Cineplex Inc.

Cineplex Inc. Management’s Discussion and Analysis

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MANAGEMENT’S DISCUSSION AND ANALYSIS

May 5, 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 (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 March 31, 2021 and all amounts are in Canadian dollars.

MANAGEMENT’S DISCUSSION AND ANALYSIS CONTENTS

Section	Contents	Page
1 2 3 4 5 6 7 8 9 10 11	Overview of Cineplex Cineplex’s businesses and strategy Overview of operations Results of operations Balance sheets Liquidity and capital resources Adjusted free cash flow and dividends Share activity Seasonality and quarterly results Related party transactions Significant accounting judgments and estimation uncertainties	3 12 14 17 32 34 41 42 44 46 46
12 13	Risks and uncertainties Controls and procedures	47 57
14 15 16	Outlook Non-GAAP measures Reconciliation	57 59 64

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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 nonGAAP 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 15, 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 wellbeing 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.

By their very nature, forward-looking statements involve inherent risks and uncertainties, including those described in Cineplex’s Annual Information Form (“AIF”), and MD&A for the year ended December 31, 2020 (“Annual MD&A”) 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

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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 forwardlooking 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, Cineplex undertakes 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 and Annual MD&A, 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 March 31, 2021, Cineplex owned, leased or had a joint venture interest in 1,657 screens in 161 theatres from coast to coast as well as 11 LBE venues in five provinces.

Cineplex
Theatre locations	and screens at March 31,		2021
									Other
			3D Digital		IMAX	VIP	D-BOX	Recliner	Screens
Province	Locations	Screens	Screens	UltraAVX	Screens(i)	Auditoriums	Auditoriums	Auditoriums	(ii)
Ontario	68	730	358	41	13	48	48	108	10
Quebec	17	220	88	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	161	1,657	816	94	25	84	98	253	19
Percentage of
screens			49 %	6 %	2 %	5 %	6 %	15 %	1 %

(i) All IMAX screens are 3D enabled. Total 3D screens including IMAX screens are 841 screens or 51% of the circuit.

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

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Management’s Discussion and Analysis

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Cineplex - Theatres, screens, andpremium offerings in the last eightquarters
	2021	2020	2019
	Q1	Q4 Q3 Q2 Q1	Q4 Q3 Q2
Theatres Screens 3D Digital Screens UltraAVX Screens IMAX Screens VIP Auditoriums D-BOX Auditoriums Recliner Auditoriums Other Screens	161 1,657 816 94 25 84 98 253 19	162 164 164 164 1,667 1,687 1,687 1,687 819 826 826 826 94 94 94 94 25 25 25 25 84 84 84 84 98 99 99 99 253 221 221 221 19 19 19 19	165 165 165 1,693 1,695 1,695 826 827 826 94 93 93 25 25 25 84 79 79 97 92 92 213 182 182 17 5 4

Cineplex - LBE at March 31, 2021
Province	*The Rec Room*	*Playdium*
Ontario	3	2
Alberta	3	—
Manitoba	1	—
Newfoundland & Labrador	1	—
Nova Scotia	—	1
TOTALS	8	3

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

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1.1 RECENT DEVELOPMENTS

COVID-19 business impacts, risks and liquidity

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 (“WHO”). 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.

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.	Indoor dining closed as of March 29, 2021.
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.	Indoor seated dining is limited to individuals residing in the same residence. Outdoor dining restricted to fourpeople.
Ontario	Cinemas closes in accordance with stay-at-home order as of April 6, 2021. Stay at home order extended to May 20, 2021.	Indoor dining closed in accordance with stay- at-home order as of April 6, 2021. Stay at home order extended to May 20, 2021.
Quebec	Cinemas open in select regions up to 250 persons per auditorium.	Indoor dining open, subject to regional restrictions, as of March 8, 2021.
New Brunswick	Most regions now open at 50% of maximum occupant load, with 50 per auditorium in regions bordering Quebec.	Restaurants open.
Nova Scotia	Theatre closures scheduled to expire on May 20, 2021.	Indoor dining and events prohibited.
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	Cinemas open up to 100 persons per auditorium.	Permitted since June 8, 2020. Indoor dining open at 50% capacity.

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

Liquidity measures:

June 2020: entered into the First Credit Agreement Amendment with The Bank of Nova Scotia as administrative agent to Cineplex’s seventh amended and restated credit agreement (Credit Facilities) providing certain financial covenant relief in light of the COVID-19 pandemic and its impact on Cineplex’s business (Section 6.4, Long-term debt);

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July 2020: issued convertible unsecured subordinated debentures for net proceeds of $303.3 million, (Section 6.4, Long-term debt);
November 2020: entered into the Second Credit Agreement Amendment providing further financial covenant relief (Section 6.4, Long-term debt);
December 2020: entered into an agreement to enhance and expand the SCENE Scotiabank Loyalty program receiving $60.0 million with respect to the reorganization.
January 2021: completed the sale and leaseback transaction of Cineplex’s head office buildings located at 1303 Yonge Street and 1257 Yonge Street, Toronto, Ontario for gross proceeds of $57.0 million;
January 2021: filed tax returns for the 2020 taxation year claiming a $62.6 million recovery of income taxes paid in prior periods ($4.7 million received by March 31, 2021);
February 2021: entered into the Third Credit Agreement Amendment providing further financial covenant relief (Section 6.4, Long-term debt); and
February 2021: issued 7.50% senior secured second lien notes due February 26, 2026 (the “Notes Payable”) for net proceeds of $243.3 million (Section 6.4 Long-term debt).

Cost reduction and subsidy measures undertaken upon the declaration of the pandemic and on an ongoing basis:

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 during the second quarter of 2020;
reduced full-time employee salaries by agreement with such employees during the second and third quarters of 2020;
suspended or deferred current capital spending, 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 plans to reduce purchases of property, plant and equipment (net of tenant inducements) to approximately $50.0 million for the next 12 months. Cineplex continues to focus on revenue-driving opportunities including the expansion of Cineplex Store offerings and food home delivery from theatres and LBE venues.

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. In the last 12 months since the shutdown on March 15, 2020, Cineplex has experienced a total net cash burn of approximately $258.5 million or on average $21.5 million per month, as a result of having to close its theatres and LBE venues (Section 15, Non-GAAP measures). When used in this MD&A, net cash burn is calculated as adjusted EBITDAaL (Section 15, 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,

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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 $31.4 million reported in the first quarter of 2020 to approximately $3.6 million in the first quarter of 2021. During the first quarter of 2021, Cineplex recorded approximately $14.8 million in wage subsidies, primarily under the CEWS program, of which $6.1 million was used to offset theatre payroll costs. In addition, Cineplex was able to further reduce operating expenses as a result of rent subsidies of $7.0 million, realty tax subsidies of $4.8 million and utilities subsidies of $1.6 million that were recognized during the period. With respect to theatre occupancy expenses, Cineplex has continued to work with its landlord partners subsequent to the lockdowns to obtain relief measures, which has resulted in significantly reduced cash rent being paid in 2020 and 2021. Including the sale of certain restrictive lease rights to landlords undertaken in the third quarter of 2020, Cineplex was able to materially reduce net cash lease outflows on an annual basis by $72.5 million in 2020. Ongoing discussions with landlords resulted in $11.5 million of additional savings in occupancy costs during the first quarter of 2021. With the expanding impact of the third wave of COVID-19 due to more transmissible variants, Cineplex continues to work with landlord partners to obtain further relief. This includes remaining focused on identifying opportunities for lease-related abatements during the closure period, converting fixed components of rent to variable rent during the reopening period and pursuing other opportunities to extract value under its existing lease agreements.

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 reexamined 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 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 evolving provincial regulations; and
making hand sanitizer readily available for guests and employees throughout the buildings.

Although restrictions on social gatherings were temporarily lifted in many of the markets in which Cineplex operated over the summer and into the fall of 2020, social gathering restrictions were reinstituted in the late fall and winter with the increased number of COVID-19 cases and the onset of the third wave in the latter half of the first quarter of 2021, involving more transmissible variants. This has resulted in ongoing mandatory lockdown measures which have resulted in prolonged mandatory closures and operating restrictions on the theatre and 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 material negative impact on Cineplex’s operations.

In addition to the ongoing closures, some previously expected theatrical releases have instead been redirected to streaming services or adjusted their release date. The impact of the reduction of new releases as a result of these postponements in combination with the ongoing restrictions on the reopening of Cineplex’s businesses, has and continues to negatively impact the timing of Cineplex’s return to profitability.

Canada has begun its inoculation process, starting with front line workers and high-risk individuals. 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. When compared to other major markets such as the United States, Canada’s vaccination process lags which will further prolong the reopening of theatres and LBE businesses resulting in negative implications on business operations.

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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 the past year. The release of the highly anticipated Godzilla vs. Kong generated strong business in the United States, and globally since its release making it the most successful film to release since the pandemic started in March 2020. Despite simultaneously playing on streaming platforms, the success of Godzilla vs. Kong during the pandemic provides optimism for the movie exhibition industry. 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. China set box office records during the quarter with February marking an all-time record for the biggest month of movie ticket sales of US $1.7 billion while operating under capacity restrictions. Australian cinemas have also performed strongly during the quarter.

Management continues to pursue all viable options to maintain adequate liquidity to fund operations for the currently anticipated duration of the pandemic. This includes but is not limited to asset sales such as Cineplex’s head office buildings in Toronto which was completed during the period, issuance of Notes Payable (Section 6.4, Longterm debt) and amendments to existing credit facilities (Section 6.4, Long-term debt). The proceeds received were primarily used to repay Cineplex’s existing credit facilities and fund continuing operations.

As at March 31, 2021, Cineplex had a cash balance of $19.5 million and $258.7 million available under its Revolving Facility subject to the liquidity covenants set forth in the Credit Facilities as amended (Section 6.4, Longterm debt). Cineplex also expects to recover income taxes paid in prior periods of $62.6 million of which $4.7 million has been received as of March 31, 2021. Combined with the continued focus on reducing costs and capital expenditures, management believes that it has adequate liquidity to fund operations for the currently anticipated duration of the pandemic in the regions that Cineplex operates in.

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

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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. On February 23, 2021, Cineworld amended its Statement of Defence and Counterclaim to add additional allegations that Cineplex had breached the Arrangement Agreement. Cineplex delivered an Amended Reply and Defence to Counterclaim on March 9, 2021 denying all of Cineworld’s additional allegations. The parties are currently engaged in the discovery process.

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.

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1.2 FINANCIAL HIGHLIGHTS

1.2 FINANCIAL HIGHLIGHTS
Financial highlights (in thousands of dollars, except theatre attendance in thousands of patrons and per Share and per patron amounts)	FirstQuarter
	2021 2020 Change (i)
Total revenues (ii) Theatre attendance Net loss from continuing operations (iii) Net loss from discontinued operations Net loss (iii) Box office revenues per patron (“BPP”) (iv) Concession revenues per patron (“CPP”) (iv) Adjusted EBITDA (iv) Adjusted EBITDAaL (iii) (iv) Adjusted EBITDAaL margin (iii) (iv) Adjusted free cash flow (iv) Adjusted free cash flow per Share (iv) Earnings per Share (“EPS”) from continuing operations - basic and diluted (iii) EPS from discontinued operations - basic and diluted EPS - basic and diluted(iii)	$ 41,412 $ 282,801 -85.4 % 415 10,710 -96.1 % $ (89,688) $ (174,155) -48.5 % $ — $ (4,259) -100.0 % $ (89,688) $ (178,414) -49.7 % $ 9.20 $ 10.36 -11.2 % $ 6.12 $ 6.79 -9.9 % $ (30,105) $ 46,472 NM $ (62,090) $ 2,390 NM -149.9 % 0.8 % -150.7 % $ (78,785) $ (207) NM $ (1.244) $ (0.003) NM $ (1.42) $ (2.75) -48.4 % $ — $ (0.07) NM $ (1.42)$ (2.82) -49.6 %
(i) Throughout this MD&A, changes in percentage amounts are calculated as 2021 value less 2020 value. (ii) All amounts are from continuing operations. (iii) 2021 includes expenses related to the Cineworld Transaction in the amount of $2.4 million (2020 - $1.3 million). (iv)See Section 15,Non-GAAP measures.

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. In response to the ongoing government directives and guidance from Canadian public health authorities, the majority of Cineplex’s theatre circuit and LBE venues across Canada were closed or operating under stringent restrictions for the duration of 2020, continuing into 2021. 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. Total revenues for the first quarter of 2021 decreased 85.4%, or $241.4 million as compared to the prior year period during which Cineplex’s operations were open until early March. Theatre closures led to a 10.3 million or 96.1% decrease in theatre attendance resulting in the significantly lower box office, and theatre food service and all ancillary theatre revenues. Food delivery revenues of $3.8 million provided the majority of food service revenues in the quarter. With most media revenue generating venues including theatres, retail and digital out of home locations closed, media revenues of $9.1 million were primarily from digital place-based media revenues specifically from network management, creative services and media hardware sales. The majority of amusement revenues of $13.9 million were from route operations and equipment sales primarily in the United States as states have begun removing restrictions and reopening venues. While efforts to reduce costs are ongoing, including negotiations with landlords and savings realized under government subsidy programs, the negative impact of the closures on the business resulting from COVID-19 resulted in adjusted EBITDAaL decreasing $64.5 million to a loss of $62.1 million as compared to the prior year and adjusted free cash flow per Share decreased $1.241 to $(1.244) per Share.

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1.3 KEY DEVELOPMENTS IN THE FIRST QUARTER OF 2021

The following describes certain key business initiatives undertaken and results achieved during the first quarter of 2021 in each of Cineplex’s core business areas:

FILM ENTERTAINMENT AND CONTENT

Theatre Exhibition

During the first quarter, a majority of Cineplex’s theatres remained closed or under strict operating restrictions resulting in a 96.1% decrease in theatre attendance. As a result, Cineplex reported box office revenues of $3.8 million.
BPP was $9.20, a decrease of $1.16 (11.2%) compared to the prior period BPP of $10.36.

Theatre Food Service

Mandatory closures of theatres and strict operating restrictions on theatres negatively impacted theatre food service revenues in the quarter. Cineplex continued to focus on food home delivery services and reported $3.8 million of food delivery revenues in the quarter.
CPP was $6.12, a decrease of $0.67 (9.9%) compared to the prior period CPP of $6.79, partially as a result of concession restrictions in select regions in Quebec.

Alternative Programming

Alternative Programming continued with classic films and other repertory film programming during this period. With the limited reopening of Quebec theatres, Cineplex released 100% Wolf in theatres across the province.

Digital Commerce

Total registered users for Cineplex Store increased 33% from the prior year period, reaching 2.0 million registered users.

MEDIA

Media revenues continued to be negatively impacted by the mandatory closures of theatres, retail and digital out of home locations, resulting in a decline in advertising revenue. During the quarter, media revenues were primarily driven by digital place-based media revenues specifically from network management, creative services and media hardware sales.
A long-term arrangement with Torstar Corporation was announced whereby Torstar will acquire publishing and exclusive theatre distribution rights of Cineplex Magazine. Torstar will continue both print and digital publications of the magazine under the brand Star Cineplex.

AMUSEMENT AND LEISURE

Amusement Solutions

P1AG’s revenues for the period were primarily earned through route operations including Family Entertainment Centres (“FEC”) locations and equipment sales, primarily in the United States which commenced limited reopenings during the quarter.

Location Based Entertainment

During the quarter, a majority of Cineplex’s LBE venues were closed due to government mandated lockdown measures and enforced operating restrictions resulting in a material negative impact on revenue during the quarter.
Cineplex opened the third location of Playdium in Dartmouth, on February 26, 2021 to strong results.

LOYALTY

Membership in the SCENE loyalty program remained flat during the period ended March 31, 2021.

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CORPORATE

During the quarter, 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 the amount outstanding under Cineplex’s Credit Facilities.
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 (Section 6.4 Long-term debt).
On February 26, 2021, Cineplex completed the $250.0 million Notes Payable offering. Cineplex used the net proceeds raised in part to permanently repay $100.0 million of its Credit Facilities. The Notes Payable bear interest at a rate of 7.50% per annum and mature on February 26, 2026 (Section 6.4 Long-term debt).

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 and 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 intheatre, 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.

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Diversified Entertainment and Media Company

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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.

While box office revenues (which include alternative programming) typically 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 (Section 1.1, COVID-19 business impacts, risks and liquidity).

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3. 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 negatively impacted during 2021. The following table presents the revenue mix for the comparative year:

for the comparative year:
Revenue mix % by period	Q1 2021	Q1 2020 Q1 2019 Q1 2018 Q1 2017
Box office Food service Media Amusement Other	9.2 % 15.8 % 21.9 % 33.5 % 19.6 %	39.3 % 42.9 % 46.6 % 49.7 % 28.1 % 28.3 % 30.0 % 29.0 % 11.4 % 9.5 % 8.0 % 8.3 % 16.7 % 16.0 % 12.8 % 10.5 % 4.5 % 3.3 % 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 locationbased 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 period were materially impacted by the closures and reduced capacities of theatres and LBE locations as a result of COVID-19.

of COVID-19.
Segment revenue mix % by period	FirstQuarter
	2021 2020
Film Entertainment and Content Media Amusement and Leisure Location-Based Entertainment	44.7 % 70.1 % 21.4 % 11.2 % 30.3 % 12.4 % 3.6 % 6.3 %
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. Cineplex has focused on optimizing revenues during the COVID-19 closures by offering a catalog of classic film products along with new releases and expanding product offerings through the Cineplex Store which saw significant growth in the period. In addition, prior to COVID-19, 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.

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

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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.

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.

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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 Cineplex’s Omnibus 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.

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”), 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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4. RESULTS OF OPERATIONS

4.1 SELECTED FINANCIAL DATA

The following table presents summarized financial data for Cineplex for the three months ended March 31, 2021 and 2020 (expressed in thousands of dollars except Shares outstanding, per Share data and per patron data, unless otherwise noted):

otherwise noted):
Box office revenues Food service revenues Media revenues Amusement revenues Other revenues Total revenues Film cost Cost of food service Depreciation - right-of-use assets Depreciation and amortization - other assets (Gain) loss on disposal of assets Other costs (a) Impairment of long-lived assets and goodwill Costs of operations Net loss from continuing operations Net loss from discontinued operations Net loss Adjusted EBITDA (i) (iii) Adjusted EBITDAaL (i) (iii) (a) Other costs include: Theatre occupancy expenses Other operating expenses General and administrative expenses (iii) Total other costs EPS from continuing operations - basic and diluted (iii) EPS from discontinued operations - basic and diluted EPS - basic and diluted (iii) Total assets Total long-term financial liabilities (ii) Shares outstandingatperiod end	Three months ended March 31, 2021 Three months ended March 31, 2020 Variance (%)
	$ 3,818 $ 111,002 -96.6 % 6,525 79,365 -91.8 % 9,074 32,157 -71.8 % 13,874 47,337 -70.7 % 8,121 12,940 -37.2 %
	41,412 282,801 -85.4 %
	1,235 56,500 -97.8 % 1,412 22,209 -93.6 % 26,318 35,533 -25.9 % 29,509 33,962 -13.1 % (30,060) 817 NM 68,705 157,548 -56.4 % — 173,054 NM
	97,119 479,623 -79.8 %
	$ (89,688) $ (174,155) NM — (4,259) (100.0)%
	$ (89,688) $ (178,414) NM
	$ (30,105) $ 46,472 NM $ (62,090) $ 2,390 NM 6,782 17,971 -62.3 % 47,806 134,548 -64.5 % 14,117 5,029 180.7 %
	$ 68,705 $ 157,548 -56.4 %
	$ (1.42) $ (2.75) -48.4 % $ — $ (0.07) 100.0 % $ (1.42) $ (2.82) -49.6 % $ 2,246,653 $ 2,815,118 -20.2 % $ 739,005 $ 665,000 11.1 % 63,338,389 63,333,238 — %
Cash dividends declared per Share Adjusted free cash flow per Share (i) Box office revenue per patron (i) Concession revenue per patron (i) Film cost as a percentage of box office revenues Theatre attendance (in thousands of patrons) (i) Theatre locations (at period end) Theatre screens(atperiod end)	$ — $ 0.150 -100.0 % $ (1.244) $ (0.003) NM $ 9.20 $ 10.36 -11.2 % $ 6.12 $ 6.79 -9.9 % 32.3 % 50.9 % -18.6 % 415 10,710 -96.1 % 161 164 -1.8 % 1,657 1,687 -1.8 %
(i) See Section 15, Non-GAAP measures, for the definition of non-GAAP measures reported by Cineplex. (ii) Represents the principal component as presented on the financial statements net of any equity component and unamortized costs of long- term debt, convertible debentures, and Notes payable. Excludes share-based compensation, lease obligations, fair value of interest rate swap agreements, post-employment benefit obligations and other liabilities. (iii)Includes expenses related to the Cineworld Transaction in the amount of $2.4 million in 2021.(2020 - $1.3 million).

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4.2 OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2021

Total revenues

Total revenues for the three months ended March 31, 2021 decreased $241.4 million (85.4%) to $41.4 million as compared to the prior year period. A discussion of the factors affecting the changes in box office, food service, media, amusement and other revenues for the period 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 15, Non-GAAP measures.

Box office revenues

The following table highlights the movement in box office revenues, theatre attendance and BPP for the quarter (in thousands of dollars, except theatre attendance reported in thousands of patrons and per patron amounts, unless otherwise noted):

Box office revenues	Box office revenues	Box office revenues	Box office revenues	Box office revenues	Box office revenues	FirstQuarter	FirstQuarter	FirstQuarter	FirstQuarter
						2021 2020 Change
Box office revenues Theatre attendance (i) Box office revenue per patron (i) BPP excluding premium priced product (i)						$ 3,818 $ 111,002 -96.6 % 415 10,710 -96.1 % $ 9.20 $ 10.36 -11.2 % $ 8.84 $ 9.33 -5.3 %
Same theatre box office revenues (i) Same theatre attendance (i) % Total box frompremiumpricedproduct(i)						$ 3,818 $ 110,152 -96.5 % 415 10,609 -96.1 % 11.5 % 28.7 % -17.2 %
(i)See Section 15,Non-GAAP measures.
Box office continuity							First Quarter Box Office Theatre Attendance
2020 as reported Same theatre attendance change Impact of same theatre BPP change							$ 111,002 10,710 (105,842) (10,194) (492) —
Disposed and closed theatres(i)							(850) (101)
2021 as reported							$ 3,818 415
(i) See Section 15, Non-GAAP measures. Represents theatres opened, acquired, disposed or closed subsequent to the start of the prior year comparativeperiod.
FirstQuarter 2021 Top Cineplex Films		3D	% Box	FirstQuarter 2020 Top Cineplex Films				3D	% Box
1 2 3 4 5	Tom & Jerry The Croods: A New Age Wonder Woman 1984 The Little Things News Of The World		19.3 % 16.1 % 15.5 % 5.1 % 4.2 %	1 2 3 4 5	1917 Star Wars: The Rise Of Skywalker Jumanji: The Next Level Bad Boys For Life Sonic The Hedgehog			a a	9.7 % 9.2 % 9.1 % 8.7 % 6.4 %

Box office revenues decreased $107.2 million, or 96.6%, to $3.8 million during the first quarter of 2021, compared to $111.0 million reported in the same period in 2020. The decrease was due to the 96.1% decrease in theatre attendance to 0.4 million as a result of continued mandatory lockdown measures, capacity and operating restrictions in venues that remained open and limited first run film product availability. As a result of the emergence of more transmissible variants of COVID-19, there has been the onset of a third wave of the pandemic across a majority of provinces resulting in expanded government mandated lockdown measures which continue to negatively impact Cineplex’s box office revenues.

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Cineplex Inc. Management’s Discussion and Analysis

__________________ BPP for the three months ended March 31, 2021 was $9.20, a $1.16 decrease (11.2%) from the prior year period. The decrease in BPP was primarily due to a lower percentage of box office revenue from premium priced offerings, lower ticket pricing on previously released content, SCENE promotions and limited new film releases.

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Box Office Revenue per
Patron
$9.97 $10.21 $10.44 $10.36
$9.20
Q1 17 Q1 18 Q1 19 Q1 20 Q1 21
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Box Office Revenues (millions) Theatre Attendance (millions)
$195.4 19.6
$181.4 17.8
$156.5 15.0
$111.0 10.7
$3.8 0.4
Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21
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Food service revenues

The following table highlights the movement in food service revenues, theatre attendance and CPP for the quarter (in thousands of dollars, except theatre attendance and same store attendance reported in thousands of patrons and per patron amounts):

(in thousands of dollars, except theatre attendance and same store attendance per patron amounts):	reported in thousands of patrons and
Food service revenues	FirstQuarter
	2021 2020 Change
Food service - theatres Food delivery - theatres Food service - LBE Food delivery- LBE ~~Total food service revenues~~	$ 2,539 $ 72,681 -96.5 % 3,778 — NM 171 6,684 -97.4 % 37 — NM
	$ 6,525 $ 79,365 -91.8 %
Theatre attendance (i) CPP (i) (ii) Same theatre food service revenues (i) Same theatre attendance (i)	415 10,710 -96.1 % $ 6.12 $ 6.79 -9.9 % $ 2,538 $ 72,242 -96.5 % 415 10,609 -96.1 %
(i) See Section 15, Non-GAAP measures. (ii)Onlytheatre food service revenue is included in the CPP calculation.

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Theatre food service revenue continuity	First Quarter Theatre Food Service Theatre Attendance
2020 as reported Same theatre attendance change Impact of same theatre CPP change	$ 72,681 10,710 (69,415) (10,194) (289) —
Disposed and closed theatres(i)	(439) (101)
2021 as reported	$ 2,538 415
(i) See Section 15, Non-GAAP measures. Represents theatres opened, acquired, disposed or closed subsequent to the start of the prior year comparativeperiod.

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 have continued to be materially impacted by the COVID-19 government mandated closures and capacity restrictions of theatres and LBE venues. For a majority of the current period, indoor dining was prohibited in most markets in which The Rec Room and Playdium operate also contributing to the material decrease in food service revenues. Food service revenues decreased $72.8 million, or 91.8% to $6.5 million due to the impact of the 96.1% decrease in theatre attendance, limited concession menu options and operating restrictions on Cineplex’s theatre circuit and LBE venues. Food delivery sales continue to provide steady results with total food delivery sales of $3.8 million during the period.

CPP decreased 9.9% to $6.12 compared to $6.79 in the prior year period. The decrease in CPP compared to the prior year period is due to limited concession menu options and operating restrictions on Cineplex’s theatre circuit and LBE venues. For example, Cineplex re-opened theatres in the Quebec region but was unable to offer concessions at a majority of re-opened locations due to government restrictions on concessions, contributing to the decrease in CPP when compared to the prior year period.

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Theatre Food Revenues Concession Revenue per
(millions) Patron
$111.8 $108.2 $95.2 $72.7 $5.71 $6.09 $6.35 $6.79 $6.12
$6.3
Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21
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Media revenues

The following table highlights the movement in media revenues for the quarter (in thousands of dollars):

The following table highlights the movement in media revenues for the quarter	(in thousands of dollars):
Media revenues	FirstQuarter
	2021 2020 Change
Cinema media Digitalplace-based media	$ 1,899 $ 17,262 -89.0 % 7,175 14,895 -51.8 %
Total media revenues from continuingoperations	$ 9,074 $ 32,157 -71.8 %
Media revenues from discontinued operations	— 382 -100.0 %
Total media revenues	$ 9,074 $ 32,539 -72.1 %

Total media revenues from continuing operations decreased $23.1 million or 71.8% compared to the prior year period to $9.1 million. During the period, media revenues were primarily driven by digital place-based media revenues specifically from network management, creative services and media hardware sales. The decrease in media revenues compared to the prior year period is due to a $15.4 million decrease in cinema media revenues with the decline in show-time and pre-show advertising revenues due to prolonged theatre closures, and $7.7 million decrease in digital place-based media revenues, due to continued mandatory lockdown measures which resulted in mall and retail closures, leading to a decline in installation and media advertising revenue.

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Media Revenues
(millions) (i)
$32.6 $31.3 $34.7 $32.2
$9.1
Q1 17 Q1 18 Q1 19 Q1 20 Q1 21
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(i) Media revenues for prior year periods have been restated to present revenue amount from continuing operations.

The following table shows a breakdown of the nature of digital place-based media revenues for the quarter (in thousands of dollars):

thousands of dollars):
Digital place-based media revenues	FirstQuarter
	2021 2020 Change
Project revenues (i) Other revenues(ii)	$ 2,315 $ 5,815 -60.2 % 4,860 9,080 -46.5 %
Total digitalplace-based media revenues	$ 7,175 $ 14,895 -51.8 %
(i) Project revenues include hardware sales and professional services. (ii)Other revenues include sales of software and its support as well as mall and media advertising.

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Amusement revenues

The following table highlights the movement in amusement revenues for the quarter (in thousands of dollars):

Amusement revenues	FirstQuarter
	2021 2020 Change
Amusement - P1AG excluding Cineplex exhibition and LBE (i) Amusement - Cineplex exhibition (i) Amusement - LBE	$ 12,559 $ 34,961 -64.1 % 72 2,196 -96.7 % 1,243 10,180 -87.8 %
Total amusement revenues	$ 13,874 $ 47,337 -70.7 %
(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 sharepaid to Cineplex reflected in Amusement - Cineplex exhibition above.

(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.

Amusement revenues decreased 70.7%, or $33.5 million, to $13.9 million in the first quarter of 2021 compared to the prior year period. The decrease was primarily due to continued government mandated closures of P1AG route locations, Cineplex theatres and LBE venues, and mandated capacity restrictions in locations that were able to open.

The following table presents the adjusted EBITDAaL for the quarter for P1AG (in thousands of dollars):

P1AG Summary	FirstQuarter
	2021 2020 Change
Amusement revenues	$ 12,559 $ 34,961 -64.1 %
Operating Expenses	14,354 32,995 -56.5 %
Cash rent related to lease obligations(i)	1,216 1,427 -14.8 %
Total adjusted operatingexpenses	$ 15,570 $ 34,422 -54.8 %
P1AG Adjusted EBITDAaL (ii) P1AG Adjusted EBITDAaL Margin(ii)	$ (3,011) $ 539 NM -24.0 % 1.5 % -25.5 %
(i) Cash rent that has been reallocated to offset the lease obligations.
(ii)See Section 15,Non-GAAP measures.

Margins for P1AG decreased in 2021 compared to 2020 as a result of the prolonged government mandated closures of P1AG route locations and capacity restrictions imposed as a result of COVID-19. Certain operating expenses such as salaries, occupancy and utilities are fixed in nature, which also contributed to the lower adjusted EBITDAaL margin during the period. Payroll costs were reduced by $1.1 million received under the COVID-19 CEWS wage subsidy program during the quarter. Cash rent related to lease obligations decreased as a result of rent abatements and deferrals negotiated with landlords.

With the wider rollout of vaccinations in the United States and additional guidance provided by health officials, P1AG US route locations have begun to re-open at limited capacities with strong results. However, there is no guarantee that restrictions will not be reinstated which would negatively impact route operations and future reopenings.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc.

Management’s Discussion and Analysis

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The following table presents the adjusted store level EBITDAaL for the quarter for LBE:

LBE Summary	FirstQuarter
	2021 2020 Change
Food service revenues Amusement revenues	$ 208 $ 6,684 -96.9 % 1,243 10,180 -87.8 %
Media and other revenues	35 826 -95.8 %
Total revenues Cost of food service Operating expenses before adjustments (i)	$ 1,486 $ 17,690 -91.6 % 79 2,008 -96.1 % 2,121 11,312 -81.3 %
Cash rent related to lease obligations(ii)	1,697 1,764 -3.8 %
Total adjusted costs	$ 3,897 $ 15,084 -74.2 %
Store level Adjusted EBITDAaL (iii) Store level Adjusted EBITDAaL Margin(iii)	$ (2,411) $ 2,606 NM NM 14.7 % NM
(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 15,Non-GAAP measures.

Revenues from LBE decreased $16.2 million or 91.6% to $1.5 million as compared to the prior year period with the majority of the first quarter revenues coming from the newly opened The Rec Room location in Dartmouth, Nova Scotia. The decrease is due to temporary closures of LBE locations and operating restrictions as a result of the ongoing COVID-19 pandemic. Certain costs are also fixed in nature such as salaries and occupancy, further contributing to the decrease in margins. These costs were partially offset by $1.2 million received under the COVID-19 CEWS wage subsidy program, $0.4 million realty tax subsidy and $0.5 million rent subsidy received during the quarter.

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 (in thousands of dollars):

The following table highlights the other revenues which includes revenues from activities, screenings, private parties, corporate events, breakage on gift card sales fees for the quarter (in thousands of dollars):	the Cineplex Store, promotional and revenues from management
Other revenues	FirstQuarter
	2021 2020 Change
Other revenues from continuing operations Other revenues from discontinued operations	$ 8,121 $ 12,940 -37.2 % — 199 NM
Total other revenues	$ 8,121 $ 13,139 -38.2 %

Other revenues from continuing operations decreased $4.8 million or 37.2% in the first quarter of 2021 compared to the prior year period due primarily due to the suspension of the recognition of deferred revenues on gift cards and other related products during the shutdown of theatre and LBE venues. In addition, the mandatory closures of theatres and LBE venues reduced other ancillary revenues generated from theatres such as venue rentals.

Film cost

The following table highlights the movement in film cost and the film cost percentage for the quarter (in thousands of dollars, except film cost percentage):

Film cost	FirstQuarter 2021 2020 Change
Film cost Film costpercentage(i)	$ 1,235 $ 56,500 -97.8 % 32.3 % 50.9 % -18.6 %
(i)See Section 15,Non-GAAP measures.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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Film cost varies primarily with box office revenues, and can vary from quarter to quarter based on the relative strength of the titles exhibited during the period, impacted by film cost terms varying by title and distributor. Film cost percentage during the first quarter of 2021 was 32.3%, a 18.6% decrease from the prior year period. Film costs decreased during the period compared to the prior year period due to limited releases of first run product and lower settlement rates on older and classic film product.

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Film Cost Percentage
52.9% 52.5% 50.3% 50.9%
32.3%
Q1 17 Q1 18 Q1 19 Q1 20 Q1 21
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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 (in thousands of dollars, except percentages and margins per patron):

except percentages and margins per patron):
Cost of food service	FirstQuarter
	2021 2020 Change
Cost of food service - theatre Cost of food service - LBE	$ 1,333 $ 20,201 -93.4 % 79 2,008 -96.1 %
Cost of food service	$ 1,412 $ 22,209 -93.6 %
Theatre concession cost percentage (i) LBE food cost percentage (i) Theatre concession margin per patron (i)	21.1 % 27.8 % -6.7 % 38.1 % 30.0 % 8.1 % $ 4.83 $ 4.90 -1.4 %
(i)See Section 15,Non-GAAP measures

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 varies primarily with the volume of guests who visit the locations as well as the quantity and mix of food and beverage items sold.

The lower food service revenues for both segments as a result of the government mandated temporary closures and operating restrictions placed on Cineplex’s theatres and LBE locations in response to COVID-19 resulted in lower cost of food sales. The decrease in theatre concession cost percentage compared to the prior year is due to the higher costs arising on the sudden closure of the theatres in 2020 which required the reduction of inventory and included, donations of perishable food items to those in need, including to local food banks. The increase in LBE food cost percentage as compared to the prior period is primarily due to higher costs arising from prepackaged products associated with food delivery services and decreases in groups and events bookings which have historically reduced the average cost of food purchases.

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Theatre Concession Cost
Percentage
22.3% 20.7% 22.4% 27.8% 21.1%
Q1 17 Q1 18 Q1 19 Q1 20 Q1 21
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CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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Depreciation and amortization

The following table highlights the movement in depreciation and amortization expenses during the quarter (in thousands of dollars):

thousands of dollars):
Depreciation and amortization expenses	FirstQuarter
	2021 2020 Change
Depreciation of property, equipment and leaseholds Amortization of intangible assets and other	$ 26,783 $ 30,689 -12.7 % 2,726 3,273 -16.7 %
Sub-total - depreciation and amortization - other assets	$ 29,509 $ 33,962 -13.1 %
Depreciation - right-of-use assets	26,318 35,533 -25.9 %
Total depreciation and amortization	$ 55,827 $ 69,495 -19.7 %

The quarterly decrease in depreciation of property, equipment and leaseholds of $3.9 million or 12.7% as compared to the prior year period is primarily due to fully depreciated property, equipment and leaseholds.

The quarterly decrease in amortization of intangible assets compared to the prior period is due to fully amortized intangible assets.

The decrease in depreciation of right-of-use assets is primarily due to modifications to lease agreements as a result of COVID-19 which reduced the corresponding right-of-use asset and depreciation recognized.

Impairment of long-lived assets and goodwill

The following table highlights the movement in impairment of long-lived assets and goodwill during the quarter (in thousands of dollars):

thousands of dollars):
Impairment of long-lived assets and goodwill	FirstQuarter
	2021 2020 Change
Impairment of property, equipment and leaseholds Impairment of right-of-use assets Impairment ofgoodwill	$ — $ 33,949 NM — 50,610 NM — 88,495 NM
Impairment of long-lived assets andgoodwill	$ — $ 173,054 NM

Cineplex generally performs its annual test for impairment of goodwill and indefinite-lived intangible assets in the fourth quarter, in accordance with the policy described in its annual consolidated financial statements. Assessment of impairment for long-lived assets, including property, equipment, leaseholds, right-of-use assets, intangible assets and goodwill is performed more frequently as specific events or circumstances dictate triggering events and changes in circumstances indicate that the carrying amount of the asset group may not be fully recoverable.

On March 31, 2021, Cineplex reassessed the underlying key assumptions and inputs used during the impairment testing completed at December 31, 2020 and determined that there were no material changes in those key judgements and conclusions.

In early 2020, in response to the outbreak of the COVID-19 pandemic as declared by the WHO, governmental authorities announced mandated closure of schools, public facilities and non-essential businesses. Consequently, effective March 16, 2020 and continuing throughout the remainder of the year, Cineplex had to either temporarily close its theatres and location-based entertainment venues or operate with strict capacity restrictions across Canada, resulting in material decreases in revenues, results of operations and cash flows and a material decrease in Cineplex’s market value due to a sharp decline in its share price. These represented triggering events at each balance sheet date in 2020. As a result of the triggering events, Cineplex performed impairment testing and recognized noncash impairment charges in each of the three months ended March 31, September 30, and December 31, 2020 as follows:

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc.

Management’s Discussion and Analysis

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Impairment of long-lived assets, goodwill and investments	2020	2020	2020	2020
	Q1	Q3	Q4	Total
Impairment of property, equipment and leaseholds Impairment of right-of-use assets Impairment of goodwill Impairment of investments Impairment of long-lived assets, goodwill and investments	$ 33,949 50,610 88,495 —	$ — — 65,634 —	$ 5,243 21,236 26,906 2,790	$ 39,192 71,846 181,035 2,790
	$ 173,054	$ 65,634	$ 56,175	$ 294,863

In assessing long-lived assets and goodwill for impairment, Cineplex compared the aggregate recoverable amount of the assets included in the relevant Cash Generating Units (“CGUs”) to their respective carrying amounts. The recoverable amount was determined based on the fair value less costs of disposal of the groups CGUs.

The determination of fair value less costs of disposal is sensitive to the growth rates, discount rates, and long-term growth rates used. The risk premiums expected by market participants related to uncertainties about the industry and assumptions relating to future cash flows may differ, depending on economic conditions and other events. Accordingly, it is reasonably possible that future changes in assumptions may negatively impact future assessments of the recoverable amount for groups of CGUs.

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, cash flows 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 CGU level on an annual basis during its fourth quarter and whenever events or changes in circumstances indicate there may be a potential impairment.

Impairment of intangible assets - discontinued operations

The following table highlights the movement in impairment of intangible assets - discontinued operations during the quarter (in thousands of dollars):

quarter (in thousands of dollars):
Impairment of intangible assets - discontinued operations	FirstQuarter
	2021 2020 Change
Impairment of intangible assets - discontinued operations	$ — $ 5,135 NM

Intangible assets included in assets held for sale were written down to reflect their expected net realizable value in the prior period. On June 29, 2020, Cineplex sold all of its interest in WGN for a nominal amount. No other operations were classified as a discontinued operation in the current period.

(Gain) loss on disposal of assets

The following table shows the movement in the loss on disposal of assets during the quarter (in thousands of dollars):

The following table shows the movement in the loss on disposal of assets dollars):	during the quarter (in thousands of
(Gain) loss on disposal of assets	FirstQuarter
	2021 2020 Change
(Gain)loss on disposal of assets	$ (30,060)$ 817 NM

The change in the (gain) loss on disposal of assets as compared to the prior year period is due to the sale of the head office building for gross proceeds of $57.0 million completed during the quarter. Cineplex will continue to occupy its head office buildings as a tenant.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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Other costs

Other costs include three main sub-categories of expenses; theatre occupancy expenses, which capture associated occupancy costs for Cineplex’s theatre operations; other operating expenses, which include the costs 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 (in thousands of dollars):

Other costs	FirstQuarter
	2021 2020 Change
Theatre occupancy expenses Other operating expenses General and administrative expenses	$ 6,782 $ 17,971 -62.3 % 47,806 134,548 -64.5 % 14,117 5,029 NM
Total other costs from continuingoperations	$ 68,705 $ 157,548 -56.4 %
Other costs from discontinued operations	— 1,606 -100.0 %
Total other costs	$ 68,705 $ 159,154 -56.8 %

Theatre occupancy expenses

The following table highlights the movement in theatre occupancy expenses for the quarter (in thousands of dollars):

Theatre occupancy expenses	FirstQuarter	FirstQuarter
	2021 2020 Change
Cash rent - theatre (i) (iv) Other occupancy One-time items(ii)	$ 22,222 $ 40,356 -44.9 % 14,307 18,437 -22.4 % (982) (580) 69.3 %
Total theatre occupancyincludingcash leasepayments	$ 35,547 $ 58,213 -38.9 %
Cash rent related to lease obligations(iii)	(28,765) (40,242) -28.5 %
Theatre occupancyas reported	$ 6,782 $ 17,971 -62.3 %
(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. theatre rent and other theatre occupancy costs excluding these one-time, non-recurring items.	They are isolated here to illustrate Cineplex’s
(iii) Cash rent that has been reallocated to offset the lease obligations.
(iv) The 2021 balance includes $1.1 million (2020 - $1.1 million) of cash rent paid not pertaining to the current period. See Section 15, Non- GAAP measures.
Theatre occupancy continuity		First Quarter Occupancy
2020 as reported		$ 17,971
Impact of disposed theatres Same theatre rent change (i) One-time items Other Impact of IFRS 16:		(517) (11,322) (403) (10,424)
Cash rent related to lease obligations		11,477
2021 as reported		$ 6,782
(i)See Section 15,Non-GAAP measures

Theatre occupancy expenses as reported decreased $11.2 million or 62.3% during the first quarter of 2021 compared to the prior year period. This decrease was primarily due to rent relief measures Cineplex has undertaken with landlord partners resulting in lower theatre rent related expenses. In addition, Cineplex recognized realty tax subsidies of $4.4 million and rent subsidies of $6.5 million during the quarter, both charged against and further contributing to the decrease in theatre occupancy expenses.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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Other operating expenses

The following table highlights the movement in other operating expenses during the quarter (in thousands of dollars):

The following table highlights the movement in other operating expenses dollars):	during the quarter (in thousands of	during the quarter (in thousands of	during the quarter (in thousands of
Other operating expenses	FirstQuarter
	2021 2020 Change
Theatre payroll Theatre operating expenses Media P1AG LBE (i) LBE pre-opening (ii) SCENE Marketing	$ 3,635 $ 31,430 -88.4 % 9,353 26,489 -64.7 % 8,284 18,911 -56.2 % 15,570 34,422 -54.8 % 3,818 13,076 -70.8 % 228 745 -69.4 % 4,744 2,573 84.4 % 1,117 2,921 -61.8 %
Other(iii)	5,520 8,735 -36.8 %
Other operating expenses including cash lease payments	$ 52,269 $ 139,302 -62.5 %
Cash rent related to lease obligations(iv)	(4,463) (4,754) -6.1 %
Other operatingexpenses from continuingoperations	$ 47,806	$ 134,548 -64.5 %
Other operatingexpenses from discontinued operations	—	1,606 -100.0 %
Total other operatingexpenses	$ 47,806	$ 136,154 -64.9 %
(i) Includes operating costs of LBE locations. Overhead relating to management of LBE portfolio are included in (ii) Includes pre-opening costs of LBE. (iii) Other category includes overhead costs related to LBE and other Cineplex internal departments.		the ‘Other’ line.
(iv)Cash rent that has been reallocated to offset the lease obligations.
Other operating continuity from continuing operations			First Quarter Other Operating
2020 as reported			$ 134,548
Impact of disposed theatres Same theatre payroll change (i) Same theatre operating expenses change (i) Media operating expenses change P1AG operating expenses change LBE operating expenses change LBE pre-opening change SCENE change Marketing change Other Impact of IFRS 16:			(537) (27,521) (16,873) (10,627) (18,852) (9,258) (517) 2,171 (1,804) (3,215)
Cash rent related to lease obligations			291
2021 as reported			$ 47,806
(i)See Section 15,Non-GAAP measures

Other operating expenses from continuing operations during the first quarter of 2021 decreased $86.7 million or 64.5% compared to the prior year period. The overall decrease was a result of the temporary closures and operating restrictions on theatres, P1AG route locations and LBE locations. Cineplex continued to benefit from government subsidy programs in Canada and the United States to partially offset other operating costs with $14.4 million of subsidies recognized in the quarter, comprised of $11.9 million of payroll subsidies of which $6.1 million was offset against theatre payroll, and $2.5 million of non-theatre rent, realty tax and utility subsidies.

General and administrative expenses

The following table highlights the movement in general and administrative (“G&A”) expenses during the quarter, including Share-based compensation costs, and G&A expenses net of these costs (in thousands of dollars):

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc.

Management’s Discussion and Analysis

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G&A expenses	FirstQuarter
	2021 2020 Change
G&A excluding the following items Restructuring Transaction / Litigation costs LTIP (i) Optionplan	$ 10,618 $ 17,254 -38.5 % — 360 -100.0 % 2,430 1,271 91.2 % 1,304 (11,437) NM 399 (2,241) NM
G&A expenses including cash lease payments	$ 14,751 $ 5,207 183.3 %
Cash rentpaid/payable included aspart of lease obligations(ii)	(634) (178) NM
G&A expenses as reported	$ 14,117 $ 5,029 180.7 %
(i) LTIP includes the expenses for RSUs and PSUs, as well as the expense for the executive and Board deferred share unit plans.
(ii)Cash rent that has been reallocated to offset the lease obligations.

G&A expenses increased $9.1 million during the first quarter of 2021 compared to the prior year period. The change was primarily due to a significant decrease in LTIP expense in the prior year period due to the sharp decline in Cineplex’s Share price as a result of the impact of the COVID-19 pandemic on Cineplex’s business. Share based compensation reflects the fair value of the share price, which fell from $33.90 at the beginning of the prior year period to $11.70 per Share at March 31, 2020. Employee benefit costs were reduced by $2.9 million under the CEWS program. Cineworld litigation-related costs of $2.4 million were incurred in the first quarter of 2021 (2020 - costs of $1.3 million were incurred with respect to the Cineworld Transaction, prior to its termination). Costs incurred in the current quarter are with respect to the ongoing litigation arising from the termination.

Share of loss of joint ventures and associates

Cineplex’s share of loss of joint ventures and associates include its 78.2% interest in CDCP (2020 - 78.2%), 50% interest in one IMAX screen in Ontario (2020 - 50%), 50% interest in YoYo’s (2020 - 50%) and in 2020 included a 34.7% interest in VRstudios.

The following table highlights the components of share of loss of joint ventures and associates during the quarter (in thousands of dollars):

thousands of dollars):
Share of loss of joint ventures and associates	FirstQuarter
	2021 2020	Change
Share of loss of CDCP Share of loss of otherjoint ventures and associates	$ 2,238 $ 590 176 145	279.3 % 21.4 %
Total share of loss ofjoint ventures and associates	$ 2,414 $ 735	228.4 %

Interest expense

The following table highlights the movement in interest expense during the quarter (in thousands of dollars):

Interest expense	FirstQuarter
	2021 2020 Change
Interest expense on long-term debt	$ 13,107 $ 7,474 75.4 %
Lease interest expense Financingfees	13,939 11,355 22.8 % 321 — NM
Sub-total - cash interest expense Deferred financing fee accretion and other non-cash interest	$ 27,367 $ 18,829 45.3 % $ 447 $ 349 28.1 %
Accretion expense on Debentures and Notes Payable	3,738 — NM
Interest rate swap- non-cash	(3,528) 9,386 NM
Sub-total - non-cash interest expense	$ 657 $ 9,735 -93.3 %
Total interest expense	$ 28,024 $ 28,564 -1.9 %

Interest expense decreased $0.5 million for the quarter compared to the prior year period. The decrease compared to the prior year period is due to changes in the fair value of the interest rate swap resulting in a decrease of $12.9

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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million of non-cash interest expense offset by an increase in cash interest of $8.6 million and non-cash interest of $3.8 million arising from the 2020 third quarter and 2021 first quarter financings.

Cash interest expense increased $8.6 million or 45.3% when compared to the prior year period. The increase in cash interest expense is due to the issuance of Debentures (Section 6.4, Long-term debt) during the third quarter of 2020 and Notes Payable (Section 6.4, Long-term debt) completed during the current period, resulting in cash interest expense of $4.5 million and $1.7 million, respectively. The Debentures bear interest at a rate of 5.75% per annum and the Notes Payable bear interest at a rate of 7.50% per annum. This was partially offset by a decrease in cash interest expense incurred on the Credit Facilities due to significantly lower outstanding balances in the current period compared to the prior year period. Proceeds from transactions undertaken to enhance liquidity in 2020 and 2021 were used to repay the Credit Facilities and fund ongoing operations. Cineplex’s ongoing negotiations with landlord partners have resulted in lease modifications recorded at higher incremental borrowing rates, increasing lease interest expense by $2.6 million, further contributing to the increase in cash interest expense when compared to the prior year. Cineplex also incurred $0.3 million in financing fees during the period as a result of the amendments made to the Credit Facilities which have been included in interest expense in the consolidated statement of operations.

Non-cash interest expense, excluding the interest rate swap, increased by $3.8 million when compared to the prior year period. The increase in non-cash interest expense is due to the issuance of Debentures (Section 6.4, Long-term debt) during the third quarter of 2020 and Notes Payable (Section 6.4, Long-term debt) completed during the current period, resulting in non-cash interest expense of $3.7 million and $0.1 million, respectively.

Interest income

The following table highlights the movement in interest income during the quarter (in thousands of dollars):

Interest income	FirstQuarter
	2021 2020 Change
Interest income	$ 26 $ 72 -63.9 %

Foreign exchange

The following table highlights the movement in foreign exchange during the quarter (in thousands of dollars):

Foreign exchange	FirstQuarter
	2021 2020 Change
Foreign exchange loss (gain) from continuing operations Foreign exchangegain from discontinued operations	$ 230 $ (1,927) NM — (208) NM
Total foreign exchange loss(gain)	$ 230 $ (2,135) NM

The movement in the quarterly foreign exchange was due to a decrease in the CAD/USD foreign exchange month end rate from 1.2732 at December 31, 2020 to 1.2575 at March 31, 2021.

Income taxes

The following table highlights the movement in current and deferred income tax expense during the quarter (in thousands of dollars):

thousands of dollars):
Income taxes	FirstQuarter
	2021 2020 Change
Current income tax expense (recovery) Deferred income tax recovery	$ 3,339 $ (233) NM — (49,734) NM
Provision for income taxes from continuingoperations	$ 3,339 $ (49,967) NM
Provision for income taxes from discontinued operations	— (1,693) NM
Totalprovision for income taxes	$ 3,339 $ (51,660) NM

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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At December 31, 2020 the recoverability of the net deferred income tax assets in the normal course of business was uncertain and accordingly the net deferred tax assets were derecognized. Cineplex will evaluate the likelihood of recoverability in the ordinary course of business at each balance sheet date, and will recognize net deferred tax assets when and if appropriate.

By Notice of Reassessment (“NOR”) dated January 22, 2019, the Canada Revenue Agency (“CRA”), disallowed the deduction of $26.6 million of losses of AMC Ventures Inc. (“AMC”) that Cineplex had obtained on the acquisition of AMC in 2012. The disallowance of the losses, which offset taxable income generated in 2014, increased taxes and interest payable by approximately $8.6 million, 50% of which was required to be paid immediately (interest continues to accrue on the unpaid amount). Cineplex disagrees with the CRA’s position. It has filed an appeal to the Tax Court of Canada in respect of the NOR. Cineplex believes that it should prevail in defending its original filing position, although no assurance can be given in this regard.

Current tax recognized in the first quarter of 2021 reflects adjustments from the provision to returns as actually filed. Cineplex’s combined statutory income tax rate tax rate at March 31, 2021 was 26.4% (2020 - 26.8%).

Net loss

Net loss during the quarter was as follows (in thousands of dollars):

Net loss	FirstQuarter
	2021 2020 Change
Net loss from continuing operations Net loss from discontinued operations	$ (89,688) $ (174,155) -48.5 % — (4,259) NM
Net loss	$ (89,688)$ (178,414) -49.7 %

4.3 EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION (“EBITDA”) (Section 15, Non-GAAP measures)

The following table presents EBITDA, adjusted EBITDA and adjusted EBITDAaL for the three months ended March 31, 2021 as compared to the prior year period (expressed in thousands of dollars, except adjusted EBITDAaL margin):

EBITDA	FirstQuarter
	2021 2020 Change
EBITDA Adjusted EBITDA Adjusted EBITDAaL (i) Adjusted EBITDAaL margin(i)	$ (2,524) $ (126,135) -98.0 $ (30,105) $ 46,472 NM $ (62,090) $ 2,390 NM -149.9 % 0.8 % -150.7 %

Adjusted EBITDAaL for the first quarter of 2021 decreased $64.5 million, as compared to the prior year period. The decrease was primarily due to the material negative effect that the COVID-19 pandemic had on all aspects of Cineplex’s businesses. The third wave of COVID-19 due to increased number of cases involving more transmissible variants has led to prolonged mandatory lockdown measures and operating restrictions, resulting in the closure of Cineplex’s theatres and LBE venues for the majority of the first quarter of 2021. 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.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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5. BALANCE SHEETS

The following sets out significant changes to Cineplex’s consolidated balance sheets during the three months ended March 31, 2021 as compared to December 31, 2020 (in thousands of dollars):

	March 31, 2021 December 31, 2020 Change ($) Change (%)
Assets Current assets Cash and cash equivalents Trade and other receivables Income taxes receivable Inventories Prepaid expenses and other current assets	$ 19,503 $ 16,254 $ 3,249 20.0 % 39,083 51,834 (12,751) -24.6 % 58,725 66,551 (7,826) -11.8 % 21,123 21,712 (589) -2.7 % 10,721 11,613 (892) -7.7 %
Non-current assets Property, equipment and leaseholds Right-of-use assets	149,155 167,964 (18,809) -11.2 % 521,694 555,340 (33,646) -6.1 % 849,907 881,418 (31,511) -3.6 %
Interests in joint ventures Intangible assets Goodwill Liabilities Current liabilities Accounts payable and accrued expenses Share-based compensation	5,428 8,644 (3,216) -37.2 % 84,994 84,922 72 0.1 % 635,475 635,582 (107) — %
	$ 2,246,653 $ 2,333,870 $ (87,217) -3.7 %
	$ 77,712 $ 82,992 $ (5,280) -6.4 % 691 482 209 43.4 %
Income taxes payable Deferred revenue	819 802 17 2.1 % 222,113 219,983 2,130 1.0 %
Lease obligations Fair value of interest rate swap agreements	108,649 97,259 11,390 11.7 % 8,375 7,202 1,173 16.3 %
Non-current liabilities Share-based compensation Long-term debt Fair value of interest rate swap agreements Lease obligations Post-employment benefit obligations Other liabilities	418,359 408,720 9,639 2.4 % 3,766 2,670 1,096 41.0 % 739,005 725,271 13,734 1.9 % 14,478 19,157 (4,679) -24.4 % 1,057,761 1,073,666 (15,905) -1.5 % 10,614 11,503 (889) -7.7 % 67,988 68,649 (661) -1.0 %
Shareholders’ (deficit) equity Total shareholders’ (deficit) equity	2,311,971 2,309,636 2,335 0.1 % (65,318) 24,234 (89,552) NM
	$ 2,246,653 $ 2,333,870 $ (87,217) -3.7 %

Cash and cash equivalents. Cash and cash equivalents includes operations petty cash and outstanding deposits and fluctuates with business activities.

Trade and other receivables. The decrease in trade and other receivables is primarily due to lower sales and the timing of occupancy and labour subsidies received during the first quarter of 2021.

Income taxes receivable. The decrease in income taxes receivable is primarily due to the receipt of $4.7 million resulting from loss carrybacks realized in 2020 to offset taxable income in prior years and $3.3 million adjustment from the income tax provision to the returns as filed.

Inventories. The decrease in inventories is primarily due to lower amusement solutions inventories sales along with a decrease in new equipment for resale purchased.

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 and lower prepayments of service contracts.

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Property, equipment and leaseholds. The decrease in property, equipment and leaseholds is due to amortization expense ($26.8 million), asset dispositions ($12.6 million), and foreign exchange impact ($0.4 million), partially offset by additions to new build and other capital expenditures ($5.8 million), and maintenance capital expenditures ($0.3 million).

Right-of-use assets. The decrease in right-of-use assets is due to amortization expense ($26.3 million), asset dispositions ($3.4 million), foreign exchange impact ($0.1 million), and lease modifications ($4.4 million) resulting from renegotiated lease terms due to the impact of COVID-19 on the business.

Interest 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.

Intangible assets. The increase in intangible assets is due to the amortization expense ($2.7 million), partially offset by the capitalization of software development costs ($2.8 million).

Goodwill. The decrease in goodwill is due to the impact of foreign exchange ($0.1 million).

Accounts payable and accrued expenses. The decrease in accounts payable and accrued expenses primarily relates to the settlement of year end liabilities.

Share-based compensation. The increase in share-based compensation is due to the increase in Share price, which was $11.91 per Share at March 31, 2021 increasing the fair value of the compensation liability (Section 8, Share Activity).

Deferred revenue. The small increase in deferred revenue is the result of lower sales and redemptions of gift cards and coupons, and lower redemptions for Scene during the first quarter as a result of ongoing pandemic.

Lease obligations. The decrease in lease obligations is due to leases payments during the quarter, and the lease modifications recognized from renegotiated leases due to the impact of COVID-19 on the business and settlement of lease obligation.

Fair value of interest rate swap agreements. The interest rate swaps provide for fixed interest rates on $450 million of debt. The decrease in the net liability for swap agreements is due to the expectation of future interest rate increases. (see discussion in Section 6.4 Long-term debt)

Long-term debt. Long-term debt consists of the Credit Facilities, Debentures and Notes Payable. The increase in long-term debt is due to the issuance of the Notes Payable during the quarter and an increase in borrowings under the Credit Facilities, net of its repayment with the proceeds from the issuance of Notes Payable and the proceeds from the head office buildings sale. The accretion of the Debentures and Notes Payable also increased long-term debt (Section 6.4 Long-term debt).

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6. LIQUIDITY AND CAPITAL RESOURCES

6.1 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 ended March 31, 2021 and 2020 (in thousands of dollars):

Cash flows (used in) provided by operating activities	FirstQuarter
	2021 2020 Change
Net loss from continuing operations Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of other assets (i) Depreciation of right-of-use assets	$ (89,688) $ (174,155) $ 84,467 29,509 33,962 (4,453) 26,318 35,533 (9,215)
Unrealized foreign exchange Interest rate swap agreements - non-cash interest Accretion of Debentures and Notes Payable Other non-cash interest (ii)	211 (1,429) 1,640 (3,528) 9,386 (12,914) 3,738 — 3,738 447 349 98
(Gain) loss on disposal of assets	(30,060) 817 (30,877)
Deferred income taxes Non-cash Share-based compensation	— (49,734) 49,734 624 3,944 (3,320)
Impairment of long-lived assets and goodwill Net change in interests in joint ventures and associates	— 173,054 (173,054) 3,216 1,891 1,325
Changes in operatingassets and liabilities	23,581 (10,428) 34,009
Net cash (used in) provided by operating activities	$ (35,632) $ 23,190 $ (58,822)
(i) Includes depreciation of property, equipment and leaseholds and amortization of intangible asse	ts.
(ii)Includes accretion of assets retirement obligations and non-cash interest costs on lease obligations.

Cash used in operating activities was $35.6 million in the first quarter of 2021, as compared to cash provided by operating activities of $23.2 million in the prior year period. The movement was primarily due to prolonged mandatory lockdown measures in response to the COVID-19 pandemic resulting in closures of a majority of theatres and LBE venues during the first quarter of 2021.

6.2 INVESTING ACTIVITIES

The following table highlights the movements in cash used in investing activities for the three months ended March 31, 2021 and 2020 (in thousands of dollars):

31, 2021 and 2020 (in thousands of dollars):
Cash flows provided by (used in) investing activities	FirstQuarter
	2021 2020 Change
Proceeds from sale of assets, net Purchases of property, equipment and leaseholds	$ 56,664 $ — $ 56,664 (8,715) (37,503) 28,788
Intangible assets additions Tenant inducements Net cash received fromjoint ventures and associates	(3,086) (3,721) 635 3,660 11,877 (8,217) — 3,128 (3,128)
Net cash provided by (used in) investing activities	$ 48,523 $ (26,219) $ 74,742

Cash provided by investing activities during the first quarter of 2021 was $48.5 million, as compared to cash used in investing activities of $26.2 million in the prior year period. The movement was primarily due to proceeds from the

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Components of capital expenditures include (in thousands of dollars):

Components of capital expenditures include (in thousands of dollars):
Capital expenditures	FirstQuarter
	2021 2020 Change
Gross capital expenditures Less: tenant inducements Net capital expenditures	$ 8,715 $ 37,503 $ (28,788) (3,660) (11,877) 8,217
	$ 5,055 $ 25,626 $ (20,571)

Net capital expenditures consists of: Growth and acquisition capital expenditures (i) Tenant inducements Media growth capital expenditures Amusement and leisure growth capital expenditures (excluding LBE build expenditures) Premium formats (ii) Maintenance capital expenditures Other (iii)	$ 5,696 $ 20,056 $ (14,360) (3,660) (11,877) 8,217 38 58 (20) 247 400 (153) (141) 1,994 (2,135) 254 2,977 (2,723) 2,621 12,018 (9,397)
	$ 5,055 $ 25,626 $ (20,571)
(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)Primarycomponent of Other is the impact of the timingof cashpayments relatingto thepurchases ofproperty,equipment and leaseholds.

(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.

Cineplex funds maintenance capital expenditures through internally generated cash flow and cash on hand. Cineplex’s Revolving Facility (defined and discussed in Section 6.4, Long-term debt) is available to fund new theatre capital expenditures.

6.3 FINANCING ACTIVITIES

The following table highlights the movements in cash from financing activities for the three months ended March 31, 2021 and 2020 (in thousands of dollars):

31, 2021 and 2020 (in thousands of dollars):
Cash flows used in financing activities	FirstQuarter
	2021 2020 Change
Dividends paid (Repayment) Borrowings under Credit Facilities, net	$ — $ (19,000) $ 19,000 (234,000) 40,000 (274,000)
Repayments of lease obligations - principal	(19,457) (33,819) 14,362
Issuance of Notes Payable, net Financing fees	243,996 — 243,996 (321) — (321)
Net cash used in financing activities	$ (9,782) $ (12,819) $ 3,037

Cash flows used in financing activities during the first quarter decreased $3.0 million, as compared to the prior year period, primarily due to the suspension of dividend payments and lower rent payments as a result of abatements received from landlords during the first quarter of 2021. The proceeds of the Notes Payables were used to repay the Credit Facilities ($100.0 million of which was a permanent repayment).

In response to the impact of the COVID-19 pandemic, Cineplex is closely monitoring its liquidity. Details with respect to its ongoing undertakings are detailed in Section 1.1 COVID-19 business impacts, risks and liquidity.

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6.4 LONG-TERM DEBT

Credit facilities

Cineplex has bank facilities with a syndicate of lenders which includes a revolving facility (the “Revolving Facility”) and non-revolving credit facility (the “Term Facility”, and together with the Revolving Facility, the “Credit Facilities”) pursuant to a seventh amended and restated credit agreement between Cineplex, Cineplex Entertainment Limited Partnership, the guarantors from time to time party thereto, and a syndicate of lenders dated November 13, 2018 (as further amended from time to time, the “Credit Agreement”). Prior to the end of the quarter, the Term Facility was repaid in full and is no longer available for future borrowing.

As at March 31, 2021, the Credit Facilities consisted of the following (in millions of Canadian dollars), subject to the liquidity covenant described below:

the liquidity covenant described below:
“RevolvingFacility”	Available	Drawn	Reserved	Remaining
	$ 541.7	$ 272.0	$ 11.0	$ 258.7
Letters of credit outstandingat March 31,2021 of $11.0 million are reserved against the	RevolvingFacility.

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. Borrowings on the Revolving Facility can be made in either Canadian or US dollars.

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. The Revolving Facility is drawn upon and repaid on a regular basis and as such is presented on a net basis in the Statement of Cash flows.

On June 29, 2020, Cineplex entered into the First Credit Agreement Amendment, following which, on November 12, 2020 Cineplex entered into the Second Credit Agreement Amendment, as described in further detail in the AIF. Both amendments provided certain financial covenant relief in light of the COVID-19 pandemic and its effects on Cineplex’s businesses, while applying additional restrictive covenants and required repayments in certain circumstances.

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. The following is a summary of the key terms of the Third Credit Agreement Amendment:

Allow the issuance by Cineplex of the Notes Payable with the following terms:
a minimum of $200.0 million and a maximum of $250.0 million of notes may be issued on or prior to March 31, 2021;
term 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 Notes Payable, $100.0 million of which would constitute a permanent reduction.
The following amendments to the Credit Facilities became effective upon the completion of the issuance of $250.0 million Notes Payable during the period ended March 31, 2021:

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The suspension of financial covenant testing has been extended until the fourth quarter of 2021. On resumption of financial covenant testing in the fourth quarter of 2021:
for the fourth quarter of 2021, testing will be based on an annualized calculation of Adjusted EBITDA (as further adjusted in accordance with the Credit Agreement definitions) based on the actual results for such quarter;
for the quarter ending on March 31, 2022, testing will be based on an annualized calculation of Adjusted EBITDA based on actual results for the fourth quarter of 2021 and the first quarter of 2022 multiplied by 2; and
for the quarter ending on June 30, 2022, testing will be based on an annualized calculation of Adjusted EBITDA for the fourth quarter of 2021, the first quarter of 2022 and the second of 2022 multiplied by 4/3;
Thereafter, testing will be based on an annualized calculation of the cumulative Adjusted EBITDA on a trailing four fiscal quarter basis;
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 will continue and has been amended and extended beginning 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, 2021 - $100.0 million;
The addition of a Senior Leverage Ratio will 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 (as defined in the Credit Agreement) less any Notes Payable 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 12 months’ EBITDA; and
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).

During the quarter, 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, recognizing a gain of $30.1 million. Net proceeds from the sale, in addition to the net proceeds from the issuance of the Notes Payable (discussed below) were used to repay the Credit Facilities, a portion of which was permanent. As a result, Cineplex permanently repaid the remaining $50.0 million balance of its outstanding Term Facility.

This summary of the Credit Agreement is qualified in its entirety by reference to the provisions of the Credit Agreement which contains a complete statement of those terms and conditions. The Credit Agreement and each of the First Credit Agreement Amendment, Second Credit Agreement Amendment and Third Credit Agreement Amendment are available on SEDAR at www.sedar.com.

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One of the key financial covenants in the Credit Facilities is the Senior Leverage Covenant which is 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 for the purposes of the Senior Leverage Covenant includes the Credit Facilities, financing leases and letters of credit but does not include Debentures, Notes Payable, 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 Third Credit Agreement Amendment, financial covenant testing has been suspended until the fourth quarter of 2021.

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Senior Leverage
Covenant Ratio
2.92
2.35
1.97
1.60
—
Q1 17 Q1 18 Q1 19 Q1 20 Q1 21
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Additional transactions focused on enhancing Cineplex’s liquidity included amendments to the Credit Facilities that will provide Cineplex with financial covenant relief in light of the COVID-19 pandemic and its effects on Cineplex’s businesses, and the issuance of Notes Payable for gross proceeds of $250.0 million. Cineplex used the net proceeds from the issuance of the Notes Payable to permanently repay $50.0 million of its Revolving Facility and $50.0 million of its Term Facility. Cineplex remains focused on exploring other measures to maintain adequate liquidity for the duration of the pandemic.

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 March 31, 2021:

Interest rate swap agreements	Interest rate swap agreements
	Notional amount	Inception date	Effective date	Maturity date	Fixed ratepayable
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 %

Cineplex ceased the use of hedge accounting for the interest rate swaps during the fourth quarter of 2019 as a result of the terms of the Arrangement Agreement. 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.

Despite the termination of the Arrangement Agreement, the swaps can only be re-designated on a prospective basis for hedge accounting treatment.

Based on the leverage ratio covenant in effect at March 31, 2021, Cineplex’s effective cost of borrowing on up to $450.0 million of hedged borrowings under the Credit Facilities was 6.254% (March 31, 2020 - 3.509%).

Convertible debentures

On July 17, 2020, Cineplex issued $316.3 million aggregate principal amount of convertible unsecured subordinated debentures (the “Debentures”), which mature on September 30, 2025 (the “Maturity Date”) and bear interest at a rate of 5.75% per annum, payable semi-annually in arrears on September 30 and March 31 in each year.

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

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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 be in the form of 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. Conversion of outstanding Debentures will result in the issuance of Shares from treasury.

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 Debentures. Cineplex recorded interest expense on Debentures of $8.1 million for the three months ended March 31, 2020 (2020 - $nil) which comprises of cash interest expense of $4.4 million and accretion expense of $3.7 million, both of which are included as part of the interest expense in 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 .

The foregoing is a summary of the key terms of the Debentures. This summary is qualified in its entirety by reference to the provisions of the Debentures trust indenture which contains a complete statement of those terms and conditions. The Debenture trust indenture is available on SEDAR.

Notes payable

On February 26, 2021, Cineplex completed the $250.0 million Notes Payable offering. The Notes Payable mature on February 26, 2026 and bear interest at a rate of 7.50% per annum, payable semi-annually in arrears on January 31 and July 31 of each year, commencing July 31, 2021. The Notes Payable are subordinate to the security granted for the obligations under the Credit Facilities, and are subject to the terms of an intercreditor agreement with the agent under the Credit Facilities.

Cineplex recorded interest expense on the Notes Payable of $1.8 million for the three months ended March 31, 2021 (2020 - $nil) which comprises of cash interest expense of $1.7 million and accretion expense of $0.1 million, both of which are included as part of interest expense in the consolidated statement of operations. As at March 31, 2021, Cineplex has $250.0 million principal amount of Notes Payable outstanding.

At any time from and after January 31, 2023, the Notes Payable may be redeemed in whole or in part from time to time at the option of the Corporation at a price equal to their principal amount plus accrued and unpaid interest. Prior to January 31, 2023, the Corporation may redeem all or a part of the Notes Payable at a price equal to 100% of the aggregate principal amount of the Notes Payable redeemed plus an applicable premium and accrued and unpaid interest. The Corporation may also, at any time prior to January 31, 2023, redeem up to 40% of the aggregate principal amount of the Notes Payable at a price equal to 107.50% of their principal amount thereof plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings. In addition, the Corporation may redeem up to 10% of the outstanding aggregate principal amount of Notes Payable at any time prior to January 31, 2022 at a price equal to 103.75% of their principal amount plus accrued and unpaid interest, provided that at least $150.0 million aggregate principal amount of Notes Payable originally issued under the Notes Payable Indenture (and any additional Notes Payable issued under the Notes Payable Indenture) remains outstanding immediately after the occurrence of each such redemption unless all such Notes Payable are redeemed substantially concurrently. Cineplex has estimated the fair value of this embedded derivative at $0.5 million as at March 31, 2021, which is presented on the consolidated balance sheets in prepaid expenses and other current assets.

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The foregoing is a summary of the key terms of the Notes Payable. This summary is qualified in its entirety by reference to the provisions of the Notes Payable trust indenture which contain a complete statement of those terms and conditions. The Notes Payable trust indenture is available on SEDAR.

6.5 FUTURE OBLIGATIONS

Cineplex has aggregate gross capital commitments of $75.3 million ($51.7 million net of tenant inducements) related to the completion of construction of 10 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 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 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 March 31, 2021 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 March 31, 2021, Cineplex had $316.3 million principal amount of Debentures outstanding that bear interest at 5.75% per annum and have a maturity date of September 30, 2025. At March 31, 2021, the Debentures were recorded on Cineplex’s balance sheet at $222.9 million (Section 6.4, Long-term debt). 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 8, Share activity, for more information regarding the Debentures.

At March 31, 2021, Cineplex had $250.0 million Notes Payable principal amount outstanding that bear interest at 7.50% per annum and have a maturity date of February 26, 2026. Cineplex, may at its option, redeem the Notes Payable at specified redemption prices prior to maturity. See Section 6.4 Long-term debt, for more information regarding the Notes Payable.

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- 7. ADJUSTED FREE CASH FLOW AND DIVIDENDS (Section 15, 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 the contractual restrictions imposed by the terms of its long-term debt agreements permit, and liquidity has improved. 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.

7.1 ADJUSTED FREE CASH FLOW

Prior to 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 ended March 31, 2021 and 2020:

Adjusted free cash flow	FirstQuarter
	2021 2020 Change
Adjusted free cash flow per Share Dividends declared per Share Payout ratio - 12 months ended March 31	$ (1.244) $ (0.003) NM $ — $ 0.150 -100.0 % — % 68.7 % -68.7 %

Adjusted free cash flow per Share for the first quarter of 2021 decreased mainly due to the weaker operation results arising from the closure of Cineplex’s theatres and LBE venues for the majority of the first quarter of 2021, in response to prolonged mandatory lockdown measures and operating restrictions.

Measures relevant to the discussion of adjusted free cash flow per Share are as follows (expressed in thousands of dollars except Shares outstanding):

dollars except Shares outstanding):
	FirstQuarter
	2021 2020 Change
Cash flows (used in) provided by continuing operations Net loss from continuing operations Standardized free cash flow Adjusted free cash flow Cash dividends declared Average number of Shares outstanding	$ (35,632) $ 23,190 NM $ (89,688) $ (174,155) -48.5 % $ (44,347) $ (14,313) NM $ (78,785) $ (207) NM $ — $ 9,500 -100.0 % 63,334,317 63,333,238 —

7.2 DIVIDENDS

Cineplex has not paid any dividends since the monthly dividend was that paid on February 28, 2020 and is restricted from paying any dividends under the Credit Facilities (as amended) and other long-term debt arrangements.

The following table outlines Cineplex’s distribution and dividend history:

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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Cineplex Inc. Management’s Discussion and Analysis __________________	Cineplex Inc. Management’s Discussion and Analysis __________________
Distribution and dividend history
Effective Date January 2004 (i) May 2007 May 2008 May 2011 May 2012 May 2013 May 2014 May 2015 May 2016 May 2017 May 2018 May2019 - January2020	Monthly Distribution/ Dividend per Unit/Share $ 0.0958 $ 0.1000 $ 0.1050 $ 0.1075 $ 0.1125 $ 0.1200 $ 0.1250 $ 0.1300 $ 0.1350 $ 0.1400 $ 0.1450 $ 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 $0.1050per month.

8. SHARE ACTIVITY

Share capital balances at March 31, 2021 and 2020 is as follows (expressed in thousands of dollars except Share amounts):

amounts):
	Shares	Amount
	Number of common shares issued and outstanding	Common shares Total
Balance - December 31, 2020 Issuance of shares on exercise of options	63,333,238 5,151	$ 852,379 $ 852,379 43 43
Balance - March 31,2021	63,338,389	$ 852,422 $ 852,422

	Shares	Amount
	Number of common shares issued and outstanding	Common shares Total
Balance - December 31,2019 and March 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 are subsequently cancelled 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 awards will be settled in Shares, and as a result those awards are accounted for as equitysettled. 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.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

__________________ 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 which 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. Options issued under the Incentive Plan may be exercised for cash or on a cashless basis, both of which result in the issuance of Shares from treasury. Options will be accounted for as equity-settled.

No options were granted in the first quarter of 2021 or 2020.

A summary of option activities in 2021 and 2020 is as follows:

Options outstanding - January 1		2021	2020
	Weighted average remaining contractual life (years)	Number of underlying Shares Weighted average exercise price	Number of underlying Shares Weighted average exercise price
	7.64	2,042,019 $ 25.37	3,123,521 $ 38.62
Cancelled Exercised Forfeited Options outstanding	7.70	(165,146) 44.90 (13,637) 8.25 (38,620) 21.87 1,824,616 $ 23.80	— —
			— — (28,784) 36.77 3,094,737 $ 38.64

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. Stock options impacted by the termination of the Arrangement Agreement have since been revalued and accounted for as equity-settled and any previously recognized share based compensation liability was reclassified to contributed surplus. The accelerated recognition of unvested options were subsequently reversed and will be recognized over their remaining vesting periods at the value determined at March 31, 2020. Forfeitures are estimated to be nominal, based on historical forfeiture rates.

Cineplex recorded $0.4 million of employee benefits expense with respect to the options during the period ended March 31, 2021 (2020 - $(2.4) million recovery). During the period, 165,146 stock options issued under the Legacy Plan were cancelled as part of a voluntary stock option cancellation program that was initiated in the fourth quarter of 2020.

The grants of Share equivalents were as follows:

	PSU Share equivalentsgranted	RSU Share equivalentsgranted	PSU Share equivalents minimumpayout	PSU Share equivalents maximumpayout
2020 LTIP award 2019 LTIP award	284,214 105,777	277,105 54,940	— 7,788	568,428 211,553

No RSUs or PSUs were granted in in the three months ended March 31, 2021 or 2020.

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. For the period ended March 31, 2021, Cineplex recognized compensation expense of $0.4 million (2020 - $(4.3) million recovery) under the Incentive Plan relating to RSU and PSU. At March 31, 2021, $0.6 million (2020 - $3.8 million) was included in current share-based compensation liability, and $0.6 million in contributed surplus (2020 - $nil).

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Subsequent to March 31, 2021, as part of the 2021 compensation program, Cineplex issued 281,486 stock options to employees at an exercise price of $12.87 that will vest over four years, and 430,031 PSU and RSU that will vest in the fourth quarter of 2023.

9. 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 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, which had $272.0 million drawn and $258.7 million available as of March 31, 2021, subject to restrictions under the Credit Facilities including liquidity covenants described above (as amended, Section 6.4, Long-term debt). In response to the impact of the COVID-19 pandemic, Cineplex is closely monitoring its liquidity. Details with respect to its ongoing undertakings are detailed in Section 1.1 COVID-19 business impacts, risks and liquidity.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc.

Management’s Discussion and Analysis

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Summary of Quarterly Results (expressed in thousands of dollars except per Share, per patron, theatre attendance and theatre location and screen data, unless otherwise noted):

Revenues Box office revenues Food service revenues Media revenues Amusement revenues Other revenues Expenses Film cost Cost of food service Depreciation - right-of-use assets Depreciation and amortization - other (Gain) loss on disposal of assets Other costs Impairment of long-lived assets and goodwill (Loss) Income from operations Adjusted EBITDA (i) Adjusted EBITDAaL (i) (ii) Net (loss) income from continuing operations Net loss from discontinued operations Net (loss) income EPS - basic and diluted from continuing operations EPS - basic and diluted from discontinued operations EPS - basic and diluted Cash (used in) provided by operating activities (ii) Cash provided by (used in) investing activities (ii) Cash (used in) provided by financing activities Effect of exchange rate differences on cash Net change in cash Cash flows (used in) provided by discontinued operations BPP (i) CPP (i) Film cost percentage (i) Theatre attendance (in thousands of patrons) (i) Theatre locations (at period end) Theatre screens (at period end)	2021 Q1 $ 3,818 6,525 9,074 13,874 8,121	2020 2019 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Restated $ 7,260 $ 14,531 $ 27 $ 111,002 $ 181,789 $ 177,865 $ 189,371 10,543 15,468 3,256 79,365 125,159 125,550 129,563 12,496 12,825 7,880 32,157 69,545 43,308 49,196 13,597 13,236 3,731 47,337 53,471 58,143 58,117 8,556 4,962 7,094 12,940 13,256 13,582 12,608
	41,412 1,235 1,412 26,318 29,509 (30,060) 68,705 —	52,452 61,022 21,988 282,801 443,220 418,448 438,855 3,151 7,261 10 56,500 93,925 93,735 103,005 3,989 3,680 789 22,209 27,701 27,439 28,247 28,136 30,539 34,185 35,533 36,471 36,456 36,557 28,750 30,375 31,759 33,962 33,135 31,712 32,403 (283) (14,113) 478 817 868 303 116 77,213 78,754 62,175 157,548 214,922 190,955 192,988 56,175 65,634 — 173,054 — — —
	97,119	197,131 202,130 129,396 479,623 407,022 380,600 393,316
	(55,707) $ (30,105) $ (62,090) $ (89,688) —	$ (144,679) $ (141,108) $ (107,408) $ (196,822) $ 36,198 $ 37,848 $ 45,539 $ (32,097) $ (28,928) $ (41,313) $ 46,472 $ 106,529 $ 106,132 $ 114,383 $ (65,948) $ (46,725) $ (72,532) $ 2,390 $ 62,327 $ 62,312 $ 70,255 $ (230,403) $ (121,209) $ (98,234) $ (174,155) $ 4,668 $ 15,100 $ 22,077 — — (693) (4,259) (1,196) (1,718) (2,680)
	$(89,688)	$(230,403)$(121,209)$(98,927) $(178,414)$ 3,472 $ 13,382 $ 19,397
	$ (1.42) —	$ (3.64) $ (1.91) $ (1.55) $ (2.75) $ 0.08 $ 0.24 $ 0.35 — — (0.01) (0.07) (0.02) (0.03) (0.04)
	$ (1.42) (35,632) 48,523 (9,782) 140	$ (3.64) $ (1.91) $ (1.56) $ (2.82) $ 0.06 $ 0.21 $ 0.31 $ (61,041) (86,558) 18,095 23,190 $ 124,133 77,760 58,346 50,492 11,384 (8,947) (26,219) (46,443) (25,791) (24,851) 12,977 74,252 (2,793) (12,819) (84,850) (52,336) (24,447) 650 292 560 (950) 345 (158) 235
	$ 3,249 $ — $ 9.20 $ 6.12 32.3 % 415	$ 3,078 $ (630) $ 6,915 $ (16,798) $ (6,815) $ (525) $ 9,283 $ — $ — $ (253) $ (2.138) $ 2,821 $ (1,441) $ (1,120) $ 9.23 $ 9.30 $ 4.50 $ 10.36 $ 10.79 $ 10.16 $ 11.13 $ 9.06 $ 7.37 $ 10.33 $ 6.79 $ 6.81 $ 6.68 $ 7.04 43.4 % 50.0 % 37.0 % 50.9 % 51.7 % 52.7 % 54.4 % 786 1,563 6 10,710 16,849 17,512 17,011 162 164 164 164 165 165 165 1,667 1,687 1,687 1,687 1,693 1,696 1,695
	161
	1,657

(i) See Section 15, Non-GAAP measures.

(ii) Prior period figures have been revised to conform to current period presentation. See Section 16, Reconciliation for further details.

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Summary of adjusted free cash flow by quarter

Management calculates adjusted free cash flow per Share as follows (see Section 15, Non-GAAP measures, for a discussion of adjusted free cash flow) (expressed in thousands of dollars except per Share data and number of Shares outstanding):

Cash (used in) provided by operating activities (i) Less: Total capital expenditures Standardized free cash flow Add/(Less): Changes in operating assets and liabilities Changes in operating assets and liabilities of joint ventures Principal component of lease obligations Principal portion of cash rent paid not pertaining to current period Growth capital expenditures and other Share of income of joint ventures, net of non-cash depreciation Non-controlling interests Net cash received from CDCP Adjusted free cash flow Average number of Shares outstanding Adjusted free cash flow per Share	2021 Q1 $ (35,632) (8,715)	2020 2019 Q4 Q3 Q2 Q1 Q4 Q1 Q2 Restated $ (61,041) $ (86,558) $ 18,095 $ 23,190 $ 124,133 $ 77,760 $ 58,346 (10,099) (11,418) (14,391) (37,503) (51,448) (34,905) (27,653)
	(44,347) (23,581) (802)	(71,140) (97,976) 3,704 (14,313) 72,685 42,855 30,693 67,257 34,894 (69,401) 10,428 (40,670) 3,666 30,432 (2,699) 372 (986) (1,156) (131) (411) (240) (32,323) (24,811) (993) (33,819) (32,352) (31,836) (31,580) (357) (357) (357) 1,071 (346) (345) (346) 8,928 10,801 13,777 34,526 37,202 30,580 19,190 (196) (255) (331) (73) (147) (189) (238) — — 4 1 4 2 7 — — 782 3,128 2,882 3,910 3,128
	(19,457) 1,106 8,461 (165) — —
	$(78,785)	$(30,530)$(77,332)$(53,801)$ (207)$ 39,127 $ 48,232 $ 51,046
	63,334,317 $ (1.244)	63,333,238 63,333,238 63,333,238 63,333,238 63,333,238 63,333,238 63,333,238 $ (0.482) $ (1.221) $ (0.849) $ (0.003) $ 0.618 $ 0.762 $ 0.806

(i) Prior period figures have been revised to conform to current period presentation. See Section 16, Reconciliation for further details.

10. 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.

11. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATION UNCERTAINTIES

Cineplex makes estimates and assumptions concerning the future that may not equal actual results. These estimates and assumptions are outlined in Section 12 of the Annual MD&A. These estimates and assumptions have not changed materially since December 31, 2020.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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12. 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”. For a complete discussion of the risks to which Cineplex is exposed, reference is made to the Annual MD&A.

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 restrictions on social gatherings were temporarily lifted in many of the markets in which Cineplex operated over the summer and into the fall of 2020, social gathering restrictions were reinstituted in the late fall and winter with the increased number of COVID-19 cases and the onset of the third wave in the latter half of the first quarter of 2021, involving more transmissible variants. This has resulted in ongoing mandatory lockdown measures which have resulted in prolonged mandatory theatre closures and operating restrictions on the LBE businesses, with no clear date for reopening at the date of this MD&A.

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.

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

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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 further 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, critical maintenance capital expenditures and compensation and benefits payments);
Cineplex’s inability to service its existing and future indebtedness; and
decreased attendance at Cineplex’s theatres after they reopen, including due to (i) continued health and safety concerns or (ii) a change in consumer behaviour in favour of alternative forms of entertainment.

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 reduced fixed costs to the extent possible, Cineplex continues to incur significant expenses, including interest payments, 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 since the shutdowns in 2020 may not be sustainable at its current levels and may worsen in the future. Further, the extent of Cineplex’s cash burn in the future will also be dependent on attendance, which will drive admissions, food and beverage and other revenue once Cineplex begins to reopen theatres. 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 for at least the first half of 2021 and potentially longer.

Litigation Arising Out 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 (Section 1.1, COVID-19 business impacts,

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risks and liquidity). 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 period ended March 31, 2021 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, and have been by 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.

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

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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 transactional video-on-demand (“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 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

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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, reductions to the exclusive theatrical release window and redirection of a limited number of theatrical releases to streaming services.

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, the last full year of unrestricted operations, 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, internet 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.

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.

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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 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

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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/Cyber 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 onthe-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.

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.

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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 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.

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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 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

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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 up to $450 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 represented 10.3% of Cineplex’s revenues in 2019. 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 6.4, Long-term debt.

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.

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

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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.

13. CONTROLS AND PROCEDURES

13.1 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.

13.2 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.

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.

14. 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 12, 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. Although restrictions on social gatherings were temporarily lifted in many of the markets in which Cineplex operated over the summer and into the fall of 2020, social gathering restrictions were reinstituted in the late fall and winter with the increased number of COVID-19 cases and the onset of the third wave in the latter half of the first quarter of 2021, involving more transmissible variants of the virus. This has resulted in ongoing mandatory lockdown measures which have resulted in prolonged theatre closures and operating restrictions on the LBE businesses.

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.

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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.

Canada has begun the inoculation process, starting with front line workers and high-risk individuals. 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. When compared to other major markets such as the United States, Canada’s vaccination process lags which will further prolong the reopening of theatres and LBE businesses resulting in negative implications on business operations.

The release of the highly anticipated Godzilla vs. Kong generated US$32.0 million during the opening weekend in the United States, US$48.5 million during the first five days of its release in the United States and US$391.0 million globally during the first month of its release making it the most successful film to release since the pandemic started in March 2020. Despite simultaneously playing on streaming platforms, the success of Godzilla vs. Kong during the pandemic provides optimism for the movie exhibition industry. 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. China set box office records during the quarter with February marking an alltime record for the biggest month of movie ticket sales of US $1.7 billion while operating under capacity restrictions. Australian cinemas have also performed strongly during the quarter marking the first time in the country’s history that the top three grossing films were all Australian films. Robert Connolly’s The Dry, has grossed more than US $17.0 million since it released in January making it the number one grossing film in 2021 outperforming, DreamWorks The Croods: A New Age and the Hollywood blockbuster, Wonder Woman 1984 . Upcoming film releases for the year include the following: Mortal Kombat, A Quiet Place Part II, Cruella, Peter Rabbit 2, Fast & Furious 9, Black Widow, Space Jam: A New Legacy, Hotel Transylvania 4, Jungle Cruise, The Suicide Squad, Shang-Chi and the Legend of the Ten Rings, Venom: Let There Be Carnage, Dune, No Time To Die, Eternals, Ghostbusters: Afterlife, Top Gun: Maverick, West Side Story, Spider-Man: No Way Home and The Matrix 4. With the strong slate of upcoming film products, Cineplex remains confident that moviegoers will return to theatres to enjoy the full theatrical experience that they have become accustomed to.

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

With the ongoing negative impact of the ongoing COVID-19 pandemic, 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 the Credit Facilities, providing Cineplex with certain financial covenant relief in light of the COVID-19 pandemic and its effects on Cineplex’s businesses (Section 6.4 Long-term debt).

On January 11, 2021, Cineplex completed the sale of its head office buildings located at 1303 Yonge Street and 1257 Yonge Street, Toronto, Ontario for total gross cash proceeds of $57.0 million. Cineplex will continue to use the

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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office building through the 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 26, 2021, Cineplex completed the offering of $250.0 million of Notes Payable that mature on February 26, 2026, allowing it to meet the conditions of the Third Credit Agreement Amendment and provide additional liquidity for the recovery period. Cineplex used the net proceeds to permanently repay the remaining $50.0 million balance of its outstanding Term Facility and $50.0 million of its Revolving Facility, with the remaining proceeds available to be drawn under the Revolving Facility to fund continuing operations, subject to certain liquidity covenants in the Credit Facilities.

Cineplex received a recovery for income taxes paid in prior periods of $4.7 million during the quarter and expects to receive the remaining $57.9 million during the second quarter of 2021.

Management continues to focus on reducing costs including the elimination of future capital expenditures. With the issuance of the Notes Payable, 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.

15. 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 management believes that they assist investors in assessing financial performance.

15.1 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.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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The following represents management’s calculation of EBITDA, adjusted EBITDA, and adjusted EBITDAaL (expressed in thousands of dollars):

(expressed in thousands of dollars):
	Three months ended March 31,
	2021 2020
Net loss from continuing operations Depreciation and amortization - other Depreciation - right-of-use assets Interest expense - lease obligations Interest expense - other Interest income Current income tax expense (recovery) Deferred income tax recovery EBITDA from continuing operations	$ (89,688) $ (174,155) 29,509 33,962 26,318 35,533 14,359 11,678 13,665 16,886 (26) (72) 3,339 (233) — (49,734)
	$ (2,524) $ (126,135)
(Gain) loss on disposal of assets CDCP equity loss (i) Foreign exchange loss (gain) Impairment of long-lived assets and goodwill Non-controlling interest adjusted EBITDA Depreciation and amortization - joint ventures and associates (ii) Taxes and interest of joint ventures and associates (ii)	(30,060) 817 2,238 590 230 (1,927) — 173,054 — 1 — 24 11 48
Adjusted EBITDA from continuing operations Cash rent paid/payable related to lease obligations (iii) Negotiated lease-related cash savings for the period (iii) (iv) Cash rent paid not pertaining to current period	$ (30,105) $ 46,472 (33,861) (45,174) 751 — 1,125 1,092
Adjusted EBITDAaL (iv)	$ (62,090) $ 2,390
(i) CDCP equity loss 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) The cash rent paid or payable includes negotiated lease obligations savings of $0.8 million through March 31, 2021 (iv)See Section 15,Non-GAAP measures.

(i) CDCP equity loss 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) The cash rent paid or payable includes negotiated lease obligations savings of $0.8 million through March 31, 2021

(iv) See Section 15, Non-GAAP measures.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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15.2 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.

Management calculates adjusted free cash flow per Share as follows (expressed in thousands of dollars except Shares outstanding and per Share data):

Shares outstanding and per Share data):
	Three months ended March 31,
	2021 2020
Cash (used in) provided by operating activities Less: Total capital expenditures net of proceeds on sale of assets Standardized free cash flow Add/(Less): Changes in operating assets and liabilities (i) Changes in operating assets and liabilities of joint ventures and associates (i)	$ (35,632) $ 23,190 (8,715) (37,503)
	(44,347) (14,313) (23,581) 10,428 (802) (1,156)
Principal component of lease obligations Principal portion of cash rent paid not pertaining to current period Growth capital expenditures and other (ii) Share of income of joint ventures and associates, net of non-cash depreciation Non-controlling interests Net cash received from CDCP (iii)	(19,457) (33,819) 1,106 1,071 8,461 34,526 (165) (73) — 1 — 3,128
Adjusted free cash flow Average number of Shares outstanding	$ (78,785) $ (207)
	63,334.317 63,333.238
Adjusted free cash flow per Share Dividends declared	$ (1.244) $ (0.003) $ — $ 0.150
(i) Changes in operating assets and liabilities are not considered a source or use of adjusted free cash flow.
(ii) 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 in Section 6.4, Long-term debt) is available to Cineplex to fund Board approved projects. (iii) Excludes the share of loss 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.

(ii) 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 in Section 6.4, Long-term debt) is available to Cineplex to fund Board approved projects.

(iii) Excludes the share of loss 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.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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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):

	Three months ended March 31,
	2021 2020
Net loss Adjust for: Depreciation and amortization - other Depreciation - right-of-use assets Loss on disposal of assets	$ (89,688) $ (174,155) 29,509 33,962 26,318 35,533 (30,060) 817
Non-cash interest (i)	657 9,735
Foreign exchange on non-cash interest Impairment of long-lived assets and goodwill Share of income of CDCP (ii) Non-controlling interests Non-cash depreciation of joint ventures and associates Deferred income tax recovery Taxes and interest of joint ventures and associates Maintenance capital expenditures Principal component of finance lease obligations Principal portion of cash rent paid not pertaining to current period Net cash received from CDCP (ii) Non-cash items:	211 (1,429) — 173,054 2,238 590 — 1 — 24 — (49,734) 11 48 (254) (2,977) (19,457) (33,819) 1,106 1,071 — 3,128
Non-cash Share-based compensation	624 3,944
Adjusted free cash flow	$ (78,785) $ (207)
(i) Non-cash interest includes amortization of deferred financing costs on the long-term debt, accretion expense on the debentures and notes payable, and other non-cash interest expense items.
(ii) Excludes the share of loss 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.

(ii) Excludes the share of loss 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.

15.3 OTHER NON-GAAP MEASURES MONITORED BY MANAGEMENT

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 or net loss 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.

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. Management’s Discussion and Analysis

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CPP: Calculated as total theatre food service revenues divided by total paid theatre attendance for the period.

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 March 31, 2021 the impact of the four locations that have been closed or otherwise disposed of have been excluded, resulting in 157 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, 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 the LBE which is calculated as total LBE revenues from all locations less the total of 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. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc.

Management’s Discussion and Analysis

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Net cash burn	Last Twelve Months	2021	2020	2020	2020
		Q1	Q4	Q3	Q2
Adjusted EBITDAaL Cash interest expense excluding lease obligations Provision for incomes taxes Net capital expenditures	$ (247,295) (45,940) 63,292 (28,544)	$ (62,090) (13,429) — (5,055)	$ (65,948) (13,412) 12,355 (7,272)	$ (46,725) (11,317) 16,497 (8,198)	$ (72,532) (7,782) 34,440 (8,019)
Total net cash burn	$ (258,487)	$ (80,574)	$ (74,277)	$ (49,743)	$ (53,893)
Average monthlynet cash burn	$ (21,541)	$ (26,858)	$ (24,759)	$ (16,581)	$ (17,964)

16. RECONCILIATION

During the quarter ended September 30, 2019, Cineplex initiated a review process of WGN’s online e-sports business, engaging a third-party adviser to identify a strategic equity partner. 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 second quarter in 2019:

Other operating expenses	Restated 2019
	Q2
Theatre payroll Theatre operating expenses Media P1AG LBE (i) LBE pre-opening (ii) SCENE Marketing	$ 41,072 30,225 21,185 40,529 13,957 673 4,060 4,192
Other(iii)	7,892
Other operating expenses including cash lease payments	$ 163,785
Cash rent related to lease obligations(iv)	(4,652)
Other operating expenses from continuing operations as reported Other operatingexpenses from discontinued operations as reported	$ 159,133 2,525
Total other operatingexpenses	$ 161,658
(i) Includes operating costs of LBE. Overhead relating to management of LBE portfolio are included in the (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.	‘Other’ line.

The following tables show the changes to the previously disclosed balances for other expenses for the second quarter in 2019:

in 2019:
Other	Restated 2019
	Q2
Other expenses included in other operating expense as previously reported Other expenses included in other operatingexpense from discontinued operations	$ 10,427 (2,535)
Other expenses included in other operatingexpense as restated	$ 7,892

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

Cineplex Inc. 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:

in 2019:
Other	Restated 2019
	Q2
Cash rent related to lease obligations as reported Cash rent related to lease obligations from discontinued operations	$ (4,662) 10
Cash rent related to lease obligations as restated	$ (4,652)

The following table shows the calculation of adjusted EBITDAaL from adjusted EBITDA as previously disclosed for the second quarter in 2019.

for the second quarter in 2019.
Adjusted EBITDAaL	Restated 2019
	Q2
Adjusted EBITDA as previously reported Net loss from discontinued operations Depreciation and amortization from discontinued operations Income tax recovery from discontinued operations Foreign exchange gain from discontinued operations	$ 112,249 2,680 (1,186) 658 (18)
Adjusted EBITDA from continuing operations	$ 114,383
Cash rent related to lease obligations Cash rentpaid notpertainingto currentperiod	(43,775) (353)
Adjusted EBITDAaL as restated	$ 70,255

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 second quarter in 2019.

Cash provided by operating activities	Restated 2019
	Q2
Cash provided by operating activities as previously reported	$ 57,494
Less: Operatingcash flows in discontinued operations	(852)
Cashprovided byoperatingactivities as restated	$ 58,346

Cash used in investing activities	Restated 2019
	Q2
Cash used in investing activities as previously reported	$ (25,110)
Less: Investingcash flows in discontinued operations	(259)
Cash used in investingactivities as restated	$ (24,851)

CINEPLEX INC. 2021 FIRST QUARTER REPORT MANAGEMENT’S DISCUSSION & ANALYSIS

AI assistant

Cineplex Inc. — Interim / Quarterly Report 2021

46710_rns_2021-05-06_6e69029d-7d17-4551-b45c-1e66ac13c35c.pdf

MANAGEMENT’S DISCUSSION AND ANALYSIS

May 5, 2021

MANAGEMENT’S DISCUSSION AND ANALYSIS CONTENTS

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Non-GAAP Measures

Forward-Looking Statements

1. OVERVIEW OF CINEPLEX

Cineplex Inc.

Management’s Discussion and Analysis

1.1 RECENT DEVELOPMENTS

COVID-19 business impacts, risks and liquidity

Liquidity measures:

Cineworld Transaction

1.2 FINANCIAL HIGHLIGHTS

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1.3 KEY DEVELOPMENTS IN THE FIRST QUARTER OF 2021

FILM ENTERTAINMENT AND CONTENT

Theatre Exhibition

Theatre Food Service

Alternative Programming

Digital Commerce

MEDIA

AMUSEMENT AND LEISURE

Amusement Solutions

Location Based Entertainment

LOYALTY

CORPORATE

2. CINEPLEX’S BUSINESS AND STRATEGY

Diversified Entertainment and Media Company

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3. OVERVIEW OF OPERATIONS

Revenues

Cost of Sales and Expenses

Accounting for Joint Arrangements

4. RESULTS OF OPERATIONS

4.1 SELECTED FINANCIAL DATA

4.2 OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2021

Total revenues

Box office revenues

Food service revenues

Cineplex Inc.

Management’s Discussion and Analysis

Media revenues

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Amusement revenues

Management’s Discussion and Analysis

Other revenues

Film cost

Cost of food service

__________________

Depreciation and amortization

Impairment of long-lived assets and goodwill

Cineplex Inc.

Management’s Discussion and Analysis

Impairment of intangible assets - discontinued operations

(Gain) loss on disposal of assets

Other costs

Theatre occupancy expenses

Other operating expenses

General and administrative expenses

Cineplex Inc.

Management’s Discussion and Analysis

Share of loss of joint ventures and associates

Interest expense

Cineplex Inc. Management’s Discussion and Analysis

Interest income

Foreign exchange

Income taxes

Net loss

4.3 EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION (“EBITDA”) (Section 15, Non-GAAP measures)

5. BALANCE SHEETS

6. LIQUIDITY AND CAPITAL RESOURCES

6.1 OPERATING ACTIVITIES

6.2 INVESTING ACTIVITIES

Cineplex Inc. Management’s Discussion and Analysis

6.3 FINANCING ACTIVITIES

6.4 LONG-TERM DEBT

Cineplex Inc. Interim / Quarterly Report 2021