2021
Table of Contents
Chair of the Board of Directors' Letter to Shareholders .....................................................................................4
Chief Executive Officer's Letter to Shareholders ............................................................................................... 6
Management’s Discussion and Analysis.......................................................................................................... 9
Overview of Cineplex.................................................................................................................................. 11
Business Strategy......................................................................................................................................... 21
Cineplex’s Businesses.................................................................................................................................. 23
Overview of Operations............................................................................................................................... 29
Results of Operations................................................................................................................................... 33
Balance Sheets............................................................................................................................................. 53
Liquidity and Capital Resources.................................................................................................................. 55
Adjusted Free Cash Flow and Dividends..................................................................................................... 63
Share Activity .............................................................................................................................................. 64
Seasonality and Quarterly Results ............................................................................................................... 67
Related Party Transactions .......................................................................................................................... 69
Significant Accounting Judgments and Estimation Uncertainties ............................................................... 69
Accounting Policies ..................................................................................................................................... 71
Risks and Uncertainties ............................................................................................................................... 71
Controls and Procedures .............................................................................................................................. 82
Outlook ........................................................................................................................................................ 83
Non-GAAP and Other Financial Measures.................................................................................................. 84
Financial Statements and Notes................................................................................................................ 91
Management’s Report to Shareholders ......................................................................................................... 91
Independent Auditor’s Report....................................................................................................................... 92
Consolidated Balance Sheets ........................................................................................................................ 98
Consolidated Statements of Operations...................................................................................................... 100
Consolidated Statements of Comprehensive Loss...................................................................................... 101
Consolidated Statements of Changes in Equity .......................................................................................... 102
Consolidated Statements of Cash Flows..................................................................................................... 103
Notes to Consolidated Financial Statements............................................................................................... 104
Investor Information .................................................................................................................................... 167
Cineplex Inc.
Letter to Shareholders
Letter from the Chair of the Board
Dear fellow shareholders,
It is my pleasure to write you today as the Chair of the Board of Directors of
Cineplex Inc. I am honoured to be leading this great group of Directors and
to be part of an organization which I strongly support.
This year Cineplex will host a hybrid in-person and virtual Annual General
Meeting (“AGM”). Our meeting will be on Wednesday, May 25, 2022.
Registered shareholders and duly appointed proxyholders can participate in-
person or via live webcast, which will include voting on the motions put
forward and the ability to ask questions, all in real-time.
During the past two challenging years, the Board remained guided by our
corporate strategy and values, took decisive action to ensure the ongoing
viability of the Corporation, and upheld our commitment to our employees,
guests, shareholders, and the communities in which we operate.
Navigating the Prolonged Pandemic and Return to Normalcy
We continue to find ourselves in unprecedented times. As I look back on 2021, I take great pride in Cineplex’s
achievements and successful management of the impact of yet another year of the pandemic. Challenges posed
by new variants during the past year resulted in continued volatility and the prolonged provincial closures and
operating restrictions of our entertainment venues. However, our team’s agility, resilience, and focus on cost
management and liquidity have positioned us well to capitalize on the resurgence of our business as restrictions
continue to ease and we begin to see a return to normalcy.
Cineworld Litigation
The past year also entailed gratifying developments in Cineplex’s litigation against Cineworld. The Ontario
Superior Court of Justice held that Cineworld breached the Arrangement Agreement and awarded Cineplex
approximately $1.24 billion in damages. We are extremely pleased with this outcome and while Cineworld has
filed its Notice of Intent to Appeal the judgement, we remain confident in the Superior Court’s decision. We
have filed a Notice of Cross-Appeal and will defend the Superior Court’s decision.
We will continue pursuing compensation for what was a wrongful repudiation of the Arrangement Agreement
between Cineplex and Cineworld. The Board recognizes the significance of this matter and will take the
necessary steps to optimize the value of this litigation.
Continued Good Governance and Corporate Citizenship
As your Board, we are committed to promoting excellent corporate governance. Throughout this past year, the
Board worked closely with senior management to ensure the financial health of the Corporation and to drive
strategic initiatives geared towards value creation for shareholders.
Over the last year, Cineplex and the Board remained committed to our employees and community partners.
While we have a long history of corporate responsibility and sustainability, these past two years have
demonstrated the importance of a renewed focus on the health and safety of our employees, guests, and
communities. We are proud of the numerous initiatives we have taken in this regard, including an industry-
leading health and safety protocol (“VenueSafe”). Furthermore, Cineplex’s commitment to its community
partners was made even more evident this year by our unwavering support for local communities across the
CINEPLEX INC. 2021 ANNUAL REPORT
LETTER TO SHAREHOLDERS
4
Cineplex Inc.
Letter to Shareholders
country during the pandemic. Even with our network of theatres and entertainment venues closed for the first
half of the year, contributions were made from across Cineplex’s businesses to assist communities in times of
need. In addition, Cineplex has integrated sustainability initiatives across its ecosystem and is taking steps
through three inter-connected environmental issues: waste, energy consumption, and eco-friendly materials.
Commitment to Inclusion and Diversity
As we continue to prioritize inclusion and diversity within the Corporation, I am proud to report that Cineplex
was an early adopter of the Catalyst Accord and is a member of the international Catalyst-affiliated “30% Club”.
Today, forty-four percent of our Board is comprised of females and 44% is comprised of underrepresented
groups. As at year end, 30% of executive management and 28% of senior management are women.
In addition to the Corporation’s long-standing commitment to inclusion, in 2020, Mr. Jacob signed the Black
North Initiative CEO Pledge, which includes a commitment to hire a minimum of one Black leader to fill an
executive or Board member role in Canada by 2025. Also, in recognition of National Indigenous Peoples Day
on June 21, 2021, we donated $1 from every movie ticket sold, as well as purchases across our ecosystem to
imagineNATIVE – the world’s largest presenter of Indigenous screen content. In addition to these initiatives,
we provide venues and platforms to promote content and lend a voice to these and other underrepresented
communities.
Path Forward: The Future is Bright
As we resume operations across our circuit of theatres and entertainment venues at full capacity, Cineplex is
moving to the next phase of its recovery. With the pent-up consumer demand for out-of-home entertainment and
the abundance of film product available, we have renewed confidence for a bright future ahead.
On behalf of the entire Board, I extend our thanks and appreciation to the management team and to all employees
for their hard work, passion, and dedication during what has been another challenging year for Cineplex. I look
forward to connecting with you at our AGM, but should you wish to contact me directly, please email me at
boardchair@cineplex.com.
Sincerely yours,
Phyllis Yaffe
Chair of the Board, Cineplex Inc.
boardchair@cineplex.com
CINEPLEX INC. 2021 ANNUAL REPORT
LETTER TO SHAREHOLDERS
5
Cineplex Inc.
Letter to Shareholders
Letter from the CEO
Dear fellow shareholders,
Throughout 2021, our team worked diligently to mitigate the negative
effects of COVID-19, support the Corporation’s long-term stability,
protect the health and safety of our employees and guests, and advance
growth initiatives. Unfortunately, governmental operating restrictions
arising from new variants including mandated closures, provincial
capacity restrictions, and prohibitions on concessions sales impacted our
annual results significantly.
Despite these challenges, I am pleased to report that Cineplex and the
exhibition industry continue to make significant progress in recovering
from the effects of the pandemic. In the latter part of the year, the industry
witnessed record-breaking results from films such as Shang-Chi and the
Legends of the Ten Rings and Spider-Man: No Way Home, which
generated over $1 billion of global box office revenues within two weeks
of its release and is the third-highest grossing movie in history at the
domestic box office. The high demand for out-of-home entertainment that
we experienced during operating periods was encouraging, and Cineplex
is well positioned to capitalize on this demand now that operating restrictions are being lifted and we return to
normalcy.
Positive Momentum Across All Businesses During Operational Periods
While our theatres and entertainment venues were closed for the first half of 2021, we saw encouraging results
across all business lines once we were able to reopen from mid-July to early December of 2021. During our
periods of operation, box office revenues were progressively approaching pre-pandemic levels with October
2021 reaching 80% of the same month in 2019. We also saw strong momentum in our Media businesses and our
Amusement and Leisure businesses in the second half of the year.
With the onset of the COVID-19 Omicron variant, provincially mandated operating restrictions and closures
were reinstated across Canada in December 2021. Further operating restrictions, including restrictions on
concession sales were extended to additional regions, including our largest market, Ontario. The timing of the
restrictions was extremely unfortunate as the last two weeks of December account for a material portion of our
business, typically delivering around 30% of our fourth quarter box office revenues. This prevented us from
realizing the full benefits of the highly anticipated release Spider-Man: No Way Home. However, we know from
our box office results prior to the most recent closures, as well as box office results from our peers in the United
States and across the globe that guests are excited to be back in theatres when given the opportunity.
Despite the numerous challenges we faced, all our business segments generated positive adjusted EBITDAaL1
for the last two quarters of 2021. In Q4 2021 we delivered our strongest quarter in two years, reporting our first
quarter without a net cash burn1 since the beginning of the pandemic, generating positive net cash from operating
activities of $27.5 million compared to negative $61.0 million in Q4 2020.
For the year ended 2021, total revenues increased 57% to $656.8 million compared to $418.3 million in 2020.
During this period, attendance grew from 13.1 million to 20.1 million, box office revenues per patron1 (“BPP”)
increased from $10.17 to $11.77, and while Q4 2021 concession revenues per patron1 (“CPP”) was significantly
impacted by restrictions on concession sales, we still set an-all time annual record CPP1 of $7.93. We
1 Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP and Other Financial Measures” section of the MD&A.
CINEPLEX INC. 2021 ANNUAL REPORT
LETTER TO SHAREHOLDERS
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Cineplex Inc.
Letter to Shareholders
significantly improved our net loss during the year to $248.7 million from $629.0 million in 2020 and improved
adjusted EBITDAaL2 to a loss of $84.3 million from $182.8 million in 2020. Through a combination of
attendance growth, positive contribution from our non-theatrical businesses, and strong working capital
management, we generated positive net cash from operating activities of $61.0 million in 2021 compared to
negative $106.3 million in 2020.
Proactive Efforts to Reinstate Financial Stability
Throughout 2021, we took proactive steps to restore financial stability and prepared for potential challenges
arising from new COVID variants. We also continued our focus on minimizing cash burn and managing costs
across all business lines and added liquidity, which included government subsidies where possible.
Key liquidity events for the year include receiving $62.6 million in income taxes recoverable to date, the head
office sale-leaseback proceeds of $57 million received in the first quarter, as well as the issuance of $250 million
in the form of Second Lien Secured Notes in Q1. Moreover, with the onset of Omicron in December 2021, we
immediately and proactively worked with our supportive lenders and obtained the continued suspension of
financial covenant testing until the end of the second quarter of 2022. This continued support speaks volumes
about our lenders’ confidence in our business plan and our expected recovery. Overall, our team has taken
significant measures to manage the financial uncertainties created by COVID-19 and we believe we have
positioned the corporation well to withstand any further pressures in the near-term.
Advanced Growth Initiatives
We have always provided our guests with an exceptional experience, but now more than ever we are taking steps
to drive attendance and moviegoing frequency. During the third quarter, we launched our entertainment
subscription program, CineClub, which provides members with benefits in our theatres, location-based
entertainment venues, and at the Cineplex Store. So far, CineClub has received a positive response from our
guests despite the impacts of operating restrictions late in the year. Also, in Q3, we launched our new brand
platform – Where Escape Begins – to welcome guests back to theatres and remind them of what they’ve been
missing for far too long. In addition, during the fourth quarter, we announced the launch of Scene+. This
enhanced rewards program brings together two of Canada’s favourite loyalty programs, SCENE and Scotia
Rewards. Scene+ members will still enjoy the much-loved features and rewards for movies, entertainment and
dining, while also adding the option of earning and redeeming points for travel, shopping and banking. This
strategic alignment creates huge opportunities for the future of the Scene+ program and enables our team to
reach and entertain even more guests and movie-lovers than ever before.
Last year, we opened three new VIP locations each in Montreal (Quebec), Burnaby (British Columbia), and
Calgary (Alberta). We also opened one Playdium location in Dartmouth (Nova Scotia) and two new locations
of The Rec Room in Burnaby (British Columbia) and Barrie (Ontario) in 2021. With these additions, we now
have location-based entertainment venues open coast-to-coast and expect to realize benefits from these new
locations as we move forward.
Finally, we are also exploring alternative content offerings including the expansion of our distribution business
(“Cineplex Pictures”) for select feature films in Canada. With this initiative, we see growth opportunities where
we can leverage Cineplex’s numerous assets and database to promote and find audiences for film product which
might not otherwise have played in Canada. This is in addition to our ongoing efforts to increase and diversify
content through international titles and other alternative programming through “Cineplex Events”, where we are
experiencing tremendous success.
2 Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP and Other Financial Measures” section of the MD&A.
CINEPLEX INC. 2021 ANNUAL REPORT
LETTER TO SHAREHOLDERS
7
Cineplex Inc.
Letter to Shareholders
Cineworld Litigation
The past year also entailed gratifying developments in Cineplex’s litigation against Cineworld. The Ontario
Superior Court of Justice held that Cineworld breached the Arrangement Agreement and awarded Cineplex
approximately $1.24 billion in damages. We are extremely pleased with this outcome and while Cineworld has
filed its Notice of Intent to Appeal the judgement, we remain confident in the Superior Court’s decision. We
have filed a Notice of Cross-Appeal and will defend the Superior Court’s decision.
We will continue pursuing compensation for what was a wrongful repudiation of the Arrangement Agreement
between Cineplex and Cineworld. Together with the help of our Board, we will take the necessary steps to
optimize the value of this litigation.
Path Forward – The Future is Bright
Cineplex has an exciting year and future ahead. We remain confident in the strength of our businesses and our
efforts to control costs and manage financial uncertainties. We are encouraged by this year’s strong film slate
and the momentum that we are seeing in all our businesses. Our studio partners are gravitating towards an
exclusive theatrical window and continue to acknowledge the important role theatrical exhibition plays in
elevating content. Our theatres and entertainment venues are now open countrywide, and we expect the
remaining restrictions to be lifted in the coming weeks. Above all, we are thrilled to be back doing what we do
best, entertaining Canadians – something we’ve been proudly doing for 100 years!
I am extremely proud of the Cineplex team and want to thank them for their agility, resourcefulness and
willingness to make sacrifices as we worked together to accomplish all that we did. I also want to thank our
Board of Directors for its ongoing support and sound advice during these unprecedented times. Finally, I want
to thank our customers, partners, guests and investors for their ongoing support and belief in Cineplex.
Sincerely,
Ellis Jacob
President and CEO, Cineplex Inc.
CINEPLEX INC. 2021 ANNUAL REPORT
LETTER TO SHAREHOLDERS
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Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
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MANAGEMENT’S DISCUSSION AND ANALYSIS
February 10, 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 December 31, 2021 and all amounts are in
Canadian dollars.
Cineplex Inc.
Management’s Discussion and Analysis
MANAGEMENT’S DISCUSSION AND ANALYSIS CONTENTS
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Section Contents
Non-GAAP and Other Financial Measures
Cineplex reports on certain non-GAAP measures, non-GAAP ratios, supplementary financial measures and total
segments measure 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.
Overview of Cineplex
Business strategy
Cineplex’s businesses
Overview of operations
Results of operations
Balance sheets
Liquidity and capital resources
Adjusted free cash flow and dividends
Share activity
Seasonality and quarterly results
Related party transactions
Significant accounting judgments and estimation uncertainties
Accounting policies
Risks and uncertainties
Controls and procedures
Outlook
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:
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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. The situation continues to evolve and the social and economic effects are widespread. 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
include, among other things, the introduction of vaccine passports or proof of vaccination mandates, social
distancing measures and restrictions including those on capacity. The uncertainty of the timing of the reductions of
many government-imposed restrictions may potentially have negative effects on Cineplex’s businesses. Restrictions
imposed in many of the markets in which Cineplex operates are gradually being lifted as COVID-19 cases decline
CINEPLEX INC. 2021 ANNUAL REPORT
across the country, providing clearer visibility for the reopening of Cineplex’s business and the return to normalcy.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cineplex is actively monitoring the situation and is adapting its business strategies as the impact of the COVID-19
9
pandemic evolves.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
By their very nature, forward-looking statements involve inherent risks and uncertainties, including those described
in Cineplex’s Annual Information Form (“AIF”), 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 duration and impact of the COVID-19 pandemic on Cineplex, the movie exhibition industry and
the economy in general, as well as Cineplex’s response to the COVID-19 pandemic as it relates to the closure of its
theatres and LBE venues, employee reductions and other cost-cutting initiatives, and increased expenses relating to
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
1
2
Cineplex Inc.
Management’s Discussion and Analysis
Non-GAAP and Other Financial Measures
—————————————————————————————————————————————
Cineplex reports on certain non-GAAP measures, non-GAAP ratios, supplementary financial measures and total
segments measure 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
•
•
Cineplex Inc.
Management's Discussion and Analysis
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. The situation continues to evolve and the social and economic effects are widespread. 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
include, among other things, the introduction of vaccine passports or proof of vaccination mandates, social
distancing measures and restrictions including those on capacity. The uncertainty of the timing of the reductions of
many government-imposed restrictions may potentially have negative effects on Cineplex’s businesses. Restrictions
imposed in many of the markets in which Cineplex operates are gradually being lifted as COVID-19 cases decline
across the country, providing clearer visibility for the reopening of 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 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
Cineplex Inc.
not limited to, the duration and impact of the COVID-19 pandemic on Cineplex, the movie exhibition industry and
Management’s Discussion and Analysis
the economy in general, as well as Cineplex’s response to the COVID-19 pandemic as it relates to the closure 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, 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.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
2
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
CINEPLEX INC. 2021 ANNUAL REPORT
LP (“Scene+”), Canada’s largest entertainment and lifestyle loyalty program.
MANAGEMENT'S DISCUSSION AND ANALYSIS
10
Cineplex’s theatre circuit is concentrated in major metropolitan and mid-sized markets. As of December 31, 2021,
Cineplex owned, leased or had a joint venture interest in 1,652 screens in 160 theatres from coast to coast as well as
13 LBE venues in six provinces.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
3
Cineplex Inc.
Management’s Discussion and Analysis
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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, 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
Cineplex Inc.
are made as of the date hereof and are qualified by these cautionary statements. Additional information, including
Management's Discussion and Analysis
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 (“Scene+”), Canada’s largest entertainment and lifestyle loyalty program.
Cineplex’s theatre circuit is concentrated in major metropolitan and mid-sized markets. As of December 31, 2021,
Cineplex owned, leased or had a joint venture interest in 1,652 screens in 160 theatres from coast to coast as well as
Cineplex Inc.
13 LBE venues in six provinces.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Cineplex
Theatre locations and screens at December 31, 2021
Locations
Screens
Screens UltraAVX
3D Digital
IMAX
Screens (i)
VIP
Auditoriums
D-BOX
Auditoriums
Recliner
Auditoriums
Other
Screens (ii)
Province
Ontario
Quebec
British Columbia
Alberta
Nova Scotia
Saskatchewan
Manitoba
New Brunswick
Newfoundland &
Labrador
Prince Edward Island
67
17
25
20
11
6
5
5
2
2
722
220
236
213
90
54
49
41
14
13
356
88
125
114
43
28
26
20
9
6
41
10
16
20
1
3
1
2
—
—
94
13
3
3
2
1
1
1
—
1
—
25
48
9
20
16
—
3
3
—
—
—
99
48
7
16
16
2
3
2
2
1
1
108
11
17
43
83
—
16
—
—
—
—
1
1
6
1
1
1
—
—
—
22
TOTALS
160
1,652
815
98
267
Percentage of
screens
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
49 %
2 %
6 %
6 %
6 %
16 %
1 %
3
(i) All IMAX screens are 3D enabled. Total 3D screens including IMAX screens are 840 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
2021
2020
Theatres
Screens
3D Digital Screens
UltraAVX Screens
IMAX Screens
VIP Auditoriums
D-BOX Locations
Recliner Screens
Other Screens
Cineplex - LBE - at December 31, 2021
Province
Ontario
Alberta
Manitoba
Newfoundland & Labrador
British Columbia
Nova Scotia
TOTALS
Q4
Q3
Q2
160
161
160
Q1
161
Q4
Q3
Q2
Q1
162
164
164
164
1,652
1,656
1,651
1,657
1,667
1,687
1,687
1,687
815
816
816
816
819
826
826
826
94
25
99
98
267
22
94
25
94
98
262
19
94
25
84
98
253
19
94
25
84
98
253
19
94
25
89
98
258
19
2021
94
25
84
99
221
19
94
25
84
99
221
19
2020
94
25
84
99
221
19
The Rec Room
Playdium
The Rec Room
Playdium
4
3
1
1
1
—
10
2
2
3
CINEPLEX INC. 2021 ANNUAL REPORT
—
3
—
MANAGEMENT'S DISCUSSION AND ANALYSIS
11
—
—
1
—
—
1
3
1
—
—
8
—
—
—
2
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
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
4
Cineplex Inc.
Management’s Discussion and Analysis
Theatre locations and screens at December 31, 2021
—————————————————————————————————————————————
Locations
Screens
Screens UltraAVX
Screens (i)
Auditoriums
Auditoriums
Auditoriums
Screens (ii)
3D Digital
IMAX
VIP
D-BOX
Recliner
Other
Cineplex
Province
Ontario
Quebec
British Columbia
Alberta
Nova Scotia
Saskatchewan
Manitoba
New Brunswick
Newfoundland &
Labrador
Prince Edward Island
67
17
25
20
11
6
5
5
2
2
722
220
236
213
90
54
49
41
14
13
356
88
125
114
43
28
26
20
9
6
41
10
16
20
1
3
1
2
—
—
13
3
3
2
1
1
1
—
1
—
48
9
20
16
—
3
3
—
—
—
48
7
16
16
2
3
2
2
1
1
108
11
17
43
83
—
16
—
—
—
—
267
1
1
6
1
1
1
—
—
—
22
16 %
1 %
TOTALS
Cineplex Inc.
Percentage of
screens
Management's Discussion and Analysis
(i) All IMAX screens are 3D enabled. Total 3D screens including IMAX screens are 840 screens or 51% of the circuit.
1,652
49 %
160
815
2 %
6 %
6 %
6 %
25
94
99
98
(ii) Other screens includes 4DX, Cineplex Clubhouse and ScreenX.
Cineplex - Theatres, screens and premium offerings in the last eight quarters
2021
2020
Theatres
Screens
3D Digital Screens
UltraAVX Screens
IMAX Screens
VIP Auditoriums
D-BOX Locations
Recliner Screens
Other Screens
Cineplex - LBE - at December 31, 2021
Province
Ontario
Alberta
Manitoba
Newfoundland & Labrador
British Columbia
Nova Scotia
TOTALS
Q4
Q3
Q2
160
161
160
Q1
161
Q4
Q3
Q2
Q1
162
164
164
164
1,652
1,656
1,651
1,657
1,667
1,687
1,687
1,687
815
816
816
816
819
826
826
826
94
25
99
98
267
22
94
25
94
98
262
19
94
25
84
98
253
19
94
25
84
98
253
19
94
25
89
98
258
19
2021
94
25
84
99
221
19
94
25
84
99
221
19
2020
94
25
84
99
221
19
The Rec Room
Playdium
The Rec Room
Playdium
4
3
1
1
1
—
10
2
—
—
—
—
1
3
3
3
1
1
—
—
8
2
—
—
—
—
—
2
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
Cineplex Inc.
immediately introduced enhanced cleaning protocols and reduced theatre capacities to promote social distancing. By
Management’s Discussion and Analysis
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.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
4
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. The reinstated
restrictions significantly impacted Cineplex’s ability to benefit from the strong slate of films released during the
busiest weeks of the fourth quarter of 2021 including Spider-Man: No Way Home and Sing 2. Subsequent to
December 31, 2021, social gathering restrictions were further modified or reinstituted in several key markets in
which Cineplex operates, resulting in theatre closures and prohibiting indoor dining 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. Cineplex is continuously monitoring operating restrictions and adjusts operating capacities in
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
accordance with government directives.
12
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
5
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
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
Cineplex Inc.
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
Management's Discussion and Analysis
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. The reinstated
restrictions significantly impacted Cineplex’s ability to benefit from the strong slate of films released during the
busiest weeks of the fourth quarter of 2021 including Spider-Man: No Way Home and Sing 2. Subsequent to
December 31, 2021, social gathering restrictions were further modified or reinstituted in several key markets in
which Cineplex operates, resulting in theatre closures and prohibiting indoor dining 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
Cineplex Inc.
levels, respectively. Cineplex is continuously monitoring operating restrictions and adjusts operating capacities in
Management’s Discussion and Analysis
accordance with government directives.
—————————————————————————————————————————————
In Canada, most provinces have adopted a phased approach to reopening businesses subsequent to each closure. The
plan includes mandatory proof of vaccination for people attending certain social and recreational settings and events
which includes indoor dining, performance venues, cinemas, sports venues, gyms, arcades, amusement parks,
recreation centres and sports and physical activities. The following table reflects the current status to the date of this
MD&A. The reopening plans are subject to frequent change.
Province
British
Columbia
Cinemas open at 50% capacity per auditorium.
Proof of vaccination required effective September 13, 2021.
Theatres
Alberta
Cinemas open to a maximum of 500 per auditorium.
Saskatchewan
Cinemas open at 100% capacity.
Proof of vaccination required effective October 1, 2021.
Manitoba
Ontario
Quebec
New
Brunswick
Nova Scotia
Cinemas open at 50% capacity.
Proof of vaccination required effective September 3, 2021.
Cinemas open at 50% capacity per auditorium. Permitted to operate at
100% capacity effective February 21, 2022.
Proof of vaccination required effective September 22, 2021.
Cinemas open at 50% capacity up to 500 per auditorium. Permitted to
operate at 100% capacity effective February 28, 2022.
Proof of vaccination required effective September 1, 2021.
Cinemas open at 50% capacity with physical distancing measures in
place.
Proof of vaccination required effective September 22, 2021.
Cinemas open at 25% capacity up to 50 per auditorium with physical
distancing measures.
Proof of vaccination required effective October 4, 2021.
Restaurants
Restaurants open at 50% capacity with a
maximum of 6 guests per table.
Proof of vaccination required effective
September 13, 2021.
Restaurants open with capacity limits that vary
to a maximum of 500 persons per building
depending on building size.
Restaurants open at 100% capacity.
Proof of vaccination required effective October
1, 2021.
Restaurants open at 50% capacity.
Proof of vaccination required effective
September 3, 2021.
Restaurants open at 50% capacity. Permitted to
operate at 100% capacity effective February 21,
2022.
Proof of vaccination required effective
September 22, 2021.
Restaurants open at 50% capacity with a
maximum of 4 guests per table.
Proof of vaccination required effective
September 1, 2021.
Restaurants open at 50% capacity.
Proof of vaccination required effective
September 22, 2021.
Restaurants open at 50% capacity with physical
distancing measures with a maximum of 10
guests per table.
Proof of vaccination required effective October
4, 2021.
Prince Edward
Island
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
Cinemas open at 50 per building. Permitted to operate at 50% capacity
effective February 17, 2022.
Proof of vaccination required effective October 5, 2021.
Cinemas open at the lower of 25% capacity or 50 per auditorium.
Permitted to operate at 50% capacity per auditorium effective
February 14, 2022.
Proof of vaccination required effective October 22, 2021.
Newfoundland
Restaurants open at 50% capacity.
Proof of vaccination required effective October
5, 2021.
Restaurants open at 50% capacity with a
maximum of 10 guests per table.
Proof of vaccination required effective October
22, 2021.
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 to 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 INC. 2021 ANNUAL REPORT
Cineplex’s business (Section 7.4, Long-term debt);
MANAGEMENT'S DISCUSSION AND ANALYSIS
13
July 2020: issued convertible unsecured subordinated debentures (the “Debentures”) for net proceeds of
$303.3 million, (Section 7.4, Long-term debt);
November 2020: entered into the Second Credit Agreement Amendment providing further financial
covenant relief (Section 7.4, Long-term debt);
$60.0 million with respect to the reorganization;
December 2020: entered into an agreement to enhance and expand the SCENE loyalty program receiving
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 has been received as of December 31, 2021);
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
5
6
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
In Canada, most provinces have adopted a phased approach to reopening businesses subsequent to each closure. The
plan includes mandatory proof of vaccination for people attending certain social and recreational settings and events
which includes indoor dining, performance venues, cinemas, sports venues, gyms, arcades, amusement parks,
recreation centres and sports and physical activities. The following table reflects the current status to the date of this
MD&A. The reopening plans are subject to frequent change.
Province
British
Columbia
Cinemas open at 50% capacity per auditorium.
Proof of vaccination required effective September 13, 2021.
Theatres
Alberta
Cinemas open to a maximum of 500 per auditorium.
Saskatchewan
Cinemas open at 100% capacity.
Proof of vaccination required effective October 1, 2021.
Manitoba
Cinemas open at 50% capacity.
Proof of vaccination required effective September 3, 2021.
Ontario
Cinemas open at 50% capacity per auditorium. Permitted to operate at
100% capacity effective February 21, 2022.
Proof of vaccination required effective September 22, 2021.
Quebec
Cinemas open at 50% capacity up to 500 per auditorium. Permitted to
Restaurants open at 50% capacity with a
operate at 100% capacity effective February 28, 2022.
Proof of vaccination required effective September 1, 2021.
New
Brunswick
place.
Cinemas open at 50% capacity with physical distancing measures in
Proof of vaccination required effective September 22, 2021.
September 22, 2021.
Nova Scotia
Cinemas open at 25% capacity up to 50 per auditorium with physical
distancing measures.
Proof of vaccination required effective October 4, 2021.
guests per table.
Restaurants
Restaurants open at 50% capacity with a
maximum of 6 guests per table.
Proof of vaccination required effective
September 13, 2021.
Restaurants open with capacity limits that vary
to a maximum of 500 persons per building
depending on building size.
Restaurants open at 100% capacity.
Proof of vaccination required effective October
1, 2021.
Restaurants open at 50% capacity.
Proof of vaccination required effective
September 3, 2021.
Restaurants open at 50% capacity. Permitted to
operate at 100% capacity effective February 21,
2022.
Proof of vaccination required effective
September 22, 2021.
maximum of 4 guests per table.
Proof of vaccination required effective
September 1, 2021.
Restaurants open at 50% capacity.
Proof of vaccination required effective
Restaurants open at 50% capacity with physical
distancing measures with a maximum of 10
Proof of vaccination required effective October
4, 2021.
Restaurants open at 50% capacity.
Proof of vaccination required effective October
5, 2021.
Restaurants open at 50% capacity with a
maximum of 10 guests per table.
Proof of vaccination required effective October
22, 2021.
Cinemas open at 50 per building. Permitted to operate at 50% capacity
effective February 17, 2022.
Proof of vaccination required effective October 5, 2021.
Cinemas open at the lower of 25% capacity or 50 per auditorium.
Permitted to operate at 50% capacity per auditorium effective
February 14, 2022.
Proof of vaccination required effective October 22, 2021.
Cineplex Inc.
Newfoundland
Management's Discussion and Analysis
Prince Edward
Island
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 to 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 7.4, Long-term debt);
July 2020: issued convertible unsecured subordinated debentures (the “Debentures”) for net proceeds of
$303.3 million, (Section 7.4, Long-term debt);
November 2020: entered into the Second Credit Agreement Amendment providing further financial
covenant relief (Section 7.4, 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 has been received as of December 31, 2021);
February 2021: entered into the Third Credit Agreement Amendment providing further financial covenant
relief (Section 7.4, 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 7.4, Long-term debt); and
December 2021: entered into the Fourth Credit Agreement Amendment providing further financial
covenant relief (Section 7.4, Long-term debt).
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
•
•
•
•
•
6
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 further expanding in
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 deferral;
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 provides wage and rent
subsidies for businesses that have faced revenue losses, with a subsidy rate of up to 75%;
continued evaluation of Cineplex’s eligibility under other relief programs; and
continued the suspension of dividends.
The COVID-19 pandemic continues to have a material negative effect on all aspects of Cineplex’s businesses
resulting in material decreases in revenues, results of operations and cash flows. As a result of the reopening of its
CINEPLEX INC. 2021 ANNUAL REPORT
theatres, Cineplex was able to significantly reduce its average monthly net cash burn to an approximately net neutral
MANAGEMENT'S DISCUSSION AND ANALYSIS
14
position during the fourth quarter of 2021 (defined as net cash provided by (used in) operating activities adjusted for
changes in operating assets and liabilities, less repayments of lease obligations - principal and net capital
expenditures, plus net cash received from CDCP) compared to the prior six quarters, however, Cineplex continues to
be materially impacted by capacity and other restrictions in major markets in which it operates.
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 payroll and theatre occupancy. With higher revenues from the reopening of
theatres that commenced during the third quarter, variable wage and rent subsidy rates which were designed to
reduce with revenue growth, have declined and Cineplex recognized no additional subsidy receipts with respect to
the CEWS and CERS programs beyond October with both programs coming to an end on October 23, 2021.
However, in December of 2021, capacity restrictions or closure requirements were reinstituted in several key
markets in which Cineplex operates, including Ontario, New Brunswick, Nova Scotia, Quebec, British Columbia
and Prince Edward Island, materially impacting its ability to benefit from highly anticipated film releases. Cineplex
was able to mitigate these losses through the recognition of wage and rent subsidies of $9.4 million and $1.1 million,
respectively, from Canada’s THRP. With respect to theatre occupancy expenses, Cineplex has continued to work
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
7
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
February 2021: entered into the Third Credit Agreement Amendment providing further financial covenant
relief (Section 7.4, 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 7.4, Long-term debt); and
December 2021: entered into the Fourth Credit Agreement Amendment providing further financial
covenant relief (Section 7.4, 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 further expanding in
the first quarter of 2022;
quarters of 2020;
cancellation;
entertainment);
requests;
contractual payments;
reduced full-time employee salaries by agreement with such employees during the second and third
suspended or deferred current capital spending, reviewing all capital projects to consider either deferral or
reduced non-essential discretionary operational expenditures (such as spending on marketing, travel and
implemented a more stringent review and approval process for all outgoing procurement and payment
continued negotiations with landlords for cash payments in exchange for the sale of contractual rights or
negotiating rent relief, including abatements, reductions and deferral;
worked with major suppliers and other business partners to modify the timing and quantum of certain
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 provides wage and rent
subsidies for businesses that have faced revenue losses, with a subsidy rate of up to 75%;
continued evaluation of Cineplex’s eligibility under other relief programs; and
continued the suspension of dividends.
Cineplex Inc.
Management's Discussion and Analysis
•
•
The COVID-19 pandemic continues to have a material negative effect on all aspects of Cineplex’s businesses
resulting in material decreases in revenues, results of operations and cash flows. As a result of the reopening of its
theatres, Cineplex was able to significantly reduce its average monthly net cash burn to an approximately net neutral
position during the fourth quarter of 2021 (defined as net cash provided by (used in) operating activities adjusted for
changes in operating assets and liabilities, less repayments of lease obligations - principal and net capital
expenditures, plus net cash received from CDCP) compared to the prior six quarters, however, Cineplex continues to
be materially impacted by capacity and other restrictions in major markets in which it operates.
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 payroll and theatre occupancy. With higher revenues from the reopening of
theatres that commenced during the third quarter, variable wage and rent subsidy rates which were designed to
reduce with revenue growth, have declined and Cineplex recognized no additional subsidy receipts with respect to
the CEWS and CERS programs beyond October with both programs coming to an end on October 23, 2021.
However, in December of 2021, capacity restrictions or closure requirements were reinstituted in several key
markets in which Cineplex operates, including Ontario, New Brunswick, Nova Scotia, Quebec, British Columbia
Cineplex Inc.
and Prince Edward Island, materially impacting its ability to benefit from highly anticipated film releases. Cineplex
was able to mitigate these losses through the recognition of wage and rent subsidies of $9.4 million and $1.1 million,
Management’s Discussion and Analysis
respectively, from Canada’s THRP. With respect to theatre occupancy expenses, Cineplex has continued to work
—————————————————————————————————————————————
with its landlord partners subsequent to the government-imposed lockdowns to obtain relief measures, resulting in
significantly reduced cash rent being paid in 2020 and 2021. Including the sale of certain restrictive lease rights to
landlords undertaken in the third quarter of 2020, Cineplex was able to materially reduce net cash lease outflows on
an annual basis by $72.5 million in 2020. As a result of ongoing discussions with landlords, Cineplex was able to
reduce net cash lease outflows by $6.6 million during the fourth quarter of 2021 ($36.1 million year to date
including the sale of certain lease rights for $6.4 million in 2021). The negotiated lease obligation savings represent
forgiveness of lease payments. Cineplex remains focused on identifying opportunities to extract value under its
existing lease agreements.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
7
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 once again in both our theatres and other
entertainment venues.
While the specific protocols will evolve over time with the emergence from the pandemic, VenueSafe will remain
consistent across all of Cineplex’s venues as health and safety remain a top priority and top of mind for our guests.
Some of the measures include:
•
•
•
•
improved ventilation systems to improve the delivery of clean air;
reserved seating in all auditoriums across Canada; specially designed games-floor and dining-space
configurations in LBE venues;
reduced capacity based on province-specific guidelines;
enhanced cleaning practices throughout the facilities, with particular focus on high-contact surfaces,
restrooms and seats;
safety signage throughout theatres and LBE venues;
ensuring employees have the personal protective equipment they need and as required by law; and
•
•
• making hand sanitizer readily available for guests and employees throughout the buildings.
Canada’s vaccination rate has made tremendous progress during the year with a high percentage of the eligible
population receiving at least one dose of a COVID-19 vaccine and an increasing number having received two or
three doses. With increasing concerns over more transmissible variants, including the highly transmissible new
Omicron variant, the Canadian government has accelerated the rollout of COVID-19 vaccine booster doses
providing extra protection against COVID-19 and its variants. In order to control the spread of COVID-19, the
majority of provinces across Canada require proof of vaccination as part of the reopening plans in select settings
including those that operate indoors with close proximity of patrons.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
15
The capacity and other restrictions materially impacted Cineplex’s ability to benefit from highly anticipated film
releases released during the holiday season. Despite mandatory capacity restrictions that continue to be enforced
where and as applicable, Cineplex recognized a significant increase in revenues during the fourth quarter, the highest
since the pandemic was declared in early 2020. Cineplex will continue to monitor capacity restrictions and will
adjust operating levels in accordance with government directives. Cineplex is optimistic that all of its businesses will
recover over time, believing that consumer demand for the theatrical experience, combined with a backlog of
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
8
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
with its landlord partners subsequent to the government-imposed lockdowns to obtain relief measures, resulting in
significantly reduced cash rent being paid in 2020 and 2021. Including the sale of certain restrictive lease rights to
landlords undertaken in the third quarter of 2020, Cineplex was able to materially reduce net cash lease outflows on
an annual basis by $72.5 million in 2020. As a result of ongoing discussions with landlords, Cineplex was able to
reduce net cash lease outflows by $6.6 million during the fourth quarter of 2021 ($36.1 million year to date
including the sale of certain lease rights for $6.4 million in 2021). The negotiated lease obligation savings represent
forgiveness of lease payments. 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 once again in both our theatres and other
entertainment venues.
While the specific protocols will evolve over time with the emergence from the pandemic, VenueSafe will remain
consistent across all of Cineplex’s venues as health and safety remain a top priority and top of mind for our guests.
Some of the measures include:
improved ventilation systems to improve the delivery of clean air;
reserved seating in all auditoriums across Canada; specially designed games-floor and dining-space
configurations in LBE venues;
reduced capacity based on province-specific guidelines;
•
•
•
•
enhanced cleaning practices throughout the facilities, with particular focus on high-contact surfaces,
restrooms and seats;
safety signage throughout theatres and LBE venues;
ensuring employees have the personal protective equipment they need and as required by law; and
•
•
• making hand sanitizer readily available for guests and employees throughout the buildings.
Cineplex Inc.
Management's Discussion and Analysis
Canada’s vaccination rate has made tremendous progress during the year with a high percentage of the eligible
population receiving at least one dose of a COVID-19 vaccine and an increasing number having received two or
three doses. With increasing concerns over more transmissible variants, including the highly transmissible new
Omicron variant, the Canadian government has accelerated the rollout of COVID-19 vaccine booster doses
providing extra protection against COVID-19 and its variants. In order to control the spread of COVID-19, the
majority of provinces across Canada require proof of vaccination as part of the reopening plans in select settings
including those that operate indoors with close proximity of patrons.
The capacity and other restrictions materially impacted Cineplex’s ability to benefit from highly anticipated film
releases released during the holiday season. Despite mandatory capacity restrictions that continue to be enforced
where and as applicable, Cineplex recognized a significant increase in revenues during the fourth quarter, the highest
Cineplex Inc.
since the pandemic was declared in early 2020. Cineplex will continue to monitor capacity restrictions and will
adjust operating levels in accordance with government directives. Cineplex is optimistic that all of its businesses will
Management’s Discussion and Analysis
recover over time, believing that consumer demand for the theatrical experience, combined with a backlog of
—————————————————————————————————————————————
anticipated releases of strong film content will help drive visitation, as was evidenced by strong post-reopening box
office and food services revenues recognized during the second half of 2021.
The release late in the second quarter of 2021 of the highly anticipated F9: The Fast Saga generated strong
attendance in North America and globally, grossing $173.0 million and $726.2 million, respectively, as reported to
date. The film generated $70.0 million during the opening weekend, more than doubling the opening box office
earnings of Godzilla vs. Kong which previously held the opening box office record since the pandemic started in
March 2020. The release of Shang-Chi and the Legend of the Ten Rings set the all-time box-office record for a
Labour Day release generating $94.0 million during its opening weekend, and total gross box office revenues in
North America and globally of $224.5 million and $432.0 million, respectively, as reported to date. The release of
Marvel’s highly anticipated Spider-Man: No Way Home in December 2021 generated the second biggest North
American opening weekend of all time and the biggest December opening weekend of all-time grossing $260.1
million and earning $735.9 million in North America and $1.7 billion globally since its release, as reported.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
8
Management continues to pursue all viable options to maintain adequate liquidity to fund operations for the
currently anticipated duration of the pandemic. This includes but is not limited to asset sales such as Cineplex’s head
office buildings in Toronto which was completed during the first quarter, the issuance of Notes Payable (Section 7.4,
Long-term debt) and amendments to its existing Credit Facilities (Section 7.4, Long-term debt).
As at December 31, 2021, Cineplex had a cash balance of $26.9 million and $270.7 million available under its
Revolving Facility subject to the liquidity covenants set forth in the Credit Facilities as amended (Section 7.4, Long-
term debt). Combined with the continued focus on reducing costs and capital expenditures, management believes
that it has adequate liquidity to fund operations for the currently anticipated duration of the pandemic in the regions
in which Cineplex operates.
Cineworld Transaction
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 (“Shares”) 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 $2.18
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
billion that Cineworld would have paid upon the closing of the Cineworld Transaction for Cineplex’s securities,
16
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 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.
On July 6, 2020, Cineworld announced that it would defend Cineplex’s claim, and on September 2, 2020, filed its
Statement of Defence and Counterclaim in which it denied Cineplex’s claims and advanced a counterclaim seeking
reimbursement of £32 million for costs incurred with respect to the transaction and an unspecified amount for
punitive damages. Cineplex responded to Cineworld’s defence and counterclaim on September 15, 2020, denying all
claims levied by Cineworld.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
9
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
anticipated releases of strong film content will help drive visitation, as was evidenced by strong post-reopening box
office and food services revenues recognized during the second half of 2021.
The release late in the second quarter of 2021 of the highly anticipated F9: The Fast Saga generated strong
attendance in North America and globally, grossing $173.0 million and $726.2 million, respectively, as reported to
date. The film generated $70.0 million during the opening weekend, more than doubling the opening box office
earnings of Godzilla vs. Kong which previously held the opening box office record since the pandemic started in
March 2020. The release of Shang-Chi and the Legend of the Ten Rings set the all-time box-office record for a
Labour Day release generating $94.0 million during its opening weekend, and total gross box office revenues in
North America and globally of $224.5 million and $432.0 million, respectively, as reported to date. The release of
Marvel’s highly anticipated Spider-Man: No Way Home in December 2021 generated the second biggest North
American opening weekend of all time and the biggest December opening weekend of all-time grossing $260.1
million and earning $735.9 million in North America and $1.7 billion globally since its release, as reported.
Management continues to pursue all viable options to maintain adequate liquidity to fund operations for the
currently anticipated duration of the pandemic. This includes but is not limited to asset sales such as Cineplex’s head
office buildings in Toronto which was completed during the first quarter, the issuance of Notes Payable (Section 7.4,
Long-term debt) and amendments to its existing Credit Facilities (Section 7.4, Long-term debt).
As at December 31, 2021, Cineplex had a cash balance of $26.9 million and $270.7 million available under its
Revolving Facility subject to the liquidity covenants set forth in the Credit Facilities as amended (Section 7.4, Long-
term debt). Combined with the continued focus on reducing costs and capital expenditures, management believes
that it has adequate liquidity to fund operations for the currently anticipated duration of the pandemic in the regions
in which Cineplex operates.
Cineworld Transaction
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 (“Shares”) for $34.00 per share in cash (the
Cineplex Inc.
“Cineworld Transaction”). The Cineworld Transaction was to be implemented by way of a statutory plan of
Management's Discussion and Analysis
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 $2.18
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 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.
On July 6, 2020, Cineworld announced that it would defend Cineplex’s claim, and on September 2, 2020, filed its
Statement of Defence and Counterclaim in which it denied Cineplex’s claims and advanced a counterclaim seeking
Cineplex Inc.
reimbursement of £32 million for costs incurred with respect to the transaction and an unspecified amount for
punitive damages. Cineplex responded to Cineworld’s defence and counterclaim on September 15, 2020, denying all
Management’s Discussion and Analysis
claims levied by Cineworld.
—————————————————————————————————————————————
A trial of the action commenced before the Court on September 13, 2021 and continued until November 4, 2021.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
9
On December 14, 2021, the Court released its decision in the action (the “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 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.
Due to uncertainties inherent in appeals, it is not possible for Cineplex to predict the timing or final outcome of the
appeal of the Decision announced by Cineworld. Further, even if Cineworld’s appeal 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.
1.2 FINANCIAL HIGHLIGHTS
Financial highlights
Fourth Quarter
Full Year
(in thousands of dollars, except theatre attendance in
thousands of patrons and per Share and per patron
amounts)
2021
2020 Change (i)
2021
2020 Change (i)
Total revenues (ii)
Theatre attendance
$ 299,951
$ 52,452
471.9 % $ 656,669
$ 418,263
10,245
786
NM
20,080
13,065
Net loss from continuing operations (iii)
$ (21,778)
$ (230,403)
-90.5 % $ (248,722)
$ (624,001)
Net loss from discontinued operations
$
—
$
—
—
$
—
$
(4,952)
57.0 %
53.7 %
-60.1 %
-100.0 %
Net loss (iii)
Net loss as a percentage of sales
$ (21,778)
$ (230,403)
(7.3) %
(439.3) %
Cash provided by (used in) operating activities
$ 27,480
$ (61,041)
Box office revenues per patron (“BPP”) (iv)
Concession revenues per patron (“CPP”) (iv)
$
$
12.29
7.49
$
$
9.23
9.06
(37.9) %
-90.5 % $ (248,722)
-60.5 %
$ (628,953)
CINEPLEX INC. 2021 ANNUAL REPORT
111.3 %
432.0 %
MANAGEMENT'S DISCUSSION AND ANALYSIS
NM
17
15.7 %
13.4 %
33.2 % $
-17.3 % $
NM $ 61,004
10.17
6.99
11.77
7.93
$ (106,314)
(149.2) %
$
$
Adjusted EBITDA (v)
Adjusted EBITDAaL (iii) (v)
Adjusted EBITDAaL margin (iii) (vi)
Adjusted free cash flow (v)
$ 58,328
$ (32,097)
NM $ 59,927
$ (55,866)
$ 20,198
$ (65,948)
NM $ (84,295)
$ (182,815)
6.7 %
(125.7) %
132.4 %
(12.8) %
(43.7) %
(1,032)
$ (30,530)
-96.6 % $ (151,517)
$ (161,870)
Adjusted free cash flow per Share (vi)
(0.016)
$
(0.482)
-96.7 % $
(2.392)
$
(2.556)
Earnings per Share (“EPS”) from continuing operations -
basic and diluted (iii)
EPS from discontinued operations - basic and diluted
EPS - basic and diluted (iii)
(0.34)
—
(0.34)
$
$
$
(3.64)
—
(3.64)
-90.7 % $
(3.93)
— % $
—
-90.7 % $
(3.93)
$
$
$
(9.85)
(0.08)
(9.93)
(i) Throughout this MD&A, changes in percentage amounts are calculated as 2021 value less 2020 value.
$
$
$
$
$
NM
-53.9 %
30.9 %
-6.4 %
-6.4 %
-60.1 %
-100.0 %
-60.4 %
(ii) All amounts are from continuing operations.
(iii) 2021 includes expenses related to the Cineworld Transaction and associated litigation in the amount of $2.3 million (2020 - $1.3 million)
for the fourth quarter and $11.4 million (2020 - $4.1 million) for the full year.
(iv) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
(v) Represents a non-GAAP financial measure. See Section 17, Non-GAAP and other financial measures.
(vi) Represents a non-GAAP ratio. See Section 17, Non-GAAP and other financial measures.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
10
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
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 “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 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.
Due to uncertainties inherent in appeals, it is not possible for Cineplex to predict the timing or final outcome of the
appeal of the Decision announced by Cineworld. Further, even if Cineworld’s appeal is not successful, Cineworld
Cineplex Inc.
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.
Management's Discussion and Analysis
1.2 FINANCIAL HIGHLIGHTS
Financial highlights
Fourth Quarter
Full Year
(in thousands of dollars, except theatre attendance in
thousands of patrons and per Share and per patron
amounts)
2021
2020 Change (i)
2021
2020 Change (i)
Total revenues (ii)
Theatre attendance
$ 299,951
$ 52,452
471.9 % $ 656,669
$ 418,263
10,245
786
NM
20,080
13,065
Net loss from continuing operations (iii)
$ (21,778)
$ (230,403)
-90.5 % $ (248,722)
$ (624,001)
Net loss from discontinued operations
$
—
$
—
—
$
—
$
(4,952)
Net loss (iii)
$ (21,778)
$ (230,403)
-90.5 % $ (248,722)
$ (628,953)
Net loss as a percentage of sales
(7.3) %
(439.3) %
432.0 %
(37.9) %
(149.2) %
Cash provided by (used in) operating activities
$ 27,480
$ (61,041)
NM $ 61,004
$ (106,314)
Box office revenues per patron (“BPP”) (iv)
Concession revenues per patron (“CPP”) (iv)
$
$
12.29
7.49
$
$
9.23
9.06
33.2 % $
11.77
-17.3 % $
7.93
$
$
10.17
6.99
Adjusted EBITDA (v)
Adjusted EBITDAaL (iii) (v)
Adjusted EBITDAaL margin (iii) (vi)
Adjusted free cash flow (v)
Adjusted free cash flow per Share (vi)
Earnings per Share (“EPS”) from continuing operations -
basic and diluted (iii)
EPS from discontinued operations - basic and diluted
EPS - basic and diluted (iii)
$ 58,328
$ (32,097)
NM $ 59,927
$ (55,866)
$ 20,198
$ (65,948)
NM $ (84,295)
$ (182,815)
6.7 %
(125.7) %
132.4 %
(12.8) %
(43.7) %
(1,032)
$ (30,530)
-96.6 % $ (151,517)
$ (161,870)
(0.016)
$
(0.482)
-96.7 % $
(2.392)
$
(2.556)
(0.34)
—
(0.34)
$
$
$
(3.64)
—
(3.64)
-90.7 % $
(3.93)
— % $
—
-90.7 % $
(3.93)
$
$
$
(9.85)
(0.08)
(9.93)
$
$
$
$
$
57.0 %
53.7 %
-60.1 %
-100.0 %
-60.5 %
111.3 %
NM
15.7 %
13.4 %
NM
-53.9 %
30.9 %
-6.4 %
-6.4 %
-60.1 %
-100.0 %
-60.4 %
(i) Throughout this MD&A, changes in percentage amounts are calculated as 2021 value less 2020 value.
(ii) All amounts are from continuing operations.
(iii) 2021 includes expenses related to the Cineworld Transaction and associated litigation in the amount of $2.3 million (2020 - $1.3 million)
for the fourth quarter and $11.4 million (2020 - $4.1 million) for the full year.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
(iv) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
(v) Represents a non-GAAP financial measure. See Section 17, Non-GAAP and other financial measures.
Cineplex Inc.
(vi) Represents a non-GAAP ratio. See Section 17, Non-GAAP and other financial measures.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Total revenues for the fourth quarter of 2021 increased 471.9%, or $247.5 million to $300.0 million as compared to
the prior year period. In the prior year, the majority of Cineplex’s businesses were closed or operating under strict
capacity restrictions as a result of significant increases in daily COVID-19 case counts. During the fourth quarter of
2021, Cineplex’s entire circuit of theatres and LBE venues were open, subject to capacity and operating restrictions
in select provinces, resulting in significant increases in revenue when compared to the prior year period. The release
of highly anticipated films including Spider-Man: No Way Home, Dune, No Time To Die and Venom: Let There Be
Carnage contributed to the significant theatre attendance increase of 9.5 million to 10.2 million as compared to 0.8
million in the prior year period which had limited first run films. Cineplex reported box office revenues of
$125.9 million in the fourth quarter and an all-time quarterly record BPP of $12.29, food service revenues of
$87.2 million and a fourth quarter CPP of $7.49 which was negatively impacted by restrictions on food service sales
in Cineplex’s theatres. Food service revenues consist of theatre food service revenue of $76.7 million, home delivery
revenues of $3.0 million and LBE food service revenues of $7.5 million. Media revenues of $32.8 million were
mainly from cinema media and network management and services. Amusement revenues of $45.1 million generated
in the fourth quarter were primarily from P1AG route operations including family entertainment centres (“FEC”)
locations and theatres that reopened in the United States and Canada. Cineplex reported an increase in adjusted
EBITDAaL of $86.1 million to $20.2 million compared to the prior year period loss of $65.9 million and adjusted
free cash flow per Share was a loss of $(0.016) as compared to a loss in the prior year period of $(0.482). Cineplex’s
net loss from continuing operations decreased from a reported loss of $230.4 million in the prior year period to a
loss of $21.8 million in the current period with a net loss per share from continuing operations decreasing from
$(3.64) in the prior year period to $(0.34) in the current period.
10
Reflecting the positive reopening of Cineplex’s businesses, total revenues for the year ended December 31, 2021
increased by $238.4 million to $656.7 million, or 57.0% from $418.3 million recognized in the prior year period.
Adjusted EBITDAaL for the year was a loss of $84.3 million as compared to a loss of $182.8 million recognized in
the prior year. For the annual period, Cineplex was able to reduce its net loss from continuing operations reported in
CINEPLEX INC. 2021 ANNUAL REPORT
the current year from $624.0 million reported in the prior year to $248.7 million reported in the current year period.
MANAGEMENT'S DISCUSSION AND ANALYSIS
18
The following describes certain key business initiatives undertaken and results achieved during 2021 in each of
1.3 KEY DEVELOPMENTS IN 2021
Cineplex’s core business areas:
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
•
•
•
•
•
•
•
Reported annual box office revenues of $236.3 million, a 77.9% increase from 2020 as a result of increased
theatre attendance due to theatre reopenings compared to theatre closures that remained in effect for a
majority of the prior year period.
BPP was $11.77, an all-time annual record, an increase of $1.60 or 15.7% when compared to the prior year
due to new releases and premium offerings in the current period as compared to the prior period which
focused on discounted pricing for older and more classic film product.
Opened Quebec’s second VIP Cinemas at Cineplex Forum and VIP in downtown Montreal on June 18,
2021.
British Columbia on July 7, 2021.
District Calgary on November 17, 2021.
Opened Western Canada’s first standalone VIP Cinemas at Cineplex VIP Cinemas Brentwood in Burnaby,
Opened Cineplex’s 25th VIP Cinemas, Cineplex VIP Cinemas University District located in the University
Opened three new ScreenX auditoriums: Scotiabank Theatre Winnipeg in Manitoba, Cinéma Cineplex
Odeon Brossard et VIP in Quebec and Cineplex Cinemas Ancaster in Ontario
Launched CineClub, Canada’s first of its kind movie subscription program providing members with
benefits accessible across Cineplex’s businesses nationwide including Cineplex theatres, the Cineplex Store
and LBE venues.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
11
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Total revenues for the fourth quarter of 2021 increased 471.9%, or $247.5 million to $300.0 million as compared to
the prior year period. In the prior year, the majority of Cineplex’s businesses were closed or operating under strict
capacity restrictions as a result of significant increases in daily COVID-19 case counts. During the fourth quarter of
2021, Cineplex’s entire circuit of theatres and LBE venues were open, subject to capacity and operating restrictions
in select provinces, resulting in significant increases in revenue when compared to the prior year period. The release
of highly anticipated films including Spider-Man: No Way Home, Dune, No Time To Die and Venom: Let There Be
Carnage contributed to the significant theatre attendance increase of 9.5 million to 10.2 million as compared to 0.8
million in the prior year period which had limited first run films. Cineplex reported box office revenues of
$125.9 million in the fourth quarter and an all-time quarterly record BPP of $12.29, food service revenues of
$87.2 million and a fourth quarter CPP of $7.49 which was negatively impacted by restrictions on food service sales
in Cineplex’s theatres. Food service revenues consist of theatre food service revenue of $76.7 million, home delivery
revenues of $3.0 million and LBE food service revenues of $7.5 million. Media revenues of $32.8 million were
mainly from cinema media and network management and services. Amusement revenues of $45.1 million generated
in the fourth quarter were primarily from P1AG route operations including family entertainment centres (“FEC”)
locations and theatres that reopened in the United States and Canada. Cineplex reported an increase in adjusted
EBITDAaL of $86.1 million to $20.2 million compared to the prior year period loss of $65.9 million and adjusted
free cash flow per Share was a loss of $(0.016) as compared to a loss in the prior year period of $(0.482). Cineplex’s
Cineplex Inc.
net loss from continuing operations decreased from a reported loss of $230.4 million in the prior year period to a
loss of $21.8 million in the current period with a net loss per share from continuing operations decreasing from
Management's Discussion and Analysis
$(3.64) in the prior year period to $(0.34) in the current period.
Reflecting the positive reopening of Cineplex’s businesses, total revenues for the year ended December 31, 2021
increased by $238.4 million to $656.7 million, or 57.0% from $418.3 million recognized in the prior year period.
Adjusted EBITDAaL for the year was a loss of $84.3 million as compared to a loss of $182.8 million recognized in
the prior year. For the annual period, Cineplex was able to reduce its net loss from continuing operations reported in
the current year from $624.0 million reported in the prior year to $248.7 million reported in the current year period.
1.3 KEY DEVELOPMENTS IN 2021
The following describes certain key business initiatives undertaken and results achieved during 2021 in each of
Cineplex’s core business areas:
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
•
•
•
•
•
•
Reported annual box office revenues of $236.3 million, a 77.9% increase from 2020 as a result of increased
theatre attendance due to theatre reopenings compared to theatre closures that remained in effect for a
majority of the prior year period.
BPP was $11.77, an all-time annual record, an increase of $1.60 or 15.7% when compared to the prior year
due to new releases and premium offerings in the current period as compared to the prior period which
focused on discounted pricing for older and more classic film product.
Opened Quebec’s second VIP Cinemas at Cineplex Forum and VIP in downtown Montreal on June 18,
2021.
Opened Western Canada’s first standalone VIP Cinemas at Cineplex VIP Cinemas Brentwood in Burnaby,
British Columbia on July 7, 2021.
Opened Cineplex’s 25th VIP Cinemas, Cineplex VIP Cinemas University District located in the University
District Calgary on November 17, 2021.
Opened three new ScreenX auditoriums: Scotiabank Theatre Winnipeg in Manitoba, Cinéma Cineplex
Odeon Brossard et VIP in Quebec and Cineplex Cinemas Ancaster in Ontario
Launched CineClub, Canada’s first of its kind movie subscription program providing members with
benefits accessible across Cineplex’s businesses nationwide including Cineplex theatres, the Cineplex Store
and LBE venues.
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
•
Theatre Food Service
•
•
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
Reported annual theatre food service revenues of $159.2 million, a 74.2% increase compared to the prior
year period primarily due to a significant increase in theatre attendance as a result of the reopening of
theatres coupled with a record CPP.
CPP was $7.93, an all-time annual record, an increase of $0.94 or 13.4% when compared to the prior year,
due to product mix, modest price increases and film product that appealed to first-run viewers who tend to
have a higher concession spend.
Continued focus on theatre food delivery service over the prior year reporting annual revenues of $13.1
million, an increase of 59.7% or $4.9 million.
•
11
Alternative Programming
•
•
Alternative Programming (Cineplex Events) included the stage event The Great Big Boo, the documentary
about the author CS Lewis, the anime features Sword Art Online and Gintara, as well as the successful re-
release of past films including the reissue of The Matrix, Halloween (1999) and Rad the 35th Anniversary.
Cineplex released the feature film Lamb on October 8, 2021 and The Tragedy of Macbeth on December 25,
2021.
Digital Commerce
•
•
Total registered users for Cineplex Store increased by 18% as compared to the prior year period, reaching
over 2.2 million registered users.
Cineplex Store continues to benefit from Premium Video On Demand (“PVOD”) and Premium Electronic
Sell Through (“PEST”) releases.
MEDIA
•
Cinema Media
•
•
•
•
•
•
Total media revenues remained flat at $65.3 million for the year ended December 31, 2021.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
19
Reported annual Cinema media revenues of $33.0 million, an increase of $9.4 million or 39.8% over the
prior year, due to increases in show-time and pre-show advertising as a result of reopened theatres and new
film releases.
Digital Place-Based Media
that optimizes digital signage.
AMUSEMENT AND LEISURE
Amusement Solutions
Location-based Entertainment
Reported annual revenues of $32.4 million, a decrease of $9.4 million or 22.5%, compared to 2020. The
decrease is attributable to a lower number of deployments combined with the impact of certain contract
expirations while focusing on higher margin projects.
Cineplex Digital Media rolled out the Flex SmartEngine, a data-driven machine learning software platform
Reported annual revenues of $134.5 million an increase of $56.6 million or 72.6% as compared to the prior
year. The increase is due to the reopening of P1AG route locations in Canada and the United States.
Reported total annual revenues of $44.8 million including food service revenues of $14.7 million,
amusement revenues of $29.2 million and other revenues of $0.8 million, an increase of $19.2 million or
75.3% as compared to 2020. The increase was due to the reopening of LBE businesses compared to
closures that remained in effect for a majority of the prior year period.
Opened Playdium in Dartmouth, Nova Scotia on February 26, 2021, British Columbia’s first location of
The Rec Room in Burnaby on July 5, 2021, and The Rec Room in Barrie, Ontario, on July 26, 2021. With
these openings, Cineplex has 10 locations of The Rec Room and three locations of Playdium across Canada.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
12
Cineplex Inc.
Management’s Discussion and Analysis
Theatre Food Service
—————————————————————————————————————————————
Reported annual theatre food service revenues of $159.2 million, a 74.2% increase compared to the prior
year period primarily due to a significant increase in theatre attendance as a result of the reopening of
theatres coupled with a record CPP.
CPP was $7.93, an all-time annual record, an increase of $0.94 or 13.4% when compared to the prior year,
due to product mix, modest price increases and film product that appealed to first-run viewers who tend to
have a higher concession spend.
million, an increase of 59.7% or $4.9 million.
Continued focus on theatre food delivery service over the prior year reporting annual revenues of $13.1
Alternative Programming
Alternative Programming (Cineplex Events) included the stage event The Great Big Boo, the documentary
about the author CS Lewis, the anime features Sword Art Online and Gintara, as well as the successful re-
release of past films including the reissue of The Matrix, Halloween (1999) and Rad the 35th Anniversary.
Cineplex released the feature film Lamb on October 8, 2021 and The Tragedy of Macbeth on December 25,
•
•
•
•
•
2021.
Digital Commerce
•
Total registered users for Cineplex Store increased by 18% as compared to the prior year period, reaching
Cineplex Inc.
over 2.2 million registered users.
Cineplex Store continues to benefit from Premium Video On Demand (“PVOD”) and Premium Electronic
Management's Discussion and Analysis
Sell Through (“PEST”) releases.
•
MEDIA
•
Total media revenues remained flat at $65.3 million for the year ended December 31, 2021.
Cinema Media
•
Reported annual Cinema media revenues of $33.0 million, an increase of $9.4 million or 39.8% over the
prior year, due to increases in show-time and pre-show advertising as a result of reopened theatres and new
film releases.
Digital Place-Based Media
•
•
Reported annual revenues of $32.4 million, a decrease of $9.4 million or 22.5%, compared to 2020. The
decrease is attributable to a lower number of deployments combined with the impact of certain contract
expirations while focusing on higher margin projects.
Cineplex Digital Media rolled out the Flex SmartEngine, a data-driven machine learning software platform
that optimizes digital signage.
AMUSEMENT AND LEISURE
Amusement Solutions
•
Reported annual revenues of $134.5 million an increase of $56.6 million or 72.6% as compared to the prior
year. The increase is due to the reopening of P1AG route locations in Canada and the United States.
Location-based Entertainment
•
•
Reported total annual revenues of $44.8 million including food service revenues of $14.7 million,
amusement revenues of $29.2 million and other revenues of $0.8 million, an increase of $19.2 million or
75.3% as compared to 2020. The increase was due to the reopening of LBE businesses compared to
closures that remained in effect for a majority of the prior year period.
Opened Playdium in Dartmouth, Nova Scotia on February 26, 2021, British Columbia’s first location of
The Rec Room in Burnaby on July 5, 2021, and The Rec Room in Barrie, Ontario, on July 26, 2021. With
these openings, Cineplex has 10 locations of The Rec Room and three locations of Playdium across Canada.
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
LOYALTY
•
Scene+ launched on December 13, 2021, merging the SCENE loyalty and Scotia Rewards programs.
• Membership in the Scene+ loyalty program remained flat during the year ended December 31, 2021.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
12
CORPORATE
•
•
•
•
•
•
Cineplex completed a sale and 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. Fifty percent of the net
proceeds were used to permanently reduce the amount outstanding under Cineplex’s Credit Facilities.
On February 8, 2021, Cineplex and Cineplex Entertainment Limited Partnership entered into the Third
Credit Agreement Amendment with The Bank of Nova Scotia providing Cineplex with certain financial
covenant relief in light of the COVID-19 pandemic and its effects on Cineplex’s business (Section 7.4,
Long-term debt).
On February 26, 2021, Cineplex completed the $250.0 million Notes Payable offering. Cineplex used the
net proceeds raised in part to permanently repay $100.0 million of its Credit Facilities. The Notes Payable
bear interest at a rate of 7.50% per annum and mature on February 26, 2026 (Section 7.4, Long-term debt)
Cineplex negotiated the sale of certain restrictive lease rights for total proceeds of $6.4 million.
On December 14, 2021 the Ontario Superior Court of Justice ruled in favour of Cineplex, finding that
Cineworld repudiated the transaction to acquire Cineplex. The court awarded damages for breach of
contract to Cineplex in the amount of $1.24 billion and reimbursement of transaction costs of $5.5 million.
On December 30, 2021, Cineplex and Cineplex Entertainment Limited Partnership entered into the Fourth
Credit Agreement Amendment with The Bank of Nova Scotia, which among other things, extended the
suspension of financial covenant testing until the second quarter of 2022 and liquidity covenant
requirements until June 30, 2022 (Section 7.4, Long-term debt).
2. CINEPLEX’S BUSINESS AND STRATEGY
Cineplex’s mission statement is “Passionately delivering exceptional experiences.” All of its efforts are focused
towards this mission and it is Cineplex’s goal to consistently provide guests and customers with exceptional
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
experiences.
20
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;
business both inside and outside theatres;
Capitalize on core media strengths and infrastructure to provide continued growth of Cineplex’s media
Develop and scale amusement and leisure concepts by extending existing capabilities and infrastructure;
Drive value 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.
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.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
13
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
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 program 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.
As a result of the impact of the COVID-19 pandemic on Cineplex’s business, Cineplex’s attention has shifted to
respond to the impacts of the COVID-19 pandemic by implementing a variety of measures to reduce costs and has
placed an increased focus on the safe reopening of its business (see Section 1.1, COVID-19 business impacts, risks
and liquidity). The following charts present the annual results:
Net income (loss) (millions)
2017
2018
2019
2020
2021
$(624.0)
$(248.7)
$70.3
$77.0
$28.9
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
14
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Scene+ launched on December 13, 2021, merging the SCENE loyalty and Scotia Rewards programs.
• Membership in the Scene+ loyalty program remained flat during the year ended December 31, 2021.
LOYALTY
CORPORATE
Cineplex completed a sale and 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. Fifty percent of the net
proceeds were used to permanently reduce the amount outstanding under Cineplex’s Credit Facilities.
On February 8, 2021, Cineplex and Cineplex Entertainment Limited Partnership entered into the Third
Credit Agreement Amendment with The Bank of Nova Scotia providing Cineplex with certain financial
covenant relief in light of the COVID-19 pandemic and its effects on Cineplex’s business (Section 7.4,
Long-term debt).
On February 26, 2021, Cineplex completed the $250.0 million Notes Payable offering. Cineplex used the
net proceeds raised in part to permanently repay $100.0 million of its Credit Facilities. The Notes Payable
bear interest at a rate of 7.50% per annum and mature on February 26, 2026 (Section 7.4, Long-term debt)
Cineplex negotiated the sale of certain restrictive lease rights for total proceeds of $6.4 million.
•
•
•
•
•
•
On December 14, 2021 the Ontario Superior Court of Justice ruled in favour of Cineplex, finding that
Cineworld repudiated the transaction to acquire Cineplex. The court awarded damages for breach of
contract to Cineplex in the amount of $1.24 billion and reimbursement of transaction costs of $5.5 million.
On December 30, 2021, Cineplex and Cineplex Entertainment Limited Partnership entered into the Fourth
Credit Agreement Amendment with The Bank of Nova Scotia, which among other things, extended the
suspension of financial covenant testing until the second quarter of 2022 and liquidity covenant
requirements until June 30, 2022 (Section 7.4, Long-term debt).
Cineplex Inc.
Management's Discussion and Analysis
•
2. CINEPLEX’S BUSINESS AND STRATEGY
Cineplex’s mission statement is “Passionately delivering exceptional experiences.” All of its efforts are focused
towards 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 value 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.
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.
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Diversified Entertainment and Media Company
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
13
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 program 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.
CINEPLEX INC. 2021 ANNUAL REPORT
While box office revenues (which include alternative programming) typically account for the largest portion of
MANAGEMENT'S DISCUSSION AND ANALYSIS
21
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.
As a result of the impact of the COVID-19 pandemic on Cineplex’s business, Cineplex’s attention has shifted to
respond to the impacts of the COVID-19 pandemic by implementing a variety of measures to reduce costs and has
placed an increased focus on the safe reopening of its business (see Section 1.1, COVID-19 business impacts, risks
and liquidity). The following charts present the annual results:
Net income (loss) (millions)
2017
2018
2019
2020
2021
$(624.0)
$(248.7)
$70.3
$77.0
$28.9
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
14
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Diversified Entertainment and Media Company
Cineplex Inc.
Management's Discussion and Analysis
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 program 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.
As a result of the impact of the COVID-19 pandemic on Cineplex’s business, Cineplex’s attention has shifted to
respond to the impacts of the COVID-19 pandemic by implementing a variety of measures to reduce costs and has
placed an increased focus on the safe reopening of its business (see Section 1.1, COVID-19 business impacts, risks
and liquidity). The following charts present the annual results:
Net income (loss) (millions)
2017
2018
2019
2020
2021
$(624.0)
$(248.7)
$70.3
$77.0
$28.9
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
14
Net income (loss) as a % of sales
2017
2018
2019
2020
2021
(149.2)%
(37.9)%
4.5%
4.8%
1.7%
Adjusted EBITDAaL
(millions) (i)
2017
2018
2019
2020
2021
$(182.8)
$(84.3)
$224.7
$247.3
$230.5
Adjusted EBITDAaL
Margin (i)
2017
2018
2019
2020
2021
(43.7)%
(12.8)%
14.5%
15.3%
13.8%
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
22
(i) 2021 includes expenses related to the Cineworld Transaction and associated litigation in the amount of $11.4 million (2020 $4.1 million).
3. CINEPLEX’S BUSINESSES
During 2021, all aspects of Cineplex’s business were materially negatively impacted by COVID-19. Despite this
impact, the following reflects management’s belief that its business will return to profitability as operating
restrictions are eventually fully lifted across all of Cineplex’s businesses and guests return to Cineplex’s theatres and
venues. 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.
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
Theatre exhibition is the core business of Cineplex. Box office revenues are highly dependent on the marketability,
quality and appeal of the film product released by the major motion picture studios.
The motion picture industry consists of three principal activities: production, distribution and exhibition. Production
involves the development, financing and creation of feature-length motion pictures. Distribution involves the
promotion and exploitation of motion pictures in a variety of different channels. Theatrical exhibition is a key
channel for new motion picture releases and is the core business function of Cineplex.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
15
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Net income (loss) as a % of sales
2017
2018
2019
2020
2021
(149.2)%
(37.9)%
4.5%
4.8%
1.7%
Cineplex Inc.
Management's Discussion and Analysis
Adjusted EBITDAaL
(millions) (i)
2017
2018
2019
2020
2021
$(182.8)
$(84.3)
$224.7
$247.3
$230.5
Adjusted EBITDAaL
Margin (i)
2017
2018
2019
2020
2021
(43.7)%
(12.8)%
14.5%
15.3%
13.8%
(i) 2021 includes expenses related to the Cineworld Transaction and associated litigation in the amount of $11.4 million (2020 $4.1 million).
3. CINEPLEX’S BUSINESSES
During 2021, all aspects of Cineplex’s business were materially negatively impacted by COVID-19. Despite this
impact, the following reflects management’s belief that its business will return to profitability as operating
restrictions are eventually fully lifted across all of Cineplex’s businesses and guests return to Cineplex’s theatres and
venues. 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.
FILM ENTERTAINMENT AND CONTENT
Theatre Exhibition
Theatre exhibition is the core business of Cineplex. Box office revenues are highly dependent on the marketability,
quality and appeal of the film product released by the major motion picture studios.
The motion picture industry consists of three principal activities: production, distribution and exhibition. Production
involves the development, financing and creation of feature-length motion pictures. Distribution involves the
promotion and exploitation of motion pictures in a variety of different channels. Theatrical exhibition is a key
channel for new motion picture releases and is the core business function of Cineplex.
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Canadian Industry Box Office
(in millions)
$992.5
$1,031.3
$1,022.0
$235.0
$345.0
CINEPLEX INC. 2021 ANNUAL REPORT
2021
MANAGEMENT’S DISCUSSION & ANALYSIS
2017
2018
2019
2020
Source: Movie Theatre Association of Canada ("MTAC")
15
Cineplex believes that the following market trends are important factors in the growth of the film exhibition industry
in Canada:
•
•
Importance of theatrical success in establishing movie brands and subsequent movies. Theatrical exhibition
is the initial and most important channel for new motion picture releases. A successful theatrical release
which “brands” a film is often the determining factor in its popularity and value in “downstream”
distribution channels, such as
transactional video-on-demand (“TVoD”), Blu-ray, pay-per-view,
subscription video-on-demand (“SVoD”) as well as network television. While studios have experimented
with different release strategies through secondary channels such as streaming, initial theatrical releases
continue to be the most vital channel for film success as evidenced by the successful box office releases of
CINEPLEX INC. 2021 ANNUAL REPORT
Spider-Man: No Way Home and Shang-Chi and the Legend of the Ten Rings.
MANAGEMENT'S DISCUSSION AND ANALYSIS
23
Continued supply of successful films. Studios are increasingly producing film franchises, such as Star Wars,
Fast & Furious and Jurassic Park. Additionally, new franchises continue to be developed, such as the films
in the Marvel and DC universes. When the first film in a franchise is successful, subsequent films in the
franchise benefit from existing public awareness and anticipation. The result is that such features typically
attract large audiences and generate strong box office revenues. The success of a broader range of film
genres also benefits film exhibitors. In 2022, the studios are currently planning to release a strong slate of
films, including Morbius, Uncharted, The Batman, Sonic the Hedgehog 2, Fantastic Beasts: The Secrets of
Dumbledore, Doctor Strange in the Multiverse of Madness, Legally Blonde 3, Top Gun:Maverick, John
Wick: Chapter 4, Jurassic World: Dominon, Lightyear, Minions: The Rise of Gru, Thor:Love and Thunder,
Black Adam, Puss in Boots: The Last Wish, Spider-Man: Across The Spider-Verse - Part One, The Flash,
Black Panther: Wakanda Forever, Avatar 2 and Aquaman and the Lost Kingdom. In spite of changing
release models, Cineplex remains confident that studios will continue to release a significant number of
films with an exclusive theatrical window.
•
Convenient and affordable form of out-of-home entertainment. Cineplex’s BPP was $11.77 and $10.17 in
2021 and 2020, respectively. Excluding the impact of Cineplex’s premium-priced product, BPP was $10.25
and $9.18 in 2021 and 2020, respectively. The movie-going experience continues to provide value and
compares favourably to alternative forms of out-of-home entertainment in Canada such as professional
sporting events or live theatre, and with Cineplex, Scene+ members enjoy the ability to earn points towards
Cineplex products as well as discounts and special offers. CineClub members also have benefits accessible
across Cineplex’s businesses nationwide including Cineplex theatres, the Cineplex Store and LBE venues.
•
Providing a variety of premium and enhanced guest theatre experiences. Premium priced theatre offerings
include 3D, 4DX, UltraAVX, VIP, IMAX, D-BOX, ScreenX and Cineplex Clubhouse. BPP for premium-
priced product was $15.37 in 2021, and accounted for 38.7% of total box office revenues in 2021. Recent
enhancements to the current circuit include the addition of three VIP Cinemas and three new ScreenX
auditoriums.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
16
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Canadian Industry Box Office
(in millions)
$992.5
$1,031.3
$1,022.0
$235.0
$345.0
2017
2018
2019
2020
2021
Source: Movie Theatre Association of Canada ("MTAC")
Cineplex Inc.
Cineplex believes that the following market trends are important factors in the growth of the film exhibition industry
Management's Discussion and Analysis
in Canada:
•
•
•
Importance of theatrical success in establishing movie brands and subsequent movies. Theatrical exhibition
is the initial and most important channel for new motion picture releases. A successful theatrical release
which “brands” a film is often the determining factor in its popularity and value in “downstream”
distribution channels, such as
transactional video-on-demand (“TVoD”), Blu-ray, pay-per-view,
subscription video-on-demand (“SVoD”) as well as network television. While studios have experimented
with different release strategies through secondary channels such as streaming, initial theatrical releases
continue to be the most vital channel for film success as evidenced by the successful box office releases of
Spider-Man: No Way Home and Shang-Chi and the Legend of the Ten Rings.
Continued supply of successful films. Studios are increasingly producing film franchises, such as Star Wars,
Fast & Furious and Jurassic Park. Additionally, new franchises continue to be developed, such as the films
in the Marvel and DC universes. When the first film in a franchise is successful, subsequent films in the
franchise benefit from existing public awareness and anticipation. The result is that such features typically
attract large audiences and generate strong box office revenues. The success of a broader range of film
genres also benefits film exhibitors. In 2022, the studios are currently planning to release a strong slate of
films, including Morbius, Uncharted, The Batman, Sonic the Hedgehog 2, Fantastic Beasts: The Secrets of
Dumbledore, Doctor Strange in the Multiverse of Madness, Legally Blonde 3, Top Gun:Maverick, John
Wick: Chapter 4, Jurassic World: Dominon, Lightyear, Minions: The Rise of Gru, Thor:Love and Thunder,
Black Adam, Puss in Boots: The Last Wish, Spider-Man: Across The Spider-Verse - Part One, The Flash,
Black Panther: Wakanda Forever, Avatar 2 and Aquaman and the Lost Kingdom. In spite of changing
release models, Cineplex remains confident that studios will continue to release a significant number of
films with an exclusive theatrical window.
Convenient and affordable form of out-of-home entertainment. Cineplex’s BPP was $11.77 and $10.17 in
2021 and 2020, respectively. Excluding the impact of Cineplex’s premium-priced product, BPP was $10.25
and $9.18 in 2021 and 2020, respectively. The movie-going experience continues to provide value and
compares favourably to alternative forms of out-of-home entertainment in Canada such as professional
sporting events or live theatre, and with Cineplex, Scene+ members enjoy the ability to earn points towards
Cineplex products as well as discounts and special offers. CineClub members also have benefits accessible
across Cineplex’s businesses nationwide including Cineplex theatres, the Cineplex Store and LBE venues.
•
Providing a variety of premium and enhanced guest theatre experiences. Premium priced theatre offerings
include 3D, 4DX, UltraAVX, VIP, IMAX, D-BOX, ScreenX and Cineplex Clubhouse. BPP for premium-
priced product was $15.37 in 2021, and accounted for 38.7% of total box office revenues in 2021. Recent
enhancements to the current circuit include the addition of three VIP Cinemas and three new ScreenX
Cineplex Inc.
auditoriums.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Box Office Revenues (millions)
$715.6
$724.2
$705.5
Box Office Revenue per
Patron
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
$10.17
$10.46
$10.63
$10.17
$11.77
16
$132.8
$236.3
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Alternative Programming
it
to
leading market position enables
Cineplex’s
effectively manage film, food service and other theatre-
level costs, thereby maximizing operating efficiencies.
Cineplex seeks to continue to achieve incremental
operating savings by, among other things, implementing
improved supplier
best practices and negotiating
CINEPLEX INC. 2021 ANNUAL REPORT
contracts. In addition, Cineplex continues to evaluate its
MANAGEMENT'S DISCUSSION AND ANALYSIS
existing theatre portfolio on an ongoing basis.
24
Theatre Attendance (millions)
70.4
69.3
66.4
13.1
20.1
2017
2018
2019
2020
2021
The development of premium experiences through design, structure and digital technology makes Cineplex theatres
ideal locations for meetings and corporate events. Organizations, particularly corporations with offices across the
country, can use Cineplex’s theatres and digital technology for annual meetings, product launches and employee or
customer events, producing revenue streams independent of film exhibition.
Theatre Food Service
Cineplex’s theatre food service business offers guests a range of food choices to enhance their theatre experience
while generating strong profit margins for the company. Cineplex’s theatres feature its internally developed brands:
Outtakes and Melt. Certain Cineplex theatres also feature popular fast food retail branded outlets (“RBO’s”)
including Starbucks and Pizza Pizza, among others.
Cineplex continually focuses on process improvements designed to increase the speed of service at the concession
counter in addition to optimizing the RBO’s available at Cineplex’s theatres. Each of the wide range of menu items
available at Outtakes locations, expanded liquor service available in theatres, partnerships with Uber Eats and Skip
The Dishes as well as the expanded menu and the licensed lounge service available at VIP Cinemas are designed to
reach a wider market and to increase both purchase incidence and transaction value. Digital menu boards installed
across the circuit offer flexibility in menu offerings to guests which contribute to an improved guest experience
while also creating additional revenue opportunities.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
17
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Theatre Food Service
Revenues (millions)
$422.3
$440.7
$446.6
$99.6
$172.3
Concession Revenue per
Patron
$6.00
$6.36
$6.73
$6.99
$7.93
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Alternative programming includes Cineplex’s international film programming as well as content offered under its
Event Cinema brand offerings, including The Metropolitan Opera, sporting events, concerts and dedicated event
screens. International film programming includes Bollywood content as well as Cantonese, Hindi, Punjabi,
Mandarin, Korean and Filipino language films, amongst others, in select theatres across the country based on local
demographics. This programming attracts a more diverse audience, expanding Cineplex’s demographic reach and
enhancing revenues.
The success of Cineplex’s alternative programming events has led to offerings including the National Theatre from
London, the In the Gallery series and screening select television content on the big screen. Cineplex offers the
Classic Film Series and Family Favourites programming at non-peak hours to enhance theatre utilization rates. As
additional content becomes available, Cineplex will continue to expand its alternative programming offerings.
Cineplex distributed a limited number of films including the feature film Lamb on October 8, 2021 and The Tragedy
of Macbeth on December 25, 2021.
Digital Commerce
Cineplex’s digital products consist of cineplex.com, the Cineplex mobile app and the Cineplex Store. Cineplex has
developed cineplex.com into one of the leading entertainment sites in Canada, a destination of choice for Canadians
seeking movie entertainment information on the internet. The website offers streaming video, movie information,
showtimes and the ability to buy tickets online, entertainment news and box office reports as well as advertising and
digital commerce opportunities. To complement cineplex.com, the Cineplex mobile app is available as a free
download for a wide variety of devices, providing guests with the ability to find showtimes, buy tickets as well as
find information relating to the latest movie choices and movie-related entertainment content in addition to
providing mobile food and beverage ordering in VIP auditoriums.
These features and others enable Cineplex to engage and interact with its guests online and on-the-go, allowing
Cineplex to offer engaging, targeted and sponsored content to visitors and advertisers, resulting in opportunities to
generate additional revenues.
The Cineplex Store rents and sells over 11,600 movies in digital form (TVoD including PVOD and PEST movies).
Cineplex continues to improve the user experience including releasing new Cineplex Store user interfaces and
experiences across the website and multiple connected televisions and device apps.
Cineplex’s strong brand association with movies and well-established partnerships with movie studios combined
with Cineplex’s website, app and the Cineplex Store provide Cineplex with the ability to expand its touchpoints to
consumers across multiple channels. As emerging technologies continue to change the ways in which content is
consumed, Cineplex will continue to leverage its digital commerce properties to provide guests with in home and
on-the-go options for content delivery.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
18
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Box Office Revenues (millions)
$715.6
$724.2
$705.5
$132.8
$236.3
Box Office Revenue per
Patron
$10.17
$10.46
$10.63
$10.17
$11.77
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Cineplex Inc.
Management's Discussion and Analysis
it
to
leading market position enables
Cineplex’s
effectively manage film, food service and other theatre-
level costs, thereby maximizing operating efficiencies.
Cineplex seeks to continue to achieve incremental
operating savings by, among other things, implementing
best practices and negotiating
improved supplier
contracts. In addition, Cineplex continues to evaluate its
existing theatre portfolio on an ongoing basis.
Theatre Attendance (millions)
70.4
69.3
66.4
13.1
20.1
2017
2018
2019
2020
2021
The development of premium experiences through design, structure and digital technology makes Cineplex theatres
ideal locations for meetings and corporate events. Organizations, particularly corporations with offices across the
country, can use Cineplex’s theatres and digital technology for annual meetings, product launches and employee or
customer events, producing revenue streams independent of film exhibition.
Theatre Food Service
Cineplex’s theatre food service business offers guests a range of food choices to enhance their theatre experience
while generating strong profit margins for the company. Cineplex’s theatres feature its internally developed brands:
Outtakes and Melt. Certain Cineplex theatres also feature popular fast food retail branded outlets (“RBO’s”)
including Starbucks and Pizza Pizza, among others.
Cineplex continually focuses on process improvements designed to increase the speed of service at the concession
counter in addition to optimizing the RBO’s available at Cineplex’s theatres. Each of the wide range of menu items
available at Outtakes locations, expanded liquor service available in theatres, partnerships with Uber Eats and Skip
The Dishes as well as the expanded menu and the licensed lounge service available at VIP Cinemas are designed to
reach a wider market and to increase both purchase incidence and transaction value. Digital menu boards installed
Cineplex Inc.
across the circuit offer flexibility in menu offerings to guests which contribute to an improved guest experience
Management’s Discussion and Analysis
while also creating additional revenue opportunities.
—————————————————————————————————————————————
Theatre Food Service
Revenues (millions)
$446.6
$440.7
$422.3
$99.6
$172.3
Concession Revenue per
Patron
$6.00
$6.36
$6.73
$6.99
$7.93
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
Alternative Programming
17
Alternative programming includes Cineplex’s international film programming as well as content offered under its
Event Cinema brand offerings, including The Metropolitan Opera, sporting events, concerts and dedicated event
screens. International film programming includes Bollywood content as well as Cantonese, Hindi, Punjabi,
Mandarin, Korean and Filipino language films, amongst others, in select theatres across the country based on local
demographics. This programming attracts a more diverse audience, expanding Cineplex’s demographic reach and
enhancing revenues.
The success of Cineplex’s alternative programming events has led to offerings including the National Theatre from
London, the In the Gallery series and screening select television content on the big screen. Cineplex offers the
Classic Film Series and Family Favourites programming at non-peak hours to enhance theatre utilization rates. As
CINEPLEX INC. 2021 ANNUAL REPORT
additional content becomes available, Cineplex will continue to expand its alternative programming offerings.
MANAGEMENT'S DISCUSSION AND ANALYSIS
25
Cineplex distributed a limited number of films including the feature film Lamb on October 8, 2021 and The Tragedy
of Macbeth on December 25, 2021.
Digital Commerce
Cineplex’s digital products consist of cineplex.com, the Cineplex mobile app and the Cineplex Store. Cineplex has
developed cineplex.com into one of the leading entertainment sites in Canada, a destination of choice for Canadians
seeking movie entertainment information on the internet. The website offers streaming video, movie information,
showtimes and the ability to buy tickets online, entertainment news and box office reports as well as advertising and
digital commerce opportunities. To complement cineplex.com, the Cineplex mobile app is available as a free
download for a wide variety of devices, providing guests with the ability to find showtimes, buy tickets as well as
find information relating to the latest movie choices and movie-related entertainment content in addition to
providing mobile food and beverage ordering in VIP auditoriums.
These features and others enable Cineplex to engage and interact with its guests online and on-the-go, allowing
Cineplex to offer engaging, targeted and sponsored content to visitors and advertisers, resulting in opportunities to
generate additional revenues.
The Cineplex Store rents and sells over 11,600 movies in digital form (TVoD including PVOD and PEST movies).
Cineplex continues to improve the user experience including releasing new Cineplex Store user interfaces and
experiences across the website and multiple connected televisions and device apps.
Cineplex’s strong brand association with movies and well-established partnerships with movie studios combined
with Cineplex’s website, app and the Cineplex Store provide Cineplex with the ability to expand its touchpoints to
consumers across multiple channels. As emerging technologies continue to change the ways in which content is
consumed, Cineplex will continue to leverage its digital commerce properties to provide guests with in home and
on-the-go options for content delivery.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
18
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Theatre Food Service
Revenues (millions)
$422.3
$440.7
$446.6
$99.6
$172.3
Concession Revenue per
Patron
$6.00
$6.36
$6.73
$6.99
$7.93
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Cineplex Inc.
Management's Discussion and Analysis
Alternative Programming
Alternative programming includes Cineplex’s international film programming as well as content offered under its
Event Cinema brand offerings, including The Metropolitan Opera, sporting events, concerts and dedicated event
screens. International film programming includes Bollywood content as well as Cantonese, Hindi, Punjabi,
Mandarin, Korean and Filipino language films, amongst others, in select theatres across the country based on local
demographics. This programming attracts a more diverse audience, expanding Cineplex’s demographic reach and
enhancing revenues.
The success of Cineplex’s alternative programming events has led to offerings including the National Theatre from
London, the In the Gallery series and screening select television content on the big screen. Cineplex offers the
Classic Film Series and Family Favourites programming at non-peak hours to enhance theatre utilization rates. As
additional content becomes available, Cineplex will continue to expand its alternative programming offerings.
Cineplex distributed a limited number of films including the feature film Lamb on October 8, 2021 and The Tragedy
of Macbeth on December 25, 2021.
Digital Commerce
Cineplex’s digital products consist of cineplex.com, the Cineplex mobile app and the Cineplex Store. Cineplex has
developed cineplex.com into one of the leading entertainment sites in Canada, a destination of choice for Canadians
seeking movie entertainment information on the internet. The website offers streaming video, movie information,
showtimes and the ability to buy tickets online, entertainment news and box office reports as well as advertising and
digital commerce opportunities. To complement cineplex.com, the Cineplex mobile app is available as a free
download for a wide variety of devices, providing guests with the ability to find showtimes, buy tickets as well as
find information relating to the latest movie choices and movie-related entertainment content in addition to
providing mobile food and beverage ordering in VIP auditoriums.
These features and others enable Cineplex to engage and interact with its guests online and on-the-go, allowing
Cineplex to offer engaging, targeted and sponsored content to visitors and advertisers, resulting in opportunities to
generate additional revenues.
The Cineplex Store rents and sells over 11,600 movies in digital form (TVoD including PVOD and PEST movies).
Cineplex continues to improve the user experience including releasing new Cineplex Store user interfaces and
experiences across the website and multiple connected televisions and device apps.
Cineplex’s strong brand association with movies and well-established partnerships with movie studios combined
with Cineplex’s website, app and the Cineplex Store provide Cineplex with the ability to expand its touchpoints to
consumers across multiple channels. As emerging technologies continue to change the ways in which content is
consumed, Cineplex will continue to leverage its digital commerce properties to provide guests with in home and
on-the-go options for content delivery.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
18
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
26
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
MEDIA
Cineplex’s media businesses cover two major categories: cinema media, which incorporates advertising mediums
related to theatre exhibition, and digital place-based media which provides digital signage solutions.
Media Revenues
(millions) (i)
$196.8
$162.8
$65.4
$65.3
$167.1
2017
2018
2019
2020
2021
(i) Media revenues for prior year periods have been restated to present revenue amounts from continuing operations.
Cinema Media
Cinema media incorporates advertising mediums related to theatre exhibition, both within Cineplex’s own circuit of
theatres as well as in competitors’ theatres through revenue sharing arrangements. Cineplex’s media advertising
arrangements are impacted by theatre attendance levels which drive impressions and ultimately impact media
revenue generated by Cineplex.
Cineplex’s core cinema media offerings include:
•
•
•
Show-time advertising, which runs just prior to the movie trailers in the darkened auditorium with limited
distractions.
Pre-show advertising, featured on the big screen as guests settle in to enjoy their movie night, in the period
prior to Show-time.
Digital lobby advertising and digital poster cases located in high traffic areas featuring big, bold digital
signage.
• Website and mobile advertising sales through cineplex.com and the Cineplex mobile app.
Cineplex’s theatres also provide opportunities for advertisers’ special media placements (including floor and door
coverings, window clings, standees, banners, samplings, activations and lobby domination setups).
In addition to these individual offerings, Cineplex offers integrated solutions that can cross over some or all of the
above-mentioned platforms. Advertisers can utilize these forms of media individually or take advantage of an
integrated advertising program spanning multiple platforms. In partnership with its digital commerce platforms,
Cineplex offers online media packages that include page dominations, page skins, pre-roll and post-roll advertising;
all with geo-targeting capabilities.
Cineplex’s cinema media business is well positioned for continued growth and is the ideal channel for advertisers
wanting to reach all demographics, especially the highly sought-after 17 to 25-year-old Canadian market.
Cineplex also generates revenues from the sale of sponsorship and advertising at LBE venues.
Digital Place-Based Media
Cineplex’s digital place-based 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 INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
27
19
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
Cineplex Digital Media is focused on providing its clients smart solutions including the rollout of Flex SmartEngine,
a data-driven machine learning software platform that optimizes digital signage to deliver the right content, to the
right audience at the right time. Cineplex believes it can generate increased profitability with this new platform.
Cineplex Digital Media’s advertising sales team combined with the project management, system design, network
operations, and creative services teams within its digital place-based media business have Cineplex well positioned
to expand its media reach throughout its current infrastructure as well as in numerous place-based advertising
locations across the country. Cineplex believes that the strength of its digital place-based media assets make it a
leader in the indoor digital signage industry and provide a platform for significant growth throughout North America
and Europe.
AMUSEMENT AND LEISURE
Amusement and leisure includes two primary areas of operations:
•
•
Amusement solutions, comprised of P1AG which is one of the largest distributors and operators of
amusement, gaming and vending equipment in North America;
Location-based entertainment, which includes social entertainment destinations featuring gaming,
entertainment and dining, including The Rec Room, and Playdium.
Amusement Solutions
Cineplex’s amusement solutions business generates revenues from the following activities in both Canada and the
United States:
•
•
•
Route operations: P1AG collects a revenue share on games revenues earned by P1AG-owned amusement
and vending equipment placed into third party locations such as family entertainment centres, arcades,
theatres, restaurants, bars and other locations.
Third party equipment sales.
Operating family entertainment centres.
In addition to expanding Cineplex’s amusement and gaming presence outside of its theatres, the growth of P1AG
has allowed Cineplex to vertically integrate its gaming operations. Cineplex’s in-theatre gaming business features
Cineplex’s 40 XSCAPE Entertainment Centres as well as arcade games in select Cineplex theatres and LBE venues,
with all of the games supplied and serviced by P1AG.
Location-based Entertainment
Cineplex operates LBE establishments under the brand names The Rec Room and Playdium, as well as other family
entertainment centres.
The Rec Room is a social entertainment destination targeting millennials featuring a wide range of entertainment
options including, simulation, redemption, video, recreational gaming, attractions, and a live entertainment venue for
watching a wide range of entertainment programming. 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.
The Rec Room earns revenues from food and beverage service, from amusement, gaming and leisure attraction play,
and from ticket sales for events held within the destination. Cineplex opened British Columbia’s first location of The
Rec Room in Burnaby on July 5, 2021, as well as The Rec Room in Barrie, Ontario, on July 26, 2021. With these
openings, Cineplex has ten locations of The Rec Room.
Playdium targets families and teens in mid-sized communities across Canada. Cineplex opened a new location in
Dartmouth, Nova Scotia on February 26, 2021. With this opening, Cineplex has three locations of Playdium.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
28
20
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
LOYALTY
Cineplex and Scotiabank are partners in the Scene+ loyalty program, providing Cineplex with significant data and a
more comprehensive understanding of the demographics and behaviors of its audience. 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.
Scene+ is a customer loyalty program designed to offer members discounts and the opportunity to earn and redeem
points. Scene+ members can earn and redeem points for purchases at Cineplex’s theatres, at its location-based
entertainment establishments, online at the Cineplex Store as well as at locations operated by select program partners
and as part of the Cineplex Tuesdays program. Scene+ members also can earn and redeem points at a wide variety of
popular retailers, and redeem points as statement credits on certain Scotiabank products, as well as book flexible
travel.
The Scene+ loyalty program has been well received as evidenced by the strong membership, high engagement and
satisfaction levels of its program members. Management believes Scene+ will drive further growth and engagement
by providing members with more reward options and ways to earn and redeem points. Through Scene+, Cineplex
has gained a more thorough understanding of its customers, driven increased customer frequency, increased overall
customer spending across its businesses and provides Cineplex with the targeted ability to communicate directly and
regularly with customers.
The Scene+ customer database has allowed Cineplex to segment the member population and provide special offers
to Cineplex’s guests, implement targeted marketing programs and deliver tailored messages to subsets of the
membership base, providing members with relevant information and offers which in turn drive increased frequency
and spend. Cineplex continues to influence consumer behavior through the use of Scene+ points and experience
upgrades for Scene+ members in its initiatives as well as in partnership with movie studios.
Cineplex has gained tremendous insight into customer behavior with over 14 years of data collected. Cineplex will
continue to focus on leveraging this data through marketing automation to drive customer behavior as well as
accelerating the adoption of artificial intelligence and machine learning for more robust consumer insight. Scene+
will continue to build its strategic marketing partnerships with participating partners across Canada, providing
promotions and offerings.
4. 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 36.0% of revenue in
2021. Revenues continue to be materially impacted due to the ongoing negative impact of the COVID-19 pandemic.
The following table presents the revenue mix for comparative years:
Revenue mix % by period
Box office
Food service
Media
Amusement
Other
Total
2021
36.0 %
28.5 %
9.9 %
20.5 %
5.1 %
2020
31.8 %
26.0 %
15.6 %
18.6 %
8.0 %
2019
42.4 %
29.0 %
11.8 %
13.7 %
3.1 %
2018
44.9 %
29.5 %
10.1 %
12.8 %
2.7 %
2017
46.2 %
28.5 %
10.8 %
11.9 %
2.6 %
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
managed separately due to their distinct natures. These four reportable segments are based on the information used
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by Cineplex’s chief operating decision makers. The revenue mix percentages for the four reportable segments during
the year continue to be materially impacted by reduced capacities of theatres and LBE locations as a result of
COVID-19.
Revenue mix % by year
Film Entertainment and Content
Media
Amusement and Leisure
LBE
Total
Year to date
2021
68.0 %
9.9 %
15.3 %
6.8 %
2020
64.0 %
15.5 %
14.4 %
6.1 %
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. Cineplex has 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 premium
priced product available that increase BPP. While BPP was negatively 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 individual 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 by 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 impact of SCENE
points on the purchases of food and beverages at theatres prior to the introduction of Scene+. Films targeted to
families and teenagers tend to result in a higher CPP and more adult-oriented product tends to result in a lower CPP.
As a result, CPP can fluctuate from quarter to quarter depending on the genre of film product playing. Prior to the
launch of Scene+, the SCENE points on theatre food service purchases decreased food service revenues on
individual purchases. 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
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 DOOH (in public spaces such as shopping malls and office towers), quick service restaurants,
financial institutions and retailers.
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Amusement revenues include amusement solutions revenues from P1AG, which supplies and services all of 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, 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 on films exhibited in Cineplex 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 the film, or estimated terms where a mutually agreed settlement is reached upon conclusion
of the 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 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.
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.
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 and advertising, media, amusement and leisure
(including P1AG and LBE), loyalty, digital commerce, supplies and services, utilities and maintenance. To the
extent these costs are variable, they can be curtailed 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 portfolio and its business
activities.
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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”) 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.
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 (“Scene+”), the operator of the Scene+ loyalty program.
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.
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%. Cineplex continues to
be entitled to and responsible for 50% of the economic benefits and obligations until specific non-financial
milestones are met, resulting in the deferral of the recognition of the proceeds in deferred revenue and other. As a
result of the December 13, 2021 step in the reorganization, Cineplex will no longer consolidate 50% of the results of
Scene LP, but will continue 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.
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5. RESULTS OF OPERATIONS
5.1 SELECTED FINANCIAL DATA
The following table presents summarized financial data for Cineplex for the three most recently completed financial
years (expressed in thousands of dollars except Shares outstanding, per Share data and per patron data, unless
otherwise noted):
Year ended
December 31,
2021
Year ended
December 31,
2020
Year ended
December 31,
2019
Box office revenues
Food service revenues
Media revenues
Amusement revenues
Other revenues
Total revenues
Film cost
Cost of food service
Depreciation - right-of-use assets
Depreciation and amortization - other assets
(Gain) loss on disposal of assets
Other costs (a)
Impairment of long-lived assets and goodwill
Costs of operations
Net (loss) income from continuing operations
Net loss from discontinued operations
Net (loss) income
Adjusted EBITDA (i) (v)
Adjusted EBITDAaL (i) (v)
(a) Other costs include:
Theatre occupancy expenses
Other operating expenses
General and administrative expenses (v)
Total other costs
$
236,320 $
186,998
65,330
134,473
33,548
656,669
114,674
41,683
102,247
113,042
132,820 $
108,632
65,358
77,901
33,552
418,263
66,922
30,667
128,393
124,846
(28,283)
(13,101)
439,554
3,717
786,634
375,690
294,863
1,008,280
(248,722) $
(624,001) $
—
(4,952)
(248,722) $
(628,953) $
59,927 $
(84,295) $
(55,866) $
(182,815) $
$
$
$
$
40,945
339,313
59,296
60,514
276,092
39,084
$
439,554 $
375,690 $
705,521
483,330
196,755
228,231
51,309
1,665,146
369,386
106,823
145,946
128,883
1,764
782,693
—
1,535,495
36,516
(7,625)
28,891
405,786
230,546
71,867
629,849
80,977
782,693
0.58
(0.12)
0.46
Net (loss) income per share from continuing operations - basic and diluted (iii) $
Net loss per share from discontinued operations - basic and diluted
Net (loss) income per share - basic and diluted (v)
Total assets
Long-term debt (iv)
Shares outstanding at period end
Cash dividends declared per Share
Adjusted free cash flow per Share (ii)
Box office revenue per patron (iii)
Concession revenue per patron (iii)
Film cost as a percentage of box office revenues
Theatre attendance (in thousands of patrons) (iii)
Theatre locations (at period end)
Theatre screens (at period end)
$
$
$
$
$
$
$
(3.93) $
—
(3.93) $
(9.85) $
(0.08)
(9.93) $
2,114,838 $
2,333,870 $
739,211 $
725,271 $
63,344,298
63,333,238
3,100,412
625,000
63,333,238
— $
(2.392) $
11.77 $
7.93 $
48.5%
20,080
160
1,652
0.150 $
(2.556) $
10.17 $
6.99 $
50.4%
13,065
162
1,667
1.780
2.660
10.63
6.73
52.4%
66,360
165
1,693
(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) 2021 includes expenses related to the Cineworld Transaction and resulting litigation in the amount of $11.4 million (2020 - $4.1 million).
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5.2 OPERATING RESULTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2021
Total revenues
Total revenues for the three months ended December 31, 2021 increased $247.5 million (471.9%) to $300.0 million
as compared to the prior year period. Total revenues for the year ended December 31, 2021 increased $238.4 million
(57.0%) to $656.7 million as compared to the prior year. A discussion of the factors affecting the changes in box
office, food service, media, amusement and other revenues for the two periods 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, concession margin per patron and net cash burn 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 fourth
quarter and the full year (in thousands of dollars, except theatre attendance reported in thousands of patrons and per
patron amounts, unless otherwise noted):
Box office revenues
Box office revenues
Theatre attendance (i)
Box office revenue per patron (i)
BPP excluding premium priced product (i)
Same theatre box office revenues (i)
Same theatre attendance (i)
% Total box from premium priced product (i)
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$ 125,890
10,245
12.29
10.40
$
$
$ 124,747
10,187
$
$
$
$
47.3 %
7,260
786
9.23
8.61
7,239
783
19.1 %
NM $ 236,320
20,080
NM
11.77
33.2 % $
10.25
20.8 % $
NM $ 234,474
19,982
NM
$ 132,820
13,065
10.17
9.18
$
$
$ 131,601
12,920
28.2 %
38.7 %
28.1 %
77.9 %
53.7 %
15.7 %
11.7 %
78.2 %
54.7 %
10.6 %
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
Box office continuity
Fourth Quarter
Full Year
2020 as reported
Same theatre attendance change
Impact of same theatre BPP change
New and acquired theatres (i)
Disposed and closed theatres (i)
2021 as reported
$
Box Office
7,260
86,915
30,595
1,123
(3)
$
125,890
Theatre
Attendance
786 $
9,404
—
56
(1)
10,245 $
Box Office
132,820
71,939
30,937
1,722
(1,098)
236,320
Theatre
Attendance
13,065
7,062
—
85
(132)
20,080
(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.
Fourth Quarter and Full Year
Fourth Quarter 2021 Top Cineplex Films
1 Spider-Man: No Way Home
2 No Time To Die
3 Dune
4 Venom: Let There Be Carnage
5 Eternals
3D % Box Fourth Quarter 2020 Top Cineplex Films
a 23.7 % 1 Honest Thief
a 13.4 % 2 Tenet
a 11.4 % 3 The War With Grandpa
a 8.4 % 4 The Croods: A New Age
a 8.3 % 5 100% Wolf
3D % Box
11.9 %
11.3 %
10.3 %
7.6 %
5.3 %
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Full Year 2021 Top Cineplex Films
1 Spider-Man: No Way Home
2 Shang-Chi And The Legend Of The Ten Rings
3 No Time To Die
4 Dune
5 Venom: Let There Be Carnage
3D % Box Full Year 2020 Top Cineplex Films
a 12.6 % 1 1917
a 8.0 % 2 Star Wars: The Rise of Skywalker
a 7.1 % 3 Jumanji: The Next Level
a 6.1 % 4 Bad Boys For Life
a 4.5 % 5 Sonic The Hedgehog
3D % Box
8.1 %
a 7.7 %
a 7.6 %
7.2 %
5.4 %
Fourth Quarter and Full Year
Box office revenues increased $118.6 million to $125.9 million during the fourth quarter of 2021, compared to $7.3
million recorded in the same period in 2020. This increase was mainly due to a 9.5 million increase in theatre
attendance as Cineplex’s theatre circuit commenced reopening during the third quarter, compared to closures that
remained in effect for a majority of the prior year period. The release of Marvel’s highly anticipated Spider-Man: No
Way Home also contributed to the significant increase in box office revenues when compared to the prior year; it had
the second biggest North American opening weekend of all-time, grossing $260.1 million becoming the fourth
highest grossing film in North America and eighth highest worldwide of all-time. It is also the first film to generate
in excess of $200.0 million during its opening weekend since Avengers: Endgame which debuted in 2019. However,
government imposed capacity restrictions were reinstated in December 2021 impacting the majority of Cineplex’s
theatres, limiting Cineplex’s ability to fully benefit from the strong slate of film releases in December.
BPP for the three months ended December 31, 2021 was $12.29, an all-time quarterly record for Cineplex. Price
increases in select key markets and additional VIP theatre locations which drive higher per patron spend attributed to
the increase. The release of first run film product available in the current period drove guests to premium
experiences compared to limited film product in the prior year, further contributing to the increase in BPP. When
compared to the prior year period, BPP increased $3.06 or 33.2% from $9.23 due to more new releases and premium
offerings in the current period as compared to the prior period which focused on discounted pricing for older and
more classic film products.
Cineplex reported box office revenues for the year ended December 31, 2021 of $236.3 million, an increase of
$103.5 million or 77.9% from the prior year. The increase in box office revenues was primarily due to a 7.0 million
increase in theatre attendance as a result of the full reopening of Cineplex’s theatres that commenced during the third
quarter compared to prolonged closures or significant capacity restrictions that remained in effect for a majority of
the prior year period.
Cineplex’s BPP for the year ended December 31, 2021 increased $1.60, or 15.7%, from $10.17 in 2020 to an all-
time annual record of $11.77 in 2021, eclipsing a record previously established in 2019. This increase was primarily
due price increases in select key markets, and more first run film product available in the current period driving
guests to premium experiences in the current period as compared to the prior period which focused on discounted
pricing for older and more classic film products.
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Food service revenues
The following table highlights the movement in food service revenues, theatre attendance and CPP for the quarter
and the full year (in thousands of dollars, except theatre attendance and same store attendance reported in thousands
of patrons and per patron amounts):
74.2 %
59.7 %
64.5 %
-31.1 %
72.1 %
53.7 %
13.4 %
73.6 %
54.7 %
Food service revenues
Food service - theatres
Food delivery - theatres
Food service - LBE
Food delivery - LBE
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$
76,695 $
2,999
7,524
26
7,122
2,660
632
129
976.8 % $ 159,201 $
91,384
12.7 %
13,052
NM $
14,613
-79.9 %
132
8,175
8,882
191
Total food service revenues
$
87,244 $
10,543
727.5 % $ 186,998 $ 108,632
Theatre attendance (i)
CPP (i) (ii) (iii)
Same theatre food service revenues (i)
Same theatre attendance (i)
$
$
10,245
7.49 $
786
9.06
NM
20,080
13,065
-17.3 % $
7.93 $
6.99
75,594 $
7,189
951.5 % $ 157,465 $
90,695
10,187
783
NM
19,982
12,920
(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.
(iii) 2021 CPP was negatively impacted by government restrictions prohibiting concession sales effective December 18, 2021, in Ontario.
Theatre food service revenue continuity
Fourth Quarter
Full Year
2020 as reported
Same theatre attendance change
Impact of same theatre CPP change
New and acquired theatres (i)
Disposed and closed theatres (i)
2021 as reported
Theatre Food
Service
Theatre
Attendance
Theatre Food
Service
Theatre
Attendance
$
7,122
86,412
(17,911)
1,089
(17)
786 $
9,404
—
56
(1)
91,384
49,576
17,193
1,651
(603)
$
76,695
10,245 $
159,201
13,065
7,062
—
85
(132)
20,080
(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.
Fourth Quarter and Full Year
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.
Food services revenues increased by $76.7 million primarily due to the $69.6 million increase in theatre food service
revenues to $76.7 million in the quarter. The increase in food service revenues is due to the reopening of theatres
and LBE businesses that commenced during the third quarter resulting in an increase in attendance across Cineplex’s
businesses, although government imposed capacity restrictions reinstated in December limited attendance levels that
have historically been higher during the holiday period. CPP decreased by $1.57 or 17.3% to $7.49, partly due to
government restrictions imposed in Ontario prohibiting food consumption which negatively impacted theatre food
sales and CPP. In the prior year period, a higher percentage of theatres were open in provinces that have historically
had a higher CPP, with excited movie goers incurring a higher spend per visit. Food service revenues from LBE
venues increased by $6.9 million to $7.5 million compared to the prior year period due to the reopening of LBE
businesses across Canada as restrictions were temporarily lifted in 2021 and the addition of new LBE locations.
Annual food service revenues increased $78.4 million, or 72.1% as compared to the prior year to $187.0 million.
The increase in food service revenues is primarily driven by the increase in theatre food service revenue as a result
of the reopening of theatres across Canada compared to extended closure periods experienced in the prior year. CPP
increased $0.94 or 13.4% to an all-time annual record of $7.93. Product mix, modest prices increases to Cineplex’s
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core food service products, additional VIP theatre locations and film product targeted towards adult demographics
all contributed to the increase in CPP.
Media revenues
The following table highlights the movement in media revenues for the quarter and the full year (in thousands of
dollars):
Media revenues
Cinema media
Digital place-based media
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$
22,007 $
1,368
NM $
32,958 $
23,568
10,788
11,128
-3.1 %
32,372
41,790
39.8 %
-22.5 %
— %
Total media revenues from continuing operations
$
32,795 $
12,496
162.4 % $
65,330 $
65,358
Media revenues from discontinued operations
—
—
— %
—
602
-100.0 %
Total media revenues
$
32,795 $
12,496
162.4 % $
65,330 $
65,960
-1.0 %
Fourth Quarter and Full Year
Total media revenues from continuing operations increased $20.3 million or 162.4% to $32.8 million in the fourth
quarter of 2021 compared to the prior year period. This increase was due to a $20.6 million increase in Cinema
media as a result of the reopening of theatres leading to significant increases in pre-show and show-time advertising
revenues. Cineplex’s cinema media arrangements are impacted by theatre attendance levels which drive impressions
and ultimately impact media revenue generated by Cineplex. Accordingly, the increase in cinema media revenue is
consistent with the increase in attendance levels when compared to the prior period. The release of the highly
anticipated films Spider-Man: No Way Home and The Matrix Resurrections during the fourth quarter of 2021
contributed to the increase in both pre-show and show-time advertising revenue compared to the prior year period
which had limited first run product releases. The increase in Cinema media revenues was partially offset by a
$0.3 million decrease in digital place-based media revenues.
Total media revenues from continuing operations remained flat at $65.3 million for the year ended December 31,
2021. Cineplex recognized a $9.4 million increase in Cinema media revenue primarily due to the reopening of
theatres resulting in an increase in pre-show and show time advertising revenue. This was offset by a decrease in
digital place-based media revenue of $9.4 million due to lower project revenue (hardware sales), creative and digital
advertising revenue.
The following table shows a breakdown of the nature of digital place-based media revenues for the quarter and the
full year (in thousands of dollars):
Digital place-based media revenues
Fourth Quarter
2021
2020
Change
2021
Full Year
2020
Project revenues (i)
Other revenues (ii)
$
3,502 $
7,286
1,972
9,156
77.6 % $
10,516 $
11,066
-20.4 %
21,856
30,724
Change
-5.0 %
-28.9 %
Total digital place-based media revenues
$
10,788 $
11,128
-3.1 % $
32,372 $
41,790
-22.5 %
(i) Project revenues include hardware sales and professional services.
(ii) Other revenues include sales of software and its support as well as media advertising.
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Amusement revenues
The following table highlights the movement in amusement revenues for the quarter and the full year (in thousands
of dollars):
Amusement revenues
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Amusement - P1AG excluding Cineplex exhibition and
LBE (i)
Amusement - Cineplex exhibition (i)
Amusement - LBE
Total amusement revenues
$
31,804 $
11,815
169.2 % $ 100,282 $
60,027
1,963
11,329
130
1,652
NM
4,943
585.7 %
29,248
2,457
15,417
$
45,096 $
13,597
231.7 % $ 134,473 $
77,901
67.1 %
101.2 %
89.7 %
72.6 %
(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.
Fourth Quarter and Full Year
Amusement revenues increased $31.5 million or 231.7% to $45.1 million during the quarter compared to the prior
year period. The quarterly increase in revenues was primarily due to the reopening of P1AG US and Canada route
locations at FECs and theatres. Additionally, the reopening of LBE businesses also resulted in increased amusement
revenues when compared to the prior year period. However, government imposed restrictions reinstated during
December in several key provinces in which Cineplex operates, reduced operations to below normal capacity levels
negatively impacting Cineplex’s revenue generating potential.
For the annual period, amusement revenues increased by $56.6 million or 72.6% compared to the prior year period
to $134.5 million. The increase was due to strong reopening of P1AG US route locations at FECs, theatres and
increased equipment sales when compared to the prior year where government mandated closures resulted in
prolonged closures of P1AG route locations, Cineplex theatres and LBE venues. The opening of an additional
Playdium location in Dartmouth, Nova Scotia and two additional The Rec Room locations in Burnaby, British
Columbia and Barrie, Ontario during year also contributed to the increase in LBE amusement revenues.
The following table presents the adjusted EBITDAaL for the quarter and the full year for P1AG (in thousands of
dollars):
P1AG Summary
Amusement revenues
Operating Expenses
Cash rent related to lease obligations (i)
Total adjusted operating expenses
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$ 31,804
$ 11,815
169.2 % $ 100,282
$ 60,027
26,940
14,900
80.8 %
87,579
913
594
53.7 %
3,994
69,216
2,422
$ 27,853
$ 15,494
79.8 % $ 91,573
$ 71,638
P1AG adjusted EBITDAaL (ii)
$
3,951
$
(3,679)
NM $
8,709
$ (11,611)
P1AG adjusted EBITDAaL Margin (iii)
(i) Cash rent that has been reallocated to offset the lease obligations.
12.4 %
(31.1) %
43.5 %
8.7 %
(19.3) %
(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.
67.1 %
26.5 %
64.9 %
27.8 %
NM
28.0 %
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When compared to the prior year period, P1AG’s adjusted EBITDAaL margins have improved for both the three
month and annual periods due to the increased revenues from the strong reopening of P1AG US route locations
through 2021, and the Canadian route locations that began to reopen during the third quarter. However, when
compared to the third quarter of 2021, P1AG’s adjusted EBITDAaL margins decreased from 19.8% to 12.4%,
primarily due to reinstated capacity restrictions as a result of the rise in COVID-19 cases an a reduction in route
revenue due to seasonality changes. Continued cost management of operating expenses, including realizing the
benefits of subsidy programs where available, allowed for the growth in margins when compared to the prior year
period. Payroll costs were reduced by the CEWS or THRP wage subsidy programs for the quarter and the year to
date period by $0.3 million (2020 - $0.7) and $3.1 million (2020 - $4.6 million), respectively. Certain operating
expenses which are fixed in nature, such as salaries, rent and utilities, created a downward pressure on margins
during the periods when locations were closed or subject to operating restrictions.
The following table presents the adjusted store level EBITDAaL for the quarter and the full year for LBE (in
thousands of dollars):
LBE Summary
Fourth Quarter
Full Year
Food service revenues
Amusement revenues
Media and other revenues
Total revenues
Cost of food service
Operating expenses before adjustments (i)
Cash rent related to lease obligations (ii)
Total adjusted costs
Adjusted store level EBITDAaL (iii)
2021
2020
Change
2021
2020
Change
$
7,550
$
761
892.1 % $ 14,745
$
9,073
11,329
522
1,652
78
585.8 %
29,248
569.2 %
769
15,417
1,040
$ 19,401
$
2,491
678.8 % $ 44,762
$ 25,530
1,976
10,357
2,335
$ 14,668
$
4,733
$
$
285
3,057
1,979
5,321
593.3 %
3,986
238.8 %
23,482
18.0 %
7,849
2,822
21,258
5,473
175.7 % $ 35,317
$ 29,553
(2,830)
NM $
9,445
$
(4,023)
62.5 %
89.7 %
-26.1 %
75.3 %
41.2 %
10.5 %
43.4 %
19.5 %
NM
Adjusted store level EBITDAaL Margin (iv)
36.9 %
24.4 %
(i) Includes operating costs of LBE. Pre-opening costs relating to LBE and overhead relating to management of LBE portfolio are not included.
(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.
(113.6) %
138.0 %
(15.8) %
21.1 %
During the fourth quarter of 2021, revenues increased by $16.9 million or 678.7% when compared to the prior year
period to $19.4 million. Revenues for the annual period increased by $19.2 million or 75.3% when compared to the
prior period to $44.8 million. The increase in revenues during both periods is due to the strong reopening of LBE
businesses across Canada as mandated operating restrictions were gradually lifted. The opening of an additional
Playdium location in Dartmouth, Nova Scotia and two additional The Rec Room locations in Burnaby, British
Columbia and Barrie, Ontario during the year also contributed to the increase in revenues.
Adjusted EBITDAaL for the fourth quarter and annual period was $4.7 million and $9.4 million, respectively. The
increase in adjusted EBITDAaL is primarily due to increased amusement revenues which have historically
contributed the highest margin to LBE locations. Cineplex’s LBE venues were closed or operating at significantly
reduced capacities in the prior period leading to negative 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 costs reductions during the quarter and annual
period of $1.2 million (2020 - $1.2 million) and $7.6 million (2020 - $6.0 million), respectively.
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Other revenues
The following table highlights the other revenues which includes revenues from 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 full year (in thousands of dollars):
Other revenues
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Other revenues from continuing operations
Other revenues from discontinued operations
Total other revenues
$
$
8,926 $
8,556
4.3 % $
33,548 $
33,552
— %
—
—
—
—
199
-100.0 %
8,926 $
8,556
4.3 % $
33,548 $
33,751
-0.6 %
Fourth Quarter and Full Year
The quarterly increase in other revenues from continuing operations is primarily due to the resumption of the
recognition of breakage revenues relating to gift card sales, net of lower digital commerce sales.
The annual increase in other revenues from continuing operations was primarily due to the resumption of the
recognition of breakage revenues relating to gift card sales compared to the prior year where the recognition of
breakage revenue was suspended during the shutdown of theatres and LBE venues.
Film cost
The following table highlights the movement in film cost and the film cost percentage for the quarter and the full
year (in thousands of dollars, except film cost percentage):
Film cost
Film cost
Film cost percentage (i)
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$ 61,990
$
3,151
NM $ 114,674
$ 66,922
49.2 %
43.4 %
5.8 %
48.5 %
50.4 %
71.4 %
-1.9 %
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
Fourth Quarter and Full Year
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 fourth quarter over the prior year period is due to the release
of first run film product including Spider-Man: No Way Home, Dune, Ghostbusters: Afterlife and No Time to Die,
compared to limited releases in the comparative period.
The increase in film cost for the annual period is due to the release of first run film product in the current period
compared to limited releases and older and classic film product with lower settlement rates in the prior year. In the
prior year period, there were a limited number of theatres open operating at significantly reduced capacities,
resulting in a less meaningful comparison of film cost percentages.
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MANAGEMENT’S DISCUSSION & ANALYSIS
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Management’s Discussion and Analysis
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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 full year (in
thousands of dollars, except percentages and margins per patron):
Cost of food service
Cost of food service - theatre
Cost of food service - LBE
Total cost of food service
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$ 19,066
$
3,704
414.8 % $ 37,697
$ 27,845
1,976
285
593.2 %
3,986
2,822
$ 21,042
$
3,989
427.5 % $ 41,683
$ 30,667
Theatre concession cost percentage (i)
LBE food cost percentage (i)
23.9 %
26.2 %
Theatre concession margin per patron (i)
$
5.70
$
37.9 %
37.4 %
5.63
-14.0 %
-11.2 %
21.9 %
27.0 %
1.2 % $
6.19
$
28.0 %
31.1 %
5.04
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
35.4 %
41.2 %
35.9 %
-6.1 %
-4.1 %
22.8 %
Fourth Quarter and Full Year
Cost of food service at the theatres varies primarily with theatre attendance 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 quarterly and annual increase in cost of food service is positively correlated to the increase in food service
revenues recognized during the quarter and annual period as a result of the reopening of Cineplex theatres and LBE
businesses, compared to closures that remained in effect for a majority of the prior year period. The quarterly and
annual decrease in theatre concession cost percentage and LBE food cost percentage when compared to the prior
year is due to higher costs resulting from extended closure periods of theatres and LBE businesses in 2020 resulting
in lower volume of food sales and increased reserves on perishable inventory as a result of mandated closures with
limited notice in 2020.
Depreciation and amortization
The following table highlights the movement in depreciation and amortization expenses during the quarter and the
full year (in thousands of dollars):
Depreciation and amortization expenses
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Depreciation of property, equipment and leaseholds
$
24,754 $
27,043
-8.5 % $ 102,277 $ 113,346
Amortization of intangible assets and other
2,747
1,707
60.9 %
10,765
11,500
Sub-total - depreciation and amortization - other assets
$
27,501 $
28,750
-4.3 % $ 113,042 $ 124,846
Depreciation - right-of-use assets
Total depreciation and amortization
25,041
28,136
-11.0 %
102,247
128,393
$
52,542 $
56,886
-7.6 % $ 215,289 $ 253,239
-9.8 %
-6.4 %
-9.5 %
-20.4 %
-15.0 %
Fourth Quarter and Full Year
Depreciation of property, equipment and leaseholds decreased by $2.3 million, or 8.5% during the quarter compared
to the prior year period, and by $11.1 million or 9.8% for the year compared to the prior year period. The decrease
was due primarily to fully depreciated property, equipment and leaseholds.
The quarterly increase in amortization of intangible assets and other relates to software developments and additions
in the current period. The decrease in amortization of intangible assets and other assets as compared to the prior full
year period is due to fully amortized intangible assets.
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Management’s Discussion and Analysis
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The quarterly and annual decrease of $3.1 million and $26.1 million, respectively, in depreciation of right-of-use
assets 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.
Impairment of long-lived assets, goodwill and investments
The following table highlights the movement in impairment of long-lived assets, goodwill and investments during
the quarter and the full year (in thousands of dollars):
Impairment of long-lived assets, goodwill and
investments
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Impairment of property, equipment and leaseholds
$
943 $
5,243
-82.0 % $
943 $
39,192
Impairment of right-of-use assets
Impairment of goodwill
Impairment of investments
2,774
—
—
21,236
26,906
2,790
-86.9 %
2,774
NM
NM
—
—
71,846
181,035
2,790
-97.6 %
-96.1 %
NM
NM
Impairment of long-lived assets, goodwill and investments
$
3,717 $
56,175
-93.4 % $
3,717 $ 294,863
-98.7 %
Fourth Quarter and Full Year
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.
In early 2020, in response to the outbreak of the COVID-19 pandemic as declared by the WHO, the government of
Canada announced mandated closure of schools, public facilities and non-essential businesses. Consequently,
effective March 16, 2020 and continuing throughout the remainder of the year, Cineplex had to either temporarily
close its theatres and location-based entertainment venues or operate with strict capacity restrictions across its
operations, resulting in material decreases in revenues, results of operations and cash flows and a material decrease
in Cineplex’s market value due to a sharp decline in its share price. These represented triggering events at each
balance sheet date in 2020.
The following discussion is qualified in its entirety by the caution regarding forward-looking statements at the
beginning of this MD&A and Section 14, Risks and uncertainties.
Increasing concerns over the new highly transmissible Omicron COVID-19 variant and increased daily COVID-19
case counts led to shutdowns and restrictions in several provinces that materially affected operations representing a
triggering event requiring impairment testing for long-lived assets, indefinite-lived intangible assets and goodwill at
December 31, 2021. During the fourth quarter of 2021, government imposed restrictions were reinstituted in
Ontario, British Columbia, New Brunswick, Nova Scotia and Prince Edward Island, reducing capacity limits to 50%
and requiring temporary theatre closures in Quebec. Further government-imposed restrictions were reinstated or
modified subsequent to December 31, 2021 resulting in temporary theatre closures in Ontario, Newfoundland and
New Brunswick. Based on the results of the impairment tests, Cineplex recognized non-cash impairment charges of
$0.9 million to property, equipment and leaseholds and $2.8 million to right-of-use assets for the year ended
December 31, 2021. If the discount rates were to increase by 2.0%, assuming a constant cash flow margin, or
discounted cash flows were 13% less than estimated, there would not be any further material impairments to
property, equipment and leaseholds, and right-of-use assets.
Fair value less cost to sell is determined using Level 3 inputs such as attendance and the related revenue growth
rates, variable and fixed cash flows, operating margins, and discount rates based on Cineplex’s internal budget.
Cineplex projects revenue, operating margins and cash flows for a period of five years, and applies a perpetual long-
term growth rate thereafter. In arriving at its forecasts, Cineplex considers past experience, economic trends such as
inflation, as well as industry and market trends. Cineplex has considered the significant impact of COVID-19 on the
business with the capacity restrictions and/or temporary theatre closures reinstated during and subsequent to
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Management’s Discussion and Analysis
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December 2021. Estimates have been applied for the impact of temporary closures and for operations with capacity
restrictions, for both Cineplex and customer locations for the first quarter of 2022. Subsequent to 2022, a range of
estimates for growth in adjusted EBITDAaL (Section 17, Non-GAAP and other financial measures) from 1% to 6%
has been applied across locations for the period 2023-2026 to reflect a staged reopening and other scenarios.
Cineplex’s estimated adjusted EBITDAaL for 2022 contemplates the latest information provided by government, at
the measurement date, related to the timing of the lifting of restrictions on locations and available information
related to the release of film content, as well as observable evidence from other territories of consumer behaviour
upon the reopening of theatres.
Cineplex’s projected revenue and cash flows for 2022 assume business will be negatively impacted by the further
government-imposed restrictions reinstituted or modified in Ontario, Quebec, British Columbia, Newfoundland and
New Brunswick subsequent to December 31, 2021 For every quarter Cineplex stays closed, additional impairment
charges could be required.
Discount rates applied to the groups of goodwill cash-generating units (“CGUs”) represent Cineplex’s assessment of
the risks specific to each group of CGUs regarding the time value of money and individual risks of the underlying
assets. Cineplex used discount rates between 8.0% and 13.6% (2020 - between 11.0% and 16.7%), and no change to
the perpetual growth rates between 0.5% and 1.0% (2020 - between 0.5% and 1.0%), which are consistent with the
observed long-term average growth rates in the exhibition, amusement and leisure, and digital media industries.
The determination of fair value less costs of disposal is sensitive to the growth rates, discount rates, and long-term
growth rates used. The risk premiums expected by market participants related to uncertainties about the industry and
assumptions relating to future cash flows may differ, depending on economic conditions and other events.
Accordingly, it is reasonably possible that future changes in assumptions may negatively impact future assessments
of the recoverable amount for groups of CGUs.
If the return to business continues to be delayed as a result of actions outside of the control of management,
including but not limited to additional changes to the film slate release schedule, ongoing government restrictions
impacting the re-opening of entertainment venues and delays in the vaccine roll out, management's estimates of
operating results and further cash flows for the forecasted period may be negatively impacted. As a result, they may
be insufficient to support the recoverability of goodwill and long lived assets in certain CGUs, thus requiring further
impairment charges. Cineplex will continue to evaluate the recoverability of goodwill at the cash generating unit
level on an annual basis during its fourth quarter and whenever events or changes in circumstances indicate there
may be a potential impairment.
For goodwill, Cineplex concluded there were no non-cash impairment losses in the exhibition business within the
Film Entertainment and Content segment. For one group of CGUs in the Film Entertainment and Content segment,
if the discount rates were to increase by 2.0%, assuming a constant cash flow margin, or discounted cash flows were
13% less than estimated, the carrying amount of the group of CGUs would exceed the reasonable range for the
recoverable amounts by $5.2 million. The goodwill for this group of CGUs represents 8% of the total carrying
amount of goodwill. For all other CGUs, no reasonably possible change in assumption would cause the recoverable
amount to fall below the carrying value.
At the end of each future reporting period Cineplex will assess whether there are indications that the impairment loss
recognised 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
losses.
Impairment of intangible assets - discontinued operations
The following table highlights the movement in impairment of intangible assets - discontinued operations during the
quarter and the full year (in thousands of dollars):
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Management’s Discussion and Analysis
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Impairment of intangible assets - discontinued
operations
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Impairment of intangible assets - discontinued operations
$
— $
—
NM $
— $
5,156
NM
Intangible assets included in assets held for sale were written down in 2020 prior to disposition to reflect their
expected net realizable value. On June 29, 2020, Cineplex sold all of its interest in WorldGaming Network LP for a
nominal amount. No other operations were classified as a discontinued operation in the current period.
Loss (gain) on disposal of assets
The following table shows the movement in the loss on disposal of assets during the quarter and the full year (in
thousands of dollars):
Loss (gain) on disposal of assets
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Loss (gain) on disposal from continuing operations
Loss on disposal from discontinued operations
Loss (gain) on disposal of assets
$
$
1,576 $
—
1,576 $
(283)
—
(283)
NM $
(28,283) $
(13,101)
115.9 %
—
—
129
-100.0 %
NM $
(28,283) $
(12,972)
118.0 %
The annual gain on disposal of assets was primarily from the sale of the head office buildings completed in the first
quarter of 2021, for gross proceeds of $57.0 million. Cineplex continues to occupy its head office buildings as a
tenant. The prior full year gain includes the sale of certain restrictive lease rights in the third quarter.
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 full year (in thousands of dollars):
Other costs
Theatre occupancy expenses
Other operating expenses
General and administrative expenses
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$
13,176 $
9,891
33.2 % $
40,945 $
60,514
-32.3 %
129,023
15,771
55,567
11,755
132.2 %
339,313
276,092
34.2 %
59,296
39,084
22.9 %
51.7 %
17.0 %
Total other costs from continuing operations
$ 157,970 $
77,213
104.6 % $ 439,554 $ 375,690
Other costs from discontinued operations
—
—
— %
—
2,212
-100.0 %
Total other costs
$ 157,970 $
77,213
104.6 % $ 439,554 $ 377,902
16.3 %
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
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36
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
Theatre occupancy expenses
The following table highlights the movement in theatre occupancy expenses for the quarter and the full year (in
thousands of dollars):
Theatre occupancy expenses
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Cash rent paid/payable (i)
Other occupancy
One-time items (ii)
$
32,415 $
23,727
36.6 % $ 113,080 $ 109,161
14,786
12,820
15.3 %
57,852
65,545
(863)
(169)
410.7 %
(4,690)
(2,108)
Total theatre occupancy including cash lease payments
$
46,338 $
36,378
27.4 % $ 166,242 $ 172,598
Cash rent paid/payable related to lease obligations (iii)
(33,162)
(26,487)
25.2 %
(125,297)
(112,084)
Theatre occupancy as reported
$
13,176 $
9,891
33.2 % $
40,945 $
60,514
3.6 %
-11.7 %
122.5 %
-3.7 %
11.8 %
-32.3 %
(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.
Theatre occupancy continuity
2020 as reported
Impact of new and acquired theatres
Impact of disposed theatres
Same store rent change (i)
One-time items
Other
Impact of IFRS 16 adoption:
Cash rent related to lease obligations
2021 as reported
Fourth Quarter
Occupancy
Full Year
Occupancy
$
$
9,891 $
218
(179)
7,100
(694)
3,515
(6,675)
13,176 $
60,514
363
(1,410)
14,566
(2,582)
(17,293)
(13,213)
40,945
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
Fourth Quarter
Theatre occupancy expenses increased $3.3 million or 33.2% during the fourth quarter of 2021 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 the increase theatre rent related expenses including
common area maintenance and taxes incurred as Cineplex’s theatres were open during the period. During the prior
year period, Cineplex recognized lower theatre occupancy expenses as a majority of theatres were closed or
operating at far below normal capacity levels. As a result, rent relief measures negotiated with landlord partners
were higher in the prior year period as compared to the current period. Cineplex was able to reduce theatre
occupancy expenses through the receipt of realty tax and rent subsidies of $0.5 million (2020 - $2.9 million) and
$1.0 million ($2.7 million), respectively.
Full Year
The decrease in theatre occupancy expenses of $19.6 million or 32.3% for the 2021 year compared the prior year
was due to lower theatre rent related expenses including common area maintenance and taxes as compared to the
prior year period. Cineplex recognized realty tax subsidies of $11.0 million (2020 - $2.9 million) and rent subsidies
of $12.9 million (2020 - $2.7 million), contributing to the decrease in theatre occupancy expenses.
Other operating expenses
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
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37
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Cineplex Inc.
Management’s Discussion and Analysis
Theatre occupancy expenses
thousands of dollars):
Cash rent paid/payable (i)
Other occupancy
One-time items (ii)
The following table highlights the movement in theatre occupancy expenses for the quarter and the full year (in
Theatre occupancy expenses
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$
32,415 $
23,727
36.6 % $ 113,080 $ 109,161
14,786
12,820
15.3 %
57,852
65,545
(863)
(169)
410.7 %
(4,690)
(2,108)
Total theatre occupancy including cash lease payments
$
46,338 $
36,378
27.4 % $ 166,242 $ 172,598
Cash rent paid/payable related to lease obligations (iii)
(33,162)
(26,487)
25.2 %
(125,297)
(112,084)
Theatre occupancy as reported
$
13,176 $
9,891
33.2 % $
40,945 $
60,514
(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.
3.6 %
-11.7 %
122.5 %
-3.7 %
11.8 %
-32.3 %
60,514
363
(1,410)
14,566
(2,582)
(17,293)
(13,213)
40,945
Fourth Quarter
Occupancy
Full Year
Occupancy
$
$
9,891 $
218
(179)
7,100
(694)
3,515
(6,675)
13,176 $
Theatre occupancy continuity
2020 as reported
Impact of new and acquired theatres
Impact of disposed theatres
Same store rent change (i)
One-time items
Other
Impact of IFRS 16 adoption:
Cash rent related to lease obligations
2021 as reported
Fourth Quarter
(i) Represents a supplementary financial measure. See Section 17, Non-GAAP and other financial measures.
Theatre occupancy expenses increased $3.3 million or 33.2% during the fourth quarter of 2021 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 the increase theatre rent related expenses including
common area maintenance and taxes incurred as Cineplex’s theatres were open during the period. During the prior
year period, Cineplex recognized lower theatre occupancy expenses as a majority of theatres were closed or
operating at far below normal capacity levels. As a result, rent relief measures negotiated with landlord partners
were higher in the prior year period as compared to the current period. Cineplex was able to reduce theatre
occupancy expenses through the receipt of realty tax and rent subsidies of $0.5 million (2020 - $2.9 million) and
$1.0 million ($2.7 million), respectively.
Full Year
The decrease in theatre occupancy expenses of $19.6 million or 32.3% for the 2021 year compared the prior year
was due to lower theatre rent related expenses including common area maintenance and taxes as compared to the
prior year period. Cineplex recognized realty tax subsidies of $11.0 million (2020 - $2.9 million) and rent subsidies
of $12.9 million (2020 - $2.7 million), contributing to the decrease in theatre occupancy expenses.
Cineplex Inc.
Management's Discussion and Analysis
Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Other operating expenses
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
The following table highlights the movement in other operating expenses during the quarter and the full year (in
thousands of dollars):
37
Other operating expenses
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Theatre payroll
Theatre operating expenses
Media
P1AG
LBE (i)
LBE pre-opening (ii)
SCENE
Marketing
Other (iii)
$
30,766 $
5,157
496.6 % $
63,818 $
40,689
27,146
13,146
27,853
12,692
—
8,641
5,211
7,605
12,717
8,513
15,494
5,037
785
4,890
2,136
5,093
113.5 %
54.4 %
79.8 %
152.0 %
NM
76.7 %
144.0 %
49.3 %
66,188
37,263
91,573
31,331
1,354
29,019
10,710
24,676
61,359
42,913
71,638
26,731
1,907
13,423
7,223
24,389
Other operating expenses including cash lease payments
$ 133,060 $
59,822
122.4 % $ 355,933 $ 290,272
Cash rent paid/payable related to lease obligations (iv)
(4,037)
(4,255)
-5.1 %
(16,620)
(14,180)
Other operating expenses from continuing operations
$ 129,023 $
55,567
132.2 % $ 339,313 $ 276,092
56.8 %
7.9 %
-13.2 %
27.8 %
17.2 %
-29.0 %
116.2 %
48.3 %
1.2 %
22.6 %
17.2 %
22.9 %
Other operating expenses from discontinued operations
—
—
—
—
2,212
-100.0 %
Total other operating expenses
$ 129,023 $
55,567
132.2 % $ 339,313 $ 278,304
21.9 %
(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 continuity from continuing operations
Fourth Quarter
Full Year
2020 as reported
Impact of new and acquired theatres
Impact of disposed theatres
Same theatre payroll change (i)
Same theatre operating expenses change (i)
Media operating expenses change
P1AG operating expenses change
LBE operating expenses change
LBE pre-opening change
SCENE change
Marketing change
Other
Impact of IFRS 16 adoption:
Cash rent related to lease obligations
2021 as reported
$
55,567 $
788
21
24,834
14,451
4,633
12,359
7,655
(785)
3,751
3,075
2,456
$
$
218 $
129,023 $
276,092
1,238
(1,071)
22,542
5,276
(5,650)
19,935
4,600
(553)
15,596
3,487
261
(2,440)
339,313
(i) See Section 17, Non-GAAP and other financial measures. These are measures included as part of Cineplex’s supplementary financial
measure calculations.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
46
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
38
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
Fourth Quarter
Other operating expenses increased $73.5 million or 132.2% during the fourth quarter of 2021 compared to the prior
year period. The increase was primarily driven by increases in same store theatre payroll and theatre operating
expenses of $25.6 million and $14.4 million, respectively, as Cineplex’s theatres were operating at a greater capacity
in the current period as compared to extended closures in effect during the prior year. Cineplex also recognized
P1AG other operating expenses of $27.9 million, an increase of $12.4 million when compared to the prior year due
to the reopening of P1AG US and Canadian route locations. With the lifting of government-imposed restrictions,
Cineplex’s LBE locations were also open for the majority of the fourth quarter resulting in LBE other operating
expenses of $12.7 million an increase of $7.7 million when compared to the prior year. Cineplex also recognized a
$3.8 million increase in SCENE operating costs prior to the launch of Scene+, and a $3.1 million increase in
marketing expenses primarily related to the launch of Cineplex’s national brand campaign, Where Escape Begins
which launched on September 27, 2021. Cineplex received $8.9 million of subsidies in the current period, comprised
of $8.8 million (2020 -$14.3 million) of payroll subsidies of which $6.5 million (2020 - $6.9 million) was offset
against theatre payroll, and $0.1 million (2020 - $1.8 million) of non-theatre rent, realty tax and utilities subsidies.
Full Year
The overall increase in other operating expenses was a result of the reopening of Cineplex’s theatres, LBE
businesses and P1AG US and Canada route locations at FEC’s and theatres. The increase is also attributable to the
increase in SCENE operating costs prior the launch of Scene+. In the prior year period, Cineplex experienced
extended closure periods of its theatres, LBE locations and P1AG route locations resulting in a significant decrease
in business volumes. For the annual period, Cineplex received $54.8 million (2020 - $49.8 million) of subsidies in
the current period, comprised of $48.4 million (2020 - $47.6 million) of payroll subsidies of which $30.6 million
(2020 - $25.3 million) was offset against theatre payroll, and $6.4 million (2020 - $2.2 million) 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 full year, including share-based compensation costs, and G&A net of these costs (in thousands of dollars):
G&A expenses
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
G&A excluding the following items
$
12,730 $
Restructuring
Transaction / Litigation costs
LTIP (i)
Option plan
—
2,275
800
523
7,261
2,396
1,279
248
718
75.3 % $
44,239 $
43,717
-100.0 %
—
77.9 %
11,395
8,258
4,101
1.2 %
-100.0 %
177.9 %
222.6 %
-27.2 %
4,065
1,903
(15,104)
-126.9 %
(1,203)
-258.2 %
G&A expenses including cash lease payments
$
16,328 $
11,902
37.2 % $
61,602 $
39,769
54.9 %
Cash rent paid/payable included as part of lease obligations
(ii)
(557)
(147)
278.9 %
(2,306)
(685)
236.6 %
G&A expenses as reported
$
15,771 $
11,755
34.2 % $
59,296 $
39,084
51.7 %
(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.
Fourth Quarter and Full Year
G&A expenses increased $4.0 million during the fourth quarter of 2021 compared to the prior year period. The
change is attributable to higher head office payroll expenses and professional fees incurred related to the litigation
against Cineworld. Cineplex incurred $2.3 million (2020 - $1.3 million) of expenses related to litigation arising from
the Cineworld Transaction during the quarter (Section 1.1, Cineworld Transaction). Variable wage subsidies
declined as business volumes increased, resulting in lower wage benefits received in the current period, contributing
to the higher G&A expenses compared to the prior year. Employee payroll was reduced by $0.8 million (2020 - $2.3
million) under the THRP.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
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39
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
G&A expenses for the annual period increased $20.2 million as compared to the prior year. The change was
primarily due to a significant decrease in LTIP expense in the prior period due to the sharp decline in Cineplex’s
Share price as a result of the impact of the COVID-19 pandemic on Cineplex’s business, which fell from $33.90 at
the beginning of 2020 to $9.27 per Share at December 31, 2020. Cineplex also recognized total costs relating to
litigation arising from the Cineworld Transaction of $11.4 million, an increase of $7.3 million when compared to the
prior year. (Section 1.1, Cineworld Transaction). Employee payroll was reduced by $7.8 million (2020 - $9.4
million) received under the CEWS and THRP program in 2021.
Share of (income) loss of joint ventures and associates
Cineplex’s joint ventures and associates include its 78.2% interest in CDCP (2020 - 78.2%), 50% economic interest
in Scene+, 50% interest in one IMAX screen in Ontario (2020 - 50%) and a 50% interest in YoYo’s (2020 - 50%).
The following table highlights the components of share of (income) loss of joint ventures and associates during the
quarter and the full year (in thousands of dollars):
Share of (income) loss of joint ventures and associates
Fourth Quarter
Full Year
Share of (income) loss of CDCP
Share of loss of Scene+
Share of income (loss) of other joint ventures and associates
2021
2020
Change
2021
2020
Change
$
(2,439) $
2,085
-217.0 % $
(146) $
7,279
-102.0 %
794
(136)
—
260
NM
-152.3 %
794
107
—
1,130
8,409
NM
-90.5 %
-91.0 %
Total (income) loss of joint ventures and associates
$
(1,781) $
2,345
-175.9 % $
755 $
CDCP revenues were positively impacted by the reopening of theatres that commenced during the third quarter and
from the release of first-run movies, resulting in a $4.5 million increase in share of income from CDCP for the
quarter and $7.4 million increase for the annual period. This was partially offset by losses of $0.8 million recognized
from Cineplex’s investment in Scene+.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
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40
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
Interest expense
The following table highlights the movement in interest expense during the quarter and full year (in thousands of
dollars):
Interest expense
Interest expense on long-term debt
Lease interest expense
Financing fees
Sub-total - cash interest expense
Deferred financing fee accretion and other non-cash
interest, net
Accretion expense on Debentures and Notes Payable
Interest rate swap - non-cash
Sub-total - non-cash interest expense
Total interest expense
Total cash interest paid
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$
$
$
$
16,127 $
14,533
542
31,202 $
148
4,164
(5,282)
(970)
30,232 $
42,379 $
12,712
13,858
700
27,270
368
3,428
2,509
6,305
33,575
40,450
26.9 % $
4.9 %
-22.6 %
14.4 % $ 119,525 $
60,918 $
57,744
863
38,485
47,794
1,500
87,779
-59.8 %
21.5 %
-310.5 %
-115.4 %
1,396
960
7,471
15,973
13,922
(12,730)
22,789
4,203
-10.0 % $ 123,728 $ 110,568
80,230
4.8 % $ 108,851 $
58.3 %
20.8 %
-42.5 %
36.2 %
-31.2 %
113.8 %
-191.4 %
-81.6 %
11.9 %
35.7 %
Total interest expense decreased $3.3 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 $7.8 million decrease in non-cash
interest expense. This was partially offset by a $3.9 million increase in cash interest expense primarily relating to the
issuance of Notes Payable (Section 7.4, Long-term debt) completed in the first quarter of 2021 and Debentures (as
described in Section 7.4, Long-term debt) during the third quarter of 2020, resulting in Notes Payable cash interest
expense of $4.7 million (2020 - $nil) and Debentures cash interest of $4.6 million (2020 - $4.6 million). Lower
Credit Facilities balances in 2021 as compared to the prior year quarter resulted in a decrease of $1.4 million of
interest on Cineplex’s outstanding Credit Facilities. Lease interest expense increased by $0.7 million as a result of
lease modifications negotiated with landlord partners resulting in higher incremental borrowing rates (and lower
principal balances), contributing to the increase in cash interest expense . Cineplex recognized accretion expense
relating to the issuance of Notes Payable and Debentures of $0.2 million (2020 - $nil) and $3.9 million (2020 - $3.4
million), respectively.
For the full year, interest expense increased $13.2 million when compared to the prior year period. The increase was
due to increases in cash interest expense as a result of the issuance of Notes Payable (Section 7.4, Long-term debt)
completed in the first quarter of 2021 and Debentures (Section 7.4, Long-term debt) during the third quarter of 2020,
resulting in Notes Payable cash interest expense of $15.8 million (2020 - $nil) and Debentures cash interest of $18.2
million (2020 - $8.5 million). Lower Credit Facilities balances in 2021 as compared to the prior year quarter resulted
in a decrease of $2.9 million of interest on Cineplex’s outstanding Credit Facilities. Cash interest relating to lease
obligations increased by $10.0 million when compared to the prior period as a result of higher incremental
borrowing rates due to lease modifications negotiated with landlord partners. Non-cash interest expense decreased
by $18.6 million when compared to the prior year. The decrease in non-cash interest is due to changes in the fair
value of the interest rate swap resulting in a $26.7 million decrease in non-cash interest expense. This was partially
offset by an increase in accretion expense relating to the issuance of Notes Payable and Debentures of $0.8 million
(2020 - $nil) and $15.2 million (2020 - $7.5 million), respectively.
Interest income
Interest income during the fourth quarter and the full year was as follows (in thousands of dollars):
Interest income
Interest income
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
$
30 $
33
-9.1 % $
232 $
182
27.5 %
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
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41
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
Foreign exchange
The following table highlights the movement in foreign exchange during the quarter and the full year (in thousands
of dollars):
Foreign exchange
Fourth Quarter
2021
2020
Change
2021
Full Year
2020
Foreign exchange (gain) loss from continuing operations
Foreign exchange gain from discontinued operations
Total foreign exchange (gain) loss
$
$
(109) $
—
(109) $
759
—
759
NM $
NM
NM $
(43) $
—
(43) $
57
(117)
(60)
Change
NM
NM
-28.3 %
The movement in the quarterly and full year foreign exchange was due to the change in the CAD/USD foreign
exchange month end rate from 1.2741 at September 30, 2021 and 1.2732 at December 31, 2020 to 1.2678 at
December 31, 2021.
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
Fourth Quarter
2021
2020
Change
2021
Year to Date
2020
Change
Change in fair value of financial instruments
$
(5,420) $
—
NM $
(8,790) $
—
NM
The gain on change in fair value of financial instruments 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 7.4, Long-
term debt).
Income taxes
The following table highlights the movement in current and deferred income tax expense during the quarter and the
full year (in thousands of dollars):
Income taxes
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Current income tax (recovery) expense
Deferred income tax expense (recovery)
Provision for income taxes from continuing operations
Provision for income taxes from discontinued operations
Provision for income taxes
$
$
$
— $
—
— $
—
— $
(65,776)
114,854
49,078
—
49,078
NM $
-100.0 %
-100.0 % $
—
-100.0 % $
3,339 $
—
3,339 $
(73,495)
(11,373)
(84,868)
—
3,339 $
(1,627)
(86,495)
NM
-100.0 %
NM
-100.0 %
NM
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.
The 2021 current tax expense represents Ontario corporate minimum tax paid on the filing of 2020 tax returns as a
result of losses carried back to offset taxable income. The minimum tax paid is creditable against future Ontario
corporate income tax payable.
In 2021, Cineplex recovered income taxes paid in prior periods of $62.6 million as a result of its tax returns filed for
the 2020 taxation year.
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MANAGEMENT’S DISCUSSION & ANALYSIS
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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’s combined statutory income tax rate at December 31, 2021 was 26.3% (2020 - 26.8%).
Non-capital losses available for carry-forward expire as follows:
2027
2028
2029
2030
2032
2034
2035
2036
2037
2038
2040
2041
Indefinite
$2,502
8,822
5,122
2,184
254
1,947
2,770
2,749
18,546
3,110
16,977
221,169
28,423
314,575
$
Losses denominated in US dollars are presented at the Canadian dollar equivalent using the December 31, 2021
exchange rate.
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MANAGEMENT’S DISCUSSION & ANALYSIS
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5.3 NET LOSS AND EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND
AMORTIZATION (“EBITDA”) (see Section 17, Non-GAAP and other financial measures)
The following table presents net loss, EBITDA, adjusted EBITDA and adjusted EBITDAaL for the three months
and year ended December 31, 2021 as compared to the prior year periods (expressed in thousands of dollars, except
adjusted EBITDAaL margin):
NET LOSS AND EBITDA
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Net loss
$ (21,778)
$ (230,403)
-90.5 % $ (248,722)
$ (624,001)
Net loss as a percentage of sales
(7.3) %
(439.3) %
432.0 %
(37.9) %
(149.2) %
EBITDA
Adjusted EBITDA
Adjusted EBITDAaL
$ 60,966
$ (90,897)
NM $ 93,402
$ (345,244)
$ 58,328
$ (32,097)
NM $ 59,927
$ (55,866)
$ 20,198
$ (65,948)
NM $ (84,295)
$ (182,815)
Adjusted EBITDAaL margin
6.7 %
(125.7) %
132.4 %
(12.8) %
(43.7) %
-60.1 %
111.3 %
NM
NM
-53.9 %
30.9 %
Net loss and adjusted EBITDAaL for the fourth quarter of 2021 were $(21.8) million and $20.2 million,
respectively, as compared to the net loss of $(230.4) million and adjusted EBITDAaL of $(65.9) million,
respectively, in the prior year period. The movement in both net loss and adjusted EBITDAaL was primarily due to
the reopening of Cineplex’s entire circuit of theatres and LBE venues during the majority of the fourth quarter,
despite capacity restrictions reinstated in Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and British
Columbia on December 18, 2021 and theatres in Quebec mandated to close effective December 20, 2021 in response
to a surge in COVID-19 cases. Cinema media revenues and amusement revenues from route operations in both
Canada and the United States also increased in the periods of reopening. In the prior year period, the second wave of
COVID-19 in the winter resulted in another round of closures of Cineplex’s theatres and LBE venues in several
provinces during the latter half of the fourth quarter of 2020.
Net loss for the year ended December 31, 2021 was $(248.7) million, as compared to the net loss of $(624.0) million
in the prior year period. Adjusted EBITDAaL for the year ended December 31, 2021 was a loss of $(84.3) million as
compared to a loss of $(182.8) million for the same period in 2020. The movements in both net loss and adjusted
EBITDAaL were primarily due to the lifting of some restrictions on the theatre and LBE businesses commencing
near the end of the second quarter of 2021, and reopening of Cineplex’s entire circuit of theatres and LBE venues as
of July 17, 2021, continuing into the third and fourth quarters. In response to a surge in COVID-19 cases, capacity
restrictions were reinstated in Ontario, New Brunswick, Nova Scotia, Prince Edward Island and British Columbia
effective December 18, 2021 and theatres in Quebec were mandated to close effective December 20, 2021. In the
prior year period, Cineplex operated at full capacity until restrictions and closures began in March 2020 which
continued until the latter half of August subsequent to which limited reopenings were allowed. The second wave of
COVID-19 in the winter resulted in another round of closures in Cineplex’s theatres and LBE venues in several
provinces during the latter half of the fourth quarter of 2020.
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MANAGEMENT’S DISCUSSION & ANALYSIS
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6. BALANCE SHEETS
The following sets out significant changes to Cineplex’s consolidated balance sheets during the year ended
December 31, 2021 as compared to December 31, 2020 (in thousands of dollars):
December 31, 2021
December 31, 2020
Change ($)
Change (%)
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income taxes receivable
Inventories
Prepaid expenses and other current assets
Non-current assets
Property, equipment and leaseholds
Right-of-use assets
Interests in joint ventures
Intangible assets
Goodwill
Derivative financial instrument
Liabilities
Current liabilities
Accounts payable and accrued expenses
Share-based compensation
Income taxes payable
Deferred revenue and other
Lease obligations
Fair value of interest rate swap agreements
Non-current liabilities
Share-based compensation
Long-term debt
Fair value of interest rate swap agreements
Lease obligations
Post-employment benefit obligations
Other liabilities
Shareholders’ (deficit) equity
Total shareholders’ (deficit) equity
$
26,938 $
16,254 $
80,679
1,984
24,899
13,365
147,865
464,439
768,675
7,423
81,651
635,545
9,240
51,834
66,551
21,712
11,613
10,684
28,845
(64,567)
3,187
1,752
167,964
(20,099)
555,340
881,418
8,644
84,922
635,582
—
(90,901)
(112,743)
(1,221)
(3,271)
(37)
9,240
$
$
2,114,838 $
2,333,870 $
(219,032)
157,950 $
82,992 $
—
1,945
293,206
101,058
8,063
562,222
4,940
739,211
6,160
1,004,465
9,973
7,590
2,334,561
482
802
219,983
97,259
7,202
408,720
2,670
725,271
19,157
1,073,666
11,503
68,649
2,309,636
74,958
(482)
1,143
73,223
3,799
861
153,502
2,270
13,940
(12,997)
(69,201)
(1,530)
(61,059)
24,925
65.7 %
55.6 %
-97.0 %
14.7 %
15.1 %
-12.0 %
-16.4 %
-12.8 %
-14.1 %
-3.9 %
— %
NM
-9.4 %
90.3 %
-100.0 %
142.5 %
33.3 %
3.9 %
12.0 %
37.6 %
85.0 %
1.9 %
-67.8 %
-6.4 %
-13.3 %
-88.9 %
1.1 %
$
(219,723)
2,114,838 $
24,234
2,333,870 $
(243,957)
(219,032)
-1,006.7 %
-9.4 %
Cash and cash equivalents. The increase in cash and cash equivalents is due to the higher cash in transit in
resulting from reopening of entire circuit of theatres and LBE venues since July 17, 2021.
Trade and other receivables. The increase in trade and other receivables is primarily due to timing of billing and
collection based on higher business volumes including the sale of gift cards and coupons in the current year. With
restrictions being reinstated in several provinces as a result of rising case counts of COVID-19 in the latter half of
December 2021, accounts receivables also included $9.9 million of labour, utilities and other occupancy subsidies at
December 31, 2021 (2020 - $15.8 million).
Income taxes receivable. The decrease in income taxes receivable is primarily due to the receipt of tax refunds of
$62.6 million, resulting from loss carrybacks realized in 2020 used to offset taxable income in prior years.
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MANAGEMENT’S DISCUSSION & ANALYSIS
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Inventories. The increase in inventories is primarily due to increased inventory with anticipated higher business
volumes resulting from reopening of the entire circuit of theatres and LBE venues since July 17, 2021.
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 an increase in annual insurance premiums
during the fourth quarter of 2021.
Property, equipment and leaseholds. The decrease in property, equipment and leaseholds is due to amortization
expense ($102.3 million), asset dispositions ($13.9 million), foreign exchange impact ($0.3 million), and an
impairment charge ($0.9 million). This is offset by additions to new build and other capital expenditures ($19.6
million) and maintenance capital expenditures ($6.9 million).
Right-of-use assets. The decrease in right-of-use assets is due to amortization expense ($102.2 million), lease
modifications ($7.6 million), and an impairment charge ($2.8 million) recorded during the fourth quarter. During the
second quarter of 2021, Cineplex derecognized right-of-use assets in accordance with an amended lease agreement
entered with the landlord ($6.3 million).
Interests in joint ventures. The decrease in interest in joint ventures is primarily due to the $2.0 million cash
received from CDCP in 2021, as well as the equity loss realized by Scene+ which adopted equity accounting as of
December 13, 2021, with the launch of Scene+.
Intangible assets. The decrease in intangible assets is due to amortization expense ($10.8 million), and asset
dispositions ($1.4 million), partially offset by the capitalization of software development costs ($9.5 million).
Derivative financial instrument. The increase in derivative financial instrument is due to the change in fair value
of Notes Payable prepayment option.
Accounts payable and accrued expenses. The increase in accounts payable and accrued liabilities is primarily due
to increased business volumes arising from the reopening of the entire circuit of theatres and LBE venues since July
17, 2021.
Share-based compensation. The increase in share-based compensation is due to the increase in Share price, which
was $13.49 per Share at December 31, 2021 as compared to $9.27 at December 31, 2020, increasing the fair value of
the compensation liability (see Section 8, Share activity)
Income taxes payable. The increase in income taxes payable represents minimum tax payable by certain entities as
a result of losses used to offset taxable income in prior years.
Deferred revenue and other. The deferred revenue increase is primarily due to higher sales volume of gift cards
and vouchers with the reopening of theatres and LBE venues in the fourth quarter of 2021, in excess of redemption.
In addition, deferred revenue includes $60.0 million from the SCENE reorganisation that was reclassified from other
liability and will be recognized when the economic substance of the transaction is realized in 2022.
Lease obligations. The decrease in lease obligations is primarily due to the payment of lease obligations and lease
modifications recognized from leases renegotiated due to the impact of COVID-19 on the business.
Fair value of interest rate swap agreements. Represents the fair values of Cineplex’s outstanding interest rate
swap agreements (see Section 7.4 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 the accretion of the Debentures and Notes Payable. The Credit Facilities were
reduced by the application of proceeds from the issuance of the Notes Payable and the sale of the head office
buildings (Section 7.4 Long-term debt).
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MANAGEMENT’S DISCUSSION & ANALYSIS
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Management’s Discussion and Analysis
—————————————————————————————————————————————
7. LIQUIDITY AND CAPITAL RESOURCES
7.1 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 months and year ended December 31, 2021 and 2020 (in thousands of dollars):
Cash flows provided by operating activities
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Net loss from continuing operations
$
(21,778) $ (230,403) $ 208,625 $ (248,722) $ (624,001) $ 375,279
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of other assets (i)
Depreciation of right-of-use assets
Unrealized foreign exchange
Interest rate swap agreements - non-cash interest
Accretion of convertible debentures
Other non-cash interest (ii)
Loss (gain) on disposal of assets
Deferred income taxes (recovery)
Non-cash Share-based compensation
Impairment of long-lived assets and goodwill
Change in fair value of financial instrument
Net change in interests in joint ventures and associates
Changes in operating assets and liabilities
27,501
25,041
78
(5,282)
4,164
148
1,576
—
1,228
3,717
(5,420)
(2,088)
(1,405)
28,750
28,136
787
2,509
3,428
368
(1,249)
113,042
(3,095)
102,247
(709)
55
124,846
128,393
342
(11,804)
(26,146)
(287)
(7,791)
(12,730)
13,922
(26,652)
736
(220)
15,973
960
(283)
114,854
(3,149)
56,175
—
5,044
(67,257)
1,859
(114,854)
4,377
(52,458)
(5,420)
(7,132)
65,852
(28,283)
—
4,292
3,717
(8,790)
1,805
117,438
7,471
1,396
(13,101)
(11,373)
1,228
294,863
—
12,878
(43,178)
8,502
(436)
(15,182)
11,373
3,064
(291,146)
(8,790)
(11,073)
160,616
Net cash provided by (used in) operating activities
$
27,480 $
(61,041) $
88,521 $
61,004 $ (106,314) $ 167,318
(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.
Fourth Quarter
Cash provided by operating activities was $27.5 million as compared to cash flows of $61.0 million used in
operating activities in the prior year period. The movement was primarily due to Cineplex’s improved operating
results arising from the reopened theatres and LBE venues for the majority of the fourth quarter. The timing of the
settlement of accounts receivables and payables balances also positively contributed to the movement.
Full Year
For the year ended December 31, 2021, cash provided by operating activities was $61.0 million compared to cash
flows of $106.3 million used in the prior year period. The movement was primarily due to the reopening of
Cineplex’s entire circuit of theatres and LBE venues as of July 17, 2021 leading to improved operating results in the
third and fourth quarters of 2021, despite the negative impact from capacity restrictions reinstated in Ontario, New
Brunswick, Nova Scotia, Prince Edward Island and British Columbia effective December 18, 2021 and from
temporary theatre closures in Quebec in response to a surge in COVID-19 cases. The timing of settlement of
operating assets and liabilities in 2021 including the receipt of the $62.6 million tax refunds, also positively
contributed to the movement. During the prior year period, Cineplex operated at full capacity until restrictions and
closures began in March 2020 which continued until the latter half of August at which time limited reopenings were
allowed. The second wave of COVID-19 emerging during the winter of 2020 resulted in another round of closures
in Cineplex’s theatres and LBE venues in several provinces during the latter half of the fourth quarter of 2020.
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Management’s Discussion and Analysis
—————————————————————————————————————————————
7.2 INVESTING ACTIVITIES
The following table highlights the movements in cash used in investing activities for the three months and year
ended December 31, 2021 and 2020 (in thousands of dollars):
Cash flows provided by (used in) investing activities
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Proceeds from disposal of assets, net
Purchases of property, equipment and leaseholds
Intangible assets additions
Tenant inducements
Net cash received from joint ventures and associates
$
68 $
(5,052)
(1,992)
1,044
1,995
59,870 $
(9,969)
(2,106)
2,697
—
(59,802) $
4,917
114
(1,653)
1,995
63,215 $
(23,627)
(9,200)
8,068
1,995
80,920 $
(73,411)
(9,005)
24,296
3,910
(17,705)
49,784
(195)
(16,228)
(1,915)
Net cash (used in) provided by investing activities
$
(3,937) $
50,492 $
(54,429) $
40,451 $
26,710 $
13,741
Fourth Quarter
Cash used in investing activities during the fourth quarter of 2021 was $3.9 million, as compared to cash provided
by investing activities of $50.5 million in the prior year period. The movement was primarily due to cash proceeds
of $60.0 million that were received in the prior year period as a result of Cineplex’s reorganization of its joint
operation with SCENE.
Full Year
For the full year, cash provided by investing activities was $13.7 million higher than the prior year. The increase was
primarily due to a reduction of capital expenditures net of tenant inducement received in response to the pandemic.
The increase was partially offset by the movement in cash proceeds. During 2021 cash proceeds received were for
the sale of Cineplex’s head office buildings and the sale of certain restrictive lease rights, while cash proceeds
received in the prior year period were with respect to Cineplex’s reorganization of its joint operation with SCENE.
The COVID-19 pandemic continues to have a material negative effect on Cineplex’s business. Management
continues to focus on reducing capital expenditures and believes that it has adequate liquidity to fund operations for
the currently anticipated duration of the pandemic in the regions in which Cineplex operates. Components of capital
expenditures include (in thousands of dollars):
Capital expenditures
Gross capital expenditures
Less: tenant inducements
Net capital expenditures
Net capital expenditures consists of:
Growth and acquisition capital expenditures (i)
Tenant inducements
Media growth capital expenditures
Premium formats (ii)
Amusement and leisure growth capital expenditures
(excluding LBE build expenditures)
Maintenance capital expenditures
Other (iii)
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
5,052 $
(1,044)
4,008 $
9,969 $
(2,697)
7,272 $
(4,917) $
1,653
(3,264) $
23,627 $
(8,068)
15,559 $
73,411 $
(24,296)
49,115 $
(49,784)
16,228
(33,556)
2,525 $
(1,044)
2,647
399
445
5,335
(6,299)
4,008 $
8,823 $
(2,697)
—
541
372
1,171
(938)
7,272 $
(6,298) $
1,653
2,647
(142)
73
4,164
(5,361)
(3,264) $
13,110 $
(8,068)
4,238
258
1,133
6,937
(2,049)
15,559 $
37,104 $
(24,296)
198
2,884
(23,994)
16,228
4,040
(2,626)
877
5,379
26,969
49,115 $
256
1,558
(29,018)
(33,556)
$
$
$
$
(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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Management’s Discussion and Analysis
—————————————————————————————————————————————
7.3 FINANCING ACTIVITIES
The following table highlights the movements in cash from financing activities for the three months and year ended
December 31, 2021 and 2020 (in thousands of dollars):
Cash flows provided by (used in) financing activities
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Dividends paid
Borrowings (repayments) under credit facility, net
Repayments of lease obligations - principal
Issuance of convertible debentures, net
Insurance of notes payable, net
Financing fees
$
— $
— $
1,000
(25,525)
46,000
(32,323)
—
—
(542)
—
—
(700)
— $
(45,000)
6,798
—
—
158
— $
(246,000)
(88,259)
—
243,996
(863)
(19,000) $
(119,000)
(91,946)
303,063
—
(1,500)
19,000
(127,000)
3,687
(303,063)
243,996
637
Net cash (used in) provided by financing activities
$
(25,067) $
12,977 $
(38,044) $
(91,126) $
71,617 $ (162,743)
Fourth Quarter
Cash flows used in financing activities were $25.1 million in the fourth quarter of 2021, as compared to cash
provided in the prior year comparative period of flows of $13.0 million. The movement was mainly due to
borrowings under the Credit Facilities to fund operations during the COVID-19 driven closures in the prior year
period.
Full Year
Cash flows used in financing activities were $91.1 million for the year ended December 31, 2021, as compared to
cash provided financing activities in the prior year in the amount of $71.6 million. The movement was mainly due to
the net proceeds arising from the debt financing and repayment of amounts borrowed under the Credit Facilities in
both 2020 and 2021. During the first quarter of 2021, the net proceeds of the Notes Payables and sale of head office
buildings were used to repay the Credit Facilities ($100.0 million of which was a permanent repayment). During the
third quarter of 2020, the net proceeds of the issuance of the Debentures was used to repay the Credit Facilities, of
which $100.0 million was permanent. Dividends were suspended under the terms of the Arrangement Agreement
subsequent to the dividend paid on February 28, 2020 and remained suspended after the termination of the
Arrangement Agreement as a result of the terms of the Credit Agreement Amendments (see Section 7.4, Credit
Facilities).
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 Response to COVID-19.
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Management’s Discussion and Analysis
—————————————————————————————————————————————
7.4 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 between Cineplex, Cineplex
Entertainment Limited Partnership, the guarantors from time to time party thereto, and a syndicate of lenders dated
November 13, 2018 (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 December 31, 2021, the Credit Facilities consisted of the following (in millions of dollars), subject to
amendments described below pursuant to the Credit Agreement Amendments:
Revolving Facility
Letters of credit outstanding at December 31, 2021 of $11.0 million are reserved against the Revolving Facility.
541.7 $
$
260.0 $
Available
Drawn
Reserved Remaining
270.7
11.0 $
The Credit Facilities bear interest at a floating rate based on the Canadian dollar prime rate, U.S. Base Rate, LIBOR
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 and on December 30, 2021 Cineplex entered into the Fourth 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.
The following is a summary of the key terms of the Third Credit Agreement Amendment entered into on February 8,
2021 that are updated from the First and Second Credit Agreement Amendments (certain of which have been
modified further by the Fourth Credit Agreement Amendment described below):
•
The following amendments to the Credit Facilities became effective upon the completion of the issuance of
$250,000 Notes Payable during the first quarter of 2021:
▪
The suspension of financial covenant testing was extended until the fourth quarter of 2021. On
resumption of financial covenant testing in the fourth quarter of 2021:
•
•
•
for the fourth quarter of 2021, 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 such quarter;
for the quarter ending on March 31, 2022, testing will be based on an annualized
calculation of Adjusted EBITDA based on actual results for the fourth quarter of 2021
and the first quarter of 2022 multiplied by 2; and
for the quarter ending on June 30, 2022, testing will be based on an annualized
calculation of Adjusted EBITDA for the fourth quarter of 2021, the first quarter of 2022
and the second of 2022 multiplied by 4/3.
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▪
▪
▪
▪
▪
▪
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 until the third quarter of 2022 at which point it will reach a level of 3.00x;
The liquidity covenant will continue and be amended and extended beginning in February 2021,
through to and including December 2021, requiring available liquidity as defined on a monthly
basis (November 1, 2020 through January 31, 2021 - $100.0 million; February 2021 - $75.0
million; March 2021 - $60.0 million; April 1, 2021 through December 31, 2021 - $100.0 million;
The addition of a Senior Leverage Ratio to be based on annualized Adjusted EBITDA and set at
1.0x lower than the Total Leverage Ratio. Senior Leverage Ratio to be defined as (i) Total Debt
(as defined in the Credit Agreement) less any Notes Payable to (ii) Adjusted EBITDA;
Effective with the fourth quarter of 2021, additional growth capital expenditures will be subject to
pro-forma Total Leverage covenant of 2.75x (both prior to and immediately after giving effect to
any such growth capital expenditure) based on actual last 12 months’ EBITDA; and
Distributions continue to be blocked during the extended financial covenant suspension period and
only permitted when the Total Leverage ratio is less than 2.75x (both prior to and immediately
after giving effect to any such distribution).
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:
•
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 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 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.
▪
▪
▪
▪
▪
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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.
This summary of the Credit Agreement 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 and Fourth Credit Agreement Amendment were filed on SEDAR on June 30, 2020,
November 13, 2020, February 8, 2021 and January 4, 2022, respectively, for each of Credit Agreement
Amendments..
One of the key financial covenants in the Credit Facilities is the Total Leverage Ratio which is calculated in
accordance with IFRS in effect at November 13, 2018, which excludes the impact of the adoption of IFRS 16 on
Cineplex’s financial reporting. The definition of debt in the Credit Facilities for the purposes of the Total Leverage
Ratio includes the Credit Facilities, financing leases and letters of credit but does not include Debentures, Notes
Payable, the lease obligations arising on the adoption of IFRS 16 or a reduction for cash on hand. For the purposes
of the Credit Facilities definition, EBITDA is adjusted for certain non-cash, non-recurring items, excluded
subsidiaries and the annualized impact of new operating locations or acquisitions.
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 December 31, 2021:
Interest rate swap agreements
Notional amount
Inception date
Effective date
Maturity date
Fixed rate payable
Swap - 1
Swap - 2
Swap - 3
$200.0 million
November 13, 2018
April 26, 2021
November 14, 2023
$100.0 million
November 13, 2018
November 13, 2018
November 14, 2023
$150.0 million
November 13, 2018
November 13, 2018
November 14, 2025
2.945 %
2.830 %
2.898 %
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 December 31, 2021 Cineplex’s effective cost of borrowing on the $450.0
million hedged borrowings was 6.904% (December 31, 2020 - $450.0 million hedged borrowings - 5.754%).
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.
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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 of $4.6 million (2020 - $4.6 million) and $18.2 million (2020 - $8.5 million), respectively. Furthermore,
Cineplex recorded accretion expense during the quarter and year to date of $3.9 million (2020 - $3.4 million) and
$15.2 million (2020 - $7.5 million), respectively, both of which are included as part of the interest expense in the
consolidated statement of operations. The residual value was allocated to the equity component less the pro-rata
portion of transaction costs as prescribed by IFRS 9, Financial Instruments.
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.
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 of $4.7 million
(2020 - $nil) and $15.8 million (2020 - $nil), respectively. Furthermore, Cineplex recorded accretion expense during
the quarter and year to date of $0.2 million (2020 - $nil) and $0.8 million (2020 - $nil), respectively, both of which
are included as part of interest expense in the consolidated statement of operations. As at December 31, 2021,
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
are consistent with accepted methods for valuing financial instruments. Cineplex has estimated the fair value of this
embedded derivative at $9.2 million as at December 31, 2021 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.
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7.5 FUTURE OBLIGATIONS
At December 31, 2021, Cineplex had the following contractual or other commitments authorized by the Board
(expressed in thousands of dollars):
Contractual obligations
Total Within 1 year
2-3 years
4-5 years
After 5 years
Payments due by period
Accounts payable and accrued liabilities
$
Interest rate swap agreements
Long-term debt
Interest on long-term debt
Equipment obligations
Deferred consideration - AMC
Convertible debentures
Convertible debentures interest
Notes payable
Notes payable interest
157,950
14,223
260,000
33,539
3,045
3,134
316,250
68,154
250,000
78,083
157,950
8,063
—
17,950
1,963
—
—
18,184
—
18,750
—
5,081
260,000
15,589
829
3,134
—
36,369
—
37,552
—
1,079
—
—
160
—
316,250
13,601
250,000
21,781
Total contractual obligations
$
1,184,378 $
222,860 $
358,554 $
602,871 $
The following table discloses the undiscounted cash flow for lease obligations as of December 31, 2021:
—
—
—
—
93
—
—
—
—
—
93
Less than one year
One to five years
More than five years
Total undiscounted lease obligations
$
$
173,086
637,415
610,456
1,420,957
Cineplex has aggregate gross capital commitments of $71.2 million ($53.1 million net of tenant inducements)
related to the completion of construction of 5 operating locations including both theatres and location-based
entertainment locations, in addition to the ongoing rollout of expanded entertainment offerings at select theatres and
location-based entertainment locations, over the next four years.
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 for the currently anticipated duration of
the pandemic in the regions in which Cineplex operates. With the uncertainty surrounding the timing and impact of
the theatre and LBE venue closures, 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. In response to the
COVID-19 pandemic and resulting government mandated closures, Cineplex temporarily closed all of its theatres
and LBE locations on March 16, 2020, then reopened all theatres and LBE venues on July 17, 2021, but operated the
theatres under capacity restrictions reinstated on December 18, 2021 in Ontario, New Brunswick, Nova Scotia,
Prince Edward Island, and British Columbia on December 18, 2021, and further temporarily closed theatres in
Quebec on December 20, 2021.
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
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guarantor. Cineplex has assessed the fair value of the lease guarantees and determined that the fair value of these
guarantees at December 31, 2021 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.
8. 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.
8.1 ADJUSTED FREE CASH FLOW
Prior to the monthly 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, dividends paid per Share, and the
payout ratio of dividends relative to adjusted free cash flow for the three months and year ended December 31, 2021
and 2020:
Adjusted free cash flow
Fourth Quarter
Full Year
Adjusted free cash flow per Share (i)
Dividends declared per Share
Payout ratio - year ended December 31
2021
2020
Change
2021
2020
Change
$
$
(0.016) $
(0.482)
-96.7 % $ (2.392)
— $
—
—
—
NM $
—
—
— %
$
$
(2.556)
0.150
-6.4 %
-100.0 %
(5.9) %
5.9 %
(i) Represents a non-GAAP ratio. See Section 17, Non-GAAP and other financial measures.
Adjusted free cash flow per Share for the fourth quarter and full year were negative for both 2020 and 2021. The
year-over-year movement was mainly due to improved operating results as a result of reopening of Cineplex’s entire
circuit of theatres and LBE venues as of July 17, 2021, continuing to the third quarter and the majority of the fourth
quarter of 2021.
Measures relevant to the discussion of adjusted free cash flow per Share are as follows (expressed in thousands of
dollars except Shares outstanding):
Fourth Quarter
Full Year
2021
2020
Change
2021
2020
Change
Cash flows provided by (used in) continuing
operations
Net loss from continuing operations
Standardized free cash flow (i)
Adjusted free cash flow (i)
Cash dividends declared
$
$
$
$
$
27,480 $
(61,041)
NM $
61,004 $
(106,314)
NM
(21,778) $
(230,403)
-90.5 % $
(248,722) $
(624,001)
-60.1 %
22,495 $
(71,140)
NM $
40,709 $
(179,725)
(1,032) $
(30,530)
-96.6 % $
(151,517) $
(161,870)
NM
-6.4 %
— $
—
NM $
— $
9,500
-100.0 %
Average number of Shares outstanding
63,343,223
63,333,238
— % 63,339,239
63,333,238
— %
(i) Represents a non-GAAP financial measure. See Section 17, Non-GAAP and other financial measures.
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8.2 DIVIDENDS
Cineplex has not paid any dividends after the monthly dividend that was paid on February 28, 2020 and is currently
restricted from paying any dividends under the Credit Facilities.
The following table outlines Cineplex’s distribution and dividend history:
Distribution and dividend history
Effective Date
January 2004 (i)
May 2007
May 2008
May 2011
May 2012
May 2013
May 2014
May 2015
May 2016
May 2017
May 2018
May 2019 - January 2020
(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.
Monthly Distribution/Dividend per Unit/Share
$0.0958
$0.1000
$0.1050
$0.1075
$0.1125
$0.1200
$0.1250
$0.1300
$0.1350
$0.1400
$0.1450
$0.1500
9. SHARE ACTIVITY
Share capital at December 31, 2021 and the transactions during the year are as follows (expressed in thousands of
dollars except Share amounts):
Balance - December 31, 2020
Issuance of shares on exercise of options
Balance - December 31, 2021
Shares
Number of common
shares issued and
outstanding
63,333,238 $
11,060
63,344,298 $
Shares
Number of common
shares issued and
outstanding
Common shares
852,379 $
86
852,465 $
Common shares
Balance - December 31, 2020
63,333,238 $
852,379 $
Omnibus Incentive Plan
Amount
Total
852,379
86
852,465
Amount
Total
852,379
On November 12, 2020, the Board of Directors approved a new 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 3,487,960 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
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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 December 31, 2021, 1,489,143 Shares are available to be issued
under the Incentive Plan (2020 - 2,111,140).
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.
A summary of option activities for the year ended December 31, 2021 and 2020 is as follows:
Options outstanding - January 1
Granted
Cancelled
Forfeited
Exercised
Weighted
average
remaining
contractual life
(years)
7.64
2021
2020
Number of
underlying
Shares
2,042,019 $
459,501
(188,303)
(87,049)
(27,363)
Weighted
average
exercise price
25.37
12.69
43.90
21.89
8.25
Number of
underlying
Shares
3,123,521
725,758
(1,408,439)
(398,821)
—
Weighted
average
exercise price
38.62
8.25
44.70
29.64
—
Options outstanding – end of period
7.44
2,198,805 $
21.48
2,042,019 $
25.37
Effective December 15, 2019, as a result of the terms of the Arrangement Agreement, options were considered cash-
settled, and the fair value of the options outstanding in excess of their respective exercise price was recognized as a
current share-based compensation liability, and changes in value were reflected in the statement of operations. Stock
options impacted by the termination of the Arrangement Agreement were revalued and accounted for as equity-
settled and any previously recognized share based compensation liability was reclassified to contributed surplus. The
accelerated recognition of unvested options was reversed and is being recognized over their remaining vesting
periods at the value determined at March 31, 2020. Forfeitures are estimated to be nominal, based on historical
forfeiture rates.
Cineplex recorded $1.9 million of employee benefits cost with respect to the options during the year ended
December 31, 2021 (2020 recovery - $1.2 million). The intrinsic value of vested share options at December 31, 2021
is $0.7 million (2020 - $nil), based on the closing Share price of $13.49 per share (2020 - $9.27). In 2021, 165,146
(2020 - 1,307,301) stock options issued under the Legacy Plan were cancelled for total consideration of $60 (2020 -
$0.5 million) as part of a voluntary stock option cancellation program that was initiated in the fourth quarter of
2020.
Upon cashless exercises, the options exercised in excess of Shares issued are cancelled and returned to the pool
available for future grants. At December 31, 2021, 532,760 options are available for grant (2020 - 1,900,606, of
which a maximum of 1,200,000 were allocated to PSU/RSU availability in 2021).
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RSU and PSU awards
2021 LTIP awards granted in Q2 2021
2020 LTIP award granted in Q3 2020
2019 LTIP award granted in Q1 2019
RSU
PSU Share
equivalents
granted
167,546
284,214
105,777
RSU Share
equivalents
granted
PSU Share
equivalents
minimum payout
PSU Share
equivalents
maximum payout
315,619
277,105
54,940
—
—
7,788
335,092
568,428
211,553
Valuation of restricted stock units is based on Cineplex’s closing Share price on the grant date. On April 12, 2021,
Cineplex issued 262,487 equity settled RSUs with a fair value of $12.87 per unit (total fair value of $3.4 million on
issuance), that will fully vest in November 2023, at the completion of the three year performance period. On May
10, 2021, Cineplex issued 53,132 cash settled RSUs with a fair value of $14.95 (total fair value of $0.8 million on
issuance) and will fully vest on the second anniversary of the grant date. The valuation was based on Cineplex’s
Share price on the grant date and will fluctuate in value based on Cineplex’s Share price.
A summary of RSU activities during the year ended December 31, 2021 is as follows:
RSUs outstanding, January 1
Granted
Notional dividends
Settled
Cancelled
RSUs outstanding, December 31
2021
295,189
315,619
—
(44,041)
(30,420)
536,347
2020
93,835
277,105
415
(37,572)
(38,594)
295,189
The RSUs associated with the 2019 LTIP were settled in 2021 for $0.6 million cash.
PSU
On April 12, 2021, Cineplex issued 167,546 PSUs which will be equity-settled in November 2023, representing the
completion of the three year performance period. Compensation expense is recorded based on the number of units
expected to vest, the current market price of Cineplex’s 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.
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A summary of PSU activities during the year ended December 31, 2021 is as follows:
PSUs outstanding, January 1
Granted
Notional dividends
Settled
Cancelled
PSUs outstanding, December 31
2021
333,908
167,546
—
(88,422)
(1,774)
411,258
2020
183,323
284,214
1,624
(18,455)
(116,798)
333,908
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. For the year ended
December 31, 2021, Cineplex recognized compensation cost of $2.9 million (2020 recovery - $6.9 million) under
the Incentive Plan relating to RSU and PSU. At December 31, 2021, $0.2 million (2020 - $0.4 million) was included
in current share-based compensation liability and $2.8 million in contributed surplus (2020 - $nil).
The PSUs associated with the 2019 LTIP were settled in 2021 for $0.1 million cash.
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 year ended December 31, 2021, Cineplex recognized
compensation cost of $1.2 million (2020 recovery - $8.2 million) associated with the deferred equity units. At
December 31, 2021, $4.7 million (2020 - $2.8 million) was included in share-based compensation liability.
10. SEASONALITY AND QUARTERLY RESULTS
Historically, Cineplex’s revenues have been seasonal, coinciding with the timing of major film releases. The most
marketable motion pictures were traditionally released during the summer and the late-November through December
holiday season. This caused changes from quarter to quarter in theatre attendance, affecting theatre exhibition
reported results. The seasonality of theatre attendance has become less pronounced as film studios have expanded
the historical summer and holiday release windows and increased the number of heavily marketed films released
during traditionally weaker periods. The impact COVID-19 has also impacted the timing of major film releases as
distributors has been moving their films out to future dates in response to government restrictions for theatres 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 $260.0 million drawn and $270.7 million available as of December 31,
2021, subject to restrictions under the Credit Facilities including the liquidity covenant described above (Section 7.4,
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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Management’s Discussion and Analysis
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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):
Q4
2021
Q3
Q2
Q1
Q4
2020
Q3
Q2
Q1
Revenues
Box office revenues
Food service revenues
Media revenues
Amusement revenues
Other revenues
Expenses
Film cost
Cost of food service
$ 125,890
$ 94,114
$ 12,498
$ 3,818
$ 7,260
$ 14,531
$
27
$ 111,002
87,244
79,971
13,258
6,525
10,543
15,468
3,256
79,365
32,795
14,060
9,401
9,074
12,496
12,825
7,880
32,157
45,096
53,319
22,184
13,874
13,597
13,236
3,731
47,337
8,926
8,916
7,585
8,121
8,556
4,962
7,094
12,940
299,951
250,380
64,926
41,412
52,452
61,022
21,988
282,801
61,990
45,838
21,042
16,362
5,611
2,867
1,235
1,412
3,151
3,989
7,261
3,680
10
56,500
789
22,209
Depreciation - right-of-use assets
25,041
25,151
25,737
26,318
28,136
30,539
34,185
35,533
Depreciation and amortization - other
27,501
28,297
27,735
29,509
28,750
30,375
31,759
33,962
Loss (gain) on disposal of assets
1,576
22
179
(30,060)
(283)
(14,113)
478
817
Other costs
157,970
139,527
73,352
68,705
77,213
78,754
62,175
157,548
Impairment of long-lived assets and
goodwill
Income (loss) from continuing
operations
3,717
—
—
—
56,175
65,634
—
173,054
298,837
255,197
135,481
97,119
197,131
202,130
129,396
479,623
$ 1,114
$ (4,817)
$ (70,555) $ (55,707)
$ (144,679) $ (141,108) $ (107,408) $ (196,822)
Adjusted EBITDA (i)
$ 58,328
$ 48,606
$ (16,902) $ (30,105) $ (32,097) $ (28,928) $ (41,313) $ 46,472
Adjusted EBITDAaL (i)
$ 20,198
$ 10,762
$ (53,165) $ (62,090) $ (65,948) $ (46,725) $ (72,532) $ 2,390
Net loss from continuing operations
$ (21,778) $ (33,552) $ (103,704) $ (89,688) $ (230,403) $ (121,209) $ (98,234) $ (174,155)
Net loss from discontinued operations
—
—
—
—
—
—
(693)
(4,259)
Net loss
$ (21,778) $ (33,552) $ (103,704) $ (89,688) $ (230,403) $ (121,209) $ (98,927) $ (178,414)
EPS - basic and diluted from continuing
operations
EPS - basic and diluted from
discontinued operations
$ (0.34)
$
(0.53)
$
(1.64)
$
(1.42)
$
(3.64)
$
(1.91)
$
(1.55)
$
(2.75)
—
—
—
—
—
—
(0.01)
(0.07)
EPS - basic and diluted
$ (0.34)
$
(0.53)
$
(1.64)
$
(1.42)
$
(3.64)
$
(1.91)
$
(1.56)
$
(2.82)
Cash provided by (used in) operating
activities
Cash (used in) provided by investing
activities
Cash (used in) provided by financing
activities
Effect of exchange rate differences on
cash
$ 27,480
$ 52,023
$ 17,133
$ (35,632) $ (61,041) $ (86,558) $ 18,095
$ 23,190
(3,937)
(2,374)
(1,761)
48,523
50,492
11,384
(8,947)
(26,219)
(25,067)
(50,191)
(6,086)
(9,782)
12,977
74,252
(2,793)
(12,819)
(9)
(189)
413
140
650
292
560
(950)
Net change in cash
$ (1,533)
$
(731)
$ 9,699
$ 3,249
$ 3,078
$
(630)
$ 6,915
$ (16,798)
Cash flows used in discontinued
operations
BPP (ii)
CPP (ii)
$ —
$ —
$ —
$ —
$ —
$ —
$ 12.29
$ 11.38
$ 10.89
$ 7.49
$
8.58
$
7.86
$
$
9.20
6.12
$
$
9.23
9.06
$
$
9.30
7.37
$
$
(253)
$ (2,138)
4.50
$ 10.36
$ 10.33
$
6.79
Film cost percentage (ii)
49.2 %
48.7 %
44.9 %
32.3 %
43.4 %
50.0 %
37.0 %
50.9 %
Theatre attendance (in thousands of
patrons) (ii)
Theatre locations (at period end)
Theatre screens (at period end)
10,245
160
1,652
8,272
161
1,656
1,148
160
1,651
415
161
786
162
1,657
1,667
1,563
164
1,687
6
10,710
164
1,687
164
1,687
(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):
Q4
2021
Q3
Q2
Q1
Q4
2020
Q3
Q2
Q1
Cash (used in) provided by operating
activities (i)
Less: Total capital expenditures net of
proceeds on sale of assets
$ 27,480 $ 52,023 $ 17,133 $ (35,632) $ (61,041) $ (86,558) $ 18,095 $ 23,190
(4,985)
(1,603)
(4,992)
(8,715)
(10,099)
(11,418)
(14,391)
(37,503)
Standardized free cash flow
22,495
50,420
12,141
(44,347)
(71,140)
(97,976)
3,704
(14,313)
Add/(Less):
Changes in operating assets and liabilities
1,405
(32,640)
(62,622)
(23,581)
67,257
34,894
(69,401)
10,428
Changes in operating assets and liabilities
of joint ventures
307
(31)
(524)
(802)
(2,699)
372
(986)
(1,156)
Principal component of lease obligations
(25,525)
(24,191)
(19,086)
(19,457)
(32,323)
(24,811)
(993)
(33,819)
Principal portion of cash rent paid not
pertaining to current period
Growth capital expenditures and other
Share of income of joint ventures, net of
non-cash depreciation
Non-controlling interests
Net cash received from CDCP
(737)
(350)
—
736
(369)
4,511
1,106
8,461
(357)
(357)
(357)
1,071
8,928
10,801
13,777
34,526
(622)
(47)
—
1,995
—
—
(165)
(196)
(255)
(331)
—
—
—
—
—
—
4
782
2
—
—
0
(73)
1
3,128
(207)
Adjusted free cash flow
$
(1,032)
(5,753) $ (65,947) $ (78,785) $ (30,530) $ (77,332) $ (53,801) $
Average number of Shares outstanding
63,343,223
63,342,557
63,339,618
63,334,317
63,333,238
63,333,238
63,333,238
63,333,238
Adjusted free cash flow per Share
$
(0.016) $
(0.091) $
(1.041) $
(1.244) $
(0.482) $
(1.221) $
(0.849) $
(0.003)
11. 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.
The Chair of Riocan Real Estate Investment Trust (“Riocan”) served as a Board member until May 5, 2020. Prior to
his departure, Cineplex incurred theatre expenditures for theatres under lease commitments with Riocan in the
amount of $20.2 million during the prior year period. No material related party transactions were recorded during
the year ended December 31, 2021.
12. 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.
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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.
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
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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.
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.
13. ACCOUNTING POLICIES
ACCOUNTING STANDARDS APPLIED OR ADOPTED IN THE CURRENT YEAR
Management of Cineplex reviews all changes to the IFRS when issued. The International Accounting Standards
Board (“IASB”) has issued the following standards, which have not yet been adopted by Cineplex. The following is
a description of the new standards:
Cloud Computing Arrangements
In April 2021, the International Financial Reporting Interpretations Committee (IFRIC) finalized their decision with
respect to configuration and customization costs in a cloud computing arrangement, particularly surrounding the
recognition of an expense or an intangible asset. Cineplex has evaluated the impact regarding the changes
surrounding the configuration or customization costs in a cloud computing arrangement and has determined that
there is no material effect on its consolidated financial statements.
In January 2020, the International Accounting Standards Board issued Classification of Liabilities as Current or
Non-current, which amended IAS 1 Presentation of Financial statements. The amendments clarified how an entity
classifies debt and other financial liabilities as current or non-current in particular circumstances. The amendments
are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted.
Cineplex has not applied the accounting pronouncement issued.
In May 2021, the International Accounting Standards Board (Board) issued Deferred Tax related to Assets and
Liabilities arising from a Single Transaction, which amended IAS 12 Income Taxes. The amendments require
companies to recognize deferred tax on particular transactions that, on initial recognition, give rise to equal amounts
of taxable and deductible temporary differences. The amendments are effective for annual reporting periods
beginning on or after January 1, 2023. Earlier application is permitted. Cineplex has not applied the accounting
pronouncement issued.
14. 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 typically conducts an annual enterprise risk management assessment which is overseen by Cineplex’s
executive management team and the audit committee of the Board and is reported to the full Board. The enterprise
risk management framework sets out principles and tools for identifying, evaluating, prioritizing and managing risk
effectively and consistently across Cineplex. Senior management participate in a detailed review of enterprise risk
in four major categories: environment risks, process risks, information risks and business unit risks. In addition,
Cineplex monitors risks and changing economic conditions on an ongoing basis and adapts its operating strategies as
required.
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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 is 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. Subsequent to December 31, 2021, 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. The uncertainty of when such lockdown measures will be lifted or the
introduction of further lockdown measures will delay Cineplex’s return to profitability.
The impact of the COVID-19 pandemic cannot be quantified at this time because of the significant uncertainty
around the timing of the reductions of government imposed restrictions and the potential long-term effects that
COVID-19 may have on Cineplex’s exhibition and amusement and leisure businesses. Cineplex cannot predict how
quickly guests will return to its locations, which may be a function of (i) continued health and safety concerns, (ii)
additional regulatory requirements, and/or (iii) depressed consumer sentiment, among other things. If Cineplex does
not continue to respond appropriately to the pandemic, or if guests do not perceive its response to be adequate,
Cineplex could suffer damage to its reputation, which could adversely affect its business.
Additional significant impacts on Cineplex’s business caused by the COVID-19 pandemic include, and are likely to
continue to 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
production, or (iv) the reduction or elimination of the theatrical exclusive release window including the
introduction of a 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 under revised work
environment protocols;
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;
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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; and
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.
The longer and more severe the COVID-19 pandemic is, including new outbreaks in the future, the more significant
the negative effects will be on Cineplex’s business, financial conditions and results of operations. Even when the
COVID-19 pandemic subsides, 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. Further,
if Canada experiences additional outbreaks of COVID-19, governmental officials may order additional closures,
impose further 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.
While Cineplex has eliminated certain variable costs and reduced fixed costs to the extent possible, Cineplex
continues to incur significant expenses, including interest payments, critical maintenance capital expenditures,
occupancy costs, and compensation and benefits payments. 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. If further lockdown measures and mandatory closure requirements are
reinstituted in the future, Cineplex’s net cash burn may worsen and may not be sustainable. Further, the extent of
Cineplex’s net cash burn in the future will also be dependent on attendance, which will drive admissions, food and
beverage and other revenues. 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
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
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.
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Due to uncertainties inherent in appeals, it is not possible for Cineplex to predict the timing or final outcome of the
appeal of the Decision announced by Cineworld. Further, even if Cineworld’s appeal is not successful, Cineworld
may not have the ability to pay the full amount of any damages or costs awarded by the Court.
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.
Negative Cash Flow from Operations
The COVID-19 pandemic continues to have a negative impact on Cineplex’s operating margins and cash flows.
There can be no assurance that Cineplex will generate sufficient revenues to achieve or maintain profitability or
positive cash flow from operations in the future. If Cineplex does not achieve or maintain profitability or positive
cash flow from operating activities, then there could be a material adverse effect on Cineplex’s business, financial
condition and results of operation.
Business Continuity Risk
Cineplex’s primary sources of revenues are derived from providing an out of home entertainment experience. Our
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.
During the reopening period of its theatres and location-based entertainment venues following the closures resulting
from COVID-19, there is a risk that locations 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, and meet its short and long-
term obligations.
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 that consumers will be exposed to. 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.
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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 in that customers may not be satisfied with
the offering or any change in offerings. As a result, there is a risk of customer migration to other subscription or
loyalty programs. There also exists a risk of saturation of loyalty programs in a market or the inability to further
grow membership such that the program may generate costs in excess of the benefits. 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. Cineplex
continues to evolve the movie-going experience by launching Canada’s first of its kind movie subscription program,
CineClub, providing members with benefits accessible at Cineplex theatres, the Cineplex Store and LBE venues. In
addition, digital technology has allowed for more niche programming.
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 execution of processes 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.
Even when government restrictions are fully lifted as the number of COVID-19 cases subside, it is unclear how
quickly customers will return to Cineplex’s theatres and location-based entertainment venues, which may be a
function of continued concerns over safety and social distancing and/or depressed consumer sentiment due to
adverse economic conditions. Even once theatres resume operations at unrestricted capacity levels, increasing
COVID-19 case counts could result in additional costs and further closures. If Cineplex does not respond
appropriately to the COVID-19 pandemic, or if customers do not perceive its response to be adequate, Cineplex
could suffer damage to its reputation, which could significantly adversely affect its business, financial condition and
results of operations.
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 new in-home and on-the-go entertainment
offerings. Cineplex’s offerings through the Cineplex Store of 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 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 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, 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 during the reopening phase and beyond as a result of continued health and safety concerns
and depressed consumer sentiment due to adverse economic conditions, arising from the impact of COVID-19
pandemic. 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.
Cineplex’s new 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.
Due to the outbreak of the COVID-19 pandemic, there is a risk of a permanent 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.
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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
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 the customer traffic in venues in which they
operate. 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 will
have long term decreased customer traffic. Any reduction in traffic or permanent shutdown of venues could have a
material impact on their 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 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 supplier 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.
Information Management Risk
Cineplex needs an 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 subsidiary and joint venture partners store
sensitive data, including intellectual property, proprietary business information including data with respect to
suppliers, employees and business partners, as well as some personally identifiable information on their customers
and employees. Further, Cineplex regularly works with third party suppliers in the delivery of services to their
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
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strategies. As such Cineplex adheres to industry standards for the payment card industry (“PCI”) data security
standard (“DSS”) compliance, as well as undertaking commercially reasonable efforts for non-financial data.
Cineplex recognizes that security breaches of the information systems of Cineplex or any one of its third-party
suppliers could compromise this information and expose Cineplex to liability, which could cause their businesses or
reputations 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 this risk, Cineplex has employees whose role is to monitor information
technology and processes to ensure risk is minimized. 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 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.
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.
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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
The success of Cineplex 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 and ongoing government mandated closures and continuous capacity restrictions due to the
impact of the COVID-19 pandemic, Cineplex has 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 increased risk that Cineplex will have a
shortage of staff in the short-term due to employee illnesses as a result of rising COVID-19 cases.
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.
There is a significant risk that concerns over health and safety as a result of COVID-19 will be long lasting and will
have an adverse impact on the business of Cineplex. In order to help mitigate these risks, Cineplex has made
changes to its operations to enable social distancing, as well as increasing safety measures by reducing capacity
where applicable, promoting cashless transactions where possible and by cleaning and disinfecting surfaces on a
regular basis.
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Environment/Sustainability Risk
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 the 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
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, 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 the ability of Cineplex 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 7.4, Long-term debt.
Inflation Risk
Cineplex is exposed to inflation risk, limiting customer purchasing power on forms of entertainment. To mitigate
this risk, Cineplex actively monitors the prices of its products and services to provide competitive 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
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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 also 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.
15. CONTROLS AND PROCEDURES
15.1 DISCLOSURE CONTROLS AND PROCEDURES
Management of Cineplex 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.
Management has evaluated the design and operation of Cineplex’s disclosure controls and procedures as of
December 31, 2021 and has concluded that such disclosure controls and procedures are effective.
15.2 INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management of Cineplex 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 their 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.
Management has used the Internal Control - Integrated Framework: 2013 to evaluate the effectiveness of internal
controls over financial reporting, which is a recognized and suitable framework developed by COSO.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with policies
and procedures may deteriorate.
Management has evaluated the design and operation of Cineplex’s internal controls over financial reporting as of
December 31, 2021, and has concluded that such controls over financial reporting are effective. There are no
material weaknesses that have been identified by management in this regard.
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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.
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 14, Risks and uncertainties.
The outlook for Cineplex’s businesses is contingent on its ability to navigate the current and future impact of
COVID-19 on its businesses. Canada’s vaccination rate has made tremendous progress during the year with a high
percentage of the eligible population receiving at least one dose of a COVID-19 vaccine and an increasing number
having received two or three doses. With increasing concerns over more transmissible variants, including the highly
transmissible new Omicron variant, the Canadian government has accelerated the rollout of COVID-19 vaccine
booster doses providing extra protection against COVID-19 and its variants. In order to control the spread of
COVID-19, the majority of provinces across Canada require proof of vaccination as part of the reopening plans in
select settings including those that operate indoors with close proximity of patrons. However, growing concerns over
the highly transmissible new Omicron variant coupled with the significant rise in COVID-19 cases during the winter
months resulted in the reinstatement of government imposed lockdown measures during the fourth quarter of 2021
continuing into 2022 which continue to negatively impact Cineplex’s operations and return to profitability.
Subsequent to December 31, 2021, social gathering restrictions were further modified or reinstituted in several key
markets that Cineplex operates, resulting in temporary theatre closures in Ontario, Newfoundland and New
Brunswick. On January 20, 2022, the Ontario government announced plans to gradually ease government-imposed
restrictions that were put in place to reduce the spread of the highly transmissible Omicron variant. 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
The release of Shang-Chi and the Legend of the Ten Rings generated strong results in North America and globally,
setting the all-time box-office record for a Labour Day release generating $94.0 million, as reported, during its
opening weekend, grossing total box office revenues since its release of $224.5 million and $432.0 million, as
reported, respectively. On September 10, 2021 Disney announced plans for exclusive theatrical release windows for
the remainder of their 2021 slate of films. The release of Marvel’s highly anticipated Spider-Man: No Way Home
generated the second biggest North American opening weekend of all time grossing $260.1 million, $735.9 million
in North America since its release and $1.7 billion globally since its release, as reported.
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. However, the significance of the COVID-19 pandemic, including the adverse impact on Cineplex’s
business, financial condition and results of operations will be dictated by the duration of the pandemic and the effect
on the economy and of responsive governmental directives, all of which are currently unknown. Cineplex’s business
could also be significantly negatively impacted by changes in consumer behaviors as a result of COVID-19 (such as
social distancing) 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 the ability of Cineplex 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.
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FINANCIAL OUTLOOK
Cineplex continues to be negatively impacted by the ongoing COVID-19 pandemic and management focus
continues to be on minimizing net cash burn and optimizing liquidity. During the fourth quarter of 2021, Cineplex
and Cineplex Entertainment Limited Partnership entered into a fourth amendment to its Credit Facilities, providing
Cineplex with certain financial covenant relief in light of the COVID-19 pandemic and its effects on Cineplex’s
businesses (Section 7.4, Long-term debt). Cineplex continued to evaluate eligibility under relief programs and was
able to materially reduce operating expenses through the receipt of assistance under Canada’s THRP as a result of
reinstated government-imposed restrictions that continue to impact Cineplex’s operations.
On January 11, 2021, Cineplex completed the sale of its head office buildings located at 1303 Yonge Street and
1257 Yonge Street, Toronto, Ontario for total gross cash proceeds of $57.0 million. Cineplex will continue to use the
office building in accordance with the terms of the sale-leaseback transaction. Cineplex used a portion of the
proceeds to permanently repay the Credit Facilities and the remaining proceeds are available to be drawn under the
Credit Facilities to fund continuing operations.
On February 26, 2021, Cineplex completed the offering of $250.0 million of Notes Payable that mature on February
26, 2026, allowing it to meet the conditions of the Third Credit Agreement Amendment and provide additional
liquidity for the recovery period. Cineplex used the net proceeds to permanently repay the remaining $50.0 million
balance of its outstanding Term Facility and $50.0 million of its Revolving Facility, with the remaining proceeds
available to be drawn under the Revolving Facility to fund continuing operations, subject to certain liquidity
covenants in the Credit Facilities.
Cineplex 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 as at December 31, 2021.
Management continues to focus on reducing costs including the minimization of future capital expenditures and
reducing net cash burn with a significant reduction to an approximately net neutral position compared to the prior six
quarters. With the issuance of the Notes Payable, amendments to the Credit Facilities, the execution of planned asset
sales and income tax recoveries received, management believes that it has adequate liquidity to fund operations for
the currently anticipated duration of the pandemic.
On December 14, 2021, the Court made a decision with respect to Cineplex’s trial of its action against Cineworld.
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. 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, however, no assurance can be given on the collection of damages
awarded (Section 1.1, Cineworld Transaction).
17. NON-GAAP AND OTHER FINANCIAL MEASURES
National Instrument 52-112, Non-GAAP and Other Financial Measures Disclosure (“NI 52-112”) is effective for
documents filed by reporting issuers for years ending on or after October 15, 2021. The Instrument 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 the performance of Cineplex. 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.
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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 RATIO
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.
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, the non-controlling interests’ share of adjusted
EBITDA of TG-CPX Limited Partnership, 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
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representation.
NON-GAAP RATIO
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
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.
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, the non-controlling interests’ share of adjusted
EBITDA of TG-CPX Limited Partnership, 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.
Calculated as amusement revenues of P1AG less the total operating expenses of P1AG, which excludes foreign
P1AG Adjusted EBITDAaL
exchange.
P1AG Adjusted EBITDAaL Margin
Calculated as P1AG Adjusted EBITDAaL divided by total amusement revenues for P1AG for the period.
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Calculated as adjusted store level EBITDAaL divided by total revenues for LBE for the period.
The following represents management’s calculation of EBITDA, adjusted EBITDA, and adjusted EBITDAaL
(expressed in thousands of dollars):
Reconciliation of reported net (loss) income to adjusted EBITDAaL
Net (loss) income from continuing operations
$
(248,722) $
(624,001) $
Depreciation and amortization - other
Depreciation - right-of-use assets
Interest expense - lease obligations
Interest expense - other
Interest income
Current income tax expense (recovery)
Deferred income tax recovery
EBITDA from continuing operations
(Gain) loss on disposal of assets
Change in fair value of financial instruments
CDCP equity (income) loss (i)
Foreign exchange (gain) loss
Impairment of long-lived assets, goodwill and investments
Non-controlling interest adjusted EBITDA
Depreciation and amortization - joint ventures and associates (ii)
Taxes and interest of joint ventures and associates (ii)
Year ended December 31,
2021
2020
113,042
102,247
58,590
65,138
(232)
3,339
—
(28,283)
(8,790)
(146)
(43)
3,717
—
25
45
124,846
128,393
61,483
49,085
(182)
(73,495)
(11,373)
(13,101)
—
7,279
57
294,863
5
73
202
2019
36,516
128,883
145,946
48,659
36,063
(252)
21,759
(9,990)
1,764
—
(4,827)
1,065
—
24
99
77
$
93,402 $
(345,244) $
407,584
Adjusted EBITDA from continuing operations
59,927 $
(55,866) $
405,786
Cash rent paid/payable related to lease obligations (iii)
(144,222)
(126,949)
(175,240)
Adjusted EBITDAaL (iv)
(84,295) $
(182,815) $
230,546
(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 $29.7 million (2020 - $42.5 million) through December 31,
2021. 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, 20219, 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
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Adjusted Store Level EBITDAaL Metrics
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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
Management's Discussion and Analysis
overhead relating to the management of LBE.
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Management’s Discussion and Analysis
Adjusted Store Level EBITDAaL Margin
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Calculated as adjusted store level EBITDAaL divided by total revenues for LBE for the period.
The following represents management’s calculation of EBITDA, adjusted EBITDA, and adjusted EBITDAaL
(expressed in thousands of dollars):
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Reconciliation of reported net (loss) income to adjusted EBITDAaL
Year ended December 31,
Net (loss) income from continuing operations
2021
(248,722) $
2020
(624,001) $
$
Depreciation and amortization - other
Depreciation - right-of-use assets
Interest expense - lease obligations
Interest expense - other
Interest income
Current income tax expense (recovery)
Deferred income tax recovery
EBITDA from continuing operations
(Gain) loss on disposal of assets
Change in fair value of financial instruments
CDCP equity (income) loss (i)
Foreign exchange (gain) loss
Impairment of long-lived assets, goodwill and investments
Non-controlling interest adjusted EBITDA
Depreciation and amortization - joint ventures and associates (ii)
Taxes and interest of joint ventures and associates (ii)
Adjusted EBITDA from continuing operations
Cash rent paid/payable related to lease obligations (iii)
Adjusted EBITDAaL (iv)
113,042
102,247
58,590
65,138
(232)
3,339
—
124,846
128,393
61,483
49,085
(182)
(73,495)
(11,373)
2019
36,516
128,883
145,946
48,659
36,063
(252)
21,759
(9,990)
$
93,402 $
(345,244) $
407,584
(28,283)
(8,790)
(146)
(43)
3,717
—
25
45
(13,101)
—
7,279
57
294,863
5
73
202
1,764
—
(4,827)
1,065
—
24
99
77
$
$
59,927 $
(55,866) $
405,786
(144,222)
(126,949)
(175,240)
(84,295) $
(182,815) $
230,546
(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 $29.7 million (2020 - $42.5 million) through December 31,
2021. 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, 20219, 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
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
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CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
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Cineplex Inc.
Management’s Discussion and Analysis
—————————————————————————————————————————————
Calculated as adjusted store level EBITDAaL divided by total revenues for LBE for the period.
The following represents management’s calculation of EBITDA, adjusted EBITDA, and adjusted EBITDAaL
(expressed in thousands of dollars):
Reconciliation of reported net (loss) income to adjusted EBITDAaL
Net (loss) income from continuing operations
$
(248,722) $
(624,001) $
Depreciation and amortization - other
Depreciation - right-of-use assets
Interest expense - lease obligations
Interest expense - other
Interest income
Current income tax expense (recovery)
Deferred income tax recovery
EBITDA from continuing operations
(Gain) loss on disposal of assets
Change in fair value of financial instruments
CDCP equity (income) loss (i)
Foreign exchange (gain) loss
Impairment of long-lived assets, goodwill and investments
Non-controlling interest adjusted EBITDA
Depreciation and amortization - joint ventures and associates (ii)
Taxes and interest of joint ventures and associates (ii)
Year ended December 31,
2021
2020
113,042
102,247
58,590
65,138
(232)
3,339
—
(28,283)
(8,790)
(146)
(43)
3,717
—
25
45
124,846
128,393
61,483
49,085
(182)
(73,495)
(11,373)
(13,101)
—
7,279
57
294,863
5
73
202
2019
36,516
128,883
145,946
48,659
36,063
(252)
21,759
(9,990)
1,764
—
(4,827)
1,065
—
24
99
77
$
93,402 $
(345,244) $
407,584
Adjusted EBITDA from continuing operations
59,927 $
(55,866) $
405,786
Cash rent paid/payable related to lease obligations (iii)
(144,222)
(126,949)
(175,240)
Adjusted EBITDAaL (iv)
(84,295) $
(182,815) $
230,546
(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 $29.7 million (2020 - $42.5 million) through December 31,
2021. 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, 20219, 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,
Cineplex Inc.
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
Management's Discussion and Analysis
principal amount of repayment of lease obligation.
Cineplex Inc.
Management’s Discussion and Analysis
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
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.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
78
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 (used in) provided by operating activities to
adjusted free cash flow per share
Year ended December 31
2021
2020
2019
Cash (used in) provided by operating activities
$
61,004 $
(106,314) $
Less: Total capital expenditures net of proceeds on sale of assets
(20,295)
(73,411)
321,665
(146,367)
Standardized free cash flow
40,709
(179,725)
175,298
Add/(Less):
Changes in operating assets and liabilities (i)
Changes in operating assets and liabilities of joint ventures and associates (i)
Repayments of lease obligations - principal
Growth capital expenditures and other (ii)
Share of income of joint ventures and associates, net of non-cash depreciation
Non-controlling interests
Net cash received from CDCP (iii)
Adjusted free cash flow
Average number of Shares outstanding
Adjusted free cash flow per Share
Dividends declared
(117,438)
(1,050)
(88,259)
13,358
(832)
—
1,995
43,178
(4,469)
(91,946)
68,032
(855)
5
3,910
(151,517) $
(161,870) $
(8,727)
535
(128,252)
114,665
(482)
24
15,394
168,455
63,339,239
63,333,238
63,333,238
(2.392) $
— $
(2.556) $
0.150 $
2.660
1.780
$
$
$
(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 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 7.4 Credit Facilities) is available to Cineplex to
fund Board approved projects.
(iii) 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 distributions received from CDCP, are considered to be uses and sources of adjusted free
cash flow.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
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 (loss) income to adjusted free cash flow
Year ended December 31,
2021
2020
2019
Net (loss) income from continuing operations
$
(248,722) $
(624,001) $
36,516
Adjust for:
Depreciation and amortization - other
Depreciation - right-of-use assets
Change in fair value of financial instrument
(Gain) loss on disposal of assets
Non-cash interest (i)
Non-cash foreign exchange
Impairment of long-lived assets, goodwill and investments
Share of loss (income) of CDCP (ii)
Non-controlling interests
Non-cash depreciation of joint ventures and associates
Deferred income tax recovery
Taxes and interest of joint ventures and associates
Maintenance capital expenditures
Repayments of lease obligations - principal
Net cash received from CDCP (ii)
Non-cash items:
113,042
102,247
(8,790)
(28,283)
4,203
55
3,717
(146)
—
24
—
45
(6,937)
(88,259)
1,995
124,846
128,393
—
(13,101)
22,789
342
294,863
7,279
5
73
(11,373)
202
(5,379)
(91,946)
3,910
128,883
145,946
—
1,764
12,217
698
—
(4,827)
24
99
(9,990)
77
(31,702)
(128,252)
15,394
Non-cash Share-based compensation
4,292
1,228
1,608
Adjusted free cash flow
$
(151,517) $
(161,870) $
168,455
(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.
17.3 NET CASH BURN
Management believes that net cash burn is an important non-GAAP measure that is used to analyze Cineplex’s cash
used to maintain operating activities, make growth capital expenditures and principal repayments on its lease
obligations. Net Cash Burn is calculated as net cash provided by (used in) operating activities adjusted for the timing
differences of changes in operating assets and liabilities, less repayments of lease obligations - principal and net
capital expenditures, adjusted for the the timing of lease payments and tax recoveries.
Net cash burn
2021
Q4
Q3
Q2
Q1
Q4
2020
Q3
Q2
Net cash provided by (used in)
operating activities
Changes in operating assets and
liabilities
Repayments of lease obligations -
principal
Net capital expenditures
Timing difference of lease abatements
recognized as compared to cash
payments
Timing difference of cash tax
recoveries as compared to current tax
provision
$
27,480 $
52,023 $
17,133 $
(35,632) $
(61,041) $
(86,558) $
18,095
1,405
(32,640)
(62,622)
(23,581)
67,257
34,894
(69,401)
(25,525)
(4,008)
(24,191)
(3,475)
(19,086)
(3,021)
(19,457)
(5,055)
(32,323)
(7,272)
(24,811)
(8,198)
(933)
(8,019)
1,965
1,153
(2,435)
1,830
12,672
18,868
(18,933)
—
—
—
3,309
(53,946)
16,643
26,808
Total net cash burn
Average monthly net cash burn
$
$
1,317 $
439 $
(7,130) $
(2,377) $
(70,031) $
(23,344) $
(78,586) $
(26,195) $
(74,653) $
(24,884) $
(49,162) $
(16,387) $
(52,383)
(17,461)
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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80
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
To comply with NI 52-112, effective this quarter, Cineplex revised its presentation of Net Cash Burn to reconcile
from its closest GAAP figure, net cash provided by (used in) operating activities. Under the previous presentation
beginning with Adjusted EBITDAaL, Net Cash Burn would be presented as follows:
Net cash burn
2021
Q4
Q3
Q2
Q1
Q4
2020
Q3
Q2
Adjusted EBITDAaL
$
20,198 $
10,762 $
(53,165) $
(62,090) $
(65,948) $
(46,725) $
(72,532)
Cash interest expense excluding lease
obligations
Provision for income taxes
Net capital expenditures
Other adjustments to conform to
current presentation
(16,669)
(15,983)
(15,701)
(13,429)
(13,412)
(11,317)
—
(4,008)
—
(3,475)
—
(3,021)
—
(5,055)
12,355
(7,272)
16,497
(8,198)
(7,782)
34,440
(8,019)
1,796
1,566
1,856
1,988
(376)
581
1,510
Total net cash burn
Average monthly net cash burn
$
$
1,317 $
439 $
(7,130) $
(2,377) $
(70,031) $
(23,344) $
(78,586) $
(26,195) $
(74,653) $
(24,884) $
(49,162) $
(16,387) $
(52,383)
(17,461)
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.
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.
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
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81
Cineplex Inc.
Cineplex Inc.
Management's Discussion and Analysis
Management’s Discussion and Analysis
—————————————————————————————————————————————
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
December 31, 2021 the impact of 2 locations that have been opened or acquired and 6 locations that have been
closed have been excluded, resulting in 152 theatres being included in the same theatre metrics. For the year ended
December 31, 2021 the impact of the 2 locations that have been opened or acquired and the 7 locations that have
been closed have been excluded, resulting in 151 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. 2021 ANNUAL REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
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Cineplex Inc.
Management's Discussion and Analysis
Management’s Report to Shareholders
Management is responsible for the preparation of the accompanying consolidated financial statements and all other
information contained in this Annual Report. The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards, which involve management’s best estimates and
judgments, based on available information.
Management maintains a system of internal accounting controls designed to provide reasonable assurance that
transactions are authorized, assets are safeguarded, and financial records are reliable for preparing consolidated
financial statements.
The Board of Directors of Cineplex Inc. (the “Board” of the “Company”) is responsible for ensuring that
management fulfills its responsibilities for financial reporting and internal control. The Board is assisted in
exercising its responsibilities through the Audit Committee of the Board (the “Audit Committee”). The Audit
Committee meets periodically with management and the independent auditor to satisfy itself that management’s
responsibilities are properly discharged and to recommend approval of the consolidated financial statements to the
Board.
PricewaterhouseCoopers LLP serves as the Company’s auditor. PricewaterhouseCoopers LLP’s report on the
accompanying consolidated financial statements follows. It outlines the extent of its examination as well as an
opinion on the consolidated financial statements.
Ellis Jacob
Chief Executive Officer
Toronto, Ontario
February 10, 2022
Gord Nelson
Chief Financial Officer
CINEPLEX INC. 2021 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
91
Independent auditor’s report
To the Shareholders of Cineplex Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Cineplex Inc. and its subsidiaries (together, the Company) as at December 31,
2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance
with International Financial Reporting Standards (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
●
●
●
●
●
●
the consolidated balance sheets as at December 31, 2021 and 2020;
the consolidated statements of operations for the years then ended;
the consolidated statements of comprehensive loss for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2
T: +1 416 863 1133, F: +1 416 365 8215
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
92
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2021. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of goodwill, indefinite-
lived intangible assets, property, equipment
and leaseholds, right-of-use assets and
definite lived intangible assets
Refer to note 11 – Goodwill and impairment of
long-lived assets and note 31 – Significant
accounting policies, judgments and estimation
uncertainty to the consolidated financial
statements.
As at December 31, 2021, the Company had $636
million of goodwill, $64 million of indefinite-lived
intangible assets, $464 million of property,
equipment and leaseholds (PPE), $769 million of
right-of-use assets (ROU) and $18 million of
definite lived intangible assets.
Goodwill and indefinite-lived intangible assets are
tested for impairment annually or more frequently
if specific events or circumstances dictate that the
carrying amount of the asset group may not be
fully recoverable. PPE, ROU and definite lived
intangible assets (collectively, long-lived assets)
are tested for impairment when events or changes
in circumstances indicate that the carrying value
may not be recoverable. In addition, for assets
other than goodwill and indefinite-lived intangible
assets, indicators are assessed considering
whether an impairment loss previously recognized
may no longer exist or may have decreased. For
the purpose of measuring recoverable amounts,
assets are grouped at the lowest levels for which
there are separately identifiable cash inflows
relating to the relevant intangible asset (cash-
generating units or CGUs).
Our approach to addressing the matter included
the following procedures, among others:
● Evaluated how management determined the
recoverable amounts of goodwill and
indefinite-lived intangible assets CGUs and a
sample of long-lived assets CGUs, which
included the following:
(cid:31) Tested the appropriateness of the
method used and the mathematical
accuracy of the discounted cash flow
models.
(cid:31) Tested the reasonableness of the key
assumptions used by management,
including attendance and the related
revenue growth rates, operating margins,
variable and fixed cash flows and
discount rates applied by management by
comparing them to the budget,
management’s strategic plans approved
by the Board of Directors and available
third party published economic data,
industry forecasts and historical trends.
(cid:31) Professionals with specialized skill and
knowledge in the field of valuation
assisted in testing the reasonableness of
the discount rates applied by
management based on available data of
comparable companies.
(cid:31) Tested the underlying data used in the
discounted cash flow models.
93
Key audit matter
How our audit addressed the key audit matter
Tested the disclosures made in the consolidated
financial statements, particularly with regard to the
sensitivity of the key assumptions used.
An impairment loss, if estimated, is recognized for
the amount by which the CGU’s carrying value
exceeds its recoverable amount. A reversal of
impairment, if estimated, is recognized to a limit of
increasing the carrying amount to the lower of the
recoverable amount and the carrying amount that
would have been determined (net of depreciation)
had no impairment loss been recognized in prior
periods. The recoverable amounts were
determined based on the fair value less costs to
sell method using discounted cash flow models.
The key assumptions applied by management in
estimating the recoverable amounts of the CGUs
included attendance and the related revenue
growth rates, operating margins, variable and
fixed cash flows and discount rates.
Shutdowns and restrictions in several provinces
that materially affected operations represented a
triggering event requiring impairment testing for
long-lived assets, goodwill and indefinite-lived
intangible assets at December 31, 2021.
The impairment tests described above resulted in
PPE and ROU impairment charges of $4 million.
No impairment loss was required for goodwill,
indefinite-lived intangible assets, or definite lived
intangible assets.
We considered this a key audit matter due to (i)
the significance of the balances and (ii) the
significant judgment made by management in
determining the recoverable amounts of the
goodwill and indefinite-lived intangible assets
CGUs and certain long-lived assets CGUs,
including the use of key assumptions. This has
resulted in a high degree of subjectivity and audit
effort in performing audit procedures to test the
key assumptions used by management, which
involved significant judgment by management.
Professionals with specialized skill and knowledge
in the field of valuation assisted us in performing
our procedures.
94
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
95
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
●
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
● Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
● Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
● Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
● Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
● Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
96
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Adam Boutros.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
February 10, 2022
97
Cineplex Inc.
Cineplex Inc.
Consolidated Balance Sheets
Consolidated Balance Sheets
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
(expressed in thousands of Canadian dollars)
Assets
Current assets
Cash and cash equivalents (note 3)
Trade and other receivables (note 4)
Income taxes receivable (note 8)
Inventories (note 5)
Prepaid expenses and other current assets
Non-current assets
Property, equipment and leaseholds (note 6)
Right-of-use assets (note 7)
Interests in joint ventures and associates (note 9)
Intangible assets (note 10)
Goodwill (note 11)
Derivative financial instrument (note 16)
COVID-19 business impacts, risks and liquidity (note 2)
Commitments, guarantees and contingencies (note 27)
December 31,
December 31,
2021
2020
$
26,938 $
80,679
1,984
24,899
13,365
16,254
51,834
66,551
21,712
11,613
147,865
167,964
464,439
768,675
7,423
81,651
635,545
9,240
555,340
881,418
8,644
84,922
635,582
—
$
2,114,838 $
2,333,870
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED BALANCE SHEETS
CINEPLEX INC. 2021 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
98
(1)
Cineplex Inc.
Cineplex Inc.
Consolidated Balance Sheets...continued
Consolidated Balance Sheets...continued
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
(expressed in thousands of Canadian dollars)
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 12)
$
157,950 $
82,992
December 31,
December 31,
2021
2020
Share-based compensation (note 13)
Income taxes payable
Deferred revenue and other (note 20)
Lease obligations (note 15)
Fair value of interest rate swap agreements (note 28)
Non-current liabilities
Share-based compensation (note 13)
Long-term debt (note 16)
Fair value of interest rate swap agreements (note 28)
Lease obligations (note 15)
Post-employment benefit obligations (note 17)
Other liabilities (note 18)
Total liabilities
Shareholders’ (deficit) equity
Share capital (note 19)
Deficit
Hedging reserves and other
Contributed surplus
Cumulative translation adjustment
Total shareholders’ (deficit) equity
Approved by the Board of Directors
—
1,945
293,206
101,058
8,063
562,222
4,940
739,211
6,160
482
802
219,983
97,259
7,202
408,720
2,670
725,271
19,157
1,004,465
1,073,666
9,973
7,590
11,503
68,649
1,772,339
1,900,916
2,334,561
2,309,636
852,465
(1,151,394)
(131)
80,027
(690)
(219,723)
852,379
(903,394)
(131)
75,882
(502)
24,234
$
2,114,838 $
2,333,870
Director
Director
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED BALANCE SHEETS
CINEPLEX INC. 2021 ANNUAL REPORT
CONSOLIDATED BALANCE SHEETS
99
(2)
Cineplex Inc.
Cineplex Inc.
Consolidated Statements of Operations
Consolidated Statements of Operations
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Revenues (note 20)
Box office
Food service
Media
Amusement
Other
Expenses
Film cost
Cost of food service
Depreciation - right-of-use assets
Depreciation and amortization - other assets
Gain on disposal of assets (note 6)
Other costs (note 21)
Share of loss of joint ventures and associates (note 9)
Interest expense - lease obligations (note 15)
Interest expense - other
Interest income
Foreign exchange
Change in fair value of financial instruments (note 16)
Impairment of long-lived assets and goodwill (note 11)
$
2021
2020
236,320 $
186,998
65,330
134,473
33,548
132,820
108,632
65,358
77,901
33,552
656,669
418,263
114,674
41,683
102,247
113,042
(28,283)
439,554
755
58,590
65,138
(232)
(43)
(8,790)
3,717
66,922
30,667
128,393
124,846
(13,101)
375,690
8,409
49,085
61,483
(182)
57
—
294,863
902,052
1,127,132
Loss from continuing operations before income taxes
(245,383)
(708,869)
Provision for income taxes (note 8)
Current
Deferred
Net loss from continuing operations
Net loss from discontinued operations, net of taxes (note 30)
Net loss
Net loss from continuing operations attributable to:
Owners of Cineplex
Non-controlling interests
Net loss from continuing operations
Net loss attributable to:
Owners of Cineplex
Non-controlling interests
Net loss
Net loss per share attributable to owners of Cineplex - basic and diluted:
Continuing operations (note 22)
Discontinued operations (note 22)
Total operations
3,339
—
3,339
(73,495)
(11,373)
(84,868)
(248,722) $
(624,001)
—
(4,952)
(248,722) $
(628,953)
(248,722) $
—
(623,996)
(5)
(248,722) $
(624,001)
(248,722) $
—
(628,948)
(5)
(248,722) $
(628,953)
(3.93) $
—
(3.93) $
(9.85)
(0.08)
(9.93)
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
CINEPLEX INC. 2021 ANNUAL REPORT
CINEPLEX INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
2021 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED STATEMENTS OF OPERATIONS
100
(3)
Cineplex Inc.
Cineplex Inc.
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Comprehensive Loss
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
(expressed in thousands of Canadian dollars)
2021
2020
Net loss from continuing operations
$
(248,722) $
(624,001)
Other comprehensive income (loss) from continuing operations
Items that will be reclassified subsequently to net income:
Foreign currency translation adjustment
Recognition of currency translation adjustment on disposition of discontinued
operations (note 30)
Items that will not be reclassified to net income:
Actuarial income (loss) of post-employment benefit obligations
Associated deferred income taxes expense
Other comprehensive income (loss) from continuing operations
Comprehensive loss from continuing operations
Net loss from discontinued operations, net of taxes (note 30)
Foreign currency translation adjustment from discontinued operations
(188)
—
722
—
534
378
(160)
(495)
133
(144)
(248,188)
—
—
(624,145)
(4,952)
7
Comprehensive loss
$
(248,188) $
(629,090)
Comprehensive loss from continuing operations attributable to:
Owners of Cineplex
Non-controlling interests
Comprehensive loss attributable to:
Owners of Cineplex
Non-controlling interests
$
$
$
$
(248,188) $
(624,140)
—
(5)
(248,188) $
(624,145)
(248,188) $
(629,085)
—
(5)
(248,188) $
(629,090)
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
CINEPLEX INC. 2021 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
101
(4)
Cineplex Inc.
Cineplex Inc.
Consolidated Statements of Changes in Equity
Consolidated Statements of Changes in Equity
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
(expressed in thousands of Canadian dollars)
Share
capital
Contributed
surplus
Hedging
reserves and
other
Cumulative
translation
adjustment
Non-
controlling
interests
Deficit
Total
January 1, 2021
$
852,379 $
75,882 $
(131) $
(502) $
(903,394) $
— $
24,234
Net loss
Other comprehensive
income (loss) (page 4)
Total comprehensive
loss
Share option expense
PSU/RSU expense
Settlement for
cancelled options
Issuance of shares on
exercise of options
—
—
—
—
—
—
86
—
—
—
1,903
2,388
(60)
(86)
—
—
—
—
—
—
—
—
(248,722)
(188)
722
(188)
(248,000)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(248,722)
534
(248,188)
1,903
2,388
(60)
—
December 31, 2021
$
852,465 $
80,027 $
(131) $
(690) $ (1,151,394) $
— $
(219,723)
January 1, 2020
$
852,379 $
4,052 $
(131) $
(887) $
(264,310) $
(109) $
590,994
Net loss
Other comprehensive
loss (page 4)
Total comprehensive
loss
Dividends declared
Share option expense
PSU/RSU expense
Settlement for
cancelled options
Conversion to equity-
settled option plan
Conversion to equity-
settled PSU/RSU plan
Issuance of
convertible debentures
Non-controlling
interests acquired
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,152
76
(453)
3,944
311
66,800
—
—
—
—
—
—
—
—
—
—
—
—
—
(628,948)
(5)
(628,953)
385
385
—
—
—
—
—
—
—
—
(522)
—
(137)
(629,470)
(9,500)
—
—
—
—
—
—
(5)
(629,090)
—
—
—
—
—
—
—
(9,500)
1,152
76
(453)
3,944
311
66,800
(114)
114
—
December 31, 2020
$
852,379 $
75,882 $
(131) $
(502) $
(903,394) $
— $
24,234
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
CINEPLEX INC. 2021 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
102
(5)
Cineplex Inc.
Cineplex Inc.
Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars)
(expressed in thousands of Canadian dollars)
2021
2020
Cash provided by (used in)
Operating activities
Net loss from continuing operations
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization - other assets
Depreciation - right-of-use assets
Unrealized foreign exchange
Interest rate swap agreements - non-cash interest
Accretion of convertible debentures and notes payable
Other non-cash interest
Gain on disposal of assets
Deferred income taxes (note 8)
Non-cash share-based compensation
Change in fair value of financial instruments
Impairment of long-lived assets, goodwill and investments (note 11)
Net change in interests in joint ventures and associates
Changes in operating assets and liabilities (note 26)
Net cash provided by (used in) operating activities
Investing activities
Proceeds from disposal of assets, net (notes 6 and 7)
Purchases of property, equipment and leaseholds
Intangible assets additions
Tenant inducements
Net cash received from CDCP
Net cash provided by investing activities
Financing activities
Dividends paid
Repayments under credit facilities, net (note 16)
Repayments of lease obligations - principal
Issuance of convertible debentures, net (note 16)
Issuance of notes payable, net (note 16)
Financing fees
Net cash (used in) provided by financing activities
Effect of exchange rate differences on cash
Increase (decrease) in cash and cash equivalents from continuing operations
Cash flows used in discontinued operations (note 30)
Cash and cash equivalents - Beginning of period
Cash and cash equivalents - End of period
Supplemental information
Cash paid for interest - lease obligation
Cash paid for interest - other
Cash received for income taxes, net
$
$
$
$
$
(248,722) $
(624,001)
113,042
102,247
55
(12,730)
15,973
960
(28,283)
—
4,292
(8,790)
3,717
1,805
117,438
61,004
63,215
(23,627)
(9,200)
8,068
1,995
40,451
—
(246,000)
(88,259)
—
243,996
(863)
(91,126)
355
10,684
—
16,254
26,938 $
124,846
128,393
342
13,922
7,471
1,396
(13,101)
(11,373)
1,228
—
294,863
12,878
(43,178)
(106,314)
80,920
(73,411)
(9,005)
24,296
3,910
26,710
(19,000)
(119,000)
(91,946)
303,063
—
(1,500)
71,617
552
(7,435)
(2,391)
26,080
16,254
56,708 $
52,143 $
(62,329) $
32,371
47,859
(16,297)
The accompanying notes are an integral part of these consolidated financial statements.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED STATEMENTS OF CASH FLOWS
CINEPLEX INC. 2021 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
103
(6)
The accompanying notes are an integral part of these consolidated financial statements.
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
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.
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 (“Shares”) 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.
On July 6, 2020, Cineworld announced that it would defend Cineplex’s claim, and on September 2, 2020, filed its
Statement of Defence and Counterclaim in which it denied Cineplex’s claims and advanced a counterclaim seeking
reimbursement of £32,000 for costs incurred with respect to the transaction and an unspecified amount for punitive
damages. Cineplex responded to Cineworld’s defence and counterclaim on September 15, 2020, denying all claims
levied by Cineworld.
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 “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 $1,240,000 on account of lost synergies, and $5,500 for transaction costs, exclusive of pre-judgment
interest. 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.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
104
(7)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
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.
Due to uncertainties inherent in appeals, it is not possible for Cineplex to predict the timing or final outcome of the
appeal of the Decision announced by Cineworld. Further, even if Cineworld’s appeal 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 February 10, 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. Subsequent to
December 31, 2021, social gathering restrictions were further modified or reinstituted in several key markets in
which Cineplex operates, resulting in theatre closures and prohibiting indoor dining 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 Cineplex is continuously monitoring operating restrictions and adjusts operating capacities in
accordance with government directives.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
105
(8)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
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 to 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 16, Long-term debt);
July 2020: issued convertible unsecured subordinated debentures (the “Debentures”) for net proceeds of
$303,000, (note 16, Long-term debt)
November 2020: entered into the Second Credit Agreement Amendment providing further financial
covenant relief (note 16, 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 16, 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 has been received as of December 31, 2021);
February 2021: entered into the Third Credit Agreement Amendment providing further financial covenant
relief (note 16, 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 16, Long-term debt); and
December 2021: entered into the Fourth Credit Agreement Amendment providing further financial
covenant relief (note 16, 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 further expanding in
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 deferral;
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 provides wage and rent
subsidies for businesses that have faced revenue losses, with a subsidy rate of up to 75%;
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
106
(9)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
•
•
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 during the year with a high percentage of the eligible
population receiving at least one dose of a COVID-19 vaccine and an increasing number having received two or
three doses. With increasing concerns over more transmissible variants, including the highly transmissible new
Omicron variant, the Canadian government has accelerated the rollout of COVID-19 vaccine booster doses
providing extra protection against COVID-19 and its variants. In order to control the spread of COVID-19, the
majority of provinces across Canada require proof of vaccination as part of the reopening plans in select settings
including those that operate indoors with close proximity of patrons.
Although the lifting of some restrictions on theatre and LBE businesses commenced near the end of the second
quarter of 2021 continuing into the third quarter, growing concerns over the high transmissivity of the Omicron
variant causing a significant rise in COVID-19 cases in December 2021, has resulted in the reinstatement of
numerous government imposed restrictions and lockdown measures. Government-imposed restrictions reinstituted
in December 2021 in Ontario, New Brunswick, Nova Scotia, Prince Edward Island and British Columbia, reduced
capacity limits to 50% and in certain provinces limited food sales and temporarily closed theatres in Quebec.
Additional government-imposed restrictions subsequent to December 31, 2021 resulted in temporary theatre
closures and prohibited 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 With the uncertainty of further 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.
The capacity restrictions materially impacted Cineplex’s ability to benefit from highly anticipated film releases
released during the holiday season. Despite mandatory capacity restrictions that continue to be enforced where and
as applicable, Cineplex recognized a significant increase in revenues during the fourth quarter, the highest since the
pandemic was declared in early 2020. Cineplex will continue to monitor capacity restrictions and will adjust
operating levels in accordance with government directives.
Management continues to pursue all viable options to maintain adequate liquidity to fund operations for the
currently anticipated duration of the pandemic. This includes but is not limited to asset sales such as Cineplex’s head
office buildings in Toronto which was completed during the first quarter, the issuance of Notes Payable (note 16,
Long-term debt) and amendments to its existing Credit Facilities (note 16, Long-term debt).
As at December 31, 2021, Cineplex had a cash balance of $26,938 and $270,702 available under its Revolving
Facility subject to the liquidity covenants set forth in the Credit Facilities as amended (note 16, Long-term debt).
Combined with the continued focus on reducing costs and capital expenditures, management believes that it has
adequate liquidity to fund operations for the currently anticipated duration of the pandemic in the regions in which
Cineplex operates.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
107
(10)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
3. Cash and cash equivalents
Cash and cash equivalents comprise the following:
Cash at bank and on hand, net of outstanding cheques
$
26,938 $
16,254
2021
2020
4. Trade and other receivables
Trade and other receivables comprise the following:
Trade receivables
Other receivables
5. Inventories
Inventories comprise the following:
Food service inventories
Gaming inventories
Other inventories, including work-in-progress
2021
53,326 $
27,353
80,679 $
2020
29,188
22,646
51,834
2021
7,815 $
9,673
7,411
24,899 $
2020
3,023
12,088
6,601
21,712
$
$
$
$
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
108
(11)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
6. Property, Equipment, and Leaseholds
Property, equipment and leaseholds consist of:
Buildings and
leasehold
improvements
Land
Equipment
Construction-
in-progress
Total
At January 1, 2021
Cost
$
19,382
$
804,439
$
$
837,073
$
$
$
51,669 $
1,712,563
Accumulated depreciation
—
(520,436)
(636,787)
—
(1,157,223)
Net book value
$
19,382
$
284,003
$
$
200,286
$
$
$
51,669 $
555,340
Year ended December 31, 2021
Opening net book value
Additions, net of transfers
Reclassification to interests in joint ventures and
associates
Disposals
Impairment (note 11)
Foreign exchange rate changes
Depreciation for the year
Closing net book value
At December 31, 2021
Cost
Accumulated amortization
Net book value
At January 1, 2020
Cost
—
—
—
—
—
$
19,382
$
284,003
$
$
200,286
$
$
$
51,669 $
555,340
38,859
33,184
(45,554)
26,489
(10,196)
(1,666)
—
(943)
(7)
(25)
(1,430)
—
(253)
(41,225)
(61,052)
—
(593)
—
—
—
(25)
(13,885)
(943)
(260)
(102,277)
$
$
$
9,186
$
279,021
$
$
170,710
$
$
5,522 $
464,439
$
`
9,186
$
831,551 $
$
850,433 $
5,522 $
1,696,692
—
(552,530)
(679,723)
—
(1,232,253)
9,186 $
279,021
$
170,710
0
$
0
5,522 $
464,439
$
19,372
$
823,965
$
$
841,572
$
$
$
45,324 $
1,730,233
Accumulated depreciation
—
(480,554)
(586,881)
—
(1,067,435)
Net book value
$
19,372
$
343,411
$
$
254,691
$
$
$
45,324 $
662,798
Year ended December 31, 2020
Opening net book value
Additions, net of transfers
Reclassification to assets held for sale
Disposals
Impairment (note 11)
Foreign exchange rate changes
Depreciation for the year
$
19,372
$
343,411
$
$
254,691
$
$
$
45,324 $
662,798
10
—
—
—
—
—
19,152
1
(481)
(34,117)
(7)
(43,956)
17,499
723
(2,118)
(881)
(237)
(69,391)
0
200,286 $
3
11,664
—
(1,125)
(4,194)
—
—
48,325
724
(3,724)
(39,192)
(244)
(113,347)
51,669 $
555,340
Closing net book value
$
19,382
$
284,003
$
$
In January 2021, Cineplex completed the sale and leaseback of its head office buildings located in Toronto, Ontario
for $57,000 gross proceeds, recognizing a gain of $30,061 on the derecognition of $11,870 of assets.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
109
(12)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
7. Right-of-use-assets
Right-of-use assets consists of:
At December 31, 2021
Cost
Accumulated depreciation
Net book value
Year ended December 31, 2021
Balance - December 31, 2020
Modifications, net of additions
Reclassification to interests in joint ventures and associates
Foreign exchange rate changes
Depreciation for the period
Impairment (note 11)
Closing net book value
At December 31, 2020
Cost
Accumulated depreciation
Net book value
Year ended December 31, 2020
Balance - December 31, 2019
Modifications, net of additions
Disposals
Foreign exchange rate changes
Depreciation for the period
Impairment (note 11)
Closing net book value
Property
Equipment
Total
$
1,112,361 $
25,057 $
1,137,418
(355,164)
(13,579)
(368,743)
$
757,197 $
11,478 $
768,675
$
871,741 $
(13,776)
9,677 $
6,318
881,418
(7,458)
(225)
(39)
(97,730)
(2,774)
—
—
(225)
(39)
(4,517)
(102,247)
—
(2,774)
$
757,197 $
11,478 $
768,675
Property
Equipment
Total
$
1,132,613 $
19,843 $
1,152,456
(260,872)
(10,166)
(271,038)
$
871,741 $
9,677 $
881,418
$
1,218,054 $
14,795 $
1,232,849
(144,078)
(7,151)
39
(123,277)
(71,846)
(4)
—
2
(5,116)
—
(144,082)
(7,151)
41
(128,393)
(71,846)
$
871,741 $
9,677 $
881,418
COVID-19 resulted in closures of substantially all leased properties and the suspension of the use of most equipment
for periods in both 2020 and 2021 (note 2, COVID-19 business impacts, risks and liquidity). 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 abatements, reductions and/or deferrals reduced both lease obligations and right-of-use assets by
approximately $35,834 and $129,085 for the years ended December 31, 2021 and 2020, respectively.
In 2021, Cineplex disposed of certain protective rights on leased properties in exchange for $6,436 cash proceeds
(2020 - $21,000), reducing right-of-use assets. In 2020, Cineplex recognized a gain of $13,780 on the derecognition
of $7,220 of right-of-use assets.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
110
(13)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
8. 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:
Deferred income tax assets
Property, equipment and leaseholds and deferred tenant inducements
- difference between net carrying value and undepreciated capital cost $
Accounting provisions not currently deductible
Deferred revenue
Interest rate swap agreements
Income tax credits available
Operating losses available for carry-forward and carry-back
2021
2020
11,653 $
93,663
15,929
3,614
3,789
81,844
12,494
83,900
16,243
6,943
397
24,656
Total gross deferred income tax assets
210,492
144,633
Future deferred tax liabilities
Intangible assets
Goodwill
Other
Convertible debentures
Total gross deferred income tax liabilities
(9,854)
(29,909)
5,614
(23,961)
(58,110)
Net deferred income tax recognized
$
— $
(10,151)
(27,841)
4,892
(24,464)
(57,564)
—
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.
The 2021 current tax expense represents Ontario corporate minimum tax paid on the filing of 2020 tax returns as a
result of losses carried back to offset taxable income. The minimum tax paid is creditable against future Ontario
corporate income tax payable.
In 2021, Cineplex recovered income taxes paid in prior periods of $62,624 as a result of its tax returns filed for the
2020 taxation year.
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
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’s combined statutory income tax rate at December 31, 2021 was 26.3% (2020 - 26.8%).
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
111
(14)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
The provision for income taxes included in the consolidated statement of operations differs from the statutory
income tax rate for the years ended December 31, 2021 and 2020 as follows:
Income from continuing operations before income taxes
Combined statutory income tax rates for the current year
Income taxes (recoverable) payable at statutory rate
Adjustments relating to prior periods
Goodwill impairment - permanent differences
Other permanent differences
Derecognition of deferred income tax assets
Provision for income taxes
2021
2020
$
(245,383)
$
(708,869)
26.25 %
26.81 %
(64,425)
872
—
1,757
65,135
3,339
$
(190,020)
4,244
19,447
(3,608)
85,069
(84,868)
$
Adjustments relating to prior periods include differences between the prior year provision and the income tax returns
as filed.
Non-capital losses available for carry-forward expire as follows:
2027
2028
2029
2030
2032
2034
2035
2036
2037
2038
2040
2041
Indefinite
$2,502
8,822
5,122
2,184
254
1,947
2,770
2,749
18,546
3,110
16,977
221,169
28,423
314,575
$
Losses denominated in US dollars are presented at the Canadian dollar equivalent using the December 31, 2021
exchange rate.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
112
(15)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
9. Interests in joint ventures and associates
Cineplex participates in incorporated and unincorporated joint ventures with other parties and accounts for its
interests using the equity method.
Canadian Digital Cinemas Partnership, (“CDCP”), is a joint venture formed by Cineplex and Empire Theatres
Limited to finance the implementation of digital projectors. Cineplex leases its digital projectors from CDCP.
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 (“Scene+”), the operator of the Scene+ loyalty program. Cineplex’s share of
Scene+’s loss from December 13, 2021 onwards is disclosed in the table below.
Other joint ventures include a 50% interest in a theatre operation (2020 - 50%), and a 50% interest in YoYo’s
Yogurt Cafe (“YoYo’s”) (2020 - 50%).
The joint ventures and associates are headquartered in Canada and the United States.
The net interest in joint ventures is summarized as follows as at December 31, 2021 and 2020:
2021
Ownership percentage
Voting percentage
Equity (Deficit)
Economic interest
Accounts (payable) receivable
Net interest in joint ventures and associates
Interest at beginning of year
Interest recognized on equity accounting
Investment
Dividends or distributions
Net change in receivable or payable
Share of net income (loss)
$
$
$
$
CDCP
78.2%
50%
8,622 $
78.2%
6,742 $
(1,197)
5,545 $
8,639 $
—
—
(1,955)
(1,285)
146
Scene+
33.3 %
50 %
4,001
50%
2,001
1
2,002
—
(6,705)
9,500
—
—
(793)
$
$
$
$
$
Other
Total
17%-50%
17%-50%
(3,232) $
50%
(1,616) $
1,492 $
(124) $
5 $
—
—
—
(21)
(108)
9,391
7,127
296
7,423
8,644
(6,705)
9,500
(1,955)
(1,306)
(755)
Net interest in joint ventures and associates
$
5,545 $
2,002
$
(124) $
7,423
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
113
(16)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
2020
Ownership percentage
Voting percentage
Equity (Deficit)
Economic interest
Accounts receivable
Net interest in joint ventures and associates
Interest at beginning of year
Investments
Dividends or distributions
Net change in receivable or payable
Share of net loss
Net interest in joint ventures
$
$
$
$
CDCP
78.2 %
50 %
10,935
78.2 %
8,551
88
8,639
24,578
(3,910)
—
(4,750)
(7,279)
$
$
$
$
Other
Total
17%-50%
17%-50%
(2,977)
$
7,958
$
$
$
17 %
(506)
511
5
3,643
—
(2,790)
282
(1,130)
8,045
599
8,644
28,221
(3,910)
(2,790)
(4,468)
(8,409)
$
8,639
$
5
$
8,644
The summarized balance sheets including 100% of the assets, liabilities and equity of each of the joint ventures at
December 31 each year are as follows:
2021
CDCP
Scene+
Other
Total
Assets
Cash and cash equivalents
Trade and other receivables
Prepaid expenses and other current assets
Equipment
Total assets
Liabilities
Accounts payable and accrued liabilities
Deferred revenue
$
$
$
Long-term debt
Total liabilities
Equity (Deficit)
1,423 $
4,580
21
6,024
3,121
4,561 $
11,535
—
16,096
2,663
9,145 $
18,759 $
14,381 $
—
14,381
377
14,758
365 $
158
523
—
523
8,622
1 $
34
25
60
—
60 $
753 $
—
753
2,539
3,292
5,985
16,149
46
22,180
5,784
27,964
15,499
158
15,657
2,916
18,573
9,391
27,964
Total liabilities and equity
$
9,145 $
18,759 $
60 $
4,001
(3,232)
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
114
(17)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
2020
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepaid expenses and other current assets
Equipment
Total assets
Liabilities
Accounts payable and accrued liabilities
Deferred revenue
Long-term debt
Total liabilities
Equity (Deficit)
CDCP
Other
Total
$
623 $
2,079
—
60
2,762
10,135
85 $
183
31
25
324
9
$
$
12,897 $
333 $
1,804 $
158
1,962
—
1,962
10,935
641 $
—
641
2,669
3,310
(2,977)
708
2,262
31
85
3,086
10,144
13,230
2,445
158
2,603
2,669
5,272
7,958
13,230
Total liabilities and equity
$
12,897 $
333 $
The summarized statements of comprehensive income (loss) including 100% of the revenue, expenses and income
of each of the joint ventures for the years ending December 31 are as follows:
2021
Revenues
Depreciation and amortization
Interest expense
Other expenses
Total expenses
CDCP
Scene+
Other
Total
$
10,728 $
890 $
1,422 $
13,040
7,001
11
3,529
10,541
73
—
4,011
4,084
—
—
1,348
1,348
7,074
11
8,888
15,973
Net income (loss) and comprehensive income
(loss)
$
187 $
(3,194) $
74 $
(2,933)
2020
Revenues
Depreciation and amortization
Interest income expense
Other expenses
Total expenses
CDCP
Other
$
6,484 $
464 $
9,458
23
6,312
15,793
—
92
1,187
1,279
Total
6,948
9,458
115
7,499
17,072
Net loss and comprehensive loss
$
(9,309) $
(815) $
(10,124)
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
115
(18)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
SCENE
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, and up to December 12, 2021
Scene+.
In the fourth quarter of 2020, Cineplex announced that it had entered into an agreement with its existing partner to
enhance and expand the SCENE loyalty program. Cineplex received $60,000 in December 2020 from its existing
partner with respect to the agreement to reorganize the program and reposition it for future growth. Cineplex
continues to have joint control of the joint operation, and is entitled to and responsible for 50% of the economic
benefits and obligations until specific non-financial milestones are met, resulting in the deferral of the recognition of
the proceeds in other liabilities.
As part of the reorganization, Scene+ was launched on December 13, 2021 resulting in Scene LP becoming the
operator of Scene+. As a result of this phase in the reorganization, Cineplex will no longer consolidate 50% of the
results of Scene+. Cineplex will continue to consolidate 50% of SCENE which subsequent to December 12, 2021
holds the deferred revenue obligation for SCENE points issued up to December 12, 2021.
The summarized balance sheets of SCENE at December 31 are as follows (2020 figures include the combined
balance sheets of SCENE and Scene+):
Assets
Cash and cash equivalents
Trade and other receivables
Prepaid expenses
Intangible Assets
Equipment
Right-of-use assets
Promissory notes receivable from partners
Total assets
Liabilities
Accounts payable and accrued liabilities
Deferred revenue
Lease obligations
Total liabilities
Deficiency
$
$
$
2021
2020
9,957 $
1,268
196
11,421
—
—
—
19,000
30,421 $
9,798 $
95,993
—
105,791
(75,370)
13,527
16,460
1,320
31,307
1,745
137
20
—
33,209
7,604
72,643
21
80,268
(47,059)
$
30,421 $
33,209
The summarized combined results of operations of SCENE for the full year and Scene+ up to December 12, 2021
are as follows:
Revenues
Expenses
Net loss
2021
42,778 $
84,502
2020
36,686
52,130
(41,724) $
(15,444)
$
$
Cineplex and the other partner of SCENE and Scene+ contribute capital as required to fund SCENE’s future
redemption costs.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
116
(19)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
10. Intangible assets
Intangible assets consist of the following:
At January 1, 2021
Cost
Accumulated amortization
Net book value
Year ended December 31, 2021
Opening net book value
Additions
Disposals
Reclassification to interests in joint ventures and
associates
Foreign exchange rate changes
Amortization for the year
Closing net book value
At December 31, 2021
Cost
Accumulated amortization
Net book value
At January 1, 2020
Cost
Accumulated amortization
Net book value
Year ended December 31, 2020
Opening net book value
Additions
Disposals
Reclassification to assets held for sale
Foreign exchange rate changes
Amortization for the year
Customer
relationships
Software and
other
Trademarks
and
trade names
Total
$
$
$
$
$
$
$
$
$
32,755
$
$
55,224
$
$
63,599
$
$
151,578
(28,936)
(37,720)
—
(66,656)
3,819
$
$
17,504
$
$
63,599
$
$
84,922
3,819
$
17,504
$
$
63,599
$
$
—
—
—
(36)
(1,763)
9,487
(1,348)
(609)
—
(9,002)
—
—
—
—
—
2,020
$
$
16,032
$
$
63,599
$
$
84,922
$
9,487
(1,348)
(609)
(36)
(10,765)
81,651 `
32,706
$
60,502
$
$
63,599
$
$
156,807
$
(30,686)
(44,470)
— $
(75,156)
2,020
$
16,032
$
$
63,599
$
$
81,651
$
32,988
$
47,152
$
$
63,599
$
$
143,739
$
(24,764)
(30,608)
—
(55,372)
8,224
$
16,544
$
$
63,599
$
$
88,367
$
8,224
$
16,544
$
$
63,599
$
$
—
—
—
(17)
(4,388)
8,546
(514)
(21)
60
(7,111)
—
—
—
—
—
88,367
$
8,546
(514)
(21)
43
(11,499)
Closing net book value
$
3,819
$
17,504
$
$
63,599
$
$
84,922
$
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
117
(20)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
11. Impairment of long-lived assets and goodwill
Cineplex performs its annual test for impairment of goodwill and indefinite-lived intangible assets in the fourth
quarter, in accordance with its policy described in note 31, Significant accounting policies, judgments and estimation
uncertainty. 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. In addition, for assets other than goodwill and indefinite-lived intangible assets, indicators are assessed
considering whether an impairment loss previously recognized may no longer exist or may have decreased.
In early 2020, in response to the outbreak of the COVID-19 pandemic as declared by the WHO, the government of
Canada announced mandated closure of schools, public facilities and non-essential businesses. Consequently,
effective March 16, 2020 and continuing throughout the remainder of the year, Cineplex had to either temporarily
close its theatres and location-based entertainment venues or operate with strict capacity restrictions across its
operations, resulting in material decreases in revenues, results of operations and cash flows and a material decrease
in Cineplex’s market value due to a sharp decline in its share price. These represented triggering events at each
balance sheet date in 2020.
Increasing concerns over the new highly transmissible Omicron COVID-19 variant and increased daily COVID-19
case counts led to shutdowns and restrictions in several provinces that materially affected operations representing a
triggering event requiring impairment testing for long-lived assets, indefinite-lived intangible assets and goodwill at
December 31, 2021. During the fourth quarter of 2021, government imposed restrictions were reinstituted in
Ontario, British Columbia, New Brunswick, Nova Scotia and Prince Edward Island, reducing capacity limits to 50%
and requiring temporary theatre closures in Quebec. Further government-imposed restrictions were reinstated or
modified subsequent to December 31, 2021 resulting in temporary theatre closures in Ontario, Newfoundland and
New Brunswick. Based on the results of the impairment tests, Cineplex recognized non-cash impairment charges of
$943 to property, equipment and leaseholds and $2,774 to right-of-use assets for the year ended December 31, 2021.
If the discount rates were to increase by 2.0%, assuming a constant cash flow margin, or discounted cash flows were
13% less than estimated, there would not be any further material impairments to property, equipment and leaseholds,
and right-of-use assets.
Fair value less cost to sell is determined using Level 3 inputs such as attendance and the related revenue growth
rates, variable and fixed cash flows, operating margins, and discount rates based on Cineplex’s internal budget.
Cineplex projects revenue, operating margins and cash flows for a period of five years, and applies a perpetual long-
term growth rate thereafter. In arriving at its forecasts, Cineplex considers past experience, economic trends such as
inflation, as well as industry and market trends. Cineplex has considered the significant impact of COVID-19 on the
business with the capacity restrictions and/or temporary theatre closures reinstated during and subsequent to
December 2021. Estimates have been applied for the impact of temporary closures and for operations with capacity
restrictions, for both Cineplex and customer locations for the first quarter of 2022. Subsequent to 2022, a range of
estimates for growth in adjusted EBITDAaL from 1% to 6% has been applied across locations for the period
2023-2026 to reflect a staged reopening and other scenarios. Cineplex’s estimated adjusted EBITDAaL for 2022
contemplates the latest information provided by government, at the measurement date, related to the timing of the
lifting of restrictions on locations and available information related to the release of film content, as well as
observable evidence from other territories of consumer behaviour upon the reopening of theatres.
Cineplex’s projected revenue and cash flows for 2022 assume business will be negatively impacted by the further
government-imposed restrictions reinstituted or modified in Ontario, Quebec, British Columbia, Newfoundland and
New Brunswick subsequent to December 31, 2021 For every quarter Cineplex stays closed, additional impairment
charges could be required.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
118
(21)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Discount rates applied to the groups of goodwill cash-generating units (“CGUs”) represent Cineplex’s assessment of
the risks specific to each group of CGUs regarding the time value of money and individual risks of the underlying
assets. Cineplex used discount rates between 8.0% and 13.6% (2020 - between 11.0% and 16.7%), and no change to
the perpetual growth rates between 0.5% and 1.0% (2020 - between 0.5% and 1.0%), which are consistent with the
observed long-term average growth rates in the exhibition, amusement and leisure, and digital media industries.
The determination of fair value less costs of disposal is sensitive to the growth rates, discount rates, and long-term
growth rates used. The risk premiums expected by market participants related to uncertainties about the industry and
assumptions relating to future cash flows may differ, depending on economic conditions and other events.
Accordingly, it is reasonably possible that future changes in assumptions may negatively impact future assessments
of the recoverable amount for groups of CGUs.
If the return to business continues to be delayed as a result of actions outside of the control of management,
including but not limited to additional changes to the film slate release schedule, ongoing government restrictions
impacting the re-opening of entertainment venues and delays in the vaccine roll out, management's estimates of
operating results and further cash flows for the forecasted period may be negatively impacted. As a result, they may
be insufficient to support the recoverability of goodwill and long lived assets in certain CGUs, thus requiring further
impairment charges. Cineplex will continue to evaluate the recoverability of goodwill at the cash generating unit
level on an annual basis during its fourth quarter and whenever events or changes in circumstances indicate there
may be a potential impairment.
Impairment of long-lived assets and goodwill for the year ended December 31, 2021 and 2020 were as follows:
Impairment of property, equipment and leaseholds
Impairment of right-of-use assets
Impairment of investments
Impairment of goodwill
2021
$
943 $
2,774
—
—
2020
39,192
71,846
2,790
181,035
Impairment of long-lived assets and goodwill
$
3,717 $
294,863
The following table discloses the change in goodwill for the years ended and December 31:
Balance - Beginning of year
Goodwill impairment
Foreign exchange rate changes
Balance - End of year
2021
2020
635,582
—
(37)
816,790
(181,035)
(173)
$
635,545 $
635,582
For the purpose of impairment testing, goodwill has been allocated to CGUs or groups of CGUs. Total goodwill of
the reporting segments are as follows:
Exhibition
Media
Amusement and leisure
$
2021
413,915 $
206,385
15,245
2020
413,915
206,385
15,282
$
635,545 $
635,582
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
119
(22)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
For goodwill, Cineplex concluded there were no non-cash impairment losses in the exhibition business within the
Film Entertainment and Content segment. For one group of CGUs in the Film Entertainment and Content segment,
if the discount rates were to increase by 2.0%, assuming a constant cash flow margin, or discounted cash flows were
13% less than estimated, the carrying amount of the group of CGUs would exceed the reasonable range for the
recoverable amounts by $5,200. The goodwill for this group of CGUs represents 8% of the total carrying amount of
goodwill. For all other CGUs, no reasonably possible change in assumption would cause the recoverable amount to
fall below the carrying value.
At the end of each future reporting period Cineplex will assess whether there are indications that the impairment loss
recognised 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
losses.
12. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consist of:
Accounts payable - trade
Film payables and accruals
Accrued salaries and benefits
Sales taxes payable
Accrued occupancy costs
Other payables and accrued liabilities
13. Share-based compensation
Omnibus Incentive Plan (“Incentive Plan”)
$
2021
78,254 $
27,244
24,442
5,275
4,272
18,463
$
157,950 $
2020
39,098
3,700
14,915
6,017
4,868
14,394
82,992
On November 12, 2020, the Board of Directors approved a new 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 3,487,960 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 December 31, 2021, 1,489,143 Shares are available to be issued
under the Incentive Plan (2020 - 2,111,140).
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
120
(23)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
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.
Stock options have been granted as follows:
Grant date
Number of
options
granted
Exercise
price
Number of
employees
granted
options
Vesting period
Expiry
February 14, 2012
474,000
27.33
February 12, 2013
385,834
33.49
February 14, 2014
440,519
40.45
February 18, 2015
446,004
49.14
February 12, 2016
501,270
47.86
February 21, 2017
544,922
51.25
February 27, 2018
559,703
33.59
February 20, 2019
709,092
25.05
August 17, 2020
725,758
8.25
April 12, 2021
281,503
12.87
May 10, 2021
177,998
12.41
42
42
54
59
76
80
74
78
76
71
22
One third on each successive
anniversary of the grant date
One third on each successive
anniversary of the grant date
One third on each successive
anniversary of the grant date
One fourth on each successive
anniversary of the grant date
One fourth on each successive
anniversary of the grant date
One fourth on each successive
anniversary of the grant date
One fourth on each successive
anniversary of the grant date
One fourth on each successive
anniversary of the grant date
One fourth on February 17, 2021,
2022, 2023 and 2024
One fourth on each successive
anniversary of the grant date
Fully vested on the first anniversary of
the grant date
February 13, 2022
February 11, 2023
February 14, 2024
February 18, 2025
February 12, 2026
February 21, 2027
February 27, 2028
February 20, 2029
August 17, 2030
April 12, 2031
May 10, 2031
The exercise price was equal to the market price of Cineplex shares or units at the grant date.
Effective December 15, 2019, as a result of the terms of the Arrangement Agreement, options were considered cash-
settled, and the fair value of the options outstanding in excess of their respective exercise price was recognized as a
current share-based compensation liability, and changes in value were reflected in the statement of operations. Stock
options impacted by the termination of the Arrangement Agreement were revalued and accounted for as equity-
settled and any previously recognized share based compensation liability was reclassified to contributed surplus. The
accelerated recognition of unvested options was reversed and is being recognized over their remaining vesting
periods at the value determined at March 31, 2020. Forfeitures are estimated to be nominal, based on historical
forfeiture rates.
Cineplex recorded $1,903 of employee benefits expense with respect to the options during the year ended December
31, 2021 (2020 recovery - $1,203). The intrinsic value of vested share options at December 31, 2021 is $726 (2020 -
$nil), based on the closing Share price of $13.49 per share (2020 - $9.27). In 2021, 165,146 (2020 - 1,307,301) stock
options issued under the Legacy Plan were cancelled for total consideration of $60 ($2020 - $453) as part of a
voluntary stock option cancellation program that was initiated in the fourth quarter of 2020.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
121
(24)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
A summary of option activities in 2021 and 2020 is as follows:
2021
2020
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
7.64
2,042,019 $
Granted
Cancelled
Forfeited
Exercised
459,501
(188,303)
(87,049)
(27,363)
25.37
12.69
43.90
21.89
8.25
3,123,521 $
38.62
725,758
(1,408,439)
(398,821)
—
8.25
44.70
29.64
—
Options outstanding, December 31
7.44
2,198,805 $
21.48
2,042,019 $
25.37
At December 31, 2021 and 2020, options are vested and exercisable as follows:
Options vested and exercisable at $8.25
Options vested and exercisable at $25.05
Options vested and exercisable at $33.59
Options vested and exercisable at $51.25
Options vested and exercisable at $47.86
Options vested and exercisable at $49.14
Options vested and exercisable at $40.45
Options vested and exercisable at $33.49
Options vested and exercisable at $27.33
Options vested and exercisable at $23.12
2021
135,393
266,236
302,496
45,828
51,812
49,723
43,391
23,144
2,563
—
2020
—
140,996
211,378
76,416
96,478
81,574
69,985
44,634
15,237
9,186
920,586
745,884
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
122
(25)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
The fair values of options granted in 2021 and 2020 were determined using the Black-Scholes valuation model using
the following significant inputs:
Number of options granted
Share price
Exercise price
Expected option life (years)
Volatility
Dividend yield
Annual risk-free rate
Fair value of options granted
2021
2020
459,501
725,758
$12.41 - $12.87 $
$12.41 - $12.87 $
4.0
47 %
— %
0.68%-0.72%
8.25
8.25
4.0
60 %
— %
0.27 %
$3.70 - $3.83 $
3.15
Upon cashless exercises, the options exercised in excess of Shares issued are cancelled and returned to the pool
available for future grants. At December 31, 2021, 532,760 options are available for grant (2020 - 1,900,606, of
which a maximum of 1,200,000 were allocated to PSU/RSU availability in 2021).
RSU and PSU awards
2021 LTIP awards granted in Q2 2021
2020 LTIP award granted in Q3 2020
2019 LTIP award granted in Q1 2019
RSU
PSU Share
equivalents
granted
167,546
284,214
105,777
RSU Share
equivalents
granted
PSU Share
equivalents
minimum payout
PSU Share
equivalents
maximum payout
315,619
277,105
54,940
—
—
7,788
335,092
568,428
211,553
Valuation of restricted stock units is based on Cineplex’s closing Share price on the grant date. On April 12, 2021,
Cineplex issued 262,487 equity settled RSUs with a fair value of $12.87 per unit (total fair value of $3,378 on
issuance), that will fully vest in November 2023, at the completion of the three year performance period. On May
10, 2021, Cineplex issued 53,132 cash settled RSUs with a fair value of $14.95 (total fair value of $794 on issuance)
and will fully vest on May 10, 2023. The valuation was based on Cineplex’s Share price on the grant date and will
fluctuate in value based on Cineplex’s Share price.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
123
(26)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
A summary of RSU activities during the years ended December 31, 2021 and 2020 is as follows:
RSUs outstanding, January 1
Granted
Notional dividends
Settled
Cancelled
RSUs outstanding, December 31
2021
295,189
315,619
—
(44,014)
(30,420)
536,374
2020
93,835
277,105
415
(37,572)
(38,594)
295,189
The RSUs associated with the 2019 LTIP were settled in 2021 for $586 cash.
PSU
On April 12, 2021, Cineplex issued 167,546 PSUs which will be equity-settled in November 2023, representing the
completion of the three year performance period. Compensation expense is recorded based on the number of units
expected to vest, the current market price of Cineplex’s 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.
A summary of PSU activities during the years ended December 31, 2021 and 2020 is as follows:
PSUs outstanding, January 1
Granted
Notional dividends
Settled
Cancelled
PSUs outstanding, December 31
2021
333,908
167,546
—
(88,422)
(1,774)
411,258
2020
183,323
284,214
1,624
(18,455)
(116,798)
333,908
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. For the year ended
December 31, 2021, Cineplex recognized compensation cost of $2,881 (2020 recovery - $6,858) under the Incentive
Plan relating to RSU and PSU. At December 31, 2021, $207 (2020 - $384) was included in current share-based
compensation liability and $2,776 in contributed surplus (2020 - $nil).
The PSUs associated with the 2019 LTIP were settled in 2021 for $82 cash.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
124
(27)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
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 year ended December 31, 2021, Cineplex recognized
compensation cost of $1,184 (2020 recovery - $8,246) associated with the deferred equity units. At December 31,
2021, $4,733 (2020 - $2,768) was included in share-based compensation liability.
14. Dividends payable
Cineplex has declared the following dividends during the years:
Record date
January
2021
Amount
per share
2020
Amount
per share
Amount
Amount
$
— $
— $
9,500 $
0.1500
The dividends are paid on the last business day of the following month. Dividends are at the discretion of the Board
of Directors of Cineplex. Cineplex has not paid any dividends after the monthly dividend was paid on February 28,
2020 and does not expect to return to paying dividends as a result of Credit Facilities restrictions and the negative
impact of the COVID-19 pandemic on liquidity.
15. Lease obligations
The following table presents lease obligations for Cineplex for the year ended December 31, 2021 and 2020:
Year ended December 31, 2021
Opening balance
Modifications, net of additions
Tenant inducement
Lease payment
Interest expense
Reclassification to interests in joint ventures and associates
Foreign exchange rate changes
Closing lease obligations
Less: current portion
Property
Equipment
Total
$
1,160,849 $
10,076 $
1,170,925
7,340
7,595
(141,067)
58,235
(226)
(52)
6,318
—
(3,900)
355
—
—
13,658
7,595
(144,967)
58,590
(226)
(52)
$
1,092,674 $
12,849 $
1,105,523
97,236
3,822
101,058
Non-current portion of lease obligations
$
995,438 $
9,027 $
1,004,465
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
125
(28)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Year ended December 31, 2020
Opening balance
Modifications. net of additions
Tenant inducement
Lease payment
Interest expense
Foreign exchange rate changes
Closing lease obligations
Less: current portion
Property
Equipment
Total
$
1,352,541 $
15,054 $
1,367,595
(143,954)
22,587
(4)
—
(143,958)
22,587
(118,922)
(5,394)
(124,316)
48,664
(67)
420
—
49,084
(67)
$
1,160,849 $
10,076 $
1,170,925
92,869
4,390
97,259
Non-current portion of lease obligations
$
1,067,980 $
5,686 $
1,073,666
Current portion of lease obligations are net of estimated tenant inducements.
The following table discloses the undiscounted cash flow for lease obligations as of December 31:
Less than one year
One to five years
More than five years
$
2021
173,086 $
637,415
610,456
2020
159,928
635,088
695,714
Total undiscounted lease obligations
$
1,420,957 $
1,490,730
The following table provides the lease amounts recognized in the statement of operations for the periods ended
December 31:
Depreciation expense on right-of-use assets
Interest expense on lease obligations
Expense relating to variable lease payments not included in the measurement
of the lease obligations (i)
(i) Variable lease payments include realty taxes and insurance.
2021
102,247 $
58,590 $
2020
128,393
49,085
49,250 $
52,993
$
$
$
Cineplex conducts a significant part of its operations in leased premises. Leased premises include leases for theatre
locations, location-based entertainment venues, route operation locations, warehouses and offices. Cineplex also
leases equipment for use in its theatre operations and offices. Leases for premises generally provide for minimum
rentals and, in certain situations, percentage rentals based on sales volume or other identifiable targets; and may
require the tenant to pay a portion of realty taxes and other property operating expenses. Property lease terms
generally range from 15 to 20 years and contain various renewal options, generally, in intervals of five to ten years.
Equipment lease terms generally range from one to five years and may contain renewal options.
Cineplex records the landlord’s share of amusement revenue under venue revenue share (note 21, Other costs). This
balance consists of all variable rental payments paid to landlords. Certain contracts may contain a lease under the
definition in IFRS 16, however no obligation is recorded because the payment is variable. Venue revenue share also
includes fixed payments where Cineplex has concluded the contract does not contain a lease under IFRS 16.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
126
(29)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Some of the property leases in which Cineplex is the lessee contain fixed lease payments and variable lease
payments that are derived from sales or attendance generated from the leased properties. Variable payments related
to these leases for the period ended December 31, 2021 were not material.
16. Long-term debt
Long-term debt consists of the following as at December 31, 2021 and 2020:
Credit Facilities
Convertible Debentures
Notes Payable
Total
Letters of credit reserved against Revolving Facility
Revolving Facility available
December 31, 2021 December 31, 2020
260,000
234,472
244,739
739,211 $
10,966 $
270,702 $
506,000
219,271
—
725,271
10,234
153,766
$
$
$
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 between Cineplex, Cineplex
Entertainment Limited Partnership, the guarantors from time to time party thereto, and a syndicate of lenders dated
November 13, 2018 (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, LIBOR
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.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
127
(30)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
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 and on December 30, 2021 Cineplex entered into the Fourth 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.
The following is a summary of the key terms of the Third Credit Agreement Amendment entered into on February 8,
2021 that are updated from the First and Second Credit Agreement Amendments (certain of which have been
modified further by the Fourth Credit Agreement Amendment described below):
•
The following amendments to the Credit Facilities became effective upon the completion of the issuance of
$250,000 Notes Payable during the first quarter of 2021:
▪
The suspension of financial covenant testing was extended until the fourth quarter of 2021. On
resumption of financial covenant testing in the fourth quarter of 2021:
•
•
•
for the fourth quarter of 2021, 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 such quarter;
for the quarter ending on March 31, 2022, testing will be based on an annualized
calculation of Adjusted EBITDA based on actual results for the fourth quarter of 2021
and the first quarter of 2022 multiplied by 2; and
for the quarter ending on June 30, 2022, testing will be based on an annualized
calculation of Adjusted EBITDA for the fourth quarter of 2021, the first quarter of 2022
and the second 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 until the third quarter of 2022 at which point it will reach a level of 3.00x;
The liquidity covenant will continue and be amended and extended beginning in February 2021,
through to and including December 2021, requiring available liquidity as defined on a monthly
basis (November 1, 2020 through January 31, 2021 - $100,000; February 2021 - $75,000; March
2021 - $60,000; April 1, 2021 through December 31, 2021 - $100,000;
The addition of a Senior Leverage Ratio to be based on annualized Adjusted EBITDA and set at
1.0x lower than the Total Leverage Ratio. Senior Leverage Ratio to be defined as (i) Total Debt
(as defined in the Credit Agreement) less any Notes Payable to (ii) Adjusted EBITDA;
Effective with the fourth quarter of 2021, additional growth capital expenditures will be subject to
pro-forma Total Leverage covenant of 2.75x (both prior to and immediately after giving effect to
any such growth capital expenditure) based on actual last 12 months’ EBITDA; and
Distributions continue to be blocked during the extended financial covenant suspension period and
only permitted when the Total Leverage ratio is less than 2.75x (both prior to and immediately
after giving effect to any such distribution).
▪
▪
▪
▪
▪
▪
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:
•
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:
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
128
(31)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
•
•
•
for the second 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 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.
▪
▪
▪
▪
▪
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.
This summary of the Credit Agreement 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 and Fourth Credit Agreement Amendment were filed on SEDAR with the dates of filing on
June 30, 2020, November 13, 2020, February 8, 2021 and January 4, 2022, respectively, for each of Credit
Agreement Amendments.
Following the Fourth Credit Agreement Amendment, including mandatory repayments, the Credit Facilities consist
of the following:
a) a five-year, $541,668 senior secured Revolving Facility; $260,000 that has been drawn; $10,966
reserved and $270,702 remaining available balance.
At December 31, 2021, Cineplex was subject to a margin of 3.00% (2020 - 3.00%) on the prime rate and 4.00%
(2020 - 4.00%) on the bankers’ acceptance rate, plus a 0.25% (2020 - 0.25%) per annum fee for letters of credit
issued on the Revolving Facility. The average interest rate on borrowings under the Credit Facilities was 6.90% for
the year ended December 31, 2021 (2020 - 4.87%). Cineplex pays a commitment fee on the daily unadvanced
portion of the Revolving Facility, which will vary based on certain financial ratios and was 1.00% at December 31,
2021 (2020 - 1.00%).
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.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
129
(32)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
The following table outlines Cineplex’s current interest rate swap agreements as of December 31, 2021:
Interest rate swap agreements
Notional amount
Inception date
Effective date
Maturity date
Swap - 1
Swap - 2
Swap - 3
$200.0 million November 13, 2018
April 26, 2021 November 14, 2023
$100.0 million November 13, 2018 November 13, 2018 November 14, 2023
$150.0 million November 13, 2018 November 13, 2018 November 14, 2025
Fixed rate
payable
2.945 %
2.830 %
2.898 %
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 December 31, 2021 Cineplex’s effective cost of borrowing on the
$450,000 hedged borrowings was 6.904% (December 31, 2020 - $450,000 hedged borrowings - 5.754%).
Convertible debentures
Convertible debentures consist of the following:
Face value of convertible debentures outstanding
Unaccreted deferred financing fees and discount
Convertible debentures
December 31, 2021 December 31, 2020
$
$
316,250 $
(81,778)
234,472 $
316,250
(96,979)
219,271
On July 17, 2020, Cineplex issued $316,260 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
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
130
(33)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
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. During the year ended December 31, 2021, Cineplex recorded accretion and cash
interest expense on the Debentures of $15,201 (2020 - $7,472) and $18,135 (2020 - $8,459), respectively, both of
which are included as part of the interest expense in the consolidated statement of operations. As at December 31,
2021, 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.
Notes payable
Notes Payable outstanding as of December 31, 2021 are as follows:
Face value of Notes Payable
Unaccreted deferred financing fees and discount
Notes Payable
2021
250,000
(5,261)
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.
During the year ended December 31, 2021, Cineplex recorded accretion and cash interest expense on the Notes
Payable of $772 (2020 - $nil) and $15,822 (2020 - $nil) , respectively, both of which are included as part of interest
expense in the consolidated statement of operations. As at December 31, 2021, 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 are consistent with
accepted methods for valuing financial instruments. Cineplex has estimated the fair value of this embedded
derivative at $9,240 as at December 31, 2021 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.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
131
(34)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
17. Post-employment benefit obligations
Cineplex sponsors a defined benefit supplementary executive retirement plan (“DB SERP”). The DB SERP has a
defined benefit obligation of $10,054 at December 31, 2021 (December 31, 2020 - $10,966), which is substantially
unfunded. Annual benefits payable is $650 according to the retirement date of the sole beneficiary. The DB SERP
does not have a material effect on the operations or cash flows of Cineplex.
Cineplex also sponsors the Retirement Plan for Salaried Employees of Famous Players Limited Partnership, a
defined benefit pension plan, and the Famous Players Retirement Excess Plan (collectively known as the “Famous
Players Plans”). Effective October 23, 2005, Cineplex elected to freeze future accrual of defined benefits under the
Famous Players Plans. The Famous Players Plans do not have a material effect on the operations, cash flows or
financial position of Cineplex.
Cineplex also provides a group registered retirement plan for the benefit of full-time employees.
The net post-retirement benefit obligation for each of the plans is as follows:
DB SERP obligation, net of assets
Famous Players Plans obligations
Net post-retirement benefit obligation
Reconciliation of the net post-retirement benefit obligations
Accrued benefit obligations
Balance - Beginning of year
Current service cost
Interest cost
Benefits paid
Actuarial (gains) losses
Balance - End of year
Less: Fair value of plan assets
Net post-retirement benefit obligation
2021
8,490 $
1,483
2020
9,868
1,635
9,973 $
11,503
2021
2020
12,601 $
—
296
(142)
(1,218)
11,537 $
1,564 $
9,973 $
11,582
485
371
(107)
270
12,601
1,098
11,503
$
$
$
$
$
$
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
132
(35)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Significant assumptions
Accrued benefit obligations at December 31
Discount rate - all plans
Health care cost trend rates at December 31
Initial rate
Ultimate rate
Year ultimate rate reached
Sensitivity analysis
2021
2020
2.70% - 2.90% 2.10% - 2.40%
5.72 %
4.00 %
2041
5.82 %
4.00 %
2041
The following table shows the impact of a 1% increase or decrease of the discount rate on the defined benefit
obligation at the end of the year.
Impact of 1% increase in the discount rate
Impact of 1% decrease in the discount rate
18. Other liabilities
Other liabilities consist of the following:
Asset retirement obligations
Licensing obligations - non-current
Deferred consideration - AMC business acquisition
Other, including provisions
2021
2020
(1,159) $
(1,340)
1,370 $
1,529
2021
3,097 $
1,051
3,134
308
7,590 $
2020
2,984
2,120
3,134
60,411
68,649
$
$
$
$
In 2020, other liabilities included $60,000 proceeds for the reorganization of SCENE (note 9, Interests in joint
ventures and associates).
19. Share capital
Cineplex is authorized to issue an unlimited number of common shares and 10,000,000 preferred shares of which
none are outstanding.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
133
(36)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Share capital balances at December 31, 2021 and 2020 and transactions during the periods are as follows:
2021
Number of
common shares
issued and
outstanding Common shares
Amount
Total
Balance - December 31, 2020
Issuance of shares on exercise of options
63,333,238 $
852,379 $
852,379
11,060
86
86
Balance - December 31, 2021
63,344,298 $
852,465 $
852,465
2020
Number of
common shares
issued and
outstanding Common shares
Amount
Total
Balance - December 31, 2020
63,333,238 $
852,379 $
852,379
20. Revenue
The following tables disclose the changes in deferred revenue for the year ended December 31, 2021 and 2020:
Gift cards
SCENE loyalty program
Advances and deposits
Other
Gift cards
SCENE loyalty program
Advances and deposits
$
December 31,
2020
164,025 $
36,109
19,849
—
Additions
Revenue
Recognized
38,264 $
33,241
7,410
60,000
32,909 $
21,353
11,430
—
December 31,
2021
169,380
47,997
15,829
60,000
$
219,983 $
138,915 $
65,692 $
293,206
December 31,
2019
184,755 $
21,277
16,966
222,998 $
$
$
Additions
Revenue
Recognized
23,743 $
33,173
20,854
77,770 $
44,473 $
18,341
17,971
80,785 $
December 31,
2020
164,025
36,109
19,849
219,983
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. Cineplex accounted for the $60,000 in other liabilities and
reclassified it to deferred revenue as it is expected to be recognized in the next twelve months.
The following tables provide the disaggregation of revenue into categories by nature for the years ended December
31, 2021 and 2020:
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
134
(37)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Box revenues
Box office revenues
Food service revenues
Food service - theatres
Food delivery - theatres
Food service - location-based entertainment
Food delivery - location-based entertainment
Total food service revenues
Media revenues
Cinema media
Digital place-based media
Total media revenues
Amusement revenues
Amusement solutions excluding exhibition and LBE
Amusement solutions - exhibition
Amusement solutions - location based entertainment
Total amusement revenues
Other revenues
Other revenues
Year ended December 31,
2021
2020
$
236,320 $
132,820
Year ended December 31,
2020
2021
159,201 $
13,052
14,613
132
186,998 $
91,384
8,175
8,882
191
108,632
$
$
Year ended December 31,
2020
2021
$
$
32,958 $
32,372
65,330 $
23,568
41,790
65,358
Year ended December 31,
2020
2021
$
$
100,282 $
4,943
29,248
134,473 $
60,027
2,457
15,417
77,901
Year ended December 31,
2020
2021
$
33,548 $
33,552
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
135
(38)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
21. Other costs
Employee wages, salaries and benefits
Rent
Realty and occupancy taxes and maintenance fees
Utilities
Purchased services
Other inventories consumed, including amusement and digital place-based media
Venue revenue share
Repairs and maintenance
Advertising and promotion
Office and operating supplies
Licenses and franchise fees
Insurance
Professional and consulting fees
Telecommunications and data
Bad debts
Equipment rental
Other costs
Year ended December 31,
2021
2020
$
150,251 $
(12,978)
56,286
21,717
39,964
106,942
(2,278)
67,381
23,870
37,185
60,502
29,051
24,233
13,636
6,526
15,337
6,353
17,175
5,160
172
1,359
4,810
40,256
15,577
25,271
11,353
6,122
15,028
5,691
10,560
5,195
1,735
61
5,741
$
439,554 $
375,690
Management continued to focus on cost cutting measures to mitigate the negative impact of COVID-19 on
Cineplex’s business, in addition to applying for government subsidy programs where available. During the years
ended December 31, 2021 and 2020, Cineplex recorded the following subsidies which have all been offset against
their related costs:
Subsidies
Wage subsidy (CEWS and THRP)
Rent subsidy (CERS and THRP)
Realty tax subsidy
Utility subsidy
Total
Year to Date
2021
2020
$56,059
13,643
11,963
4,826
$57,013
2,761
3,249
1,838
$
86,491 $
64,861
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
136
(39)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
22. Net 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.
Net loss attributable to owners of Cineplex - continuing operations
Net loss attributable to owners of Cineplex
Weighted average number of shares outstanding
Basic EPS from continuing operations
Basic EPS from discontinued operations
Basic EPS
2021
2020
(248,722) $
(623,996)
(248,722) $
(628,948)
63,339,239
63,333,238
(3.93) $
—
(3.93) $
(9.85)
(0.08)
(9.93)
$
$
$
$
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. Anti-dilutive shares that have been excluded in the current period were 51,133 potential shares that would
be issued under the treasury stock method and 5,051,493 potential shares that would have been issued under the if-
converted method relating to Debenture units outstanding. The options and Debentures are anti-dilutive in 2021 and
2020, as applicable.
Net loss attributable to owners of Cineplex - continuing operations
Net loss attributable to owners of Cineplex
Weighted average number of shares for diluted EPS
Diluted EPS from continuing operations
Diluted EPS from discontinued operations
Diluted EPS
2021
2020
(248,722) $
(623,996)
(248,722) $
(628,948)
63,339,239
63,333,238
(3.93) $
(9.85)
—
(3.93) $
(0.08)
(9.93)
$
$
$
$
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
137
(40)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
23. 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.
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, gain on disposal
of assets, foreign exchange, the equity income (loss) of CDCP, the non-controlling interests’ share of adjusted
EBITDA of TG-CPX Limited Partnership, 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 INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
138
(41)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
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.
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
139
(42)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
The following tables disclose the results of the Film Entertainment and Content, Media, Amusement and Leisure and
Location-Based Entertainment segments for the year ended December 31, 2021 and 2020:
Year ended December 31, 2021
Major product and service lines
Box office
Food service
Media
Amusement
Other
Total revenues
Film
Entertainment
and Content
(i)
$
236,320
$
172,253
—
4,943
33,258
Amusement
and Leisure
Location-
Based
Entertainment
Media (i)
Corporate and
other (iii)
Consolidated
$
—
—
64,852
—
—
—
—
—
100,282
—
$
— $
— $
14,745
478
29,248
290
—
—
—
—
236,320
186,998
65,330
134,473
33,548
$
446,774
$
64,852
$
100,282
$
44,761 $
— $
656,669
Primary geographical markets
Canada
$
446,774
$
55,381
$
25,387
$
44,761 $
United States and other countries
—
9,471
74,895
—
Total revenues
$
446,774
$
64,852
$
100,282
$
44,761 $
Timing of revenue recognition
Transferred at a point in time
$
446,774
$
12,458
$
100,282
$
44,761 $
Transferred over time
Total revenues
Adjusted EBITDAaL
—
446,774
(64,769)
$
$
$
$
52,394
64,852
27,588
—
100,282
8,709
$
$
$
$
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.
Other adjustments (ii)
Depreciation and amortization - other assets
Interest expense - other
Interest income
Provision for income taxes
Impairment of long-lived assets and
goodwill
Net loss
Other operating segment disclosures
— $
572,303
—
84,366
— $
656,669
— $
604,275
—
52,394
— $
656,669
—
44,761 $
5,778 $
(61,601) $
(84,295)
16,617
(37,194)
113,042
65,138
(232)
3,339
3,717
$
(248,722)
Depreciation - right-of-use assets
$
91,960
Depreciation and amortization - other assets $
Interest expense - lease obligations
Impairment of long-lived assets and
goodwill
Goodwill balance
$
$
$
69,140
51,778
3,717
413,915
$
$
$
$
$
2,803
4,674
367
—
206,385
$
$
$
$
$
3,154
23,372
519
—
15,245
$
$
$
$
$
3,747 $
15,856 $
5,207 $
583 $
102,247
— $
113,042
719 $
58,590
— $
— $
— $
— $
3,717
635,545
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
140
(43)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Year ended December 31, 2020
Major product and service lines
Box office
Food service
Media
Amusement
Other
Film
Entertainment
and Content
(i)
$
132,820 $
99,559
—
2,457
33,112
Amusement
and Leisure
Location-
Based
Entertainment
Media (i)
Corporate and
other (iii)
Consolidated
— $
—
64,758
—
—
— $
— $
— $
132,820
—
—
60,027
—
9,073
600
15,417
440
—
—
—
—
108,632
65,358
77,901
33,552
Total revenues
$
267,948 $
64,758 $
60,027 $
25,530 $
— $
418,263
Primary geographical markets
Canada
United States and other countries
Total revenues
Timing of revenue recognition
Transferred at a point in time
Transferred over time
Total revenues
Adjusted EBITDAaL
$
$
$
$
$
267,948 $
50,387 $
18,259 $
25,530 $
— $
362,124
—
14,371
41,768
—
—
56,139
267,948 $
64,758 $
60,027 $
25,530 $
— $
418,263
267,948 $
17,624 $
60,027 $
24,930 $
— $
370,529
—
47,134
—
600
—
47,734
267,948 $
64,758 $
60,027 $
25,530 $
— $
418,263
(145,855) $
21,775 $
(10,805) $
(8,160) $
(39,770) $
(182,815)
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.
Other adjustments (ii)
Depreciation and amortization - other assets
Interest expense - other
Interest income
Income taxes recovery
Impairment of long-lived assets and
goodwill
Net loss from continuing operations
Net loss from discontinued operations (note 30)
Net loss
Other operating segment disclosures
50,535
(5,491)
124,846
61,483
(182)
(84,868)
294,863
(624,001)
(4,952)
(628,953)
$
$
Depreciation - right-of-use assets
$
114,798 $
3,360 $
4,469 $
5,065 $
701 $
128,393
Depreciation and amortization - other assets $
72,319 $
10,318 $
28,053 $
14,156 $
Interest expense - lease obligations
Impairment of long-lived assets and
goodwill
Goodwill balance
$
$
$
44,153 $
457 $
617 $
3,833 $
262,645 $
— $
— $
32,218 $
413,915 $
206,385 $
15,282 $
— $
— $
25 $
— $
— $
124,846
49,085
294,863
635,582
(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, 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.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
141
(44)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
24. Barter transactions
Cineplex occasionally enters into barter arrangements with other parties to exchange goods or services. During the
year ended December 31, 2021, Cineplex provided advertising and media services to third parties and recognized
advertising revenues of $941 (2020 - $144). Cineplex received sponsorship and advertising services in exchange,
recording marketing expenses of $1,311 (2020 - $345). The exchanges were measured at the estimated fair value of
the services provided by Cineplex, by reference to similar services provided by Cineplex for monetary consideration
to arm’s-length third parties other than those with whom the transactions were entered into.
25. 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.
The Chief Executive Officer of Riocan Real Estate Investment Trust (“Riocan”) served as a Board member until
May 5, 2020. Prior to his departure, Cineplex incurred theatre expenditures for theatres under lease commitments
with Riocan in the amount of $20,217 during the prior year period. No material related party transactions were
recorded during the year ended December 31, 2021.
Joint ventures
Cineplex leased digital projection systems from CDCP in the amount of $2,308 for the year ended December 31,
2021 (2020 - $1,178).
Cineplex performs certain management and film booking services for the joint ventures in which it is either a joint
venturer or an associate. During the year ended December 31, 2021, Cineplex earned revenue of $402 for these
services (2020 - $571).
Cineplex incurred marketing expenses related to Scene+ point issuances from Scene LP in the amount of $2,125 for
the year ended December 31, 2021.
Compensation of key management
Compensation recognized in employee benefits for key management, who are defined as the Named Executive
Officers, included:
Salaries and short-term employee benefits
Post-employment benefits
Share-based payments
2021
4,051 $
73
2,487
6,611 $
2020
2,155
1,037
(5,492)
(2,300)
$
$
CINEPLEX INC.
2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CINEPLEX INC. 2021 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
142
(45)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
26. Changes in operating assets and liabilities
The following summarizes the changes in operating assets and liabilities:
Trade and other receivables
Inventories
Prepaid expenses and other current assets
Accounts payable and accrued liabilities
Income taxes receivable
Deferred revenue
Post-employment benefit obligations
Share-based compensation
Other liabilities
$
2021
(30,962) $
(1,998)
(2,912)
76,097
65,705
13,416
(806)
881
(1,983)
$
117,438 $
2020
115,122
10,222
2,737
(87,968)
(56,825)
(2,990)
330
(20,681)
(3,125)
(43,178)
Property, equipment and leasehold purchases are included in accounts payable and accrued liabilities as at December
31, 2021, in the amount of $6,830 (2020 - $4,717).
27. Commitments, guarantees and contingencies
Commitments
As of December 31, 2021, Cineplex has aggregate capital commitments as follows:
Capital commitments for operating locations to be completed or renovated during 2022 - 2025 (i)
Letters of credit
$
$
71,164
10,966
(i) The amounts are $2,893 for 2022, $38,665 for 2023, $29,606 for 2024, and nil for 2025.
Guarantees
During 2005 and 2006, Cineplex entered into agreements with third parties to divest a total of 36 theatres, 30 of
which were leased properties. 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
December 31, 2021 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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(46)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Other
Cineplex’s litigation with Cineworld including the damages awarded to Cineplex is discussed in detail in note 1 to
the financial statements. Cineplex or a subsidiary of Cineplex is a defendant in various claims and lawsuits arising in
the ordinary course of business. From time to time, Cineplex is involved in disputes with landlords, contractors,
suppliers, former employees and other third parties. It is the opinion of management that any liability to Cineplex,
which may arise as a result of these matters, will not have a material adverse effect on Cineplex’s operating results,
financial position or cash flows.
28. Financial instruments
Fair value of financial instruments
The carrying value and fair value of Cineplex’s financial instruments at December 31, 2021 and 2020 are as follows:
Convertible debentures
Notes payable
Bank debt
Other liabilities - equipment liabilities
Interest rate swap agreements, net
Deferred consideration - AMC
Embedded derivative on notes payable
Input
level
Carrying
value
1
2
2
2
2
2
2
301,272
244,739
260,000
3,045
14,223
3,134
9,240
2021
Fair
value
417,450
265,975
260,000
3,045
14,223
3,134
9,240
Carrying
value
286,071
—
506,000
4,168
26,359
3,134
—
2020
Fair
value
344,713
—
506,000
4,168
26,359
3,134
—
Cash and cash equivalents, trade and other receivables, accounts payable and accrued liabilities and dividends
payable are reflected in the consolidated financial statements at carrying values that approximate fair values because
of the short-term maturities of these financial instruments.
At the time of entering into the Fourth Credit Amendment Agreement, there was no further change to the interest
margins charged by the Bank on Cineplex’s outstanding debt from that implemented under the First, Second and
Third Credit Amendment Agreements. The bank debt is considered a Level 2 fair value measurement. The carrying
value of the bank debt reflects the fair value, as the debt bears floating interest at market rates.
The equipment liabilities are recorded at amortized cost, as derived from expected cash outflows and Cineplex’s
estimated incremental borrowing rate, 5.2%. The equipment liabilities are included in accounts payable and accrued
liabilities (current portion) and in other liabilities on the balance sheet.
The purpose of the interest rate swap agreements is to act as a cash flow hedge of the floating interest rate payable
on Cineplex’s first $450,000 of borrowings. Cineplex ceased hedge accounting for the interest rate swaps during the
fourth quarter of 2019. The interest rate swap is measured at fair market value at each reporting period with changes
in fair market value recognized in the consolidated statement of operations.
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(47)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
The deferred consideration for AMC (an undiscounted amount of $3,134 based on estimated non-capital losses
arising from the 2012 acquisition of AMC Ventures Inc.) is recorded at fair value and included in other liabilities
(note 18, Other liabilities). There was no change in fair value of $3,134 for the year ended December 31, 2021.
The convertible debentures are publicly traded on the TSX, and are recorded at amortized cost (note 16, Long-term
debt).
The notes payable are publicly traded and are recorded at amortized cost based on Cineplex’s expected cash
outflows and reflects a monthly effective interest rate of 0.67% (note 16, Long-term debt).
The fair market value of the embedded derivative on notes payable was determined using an option pricing model
with observable market inputs consistent with accepted methods for valuing financial instruments (note 16, Long-
term debt).
In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical financial assets
or financial liabilities that Cineplex has the ability to access.
Fair values determined by Level 2 inputs use inputs other than the quoted prices included in Level 1 that are
observable for the financial asset or financial liability, either directly or indirectly. Level 2 inputs include quoted
prices for similar financial assets and financial liabilities in active markets, and inputs other than quoted prices that
are observable for the financial assets or financial liabilities. Cineplex uses market interest rates and yield curves that
are observable at commonly quoted intervals in the valuation of its interest rate swap agreements. The derivative
positions are valued using models developed internally by the respective counterparty that uses as its basis readily
observable market parameters (such as forward yield curves) and are classified within Level 2 of the valuation
hierarchy. Cineplex considers its own credit risk as well as the credit risk of its counterparties when evaluating the
fair value of its derivatives.
Level 3 inputs are unobservable inputs for the financial asset or financial liability, and include situations where there
is little, if any, market activity for the financial asset or financial liability. Cineplex’s assessment of the significance
of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to
the financial asset or financial liability.
Credit risk
Credit risk is the risk of financial loss to Cineplex if a customer or counterparty to a financial instrument fails to
meet its contractual obligation. Management believes the credit risk on cash and cash equivalents is low because the
counterparties are banks with high credit ratings.
Accounts receivable include trade and other receivables. Trade receivables are amounts billed to customers for the
sales of goods and services, and represent the maximum exposure to credit risk of those financial assets, exclusive of
the allowance for doubtful accounts. Normal credit terms for amounts due from customers call for payment within
30 to 45 days. Other receivables include amounts due from suppliers and landlords and other miscellaneous
amounts. Cineplex’s credit risk is primarily related to its trade receivables, as other receivables generally are
recoverable through ongoing business relationships with the counterparties.
Cineplex grants credit to customers in the normal course of business. Cineplex typically does not require collateral
or other security from customers; however, credit evaluations are performed prior to the initial granting of credit
when warranted and periodically thereafter. Cineplex records a reserve for estimated uncollectible amounts, which
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(48)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
management believes reduces credit risk. See note 31, Significant accounting policies, judgments and estimation
uncertainty, for Cineplex’s policy on impairment of financial assets.
The following schedule reflects the balance and age of trade receivables at December 31, 2021 and 2020:
Trade receivables carrying value
Percentage past due
Percentage outstanding more than 120 days
2021
2020
$
53,326
$
29,188
30 %
12 %
57 %
27 %
The following schedule reflects the changes in the allowance for trade receivables during the years ended
December 31, 2021 and 2020:
Expected credit loss for trade receivables - Beginning of year
Additional allowance recorded
Amounts written off
Expected credit loss for trade receivables - End of year
2021
1,191 $
197
(158)
1,230 $
2020
516
1,244
(569)
1,191
$
$
Due to Cineplex’s diversified client base, management believes Cineplex does not have a significant concentration
of credit risk.
Liquidity risk
Liquidity risk is the risk that Cineplex will encounter difficulty in meeting obligations associated with its financial
liabilities.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
146
(49)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
The table below reflects the contractual maturity of Cineplex’s undiscounted cash flows for its financial liabilities
and interest rate swap agreements:
2021
Payments due by period
Contractual obligations
Total
Within
1 year
2 - 3
years
4 - 5
years
After
5 years
Accounts payable and accrued liabilities
Interest rate swap agreements
Long-term debt
Interest on long-term debt
Equipment obligations
Deferred consideration - AMC
Convertible debentures
Convertible debentures interest
Notes payable
Notes payable interest
$ 157,950 $ 157,950 $
— $
— $
14,223
260,000
33,539
3,045
3,134
316,250
68,154
250,000
78,083
8,063
—
17,950
1,963
—
—
18,184
—
18,750
5,081
260,000
15,589
829
3,134
—
36,369
—
37,552
1,079
—
—
160
—
316,250
13,601
250,000
21,781
Total contractual obligations
$ 1,184,378 $ 222,860 $ 358,554 $ 602,871 $
—
—
—
—
93
—
—
—
—
—
93
2020
Payments due by period
Contractual obligations
Total
Within
1 year
2 - 3
years
4 - 5
years
After
5 years
Accounts payable and accrued liabilities
Interest rate swap agreements
Long-term debt
Interest on long-term debt
Equipment obligations
Deferred consideration - AMC
Convertible debentures
Convertible debentures interest
$ 82,992 $ 82,992 $
— $
— $
26,359
506,000
70,618
4,168
3,134
316,250
86,388
7,201
—
24,642
1,975
—
—
18,184
15,449
506,000
45,976
2,018
3,134
—
36,369
3,709
—
—
150
—
316,250
31,835
Total contractual obligations
$ 1,095,909 $ 134,994 $ 608,946 $ 351,944 $
—
—
—
—
25
—
—
—
25
Existing lease commitments are disclosed in note 15, Lease obligations. Cineplex also has significant new theatre
and other capital commitments (note 27, Commitments, guarantees and contingencies), as well as contingent
obligations in the form of letters of credit, guarantees and the Incentive Plan for options, RSUs, and PSUs.
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147
(50)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
New capital commitments not funded through cash flows from operations will be funded through Cineplex's
Revolving Facility. Management believes that Cineplex's cash flows from operations and the Revolving Facility will
be adequate to support all of its financial liabilities.
Currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of the
changes in foreign currency exchange rates.
The majority of Cineplex’s revenues and expenses are in Canadian dollars, with the remainder denominated in US
dollars. Approximately 12.8% of Cineplex’s revenues are derived from sales to customers in the United States,
which are naturally hedged by the Cineplex’s US-based operating costs. Management considers currency risk to be
low and does not hedge its currency risk. An assumed increase of 10% in exchange rates at December 31, 2021
would have increased other comprehensive income by $2,773 and decreased net income by $814. An assumed
decrease of 10% in exchange rates at December 31, 2021 would have decreased other comprehensive income by
$2,656 and increased net income by $814.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
Cineplex is exposed to interest rate risk on its long-term debt, which bears interest at floating rates.
Interest expense on the long-term debt is adjusted to include the payments made or received under the interest rate
swap agreements. The interest rate swap agreements are recognized in the consolidated balance sheets at their
estimated fair value. During the year ended December 31, 2021, Cineplex recorded non-cash interest expense of
$12,730 relating its interest rate swaps (2020 - interest expense of $13,922).
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(51)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
There was no impact on OCI in the current and prior period resulting from a 1% change in interest rates on
Cineplex’s long-term debt and interest rate swap agreements. The following table shows Cineplex’s exposure to
interest rate risk and the pre-tax effects on net income for the years ended December 31, 2021 and 2020 of a 1%
change in interest rates management believes is reasonably possible:
2021
Pre-tax effects on net income and OCI - increase (decrease)
1% decrease
in interest rates
1% increase
in interest rates
Carrying value of
financial liability
Net income
Net income
Long-term debt
Interest rate swap agreements - net
$
260,000 $
14,223
$
2,911 $
(9,772)
(6,861) $
(2,911)
9,461
6,550
2020
Pre-tax effects on net income and OCI - increase (decrease)
1% decrease
in interest rates
1% increase
in interest rates
Carrying value of
financial liability
Net income
Net income
Long-term debt
Interest rate swap agreements - net
$
506,000 $
26,360
$
5,836
(12,192)
$
(6,356) $
(5,836)
11,692
5,856
The carrying value of the interest rate swaps liability was $14,223 at December 31, 2021. If interest rates changed
plus or minus 1% from existing estimates throughout the contract period, the carrying value would decrease to
$4,762 or increase to $23,995, primarily affecting interest expense.
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(52)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
29. Capital disclosures
Cineplex’s objectives when managing capital are to:
a) maintain financial flexibility to preserve its ability to meet financial obligations and growth objectives,
including future investments;
b) deploy capital to provide an appropriate investment return to its shareholders; and
c) maintain a capital structure that allows multiple financing options, should a financing need arise.
Cineplex defines its capital as follows:
a) equity;
b) long-term debt, convertible debentures, notes payable and finance lease obligations, including the current
portion;
c) fair value of equipment liabilities, including the current portion; and
d) cash and cash equivalents.
It is Cineplex’s policy to distribute annually to shareholders available cash from operations after cash required for
maintenance capital expenditures, working capital and other reserves at the discretion of the Board of Directors.
Distributions will be limited and only permitted when the Total Leverage ratio is less than 2.75 to 1 as required
under Credit Facility, both prior to and immediately after giving effect to any such distribution. Distributions are not
allowed during the financial covenant suspension period.
During the year ended December 31, 2021, Cineplex entered into a Fourth Credit Agreement Amendment with The
Bank of Nova Scotia, as administrative agent, and the lenders from time to time named therein. The credit agreement
amendments provided Cineplex with financial covenant relief in light of the COVID-19 pandemic and its effects on
Cineplex’s business. As a result, financial covenant testing has been temporarily suspended until the second quarter
of 2022. On the reinstatement of financial covenant testing, the Total Leverage Ratio may not exceed 3.75 to 1, and
will be reduced over the course of 2022 each quarter until it is at 3 to 1 for the first quarter of 2023. The addition of
a Senior Leverage Ratio set at 1.0x lower than the Total Leverage Ratio was included as part of the third amendment
to the credit agreement. Growth capital expenditures will be permitted subject to a pro forma Total Leverage
covenant of 2.75 to 1, both prior to and immediately after giving effect to any such growth capital expenditures.
The basis for Cineplex’s capital structure is dependent on Cineplex’s expected growth and changes in the business
and regulatory environments. To maintain or adjust its capital structure, Cineplex may purchase shares for holding
or cancellation, issue new shares, raise debt or refinance existing debt with different characteristics.
Objectives and strategies are reviewed periodically by management. During 2021, Cineplex completed the offering
of Notes Payable for $250,000 aggregate principal amount and repaid its Term Facility in full. In 2020 and 2021,
Cineplex’s capital composition, objectives or strategies all changed in response to the substantial business
challenges of COVID-19.
30. Assets held for sale and discontinued operations
During the quarter ended September 30, 2019, Cineplex initiated a review process of WorldGaming Network LP’s
(“WGN”) online esports business, engaging a third party adviser to identify a strategic equity partner. On June 29,
2020, Cineplex sold all of its interest in WGN for a nominal amount. A nominal gain was recognized on the
disposition and was included in net loss from discontinued operations. No further operations have been classified as
a discontinued operation and all amounts presented in the annual consolidated financial statements are from
continuing operations.
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150
(53)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
31. Significant accounting policies, judgments and estimation uncertainty
Significant accounting policies
The significant accounting policies used in the preparation of these consolidated financial statements are described
below.
Basis of preparation and measurement
Cineplex prepares its consolidated financial statements in accordance with International Financial Reporting
Standards (“IFRS”). The preparation of consolidated financial statements in accordance with IFRS requires the use
of certain critical accounting estimates. It also requires management to exercise judgment in applying Cineplex’s
accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions are
significant to the consolidated financial statements are disclosed later in this note.
These consolidated financial statements have been prepared under the historical cost convention, except for the
revaluation of certain financial assets and financial liabilities to fair value, including derivative instruments and
available-for-sale investments.
Reportable operating segments
Cineplex is comprised of four reportable operating segments, Film Entertainment and Content, Media, Amusement
and Leisure, and Location-Based Entertainment. The reportable segments are business units offering differing
products and services. Details of Cineplex’s four reportable operating segments are provided in (note 23, Operating
segments).
Consolidation
Subsidiaries are all entities over which Cineplex has control. Cineplex controls an entity when it is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
Cineplex. They are deconsolidated from the date that control ceases.
Cineplex applies the acquisition method to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of
the acquiree and the equity interests issued by Cineplex. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date. Cineplex recognises any non-controlling interest in the acquiree at fair value of the recognised
amounts of the acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously
held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising
from such re-measurement are recognised in profit or loss.
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(54)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Any contingent consideration to be transferred by Cineplex is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is
recognised in accordance with IFRS 9 in profit or loss. Contingent consideration that is classified as equity is not re-
measured, and its subsequent settlement is accounted for within equity.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net
assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised
and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the
case of a bargain purchase, the difference is recognised directly in the statement of operations.
Inter-company transactions, balances and unrealised gains and losses on transactions between Cineplex entities are
eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with Cineplex’s
accounting policies.
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity
transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value
of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is
recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
Associates are all entities over which Cineplex has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the
equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the
carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after
the date of acquisition. Cineplex’s investment in associates includes goodwill identified on acquisition.
Cineplex determines at each reporting date whether there is any objective evidence that the investment in the
associate is impaired. If this is the case, Cineplex calculates the amount of impairment as the difference between the
recoverable amount of the associate and its carrying value and recognises the amount in the statement of operations.
Profits and losses resulting from upstream and downstream transactions between Cineplex and its associate are
recognised in the group’s financial statements only to the extent of unrelated investor’s interests in the associates.
Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of associates have been changed where necessary to ensure consistency with the policies
adopted by Cineplex.
Dilution gains and losses arising in investments in associates are recognised in the consolidated statement of
operations.
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(55)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Investments in joint ventures and associates
Investments in joint arrangements are classified either as joint operations and proportionately consolidated or as
joint ventures or associates and equity-accounted, depending on the contractual rights and obligations of each
investor.
Under the equity method of accounting, interests in joint ventures and associates are initially recognised at cost and
adjusted thereafter to recognise Cineplex’s share of the post-acquisition profits or losses and movements in OCI.
When Cineplex’s share of losses in a joint venture or an associate equals or exceeds its interests in that joint venture
or associate (which includes any long-term interests that, in substance, form part of Cineplex’s net investment in the
joint ventures), Cineplex does not recognise further losses, unless it has incurred obligations or made payments on
behalf of the joint venture or associate.
Unrealised gains on transactions between Cineplex and its joint ventures and associates are eliminated to the extent
of Cineplex’s interest in the joint ventures and associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures
have been changed where necessary to ensure consistency with the policies adopted by Cineplex.
Cineplex assesses at each year-end whether there is any objective evidence that its interests in joint ventures and
associates are impaired. In determining the value-in-use of an investment, Cineplex estimates its share of the present
value of the estimated cash flows expected to be generated by the joint venture or associate, including the cash flows
from the operations of the joint venture or associate and the proceeds on the ultimate disposal of the investment, or
the present value of the estimated future cash flows expected to arise from dividends to be received from the joint
venture or associate and its ultimate disposal. If impaired, the carrying value of Cineplex’s share of the underlying
assets of joint ventures or associates is written down to its estimated recoverable amount (being the higher of fair
value less costs of disposal and value in use) and charged to the consolidated statements of operations.
Cineplex has interests in a jointly controlled entity and accounts for its share of assets and liabilities, revenue and
expenses of the joint operation. Cineplex conducts a portion of its business through Scene GP, a joint operation
whereby the joint operation participants are bound by contractual agreements establishing joint control. Joint control
exists when unanimous consent of the joint operation participants is required regarding strategic, financial and
operating policies of the joint operation. Cineplex’s share of results from Scene GP has been recognized in
Cineplex’s consolidated financial statements. Inter-company transactions between Cineplex and Scene GP are
eliminated to the extent of Cineplex’s interest. As part of the ongoing reorganization of Scene GP 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.
Foreign currency translation
Functional and presentation currency
Cineplex determines its subsidiaries’ functional currency by reviewing the currency of the primary economic
environment in which each entity operates (the “functional currency”). The functional currency of three subsidiaries
of P1AG is the United States dollar. The functional currency of all other entities of the Cineplex group is the
Canadian dollar.
The consolidated financial statements are presented in Canadian dollars.
CINEPLEX INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
153
(56)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions. Generally, foreign exchange gains and losses resulting from the settlement of foreign
currency transactions and from the translation at fiscal year-end exchange rates of monetary assets and liabilities
denominated in currencies other than an operation’s functional currency are recognized in the consolidated
statements of operations.
Subsidiaries
The results and balance sheet of the subsidiaries that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
• income and expenses for each statement of profit or loss and statement of comprehensive income are
translated at average exchange rates, and
• all resulting exchange differences are recognised in other comprehensive income.
Goodwill recognized on the acquisition of a subsidiary are treated as assets and liabilities of the subsidiary and
translated at the closing rate.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held with banks, and other short-term highly liquid
investments with original maturities of three months or less. Cash equivalents are readily converted into known
amounts of cash, and are subject to an insignificant risk of changes in value.
Financial instruments
Financial assets and financial liabilities are recognized when Cineplex becomes a party to the contractual provisions
of the financial instrument. Financial assets are derecognized when the rights to receive cash flows from the
financial assets have expired or have been transferred and Cineplex has transferred substantially all risks and
rewards of ownership. Financial liabilities are derecognized when the contractual obligations are discharged,
canceled or expire. Regular purchases and sales of financial assets are recognized on the trade-date, the date on
which Cineplex commits to purchase or sell the asset.
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheets
when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net
basis, or realize the financial asset and settle the financial liability simultaneously.
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(57)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
IFRS 9 contains three classification categories for financial assets and liabilities measured at amortized cost, fair
value through profit or loss (“FVPL”) and fair value through other comprehensive income (“FVOCI”).
At initial recognition, Cineplex classifies its financial instruments in the following categories depending on the
purpose for which the financial instruments were acquired:
i.
Financial assets and financial liabilities at FVPL: The only instruments held by Cineplex classified in
this category are certain equipment purchase liabilities, and the deferred consideration payable for
business combinations. Derivatives are included in this category unless they are designated as hedges.
Financial instruments in this category are recognized initially and subsequently at fair value.
Transaction costs are expensed in the consolidated statements of operations. Gains and losses arising
from changes in fair value are presented in the consolidated statements of operations. Financial assets
and financial liabilities at fair value through profit or loss are classified as current, except for the
portion expected to be realized or paid beyond 12 months of the consolidated balance sheet date,
which is classified as non-current. Financial assets and liabilities at FVPL are presented within
changes in operating assets and liabilities in the consolidated statements of cash flows.
ii.
Financial assets and liabilities at amortized cost: Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in an active market. Cineplex’s loans
and receivables comprise trade receivables and cash and cash equivalents, and are included in current
assets due to their short-term nature. Loans and receivables are initially recognized at the amount
expected to be received, less, when material, a discount to reduce the loans and receivables to fair
value. Subsequently, loans and receivables are measured at amortized cost using the effective interest
method, less a provision for impairment.
Financial liabilities at amortized cost include trade payables, dividends and distributions payable,
bank indebtedness and long-term debt and the non-derivative component of convertible debentures.
Trade payables are initially recognized at the amount required to be paid, less, when material, a
discount to reduce the payables to fair value. Subsequently, trade payables are measured at amortized
cost using the effective interest method. Bank indebtedness and long-term debt, and the non-
derivative component of convertible debentures are recognized initially at fair value, net of any
transaction costs incurred and, subsequently, at amortized cost using the effective interest method.
Financial liabilities are classified as current liabilities if payment is due within 12 months. Otherwise,
they are presented as non-current liabilities.
Equity investments are required to be measured fair value with all changes recognized at FVPL. At
initial recognition, Cineplex can make an irrevocable election to classify the instruments at FVOCI,
with all subsequent changes in fair value being recognized in OCI. Cineplex has not classified any
equity instruments at FVOCI.
iii.
Financial instruments at FVOCI: Cineplex ceased the use of hedge accounting for its interest rate
swap agreements during the fourth quarter of 2019 as a result of the terms of the Arrangement
Agreement. The interest rate swap are measured at fair market value at each reporting period with
changes in fair market value recognized in the consolidated statement of operations.
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155
(58)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Impairment of financial assets
At each reporting date, Cineplex assesses whether there is objective evidence that a financial asset is impaired. If
such evidence exists, Cineplex recognizes an impairment loss. IFRS 9 uses forward-looking Expected Credit Loss
(“ECL”), Cineplex applies the impairment model to financial asset measured at amortized cost or FVOCI, except for
investments in equity instruments, and to contract assets.
Under IFRS 9, loss allowances will be measured on either of the following bases:
i.
ii.
12-month ECLs which are ECLs that result from possible default events within 12 months after the
reporting date; and
lifetime ECLs which are ECLs that result from all possible default events over the expected life of a
financial instruments.
Cineplex applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all trade receivables. Impairment losses on financial assets carried at amortized cost or FVOCI are
reversed in subsequent years if the amount of the loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognized.
Inventories
Inventories consist of food service inventories, gaming inventories and other inventories, including work in
progress.
Food service inventories, gaming equipment purchased for re-sale, merchandise that is used as redemption prizes
and work-in progress inventories are stated at the lower of cost and net realizable value. Cost is determined using the
first-in, first-out method. Net realizable value is the estimated selling price less applicable selling expenses.
Gaming inventories includes gaming equipment purchased for re-sale or transferred from property, equipment and
leaseholds and merchandise that is used as redemption prizes for certain games. Gaming equipment also includes
equipment that has been transferred from property, equipment and leaseholds to inventory when it is no longer in
route operations and it will be sold or auctioned to third parties at the discretion of management. Gaming equipment
is transferred to inventory at its net book value and stated at the lower of the net book value or net realizable value.
Net realizable value is the estimated selling price less applicable selling expenses.
Other inventories include consumable supplies and work-in-progress being assembled for sale or installation by
CDM.
Impairment of non-financial assets
Property, equipment and leaseholds and intangible assets subject to amortization are tested for impairment when
events or changes in circumstances indicate that the carrying value may not be recoverable. Long-lived assets that
are not amortized are subject to an annual impairment test. For the purpose of measuring recoverable amounts,
assets are grouped at the lowest levels for which there are separately identifiable cash inflows relating to the relevant
intangible asset (“cash-generating units” or “CGUs”). Cineplex considers each theatre a CGU. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use (being the present value of the
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(59)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
expected future cash flows of the relevant asset or CGU). An impairment loss if estimated is recognized for the
amount by which the CGU’s carrying value exceeds its recoverable amount.
Goodwill is reviewed for impairment annually or at any time if an indicator of impairment exists.
Goodwill acquired through a business combination is allocated to each CGU or group of CGUs that is expected to
benefit from the related business combination. A group of CGUs represents the lowest level within the entity at
which the goodwill is monitored for internal management purposes, which is not higher than an operating segment.
Cineplex groups theatre CGUs based on geographical regions of financial management responsibility in testing
goodwill for impairments.
Cineplex groups CGUs based on trade name in testing indefinite-lived trade names for impairment.
A reversal of impairment, if estimated, is recognized to a limit of increasing the carrying amount to the lower of the
recoverable amount and the carrying amount that would have been determined (net of depreciation) had no
impairment loss been recognized in prior periods.
Property, equipment and leaseholds
Property, equipment and leaseholds are stated at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are
included in the asset’s carrying value or recognized as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to Cineplex and the cost can be measured reliably. The
carrying value of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged to the
consolidated statements of operations during the year in which they are incurred.
The major categories of property, equipment and leaseholds are depreciated on a straight-line basis as follows:
Buildings
Equipment
Leasehold improvements
30 - 40 years
3 - 10 years
term of lease but not in excess of the useful lives
For owned buildings constructed on leased property, the useful lives do not exceed the terms of the land leases.
Cineplex allocates the amount initially recognized in respect of an item of property, equipment and leaseholds to its
significant parts and depreciates separately each such part. Residual values, method of depreciation and useful lives
of the assets are reviewed at least annually or whenever events or circumstances suggest a change that may
otherwise indicate an impairment exists and adjusted if appropriate. Construction-in-progress is depreciated from the
date the asset is ready for productive use.
Gains and losses on disposals of property, equipment and leaseholds are determined by comparing the proceeds with
the carrying value of the asset and are included as part of other gain or loss on the sale of assets in the consolidated
statements of operations.
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(60)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of Cineplex’s share of the net
identifiable assets of the acquired business at the date of acquisition.
Identifiable intangible assets
Intangible assets include trademarks, trade names, leases, software and customer relationships acquired by Cineplex.
As Cineplex intends to use certain of the trademarks and trade names of the Partnership and GEI for the foreseeable
future, the useful lives of those trademarks and trade names are indefinite and no amortization is recorded. Other
trade names are expected to be substantially discontinued and are amortized over their expected useful lives (note
10, Intangible assets). Management tests indefinite-lived intangible assets for impairment at least annually, and
considers at least annually or whenever events or circumstances indicate that the life of an indefinite-lived intangible
asset may be finite. The advertising contracts have limited lives and are amortized over their useful lives, estimated
to be between five to nine years. The estimated fair value of lease contract assets is amortized on a straight-line basis
over the remaining term of the lease into amortization expense.
The major categories of intangible assets are amortized on a straight-line basis as follows:
Internally generated software
Customer relationships
Trade names
Leases
3 - 5 years
5 - 10 years
not amortized
Cineplex conducts a significant part of its operations in leased premises. In assessing whether a contract is, or
contains a lease, Cineplex applies the definition of a lease and related guidance set out in IFRS 16 for all lease
contracts entered into or modified. A contract is, or contains a lease if the contract conveys the right to control the
use of an identified asset for a period of time in exchange for consideration. Under the provisions of IFRS 16,
substantially all of Cineplex’s leases are recorded as lease obligations and right-of-use assets.
Lease payments included in the measurement of the lease obligation are comprised of the following:
Fixed lease payments, including in-substance fixed payments;
i.
ii. Variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date;
iii. Amounts expected to be payable under a residual value guarantee;
iv. The exercise price of purchase options that Cineplex is reasonably certain to exercise, lease payments in an
option renewal period if Cineplex is reasonably certain to exercise the extension option, and penalties for
early termination of the lease unless Cineplex is reasonably certain not to terminate early; and
v. Less any lease incentives receivable.
Variable payments for leases that do not depend on an index or rate are not included in the measurement of the lease
liability. The variable payments are recognized as an expense in the period in which they are incurred and are
included in the consolidated statement of operations.
Cineplex accounts for any lease and associated non-lease components separately, as opposed to a single
arrangement, which is permitted under IFRS 16. Cineplex records non-lease components such as common area
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2021 ANNUAL FINANCIAL STATEMENTS - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
158
(61)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
maintenance as an expense in the period in which they are incurred and are included in the consolidated statement of
operations.
Interest on the lease obligations is calculated using the effective interest method with rent payments reducing the
liability. The lease obligation is remeasured whenever a lease contract is modified and the lease modification is not
accounted for as a separate lease, or there is a change in the assessment of the exercise of an extension option. The
lease obligation is remeasured by discounting the revised lease payments using a revised discount rate resulting in a
corresponding adjustment to the right-of-use asset or is recorded in gain or loss if the carrying amount of the right-
of-use asset has been reduced to zero or the modification results in a reduction in the scope of the lease.
The right-of-use assets are depreciated on a straight-line basis from the date of commencement to the earlier of the
end of the useful life of the asset or the end of the lease term.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36, Impairment of Assets which
replaces the previous requirement to recognize a provision for onerous lease contracts under IAS 37, Provisions,
Contingent Liabilities and Contingent Assets.
Borrowing costs
Borrowing costs attributable to the acquisition, construction or production of qualifying assets are added to the cost
of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs
are recognized as interest expense in the consolidated statements of operations in the year in which they are incurred.
Employee benefits
Cineplex is the sponsor of a number of employee benefit plans. These plans include a defined benefit pension plan,
additional unfunded defined benefit obligations for former Famous Players employees, and a group registered
retirement savings plan.
i. Post-employment benefit obligations
For defined benefit plans, the level of benefit provided is based on the length of service and annual
earnings of the person entitled.
The cost of defined benefit plans is determined using the projected unit credit method. The related benefit
liability recognized in the consolidated balance sheets is the present value of the defined benefit
obligation at the consolidated balance sheet dates less the fair value of plan assets. The cost of the group
registered retirement savings plan is charged to expense as the contributions become payable.
Actuarial valuations for defined benefit plans are carried out periodically and considered at each annual
consolidated balance sheet date. The discount rate applied in arriving at the present value of the benefit
liability represents yields on high-quality corporate bonds that are denominated in Canadian dollars, the
currency in which the benefits will be paid, and that have terms to maturity approximating the terms of
the related benefit liability.
The net defined benefit liability (asset) is recognized on the balance sheet without any deferral of actuarial
gains and losses. Past service costs are recognized in net income when incurred. Post-employment
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(62)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
benefits expense includes the net interest on the net defined benefit liability (asset) calculated using a
discount rate based on market yields on high quality bonds. Remeasurements consisting of actuarial gains
and losses, the actual return on plan assets (excluding the net interest component) and any change in the
asset ceiling are recognized in other comprehensive income without recycling to the consolidated
statements of operations.
Employee benefits are classified as long-term employee benefits if payments are not expected to be made
within the next 12 months.
ii. Share-based compensation - options
Cineplex grants stock options to certain employees. Each tranche in an award is considered a separate
award with its own vesting period and grant date fair value. Until December 16, 2019 the options were
considered equity-settled, and fair value of each tranche was measured at the date of grant using the
Black-Scholes option pricing model. Compensation expense was based on the number of awards expected
to vest and was recognized over the tranche’s vesting period, included as employee benefits expense in
other costs. On December 16, 2019 as a result of the terms of the Arrangement Agreement, the options
were considered cash-settled, and the fair value of the excess of outstanding options in excess of the
exercise price was recognized as a current share-based compensation liability, and changes in value were
reflected in the statement of operations. Stock options impacted by the termination of the Arrangement
Agreement were revalued and accounted for as equity-settled and any previously recognized share based
compensation liability was reclassified to contributed surplus. The accelerated recognition of unvested
options was reversed and is being recognized over their remaining vesting periods at the value determined
at March 31, 2020. Forfeitures are estimated to be nominal, based on historical forfeiture rates.
iii. Share-based compensation - other plans
Cineplex has a number of other cash-settled share-based compensation plans. The obligation for these
plans is recorded at fair value on a percentage vested basis. Changes in the obligation are reflected in
employee benefits in other costs in the consolidated statements of operations. Cineplex also issues RSUs
and PSUs that will be equity settled and will fully vest at the completion of the performance period
determined by management at the time of issuance.
Provisions
Provisions for asset retirement obligations, theatre shutdowns and legal claims, where applicable, are recognized
when Cineplex has a present legal or constructive obligation as a result of past events, it is more likely than not that
an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions
are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the
reporting period, and are discounted to present value where the effect is material. Cineplex performs evaluations to
identify onerous contracts and, where applicable, records provisions for such contracts. Provisions are included in
other liabilities on the consolidated balance sheets.
Income taxes
Income taxes comprise current and deferred income taxes. Income taxes are recognized in the consolidated
statements of operations, except to the extent that they relate to items recognized directly in equity or in OCI, in
which case, the income taxes are also recognized directly in equity or in OCI.
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(63)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Current income taxes are the expected taxes payable on the taxable income for the year, using income tax rates
enacted or substantively enacted, at the end of the reporting period, and any adjustment to income taxes payable in
respect of previous years.
In general, deferred income taxes are recognized in respect of temporary differences arising between the income tax
bases of assets and liabilities and their carrying values in the consolidated financial statements. Deferred income
taxes are determined on a non-discounted basis using income tax rates and laws that have been enacted or
substantively enacted at the consolidated balance sheet dates and are expected to apply when the deferred income tax
asset or liability is settled. Deferred income tax assets are recognized to the extent that it is probable that the assets
can be recovered.
Deferred income taxes are provided on temporary differences arising on investments in subsidiaries and joint
ventures, except, in the case of subsidiaries, where the timing of the reversal of the temporary difference is
controlled by Cineplex and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are presented as non-current.
Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares are
recognized as a deduction from equity.
Dividends
Dividends on common shares are recognized in the consolidated financial statements in the year in which the
dividends are approved by the Board of Directors of Cineplex.
Revenue
Film Entertainment and Content
Cineplex generates box office revenues from the sale of admission tickets for theatrical releases purchased by
customers in theatres, online at Cineplex.com or through the Cineplex mobile app. Revenue is recognized at the time
the obligation is satisfied which is when the movie for which the ticket purchased has played. Amounts collected on
advanced tickets sales are recorded as deferred revenue and recognized when the movie has played. Cineplex also
generates revenues from the sale of food service which is comprised of food and beverage sales. Food service
revenue is recognized when control of the food service has transferred, being at the point the customer purchases the
food service at the theatres. Payment of the transaction price is due immediately at the point the customer purchases
the concessions. Until December 12, 2021, when retail transactions include the issuance of SCENE points, Cineplex
recorded deferred revenue based on the relative stand-alone selling price of the points issued. The deferred revenue
associated with the points redeemed is recognized as revenue when points are redeemed by customers or in
accordance with Cineplex’s accounting policy for breakage. Beginning December 13, 2021, as a result of the the
launch of Scene+, Scene+ points issued in association with Cineplex revenue transactions are accounted for as
marketing expense.
Cineplex sells gift cards directly to individual customers and vouchers to both wholesale resellers and directly to
individual customers. The transaction price received from the sales of gift cards and vouchers is due at the time of
sale and is recorded as deferred revenue. Revenues from gift cards and vouchers are recognized either on redemption
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(64)
Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
or in accordance with Cineplex's accounting policy for breakage. Breakage income is included in other revenues and
represents the estimated value of gift cards and vouchers that are not expected to be redeemed by customers. It is
estimated based on historical redemption patterns. The sale of a voucher creates a future obligation from Cineplex to
provide an admission ticket or a combination of admission ticket(s) and concessions. The transaction price of the
voucher is allocated between box office and concessions based on a relative stand-alone selling price basis.
Media
The media segment principally generates revenue from providing advertising services, sales of digital hardware for
digital signage networks, installation of digital hardware, digital software services subscriptions, software
maintenance and support services, creative services, printing services and warranties. Products and services may be
sold separately or in bundled packages. For bundled packages, Cineplex determines whether individual products and
services are distinct (if a product or service is separately identifiable from other items in the bundled package and if
a customer can benefit from it). The consideration is allocated between separate products and service in a bundle
based on their relative stand-alone selling prices.
Advertising Media
Media revenues consist primarily of advertising revenues generated from customers who advertise their products
and services through Cineplex’s media offerings which include onscreen, online, magazine, and digital out of home.
Revenue for advertising is recognized over time as services are delivered. The transaction price allocated to these
services is recognized as the media runs from the start to the end dates specified in the contracts with the customer.
The transaction price allocated to the distinct services to be provided is based on the stand-alone selling prices of the
distinct services. Amounts collected on advanced media sales are recorded as deferred revenue and recognized over
the period that the media is presented.
Each contract with a customer is also evaluated to determine whether Cineplex is the principal or agent in the
transaction. For transactions which Cineplex is the principal, revenues are recorded on a gross basis and for
transactions where Cineplex is the agent, revenues are recorded on a net basis.
Installation and Digital Hardware for digital signage network
Cineplex sells digital hardware, installation and other professional services for digital signage networks. The
installation and other professional services that Cineplex provides are not a significant integration service, does not
customize or modify the hardware and can be performed by another party. The installation and other professional
services are therefore accounted for as a separate performance obligation and the transaction price is allocated to
each performance obligation based on the stand-alone selling prices. Revenue for installation and other professional
services are recognized upon completion of the installation of the digital hardware at the individual site being
installed for the customer. If contracts include the purchase of hardware, revenue for the hardware is recognized at
the point in time when hardware is delivered to the customer. Delivery occurs when the hardware has been shipped
to the customer’s specific location, the legal title has passed and the customer has accepted the hardware.
Digital software services subscription
Cineplex sells software service subscriptions to customers which provides the functionality for the digital signage
network, the customer portal, the content management tool and media player software at the customer’s location.
Cineplex also sells maintenance and support services for the software service subscriptions. Software service
subscription and maintenance and support services are considered to represent a single performance obligation and
revenue is recognized over time over the life of the contract. For software service subscriptions, customers have
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Cineplex Inc.
Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
payment options of either equal monthly payments over the term of the contract or a single lump sum payment at the
inception of the contract. Amounts collected as advanced payments are recorded as deferred revenue and recognized
equally over the term of the contract unless the contract contains a renewal option with an embedded material right
which provides the customer a material right (such as a free or discounted good or service) and gives rise to a
separate performance obligation. If an embedded material right exists, revenue is recognized on a straight-line basis
over the term of the contract including the renewal period. Contracts are evaluated to determine whether renewal
options provide the customer with an embedded material right and whether a significant financing arrangement
exists. For maintenance and support services, the transaction price is paid monthly in equal payments over the term
of the contract as service is provided.
Creative Services
Cineplex provides creative services producing content to be run on customer’s digital display networks. For creative
services, revenue is recognized at a point in time when the project is completed and the customer has accepted the
final product. Creative services are based on an hourly rate and the transaction price recognized as revenue is the
amount to which Cineplex has a right to invoice based on the amount of hours required to complete the project.
Payment of the transaction price is due at completion of the project.
Amusement and Leisure
The amusement and leisure segment principally generates revenue from route operations, the sale of amusement
gaming and vending equipment and from the sale of food services and entertainment at location based entertainment
venues.
Cineplex operates amusement, gaming and vending equipment at family entertainment centres (“FECs”) and non-
FECs which is referred to as route operations. The transaction price is the set price that the customer playing the
game is required to pay and revenue is recognized upon the customer playing the game. As it relates to gaming
revenues, the most significant judgment is determining whether Cineplex is the principal or agent in the route
operations. Cineplex is considered to be the principal in its route operations as it owns all of the equipment hosted at
sites, is responsible for the maintenance of the equipment, and has control over which equipment will be on site.
Revenues from route operations are recorded at the gross amount with the portion shared with the location hosting
the equipment recorded in other costs as venue revenue share. Cineplex also sells rechargeable cards to be used for
gameplay. IFRS 15 requires unused cash values on the rechargeable cards to be deferred. Revenue from the
rechargeable cards is recognized upon redemption or in accordance with Cineplex’s policy for breakage based on
historical redemption patterns.
For the sale of equipment to customers, revenue is recognized when control of the goods has transferred and title has
passed, being when the goods have been delivered to the customer’s specific location.
Food and beverage sales at location-based entertainment venues are recognized when control of the goods has
transferred, being at the point the customer purchases and receives the goods. Payment of the transaction price is due
at the point the customer purchases food and/or beverages.
Income per share
Basic EPS is calculated by dividing the net income for the year attributable to equity owners of Cineplex by the
weighted average number of common shares outstanding during the year.
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Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
Diluted EPS is calculated by adjusting the weighted average number of common shares outstanding for dilutive
instruments. The number of shares included with respect to options and similar instruments is computed using the
treasury stock method. Cineplex’s potentially dilutive common shares include stock options granted to employees
and the conversion feature of the convertible debentures.
Film rental costs
Film rental costs are recorded based on the terms of the respective film licence agreements. In some cases, the final
film cost is dependent on the ultimate duration of the film’s play and, until this is known, management uses its best
estimate of the final settlement of these film costs. Film costs and the related film costs payable are adjusted to the
final film settlement in the year Cineplex settles with the distributors. Actual settlement of these film costs could
differ from those estimates.
Consideration received from vendors
Cineplex receives rebates from certain vendors with respect to the purchase of concession goods. In addition,
Cineplex receives payments from vendors for advertising undertaken by the theatres on behalf of the vendors.
Cineplex recognizes rebates earned for purchases of each vendor’s product as a reduction of concession costs and
recognizes payments received for services delivered to the vendor as media or other revenue.
Significant accounting judgments and estimation uncertainties
Critical accounting estimates and judgments
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 values of assets and liabilities within the next financial year.
a) Goodwill and recoverable amount of 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 (note 11, Impairment of
long-lived assets and goodwill).
b) 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
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Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
prepayment option on Notes Payable was determined using an option pricing model with observable
market inputs consistent with accepted methods for valuing financial instruments.
c)
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.
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.
d) 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.
As described in note 2, COVID-19 business impacts, risks and liquidity, 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.
e) 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.
f) 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. Significant
estimates and assumptions relating to the option plan are disclosed in note 13, Share-based compensation.
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.
g) Lease terms
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Cineplex Inc.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
For the years ended December 31, 2021 and 2020
—————————————————————————————————————————————
(expressed in thousands of Canadian dollars, except per share amounts)
(expressed in thousands of Canadian dollars, except per share amounts)
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.
Accounting standards applied or adopted in the current year
Cloud Computing Arrangements
In April 2021, the International Financial Reporting Interpretations Committee (IFRIC) finalized their decision with
respect to configuration and customization costs in a cloud computing arrangement, particularly surrounding the
recognition of an expense or an intangible asset. Cineplex has evaluated the impact regarding the changes
surrounding the configuration or customization costs in a cloud computing arrangement and has determined that
there is no material effect on its consolidated financial statements.
In January 2020, the International Accounting Standards Board issued Classification of Liabilities as Current or
Non-current, which amended IAS 1 Presentation of Financial statements. The amendments clarified how an entity
classifies debt and other financial liabilities as current or non-current in particular circumstances. The amendments
are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted.
Cineplex has not applied the accounting pronouncement issued.
In May 2021, the International Accounting Standards Board issued Deferred Tax related to Assets and Liabilities
arising from a Single Transaction, which amended IAS 12 Income Taxes. The amendments require companies to
recognize deferred tax on particular transactions that, on initial recognition, give rise to equal amounts of taxable and
deductible temporary differences. The amendments are effective for annual reporting periods beginning on or after
January 1, 2023. Earlier application is permitted. Cineplex has not applied the accounting pronouncement issued.
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Investor Information
Cineplex Inc.
Investor Information
_____________________________________________________________________________________________
BOARD OF DIRECTORS
INVESTOR RELATIONS
Jordan Banks (4)
Corporate Director
Toronto, ON
Robert Bruce (5)
Executive Chair and Founding Partner
Mobile Klinik
Toronto, ON
Joan Dea (4)
Corporate Director
Ross, CA
Janice Fukakusa (3)
Corporate Director
Toronto, ON
Donna Hayes (5)
Corporate Director
Toronto, ON
Ellis Jacob, C.M.
President and Chief Executive Officer
Cineplex Inc.
Toronto, ON
Sarabjit (Sabi) Marwah (4)
Corporate Director
Toronto, ON
Nadir Mohamed (2)
Corporate Director
Toronto, ON
Phyllis Yaffe (1) (4)
Corporate Director
Toronto, ON
Gord Nelson
Chief Financial Officer
Cineplex Inc.
Mahsa Rejali
Executive Director, Corporate Development &
Investor Relations
Cineplex Inc.
Email: investorrelations@cineplex.com
Address: Cineplex Inc.
1303 Yonge Street
Toronto, ON M4T 2Y9
STOCK EXCHANGE LISTING
The Toronto Stock Exchange CGX
AUDITORS
PricewaterhouseCoopers LLP
Toronto, ON
TRANSFER AGENT
TSX Trust Company
Toronto, ON
416-682-3860
800-387-0825
Email: shareholderinquiries@tmx.com
www.tsxtrust.com
ANNUAL MEETING
Wednesday May 25, 2022
9:00AM EDT
Scotiabank Theatre Toronto
259 Richmond St. West
Toronto, ON
(1) Chair of the Board of Directors of Cineplex Inc.
(2) Chair of the Compensation, Nominating and Corporate Governance Committee
(3) Chair of the Audit Committee
(4) Member of the Compensation, Nominating and Corporate Governance Committee
(5) Member of the Audit Committee
CINEPLEX INC. 2021 ANNUAL REPORT
INVESTOR INFORMATION
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