Q4 2020 Cineplex Inc Earnings Call
Okay.
[music].
Good day and welcome to the Cineplex, Inc, Q4, and year end 2020 analyst call.
Today's conference is being recorded.
At this time I would like to turn the conference over to MS. Melissa <unk> Senior manager Investor Relations and Communications. Please go ahead Mr. Tsakos.
Thank you Kevin Good morning, and welcome to Cineplex's fourth quarter and year end 2020 conference call with me today is our Jacobs, our president and Chief Executive Officer and.
Gordon Wilson, our Chief Financial Officer.
Before I turn the call over to Ellis, Let me remind you that certain statements being made are forward looking and subject to various risks and uncertainties.
Such forward looking statements are based on management's beliefs and assumptions regarding the information currently available.
Actual results could differ materially from those expressed and the forward looking statements factors that could cause results to vary include among other things the negative impact of the COVID-19 pandemic adverse factors generally encountered and the film exhibition industry risks associated with other national and world events.
And discovery of undisclosed material liabilities and general economic conditions.
Following today's remarks, we will close the call with our customary question and answer period.
I'll now turn the call over to Alex Jacob.
Thank you Melissa good morning, and welcome to our Q4 and year end 2020 conference call. We're glad you for joining US today, let me start by saying I Hope you and your families are well and staying healthy.
This has truly been a time like no other and the history of firewall company and the impact of COVID-19 has been widespread and dramatically affected so many industries, but specific to your entertainment and movie exhibition.
Which is why we won't come as a surprise that cineplex experienced declines and a year over year result.
Given the non mandated temporary closures capacity restrictions and the shifts and the film release slate and our results were significantly impacted.
What I would like to focus the discussion on today is how we responded to the impacts of COVID-19, and laid the groundwork for an upward trajectory over the long term.
And once you believe today's call knowing that we are on a path to a stronger more successful organization.
Over the past year.
And with agility and created a leaner more resilient and cineplex we.
And we scrutinize our business divisions analyze our structures and challenged every assumption all in an effort to streamline our operations and more importantly, improve our profitability and the long term and.
Sure we'll use this time as an opportunity.
We took a strategic look at the structure of our business divisions, our partnerships and programs and made some tough but necessary decisions to reduce overhead and operating expenses and capital commitments.
We realigned and streamline our corporate and divisional operating structures to improve efficiencies.
Also terminated our partnerships with top golf and canceled a number of capital projects recognizing that this isn't the time to invest and large development projects.
The average of 2020 also saw the conclusion of our partnership with dice slate as well as the final issue of Cineplex magazine, which we released in December.
Moving away from the printed magazine, we're able to focus on what we know our clients are looking for digital scalable ways of reaching their customers.
As Canadians will focus the stay at home, we turned our focus to US digital movie platform, the cineplex store, which experienced significant growth last year with a massive 39% increase and registered users from the prior year to one 9 million total users.
Cineplex store, which is a key differentiator for us from our peers benefited from a number of premium video on demand releases during the year offering guests a chance to view exclusive content directly and therefore to.
To set up box still also provided us with the opportunity to meaningfully engage with Todd debt to our digital platform while theaters are closed.
Like us our studio partners also use this time to test different from earnings models.
Be clear there isn't a one size fits all window for all firms and all studios and my discussions with the major studios. The mutual goal is to protect the theatrical window, especially for blockbusters entitled forecasted to perform well at the box office.
Studios recognize that the theatrical release is critical for the financial success of for 10 for that for Phil as it generates the highest percentage of worldwide revenues for the flow. It also generates media and consumer interest for sequels and others downstream revenue opportunities.
As the industry evolves, there will be more ways to maximize revenue for ourselves and the studio is moving forward and.
In fact this is already the case and in November we announced the dynamic window agreement with Universal and that will preserve the theatrical experience, while adapting to changing consumer behavior.
As we indicated.
Industry navigates the effects of the COVID-19 pandemic discussions like this are of the utmost importance that we will continue to have them with other studios and content producers.
These types of partnerships make more content available, which benefits all cash when it comes to film offerings and rich entertainment experiences.
<unk>.
Well for and will provide a more fulsome financial update and a moment because 2020, we remained laser focused on minimizing cash burn and extracting value from all of our assets and adding that and necessary.
Necessary liquidity.
We did this to provide ample runway for our recovery period and beyond.
And we significantly reduced capital expenditures and our two primary operating costs payroll and lease costs during mandated closure periods. We temporarily laid off are parked on field workforce. Our full time employees took voluntary temporary salary reductions and we realigned and consolidated our corporate teams eliminate.
And 130 roles across the cineplex ecosystem.
We also benefited from approximately $57 million and weight subsidies, primarily through the <unk> program and work with our landlord partners to obtain relief debt reduced cash rents being paid in 2020 subsequent to the lockdown.
But the second wave of Covid, 19, and resulting in another round of widespread temporary closures and late 2020 and into 2021. We were pleased to hear that the accused program has been extended to June of 2021.
As I mentioned, we work closely with our landlords for rent relief, reducing net cash outflows and 2020 and have continued discussions with our landlords on further relief into 'twenty and 'twenty one.
Cineplex has a unique suite of assets like no other exhibitor and North America, allowing us to extract additional value and strengthen our financial position and beyond the current pandemic environment.
And so key example of this was in the fourth quarter. When we entered into an agreement to enhance and expand the scene loyalty program receiving $60 million from Scotiabank.
We also recently completed a sale leaseback for a head office in Toronto for $57 million.
Subsequent to year and we obtain further relief under our credit facilities and have engaged BMO capital markets and Scotiabank on a proposed private placement offering of second lien secured notes, which quarter will go into more detail shortly.
<unk>.
We will also explore other measures to maintain adequate liquidity, but these are just some of the examples of the value extraction and I mentioned earlier.
It will be strategic actions like these that will see us through the pandemic recovery period is vaccines are rolled out restrictions are lifted and a return to normalcy begins.
Although the pandemic has lasted longer than any of US initially expected, we know that the exhibition amusement and leisure industries will recover.
And the box office numbers coming out of countries, where theaters are permitted to operate like Japan, China, and Australia has exceeded expectations and Japan. The animated films Demon Slayer, which opened late last year went on to become the highest grossing film ever.
We are also reassured by a recent survey data from Abacus data that puts movie going is the most mist and <unk> activity among Canadians.
We know our guests will be looking for safe and affordable out of home entertainment experiences coming out of the pandemic and.
And our focus is how best to leverage and capitalize on this desire.
Health and safety are of course top of mind and everything we do which is why we have implemented industry, leading operating procedures and focus on the health safety and wellbeing of our employees and guests.
I want to reiterate there remains no claim of COVID-19 transmission and a cinema two day globally.
And the worldwide industry. We are all focused on the safety of our guests and we will continue to do so.
With the vaccine rollout underway plus team is looking for to safely reopening the rest of our stroke that of theaters and entertainment venues across Canada, and we anticipate a return to more normal operating conditions later this spring.
We have all been cooped up for a long time, and a long and to come back together as a community and take part and social experiences.
That desire combined with the build up of strong film content for both this year and next means there's a lot to look forward.
Just to name a few films scheduled for this year, we have Godzilla vs call Black widow fast and furious nine grew Ela Peter Rabbit, two the runaway venom, let Debbie Carnage Minium minions. The rise of grew top gun Maverick, a quiet place part to do low type debt.
<unk> mission impossible, seven Spider man far from home sequel, West side story and the matrix for.
And I think about the pent up demand for the theatrical experience the back backlog of film releases and all of the social experiences, which have been restricted for almost a year and I'm confident that as our locations reopened and the odds guests will be debt and we are ready for them. We are positioned well for the growth that this to come.
Before I turn things over to God I want to take a moment to recognize the unwavering commitment and hard work of our employees when I look back on the last year I'm extremely proud of our team's focus and agility and willingness to make sacrifices as we work together towards everything and we accomplish.
And I also want to thank our board of directors for their ongoing support and it sounded like during these unprecedented times.
We have qualified for financial position of our company and secured the money and we need to see it through and develop the gold standard and health and safety protocols for safety and welcome our guests.
The bottom line is that set up blacks will make it through this tough time.
And the pandemic expedited parts of our future plans to become a leaner more agile company and prompted pivots that were already on the roadmap, we remain confident and our strategy and we'll continue to take all necessary actions to ensure a cineplex not only survive the pandemic, but price for years to come.
With that I will pass the call over to board.
Thanks, Alex and I am pleased to present and condensed summary of the fourth quarter results for Cineplex, Inc. And to provide additional detail on the ongoing financial impacts of COVID-19 on our operations for your further reference and financial statements and MD&A and have been filed on SEDAR and there also.
So avail Western relations website Cineplex dot com.
Our MD&A and earnings press release includes a fulsome narrative on the operational results. So I will focus on highlighting and and quantifying some of the key items, including commentary on cost control.
Accounting matters liquidity initiatives and outlook.
The COVID-19 pandemic continued to have a material negative impact on all aspects of cineplex is core businesses, resulting in material decreases and revenues results of operations and cash flows for the fourth quarter of 2020.
As a result, we continue to focus on cost control and liquidity.
With respect to cost control I want to provide some additional details on our largest fixed and semi fixed costs, our lease costs and our payroll costs.
Lease costs are on our largest fixed costs throughout 2020, we maintain strong communication channels with our landlord partners and identifying opportunities for relief during these unprecedented times.
And our focus is on on working with them to identify opportunities for abatements during the closure period and to jointly look for other opportunities under our existing lease agreements.
During the 2020 period, and we were able to materially reduce net cash outflows by approximately $73 million.
Which includes approximately $52 million and lease savings and $21 million as a result of the sale of certain restrictive rates to landlords.
Of this total approximately $15 million was reflected in Q4.
We continue to work with Orlando and partners to provide additional relief during 2021 as a result of a second wave of closures.
Payroll is our largest semi fixed costs with the mandated closures, we immediately initiated temporary layoffs and reduced full time employee salaries across the board by was accretive and by agreement was for employees.
We reviewed and apply for government subsidy programs, where available, including the Canada emergency wage subsidy.
During Q4, we benefited from approximately $14 $3 million and subsidies primarily under this program and we were able to materially reduce our theater payroll to approximately $5 $2 million and the fourth quarter of 2020 from approximately $41 $9 million from the prior year quarter.
We are encouraged that the <unk> program has been extended through to June 2020.
With enhanced participation and availability and the first quarter of total.
In July the company initiated a restructuring process, which resulted and the elimination of approximately 130 rules for an annualized savings of approximately $12 million.
Approximately half of our savings related to G&A and the other half relates to Opex savings and the various businesses during Q for the company recorded an additional $2 4 million and restructuring expenses related to this initiative.
With respect to our other supplier partners and expense controls, we put in place and immediate expense and Capex curtailment programs. During the closure period and worked with our supplier partners to provide elements of relief.
Including eliminating or reducing amounts due for contractual and monthly services and addition to payment deferrals and abatements and you can continue to see the benefits of these initiatives and the substantial cost reductions and a number of our controllable cost categories.
In addition, we continue to monitor other subsidy and relief programs, which could benefit cineplex.
With all the actions previously described we're able to achieve a cash burn rate of approximately $20 million per month for the period from Q2 through Q4 of 2020.
I would now like to discuss select accounting impacts during the fourth quarter.
We recorded total.
Total impairment charges of $56 2 million from Q4.
Additional impairment charges, primarily of Roes because of the second wave impact of COVID-19, and the winter of 2020, and the resulting in delayed timing on the assumed recovery to normality.
In addition, we have a going concern noted on our financial statements as we have a bank waiver, which is conditional on satisfying and certain requirements based on any future events.
Closed that offering which has now commenced subsequent to the flow and our financial statements.
I'd now like to focus on some of our liquidity initiatives.
During the fourth quarter seen and Cineplex announced that it had received 60 million instruments partner scotiabank to enhance and expand the scene loyalty programming, including an agreement to reorganize the programs and position and for future growth growth in conjunction with this agreement Cineplex's interest and the operations of <unk>.
<unk> was reduced to 33, 3%.
Cineplex will continue to be responsible for 50% of the economic benefits and obligations until specific non financial milestones are met resulting in the deferral of the recognized recognition of the proceeds and any related gain or loss until that time.
Also during Q4, we entered into the second credit agreement Amendment with our Bank Syndicate on November 12.
And this amendment and extended the suspension of financial Covenant testing until the second quarter of 2021, well provided for a monthly liquidity test until the financial covenants are introduced.
Subsequent to year and we entered into the third credit agreement Amendment, which we announced earlier this week.
As Ellis mentioned, we advanced the sales process related to our head office on.
And street and in early January 2021 completed a sale leaseback transaction for gross proceeds of $57 million.
We also recognize the benefit of our ability to carry back our 2020 tax losses, three years and claim a refund of taxes paid during these periods.
And we completed our 2020 tax returns for select entities and January 2021, and have filed for approximately $66 2 million and tax refunds.
Which are included as a current assets income taxes receivable on the year and balance sheet.
As I.
And this past week, we announced the third amendment to our credit facility, which provides for the continued suspension of financial Covenant testing.
Until the fourth quarter of 2021 upon certain conditions be met including the completion of a minimum $200 million financing by the company and secondly.
Second we secured notes on or prior to March 31, 2021, with a maturity of at least five years.
These proceeds $100 million will constitute a permanent and repayment of our credit facilities.
As at year end, we had approximately $154 million and availability under our credit facilities.
Adjusting solely for the head office sale, depending tax refunds and they proposed $250 million second lien secured note offering.
Net of the required permanent paydowns and expenses of the offering.
Our pro forma availability would be approximately $392 million.
With our continued focus on cash burn and liquidity.
We believe we will position the company well to handle any further uncertainties throughout 2021 and into 2022.
As we look ahead and see positive news and and confidence on new vaccines and Rollouts, we see pent up consumer demand and we see a backlog of film sales supply to supply the market on reopening.
We continue to focus on the reopening of our business businesses and continuing to explore further opportunities for cost reduction and value creation.
That concludes our remarks for this morning, and we'd now like to turn the call over to the conference operator for questions.
Thank you, ladies and gentlemen, if you wish to ask a question. Please signal by pressing star one on your telephone keypad.
Please ensure that the mute function on your telephone is switched off to allow your signal for each hour equipment again. Please press star one to ask a question.
Our first question today comes from Derek Lessard of TD Securities.
Yes, good morning, everybody and hope, you're all well and safe.
Just one question for me.
And maybe Gordon if you could just talk about the drivers behind.
<unk> increase.
And monthly cash burn and.
Maybe what we should be modeling going forward.
Sure sure Derik so.
Look at the from.
For the fourth quarter and the cash burn was roughly $25 million and was under 20 and Q2 and Q3, the three quarter average was $20 million.
Which was relatively in line with what we had suggested when we initially went into the pandemic. There are a number of variables and key drivers and.
And what ends up and the resulting net average monthly cash burn and any period I tried to provide some color on our largest fixed cost.
Semi fixed costs. So the largest drivers tend to be our our lease cost and our payroll costs.
And so our focus on that area.
And let's take them each went on.
And typically abatements.
Looking at lease rights and the ability to extract value on lease rates with respect to our lease costs.
We.
And went through the initial period of shutdown.
There is an expectation that as and then our discussions and our conversations with our landlord partners.
Is that the economic.
And.
And the environment.
Post Covid and COVID-19, with there would be a recovery commenced and the fourth quarter of 2020 as Youre. All aware the second wave came in and a little bit stronger and stronger I think good people and initially anticipated. So we were able to extract very strong relief.
From our landlords and Q2 and Q3.
And.
While we were closed and when there was that expectation of recovery.
There was a loss.
Lesser opportunity evolving.
As we look forward, though what we see is and a mandated closure period that we're just coming out of right now.
Is that the opportunities both from a landlord conversation perspective, but also Martin for importantly, there have been some new relief programs.
<unk> by the government, which we've been able to participate and so they can.
On the serve program as one is one that we were extracting and able to extract some benefit from in Q4. So.
We see.
As we look forward.
We continue to pull the levers on rent abatements, we still see interest on.
Extracting value for some of the lease rights transactions.
And we had executed about $21 million for value for.
For those types of transactions and 2020, so we see additional interest on potentially unlocking value from those.
And coming out of the closure period obviously.
That provides a little bit of support from our landlord partners to provide some additional payments they're on the payroll side of things again, the government the Canada emergency wage program.
And typically the.
The quantum and the mechanics, and the program, our announcements and advance of the quarter.
And again.
And there was an expectation that we would be moving into a gradual recovery phase and Q4 and as such the government calculator of the wage subsidy program.
Starting to diminish over time, so from Q2 to Q3 for Q4 on and expected recovery basis.
On the wage subsidy program northwest Rich now as we look into Q1.
And the government has has recognized and recognized earlier, obviously that the ongoing impacts of Covid on on impact on affected businesses has continued and has now become more severe so the benefits of the wage subsidy program actually improved for the first quarter of 'twenty.
'twenty one and.
And at this point of the calculator and the mechanics have not been announced for the second quarter.
And presumably on the assumption that they are looking more into.
And what's the visibility on what the recovery may or may not look like.
Before they set the calculator and stone.
So youre getting a lot of movement and so as you look from quarter to quarter.
As we extract value and do certain transactions that you can get some lumpiness.
And with those suggest that.
Our ability to pull on all levers.
And we really extracted and for Q2 and Q3, we really focused and there are certain levers we may not be able to re pull on to the full extent and.
And.
On the <unk>.
Q4 level of cash burn is probably the more appropriate for one to think and going forward.
Thanks for all that color Gordon and so it really helps.
Okay.
Our next question comes from Jeff fan of Scotiabank.
Hi, good morning.
And in outlet.
For you guys are doing well.
Couple of questions.
And it's just.
And as you kind of look out.
With respect to the recovery and Canada compared to the U S. There is just some dynamics that are kind of happening.
And what changed over the last six months or so.
And you look at well look and Canada like the percentage of population box made is really falling behind the U S.
No.
And we foresee a situation where the U S film slate and the need for.
U S theaters reopen.
Is Canada and kind of still stuck in that kind of known and state and without reopening what happens to how the studios will deal with the Canadian.
Lisa.
Try to get some color as to how those conversations have gone and then the second question is just on additional financing options.
At what stage do you think you may need to pursue other means and what some of those areas maybe thanks a lot.
Thanks, Jeff and.
Going to the.
Positioning and North America between the U S and Canada as we saw in 2020 when tenant was released it was actually released and Canada before the U S based on the conditions at the at that particular point to Todd.
No yes, the U S. They are being people vaccinated a lot faster. The difference is the number of cases and the U S are significantly higher than those in Canada and there is a possibility.
And discussions with our peers that parts of the U S debt for Lockdown, like California, and New York.
Certain parts of California will start to reopen and also parts of New York will reopen and which may cause the studios to decide to start for the leasing the films if that does happen I think youre looking probably in the period of April May June timeframe, and what would then take place as there were.
Would be a huge backlog for cineplex for these movies moving into the future and I think that will provide us with a great startup as we ramp up and different provinces, because we have been opened and a certain provinces.
And down through the last number of quarters and that.
We will think will continue but the film slate is very deep and we feel it will put us on a great position once we get reopened as long as the GAAP between the U S and Canada is not too significant.
For the financial question and I'll turn it over for it yes. Thanks also on financing options for Jeff.
And we were pleased earlier this week to them that the credit facility amendments as well as.
Exploring the high yield offering.
This has been and areas of focus for us for probably the last two months or so at least we've always wanted to broaden out our capital structure. We know there is a demand from high yield investors.
For the movie exhibition produces large once it's up and return to normality produces a lot of significant for.
Free cash flow, we've removed a number of outflows.
From our business model, including roughly $100 million, just over $100 million and dividends, which we've historically paid.
Well as reducing our near term capex from about 150 million for $50 million, So there's $200 million of sort of external up toward debt.
We're taking out of the system and the short term. So it has always been attractive to us to kind of broaden out that capital structure.
And given the environment that we're in today, and particularly the economic environment and high yield market. The timing worked well for us to explore and move forward with this so we're excited to do that and with this offering and as I had said on my notes earlier.
Our availability and our board for our liquidity availability pro forma office offering and some of the other sales.
Q1 events that I mentioned and the tax refund and the and <unk>.
Building sale.
We're just under.
Right around $400 million.
Liquidity availability.
You've looked at the recent cash burn in Q4, as an example, and.
And as you can share.
Our comfort and and our confidence that this round.
And we'll.
And we will put the company and.
A great position.
Well through 2021 and into 2022, so with that said.
And I would suggest that.
There is no real we believe short term requirement to.
To look at any other financing options.
But with that said as we have a number of we're always looking where if there are opportunities to extract value, so and we think and the short term.
True value creation opportunity that record debt.
Results on liquidity event, we'd we'd explore but as I've described to you and the numbers that I just provided.
We don't believe we really need to do anything.
And throughout 2021.
Great. Thanks, Paul.
Our next question comes from Adam Shine of National Bank Finance.
Hello, Good morning.
In terms of.
One for Concord, and one for <unk> just in terms of.
And the confidence.
George when we push this out for Q4 is it similar to what we've seen perhaps for the prior way for us.
And the work.
Yes, Everything's just kind of shifted them four times Q4.
Okay perfect. Thanks.
Maybe for you Ellis acknowledging obviously you got the Capex and has been curtailed for that I think 50 billion Mark.
Have you been doing a bunch of things in the theaters has there been perhaps get more and regards to <unk>.
For quieter installations, or perhaps any other activities and to.
I think you're up to.
Actually patrons coming back into the theaters.
But given the situation Adam there has only been limited amount of recliner installations that we've done we continue to look at technology and ways to improve the experience for our guests and that is something we will.
And focus on and we will wait and come back to market to what we.
Make sure that the guests have which is great.
Experience, where they feel totally comfortable and at ease and our facilities.
Okay I'll leave it there thanks.
Okay.
Okay.
Our next question comes from Arvind Gala Patchy day of care.
On the cards Cumulus.
Good morning, Thanks for taking my questions hopefully bodes well for one.
For God and one for Alice Alice.
More big picture question can you sort of characterize the conversations that youre, having with studios nowadays.
In the backdrop of the universal arrangement that you've announced and some of the trends that we've seen from Warner and Disney obviously different from one to the other.
And what set of feedback are you getting from the studios and are there any prospects at least at the outset of subset of concession on the film cost side of things that sort of help out there.
The exhibitors and.
For Covid.
Just following up on your answer to the first question.
And obviously.
<unk> forecasting that variance between EBITDA and EBITDA, which is predominantly the cash rent piece instead of difficult on a quality basis.
Should we assume based on your on so that set of debt Q4 variance on the queue for Delta, which is sort of 30 $33 million thats, probably the right number to reasonably use going forward given that we don't know what the outcome of your conversations with the <unk>.
<unk>. Thank you.
For Windows.
On your first question as it relates to the theatrical relationship with our studio partners. We continue to work very closely with them and a lot of things that we're doing on basically driven by the fact that we are on the middle of Covid.
And for example, with Wonder woman and we worked out a deal where we played it and the cinema, but we also played it and the cineplex store on premium Vod format, and did extremely well, where it was settling and the store and also and the theaters that were open but there were limited theaters.
We are open so we are trying to balance the two and we will continue to do that until we see it the other side, but I feel and I know our partners feel that the theatrical window is an important part of the overall box office that we can garner from a sales both in Canada and around the world.
So we will continue to be doing that and on the big films that will continue to take place with the.
And one size fits all and we continue to work with others.
Creators of content to see what we can do that makes for more sense.
And forward into 'twenty and 'twenty, one and 2022. So we can provide our guests with the most amount of content on the big screen with all of the <unk>.
Facilities that they have.
And then on the second question.
And the.
And due to the Lumpiness somewhat tricky and there's a lot of moving parts. Obviously is as we're on.
And always in discussions with Orlando and partners.
And and.
And of Abatements, which makes and over a period of time and it's not until we actually.
I agree and paper and agreement.
And sign off on both sides that we can reflected and the accounting records. So there may be things.
It suggests that are going on right now that are activities that are going to benefit.
And may not necessarily be fully reflected.
With that said is I think my commentary is that.
But the landlord the ability to.
To provide relief.
And is not there forever and.
<unk>.
And as that drops off a bit with what we're seeing and the government step in and pick up and provide some other forms of relief. So probably Q4 is a better indicator than some of the earlier quarters, where we're getting significant amounts of relief.
And the only other thing I'd want to add to that.
We've chatted about.
Looking at extracting value.
And from our lease rates and when we look at extracting value from our lease rates that doesn't end up being and EBIT.
And EBITDA versus EBIT DAU question, so thats, something that becomes kind of on proceeds or and game.
Even on this.
It's not detrimental to the.
The operating results of our company. So I'm just going to say there is interest on.
More items related to those to that don't come in on that EBITDA question, but are definitely a cash savings and element.
Okay. That's helpful. Thanks, I'll pass the line.
Okay.
And as a reminder, ladies and gentlemen, please press star one to ask a question.
Our next question today comes from Tim Casey of BMO.
Thanks.
Couple for me one for Gordon and a couple for al.
Gordon.
And on your.
Efforts to monetize these lease rates and you just walk us through whats in it for the landlord.
And we can obviously see the benefits and you're getting some cash but what's in it for them.
And then Alex for you as you think about.
Reopened and get back to normal and just wondering if.
And we should think about.
On a smaller platform.
And both.
The theater.
And the Rec room side and just wondering if you.
If you think it's in your best interest to close and theaters.
And that may have been.
Performing less well than others and.
And when you contemplate.
Reopening.
And just be and your best interest to move on from then and.
And as well as Rec room, I know that with your revised Capex plans and youre not doing any new builds for finishing and stuff.
That was in place.
You still have longer term aspirations to grow that business in terms of sites too.
<unk> had articulated pre COVID-19 or are you kind of rethinking that and anyway. Thanks.
Thanks, Tim and us and so I'll take your first question and I always like to provide a hypothetical example on a scenario just from that you can really understand and from people.
Provided this too I think it really helps them understand what these are.
And so we're typically imagine a theater on a pad.
And there's a number of parking lots and there may be some businesses on the periphery and those parking lots.
And it's a couple of restaurants like maybe a bank.
And.
And other small retail store and under our lease.
The landlord would be restricted on.
And maintaining a certain number of parking spaces as well as the type of facilities that could be in those and those occupy those buildings.
And so.
Imagine a scenario where we are.
For 10 years later 15 years later, the trends and how that's grown.
And now for from the Landlord's perspective, the highest and best use of that space is not having a couple of restaurants and on that path. Maybe it is building a condo or something like that.
But they are restricted from doing that and monetizing the value of their site because of the rates that we have and Luis So we would then go back to them and say okay. There is something that is going to be a real value creation for you.
You can't do it.
But.
Let's let's negotiate and let's see what can happen and so those are the types of activities. So that's not impacting at all the economics of what we were paying under our lease it's not impacting at all our building on on the property.
And what it is is that that's provided and the landlord and some additional flexibility and what they can do on the site and that's the benefit for them.
Okay.
Thank you ward.
On the other questions that you asked.
On the theater closures again, we are being opportunistic and we would basically say there will be limited closures.
We would look at situations, where the lease was coming up and we've got two theaters and close proximity to each other and one is state of the art and one is and so we would basically look at those positioning and make sure we're making the right decision from an overall cash flow moving forward and.
And to meet that kind of very very important for.
Focus on on the theater portfolio for the future.
On the L b.
We will continue to look at that business and grow it but on a much more limited pace, depending on how quickly we are out of the pandemic because we still believe.
And the business and we feel that.
Canadians between the movie theaters between our location based entertainment venues basically will be happy and we can capture their entertainment dollars.
And as we move forward, but again, we will probably slow the pace down depending on what the situation is.
From a vaccine perspective and enough for them on overall return to the.
The rec room, and where we have been open a indirect rooms during the pandemic, we have seen some strong and meaningful results. So as we move forward, we feel that that will continue.
Once things get back to normal and our guests feel more comfortable about the experience and environment.
And just thought to add to that too.
Obviously, the pandemic has accelerated and thick.
The massive disruption and the retail landscape lessor.
And globally.
And.
For the future of retail income.
Food.
Food and beverage and entertainment gaming acres retail destination for future. So as we go through this transition and evolution, which is now set up.
It's probably better for us to pause and there may be better value opportunities for us that come out as a result of this disruption that's going on so for those that we continue we're focused on it we're committed to it.
Pause and we will complete the ones that we're doing but there may be better opportunities better sites better value opportunities for us and the future.
And thanks for that.
As there are no further questions I would like to pass the call to Ellis Jacob for any additional or closing remarks.
And.
Thank you all for joining us this morning as you've heard today, we have adapted with agility to create a leaner more resilient organization minimized our cash burn and added the liquidity, we need to see us through we use this opportunity to become a stronger well positioned and ultimately and most successful organization.
I am confident and cineplex is on the industry's ability to recover and look for to welcoming our guests back towards theaters and entertainment venues that as soon as we're able to do so.
We look forward to speaking with you again in May for our first quarter results until then please take care and be well. Thank you very very much.
Ladies and gentlemen that concludes today's conference call. We thank you for your participation you may now disconnect.
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