IMAX Corporation Reports Second-Quarter 2016 Financial Results HIGHLIGHTS

- Robust Q2 2016 signings of 95 IMAX® theatre systems, up 217% year-over-year

- IMAX increases 2016 installation guidance to 155 theatres, up from original 2016 guidance of 115 to 120 theatres, underscoring strong worldwide demand for IMAX theatres

- Record backlog of 442 systems represents 40% growth to existing network of 1,102 theatres

NEW YORK, July 20, 2016 /CNW/ -- IMAX Corporation (NYSE: IMAX) today reported second-quarter 2016 revenues of $91.7 million and GAAP net income after non-controlling interest of $7.8 million, or $0.11 per share. Adjusted net income after non-controlling interest was $12.1 million, or $0.18 per diluted share. EBITDA as calculated in accordance with the Company's credit facility was $29.0 million. For reconciliations of adjusted net income to reported net income, adjusted earnings per share to reported earnings per share, and for the definition and reconciliation of EBITDA as calculated in accordance with the Company's credit facility, please see the tables at the end of this press release.

"Demand for IMAX theatres has never been stronger and bodes well for our business as more signings lead to more installs, which then lead to more box office, and, ultimately, to greater revenue. Including the 95 theatres signed in the second quarter, we have signed nearly as many deals in the first half of 2016 as we did in all of 2015. This robust signings momentum has resulted in a record backlog, which includes a 40-theatre full revenue-share agreement with Guangzhou JinYi Media Corporation, a 25-theatre deal with AMC Theatres and additional multi-theatre agreements with several other key exhibition partners, and improves visibility into installations and ultimately revenue over the next several years.  As a result, we are once again raising our installation guidance –this time to 155 theatres, up from our prior guidance range of 135 to 140 theatres and compared to our original 2016 install guidance range of 115 to 120 that was set late last year," said IMAX CEO Richard L. Gelfond.

Network Update: 
During the quarter, the Company installed 40 theatres, of which 38 were for new theatre locations and two were upgrades. The Company also signed contracts for 95 theatres in the second quarter of 2016. The total IMAX theatre network consisted of 1,102 systems as of June 30, 2016, of which 990 were in commercial multiplexes. There were 442 theatres in backlog as of June 30, 2016, up 14% from the 388 in backlog as of March 31, 2016. For a breakdown of theatre system signings, installations, network and backlog by type, please see the end of this press release.

Box Office Update:
Gross box office from IMAX DMR® titles was $260.8 million in the second quarter of 2016, compared with $343.0 million in the prior-year period, which was the highest-grossing box office quarter in Company history and included Furious 7, Jurassic World, and Avengers: Age of Ultron last year. The average global DMR box office per-screen average in the second quarter of 2016 was $268,200.

"While IMAX faced a challenging comparison to last year's second-quarter box office – which was the highest-grossing box office quarter in Company history – considering the strong outperformance in box office we saw in the first quarter, we believe our portfolio of titles released across the full year will result in an annual box office that is relatively consistent with our historical PSA. Looking ahead, we expect our heightened network growth in 2016, which is heavily weighted towards our joint revenue-sharing model, will position us well to capitalize on a promising array of upcoming tentpole franchises and sequels this year and next, including Suicide Squad, Marvel's Dr. Strange, Fantastic Beasts and Where to Find Them, Rogue One: A Star Wars Story, Kong: Skull Island, Guardians of the Galaxy Vol. 2, Spider-Man Homecoming, and, of course, Star Wars: Episode VIII."

Second-Quarter Segment Results

  • Revenue from sales and sales-type leases was $18.7 million in the second quarter of 2016, compared with $18.7 million in the second quarter of 2015. The Company installed 13 full theatre systems under sales and sales-type lease arrangements in the most recent quarter, compared with the 15 full sales-type theatres the Company installed in the second quarter of 2015.
  • Revenue from joint revenue-sharing arrangements was $23.9 million in the quarter, compared with $31.6 million in the prior-year period. During the quarter, the Company installed 25 new theatres under joint revenue-sharing arrangements, compared with 20 in the second quarter of 2015. The Company had 559 theatres operating under joint revenue-sharing arrangements as of June 30, 2016, as compared to 477 joint revenue-sharing theatres one year prior.
  • Production and DMR revenues were $27.4 million in the second quarter of 2016, compared with $36.6 million in the second quarter of 2015. As mentioned above, gross box office from DMR titles was $260.8 million in the second quarter of 2016, compared with $343.0 million in the prior-year period, which was the highest grossing box office quarter in Company history and included Furious 7, Jurassic World, and Avengers: Age of Ultron last year. The global DMR per screen average in the second quarter of 2016 was $268,200, compared with $414,600 in same period last year.
  • Gross margin of 54.8%, compared with 64.4% last year, primarily resulting from lower box office, higher DMR cost and a larger mix of hybrid sales in the quarter.
  • Operating expenses (which include SG&A and R&D, and excludes stock-based compensation) were $27.7 million in the quarter, compared with $26.3 million in the second quarter of 2015.

Share Buybacks

The Company repurchased 1,344,094 shares in the second quarter of 2016, which does not include 68,430 shares purchased in connection with the Company's long-term incentive plan. The Company purchased the shares at an average price of $30.55, for a total value of $41.1 million.

Conference Call
The Company will host a conference call today at 4:30 PM ET to discuss its second-quarter 2016 financial results. To access the call via telephone, interested parties in the US and Canada should dial (800) 505-9568 approximately 5 to 10 minutes before the call begins. Other international callers should dial (416) 204-9271. The conference ID for the call is 1146762. A replay of the call will be available via webcast on the 'Investor Relations' section of www.imax.com or via telephone by dialing (888) 203-1112 (US and Canada), or (647) 436-0148 (international). The Conference ID for the telephone replay is 1146762.

About IMAX Corporation
IMAX, an innovator in entertainment technology, combines proprietary software, architecture and equipment to create experiences that take you beyond the edge of your seat to a world you've never imagined. Top filmmakers and studios are utilizing IMAX theatres to connect with audiences in extraordinary ways, and, as such, IMAX's network is among the most important and successful theatrical distribution platforms for major event films around the globe.

IMAX is headquartered in New York, Toronto and Los Angeles, with offices in London, Tokyo, Shanghai and Beijing. As of Jun. 30, 2016, there were 1,102 IMAX theatres (990 commercial multiplexes, 16 commercial destinations and 96 institutions) in 69 countries. On Oct. 8, 2015, shares of IMAX China, a subsidiary of IMAX Corp., began trading on the Hong Kong Stock Exchange under the stock code "HK.1970."

IMAX®, IMAX® 3D, IMAX DMR®, Experience It In IMAX®, An IMAX 3D Experience®, The IMAX Experience®, IMAX Is Believing® and IMAX nXos® are trademarks of IMAX Corporation. More information about the Company can be found at www.imax.com. You may also connect with IMAX on Facebook (www.facebook.com/imax), Twitter (www.twitter.com/imax) and YouTube (www.youtube.com/imaxmovies).

This press release contains forward looking statements that are based on IMAX management's assumptions and existing information and involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. Important factors that could affect these statements include, but are not limited to, references to future capital expenditures (including the amount and nature thereof), business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business, operations and technology, plans and references to the future success of IMAX Corporation together with its consolidated subsidiaries (the "Company") and expectations regarding the Company's future operating, financial and technological results. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictions of the Company is subject to a number of risks and uncertainties, including, but not limited to, the signing of theater system agreements; conditions, changes and developments in the commercial exhibition industry; the performance of IMAX DMR films; the potential impact of increased competition in the markets within which the Company operates; competitive actions by other companies; the failure to respond to change and advancements in digital technology; risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and Canada; risks related to the Company's growth and operations in China; the Company's largest customer accounting for a significant portion of the Company's revenue and backlog; risks related to new business initiatives; conditions in the in-home and out-of-home entertainment industries; the opportunities (or lack thereof) that may be presented to and pursued by the Company; risks related to cyber-security; risks related to the Company's inability to protect its intellectual property; risks related to the Company's implementation of a new enterprise resource planning system; general economic, market or business conditions; the failure to convert theater system backlog into revenue; changes in laws or regulations; and other factors, many of which are beyond the control of the Company. These factors, other risks and uncertainties and financial details are discussed in IMAX's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

Investors:

Media:

IMAX Corporation, New York

IMAX Corporation, New York

Jessica Kourakos

Ann Sommerlath

212-821-0100

212-821-0155

jkourakos@imax.com 

asommerlath@imax.com





Michael Mougias

Entertainment Media:

mmougias@imax.com

Principal Communications Group, Los Angeles


Melissa Zuckerman/Paul Pflug


323-658-1555

Business Media:

melissa@pcommgroup.com

Sloane & Company, New York

paul@pcommgroup.com

Whit Clay


212-446-1864


wclay@sloanepr.com 


 








Signings and Installations





June 30, 2016








Three Months





Ended June 30,



Theater Signings:

2016


2015




Full new sales and sales-type lease arrangements

19


19

(1)



New joint revenue sharing arrangements

75


9



  Total new theaters

94


28











Upgrades of IMAX theater systems

1


2



Total Theater Signings

95


30












Three Months





Ended June 30,



Theater Installations:

2016


2015




Full new sales and sales-type lease arrangements

13

(2)

15

(2)



New joint revenue sharing arrangements

25


20



  Total new theaters

38


35




Upgrades of IMAX theater systems

2

(3)

-



Total Theater Installations

40


35












As of June 30,



Theater Backlog:

2016


2015




New sales and sales-type lease arrangements

178


181




New joint revenue sharing arrangements

264


210



  Total new theaters

442

(4)(5)

391

(4)(6)


















As of June 30,



Theater Network:

2016


2015



Commercial Multiplex Theaters:







Sales and sales-type lease arrangements

431


375




Joint revenue sharing arrangements

559


477



Total Commercial Multiplex Theaters

990


852










Commercial Destination Theaters

16


20



Institutional Theaters

96


104



Total IMAX Theater Network

1,102


976









 

(1) Includes one signing which replaced a theatre system under an existing arrangement in backlog.
(2) Includes one used theater system (2015 – one theater system).
(3) Includes one installation of an upgrade to a laser-based digital system and one upgrade to a xenon-based digital system under sales and sales-type lease arrangements.
(4) Includes 19 laser-based digital theater system configurations (2015 – 73), including upgrades. The Company continues to develop and roll out its laser-based digital projection system.
(5) Includes seven upgrades to a digital theater system, in existing IMAX theater locations (one xenon configuration and six laser configurations).
(6) Includes 24 upgrades to a digital theater system, in existing IMAX theater locations (two xenon configurations and 22 laser configurations, of which five are under joint revenue sharing arrangements).

Additional Information (continued)

In addition to the 21 IMAX DMR films released to the IMAX theater network during the first six months ended June 30, 2016, 21 additional IMAX DMR films have been announced so far to be released in the remaining six months of 2016:

  • Ice Age: Collision Course: An IMAX 3D Experience (20th Century Fox, July 2016);
  • The BFG: An IMAX 3D Experience (Walt Disney Studios, July 2016);
  • Jason Bourne: The IMAX Experience (Universal Studios, July 2016);
  • Godzilla: Resurgence: The IMAX Experience (Toho-Towa Company, Ltd., July 2016, Japan only);
  • Cold War 2: An IMAX 3D Experience (Edko Films, July 2016, China only);
  • Ghostbusters: An IMAX 3D Experience (Sony Pictures, July 2016);
  • For A Few Bullets: The IMAX Experience (Wanda Media Co., July 2016, China only);
  • Star Trek Beyond: An IMAX 3D Experience (Paramount Pictures, July 2016);
  • Skiptrace: An IMAX 3D Experience (Talent Int., August 2016, China only);
  • Time Raiders: An IMAX 3D Experience (Le Vision Pictures, August 2016, China only);
  • Suicide Squad: An IMAX 3D Experience (Warner Bros. Pictures, August 2016);
  • Ben-Hur: An IMAX 3D Experience (Paramount Pictures, August 2016);
  • Sully: The IMAX Experience (Warner Bros. Pictures, September 2016);
  • The Magnificent Seven: The IMAX Experience (Sony Pictures, September 2016);
  • Deepwater Horizon: The IMAX Experience (Lionsgate Entertainment, September 2016);
  • Inferno: The IMAX Experience (Sony Pictures, October 2016);
  • Jack Reacher: Never Go Back: The IMAX Experience (Paramount Pictures, October 2016);
  • The Duelist: The IMAX Experience (Non-Stop Production LLC, October 2016, Russia only);
  • Doctor Strange: An IMAX 3D Experience (Walt Disney Studios, November 2016);
  • Fantastic Beasts and Where to Find Them: An IMAX 3D Experience (Warner Bros. Pictures, November 2016); and
  • Rogue One: A Star Wars Story: An IMAX 3D Experience (Walt Disney Studios, December 2016).

In addition, the Company will be releasing an IMAX documentary film, Voyage of Time, on October 7, 2016.

To date, the Company has announced the following 13 titles to be released in 2017 to the IMAX theater network:

  • Attraction: An IMAX 3D Experience (Art Pictures Studio, January 2017, Russia only);
  • God Particle: The IMAX Experience (Paramount Pictures, February 2017);
  • Untitled Wolverine Film: The IMAX Experience (20th Century Fox, March 2017);
  • Kong: Skull Island: An IMAX 3D Experience (Warner Bros. Pictures, March 2017);
  • Ghost in the Shell: An IMAX 3D Experience (Paramount Pictures, March 2017);
  • Guardians of the Galaxy Vol. 2: An IMAX 3D Experience (Walt Disney Studios, May 2017);
  • Pirates of the Caribbean: Dead Men Tell No Tales: An IMAX 3D Experience (Walt Disney Studios, May 2017);
  • Transformers: The Last Knight: An IMAX 3D Experience (Paramount Pictures, June 2017);
  • Spider-Man: Homecoming: An IMAX 3D Experience (Sony Pictures, July 2017);
  • Dunkirk: The IMAX Experience (Warner Bros. Pictures, July 2017);
  • Thor: Ragnarök: An IMAX 3D Experience (Walt Disney Studios, November 2017);
  • Justice League: An IMAX 3D Experience (Warner Bros. Pictures, November 2017); and
  • Star Wars: Episode VIII: An IMAX 3D Experience (Walt Disney Studios, December 2017);

The Company remains in active negotiations with all of the major Hollywood studios for additional films to fill out its short and long-term film slate, and anticipates that a similar number of IMAX DMR films will be released to the IMAX network in 2016 to the 44 films that were released to the IMAX network in 2015.

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except per share amounts)

(Unaudited)


















Three Months


Six Months




Ended June 30,


Ended June 30,




2016


2015


2016


2015

Revenues













Equipment and product sales


$

26,489


$

25,305


$

50,229


$

39,741

Services



41,385



50,958



85,658



82,674

Rentals



20,752



28,527



42,531



42,341

Finance income



2,367



2,229



4,703



4,474

Other



750



141



750



141





91,743



107,160



183,871



169,371

Costs and expenses applicable to revenues













Equipment and product sales



15,594



13,521



33,385



21,061

Services



20,528



19,495



38,124



34,302

Rentals



5,298



5,109



9,863



8,992

Other



46



-



46



-





41,466



38,125



81,418



64,355

Gross margin



50,277



69,035



102,453



105,016

Selling, general and administrative expenses



30,436



29,023



62,020



57,375

(including share-based compensation expense of $6.2 million and  $14.7 million for the three and six months ended June 30, 2016, respectively (2015 - expense of $5.1 million and $10.7 million, respectively))












Research and development



3,435



2,347



7,143



6,889

Amortization of intangibles



515



443



1,006



873

Receivable provisions, net of recoveries



230



343



356



348

Impairment of investments



194



350



194



350

Income from operations



15,467



36,529



31,734



39,181

Interest income



380



259



847



505

Interest expense



(458)



(403)



(856)



(707)

Income from operations before income taxes



15,389



36,385



31,725



38,979

Provision for income taxes



(3,366)



(9,256)



(7,084)



(9,931)

Loss from equity-accounted investments, net of tax



(1,340)



(749)



(1,781)



(1,183)

Net income



10,683



26,380



22,860



27,865

Less: net income attributable to non-controlling interests



(2,892)



(2,030)



(5,542)



(3,124)

Net income attributable to common shareholders


$

7,791


$

24,350


$

17,318


$

24,741















Net income per share attributable to common shareholders - basic & diluted:












Net income per share - basic


$

0.11


$

0.34


$

0.25


$

0.35

Net income per share - diluted


$

0.11


$

0.34


$

0.25


$

0.34















Weighted average number of shares outstanding (000's):














Basic



67,768



69,843



68,540



69,526


Fully Diluted



68,455



71,688



69,222



71,349















Additional Disclosure:













Depreciation and amortization(1)


$

11,626


$

11,091


$

22,064


$

20,724















(1) Includes $0.2 million and $0.3 million of amortization of deferred financing costs charged to interest expense for the three and six months ended June 30, 2016, respectively (2015 - $0.2 million and $0.4 million, respectively).

 

 

 


IMAX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

(Unaudited)














As at


As at


June 30


December 31


2016


2015






Assets






Cash and cash equivalents

$

228,081


$

317,449

Accounts receivable, net of allowance for doubtful accounts of $1,319 (December 31, 2015 — $1,146)


94,687



97,981

Financing receivables


118,884



117,231

Inventories


44,776



38,753

Prepaid expenses


8,754



6,498

Film assets


16,859



14,571

Property, plant and equipment


234,480



218,267

Other assets


26,017



26,136

Deferred income taxes


25,893



26,666

Other intangible assets


29,279



28,950

Goodwill


39,027



39,027

Total assets

$

866,737


$

931,529







Liabilities






Bank indebtedness

$

28,296


$

29,276

Accounts payable


21,451



23,455

Accrued and other liabilities


83,539



95,748

Deferred revenue


106,967



104,993

Total liabilities


240,253



253,472







Commitments and contingencies












Non-controlling interests


3,221



3,307







Shareholders' equity






Capital stock common shares — no par value. Authorized — unlimited number.






67,112,751 — issued and 67,112,358 — outstanding (December 31, 2015 — 69,673,244 — issued and outstanding)


435,711



448,310

Less: Treasury stock held in trust, 393 shares at cost


(13)



-

Other equity


172,645



168,425

Accumulated (deficit) earnings


(34,923)



15,499

Accumulated other comprehensive loss


(4,471)



(7,443)

Total shareholders' equity attributable to common shareholders


568,949



624,791

Non-controlling interests


54,314



49,959

Total shareholders' equity


623,263



674,750

Total liabilities and shareholders' equity

$

866,737


$

931,529

 

 

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)



Six Months Ended June 30,




2016


2015









Cash provided by (used in):







Operating Activities








Net income


$

22,860


$

27,865


Adjustments to reconcile net income to cash from operations:








Depreciation and amortization



22,064



20,724


Write-downs, net of recoveries



1,249



1,457


Change in deferred income taxes



(29)



2,232


Stock and other non-cash compensation



15,014



10,861


Unrealized foreign currency exchange (gain) loss



(583)



851


Loss from equity-accounted investments



1,980



1,923


Gain on non-cash contribution to equity-accounted investees



(199)



(740)


Investment in film assets



(10,890)



(7,404)


Changes in other non-cash operating assets and liabilities



(15,399)



(39,271)


Net cash (used in) provided by operating activities



36,067



18,498










Investing Activities








Purchase of property, plant and equipment



(8,472)



(34,920)


Investment in joint revenue sharing equipment



(20,700)



(11,613)


Acquisition of other intangible assets



(1,691)



(2,972)


Net cash used in investing activities



(30,863)



(49,505)










Financing Activities








Increase in bank indebtedness



-



17,568


Repayment of bank indebtedness



(1,000)



-


Repurchase of common shares



(85,714)



-


Settlement of restricted share units and options



(8,369)



(4,988)


Common shares issued - stock options exercised



3,582



22,850


Taxes paid on secondary sale and repatriation dividend



(2,991)



-


Taxes withheld and paid on employee stock awards vested



(73)



-


Treasury stock purchased for future settlement of restricted share units



(13)



(1,214)


Credit facility amendment fees paid



-



(1,161)


Issuance of subsidiary shares to non-controlling interests - private offering



-



40,000


Share issuance costs from the issuance of subsidiary shares to non-controlling








interests - private offering



-



(2,000)


Net cash (used in) provided by financing activities



(94,578)



71,055










Effects of exchange rate changes on cash



6



(168)










(Decrease) increase in cash and cash equivalents during period



(89,368)



39,880










Cash and cash equivalents, beginning of period



317,449



106,503










Cash and cash equivalents, end of period


$

228,081


$

146,383


 

IMAX CORPORATION
SELECTED FINANCIAL DATA
In accordance with United States Generally Accepted Accounting Principles
(in thousands of U.S. dollars)

The Company has seven reportable segments identified by category of product sold or service provided: IMAX systems; theater system maintenance; joint revenue sharing arrangements; film production and IMAX DMR; film distribution; film post-production; and other. The IMAX systems segment includes the design, manufacture, sale or lease of IMAX theater projection system equipment. The theater system maintenance segment includes the maintenance of IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment includes the provision of IMAX theater projection system equipment to an exhibitor in exchange for a share of the box-office and concession revenues. The film production and IMAX DMR segment includes the production of films and the performance of film re-mastering services. The film distribution segment includes the distribution of films for which the Company has distribution rights. The film post-production segment provides film post-production and film print services. The other segment includes certain IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items.

 





Three Months


Six Months





Ended June 30,


Ended June 30,






2016



2015


2016


2015

Revenue













IMAX Theater Systems














IMAX Systems















Sales and sales-type leases


$

18,720


$

18,674


$

36,718


$

27,289



Ongoing rent, fees, and finance income



4,241



3,691



8,103



7,190



Other



5,009



4,674



9,490



8,099






27,970



27,039



54,311



42,578

















Theater System Maintenance



9,912



9,158



19,738



18,008

















Joint Revenue Sharing Arrangements



23,856



31,594



47,242



47,462
















Film














Production and IMAX DMR



27,413



36,603



57,218



54,279


Film distribution and post-production



2,592



2,766



5,362



7,044






30,005



39,369



62,580



61,323

Total


$

91,743


$

107,160


$

183,871


$

169,371
















Gross margins













IMAX Theater Systems














IMAX systems(1)















Sales and sales-type leases


$

9,540


$

10,038


$

13,859


$

14,945



Ongoing rent, fees, and finance income



4,135



3,499



7,650



6,777



Other



162



(114)



(320)



(154)






13,837



13,423



21,189



21,568

















Theater System Maintenance



3,370



3,089



6,809



6,370

















Joint Revenue Sharing Arrangements(1)



15,744



24,069



33,736



34,686
















Film














Production and IMAX DMR(1)



17,127



28,488



39,950



41,713


Film distribution and post-production(1)



199



(34)



769



679






17,326



28,454



40,719



42,392

Total


$

50,277


$

69,035


$

102,453


$

105,016

__________________

(1)

IMAX systems include marketing and commission costs of $0.6 million and $1.1 million for the three and six months ended June 30, 2016, respectively (2015 - $0.6 million and $0.9 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.4 million and $1.5 million for the three and six months ended June 30, 2016, respectively (2015 - $1.3 million and $1.4 million, respectively). Production and DMR segment margins include marketing costs of $5.2 million and  $7.5 million for the three and six months ended June 30, 2016, respectively (2015 - $3.6 million and $4.9 million, respectively). Distribution segment margins include marketing expense of $0.8 million and $1.5 million for the three and six months ended June 30, 2016, respectively (2015 - cost of less than $0.1 million and cost recovery of $0.1 million, respectively).

 

IMAX CORPORATION
OTHER INFORMATION
(in thousands of U.S. dollars)

Non-GAAP Financial Measures:

In this release, the Company presents adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share as supplemental measures of performance of the Company, which are not recognized under U.S. GAAP. The Company presents adjusted net income and adjusted net income per diluted share because it believes that they are important supplemental measures of its comparable controllable operating performance and it wants to ensure that its investors fully understand the impact of its stock-based compensation (net of any related tax impact) on net income. In addition, the Company presents adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share because it believes that they are important supplemental measures of its comparable financial results and could potentially distort the analysis of trends in business performance and it wants to ensure that its investors fully understand the impact of net income attributable to non-controlling interests and its stock-based compensation (net of any related tax impact) in determining net income attributable to common shareholders. Management uses these measures to review operating performance on a comparable basis from period to period. However, these non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share should be considered in addition to, and not as a substitute for, net income and net income attributable to common shareholders and other measures of financial performance reported in accordance with U.S. GAAP.

The Credit Facility provides that the Company will be required at all times to satisfy a Minimum Liquidity Test (as defined in the Credit Agreement) of at least $50.0 million. The Company will also be required to maintain minimum adjusted EBITDA (as defined in the credit agreement) of $100.0 million. The Company must also maintain a Maximum Total Leverage Ratio (as defined in the credit agreement) of 2.25:1.0, which requirement decreases to (i) 2.0:1.0 on December 31, 2016; and (ii) 1.75:1.0 on December 31, 2017. The Company was in compliance with all of these requirements at June 30, 2016. The ratio of total debt to adjusted EBITDA was 0.21:1 as at June 30, 2016, where Total Debt (as defined in the credit agreement) is the sum of all obligations evidenced by notes, bonds, debentures or similar instruments and was $28.7 million. Adjusted EBITDA is calculated as follows:

 



For the


For the


For the



3 months ended


12 months ended


3 months ended


June 30, 2016


June 30, 2016

(1)

June 30, 2015

(In thousands of U.S. Dollars)









Net income

$

10,683


$

59,619


$

26,380

Add (subtract):










Loss from equity accounted investments


1,340



3,000



749


Provision for income taxes


3,366



17,205



9,256


Interest expense, net of interest income


78



500



144


Depreciation and amortization, including film asset amortization


11,496



43,252



10,861


Write-downs, net of recoveries including asset impairments and










receivable provisions


601



3,517



1,329


Stock and other non-cash compensation


6,347



26,532



5,195


EBITDA before non-controlling interests


33,911



153,625



53,914


EBITDA attributable to non-controlling interests(2)


(4,876)



(18,667)



(3,538)


EBITDA attributable to common shareholders

$

29,035


$

134,958


$

50,376

__________________




(1)

Ratio of funded debt calculated using twelve months ended EBITDA.




(2)

The EBITDA calculation specified for purpose of the minimum EBITDA covenant excludes the reduction in EBITDA from the Company's non-controlling interests.

 

IMAX CORPORATION
OTHER INFORMATION
(in thousands of U.S. dollars)

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended June 30, 2016 vs. 2015:

The Company reported net income of $10.7 million or $0.16 per basic and diluted share for the second quarter of 2016 as compared to net income of $26.4 million or $0.37 per basic share and $0.36 per diluted share for the second quarter of 2015. Net income for the second quarter of 2016 includes a $6.2 million charge or $0.09 per diluted share (2015 — $5.1 million or $0.07 per diluted share) for stock-based compensation. Adjusted net income, which consists of net income excluding the impact of stock-based compensation and the related tax impact, was $15.1 million or $0.22 per diluted share for the second quarter of 2016 as compared to adjusted net income of $30.7 million or $0.42 per diluted share for the quarter ended June 30, 2015. Adjusted net income attributable to common shareholders, which consists of net income attributable to common shareholders excluding the impact of stock-based compensation and the related tax impact, was $12.1 million or $0.18 per diluted share for the second quarter of 2016 as compared to adjusted net income attributable to common shareholders of $28.7 million or $0.40 per diluted share for the second quarter of 2015. A reconciliation of net income and net income attributable to common shareholders, the most directly comparable U.S. GAAP measure, to adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share is presented in the table below:

 



Quarter Ended June 30,




2016



2015




Net Income


Diluted EPS



Net Income


Diluted EPS


Reported net income

$

10,683


$

0.16



$

26,380


$

0.36

(1)

Adjustments:















Stock-based compensation


6,205



0.09




5,103



0.07



Tax impact on items listed above


(1,744)



(0.03)




(740)



(0.01)


Adjusted net income


15,144



0.22




30,743



0.42

(1)


Net income attributable to non-controlling interests


(2,892)



(0.04)




(2,030)



(0.02)



Stock-based compensation (net of tax of less than $0.1















 million) attributable to non-controlling interests


(168)



-




-



-


Adjusted net income attributable to common shareholders

$

12,084


$

0.18



$

28,713


$

0.40

(1)
















Weighted average diluted shares outstanding





68,455







71,688

















_____________


(1)

Includes impact of $0.3 million of accretion charges associated with redeemable Class C shares of IMAX China.

 

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Period Ended June 30, 2016 vs. 2015

The Company reported net income of $22.9 million or $0.33 per basic and diluted share for the six months ended June 30, 2016, as compared to net income of $27.9 million or $0.39 per basic share and $0.38 per diluted share for the six months ended June 30, 2015. Net income for the six months ended June 30, 2016 includes a $14.7 million charge or $0.21 per diluted share (2015 — $10.7 million or $0.15 per diluted share) for stock-based compensation. Adjusted net income, which consists of net income excluding the impact of stock-based compensation and the related tax impact, was $33.4 million or $0.48 per diluted share for the six months ended June 30, 2016, as compared to adjusted net income of $36.8 million or $0.51 per diluted share for the six months ended June 30, 2015. Adjusted net income attributable to common shareholders, which consists of net income attributable to common shareholders excluding the impact of stock-based compensation and the related tax impact, was $27.6 million or $0.40 per diluted share for the six months ended June 30, 2016, as compared to adjusted net income attributable to common shareholders of $33.7 million or $0.47 per diluted share for the six months ended June 30, 2015. A reconciliation of net income and net income attributable to common shareholders, the most directly comparable U.S. GAAP measure, to adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share is presented in the table below:

 



Six Months Ended June 30,




2016



2015




Net Income


Diluted EPS



Net Income


Diluted EPS


Reported net income

$

22,860


$

0.33



$

27,865


$

0.38

(1)

Adjustments:















Stock-based compensation


14,743



0.21




10,678



0.15



Tax impact on items listed above


(4,184)



(0.06)




(1,702)



(0.02)


Adjusted net income


33,419



0.48




36,841



0.51

(1)


Net income attributable to non-controlling interests


(5,542)



(0.08)




(3,124)



(0.04)



Stock-based compensation (net of tax of $0.1 million)















attributable to non-controlling interests


(293)



-




-



-


Adjusted net income attributable to common shareholders

$

27,584


$

0.40



$

33,717


$

0.47

(1)
















Weighted average diluted shares outstanding





69,222







71,349

















_____________


(1)

Includes impact of $0.5 million of accretion charges associated with redeemable Class C shares of IMAX China.

 

Free Cash Flow:
Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the consolidated statements of cash flows). Cash provided by operating activities consist of net income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow, a non-GAAP measure, as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities. Free cash flow does not represent residual cash flow available for discretionary expenditures. A reconciliation of cash provided by operating activities to free cash flow is presented in the table below:

 



For the


For the



3 months ended


6 months ended


June 30, 2016


June 30, 2016

(In thousands of U.S. Dollars)






Net cash provided by operating activities

$

31,103


$

36,067

Net cash used in investing activities


(21,520)



(30,863)


Free cash flow

$

9,583


$

5,204

 

 

SOURCE IMAX Corporation


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