2020 Annual Report

2020

Table of Contents

Chair of the Board of Directors' Letter to Shareholders .....................................................................................4

Chief Executive Officer's Letter to Shareholders ...............................................................................................6

Management’s Discussion and Analysis..........................................................................................................9

Overview of Cineplex.................................................................................................................................. 10

Business Strategy......................................................................................................................................... 20

Cineplex’s Businesses.................................................................................................................................. 21

Overview of Operations............................................................................................................................... 27

Results of Operations...................................................................................................................................30

Balance Sheets.............................................................................................................................................45

Liquidity and Capital Resources..................................................................................................................48

Adjusted Free Cash Flow and Dividends..................................................................................................... 55

Share Activity ..............................................................................................................................................56

Seasonality and Quarterly Results ............................................................................................................... 58

Related Party Transactions ..........................................................................................................................60

Significant Accounting Judgments and Estimation Uncertainties ............................................................... 60

Accounting Policies .....................................................................................................................................62

Risks and Uncertainties ............................................................................................................................... 63

Controls and Procedures..............................................................................................................................73

Subsequent Events.......................................................................................................................................74

Outlook........................................................................................................................................................

Non-GAAP Measures .................................................................................................................................. 77

Reconciliation: World Gaming Network LP................................................................................................ 82

Financial Statements and Notes ....................................................................................................................84

Management’s Report to Shareholders.........................................................................................................84

Independent Auditor’s Report....................................................................................................................... 85

Consolidated Balance Sheets........................................................................................................................91

Consolidated Statements of Operations........................................................................................................ 93

Consolidated Statements of Comprehensive Income....................................................................................94

Consolidated Statements of Changes in Equity ............................................................................................ 95

Consolidated Statements of Cash Flows....................................................................................................... 96

Notes to Consolidated Financial Statements.................................................................................................97

Investor Information .................................................................................................................................... 162

Letter from the Chair of the Board

Dear fellow shareholders,

It is my pleasure to address you today as the Chair of the Board of Directors

of Cineplex Inc. As a former Cineplex board member and previous Chair of

the Board, I am honoured to be back leading this great group of Directors

and to be part of an organization that I believe in so strongly.

In light of the ongoing public health concerns related to the spread of

COVID-19, this year Cineplex will once again host a hybrid in-person and

virtual Annual General Me

eting (“AGM”) on Wednesday, May 19, 2021.

Registered shareholders and duly appointed proxyholders can participate in-

person or via live webcast, which will include voting on the motions put

forward and the ability to ask questions, all in real-time.

During a year that challenged us all, the Board remained guided by our

corporate strategy, took strong, decisive action to ensure the ongoing

viability of the Company and upheld our commitment to protect employees

and support customers and communities.

Navigating A Year Like No Other

When I look back on 202

0, I am extremely proud of the Cineplex team for managing through what was a truly

unprecedented year in the company’s history. We began with a strong focus and commitment to completing the

proposed Cineworld transaction, which was ultimately repudiated by Cineworld and is now in litigation.

Then the pandemic hit in early March and the negative impact was significant for both the movie exhibition

industry around the world, and the other industries in which we operate. Pivoting with great agility, the team’s

top priorities were to protect the heal

th and safety of employees and guests, as well as manage costs and address

liquidity options to solidify the financial health of the Company. As a result, Cineplex significantly reduced

operating and capital expenditures, worked with partners to abate or defer payments, initiated a number of

liquidity measures, and focused on growing and supporting our diversified and online businesses. In anticipation

of re-opening, the team also developed an industry-leading health and safety program to ensure that employees

and guests feel comfortable when t

hey return to our venues.

Continued Good Governance and Corporate Citizenship

Throughout this past year, the Board worked closely with senior management to ensure the financial health of

the Company, in addition to focusing on our strategic direction and long-term value creation for shareholders

beyond the current pandemic environment. All Directors have been extremely focused and involved, holding 21

full board meetings in 2020 to address the unusual challenges.

Further, Cineplex’s dedication to being a good corporate citizen and community partner was made all the more

evi

dent this year, through our ongoing support of local communities across the country during the COVID-19

pandemic. Just one example of this includes hosting our annual Community Day fundraiser in 2020, which

traditionally welcomes guests across Canada into our theatres for a morning of free movies. Instead of the in-

theatre event, Cineplex raised money for Food Banks Canada by donating $1 from certain transactions on the

Cineplex Store, as well as through our food delivery services.

Cineplex Inc.

Letter to Shareholders

CINEPLEX INC. 2020 ANNUAL REPORT

LETTER TO SHAREHOLDERS

Commitment to Inclusion and Diversity

As we continue to prioritize inclusion and diversity within Cineplex, I am proud to report that our Board currently

includes four members who identify as women, who together represent 44% of the Directors or 50% of the

independent Directors. The Board also includes four members who identify as minorities, who together represent

44% of the Directors. Finally, three members of executive management of the Company, including its major

subsidiaries, identify as women, representing 38% of executive management.

In addition to the Company’s long standing commitment to inclusion, in 2020, Mr. Jacob signed the Black North

Initiative CEO Pledge – acknowledging the existence of anti-Black systemic racism in Canada and ensuring that

inclusion remains at the core of Cineplex’s workplace culture. The pledge includes a commitment to hire a

minimum of one Black leader to fill an executive or Board member role in Canada by 2025. Also, in response

to the social injustice happening in North America, Cineplex launched its ‘Understanding Black Stories’

collection – a curated collection of films to help educate and inform perspectives on Black storytelling and

culture that were available as free rentals on the Cineplex Store.

Path Forward: The Future is Bright

Throughout 2020, the team took necessary actions to address the ongoing impact of the pandemic and liquidity

needs of the company. We focused on the other revenue-generating areas of our business, including Cineplex

Digital Media, our expanded food delivery services and our online Cineplex Store, and will continue to focus on

all revenue sources as we emerge from the pandemic. Cineplex is moving toward the next phase of its future.

We are all looking forward to reopening the entire circuit of theatres and entertainment venues, which together

with the pent-up consumer demand and abundance of film product available, gives us confidence for a bright

future ahead.

On behalf of the entire Board, I extend our thanks and appreciation to the management team and to all employees

for their hard work, passion and dedication during what has been the toughest year in Cineplex’s history. I look

forward to connecting with you at our AGM, but should you wish to contact me directly, please send an email

to boardchair@cineplex.com.

Sincerely yours,

Phyllis Yaffe

Chair of the Board, Cineplex Inc.

boardchair@cineplex.com

Cineplex Inc.

Letter to Shareholders

CINEPLEX INC. 2020 ANNUAL REPORT

LETTER TO SHAREHOLDERS

Letter from the CEO

Dear fellow shareholders,

This has truly been a year like no other in the history of our company.

The impact of COVID-19 has been wide-spread and has dramatically

affected so many industries, including entertainment and movie

exhibition. As expected, given our mandated closures, capacity

restrictions and the shifts in the film release slate, our annual results were

significantly impacted.

Our teams worked diligently throughout the year to mitigate the negative

effects of COVID-19, support the Company’s long

-term stability and

implement industry leading operating procedures focused on the health,

safety and well-being of our employees and guests. We remained laser-

focused on minimizing cash burn, extracting value from all of our assets,

and implementing liquidity measures to see us through the pandemic

recovery period. We adapted with agility and created a leaner, more

resilient Cineplex and laid the groundwork to set us on a path to create a

stronger, more successful organization for the future.

Focused Response to COVID-19

Throughout the year, our team w

orked harder than ever to adapt our operations, control costs, and strengthen

Cineplex’s financial position. We significantly reduced capital expenditures and our two primary operating costs:

payroll and lease costs.

During mandated closure periods, we temporarily laid off our part-time field workforce, our full-time employees

voluntarily took temporary salary reductions and we realigned and consolidated our corporate teams,

permanently eliminating 130 full-time roles across the Cineplex ecosystem. We also benefited from

approximately $57 million in

wage subsidies, primarily through the Canada Emergency Wage Subsidy program

(“CEWS program”) and worked with our landlord partners to obtain relief that materially reduced net cash lease

outflows by approximately $73 million. With the second wave of COVID-19 resulting in another round of

widespread temporary closures from late 2020 into 2021, we were pleased to hear that the CEWS program was

extended through June 2021. We are also continuing discussions with our landlord partners for further relief as

we r

espond to the pandemic crisis together.

Additionally, in an effort to further reduce our operating costs, we eliminated all discretionary spending, and

worked with our suppliers to renegotiate and revise contracts.

Gold Standard in Health & Safety Protocols

Our top priority is the health and safety of our employees and our guests. During the Canada-wide shut down

between March and June 2021, we used that time to carefully re-examine our health and safety processes and

procedures and worked with the country’s top infectious disease experts to develop and impl

ement an industry-

leading program. We made sure that our guests would feel confident and relaxed returning to our venues.

Detailed information about the measures we have put in place is available on Cineplex.com, but at a high-level,

our strategy centres around three key components – enhanced cleaning, reducing capacity to ensure physical

distancing and leveraging technology to ease operations and reduce physical touchpoints between our employees

and guests. It’s also important to note that there remains no claim of COVID-19 transmission in a cinema to date

– globally. As a worldwide industry, we have all focused on the safety of our guests and will continue to do so.

Cineplex Inc.

Letter to Shareholders

CINEPLEX INC. 2020 ANNUAL REPORT

LETTER TO SHAREHOLDERS

A Leaner, More Resilient Cineplex

In response to the challenges faced in 2020, we adapted with agility and created a leaner, more resilient Cineplex.

We scrutinized our business divisions, analyzed our structures and challenged every assumption, in an effort to

streamline our operations, and more importantly, improve our profitability for the long-term. 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 overheads, operating expenses and capital commitments. We re-aligned and

streamlined our corporate and divisional operating structures to improve efficiencies, and reduced the number

of capital projects, recognizing that this isn’t the time to invest in large development projects.

While we were able to dramatically reduce our cash burn, we also focused on the other revenue-generating areas

of our business, which were not as heavily impacted by COVID-19. These included Cineplex Digital Media, our

expanded food delivery services through SkipTheDishes and Uber Eats, and our online Cineplex Store, which

experienced significant growth with a massive 39% increase in registered users from the prior year, to 1.9 million

total users. As Canadians were forced to stay home, the Cineplex Store, which is a key differentiator for us from

our peers, provided us with the opportunity to meaningfully engage with our guests through our digital platform,

and offer them the chance to view film content directly in their homes.

Overall, in the short and medium term, we are focusing on a smaller number of projects and priorities supported

by a sustainable financial model.

Strengthening our Financial Position

Cineplex has a unique suite of assets like no other exhibitor in the world, allowing us to extract additional value

and strengthen our financial position beyond the current pandemic environment. A 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 raised over $300 million in additional financing in 2020, in the form of convertible unsecured subordinated

debentures and subsequent to year end raised another $250 million in the form of senior secured second lien

notes. We obtained additional relief under our credit facilities, which subsequent to year end, was extended

through to the fourth quarter of 2021. We also began the sale process of our Head Office, which was completed

subsequent to year end for $57 million and expect to receive approximately $66 million in tax refunds in early

2021, as a result of the tax losses created in 2020.

These initiatives, combined with our ongoing focus on minimizing costs, will provide the liquidity we need to

see us through the pandemic recovery period as vaccines are rolled out, restrictions are lifted and a return to

normalcy begins.

Undeniable Recovery of the Industry

Although the pandemic has lasted longer than any of us initially expected, we know that the exhibition,

amusement and leisure industries will recover. The box office numbers coming out of countries where theatres

are currently operating, like Japan, China and Australia have exceeded expectations and, in some cases, have

broken all-time records. Closer to home, we experienced record-breaking opening results from our newest

location of Playdium in Dartmouth, Nova Scotia, which opened in February 2021. We know our guests will be

looking for safe and affordable out of home entertainment experiences coming out of the pandemic and our focus

is how best to leverage and capitalize on this desire.

With the vaccine roll-out underway and restrictions starting to ease in certain regions, our team is looking

forward to safely reopening the rest of our circuit of theatres and entertainment venues across Canada. Recent

theatre reopenings have proven very successful and we anticipate a return to more normal operating conditions

in the near future. We have all been cooped up for over a year and are longing to come back together as a

Cineplex Inc.

Letter to Shareholders

CINEPLEX INC. 2020 ANNUAL REPORT

LETTER TO SHAREHOLDERS

community and take part in social experiences. That desire, combined with the buildup of strong film content

for both this year and next, means there is a lot to look forward to.

As I look back on 2020, I am extremely proud of the ‘One Cineplex’ team and want to thank them for their focus,

agility and willingness to make sacrifices as we worked together to accomplish all that we did. I also want to

thank our Board of Directors for their ongoing support and sound advice during these unprecedented times.

Finally, I want to thank our customers, partners, guests and investors for their ongoing support and belief in

Cineplex.

The bottom line is that Cineplex will make it through this tough time. We have fortified the financial position of

our company, secured the financing we need to see us through, and developed the ‘gold standard’ in health and

safety protocols to safely welcome guests back. We remain confident in our strategy and will continue to take

all necessary actions to ensure Cineplex not only survives the pandemic, but thrives for years to come.

Sincerely,

Ellis Jacob

President and CEO, Cineplex Inc.

Cineplex Inc.

Letter to Shareholders

CINEPLEX INC. 2020 ANNUAL REPORT

LETTER TO SHAREHOLDERS

MANAGEMENT’S DISCUSSION AND ANALYSIS

February 10, 2021

The following management’s discussion and analysis (“MD&A”) of Cineplex Inc. (“Cineplex”) financial condition

and results of operations should be read together with the consolidated financial statements and related notes of

Cineplex (see Section 1, Overview of Cineplex). These financial statements, presented in Canadian dollars, were

prepared in accordance with Canadian generally accepted accounting principles (“GAAP”), defined as

International Financial Reporting Standards (“IFRS”) as set out in the Handbook of the Canadian Institute of

Chartered Professional Accountants.

Unless otherwise specified, all information in this MD&A is as of December 31, 2020 and all amounts are in

Canadian dollars.

Non-GAAP Measures

Cineplex reports on certain non-GAAP measures that are used by management to evaluate performance of Cineplex.

In addition, non-GAAP measures are used in measuring compliance with debt covenants. Because non-GAAP

measures do not have standardized meanings, securities regulations require that non-GAAP measures be clearly

defined and qualified, and reconciled to their nearest GAAP measure. The definition, calculation and reconciliation

of non-GAAP measures are provided in Section 18, Non-GAAP measures.

Forward-Looking Statements

Certain information included in this MD&A 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, goals and strategies to achieve those 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 negative thereof), and words and expressions of similar

import, are intended to identify forward-looking statements. Forward-looking statements also include, statements

pertaining to:

• Cineplex’s outlook, goals, expectations and projected results of operations, including factors and

assumptions underlying Cineplex’s projections regarding the duration and impact of a novel strain of

coronavirus (“COVID-19”) pandemic on Cineplex, the movie exhibition industry and the economy in

general, as well as Cineplex’s response to the pandemic related to the closure of its theatres and

location-based entertainment (“LBE”) venues, employee reductions and other cost-cutting initiatives

and increased expenses relating to safety measures taken at its facilities to protect the health and well-

being of guests and employees;

• Cineplex’s expectations with respect to net cash burn, liquidity and capital expenditures, including its

ability to meet its ongoing capital, operating and other obligations, and anticipated needs for, and

sources of, funds; and

• Cineplex’s ability to execute cost-cutting and revenue enhancement initiatives in response to the

COVID-19 pandemic.

The COVID-19 pandemic has had an unprecedented impact on Cineplex, along with the rest of the movie exhibition

industry and other industries in which Cineplex operates, including material decreases in revenues, results of

operations and cash flows. The situation continues to evolve and the social and economic effects are widespread. As

an entertainment and media company that operates spaces where guests gather in close proximity, Cineplex’s

business has been significantly impacted by the actions taken to control the spread of COVID-19. These actions

include, among other things, the temporary closure of theatres and LBE venues, the introduction of social distancing

measures and restrictions including those on capacity. There is limited visibility on when these restrictions will be

lifted in many of the markets in which Cineplex operates and how quickly guests will return to Cineplex’s locations

once its operations resume due to prolonged safety concerns and adverse economic conditions. Cineplex is actively

monitoring the situation and is adapting its business strategies as the impact of the COVID-19 pandemic evolves.

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 1

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex Inc.

Management's Discussion and Analysis

By their very nature, forward-looking statements involve inherent risks and uncertainties, including those described

in Cineplex’s Annual Information Form (“AIF”), and in this MD&A. Those 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, the duration and impact of the COVID-19 pandemic on Cineplex, the movie exhibition industry and

the economy in general, as well as Cineplex’s response to the COVID-19 pandemic as it relates to the closure of its

theatres and LBE venues, employee reductions and other cost-cutting initiatives, and increased expenses relating to

safety measures taken at its facilities to protect the health and well-being of customers and employees; 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 the COVID-19 pandemic; risks generally encountered in

the relevant industry, competition, customer, legal, taxation and accounting matters; the outcome of any litigation

surrounding the termination of the Cineworld transaction (described below); and diversion of management time on

litigation related to the Cineworld transaction.

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. 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 this 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, we

undertake 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 MD&A are made

as of the date hereof and are qualified by these cautionary statements. Additional information, including Cineplex’s

AIF, can be found on SEDAR at www.sedar.com.

1. OVERVIEW OF CINEPLEX

Cineplex is a top-tier Canadian brand that operates in the film entertainment and content, amusement and leisure,

and media sectors. As a leading entertainment and media company, Cineplex welcomes millions of guests annually

through its circuit of theatres and LBE venues across the country. In addition to being Canada’s largest and most

innovative film exhibitor, Cineplex also operates businesses in digital commerce (Cineplex Store), food service,

alternative programming (Cineplex Events), cinema media (Cineplex Media), digital place-based media (Cineplex

Digital Media “CDM”) and amusement solutions (Player One Amusement Group “P1AG”). Additionally, Cineplex

operates an LBE business through Canada’s destinations for ‘Eats & Entertainment’ (The Rec Room), and

entertainment complexes specifically designed for teens and families (Playdium). Cineplex is a joint venture partner

in SCENE, Canada’s largest entertainment loyalty program.

Cineplex’s theatre circuit is concentrated in major metropolitan and mid-sized markets. As of December 31, 2020,

Cineplex owned, leased or had a joint venture interest in 1,667 screens in 162 theatres from coast to coast as well as

eight LBE venues in four provinces.

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 2

Cineplex Inc.

Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex

Theatre locations and screens at December 31, 2020

Province

Locations Screens

3D Digital

Screens UltraAVX

IMAX

Screens (i)

VIP

Auditoriums

D-BOX

Auditoriums

Recliner

Auditoriums

Other

Screens (ii)

Ontario 68 730 358 41 13 48 48 108 10

Quebec 18 230 91 10 3 4 7 12 —

British Columbia 24 231 125 16 3 15 16 39 1

Alberta 19 208 112 20 2 11 16 78 6

Nova Scotia 12 91 44 1 1 — 2 — 1

Saskatchewan 6 54 28 3 1 3 3 16 1

Manitoba 5 49 26 1 1 3 2 — —

New Brunswick 5 41 20 2 — — 2 — —

Newfoundland &

Labrador 3 20 9 — 1 — 1 — —

Prince Edward Island 2 13 6 — — — 1 — —

TOTALS 162 1,667 819 94 25 84 98 253 19

Percentage of

screens 49 % 6 % 1 % 5 % 6 % 15 % 1 %

(i) All IMAX screens are 3D enabled. Total 3D screens including IMAX screens are 844 screens or 51% of the circuit.

(ii) Other screens includes 4DX, Cineplex Clubhouse and ScreenX.

Cineplex - Theatres, screens and premium offerings in the last eight quarters

2020 2019

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Theatres 162 164 164 164 165 165 165 165

Screens 1,667 1,687 1,687 1,687 1,693 1,695 1,695 1,692

3D Digital Screens 819 826 826 826 826 827 826 824

UltraAVX Screens 94 94 94 94 94 93 93 90

IMAX Screens 25 25 25 25 25 25 25 25

VIP Auditoriums 84 84 84 84 84 79 79 75

D-BOX Locations 98 99 99 99 97 92 92 89

Recliner Screens 253 221 221 221 213 182 182 173

Other Screens 19 19 19 19 17 5 4 4

Cineplex - LBE - at December 31, 2020

Province The Rec Room Playdium

Ontario 3 2

Alberta 3 —

Manitoba 1 —

Newfoundland & Labrador 1 —

TOTALS 8 2

1.1 RECENT DEVELOPMENTS

Response to COVID-19 and going concern

In early 2020, the outbreak of COVID-19 was confirmed in multiple countries throughout the world and on March

11, 2020, it was declared a global pandemic by the World Health Organization. In response, Cineplex immediately

introduced enhanced cleaning protocols and reduced theatre capacities to promote social distancing. By mid-March,

each of Canada’s provinces and territories had declared a state of emergency resulting in, among other things, the

mandated closure of non-essential businesses, restrictions on public gatherings and quarantining of people who may

have been exposed to the virus.

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 3

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex Inc.

Management's Discussion and Analysis

On March 16, 2020, Cineplex announced the temporary closure of all of its theatres and LBE venues across Canada,

as well as substantially all route locations operated by P1AG. On April 1, 2020, in response to applicable

government directives and guidance from Canadian public health authorities, Cineplex announced that the closure of

its theatres and LBE venues across Canada would remain in effect and that the reopening of such locations would be

reassessed as further guidance is provided by Canadian public health authorities and applicable government

authorities.

Cineplex was able to reopen a limited number of venues in late June, and as government restrictions across the

country were eased, additional locations were opened. On August 21, 2020, Cineplex became one of the first of all

the major film exhibitors in the world to reopen its entire circuit of theatres across Canada, including location based

entertainment venues. During this period, Cineplex continued its negotiations with landlords, finalizing the majority

of discussions and realizing material reductions in rent payments for both the closure period in the second, third, as

well as for the fourth quarter and future periods.

In Canada, most provinces have adopted a phased approach to reopening businesses. The following table reflects the

current status of reopening to the date of this MD&A. The reopening plans are subject to change from time to time.

Province Theatres Restaurants

British

Columbia

All cinemas closed as of November 24, 2020.

Restaurants limited to 50% capacity as of

November 24, 2020.

Alberta All cinemas closed as of December 31, 2020.

All indoor dining closed as of December 13,

2020.

Saskatchewan

Cinemas open at 30 per auditorium.

Restaurants open.

Manitoba All cinemas closed as of November 12, 2020. All indoor dining closed as of November 20,

2020.

Ontario

Cinemas will begin reopening in Ontario on February 10 with

additional regions scheduled to reopen on February 16 and 22.

Restaurants will begin reopening in Ontario on

February 10 with additional regions scheduled

to reopen on February 16 and 22.

Quebec All cinemas closed as of November 11, 2020. All indoor dining closed as of November 11,

2020.

New

Brunswick

Cinemas open at 50 per building.

Restaurants open.

Nova Scotia

Cinemas open at 100 per auditorium.

Indoor dining open as of January 4, 2021.

Prince Edward

Island

Cinemas open at 200 per building, no more than 50 per auditorium.

Indoor dining permitted with a limit of up to 50

patrons.

Newfoundland

Permitted since June 24.

Permitted since June 8.

Limit of 50 persons per auditorium or 50% capacity, whichever is less.

To mitigate the negative impact of COVID-19 and support its long-term stability, Cineplex has undertaken a variety

of measures including:

Liquidity measures:

• entered into amendment agreements with The Bank of Nova Scotia as administrative agent to the seventh

amended and restated credit agreement that provided Cineplex with certain financial covenant relief in light

of the COVID-19 pandemic and its effects on Cineplex’s business. Refer to Section 7.4, Credit Facilities

and Section 16, Subsequent events, for a summary of key terms of the First, Second and Third Credit

Agreement Amendments;

• issued convertible unsecured subordinated debentures for net proceeds of $303.0 million (the

“Debentures”) (see Section 9.1, Convertible debentures);

• entered into an agreement to enhance and expand the SCENE Scotiabank Loyalty program receiving $60.0

million with respect to the reorganization.

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 4

Cineplex Inc.

Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

• focused on revenue driving opportunities including the expansion of Cineplex Store offerings and

expansion of food home delivery from theatres and LBE venues; and

• filed corporate tax returns for income tax recoveries in a timely manner

Cost reduction and subsidy measures:

• temporary layoffs of all part-time and full-time hourly employees as well as a number of full-time

employees who chose a temporary layoff rather than a salary reduction;

• reduced full-time employee salaries by agreement with such employees during the second and third

quarters;

• suspended or deferred current capital spending and reviewing all capital projects to consider either deferral

or cancellation;

• reduced non-essential discretionary operational expenditures (such as spending on marketing, travel and

entertainment);

• implemented a more stringent review and approval process for all outgoing procurement and payment

requests;

• continued negotiations with landlords for rent relief, including abatements and converting fixed rent to

variable rent depending on attendance, until attendance returns to previous levels;

• worked with major suppliers and other business partners to modify the timing and quantum of certain

contractual payments;

• reviewed and applied for government subsidy programs where available, including municipal and

provincial property tax and energy rebates or subsidies;

• applied for the ongoing Canada Emergency Wage Subsidy (“CEWS”) made available by the Government

of Canada since March 2020;

• applied for the ongoing Canada Emergency Rent Subsidy (“CERS”), which was launched by the

Government of Canada as a result of government mandated lockdowns, providing a variable subsidy for

rent and other occupancy-related costs incurred from September 27, 2020 through June, 2021;

• continued evaluation of Cineplex’s eligibility under other relief programs; and

• continued the suspension of dividends;

In addition to cost savings associated with the temporary layoffs of its employees, reductions in salaries and other

mitigation efforts, Cineplex has suspended or deferred certain capital spending and is reviewing all capital projects

to consider further deferrals or cancellations and has plans to reduce purchases of property, plant and equipment (net

of tenant inducements) to approximately $50.0 million over the next 12 months.

The COVID-19 pandemic has had a material negative effect on all aspects of Cineplex’s businesses resulting in

material decreases in revenues, results of operations and cash flows. Since March 15, 2020, Cineplex has

experienced a net cash burn of approximately $15 million to $20 million per month as a result of having to close its

theatres and LBE venues (for Q4 2020 net cash burn was $74.3 million for the three months or approximately $24.8

million monthly) (see Section 18, Non-GAAP measures). When used in this MD&A, net cash burn is calculated as

adjusted EBITDAaL (see Section 18, Non-GAAP measures) less cash interest (excluding amounts with respect to

lease obligations), provision for income taxes and net capital expenditures.

As some of Cineplex’s largest expenses, such as film cost and cost of food services, are fully variable, during the

closure of its theatres and LBE venues Cineplex focused on reducing its largest fixed and semi-fixed expenses,

including those attributed to theatre payroll and theatre occupancy. As a result of the measures described above and

below, including receipt of assistance under the CEWS, Cineplex was able to materially reduce theatre payroll

expenses from $41.9 million reported in the fourth quarter of 2019 to approximately $5.2 million in the fourth

quarter of 2020. In total, Cineplex has received approximately $57.0 million in wage subsidies to end of the fourth

quarter, primarily under the CEWS program. With respect to theatre occupancy expenses, Cineplex has worked with

its landlord partners to obtain relief measures, which resulted in significantly reduced cash rent being paid in 2020

subsequent to the lockdowns. During the fourth quarter Cineplex was able to reduce occupancy costs by

approximately $14.9 million. Including the sale of certain restrictive lease rights to landlords during the third

quarter, on an annual basis Cineplex was able to materially reduce net cash lease outflows by approximately $72.5

million. The focus was on identifying opportunities for lease-related abatements during the closure period,

converting fixed components of rent to variable rent during the reopening period and looking for other opportunities

to extract value under its existing lease agreements. With the second wave of COVID-19 resulting in another round

Cineplex Inc.

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MANAGEMENT’S DISCUSSION & ANALYSIS 5

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Cineplex Inc.

Management's Discussion and Analysis

of closures in the fall and winter of 2020/2021, Cineplex continues to work with landlord partners to obtain further

relief.

Since the closure of its theatres and LBE venues in March 2020, Cineplex diligently prepared for their safe

reopening, with the health and well-being of its employees and guests being its top priority. Cineplex carefully re-

examined all of its buildings and processes, so that when its theatres and LBE venues reopened, it had implemented

an industry-leading program with end-to-end health and safety protocols.

Some of the new measures implemented on reopening included:

• launching reserved seating in all auditoriums across Canada; seating options are automatically blocked off

to ensure proper distance in every direction between guests;

• reducing capacity in all auditoriums to allow for physical distancing in accordance with government

regulations;

• enhancing cleaning practices throughout our facilities, with particular focus on high-contact surfaces,

restrooms and seats;

• accepting debit and credit payments only, with the exception of gift card purchases;

• limiting food offerings in theatres;

• ensuring employees have the personal protective equipment they need and as required by provincial

regulations; and

• making hand sanitizer readily available for guests and employees throughout the buildings.

Although restrictions on social gatherings were partially lifted in many of the markets in which Cineplex operated

during the third quarter, social gathering restrictions were reinstituted in the fourth quarter with the increased

number of COVID-19 cases throughout the country. The second wave of increased cases during the fall months

resulted in several provinces across Canada implementing mandatory lockdown measures which have resulted in

prolonged mandatory theatre closures and operating restrictions on the LBE businesses. Due to the uncertainty of the

timing of the reductions of many government-imposed restrictions and the potential long-term effects that the

COVID-19 pandemic may have on the exhibition and amusement and leisure businesses, COVID-19 may have a

prolonged negative impact on Cineplex’s operations. In addition, with the global delay of exhibitors reopening,

specifically those in California and New York, distributors shifted the release dates of major movie titles out of 2020

into 2021 and beyond, in an effort to maximize box office revenues on the eventual release of such titles. This

included the following releases: Godzilla vs. Kong, Black Widow, Fast & Furious 9, Cruella, Peter Rabbit 2,

Venom: Let There Be Carnage, Minions: The Rise of Gru, Top Gun: Maverick, Shang-Chi and the Legend of the

Ten Rings, Space Jam: A New Legacy, Jungle Cruise, The Suicide Squad, The King’s Man, A Quiet Place Part II,

Dune, No Time To Die, Eternals, Ghostbuster: Afterlife, Mission: Impossible 7, Spider-Man 3, West Side Story and

The Matrix 4.

In addition, a limited number of previously expected theatrical releases have instead been redirected to streaming

services. The impact of the reduction of new releases in the fourth quarter as a result of these changes in

combination with the ongoing and potentially expanded restrictions on the reopening of Cineplex’s businesses, also

negatively impacted the timing of Cineplex’s return to profitability.

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Management’s Discussion and Analysis

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MANAGEMENT’S DISCUSSION & ANALYSIS 6

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

In December 2020, Health Canada approved and authorized the Pfizer-BioNTech and Moderna COVID-19 vaccines

for use in Canada with the first doses arriving during the holiday season. Canada has begun the inoculation process

of Canadians, starting with front line workers and high-risk individuals with plans to start vaccinating the general

population during the spring of 2021, and having all Canadians immunized by the fall of 2021. The efficient rollout

of vaccines is a significant leap forward to the return of normalcy and end of the COVID-19 pandemic. However,

the supply and roll-out of approved vaccines in Canada has been inconsistent to date and there can be no assurance

that vaccines will be widely available or distributed as currently anticipated, which would delay a return to

normalcy.

With the unknown duration of the pandemic and yet to be determined timing of the phased complete reopening of

Cineplex’s businesses, as well as consumers’ future risk tolerance regarding health matters, it is not possible to

know the impact of the pandemic on future results. However, Cineplex is optimistic that the exhibition and

amusement and leisure industries will recover over time. Cineplex believes consumer demand for the theatrical

experience combined with a backlog of anticipated releases of strong film content will help drive visitation, and that

LBE activities will increase as people seek out-of-home experiences they have been restricted from enjoying for

almost a year.

Management continues to pursue all viable options to maintain adequate liquidity to fund operations for the

currently anticipated duration of the pandemic. During the fourth quarter, Cineplex entered into an agreement to

enhance and expand the SCENE Scotiabank Loyalty program receiving $60.0 million with respect to the

reorganization. In addition, Cineplex continues to explore other measures to maintain adequate liquidity, including

but is not limited to planned asset sales such as Cineplex’s head office building in Toronto which was completed

subsequent to year end, additional financing sources and amendments to existing credit facilities. All proceeds are

used to repay the Credit Facilities, in part as a permanent reduction.

As of December 31, 2020, Cineplex was in compliance with all financial covenants under the terms of its senior

secured credit facilities (“Credit Facilities”). However, with potential ongoing closures and delayed film releases,

management’s forecasts indicate a potential breach of covenants within the next twelve months as a result of the

ongoing pandemic. Management’s forecasts may change materially as the impact of COVID-19 on Cineplex’s

business is better understood over the course of time. A violation of its covenants would represent an event of

default under the terms of the Credit Facilities, enabling the lenders to demand immediate repayment of all amounts

due. See section 16, Subsequent Events, for a description of certain amendments to the Credit Facilities entered into

after year end.

As of December 31, 2020, Cineplex had a cash balance of $16.3 million and $153.8 million available under its

Credit Facilities subject to the liquidity covenants set forth in the Credit Facilities as amended (see Section 16,

Subsequent events). Cineplex also reported a loss from continuing operations during the year of $624.0 million and

an accumulated deficit of $903.4 million. Subsequent to year end, Cineplex entered into an amendment to the credit

agreement governing the Credit Facilities to obtain certain financial covenant relief from the syndicate of lenders

under its Credit Facilities, see Section 16, Subsequent Events. Cineplex continues to pursue a variety of options to

maintain adequate liquidity to fund operations for the currently anticipated duration of the pandemic and is

investigating additional sources of financing including further asset sales, such as the sale of the head office

completed subsequent to year end, however as of the date of this MD&A, no further financing had been concluded,

and there can be no assurance that such financing initiatives will be successful.

Cineplex has prepared its condensed consolidated financial statements on a going concern basis, which presumes it

will continue its operations for the foreseeable future, and will be able to realize its assets and discharge its liabilities

and commitments in the normal course of business as they become due. While Cineplex currently has sufficient

liquidity to satisfy its immediate financial obligations, there can be no assurance that the steps that management is

taking will provide sufficient liquidity in the near term to meet its ongoing obligations, nor can it be assured that it

will be able to obtain additional financing at favorable terms, or at all. These material uncertainties lend significant

doubt about the Company’s ability to continue as a going concern and, accordingly, the appropriateness of the use of

accounting principles applicable to a going concern. The consolidated financial statements do not reflect adjustments

and classifications of assets, liabilities, revenues and expenses which would be necessary if Cineplex were unable to

continue as a going concern. Such adjustments could be material.

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Management’s Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex Inc.

Management's Discussion and Analysis

Cineworld Transaction

On December 15, 2019, Cineplex entered into an arrangement agreement (the “Arrangement Agreement”) with

Cineworld Group, plc (“Cineworld”), pursuant to which an indirect wholly-owned subsidiary of Cineworld agreed to

acquire all of the issued and outstanding common shares of Cineplex (“Shares”) for $34 per share in cash (the

“Cineworld Transaction”). The Cineworld Transaction was to be implemented by way of a statutory plan of

arrangement under the Business Corporation Act (Ontario).

On June 12, 2020, Cineworld delivered a notice (the “Termination Notice”) to Cineplex purporting to terminate the

Arrangement Agreement. In the Termination Notice, Cineworld alleged that Cineplex took certain actions that

constituted breaches of Cineplex’s covenants under the Arrangement Agreement including failing to operate its

business in the ordinary course. In addition, Cineworld alleged that a material adverse effect had occurred with

respect to Cineplex. Cineworld’s repudiation of the Arrangement Agreement has been acknowledged by Cineplex

and the Cineworld Transaction will not proceed. Cineplex vigorously denies Cineworld’s allegations. The

Arrangement Agreement explicitly excludes any “outbreaks of illness or other acts of God” from the definition of

material adverse effect and all of Cineworld’s allegations stem from an outbreak of illness and act of God

(COVID-19). Cineplex believes that Cineworld had no legal basis to terminate the Arrangement Agreement and

that Cineworld breached the Arrangement Agreement and its other contractual obligations because, among other

failures, it did not use reasonable best efforts to obtain approval under the Investment Canada Act as soon as

reasonably practicable (“ICA Approval”). If Cineworld had complied with its obligation to obtain ICA Approval,

Cineplex believes the ICA Approval would have been obtained and the Cineworld Transaction would have closed

well before the outside date for completion in the Arrangement Agreement. No amounts are due to be paid by

Cineplex as a result of the Termination Notice and no amounts have been accrued in the financial statements with

respect to the Termination Notice.

On July 3, 2020, Cineplex announced that it had commenced an action in the Ontario Superior Court of Justice

against Cineworld and 1232743 B.C. Ltd. seeking damages arising from what Cineplex claims was a wrongful

repudiation of the Arrangement Agreement. The claim seeks damages, including the approximately $2.18 billion

that Cineworld would have paid upon the closing of the Cineworld Transaction for Cineplex’s securities, reduced by

the value of the Cineplex securities retained by its security holders, as well as compensation for other losses

including the failure of Cineworld to repay or refinance Cineplex’s approximately $664 million in debt and

transaction expenses. Cineplex has also advanced alternative claims for damages for the loss of benefits to its

security holders, and to require Cineworld to disgorge the benefits it improperly received by wrongfully repudiating

the Cineworld Transaction.

Cineplex claims that Cineworld breached its contractual obligations and its duty of good faith and honesty in

contractual performance. Cineworld purports to rely upon alleged adverse impacts of COVID-19 on Cineplex’s

business to terminate the Arrangement Agreement, which it is not entitled to do. The contractual agreements

between the parties expressly exclude outbreaks of illness, such as the COVID-19 pandemic, as a circumstance

entitling Cineworld to terminate the Arrangement Agreement. Without any legal right to avoid its contractual

obligations, Cineworld intentionally chose to breach its obligations, including its obligation to obtain ICA Approval.

On July 6, 2020, Cineworld announced that it would defend Cineplex’s claim, and on September 2, 2020, filed its

Statement of Defence and Counterclaim in which it denied Cineplex’s claims and advanced a counterclaim seeking

reimbursement of an unspecified amount for costs incurred with respect to the transaction and an unspecified

amount for punitive damages. Cineplex responded to Cineworld’s defence and counterclaim on September 15, 2020,

denying all claims levied by Cineworld.

While a trial date has been set for September 2021, due to uncertainties inherent in litigation, it is not possible for

Cineplex to predict the timing or final outcome of the legal proceedings against Cineworld or to determine the

amount of damages, if any, that may be awarded. Further, even if Cineplex’s action against Cineworld is successful,

Cineworld may not have the ability to pay the full amount of any damages awarded.

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 8

Cineplex Inc.

Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

1.2 FINANCIAL HIGHLIGHTS

Financial highlights Fourth Quarter Full Year

(in thousands of dollars, except theatre attendance in

thousands of patrons and per Share and per patron

amounts) 2020 2019 Change (i) 2020 2019 Change (i)

Total revenues (ii) $ 52,452 $ 443,220 -88.2 % $ 418,263 $ 1,665,146 -74.9 %

Theatre attendance 786 16,849 -95.3 % 13,065 66,360 -80.3 %

Net (loss) income from continuing operations $ (230,403) $ 4,668 NM $ (624,001) $ 36,516 NM

Net loss from discontinued operations $ — $ (1,196) NM $ (4,952) $ (7,625) NM

Net (loss) income $ (230,403) $ 3,472 NM $ (628,953) $ 28,891 NM

Box office revenues per patron (“BPP”) (iv) $ 9.23 $ 10.79 -14.5 % $ 10.17 $ 10.63 -4.3 %

Concession revenues per patron (“CPP”) (iv) $ 9.06 $ 6.81 33.0 % $ 6.99 $ 6.73 3.9 %

Adjusted EBITDA (iv) $ (32,097) $ 106,529 NM $ (55,866) $ 405,786 NM

Adjusted EBITDAaL (iii) (iv) $ (65,948) $ 62,327 NM $ (182,815) $ 230,546 NM

Adjusted EBITDAaL margin (iii) (iv) (125.7) % 14.1 % -139.8 % (43.7) % 13.8 % -57.5 %

Adjusted free cash flow (iv) $ (30,530) $ 39,127 NM $ (161,870) $ 168,455 NM

Adjusted free cash flow per Share (iv) $ (0.482) $ 0.618 NM $ (2.556) $ 2.660 NM

Earnings per Share (“EPS”) from continuing operations -

basic and diluted (iii) $ (3.64) $ 0.08 NM $ (9.85) $ 0.58 NM

EPS from discontinued operations - basic and diluted $ — $ (0.02) NM $ (0.08) $ (0.12) -33.3 %

EPS - basic and diluted (iii) $ (3.64) $ 0.06 NM $ (9.93) $ 0.46 NM

(i) Throughout this MD&A, changes in percentage amounts are calculated as 2020 value less 2019 value.

(ii) All amounts are from continuing operations. See Section 13, Accounting policies.

(iii) 2020 includes expenses related to the Cineworld Transaction and associated Litigation in the amount of $1.3 million for the fourth quarter

and $4.1 million for the full year.

(iv) See Section 18, Non-GAAP measures.

In response to the second wave of COVID-19, increased operating restrictions for non-essential businesses in

addition to new government mandated lockdown measures were implemented across Canada, resulting in the

closure of most of Cineplex’s theatres and LBE venues by the end of the year. Total revenues for the fourth quarter

of 2020 decreased 88.2%, or $390.8 million to $52.5 million as compared to the prior year period, due to the

ongoing material negative impact of the COVID-19 pandemic on Cineplex’s business operations. For the periods

when venues were open, Cineplex reported box office revenues of $7.3 million and food service revenues of

$10.5 million including theatre food service revenue of $7.1 million, home delivery revenues of $2.8 million and

LBE food service revenues of $0.6 million. Media revenues of $12.5 million were mainly from digital place-based

media revenues which recognized the majority of its $11.1 million of revenue from creative and support services.

Amusement revenues of $13.6 million were primarily from route operations including family entertainment centres

(“FEC”) and equipment sales. As a result of the ongoing negative impact of COVID-19, adjusted EBITDAaL

decreased $128.3 million to a loss of $65.9 million as compared to the prior year period and adjusted free cash flow

per Share decreased $1.100 to $(0.482) per Share.

Reflecting the impact of the business closures and reduced operations that began in March and continued through

the rest of the year, total revenues for the year ended December 31, 2020 decreased by $1.2 billion, or 74.9% as

compared to the prior year period. Adjusted EBITDAaL decreased $413.4 million to a loss of $182.8 million

1.3 KEY DEVELOPMENTS IN 2020

The following describes certain key business initiatives undertaken and results achieved during 2020 in each of

Cineplex’s core business areas:

FILM ENTERTAINMENT AND CONTENT

Theatre Exhibition

• Government operating restrictions and mandated closures during the fourth quarter resulted in the closure

of most of Cineplex’s theatres by the end of the year.

Cineplex Inc.

Management’s Discussion and Analysis

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Cineplex Inc.

Management's Discussion and Analysis

• Reported annual box office revenues of $132.8 million, a 81.2% decrease from 2019 as a result of the

impact of the COVID-19 pandemic on theatre operations commencing at the end of the first quarter.

• Opened two new ScreenX auditoriums: Scotiabank Theatre Halifax in Nova Scotia and Cineplex Cinemas

Ottawa in Ontario.

• Converted four auditoriums to recliner seating during the year.

• Announced a multi-year agreement with Universal Filmed Entertainment Group that provides theatrical

exclusivity of their film releases for a shortened window of a minimum of 17 days up to a maximum of 31

days after which the studio will have the option to make its title available on Premium Video on Demand

(“PVOD”).

• Launched Private Movie Nights offering up to 20 guests to enjoy a private moving-screening experience

with more than 1,000 movies to choose from.

Theatre Food Service

• Reported annual theatre food service revenues of $91.4 million, a 79.5% decrease from 2019 as a result of

the impact of COVID-19 on theatre operations.

• Expanded alcohol beverage service to an additional four theatres, now totaling 91 (not including VIP

auditoriums).

• Increased focus on home delivery services with Uber Eats and Skip the Dishes as a result of the theatre and

LBE restrictions and closures, reporting annual theatre food service delivery revenues of $8.4 million.

During the year, added five additional locations to the Uber Eats delivery platform, and seven additional

locations to the Skip the Dishes platform.

Alternative Programming

• Alternative Programming (Cineplex Events) included the feature release of On The Rocks, concerts

included Stevie Nicks 24 Karat Gold and the re-release of Break The Silence: The Movie starring BTS

along with anime title Fate/stay night [Heaven’s Feel] III, Akira 4K.

• Cineplex released the feature 100% Wolf on October 9, 2020 across the country with the exception of

Quebec. While theatres did continue to shut down in most markets, the film remained on-screen through

mid-December and was in Cineplex’s top five films for the quarter.

Digital Commerce

• Experienced significant growth for the Cineplex Store benefiting from PVOD releases including Wonder

Woman 1984 and The Croods: A New Age.

• Total registered users for Cineplex Store increased by 39% from the prior year, reaching over 1.9 million

users.

• Cineplex Store continued to show significant growth with a 36% increase over the prior year in active

monthly users and an increase of 57% in device activation compared to the prior year.

• Cineplex offered a collection of “Understanding Black Stories” films that were available free to rent or

stream to support the Black Lives Matter movement.

MEDIA

• Reported annual media revenues of $65.4 million, a decrease of $131.4 million or 66.8% compared to the

prior year.

Cinema Media

• Cinema media reported annual revenues of $23.6 million in 2020, a decrease of $91.8 million or 79.6%,

due to decreases in show-time and pre-show advertising as a result of theatre closures and limited film

releases.

Digital Place-Based Media

• Reported annual revenues of $41.8 million in 2020, a decrease of $39.6 million or 48.6%, compared to

2019 mainly due to decreases in recurring revenue and lower project installation revenues as a result of

COVID-19 and reductions in customers’ business.

AMUSEMENT AND LEISURE

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Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Amusement Solutions

• Reported annual revenues of $62.5 million in 2020 ($2.5 million from Cineplex theatre gaming and $60.0

million from all other sources of revenues), a decrease of $126.6 million as compared to the prior year. The

decrease is due to closures and capacity restrictions of route operations that remained in effect for a

majority of the year and decreased distribution sales as a result of the negative economic impact of

COVID-19 across all markets.

Location-based Entertainment

• Increased operating restrictions for non-essential businesses in addition to new government mandated

lockdown measures were implemented across Canada in response to the second wave of COVID-19,

resulting in closures of most LBE locations.

• Reported total annual revenues of $25.5 million including food service revenues of $9.1 million,

amusement revenues of $15.4 million and other revenues of $1.0 million, a decrease of $53.7 million or

67.8% as compared to 2019 due to closures and capacity restrictions on locations that were able to open.

• Opened The Rec Room at Seasons of Tuxedo in Winnipeg, Manitoba, on February 18, 2020, the eighth

location of The Rec Room.

• Terminated its partnership with Topgolf in the third quarter of 2020.

LOYALTY

• Membership in the SCENE loyalty program increased by 0.1 million in 2020, reaching 10.4 million

members at December 31, 2020.

• Cineplex entered into an agreement with Scotiabank to bring together the full benefits of SCENE with

Scotia Rewards, Scotiabank’s flexible customer loyalty program. The repositioning includes adding new

rewards partners, driving value through future consolidation of SCENE and Scotia Rewards. Cineplex

received cash proceeds of $60.0 million for the reorganization of its joint operation with SCENE.

• During the year, SCENE announced a strategic three-year extension with its long-standing partners at

Recipe Unlimited Corporation.

CORPORATE

• On June 12, 2020, Cineworld delivered the Termination Notice to Cineplex purporting to terminate the

Arrangement Agreement (See section 1.1, Recent Developments). Cineplex has commenced legal action

against Cineworld for its wrongful termination of the Agreement.

• On June 29, 2020, Cineplex and Cineplex Entertainment Limited Partnership entered into an amendment

agreement with The Bank of Nova Scotia, as administrative agent, and the lenders from time to time named

therein, to the seventh amended and restated credit agreement with a syndicate of lenders (See section 7.4

Credit Facilities).

• Cineplex completed the offering of $316.3 million aggregate principal amount of convertible unsecured

subordinated debentures on July 17, 2020.

• In July, Cineplex announced a cost restructuring program incurring $8.3 million in related costs during the

year.

• On June 29,2020, Cineplex sold its interest in WorldGaming Network for a nominal amount.

• Cineplex announced the appointment and return of Phyllis Yaffe to the Board of Directors. Ms. Yaffe

returned to the role of Board Chair, replacing Ian Greenberg who did not stand for re-election at the Annual

and Special Meeting of shareholders held in October 2020.

• On November 12, 2020, Cineplex and Cineplex Entertainment Limited Partnership entered into the Second

Credit Agreement Amendment with the Bank of Nova Scotia, as administrative agent, and the lenders from

time to time named therein, to the seventh amended and restated credit agreement with a syndicate of

lenders (see section 7.4, Credit Facilities).

• During the year, Cineplex initiated a process to sell its head office building located at 1303 Yonge Street

and 1257 Yonge Street, Toronto, Ontario. Subsequent to period end, Cineplex completed a sale-leaseback

transaction for cash proceeds of $57.0 million (see Section 16, Subsequent Events).

Cineplex Inc.

Management’s Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex Inc.

Management's Discussion and Analysis

2. CINEPLEX’S BUSINESS AND STRATEGY

Cineplex’s mission statement is “Passionately delivering exceptional experiences.” All of its efforts are focused

towards this mission and it is Cineplex’s goal to consistently provide guests and customers with exceptional

experiences.

Cineplex’s operations are primarily conducted in four main areas: film entertainment and content, media,

amusement and leisure and location-based entertainment, all supported by the SCENE loyalty program. Cineplex’s

key strategic areas of focus include the following:

• Continue to enhance and expand Cineplex’s presence as an entertainment destination for Canadians in-

theatre, at-home and on-the-go;

• Capitalize on core media strengths and infrastructure to provide continued growth of Cineplex’s media

business both inside and outside theatres;

• Develop and scale amusement and leisure concepts by extending existing capabilities and infrastructure;

• Drive value within businesses by leveraging opportunities to optimize value, realize synergies,

implement customer-centric technology and leverage big data across the Cineplex ecosystems; and

• Pursue opportunities that capitalize on Cineplex’s core strengths.

Cineplex uses the SCENE loyalty program and database as a strategic asset to link these areas of focus and drive

customer acquisition and ancillary businesses.

Diversified Entertainment and Media Company

Key elements of this strategy include going beyond movies to reach customers in new ways and maximizing

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 initiatives in theatre food service such as optimizing and adding

product offerings 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.

Cineplex Inc.

Management’s Discussion and Analysis

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Cineplex Inc.

Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

While box office revenues (which include alternative programming) continue to account for the largest portion of

Cineplex’s revenues, expanded theatre food service offerings, cinema media, digital place-based media, amusement

and leisure, the Cineplex Store, promotions and other revenue streams have increased as a share of total revenues.

Cineplex is committed to diversifying its revenue streams outside of the traditional theatre exhibition model through

its media and amusement and leisure businesses.

As a result of the impact of the COVID-19 pandemic on Cineplex’s business, Cineplex’s attention has shifted to

respond to the impacts of the COVID-19 pandemic by implementing a variety of measures to reduce costs and has

placed an increased focus on the safe reopening of its business (see Section 1.1 Response to COVID-19).

Adjusted EBITDAaL

(millions) (i)

$222.9

$224.7

$247.3

$230.5

$(182.8)

2016

2017

2018

2019

2020

Adjusted EBITDAaL

Margin (i)

15.1% 14.5% 15.3% 13.8%

(43.7)%

2016 2017 2018 2019 2020

(i) 2020 includes expenses related to the Cineworld Transaction and associated Litigation in the amount of $4.1 million.

3. CINEPLEX’S BUSINESSES

During 2020, all aspects of Cineplex’s business were materially negatively impacted by COVID-19. Despite this

impact, the following reflects management’s belief that its business will return when it is able to reopen theatres and

LBE venues without restrictions. Cineplex’s operations are primarily conducted in four main areas: film

entertainment and content, media, amusement and leisure and location-based entertainment, all supported by the

SCENE loyalty program.

FILM ENTERTAINMENT AND CONTENT

Theatre Exhibition

Theatre exhibition is the core business of Cineplex. Box office revenues are highly dependent on the marketability,

quality and appeal of the film product released by the major motion picture studios.

The motion picture industry consists of three principal

activities: production, distribution and exhibition.

Production involves the development, financing and

creation of feature-length motion pictures. Distribution

involves the promotion and exploitation of motion

pictures in a variety of different channels. Theatrical

exhibition is the primary channel for new motion picture

releases and is the core business function of Cineplex.

Source: Movie Theatre Association of Canada ("MTAC")

Canadian Industry Box Office

(in millions)

$994.0 $992.5 $1,031.3 $1,022.0

$235.0

2016 2017 2018 2019 2020

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Management's Discussion and Analysis

Cineplex believes that the following market trends are important factors in the growth of the film exhibition industry

in Canada:

• Importance of theatrical success in establishing movie brands and subsequent movies. Theatrical exhibition

is the initial and most important channel for new motion picture releases. A successful theatrical release

which “brands” a film is often the determining factor in its popularity and value in “downstream”

distribution channels, such as transactional video-on-demand (“TVoD”), Blu-ray, pay-per-view,

subscription video-on-demand as well as network television.

• Continued supply of successful films. Studios are increasingly producing film franchises, such as Star

Wars, Fast & Furious and Jurassic Park. Additionally, new franchises continue to be developed, such as

the films in the Marvel and DC universes. When the first film in a franchise is successful, subsequent films

in the franchise benefit from existing public awareness and anticipation. The result is that such features

typically attract large audiences and generate strong box office revenues. The success of a broader range of

film genres also benefits film exhibitors. In 2021, the studios are currently planning to release a strong slate

of films, including Godzilla vs. Kong, Black Widow, Fast & Furious 9, Cruella, Peter Rabbit 2, Venom:

Let There Be Carnage, Minions: The Rise of Gru, Top Gun: Maverick, Shang-Chi and the Legend of the

Ten Rings, Space Jam: A New Legacy, Jungle Cruise, The Suicide Squad, The King’s Man, A Quiet Place

Part II, Dune, No Time To Die, Eternals, Ghostbuster: Afterlife, Mission: Impossible 7, Spider-Man 3, West

Side Story and The Matrix 4. In spite of changing release models, Cineplex remains confident that there

will continue to be significant theatrical releases.

• Convenient and affordable form of out-of-home entertainment. Cineplex’s BPP was $10.17 and $10.63 in

2020 and 2019 respectively. Excluding the impact of Cineplex’s premium-priced product, BPP was $9.18

and $9.17 in 2020 and 2019 respectively. The movie-going experience continues to provide value and

compares favorably to alternative forms of out-of-home entertainment in Canada such as professional

sporting events or live theatre, and with Cineplex, SCENE members enjoy the ability to earn points towards

Cineplex products as well as discounts and special offers.

• Providing a variety of premium and enhanced guest theatre experiences. Premium priced theatre offerings

include 3D, 4DX, UltraAVX, VIP, IMAX, D-BOX, ScreenX and Cineplex Clubhouse. BPP for premium-

priced product was $14.04 in 2020, and accounted for 28.1% of total box office revenues in 2020. Recent

enhancements to the current circuit include the addition of 4 retrofit auditoriums.

• Reduced seasonality of revenues. Historically, film exhibition industry revenues have been seasonal, with

the most marketable motion pictures generally being released during the summer and the late-November

through December holiday season. The seasonality of motion picture exhibition theatre attendance has

become less pronounced as film studios have expanded the historical summer and holiday release windows

and increased the number of films released during traditionally weaker periods.

Box Office Revenues (millions)

$734.1

$715.6 $724.2

$705.5

$132.8

2016 2017 2018 2019 2020

Box Office Revenue per

Patron

$9.84

$10.17 $10.46

$10.63

$10.17

2016 2017 2018 2019 2020

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MANAGEMENT’S DISCUSSION & ANALYSIS 14

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Management's Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex’s leading market position enables it to

effectively manage film, food service and other theatre-

level costs, thereby maximizing operating efficiencies.

Cineplex seeks to continue to achieve incremental

operating savings by, among other things, implementing

best practices and negotiating improved supplier

contracts. In addition, Cineplex continues to evaluate its

existing theatre portfolio on an ongoing basis.

Theatre Attendance (millions)

74.6

70.4

69.3

66.4

13.1

2016 2017 2018 2019 2020

The development of premium experiences through design, structure and digital technology makes Cineplex theatres

ideal locations for meetings and corporate events. Organizations, particularly corporations with offices across the

country, can use Cineplex’s theatres and digital technology for annual meetings, product launches and employee or

customer events, producing revenue streams independent of film exhibition.

In recognition of the need to adapt to changing consumer behavior, particularly as the entertainment industry

continues to navigate the impact of COVID-19, during 2020, Cineplex entered into a multi-year agreement with

Universal Filmed Entertainment Group that provides theatrical exclusivity of their film releases for a shortened

window of a minimum of 17 days up to a maximum of 31 days, at which point the studio will have the option to

make its titles available across PVOD. Management continues to work with distributors to ensure it is well

positioned as venues begin to reopen to provide moviegoers with the theatrical experience that is a key factor to the

success of film.

Theatre Food Service

Cineplex’s theatre food service business offers guests a range of food choices to enhance their theatre experience

while generating strong profit margins for the company. Cineplex’s theatres feature its internally developed brands:

Outtakes, Poptopia and Melt. Certain Cineplex theatres also feature popular fast food retail branded outlets

(“RBO’s”) including Starbucks and Pizza Pizza, among others.

Cineplex continually focuses on process improvements designed to increase the speed of service at the concession

counter in addition to optimizing the RBO’s available at Cineplex’s theatres. Each of the wide range of menu items

available at Outtakes locations, expanded liquor service available in theatres, partnerships with Uber Eats and Skip

The Dishes as well as the expanded menu and the licensed lounge service available at VIP Cinemas are designed to

reach a wider market and to increase both purchase incidence and transaction value. Digital menu boards installed

across the circuit offer flexibility in menu offerings to guests which contribute to an improved guest experience

while also creating additional revenue opportunities.

Theatre Food Service

Revenues (millions)

$421.2

$422.3

$440.7 $446.6

$99.6

2016 2017 2018 2019 2020

Concession Revenue per

Patron

$5.65

$6.00

$6.36

$6.73

$6.99

2016 2017 2018 2019 2020

Alternative Programming

Alternative programming includes Cineplex’s international film programming as well as content offered under its

Event Cinema brand offerings, including The Metropolitan Opera, NFL Sunday Nights, sporting events, concerts

and dedicated event screens. International film programming includes Bollywood content as well as Cantonese,

Hindi, Punjabi, Mandarin, Korean and Filipino language films, amongst others, in select theatres across the country

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Cineplex Inc.

Management's Discussion and Analysis

based on local demographics. This programming attracts a more diverse audience, expanding Cineplex’s

demographic reach and enhancing revenues.

The success of Cineplex’s alternative programming events has led to offerings including the National Theatre from

London, the In the Gallery series and screening select television content on the big screen. Cineplex offers the

Classic Film Series and Family Favorites programming at non-peak hours to enhance theatre utilization rates. As

additional content becomes available, Cineplex will continue to expand its alternative programming offerings.

Digital Commerce

Cineplex’s digital products consist of cineplex.com, the Cineplex mobile app and the Cineplex Store. Cineplex has

developed cineplex.com into one of the leading entertainment sites in Canada, a destination of choice for Canadians

seeking movie entertainment information on the internet. The website offers streaming video, movie information,

showtimes and the ability to buy tickets online, entertainment news and box office reports as well as advertising and

digital commerce opportunities. To complement cineplex.com, the Cineplex mobile app is available as a free

download for a wide variety of devices, providing guests with the ability to find showtimes, buy tickets as well as

find information relating to the latest movie choices and movie-related entertainment content and provide mobile

food and beverage ordering in VIP auditoriums.

These features and others enable Cineplex to engage and interact with its guests online and on-the-go, allowing

Cineplex to offer engaging, targeted and sponsored content to visitors and advertisers, resulting in opportunities to

generate additional revenues.

The Cineplex Store rents and sells over 9,000 movies in digital form (TVoD and PVOD movies). Cineplex

continues to improve the user experience including releasing new Cineplex Store user interfaces and experiences

across the website and multiple connected televisions and device apps.

Cineplex’s strong brand association with movies and well-established partnerships with movie studios combined

with Cineplex’s website, app and the Cineplex Store provide Cineplex with the ability to expand its touchpoints to

consumers across multiple channels. As emerging technologies continue to change the ways in which content is

consumed, Cineplex will continue to leverage its digital commerce properties to provide guests with in home and

on-the-go options for content delivery.

MEDIA

Cineplex’s media businesses cover two major categories: cinema media, which incorporates advertising mediums

related to theatre exhibition, and digital place-based media which provides digital signage solutions.

Media Revenues

(millions) (i)

$166.7 $167.1

$162.8

$196.8

$65.4

2016 2017 2018 2019 2020

(i) Media revenues for prior year periods have been restated to present revenue amounts from continuing operations.

Cinema Media

Cinema media incorporates advertising mediums related to theatre exhibition, both within Cineplex’s own circuit of

theatres as well as in competitors’ theatres through revenue sharing arrangements.

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Management's Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex’s core cinema media offerings include:

• Show-time advertising, which runs just prior to the movie trailers in the darkened auditorium with limited

distractions.

• Pre-show advertising, featured on the big screen as guests settle in to enjoy their movie night, in the period

prior to Show-time.

• Digital lobby advertising and digital poster cases located in the highest-traffic areas featuring big, bold

digital signage.

• Website and mobile advertising sales through cineplex.com and the Cineplex mobile app.

Cineplex’s theatres also provide opportunities for advertisers’ special media placements (including floor and door

coverings, window clings, standees, banners, samplings, activations and lobby domination setups).

In addition to these individual offerings, Cineplex offers integrated solutions that can cross over some or all of the

above-mentioned platforms. Advertisers can utilize these forms of media individually or take advantage of an

integrated advertising program spanning multiple platforms. In partnership with its digital commerce platforms,

Cineplex offers online media packages that include page dominations, page skins, pre-roll and post-roll advertising;

all with geo-targeting capabilities.

Cineplex’s cinema media business is well positioned for continued growth and is the ideal channel for advertisers

wanting to reach all demographics, especially the highly sought-after 17 to 25-year-old Canadian market.

Cineplex also generates revenues from the sale of sponsorship and advertising at LBE venues.

Digital Place-Based Media

Cineplex’s digital place-based media designs, installs, maintains and operates digital signage networks in four

verticals including digital out of home (in public spaces such as shopping malls and office towers), quick service

restaurants, financial institutions and retailers.

Cineplex media’s advertising sales team combined with the project management, system design, network operations,

and creative services teams within its digital place-based media business have Cineplex well positioned to expand its

media reach throughout its current infrastructure as well as in numerous place-based advertising locations across the

country. Cineplex believes that the strength of its digital place-based media assets make it a leader in the indoor

digital signage industry and provide a platform for significant growth throughout North America and Europe.

AMUSEMENT AND LEISURE

Amusement and leisure includes two primary areas of operations:

• Amusement solutions, comprised of P1AG which is one of the largest distributors and operators of

amusement, gaming and vending equipment in North America;

• Location-based entertainment, which includes social entertainment destinations featuring gaming,

entertainment and dining, including The Rec Room, and Playdium.

Amusement Solutions

Cineplex’s amusement solutions business generates revenues from the following activities in both Canada and the

United States:

• Route operations: P1AG collects a revenue share on games revenues earned by P1AG-owned amusement

and vending equipment placed into locations such as family entertainment centres, arcades, theatres,

restaurants, bars and other locations.

• Third party equipment sales.

• Operating family entertainment centres.

In addition to expanding Cineplex’s amusement and gaming presence outside of its theatres, the acquisition and

expansion of P1AG allowed Cineplex to vertically integrate its gaming operations. Cineplex’s in-theatre gaming

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Cineplex Inc.

Management's Discussion and Analysis

business features Cineplex’s 38 XSCAPE Entertainment Centres as well as arcade games in select Cineplex theatres,

with all of the games supplied and serviced by P1AG.

Location-based Entertainment

Cineplex operates LBE establishments under the brand names The Rec Room and Playdium, as well as other family

entertainment centres.

The Rec Room is a social entertainment destination targeting millennials featuring a wide range of entertainment

options including virtual reality (“VR”), simulation, redemption, video and recreational gaming, and a live

entertainment venue for watching a wide range of entertainment programming. These entertainment options are

complemented with an upscale casual dining environment, featuring an open kitchen and contemporary menu, as

well as a larger bar with a wide range of digital monitors and a large screen for watching sporting and other major

events.

The Rec Room earns revenues from food and beverage service, from amusement, gaming and leisure attraction play,

and from ticket sales for events held within the destination.

Cineplex has eight locations of The Rec Room and announced plans to open two additional locations in Barrie,

Ontario, and Burnaby, British Columbia in 2021.

Playdium is the Playdium brand concept relaunched for targeting families and teens in mid-sized communities

across Canada. Cineplex has two locations of Playdium, and announced plans to open one additional location in

Dartmouth, Nova Scotia with an expected opening date in early 2021.

LOYALTY

Cineplex has a joint venture agreement with Scotiabank to operate the SCENE loyalty program, providing Cineplex

with significant data and a more comprehensive understanding of the demographics and behaviors of its audience.

During the fourth quarter of 2020, Cineplex and Scotiabank entered into an agreement to enhance and expand the

SCENE Scotiabank Loyalty program. Cineplex received $60.0 million with respect to the reorganization.

SCENE is a customer loyalty program designed to offer members discounts and the opportunity to earn and redeem

SCENE points. SCENE members can earn and redeem SCENE points for purchases at Cineplex’s theatres, at its

location-based entertainment establishments, online at the Cineplex Store as well as at locations operated by select

program partners and as part of the Cineplex Tuesdays program. In conjunction with the reorganization of its joint

operation in SCENE, Cineplex announced an agreement with Scotiabank to bring together the full benefits of

SCENE with Scotia Rewards, Scotiabank’s flexible customer loyalty program. Beginning in the fall of 2021,

members can look forward to redemption opportunities for a wide variety of popular retailers. Members will also be

able to apply points as statement credits on certain Scotiabank products, as well as book flexible travel.

The SCENE loyalty program has been well received as evidenced by the strong membership growth and high

engagement and satisfaction levels of its program members. Membership in the SCENE loyalty program at

December 31, 2020 was approximately 10.4 million, an increase of approximately 0.1 million members during 2020.

Through SCENE, Cineplex has gained a more thorough understanding of its customers, driven increased customer

frequency, increased overall spending across its businesses and provides Cineplex with the ability to communicate

directly and regularly with customers.

The SCENE customer database has allowed Cineplex to segment SCENE’s member population and provide special

offers to Cineplex’s guests, implement targeted marketing programs and deliver tailored messages to subsets of the

membership base, providing members with relevant information and offers which in turn drive increased frequency

and spend. Cineplex continues to influence consumer behavior through the use of SCENE bonus points and

experience upgrades for SCENE members in its initiatives as well as in partnership with movie studios.

Cineplex has gained tremendous insight into customer behavior with over 13 years of data collected. Cineplex will

continue to focus on leveraging this data through marketing automation to drive customer behavior as well as

accelerating the adoption of artificial intelligence and machine learning for more robust consumer insight. SCENE

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Management's Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

continues to build its strategic marketing partnerships with participating partners across Canada, providing

promotions and offerings.

SCENE Members

(millions)

8.1

8.9

9.6

10.3

10.4

2016 2017 2018 2019 2020

4. OVERVIEW OF OPERATIONS

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. Due to the closures as a result of the COVID-19

pandemic, revenues were materially impacted during 2020. The following table presents the revenue mix for

comparative years:

Revenue mix % by period 2020 2019 2018 2017 2016

Box office 31.8 % 42.4 % 44.9 % 46.2 % 49.8 %

Food service 26.0 % 29.0 % 29.5 % 28.5 % 28.8 %

Media 15.6 % 11.8 % 10.1 % 10.8 % 11.3 %

Amusement 18.6 % 13.7 % 12.8 % 11.9 % 7.6 %

Other 8.0 % 3.1 % 2.7 % 2.6 % 2.5 %

Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Cineplex has four reportable segments, film entertainment and content, media, amusement and leisure and location-

based entertainment. The reportable segments are business units offering differing products and services and

managed separately due to their distinct natures. These four reportable segments have been determined by

Cineplex’s chief operating decision makers. The revenue mix percentages for the four reportable segments during

the year were materially impacted by the closures and reduced capacities of theatres and LBE locations as a result of

COVID-19.

Revenue mix % by year

Year to date

2020 2019

Film Entertainment and Content 64.0 % 72.8 %

Media 15.5 % 11.8 %

Amusement and Leisure 14.4 % 10.7 %

LBE 6.1 % 4.7 %

Total 100.0 % 100.0 %

A key component of Cineplex’s business strategy is to position itself as the leading exhibitor in the Canadian market

by focusing on providing customers with an exceptional entertainment experience. Box office revenues were

negatively impacted as a result of the negative economic effects of COVID-19. Cineplex optimized revenues in the

current period by offering a catalog of classic film products and expanding product offerings through the Cineplex

Store which saw significant growth in the period. In addition, as a result of Cineplex’s focus on diversifying the

business beyond the traditional movie exhibition model, its revenue mix has shifted from box office revenue to other

revenue sources.

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Management's Discussion and Analysis

The commercial appeal of the films and alternative content released during a given period, and the success of

marketing as well as promotion for those films by film studios, distributors and content providers all drive theatre

attendance. BPP is affected by the mix of film and alternative content product that appeals to certain audiences (such

as children or seniors who pay lower ticket prices), ticket prices during a given period and the appeal of premium

priced product available. While BPP is negatively impacted by the SCENE loyalty program and the Cineplex

Tuesdays program, these programs are designed to increase theatre attendance frequency at Cineplex’s theatres.

Cineplex’s main focus is to drive incremental visits to theatres, to employ a ticket price strategy which takes into

account the local demographics at each individual theatre and to maximize BPP through premium offerings.

Food service revenues are comprised primarily of concession revenues, arising from food and beverage sales at

theatre locations, as well as food and beverage sales at LBE venues including The Rec Room and Playdium. In

addition, food service revenues include home delivery serviced by Uber Eats and by Skip the Dishes. CPP represents

theatre food service revenues divided by theatre attendance, and is impacted by the theatre food service product mix,

theatre food service prices, film genre, promotions and the issuance and redemption of SCENE points on the

purchases of food and beverages at theatres. Films targeted to families and teenagers tend to result in a higher CPP

and more adult-oriented product tends to result in a lower CPP. As a result, CPP can fluctuate from quarter to

quarter depending on the genre of film product playing. The SCENE points issued and redeemed on theatre food

service purchases decreases food service revenues on individual purchases. Cineplex believes the program drives

incremental purchase incidence, increasing overall revenues. Cineplex focuses primarily on growing CPP by

optimizing the product offerings, improving operational excellence and strategic pricing to increase purchase

incidence and transaction value. Food service revenues from LBE include food and beverage revenues from the

various bars and restaurants located throughout the venues.

Media revenues include both cinema media (Cineplex Media) and digital place-based media (Cineplex Digital

Media) revenues. Cineplex Media generates revenues primarily from selling pre-show and show-time advertising in

Cineplex’s theatres as well as other circuits through representation sales agreements. Additionally, Cineplex Media

sells media placements throughout Cineplex’s circuit including digital poster cases, as well as sponsorship and

advertising in LBE venues. Cineplex Media also sells digital advertising for cineplex.com, the Cineplex mobile app

and on third party networks operated by Cineplex Digital Media. Cineplex Digital Media designs, installs, maintains

and operates digital signage networks in four verticals including digital out of home (in public spaces such as

shopping malls and office towers), quick service restaurants, financial institutions and retailers.

Amusement revenues include amusement solutions revenues from P1AG, which supplies and services all of the

games in Cineplex’s theatre circuit while also supplying equipment to third party arcades, amusement parks and

centres, bowling alleys and theatre circuits across Canada and the United States, in addition to owning and operating

family entertainment centres. Additionally, included in amusement revenues are revenues generated by Cineplex’s

XSCAPE Entertainment Centres and game rooms in theatres as well as revenues generated at LBE venues.

Cineplex generates other revenues from the Cineplex Store, promotional activities, screenings, private parties,

corporate events, breakage on gift card sales and revenues from management fees.

Cost of Sales and Expenses

Film cost represents the film rental fees paid to distributors on films exhibited in Cineplex theatres. Film costs are

calculated as a percentage of box office revenue and are dependent on various factors including the performance of

the film. Film costs are accrued on the related box office receipts at either mutually agreed-upon terms established

prior to the opening of the film, or estimated terms where a mutually agreed settlement is reached upon conclusion

of the film’s run, depending upon the film licensing arrangement. There can be significant variances in film cost

percentage between quarters due to, among other things, the concentration of box office revenues amongst the top

films in the period with stronger performing films having a higher film cost percentage.

Cost of food service represents the cost of concession items and other theatre food service items sold and varies with

changes in concession and other theatre food service revenues as well as the quantity and mix of concession and

other food service offerings sold. Cost of food and beverages sold at LBE is also included in cost of food service.

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Management's Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Depreciation - right-of-use assets, represents the depreciation of Cineplex’s right-of-use assets related to leases.

Depreciation is calculated on a straight-line basis from the date of commencement of the lease to the earlier of the

end of the useful life of the asset or the end of the lease term.

Depreciation and amortization - other, represents the depreciation and amortization of Cineplex’s property,

equipment and leaseholds, as well as certain of its intangible assets. Depreciation and amortization are calculated on

a straight-line basis over the useful lives of the assets.

(Gain) loss on disposal of assets represents the (gain) loss recognized on assets or components of assets that were

sold or otherwise disposed.

Other costs are comprised of theatre occupancy expenses, other operating expenses and general and administrative

expenses. These categories are described below.

Theatre occupancy expenses include lease related expenses, percentage rent, property related taxes, business related

taxes and insurance and exclude cash rent.

Other operating expenses consist of fixed and variable expenses, with the largest component being theatre salaries

and wages. Although theatre salaries and wages net of subsidies (CEWS) include a fixed cost component, these

expenses vary in relation to revenues as theatre staffing levels are adjusted to handle fluctuations in theatre

attendance. Other components of this category include marketing and advertising, media, amusement and leisure

(including P1AG and LBE), loyalty including SCENE, digital commerce, supplies and services, utilities and

maintenance. To the extent these costs are variable, they can be curtailed with changes in business volumes.

General and administrative expenses are primarily costs associated with managing Cineplex’s business, including

film buying, marketing and promotions, operations and theatre food service management, accounting and financial

reporting, legal, treasury, design and construction, real estate development, communications and investor relations,

information systems and administration. Included in these costs are payroll (including the Omnibus Incentive Plan

(“Incentive Plan”) costs), occupancy costs related to Cineplex’s corporate offices, professional fees (such as public

accountant and legal fees) and travel and related costs. Cineplex maintains general and administrative staffing and

associated costs at a level that it deems appropriate to manage and support the size and nature of its theatre portfolio

and its business activities. Many of these costs have been and can be further reduced as required by changes in

business volumes.

Accounting for Joint Arrangements

The financial statements incorporate the operating results of joint arrangements in which Cineplex has an interest

using either the equity accounting method (for joint ventures and associates) or recognizing Cineplex’s share of the

assets, liabilities, revenues and expenses in Cineplex’s consolidated results (for joint operations), as required by

GAAP.

Under IFRS 11, Cineplex’s 50% share of one IMAX auditorium in Ontario, its 78.2% interest in the Canadian

Digital Cinema Partnership (“CDCP”) and a 50% interest in YoYo’s Yogurt Cafe (“YoYo’s”) are classified as joint

ventures or associates. Through equity accounting, Cineplex’s share of the results of operations for these joint

ventures and associates are reported as a single item in the statements of operations, ‘Share of income of joint

ventures and associates’. Theatre attendance for the IMAX auditorium held in a joint venture is not reported in

Cineplex’s consolidated theatre attendance as the line-by-line results of the joint venture are not included in the

relevant lines in the statement of operations.

In the fourth quarter of 2020, Cineplex announced that it had entered into an agreement with Scotiabank to enhance

and expand the SCENE loyalty program. Cineplex received $60.0 million with respect to the agreement to

reorganize the program and reposition it for future growth. In conjunction with the agreement, Cineplex’s interest in

the operations of SCENE was reduced to 33.3%. Cineplex continues to have joint control of the joint operation and

is entitled to and responsible for 50% of the economic benefits and obligations until specific non-financial

milestones are met, resulting in the deferral of recognition of the proceeds in other liabilities, and the continued

consolidation of 50% of SCENE.

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Management’s Discussion and Analysis

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Management's Discussion and Analysis

5. RESULTS OF OPERATIONS

5.1 SELECTED FINANCIAL DATA

The following table presents summarized financial data for Cineplex for the three most recently completed financial

years (expressed in thousands of dollars except Shares outstanding, per Share data and per patron data, unless

otherwise noted):

Year ended

December 31,

2020

Year ended

December 31,

2019

Year ended

December 31,

2018

Box office revenues $ 132,820 $ 705,521 $ 724,244

Food service revenues 108,632 483,330 475,501

Media revenues 65,358 196,755 162,820

Amusement revenues 77,901 228,231 205,793

Other revenues 33,552 51,309 44,080

Total revenues 418,263 1,665,146 1,612,438

Film cost 66,922 369,386 379,325

Cost of food service 30,667 106,823 100,191

Depreciation - right-of-use assets 128,393 145,946 —

Depreciation and amortization - other assets 124,846 128,883 127,423

(Gain) loss on disposal of assets (13,101) 1,764 2,681

Other costs (a) 375,690 782,693 870,358

Impairment of long-lived assets and goodwill 294,863 — —

Costs of operations 1,008,280 1,535,495 1,479,978

Net (loss) income from continuing operations $ (624,001) $ 36,516 $ 85,459

Net loss from discontinued operations (4,952) (7,625) (8,503)

Net (loss) income $ (628,953) $ 28,891 $ 76,956

Adjusted EBITDA (i) (iii) $ (55,866) $ 405,786 $ 262,357

Adjusted EBITDAaL (i) (iii) $ (182,815) $ 230,546 $ 247,295

(a) Other costs include:

Theatre occupancy expenses 60,514 71,867 209,838

Other operating expenses 276,092 629,849 593,736

General and administrative expenses (iii) 39,084 80,977 66,783

Total other costs $ 375,690 $ 782,693 $ 870,357

Net (loss) income per share from continuing operations - basic and diluted (iii) $ (9.85) $ 0.58 $ 1.35

Net loss per share from discontinued operations - basic and diluted (0.08) (0.12) (0.13)

Net (loss) income per share - basic and diluted (iii) $ (9.93) $ 0.46 $ 1.22

Total assets $ 2,333,870 $ 3,100,412 $ 1,856,449

Total long-term financial liabilities (ii) $ 725,271 $ 625,000 $ 580,000

Shares outstanding at period end 63,333,238 63,333,238 63,333,238

Cash dividends declared per Share $ 0.150 $ 1.780 $ 1.720

Adjusted free cash flow per Share (i) $ (2.556) $ 2.660 $ 2.887

Box office revenue per patron (i) $ 10.17 $ 10.63 $ 10.46

Concession revenue per patron (i) $ 6.99 $ 6.73 $ 6.36

Film cost as a percentage of box office revenues 50.4% 52.4% 52.4%

Theatre attendance (in thousands of patrons) (i) 13,065 66,360 69,272

Theatre locations (at period end) 162 165 164

Theatre screens (at period end) 1,667 1,693 1,686

(i) See Section 18, Non-GAAP measures, for the definition of non-GAAP measures reported by Cineplex.

(ii) Represents the principal component of convertible debentures. Excludes share-based compensation, lease obligations, fair value of interest

rate swap agreements, post-employment benefit obligations and other liabilities.

(iii) 2020 includes expenses related to the Cineworld Transaction and resulting litigation in the amount of $4.1 million.

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

5.2 OPERATING RESULTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2020

Total revenues

Total revenues for the three months ended December 31, 2020 decreased $390.8 million (88.2%) to $52.5 million as

compared to the prior year period. Total revenues for the year ended December 31, 2020 decreased $1.2 billion

(74.9%) to $418.3 million as compared to the prior year. A discussion of the factors affecting the changes in box

office, food service, media, amusement and other revenues for the two periods is provided below.

Non-GAAP measures discussed throughout this MD&A, including adjusted EBITDA, adjusted EBITDAaL,

adjusted store level EBITDAaL, adjusted EBITDAaL margin, adjusted store level EBITDAaL margin, adjusted free

cash flow, theatre attendance, BPP, premium priced product, same theatre metrics, CPP, film cost percentage, food

service cost percentage and concession margin per patron are defined and discussed in Section 18, Non-GAAP

measures.

Box office revenues

The following table highlights the movement in box office revenues, theatre attendance and BPP for the quarter and

the full year (in thousands of dollars, except theatre attendance reported in thousands of patrons and per patron

amounts, unless otherwise noted):

Box office revenues Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Box office revenues $ 7,260 $ 181,789 -96.0 % $ 132,820 $ 705,521 -81.2 %

Theatre attendance (i) 786 16,849 -95.3 % 13,065 66,360 -80.3 %

Box office revenue per patron (i) $ 9.23 $ 10.79 -14.5 % $ 10.17 $ 10.63 -4.3 %

BPP excluding premium priced product (i) $ 8.61 $ 9.40 -8.4 % $ 9.18 $ 9.17 0.1 %

Same theatre box office revenues (i) 7,177 180,184 -96.0 % $ 130,124 $ 694,360 -81.3 %

Same theatre attendance (i) 778 16,686 -95.3 % 12,825 65,342 -80.4 %

% Total box from premium priced product (i) 19.1 % 38.7 % -19.6 % 28.1 % 41.7 % -13.6 %

(i) See Section 18, Non-GAAP measures.

Box office continuity Fourth Quarter Full Year

Box Office

Theatre

Attendance Box Office

Theatre

Attendance

2019 as reported $ 181,789 16,849 $ 705,521 66,360

Same theatre attendance change (171,789) (15,908) (558,074) (52,517)

Impact of same theatre BPP change (1,220)

—

(6,163) —

New and acquired theatres (i) (535) (45) (4,278) (299)

Disposed and closed theatres (i) (985) (110) (4,186) (479)

2020 as reported $ 7,260 786 $ 132,820 13,065

(i) See Section 18, Non-GAAP measures. Represents theatres opened, acquired, disposed or closed subsequent to the start of the prior year

comparative period.

Fourth Quarter and Full Year

Fourth Quarter 2020 Top Cineplex Films 3D % Box Fourth Quarter 2019 Top Cineplex Films 3D % Box

1 Honest Thief 11.9 % 1 Joker 15.4 %

2 Tenet 11.3 % 2 Frozen II

14.4 %

3 The War With Grandpa 10.3 % 3 Star Wars: The Rise Of Skywalker

13.9 %

4 The Croods: A New Age 7.6 % 4 Jumanji: The Next Level

7.3 %

5 100% Wolf 5.3 % 5 Maleficent: Mistress Of Evil

3.6 %

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Cineplex Inc.

Management's Discussion and Analysis

Full Year 2020 Top Cineplex Films 3D % Box Full Year 2019 Top Cineplex Films 3D % Box

1 1917 8.1 % 1 Avengers: Endgame

8.6 %

2 Star Wars: The Rise of Skywalker

7.7 % 2 The Lion King

4.7 %

3 Jumanji: The Next Level

7.6 % 3 Captain Marvel

4.3 %

4 Bad Boys For Life 7.2 % 4 Joker 4.0 %

5 Sonic The Hedgehog 5.4 % 5 Frozen II

3.7 %

Fourth Quarter and Full Year

Box office revenues decreased $174.5 million, or 96.0%, to $7.3 million during the fourth quarter of 2020,

compared to $181.8 million recorded in the same period in 2019. This decrease was due to a 95.3% decrease in

theatre attendance as a result of mandatory lockdown measures during the fourth quarter of 2020 in many provinces

in response to the second wave of rising COVID-19 infections, as well as reduced seating capacity restrictions in

venues that were open and limited first run film product.

BPP for the three months ended December 31, 2020 was $9.23, a $1.56 decrease from the prior year period as a

result of lower ticket pricing on classic film product, SCENE promotions and reduced premium offerings.

Box office revenues for the year ended December 31, 2020 were $132.8 million, a decrease of $572.7 million or

81.2% from the prior year. The decrease in box office revenues was primarily due to a 80.3% decrease in theatre

attendance as a result of the negative impact of COVID-19 government mandated restrictions that have kept a

theatres closed or operating below full capacity for a majority of the year.

Cineplex’s BPP for the year ended December 31, 2020 decreased $0.46, or 4.3%, from $10.63 in 2019 to $10.17 in

2020. This decrease was primarily due to lower ticket pricing on previously released content with limited new film

releases during the year as a distributors have continued to push their film slates further out in the calendar and into

2021.

Food service revenues

The following table highlights the movement in food service revenues, theatre attendance and CPP for the quarter

and the full year (in thousands of dollars, except theatre attendance and same store attendance reported in thousands

of patrons and per patron amounts):

Food service revenues Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Food service - theatres $ 7,122 $ 114,678 -93.8 % $ 91,384 $ 446,639 -79.5 %

Food delivery - theatres 2,660

—

NM 8,175 — NM

Food service - LBE 632 10,481 -94.0 % $ 8,882 36,691 -75.8 %

Food delivery - LBE 129 — NM 191 — NM

Total food service revenues $ 10,543 $ 125,159 -91.6 % $ 108,632 $ 483,330 -77.5 %

Theatre attendance (i) 786 16,849 -95.3 % 13,065 66,360 -80.3 %

CPP (i) (ii) $ 9.06 $ 6.81 33.0 % $ 6.99 $ 6.73 3.9 %

Same theatre food service revenues (i) $ 7,131 $ 113,706 -93.7 % $ 89,282 $ 439,444 -79.7 %

Same theatre attendance (i) 778 16,686 -95.3 % 12,825 65,342 -80.4 %

(i) See Section 18, Non-GAAP Measures.

(ii) Food service revenue from LBE and delivery is not included in the CPP calculation.

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Management’s Discussion and Analysis

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Theatre food service revenue continuity Fourth Quarter Full Year

Theatre Food

Service

Theatre

Attendance

Theatre Food

Service

Theatre

Attendance

2019 as reported $ 114,678 16,849 $ 446,639 66,360

Same theatre attendance change (111,112) (15,908) (361,365) (52,517)

Impact of same theatre CPP change 4,444 — 11,205 —

New and acquired theatres (i) (293) (45) (2,462) (299)

Disposed and closed theatres (i) (595) (110) (2,633) (479)

2020 as reported $ 7,122 786 $ 91,384 13,065

(i) See Section 18, Non-GAAP measures. Represents theatres opened, acquired, disposed or closed subsequent to the start of the prior year

comparative period.

Fourth Quarter and Full Year

Food service revenues are comprised primarily of concession revenues, which includes food service sales at theatre

locations and through delivery services including Uber Eats and Skip the Dishes. Food service revenues also include

food and beverage sales at LBE venues, The Rec Room and Playdium.

Food services revenues were materially impacted by the government mandated capacity restrictions and closures of

theatres and LBE venues as a result of COVID-19. Food delivery sales continue to produce strong results with

quarterly revenues of $2.8 million. Theatre food service revenues decreased $107.6 million (93.8%) as compared to

the prior year period to $7.1 million.

CPP increased 33.0% as compared to the prior year period to $9.06 from $6.81. The increase in CPP compared to

the prior period is largely attributable to increased concession purchases as a result of customers excited to return to

the theatre incurring a higher spend per visit in addition to a higher percentage of theatres open in provinces that

historically have a higher CPP.

Annual food service revenues decreased $374.7 million, or 77.5% as compared to the prior year to $108.6 million,

due to impact of COVID-19 on its business. Cineplex continued to provide home delivery services through Uber

Eats and Skip the Dishes and reported revenues of $8.4 million.

Media revenues

The following table highlights the movement in media revenues for the quarter and the full year (in thousands of

dollars):

Media revenues Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Cinema media $ 1,368 $ 42,171 -96.8 % $ 23,568 $ 115,415 -79.6 %

Digital place-based media 11,128 27,374 -59.3 % 41,790 81,340 -48.6 %

Total media revenues from continuing operations $ 12,496 $ 69,545 -82.0 % $ 65,358 $ 196,755 -66.8 %

Media revenues from discontinued operations — 248 -100.0 % 602 1,075 -44.0 %

Total media revenues $ 12,496 $ 69,793 -82.1 % $ 65,960 $ 197,830 -66.7 %

Fourth Quarter and Full Year

Total media revenues from continuing operations decreased 82.0% to $12.5 million in the fourth quarter of 2020

compared to the prior year period. This decrease was due to a $40.8 million decrease in cinema media and

$16.2 million decrease in digital place-based media. The second wave of rising COVID-19 infections during the

fourth quarter further prolonged the closure of theatres leading to a sharp decline in pre-show and show-time

revenues which have historically provided strong results during the holiday season. Further, re-imposed mandatory

lockdown measures during the fourth quarter kept many malls and restaurants closed for a majority of the quarter

leading to a decline in installation and digital advertising revenues.

Total media revenues from continuing operations decreased $131.4 million, or 66.8%, in the year ended December

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Management’s Discussion and Analysis

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Cineplex Inc.

Management's Discussion and Analysis

31, 2020 compared to the prior year to $65.4 million. This decrease was due to a $91.8 million decrease in cinema

media revenue primarily as a result of a decrease in pre-show advertising and show time advertising revenue due to

theatre closures and limited first run film product available. In addition, digital place-based media decreased $39.6

million as compared to the prior period. The decrease compared to the prior period is primarily attributable to a

decrease in media hardware sales, and digital media revenue as a result of mall and theatre closures that have

remained in effect for a majority of the year due to the COVID-19 pandemic.

The following table shows a breakdown of the nature of digital place-based media revenues for the quarter and the

full year (in thousands of dollars):

Digital place-based media revenues Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Project revenues (i) $ 1,972 $ 14,189 -86.1 % $ 11,066 $ 39,943 -72.3 %

Other revenues (ii) 9,156 13,185 -30.6 % 30,724 41,397 -25.8 %

Total digital place-based media revenues $ 11,128 $ 27,374 -59.3 % $ 41,790 $ 81,340 -48.6 %

(i) Project revenues include hardware sales and professional services.

(ii) Other revenues include sales of software and its support as well as media advertising.

Amusement revenues

The following table highlights the movement in amusement revenues for the quarter and the full year (in thousands

of dollars):

Amusement revenues Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Amusement - P1AG excluding Cineplex exhibition and

LBE (i) $ 11,815 $ 39,931 -70.4 % $ 60,027 $ 178,209 -66.3 %

Amusement - Cineplex exhibition (i) 130 2,668 -95.1 % 2,457 10,907 -77.5 %

Amusement - LBE 1,652 10,872 -84.8 % 15,417 39,115 -60.6 %

Total amusement revenues $ 13,597 $ 53,471 -74.6 % $ 77,901 $ 228,231 -65.9 %

(i) Cineplex receives a venue revenue share on games revenues earned at in-theatre game rooms and XSCAPE Entertainment Centres.

Amusement - Cineplex exhibition reports the total of this venue revenue share which is consistent with the historical presentation of Cineplex’s

amusement revenues. Amusement - P1AG excluding Cineplex exhibition and LBE reflects P1AG’s gross amusement revenues, net of the venue

revenue share paid to Cineplex reflected in Amusement - Cineplex exhibition above.

Fourth Quarter and Full Year

Amusement revenues decreased $39.9 million (74.6%) to $13.6 million during the quarter compared to the prior

year period. For the full year period, amusement revenues decreased by $150.3 million (65.9%) to $77.9 million.

The quarterly and full year decrease in revenue was primarily due to the government mandated closures of P1AG

route locations, Cineplex theatres and LBE venues due to COVID-19 implemented throughout the second to fourth

quarters.

The following table presents the adjusted EBITDAaL for the quarter and the full year for P1AG (in thousands of

dollars):

P1AG Summary Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Amusement revenues $ 11,815 $ 39,931 -70.4 % $ 60,027 $ 178,209 -66.3 %

Operating Expenses 14,900 35,275 -57.8 % 69,216 150,615 -54.0 %

Cash rent related to lease obligations (i) 594 1,543 -61.5 % 2,422 6,072 -60.1 %

Total adjusted operating expenses $ 15,494 $ 36,818 -57.9 % $ 71,638 $ 156,687 -54.3 %

P1AG adjusted EBITDAaL (ii) $ (3,679) $ 3,113 NM $ (11,611) $ 21,522 NM

P1AG adjusted EBITDAaL Margin (ii) (31.1) % 7.8 % -38.9 % (19.3) % 12.1 % -31.4 %

(i) Cash rent that has been reallocated to offset the lease obligations.

(ii) See Section 18, Non-GAAP measures.

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Management’s Discussion and Analysis

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Mandatory closures of P1AG route locations as well as increased operating restrictions beginning in March 2020

due to rising COVID-19 cases resulted in decreased margins for the fourth quarter and full year when compared to

the prior year periods. Certain operating expenses such as, salaries, rent, and utilities are fixed in nature, which also

contributed to the lower adjusted EBITDAaL margin. Payroll costs were reduced by $0.7 million received under the

COVID-19 CEWS wage subsidy program during the quarter and $4.6 million for the full year. Cash rent related to

lease obligations decreased as a result of rent abatements negotiated with landlords.

The following table presents the adjusted store level EBITDAaL for the quarter and the full year for LBE (in

thousands of dollars):

LBE Summary Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Food service revenues $ 761 $ 10,481 -92.7 % $ 9,073 $ 36,691 (75.3) %

Amusement revenues $ 1,652 10,872 -84.8 % 15,417 39,115 (60.6) %

Media and other revenues 78 911 -91.4 % 1,040 3,391 (69.3) %

Total revenues $ 2,491 $ 22,264 -88.8 % $ 25,530 $ 79,197 (67.8) %

Cost of food service 285 2,478 -88.5 % 2,822 9,517 -70.3 %

Operating expenses before adjustments (i) 3,057 13,127 -76.7 % 21,258 47,392 -55.1 %

Cash rent related to lease obligations (ii) 1,979 1,564 26.5 % 5,473 5,718 -4.3 %

Total adjusted costs $ 5,321 $ 17,169 -69.0 % $ 29,553 $ 62,627 -52.8 %

Adjusted store level EBITDAaL (iii) $ (2,830) $ 5,095 NM $ (4,023) $ 16,570 NM

Adjusted store level EBITDAaL Margin (iii) (113.6) % 22.9 % (136.5) % (15.8) % 20.9 % (36.7) %

(i) Includes operating costs of LBE. Pre-opening costs relating to LBE and overhead relating to management of LBE portfolio are not included.

(ii) Cash rent that has been reallocated to offset the lease obligations.

(iii) See Section 18, Non-GAAP measures.

Negative operating margins in the fourth quarter and annual period compared to the prior year periods are due to

operating restrictions and mandatory closures that have kept LBE locations with limited operations or closed for a

majority of the year. In addition, operating restrictions as a result of COVID-19 have resulted in limited corporate

events at LBE locations which have historically resulted in higher margins. Certain fixed costs such as salaries and

rent are fixed in nature contributing to lower margins. Payroll costs were partially offset by $1.1 million and $3.6

million government wage subsidies recognized during the quarter and full year, respectively.

Other revenues

The following table highlights the other revenues which includes revenues from the Cineplex Store, promotional

activities, screenings, private parties, corporate events, breakage on gift card sales and revenues from management

fees for the quarter and the full year (in thousands of dollars):

Other revenues Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Other revenues from continuing operations $ 8,556 $ 13,256 -35.5 % $ 33,552 $ 51,309 -34.6 %

Other revenues from discontinued operations — — NM 199 16 NM

Total other revenues $ 8,556 $ 13,256 -35.5 % $ 33,751 $ 51,325 -34.2 %

Fourth Quarter and Full Year

The quarterly and annual decreases in other revenues from continuing operations were primarily due to the

suspension of the recognition of deferred revenues on gift card and other related products during the shutdown of

theatre and LBE venues. In addition, the shutdown reduced other ancillary revenues generated from theatres, such as

venue rentals. This decrease was partially offset by higher sales from Cineplex Store during the year resulting from

the widespread closures and lockdowns across all businesses and the strength of PVOD titles including Wonder

Woman 1984.

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Management’s Discussion and Analysis

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Cineplex Inc.

Management's Discussion and Analysis

Film cost

The following table highlights the movement in film cost and the film cost percentage for the quarter and the full

year (in thousands of dollars, except film cost percentage):

Film cost Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Film cost $ 3,151 $ 93,925 -96.6 % $ 66,922 $ 369,386 -81.9 %

Film cost percentage (i) 43.4 % 51.7 % -8.3 % 50.4 % 52.4 % -2.0 %

(i) See Section 18, Non-GAAP measures.

Fourth Quarter and Full Year

Film cost varies primarily with box office revenues, and can vary from quarter to quarter usually based on the

relative strength of the titles exhibited during the period, impacted by film cost terms varying by title and distributor.

Film costs decreased during the fourth quarter and annual period due to limited releases of first run product and

lower settlement rates on older and classic film products. Due to the ongoing pandemic, major distributors have

continued to delay films which were initially scheduled to release in 2020 further into 2021 and beyond or have

released via other platforms.

Cost of food service

The following table highlights the movement in cost of food service and food service cost as a percentage of food

service revenues (“concession cost percentage”) for both theatres and LBE for the quarter and the full year (in

thousands of dollars, except percentages and margins per patron):

Cost of food service Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Cost of food service - theatre $ 3,704 $ 25,223 -85.3 % $ 27,845 $ 97,306 -71.4 %

Cost of food service - LBE 285 2,478 -88.5 % 2,822 9,517 -70.3 %

Total cost of food service $ 3,989 $ 27,701 -85.6 % $ 30,667 $ 106,823 -71.3 %

Theatre concession cost percentage (i) 37.9 % 22.0 % 15.9 % 28.0 % 21.8 % 6.2 %

LBE food cost percentage (i) 37.4 % 23.6 % 13.8 % 31.1 % 25.9 % 5.2 %

Theatre concession margin per patron (i) $ 5.63 $ 5.31 6.0 % $ 5.04 $ 5.26 -4.2 %

(i) See Section 18, Non-GAAP measures.

Fourth Quarter and Full Year

Cost of food service at the theatres varies primarily with theatre attendance as well as the quantity and mix of

offerings sold. Cost of food service at LBE venues varies primarily with the volume of guests who visit the locations

as well as the quantity and mix between food and beverage items sold. The increase in theatre and LBE food cost

percentages as compared to the prior period is primarily due to increases in prepackaged products associated with

food delivery services, and a decrease in groups and events bookings which have historically reduced the average

cost of food purchases and increased reserves taken for perishable concession items as a result of year end closures.

Decreases in cost of food service for both segments are primarily attributable to the temporary capacity restrictions

and mandated closures at Cineplex’s theatres and LBE locations. Cineplex opened a limited number of theatres and

LBE locations, which were then subsequently closed as several provinces across Canada experienced a surge in

COVID-19 cases during the fourth quarter, further limiting the reopening phase of theatre circuits. Increases in

theatre and LBE food cost percentages were primarily due to lower volumes of foods sales, and increased reserves

taken on perishable concession items as a result of year end closures after limited openings during the summer and

fall periods.

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Management’s Discussion and Analysis

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Depreciation and amortization

The following table highlights the movement in depreciation and amortization expenses during the quarter and the

full year (in thousands of dollars):

Depreciation and amortization expenses Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Depreciation of property, equipment and leaseholds $ 27,043 $ 29,967 -9.8 % $ 113,346 $ 116,911 -3.0 %

Amortization of intangible assets and other 1,707 3,168 -46.1 % 11,500 11,972 -3.9 %

Sub-total - depreciation and amortization - other assets $ 28,750 $ 33,135 -13.2 % $ 124,846 $ 128,883 -3.1 %

Depreciation - right-of-use assets 28,136 36,471 -22.9 % 128,393 145,946 -12.0 %

Total depreciation and amortization from continuing

operations $ 56,886 $ 69,606 -18.3 % $ 253,239 $ 274,829 -7.9 %

Depreciation and amortization from discontinued

operations — — NM — 3,623 -100.0 %

Total depreciation and amortization $ 56,886 $ 69,606 -18.3 % $ 253,239 $ 278,452 -9.1 %

Fourth Quarter and Full Year

Depreciation of property, equipment and leaseholds from continuing operations decreased by $2.9 million, or 9.8%

during the quarter compared to the prior year period, and by $3.6 million or 3.0% for the year compared to the prior

year period. The decrease was due to the impact of the impairment recorded in the first quarter of 2020 on the

carrying amount of long-lived assets.

The quarterly and annual amortization of intangible assets and other from continuing operations decreased as

compared to the prior year periods as a result of fully depreciated intangible assets.

The quarterly and annual decrease in depreciation of right-of-use assets from continuing operations was due to

reduced carrying values resulting from the impairment recorded in the first quarter of 2020 in addition to

modifications to lease agreements related to COVID-19 that reduced the carrying value of these assets.

Impairment of long-lived assets, goodwill and investments

The following table highlights the movement in impairment of long-lived assets, goodwill and investments during

the quarter and the full year (in thousands of dollars):

Impairment of long-lived assets, goodwill and

investments

Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Impairment of property, equipment and leaseholds $ (5,243) $ — NM $ (39,192) $ — NM

Impairment of right-of-use assets (21,236) — NM (71,846) — NM

Impairment of goodwill (26,906) — NM (181,035) — NM

Impairment of investments (2,790) — NM (2,790) — NM

Impairment of long-lived assets, goodwill and investments $ (56,175) $ — NM $ (294,863) $ — NM

Fourth Quarter and Full Year

With the closure of its operations on March 16, 2020 as a result of the declaration of a global pandemic, and the

ensuing negative impact on Cineplex’s businesses throughout the remainder of the year, triggering events for

purposes of testing long-lived assets and goodwill for impairment occurred at each quarter end.

At each of March 31st and September 30th carrying values of assets were tested for recoverability measured as the

fair value based on internal budgets which reflected the negative impact of the COVID-19 pandemic on Cineplex’s

current and future results. Where the carrying value of assets were assessed as exceeding the recoverable value of

those assets at those points in time, impairments were recognized. As at June 30th, management determined that

there were no material changes in key judgements or assumptions from those determined as at March 31st and

therefore concluded that there was no impairment as at June 30th.

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Management’s Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex Inc.

Management's Discussion and Analysis

In addition to its required annual testing for impairment of goodwill and indefinite-lived intangible assets in the

fourth quarter, the closure of most theatre and location-based entertainment operations resulted in further decreases

in revenues, results of operations and cash flows which represented an indicator to trigger impairment testing for

both long-lived assets and goodwill at December 31, 2020. Based on the results of the impairment tests, Cineplex

recognized non-cash impairment charges of $53.4 million ($26.9 million to goodwill and $26.5 million to tangible

and right-of-use assets) for the three months ended December 31, 2020 and $292.1 million ($181.0 million to

goodwill and $111.1 million to tangible and right-of-use assets) for the full year.

Where an impairment has been recorded with respect to a long-lived asset, it will be reversed when and if the

recoverable value of the related asset increases. Management will monitor and re-assess the recoverable value of the

impaired assets, reversing the impairments where it increases. Impairments recorded with respect to goodwill cannot

be reversed.

If the return to business continues to be delayed as a result of actions outside of the control of management,

including but not limited to additional changes to the film slate release schedule, ongoing government restrictions

impacting the re-opening of entertainment venues and delays in the vaccine roll out, management's estimates of

operating results and further cash flows for the forecasted period may be negatively impacted. As a result, they may

be insufficient to support the recoverability of goodwill and long lived assets in certain CGUs, thus requiring further

impairment charges. Cineplex will continue to evaluate the recoverability of goodwill at the cash generating unit

level on an annual basis during its fourth quarter and whenever events or changes in circumstances indicate there

may be a potential impairment.

During the quarter, Cineplex assessed the recoverability of its investment in VR Studios Inc. and recognized

impairment of $2.8 million, reducing the carrying value of its investment to $nil.

Impairment of intangible assets - discontinued operations

The following table highlights the movement in impairment of intangible assets - discontinued operations during the

quarter and the full year (in thousands of dollars):

Impairment of intangible assets - discontinued

operations

Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Impairment of intangible assets - discontinued operations $ — $ — NM $ 5,156 $ — NM

Intangible assets included in assets held for sale were written down prior to disposition to reflect their expected net

realizable value.

(Gain) loss on disposal of assets

The following table shows the movement in the loss on disposal of assets during the quarter and the full year (in

thousands of dollars):

(Gain) loss on disposal of assets Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

(Gain) loss on disposal from continuing operations $ (283) $ 868 NM $ (13,101) $ 1,764 NM

Loss on disposal from discontinued operations — — NM 129 — NM

(Gain) loss on disposal of assets $ (283) $ 868 NM $ (12,972) $ 1,764 NM

The quarterly and annual movements in (gain) loss on disposal of assets from continuing operations as compared to

the prior year periods were due mainly to the negotiated sale of certain restrictive lease rights completed during the

third quarter.

Other costs

Other costs include three main sub-categories of expenses; theatre occupancy expenses, which capture the rent and

associated occupancy costs for Cineplex’s theatre operations; other operating expenses, which include the costs

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Management's Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

related to running Cineplex’s film entertainment and content, media, as well as amusement and leisure; and general

and administrative expenses, which include costs related to managing Cineplex’s operations, including head office

expenses. Please see the discussions below for more details on these categories. The following table highlights the

movement in other costs for the quarter and the full year (in thousands of dollars):

Other costs Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Theatre occupancy expenses $ 9,891 $ 18,493 -46.5 % $ 60,514 $ 71,867 -15.8 %

Other operating expenses 55,567 167,416 -66.8 % 276,092 629,849 -56.2 %

General and administrative expenses 11,755 29,014 -59.5 % 39,084 80,977 -51.7 %

Total other costs from continuing operations $ 77,213 $ 214,923 -64.1 % $ 375,690 $ 782,693 -52.0 %

Other costs from discontinued operations — 1,471 NM 2,212 7,001 -68.4 %

Total other costs $ 77,213 $ 216,394 -64.3 % $ 377,902 $ 789,694 -52.1 %

Theatre occupancy expenses

The following table highlights the movement in theatre occupancy expenses for the quarter and the full year (in

thousands of dollars):

Theatre occupancy expenses Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Cash rent paid/payable (i) $ 23,727 $ 39,042 -39.2 % $ 109,161 $ 156,921 -30.4 %

Other occupancy 12,820 18,545 -30.9 % 65,545 73,736 -11.1 %

One-time items (ii) (169) (62) NM (2,108) (2,275) -7.3 %

Total theatre occupancy including cash lease payments $ 36,378 $ 57,525 -36.8 % $ 172,598 $ 228,382 -24.4 %

Cash rent paid/payable related to lease obligations (iii) (26,487) (39,032) -32.1 % (112,084) (156,515) -28.4 %

Theatre occupancy as reported $ 9,891 $ 18,493 -46.5 % $ 60,514 $ 71,867 -15.8 %

(i) Represents the cash payments for theatre rent paid or payable during the quarter.

(ii) One-time items include amounts related to both theatre rent and other theatre occupancy costs. They are isolated here to illustrate

Cineplex’s theatre rent and other theatre occupancy costs excluding these one-time, non-recurring items.

(iii) Cash rent paid/payable that has been reallocated to offset the lease obligations.

Theatre occupancy continuity Fourth Quarter Full Year

Occupancy Occupancy

2019 as reported $ 18,493 $ 71,867

Impact of new and acquired theatres (20) 580

Impact of disposed theatres (251) (1,241)

Same store rent change (i) (15,094) (44,623)

One-time items (107) 167

Other (5,675) (10,667)

Impact of IFRS 16 adoption:

Cash rent related to lease obligations 12,545 44,431

2020 as reported $ 9,891 $ 60,514

(i) See Section 18, Non-GAAP measures.

Fourth Quarter

Theatre occupancy expenses decreased $8.6 million during the fourth quarter of 2020 compared to the prior year

period. This decrease was primarily due to the rent relief measures Cineplex has undertaken with landlord partners

resulting in lower theatre rent related expense including common area maintenance and taxes as compared to the

prior year period. In addition, the decrease compared to the prior period can be attributed to rent and realty tax

subsidies totaling $2.8 million and $3.2 million, of which $2.7 million and $2.9 million were offset against theatre

occupancy costs during the period, respectively.

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Cineplex Inc.

Management's Discussion and Analysis

Full Year

The decrease in theatre occupancy expenses of $11.4 million for the 2020 year compared the prior year was mainly

due to lower theatre rent related expense including common area maintenance and taxes as compared to the prior

year period, net of rent and realty tax subsidies received.

Other operating expenses

The following table highlights the movement in other operating expenses during the quarter and the full year (in

thousands of dollars):

Other operating expenses Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Theatre payroll $ 5,157 $ 41,925 -87.7 % $ 40,689 $ 160,593 -74.7 %

Theatre operating expenses 12,717 32,986 -61.4 % 61,359 121,833 -49.6 %

Media 8,513 27,762 -69.3 % 42,913 88,621 -51.6 %

P1AG 15,494 36,818 -57.9 % 71,638 156,687 -54.3 %

LBE (i) 5,037 14,692 -65.7 % 26,731 53,110 -49.7 %

LBE pre-opening (ii) 785 603 30.3 % 1,907 2,447 -22.1 %

SCENE 4,890 2,470 98.0 % 13,423 15,549 -13.7 %

Marketing 2,136 5,128 -58.3 % 7,223 16,254 -55.6 %

Other (iii) 5,093 9,686 -47.4 24,389 32,879 -25.8 %

Other operating expenses including cash lease payments $ 59,822 $ 172,070 -65.2 % $ 290,272 $ 647,973 -55.2 %

Cash rent paid/payable related to lease obligations (iv) (4,255) (4,654) -8.6 % (14,180) (18,124) -21.8 %

Other operating expenses from continuing operations $ 55,567 $ 167,416 -66.8 % $ 276,092 $ 629,849 -56.2 %

Other operating expenses from discontinued operations — 1,471 NM 2,212 7,001 -68.4 %

Total other operating expenses $ 55,567 $ 168,887 -67.1 % $ 278,304 $ 636,850 -56.3 %

(i) Includes operating costs of LBE locations. Overhead relating to management of LBE portfolio are included in the ‘Other’ line.

(ii) Includes pre-opening costs of LBE.

(iii) Other category includes overhead costs related to LBE and other Cineplex internal departments.

(iv) Cash rent paid/payable that has been reallocated to offset the lease obligations.

Other operating continuity from continuing operations Fourth Quarter Full Year

Other Operating Other Operating

2019 as restated $ 167,416 $ 629,849

Impact of new and acquired theatres (166) (1,182)

Impact of disposed theatres (535) (1,953)

Same theatre payroll change (i) (36,233) (117,621)

Same theatre operating expenses change (i) (20,102) (59,626)

Media operating expenses change (19,249) (45,708)

P1AG operating expenses change (21,324) (85,049)

LBE operating expenses change (9,655) (26,379)

LBE pre-opening change 182 (540)

SCENE change 2,420 (2,126)

Marketing change (2,992) (9,031)

Other (4,594) (8,486)

Impact of IFRS 16 adoption:

Cash rent related to lease obligations $ 399 $ 3,944

2020 as reported $ 55,567 $ 276,092

(i) See Section 18, Non-GAAP measures.

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Fourth Quarter

The overall decrease in other operating expenses was a result of the restricted operations and temporary closures of

theatres, LBE locations and P1AG route locations and the resulting impact on all other parts of the business. In

managing its costs, Cineplex benefited from government subsidy programs in Canada and the United States. During

the fourth quarter, Cineplex recognized $14.3 million in payroll subsidies, with $6.9 million offsetting theatre

payroll and additionally $1.8 million offsetting utilities.

Full Year

The overall decrease in other operating expenses was as a result of the temporary closure of theatres, LBE locations

and P1AG route locations leading to a decrease in business volumes. Rising COVID-19 cases during the fall months

resulted in delayed rollouts of re-openings and limited operating capacity on locations permitted to remain open.

General and administrative expenses

The following table highlights the movement in general and administrative (“G&A”) expenses during the quarter

and the full year, including share-based compensation costs, and G&A net of these costs (in thousands of dollars):

G&A expenses Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

G&A excluding the following items $ 7,261 $ 16,403 -55.7 % $ 43,717 $ 64,108 -31.8 %

Restructuring 2,396 189 NM 8,258 1,078 NM

Transaction / Litigation costs 1,279 11,711 -89.1 % 4,101 11,711 -65.0 %

LTIP (i) 248 466 NM (15,104) 3,076 NM

Option plan 718 407 76.4 % (1,203) 1,605 NM

G&A expenses including cash lease payments $ 11,902 $ 29,176 -59.2 % $ 39,769 $ 81,578 -51.3 %

Cash rent paid/payable included as part of lease obligations

(ii) (147) (162) -9.3 % (685) (601) 14.0 %

G&A expenses as reported $ 11,755 $ 29,014 -59.5 % $ 39,084 $ 80,977 -51.7 %

(i) LTIP includes the expense for RSUs and PSUs, as well as the expense for the executive and Board deferred share unit plans.

(ii) Cash rent paid/payable that has been reallocated to offset the lease obligations.

Fourth Quarter and Full Year

G&A expenses decreased $17.3 million during the fourth quarter of 2020 compared to the prior year period. This

was primarily due to a $9.1 million decrease in G&A excluding LTIP costs as a result of the $2.3 million received

under the COVID-19 CEWS wage subsidy program, and $10.4 million decrease in Cineworld Transaction related

costs as compared to the prior period. These savings were partially offset by costs of $2.4 million arising from a cost

restructuring program implemented in the third quarter.

G&A expenses for 2020 decreased $41.9 million (51.7%) as compared to the prior year. The decrease is due to a

$26.6 million decrease in Incentive Plan expenses, $8.4 million of which was included in the $11.7 million

Cineworld Transaction costs, a $2.8 million decrease in option plan expense and the $9.4 million received under the

COVID-19 CEWS wage subsidy program that was recorded against payroll costs. Additionally, payroll costs were

reduced mainly due to voluntary salary reductions for full-time employees. With the termination of the Arrangement

Agreement, Share options have been reclassified to being accounted for as equity-settled and equity instruments

issued under the previous Long-Term Incentive Plan have been accounted for over their original vesting periods

(prior to the Arrangement Agreement). These savings were partially offset by an increase in restructuring costs of

$7.2 million compared to the prior period.

Share of loss (income) of joint ventures and associates

Cineplex’s joint ventures and associates include its 78.2% interest in CDCP (2019 - 78.2%), 50% interest in one

IMAX screen in Ontario (2019 - 50%), 50% interest in YoYo’s and 34.7% interest in VRStudios (2019 - 34.7%).

Cineplex Inc.

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Cineplex Inc.

Management's Discussion and Analysis

The following table highlights the components of share of income of joint ventures and associates during the quarter

and the full year (in thousands of dollars):

Share of income of joint ventures and associates Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Share of loss (income) of CDCP $ 2,085 $ (1,803) NM $ 7,279 $ (4,827) NM

Share of loss of other joint ventures and associates 260 206 26.2 % 1,130 658 71.7 %

Total loss (income) of joint ventures and associates $ 2,345 $ (1,597) NM $ 8,409 $ (4,169) NM

CDCP revenues were negatively impacted by the temporary closures of theatres from March with limited reopenings

in the third quarter during the quarter with a slow rollout and a limited number of first-run movies, resulting in a

$3.9 million decrease in share of loss (income) from CDCP for the quarter and $12.6 million decrease for the full

year. In the fourth quarter of 2020, Cineplex assessed the recoverability of its investment in VRStudios Inc. and

recognized an impairment loss of $2,790, reducing the carrying value to nil.

Interest expense

The following table highlights the movement in interest expense during the quarter and full year (in thousands of

dollars):

Interest expense

Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Long-term debt interest expense $ 8,128 $ 6,693 21.4 % $ 30,026 $ 25,487 17.8 %

Financing fees 700 — NM 1,500 — NM

Convertible debenture interest expense 4,584 — NM 8,459 — NM

Sub-total - long-term debt interest expense $ 13,412 $ 6,693 NM $ 39,985 $ 25,487 56.9 %

Lease interest expense (i) 13,858 11,497 20.5 % 47,794 47,018 1.7 %

Sub-total - cash interest expense $ 27,270 $ 18,190 49.9 % $ 87,779 $ 72,505 21.1 %

Deferred financing fee accretion and other non-cash

interest, net 368 408 -9.8 % 1,396 1,745 -20.0 %

Convertible debenture accretion 3,428 — NM 7,471 — NM

Interest rate swap - non-cash 2,509 11,891 -78.9 % 13,922 10,472 32.9 %

Sub-total - non-cash interest expense 6,305 12,299 -48.7 % 22,789 12,217 86.5 %

Total interest expense $ 33,575 $ 30,489 10.1 % $ 110,568 $ 84,722 30.5 %

(i) See Section 13, Accounting policies.

Interest expense increased $3.1 million for the quarter and increased $25.8 million during for the full year as

compared to the prior year periods. The increase in the fourth quarter compared to the prior period is due to the

increases in cash interest of $9.1 million, and non-cash interest of $3.4 million relating to the issuance of the

Debentures, partially offset by a $9.4 million decrease in non-cash interest relating to the interest rate swap. The

increase in interest expense for the annual period as compared to the prior year period is due to a $15.3 million

increase in cash interest and a $10.6 million increase in non-cash interest which is primarily as a result of the

issuance of the Debentures. For both the fourth quarter and annual period, the increase in cash interest was primarily

due to increased borrowing on Cineplex’s revolving credit facility (see Section 7.4, Credit Facilities), in addition to

interest incurred as a result of the issuance of the Debentures on July 15, 2020 (see Section 9.1, Convertible

debentures).

Non-cash interest decreased in the quarter which was mainly due to the decrease in non-cash interest relating to the

interest rate swaps which are being accounted for without hedge accounting. The increase in non-cash interest for

the full year is mainly due to accretion expense arising on the issuance of the Debentures. The change in fair value

of the interest rate swaps has been recorded in the statement of operations as of December 31, 2019 as a result of

terms of the Arrangement Agreement. The termination of the Arrangement Agreement does not change accounting

treatment as the swaps require re-designation on a prospective basis to qualify for hedge accounting.

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Management’s Discussion and Analysis

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Interest income

Interest income during the fourth quarter and the full year was as follows (in thousands of dollars):

Interest income Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Interest income $ 33 $ 44 -25.0 % $ 182 $ 252 -27.8 %

Foreign exchange

The following table highlights the movement in foreign exchange during the quarter and the full year (in thousands

of dollars):

Foreign exchange Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Foreign exchange loss (gain) from continuing operations $ 759 $ 496 53.0 % $ 57 $ 1,065 -94.6

Foreign exchange loss (gain) from discontinued operations — 82 NM (117) 268 NM

Total foreign exchange loss (gain) $ 759 $ 578 31.3 % $ (60) $ 1,333 NM

The movement in the quarterly and full year foreign exchange was due to the change in the CAD/USD foreign

exchange month end rate from 1.3339 at September 30, 2020 and 1.2988 at December 31, 2019 to 1.2732 at

December 31, 2020.

Income taxes

The following table highlights the movement in current and deferred income tax expense during the quarter and the

full year (in thousands of dollars):

Income taxes Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Current income tax expense (recovery) $ (65,776) $ 5,414 NM $ (73,495) $ 21,759 NM

Deferred income tax expense (recovery) 114,854 (3,228) NM (11,373) (9,990) NM

Provision for income taxes from continuing operations $ 49,078 $ 2,186 NM $ (84,868) $ 11,769 NM

Provision for income taxes from discontinued operations — (109) NM (1,627) (2,176) -25.2 %

Provision for income taxes $ 49,078 $ 2,077 NM $ (86,495) $ 9,593 NM

The increase in the fourth quarter provision for income taxes was primarily due to the derecognition of deferred

income tax assets as a consequence of material uncertainties resulting from COVID-19 business impacts, risks and

going concern (see Section 1.1, Response to COVID-19 and going concern). The remaining change was related to

the expected recovery of income taxes paid in prior periods which have been recognized as income taxes receivable.

The decrease in the annual provision for income taxes was primarily due to the derecognition of deferred income tax

assets as a consequence of material uncertainties resulting from COVID-19 business impacts, risks and going

concern (see Section 1.1, Response to COVID-19 and going concern). The remaining change was related to the

expected recovery of income taxes paid in prior periods which have been recognized as income taxes receivable.

The use of $26.6 million of losses by Cineplex to offset taxable income generated in 2014 remains under objection

with the Canada Revenue Agency (“CRA”). Cineplex believes that it should prevail in defending its original filing

position although no assurance can be given in this regard.

Cineplex’s combined statutory income tax rate at December 31, 2020 was 26.8% (2019 - 26.8%).

Cineplex Inc.

Management’s Discussion and Analysis

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Cineplex Inc.

Management's Discussion and Analysis

Net (loss) income

Net income during the fourth quarter of 2020 and the year ended December 31, 2020 was as follows (in thousands of

dollars):

Net income Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Net (loss) income from continued operations $ (230,403) $ 4,668 NM $ (624,001) $ 36,516 NM

Net loss from discontinued operations — (1,196) NM (4,952) (7,625) -35.1 %

Net (loss) income $ (230,403) $ 3,472 NM $ (628,953) $ 28,891 NM

5.3 EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION

(“EBITDA”) (see Section 18, Non-GAAP measures)

The following table presents EBITDA, adjusted EBITDA and adjusted EBITDAaL for the three months and year

ended December 31, 2020 as compared to the prior year periods (expressed in thousands of dollars, except adjusted

EBITDAaL margin):

EBITDA Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

EBITDA $ (90,897) $ 106,905 NM $ (345,244) $ 407,584 NM

Adjusted EBITDA $ (32,097) $ 106,529 NM $ (55,866) $ 405,786 NM

Adjusted EBITDAaL $ (65,948) $ 62,327 NM $ (182,815) $ 230,546 NM

Adjusted EBITDAaL margin (125.7) % 14.1 % -139.8 % (43.7) % 13.8 % -57.5 %

Adjusted EBITDAaL for the fourth quarter of 2020 decreased $128.3 million, as compared to the prior year period.

For the year ended December 31, 2020, adjusted EBITDAaL decreased $413.4 million, as compared to the prior

year period. The quarterly and annual decreases were primarily due to the impact of the COVID-19 government

imposed restrictions and resulting closure of substantially all of Cineplex businesses since March 2020. In

computing adjusted EBITDAaL, cash rents paid or payable have been partially offset by the quantified lease-related

savings negotiated with landlords as a result of the COVID-19 closures. This includes agreements with landlords

that are evidenced by way of written confirmation of the terms agreed upon up to the date of this MD&A, and are in

the process of being formally documented. Adjusted EBITDAaL margin is calculated as adjusted EBITDAaL

divided by total revenues.

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Management’s Discussion and Analysis

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Cineplex Inc.

Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

6. BALANCE SHEETS

The following sets out significant changes to Cineplex’s consolidated balance sheets during the year ended

December 31, 2020 as compared to December 31, 2019 (in thousands of dollars):

December 31, 2020 December 31, 2019 Change ($) Change (%)

Assets

Current assets

Cash and cash equivalents $ 16,254 $ 26,080 $ (9,826) -37.7 %

Trade and other receivables 51,834 168,065 (116,231) -69.2 %

Income taxes receivable 66,551 9,757 56,794 582.1 %

Inventories 21,712 30,995 (9,283) -29.9 %

Prepaid expenses and other current assets 11,613 14,226 (2,613) -18.4 %

Fair value of interest rate swap agreements — 1,022 (1,022) -100.0 %

Assets held for sale — 6,573 (6,573) -100.0 %

167,964 256,718 (88,754) -34.6 %

Non-current assets

Property, equipment and leaseholds 555,340 662,798 (107,458) -16.2 %

Right-of-use assets 881,418 1,232,849 (351,431) -28.5 %

Deferred income taxes — 14,197 (14,197) -100.0 %

Fair value of interest rate swap agreements — 472 (472) -100.0 %

Interests in joint ventures 8,644 28,221 (19,577) -69.4 %

Intangible assets 84,922 88,367 (3,445) -3.9 %

Goodwill 635,582 816,790 (181,208) -22.2 %

$ 2,333,870 $ 3,100,412 $ (766,542) -24.7 %

Liabilities

Current liabilities

Accounts payable and accrued expenses $ 82,992 $ 220,188 $ (137,196) -62.3 %

Share-based compensation 482 25,681 (25,199) -98.1 %

Dividends payable — 9,500 (9,500) -100.0 %

Income taxes payable 802 1,183 (381) -32.2 %

Deferred revenue 219,983 222,998 (3,015) -1.4 %

Lease obligations 97,259 106,352 (9,093) -8.5 %

Fair value of interest rate swap agreements 7,202 1,874 5,328 284.3 %

Liabilities related to assets held for sale — 2,808 (2,808) -100.0 %

408,720 590,584 (181,864) -30.8 %

Non-current liabilities

Share-based compensation 2,670 — 2,670 NM

Long-term debt 506,000 625,000 (119,000) -19.0 %

Fair value of interest rate swap agreements 19,157 10,837 8,320 76.8 %

Lease obligations 1,073,666 1,261,243 (187,577) -14.9 %

Post-employment benefit obligations 11,503 10,678 825 7.7 %

Other liabilities 68,649 9,813 58,836 599.6 %

Deferred income taxes — 1,263 (1,263) -100.0 %

Convertible debentures 219,271 — 219,271 NM

2,309,636 2,509,418 (199,782) -8.0 %

Equity

Equity attributable to owners of Cineplex 24,234 591,103 (566,869) -95.9 %

Non-controlling interests — (109) 109 -100.0 %

Total Equity 24,234 590,994 (566,760) -95.9 %

$ 2,333,870 $ 3,100,412 $ (766,542) -24.7 %

Cash and cash equivalents. The decrease in cash and cash equivalents is due to the minimal use of cash at theatres

and LBE venues resulting in a reduction of manager’s funds held at locations in addition to lower cash in transit.

Trade and other receivables. The decrease in trade and other receivables is primarily due to the low business

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Cineplex Inc.

Management's Discussion and Analysis

volumes in 2020 including the reduced sale of gift cards and vouchers as a result of the impact of COVID-19.

Income taxes receivable. The increase in income taxes receivable is primarily the result of tax refunds of $66.2

million expected from loss carrybacks realized in 2020 to offset taxable income in prior years.

Inventories. The decrease in inventories is primarily due to lower theatre and location-based entertainment

inventories as a result of the lower business volumes due to continued government restrictions and business closures.

Prepaid expenses and other current assets. The decrease in prepaid expenses and other current assets is due to the

deferral of some real estate tax payments due to the impact of COVID-19 on the businesses.

Fair value of interest rate swap agreements. The interest rate swaps provide for fixed interest rates on $450

million of debt. The increase in the net liability for swap agreements is due to the expectation of future interest rate

decreases (see discussion in Section 7.4, Credit Facilities).

Assets held for sale. The decrease in assets held for sale is due to the sale of discontinued operations during the

second quarter of 2020.

Property, equipment and leaseholds. The decrease in property, equipment and leaseholds is due to amortization

expenses ($113.3 million), asset dispositions ($3.7 million), foreign exchange impact ($0.2 million), and an

impairment charge ($39.2 million) recorded during the year. This was offset by new build and other capital

expenditures ($42.9 million), maintenance capital expenditures ($5.4 million) and a reclassification from assets held

for sale to continuing operations ($0.7 million).

Right-of-use assets. The decrease in right-of-use assets is due to amortization expense ($128.4 million) and lease

modifications ($144.1 million) resulting from renegotiated lease terms due to the impact of COVID-19 on the

business, and an impairment charge ($71.8 million) recorded during the year. In addition, during the third quarter of

2020, Cineplex sold certain protective rights on leased properties which resulted in a derecognition of right-of use

assets ($7.2 million).

Deferred income tax assets. The decrease is due to the derecognition of the net deferred income tax asset as a

consequence of material uncertainties resulting from COVID-19 business impacts, risks and going concern (see

Section 1.1, Response to COVID-19 and going concern).

Interests in joint ventures. The decrease in interest in joint ventures is primarily due to the equity loss realized by

CDCP which has been negatively impacted by the theatre closures, in addition to an impairment of the investment in

VR studios Inc. ($2.8 million) during the fourth quarter of 2020.

Intangible assets. The decrease in intangible assets is due to the amortization expense ($11.5 million), partially

offset by the capitalization of software development costs ($8.1 million).

Goodwill. The decrease in goodwill is due to an impairment charges recorded ($181.0 million) during the year,

offset by the impact of foreign exchange ($0.2 million).

Accounts payable and accrued expenses. The decrease in accounts payable and accrued liabilities relates to lower

business volume in 2020 as a result of the impact of COVID-19.

Share-based compensation. The decrease in share-based compensation is due to the decrease in Share price, which

fell to $9.27 per Share at December 31, 2020 from $34.00 per Share as contemplated by the Arrangement

Agreement at December 31, 2019, decreasing the fair value of the compensation liability, as well as the

reclassification of the liability with respect to options to equity on the termination the Cineworld Transaction (see

Section 9, Share Activity). Current grants under the Incentive Plan are accounted for as equity settled and included

in equity.

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Management's Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Dividends Payable. The decrease in dividends payable is due to the suspension of dividends as required by the

Arrangement Agreement with Cineworld in the first quarter of 2020 and the continued suspension as required by the

terms of the First and Second Credit Agreement Amendments entered into during 2020.

Income taxes payable. The decrease in income taxes payable represents amounts paid by several taxable entities in

Cineplex’s consolidated group during 2020 for taxes due based on its 2019 results. The remaining balance includes

minimum tax payable by certain entities as a result of losses used to offset taxable income in 2020.

Deferred revenue. The deferred revenue decrease is primarily due to the significant decrease in gift cards and

vouchers sales during the 2020 holiday season as a result of the impact of COVID-19.

Long-term debt. The decrease in long-term debt is primarily due to the repayment of long-term debt with the

proceeds from the issuance of the Debenture (see Section 9.1, Convertible Debentures) and payment received with

respect to the reorganization of SCENE.

Lease obligations. The decrease in lease obligations is primarily due to lease modifications recognized from

renegotiated leases due to the impact of COVID-19 on the business and settlement of lease obligation.

Other liabilities. The increase in other liabilities is due to the deferral of $60.0 million proceeds received for the

reorganization of SCENE. Cineplex continues to have joint control of the joint operation and is entitled to and

responsible for 50% of the economic benefits and obligations until specific non-financial milestones are met,

resulting in the deferral of recognition of the proceeds in other liabilities.

Convertible debentures. The increase in convertible debentures is due to the issuance of the Debentures completed

during the third quarter and the accretion of the Debentures (see Section 9, Share Activity).

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Management's Discussion and Analysis

7. LIQUIDITY AND CAPITAL RESOURCES

7.1 OPERATING ACTIVITIES

Cash flow is generated primarily from film entertainment (the sale of admission tickets and food service sales),

media sales and services, amusement and leisure (amusement and food service sales) and other revenues. Generally,

this provides Cineplex with positive working capital, since certain cash revenues are normally collected in advance

of the payment of certain expenses. Box office revenues are directly related to the success and appeal of the film

product produced and distributed by the studios. The following table highlights the movements in cash from

operating activities for the three months and year ended December 31, 2020 and 2019 (in thousands of dollars):

Cash flows provided by operating activities Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Net (loss) income from continuing operations $ (230,403) $ 4,668 $ (235,071) $ (624,001) $ 36,516 $ (660,517)

Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization of other assets (i) 28,750 33,135 (4,385) 124,846 128,883 (4,037)

Depreciation of right-of-use assets 28,136 36,471 (8,335) 128,393 145,946 (17,553)

Unrealized foreign exchange 787 309 478 342 698 (356)

Interest rate swap agreements - non-cash interest 2,509 11,891 (9,382) 13,922 10,472 3,450

Accretion of convertible debentures 3,428 — 3,428 7,471 — 7,471

Other non-cash interest (ii) 368 408 (40) 1,396 1,745 (349)

(Gain) loss on disposal of assets (283) 868 (1,151) (13,101) 1,764 (14,865)

Deferred income taxes (recovery) 114,854 (3,228) 118,082 (11,373) (9,990) (1,383)

Non-cash Share-based compensation (3,149) 407 (3,556) 1,228 1,608 (380)

Impairment of ling-lived assets and goodwill 56,175 — 56,175 294,863 — 294,863

Net change in interests in joint ventures and associates 5,044 (1,466) 6,510 12,878 (4,704) 17,582

Changes in operating assets and liabilities (67,257) 40,670 (107,927) (43,178) 8,727 (51,905)

Net cash (used in) provided by operating activities $ (61,041) $ 124,133 $ (185,174) $ (106,314) $ 321,665 $ (427,979)

(i) Includes depreciation of property, equipment and leaseholds and amortization of intangible assets.

(ii) Includes accretion of asset retirement obligations and non-cash interest costs on lease obligations.

Fourth Quarter and Full Year

Cash used in operating activities was $61.0 million in the fourth quarter and $106.3 million for the year ended

December 31, 2020, as compared to cash provided by operating activities of $124.1 million and $321.7 million in

the prior year comparative periods. The movements were primarily due to the negative impact of COVID-19 on

businesses, coupled with the timing of settlement of accounts payables and recognition of income taxes receivable

during the quarter. Tax returns with respect to these receivables were promptly filed subsequent to year end.

7.2 INVESTING ACTIVITIES

The following table highlights the movements in cash used in investing activities for the three months and year

ended December 31, 2020 and 2019 (in thousands of dollars):

Cash flows provided by (used in) investing activities Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Proceeds from disposal of assets, including sale of

discontinued operations $ 59,870 $ — $ 59,870 $ 80,920 $ — $ 80,920

Purchases of property, equipment and leaseholds (9,969) (51,448) 41,479 (73,411) (146,367) 72,956

Intangible assets additions (2,106) (2,709) 603 (9,005) (7,865) (1,140)

Tenant inducements 2,697 4,832 (2,135) 24,296 13,985 10,311

Net cash received from joint ventures and associates — 2,882 (2,882) 3,910 15,394 (11,484)

Net cash provided by (used in) investing activities $ 50,492 $ (46,443) $ 96,935 $ 26,710 $ (124,853) $ 151,563

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Fourth Quarter

Cash provided by investing activities during the fourth quarter of 2020 was $50.5 million, as compared to cash used

in investing activities of $46.4 million in the prior year period. The movement was primarily due to the reduction of

capital expenditures during the period as a result of COVID-19, and cash proceeds of $60.0 million that were

received as a result of Cineplex’s reorganization of its joint operation with SCENE. The negative capital

expenditures resulted from accruals movement during the quarter.

Full Year

For the full year, cash provided by investing activities was $26.7 million, as compared to cash used in investing

activities of $124.9 million in the prior year. The movement was primarily due to cash proceeds received from the

sale of certain protective rights on leased properties in the third quarter of 2020, $60.0 million proceeds from

Cineplex’s reorganization of its joint operation with SCENE, and reduced capital expenditures as a result of the

significant reduction of all capital assets acquisitions and contractual projects during the period due to COVID-19.

Components of capital expenditures include (in thousands of dollars):

Capital expenditures Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Gross capital expenditures $ 9,969 $ 51,448 $ (41,479) $ 73,411 $ 146,367 $ (72,956)

Less: tenant inducements (2,697) (4,832) 2,135 (24,296) (13,985) (10,311)

Net capital expenditures $ 7,272 $ 46,616 $ (39,344) $ 49,115 $ 132,382 $ (83,267)

Net capital expenditures consists of:

Growth and acquisition capital expenditures (i) $ 8,823 $ 32,962 $ (24,139) $ 37,104 $ 102,220 $ (65,116)

Tenant inducements (2,697) (4,832) 2,135 (24,296) (13,985) (10,311)

Media growth capital expenditures — 26 (26) 198 402 (204)

Premium formats (ii) 541 13,951 (13,410) 2,884 21,662 (18,778)

Amusement and leisure growth capital expenditures

(excluding LBE build expenditures) 372 4,561 (4,189) 877 5,748 (4,871)

Maintenance capital expenditures 1,171 14,246 (13,075) 5,379 31,702 (26,323)

Other (iii) (938) (14,298) 13,360 26,969 (15,367) 42,336

$ 7,272 $ 46,616 $ (39,344) $ 49,115 $ 132,382 $ (83,267)

(i) Growth and acquisition capital expenditures include expenditures on the construction of new locations (including VIP cinemas) and other

Board approved growth projects with the exception of premium formats, media growth, and amusement gaming and leisure growth capital

expenditures.

(ii) Premium formats include capital expenditures for recliner seating, IMAX, UltraAVX, 3D, 4DX and ScreenX.

(iii) Primary component of Other is the impact of the timing of cash payments relating to the purchases of property, equipment and leaseholds.

7.3 FINANCING ACTIVITIES

The following table highlights the movements in cash from financing activities for the three months and year ended

December 31, 2020 and 2019 (in thousands of dollars):

Cash flows provided by (used in) financing activities Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Dividends paid $ — $ (28,498) $ 28,498 $ (19,000) $ (112,415) $ 93,415

Borrowings (repayments) under credit facility, net 46,000 (24,000) 70,000 (119,000) 45,000 (164,000)

Repayments of lease obligations - principal (32,323) (32,352) 29 (91,946) (128,252) 36,306

Issuance of convertible debentures, net — — — 303,063 — 303,063

Financing fees (700) — (700) (1,500) (243) (1,257)

Net cash provided by (used in) financing activities $ 12,977 $ (84,850) $ 97,827 $ 71,617 $ (195,910) $ 267,527

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Management's Discussion and Analysis

Fourth Quarter

Cash flows provided by financing activities were $13.0 million in the fourth quarter of 2020, as compared to cash

used in financing activities in the prior year comparative periods in the amount of $84.9 million. The movement was

mainly due to borrowings under the Credit Facilities to fund operations during the COVID-19 driven closures.

Dividends were suspended under the terms of the Arrangement Agreement subsequent to the dividend paid on

February 28, 2020 and remained suspended after the termination of the Arrangement Agreement as a result of the

terms of the Credit Agreement Amendments.

Full Year

Cash flows provided by financing activities were $71.6 million for the year ended December 31, 2020, as compared

to cash used in financing activities in the prior year period in the amount of $196.0 million. The movement was

mainly due to the net proceeds arising from the issuance of the Debentures of $303.1 million net of repayment of

amounts borrowed under the Credit Facilities. In addition, cash rent paid was reduced as a result of the relief

measures that Cineplex negotiated with landlords in response to COVID-19. Dividends were suspended under the

terms of the Arrangement Agreement subsequent to the dividend paid on February 28, 2020 and remained

suspended after the termination of the Arrangement Agreement as a result of the terms of the Credit Agreement

Amendments.

In response to the impact of the COVID-19 pandemic, Cineplex is closely monitoring its liquidity. Details with

respect to its ongoing measures to maximize liquidity are detailed in Section 1.1 Response to COVID-19.

7.4 CREDIT FACILITIES

Cineplex increased and extended its Credit Facilities effective November 13, 2018. On June 29, 2020, Cineplex and

Cineplex Entertainment Limited Partnership entered into the First Credit Agreement Amendment with The Bank of

Nova Scotia, as administrative agent, and the lenders from time to time named therein, to the seventh amended and

restated credit agreement with a syndicate of lenders. The First Credit Agreement Amendment Agreement (along

with the Second Credit Amendment and Third Credit Agreement Amendment described below) provides Cineplex

with certain financial covenant relief in light of the COVID-19 pandemic and its effects on Cineplex’s businesses.

At December 31, 2020, the Credit Facilities consisted of the following (in millions of dollars), subject to

amendments described below pursuant to the Credit Agreement Amendment:

Available Drawn Reserved Remaining

(i) a five-year senior secured revolving credit facility (“Revolving Facility”) $ 620.0 $ 456.0 $ 10.2 $ 153.8

(ii) a five-year senior secured non-revolving term facility (“Term Facility”) (i) $ 50.0 $ 50.0 $ — $ —

Letters of credit outstanding at December 31, 2020 of $10.2 million are reserved against the Revolving Facility.

(i) Reduced to a five-year senior secured non-revolving term facility with a balance of $50.0 million available and drawn as a result of the

repayment of $100.0 million on the successful completion of the issuance of the Debentures.

The Credit Facilities bear interest at a floating rate based on the Canadian dollar prime rate, U.S. Base Rate, LIBOR

or bankers’ acceptances rates plus, in each case, an applicable margin to those rates. The Revolving Facility matures

in November 2023 and, as a result of the First Credit Agreement Amendment, the Term Facility also matures in

November 2023, payable in full at maturity with no scheduled repayment of principal required prior to maturity.

Cineplex’s Credit Facilities contain restrictive covenants that limit the discretion of Cineplex’s management with

respect to certain business matters. These covenants place limits and restrictions on, among other things, the ability

of Cineplex to create liens or other encumbrances, to pay dividends or make certain other payments, minimum

liquidity covenants, anti-hoarding provisions, investments, loans and guarantees and to sell or otherwise dispose of

assets and merge or consolidate with another entity. The Credit Facilities are secured by all of Cineplex’s assets.

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Management's Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

The following is a summary of the key terms of the First Credit Agreement Amendment (certain of which have been

modified further by the Second Credit Agreement Amendment and Third Credit Agreement Amendment described

below):

• Financial covenant testing was suspended effective upon execution of the First Credit Agreement

Amendment, and subsequently extended for the second and third quarters of 2020 following a $100.0

million permanent repayment of the Term Facility from the proceeds of the offering of the Debentures (see

Section 8 Share Activity). On the resumption of financial covenant testing at the beginning of the fourth

quarter of 2020, it will be based on an annualized calculation of Adjusted EBITDA for the following four

fiscal quarters;

• The leverage ratio of 3.75x will apply when financial covenants are reinstated, and will be reduced over the

course of 2021 each quarter until it is at 3.00x for the fourth fiscal quarter of 2021 until the fourth quarter of

2021 at which point it will reach a level of 3.00x;

• The maturity date for the Term Facility was advanced by two years to be coincident with the maturity date

for the Revolving Facility of November 13, 2023;

• If Cineplex chooses to undertake any new debt, equity or equity-related issuances or the sale of certain

assets, Cineplex will be required to make certain mandatory permanent repayments of the Credit Facilities

from the proceeds of such issuances or asset sales;

• Growth capital expenditures will be limited to certain agreed projects. After December 31, 2020, additional

growth capital expenditures will be permitted subject to a pro forma leverage covenant of 2.75x (both prior

to and immediately after giving effect to any such growth capital expenditure);

• Distributions will be limited to free cash flow and only permitted when the leverage ratio is less than 2.75x

(both prior to and immediately after giving effect to any such distribution);

• Cineplex will not be permitted to make any acquisitions without consent from at least three of its lenders

holding, in the aggregate, a minimum of 51% of the commitments under its Credit Facilities;

• The applicable margins for the interest rates on all borrowings will increase;

• Cineplex will no longer be able to request an increase in the total commitments under the Credit Facilities

pursuant to the “accordion” provisions of the Credit Agreement prior to amendment; and

• Payments of interest on the Debentures (as defined below) will be permitted so long as no default or event

of default has occurred under the Credit Agreement.

On November 12, 2020, Cineplex and Cineplex Entertainment Limited Partnership entered into the Second Credit

Agreement Amendment. Without the provisions of the Second Credit Agreement Amendment, management’s

internal forecasts indicated a potential breach of the financial covenants as of December 31, 2020.

The following is a summary of the key terms of the Second Credit Agreement Amendment that are updated from the

First Credit Agreement Amendment (certain of which have been modified further by the Third Credit Agreement

Amendment in Section 16 Subsequent Events):

• Financial covenant testing will be suspended until the second quarter of 2021. On resumption of financial

covenant testing in the second quarter of 2021, the testing will be based on an annualized calculation of

Adjusted EBITDA for the following four fiscal quarters;

• The leverage ratio of 3.75x will apply when financial covenants are reinstated, and will be reduced over the

course of successive four quarters until the first quarter of 2022 at which point it will reach a level of 3.00x;

• Effective with the second quarter of 2021, additional growth capital expenditures will be subject to pro-

forma leverage covenant of 2.75x (both prior to and immediately after giving effect to any such growth

capital expenditure) based on actual last twelve month EBITDA;

• A liquidity covenant effective at all times through the covenant suspension period beginning in November

2020, through to and including June 2021, requiring available liquidity as defined on a monthly basis;

• Distributions continue to be blocked during the extended financial covenant suspension period and only

permitted when the leverage ratio is less than 2.75x (both prior to and immediately after giving effect to any

such distribution); and

• An anti-cash hoarding provision has been added limiting the request for advances under the Credit

Facilities to those amounts required to fund costs and expenses reasonably anticipated to be incurred in the

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Management's Discussion and Analysis

ordinary course of business. No amounts may be requested if sufficient cash on hand exists to pay such

costs.

Following the First and Second Credit Agreement Amendments, including mandatory repayments, the Credit

Facilities consist of the following:

a) a five-year, $620.0 million senior, secured, Revolving Facility; and

b) a five-year, $50.0 million, senior, secured, Term Facility.

Subsequent to year end, Cineplex completed a sale-leaseback transaction for its head office buildings located at

1303 Yonge Street and 1257 Yonge Street, Toronto, Ontario for gross proceeds of $57.0 million. Fifty percent of the

net proceeds were used to permanently reduce Cineplex’s Revolving Facility to $591.7 million(see Section 16,

Subsequent events).

Subsequent to year end, on February 8, 2021, Cineplex entered into the Third Credit Agreement Amendment, which,

among other things, extended the suspension of financial covenant testing for two additional fiscal quarters and

extended the liquidity covenant requirement until December 2021 (see Section 16, Subsequent events).

The Credit Facilities mature and are payable in full at maturity, with no scheduled repayment of principal required

prior to maturity. The Credit Facilities bear interest at a floating rate, based on the Canadian dollar prime rate, or

bankers’ acceptances rate plus, in each case, an applicable margin to those rates. Borrowings on the Revolving

Facility and the Term Facility can be made in either Canadian or US dollars.

A copy of the Credit Agreement Amendments are available on SEDAR at www.sedar.com.

One of the key financial covenants in the Credit Facilities

is the leverage covenant which will be calculated in

accordance with IFRS in effect at November 13, 2018

which excludes the impact of the adoption of IFRS 16 on

Cineplex’s financial reporting. The definition of debt in

the Credit Facilities includes long-term debt, financing

leases and letters of credit but does not include

Debentures, the lease obligations arising on the adoption

of IFRS 16 or a reduction for cash on hand. For the

purposes of the Credit Facilities definition, EBITDA is

adjusted for certain non-cash, non-recurring items and the

annualized impact of new operating locations or

acquisitions. Under the term of the Second Credit

Agreement Amendment, financial covenant testing has

been suspended until the end of the second quarter of

2021 and further extended to the fourth quarter of 2021

pursuant to the terms of the Third Credit Agreement

Amendment entered into after year end.

Covenant Leverage

Ratio

1.31

1.88

2.17

2.32

—

2016 2017 2018 2019 2020

Management continues to pursue all viable options to maintain adequate liquidity to fund operations for the

currently anticipated duration of the pandemic. During the fourth quarter, Cineplex entered into an agreement to

enhance and expand the SCENE Scotiabank Loyalty program receiving $60.0 million with respect to the

reorganization. In addition, Cineplex continues to explore other measures to maintain adequate liquidity, including

but is not limited to planned asset sales such as Cineplex’s head office building in Toronto which was completed

subsequent to year end, additional financing sources and amendments to existing credit facilities. All proceeds are

used to repay the Credit Facilities, in part as a permanent reduction.

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

As of December 31, 2020, Cineplex was in compliance with all financial covenants under the terms of the Credit

Facilities. However, management’s forecasts indicate a potential breach of its covenants within the next 12 months

as a result of the COVID-19 pandemic. Management’s forecasts may change materially as the impact of COVID-19

on Cineplex’s business is better understood. A violation of its covenants would represent an event of default under

the terms of the Credit Facilities, enabling the lenders to demand immediate repayment of all amounts due.

Interest rate swap agreements. Cineplex entered into interest rate swap agreements where Cineplex agreed to pay

fixed rates per annum, plus an applicable margin and receive a floating rate of interest equal to the three-month

Canadian deposit offering rate set quarterly in advance, with net settlements quarterly.

The following table outlines Cineplex’s current interest rate swap agreements as of December 31, 2020:

Interest rate swap agreements

Notional amount Inception date Effective date Maturity date Fixed rate payable

Swap - 1 $200.0 million April 25, 2016 October 24, 2018 April 26, 2021 1.484 %

Swap - 2 $200.0 million November 13, 2018 April 26, 2021 November 14, 2023 2.945 %

Swap - 3 $100.0 million November 13, 2018 November 13, 2018 November 14, 2023 2.830 %

Swap - 4 $150.0 million November 13, 2018 November 13, 2018 November 14, 2025 2.898 %

The purpose of the interest rate swap agreements is to act as a cash flow hedge on the floating interest rate payable

on Cineplex’s first $450.0 million of borrowings. Cineplex ceased the use of hedge accounting for the interest rate

swaps during the fourth quarter of 2019. The interest rate swap will be measured at fair market value at each

reporting period with changes in fair market value recognized in the consolidated statement of operations.

As a result of the terms of the Arrangement Agreement, hedge accounting was determined to no longer to be

appropriate. Despite the termination of the Arrangement Agreement, the swaps can only be re-designated on a

prospective basis for hedge accounting treatment.

Accordingly, losses associated with the interest rate swaps previously recognized in Other Comprehensive Income

(“OCI”) were recognized as interest expense in the fourth quarter of 2019. Changes in the value of these interest rate

swaps are recognized in net income.

Based on the amended credit agreement in effect at December 31, 2020 Cineplex’s effective cost of borrowing on

the $450.0 million hedged borrowings was 5.754% (December 31, 2019 - $450.0 million hedged borrowings -

4.079%).

7.5 FUTURE OBLIGATIONS

At December 31, 2020, Cineplex had the following contractual or other commitments authorized by the Board

(expressed in thousands of dollars):

Payments due by period

Contractual obligations Total Within 1 year 2-3 years 4-5 years After 5 years

Long-term debt 506,000 — 506,000 — —

Interest rate swap agreements 26,359 7,201 15,449 3,709 —

Capital commitment - exhibition and LBE 82,100 14,470 67,630 — —

Deferred consideration - AMC 3,134 3,134 — — —

Equipment obligations 4,168 1,975 2,018 150 25

Convertible debentures 316,250 — — 316,250 —

Total contractual obligations $ 938,011 $ 26,780 $ 591,097 $ 320,109 $ 25

The following table discloses the undiscounted cash flow for lease obligations as of December 31, 2020:

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Management's Discussion and Analysis

Less than one year $ 159,928

One to five years 635,088

More than five years 695,714

Total undiscounted lease obligations $ 1,490,730

Cineplex has aggregate gross capital commitments of $82.1 million ($53.9 million net of tenant inducements)

related to the completion of construction of 11 operating locations including both theatres and location-based

entertainment locations, in addition to the ongoing rollout of expanded entertainment offerings at select theatres and

location-based entertainment locations, over the next four years.

As a result of the negative impact of COVID-19 on its business, Cineplex has minimized all capital expenditures by

deferring or canceling project spending during the crisis. With the uncertainty surrounding the timing and impact of

the theatre and LBE venue closures, management will continue to assess its future capital spending taking into

consideration its legal commitments, restrictions imposed by the Credit Facilities (as amended) and requirements of

the business on a short and long-term basis.

Cineplex conducts a significant part of its operations in leased premises. Cineplex’s leases generally provide for

minimum rent and a number of the leases also include percentage rent based primarily upon sales volume.

Cineplex’s leases may also include escalation clauses, guarantees and certain other restrictions, and generally require

it to pay a portion of the real estate taxes and other property operating expenses. Initial lease terms generally range

from 15 to 20 years and contain various renewal options, generally in intervals of five to ten years. In response to the

COVID-19 pandemic and resulting government mandated closures, Cineplex temporarily closed all of its theatres

and LBE locations on March 16, 2020. Government mandates remain in effect in multiple markets which have

resulted in theatre closures and restrictions on the LBE business.

Cineplex is guarantor under the leases for the remainder of the lease terms for certain theatres that it has sold in the

event that the purchaser of the theatres does not fulfill its obligations under the respective lease; ten or fewer of those

theatres are still operated by a third-party lease under which Cineplex arguably could be responsible as a guarantor.

Cineplex has assessed the fair value of the lease guarantees and determined that the fair value of these guarantees at

December 31, 2020 is nominal. As such, no additional amounts have been provided in the consolidated financial

statements for these guarantees. Should the purchasers of the theatres fail to fulfill their lease commitment

obligations, Cineplex could face a substantial financial burden, which could be mitigated by Cineplex operating any

theatres under default.

At December 31, 2020, Cineplex had $316.3 million ($303.1 million net of fees) principal amount of Debentures

outstanding that bear interest at 5.75% and have a maturity date of September 30, 2025. At December 31, 2020, the

Debentures were recorded on Cineplex’s balance sheet at $219.3 million (see Section 9.1, Convertible debentures).

The Debentures are being accreted to their maturity value using the effective interest method as prescribed by IFRS

9, Financial Instruments. The Debentures are not redeemable by Cineplex prior to September 30, 2023. On or after

September 30, 2023 and prior to September 30, 2024, Cineplex may, at its option, redeem the Debentures in whole

or in part from time to time, subject to specific market conditions. On or after September 30, 2024, the Debentures

may be redeemed in whole or in part from time to time at the option of Cineplex at a price equal to their principal

amount plus accrued and unpaid interest. Redemption may be in cash or in the form of Shares, at the option of

Cineplex. See Section 9, Share activity, for more information regarding the Debentures.

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MANAGEMENT'S DISCUSSION AND ANALYSIS

8. ADJUSTED FREE CASH FLOW AND DIVIDENDS (see Section 18, Non-GAAP measures)

Cineplex’s dividend policy is subject to the discretion of the Board and may vary depending on, among other things,

Cineplex’s results of operations, cash requirements, financial condition, contractual restrictions, business

opportunities, provisions of applicable law and other factors that the Board may deem relevant. As a result of the

Arrangement Agreement, Cineplex did not pay any further dividends after the monthly dividend that was paid on

February 28, 2020. Cineplex does not expect to return to paying dividends until the negative impact of the

COVID-19 crisis has been addressed and liquidity improved. The payment of any dividends in the future is also

subject to the terms of the Credit Facilities (as amended). Cineplex hereby currently designates all dividends paid or

deemed to be paid as “eligible dividends” for purposes of subsection 89(14) of the Income Tax Act (Canada), and

similar provincial and territorial legislation, unless indicated otherwise.

8.1 ADJUSTED FREE CASH FLOW

Prior to the monthly dividend that was paid on February 28, 2020, Cineplex distributed cash to its shareholders on a

monthly basis. The following table illustrates adjusted free cash flow per Share, dividends paid per Share, and the

payout ratio of dividends relative to adjusted free cash flow for the three months and year ended December 31, 2020

and 2019:

Adjusted free cash flow Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Adjusted free cash flow per Share $ (0.482) $ 0.618 NM $ (2.556) $ 2.660 NM

Dividends declared per Share $ — $ 0.450 -100.0 % $ 0.150 $ 1.780 -91.6 %

Payout ratio - year ended December 31 — — — (5.9) % 66.9 % -72.8 %

Adjusted free cash flow per Share for the fourth quarter and full year compared to the prior year decreased due to

weaker operating results as a result of the economic effects of COVID-19 and the temporary closure of theatres and

LBE locations and P1AG route locations.

Measures relevant to the discussion of adjusted free cash flow per Share are as follows (expressed in thousands of

dollars except Shares outstanding):

Fourth Quarter Full Year

2020 2019 Change 2020 2019 Change

Cash flows (used in) provided by continuing

operations $ (61,041) $ 124,133 NM $ (106,314) $ 321,665 NM

Net (loss) income from continuing operations $ (230,403) $ 4,668 NM $ (624,001) $ 36,516 NM

Standardized free cash flow $ (92,060) $ 72,685 NM $ (179,725) $ 175,298 NM

Adjusted free cash flow $ (30,530) $ 39,127 NM $ (161,870) $ 168,455 NM

Cash dividends declared $ — $ 28,499 -100.0 % $ 9,500 $ 112,731 -91.6 %

Average number of Shares outstanding 63,333,238 63,333,238 — % 63,333,238 63,333,238 — %

8.2 DIVIDENDS

Cineplex has not paid any dividends after the monthly dividend that was paid on February 28, 2020 and is restricted

from paying any dividends under the Credit Facilities (as amended).

The following table outlines Cineplex’s distribution and dividend history:

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Management’s Discussion and Analysis

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Management's Discussion and Analysis

Distribution and dividend history

Effective Date Monthly Distribution/Dividend per Unit/Share

January 2004 (i) $0.0958

May 2007 $0.1000

May 2008 $0.1050

May 2011 $0.1075

May 2012 $0.1125

May 2013 $0.1200

May 2014 $0.1250

May 2015 $0.1300

May 2016 $0.1350

May 2017 $0.1400

May 2018 $0.1450

May 2019 - January 2020 $0.1500

(i) Cineplex Galaxy Income Fund, the predecessor to Cineplex (“The Fund”) declared and paid distributions at a rate of $0.1050 per month

from May 2008 until December 2010. The Fund converted to a corporation on January 1, 2011, at which time distributions ceased and

dividends began at the same rate of $0.1050 per month.

9. SHARE ACTIVITY

Share capital at December 31, 2020 and the transactions during the year are as follows (expressed in thousands of

dollars except Share amounts):

Shares Amount

Number of common

shares issued and

outstanding

Common shares Total

Balance - December 31, 2019 and 2020 63,333,238 $ 852,379 $ 852,379

On November 12, 2020, the Board of Directors approved the new Omnibus Incentive Plan (the “Incentive Plan”).

This plan supersedes the former Incentive Plans (“Legacy Plan”) that included Options, Performance Share Units

(“PSU”) and Restricted Share Units (“RSU”). All employees and consultants are eligible to participate in the

Incentive Plan. The Incentive Plan consists of stock options, RSU and PSU. Awards of RSU and PSU granted

during a service year will be subject to a three year service period. The aggregate number of Shares that may be

issued under the Incentive Plan is 1.8 million provided that no more than 1.2 million Shares may be issued in

aggregate pursuant to the settlement of RSUs and PSUs. Options that were issued under the Legacy Plan and

cancelled subsequent to the approval of the Incentive Plan will be available to be issued under the Incentive Plan.

The base Share equivalents granted as RSU and PSU awards attract compounding notional dividends at the same

rate as outstanding Shares, which are notionally re-invested as additional base Share equivalents. PSU and RSU

awards may be settled in Shares issued from treasury, cash, or a mix of Shares and cash, at Cineplex’s option at the

time of settlement. Cineplex has determined that the 2020 award will be settled in Shares, and as a result are

accounted for as equity-settled. Awards outstanding under prior plans shall remain in full force and effect under the

prior plans according to their respective terms. Under the prior plans, the effects of changes in estimates of

performance results are recognized in the year of change. As at December 31, 2020, 2.1 million Shares are available

to be issued under the Incentive Plan.

Incentive Plan costs are estimated at the grant date based on expected performance results then accrued and

recognized on a graded basis over the vesting period. Forfeitures are estimated at $nil.

Stock options issued under the Incentive Plan will be administered by the Board of Directors who will establish the

exercise price at the time each option is granted, which in all cases will not be less than the market price on the grant

date. All of the options must be exercised over specified periods not to exceed ten years from the date granted.

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Management's Discussion and Analysis

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Options issued under the Incentive Plan may be exercised for cash or on a cash less basis, both of which result in the

issuance of Shares from treasury. Options will be accounted for as equity-settled.

A summary of option activities for the year ended December 31, 2020 and 2019 is as follows:

2020 2019

Weighted

average

remaining

contractual life

(years)

Number of

underlying

Weighted

average

exercise price

Number of

underlying

Weighted

average

exercise price

Options outstanding - January 1 6.67 3,123,521 $ 38.62 2,433,589 42.84

Granted 725,758 8.25 757,639 25.05

Cancelled (1,408,439) 44.74 —

Forfeited (398,821) 29.64 (67,707) 38.51

Options outstanding – end of period 7.64 2,042,019 $ 25.37 3,123,521 $ 38.62

Until December 15, 2019, the options could only be equity-settled, and were accounted for as equity, not liabilities.

Upon cashless exercises, the options exercised in excess of Shares issued were cancelled and returned to the pool

available for future grants. The expense amount for options was determined at the time of their issuance, recognized

over the vesting period of the options. Effective December 15, 2019, as a result of the terms of the Arrangement

Agreement, the options were considered cash-settled, and the fair value of the options outstanding in excess of their

respective exercise price was recognized as a current share-based compensation liability, and changes in value were

reflected in the statement of operations. With the Termination Notice delivered by Cineworld on June 12, 2020 to

terminate the Arrangement Agreement, the options were revalued and accounted for as equity-settled, with expected

lives of the lesser of four years and their contractual lives. The value of vested options at March 31, 2020 of $3,944

was reclassified from liability to contributed surplus. Unvested options will be recognized over their remaining

vesting periods at the value determined at March 31, 2020. Forfeitures are estimated at nil, based on historical

forfeiture rates.

Cineplex recorded $1.2 million of employee benefits recovery with respect to the options during the year ended

December 31, 2020 (2019 - $2.5 million). At December 31, 2020, $nil associated with the options is reflected in

current share-based compensation liability on the consolidated balance sheets (2019 - $6.3 million). The intrinsic

value of vested share options at December 31, 2020 is $nil (2019 - $0.6 million, based on the purchase price of

$9.27 per share (2019 - $34.00). Cineplex undertook a one-time voluntary stock option cancellation program in

December 2020 under which qualified holders of outstanding options granted from 2012 to 2017 were given the

opportunity to cancel their options in exchange for a market value payment. In December, 1.3 million options were

cancelled for aggregate proceeds of $0.5 million.

9.1 CONVERTIBLE DEBENTURES

During the third quarter of 2020, Cineplex issued a $316.3 million principal amount of convertible unsecured

subordinated debentures, maturing on September 30, 2025 (the “Maturity Date”) and bearing interest at a rate of

5.75% per annum, payable semi-annually in arrears on September 30 and March 31 in each year, commencing on

September 30, 2020. At the holder’s option, the Debentures may be converted into Shares at a conversion price of

$10.94 per Share at any time prior to the close of business on the earlier of: (i) five business days prior to the

Maturity Date, and (ii) if called for redemption, five business days immediately preceding the dated fixed for

redemption of the Debentures, at a conversion price to be determined at the time of pricing. Holders who convert

their Debentures into Shares will receive accrued and unpaid interest for the period from the date of the latest

Interest Payment Date to the date of conversion.

The Debentures are direct, unsecured subordinated obligations of Cineplex, subordinated to any senior indebtedness

of Cineplex and ranking equally with one another and with all other existing and future unsecured subordinated

indebtedness of Cineplex.

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Cineplex Inc.

Management's Discussion and Analysis

The Debentures will not be redeemable by Cineplex prior to September 30, 2023. On or after September 30, 2023

and prior to September 30, 2024, Cineplex may, at its option, redeem the Debentures in whole or in part from time

to time provided that the volume weighted average trading price of the Share on the Toronto Stock Exchange during

the 20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of redemption

is given is not less than 125% of the conversion price. On or after September 30, 2024, the Debentures may be

redeemed in whole or in part from time to time at the option of Cineplex at a price equal to their principal amount

plus accrued and unpaid interest. Redemption may in cash or in the form of Shares, at the option of Cineplex.

At the holder’s option, the Debentures may be converted into shares at a conversion price of $10.94 per share at any

time prior to the close of business on the earlier of: (i) five business days prior to the Maturity Date, and (ii) if called

for redemption, five business days immediately preceding the dated fixed for redemption of the Debentures, at a

conversion price to be determined at the time of pricing. Holders who convert their Debentures into shares will

receive accrued and unpaid interest for the period from the date of the latest interest payment date to the date of

conversion.

The fair value of the liability component of the Debentures was assessed at inception based on an estimated market

discount rate of 14.1% less the pro-rata portion of transaction costs, and will be accreted to the full face value over

the term of the debenture. Cineplex recorded accretion on Debentures of $7.5 million. Accretion on Debentures is

included as part of the interest expense on the consolidated statement of operations. The residual value was allocated

to the equity component less the pro-rata portion of transaction costs as prescribed by IFRS 9, Financial

Instruments.

10. SEASONALITY AND QUARTERLY RESULTS

Historically, Cineplex’s revenues have been seasonal, coinciding with the timing of major film releases. The most

marketable motion pictures were traditionally released during the summer and the late-November through December

holiday season. This caused changes from quarter to quarter in theatre attendance, affecting theatre exhibition

reported results. The seasonality of theatre attendance has become less pronounced as film studios have expanded

the historical summer and holiday release windows and increased the number of heavily marketed films released

during traditionally weaker periods. Cineplex’s diversification into other businesses such as digital media and

amusement and leisure, which are not as dependent on Hollywood content, has contributed to reduce the impact of

this seasonality on Cineplex’s consolidated results. To meet working capital requirements during lower revenue

quarters, Cineplex can draw upon the Revolving Facility subject to restrictions under the Credit Facilities including

liquidity covenants set forth in the Credit Facilities (as amended, see Section 16, Subsequent Events), which had

$456.0 million drawn and $153.8 million available subject to the Credit Facilities (see Section 16, Subsequent

events) as of December 31, 2020. In response to the impact of the COVID-19 pandemic, Cineplex is closely

monitoring its liquidity. Details with respect to its ongoing measures are detailed in Section 1.1 Response to

COVID-19.

Summary of Quarterly Results (in thousands of dollars except per Share, per patron, theatre attendance and theatre

location and screen data, unless otherwise noted):

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

2020 2019

Q2 Q1 Q4 Q3 Q2

Restated

Revenues

Box office revenues $ 7,260 $ 14,531 $ 27 $ 111,002 $ 181,789 $ 177,865 $ 189,371 $ 156,496

Food service revenues 10,543 15,468 3,256 79,365 125,159 125,550 129,563 103,058

Media revenues 12,496 12,825 7,880 32,157 69,545 43,308 49,196 34,706

Amusement revenues 13,597 13,236 3,731 47,337 53,471 58,143 58,117 58,500

Other revenues 8,556 4,962 7,094 12,940 13,256 13,582 12,608 11,864

52,452 61,022 21,988 282,801 443,220 418,448 438,855 364,624

Expenses

Film cost 3,151 7,261 10 56,500 93,925 93,735 103,005 78,721

Cost of food service 3,989 3,680 789 22,209 27,701 27,439 28,247 23,436

Depreciation - right-of-use assets 28,136 30,539 34,185 35,533 36,471 36,456 36,557 36,462

Depreciation and amortization - other 28,750 30,375 31,759 33,962 33,135 31,712 32,403 31,633

(Gain) loss on disposal of assets (283) (14,113) 478 817 868 303 116 477

Other costs 77,213 78,754 62,175 157,548 214,922 190,955 192,988 183,828

Impairment of long-lived assets and

goodwill 56,175 65,634 — 173,054 — — — —

197,131 202,130 129,396 479,623 407,022 380,600 393,316 354,557

(Loss) income from continuing

operations

$ (144,679)

$ (141,108)

$ (107,408)

$ (196,822)

$ 36,198 $ 37,848 $ 45,539 $ 10,067

Adjusted EBITDA (i)

$ (32,097)

$ (28,928) $ (41,313) $ 46,472

$ 106,529

$ 106,132

$ 114,383

$ 78,742

Adjusted EBITDAaL (i) (ii) $ (65,948) $ (46,725) $ (72,532) $ 2,390 $ 62,327 $ 62,312 $ 70,255 $ 35,652

Net (loss) income from continuing

operations

$ (230,403)

$ (121,209)

$ (98,234)

$ (174,155)

$ 4,668 $ 15,100 $ 22,077 $ (5,329)

Net loss from discontinued operations — — (693) (4,259) (1,196) (1,718) (2,680) (2,031)

Net (loss) income

$ (230,403)

$ (121,209)

$ (98,927)

$ (178,414)

$ 3,472 $ 13,382 $ 19,397 $ (7,360)

EPS - basic and diluted from continuing

operations $ (3.64) $ (1.91) $ (1.55) $ (2.75) $ 0.08 $ 0.24 $ 0.35 $ (0.09)

EPS - basic and diluted from

discontinued operations — — (0.01) (0.07) (0.02) (0.03) (0.04) (0.03)

EPS - basic and diluted $ (3.64) $ (1.91) $ (1.56) $ (2.82) $ 0.06 $ 0.21 $ 0.31 $ (0.12)

Cash (used in) provided by operating

activities (ii) $ (61,041) $ (86,558) $ 18,095 $ 23,190 $ 124,133 $ 77,760 $ 58,346 $ 61,426

Cash provided by (used in) investing

activities (ii) 50,492 11,384 (8,947) (26,219) (46,443) (25,791) (24,851) (27,768)

Cash provided by (used in) financing

activities 12,977 74,252 (2,793) (12,819) (84,850) (52,336) (24,447) (34,277)

Effect of exchange rate differences on

cash 650 292 560 (950) 345 (158) 235 61

Net change in cash $ 3,078 $ (630) $ 6,915 $ (16,798) $ (6,815) $ (525) $ 9,283 $ (558)

Cash flows used in discontinued

operations $ — $ — $ (253) $ (2,138) $ 2,821 $ (1,441) $ (1,120) $ (807)

BPP (i) $ 9.23 $ 9.30 $ 4.50 $ 10.36 $ 10.79 $ 10.16 $ 11.13 $ 10.44

CPP (i) $ 9.06 $ 7.37 $ 10.33 $ 6.79 $ 6.81 $ 6.68 $ 7.04 $ 6.35

Film cost percentage (i) 43.4 % 50.0 % 37.0 % 50.9 % 51.7 % 52.7 % 54.4 % 50.3 %

Theatre attendance (in thousands of

patrons) (i) 786 1,563 6 10,710 16,849 17,512 17,011 14,988

Theatre locations (at period end) 162 164 164 164 165 165 165 165

Theatre screens (at period end) 1,667 1,687 1,687 1,687 1,693 1,695 1,695 1,692

(i) See section 18, Non-GAAP measures.

(ii) Prior period figures have been revised to current period presentation. See Section 19, Reconciliation for further details.

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Management's Discussion and Analysis

Summary of adjusted free cash flow by quarter

Management calculates adjusted free cash flow per Share as follows (see Section 18, Non-GAAP measures, for a

discussion of adjusted free cash flow) (in thousands of dollars except per Share data and number of Shares

outstanding):

2020 2019

Q4 Q3 Q2 Q1 Q4 Q3

Restated

Cash (used in) provided by operating

activities (i) $ (61,041) $ (86,558) $ 18,095 $ 23,190 $ 124,133 $ 77,760 $ 58,346 $ 61,426

Less: Total capital expenditures net of

proceeds on sale of assets (10,099) (11,418) (14,391) (37,503) (51,448) (34,905) (27,653) (32,361)

Standardized free cash flow (71,140) (97,976) 3,704 (14,313) 72,685 42,855 30,693 29,065

Add/(Less):

Changes in operating assets and liabilities 67,257 34,894 (69,401) 10,428 (40,670) 3,666 30,432 (2,155)

Changes in operating assets and liabilities

of joint ventures (2,699) 372 (986) (1,156) (131) (411) (240) 1,317

Principal component of lease obligations (32,323) (24,811) (993) (33,819) (32,352) (31,836) (31,580) (32,484)

Principal portion of cash rent paid not

pertaining to current period (357) (357) (357) 1,071 (346) (345) (346) 1,037

Growth capital expenditures and other 8,928 10,801 13,777 34,526 37,202 30,580 19,190 27,693

Share of income of joint ventures, net of

non-cash depreciation (196) (255) (331) (73) (147) (189) (238) 92

Non-controlling interests — — 4 1 4 2 7 11

Net cash received from CDCP — — 782 3,128 2,882 3,910 3,128 5,474

Adjusted free cash flow $ (30,530) $ (77,332) $ (53,801) $ (207) $ 39,127 $ 48,232 $ 51,046 $ 30,050

Average number of Shares outstanding

63,333,238 63,333,238 63,333,238 63,333,238 63,333,238 63,333,238 63,333,238 63,333,238

Adjusted free cash flow per Share $ (0.482) $ (1.221) $ (0.849) $ (0.003) $ 0.618 $ 0.762 $ 0.806 $ 0.474

(i) Prior period figures have been revised to conform to current period presentation. See Section 19, Reconciliation for further details.

11. RELATED PARTY TRANSACTIONS

Cineplex may have transactions in the normal course of business with entities whose management, directors or

trustees are also directors of Cineplex. Any such transactions are in the normal course of operations and are

measured at market-based exchange amounts. Unless otherwise noted, these transactions are not considered related

party transactions for financial statement purposes.

The Chief Executive Officer of Riocan Real Estate Investment Trust (“Riocan”) served as a member of the Board

until May 5, 2020. Prior to his departure, Cineplex incurred theatre expenditures for theatres under lease

commitments with Riocan in the amount of $20.2 million (2019 - $43.0 million).

12. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATION UNCERTAINTIES

Cineplex makes estimates and assumptions concerning the future that may not equal actual results. The following

are the estimates and judgments applied by management that most significantly impact Cineplex’s consolidated

financial statements. These estimates and judgments have a significant risk of causing a material adjustment to the

carrying amounts of assets and liabilities within the next financial year.

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Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Goodwill - recoverable amount

Cineplex tests at least annually whether goodwill suffered any impairment. Management makes key assumptions

and estimates in determining the recoverable amount of groups of cash generating units’ goodwill, including future

cash flows based on historical and budgeted operating results, growth rates, tax rates and appropriate after-tax

discount rates.

Financial instruments - fair value of over-the-counter derivatives

Cineplex’s over-the-counter derivatives include interest rate swaps used to economically hedge exposure to variable

cash flows associated with interest payments on Cineplex’s borrowings. Management estimates the fair values of

these derivatives as the present value of expected future cash flows to be received or paid, based on available market

data, which includes market yields and counter-party credit spreads.

Revenue recognition - gift cards

Management estimates the value of gift cards that are not expected to be redeemed by customers, based on the terms

of the gift cards and historical redemption patterns, including industry data. The estimates are reviewed annually, or

when evidence indicates the existing estimate is not valid.

Income taxes

The timing of reversal of timing differences and the expected income allocation to various tax jurisdictions within

Canada affect the effective income tax rate used to compute the deferred income tax asset. Management estimates

the reversals and income allocation based on historical and budgeted operating results and income tax laws existing

at the consolidated balance sheet dates. In addition, management occasionally estimates the current or future

deductibility of certain expenditures, affecting current or deferred income tax balances and expenses.

Fair value of identifiable assets acquired and liabilities assumed in business combinations

Significant judgment is required in the identifying of tangible and intangible assets and liabilities of the acquired

businesses, as well as determining their fair values.

Share-based compensation

Management is required to make certain assumptions and to estimate future financial performance to estimate the

fair value of Share-based awards at each consolidated balance sheet date. The LTIP and Incentive Plan requires

management to estimate future non-GAAP earnings measures, future revenue growth relative to specified industry

peers, and total shareholder return, both absolutely and relative to specified industry peers. Future non-GAAP

earnings are estimated based on current projections, updated at least annually, taking into account actual

performance since the grant of the award. Future revenue growth relative to peers is based on historical performance

and current projections, updated at least annually for actual performance since the grant of the award by Cineplex

and its peers. Total shareholder return for Cineplex and its peers is updated at each consolidated balance sheet date

based on financial models, taking into account financial market observable inputs.

Lease terms

Some leases of property contain extension options exercisable by Cineplex up to one year before the end of the non-

cancellable contract period. Where practicable, Cineplex seeks to include extension options in new leases to provide

operational flexibility. In determining the lease term, Cineplex considers all facts and circumstances that create an

economic incentive to exercise an extension option, or not exercise a termination option. The assessment is reviewed

upon a trigger by a significant event or a significant change in circumstances.

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Cineplex Inc.

Management's Discussion and Analysis

13. ACCOUNTING POLICIES

ACCOUNTING STANDARDS APPLIED OR ADOPTED IN THE CURRENT YEAR

Management of Cineplex reviews all changes to the IFRS when issued. The International Accounting Standards

Board (“IASB”) has issued the following standards, which have not yet been adopted by Cineplex. The following is

a description of the new standards:

Accounting for Government Subsidies

Cineplex recorded, presented, and disclosed the government subsidies received in Canada and the United States in

accordance with IAS 20, Accounting for Government Grants and Disclosure of Government Assistance. During the

year ended December 31, 2020, Cineplex recorded subsidies in the amount of $61.9 million which have been offset

in other costs.

ACCOUNTING STANDARDS

IFRS 16, Leases (“IFRS 16”) - Amendment

In May 2020, the IASB issued an amendment to IFRS 16, which added a practical expedient to provide relief for

lessees from lease modification accounting for rent concessions related to COVID-19. The practical expedient is

only applicable to rent concessions provided as a direct result of the COVID-19 pandemic. In order to apply the

practical expedient, all of the following conditions must be met:

• the change in lease payments results in revised consideration for the lease that is substantially the same as,

or less than, the consideration for the lease immediately preceding the change;

• the rent concession is for relief for payments that were originally due on or before June 30, 2021. Any

subsequent rental increases of amounts deferred can extend beyond June 30, 2021; and

• there is no substantive change to other terms and conditions of the lease.

The practical expedient relieve lessees from assessing whether rent concessions are lease modifications and applying

the lease modification requirements to those concessions. A lessee applying the practical expedient would generally

account for forgiveness or waiver of lease payments as a variable lease payment which is recognized on the

Statement of Operations as a gain or loss with a corresponding adjustment to derecognize the portion of lease

liability which has been waived or forgiven. Lease payments that are deferred to other periods would result in a re-

measurement of the lease obligation using the original incremental borrowing rate with any difference related to the

change in timing of payments being recognized in gain or loss. Rent concessions can also incorporate both a

forgiveness or waiver of payments and a change in the timing of payments.

Cineplex will not apply the practical expedient to lease concessions.

Accounting standards issued but not yet applied

Management of Cineplex reviews all changes to IFRS when issued. The International Accounting Standards Board

(“IASB”) has issued the following standard, which has not yet been adopted by Cineplex. The following is a

description of the new standard:

IAS 1 Presentation of Financial Statements - Amendment

In January 2020, the IASB issued Classification of Liabilities as Current or Non-current, which amended IAS 1

Presentation of Financial Statements and clarified how to classify debt and other financial liabilities as current or

non-current in particular circumstances. The amendments are effective for annual reporting periods beginning on or

after January 1, 2023, with earlier application permitted.

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Under the new amendment, an entity shall classify a liability as current when: (a) it expects to settle the liability in

its normal operating cycle: (b) it holds the liability primarily for the purpose of trading; (c ) the liability is due to be

settled within twelve months after the reporting period; or (d) it does not have the right at the end of the reporting

period to defer settlement of the liability for at least twelve months after the reporting period.

If Cineplex were to early adopt the amendment to IAS 1, the application would result in the long-term debt being

classified as current in the December 31, 2020 balance sheet due to the projected covenant breaches.

14. RISKS AND UNCERTAINTIES

Cineplex is exposed to a number of risks and uncertainties in the normal course of business that have the potential to

affect operating performance. Cineplex has operating and risk management strategies and insurance programs to

help minimize these operating risks and uncertainties. In addition, Cineplex has entity level controls and governance

procedures including a corporate code of business conduct and ethics, whistle blowing procedures, clearly

articulated corporate values and detailed policies outlining the delegation of authority within Cineplex.

Cineplex conducts an annual enterprise risk management assessment which is overseen by Cineplex’s executive

management team and the audit committee of the Board and is reported to the full Board. The enterprise risk

management framework sets out principles and tools for identifying, evaluating, prioritizing and managing risk

effectively and consistently across Cineplex. Senior management participate in a detailed review of enterprise risk

in four major categories: environment risks, process risks, information risks and business unit risks. In addition,

Cineplex monitors risks and changing economic conditions on an ongoing basis and adapts its operating strategies as

required.

This section describes the principal risks and uncertainties that could have a material adverse effect on Cineplex’s

business and financial results. The risks and uncertainties described below are not the only risks that may impact

Cineplex’s business. Additional risks not currently known to Cineplex or that management currently believes are

immaterial may also have a material adverse effect on future business and operations. Any discussion about risks

should be read in conjunction with “Forward-Looking Statements”.

Impact of COVID-19 on the Business, Financial Condition and Results of Operations of Cineplex

The outbreak of the COVID-19 pandemic has had an unprecedented impact on all of Cineplex’s business segments.

As an entertainment company that operates in spaces where guests gather in close proximity, including theatres and

LBE venues, Cineplex has been significantly impacted by the actions taken to control the spread of COVID-19. On

March 16, 2020, Cineplex announced the temporary closure of all of its theatres and LBE venues across Canada, as

well as substantially all route locations operated by P1AG. On April 1, 2020, in response to applicable government

directives and guidance from Canadian public health authorities, Cineplex announced that the closure of its theatres

and LBE venues across Canada would remain in effect and that the reopening of such locations would be reassessed

as further guidance is provided by Canadian public health authorities and applicable government authorities.

Although Cineplex has been able to temporarily open some locations since March 2020, the second wave of

COVID-19 infections in the fall and winter of 2020/2021 has resulted in another round of government mandated

closures in select markets, many of which remain in force at the date of this MD&A with no clear date for

reopening.

The impact of the COVID-19 pandemic cannot be quantified at this time because of the significant uncertainty

around the timing of the reductions of government imposed restrictions and mandated closures of non-essential

businesses, and the potential long-term effects that COVID-19 may have on Cineplex’s exhibition and amusement

and leisure businesses. Cineplex cannot predict when restrictions will be lifted or how quickly (a) its businesses will

be permitted to resume operations and (b) guests will return to its locations once operations have resumed, which

may be a function of (i) continued safety and health concerns, (ii) additional regulatory requirements limiting

Cineplex’s seating capacity, and/or (iii) depressed consumer sentiment due to adverse economic conditions,

including job losses, among other things. If Cineplex does not respond appropriately to the pandemic, or if guests do

not perceive its response to be adequate, Cineplex could suffer damage to its reputation, which could adversely

affect its business.

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Additional significant impacts on Cineplex’s business caused by the COVID-19 pandemic include, and are likely to

continue to include, among others:

• lack of availability of films in the short or long-term, including as a result of (i) continued delay in film

releases; (ii) release of scheduled films on alternative channels, (iii) disruptions or suspensions of film

production, or (iv) the reduction or elimination of the theatrical exclusive release window including the

introduction of a Premium Video On Demand (“PVOD”) window and direct to streaming services releases;

• increased operating costs resulting from additional regulatory requirements enacted in response to the

COVID-19 pandemic and from precautionary measures it voluntarily takes at Cineplex’s locations for the

health and well being of its guests and employees;

• challenges maintaining relationships with its business partners, including its landlords, suppliers and

motion picture distributors as a result of its business closures during the COVID-19 pandemic;

• unavailability of employees and/or their inability or unwillingness to conduct work under revised work

environment protocols;

• increased risks related to employee matters, including increased employment litigation and claims relating

to terminations or leaves of absence caused by the suspension of operations;

• reductions and delays associated with planned operating and capital expenditures;

• Cineplex’s inability to generate significant cash flow from operations if Cineplex’s theatres continue to

operate at significantly lower than historical levels, which could, in the long-term, lead to a substantial

increase in indebtedness and may negatively impact Cineplex’s ability to comply with the financial

covenants in the Credit Facilities;

• Cineplex’s inability to access lending, capital markets and other sources of liquidity, if needed, on

reasonable terms, or at all, or obtain amendments, extensions and waivers of financial maintenance or other

material terms;

• Cineplex’s inability to effectively meet short-term and long-term obligations which it does not have the

ability to eliminate or reduce (including interest payments, taxes, critical maintenance capital expenditures

and compensation and benefits payments); and

• Cineplex’s inability to service its existing and future indebtedness.

The longer and more severe the COVID-19 pandemic is, including new outbreaks in the future, the more significant

the effects will be on Cineplex’s business, financial conditions and results of operations. Even when the COVID-19

pandemic subsides, Cineplex cannot guarantee that it will recover as rapidly as other industries, or as other operators

within the movie exhibition industry, due to its strong footprint in densely populated areas. Further, if Canada

experiences additional outbreaks of COVID-19, Cineplex may elect on a voluntary basis to again close (after

reopening) certain of its theatres and LBE venues or governmental officials may order additional closures, impose

further restrictions on travel or introduce social distancing measures such as limiting the number of people allowed

in a theatre or other venue at any given time.

While Cineplex has eliminated certain variable costs and reduce fixed costs to the extent possible, Cineplex

continues to incur significant expenses, including interest payments, taxes, critical maintenance capital expenditures,

occupancy costs, and compensation and benefits payments. Cineplex cannot be certain that it will have access to

sufficient liquidity to meet its obligations for the time required to allow its operations to resume or normalize. The

net cash burn experienced by the Company in the second, third and fourth quarters of 2020 may not be sustainable at

its current levels and may worsen in the future. Further, Cineplex may not be able to obtain additional liquidity and

any relief provided by lenders, governmental agencies, and business partners may not be adequate or may include

onerous terms.

Cineplex continues to actively monitor all aspects of its business and operations in order to minimize the impact of

COVID-19 on its operations wherever possible. However, the outbreak of COVID-19 has caused significant

disruptions to Cineplex’s ability to generate profitability and cash flows. Cineplex expects the ongoing COVID-19

pandemic and the events and circumstances resulting from the COVID-19 pandemic to have a material negative

impact on its business, financial condition and results of operations into 2021.

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Litigation Arising Out of the Termination of the Cineworld Transaction

Cineplex has commenced an action against Cineworld as a result of Cineworld’s repudiation of the Arrangement

Agreement. Cineworld has filed a counterclaim against Cineplex for an unspecified amount of costs that it incurred

as a result of Cineplex’s alleged breaches of the Arrangement Agreement. See Section 1.1 Recent Developments.

While Cineplex denies Cineworld’s allegations and believes that Cineworld (a) had no legal basis to terminate the

Arrangement Agreement, and (b) breached the Arrangement Agreement and its other contractual obligations, the

outcome of such litigation cannot be predicted with certainty. Cineplex will incur additional expenses in connection

with these matters, and there can be no assurance that it will be successful in obtaining any financial remedy. Even if

Cineplex’s action against Cineworld is successful, Cineworld may not have the ability to pay the full amount of any

damages awarded. As well, the litigation proceedings could take away from management’s time and effort, which

could be otherwise spent on running Cineplex’s business. There can be no assurance that the proceedings, and

associated costs, will not have a material adverse impact on Cineplex’s financial performance, cash flow and results

of operations.

General Economic Conditions

Entertainment companies compete for guests’ entertainment time and spending, and as such can be sensitive to

global, national or regional economic conditions and any changes in the economy may either adversely influence

these revenues in times of an economic downturn or positively influence these revenue streams should economic

conditions improve. Historical data shows that movie theatre attendance has not been negatively affected by

economic downturns over the past 25 years. However, COVID-19 has significantly increased economic uncertainty,

which could lead to a long lasting recession in Canada, which will further adversely affect Cineplex’s business, and

such adverse effects may be material. Cineplex has never previously experienced a sustained complete halt of its

operations across Canada, and as a result, its ability to predict the impact of such a halt on its operations and future

prospects is uncertain.

Negative Cash Flow from Operations

Cineplex reported negative cash flow from operations for the year ended December 31, 2020 due to the impact of

the COVID-19 pandemic. There can be no assurance that Cineplex will generate sufficient revenues to achieve or

maintain profitability or positive cash flow from operations in the future. If Cineplex does not achieve or maintain

profitability or positive cash flow from operating activities, then there could be a material adverse effect on

Cineplex’s business, financial condition and results of operation.

Business Continuity Risk

Cineplex’s primary sources of revenues are derived from providing an out of home entertainment experience. Our

business results could be significantly impacted by a terrorist threat, severe weather incidents, the outbreak of a

pandemic or general fear of community gatherings that may cause people to stay away from public places including

movie theatres, malls and amusement and leisure locations. Cineplex operates in locations spread throughout North

America which mitigates the risk to a specific location or locations. Cineplex has procedures to manage such events

should they occur. These procedures identify risks, prioritize key services, plan for large staff absences and clarify

communication and public relations processes. However, should there be a large-scale threat or occurrence, it is

uncertain to what extent Cineplex could mitigate this risk and the costs that may be associated with any such crises.

Further, Cineplex purchases insurance coverage from third-party insurance companies to cover certain operational

risks, and is self-insured for other matters.

Upon reopening its theatres and location-based entertainment venues following the closures resulting from

COVID-19, there is a risk that locations operate at significantly lower levels than prior to the COVID-19 pandemic

and as a result this may negatively impact the ability of Cineplex to meet its financial covenants, access debt or

equity capital markets for sources of additional liquidity on reasonable terms, and meet its short and long-term

obligations.

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Customer Risk

In its consumer-facing entertainment businesses, Cineplex competes for the leisure time and disposable income of

all potential customers. All other forms of entertainment are substantial competitors to the movie-going experience

including home and online consumption of content, sporting events, streaming services, gaming, live music

concerts, live theatre, other entertainment venues and restaurants. Cineplex aims to deliver value to its guests

through a wide variety of entertainment experiences and price points. Cineplex monitors pricing in all markets to

ensure that it offers a reasonably priced out of home experience compared to other entertainment alternatives. If

Cineplex is too aggressive in raising ticket prices or concession prices, there may be an adverse effect on theatre

attendance and food service revenues.

To mitigate this risk, Cineplex offers the SCENE loyalty program, which rewards guests for their patronage with

special offers as well as the ability to earn and redeem points. However, loyalty programs also carry a risk in that

customers may not be satisfied with the offering or any change in offerings. There also exists a risk of saturation of

loyalty programs in a market or the inability to further grow membership such that the program may generate costs

in excess of the benefits. Cineplex monitors customer needs to try and ensure that its entertainment experiences meet

the anticipated needs of key demographic groups. Cineplex is differentiating the movie-going experience by

providing premium alternatives such as UltraAVX, VIP, 4DX, ScreenX, Cineplex Clubhouse and D-BOX seating.

Cineplex also includes XSCAPE Entertainment Centres in select theatres and provides alternative programming

which appeals to specific demographic groups. In addition, digital technology has allowed for more niche

programming.

In the event that consumer preferences change, Cineplex may need to incur further capital expenditures to redevelop

or upgrade existing locations. Cineplex continues to improve the quality of its theatre assets through ongoing

renovations and theatre recliner retrofits. If Cineplex’s execution of processes does not consistently meet or exceed

customer expectations due to poor customer service or poor quality of assets, movie theatre attendance may be

adversely affected. Cineplex monitors customer satisfaction through surveys and focus groups and maintains a guest

services department to address customer concerns. Guest satisfaction is tied to performance measures for theatre

management ensuring alignment between corporate and operational objectives.

Even when government restrictions are lifted as the number of COVID-19 cases subside, it is unclear how quickly

customers will return to Cineplex’s theatres and location-based entertainment venues, which may be a function of

continued concerns over safety and social distancing and/or depressed consumer sentiment due to adverse economic

conditions. Even once theatres resume operations, a single outbreak of COVID-19 in a theatre could result in

additional costs and further closures. If Cineplex does not respond appropriately to the COVID-19 pandemic, or if

customers do not perceive its response to be adequate, Cineplex could suffer damage to its reputation, which could

significantly adversely affect its business, financial condition and results of operations.

There is the potential for misinformation to be spread virally through social media relating to Cineplex’s assets as

well as the quality of its customer service. In response to this risk, Cineplex monitors commentary on social media

in order to respond quickly to potential social media misinformation or service issues.

Cineplex developed its Cineplex Store in response to the risk created by new in-home and on-the-go entertainment

offerings. Cineplex’s offerings through the Cineplex Store of TVoD movies are delivered online via third-party

technology platforms. Technological issues relating to online delivery of content could negatively impact customer

satisfaction. Cineplex monitors performance metrics for electronic delivery in order to proactively manage any

potential customer satisfaction issues.

Regarding its media sales businesses, certain of Cineplex’s media customers have signed contracts of finite lengths

or that allow for early termination. There is a risk that these customers could choose not to renew these contracts at

their maturity, or take steps to terminate them prior to maturity, which would have adverse effects on Cineplex’s

media revenues.

In its digital place-based media and amusement solutions businesses, Cineplex engages with multiple businesses

where it provides products and services. These arrangements include the risk that businesses could decide to source

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the same products or similar services from a competitor, delay the timing of contract fulfillment or curtail spending

due to economic conditions, which would have a negative impact on Cineplex’s results.

Film Entertainment and Content Risk

Cineplex’s ability to operate successfully depends upon the availability, diversity and appeal of filmed content, the

ability of Cineplex to license films and the performance of these films in Cineplex’s markets. Cineplex primarily

licenses first-run films, the success of which is dependent upon their quality, as well as on the marketing efforts of

film studios and distributors. To mitigate this risk, Cineplex continues to diversify its entertainment offerings.

Nonetheless, Cineplex is highly dependent on film product and film performance, including the number and success

of blockbuster films. A reduction in quality or quantity of both 2D and 3D film product, any disruption or delay in

the production or release of films, the introduction of new delivery platforms for first run product, a strike or threat

of a strike in film production, a reduction in the marketing efforts of film studios and distributors or a significant

change in film release patterns, would have a negative effect on movie theatre attendance and adversely affect

Cineplex’s business and results of operations.

The impact of COVID-19 has led to less film productions by studios, delayed film releases, further reductions to the

theatrical release window and redirection of a limited number of theatrical releases to streaming services. There is a

risk that there will be less film content available on the reopening of theatres to entice customers to return to theatres

at historical levels.

Cineplex box office revenues depend upon movie production and its relationships with film distributors, including a

number of major Hollywood and Canadian distributors. In 2019, seven major film distributors accounted for

approximately 86% of Cineplex’s box office revenues, which is consistent with industry standards. Deterioration in

Cineplex’s relationships with any of the major film distributors or an increase in studio concentration or

consolidation could affect its ability to negotiate film licenses on favourable terms or its ability to obtain

commercially successful films. Cineplex actively works on maintaining good relations with these distributors, as

this affects its ability to negotiate commercially favourable licensing terms for first-run films or to obtain licenses at

all. In addition, a change in the type and breadth of movies offered by studios may adversely affect the demographic

base of moviegoers.

Cineplex competes with other consumption platforms, including cable, satellite television, and Blu-rays, as well as

TVoD, subscription video on demand (“SVOD”) and other over the top operators via the Internet. The release date

of a film in other channels of distribution such as over the top internet streaming, pay television and SVOD is at the

discretion of each distributor and day and date release or earlier release windows for these or new alternative

channels including the recent pilots by certain studios with PVOD models could have a negative impact on

Cineplex’s business.

Exhibition Industry Risk

Cineplex operates in each of its local markets with other forms of entertainment, as well as in some of its markets

with national and regional film exhibition circuits and independent film exhibitors. In respect of other film

exhibitors, Cineplex primarily competes with respect to film licensing, attracting guests and acquiring and

developing new theatre sites and acquiring existing theatres. Movie-goers are generally not brand conscious and

usually choose a theatre based on its location, the films showing, showtimes available and the theatre’s amenities.

As a result, the building of new theatres, renovations or upgrades to existing theatres, or the addition of screens to

existing theatres by competitors in areas in which Cineplex operates theatres may result in reduced theatre

attendance levels at Cineplex’s theatres.

In response to this risk, management continually reviews and upgrades its existing locations. Cineplex also fosters

strong ties with the real estate and development communities and monitors potential development sites. Most prime

locations in larger markets have been developed such that significant further development would be generally

uneconomical. In addition, the exhibition industry is capital intensive with high operating costs and long-term

contractual commitments. Significant construction and real estate costs make it increasingly difficult to develop new

sites profitably.

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Management's Discussion and Analysis

In response to risks to theatre attendance, Cineplex continues to pursue other revenue opportunities including media

in the form of in-theatre and out of home advertising, amusement and leisure, promotions and alternative uses of its

theatres during non-peak hours. Amusement and leisure includes amusement solutions offered by P1AG, in-theatre

gaming locations, XSCAPE Entertainment Centres and in-theatre at select Cineplex locations and location-based

entertainment including The Rec Room and Playdium. Cineplex’s ability to achieve its business objectives may

depend in part on its ability to successfully increase these revenue streams.

Media Risk

Media revenue has been shown to be particularly sensitive to economic conditions and any changes in the economy

may either adversely influence this revenue stream in times of a downturn or positively influence this revenue

stream should economic conditions improve. Cineplex has numerous large media and digital place-based media

customers, the loss of which could impact Cineplex’s results. There is no guarantee that Cineplex could replace the

revenues generated by these large customers if their business was lost.

The majority of Cineplex’s advertising revenue is earned at Cineplex theatres. There is a risk of decreased

attendance at theatres once they reopen as a result of continued safety and health concerns and depressed consumer

sentiment due to adverse economic conditions, arising from the impact of COVID-19 pandemic. This could result in

media customers electing to reduce their spending in cinemas and advertise through alternative channels.

Amusement and Leisure Risk

Cineplex’s location-based entertainment concepts are new concepts in the Canadian marketplace, and as such there

is a risk that consumers may not react as favourably to the concepts, entertainment options or food service options as

Cineplex’s projections indicate. As part of Cineplex’s vertical integration, P1AG is the primary supplier of games

and amusement offerings for Cineplex’s theatres, The Rec Room and Playdium locations, mitigating supplier risk.

Cineplex’s amusement and leisure operations compete against other offerings for guests’ entertainment spending. In

each of the local markets in which Cineplex operates and will operate, it faces competition from local, national or

international brands that also offer a wide variety of restaurant and/or amusement and gaming experiences, including

sporting events, bowling alleys, entertainment centres, nightclubs and restaurants. Competition for guests’

entertainment time and spending also extends to in-home entertainment such as internet or video gaming and other

in-home leisure activities. Cineplex’s failure to compete favourably in these markets could have a material adverse

effect on Cineplex’s business, results of operations and financial condition.

Cineplex’s new location-based entertainment locations may not meet or exceed the performance of our existing

locations or our performance targets. New locations may even operate at a loss, which could have a significant

adverse effect on our overall operating results.

Cineplex’s results of operations are subject to fluctuations due to the timing of location-based entertainment

openings which may result in significant fluctuations in our quarterly performance. Cineplex typically incurs most

cash pre-opening costs for a new location within the two months immediately preceding, and the month of, the

location’s opening. In addition, the labor and operating costs for a newly opened store during the first three to six

months of operation are materially greater than what can be expected after that time, both in aggregate dollars and as

a percentage of revenues. Additionally, a portion of a current fiscal year new location capital expenditures is related

to locations that are not expected to open until the following fiscal year.

To mitigate these risks, Cineplex leverages its core competencies in food service execution, its partnership in

SCENE and its knowledge of the trends in amusement and gaming via its P1AG operations to continuously update

its amusement and leisure offerings in order to provide guests with the most compelling offerings available in

Canada.

Due to the outbreak of the COVID-19 pandemic, there is a risk of a permanent decrease in guests and corporate

events frequenting LBE locations upon reopening. Cineplex’s LBE venues have a larger guest-facing footprint and

higher levels of customer traffic than other concepts in the dining and entertainment industry. The effects of the

COVID-19 pandemic as a result of continued concerns over safety and social distancing and/or depressed consumer

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sentiment due to adverse economic conditions could have an adverse effect on Cineplex’s business, financial

conditional and results of operations.

P1AG’s procurement of games and amusement offerings is dependent upon a few suppliers, the ability to continue

to procure new games, amusement offerings and other entertainment-related equipment. To the extent that the

number of suppliers declines, P1AG could be subject to the risk of distribution delays, pricing pressure, lack of

innovation and other associated risks. In addition, any increase in cost or decrease in availability of new amusement

offerings that appeal to customers could have a negative impact on Cineplex’s revenues from its amusement and

leisure businesses.

P1AG competes with other providers of amusement and gaming services across North America. P1AG manages the

risk of customers switching gaming providers by continually monitoring the performance of its amusement solutions

and reacting quickly to replace underperforming solutions with newer or more relevant equipment. P1AG’s

expertise and experience in the industry and proven success maximizing revenue for its customers helps mitigate this

switching risk. A material amount of P1AG’s revenue is dependent on the customer traffic in venues in which they

operate. The COVID-19 pandemic in North America resulted in the closure of venues in which P1AG operates

gaming equipment. There is a risk that these venues will have decreased customer traffic once shutdowns are lifted

or may permanently shut down. Any reduction in traffic or permanent shutdown of venues could have a material

impact on their business.

Technology Risk

Technological advances have made it easier to create, transmit and electronically share unauthorized high-quality

copies of films during theatrical release. Some consumers may choose to obtain unauthorized copies of films rather

than attending the theatre which may have an adverse effect on Cineplex’s business. In addition, as home theatre

technology becomes more sophisticated and additional technologies become available to consume content,

consumers may choose other technology options rather than attending a theatre.

To mitigate these risks, Cineplex continues to enhance the out of home experience through the addition of new

technologies and experiences including 3D, VIP, UltraAVX, D-BOX, 4DX, ScreenX and digital projection in order

to further differentiate the theatrical product from the home product. Cineplex has also diversified its offerings to

customers by operating the Cineplex Store which sells TVOD movies in order to participate in the in-home and on-

the-go entertainment markets.

Changing platform technologies and new emerging technologies in the digital commerce industry, and specifically

relating to the delivery of TVOD and SVOD services, present a risk to the Cineplex Store’s operations. Should

Cineplex’s supplier cease operations or have its technology platform rendered obsolete, Cineplex’s sales of TVOD

products could be jeopardized.

Cineplex relies on various information technology solutions to provide its services to guests and customers, as well

in running its operations from its various office locations. Cineplex may be subject to information technology

malfunctions, outages, thefts or other unlawful acts that could result in loss of communication, unauthorized access

to data, change in data, or loss of data which could compromise Cineplex’s operations and/or the privacy of

Cineplex’s guests, customers and suppliers. Currently, as the majority of Cineplex’s corporate employees have

moved to a work-from-home platform, there is an increased risk to Cineplex’s technology systems, In response,

Cineplex has implemented additional security measures, including training, monitoring and testing and contingency

plans, to protect systems.

Information Management Risk

Cineplex needs an effective information technology infrastructure including hardware, networks, software, people

and processes to effectively support the current and future needs of the business in an efficient, cost-effective and

well-controlled fashion. To mitigate this risk, Cineplex is continually upgrading systems and infrastructure to meet

business needs.

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Management's Discussion and Analysis

Cineplex requires relevant and reliable information to support the execution of its business model and reporting on

performance. The integrity, reliability and security of information are critical to Cineplex’s daily and strategic

operations. Inaccurate, incomplete or unavailable information or inappropriate access to information could lead to

incorrect financial or operational reporting, poor decisions, privacy breaches or inappropriate disclosure of sensitive

information. To mitigate this risk, Cineplex continues to strengthen general information technology controls by

developing operating policies and procedures in the areas of change management, computer operations and security

access.

At select times during the normal course of business, Cineplex and its subsidiary and joint venture partners store

sensitive data, including intellectual property, proprietary business information including data with respect to

suppliers, employees and business partners, as well as some personally identifiable information on their customers

and employees. Further, Cineplex regularly works with third party suppliers in the delivery of services to their

customers and employees where such data is provided in the normal course of the commercial relationship. The

secure processing, maintenance and transmission of this information is critical to Cineplex’s operations and business

strategies. As such Cineplex adheres to industry standards for the payment card industry (“PCI”) data security

standard (“DSS”) compliance, as well as undertaking commercially reasonable efforts for non-financial data.

Cineplex recognizes that security breaches of the information systems of Cineplex or any one of its third-party

suppliers could compromise this information and expose Cineplex to liability, which could cause their businesses or

reputations to suffer. Despite security measures, information technology and infrastructure may be vulnerable to

unforeseen attacks by hackers or breached due to employee error, malfeasance, computer viruses, malware,

phishing, denial of service attacks, unauthorized access to confidential, proprietary or sensitive information,

industrial espionage or other disruptions. Any such breach could compromise networks and the information stored

there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information

could result in legal claims or proceedings, liability under laws that protect the privacy of personal information,

regulatory penalties, disrupt operations and the services provided to customers, damage reputation and cause a loss

of confidence in products and services, which could adversely affect business, financial condition, results of

operations and cash flows. In response to this risk, Cineplex has employees whose role is to monitor information

technology and processes to ensure risk is minimized.

Real Estate Risk

The acquisition and development of potential operating locations by Cineplex is dependent on the ability of

Cineplex to identify, acquire and develop suitable sites for these locations with favorable economic terms in both

new and existing markets, while competing with other entertainment and non-entertainment companies for site

locations. The cost to develop a new building is substantial and its success is not assured. While Cineplex is diligent

in selecting sites, the significant time lag from identifying a new site to opening can result in a change in local

market circumstances and could negatively impact the location’s chance of success. In addition, building new

operating locations may draw audiences away from existing sites operated by Cineplex. Cineplex considers the

overall return for the theatres in a geographic area when making the decision to build new locations. The majority of

Cineplex’s operating sites are subject to long-term leases. In accordance with the terms of these leases, Cineplex is

responsible for costs associated with utilities consumed at the location and property taxes associated with the

location. Cineplex has no control over these costs and these costs have been increasing over the last number of

years. Furthermore, due to the outbreak of the COVID-19 pandemic, Cineplex continued its negotiations with

landlord partners with respect to reductions in rent payments for current and future periods. While Cineplex works

hard to maintain positive relationships with its landlords, we cannot guarantee continued reductions in future rent

payments and there exists a potential for a default on existing lease obligations should the pandemic continue.

Cineplex continues to be liable for obligations under theatre leases in respect of certain divested theatres. If the

transferee of any such theatres fails to satisfy the obligations under such leases, Cineplex may be required to assume

the lease obligations.

Sourcing Risk

Cineplex relies on a small number of companies for the distribution of a substantial portion of its concession

supplies. If these distribution relationships were disrupted, Cineplex could be forced to negotiate a number of

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substitute arrangements with alternative distributors that could, in the aggregate, be less favourable to Cineplex than

the current arrangements.

Substantially all of Cineplex’s non-alcohol beverage concessions are products of one major beverage company. If

this relationship was disrupted, Cineplex may be forced to negotiate a substitute arrangement that could be less

favourable to Cineplex than the current arrangement. Any such disruptions could therefore increase the cost of

concessions and harm Cineplex’s operating margins, which would adversely affect its business and results of

operations.

Cineplex relies on one major supplier to source popcorn seed, and has entered contracts with this supplier to

guarantee a fixed supply. As crop yields can be affected by drought or other environmental factors, the supplier may

be unable to fulfill the whole of its contractual commitments, such that Cineplex would need to source the remaining

needed corn product from other suppliers at a potentially higher cost.

In order to minimize these operating risks, Cineplex actively monitors and manages its relationships with its key

suppliers.

The economic impacts of COVID-19 may have negative impact on Cineplex’s suppliers and as a result its suppliers

may not be able to sustain operations after the pandemic. A reduction in the number of suppliers or the loss of

critical suppliers may result in increased costs, or the inability to find satisfactory replacement goods and services in

the short or long-term.

Human Resources Risk

The success of Cineplex depends upon the retention of senior executive management, including its Chief Executive

Officer, Ellis Jacob. The loss of services of one or more members of the executive management team could

adversely affect Cineplex’s business, results of operations and Cineplex’s ability to effectively pursue its business

strategy. Cineplex does not maintain key-man life insurance for any of its employees but does provide long-term

incentive programs to retain key personnel and undertakes a comprehensive succession planning program.

Cineplex typically employs approximately 10,000 people, of whom approximately 80% are hourly workers whose

compensation is based on the prevailing provincial minimum wages with incremental adjustments as required to

match market conditions. Any increase in these minimum wages will increase employee related costs. Any increase

in minimum wages will impact employee-related costs. In order to mitigate the impact of the proposed increases,

Cineplex works to expand automation, take advantage of technological efficiencies and continually reviews pricing.

Approximately 6% of Cineplex’s employees are represented by unions, located primarily in the province of Quebec.

Because of the small percentage of employees represented by unions, the impact of labour disruption nationally is

low.

As a result of the government mandated closures, due to the impact of the COVID-19 pandemic, Cineplex

temporarily laid off all part-time staff members. There is a risk upon reopening, Cineplex may not be able to rehire

enough staff to sustain operations due to their unavailability, inability or unwillingness to rejoin the workforce.

Health and Safety Risk

Cineplex is subject to risks associated with food safety, alcohol consumption by guests, product handling and the

operation of machinery. Cineplex is in compliance with health and safety legislation and conducts employee

awareness and training programs on a regular basis. Health and safety issues related to our guests such as pandemics

and bedbug concerns are risks that may deter people from attending places of public gathering, potentially including

movie theatres, gaming centres, malls and dining locations. For those risks that it can control, Cineplex has

programs in place to mitigate its exposure. Cineplex will investigate further methods in order to keep guests and

employees safe at both locations and corporate offices.

There is a significant risk that concerns over health and safety as a result of COVID-19 will be long lasting and will

have an adverse impact on the business of Cineplex. In order to help mitigate these risks, Cineplex has made

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changes to its operations to enable social distancing, as well as increasing safety measures by reducing capacity,

promoting cashless transactions where possible and by cleaning and disinfecting surfaces on a regular basis.

Environment/Sustainability Risk

Cineplex’s business is primarily a service and retail business which delivers guest experiences rather than physical

commercial products and thus does not have substantial environmental risk. Cineplex operates multiple locations in

major urban markets and does not anticipate any significant changes to operations due to climate change. Should

legislation change to require more stringent management of carbon emissions or more stringent reporting of

environmental impacts, Cineplex anticipates this will result in minimal cost increases or changes to operating

procedures. Severe weather incidents (as a result of environmental changes or otherwise) have potential to

negatively impact Cineplex’s operation. See “Business Continuity Risk” above.

Integration Risk

While Cineplex has successfully integrated businesses acquired in the past, there can be no assurance that all

acquisitions, including recent acquisitions, will be successfully integrated or that Cineplex will be able to realize

expected operating and economic efficiencies from the acquisitions.

Financial and Markets Risk

Cineplex requires efficient access to capital in order to fuel growth, execute strategies and generate future financial

returns. For this reason Cineplex entered into the Revolving Facility. Cineplex hedges interest rates on the Term

Facility and $300 million of the Revolving Facility, thereby minimizing the impact of significant fluctuations in the

market rates. Cineplex’s exposure to currency and commodity risk is minimal as the majority of its transactions are

in Canadian dollars and commodity costs are not a significant component of the overall cost structure. Counter party

risk on the interest rate swap agreements is minimized through entering into these transactions with Cineplex’s

lenders. Upon the maturity of the Credit Facilities, there is a risk that Cineplex may not be able to renegotiate under

favorable terms in the then current economic environment.

As a result of COVID-19, Cineplex may not have sufficient funds available under its current financing sources to

fund operations on a short and/or long-term basis. The effects of COVID-19 on the financial markets could

significantly impact the ability of Cineplex to raise capital and could increase the cost of borrowing. There is a risk

that Cineplex may not be able to find timely sources of financing, which could have an adverse effect on its

business, financial condition and results of operations.

Foreign Currency Risk

Cineplex is exposed to foreign currency risk related to transactions in its normal course of business that are

denominated in currencies other than the Canadian dollar. Cineplex’s largest foreign currency exposure is to the US

dollar, as its amusement solutions and digital place-based media all operate in the United States and which represent

13.4% of Cineplex’s revenues. These revenues are naturally hedged by Cineplex’s US-based operating costs.

Interest Rate Risk

Cineplex is exposed to risk on the interest rates applicable on its Credit Facilities. To mitigate this risk, Cineplex has

entered into interest rate swap agreements as outlined in Section 7.4, Credit Facilities.

Legal, Regulatory, Taxation and Accounting Risk

Changes to any of the various international, federal, provincial and municipal laws, tariffs, treaties, rules and

regulations related to Cineplex’s business could have a material impact on its financial results. Compliance with any

changes could also result in significant cost to Cineplex. Failure to fully comply with various laws, rules and

regulations may expose Cineplex to proceedings which may materially affect its performance.

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On an ongoing basis, Cineplex may be involved in various judicial, administrative, regulatory and litigation

proceedings concerning matters arising in the ordinary course of business operations, including but not limited to,

personal injury claims, landlord-tenant disputes, alcohol-related incidents, commercial disputes, tax disputes,

employment disputes and other contractual disputes. Many of these proceedings seek an indeterminate amount of

damages.

To mitigate these risks, Cineplex promotes a strong ethical culture through its values and code of conduct. Cineplex

employs in-house counsel and uses third party tax and legal experts to assist in structuring significant transactions

and contracts. Cineplex also has systems and controls that ensure efficient and orderly operations. Cineplex also has

systems and controls that ensure the timely production of financial information in order to meet contractual and

regulatory requirements and has implemented disclosure controls and internal controls over financial reporting

which are tested for effectiveness on an ongoing basis. In situations where management believes that a loss arising

from a proceeding is probable and can be reasonably estimated, Cineplex records the amount of the probable loss.

As additional information becomes available, any potential liability related to these proceedings is assessed and the

estimates are revised, if necessary.

15. CONTROLS AND PROCEDURES

15.1 DISCLOSURE CONTROLS AND PROCEDURES

Management of Cineplex is responsible for establishing and maintaining disclosure controls and procedures for

Cineplex as defined under National Instrument 52-109 issued by the Canadian Securities Administrators.

Management has designed such disclosure controls and procedures, or caused them to be designed under its

supervision, to provide reasonable assurance that material information relating to Cineplex, including its

consolidated subsidiaries, is made known to the Chief Executive Officer and the Chief Financial Officer by others

within those entities, particularly during the period in which the annual filings are being prepared.

Management has evaluated the design and operation of Cineplex’s disclosure controls and procedures as of

December 31, 2020 and has concluded that such disclosure controls and procedures are effective.

15.2 INTERNAL CONTROLS OVER FINANCIAL REPORTING

Management of Cineplex is responsible for designing and evaluating the effectiveness of internal controls over

financial reporting for Cineplex as defined under National Instrument 52-109 issued by the Canadian Securities

Administrators. Management has designed such internal controls over financial reporting using the Integrated

Control - Integrated Framework: 2013 issued by the Committee of Sponsoring Organizations of the Treadway

Commission, or caused them to be designed under their supervision, to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of the financial statements for external purposes in accordance

with GAAP.

Management has used the Internal Control - Integrated Framework: 2013 to evaluate the effectiveness of internal

controls over financial reporting, which is a recognized and suitable framework developed by COSO.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with policies

and procedures may deteriorate.

Management has evaluated the design and operation of Cineplex’s internal controls over financial reporting as of

December 31, 2020, and has concluded that such controls over financial reporting are effective. There are no

material weaknesses that have been identified by management in this regard.

There has been no change in Cineplex’s internal controls over financial reporting that occurred during the most

recently completed interim period that has materially affected, or is reasonably likely to materially affect, Cineplex’s

internal control over financial reporting.

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16. SUBSEQUENT EVENTS

Subsequent to December 31, 2020, Cineplex completed a sale and leaseback transaction for its head office buildings

located at 1303 Yonge Street and 1257 Yonge Street, Toronto, Ontario for gross proceeds of $57.0 million. Fifty

percent of the net proceeds were used to permanently reduce Cineplex’s Revolving Credit Facilities to $591.7

million.

In January 2021, 165,146 stock options were cancelled as part Cineplex’s voluntary stock option cancellation

program for payment of $59 thousand. The cancelled stock options were returned to the pool available for future

grants under the Incentive Plan.

On February 8, 2021, Cineplex and Cineplex Entertainment Limited Partnership entered into the Third Credit

Agreement Amendment with The Bank of Nova Scotia providing Cineplex with certain financial covenant relief in

light of the COVID-19 pandemic and its effects on Cineplex’s business.

The following is a summary of the key terms of the Third Credit Agreement Amendment that are updated from the

First and Second Credit Agreement Amendments.

• Allow the issuance by Cineplex of second lien secured notes (the “Second Lien Notes”) with the following

terms:

▪ a minimum of $200 million and a maximum of $250 million of notes may be issued on or prior to

March 31, 2021;

▪ tenor of at least five years;

▪ secured second lien ranking, subordinate to the security granted for the obligations under the

Credit Facilities, and shall be subject to the terms of an intercreditor agreement that incorporates

certain agreed intercreditor principles and otherwise in form and substance satisfactory to the

agent under to the Credit Facilities; and

▪ mandatory repayment of the Credit Facilities from the issuance of Second Lien Notes, $100

million of which would constitute a permanent reduction.

• The following amendments to the Credit Facilities would become effective upon the completion of the

issuance of at least $200 million of Notes on or prior to March 31, 2021:

▪ The suspension of financial covenant testing would be extended until the fourth quarter of 2021.

On resumption of financial covenant testing in the fourth quarter of 2021, testing will be based on

an annualized calculation of Adjusted EBITDA (as further adjusted per Credit Agreement

definitions) for the fourth quarter of 2021 and immediately following two fiscal quarters, and

thereafter on a trailing four fiscal quarter period;

▪ The Total Leverage Ratio of 3.75x will apply when financial covenants are reinstated, and will be

reduced until the third quarter of 2022 at which point it will reach a level of 3.00x;

▪ The liquidity covenant would continue and be amended and extended beginning in February 2021,

through to and including December 2021, requiring available liquidity as defined on a monthly

basis (November 1, 2020 through January 31, 2021 - $100.0 million; February 2021 - $75.0

million; March 2021 - $60.0 million; April 1, 2021 through December 31, 2020 - $100.0 million;

▪ The addition of a Senior Leverage Ratio to be based on annualized Adjusted EBITDA and set at

1.0x lower than the Total Leverage Ratio. Senior Leverage Ratio to be defined as (i) Total Debt

less any Second Lien Notes to (ii) Adjusted EBITDA.

▪ Effective with the fourth quarter of 2021, additional growth capital expenditures will be subject to

pro-forma leverage covenant of 2.75x (both prior to and immediately after giving effect to any

such growth capital expenditure) based on actual last twelve month EBITDA; and

▪ Distributions continue to be blocked during the extended financial covenant suspension period and

only permitted when the total leverage ratio is less than 2.75x (both prior to and immediately after

giving effect to any such distribution).

On February 8, 2021, Cineplex announced that it has entered into an engagement letter with BMO Capital Markets

and Scotiabank in connection with a proposed private placement offering (the “Note Offering”) of second lien

secured notes (the “Notes”), subject to market and other conditions, Cineplex intends to use the net proceeds from

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the proposed Note Offering, if completed, to repay indebtedness under its Credit Facilities, in accordance with the

terms of the Third Amendment.

17. OUTLOOK

The following discussion is qualified in its entirety by the caution regarding forward-looking statements at the

beginning of this MD&A and Section 14, Risks and uncertainties.

The outlook for Cineplex’s businesses is contingent on its ability to navigate the current and future impact of

COVID-19 on its businesses.

On March 16, 2020, Cineplex temporarily closed all of its theatres and LBE locations and substantially all of its

route locations throughout North America in response to the COVID-19 pandemic. Cineplex’s related businesses,

including its media business, continue to experience the fallout of the closure of significant portions of the global

economy.

Since the closure of its theatres and LBE venues in March 2020, Cineplex diligently prepared for their safe

reopening, with the health and well being of its employees and guests being its top priority. Cineplex has carefully

re-examined all of its buildings and processes, so that when its theatres and LBE venues reopened, it has

implemented an industry-leading program with end-to-end health and safety protocols. At Cineplex’s theatres

specifically, it has also launched reserved seating in all auditoriums across the country to ensure proper physical

distancing between its guests.

Cineplex has been able to maintain connections with its guests during the period of theatre and LBE venue closures

through its online Cineplex Store and home delivery of food offerings via Uber Eats and Skip the Dishes, as well as

through the SCENE loyalty program and social media channels. Cineplex will use these communication channels to

ensure that its guests are made aware of when its theatres and LBE venues will reopen, and the various measures put

in place to ensure their safety while enjoying a long-deserved outing.

Cineplex gradually reopened theatre and LBE locations throughout July and August as government mandated

closures were reduced in markets in which Cineplex operates. On August 21, 2020, Cineplex became the first of all

the major film exhibitors in the world to reopen its entire circuit of theatres with all 164 Cineplex theatres and 1,687

screens across Canada were reopened, including 22 VIP Cinemas locations, as well as 10 location-based

entertainment venues. Although restrictions on social gatherings were partially lifted in many of the markets in

which Cineplex operated during the third quarter, social gathering restrictions were reinstituted in the fourth quarter

with the increased number of COVID-19 cases throughout the country. The second wave of COVID-19 cases during

the fall and winter months resulted in several provinces across Canada implementing mandatory lockdown measures

which have resulted in prolonged mandatory theatre closures and operating restrictions on the LBE businesses.

In December 2020, Health Canada approved and authorized the Pfizer-BioNTech and Moderna COVID-19 vaccines

for use in Canada with the first doses arriving during the holiday season. Canada has begun the inoculation process

of Canadians, starting with front line workers and high-risk individuals with plans to start vaccinating the general

population during the spring of 2021, and having all Canadians immunized by the fall of 2021. The efficient rollout

of vaccines is a significant leap forward to the return of normalcy and end of the COVID-19 pandemic. However,

the supply and roll-out of approved vaccines in Canada has been inconsistent to date and there can be no assurance

that vaccines will be widely available or distributed as currently anticipated, which would delay a return to

normalcy.

Countries around the world have recently updated their scheduled reopening dates for cinemas. Countries that are

scheduled to reopen their cinemas in January 2021 include but are not limited to Australia, Greece, Bulgaria and

Denmark. Japan had its biggest box office weekend in the country’s history during the fourth quarter of 2020 with

the exhibition of Demon Slayer: Mugen Train. The film exceeded expectations and welcomed over 3.4 million

guests and resulting in a record opening box office weekend topping the country’s previous record. With the strong

slate of upcoming film products, Cineplex remains confident that there will continue to be significant theatrical

releases.

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Based on how the exhibition industry has historically performed during depressed economic environments, and the

results of openings in other countries subsequent to COVID-19 related closures, Cineplex believes, but cannot

guarantee, that the industry will recover as consumer demand for the theatrical experience combined with a build-up

of anticipated content will help drive visitation as people look to return to normalcy. However, the significance of

the COVID-19 pandemic, including the adverse impact on Cineplex’s business, financial condition and results of

operations will be dictated by the duration of the pandemic and the effect on the economy and of responsive

governmental directives, all of which are currently unknown. Cineplex’s business could also be significantly

negatively impacted by changes in consumer behaviors as a result of COVID-19 (such as social distancing) or

further reductions to the theatrical release window. Further, the effect of COVID-19 on financial markets could

significantly impact the ability to raise capital and increase the cost of borrowing. There are limitations on the ability

of Cineplex to mitigate the adverse financial impact of the foregoing. The COVID-19 pandemic also creates

challenges for Cineplex in predicting future performance of its businesses or its liquidity needs in the near term.

FINANCIAL OUTLOOK

Cineplex continues to be negatively impacted by the ongoing COVID-19 pandemic and management focus

continues to be on minimizing net cash burn and optimizing liquidity. Since the onset of the COVID-19 pandemic,

Cineplex and Cineplex Entertainment Limited Partnership have entered into three amendments to its Credit

Facilities, providing Cineplex with certain financial covenant relief in light of the COVID-19 pandemic and its

effects on Cineplex’s businesses (see Section 6.4 Credit Facilities and Section 16, Subsequent events).

On July 15, 2020, Cineplex completed the offering of the Debentures for gross proceeds of $316.3 million, allowing

it to meet the conditions of the First Credit Agreement Amendment and providing additional liquidity for the

recovery period. In addition, a restructuring undertaken in July 2020 reduced headcount by approximately 130

positions, resulting in annual saving of approximately $12.0 million in employee costs, approximately half of which

relates to corporate overhead functions.

In December 2020, Cineplex entered into an agreement with Scotiabank to enhance and expand the SCENE program

receiving $60.0 million with respect to the reorganization. A portion of the proceeds were used to permanently repay

the Credit Facilities, and the remaining proceeds are available to be drawn under the Credit Facilities to fund

continuing operations.

In January 2021, Cineplex announced the sale of its head office building located at 1257 Yonge Street and 1303

Yonge Street, Toronto, Ontario for total cash proceeds of $57.0 million. Cineplex will continue to use the office

building through a sale-leaseback transaction. Cineplex used a portion of the proceeds to permanently repay the

Credit Facilities and the remaining proceeds are available to be drawn under the Credit Facilities to fund continuing

operations.

On February 8, 2021, Cineplex announced that it has entered into an engagement letter with BMO Capital Markets

and Scotiabank in connection with a proposed private placement offering (the “Note Offering”) of second lien

secured notes (the “Notes”), subject to market and other conditions, Cineplex intends to use the net proceeds from

the proposed Note Offering, if completed, to repay indebtedness under its Credit Facilities, in accordance with the

terms of the Third Amendment.

Management continues to focus on reducing costs including the elimination of future capital expenditures and the

termination of its partnership with Topgolf during the third quarter of 2020. With the issuance of the Debentures,

amendments to the Credit Facilities, planned asset sales and income tax recoveries, management believes that it has

adequate liquidity to fund operations for the currently anticipated duration of the pandemic.

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18. NON-GAAP MEASURES

The following measures included in this MD&A do not have a standardized meaning under GAAP and may not be

comparable to similar measures provided by other issuers. Cineplex includes these measures because its

management believes that they assist investors in assessing financial performance.

18.1 EBITDA, ADJUSTED EBITDA AND ADJUSTED EBITDAaL

Management defines EBITDA as earnings before interest income and expense, income taxes and depreciation and

amortization expense. Adjusted EBITDA excludes the change in fair value of financial instrument, (gain) loss on

disposal of assets, foreign exchange, impairment of long-lived assets, goodwill and investments, the equity loss

(income) of CDCP, the non-controlling interests’ share of adjusted EBITDA of TG-CPX Limited Partnership, and

depreciation, amortization, interest and taxes of Cineplex’s other joint ventures and associates. Adjusted EBITDAaL

modifies adjusted EBITDA to deduct current period cash rent paid or payable related to lease obligations net of

quantified savings negotiated with landlords as a result of the COVID-19 closures, including savings negotiated after

the period end. This includes agreements with landlords that are evidenced by way of written confirmation of the

terms agreed upon to the date of approval of the MD&A, and are in the process of being formally documented.

Cineplex’s management believes that adjusted EBITDAaL is an important supplemental measure of Cineplex’s

profitability at an operational level and provides analysts and investors with comparability in evaluating and valuing

Cineplex’s performance period over period. EBITDA, adjusted for various unusual items, is also used to define

certain financial covenants in Cineplex’s Credit Facilities. Management calculates adjusted EBITDAaL margin by

dividing adjusted EBITDAaL by total revenues.

EBITDA, adjusted EBITDA and adjusted EBITDAaL are non-GAAP measures generally used as an indicator of

financial performance and they should not be seen as a measure of liquidity or a substitute for comparable metrics

prepared in accordance with GAAP. Cineplex’s EBITDA, adjusted EBITDA and adjusted EBITDAaL may differ

from similar calculations as reported by other entities and accordingly may not be comparable to EBITDA, adjusted

EBITDA or adjusted EBITDAaL as reported by other entities.

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The following represents management’s calculation of EBITDA, adjusted EBITDA, and adjusted EBITDAaL

(expressed in thousands of dollars):

Year ended December 31,

2020 2019 2018

Net (loss) income from continuing operations $ (624,001) $ 36,516 $ 85,459

Depreciation and amortization - other 124,846 128,883 127,423

Depreciation - right-of-use assets 128,393 145,946 —

Interest expense - lease obligations 49,085 48,659 535

Interest expense - other 61,483 36,063 30,155

Interest income (182) (252) (274)

Current income tax (recovery) expense (73,495) 21,759 28,894

Deferred income tax recovery (11,373) (9,990) (6,580)

EBITDA from continuing operations $ (345,244) $ 407,584 $ 265,612

(Gain) loss on disposal of assets (13,101) 1,764 2,681

CDCP equity loss (income) (i) 7,279 (4,827) (4,186)

Foreign exchange loss (gain) 57 1,065 (1,981)

Impairment of long-lived assets, goodwill and investments 294,863 — —

Non-controlling interest adjusted EBITDA 5 24 78

Depreciation and amortization - joint ventures and associates (ii) 73 99 33

Taxes and interest of joint ventures and associates (ii) 202 77 120

Adjusted EBITDA from continuing operations $ (55,866) $ 405,786 $ 262,357

Cash rent paid/payable related to lease obligations (126,949) (175,240) —

Rent previously recognized as a finance lease (iii) — — (3,956)

Non-cash rent (v) — — (11,106)

Adjusted EBITDAaL (iv) (vi) $ (182,815) $ 230,546 $ 247,295

(i) CDCP equity loss (income) not included in adjusted EBITDA as CDCP is a limited-life financing vehicle that is funded by virtual print

fees collected from distributors.

(ii) Includes the joint ventures with the exception of CDCP (see (i) above).

(iii) Rent payments that were charged to the finance lease obligations in the previous reporting period.

(iv) See Section 18, Non-GAAP measures.

(v) Prior period figures have been revised to conform to current period presentation.

18.2 ADJUSTED FREE CASH FLOW

Free cash flow measures the amount of cash from operating activities net of capital expenditures available for

activities such as repayment of debt, dividends to owners and investments in future growth through acquisitions.

Free cash flow is a non-GAAP measure generally used by Canadian corporations as an indicator of financial

performance and it should not be viewed as a measure of liquidity or a substitute for comparable metrics prepared in

accordance with GAAP. Standardized free cash flow is a non-GAAP measure recommended by the CICA in its

2008 interpretive release, Improved Communication with Non-GAAP Financial Measures: General Principles and

Guidance for Reporting EBITDA and Free Cash Flow, and is designed to enhance comparability.

Cineplex presents standardized free cash flow and adjusted free cash flow per Share because they are key measures

used by investors to value and assess Cineplex. Management of Cineplex defines adjusted free cash flow as

standardized free cash flow adjusted for certain items, and considers adjusted free cash flow the amount available for

distribution to Shareholders. Standardized free cash flow is defined by the CICA as cash from operating activities as

reported in the GAAP financial statements, less total capital expenditures minus proceeds from the disposition of

capital assets other than those of discontinued operations, as reported in the GAAP financial statements; and

dividends, when stipulated, unless deducted in arriving at cash flows from operating activities. The standardized

free cash flow calculation excludes common dividends and others that are declared at the Board’s discretion.

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 70

Cineplex Inc.

Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Management calculates adjusted free cash flow per Share as follows (expressed in thousands of dollars except

Shares outstanding and per Share data):

Year ended December 31

2020 2019 2018

Restated

Cash (used in) provided by operating activities (i) $ (106,314) $ 321,665 $ 198,364

Less: Total capital expenditures net of proceeds on sale of assets (73,411) (146,367) (108,149)

Standardized free cash flow (179,725) 175,298 90,215

Add/(Less):

Changes in operating assets and liabilities (ii) 43,178 (8,727) 3,660

Changes in operating assets and liabilities of joint ventures and associates (ii) (4,469) 535 (609)

Principal component of lease obligations (91,946) (128,252) (3,420)

Growth capital expenditures and other (iii) 68,032 114,665 88,941

Share of income of joint ventures and associates, net of non-cash depreciation (iv) (855) (482) (285)

Non-controlling interests 5 24 78

Net cash received from CDCP (iv) 3,910 15,394 4,266

Adjusted free cash flow $ (161,870) $ 168,455 $ 182,846

Average number of Shares outstanding 63,333,238 63,333,238 63,332,159

Adjusted free cash flow per Share $ (2.556) $ 2.660 $ 2.887

Dividends declared $ 0.150 $ 1.780 $ 1.720

(i) Prior period figures have been revised to conform to current period presentation. See Section 19, Reconciliation for further details.

(i) Changes in operating assets and liabilities are not considered a source or use of adjusted free cash flow.

(iii) Growth capital expenditures and other represent expenditures on Board approved projects, exclude maintenance capital expenditures

and are net of proceeds on asset sales. The Revolving Facility (discussed above in Section 7.4 Credit Facilities) is available to Cineplex to

fund Board approved projects.

(iv) Excludes the share of income of CDCP, as CDCP is a limited-life financing vehicle funded by virtual print fees collected from

distributors. Cash invested into CDCP, as well as distributions received from CDCP, are considered to be uses and sources of adjusted free

cash flow.

Cineplex Inc.

Management’s Discussion and Analysis

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MANAGEMENT’S DISCUSSION & ANALYSIS 71

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex Inc.

Management's Discussion and Analysis

Alternatively, the calculation of adjusted free cash flow using the income statement as a reference point would be as

follows (expressed in thousands of dollars):

Year ended December 31,

2020 2019 2018

Restated

Net (loss) income from continuing operations $ (624,001) $ 36,516 $ 85,459

Adjust for:

Depreciation and amortization - other 124,846 128,883 127,423

Depreciation - right-of-use assets 128,393 145,946 —

(Gain) loss on disposal of assets (13,101) 1,764 2,681

Non-cash interest (i) 22,789 12,217 5,080

Non-cash foreign exchange 342 698 (1,231)

Impairment of long-lived assets, goodwill and investments 294,863 — —

Financing fees in interest expense — — 1,718

Share of loss (income) of CDCP (ii) 7,279 (4,827) (4,186)

Non-controlling interests 5 24 78

Non-cash depreciation of joint ventures and associates 73 99 33

Deferred income tax recovery (11,373) (9,990) (6,580)

Taxes and interest of joint ventures and associates 202 77 120

Maintenance capital expenditures (5,379) (31,702) (19,207)

Principal component of finance lease obligations (91,946) (128,252) (3,420)

Net cash received from CDCP (ii) 3,910 15,394 4,266

Non-cash items:

Amortization of tenant inducements, rent averaging liabilities and fair value

lease contract assets — — (11,106)

Non-cash Share-based compensation 1,228 1,608 1,718

Adjusted free cash flow $ (161,870) $ 168,455 $ 182,846

(i) Non-cash interest includes amortization of deferred financing costs on the long-term debt, accretion expense on the convertible debentures,

and other non-cash interest expense items.

(ii) Excludes the share of income of CDCP, as CDCP is a limited-life financing vehicle funded by virtual print fees collected from distributors.

Cash invested into CDCP, as well as cash distributions received from CDCP, are considered to be uses and sources of adjusted free cash flow.

Management uses the following non-GAAP measures as indicators of performance for Cineplex.

Earnings per Share Metrics

Cineplex has presented basic and diluted earnings per share net of this item to provide a more comparable earnings

per share metric between the current periods and prior year periods. In the non-GAAP measure, earnings is defined

as net income attributable to Cineplex excluding the change in fair value of financial instrument.

Per Patron Revenue Metrics

Cineplex reviews per patron metrics as they relate to box office revenue and theatre food service revenue such as

BPP, CPP, BPP excluding premium priced product, and concession margin per patron, as these are key measures

used by investors to value and assess Cineplex’s performance, and are widely used in the theatre exhibition industry.

Management of Cineplex defines these metrics as follows:

Theatre attendance: Theatre attendance is calculated as the total number of paying patrons that frequent Cineplex’s

theatres during the period.

BPP: Calculated as total box office revenues divided by total paid theatre attendance for the period.

BPP excluding premium priced product: Calculated as total box office revenues for the period, less box office

revenues from 3D, 4DX, UltraAVX, VIP, ScreenX and IMAX product; divided by total paid theatre attendance for

the period, less paid theatre attendance for 3D, 4DX, UltraAVX, VIP, ScreenX and IMAX product.

CPP: Calculated as total theatre food service revenues divided by total paid theatre attendance for the period.

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 72

Cineplex Inc.

Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Premium priced product: Defined as 3D, 4DX, UltraAVX, IMAX, ScreenX and VIP film product.

Theatre concession margin per patron: Calculated as total theatre food service revenues less total theatre food

service cost, divided by theatre attendance for the period.

Same Theatre Analysis

Cineplex reviews and reports same theatre metrics relating to box office revenues, theatre food service revenues,

theatre rent expense and theatre payroll expense, as these measures are widely used in the theatre exhibition industry

as well as other retail industries.

Same theatre metrics are calculated by removing the results for all theatres that have been opened, acquired, closed

or otherwise disposed of subsequent to the start of the prior year comparative period. For the three months ended

December 31, 2020 the impact of 1 location that has been opened or acquired and 4 locations that have been closed

have been excluded, resulting in 157 theatres being included in the same theatre metrics. For the year ended

December 31, 2020 the impact of the 2 locations that have been opened or acquired and the 5 locations that have

been closed have been excluded, resulting in 155 theatres being included in the same theatre metrics.

Cost of sales percentages

Cineplex reviews and reports cost of sales percentages for its two largest revenue sources, box office revenues and

food service revenues as these measures are widely used in the theatre exhibition industry. These measures are

reported as film cost percentage and concession cost percentage, respectively, and are calculated as follows:

Film cost percentage: Calculated as total film cost expense divided by total box office revenues for the period.

Theatre concession cost percentage: Calculated as total theatre food service costs divided by total theatre food

service revenues for the period.

LBE food cost percentage: Calculated as total LBE food costs divided by total LBE food service revenues for the

period.

P1AG Adjusted EBITDAaL

Calculated as amusement revenues of P1AG less the total operating expenses of P1AG, which excludes foreign

exchange.

P1AG Adjusted EBITDAaL Margin

Calculated as P1AG Adjusted EBITDAaL divided by total amusement revenues for P1AG for the period.

Adjusted Store Level EBITDAaL Metrics

Cineplex reviews and reports adjusted EBITDAaL at the location level for LBE which is calculated as total LBE

revenues from all locations less the total operating expenses of LBE, which excludes pre-opening costs and

overhead relating to the management of LBE.

Adjusted Store Level EBITDAaL Margin

Calculated as adjusted store level EBITDAaL divided by total revenues for LBE for the period.

Lease-related cash saving

Quantified savings negotiated with landlords as a result of the COVID-19 disclosures. This includes agreements that

are evidenced by way of written confirmation of the terms agreed upon to the date of this MD&A, and are in the

process of formally documented.

Net Cash Burn

Calculated as adjusted EBITDAaL less cash interest expense (excluding amounts with respect to lease obligations),

provision for income taxes and net capital expenditures.

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 73

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex Inc.

Management's Discussion and Analysis

Net cash burn 2020

Q4 Q3 Q2

Adjusted EBITDAaL $ (65,948) $ (46,725) $ (72,532)

Cash interest expense excluding lease obligations (13,412) (11,317) (7,782)

Provision for income taxes 12,355 16,497 34,440

Net capital expenditures (7,272) (8,198) (8,019)

Total net cash burn $ (74,277) $ (49,743) $ (53,893)

Average monthly net cash burn $ (24,759) $ (16,581) $ (17,964)

19. RECONCILIATION: WORLD GAMING NETWORK LP

During the quarter ended September 30, 2019, Cineplex initiated a review process of WorldGaming Network LP’s

(“WGN”) online esports business, engaging a third-party adviser to identify a strategic equity partner. On June 29,

2020, Cineplex sold all of its interest in WGN for a nominal amount. Cineplex has measured, presented and

disclosed the financial information of WGN as a discontinued operation in accordance with IFRS 5, Non-current

assets held for sale and discontinued operations. As a result, prior period figures have been retroactively restated to

exclude the results related to discontinued operations in order to provide comparability to the current year period.

The following table discloses the changes to the other operating expenses for the first two quarters in 2019:

Other operating expenses Restated 2019

Q1 Q2

Theatre payroll $ 36,710 $ 41,072

Theatre operating expenses 28,562 30,225

Media 16,742 21,185

P1AG 40,965 40,529

LBE (i) 11,148 13,957

LBE pre-opening (ii) 691 673

SCENE 5,038 4,060

Marketing 2,851 4,192

Other (iii) 8,174 7,892

Other operating expenses including cash lease payments $ 150,881 $ 163,785

Cash rent related to lease obligations (iv) (4,312) (4,652)

Other operating expenses from continuing operations as reported $ 146,569 $ 159,133

Other operating expenses from discontinued operations as reported 1,614 2,525

Total other operating expenses $ 148,183 $ 161,658

(i) Includes operating costs of LBE. Overhead relating to management of LBE portfolio are included in the ‘Other’ line.

(ii) Includes pre-opening costs of LBE.

(iii) Other category includes overhead costs related to LBE and other Cineplex internal departments.

(iv) Cash rent that has been reallocated to offset the lease obligations.

The following tables show the changes to the previously disclosed balances for other expenses for the first two

quarters in 2019:

Other Restated 2019

Q1 Q2

Other expenses included in other operating expense as previously reported $ 9,809 $ 10,427

Other expenses included in other operating expense from discontinued operations (1,635) (2,535)

Other expenses included in other operating expense as restated $ 8,174 $ 7,892

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 74

Cineplex Inc.

Management's Discussion and Analysis

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following tables show the changes to the previously disclosed balances for cash rent related to lease obligation

in 2019:

Other Restated 2019

Q1 Q2

Cash rent related to lease obligations as reported $ (4,333) $ (4,662)

Cash rent related to lease obligations from discontinued operations 21 10

$ (4,312) $ (4,652)

The following table shows the calculation of adjusted EBITDAaL from adjusted EBITDA as previously disclosed

for the first two quarters in 2019.

Adjusted EBITDAaL Restated 2019

Q2 Q1

Adjusted EBITDA as previously reported $ 112,249 $ 77,442

Net loss from discontinued operations 2,680 2,031

Depreciation and amortization from discontinued operations (1,186) (1,222)

Income tax recovery from discontinued operations 658 671

Foreign exchange (gain) loss from discontinued operations (18) (180)

Adjusted EBITDA from continuing operations $ 114,383 $ 78,742

Cash rent related to lease obligations (43,775) (44,150)

Cash rent paid not pertaining to current period (353) 1,060

Adjusted EBITDAaL as restated $ 70,255 $ 35,652

The following tables show the changes to the previously disclosed balances in cash provided by operating activities

and in cash used in investing activities, for the first two quarters in 2019.

Cash provided by operating activities Restated 2019

Q2 Q1

Cash provided by operating activities as previously reported $ 57,494 $ 60,580

Less:

Operating cash flows in discontinued operations (852) (846)

Cash provided by operating activities as restated $ 58,346 $ 61,426

Cash used in investing activities Restated 2019

Q2 Q1

Cash used in investing activities as previously reported $ (25,110) $ (27,885)

Less:

Investing cash flows in discontinued operations (259) (117)

Cash used in investing activities as restated $ (24,851) $ (27,768)

Cineplex Inc.

Management’s Discussion and Analysis

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CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT’S DISCUSSION & ANALYSIS 75

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

Cineplex Inc.

Management's Discussion and Analysis

Management’s Report to Shareholders

Management is responsible for the preparation of the accompanying consolidated financial statements and all other

information contained in this Annual Report. The consolidated financial statements have been prepared in

accordance with International Financial Reporting Standards, which involve management’s best estimates and

judgments, based on available information.

Management maintains a system of internal accounting controls designed to provide reasonable assurance that

transactions are authorized, assets are safeguarded, and financial records are reliable for preparing consolidated

financial statements.

The Board of Directors of Cineplex Inc. (the “Board” of the “Company”) is responsible for ensuring that

management fulfills its responsibilities for financial reporting and internal control. The Board is assisted in

exercising its responsibilities through the Audit Committee of the Board (the “Audit Committee”). The Audit

Committee meets periodically with management and the independent auditor to satisfy itself that management’s

responsibilities are properly discharged and to recommend approval of the consolidated financial statements to the

Board.

PricewaterhouseCoopers LLP serves as the Company’s auditor. PricewaterhouseCoopers LLP’s report on the

accompanying consolidated financial statements follows. It outlines the extent of its examination as well as an

opinion on the consolidated financial statements.

Ellis Jacob Gord Nelson

Chief Executive Officer Chief Financial Officer

Toronto, Ontario

February 10, 2021

CINEPLEX INC. 2020 ANNUAL REPORT

MANAGEMENT'S REPORT TO SHAREHOLDERS

Cineplex Inc.

Management's Report to Shareholders

PricewaterhouseCoopers LLP

PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2

T: +1 416 863 1133, F: +1 416 365 8215

“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

Independent auditor’s report

To the Shareholders of Cineplex Inc.

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,

the financial position of Cineplex Inc. and its subsidiaries (together, the Company) as at December 31,

2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance

with International Financial Reporting Standards (IFRS).

What we have audited

The Company’s consolidated financial stat

ements comprise:

 the consolidated balance sheets as at December 31, 2020 and 2019;

 the consolidated statements of operations for the years then ended;

 the consolidated statements of comprehensive (loss) income for the years then ended;

 the consolidated statements of changes in equity for the years then ended;

 the consolidated statements of cash flows for the years then ended; and

 the notes to the consolidated financial statements, which include signifi

cant accounting policies and

other explanatory information.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our

responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of

the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our opinion.

Independence

We are independent of the Company in accordance with the

ethical requirements that are relevant to our

audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities

in accordance with these requirements.

Material uncertainty related to going concern

We draw attention to note 2 in the consolidated financial statements, which describes events or conditions

that indicate the existence of a material uncertainty that may cast significant doubt about the Company’s

ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our

audit of the consolidated financial statements for the year ended December 31, 2020. These matters were

addressed in the context of our audit of the consolidated financial statements as a whole, and in forming

our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter

described in the Material uncertainty re

lated to going concern section, we have determined the matter

described below to be the key audit matter to be communicated in our report.

Key audit matter How our audit addressed the key audit matter

Impairment assessment of goodwill, indefinite lived

intangible assets, property, equipment and

leaseholds, right-of-use assets and definite lived

intangible assets

Refer to note 11 – Goodwill and impairment of long-

lived assets and investments and note 32 – Significant

accounting policies, judgments and estimation

uncertainty to the consolidated financial statements.

As at December 31, 2020, the Company had $636

million of goodwill, $555 million of prop

erty,

equipment and leaseholds (PPE), $881.4 million of

right-of-use assets (ROU), $21 million of definite lived

intangible assets and $64 million of indefinite lived

intangible assets.

Goodwill and indefinite lived intangible assets are

tested for impairment annually or more frequently if

specific events or circumstances dictate that the

carrying amount of the asset group may not be fully

recoverable. Property, equipment and leaseholds,

right-

of-use assets and definite lived intangible assets

(collectively, long-lived assets) are tested for

impairment when events or changes in circumstances

indicate that the carrying value may not be recoverable.

For the purpose of measuring recoverable amounts,

assets are grouped at the lowest levels for which there

are separately identifiable cash inflows relating to the

relevant intangible asset (cash-generating units or

CGUs).

Our appro

ach to addressing the matter included the

following procedures, among others:

● Evaluated how management determined the

recoverable amounts of all goodwill and

indefinite lived intangible assets CGUs and a

sample of long-lived assets CGUs, which

included the following:

– Tested the appropriateness of the method used

and the mathematical accuracy of the

discounted cash flow models.

– Tested the reasonableness of attendance and

e related revenue growth rates, operating

margins, variable and fixed cash flows and

discount rates applied by management by

comparing them to the budget, management’s

strategic plans approved by the Board of

Directors and available third party published

economic data, industry forecasts and

historical trends.

– Professionals with specialized skill and

knowledge in the field of valuation assisted in

testing the reasonableness of the discount

rates a

pplied by management based on

available data of comparable companies.

– Tested the underlying data used in the

discounted cash flow models.

An impairment loss is recognized for the amount by

which the CGU’s carrying value exceeds its recoverable

amount. The recoverable amounts were determined

based on the fair value less costs to sell method using

discounted cash flow models. The key assumptions

applied by management in estimating the recoverable

amounts of the CGUs included attendance and the

related revenue growth rates, operating margins,

variable and fixed ca

sh flows and discount rates.

Due to the COVID-19 pandemic, Cineplex noted during

the year a material decreases in revenues, results of

operations and cash flows which represented an

indicator to trigger impairment testing for both long-

lived assets, indefinite lived intangible assets and

goodwill. The impairment tests resulted in property,

equipment and leaseholds and right of use assets

impairment charges of $111 million and an impairmen

loss of $181 million with respect to goodwill. No

impairment loss was required for definite and indefinite

lived intangible assets.

We considered this a key audit matter due to (i) the

significance of the balances and (ii) the significant

judgment made by management in determining the

recoverable amounts of all of the goodwill and indefinite

lived intangible assets CGUs and certain long-lived

assets CGUs, including the use of key

assumptions. This

has resulted in a high degree of subjectivity and audit

effort in performing audit procedures to test the key

assumptions. Professionals with specialized skill and

knowledge in the field of valuation assisted us in

performing our procedures.

– Tested the disclosures made in the

consolidated financial statements, particularly

with regard to the sensitivity of the key

assumptions used.

Other information

Management is responsible for the other information. The other information comprises the Management’s

Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,

other than the consolidated financial statements and our auditor’s report thereon, included in the annual

report, which is expected to be made available to us after that date.

Our opinion on the consolidated financial statements does not cover the other information and we do not

and will not express an opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other

information identified above and, in doing so, consider whether the other information is materially

inconsistent with the consolidated financ

ial statements or our knowledge obtained in the audit, or

otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this

auditor’s report, we conclude that there is a material misstatement of this other information, we are

required to report that fact. We have nothing to report in this regard. When we read the information, other

than the consolid

ated financial statements and our auditor’s report thereon, included in the annual report,

if we conclude that there is a material misstatement therein, we are required to communicate the matter to

those charged with governance.

Responsibilities of management and those charged with governance for the

consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial

statements in accordance with IFRS, and for such internal control as management determines is

necessary to enable the preparation of consolidated financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is

responsible for assessing the

Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless management either intends to liquidate

the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting

process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as

a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s

report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards

will always detect a material misstateme

nt when it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in the aggregate, they could reasonably be expected to influence

the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise

professional judgment and maintain professional skepticism throug

hout the audit. We also:

 Identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of

not detecting a material misstatement resulting from fraud is higher than for one resulting from

error, as fraud may involve collusion, forgery, i

ntentional omissions, misrepresentations, or the

override of internal control.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimate

s and related disclosures made by management.

 Conclude on the appropriateness of management’s use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to events

or conditions that may cast significant doubt on the Company’s ability to continue as a going

concern. If we conclude that a material uncertainty exists, we are required to draw attention in our

aud

itor’s report to the related disclosures in the consolidated financial statements or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence

obtained up to the date of our auditor’s report. However, future events or conditions may cause the

Company to cease to continue as a going concern.

 Evaluate the overall presentation, structure and content of the consolidated financial statements,

includi

ng the disclosures, and whether the consolidated financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Company to express an opinion on the consolidated financial

statements. We are responsible for the direction, supervision and perform

ance of the group audit.

We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope

and timing of the audit and significant audit findings, including any significant deficiencies in internal

control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant

ethical requirements

regarding independence, and to communicate with them all relationships and other

matters that may reasonably be thought to bear on our independence, and where applicable, related

safeguards.

From the matters communicated with those charged with governance, we determine those matters that

were of most significance in the audit of the consolidated financial statements of the current period and

are therefore the key audit matters. We describe these

matters in our auditor’s report unless law or

regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we

determine that a matter should not be communicated in our report because the adverse consequences of

doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Paul Feetham.

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Ontario

February 10, 2021

December 31, December 31,

2020 2019

Assets

Current assets

Cash and cash equivalents (note 3)

$ 16,254

$ 26,080

Trade and other receivables (note 4) 51,834 168,065

Income taxes receivable (note 8) 66,551 9,757

Inventories (note 5) 21,712 30,995

Prepaid expenses and other current assets 11,613 14,226

Fair value of interest rate swap agreements

(note 29) — 1,022

Assets held for sale (note 31) — 6,573

167,964 256,718

Non-current assets

Property, equipment and leaseholds (note 6 and 11) 555,340 662,798

Right-of-use assets (note 7 and 11) 881,418 1,232,849

Deferred income taxes (note 8) — 14,197

Fair value of interest rate swap agreements

(note 29)

— 472

Interests in joint ventures and associates (note 9) 8,644 28,221

Intangible assets (note 10) 84,922 88,367

Goodwill (note 11) 635,582 816,790

$ 2,333,870 $ 3,100,412

COVID-19 business impacts and risks and going concern (note 2)

Subsequent events (note 34)

Cineplex Inc.

Consolidated Balance Sheets

—————————————————————————————————————————————

(expressed in thousands of Canadian dollars)

The accompanying notes are an integral part of these consolidated financial statements.

CINEPLEX INC.

2020 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED BALANCE SHEETS

(1)

The accompanying notes are an integral part of these consolidated nancial statements.

CINEPLEX INC. 2020 ANNUAL REPORT

CONSOLIDATED BALANCE SHEETS

Cineplex Inc.

Consolidated Balance Sheets

(expressed in thousands of Canadian dollars)

December 31, December 31,

2020 2019

Liabilities

Current liabilities

Accounts payable and accrued liabilities (note 12) $ 82,992 $ 220,188

Share-based compensation (note 13) 482 25,681

Dividends payable (note 14) — 9,500

Income taxes payable 802 1,183

Deferred revenue (note 21) 219,983 222,998

Lease obligations (note 15) 97,259 106,352

Fair value of interest rate swap agreements (note 29) 7,202 1,874

Liabilities related to assets held for sale (note 31) — 2,808

408,720 590,584

Non-current liabilities

Share-based compensation (note 13) 2,670 —

Long-term debt (note 16) 506,000 625,000

Fair value of interest rate swap agreements (

note 29) 19,157 10,837

Lease obligations (note 15) 1,073,666 1,261,243

Post-employment benefit obligations (note 18) 11,503 10,678

Other liabilities (note 19) 68,649 9,813

Deferred income taxes (note 8) — 1,263

Convertible debentures (note 17) 219,271

—

1,900,916 1,918,834

Total liabilities 2,309,636 2,509,418

Equity

Share capital (note 20) 852,379 852,379

Deficit (903,394) (264,310)

Hedging reserves and other (131) (131)

Contributed surplus 75,882 4,052

Cumulative translation adjustment (502) (887)

Total equity attributable to owners of Cineplex 24,234 591,103

Non-controlling interests — (109)

Total equity 24,234 590,994

$ 2,333,870 $ 3,100,412

Approved by the Board of Directors

Director

Cineplex Inc.

Consolidated Balance Sheets...continued

—————————————————————————————————————————————

(expressed in thousands of Canadian dollars)

The accompanying notes are an integral part of these consolidated financial statements.

CINEPLEX INC.

2020 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED BALANCE SHEETS

(2)

The accompanying notes are an integral part of these consolidated nancial statements.

CINEPLEX INC. 2020 ANNUAL REPORT

CONSOLIDATED BALANCE SHEETS

Cineplex Inc.

Consolidated Balance Sheets...continued

(expressed in thousands of Canadian dollars)

2020 2019

Revenues (note 21)

Box office $ 132,820 $ 705,521

Food service 108,632 483,330

Media 65,358 196,755

Amusement 77,901 228,231

Other 33,552 51,309

418,263 1,665,146

Expenses

Film cost 66,922 369,386

Cost of food service 30,667 106,823

Depreciation - right-of-use assets 128,393 145,946

Depreciation and amortization - other assets 124,846 128,883

(Gain) loss on disposal of assets (note 7) (13,101) 1,764

Other costs (note 22) 375,690 782,693

Share of loss (income) of joint ventures and associates (note 9) 8,409 (4,169)

Interest expense - lease obligations (note 15) 49,085 48,659

Interest expense - other 61,483 36,063

Interest income (182) (252)

Foreign exchange 57 1,065

Impairment of long-lived assets, goodwill and investments (notes 9 and 11) 294,863 —

1,127,132 1,616,861

(Loss) income from continuing operations before income taxes (708,869) 48,285

Provision for income taxes (note 8)

Current (73,495) 21,759

Deferred (11,373) (9,990)

(84,868) 11,769

Net (loss) income from continuing operations $ (624,001) $ 36,516

Net loss from discontinued operations, net of taxes (note 31) (4,952) (7,625)

Net (loss) income $ (628,953) $ 28,891

Net (loss) income from continuing operations attributable to:

Owners of Cineplex $ (623,996) $ 36,540

Non-controlling interests (5) (24)

Net (loss) income from continuing operations $ (624,001) $ 36,516

Net (loss) income attributable to:

Owners of Cineplex $ (628,948) $ 28,915

Non-controlling interests (5) (24)

Net (loss) income $ (628,953) $ 28,891

Net (loss) income per share attributable to owners of Cineplex - basic and diluted:

Continuing operations (note 23) $ (9.85) $ 0.58

Discontinued operations (note 23) (0.08) (0.12)

Total operations $ (9.93) $ 0.46

Cineplex Inc.

Consolidated Statements of Operations

For the years ended December 31, 2020 and 2019

————————————————————————————————————————————

(expressed in thousands of Canadian dollars, except per share amounts)

The accompanying notes are an integral part of these consolidated financial statements.

CINEPLEX INC.

2020 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED STATEMENTS OF OPERATIONS

(3)

The accompanying notes are an integral part of these consolidated nancial statements.

CINEPLEX INC. 2020 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF OPERATIONS

Cineplex Inc.

Consolidated Statements of Operations

For the years ended December 31, 2020 and 2019

(expressed in thousands of Canadian dollars, except per share amounts)

2020 2019

Restated

(note 33)

Net (loss) income from continuing operations $ (624,001) $ 36,516

Other comprehensive (loss) income from continuing operations

Items that will be reclassified subsequently to net income:

Gain on hedging instruments — 4,853

Associated deferred income taxes recovery — (1,306)

Foreign currency translation adjustment 378 (3,398)

Recognition of currency translation adjustment on disposition of discontinued

operations (note 31) (160) —

Items that will not be reclassified to net income:

Actuarial loss of post-employment benefit obligations (495) (1,054)

Associated deferred income taxes expense 133 282

Other comprehensive loss (144) (623)

Comprehensive (loss) income from continuing operations (624,145) 35,893

Net loss from discontinued operations, net of taxes (note 31) (4,952) (7,625)

Foreign currency translation adjustment from discontinued operations 7 210

Comprehensive (loss) income $ (629,090) $ 28,478

Comprehensive (loss) income from continuing operations attributable to:

Owners of Cineplex $ (624,140) $ 35,917

Non-controlling interests (5) (24)

$ (624,145) $ 35,893

Comprehensive (loss) income attributable to:

Owners of Cineplex $ (629,085) $ 28,502

Non-controlling interests (5) (24)

$ (629,090) $ 28,478

Cineplex Inc.

Consolidated Statements of Comprehensive (Loss) Income

For the years ended December 31, 2020 and 2019

————————————————————————————————————————————

(expressed in thousands of Canadian dollars)

The accompanying notes are an integral part of these consolidated financial statements.

CINEPLEX INC.

2020 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(4)

Cineplex Inc.

Consolidated Statements of Comprehensive (Loss) Income

For the years ended December 31, 2020 and 2019

(expressed in thousands of Canadian dollars)

The accompanying notes are an integral part of these consolidated nancial statements.

CINEPLEX INC. 2020 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

capital

Contributed

surplus

Hedging

reserves and

other

Cumulative

translation

adjustment Deficit

Non-

controlling

interests Total

January 1, 2020 $ 852,379 $ 4,052 $ (131) $ (887) $ (264,310) $ (109) $ 590,994

Net loss — — — — (628,948) (5) (628,953)

Other comprehensive

loss (page 4) — — — 385 (522) — (137)

Total comprehensive

loss

— —

— 385 (629,470) (5) (629,090)

Dividends declared — — — — (9,500) — (9,500)

Share option expense — 1,152 — — — — 1,152

PSU/RSU expense — 76 — — — — 76

Settlement for

cancelled options — (453) — — — — (453)

Conversion to equity-

settled option plan

(note 13) — 3,944 — — — — 3,944

Conversion to equity-

settled PSU/RSU plan — 311 — — — — 311

Issuance of convertible

debentures (note 17) — 66,800 — — — — 66,800

Non-controlling

interests acquired — — — — (114) 114 —

December 31, 2020 $ 852,379 $ 75,882 $ (131) $ (502) $ (903,394) $ — $ 24,234

January 1, 2019 $ 852,379 $ 7,815 $ (3,678) $ 2,301 $ (179,721) $ (85) $ 679,011

Net income — — — — 28,915 (24) 28,891

Other comprehensive

loss (page 4) — — 3,547 (3,188) (772) — (413)

Total comprehensive

income — — 3,547 (3,188) 28,143 (24) 28,478

Dividends declared — — — — (112,732) — (112,732)

Share option expense — 1,607 — — — — 1,607

Conversion to cash-

settled option plan

—

(5,370)

— — — —

(5,370)

December 31, 2019 $ 852,379 $ 4,052 $ (131) $ (887) $ (264,310) $ (109) $ 590,994

Cineplex Inc.

Consolidated Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

————————————————————————————————————————————

(expressed in thousands of Canadian dollars)

The accompanying notes are an integral part of these consolidated financial statements.

CINEPLEX INC.

2020 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(5)

Cineplex Inc.

Consolidated Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

(expressed in thousands of Canadian dollars)

The accompanying notes are an integral part of these consolidated nancial statements.

CINEPLEX INC. 2020 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

2020 2019

Cash provided by (used in)

Operating activities

Net (loss) income from continuing operations $ (624,001) $ 36,516

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization of property, equipment and leaseholds, and

intangible assets 124,846 128,883

Depreciation of right-of-use assets 128,393 145,946

Unrealized foreign exchange 342 698

Interest rate swap agreements - non-cash interest 13,922 10,472

Accretion of convertible debentures 7,471 —

Other non-cash interest 1,396 1,745

(Gain) loss on disposal of assets (13,101) 1,764

Deferred income taxes (11,373) (9,990)

Non-cash share-based compensation 1,228 1,608

Impairment of long-lived assets, goodwill and investments (note 11) 294,863 —

Net change in interests in joint ventures and associates 12,878 (4,704)

Changes in operating assets and liabilities (note 27)

(43,178) 8,727

Net cash (used in) provided by operating activities (106,314) 321,665

Investing activities

Proceeds from disposal of assets, including sale of discontinued operations (notes

7 and 9) 80,920 —

Purchases of property, equipment and leaseholds (73,411) (146,367)

Intangible assets additions (9,005) (7,865)

Tenant inducements 24,296 13,985

Net cash received from CDCP 3,910 15,394

Net cash provided by (used in) investing activities 26,710 (124,853)

Financing activities

Dividends paid (19,000) (112,415)

(Repayments) borrowings under credit facilities, net (119,000) 45,000

Repayments of lease obligations - principal (91,946) (128,252)

Issuance of convertible debentures, net (note 17)

303,063 —

Financing fees

(1,500) (243)

Net cash provided by (used in) financing activities 71,617 (195,910)

Effect of exchange rate differences on cash 552 483

(Decrease) increase in cash and cash equivalents from continuing operations (7,435) 1,385

Cash flows used in discontinued operations (note 31) (2,391) (547)

Cash and cash equivalents - Beginning of period 26,080 25,242

Cash and cash equivalents - End of period $ 16,254 $ 26,080

Supplemental information

Cash paid for interest - lease obligation $ 32,371 $ 47,018

Cash paid for interest - other $ 47,859 $ 25,302

Cash (received) paid for income taxes, net $ (16,297) $ 36,402

Cineplex Inc.

Consolidated Statements of Cash Flows

For the years ended December 31, 2020 and 2019

—————————————————————————————————————————————

(expressed in thousands of Canadian dollars)

The accompanying notes are an integral part of these consolidated financial statements.

CINEPLEX INC.

2020 ANNUAL FINANCIAL STATEMENTS - CONSOLIDATED STATEMENTS OF CASH FLOWS

(6)

Cineplex Inc.

Consolidated Statements of Cash Flows

For the years ended December 31, 2020 and 2019

(expressed in thousands of Canadian dollars)

The accompanying notes are an integral part of these consolidated nancial statements.

CINEPLEX INC. 2020 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

1. General information

Cineplex Inc. (“Cineplex”) an Ontario, Canada corporation, is one of Canada’s largest entertainment organizations,

with theatres and location-based entertainment venues in ten provinces. Cineplex also operates businesses in digital

commerce, cinema media, digital place-based media and amusement solutions through its wholly owned

subsidiaries, Cineplex Entertainment Limited Partnership (the “Partnership”), Famous Players Limited Partnership

(“Famous Players”), Galaxy Entertainment Inc. (“GEI”), Cineplex Digital Media Inc. (“CDM”), and Player One

Amusement Group Inc. (“P1AG”). Cineplex is headquartered at 1303 Yonge Street, Toronto, Ontario, M4T 2Y9.

On December 15, 2019, Cineplex entered into an arrangement agreement (the “Arrangement Agreement”) with

Cineworld Group, plc (“Cineworld”), pursuant to which an indirect wholly-owned subsidiary of Cineworld agreed to

acquire all of the issued and outstanding common shares of Cineplex (“Shares”) for $34.00 per share in cash (the