Cineplex Inc

TSX:CGX

Earnings Call Transcript 2020-Q4

[Operator]

Good day and welcome to the Cineplex Inc. Q4 and year-end 2020 analyst call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Melissa Pressacco, Senior Manager, Investor Relations and Communications. Please go ahead, Ms. Pressacco.

[Melissa Pressacco]

Thank you, Kevin. Good morning and welcome to Cineplex's fourth quarter and year-end 2020 conference call. With me today is Ellis 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 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-19 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 Ellis Jacob.

[Ellis Jacob, President, CEO & Director]

Thank you, Melissa. Good morning and welcome to our Q4 and year-end 2020 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-19 has been widespread and dramatically affected so many industries, but specifically entertainment and movie exhibition, 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-19 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 end of 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 to 1.9 million 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 a 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 film 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 windows, especially for blockbusters and titles forecasted to perform well at the box office. Studios recognize that the theatrical release is critical to the financial success of a tentpole film has generated 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 the 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-19 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 Gord will provide a more fulsome financial update in a moment, in 2020 we remained 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 in our 2 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 rows across the Cineplex ecosystem.We also benefited from approximately $57 million in wage subsidies, primarily through the CEWS program and work with our landlord partners to obtain relief that reduce cash rent being paid in 2020 subsequent to the lockdown. With the second wave of COVID-19 resulting in another round of widespread temporary closures in late 2020 and into 2021, we were pleased to hear that the CEWS program has been extended to June of 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 release 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 million from Scotiabank. We also recently completed a sale-leaseback of our head office in Toronto for $57 million.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-19 transmission in the cinema to-date globally. As a worldwide industry, we are all focused on the safety of our guests and will continue to do so.With the vaccine rollout under way, 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 is a lot to look forward to.Just to name a few film scheduled for this year, we have got Godzilla vs. Kong, Black Widow, Fast & Furious 9, Cruella, Peter Rabbit 2: The Runaway, Venom: Let There Be Carnage, Minions: The Rise of Gru, Top Gun: Maverick, A Quiet Place Part II, Dune, No Time To Die, Mission Impossible 7, Spider-Man: Far From Home Sequel, West Side Story and The Matrix 4.When I think about the pent-up demand for the theatrical experience, the backlog of film releases and all of social experiences which have been restricted for almost a year, I am 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 always 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 develop the goals and 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.

[Gord Nelson, Chief Financial Officer]

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-19 on our operations.For your further reference, our financial statements and MD&A have been filed on SEDAR. They're also available at the investor relations website at cineplex.com. Our MD&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-19 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 fourth quarter of 2020. As a result, we continue to focus on cost control and liquidity.With respect to cost control, I want to provide some additional details on our largest fixed and semi-fixed costs, our lease costs and our payroll costs. Lease costs are our largest fixed costs. Throughout 2020, we maintained strong communication channels with our landlord partners in identifying 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 million, which includes approximately $52 million in lease savings and $21 million as a result of the sale of certain restrictive rights to landlords. Of this total, approximately $15 million was reflected in Q4. 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 costs. With the mandated closures, we immediately initiated temporary layoffs and reduced full-time employee salaries across the board by agreement with employees. We reviewed and applied where government subsidy programs were available, including the Canada emergency wage subsidy.During Q4, we benefited from approximately $14.3 million in subsidies, primarily under this program and we're able to materially reduce our theater payroll to approximately $5.2 million in the fourth quarter of 2020 from approximately $41.9 million in the prior year quarter. We are encouraged that the CEWS program has been extended through to June 2020 with enhanced participation in availability in the first quarter of 2020.In July, the company initiated a restructuring process, which resulted in the elimination of approximately 130 roles for an annualized savings of approximately $12 million. Approximately half of the savings related to G&A and the other half relates to OpEx savings in the various businesses. During Q4, the company recorded an additional $2.4 million 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 and the substantial cost reductions in a number of our controllable categories.In addition, we continue to monitor our 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 million per month for the period from Q2 through Q4 2020.I'd now like to discuss select accounting impacts during the fourth quarter. We recorded total impairment charges of $56.2 million in Q4. Additional impairment charges primarily arose because of the second wave impact of COVID-19 in the winter of 2020 and the resulting delayed timing on the assumed recovery to normality.In addition, we have a one concerned note in our financial statements as we have a bank waiver, which is conditional on satisfying certain requirements based on the future events proposed debt offering, which has now commenced subsequent to the filing of financial statements.I'd now like to focus on some of our liquidity initiatives. During the fourth quarter, SCENE in the Cineplex announced that it had received $60 million from its partner Scotiabank to enhance and expand the SCENE loyalty programing, including an agreement to reorganize the program and to 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 Q4, 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 second quarter of 2021 but provided for a monthly liquidity test until those 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 located at Yonge Street and in early January 2021, completed a sale-leaseback transaction for gross proceeds of $57 million.We also recognized the benefit of our ability to carry back our 2020 tax losses 3 years and claimed a refund of taxes paid during these periods. We completed our 2020 tax returns for select entities in January 2021 and have filed for approximately $66.2 million in tax refunds, which are included as a current asset income taxes receivable on the year-end balance sheet.As I mentioned this past weekly, we've done the third amendment to our credit facility, which provides for the continued suspension of financial covenant testing until the fourth quarter of 2021. Upon certain conditions being met, including the completion of a minimum $200 million financing by the company is a second-lien secured notes on or prior to March 31, 2021, with a maturity of at least 5 years. Of these proceeds, $100 million will constitute a permanent repayment of our credit facilities.As of year-end, we had approximately $154 million in availability under our credit facilities. Adjusting solely for the head office sale, the pending tax refunds and the proposed $250 million second-lien secured note offering, net of the required permanent paydowns and expenses of the offering, our pro forma availability would be approximately $392 million.With our continued focus on cash burn and liquidity, we believe we will have positioned the company well to handle any further uncertainties throughout 2021 and into 2022. As we look ahead and see positive news and in confidence on new vaccines and rollouts, we see pent-up consumer demand and we see a backlog of film titles supplied -- to supply the market on reopening. We continue to focus on the reopening of our 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.

[Operator]

[Operator Instructions] Our first question today comes from Derek Lessard of TD Securities.

[Derek J. Lessard, Research Analyst]

I hope you all are well and safe as well. Just one question from me. Maybe, Gord, if you could just talk about the drivers behind the small increase in monthly cash burn and maybe what we should be modeling going forward?

[Gord Nelson, Chief Financial Officer]

Sure, Derek. So look at the -- for the fourth quarter, the cash burn is roughly $25 million. It was under $20 million in Q2 and Q3. The 3-quarter average was $20 million, which was relatively in line with what we have suggested when we initially went into the pandemic. There are a number of variables and key drivers in what end up in the resulting that average monthly cash burn in any period. I tried to provide some color on our largest fixed cost and semi-fixed costs. So even the largest drivers tend to be our lease costs and our payroll costs. And so our focus in that area, and let's take that each went on is typically a maintenance and looking at least rights on the ability to extract value on lease rates with respect to our lease costs.As we went through the initial period of shutdown, there's an expectation that has -- and then our discussions in our conversations with our landlord partners is that the economic and the environment post-COVID-19 would -- there would be a recovery commenced in the fourth quarter of 2020. As you're all aware, the second wave came in a little bit stronger I think than people had initially anticipated. So we were able to extract very strong relief from our landlords in Q2 and Q3. And while we were closed and when there was that expectation of recovery, there was a lesser opportunity of maintenance.As we look forward though, what we see as 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 importantly, there have been some new relief programs introduced by the government, which we've been able to participate in. So they can -- the CEWS program as one -- is one that we were able to extract some benefit from in Q4. So we see, as we look forward, that we continue to pull the levers on rent abatements. We still see interest on extracting value through some of the lease rights transactions. We've executed about $21 million of value for those types of transactions in 2020. So we see additional interest on potentially unlocking value from those. And coming out of the closure period, obviously that provides a little bit support from our landlord partners to provide some additional abatements there.On the payroll side of things, again the government -- 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 Q4. And as such, the government calculator of the wage subsidy program started to diminish over time. So from Q2 to Q3 to Q4 on an expected recovery basis, the wage subsidy program was less rich.Now, as we look into Q1, the government has recognized and recognized earlier, obviously, that the ongoing impacts of COVID impact on affected businesses has continued and has now become more severe. So the benefits of the wage subsidy program actually improved for the first quarter of 2021. And at this point, the calculator and the mechanics have not been announced for the second quarter and presumably got an assumption that they're looking more into what's the visibility on what the recovery may or may not look like before they set the calculators on. So you're getting a lot of movement. And so as you look from quarter-to-quarter, as we extract value into certain transactions, you can get some lumpiness. I would though suggest that our ability to pull on all levers. We really extracted -- and for Q2 and Q3, we really focused and there are certain levers we may not be able to re-pull on to the full extent. And the Q4 level of cash burn is probably the more appropriate one to think in going forward.

[Operator]

Our next question comes from Jeff Fan of Scotiabank.

[Jeffrey Fan]

A couple of questions. Firstly, is just, as you kind of look out with respect to the recovery in Canada compared to the U.S., there's just some dynamics that are kind of happening that's kind of changed over the last 6 months or so. When you look at Canada, like the percentage of population vaccinated is really falling behind the U.S. So could we foresee a situation where the U.S. strong slates are to again leave the U.S. theaters certainly open, whereas Canada is kind of still stuck in this kind of no man's state and without reopening? What happens to how the studios will deal with the Canadian releases? So I'm just trying to get some color as to how these 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?

[Ellis Jacob, President, CEO & Director]

Thanks, Jeff. And going to the positioning in North America between the U.S. and Canada, as we saw in 2020 when Tenet was released, it was actually released in Canada before the U.S. based on the conditions at that particular point in time. Now yes, the U.S., they are being people vaccinated a lot faster. The difference is the number of cases in the U.S. are significantly higher than those in Canada. And there is possibilities and in discussions with our peers that parts of the U.S. 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 timeframe. 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 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 U.S. and Canada is not too significant.For the financial question, I'll turn it over to Gord.

[Gord Nelson, Chief Financial Officer]

So on financing I can suggest, we were pleased earlier to this week to amount the credit facility amendments as well as exploring the high-yield offering. This hasn't been an area that's been a focus for us for probably the last 2 months or so at least. We've always wanted to broaden out our capital structure. We know there is demand from high-yield investors. The movie exhibition produces large [indiscernible] return to normality produces a large significant free cash flow. We've removed a number of outflows from our business model, including roughly $100 million -- just over $100 million in dividends, which we have historically paid, as well as reducing our near-term CapEx from about $150 million to $50 million. So there's $200 million of sort of external outflows that we're taking out of the system in the short term. So it has always been attractive to have to kind of broaden up that capital structure. And given the environment that we're in today particularly 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, our availability and our liquidity availability, pro forma this offering and some of the other sales, the Q1 events that I mentioned the tax refund and the building sale. We're just under -- right around $400 million liquidity availability. You've looked at the recent cash burn in Q4 as an example. And I think you can share our comfort and our confidence that this round will put the company in a great position well through 2021 and into 2022. So with that said, I would suggest that there is no real, we believe, short-term requirement to look at any other financing options. But with that said, it is -- we have a number of -- we're always looking where if there is opportunities to extract value. So as we think in the short term, there's a true value creation opportunity that results on the liquidity event. We'd explore it by what I described to you and the numbers that I just provided to you. We don't believe we really need to do anything throughout 2021.

[Operator]

Our next question comes from Adam Shine of National Bank Financial.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

In terms of the [indiscernible], just in terms of the covenant, Gord, when we pushed this out to Q4, is it similar to what we've seen perhaps in the prior wafers? Is it Q4 the guidance…

[Gord Nelson, Chief Financial Officer]

Everything's just kind of shifted out. So 4 times Q4.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

Maybe for you, Ellis. Acknowledging obviously that the CapEx spend has been curtailed to that, I think, $50 million 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 as a gear up to eventually patrons coming back into the theaters?

[Ellis Jacob, President, CEO & Director]

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.

[Operator]

Our next question comes from Aravinda Galappatthige of Canaccord Genuity.

[Aravinda Suranimala Galappatthige, Managing Director]

It will be worthwhile. One for Gord and one for Ellis. Ellis, more big picture question, can you just characterize the conversations that you're having with studios nowadays in the backdrop of the Universal arrangement that you've announced, and some of the trends that we've seen from Warner and Disney, obviously different from one to the other. 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 help out the exhibitors?And for Gord, just following up on your answer to the first question, obviously forecasting that variance between EBITDA and EBITDAAL, which is predominantly the cash rent piece is sort of difficult on a quarterly basis. Should we assume based on your answer that sort of the Q4 variance or the Q4 delta, which is sort of $33 million, 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.

[Ellis Jacob, President, CEO & Director]

Aravinda, 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 cinemas, but we also played it in the Cineplex Store on a premium VOD format and did extremely well where it was settling in the store and also in the theaters that were opened, but there were limited theaters that were open. So we are trying to balance the 2, and we will continue to do that until we see it the other side. But I feel and I know our partners feel that the theatrical window is an important part of the overall box office that we can garner from a 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 one size fits all, we continue to work with other creators or 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.

[Gord Nelson, Chief Financial Officer]

And then on the second question, Aravinda, the one thing that's somewhat tricky in a lot of moving parts obviously is we're always in discussions with our landlord partners and of abatements, which may extend over a period of time. It's not until we actually agree and pay for an agreement and sign off on both sides that can reflect it in the accounting record. So there may be things that I suggest that are going on right now that are activities that are going to benefit, but may not necessarily before we reflect it.But with that said is -- I think my commentary is that the landlord ability to provide relief is not there forever. And as that drops off a bit, it's what we're seeing as the government step in and pick up and provide some other forms of relief. So probably Q4 is your better indicator than the little earlier quarters where we're getting significant amounts of relief. And the only other thing I'd want to add to that is we've chatted about looking at extracting value from our lease rights. And when we look at extracting value from our lease rights, that doesn't end up even EBITDAAL -- EBITDA versus EBITDAAL question. So that's something that becomes kind of a proceeds or a gain, even it's not detrimental to the operating results of our company. So I just want to say there's interest on more items related to those 2 that don't come to the EBITDAAL question, definitely a cash savings element.

[Operator]

[Operator Instruction] Our next question today comes from Tim Casey of BMO.

[Tim Casey, Equity Research Analyst]

A couple from you. One for Gord and a couple for Ellis. Gord, just on your efforts to monetize these lease rates. Can you just walk us through what's in it for the landlord, like I -- we can obviously see the benefits that you are 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 recurring side. I'm just wondering if you think it's in your best interest to close some theaters that may have been performing less well than others. And when you contemplate reopening that it may just be in your best interest to move on from then. And as well as Rec Rooms, I know that with your revised CapEx plans, you're not doing any new builds or finishing stuff 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?

[Gord Nelson, Chief Financial Officer]

So I'll take your first question. And I always like to provide some hypothetical example on a scenario so that you can really understand and for people I provided this to, I think, has really helped them understand what these are. So we're typically -- imagine a theatre [indiscernible] where there's a number of parking lots and there may be some businesses on the periphery in those parking lots. I'd say there's a couple of restaurants and maybe a bank, and another small retail store. And under our lease, the landlord would be restricted on maintaining a certain number of parking spaces as well as the type of facilities that could be in those -- occupy those buildings. So imagine the scenario where we've been -- 10 years later, 15 years later, the transit hub has grown. And now from the landlords perspective, the highest and best use of that space is not having a couple of restaurants on that pad. Maybe 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, there's something that's going to be a real value creation for you. You can't do it. But let's negotiate and let's see what can happen. And so those are the types of activities. So it's not impacting at all the economics of what we're paying under a lease. It's not impacting at all our building, the property. And what it is is that it's providing the landlord some additional flexibility and what they can do it. And that's the benefit to them.

[Ellis Jacob, President, CEO & Director]

On the other questions 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 2 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 positionings and make sure we are making the right decision from an overall cash flow moving forward. And to meet that kind of very, very important as we focus on the theater portfolio for the future.On the [ LPE ], 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 theaters, between our location-based entertainment venues, basically will be happy and we can capture their entertainment dollars 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.

[Gord Nelson, Chief Financial Officer]

Yes. And just I can add to that, too, obviously, the pandemic has been accelerated, like the massive disruption in the retail landscape that's occurring globally. And the future of retail will include food and beverage and entertainment being the anchors of retail destination in the future. So as we go through the transition and evolution which is now sped up, it's probably better for us to pause. And there may be better value opportunities for us that come out as a result of this disruption that's going on. So that was that we're continue -- we're focused on it, we're committed to it -- path. 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.

[Operator]

As there are no further questions, I would like to pass the call to Ellis Jacob for any additional or closing remarks.

[Ellis Jacob, President, CEO & Director]

Thank you all for joining us this morning. As you heard today, we have adapted with agility to create a leaner, more resilient organization, minimize our cash burn and added the liquidity we need to see us through. We use this opportunity to become a stronger, well positioned and ultimately 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.

[Operator]

Ladies and gentlemen, that concludes today's conference call. We thank you for your participation. You may now disconnect.