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Press release from Marketwire

Cineplex Inc. Reports Record First Quarter Adjusted EBITDA and Announces Dividend Increase

Thursday, May 10, 2012

Cineplex Inc. Reports Record First Quarter Adjusted EBITDA and Announces Dividend Increase06:15 EDT Thursday, May 10, 2012TORONTO, ONTARIO--(Marketwire - May 10, 2012) - Cineplex Inc. ("Cineplex") (TSX:CGX) today released its financial results for the first quarter of 2012.First Quarter ResultsPeriod over20122011Period Change (i)Total Revenues$248.2 million$221.4 million12.1%Attendance17.1 million15.3 million12.1%Other Revenues$21.7 million$26.3 million(17.3)%Net Income (Loss)$15.1 million$(0.8) millionNMAdjusted EBITDA$41.1 million$31.2 million31.7%Adjusted EBITDA Margin16.6%14.1%2.5%Adjusted Free Cash Flow per Share$0.480$0.39222.4%(i) Period over Period change calculated based on thousands of dollars except percentage and per share values."We are pleased to report our strongest first quarter adjusted EBITDA results ever," said Ellis Jacob, President and CEO, Cineplex Entertainment. "A strong film slate including titles such as The Hunger Games and Dr. Seuss' The Lorax contributed to a 12.1% increase in both attendance and total revenue. Cost controls mitigated a decline in media revenues to deliver a 31.7% increase in adjusted EBITDA and a significant increase in net income. We are also pleased to announce a dividend increase to $1.35 per share on an annual basis from the current $1.29 per share. This increase will be effective with the May 2012 dividend which will be paid in June 2012. This increase represents our second dividend increase since converting to a corporation on January 1, 2011.""During the first quarter, we also continued to enhance the quality of our circuit through expanded premium offerings and digital projection deployment. We added two UltraAVX auditoriums, 16 RealD 3D screens and converted 219 projection systems to digital resulting in an 82% digital penetration as of March 31, 2012. We also continued to expand the SCENE loyalty program, with total membership as of March 31, 2012 of 3.5 million, and advance our interactive and e-commerce initiatives."EBITDA and adjusted free cash flow are not measures recognized by generally accepted accounting principles ("GAAP") and do not have standardized meanings in accordance with such principles. Therefore, EBITDA and adjusted free cash flow may not be comparable to similar measures presented by other issuers. EBITDA is calculated by adding back to net income, income tax expense, amortization and interest expense net of interest income. Adjusted EBITDA is calculated by adjusting EBITDA for gains and losses on disposal of assets and the share of income or loss of the Canadian Digital Cinema Partnership ("CDCP"). Adjusted free cash flow is a non-GAAP measure generally used by Canadian corporations, as an indicator of financial performance and it should not be seen as a measure of liquidity or a substitute for comparable metrics prepared in accordance with GAAP. Management uses adjusted EBITDA and adjusted free cash flow to evaluate performance primarily because of the significant effect certain unusual or non-recurring charges and other items have on EBITDA from period to period. For a detailed reconciliation of net income to EBITDA and adjusted EBITDA and from cash provided by operating activities to adjusted free cash flow, please refer to Cineplex's management's discussion and analysis filed on www.sedar.com.KEY DEVELOPMENTS IN THE FIRST QUARTER OF 2012The following describes certain key business initiatives undertaken during the first quarter of 2012 in each of Cineplex's core business areas:THEATRE EXHIBITIONReported a 15.0% increase in box office revenues during the quarter, due to a 12.1% increase in attendance, primarily due to The Hunger Games which had the highest-grossing first-quarter weekend of all-time and the third-largest opening weekend of all-time. BPP increased 2.5% from $8.51 in the first quarter of 2011 to $8.72 in the current year period. Installed 219 digital projectors and 16 RealD 3D systems during the first quarter of 2012, bringing the circuit totals to 1,110 digital projectors and 412 RealD 3D systems in 122 theatres. Installed seven digital IMAX projectors into existing IMAX locations during the period. Installed D-BOX MFX seats in three Cineplex theatres during the quarter. At March 31, 2012, 14 of Cineplex's theatres offer D-BOX MFX seats. MERCHANDISINGReported record first quarter CPP of $4.50 during first quarter of 2012, up $0.23 or 5.4% over the first quarter of 2011. Entered into a joint venture agreement with Starburst Coin Machines Inc. ("SCM") which saw New Way Sales ("NWS") acquire SCM's games business in exchange for cash and a 50% interest in NWS. The joint venture was named Cineplex Starburst Inc. ("CSI"). CSI supplies and services all of the games in Cineplex's circuit, while also supplying equipment to third party arcades, amusement centres, bowling alleys, amusement parks and theatre circuits, in addition to owning and operating Playdium, a family entertainment centre located in Mississauga, Ontario. MEDIAMedia revenues decreased 29.3% compared to the strong comparator in the prior year, which was a record first quarter for media revenues. Contributing to this decrease was reduced spending from the government and telecommunications sectors. Government spending accounted for 25% of total spending in the first quarter of 2011 compared to 10% in the current year period. In the 2012 Spring study by the Print Measurement Bureau, Cineplex Magazine and Le magazine Cineplex earned outstanding readership numbers, with Cineplex Magazine ranking as the 7th most-read magazine in Canada, with a circulation of over 700,000 copies per issue, and Le magazine Cineplex reaching circulation of over 200,000 copies per issue. ALTERNATIVE PROGRAMMINGThe highly successful Metropolitan Opera series continued its strong performance in Cineplex's theatres. Scotiabank Theatre Toronto hosted actor and director Kevin Smith for his Kevin Smith: Live from Behind show, which was also broadcast live to select theatres across the Cineplex circuit and sub-distributed by Cineplex to other circuits across Canada and the United States. Other alternative programming during first quarter of 2012 included the Classic Film Series, the Great Digital Film Festival, the Family Favourites film series, and live events such as World Wrestling Entertainment and concert performances. INTERACTIVECineplex.com registered all-time high results in the first quarter of 2012 with page views and visits up 76.9% and 33.3%, respectively, over the prior year period to 95.5 million page views and 16.7 million visits during the quarter. Cineplex Mobile is ranked by Comscore as the 8th most popular mobile app in Canada and the first in entertainment listings with 1.7 million unique visitors, reaching 8.3% of mobile subscribers in Canada. At March 31, 2012, the app had been downloaded 3.1 million times and recorded 55.1 million app sessions. Site optimization continues to be a focus for both cineplex.com and the Cineplex Store, utilizing cloud technology to enhance performance. Continued the development of the UltraViolet cloud-based digital locker that is anticipated to be integrated into the Cineplex Store. LOYALTYMembership in the SCENE loyalty program increased by approximately 0.2 million members during the first quarter of 2012 to approximately 3.5 million at March 31, 2012. SCENE partnered with Cara Foods, Telus, Sirius Satellite Radio and Samsung during the first quarter of 2012 for various programs. OPERATING RESULTS FOR THE FIRST QUARTER OF 2012Total revenuesTotal revenues for the three months ended March 31, 2012 increased $26.8 million (12.1%) to $248.2 million as compared to the prior year period. A discussion of the factors affecting the changes in box office, concession and other revenues for the periods is provided on the following pages.Box office revenuesThe following table highlights the movement in box office revenues, attendance and BPP for the quarter (in thousands of Canadian dollars, except attendance reported in thousands of patrons, and per patron amounts, unless otherwise noted):Box office revenuesFirst Quarter20122011ChangeBox office revenues$149,413$129,95615.0%Attendance17,12715,27212.1%Box office revenue per patron8.728.512.5%Canadian industry revenues (i)13.8%Same store box office revenues148,868129,17815.2%Same store attendance17,07215,16412.6%% Total box from 3D, UltraAVX, VIP & IMAX27.1%23.0%4.1%(i) The Motion Picture Theatre Associations of Canada reported that the Canadian exhibition industry reported a box office increase of 12.4% for the period from December 30, 2011 to March 29, 2012 as compared to the period from December 31, 2010 to March 31, 2011. On a basis consistent with Cineplex's calendar reporting period (January 1 to March 31), the Canadian industry box office is estimated to be an increase of 13.8%.Box office continuityFirst QuarterBox OfficeAttendance2011 as reported$129,95615,272Same store attendance change16,2511,908Impact of same store BPP change3,440-New and acquired theatres54455Disposed and closed theatres(778)(108)2011 as reported$149,41317,127First QuarterFirst Quarter 2012 Top Cineplex FilmsIMAX3D% BoxFirst Quarter 2011 Top Cineplex FilmsIMAX3D% Box1The Hunger GamesX8.3%1The King's Speech7.0%2Dr. Seuss' The LoraxXX7.3%2The Green HornetX5.1%3Mission: Impossible - Ghost ProtocolX5.1%3Just Go With It4.8%4The Vow4.7%4Gnomeo and JulietX4.2%5Journey 2: The Mysterious IslandXX4.6%5RangoX4.0%Box office revenues increased $19.5 million, or 15.0%, to $149.4 million during the first quarter of 2012, compared to $130.0 million recorded in the same period in 2011. This increase was primarily due to a 12.1% increase in attendance, as well as a 2.5% increase in BPP. Film product during the current year period was stronger than the prior year period, with The Hunger Games recording the highest-ever box office revenues for a first quarter release and the third-largest opening weekend of all-time. Attendance in the first quarter of 2012 also benefited from the first week of January being a school holiday whereas the first week of 2011 was not.BPP increased $0.21, from $8.51 in the first quarter of 2011 to $8.72 in the same period in 2012 mainly due to premium-priced product (3D, UltraAVX and IMAX) accounting for 27.1% of box office revenues in the current quarter, up from 23.0% in the prior year period. The increase in the percentage of box office revenues from premium-priced product was due to the impact of UltraAVX, VIP and IMAX installations, the screen counts of which have increased since the first quarter of 2011.Cineplex's investment in premium-priced formats, including 3D, UltraAVX, IMAX and VIP, over the last four years has positioned it to take advantage of the price premiums offered on these formats, which has contributed to Cineplex's BPP growth in the current period compared to the prior year period.Concession revenuesThe following table highlights the movement in concession revenues, attendance and CPP for the quarter (in thousands of Canadian dollars, except attendance and same store attendance reported in thousands of patrons, and per patron amounts):Concession revenuesFirst Quarter20122011ChangeConcession revenues$77,037$65,15418.2%Attendance17,12715,27212.1%Concession revenue per patron4.504.275.4%Same store concession revenues76,75064,86818.3%Same store attendance17,07215,16412.6%Concession revenue continuityFirst QuarterConcessionAttendance2011 as reported$65,15415,272Same store attendance change8,1611,908Impact of same store CPP change3,721-New and acquired theatres28755Disposed and closed theatres(286)(108)2012 as reported$77,03717,127First QuarterConcession revenues increased 18.2% as compared to the prior year quarter, due to the 12.1% increase in attendance during the period and the 5.4% increase in CPP. CPP increased from $4.27 in the first quarter of 2011 to $4.50 in the same period in 2012, and represents a first quarter record for Cineplex. Cineplex believes a focus on revised concession offerings through its RBO rationalization program and better communication with customers through the expansion of a digital menu board program have both contributed to the higher CPP in the current period compared to the prior year period.While the 10% SCENE discount and SCENE points issued on concession combo purchases have a negative impact on CPP, Cineplex believes that this program drives incremental visits and concession purchases, resulting in higher overall concession revenues.Other revenuesThe following table highlights the movement in media, games and other revenues for the quarter (in thousands of Canadian dollars):Other revenuesFirst Quarter20122011ChangeMedia$12,686$17,939-29.3%Games1,9221,23555.6%Other7,1297,1080.3%Total$21,737$26,282-17.3%Other revenues decreased 17.3% from $26.3 million in the first quarter of 2011 to $21.7 million in the same period in 2012. This decrease was due to lower media revenues, which during the first quarter of 2012 were $12.7 million, down $5.3 million, or 29.3%, when compared to the prior year period. The prior year period is a strong comparator for media, as it was a first quarter record for media revenues. The decrease was due to lower full motion and digital pre-show revenues ($5.2 million) compared to the record-setting first quarter of 2011, as a result of decreased spending by the government and telecommunications sectors and the impact of the continued economic uncertainty during the period.The games revenue increase is due to the acquisition of NWS in May 2011 and therefore is not included in the prior year comparative. The first quarter of 2012 includes one month of revenues for NWS prior to the creation of CSI ($0.4 million). The February and March results for CSI are included in the 'Share of loss of joint ventures' line in the Statements of Operations. The addition of three new XSCAPE entertainment centres since the first quarter of 2011 also contributed to the increase in games revenues.Film costThe following table highlights the movement in film cost and Film Cost Percentage for the quarter (in thousands of Canadian dollars, except film cost percentage):Film costFirst Quarter20122011ChangeFilm cost$76,707$65,54417.0%Film cost percentage51.3%50.4%0.9%First QuarterFilm cost varies primarily with box office revenue, and can vary from quarter to quarter based on the relative strength of the titles exhibited during the period. The increase in the first quarter of 2012 compared to the prior year period was due to the increase in box office revenue and the 0.9% increase in film cost percentage. The increase in film cost percentage is primarily due to the settlement rate on certain strong performing titles during the first quarter of 2012 being higher than the average film settlement rate.Cost of concessionsThe following table highlights the movement in concession cost and concession cost as a percentage of concession revenues ("concession cost percentage") for the quarter (in thousands of Canadian dollars, except concession cost percentage and concession margin per patron):Cost of concessionsFirst Quarter20122011ChangeConcession cost$15,770$13,64815.5%Concession cost percentage20.5%20.9%-0.4%Concession margin per patron$3.58$3.376.2%First QuarterCost of concessions varies primarily with theatre attendance as well as the quantity and mix of concession offerings sold. The increase in concession cost as compared to the prior year period was due to the 18.2% increase in concession revenues. The concession cost percentage of 20.5% was in line with the prior year period. The concession margin per patron increased from $3.37 in the first quarter of 2011 to $3.58 in the same period in 2012, reflecting the impact of the higher CPP during the period.Depreciation and amortizationThe following table highlights the movement in depreciation and amortization expenses during the quarter (in thousands of Canadian dollars):Amortization expensesFirst Quarter20122011ChangeAmortization of property, equipment and leaseholds$14,515$15,124-4.0%Amortization of intangible assets and other1,9392,248-13.7%Amortization expenses as reported$16,454$17,372-5.3%The first quarter decrease in amortization of property, equipment and leaseholds of $0.6 million primarily relates to the transfer of digital projection equipment to CDCP in June 2011 resulting in lower asset values to depreciate. Lower depreciation relating to the declining 35 millimeter projector base due to the circuit's conversion to digital also contributed to the decrease in amortization of property, equipment and leaseholds.(Gain) loss on disposal of assetsThe following table shows the movement in the (gain) loss on disposal of assets during the quarter (in thousands of Canadian dollars):(Gain) loss on disposal of assetsFirst Quarter20122011Change(Gain) loss on disposal of assets$(55)$537-110.2%First QuarterThe gain or loss on disposal of assets represents the gain or loss recorded on certain assets that were sold or otherwise disposed. For the first quarter of 2012, Cineplex recorded a gain of $0.1 million on the disposal of assets, compared to a loss of $0.5 million in the prior year period.Other costsOther costs include three main sub-categories of expenses, including theatre occupancy expenses, which capture the rent and associated occupancy costs for Cineplex's various operations; other operating expenses, which include the costs related to running Cineplex's theatres and ancillary businesses; and general and administrative expenses, which includes costs related to managing Cineplex's operations, including the head office expenses. Please see the discussions below for more details on these categories. The following table highlights the movement in other costs for the quarter (in thousands of Canadian dollars):Other costsFirst Quarter20122011ChangeTheatre occupancy expenses$41,708$41,5410.4%Other operating expenses57,86656,2322.9%General and administrative expenses15,57215,703-0.8%Total other costs$115,146$113,4761.5%Theatre occupancy expensesThe following table highlights the movement in theatre occupancy expenses for the quarter (in thousands of Canadian dollars):Theatre occupancy expensesFirst Quarter20122011ChangeRent$27,758$27,5760.7%Other occupancy14,20814,399-1.3%One-time items (i)(258)(434)-40.6%Total$41,708$41,5410.4%(i) One-time items include amounts related to both theatre rent and other theatre occupancy costs. They are isolated here to illustrate Cineplex's theatre rent and other theatre occupancy costs excluding these one-time, non-recurring items. Theatre occupancy continuityFirst QuarterOccupancy2011 as reported$41,541Impact of new theatres163Impact of disposed theatres(181)Same store rent change246Non-recurring items118Other(179)2012 as reported$41,708First QuarterTheatre occupancy expenses increased $0.2 million during the first quarter of 2012 compared to the prior year period. This increase was primarily due to higher same-store rent costs, including common-area maintenance and real estate taxes.Other operating expensesThe following table highlights the movement in other operating expenses during the quarter (in thousands of Canadian dollars):Other operating expensesFirst Quarter20122011ChangeOther operating expenses$57,866$56,2322.9%Other operating continuityFirst QuarterOther Operating2011 as reported$56,232Impact of new theatres154Impact of disposed theatres(362)Same store payroll change1,847Marketing change814Media(1,127)New Way Sales299Other92012 as reported$57,866First QuarterOther operating expenses increased $1.6 million during the first quarter of 2012 compared to the prior year period primarily due to higher business volumes in the 2012 period. The higher business volumes resulted in higher payroll costs ($1.8 million), with total theatre payroll accounting for 46.3% of total operating expenses during the first quarter of 2012 as compared to 44.5% for the same period one year earlier. Marketing expenses increased $0.8 million compared to the prior year period due to enhanced marketing programs supporting new and existing initiatives. One month of operations for NWS are included in other operating expenses in 2012 but not in 2011, resulting in a $0.3 million increase. These increases were partially offset by lower Media expenses ($1.1 million) due to the reduced Media activities during the quarter.General and administrative expensesThe following table highlights the movement in general and administrative ("G&A") expenses during the quarter, including share and unit based compensation costs, and G&A net of these costs (in thousands of Canadian dollars):G&A expensesFirst Quarter20122011ChangeG&A excluding LTIP and Option Plan expense$12,342$10,53617.1%LTIP2,5852,5780.3%Option plan6452,589-75.1%G&A expenses as reported$15,572$15,703-0.8%First QuarterG&A expenses decreased $0.1 million during the first quarter of 2012 compared to the prior year period, primarily due to a $1.9 million decrease in the expense for the option plan. This decrease was partially offset by higher professional fees ($0.6 million) relating to the creation of CSI and an internal corporate reorganization effected during the first quarter of 2012, and salary and general cost increases ($0.7 million).Effective January 1, 2012, the Board of Directors of Cineplex invoked Cineplex's right to substitute a cashless exercise for any requested exercise of options for cash, in accordance with the terms of the option plan. As a result of the change in administrative policy, the options may only be equity-settled, and are considered equity, not liabilities. The expense amount for options is determined at the time of their issuance, recognized over the vesting period of the options. Existing options at the time of the change in administrative policy have their remaining expense determined at the time of the change in administrative policy, recognized over the remaining vesting periods.Share of income of joint venturesCineplex's joint ventures in 2012 include its share of one theatre in Quebec, one IMAX screen in Ontario, its 50% interest in SCENE LP, its 78.2% interest in CDCP (formed in June 2011) and its 50% interest in CSI (formed January 31, 2012). For the 2011 period, Cineplex's joint ventures included one theatre in Quebec, one IMAX screen in Ontario and its interest in SCENE LP. The following table highlights the movement in the share of income of joint ventures during the quarter (in thousands of Canadian dollars):Share of (income) loss of joint venturesFirst Quarter20122011ChangeShare of CDCP$(75)$-NMShare of CSI(226)-NMShare of SCENE50(2,531)NMShare of other joint ventures(26)58NMTotal income of joint ventures$(277)$(2,473)-88.8%First QuarterThe decrease in income of joint ventures during the period was primarily due to the SCENE loyalty program. SCENE's results in the first quarter of 2011 include income relating to a change in accounting estimate for breakage resulting in a program-to-date adjustment to its outstanding points liability. Two of the joint ventures created subsequent to the first quarter of 2011 also contributed to the movement (CSI - income of $0.2 million and CDCP - income of $0.1 million).EBITDA and adjusted EBITDAThe following table represents EBITDA and adjusted EBITDA for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011 (expressed in thousands of Canadian dollars, except adjusted EBITDA margin):EBITDAFirst Quarter20122011ChangeEBITDA$41,269$30,70134.4%Adjusted EBITDA$41,139$31,23831.7%Adjusted EBITDA margin16.6%14.1%2.5%Adjusted EBITDA for the first quarter of 2012 increased $9.9 million, or 31.7%, as compared to the prior year period. This represents Cineplex's highest-ever first quarter adjusted EBITDA, exceeding the $34.7 million recorded in the first quarter of 2010 which featured Avatar, the highest grossing film of all-time. The increase over the prior year period was primarily due to the higher exhibition and concession revenues recorded in the period. Adjusted EBITDA margin, calculated as adjusted EBITDA divided by total revenues, was 16.6%, up 2.5% from 14.1% in the prior year period. Adjusted Free Cash Flow For the first quarter of 2012, adjusted free cash flow per common share of Cineplex was $0.480 as compared to $0.392 in the prior year period. The declared dividends per common share of Cineplex were $0.323 in the first quarter of 2012 and $0.315 in the prior year period. The payout ratios for these periods were 67% and 80%, respectively.This news release contains "forward-looking statements" within the meaning of applicable securities laws, such as statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in our Annual Information Form and in this news release. Those risks and uncertainties include adverse factors generally encountered in the film exhibition industry such as poor film product and unauthorized copying; the risks associated with national and world events, including war, terrorism, international conflicts, natural disasters, extreme weather conditions, infectious diseases, changes in income tax legislation; and general economic conditions. Many of these risks and uncertainties can affect our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf. All forward-looking statements in this news release are qualified by these cautionary statements. These statements are made as of the date of this news release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of Cineplex Inc. or Cineplex Entertainment Limited Partnership, their financial or operating results or their securities.About Cineplex Inc.Cineplex is the largest motion picture exhibitor in Canada and owns, leases or has a joint-venture interest in 130 theatres with 1,359 screens serving approximately 66 million guests annually. Headquartered in Toronto, Canada, Cineplex operates theatres from British Columbia to Quebec and is the exclusive provider of UltraAVX and the largest exhibitor of digital 3D and IMAX projection technologies in the country. Proudly Canadian and with a workforce of approximately 10,000 employees, the company operates the following top tier brands: Cineplex Odeon, Galaxy, Famous Players, Colossus, Coliseum, SilverCity, Cinema City and Scotiabank Theatres. Cineplex shares trade on the Toronto Stock Exchange (TSX) under the symbol "CGX". For more information, visit www.cineplex.com.Further information can be found in the disclosure documents filed by Cineplex with the securities regulatory authorities, available at www.sedar.com.You are cordially invited to participate in a teleconference call with the management of Cineplex (TSX:CGX) to review our quarterly results. Ellis Jacob, President and Chief Executive Officer and Gord Nelson, Chief Financial Officer, will host the call. The teleconference call is scheduled for:Thursday, May 10, 2012 10:00 a.m. Eastern TimeIn order to participate in the conference call, please dial 416-644-3417 or outside of Toronto dial 1-877-974-0446 at least five to ten minutes prior to 10:00 a.m. Eastern Time. Please quote the conference ID 4534140 to access the call.If you cannot participate in the live mode, a replay will be available. Please dial 416-640-1917 or 1-877-289- 8525 and enter code 4534140#. The replay will begin at 12:00 p.m. Eastern Time on Thursday, May 10, 2012 and end at 11:59 p.m. Eastern Time on Thursday, May 17, 2012. Note that media will be participating in the call in listen-only mode. Thank you in advance for your interest and participation. Cineplex Inc.Interim Consolidated Balance Sheets(Unaudited)(expressed in thousands of Canadian dollars)March 31,December 31,20122011AssetsCurrent assetsCash and cash equivalents$9,259$48,992Trade and other receivables30,03767,185Inventories4,0924,118Prepaid expenses and other current assets7,2243,72750,612124,022Non-current assetsProperty, equipment and leaseholds388,798389,532Deferred income taxes10,90612,052Fair value of interest rate contracts1,010-Interests in joint ventures39,27826,163Intangible assets82,44084,379Goodwill608,929608,929$1,181,973$1,245,077LiabilitiesCurrent liabilitiesAccounts payable and accrued expenses$80,939$112,285Share-based compensation-1,331Dividends payable6,5586,285Income taxes payable5,05017,485Deferred revenue62,37383,907Finance lease obligations2,1042,411Fair value of interest rate swap agreements638565Convertible debentures33,69876,864191,360301,133Non-current liabilitiesShare-based compensation6,6239,466Long-term debt167,676167,531Fair value of interest rate swap agreements-1,199Finance lease obligations22,22926,474Post-employment benefit obligations5,6865,688Other liabilities113,001103,727Deficiency interest in joint venture4,9628,250320,177322,335Total liabilities511,537623,468EquityShare capital813,569764,801Deficit(145,351)(140,469)Accumulated other comprehensive loss(309)(2,723)Contributed surplus2,527-670,436621,609$1,181,973$1,245,077Cineplex Inc.Interim Consolidated Statements of Operations (Unaudited)(expressed in thousands of Canadian dollars)Three monthsThree monthsended Marchended March31, 201231, 2011RevenuesBox office$149,413$129,956Concessions77,03765,154Other21,73626,282248,186221,392ExpensesFilm cost76,70765,544Cost of concessions15,77013,648Depreciation and amortization16,45417,372(Gain) loss on disposal of assets(55)537Other costs115,146113,476Share of income of joint ventures(277)(2,473)Interest expense4,3845,699Interest income(80)(232)228,049213,571Income before income taxes20,1377,821Provision for (recovery of) income taxesCurrent5,642-Deferred(613)8,6695,0298,669Net income (loss)$15,108$(848)Cineplex Inc.Interim Consolidated Statements of Comprehensive Income(Unaudited)(expressed in thousands of Canadian dollars)ThreeThreemonthsmonthsendedendedMarch 31,March 31,20122011Net income (loss)$15,108$(848)Other comprehensive income (loss)Income on hedging instruments3,324919Associated deferred income taxes expense(910)(2,073)Other comprehensive income (loss)2,414(1,154)Comprehensive income (loss)$17,522$(2,002)Cineplex Inc.Interim Consolidated Statements of Changes in Equity(Unaudited)(expressed in thousands of Canadian dollars)For the three months ended March 31, 2012 and 2011UnitShareContributedAccumulated othercapitalcapitalsurpluscomprehensive lossDeficitTotalBalance - January 1, 2012$-$764,801$-$(2,723)$(140,469)$621,609Share option liabilities reclassified--6,850--6,850Net income----15,10815,108Other comprehensive income---2,414-2,414Dividends declared----(19,140)(19,140)Long-term incentive plan obligation-(5,575)---(5,575)Long-term incentive plan shares-6,471---6,471Share option expense--646--646Issuance of shares upon exercise of options-4,969(4,969)---Issuance of shares on conversion of debentures-43,338---43,338Issuance of shares for cash-501---501Shares repurchased and cancelled-(936)--(850)(1,786)Balance - March 31, 2012$-$813,569$2,527$(309)$(145,351)$670,436Balance - January 1, 2011$710,121$-$1,407$(3,534)$(113,120)$594,874Effect of corporate conversion(710,121)744,760(1,407)--33,232Net loss----(848)(848)Other comprehensive loss---(1,154)-(1,154)Long-term incentive plan obligation-(4,306)---(4,306)Dividends declared----(18,111)(18,111)Long-term incentive plan shares-1,888---1,888Issuance of shares on conversion of debentures-1,823---1,823Balance - March 31, 2011$-$744,165$-$(4,688)$(132,079)$607,398Cineplex Inc.Interim Consolidated Statements of Cash Flows(Unaudited)(expressed in thousands of Canadian dollars)Three monthsThree monthsended Marchended March31, 201231, 2011Cash provided by (used in)Operating activitiesNet income (loss)$15,108$(848)Adjustments to reconcile net income (loss) to net cash provided by operating activitiesDepreciation and amortization of property, equipment and leaseholds, deferred charges and intangible assets16,45417,372Amortization of tenant inducements, rent averaging liabilities and fair value lease contract liabilities(935)(1,050)Accretion of debt issuance costs and other non-cash interest140233(Gain) loss on disposal of assets(55)537Deferred income taxes(613)8,669Interest rate swap agreements - non-cash interest916(96)Non-cash share-based compensation682218Accretion of convertible debentures172310Net change in interests in joint ventures2,665(2,468)Tenant inducements3,2972,855Changes in operating assets and liabilities(36,449)(17,879)Net cash provided by operating activities1,3827,853Investing activitiesProceeds from sale of assets1,1207Purchases of property, equipment and leaseholds(13,899)(12,421)Acquisition and formation of businesses, net of cash acquired(7,399)-Additional equity funding of CDCP(244)-Net cash used in investing activities(20,422)(12,414)Financing activitiesDividends paid(18,867)(12,070)Borrowings under credit facility30,00015,000Repayment of credit facility(30,000)(15,000)Payments under finance leases(541)(545)Proceeds from issuance of shares501-Acquisition of long-term incentive plan shares-(9,793)Purchase of shares for cancellation(1,786)-Net cash used in financing activities(20,693)(22,408)Decrease in cash and cash equivalents during the period(39,733)(26,969)Cash and cash equivalents - Beginning of period48,99285,343Cash and cash equivalents - End of period$9,259$58,374Supplemental informationCash paid for interest$1,944$3,764Cash paid for income taxes$18,120$-Cineplex Inc.Interim Consolidated Supplemental Information (Unaudited)(expressed in thousands of Canadian dollars) Reconciliation to Adjusted EBITDA Three months ended March 31,20122011Net income (loss)$15,108$(848)Depreciation and amortization (i)16,82817,413Interest expense4,3845,699Interest income(80)(232)Current income tax expense5,642-Deferred income tax (recovery) expense(613)8,669EBITDA$41,269$30,701(Gain) loss on disposal of assets(55)537CDCP equity income (ii)(75)-Adjusted EBITDA$41,139$31,238 (i)Includes the depreciation and amortization incurred by the joint ventures with the exception of CDCP (see (ii) below)(2012 - $374 thousand and 2011 - $41 thousand). (ii)CDCP equity income not included in adjusted EBITDA as CDCP is a limited-life financing vehicle that is funded byvirtual print fees collected from distributors. Components of Other Costs Other costsThree months ended March 31,20122011Theatre occupancy expenses$41,708$41,541Other operating expenses57,86656,232General and administrative expenses15,57215,703Total other costs$115,146$113,476Cineplex Inc.Interim Consolidated Supplemental Information(Unaudited)(expressed in thousands of Canadian dollars, except number of shares and per share data) Adjusted Free Cash Flow Three months ended March 31,20122011Cash provided by operating activities$1,382$7,853Less: Total capital expenditures(12,779)(12,414)Standardized free cash flow(11,397)(4,561)Add/(Less):Changes in operating assets and liabilities (i)36,44917,879Changes in operating assets and liabilities of joint ventures (i)(2,942)(5)Tenant inducements (ii)(3,297)(2,855)Principal component of financing lease obligations(541)(545)New build capital expenditures and other (iii)9,66010,090Share of income of joint ventures, net of non-cash depreciation (iv)5762,514Cash invested in CDCP (iv)(244)-Adjusted free cash flow$28,264$22,517Average number of Shares outstanding58,847,72857,468,588Adjusted free cash flow per Share$0.480$0.392(i) Changes in operating assets and liabilities are not considered a source or use of adjusted free cash flow (ii) Tenant inducements received are for the purpose of funding new theatre capital expenditures and are not considered a source of adjusted free cash flow. (iii) New build capital expenditures and other represent expenditures on Board approved projects as well as any expenditures for digital equipment that was contributed to CDCP, exclude maintenance capital expenditures, and are net of proceeds on asset sales. The Revolving Facility is available to Cineplex to fund Board approved projects. (iv) 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 cash distributions received from CDCP, are considered to be uses and sources of adjusted free cash flow. FOR FURTHER INFORMATION PLEASE CONTACT: Gord NelsonCineplex Inc.Chief Financial Officer(416) 323-6602ORPat MarshallCineplex Inc.Vice President Communications and Investor Relations(416) 323-6648