Press

IMAX Corporation Reports Fourth-Quarter And Full-Year 2017 Results
Feb 27, 2018

NEW YORK, Feb. 27, 2018 /PRNewswire/ --

HIGHLIGHTS

  • Company achieved fourth-quarter global box office of $278 million, up 13% over the prior year.
  • IMAX domestic box office increased 17% in the second half of 2017, compared to an industry decline of 6%.
  • Installed 165 new IMAX® theater systems during 2017, bringing the Company's total commercial multiplex network to 1,272 theaters, 68% of which are in international markets.
  • Company signed agreements for 170 new theater systems in 2017, resulting in year-end backlog of 494 new systems, plus five upgrades.
  • SG&A, excluding stock-based compensation, was down 5% year-over-year to $90 million, following the Company's cost-reduction initiative.
  • Over the four-day Presidents' Day and Chinese New Year weekend, the Company achieved record February box office of $53 million, led by the release of Marvel Studios' Black Panther and three local-language titles released in China.

IMAX Corporation (NYSE:IMAX) today reported fourth-quarter 2017 revenue of $125.6 million and net income attributable to common shareholders of $4.8 million, or $0.08 per diluted share, which includes a one-time tax charge of $9.3 million ($0.14 per diluted share) associated with the recent U.S. tax reform and a $2.5 million ($0.04 per diluted share) charge associated with the Company's cost reduction exercise announced in June. Full-year 2017 revenue was $380.8 million and net income attributable to common shareholders was $2.3 million, or $0.04 per diluted share, which includes the one-time tax charge of $9.3 million ($0.14 per diluted share) and total restructuring charge of $16.2 million ($0.25 per diluted share).

Adjusted net income attributable to common shareholders for the fourth quarter was $21.8 million, or $0.34 per diluted share. Full-year 2017 adjusted net income attributable to common shareholders was $40.5 million, or $0.62 per diluted share. For reconciliations of reported results to non-GAAP financial results, and for the definition and reconciliation of Adjusted EBITDA per Credit Facility, please see the end of this press release.

"We saw tangible improvements to box office performance and operating leverage in the second half last year, largely the result of our implementing several initiatives aimed at refining our programming strategy and containing costs," said
Richard L. Gelfond, IMAX CEO. "IMAX domestic box office increased 17% in the second half, compared to an exhibitor industry decline of 6%. In international markets, we grew box office 14% over the same period. We believe this underscores the IMAX consumer value proposition for compelling content and highlights the importance of analyzing our results separately from the overall industry's. Moreover, our growing international presence in markets such as Japan—a market that housed our single strongest-performing theater last year—continued to contribute meaningfully to our overall results."

Fourth-Quarter 2017 Results                                                                           

U.S. Tax Cuts and Jobs Act (Tax Act)
In the fourth quarter of 2017, IMAX incurred a discrete tax expense of $9.3 million, related to the enactment of the U.S. Tax Cuts and Jobs Act on Dec. 22, 2017. This non-recurring charge relates to the provisional re-measurement and write-down of the Company's U.S. deferred tax assets and liabilities, given the changes enacted by the Tax Act.

Network Update 
During the quarter, the Company installed 70 theaters, of which 69 were for new theater locations and one was an upgrade. The total IMAX theater network consisted of 1,370 systems as of Dec. 31, 2017, of which 1,272 were in commercial multiplexes. There were 499 theaters in backlog as of Dec. 31, 2017, compared to the 498 in backlog as of Dec. 31, 2016.

IMAX signed contracts for 23 new theaters across 12 countries in the fourth quarter of 2017.  For a breakdown of theater system signings, installations, network and backlog by type for the fourth quarter of 2017, please see the end of this press release.

Box Office Update
Gross box office from IMAX DMR® films increased by 13% to $278.1 million in the fourth quarter of 2017 from $246.5 million in the fourth quarter of 2016, resulting in higher DMR revenues. Gross box office per-screen for the fourth quarter of 2017 averaged $227,000 in comparison to $233,300 in the fourth quarter of 2016. Gross box office was generated primarily by the exhibition of 45 films (20 new and 25 carryovers), as compared to 24 films (17 new and 7 carryovers) exhibited in the fourth quarter of 2016.

Please reference the chart below for a breakout of box office and per-screen averages on a regional basis:

 

 

Box Office (M's)

 

Per Screen Average (000's)

 

Q4 2017

Q4 2016

 

Q4 2017

Q4 2016

Global

$         278.1

$         246.5

 

$         227.0

$         233.3

Domestic

116.9

101.0

 

286.1

255.4

Greater China

63.3

60.0

 

131.1

168.4

Other Intl.

97.9

85.5

 

290.2

280.5

           
 

FY 2017

FY 2016

 

FY 2017

FY 2016

Global

$         976.5

$         965.7

 

$         838.4

$         963.8

Domestic

357.8

368.5

 

883.4

934.9

Greater China

290.8

295.7

 

666.1

932.3

Other Intl.

327.9

301.5

 

1,014.7

1,037.2

 

Fourth-Quarter Segment Results

Network Business

  • Network business revenue was $53.8 million in the quarter, compared with $47.6 million in the prior-year period. Margins for the network business were 64.3% in the most recent quarter, compared to 65.8% in the prior-year period.
  • IMAX DMR revenues were $31.7 million in the fourth quarter of 2017, compared to $27.6 million in the fourth quarter of 2016. Gross margin for the IMAX DMR segment was 60.6%, compared to 60.8% in the prior-year comparative period.
  • Revenue from joint revenue-sharing arrangements was $20.7 million in the quarter, compared with $18.5 million in the prior-year comparative period. Gross margin for joint revenue-sharing arrangements was 67.8%, compared to 70.7% in the prior-year comparative period.

Theater Business

  • Theater business segment revenue was $55.5 million in the quarter, compared with $53.0 million in the prior-year comparative period.
  • The Company's gross margin on full, new sales and sales-type leases were 68.7% compared with 63.7% in the year-ago period, with the increase primarily a result of the deal-types for the systems recognized in the respective periods.
  • The Company expects to install approximately 145 new IMAX theater systems in 2018.

Fourth-Quarter Consolidated Results
The gross margin across all segments in the fourth quarter of 2017 was $60.1 million, or 48.0% of total revenue, compared to $55.3 million, or 51.7% of total revenue in the fourth quarter of 2016. Operating expenses (which include SG&A and R&D, and exclude stock-based compensation) were $27.3 million in the quarter, down 5% compared to $28.7 million in the fourth quarter of 2016.

Full-Year 2017 Results
Full-year 2017 revenue was $380.8 million as compared to 2016 revenue of $377.3 million. Reported net income attributable to common shareholders was $2.3 million, or $0.04 per diluted share, as compared to $28.8 million or $0.42 per diluted share in 2016. Adjusted net income attributable to common shareholders was $40.5 million as compared to $50.0 million in 2016, or $0.62 per diluted share as compared to $0.73 per diluted share in 2016. Adjusted EBITDA per the Credit Facility, excluding the Company's investment in the television series Marvel's Inhumans, was $126.2 million in 2017 as compared to $121.9 million in 2016.  The Company also reported a global 2017 per-screen average of $838,373, as compared to $963,800 in the prior year.

The full-year systems installation total was 170 theater systems, of which 5 were upgrades, compared with 182 and 16, respectively, in the prior-year period. Continuing to build upon the Company's record signings momentum from 2016, IMAX signed contracts for 177 theaters in 2017, across 35 countries, resulting in 499 theater systems in backlog as of Dec. 31, 2017, compared to 498 theater systems in backlog as of Dec. 31, 2016. The Company's top three markets for signings during 2017 were China, Germany and India. For a breakdown of theater system signings, installations, network and backlog by type, please see the end of this press release.

"As we look to 2018, our primary focus is on expanding the earnings power of our core business," said Gelfond. "We believe the combination of the initiatives we implemented last year, coupled with a growing international presence and reduced spend on non-core businesses and R&D, should help facilitate operating leverage in the future. Our overarching efforts this year are aimed at growing the network, controlling costs and generating more box office across our theaters. And I am pleased to say that 2018 is off to a solid start. We recently achieved record box office in February, led by Black Panther, which did $35 million in IMAX box office over the four-day opening weekend. In China, we exhibited three local-language titles during the Chinese New Year period and grew box office 60%, compared to the prior years' holiday."

Supplemental Materials
For more information about the Company's results, please refer to the IMAX Investor Relations website located at investors.imax.com.

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 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 4:30PM ET to discuss its fourth quarter and full-year 2017 financial results. This call is being webcast by Nasdaq and can be accessed at investors.imax.com. To access the call via telephone, interested parties in the US and Canada should dial (888) 394-8218 approximately 5 to 10 minutes before the call begins. Other international callers should dial (647) 484-0475. The conference ID for the call is 8365766. A replay of the call will be available via webcast at investors.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 8365766.

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 theaters 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 additional offices in London, Dublin, Tokyo, and Shanghai. As of December 31, 2017, there were 1,370 IMAX theater systems (1,272 commercial multiplexes, 12 commercial destinations, 86 institutional) operating 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 performance of IMAX DMR films; the signing of theater system agreements; conditions, changes and developments in the commercial exhibition industry; risks related to currency fluctuations; the potential impact of increased competition in the markets within which the Company operates; competitive actions by other companies; the failure to respond to change and advancements in digital technology; risks relating to recent consolidation among commercial exhibitors and studios; 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 the Company's intellectual property; general economic, market or business conditions; the failure to convert theater system backlog into revenue; changes in laws or regulations; the failure to fully realize the projected cost savings and benefits from the Company's restructuring initiative; 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:

Michael K. 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

 

IMAX Theater Information

December 31, 2017

         
     

Years Ended December 31,

 
     

2017

   

2016

 
               

Theater System Signings:

           

Full new sales and sales-type lease arrangements

 

85

   

61

 

New traditional joint revenue sharing arrangements

 

35

   

246

 

New hybrid joint revenue sharing arrangements

 

50

   

7

 
 

Total new theaters

   

170

   

314

 

Upgrades of IMAX theater systems

 

7

   

5

 
 

Total Theater Signings

   

177

   

319

 
               
     

Years Ended December 31,

 
     

2017

   

2016

 
               

Theater System Installations:

           

Full new sales and sales-type lease arrangements

 

60

   

56

 

New traditional joint revenue sharing arrangements

 

86

   

76

 

New hybrid joint revenue sharing arrangements

 

19

   

33

 

Short-term operating lease arrangement

 

-

   

1

 
 

Total new theaters

   

165

   

166

 

Upgrades of IMAX theater systems

 

5

   

16

 
 

Total Theater Installations

   

170

   

182

 
       
   

As of December 31,

 

Theater Backlog:

 

2017

   

2016

 

New sales and sales-type lease arrangements

 

161

   

140

 

New joint revenue sharing arrangements

           
 

Hybrid arrangements

   

121

   

92

 
 

Traditional arrangements

   

212

   

263

 
 

Total new theaters

   

494

   

495

 

Upgrades of IMAX theater systems

 

5

   

3

 

Total Theater Backlog

 

499

   

498

 
       
   

As of December 31,

 

Theater Network:

 

2017

   

2016

 

Commercial Multiplex Theaters:

           

Sales and sales-type lease arrangements

 

525

   

467

 

Joint revenue sharing arrangements

 

747

   

640

 

Total Commercial Multiplex Theaters

 

1,272

   

1,107

 
             

Commercial Destination

   

12

   

16

 

Institutional

 

86

   

92

 

Total Theater Network

 

1,370

   

1,215

 

 


Additional Information (continued)

2018 DMR Films:

To date, the Company has announced the following 31 DMR titles to be released in 2018 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 theater network in 2018 will be similar to the 60 IMAX DMR films released to the IMAX theater network in 2017.

(1)     The Commuter: The IMAXExperience (Lionsgate Entertainment Inc., January 2018);
(2)     12 Strong: The IMAXExperience (Warner Bros. Pictures, January 2018);
(3)     Padmaavat: The IMAXExperience (Viacom 18 Motion Pictures and Paramount Pictures, January 2018, India plus limited Domestic footprint and International markets);
(4)     Maze Runner: The Death Cure: The IMAXExperience (20th Century Fox, January 2018);
(5)     Fifty Shades Freed: The IMAX Experience (Universal Pictures, February 2018);
(6)     Monster Hunt 2: The IMAX Experience (Edko Films, February 2018, China only);
(7)     Detective Chinatown 2: The IMAXExperience (WanDa Pictures, February 2018, China only);
(8)     Operation Red Sea: The IMAX Experience (Bona Film Group, February 2018, China only);
(9)     Marvel's Black Panther: The IMAX Experience (Walt Disney Studios, February 2018);
(10) 
Red Sparrow: The
IMAXExperience (20th Century Fox, March 2018);
(11)  A Wrinkle in Time: The IMAXExperience (Walt Disney Studios, March 2018);
(12)  Tomb Raider: The IMAXExperience (Warner Bros. Pictures, March 2018);
(13)  Pacific Rim Uprising: The IMAXExperience (Warner Bros. Pictures, March 2018);
(14)  Ready Player One: The IMAXExperience (Warner Bros. Pictures, March 2018);
(15)  Rampage: The IMAX Experience (Warner Bros. Pictures, April 2018);
(16)  Avengers: Infinity War: The IMAXExperience (Walt Disney Studios, May 2018, most International markets – April 2018);
(17)  Deadpool 2: The IMAX Experience (20th Century Fox, May 2018, select markets only);
(18)  Solo: A Star Wars Story: The IMAX Experience (Walt Disney Studios, May 2018);
(19)  The Incredibles 2: The IMAX Experience (Walt Disney Studios, June 2018);
(20)  Jurassic World: Fallen Kingdom: The IMAX Experience (Universal Pictures, June 2018);
(21)  Ant-Man and the Wasp: The IMAX Experience (Walt Disney Studios, June 2018, US markets - July 2018);
(22)  Mission Impossible: Fallout: The IMAXExperience (Paramount Pictures, July 2018);
(23)  Predator: The IMAX Experience (20th Century Fox, August 2018);
(24)  The Darkest Minds: The IMAX Experience (20th Century Fox, September 2018);
(25) 
Robin Hood: The
IMAXExperience (Lionsgate Entertainment Inc., September 2018);
(26)  Venom: The IMAXExperience (Sony Pictures Entertainment, October 2018);
(27)  X-Men: Dark Phoenix: The IMAX Experience (20th Century Fox, November 2018);
(28)  Fantastic Beasts: The Crimes of Grindelwald: The IMAXExperience (Warner Bros. Pictures, November 2018);
(29)  Ralph Breaks the Internet: Wreck-It-Ralph 2: The IMAXExperience (Walt Disney Studios, December 2018, select markets); 
(30)  Alita: Battle Angel: An IMAXExperience (20th Century Fox, December 2018); and
(31)  Aquaman: The IMAX Experience (Warner Bros. Pictures, December 2018).

In addition, the Company in conjunction with Panda Productions will be releasing an IMAX original production, Pandas, in April 2018.


 

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,

   

2017

 

2016

 

2017

 

2016

Revenues

                     

Equipment and product sales

$

39,700

 

$

41,318

 

$

103,294

 

$

122,382

Services

 

62,330

   

44,009

   

195,594

   

166,862

Rentals

 

21,138

   

18,777

   

72,281

   

77,315

Finance income

 

2,384

   

2,509

   

9,598

   

9,500

Other

 

-

   

300

   

-

   

1,275

     

125,552

   

106,913

   

380,767

   

377,334

Costs and expenses applicable to revenues

                     

Equipment and product sales

 

15,819

   

20,605

   

48,172

   

69,680

Services

 

40,951

   

25,263

   

120,629

   

83,780

Rentals

 

8,634

   

5,719

   

26,720

   

21,086

Other

 

-

   

-

   

-

   

110

     

65,404

   

51,587

   

195,521

   

174,656

Gross margin

 

60,148

   

55,326

   

185,246

   

202,678

Selling, general and administrative expenses

 

25,329

   

32,039

   

110,400

   

124,745

 

(including share-based compensation expense of $4.2 million and $20.4 million for the three months and year ended December 31, 2017, respectively (2016 - expense of $8.0 million and $30.5 million, respectively))

                     

Research and development

 

6,217

   

4,712

   

20,855

   

16,315

Amortization of intangibles

 

837

   

542

   

3,019

   

2,079

Receivable provisions, net of recoveries

 

559

   

323

   

2,647

   

954

(Impairment recoveries) asset impairments

 

-

   

(1,000)

   

1,225

   

417

Exit costs, restructuring charges and associated impairments

 

2,479

   

-

   

16,174

   

-

Income from operations

 

24,727

   

18,710

   

30,926

   

58,168

Interest income

 

266

   

273

   

1,027

   

1,490

Interest expense

 

(524)

   

(480)

   

(1,942)

   

(1,805)

Income from operations before income taxes

 

24,469

   

18,503

   

30,011

   

57,853

Provision for income taxes

 

(15,905)

   

(6,577)

   

(16,790)

   

(16,212)

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

 

134

   

150

   

(703)

   

(2,321)

Net income

 

8,698

   

12,076

   

12,518

   

39,320

Less: net income attributable to non-controlling interests

 

(3,867)

   

(3,131)

   

(10,174)

   

(10,532)

Net income attributable to common shareholders

$

4,831

 

$

8,945

 

$

2,344

 

$

28,788

                         

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

                 

Net income per share – basic

$

0.08

 

$

0.14

 

$

0.04

 

$

0.43

Net income per share – diluted

$

0.08

 

$

0.13

 

$

0.04

 

$

0.42

                         

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

                     
 

Basic

 

64,658

   

66,152

   

65,380

   

67,575

 

Fully Diluted

 

64,790

   

66,950

   

65,540

   

68,263

                         

Additional Disclosure:

                     

Depreciation and amortization(1)

$

27,040

 

$

12,306

 

$

66,807

 

$

46,485

                         

(1) Includes $0.2 million and $0.6 million of amortization of deferred financing costs charged to interest expense for the three months and year ended December 31, 2017 (2016 - $0.1 million and $0.5 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,

 

2017

 

2016

Assets

         

Cash and cash equivalents

$

158,725

 

$

204,759

Accounts receivable, net of allowance for doubtful accounts of $1,613 (December 31, 2016 — $1,250)

 

130,546

   

96,349

Financing receivables

 

129,494

   

122,125

Inventories

 

30,788

   

42,121

Prepaid expenses

 

7,549

   

6,626

Film assets

 

5,026

   

16,522

Property, plant and equipment

 

276,781

   

245,415

Other assets

 

26,757

   

33,195

Deferred income taxes

 

30,708

   

20,779

Other intangible assets

 

31,211

   

30,416

Goodwill

 

39,027

   

39,027

Total assets

$

866,612

 

$

857,334

           

Liabilities

         

Bank indebtedness

$

25,357

 

$

27,316

Accounts payable

 

24,235

   

19,990

Accrued and other liabilities

 

100,140

   

93,208

Deferred revenue

 

113,270

   

90,266

Total liabilities

 

263,002

   

230,780

           

Commitments and contingencies

         
           

Non-controlling interests

 

1,353

   

4,980

           

Shareholders' equity

         

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

         

64,902,201 — issued and 64,695,550 — outstanding (December 31, 2016 — 66,224,467 — issued and 66,159,902 — outstanding)

 

445,797

   

439,213

Less: Treasury stock, 206,651 shares at cost (December 31, 2016 — 64,565)

 

(5,133)

   

(1,939)

Other equity

 

175,300

   

177,304

Accumulated deficit

 

(87,592)

   

(47,366)

Accumulated other comprehensive loss

 

(626)

   

(5,200)

Total shareholders' equity attributable to common shareholders

 

527,746

   

562,012

Non-controlling interests

 

74,511

   

59,562

Total shareholders' equity

 

602,257

   

621,574

Total liabilities and shareholders' equity

$

866,612

 

$

857,334


 

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,

 
     

2017

 

2016

 
               

Cash provided by (used in):

           

Operating Activities

             

Net income

 

$

12,518

 

$

39,320

 

Adjustments to reconcile net income to cash from operations:

             
 

Depreciation and amortization

   

66,807

   

46,485

 
 

Write-downs, net of recoveries

   

29,568

   

5,940

 
 

Change in deferred income taxes

   

(4,017)

   

4,940

 
 

Stock and other non-cash compensation

   

24,075

   

31,586

 
 

Unrealized foreign currency exchange (gain) loss

   

(502)

   

462

 
 

Loss from equity-accounted investments

   

306

   

2,685

 
 

Gain on non-cash contribution to equity-accounted investees

   

397

   

(364)

 

Investment in film assets

   

(34,645)

   

(22,308)

 

Changes in other non-cash operating assets and liabilities

   

(9,141)

   

(30,874)

 
 

Net cash provided by operating activities

   

85,366

   

77,872

 
                 

Investing Activities

             

Purchase of property, plant and equipment

   

(24,143)

   

(15,278)

 

Investment in joint revenue sharing equipment

   

(42,634)

   

(42,910)

 

Investment in new business ventures

   

(1,606)

   

(1,911)

 

Acquisition of other intangible assets

   

(5,214)

   

(4,787)

 
 

Net cash used in investing activities

   

(73,597)

   

(64,886)

 
                 

Financing Activities

             

Repayment of bank indebtedness

   

(2,000)

   

(2,000)

 

Repurchase of common shares

   

(46,140)

   

(116,518)

 

Settlement of restricted share units and options

   

(20,331)

   

(17,889)

 

Exercise of stock options

   

16,668

   

13,113

 

Treasury stock repurchased for future settlement of restricted share units

   

(5,133)

   

(1,996)

 

Taxes withheld and paid on employee stock awards vested

   

(600)

   

(528)

 

Taxes paid on secondary sales and repatriation dividend

   

-

   

(2,443)

 

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

   

-

   

2,479

 
 

Net cash used in financing activities

   

(57,536)

   

(125,782)

 
                 

Effects of exchange rate changes on cash

   

(267)

   

106

 
                 

Decrease in cash and cash equivalents during year

   

(46,034)

   

(112,690)

 
                 

Cash and cash equivalents, beginning of year

   

204,759

   

317,449

 
                 

Cash and cash equivalents, end of year

 

$

158,725

 

$

204,759

 

 

 

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

The Company has four primary reporting groups identified by nature of product sold or service provided: (1) Network Business, representing variable revenue generated by box-office results and which includes the reportable segments of IMAX DMR and contingent rent from the JRSAs and IMAX systems segments; (2) Theater Business, representing revenue generated by the sale and installation of theater systems and maintenance services, primarily related to the IMAX Systems and Theater System Maintenance reportable segments, and also includes fixed hybrid revenues and upfront installation costs from the JRSA segment; (3) New Business, which includes content licensing and distribution fees associated with our original content investments, virtual reality initiatives, IMAX Home Entertainment, and other business initiatives that are in the development and/or start-up phase, and (4) Other; which includes the film post-production and distribution segments and 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,

         

2017

   

2016

 

2017

 

2016

Revenue(1)

                       

Network Business

                       
 

  IMAX DMR

 

$

31,717

 

$

27,636

 

$

108,853

 

$

106,403

 

  Joint revenue sharing arrangements - contingent rent

   

20,741

   

18,506

   

70,444

   

73,500

 

  IMAX systems - contingent rent

   

1,317

   

1,466

   

3,890

   

4,644

         

53,775

   

47,608

   

183,187

   

184,547

Theater Business

                       
 

  IMAX systems

                       
 

Sales and sales-type leases

   

31,675

   

31,002

   

79,853

   

89,525

 

Ongoing fees and finance income

   

2,650

   

2,551

   

10,494

   

11,359

 

Joint revenue sharing arrangements – fixed fees

   

5,582

   

5,967

   

10,118

   

17,913

 

  Theater system maintenance

   

11,924

   

10,399

   

45,383

   

40,430

 

  Other theater

   

3,696

   

3,100

   

9,145

   

10,888

       

55,527

   

53,019

   

154,993

   

170,115

                             

New Business

   

13,014

   

25

   

24,522

   

626

Other

                       
 

Film distribution and post-production

   

1,803

   

4,346

   

13,172

   

14,127

 

Other

   

1,433

   

1,915

   

4,893

   

7,919

         

3,236

   

6,261

   

18,065

   

22,046

Total

 

$

125,552

 

$

106,913

 

$

380,767

 

$

377,334

                             

Gross margin

                       

Network Business

                       
 

IMAX DMR

 

$

19,211

 

$

16,798

 

$

71,789

 

$

69,196

 

Joint revenue sharing arrangements – contingent rent

   

14,066

   

13,085

   

47,337

   

54,705

 

IMAX systems – contingent rent

   

1,317

   

1,466

   

3,890

   

4,644

         

34,594

   

31,349

   

123,016

   

128,545

Theater Business

                       
 

IMAX systems

                       
 

Sales and sales-type leases

   

19,449

   

17,993

   

47,639

   

44,788

 

Ongoing fees and finance income

   

2,513

   

2,381

   

10,095

   

10,660

 

Joint revenue sharing arrangements – fixed fees

 

   

1,462

   

2,036

   

2,349

   

5,132

Theater system maintenance

   

4,969

   

3,453

   

18,275

   

13,660

 

Other theater

   

883

   

937

   

1,965

   

1,930

         

29,276

   

26,800

   

80,323

   

76,170

New Business

   

(2,744)

   

(1,338)

   

(16,176)

   

(2,199)

Other

                       
 

Film distribution and post-production

   

(744)

   

(2,210)

   

(1,006)

   

(180)

 

Other

   

(234)

   

725

   

(911)

   

342

         

(978)

   

(1,485)

   

(1,917)

   

162

Total

 

$

60,148

 

$

55,326

 

$

185,246

 

$

202,678

 
                               

 

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, adjusted net income attributable to common shareholders per diluted share, EBITDA, Adjusted EBITDA per Credit Facility and Adjusted EBITDA per Credit Facility excluding "Marvel's Inhumans" 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 stock-based compensation (net of any related tax impact) and non-recurring charges 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. Without the presentation of these adjusted presentation measures the Company believes it could potentially distort the analysis of trends in business performance, and it wants to ensure that its investors fully understand the impact of net income attributable to non-controlling interests, its stock-based and non-recurring charges in determining net income attributable to common shareholders. Management uses these measures to review operating performance on a comparable basis from period to period. However, these non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share should be considered in addition to, and not as a substitute for, net income and net income attributable to common shareholders and other measures of financial performance reported in accordance with U.S. GAAP.

The Company is required to maintain a minimum level of "EBITDA", as such term is defined in the Company's credit agreement (and which is referred to herein as "Adjusted EBITDA per Credit Facility" or "Adjusted EBITDA per Credit Facility excluding Marvel's Inhumans", as the credit agreement includes additional adjustments beyond interest, taxes, depreciation and amortization). Adjusted EBITDA per Credit Facility and Adjusted EBITDA per Credit Facility excluding "Marvel's Inhumans" (each as defined below) should not be construed as substitutes for net income, operating income or other operating performance measures that are determined in accordance with U.S. GAAP. The Company believes that EBITDA, Adjusted EBITDA per Credit Facility and Adjusted EBITDA per Credit Facility excluding Marvel's Inhumans are relevant and useful information widely used by analysts, investors and other interested parties in the Company's industry.

   

Quarter Ended

 

Year Ended

 

Year Ended

 
 

December 31, 2017

 

December 31, 2017

(1)

December 31, 2016

 

(In thousands of U.S. Dollars)

                 

Net income

$

8,698

 

$

12,518

 

$

39,320

 

Add (subtract):

                 
 

Provision for income taxes

 

15,905

   

16,790

   

16,212

 
 

Interest expense, net of interest income

 

258

   

915

   

315

 
 

Depreciation and amortization, including film asset amortization

 

26,900

   

66,245

   

45,953

 
 

EBITDA

 

51,761

   

96,468

   

101,800

 
 

Exit costs, restructuring charges and associated impairments

 

2,479

   

16,174

       
 

Stock and other non-cash compensation

 

4,802

   

23,718

   

31,586

 
 

Write-downs, net of recoveries including asset impairments and

     receivable provisions

 

3,948

   

24,015

   

5,940

 
 

(Gain) loss from equity accounted investments

 

(134)

   

703

   

2,321

 
 

Adjusted EBITDA before non-controlling interests

 

62,856

   

161,078

   

141,647

 
 

Adjusted EBITDA attributable to non-controlling interests(2)

 

(7,055)

   

(22,927)

   

(19,743)

 
 

Adjusted EBITDA per Credit Facility

$

55,801

 

$

138,151*

 

$

121,904

 
 

Adjusted EBITDA per Credit Facility, excluding impact from "Marvel's Inhumans"

$

42,361

 

$

126,158*

 

$

121,904

 
 

Adjusted revenues attributable to common shareholders (3)

$

113,285

 

$

340,460

 

$

339,868

 
 

Adjusted EBITDA margin, excluding impact from "Marvel's Inhumans"

 

37.4

%

 

37.1

%

 

35.9

%

                     

*

Adjusted EBITDA per Credit Facility of $138.2 million includes the impact of the Company's investment in "Marvel's Inhumans", which resulted in a $13.0 million loss. However, as permitted by the Credit Facility, this loss was offset by addbacks of $13.3 million and $11.7 million for amortization and impairment charges, respectively, relating to the investment, the net effect of which was to increase Adjusted EBITDA per Credit Facility by $12.0 million. This investment represents the Company's first foray into a commercial television property, and therefore the Adjusted EBITDA per Credit Facility metric presented above may not be reflective of the Company's typical operational activity. Further, the Company does not yet know whether it will make similar investments in the future. As a result, the Company is also presenting Adjusted EBITDA per Credit Facility excluding the impact of "Marvel's Inhumans" to better facilitate comparisons to prior and future periods.

 
                     

__________________

       

(1)

Ratio of funded debt calculated using twelve months ended EBITDA.

       

(2)

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

 

 

 

(3)

   

Quarter Ended

 

Year Ended

 

Year Ended

 
     

December 31, 2017

 

December 31, 2017

 

December 31, 2016

 
 

Total revenues

     

$

125,552

     

$

380,767

     

$

377,334

 
 

Greater China revenues

 

$

38,339

     

$

126,474

     

$

118,532

     
 

Non-controlling interest ownership percentage (4)

   

32.00%

       

31.87%

       

31.61%

     
 

Deduction for non-controlling interest share

     of revenues

       

(12,268)

       

(40,307)

       

(37,466)

 
 

Adjusted revenues attributable to common

     shareholders

     

$

113,285

     

$

340,460

     

$

339,868

 

 

(4)

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

 

IMAX CORPORATION
OTHER INFORMATION 
 (in thousands of U.S. dollars, except per share amounts)

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended December 31, 2017 vs. 2016:

The Company reported net income of $8.7 million or $0.13 per basic and diluted share for the quarter ended December 31, 2017 as compared to net income of $12.1 million, or $0.18 per basic and diluted share for the quarter ended December 31, 2016.

Net income for the quarter ended December 31, 2017 includes a $4.9 million charge or $0.08 per diluted share (2016 — $8.0 million or $0.13 per diluted share) for stock-based compensation and a $2.5 million charge, or $0.04 per diluted share for exit costs, restructuring charges and associated impairments (2016 - $nil). In the quarter ended December 31, 2017, the Company also recognized a $9.3 million, or $0.14 per diluted share, non-recurring tax charge as the Company re-measured its deferred tax assets and liabilities as of the date of enactment of the recently passed U.S Tax Act.

Adjusted net income, which consists of net income excluding the impact of stock-based compensation, exit costs, restructuring charges and associated impairments, the related tax impact of these adjustments, and tax charge from the provisional re-measurement of U.S. deferred tax assets and liabilities given changes enacted by the Tax Act was $25.7 million or $0.40 per diluted share for the quarter ended December 31, 2017 as compared to adjusted net income of $17.7 million or $0.27 per diluted share for the quarter ended December 31, 2016.

The Company reported net income attributable to common shareholders of $4.8 million, or $0.08 per basic and diluted share for the quarter ended December 31, 2017 (2016 — $8.9 million, or $0.14 per basic and $0.13 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, exit costs, restructuring charges and associated impairments, the related tax impact of these adjustments, and tax charge from the provisional re-measurement of U.S. deferred tax assets and liabilities given changes enacted by the Tax Act, was $21.8 million or $0.34 per diluted share for the quarter ended December 31, 2017 as compared to adjusted net income attributable to common shareholders of $14.5 million or $0.22 per diluted share for the quarter ended December 31, 2016.

 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,

 
   

2017

   

2016

 
   

Net Income

 

Diluted EPS

   

Net Income

 

Diluted EPS

 

Reported net income

$

8,698

 

$

0.13

   

$

12,076

 

$

0.18

(1)

Adjustments:

                         
 

Stock-based compensation

 

4,857

   

0.08

     

8,038

   

0.13

 
 

Exit costs, restructuring charges and associated impairments

 

2,479

   

0.04

     

-

   

-

 
 

Tax impact on items listed above

 

360

   

0.01

     

(2,389)

   

(0.04)

 
 

Impact of enactment of U.S. Tax Act

 

9,323

   

0.14

     

-

   

-

 

Adjusted net income

 

25,717

   

0.40

     

17,725

   

0.27

(1)

 

Net income attributable to non-controlling interests

 

(3,867)

   

(0.06)

     

(3,131)

   

(0.05)

 
 

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

                         
 

 million and less than $0.1 million, respectively) 

 

(76)

   

-

     

(112)

   

-

 
 

Exit costs, restructuring charges and associated impairments

                         
 

(net of tax of $nil) 

 

(2)

   

-

     

-

   

-

 

Adjusted net income attributable to common shareholders

$

21,772

 

$

0.34

   

$

14,482

 

$

0.22

(1)

                             

Weighted average diluted shares outstanding

       

64,790

           

66,950

 
                             

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Year Ended December 31, 2017 vs. 2016:

The Company reported net income of $12.5 million or $0.19 per basic and diluted share for the year ended December 31, 2017 as compared to net income of $39.3 million, or $0.58 per basic and diluted share, for the year ended December 31, 2016.

Net income for the year ended December 31, 2017 includes a $22.7 million charge or $0.35 per diluted share (2016 — $30.5 million or $0.45 per diluted share) for stock-based compensation and a $16.2 million charge, or $0.25 per diluted share for exit costs, restructuring charges and associated impairments (2016 - $nil). In 2017, the Company also recognized a $9.3 million, or $0.14 per diluted share, non-recurring tax charge as the Company re-measured its deferred tax assets and liabilities as of the date of enactment of the recently passed Tax Act.

Adjusted net income, which consists of net income excluding the impact of stock-based compensation, exit costs, restructuring charges and associated impairments, the related tax impact of these adjustments, and tax charge from the provisional re-remeasurement of U.S. deferred tax assets and liabilities given changes enacted by the Tax Act, was $51.5 million or $0.79 per diluted share for the year ended December 31, 2017 as compared to adjusted net income of $61.1 million or $0.90 per diluted share for the year ended December 31, 2016.

The Company reported net income attributable to common shareholders of $2.3 million, or $0.04 per basic and diluted share for the year ended December 31, 2017 (2016 — $28.8 million, or $0.43 per basic share and $0.42 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, exit costs, restructuring charges and associated impairments, the related tax impact of these adjustments, and tax charge from the provisional re-remeasurement of U.S. deferred tax assets and liabilities given changes enacted by the Tax Act, was $40.5 million or $0.62 per diluted share for the year ended December 31, 2017 as compared to adjusted net income attributable to common shareholders of $50.0 million or $0.73 per diluted share for the year ended December 31, 2016.

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,

 
   

2017

   

2016

 
   

Net Income

 

Diluted EPS

   

Net Income

 

Diluted EPS

 

Reported net income

$

12,518

 

$

0.19

   

$

39,320

 

$

0.58

 

Adjustments:

                         
 

Stock-based compensation

 

22,653

   

0.35

     

30,523

   

0.45

 
 

Exit costs, restructuring charges and associated impairments

 

16,174

   

0.25

     

-

   

-

 
 

Tax impact on items listed above

 

(9,218)

   

(0.14)

     

(8,783)

   

(0.13)

 
 

Impact of enactment of U.S. Tax Act

 

9,323

   

0.14

     

-

   

-

 

Adjusted net income

 

51,450

   

0.79

     

61,060

   

0.90

 
 

Net income attributable to non-controlling interests

 

(10,174)

   

(0.16)

     

(10,532)

   

(0.16)

 
 

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

                         
 

and $0.2 million, respectively) 

 

(620)

   

(0.01)

     

(533)

   

(0.01)

 
 

Exit costs, restructuring charges and associated impairments

                         
 

(net of tax of $0.1 million) 

 

(181)

   

-

     

-

   

-

 

Adjusted net income attributable to common shareholders

$

40,475

 

$

0.62

   

$

49,995

 

$

0.73

 
                             

Weighted average diluted shares outstanding

       

65,540

           

68,263

 
                             

 

Free Cash Flow:

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

 

     

For the

 

For the

 
     

Three months ended

 

Twelve months ended

 
     

December 31, 2017

 

December 31, 2017

 
               

Net cash provided by operating activities

 

$

21,947

 

$

85,366

 

Net cash used in investing activities

   

(16,264)

   

(73,597)

 
               

Net cash flow

 

$

5,683

 

$

11,769