FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-9454
------
CINEPLEX ODEON CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ontario, Canada Non-Resident Alien
---------------------------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1303 Yonge Street, Toronto, Ontario M4T 2Y9
- --------------------------------------- -------------
(Address of principal executive offices) (Postal Code)
416-323-6600
------------------------------
(Registrant's telephone number
including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X or No
-
As of November 2, 1996, 103,323,551 shares of Cineplex Odeon Corporation
Common Stock were outstanding.
TOTAL NO. OF PAGES 35
EXHIBIT INDEX PAGE 14
<PAGE>
CINEPLEX ODEON CORPORATION
FORM 10-Q
SEPTEMBER 30, 1996
Index
PART I - FINANCIAL INFORMATION Page No.
--------
ITEM 1 - Financial Statements (Unaudited)
Consolidated Balance Sheet
September 30, 1996 and December 31, 1995 3
Consolidated Income Statement
Three Months Ended September 30, 1996 and
September 30, 1995 and;
Nine Months Ended September 30, 1996 and 4
September 30, 1995
Consolidated Statement of Changes in
Cash Resources
Nine Months Ended September 30, 1996 and
September 30, 1995 5
Notes to the Consolidated Financial
Statements - September 30, 1996 6 - 7
ITEM 2 - Management's Discussion and Analysis
of Results of Operations and
Financial Condition 8 - 10
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 11
ITEM 6 - Exhibits and Reports on Form 8-K 11
SIGNATURE PAGE 12
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Unaudited Audited
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,927 $ 1,604
Accounts receivable 7,956 10,362
Other 9,332 7,614
-------------- ---------------
19,215 19,580
PROPERTY, EQUIPMENT AND
LEASEHOLDS 574,685 583,442
OTHER ASSETS
Long-term investments and
receivables 2,966 3,945
Goodwill 33,096 33,927
Deferred charges 7,991 8,749
------------- --------------
44,053 46,621
------------- --------------
TOTAL ASSETS $ 637,953 $ 649,643
============= ==============
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and
accruals $ 54,726 $ 59,591
Deferred income 14,840 14,930
Current portion of long-term
debt and other obligations 6,749 7,146
------------ -------------
76,315 81,667
LONG-TERM DEBT 315,908 381,857
CAPITALIZED LEASE OBLIGATIONS 8,850 10,451
DEFERRED INCOME 7,172 8,428
PENSION OBLIGATION 993 1,248
SHAREHOLDERS' EQUITY
Capital stock 555,356 472,479
Translation adjustment 4,284 3,241
Retained earnings (deficit) (330,925) (309,728)
------------- -------------
228,715 165,992
COMMITMENTS AND CONTINGENCIES (note 2)
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 637,953 $ 649,643
============== ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED INCOME STATEMENT
(in thousands of U.S. dollars except per share figures)
<TABLE>
<CAPTION>
Unaudited
3 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended
September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995
------------------ ------------------ ------------------ ------------------
<C> <C> <C> <C>
<S>
REVENUE
Admissions $ 99,893 $ 111,038 $ 274,094 $ 276,370
Concessions 36,169 39,168 97,101 96,256
Other 5,914 5,461 16,915 15,519
------------- ------------ -------------- -----------
141,976 155,667 388,110 388,145
EXPENSES
Theatre operations and
other expenses 113,412 118,955 316,400 317,671
Cost of concessions 6,473 6,767 17,323 16,762
General and administrative 4,625 4,262 13,330 13,252
Depreciation and amortization 10,943 10,903 32,376 31,706
------------ ----------- ------------- ------------
135,453 140,887 379,429 379,391
------------- ----------- ------------- ------------
Income before the undernoted 6,523 14,780 8,681 8,754
Other income(expenses) (458) (156) (1,295) (2,806)
------------- ----------- ------------ ------------
Income before interest on
long-term debt and income
taxes 6,065 14,624 7,386 5,948
Interest on long-term debt 8,736 10,096 27,478 30,880
------------- ----------- ------------ ------------
Income/(loss) before income
taxes (2,671) 4,528 (20,092) (24,932
Income taxes 299 195 1,105 991
-------------- ----------- ------------ ------------
NET INCOME / (LOSS) $ (2,970) $ 4,333 $ (21,197) $ (25,923
============== =========== ============ ============
BASIC
Weighted average shares
outstanding 176,765,000 114,769,000 159,007,000 114,757,000
Net income(loss) per share ($0.02) $0.04 ($0.13) ($0.23)
FULLY DILUTED
Weighted average shares
outstanding 183,362,000 122,611,000 166,082,000 122,616,000
Net income(loss) per share ($0.02) $0.04 ($0.13) ($0.23)
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN CASH RESOURCES
(in thousands of U.S. dollars except per share figures)
<TABLE>
<CAPTION>
Unaudited
9 Months Ended 9 Months Ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss $ (21,197) $ (25,923)
Depreciation and amortization 32,376 31,706
Other non-cash items (1,569) 1,692
-------------- -----------
9,610 7,475
Net change in non-cash working
capital (3,027) (6,124)
-------------- ------------
6,583 1,351
-------------- ------------
FINANCING ACTIVITIES
Decrease in long-term debt and
other obligations (67,835) (12,953)
Increase in long-term debt and
other obligations - 14,166
Issue of share capital, net of
issue costs 82,877 56
Other (1,474) (523)
-------------- -------------
13,568 746
-------------- -------------
INVESTMENT ACTIVITIES
Additions to property, equipment
and leaseholds (18,981) (25,115)
Long-term investments (260) (73)
Proceeds on sale of certain
theatre properties 1,901 23,674
Other (2,488) (458)
-------------- -------------
(19,828) (1,972)
-------------- -------------
NET INCREASE DURING PERIOD 323 125
CASH AT BEGINNING OF PERIOD 1,604 1,551
-------------- -------------
CASH AT END OF PERIOD $ 1,927 $ 1,676
============== ==============
CASH FLOW FROM OPERATING ACTIVITIES
PER SHARE
Basic $ 0.04 $ 0.01
Fully Diluted $ 0.04 $ 0.01
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(in U.S. dollars)
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements in this quarterly report to
shareholders are prepared in accordance with accounting principles
generally accepted in Canada. For the three and nine months ended
September 30, 1996, the application of accounting principles generally
accepted in the United States did not have a material effect on the
measurement of the Corporation's net loss and shareholders' equity. For
information on differences between Canadian and United States generally
accepted accounting principles, reference is made to the Corporation's
1995 annual report to shareholders.
The consolidated financial statements in this quarterly report to
shareholders are based in part on estimates, and include all adjustments
consisting of normal recurring accruals that management believes are
necessary for a fair presentation of the Corporation's financial position
as at September 30, 1996, and the results of its operations for the three
and nine months then ended. Operating results for the three and nine
months ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996.
The consolidated financial statements and related notes have been
prepared in accordance with generally accepted accounting principles
applicable to interim periods; consequently they do not include all
generally accepted accounting disclosures required for annual
consolidated financial statements. For more complete information these
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes contained in the
Corporation's 1995 annual report to shareholders.
2. COMMITMENTS AND CONTINGENCIES
i) The Corporation and its subsidiaries are currently subject to audit by
taxation authorities in several jurisdictions. The taxation authorities
have proposed to reassess taxes in respect of certain transactions and
income and expense items. Management believes that the Corporation and
its subsidiaries have meritorious defenses and is vigorously contesting
the adjustments proposed by the taxation authorities. Although such
matters cannot be predicted with certainty, management does not consider
the Corporation's exposure to such litigation to be material to these
financial statements.
ii) The Corporation and its subsidiaries are also involved in certain
litigation arising out of the ordinary course and conduct of its business.
The outcome of this litigation is not currently determinable. Although
such matters cannot be predicted with certainty, management does not
consider the Corporation's exposure to such litigation to be material to
these financial statements.
<PAGE>
3. SUMMARY FINANCIAL INFORMATION
The following is consolidated summarized financial information of the
Corporation's wholly owned subsidiary Plitt Theatres, Inc.:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Unaudited
3 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
Revenue $ 95,433,000 $ 105,621,000 $ 266,447,000 $ 272,379,000
=================================================================================
Income before general and
administrative expenses,
depreciation and amortization,
interest on long-term debt
and income taxes $ 14,993,000 $ 18,665,000 $ 35,463,000 $ 32,108,000
=================================================================================
Net loss $ (4,222,000) $ (855,000) $ (22,291,000) $ (25,956,000)
=================================================================================
- -----------------------------------------------------------------------
September 30, 1996 December 31, 1995
- -----------------------------------------------------------------------
Current assets $ 14,572,000 $ 21,259,000
Noncurrent assets 487,109,000 502,989,000
Current liabilities 53,443,000 54,790,000
Noncurrent liabilities 263,440,000 282,577,000
=======================================================================
</TABLE>
Current liabilities at September 30, 1996 include a net payable to the
Corporation and other corporations within the consolidated group in the
amount of $4,682,000 (December 31, 1995 - net payable of $3,834,000).
Noncurrent liabilities at September 30, 1996 and December 31, 1995
include $10,000,000 that is owed to the Corporation.
4. RECLASSIFICATION
Certain of the prior period's balances have been reclassified to conform
with the presentation adopted in the current period.
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
(All figures are in U.S. dollars except where otherwise noted)
The Corporation's net loss for the three months ended September 30, 1996
was $2,970,000 or $0.02 per share compared to a net income of $4,333,000
or $0.04 per share for the same period in 1995. For the nine months
ended September 30, 1996, the net loss was $21,197,000 or $0.13 per
share as compared to $25,923,000 or $0.23 per share in the corresponding
period in the prior year. The loss in the third quarter of 1996 is
directly attributable to the impact of the Summer Olympics on the
industry box office and a disappointing late summer film release schedule.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations for the nine months ended September 30, 1996
amounted to a net inflow of $6,583,000 compared to a net inflow of
$1,351,000 for the same period in 1995. Excluding the impact of the net
change in non-cash working capital, the Corporation's cash flow from
operations for the nine months ended September 30, 1996 amounted to a net
inflow of $9,610,000 compared to a net inflow of $7,475,000 for the same
period in 1995. The increase in cash flow resulted primarily from the
reduction in interest on long-term debt in the first nine months of 1996
compared to the same period of 1995.
Management expects to open 8 new theatre locations (adding 74 new screens)
and refurbish a total of 8 theatres (adding 19 new screens) during the
remainder of 1996 at an estimated net cost of $18,000,000. In 1997 it is
management's current intention to open up to 26 new theatre locations
(adding 257 screens) and refurbish a total of 4 theatres (adding 17
screens) at an estimated net cost to the Corporation of less than
$70,000,000. The Corporation's current strategy is to develop and build
additional theatres and screens in target markets that complement the
Corporation's existing position in such markets or that provide the
Corporation with a strategic position in a new market. In addition to
the Corporation's plans to develop and build theatres in North America,
the Corporation's growth strategy also includes the development and
operation of "location-based entertainment centres" and limited
international expansion. Location-based entertainment centres are
destination entertainment complexes anchored by a movie theatre and
the first such centre opened in Calgary, Alberta during the third quarter
of 1996. It is the Corporation's current intention to invest
approximately $10,000,000 in location-based entertainment centres during
the next three years. The Corporation will open its first theatre outside
of North America in Budapest, Hungary in the fourth quarter of 1996. In
addition to Hungary, management is reviewing other international markets
with a view to finalizing an international strategy. At this stage it is
premature to comment on the magnitude of the Corporation's capital
commitment relating to its international expansion strategy. The
Corporation plans to fund its expansion programs by drawing on its bank
credit facilities and through internally generated cash flow. The
Corporation has approximately $86,500,000 available under its bank credit
facilities at September 30, 1996.
At September 30, 1996 the Corporation's long-term debt was $315,908,000
as compared to $381,857,000 at December 31, 1995. This reduction reflects
the fact that the equity proceeds raised by the Corporation in the first
quarter of 1996 were used to initially reduce the Corporation's revolving
long-term credit facilities.
RESULTS OF OPERATIONS
The Corporation reports its results in U.S. dollars. In order to
eliminate the impact of exchange rate fluctuations on the yearly
comparison of both admission and concession revenue, the results of
the Corporation's Canadian operations as discussed below are measured in
Canadian dollars. The Corporation's U.S. results for the first nine
months of 1996 have been impacted by the sale of 28 theatres, located in
Florida and Georgia, to Carmike Cinemas, Inc. in the second quarter of
1995.
The Corporation's United States theatres recorded a decrease in admission
revenue of 10.2% for the three months ended September 30, 1996 compared
to the same period in 1995. This admission revenue decrease was the result
of a 13.8% decrease in attendance offset by a 3.6% increase in box office
revenue per patron. Admission revenue for the nine months ended
September 30, 1996 decreased by 2.5% compared to the same period in 1995.
This decrease was the result of a 6.3% decrease in attendance offset by a
3.8% increase in box office revenue per patron. Adjusting for theatres
sold, admission revenue for the nine months ended September 30, 1996
increased by 0.4%. This increase was a result of a 2.3% decrease in
attendance and a 2.7% increase in box office revenue per patron.
The Corporation's Canadian theatres reported a decrease in admission
revenue of 10.1% (when measured in Canadian dollars) for the three months
ended September 30, 1996 compared to the same period in 1995. This
decrease was the result of a decrease in attendance of 9.4% and a
decrease in box office revenue per patron of 0.7% over the same period
in 1995. Admission revenue for the nine months ended September 30, 1996
increased by 2.2% compared to the same period in 1995. This increase was
the result of a 3.3% increase in attendance offset by a 1.1% decrease in
box office revenue per patron.
The decrease in both third quarter attendance and admission revenue in
1996 as compared to the same period in 1995 reflects the impact of the
Summer Olympics on the industry box office and a disappointing late
summer film release schedule.
The Corporation's United States concession revenue decreased by 9.1% for
the three months ended September 30, 1996 compared to the same period in
1995. The attendance decrease of 13.8%, combined with an increase in
concession revenue per patron of 4.7% was responsible for the decrease
in concession revenue. Concession revenue decreased by 2.3% for the nine
months ended September 30, 1996 compared to the same period in 1995.
This decrease was the result of a 6.3% decrease in attendance offset by
a 4.0% increase in concession revenue per patron. Adjusting for theatres
sold, concession revenue for the nine months ended September 30, 1996
increased by 1.7%. This increase is a result of a 2.3% decrease in
attendance and a 4.0% increase in concession revenue per patron.
The Corporation's Canadian concession revenue decreased by 5.4% (when
measured in Canadian dollars) for the three months ended
September 30, 1996 compared to the same period in 1995, reflecting the
decrease in attendance of 9.4% and an increase in concession revenue per
patron of 4.0%. Concession revenue increased by 6.6% in the nine months
ended September 30, 1996 compared to the same period in 1995, reflecting
the 3.3% increase in attendance and a 3.3% increase in concession revenue
per patron.
The gross margin from theatre operations (consisting of revenue from
theatre operations less film cost, cost of concessions, theatre
advertising, payroll, occupancy and supplies and services), when
expressed as a percentage of theatre operating revenue, decreased for the
three months ended September 30, 1996 to 17.2% from 20.0% for the same
period in 1995. This decrease is attributable to the decreased revenue
experienced in both the Corporation's Canadian and United States theatres
in the third quarter of 1996. The gross margin from theatre operations
for the nine months ended September 30, 1996 increased from 14.5% to
15.8%. This increase in gross margin is due to the impact of the sale
of certain theatres in Florida and Georgia.
Interest on long-term debt decreased by 11.0% during the nine months
ended September 30, 1996 compared to the same period in 1995. This
decrease is a result of the initial application of equity proceeds
from the public offering in March of 1996 against the Corporation's
long-term debt.
During 1996 the value of the Canadian dollar has strengthened relative
to the United States dollar. While currency movements affect the
reporting of revenues and expenses of the Corporation's Canadian
operations, the financial impact is limited as the costs of operating
the Canadian theatres are supported by the revenue of such theatres.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
-----------------
The Corporation has been, and continues to be, involved in numerous
legal proceedings. However, although such matters cannot be predicted
with certainty, the Corporation does not believe that such lawsuits are
likely to result in a judgment which would have a material adverse effect
on the Corporation's financial condition.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibit 10.1 Sixth Amendment Agreement dated as of
August 16, 1996 by and among Cineplex Odeon
Corporation, Plitt Theatres,Inc., the Guarantors,
The Bank of Nova Scotia as agent, and the Banks
party thereto.
(b) Exhibit 10.2 Seventh Amendment Agreement dated as of
October 31, 1996 by and among Cineplex Odeon
Corporation, Plitt Theatres, Inc., the Guarantors,
The Bank of Nova Scotia as agent, and the Banks
party thereto.
(c) Exhibit 11.1 Statement re Computation of Per Share Earnings.
(d) Exhibit 27 Financial Data Schedule.
(e) The Corporation did not file any reports on Form 8-K during the
quarter ended September 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CINEPLEX ODEON CORPORATION
(Registrant)
Date November 13, 1996 Allen Karp
----------------- -------------------------
Allen Karp
President and Chief
Executive Officer
Date November 13, 1996 Ellis Jacob
----------------- -------------------------
Ellis Jacob
Executive Vice President
and Chief Financial Officer
<PAGE>
Commission File No. 1-9454
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
QUARTERLY REPORT ON FORM 10-Q
OF
CINEPLEX ODEON CORPORATION
For the Quarterly Period Ended September 30, 1996
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Description Page Number
- ------- ----------------- -----------
10.1 Sixth Amendment Agreement dated as of August 16, 15-21
1996 by and among Cineplex Odeon Corporation, Plitt
Theatres, Inc., the Guarantors, The Bank of Nova
Scotia as agent, and the Banks party thereto.
10.2 Seventh Amendment Agreement dated as of October 31, 22-33
1996 by and among Cineplex Odeon Corporation, Plitt
Theatres, Inc., the Guarantors, The Bank of Nova
Scotia as agent, and the Banks party thereto.
11.1 Statement re Computation of Per Share Earnings. 34
27 Financial Data Schedule. 35
MODIFICATION NO. 8
THIS SIXTH AMENDMENT AGREEMENT is made as of the 16th day of
August, 1996.
B E T W E N:
CINEPLEX ODEON CORPORATION
a corporation incorporated under the
laws of the Province of Ontario
("Cineplex")
- and -
PLITT THEATRES, INC.
a corporation incorporated under the
laws of the State of Delaware
("Plitt")
- and -
CINEPLEX ODEON (QUEBEC) INC.
RKO CENTURY WARNER THEATRES, INC.
THE WALTER READE ORGANIZATION, INC.
PLITT SOUTHERN THEATRES, INC.
MANBECK THEATRE CORPORATION
(collectively, the "Guarantors")
- and -
THE BANK OF NOVA SCOTIA
NATIONAL BANK OF CANADA
THE BANK OF NEW YORK
ROYAL BANK OF CANADA
(collectively, the "Banks")
- and -
THE BANK OF NOVA SCOTIA
in its capacity as agent for the Banks
(the "Agent")
- and -
THE BANK OF NOVA SCOTIA
as operating lender
(the "Operating Lender")
WHEREAS:
A. Cineplex, Plitt, the Banks and the Agent entered into a credit
agreement dated as of 23 June 1994 pursuant to which the Banks
established a reducing/revolving term credit facility in favour of
Cineplex and Plitt, which agreement has been amended by a Waiver
Agreement made as of 25 October 1994, a Second Amendment Agreement
made as of 31 March 1995, a Second Waiver Agreement made as of 19
September 1995, a Third Amendment Agreement made as of 30 September
1995, a Consent made as of 15 December 1995, a Fourth Amendment
Agreement made as of 9 February 1996 and a Fifth Amendment Agreement
made as of 26 March 1996, (such credit agreement as so amended and
as further supplemented, amended, restated or replaced from time to
time, the "Credit Agreement").
B. Cineplex and the Operating Lender entered into a letter loan
agreement dated 23 June 1994 (as the same may be amended, supplemented,
restated or replaced from time to time, the "Operating Credit Agreement")
pursuant to which the Operating Lender established in favour of Cineplex
a revolving operating credit facility.
C. Pursuant to the Credit Agreement and the Operating Credit
Agreement, each of the Guarantors has provided a Guarantee.
D. Cineplex has requested that certain provisions of the Credit
Agreement be amended to permit the making of investments in certain
financial instruments, the expansion of its Exhibition Business in
Budapest, Hungary and the creation of certain Liens in connection with
the procurement of exhibition locations in the United States of America
and Canada.
E. The Banks and the Operating Lender have agreed to such requests
on the terms set forth herein and the parties hereto are entering into
to this Agreement to evidence their agreement with respect to such
requests, to set forth the terms and conditions upon which such
agreements by the Banks and the Operating Lender are made and to deal
with the other matters set forth herein.
NOW THEREFORE in consideration of these premises and for other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto
agree as follows:
Section 1 - Interpretation
Capitalized terms used herein, unless otherwise defined or
indicated herein, have the respective meanings ascribed thereto in
the Credit Agreement. This Agreement amends the Credit Agreement
effective from and after the date hereof. This Agreement and the
Credit Agreement shall be read together and have effect so far as
practicable as though the provisions thereof and the relevant provisions
hereof are contained in one agreement.
Section 2 - Amendment to Definitions
Section 1.01 of the Credit Agreement is amended by adding the
following definition as section 1.01(uu.1):
"(uu.1) "Ground Lease Property" means each freehold property
which is acquired by Cineplex
or a Restricted Subsidiary for the development of a location to be used
in its Exhibition Business in respect of which Cineplex and/or a
Restricted Subsidiary has (i) entered into agreements with a Person
to develop such property as a location to be used in its Exhibition
Business, (ii) has provided to the Banks a first priority security
interest in the furniture, fixtures and equipment relating to such
location, to the extent financed by Cineplex or a Restricted Subsidiary,
(iii) agreed to provide such Person with a long term ground lease of
the freehold interest, and (iv) agreed to enter into a long term lease
of the completed development with such Person."
Section 1.01 of the Credit Agreement is amended by adding the
following definition as section 1.01(ddd.1):
"(ddd.1) "Landlord Lender Ground Lease Mortgage" means,
with respect to each Ground Lease Property, a first priority mortgage
granted by the ground lessee of such property to its lenders charging
the ground lessee's interest in the ground lease of such Ground Lease
Property."
Section 1.01 of the Credit Agreement is amended by amending the
definition of "Permitted Investments" by deleting the period at the end
of subparagraph 1.01(vvv)(xi) and replacing it with "; and" by adding
the following provision as subparagraph (xii) thereof:
"(xii) Investments in bankers' acceptances with a maturity of
not more than 180 days which are issued by a corporation organized under
the laws of Canada or of a province of Canada and which are accepted by
a bank chartered under the Bank Act (Canada) applies which has combined
capital, surplus and undivided profits of not less than U.S.
$100,000,000 (or the equivalent in Canadian dollars) determined on the
date of the Investment and which is either rated in one of the top two
rating classifications by at least one nationally recognized rating
agency in Canada acceptable to the Agent or is a Bank under this
Agreement."
Section 1.01 of the Credit Agreement is amended by amending the
definition of "Permitted Lien" by deleting the period at the end of
subparagraph 1.01(www) (xv) and replacing it with "; and" by adding
the following provision as subparagraph (xvi) thereof:
"(xvi) Liens which are Landlord Lender Ground Lease Mortgages
to the extent that the face amount of all such Landlord Lender Ground
Lease Mortgages does not, in the aggregate, exceed U.S. $30,000,000."
Section 3 - Consent to Budapest, Hungary Project
Subject to and in accordance with the provisions of this Agreement and
the Credit Agreement, the Banks agree to permit Cineplex to enter into
the transactions relating to a proposed exhibition location in
Budapest, Hungary strictly on the terms and conditions of the deal
memorandum attached hereto as Appendix A.
Section 4 - Conditions
Precedent to Effectiveness of this Amendment Agreement
This Sixth Amendment Agreement shall only become binding on the
Banks upon satisfaction of the following conditions precedent:
(a) receipt by the Agent of evidence, in form and substance
satisfactory to the Agent and its counsel, that all terms, conditions
and provisions relating to the subject matter of this Sixth Amendment
Agreement are permitted under the Senior Subordinated Indenture; and
(b) execution of this Sixth Amendment Agreement by the
Super Majority Banks in accordance with Section 12.01(ii) of the Credit
Agreement.
Section 5 - Confirmation by Guarantors
Each Guarantor confirms that the Guarantee and Collateral made
or granted by it pursuant to the Credit Agreement and the Operating
Credit Agreement remain in full force and effect notwithstanding the
amendments and supplements to Credit Agreement herein contained.
Section 6 - Continuing Effect of Agreements
Except as amended by this Agreement, the Credit Agreement and the
Operating Credit Agreement shall remain in full force and effect,
without amendment, and each is hereby ratified and confirmed.
Section 7 - Counterparts
This Agreement may be executed in any
number of counterparts and all such counterparts taken together shall
be deemed to constitute one and the same instrument and shall be
effective on the date when each of the parties hereto has signed a
copy hereof and shall have delivered the same to the Agent.
EXECUTED AND EFFECTIVE as of the date first written above.
THE BANKS
- ---------
THE BANK OF NOVA SCOTIA NATIONAL BANK OF CANADA
By: K. Lehner By: L. Shain
THE BANK OF NEW YORK ROYAL BANK OF CANADA
By: Geoffrey C. Brooks By: M. Waiser
THE BANK OF NOVA SCOTIA, THE BANK OF NOVA SCOTIA, as
as Agent Operating Lender
By: J. Hall By: K. Lehner
THE BORROWERS
- -------------
CINEPLEX ODEON CORPORATION PLITT THEATRES, INC.
By: Ellis Jacob By: Ellis Jacob
EACH OF THE UNDERSIGNED hereby acknowledges and agrees to and accepts
the terms and conditions set forth in this Agreement as of the date
first written above.
THE GUARANTORS
- --------------
CINEPLEX ODEON CORPORATION PLITT THEATRES, INC.
By: Ellis Jacob By: Ellis Jacob
RKO CENTURY WARNER THE WALTER READE ORGANIZATION,
THEATRES, INC. INC.
By: Ellis Jacob By: Ellis Jacob
PLITT SOUTHERN THEATRES, INC. MANBECK THEATRE CORPORATION
By: Ellis Jacob By: Ellis Jacob
CINEPLEX ODEON (QUEBEC) INC.
By: Ellis Jacob
MODIFICATION NO. 9
THIS SEVENTH AMENDMENT AGREEMENT is made as of the 31st day of
October, 1996.
B E T W E E N:
CINEPLEX ODEON CORPORATION
a corporation incorporated under the
laws of the Province of Ontario
("Cineplex")
- and -
PLITT THEATRES, INC.
a corporation incorporated under the
laws of the State of Delaware
("Plitt")
- and -
CINEPLEX ODEON (QUEBEC) INC.
RKO CENTURY WARNER THEATRES, INC.
THE WALTER READE ORGANIZATION, INC.
PLITT SOUTHERN THEATRES, INC.
MANBECK THEATRE CORPORATION
(collectively, the "Guarantors")
- and -
THE BANK OF NOVA SCOTIA
NATIONAL BANK OF CANADA
THE BANK OF NEW YORK
ROYAL BANK OF CANADA
(collectively, the "Banks")
- and -
THE BANK OF NOVA SCOTIA
in its capacity as agent for the Banks
(the "Agent")
- and -
THE BANK OF NOVA SCOTIA
as operating lender
(the "Operating Lender")
WHEREAS:
A.Cineplex, Plitt, the Banks and the Agent entered into a credit
agreement dated as of 23 June 1994 pursuant to which the Banks
established a reducing/revolving term credit facility in favour of
Cineplex and Plitt, which agreement has been amended by a Waiver
Agreement made as of 25 October 1994, a Second Amendment Agreement
made as of 31 March 1995, a Second Waiver Agreement made as of 19
September 1995, a Third Amendment Agreement made as of 30 September
1995, a Consent made as of 15 December 1995, a Fourth Amendment
Agreement made as of 9 February 1996, a Fifth Amendment Agreement made
as of 26 March 1996 and a Sixth Amendment Agreement made as of 16 August
1996 (such credit agreement as so amended and as further supplemented,
amended, restated or replaced from time to time, the "Credit Agreement").
B.Cineplex and the Operating Lender entered into a letter loan agreement
dated 23 June 1994 (as the same may be amended, supplemented, restated or
replaced from time to time, the "Operating Credit Agreement") pursuant
to which the Operating Lender established in favour of Cineplex a
revolving operating credit facility.
C.Pursuant to the Credit Agreement and the Operating Credit Agreement,
each of the Guarantors has provided a Guarantee.
D.Cineplex has requested that certain provisions of the Credit Agreement
be amended to permit minor amendments to its proposed new business
operation in Budapest, Hungary which was previously approved, to permit
further international developments and to permit the granting of liens
in certain circumstances to landlords of leased theatre locations.
E.The Banks and the Operating Lender have agreed to such requests on the
terms set forth herein and the parties hereto are entering into to this
Agreement to evidence their agreement with respect to such requests, to
set forth the terms and conditions upon which such agreements by the
Banks and the Operating Lender are made and to deal with the other
matters set forth herein.
NOW THEREFORE in consideration of these premises and for other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
Section 1 - Interpretation Capitalized terms used herein, unless
otherwise defined or indicated herein, have the respective meanings
ascribed thereto in the Credit Agreement. This Agreement amends the
Credit Agreement effective from and after the date hereof. This
Agreement and the Credit Agreement shall be read together and have
effect so far as practicable as though the provisions thereof and the
relevant provisions hereof are contained in one agreement.
Section 2 - Amendment to Definitions Section 1.01 of the Credit
Agreement is amended by adding the following provision as Section
1.01(bbb.1):
"(bbb.1) "International Exhibition Business" means the
construction, ownership, operation and management of feature length
motion picture exhibition theatres and associated in-theatre concession
facilities outside the United States of America and Canada and
entertainment complexes outside the United States of America and
Canada which include motion picture exhibition theatres owned or
operated by Cineplex, Plitt, any Restricted Subsidiary or any Related
Party."
Section 1.01 of the Credit Agreement is amended by adding the
following provision as Section 1.01(bbb.2):
"(bbb.2) "International Structuring Arrangement" means
any arrangement relating to any activity in the International Exhibition
Business by Cineplex, any Subsidiary of Cineplex, or any Affiliate of
either pursuant to which such entity incurs liabilities or obligations,
whether contingent or otherwise, if such arrangements do not otherwise
constitute an Investment hereunder."
Section 1.01 of the Credit Agreement is amended by adding the
following provision as Section 1.01(bbb.3):
"(bbb.3) "International Structuring Mismatched Arrangement"
means an International Structuring Arrangement which, had it been
structured such that it constitutes an Investment hereunder, would have
been a Mismatched International Investment and/or a Non-Repatriation
International Investment."
Section 1.01 of the Credit Agreement is amended by adding the
following provision as Section 1.01(nnn.1):
"(nnn.1) "Mismatched International Investment" means, at
any time, each Investment by Cineplex, Plitt, a Restricted Subsidiary
or a Related Party, as applicable, in the International Exhibition
Business in respect of which, at such time:
(i) the operating costs (calculated without inclusion
of amounts for depreciation and amortization) of the business relating
to such Investment which are denominated and payable in a currency other
than the currency in which the revenues generated from such business
are denominated and received;
exceed,
(ii) 15% of the total operating costs (calculated
without inclusion of amounts for depreciation and amortization) of
such business;unless the currency risks associated
with such Investment have been hedged to the reasonable satisfaction
of the Agent, in which case such Investment shall not be considered to
be a Mismatched International Investment for the purposes of this
Agreement."
Section 1.01 of the Credit Agreement is amended by adding the
following provision as Section 1.01(qqq.1):
"(qqq.1) "Non-Repatriation International Investment" means,
at any time, each Investment by Cineplex, Plitt, a Restricted Subsidiary
or a Related Party, as applicable, in the International Exhibition Business
in respect of which, at such time, some difficulty exists, or is likely
to exist, in paying, transferring or otherwise distributing the revenues,
profits or income therefrom to Cineplex, Plitt, such Restricted
Subsidiary or such Related Party, as the case may be, to the extent that
such payment, transfer or distribution is to be made outside the
jurisdiction of its origin."
Section 1.01 of the Credit Agreement is amended by amending the
definition of "Permitted Indebtedness" in subsection 1.01(uuu) thereof
by deleting the word "and" at the end of subparagraph (xi) thereof, by
deleting the period at the end of subparagraph (xii) thereof and
replacing it with "; and" and by adding the following provision as
subparagraph (xiii) thereof:
"(uuu) (xiii) Indebtedness of Cineplex, Plitt or a Restricted
Subsidiary in respect of Permitted Landlord Arrangements."
Section 1.01 of the Credit Agreement is amended by adding the
following provision as Section 1.01(uuu.1):
"(uuu.1) "Permitted International Exhibition Business
Investment" means Investments by Cineplex, Plitt, a Restricted Subsidiary
or a Related Party in the International Exhibition Business to the extent
that the following criteria are met with respect to such Investments:
(i) not more than U.S. $10,000,000, in the aggregate
(herein, the "International Limit"), may be expended on all such
Investments;
(ii) not more than U.S. $4,000,000, in the aggregate, of the
International Limit may be expended for or held in Mismatched
International Investments;
(iii) not more than U.S. $2,000,000, in the aggregate, of the
International Limit may be expended for or held in Non-Repatriation
International Investments; and
(iv) at no time may Investments be made in more than five
locations which are Mismatched International Investments and/or
Non-Repatriation International Investments.
Notwithstanding anything else contained in this
Agreement:
(v) if Cineplex or any Subsidiary of Cineplex, or any
Affiliate of either, enters into or becomes subject to any International
Structuring Mismatched Arrangement, then the aggregate amount of the
liabilities or obligations associated with such International
Structuring Arrangement shall be deemed, as applicable, to be a
Mismatched International Investment or a Non-Repatriation International
Investment and (A) if such International Structuring Mismatched
Arrangement is not made in conjunction with an Investment, the
International Structuring Mismatched Arrangement shall be deemed to be
an Investment in the amount of U.S. $500,000, (B) if such International
Structuring Mismatched Arrangement is made in conjunction with an
Investment in an amount less than U.S. $500,000, the International
Stucturing Mismatched Arrangement shall be deemed to be an Investment
in the amount of U.S. $500,000, and (C) if such International
Structuring Arrangement is made in conjunction with an Investment in an
amount in excess of U.S. $500,000, the International Structuring
Mismatched Arrangement shall not be deemed to be an Investment, but,
for greater certainty, the amount of such Investment shall be included
for all purposes of this Agreement; and
(vi) at any time when the aggregate (without duplication) of
earnings before interest, taxes, depreciation and amortization for all
Permitted International Exhibition Business Investments, deemed
Investments as contemplated in paragraph (v) above and International
Structuring Arrangements (whether such aggregate amount is positive or
negative) exceeds 10% of Cash Flow attributable on a reasonable basis
to the North American operations of Cineplex on a consolidated basis
for a comparable period, then no further Investments in the International
Exhibition Business or International Structuring Arrangements shall be
permitted hereunder.
Section 1.01 of the Credit Agreement is amended by amending the
definition of "Permitted Investments" in subsection 1.01(vvv) thereof
by deleting the word "and" at the end of subparagraph (xi) thereof, by
deleting the period at the end of subparagraph (xii) thereof and
replacing it with "; and" and by adding the following provision as
subparagraph (xiii) thereof:
"(vvv) (xiii) Permitted International Exhibition Business
Investments."
Section 1.01 of the Credit Agreement is amended by adding the
following provision as Section 1.01(vvv.1):
"(vvv.1) "Permitted Landlord Arrangements" means an
arrangement entered into between Cineplex, Plitt or a Restricted
Subsidiary and the landlord of a theatre location leased to and operated
by Cineplex, Plitt or such Restricted Subsidiary which, in substance,
provides an advance of moneys to Cineplex, Plitt or such Restricted
Subsidiary, as applicable, which moneys are expended for furniture,
fixtures and equipment used for such theatre location, provided however,
that the aggregate amount of moneys provided to Cineplex, Plitt and any
Restricted Subsidiary under all Permitted Landlord Arrangements shall
not exceed U.S. $10,000,000."
Section 1.01 of the Credit Agreement is amended by amending
the definition of "Permitted Liens" in subsection 1.01(www) thereof
by deleting the word "and" at the end of subparagraph (xv) thereof, by
deleting the period at the end of subparagraph (xvi) thereof and
replacing it with "; and" and by adding the following provision as
subparagraph (xvii) thereof:
"(www) (xvii) Liens granted to secure Permitted Landlord
Arrangements hereof to the extent only that such Liens relate to the
property and assets acquired with funds advanced by the landlord under
such Permitted Landlord Arrangements."
Section 3 - Amendment to Security
Section 5.01 of the Credit Agreement is amended by adding the
word "and" after the semi-colon in subsection (l) thereof and by adding
the following provision as subsection (m) thereof:
"(m) to the extent possible with respect to all Permitted
International Exhibition Business Investments, security documentation
and guarantees parallel in scope to that required for Restricted
Subsidiaries hereunder, duly registered, filed or recorded in all
relevant jurisdictions."
Section 4 - Amendment to Reporting Requirements
The Credit Agreement is amended by adding the following provision
as Section 7.01(b.1) thereof:
"(b.1) as soon as possible, but in any event within 45 days after
the end of each fiscal quarter of Cineplex (including the fourth quarter),
detailed reports setting forth, as at the end of such quarter, the
aggregate amount of expenditures made or commitments entered into in
relation to Investments in the International Exhibition Business, with
separate reporting of the aggregate of all such amounts or commitments
in relation to Mismatched International Investments and Non-Repatriation
International Investments;"
Section 5 - Amendment to Negative Covenants The Credit Agreement is
amended by adding the following sentence to the end of Section 8.04
thereof: "For avoidance of doubt, to the extent that any Investment
in the International Exhibition Business (or any part thereof) relates
to a facility which includes ancillary and/or complimentary activities
such as (without limitation) games rooms, virtual reality centres and
sporting facilities, such Investment or, as applicable, the portion
thereof reasonably attributable to such facilities, shall be considered
to be an Ancillary Facility for all purposes of this Agreement including,
without limitation, the limitations on Investments in Ancillary Facility
as set forth herein."
The Credit Agreement is amended by adding the following provision
as Section 8.13 thereof:
"Section 8.13 Permitted Landlord Arrangements: None of
Cineplex, Plitt, any Subsidiary or any Related Party will enter into
any arrangements with a landlord of a theatre location if such
arrangement is in substance an advance by the landlord of moneys to
such party to enable it to acquire furniture, fixtures and/or equipment
for use in such theatre location unless such arrangement is a Permitted
Landlord Arrangement."
Section 6 - Consent to Budapest, Hungary Project Subject to and
in accordance with the provisions of this Agreement and the Credit
Agreement, the Banks agree to permit Cineplex to enter into the
transactions relating to a proposed exhibition location in Budapest,
Hungary strictly on the terms and conditions of the deal memorandum
attached hereto as Appendix A. It is acknowledged and agreed that
such transactions shall constitute a Permitted International Exhibition
Business Investment, subject to all of the terms and conditions of
the Credit Agreement (as amended by, inter alia, this Seventh Amendment
Agreement).
Section 7 - Conditions Precedent to Effectiveness of this Amendment
Agreement
This Seventh Amendment Agreement shall only become
binding on the Banks upon satisfaction of the following conditions
precedent:(a) receipt by the Agent of evidence, in form and
substance satisfactory to the Agent and its counsel, that all terms,
conditions and provisions relating to the subject matter of this Seventh
Amendment Agreement are permitted under the Senior Subordinated
Indenture; and
(b) execution of this Seventh Amendment Agreement by the Super
Majority Banks in accordance with Section 12.01(ii) of the Credit
Agreement.
Section 8 - Confirmation by Guarantors
Each Guarantor confirms that the Guarantee and Collateral made
or granted by it pursuant to the
Credit Agreement and the Operating Credit Agreement remain in full
force and effect notwithstanding the amendments and supplements to
Credit Agreement herein contained.
Section 9 - Continuing Effect of Agreements
Except as amended by this Agreement, the Credit Agreement and
the Operating Credit Agreement shall remain in full force and effect,
without amendment, and each is hereby ratified and confirmed.
Section 10 - Counterparts
This Agreement may be executed in any number of counterparts and
all such counterparts taken together shall
be deemed to constitute one and the same instrument and shall be
effective on the date when each of the parties hereto has signed a
copy hereof and shall have delivered the same to the Agent.
EXECUTED AND EFFECTIVE as of the date first written above.
THE BANKS
- ---------
THE BANK OF NOVA SCOTIA NATIONAL BANK OF CANADA
By: K. Lehner By: L. Shain
THE BANK OF NEW YORK ROYAL BANK OF CANADA
By: Geoffrey C. Brooks By: M. Waiser
THE BANK OF NOVA SCOTIA, as Agent THE BANK OF NOVA SCOTIA, as
By: J. Hall Operating Lender
By: K. Lehner
THE BORROWERS
- -------------
CINEPLEX ODEON CORPORATION PLITT THEATRES, INC.
By: Ellis Jacob By: Ellis Jacob
EACH OF THE UNDERSIGNED hereby acknowledges and agrees to and accepts
the terms and conditions set forth in this Agreement as of the date
first written above.
THE GUARANTORS
- --------------
CINEPLEX ODEON CORPORATION PLITT THEATRES, INC.
By: Ellis Jacob By: Ellis Jacob
RKO CENTURY WARNER THE WALTER READE ORGANIZATION, INC
THEATRES, INC.
By: Ellis Jacob By: Ellis Jacob
PLITT SOUTHERN THEATRES, MANBECK THEATRE CORPORATION
INC.
By: Ellis Jacob By: Ellis Jacob
CINEPLEX ODEON (QUEBEC) INC.
By: Ellis Jacob
EXHIBIT 11.1
CINEPLEX ODEON CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Calculated in accordance with Canadian generally accepted accounting
principles)
(In U.S. dollars, except number of shares)
<TABLE>
<CAPTION>
3 months ended 3 months ended 9 months ended 9 months ended
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Basic
- -----
Net income/
(loss) (B) ($2,970,000) $4,333,000 ($21,197,000) ($25,923,000)
============ ========== ============= =============
Weighted average
outstanding common
and subordinate
restricted voting
shares (C) 176,765,000 114,769,000 159,007,000 114,757,000
=========== =========== =========== ===========
Net income(loss)
per share (B/C) ($0.02) $0.04 ($0.13) ($0.23)
======= ====== ======= =======
Fully Diluted
- -------------
Net income/
(loss) ($2,970,000) $4,333,000 ($21,197,000) ($25,923,000)
Imputed interest on
stock options converted
at beginning of year
(net of income tax
of nil) 0 (1) 0 (1) 0 (1) 0 (1)
----------- ----------- ------------ -----------
Adjusted net
income/(loss) (E) ($2,970,000) $4,333,000 ($21,197,000) ($25,923,000)
============ ========== ============= =============
Weighted average
outstanding shares
- - after all
conversions (F) 176,765,000 (2) 114,769,000 (2) 159,007,000 (2) 114,757,000 (2)
=========== =========== =========== ===========
Net income(loss)
per share (E/F) ($0.02) $0.04 ($0.13) ($0.23)
======== ===== ======= ========
</TABLE>
(1) Imputed interest calculations would be anti-dilutive and therefore
have been excluded in calculations.
(2) Inclusion of conversions would be anti-dilutive and therefore are
excluded in calculations. Weighted average outstanding shares after
all conversions would be 183,362,000 for the 3 months ended
September 30, 1996, 122,611,000 for the three months ending
September 30, 1995, 166,082,000 for the 9 months ending
September 30, 1996 and 122,616,000 for the 9 months ending
September 30, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1927
<SECURITIES> 409
<RECEIVABLES> 4392
<ALLOWANCES> 752
<INVENTORY> 6551
<CURRENT-ASSETS> 19215
<PP&E> 852546
<DEPRECIATION> 277861
<TOTAL-ASSETS> 637953
<CURRENT-LIABILITIES> 76315
<BONDS> 246996
0
0
<COMMON> 555356
<OTHER-SE> (326641)
<TOTAL-LIABILITY-AND-EQUITY> 637953
<SALES> 97101
<TOTAL-REVENUES> 388110
<CGS> 17323
<TOTAL-COSTS> 333723
<OTHER-EXPENSES> 47001
<LOSS-PROVISION> 320
<INTEREST-EXPENSE> 27478
<INCOME-PRETAX> (20097)
<INCOME-TAX> 1105
<INCOME-CONTINUING> (21197)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21197)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
