Cineplex : Financial document (Cineplex 2024 Annual Information Form Final)

Published: 2025-04-10 13:50:05 ET CGX.TO

ANNUAL INFORMATION FORM

For the year ended December 31, 2024

March 28, 2025

TABLE OF CONTENTS

Page

Explanatory Notes

Corporate Structure

General Development of the Business

History of the Corporation

Recent Developments

Cineplex's Businesses

Corporate Strategy

Diversified Entertainment & Media Company

Cineplex Revenues

Theatre andLocation-BasedEntertainment Locations

Sale of Player One Amusement Group Inc

Employees

Trademarks

Competition

Environmental, Social & Governance ("ESG")

Regulatory Environment

Credit Facilities

Capital Structure

Common Shares

Preferred Shares

2024 Refinancing

Convertible Debentures

Notes Offerings

Normal Course Issuer Bid ("NCIB")

Shareholder Rights Plan

Directors and Officers

Penalties or Sanctions

Conflicts of Interest

Biographies

Committees of the Board of Directors of the Corporation

Audit Committee

Audit Fees

Pre-ApprovalPolicies and Procedures

Risk Factors

Market for Securities

Trading Price and Volume

Accounting Matters

Legal Proceedings and Regulatory Actions

Interest of Management and Others in Material Transactions

Transfer Agent and Registrar

Material Contracts

Interests of Experts

Additional Information

Glossary of Terms

Schedule "A": Cineplex Inc. Audit Committee Terms of Reference

Cineplex Inc.

ANNUAL INFORMATION FORM

EXPLANATORY NOTES

The information in this Annual Information Form is stated as at December 31, 2024, unless otherwise indicated.

For an explanation of the capitalized terms and expressions, please refer to the "Glossary of Terms" on page 36 of this Annual Information Form. Unless otherwise indicated, or the context otherwise requires, "Corporation" refers to Cineplex Inc.; "Cineplex" refers to the Corporation and its subsidiaries; and "Cineplex Entertainment LP" refers to Cineplex Entertainment Limited Partnership. Unless otherwise indicated, all dollar amounts are expressed in Canadian dollars and references to "$" are to Canadian dollars.

Certain information included in this Annual Information Form contains forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include, among others, statements with respect to Cineplex's objectives and goals, and the strategies to achieve these objectives and goals, as well as statements with respect to Cineplex's beliefs, plans, objectives, expectations, anticipations, estimates and intentions. The words "may", "will", "could", "should", "would", "suspect", "outlook", "believe", "plan", "anticipate", "estimate", "expect", "intend", "forecast", "objective" and "continue" (or the negatives thereof), and words and expressions of similar import, are intended to identify forward-looking statements.

By their very nature, forward-looking statements involve inherent risks and uncertainties, including those described in the Corporation's Annual Management's Discussion and Analysis, dated February 10, 2025, for the year ended December 31, 2024 ("Annual MD&A"), which is incorporated herein by reference and available on SEDAR+, operated by the Canadian Securities Administrators, and available online at www.sedarplus.ca. These risks and uncertainties, both general and specific, give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. Cineplex cautions readers not to place undue reliance on these statements as a number of important factors, many of which are beyond Cineplex's control, could cause actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, Cineplex's expectations with respect to liquidity and capital expenditures, including its ability to meet its ongoing capital, operating and other obligations, and anticipated needs for, and sources of, funds; Cineplex's ability to execute cost-cutting and revenue enhancement initiatives in response to adverse economic conditions; competition from alternative forms of entertainment and content delivery via streaming and other formats; the impacts of any pandemic, epidemic, natural disaster, governmental restrictions, strikes or the inability to procure materials and supplies; information concerning future purchases of Common Shares under Cineplex's normal course issuer bid (NCIB); the outcome of the litigation with respect to Cineplex's online booking fee (described in further detail in this Annual Information Form); and risks generally encountered in the relevant industry, competition, customer, legal, taxation and accounting matters.

The foregoing list of factors that may affect future results is not exhaustive. When reviewing Cineplex's forward-looking statements, readers should carefully consider the foregoing factors and other uncertainties and potential events, including possible consequences of epidemics and pandemics. Additional information, about factors that may cause actual results to differ materially from expectations, and about material factors or assumptions applied in making forward-looking statements, may be found in the "Risks and Uncertainties" section of the Annual MD&A.

Cineplex does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable Canadian securities law. Additionally, Cineplex undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of Cineplex, its financial or operating results or its securities. All forward-looking statements in this Annual Information Form are made as of the date hereof and are qualified by these cautionary statements. Additional information, including the Annual MD&A, can be found on SEDAR+ at www.sedarplus.ca.

Cineplex Inc.

CORPORATE STRUCTURE

The Corporation is governed by the Business Corporations Act (Ontario) pursuant to articles of arrangement dated January 1, 2011. The Corporation is a reporting issuer in each of the provinces and territories in Canada. Its Common Shares are listed on the Toronto Stock Exchange ("TSX") under the symbol "CGX" and the Convertible Debentures are listed on the TSX under the symbol "CGX.DB.B". The Corporation directly owns all of the LP Units of Cineplex Entertainment LP, a limited partnership formed under the laws of the Province of Manitoba. The head and registered office of the Corporation is located at 1303 Yonge Street, Toronto, Ontario, M4T 2Y9. The chart below illustrates the structure of the Corporation and its principal subsidiaries as at the date hereof (including jurisdiction of establishment/incorporation of the various entities)1:

Cineplex Inc.

GENERAL DEVELOPMENT OF THE BUSINESS

History of the Corporation

Cineplex's history dates back to 1912 when Adolph Zukor founded the Famous Players Film Corporation. Subsequent decades have seen a series of mergers, acquisitions and growth that created today's corporate structure. Since its initial public offering in 2003, Cineplex has acquired theatres from Viacom Canada Inc., American Multi- Cinema Inc., Empire Theatres Limited, and others, creating a national coast-to-coast movie exhibition company. In recent years, Cineplex has also focused on diversification initiatives expanding its core competencies into digital place-based media, and amusement and leisure businesses.

Cineplex is a top-tier Canadian brand that operates in the Film Entertainment and Content, Amusement and Leisure, and Media sectors. Cineplex offers a unique escape from the everyday to millions of guests through its circuit of movie theatres and location-based entertainment venues. In addition to being Canada's largest and most innovative film exhibitor, Cineplex operates Canada's favourite destination for 'Eats & Entertainment' (The Rec Room), complexes specially designed for teens and families (Playdium), and an entertainment concept that brings movies, amusement gaming, dining, and live performances together under one roof (Cineplex Junxion). It also operates successful businesses in alternative programming (Cineplex Events), motion picture distribution (Cineplex Pictures), cinema media (Cineplex Media) and digital place-based media (Cineplex Digital Media). Providing even more value for its guests, Cineplex is a partner in Scene+, Canada's largest entertainment and lifestyle loyalty program.

As at December 31, 2024, Cineplex owned, leased or had a joint venture interest in 1,617 screens in 156 theatres from coast to coast, as well as 16 location based entertainment ("LBE") venues in seven provinces.

Developments in 2024

Corporate Initiatives

Cineplex Inc.

For a complete discussion of the 2024 key developments in each of the Corporation's businesses, please refer to the Annual MD&A.

Cineworld Bankruptcy

In 2020, the Corporation successfully sued Cineworld Group plc (Cineworld"), and was awarded $1.24 billion in damages, as a result of Cineworld's repudiation of its agreement to acquire all of the issued and outstanding shares of the Corporation.

On September 7, 2022, Cineworld and certain of its subsidiaries filed a petition in the United States Bankruptcy Court commencing Chapter 11 bankruptcy proceedings. Cineworld's Chapter 11 proceedings stayed Cineplex's $1.24 billion judgement against Cineworld. Cineworld filed a proposed plan of reorganization (the "Chapter 11 Plan") on April 11, 2023, which was confirmed by the U.S. Bankruptcy Court on June 28, 2023 and made effective on July 31, 2023. The Chapter 11 Plan contemplates holders of general unsecured claims (which includes Cineplex's litigation claim of $1.24 billion) receiving, in aggregate, (i) USD $10 million in cash and (ii) interests in a litigation trust relating to certain class actions against credit card issuers (collectively, the "Recovery Pool"). Allocations and distributions from the Recovery Pool remain to be finalized. Cineplex's portion of the Recovery Pool is not expected to be a material amount and has not been accrued as a receivable in Cineplex's financial statements as at December 31, 2024. Please refer to Cineplex's annual management's discussions and analysis for the years ended December 31, 2022 and December 31, 2023, for additional details on Cineplex's litigation against Cineworld that occurred prior to the year ended December 31, 2024.

Cineplex Inc.

Online Booking Fee: Appeal of the Competition Tribunal's Decision

On May 18, 2023, the federal Commissioner of Competition (the "Commissioner") commenced legal action against Cineplex, alleging that the manner in which Cineplex displayed its online booking fee constituted misleading advertising and "drip pricing". The Commissioner did not contest Cineplex's right to charge the online booking fee, but contested the manner in which the online booking fee was displayed.

The trial of this matter was held in February, 2024 before the Competition Tribunal. On September 23, 2024, the Competition Tribunal ruled in the Commissioner's favour, and ordered that Cineplex pay an administrative penalty of approximately $39.0 million plus certain legal and other costs.

On October 23, 2024, Cineplex filed its Notice of Appeal with the Federal Court of Appeal. On November 7, 2024, the Federal Court of Appeal, with the Commissioner's consent, granted Cineplex a stay of the Competition Tribunal's decision pending the Federal Court of Appeal's final determination on Cineplex's appeal.

Although the Corporation believes that this matter will not have a material adverse effect on its operating results, financial position, or cash flows, the quantum of monetary penalties that may arise from any adverse judgement in the future is not-yet known to the Corporation. The administrative monetary penalty of approximately $39.0 million dollars, including certain legal costs and expenses, is presented separately on the Corporation's statement of operations and balance sheet.

The Corporation is diligently conducting all necessary filings and other matters in order for its appeal to be heard expeditiously.

Online Booking Fee: Class Action Lawsuits

In January, 2024, two separate lawsuits were filed against the Corporation in British Columbia and Québec. Similar to the above-noted allegations by the Competition Bureau, the lawsuits allege that the Corporation's online booking fee constitutes misleading advertising and "drip pricing". The class-action lawsuits seek to include all Canadians who purchased a Cineplex movie ticket and were charged an online booking fee.

As at the date of this Annual Information Form, the class action lawsuits have not received the necessary judicial authorization for them to proceed in their respective jurisdictions.

Although the Corporation believes that this matter will not have a material adverse effect on its operating results, financial position, or cash flows, the quantum of monetary penalties that may arise from any adverse judgement in the future is not-yet known to the Corporation, and no amount has been accrued in the Corporation's consolidated financial statements.

2024 Refinancing

On March 4, 2024, Cineplex completed the 2024 Refinancing, which included the following components:

See "Capital Structure - 2024 Refinancing" on page 17 for further details on the 2024 Refinancing.

Cineplex Inc.

CINEPLEX'S BUSINESSES

Cineplex's operations are primarily conducted in three main areas, all supported by the Scene+ loyalty program: (i) film entertainment and content; (ii) media; and (iii) amusement and leisure. These three reportable segments are operated by business units offering differing products and services and are managed separately due to their distinct natures.

Corporate Strategy

Cineplex's mission statement is "Passionately delivering exceptional experiences." All of Cineplex's efforts are focused on this mission and on its goal to consistently provide its guests with exceptional experiences.

Cineplex's key strategic areas of focus include:

Cineplex uses the Scene+ loyalty program and database as a strategic asset to link these areas of focus and drive customer acquisition and spending across all lines of business.

Diversified Entertainment & Media Company

Cineplex Inc.

Key elements of this strategy include going beyond movies to reach guests in new ways and maximize revenue per patron. Cineplex has implemented in-theatre initiatives to improve the overall entertainment experience, including increased premium offerings, enhanced in-theatre services, alternative pricing strategies, continued development of the Scene+ loyalty program and CineClub subscription program, and initiatives in theatre food service such as optimizing and adding product offerings, mobile food and beverage ordering and improving service execution. The ultimate goal of these in-theatre customer service initiatives is to maximize revenue per patron and increase the frequency of movie-going at Cineplex's theatres.

While box office revenues (which include alternative programming) typically account for the largest portion of Cineplex's revenues, Cineplex has diversified its revenue streams through expanded theatre food service offerings, cinema media, digital place-based media, location-based entertainment, Cineplex Pictures, promotions and other revenue streams which have increased as a share of total revenues.

Net income (loss) (millions) (i)

2020

2021

2022

2023

2024

(588.0)

(237.4)

(9.7)

138.1

(105.7)

Net income (loss) as a % of sales (i)

2020

(164.1)%

2021

(42.7)%

2022

(0.9)%

2023

9.9%

2024

(7.9)%

Adjusted EBITDAaL (millions) (i) (ii) (iii)

54.2

157.4

93.3

(93.0)

(171.2)

2021

2022

2023

2024

2020

Adjusted EBITDAaL Margin

(i) (ii) (iii)

2020

(47.8)%

2021

(16.7)%

2022

4.9%

2023

11.3%

2024

7.0%

Cineplex Inc.

Cineplex's Revenues

Cineplex generates revenues primarily from box office and food service sales. These revenues are affected primarily by theatre attendance levels and by changes in BPP and CPP. Box office revenue represented 42.3% of revenue in 2024.

The following table presents the revenue mix for comparative years:

Revenue mix % by period

2024

2023

2022

2021

2020

(i)

Box office

42.3 %

43.2 %

41.9 %

42.5 %

37.0 %

Food service

34.7 %

34.8 %

34.6 %

33.6 %

30.2 %

Media

10.1 %

8.5 %

10.1 %

11.8 %

18.4 %

Amusement

7.0 %

6.9 %

7.3 %

6.1 %

5.0 %

Other

5.9 %

6.6 %

6.1 %

6.0 %

9.4 %

Total

100.0 %

(i) The results of discontinued operations (P1AG) have been excluded from prior period figures as applicable per IFRS 5 to conform to current period presentation. All amounts are from continuing operations unless noted. See Section 13, Accounting policies in the Annual MD&A.

After adjusting for the sale of P1AG, Cineplex has three reportable segments, film entertainment and content, media, and amusement and leisure. The reportable segments are business units offering differing products and services and are managed separately, due to their distinct natures, based on the information used by Cineplex's chief operating decision makers.

Revenue mix % by year

Full Year

2024

2023

(i)

Film Entertainment and Content

80.3

82.0

Media

10.1

8.5

LBE

9.6

9.5

Total

100.0 %

Theatre and Location-Based Entertainment Locations

As of December 31, 2024, Cineplex owned, leased or had a joint venture interest in 1,617 screens in 156 theatres from coast to coast as well as 16 LBE venues in seven provinces. Cineplex's modern multiplex theatres are designed to provide guests with a premium movie-going experience and maximize profitability by matching the number and quality of auditoriums and seats with the size of the market served. In addition, Cineplex's auditorium seating capacities are varied within individual theatres, enabling it to maximize revenues by transferring films to smaller or larger auditoriums in response to changing attendance levels. Cineplex continues to focus on providing guests with a variety of premium viewing options in which to enjoy the theatre experience. Cineplex believes that these premium- priced offerings, which include 3D, 4DX, UltraAVX, VIP Cinemas, IMAX, ScreenX, D-BOX, Recliner auditoriums and the Clubhouse, generate higher revenues per patron and also expand the customer base.

In general, Cineplex leases theatres under long-term leases, with original terms typically ranging from 15 to 20 years (with lease payment increases typically every five years) and containing various extension options, usually in intervals of five years and, in some cases, termination rights. Leases for 100 theatres expire within five years (84 of which have renewal or extension options). Cineplex's theatre leases generally provide for payment of minimum/base rent.

Cineplex Inc.

Disclaimer

Cineplex Inc. published this content on April 10, 2025, and is solely responsible for the information contained herein. Distributed via , unedited and unaltered, on April 10, 2025 at 17:49 UTC.