FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-9454
CINEPLEX ODEON CORPORATION
(Exact name of Registrant as specified in its charter)
Ontario, Canada Non-Resident Alien
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1303 Yonge Street, Toronto, Ontario M4T 2Y9
(Address of principal executive offices) (Postal Code)
416-323-6600
(Registrant's telephone number
including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X or No
As of May 2, 1997, 103,352,282 shares of Cineplex Odeon Corporation
Common Stock were outstanding.
TOTAL NO. OF PAGES
EXHIBIT INDEX PAGE
<PAGE>
CINEPLEX ODEON CORPORATION
FORM 10-Q
MARCH 31, 1997
Index
PART I - FINANCIAL INFORMATION Page No.
ITEM 1 - Financial Statements (Unaudited)
Consolidated Balance Sheet
March 31, 1997 and December 31, 1996
Consolidated Income Statement
Three Months Ended March 31, 1997 and
March 31, 1996
Consolidated Statement of Changes in Cash Resources
Three Months Ended March 31, 1997 and
March 31, 1996
Notes to the Consolidated Financial Statements
March 31, 1997
ITEM 2 - Management's Discussion and Analysis of Results of
Operations and Financial Condition
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
ITEM 6 - Exhibits and Reports on Form 8-K
SIGNATURE PAGE
<PAGE>
CINEPLEX ODEON CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Unaudited Audited
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,494 $ 2,718
Accounts receivable 12,305 9,552
Other 10,452 8,852
----------- ----------
25,251 21,122
PROPERTY, EQUIPMENT AND LEASEHOLDS 575,789 579,841
OTHER ASSETS
Long-term investments and receivables 2,099 2,535
Goodwill 32,536 32,816
Deferred charges 7,819 7,857
---------- ----------
42,454 43,208
---------- ----------
TOTAL ASSETS $ 643,494 $ 644,171
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals $ 66,812 $ 59,474
Deferred income 17,424 17,150
Current portion of long-term debt
and other obligations 7,280 6,926
-------- --------
91,516 83,550
LONG-TERM DEBT 317,256 326,058
CAPITALIZED LEASE OBLIGATIONS 7,781 8,317
DEFERRED INCOME 5,843 6,594
PENSION OBLIGATION 1,063 1,072
SHAREHOLDERS' EQUITY
Capital stock 555,385 555,374
Translation adjustment 3,353 4,016
Retained earnings (deficit) (338,703) (340,810)
---------- ---------
220,035 218,580
COMMITMENTS AND CONTINGENCIES (note 2)
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 643,494 $ 644,171
========== ===========
</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
March 31, 1997 March 31, 1996
-------------- ----------------
<S> <C> <C>
REVENUE
Admissions $ 106,392 $ 91,259
Concessions 38,347 31,861
Other 5,807 5,231
----------- ------------
150,546 128,351
EXPENSES
Theatre operations and other expenses 116,485 103,817
Cost of concessions 7,114 5,708
General and administrative 5,167 4,175
Depreciation and amortization 11,021 10,700
------------ ------------
139,787 124,400
------------ ------------
Income before the undernoted 10,759 3,951
Other expenses (73) (773)
------------ ------------
Income before interest on long-term
debt and income taxes 10,686 3,178
Interest on long-term debt 8,273 9,921
------------ ------------
Income/(loss) before income taxes 2,413 (6,743)
Income taxes 306 414
------------ ------------
NET INCOME/(LOSS) $ 2,107 $ (7,157)
============ ===========
BASIC
Weighted average shares outstanding 176,784,000 123,551,000
Income/(loss) per share $0.01 ($0.06)
FULLY DILUTED
Weighted average shares outstanding 191,291,000 131,384,000
Income/(loss) per share $0.01 ($0.06)
</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
3 Months Ended 3 Months Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
CASH PROVIDED BY(USED FOR)
OPERATING ACTIVITIES
Net income/(loss) $ 2,107 $ (7,157)
Depreciation and amortization 11,021 10,700
Other non-cash items (717) (484)
--------- ---------
12,411 3,059
Net change in non-cash working capital 3,792 (3,899)
--------- ---------
16,203 (840)
--------- ---------
FINANCING ACTIVITIES
Decrease in long-term debt and other obligations (9,207) (75,645)
Increase in long-term debt and other obligations 214 -
Issue of share capital, net of issue costs 11 82,056
Other (340) (728)
--------- --------
(9,322) 5,683
--------- --------
INVESTMENT ACTIVITIES
Additions to property, equipment and leaseholds (9,567) (5,469)
Proceeds on sale of certain theatre properties 2,626 632
Other (164) (206)
-------- --------
(7,105) (5,043)
-------- --------
NET DECREASE DURING PERIOD (224) (200)
CASH AT BEGINNING OF PERIOD 2,718 1,604
-------- --------
CASH AT END OF PERIOD $ 2,494 $ 1,404
========= =========
CASH FLOW FROM OPERATING ACTIVITIES PER SHARE
Basic $ 0.09 $ (0.01)
Fully Diluted $ 0.08 $ (0.01)
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CINEPLEX ODEON CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(in U.S. dollars)
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements in this quarterly report to
shareholders are prepared in accordance with accounting principles
generally accepted in Canada. For the three months ended March 31, 1997,
the application of accounting principles generally accepted in the United
States did not have a material effect on the measurement of the
Corporation's net profit and shareholders' equity. For information on
differences between Canadian and United States generally accepted
accounting principles, reference is made to the Corporation's 1996 annual
report to shareholders.
The consolidated financial statements in this quarterly report to
shareholders are based in part on estimates, and include all adjustments
consisting of normal recurring accruals that management believes are
necessary for a fair presentation of the Corporation's financial position
as at March 31, 1997, and the results of its operations for the three
months then ended. Operating results for the three months ended March 31,
1997 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1997.
The consolidated financial statements and related notes have been
prepared in accordance with generally accepted accounting principles
applicable to interim periods; consequently they do not include all
generally accepted accounting disclosures required for annual
consolidated financial statements. For more complete information these
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes contained in the
Corporation's 1996 annual report to shareholders.
2. COMMITMENTS AND CONTINGENCIES
i) The Corporation and its subsidiaries are currently subject to audit by
taxation authorities in several jurisdictions. The taxation authorities
have proposed to reassess taxes in respect of certain transactions and
income and expense items. Management believes that the Corporation and
its subsidiaries have meritorious defenses and is vigorously contesting
the adjustments proposed by the taxation authorities. Although such
matters cannot be predicted with certainty, management does not consider
the Corporation's exposure to such litigation to be material to these
financial statements.
ii) The Corporation and its subsidiaries are also involved in certain
litigation arising out of the ordinary course and conduct of its
business. The outcome of this litigation is not currently determinable.
Although such matters cannot be predicted with certainty, management does
not consider the Corporation's exposure to such litigation to be material
to these financial statements.
3. SUMMARY FINANCIAL INFORMATION
The following is consolidated summarized financial information of the
Corporation's wholly owned subsidiary Plitt Theatres, Inc.:
- ------------------------------------------------------------------------
Unaudited
3 Months Ended 3 Months Ended
March 31, 1997 March 31, 1996
- ------------------------------------------------------------------------
Revenue $ 95,615,000 $ 86,670,000
========================================================================
Income before general and administrative
expenses, depreciation and amortization,
interest on long-term debt
and income taxes $ 13,747,000 $ 10,475,000
========================================================================
Net loss $ (5,688,000) $ (8,787,000)
========================================================================
- ----------------------------------------------------------
March 31, 1997 December 31, 1996
- ----------------------------------------------------------
Current assets $ 24,386,000 $ 17,105,000
Noncurrent assets 471,363,000 484,618,000
Current liabilities 68,829,000 55,078,000
Noncurrent liabilities 276,164,000 265,386,000
==========================================================
Current liabilities at March 31, 1997 include a net payable to the
Corporation and other corporations within the consolidated group in the
amount of $4,316,000 (December 31, 1996 - net payable of $9,551,000).
Noncurrent liabilities at March 31, 1997 and December 31, 1996 include
$10,000,000 that is owed to the Corporation.
4. RECLASSIFICATION
Certain of the prior period's balances have been reclassified to conform
with the presentation adopted in the current period.
<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 income for the three months ended March 31, 1997
was $2,107,000 or $0.01 per share compared to a net loss of $7,157,000 or
$0.06 per share for the same period in 1996. The Corporation's improved
performance in the first quarter of 1997 is primarily attributable to the
increase in admission revenue. Admission revenue in the first quarter of
1997 was $106,392,000 compared to $91,259,000 in the corresponding period
in the prior year, an increase of 16.6%. This increase in admission
revenue is a direct result of a strong slate of films released during
this period, including the re-release of the Star Wars trilogy, Liar,
Liar and Dante's Peak. The increase in attendance reflected in the higher
admission revenue had a corresponding impact on the Corporation's
concession revenue which increased by 20.4% in the first quarter of 1997
compared to the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations for the three months ended March 31, 1997
amounted to a net inflow of $16,203,000 compared to a net outflow of
$840,000 for the same period in 1996. Excluding the impact of the net
change in non-cash working capital, the Corporation's cash flow from
operations for the three months ended March 31, 1997 amounted to a net
inflow of $12,411,000 compared to a net inflow of $3,059,000 for the same
period in 1996. The increase in cash flow resulted primarily from the
increase in revenue noted above.
Management expects to open 16 new theatre locations (adding 169 new
screens) and refurbish a total of eight theatres (adding 48 new screens)
during the remainder of 1997 at an estimated net cost of less than
$50,000,000. The Corporation's current strategy is to develop and build
additional theatres and screens in target markets that complement the
Corporation's existing position in such markets or that provide the
Corporation with a strategic position in a new market. In late 1996 the
Corporation opened its first theatre outside of North America in
Budapest, Hungary. In addition to Hungary, management is considering
opportunities in other international markets, although at this stage it
is premature to comment on either the possibility of further
international expansion or the potential magnitude of the Corporation's
capital commitment relating to its international expansion strategy. The
Corporation plans to fund its expansion programs by drawing on its bank
credit facilities and through internally generated cash flow. The
Corporation has approximately $73,000,000 available under its bank credit
facilities at March 31, 1997.
At March 31, 1997 the Corporation's long-term debt was $317,256,000
compared to $326,058,000 at December 31, 1996. This reduction is
directly attributable to the revenues produced by the Corporation in the
first quarter of 1997 which have been used to temporarily reduce the
Corporation's revolving bank facility.
RESULTS OF OPERATIONS
The Corporation reports its results in U.S. dollars. In order to
eliminate the impact of exchange rate fluctuations on the yearly
comparison of both admission and concession revenue, the results of the
Corporation's Canadian operations as discussed below are measured in
Canadian dollars.
The Corporation's United States theatres recorded an increase in
admission revenue of 9.4% for the three months ended March 31, 1997
compared to the same period in 1996. This admission revenue increase was
the result of a 5.1% increase in attendance and a 4.3% increase in box
office revenue per patron.
The Corporation's Canadian theatres reported an increase in admission
revenue of 27.6% (when measured in Canadian dollars) for the three months
ended March 31, 1997 compared to the same period in 1996. This increase
was the result of an increase in attendance of 20.5% and an increase in
box office revenue per patron of 7.1% over the same period in 1996.
The increase in both first quarter attendance and admission revenue in
1997 compared to the same period in 1996 reflects the strong slate of
films released. The Corporation's Canadian theatres significantly
improved performance is due to the fact that the more successful films
released in the first quarter of 1997 were distributed by the
Corporation's traditional Canadian suppliers.
The Corporation's United States concession revenue increased by 12.8% for
the three months ended March 31, 1997 compared to the same period in
1996. The attendance increase of 5.1%, combined with an increase in
concession revenue per patron of 7.7% was responsible for the increase in
concession revenue.
The Corporation's Canadian concession revenue increased by 30.2% (when
measured in Canadian dollars) for the three months ended March 31, 1997
compared to the same period in 1996, reflecting the increase in
attendance of 20.5% and an increase in concession revenue per patron of
9.7%.
The gross margin from theatre operations (consisting of revenue from
theatre operations less film cost, cost of concessions, theatre
advertising, payroll, occupancy and supplies and services), when
expressed as a percentage of theatre operating revenue, increased for the
three months ended March 31, 1997 to 19.4% from 16.5% for the same period
in 1996. This increase is attributable to the increased revenue
experienced in both the Corporation's Canadian and United States theatres
in the first quarter of 1997.
General and administrative expenses increased by 23.8% in the first
quarter of 1997 compared to the corresponding period in 1996. This
increase is the result of certain costs associated with the
infrastructure necessary for the Corporation's expansion program and
certain one-time charges.
Interest on long-term debt decreased by 16.6% during the three months
ended March 31, 1997 compared to the same period in 1996. This decrease
is a result of a reduced average debt balance during the first quarter of
1997 compared to the first quarter of 1996 and the decision to denominate
certain of the Corporation's long-term debt in Canadian dollars.
In the twelve month period ending March 31, 1997 the value of the
Canadian dollar has strengthened relative to the United States dollar.
While currency movements affect the reporting of revenues and expenses of
the Corporation's Canadian operations, the financial impact is limited as
the costs of operating the Canadian theatres are supported by the revenue
of such theatres.
FORWARD LOOKING STATEMENTS
The Corporation and its representatives have made, or may make, forward
looking statements including those contained in this Management's
Discussion and Analysis of Results of Operations and Financial Condition.
Use of the words "expects", "estimated", "plans", or similar
expressions identify such forward looking statements.
The results contemplated by the Corporation's forward looking statements
are subject to certain risks and uncertainties that could result in
actual performance being materially different from anticipated results,
including without limitation, lack of high quality commercial film
product, construction risks and delays, failure to obtain future waivers
or amendments under the Corporation's bank credit facilities and other
factors described herein.
<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 Performance-Based Option Agreement.
(b) Exhibit 11.1 Statement re Computation of Per Share
Earnings.
(c) Exhibit 27 Financial Data Schedule.
(d) The Corporation did not file any reports on Form 8-K during the
quarter ended March 31, 1997.
* Please note that a request for confidential treatment of the
performance targets in section 4 (b)(i) has been filed with the
Securities and Exchange Commission.
<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 May 14, 1997 Allen Karp
------------ --------------------
Allen Karp
President and Chief
Executive Officer
Date May 14, 1997 Ellis Jacob
------------ -----------------------
Ellis Jacob
Executive Vice President
and Chief Financial Officer
<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 March 31, 1997
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
Number
* 10.1 Performance-Based Option Agreement.
11.1 Statement re Computation of Per Share Earnings.
27 Financial Data Schedule.
* Please note that a request for confidential treatment of the
performance targets in section 4 (b)(i) has been filed
with the Securities and Exchange Commission.
EXHIBIT 10.1
U.S. Resident
(performance based vesting)
(Expiring in 10 years)
THIS CINEPLEX ODEON PERFORMANCE-BASED OPTION AGREEMENT made
as of the 16th day of April, 1996.
B E T W E E N:
CINEPLEX ODEON CORPORATION, a company continued by Articles
of Amalgamation under the laws of the Province of Ontario,
(hereinafter called the "Company")
OF THE FIRST PART
AND
(hereinafter called the "Employee")
OF THE SECOND PART
WHEREAS the Employee is an employee of the Company, or an
affiliate thereof;
AND WHEREAS the Company has determined that it is in the best
interests of the Company to grant to the Employee an option to purchase
common shares of the Company as a performance incentive upon the terms and
conditions contained herein;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of
the mutual covenants contained herein, the parties hereto agree as follows:
1. THE SHARES
As used herein the term "share" or "shares" shall mean one or
more common shares of the Company.
2. PURCHASE OPTION
The Company hereby grants to the Employee, subject to the terms
and conditions hereinafter set forth and the provisions of the Company's
Stock Option Plan, as amended from time to time (the "Plan"), an
irrevocable option to purchase up to *** shares (hereinafter collectively
called the "Optioned Shares") at the purchase price of $1.868 Canadian per
share.
3. DURATION OF OPTION
Subject to the provisions hereof including, without limitation,
the provisions of Section 4 hereof:
(i) the Employee shall have the right to exercise the option
hereby granted with respect to all or any part of the Optioned
Shares at any time or from time to time on or after the Initial
Vesting Date (as defined below) and prior to the close of
business on the first business day following the tenth (10th)
anniversary of the date hereof (such time on such date being
hereinafter called the "Expiry Date"); and
(ii) at the Expiry Date, the option hereby granted shall
forthwith expire and terminate and be of no further force or
effect whatsoever as to such of the Optioned Shares in respect of
which the option hereby granted has not then been properly
exercised.
For the purposes hereof:
(iii) "Vesting Date" means the date on which the Company first
announces its fiscal year end consolidated financial results for
its then most recently completed financial year;
(iv) "Initial Vesting Date" means the first Vesting Date
following the date hereof; and
(v) "Financial Year" means each of the 1996 to 2000,
inclusive, financial years of the Company.
4. PURCHASE PER YEAR, VESTING
(a) Subject to the provisions hereof, no Optioned Shares shall be
purchasable prior to the Initial Vesting Date and the number of
Optioned Shares which may be purchased hereunder during:
(i) any particular period (A) commencing on the Initial
Vesting Date or commencing on the second, third and fourth
Vesting Dates following the date hereof, and (B) ending on the
second, third, fourth and fifth Vesting Dates following the date
hereof, respectively; and
(ii) the period commencing on the fifth Vesting Date following
the date hereof and ending on the Expiry Date,
(in each case, an "Option Period") shall, subject to the
provisions of this Section 4, be twenty per cent (20%) of the
Optioned Shares (a "Target Award"); provided, however, that the
option hereby granted shall not be exercisable with respect to
fractional shares.
For purposes of clarity, the number of Optioned Shares which may,
subject to the provisions hereof, be purchased hereunder during
each Option Period shall be as follows:
Number of Optioned
Shares in respect
of which the option
hereby granted is
Option Period exercisable
Initial Vesting Date to Second
Vesting Date and thereafter
Second Vesting Date to Third
Vesting Date and thereafter
Third Vesting Date to Fourth
Vesting Date and thereafter
Fourth Vesting Date to Fifth
Vesting Date and thereafter
Fifth Vesting Date to Expiry Date
TOTAL
If the Employee shall, during any Option Period, not exercise his
right to purchase all of the Option Shares purchasable by him
during such Option Period then, subject to the provisions hereof,
the Employee shall have the right, at any time or from time to
time thereafter but prior to the Expiry Date, to purchase such
number of Optioned Shares which were purchasable but not
purchased by him.
(b) (i) For purposes of this Agreement, the board of directors of
the Company (the "Board of Directors") has prescribed an
operating performance objective measured by "Consolidated
EBITDA", as such term is defined in Schedule "A" attached hereto
(a "Performance Target") for the Company in respect of each of
the 1996 to 2000, inclusive, Financial Years, being the
following:
Financial Year Performance Target
(in thousands of
U.S. dollars)
1996 (confidential treatment requested)
1997 (confidential treatment requested)
1998 (confidential treatment requested)
1999 (confidential treatment requested)
2000 (confidential treatment requested)
(ii) Performance Targets are based on the current business and
assets of the Company and its subsidiaries. Accordingly, it is
the intent of the Company and those employees of the Company who
are being granted performance-based options that Performance
Targets be subject to adjustment to deal with material unforeseen
future events which may occur during any one or more of the
Financial Years in respect of which Performance Targets have been
established. For instance, if the Company hereafter invests
material sums of money to carry on a business (or to carry on its
business in a manner not currently contemplated) which was not
contemplated in the business plans which formed the basis upon
which the Performance Targets were established or if the Company
completes a material asset disposition or acquisition which is
not in the ordinary course of its business or if a
recapitalization is effected in connection with any significant
treasury offering of the Company's securities or if the Company
changes its fiscal year end, said parties intend that the
Performance Targets may be adjusted accordingly. It is
acknowledged that any or all of such adjustments may be made
before or after the event which precipitates such adjustment.
Performance Targets shall be adjusted if agreed to by the
Company's Compensation Committee, on the one hand, and its Chief
Executive Officer and Chief Financial Officer, on the other. The
Employee acknowledges that, in such circumstances, the Company's
Chief Executive Officer and Chief Financial Officer are
authorized on his behalf to agree to an adjustment of Performance
Targets and the Employee acknowledges that he will be bound by
any such agreement. The Employee agrees to indemnify and save
harmless the Company's Chief Executive Officer and Chief
Financial Officer and their respective heirs and legal
representatives against any and all liabilities, costs, charges
and expenses incurred in respect of the making of such agreement
if, in making such agreement, they acted honestly and in good
faith with a view to the best interests of all employees to whom
performance-based options have been granted.
(c) In the event that the Company's Consolidated EBITDA for a
Financial Year as reflected in the consolidated audited annual
financial statements of the Company (the "Annual Financial
Statements") for such year is equal to or greater than the
Performance Target for such Financial Year:
(i) the option hereby granted shall be exercisable for the
full amount of the Target Award in respect of such Financial
Year; and
(ii) the amount by which the Company's Consolidated EBITDA
exceeds the Performance Target for such Financial Year shall be
referred to herein as "Excess Consolidated EBITDA" and shall, for
purposes of this agreement, be dealt with in the manner set out
in Subsection 4(e) hereof.
(d) (i) In the event that the Company's Consolidated EBITDA for a
Financial Year as reflected in the Annual Financial Statements
for such year is less than the Performance Target for such
Financial Year, then, subject to the provisions of Subsection
4(e) hereof, the option hereby granted in respect of such
Financial Year shall not be exercisable in whole or in part.
(ii) Notwithstanding the provisions of Paragraph 4(d)(i)
hereof, if in any Financial Year the Company's Consolidated
EBITDA is less than the Performance Target for such Financial
Year but the shortfall is immaterial, the Company's Board of
Directors may nevertheless allow all employees to whom
performance-based options have been granted to exercise the
option hereby granted for all or a portion of the Target Award in
respect of such Financial Year, it being the intention of the
Company to treat the said employees fairly (it being
acknowledged, however, that the power granted to the Company
contained in this Paragraph 4(d)(ii) is wholly discretionary on
the part of the Company). It is hereby acknowledged, however,
that notwithstanding a decision to allow employees to exercise
all or a portion of the Target Award in respect of such Financial
Year as aforesaid, the Performance Target for such Financial Year
shall, for the purposes of Subsection 4(e) hereof, not be deemed
to have been adjusted and shall remain the same as it was
notwithstanding a decision made pursuant to this Subsection
4(d)(ii).
(e) Whenever there shall be Excess Consolidated EBITDA, it shall be
carried back to the earliest Financial Year prior to the
Financial Year in question (a "Prior Financial Year") in respect
of which the Company's Consolidated EBITDA (plus any Excess
Consolidated EBITDA previously carried back ("Prior Carry Backs")
pursuant to this Subsection 4(e) was less than the Performance
Target for such Financial Year and, thereafter, in the same
manner, to the next earliest Prior Financial Year and so on. The
Company's Consolidated EBITDA in respect of such Prior Financial
Year together with any Prior Carry Backs and together with any
Excess Consolidated EBITDA added thereto as aforesaid shall be
referred to as "Deemed Consolidated EBITDA". Upon Deemed
Consolidated EBITDA in respect of any Prior Financial Year
equalling the Performance Target for such Financial Year, the
option hereby granted in respect of such Financial Year shall be
exercisable for the full amount of the Target Award in respect of
such Financial Year. Notwithstanding the immediately preceding
sentence, where a decision was made in respect of such Financial
Year pursuant to Subsection 4(d)(ii) hereof, then upon Deemed
Consolidated EBITDA in respect of such Financial Year equalling
the Performance Target for such Financial Year, the option hereby
granted in respect of such Financial Year shall be exercisable
only in respect of the difference between the full amount of the
Target Award for such Financial Year and the portion thereof
which was already the subject matter of the decision made
pursuant to Subsection 4(d)(ii).
To the extent Excess Consolidated EBITDA is not utilized in
respect of Prior Financial Years as aforesaid, it shall be
available for carry forward to future Financial Years in the same
manner, mutatis mutandis, as provided for in this Subsection
4(e).
5. IN THE EVENT OF DEATH
In the event of the death of the Employee on or prior to the
Expiry Date while in the employment of the Company or an affiliate thereof,
the legal personal representatives, heirs or legatees of the Employee shall
be entitled to exercise from time to time, up to and including the date six
(6) months following the date of the announcement of the Company's
consolidated financial results for the Financial Year in which the death in
question occurred, the option hereby granted with respect to any or all of
the Optioned Shares to the extent purchasable as at the date of death of
the Employee and in respect of the Financial Year in which the death in
question occurred, to the extent the Employee's option hereunder has not
been previously exercised. Thereafter, all options hereby granted will, to
the extent unexercised, immediately terminate and be of no further force or
effect.
6. RESIGNATION OR DISCHARGE
(a) In the event of the termination of the Employee as an employee of
the Company or an affiliate thereof prior to the Expiry Date,
whether as a result of resignation or discharge, the Employee
shall continue to have the right to purchase any Optioned Shares
then purchasable in accordance with the provisions of Section 4
hereof, but not previously purchased by him, at any time up to
and including, but not after, the earlier of: (i) the Expiry
Date, or (ii) the date which is sixty (60) days following the
date on which the Employee's employment shall terminate (the
"Termination Date"). For greater certainty, subject to
Subsection 6(b), this Agreement shall be void and of no further
force and effect with respect to any Optioned Shares not
purchasable as at the Termination Date.
(b) Notwithstanding the provisions of Subsection 6(a) and as a
separate and additional right of the Employee hereunder, where
the employment of the Employee as an employee of the Company or
an affiliate thereof is terminated by the Company or such
affiliate prior to the Expiry Date without cause, the Employee
shall also have the right to purchase additional Optioned Shares
in respect of the Financial Year in which his employment is
terminated if the Performance Target in respect of such Financial
Year is met or a decision is made in respect of such Financial
Year pursuant to Subsection 4(d)(ii). In that event, the
Employee in question shall, in respect of this additional right,
be entitled to purchase the number of Optioned Shares which he
would have been entitled to purchase if he was then still
employed times a fraction, the numerator of which is the number
of full months in the Financial Year in question during which he
was so employed, and the denominator of which is 12. The Employee
shall, in respect of this additional right, continue to have the
right to purchase the Optioned Shares referred to in this
Subsection 6(b) at any time up to and including, but not after,
the earlier of: (i) the Expiry Date, or the date which is sixty
(60) days following the Vesting Date following the Financial Year
in question.
7. THIRD PARTY OFFER
Pursuant to Section 6.06 of the Plan, the Company may, in the
manner provided for therein, require the acceleration of the time for the
exercise of the option hereby granted and of the time for the fulfillment
of any conditions or restrictions on such exercise. It is hereby
acknowledged and agreed that if the Company so opts in accordance with
Section 6.06 of the Plan, the Employee shall be entitled to exercise, for a
minimum of thirty (30) days following the Company so opting or such longer
period as is specified by the Company in such circumstances, the option
hereby granted with respect to: (i) any or all of the Optioned Shares to
the extent then purchasable in accordance with the provisions of Section 4
hereof, but not previously purchased by him, and (ii) in respect of the
Financial Year which then has not yet been completed and any subsequent
Financial Years, seventy-five per cent (75%) of the Optioned Shares which
would be purchasable by him if the Performance Targets for such Financial
Years were met (ignoring the provisions of Subsection 4(e) hereof). For
purposes of clarity, in such latter circumstances the option hereby granted
shall then be immediately exercisable without waiting until the end of such
Financial Years and without waiting to determine whether Performance
Targets have been met.
8. EXERCISE OF OPTION
(a) Subject to the provisions hereof, the option hereby granted shall
be exercisable, at any time or from time to time as aforesaid, by
the Employee, his legal personal representatives, heirs or
legatees delivering a notice in writing addressed to the
Director, Corporate Services, of the Company at its principal
office in the City of Toronto, Ontario, or at such address in
Toronto addressed to such person as the Company may in writing
direct, which notice shall specify therein the number of Optioned
Shares in respect of which this option is being exercised and
shall be accompanied by payment, by cash or certified cheque, in
full of the purchase price for the number of Optioned Shares
specified therein. Upon any such exercise of the option hereby
granted as aforesaid, the Company shall forthwith cause the
transfer agent and registrar of the Company to deliver to the
Employee, his legal personal representatives, heirs or legatees
or as he or they may otherwise direct in the notice of exercise
of option, within ten (10) days following receipt by the Company
of any such notice and full payment as aforesaid, a share
certificate or certificates in the name of the Employee or his
legal personal representatives, heirs or legatees, or as he or
they may have otherwise directed, representing in the aggregate
such number of Optioned Shares as shall have been specified in
such notice and paid for.
(b) The Employee represents and agrees that if the Employee exercises
this option in whole or in part at a time when there is not in
effect under the Securities Act of 1933 a registration statement
relating to the shares issuable upon exercise hereof and there is
not available for delivery a prospectus meeting the requirements
of Section 10(a)(3) of the said Act, (i) the Employee will
acquire the shares upon such exercise for the purpose of
investment and not with a view to the distribution thereof, (ii)
that upon each such exercise of this option, the Employee will
furnish to the Company an investment letter in form and substance
satisfactory to the Company, (iii) prior to selling or offering
for sale any such shares, the Employee will furnish the Company
with an opinion of counsel satisfactory to the Company to the
effect that such sale may lawfully be made and will furnish it
with such certificates as to factual matters as it may reasonably
request, and (iv) that certificates representing such shares may
be marked with an appropriate legend describing such conditions
precedent to sale or transfer. Any person or persons entitled to
exercise such option under the provision of Paragraph 5 hereof
shall furnish to the Company letters, opinions, and certificates
to the same effect as would otherwise be required of the
Employee.
9. NO OBLIGATION
Nothing herein contained or contemplated hereunder shall obligate
the Employee to purchase and/or pay for any Optioned Shares, except those
Optioned Shares in respect of which the Employee shall have properly
exercised his option to purchase hereunder in the manner hereinbefore
provided.
10. SUBDIVISION, CONSOLIDATION OR AMALGAMATION
(a) In the event of any subdivision, redivision, or other alteration
of the share capital of the Company at any time during the term
of the option granted hereby, which change results in a greater
number of shares, the Company shall deliver, at the time of any
subsequent exercise of the option hereby granted, such additional
number of shares as would have resulted from such subdivision,
redivision, or change if the particular exercise of the option
hereby granted had been made prior to the date of such
subdivision, redivision, or change.
(b) In the event of any consolidation or other alteration of the
share capital of the Company at any time during the term of the
option granted hereby, which change results in a lesser number of
shares, the number of shares deliverable by the Company on any
subsequent exercise of the option hereby granted shall be reduced
to such number of shares as would have resulted from such
consolidation or change if the particular exercise of the option
hereby granted had been made prior to the date of such
consolidation or change.
(c) In the event of any amalgamation of the Company with another
corporation, the Employee shall, after such amalgamation, be
entitled to receive, upon any exercise of the option hereby
granted after the amalgamation, in lieu of shares of the Company,
the number and class of shares or other securities of the
corporation continuing from such amalgamation to which he would
have been entitled pursuant to the agreement of amalgamation (or
other applicable documentation, however designated) if, at the
effective date of the amalgamation, the Employee had been the
holder of record of a number of shares of the Company equal to
the number of shares in respect of which such option was then
being exercised.
(d) In the event that the foregoing provisions of this Section 10
become applicable, the purchase price per Optioned Share shall be
proportionately adjusted.
11. SHAREHOLDER'S RIGHTS
The Employee shall have no rights whatsoever as a shareholder in
respect of any Optioned Shares (including, but without limitation, any
voting rights or any right to receive dividends or other distributions
therefrom or thereon), other than in respect of Optioned Shares which the
Employee shall have exercised his option to purchase and which the Employee
shall have actually taken up and paid for.
12. TIME OF THE ESSENCE
Time shall be of the essence of this Agreement and of every part
hereof.
13. NOTICES
Any notice, request, payment, or other communication required or
permitted to be given hereunder by either the Company or the Employee to
the other of them, shall be in writing and shall be given, made, or
communicated by personally delivering the same, or by registered or
certified mail, first-class postage fees prepaid, return receipt requested,
addressed as follows:
(a) to the Company at: 1303 Yonge Street
Toronto, Ontario
M4T 2Y9
Attention: Director, Corporate
Services Department
(b) to the Employee at:
or at such other address as either party hereto may designate from time to
time by giving notice to the other to that effect as herein provided. Any
notice, request, payment, or other communication shall be deemed to have
been given, made, or communicated, as the case may be, at the time that the
same is personally delivered, or, if delivered by certified or registered
mail as aforesaid, on the third (3rd) business day (excluding Saturdays,
Sundays, statutory holidays, and periods during which strikes or other
occurrences interfere with normal mail service) next following the date
when the same is so mailed.
14. NO WAIVER
The waiver by either of the parties of a breach or default of any
provision of this Agreement by the other of them shall not be deemed to
constitute a waiver of any preceding or subsequent breach or default of the
same or any other provision of this Agreement.
15. ENTIRE AGREEMENT
Subject to the provisions of any written employment contracts,
this Agreement contains the entire understanding of the parties hereto with
respect to the matters herein contained. There are no representations,
warranties, promises, covenants, or undertakings, other than those
expressly stated herein.
16. NO MODIFICATION
No waiver or modification of any of the terms of this Agreement
shall be valid unless the same is reduced to writing and signed by the
parties hereto.
17. HEADINGS
The headings contained in this Agreement are for convenience of
reference only and do not form any part hereof and in no manner modify,
interpret, or construe the Agreement between the parties hereto.
18. BINDING UPON SUCCESSORS:
NON-ASSIGNABILITY BY EMPLOYEE
This Agreement shall enure to the benefit of and be binding upon
the Company, its successors and assigns, and the Employee and his legal
personal representatives. Subject to the terms hereof, this option shall
be non-transferable and non-assignable by the Employee other than by will
or the laws of descent and distribution, and shall be exercisable during
the lifetime of the Employee only by the Employee or by the Employee's
guardian or legal representative. After the death of the Employee, this
option may be exercised prior to its termination by the Employee's legal
representative, heir or legatee, to the extent permitted in the Plan or
this Agreement. Upon any attempt to transfer, assign, pledge, hypothecate
or otherwise dispose of this option, or of any right or privilege conferred
hereby, contrary to the provisions hereof, or upon any attempted sale under
any execution, attachment or similar process upon the rights and privileges
conferred hereby, the option granted hereby and the rights and privileges
conferred hereby shall immediately become null and void. Until written
notice of any permitted transfer or assignment of rights in respect of the
option granted hereby shall
have been given to and received by the Director, Corporate Services, of the
Company, the Company may, for all purposes, regard the Employee as the
holder of the option granted hereby.
19. CONSTRUCTION
This Agreement shall be governed, construed and enforced
exclusively in accordance with the laws of the Province of Ontario and the
parties hereto hereby irrevocably attorn to the jurisdiction of the Courts
of the said province.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement, this ____ day of ___________________, 1996.
SIGNED, SEALED AND DELIVERED ) CINEPLEX ODEON CORPORATION
)
) per:
) ____________________________C/S
) Title:
)
) ____________________________
) Title:
)
)
__________________________ ) ___________________________ L/S
(Witness) )
)
)
)
)
<PAGE>
SCHEDULE "A"
For all purposes of this Agreement, Consolidated EBITDA will be
determined based upon the data in the audited consolidated financial
statements of the Company and its subsidiaries, and the determination
thereof at any relevant time will be based upon the data in the audited
consolidated financial statements of the Company and its subsidiaries as at
the end of the Company's most recently completed Financial Year. The
calculation of all such amounts based on such audited consolidated
financial statements will be final and binding on the Company and on the
Employee.
"EBITDA" in respect of any Financial Year of the Company means
the reported Net Income/(Loss) of the Company and its subsidiaries plus, to
the extent deducted in determining such Net Income/(Loss), interest expense
(net of interest income), income taxes, depreciation and amortization,
other income (expenses) and gains or losses from discontinued operations as
reported in the audited consolidated financial statements of the Company
for that Financial Year.
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
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Basic
-----
Net income/(loss) (B) $2,107,000 ($7,157,000)
=========== ============
Weighted average outstanding common and
subordinate restricted voting shares (C) 176,784,000 123,551,000
=========== ===========
Net income(loss) per share (B/C) $0.01 ($0.06)
=========== ============
Fully Diluted
-------------
Net income/(loss) $2,107,000 ($7,157,000)
Imputed interest on stock options converted
at beginning of year (net of income tax of nil) 148,000 0 (1)
---------- ------------
Adjusted net income/(loss) (E) $2,255,000 ($7,157,000)
========== ============
Weighted average outstanding shares
- after all conversions (F) 191,291,000 123,551,000 (2)
=========== ===========
Net income(loss) per share (E/F) $0.01 ($0.06)
=========== ============
</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 131,384,000 for the 3 months ended March 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,494
<SECURITIES> 404
<RECEIVABLES> 4,167
<ALLOWANCES> 703
<INVENTORY> 6,767
<CURRENT-ASSETS> 25,251
<PP&E> 872,142
<DEPRECIATION> 296,450
<TOTAL-ASSETS> 643,494
<CURRENT-LIABILITIES> 91,516
<BONDS> 245,978
0
0
<COMMON> 555,385
<OTHER-SE> (335,350)
<TOTAL-LIABILITY-AND-EQUITY> 643,494
<SALES> 38,347
<TOTAL-REVENUES> 150,546
<CGS> 7,114
<TOTAL-COSTS> 123,599
<OTHER-EXPENSES> 16,261
<LOSS-PROVISION> 320
<INTEREST-EXPENSE> 8,273
<INCOME-PRETAX> 2,413
<INCOME-TAX> 306
<INCOME-CONTINUING> 2,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,107
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
