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, 1996
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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
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CINEPLEX ODEON CORPORATION
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(Exact name of Registrant as specified in its charter)
Ontario, Canada Non-Resident Alien
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1303 Yonge Street, Toronto, Ontario M4T 2Y9
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(Address of principal executive offices) (Postal Code)
416-323-6600
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(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, 1996, 103,058,039 shares of Cineplex Odeon Corporation Common Stock
were outstanding.
TOTAL NO. OF PAGES 15
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EXHIBIT INDEX PAGE 13
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CINEPLEX ODEON CORPORATION
FORM 10-Q
MARCH 31, 1996
Index
PART I - FINANCIAL INFORMATION Page No.
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ITEM 1 - Financial Statements (Unaudited)
Consolidated Balance Sheet
March 31, 1996 and December 31, 1995 3
Consolidated Income Statement
Three Months Ended March 31, 1996 and 4
March 31, 1995;
Consolidated Statement of Changes in
Cash Resources
Three Months Ended March 31, 1996 and
March 31, 1995 5
Notes to the Consolidated Financial
Statements - March 31, 1996 6 - 7
ITEM 2 - Management's Discussion and Analysis
of Results of Operations and
Financial Condition 8 - 9
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 10
ITEM 6 - Exhibits and Reports on Form 8-K 10
SIGNATURE PAGE 11
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CINEPLEX ODEON CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
------------------------------------------------------------------
Unaudited Audited
March 31, 1996 December 31, 1995
------------------- -------------------
ASSETS
CURRENT ASSETS
Cash $ 1,404 $ 1,604
Accounts receivable 9,279 10,362
Other 8,884 7,614
------------------- -------------------
19,567 19,580
PROPERTY, EQUIPMENT AND LEASEHOLDS 578,462 583,442
OTHER ASSETS
Long-term investments and receivables 3,693 3,945
Goodwill 33,649 33,927
Deferred charges 8,442 8,749
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45,784 46,621
------------------- -------------------
TOTAL ASSETS $ 643,813 $ 649,643
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals $ 55,912 $ 59,591
Deferred income 14,415 14,930
Current portion of long-term debt and other 7,242 7,146
------------------- -------------------
77,569 81,667
LONG-TERM DEBT 307,050 381,857
CAPITALIZED LEASE OBLIGATIONS 9,633 10,451
DEFERRED INCOME 7,942 8,428
PENSION OBLIGATION 1,216 1,248
SHAREHOLDERS' EQUITY
Capital stock (note 4) 554,535 472,479
Translation adjustment 2,753 3,241
Retained earnings (deficit) (316,885) (309,728)
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$ 240,403 $ 165,992
COMMITMENTS AND CONTINGENCIES (note 2)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 643,813 $ 649,643
=================== ===================
The accompanying notes are an integral part of these consolidated financial
statements.
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CINEPLEX ODEON CORPORATION
CONSOLIDATED INCOME STATEMENT
(in thousands of U.S. dollars except per share figures)
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Unaudited
3 Months Ended 3 Months Ended
March 31, 1996 March 31, 1995
-------------- --------------
REVENUE
Admissions $ 91,259 $ 78,594
Concessions 31,861 26,741
Other 5,231 4,629
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128,351 109,964
EXPENSES
Theatre operations and other expenses 103,817 96,102
Cost of concessions 5,708 4,795
General and administrative 4,175 4,519
Depreciation and amortization 10,700 10,208
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124,400 115,624
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Income/(loss) before the undernoted 3,951 (5,660)
Other income(expenses) (773) 1,105
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Income/(loss) before interest on long-term
debt and income taxes 3,178 (4,555)
Interest on long-term debt 9,921 10,138
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Loss before income taxes (6,743) (14,693)
Income taxes 414 416
--------------------- --------------------
NET LOSS $ (7,157) $ (15,109)
===================== ====================
BASIC
Weighted average shares outstanding 123,551,000 114,747,000
Loss per share (0.06) (0.13)
FULLY DILUTED
Weighted average shares outstanding 131,384,000 122,620,000
Loss per share (0.06) (0.13)
The accompanying notes are an integral part of these consolidated financial
statements.
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CINEPLEX ODEON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN CASH RESOURCES
(in thousands of U.S. dollars except per share figures)
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Unaudited
3 Months Ended 3 Months Ended
March 31, 1996 March 31, 1995
-------------- ---------------
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss $ (7,157) $ (15,109)
Depreciation and amortization 10,700 10,208
Other non-cash items (484) (312)
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3,059 (5,213)
Net change in non-cash working capital (3,899) (7,597)
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(840) (12,810)
FINANCING ACTIVITIES
Decrease in long-term debt and other obligations (75,645) (1,443)
Increase in long-term debt and other obligations 0 17,732
Net change in operating credit facilities 0 901
Issue of share capital, net of issue costs 82,056 3
Other (728) (688)
--------------------- --------------------
5,683 16,505
INVESTMENT ACTIVITIES
Additions to property, equipment and leaseholds (5,469) (3,577)
Long-term investments 0 (179)
Proceeds on sale of certain theatre properties 632 0
Other (206) 0
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(5,043) (3,756)
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NET INCREASE(DECREASE) DURING PERIOD (200) (61)
CASH AT BEGINNING OF PERIOD 1,604 1,551
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CASH AT END OF PERIOD $ 1,404 $ 1,490
===================== ====================
CASH FLOW FROM OPERATING ACTIVITIES PER SHARE
Basic $ (0.01) $ (0.11)
Fully Diluted $ (0.01) $ (0.11)
The accompanying notes are an integral part of these consolidated financial
statements.
CINEPLEX ODEON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(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, 1996 and 1995, 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 loss and
shareholders' equity. For information on differences between Canadian and United
States generally accepted accounting principles, reference is made to the
Corporation's 1995 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, 1996, and
the results of its operations for the three months then ended. Operating
results for the three months ended March 31, 1996 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1996.
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 1995 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.
4
3. SUMMARY FINANCIAL INFORMATION
The following is consolidated summarized financial information of the
Corporation's wholly owned subsidiary Plitt Theatres, Inc.:
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Unaudited
3 Months Ended 3 Months Ended
March 31, 1996 March 31, 1995
- ------------------------------------------------------------------------------------------
Revenue $ 86,670,000 $ 77,441,000
==========================================================================================
Income before general and administrative
expenses, depreciation and amortization,
interest on long-term debt
and income taxes $ 10,475,000 $ 4,597,000
==========================================================================================
Net loss $ (8,787,000) $(14,420,000)
==========================================================================================
- -------------------------------------------------------------------------------
March 31, 1996 December 31, 1995
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Current assets $ 18,211,000 $ 21,259,000
Noncurrent assets 498,521,000 502,989,000
Current liabilities 58,529,000 54,790,000
Noncurrent liabilities 268,806,000 282,577,000
===============================================================================
Current assets at March 31, 1996 include a net receivable from the Corporation
and other corporations within the consolidated group in the amount of $4,999,000
(December 31, 1995 - net payable of $3,834,000). Noncurrent liabilities at
March 31, 1996 and December 31, 1995 include $10,000,000 that is owed to the
Corporation.
4. CAPITAL STOCK
On March 20, 1996 the Corporation filed a supplemented final short form
prospectus in Canada and the United States pursuant to the multi-jurisdictional
disclosure system with respect to an offering of 25,000,000 Common Shares to the
public at a price of $1.375 per share, for an aggregate consideration of
$34,375,000. In addition, in accordance with the provisions of the Amended and
Restated Subscription Agreement, MCA INC. (MCA) and the Charles Rosner Bronfman
Trust (the Trust) agreed to subscribe for 24,242,181 SRV Shares and 12,121,454
Common Shares respectively, at the same price as the offering price to the
public, for an aggregate consideration of $50,000,000. The public offering and
the subscriptions by MCA and the Trust were completed on March 28, 1996. The net
proceeds from the issuance of the Common and SRV Shares have been used to reduce
indebtedness owing under the Corporation's revolving bank credit facilities.
5. RECLASSIFICATION
Certain of the prior period's balances have been reclassified to conform with
the presentation adopted in the current period.
5
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 loss for the three months ended March 31, 1996 was
$7,157,000 or $0.06 per share compared to a net loss of $15,109,000 or $0.13 per
share for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations for the three months ended March 31, 1996 amounted to
a net outflow of $840,000 compared to a net outflow of $12,810,000 for the same
period in 1995. 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, 1996 amounted to a net inflow of $3,059,000 compared to a net outflow
of $5,213,000 for the same period in 1995. The increase in cash flow resulted
primarily from a significantly stronger box office performance and improved
concession sales in the first quarter of 1996 compared to the first quarter of
1995.
On March 20, 1996 the Corporation filed a supplemented final short form
prospectus in Canada and the United States pursuant to the multi-jurisdictional
disclosure system with respect to an offering of 25,000,000 Common Shares to the
public at a price of $1.375 per share, for an aggregate consideration of
$34,375,000. In addition, in accordance with the provisions of the Amended and
Restated Subscription Agreement, MCA INC. (MCA) and the Charles Rosner Bronfman
Trust (the Trust) agreed to subscribe for 24,242,181 Subordinate Restricted
Voting (SRV) Shares and 12,121,454 Common Shares respectively, at the same price
as the offering price to the public, for an aggregate consideration of
$50,000,000. The public offering and the subscriptions by MCA and the Trust were
completed on March 28, 1996. On April 16, 1996, the Corporation issued 355,958
Common Shares at a price of $1.375 per Common Share as part of the over-
allotment option provided to the underwriters pursuant to the public offering.
The aggregate consideration from this issuance was approximately $489,000. The
net proceeds from the issuances of the Common and SRV Shares have initially been
used to reduce the Corporation's revolving bank credit facilities.
Management expects to open 10 new theatre locations (adding 99 new screens) and
refurbish a total of 21 theatres (adding 49 new screens) during the remainder of
1996 at an estimated net cost of $33,000,000. In 1997 and 1998 it is
management's current intention to open up to 31 new theatre locations (adding
320 screens) and refurbish a total of 25 theatres (adding 19 screens) at an
estimated net cost to the Corporation of less than $81,000,000. The Corporation
plans to fund this expansion program by drawing on its bank credit facilities
and through internally generated cash flow. 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 addition to the
Corporation's plans to develop and build theatres in North America, the
Corporation's growth strategy also includes the development and operation of
"location-based entertainment centres" which are destination entertainment
complexes anchored by a movie theatre. In April 1996, the Corporation announced
that it has entered into a strategic alliance with Sega GameWorks L.L.C., a
joint venture comprised of SEGA Enterprises, DreamWorks SKG, and MCA, for the
development and operation of location-based entertainment centres in the United
States. It is the Corporation's current intention to invest approximately
$10,000,000 in location-based entertainment centres during the next three years.
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
6
revenue, the results of the Corporation's Canadian operations are
measured in Canadian dollars. The Corporation's U.S. results have been impacted
by the sale of 28 theatres, located in Florida and Georgia, to Carmike Cinemas,
Inc. in the second quarter of 1995.
The Corporation's United States theatres recorded an increase in admission
revenue of 11.5% for the three months ended March 31, 1996 compared to the same
period in 1995. This admission revenue increase was the result of an 8.6%
increase in attendance and a 2.9% increase in box office revenue per patron.
Adjusting for theatres sold, the Corporation's United States theatres recorded
an increase in admission revenue of 18.9%. This admission revenue increase was
comprised of an 18.8% increase in attendance and a 0.1% increase in box office
revenue per patron.
The Corporation's Canadian theatres reported an increase in admission revenue of
24.5% (when measured in Canadian dollars) for the three months ended March 31,
1996 compared to the same period in 1995. This increase was the result of an
increase in attendance of 26.9% and a decrease in box office revenue per patron
of 2.4% over the same period in 1995. The strong performance of films such as
Broken Arrow, The Bird Cage, 12 Monkeys, Dead Man Walking and Sense and
Sensibility in the first quarter of 1996 was responsible for the attendance
improvement in both the Corporation's United States and Canadian theatres.
The Corporation's United States concession revenue increased by 12.2% for the
three months ended March 31, 1996 compared to the same period in 1995. The
attendance increase of 8.6%, combined with an increase in concession revenue per
patron of 3.6% for the three months ended March 31, 1996 was responsible for the
increase in concession revenue. Adjusting for theatres sold, the Corporation's
United States theatres recorded an increase in concession revenue of 22.6%,
reflecting the attendance increase of 18.8% and an increase in concession
revenue per patron of 3.8%. The Corporation's Canadian concession revenue
increased by 31.2% (when measured in Canadian dollars) for the three months
ended March 31, 1996 compared to the same period in 1995, reflecting the
increase in attendance of 26.9% and an increase in concession revenue per patron
of 4.3%.
The gross margin from theatre operations (consisting of revenue from theatre
operations less film cost, cost of concessions, advertising, theatre payroll,
occupancy and supplies and services), when expressed as a percentage of theatre
operating revenue, increased for the three months ended March 31, 1996 to 16.5%
from 10.1% for the same period in 1995. The increase in the gross margin was
attributable to the increased revenue experienced in both the Corporation's
Canadian and United States theatres and the impact of the sale of certain
theatres in Florida and Georgia.
General and administrative expenses decreased by 7.6% for the three months ended
March 31, 1996 when compared to the same period of 1995. This decrease reflects
the impact of certain one time costs incurred in the first quarter of 1995 and
the sale of certain theatres in Florida and Georgia.
Interest on long-term debt decreased by 2.1% during the three months ended March
31, 1996 compared to the same period in 1995. Management anticipates that
interest on long-term debt will continue to decline during at least the next two
fiscal quarters of 1996 as a result of the initial application of the equity
proceeds against the Corporation's long-term debt.
In the past twelve months 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.
7
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
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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 11.1 Statement re Computation of Per Share Earnings.
(b) Exhibit 27 Financial Data Schedule
(c) The Corporation did not file any reports on Form 8-K during the quarter
ended March 31, 1996.
SIGNATURES
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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
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(Registrant)
Date May 13, 1996 Allen Karp
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Allen Karp
President and Chief
Executive Officer
Date May 13, 1996 Ellis Jacob
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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, 1996
EXHIBIT INDEX
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Sequential
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Exhibit Description Page Number
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11.1 Statement re Computation of Per Share Earnings. 14
27 Financial Data Schedule 15