBITDAaL $ 8,840 $ 6,025 $ 7,011 $ 8,009 $ (19,123) $ 10,762
Difference between the sum of depreciation of right-of-use assets and interest expense related to the lease
obligations as compared to the cash rent paid or payable related to lease obligations with respect to the current
period. 2,064
Other adjustments (ii) (3,969)
Depreciation and amortization - other assets 28,297
Interest expense - other 17,990
Interest income (68)
Net loss $ (33,552)
Other operating segment disclosures
Depreciation - right-of-use assets $ 22,694 $ 614 $ 837 $ 914 $ 92 $ 25,151
Depreciation and amortization - other assets $ 16,843 $ 1,199 $ 5,951 $ 4,304 $ — $ 28,297
Interest expense - lease obligations $ 13,086 $ 78 $ 124 $ 1,330 $ 224 $ 14,842
Goodwill balance $ 413,915 $ 206,385 $ 15,288 $ — $ — $ 635,588
(i) The Film Entertainment and Content reporting segment does not charge an access fee to the Media reporting segment for in-theatre
advertising.
(ii) Other adjustments include change in fair value of financial instruments, (loss)/gain on disposal of assets, CDCP equity income/(loss),
foreign exchange, non-controlling interest adjusted EBITDA, depreciation and amortization for joint ventures and taxes and interest - joint
ventures.
(iii) Corporate and other represents the cost of centralized corporate overhead that is not allocated to the other operating segments and includes
the change in fair value of financial instruments.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (29)
Nine months ended September 30, 2022
Film
Entertainment
and Content
(i) Media (i)
Amusement
and Leisure
Location-
Based
Entertainment
Corporate and
other (iii) Consolidated
Major product and service lines
Box office $ 341,024 $ — $ — $ — $ — $ 341,024
Food service 257,249 — — 26,969 — 284,218
Media — 66,547 — 628 — 67,175
Amusement 9,249 — 125,477 51,028 — 185,754
Other 39,687 — — 580 — 40,267
Total revenues $ 647,209 $ 66,547 $ 125,477 $ 79,205 $ — $ 918,438
Primary geographical markets
Canada $ 647,209 $ 60,443 $ 40,982 $ 79,205 $ — $ 827,839
United States and other countries — 6,104 84,495 — — 90,599
Total revenues $ 647,209 $ 66,547 $ 125,477 $ 79,205 $ — $ 918,438
Timing of revenue recognition
Transferred at a point in time $ 647,209 $ 10,191 $ 125,477 $ 79,205 $ — $ 862,082
Transferred over time — 56,356 — — — 56,356
Total revenues $ 647,209 $ 66,547 $ 125,477 $ 79,205 $ — $ 918,438
Adjusted EBITDAaL $ 25,697 $ 31,419 $ 22,104 $ 22,912 $ (51,657) $ 50,475
Difference between the sum of depreciation of right-of-use assets and interest expense related
to the lease obligations as compared to the cash rent paid or payable related to lease
obligations with respect to the current period. (9,618)
Other adjustments (ii) (48,796)
Depreciation and amortization - other assets
79,622
Interest expense - other
40,198
Interest income
(152)
Provision for income taxes
(724)
Net loss $ (10,055)
Other operating segment disclosures
Depreciation - right-of-use assets $ 65,503 $ 2,210 $ 1,313 $ 2,687 $ 313 $ 72,026
Depreciation and amortization - other assets $ 49,152 $ 3,570 $ 13,648 $ 13,252 $ — $ 79,622
Interest expense - lease obligations $ 40,004 $ 427 $ 401 $ 3,915 $ 642 $ 45,389
Goodwill balance $ 413,915 $ 206,385 $ 15,945 $ — $ — $ 636,245
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (30)
Nine months ended September 30, 2021
Film
Entertainment
and Content
(i) Media (i)
Amusement
and Leisure
Location-
Based
Entertainment
Corporate and
other (iii) Consolidated
Major product and service lines
Box office $ 110,430 $ — $ — $ — $ — $ 110,430
Food service 92,559 — — 7,195 — 99,754
Media — 32,370 — 165 — 32,535
Amusement 2,980 — 68,478 17,919 — 89,377
Other 24,541 — — 81 — 24,622
Total revenues $ 230,510 $ 32,370 $ 68,478 $ 25,360 $ — $ 356,718
Primary geographical markets
Canada $ 230,510 $ 24,533 $ 16,837 $ 25,360 $ — $ 297,240
United States and other countries — 7,837 51,641 — — 59,478
Total revenues $ 230,510 $ 32,370 $ 68,478 $ 25,360 $ — $ 356,718
Timing of revenue recognition
Transferred at a point in time $ 230,510 $ 8,721 $ 68,478 $ 25,360 $ — $ 333,069
Transferred over time — 23,649 — — — 23,649
Total revenues $ 230,510 $ 32,370 $ 68,478 $ 25,360 $ — $ 356,718
Adjusted EBITDAaL $ (70,488) $ 8,252 $ 4,758 $ 1,629 $ (48,644) $ (104,493)
Difference between the sum of depreciation of right-of-use assets and interest expense related to the lease
obligations as compared to the cash rent paid or payable related to lease obligations with respect to the current
period. 14,971
Other adjustments (ii) (30,752)
Depreciation and amortization - other assets 85,541
Interest expense - other 49,554
Interest income (202)
Provision for income taxes 3,339
Net loss $ (226,944)
Other operating segment disclosures
Depreciation - right-of-use assets $ 69,366 $ 2,133 $ 2,377 $ 2,840 $ 490 $ 77,206
Depreciation and amortization - other assets $ 52,448 $ 3,523 $ 17,865 $ 11,705 $ — $ 85,541
Interest expense - lease obligations $ 38,894 $ 261 $ 403 $ 3,883 $ 501 $ 43,942
Goodwill balance $ 413,915 $ 206,385 $ 15,288 $ — $ — $ 635,588
(i) The Film Entertainment and Content reporting segment does not charge an access fee to the Media reporting segment for in-theatre
advertising.
(ii) Other adjustments include change in fair value of financial instruments, (loss)/gain on disposal of assets, CDCP equity income/(loss),
foreign exchange, non-controlling interest adjusted EBITDA, depreciation and amortization for joint ventures and taxes and interest - joint
ventures.
(iii) Corporate and other represents the cost of centralized corporate overhead that is not allocated to the other operating segments and includes
the change in fair value of financial instruments.
Cineplex’s cash management and other treasury functions are centralized; interest expense not related to the lease
obligations and interest income are not allocated to segments. Income taxes are accounted for by entity, and cannot
be attributable to individual segments. Cineplex does not report balance sheet information by segment because that
information is not used to evaluate performance or allocate resources between segments.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (31)
14. Basis of presentation and accounting standards
Basis of preparation and measurement
Cineplex prepares its unaudited interim condensed consolidated financial statements in accordance with Canadian
generally accepted accounting principles (“Canadian GAAP”), defined as International Financial Reporting
Standards (“IFRS”) as set out in the CPA Canada Handbook. The preparation of consolidated financial statements in
accordance with IFRS requires the use of certain critical accounting estimates. It also requires that management
exercise judgment in applying Cineplex’s accounting policies. These unaudited interim condensed consolidated
financial statements are presented in accordance with International Accounting Standard (“IAS”) 34, Interim
Financial Reporting. The disclosures contained in these unaudited interim condensed consolidated financial
statements do not contain all requirements of Canadian GAAP for annual consolidated financial statements and
should be read in conjunction with the audited consolidated financial statements for the year ended December 31,
2021. These unaudited interim condensed consolidated financial statements follow the same accounting policies and
methods of application as the audited financial statements for the year ended December 31, 2021.
The International Accounting Standards Board (“IASB”) has published a number of amendments to existing
accounting standards effective for years beginning on or after January 1, 2023. Cineplex continues the evaluate the
impact of the amended accounting standards on Cineplex’s consolidated financial statements and has not early
adopted any amendments to existing accounting standards.
The following amendments are currently being evaluated by Cineplex:
IAS 12, Deferred taxes related to assets and liabilities arising from a single transaction
In May 2021, the IASB issued deferred tax related to assets and liabilities arising from a single transaction. The
amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 (recognition
exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and
deductible temporary differences.
IAS 1, Classification of liabilities as current or non-current
In January 2020 the IASB issued classification of liabilities as current or non-current (2020 amendments). The 2020
amendments clarified aspects of how entities classify liabilities as current or non-current.
IAS 8, Definition of accounting estimates
In February 2021, the IASB issued definition of accounting estimates, which amended IAS 8, Accounting Policies,
Changes in Accounting Estimates and Errors. The amendments introduced the definition of accounting estimates
and included other amendments to IAS 8 to help entities distinguish changes in accounting estimates from changes
in accounting policies.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (32)
15. Subsequent events
CDCP expects to distribute its assets to its partners in 2022 and Cineplex will recognize a return of capital under
IAS 28, Investments in Associates and Joint Ventures. Cineplex expects to recognize a gain of $4,200 on the
dissolution of its investment in CDCP.
Cineplex Inc.
Notes to Interim Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2022 and 2021
(Unaudited)
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
CINEPLEX INC.
2022 THIRD QUARTER REPORTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (33)
