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1、 ANNUAL REPORT 2019 LETTER TO SHAREHOLDERS Dear fellow shareholders,As a result of growth across many of our businesses,Cineplex reported strong results for 2019.Our diversified businesses continued to build scale and show more meaningful returns,resulting in total revenue of$1.7 billion,up 3.3%,yea
2、r over year,as we achieved all-time annual records for media,amusement and food service revenue.Despite the strong results,adjusted EBITDAaL and net income were negatively impacted by transaction costs related to the proposed Cineworld Group PLC(“Cineworld”)acquisition,which was announced in Decembe
3、r,as well as the adoption of IFRS 16.Shifting our focus to key accomplishments,there was much to celebrate in 2019.We opened two new theatres,added a new VIP Cinemas to an existing theatre,and added five new 4DX auditoriums and five new ScreenX auditoriums to our circuit.We also introduced Junxion o
4、ur new Cinema of the Future concept that combines cinema with location based entertainment to create the perfect entertainment destination for any occasion.In partnership with Tangerine Bank,Cineplex Media announced Tangerine Tuesdays a continuation of our popular Tuesday ticket program,where guests
5、 enjoy discounted movie admissions and free popcorn upgrades for Tangerine customers.Cineplex Digital Media saw continued growth with existing clients and completed the deployment of a digital network at approximately 630 AMC Theatres locations across the United States.During the year,we opened two
6、new locations of The Rec Room in Mississauga,Ontario and St.Johns,Newfoundland,as well as the first two reinvented Playdium concepts in Brampton and Whitby,Ontario.SCENE also celebrated a big milestone last year as we reached the 10 million member mark in September.In December 2019,we announced that
7、 we had entered into an agreement to be acquired by Cineworld.As the entertainment industry continues to transform,the pending transaction ensures that Cineplex is part of the next era of global entertainment.It means that our business,particularly our network of 165 movie theatres across Canada,has
8、 access to global opportunities in an evolving entertainment landscape.Subsequent to year end,Cineplex and Cineworld shareholders approved the proposed acquisition and management is working to obtain the remaining required approvals to complete the transaction.Since going public in 2003,we have work
9、ed hard to deliver value to our shareholders,and we are confident that the pending transaction with Cineworld does just that.I want to say thank you to our shareholders for their continued support,to our Board of Directors for their guidance and insight and to our 13,000 employees across Canada and
10、the U.S.for their hard work and commitment throughout the year.Sincerely,Ellis Jacob President and CEO Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS1MANAGEMENTS DISCUSSION AND ANALYSISFebruary 11,2020 The following managements discussi
11、on 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
12、 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 Dece
13、mber 31,2019 and all amounts are in Canadian dollars.MANAGEMENTS DISCUSSION AND ANALYSIS CONTENTSSection ContentsPage1Overview of Cineplex2Business strategy3Cineplexs businesses94Overview of operations5Results of operations6Balance sheets347Liquidity and capital resources368Adjusted free cash flow a
14、nd dividends419Share activity10Seasonality and quarterly results4411Related party transactions4612Significant accounting judgments and estimation uncertainties4613Accounting policies14Risks and uncertainties5115Controls and procedures5816Subsequent event5917Outlook5918Non-GAAP measures6219Reconcilia
15、tion672715184347Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS2Non-GAAP MeasuresCineplex reports on certain non-GAAP measures that are used by management to evaluate performance of Cineplex.In addition,non-GAAP measures are used in meas
16、uring compliance with debt covenants.Because non-GAAP measures do not have standardized meanings,securities regulations require that non-GAAP measures be clearly defined and qualified,and reconciled to their nearest GAAP measure.The definition,calculation and reconciliation of non-GAAP measures are
17、provided in Section 18,Non-GAAP measures.Forward-Looking StatementsThis MD&A contains“forward-looking statements”within the meaning of applicable securities laws,such as statements concerning anticipated future events,results,circumstances,performance or expectations that are not historical facts.Th
18、ese statements are not guarantees of future performance and are subject to numerous risks and uncertainties,including those described in this MD&A.Those risks and uncertainties include adverse factors generally encountered in the film exhibition industry such as poor film product and unauthorized co
19、pying;the risks associated with national and world events,including war,terrorism,international conflicts,natural disasters,extreme weather conditions,infectious diseases,criminal acts,changes in income tax legislation;and general economic conditions.Many of these risks and uncertainties can affect
20、our actual results and could cause our actual results to differ materially from those expressed or implied in any forward-looking statement made by us or on our behalf.All forward-looking statements in this MD&A are qualified by these cautionary statements.These statements are made as of the date of
21、 this MD&A and,except as required by applicable law,we undertake no obligation to publicly update or revise any forward-looking statement,whether as a result of new information,future events or otherwise.Additionally,we undertake no obligation to comment on analyses,expectations or statements made b
22、y third parties in respect of Cineplex,its financial or operating results or its securities.Additional information,including Cineplexs Annual Information Form,can be found on SEDAR at .1.OVERVIEW OF CINEPLEXCineplex is a top-tier Canadian brand that operates in the film entertainment and content,amu
23、sement and leisure,and media sectors.As a leading entertainment and media company,Cineplex welcomes over 70 million guests annually through its circuit of theatres and location-based entertainment(“LBE”)venues across the country.Cineplex also operates successful businesses in digital commerce(Cinepl
24、exS),food service,alternative programming(Cineplex Events),cinema media(Cineplex Media),digital place-based media(Cineplex Digital Media“CDM”)and amusement solutions(Player One Amusement Group“P1AG”).Additionally,Cineplex operates a LBE business through Canadas newest destinations for Eats&Entertain
25、ment(The Rec Room),and complexes designed for teens and families(Playdium)as well as exciting new sports and entertainment venues across Canada(Topgolf).Cineplex is a joint venture partner in SCENE,Canadas largest entertainment loyalty program.Cineplexs theatre circuit is concentrated in major metro
26、politan and mid-sized markets.As of December 31,2019,Cineplex owned,leased or had a joint venture interest in 1,693 screens in 165 theatres from coast to coast.On December 15,2019,Cineplex entered into an arrangement agreement(the“Arrangement Agreement”)with Cineworld Group,plc,(“Cineworld”),whereby
27、 Cineworld agreed to indirectly acquire all of the issued and outstanding common shares of Cineplex(“Shares”)for$34.00 per Share in cash pursuant to a statutory plan of arrangement(the“Cineworld Transaction”).The Cineworld Transaction is supported by Cineplexs Board of Directors,and is subject to ap
28、proval by the shareholders of both Cineplex and Cineworld and receipt of required regulatory and court approvals.The transaction is expected to close during the first half of 2020.Upon closing,the Cineplex Shares will cease trading on the Toronto Stock Exchange and Cineplex would become a wholly-own
29、ed subsidiary of Cineworld.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS3CineplexTheatre locations and screens at December 31,2019ProvinceLocationsScreens3D DigitalScreensUltraAVXIMAXScreens(i)VIPAuditoriumsD-BOXAuditoriumsReclinerAudi
30、toriumsOtherScreens(ii)Ontario68730358411348471059Quebec20250981034711British Columbia252371251631516391Alberta192081122021116426Nova Scotia129144112Saskatchewan654283133161Manitoba549261132New Brunswick5412022Newfoundland&Labrador320911Prince EdwardIsland21361TOTALS1651,6938269425849721317Percentag
31、e ofscreens49%6%1%5%6%13%1%(i)All IMAX screens are 3D enabled.Total 3D screens including IMAX screens are 851 screens or 50%of the circuit.(ii)Other screens includes 4DX,Cineplex Clubhouse and ScreenX.Cineplex-Theatres,screens and premium offerings in the last eight quarters20192018Q4Q3Q2Q1Q4Q3Q2Q1T
32、heatres165165165165164165164163Screens1,6931,6951,6951,6921,6861,6961,6831,6763D Digital Screens826827826824821826816811UltraAVX Screens9493939090908887IMAX Screens2525252525252524VIP Auditoriums8479797575756363D-BOX Locations9792928989898682Recliner Screens213182182173173173155149Other Screens17544
33、4321Cineplex-LBE-at December 31,2019ProvinceThe Rec RoomPlaydiumOntario32Alberta3Newfoundland&Labrador1TOTALS72Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS41.1 FINANCIAL HIGHLIGHTSFinancial highlightsFourth QuarterFull Year(in thousan
34、ds of dollars,except theatre attendance inthousands of patrons and per Share and per patronamounts)20192018 Change(i)20192018 Change(i)Revised andRestated(i)Revised andRestated(i)Total revenues(iii)$443,220$427,8433.6%$1,665,146$1,612,4383.3%Theatre attendance16,84916,992-0.8%66,36069,272-4.2%Net in
35、come from continuing operations$4,668$29,262-84.0%$36,516$85,459-57.3%Net loss from discontinued operations$(1,196)$(2,108)NM$(7,625)$(8,503)NMNet income$3,472$27,154-87.2%$28,891$76,956-62.5%Box office revenues per patron(“BPP”)(v)$10.79$10.730.6%$10.63$10.461.6%Concession revenues per patron(“CPP”
36、)(v)$6.81$6.534.3%$6.73$6.365.8%Adjusted EBITDA(v)$106,529$83,35127.8%$405,786$262,35754.7%Adjusted EBITDAaL(i)(iv)(v)$62,327$80,039-22.1%$230,546$247,295-6.8%Adjusted EBITDAaL margin(i)(iv)(v)14.1%18.7%-4.6%13.8%15.3%-1.5%Adjusted free cash flow(v)$39,127$60,842-35.7%$168,455$182,846-7.9%Adjusted f
37、ree cash flow per Share(v)$0.618$0.961-35.7%$2.660$2.887-7.9%Earnings per Share(“EPS”)from continuing operations-basic and diluted(iv)$0.08$0.46-82.6%$0.58$1.35-57.0%EPS from discontinued operations-basic and diluted$(0.02)$(0.03)-33.3%$(0.12)$(0.13)-7.7%EPS-basic and diluted(iv)$0.06$0.43-86.0%$0.4
38、6$1.22-62.3%(i)Prior period figures have been revised as applicable per IFRS 16 and restated as applicable per IFRS 5 to conform to current period presentation.See Section 13,Accounting policies and Section 19,Reconciliation for further details.(ii)Throughout this MD&A,changes in percentage amounts
39、are calculated as 2019 value less 2018 value.(iii)All amounts are from continuing operations.See Section 13,Accounting policies.(iv)2019 includes expenses related to the Cineworld Transaction in the amount of$11.7 million.(v)See Section 18,Non-GAAP measures.Total revenues for the fourth quarter of 2
40、019 increased 3.6%,or$15.4 million to an all-time quarterly record of$443.2 million as compared to the prior year period,primarily due to increases in media and food service revenues.Media revenues increased 20.1%,to an all-time quarterly record of$69.5 million as a result of all-time quarterly reco
41、rds for both Cinema Media which grew by$2.0 million to$42.2 million due to increased in-theatre advertising and Digital Placed-Based Media which increased by$9.6 million to$27.4 million as a result of higher project installation revenues.Theatre food service revenues increased$3.7 million(3.3%)to a
42、fourth quarter record of$114.7 million as a result of a fourth quarter record CPP of$6.81,despite a 0.8%decrease in theatre attendance.Combined with the increased results from LBE due to additional locations of The Rec Room and the recently launched reinvented Playdium,total food service revenues in
43、creased$4.4 million(3.7%)to a fourth quarter record of$125.2 million.Box office revenues decreased$0.6 million(0.3%)to$181.8 million due to the decrease in attendance,partially offset by a fourth quarter record BPP of$10.79.Amusement revenues were flat compared to the prior year at$53.5 million due
44、to decreased route revenue at P1AG which was offset by the impact of the growth in LBE locations.General and administrative(“G&A”)costs increased$16.2 million due to costs related to the Cineworld Transaction and share-based compensation expenses as a result of the terms of the Arrangement Agreement
45、.Despite the all-time quarterly record for revenue,Cineplex reported adjusted EBITDAaL of$62.3 million,a decrease of$17.7 million or 22.1%as compared to the prior year period primarily due to expenses related to the Cineworld Transaction in the amount of$11.7 million.Net income was negatively impact
46、ed by these transaction costs and$12.1 million of non-cash interest expenses arising as a result of the Arrangement Agreement.The adoption of IFRS 16 also negatively impacted net income by approximately$5.8 million as compared to 2018.In total,net income was negatively impacted by$23.4 million or$0.
47、37 per share as compared to 2018.Adjusted free cash flow per Share decreased 35.7%to$0.618 per Share.Total revenues of$1.7 billion for the year ended December 31,2019 increased 3.3%,or$52.7 million compared to the prior year as a result of all-time annual records for food service,media and amusement
48、 revenues.The 4.2%decrease in theatre attendance more than offset the$0.17(1.6%)increase in BPP to an all-time annual record of$10.63 resulting in an$18.7 million(2.6%)decrease to box office revenues.However,as a result of an all-time record for CPP at$6.73,theatre food service revenues increased$5.
49、9 million(1.3%)to an all-time record of$446.6 million.Total media revenues increased$33.9 million(20.8%)to an all-time annual record of$196.8 million due to all-time annual records for cinema Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYS
50、IS5media and digital placed-based media revenues.Amusement revenues increased$22.4 million(10.9%)to an all-time annual record of$228.2 million due to increased route revenues and distribution sales from P1AG and the growth in the LBE locations.Adjusted EBITDAaL decreased 6.8%from$247.3 million to$23
51、0.5 million mainly due to the increase of G&A due to costs related to the Cineworld Transaction.Net income was negatively impacted by these transaction costs and$12.1 million of non-cash interest expenses arising as a result of the Arrangement Agreement.The adoption of IFRS 16 also negatively impact
52、ed net income by approximately$25.5 million as compared to 2018.In total,net income was negatively impacted by$43.1 million or$0.68 per share as compared to 2018.Adjusted free cash flow per Share decreased 7.9%,from$2.887 in 2018 to$2.660 in 2019.On January 1,2019,Cineplex adopted the new accounting
53、 standard IFRS 16,Leases(“IFRS 16”).The new standard has a significant impact on the balance sheet,statement of operations and statement of cash flows.Under the provisions of this standard,substantially all of Cineplexs leases are recorded on the balance sheet as right-of-use assets and correspondin
54、g lease obligations.Depreciation and interest expense related to the right-of-use asset and lease obligations are deducted in computing net income.As a result,there is a significant impact on EBITDA,as well as impacts on net income and earnings per share.There is no impact on adjusted free cash flow
55、.Cineplex has applied IFRS 16 using the modified retrospective approach and as a result the standard has been applied prospectively and comparative historical information has not been restated.Accordingly,new non-GAAP measures including adjusted EBITDAaL and associated adjusted EBITDAaL margin have
56、been introduced to ensure comparability of periods.Adjusted EBITDAaL represents adjusted EBITDA as previously calculated reduced by current period cash rent which is allocated between interest expense and a reduction of the lease obligation under IFRS 16(see Section 18,Non-GAAP measures).Presentatio
57、n of prior period results have been revised to provide a similar comparator to the current period.During the quarter ended September 30,2019,Cineplex initiated a review process of WGNs online esports business,engaging a third-party adviser to identify a strategic equity partner.Cineplex may retain a
58、 minority equity interest in the operations of the business.Cineplex has measured,presented and disclosed the financial information of WGN as a discontinued operation in accordance with IFRS 5,Non-current assets held for sale and discontinued operations(“IFRS 5”).As a result,prior period figures hav
59、e been retroactively restated to exclude the results related to discontinued operations.Other than where disclosed,discussions of results in the MD&A reference amounts for continuing operations only.1.2 KEY DEVELOPMENTS IN 2019 The following describes certain key business initiatives undertaken and
60、results achieved during 2019 in each of Cineplexs core business areas:FILM ENTERTAINMENT AND CONTENTTheatre Exhibition Reported annual box office revenues of$705.5 million,a 2.6%decrease from 2018 due to a 4.2%decrease in theatre attendance,despite a 1.6%increase in BPP to$10.63.Reported an annual r
61、ecord BPP of$10.63 for Cineplex,$0.17 or 1.6%higher than$10.46 reported during 2018.Opened two new theatres,Cineplex Cinemas Park Royal and VIP in Vancouver,British Columbia,an eleven screen theatre featuring all recliner seating as well as an UltraAVX screen,D-BOX Motion Seats and four VIP auditori
62、ums;and the other,Cineplex Cinemas at The Centre in Saskatoon,Saskatchewan,a seven screen theatre featuring all recliner seating as well as an UltraAVX screen,D-BOX Motion Seats and Cineplex Clubhouse.Opened a new VIP Cinema in Oakville,Ontario in December at Cineplex Cinemas Winston Churchill and V
63、IP with five retrofitted luxury auditoriums.Opened five new 4DX auditoriums,two in Alberta at the Scotiabank Theatre Chinook in Calgary and the Scotiabank Theatre Edmonton;and three in Ontario at the Cineplex Cinemas Winston Churchill in Oakville,Cineplex Cinemas Hamilton Mountain and the Scotiabank
64、 Theatre Ottawa.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS6 Opened five new ScreenX auditoriums:Cineplex Odeon Sunridge Spectrum Cinemas in Calgary,Alberta;Cineplex Odeon South Edmonton Cinemas in Alberta;Scotiabank Theatre Vancouve
65、r in British Columbia;Scotiabank Theatre Toronto in Ontario;and Cineplex Cinemas Yorkdale in Toronto,Ontario.Announced plans for Junxion,a new entertainment concept which will feature a cinema with reclining seats and in-seat food service,a space for outdoor screenings,an open lobby and stage for ev
66、ents,performances,amusement games,virtual reality experiences(“VR”)from VRstudios Inc.(“VRstudios”)and a food hall which will include a bar and an indoor food truck.Cineplex plans to open 8-10 Junxion locations with the first location at the Erin Mills Town Centre in Mississauga,Ontario which is sch
67、eduled to open in 2020.Announced plans for a new all-in-one entertainment complex at Kildonan Place in Winnipeg,Manitoba scheduled to open in 2021.The entertainment complex will include a six screen theatre featuring all recliner seating,an UltraAVX screen,a large amusement game and attractions area
68、 featuring VR and a range of dining experiences.Announced plans for two new Cineplex VIP Cinemas in Montreal,Quebec:one at the Cineplex Cinemas Forum which is expected to open in 2020 and the other at the Royalmount which is expected to open in 2022.Both locations will include five luxury auditorium
69、s and a fully licensed lounge.Theatre Food Service Reported record annual theatre food service revenues of$446.6 million,a 1.3%increase from 2018 due to an annual record CPP of$6.73,a$0.37 or 5.8%increase from 2018.During the year,Cineplex expanded alcohol beverage service to an additional 52 theatr
70、es,now totalling 87(excluding VIP).During the year,added nine additional locations to the Uber Eats delivery platform,which now provides home delivery from 101 theatres.Announced an expanded partnership with Skip the Dishes,which now provides home delivery from 130 theatres.Alternative Programming A
71、lternative Programming(Cineplex Events)included the theatrical release of the family feature Arctic Dogs,Opera performances from The Metropolitan Opera,The Bolshoi Ballet,Fleabag from The National Theatre along with concerts from Metallica and Roger Waters.Cineplex International film programming fea
72、tured strong performing Chinese,Filipino,Hindi and Punjabi-language titles in select markets across the country.Digital Commerce Online and mobile ticketing represented 35%of total theatre admissions during the year,up from 28%in the prior year.Cineplex Store continued to show significant growth wit
73、h a 57%increase in active monthly users,reaching over 1.3 million users.MEDIA Reported record annual media revenues of$196.8 million,20.8%higher than 2018 as a result of record cinema media and digital place-based media revenues.Cinema Media Cinema media reported record revenue of$115.4 million in 2
74、019,$8.6 million or 8.0%higher than 2018,primarily due to increases in show-time and pre-show advertising.Cineplex Media,in partnership with Tangerine Bank,announced Tangerine Tuesdays,a continuation of the popular Tuesday ticket program where guests can enjoy discounted movie admission at theatres,
75、as well as free popcorn upgrades.Digital Place-Based Media Reported record revenues of$81.3 million in 2019,an increase of$25.4 million or 45.3%,compared to 2018 mainly due to higher project installation revenues.Completed the deployment of AMC theatres digital network at approximately 630 locations
76、 across the United States,including its box office signage,theatre menu boards and other ancillary signage.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS7 Announced a new partnership with Mountain Equipment Co-op(“MEC”)to deliver a uniq
77、ue digital signage to optimize the retail experience for customers at MEC stores across Canada.AMUSEMENT AND LEISUREAmusement Solutions Reported record annual revenues of$189.1 million in 2019($10.9 million from Cineplex theatre gaming and$178.2 million from all other sources of revenues).This$13.0
78、million increase over the prior year is mainly due to increased route operations revenues and distribution sales.Location-based Entertainment Reported total annual revenues of$79.2 million including food service revenues of$36.7 million,amusement revenues of$39.1 million and other revenues of$3.4 mi
79、llion,an increase of$12.7 million(19.1%)as compared to 2018.Opened two additional locations of The Rec Room:one located at the Square One Shopping Centre in Mississauga,Ontario and the other at the Avalon Mall in St.Johns,Newfoundland.Opened Canadas first reinvented Playdium entertainment complex in
80、 Brampton,Ontario and the second complex in Whitby,Ontario.Announced plans for two new locations of The Rec Room:one in the Granville Entertainment District in Vancouver,British Columbia which is expected to open in 2021,and the other,Quebecs first location of The Rec Room at Royalmount in Montreal,
81、Quebec,which is expected to open in 2022.Announced plans for two Playdium locations:one in Dartmouth,Nova Scotia at the Dartmouth Crossing Shopping Centre,and the other at Quartier DIX30 in Brossard,Quebec.Both locations are expected to open in 2020.LOYALTY Membership in the SCENE loyalty program in
82、creased by 0.7 million in 2019,reaching 10.3 million members at December 31,2019.SCENE celebrated 10 million members with National No Excuses Day on September 27,2019 offering SCENE members exclusive promotional offers,including half off point redemptions.CORPORATE Cineplex was named by Waterstone H
83、uman Capital one of Canadas 10 Most Admired Corporate Cultures in the large enterprise category for 2018,the third time that Cineplex has won the award that celebrates best-in-class Canadian organizations.Cineplex was recognized by Brand Z as one of the Top 40 Most Valuable Canadian Brands and honou
84、red with the Best Brand Experience Award,one of three special awards presented by Brand Z.Entered into the Arrangement Agreement with Cineworld on December 15,2019.Effective with the May 2019 dividend,the Board of Directors of Cineplex(the“Board”)announced a monthly dividend increase of 3.4%to$0.150
85、 per share($1.80 on an annual basis)up from$0.145 per share($1.74 on an annual basis).As a result of the Arrangement Agreement,Cineplex does not expect to pay any further dividends after the dividend payable on February 28,2020,assuming the Cineworld Transaction is completed.Cineplex held its ninth
86、annual Community Day,raising over$175,000 in support of the Boys and Girls Clubs of Canada.2.BUSINESS STRATEGYCineplexs mission statement is“Passionately delivering exceptional experiences.”All of its efforts are focused towards this mission and it is Cineplexs goal to consistently provide guests an
87、d customers with exceptional experiences.Cineplexs operations are primarily conducted in three main areas:film entertainment and content,media and amusement and leisure,all supported by the SCENE loyalty program.Cineplexs key strategic areas of focus include the following:Continue to enhance and exp
88、and Cineplexs presence as an entertainment destination for Canadians in-theatre,at-home and on-the-go;Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS8 Capitalize on core media strengths and infrastructure to provide continued growth of C
89、ineplexs 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 leve
90、rage big data across the Cineplex ecosystems;and Pursue opportunities that are strategic,accretive and capitalize on Cineplexs 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 ancillary businesses
91、.Diversified Entertainment and Media CompanyKey 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
92、,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 i
93、s to maximize revenue per patron and increase the frequency of movie-going at Cineplexs theatres.While box office revenues(which include alternative programming)continue to account for the largest portion of Cineplexs revenues,expanded theatre food service offerings,cinema media,digital place-based
94、media,amusement and leisure,the Cineplex Store,promotions and other revenue streams have increased as a share of total revenues.Cineplex is committed to diversifying its revenue streams outside of the traditional theatre exhibition model through its media and amusement and leisure businesses.Althoug
95、h Cineplex focuses on growth initiatives,management remains vigilant in controlling costs without compromising experiences.Cineplex will continue to invest in new revenue generating activities,as it has in prior years.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMAN
96、AGEMENTS DISCUSSION&ANALYSIS9 (i)2019 includes expenses related to the Cineworld Transaction in the amount of$11.7 million.3.CINEPLEXS BUSINESSESCineplexs operations are primarily conducted in three main areas:film entertainment and content,media,and amusement and leisure,all supported by the SCENE
97、loyalty program.FILM ENTERTAINMENT AND CONTENTTheatre ExhibitionTheatre 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 o
98、f 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 the pri
99、mary channel for new motion picture releases and is the core business function of Cineplex.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 mov
100、ies.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-ra
101、y,pay-per-view,subscription video-on-demand as well as network television.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
102、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 ge
103、nres also benefits film exhibitors.In 2020,the studios are releasing a strong slate of films,including 1917,Bad Boys for Life,Birds of Prey:And the Fantabulous Emancipation of One Harley Quinn,Onward,A Quiet Place:Part II,Mulan,No Time to Die,Black Widow,Legally Blonde 3,Scoob!,Fast&Furious 9,Artemi
104、s Fowl,Wonder Woman 1984,Top Gun:Maverick,Free Guy,Minions:The Rise of Gru,Ghostbusters:Afterlife,Tenet,Jungle Cruise,Morbius,The Kings Man,Eternals,Godzilla vs.Kong and Raya and the Last Dragon.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANA
105、LYSIS10 Convenient and affordable form of out-of-home entertainment.Cineplexs BPP was$10.63 and$10.46 in 2019and 2018 respectively.Excluding the impact of Cineplexs premium-priced product,BPP was$9.17 and$8.94in 2019 and 2018 respectively.The movie-going experience continues to provide value and com
106、pares favorably 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.Providing a variety of premium and enhan
107、ced 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$13.69 in 2019,and accounted for 41.7%of total box office revenues in 2019.In response to the increased demand for premium entertainm
108、ent experiences,in 2019 Cineplex installed eight D-Box auditoriums,four UltraAVX auditoriums,five 4DX auditoriums,five ScreenX auditoriums,three Cineplex Clubhouse auditoriums and continues to expand its successful VIP offering,adding two new VIP locations in 2019.Recent enhancements to the current
109、circuit include the addition of all recliner seating at 7 locations,including 5 location retrofits.Cineplex announced plans for Junxion,a new entertainment concept which will feature a cinema with reclining seats and in-seat food service,a space for outdoor screenings,an open lobby and stage for eve
110、nts and performances,VR from VRstudios and a food hall which will include a bar and an indoor food truck.Cineplex also announced plans for a new all-in-one entertainment complex at Kildonan Place in Winnipeg,Manitoba which is scheduled to open in 2021.Reduced seasonality of revenues.Historically,fil
111、m exhibition industry revenues have been seasonal,with the most marketable motion pictures generally being released during the summer and the late-November through December holiday season.The seasonality of motion picture exhibition theatre attendance has become less pronounced as film studios have
112、expanded the historical summer and holiday release windows and increased the number of films released during traditionally weaker periods.In the next few years,Cineplex plans to open or renovate an average of two to three theatres per year and continue to expand its premium offerings through these n
113、ew theatres and existing locations.Cineplexs leading market position enables it to 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
114、practices and negotiating improved supplier contracts.Cineplex also continues to evaluate its existing theatres as it continues to replace or upgrade older theatres to state-of-the-art entertainment complexes including recliner retrofits in select theatres.Cineplex Inc.Managements Discussion and Ana
115、lysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS11The 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 countr
116、y,can use Cineplexs theatres and digital technology for annual meetings,product launches and employee or customer events,producing revenue streams independent of film exhibition.Theatre Food ServiceCineplexs theatre food service business offers guests a range of food choices to enhance their theatre
117、 experience while generating strong profit margins for the company.Cineplexs theatres feature its internally developed brands:Outtakes and Poptopia.Certain Cineplex theatres also feature popular fast food retail branded outlets(“RBOs”)including Starbucks and Pizza Pizza,among others.Cineplex continu
118、ally focuses on process improvements designed to increase the speed of service at the concession counter in addition to optimizing the RBOs available at Cineplexs theatres.Each of the wide range of menu items available at Outtakes locations,expanded liquor service available in theatres,partnerships
119、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 offer
120、ings to guests which contribute to an improved guest experience while also creating additional revenue opportunities.The execution of this strategy contributed to a record CPP of$6.73 in 2019,an increase of$0.37 from the previous record of$6.36 achieved in 2018.Alternative ProgrammingAlternative pro
121、gramming includes Cineplexs international film programming as well as content offered under its Event Cinema brand offerings,including The Metropolitan Opera,NFL Sunday Nights,sporting events,concerts and dedicated event screens.International film programming includes Bollywood content as well as Ca
122、ntonese,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 Cineplexs demographic reach and enhancing revenues.The success of Cineplexs alternative progr
123、amming 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 additi
124、onal content becomes available,Cineplex will continue to expand its alternative programming offerings.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS12Digital CommerceCineplexs digital products consist of ,the Cineplex mobile app and the
125、 Cineplex Store.Cineplex has developed 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,entertainmen
126、t news and box office reports as well as advertising and digital commerce opportunities.To complement ,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 lat
127、est movie choices and movie-related entertainment content and provide 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 visit
128、ors and advertisers,resulting in opportunities to generate additional revenues.The Cineplex Store rents and sells over 9,000 movies in digital form(TVoD movies).Cineplex also offers SuperTicket,a bundled offering that allows movie-goers to purchase a movie admission ticket and pre-order the digital
129、download of a movie at the same time.SuperTicket provides Cineplex with the flexibility to bundle offerings to consumers,providing enhanced value above and beyond an in-theatre or at-home experience.Cineplex continues to improve the user experience including releasing new Cineplex Store user interfa
130、ces and experiences across the website and multiple connected televisions and device apps.Cineplexs strong brand association with movies and well-established partnerships with movie studios combined with Cineplexs website,app and the Cineplex Store provide Cineplex with the ability to expand its tou
131、chpoints 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.MEDIACineplexs media businesse
132、s cover two major categories:cinema media,which incorporates advertising mediums related to theatre exhibition,and digital place-based media which provides digital signage solutions.(i)Media revenues for prior year periods have been restated to present revenue amounts from continuing operations.Cine
133、ma MediaCinema media incorporates advertising mediums related to theatre exhibition,both within Cineplexs own circuit of theatres as well as in competitors theatres through revenue sharing arrangements.Cineplexs core cinema media offerings include:Show-time advertising,which runs just prior to the m
134、ovie 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.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANA
135、LYSIS13 Digital lobby advertising and digital poster cases located in the highest-traffic areas featuring big,bold digital signage.Website and mobile advertising sales through and the Cineplex mobile app.Magazine advertising through Cineplex Magazine,which offers advertising opportunities in Canadas
136、 leading entertainment magazine.Select Cineplex theatres also offer the following media opportunities:Timeplay,a third-party app that allows Cineplex to sell media integrated into real-time content on the big screen,with movie-goers using the app to compete for prizes and receive special offers from
137、 Cineplex and advertisers.The Interactive Media Zone(“IMZ”),an interactive media experience allowing advertisers to engage and interact with Cineplex guests in high traffic lobby locations.Cineplexs theatres also provide opportunities for advertisers special media placements(including floor and door
138、 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 ta
139、ke 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.Cineplexs cinema medi
140、a 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
141、-Based MediaCineplexs digital place-based media designs,installs,maintains and operates digital signage networks in four verticals including digital out of home(in public spaces such as shopping malls and office towers),quick service restaurants,financial institutions and retailers.Cineplex medias a
142、dvertising 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 adver
143、tising 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,South America and Europe.AMUSEMENT AND LEISUREAmusement and l
144、eisure 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,enter
145、tainment and dining,including The Rec Room,Playdium and in the future,Topgolf.In addition to the two primary areas of operations,Cineplex is also focusing on opportunities related to location-based entertainment VR attractions.In 2018 Cineplex announced a strategic partnership with VRstudios,the lar
146、gest provider of turn-key,location-based virtual reality solutions.The agreement also includes a commercial partnership which will provide expansion opportunities in North America and internationally.In 2018,Cineplex also announced a new exclusive expansion agreement with The VOID that provides Cine
147、plex with the exclusive rights to operate The VOID concept in Canada.Cineplex plans to open a minimum of five VOID Experience Centres over the coming years,with the third location in Canada opened in the Mississauga Square One location of The Rec Room in 2019 featuring Jumanji:Reverse the Curse and
148、Avengers:Damage Control.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS14Amusement SolutionsCineplexs amusement solutions business generates revenues from the following activities in both Canada and the United States:Route operations:P1A
149、G collects a revenue share on games revenues earned by P1AG-owned amusement and vending equipment placed into locations such as family entertainment centres,arcades,theatres,restaurants,bars and other locations.Third party equipment sales.Operating family entertainment centres.In addition to expandi
150、ng Cineplexs amusement and gaming presence outside of its theatres,the acquisition and expansion of P1AG allowed Cineplex to vertically integrate its gaming operations.Cineplexs in-theatre gaming business features Cineplexs 38 XSCAPE Entertainment Centres as well as arcade games in select Cineplex t
151、heatres,with all of the games supplied and serviced by P1AG.Location-based EntertainmentCineplex operates LBE establishments under the brand names The Rec Room and Playdium and in the future Topgolf,as well as other family entertainment centres.The Rec Room is a social entertainment destination targ
152、eting millennials featuring a wide range of entertainment options including VR,simulation,redemption,video and recreational gaming,and a live entertainment venue for watching a wide range of entertainment programming.These entertainment options are complemented with an upscale casual dining environm
153、ent,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 tick
154、et sales for events held within the destination.Cineplex has opened seven locations of The Rec Room and has announced plans to open five additional locations in Barrie,Ontario,Burnaby,British Columbia,Winnipeg,Manitoba,Vancouver,British Columbia,and Montreal,Quebec in 2020 through 2022.Playdium is t
155、he Playdium brand concept relaunched for targeting families and teens in mid-sized communities across Canada.In 2019,Cineplex opened two locations of Playdium and announced its plans to open two additional locations in Dartmouth,Nova Scotia and Brossard,Quebec in 2020.Topgolf is a golf focused locat
156、ion-based sports and entertainment destination.Cineplex will build and operate Topgolfsports and entertainment venues across Canada through its majority-owned subsidiary TGLP.LOYALTYCineplex has a joint venture agreement with Scotiabank to operate the SCENE loyalty program,providing Cineplex with si
157、gnificant data and a more comprehensive understanding of the demographics and behaviors of its audience.Cineplex and Scotiabank each have a 50%interest in the program.SCENE is a customer loyalty program designed to offer members discounts and the opportunity to earn and redeem SCENE points.SCENE mem
158、bers can earn and redeem SCENE points for purchases at Cineplexs 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.The SCENE loyalty program has been well r
159、eceived as evidenced by the strong membership growth and high engagement and satisfaction levels of its program members.Membership in the SCENE loyalty program at December 31,2019 was approximately 10.3 million,an increase of approximately 0.7 million members during 2019.Through SCENE,Cineplex has g
160、ained a more thorough understanding of its customers,driven increased customer frequency,increased overall Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS15spending across its businesses and provides Cineplex with the ability to communic
161、ate directly and regularly with customers.The SCENE customer database has allowed Cineplex to segment SCENEs member population and provide special offers to Cineplexs guests,implement targeted marketing programs and deliver tailored messages to subsets of the membership base,providing members with r
162、elevant information and offers which in turn drive increased frequency and spend.Cineplex continues to influence consumer behaviour through the use of SCENE bonus points and experience upgrades for SCENE members in its initiatives as well as in partnership with movie studios.Cineplex has gained trem
163、endous insight into customer behaviour with over 10 years of data collected.Cineplex will continue to focus on leveraging this data through marketing automation to drive customer behaviour as well as accelerating the adoption of artificial intelligence and machine learning for more robust consumer i
164、nsight.SCENE continues to build its strategic marketing partnerships with participating partners across Canada,providing promotions and offerings.4.OVERVIEW OF OPERATIONSRevenuesCineplex generates revenues primarily from box office and food service sales.These revenues are affected primarily by thea
165、tre attendance levels and by changes in BPP and CPP.Box office revenues represented 42.4%of revenues in 2019 and continues to represent Cineplexs largest revenue component.Revenue mix%by period20192018201720162015Box office42.4%44.9%46.2%49.8%53.3%Food service29.0%29.5%28.5%28.8%30.5%Media11.8%10.1%
166、10.8%11.3%11.2%Amusement13.7%12.8%11.9%7.6%2.2%Other3.1%2.7%2.6%2.5%2.8%Total100.0%100.0%100.0%100.0%100.0%Cineplex has three reportable segments,film entertainment and content,media and amusement and leisure.The reportable segments are business units offering differing products and services and man
167、aged separately due to their distinct natures.These three reportable segments have been determined by Cineplexs chief operating decision makers.Revenue mix%by yearYear to date20192018Film Entertainment and Content72.8%75.5%Media11.8%10.0%Amusement and Leisure15.4%14.5%Total100.0%100.0%Cineplex Inc.M
168、anagements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS16A key component of Cineplexs business strategy is to position itself as the leading exhibitor in the Canadian market by focusing on providing customers with an exceptional entertainment experience.Cinep
169、lexs share of the Canadian theatre exhibition market based on Canadian industry box office revenues was approximately 75%for the quarter and year ended December 31,2019.As a result of Cineplexs focus on diversifying the business beyond the traditional movie exhibition model,its revenue mix has shift
170、ed 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 affec
171、ted 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.While BPP is negatively impacted by the SCENE loyalty program and t
172、he Cineplex Tuesdays program,these programs are designed to increase theatre attendance frequency at Cineplexs theatres.Cineplexs 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
173、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.CPP represents theatre food service revenues divi
174、ded by theatre attendance,and is impacted by the theatre food service product mix,theatre food service prices,film genre,promotions and the issuance and redemption of SCENE points on the purchases of food and beverages at theatres.Films targeted to families and teenagers tend to result in a higher C
175、PP 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.The SCENE points issued and redeemed on theatre food service purchases decreases food service revenues on individual purchases.Cinepl
176、ex believes the program drives 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 fr
177、om 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 sh
178、ow-time advertising in Cineplexs theatres as well as other circuits through representation sales agreements and magazine advertising for Cineplex Magazine.Additionally,Cineplex Media sells media placements throughout Cineplexs circuit including digital poster cases,IMZ in select Cineplex theatre lob
179、bies,as well as sponsorship and advertising in LBE venues.Cineplex Media also sells digital advertising for ,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 vertical
180、s including digital out of home(in public spaces such as shopping malls and office towers),quick service restaurants,financial institutions and retailers.Amusement revenues include amusement solutions revenues from P1AG,which supplies and services all of the games in Cineplexs theatre circuit while
181、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 family entertainment centres.Additionally,included in amusement revenues are revenues generated by Cineplexs XSCAPE
182、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,breakage on gift card sales and revenues from management fees.Cost of Sales and Ex
183、pensesFilm 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 rec
184、eipts 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 films run,depending upon the film licensing arrangement.There can be significant variances in film cost percentage between q
185、uarters 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.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS17Cost of f
186、ood 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 al
187、so included in cost of food service.Depreciation-right-of-use assets,represents the depreciation of Cineplexs 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
188、 or the end of the lease term.Depreciation and amortization-other,represents the depreciation and amortization of Cineplexs 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
189、 assets.Loss on disposal of assets represents the loss 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.Theat
190、re 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
191、 and wages 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 i
192、ncluding SCENE,digital commerce,supplies and services,utilities and maintenance.General and administrative expenses are primarily costs associated with managing Cineplexs business,including film buying,marketing and promotions,operations and theatre food service management,accounting and financial r
193、eporting,legal,treasury,design and construction,real estate development,communications and investor relations,information systems and administration.Included in these costs are payroll(including the long-term incentive plan(“LTIP”)and Share option plan costs),occupancy costs related to Cineplexs cor
194、porate 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
195、activities.Accounting for Joint ArrangementsThe 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 Cineplexs share of the assets,liabilities,revenues
196、 and expenses in Cineplexs consolidated results(for joint operations),as required by GAAP.Under IFRS 11,Cineplexs 50%share of one IMAX auditorium in Ontario,its 78.2%interest in the Canadian Digital Cinema Partnership(“CDCP”),50%interest in YoYos Yogurt Cafe(“YoYos”)and a 34.7%interest in VRstudios
197、are classified as joint ventures or associates.Through equity accounting,Cineplexs 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
198、 auditorium held in a joint venture is not reported in Cineplexs 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.Under IFRS 11,Cineplexs 50%interest in SCENE is classified as a joint operation and
199、Cineplex recognizes its share of the assets,liabilities,revenues and expenses of SCENE in its consolidated financial statements.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS185.RESULTS OF OPERATIONS5.1 SELECTED FINANCIAL DATAThe follow
200、ing 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 endedDecember 31,2019Year endedDecember 31,2018Year endedDecembe
201、r 31,2017Revised andRestatedRevised andRestatedBox office revenues$705,521$724,244$715,605Food service revenues483,330475,501441,876Media revenues196,755162,820167,061Amusement revenues228,231205,793185,341Other revenues51,30944,08040,126Total revenues1,665,1461,612,4381,550,009Film cost369,386379,3
202、25376,759Cost of food service106,823100,19199,438Depreciation-right-of-use assets145,946Depreciation and amortization-other assets128,883127,423115,660Loss on disposal of assets1,7642,681706Other costs(a)782,693870,358834,891Costs of operations1,535,4951,479,9781,427,454Net income from continuing op
203、erations$36,516$85,459$76,182Net loss from discontinued operations(7,625)(8,503)(5,836)Net income$28,891$76,956$70,346Adjusted EBITDA(i)(iv)$405,786$262,357$239,010Adjusted EBITDAaL(i)(ii)(iv)$230,546$247,295$224,692(a)Other costs include:Theatre occupancy expenses71,867209,838207,022Other operating
204、 expenses629,849593,736561,078General and administrative expenses(iv)80,97766,78366,791Total other costs$782,693$870,357$834,891EPS from continuing operations-basic and diluted(iv)$0.58$1.35$1.21EPS from discontinued operations-basic and diluted(0.12)(0.13)(0.09)EPS-basic and diluted(iv)$0.46$1.22$1
205、.12Total assets$3,100,412$1,856,449$1,855,168Total long-term financial liabilities(iii)$625,000$580,000$576,500Shares outstanding at period end63,333,23863,333,23863,330,446Cash dividends declared per Share$1.780$1.720$1.660Adjusted free cash flow per Share(i)$2.660$2.887$2.410Box office revenue per
206、 patron(i)$10.63$10.46$10.17Concession revenue per patron(i)$6.73$6.36$6.00Film cost as a percentage of box office revenues52.4%52.4%52.6%Theatre attendance(in thousands of patrons)(i)66,36069,27270,394Theatre locations(at period end)165164163Theatre screens(at period end)1,6931,6861,676(i)See Secti
207、on 18,Non-GAAP measures,for the definitions of non-GAAP measures reported by Cineplex.(ii)Prior period figures have been revised to conform to current period presentation.See Section 19,Reconciliation for further details.(iii)Comprised of the principal components of long-term debt and convertible de
208、bentures.Excludes Share-based compensation,fair value ofinterest rate swap agreements,financing lease obligations,post-employment benefit obligations,other liabilities and deferred financing fees netagainst long-term debt and convertible debentures.(iv)Includes expenses related to the Cineworld Tran
209、saction in the amount of$11.7 million.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS195.2 OPERATING RESULTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31,2019 Total revenuesTotal revenues for the three months ended December 31,2019 in
210、creased$15.4 million(3.6%)to$443.2 million as compared to the prior year period.Total revenues for the year ended December 31,2019 increased$52.7 million(3.3%)to$1.7 billion as compared to the prior year.A discussion of the factors affecting the changes in box office,food service,media,amusement and
211、 other revenues for the two periods is provided below.Non-GAAP 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
212、 product,same theatre metrics,CPP,film cost percentage,food service cost percentage and concession margin per patron are defined and discussed in Section 18,Non-GAAP measures.Box office revenuesThe following table highlights the movement in box office revenues,theatre attendance and BPP for the quar
213、ter 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 revenuesFourth QuarterFull Year20192018Change20192018ChangeBox office revenues$181,789$182,352-0.3%$705,521$724,244-2.6%Theatre attendanc
214、e(i)16,84916,992-0.8%66,36069,272-4.2%Box office revenue per patron(i)$10.79$10.730.6%$10.63$10.461.6%BPP excluding premium priced product(i)$9.40$9.222.0%$9.17$8.942.6%Canadian industry revenues(ii)3.1%-0.5%Same theatre box office revenues(i)$178,652181,660-1.7%$681,298$711,074-4.2%Same theatre att
215、endance(i)16,59316,913-1.9%64,39668,017-5.3%Total box from premium priced product(i)38.7%44.6%-5.9%41.7%44.1%-2.4%(i)See Section 18,Non-GAAP measures.(ii)Source:Gross box office receipts(inclusive of all taxes)from The Movie Theatre Association of Canada industry data adjusted for calendar quarter a
216、nd full year dates.Box office continuityFourth QuarterFull YearBox OfficeTheatre AttendanceBox OfficeTheatre Attendance2018 as reported$182,35216,992$724,24469,272Same theatre attendance change(3,433)(320)(37,847)(3,620)Impact of same theatre BPP change4258,071New and acquired theatres(i)3,09224915,
217、5391,216Disposed and closed theatres(i)(647)(72)(4,486)(508)2019 as reported$181,78916,849$705,52166,360(i)See Section 18,Non-GAAP measures.Represents theatres opened,acquired,disposed or closed subsequent to the start of the prior yearcomparative period.Fourth Quarter Fourth Quarter 2019 Top Cinepl
218、ex Films3D%Box Fourth Quarter 2018 Top Cineplex Films3D%Box1 Joker15.4%1 Dr.Seuss The Grinch8.9%2 Frozen II14.4%2 A Star Is Born8.9%3 Star Wars:The Rise Of Skywalker13.9%3 Venom8.7%4 Jumanji:The Next Level7.3%4 Bohemian Rhapsody8.6%5 Maleficent:Mistress Of Evil3.6%5 Fantastic Beasts:The Crimes Of Gr
219、indelwald7.2%Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS20Box office revenues decreased$0.6 million,or 0.3%,to$181.8 million during the fourth quarter of 2019,compared to$182.4 million recorded in the same period in 2018.This decreas
220、e was due to a 0.8%decrease in theatre attendance more than offsetting the impact of a 0.6%increase in BPP.BPP for the three months ended December 31,2019 was a fourth quarter record of$10.79,a$0.06 increase from the prior year period as a result of price increases in selective markets as compared t
221、o the prior year period.Full Year Full Year 2019 Top Cineplex Films3D%BoxFull Year 2018 Top Cineplex Films3D%Box1 Avengers:Endgame8.6%1 Avengers:Infinity War6.3%2 The Lion King4.7%2 Black Panther6.1%3 Captain Marvel4.3%3 Incredibles 24.1%4 Joker4.0%4 Jurassic World:Fallen Kingdom3.4%5 Frozen II3.7%5
222、 Deadpool 23.1%Box office revenues for the year ended December 31,2019 were$705.5 million,a decrease of$18.7 million or 2.6%from the prior year.This was due to a 4.2%decrease in theatre attendance year over year despite the increase in BPP.The prior year was a tough comparator due to Avengers:Infini
223、ty War,Black Panther and Incredibles 2 all which finished in the top ten highest grossing films of all-time in North America while only Avengers:Endgame finished in the top ten in 2019.In particular,the first quarter experienced a 15.6%decrease in attendance resulting in a$24.9 million decrease in b
224、ox office revenues as compared to the prior year period due to the weaker film slate.Cineplexs BPP for the year ended December 31,2019 increased$0.17,or 1.6%,from$10.46 in 2018 to an annual record of$10.63 in 2019.This increase was primarily due to price increases in selective markets as compared to
225、 the prior year.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)
226、:Food service revenuesFourth QuarterFull Year20192018Change20192018ChangeFood service-theatres$114,678$111,0153.3%$446,639$440,7331.3%Food service-LBE10,4819,7117.9%36,69134,7685.5%Total food service revenues$125,159$120,7263.7%$483,330$475,5011.6%Theatre attendance(i)16,84916,992-0.8%66,36069,272-4
227、.2%CPP(i)(ii)$6.81$6.534.3%$6.73$6.365.8%Same theatre food service revenues(i)$112,551$110,5361.8%$427,546$430,912-0.8%Same theatre attendance(i)16,59316,913-1.9%64,39668,017-5.3%(i)See Section 18,Non-GAAP Measures.(ii)Food service revenue from LBE is not included in the CPP calculation.Cineplex Inc
228、.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS21Theatre food service revenue continuityFourth QuarterFull YearTheatre FoodServiceTheatreAttendanceTheatre FoodServiceTheatreAttendance2018 as reported$111,01516,992$440,73369,272Same theatre attendanc
229、e change(2,089)(320)(22,935)(3,620)Impact of same theatre CPP change4,10419,569New and acquired theatres(i)2,08124912,0531,216Disposed and closed theatres(i)(433)(72)(2,781)(508)2019 as reported$114,67816,849$446,63966,360(i)See Section 18,Non-GAAP measures.Represents theatres opened,acquired,dispos
230、ed or closed subsequent to the start of the prior yearcomparative period.Fourth Quarter 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 reven
231、ues also include food and beverage sales at LBE venues including The Rec Room and Playdium.Theatre food service revenues increased$3.7 million(3.3%)as compared to the prior year period to a fourth quarter record of$114.7 million due to a 4.3%increase in CPP more than offsetting the impact of a 0.8%d
232、ecrease in theatre attendance.The operations of LBE contributed$10.5 million in the period resulting in a$4.4 million(3.7%)increase in total food service revenues to a fourth quarter record of$125.2 million.Expanded offerings outside of core food service products,including offerings at Cineplexs VIP
233、 Cinemas and Outtakes locations and expanded beverage services,have contributed to increased visitation and higher average transaction values,resulting in the record CPP in the period.Food service revenues from LBE increased$0.8 million(7.9%)compared to the prior year period primarily due to the inc
234、rease in locations from six in 2018 to nine for the full quarter and one for part of the quarter in 2019.CPP of$6.81,an increase of 4.3%compared to the prior year period was a fourth quarter record for Cineplex.Expanded offerings outside of core food service products,including offerings at Cineplexs
235、 VIP Cinemas and Outtakes locations and expanded beverage services,have contributed to increased visitation and higher average transaction values,resulting in the record CPP in the period.Full Year Food service revenues increased$7.8 million,or 1.6%as compared to the prior year to an annual record o
236、f$483.3 million due to a 5.5%increase in LBE revenues and the record CPP more than offsetting the impact of the lower theatre attendance.CPP of$6.36 in 2018 increased 5.8%to$6.73 in 2019,an annual record for Cineplex.The operations of LBE contributed$36.7 million in 2019.Newer locations typically ex
237、perience higher sales volumes in the first year of operations(honeymoon period)before settling into their expected long-term run-rate levels resulting in a leveling off of results for older locations.While programs including SCENE offers provided on food service purchases impact CPP,Cineplex believe
238、s that this loyalty program drives incremental visits and food service purchases,resulting in higher overall food service revenues.Media revenuesThe following table highlights the movement in media revenues for the quarter and the full year(in thousands of dollars):Media revenuesFourth QuarterFull Y
239、ear20192018Change20192018ChangeRestatedRestatedCinema media$42,171$40,1675.0%$115,415$106,8348.0%Digital place-based media27,37417,74054.3%81,34055,98645.3%Total media revenues from continuing operations$69,545$57,90720.1%$196,755$162,82020.8%Media revenues from discontinued operations248311-20.3%1,
240、0752,189-50.9%Total media revenues$69,793$58,21819.9%$197,830$165,00919.9%Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS22Fourth Quarter Total media revenues from continuing operations increased 20.1%to an all-time quarterly record of$6
241、9.5 million in the fourth quarter of 2019 compared to the prior year period.This increase was due to higher cinema media and digital place-based media revenues.Cinema media increased by$2.0 million,or 5.0%higher than the prior year period to an all-time quarter record of$42.2 million as a result of
242、increased pre-show and show-time.Digital place-based media revenues increased$9.6 million(54.3%)to an all-time quarterly record of$27.4 million.The increase as compared to the prior year period was primarily due to increased project installation revenues which included rollouts for new and growth wi
243、th existing clients.During the fourth quarter of 2019,digital place-based media added 752 new locations,an increase of 5.2%over the third quarter of 2019.Full Year Total media revenues from continuing operations increased$33.9 million,or 20.8%,in the year ended December 31,2019 compared to the prior
244、 year,to an all-time annual record of$196.8 million.This increase was due to the performance of Cinema media,which reported an increase of$8.6 million(8.0%)compared to the prior year due primarily to higher pre-show results.Digital place-based media revenues increased$25.4 million due to higher proj
245、ect installation revenues.Full year,digital place-based media added 1,809 new locations(an increase of 13.4%)for a total of 15,311 locations as at December 31,2019.The following table shows a breakdown of the nature of digital place-based media revenues for the quarter and the full year(in thousands
246、 of dollars):Digital place-based media revenuesFourth QuarterFull Year20192018Change20192018ChangeProject revenues(i)$14,189$5,391163.2%$39,943$15,872151.7%Other revenues(ii)13,18512,3496.8%41,39740,1143.2%Total digital place-based media revenues$27,374$17,74054.3%$81,340$55,98645.3%(i)Project reven
247、ues include hardware sales and professional services.(ii)Other revenues include sales of software and its support as well as media advertising.Amusement revenuesThe following table highlights the movement in amusement revenues for the quarter and the full year(in thousands of dollars):Amusement reve
248、nuesFourth QuarterFull Year20192018Change20192018ChangeAmusement-P1AG excluding Cineplex exhibition andLBE(i)$39,931$43,307-7.8%$178,209$165,4867.7%Amusement-Cineplex exhibition(i)2,6682,697-1.1%10,90710,6642.3%Amusement-LBE10,8727,46945.6%39,11529,64332.0%Total amusement revenues$53,471$53,473%$228
249、,231$205,79310.9%(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 Cineplexs amusement reven
250、ues.Amusement-P1AG excluding Cineplex exhibition and LBE reflects P1AGs gross amusement revenues,net of the venue revenue share paid to Cineplex reflected in Amusement-Cineplex exhibition above.Fourth QuarterAmusement revenues of$53.5 million were flat compared to the prior year period.Amusement rev
251、enues from P1AG decreased$3.4 million(7.8%)primarily due to a decrease in route revenues in the United States from theatres,non-family entertainment centres and the retail segment.Amusement revenues from LBE increased 45.6%or$3.4 millioncompared to the prior year period as a result of the additional
252、 locations and VR offerings.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS23Full YearFor the full year period,amusement revenues increased by$22.4 million(10.9%)to an all-time annual record of$228.2 million.The increase as compared to t
253、he prior year is due to increased distribution revenue as well as route business,in part due to the P1AG agreement with Cinemark,entered in 2018,as well as strong growth in revenue from the additional locations of LBE venues as compared to the prior year period.The following table presents the adjus
254、ted EBITDAaL for the quarter and the full year for P1AG(in thousands of dollars):P1AG SummaryFourth QuarterFull Year20192018Change20192018ChangeRevisedRevisedAmusement revenues$39,931$43,307-7.8%$178,209$165,4867.7%Operating Expenses35,27540,076-12.0%150,615150,4760.1%Non-cash rent(i)(iii)20NM82NMCa
255、sh rent related to lease obligations(ii)1,543NM6,072NMTotal adjusted operating expenses$36,818$40,096-8.2%$156,687$150,5584.1%P1AG adjusted EBITDAaL(iii)$3,113$3,211-3.1%$21,522$14,92844.2%P1AG adjusted EBITDAaL Margin(iii)7.8%7.4%0.4%12.1%9.0%3.1%(i)Non-cash rent included in the 2018 balances in th
256、e previous reporting period.See Section 19,Reconciliation for further details.(ii)Cash rent that has been reallocated to offset the lease obligations.(iii)See Section 18,Non-GAAP measures.(iv)Prior period figures have been revised to conform to current period presentation.See Section 19,Reconciliati
257、on for further details.A shift in the revenue mix,coupled with a growth in margins from route revenue and a decrease in operating costs resulted in increased margins for P1AG in the fourth quarter as compared to the prior year period.Margins for P1AG increased full year compared to the prior year as
258、 a result of the increase in route revenues in the United States and Canada and a non-recurring charge recorded in the third quarter of 2018.The following table presents the adjusted store level EBITDAaL for the quarter and the full year for LBE(in thousands of dollars):LBE SummaryFourth QuarterFull
259、 Year20192018Change20192018ChangeRevisedRevisedFood service revenues$10,481$9,7117.9%$36,691$34,7685.5%Amusement revenues10,8727,46945.6%39,11529,64332.0%Media and other revenues91169032.0%3,3912,07663.3%Total revenues$22,264$17,87024.6%$79,197$66,48719.1%Cost of food service2,4782,3336.2%9,5179,190
260、3.6%Operating expenses before adjustments(i)13,12711,60913.1%47,39244,5126.5%Non-cash rent(ii)(iv)56NM221NMCash rent related to lease obligations(iii)1,564NM5,718NMTotal adjusted costs$17,169$13,99822.7%$62,627$53,92316.1%Adjusted store level EBITDAaL(iv)$5,095$3,87231.6%$16,570$12,56431.9%Adjusted
261、store level EBITDAaL Margin(iv)22.9%21.7%1.2%20.9%18.9%2.0%(i)Includes operating costs of LBE.Pre-opening costs relating to LBE and overhead relating to management of LBE portfolio are not included.(ii)Non-cash rent included in the 2018 balances in the previous reporting period.See Section 19,Reconc
262、iliation for further details.(iii)Cash rent that has been reallocated to offset the lease obligations.(iv)See Section 18,Non-GAAP measures.Margins for LBE increased 1.2%for the fourth quarter and 2.0%for the year as compared to the prior year periods due to improved cost management with the rollout
263、of additional LBE locations.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS24Other revenues The following table highlights the other revenues which includes revenues from the Cineplex Store,promotional activities,screenings,private parti
264、es,corporate events,breakage on gift card sales and revenues from management fees for the quarter and the full year(in thousands of dollars):Other revenuesFourth QuarterFull Year20192018Change20192018ChangeRestatedRestatedOther revenues from continuing operations$13,256$13,385-1.0%$51,309$44,08016.4
265、%Other revenues from discontinued operations29NM16196-91.8%Total other revenues$13,256$13,414-1.2%$51,325$44,27615.9%Other revenues from continuing operations decreased 1.0%in the fourth quarter of 2019 compared to the prior year period.In 2019,the increase of 16.4%in other revenues was due primaril
266、y to higher volume of digital commerce sales.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 costFourth QuarterFull Year20192018Change20192018ChangeFilm cost$93
267、,925$91,5622.6%$369,386$379,325-2.6%Film cost percentage(i)51.7%50.2%1.5%52.4%52.4%(i)See Section 18,Non-GAAP measures.Fourth Quarter Film cost varies primarily with box office revenues,and can vary from quarter to quarter usually based on the relative strength and concentration of the titles exhibi
268、ted during the prior period.The 1.5%increase in film cost percentage in the current period was as a result of higher settlement rates attributable to the top films in 2019 compared to 2018.Full Year Film cost percentage remained flat year over year as a result of the top films having comparable sett
269、lement rates.Cost of food serviceThe 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
270、margins per patron):Cost of food serviceFourth QuarterFull Year20192018Change20192018ChangeCost of food service-theatre$25,223$23,8056.0%$97,306$91,0016.9%Cost of food service-LBE2,4782,3336.2%9,5179,1903.6%Total cost of food service$27,701$26,1386.0%$106,823$100,1916.6%Theatre concession cost perce
271、ntage(i)22.0%21.4%0.6%21.8%20.6%1.2%LBE food cost percentage(i)23.6%24.0%-0.4%25.9%26.4%-0.5%Theatre concession margin per patron(i)$5.31$5.133.5%$5.26$5.054.2%(i)See Section 18,Non-GAAP measures.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&AN
272、ALYSIS25Fourth Quarter 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 locations as well as the quantity and mix between food an
273、d beverage items sold.The increase in the theatre cost of food service as compared to the prior year period was due to a 0.6%increase in the concession cost percentage during the period and higher theatre food service revenues due to sales from an expanded menu and shift in product mix.The theatre c
274、oncession margin per patron increased 3.5%from$5.13 in the fourth quarter of 2018 to$5.31 in the same period in 2019,reflecting the impact of the higher CPP more than offsetting the higher theatre concession cost percentage during the quarter.The increase in LBE cost of food service as compared to t
275、he prior year period was due to the higher food service revenues as a result of the increase in operating locations.This was partially offset by the decrease of 0.4%in LBE food cost percentage during the quarter compared to the prior period as a result of improved cost management and menu optimizati
276、on as new locations opened.Full Year The increase in the theatre cost of food service as compared to the prior year was due to a 1.2%increase in the theatre concession cost percentage and higher theatre food service revenues.The theatre concession margin per patron increasedfrom$5.05 in the prior ye
277、ar to$5.26 in 2019,reflecting the impact of the higher CPP in 2019.The increase in LBE cost of food service as compared to the prior year was due to the higher food service revenues as a result of the increase in operating locations.This was partially offset by the decrease of 0.5%in LBE food cost p
278、ercentage as a result of improved cost management and menu optimization with the rollout of new locations.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
279、 amortization expensesFourth QuarterFull Year20192018Change20192018ChangeDepreciation of property,equipment and leaseholds$29,967$30,387-1.4%$116,911$115,0161.6%Amortization of intangible assets and other3,1683,293-3.8%11,97212,407-3.5%Sub-total-depreciation and amortization-other assets$33,135$33,6
280、80-1.6%$128,883$127,423108.4%Depreciation-right-of-use assets36,471NM145,946NMTotal depreciation and amortization from continuingoperations$69,606$33,680106.7%$274,829$127,423115.7%Depreciation and amortization from discontinuedoperations1,119NM3,6234,429-18.2%Total depreciation and amortization$69,
281、606$34,799100.0%$278,452$131,852111.2%The quarterly decrease in depreciation of property,equipment and leaseholds from continuing operations of$0.4 millionwas due to the reduction in depreciation resulting from fully depreciated assets more than offsetting the incremental depreciation from new build
282、 and expansions.The annual increase in depreciation of$1.9 million was primarily due to the investments in route equipment,furniture and fixtures and leasehold improvements.The quarterly and year to date increase in depreciation of right-of-use assets from continuing operations was as a result of th
283、e adoption of IFRS 16(see Section 13,Accounting policies).The right-of-use assets are depreciated over the lease term.The current quarter and year to date expense represents the depreciation charge for the periods.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEM
284、ENTS DISCUSSION&ANALYSIS26The quarterly and annual decrease in amortization of intangible assets and other from continuing operations was primarily due to certain assets being fully amortized.Loss on disposal of assets The following table shows the movement in the loss on disposal of assets during t
285、he quarter and the full year(in thousands of dollars):Loss on disposal of assetsFourth QuarterFull Year20192018Change20192018ChangeLoss on disposal from continuing operations$868$1,064-18.4%$1,764$2,681-34.2%Loss on disposal from discontinued operationsNM16-100.0%Loss on disposal of assets$868$1,064
286、-18.4%$1,764$2,697-34.6%Other costsOther costs include three main sub-categories of expenses;theatre occupancy expenses,which capture the rent and associated occupancy costs for Cineplexs theatre operations;other operating expenses,which include the costs related to running Cineplexs film entertainm
287、ent and content,media,as well as amusement and leisure;and general and administrative expenses,which include costs related to managing Cineplexs operations,including head office expenses.Please see the discussions below for more details on these categories.The following table highlights the movement
288、 in other costs for the quarter and the full year(in thousands of dollars):Other costsFourth QuarterFull Year20192018Change20192018ChangeRestatedRestatedTheatre occupancy expenses$18,493$51,991-64.4%$71,867$209,838-65.8%Other operating expenses167,416161,7413.5%629,849593,7366.1%General and administ
289、rative expenses29,01412,779127.0%80,97766,78321.3%Total other costs from continuing operations$214,923$226,511-5.1%$782,693$870,358-10.1%Other costs from discontinued operations1,4712,054-28.4%7,0018,377-16.4%Total other costs$216,394$228,565-5.3%$789,694$878,735-10.1%Cineplex Inc.Managements Discus
290、sion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS27Theatre occupancy expensesThe following table highlights the movement in theatre occupancy expenses for the quarter and the full year(in thousands of dollars):Theatre occupancy expensesFourth QuarterFull Year20192018Cha
291、nge20192018ChangeRevisedRevisedCash rent-theatre(i)$39,042$38,6251.1%$156,921$154,5451.5%Other occupancy18,54517,5785.5%73,73673,4350.4%One-time items(ii)(62)(550)-88.7%(2,275)(2,776)-18.0%Total theatre occupancy including cash lease payments$57,525$55,6533.4%$228,382$225,2041.4%Non-cash rent(iii)(v
292、i)(2,672)NM(11,410)NMRent previously recognized as a finance lease(iv)(990)NM(3,956)NMCash rent related to lease obligations(v)(39,032)NM(156,515)NMTheatre occupancy as reported$18,493$51,991-64.4%$71,867$209,838-65.8%(i)Represents the cash payments for theatre rent during the quarter.See Section 19
293、,Reconciliation for further details.(ii)One-time items include amounts related to both theatre rent and other theatre occupancy costs.They are isolated here to illustrate Cineplexstheatre rent and other theatre occupancy costs excluding these one-time,non-recurring items.(iii)Non-cash rent included
294、in the 2018 balances in the previous reporting period.See Section 19,Reconciliation for further details.(iv)Rent payments that were charged to the finance lease obligations in the previous reporting period.See Section 19,Reconciliation for furtherdetails.(v)Cash rent that has been reallocated to off
295、set the lease obligations.(vi)See Section 18,Non-GAAP measures.Theatre occupancy continuityFourth QuarterFull YearOccupancyOccupancy2018 as reported$51,991$209,838Impact of new and acquired theatres9204,182Impact of disposed theatres(501)(2,232)Same store rent change(i)22750One-time items488502Other
296、944(24)Impact of IFRS 16 adoption:Impact of non-cash rent in prior period2,67211,410Rent previously recognized as a finance lease9893,956Cash rent related to lease obligations(39,032)(156,515)2019 as reported$18,493$71,867(i)See Section 18,Non-GAAP measures.Fourth Quarter Theatre occupancy expenses
297、decreased$33.5 million during the fourth quarter of 2019 compared to the prior year period.This decrease was primarily due to the impact of the adoption of IFRS 16 partially offset by the impact of non-cash rent in the prior period.Total theatre occupancy including cash lease payments increased$1.9
298、million(3.4%)during the fourth quarter of 2019 compared to the prior year period.This increase was due to a decrease in one-time credits and increase in taxes and insurance.Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS28Full Year The d
299、ecrease in theatre occupancy expenses of$138.0 million for the 2019 year compared the prior year was mainly due to the impact of the adoption of IFRS 16 partially offset by the impact of non-cash rent in the prior year period.For the year to date period,theatre occupancy including cash payments incr
300、eased$3.1 million(1.4%)as compared to the prior year period.The increase was primarily due to the impact of new theatres net of disposed theatres.Other operating expenses The following table highlights the movement in other operating expenses during the quarter and the full year(in thousands of doll
301、ars)with the prior period presentation revised and restated to provide comparability to the impact of the transition to IFRS 16 and application of IFRS 5:Other operating expensesFourth QuarterFull Year20192018Change20192018ChangeRevisedandRestatedRevisedandRestatedTheatre payroll$41,925$38,6638.4%$1
302、60,593$152,4655.3%Theatre operating expenses32,98629,94010.2%121,833117,4243.8%Media(i)27,76218,88147.0%88,62166,82532.6%P1AG(i)36,81840,096-8.2%156,687150,5584.1%LBE(i)(ii)14,69211,66525.9%53,11044,73318.7%LBE pre-opening(i)(iii)603(87)NM2,4471,26094.2%SCENE2,4706,991-64.7%15,54917,447-10.9%Marketi
303、ng5,1286,663-23.0%16,25419,959-18.6%Business interruption insurance proceeds(1,749)NM(5,449)NMOther(iv)9,68610,329-6.2%32,87928,21216.5%Other operating expenses including cash lease payments$172,070$161,3928.0%$647,973$593,4349.2%Non-cash rent(v)(vi)348NM302NMCash rent related to lease obligations(v
304、ii)(4,654)NM(18,124)NMOther operating expenses from continuing operations$167,416$161,7403.5%$629,849$593,7366.1%Other operating expenses from discontinued operations1,4712,055NM7,0018,378-16.4%Total other operating expenses$168,887$163,7953.1%$636,850$602,1145.8%(i)Prior period balances were revise
305、d to exclude non-cash rent.See Section 19,Reconciliation for further details.(ii)Includes operating costs of LBE.Overhead relating to management of LBE portfolio are included in the Other line.(iii)Includes pre-opening costs of LBE.(iv)Other category includes overhead costs related to LBE and other
306、Cineplex internal departments.(v)Non-cash rent included in the 2018 balances in the previous reporting period.See Section 19,Reconciliation for further details.(vi)See Section 18,Non-GAAP measures.(vii)Cash rent that has been reallocated to offset the lease obligations.Cineplex Inc.Managements Discu
307、ssion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS29Other operating continuity from continuing operationsFourth QuarterFull YearOther OperatingOther Operating2018 as restated$161,740$593,736Impact of new and acquired theatres1,2917,129Impact of disposed theatres(357)(1,
308、827)Same theatre payroll change(i)2,6074,307Same theatre operating expenses change(i)2,7672,968Media operating expenses change8,88121,796P1AG operating expenses change(3,278)6,129LBE operating expenses change3,0278,377LBE pre-opening change6901,187SCENE change(4,521)(1,898)Marketing change(1,535)(3,
309、705)Business interruption insurance proceeds change1,7495,449Other(643)4,627Impact of IFRS 16 adoption:Non-cash rent in prior period(348)$(302)Cash rent related to lease obligations(4,654)$(18,124)2019 as reported$167,416$629,849(i)See Section 18,Non-GAAP measures.Fourth Quarter Other operating expe
310、nses during the fourth quarter of 2019 increased$5.7 million or 3.5%compared to the prior year period.The increase was primarily due to higher media operating expenses as a result of higher digital place-based media project installation revenue as compared to the prior year period.Same theatre payro
311、ll expenses increased due to higher minimum wages in Alberta,Quebec and British Columbia.Payroll and other costs associated with expanded service offerings also resulted in higher costs.Higher LBE operating expenses were due to an increase in the number of LBE locations from six in the fourth quarte
312、r of 2018 to ten at the end of 2019.These were partially offset by the$3.2 million decrease in P1AG costs due to a decrease in the route business and$4.5 million decrease in SCENE due to timing of expenses.Full Year For the year ended December 31,2019,other operating expenses increased$36.1 million
313、or 6.1%compared to the prior year.Media operating expenses increased due to higher CDM project installation revenue and cinema media volumes as compared to the prior year period.The increase in other operating expenses can also be attributed to the net impact of new and acquired theatres.Cineplex in
314、curred higher amusement and leisure costs due to an increase in distribution sales and route revenue from P1AG and from the impact of the increase in the number of LBE venues.Same theatre payroll expenses increased due to higher minimum wages in Alberta,Quebec and British Columbia.During 2018,Cinepl
315、ex recognized business interruption insurance proceeds of$5.4 million,as a result of a fire at Cineplex Seton and VIP.Cost increases were partially offset by a decrease in marketing due to the timing of campaigns and cash rent allocated to lease obligations arising upon the adoption of IFRS 16.Gener
316、al and administrative expensesThe following table highlights the movement in 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)with the prior period presentation revised to provide comparability to the impact
317、 of the transition to IFRS 16:Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS30G&A expensesFourth QuarterFull Year20192018Change20192018ChangeRevisedRevisedG&A excluding LTIP and option plan expense(i)$16,403$13,43722.1%$64,108$60,5685.8
318、%Restructuring1891,022-81.5%1,0785,842-81.5%Transaction costs(vi)11,711NM11,711NMLTIP(ii)466(2,076)NM3,076(1,347)NMOption plan4073953.0%1,6051,718-6.6%G&A expenses including cash lease payments$29,176$12,778128.3%$81,578$66,78122.2%Non-cash rent(iii)(iv)1-100.0%2-100.0%Cash rent included as part of
319、lease obligations(v)(162)NM(601)NMG&A expenses as reported$29,014$12,779127.0%$80,977$66,78321.3%(i)Prior period balance was revised to exclude non-cash rent.See Section 19,Reconciliation for further details.(ii)LTIP includes the expense for the LTIP program as well as the expense for the executive
320、and Board deferred share unit plans.(iii)Non-cash rent included in the 2018 balances in the previous reporting period.(iv)See Section 18,Non-GAAP measures.(v)Cash rent that has been reallocated to offset the lease obligations.(vi)Transaction costs include share-based compensation costs and out-of-po
321、cket expenses.Fourth Quarter G&A expenses increased$16.2 million during the fourth quarter of 2019 compared to the prior year primarily due to higher expenses resulting from the proposed Cineworld Transaction.Included in transaction costs of$11.7 million are share-based compensation costs of$8.4 mil
322、lion.These expenses are due to the impact of the combination of the valuation of the expected benefits at$34.00 as compared to the share price preceding the announcement of the Arrangement Agreement and an accelerated vesting period.The vesting service period was revised to March 31,2020,to reflect
323、the estimated earliest closing date of the Cineworld Transaction which is expected to occur in during the first half of 2020.Revised vesting terms of the options as a result of the Cineworld Transaction also resulted in increased costs in the quarter.The transaction costs also include$3.3 million of
324、 professional fees arising from the Cineworld Transaction.Excluding the impact of the Cineworld Transaction,LTIP costs increased$2.5 million due to an increase in share price in the current quarter as compared to a decrease in share price in the prior year period.Full Year G&A expenses for 2019 incr
325、eased$14.2 million(21.3%)as compared to the prior year,primarily due to expenses related to the Cineworld Transaction in the amount of$11.7 million.Included in$11.7 million of transaction costs are the share-based compensation costs of$8.4 million,resulting from the combination of the valuation of t
326、he expected benefits at$34.00(the price per Share in the Cineworld Transaction)as compared to the share price preceding the announcement of the Arrangement Agreement and an accelerated vesting period.The vesting service period was revised to March 31,2020,to reflect the estimated earliest closing da
327、te of the Cineworld Transaction which is expected to occur in during the first half of 2020.Professional fees relating to the Cineworld Transaction in the amount of$3.3 million are also included in the transaction costs.The increase in G&A can also be attributed to professional fees relating to the
328、software upgrade undertaken for IFRS 16.The prior year included expenses incurred relating to a cost reduction initiative implemented in 2018.Excluding the impact of the Cineworld Transaction,LTIP costs increased$4.4 million due to an increase in share price in the current year period as compared to
329、 a decrease in the share price in the prior year period.Share of income of joint ventures and associatesCineplexs joint ventures and associates include its 78.2%interest in CDCP,50%interest in one IMAX screen in Ontario,50%interest in YoYos and 34.7%interest in VRstudios.The following table highligh
330、ts the components of share of income of joint ventures and associates during the quarter and the full year(in thousands of dollars):Cineplex Inc.Managements Discussion and AnalysisCINEPLEX INC.2019 ANNUAL REPORTMANAGEMENTS DISCUSSION&ANALYSIS31Share of income of joint ventures and associatesFourth Q
331、uarterFull Year20192018Change20192018ChangeShare of income of CDCP$(1,803)$(1,311)37.5%$(4,827)$(4,186)15.3%Share of loss of other joint ventures and associates206413-50.1%65843850.2%Total income of joint ventures and associates$(1,597)$(898)77.8%$(4,169)$(3,748)11.2%Interest expense The following t
332、able highlights the movement in interest expense during the quarter and full year(in thousands of dollars):Interest expenseFourth QuarterFull Year20192018Change20192018ChangeLong-term debt interest expense$6,693$4,91036.3%$25,487$18,31939.1%Financing fees1,945NM1,945NMConvertible debenture interest
333、expense1,193NM4,811NMSub-total-long-term debt interest expense$6,693$8,048-16.8%$25,487$25,0751.6%Lease interest expense(i)11,497110NM47,018535NMSub-total-cash interest expense$18,190$8,158123.0%$72,505$25,610183.1%Deferred financing fee accretion and other non-cashinterest408893-54.3%1,7451,19446.1%Convertible debenture accretion605NM2,420NMInterest rate swap-non-cash11,8911,0731,008.2%10,4721,46
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