Cineplex

1. a) Adjusted EBITDA – Gains/losses on disposal of assets doesn’t make sense, changes in fair
value too. Adjusted EBITDA want to be more reflective of organic growth could make sense.
Theatre value goes up or down, not reflected properly.

b) Should start from revenue – Other revenue increased by 16 mm, film costs goes down by 16
mm. Other revenue items decreased. Look at margins: Revenue decreasing but the costs are
also going down can make the argument that margins are increasing though. D&A following –
Not investing sufficiently?

c) Balance Sheet, SCF – Look at CFO subtract dividends. See if there are any one-time expenses
that delayed the amount of cash available, and then look at repayments and interest in debt to
see if the new dividends would be sufficient.
Consumer trends, increasing trends of piracy. Are people going to movies? This will affect
bottom line to see if dividend will be affected.

2. a) USD Bank in 2010 = 9,950,000 USD Bank in 2011 = 10,170,000. Gain = 220,000 because
Monetary item. Use year end currency rates.
Theatre equipment – 25mm * 0.995 = 24,875,000 non-monetary.

b) Net Income wouldn’t be changed because it would flow through OCI

c) CGUs – smallest group of assets that can generate cash independently.

Alternatives include the brands: Cineplex Odeon, Coliseum etc.
Maybe theatres in regions? Subsidiaries/JV that are different in nature?

d) a) Based on policy, they would add all 5 years up and then divide by 5 for average = 53,091/5
Doesn’t because theatres are pretty core part of their business, inflation built into the lease
payments. By averaging, we are overstating lease right now but understating in the future.
Therefore, not economic reality.
b) Dr. Cash Cr. Tenant Inducement. Liability = Obligation. Is this tenant inducement a
obligation? Obligation for Cineplex to pay higher lease terms?

3. a) Voting rights are only 50%. Therefore there’s no control. BS: record at cost + 78.2% of net
income – 78.2% of dividends
78.2% of NI goes on IS, 78.2% of Dividends goes on SCF

b) Tax loss – Carry forwards.

c) Goodwill: reputation/brand is really good? Customer base worth the goodwill

4. a) 3 levels of hierarchy. Convertible debentures would be traded on active markets. Interest rate
swaps probably no active market – level 2 because you would have observable inputs so not
level 3
 b) a) More attractive for customers. Cheapers for convertible debentures. Issues around
covenants.
b) Split debt first – look at what a similar investment would look like.
c) Added back so some sort of non-cash item. Discounted premium amount? PIK
interest?
d) Chance of convertible debentures is very high because they’re in the money right
now. More in the nature of equity rather than debt.

5. a) Recognized in OCI
b) Severely underfunded, Cash contribution will be required in the future, actuarial losses not
cash.
Would want to know some more actuarial assumptions, how are they changing. Eg. Life
expectancy etc.
c) Defined Contribution: 1318. Defined Benefit = sum of costs
d) Do they want to move risk to the employees, more predictability of payments?

6. a) 29,294/78 = 37.3%
Changes in statutory income taxes. Look at permanent differences. Likely to go down?????
Help?
b) Pay less taxes in the future. Not become profitable.
c) Recognize accounting expense, but haven’t realized for tax.

7. a)
b) Increase total amount because higher chance to realize. But lower per year cost because
longer vesting period. What would motivate???
c) Decrease the expense, fewer people that would take the sbc.
d) Would record it as an expense so would lower basic EPS. Definitely dilute diluted EPS.