Transcript Canada`s #1 Film Exhibitor

CINEPLEX GALAXY
Q2 Report
Canada’s #1 Film Exhibitor
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Cineplex Galaxy
Locations: 86
Screens:
775
Locations: 80
Screens:
785
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Rationale for the Acquisition
The Leading Film Exhibitor in Canada
Immediately Accretive to Distributable Cash
Complementary Operations will Lead to Cost
Savings
Opportunities to Increase Distributable Cash
through Revenue Growth
Addition of High Quality theatres in
Metropolitan Markets
Superior Combined Management
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Famous Players Acquisition
Deal signed June 10, 2005
Deal closed July 22, 2005
Organization structure finalized July 29,
2005
Sale of real estate to Rio Can completed
August 4, 2005
Employee integration/terminations
completed August 5, 2005
Announced sale of 27 locations to Empire
on August 22, 2005 for gross proceeds of
approx. $83 million
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Executive
Ellis Jacob
President & CEO
Dan McGrath
Executive Vice
President
Robert O'Brien
Sr Vice
President,
Human
Resources/
Payroll
Michael
McCartney
Sr Ex VP, Film
Programming
Gord Nelson
Chief Financial
Officer
Michael
Kennedy
Executive VP,
Film
Programming
Jeff Kent
Chief
Technology
Officer
Anne Fitzgerald
Sr Vice
President Legal
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Top Tier Theatre Brands
SilverCity
22 theatres/286 screens
BC, AB, MB, ON, QC
Colossus
3 theatres/56 screens
QC, ON, BC
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Top Tier Theatre Brands
Coliseum
4 theatres/49 screens
3 in ON, QC
Paramount
4 theatres/53 screens
BC, AB, ON, QC
“Renaming opportunity”
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Top Tier Theatre Brands
Premium “Urban” Market Brand
51 theatres/489 screens
Mid-size market brand
Community focus
23 theatres/193 screens
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Financing the Acquisition
Gross Proceeds
Subscription Receipts
$110 million
6.0% Convertible
Debentures
$105 million
Incremental Borrowing
under Credit Facility
$259 million
Number of Units
6,835,000
Subsequent repayments of incremental borrowing
RioCan transaction
$67 million
Empire sale (27 theatres)
$83 million
Remaining divestitures
$TBD
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Synergies
Completed to Date:
Employee head count reduced by 35% -- well on the way
to meeting $20mm target
Head office employee integration/terminations completed
August 5, 2005
Planned to Occur:
Vendor Contract negotiations
Head office facility integration - December 31, 2005
Technology integration – October 31, 2005
Merging the Media businesses – October 31, 2005
Marketing efficiencies – single programs for all brands
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Strong Market Share
Market Share of Canadian Box Office Revenues
Q2 YTD 2004
Q2 YTD 2005
Other: 7.6%
Guzzo: 3.1%
Landmark: 2.9%
Cineplex Galaxy:
31.4%
Other: 6.9%
Guzzo: 3.0%
Landmark: 3.1%
Empire: 5.7%
Empire: 6.0%
AMC: 6.5%
AMC: 6.3%
Famous Players:
42.8%
Cineplex Galaxy:
32.1%
Famous Players:
42.6%
Source: A.C. Nielsen EDI data
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Strong Market Share
Market Share of Canadian Box Office Revenues
Q2 YTD 2005
Cineplex Galaxy
Other: 6.9%
Guzzo: 3.0%
Landmark: 3.1%
Combined After Divestiture
Cineplex Galaxy:
32.1%
Other: 9.8%
Cineplex Galaxy:
64.2%
Guzzo: 3.0%
Landmark: 3.1%
Empire: 6.0%
Empire: 13.6%
AMC: 6.3%
AMC: 6.3%
Famous Players:
42.6%
Source: A.C. Nielsen EDI data
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Diverse Supply of Films
Cineplex Galaxy Film Supply by Distributor
YTD Q2 2005
Other: 6.2%
MGM: 4.5%
Alliance Atlantis: 13.5%
DreamWorks: 5.8%
Paramount 6.0%
Sony 12.1%
Universal 10.5%
Twentieth Century
Fox.: 22.5%
Buena Vista 5.9%
Warner Bros:
13.0%
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Consistent Long-Term Box Office Revenue Growth
Canadian Box Office Revenues
1965 - 2004
$ Millions
$1,000
CAGR since 1965: 6.3%
$750
$500
$250
$0
1965
1970
1975
1980
1985
1990
Canadian Recessionary Periods
1995
2000
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Current Year CGX vs. Industry
Q1
Q2
Q2 YTD
Canadian Industry (*)
- 5.4% - 16.9%
- 11.7%
Cineplex Galaxy
- 4.7% - 13.2%
- 9.2%
(*) source: Motion Picture Theatre Association of Canada
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Consistent Supply of Theatrical Releases
US Annual Film Releases
510
462
509
471
453
461
478
482
467
473
483
411
Films
greater than
$100 million
gross
8
12
10
15
16
18
21
22
20
24
28
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1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
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Source: Motion Picture Association of America, 2003
Highest Grossing Films in 2005
In Millions of dollars
Star Wars Episode3
Revenge of the Sith
$379.1
War of the Worlds
Batman Begins
$230.9
$202.5
Charlie and the
Chocolate Factory
Madagascar
$183.6
$194.8
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Highest Grossing Films in 2004
In Millions of Dollars
Shrek 2
Spiderman 2
$441.2
$373.5
The Passion of the
Christ
Meet the Fockers
The Incredibles
$279.2
$261.4
$370.2
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Upcoming Films for 2005
Harry Potter
and the Goblet
of Fire
The Lion, the
Witch and the
Wardrobe
November 2005
December 2005
King Kong
December 2005
Fun with Dick
and Jane
December 2005
The Producers
December 2005
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Increasing Revenue Per Patron
Revenue Per Patron
$0.67
$ 11.12
$0.72
$2.77
$6.65
2001
$9.83
$0.54
$2.64
$10.27
$0.53
$10.84
$ 11.06
$ 11.36
$0.62
$0.83
$2.89
$3.00
$3.00
$3.15
$6.97
$7.28
$7.40
$7.44
$7.38
2002
2003
2004
Pro forma normalized values
Box Office
Q2 YTD 2004 Q2 YTD 2005
Concession
Ancillary
$12.31
$1.04
$3.35
$7.92
Pro forma
LTM March
2005
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Box Office Pricing
Strategy:
Cineplex Galaxy – Theatre based pricing
strategy
Famous Players – Market based pricing
strategy
Action Plan:
Integrate to theatre based pricing
strategy
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Expanded Concessions Driving Revenue per Patron
Average Concession Dollars per Patron
$2.64
2001
$2.77
$2.89
2002
2003
$3.00
2004
$3.00
$3.15
Q2 2004 YTD Q2 YTD 2005
$3.35
Pro forma
LTM March
2005
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Significant Other Revenue Contribution
Ancillary Revenues ($mill)
$62.5
+ 25.8%
$13.4
2001
$17.4
$20.9
$22.8
$9.5
2002
2003
Advertising
2004
Pro forma
LTM March
2005
Games
$12.0
Q2 YTD 2004 Q2 YTD 2005
Other
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New Projects Announced
Projected
Opening
Project
Screens
Barrhaven
7
Oct. 21 2005
Aurora
10
Nov. 18 2005
Milton
8
Spring 2006
Brockville
6
Spring 2006
Saskatoon
12
Spring 2006
Brossard
16
Spring 2006
Burloak
12
Fall 2006
Brand
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Cost Control
Prominent market position allows for
effective management of direct theatrelevel costs
Best practices amongst both companies
will result in incremental operating
savings and revenue enhancements
Significant focus on managing costs to
the business volumes
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Corporate Initiatives 2005
New Theatres:
Theatre Rebranding
On-Screen Advertising Business
Integration
POS System integration
Loyalty Program
Digital Advertising Pre-Show Network
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Threats to the Business
Threats:
Piracy
DVD release window erosion
Quality of Film Product
Opportunities:
Social aspect of an out-of-home experience vs.
stay at home
Theatre technology is far superior to “in-home”
television system and screen
Entertainment Destinations
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Annual Total Revenue
($ millions)
1,278
Screen Count
613
$197.5
2000
678
$250.2
2001
694
740
775
$316.4
$330.0
$353.7
2002
2003
2004
$740.0
Pro Forma
LTM March
2005
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Annual Box Office
($ millions)
$475.9
16.0% CAGR
$130.1
2000
$213.9
$221.2
2002
2003
$235.4
$169.3
2001
2004
Pro forma
LTM March
2005
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Annual Attendance
(millions)
60.1
10.8% CAGR
21.1
2000
25.5
2001
30.7
30.4
31.8
2002
2003
2004
Pro forma
LTM March
2005
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Annual Concession Revenues
($ millions)
$201.5
15.9% CAGR
$52.9
2000
$67.2
2001
$85.1
2002
$88.0
$95.5
2003
2004
Pro forma
LTM March
2005
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Annual EBITDA
($ millions)
$117.5
19.4%
20.4%
21.1%
$97.5
EBITDA Margin
16.7%
$63.0
12.2%
$68.5
$74.5
13.2%
15.6%
$41.7
$24.1
2000
2001
2002
Adjusted EBITDA Margins – LTM March 2005:
CGX
FP
20.2%
2003
2004
P ro f orma
P ro f orma
LT M March
LT M March
2005 without
2005 with
synergies
synergies
9.0%
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Flexible Financing Structure
Development Facility
– Available - $60 million
Working Capital Facility
– Available - $50 million
Term Facility
– Available - $315 million (reduced with
divestiture proceeds)
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Leverage
$ millions
Debt prior to acquisition of FP
Incremental acquisition debt
$141
259
Repayment – RioCan transaction
<67>
Repayment – Empire transaction
<83>
Repayment – additional divestiture proceeds
TBD
Net debt
$250
Pro forma LTM March 2005 Adjusted EBITDA
Non-cash items
Pro forma LTM March 2005 “Adjusted Cash EBITDA” - pre-synergies
Synergies
Pro forma LTM March 2005 “Adjusted Cash EBITDA” – post-synergies
$101.4
6.4
$107.8
20.0
$127.8
Pro forma LTM March 2005 Leverage – pre-synergies(*)
2.3 x
Prom forma LTM March 2005 Leverage – post-synergies (*)
2.0 x
(*) excludes debt reduction with additional divestiture proceeds
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Focus on Value Creation
The number one Canadian film exhibitor with a
market share of 64.2 %+ of Canadian Box
Office
Own and operate the five top-tier entertainment
brands in Canada
Significant opportunities to grow distributable
cash
Only exhibitor in Canada with a continuing build
program
Marketing power of the brands – reach more
than 85 million Canadians across the country.
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CINEPLEX GALAXY
Contact: Gord Nelson, Chief Financial Officer, 416-323-6602
Pat Marshall, Vice President Investor Relations, 416-323-6648
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