Good day, and welcome to the Cineplex Inc. Q4 and Year End twenty twenty Analyst Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Melissa Prasacco, Senior Manager, Investor Relations and Communications.
Please go ahead, Ms. Prasacco.
Thank you, Kevin. Good morning, and welcome to Cineplex's fourth quarter and year end twenty twenty conference call. With me today is Alex Jacob, our President and Chief Executive Officer and Gord Nelson, our Chief Financial Officer. Before I turn the call over to Ellis, let me remind you that certain statements being made are forward looking and subject to various risks and uncertainties. Such forward looking statements are based on management's beliefs and assumptions regarding the information currently available.
Actual results could differ materially from those expressed in the forward looking statements. Factors that could cause results to vary include, among other things, the negative impact of the COVID-nineteen pandemic, adverse factors generally encountered in the film exhibition industry, risks associated with other national and world events and discovery of undisclosed material liabilities and general economic conditions. Following today's remarks, we will close the call with our customary question and answer period. I will now turn the call over to Alex Jacob.
Thank you, Melissa. Good morning, and welcome to our Q4 and year end twenty twenty conference call. We are glad you could join us today. Let me start by saying I hope you and your families are well and staying healthy. This has truly been a time like no other in the history of our company.
The impact of COVID nineteen has been widespread and dramatically affected so many industries, but specifically entertainment and movie exhibitions, which is why it won't come as a surprise that Cineplex experienced declines in our year over year results. Given our mandated temporary closures, capacity restrictions, and the shifts in the film release slate, our results were significantly impacted. What I would like to focus the discussion on today is how we responded to the impacts of COVID nineteen and laid the groundwork for an upward trajectory over the long term. I want you to leave today's call knowing that we are on a path to a stronger, more successful organization. Over the past year, we adapted with agility and created a leaner, more resilient Cineplex.
We scrutinize our business divisions, analyze our structures, and challenge every assumption, all in an effort to streamline our operations and, more importantly, improve our profitability in the long term. In short, we use this time as an opportunity. We took a strategic look at the structure of our business divisions, our partnerships and programs and made some tough but necessary decisions to reduce overheads, operating expenses and capital commitments.
We
realigned and streamlined our corporate and divisional operating structures to improve efficiencies. We also terminated our partnership with Topgolf and canceled a number of capital projects, recognizing that this isn't the time to invest in large development projects. The 2020 also saw the conclusion of our partnership with Timeplay as well as the final issue of Cineplex Magazine, which we released in December. By moving away from the printed magazine, we're able to focus on what we know our clients are looking for, digital, scalable ways of reaching their customers. As Canadians were focused to stay home, we turned our focus to our digital movie platform, the Cineplex Store, which experienced significant growth last year with a massive 39% increase in registered users from the prior year to 1,900,000 total users.
The Cineplex store, which is a key differentiator for us from our peers, benefited from a number of premium video on demand releases during the year, offering guests the chance to view exclusive content directly in their homes. The Cineplex store also provided us with the opportunity to meaningfully engage with our guests through our digital platform while our theaters were closed. Like us, our studio partners also used this time to test different firmware release models. To be clear, there isn't a one size fits all window for all films and all studios. In my discussions with the major studios, the mutual goal is to protect the theatrical window, especially for blockbusters and titles forecast to perform well at the box office.
Studios recognize that the theatrical release is critical to the financial success of a tenfold tenfold film as it generates the highest percentage of worldwide revenues for the film. It also generates media and consumer interest for sequels and other downstream revenue opportunities. As the industry evolves, there will be more ways to maximize revenue for ourselves and the studios moving forward. In fact, this is already the case. In November, we announced a dynamic window agreement with Universal that will preserve the theatrical experience while adapting to changing consumer behavior.
As the industry navigates the effects of the COVID nineteen pandemic, discussions like this are of the utmost importance, and we will continue to have them with our other studios and content producers. These types of partnerships makes more content available, which benefits our guests when it comes to film offerings and rich entertainment experiences. While Borne will provide a more fulsome financial update in a moment, in 2020, we remain laser focused on minimizing cash burn, extracting value from all of our assets and adding the necessary liquidity. We did this to provide ample runway for our recovery period and beyond. 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 took voluntary temporary salary reductions, and we realigned and consolidated our corporate teams, eliminating 130 roles across the Cineplex ecosystem. We also benefited from approximately 57,000,000 in wage subsidies primarily through the CUSE program and worked with our landlord partners to obtain relief that reduced cash rent being paid in 2020 subsequent to the lockdown. So the second wave of COVID nineteen resulting in another round of widespread temporary closures in late twenty twenty and into 2021, we were pleased to hear that the CUES program has been extended to June 2021. As I mentioned, we work closely with our landlords for rent relief, reducing net cash lease outflows in 2020 and have continued discussions with our landlords on further relief into 2021.
Cineplex has a unique suite of assets like no other exhibitor in North America, allowing us to extract additional value and strengthen our financial position beyond the current pandemic environment. The key example of this was in the fourth quarter when we entered into an agreement to enhance and expand the SCENE loyalty program, receiving $60,000,000 from Scotiabank. We also recently completed a sale leaseback of our head office in Toronto for $57,000,000 Subsequent to year end, we obtained further relief under our credit facilities and have engaged BMO Capital Markets and Scotiabank on a proposed private placement offering of second lien secured notes, which Gord will go into more detail shortly. We will also explore other measures to maintain adequate liquidity, but these are just some of the examples of the value extraction I mentioned earlier. It will be strategic actions like these that will see us through the pandemic recovery period as vaccines are rolled out, restrictions are lifted, and a return to normalcy begins.
Although the pandemic has lasted longer than any of us initially expected, we know that the exhibition, amusement, and leisure industries will recover. The box office numbers coming out of countries where theaters are permitted to operate like Japan, China, and Australia have exceeded expectations. In Japan, the anime film Demon Slayer, which opened late last year, went on to become the highest grossing film ever. We are also reassured by recent survey data from Abacus Data that puts movie going as the most missed in person activity among Canadians. We know our guests will be looking for safe and affordable out of home entertainment experiences coming out of the pandemic, and our focus is how best to leverage and capitalize on this desire.
Health and safety are, of course, top of mind in everything we do, which is why we have implemented industry leading operating procedures focused on the health, safety, and well-being of our employees and guests. I want to reiterate there remains no claim of COVID nineteen 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. With the vaccine rollout underway, our team is looking forward to safely reopen the rest of our circuit of theaters and entertainment venues across Canada, and we anticipate a return to more normal operating conditions later this spring. We have all been cooped up for a long time and are longing to come back together as a 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's a lot to look forward to. Just to name a few film schedule for this year, we have gotzilla versus Kong, black widow, fast and furious nine, Cruella, Peter Rabbit two, the runway, Venom, let there be carnage, minion minions, the rise of group, Top Gun, Maverick, A Quiet Place Part two, Doom, No Time to Die, Mission Impossible seven, Spider Man, Far From Home sequel, West Side Story, and The Matrix four. When I think about the pent up demand for the theatrical experience, the back backlog of film releases, and all the social experiences which have been restricted for almost a year, I'm confident that as our locations reopen, our guests will be there, and we are ready for them. We are positioned well for the growth that is to come. Before I turn things over to Gord, I want to take a moment to recognize the unwavering commitment and hard work of our employees.
When I look back on the last year, I'm extremely proud of our team's focus, agility, and willingness to make sacrifices as we work together towards everything we accomplish. I also want to thank our board of directors for their ongoing support and sound advice during these unprecedented times. We have fortified the financial position of our company, secured the money we need to see us through, and developed the gold standard in health and safety protocols to safely welcome our guests back. The bottom line is that Cineplex will make it through this tough time. The pandemic expedited parts of our future plans to become a leaner, more agile company and prompted pivots that were already on the road map.
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. With that, I will pass the call over to Gord.
Thanks, Ellis. I am pleased to present a condensed summary of the fourth quarter results for Cineplex Inc. And to provide additional detail on the ongoing financial impacts of COVID-nineteen on our operations. For your further reference, our financial statements and MD and A have been filed on SEDAR. They're also available on our Investor Relations website at cineplex.com.
Our MD and A and earnings press release includes a fulsome narrative on the operational results. So I will focus on highlighting and quantifying some of the key items, including commentaries on cost control, some accounting matters, liquidity initiatives, and outlook. The COVID-nineteen pandemic continued to have a material negative impact on all aspects of Cineplex's core businesses, resulting in material decreases in revenues, results of operations and cash flows for the 2020. As a result, we continue to focus on cost control and liquidity. With respect to cost control, I want to provide some additional details on our largest fixed and semi fixed costs, our lease costs and our payroll costs.
Lease costs are our largest fixed costs. Throughout 2020, we maintained strong communication channels with our landlord partners and identified opportunities for relief during these unprecedented times. Our focus has been on working with them to identify opportunities for abatements during the closure period and to jointly look for other opportunities under our existing lease agreements. During the 2020 period, we were able to materially reduce net cash lease outflows by approximately $73,000,000 which includes approximately $52,000,000 of lease savings and $21,000,000 as a result of the sale of certain restrictive rights to landlords. Of this total, approximately 15,000,000 was reflected in q We continue to work with our landlord partners to provide additional relief during 2021 as a result of the second wave of closures.
Payroll is our largest semi fixed cost. With the mandated closures, we immediately initiated temporary layoffs and reduced full time employee salaries across the board by with a by agreement with employees. We reviewed and applied for government subsidy programs where available, including the Canada Emergency Wage Subsidy. During q four, we benefited from approximately $14,300,000 in subsidies primarily under this program, and we're able to materially reduce our theater payroll to approximately $5,200,000 in the 2020 from approximately $41,900,000 in the prior year quarter. We are encouraged that the CUES program has been extended through to June 2020, with enhanced, participation and availability in the 2020.
In July, the company initiated a restructuring process, which resulted in the elimination of approximately 130 rolls for an annualized savings of approximately $12,000,000 Approximately half of the savings relates to G and A, and the other half relates to OpEx savings in the various businesses. During Q4, the company recorded an additional $2,400,000 in restructuring expenses related to this initiative. With respect to our other supplier partners and expense control, we put in place immediate expense and CapEx curtailment programs during the closure period and worked with our supplier partners to provide elements of relief, including eliminating or reducing amounts due for contractual monthly services in addition to payment deferrals and abatements. You can continue to see the benefits of these initiatives in the substantial cost reductions in a number of our controllable cost categories. In addition, we continue to monitor other subsidy and relief programs, which could benefit Cineplex.
With all the actions previously described, we were able to achieve a cash burn rate of approximately $20,000,000 per month for the period from Q2 through Q4 twenty twenty. I'd now like to discuss select accounting impacts during the fourth quarter. We recorded total impairment charges of $56,200,000 in Q4. Additional impairment charges primarily arose because of the second wave impact of COVID-nineteen in the 2020 and the resulting delayed timing on the assumed recovery to normality. In addition, we have a going concern note in our financial statements as we have a bank waiver, which is conditional on satisfying certain requirements based on a future event proposed debt offering, which has now commenced subsequent to the filing of our financial statements.
I'd now like to focus on some of our liquidity initiatives. During the fourth quarter, Cineplex announced that it had received $60,000,000 from its partner, Scotiabank, to enhance and expand the SCENE loyalty programming, including an agreement to reorganize the program and position it for future growth. In conjunction with this agreement, Cineplex's interest in the operations of SCENE was reduced to 33.3%. Cineplex will continue to be responsible for 50% of the economic benefits and obligations until specific nonfinancial milestones are met, resulting in the deferral of the recognition of the proceeds and any related gain or loss until that time. Also during q four, we entered into the second credit agreement amendment with our bank syndicate on November 12.
This amendment extended the suspension of financial covenant testing until the 2021, but provided for a monthly liquidity test until the financial covenants are introduced. Subsequent to year end, we entered into the third credit agreement amendment, which we announced earlier this week. As Ellis mentioned, we advanced the sales process related to our head office building at Yonge Street, and in early January twenty twenty one, completed a sale leaseback transaction for gross proceeds of $57,000,000. We also recognize the benefit of our ability to carry back our 2020 tax losses three years and claim a refund of taxes paid during these periods. We completed our twenty twenty tax returns for select entities in January 2021 and have filed for approximately $66,200,000 in tax refunds, which are included as a current asset income taxes receivable on the year end balance sheet.
As I mentioned this past week, we announced the third amendment to our credit facility, which provides for the continued suspension of financial covenant testing until the 2021 upon certain conditions being met, including the completion of a minimum $200,000,000 financing by the company, if a second lien secured notes on or prior to 03/31/2021 with a maturity of at least five years. Of these proceeds, $100,000,000 will constitute a permanent repayment of our credit facilities. As at year end, we had approximately a $154,000,000 in availability under our credit facilities. Adjusting solely for the head office sale, the pending tax refunds, and they proposed $250,000,000 second lien secured note offering, net of the required permanent pay downs and expenses of the offering, our pro form a availability would be approximately $392,000,000. With our continued focus on cash burn and liquidity, we believe we will have positioned the company well to handle any further uncertainties throughout 2021 and into 2022.
As we look ahead, we see positive news and a confidence on new vaccines and rollouts. We see pent up consumer demand, and we see a backlog of film titles to supply the market on reopening. We continue to focus on the reopening of our business businesses and continuing to explore further opportunities for cost reduction and value creation. That concludes our remarks for this morning, and we'd now like to turn the call over to the conference operator for questions.
Thank
Our first question today comes from Derek Lessard of TD Securities.
Yes. Good morning, everybody, and hope you're all well and safe as well. Just one question for me.
Maybe, Gord, if you could
just talk about the drivers behind the the small increase in in in monthly cash burn and maybe what we
should be modeling going forward. Sure. Sure, Derek. So look at the for the fourth quarter, the cash burn was roughly $25,000,000 It was under $20,000,000 in Q2 and Q3. The March average was $20,000,000 you know, which was, you know, relatively in line with, you know, what we had suggested when we initially went into the pandemic.
There are a number of variables and key drivers, in what ends up being the resulting that, you know, average monthly cash burn in any period. I tried to provide some color on our largest fixed costs and semi fixed costs. So, you know, the largest drivers tend to be our our lease costs and our payroll costs. And so our focus in that area, and let's take them each one on, is typically abatements and looking at lease rights and the ability to extract value on lease rights as with respect to our our lease costs. You know, as we went through the initial period of shutdown, you know, there's an expectation that as and and then our discussions and our conversations with our landlord partners is, you know, that the economic and and the environment post COVID COVID nineteen would there would be a a recovery commenced in the 2020.
As you're all aware, the second wave came in a little bit strong stronger, I think, than people had initially anticipated. So we were able to extract very strong relief, from our landlords in q two and q three. And while we were closed and when there was that expectation of recovery, you know, there was a less lesser opportunity of abatement. As we look forward, though, what we see is in a mandated closure period that we're just coming out of right now is that the opportunities both from a landlord conversation perspective, but also more more importantly, there have been some new relief programs that have been introduced by the government, which we've been able to participate in. They can the SERVE program is one is one that we were extract able to extract some benefit from in q four.
So, you know, we see, as we look forward, that, we continue to pull the levers on on renovatements. We still see interest on, you know, extracting value through some of the lease rights transactions. You know, we've executed about $21,000,000 of value, for those types of transactions in 2020. So we see additional interest on potentially unlocking value from those. And coming down the closure period, obviously, you know, that provides a little bit support from our landlord partners to, to provide some additional abatements there.
On the payroll side of things, again, the government, the the Canada Emergency Wage Program, typically, the quantums and the mechanics of the program are announced in advance of the quarter. And, again, there was an expectation that we would be moving into a gradual recovery phase in q four. And as such, the government calculator, of the wage subsidy program started to diminish over time. So from q two to q three to q four, on an expected recovery basis, the the wage subsidy program was less rich. Now as we look into q one, the government has has recognized and recognized earlier, obviously, that the ongoing impacts of COVID on an impact on affected businesses has has continued and has now become more severe.
So the benefits of the wage subsidy program actually improved for the 2021. And, you know, at this point, the calculator and the mechanics have not been announced for the second quarter, and presumably, on the assumption that they're looking more into what what's the visibility on what the recovery may or may not look like before they set the calculator in stone. You're getting a lot of movement. And so as you look from quarter to quarter, as we extract value and do certain transactions, you can get some lumpiness. I would though suggest that our ability to pull on all levers, You know, we really extracted.
And for q two and q three, we really focused, and and there's certain levers we may not be able to re pull on to the full extent. And, you know, that, you know, the the the q four level of cash burn is probably the more appropriate one to think of going forward.
Thanks for all that color, Gord. That's really helpful.
Our next question comes from Geoff Pham of Scotiabank.
Hi, good morning, Gord and Ellis. I hope you guys are doing well. Couple A of questions. First is just as you kinda look out with respect to the recovery in Canada compared to The US, there there's just some dynamics that are kind of happening that's kind of changed over the last six months or so. When you look at when we look at Canada, like, the percentage of population vaccinated is really falling behind in US.
So could we foresee a situation where The US film slate start to get released as US theaters reopen, whereas Canada is kinda still stuck in this kind of no man's state and without reopening. What happens to how the studios will deal with their Canadian releases? So I'm just trying to get some color as to how those conversations have gone. And then the second question is just on additional financing options. At what stage do you think you may need to pursue other means and what some of
those areas may be? Thanks a lot.
Thanks, Jeff. And, going to the positioning in North America between The US and Canada. As we saw in 2020, when Tenant was released, it was actually released in Canada before The US based on the conditions at the at that particular point in time. Now, yes, The US, there are being people vaccinated a lot faster. The difference is the number of cases in the significantly higher than those in Canada.
And there is possibilities in discussions with our peers that parts of The US that were locked down like California and New York, certain parts of California will start to reopen and also parts of New York will reopen, which may cause the studios to decide to start releasing the films. If that does happen, I think you're looking probably in the period of April, May, June time frame. And what would then take place is there would be a huge backlog for Cineplex for these movies moving into the future, and I think that will provide us with a great start up as we ramp up in different provinces. Because we have been open in certain provinces, you know, up and down through the last number of quarters, and that we will think will continue. But the film slate is very deep, and we feel it will put us in a great position once we get reopened as long as the gap between The US and Canada is not too significant.
For the financial question, I'll turn it over to Board.
Yeah. Thanks, Al. So on financing options. So, Jeff, you know, we were pleased earlier to this week, you know, to announce the credit facility amendments as well as, you know, exploring, the high yield offering. You know, this has been an area that's been a focus for us for probably the last two months or so at least.
We've always wanted to broaden out our capital structure. We know this is a demand from high yield investors. You know, the movie exhibition produces, you know, large once it's up and return to normality, it produces a lot of significant, you know, free cash flow. We've removed, you know, a number of, outflows, you know, from our business model, including, you know, roughly a $100,000,000, just over a $100,000,000 in dividends, which we have historically paid, you know, as well as reducing our near term CapEx from about a 150,000,000 to 50,000,000. So, you know, there's there's $200,000,000 of, you know, sort of external outflows that we've that we're taking out of the system in the short term.
So it had always been attractive to us to kind of broaden out that capital structure. And given the environment that we're in today, in particular, the economic environment, high yield market, the timing worked well for us to explore and move forward with this. So we're excited to do that. And with this offering, as I had said in my notes, earlier, you know, our availability and our you know, sorry, our liquidity availability pro form a of this offering and some of the other sale, you know, the the q one events that I that I mentioned, the tax refund and the, and the building sale. You know, we're just under, you know, right around $400,000,000, liquidity availability.
You know, you've looked at the recent cash burn in in q four as an example, And, you know, I could you can share, you know, our comfort and our confidence that, this round, will, will put the company in in a a great position, you know, well through 2021 and into 2022. So so with that said, you know, I would suggest that, you know, there is no real, we believe, short term requirement to, to look at any other financing options. But with that said is, you know, we have a number of, you know, we're always looking where if there is opportunities to extract value. So if we think in the short term, there's a a true value creation opportunity that that, you know, results in a liquidity event, we'd we'd explore it. But as I described to you in the numbers that I just provided to you, you know, we don't believe we really need to do anything in in throughout 2021.
Our
next question comes from Adam Shine of National Bank Finance.
Hello. Good morning. In terms of one for you, Gord, and one for you, Ellis. Just in terms of the covenant, Gord, when we push this out to Q4, is it similar to what we've seen perhaps in the prior waivers? Is it Yes. The
Q4 and
Everything's just kind of shifted out. So 4x Q4, yes.
Okay. Perfect. Maybe for you, Ellis, acknowledging obviously that the CapEx spend has been curtailed to that, I think, dollars 50,000,000 mark.
Have you been doing a bunch
of things in the theaters? Has there been perhaps a bit more in regards to recliner installations or perhaps any other activities I think, year up to, you know, eventually patrons coming back into the theaters?
Given the situation, Adam, there's only been limited amount of, recliner, installations that we've done. We continue to look at technology and ways to improve the experience for our guests, and that is something we will focus on. And we'll wait as we come back to market as to what we make sure that the guests have, which is a great experience where they feel totally comfortable and at ease in our facilities.
Okay. I'll leave it there. Thanks.
Our next question comes from Aravinda Galappatthige of Canaccord Genuity.
Good morning. Thanks for taking my questions. Hope you're both well. One for Gord and one for Ellis. Ellis, more big picture question.
Can you sort of characterize the conversations that you're having with studios nowadays, you know, in the backdrop of the universal arrangement that you've announced and some of the trends that we've seen from Warner and Disney, obviously different from one to the other, what sort of feedback are you getting from the studios? And are there any prospects, at least at the outset, of some sort of concession on the film cost side of things, that would sort of help out the exhibitors? And, for Gord, just following up on your answer to the first question, obviously, you know, forecasting that that variance between EBITDA and EBITDA, which is predominantly the cash rent piece, is sort of difficult on a costly basis. Should we assume based on your answer that sort of the q four variance or the q four delta, which is sort of $3,033,000,000 dollars, that's probably the right number to reasonably use going forward given that we don't know what sort of the outcome of the, your conversations with the landlords are? Thank you.
Arvinda, on your first question as it relates to the, theatrical relationship with our studio partners, we continue to, work very closely with them. And a lot of things that we are doing are basically driven by the fact that we are in the middle of COVID. And for example, with Wonder Woman, we worked out a deal where we played it in the cinema, but we also played it in the Cineplex store on a premium VOD format and did extremely well where it was sit playing in the store and also in the theaters that were open, but there were limited theaters that were open. So we are trying to balance the two, and we'll continue to do that until we see it the other side. But I feel, and I know our partners feel, that the theatrical window is an important part of the overall box office that we can garner from a film, both in Canada and around the world.
So we will continue to be doing that. And on the big films, that will continue to take place. With the, you know, one size fits all, we continue to work with other, you know, creators of content to see what we can do that makes the most sense, going forward into 2021 and 2022 so we can provide our guests with the most amount of content, on the big screen with, all of the facilities that they have.
And then on the second question, Aravinda, you know, the one thing that's somewhat tricky and and there's a lot of moving parts obviously is is we're always in discussions with our landlord partners and and and of abatements, which may extend over a period of time. And it's not until we actually, you know, agree and and and paper agreement and sign off on both sides that we can reflect it in the accounting records. So there may be things that that I would suggest that are going on right now that are activities that are gonna add benefit that may not necessarily, you know, be fully reflected. But with that said is, I think my commentary is that, you know, that the landlord ability to provide relief, you know, is not there forever. And and, you know, as that drops off a bit, it's what what we're seeing as the government step in and pick up and provide some other forms of relief.
So, you know, probably q four is your better indicator than some of the earlier quarters where we're getting significant amounts of relief. And the only other thing I wanna add to that is, you know, we've chatted about, you know, looking at extracting value from our lease rights. And when we look at extracting value from our lease rights, that doesn't end up being an EBITDA EBITDA versus EBITDA question. So that's something that becomes kind of a proceeds or a gain even, you know, if it's not detrimental to to the operating results of our company. So I'm just gonna say there's interest on more items related to those two that don't come into any EBITDA question, but are definitely a cash savings element.
Okay. That's that's helpful. Thanks. I'll pop the line.
Our next question today comes from Tim Casey of BMO.
Thanks. Couple for me. One for Gordon, a couple for Alice. Gordon, just just on your efforts to monetize these lease rates, can you just walk us through, you know, what's in it for the landlord? Like, I I we can obviously see the benefits of you getting some cash, but what's in it for them?
And then, Ellis, for you, as you think about reopening it back to normal, I'm just wondering if we should think about a smaller platform in both the theater and the rec room side. I'm just wondering if you if you if you think it's in your best interest to close some theaters that may have been, you know, performing less well than others. And and and when you contemplate reopening, they they may just be your best interest to move on from them. And as well as rec room, I I know that with your revised CapEx plans, you're not doing any new builds. You're finishing stuff that was that was in place.
Do you still have longer term aspirations to grow that business in terms of sites to what you had articulated pre COVID, or are you kind of rethinking that in any way? Thanks.
Thanks, Kevin. And so I'll take your first question. And I always like to provide a hypothetical example in a scenario just so that you can really understand. And and from people, you know, I provided this to, I think it it really helps them understand what these are. So, you know, we're typically imagine a theater on a pad, you know, where there's a number of parking lots, and there may be some businesses on the periphery in those parking lots.
Let's say there's a couple of restaurants, like maybe a bank and, you know, another small retail store. And under our lease, the landlord would be restricted on maintaining a certain number of parking spaces as well as, you know, the type of facilities that could be in those in those occupying those buildings. So imagine a scenario where, you know, we've been at ten years later, fifteen years later, the transit hub has grown. And now for from the landlord's perspective, the highest and best use of that space is not having a couple restaurants, you know, on that path. Maybe it's it's it's building a condo or something like that.
But they're restricted from doing that and monetizing the value of their site because of the rights that we have in the lease. So we would then go back to them and say, okay. You know, there's something that's gonna be a real value creation for you. You can't do it, But, you know, let's let's negotiate and let's see what can happen then. And so those are the types of activities.
So it's it's not impacting at all the economics of what we're paying under a lease. It's not impacting at all our building and on the property. And what it is is that it's providing the landlord some additional flexibility in what they can do in the site, and that's the benefit to them.
Thank you, Gord. On the other question that you asked, on the theater closures, again, we are being opportunistic, and we would basically say there would be limited closures. We would look at situations where the lease was coming up, and we've got two theaters in close proximity to each other. And one is state of the art and one isn't. So we would basically look at those positioning and make sure we are making the right decision from an overall cash flow moving forward.
And to me, that's kind of very, very important as we focus on the theater portfolio for the future. On the LBE, we will continue to look at that business and grow it, but on a much more limited pace depending on how quickly we are out of the pandemic because we still believe in the business, and we feel that Canadians between the movie theatres, between our location based entertainment venues, basically, will be happy and we can capture their entertainment dollars as they as we move forward. But again, we will probably slow the pace down depending on what the situation is from a vaccine perspective and from an overall return to the rec room. And where we have been open in the rec rooms during the pandemic, we have seen some strong and meaningful results. So, as we move forward, we feel that that will continue, once things get, back to normal, and our guests feel more comfortable about the experience and environment.
Yeah. And just thought could I add to that too? You know, obviously, the pandemic has, like, accelerated, like, the, the massive disruption in the retail landscape that's occurring globally. And, you know, the the future of retail will include, you know, food and beverage and entertainment being the anchors of retail destination in the future. So as we go through this transition and evolution, which is now sped up, you know, it's probably better for us to pause, and there may be better value opportunities for us that come out, you know, as a result of this disruption that's going on.
So so that was it. We've continued we're focused on it. We're committed to it. You know, pause. We'll complete the ones that we're doing, but there may be better opportunities, better sites, better value opportunities for us in the future.
Thanks a lot.
As there are no further questions, I would like to pass the call to Ellis Jacob for any additional or closing remarks.
Thank you all for joining us this morning. As you heard today, we have adapted with Agility to create a leaner, more resilient organization, minimized our cash burn and added the liquidity we need to see us through. We used this opportunity to become a stronger, well positioned and ultimately more successful organization. I am confident in Cineplex's and the industry's ability to recover and look forward to welcoming our guests back to our theaters and entertainment venues as soon as we are able to do so. We look forward to speaking with you again in May for our first quarter results.
Until then, please take care and be well. Thank you very, very much.
Ladies and gentlemen, that concludes today's conference call. We thank you for your participation. You may now disconnect.