IMAX CORPORATION
Exhibit 99.1
IMAX CORPORATION
2525 Speakman Drive
Mississauga, Ontario, Canada L5K 1B1
Tel: (905) 403-6500 Fax: (905) 403-6450
www.imax.com
IMAX CORPORATION REPORTS THIRD QUARTER 2012 FINANCIAL RESULTS
HIGHLIGHTS
| • | Operating leverage of business drives strong financial results |
| • | Q3 2012 Revenues increased 20% to $80.7 million |
| • | Adjusted EPS increased 86% to $0.26 and Adjusted EBITDA grew 59% to $34.0 million in the third quarter |
| • | Free Cash Flow generation of $30.3 million in the quarter |
| • | Maintaining full year 2012 install guidance of approximately 110 new theatre installations and issuing full year 2013 guidance of 110 to 125 new theatre installations |
LOS ANGELES, CA – October 25, 2012 – IMAX Corporation (NYSE:IMAX; TSX:IMX)today reported strong financial results for the third quarter of 2012 driven by operating leverage and continued theatre network growth globally, with 41 signings and 33 theatre installations in the quarter. Third quarter 2012 revenues were $80.7 million, adjusted EBITDA as calculated in accordance with the Company’s Credit Facility was $34.0 million, adjusted net income was $17.9 million, or $0.26 per diluted share, and reported net income was $15.0 million, or $0.22 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.
“Our strong quarterly financial results once again demonstrate how much the IMAX business model has evolved,” said IMAX Chief Executive Officer Richard L. Gelfond. “We believe IMAX has become a story of growth and operating leverage, and our pipeline for future theatre deals remains robust. Our view is that we have reached a point of critical mass where our portfolio approach to our film slate combined with our global network expansion is driving scalability in the business.”
“We are also seeing an increase in demand from filmmakers who want to take advantage of our differentiation opportunities, whether it be using our IMAX cameras, or specially formatting their movies for IMAX, or using an early release window in IMAX to further promote their film,” Gelfond continued. “This ability to work closely with studios and directors, taken together with our strong brand and our end-to-end approach to our business, continues to set us apart and positions us well to create a unique experience that consumers cannot get anywhere else.”
Third Quarter Segment Results
| • | IMAX posted third quarter 2012 revenues of $80.7 million, compared to $67.5 million in the same period last year |
| • | IMAX systems revenue was $25.4 million in the quarter, compared to $20.6 million in the third quarter of 2011, primarily reflecting the installation of 14 full, new theatre systems under sales and sales-type lease arrangements in the most recent third quarter, compared to 11 full, new theatre systems in the third quarter of 2011. The Company also installed 3 digital system upgrades under sales or sales-type lease arrangements in the third quarter of 2012, compared to 4 upgrades in the third quarter of 2011 |
| • | Revenue from joint revenue sharing arrangements increased 31.9% to $13.2 million, compared to $10.0 million in the prior-year period. During the quarter, the Company installed 14 new theatres under joint revenue sharing arrangements, compared to 14 in the year-ago period. The Company ended the third quarter of 2012 with 287 theatres operating under joint revenue sharing arrangements, as compared to 218 theatres at the end of the third quarter of 2011 |
| • | Production and IMAX DMR® (Digital Re-Mastering) revenues increased 35.6% to $25.2 million in the third quarter of 2012 from $18.6 million in the third quarter of 2011. Gross box office from DMR titles was $173.2 million in the third quarter of 2012, compared to $149.5 million in the third quarter of 2011. The average DMR box office per screen in the third quarter of 2012 was $311,700, compared to $355,500 in the third quarter of 2011 |
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Network Growth and Guidance Update
In the third quarter of 2012, the Company signed contracts for 41 theatres, of which 32 were new systems, and installed 33 theatres, of which 28 were new systems and 5 were digital upgrades.
The Company continues to expect that approximately 110 new theatre systems (excluding digital upgrades) will be installed during the full year of 2012, which implies that approximately 46 new theatre systems (excluding digital upgrades) will be installed in the fourth quarter of 2012. The Company updated its annual installation guidance to a more comprehensive definition which includes scheduled installations from backlog as well as the Company’s estimate of installations from arrangements that will sign and install within a given year. Under this definition, the Company is issuing installation guidance for 2013 of an estimated 110 to 125 new theatre systems (excluding digital upgrades). The Company cautions that theatre system installations can slip from period to period in the course of the Company’s business, usually for reasons beyond its control.
The total IMAX® theatre network consisted of 689 systems at the end of the quarter, of which 556 were in commercial multiplexes. There were 285 theatre systems in backlog as of Sept. 30, 2012, compared to 280 theatre systems in backlog as of June 30, 2012 and 295 systems in backlog as of Sept. 30, 2011. For a breakdown of theatre system signings, installations and backlog by type, please see the end of this press release.
“We believe that IMAX’s fundamentals have never been stronger,” Gelfond concluded. “The healthy level of business activity is evidenced by our signings and installations this quarter, and we continue to be encouraged by the pace and quality of discussions regarding future theatre deals. IMAX has created a truly differentiated brand and entertainment offering that is being embraced by exhibitors, studios, filmmakers, and—most importantly—by moviegoers around the world.”
Conference Call
The Company will host a conference call today at 8:30 AM ET to discuss its third quarter 2012 financial results. To access the call via telephone, interested parties should dial (866) 321-6651 approximately 5 to 10 minutes before it begins. International callers should dial (416) 642-5212. The participant passcode for the call is 9337410. This call is also being webcast by Thomson Financial and can be accessed on the ‘Investor Relations’ section of www.imax.com. 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, or (647) 436-0148 for international callers. The participant passcode for the telephone replay is 9337410.
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 Sept. 30, 2012, there were 689 IMAX theatres (556 commercial multiplex, 20 commercial destination and 113 institutional) in 52 countries.
IMAX®, IMAX® 3D, IMAX DMR®, Experience It In IMAX®, An IMAX 3D Experience®, The IMAX Experience® and IMAX Is Believing® 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).
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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, general economic, market or business conditions; including the length and severity of the current economic downturn, 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; the failure to convert theater system backlog into revenue; the failure to respond to change and advancements in digital technology; risks related to the acquisition of AMC Entertainment Holdings, Inc. by Dalian Wanda Group Co., Ltd.; risks related to the Company’s implementation of a new enterprise resource planning (“ERP”) system; risks related to new business initiatives; risks associated with investments
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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; 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 foreign currency transactions; risks related to the Company’s prior restatements and the related litigation; and other factors, many of which are beyond the control of the Company. These factors and other risks and uncertainties are discussed in IMAX’s most recent Annual Report on Form 10-K and most recent Quarterly Reports on Form 10-Q.
For additional information please contact:
Investors: IMAX Corporation, New York Teri Loxam/Blaire Lomasky 212-821-0100 tloxam@imax.com blomasky@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 |
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Additional Information
2012 DMR Films Announced to Date:
To date, IMAX has announced 31 DMR titles that will be released in the IMAX theatre network in 2012. Films to run throughout the remainder of 2012 include:
| • | Paranormal Activity 4: TheIMAX Experience (Paramount Pictures, October 2012); |
| • | Tai Chi Hero: AnIMAX 3D Experience(Huayi Brothers, October 2012, Asia only); |
| • | Cloud Atlas: TheIMAX Experience(WB, October 2012); |
| • | Skyfall: TheIMAX Experience(Sony, November 2012); |
| • | The Twilight Saga: Breaking Dawn—Part 2: TheIMAX Experience(Lionsgate, November 2012, UK and select international markets only) |
| • | Back to 1942: TheIMAX Experience (Huayi Brothers, November 2012, Asia only); |
| • | CZ12: The IMAXExperience (JCE Entertainment Ltd., Huayi Brothers & Emperor Motion Pictures, December 2012, Asia only); and |
| • | The Hobbit: An Unexpected Journey: AnIMAX 3D Experience(WB, December 2012). |
2013 DMR Films Announced to Date:
To date, IMAX has announced 10 titles to be released in 2013. The Company remains in discussions with virtually every major studio regarding future titles and expects the total number of titles in 2013 to be similar to that in 2012.
| • | Hansel & Gretel: Witch Hunters: AnIMAX 3D Experience(Paramount, January 2013); |
| • | Jack the Giant Killer: An IMAX 3DExperience(WB, March 2013); |
| • | Oblivion: TheIMAX Experience (Universal, April 2013); |
| • | Star Trek: Into Darkness: AnIMAX3D Experience(Paramount, May 2013); |
| • | Man of Steel: TheIMAX Experience(WB, June 2013); |
| • | Gravity: An IMAX 3DExperience(WB, September 2013); |
| • | Stalingrad: AnIMAX 3D Experience(AR Films, October 2013, Russia and the CIS only); |
| • | The Hunger Games: Catching Fire: TheIMAX Experience(Lionsgate, November 2013); |
| • | The Hobbit: The Desolation of Smaug: AnIMAX 3D Experience(WB, December 2013); and |
| • | Dhoom 3: TheIMAX Experience(Yash Raj Films, 2013, India only). |
Theatre Network Details:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| Theatre System Signings: | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Full new sales and sales-type lease arrangements | 4 | 10 | 32 | 46 | ||||||||||||
New joint revenue sharing arrangements | 28 | 18 | 61 | 120 | ||||||||||||
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Total new theatres | 32 | 28 | 93 | 166 | ||||||||||||
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Upgrades of IMAX theatre systems | 9 | (1) | 2 | 11 | 17 | |||||||||||
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Total Theatre Signings | 41 | 30 | 104 | 183 | ||||||||||||
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| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| Theatre System Installations: | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Full new sales and sales-type lease arrangements | 14 | 11 | 33 | 33 | ||||||||||||
New joint revenue sharing arrangements | 14 | 14 | 31 | 47 | ||||||||||||
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Total new theatres | 28 | 25 | 64 | 80 | ||||||||||||
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Upgrades and other | 5 | 4 | 15 | 33 | ||||||||||||
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Total Theatre Installations | 33 | 29 | 79 | 113 | ||||||||||||
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| As of September 30, | ||||||||||||||||
| Theatre Backlog: | 2012 | 2011 | ||||||||||||||
New sales and sales-type lease arrangements | 133 | 137 | ||||||||||||||
New joint revenue sharing arrangements | 149 | 148 | ||||||||||||||
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Total new theatres | 282 | 285 | ||||||||||||||
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Upgrades under sales and sales-type lease arrangements | 3 | 10 | ||||||||||||||
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Total Theatres in Backlog | 285 | 295 | ||||||||||||||
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| (1) | Includes three IMAX theatres acquired from another existing customer that had been operating under a joint revenue sharing arrangement. These theaters were purchased from the Company under a sales arrangement. |
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IMAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
In accordance with United States Generally Accepted Accounting Principles
(In thousands of U.S. dollars, except per share amounts)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenues | ||||||||||||||||
Equipment and product sales | $ | 24,327 | $ | 18,378 | $ | 55,756 | $ | 58,359 | ||||||||
Services | 40,316 | 35,104 | 102,312 | 80,371 | ||||||||||||
Rentals | 14,013 | 11,350 | 42,912 | 25,416 | ||||||||||||
Finance income | 2,055 | 1,581 | 5,537 | 4,409 | ||||||||||||
Other | — | 1,075 | — | 1,325 | ||||||||||||
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| 80,711 | 67,488 | 206,517 | 169,880 | |||||||||||||
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Costs and expenses applicable to revenues | ||||||||||||||||
Equipment and product sales | 10,652 | 8,083 | 27,727 | 28,595 | ||||||||||||
Services | 21,107 | 19,113 | 55,378 | 48,015 | ||||||||||||
Rentals | 4,202 | 3,468 | 12,968 | 9,478 | ||||||||||||
Other | — | 386 | — | 406 | ||||||||||||
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| 35,961 | 31,050 | 96,073 | 86,494 | |||||||||||||
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Gross margin | 44,750 | 36,438 | 110,444 | 83,386 | ||||||||||||
Selling, general and administrative expenses | 19,326 | 19,440 | 58,713 | 55,778 | ||||||||||||
Provision for arbitration award | — | — | — | 2,055 | ||||||||||||
Research and development | 2,528 | 2,041 | 7,623 | 6,026 | ||||||||||||
Amortization of intangibles | 166 | 113 | 532 | 341 | ||||||||||||
Receivable provisions, net of recoveries | 241 | 408 | 829 | 767 | ||||||||||||
Asset impairments | — | 8 | — | 8 | ||||||||||||
Impairment of available-for-sale investment | — | — | 150 | — | ||||||||||||
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Income from operations | 22,489 | 14,428 | 42,597 | 18,411 | ||||||||||||
Interest income | 22 | 13 | 73 | 44 | ||||||||||||
Interest expense | (373 | ) | (431 | ) | (1,375 | ) | (1,425 | ) | ||||||||
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Income from continuing operations before income taxes | 22,138 | 14,010 | 41,295 | 17,030 | ||||||||||||
Provision for income taxes | (6,814 | ) | (5,179 | ) | (11,599 | ) | (6,504 | ) | ||||||||
Loss from equity-accounted investments | (334 | ) | (439 | ) | (1,038 | ) | (1,312 | ) | ||||||||
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Net income | $ | 14,990 | $ | 8,392 | $ | 28,658 | $ | 9,214 | ||||||||
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Net income per share—basic & diluted: | ||||||||||||||||
Net income per share—basic | $ | 0.23 | $ | 0.13 | $ | 0.44 | $ | 0.14 | ||||||||
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Net income per share—diluted | $ | 0.22 | $ | 0.12 | $ | 0.42 | $ | 0.14 | ||||||||
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Weighted average number of shares outstanding (000’s): | ||||||||||||||||
Basic | 65,930 | 64,654 | 65,718 | 64,406 | ||||||||||||
Fully Diluted | 68,301 | 67,756 | 68,187 | 68,110 | ||||||||||||
Additional Disclosure: | ||||||||||||||||
Depreciation and amortization(1) | $ | 8,038 | $ | 5,838 | $ | 24,704 | $ | 18,020 | ||||||||
| (1) | Includes less than $0.1 million and $0.1 million of amortization of deferred financing costs charged to interest expense for the three and nine months ended September 30, 2012, respectively (September 30, 2011 — less than $0.1 million and $0.3 million , respectively). |
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IMAX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In accordance with United States Generally Accepted Accounting Principles
(in thousands of U.S. dollars)
| As at September 30, 2012 | As at December 31, 2011 | |||||||
| (unaudited) | ||||||||
Assets | ||||||||
Cash and cash equivalents | $ | 29,450 | $ | 18,138 | ||||
Accounts receivable, net of allowance for doubtful accounts of $1,636 (December 31, 2011 — $1,840) | 36,147 | 46,659 | ||||||
Financing receivables | 91,533 | 86,714 | ||||||
Inventories | 20,841 | 19,747 | ||||||
Prepaid expenses | 4,081 | 3,126 | ||||||
Film assets | 3,488 | 2,388 | ||||||
Property, plant and equipment | 109,115 | 101,253 | ||||||
Other assets | 25,480 | 14,238 | ||||||
Deferred income taxes | 40,164 | 50,033 | ||||||
Goodwill | 39,027 | 39,027 | ||||||
Other intangible assets | 27,709 | 24,913 | ||||||
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Total assets | $ | 427,035 | $ | 406,236 | ||||
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Liabilities | ||||||||
Bank indebtedness | $ | 30,000 | $ | 55,083 | ||||
Accounts payable | 15,389 | 28,985 | ||||||
Accrued and other liabilities | 63,405 | 54,803 | ||||||
Deferred revenue | 79,660 | 74,458 | ||||||
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Total liabilities | 188,454 | 213,329 | ||||||
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Commitments, contingencies and guarantees | ||||||||
Shareholders’ equity | ||||||||
Capital stock, common shares — no par value. Authorized — unlimited number. | ||||||||
Issued and outstanding — 65,997,319 (December 31, 2011 — 65,052,740) | 310,105 | 303,395 | ||||||
Other equity | 26,587 | 17,510 | ||||||
Deficit | (97,008 | ) | (125,666 | ) | ||||
Accumulated other comprehensive loss | (1,103 | ) | (2,332 | ) | ||||
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Total shareholders’ equity | 238,581 | 192,907 | ||||||
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Total liabilities and shareholders’ equity | $ | 427,035 | $ | 406,236 | ||||
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IMAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In accordance with United States Generally Accepted Accounting Principles
(In thousands of U.S. dollars)
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2012 | 2011 | |||||||
Cash provided by (used in): | ||||||||
Operating Activities | ||||||||
Net income | $ | 28,658 | $ | 9,214 | ||||
Adjustments to reconcile net income to cash from operations: | ||||||||
Depreciation and amortization | 24,704 | 18,020 | ||||||
Write-downs, net of recoveries | 1,516 | 841 | ||||||
Change in deferred income taxes | 9,545 | 5,694 | ||||||
Stock and other non-cash compensation | 10,781 | 9,595 | ||||||
Provision for arbitration award | — | 2,055 | ||||||
Unrealized foreign currency exchange (gain) loss | (152 | ) | 4,270 | |||||
Loss from equity-accounted investments | 1,038 | 1,312 | ||||||
Gain on non-cash contribution to equity-accounted investees | — | (404 | ) | |||||
Investment in film assets | (13,508 | ) | (8,814 | ) | ||||
Changes in other non-cash operating assets and liabilities | (8,672 | ) | (48,192 | ) | ||||
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Net cash provided by (used in) operating activities | 53,910 | (6,409 | ) | |||||
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Investing Activities | ||||||||
Purchase of property, plant and equipment | (2,599 | ) | (4,409 | ) | ||||
Investment in joint revenue sharing equipment | (15,174 | ) | (22,432 | ) | ||||
Investment in new business ventures | (381 | ) | (1,571 | ) | ||||
Acquisition of other intangible assets | (5,046 | ) | (4,008 | ) | ||||
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Net cash used in investing activities | (23,200 | ) | (32,420 | ) | ||||
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Financing Activities | ||||||||
Increase in bank indebtedness | 9,917 | 59,583 | ||||||
Repayment of bank indebtedness | (35,000 | ) | (37,500 | ) | ||||
Credit facility amendment fees paid | — | (297 | ) | |||||
Common shares issued - stock options exercised | 5,831 | 5,635 | ||||||
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Net cash (used in) provided by financing activities | (19,252 | ) | 27,421 | |||||
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Effects of exchange rate changes on cash | (146 | ) | (139 | ) | ||||
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Increase (decrease) in cash and cash equivalents during the period | 11,312 | (11,547 | ) | |||||
Cash and cash equivalents, beginning of period | 18,138 | 30,390 | ||||||
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Cash and cash equivalents, end of period | $ | 29,450 | $ | 18,843 | ||||
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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 of 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 of 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 Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenue | ||||||||||||||||
IMAX systems | ||||||||||||||||
Sales and sales-type leases | $ | 21,937 | $ | 17,593 | $ | 49,751 | $ | 54,758 | ||||||||
Ongoing rent, fees, and finance income | 3,421 | 3,056 | 9,312 | 8,620 | ||||||||||||
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| 25,358 | 20,649 | 59,063 | 63,378 | |||||||||||||
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Theater system maintenance | 7,042 | 6,348 | 20,878 | 18,270 | ||||||||||||
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Joint revenue sharing arrangements | 13,186 | 9,995 | 40,477 | 22,382 | ||||||||||||
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Films | ||||||||||||||||
Production and IMAX DMR | 25,223 | 18,600 | 58,805 | 38,280 | ||||||||||||
Distribution | 3,259 | 4,965 | 11,122 | 12,857 | ||||||||||||
Post-production | 1,646 | 3,023 | 5,778 | 5,686 | ||||||||||||
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| 30,128 | 26,588 | 75,705 | 56,823 | |||||||||||||
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Other | 4,997 | 3,908 | 10,394 | 9,027 | ||||||||||||
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Total | $ | 80,711 | $ | 67,488 | $ | 206,517 | $ | 169,880 | ||||||||
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Gross margins | ||||||||||||||||
IMAX systems(1) | ||||||||||||||||
Sales and sales-type leases | $ | 12,575 | $ | 10,329 | $ | 25,259 | $ | 28,163 | ||||||||
Ongoing rent, fees, and finance income | 3,381 | 2,965 | 9,216 | 8,306 | ||||||||||||
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| 15,956 | 13,294 | 34,475 | 36,469 | |||||||||||||
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Theater system maintenance | 2,828 | 1,944 | 8,122 | 6,912 | ||||||||||||
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Joint revenue sharing arrangements(1) | 9,286 | 6,733 | 28,340 | 13,792 | ||||||||||||
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Films | ||||||||||||||||
Production and IMAX DMR(1) | 15,426 | 12,015 | 35,714 | 21,235 | ||||||||||||
Distribution(1) | 587 | 1,418 | 2,133 | 2,531 | ||||||||||||
Post-production | 103 | 808 | 1,373 | 2,804 | ||||||||||||
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| 16,116 | 14,241 | 39,220 | 26,570 | |||||||||||||
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Other | 564 | 226 | 287 | (357 | ) | |||||||||||
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Total | $ | 44,750 | $ | 36,438 | $ | 110,444 | $ | 83,386 | ||||||||
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| (1) | IMAX systems include commission costs of $0.9 million and $2.1 million for the three and nine months ended September 30, 2012, respectively (2011 — $0.6 million and $1.4 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.1 million and $2.1 million for the three and nine months ended September 30, 2012, respectively (2011 — $1.3 million and $3.6 million, respectively). Production and DMR segment margins include marketing costs of $0.5 million and $2.2 million for the three and nine months ended September 30, 2012, respectively (2011 — $0.7 million and $1.9 million, respectively). Distribution segment margins include a marketing cost recovery of less than $0.1 million and an expense of $1.2 million for the three and nine months ended September 30, 2012, respectively (2011 — expense of $0.1 million and $1.7 million, respectively). |
8
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, adjusted net income per diluted share and free cash flow 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, adjusted net income per diluted share, and free cash flow 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 and a provision for an arbitration award (net of any related taxes) 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, adjusted net income per diluted share and free cash flow 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:
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 ratio of funded debt (as defined in the Credit Agreement) to EBITDA (as defined in the Credit Agreement) of not more than 2:1. The Company will also be required to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of not less than 1.1:1.0. At all times under the terms of the Credit Facility, the Company is required to maintain minimum Excess Availability of not less than $5.0 million and minimum Cash and Excess Availability of not less than $15.0 million. The ratio of funded debt to EBITDA was 0.30:1 as at September 30, 2012, where Funded Debt (as defined in the Credit Agreement) is the sum of all obligations evidenced by notes, bonds, debentures or similar instruments and was $30.0 million. EBITDA is calculated as follows:
| (In thousands of U.S. Dollars) | For the 3 months ended September 30, 2012 | For the 12 months ended September 30, 2012(1) | ||||||
Net income | $ | 14,990 | $ | 34,987 | ||||
Add: | ||||||||
Loss from equity accounted investments | 334 | 1,517 | ||||||
Provision for income taxes | 6,814 | 14,483 | ||||||
Interest expense, net of interest income | 351 | 1,691 | ||||||
Depreciation and amortization, including film asset amortization | 7,995 | 31,676 | ||||||
Write-downs net of recoveries including asset impairments and receivable provisions | 597 | 2,629 | ||||||
Stock and other non-cash compensation | 2,930 | 13,621 | ||||||
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Adjusted EBITDA | $ | 34,011 | $ | 100,604 | ||||
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| (1) | Ratio of funded debt calculated using twelve months ended EBITDA. |
9
IMAX CORPORATION
OTHER INFORMATION
(in thousands of U.S. dollars)
Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended September 30, 2012 vs. 2011:
The Company reported net income of $15.0 million or $0.23 per basic share and $0.22 per diluted share for the third quarter of 2012, as compared to net income of $8.4 million or $0.13 per basic share and $0.12 per diluted share for the third quarter of 2011. Net income for the third quarter of 2012 includes a $2.8 million charge, or $0.04 per diluted share, for stock-based compensation (2011—$0.5 million or $0.01 per diluted share) and the related tax benefit of $0.1 million (2011—$0.5 million or $0.01 per diluted share). Adjusted net income, which consists of net income excluding stock-based compensation expense and the related tax benefit, was $17.9 million, or $0.26 per diluted share, in the third quarter of 2012, as compared to adjusted net income of $9.5 million, or $0.14 per diluted share, for the third quarter of 2011. 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 September 30, 2012 | Three Months Ended September 30, 2011 | |||||||||||||||
| Net Income | Diluted EPS | Net Income | Diluted EPS | |||||||||||||
Reported | $ | 14,990 | $ | 0.22 | $ | 8,392 | $ | 0.12 | ||||||||
Adjustments: | ||||||||||||||||
Stock-based compensation | 2,756 | 0.04 | 519 | 0.01 | ||||||||||||
Tax benefit of items listed above | 114 | — | 549 | 0.01 | ||||||||||||
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Adjusted | $ | 17,860 | $ | 0.26 | $ | 9,460 | $ | 0.14 | ||||||||
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Weighted average diluted shares outstanding | 68,301 | 67,756 | ||||||||||||||
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Adjusted Net Income and Adjusted Diluted Per Share Calculations – Nine Months Ended September 30, 2012 vs. 2011:
The Company reported net income of $28.7 million or $0.44 per basic share and $0.42 per diluted share for the nine months ended September 30, 2012, as compared to net income of $9.2 million or $0.14 per basic and diluted share for the nine months ended September 30, 2011. Net income for the nine months ended September 30, 2012 includes a $10.3 million charge, or $0.15 per diluted share (2011 – $9.0 million or $0.13 per diluted share), for stock-based compensation. Net income for the nine months ended September 30, 2011 also includes a one-time $2.1 million pre-tax charge ($0.03 per diluted share), due to an arbitration award arising from an arbitration proceeding brought against the Company in connection with a discontinued subsidiary. Adjusted net income, which consists of net income excluding the impact of the stock-based compensation expense, the charge for the arbitration award and the related tax impact, was $38.8 million, or $0.57 per diluted share, in the nine months ended September 30, 2012, as compared to adjusted net income of $19.4 million, or $0.28 per diluted share, for the nine months ended September 30, 2011. 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:
| Nine Months Ended September 30, 2012 | Nine Months Ended September 30, 2011 | |||||||||||||||
| Net Income | Diluted EPS | Net Income | Diluted EPS | |||||||||||||
Reported | $ | 28,658 | $ | 0.42 | $ | 9,214 | $ | 0.14 | ||||||||
Add: | ||||||||||||||||
Stock-based compensation | 10,252 | 0.15 | 8,973 | 0.13 | ||||||||||||
Provision for arbitration award | — | — | 2,055 | 0.03 | ||||||||||||
Tax impact on items listed above | (86 | ) | — | (882 | ) | (0.02 | ) | |||||||||
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Adjusted | $ | 38,824 | $ | 0.57 | $ | 19,360 | $ | 0.28 | ||||||||
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Weighted average diluted shares outstanding | 68,187 | 68,110 | ||||||||||||||
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10
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:
| (In thousands of U.S. Dollars) | For the Three Months Ended September 30, 2012 | For the Nine Months Ended September 30, 2012 | ||||||
Net cash provided by operating activities | $ | 34,067 | $ | 53,910 | ||||
Net cash (used in) investing activities | (3,797 | ) | (23,200 | ) | ||||
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Free cash flow | $ | 30,270 | $ | 30,710 | ||||
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11