FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-9454
CINEPLEX ODEON CORPORATION
(Exact name of Registrant as specified in its charter)
Ontario, Canada Non-Resident Alien
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1303 Yonge Street, Toronto, Ontario M4T 2Y9
(Address of principal executive offices) (Postal Code)
416-323-6600
(Registrant's telephone number
including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X or No
As of May 2, 1997, 103,352,282 shares of Cineplex Odeon Corporation
Common Stock were outstanding.
TOTAL NO. OF PAGES
EXHIBIT INDEX PAGE
CINEPLEX ODEON CORPORATION
FORM 10-Q
MARCH 31, 1997
Index
PART I - FINANCIAL INFORMATION Page No.
ITEM 1 - Financial Statements (Unaudited)
Consolidated Balance Sheet
March 31, 1997 and December 31, 1996
Consolidated Income Statement
Three Months Ended March 31, 1997 and
March 31, 1996
Consolidated Statement of Changes in Cash Resources
Three Months Ended March 31, 1997 and
March 31, 1996
Notes to the Consolidated Financial Statements
March 31, 1997
ITEM 2 - Management's Discussion and Analysis of Results of
Operations and Financial Condition
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
ITEM 6 - Exhibits and Reports on Form 8-K
SIGNATURE PAGE
CINEPLEX ODEON CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
Unaudited Audited
March 31, 1997 December 31, 1996
-------------- -----------------
ASSETS
CURRENT ASSETS
Cash $ 2,494 $ 2,718
Accounts receivable 12,305 9,552
Other 10,452 8,852
----------- ----------
25,251 21,122
PROPERTY, EQUIPMENT AND LEASEHOLDS 575,789 579,841
OTHER ASSETS
Long-term investments and receivables 2,099 2,535
Goodwill 32,536 32,816
Deferred charges 7,819 7,857
---------- ----------
42,454 43,208
---------- ----------
TOTAL ASSETS $ 643,494 $ 644,171
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals $ 66,812 $ 59,474
Deferred income 17,424 17,150
Current portion of long-term debt
and other obligations 7,280 6,926
-------- --------
91,516 83,550
LONG-TERM DEBT 317,256 326,058
CAPITALIZED LEASE OBLIGATIONS 7,781 8,317
DEFERRED INCOME 5,843 6,594
PENSION OBLIGATION 1,063 1,072
SHAREHOLDERS' EQUITY
Capital stock 555,385 555,374
Translation adjustment 3,353 4,016
Retained earnings (deficit) (338,703) (340,810)
---------- ---------
220,035 218,580
COMMITMENTS AND CONTINGENCIES (note 2)
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 643,494 $ 644,171
========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
CINEPLEX ODEON CORPORATION
CONSOLIDATED INCOME STATEMENT
(in thousands of U.S. dollars except per share figures)
Unaudited
3 Months Ended 3 Months Ended
March 31, 1997 March 31, 1996
-------------- ----------------
REVENUE
Admissions $ 106,392 $ 91,259
Concessions 38,347 31,861
Other 5,807 5,231
----------- ------------
150,546 128,351
EXPENSES
Theatre operations and other expenses 116,485 103,817
Cost of concessions 7,114 5,708
General and administrative 5,167 4,175
Depreciation and amortization 11,021 10,700
------------ ------------
139,787 124,400
------------ ------------
Income before the undernoted 10,759 3,951
Other expenses (73) (773)
------------ ------------
Income before interest on long-term
debt and income taxes 10,686 3,178
Interest on long-term debt 8,273 9,921
------------ ------------
Income/(loss) before income taxes 2,413 (6,743)
Income taxes 306 414
------------ ------------
NET INCOME/(LOSS) $ 2,107 $ (7,157)
============ ===========
BASIC
Weighted average shares outstanding 176,784,000 123,551,000
Income/(loss) per share $0.01 ($0.06)
FULLY DILUTED
Weighted average shares outstanding 191,291,000 131,384,000
Income/(loss) per share $0.01 ($0.06)
The accompanying notes are an integral part of these consolidated
financial statements.
CINEPLEX ODEON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN CASH RESOURCES
(in thousands of U.S. dollars except per share figures)
Unaudited
3 Months Ended 3 Months Ended
March 31, 1997 March 31, 1996
-------------- --------------
CASH PROVIDED BY(USED FOR)
OPERATING ACTIVITIES
Net income/(loss) $ 2,107 $ (7,157)
Depreciation and amortization 11,021 10,700
Other non-cash items (717) (484)
--------- ---------
12,411 3,059
Net change in non-cash working capital 3,792 (3,899)
--------- ---------
16,203 (840)
--------- ---------
FINANCING ACTIVITIES
Decrease in long-term debt and other obligations (9,207) (75,645)
Increase in long-term debt and other obligations 214 -
Issue of share capital, net of issue costs 11 82,056
Other (340) (728)
--------- --------
(9,322) 5,683
--------- --------
INVESTMENT ACTIVITIES
Additions to property, equipment and leaseholds (9,567) (5,469)
Proceeds on sale of certain theatre properties 2,626 632
Other (164) (206)
-------- --------
(7,105) (5,043)
-------- --------
NET DECREASE DURING PERIOD (224) (200)
CASH AT BEGINNING OF PERIOD 2,718 1,604
-------- --------
CASH AT END OF PERIOD $ 2,494 $ 1,404
========= =========
CASH FLOW FROM OPERATING ACTIVITIES PER SHARE
Basic $ 0.09 $ (0.01)
Fully Diluted $ 0.08 $ (0.01)
The accompanying notes are an integral part of these consolidated
financial statements.
CINEPLEX ODEON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(in U.S. dollars)
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements in this quarterly report to
shareholders are prepared in accordance with accounting principles
generally accepted in Canada. For the three months ended March 31, 1997,
the application of accounting principles generally accepted in the United
States did not have a material effect on the measurement of the
Corporation's net profit and shareholders' equity. For information on
differences between Canadian and United States generally accepted
accounting principles, reference is made to the Corporation's 1996 annual
report to shareholders.
The consolidated financial statements in this quarterly report to
shareholders are based in part on estimates, and include all adjustments
consisting of normal recurring accruals that management believes are
necessary for a fair presentation of the Corporation's financial position
as at March 31, 1997, and the results of its operations for the three
months then ended. Operating results for the three months ended March 31,
1997 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1997.
The consolidated financial statements and related notes have been
prepared in accordance with generally accepted accounting principles
applicable to interim periods; consequently they do not include all
generally accepted accounting disclosures required for annual
consolidated financial statements. For more complete information these
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes contained in the
Corporation's 1996 annual report to shareholders.
2. COMMITMENTS AND CONTINGENCIES
i) The Corporation and its subsidiaries are currently subject to audit by
taxation authorities in several jurisdictions. The taxation authorities
have proposed to reassess taxes in respect of certain transactions and
income and expense items. Management believes that the Corporation and
its subsidiaries have meritorious defenses and is vigorously contesting
the adjustments proposed by the taxation authorities. Although such
matters cannot be predicted with certainty, management does not consider
the Corporation's exposure to such litigation to be material to these
financial statements.
ii) The Corporation and its subsidiaries are also involved in certain
litigation arising out of the ordinary course and conduct of its
business. The outcome of this litigation is not currently determinable.
Although such matters cannot be predicted with certainty, management does
not consider the Corporation's exposure to such litigation to be material
to these financial statements.
3. SUMMARY FINANCIAL INFORMATION
The following is consolidated summarized financial information of the
Corporation's wholly owned subsidiary Plitt Theatres, Inc.:
- ------------------------------------------------------------------------
Unaudited
3 Months Ended 3 Months Ended
March 31, 1997 March 31, 1996
- ------------------------------------------------------------------------
Revenue $ 95,615,000 $ 86,670,000
========================================================================
Income before general and administrative
expenses, depreciation and amortization,
interest on long-term debt
and income taxes $ 13,747,000 $ 10,475,000
========================================================================
Net loss $ (5,688,000) $ (8,787,000)
========================================================================
- ----------------------------------------------------------
March 31, 1997 December 31, 1996
- ----------------------------------------------------------
Current assets $ 24,386,000 $ 17,105,000
Noncurrent assets 471,363,000 484,618,000
Current liabilities 68,829,000 55,078,000
Noncurrent liabilities 276,164,000 265,386,000
==========================================================
Current liabilities at March 31, 1997 include a net payable to the
Corporation and other corporations within the consolidated group in the
amount of $4,316,000 (December 31, 1996 - net payable of $9,551,000).
Noncurrent liabilities at March 31, 1997 and December 31, 1996 include
$10,000,000 that is owed to the Corporation.
4. RECLASSIFICATION
Certain of the prior period's balances have been reclassified to conform
with the presentation adopted in the current period.
Management's Discussion and Analysis of
Results of Operations and Financial Condition
(All figures are in U.S. dollars except where otherwise noted)
The Corporation's net income for the three months ended March 31, 1997
was $2,107,000 or $0.01 per share compared to a net loss of $7,157,000 or
$0.06 per share for the same period in 1996. The Corporation's improved
performance in the first quarter of 1997 is primarily attributable to the
increase in admission revenue. Admission revenue in the first quarter of
1997 was $106,392,000 compared to $91,259,000 in the corresponding period
in the prior year, an increase of 16.6%. This increase in admission
revenue is a direct result of a strong slate of films released during
this period, including the re-release of the Star Wars trilogy, Liar,
Liar and Dante's Peak. The increase in attendance reflected in the higher
admission revenue had a corresponding impact on the Corporation's
concession revenue which increased by 20.4% in the first quarter of 1997
compared to the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations for the three months ended March 31, 1997
amounted to a net inflow of $16,203,000 compared to a net outflow of
$840,000 for the same period in 1996. Excluding the impact of the net
change in non-cash working capital, the Corporation's cash flow from
operations for the three months ended March 31, 1997 amounted to a net
inflow of $12,411,000 compared to a net inflow of $3,059,000 for the same
period in 1996. The increase in cash flow resulted primarily from the
increase in revenue noted above.
Management expects to open 16 new theatre locations (adding 169 new
screens) and refurbish a total of eight theatres (adding 48 new screens)
during the remainder of 1997 at an estimated net cost of less than
$50,000,000. The Corporation's current strategy is to develop and build
additional theatres and screens in target markets that complement the
Corporation's existing position in such markets or that provide the
Corporation with a strategic position in a new market. In late 1996 the
Corporation opened its first theatre outside of North America in
Budapest, Hungary. In addition to Hungary, management is considering
opportunities in other international markets, although at this stage it
is premature to comment on either the possibility of further
international expansion or the potential magnitude of the Corporation's
capital commitment relating to its international expansion strategy. The
Corporation plans to fund its expansion programs by drawing on its bank
credit facilities and through internally generated cash flow. The
Corporation has approximately $73,000,000 available under its bank credit
facilities at March 31, 1997.
At March 31, 1997 the Corporation's long-term debt was $317,256,000
compared to $326,058,000 at December 31, 1996. This reduction is
directly attributable to the revenues produced by the Corporation in the
first quarter of 1997 which have been used to temporarily reduce the
Corporation's revolving bank facility.
RESULTS OF OPERATIONS
The Corporation reports its results in U.S. dollars. In order to
eliminate the impact of exchange rate fluctuations on the yearly
comparison of both admission and concession revenue, the results of the
Corporation's Canadian operations as discussed below are measured in
Canadian dollars.
The Corporation's United States theatres recorded an increase in
admission revenue of 9.4% for the three months ended March 31, 1997
compared to the same period in 1996. This admission revenue increase was
the result of a 5.1% increase in attendance and a 4.3% increase in box
office revenue per patron.
The Corporation's Canadian theatres reported an increase in admission
revenue of 27.6% (when measured in Canadian dollars) for the three months
ended March 31, 1997 compared to the same period in 1996. This increase
was the result of an increase in attendance of 20.5% and an increase in
box office revenue per patron of 7.1% over the same period in 1996.
The increase in both first quarter attendance and admission revenue in
1997 compared to the same period in 1996 reflects the strong slate of
films released. The Corporation's Canadian theatres significantly
improved performance is due to the fact that the more successful films
released in the first quarter of 1997 were distributed by the
Corporation's traditional Canadian suppliers.
The Corporation's United States concession revenue increased by 12.8% for
the three months ended March 31, 1997 compared to the same period in
1996. The attendance increase of 5.1%, combined with an increase in
concession revenue per patron of 7.7% was responsible for the increase in
concession revenue.
The Corporation's Canadian concession revenue increased by 30.2% (when
measured in Canadian dollars) for the three months ended March 31, 1997
compared to the same period in 1996, reflecting the increase in
attendance of 20.5% and an increase in concession revenue per patron of
9.7%.
The gross margin from theatre operations (consisting of revenue from
theatre operations less film cost, cost of concessions, theatre
advertising, payroll, occupancy and supplies and services), when
expressed as a percentage of theatre operating revenue, increased for the
three months ended March 31, 1997 to 19.4% from 16.5% for the same period
in 1996. This increase is attributable to the increased revenue
experienced in both the Corporation's Canadian and United States theatres
in the first quarter of 1997.
General and administrative expenses increased by 23.8% in the first
quarter of 1997 compared to the corresponding period in 1996. This
increase is the result of certain costs associated with the
infrastructure necessary for the Corporation's expansion program and
certain one-time charges.
Interest on long-term debt decreased by 16.6% during the three months
ended March 31, 1997 compared to the same period in 1996. This decrease
is a result of a reduced average debt balance during the first quarter of
1997 compared to the first quarter of 1996 and the decision to denominate
certain of the Corporation's long-term debt in Canadian dollars.
In the twelve month period ending March 31, 1997 the value of the
Canadian dollar has strengthened relative to the United States dollar.
While currency movements affect the reporting of revenues and expenses of
the Corporation's Canadian operations, the financial impact is limited as
the costs of operating the Canadian theatres are supported by the revenue
of such theatres.
FORWARD LOOKING STATEMENTS
The Corporation and its representatives have made, or may make, forward
looking statements including those contained in this Management's
Discussion and Analysis of Results of Operations and Financial Condition.
Use of the words "expects", "estimated", "plans", or similar
expressions identify such forward looking statements.
The results contemplated by the Corporation's forward looking statements
are subject to certain risks and uncertainties that could result in
actual performance being materially different from anticipated results,
including without limitation, lack of high quality commercial film
product, construction risks and delays, failure to obtain future waivers
or amendments under the Corporation's bank credit facilities and other
factors described herein.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The Corporation has been, and continues to be, involved in numerous legal
proceedings. However, although such matters cannot be predicted with
certainty, the Corporation does not believe that such lawsuits are likely
to result in a judgment which would have a material adverse effect on the
Corporation's financial condition.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
* (a) Exhibit 10.1 Performance-Based Option Agreement.
(b) Exhibit 11.1 Statement re Computation of Per Share
Earnings.
(c) Exhibit 27 Financial Data Schedule.
(d) The Corporation did not file any reports on Form 8-K during the
quarter ended March 31, 1997.
* Please note that a request for confidential treatment of the
performance targets in section 4 (b)(i) has been filed with the
Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CINEPLEX ODEON CORPORATION
(Registrant)
Date May 14, 1997 Allen Karp
------------ --------------------
Allen Karp
President and Chief
Executive Officer
Date May 14, 1997 Ellis Jacob
------------ -----------------------
Ellis Jacob
Executive Vice President
and Chief Financial Officer
Commission File No. 1-9454
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
QUARTERLY REPORT ON FORM 10-Q
OF
CINEPLEX ODEON CORPORATION
For the Quarterly Period Ended March 31, 1997
EXHIBIT INDEX
Exhibit Description Page
Number
* 10.1 Performance-Based Option Agreement.
11.1 Statement re Computation of Per Share Earnings.
27 Financial Data Schedule.
* Please note that a request for confidential treatment of the
performance targets in section 4 (b)(i) has been filed
with the Securities and Exchange Commission.