News Column

IMAX Corporation Reports Fourth Quarter And Full Year 2013 Financial Results

February 20, 2014

HIGHLIGHTS

- Robust performance in Q4 leads to adjusted EPS of $0.44, 91% growth over same period last year, drives full year adjusted EPS to $0.81

- Highest global box office quarter ever for IMAX of $244 million, brings full year 2013 box office to $727 million

- IMAX has record year for signings with 119 signings in Q4 and 277 in the full year, double that of 2012

- IMAX expands backlog to historical high of 384 new commercial theatres, a 45% increase year-over-year


NEW YORK, Feb. 20, 2014 /CNW/ - IMAX Corporation (NYSE:IMAX; TSX:IMX) today reported robust fourth quarter 2013 financial results driven by the combination of strong installations as well as its highest grossing quarterly global box office ever. The Company reported revenues for the fourth quarter 2013 of $105.1 million, adjusted EBITDA as calculated in accordance with the Company's credit facility of $52.2 million, adjusted net income of $30.8 million, or $0.44 per diluted share, and reported net income of $27.8 million, or $0.40 per diluted share. The Company also reported a fourth quarter per screen average of $366,300.

(Logo: http://photos.prnewswire.com/prnh/20111107/MM01969LOGO )

Full year 2013 revenues were $287.9 million, adjusted EBITDA as calculated in accordance with the Company's credit facility was $113.2 million, adjusted net income was $55.7 million, or $0.81 per diluted share, and reported net income was $44.1 million, or $0.64 per diluted share. For reconciliations of adjusted net income to reported net income and for the definition of adjusted EBITDA and free cash flow, please see the tables at the end of this press release. The Company also reported a 2013 per screen average of $1.15 million. With the exception of 2010, when the Company's per screen average was much higher driven by Avatar, the Company's per screen averages over the past 5 years have been in a range of approximately $1.1 to $1.2 million.

"IMAX fired on all cylinders in the fourth quarter, with an exceptional number of installations and signings, as well as the highest grossing box office in the Company's history," said IMAX CEO, Richard L. Gelfond. "Breakout performances by films such as Gravity, Hobbit, and Stalingrad internationally, exemplify the power and differentiation of the IMAX format." Gelfond continued, "The strong fourth quarter drove over 90% growth in our EBITDA compared to the same period last year, resulting in margin expansion and strong operating leverage for the full year. Overall, 2013 was a very exciting and productive year at IMAX as we effectively streamlined costs, expanded the network, signed a record number of deals and continued to execute on the film front."

Network Growth Update

In the fourth quarter of 2013, the Company signed contracts for 119 theatre systems and installed 58 theatre systems, of which 4 were upgrades of existing theatre locations, bringing the full year total installations to 112 new theatre systems across 23 countries.

"With our footprint now spanning 57 countries, IMAX is more global than ever before," added Gelfond. "Moving forward, we are focused on managing all aspects of our business to ensure that we take full advantage of attractive movie-going trends unique to each local market and that we secure IMAX's position as the world's premium cinematic experience. Our record level of signings in 2013 will drive ongoing network growth, and we are optimistic about what the future holds."

The total IMAX® theatre network consisted of 837 systems as of December 31, 2013, of which 701 were in commercial multiplexes. IMAX signed contracts for 277 theatres in 2013, across 31 countries, resulting in 407 theatre systems in backlog as of December 31, 2013, compared to 276 theatre systems in backlog as of December 31, 2012. For a breakdown of theatre system signings, installations, network and backlog by type, please see the end of this press release.

Fourth-Quarter Segment Results


•Revenue from sales and sales-type leases was $32.6 million in the fourth quarter of 2013, compared to $20.2 million in the fourth quarter of 2012, primarily reflecting the installation of 24 full, new theatre systems under sales and sales-type lease arrangements in the most recent fourth quarter, compared to the 14 in the fourth quarter of 2012. In addition there were 4 digital system upgrades in existing locations in the fourth quarter of 2013, compared to 3 upgrades in the fourth quarter of 2012. •Revenue from joint revenue-sharing arrangements was $24.5 million in the quarter, compared to $17.0 million in the prior-year period. During the quarter, the Company installed 30 new theatres under joint revenue-sharing arrangements, compared to 29 in the year ago period. The Company had 382 theatres operating under joint revenue-sharing arrangements as of December 31, 2013, as compared to 316 theatres one year prior. •Production and IMAX DMR® (Digital Re-Mastering) revenues were $28.6 million in the fourth quarter of 2013, compared to $19.2 million in the fourth quarter of 2012. Gross box office from DMR titles was $244.5 million in the fourth quarter of 2013, compared to $152.0 million in the prior-year period. The average global DMR box office per screen in the fourth quarter of 2013 was $366,300 compared to $264,400 in the prior-year period.

Conference Call

The Company will host a conference call today at 8:30 AM ET to discuss its fourth quarter and full year 2013 financial results. To access the call via telephone, interested parties in the US and Canada should dial (800) 820-0231 approximately 5 to 10 minutes before the call begins. International callers should dial (416) 640-5926. The conference ID for the call is 9729185. 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 9729185.

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 Dec. 31, 2013, there were 837 IMAX theatres (701 commercial multiplexes, 19 commercial destinations and 117 institutions) in 57 countries.

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 wholly-owned 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, general economic, market or business conditions; the opportunities (or lack thereof) that may be presented to and pursued by the Company; the performance of IMAX DMR films; competitive actions by other companies; conditions in the in-home and out-of-home entertainment industries; the signing of theater system agreements; changes in laws or regulations; conditions, changes and developments in the commercial exhibition industry; 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 failure to respond to change and advancements in digital technology; the Company's largest customer accounting for a significant portion of the Company's revenue and backlog; risks related to new business initiatives; the potential impact of increased competition in the markets within which the Company operates; risks related to the Company's inability to protect the Company's intellectual property; risks related to the Company's implementation of a new enterprise resource planning system; the failure to convert theater system backlog into revenue; risks related to the Company's dependence on a sole supplier for its analog film; 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.


For additional information please contact:

Investors:

IMAX Corporation, New York

Teri Loxam

212-821-0100

tloxam@imax.com



Business Media:

Sloane & Company, New York

Whit Clay

212-446-1864

wclay@sloanepr.com

Media:

IMAX Corporation, New York

Ann Sommerlath

212-821-0155

asommerlath@imax.com





Entertainment Media:

Principal Communications Group, Los Angeles

Melissa Zuckerman/Paul Pflug

323-658-1555

melissa@pcommgroup.com

paul@pcommgroup.com



Additional Information

Signings and Installations



Dec. 31, 2013

























Three Months





Twelve Months









Ended Dec. 31,





Ended Dec. 31,





Theatre Signings:

2013



2012





2013



2012







Full new sales and sales-type lease arrangements

18



11





56



43







New joint revenue sharing arrangements

98



17





190



78





Total new theatres

116



28





246



121































Upgrades of IMAX theatre systems

3



10





31

(1)

21

(2)



Total Theatre Signings

119



38





277



142

































Three Months





Twelve Months









Ended Dec. 31,





Ended Dec. 31,





Theatre Installations:

2013



2012





2013



2012







Full new sales and sales-type lease arrangements

24



14





47

(3)

47







New joint revenue sharing arrangements

30



29





65



60





Total new theatres

54



43





112

(3)

107































Upgrades of IMAX theatre systems

4



3





21

(1)

18





Total Theatre Installations

58



46





133



125

































As of Dec. 31,















Theatre Backlog:

2013



2012

















New sales and sales-type lease arrangements

125



128

















New joint revenue sharing arrangements

259



137















Total new theatres

384



265









































Upgrades of IMAX theatre systems

23



11















Total Theatres in Backlog

407

(4)

276

(5)









































As of Dec. 31,















Theatre Network:

2013



2012















Commercial Multiplex Theatres:























Sales and sales-type lease arrangements

319



282

















Joint revenue sharing arrangements

382



316















Total Commercial Multiplex Theatres

701



598







































Commercial Destination Theatres

19



19















Institutional Theatres

117



114















Total IMAX Theatre Network

837



731















______________________

(1)

Includes upgrades to xenon-based digital systems under short-term operating lease arrangements (10 signings, 10 installations).

(2)

Includes 3 IMAX theaters acquired from another existing customer that has been operating under a joint revenue sharing arrangement. These theaters were purchased from the Company under a sales arrangement.

(3)

Includes the following items: (i) one new xenon-based digital system under a short-term operating lease arrangement; (ii) one theater system which has increased the Company's institutional theater network; and (iii) one IMAX Private Theater (the first of its kind in the IMAX theater network).

(4)

Includes 23 upgrades to a digital theater system, in an existing IMAX theater location (3 xenon and 20 laser, of which 4 are under joint revenue sharing arrangements).

(5)

Includes 11 upgrades to a digital theater system, in an existing IMAX theater location (6 xenon and 5 laser).



Additional Information (continued)

2013 DMR Films:

In 2013, 38 films were converted through the IMAX DMR process and released to theaters in the IMAX network by film studios as compared to 35 films in 2012. These films were:

The Grandmaster: The IMAX Experience (Jet Tone Films and Sil-Metropole Organization, January 2013, China only);Hansel & Gretel: Witch Hunters: An IMAX3D Experience (Paramount Pictures, January 2013);Top Gun: An IMAX3D Experience (Paramount Pictures, February 2013);Journey to the West: Conquering the Demons: An IMAX3D Experience (Bingo Movie Development Ltd, February 2013, China only); A Good Day to Die Hard: The IMAX Experience (Twentieth Century Fox, February 2013);Jack the Giant Slayer: An IMAX3D Experience (Warner Bros. Pictures, March 2013);Oz: The Great and Powerful: An IMAX 3D Experience (Walt Disney Pictures, March 2013);G.I. Joe: Retaliation: An IMAX3D Experience (Paramount Pictures, March 2013);Dragon Ball Z: Battle of the Gods: An IMAX3D Experience (Toei Animation Company, March 2013, Japan only);Jurassic Park: An IMAX 3D Experience (Universal Pictures, April 2013);Oblivion: The IMAXExperience (Universal Pictures, April 2013);Iron Man 3: An IMAX3D Experience (Walt Disney Pictures, May 2013);Star Trek: Into Darkness: An IMAX 3D Experience (Paramount Pictures, May 2013);Fast & Furious 6: The IMAX Experience (Universal Pictures, May 2013, select international markets);After Earth: The IMAX Experience (Columbia Pictures, May 2013);Man of Steel: The IMAX Experience (Warner Bros. Pictures, June 2013);World War Z: An IMAX3D Experience (Paramount Pictures, June 2013, select international markets);Despicable Me 2: An IMAX3D Experience (Universal Pictures, July 2013, select international markets);White House Down: The IMAX Experience (Sony Pictures, July 2013, select international markets);Man of Tai Chi: The IMAX Experience (China Film Group, Wanda Group, Village Roadshow, July 2013, China only);Lone Ranger: The IMAX Experience (Walt Disney Pictures, July 2013, select international markets);Pacific Rim: An IMAX 3D Experience (Warner Bros. Pictures, July 2013);Elysium: The IMAX Experience (Sony Pictures, August 2013);The Mortal Instruments: City of Bones: The IMAX Experience (Sony Pictures, August 2013);Riddick Sequel: The IMAX Experience (Universal Pictures, September 2013);The Wizard of Oz: An IMAX 3D Experience (Picturehouse, September 2013);Young Detective Dee: Rise of the Sea Dragon: An IMAX3D Experience (Huayi Bros., September 2013, China only);Metallica Through the Never: An IMAX 3D Experience (Warner Bros. Pictures, September 2013);Gravity: An IMAX 3D Experience (Warner Bros. Pictures, October 2013); Stalingrad: An IMAX 3D Experience (AR Films, October 2013, Russia and the CIS only); Captain Phillips: The IMAX Experience (Sony Pictures, October 2013);The Young and Prodigious T.S. Spivet: An IMAX 3D Experience (EpithÈte Films., October 2013, France only);Thor: The Dark World: An IMAX3D Experience (Walt Disney Pictures, October 2013, select international markets);Ender's Game: The IMAX Experience (Lionsgate, November 2013);The Hunger Games: Catching Fire: The IMAX Experience (Lionsgate, November 2013); The Hobbit: The Desolation of Smaug: An IMAX 3D Experience (Warner Bros. Pictures, December 2013); Dhoom 3: The IMAX Experience (Yash Raj Films, December 2013, India only); andPolice Story: An IMAX3D Experience (China Vision, December 2013, China only).

IMAX CORPORATION



CONSOLIDATED STATEMENTS OF OPERATIONS

In accordance with United States Generally Accepted Accounting Principles

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







Three Months



Year Ended





Ended December 31,



Ended December 31,





2013



2012*



2013



2012*

Revenues























Equipment and product sales

$

38,014



$

22,405



$

78,663



$

78,161

Services



42,463





33,936





139,464





135,071

Rentals



22,511





18,356





61,293





61,268

Finance income



2,063





1,986





8,142





7,523

Other



-





732





375





732







105,051





77,415





287,937





282,755

Costs and expenses applicable to revenues























Equipment and product sales



16,956





9,811





37,517





37,538

Services



15,483





16,741





68,844





70,570

Rentals



5,286





8,434





16,973





21,402

Other



-





-





-





-







37,725





34,986





123,334





129,510

Gross margin



67,326





42,429





164,603





153,245

Selling, general and administrative expenses



23,305





22,529





82,669





81,560



(including share-based compensation expense of $3.2 million and $11.9 million for the three months and year ended December 31, 2013, respectively (2012 - expense of $2.8 million and $13.1 million, respectively))























Research and development



3,504





3,788





14,771





11,411

Amortization of intangibles



472





174





1,618





706

Receivable provisions, net of recoveries



166





(305)





445





524

Impairment of available-for-sale investment



-





-





-





150

Income from operations



39,879





16,243





65,100





58,894

Interest income



16





12





55





85

Interest expense



(338)





686





(1,345)





(689)

Income from continuing operations before income taxes



39,557





16,941





63,810





58,290

Provision for income taxes



(9,927)





(3,594)





(16,629)





(15,079)

Loss from equity-accounted investments



(1,759)





(324)





(2,757)





(1,362)

Income from continuing operations



27,871





13,023





44,424





41,849

Net loss from discontinued operations



(42)





(140)





(309)





(512)

Net Income

$

27,829



$

12,883



$

44,115



$

41,337



























Net income per share - Basic:

























Net income per share from continuing operations

$

0.41



$

0.20



$

0.66



$

0.64



Net loss per share from discontinued operations



-





-





-





(0.01)





$

0.41



$

0.20



$

0.66



$

0.63

Net income per share - Diluted:

























Net income per share from continuing operations

$

0.40



$

0.19



$

0.64



$

0.62



Net loss per share from discontinued operations



-





-





-





(0.01)





$

0.40



$

0.19



$

0.64



$

0.61



























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

























Basic



67,696





66,264





67,151





65,854



Fully Diluted



69,334





68,281





68,961





67,933





















































Additional Disclosure:























Depreciation and amortization(1)

$

8,145



$

8,084



$

37,172



$

32,788



(1)

Includes $0.1 million and $0.5 million of amortization of deferred financing costs charged to interest expense for the three months and year ended December 31, 2013 (2012 - less than $0.1 million and $0.2 million respectively).





*

Includes a reclass of the Company's owned and operated Nyack theater from continuing operations to discontinued operations.












IMAX CORPORATION

CONSOLIDATED BALANCE SHEETS

In accordance with United States Generally Accepted Accounting Principles

(In thousands of U.S. dollars)















































As at December 31,





2013



2012













Assets













Cash and cash equivalents



$

29,546



$

21,336

Accounts receivable, net of allowance for doubtful accounts of $887 (December 31, 2012$1,564)



73,074





42,007

Financing receivables





107,110





94,193

Inventories





9,825





15,794

Prepaid expenses





3,602





3,833

Film assets





7,076





3,737

Property, plant and equipment





132,847





113,610

Other assets





27,034





23,963

Deferred income taxes





24,259





36,461

Goodwill





39,027





39,027

Other intangible assets





27,745





27,911

Total assets



$

481,145



$

421,872















Liabilities













Bank indebtedness



$

-



$

11,000

Accounts payable





19,396





15,144

Accrued and other liabilities





65,232





68,695

Deferred revenue





76,932





73,954

Total liabilities





161,560





168,793















Commitments and contingencies



























Shareholders' equity













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













Issued and outstanding — 67,841,233 (December 31, 2012 — 66,482,425)





327,313





313,744

Other equity





36,452





28,892

Deficit





(43,051)





(87,166)

Accumulated other comprehensive loss





(1,129)





(2,391)

Total shareholders' equity





319,585





253,079

Total liabilities and shareholders' equity



$

481,145



$

421,872



IMAX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

In accordance with United States Generally Accepted Accounting Principles

(In thousands of U.S. dollars)





Years Ended December 31,





2013



2012*



Cash provided by (used in):











Operating Activities













Net income

$

44,115



$

41,337





Net loss from discontinued operations



309





512



Adjustments to reconcile net income to cash from operations:















Depreciation and amortization



37,172





32,788





Write-downs, net of recoveries



1,336





1,607





Change in deferred income taxes



12,899





14,724





Stock and other non-cash compensation



12,685





14,220





Unrealized foreign currency exchange loss (gain)



1,183





(329)





Gain on curtailment of postretirement benefits



(2,185)





-





Loss from equity-accounted investments



2,757





1,362



Investment in film assets



(20,935)





(16,817)



Changes in other non-cash operating assets and liabilities



(33,755)





(15,262)



Net cash used in operating activities from discontinued operations



(548)





(512)





Net cash provided by operating activities



55,033





73,630



















Investing Activities













Purchase of property, plant and equipment



(13,016)





(6,055)



Investment in joint revenue sharing equipment



(22,775)





(23,257)



Investment in new business ventures



(4,000)





(381)



Acquisition of other intangible assets



(2,486)





(5,826)





Net cash used in investing activities



(42,277)





(35,519)



















Financing Activities













Increase in bank indebtedness



12,000





9,917



Repayment of bank indebtedness



(23,000)





(54,000)



Common shares issued - stock options exercised



8,970





8,920



Proceeds from disgorgement of stock sale profits



-





314



Credit Facility amendment fees paid



(2,151)





-



Share issuance expenses



(202)





-





Net cash used in financing activities



(4,383)





(34,849)



















Effects of exchange rate changes on cash



(163)





(64)



















Increase in cash and cash equivalents during year



8,210





3,198



















Cash and cash equivalents, beginning of year



21,336





18,138



















Cash and cash equivalents, end of year

$

29,546



$

21,336










*

Includes a reclass of the Company's owned and operated Nyack theater from continuing operations to discontinued operations.



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 is comprised of the design, manufacture, sale or lease IMAX theater projection system equipment. The theater system maintenance segment consists of the maintenance of IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment is comprised of the installation IMAX theater projection system equipment to an exhibitor in exchange for a certain percentage of box-office receipts, concession revenue and in some cases a small upfront or initial payment. The film production and IMAX DMR segment is comprised of the production of films and 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 includes the provision of 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



Year Ended







Ended December 31,



Ended December 31,









2013





2012(*)



2013



2012(*)

Revenue























IMAX Theater Systems

























IMAX Systems



























Sales and sales-type leases

$

32,623



$

20,237



$

65,944



$

69,988





Ongoing rent, fees, and finance income



4,134





4,105





14,245





13,417





Other



3,838





3,802





11,182





13,019









40,595





28,144





91,371





96,424



Theater system maintenance



8,134





7,751





31,978





28,629



Joint revenue sharing arrangements



24,458





17,049





64,130





57,526





























Film

























Production and IMAX DMR



28,642





19,245





83,496





78,050



Film distribution and post-production



3,222





5,226





16,962





22,126









31,864





24,471





100,458





100,176

Total

$

105,051



$

77,415



$

287,937



$

282,755





























Gross margins























IMAX Theater Systems

























IMAX systems(1)



























Sales and sales-type leases

$

19,262



$

11,715



$

35,652



$

36,974





Ongoing rent, fees, and finance income



3,630





4,055





13,388





13,271





Other



(273)





398





102





1,057









22,619





16,168





49,142





51,302



Theater system maintenance



2,664





2,848





12,096





10,970



Joint revenue sharing arrangements(1)



17,769





8,968





44,565





37,308





























Film

























Production and IMAX DMR(1)



23,344





13,641





56,088





49,355



Film distribution and post-production



930





804





2,712





4,310









24,274





14,445





58,800





53,665

Total

$

67,326



$

42,429



$

164,603



$

153,245








(1)

IMAX systems include marketing and commission costs of $1.5 million and $2.5 million for the three and twelve months ended December 31, 2013, respectively (2012 — $0.6 million and $2.7 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.6 million and $3.6 million for the three and twelve months ended December 31, 2013, respectively (2012 — $1.3 million and $3.4 million, respectively). Production and DMR segment margins include marketing costs of $1.1 million and $4.2 million for the three and twelve months ended December 31, 2013, respectively (2012 — $1.1 million and $3.3 million, respectively). Distribution segment margins include marketing costs of $0.2 million and $0.4 million for the three and twelve months ended December 31, 2013, respectively (2012 — $0.3 million and $1.5 million, respectively).



*



Includes a reclass of the Company's owned and operated Nyack theater from continuing operations to discontinued operations.



IMAX CORPORATION

OTHER INFORMATION

(In thousands of U.S. dollars)


Non-GAAP Financial Measures:

In this release, the Company presents adjusted EBITDA, adjusted net income and adjusted net income per diluted share as supplemental measures of performance of the Company, which are not recognized under United States generally accepted accounting principles ("GAAP"). The Company presents adjusted EBITDA, 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 its net income. 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 EBITDA, adjusted net income and adjusted net income per diluted share should be considered in addition to, and not as a substitute for, net income and other measures of financial performance reported in accordance with GAAP.

Adjusted EBITDA is calculated on a basis consistent with the Company's Credit Facility, which refers to Adjusted EBITDA as EBITDA. The Credit Facility provides that the Company will be required to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of not less than 1.1:1. The Company will also be required to maintain minimum EBITDA (as defined in the Credit Agreement) of $80.0 million on December 31, 2013, which increases to $90.0 million on December 31, 2014, and $100.0 million on December 31, 2015. The Company must also maintain a Maximum Total Leverage Ratio (as defined in the Credit Agreement) of 2.25:1 on December 31, 2013, which requirement decreases to 2.0:1 on December 31, 2014, and 1.75:1 on December 31, 2015. The ratio of total debt to EBITDA was nil:1 as at December 31, 2013, 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 $nil. EBITDA is calculated as follows:




















For the



For the





3 months ended



12 months ended



December 31, 2013



December 31, 2013

(In thousands of U.S. Dollars)











Net income

$

27,829



$

44,115

Add:













Loss from equity-accounted investments



1,759





2,757



Provision for income taxes(1)



9,906





16,470



Interest expense, net of interest income



321





1,290



Depreciation and amortization, including film asset amortization



8,011





36,685



Write-downs, net of recoveries and receivable provisions



1,057





1,336



Stock and other non-cash compensation



3,337





12,685



Gain on curtailment of postretirement benefits



-





(2,185)



Adjusted EBITDA

$

52,220



$

113,153









(1)

Includes a tax recovery in discontinued operations of less than $0.1 million and $0.2 million for the three and twelve months ended December 31, 2013, respectively.



IMAX CORPORATION

OTHER INFORMATION

(in thousands of U.S. dollars)


Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended December 31, 2013 vs. 2012:

The Company reported net income of $27.8 million or $0.41 per basic share and $0.40 per diluted share for the fourth quarter of 2013 as compared to $12.9 million or $0.20 per basic share and $0.19 per diluted share for the fourth quarter of 2012. Net income for the quarter includes a $3.2 million charge or $0.04 per diluted share (2012 – $2.9 million or $0.04 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 $30.8 million or $0.44 per diluted share in the fourth quarter of 2013 as compared to adjusted net income of $15.7 million or $0.23 per diluted share for the fourth quarter of 2012. A reconciliation of net income, the most directly comparable U.S. GAAP measure, to adjusted net income and adjusted net income per diluted share is presented in the table below:






Three Months Ended



Three Months Ended





December 31, 2013



December 31, 2012





Net Income



Diluted EPS



Net Income



Diluted EPS

Reported

$

27,829



$

0.40



$

12,883



$

0.19

Adjustments:

























Stock-based compensation



3,156





0.04





2,861





0.04



Tax impact on item listed above



(185)





-





(74)





-

Adjusted

$

30,800



$

0.44



$

15,670



$

0.23



























Weighted average diluted shares outstanding









69,334











68,281




Adjusted Net Income and Adjusted Diluted Per Share Calculations – Year Ended December 31, 2013 vs. 2012:

The Company reported net income of $44.1 million or $0.66 per basic share and $0.64 per diluted share for the year ended December 31, 2013 as compared to net income of $41.3 million or $0.63 per basic share and $0.61 per diluted share for the year ended December 31, 2012. Net income for the year ended December 31, 2013 includes an $11.9 million charge or $0.17 per diluted share (2012 — $13.1 million or $0.19 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 $55.7 million or $0.81 per diluted share for the year ended December 31, 2013 as compared to adjusted net income of $54.3 million or $0.80 per diluted share for the year ended December 31, 2012. A reconciliation of net income, the most directly comparable U.S. GAAP measure, to adjusted net income and adjusted net income per diluted share is presented in the table below:










Year Ended



Year Ended





December 31, 2013



December 31, 2012





Net Income



Diluted EPS



Net Income



Diluted EPS

Net income

$

44,115



$

0.64



$

41,337



$

0.61

Add:

























Stock-based compensation



11,928





0.17





13,113





0.19



Tax impact on items listed above



(344)





-





(160)





-

Adjusted net income

$

55,699



$

0.81



$

54,290



$

0.80



























Weighted average diluted shares outstanding









68,961











67,933



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. 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



12 months ended



December 31, 2013



December 31, 2013

(In thousands of U.S. Dollars)











Net cash provided by operating activities

$

22,058



$

55,033

Net cash (used in) investing activities



(15,435)





(42,277)

Free cash flow

$

6,623



$

12,756




SOURCE IMAX Corporation


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