Boxoffice duds dampen earnings at Cineplex

Canadian exhibitor posts 12% drop in Q2 earnings

TORONTO -- Canadian exhibitor Cineplex Galaxy Income Fund on Thursday posted a 12% slide in second quarter earnings due to a series of Hollywood boxoffice duds and lower theatre attendance.

Toronto-based Cineplex Galaxy recorded a profit to June 30 of CAN$17.4 million ($16.6 million), against earnings of CAN$19.8 million in 2009, on revenue down 2% to CAN$243.7 million ($233.2 million).

Cineplex's weak summer boxoffice included releases of the Lionsgate romancer "Killers" and Fox's "The A-Team" that disappointed.

"Cineplex's second quarter revenues were impacted by the lack of success of certain highly anticipated movie titles," Cineplex president and CEO Ellis Jacob told analysts during a morning conference call.

Less-appealing films meant theatre attendance was down 8.2% during the latest frame to 16.7 million patrons, against a year-earlier 18.2 million Canadians through the turnstiles.

The Canuck market, like the U.S. to the south, has seen strong theatre attendance through the economic downturn.

But Cineplex, like the American circuits, remains dependent on the product supply from the major studios for ultimate profitability.

During the latest quarter, Cineplex did take advantage of premium ticket prices for its Imax screens.

The top five films during the quarter were all shown on Imax screens, and four of those titles, including "Shrek Forever After" and "How to Train your Dragon," were screened in 3D.

Looking to the third quarter, Jacob said he was encouraged by recent summer releases like "Toy Story 3," the latest installment of the "Twilight" franchise and "Despicable Me."

But he stopped short on speculating on the ultimate Q3 boxoffice performance.

Cineplex also managed to offset underperforming titles during the second quarter with impressive gains from its merchandising and media businesses.

And concession revenue per patron at CAN$4.36 ($4.17) was the highest in company history due in part to recent price increases.

And boxoffice per-patron rose 4% to CAN$8.67 ($8.29), while Cineplex's media division for on-screen and lobby advertising saw revenue rise 18.6% to $19.4 million ($18.6 million).

The exhibitor is also pressing ahead with its digital rollout, adding 42 digital projectors and 37 3D systems during the latest quarter.

Jacob said Cineplex is focusing on installing 3D screens in major urban centers, and going with as many as six new digital screens in a multiplex.

"We will continue to add multiple screens in larger locations as we see the need, based on the product flow from the studios," he remarked.

The Canadian circuit now has 21% of its screens equipped with digital projectors and 17% of screens have 3D systems.