Press

IMAX Corporation Reports Second Quarter 2018 Results
Jul 25, 2018

NEW YORK, July 25, 2018 /PRNewswire/ --

 

HIGHLIGHTS

  • Strong financial results driven by compelling blockbuster content worldwide, global network expansion and ongoing cost discipline – three factors the Company anticipates will continue to drive earnings in the future.
  • Delivered Q2 2018 earnings per share and adjusted earnings per share of $0.12 and $0.30, respectively compared to a loss per share of $0.03 and adjusted earnings per share of $0.15, respectively in Q2 2017.
  • Studios' continued emphasis on blockbuster content, coupled with consumers' desire to experience that content in differentiated ways, drove IMAX global box office to $343 million in the second quarter, a 28% increase compared to Q2 2017 and, representing the Company's fifth consecutive period of quarterly box office growth.
  • Repurchased $33.0 million of shares in the second quarter at an average price of $22.01 per share, and repurchased $46 million of shares in the first half of 2018 at an average price of $21.54 per share.

IMAX Corporation (NYSE:IMAX) today reported second quarter 2018 revenues of $98.3 million, gross profit of $60.4 million and net income attributable to common shareholders of $7.6 million, which calculates to $0.12 per diluted share. Adjusted net income attributable to common shareholders for the second quarter was $19.0 million, which calculates to $0.30 per diluted share. Adjusted EBITDA per Credit Facility was $39.5 million. 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.

"Building on our first quarter momentum, we continued to demonstrate the value of our differentiated consumer experience, expanding global footprint and focus on blockbuster content from around the world. These factors, coupled with our continued focus on controlling costs, helped drive second quarter adjusted EBITDA of $39.5 million, a 35% increase compared to the second quarter last year. Through the first six months of 2018, adjusted EBITDA is up 49% compared to the same period last year," said IMAX CEO
Richard L. Gelfond. "Not only are studios emphasizing blockbuster-type content, consumers are increasingly seeking differentiated ways to experience that content. We believe IMAX is uniquely positioned to benefit from these trends, especially with the roll out of our new IMAX® with Laser experience, which we expect will further increase the differentiation of The IMAX Experience®."                                                             

Second Quarter 2018 Results

Network Update
During the quarter, the Company installed 31 theater systems, 30 of which were for new theater locations. The total IMAX® theater network consisted of 1,410 systems as of June 30, 2018, of which 1,314 were in commercial multiplexes. There were 635 theaters in backlog as of June 30, 2018, compared to the 580 in backlog as of June 30, 2017.

IMAX also signed contracts for 40 new theaters and 98 upgrades in the second  quarter of 2018.  For a breakdown of theater system signings, installations, network and backlog by type for the second quarter of 2018, please see the end of this press release.

Box Office Update
Gross box office from IMAX DMR® films increased 27.4% to $342.6 million in the second quarter of 2018 from $268.9 million in the second quarter of 2017. Gross box office was generated primarily by the exhibition of 14 films (10 new and 4 carryovers), as compared to 16 films (11 new and 5 carryovers) exhibited in the second quarter of 2017.

Second Quarter Consolidated Results
The gross margin across all segments in the second quarter of 2018 was $60.4 million, or 61.4% of total revenues, compared to $49.5 million, or 56.4% of total revenues, in the second quarter of 2017. Operating expenses (which includes SG&A, excluding stock-based compensation, plus R&D) were $30.3 million in the quarter.

Gelfond continued, "Blockbuster content from Hollywood, China, India and South Korea will hit IMAX screens across the globe this year. Expanding our content offering by including more local-language titles is a key initiative of the Company, given our 1,300-plus screens span nearly 80 countries. We believe that tailoring our slate to the varying consumer preferences in diverse markets such as China will increase the box office productivity of our network. In addition to the compelling mix of global blockbusters, we are also confident that the launch of our new global brand campaign will more effectively communicate to consumers the benefits of the premium IMAX experience. We expect the new brand campaign, combined with the launch of IMAX with Laser and our growing global footprint, to drive incremental attendance at IMAX screens around the world."

Second Quarter Segment Results

Network Business

  • Network business revenues were $60.9 million in the quarter, compared with $47.4 million in the prior-year period. Gross margin for the network business were 70.5% in the most recent quarter, compared to 66.3% in the prior-year period. The increase in revenue and gross margin was primarily driven by a 27.4% increase in box office.
  • IMAX DMR revenues were $36.2 million in the second quarter of 2018, compared to $27.8 million in the second quarter of 2017. Gross margin for the IMAX DMR segment was 67.1%, compared to 61.2% in the prior-year comparative period.
  • Revenue from joint revenue-sharing arrangements were $24.7 million in the quarter, compared with $18.9 million in the prior-year period.  Gross margin for joint revenue-sharing arrangements was 75.3%, compared to 72.3% in the prior-year comparative period.

Theater Business

  • Theater business segment revenues were $30.9 million in the quarter, compared with $32.7 million in the prior-year period, primarily reflecting the installation of 3 fewer sales-type theaters.
  • Gross margin on sales and sales-type leases was 57.6% compared with 60.3% in the year-ago period. The decrease in the recent period is primarily the result of three fewer system installations compared to the prior year period.

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 second quarter 2018 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 (800) 263-0877 approximately 5 to 10 minutes before the call begins. Other international callers should dial (438) 968-3557. The conference ID for the call is 5362019. 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 5362019.         

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 June 30, 2018, there were 1,410 IMAX theater systems (1,314 commercial multiplexes, 12 commercial destinations, 84 institutional) operating in 79 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:

IMAX Corporation, New York

Michael K. Mougias

212-821-0187

mmougias@imax.com

 

 

Media:

IMAX Corporation, New York

Amanda Collins

212-821-0155

abcollins@imax.com

 

 

 

Additional Information

Signings and Installations

         

June 30, 2018

         
   

Three Months

Ended June 30,

   
 

Theater Signings:

2018

 

2017

   
 

Full new sales and sales-type lease arrangements

9

 

14

   
 

New traditional joint revenue sharing arrangements

31

 

31

   
 

New hybrid joint revenue sharing lease arrangements

-

 

47

   
 

Total new theaters

40

 

92

   
 

Upgrades of IMAX theater systems

98

 

3

   
 

Total Theater Signings

138

 

95

   
             
   

Three Months

Ended June 30,

   
 

Theater Installations:

2018

 

2017

   
 

Full new sales and sales-type lease arrangements

9

 

12

   
 

New traditional joint revenue sharing arrangements

19

 

18

   
 

New hybrid joint revenue sharing lease arrangements

2

 

3

   
 

Total new theaters

30

 

33

   
 

Upgrades of IMAX theater systems

1

(1)

1

(1)

 
 

Total Theater Installations

31

 

34

   
             
   

Three Months

Ended June 30,

   
       
 

Theater Backlog:

2018

 

2017

   
 

New sales and sales-type lease arrangements

181

(2)

174

   
 

New joint revenue sharing arrangements

         
 

Hybrid lease arrangements

115

 

137

   
 

Traditional arrangements

339

 

269

   
 

Total Theater Backlog

635

(3)

580

(4)

 
             
   

Three Months

Ended June 30,

   
       
 

Theater Network:

2018

 

2017

   
 

Commercial Multiplex Theaters:

         
 

Sales and sales-type lease arrangements

576

(5)

483

   
 

Traditional joint revenue sharing arrangements

628

 

554

   
 

Hybrid joint revenue sharing lease arrangements

110

 

117

   
 

Total Commercial Multiplex Theaters

1,314

 

1,154

   
 

Commercial Destination Theaters

12

 

13

   
 

Institutional Theaters

84

 

90

   
 

Total Theater Network

1,410

 

1,257

   

______________________

(1)

Includes one installation of an upgrade to a laser-based digital system under a joint revenue (2017 – one under a sales arrangement).

(2)

Includes 22 hybrid sales theater systems which were previously classified under joint revenue sharing arrangements – hybrid sales arrangements.

(3)

Includes 75 new laser projection system configurations, including 101 upgrades of existing locations to laser projection system configurations (99 of these 101 are for the new next generation laser projection system configurations).

(4)

Includes 24 laser projection system configurations and four upgrades of existing locations to laser projection system configurations.

(5)

Includes 35 theater systems which were previously classified under joint revenue sharing arrangements – hybrid sales arrangements. See "Critical Accounting Policies and estimates" in the form 10-Q for further details of the adoption impact of ASC Topic 606 on the Company's revenues.


 

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

                           
     

Three Months Ended

 

Six Months Ended

     

June 30,

 

June 30,

     

2018

 

2017

 

2018

 

2017

Revenues

                       

Equipment and product sales

 

$

15,368

 

$

21,334

 

$

34,881

 

$

32,879

Services

   

54,785

   

44,603

   

99,531

   

83,447

Rentals

   

25,124

   

19,438

   

43,326

   

35,294

Finance income

   

3,068

   

2,383

   

5,591

   

4,794

       

98,345

   

87,758

   

183,329

   

156,414

Costs and expenses applicable to revenues

                       

Equipment and product sales

   

7,549

   

11,453

   

15,521

   

18,917

Services

   

23,633

   

21,266

   

43,984

   

41,080

Rentals

   

6,759

   

5,580

   

12,728

   

11,187

       

37,941

   

38,299

   

72,233

   

71,184

Gross margin

   

60,404

   

49,459

   

111,096

   

85,230

Selling, general and administrative expenses

   

32,608

   

28,589

   

60,691

   

59,531

 

(including share-based compensation expense of $6.2 million and $10.7 million for the three and six months ended June 30, 2018 (2017 — $6.2 million and $11.0 million, respectively))

                     

Research and development

   

3,922

   

5,678

   

7,514

   

10,012

Asset impairments

   

-

   

1,225

   

-

   

1,225

Amortization of intangibles

   

965

   

779

   

1,857

   

1,380

Receivable provisions, net of recoveries

   

355

   

940

   

806

   

1,125

Legal arbitration award

   

7,500

   

-

   

7,500

   

-

Exit costs, restructuring charges and associated impairments

   

456

   

10,258

   

1,158

   

10,258

Income from operations

   

14,598

   

1,990

   

31,570

   

1,699

Interest income

   

243

   

280

   

490

   

508

Interest expense

   

(851)

   

(435)

   

(1,345)

   

(890)

Income from operations before income taxes

   

13,990

   

1,835

   

30,715

   

1,317

(Provision for) recovery of income taxes

   

(3,635)

   

238

   

(8,088)

   

124

Loss from equity-accounted investments, net of tax

   

(100)

   

(264)

   

(305)

   

(519)

Net income

   

10,255

   

1,809

   

22,322

   

922

Less: income loss attributable to non-controlling interests

   

(2,630)

   

(3,521)

   

(6,192)

   

(2,559)

Net income (loss) attributable to common shareholders

 

$

7,625

 

$

(1,712)

 

$

16,130

 

$

(1,637)

                           

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

                 

Net income (loss) per share — basic and diluted

 

$

0.12

   

(0.03)

 

$

0.25

 

$

(0.02)

                           

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

                       
 

Basic

   

63,314

   

65,793

   

63,931

   

66,076

 

Fully Diluted

   

63,426

   

65,992

   

64,006

   

66,548

                           

Additional Disclosure:

                       

Depreciation and amortization(1)

 

$

14,513

 

$

13,266

 

$

28,034

 

$

25,354

                           

(1) Includes $0.4 million and $0.5 million of amortization of deferred financing costs charged to interest expense for the three and six months ended June 30, 2018, respectively (2017 - $0.2 million and $0.3 million, respectively).

 

 

 

IMAX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

(Unaudited)

           
           
       
 

June 30,

 

December 31,

 

2018

 

2017

         

Assets

         

Cash and cash equivalents

$

133,042

 

$

158,725

Accounts receivable, net of allowance for doubtful accounts of $2,348 (December 31, 2017 — $1,613)

 

113,461

   

130,546

Financing receivables

 

125,756

   

129,494

Inventories

 

40,705

   

30,788

Prepaid expenses

 

9,401

   

7,549

Film assets

 

15,193

   

5,026

Property, plant and equipment

 

276,129

   

276,781

Other assets

 

61,956

   

26,757

Deferred income taxes

 

24,386

   

30,708

Other intangible assets

 

30,456

   

31,211

Goodwill

 

39,027

   

39,027

Total assets

$

869,512

 

$

866,612

           

Liabilities

         

Bank indebtedness

$

24,377

 

$

25,357

Accounts payable

 

15,027

   

24,235

Accrued and other liabilities

 

107,799

   

100,140

Deferred revenue

 

110,286

   

113,270

Total liabilities

 

257,489

   

263,002

           

Commitments and contingencies

         
           

Non-controlling interests

 

7,578

   

1,353

           

Shareholders' equity

         

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

         

62,747,512 issued and 62,521,916 outstanding (December 31, 2017 — 64,902,201 issued and 64,695,550 outstanding)

 

431,003

   

445,797

Less: Treasury stock, 225,596 shares at cost (December 31, 2017 — 206,651)

 

(4,636)

   

(5,133)

Other equity

 

179,767

   

175,300

Accumulated deficit

 

(75,908)

   

(87,592)

Accumulated other comprehensive loss

 

(2,762)

   

(626)

Total shareholders' equity attributable to common shareholders

 

527,464

   

527,746

Non-controlling interests

 

76,981

   

74,511

Total shareholders' equity

 

604,445

   

602,257

Total liabilities and shareholders' equity

$

869,512

 

$

866,612


 

IMAX CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In thousands of U.S. dollars)

 

(Unaudited)

 
   

Six Months Ended June 30,

 
   

2018

 

2017

 
             

Cash provided by (used in):

           

Operating Activities

             

Net income

 

$

22,322

 

$

922

 

Adjustments to reconcile net income to cash from operations:

             

Depreciation and amortization

   

28,034

   

25,354

 

Write-downs, net of recoveries

   

1,686

   

13,155

 

Change in deferred income taxes

   

347

   

(3,133)

 

Stock and other non-cash compensation

   

11,920

   

12,570

 

Unrealized foreign currency exchange gain

   

473

   

(462)

 

Loss from equity-accounted investments

   

106

   

321

 

Loss on non-cash contribution to equity-accounted investees

   

199

   

198

 

Investment in film assets

   

(18,219)

   

(19,589)

 

Changes in other non-cash operating assets and liabilities

   

(214)

   

7,884

 

Net cash provided by operating activities

   

46,654

   

37,220

 
               

Investing Activities

             

Purchase of property, plant and equipment

   

(8,632)

   

(9,771)

 

Investment in joint revenue sharing equipment

   

(8,455)

   

(17,550)

 

Acquisition of other intangible assets

   

(1,705)

   

(2,624)

 

Investment in new business ventures

   

-

   

(1,500)

 

Net cash used in investing activities

   

(18,792)

   

(31,445)

 
               

Financing Activities

             

Repayment of bank indebtedness

   

(1,000)

   

(1,000)

 

Repurchase of common shares

   

(46,452)

   

(46,138)

 

Treasury stock purchased for future settlement of restricted share units

   

(4,636)

   

(5,412)

 

Taxes withheld and paid on employee stock awards vested

   

(1,279)

   

(187)

 

Settlement of restricted share units and options

   

(1,529)

   

(14,048)

 

Issuance of subsidiary shares to a non-controlling interest

   

6,696

   

-

 

Common shares issued - stock options exercised

   

799

   

14,419

 

Credit facility amendment fees paid

   

(1,963)

   

-

 

Dividends paid to non-controlling interests

   

(4,623)

   

-

 

Net cash used in financing activities

   

(53,987)

   

(52,366)

 
               

Effects of exchange rate changes on cash

   

442

   

76

 
               

Decrease in cash and cash equivalents during period

   

(25,683)

   

(46,515)

 
               

Cash and cash equivalents, beginning of period

   

158,725

   

204,759

 
               

Cash and cash equivalents, end of period

 

$

133,042

 

$

158,244

 
                 

 

 

 

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

 

Six Months

         

Ended June 30,

 

Ended June 30,

           

2018

   

2017

 

2018

 

2017

Revenue

                         

Network Business

                         
 

IMAX DMR

   

$

36,161

 

$

27,757

 

$

63,214

 

$

51,166

 

Joint revenue sharing arrangements – contingent rent

     

24,730

   

18,896

   

42,593

   

34,130

 

IMAX systems – contingent rent

     

-

   

790

   

-

   

1,478

           

60,891

   

47,443

   

105,807

   

86,774

Theater Business

                       
 

IMAX systems

                         
   

Sales and sales-type leases

     

11,981

   

16,125

   

30,118

   

23,067

   

Ongoing fees and finance income

     

3,282

   

2,613

   

6,012

   

5,198

 

Joint revenue sharing arrangements – fixed fees

     

1,022

   

1,408

   

1,022

   

1,878

 

Theater system maintenance

     

12,335

   

10,904

   

25,047

   

21,949

 

Other theater

     

2,255

   

1,699

   

3,631

   

3,864

           

30,875

   

32,749

   

65,830

   

55,956

New Business

     

3,116

   

1,311

   

3,723

   

2,591

                               

Other

                         
 

Film distribution and post-production

     

2,360

   

5,087

   

6,094

   

8,670

 

Other

     

1,103

   

1,168

   

1,875

   

2,423

           

3,463

   

6,255

   

7,969

   

11,093

Total

   

$

98,345

 

$

87,758

 

$

183,329

 

$

156,414

                               

Gross margin

                         

Network Business

                         
 

IMAX DMR(1)

   

$

24,280

 

$

16,998

 

$

43,063

 

$

34,466

 

Joint revenue sharing arrangements – contingent rent(1)

     

18,621

   

13,668

   

31,362

   

23,920

 

IMAX systems – contingent rent

     

-

   

790

   

-

   

1,478

           

42,901

   

31,456

   

74,425

   

59,864

Theater Business

                         
 

IMAX systems

                         
   

Sales and sales-type leases

     

6,899

   

9,724

   

18,508

   

12,944

   

Ongoing fees and finance income

     

3,234

   

2,539

   

5,917

   

5,060

 

Joint revenue sharing arrangements – fixed fees(1)

     

246

   

176

   

246

   

264

 

Theater system maintenance

     

5,088

   

4,434

   

11,292

   

8,683

 

Other theater

     

563

   

405

   

517

   

834

           

16,030

   

17,278

   

36,480

   

27,785

New Business

     

1,906

   

(1,183)

   

436

   

(1,520)

                               

Other

                         
 

Film distribution and post-production(1)

     

(387)

   

1,998

   

59

   

(665)

 

Other

     

(46)

   

(90)

   

(304)

   

(234)

           

(433)

   

1,908

   

(245)

   

(899)

Total

   

$

60,404

 

$

49,459

 

$

111,096

 

$

85,230

   

(1)

IMAX DMR segment margins include marketing costs of $6.5 million and $10.6 million for the three and six months ended June 30, 2018, respectively (2017 - $4.7 million and $7.3 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.0 million and $1.2 million for the three and six months ended June 30, 2018, respectively (2017 - $0.8 million and $1.2, respectively). IMAX system sales and sales-type lease segment margins include marketing and commission costs of $0.5 million and $1.2 million for the three and six months ended June 30, 2018, respectively (2017 - $0.8 million and $1.1 million). Film distribution and post production segment margins include marketing expense of $0.8 million and $2.0 million for the three and six months ended June 30, 2018 (2017 - recovery of $0.6 million and $0.7 million, respectively).

 

 

 

IMAX CORPORATION

OTHER INFORMATION

 (in thousands of U.S. dollars)

 

Non-GAAP Financial Measures:

 

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

 

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

 
   

For the

 

For the

 
   

3 months ended

 

12 months ended

 
 

June 30, 2018

 

June 30, 2018

(1)

(In thousands of U.S. Dollars)

           

Net income

$

10,255

 

$

33,918

 

Add (subtract):

           
 

Provision for income taxes

 

3,635

   

25,002

 
 

Interest expense, net of interest income

 

608

   

1,388

 
 

Depreciation and amortization, including film asset amortization

 

14,513

   

69,488

 
 

EBITDA

$

29,011

 

$

129,796

 
 

Stock and other non-cash compensation

 

6,779

   

23,141

 
 

Write-downs, net of recoveries including asset impairments and

           
 

receivable provisions

 

650

   

18,099

 
 

Exit costs, restructuring charges and associated impairments

 

456

   

7,074

 
 

Legal arbitration award

 

7,500

   

7,500

 
 

Loss from equity accounted investments

 

100

   

489

 
 

Adjusted EBITDA before non-controlling interests(2)

$

44,496

 

$

186,099

 
 

Adjusted EBITDA attributable to non-controlling interests

 

(5,014)

   

(24,404)

 
 

Adjusted EBITDA per Credit Facility

$

39,482

*

$

161,695

*

 

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

$

39,489

*

$

148,930

*

 

Adjusted revenues attributable to common shareholders (3)

$

90,860

 

$

367,281

 
 

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

 

43.5

%

 

40.5

%

               

* Adjusted EBITDA per Credit Facility of $39.5 million and $161.7 million for the three and twelve months ended June 30, 2018 respectively, include the impact of the Company's investment in "Marvel's Inhumans", which resulted in a less than $0.1 million and $12.2 million loss, respectively. However, as permitted by the Credit Facility, this loss was offset by addbacks of $nil and $13.3 million for amortization and by addbacks of, $nil and $11.7 million for impairment charges relating to the investment, in each case for the three and twelve months ended June 30, 2018, respectively. The net effect of these addbacks was to increase Adjusted EBITDA per Credit Facility by less than $0.1 million and $12.8 million for the three and twelve months ended June 30, 2018, respectively. This investment represents the Company's first foray into a commercial television property, and therefore the Adjusted EBITDA per Credit Facility

__________________

 


(1)

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

   

(2)

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

   

(3)

   

3 months ended June 30, 2018

 

12 months ended June 30, 2018

 

Total revenues

     

$

98,345

     

$

407,681

 

Greater China revenues

 

$

 

23,341

     

$

 

126,389

   
 

Non-controlling interest ownership percentage(4)

   

32.07%

         

31.96%

     
 

Deduction for non-controlling interest share of revenues

       

(7,485)

       

(40,400)

 

Adjusted revenues attributable to common shareholders

     

$

90,860

     

$

367,281

 

(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 June 30, 2018 vs. 2017:

 

The Company reported net income of $10.3 million, which calculates to $0.16 per basic and diluted share, for the second quarter of 2018 as compared to a net income of $1.8 million, $0.03 per basic and diluted share for the second quarter of 2017.

 

Net income for the second quarter of 2018 includes a $6.8 million charge, or $0.10 per diluted share (2017 — $6.8 million or $0.10 per diluted share), for stock-based compensation and a $0.5 million charge, or $0.01 per diluted share for exit costs, restructuring charges and associated impairments (2017 - $10.3 million or $0.15 per diluted share), and a $7.5 million charge, or $0.12 per diluted share, for a legal arbitration award related to one of the Company's litigation matters from 2006 (2017 - $nil or $nil per diluted share).

 

Adjusted net income, which consists of net income excluding the impact of stock-based compensation, exit costs, restructuring charges and associated impairments, the legal arbitration award and the related tax impact, was $21.7 million, or $0.34 per diluted share, for the second quarter of 2018 as compared to adjusted net income of $13.5 million, or $0.20 per diluted share, for the second quarter of 2017.

 

The Company reported net income attributable to common shareholders of $7.6 million, or $0.12 per basic and diluted share for the second quarter of 2018 (2017 — loss of $1.7 million or $0.03 per basic and 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 legal arbitration award and the related tax impact, was $19.0 million, or $0.30 per diluted share, for the second quarter of 2018 as compared to adjusted net income attributable to common shareholders of $9.6 million, or $0.15 per diluted share, for the second quarter of 2017.

 

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:

 

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

Quarter Ended June 30,

 

2018

   

2017

 
   

Net Income

 

Diluted EPS

   

Net Income

 

Diluted EPS

 

Reported net income

$

10,255

 

$

0.16

   

$

1,809

 

$

0.03

 

Adjustments:

                         
 

Stock-based compensation

 

6,756

   

0.10

     

6,793

   

0.10

 
 

Exit costs, restructuring charges and associated impairments

 

456

   

0.01

     

10,258

   

0.15

 
 

Legal arbitration award

 

7,500

   

0.12

     

-

   

-

 
 

Tax impact on items listed above

 

(3,228)

   

(0.05)

     

(5,382)

   

(0.08)

 

Adjusted net income

 

21,739

   

0.34

     

13,478

   

0.20

 
 

Net (income) loss attributable to non-controlling interests

 

(2,630)

   

(0.04)

     

(3,521)

   

(0.05)

 

Stock-based compensation (net of tax of less than

                         
 

$0.1 million and less than $0.1 million, respectively) 

 

(147)

   

-

     

(153)

   

-

 

Exit costs, restructuring charges and associated

                         
 

  impairments (net of tax of less than $0.1 million)

 

-

   

-

     

(168)

   

-

 

Adjusted net income attributable to common shareholders

$

18,962

 

$

0.30

   

$

9,636

 

$

0.15

 
                             

Weighted average diluted shares outstanding

       

63,426

           

65,992

 
                             
   
     
                               

 

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Six Months Ended June 30, 2018 vs. 2017:

 

The Company reported net income of $22.3 million, or $0.35 per basic and diluted share, for the six months ended June 30, 2018 as compared to net income of $0.9 million, or $0.01 per basic and diluted share for the six months ended June 30, 2017.

 

Net income for the six months ended June 30, 2018 includes a $11.6 million charge, or $0.18 per diluted share (2017 — $12.1 million or $0.18 per diluted share) for stock-based compensation, and a $1.2 million charge, or $0.02 per diluted share for exit costs, restructuring charges and associated impairments (2017 — $10.3 million, or $0.15 per diluted share), and a $7.5 million charge, or $0.12 per diluted share for a legal arbitration award related to one of the Company's litigation matters from 2006 (2017 - $nil or $nil per diluted share).

 

Adjusted net income, which consists of net income excluding the impact of stock-based compensation, exit costs, restructuring charges and associated impairments, the legal arbitration award and the related tax impact, was $38.8 million, or $0.61 per diluted share, for the six months ended June 30, 2018 as compared to adjusted net income of $16.5 million, or $0.24 per diluted share, for the six months ended June 30, 2017.

 

The Company reported a net income attributable to common shareholders of $16.1 million, or $0.25 per basic and diluted share for the six months ended June 30, 2018 (2017 — net loss of $1.6 million, or a loss of $0.02 per basic and 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 legal arbitration award and the related tax impact, was $32.4 million, or $0.51 per diluted share, for the six months ended June 30, 2018 as compared to adjusted net income attributable to common shareholders of $13.5 million, or $0.20 per diluted share, for the six months ended June 30, 2017.

 

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:

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

Six Months Ended June 30,

 

2018

 

2017

 
   

Net Income

 

Diluted EPS

 

Net Income

 

Diluted EPS

 

Reported net income

$

22,322

 

$

0.35

 

$

922

 

$

0.01

 

Adjustments:

                       
 

Stock-based compensation

 

11,603

   

0.18

   

12,057

   

0.18

 
 

Exit costs, restructuring charges and associated impairments

 

1,158

   

0.02

   

10,258

   

0.15

 
 

Legal arbitration award

 

7,500

   

0.12

   

-

   

-

 
 

Tax impact on items listed above

 

(3,787)

   

(0.06)

   

(6,723)

   

(0.10)

 

Adjusted net income

 

38,796

   

0.61

   

16,514

   

0.24

 
 

Net (income) loss attributable to non-controlling interests

 

(6,192)

   

(0.10)

   

(2,559)

   

(0.04)

 
 

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

                       
 

$0.1 million, respectively)

 

(204)

   

-

   

(281)

   

-

 
 

Exit costs, restructuring charges and associated impairments

                       
 

(net of tax of less than $0.1 million)

 

-

   

-

   

(168)

   

-

 

Adjusted net income attributable to common shareholders

$

32,400

 

$

0.51

 

$

13,506

 

$

0.20

 
                           

Weighted average diluted shares outstanding

       

64,006

         

66,548

 
                           

 

 

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

 

Six months ended

   

June 30, 2018

 

June 30, 2018

(In thousands of U.S. Dollars)

           

Net cash provided by operating activities

 

$

31,191

 

$

46,654

Net cash used in investing activities

   

(6,839)

   

(18,792)

 

Net cash flow

 

$

24,352

 

$

27,862