Prensa

IMAX Corporation Reports Fourth-Quarter And Full-Year 2016 Results
Feb. 23, 2017

NEW YORK, Feb. 23, 2017 /PRNewswire/ -- 

 

HIGHLIGHTS

- Installed 166 new IMAX® theatres during 2016, up 22% vs. prior year, bringing the IMAX theatre network count to 1,215 screens across 75 countries

- Signed agreements for record 319 IMAX theatre systems during 2016, up from 138 signings in 2015

- Ended year with 498 theatres in backlog, up 34% vs. prior year

- Company provides 2017 installation guidance range of approximately 150-155 new systems

- Opened flagship IMAX Virtual Reality Centre in Los Angeles in January of 2017, with an additional five pilot centres signed and scheduled to be open in coming months
 

IMAX Corporation (NYSE:IMAX) today reported fourth-quarter 2016 revenue of $106.9 million and net income attributable to common shareholders of $8.9 million, or $0.13 per diluted share. Full year 2016 revenue was $377.3 million and net income attributable to common shareholders was $28.8 million, or $0.42 per diluted share. Adjusted net income attributable to common shareholders for the fourth quarter and full year was $0.22 per diluted share and $0.73 per diluted share, respectively. For reconciliations of reported results to non-GAAP financial results, and for the definition and reconciliation of Adjusted EBITDA as calculated in accordance with the Company's credit facility, please see the end of this press release.

"2016 was an impressive year for IMAX on several strategic fronts: our footprint grew 15%, we signed a record 319 new theatre agreements, and we further established IMAX as a leader in the entertainment industry through two key growth initiatives – original content and virtual reality," said IMAX CEO Richard L. Gelfond. "We're extremely optimistic on the theatrical side of the business, where demand for IMAX has hit record levels. With a global footprint of 1,215 theatres in 75 countries and a promising blockbuster-driven 2017 film slate that features more IMAX differentiation than any year in our history, we believe we're extremely well positioned for future growth."

Fourth-Quarter 2016 Results

Network Update
During the quarter, the Company installed 73 theatres, of which 70 were for new theatre locations and 3 were upgrades. The Company also signed contracts for 26 theatres in the fourth quarter of 2016. The total IMAX theatre network consisted of 1,215 systems as of Dec. 31, 2016, of which 1,107 were in commercial multiplexes. 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 $246.5 million in the fourth quarter of 2016, compared with $288.4 million in the prior-year period. The average global DMR box office per-screen average in the fourth quarter of 2016 was $233,300, compared with $318,600 in same period last year.

Fourth-Quarter Segment Results

  • Revenue from sales and sales-type leases was $31.0 million in the fourth quarter of 2016, compared with $33.0 million in the fourth quarter of 2015. The Company installed 23 full theatre systems under sales and sales-type lease arrangements in the most recent quarter, compared with the 24 full sales-type theatres the Company installed in the fourth quarter of 2015. The Company also recognized one laser upgrade under a sales-type lease arrangement in the most recent quarter, compared to two in the same period last year. Gross margin for sales and sales-type leases was 58.9% vs. 60.7% in the year ago period, primarily a result of lower margins from the installation of laser-based digital systems. The Company's margins on full, new sales and sales-type leases was 62.6% in the most recent quarter.
     
  • Revenue from joint revenue-sharing arrangements was $24.5 million in the quarter, compared with $31.9 million in the prior-year period. During the quarter, the Company installed 46 new theatres under joint revenue-sharing arrangements, compared with 32 new theatres in the fourth quarter of 2015. The Company had 640 theatres operating under joint revenue-sharing arrangements as of Dec. 31, 2016, as compared to 529 theatres one year prior. Gross margin for joint revenue-sharing arrangements was 61.8%, compared to 67.7% in the prior-year period. Revenue and gross margin results primarily reflected lower box office revenue and FX headwinds.
     
  • Production and DMR revenues were $27.6 million in the fourth quarter of 2016, compared with $31.9 million in the fourth quarter of 2015. Gross margin for the Production and DMR segment was 60.8%, compared to 68.9% in the prior-year period, primarily a result of lower box office revenue, higher marketing costs and FX headwinds.
     
  • Gross margin across all segments in the fourth quarter of 2016 was 51.7%, compared to 60.2% in the fourth quarter of 2015, mainly due to lower box office, upfront costs associated with heightened installation activity and FX headwinds.
     
  • Operating expenses (which includes SG&A and R&D, and excludes stock-based compensation) were $28.7 million in the quarter, compared to $29.2 million in the fourth quarter of 2015 and consistent with guidance disclosed on the Q3 2016 call.

Full-Year 2016 Results
Full-year 2016 revenue was $377.3 million as compared to 2015 revenue of $373.8 million. Reported net income attributable to common shareholders was $28.8 million, or $0.42 per diluted share, as compared to $55.8 million or $0.78 per diluted share in 2015. Adjusted net income attributable to common shareholders was $50.0 million as compared to $73.0 million in 2015, or $0.73 per diluted share as compared to $1.02 per diluted share in 2015 Adjusted EBITDA, as calculated in accordance with the Company's credit facility, was $121.9 million in 2016 as compared to $140.8 million in 2015.  The Company also reported a global 2016 per-screen average of $963,800, as compared to $1,155,800 in the prior year.

The full-year installations total grew to 182 theatre systems, of which 16 were upgrades, compared with 154 and 18, respectively, in the prior-year period. IMAX signed contracts for 319 theatres in 2016, across 28 countries, resulting in 498 theatre systems in backlog as of Dec. 31, 2016, compared to 372 theatre systems in backlog as of Dec. 31, 2015. The Company's top three markets for signings were China, the United States and France. For a breakdown of theatre system signings, installations, network and backlog by type, please see the end of this press release.

"In terms of new business opportunities, we formed a ground-breaking partnership with Marvel and ABC to exclusively launch the first two episodes of the television series Marvel's Inhumans across the global IMAX network ahead of its premiere on ABC and in international markets later this year. We are excited to have an equity interest in the venture and we believe this approach could help facilitate quicker international syndication," Gelfond said.

"We've also taken a giant step forward in establishing location-based VR with the launch of our $50 million VR content fund and several new innovative technology and content partnerships," he continued. "Last month, we opened our flagship pilot IMAX VR Centre in Los Angeles, which has already had more than 7,000 unique, satisfied visitors. We also signed agreements to open five new VR pilot centres in China, the U.K. and the U.S. by year-end. While this venture is still in its pilot phase, we are extremely encouraged by the initial results and look forward to getting the additional locations up and running over the coming months."

Share Buybacks
In 2016, the Company repurchased 3,849,222 common shares under the Company's repurchase program at an average price of $30.25 per share. The retired shares were purchased for $116.5 million. The Company has $46.3 million available under its approved repurchase program.

Supplemental Materials
For more information about our results, please refer to the IMAX Investor Relations website located at www.imax.com/content/investor-relations.

Investor Relations Website and Social Media
On a weekly basis, the Company posts quarter-to-date box office results on the IMAX Investor Relations website located at www.imax.com/content/investor-relations. The Company expects to provide such updates on Friday of each week, although the Company may change this timing without notice. Results will be displayed with a one week lag. In addition, the Company maintains a Twitter account: @IMAX_Investors. The Company intends to use Twitter to disclose the box office information, as well as other information that may be of interest to the Company's investor community.

The information posted on the Company's Investor Relations website and/or via its Twitter account may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the Company's website and its Twitter account in addition to the Company's press releases, SEC filings and public conference calls and webcasts.

Conference Call
The Company will host a conference call today at 4:30 PM ET to discuss its fourth-quarter and full-year 2016 financial results. To access the call via telephone, interested parties in the US and Canada should dial (800) 274-0251 approximately 5 to 10 minutes before the call begins. Other international callers should dial (647) 794-1827. The conference ID for the call is 6312959. A replay of the call will be available via webcast on the IMAX Investor Relations website located at www.imax.com/content/investor-relations or via telephone by dialing (888) 203-1112 (US and Canada), or (647) 436-0148 (international). The Conference ID for the telephone replay is 6312959.

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, 2016, there were 1,215 IMAX theatres (1,107 commercial multiplexes, 16 commercial destinations and 92 institutions) in 75 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, 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 signing of theater system agreements; conditions, changes and developments in the commercial exhibition industry; risks related to currency fluctuations; 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; 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.

For additional information please contact:

Investors:

IMAX Corporation, New York

Jessica Kourakos

212-821-0100

jkourakos@imax.com

 

Michael Mougias

212-821-0187

mmougias@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

     

December 31, 2016

     
  

Year Ended December 31,

  
 

Theater Signings:

2016

 

2015

  
 

Full new sales and sales-type lease arrangements

61

 

55

(1)

 
 

New joint revenue sharing arrangements

253

 

78

  
 

Total new theaters

314

 

133

  
 

Upgrade of IMAX theater systems

5

 

5

  
 

Total Theater Signings

319

 

138

  
       
       
  

Year Ended December 31,

  
 

Theater Installations:

2016

 

2015

  
 

Full new sales and sales-type lease arrangements

56

(2)

56

(2)

 
 

New joint revenue sharing arrangements

109

 

80

  
 

Operating lease arrangements

1

 

-

  
 

Total new theaters

166

 

136

  
 

Upgrade of IMAX theater systems

16

(3)(4)

18

(3)(4)

 
 

Total Theater Installations

182

 

154

  
       
       
  

As of December 31,

  
 

Theater Backlogs:

2016

 

2015

  
 

New sales and sales-type lease arrangements

143

 

160

  
 

New joint revenue sharing arrangements

     
 

Hybrid arrangements

92

 

117

  
 

Traditional arrangements

263

 

95

  
 

Total new theaters

498

(5)(6)

372

(5)(7)

 
       
       
  

As of December 31,

  
 

Theater Network:

2016

 

2015

  
 

Commercial Multiplex Theaters:

     
 

Sales and sales-type lease arrangements

467

 

414

  
 

Joint revenue sharing arrangements

640

 

529

  
 

Total Commercial Multiplex Theaters

1,107

 

943

  
       
 

Commercial Destination Theaters

16

 

19

  
 

Institutional Theaters

92

 

99

  
 

Total Theater Network

1,215

 

1,061

  

______________________

(1)

Includes four signings which replaced theaters under an existing arrangement in backlog.

  

(2)

Includes one used theater system (2015 – one used theater system).

  

(3)

Includes 14 installations of an upgrade to a laser-based digital system, 12 under sales and sales-type lease arrangement and two under joint revenue sharing arrangements (2015 – 16 laser-based digital systems, ten under sales and sales-type lease arrangements, one under a short-term operating lease arrangement and five under joint revenue sharing arrangements).

  

(4)

Includes two installations of an upgrade to a xenon-based digital system under sales arrangements (2015 – two xenon-based digital systems, one under a sales and sales-type lease arrangement and one under a short-term operating lease arrangement).

  

(5)

Includes 20 laser-based digital theater system configurations (2015 – 24), including upgrades. The Company continues to develop and roll out its laser-based digital projection system.

  

(6)

Includes three upgrades to a laser-based digital theater system, in existing IMAX theater locations.

  

(7)

Includes 15 upgrades to a digital theater system, in existing IMAX theater locations (two xenon configurations and 13 laser configurations).

 

 

2017 DMR Films:

To date, the Company has announced the following 26 DMR titles to be released in 2017 to the IMAX theater network. The Company remains in active negotiations with all of the major Hollywood studios, as well as international studios, for additional films to fill out its short and long-term film slate, and anticipates that the number of IMAX DMR films to be released to the IMAX network in 2017 will be similar to the IMAX DMR films released to the IMAX network in 2016.

  • Your Name: The IMAX Experience (Toho Co., Ltd., January 2017);
  • xXx: Return of Xander Cage: The IMAX Experience (Paramount Pictures, January 2017);
  • Resident Evil: The Final Chapter: The IMAX Experience (Sony Pictures, February 2017);
  • Attraction: The IMAX Experience (Art Pictures Studio, January 2017, Russia only);
  • Journey to The West: The Demons Strike Back: The IMAX Experience (Alibaba Pictures Group, January 2017);
  • The Lego Batman Movie: The IMAX Experience (Warner Bros. Pictures, February 2017);
  • Sing: The IMAX Experience (Universal Pictures, February 2017, China and Japan only);
  • Logan: The IMAX Experience (20th Century Fox, March 2017);
  • Kong: Skull Island: The IMAX Experience (Warner Bros. Pictures, March 2017);
  • Beauty and The Beast: The IMAX Experience (Walt Disney Studios, March 2017);
  • Ghost in the Shell: The IMAX Experience (Paramount Pictures, March 2017);
  • The Fate of the Furious: The IMAX Experience (Universal Pictures, April 2017);
  • Guardians of the Galaxy Vol. 2: The IMAX Experience (Walt Disney Studios, May 2017);
  • Pirates of the Caribbean: Dead Men Tell No Tales: The IMAX Experience (Walt Disney Studios, May 2017);
  • Wonder Woman: The IMAX Experience (Warner Bros. Pictures, June 2017);
  • The Mummy: The IMAX Experience (Universal Pictures, June 2017);
  • Transformers: The Last Knight: The IMAX Experience (Paramount Pictures, June 2017);
  • Spider-Man: Homecoming: The IMAX Experience (Sony Pictures-distributed and Marvel Studios and Sony Pictures- produced, July 2017);
  • Dunkirk: The IMAX Experience (Warner Bros. Pictures, July 2017);
  • The Solutrean: The IMAX Experience (Sony Pictures, September 2017);
  • The Lego Ninjago Movie: The IMAX Experience (Warner Bros. Pictures, September 2017);
  • Blade Runner 2049: The IMAX Experience (Warner Bros. Pictures, October 2017);
  • Geostorm: The IMAX Experience (Warner Bros. Pictures, October 2017);
  • Thor: Ragnarök: The IMAX Experience (Walt Disney Studios, November 2017);
  • Justice League: The IMAX Experience (Warner Bros. Pictures, November 2017); and
  • Star Wars: The Last Jedi: The IMAX Experience (Walt Disney Studios, December 2017).

In addition, in conjunction with Marvel and Disney|ABC Television Group, the Company will be co-producing and exclusively premiering the new ABC series "Marvel's Inhumans" in IMAX theaters. The first two episodes of the series are expected to run worldwide exclusively in IMAX theaters for two weeks in September 2017, and several weeks later, the series will premiere on the ABC network. The Company will have an equity participation both in the pilot and in the television series, representing the first time the Company will have an economic interest in a television property.

 

 

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

 

Years Ended

  

Ended December 31,

 

Ended December 31,

  

2016

 

2015

 

2016

 

2015

Revenues

           

Equipment and product sales

$

41,318

 

$

46,113

 

$

122,382

 

$

118,937

Services

 

44,009

  

46,266

  

166,862

  

161,964

Rentals

 

18,777

  

24,645

  

77,315

  

83,651

Finance income

 

2,509

  

2,309

  

9,500

  

9,112

Other

 

300

  

-

  

1,275

  

141

   

106,913

  

119,333

  

377,334

  

373,805

Costs and expenses applicable to revenues

           

Equipment and product sales

 

20,605

  

20,625

  

69,680

  

63,635

Services

 

25,263

  

20,654

  

83,780

  

70,855

Rentals

 

5,719

  

6,171

  

21,086

  

20,027

Other

 

-

  

-

  

110

  

-

   

51,587

  

47,450

  

174,656

  

154,517

Gross margin

 

55,326

  

71,883

  

202,678

  

219,288

Selling, general and administrative expenses

 

32,039

  

32,997

  

124,745

  

115,345

 

(including share-based compensation expense of $8.0 million and $30.5
million for the three months and year ended December 31, 2016, respectively
(2015 - expense of $7.0 million and $21.9 million, respectively))

           

Research and development

 

4,712

  

3,119

  

16,315

  

12,730

Amortization of intangibles

 

542

  

558

  

2,079

  

1,860

Receivable provisions, net of recoveries

 

323

  

43

  

954

  

752

Asset (recoveries) impairments

 

(1,000)

  

235

  

417

  

830

Income from operations

 

18,710

  

34,931

  

58,168

  

87,771

Interest income

 

273

  

241

  

1,490

  

968

Interest expense

 

(480)

  

(491)

  

(1,805)

  

(1,661)

Income from operations before income taxes

 

18,503

  

34,681

  

57,853

  

87,078

Provision for income taxes

 

(6,577)

  

(7,644)

  

(16,212)

  

(20,052)

Gain (loss) from equity-accounted investments, net of tax

 

150

  

(792)

  

(2,321)

  

(2,402)

Net income

 

12,076

  

26,245

  

39,320

  

64,624

Less: net income attributable to non-controlling interests

 

(3,131)

  

(3,752)

  

(10,532)

  

(8,780)

Net income attributable to common shareholders

$

8,945

 

$

22,493

 

$

28,788

 

$

55,844

             

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

         
 

$

0.14

 

$

0.33

 

$

0.43

 

$

0.79

 

$

0.13

 

$

0.32

 

$

0.42

 

$

0.78

             

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

           
 

Basic

 

66,152

  

69,364

  

67,575

  

69,526

 

Fully Diluted

 

66,950

  

70,764

  

68,263

  

71,058

             

Additional Disclosure:

           

Depreciation and amortization(1)

$

12,306

 

$

11,612

 

$

46,485

 

$

42,803

             

(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, 2016 (2015 - $0.4 million and $1.0 million, respectively).

 

 

IMAX CORPORATION

CONSOLIDATED BALANCE SHEETS

In accordance with United States Generally Accepted Accounting Principles

(In thousands of U.S. dollars)

      
      
      
 

As at December 31,

 

2016

 

2015

Assets

     

Cash and cash equivalents

$

204,759

 

$

317,449

Accounts receivable, net of allowance for doubtful accounts of $1,250 (December 31, 2015 — $1,146)

 

96,349

  

97,981

Financing receivables

 

122,125

  

117,231

Inventories

 

42,121

  

38,753

Prepaid expenses

 

6,626

  

6,498

Film assets

 

16,522

  

14,571

Property, plant and equipment

 

245,415

  

218,267

Other assets

 

33,195

  

26,136

Deferred income taxes

 

20,779

  

25,766

Other intangible assets

 

30,416

  

28,950

Goodwill

 

39,027

  

39,027

Total assets

$

857,334

 

$

930,629

      

Liabilities

     

Bank indebtedness

$

27,316

 

$

29,276

Accounts payable

 

19,990

  

23,455

Accrued and other liabilities

 

93,208

  

95,748

Deferred revenue

 

90,266

  

104,993

Total liabilities

 

230,780

  

253,472

      

Commitments and contingencies

     
      

Non-controlling interests

 

4,980

  

3,307

      

Shareholders' equity

     

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

     

66,224,467 — issued and 66,159,902 — outstanding (December 31, 2015 — 69,673,244 — issued and outstanding)

 

439,213

  

448,310

Less: Treasury stock, 64,565 shares at cost (December 31, 2015 – nil)

 

(1,939)

  

-

Other equity

 

177,304

  

163,094

Accumulated (deficit) earnings

 

(47,366)

  

19,930

Accumulated other comprehensive loss

 

(5,200)

  

(7,443)

Total shareholders' equity attributable to common shareholders

 

562,012

  

623,891

Non-controlling interests

 

59,562

  

49,959

Total shareholders' equity

 

621,574

  

673,850

Total liabilities and shareholders' equity

$

857,334

 

$

930,629

 

 

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,

 
   

2016

 

2015

 
        

Cash provided by (used in):

      

Operating Activities

       

Net income

 

$

39,320

 

$

64,624

 

Adjustments to reconcile net income to cash from operations:

       
 

Depreciation and amortization

  

46,485

  

42,803

 
 

Write-downs, net of recoveries

  

5,940

  

3,725

 
 

Change in deferred income taxes

  

4,940

  

(1,336)

 
 

Stock and other non-cash compensation

  

31,586

  

22,379

 
 

Unrealized foreign currency exchange loss

  

462

  

785

 
 

Loss from equity-accounted investments

  

2,685

  

3,838

 
 

Gain on non-cash contribution to equity-accounted investees

  

(364)

  

(1,436)

 

Investment in film assets

  

(22,308)

  

(15,119)

 

Changes in other non-cash operating assets and liabilities

  

(30,874)

  

(36,058)

 
 

Net cash provided by operating activities

  

77,872

  

84,205

 
         

Investing Activities

       

Purchase of property, plant and equipment

  

(15,278)

  

(43,257)

 

Investment in joint revenue sharing equipment

  

(42,910)

  

(28,474)

 

Investment in new business ventures

  

(1,911)

  

(2,000)

 

Acquisition of other intangible assets

  

(4,787)

  

(5,065)

 
 

Net cash used in investing activities

  

(64,886)

  

(78,796)

 
         

Financing Activities

       

Increase in bank indebtedness

  

-

  

25,290

 

Repayment of bank indebtedness

  

(2,000)

  

(333)

 

Repurchase of common shares

  

(116,518)

  

(34,276)

 

Settlement of restricted share units and options

  

(17,889)

  

(10,000)

 

Exercise of stock options

  

13,113

  

35,609

 

Taxes paid on secondary sales and repatriation dividend

  

(2,443)

  

-

 

Treasury stock repurchased for future settlement of restricted share units

  

(1,996)

  

-

 

Taxes withheld and paid on employee stock awards vested

  

(528)

  

(520)

 

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

  

2,479

  

40,000

 

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

  

-

  

(2,000)

 

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

  

-

  

178,226

 

Share issuance expenses - public offering

  

-

  

(16,257)

 

Dividends paid to non-controlling interests

  

-

  

(9,511)

 

Credit facility amendment fees paid

  

-

  

(1,533)

 
 

Net cash (used in) provided by financing activities

  

(125,782)

  

204,695

 
         

Effects of exchange rate changes on cash

  

106

  

842

 
         

(Decrease) increase in cash and cash equivalents during year

  

(112,690)

  

210,946

 
         

Cash and cash equivalents, beginning of year

  

317,449

  

106,503

 
         

Cash and cash equivalents, end of year

 

$

204,759

 

$

317,449

 

 

 

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

 

Years Ended

    

Ended December 31,

 

Ended December 31,

    

2016

 

2015

 

2016

 

2015

Revenue

            

IMAX Theater Systems

            
 

IMAX Systems

            
  

Sales and sales-type leases

 

$

31,002

 

$

33,011

 

$

89,524

 

$

86,935

  

Ongoing rent, fees, and finance income

  

4,017

  

4,485

  

16,003

  

15,193

  

Other

  

5,040

  

6,259

  

19,434

  

17,579

     

40,059

  

43,755

  

124,961

  

119,707

               
 

Theater System Maintenance

  

10,399

  

9,599

  

40,430

  

36,944

               
 

Joint Revenue Sharing Arrangements

  

24,473

  

31,861

  

91,413

  

99,120

               

Film

            
 

Production and IMAX DMR

  

27,636

  

31,945

  

106,403

  

107,089

 

Film distribution and post-production

  

4,346

  

2,173

  

14,127

  

10,945

     

31,982

  

34,118

  

120,530

  

118,034

Total

 

$

106,913

 

$

119,333

 

$

377,334

 

$

373,805

               

Gross margins

            

IMAX Theater Systems

            
 

IMAX Systems(1)

            
  

Sales and sales-type leases

 

$

17,991

 

$

20,070

 

$

44,786

 

$

44,790

  

Ongoing rent, fees, and finance income

  

3,847

  

4,267

  

15,304

  

14,378

  

Other

  

327

  

700

  

76

  

279

     

22,165

  

25,037

  

60,166

  

59,447

 

Theater System Maintenance

  

3,452

  

2,811

  

13,659

  

12,702

 

Joint Revenue Sharing Arrangements(1)

  

15,121

  

21,556

  

59,837

  

68,372

               

Film

            
 

Production and IMAX DMR(1)

  

16,798

  

22,003

  

69,196

  

77,645

 

Film distribution and post-production(1)

  

(2,210)

  

476

  

(180)

  

1,122

     

14,588

  

22,479

  

69,016

  

78,767

Total

 

$

55,326

 

$

71,883

 

$

202,678

 

$

219,288

__________________

(1)

IMAX systems include marketing and commission costs of $1.1 million and $3.0 million for the three and twelve months ended December 31, 2016, respectively (2015 - $1.2 million and $3.0 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.2 million and $4.1 million for the three and twelve months ended December 31, 2016, respectively (2015 - $1.6 million and $4.3 million, respectively). Production and DMR segment margins include marketing costs of $5.8 million and $17.5 million for the three and twelve months ended December 31, 2016, respectively (2015 - $5.0 million and $13.3 million, respectively). Distribution segment margins include marketing costs of $0.1 million and $2.2 million for the three and twelve months ended December 31, 2016, respectively (2015 - less than $0.1 million recovery and $0.1 million recovery, 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 not including these measures could potentially distort the analysis of trends in business performance. 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 is required to maintain a minimum level of "EBITDA" of $100.0 million, as such term is defined in the Company's credit agreement (herein referred to as "Adjusted EBITDA" as the credit agreement includes additional adjustments beyond interest, taxes, depreciation and amortization). EBITDA and Adjusted EBITDA should not be construed as substitutes for net income or as better measures of liquidity than cash flow from operating activities determined in accordance with U.S. GAAP.  The Company must also maintain a Maximum Total Leverage Ratio (as defined in the credit agreement) of 2.0:1.0, which requirement decreases to 1.75:1.0 on December 31, 2017. The Company was in compliance with all of these requirements at December 31, 2016. The Maximum Total Leverage Ratio was 0.23:1 as at December 31, 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 $27.7 million. Adjusted EBITDA is calculated as follows:

 

  

Quarter Ended

 

Year Ended

 

Year Ended

 
 

December 31, 2016

 

December 31, 2016

(1)

December 31, 2015

 

(In thousands of U.S. Dollars)

         

Net income

$

12,076

 

$

39,320

 

$

64,624

 

Add (subtract):

         
 

Provision for income taxes

 

6,577

  

16,212

  

20,052

 
 

Interest expense, net of interest income

 

207

  

315

  

693

 
 

Depreciation and amortization, including film asset amortization

 

12,176

  

45,953

  

41,787

 
 

EBITDA

$

31,036

 

$

101,800

 

$

127,156

 
 

Write-downs, net of recoveries including asset impairments and

     receivable provisions

 

3,037

  

5,940

  

3,725

 
 

(Gain) loss from equity accounted investments

 

(150)

  

2,321

  

2,402

 
 

Stock and other non-cash compensation

 

8,690

  

31,586

  

22,379

 
 

Adjusted EBITDA before non-controlling interests

 

42,613

  

141,647

  

155,662

 
 

Adjusted EBITDA attributable to non-controlling interests(2)

 

(5,752)

  

(19,743)

  

(14,885)

 
 

Adjusted EBITDA attributable to common shareholders

$

36,861

 

$

121,904

 

$

140,777

 
 

Adjusted revenues attributable to common shareholders(3)

$

96,192

 

$

339,868

 

$

347,862

 
 

Adjusted EBITDA margin

 

38.3

%

 

35.9

%

 

40.5

%

__________________

    

(1)

Ratio of funded debt calculated using twelve months ended Adjusted EBITDA.

    
   

(2)

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

 
       

(3)

 

Quarter Ended

 

Year Ended

 

Year Ended

  

December 31, 2016

 

December 31, 2016

 

December 31, 2015

 

Total revenues

  

$

106,913

   

$

377,334

   

$

373,805

 

Greater China revenues

$

33,735

   

$

118,532

   

$

110,591

  
 

Non-controlling interest ownership percentage(4)

 

31.78%

    

31.61%

    

23.46%

  
 

Deduction for non-controlling interest share  of revenues

   

(10,721)

    

(37,466)

    

(25,943)

 

Adjusted revenues attributable to common shareholders

  

$

96,192

   

$

339,868

   

$

347,862

  

(4)

Weighted average ownership percentage for change in non-controlling interest share

 

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

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended December 31, 2016 vs. 2015:
The Company reported net income of $12.1 million or $0.18 per basic and diluted share for the quarter ended December 31, 2016 as compared to net income of $26.2 million or $0.38 per basic share and $0.37 per diluted share for the quarter ended December 31, 2015. Net income for the quarter ended December 31, 2016 includes a $8.0 million charge or $0.13 per diluted share (2015 — $6.9 million or $0.10 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 $17.7 million or $0.27 per diluted share for the quarter ended December 31, 2016 as compared to adjusted net income of $31.7 million or $0.45 per diluted share for the quarter ended December 31, 2015. The Company reported net income attributable to common shareholders of $8.9 million, or $0.14 per basic and $0.13 per diluted share for the year ended December 31, 2016 (2015 — $22.5 million, or $0.33 per basic share and $0.32 per diluted share).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 $14.5 million or $0.22 per diluted share for the quarter ended December 31, 2016 as compared to adjusted net income attributable to common shareholders of $27.3 million or $0.39 per diluted share for the quarter ended December 31, 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 December 31,

 
  

2016

  

2015

 
  

Net Income

 

Diluted EPS

  

Net Income

 

Diluted EPS

 

Reported net income

$

12,076

 

$

0.18

  

$

26,245

 

$

0.37

(1)

Adjustments:

             
 

Stock-based compensation

 

8,038

  

0.13

   

6,949

  

0.10

 
 

Tax impact on items listed above

 

(2,389)

  

(0.04)

   

(1,453)

  

(0.02)

 

Adjusted net income

 

17,725

  

0.27

   

31,741

  

0.45

(1)

 

Net income attributable to non-controlling interests

 

(3,131)

  

(0.05)

   

(3,752)

  

(0.05)

 
 

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

             
 

 million and $0.2 million, respectively) attributable to non-controlling interests

 

(112)

  

-

   

(703)

  

(0.01)

 

Adjusted net income attributable to common shareholders

$

14,482

 

$

0.22

  

$

27,286

 

$

0.39

(1)

               

Weighted average diluted shares outstanding

    

66,950

      

70,764

 
               

_____________

 

(1)

Includes impact of less than $0.1 million of accretion charges associated with redeemable Class C shares of IMAX China.

 

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Year Ended December 31, 2016 vs. 2015:
The Company reported net income of $39.3 million or $0.58 per basic and diluted share for the year ended December 31, 2016 as compared to net income of $64.6 million or $0.92 per basic share and $0.90 per diluted share for the year ended December 31, 2015. Net income for the year ended December 31, 2016 includes a $30.5 million charge or $0.45 per diluted share (2015 — $21.9 million or $0.31 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 $61.1 million or $0.90 per diluted share for the year ended December 31, 2016 as compared to adjusted net income of $82.4 million or $1.15 per diluted share for the year ended December 31, 2015. The Company reported net income attributable to common shareholders of $28.8 million, or $0.43 per basic and $0.42 per diluted share for the year ended December 31, 2016 (2015 — $55.8 million, or $0.79 per basic share and $0.78 per diluted share). 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 $50.0 million or $0.73 per diluted share for the year ended December 31, 2016 as compared to adjusted net income attributable to common shareholders of $73.0 million or $1.02 per diluted share for the year ended December 31, 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:

 

  

Year Ended December 31,

 
  

2016

  

2015

 
  

Net Income

 

Diluted EPS

  

Net Income

 

Diluted EPS

 

Reported net income

$

39,320

 

$

0.58

  

$

64,624

 

$

0.90

(1)

Adjustments:

             
 

Stock-based compensation

 

30,523

  

0.45

   

21,880

  

0.31

 
 

Tax impact on items listed above

 

(8,783)

  

(0.13)

   

(4,056)

  

(0.06)

 

Adjusted net income

 

61,060

  

0.90

   

82,448

  

1.15

(1)

 

Net income attributable to non-controlling interests

 

(10,532)

  

(0.16)

   

(8,780)

  

(0.12)

 
 

Stock-based compensation (net of tax of $0.2 million

             
 

and $0.2 million, respectively) attributable to

             
 

non-controlling interests

 

(533)

  

(0.01)

   

(703)

  

(0.01)

 

Adjusted net income attributable to common shareholders

$

49,995

 

$

0.73

  

$

72,965

 

$

1.02

(1)

               

Weighted average diluted shares outstanding

    

68,263

      

71,058

 
               

_____________

 

(1)

Includes impact of $0.8 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. 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, 2016

 

December 31, 2016

(In thousands of U.S. Dollars)

     

Net cash provided by operating activities

$

32,568

 

$

77,872

Net cash used in investing activities

 

(26,398)

  

(64,886)

 

Free cash flow

$

6,170

 

$

12,986